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SALE OF FOREIGN BONDS OR SECURITIES
IN THE UNITED STATES
HEARINGS
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
SEVENTY-SECOND CONGRESS
FII5ST SESSION
PDKSUANT TO
S. Res. 19
A RESOLUTION AUTHORIZING THE FINANCE COMMITTEE
OP THE SENATE TO INVESTIGATE THE SALE, FLOTATION, AND ALLOCATION BY BANKS, BANKING
INSTITUTIONS, CORPORATIONS, OR INDIVIDUALS OF FOREIGN BONDS OR SECURITIES IN THE UNITED STATES
PART 3
JANUARY 8, 11, 12, 13, 14, AND 15, 1932
Printed for the use of the Committee on Finance
92929
UNITED* STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1032
COMMITTEE ON F I N A N C E
REEO SMOOT, Ufa*. Chairm**
VAT ITAULILHON. UFMTEIPPL.
WILLIAM II.
rtftb,
WALTER F. nnOROfX Gwrfrt*.
L)AVFF> L WALK!?. MMWthttMtf.
AU1EX W. SlARKLtJT, Kcomekj.
TOM CO.VNALLY,
THOMAS P. QOftfX Ofctabotti.
EDWABD P. COSTIGAN, CoJortd^
COR DELL HULL, T f r n f i t * ^
JAMES E, WATSON, LNDIAA*.
DAVID A. HEED, PeunsjlTanU.
SAMUEL M. SHOUTMDGE, CALIFOFTTTE.
JAMES CGUZENS, MICBTSTT*.
HENRY W. KEYES, NEW IUMP»HLRE.
HIRAM BINGHAM, CONNECTICUTROBERT M. U FOLLETTE, JR., WTTKWOSIO.
JOHN THOMAS, IDAHO.
WESLEY L. JONES, WAIHTNGTCM.
JESSE H. METCALF, RHODE ULTND,
Itjuc M. SnwiicT,
n
Clerk
CONTENTS
Testimony o f —
Breck, Henry C
J. & W . Seligman & Co
Dennis. Lawrence
Kemmerer, Prof. Edwin Walter
Lancaster. W . W
Lisnian, Frederick J
Mathews. II. Freeman. Department of State
Morris, Hay. Brown Bros., Harriman & Co
Mnrimue, (ieor^e, Lee Hijrpinson & Co
Scliot*ppc?rle, Victor, National City Co
Stahl, Lionel, J. & W. Seligman & Co
Strauss, Frederick, J. & W . Seligman & Co
Townsend, Oliver C., Department of Commerce
White, Francis, Assistant Secretary of State
1280,1305
— —
1579
1604
1681
1765
1787,1826
1564
1503
1623,1658
1305
1268, 1305
1610
1S49,1906
XII
SALE OF FOREIGN BONDS OB SECURITIES IN THE
UNITED STATES
FRIDAY, JANtTABY 8, 1932
UNITED STATES SENATE.
COMMITTEE ON F I N A N C E ,
Washington* D. G.
The committee met at 10 o'clock a. m.? pursuant to adjournment on
yesterday, in the committee hearing room in the Senate Office Building Senator Reed Smoot presiding.
Present: Senators Sinoot (chairman), Shortridge, Reed, Couzens,
Thomas of Idaho. Jones, Harrison, King, George, Connally, and
Gore.
Present also: Senator Johnson.
The C H A I R M A N . The committee will come to order.
Senator JOHNSON. Mr. Chairman, before you proceed with the
testimony may I say that in the early daj^s of this investigation something was said by me about a moratorium for Ireland. It was a
passing remark in a little colloquy that was more or less of no significance, but I have a letter from the Envoy Extraordinary and
Minister Plenipotentiary of the Irish Free State, in which he says
" The Irish Free State has never asked for a moratorium."
And he asks that the particular remark be corrected. Therefore,
Mr. Chairman, I ask that his letter be placet! in the record in order
that no inaccuracy, even involuntarily or unwittingly spoken, may
occur.
The C H A I R M A N . It will be printed in the record at this point.
Senator JOHNSON. I thank you.
LEGATION OF THE IRISH FREE STATE.
Washington,
D. C., January 6, 1932.
H o n . H i RAM W . JOHNSON,
United States Senate, Washington, D. C.
MY DEAR SENATOR JOHNSON : On reading through the report of the hearings
, lief ore the Committee on Finance of the United States Senate for December
18, 1831, I was much surprised to learn that in reply to a Query by Senator
Barkley you stated that Ireland " a s k e d England for a moratorium and wasdeclined." I do not know on what authority you made this statement but Ican assure you that no foundation for it exists. My Government has not asked!
England or any other country for a moratorium for the very good reason that
our budgetary conditions are sound. The Irish Free State has no war debt
obligations. Her capital liabilities are comparatively small and, as Mr. Charles
E. Mitchell pointed out to you, " she has enjoyed one of the finest positions of
credit" in this country.
I shall esteem it a favor if you will be good enough to bring this rectification
to the notice of the Committee on Finance as I am sure you will be only too
anxious to do justice to a country that has so much in common with the United
States of America.
I am. my dear Senator Johnson,
Very truly yours,
Envoy Extraordinary
#
M.
and Minister
MACWHITE,
Plenipotentiary.
1267
1268
SALE OF FOREIGN BONDS OR SEC UNITIES
TESTIMONY OF IEEDERICK STRAUSS, OF J. & W. SELIGMAH & CO.,
HEW YORK CITY
(The witness was duly sworn bv the chairman of the committee.)
The CHAIRMAN. Mr. Strauss, whom do ^ou represent i
Mr, STRAUSS. J. & W. Seligman & Co., JMJW York.
The CHAIRMAN. Your house has dealt quite extensively in foreign
loans, I take it?
Mr. STRAUSS. Our house has dealt to some extent in foreign loans,
but not as extensively perhaps as some other houses.
The CHAIRMAN. DO you have with you a record of all those
foreign loans!
Mr. STRAUSS. We have it here, yes, Mr. Chairman.
The CHAIRMAN. Senator Johnson, you may proceed.
Senator JOHNSON. Mr, Strauss, it you have a statement of the
foreign loans that you have made we would like to take that and
insert it in the record first.
Mr. STRAUSS. We will be glad to furnish such a statement to you,
butfirstI might give you a summary, if you wish.
Senator JOHNSON. If you have "a copy of vour statement that
could be given to the committee reporter ana be inserted in the
record, I should be glad.
Mr. STRAUSS. I will turn these over to you.
Senator JOHNSON. I do not want to take the only one you havef
if that is the fact.
Mr. STRAUSS. Oh, no. We have duplicates.
Senator JOHNSON. All right. I thank you.
Mr. STRAUSS. We have here every one of the foreign loans we
were connected with, in detail, and afso a summary.
The CHAIRMAN. Have you copies of those statements, Mr. Strauss?
M r . STRAUSS. O h , yes.
The CHAIRMAN. Just furnish them to the committee reporter and
they may be made a part of the record at the end of your testimony.
Mr. STRAUSS. Very wellSenator JOHNSON. I am now looking at the summary which you
have furnished the committee, if you please, for the statement that
I now interrogate you about: I see that there were 13 issues originated by your establishment.
Mr. STRAUSS. That is correct.
Senator JOHNSON. Now if you will follow me, please, Mr. Strauss*.
Mr. STRAUSS. Senator Johnson, do you wish me to answer each
time that it is correct?
Senator JOHNSON. Yes, I will put the querv in the form of a
question, and will do it as rapidly as possible if you have no
objection.
Mr. STRAUSS. Oh, certainly.
Senator JOHNSON. In your summary furnished for the committee
you have under " Business Originated " 13 issues, the principal
amount of which were $144,958,000, and I will now use round numbers only, showing $6,000,000 retired by sinking fund, with principal
amount now outstanding $138,000,000, and the total gross profit of
J. & W. Seligman & Co. being $1,003,192.51.
M r . STRAUSS. Y e a
1269
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator J O H N S O N . Y O U were the members of the original group,
I see by this summary, in 11 different instances, the principal
^amount being $83,000,000, of which there has been retired by sinking
fund or total redemption $63,000,000 in round numbers, and leaving
principal amount now outstanding $19,000,000, with a total gross
profit to J. & W. Seligman & Co. of $116,371.15. Is that correct?
Mr. STRAUSS. That is correct. And may I say this at this point?
^Senator JOHNSON. All right.
Mr. STRAUSS. When we say we were members of the original
groups that means members of groups which were led by other
houses than ourselves and .we merely participated as original members along with them.
Senator JOHNSON. That is my understanding of the situation.
But in 13 instances, as shown by this summary, you yourselves
"were the original sponsors of the securities.
M r . STRAUSS. Y e s .
Senator JOHNSON.
And in 1 1 instances you were yourselves members in a secondary capacity along with groups handling securities
sponsored by others.,
Mr. STRAUSS. That is correct.
Senator JOHNSON. In addition to that you appeared as "Members of Appearing Group " in the case of issuance of securities in
•connection with 17 issues; is that correct?
Mr. STRAUSS. That is correct also.
Senator JOHNSON. The principal amount of which loan was
$2,288,494,000, and from which vour total gross profits were $201,702.01.
Mr. STRAUSS. That is correct also.
Senator JOHNSON. The total amount of your profits, therefore, as
shown by your summary, was $1,321,265.67, and that was upon
issues of bonds or securities included in the three categories ? That
is, in the case of issues where you appeared as the sponsor, and also
as a member of the original group, and also as a subsidiary of the
•original group, the principal amount of which issues in round numbers was $1,516,000,000. Is that correct?
Mr. STRAUSS. That is correct. Of course your question implies
the situation, but I want to make it entirely clear, if I may.
Senator JOHNSON. YOU should do so in each instance, please, for
if you desire to make any explanation I will be glad to have you
take an opportunity to do so.
Mr. STRAUSS, That our interest in that principal amount of $ 1 , 2 8 8 , 494,000 of securities was a very much smaller sum than that, quite
naturally.
Senator JOHNSON. From the testimony we have heretofore taken,
I think that would be obvious.
Mr. STRAUSS. All right, if that is understood.
Senator JOHNSON. N O W , these issues were constituted as follows:
In the business originated by you in Latin America there was a
total of $128,233,000. Is that correct?
Mr. STRAUSS. That is correct.
Senator JOHNSON. Of which you were the original group in
$22,000,000?
Mr, STRAUSS. No; and may I explain that?
1270
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON. Yes; I will be glad for you to do so.
Mr. STRAUSS. The business originated by us aggregated, in round
numbers, $128,000,000. You understand "that I am skipping the
oddfiguresnow.
Senator JOHNSON. All rightMr. STRAUSS. We participated in business originated by others to
the extent of §22,000,000. That is, that was not our participation
but the total group was $22,000,000, and wo appeared m a subordinate capacity in the manner you explained before, in Latin America
in issues aggregating $77,000,000. Or, in other words, a total of
$227,000,000 in Latin America. Then, the next column is Europe,
and then you will see Japan.
Senator JOHNSON. NOW, in Europe the aggregate amount was
$1,099,000,000?
Mr. STRAUSS^ Comprising all three categories; yes.
Senator JOHNSON. The largest of which is as a member of the
appearing group, $991,000. Is that correct I
Mr. STRAUSS. Yes; $991,000,000.
Senator JOHNSON. I am sure you can pardon an old man getting
a little mixed as between millions and billions in an investigation
of this kind,
Mr. STRAUSS. Well, I am still older and perhaps more mixed myself.
Senator JOHNSON. All right. I observe here that you were a member of an appearing group in a loan to Japan amounting to $220,000,000. Is that correct?
Mr. STRAUSS. Yes; in two issues*
Senator JOHNSON. I want to turn first to the dates of your issue
to Japan, if you please.
Mr. STRAUSS. All right.
Senator JOHNSON. Or, perhaps we can identify them in another
fashion. Do you know whether one of these was a loan sponsored by
J. P. Morgan & Co. just after the earthquake in Japan I
Mr. STRAUSS. Yes; in 1924. That is*correct.
Senator JOHNSON. And that loan was for how much?
Mr. STRAUSS. The total of the loan was $150,000,000.
Senator JOHNSON. What was your participation in that? But,
first, that was in February of 1924?
M r , STRAUSS. Y e s .
Senator JOHNSON. And that loan was offered at 9*2
M r . STRAUSS. Y e s .
Senator JOHNSON. What was your participation in that loan ?
Mr. STRAUSS. In that loan we" had an interest as follows: In the
purchase group $300,000, in the distributing group $300,000, and
in the selling group a very small interest, of $15,000.
Senator JOHNSON. Do you remember what was the original purchase price of that loan ?
*
Mr. STRAUSS. Well, I don't know about that. A l l we would
know would be the price at which we entered. Whether JMorgan & Co. got a commission, and- if so, how much, we have no
knowledge.
Senator JOHNSON. YOU entered that loan at 9 2 U> *
Mr. STRAUSS. The offering price to the public was
and
entered it at 88y2.
1271
SALE OF FOREIGN BONDS OR SEC UNITIES
Senajtor JOHNSON. S O your particular spread was in the case
of that loan ?
Mr. STRAUSS. That is correct.
Senator JOHNSON. N O W , take the other loan to Japan, in June
of 1928.
Mr. STRAUSS. In June of 1 9 2 8 ?
Senator JOHNSON. Yes; $ 7 0 , 0 0 0 , 0 0 0 .
Mr. STRAUSS. That was to jthe Tokyo Electric Light Co.
Senator JOHNSON. The sponsors of that loan was the Guaranty
Co. of New York?
Mr. STRAUSS. That is correct.
Senator JOHNSON* H O W large was your participation in, jfchat
$ 7 0 , 0 0 0 , 0 0 0 loan?
Mr. STRAUSS. We had in the first group $1,000,000; in the second
group $950,000, and in the third group $965,000.
•Senator JOHNSON. And your purchase price in the case of that
loan was whajt?
Mr. STRAUSS. We went into the group at 8 7 . What the commission, if any, was that was charged by the Guaranty Co. of New York
prior to that we have no knowledge.
Senator JOHNSON. Your offering or sale price was 90%?
M r . STRAUSS. Y e s .
Senator JOHNSON. Can you state the
Mr. STRAUSS, I can not now. We
purpose of that loan?
have circulars here for all
issues of our own, those in which our name appeared, but we have
not this Tokyo Electric Light Co. circular.
Senator JOHNSON. I presume that is because the loan was negotiated by the Guaranty Co. of New York?
M r . STRAUSS.
Yes.
Senator JOHNSON. All right. Now, let us take your list here
and very rapidly go through it, if vou please. We start with the
Province of Lower Austria, $2,000,000.
M r . STRAUSS. Y e s .
Senator JOHNSON.
that correct?
And your points as shown here were
M r . STRAUSS. Y e s , s i r .
Senator JOHNSON. Does that mean spread?
Mr. STRAUSS. That means spread.
Senator JOHNSON. Out of that what was your
Mr. STRAUSS. Our total profit, of all kinds,
11.5;
is
profit?
in connection with
that matter was $39,152.
Senator JOHNSON. Why should that be so with a spread of 1 1 . 5
points ?
Mr. STRAUSS. The expenses in connection with the selling of a
small loan necessitate a wider spread.
Senator SHORTRIDGE, What did the Government get for the bonds
in that case?
Mr. STRAUSS. The Government got 8 7 for the bonds.
Senator SHORTRIDGE. And they were sold at what rate?
Mr. STRAUSS. They were sold at 9 8 % .
Senator SHORTRIDGE. You may. go on. <
Senator JOHNSON. That was one of the issues that you originated,
was it not?
M r . STRAUSS.
Yes.
1272
SAIJ3 OP FOREIGN BONDS OR SECURITIES
The CHAIRMAN. But it was only for $2,000,000 ?
S i r . STRAUSS. Y e s , sir.
Senator JOHNSON. It was
originated by this house, Mr. Chairman,
and the gross spread as shown oy the statement submitted was 11.5
points.
The CHAIRMAN. I suppose they had just about as much expense
attached to that loan as they would have had in the ca.se of a $50,000,000 loan.
Mr. STRAUSS. More proportionately.
Senator JOHNSON. I have no idea about that
The CHAIRMAN. I suppose the expense of advertising and all that
is exactly the same?
Senator JOHNSON. But with a spread of 1 1 . 5 points I was inquiring of Mr. Strauss why it was that his house made a profit of only
between thirty and forty thousand dollars.
Mr. STRAUSS. Well, we subdivided participation with the people
who brought the loan to us. And for any more details 1 am afraid
I shall have to ask my associates here what was the situation. On
my left is Mr. Henry O. Breck and on my right is Mr. Lionel Stahl,
of our house.
Senator JOHNSON. Of course you may do that whenever you wish.
There is no objection.
Mr. STRAUSS. My associate, Mr. Breck, calls my attention to the
fact that the expenses alone in the case of that loan amounted to
$87,000, which was equal to
points spread.
Senator JOHNSON. Very well. Any explanation you may desire
to make in reference to that spread, and the small amount of your
profits, I will be very glad to have you make.
Mr. STRAUSS. My associate here calls my attention to the fact that
our interest in thefinalselling group was very small: that the securities were sold through other houses to whom commissions were
allowed.
Senator JOHNSON. YOU started the sale, did you not ?
Mr. STRAUSS. We initiated the business, or we led the business.
Senator JOHNSON. And your first step-up price was what?
Mr. STRAUSS. There was a step-up price of 8 points.
.
Senator JOHNSON. You took an 8-point step-up price to begin
with in the case of that loan ?
Mr. STRAUSS. And that amounted to $160,000.
Senator JOHNSON. All right Now, we will take the next loan——
Mr. STRAUSS (interposing). One' minute, if I may. Senator
Johnson.
Senator JOHNSON. Certainly. Make any explanation you deem
proper.
Mr. STRAUSS. From that sum there was deducted, and which the
group did not get, $87,000 of actual expense, leaving the net revenue
or profit $72,000, or about 3.6 points.
Senator JOHNSON. What is the figure on the statement that T0^
have furnished us in the third column, $230,000, in relation to that
loan? What does that mean?
.
Mr. STRAUSS. That is what the spread times the principal amount
of the issues gives if carried out in that way.
Senator JOHNSON. That is simplyfiguringon the gross spread!
1273
SALE OF FOREIGN BONDS OR SEC UNITIES
Mr. STRAUSS. Yes; as a matter of convenience and before other
figures explanatory of the situation are given.
Senator JOHNSON. I am very glad you did that, because that is
what I have been striving to get here from the various parties
appearing before the committee. And now that you have made
your explanation I take it that it will be understood.. This third
column constitutes the gross profit which would have been derived
from the loan figured on the basis of that spread.
Mr. STRAUSS. If there had been no expense, commissions, or anything, that would have been the gross amount derived from such a
spread.
Senator JOHNSON. I understand. I will now GO ahead with the
next loan. The Department of Cauca Valley, where is that, Mr.
Strauss?
Mr. STRAUSS. That is in the United States of Colombia. It is a
province in that country.
Senator JOHNSON. That is a loan of $2,500,000, and your spread
was 13.
Mr. STRAUSS. It was 13 there.
Senator JOHNSON. What was your profit in that loan?
Mr. STRAUSS. It was $ 1 0 4 , 0 0 0 , a shade over 4 per cent.
Senator JOHNSON, Y O U have vour contract with the Department
of Cauca Valley, have you not! I am not asking you to produce
it for the moment, but just want to know if you have it.
Mr. STRAUSS. Yes; we have it.
Senator JOHNSON. Have you more than one contract with the
Department of Cauca Valley?
Mr. STRAUSS. We have not.
Senator JOHNSON. D O you have the original contract, first I will
ask you, for the purchase of the bonds; and, secondly, have you a
contract subsequenth7 entered into b,y which you were to sell the
bonds and providing f.or the distribution of the proceeds?
M r . STRAUSS. N O .
Senator JOHNSON. Y O U
have but one contract with the Department of Cauca Valley.
Mr. STRAUSS. D O you mean with the Government, the department?
Senator JOHNSON. That is what I mean.
M r . STRAUSS. Y e s .
Senator JOHNSON.
All right. Now, having settled that point—.
that is, that you have but one contract with the Department of Cauca,
Valley, Colombia; that is, I mean, a governmental contract—have*
you a contract with anybody connected with the government of"
Cauca Valley, or the Department of Cauca Valley, in relation to the
sale of these bonds?
Mr. STRAUSS. None.
Senator JOHNSON. S O that we may say that there is but one contract that was made or executed in relation to the disposition of these
bonds with any person, either directly or indirectly?
Mr. STRAUSS. That is correct.
Senator JOHNSON. By the way, is that bond issue of $2,500,000 still
outstanding, having a spread of 13?
M r . STRAUSS. Y e s .
Senator JOHNSON.
Mr. STRAUSS. Yes;
Is the interest on the bonds now being paid?
up to the present time.
1274
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON. The Department of Cauca Valley is some political subdivision of the United States of Colombia I assume i
Mr. STRAUSS. Yes. I might also add at this point, in view of your
last question, that the interest on the bonds of lower Austria is being
paid at the present time.
Senator JOHNSON. And then you have a second issue of bonds of
• the Department of Cauca Valley, §1,500«000. and there you had a
spread of 8?.
M r . STRAUSS. Y e s .
Senator JOHNSON.
Co. was $120,000?
And the gross profit of
J.
and W Seligman &
M r . STRAUSS. Y e s , sir.
Senator JOHNSON. The
gross profits on the other IS^UE of bonus
of the Department of Cauca Valley being $325,000.
Mr. STRAUSS. That is correct.
Senator JOHNSON. Have you more than one contract in existence,
or was there more than one contract executed, in relation to the j?econd loan made to the Department of Cauca Valley?
Mr. STRAUSS. There was not.
Senator JOHNSON. And next we come to an issue of bonds for
housing and realty improvements
Mr. STRAUSS (interposing). Senator Johnson, might I make an
observation right there?
Senator JOHNSON. Certainly.
Mr. STRAUSS. The difference in the matter of spread, being a drop
of from 13 to 8, grew out of the fact that the first time the Department of Cauca Valley came into the market there was a somewhat
different situation. A new risk had to be taken, and the situation
was not as well known, and then subsequently, the first bond issue
having been successfully placed, the next bonds were placed at a
smaller spread.
Senator JOHNSON. By the way; in connection with the^e two issues
of bonds of the Department of Cauca Valley, how many firms or
individuals were engaged with you in the ultimate sale of the bonds*
Mr. STRAUSS. In the ca?e of*the first loan, in the matter of final
distribution there were 64, and in the banking group. 51. In the
matter of the second loan, there were 05 in the distributing group,
and that was all. There was no intermediate group.
Senator JOHNSON. Were these two issues of bonds outright purchases by you?
Mr. STRAUSS. They were.
Senator JOHNSON. And what was the outright purchase price
to you?
Sir. STRAUSS. Thefirstloan was purchased at 83*£.
Senator JOHNSON. And at what price were the bonds disposed of
to thefirstgroup formed?
M r . STRAUSS. A t 9 2 % .
Senator JOHNSON. NOW,
take the second bond issue of the Department of Cauca Valley, ana that was acquired at what price by you?
M r . STRAUSS. A t 90.
Senator JOHNSON. And
they were disposed of to the first group
formed by you at what price?
M r . STRAUSS. A t 95.
1275
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON. N O W , the next issue of bonds shown on your
statement is Housing an<\ Realty Improvement Co., $1,500,000.
What was that?
Mr. STRAUSS. That was a company in the city of Berlin for workmen's houses.
Senator JOHNSON. When you say workmen's houses, were those
housing accommodations for industrial plants?
Mr. STRAUSS. N O : it was for middle-class workers. It was a
large apartment house, as we would call it in this country, located
in the western residential section of the city of Berlin, Germany.
Senator JOHNSON. It was a residential-apartment house for middle-class people in Berlin ?
Mr. STRAUSS. Eight.
Senator JOHNSON. Was that issue guaranteed by the Government ?
M r . STRAUSS. N O ; i t w a s n o t .
Senator JOHNSON. Was it guaranteed by the
M r . STRAUSS. N O .
Senator JOHNSON. -Was that loan made to a
city of Berlin?
private corporation
of the city of Berlin ?
Mr. STRAUSS. Yes; or at least to a private corporation of Germany.
I do not know under what law the corporation was organized.
Senator JOHNSON. Well, under the laws of Germany is what I
meant.
M r . STRAUSS. Y e s , s i r .
The C H A I R M A N . Have they defaulted on
Mr. STRAUSS. They have not. And if you
any of their paymentsf
wish me, Mr. Chairman,.
I can state in each case whether there has been a default or not.
The C H A I R M A N . I wish you would.
Senator JOHNSON. Those that have defaulted I wish you would call
the committee's attention to.
Mr. STRAUSS. None of these have defaulted that we have yet
reached.
Senator JOHNSON. None of these bond issues thus far mentioned
has defaulted as I understand the situation.
M r . STRAUSS. N O .
Senator JOHNSON.
And your spread in the case of this issue to the
Housing and Realty Improvement Co., $1,500,000, represents a spread
of 8% points.
Mr. STRAUSS. That is correct.
Senator JOHNSON. What did you acquire that issue at?
M r . STRAUSS. A t 8 9 % .
Senator JOHNSON. What
was the first step-up price to the first:
group that dealt with that issue?
Mr. STRAUSS. It was from 4 to 5 % points, varying with the different people in the group and depending upon how: much they disposed of. So that on an average one might say it would be 4%^points, although we can, not give you the precise figures, because.'
some got them at 4 and some at 5 and some at 5%.
Senator JOHNSON. The next issue is to Costa Rica, $8,000,000M r . STRAUSS. Y e s .
Senator JOHNSON. At what price did you obtain that issue?.1
M r . STRAUSS. A t 8 8 .
*<
Senator J O H N S O N . And what was the first step-up price there!?
1276
SALE OF FOREIGN BONDS OR SEC UNITIES
Mr. STRAUSS. Three and one-half points, namely,
Senator JOHNSON. Did you say 91%?
M r . STRAUSS. Y e s .
Senator JOHNSON. The spread, however, was
points.
Mr. STRAUSS. That is correct.
Senator JOHNSON. That was a governmental loan.
Mr, STRAUSS. That was a Government bond.
Senator JOHNSON. You say it was a Government bond I
M r . STRAUSS. Y e s , sir.
Senator JOHNSON. And
there was a total of $ 8 , 0 0 0 , 0 0 0 with a
spread of 7y2, and you show there $600,000.
Mr. STRAUSS. That is correct
Senator JOHNSON; What year was that bond issue obtained, if you
please?
Mr. STRAUSS. In December of 192G.
Senator JOHNSON. The next bond issue is that of Peru, 7 per
cent, $15,000,000. What date was that obtained ?
Mr. STRAUSS. March of 1927.
Senator JOHNSON. Was it obtained originally by you alone ?
Mr. STRAUSS. Will you let me answer that question in this way?
Senator JOHNSON. Certainly.
Mr. STRAUSS. We were the leaders in that business. It was brought
to us by F. J. Lisman & Co., however.
Senator JOHNSON. But you were the leaders in the disposition
of that bond issue?
Mr. STRAUSS. That is correct
Senator JOHNSON. Have those bonds defaulted?
Mr. STRAUSS. That has defaulted.
Senator JOHNSON. NOW, let me ask you as to the next two issues
of Peru, $50,000,000 and $35,000,000. Have they both defaulted
too?
Mr. STRAUSS. They have both defaulted.
The CHAIRMAN. At what date or in what year did they default!
Mr. STRAUSS. Thefirstdefault of any Peruvian bonds occurred
on April 1,1931.
Senator JOHNSON. What was the original purchase price of the
first issue of Peru of $15,000,000?
M r . STRAUSS. A t 90.
Senator JOHNSON. And your spread
Mr. STRAUSS. That is correct.
Senator JOHNSON. Who constituted
was 6y2 points?
the second organized group
in reference to the Peruvian loan?
Mr. STRAUSS. J. & W. Seligman & Co., National City Co., E. H.
Rollins & Co., Graham Parson & Co., F. J. Lisman & Co., and Ames,
Emerich & Co.; six in all.
Senator JOHNSON. NOW, take the next issue of Peru, 6 per cent,
$50,000,000, with spread of 5y2? vrhile the spread in the case of the
previous bond issue was 6% pointsM r . STRAUSS. Y e s .
Senator JOHNSON.
Who constituted the second sponsoring group
there?
n
Mr. STRAUSS. Besides ourselves, there was the National City CO^
Blyth, Witter & Co., Guaranty Co. of New York, F. J, Lisman &
1277
SALE OF FOREIGN BONDS OR SEC UNITIES
Co., and Central Union Trust Co. The latter, however, did not
participate in the public offering.
The C H A I R M A N . Are they in default? ^
Mr. STRAUSS. All Peruvian bonds are in default.
The C H A I R M A N . A S of April 1,1931?
Mr. STRAUSS. Well, those did not bear April coupons. They fell
due in June. That was when the coupons on the 6 per cent loan
fell due, and then they were defaulted.
The C H A I R M A N . And have they paid nothing since that time?
Mr. STRAUSS. Nothing has been paid on any of these loans since
the first default in April of 1931.
Senator K I N G . I suppose none of these bonds has matured as yet,
and that it is simply a matter of default in the payment of interest.
Mr. STRAUSS. In interest and sinking fund.
Senator K I N G . Under the terms of the bonds may the creditor declare the bonds due in event of default in interest or sinking fund?
Mr. STRAUSS. NO. That was in the case of the first loan, the 7 per
cent loan, which was secured by the tobacco monopoly. The others
were issued on the faith and credit of the Government, with certain
protective provisions as to prohibiting the Government from mortgaging the revenues to others, and other restrictive clauses wThich, if
the committee wants me to go into them at the proper time I shall be
glad to do it.
Senator K I N G . Have you made an investigation to determine what
the cause of default was, whether internal revolutions, political revolutions, followed more or less by military activities, or the economic
condition of the country ?
Mr. STRAUSS. I think both, each one accentuated by the very low
prices of commodities exported by Peru. Of course that very seriously alFected the economic condition of the country. But even after
the default the Government then in control expressed its willingness
to negotiate some kind of postponement of payment. And then revolutions broke out, one after another, and I think there must have
been half a dozen, and after that there was no one to negotiate with.
And besides the revenues were applied in contravention to the terms
of the loan. They were applied by the Government to other purposes than to the payment of interest on these bonds, even to the
point of paying interest on internal debt to the exclusion of interest
on the external debt. Therevenuecollecting agency called the Caja
down there, under the directions of the Government turned over revenues that belonged then to the tobacco loan, which had been specifically pledged, turned them over to the Government.
Senator K I N G . Has a protest been made to the authorities in power
in Peru, whether de facto or de jure against this dishonorable course?
Mr. STRAUSS. A number of protests have been made on several
occasions, the latest protest being only a few days ago.
Senator K I N G . Have those protests been given any attention by the
Peruvian authorities?
Mr. STRAUSS. To this extent, yes; I want to say this that every
government has expressed its acceptance of the obligation. There
has been no denial directly of its obligation to perform. But such*
informal answers as we have gotten, and such formal answers for
that matter, too, all have reference to the inability to perform, not
to an unwillingness to perform.
1278
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator KING. There has been no denial then*
Mr. STRAUSS. Except in so far as revenues have been diverted,
which they had no right to divert under the contract.
Senator JOHNSON. We took two of these bond issues and you gave
me the date of default. Now, the $35,000,000 6 s of Peru; what was
the date of the default?
Mr. STRAUSS. Thefirstdefault was April 1, 1 9 3 1 . The default in
the $50,000,000 issue was June, 1931.
Senator JOHNSON. Were you the original sponsor for the $35,000,000 loan?
Mr. STRAUSS. We were.
Senator JOHNSON. What was the next group formed by you i Who
constituted that group?
Mr, STRAUSS. Do you mean the next group?
Senator JOHNSON. Yes.
Mr. STRAUSS. DO you mean the people we invited into the original
group just as in the other case you asked me about \
Senator JOHNSON. Yes.
Mr. STRAUSS. Besides urselves were the National City Co., Blyth,
Witter & Co., the Guaranty Co. of New York, F, J. Lisman & Co.,
and the Central Union Trust Co.
Senator JOHNSON. What was the step-up price to them I
Mr. STRAUSS. The total spread was five points, and the difference
between the original purchase price and the next price was
per
cent.
Senator JOHNSON. What was your net profit upon these three
Peruvian issues?
Mr. STRAUSS. I will have to add them up in order to give them to
you.
#
Senator JOHNSON. Well, you may give thein separately if that is
more convenient.
Mr. STRAUSS. Altogether the profit on the 7 per cent issue and the
two issues of 6 per cent bonds, aggregating $100,000,000,1 mean our
profit on them was $601,000.
Senator JOHNSON. How much was your profit?
M r . STRAUSS. I t w a s §601,000.
Senator JOHNSON. Senator Jones
requests me to ask you the date
of these three issues. Will you give that information, beginning
with the Peru 7s?
Mr. STRAUSS. The date of the 7 per cent loan was March 1 6 , 1 9 2 7 .
The date of thefirst6 per cent national loan was December 2 1 , 1 9 2 7 .
And the date of the next, or the third issue, the national 6 per cent
loan, was October 2 4 , 1 9 2 8 .
Senator JOHNSON. The gross profit upon these issues of bonds as
shown by your statement here was: On thefirst,the $15,000,000 loan.
$975,000; on the next, or $50,000,000 loan, it was $2,750,000; and on
the next, or $35,000,000 loan, it was $1,750,000. You have stated your
net profit. Did you have any representative in Peru at the time the
issues or any of them were made?
Mr. STRAUSS. Yes. We have had representatives in Peru ever since
thefirstloan was made, constantly.
Senator JOHNSON. Who was that representative, please?
Mr. STRAUSS. Those representatives have been different people from
time to time. My partner, Mr. Henry C. Breck, who sits at my left
1279
SALE OF FOREIGN BONDS OR SEC UNITIES
here, went down two years in succession, staying in Peru in all about
eight months. Mr. Lionel Stahl, of our staff, sitting on my right
here, was down there for over a year. And Mr. Kuan, now dead, was
down there for quite a long time. Mr. Haskell, of our office staff,
was also there. One of the firm of lawyers in New York that have
been advising us in this matter spent manv months down there.
Senator JOHNSON. Who was it. if you please?
Mr. STRAUSS. Mr. Bloomer and Sir. Dennis spent quite a while
there.
Senator JOHNSON. All in connection with these loans?
Mr. STRAUSS. In connection with these loans and in connection
with a bond issue that has since been retired—or a credit, I should
have said, that has since been retired; and one that is still outstanding unpaid. Two credits.
Senator JOHNSON. Did you pay any part or parts of any commission to any individual in f*eru in connection with these loans?
M r . STRAUSS. Y e s .
Senator JOHNSON. Whom?
Mr. STRAUSS. This business
came to us from F. J. Lisman & Co.,
surcharged with a commission to be paid to a group of promoters,
and in that group we subsequently learned was the son of the President of Peru. So far as we are aware there was no other Peruvian
connected with it.
Senator JOHNSON. D O you know how much the son of the President of Peru received upon those issues being made by the Government of Peru? It wasfive-eighthsof 1 per cent, was it not ?
Mr. STRAUSS. The entire group of promoters received for the
tobacco loan two-thirds of 1 per cent, and on the subsequent, V/2 of
1 per cent.
Senator JOHNSON. That is, upon $ 1 0 0 , 0 0 0 , 0 0 0 they received twothirds of 1 per cent onfifteenmillions and onc-lialf of 1 per cent upon
eighty-five millions; is that correct.
Mr. STRAUSS. That is substantially correct.
Senator JOHNSON. That aggregates about what sum? Something
over $600,000, does it not?
M r . STRAUSS. $ 5 3 3 , 0 0 0 .
Senator K I N O . Was that on the par?
M r . STRAUSS. O n t h e p a r .
Senator K I N O . Not what they sold for?
M r . STRAUSS. N O .
Senator JOHNSON. SO that to a group
of promoters in Peru, of
which the son of
President was one, you paid for the privilege
of floating this lone five hundred and some odd thousand dollars; is
that correct ?
/
Mr. STRAUSS. Not entirely. It was not a group of promoters in
Peru; it was an American group, which included one Peruvian, the
son of the President.
Senator J O H N S O N . D O you know how much the son of the President received ?
Mr. STRAUSS. About $ 4 1 5 , 0 0 0 .
Senator JOHNSON. What was the name? please, of the President
of Peru and his son at that time?
Mr. STRAUSS. The President was Augusto Leguia.
02928—32—pt 3
2
1280
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON. And his son's name, if you recall I
Mr. STRAUSS. Juan Leguia.
Senator JOHNSON. DO yon know whether or not the fact that the
son of the President received the sum of money that you have detailed as one of those engaged in promoting this loan/and has had
anything to do with the defaulting of the loan?
Mr. STRAUSS. It has nothing to do with the defaulting of the loan.
Senator JOHNSON. It has had nothing to do with it ?
M r . STRAUSS. XO.
Senator JOHNSON.
Are yoU aware of the fact that the president
of the Republic and his son are being prosecuted upon this very
transaction?
Mr. STRAUSS. Yes, among others, I believe.
Senator JOHNSON. And are you aware of the fact that there has
been any decision of the courts of Peru in respect tn any of their
activities in regard to these loans ?
Mr. STRAUSS. A revolutionary tribunal lias given judgment against
the president and against his son.
Senator JOHNSON. Against the president and against his son?
M r . STRAUSS. Y e s .
Senator JOHNSON.
That revolutionary tribunal has given that
judgment in respect to those particular loans and because of the
sums that have been received; is not that correct?
Mr. STRAUSS. I am going to ask, if I may, to have my partner,
who is more familiar with it, answers the question. I will adopt his
answers.
Senator JOHNSON. I shall be very glad to have anybody answer
concerning this transaction; and if you will do so, go ahead, sir.
Mr. BRECK. The tribunal gave judgment against t h e p r e s i d e n t a n d
his son for a great variety of acts of so-called illegal enrichment
and found a very large
Senator JOHNSON. You say "illegal enrichment." They called
it bribery?
Mr. BRECK. I do not know, sir.
Senator JOHNSON. "Illegal enrichment" will do. Go ahead, sir.
Mr. BRECK. Among the transactions for which they were tried by
this tribunal were alleged commissions and profits oi various kinds
on various kinds of business^ contracts, concessions, and monopolies
and similar things. The tribunal had the idea that the president
and his family had made a great deal of money during the incumbency of Leguia as president of Peru.
Senator JONES. May we have the record show what his name IS.
TESTIMONY OP H E N R Y C. B B E C K
Mr. BRECK. My name is Henry C . Breck.
Senator KINO. Were any of those transactions domestic in character, that is, the granting of concessions or monopolies to private
individuals in Peru to carry the business?
Mr. BRECK. That is what the tribunal claimed.
.
Senator KINO. HOW much did theyfind,if they found at allT had
been obtained by the president's son in conection with this transaction?
Mr. BRECK. Nothing that I know of.
1281
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator K I N G . It was not singled out, then?
Mr. BRECK. Not that I know of.
Senator JOHNSON. It was included, was it not ?
Mr. BRECK. Yes. among other things.
