7.
36
11.
Your consent to exempt the dollar profits on realized investments would also, I submit, encourage sound financial methods. Should it become necessary for the Hong Kong Government to realize investments in the future, exemption would deter the Colony fran having recourse to temporary bankers' loans against its securities, instead of
selling them outright. The latter method is, I think, the sounder; but, if it involves a payment of 20% on any profit resulting from a fall in exchange, the temptation to resort
to the former method will be difficult to resist.
12.
As regards the normal accretions to the
"Suspense Account", due to the direct operations of the Crown
Agents, the above considerations broadly apply. Though the amount involved is not as yet important, I should welcome
exemption in the case of these routine realizations
principally because it would leave the Crown Agents free to
dispose of the Colony's floating balances at their own
discretion. What is involved in reality is a definition of
the term "realization". The Crown Agents normally place the
Colony's funds in various ways, long term investments, short term investments, fixed deposits, money lent at call, etc. They make and realize these investments on their own
initiative. They may recover money at call, or on fixed
deposit for the purpose of re-investment, or they may sell
Treasury Bills and short term investments in order to acquire
long dated securitics. Can it be maintained that every such
closed transaction constitutes a realization am involves the
Colonial Government in a Military Contribution liability in
the event of a drop in exchange? In order, therefore, to
allow the Crown Agents to dispose of such balances at their
own discretion and to meet temporary requirements, I should
welcome a ruling which would enable them to continue as at
present