CO129-457 - Public Offices - 1919 — Page 66

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The Treasurer of Hong Kong, in the memorandum enclosed in Mr.Severn'a despatch, investigates the effect of the scheme by a comparison of the interest and sinking fund charges payable in each year.

We have dealt with the matter above by a different method, but we may observe that Mr. Thompson's figures cannot be taken as producing a fair comparison, not only because he assumes a price of 70 instead of 75, but also because he takes 3 per cent as the basis of the sterling loan sinking fund, whereas in fact the yield on the investments in the latter has for a long time been more than 3 per cent and is at present over 54 per cent. For the purpose of comparing the advantages of the dollar loan with those of allowing the sterling loan to continue, the rates earned by the sinking fund investments in the past are of no importance and it is only the rates that may be earned in future that require to be considered. The rate may continue at about 5 as at present or may fall; but the same uncertainty exists with regard to the assumed rate of 6 per cent for the dollar sinking fund, and the latter is further dependent on the possibility of finding suitable dollar securities for investment. There may indeed be some difficulty here, Indian or Straits Settlements securities not being suitable because of the gold exchange standard in those countries.

I have the honour to be,

Sir,

Your obedient Servant,

иот тим

for Crown Agents.

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DENMAAR N

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