CONFIDENTIAL
46
24.
INVESTMENT EQUALISATION RESERVE
A transfer from the reserve of $558,480,276.36 being the
unrealized loss for the first half of 1987 was ratified at the
meeting of the Exchange Fund Advisory Committee held on
6 November 1987. A further unrealized loss of $88,129,847.81 in respect of the second half of 1987 has been offset against the reserve, making a total of $646,610,124.17 for 1987.
25.
CONTINGENCY RESERVE
It may be necessary to provide additional assistance to the
Hang Lung Bank Limited and to the Overseas Trust Bank Limited
to enable those banks to comply with the Banking Ordinance. The amount of the assistance will depend on the outcome of litigation arising or which may arise from events occurring prior to the acquisition of these banks by Government, on the banks' ability to recover bad and doubtful debts and on their performances before they are eventually sold. Early in 1987 a claim was received by Hang Lung Bank from the liquidator of Dollar Credit & Financing Limited for US$54 million in respect of certain transactions alleged to have taken place in September 1982, i.e. before the bank was taken into Government ownership. The bank has taken legal advice and been advised that it has a good defence to the claim. Nevertheless, the directors of the bank felt it necessary to approach the Financial Secretary for renewed assurances that the shareholder (Financial Secretary Incorporated) would continue to provide such assistance and support as might be necessary to enable it to meet its obligations. These assurances have been given. No further action has so far been taken by the liquidator. In the circumstances it has not been felt necessary at this stage to set aside any funds in respect of this possible claim.
CONFIDENTIAL
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