Senator JOHNSON. When you say it was not singled out, you do
not mean to say that it was not mentioned?
M r . BRECK. N O .
Senator JOHNSON.
It was a part of the indictment that was had
against the president and his son?
Mr. BRECK. SO I understand.
Senator JOHNSON. Have you any correspondence, Mr. Strauss,
with those who promoted this loan, to whom these payments were
made by Seligman & Co. ?
Mr. STRAUSS. None.
Senator JOHNSON. H O W did you make the payments?
Mr. BRECK. The account of Juan Leguia on our books was
credited with the amount of money due him.
Senator JOHNSON. You do not mean to say that your account
ran to Juan Leguia alone?
Mr. BRECK. N O : other people were also paid.
Senator JOHNSON. But you have on your books an account with
Juan Leguia?
Mr. BRECK. We did have.
Senator JOHNSON. Where is it now? You say you did have it.
Is it not still there I
Mr. BRECK. It has no money in it.
Senator JOHNSON. That is because you paid him?
Mr. BRECK. We paid it out on his order as we would for anybody
else.
Senator JOHNSON. Y O U had a distinct account of Juan Leguia?
M r . BRECK. Y e s .
Senator JOHNSON.
Republic *
He was a son of the president of the Peruvian
M r . BRECK. H e w a s .
Senator JOHNSON. How
paid him?
much does your account show that you
M r . BRECK. $ 4 1 5 , 0 0 0 .
Senator JOHNSON. What did
Mr. BRECK. Because he was
you pay Juan Leguia $ 4 1 5 , 0 0 0 for?
a member of a group of promoters
who brought the business to F, J. Lisman & Co., who, in turn,
brought it to us, so that when it reached us it was charged with that
obligation to pay commissions to a group of which Juan Leguia
was a member.
Senator JOHNSON. And you paid jthem?
Mr. BRECK. We paid them.
Senator JOHNSON. Did you pay them before you sold the bonds
or afterwards \
Mr. BRECK. Afterwards.
Senator JOHNSON. After you sold the bonds to the American
public, Juan Leguia got $ 4 1 5 , 0 0 0 from you; is that correct?
Mr. BRECK. Correct
Mr. STRAUSS. May I add this? Twenty-six per cent of the loans
were placed abroad.' That is a minor matter, but I just mention it.
1282
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator
JOHNSON.
Mr. STRAUSS. Yes.
Senator JOHNSON.
You placed some of ihem abroad?
You escaped that percentage, at any rate, on
these defaulted loans. But you are quite right; ijt is immaterial
where they were placed.
Where are your books at the present time?
Mr. BRECK. In New York.
Senator JOHNSON. Do your books show to whom you paid sums
for obtaining this loan and when !
Mr. STRAUSS. May I interrupt for a moment I
Senator JOHNSON. You may, of course; but you said that this
gentleman knew the facts.
Mr. STRAUSS. All right.
Senator JOHNSON. I am very glad merely to get the facts; that is
what I am seeking to do. I will get them from anyone, but I would
rather pursue it with ont of you at a time.
Now, if you desire, Mr. Strauss—I do not want to keep you from
saying anything you want to with reference to this transactionMr. STRAUSS. I will say it afterwards.
Senator JOHNSON. Say it right now. What is it you wish to say!
Mr. STRAUSS. This business, as I understand it*, caine to us, as
Mr. Breck has said, from people in New York savin" that they had
to pay a commission. We had no knowledge that Leguia had any
interest in it until quite a long time afterwards, when the business
had proceeded up to a certain point. I just wanted to make that
clear that we did not retain in any way the services of this son of
the President, and when we didfindit out it was something that we
did not like. We thought it did not make a good picture; but there
we were, committed to a group of promoters who had the President s
son among them, and when we found he was among them we proceeded with the business and carried out the obligations toward that
group of promoters.
#
Senator JOHNSON. Let me ^sk you right there: When Lisman ®
Co. came to you with this loan they told you, did they not, that they
were obligated for a percentage* to Juan Leguia and his set of
promoters?
Mr. BRECK. They did not.
Senator JOHNSON. You did not know it before?
M r . BRECK. W e d i d not.
Senator JOHNSON. It was subsequently that you learned
Mr. BRECK. After we had embarked on the "negotiation
it?
a consid-
erable time.
Senator JOHNSON. After you had embarked on the negotiations
with Peru?
Mr. BRECK. With the President of Peru.
Senator JOHNSON. But after you embarked upon the negotiations
with the President of Peru, but before their consummation, yo u
knew that you were obligated to a set of promoters, including the
son of the President of Peru, for the sum that you have mentioned?
Mr. BRECK. Quite correct.
Senator JOHNSON. And you went on and consummated the negotiations?
M r . BRECK. W e did.
1283 SALE OF FOREIGN BONDS OR SEC UNITIES
Senator GEORGE, Did you make any inquiry about who constituted
the group of promoters when you were advised that the loan came
to you charged with a commission to a group?
Mr. BRECK. NO. F. J. Lisman & Co. said that this group of
promoters who had brought the Peruvian business to them was
•entitled to a commission, the customary or usual commission paid
on foreign financing, but the precise amount of the commission was
not named at the time, nor were thdse entitled to it, beyond one
individual named Bolster, mentioned to us at the time.
Senator GEORGE. Y O U made no inquiries or demand for the names
•of those constituting the group?
Mr. BRECK. NO, because we thought we knew what it was. It
was said that Bolster had originated the business and that he and
his associates were entitled to this commission. "We thought we
were paying 110 commission to anybody, ourselves; but that we were
to pay it through the offices of the firm of F. J, Lisman & Co. who
had brought the business to us, and it was so charged when we
accepted it.
Senator JOHNSON. Did you draw a check for the amount of this
'commission?
Mr. BRECK. NO. I told you, Senator, we credited his account
with us.
Senator JOHNSON. That is, Juan Leguia's account?
Mr. B R E C K . He had an account with us at the time.
Senator JOHNSON. An account for what?
Mr. B R E C K . An ordinary checking account.
Senator JOHNSON. And* you credited his ordinary checking account at that time with something like half a million "dollars: is that
•correct ?
Mr. BRECK. N O : it was done as the various issues were brought
out. He was given his share of the commission to which the group
was entitled, at the same time the others were given their share.
Senator JOHNSON. Have you a transcript of your books showing
Juan Leguia's account ?
M r . BRKCK. N O , s i r .
Senator JOHNSON. We
may ask you to bring your books ultimately here in respect to that. But let us proceed, now. You
ascribe this thing originally to Lisman & Co. ?
Mr. BRECK. I do not understand u ascribe this thing/5 Senator.
Senator JOHNSON. If you do not understand it, I am sure I can
not make it •much plainer. But you ascribe the agreement to pay
Juan Lcguia and the promoters to the initiation of Lisman & Co.:
is that correct ?
M r . BRECK. Y e s .
Senator JOHNSON.
They made a full disclosure to you when they
brought the business to you, did they not?
Mr. B R E C K . They did* not.
Senator JOHNSON. Did you take it up subsequently with them?
Mr. BRECK. N O ; it arose when our own representative reached
Lima in the spring of 1927 to negotiate the tobacco loan.
Senator JOHNSON. Who was that representative?
Mr. B R E C K . Mr. S . A . Maginnis.
Senator JOHNSON. And then he learned, or you learned, or your
firm learned of the commission agreement?
1284
SALE OF FOREIGN BONDS OR SEC UNITIES
Mr. BRECK. That is correct. He learned from Juan Leguia who
came to see him about the existence of the agreement, and be cabled
us, and that was ourfirstknowledge of it.
Senator JOHNSON. And you carried it out then ?
M r . BRECK. Y e s .
Senator JOHNSON. IS that agreement in writing?
M r . BRECK. N o .
Senator JOHNSON. Was it in writing at any time?
Mr. BRECK. . Not that I know of.
Senator JOHNSON. Was there anything of evidentiary
character,
save Juan Leguia's statement to you that he was entitled to a commission that you have described?"
Mr. BRECK. The statement of the representatives of F . J. Lisman
& Co. who had gone to Peru in the first instance and made this
arrangement with Juan Leguia.
Senator JOHNSON. Did they have an agreement in writing?
Mr. BRECK. I do not know.
Senator JOHNSON. Did you ever ask them whether they did or not?
Mr. BRECK. I suppose we did. I do not recall that.
Senator JOHNSON. Do you recall whether or not they ever made
any reply?
Mr. BRECK. I think there was never any agreement in writing
between them and Juan Leguia,
Senator JOHNSON. We have reached the point where your representative went to Peru to negotiate this loan. That representative
was named what?
Mr. BRECK. S . A . Maginnis.
Senator JOHNSON. Where is he, please?
Mr. BRECK. I understand he is a lawyer in New York. He was
formerly American minister to Bolivia.
Senator JOHNSON. How do you spell his name?
MrRBRECK. M-a-g-i-n-n-i-s.
Senator JOHNSON. Mr. Maginnis then learned at Peru that there
was in existence an agreement, either verbal or written, for the payment to Juan Leguia and others of a commission upon the loan ?
Mr. BRECK. Correct.
Senator JOHNSON. That was thefirstloan, was it not?
Mr. BRECK. That was the $15,000,000 7 per cent issue.
Senator JOHNSON. That antedated by some eight or nine months
the other two loans, did it not?
Mr. BRECK. That is correct.
Senator JOHNSON, Then subsequently you paid the c o m m i s s i o n to
Juan Leguia and others upon the subsequent loans, did you n o t ? _
Mr. BRECK. It was all part of the original arrangement. The
agreement between F. J. Lisman & Co. and this group of promoters,
of which Mr. Juan Leguia was a member, related to a l l P e r u v i a n
financing which the firm of F. J. Lisman & Co. or its associates
might do. It related not onlv to the 7 per cent loan, but to the socalled refunding loan which the 6 per cent bonds constitute.
Senator JOHNSON. Did it relate also to the short-term credits?
Mr, BRECK. It related to anv Peruvianfinancingdone by a group
of which F. J. Lisman & Co. should be a member.
Senator JOHNSON. And you took that over?
1285
SALE OF FOREIGN BONDS OR SEC UNITIES
Mr. BRECK. We took the obligation over from them when we took
the business over.
Senator JOHNSON. Did your representative talk to the President
of Peru concerning that arrangement?
Mr. BRECK. Not that I know of.
Senator JOHNSON. He talked, as you know, to his son, did he not?
Mr. BRECK. His son came to him about it.
Senator JOHNSON. Did he report in writing to you concerning the
matter?
Mr. BRECK. He cabled us about it.
Senator JOHNSON. Have you the cables?
Mr. BRECK. I think we have, Senator; yes.
Senator JOHNSON. I want you to produce, if the committee will
permit it* all of the letters and the cables that you have in respect
to your Peruvian loans, and particularly in reference to the payment
of the son of the president, of the amount of money that has been
testified here this morning. Will you do that?
Mr. BRECK. I will be glad to. 1 would just like to ask, as a matter of your own convenience, whether you want all our communications with respect to Peruvianfinancing,because they would take up
several drawers full of space. There was a very complicated,
lengthy negotiation, involving particularly the refunding loan, during which we undertook to reform the mortgage law ana give them
a mortgage bank, and in which we advised tnem about the stabilization of their currency.
Senator JOHNSON. I am not interested in the mortgage bank. I
am not interested in anything except evervthing relating to the promoters who obtained the loan for you, and your payments to the son
of the president, and, if any were made to the president, to the
president himself.
Mr. BRECK. No^e was made to the president.
Senator JOHNSON. YOU are certain of that?
Mr. BRECK. Yes; positive.
Senator JOHNSON. D O you know what was done with the credit
that the son had with your firm?
Mr. BRECK. He drew against his deposit, the way that any other
customer would, when he needed money.
Senator JOHNSON. Did he exhaust that deposit?
Mr. BRECK. He has nothing on deposit with us now.
Senator JOHNSON. Have you drafts or checks that lie drew upon
that deposit?
Mr. BRECK. I would think so.
Senator JOHNSON. Will you produce them, please ?
Mr. BRECK. I would be delighted to.
Senator JOHNSON. I want the Juan Leguia checks or drafts drawn
upon the deposit which I understand that you gave him credit for—
I speak in round numbers—half a milion dollars upon those loans.
Senator K I N G . Would you return the checks to him in commercial
transactions?
Mr. BRECK. Yes; just the way any bank does. It might be possible to get a transcript of the accounts. I doubt if the checks would
be obtainable. I know there were cable payments.
Senator JOHNSON. Of what size, please?
1286
SALE OF FOREIGN BONDS OH SECT HIT IKS
Mr. BRECK'. Thousands of dollars. I remember one to some Paris
firm for merchandise.
Senator JOHNSON. Of thousands of dollars ?
M r . BRECK. Y e s .
Senator JOHNSON.
Tell me approximately how large the largest
amount was that you cabled.
Mr. BRECK. I do not recall, Senator. My recollection is, although
I have never looked at the account in summary form, that thev were
paid to tradesmen of one kind or another, such as Abcrcrombie &
Fitch, New York hotels, or
Senator JOHNSON. D O you mean to say that a large amount would
be paid out to Abercrombie & Fitch ?
Mr. BRECK. I think he lived at the rate of at least $ 2 5 0 , 0 0 0 or
$300,000 a year for several years.
Senator JOHNSON. He could, under the circumstances, I presume,
have lived at that rate.
Do you know whether or not your loans to Pent enabled Leguia to
•continue in office?
Mr. BRECK, All I know is the purposes for which the loan proceeds were applied.
Senator JOHNSON. What were the purposes?
Mr. BRECK. If I may refer to that memorandum that I gave you.
Senator, the proceeds of the tobacco loan were applied primarily
to the redemption of certain internal issues in relatively small
amount; to payment for the machinery necessary to complete the
tobacco factory itself, furnished by American concerned: and the
remainder largely for road building, according to the statements of
the Peruvian officials themselves. The G per cent Peruvian national
loan wa$ primarily a refunding operation undertaken for the purpose of simplifying the country'sfinancialstructure, which up to that
time consisted of several issues of bonds secured
.specific revenues
of one kind or another; and they had so complicated the country s
financial structure that it was "unable to borrow economically by
reason of it.
We therefore undertook this refunding loan, and of the $85,00^,000
principal amount, the bonds constituting the first and second series,
approximately 63%.per cent of the proceeds were used to purchase
or retire external secured bonds, extend secured serial notes, and
internalfloatingindebtedness—approximately 63% per cent. Alwut
1.3 per cent was used to provide capital for "a mortgage bank. Approximately 6% per cent provided the money for the construction
and improvement of dock and shipping facilities paid in its entirety
to an Americanfirmof constructors.
Senator JOHNSON. What was thatfirm'sname?
Mr. BRECK. Frederick J . Snare Co.; 2 8 . 3 per cent was used FOR
expenditures for public works of one kind or another specified in an
exhibit to the loan contract, such as roads, irrigation, and works ot
sanitation and hygiene.
#
Senator KING.* Did you supervise in any way the expenditures of
that 28 per cent, or did you have some one there to see that they were
properly applied for the purposes which you have just stated to
Senator Johnson?
Mr. BRECK. We would like very much to have, and we requested
it, but were told we were usurping the sovereignty of a nation* to
1287 SALE OF FOREIGN BONDS OR SEC UNITIES
direct how their expenditures would be employed. We were able,
however, to control the expenditure of money spent on the docks by
paying it out entirely to the contractor ourselves. Similarly with
respect to refunding. It was all done by concentrating the proceeds
with ourselves and the City Co. and paying them out to the bondholders as their bonds were* redeemed.
As to the 28.3 per cent which was spent for public works, wc paid
it over to the Government, not in one lump sum as they wished
and asked, but $ 7 5 0 , 0 0 0 monthly, on the ground, we said, that they
could not economically spend a large amount at once, and it was
better to get the money regularly, and we so paid it out to them.
Senator K I N G . Did your agents who were there report that they
were conducting these Improvements or making these improvements
for hygiene and bridge and roads as indicated?
Mr. BRECK. In a general way. yes. The Ministry of Finance of
the Republic each month published a list of the public works expenditures in great detail. We followed that list closely, and at
one time after the second series of the Peruvian national loam we
were instrumental in getting the President to designate a United
States Army officer to report upon the public works then being
carried on in Peru. We felt that there was construction going
on which we ourselves perhaps won Id not have selected had we
been doing it, and we wanted the benefit of some expert advice on
it; and Colonel Moore, this American engineer, was designated by
the President to go over the whole works, which he did, and he
reported to the President, not to us, six months after that. This
was following the second series in the fall of 1928. We felt that
those expenditures were in many cases unnecessary, or at least unnecessary at that time, having in mind Peru's state of development,
her wealth, and we urged the President to cut them down drastically
or to concentrate them, spending what money he had on 1, 2, or 3
principal works instead of distributing it largely all over the country. He objected to that, and that was the beginning of the end of
our relations as purchasers of the Republic's securities, because we
felt it was not wise thereafter to purchase additional bonds while
expenditures were being made in that way.
Senator K I N G . What were the expenditures generally that the
Army officer, Colonel Moore, looked after?
Mr. B R E C K . A large irrigation project in northern Peru, the Olmos
irrigation project, and several separated railway projects, not linked
up to each other, and considerable road building.
Senator JOHNSON. Y O U have been discussing these loans, and I
will discuss them with you, with your permission, hereafter. You
stated the amount that you credited to the account of Juan Leguia,
did you not?
M r . BRECK. Y e s .
Senator JOHNSON. That was how much?
Mr. B R E C K . Approximately $ 4 1 5 , 0 0 0 .
Senator JOHNSON. Between $ 4 0 0 , 0 0 0 and $ 5 0 0 , 0 0 0
would be within
the limits, anyway?
Mr. B R E C K . Yes; it would.
Senator JOHNSON. The account upon your books/ran just in the
name of Juan Leguia, did it not?
M r . BRECK.
Yes.
1288
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON. It credited him with some four hundred and
some odd thousands of dollars, and you paid out that four hundred
and some odd thousands of dollars upon either his personal check
or his personal request?
Mr. BRECK. Correct.
Senator JOHNSON. The account I assume is closed to-day? That
is, there is no credit due him to-day, is there?
Mr. BRECK. I think not.
Senator JOHNSON. Tell me the names of the other promoters who
were engaged in obtaining this loan.
Mr. BRECK. Mr. Harold Bolster
Senator JOHNSON. Who is Harold Bolster ?
Mr. BBECK. Harold Bolster is now dead. He was the individual
who went to Peru in thefirstinstance and interested F J. Lisman
& Co. in Peruvianfinancing.He met Juan Leguia down there, and
it was through Mr. Bolster that Mr. Juan Leguia came into the
financing.
Senator JOHNSON. Who else?
Mr. BRECK. S . A . Maginnis.
Senator JOHNSON. And he, you sav, is in
Mr. BBECK. A lawyer in New York, I believe.
(Letter received from Mr. Frederick Strauss, J. & W Seligman
& Co.:)
NEW YO*K. January 12. t!*$2.
Hon. REED SMOOT,
Chairman of Committee on Finance,
United States Senate. Washington D. C.
MY DEAB SENATOK: There is one thing I should like to mention NOW. arid
that is to correct an implication which might possibly be drawn from the
testimony of Mr. Breck on page 868 of the transcript, that Mr. S. A. Mapinnts
was ever a member of the original group of promoter? through whom F. J.
Lisman & Co. came in contact with the Peru business. Mr. Macinnis was
not associated with them in any way but was. as Mr. Breck stated earlier on
page 859 of the transcript, our own representative whom we *ent to Limn arly
in 1927 to negotiate with the President of Pem the details of the so called
tobacco loan, the general outlines of which had already »>eeii agreed upon "n an
interchange of cables between ourselves and F, J. Hainan & Co. nnd the
President of Peru. The terms of Mr. Maginnis's employment by us were such
that his compensation was dependent upon the successful consummation of the
negotiations in which he was our representative; that is, he was to be paid a
commission if we succeeded, as a result of his negotiations, in consummating
the business, He was not, however, in any way associated with the original
group of promoters, whose relation to the Peru business through F J. Usrnan
& Co. is set forth elsewhere in our testimony. Will you kindly have the foregoing read into the record?
Yours sincerely,
FREDERICK STRAUSS.
Senator JOHNSON. Who else?
Mr. BBECK. Mr. Salt.
Senator JOHNSON. What is hisfirstname?
Mr. BRECK. T V Salt.
Senator JOHNSON. Anybody else?
M r . BBECK. NO.
Senator JOHNSON. NO others?
M r . BBECK. N o .
Senator JOHNSON. Have you
accounts on your books with Mr*
Bolster, Mr. Maginnis, and Mr. Salt in relation to these loans?
1289
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JONES. Will you have him state who Mr. Salt is?
Senator JOHNSON. Who is Mr. Salt?
Mr. BKECK. He was an employee of F J. Lisman & Co. who went
to Peru after Mr. Bolster first went and made the arrangement with
Mr. Juan Leguia to give Mr. Juan Leguia a commission.
Senator JOHNSON. Was this commission all to Mr. Juan Leguia
that was to be paid?
Mr. BRECK. N O ; it was to be paid in various amounts to the names
I have given you.
Senator JOHNSON. How much did you pay Mr. Salt?
M r . BRECK. $ 1 0 , 0 0 0 .
Senator JOHNSON. How
Mr. BRECK. $67,373.
Senator JOHNSON. How
M r . BRECK. $ 4 0 , 0 0 0 .
Senator JOHNSON. And
much did you pay Mr. Bolster?
much did you pay Mr. Maginnis?
Mr. Juan Leguia—let us get his amount
accurately, please.
Mr. STAHL. $415,000.
Senator JOHNSON. That was the syndicate, then, of promoters who
obtained the loan for you and to whom you were obligated to pay
this commission, is it?
Mr. BRECK. Correct.
Senator JOHNSON. D O you know why it was that you paid Mr.
Juan Leguia $415,000 against about $100,000 to the other members?
Mr. BRECK. That was the arrangement inter se.
Senator JOHNSON. Among themselves?
M r . BRECK. Y e s .
Senator JOHNSON. Was that arrangement made in writing?
Mr. BRECK. Not that I know of.
Senator JOHNSON. Did you ever investigate to ascertain?
Mr. BRECK. We accepted the word of our associates in the business
that that was the arrangement.
Senator JOHNSON. There was no investigation at all?
Mr. BRECK. All the members of the group of promoters were agreed
that that was the arrangement. Nobody thought otherwise.
Senator JOHNSON. Mr. Juan Leguia you have described as a gentleman who was able to live at the rate of $250,000 or $300,000 a
year, and he evidently was having a very delightful time uj)on that;
but upon what theory were you entering into a contract with Juan
Leguia. living as he did and knowing what sort he was, the son of
the President of the Republic
Mr. BRECK. We entered into no contract with him.
Senator JOHNSON. Evidently you did, because you paid him
$415,000. I am not speaking now of a written contract.
Mr. BRECK. Senator, all I mean is that he was a member of the
group of promoters who were entitled to a commission approximating one-half of one point on the business which was done. That
arrangement was not made with us; it was made with the group of
promoters themselves.
Senator JOHNSON. But carried out and paid by you?
Mr. BRECK. Yes; it was paid by us, because the business was
charged with that commission when we took it.
1290
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON; And you knew it before you consummated the
business?
Mr. BRECK. Correct.
Senator JOHNSON. Let me suggest to you, if I may, without any
invidious intent at all, that as shrewd, sliarp New York bankers you
knew just what you were doing when you paid Juan Leguia $415,000,
did you not?
Mr. BRECK. When we paid him that amount ?
Senator JOHNSON. YOU knew just what you were paying it for. did
you not?
Mr. BRECK. I do not exactly understand you. Senator.
Senator JOHNSON. YOU knew that you were paying the son of the
President of Peru that amount to get these loans, did yon not ?
Mr. BRECK. We were paying it to this group of promoters who
brought the business to us."
Senator JOHNSON. The rest of the promoters did not amount to
much, as far as getting the loan was concerned. It was Juan Leguia
who was the big man m getting it, was it not ?
Mr. BRECK, I wouldn't say so.
Senator JOHNSON. Of course. So you paid Junn Lcptiia $415,000—
the son of the President of Peru—to get loans from the Government
of Peru. Is not that the fact ?
Mr. BRECK. NO, Senator. I do not think you state it c o r r e c t l y .
Senator JOHNSON. All right. You state it your way.
Mr. BRECK. A group of promoters originated a piece of business,
brought it to a New York banking house who brought it to us. \\ e
were without knowledge of the group which constituted the promoters until we were embarked on the negotiations. When we
learned that Mr. Juan Leguia was a member of the group we did not
for that reason discontinue the negotiations. We went t h r o u g h and
completed it, having all our dealings: with the President of Peru
himself. We had practically no dealings with Juan Leguia at any
time. He was simply, as far as we were concerned, an outside member of the group of promoters. When the transaction was completed
and the bonds sold we paid out of our own profits to the group of
promoters the sums of money we have already told you.
Mr. JOHNSON. May I ask, Mr. Chairman* if all" of the witnesses
were sworn this morning?
The CHAIRMAN. No; just Mr. Strauss.
Senator JOHNSON. You were not sworn, were you, Mr. Breck F #
Mr. BRECK. N O ; but I should be glad to make any of my testimony under oath.
Senator JOHNSON. I ask it merely because it has been done with all
of the witnesses. I ask that the" oath be administered as well to
these other two gentlemen.
The CHAIRMAN. That is perfectly satisfactory to me. I thought
Mr. Strauss was the witness.
Senator JOHNSON. The suggestion was made to me. That is the
reason I make it, Mr. Chairman.
(Henry C. Breck and Lionel Stahl, of J. & W. Seligmau & Co.,
54 Wall Street, New York City, were duly sworn by the c h a i r m a n . )
Senator JOHNSON. Now, Mr.*Breck. you say you had nothing to do
with Juan Leguia after you began negotiations with the P r e s i d e n t !
Mr. BRECK. That is correct.
1291
SALE OF FOREIGN BONDS OR SEC UNITIES
Senator JOHNSON, Who carried 011 the negotiations with the
President?
Mr. BRECK. Mr. Maginnis, on the tobacco loan, and the various
individuals we have named to you, including myself, in connection
with other loans.
Senator JOHNSON. Did you carry on in connection with a portion
of these loans the negotiations? Did you, personally, with the
President of Peru?
M r . BRECK. I d i d .
Senator JOHNSON.
For how long a period were you engaged in
carrying on those negotiations?
Mr. BRECK. We were negotiating at one time or another with the
Republic of Peru almost constantly, from the latter part of 1926 until
the present time practicallv.
Senator JOHNSON. For how long a period in 1927 and 1928 were
you personally negotiating with the President of Peru?
Mr. BRECK. Four months in 1928 and four months in 1929.
Senator JOHNSON. Did you on any occasion speak to the President
of Peru concerning the sums that you were paying to his son?
, M r . BRECK. I d i d n o t .
Senator JOHNSON. Why ?
Mr. BRECK. I was not asked.
Senator JOHNSON. Is that the
only reason you can suggest—that
you were not asked?
Mr. BRECK. I was not asked and it had nothing to do with the
negotiations.
Senator JOHNSON. YOU told me that you were negotiating for some
months in each year with the President of Peru with respect to these
loans.
Mr. BRECK. Yes; but the amounts that were paid to a group of
promoters had no relation to the negotiations which were being
carried on as to the terms of the loan.
Senator JOHNSON. YOU say it had no relation to it. If you had
not got the loans, you would not have paid the sums, would you ?
Mr. BRECK. That is correct.
Senator JOHNSON. All right. You were negotiating these loans,
knowing that you had to pay to the son of the President of Peru
something over $400,000.if you got them, and you never mentioned a
word to the President of Peru concerning them?
Mr. BRECK. Correct.
Senator JOHNSON. Why, I ask you again?
Mr. BRECK. There was no reason to mention it.
Senator JOHNSON. No reason to mention it. Is there nothing
that suggests itself to you in relation to a loan you are getting from
a republic, concerning which you are paying the son of the president
of the republic substantially half a million dollars?
Mr. BRECK. We did not look at it in that way, Senator. We did
not look upon this business as being obtained because the son of the
president received a certain amount of money. The son of the president was a member of a group of promoters to whom we were obligated to pay money before we went into the business.
Senator JOHNSON. Did you know, when you began your negotiations, that you were obligated to pay this group of promoters, as
you.term them, this sum of money? Did you know
1292
SAIJ3
OP
FOREIGN BONDS OR SECURITIES
Mr. BRECK. Not in detail, Senator.
Senator JOHNSON. Did you know the proportion in which yon
were to pay them?
M r . BRECK. W e d i d not.
Senator JOHNSON. HOW
did you charge the amount, in the first
instance; upon your books ?
Mr. BRECK. By the time the loan was completed the details of
each person's commission were agreed upon.
Senator JOHNSON. Agreed upon by them.
Mr. BRECK. By them.
,Senator JOHNSON. And accepted by you.
Mr.; BRECK. Accepted by us.
Senator JOHNSON. Then there must have been an agreement as to
percentage originally made, was there not?
Mr. BRECK.: An approximate agreement.
Senator JOHNSON. And that approximate agreement as to percentage was what?
Mr. BRECK. We thought it was approximately one-half of 1 per
cent on all the bonds. As it turned out, the claims of the various
promoters were such that there was more than one-half of 1 per cent
m that $15,000,000 tobacco loan, which we finally paid them.
Senator JOHNSON. Did you have any dispute" or controversy respecting that?
Mr. BRECK. We thought it was too much.
Senator JOHNSON. You thought it was too much. Why?
Mr. BRECK. Because it is more than the customary, or considerably
more than tlie customary amount. A half of 1 per cent is a fairly
high' commission to pay for originating business of this kind.
Senator JOHNSON. Is it customary or usual to pay the son of the
president of a republic one-half of I per cent for a foan?
Mr. BRECK. I think not.
.
Senator JOHNSON. Did you have any controversy in writing -m
respect to the particular matter?
M r . BRECK. N o .
Senator JOHNSON.
Did you have any communications, or any
sortof writing' that passed between yon and anyone of t h e s e g c n t l e meri" Bolster, Maginnis, or Salt?
Mr. BRECK. ! think not. It was all verbal!
Senator JOHNSON. Were there any letters or c o m m u n i c a t i o n s that
passed between you and Juan Leguia in reference to the p a y m e n t s
M r . BRICK. NO.
Senator JOHNSON.
\
Is the mere payment of five or six hundred
thousand dollars; as the case might tie, in a matter of t h i s s o r t , one
which you usually conduct without any writing whatsoever?^
f
Mr. BRECK. Frequently commissions are paid u p o n the receipt or
the individual receiving them.
Senator JOHNSON. And without the slightest evidence of a contract in'writing between you?
Mr. BRECK. I think that is done.
T
Senator JOHNSON. It may be. I am not disputing yon, but 1
am asking you, that is all; You think it may be done ?
M r ; BRECK. Y e s .
Senator JOHNSON.
with Mr. Bolster?
All right. Have you an account on your books
-
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1293
Mr. BRECK. I think we did have at one time. He is dead now*
Senator JOHNSON. D O you know whether or not that account
appears ?
Mr. BRECK. I think it does, Senator. I do not recall offhand.
Senator JOHNSON. D O vou know how Mr. Bolster was paid his
$67,000?
Mr. BRECK. I think it was paid in the first instance by a check
by R J. Lisman & Co. for $10,000, and his estate ^vvas later paid
$57,000 in connection with the 6 per cent.
Senator JOHNSON. By whom ?
Mr. BRECK. By us, as syndicate managers.
Senator JOHNSON. Was a demand made upon you by his estate?
M r . BRECK.
Yes.
Senator JOHNSON. How was that demand made?
Mr. BRECK. A request by the attorneys for the executor.
Senator JOHNSON. Did he not recite that there had been an agreement in writing in respect to the matter?
Mr. BRECK. He did—no, he cited that there had been an agreement.
Senator JOHNSON. IDO you know whether an agreement in writing
was insisted upon?
Mr. BRECK. I do not know.
Senator JOHNSON. Can you not recall?
Mr: BRECK. The commission arrangements were inter se, among
the group of promoters.
Senator, JOHNSON. Did Mr. Juan
Mr. BREOK. We were told that was the arrangement between the
promoters.
i Senator JOHNSON. Did the son of the president tell you that?
M r . BRECK. Y e s .
Senator JOHNSON. Write it to you?
M r . BRECK. N O .
Senator JOHNSON; Whom did he tell?
Mr. BRECK. He told me.
Senator JOHNSON. He told you that was it?
M r . BRECK. Y e s .
Senator JOHNSON. What did he tell you in respect to it?
Mr. BRECK. He told me that Harold Bolster was entitled
to this
amount of monev as his share of the promoters' agreement—the
promoters' commission.
Senator JOHNSON. What did you say?
Mr. BRECK. I said all right.
Senator JOHNSON. YOU said all right. What else did lie say to
you?
Mr. BRECK. I think that is all.
Senator JOHNSON, Did you know, up* to that time, that Bolster
was interested in getting a 'commission out of the loan V
Mr. BRECK. Yes. He was the one whose name first came to our
attention from F, J; Lisman & Co.
Senator JOHNSON. Juan Leguia said to vou that Bolster is entitled
to $67,000?
'
<Mr. BRECK. No. It was not said that way. The commission
agreement runs from F* J. Lisman & Co:; to Bolster, and at the time
of the tobacco loan, 7 per cent bonds werefloated^there was a con-
1294
SAIJ3
OP
FOREIGN BONDS OR SECURITIES
siderable disagreement between R J. Lisman & Co. and Mr. Bolster
as to the proper amount that he was to receive, and other individuals
in the group-—promoters—were to receive. That was not brought to
our attention until after the controversy had gone a considerable
way, and after discussion of the matter a settlement was made by
which Mr. Bolster accepted, on the tobacco loan, the amount indi*
cated.
Senator JOHNSON. What was the amount indicated ?
Mr. BRECK. $10,000.
Senator JOHNSON. $10,000. Go ahead.
Mr. BRECK. And, as part of that settlement, it was agreed that
he would receive $57,373 if and when the $50,000,000 refunding loan
was floated.
Senator JOHNSON. That had not yet beenfloated?
Mr. BRECK. It had not yet been floated.
Senator JOHNSON. And you had not yet obtained it I
Mr. BRECK. We had not yet obtained it.
Senator JOHNSON. Did you agree to that?
M r . BRECK. W e d i d .
Senator JOHNSON* Then
there must have been some agreement, at
the same time, as to what would be paid the other people, was there
not?
Mr. BRECK. Yes, there was, Senator.
Senator JOHNSON. All right. What was the agreement you then
made as to the payments to Juan Leguia?
Mr. BRECK. That he would receive one-half of 1 per cent.
Senator JOHNSON. That was the agreement?
M r . BRECK. Y e s .
Senator JOHNSON:
He told you, or did you learn it from somebody
else?
Mr. BRECK. No; at that time he told us that that was the arrangement, and we agreed to it.
Senator JOHNSON. That is, Juan Leguia told you that the arrangement was that he was to have one-half of 1 per cent upon the loans
that you got from the Peruvian Kepublic, and you agreed to it; is
that correct?
Mr. BRECK. That is correct.
Senator JOHNSON. Was that told you in Peru?
M r . BRECK. N o .
Senator JOHNSON. Where?
Mr. BRECK. New York.
Senator JOHNSON. When Leguia was
M r . BRECK. Y e s .
there?
Senator JOHXSON. Was that all he said at that time?
Mr. BRECK. That is all I recall.
Senator JOHNSON. Did you at that time know that he was to receive one-half of 1 per cent on the loan subsequently received by you t
Mr. BRECK. I thought I said that is what he
Senator JOHNSON. That is what he said to you then ?
M r . BRECK. Y e s .
Senator JOHNSON. Before that, did you know it?
Mr, BRECK. I tried to make it clear that we did not
know he vas
in the syndicate of promoters until the spring of 1927 when we m™
negotiating the $15,000,000 tobacco loam The amount of his interest
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1295
at that time was not clear, and it was later worked out at the figure
I have given you, and at that time it was agreed by the group that
Juan Leguia would thereafter receive one-half of 1 per cent on the
refunding loan.
Senator JOHNSON. H O W many times do you think you talked to his
father, the President of Peru?
Mr. BRECK. Fifteen or twenty times.
Senator JOHNSON. Y O U talked to him, I presume, concerning the
floating of these loans, did you not?
M r . BRECK. Y e s , s i r .
Senator JOHNSON. On
no occasion did you ever suggest that' his son
was receiving one-half of 1 per cent, did }rou?
M r . BRECK. N O , s i r .
Senator JOHNSON. Did you know that he knew it?
M r . BRECK. N o , s i r .
Senator JOHNSON. You have seen it subsequently
charged that he
did, have you not ?
Mr. BRECK. I do not know that I have.
Senator JOHNSON. Y O U do not know that. What became of the
bonds—those three issues?
Mr. BRECK. They were sold to the public.
Senator JOHNSON. Sold to the public. Have you any of them?
M r . BRECK. N O .
Senator JOHNSON. All sold to the Ajnerican public?
Mr. BRECK. NO. A certain proportion of them were sold
Senator JOHNSON. I beg your pardon. There was some percentage
that was stated by Mr. Strauss to have been sold in Europe. That is
correct, is it not?
M r . STRAUSS. Y e s .
Mr. BRECK. Correct.
Senator JOHNSON. But
the larger percentage of them, or the great
percentage of them, were sold to the people of the American Republic,
was it not?
M r . BRECK. Y e s .
Senator JOHNSON.
Did you convey to anybody to whom you ever
sold these bonds the fact that you were giving to the son of the President of Peru half a million dollars to get the right to sell these
bonds to Americans?
M r . BRECK. N o .
Senator JOHNSON.
Was there ever any indication of any kind or
any sort given by you, in writing or otherwise, through the press or
in any way, directly or indirectly, as to the transaction that occurred
in relation to the payment to the son of the President of Peru for
the purpose of obtaining the sale of these bonds by your house?
M R . BRECK. N o .
Senator JOHNSON. Why not?
Mr. BRECK. It is not customary.;
Senator JOHNSON. It is not customary.
Is the transaction such as
you had a customary transaction with international bankers?
Mr. BRECK. I think it is quite customary for commissions to be
paid in connection with financing.
Senator JOHNSON. Particularly South American loans.
M r . BRECK.
Yes.
92028—32—PT 3
3
1296
SAIJ3
OP FOREIGN BONDS OR SECURITIES
Senator JOHNSON. DO you know that the payment of the loans, or
the money that you obtained for the loans, from the American public,
kept Leguia in office for a long period of time i
Mr. BRECK. I do not know it.
Senator JQHNSON. DO you know that he was regarded as one of the
dictators of South American countries, do you not?
M r . BRECK. Y e s .
Senator JOHNSON.
And that he was able to maintain himself by
virtue of the funds you have obtained in the manner you have
suggested.
Mr. BRECK. I do not know that.
Senator JOHNSON. YOU do not know that?
Mr. BRECK. I know that the loan was approved by the Congress of
the Peruvian Government, and that it was passed upon by Peruvian
lawyers.
