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Hong Kong Ferry (Holdings) Co. Ltd.

Notes on the Accounts

1. PRINCIPAL ACCOUNTING POLICIES

(1) Other investments in securities

(i) Non-trading securities are stated in the balance sheet at fair value. Changes in fair value are recognised in the securities revaluation reserve until the security is sold, collected, or

otherwise disposed of, or until there is objective evidence that the security is impaired, at

which time the relevant cumulative gain or loss is transferred from the securities revaluation

reserve to the profit and loss account.

(ii) Transfers from the securities revaluation reserve to the profit and loss account as a result

of impairments are reversed when the circumstances and events that led to the impairment

cease to exist and there is persuasive evidence that the new circumstances and events

will persist for the foreseeable future.

(iii) Profits or losses on disposal of investments in securities are accounted for in the profit and

loss account as they arise. In the case of non-trading securities, the profit or loss includes

any amount previously held in the securities revaluation reserve in respect of that security.

(m) Translation of foreign currencies

Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary assets and liabilities in foreign

currencies are translated into Hong Kong dollars at the exchange rates ruling at the balance

sheet date. Exchange gains and losses on foreign currency translation are dealt with in the

profit and loss account.

(n) Deferred taxation

Deferred taxation is calculated under the liability method in respect of the taxation effect

arising from all material timing differences between the accounting and tax treatment of

income and expenditure, which are expected with reasonable probability to crystallise in

the foreseeable future.

Future deferred tax benefits are not recognised unless their realisation is assured beyond

reasonable doubt.

(0) Operating leases

Payments under operating leases are charged to the profit and loss account on a straight

line basis over the periods of the respective leases.