2007 Annual Results Announcement

Records Posted, Set for Challenges

Paul ChowChief Executive, HKEx&Archie TsimChief Financial Officer, HKEx

5 March 2008

2

Agenda

2007 Annual Results Overview

Financial Review

Business Review

Q&A

3

2007 Annual Results Overview - Business

$20.7 trillion market capitalisation as of 31 Dec 2007 – up 55% from 31 Dec 2006

$88.1 billion average daily turnover – up 160% from 2006 359,125 options & futures contracts traded daily on average – up

105% from 2006 Open Interest of 5,780,898 contracts on 31 Dec 2007 – up 91%

from 31 Dec 2006 Successful implementation of numerous initiatives under

Strategic Plan 2007-09: Mainland positioning Business expansion Service improvement

100% up-time for all IT systems despite substantial increase in volume

4

Among global exchanges…

#1 in derivative warrants trading

#1 in stock options trading market in Asia

#2 in ETF volume in Asia after Japan

#5 in capital funds raised

#7 in market capitalisation

#10 in equity turnover

4

Hong Kong – A Leading International Financial Centre Hong Kong – A Leading International Financial Centre

Source: World Federation of Exchanges website (Dec 2007)

5

Awards and Recognition in 2007

2007 HKMA Best Annual Reports Awards Gold Prize (General Category)

HKMA Citation for Achievement in Corporate Governance Disclosure (General Category)

HKICPA Best Corporate Governance Disclosure Awards 2007 - Gold Award in Hang Seng Index Category

One of the best companies in Hong Kong in terms of corporate governance by The Asset magazine

Asia Risk’s Derivatives Exchange of the Year 2007

Hong Kong ICT Awards 2007: Best Business Grand Award for HKEx’s Electronic Disclosure System

66

Market Capitalisation and Turnover Ranking

Equity Turnover Ranking and Growth Rate of Major World Exchanges

Equity Turnover Ranking and Growth Rate of Major World Exchanges

Source: World Federation of Exchanges website

Rank Exchanges2007

(US$ bn)CAGR2002-2007

1 NYSE Group 29,210 23%

2 Nasdaq 15,320 16%

3 London SE 10,324 21%

4 Tokyo SE Group 6,476 33%

5 Euronext 5,648 23%

6 Deutsche Börse 4,324 29%

7 Shanghai SE 4,070 81%

:  

10 HKEx 2,139 62%

11 Shenzhen SE 2,102 72%

:  

15 TSX Group 1,649 32%

16 Australian SE 1,379 36%

:  

23 Singapore 382 43%

Market Capitalisation Ranking and Growth Rate of Major World Exchanges

Market Capitalisation Ranking and Growth Rate of Major World Exchanges

Rank Exchanges2007

(US$ bn)CAGR 2002-2007

1 NYSE Group 15,651 12%

2 Tokyo SE Group 4,331 16%

3 Euronext 4,223 22%

4 Nasdaq 4,014 15%

5 London SE 3,852 16%

6 Shanghai SE 3,694 65%

7 HKEx 2,654 42%

8 TSX Group 2,187 31%

9 Deutsche Börse 2,105 25%

:  

20 Shenzhen SE 785 38%

:

22 Singapore 539 40%

7

HKEx is Among the Fastest-Growing Derivatives Exchanges in Asia Pacific

Source: FIA Futures and Options Monthly Volume Results 7

    Total Volume (Contracts in mn)  

