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2006 Exchange Fund Results

Learn about the investment objectives of the Exchange Fund and its performance in 2006. This press conference provides insights into the fund's goal to preserve capital, maintain monetary stability, and achieve a long-term investment return. It also discusses the market trends in exchange rates, equity markets, and interest rates. The abridged balance sheet and compounded annual investment returns are presented, along with the outlook for 2007.

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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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