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FINANCIAL AND MONETARY AFFAIRS

Chartered Bank and, from May 1994, the Bank of China. The first two banks also issue $10 notes. Apart from a very small fiduciary issue, which is backed by eligible securities, the note-issuing banks may only issue currency notes against holdings of Certificates of Indebtedness issued by the fund. These non-interest-bearing Certificates of Indebtedness are issued to or redeemed by the note-issuing banks as the amount of their notes in circulation rises or falls. The fund bears the costs of maintaining the note issue (apart from the proportion of the costs relating to the fiduciary issue), and the net profits of the note issue (seigniorage) accrue to the fund.

Coins of $10, $5, $2, $1, 50 cents, 20 cents and 10 cents denominations, and currency notes of one-cent denomination, are issued by the government, and the assets received against their issue are held in the Exchange Fund. The administration of the coin circulation is the responsibility of the HKMA. In 1994, the final two coins in the new series depicting the bauhinia flower were introduced - the 10-cent coin in May and the new $10 coin in November. The latter is Hong Kong's first bimetal coin, and will eventually replace the current $10 notes. The total currency in circulation at the end of 1994, with details of its composition, is shown at Appendix 15.

On December 31, 1993, the total assets of the fund stood at $348 billion, of which foreign currency assets amounted to US$43 billion. The accumulated earnings of the fund amounted to $128 billion. The financial position of the fund for the six years from 1987 to 1993 is shown at Appendix 16.