Senator JOHNSON. Even the fact that it was passed upon by the
Peruvian Congress and the Peruvian lawyers would not alter the
facts in the matter, J assume, as to the dictatorship, would it?
Mr. BRECK. He had been President of Peru for some eight years,
operating with a Congress elected in accordance w i t h t h e constitution. We insisted that the loans be made a matter of public record,
and approved by the Congress.
Senator JOHNSON. I am advised by certain gentlemen in Peru that
the Government of Peru received approximately 80 per cent of the
loan; that the Government is obliged to pay back the full amount
plus 5 per cent interest; and that this means that the loan cost Peru
not only interest of about 30 per cent but also the exchange, due to
the depreciation in Peruvian currency. Do you know anything of
those facts?
Mr. BRECK. I do not believe them. They are not true.
Senator JOHNSON. They are not correct?
M r . BRECK. NO.
Senator JOHNSON. D O
you know what is the difference in the
exchange at the present time?
Mr: BRECK. The exchange at the present time is 28 United States
cents per sol.
Senator JOHNSON. By the way, on these Peruvian loans vou advised the State Department, did you not?
M r . BRECK. W e d i d .
Senator JOHNSON. And
you sought, as all the other firms seek, the
negative approval of the State Department in reference to them?
M r . BRECK. W e d i d .
Senator JOHNSON. In
..
advising the State Department, did y o u tell
them that you were paying to the President's son half a milhon
dollars or thereabouts to get the loans?
M r . BRECK. W e d i d n o t .
Senator JOHNSON. Did the
State Department approve these loans
to Peru; do you know ?
Mr. BRECK. They sent us their customary letter.
Senator JOHNSON. That is, their customary letter saying that they
had no objection?
M r . BRECK. Y e s .
Senator JOHNSON.
the market to-day?
What are the Peruvian bonds selling
FOR 011
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1297
Mr. BRECK. About $7.
Senator JOHNSON. What was it you sold-them to the American
public for ?
Mr. BRECK. The 6 per cent issue at 91 y2 and 91.
Senator JOHNSON.- The 6 per cent issue at >91% and 9 1 . How about
the 7 per cent issue?
Mr. BRECK. At 96,1 believe.
Senator JOHNSON. I take it, Mr. Breck
The CHAIRMAN. Senator Johnson, I just want to ask one question.
I want to ask you what the general percentage is which you give
or which your firm gives to the initiators of a loan to a foreign
country or in this country, or any other loan that you may make.
I mean the promoters that bring it to you. What is your general
percentage paid in such a case?
Mr. BRECK. It depends on circumstances, Senator, and the amount
of work that the promoter may do in bringing the business, but,
generally speaking, we would consider one-half of 1 per cent to be
a high commission. One-quarter of 1 per cent would be a fair commission, and anything less than one-quarter of 1 per cent would be
considered a low commission.
The CHAIRMAN. YOU do not consider that there was very much
work attached to this case, do you ?
Mr. BRECK. One-half of 1 per cent is not an unreasonable commission, according to the general custom.
The CHAHIMAN. Have you made loans before this and charged
one-half of 1 per cent?
Mr. BRECK. I think not, sir.
The CHAIRMAN. Or paid, I should say, one-half of 1 per cent?
Mr. BRECK. I think not.
The CHAIRMAN. This is the highest that you ever paid?
Mr. BRECK. I think so. We have paid a quarter of 1 per cent.
The CHAIRMAN. Is it the only one you ever paid one-half of 1 per
cent on?
Mr. BRECK. I think the only foreign issue on which one-half of
1 per cent has been paid—that is, to individuals.
Mr. STAIIL. Or do you mean to banking houses? Banking houses
bring business to us, or banking agents in foreign countries might
bring it to us.
The CHAHIMAN. N O matter whether it is a banking agency or
whether it is an association of individuals^ the same as this was, is
there any reason why you should have paid one-half of 1 per cent
instead of one-quarter m this case?
Mr.^ BRECK. Because the business came charged with that size
commission.
The CHAIRMAN. You mean that was their demand?
M r . BRECK. Y e s .
The CHAIRMAN.
per cent?
Has anyone else ever demanded one-half of 1
M r . BRECK. Y e s .
The CHAIRMAN. And you
Mr. BRECK. I think not.
then have agreed to it?
This kind of arrangement is to be distinguished from the purchase of bonds, which we might make from
another house. For instance, we have bought an issue of bonds from
the house which itself had obtained them, at two points up.
1298
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FOREIGN BONDS OR SECURITIES
The CHAIRMAN. That is an entirely different proposition. You
were thefirstgroup, so called. You were the ones that advanced the
money and put the loan under way.
Mr. BRECK. That is correct.
The CHAIRMAN. Has any loan of that same character, which your
company has made, been charged with one-half of 1 per cent com*
mission?
Mr. BRECK. I think not, sir.
The CHAIRMAN. This is the only one. Do you know the reason
why one-half of 1 per cent, instead of one-quarter of 1 per cent,
was paid?
Mr. BRECK. Because that was the arrangement made by those who
had negotiated the loan when it came to us.
The CHAIRMAN. That was the demand made by them.
Mr. BRECK. That was the demand made by them.
Senator JOHNSON. Did I understand you to say—correct me if I
am in error in the repetition of it—that you have paid other promoters
sums for bringing you business of this sort?
M r . BRECK. Y e s .
Senator JOHNSON.
Will you state to me any Latin American loan
where you paid any promoters?
Mr. BRECK. The Republic of Costa Rica; the Department of Cauea
Yally; Department of Cundinamarca—only South American,
Senator?
Senator JOHNSON. I was talking about Latin America.
M r . BRECK. Y e s .
Senator JOHNSON.
M r . BRECK. Y e s .
Senator JOHNSON.
Those are all of Latin America ?
Let us take them one at a time. First, the Republic of Costa Rica; you paid for promotion costs. Whom did you
Pay?
Mr. BRECK. An individual in Costa Rica.
Senator JOHNSON. Whom?
Mr. BRECK. Mr. Alvarado.
Senator JOHNSON. What was he?
Mr. BRECK. A Costa Rican citizen.
Senator JOHNSON. A mere citizen?
Mr. BRECK. SO far as I know.
Senator JOHNSON. Did he undertake to obtain the loan for you?
Mr. BRECK. I am not well acquainted with the details, because
that business was brought to us by this same house of Lisman, and
the arrangements were made between them and Mr. Alvarado. W®
paid the amount they said he was entitled to. We, as syndicate managers, paid that amount.
Senator JOHNSON; ,HOW much?
Mr. BRECK. I do not recall, but it was something around $25,000.
Senator JOHNSON. Have you an account with him on your books?
M r . BRECK. N o .
Senator JOHNSON. Why?
Mr. BRECK. He has never asked to open one.
Senator JOHNSON. How did you pay him?
Mr. BRECK. I do not recall the details. I think
bank to whom we paid the money.
Senator JOHNSON. Do you have a receipt?
it was paid by the
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1299
Mr. BRECK. I do not think we have.
Senator JOHNSON. Y O U do not think you ever even had a receipt?
Mr. B R E C K . I think the bank to whom we paid the money did.
Senator JOHNSON. What was Mr. Alvarado's business in Costa
Rica?
Mr. B R E C K . I do not know.
Senator JOHNSON. Where did he live—what particular place?
Mr. B R E C K . San Jose, I believe.
Senator JOHNSON. Y O U simply paid him $ 2 5 , 0 0 0 for his services in
aiding you to get the loan ?
Mr. BRECK. A S I say, I do not think we paid it to him. I think
we paid it to a bank, which paid it to him.
Senator JOHNSON. Did you have any dealings with him at all?
M r . BRECK. N O ; w e d i d n o t .
Senator JOHNSON. Y O U simply
undertook to pay that when Messrs.
Lisman & Co. came to you with the loan, is that correct?
Mr. BRECK. Yes; as an introductory commission.
Senator JOHNSON. As an introductory commission. Good heavens!
Pardon me. I did not mean to indulge in the expletive, but are
there introductory commissions, and then subsequent commissions,
and then consummation commissions?
Mr. BRECK. I do not know of any, sir.
Senator JOHNSON. What do you mean by an introductory commission ?
Mr. BRECK. When a promoter introduces a piece of business to
bankers, he claims an introductory commission.
Senator JOHNSON. And Mr. Alvarado was a promoter?
Mr. BRECK. I do not know what his business is.
Senator JOHNSON. Y O U have said that when a promoter presents
a piece of business to a banker, he claims an introductory commission,
and that was the commission that Mr. Alvarado obtained, was it not?
M r . BRECK. Y e s .
Senator JOHNSON. D O you pay introductory commissions often?
Mr. BRECK. Whenever a promoter brings a piece of business to us
which we do, wc pay him an introductory commission.
Senator JOHNSON. All right. We have got the
The C H A I R M A N . I S that in addition to the regular percentage?
Mr. B R E C K . The same thing.
The C H A I R M A N . It is taken out of the regular percentage, isn't it.
or is it an additional percentage paid?
Mr. BRECK. NO. The bankers pay it out of their profits as commission to the person who brings the business to them. It is no different from any other commission. I simply characterized it as a
promoter's commission, or introductory commission.
Senator JOHNSON. All right. We have, to Mr. Alvarado, whom
you do not know, and never met, I assume,
introductory commission of $ 2 5 , 0 0 0 on the Costa Rican loan.
Mr. B R E C K . I am not sure of that figure, Senator. I would have
to consult my records to find out.
Senator JOHNSON. Would you give the exact figure, please, to the
reporter at your convenience? That was before the loan was consummated, of course, I assume?
Mr, B R E C K . After the loan was consummated.
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SAIJ3
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FOREIGN BONDS OR SECURITIES
Senator JOHNSON. After the loan was consummated, and before
you sold it, I presume?
Mr. BRECK. After it had been sold and paid for.
Senator JOHNSON. You purchased that Costa Rican loan at what
price?
Mr. BRECK. Eighty-eight, I think.
Mr. STAHL. Eighty-eight.
Senator JOHNSON. YOU sold it to the American public at what
price ?
Mr. STAHL. Niney-five and one-half.
Senator JOHNSON. Ninety-five and one-half. or a 7 3 /I! per cent
spread. Did you advise the State Department of the fact that you
were making that loan?
M r . STAHL. Y e s .
M r . BRECK. Y e s .
Senator JOHNSON.
Was there anything said about Mr. Alvarado
in connection with that?
M r . BRECK. N o .
Senator JOHNSON.
The next one you mentioned, where you paid
a commission, was the Department of Cauca Valley, as I understand it?
M r . BRECK. Y e s .
Senator JOHNSON. HOW
much commission did you pay in the case
of the Department of Cauca Valley ?
Mr. BRECK. I do not recall, sir.
Senator JOHNSON. TO whom did you pay it?
Mr. BRECK. My recollection is that it was to a New York firm, but
I would have to consult my records on that.
Senator JOHNSON. I am not speaking of the step-up price, or what
sum you paid subsequently to obtaining it, but you initiated the
Department of Cauca Valley loans, as I understand it. That has
been testified by Mr. Strauss.
Mr. BRECK. We headed the business, Mr. Strauss said. The business was initiated and found by Baker, Kellogg & Co., who brought
the business to us.
Senator JOHNSON. Are they the ones you paid the commission to?
Mr. BRECK. I would have to consult my records to find out.
Senator JOHNSON. You do not know the amount of the commission?
M r . BRECK. I d o n o t .
Senator JOHNSON. Those
two loans were to a political subdivision
of Colombia, as has been testified to here—Cauca Valley; is that
correct?
Mr. BRECK. That is correct.
Senator JOHNSON. What I want to ask you is this: What you have
done in relation to the payment of commissions to various* brokers,
individuals, and the like, to furnish you the business, has been the
course of business with all international bankers respecting South
American loans or Latin American loans?
Mr. BRECK. I can not speak for the others. I understand it is
the custom.
Senator JOHNSON. There was such keen competition among international bankers to obtain the business of South America, and to sell
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1301
its securities in the American market, that they paid commissions to
promoters, and the like, in order to get it; is that correct?
Mr. B R E C K . I think it has been so as long as I remember. I understand it to have been the custom in London before the War.
Senator JOHNSON. Are you justifying it because it was an English
custom ?
Mr. B R E C K . I am not justifying it at all. I am stating the facts.
Senator J O H N S O N . That is what I am asking—that, and that alone,
as to the facts. Did you have any competition in obtaining the Peru
loans ?
Mr. B R E C K . Yes; there was competition.
Senator JOHNSON. By whom?
Mr. B R E C K . At various times in the course of our Peruvian negotiations, which extended over a long period of time, representatives
of one or another American banking house called in Lima^ called
on the President and offered their services to him in handling the
country's financing, and we were told that he told them that lie was
satisfied with the relations he had with his bankers, and did not
wish to change.
Senator J O H N S O N . When you floated the loans of $ 1 5 , 0 0 0 , 0 0 0 ,
$ 5 0 , 0 0 0 , 0 0 0 , and $ 3 5 , 0 0 0 , 0 0 0 , respectively, you made, as^ Mr. Strauss
has testified here, a subsequent agreement with the various banking
houses. You had your first syndicate with them, did you not?
Mr. B R E C K . Correct.
Senator J O H N S O N . Those houses—I do not know whether they
were stated by Mr. Strauss or not. Can you recall from memory
who were in with you upon this $10,000,000 loan, after the first steps
were taken by you, and you became its sponsors?
Mr. B R E C K . I think you mean, Senator, the appearing group, the
ones whose names appeared on the circular.
Senator J O H N S O N . Call it that. That is the subsequent syndicate, as I understand it, not the original syndicate.
M r . BRECK. Y e s .
Senator JOHNSON.
The original syndicate consisted of a few bankers in New York City?
Mr. B R E C K . That is correct.
Senator J O H N S O N . All right. Will you give me their names?
Mr. B R E C K . J . & W, Seligman & Co., the National City Co., F . J .
Lisman & Co., and the Central Union Trust Co. The groups that
appeared on the circular and who are generally considered the sponsors of the issue, included, in addition, Blyth Witter & Co. and the
Guaranty Co. of New York.
Senator J O H N S O N . Did you state to any one of these associates
of yours
Mr. B R E C K . I beg your pardon, Senator. The Guaranty Co. of
New York did not appear on the circular. They had an interest in
the business, but did not appear on the circular.
Senator J O H N S O N . All right.
Mr. B R E C K . Nor did the Central Union appear on the circular.
Senator J O H N S O N . We will get the circular in evidence, so that
you need not worry on that score. We will «ret that accurately.
Did you disclose to any one of your associates w*no were thus acting
with you in selling to the American public $ 1 0 0 , 0 0 0 , 0 0 0 worth or
1302
SAIJ3
OP
FOREIGN BONDS OR SECURITIES
Peruvian bonds that you were obligated to pay, or that you had
paid, or that you intended to pay, to the son of the President of Peru
substantially half a million dollars for obtaining the business?
M r . BRECK. NO.
Senator JOHNSON. YOU told none
Mr. BRECK. F. J. Lisman & Co.
of them ?
knew, because they and we had
made the agreement.
Senator JOHNSON. Eliminating Lisman. did vou tell the National
City Bank?
M r . BRECK. NO.
Senator JOHNSON. Were they familiar with the facts?
Mr. BRECK. I think not.
Senator JOHNSON. Have you ever—what is it, Mr. Strauss?
Mr. STRAUSS. I thought he was making an error.
Senator JOHNSON. Surely.
Mr. STRAUSS. But evidently I was wrong.
Senator JOHNSON. I want you to correct—any one of the
three
of you—any error that any of us falls into. I have no desire to
get into any error.
You knew that the President of the Republic of Peru and his son
were in difficulties, did you not, among which was this particular
charge that had been made, and the amount that had been paid by
you for these loans?
Mr. BRECK. You refer to the action of the revolutionary tribunal,
the trial of the President and his son?
Senator JOHNSON. Yes.
Mr. BRECK. Yes; we read about that.
Senator JOHNSON. Has not the National City Bank, or any other of
your companions in putting these loans out to the American public,
ever talked to you concerning the matter?
Mr. BRECK. They have not.
Senator JOHNSON. Nor have you talked to any of them in relation to it?
Mr. BRECK. We have not.
Senator JOHNSON. GO ahead, Mr. Strauss.
Mr. STRAUSS. I was just asking Mr. Breck—I am not very familiar
with the details on that. I thought perhaps he had dropped into an
error, but he says he has not.
Senator JOHNSON. All right. If you think he has, go ahead ana
correct him. That is all right.
Mr. STRAUSS. No. I will let him stand on his own statement.
Senator JOHNSON. Will you state whether or not, during the negotiations for the loans to Peru, the negotiations which you or your
establishment held with the President of Peru, there was any delay
or any difficulty conditioned upon the payment of the money that you
were obligated to pay to the son of the President of Peru ?
Mr. BRECK. There was not.
Senator JOHNSON. Was there my delay or any difficulty that
transpired at all after you had paid the money to the son of the
President?
Mr. BRECK. I know of no delay or difficulty.
Senator JOHNSON. Were you held up when you began the negotiations with the President of Peru that you have described that you
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1303
i respect to these loans? Were there
Senator JOHNSON. Were there any difficulties encountered?
Mr. B R E C K . None; more than the usual disagreement between the
borrower and the lender as to the terms and conditions of how the
money should be spent. We insisted on a strict control and he
wanted freedom of expenditure.
Senator JOHNSON. I am going to come to that question of expenditure pretty soon, but there was nothing more than that?
M r . BRECK. NO.
Senator JOHNSON. D O
you know whether or not such difficulties as
there were suddenly ceased with the payment of the sum to the son of
the President of Peru ?
Mr. B R E C K . N O money was paid to him until after the bonds were
bought and sold.
Senator J O H N S O N . Not until after you had actually put them on
the market?
M r . BRECK. NO.
Senator JOHNSON. Was
M r . BRECK. NO, s i r .
Senator JOHNSON. Was
M r . BRECK. NO, sir.
Senator JOHNSON. Was
any credit to him?
any sum at all paid to him before?
any credit given to him before?
there any entry on your books indicating
M r . BRECK. NO, sir.
Senator JOHNSON. Prior
to the time of the disposition of these
bonds in the American market
Mr. B R E C K . Senator, I have stated that we have paid him a sum
when the tobacco bonds were sold. Thereafter he was paid nothing
until the first series of 6 per cent bonds were sold. Thereafter he
was paid nothing until the second series of 6 per cent bonds were
sold.
Senator J O H N S O N . I see. Do you remember how much it was you
paid after the tobacco bonds were sold ?
M r . BRECK. $50,000.
Senator J O H N S O N . That
was the first payment that was made by
you to the son of the President of Peru ?
Mr. B R E C K . That is right.
Senator J O H N S O N . At that time did you make any payment to
Mr. Bolster, or to Mr. Maginnis, or to Mr. Salt?
Mr. B R E C K . Payment was made, as I recall, by F. J. Lisman &
Co. to Mr. Bolster, and we made a payment to Sir. Maginnis.
Senator J O H N S O N . That is, after the first issue of tobacco bonds?
Mr. B R E C K . That is right.
Senator J O H N S O N . How much did you pay Maginnis?
M r . BRECK. $40,000.
Senator J O H N S O N . That
then?
M r . BRECK. I t w a s .
Senator J O H N S O N . What
was your total payment to Maginnis,
did you pay Bolster, or what did Lisman
pay Bolster at that time?
Mr. B R E C K . My recollection is it was $ 1 0 , 0 0 0 , but we did not have
anything to do with i t
1304
SAIJ3
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FOREIGN BONDS OR SECURITIES
Senator JOHNSON. YOU had nothing to do with that payment?
M r . BRECK. NO.
Senator JOHNSON. Did you pay Salt anything at that time?
M r . BRECK. N o .
Senator JOHNSON. Nothing at all. But Maginnis was paid his
full $40,000?
M r ; BRECK. Y e s .
Senator JOHNSON.
All right. After the second loan was floated,
the second loan beingfloatedin December, 1927, for $50,000,000, did
you make any payments?
M r . BRECK. W e d i d .
Senator JOHNSON. Did you make any to Bolster?
Mr. BRECK. 'Yes; to his estate.
Senator JOHNSON. That was to his estate, then?
• M r . BRECK. Y e s .
Senator JOHNSON. After that second loan?
Mr. BRECK. He had died.
Senator JOHNSON. You paid him in full then, or
you paid it to
his estate at that time?
Mr. BRECK. That is right.
Senator JOHNSON. Did you make any payment to Maginnis?
M r . BRECK. N o .
Senator JOHNSON.
M r . BRECK. N o .
Senator JOHNSON.
Did you make any payment to Salt then?
Did you make any payment after that second
loan to the son of the President of Peru?
M r . BRECK. Y e s .
Senator JOHNSON. What was that payment?
M r . BRECK. $192,600.
Senator JOHNSON. After the third loan you
Bolster, then, in full, had you not?
had already paid
M r . BRECK. Y e s .
Senator JOHNSON. YOU had already paid Maginnis in full?
M r . BRECK. Y e s .
Senator JOHNSON. Had you paid Salt?
M r . BRECK. N o .
Senator JOHNSON. After the third loan did you pay Salt?
M r . BRECK. Y e s .
Senator JOHNSON. You gave him that $10,000?
M r . BRECK. Y e s .
Senator JOHNSON. What did he do—make a demand upon
you
for it?
Mr. BRECK. My recollection is—I was in Peru at the time—my
recollection is that there had been some understanding between
him and his firm, F. J. Lisman & Co., that he was to get a commission plus his salary. F. J. Lisman & Co. told us of that arrangement
at the time, and he was paid $10,000.
,
Senator JOHNSON. How much was the payment that was made
to Leguia, the son of the President of Peru, after that third loans
Mr. BRECK. $173,600.
Senator JOHNSON. Have you ever made any further payments
to him?
M r . BRECK. N o .
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1305
Senator JOHNSON. Those constitute all the payments that you
have made to Leguia?
M r . BRECK. Y e s .
Senator JOHNSON. To either Leguia?
Mr. B R E C K . We made payments only to Juan Leguia.
Senator JOHNSON. Y O U made none to any other members
family?
of the
M r . BRECK. N O .
Senator JOHNSON.
Mr. Chairman, do you wanjt to take a recess
until 2 o'clock?
The C H A I R M A N . Are you through with the witness?
Senator JOHNSON. N O ; Mr. Chairman. I am not through. I
have gone through only a few of these loans.
The C H A I R M A N . The committee will stand in recess until 2 o'clock.
(Whereupon, at 12 o'clock noon, the committee recessed until
2 o'clock p. in.)
AFTER RECESS
The hearing was resumed at 2 p. m., at the expiration of the
recess.
The C H A I R M A N . The committee will come to order. We will
proceed with the hearing.
TESTIMONY OF FREDERICK STRAUSS AND HENRY C. BRECK,
PARTNERS, NEW YORK CITY; AND LIONEL STAHL, OF J. & W .
SELIGMAN & CO., NEW YORK CITY—Resumed
(These witnesses were sworn by the chairman of the committee
at the morning session.)
The C H A I R M A N . Y O U mav proceed, Senator Johnson.
Mr. B R E C K . Might I at this point repeat what I have said before,
with a view to clarity
The C H A I R M A N (interposing). What is that?
Senator JOHNSON. Mr. Breck wishes to make a little statement for
the record, and I told him I certainly should be very glad for him
to make any statement he desired.
The CnAIRMAN. Proceed.
Mr. B R E C K . 1 just wanted to say that I was speaking from memory in this case, and while to the best of my knowledge and belief
what I have said is as I have said it, I wanted Senator Johnson to
know that I would be glad to confirm any of these things by reference to the records. At the present time I merely wanted to have
him understand that I was speaking from memory; that several
of the events mentioned were distant in years and therefore it is
a question of memory. And also there might be some misunderstanding on the part of some members of the committee, although
I think not on your part, Senator Johnson, about the phrase " introductory commission " which I used. It does not mean another kind
of commission, but simply another means of characterizing a commission paid to an intermediary. It may be called introductory
commission, or intermediary commission, or other kind of commission, depending upon usage. It does not mean one of several
commissions, but the same general kind of commission.
1306
SAIJ3
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FOREIGN BONDS OR SECURITIES
The CHAIRMAN. I think that was understood by all of the members of the committee.
Mr. BRECK. All right.
Senator JOHNSON. I had asked von about the commissions that
you had paid in two instances, f think we had snoken of Costa
Rica, in which you said that some gentleman named Alvarado was
paid $25,000 by you. Is that correct ?
Mr. BRECK. Approximately that. It was something like threetenths of 1 per cent.
Senator JOHNSON. Can you describe to the committee any bettei
who Mr. Alvarado was?
Mr. BRECK. Senator Johnson, I never met Mr. Alvarado. All 1
know is that he was an individual who was said by the people who
brought the business to us as being entitled to a commission for
having originated it or brought it to them.
Senator JOHNSON. D O you K n o w whether or not he had held public
office in Costa Kica?
Mr. BRECK. I never heard of it if he did.
Senator JOHNSON. DO you know hisfirstname?
M r . BRECK. NO, sir.
Senator JOHNSON. D O
which he was engaged ?
you know anything about the business in
M r . BRECK. NO.
Senator JOHNSON. YOU simply know that a m a n n a m e d Alvarado
was stated t o you as being entitled to a c o m m i s s i o n , a n d t h a t that
commission you paid?
Mr. BKECK. Yes; not to him but to the bank that transmitted it
to him.
Senator JOHNSON. That was to a bank in Costa Rica?
Mr. BRECK. N O ; a bank in New York transmitted it.
Senator JOHNSON. What bank?
Mr. BRECK. I think it was the Central Hanover Trust Co., that
transmitted the draft to him.
Senator JOHNSON. Did he draw a draft upon you ?
M r . BRECK. N O ; h e d i d n o t .
Senator JOHNSON. Somebody
in New York must have stated to
you, then, that you must assume and pay that commission?
Mr. BRECK. That is correct.
Senator JOHNSON. Very well. Who was that person ?
Mr. BRECK. The people who originated the business and b r o u g h t
it to us.
Senator JOHNSON. And who were they?
Mr. BRECK. F, J. Lisman & Co.
Senator JOHNSON. NOW as to the department of Cauca Valley loan*
and did you pay a commission on them ?
Mr. BRECK. I think so.
Senator JOHNSON. Cauca Valley is in the Republic of C o l o m b i a ?
M r . BRECK. Y e s , sir.
Senator JOHNSON. T O whom did you pay that commission?
Mr. BRECK. My recollection is not clear on that. I think it
was
paid to a group or an individual in New York
Senator JOHNSON. All right. Who was it, group or individual?
Mr. BRECK. I do not remember* I will be glad to let you kno*
that after consulting my records.
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1307
Senator JOHNSON. If you will do that, I will thank you.
Mr. BRECK. All right.
(See exhibits at conclusion bf testimony.)
Senator JOHNSON. H O W did you learn that any individual in Colombia was entitled to a loan?
Mr. BRECK. D O you mean, was entitled to a commission?
Senator JOHNSON. Yes; I meant a commission.
Mr. BRECK. In connection with the department of Cauca Valley
loans?
Senator JOHNSON. Yes.
Mr. BRECK. From the people who brought the business to us in
New York.
Senator JOHNSON. Was that F. J . Lisman & Co. ?
Mr. BRECK. NO; it was Baker, Kellogg & Co., who brought the
Cauca Valley business to us.
Senator JOHNSON. They simply told you that somebody was entitled to a commission?
Mr. BRECK. That is right.
Senator JOHNSON. Dia they exhibit to you any agreement or contract in respect to it ?
Mr. BRECK. They did not to me. I did not handle that particular
issue, but my recollection is that there was none such. For example,
they simply said that they were committed to pay a commission to
this individual, and we as the manager of the groups paid the commission.
Senator JOHNSON. Were the individuals residents of the Republic
of Colombia?
Mr. BRECK. I am not clear on that. I think not. I think they were
Said to individuals in New York, who brought the business up to
ew York from Colombia. Senator Johnson, I do not know whether
you know or not, but as I understand the situation it was customary
m the case of South American loans in the early days, when they
were beingfinancedhere in the United States, for the Government to
entrust to some individual in the country concerned the task of coming to New York and negotiating the loan for the province, state,
or municipality, and that individual was paid a commission for
doing that business.
Senator JOHNSON. That is, if I follow you now—take the instance
of Colombia with its loans—they would entrust to some local resident the matter of negotiating for the loans, and he would come to
New York and see about it; is that what you mean?
Mr. BREOK. Yes. I was never able to establish that a Government
ever went so far as to give to an individual what we would call distinct legal power to negotiate for it. We always asked when these
promoters came in with business whether they had full authority
from the Government to act. And I was never able to discover any
such authority. What did happen, apparently, was this: That the
Government or the finance minister and the individual concerned
had talked the matter over, and the individual concerned was told
by thefinanceminister, or perhaps he told thefinanceminister, that
he was going up to New York to see what he could do toward getting
a loan for the entity concerned, and that the finance minister said:
"All right; go and try your luck and see what you can do. If you
1308
SAIJ3
OP
FOREIGN BONDS OR SECURITIES
can get it on proper terms—approximately this, that, or the other
thing—we will give a loan to the bankers, provided they are responsible in our view." That was usually the beginning* of the negotiations.
Senator JOHNSON. NOW, it was to that Kind of individual, for his
work of acting in the matter, you would pay a commission to?
Mr. BRECK. Yes; if as a result of his bringing the business to our
attention and his helping us in the negotiations we got the business
and offered it to the public, we paid him the usual commission which,
as I say was anywhere from a quarter to one-half of 1 per cent of
the principal amount of the issue.
Senator JOHNSON. Of course, when hefirstcame to you he represented the Government concerned, did he not?
Mr. BRECK. N O ; not necessarily.
_
Senator JOHNSON. What do you mean by " No; not necessarily77!
Mr. BRECK. Because he would come saying that he felt sure from
his relations with the Government officials, and his knowledge of
the situation there, that X department was anxious to have a loan,
say, of $10,000,000, and that if it could be obtained under approximately these terms from the bankers, he thought the state or city
or municipality, whatever it might be, was willing to borrow. The
bankers would then in some cases carry on the preliminary negotiations through that intermediary, telling him what they were willing
to do. He would then cable down to the department or state concerned, and when it became clear that there was a meeting of minds
approaching, the negotiations so far as we were concerned were
always thereafter carried on directly between the Minister of Finance
or other duly accredited representative of the Government or department and ourselves.
Senator JOHNSON. That is, the intermediary had brought you in
touch with the Minister of Finance or other" representative of the
Government?
M r . BRECK. Y e s , s i r .
Senator JOHNSON. That is correct, is it not?
M r . BRECK. Y e s , s i r .
Senator JOHNSON. And that intermediary came either from the
Minister of Finance or other representative of the Government?
Mr. BRECK. Not necessarily.
Senator JOHNSON. What do you mean by the answer,41 Not necessarily"? D o you mean he came out of circumambient atmosphere
and stated to you, "There is a loan down there in South America
or " in Central America that you can get," and that thereupon v°u
agreed to pay him a commission that would aggregate a c o n s i d e r a b l e
sum of money?
Mr. BRECK. He came in many cases as an individual anxious
to develop business. He would say that he felt he could
Senator JOHNSON (interposing). Develop whose business?
Mr. BRECK. Become the intermediary for a loan to a South American state or republic, or municipality.
-*
Senator JOHNSON. Were there many such people running around?
Mr. BRECK. A great many of them.
Senator JOHNSON. Did they deal with all the international bankers
in New York, substantially I mean?
Mr. BRECK. I think so.
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1309
Senator JOHNSON. And there were men there in New York from
South American republics and South American governments and
Latin-American governments?
Mr. B R E C K . They were also Americans who had friends down
there, and who went down and investigated the situation and came
back. In fact, more often than not they were Americans.
Senator JOHNSON. More often than not Americans would come in
and say, for instance: " The Republic of Colombia may want a loan
of $10,000,000, and we will go down and see about it." And you
would say: " We will see about paying you for it."
Mr. B R E C K . That is right. In other words, the individual in question would usually say: " I have reason to believe this loan can
be obtained. I will undertake to negotiate it for you, or bring you
in touch with the Minister of Finance, and my price is going to be
so-and-so." He would usually start out with 1 per cent or 2 per
cent of the principal amount of the loan. We would say: " That is
an unreasonable amount. We usually pay from one-quarter to onehalf of 1 per cent." That was the usual way of handling it.
Senator JOHNSON. That was the usual way of doing business with
Latin American and South American republics?
Mr. B R E C K . I think so.
Senator J O H N S O N . It was not only your usual way of doing business with them, but it was the usual way of doing business as conducted by all these other gentlemen in dealing in securities of Latin
America and South America?
Mr. B R F C K . That is what I understand to have been the custom,
and for hundreds of years, in the floating of Latin American government loans.
The C H A I R M A N . With European governments as well?
Mr. B R E C K . Yes: with England, France, Holland, and everybody
who made governmental loans.
Senator J O H N S O N . Is that the way government loans have been
made in the last few years with Germany?
Mr. B R E C K . Well, we have made none ourselves, but I understand
it has been done in that way.
Senator J O H N S O N . That is, that there were intermediaries who
sold those large loans to Germany and .who received a commission
from the international bankers upon them?
Mr. B R E C K . I should not be surprised. I think it is quite the
normal way.
Mr. STRAUSS. What loans do you refer to?
Senator J O H N S O N . I am speaking of loans in which either the
German Government or political subdivisions might be interested
or guarantors of.
Mr. STRAUSS. And of corporations ?
Senator J O H N S O N . Corporation loans and the like.
Mr.
BRECK. Y e s ,
sir.
Senator J O H N S O N . That was the usual mode?
Mr. B R E C K . That was the usual method.
Senator JOHNSON* N O W I want you to be very certain about that.
That is your view of it, is it not?
Mr. B R E C K . That is my. view of it.
Senator J O H N S O N . And then they were shot out to the American
public ?
1310
SAIJ3 OP FOREIGN BONDS OR SECURITIES
Mr. BRECK. The bonds were purchased to be sold to the public.
Senator JOHNSON. NOW,you are unable to state the name or names
of any individual or individuals who were engaged as intermediary
or intermediaries in the loans to the department of Cauca Valley?
Mr. BRECK. I do not recall.
Senator JOHNSON. But you can obtain that information from
your records?
Mr. BRECK. I am quite sure.
Senator JOHNSON. And if there are any writings in respect to
any of those individuals, those writings you will furnish to us also,
or copies of them?
Mr. BRECK. YOU mean relating to the commission, the amount
paid, and the receipt of it, and that kind of thing?
Senator JOHNSON. That is what I am speaking of exactly.
Mr. BRECK. All right.
(See exhibits at conclusion of testimony.)
Senator JOHNSON. Now, what was the next loan that arose in
which you had dealings with an intcrmediair or paid a commission?
By the way, do you know what commissions' vou paid in the case of
th
~
Senator JOHNSON. Yes.
Mr. BRECK. I do not recall.
Senator JOHNSON. What was the next one that you placed ?
Mr. BRECK. The next loan?
Senator JOHNSON. In which you had an intermediary, or in which
you paid a commission.
Mr. BRECK. If my recollection is correct, I think we paid a commission in practically every foreign loan that we made.
Senator JOHNSON. In tfie case of every foreign loan you made?
M r . BRECK. Y e s , sir.
Senator JOHNSON. That
is, you paid to some individual who came
to you in the manner you have suggested, a commission, is that correct?
Mr. BRECK. That is correct. Now let me make sure that you understand that the commission was paid by somebody and to somebody. We often paid it to the banking house which brought the
business to us, we paid as group managers, deducting from the gross
proceeds of the business this expense or commission, which was
charged to the profits of the business.
Senator JOHNSON. DO not let us have any misconception. I am
not speaking of any commissions paid to banking houses that participated in the loan with you.
M r . BRECK. N O ; n o r a m I .
Senator JOHNSON. I am speaking
of something that was paid to
people who were strangers to the actual distribution and sale of the
loan; people who in thefirstinstance came to vou in respect of the
loan from the government, from thefinanceminister or whoever it
might be in the particular locality, and talked to you concerning the
loan, and which loan subsequently by your own endeavors you obtained.
Mr. BRECK. We did very little of that kind of business.
Senator JOHNSON. I thought you said you did no other.
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1311
Mr. BRECK. Apparently we do not understand each other.
Senator JOHNSON. Then let us go over it again and try to get it
straight.
Mr. BRECK. We had very few direct dealings with individuals.
Nearly till of the business brought to us was brought by other banking houses. We would take over the negotiations from them, and
negotiate the matter and head the business and manage the syndicate. There were a few instances, such as I now recall the Mortgage Bank of Yugoslavia, where I think we conducted the original
negotiations—no, that again was brought to us from London, bv a
banking house in London, and the man who introduced the business
to them was paid a commission by the managers when the loan was
completed.
Senator JOHNSON. And do you know who that was?
M r . BRECK. Y e s .
Senator JOHNSON. Who was it?
Mr. BRECK. An individual named Kagan.
Senator JOHNSON. Where did he come from ?
Mr. BRECK. From Russia originally, I believe.
Senator JOHNSON. Was he a resident of Yugoslavia?
Mr. BRECK. At the time; yes.
Senator JOHNSON. And he was engaged in what occupation ?
Mr. BRECK. I think he was a promoter. He acted for certain
London groups, certain Paris groups, and in this particular instance
he acted for us.
Senator JOHNSON. D O you know what commission he was paid?
Mr. BRECK. I do not recall offhand. I think it was something like
a quarter to three-eighths of 1 per cent But I will be glad to send
that, too, if you like.
Senator JOHNSON. Send that to us as well, if you please.
(See exhibits at conclusion of testimony.)
Senator JOHNSON. We have Yugoslavia now dealing in exactly the
same fashion as Latin America, have we not?
M r . BRECK. Y e s .
Senator JOHNSON.
All right. Next we have the Province of Callao. A loan of $1,500,000, with a spread of 6.5 per cent. Do you
recall that?
M r . BRECK. Y e s , s i r .
Senator JOHNSON. Did you deal with an intermediary there?
Mr. BRECK. That business was brought to us by another banking
house, Alvin Frank & Co., of California. Mr. Frank having been
in Peru, arranged the loan, and he came up here and discussed it
with us, and we agreed to issue it with him and for him. He had
agreed to pay certain commissions in connection with iL which were
tSicen over by us as syndicate managers and paid as 1 recollect to
Mr. Frank, who in turn paid them to the persons he had agreed to
pay them to.
Senator JOHNSON. And who was that?
Mr. BRECK. I do not recall.
Senator JOHNSON. Will your records show?
Mr. BRECK. I think so. They will show payment to Mr. Alvin
Frank, anyway.
02028—32—pt3
i
1312
SAIJ3
OP FOREIGN BONDS OR SECURITIES
Senator JOHNSON. If you can state the name of the individual to
whom the commission was paid I wish you would furnish it hereafter, to be sent with the other matters that we have referred to.
Mr. BRECK. All right.
Senator JOHNSON. How much was the commission that was paid
in that case?
Mr. BRECK. I do not recall the amount.
(See exhibits at conclusion of testimony.)
Senator JOHNSON. HOW about the Province of Callao loan? Has
it been paid or redeemed? Has the interest been paid?