Rank Exchanges in Asia Pacific Jan-Dec 2006 Jan-Dec 2007 Change YoY

1 Korea Exchange 2,475 2,709 9%

2 National Stock Exchange of India 194 380 96%

3 Dalian Commodity Exchange 120 186 55%

4 Taiwan Futures Exchange 115 115 0%

5 Osaka Securities Exchange 61 109 79%

6 Zhengzhou Commodity Exchange 46 93 102%

7 Sydney Futures Exchange 78 91 17%

8 HKEx 43 88 105%

9 Shanghai Futures Exchange 58 86 48%

10 Multi Commodity Exchange of India 46 69 50%

Derivatives Market Turnover Ranking of Major Asia Pacific Exchanges 2006-07

Derivatives Market Turnover Ranking of Major Asia Pacific Exchanges 2006-07

8

2,9642,519

1,411

7,191

6,169

1,210

4,174

8,602

IncomeOperatingExpenses

Profit BeforeTaxation

Profit attributableto shareholders

+106% +17% +145%+143%

2007 Annual Results Overview - Financial

8

*Percentages are calculated based on actual results rounded to the nearest thousand dollars.**Includes one-off gain on disposal of an associate of $206 million in 2007 and share of profits of associates in both yearsSource: 2007 HKEx Annual Report

2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007

Basic EPSDividend Per Share

+144%+144%

In $

mil

**

**

2.13

5.785.19

2.37

In $

9

Results Since Merger

9Source: HKEx Annual Reports

In $mil

Year 2000 2001 2002 2003 2004 2005 2006 2007

Income (Note) 2,312 1,998 1,813 2,029 2,407 2,712 4,174 8,602

Expenses 1,331 1,179 1,165 1,224 1,156 1,145 1,210 1,411

Profit attributable to shareholders 883 734 589 693 1,057 1,340 2,519 6,169

Note : Includes gain on disposal of an associate and share of profits of associates

8,602

2,4072,3121,998

4,174

2,712

1,813 2,029

1,1561,331 1,179 1,165 1,224

1,145 1,210

1,411

734883 1,057

1,340

2,519

6,169

589 6930

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000 2001 2002 2003 2004 2005 2006 2007

Income

Expenses

Profit attributable to shareholders

In $

mil

10

Key Performance Indicators

10Source: HKEx Annual Reports

In $mil

Year 2000 2001 2002 2003 2004 2005 2006 2007

Income (Note) 2,312 1,998 1,813 2,029 2,407 2,712 4,174 8,602

Expenses 1,331 1,179 1,165 1,224 1,156 1,145 1,210 1,411

Note : Includes gain on disposal of an associate and share of profits of associates

58% 59%64%

60%

42%

29%

42% 41%36%

40%

52%58%

71%

84%

18%14%

11% 12%

48%

16%

74%

48%

31%26%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 2001 2002 2003 2004 2005 2006 2007

Fin

anci

al R

atio

(in

%)

Cost to income ratio Pre-tax profit margin Return on equity

11

Agenda

2007 Annual Results Overview

Financial Review

Business Review

Q&A

12

Financial Highlights

2007 2006 Change$ mil $ mil

Results

Income 8,390 4,147 102%

Operating expenses 1,411 1,210 17%

Operating profit 6,979 2,937 138%

Gain on disposal of an associate 206 - N/A

Share of profits of associates 6 27 -79%

Profit before taxation 7,191 2,964 143%

Taxation (1,022) (445) 130%

Profit attributable to shareholders 6,169 2,519 145%

Basic earnings per share $5.78 $2.37 144%

Diluted earnings per share $5.72 $2.34 144%

Interim dividend declared per share $1.79 $0.94 90%

Final dividend declared per share $3.40 $1.19 186%$5.19 $2.13 144%

Dividend payout ratio 90% 90% N/A

Note : Percentages are calculated based on actual results rounded to the nearest thousand dollars.

13

Breakdown of Income

2007 2006 Change$ mil $ mil

Trading fees and trading tariff 3,086 1,340 +130%

Stock Exchange listing fees 689 466 +48%

Clearing & settlement fees 1,577 675 +134%

Depository, custody and nominee services fees 627 376 +67%

Income from sale of information 679 391 +74%

Net investment income 1,238 601 +106%

Other income 494 298 +66%

Total 8,390 4,147 +102%

Note : Percentages are calculated based on actual results rounded to the nearest thousand dollars.

