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2006 Exchange Fund Results

2006 Exchange Fund Results. Press Conference 18 January 2007. Investment Objectives of The Exchange Fund. Investment objectives of the Exchange Fund: (1) to preserve capital;

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2006 Exchange Fund Results

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  1. 2006 Exchange Fund Results Press Conference 18 January 2007

  2. Investment Objectives ofThe Exchange Fund Investment objectives of the Exchange Fund: (1) to preserve capital; (2) to ensure that the entire Monetary Base at all times will be fully backed by highly liquid US dollar denominated assets; (3) to ensure sufficient liquidity for the purpose of maintaining monetary and financial stability; and (4) subject to (1) – (3), to achieve an investment return that will preserve the long-term purchasing power of the Fund.

  3. Markets in 2006 • Exchange rates: • US dollar weakened against the euro while remaining flat against the yen • Equity markets: • Gains across the board generally. The Hong Kong stock market rose significantly on the back of the strong rallies in the Chinese stock markets • Interest rates: • Monetary tightening drove up interest rates in all major financial markets

  4. Investment Income * Unaudited figures ^ Including dividends # Including interest

  5. Change in Investment Income, Treasury’s Shareand Accumulated Surplus Note (1): The effect of changing from using mid-price to using bid-price for valuing securities held, and using ask-price for valuing securities issued.

  6. Historical Change in Investment Income, Treasury’s Share and Accumulated Surplus * unaudited figures

  7. Exchange FundAbridged Balance Sheet

  8. Exchange Fund Performance Against Investment Benchmark

  9. Compounded Annual Investment Return (1994-2006) Compounded Annual Hong Kong CPI-A (1994-2006#) Investment Returnof the Exchange Fund # Hong Kong CPI-A at end-November 2006

  10. Treasury Return Against Estimate

  11. Outlook for 2007

  12. 2006 Exchange Fund Results Press Conference 18 January 2007

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