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The Hong Kong Mortgage Corporation Limited

The Hong Kong Mortgage Corporation Limited (HKMC) made the following announcement today (Thursday).

Financial Results for 2007

The HKMC and its subsidiaries (the HKMC Group) recorded 8.5% growth in its 2007 profit after tax to a record of HK$740.7 million.

Return on shareholders' equity was 13.7% (2006: 13.9%). The capital-to-assets ratio remained strong at 11.2% (2006: 11.2%), well above the minimum requirement of 5%. The cost-to-income ratio was 13.6% for 2007 (2006: 13.5%). The financial results of the HKMC Group are at Annex A.

The Board recommended and the Shareholders approved a final dividend of HK$250 million or HK$0.125 per share, representing a dividend payout ratio of 33.8% for the year.

Business Performance

The loans purchased in 2007 amounted to HK$9.6 billion (2006: HK$6.4 billion), including HK$3 billion of residential mortgage loans, HK$1.1 billion taxi and public light bus hire purchase assets in Hong Kong, and overseas purchase of US$700 million (HK$5.5 billion equivalent) residential mortgage loans from Korea. The Corporation has maintained its strong commitment to risk management and did not purchase any sub-prime mortgage loans or invest in any sub-prime related products. Taking into account loan repayments and prepayments due to competitive refinancing in the local mortgage market, the outstanding principal balance of the loan portfolio was HK$34.5 billion as at 31 December 2007 (2006: HK$32.4 billion).

The Mortgage Insurance Programme (MIP) continued to enjoy good public acceptance. Mortgage insurance coverage for newly originated mortgage loans rose from HK$9.2 billion to HK$13.2 billion in 2007 and the market penetration ratio was around 12%. As 90% of the drawdown in 2007 was on properties in the secondary market, this demonstrated again the importance of the MIP to help homebuyers in the secondary market.

In terms of debt issuance, the prudent and cost-effective pre-funding ahead of the sub-prime mortgage crisis and global credit crunch helped the Corporation to weather the volatile market conditions and make funding available for mortgage purchase and refinancing in the second half of 2007. The HKMC issued a total of HK$16.4 billion corporate debts under its Debt Issuance Programme and Retail Bond Issuance Programme in 2007, making the HKMC the most active corporate debt issuer in the Hong Kong dollar market for the seventh consecutive year. In March 2007, the HKMC offered a total value of HK$925 million equivalent of retail bonds to the public. In June 2007, the HKMC successfully established the multi-currency US$3 Billion Medium Term Note Programme to broaden its investor base and funding sources in the international market. This can help to develop a quasi-sovereign benchmark for Hong Kong to further promote the development of the regional bond market. This also paved the way for the launch of cost-effective US dollar bond issues in early 2008. As at 31 December 2007, the total amount of outstanding debt securities and mortgage-backed securities issued were HK$33.3 billion and HK$4.2 billion respectively.

Riding on the solid performance through the past 11 years, the HKMC is the first and so far the only triple-A rated institution in Hong Kong achieving long-term local and foreign currency debt ratings of Aaa (stable outlook) from Moody's and AA (positive outlook) from Standard & Poor's.

The Corporation will seek opportunities to improve its product range and continue with its business diversification strategy to maintain its viability and strengthen its ability to provide liquidity to local banks when necessary and meet mortgage insurance needs of the homebuyers.

As part of its overseas diversification, the HKMC signed an agreement in December 2007 with Cagamas Berhad, the national mortgage corporation in Malaysia, to set up a joint venture offering mortgage guarantees to banks in Malaysia. The Corporation will also seek to promote its business model in other markets in the region and the Middle East.

"The good performance in 2007 reflects the successful implementation of the Corporation's business diversification plan and the effectiveness of its funding strategy. I am confident the HKMC will again rise to the challenge in 2008, and meet its objectives of reinforcing banking stability and promoting home ownership and debt market development in Hong Kong," said Mr John C Tsang, Chairman of the HKMC.

Appointment of Board of Directors

The HKMC held its 11th Annual General Meeting today. Thirteen directors have been re-appointed by the Financial Secretary for another term - Mr Ronald Arculli, Professor K C Chan, Mr Chan Kam-lam, Mr Chan Kin-por, Ms Eva Cheng, Professor Anthony Cheung, Mr Eddy Fong, Mr Andrew Leung, Dr David Li, Mr Geoffrey Mansfield, Mr Abraham Shek, Mr Sin Chung-kai and Mr Eddie Tan. The Financial Secretary appointed Mr David Lam as a new Director to replace Mr Andy Hon who had not offered himself for re-appointment. The composition of the new Board of Directors is at Annex B.

"On behalf of the Board, I would like to thank Mr Andy Hon, the outgoing Director, for having generously contributed his time and professional skills to assist in the efficient management of the Corporation. I would also like to welcome Mr David Lam, the new Director, and look forward to his support in furthering the development of the business of the Corporation." said Mr Tsang.

According to the Articles of Association of the Company, at each Annual General Meeting all those Directors who are not Executive Directors shall retire but shall be eligible for re-appointment. Hence, the term of office of these Directors will run until the next Annual General Meeting to be held around April 2009.

Annex A & B

The Hong Kong Mortgage Corporation Limited
10 April 2008

Last revision date: 1 August 2011
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