14

Net Investment Income

Corporate Funds Margin Funds

Clearing House Funds

HKEx Group Total

Gross investment income ($mil) 385 1,473 92 1,950

Interest expenses ($mil) (12) (675) (25) (712)

Net investment income ($mil) 373 798 67 1,238

Average amount of funds available for investment ($mil) 7,423 39,976 2,330 49,729

Gross return 5.19% 3.69% 3.94% 3.92%

Net return 5.03% 2.00% 2.88% 2.49%

Gross investment income ($mil) 310 656 78 1,044

Interest expenses ($mil) (4) (409) (30) (443)

Net investment income ($mil) 306 247 48 601

Average amount of funds available for investment ($mil) 4,760 18,772 2,037 25,569

Gross return 6.52% 3.49% 3.84% 4.08%

Net return 6.42% 1.31% 2.39% 2.35%

Note : Percentages are calculated based on actual results rounded to the nearest thousand dollars.

2007

2006

15

Breakdown of Expenses

2007 2006 Change$ mil $ mil

Staff costs and related expenses 827 655 +26%

Information technology and computer maintenance expensesCosts consumed by the Group 135 133 +1%Costs directly consumed by Participants 73 85 -15%

208 218 -5%

Premises expenses 132 119 +11%

Product marketing and promotion expenses 14 11 +25%

Legal and professional fees 27 8 +240%

Depreciation 79 100 -21%

Other operating expenses 124 99 +26%

Total 1,411 1,210 +17%

Note : Percentages are calculated based on actual results rounded to the nearest thousand dollars.

16

Second & First Half-year Comparison

H2 2007 H1 2007 Change$ mil $ mil

Results

Income 5,233 3,157 66%

Operating expenses 745 666 12%

Operating profit 4,488 2,491 80%

Gain on disposal of an associate - 206 -100%

Share of profit of an associate - 6 -100%

Profit before taxation 4,488 2,703 66%

Taxation (649) (373) 74%

Profit attributable to shareholders 3,839 2,330 65%

Note : Percentages are calculated based on actual results rounded to the nearest thousand dollars.

17

Agenda

2007 Annual Results Overview

Financial Review

Business Review

Q&A

18

HKEx Strategic Focus and Initiatives of 2007-08

Primary market development Attract Mainland and overseas issuers Review and enhance listing regimes Review and automate listing processes

Secondary market development Remove trading barriers Facilitate participation of intermediaries Support growth in market volume

Product development Facilitate product development infrastructure Develop new products in cash and derivatives markets

Service enhancement Streamline and automate operations Improve service quality and increase service offerings

Market quality enhancement Enhance market and issuer information transparency Improve corporate governance standard of issuers

System enhancement

Business Expansion

Mainland Positioning

Service Improvement

Fo

cus

of 2

007

/08

Fo

cus

of 2

007

/08

Str

ate

gic

Th

em

e 2

00

7-0

9S

trat

eg

ic T

he

me

20

07-

09

18

19

5,548 6,696 8,180

13,338

20,698

-

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007

Mar

ket

cap

ital

isat

ion

($b

n)

Market Capitalisation and Funds Raised

19

Rise in market capitalisation from increase in the number of listed companies, and growth of their businesses

1,241 companies were listed in Hong Kong as of 31 Dec 2007

Total funds raised in 2007 exceeded 2006, even with 2006 mega-IPOs

Source: HKEx statistics

59.1 97.2165.7

333.9154.6

184.6136.1

190.7

267.9

290.6

213.7281.8 301.8

524.6 558.5

-

100.0

200.0

300.0

400.0

500.0

600.0

2003 2004 2005 2006 2007

Fu

nd

s R

ais

ed

($

bn

)

IPO equity funds raised Post-IPO funds raised

CAGR 27%CAGR 27%

IPO & Post-IPO Funds Raised (2003-07)IPO & Post-IPO Funds Raised (2003-07)Market Capitalisation (2003-07)Market Capitalisation (2003-07)

CAGR 39%CAGR 39%

20

15.96 18.3033.91

10.42

88.07

0.00

20.00

40.00

60.00

80.00

100.00

2003 2004 2005 2006 2007Avg

. Dai

ly T

urno

ver (

$bn)

.

