TNAG-2475-FCO40-3605-Hong-Kong-exchange-fund-report-and-accounts-for-1991-1992 — Page 43

CONFIDENTIAL

- 30 -

Unrealised 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 unrealised 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.

*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.

c. BONDS, NOTES, CERTIFICATES OF DEPOSIT AND CURRENCY OPTIONS

Purchases. Bonds, Notes, Certificates of Deposit and

Currency Options 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