ENG-2004 — Page 582

512 Appendices

amounts payable at the balance sheet date with the revaluation differences included in other liabilities. Placements by other HKSAR government funds for which interest is payable at rates determined by reference to the investment income of the Fund are stated at the principal amounts payable at the balance sheet date.

(e) Translation of foreign currency assets and liabilities

Assets and liabilities denominated in foreign currencies are translated into Hong Kong dollars at the rates of exchange ruling at the balance sheet date. Exchange gains and losses on foreign currency translation are included in the Income and Expenditure Account. Certificates of Indebtedness, government-issued currency notes and coins in circulation, all of which are denominated in Hong Kong dollars but are issued and redeemed in US dollars at the linked exchange rate of US$1-$7.80, are stated in the accounts at their Hong Kong dollar face value. At the balance sheet date the difference between their Hong Kong dollar face value and the market value of the US dollars required for their redemption is included in Hong Kong dollar assets.

(2) As backing for the banknote issues, each note-issuing bank is required to hold a non-interest bearing Certificate of Indebtedness issued by the Financial Secretary. Payments for the issuance and redemption of notes against these Certificates are made in US dollars at the fixed rate of US$1=HK$7.80.

(3) Under the interbank payment system based on Real Time Gross Settlement principles, all licensed banks maintain a Hong Kong dollar clearing account with the Hong Kong Monetary Authority for the account of the Exchange Fund. The aggregate balance in these accounts represents the total level of liquidity in the interbank market.

(4) These represent placements by other HKSAR government funds with the Exchange Fund. Until 31 March 1998, all placements by other HKSAR government funds bore interest at market-based rates. With effect from 1 April 1998, the basis of interest payable on certain placements by other HKSAR government funds was amended from market-based rates to rates determined by reference to the investment income of the Fund.

(5) Other liabilities include placements by banks and other financial institutions, placements by Hong Kong statutory bodies, interest payable on Exchange Fund Notes and placements by other HKSAR government funds, revaluation losses on off-balance sheet items which are marked to market, other accrued expenses and provisions and the revaluation differences of placements by other HKSAR government funds for which interest is payable at market-based rates.

Source: Hong Kong Monetary Authority.

(Enquiry Telephone No.: 2878 8222)