5 september 2003 hong kong baptist university 1998 superannuation fund

5 September 2003

Hong Kong Baptist University1998 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


Portfolio Size Summary

MLIIF US Dollar Global Bond Stable Fund

US$ HK$ US$ HK$

31 July 2003 1,122,258.84 8,752,833.37* 909,840.77 7,096,394.07+

* The exchange rate is the deal FX rate, which is 7.7993 HKD/USD as of 31 July 2003.+ The exchange rate is based on the spot rate from Bloomberg, which is 7.7996 HKD/USD as of 31 July 2003.

Performance Summary


Performance Summary


Actual %1 Benchmark %2 Actual %3 Benchmark %4

July 2003 -1.54 -1.82 -1.01 -0.67

2Q 2003 1.61 1.62 5.09 6.12

1 Year (1 August 02 – 31 July 03) 5.08 5.33 5.27 6.86

YTD (1 January 03 – 31 July 03) 0.93 1.01 3.59 4.74

Inception-to-date (26 April 02 – 31 July 03) 6.95 8.31 3.08 4.33

Remarks: 1. Performance figures are net of 1.15% management fee and after 0.75% rebate.2. Citigroup WGBI - 18 US $ Hdgd3. Performance figures are net of 1.15% management fee and after 0.70% rebate.4. 70% Citigroup WGBI - 18 US $ Hdgd and 30% MSCI World (net)

As at 31 July 2003


MLIIF US Dollar Global Bond, as at 29 July 2003

0

100

200

300

400

500

600

700

800

900

1000

16.66

16.9317.04

17.16

17.3617.22

17.57

17.76 17.6917.86

17.75

18.19

18.27

16.68

17.37

17.90

15.50

16.00

16.50

17.00

17.50

18.00

18.50

Apr-02 May-02 J un -02 J ul- 02 Aug-02 Sep-02 Oct -02 Nov-02 Dec-02 J an -03 Feb-03 Mar-03 Apr-03 May-03 J un -03 J ul- 03Alloted Shares Unit PriceCumulative Alloted Shares

No

. o

f S

ha

res

Cumulative Real Return*

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

16.66

16.9317.04

17.1617.36

17.2217.37

17.5717.76

17.90

17.6917.86

17.75

16.68

18.19

18.27

15.50

16.00

16.50

17.00

17.50

18.00

18.50

Apr-02 May-02 J un-02 J ul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 J an-03 Feb-03 Mar-03 Apr-03 May-03 J un-03 J ul-03

Unit PriceCumulative Invested Assets

Cumulative Capital Employed

Source: Internal* Excess returns are calculated net of management fee and before rebate.

Assume USD1,000 contribution on every 29th of the month



Stable Fund, as at 29 July 2003


No

. o

f S

ha

res

0

200

400

600

800

1000

1200

1400

1600

1800

10.01

9.87

9.62

9.87

9.67

9.779.84

9.87

9.77 9.799.84

9.98

10.2910.35

10.24

10.00

9.40

9.50

9.60

9.70

9.80

9.90

10.00

10.10

10.20

10.30

10.40

Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03

Alloted Shares Unit PriceCumulative Alloted Shares

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

10.01

9.87

9.62

9.87

9.67

9.77

9.849.87

9.77 9.799.84

9.98

10.2910.35

10.24

10.00

9.40

9.50

9.60

9.70

9.80

9.90

10.00

10.10

10.20

10.30

10.40

Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03

Unit PriceCumulative Invested Assets

Cumulative Capital Employed




-1.8%

0.5%

1.7%

-1.1%-2%

-1%

0%

1%

2%

3%

4%

5%

3 months 6 months 1 year SinceInception

1.6%

3.0% 3.2%

-0.5%-1%

0%

1%

2%

3%

4%

5%

3 months 6 months 1 year SinceInception


As at 29 July 2003



Asset Allocation


MLIIF US Dollar Global Bond Fund (%)

22.0

51.0

16.0

2.09.0

By Region, as at 31 July 2003

MLIIF US Dollar Global Bond Fund

* Citigroup WGBI - 18 US $ Hdgd Source: Internal; Datastream

The Fund Benchmark*(%) (%)

