CO129-625-1 Trading Reserve Fund 1-5-1950 - 31-10-1951 — Page 57

- 3 -

3.

59

account in Hong Kong.

4.

In the event, Scott and English Limited were

frustrated by political events from fulfilling their con-

tract to deliver ramie to Japan, and no debit was in fact

received from S.C.A.P., although it later transpired that

S.C.A.P. had made an entry in his own version of the Hong

Kong Government account.

5.

Sterling was revalued in September, 1949, and. the immediate cost of replacing US$600,000 in the Hong Kong/

S.C.A.P. Account was raised in terms of Hong Kong dollars

by some 40%. The fact that S.C.A.P. had debited the Hong Kong account with the adjusted final balance of US$572,000

Scott and English Limited were then call-

was ascertained.

ed upon to pay in cash the full amount involved converted

at the new exchange rate of 5.76 to 1. Payment of the sum converted at the old rate of 4.02, plus commission of 1%

was accepted pending settlement of the exchange difference

resulting from revaluation. The difference on US$440,000

was set off against an equivalent exchange entitlement

earned by an associate firm by exports of iron ore to Japan. This entitlement had, by the time agreement was reached,

lapsed under normal rules for exchange utilisation, but the

question of lapsing was complicated, not only by the firm's

knowledge of the pending claim, but also by an obligation

assumed by themselves to use, and by the Hong Kong Govern- ment to permit the use of, 80% of the exchange proceeds of

the export contract for iron ore for the purchase of wool-

len textiles. S.C.A.P. had made this a condition of his

purchase of iron ore, but was finally persuaded by the

firm to release them and the Hong Kong Government from

the obligation.