20

Cash Market Trading

Average daily turnover in 2007 up 160% YoY

Average daily turnover of derivative warrants (DWs) in 2007 up 164% YoY

In 2007, Hong Kong ranked #1 among world exchanges in DW trading

DW makes up over 21% of overall trading value

Source: HKEx statistics

CAGR 70%CAGR 70%

Average Daily Turnover (Overall)Average Daily Turnover (Overall)

7.25

19.08

1.07 2.113.47

0.00

5.00

10.00

15.00

20.00

25.00

2003 2004 2005 2006 2007DW

Avg

. Dai

ly T

urno

ver

($bn

) .

Average Daily Turnover (DW)Average Daily Turnover (DW)

CAGR 106%CAGR 106%

21

33 48 54 802631 49

93

134

226

5979

103

174

358

0

50

100

150

200

250

300

350

400

2003 2004 2005 2006 2007

Avg

. dai

ly n

o. o

f co

ntr

acts

tra

ded

(in

'000

)

Futures contracts traded Options contracts traded

1.39

3.03

0.73 0.93

5.78

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2003 2004 2005 2006 2007

Co

ntr

acts

(In

mn

)

21

Derivatives market trading up 105% YoY Hong Kong surpassed Australia as the

most active stock options market in Asia Derivatives market turnover in Hong

Kong surpassed Singapore in 2006 and 2007

Derivatives Market Trading

Avg. daily # of contracts traded ('000):

Jan-Dec2006

Jan-Dec 2007 Growth*

Options contracts 93 226 142%

Futures contracts 80 134 66%

Major derivative products

Stock options 73 187 156%

HSI futures 51 70 37%

HHI futures 20 44 124%

* Based on average daily number of contracts tradedSource: HKEx statistics, World Federation of Exchanges website

CAGR 68%CAGR 68%

CAGR 57%CAGR 57%

Period End Open PositionPeriod End Open Position Average Daily VolumeAverage Daily Volume

22

Major Achievements – Primary Market Development

Issued joint policy statement with SFC regarding the listing of overseas companies

Published a second board model proposal for GEM

Signed MOUs with Abu Dhabi Securities Market, Moscow Interbank Currency Exchange, Hochiminh Stock Exchange and Mongolian Stock Exchange

Delivered over 140 presentations and training sessions; met with more than 580 potential listing applicants in the Mainland and overseas, including Vietnam, Thailand, Malaysia, Kazakhstan, Russia, South Korea, India, Singapore, Taiwan, Japan and Mongolia (in addition to participation in roadshows in the US, UK and Europe)

23

Major Achievements – Secondary Market Development

Revised market maker regime for futures and options

Worked with SFC to relax position limits for HSI and H-shares Index futures and options in Mar & Dec 2007

Admitted 24 new SEHK participants and 7 new HKFE participants

Introduced Third Party Clearing

24

Major Achievements – Product Development

Launched additional stock option classes with Mainland-related stocks as underlyings

Rolled out a third calendar quarter expiry month in selected stock option classes

Introduced new Mainland-related products such as: Hang Seng China H-Financial Index Futures, WISE CSI 300 China Tracker ETF and HSBC China Dragon Fund

Reduced CBBC listing fees by 70%

Facilitated listing of Market Access Products (MAPs) on foreign, regional and global stocks and indices, and commodities

25

Major Achievements – Market Quality Enhancement

Harmonised risk management measures

Implemented Phases 1 and 2 of the Electronic Disclosure Project

Conducted review of issuers’ effectiveness of the Code on Corporate Governance Practices

Published a Consultation Paper on Periodic Financial Reporting

Launched pilot programme for publication of web proof information packs (1 Jan 2008)

Published a Combined Consultation Paper on Proposed Changes to the Listing Rules (11 Jan 2008)

26

Major Achievements – Service Enhancement

Introduced a tender service for trading rights

Provided training and seminars on the Hong Kong securities market and its products

