SFC FINANCIAL STATEMENTS

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Securities and Futures Commission
Notes to the Financial Statements
(Expressed in HK$'000)
I	STATUS OF THE SECURITIES AND FUTURES COMMISSION (SFC)
	The SFC was established under and is governed by the Securities and Futures Commission Ordinance ("the Ordinance").
2	INCOME
	Details of the funding of the SFC are set out in Sections 52 to 54 of the Ordinance. In particular,
	a	The SFC receives a share of the levies collected by the Stock Exchange of Hong Kong Limited and the Hong Kong Futures Exchange Limited on transactions recorded on the Exchanges at rates specified by the Chief Executive in Council.
	b	In each financial year, the SFC shall be paid out of general revenue such moneys as shall be appropriated by the Legislative Council. At the request of the SFC, no appropriation has been made since the financial year ended 31st March 1994.
	c	Subsidiary legislation provides for the payment to the SFC of fees or other charges in relation to the functions and services performed by the SFC.
3	SIGNIFICANT ACCOUNTING POLICIES
	These accounts have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice and accounting principles generally accepted in Hong Kong. A summary of the significant accounting policies is set out below.
	a	Depreciation
		Depreciation is calculated to write off the cost of fixed assets over their anticipated useful lives on a straight line basis. The principal depreciation rates used are as follows :

		Leasehold improvements	- over the shorter of the period of the    respective leases and three years
		Furniture and fixtures	- 33 1/3% per annum
		Office equipment	- 20% per annum
		Personal computers and software	- 33 1/3% per annum
		Mainframe computers and application systems	- 25%per annum
		Motor vehicles	- 25%per annum

	b	Investments
		Investments, representing dated securities which are intended to be held to maturity, are stated at cost adjusted for the amortisation of premiums and accretion of discounts on purchase over the periods to redemption. Provisions are made where there has been a permanent diminution m value.

	c	Recognition of income
		(i)	Levies
			Levies from the two Exchanges are credited to the income and expenditure account on an accruals basis.
		(ii)	Fees & charges
			Annual fees from registered persons and in respect of authorised investment arrangements are credited to the income and expenditure account on a straight line basis over the periods to which they relate. Other fees and charges are credited to the income and expenditure account when receivable.
		(iii)	Investment income
			Investment income is credited to the income and expenditure account on an accruals basis. It comprises interest earned on bank deposits and dated securities and the premium or discount on purchase of dated securities amortised or accreted on a straight line basis over periods to redemption.
	d	Operating leases
		Rental payable under operating leases is accounted for on a straight line basis over the period of the leases.

4	TAXATION
	In accordance with section 3(3) of the Ordinance, the receipts of the SFC are not subject to Hong Kong taxation under the Inland Revenue Ordinance.
5	PERSONNEL EXPENSES
	a	Personnel expenses comprise:

1998

1997

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	Directors' fees	$             1,170		$             1,170
	Directors' salaries, allowances and gratuities	23,188		22,017
	Directors' bonuses	785		718
	Staff salaries, allowances and gratuities	184,715		171,969
	Retirement benefits	2,930		2,741
	Medical and life insurance	5,510		4,847
	Overtime pay	1,086		918
		$          219,384		$          204,380
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	b	The number of directors whose emoluments fell within the following bands were:

		1998		1997
		No. of directors		No. of directors

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	Emolument Ranges
	$0 to $1,000	7		6
	$3,000 to $3,500	--		1
	$3,500 to $4,000	2		--
	$4,000 to $4,500	1		2
	$4,500 to $5,000	1		1
	$5,500 to $6,000	--		1
	$6,000 to $6,500	1		--
		12		11
		===========		===========

	c	The five highest paid individuals during the year were all directors of the SFC, the aggregate remuneration of whom has been included in 5(a) and (b) above.
	d	Retirement benefits are provided to certain categories of staff through a defined contribution scheme. The SFC makes monthly contributions equal to 12% of the basic salary of such staff. Forfeited contributions in respect of staff who leave the SFC prior to qualifying for 100% disbursement of the contributions are reinvested into the total pool of contributions and shared by the existing members in the scheme at the end of the scheme year. The amount so reinvested during the year was $346 (1997 : $492).

6	OTHER EXPENSES
	Other expenses comprise:

1998

1997

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	Training and development	$               8,875		$               8,332
	Legal and professional services	30,164		28,103
	Legal claims and costs awarded	400		5,500
	Information and systems services	8,171		9,249
	Auditors' remuneration	140		131
	General office and insurance	14,176		4,621
	Funding for the Hong Kong Securities Institute	10,000		--
		$             71,926		$             55,936
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