FRICKITY
CYPHER/CAT A GFS 350
FM FCO 291955Z
SECRET
ORWELL
DESKBY 306208Z
DECRET
226
(FF 9/393/D IN
REGI
V
No. 1
5 DEC 1973
PA
HKK 5/1
sti
TO PRIORITY GOVERNOR HONG KONG TEĹNO 1226 OF 29 NOVEMBER 1973
YOUR, TEL NO 1361: STERLING GUARANTEE
3x1
230
1. ON THE BASIS OF YOUR TEL NO 1133 TAKEN IN CONJUNCTION WITH
PARAS 5 AND 16 OF YOUR TEL. NO 1117, AND PARAS 1 AND 2 OF YOUR TEL
NO 1215 WE HAD ASSUMED THAT YOU WERE CONTENT TO CONTINUE WITH THE
CONVENTIONAL BOOK VALUATION BASIS. THIS WAS ACCEPTABLE TO US SINCE
IT 13 BASED ON CR 236 AND WE WERE PREPARED TO REGARD IT AS EQUIVALENT TO STATUTORY FOR THE PURPOSES OF PARA 6(3)(B) OF THE DECLARATION. 2. HOWEVER, IN THE SPECIAL CIRCUMSTANCES THAT YOU HAVE DESCRIBED, WE ARE WILLING TO AGREE THAT THE CALCULATION OF HONG KONG'S
MINIMUM STERLING HOLDING UNDER PARA 3 OF THE DECLARATION CAN BE
EASED ON CURRENT MARKET VALUE ON EACH REPORTING DATE. WE ARE THUS
PREPARED TO TAKE AS STARTING POINT THE STERLING FIGURE FOR 26 SEPTEMBER OF C313 MILLION, AND TO AGREE TO TREAT THE REFERENCES IN PARA 3 OF THE DECLARATION TO MSP FIXED FOR THE PURPOSES OF THE
STERLING AGREEMENTS AS REFERENCES TO A MSP OF 73%.
3. ACCEPTANCE OF CURRENT MARKET VALUE FOR THE CALCULATION OF MINIMUM STERLING HOLDING MEANS OF COURSE THAT THIS BASIS WOULD BE
USED IN THE CALCULATION OF ANY IMPLEMENTATION PAYMENT AND INDEED
FOR ALL PURPOSES OF THE DECLARATION.
4. WE ALSO DRAW ATTENTION TO PARA 5 OF OUR TEL NO 1133 WHICH APPLIES
MUTATIS MUTANDIS WITH THE MODIFIED VALUATION BASIS. THIS MEANS THAT THERE MAY BE CIRCUMSTANCES, EVEN ON THE MARKET VALUATION BASIS, IN WHICH STERLING PURCHASES ARE REQUIRED CONSISTENTLY WITH THE TERMS OF THE DECLARATION. WE INTERPRET PARA 2 OF YOUR TEL NO
1351 AS INDICATING THAT YOU ACCEPT THIS, BUT WOULD BE GRATEFUL FOR
CONFIRMATION THAT THERE IS NO MISUNDERSTANDING ON THIS POINT.
5. WE HAVE FELT ABLE TO ACCEPT THIS SWITCH TO MARKET VALUATION
AND A LOWER MSP CORRESPONDING TO THAT BASIS, IN THE LIGHT OF YOUR
SPECIAL DIFFICULTIES IN THIS MATTER, WHICH WE RECOGNISE. BUT IT
IS. MOST UNLIKELY THAT OTHER HOLDERS WOULD SEE THIS MODIFICATION IN
THE SAME LIGHT, AND IT IS THEREFORE ESSENTIAL THAT IT SHOULD NOT BE
Chien de Befę (Kendall)
SECKET
/PUBLICISED.