Mr. BRECK. The interest went into default January 1 , last.
Senator JOHNSON. Where is that ?
Mr. BRECK. That is the Peruvian Province in which the Port
of Callao is located.
Senator JOHNSON. Do you know for what purpose that loan was
issued?
Mr. BRECK. For building a new market place, and for paving
streets, and for redeeming certain internal issues.
Senator JOHNSON. Subsequent to your selling of these loans to the
American people did you ever follow them up to see how the money
was expended in Peru?
T
Mr. BRECK. We did the best we could in an informal way. ^e
had no control over the proceeds. We asked them how they spent
it. We did actually see some of the work being done, but we had
no way of following up and seeing how each dollar was expended.
Senator JOHNSON. Will you state whether or not a great deal
of it was wasted?
Mr. BRECK. I do not know.
The CHAIRMAN. Have you put into the record at any place a
list of all of your foreign loans?
Senator JOHNSON. He has already done that, Mr. Chairman.
Mr. BRECK. Yes; we have done that.
The CHAIRMAN. You put them in at the beginning of the testimony?
M r . BRECK. Y e s , sir.
The CHAIRMAN. I wanted to be sure about that.
M r . BRECK. Y e s , sir.
Senator JOHNSON. When was this Province of
Callao loan pur*
chased by you?
Mr. BRECK. The date of the issue was May, 1 9 2 7 .
" Senator JOHNSON. When was it disposed of?
Mr. BRECK. It was bought and sold in that same month.
Senator JOHNSON. And bought at what price?
i Mr. BRECK. Bought at 92*/ 2 and offered to the public at 9 9 .
Senator JOHNSON. You have none of these securities now, 1
assume?
M r . BRECK. N o , sir.
Senator JOHNSON. NOW
,
we will take the Mortgage Bank or
Bogota.
Mr. BECK. Senator Johnson, before you leave Peru, I should like
to add to one thing you reported this morning.
Senator JOHNSON. All right.
Mr. BECK. Some one from Peru mentioned the cost of the monev
-to them and the relation thereof to exchange depreciation. I should
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1313
like you to know that the Republic of Peru received the full purchase
price named in the contract for the bond, 86 per cent, of the principal amount; that the actual cost of the money to the Republic
of Peru of slight over seven per cent might not be fully understood
unless explained; that in connection with the service charges on the
bonds which were issued to redeem outstanding bonds, they were
slightly over $1,000,000 less than the service charge on the bonds
redeemed. So that there was an actual saving to the Republic of
a million dollars a year on the refunding operation. And with that
situation I am wholly unable to understand the figures in the report
which came to you "from Lima as to the cost of the money. Exchange depreciation has nothing whatever to do with the cost of
money to the Republic at the time it was borrowed. The fact
rthat their currency has depreciated since is no different than in the
•case of England or the Scandinavian countries which have recently
gone off the gold standard, and who find it harder to take care of
their external debts made in gold dollars at the terms fixed.
On the matter of supervision of proceeds, I think I mentioned this
morning that in Peru we tried wherever possible to supervise the
expenditure of the proceeds, and were successful to a large extent
by segregating in our own hands, first, the sums required for redemption, and then for public works, and then for refunding some
serial dollar notes that they had. But we were not able to supervise
in detail the public works expenditures, although we did require a
schedule to be furnished in advance, and although the Republic at
our suggestion published once a month in the official gazette the
•exact expenditures for public works out of those proceeds.
Senator JOHNSON. A S to the control you had in the manner yot.
have indicated, how did you maintain that control? Did the money
remain with you?
M r . BRECK. I t d i d .
Senator JOHNSON. H O W long did the money remain wTitli you?
Mr. BRECK. Until it was paid out in accordance with the contract.
Senator JOHNSON. Tell it to us substantially, I mean in years or
months.
Mr. BRECK. The public works money was paid out at the rate of
$750,000 monthly until it was exhausted.
Senator JOHNSON. And that would cover how long a period of
time?
Mr. BRECK. Anywhere from a year to fourteen or eighteen months.
Senator JOHNSON. And during that period the amount of the loan
remained with vou.
Mr. BRECK. Yes, sir. The proceeds allocated to that purpose
remained on deposit with us and with the City Bank.
Senator JOHNSON. With what City Bank?
Mr. BRECK. With the National City Bank of New York.
Senator JOHNSON* What amount of money, so far as you recall,
after the-sale of these bonds remained with you or the National Citv
Bank?
Mr. BRECK. I would have to consult the records on that.
.Senator JOHNSON. I am asking you to state it approximately.
Give the hest recollection you have.
1314
SAIJ3
OP
FOREIGN BONDS OR SECURITIES
Mr. BRECK. Well, practically all of it except the first monthly
installment of $750,000.
Senator JOHNSON. Well, that or some balance of it remained with
you for a period of from a year to two years as the case may be ?
M r . BRECK. Y e s .
Senator JOHNSON. I
see that both of your associates, Mr, Strauss
and Mr. Stahl, are trying to tell you sometliing, but I do not know
what it is.
Mr. BRECK. Senator Johnson, they are trying to tell me that the
money which was retained from the proceeds of the loan was retained for several purposes. As I have mentioned before, one was
refunding. The money for refunding was kept with ILS until the
bonds could be called under the terms of the contract, and then was
paid out, some of it 30 days, and some €0 days or 00 days later. The
money for the Callao Harbor was paid out in accordance with the
terms of the contract between the Republic and Snare & Co., the
contractors. It was a deposit that was in our hands and that we
paid out as any banker would on the order of a client. The money
for the public works was the principal category and was paid out at
the rate of $750,000 a month.
Senator JOHNSON. Did you pay them anything for the use of the
money?
Mr. BRECK. We paid the rate allowed by the New York Clearing
House for similar deposits.
Senator JOHNSON. And what was that?
Mr. BRECK. That varied. At the beginning it was 2 per cent—well,
I think for the greater part of the time it was 2 per cent.
Senator JOHNSON. What was the maximum length of time that
the money remained with you ? Can you state that i
Mr. BRECK. I can not state it offhand. My recollection is that it
was about 18 months or so; that some of it remained as long as that.
Senator JOHNSON. NOW, when those that you are speaking of, and
you are speaking of these 6 per cent loans now of Peru ?
M r . BRECK. Y e s .
Senator JOHNSON. $85,000,000?
M r . BRECK. Y e s , sir.
,
Senator JOHNSON. And you are speaking also of the P r o v i n c e of
Callao. How do you pronounce that?
,Mr. BRECK. Callao.
Senator JOHNSON. That $1,500,000 which remained with vou n>
the fashion you have mentioned while you were paying out the
warrants of the contractor?
Mr. BRECK. Yes. I think, however, the most of that was paid out
quite promptly.
z
Senator JOHNSON. And the name of the contractor was Snare «
Co., I believe?
,
Mr. BRECK. Yes; for the docks.
f
Senator JOHNSON. Let us now get to the Mortgage Bank of
Bogota. That was a $3,000,000 loan, with a 4y2 per cent spread,
and you made out of $135,000. What was that loan?
Mr. BRECK. It was a loan made to the Mortgage Bank of B o g o t a ,
and they used the proceeds for the purchase o f m o r t g a g e s
Colombia.
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1315
Mr. JOHNSON. Did you have an intermediary there?
Mr. B R E C K . I think so; yes.
Senator JOHNSON. Who was it?
Mr. B R E C K . I think his name was Borda, a Colombian.
Senator JOHNSON. Did he come to you with that particular loan?
Mr. BRECK. He did not. He came to the Central Union Trust
Co. at that time. Its representative was in Colombia at the time and
discovered the business and asked us if we would like to do it, and
we said we would, and Mr. Borda received the customary intermediary commission.
Senatotr JOHNSON. What did he receive?
Mr. B R E C K . I think it was 15 per cent on our net originating
rofits, which is another way of measuring the commission at times.
think it averaged about three-eighths of 1 per cent, or between
one-quarter and three-eighths of 1 per cent.
Senator JOHNSON. Of the total loan?
M r . BRECK. Y e s .
Senator JOHNSON.
Did the State Department ever ask you to
make a loan to Nicaragua?
Mr. BRECK. I think Mr. Strauss might answer that.
Senator JOHNSON. D O you recall that, Mr, Strauss?
M r . STRAUSS. Y e s , s i r .
Senator JOHNSON. Tell us about that.
Mr. STRAUSS. Toward the end of the Taft administration
Senator JOHNSON (interposing), O H ; it was back there, was it?
Mr. STRAUSS. Yes. The State Department, and I think Mr. Knox
was still the Secretary of State: but soon after that he was succeeded,
I think by Huntington Wilson, the Under Secretary of State. As
you will probably recall, there was appointed, either by the United
States or with the approval of the United States, an American to
advise Nicaragua as to what to do with its disordered financial
and economic condition. The name of the gentleman appointed will
occur to me in a moment. He went down there and looked into
the situation and, I believe, made a report to Nicaragua, which was
filed with the State Department; and soon after that the State Department, through him, asked us to submit to its representative;
and I am trying to be as technical as possible as to just what course
it took to show that it was with the sanction of
Senator JOHNSON (interposing). Unless you wish to do it I do
not care for the technical details, althougl/that is up to you.
Mr. STRAUSS. They are all matters of public record and t am willing to state them.
Senator JOHNSON. Well, I think you acted under the State Department.
Mr. STRAUSS. We would not have acted if we had not had the
State Department back of us, or if we had not thought the State
Department was back of the matter.
Senator JOHNSON. I understand that. Now, I further understand that they made a request of you.
Mr. STRAUSS. For the moment, about that I can not just recall.
Senator JOHNSON. D O you remember any other loan made by you
to Nicaragua at the request of the State Department?
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SAIJ3
OP FOREIGN BONDS OR SECURITIES
Mr. STRAUSS. As long as we were the bankers for Nicaragua in
any shape I will say that we did nothing that was not either approved by the State Department or at its suggestion.
Senator JOHNSON. I am not questioning that. But in the last
ten years did you make any loan to Nicaragua at the suggestion of
the State Department ?
Mr. STRAUSS. I just want to ask one of my partners here.
Senator JOHNSON. All right.
Mr. STRAUSS. Since 1926 we have not had any connevlioiu I believe, with Nicaraguan finances.
Mr. BRECK. N O ; I will say that we made a bank loan to the Bank
of Nicaragua.
Senator; JOHNSON. When was that?
( Mr. BRECK. In 1926 and 1927,1 believe.
Senator JOHNSON. And that was made at the instance or suggestion of our State Department, was it not?
Mr. BRECK. I do not know about that.
Mr, STRAUSS. Let me very briefly say this: In years gone by, way
back in the Taft administration, my brother and I—and my brother
is now dead—handled that matter. Then as the years went by it was
taken up by other partners. That is the reason I am somewhat
hazy about it now. But the earlier part of it I am quite familiar
with. When we get down to the more modern times I do not think
Mr. Breck knows much about it, for one or another of our partners
handled it. But I can briefly say this: That we never made a
public issue on Nicaraguan bonds, and what we did was handled
jointly with otherfirms,at one time Brown Bros, and the G u a r a n t y
Trust Co. of New York, I think, and at another time with the
Guaranty Trust Co. of New York but without Brown Bros. & Co.:
we made them bank loans or bank credits with which to reorganize
their currency, and we undertook then the control of the state
railroad, which was being operated at 100 per cent of the gross
receipts, and we sent down railroad men to manage it, and it was
a very different sort of thing from anything we are discussing here.
Senator JOHNSON. Do you ever remember a railroad loan being
made there?
M r . STRAUSS. Y e s , sir.
Senator JOHNSON. When
was that made ?
Mr. STRAUSS. It was very far back, over 10 years ago, I should
say. before the World War.
Senator JOHNSON. DO you remember who was the Secretary ox
State at the time?
Mr. STRAUSS. I think Mr. Bryan, if I am not mistaken.
Senator JOHNSON. I thought that might bring about your recollection. Was it during Mr. Kellogg's time?
Mr. STRAUSS. Oh, no. I think it was during Mr. Bryan's time as
Secretary of State.
Senator JOHNSON. It was done at the instance of the State DEPART'
menjt, however, was it not?
Mr. STRAUSS. It was either done at their instance or in such &
way that they were assuming the responsibility for inviting usSenator JOHNSON. I was just curious, and that was all, as to
the mode of making these loans. Take the Mortgage Bank of
Bogota, $3,000,000, was that done through an intermediary?
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1317
Mr. BRECK. That is the one I just mentioned, about having been
brought Jo our notice by the representative of the Central Union
Trust Co. who was in Colombia and who talked with this Colombian
named Borda about it, and when the business was done Mr. Borda
received a commission.
Senator JOHNSON. NOW let us take the Department of Cundinamarca. That was a $12,000,000 loan. Was that made through
an intermediary?
Mr. BRECK. Through the same intermediary.
Senator JOHNSON. Borda ?
M r . BRECK. Y e s , s i r .
Senator JOHNSON. What did he receive on that?
Mr. BRECK. I think he received 15 per cent of our
net originating
profit, which works out somewhere between one-quarter and threeeights of 1 per cent of the face amount of the issue.
Senator JOHNSON. Was he in the bond business ?
Mr. BRECK. NO. He was an individual. He was a promoter.
Senator JOHNSON. Was he connected with the Government?
Mr. BRECK. Not that I know of.
Senator JOHNSON. Did you ever investigate that matter so as to
ascertain ?
Mr. BRECK. I never met Mr. Borda.
Senator JOHNSON. Was there any competing for his particular
business by any American firms that you were aware of?
Mr. BRECK. We were told during our negotiations that other
houses had representatives in Colombia who wanted to do the business. But that was usual and often the case in connection with
foreign loan negotiations, that there was competition for loans.
Senator JOHNSON. What date was that loan made?
Mr. BRECK. June of 1928.
Senator JOHNSON. What is its condition now?
Mr. BRECK. D O you mean are payments being made regularly?
Senator JOHNSON. Yes.
Mr. BRECK. They have been. But as you know, the Republic of
Colombia has issued a decree controlling the exchange, so that the
departments can not buy foreign exchange with which to pay their
loans.
Senator JOHNSON. Therefore they have defaulted in the matter of
the interest?
M r . BRECK. N o t y e t .
Senator JOHNSON. They
will default, however, under that decree
if it is enforced?
Mr. BRECK. They must.
Senator JOHNSON. When is the next interest payment due?
M r . BRECK. M a y 1.
Senator JOHNSON. D O you mean May 1, 19321
M r . BRECK. Y e s .
Senator JOHNSON. Well, have you consulted
that at all?
M r . BRECK. N O .
Senator JOHNSON. Why not?
Mr. BRECK. We have consulted
Mr. Borda about
the department about it. It was
their responsibility, the department of Cundinamarca.
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FOREIGN BONDS OR SECURITIES
Senator JOHNSON. Well, Borda received a .considerable commission you say, something like one-half of 1 per cent.
Mr. BRECK, Not that much. Somewhere between one-quarter and
three-eighths of 1 per cent, I don*t remember exactly.
Senator JOHNSON. Next you have the city of Bio, $13,000,000.
Mr. BRECK. That was an issue the leaders in which were Blair &
Co. We were in the purchase group, but they conducted the negotiations and headed everything.
Senator JOHNSON. YOU had nothing to do with the intermediary
in that instance?
M r . BRECK. N o , sir.
Senator JOHNSON. Do
you know whether or not there was some
particular individual in that issue who obtained a commission?
Mr. BRECK. I do not know.
Senator JOHNSON. But Blair & Co. were the ones who initiated it?
M r . BRECK. Y e s .
Senator JOHNSON.
were you not?
But you were a member of the original group,
M r . BRECK. Y e s , sir.
Senator JOHNSON. What is this next one, Fried. Krupp?
Mr. BRECK. That is a German steel and iron company.
Senator JOHNSON. You have a loan of $10,000,000 to them ?
Mr. BRECK. We were the members of the original group. It
since been paid off in full.
Senator JOHNSON. HOW about the loan to the city of Rio?
Mr. BRECK. That has been since paid off in full.
Senator JOHNSON. Both of these are paid off in full?
has
M r . BRECK. Y e s , sir.
Senator JOHNSON. Next, Cunard Steamship. That has been paid?
M r . BRECK. Y e s , sir.
Senator JOHNSON. That was for $7,500,000?
M r . BRECK. Y e s , s i r ; $7,500,000.
Senator JOHNSON. Did you have an intermediary there?
Mr. BRECK. I do not know. Brown Bros. & Co. sold that I S S 1 1 ^
Senator JOHNSON. The next one is Leonard Tietz (Inc.), $3,000,-
000. What was that?
Mr. BRECK. That was a German department store. That issue
was sold by Lehman Bros.
Senator JOHNSON. When was it that that was purchased?
Mr. BRECK. In January of 1926.
Senator JOHNSON. I notice there was a spread there of 14. What
was it purchased for, at what price?
Mr. BRECK. They were purchased at a cost of 83.
Senator JOHNSON. And sold at what?
Mr. BRECK. Sold at 97.
Senator JOHNSON. Did yon take that loan up with the State Department?
Mr. BRECK. I assume that Lehman Bros. did. We were not the
leaders and naturally we would not do so.
Senator JOHNSON. In taking up any of these loans with the State
Department did you advise them at any time of the purchase p n c e
and then of the selling price?
Mr. BRECK. NO; we did not. We told them of the amount of the
financing, as I recall it, that was contemplated. I will be glad to
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1319
send you a copy of our letter to the State Department, which was
usually in general language- I think the cost price might have been
mentioned, but I would have to consult our letters in order to tell
you.
Senator JOHNSON. Please send us a copy of one of your letters of
the regular sort.
Mr. B R E C K . All right.
(See exhibits at conclusion of testimony.)
Senator JOHNSON. Next is the Berlin City Electric Co., $ 1 , 0 0 0 , 0 0 0 .
Has that been paid off?
M r . BRECK. Y e s .
Senator JOHNSON. Did you have an intermediary there?
Mr. BRECK. I do not know. Hallgarten & Co. headed that
issue,,
and I do not know the details.
Senator JOHNSON. Berlin City Electric Co., $ 2 , 0 0 0 , 0 0 0 . Has
that been paid off?
Mr. B R E C K . I think it has; yes.
Senator JOHNSON. Did you have an intermediary there?
Mr. B R E C K . I do not know, sir; because we did not head the issue.
Senator JOHNSON. Republic of Cuba, $ 9 , 0 0 0 , 0 0 0 . Do you recall
that?
M r . BRECK. Y e s , sir.
Senator JOHNSON. Give us the date, please.
Mr. B R E C K . That was offered in July of 1927.
Senator JOHNSON. Were you the original sponsor of that loan?
Mr. BRECK. N O ; J . P . Morgan & Co. were.
Senator JOHNSON. Was there an intermediary there?
Mr. BRECK. I do not know.
Senator JOHNSON. Cunard Steamship Co., $ 2 , 5 0 0 , 0 0 0 .
Mr. B R E C K . That is another issue that has since been brought out.
Senator JOHNSON. Was there an intermediary there?
Mr. B R E C K . I do not know.
Senator JOHNSON. Mortgage Bank of Venetian Provinces,
$5,000,000.
Mr. BRECK. Yes; in November of 1927.
Senator JOHNSON. Did you have an intermediary there?
Mr. BRECK. I do not know. Hollins & Co. headed that issue.
Senator JOHNSON. S O you have no idea as to whether there was
anybody who received a commission in that as intermediary or not?
Mr. BRECK. My impression is that they paid somebody a commission, but I have no knowledge of it.
Senator JOHNSON. Hellenic Republic, $ 7 , 5 0 0 , and another one of
$7,500.
Mr. BRECK. $ 7 , 5 0 0 , 0 0 0 ; they were 1-vear notes offered in May of
1930, and paid off by a similar amount of notes now outstanding.
Senator JOHNSON. Have you any short-term credits with Germany?
M r . BRECK. NO, sir.
Senator JOHNSON. Have VOU dealt in any?
Mr. B R E C K . I do not understand that.
Senator JOHNSON. Have you dealt in any
Germany?
short-time credits of
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FOREIGN BONDS OR SECURITIES
Mr. BRECK. Have we participated in any offering in this country
of short-time loans to German municipalities or cities or the German Government or States?
Senator JOHNSON. We will put the question in that way first.
Mr. BRECK. NO; we have not.
Senator JOHNSON. Have you participated in any abroad ?
Mr. BRECK. Yes; to the Repblic of Peru; we*made a credit to
them
Senator JOHNSON (interposing). No; I am speaking of Germau
short-time credits.
Mr. BRECK. We have not. We have ourselves made deposits in
German banks from time to time.
Senator JOHNSON. Oh, yes. But as a banking institution you are
not the owner of short-time German credits?
M r . BRECK. N o , sir.
Senator JOHNSON. Are
you familiar with the Bolivian loan that
is now in default?
Mr. BRECK. Only in the most general way. We were not the negotiators or principals in it. We were more or less participants.
Senator JOHNSON. Have you made any inquiry in respect of it ?
Mr. BRECK. Now or at any time?
Senator JOHNSON. At any time.
Mr. BRECK. At the time the issue was originated; yes: we looked
into the statistics, such as were available, before we decided to go in.
Senator JOHNSON. Did you investigate any of the difficulties that
subsequently arose in respect to it?
Mr. BRECK. We were not the leaders of the business. We had
nothing to do with that.
Senator JOHNSON. Are you an expert- onfinancialaffairs of Latin
America?
Mr. BRECK. I do not know, sir.
Senator JOHNSON. HOW long have you been acquainted or connected with that sort of work?
Mr. BRECK. Since 1926.
Senator JOHNSON. I presume you have devoted yourself pretty
generally to it since then, have you not?
M r . BRECK. Y e s , sir.
Senator JOHNSON. You
are familiar with the L a t i n - A m e r i c a n
republics?
Mr. BRECK. I think so.
Senator JOHNSON. And you are particularly familiar with those
with which you have dealt?
M r . BRECK. Y e s , sir.
Senator JOHNSON. IS
it your opinion that Latin America has been
overborrowed?
Mr. BRECK. In the light of hindsight; yes. But that is only to
the light of the knowledge that commodity prices, particularly the
prices of raw materials, upon which their" prosperity primarily depends, have had a catastrophic fall in the last two years. At the
time when the loans were made in most cases I think it fair to say
they were not overborrowed, and my memorandum which I g a v e
you on Peru will show you that at the'time the refunding was undertaken, at the time the §85,000,000 6 per cent loans were offered, the
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1321
annual revenues of the republic for the three years preceding
that loan had been $38,557,000. And the annual service charge on
the total external funded debt was approximately 20.78 per cent of
the Government's annual income. That figure is generally considered to be a conservative figure.
Senator JOHNSON. Did you consult, at any time, the Department
of Commerce of the United States Government in reference to the
•condition of any of these countries?
Mr. BRECK. We subscribed to and took their regular bulletins and
service analyzing all Latin-America countries, and followed them
-quite closely.
Senator JOHNSON. Weren't you aware of the fact that so far as
Bolivia, Peru, Uruguay, and" Colombia were concerned, that the
Department of Commerce advised against further loans?
Mr. BRECK. I never heard of their so advising.
Senator JOHNSON. Did you ever see any of them, any member of
that department, about it ?
average
M r . BRECK. NO.
Senator JOHNSON.
Did you consult otherwise than writing a
letter to the State Department, any member of the State Department at any time?
M r . BRECK. N O , s i r .
Senator JOHNSON. SO
that if you depended at all upon any literature it was merely the bulletins that were issued?
Mr. BKECK. The bulletins issued by the Department of Commerce
on conditions in various countries, which we follow very closely.
Senator JOHNSON. You follow them closely, do you?
Mr. BRECK. Yes, sir. And in none of those bulletins, according
to my recollection, was there any statement made at the time those
loans wrere issued that Peru or any other country was overborrowed.
Senator JOHNSON. What was it that led to the extraordinarily
keen competition among international bankers for South American
loans?
Mr. BRECK. I think it was an appetite on the part of the American public to buy foreign loans.
Senator JOHNSON. And you were ministering to that appetite
only ?
Mr. BRECK. Yes; but we did the business for profit.
Senator JOHNSON. They have eaten to repletion at the present
time. However, you neecf not answer that.
Mr. BRECK. The world has.
Senator JOHNSON. And the American public has, on South American loans, has it not?
Mr. BRECK. And, to a certain extent, the European public. There
are large amounts of South American loans in Europe.
Senator JOHNSON. S O that you think they have suffered too?
M r . BRECK. Y e s .
Senator JOHNSON.
That may be some consolation, but it is not
to the man who suffered.
Mr. BRECK. Not much. I think it should be observed that a
great many American bonds are selling at very low prices.
Senator JOHNSON. Government bonds ?
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FOREIGN BONDS OR SECURITIES
Mr. BRECK. Not necessarily, although all of the United States
Government bonds
Senator JOHNSON. The reason I say that is that I have constantly
heard here a comparison made between bonds that are selling low in
America and Government bonds of Latin America, and I do not
think it is quite an apt comparison.
Mr. BRECK. I agree with you, Senator; I do not think it is. But
if one takes such bonds as the German industrial bonds and compares them with the industrial bonds of American companies, the
comparison is a fair one, I think.
Senator JOHNSON. What are your Colombian bonds quoted at
now?
Mr. BRECK. Which ones, sir?
Senator JOHNSON. Let us take Cauca Valley. Are they on the
market?
Mr. BRECK. Yes; I think they sell around 15 or 16.
Senator JOHNSON. You sold them for what ?
Mr. BRECK. In the 90's some place.
Senator JOHNSON. Take Costa Rica?
Mr. BRECK. 95y2> They are selling at 40.
Senator JOHNSON. They are doing better?
M r . BRECK, Y e s .
Senator JOHNSON.
they on the market?
The Mortgage Bank of Botoga bonds. Are
M r . BRECK. Y e s .
Senator JOHNSON. What did vou sell them for?
M r . BRECK. 9 2 % .
Senator JOHNSON. What are they listed at now ?
Mr. BRECK. Somewhere in the lower 20's, I think.
Senator JOHNSON. And the department of Cundinamaroa?
Mr. BRECK. Offered at 93y2.
Senator JOHNSON. On the market it is listed at what?
M r . BRECK. 16 o r 17.
Senator JOHNSON. City of Rio was sold at what ?
Mr. BRECK. It has since been redeemed.
Senator JOHNSON. Oh. I beg your pardon. That is all I desire
to ask of this gentleman.
The CHAIRMAN. YOU may be excused.
Mr. STRAUSS. May I just make this observation, Mr. Chairman?
It has perhaps really been brought out in the hearing. In all of
the issues, including Peru, which by implication has been criticized,
we have never brought out a bond"issue that we did not believe at
the time was a safe investment; that so far as it was possible we
tried to control expenditures for specific purposes, and to that end
various contracts provided the purpose for which the money should
be spent. But it is almost impossible in dealing with any government to follow up the actual expenditure of the money, "it would
be a sort of usurping their powers of government. It may very
well be that unless governments are willing to have this done, no
loans should be made. But we are faced by two choices: Either
attempting to regulate the expenditure, in which case American
bankers far away from the scene charge themselves with the responsibility of running the internal affairs of the country, or else
we must trust as far as we can the expenditures to the government
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1323
itself, taking care, however, to see that the proceeds of a loan are
placed in certain categories, whether for refunding, whether for
improvements, whether for stabilization of currency, whatever the
purpose may be. So to that extent we have been in all cases, particularly in Peru, diligent.
The C H A I R M A N . Y O U do not believe that there was any man in
the world 10 years ago who though that there would ever be the
debacle in the world'sfinancesthat there is to-day?
Mr. STRAUSS. Certainly not. If we had forseen it we would not
have done any business "in the last five years; and I trust that we
should not have gone short on the market to reap a fortune at the
expense of less fortunate people. We certainly would not have been
in business during all these years.
In the Nicaraguan case, if I may revert to it for a moment, there
was a case where wre undertook at the request of instigation or at
the suggestion of the State Department the running of internal
affairs of that country. We collected the customs, we ran the railroads, we ordered the currency, we undertook the tutelage of that
country of a kind that has never been undertaken before. We did,
if I may be permitted to say so, a successful job, and then withdrew
from it after many years; but there has been constant criticism of
the Nicaragua experiment, and I can see perfectly well why, from a
certain point of view, they are justified in saying that we have no
business, no matter how good the work that was done, to be in business there, to undertake to run the country. It only took a moment
to summarize that, and I would like to leave that statement upon
the record.
Senator J O H N S O N . Let me ask you this, inasmuch as you have
made your statement, now. In the last few years there was not
the transaction of the ordinary business, Mr. Strauss, with which
you had been familiar in years gone by, was there ?
Mr. STRAUSS. I did not quite get that, Senator.
Senator J O H N S O N . The last few years of your business are not
comparable with the kind of business or the mode in which you conducted your business in prior years?
Mr. STRAUSS. That is quite true, Senator.
Senator J O H N S O N . Y O U found in the last few years a perfect madness in relation to the acquisition of bonds and the selling of them
to the public, did you not, among all of those engaged in the same
line of business with yourselves?
Mr. STRAUSS. I might qualify with an adjective, but in the main,
yes; you are correct.
Senator J O H N S O N . And there came a keenness of competition
among international bankers to obtain loans in Latin America in
order to sell them to the American public?
M r . STRAUSS. Y e s , s i r .
Senator J O H N S O N . And
you participated in that competition. I
am not criticising you in relation to that matter, but you participated in that competition, did you not?
M r . STRAUSS. W e d i d .
Senator J O H N S O N . There
were many firms—I am not speaking
of yours—in New York City who had their agents and their representatives in different places in Latin America seeking to obtain
governmental loans privately in the United States; is not that true ?
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SAIJ3
OP FOREIGN BONDS OR SECURITIES
Mr, STRAUSS. Yes; but it is also true that those tilings existed not
only in Latin America, but the world over, relating to governments,
municipalities, and industrial concerns. In other words, the accumulation of capital in America was seeking ail outlet. The bankers were the instruments of the outlet. They were the purveyors
of capital. The bankers competed to a degree that in retrospect
was wholly wrong. I am not speaking morally. I believe, however—I know I can say it of our firm, and I think I can say it of
almost every banker, that no loans were undertaken, in spite of the
madness that you speak of, that were not believed to be safe.
Senator JOHNSON. I am not speaking of that. You have widened
thefieldof investigation concerning which I was just interrogating
you. You say this keen competition existed not only in Latin
America but all over the world; is that correct?
Mr. STRAUSS. I think that is correct.
Senator JOHNSON. Did it exist in relation to German securities?
Mr. STRAUSS. I think, unquestionably so.
Senator JOHNSON. SO that international bankers were going into
Germany and soliciting loans, governmental, or political subdivisions, of industrial enterprises, of corporations, and the like, in
order tofloatthem in America; is that correct ?
Mr. STRAUSS. Yes. We did solicit; but the borrowers were very
eager to be solicited, of course.
Senator JOHNSON. But you reversed the processes of the ordinary
mode of conducting a banking business; you had in these last few
years the lenders going to the borrowers to have the borrowers borrow of the lenders, did you not?
M r . STRAUSS. Y e s , s i r .
Senator JOHNSON. And
in that fashion they acceleratcd, stimulated, increased loans of various political subdivisions, Governments,
industrial enterprises, and the like; is not that correct ?
Mr. STRAUSS. That was the effect of it; yes.
Senator JOHNSON. And that was peculiarly the effect of it in
South America and in Latin America?
Mr. STRAUSS. It may be, but I am not prepared to say that. I
should have to think that over before I could answer that question.
Senator JOHNSON. Before 10 years ago you would not have thought
of paying the son of the president of a South American Republic
half a million dollars in order to get a piece of business, would you?
Mr. STRAUSS. I just want to say this, as you advert to it. You may
think that this is a quibble, but it is not. We had absolutely no
knowledge of this. We accepted a fact. We may have made a mistake, Senator, in not at that time throwing the thing over, but we
did not solicit the son of the president of that Republic.
Senator JOHNSON. Oh, yes. You say you did not solicit; but immediately upon knowledge of the facts, before you had c o n s u m m a t e d
your transaction, you accepted——
Mr. STRAUSS. We accepted the state of facts as we found them.
Senator JOHNSON. Is there any difference between that and soliciting?
Mr. STRAUSS. I think so.
Senator JOHNSON. We will not argue that proposition. At any
rate, you had not consummated your loan; you had not put out a
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1325
10-cent piece upon it before you learned of just what was transpiring,
and you went forward afteryou had learned but before you had proceeded with your consummation, and agreed to pay the son of the
President of Peru practically half a million dollars.
Mr. STRAUSS. That is true. On the other hand, it is also true that
that did not affect the price—an arm's length transaction, long negotiations. It simply diminished the profit of the bankers.
But the point you are making is about the business methods, the
change that has come about. It would not have been natural 10
or 20 years ago; I quite agree with you. I belong to that generation.
I have seen these changes going on. Apparently they are inevitable.
Senator J O H N S O N . All right. There were business methods that
never ought to have obtained. You would agree with me on that,
would you not ?
Mr. STRAUSS. There were business methods that ought not to have
obtained. In my opinion, I have always felt, with due regard to
courtesy to the borrower, that the borrower should seek the lender
and not the lender the borrower.
Senator J O H N S O N . But I am speaking of additional sums paid,
like the payment of the sum in Peru.
Mr. STRAUSS. Let me say as to that that for the last century and
a quarter, at least long before America ever became a lender in the
money markets of the world, the custom in London, Paris, Amsterdam, wherever it was abroad, was that such business was initiated
by promoters to whom commissions were paid. What happened
was that there were extended to America, when she became a lender,
the same customs that have obtained in earlier years in the lending
nations of Europe.
Senator J O H N S O N . I do not want you to be on the record in a
fashion that you ought not to be. Do you mean to say, sir, or do
you wish this record to go to the Senate with the statement on your
part that methods such as were pursued with the son of the President
of Peru have been methods that have always been pursued with
loans?
Mr. STRAUSS. I was hot saying that.
Senator J O H N S O N . Oh. I thought you were.
Mr. STKAUSS. I was speaking of commissions paid.
Senator J O H N S O N . There may be commissions and commissions.
But we will not argue as to one kind or the other. I am certain
that you did not intend to say that always the sort of thing that
was done in Peru had been done by those who loaned money to
borrowers.
Mr. STRAUSS. I have no idea as to what those methods were or
how it was done. All I was saying was that from time immemorial
commissions have been paid to intermediaries for that kind of
business.
Senator J O H N S O N . That is a different proposition.
Mr. STRAUSS. On the other matter I think I have tried to make
my position clear, and we differ.
Senator J O H N S O N . That is all right. The methods that have
been pursued in the past ten years are methods that do not commend themselves to you?
Mr. STRAUSS. Not now, in restrospect.
1326
SAIiB OF FOREIGN" BONDS OR SECURITIES
Senator JOHNSON. They do not commend themselves to you in
retrospect; and the whole object of this investigation is to devise
some way, if we can, to put a stop to that sort of thing, and thus
protect the American investor. That is the whole object that we
are endeavoring to attain by this investigation. You agree that
that ought to be done if we can?
Mr. STRAUSS. If you can. I have my doubts as to whether it can
be; but if it could be attained, why, certainly.
Senator JOHNSON. I have my doubts, too, but that does not make
.any difference about the desirability of it ?
Mr. STRAUSS. Absolutely not.
The CHAIRMAN. There is no question about it at the present time.
It may come at some future time, but under the conditions in the
-world to-day there would be no necessity for it.
Senator JOHNSON. YOU are quite right; and after this investigation
I think there will be some difficulty in selling Latin American loans
in this country.
Do not forget that you are to send us certain things, Mr. Breck.
Mr. BRECK. Very well, sir. As I understand it, you want the
list of payments to various intermediaries?
Senator JOHNSON. Yes; and I want your original agreement with
regard to the Peru loans. Do not forget that.
Sir. BRECK. The Peru loan contracts ?
Senator JOHNSON. Yes. And if you have any secondary contracts
in reference to the loans
Mr. BRECK. There are none.
Senator JOHNSON. I want all the contracts that you have in reference to Peru. Then I asked you repeatedly, you know, concerning
the deposits of this young man Leguia, his bank statement and the
like.
M r . BRECK. Y e s , sir.
Senator JOHNSON. YOU have notes of all those?
M r . BRECK. Y e s , sir.
Senator JOHNSON. Send your contracts so that
they may go into
the record; and send some of your prospectuses, too.
Mr. BRECK. We can leave those here now.
Senator JOHNSON. Will you leave them?
M r . BRECK. Y e s , sir.
Senator JOHNSON. If
...
you want to leave them, the reporter will
copy them and send them back to you.
Mr. STAHL. I would like to take this back. It is the only copy * e
have.
-j
The CHAIRMAN. Whatever reports you send down here, I would
like to have a copy of them, please.
Mr. STRAUSS. Very well, Mr. Chairman.
The CHAIRMAN. Please send two copies of each document.
.
Senator JOHNSON. I will hand these to the reporter, and he will
return them to you if you wish them returned. Do you?
M r . BRECK. NO, s i r ; I d o n o t .
Mr. STAHL. If they want them
at the office, I will write back.
(The prospectuses referred to and submitted by the witness are
here printed in full, as follows:)
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1327
ISSUES H E A D E D BY OTHERS IN W H I C H J. AND W . SELIGMAN & CO.,
PARTICIPATED IN ORIGINAL GROUP
$ 1 5 , 0 0 0 , 0 0 0 CITY OF COPENHAGEN MUNICIPAL EXTERNAL LOAN OF 1 9 1 9
5 % PER CENT REDEEMABLE SINKING FUND GOLD BONDS
25-YEAB
Dated July 1, 1919. Due July 1, 1944.
Interest payable January 1 and July 1.
Coupon bonds in denominations of $1,000 and $500, registrable as to principal
only. Principal and interest payable at the office of Brown Bros. & Co., New
York, the fiscal agents of the loan, in gold coin of the United States of
America of or equal to the standard of weight and fineness existing on July
1, 1919.
Payable without deduction for any Danish Governmental or municipal taxes
or other Danish taxes present or future.
The loan is to be repayable, by means of yearly payments of $750,000 in
United States gold coin, to be made in the year 1925, and in each year thereafter during the life of the loan. Such payments will constitute the sinking
fund of the loan, and are to be applied on July 1, 1925, and each July 1
thereafter to the redemption at par of bonds whose numbers are to* be determined by lot.
The city may at its option increase the amount of any sinking fund payment.
Copenhagen, the capital of Denmark, is the chief seaport and leading commercial city of the Kingdom. Situated on one of the largest harbors of Europe
at the entrance to the Baltic Sea, it holds a strategic position for world trade.
The city has by far the most important free port in Scandinavia an advantage of much consequence in the commerce of northern Europe. From 1S95,
when the free port was established, to 1913, the last full year before the war,
the annual tonnage entering Copenhagen increased from 260,090 tons to
1,S01,299 tons. The population of the city is 550,000. This is nearly oue-fiftli
the population of the entire Kingdom.
Loans of Copenhagen have always been held in high favor among European
investors. In normal times these loans were issued at rates of interest of
per cent and 4 per cent The total debt of Copenhagen including the
present issue is approximately $89,879,200. The debt of the city has increased relatively little during the entire war period. W e are advised that
no other foreign loan will be issued by the city within one year.