Enhanced the Stock Segregated Account with Statement Service

Improved CCASS Nominee Services

Increased immobilisation rate of CCASS holdings

Reduced delay time of market data on HKEx website to 15 minutes

Improved Issuer Information Feed Service (IIS) and fee reduction

Enhanced news alert service of Investment Service Centre on HKEx website

Launched designated website for issuer news www.hkexnews.hk (4 Feb 2008)

27

Major Achievements – System Development

Fully consolidated all cash and derivatives systems communication network to

SDNet for higher efficiency and lower operational costs

Upgraded AMS OG/MWS hardware and system software

Upgraded AMS and MDF capacity to support 5 million daily trades (28 Jan 2008)

Replaced and upgraded CCASS mainframe and middle-tier systems

Upgraded HKATS and DCASS hardware and capacity

Upgraded PRS to deliver 900 messages per second

Rolled out the Electronic Disclosure System

28

2008 Major Initiatives – Primary Market Development

Launch depositary receipts regime 3Q2008

Launch enhanced GEM regime 3Q2008

Coordinate activities with initiatives undertaken by the Government, market practitioners, industry groups and trade associations to promote the Hong Kong securities market

Ongoing

29

2008 Major Initiatives – Secondary Market Development

Roll out 5-digit stock codes 7 Apr 2008

Introduce closing auction session 26 May 2008

Discuss with SFC on suspension of tick rule for short selling 2Q2008

Discuss with interested parties to cooperate in establishing a trading platform in emissions-related products

Ongoing

Work with SFC on feasibility of admitting remote participants Ongoing

Discuss with HKSAR Government on abolition of stamp duty or broadening exemption

Ongoing

30

2008 Major Initiatives – Product Development

Launch Mini H-share index futures 31 Mar 2008

Re-launch gold futures 3Q2008

Enrich product offerings through listing of new MAPs on underlying assets such as individual securities; single market, regional, thematic, proprietary and Islamic indices; and commodities and various financial derivatives

Ongoing

Explore the listing of emissions-related and gold-related structured products and ETFs

Ongoing

31

2008 Major Initiatives – Market Quality Enhancement

Publish Consultation Conclusions on Periodic Financial Reporting

Publish second review of issuers’ compliance with Code on Corporate Governance Practices

2Q2008

29 Feb 2008

Implement changes to the suspension policy 10 Mar 2008

Implement Phase 3 of Electronic Disclosure Project 25 Jun 2008

Publish Consultation Conclusions on Combined Consultation Paper on Proposed Changes to the Listing Rules

3Q2008

Commence review of CG Code and corporate governance disclosure requirements

3Q2008

Enhance market making services 3Q2008

32

2008 Major Initiatives – Service Enhancement

Start Project LISA, Listing Information Support System 1Q2008

Develop information business in the Mainland 1Q2008

Introduce shareholding disclosure service 2Q2008

Streamline participants admission and registration function 2Q2008

Improve two-way communication channel with participants 4Q2008

Revamp HKEx website 4Q2008

33

2008 Major Initiatives – System Development

Upgrade SMART system 1Q2008

Upgrade HKATS/DCASS software to release 19.1 3 Mar 2008

Upgrade CCASS capacity to support 5 million daily trades 22 Mar 2008

Work with SFC to facilitate electronic submission of Disclosure of Interest notices

2Q2008

Upgrade PRS to deliver 2,200 messages per second 2Q2008

Upgrade CCASS middle tier technology Aug 2008

Upgrade AMS and MDF to support 7.5 million daily trades 4Q2008

Upgrade DCASS to support 2 million daily trades 4Q2008

Upgrade capacity of HKEx website and Investment Service Centre

4Q2008

Conduct review of IT governance and core market systems 2008-09

34

2008 Major Initiatives – Corporate

Identify external consultant to conduct green audit 1Q2008

Consolidate offices and data centres 2008-09

Ongoing fee review 2008-09

35

Agenda

2007 Annual Results Overview

Financial Review

Business Review

Q&A

Thank You