3 March 2004 Hong Kong Baptist University 1998 Superannuation Fund

Hong Kong Baptist University 2 Contents Portfolio Size Summary Performance Summary Asset Allocation Performance Review Current Investment Strategy and Market Outlook

Portfolio Size Summary

Hong Kong Baptist University 4 Portfolio Size Summary *The exchange rate is the deal FX rate, which is HKD/USD as of 31 January The exchange rate is based on the spot rate from Bloomberg, which is HKD/USD as of 31 January 2004.

Performance Summary

Hong Kong Baptist University 6 Performance Summary Remarks: 1. Performance figures are net of 1.15% management fee and after 0.75% rebate. 2. Citigroup WGBI - 18 US $ Hdgd 3. Performance figures are net of 1.15% management fee and after 0.70% rebate % Citigroup WGBI - 18 US $ Hdgd and 30% MSCI World (net) As at 31 January 2004

Asset Allocation

Hong Kong Baptist University 8 By Region, as at 31 January 2004 MLIIF US Dollar Global Bond Fund * Citigroup WGBI - 18 US $ Hdgd Source: Internal; Datastream

Hong Kong Baptist University 9 By Asset Class, as at 31 January 2004 Stable Fund * 70% Citigroup WGBI - 18 US $ Hdgd and 30% MSCI World (net) Source: Internal; Datastream

Hong Kong Baptist University 10 By Region, as at 31 January 2004 Stable Fund * 70% Citigroup WGBI - 18 US $ Hdgd and 30% MSCI World (net) Source: Internal; Datastream

Hong Kong Baptist University 11 By Sector, as at 31 January 2004 Stable Fund * Allocation only includes the equity portion of Stable Fund. + MSCI World (net) Source: Internal; Datastream

Performance Review MLIIF US Dollar Global Bond Fund

Hong Kong Baptist University 13 MLIIF US Dollar Global Bond Fund  The Fund outperformed the benchmark during the fourth quarter. Positive impact came from our underweight duration position in US dollar bloc bonds.  Our overweight in A and BBB rated corporate bonds, also had a positive effect.  The Fund’s underweight US dollar position benefited as the dollar continued to decline against most major currencies.  Being overweight duration in euro-zone bonds throughout October and much of November detracted, as macroeconomic data appeared to improve and bond yields rose.

Performance Review Stable Fund

Hong Kong Baptist University 15 Stable Fund  Asset allocation added value over the period as equities performed strongly and fixed income markets underperformed cash. Strong economic growth in the US combined with strong global corporate earnings and high liquidity contributed to the strong performance seen from world equity markets over the quarter.  For the equity portion, positive contribution came from our holdings in Tyco, Assa Abloy, International Game Technologies and US homebuilders such as D R Horton.  Being underweight semiconductor companies Intel and Texas Instruments impacted negatively in October as they rose strongly. We continue to believe both stocks are overvalued.  Our Japanese listed IT holdings such as Rohm and Canon underperformed due to concern over potential yen strength against the US dollar. We believe these stocks are oversold and we retain our positions.

Performance Review Major Markets Summary

Hong Kong Baptist University 17 Major Markets Summary All indices in HK dollar terms except where indicated

Current Investment Strategy and Market Outlook

Hong Kong Baptist University 19 The story of 2003 Q Fear / depression Q Relief rally Q Cyclical recovery Q Liquidity returns

Hong Kong Baptist University 20 Five surprises for 2004 Global growth exceeds market expectations. China slowdown. Earnings improve but momentum deteriorates. G3 Interest rates remain on hold into H President Bush struggles in polls ahead of US election.

Hong Kong Baptist University 21 US consumer confidence surges after unemployment peaks Source: Datastream US Unemployment Rate US Consumer Confidence Index (R.H.Scale) % Index

Hong Kong Baptist University 22 Europe following in wake of global recovery Source: Datastream IFO Business Expectations (R. H. Scale) German GDP Growth, % % Index

Hong Kong Baptist University 23 Chinese growth set to slow

Hong Kong Baptist University 24 G3 Interest rates remain on hold into H Source: Datastream G3 capacity utilisation

Hong Kong Baptist University 25 Global real short rates to remain close to zero Source: Datastream Japanese Real Call RatesEurozone Real Repo Rates US Real Fed Funds %

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