W e offer these bonds when, as, and if issued, at 93*6 and accrued interest
yielding, according to the redemption dates for which they may be drawn by
lot for payment at par ($750,000 bonds to be drawn each year) as follows:
Per cent
6.84
0.68
6.56
6.46
6.39
6.33
6.2S
6.24
6.20
6.17
— 6.14
1925
192 6
192 7
1928
1929
193 0
193 1
1932
1933
1934
193 5
193 6
—
193 7
3938
1939
1940—
1941
1942
194 3
1944
Average yield
Per cent
6.12
6.10
6.08
6.07
6.05
6.04
6.03
6.02
6.01
6.24
Pending the preparation of definitive bonds, temporary bonds of the city of
Copenhagen will be delivered against confirmed sales. It is expected that the
temporary bonds will be ready for delivery at the office of Brown Bros. & Co.,
59 W a l l Street, New York, about August 18, 1919.
All legal matters pertaining to this issue are subject to the approval of our
counsel, Messrs. Cravath & Henderson, of New York, and former minister of
justice, supreme court counsellor, Fritz Buelow, of Copenhagen.
BROWN BROTHERS & C o .
LEE, HIGGINSON & C o .
J . & W . SELIGMAN & C o .
W M . A . R M > & Co.
92928—32—pt 3
5
1328
SAIiB
OF FOREIGN" BONDS OR SECURITIES
$13,000,000 CITY OF RIO DE JANEIRO (FEDERAL DISTRICT OF T H E UNITED STATES
OP BRAZIL) 25-YEAB 8 PER CENT EXTERNAL SECURED SINKING F U N D GOLD BONDS,
GUARANTEED PRINCIPAL, INTEREST, AND SINKING F U N D NV T H E FEDERAL
GOVERNMENT or THE UNITED STATES OF BRAZIL
Dated April 1,1922. Due April 1,1947.
Interest payable April 1 and October 1 in New York at the office of Blair &
Co., fiscal agents of tlie loan.
Principal and interest payable in United States gold, free of alt Brazilian
taxes. Coupon bonds in the denominations of $1,000 and $500.
Not redeemable except as a whole on any interest date from April l t 1024,
to April 1, 1931, inclusive, at 110 and interest; redeemable thereaf tor in whole
or in part on any interest date at 105 and interest.
PurposedThese new bonds are to be issued to refund the external serial
dollar loan of 1919, the -balance of the proceeds of this issue to be available
for the purchase and cancellation of internal loans.
Security.—These bonds are to be the direct obligation of the city of Rio de
Janeiro (Federal district of United States of Brazil).
They are to be specifically secured (upon redemption of the above-mentioned
external serial dollar loan of 1919) by deposit of £7,500,000 principal amount of
per cent bonds of 1912 which, together with £2,500,000 of the same issue,
constitute a charge on the iinposto predial (hou.se property tax), the largest
and most important source of revenue of the city. The receipts from this tax
for the last three years are officially reported as follow*:
Milreis
191 9
192 0
192 1
-
1S.V>SS,600
10.029,202
22.flSS.000
The above amounts converted at the average rates of exchange for the respective years, after deducting prior charges, similarly computed at the average
rates of exchange, average approximately $2,100,000 per annum available for
the security of the new loan. The receipts from the irnposto predial for 1922
are officially estimated at 26,000,000 milreis, or about 15 per cent more than
in 1921.
Guaranty.—1These bonds will have as further security the unconditional guaranty as to principal, interest and sinking fund by the Federal Government of
the United States of Brazil.
Sinking fund.—The loan contract is to provide for the payment to the fiscal
agents of a sinking fund semiannually, commencing October 1, 1931, each
semiannual payment to be sufficient to purchase or redeem one thirty-second
of the total issue at not exceeding 105 and interest. All moneys thus paid to
the fiscal agents are to be applied to the purchase of the bonds at not exceeding 105 and interest, and if not so obtainable within the period set by the
loan contract are to be used to redeem bond* at 105 and interest on the next
interest date.
Debt.—1The total funded debt of the city (including that to be retired by the
proceeds of this issue), reported as of January 2, 1922, amounted to approximately $68,525,000, figured at the current rates of exchange. This is divided
as to currencies into $22,000,000; £7,273,ISO and 107,5So,000 milreis.
General.—The city of Rio de Janeiro is the federal capital of the United
States of Brazil. With a population estimated at about 1.200,000, it ranks
as the largest city of Brazil and the second largest city in South America.
The estimated value of the property which serves as the basis for collection of
the imposto predial, figured at the par of exchange, amounts to approximately
5895,000,000.
PRICE 103 AND INTEREST
All offerings are made "when, as, and i f " issued and received by us and
subject to the approval of our counsel. Interim receipts or temporary bonds
will be deliverable in the first instance.
City of Rio de Janeiro 6 per cent external serial gold bonds of 1919
($10,000,000 now outstanding) with all unmatured coupons attached, will be
accepted at par and accrued interest, in payment or in exchange for bonds
of this issue deliverable on confirmed allotments. This privilege is subject to
withdrawal at any time without notice.
For purposes of calculation the current rate of the milreis is taken at 13%
cents; the current rate of the pound sterling at $4.40; the par of the milreis
at 32.44 cents, and the average of the milreis for the three years 1919-191.1
at approximately 20 cents.
SALE OP FOREIGN BONDS OB SECURITIES
1329
The statements contained in this circular are based on information from
official or other sources which we believe to be reliable, but they are not
guaranteed by us. The foregoing is based largely on cabled advices and is
necessarily subject to correction upon receipt of final docuineuts from Brazil.
$10,000,000 FRIED. Kauri* (LTD.), 7 PER CEXT FIVE*YEAR MERCHANDISE SECURED
GOLD DOLLAR NOTES
To be dated Decouil>er 15,1924. Interest payable June 15 and December 15.
To mature December 15, 1929.
These notes will be issued under ail indenture which will provide l o r the
transfer to a trustee, as security for the notes, of merchandise and raw material in salable form having at all times a value at cost or market, whichever
is lower, equal to at least 150 per cent of the amount of the outstanding notes.
AVe are advised by our counsel that the treaty of Versailles and the London
agreement of August 9, 1!>24, between the German Government and the Reparation Commission providing for carrying into effect the experts' plan (Dawes
plan) do not impose any charge or lien for reparation upon property of the
character agreed to be provided as security for these notes, and do not restrict
the right of the company directly to acquire the foreign exchange necessary
to meet its external obligations evidenced by these notes. Goldman, Sachs &
Co., fiscal agents for the loan.
Information in regard to the company and to this issue of notes is given
in the accompanying letter signed by Dr. Gustav Krupp von Bohlen and Halbacli, chairman of the executive committee of Fried. Krupp Aktiengesellschaft,
which letter has been summarized in part as f o l l o w s :
DESCRIPTION OF NOTES
These notes will be in bearer-coupon form in denominations of $1,000 and
5500. Principal and interest will be payable at the New York office of the
fiscal agents for the loan in United States gold coin of the present standard
of weight and fineness. The company covenants that net interest receivable
from it by the holders of the notes shall not fall below 7 per cent per annum,
and that net payments by way of principal and sinking fund shall not f a l l
below the specified amounts, by reason of any German taxes, present or future,
which the company may be required or permitted to deduct or withhold. T h e
notes may be redeemed only as a whole, except f o r sinking fund as below
stated, on any interest date at 102 and accrued interest on three months' prior
notice.
The notes will be issued pursuant to the terms of an agreement with the
National Bank of Commerce iu New York, defining the obligations of the company, and an agreement with the Dresdner Bank, Germany, as trustee of
pledged assets.
The company will covenant to retire $750,000 principal amount of notes on
or before December 15 in each of the years 1925 to 1928, inclusive, notes to be
purchused at not to exceed 102 and accrued interest or called-for redemption
ut 102 and accrued interest.
HISTORY AND BUSINESS
Fried. Krupp Aktiengesellschaft (Fried. Krupp ( L t d . ) ) , organized in 1903
to continue the industrial enterprises theretofore conducted f o r nearly 1 0 0
years under the firm name of Fried. Krupp, operates one of the best-known
and most important steel works in the world. T h e activities of the company
cover virtually every important steel and iron product in its various phases
of manufacture.
T h e enterprise Is entirely self-contained and throroughly integrated, running
from the production of iron ore and fuel, through pig iron and steel, up to the
manufacture and sale of semifinished and specialized goods. Under the allotment of the 44 R u h r k o h l e " (Federation of Ruhr Coal Mine Owners), the company's coal production is placed at 9,500.000 tons a year, ranking it among
the largest coal producers in Germany. T h e steel plants of the company have
an output capacity of 2,200,000 tons per annum. The company owns facilities
f o r transport as well by river and canal as by rail. A t Essen alone it owns
140 miles of railroad. The sales organization of the company Is highly developed through sales companies and agencies throughout the world. I n the
half year ending September, 1924, the value of the company's total sales In
foreign countries amounted to $7,800,000; thus, a constant supply of foreign
exchange may be relied upon.
1330
SAIiB
OF FOREIGN" BONDS OR SECURITIES
•
Although the name of Krupp had been widely associated with the production
of war material, yet such production before the year 1914 (ltd not represent
more than 5 per cent in weight of the entire iron and steel output of the concern. Since 1919, the company has been exclusively engaged In the production of industrial articles such as, among many other things, rails, locomotives and rolling stock, forging and steel castings, motors and motor trucks,
structural steel, agricultural machinery and implements, Diesel engines and
cash registers.
The company's business has been thoroughly adjusted to a peace-time basis.
With the return of stable conditions in Germany and improving business conditions throughout the world, the company looks forward to a renewed period
of prosperity.
DELATION TO DAWES PLAN
The obligations of the company with respect to the payment of reparation
(Dawes Plan) will take the form of a requirement that the company pay
annually an amount not exceeding 6 per cent upon a capital sum which has
not yet been definitely determined but which, in all probability, will not exceed
30,000,000 gold marks, or about $7,200,000. No payment whatever is required
lor the first year ending August 31, 1925. For the second year the rate is
per cent; for the third year, 5 per cent. For the fourth year, it attains
6 per cent, whereof 1 per cent is as amortization of principal. As there is no
provision for accelerating the maturity of the capital sum, the average annual
payment required of the company for account of reparation during the life of
these notes would thus not exceed $306,000. The liability of the company for
reparation will be secured by a charge in the nature of a first mortgage upon
the fixed assets of the company, but such charge docs not extend to assets of
the character to be pledged as security for these notes.
Neither German law nor any international engagements assumed by the
German Government involve any restrictions upon the acquisition by the company of the foreign exchange requisite to permit the company to meet the
external obligations evidenced by these notes.
PURPOSE
or issue
The purpose of this issue is to reduce the company's current indebtedness
and to assure adequate working capital for the future.
ASSETS AND LIABILITIES
Working assets of the company, before giving effect to this financing, on
October 1, 1924, amounted to in excess of $33,000,000, after eliminating intercompany items. Such assets in themselves substantially exceed the entire
indebtedness and liabilities of the company, including its liability for reparation at the capital sum of $7,200,000 but excluding items of Intercompany
indebtedness, transitory items, and reserves. The plant and fixed assets were
conservatively valued at approximately $45,000,000. Liberal depreciation and
reserves have been taken. The net worth of the company, exclusive of sub'
sidiaries, is in excess of $40,000,000 after including in liabilities items of intercompany indebtedness, transitory Items and reserves aggregating approximately
$12,000,000 and reparation at the capital sum of $7,200,000. Price, 99% a n d
accrued interest, to yield about 7.18 per cent
.
This offering is made in all respects when, as, and if issued and accepted
by us and subject to the approval of Messrs. Sullivan & Cromwell, of New YorkWe reserve the right to reject any and all subscriptions in whole or in part,
to allot less than the amount applied for, and to close the subscription books
at any time without notice.
It is expected that delivery of temporary notes or interim receipts will,**
made on or about February 5,1925, at the office of Goldman, Sachs & Co.,
York, N. Y., against payment therefor in New Xork funds.
GOLDMAN, SACHS & C o .
WHITE, WELD & C o .
KurmwoBT SONS & Co. (LONDON).
HALLOABTEN & C o .
J . & W . SELIGMAN & C o .
LEHMAN BBOS.
HALSET, STUABT h C o . ( I N C . ) .
SALE OP FOREIGN BONDS OB SECURITIES
1331
FRIED. KRUPP AKHENGESELLSCHAFT,
Essen, Germany, December
19,1924.
Goldman, Sachs & Co., New Y o r k ; Kleinwort Sons & Co., London; Lehman
Bros., New York; White, Weld & Co., New York; Hallgarten & Co., New
York; Halsey, Stuart & Co. (Inc.), New York; J. & W . Seligman & Co., New
York.
GENTLEMEN : Referring to the issue of $10,000,000 principal amount of 7 per
cent 5-year merchandise secured gold dollar notes of this company, we give
you the following information:
HISTORY AND BUSINESS
Fried. Krupp Aktiengeselischaft (Fried. Krupp ( L t d . ) ) was organized in
1903 to continue the industrial enterprises theretofore conducted for nearly
100 years under the firm name of Fried. Krupp. The Krupp establishment is
one of the oldest, best known, and most important steel works in the world.
The enterprise is entirely self-contained, the company's business being thoroughly integrated and balanced and running from the production of iron ore
and fuel, through pig and steel, up to the manufacture and sale of semifinished and specialized goods. The company is one of the largest coal producers in Germany and its production of coal is more than sufficient for its
own requirements. The mines controlled and worked are equipped with coking
plants for the recuperation of by-products. Under the allotment of the 11 Ruhrk o h l e " (Federation of Ruhr Coal Mine Owners) the company's coal production is placed at 9,500,000 tons a year. In addition to its control of fuel, the
company also controls and works important deposits of high-grade iron ore,
thus insuring a most valuable supply of iron ore for a long period of time. ,
The plants of the company are modern and are advantageously located for
an economic production and distribution of their products by water and raiL
The blast furnace plants, comprising 10 furnaces at Rheinhausen on the lower
Rhine and 7 on the middle Rhine, have a total daily output capacity of between
five and six thousand tons. The company is a leader among the large steel
makers in Euroi>e and is especially known for its high-grade steel specialties.
The steel plants are equipped mainly with open-hearth furnaces with capacities
of up to 80 tons, in addition to converters and electric and crucible shops.
Their total yearly steel output capacity is 2,200,000 tons.
Although the name of Krupp had been widely associated with the production
of war material, yet such production before the year 1914 did not represent
more than 5 per cent in weight of the entire iron and steel output of the concern. Since 1919 the company has exclusively been engaged in the production
ot articles of the industrial character described hereafter.
The main plants for casting, forging, rolling, and finishing are located at
Essen and Rheinhausen. A considerable part of the steel is sold as raw or
semifinished products. The finishing shops of the company are equipped to
handle the biggest pieces occurring in industry. The engineering departments,
most modern in their equipment, turn out products of wide diversity.
The company's activities cover virtuaUy every important steel and iron product in its various phases of manufacture. Among the products the following
may be specified: Structural steel (construction of bridges and steel structures
of any dimensions), rails, locomotives of all sizes and kinds, rolling stock, shipbuilding material, forging and steel castings of largest sizes, Diesel engines,
motors, and motor trucks, excavators, machinery for the textile and paper industries, agricultural machinery and implements, cash registers, and many
other kinds of machinery and apparatus. The works own facilities for transport as well by river and canal as by rail, there being besides for the circulation
within the works a well-developed network of lines with corresponding rolUng
stock. A t Essen alone the company owns about 140 miles of railroad, 91 locomotives, and 3,780 cars. For inland water and oversea transport the company
has its own shipping department
The sales organization of the company is highly developed through sales
companies and agencies throughout the world. In the half year ending September, 1924, the value of the company's total sales in foreign countries
amounted to $7,800,000; thus a constant supply of foreign exchange may be
relied upon.
ASSETS AND LIABILITIES
The policy of the management has at all times been conservative with regard
to the utilization of earnings, and large sums have regularly been put back
into the business.
1332
SAIiB
OFFOREIGN"BONDS OR SECURITIES
Working assets of the company, as of October 1, 1024, before giving effect to
this issue of notes, amounted to in excess of $33,000,000 after eliminating intercompany items. Such working assets were not less than the following;
Merchandise—
Investments—principally in stock of coal-mine companies
Cash, bills of exchange, etc
Bills and accounts receivable and moneys due
—
§10,320,000
6,360,000
2,040,000
8, 400,000
Total working assets
33,720,000
In addition are mined ores belonging to subsidiary companies to the value
of $2,400,000. The plant and fixed assets of the company arc conservatively
valued at approximately $45,000,000, not including plants and fixed assets of
subsidiary and- affiliated companies. The company has at all times maintained' its fixed properties in a high state of repair and with modem improvements. Properties have been conservatively valued and liberal depreciation
and reserves have been taken.
The liabilities of the company as of Octo!>er 1, 1024, without giving cffect
to this issue and exclusive of liability as hereafter described in connection with
reparation, were not more than the following:
Funded debts
Prepayments on account of goods ordered but not delivered
Bank indebtedness
Accounts payable and other current indebtedness
Total—
JL
—
000,000
2 ( 280,000
*0,
(5,500,000
18,400,000
In addition to the foregoing liabilities are Items of intercompany indebtedness, transitory items, and reserves totaling about $12,320,000.
The net worth of the company, exclusive of subsidiaries and exclusive of
mined ores as mentioned above, after taking its liabilities In connection vritn
reparation as described below at the capital sum of $7.20(1.000, is thus approximately $40,800,000. Working assets, as above enumerated, in themselves substantially exceed the entire indebtedness and liabilities of the company, including its liability for reparation at the capitalized figure of $7,200,000 but
excluding the items of intercompany indebtedness, transitory items and reserves. Conversion between dollars and marks, for the purpose of this letter,
has been made on the basis of 1 gold mark equals 24 cents.
MANAGEMENT AND EMPLOYEES
The management of the company is composed of persons who have for munyyears been associated with the business and who have achieved notable success in the metallurgical and engineering field.
The employees of the company numbered on December 1, 1024, over 55,0W.
The relations of the company with its employees have at all times been most
satisfactory and the company's welfare work and housing arrangements for
its employees have attracted attention throughout the world.
DESCRIPTION OK NOTES
This issue of 7 per cent o-year merchandise senired gold dollar notes !s
limited to the principal amount of $10,000,000, dated December 15, 1024, ana
due December 15, 1929. These notes will be the direct obligations of Fried.
Krupp (Ltd.). The notes will be in bearer form in denominations of $1,000
and $500 and will bear interest payable .Tune 15 and Dcfenilicr ir» at the rate
of 7 per cent per annum, such interest to be represented by coupons. Principal
and interest, and premium if any, will be payable at the New York office ot
Goldman, Sachs & Co., fiscal agents for the loan, in United States gold coin ot
the present standard of weight and fineness. Tlie company covenants that net
interest receivable from it by the holders of these notes shall not fall .bf1.0*
7 per cent per annum, and that net payments by way of princii>al and sinking
fund shall not fall below the amounts specified, by reason of any German taxes,
present or future, which the company may be required or permitted to deduct
or withhold. The notes will be issued pursuant to the terms of an agreement
with the National Bank of Commerce in New York, defining the obligations oi
the company, and an agreement with the Dresdner Bank, Germany, as trustee
of pledged assets.
i The proceeds of this issue will be applied to the redaction of these Stems.
SALE OP FOREIGN BONDS OB SECURITIES
1333
The company will covenant to retire $750,000 principal amount of notes on
or before December 15 in each of the years 1925 to 1928, inclusive. To the
extent tluit the company shall not purchase such notes at not to exceed 102 and
uccrued interest, notes will be called for redemption at 102 and accrued interest,
all as provided in the trust agreements. Except as redeemed for this purpose,
the notes may be redeemed only as a whole on any interest date at 102 and
accrued interest and on three months' prior notice. Notes not retired nor redeemed as above are payable at par on December 15, 1929.
SECURITY
These 7 per cent 5-year merchandise secured gold dollar notes will be secured
by a direct and exclusive first charge upon mercliandi.se and raw material in
salable form of a value at cost or market, whichever is lower, of at least 150
per cent of the amount of the outstanding notes, all as defined in the trust
agreements pursuant to which the notes are isstuMl. The company will covenant to maintain at all times this ratio between the pledged security and the
amount of outstanding notes. The pledge of assets to secure the notes will be
made in favor of the Dresdner Bank, as trustee of pledged assets.
RELATION TO DAWES PLAN
The obligations of the company with respect to the payment of reparation
(Dawes plan) will take the fonu of a requirement that the company pay annually an amount not exceeding (5 per cent upon a capital sum which has not
yet been definitely determined but which in all probability will not exceed
30,000,000 gold marks, or about $7,200,000. No payment whatever is required
for the first year ending August 31, 1925. For the second year the rate is 2 %
per cent; for the third year, 5 per cent. For the fourth year, it attains 6 per
cent whereof 1 per cent is as amortization of principal. As there is no provision for accelerating the maturity of the capital sum, the average annual payment required of the company for account of reparation during the life of these
notes would thus not exceed $300,000. The burden of the company's liability
for reparation will, furthermore, be considerably reduced as, under a special
Germnn law, part of the annual payments in respect of industrial reparation
bonds will be refunded to the obligors of such bonds by branches of German
industry, banking, and commerce which under the Dawes plan do not themselves assume a direct responsibility for reparation payments. The liability of
the company for reparation will be securcd by a charge in the nature of a
first mortgage upon the fixed assets of the company, but such charge does not
extend to assets of the character to be pledged as security for these notes.
Neither German law nor any international engagements assumed by the
German Government involve any restrictions upon the acquisition by the company of the foreign exchange requisite to permit the company to meet the external obligations evidenced by these notes.
PURPOSE OF ISSUE
The purpose of this issue Is to reduce the company's current indebtedness
and to assure adequate working capital for the future.
In conclusion we may say that the company's business has been thoroughly
adjusted to a peace-time basis, and with the return of stable conditions in Germany and improving business prospects throughout the world, the company
looks forward to a renewed, period of prosperity.
You are at liberty to use this letter in your prospectus.
Very truly yours,
FRIED. KRUPP AKTIENGESELXSCHAFT,
KRUPP BOHLEN HAJ.BACH,
Chairman
VIELHABER,
G . BAUR,
of the Executive
For
the Managing
Committee.
Directors.
$7,500,000 (total issue) the Cunard Steamship Co. (Ltd.), 2-year 5 per cent
external gold notes.
To be dated December 1, 1925. To mature December 1, 1927.
Interest payable June 1 and December 1. Coupon notes $10,000 and $1,000
each, interchangeable Principal on interest payable at the office of Brown
1334
SAIiB OF FOREIGN" BONDS OR SECURITIES
Brothers & Co., New York, fiscal agents for the loan, In United States gold
coin, without deduction for any British taxes. Redeemable at the option of
the company as a whole or in part at 100 and accrued interest on any interest
date on 60 days' notice. Notes will be authenticated by the Hanover National
bank of New York. The Hanover National Bank of New York, registrar.
The following information has been furnished us by Sir Thomas Royden,
Bart., C. H., chairman of the Cunard Steamship Co. (Ltd.) :
Business.—The Cunard Line, established in 1840, is not only the pioneer
trans-Atlantic steamship line but, through its subsidiaries, the Brocklebank, the
Commonwealth-Dominion, and the Anchor Lines, has an important interest
in the valuable trades between Indian and Australia and Euroj*! and the
United States. The total fleet of the Cunard Steamship Co. and its controlled
companies aggregate more than 1,000,000 tons (including ships under construction).
Relations with British GovernmentsThe
relations between the British Government and the Cunard Steamship Co. have always been close as evidenced
by the advance in 1905-1907 by the British Government at
per cent of
£2,000,000 for the construction of the Mauretania and Lusitania.
T h e British
Government has a nominal interest in the stock of the company.
Security.—The company will covenant not to increase its mortgage debt
unless all notes of this issue then outstanding are secured equally and ratably
with such additional mortgage debt.
Earnings.—During the past 10 years earnings have been as follows:
Year
1915..
1916..
1917-.
1918..
1919..
1920..
1921..
1922..
1923..
1924..
interfor Bond
Net income Depredaest and
Income tax Balance
tion
interest
discount
$5,672,000 $2,723,000
11,395,000 7,160,000
5,400,000 1,849,000
5,870,000 1,720,000
8.400,000 1,801,000
3,576,000 1,920,000
6.982,000 2*357,000
7,044,000 3,023,000
6,994,000 3,812,000
7,895,000 4,671,000
$477,000
$196,000 $2,754,000
675,000
436,000 3,799.000 I
582,000
952,000 2,570,000
542.000
1,020.000 3,138,000 !
522,000
1,401,000 5,192,000
484,000
944,000
712.000 i
839,000 3,766,000 1 1,351,000
341,000 3,680,000 '. 1,758,000
1464,000 3,646*000 1,741,000
1419,000
3,642,000 } 1,723,000
Surplus
$2,277,000
3,124.000
1,988.000
2.596,000
4,670,000
223,000
2,435,000
1,922.000
1 905,000
1,919,000
i Credit.
For the 10-year period ended December 31, 1924, surplus after all charges
including bond interest was equivalent on an average to 6.15 times the annual
interest requirement of these notes, and for the year ended December 81, 1
was equivalent to 5.11 times such interest requirement. The depreciation
policy of the company has been conservative. In addition to the depreciation
figures shown by the accounts, the cost of the new steamers delivered during
the above period has been written down by 40 per cent out of reserv es.
Finances.—Analysis of the accompanying audited balance sheet as of December 31,1924, shows net tangible assets of nearly $80,000,000 after deducting all
liabilities except funded debt This is equivalent to about two and three-fourths
times the total present funded debt, including this issue. Valuation of assets
are conservative. The company owns directly a fleet of nearly 500,000 tons, the
average age per ton being about 8 years. This fleet is carried at $04,090,S04, ot
only 52 per cent of its cost. The Aquitania is carried at 47 per cent of her cost
and the Mauretania at only 2 2 ^ per cent of her cost. The Saxonia, which was
recently sold for breaking up for $221,585, was carried on the company's books
at $79,390. The Cunard Co.'s investment in affiliated shipping concerns is
believed to be fully worth the value of $25,687,166, at which it is carried on the
balance sheet
Purpose of issue.—The proceeds to be applied to the general purposes of the
company, chiefly the purchase of new assets or the reduction of amounts due i»
respect of ships delivered to the company.
Equity.—These notes are followed by the preferred and ordinary shares
which, at current market quotations, indicate an equity of about $28,000,000*
In the foregoing sterling amounts have been converted into dollars at the
rate of $4.87 to the pound.
The information contained in this prospectus* having been received by cable,
is subject to transmission errors.
SALE OP FOREIGN BONDS OB SECURITIES
1335
W e offer the above notes when, as, and if issued and received by us, and
subject to the approval of our counsel, Messrs. Sullivan & Cromwell, of New
York. It is expected that delivery of the notes or of interim receipts will be
made about December X, 1925. Price 100 and interest to yield 5 per cent.
BROWN* BROTHERS & C o .
J. & W . SEIJGMAN & Co.
W H I T E , WELD & C o .
Balance sheet of The Cunord Steamship Co. (Ltd.),
December
81, 1924
• DEBITS
T o share capital:
Authorized—
^
£1,500,000, 5 per cent cumulative preference stock or shares
£1,000,000, 6 per cent second cumulative preference stock or shares
£4,500,000 ordinary shares of £1 each™
T h e government share
s.
d.
1,500,000
0
0
1,000,000
4,500,000
20
0
0
0
0
0
0
7,000,020
Issued—
=
=
=
5 per cent cumulative preference stock- 1 , 5 0 0 , 0 0 0
6 per cent second cumulative preference
stock
1,000,000
4,456,189 ordinary shares of £1 each— 4 , 4 5 6 , 1 8 9
The government share
20
0
=
0
0 1 $34,090.097
=
0
0
0
0
0
0
0
6,956,209
1,250,000
0
0
0
0
390,000 0
5 , 3 6 2 10
0
0
395,362 10
0
4,000,000 0
116,666 13
0
4
4 , 1 1 6 , 6 6 6 13
4
To reserve f u n d - T o 2 % per cent mortgage debenture stock held
by government
To inteerst accrued (since paid)
T o 7 per cent mortgage debenture stock
T o Interest accrued (since paid)
T o loan secured by mortgage
property, pier head, Liverpool
To employees' savings fund
To creditors and credit balances
T o profit and loss account:
Balance from last account
Add profit for the year 1924
on
freehold
Deduct dividends to June 30,
1924, on the preference
stock™£
£1,500,000 at 5 per cent- 37,500
£1,000,000 at 6 per cent- 3 0 , 0 0 0
s. d.
0* 0
0 0
£
1
33,S76,737
6,087,500
1
11,925,415
1
20,048,167
11,133,375
232,725 15 11
1 532,177
109,276 11 8
1 1 , 5 6 8 , 3 2 9 17 7 ** 5 6 , 3 3 7 , 7 6 7
158,618 19
393,968 8
9
7
552,5S7
4
8
67,500
0
0
485,087
8
4
2 5 , 1 1 3 , 6 5 7 16 10
1
2,362,376
1122,303,514
NOTE.—There are liabilities on contracts for new steamships.
1 T h e conversion of sterling into dollars on this balance sheet has been made by the
Issuing bankers at exchange $4.87 to the pound.
a O l this item, $28,482,322 are In respect of the following and therefore not In the
nature of current liabilities: (1) Reserve for contingencies, insurance, and other company funds; (2) reserves against war claims by British Government, since settled;
(3) amounts due to the Cunard Steamship Company subsidiaries; (4) installments not
yet due on ships acquired.
1336
SAIiB
OF FOREIGN" BONDS OR SECURITIES
CREDIT
£
B y steamers and shipping investments
18,434,919
B y freehold and leasehold properties
717,552
B y plant, machinery, spare gear, furniture,
etc—
—i104,443
B y ships' stores, coal, fuel oil, provisions,
wines, linen, etc
— —
3SS f 037
By debtors and debit balances (including
agents' and branch balances) 1, G03. (Xtt
B y general investments
2,50l\SC.(5
B y discount on 7 per cent mortgage debenture
stock (less proportion written off)
340,710
B y cash at bankers and in hand
1,022,04S
25,113,657
S. <1.
13 U
n u
0
0
1 11
5
13
6
0
0
1
0
5
16 10
PERCY E .
A . C. R
77S. (KSO
1
1 3,494,478
1 50$,
037
1 1,SS9,S3S
17.
S06.903
l 12.1S$,961
11,
Cr»9,2T)S
1 4.977,374
1 122,303,514
BATK.S,
HENDERSON",
W , DKAN FIELD,
Directors.
Secretary.
REPORT OF. AUDITORS TO THE 6HAKEIIDIAKKK
W e have audited the above balance sheet with the books and accounts of the
company in Liverpool and with returns from the agencies. The stock* of ships'
stores, coal, fuel oil, provisions, wines, linen, etc., have been taken and certified
by officers of the company. W e have obtained all the information and explanations we have required. In our opinion such balance sheet is properly drawn
up so as to exhibit a true and correct view of the state of the cotnpany ? s affairs
according to the best of our information and the explanations given to us and
as shown by the books of the company.
COOPER BROS. & Co..
LONDON, March
18,1925.
Chartered Accountants,
Auditor*.
$2,500,000 (TOTAL ISSUE) THE CUSARD STEAMSHIP CO. (LTD.), 2-YEAR
P®
CENT EXTERNAL GOLD NOTES
TO be dated December 1,1927. To mature December 1. 1929.
Interest payable June 1 and December 1. Coupon notes in interchangeable
denominations of $10,000 and $1,000. Principal and interest payable at the
office of Brown Bros. & Co., New York, fiscal agents f o r t h e loan, in United
States gold coin, without deduction for any British taxes. Redeemable at the
option of the company as a whole at 100 and accrued interest on any interest
date on 60 days' notice. Notes will be authenticated by t h e Hanover National
Bank of New York. The Hanover National Bank of N e w York, registrar.
The following information has been furnished us by Sir Thomas Hoyden,
Bart., C. H., chairman of the Cunard Steamship Co. ( L t d . ) :
Business.—1The Cunard Line, established in 1840, is not o n l y the pioneer
trans-Atlantic steamship line but, through its subsidiaries, has* an important
interest in tjhe valuable trades between India and Australia and Europe and the
United States. The total fleet of the Cunard Steamship Co. ( L t d . ) and its
controlled companies aggregates nearly 1.000,000 tons (including ships under
construction). The British Government has a nominal interest in the stock oi
the company.
Purpose of issue.—The Cunard Steamship Co. is already known in the financial market of New York through its borrowing two years ago of $7,500,000 in
the form of 5 per cent gold notes. These notes mature December 1, 1927. It is
the intention of the company to repay two-thirds of this issue, that is to say
$5,000,000, in cash, and the remainder through proceeds of the present note
issue, thereby retaining though in smaller degree the company's connection with
th New York finance market.
1 The conversion of sterling into dollars on this balance sheet has been made by the
issuing bankers at exchange $4.87 to the pound.
1337
SALE OP FOREIGN BONDS OB SECURITIES
Earnings.—During
the past five years the disposable balances after allowances
for depreciation, taxation, etc., have been as follows:
Balance Bond interSurplus*
est and
available
for interest discount
Year
1922..:
1923
1924
1925
J&20
$3,080,000 $1,758,000
3,046,000 1,741,000
3,042,000 1,723,000
3,064,000 1,412,000
4,250,000 1,360,000
$1,922,000
1,905,000
1,919,000
1,652,000
2,890,000
* Before interest on the $7,500,000,2-ycar 5 per cent gold notes due December 1, 1927.
For the 5-year period ended December 31, 192G, surplus as above after charges
including bond interest was equivalent on an average to approximately eighteen
times the annual interest requirement of these notes and for the year ended
December 31, 192G, was equivalent to approximately twenty-five times such,
interest requirement.
Issue of additiQiial shares.—Concurrently
with issue of this prospectus the
company lias arranged for the issue and sale to its existing ordinary shareholders of 1,100,000 additional ordinary shares at par ( £ 1 ) .
Erjuitjf.—These
notes are followed by the preferred and ordinary shares
which, at current market quotations, indicate an equity of about $40,000,000,
which compares with an equity of about $2S,000,000 two years ago.
In the foregoing, sterling amounts have been converted into dollars at the
rate of $4.S7 to the pound.
W e offer the above notes, when, as, and if issued and received by us and subject to the approval of our counsel, Messrs. Sullivan & Cromwell, of N e w York.
It is expected that delivery of the notes or of interim receipts will be made
about December 1, 1027. Price 100 and interest to yield 4 % per cent.
Balance sheet of the Cunard Steamship
Co. (Ltd.),
DEBTOR
To share capital:
Authorized—
£1,500,000 5 per cent cumulative preference stock or shares
£1,000,000, G per cent second cuinulative preference stock or shares™
4,500,000 ordinary shares of £1 each__
The Government share
Issued—
5 per cent cumulative preference stock.
G per cent second cumulative preference
stock
4.45G,1S9 ordinary shares of £1 each__
The Government share
T o reserve fund
T o 2 % per cent mortgage debenture stock held
by Government
—
T o interest accrued (since paid)
December
£
31,1926
s.
d.
1,500,000
*
1,000,000
4,500,000
20
0
0
0
0
0
0
0
0
7,000,020
0
0 *$34,090,097
1,500,000
0
0
1,000,000
4,456,189
20
0
0
0
O
0
0
6,956,209
0
0
1,350,000
0
0
130,000 0
1,787 i 0
0
0
131,787 10
0
133,870,737
1
6,574,500
1
641,805
l T h e conversion of sterling into dollars on this balance sheet has been made by the
issuing bankers at exchange $4.87 to the pound.
1338
SAIiB
OF FOREIGN" BONDS OR SECURITIES
£
s. d.
4,000,000 0 0
83,333 6 8
To 5 per cent mortgage debenture stock
To interest accrued (since paid)
4,022,333
6
8
To loan secured by mortgage on freehold property, pierhead, Liverpool
215,077 10
9
To 5 per cent 2-year gold notes issued in United
States of America
—
To interest accrued (payable June 1,1027)
1,546,30115
6,443 6
1
0
1,552,835
1
1
*7,562,301
103,118 17
7,598,062 0
7
2
1 37,006,045
To employees' savings fund
To creditors and credit balances
To profit and loan account:
Balance from last account
Add profit for the year 1926
1
$10,385,833
1 1,051,813
1 502,189
160,752 12 9
516,320 8 10
Less amount transferred to reserve fun<L~
Deduct dividends to June 30, 1026, on the
preference stocks—
£1,500,000, at 5 per cent
£37,500
£1,000,000, at 6 per cent
30,000
686,082 1
7
100,000
0
0
586,032 1
7
67,500
0
0
518,582
1
7
1 2,525,493
22,510,805 16 10 1 100,627,624
CB.
£
By steamers and shipping investments
16,406,060
By freehold and lasehold properties
681,052
By plant, machinery, spare gear, furniture,
etc
-
-
1™
By ships' stores, coal, fuel oil, provisions,
wines, linen, etc
By debtors and debit balances (including
agents'and branch balances)
By general investments
By discount and commission on 5 per cent
mortgage debenture stock
By cash at bankers in the name of the
trustee for 5 per cent mortgage debenture
stockholders
By cash at bankers and in hand
n.
14
0
d.
3
0
06,372
0
0
406,633
10
4
1,367,100
2,471,302
14
2
11
11
140,000
0
0
1 681, SW
40,417
900,876
8
17
0
5
1 4,387,2TU
22,510,805
16
10
1 100,627,62*
1
70,89<, 516
3,321,106
1
1469,332
'1,080,301
.
1 6 , G57,
1 12,035, GSO
_0„
PERCY E . BATES,
T . ROYDEN,
Directors.
W . D E A N FIELD,
Secretary*
BEFOBT OF THE AUDITORS TO THE SHAREIIOIDERS
W e have audited the above balance sheet with the books and accounts of t^e
Company in Liverpool and with returns from the agencies. The stocks of snip
*The conversion of sterling into dollars on this balance sheet has been made W
issuing bankers at exchange $4.87 to the pound.
tlie
1339
SALE OP FOREIGN BONDS OB SECURITIES
stores, coal, fuel oil, provisions, wines, linen, etc,, have been taken and certified
by officers of the company. W e have obtained all the information and explanations we have required. In our opinion such balance sheet is properly drawn
up so as to exhibit a true and correct view of the state of the company's affairs
according to the best of our information and the explanations given to us and as
shown by the books of the company.
COOPER BBOS. &
Chartered
LONDON, March 23,
Accountants$
Co.,
Auditors.
1927.
$ 3 , 0 0 0 , 0 0 0 BERLIN CITY ELECTRIC Co. 6 % PER CENT NOTES UNCONDITIONALLY
GUARANTEED AS TO PAYMENT OF PRINCIPAL AND INTEREST, BY INDORSEMENT
ON EACH NOTE, BY BERLIN CITY GAS CO.