North America 22.0 23.4

Europe 51.0 47.7

Japan 16.0 28.5

Other 2.0 0.4

Cash 9.0 0.0

Total 100 100

Benchmark* (%)

23.4

47.7

28.5

0.4


Stable Fund (%)

34.5

54.3

11.2

By Asset Class, as at 31 July 2003

Stable Fund

The Fund Benchmark* (%) (%)

Equities 34.5 30.0

Bonds 54.3 70.0

Cash 11.2 0.0

Total 100 100

* 70% Citigroup WGBI - 18 US $ Hdgd and 30% MSCI World (net)Source: Internal; Datastream

Benchmark* (%)

30

70


By Region, as at 31 July 2003

Stable Fund

* 70% Citigroup WGBI - 18 US $ Hdgd and 30% MSCI World (net)Source: Internal; Datastream

Stable Fund (%)

20.8

11.8

1.7

0.216.8

27.7

8.7

1.111.2

The Fund Benchmark*

(%) (%)

Equities


Europe 11.8 8.6

Japan 1.7 2.5

Pacific Basin 0.2 0.9

Total Equities 34.5 30.0

Bonds


Europe 27.7 33.4

Japan 8.7 19.9

Other 1.1 0.3

Total Bonds 54.3 70.0

Cash 11.2 0.0

Total Fund 100 100

Benchmark* (%)

17.9

2.5

0.9

16.433.4

19.90.3

8.6


By Sector, as at 31 July 2003

Stable Fund

Benchmark+ (%)

23.7

12.4

11.99.3

12.7

7.1

9.6

4.65.1 3.6

* Allocation only includes the equity portion of Stable Fund.+ MSCI World (net)Source: Internal; Datastream

Stable Fund* (%)

26

14

1111

11

7

8

54 2 1 The Fund* Benchmark+

(%) (%)

Financials 26.0 23.7

Healthcare 14.0 12.4

Consumer Dis. 11.0 11.9

Consumer Staples 11.0 9.3

Information Tech. 11.0 12.7

Energy 7.0 7.1

Industrials 8.0 9.6

Materials 5.0 4.6

Telecoms Services 4.0 5.1

Utilities 2.0 3.6

Cash 1.0 0.0

Total 100 100

Performance Review




Our overweight duration position in euro-zone bonds benefited from an extended rally,

although this was partially offset by market sell-offs in March and June.

We remained underweight duration in US dollar bloc bonds, which detracted as US bond

yields declined beyond expectations.

Being overweight duration in corporate bonds also benefited, these were attractive given

positive issuance and low government bond yields.

Performance Review

Stable Fund


Stable Fund

The fund slightly underperformed the benchmark for the quarter. The performance

suffered due to the defensive stance taken. Over the quarter, we significantly

underweighed bonds as we believed the bond valuation is very expensive.

The overall bond investment performance is the same as benchmark.

On equity side, our underweight in information technology detracted, as many of these

shares rallied strongly in the second quarter, as investors sought high earnings leverage

into the anticipated economic recovery.

In consumer discretionary, the media segment was impacted by similar trends. Our

holdings in high quality publishing companies like Reed Elsevier lagged.

Positive contribution came from financials, our holdings in Banca Intessa , BNP Paribas

and US corporate and municipal bond insurer, AMBAC Financial outperformed towards

end June.

Performance Review

Major Markets Summary


Major Markets SummaryJuly 2003

%YTD 2003

%

MSCI Hong Kong (27.0%) 6.4 10.1 HSBC (Reg) (3.0%) 3.4 12.2 MSCI North America (14%) 1.8 14.6 MSCI Europe (9%) 2.1 13.0 MSCI Japan (5%) 4.1 7.3 MSCI Pacific free ex Japan & Hong Kong (7.5%) 4.6 21.6 MSCI Emerging Markets Free (7.5%) 6.3 23.4 Lehman Global Agg.Bond (50% hedged)(27%) -2.5 2.3

