TNAG-1773-FCO40-2525-Hong-Kong-Exchange-Fund-Hong-Kong-Futures-Exchange-Limited--1988 — Page 173

CONFIDENTIAL

FM HONG KONG

TO PRIORITY FCO

TELNO 1243

OF 29075UZ MARCH 88

CONFIDENTIAL

HKC 105.

RECEIVED IN REGISTRY

29 MAR 1988

SK OFFICER

REGISTHY

PA

030417

MDLIAN 6062

Action Taker

TOP COPY a DIST ?

EXCHANGE FUND ORDINANCE

-

APPROVED INVESTMENTS

IN MY TELNO 1193 OF 12 AUGUST 1983, YOUR APPROVAL WAS SOUGHT IN ACCORDANCE WITH SECTION 3(S) OF THE EXCHANGE FUND ORDINANCE TO TRANSFER INTER ALIA THE HONG KONG AIR CARGO TERMINALS LIMITED (HACTL) SHARES HELD BY THE DEVELOPMENT LOAN FUND TO THE EXCHANGE FUND.

APPROVAL WAS GIVEN IN YOUR TELNO 772 OF THE SAME DATE.

2. AS A RESULT OF THIS TRANSFER, THE FUND HAS A 10 PER CENT EQUITY STAKE IN HACTL, THE OTHER SHAREHOLDERS BEING SWIRE (30 PER CENT), JARDINE (30 PERCENT), WHARF (15 PER CENT) AND HK INTERNATIONAL TERMINALS (15 PER CENT). THE INVESTMENT HAS PROVED PROFITABLE TO

THE EXCHANGE FUND OVER THE YEARS AND THE CURRENT ANNUAL DIVIDEND

REPRESENTS A RETURN ON COST OF 30.28 PER CENT.

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PROJECTIONS OF CARGO THROUGHPUT INDICATE THAT A SECOND CARGO

HANDLING TERMINAL WILL BE REQUIRED AT KAI TAK BY 1991. AFTER

PROTRACTED DELIBERATIONS, THE HACTL BOARD AGREED AT A SPECIAL

MEETING ON 22 MARCH 1988 TO GO AHEAD WITH THE TERMINAL 2 PROJECT.

4.

THE COST OF TERMINAL 2 IS ESTIMATED TO BE HKD1,190 MN. IT IS

PROPOSED TO FINANCE THIS SUM BY WAY OF BANK LOANS OF HKD1,050 MN

AND INTEREST-BEARING SHAREHOLDER LOANS OF HKD150 MN. ALTHOUGH IT

WOULD BE POSSIBLE TO OBTAIN 100 PER CENT FINANCING ARRANGEMENTS THROUGH BANK LOANS, THE BOARD FELT THAT IT WOULD STRENGTHEN THE COMPANY'S POSITION IN NEGOTIATIONS OVER TERMS IF IT COULD BE SHOWN

THAT THERE WAS SOME MEASURE OF SHAREHOLDER SUPPORT. GIVEN THE

FUND'S 10 PER CENT SHARE-HOLDING, IT WOULD BE REQUIRED TO LEND HKD15 MN.

5. AT A MEETING OF THE EXCHANGE FUND ADVISORY COMMITTEE HELD LAST

FRIDAY, 25 MARCH 1988, MEMBERS AGREED TO THE LOAN SUBJECT TO YOUR APPROVAL BEING OBTAINED. ACCORDINGLY, YOUR APPROVAL UNDER SECTION 3(2) OF THE EXCHANGE FUND ORDINANCE TO THE MAKING OF A LOAN OF HKD15 MN TO THE COMPANY IS SOUGHT. IF APPROVAL IS GIVEN, LESS THAN

4 PER CENT OF THE NOTE AND COIN ISSUE LIABILITIES OF THE FUND

COMPARED WITH THE 10 PER CENT LIMIT WILL BE INVESTED IN EQUITIES.

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