Dated February 1, 1920. Due, $1,000,000 February 1, 1 9 2 8 ; $2,000,000
February 1, 1929. Interest payable February 1 and August 1. Principal and
interest payable in New York City at the office of Hallgarten & Co., in United
States gold coin, free from all present or future German taxes. Coupon bonds
in denomination of $1,000, registerable as to principal. Callable in whole or
part on any interest date upon not less than six months' notice, a t their face
amount and accrued interest, with a premium of one-half of 1 per cent for
each unexpired year or fraction thereof. T h e Bank of America, N e w York
City, registrar.
W e quote the following from information furnished by the two companies:
4 4 The
two companies (Berliner Stiidtische Elektrizitatswerke A--G. and
Berliner Stiidtische Gaswerke A.-G.) were organized by the city of Berlin,
Germany, in 1923, for the purpose of separately operating the electrical and gas
works formerly operated by the city, all the stock of both companies being
owned by the city of Berlin. The first installation of electrical works was
made in 1884, and of gas works in 1S25. Berlin has a population of approximately 4,000,000 and is the third largest city in the world.
T h e Electric
Co. supplies about 80 per cent and the Gas Co. about 7 5 per cent of the total
consumption of the city in their respective fields.
Electric company.—The
present capacity of the company's plants is over
205,000 kilowatts and it also purchases a substantial amount of additional
current. The company is now engaged in expanding its plants and constructing an additional one to be ready by October, 1926, which will make the total
'generating capacity of 400,000 kilowatts. T h e distribution lines have a total
extent of about 6,600 miles.
Current is supplied for domestic use as well as for the local street and
underground railroad and for numerous industrial plants in the city and
surrounding territory.
Sales in 1924 amounted to over 462,000,000 kilowatt-hours, and f o r 1925
were over 662,000,000 kilowatt-hours. The number of customers during 1924
increased from 216,333 to 273,787, a gain of 57,454 ( 2 5 per cent), and in 1925
again increased to 358,669, a gain of 84,882 ( 3 0 per cent).
Gas company.—The
Gas Co. supplies gas for domestic and industrial use,
its plants having a daily capacity of over 64,000,000 cubic feet. Sales in 1924
amounted to about 11,200,000,000 cubic feet, and in 1925 to about 13,800,000,000 cubic feet.
Rates.—The
city of Berlin (which owns all the stock of both companies) has
agreed that rates for both services will be sufficient to cover operating expenses,
rental (8 per cent of gross), depreciation, interest, and amortization of loans,
and to provide necessary working capitaL
Earnings.—The net earnings of the Electric Co. in 1924 a f t e r all expenses, including heavy charges for depreciation, reserves, etc., were over $4,500,000, and
for 1925 are estimated to be about the same as in 1924. Such earnings were
at the rate of over seven times maximum interest requirements on funded
debt including this issue. T h e net earnings of the Gas Co. applicable to the
guaranty were in 1924 over $1,800,000, and f o r 1925 about $2,000,000.
No
allowance for the introduction of this new money has been made in the above
figures.
It is expected that the additional facilities provided out of the proceeds of this loan and the European loan hereinafter referred to, will add
substantially to earning power upon completion.
Description of issue.—This
loan will be the direct obligation of the Berlin
City Electric Co., and unconditionally guaranteed as to payment of principal
1340
SAIiB
OF FOREIGN" BONDS OR SECURITIES
and interest, by indorsement on each note, by the Berlin City Gas Co. The
Gas Co. has no funded debt, but the Electric Co. has recently secured a loan
in Europe of 30,000,000 Swiss francs (about $6,000,000), due in 1010, the
proceeds of the European loan and of this loan being used only in the con*
struction of additional generating capacity*. The European loan is the obligation of the Electric Co. and not secured by mortgage.
This 6 % per cent loan is to be free of all German taxes, local, state, and
national, present or future, and the notes are to be payable, principal and
interest, in United States gold coin at the office of Hallgarteu & Co.. New York
1
City.
The electric company has agreed that if during the life of this loan it shall
pledge any of its revenues as security for any other loan, these notes shall be
equally and ratably secured thereunder.
Dimes plan.—Neither of the companies is directly liable for payments under
the Dawes plan, but each shares with the other departments of the city of
Berlin in the legal obligations for the execution of the plan. This obligation
for the entire city for the year ending in September, 1020, amounts to $-175,000.
increasing to a maximum annual payment in 1028 of $l,15Ot0ft0. This total is,
however, divided among some 75 departments, including such income producing
activities as waterworks, tramways, subways, harbor works, warehouses, markets, etc., in a proportion not yet determined.
(Figures stated in United States dollars have been converted from German
reichsmarks at the rate of 4.2 reichsmarks per dollar.)
These notes are offered when, as and if issued and accepted by us and subject
to the approval of counsel. W e reserve the right to reject subscriptions in
whole or in part, to allot less than the amount applied for and to close the
subscription books at any time without notice. Temporary notes or interim
receipts deliverable in the first instance.
Price.—Notes due February 1,1028, 99 and interest, to yield over 7 per cent.
Notes due February 1,1929, 9 8 % and interest, to yield over 7 per cent.
HAULGAKTEN & C o .
HALSET, STUART & Co. (INC.).
GOLDMAN, SACHS & C o .
LEHMAN BROS.
J. & W , SEUGMAN & C o .
Leonhard Tietz Aktiengesellschaft, balance sheet as at July 31, J925, flirty
effect to the issue of $8,000,000 20-year
per cent mortgage pold bonds am
the transactions in connection therewith
ASSETS
Current assets •
Cash in banks and on hand..
Accounts receivable
Merchandise on hand
$1,502,851.31
029,077.2b
8,000,719.62
10,4a3.545.21
Accounts receivable from subsidiary companies
Stocks of subsidiary companies
$334,725. 2 5
631,776.24
NOTE.—In the above valuation of stocks of subsidiary companies, prior mortgages of $364,811.64 and unsecured revalued
obligations of $38,675 have been deducted.
Land and buildings
$4,705,358.03
Machinery and equipment
214,544.15
NOTE.—The land and buildings, which are carried at a total
value of $6,018,478.30 on the books of either the company or
its subsidiary companies, were appraised by Mr. Georg Falck
of Cologne, Germany, on Aug. 18, 1024, and O c t 14, 1025, at
an aggregate value of $16,181,512.
Prepaid interest on notes
*
066,501.40
5,000,003.03
55,216. W
16,525,168.
SALE OP FOREIGN BONDS OB SECURITIES
1341
LIABILITIES
Current liabilities:
Bank advances and trade accounts payable
Sundry debts, reserves for taxes, tantiemes, etc
$3,724,392.82
1,214,340.74
4, OSS, 733. 56
1,107,062.71
3,000,000.00
115,668.00
Prior mortgages on real estate
20-year 7 ^ per cent mortgage gold bonds, due 1946
Unsecured revalued obligations
9,161, 464.27
Contingent liability on bills discounted
$S2,494.37
CAPITAL
Capital stock:
Preferred, 7 per cent, class A
47, 600.00
Preferred, 7 per cent class 13 (less $323,7S7.10
in treasury)
9,412.90
Common
5,950, 000.00
6,007, 012.90
Surplus:
lleserve
Employees' relief fund.
Unallocated profits
..
.
-
$773,500.00
130,900.00
452,291.61
1,356,691.61
7,363,704.51
16,525,168.78
NOTE.—The liability for prtor mortgages and unsecured revalued obligations
of the company and the subsidiaries is stated as estimated by German counsel
under the revaluation law of July 16, 1925. The liabilities, as stated above,
do not include any capital amount for liability under the Dawes plan. German
counsel estimates that the maximum secured charges under the Dawes plan are
not in excess of $1,600 per year and that the additional unsecured payments
for the equalization tax provided for in the same connection are not in excess
of $75,000 per year.
W e have examined the accounts of Leonhard Tietz Aktiengesellscliaft as at
July 31, 1925, and the agreement dated January 30, 1925, as amended by supplemental agreement of January 22, 1926, for the sale of $3,000,000 twenty-year
71/* per cent mortgage gold bonds, due January 1, 1946. W e ccrtify that the
above balance sheet, in our opinion, correctly sets forth the financial position
of the company at that date, after giving effect to the issue of the said bonds
and the transactions in connection therewith.
W e further certify that, in our opinion, the net profits of I>eonliard Tietz
Aktiengesellscliaft available for interest on the present issue of bonds, after
deducting ( 1 ) depreciation of real estate and plant, based on book values, (2)
all taxes, excepting income taxes; ( 3 ) interest on all other indebtedness, including for 1924 interest on revalued mortgages at the statutory rate for 1925,
but after allowance for the saving of interest which would have been effected
by the proceeds of this financing; and ( 4 ) an allowance a t the rate of $76,GOO
per annum for payments required to be made under the Dawes plan, were as
follows:
Year ended Dec. 31, 1924
Seven months ended July 31, 1925
$1,521,818.16
882, 526.58
W e further certify that the total sales for the year ended December 31,
1924, were $24,381,344, and for the seven months ended July 31. 1925, were
$14,773,612.
W e further certify that the jirollts remaining for the common stock, adjusted
as above, after further deducting interest on the present issue of bonds, tantiemes, income taxes, and dividends on preferred stock, but before deducting
appropriations to employees' relief fund, would have amounted to $961,534.18,
or the equivalent of $3.85 per share of common stock for the year ended December 31, 1924, and to $571,981.02 or the equivalent of $2.29 per share f o r
the seven months ended July 31, 1925.
1342
SAIiB
OF
FOREIGN"
BONDS OR SECURITIES
In the above figures, conversion of German to United States currency has
been made at the rate of one reichsmark equals 23.S cents.
LTBRAND, B o s s BROS. AC MONTGOMERY,
NEW YOBK, January 22, 1926.
Accountants and Auditors.
$9,000,000 REPUBLIC OP CUBA SERIAL 5MI PEE CENT GOLD BONDS
Dated July 1,1927. Due, 5900,000 annually July 1, 192$, to July 1, 1937, in*
elusive. Interest payable January 1 and July 1.
Not redeemable before the respective maturities.
Coupon bonds in denomination of $1,000. Principal and interest i»ayable in
gold coin of the United States of America of the present standard of weight
andfineness,free from any Cuban taxes present or future, at the office of J. P.
Morgan & Co., in the city of New York, or, at the option of the holder, at the
office of the National City Bank of New York in the city of Habana.
His Excellency Santiago Gutierrez de Cells, secretary of the treasury of the
Republic of Cuba, makes the following statement in connection with this issue:
Purpose of issue.—These serial bonds are being issued to fund internal floating debt now outstanding in the form of certificates of indebtedness.
Public debt.—The funded debt of the Republic of Cuba was reduced by approximately $40,000,000 during the four years ended February. 28. 1027, to an
outstanding amount of $90,130,100, of which $79,404,900 was external debt
Upon the completion of thisfinancing,the floating debt will amount to less than
$6,000,000.
Revenues and expenditure*.—During the four fiscal years ended June 30,
1926, the ordinary revenues of the Government exceeded its ordinary expenditures by over $24,000,000. This surplus of revenues was applied chiefly to the
amortization of Government debt, in addition to the ordinary sinking fund payments on Government loans included in the budget of ordinary exi>enditures.
Preliminary figures indicate that the Government's budget for the year ending
June 30,1927, may be closed with a small deficit.
Monetary system.—Apart from a comparatively small amount of gold coin
and subsidiary coins minted by the Government, the money in circulation In
Cuba consists entirely of United States currency. The United States currency
held in the treasury, in the banks, and in genernl circulation in Cuba was
estimated, as of June 30,1926, to amount to more than $200,000,000.
The above serial bonds are offered for subscription, subject to the conditions
stated below, at prices to yield 5.25 per cent for all maturities, plus accrued
interest.
Subscription books will be opened at the office of J. P. Morgan & Co.. at 10
o'clock a. m., Friday, July 1,1927. The right is reserved to close the subscrip*
tion books at any time, to reject any and all applications, and also in any
case to allot smaller amounts than applied for. Orders for an equal amount
of each maturity will receive prior consideration. All subscriptions will be
received subject to due delivery to us of the bonds, and to approval by counsel
of the relevant documents and authorizations.
The amounts due on allotments will be payable at the office of J. P. Morgan &
Co., In New York funds to their order, and the date of payment (on or before
July 25, 1927), will be stated in the notices of allotment. Temporary bonds,
exchangeable for definitive bonds when received, are to be delivered.
J. P. MORGAN & Co.
GUARANTY CO. OP NEW YORK.
HARRIS, FOBBES & Co.
KUHN, LOEB & CO.
J. & W . SEUGMAN & C o .
T H E NATIONAL CITY C o .
BANKERS TRUST CO. NEW YORK.
DILLON, READ & C o .
$5,000,000 MORTGAGE BANK OF THE VENETIAN PROVINCES—25-YEAK 7 PER CENT
EXTERNAL SECURED SINKING FUND GOTD BONDS, SEWES A
Authorized $20,000,000. Series A $5,000,000. To be dated October 1. 1927.
To mature October 1,1952. Coupon bonds in interchangeable denominations of
$1,000 and $500 registerable as to principal only. Interest payable April 1 and
October 1. Principal and interest payable at the office of the fiscal agents,
Messrs. J. &. W. Seligman & Co. in New York City, tn United States gold coin
of or equal to the standard of weight and fineness existing on October 1, 1927,
without deduction for present or future taxes levied by or within the Kingdom
SALE OP FOREIGN BONDS OB SECURITIES
1343
of Italy. Redeemable, as a whole or in part, on at least 30 days* notice at par
and accrued interest. Central Union Trust Co. of New York, trustee.
Cumulative sinking fund payable semiannually calculated to retire entire
issue at or before maturity by redemption at par and accrued interest commencing April 1, 1928. The bank may deliver bonds at par in lieu of sinking
fund payments and may also anticipate payments, as stated in the trust
agreement.
For information regarding this issue reference is made to the letter of A w .
Comm. Riccardo Galli, president of the Mortgage Bank of the Venetian Provinces, to us, which he has summarized as follows:
GENERAL
The Mortgage Bank of the Venetian Provinces, established under special
charter approved by royal decree, was organized by savings banks of the cities
of Verona (established 1825), Padua (1822), Venice (1S22), Udine (1876), Treviso (1913), and the Federal credit bank for the reconstruction of the Venetian
Provinces, and took over the business of the real estate mortgage department
of the savings bank of the city of Verona, established in 1900. Savings banks
of Trento (1855), Trieste (1842), Pola (1S93), Fiume (1859), and Gorizia (1831)
have since become members.
The bank has no capital stock, but in lieu thereof, a guaranty fund has been
contributed by its member savings banks in an aggregate amount equivalent to
approximately $1,600,000, all of which has been paid in. In addition, a reserve fund equivalent to approximately $50,000, has been set up out of profits,
and until this reserve fund equals one-half the guaranty fund, at least one-tenth
of the amount of the annual net income of the bank must be set aside in this
reserve fund. The bank has never incurred a loss on any loan made by it.
The principal office of the bank is in Verona and its branches are operated
through its member savings banks. It operates principally in the 16 provinces
of northeastern Italy, an agricultural and industrial section with an area of
about 20,000 square miles and a population exceeding 6,000,000. The bank is
now empowered to extend its operations throughout Italy.
The principal functions of the bank include the making of loans on nonindustrial agricultural or urban real estate; to provide funds for the improvement, irrigation, and drainage of agricultural land; to provide for the acquisition or construction of so-called popular or low-priced houses.
PURPOSE OF ISSUE
The proceeds of this issue are to be used exclusively for loans against first
mortgages on nonindustrial agricultural and urban real estate. The bank has
already made preliminary contracts for such loans in the aggregate principal
amount of $5,000,000. Payment of such loans must be in dollars or in lire
sufficient to acquire the necessary dollars.
SECURITY
The bonds of series A, in the opinion of counsel, will be direct obligations
of the bank and will be secured, after the rcloan of the proceeds thereof, by
first mortgage obligations in face value equal to 100 per cent of the bonds of
series A. Each such first mortgage obligation, in the opinion of counsel, will
be secured by u direct first mortgage on nonindustrial agricultural and urban
real estate of an appraised fair sale value (as determined by appraisers of the
bank or member banks) at least equal to three times the principal amount of
such obligation. Such obligations will be specifically set aside by the bank
and held solely as security for the bonds of series A. Loans made through and
approved by member banks of the bank will be unconditionally guaranteed by
them.
SUPERVISION
The Italian Government, through the ministry of national economy, is required by law to make examinations of the books and accounts of the bank
at least semiannually, and the bank is required to make bimonthly reports
*Df its operations to the Government.
92928—32—FT 3
6
1344
SAIiB OF FOREIGN" BONDS OR SECURITIES
The bank has agreed when requested by the bankers to apply for the listing
of these bonds on the New York Stock Exchange.
These bonds are offered when, as, and if issued and accepted by us, and subject to the approval of our counsel, Messrs. Cravath, Henderson & de Gersdorff,
of New York City, and A w . Vittorio E. Baisini, of Milan, Italy. W e reserve
the right to reject subscriptions in whole or in part, to allot less than the
amount applied for and to close the subscription books at any time without
notice. Interim receipts of the fiscal agents will lie ready for delivery on or
about December 1,1927. Price 95 and accrued interest, to yield 7.45 per cent
All conversions referred to in the above have !>een made at the rate of 185
lire per United States dollar, unless otherwise stated.
E. II. liOLLlNS & SOXS,
J. & W. SELIGMAN & Co.
MORTGAGE BANK OF THE VENETIAN PROVISOS,
Verona, Italy, November 11, 1927.
Messrs. E. H. ROLLINS & Soxs and J. & W. SELIGMAN & Co..
Xcw York City.
DEAJ; SIBS: At your request I am pleased to give you the following iuformation with reference to the proposed issue of $5,000,000 principal amount of
25-year 7 per cent external secured sinking fund gold bonds, series A, <»f Mortgage Bank of the Venetian Provinces hereinafter called the tuiuk:
GENERAL
The mortgage Bank of the Venetian Provinces was established under s\nxid\
charter approved by royal decree of November 30, 1919. tt was organized by
savings banks of the cities of Verona (established 1825) Padua (1822), Venice
(1822), Udine (1876), Treviso (1913), and the Federal credit bank Tor the reconstruction of the Venetian Provinces, and took over the business of the realestate mortgage department of the savings bank of the city of Verona, established in 1900. Savings banks of Trento (ISoo), Trieste (1842), Pola (1S03),
Fiume (1859), and Gorizia (1831) have since become member*. These savings banks are not operated for profit and their activities are governed by
special legislation. They constitute a powerful group and together control
more than 2,000,000,000 lire (approximately $108,000,000) in deposits and reserve funds. The Federal credit bank for the reconstruction of the Venetian
Provinces is a Government institution founded in 1919.
The bank has no capital stock, but in lieu thereof a guaranty fund has been
contributed by its member savings banks in an aggregate amount of 29,545,333
lire, equivalent to approximately $1,600,000, all of which has been paid in.
In addition a reserve fund of 862,607 lire, equivalent to approximately §50.000,
has been set up out of profits. Under its charter the bank is required to establish a reserve fund and until such reserve fund shall equal one-half the guaranty fund, at least one-tenth of the amount of the annual net income of the
bank must be set aside in such reserve fund and the amount of such annua1
net income which may be distributed to the participating institutions may no*
exceed 5 per cent of their respective paid in quotas of the above-mentioned
guaranty fund. After such reserve fund shall equal one-half of such guaranty
fund one-half of the annual net income of the bank may be distributed to
the participating institutions and one-half of such net Income must be applied
to the creation of a special reserve fund against losses. The bank has never
incurred a loss on any loan made by it.
The principal office of the bank is in Verona and its branches are operated
through its member savings banks. It operates principally in the 16 provinces
of northeastern Italy, an agricultural and industrial section with an area oi
about 20.000 square miles and a population exceeding 6,000,000. T h e bank is
now empowered to extend its operations throughout Italy.
The principal functions of the bank include the making of loans: (1)
nonindustrial agricultural or urban real estate; (2) T o provide funds for the
improvement, irrigation, and drainage of agricultural land; ( 3 ) to provide
for the acquisition or construction of so-called popular or low priced houses.
The bank is also authorized to make loans for the payment of capital taxes
and for the repair of damages caused by the World War, but these two classes
of loans are now of small importance and none of the proceeds of the bonds
of series A will be reloaned for these purposes.
SALE OP FOREIGN BONDS OB SECURITIES
1345
The operations of tlie bank have grown rapidly since its organization, the
loans made having increased from about 17,00,000 lire in 1920 to over 240,000,000
lire, or approximately $13,000,000 as at October 31, 1927.
The bank derives its income chiefly from commissions limited by law which
are paid by the borrowers and out of which the expenses of the bank are paid.
The charges made to borrowers by the bank are less than the prescribed limits.
PURPOSE OF ISSUE
Heretofore loans for the above-mentioned purposes have been made through
the issue of internal bonds of the bank and other similar institutions. In view*
of the constantly increasing demand for such loans, the Italian Government,
recognizing the national importance of the work of these institutions, has by
royal decree of February 13, 1927, No. 187, authorized the issue of external
bonds by the respective mortgage bunks, and pursuant to such decree and to the
royal decri-o of March 3. 1927, No. 270, specifically authorizing the issue of external bonds by the batik, approval of this issue has been given in accordance
with the ministerial docroe of Mnrcli 20, 1927. The net proceeds of the bonds
of series A will be deposited with tbo savings bank of the city of Verona as
depositary to be withdrawn by the bank under restrictions to be contained in
the trust agreement only for the purpose of making loans against the first
mortgage obligations hereinafter referred to and only upon delivery to such
depositary of evidence that the required security for such loans is held by the
bank. The bank has already made preliminary contracts for such loans in the
aggregate principal amount of $5,000,000. Payment of such loans must bo in
dollars or in lire sufficient to acquire the necessary dollars.
SECURITY
The bonds of series A, in the opinion of counsel, will be direct obligations of
the bank and will be secured after the reloan of the proceeds thereof in accordance with the trust agreement, by first mortgage obligations in face value
equal to 100 per cent of the bonds of series A. Each such obligation, in the
opinion of counsel, will be secured by a direct first mortgage on nonindustrial
agricultural and urban real estate of an appraised fair sale value (as determined by appraisers of the bank or member banks) at least equal to three times
the principal amount of such obligation, subject in certain cases to current
land taxes and local charges (censis) not exceeding 10 per cent of such principal
amount, a sum sufficient to discharge which will be retained by the depositary
out of the proceeds of such bonds. Under the decrees pursuant to which these
bonds will be issued such first mortgage obligations will be specifically set aside
by the bank and held solelj- as security for the bonds of series A. In addition
the bank will give to the trustee an irrevocable mandate, so long as any of the
bonds of series A shall be outstanding («)upon the occurrence and during the
continuance of any event of default under the trust agreement, under which
these bonds will be issued, to collecj all amounts payable upon such obligations
when and as the same shall become due and payable; ( 6 ) in case of default by
the borrower under any such obligation, and in case the bank shall fail to take
action within 30 days after notice to the bank of such default, to enforce such
obligattion and the security therefor; and (c) to apply all amounts so collected
by it to the payment of the principal of, and interest and sinking fund payments on, the bonds of series A when and as the same shall become due and
payable. Each such first mortgage obligation will provide that it can not be
• canceled or discharged without the written consent of the trustee or its duly
authorized representative. Loans made through and approved by member banks
of the bank will be unconditionally guaranteed by them. The trust agreement
will permit releases of mortgaged properties, provided the fair sale value of
the remaining mortgaged properties is at least three times the unamortized
amount of the obligations secured thereby.
SUPERVISION
The Italian Government, through the ministry of national economy, is required by law to make examinations of the books and accounts of the bank at
least semiannually, and the bank is required to make bimonthly reports of its
operations to the Government.
1346
SAIiB OF FOREIGN" BONDS OR SECURITIES
DESCRIPTION OF BONDS
The bonds will be limited to the aggregate principal amount of $20,000,000
at any one time outstanding. The bonds of series A will be dated October 1,
1927; will mature October 1, 1952, and will bear interest at the rate of 7
per cent per annum, payable semiannually on April 1 and October 1 in each
year. They will be issued in coupon form and in interchangeable denominations of $1,000 and $500, registerable as to principal only. Temporary bonds
exchangeable for definitive bonds when prepared and ready for delivery may
be delivered in the first instance. The principal of, and interest on. the bonds
will be payable at the office of the fiscal agents. Messrs. J. & W\ Seligman &
Co., in New York City, in United States gold coin of or equal to the standard
of weight and fineness existing on October 1, 1927, without deduction for any
present or future taxes levied by or within the Kingdom of Italy. The bonds
of series A will have the benefit of a cumulative sinking fund payable in semiannual instalments calculated to retire the entire issue at or before maturity
by redemption by lot at par and accrued interest commencing April 1, 1928,
subject to the right of the bank to deliver bonds at par in lieu of sinking fund
payments. The bank will also have the right to anticipate sinking fund payments in cash or in bonds of this series and thus become entitled to credits in
respect of subsequent payments as stated In the trust agreement. The bonds
of series A will be redeemable at the option of the bank on any interest date,
as a whole or in part, on 30 days' notice at par and accrued interest. These
bonds will be issued under a trust agreement executed by the bank and Central
Union Trust Co. of New York, as trustee.
ISSUE OF ADDITIONAL BONDS
The $15,000,000 of additional bonds authorized under such trust agreement
will be reserved for issue in one or more series, other than series A, for the
purpose of making additional loans of the three classes above mentioned on
terms and conditions not inconsistent with the trust agreement, to be determined by the board of directors of the bank at the time of issue thereof and
to be set forth in a supplemental agreement between the bank and the trustee.
The trust agreement will provide that each series of bonds will be separate
and distinct as to security and sinking fund, and that while any of the bonds
are outstanding the bank will not issue any bonds or other obligations which
together with all its other bonds and obligations then outstanding shall exceed
fifteen times its paid in and then existing capital.
LISTING
At your request application will be made promptly to list these bonds on
the New York Stock Exchange.
Yours very truly,
KICCABDO
GAIXI,
President
All conversions referred to in the above have been made at the rate of l8/»
lire per United States dollar, unless otherwise stated.
The information and statistics contained in this circular, part of which
have been received by cable, have been obtained from sources which we believe
reliable and on which we have based our purchase of the securities offered,
but are not to be considered representations by us. All bonds offered subject
to prior sale and change in price without notice.
$3,000,000 LEONHAKD TIETZ AKTIENGESELLSCHAFT (LEONHARD TIETZ
(INC.),
20-YEAR 7Y2 FEB CENT MORTGAGE GOLD BONDS (WITH STOCK PURCHASE
WARRANTS)
To be dated January 1,1926. To mature January 1, 1946. To be presently
authorized and issued $3,000,000.
Coupon Bonds in denominations of $1,000 and $500, registerable as to principal. Interest payable January 1 and July 1 at the Corn Exchange Bank, New
York, in United States gold coin of the standard of weight and fineness existing January 1,1926, without deduction for German taxes of any nature, present or future. Callable at the option of the company in whole or in part by
lot on any interest date on and after January 1, 1931, upon 60 days' notice
SALE OP FOREIGN BONDS OB SECURITIES
1347
at 105 and accrued interest. The Corn Exchange Bank, New York, American
trustee. Deutsche Warentreuhand Aktiengesellschaft, German trustee.
As a sinking fund the company will agree on or before January 1 in each
year to and including January 1, 1931, to surrender for -cancellation bonds
aggregating 5 per cent of the principal amount of this issue provided such bonds
can be purchased at or below 102% and accrued interest The company agrees
on or before January 1 of each year thereafter to surrender for cancellation
or to redeem at 105 bonds aggregating the same amount.
Mr. Alfred Leonhard Tietz, a managing director of Leonhard Tietz Aktiengesellschaft, has summarized in part his accompanying letter as follows:
HISTOBY AND BUSINESS
The principal activity of the company is the operation of a chain of modern
department stores. Leonhard Tietz was a pioneer in the department store
business in Germany. The business, founded in 1879, has become one of the
largest retail organizations in Europe wJth a chain of 10 up-to-date depart*
ment stores, in nearly every case the largest in their respective cities.
Among the cities in which the stores are located are included Cologne, Dtisseldorf, Elberfeld and Aachen. Ninety-five per cent of our retail business is
for cash. Fourteen of our retail establishments, located on valuable sites, are
owned in fee, and provide us with a total of 2,040,000' square feet of floor
space. In all, there are over 6,000 people employed in the retail departments.
ASSETS
The balance sheet of the company, as of July 31, 1925, adjusted to give effect
to the present financing, as certified by Messers. Lybrand, Ross Bros. & Montgomery, shows total net assets applicable to these bonds, after deduction of all
other liabilities, of $10,303,704.51. Real estate, which consists of up-to-date
buildings on valuable central sites, owned by the company and wholly ow'ned
subsidiaries, is carried on their respective balance sheets as $6,018,478.30, which
is the same value put upon the property in the companies* opening gold mark
balance sheets as of January 1. 1924. plus subsequent additions, and less depreciation. This figure, as was customary in the case of opening gold mark
balance sheets because of tax and other consideration represented an extremely
low valuation," as is evident from tho appraisals of Mr. Georg Falck dated
August 18, 1924, and October 14, 1925. which value the properties at $16,181,512.
The assessed valuation, which in Germany is customarily substantially below
the actual value, is $10,8S0.490.
The actual value of the net assets applicable to these bonds, including real
estate at the appraised valuation, after deduction of all other liabilities, is thus
about $20,526,738 or over $6,842 per $1,000 bond.
SALES AND PBOFUS
Net sales, as certified by Messrs. Lybrand, Boss Bros. & Montgomery, for the
year 1924 were $24,381,344, and for the first seven months of the year 1925 were
over $14,500,000.
Earnings available for interest on these bonds, after all taxes, except income
taxes, and after ordinary depreciation charges, for the year 1924 were $1,521,818.16 or 6.75 times the amount required for interest on this issue; and for the
first seven months of the year 1925 were over $875,000, in each case after allowance for the saving of interest which would have been effected by the proceeds
of this financing, as certified by Messrs. Lybrand, Ross Bros. & Montgomery.
SECURITY
These bonds will be a direct obligation of the company. They will be secured
in the opinion of counsel by direct mortgage lien on all the fixed properties of
the company and its wholly owned subsidiaries (except certain property In the
city of Berlin, negotiations for the sale of which, at a price substantially in
excess of both the book and appraised values, are now in progress), subordinate
to the lien of revalued mortgages estimated not to exceed $1,471,873.35. The
company will agree to extend the lien of this mortgage to cover all fixed prop-
1348
SAIiB
OF FOREIGN" BONDS OR SECURITIES
erties hereafter acquired, subject to existing liens and to purchase money and
construction mortgages.
The business being mainly commercial and not industrial, only a minor part
of the company's properties are subject to secured charges under the " Dawes
plan," which are estimated not to exceed $1,000 per year. In order to equalize
the reparations burden, however, certain additional unsecured payments are
required, which are estimated at a maximum of $75,000 per year.
STOCK PURCHASE WARRANTS
The bonds will be accompanied by warrants entitling the holder at any time
on or before January 1, 1931, to purchase shares of the common stock of
Leoanhard Tietz Aktiengesellsehaft at $2G per share (par value 100 reischmarks per share). The net earnings, adjusted as above, on the commou stock,
after deduction of prior charges, for the fiscal year ended IXavinK-r 31. 1924,
as certified by Messrs. Lybrand, Boss Bros. & Montgomery, were equivalent on
the 250,000 shares now oustanding to $3.85 per share before the appropriation
of $11,900 to employes' relief fund. For the first seven months n£ 19£> such
profits were over $2.25 per share. The current market price is approximately
$17. The book value of the stock as indicated by the adjusted balance sheet
as of July 31, 1925, was approximately $29.23 per share, which would be increased to $69.88 per share if real estate were carried at the appraised value.
A cash dividend of 6 per cent ($1.42) was declared for the fiscal year ended
December 31, 1924. Price 97 and accrued interest to yiehl about 7.£0 per cent.
The bonds will carry stock purchase warrants in the ratio of 15 share? for each
$1,000 principal amount.
This offering is made in all respects, when, as and if and accepted by us and
subject to the approval of our counsel. W e reserve the right to reject any and
all subscriptions in whole or in part, to allot less than the amount applied for
and to close the subscription books at any time without notice.
I t i s expected that delivery of temporary bond or interim receipts will be made
on or about February 24, 1926, at the office of Lehman Bros.. 10 William
Street, New York, N. Y., against payment therefor in New York funds.
J . & W . SELIOMAN & C o . .
o4 Walt Street
LEONHARD TIETZ
Xac
York.
AKTXEXGESEXXSCQAFT.
Cologne, Germany,
January
22, l M -
Messrs. Yehman Bros., Goldman, Sachs & Co., Hallgarten & Co., Hal?ey,
Stuart & Co., (Inc)., J. & W . Seligman & Co.. New York. N. Y .
DEAR SIRS: In connection with your purchase of $3,000,000 Twenty-Year
7 % per cent mortgage gold bonds of Leonhard Tietz Aktiengesellsehaft (Leonhard Tietz, (Inc.), I take pleasure In giving you the following information
regarding the company and its business:
HISTORY
Leonhard Tietz, the founder of the company which b<*ars his name, was a
pioneer in the department-store business in Germany. H i s first venture was
a comparatively small store in Stralsund. Germany, which he otiened in IS*"*
T h e success of this store encouraged him to open a branch in Elberfeld, ana
eventually led to the establishment of other stores in the principal cities of the
Rhineland.
T h e business had behind it a record of 25 years of steady growth and prosperity when the present company was incorporated in 1905. At that time
began what we might term the second period of our development*. The older
stores were gradually torn down and replaced by larger m o d e m buildings,
until in 1914 the company had become one of the largest retail organizations in
Europe with a chain of 19 up-to-date department stores.
RETAILING
T h e principal activity of the company is, and will continue to be, the operation of a chain of modern department stores. Each is a complete department
SAJLtE OF FOREIGN BONDS OR SECURITIES
"1349
store and in nearly every case the largest in its own city. Among the cities in
which they are located are included Cologne, Dusseldorf, Elberfeld, and Aachen.
Our merchandising policy is" designed to meet the needs of the millions of
middle-class people living in the highly industrialized Rhinoland. Ninety-five
per cent of our retail business is for cash.
Fourteen uf our nineteen retail establishments, located on valuable sites, are
owned in fee, and provide us with a total of 2,040,000 square feet of floor space.
Most of these store buildings are of substantial construction, and, being unusually
attractive from an architectural standpoint, are excellent business assets as
they attract many visitors yearly. Of the 19 retail establishments, there are
2 with over 1,000 employees, 2 others with over 500 employees, 4 others with over
250 employees, and 11 more which average about 100 employees. In all, there
are over 6,000 people employed in the retail departments.
Buying.—Although
each store maintains its own individuality, especially irt
respect to carrying the kind of merchandise suitable to the needs of its particular locality, the general buying policy is centralized at the head office in Cologne,
supplemented by branch buying offices in the important manufacturing centers
of Berlin, Chemnitz, Offenbach, and Plauen. The past success of the business
has been largely due to the coordination of our buying departments, and we
are continually working further to strengthen this part of our organization.
Selling.—Each store having its distinct character in a country where each
city has individuality, selling activities are not so greatly centralized as buying
activities. However, everything possible is done to cut down overhead expense.
There is a continuous exchange of ideas between the managers of the various
stores, and these managers frequently gather in Cologne, under the direct
supervision of the executives of the company, to discuss questions of management policy and to benefit from their common experience.
Financing.—Financial control is also centralized, all bills being sent to
Cologne for payment, and the entire financial policy is conducted from the head
office at that city.
MANUFACTURING AND WHOLESALING
Along with the growth of its retail organization, the company has gradually built up a profitable manufacturing wholesaling business. This department of the business originated in a small way to supply certain prominent
articles which were retailed by the company's own stores, but has been gradually
extended and is now doing about 50 per cent of its business witlv other firms.
The sales of the wholesale manufacturing department to outside customers in
1924 comprised approximately 10 per cent of the total turnover of Leonhard
Tietz, Inc. Factories are now operated in Berlin for dresses, linen goods, shirts,
etc.; in Bitburg and Chemnitz for hosiery; in Plauen for laces and embroideries;
and in Augsburg, where a weaving mill is located. These establishments cover a
total floor space of about 226,000 square feet, and have on their payroll a total
of about 1,400 employees. Our own Tietz stores pay the same prices as our
other wholesale customers and there is no pressure of any sort brought to bear
upon our retail stores to buy goods from our own factories. The continued
growth of our wholesale business sustains our policy in entering this field.
MANAGEMENT
The management of the company is directed by a board of seven members,
who constitute the chief executives in charge of the business, among whom are
those responsible for the company's growth since its inception. The members
of this board are all directly financially interested in the company and devote
all of their time to its affairs. The various branches of the business are
thus constantly under their close supervision.
ASSETS
Appended hereto is a balance sheet of the company, as of July 31, 1925, adjusted to give effect to the present financing, as certified by Messrs. Lybrand,
Ross Bros. & Montgomery. The total net assets applicable to these bonds,
after deduction of all other liabilities, in accordance with this balance sheet are
$10,363,704.51. Real estate, which consists of up-to-date buildings on valuable
central sites, owned by the company and wholly owned subsidiaries, is carried
1350
SAIiB
OF FOREIGN" BONDS OR SECURITIES
on their respective balance sheets at $6,018,478.30, which is the same value
originally put upon the property in the companies* opening gold mark balance
sheets as of January 1, 1924, plus subsequent additions and less depredation.
This figure, as was customary in the case of opening gold mark balance sheets
after the stabilization of the mark in 1924, because of tax and other considerations, represented an extremely low valuation, as is evident from the appraisals of Mr. Georg Falck dated August 18, 1924 and October 14, 1925, which
value the properties at $16,181,512. The assessed valuation, which in Germany
is customarily substantially below the actual value, is $10,8S0,490.
The actual value of the net assets applicable to these bonds, including real
estate at the appraised valuation, after deduction of all other liabilities, is
thus about $20,526,738, or over $6,842 per $1,000 bond. In the balance sheet
no account is taken of the company's good will.
SALES AND FBOFITS
The sales and earnings of the company always showed a constant increase
until 1914, when by reason of the war and the subsequent depreciation of the
mark, it became impossible to make any comparable statements. Net sales, as
.certified by Messrs. Lybrand, Ross Bros. & Montgomery, for the year 1024
were $24,381,344, and for the first seven months of the year 1925 were in
excess of $14,500,000.
Earnings available for interest on these bonds, after all taxes, except income
taxes, and after ordinary depreciation charges, for the year 1924 were
$1,521,818.16 or 6.75 times the amount required for interest on this issue; and
for the first seven months of the year 1925 were in excess of $875,000, in each
case after allowance for the saving of interest which would have been effected
by the proceeds of this financing, as certified by Messrs. Lybrand, Ross Bros.
& Montgomery.
