TNAG-1773-FCO40-2525-Hong-Kong-Exchange-Fund-Hong-Kong-Futures-Exchange-Limited--1988 — Page 110

CONFIDENTIAL

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Commencing from the accounting year 1987,

unrealized exchange gains or losses on forward foreign exchange contracts outstanding as at the balance sheet date are brought to account in accordance with current accounting standards and practice. The unrealized gain or loss on a forward exchange contract is the foreign currency amount of the contract multiplied by the difference between the 'ruling exchange rate' at the balance sheet date and the

contracted forward rate.

C.

*NOTE: 'base exchange rates' for an accounting year are the exchange rates which were used to translate foreign currency assets and liabilities into Hong Kong dollars at the end of the preceding accounting year. These rates are used in bringing foreign currency transactions (not involving a Hong Kong dollar amount) and foreign currency income and expenditure to account during the succeeding accounting year.

BONDS, NOTES AND CERTIFICATES OF DEPOSIT

Purchases. Bonds, Notes and Certificates of Deposit are brought to account at the purchase price plus brokerage, stamp duty etcetera. Where the cost includes accrued interest, the interest is debited against income.

Sales. Sales are brought to account at the dealing price less any expenses. The difference between the amount brought to account and the book value is credited to or charged against income in the Income and Expenditure Account. When the sales proceeds include accrued interest, that element is credited to income.

CONFIDENTIAL

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