Selected “small” markets in local currency termsThailand (SET) 4.8 35.8Indonesia (JCI) 0.5 19.5Philippines (PHISX) 1.4 21.8Korea (KOSPI) 6.5 13.7Taiwan (weighted) 9.2 19.5Mexico (IPC) 4.3 20.0Brazil (BOVESPA) 4.6 20.4

MSCI World 2.0 13.4Hang Seng 6.2 11.2S&P 500 1.8 13.7MSCI Europe ex UK 2.9 15.8FT All Share (UK) 1.3 10.4TOPIX 3.6 10.5

HK Dollar to Japanese Yen 0.4 1.6HK Dollar to Sterling 2.6 0.1HK Dollar to Euro 2.0 -6.8HK Dollar to Aus Dollar 3.5 -13.1

All indices in HK dollar terms except where indicated

Investment Outlook


What We Said And What Happened

We Said What Happened Outlook

Growth Below trend/no double dip As forecast Improving

Deflation Low risk Growing fear Still low =

Bonds Struggle to make positivereturns

+11 (USD) Will struggle to makepositive returns

-

Credit Outperforms governmentdebt

CORRECT More of the same

Interest Rates No rise in 2003 CORRECT View maintained

Equities Range bound but positive CORRECT View maintained

Gold Effective diversifier CORRECT Remains so

Score 51/2 / 7

Source: MLIM


Markets Have Come A Long Way

In US dollar terms: % Return 01/04/03 –30/06/03

% Return YTD

DAX 40.3 22.3

DJ EUROSTOXX 27.1 13.1

NASDAQ 21.0 21.5

FTSE ALL SHARE 19.6 9.0

S&P 500 15.4 11.8

NIKKEI 225 12.5 4.6

Source: Bloomberg


Global recovery to consolidate

%

Actual Forecast

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2000 2001 2002 2003 2004

Source: OEF / MLIM

World GDP Growth

World GDP Growth


Deflation risk is low, particularly in the US & UK

Source: Datastream; MLIM

0

10

20

30

40

50

60

70

80

90

G7 UK US Eurozone Germany Japan

%

Probability of deflation in 2004


High operational leverage is boosting earnings

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

80 82 84 86 88 90 92 94 96 98 00 02

Trend Earnings

Actual EarningsSource: Datastream; MLIM

Real earnings per share, MSCI world


Global equities close to fair value in aggregate

Source: MLIM; MSCI

MSCI world, price to normalised earnings

5

10

15

20

25

30

35

40

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02

Average


For the rest of the year...

Topic Forecast Focus

Economic Growth Slow recovery, US led US vs ROW

Equity Returns Modest Gains Growth quantum

Deflation Low risk ex Germany/Japan Growth quantum

Interest Rates No rises until 2004 Growth quantum

Government Bonds Poor returns Policy desire to flatten curve &Growth quantum

Geopolitical Risk Remains high Oil supply threat

Asset Preference Equities Growth quantum

Currencies $ weakens Policy/Growth/Structural

Source: MLIM


Conclusions

• Extreme risk aversion has subsided

• Short term market direction now dependent on economic follow through

• Global equity valuations no longer cheap but opportunities exist in UK

• Bonds are still expensive, particularly investment grade

The following notes should be read in conjunction with the attached document: 1. Issued by Merrill Lynch Investment Managers Limited, regulated by The FSA and a subsidiary of Merrill Lynch & Co., Inc. Merrill

Lynch Investment Managers is a trading name of Merrill Lynch Investment Managers Limited. Merrill Lynch & Co., Inc. and its subsidiaries are known as the Merrill Lynch Group.

2. Past performance is not necessarily a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

3. Any research in this document has been procured and may have been acted on by Merrill Lynch Investment Managers for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the Merrill Lynch Group or any part thereof and no assurances are made as to their accuracy.

4. This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any Merrill Lynch Group funds and has not been prepared in connection with any such offer.

5. This material is for distribution to Intermediate Customers (as defined by The FSA Rules).

Unless otherwise specified, all information contained in this document is current as at February 2003.

5 september 2003 hong kong baptist university 1998 superannuation fund

Documents

hong kong baptist university

performance summary

month slide

internal datastream

superannuation fund

asset allocation slide

portfolio size summary

market outlook slide