DESCRIPTION OP BONDS
These bonds will be dated January 1,1926, will be due January 1, 1946, and
will bear interest at the rate of 7 % per cent per annum, payable semiannually on
January 1 and July 1. Principal and interest will be payable at the Corn Exchange Bank, New York, in United States gold coin of the standard of weight
and fineness existing January 1, 1926, without deduction for German taxes of
any nature, present or future. The bonds will be in coupon form in denominations of $1000 and $500, registerable as to principal only, and will be callable
at the option of the company in whole or in part by lot on any interest date
on and after January 1,1931, upon 60 days' notice at 105 and accrued interest
These bonds will be a direct obligation of the company. They will be secured
in the opinion of counsel by direct mortgage lien on all the fixed properties of
the company and its wholly owned subsidiaries (except certain property in the
city of Berlin, negotiations for the sale of which, at a price substantially in
excess of both the book and appraised values, are now in progress), subordinate
to the lien of revalued mortgages estimated not to exceed $1,471,874.35. The
company will agree to extend the lien of tills mortgage to cover all fixed properties hereafter acquired, subject to existing liens and to purchase money and
construction mortgages.
The business being mainly commercial and not industrial, only a minor part
of the company's properties are subject to secured charges under the " Dawes
plan," which are estimated not to exceed $1,600 per year. In order to equalize
the reparations burden, however, certain additional unsecured payments are
required, which are estimated at a maximum of §75,000 per year. Neither
German law nor any international engagements assumed by the German Government involve any restrictions upon the acquisition by the company of the
foreign exchange requisite to permit the company to meet the external obligations evidenced by these bonds.
SINKING FUND
The company will agree on or before January 1, in each year to and including
January 1,1931, to surrender for cancellation bonds aggregating 5 per cent of
the principal amount of this issue provided such bonds can be purchased at or
below 102% and accrued interest. The company agrees on or before January 1
of each year thereafter to surrender for cancellation or to redeem at 105 bonds
aggregating the same amount
SALE OP FOREIGN BONDS OB SECURITIES
1351
STOCK PURCHASE WARRANTS
The bonds will be accompanied by warrants entitling the holder at any time
on or before January 1, 1031, to purchase shares of the common stock of Leonhard Tietz Aktiengesellschaft at $26 per share (par value 100 reichsmarks per
share). The net earnings, adjusted as above, on the common stock after deduction of prior charges for the fiscal year ended December 31, 1924, as certified by Messrs. Lybrand, Ross Bros. & Montgomery, were equivalent on the
250,000 shares now outstanding to $3.85 per share before the appropriation of
$11,900 to employees' relief fund. For the first seven months of 1925 such
profits were over $2.25 per share. The stock is traded in on the stock exchanges of Berlin and Cologne, the market price having had a range from a
low of $13.56 to a high of $1S.56 during the year 1925. The current market
price is approximately $17. The book value of the stock as indicated by the
adjusted balance sheet as of July 31, 1925, was approximately $29.23 per share,
which would be increased to more than $(>9.SS per share if the appraised value
of the real estate, as described above, were substituted for the amount carried
on the balance sheet for this item. A cash dividend of 6 per cent ($1.42) was
declared for the fiscal year ended December 31, 1924, which was the first year
since the stabilization of the mark.
PURPOSE OF ISSUE
The proceeds of this issue of bonds will be used by the company to increase
Its working capital and to expand its business. W e will be enabled to extend
our lines of merchandise and will also be able to make certain improvements
in our buildings which should prove advantageous in increasing our volume
of sales.
For the purpose of this circular, conversion of German to United States
currency has been made at the rate of one reiclismark equals 23.8 cents.
Very truly yours,
ALFRED LEON HARD TIETZ.
2 8 , 0 0 0 AMERICAN SHARES, REPRESENTING 1 4 0 , 0 0 0 DEPOSITED SHARES OF COMMONSTOCK, HUNGARIAN GENERAL SAVINGS B A N K (LTD.)
(Magyar Altalanos Takarekpenztar R. T .
Ungarisclie Allgemeine Sparcassa A. G.)
CENTRA!
UNION TRUST COMPANY OF NEW YORK, DEPOSITARY I AMERICAN EXCHANGE
IRVING TRUST COMPANY, REGISTRAR
The American shares have been issued by the depositary under a deposit
agreement, and each American share represents five deposited shares of the
par value of 50 pengoe each. The deposit agreement provides that subject to
all the provisions of the deposit agreement, after July 1, 1933, or such earlier
date as may be fixed by J. & W . Seligman & Co. and the bank, American shares
may be exchanged for shares of the bank upon payment of all charges and expenses; and that dividends received by the depositary on the deposited shares
after deduction of taxes, if any, will be converted into dollars and the proceeds,
less all charges and expenses, will be distributed to the holders of American
shares. Subject to all of the provisions of the deposit agreement and at the
times specified therein additional shares of the bank may be deposited in
exchange for American shares. No voting rights attach to the American shares.
W e have been advised by Hungarian counsel that the shares deposited against
the issue of the American shares included in this offering are fully paid and
nonassessable and that under present laws there are no Hungarian taxes to
which holders of American shares will be subject.
Copies of the deposit agreement may be obtained at the offite of J. & W .
Seligman & Co., or John Nickerson & Co. (Inc.), or at the principal office of the
depositary.
Dr. Leopold Horvath, president of Hungarian General Savings Bank (Ltd.),
has summarized his accompanying letter as follows:
History and business.—Hungarian General Savings Bank (Ltd.), established
In 1881,* Is one of the large banks in Hungary. Nine branch offices are maintained in Budapest and 23 in provincial towns in Hungary. No other bank in
Hungary has as many branches.
1352
SAIiB
OF FOREIGN" BONDS OR SECURITIES
The bank carries on all the usual branches of commercial, savings, and
foreign banking. Like most continental European banks, it has assisted in
the development of and has substantial investments in a number of financial
and industrial companies. A large business in mortgage loans is transacted
against which bonds are issued.
Growth.—Upon establishment of the bank in 1S81 its capital and surplus
amounted to about $410,000 and increased to $7,700,000 in 1013, when deposits
were over $12,000,000. After the stabilization of the currency in 1925 following
the inflation period the bank resumed operations on a gold basis with a capital
and surplus of over $1,700,000 and deposits of over $5,250,000. Its deposits are
now approximately $15,800,000.
Capital stock.—The bank has only one class of stock—common stock of the
par value of 50 pengoe per share. There are now outstanding 400,000 shares
of which 140,000 shares are deposited under the deposit agreement against which
American shares are issued. The Hungarian shares are listed on the Budapest,
Vienna, and Trieste Stock Exchanges and are dealt in on the London Stock
Exchange. After having given effect to this financing the balance sheet as of
December 31, 1928 shows capital and surplus of 33,037,000 pengoe, or $5,781,475.
This is equivalent to $72.25 for each American share.
Dividends.—*The bank has an unbroken dividend record since its organization
in 1881. A cash dividend of 10 per cent was paid for 11)25. 12 per cent for
1920, and 13 per cent for 1927 on the shares of the bank outstanding during those
periods. For the year 1928 the dividend was increased to 14 per cent or 7
pengoe per share. This dividend is equivalent to approximately $0.12 (before
deducting charges and expenses) per American share at par of exchange. The
American shares are entitled to the full dividend for the year 1929.
All conversions of pengoe to dollars have been made at par of exchange, or
$0,175 per pengoe, and of crowns to dollars at the rate of $0.20 per crown.
The legality of all proceedings in connection with the issue and deposit of
the shares of the bank and the issue of the American shares has been passed
upon by Messrs. Cravath, De Gersdorff, Swaine & Wood, New York City, who
have relied upon the opinion of Dr. Akusius Vajda, of Budapest as to all matters
of Hungarian law.
The American shares are listed on the Boston Stock Exchange.
Price on application.
(The information and statistics contained herein are not guaranteed but have
been obtained from sources which we believe to be reliable.)
HUNGARIAN GENERAL SAVINGS B A N K
M e s s r s . J. & W . SELIGMAN & Co., JOHN NICKERSON & C o .
(LM),
May I, 1929.
(INC.).
GENTLEMENS With reference to the purchase by you of 140,000 shares of
common stock of Hungarian General Savings Bank (Ltd.) against which 2S,000
American shares have been issued, I submit the following information:
HISTORY AND BUSINESS
Hungarian General Savings Bank (Ltd.), established in 1881, is one of the
large banks in Hungary. Nine branch offices are maintained in Budapest and
23 in provincial towns in Hungary. Practically all of the offices outside of
Budapest were acquired by merger with existing banks and are all being
operated profitably. No other bank in Hungary has as many branches.
The bank carries on all the usual branches of commercial, savings and foreign
banking, no difference existing in Hungary between banks and savings banks
in respect of business operations. Like most continental European banks, it
has assisted in the development of and has substantial investments in a number
of financial and industrial companies.
A large business in mortgage loans is transacted against which bonds are
issued. Real-estate loans are based upon valuations made by independent
appraisers, and, under Hungarian law. can not exceed 50 per cent of appraisal
values. The bank has never suffered a loss through failure of a borrower to
pay interest or principal on any mortgage loan.
GROWTH
Upon establishment of the bank in 1881, its capital and surplus amounted to
about $410,000 and increased to $7,700,000 in 1913, when deposits were over
§12,000,000. After the stabilization of the currency in 1925 following the infla-
1353
SALE OP FOREIGN BONDS OB SECURITIES
tion period the bank resumed operations on a gold basis with a capital and
surplus of over $1,700,000 and deposits of over $5,250,000. Its deposits are now
approximately $15,800,000.
Mortgage loans outstanding amounted to approximately $2,000,000 in 1904,
and increased to $22,000,000 in 1913. The mortgage loan business of the bank
was suspended during the inflation period and. was not resumed until after
revaluation of the currency. Since that time a substantial expansion has taken
place, the amount of mortgage loans outstanding having increased from only a
nominal amount in 1925 to $6,480,066 as of December 31. 1928.
T h e following figures indicate the growth of the bank since its organization
in 1881:
Capital
Year
1882.
$100,000
400,000
400,000
400,000
800,000
2,000,000
4,000,000
G, 400,000
1885.
1890.
1895.
1900.
1905.
1910.
1913.
Surplus
Deposits
Dividends
(per cent)
$276,788
$8,708
322,700
12.010
782,700
19,258
28,467 1,003,235
80,003 1.825,832
255,007 2,439,853
6 14,000 8,239,296 I
1,300,000 12,007.053
m
4
6
7.2
7.4
Following the fluctuations in the currency during the inflation period in
Hungary, the bank resumed operations on a gold basis as of January 1, 1925.
Year
Capital
1925..
1926..
1927..
1928 V
$1,022,700
1,022,700
2,100,000
3,500,000
Surplus
Deposits
Dividends
(per
cent)
$729.050 $5,235,984
736,400 7.055,129
1,334,305 12.331,748
2,2S1,475 15, SOt, 162
10
12
13
14
* After having given effect to this financing.
CAPITAL STOCK
The bank has only one class of stock, common stock of the par value of 50
pengoe per share. There arc now outstanding 400,000 shares of which 140,000
shares are deposited under the deposit agreement against which American
shares are issued. The Hungarian shares are listed on the Budapest, Vienna
and Trieste Stock Exchanges and are dealt in on the London Stock Exchange.
Upon the stabilization of the Hungarian currency after the war the bank
resumed operations on a gold basis and drew up an opening balance sheet as of
January 1, 1925, based on a conservative revaluation of assets. A f t e r having
given effect to this financing the balance sheet as of December 31, 192S. shows
capital of 20,000,000 pengoe ($3,500,000) and surplus of 13,037,00 pengoe ($2.281,475). or a total of $5,781,475. This is equivalent to $72.25 for each American share.
DIVIDENDS
The bank has an unbroken dividend record since its organization in 1881.
A cash dividend of 10 per cent was paid for 1925, 12 per cent for 1926, and
13 per cent f o r 1927 on the shares of the bank outstanding during those periods.
For the year 1928 th^ dividend was increased to 14 per cent or 7 pengoe per
share. This dividend is equivalent to approximately $6.12 (before deducting
charges and expenses) per American share at par of exchange. The American
shares are entitled to the full dividend for the year 1929.
Dividends arc declared at the annual stockholders* meeting which is usually
held early in each calendar year. Dividends so declared are payable after said
meeting, covering the preceding calendar year.
Balance
sheet
The balance sheet of the bank as of December 31, 1928 after having given
effect to this financing was as f o l l o w s :
1354
SAIiB
OF FOREIGN" BONDS OR SECURITIES
(Pengoe converted into dollars at par of exchange or $0,175 per pengoe)
ASSETS
Cash on hand and in banks
Pension and benevolent fund investments
Securities and miscellaneous investments
Loans and discounts
Mortgage loans
Real estate
$3,023, 750
32,137
1. 50$, 862
10,74S, G35
0,4SO, 006
592, S56
Credits guaranteed by customers
2S, OSS, 306
1.702,460
LIABILITIES
Capital
Surplus
Pension and benevolent fund
Deposits
Creditors
Mortgage bonds
Assigned mortgage loans
Items in transit
Unclaimed dividends
Undivided profits
3,500,000
2.2S1, 4kj
220.17j>
15, S04.1C2
2.203.078
2. m , 144
1.049,45a
006,
-
330,m
23, OSS. 306
1.702.460
Guaranties on customers' behalf
HUNGARY
Hungary has a population of over 8.000,000 and an area of 35.000 square
miles. It is essentially an agricultural country, but rapid progress is being
made along industrial and commercial lines. The soil is very rich and on the
basis of per acre production ranks among the most fertile in Europe. Large
exports of grain, flour, sugar, live stock, poultry and meat are produced. Tne
principal industries include flour milling, distilling, manufacture of meat
products, sugar, textiles, agricultural implement, machinery and electrical appliances.
AAA AAA
Hungary has made rapid progress since the issuance in 1924 of the $50,000,0W
international reconstruction loan. The budget has been balanced and tne
currency stabilized since 1925. Savings bank deposits have increased over -00
per cent since 1925 and over 30 per cent during the last year. The National
Bank of Hungary, the central bank of rediscount, has a gold reserve of 47 per
cent as compared with 20 per cent required by law.
MANAGEMENT
The board of directors includes representatives of important Euroi>ean financial and industrial institutions.
Among the principal shareholders of the bank are Assicurazioni General!
(General Insurance Co.), Trieste, one of the oldest and largest European
continental insurance companies, Lazard Bros. & Co., (Ltd.), London, and
Commercial Bank of Trieste, Trieste.
All conversions of pengoe to dollars have been made at par of exchange, or
$0,175 per pengoe, and of crowns to dollars at the rate of ?0.20 per crown.
Yours very truly,
L . HORVATH,
President, Hungarian General Savings Bank
(Ltd).
Balance sheet
The following is a copy of the balance sheet issued by Hungarian General
Savings Bank (Ltd.), as of December 31,1929.
ASSETS
Cash on hand and in banks
Pension and benevolent fund investments
Securities and miscellaneous investments
:
$2,120,
278,220
2,380,419
1355
SALE OP FOREIGN BONDS OB SECURITIES
Loans and discounts
Mortgage loans
Heal estate
.
$16,457,638
7,448,305
600,819
29,286,095
Credits guaranteed by customers $1,848,053.
LIABILITIES
3,500,000
2,301,250
281,267
15,281,973
1,930,212
3,820,595
1,033,097
1,804
591,691
2,648
541,558
Capital
Surplus
Pension and benevolent f u n d .
Deposits
Creditors
Mortgage bonds
Assigned mortgage loans
Mortgage bonds drawn by lot
Items in transit
Unclaimed dividends
Profits
29,286,095
Guaranties on customers' behalf $1,848,053.
(Pengoe converted into dollars at par of exchange or $0,175 per pengo.)
For the year ended December 31, 1929, a cash dividend of $6.09 per American
share was paid on April 2, 1930.
(The list and summary of J. &W. Seligman & Co.'s participation
in foreign issues are here printed in full as follows:)
Summary
Number of
issues
Retired by
sinking fund
or total redemption
Principal
amount
$144,958,000.00
83,000,000.00
Business originated
*
Members of original group
13
11
Members of appearing group...
24
227,958,00a 00
17 1,288,494,00a 00
Total gross
profit of J.
& W. Seligman & Co.
Principal
amount now
outstanding
$6,768,420.00 $138,189,580.00 $1,003,192.51
116,371.15
63,836,000.00 19.164,000.00
70,604,420.00
157,353,5S0.00
1,321,265.67
41 1,516,452.000.00
Europe
Latin America
Number of
issues
Principal
amount
$128,233,000
22,000,000
77,065,000
Business originated
Members of original group. -.
Member? of appearing croup.
227,298,000
Number of
issues
4
12
25 !
Number of
issues
Principal
amount
$16,725,000
61,000,000
091,429,000
1,069,154,000
Number of
issues
Principal
amount
2
$220,000,000
13
11
17
$144,958,000
83,000,000
1,288,494,000
2
220,000,000
41
1,516,452,000
...
-
Principal
amount
Totals
Japan
Business originated
Members of original g r o u p . . . . . . .
Members of appearing group
1,119,563.66
201,702.01
1356
SAIiB OF FOREIGN" BONDS OR SECURITIES
G)%oss spread
on issues originated by J. d IV. Seligman & Co. and in ichich they
were members of original group
Name
Province of Lower Austria
Dept. of Cauca Valley
„„
Do
Housing & Realty Improvement Co
Costa Rica
Peru rs.j
„
Peru 6's—
Peru
Province of Callao
Mortgage Bank of Yugoslavia
Mortgage Bank of Bogota
Department of Cundinamarca
City of Copenhagen
City of Rio
,
Fried, Krupp
Cunard Steamship
Leonhard Tietz (Inc.)
Berlin City Electric Co
Do
Republic of Cuba
—
Cunard Steamship Co
Mortgage Bank of Venetian Provinces.
Hellenic Republic
Do
Principal
amount of
issue
Points
11.5
23.0
8.0
8.5
7.5
0.5
5.5
5.0
G. 5
5.0
4.5
5.0
3.5
7.5
4.125
1.5
14.0
2. 731
3.9135
1.122
1.375
5.75
.75
.75
$2,000,000
2,500,000
1,500,000 \
1,500,000 J
6,000.000 |
15,000,000 j
50,000.000
35,000,000
1,500.000
12,000,000
3,000.000
12.000.000
15,000,000
13,000.000
10.000,000
7.500,000
3*000,000
1,000,000
2,000.000
9.000.000
2.500.CU0
5, 000,000
7,500.0(50
7,500,000
227,000,000
Average spread 5.02.
Foreign
bonds in default in the issuance of which J. & W.
participated
Seligman
& Co.
Principal Amount
Outstanding
January 1,1932
Republic of Bolivia external 25-year secured refunding S per cent
loan of 1922-24 (due May 1, M 7 )
§22,072,000
Province of Callao, Peru, guaranteed and secured sinking fund
7 % per cent gold bonds of 1927 (due Jan. 1,1£U4)
1, 189, 000
Republic of Peru, secured sinking fund gold 7 per cent loan of
1927 (due Sept. 1,1959)
14,357,500
Republic of Peru, Peruvian national loan, 6 per cent external
sinking fund gold bonds, first series (due Dec. 1, 1900)
48,3S3,000
Republic of Peru, Peruvian national loan, C per cent external
sinking fund gold bonds, second series (due Oct 1, 1 9 6 1 ) :
Dollar bonds
24,469,500
Sterling bonds (£1,958,200)
9,529,5S0
120,000,5S0
Banking credits granted to foreign
governments
Republic of Peru:
Date granted
May 1,1930.
Principal amount
§1,520,000.00
Liquidated to date..:
889.349.52
Principal amount now outstanding
1,130,650.48
J. & W. Seligman & Co.'s net participation in principal
amount now outstanding
343,955.76
SALE OP FOREIGN BONDS OB SECURITIES
J. d TF. Seligman & Co. participations
in foreign
issues 1929 to 1931,
1357
inclusive
ISSUES ORIGINATED B Y J. & \W SELIGMAN <fc CO.
Date of issue
January, 1926.October, 1926...
December, 1926
Do
Amount
Original offering
price
Name of issue
$2,000,000
Province of Lower Austria external 7Ji per cent gold loan of
1925.
2,500,000 Department of Cauca Valley
(Columbia) 20-year "M per
ccnt secured sinking fund gold
bonds, 1916.
1,500,000 Housing & Realty Improvement
Co. first mortgage 20-year sinking fund 7 per cent gold bonds.
8,000,000 Republic of Costa Rica external
secured sinkine fund 7 per cent
gold bonds, 1920.
March, 1927
15,000,000
Republic of Peru secured 7 per
cent sinking fund gold bonds,
1927.
April, 1927
12,000,000
May, 1927
1,500,000
July, 1927
1,500,000
December, 1927
3,000,000
State Mortgage Bank of Yugoslavia secured 7 per ccnt sinking fund gold bonds.
Province of Callao, Peru guaranteed and secured sinking
fund 7H per cent gold bonds
(1941).
Department of Cauca Valley
additional issue 20-year 7>3
per cent secured sinking fund
gold bonds (1946).
Mortgage Bank of Bogota 20year 7 per cent sinking fund
gold bonds, issue of October,
1927.
Republic of Peru, Peruvian national loan 6 per ccnt external
sinking fund gold bonds, first
series.
Do
June, 1928.1
October, 1923_
50,000,000
Department of Cundinamarca
(Republic of Colombia) external secured 6H per cent sinking fund gold bonds. 1928.
25,000,000 Republic of Peru, Peruvian national loan, 6 per cent external
£2,000.000
sinking fund gold bonds, second series due Oct. 1,1961.
12,000,000
December, 1928
*2S,000
Hungarian General
Bank (Ltd).
Savings
Offering made b y -
98 \*t J. A W. Seligman & Co.; F. J.
Lisman & Co.
96H J. <fc W. Seligman A Co.; Baker,
. Kellogg & Co.
J. & V . Seligman & Co.; E. H.
Rollins & Sons; Foreign
Trade Securities (Ltd.).
95J4 J. & W. Seligman & Co.; Blyth,
"Witter A Co. Marshall Field;
Glore, Ward <fc Co.; F.J. Lisman Co.; Hemphill, Noyes
& Co.
9CH J. £ W. Seligman <fc Co.; The
National City Co.; E. II.
Rollins & Sons; Graham,
Parsons <fc Co.; F. J. Lisman
<fc Co.; Ames, Emerich & Co.
92 J. & W. Seligman & Co.; Dillon, Read <fc Co.
9S
99
J. & W. Seligman <fc Co.; Hunter, Dulin & Co.; Alvin n.
Frank <fc Co.
98
J. & W\ Seligman & Co.; Baker, Kellogg «fc Co.
92^ J. & "W . Seligman & Co.; Central Trust Co. of Illinois.
9\n J. «fc W. Seligman & Co.; The
National City Co.; Blyth,
Witter <fc Co.; The Guaranty
Co. of N. Y.; F. J. Lisman
Co.; Central Union Trust
Co.
93 H J. & W. Seligman & Co.; E. H.
Rollins & Sons: Redmond
Co.; Graham, Parsons & Co.
91
85
J. & W. Seligman & Co.; The
National City Co.: Blyth,
Witter <fc Co.; Guaranty Co.
of N. Y.; F. J. Lisman & Co.;
Central Union Trust Co.
J. & W .Seligman <fc Co.; John
Nickerson Co. (Inc.).
ISSUES ORIGINATED B Y OTHERS IN WHICH J. <fc W. S E L I G M A N d" CO. PARTICIP A T E D IN ORIGINAL GROUP
August, 1919...
April, 1922..
1
$15,000,000
City of Copenhagen External
5J4 per cent loan of 1919.
13,000,000
City of Rio de Janeiro 25-year
8 per cent external sccured
sinking fund gold bonds, 1947.
93}$ Brown Bros. & Co.; J. <fc W.
Seligman <fc Co.; Lee, Higginson & Co.; Win. A. Read
<fc Co.
103 Blair & Co. (Inc.); J. & \V.
Seligman 6t Co.; White,
Weld & Co.; E. H. Rollins
& Sons; Halsey, Stuart <fc
Co.; Cassatt & Co.; The
Union Trust Co. (Cleveland); Illinois Trust & Savings Bank (Chicago); Mercantile Securities Co. (San
Francisco); Bank of Italy
(San Francisco); First Securities Co. (Los Angeles).
American shares representing 140,000 deposited shares of common stock.
1358
SAIiB OF FOREIGN" BONDS OR SECURITIES
J. & W. Seligman & Co. participations in foreign issues 1929 to 1931, inclusive—
Continued
ISSUES ORIGINATED BY OTHERS IN WHICH J. & W. SELIGMAN & CO. PARTICIPATED IN ORIGINAL GROUP—Continued
Date of issue
Amount
December,1924. $10,000,000
November, 1825
January, 1926->
February, 1926,
Name of Issue
Fried. Krupp Aktiengesellschaft
(Fried. Krupp (Ltd.)), 7 per
cent merchandise secured gold
dollar notes.
7,500,000 Cunard Steamship Co., 5 per
cent external gold notes,
cent External gold notes.
3,000,000 Leonbard Tietz Aktiengesellschaft (Leonhard Tieti (Inc.))
20-year (closed) mortgage gold
7Hs.
3,000,000 Berlin City Electric Co. 6H per
cent notes.
July, 1927...
0,000,000 Republic of Cuba serial 5H per
cent geld bonds.
November, 1927.
2,600,000 The Cunard Steamship Co.
(Ltd.) 2-year 4}4 per cent external gold notes.
5,000,000 Mortgage Bank of the Venetian
Provinces 25-year 7 per cent
external secured sinking fund
gold bonds, series A.
7,504000 Hellenic Republic 1-year 5H per
cent treasury notes due May 5,
1931.
7,500,000 Hellenic Republic 1-year 6H per
cent treasury notes due May 6,
1932.
Do
May, 1930.
April, 1931
Original offering
price
Offering made by-
W H Goldman, Sachs A Co.; White
Weld A Co.; Hallgarten *
Co.; Lehman Bros.; J. A W.
So lip man A Co.; Halsey,
Stuart A Co.; Kleinwort,
Sons A Co, (London).
100 Brotrn Bros. A Co.; J. A W.
Seligman A Co.; White,
Weld A Co.
Lehman
Bros.; Goldman,
0)
Sachs A Co.; Hallgarten &
Co.; Halsey, Stuart A Co.;
X. A W. Seligman A Co.
Hallgarten A Co.; Halsey,
0)
Stuart A Co.; Goldman,
Sachs A Co.; Lehman Bros.;
J. A W. Seligman A Co.
J. P. Morgan A Co.; Kola,
(')
Loeb A Co.; The National
City Co.; Ouaranty Co. oi
N. Y.; Bankers Trust Co.,
N. Y.; Harris. Forbes A Co.;
J. A W. Seligman A Co.;
Dillon, Read A Co.
100 Brown Bros. A Co.; J. & J .
Seligman A Co.; Uhita,
Weld A Co.
. w
95 E. H. Rollins A Sons; J. A W
Seligman A Co.
(<)
Wi
Speyer A
man A
Co
Speyer A
man A
Co.
Co.; J. A W. SeUfCo.; National City
Co.; J. & W. Sei£
Co.; National City
ISSUES ORIGINATED BY OTHERS IN WHICH J. A W. SELIGMAN A CO. PARTICIPATED
IN APPEARING GROUP
J. P. Morgan A Co. and 17
101
February, 1919- $28,179,000 United Kingdom of Great Brit*
others (J. A W. Seligman «
aln and Ireland external gold
Co. 7th).
^
. u
5H per cent loan of 1917.
98 J. P. Morgan A Co. and 3f
October, 1919.
148,379,100 United Kingdom of Great Britain and Ireland 10-year 5H
others (J. A W. Seligman A
per cent convertible gold
Co. 17th).
bonds of 1929.
Do-.
101,620,900 United Kingdom of Great Brit96 H J. P. Morgan A Co. and 34
ain and Ireland 3-year 5H
others (J. 4 W. Seligman A
per cent convert ibV* gold notes
Co. 17th).
1922.
September,
100,000,000 Republic of France 9 -year sink- 100 J. P. Morgan A Co. and 35
othert (J. A W . Seligman*
ing fund externa/ 8 per cent
1920.
loan of 1920.
Co. 10th).
„
. 05 J. P. Morgan A Co. and »
May, 1921
100,000,000 Republic of France 20-year external 7H per cent loan of 1921.
others (J. A W. Seligman *
Co. 10th).
„ „
June, 1822—
24,000,000 Republic of Bolivia external 25- 101 Spencer Trask A Co.; Eqtft;
able Trust Co.; Stifel-M^
year secured refunding 8 per
laus Investment Co.; H&J
cent loan of 1922-1924.
garten A Co.; Halsey, fitoart
A Co.; E. H. Rollins ASog*
Caasatt A Co.; Klod.
nicutt A Co.; J. & W. M *
man A Co.
1
97 with warrants to purchase 15 shares common at 26 $1,000 bonds.
* 2-year, 99; 3-year, 93H>
*To yield 5.25 per cent.
• To yield 5^4 per cent.
SALE OP FOREIGN BONDS OB SECURITIES
J. & W, Seligman d Co. participations in foreign issues 1929 to 1931,
Continued
1359
inclusive—
ISSUES ORIGINATED BY OTHERS IN WHICH J. & W. SELIGMAN & CO. PARTICIPATED IN OFFERING GROUP—Continued
Date of issue
June, 1922..
Amount
Original offering
price
Name of issue
$25,000,000 Kingdom of the Serbs, Croats,
and Slovenes secured external
gold S's of 1922.
January, 1923..
50,000,000 Republic of Cuba external 30year sinking fund 5)4 per cent
gold bonds of 1923.
June, 1923
25,000,000
Republic of Austria guaranteed
7 per cent gold bonds of 1923.
Empire of Japan 30-year 6H per
cent sinking fund gold bonds
of 1924.
3,005,000 Republic of Bolivia external 25year secured refunding 8 per
cent loan of 1922-1924.
February* 1924. 150,000,000
August, 1924...
October, 1924„,
110,000; 000 German Government external 7
lean of 1924,1929.
November,
1924.
100,000,000
November,
1925.
100,000,000
April, 1928
June, 1928
June, 1930
Republic of France 25-year sinking fund external 7 per cent
gold loan of 1924.
Kingdom of Italy external 7 per
cent gold loan of 1925.
55,000,000 Kingdom of Denmark 34-year
4H Per cent external loan gold
bonds.
70,000,000 Tokyo Electric Light Co. (Ltd.)
first mortgage gold bonds, 6
per cent dollar series due 1953.
98,250,000 German Government international loan 1930 5H per cent 35year gold bonds.
Offering made by—
Blair & Co. (Inc.); E. H. Rollins & Sons; Cassatt & Co.;
J. <fc W. Seligman <fc Co.;
Kissel, Kinnicutt & Co.;
Redmond <fc Co.; Bonbrigbt
& Co.; West <t Co.; Union
Trust Co. (Cleveland).
99M J. P. Morgan & Co.; Kuhn,
Loeb <fc Co.; National City
Co.; Guaranty Co.; Bankers
Trust Co.; Harris, Forbes &
Co.; J. & W. Seligman & Co.;
Dillon, Read <fc Co.
90
J. P. Morgan & Co. and 42
others (J. & W. Seligman &
Co. 2Gth).
92 J4 J. P. Morgan & Co. and 40
others (J. & W. Seligman 6c
Co. 27th).
Spencer Trask 6c Co.; Equitable Trust Co.; Stifel-Nicolaus Investment Co.; Halsey,
Stuart 6c Co.; E. H. Rollins
& Sons; Kissel, Kinnicutt <fc
Co.; J. & W. Seligman 6c Co.
92 J. P. Morgan
Co. and 51
others (J. & W. Seligman 6c
Co. 32nd).
94 J. P. Morgan & Co. and 44
others (J. & W. Seligman 6c
Co. 31st).
94 H J. P. Morgan 6c Co. and 32
others (J. 6c W. Seligman 6c
Co. 24th).
Guaranty Co. of New York
95
and 13 others (J. & W. Seligman 6c Co. 9th).
90 h Guaranty Co. of New York
and 29 others (J. & W. Selig6c Co. 14th).
90 J. P. Morgan 6c Co. heading
group of 45 houses (J. 6c W.
Seligman 6c Co. 22d).
95Ht
Contracts and other documents requested by the committee are
printed in full as follows:
J. & W . SELIGMAN & Co.,
Nctc York, January
16,1932.
Hon. REED SMOOT,
Chairman Committee on Finance,
United States Senate, Washington, D, C.
MY DEAB SENATOK : IN my letter of January 12, 1932, with which I returned
to the clerk of your committee the corrected transcript of the testimony of
Mr. Strauss and myself, given before your committee on January 8, 1032,
1 stated that I would wish to clarify certain passages in the testimony and
correct certain statements, and also that I would furnish certain additional
Information and documents. W e have assembled, and I am inclosing herewith in exhibit form, the information and documents which I understand your
committee desired, accompanied by explanatory memoranda.
The abovementioned clarifications and corrections are all set forth either in the respective explanatory memoranda, or at the end of this letter under the heading
of " General."
For convenience, I am listing by countries and numbering consecutively the
exhibits referred to above:
92928—32—PT 3
7
1360
SAIiB
OF FOREIGN" BONDS OR SECURITIES
COLOMBIA
MORTGAGE BANK OF BOGOTA
Exhibit 1.—Memorandum, with copy of letter and form of release attached
Jhereto, with respect to the commission paid to Antonio Borda In connection
with the Mortgage Bank of Bogota 7 per cent sinking fund gold bonds of 1947.
DEPARTMENT OF CAUCA VALLEY
Exhibit 2.—Memorandum, with copies of letters and receipts attached thereto,
with respect to the commissions paid to Phanor J. Eder in connection with the
Department of Cauca Valley, Colombia, 7 % per cent gold bonds of 1040.
DEPARTMENT OF CUNDINAMARCA
Exhibit 3.—Memorandum, with a copy of a letter attached thereto, with respect to the commission paid to Antonio Borda in connection with the Department of Cundinamarca, Colombia, external secured
per cent sinking fund
gold bonds of 1959.
COSTA RICA
Exhibit 4.—Memorandum, with a copy of a letter attached thereto, with
respect to the commission paid to F. J. Alvarado in connection with the Republic of Costa Rica external secured sinking fund 7 per cent gold bonds of 1951.
PERU
TOBACCO AND NATIONAL LOANS, FIRST AND SECOND SERIES
Exhibit 5—Copy of the bond-purchase agreement, dated March 15, 1927,
between Republica del Peru and J. &. W . Seligman & Co. and F . J. Lisman &
Co., in connection with the secured 7 per cent sinking fund gold bonds of 1959
(tobacco loan).
Exhibit <>.—Copy of the trust agreement dated as of March 1, 1927, between
Republica del Peru and Central Union Trust Co. of New York, trustee, pursuant to which the secured 7 per cent sinking fund gold bonds, 1927, were
issued.
Exhibit 7.—Copy of the bond-purchase agreement, dated December 19, 1927,
between Republica del Peru and J. & W. Seligman & Co. and the National
City Co. in connection with first series bonds of the Peruvian national loan.
Exhibit 8.—Copy of the Peruvian national loan fiscal agency and loan agreement, dated as of December 1, 1927, between Republica del Peru and J. & W.
Seligman & Go. and the National City Bank of New York.
Exhibit 9.—English translation of agreement, dated December 29, 1927,
between Republica del Peru and Caja de Depositos y Consignacioncs, with
intervention of J. & W. Seligman & Co. and the National City Bank of New
York, fiscal agents, providing for collection by or deposit with Caja de Depositos y Consignaciones and application of revenues of the Republic pursuant
to Law No. 5931.
Exhibit 10.—Bond-purchase agreement dated October 1, 1928, between Republica del Peru and J. & W . Seligman & Co. and the National City Co. to
connection with second series bonds of the Peruvian national loan.
Exhibit 11.—-Copy of agreement, dated October 1, 1928, supplemental to
Peruvian national loan fiscal agency and loan agreement, between Republica
del Peru and J. & W . Seligman & Co. and the National City Bank of New York.
Exhibit
English translation of supplemental revenue collection agreement, dated October 22,1928, between Republic of Peru and Caja de Depositos
y Consignaciones, with intervention of J. & W . Seligman & Co. and the National City Bank of New York, fiscal agents.
Exhibit 13.—Memorandum, with copies of letters, memoranda, receipts, releases, and indemnifying agreement, all with respect to the commissions paid
to Harold Bolster, and/or Harold Bolster & Co., and to Madge Kennedy Bolster,
individually and as executrix of the estate of Harold Bolster, Juan leguia, and
Thomas V. Salt, in connection with the tobacco loan and Peruvian national
loan, first and second series.
Exhibit 14.—Memorandum, with attached transcripts of accounts of Juan
Leguia with J. & W . Seligman & Co.
SALE OP FOREIGN BONDS OB SECURITIES
1361
PROVINCE OF CALLAO, PERU
Exhibit 15.—Copy of bond-purchase contract, dated April 25, 1927, between
Province of Callao, Peru, and Alvin H. Frank & Co.
Exhibit 16.—Copy of contract of issue of bonds, trust and fiscal agency
agreement, dated April 25, 1927, between Republic of Peru, Province of Callao,
and Alvin H. Frank & Co., and copy of acceptance of trusts and fiscal agency,
dated April 25, 1927, by Central Union Trust Co. of New York, trustee, and
J. & W . Seligman & Co., fiscal agent, respectively.
Exhibit J7.—Memorandum, with copies of letters, receipt, statement, and
night letter, with respect to the commission paid to George A. Helfert, and fee
for legal services paid to Peruvian counsel, a Doctor Gallagher, in connection
with the loan to the Province of Callao.
JUGOSLAVIA
Exhibit 18.—Memorandum, with copy of cable attached with respect to the
commission paid to Marc Wilenkin and Nicholas Kagan, in connection with
the State Mortgage Bank of Jugoslavia, 7 per cent secured sinking fund gold
bonds of 1957.
GENERAL
Exhibit 19.—Copy of a typical letter to the Department of State with respect
to the proposed purchase of an issue of foreign bonds, the particular letter
given being a letter from our counsel to the Department of State, dated April 4,
1927, with respect to the State Mortgage Bank of Jugoslavia $12,000,000
secured 7 per cent sinking fund gold bonds, 1957.
20. On page 911 of the transcript of testimony, from line 17 through line 11
on page 912, the testimony, as I reread it, indicates a confusion in my mind
as to the point upon which Senator Johnson was interrogating me, and I wish
to substitute the following for my testimony therein recorded:
I understand that it has, for many years, been the custom in the several
financial centers of the world, such as London, Paris, and Amsterdam, for the
bankers who handle issues of foreign governments or corporations to pay
commissions to intermediaries who bring to their attention such financing
whenever, following the introductions by such intermediaries or as a result of
their assistance in the negotiations, the bankers consummate an issue.
I
further understand that this custom also obtained in the New York market
after the war, when numerous bond issues of foreign governments and corporations were being offered to the public here; and that it was quite usual
for the banking houses who bought such loans from the borrowers and offered
them to the public to pay a commission to such intermediaries. Whether or
not such commissions were paid in connection with all such foreign bond
Issues, I can not, of course, say. However, my understanding of the custom
prevailing at the time is that such commissions were paid more often than not.
21. In my testimony (p. 886, line 21 to p. 887, line 23), the chairman asked
me whether we had often paid a commission as high as one-half of 1 per
cent of the principal amount of a foreign bond issue, and I said that so far as I
recalled one-half of 1 per cent was the highest commission we had paid. I
would like to correct and amplify that testimony as follows:
I find on consulting our records that as a matter of fact we paid a commission just or nearly as high, namely, one-half of 1 per cent in the case of the
bond issue for the State Mortgage Bank of Jugoslavia, the bond issue for the
Province of Callao, and the bond issue for the Republic of Costa Rica; and
that we paid a higher commission, namely, 1 per cent in the case of the
Cauca Valley bond issues. I think it fair to say, however, that in general
we endeavored to limit tbe commission to intermediaries to not exceeding
15 per cent of the net originating profits made by ourselves and our associates who purchased and offered the bond issues, which in the ordinary
case resulted in a commission of less than one-half of 1 per cent of the principal amount " N e t originating profits" in this connection mean the profits made by the group which purchases an issue between the purchase price
and the first step-up price, namely, the price at which the first additional
group is formed to take over the liability from the original purchase group.
22. In the first nine lines on page 923, the implication might be drawn that
some of the proceeds of the bond issue for the Province of Callao had been
1362
SAIiB
OF FOREIGN" BONDS OR SECURITIES
applied to the construction of the new docks in Callao Harbor, which were
constructed by the Frederick Snare Corporation. Such an implication would
be an error, because, so far as we know, no proceeds of the Province of Callao
loan were so applied. The sums applied to the construction of the Port of Callao
docks, under the Snare contract, came from the proceeds of the Peruvian national loan, first and second series, and from the proceeds of a six months* bank
credit to the Republic of Peru made by J. & W . Seligman & Co.. the National
City Bank, the Central Hanover Trust Co., Guaranty Trust Co., and F. J.
Lisman & Co. in the spring of 1930.
A duplicate of this letter and of all of the enclosures are enclosed herewith
for the use of Senator Johnson.
Sincerely yours,
HENBY C . BRECK.
EXHIBIT No.
1
JANUARY 1G, 1932.
MEMORANDUM
MORTGAGE BANK OP BOGOTA 7 PER CENT SINKING FUND GOLD BONDS OF 1947
This business was brought to the attention of J. & W . Seligman & Co., by
the Central Union Trust Co. of New York, to which the business was brought
by Mr. A. Borda, a citizen of Colombia. The total amount of commission
paid to Mr. Borda was $3,000. As the arrangements with Mr. Borda were
made by the Central Union Trust Co. of New York, all documentary evidence in connection therewith would be at the Trust Co.
Attached hereto are copies of the following:
(а) Letter dated March 19, 1928, from J. & W . Seligman & Co. to Central
Union Trust Co. of New York, enclosing a check for §3,000 in payment of the
above commission.
(б) Form of release to be signed by Mr. Borda inclosed with above-mentioned letter.
MARCH 19, 1928.
CENTOAL UNION TRUST CO.,
New York.
(Attention Mr. Whittlesey.)
DEAB Snts: W e hand you herewith our check for $3,000 to your order for
credit to Sefior Antonio Borda representing commission doe him f o r services ID
connection with the purchase of Banco Hipotecario de Bogota $3,000,000 20-year
7 per cent sinking fund gold bonds, Issue of October, 1927.
You will recall that in your letter to Sefior Borda under date of December 19,
1927, he was guaranteed a minimum commission of $3,000 in the event that the
commission originally agreed upon of 15 per cent of the net underwriting profit
should prove to be less than that amount. The net underwriting profit was not
great enough to bring to Sefior Borda an increase over and above the minimum
guarantee.
W e attach hereto two copies of a release which we would thank you to have
executed in duplicate returning one copy to us for your files.
Yours very truly,
J. & W .
SELIGMAN & Co.
I hereby acknowledge receipt from Central Union Trust Co. of New York of the
sum of $3,000 as compensation for my services in connection with the issue and
sale of $3,000,000, principal amount, of Mortgage Bank of Bogota 20-year 7 per
cent sinking fund gold bonds, issue of October, 1927.
In that connection I hereby release Central Union Trust Co. of New York
and all persons, firms, and corporations associated with it in the creation, parchasing, or selling of said issue, from any and all claims whatsoever for compensation or otherwise in connection with the negotiation, creation, purchase,
and sale of said issue, whether made by me or by any person, firm or corporation claiming through or under me.
SALE OP FOREIGN BONDS OB SECURITIES
1363
EXHIBIT N o . 2
JANUARY 16, 1 9 3 2 .
MEMORANDUM—DEPARTMENT OF CAUCA .VALLEY, COLOMBIA, 7% PER CENT
GOLD BONDS OF 194G, FIRST ISSUE, $2,500,000 AND SECOND ISSUE. $1,500,000
This business was brought to J. & , W . Seligman & Co. by P. J. Eder, a lawyer
in New York. In testifying before the Finance Committee of the Senate (pp. 892
and 900 of the transcript) Mr. Henry C. Breck erroneously stated that Baker,
Kellogg & Co. brought this business to J. & W . Seligman & Co. H i s testimony on
this point should be amended accordingly.
Attached hereto are copies of the following:
( а ) Letter, dated February 18, 1926, from J. & W . Seligman & Co. to Mr.
Eder.
( б ) Letter, dated February 19,1926, from Mr. Eder to J. & W . Seligman & Co.
(c) Receipt for $27,000 principal amount of 7 % per cent Cauca Valley bonds*
dated October 15, 1926, and signed by Mr. Eder.
( d ) Letter, dated August 22, 1927, from J. & W . Seligman & Co. to Mr. Eder.
( e ) Letter, dated August 22, 1927, from Mr. Eder to J. & W . Seligman & Co.,
acknowledging receipt of $15,000.
From the foregoing correspondence, it will be noted that it was agreed that
Mr. Eder should receive commission of 1 per cent ( 1 point) of the principal
amount of the bonds issued in consideration of his having brought the business
to J. & W . Seligman & Co. Total commissions paid to Mr. Eder amounted to
$27,000, principal amount, of 7 % per cent Cauca Valley bonds (which had a
market value of approximately $25,000, at the time of delivery), on the first
issue, and $15,000 in cash on the second issue. W h i l e the letter of February
18,1926, stipulated that all commissions were to be paid in cash, the commission
on the first issue was paid and accepted in bonds.
FEBRUARY 1 8 , 1 9 2 6 .
P. J. EDEB, E s q . ,
Messrs. HAEDIN & HESS,
New York.
( R e Department E l Valle Del Cauca.)
DEAR SIB: W e refer to your letter to us dated February 1, 1926, in the
above matter.
A s we stated to you In our reply, our understanding of your commissions
was different from that expressed in your letter, as we have since discussed
with you. This is merely to record our present understanding, namely, that
you are to receive a commission of one point in cash on the first $2,000,000,
of bonds purchased and, if the option for the remaining $2,000,000, is later
exercised, a commission on such remainder of one point in cash.
Yours very truly,
J.
W.
SELIGMAN &
Co.
HARDIN & HESS,
New York, February
19,1926.
EL VALLE DEL CAUCA
J. & W .
SELIGMAN & Co.,
New York.
GENTLEMEN: This is to acknowledge receipt of your letter dated February
18th, and to express my conformity therewith.
Yours very truly,
P . J . EDEB.
Receipt acknowledged by the undersigned from J. & W . Seligman & Co. of
$27,000 principal amount of 7 % per cent 20-year secured gold bonds of department of Cauca Valley, due October 1 , 1 9 4 6 , in full settlement of commissions due
the undersigned and associates, in respect of the issue of $2,500,000 principal
amount, of such bonds this day delivered, pursuant to the letter of J. & W .
Seligman & Co. to the undersigned, dated February 18, 1926, and his confirmation, dated February 19, 1926, or otherwise.
PHANOB J . EDEB.
1364
SAIiB OF FOREIGN" BONDS OR SECURITIES
AUGUST 22. 1927.
PHANOR J. EDER, ESQ.,
Neto York.
DEAR SIR: W e inclose herewith check to your order for $15,000 in full and
final settlement of all commissions due yon in accordance with our letters dated
February 18,19,1926, relating to issue of 7 % per cent secured sinking fund gold
bonds of department of Cauca Valley, maturing 1946.
Please acknowledge receipt.
Very truly yours,
J. & W .
SELIGMAN & Co.
HARDIN. HESS., EPER & FKESCHI,
Xeic York. August 22, J927.
J. & W . SELIGMAN & Co.,
New York City.
GENTLEMEN: I acknowledge receipt of your letter of August 22 inclosing
cheque for §15,COO in full and final settlement of all commissions due me in
connection with the issue of 7 % per cent secured sinking fund gold bonds of
department of Cauca Valley.
Please accept my thanks.
Very truly yours,
P . J. EDER.
EXHIBIT No. 3
MEMORANDUM—DEPARTMENT OF CUNDINAMARCA, COLOMBIA EXTERNAL SECURED 6}
PEE CENT SINKING FUND GOLD BONDS OF 10I5L»
JANUARY LFI, 1932.
This business w;is brought to the attention of J. & W . Seligiuaii & Co. by
Central Union Trust Co. of New York, to which the business was brought by
Mr. A. Borda, a citizen of Colombia. It was agreed that Mr. Borda's commission was to be 15 per cent of the net originating profits of the original group.
As the arrangements with Mr. Borda were made by Central Union Trust Co.
on behalf of the original group, all documentary evidence in connection therewith would be with the trust company.
Attached hereto is copy of letter dated October 5. 192$, from J. & W , Seligman & Co. and E. H. Rollins & Sons, managers for the original purchase group,
to Central Union Trust Co. of New York, forwarding a check of $33,981.64 in
payment of Mr. Borda's commission.
OCTOBER 5, 1928.
CENTRAL UNION TRUST Co. o r NEW YORK,
New York City.
(Attention of Mr. Whittlesey.)
DEAR SIRS: W e refer to our conversations held at the time of the initiation
of the negotiations for the department of Cundinamarca GV6 per cent loan, W
the course of which you informed us that a commission of 15 per cent of the net
originating profits was payable by you to certain intermediaries, such commission being the only one payable by us in connection with the business. W e now
hand you check to your order for §33,981.64 in payment of such commission.
The net originating profits before deducting the above commission amount to
$226,544.27. Charges against the profits included one of $15,000 made to set up
a contingent reserve for possible future expenses, such as the cost of preparing
and authenticating the definitive bonds. In due course a statement of the re*
serve account will be rendered and a check for 15 per cent of t h e balance
remaining therein, if any, will be mailed to you.
Yours very truly,
J. & W . SELIGMAN & Co.,
E. H . ROLLINS & SONS,
Managers.
B y J. & W . SELIGMAN & Co.
SALE OF FOREIGN BONDS OE SECUB1TIES
1365
EXHIBIT NO. 4
MEMORANDUM—REPUBLIC OF COSTA RICA EXTERNAL SECURED SINKING FUND 7 PER
CENT GOLD BONDS OF 1951
JANUARY 16, 1 9 3 2 .
In testifying before the Finance Committee of the Senate (pp. 888, 889, and
891 of the transcript), Mr. Henry C. Breck stated that he was under the impression that F. J. Lisman & Co., who were members of the original group which
offered the $8,000,000 loan, had made arrangements for the payment of an intermediary commission to Mr. P. J. Alvarado, of Costa Rica, of about $25,000.
Upon later examination of the files it appears that this loan had no -connection
with the previous offer which had been made to the Republic of Costa Rica by
J. & W . Seligman & Co. and F. J. Lisman & Co., but was brought to the attention of J. & W . Seligman & Co. by Central Union Trust Co. of New York, who
negotiated the loan on behalf of the original group through a Mr. F. J. Alvarado,
a citizen of Costa Rica. As the arrangements for the commission were made by
Central Union Trust Co. of New York, all documentary evidence in connection
therewith would be in their files. The amount paid to Mr. Alvarado pursuant
to previous agreement was $38,677,46, and this amount represented the commission and expenses of Mr. Alvarado. Mr. Breck's testimony should be corrected
accordingly.
Attached hereto is copy of a letter dated March 21, 1927, from J. & W . Seligman & Co. as syndicate managers to Central Union Trust Co. of New York,
inclosing the former's check for $38,677.46.
MARCH 21, 1 9 2 7 .
C E N T A L UNION TRUST Co. OF NEW YORK.
New York, N. Y,
DEAR SIRS : W e inclose herewith our check to your order for $38,677.46 to pay
the commission and expenses of Mr. Felipe J. Alvarado in connection with the
purchase and sale of $8,000,000 external secured sinking fund 7 per cent gold
bonds, 1926, of the Republic of Costa Rica.
W e understand that this payment is in full settlement of all claims for commissions, services, expenses or otherwise which Mr. Alvarado may have against
you or ourselves or any of our associates in connection with the issue of these
bonds. W e suggest that when you make jjayment to Mr. Alvarado, you obtain
a written statement from him substantially to that effect.
Yours very truly,
J. & W , SELIGMAN & Co.,
Syndicate
Managers.
EXHIBIT NO. 5
AGREEMENT BETWEEN REPUBLICA DEL PERU (REPUBLIC OF PERU) AND J. & W .
SELIGMAN & C o . AND F . J . LISMAN & Co., MARCH 15, 1927—SECURED 7 PER
CENT SINKING FUND GOLD BONDS
Agreement, dated March 15, 1927, between Republica del Peru (Republica of
Peru) hereinafter called the Republic, acting by his excellency, the Hon. Manuel
G. Masias, its minister of finance, thereunto duly authorized, and J. & W . Seligman & Co., copartnership, and F. J. Lisman & Co., a copartnership, both of the
city and State of New York, United States of America, hereinafter collectively
called the bankers.
The Republic represents that:
( a ) The Republic, by law enacted February 22, 1904, has created and established estanco del tabaco (Peru) hereinafter called the monopoly, for the administration for account of the Republic of the national monopoly of the manufacture and sale of tobacco and its products, hereinafter called the tobacco
monopoly, and under law No.
, enacted March 14, 1927, will on or before the
issue of the bonds of 1927, hereinafter mentioned, transfer to the Caja de
DepCsitos y Consignaciones, hereinafter called the Caja, a Peruvian corporation,
the collection of all the gross revenues from the manufacture and sale of tobacco
1366
SAIiB
OF FOREIGN" BONDS OR SECURITIES
and its products and from tlie taxes and duties on tlie manufacture and sale
of tobacco and its products.
(&) The gross revenues of the Republic from the manufacture and sale of
tobacco and its products and the taxes and duties on the manufacture and sale
of tobacco and its products during the years 1921 to 1926. both inclusive, were
as. follows:
1921—
192 2
.
1923
1924—
1925
_
1926
Lp.
44
_
-
44
44
—
-
41
44
914, 368.9.46
904,744.2.12
905,221.2.46
090, 325.5.60
1,048, 529. 2. 22
1,173,814.9.00
1,195,016.6.06
The gross revenues of the Republic at any time from the manufacture and
sale of tobacco and its products, now or at any time hereafter authorized, and
from the taxes and duties now or at any time hereafter imposed on the cultivation, manufacture and sale of tobacco and its products, are hereinafter
collectively called the gross tobacco revenues.
(c) The gross tobacco revenues are free from all liens and charges whatsoever except (1) the existing lien or charge in favor of an internal issue of 8
per cent tobacco monopoly bonds of 1924, of the Republic, hereinafter called
the 8 per cent bonds of 1924, of which an aggregate principal amount of not
exceeding 385,000 Peruvian pounds are outstanding at the date of this agreement, (2) the existing lien or charge in favor of the now outstanding 21 promissory notes of the Republic dated December 27, 1926, aggregating $420,000
payable to the order of the Foundation Co., said promissory notes being hereinafter called the building notes, (3) the existing lien and charge in favor of
six promissory notes of Compafiia Recaudadora de Impuestos aggregating
$228,265.20 outstanding and/or to be outstanding under au agreement dated
August 20, 1926, between CompaSia Recaudadora de Impuestos and American
Machine & Foundry Co., covering the installation of certain machinery to be
used in the manufacture of tobacco and its products in Peru, said promissory
notes being hereinafter called the machinery notes, and (4) the lien or charge
in favor of $3,000,000 principal amount, four months* 6 per cent secured gold
notes of the Republic due July 1, 1927, hereinafter called the secured gold
notes, to be issued under an agreement between the parties hereto dated March
15, 1927. The proceeds from the issue of such notes will be used to retire the
8 per cent bonds of 1924, the building notes and the machinery notes.
(&) In order to provide funds for the payment of said $3,000,000, principal
amount, four months' 6 per cent secured gold notes and for the purchase of
machinery for, and for the construction of plants for, the manufacture of cigars
and cigarettes, and for the construction of railroads and irrigation and sewage
systems, the Republic desires to create an external loan limited to the aggregate principal amount of £5,000,000 (pounds sterling), or the equivalent amount
in United States of America dollars ($24,332,500), at par of exchange, $4.8665
for £1 (pound sterling), to consist of bonds to be issued from time to time in
series, to be the direct obligation of the Republic and to be secured by a direct
first lien and charge upon the gross tobacco revenues.
(e) The Republic desires presently to issue a first series of said bonds limited
at $15,000,000 (£3,082,297), principal amount, to be known as the secured 7
per cent sinking fund gold bonds, 1927, of the Republic.
Now, therefore, this agreement witnesseth that in consideration of the
premises and of the mutual covenants and agreements hereinafter contained,
the parties hereto have agreed, and do hereby agree, as follows:
ARTICLE 1
1. The Republic will forthwith, in conformity with its constitution and laws,
create an external loan, limited to the aggregate principal amount of £5,000,000
(pounds sterling), or the equivalent amount in the United States of America
dollars ($24,332,500), at par of exchange, $4.8665 for £1 (pound sterling), to
consist of bonds, hereinafter called the bonds, which may be issued in series
as hereinafter provided. The first series of bonds to be issued presently shall
be limited to $15,000,000 United States gold dollars, principal amount (£3,082,297), and shall be known as the secured 7 per cent sinking fund gold bonds,
1927, of the Republic, hereinafter called the bonds of 1927.
SALE OP FOREIGN BONDS OB SECURITIES
1367
The bonds shall be issued under a trust agreement (hereinafter called the
trust agreement) in the usual American form/ to be executed on behalf of
the Republic by his excellency, the Hon. Hernfin Velarde, its ambassador to
the United States of America, or other representative thereunto duly authorized,
to such bank or trust company having its principal office in the borough of
Manhattan, in the city of New York, as the bankers may designate, as trustee
(hereinafter called the trustee). The trust agreement shall be substantially
in the form attached hereto as Exhibit A, with such changes as the bankers
and the Republic may agree upon, and shall be printed in the English language
and, if desired by the Republic, also in the Spanish language, but the English
text shall govern. The trust agreement shall contain the provisions described
in section 14 of this article, and all other provisions customarily contained in
such agreements.
2. The Republic pledges its good faith and credit for the prompt payment of
the principal of, and the premium and interest upon, the bonds as and when
the same shall become due and payable and for the due and punctual penformance of all the other covenants and agreements, in this agreement and in
the trust agreement and in the bonds contained, to be performed or observed
by i t ; and covenants that in case the revenues hereinafter pledged as security
for the bonds shall prove insufficient to make any payments to be made as
provided herein or in the bonds, or in the trust agreement, it will make up such
deficiency out of its other revenues.
3. As security for the payment of the principal of, and interest upon, the
bonds, the Republic agrees to specifically pledge, and .create a direct first lien
and charge upon, and hereby does pledge and create a direct first lien and
charge upon, the gross tobacco revenues subject only to the liens or charges
existing thereon in favor of the outstanding 8 per cent bonds of 1924, the building notes, the machinery notes and the secured gold notes; and the Republic
hereby covenants that the lien and charge to be granted upon the gross tobacco
revenues is, and until all the bonds are paid, shall be maintained as, a direct
first Hen and charge thereon, subject only to said prior liens or charges in favor
of the outstanding 8 per cent bonds of 1924, the building notes, the machinery
notes and the secured gold notes. The Republic covenants to pay from other
revenues of the Republic all the administration and operating expenses of the
monopoly, and all the expenses of collecting the gross tobacco revenues.
The Republic covenants that out of the proceeds of the secured gold notes
it will retire or provide for the retirement of the 8 per cent bonds of 1924, the
building notes and the machinery notes and thus before, or as soon as practicable after, the date of execution of the trust agreement, to free the gross
tobacco revenues from the liens or charges of the 8 per cent bonds of 1924,
the building notes, the machinery notes and the secured gold notes; and that
all 8 per cent bonds of 1924 and all secured gold notes purchased or redeemed
or paid shall be Immediately cancelled and that no bond or note shall be issued
in lieu thereof.
4. The Republic covenants that so long as any of the bonds are outstanding
it will not reduce, abolish or in any manner impair, or permit the reduction,
abolition, or impairment of, the gross tobacco revenues as existing at the date
of this agreement, or abolish or impair the tobacco monopoly or in any other*
manner impair, or permit the Impairment of, the security of the bonds.
5. The bonds of 1927 shall be in coupon form, payable to bearer, shall be
dated March 1, 1927, shall mature September 1, 1959, shall bear interest from
March 1,1927, at the rate of 7 per cent per annum, and shall be issued in such
denominations as the bankers may direct The principal of, premium on, and
interest on the bonds of 1927 shall be payable at the principal office of J. & W .
Seligman & Co., the fiscal agents hereinafter appointed, in the borough of Manhattan, city and State of New York, in gold coin of the United States tof
America, of or equal to the standard of weight and fineness existing March 1,
1927. The principal of, premium on, and Interest of the bonds of 1927 shall be
paid in time of war as well as in time of peace and whether the holders be
citizens or residents of a friendly or of a hostile state, and shall be paid without deduction or diminution for any taxes, assessments, charges, or duties of
any nature, now or at any time hereafter levied or imposed by the Republic,
or any State, province, muncipality or other taxing authority thereof or therein.
6. The text of the definitive engraved bonds of 1927 and of the coupons
appurtenant thereto shall be in the English language, substantially in the form
1368
SAIiB
OF FOREIGN" BONDS OR SECURITIES
set forth in, and shall he executed in accordance with the provision of, the
trust agreement Pending the*preparation of definitive engraved bonds of 1927,
temporary typewritten, lithographed, or printed bonds of 1927 of a similar
form, with such omissions, additions and variations as may be appropriate, of
any denomination or denominations, with or without coupons, as the bankers
.may request, may be issued, and shall be exchangeable for definitive engraved
bonds of 1927 when engraved and prepared and ready for delivery, at the office
of the trustee in the city of New York all as more fully ^ t forth in the trust
.agreement.
7. The bonds of 1927 shall be manually signed on behalf of the Republic by
his excellency, the Hon. Herniin Velarde, its ambassador to the United States
of America, or other representative thereunto duly authorized. The coupons
appurtenant to each of the bonds of 1927 shall bear the facsimile signature of
Manuel G.-Masfas, the Minister of Finance of the Republic, or other representative thereunto duly authorized.
The bonds, both temporary and definitive, shall be authenticated by the certificate endorsed thereon of the trustee.
8. The bonds of 1927 shall be subject to redemption on any interest date, at
the option of the Republic, in whole or in part, at 105 per cent of the principal
amount thereof with accrued interest to the redemption date upon notice given
by publication once a week for six successive weeks, the first publication to
be not more than 90 days and not less than 60 days prior to the redemption
date, in a daily newspaper of general circulation published in English in the
borough of Manhattan, in the city of New York, alt as more fully set forth in
the trust agreement.
9. Until all the bonds of 1927 shall have been retired or redeemed, the Republic shall pay semiannually to the fiscal agents for the semiannual service
of interest and amortization of the bonds of 1927, the sum of $000,000 in gold
coin of the United States of America of the standard aforesaid, which semiannual sum will pay all interest charges and will retire the entire issue by
maturity as shown by the table of amortization of the bonds of 1927, which
is hereto annexed and marked Exhibit B. Such sum shall be paid in monthly
installments as hereinafter in section 10 of this article 1 provided and as more
fully set forth in the trust agreement
10. The Republic shall pay, so long as any of the bonds of 1927 shall be
outstanding, to the fiscal agents at their office in the city of New York, in
gold coin of the United States of America of the standard aforesaid, the following amounts:
(a) The sum of $100,000 in March, 1927, and monthly in each calendar month
thereafter. Said sum is one-sixth of the amount necessary for each semiannual
installment for the service of interest and amortization of the bonds of 1927 as
hereinbefore in section 9 of this article 1 provided. Such monthly payments
shall be made by paying weekly to a representative of the fiscal agents in
Peru all the gross tobacco revenues collected by the Republic, by the Caja or
otherwise for account of the Republic during the preceding week until the
current monthly installment has been paid in full, all as more fully set forth
in the trust agreement.
(&) Such sum on or before the first day of each calendar month, commencing
with April, 1927, as may be necessary to make up any deficiency by which the
gross tobacco revenues, paid over during the preceding calendar month for
the service of the bonds of 1927 as in paragraph ( a ) above provided, shall
not be sufficient for the full payments therein specified to be made.
11. The fiscal agents shall apportion and apply the moneys received by them
pursuant to the provisions of section 10 of this article l a s follows:
(а) The fiscal agents shall set aside out of such moneys received by them
in each six months' period the amount necessary to pay the interest maturing
on the next succeeding interest date on the bonds of 1927 then outstanding ana
shall apply the same to the payment of such interest on such next succeeding
interest date.
(б) The fiscal agents shall set aside the balance of such moneys received
by them in each six months' period as a sinking fund for the redemption oi
bonds of 1927 on behalf of the Republic on the next succeeding interest date
and shall apply the same to such redemption on such interest date in the manner hereinafter in section 12 of this article 1 provided.
12. The sum set aside by the fiscal agents in each six months' period pay"
suant to paragraph (&) of section 11 of this article 1, shall be applied by the
SALE OP FOREIGN BONDS OB SECURITIES
1369
fiscal agents to the redemption of bonds of 1927 on the next succeeding interest
date at 105 per cent of their principal amount and accrued interest to the
date of redemption, on notice given by publication, once a week for three
successive weeks, the first publication to be not more than 40 days nor less
than 30 days prior to the redemption date, in a daily newspaper of general
circulation published in English in the Borough of Manhattan in the city of
New York, all as more fully set forth in the trust agreement. All bonds of 1927
redeemed through the sinking fund and all coupons thereto appertaining shall
be canceled and no bonds shall be issued in lieu thereof.
13. The Republic covenants that as long as any of the bonds shall be outstanding it will at all times maintain in the Borough of Manhattan, city of
New York, a fiscal agency for the service of the bonds.
The Republic hereby appoints J. & W . Seligman & Co. to be the fiscal agents
for the bonds, which appointment J. & W . Seligman & Co. hereby accept. The
Republic will pay the fiscal agents as compensation for their services onequarter of 1 per cent of all amounts paid to the fiscal agents for the payment
of interest on the bonds, and one-quarter of 1 per cent of all amounts paid to
the fiscal agents for the sinking fund or for the payment of the principal and
premium of the-bonds at maturity, or by call for redemption, or otherwise, all
as more fully set forth in the trust agreement. The Republic will also reimburse the fiscal agents, on demand, for all expenses incurred in connection with
the service of the bonds, all as more fully set forth in the trust agreement.
The fiscal agents shall not be required to segregate any moneys paid or
deposited with them as herein or in the trust agreement provided.
14. The trust agreement shall provide that the Republic may, from time to
time create and issue additional series of the bonds under the trust agreement
subject to the following restrictions, all of which are more fully set forth
in the trust agreement:.
The bonds of each series shall be distinctly designated by the number of
the year in which issued or by letter or in any other manner desired by the
Republic and satisfactory to the trustee. All bonds of the same series shall be
identical in form and substance except that they may be of different denominations and may be in coupon or registered form and except that as between
bonds of different denominations and as between coupon bonds and registered
bonds there may be such appropriate differences as may be determined by the
Republic at or before the creation of the series and approved by the trustee.
The several series may consist of different aggregate principal amounts and
the maximum principal amount of bonds issuable of any series shall be
limited and such limitation shall be expressed in the bonds of such series. The
bonds of each series shall bear interest from such date at such rate and be
payable on such dates and shall mature at such date not earlier than January
1, 1960, as at the time of the creation of such series shall be fixed by the
Republic and stated in the bonds of such series. A cumulative sinking fund
of not more than 1 per cent per annum shall be created for each series of the
bonds to be applied to purchases of bonds at such prices or to the redemption
of bonds at their principal amount or at such premium or in such other manner
as the Republic may provide in the creation thereof. The principal and interest of each aeries of the bonds are to be payable in gold coin of tlie United
States of America or, in British gold coin, or, at the option of the holders in
either United States gold coin or British gold coin, as the Republic may
provide in the creation thereof, at the rate of exchange as hereinbefore provided. The Republic may provide in the creation thereof that tlx* bonds of any
series may be redeemed at its option in whole or in part before maturity at
their principal amount or at a premium plus accrued interest and such provisions shall be expressed in the bonds of said series. Except as aforesaid,
the terms and provisions of all additional series of the bonds shall be substantially identical with the terms and provisions of the bonds of 1927. All
bonds of any series shall be entitled to share in the security of the pledged
revenues equally and ratably with the outstanding bonds of all other series.
No bonds of any series in addition to the $15,000,000, principal amount, of
the bonds of 1927 shall be issued by the Republic or authenticated by the trustee
unless and until the gross tobacco revenues of the Republic, calculated on a
gold basis, shall have averaged for the three years ending on the last day of the
calendar month next preceding the date of issue of such additional bonds, and
shall have equaled for the last of such three years, at least one and one-half
1370
SAIiB
OF FOREIGN" BONDS OR SECURITIES
times the amount necessary to meet the maximum charges in any year for the
service of interest and amortization of the bonds of all series outstanding at the
time of such additional issue and on the additional bunds to be issued.
The trust agreement shall contain the usual provisions regarding the remedies
of the trustee and the bondholders in case of default and, among other provisions, shall contain the following provisions, all of which are more fully set
forth in the trust agreement:
If one or more of the following events, thereinafter called events of default,
shall happen—
(a) Default in the prompt payment of the principal of or the premium on
any of the bonds, when and as the same shall become due and payable, whether
at maturity, by call for redemption, or otherwise as therein provided; or
(&) Default in the payment of any installment of interest on any of the bonds
when and as the same shall become due and payable as therein expressed, and
such default shall continue for a period of 30 days; or
(o) Default in any payment to the fiscal agents for the service of the bonds,
as herein provided, as and when the same shall become due and payable and
such default shall continue for a period of 30 days; or
(d) Default in the performance of any other covenant in the bonds or in the
trust agreement contained, and such default shall continue for a period of 30
days after written or cabled notice to the Republic from the trustee specifying
the nature of such default,
Then, and in any such event, during the continuance of such event of default
the trustee may, and upon the written request of the holders of one-fourth in
principal amount of the bonds then outstanding shall, by written or cabled notice
to the Republic, declare all the bonds then outstanding (if not already due and
payable) to be due and payable immediately at the sinking fund redemption
price thereof, and upon any such declaration the princijnil and premium of all
the bonds then outstanding shall become and be due and payable immediately,
anything in the trust agreement or In the bonds to the contrary notwithstanding.
In case an event of default shall have happened and be continuing, the trustee
shall have the right to appoint, and the Republic shall be obligated to consent
to the appointment of, a special collections agency, which shall be a company,
bank, firm, or responsible individual designated by the trustee, to take over the
collection of the gross tobacco revenues all as more fully set forth in the trust
agreement. In the event of the appointment of such special collections agency
the Republic shall immediately transfer to such agency, and will cause the Caja
and any other collecting agency for the collection of the gross tobacco revenues
to transfer to such agency all facilities for the collection and control of the gross
tobacco revenues. From the sums collected, the special collection agency shall,
after deducting all its reasonable expenses, including an allowance for its own
reasonable compensation, retain and remit to the trustee in New York the net
proceeds thereof until the full amount then due on the bonds and coupons for
principal, premium, and interest and otherwise under the trust agreement,
including the expenses and compensation of the trustee, the fiscal agents, and
their representatives, shall have been fully paid and discharged, and shall then
retain and remit to the fiscal agents in New York from time to time as reauired
the amounts required for the service of interest and amortization of the bonds
and all other amounts payable under the trust agreement as aforesaid when and
as the same shall become due and payable. The Republic shall pay from other
revenues of the Republic all the administrative and operating expenses of the
monouoly. Any balance of the collected revenues not required by the special
collections agency for the purpose above specified shall be paid over to the
Republic.
ARTICLE I I
1. Subject to all the terms and conditions of this agreement, the Republic
agrees to sell and deliver to the bankers, and the bankers agree to purchase from
the Republic and pay for, all said $15,000,000, principal amount of the bonds of
1927 at the price of 90 per cent of the principal amount thereof and accrued
interest to the date of delivery or to the date of the issue of Interim certificates,
whichever shall be earlier. Delivery of and payment for said bonds of 1927
shall be made at the office of J. and W . Seligman & Co. in the borough of Manhattan, city of New York; 15 days after .the public offering in New York of
such bonds of 1927, provided that by mutual agreement between the Republic
SALE OP FOREIGN BONDS OB SECURITIES
1371
and the bankers the time for the delivery of and payment for said bonds of
1927 may be extended to such later date as shall be fixed by such agreementDelivery of said bonds of 1927 shall be made in the form of one temporary bond
of 1927 in the denomination of $15,000,000, or in the form of temporary bonds
of 1927 in the denomination of $1,000 each, or in such other denominations as
the bankers may request, against payment in any case exchangeable for definite
bonds of 1927 when engraved and prepared. Payment for the bonds of 1927
shall be made by crediting the amount of the purchase price therefor (less an
amount estimated by the bankers to be sufficient to cover the expenses agreed
to be paid by the Republic as provided in section 9 of Article II hereof), with
the fiscal agents for account of the Republic. The fiscal agents shall retain, out
of the amount so credited to the account of the Republic, an amount equal to the
charges for interest and amortization on the bonds of 1927 accrued on the bonds
of 1927 from date thereof to the date of such deposit and shall apply such
moneys to the service of the bonds of 1927 in accordance with the provisions
of the trust agreement. The balance so credited to the Republic shall be paid
out by the fiscal agents from time to time to or upon the order of the Republic,
provided that $3,060,000 thereof shall be held by the fiscal agents, until tlie
fiscal agents have received evidence, satisfactory to them, that the 8 per cent
bonds of 1924 and the secured gold notes have been paid and canceled. If
the temporary bond or bonds of 1927 are not delivered prior to such date, 15
days after such public offering of the bonds of 1927, the bankers may issue or
cause to be issued interim certificates, exchangeable for bonds of 1927, in temporary or definite form. Such interim certificates shall provide that if, for any
reason, the Republic shall fail to deliver the temporary bonds of 1927, in accordance with the terms of this agreement, the holders of the interim certificates
shall be entitled to receive a refund of the retail purchase price of the bonds of
1927 represented thereby with interest at the rate of 7 per cent per annum on
the principal amount of bonds of 1927 represented thereby from the date of the
issue of tlie interim certificates until payment of such refund: and In case of
the issue of such interim certificates and the failure of the Republic to deliver
the bonds of 1927, the Republic hereby agrees to pay to the bankers on demand
the full amount of such interest If the Republic shall deliver one temporary
bond in the denomination of $15,000,000 the bankers may issue, or cause to
be issued, interim certificates representing such temporary bond of 1927.
exchangeable for definite engraved bonds of 1927 when prepared and delivered.
2. As soon as practicable after the execution of this agreement the Republic
shall deliver, or cause to be delivered, to the bankers, a prospectus letter or
letters containing information concerning the financial condition of the Republic, it resources, debts, income and expenditures, financial administration, and
concerning the monoply and the Caja, and such other information, in such
form, as the bankers may reasonably require, and as shall be satisfactory to the
bankers* counsel* such letter or letters to be signed on behalf of the Republic
by the minister of finance of the Republic or other duly authorized representative. The Republic agrees that since the bankers are relying on the statements
contained in said prospectus letter or letters and on the representations set forth
in this agreement in purchasing the bonds of 1927 and will make use of such
prospectus letter or letters and representations in disposing of the bonds, it will
indemnify the bankers and hold them harmless against any damages, claims,
or liability which the bankers may incur by reason of any error or misstatement
contained therein.
3. The Republic covenants that prior to the date for the delivery of and payment for the bonds of 1927 hereinabove mentioned it will take or cause to betaken whatever action or proceeding may, in the opinion of American or Peruvian counsel for the bankers, be required by the constitution or laws of theRepublic, in order that this agreement, and the trust agreement and the bonds
of 1927 and appurtenant coupons shall be valid and binding obligations of the
Republic.
4. The Republic covenants that, prior to the date for the delivery of, and payment for the bonds of 1927, it will elect or appoint, or cause to be elected or
appointed, such person as may be designated by the fiscal agents a member o f
the board of directors (consejeros) of the Caja and such person as may be
designated by the fiscal agents an alternate member, to act in the place and
stead of such member in case of such member's death, resignation, or inability
to act for any reason, and the Republic covenants that at all times, so long as-
1372
SAIiB
OF FOREIGN" BONDS OR SECURITIES
any of the bonds of 1927 shall be outstanding, such persons as may be designated
by the fiscal agents shall be a member and an alternate member of the board of
directors, respectively, of the Caja and that such member, or, in case of such
member's death, resignation, or inability to act, such alternate member, shall
have the same rights and powers in so far as are concerned all matters relating
to the manufacture and sale of tobacco and its products and the collection of all
gross tobacco revenues from the manufacture and sale of tobacco and its products and from the taxes and duties on the manufacture and sale of tobacco
and its products, and shall be entitled to the same compensation, as the other
members of said board. The fiscal agents agree to designate to the Republic
in writing or by cable within 30 days after the date of the execution of this
agreement two persons to be such member and alternate member, respectively,
of the board of directors. In case of the death, resignation, or inability to
act for any reason of such member so designated, the alternate member shall
act in such member's place and stead until the fiscal agents shall similarly
designate the successor of such member and the Republic covenants to elect
or appoint, or to cause to be elected or appointed, as soon as practicable thereafter, such successor a member of the board of directors. In case the successor
so designated shall be the person previously designated as alternate member, or
in case of the death, resignation, or inability to assume the duties of a member
of the board of directors for any reason, of the alternate member, a successor
of such alternate member shall be similarly designated by the fiscal agents and
the Republic covenants to elect or appoint, or to cause to be elected or appointed,
as soon as practicable thereafter, such successor an alternate member of the
board of directors. In case the Republic shall with the consent of the fiscal
agents, transfer the collection of the tobacco revenues or any part thereof to
any other collection agency, the Republic will cause a member of the board or
directors of such agency and an alternate member to be similarly elected or
appointed.
If at any time, so long as any of the bonds of 1927 shall be outstanding, the
Republic shall withdraw from the Caja the collection of the gross tobacco revenues, or the Caja or any successor, either by virtue of the operation of paragraph G, Article 11, of law of the Republic No. 4500, enacted March 8, 1922,
(law creating the Banco de Reserva del Peru), or, for any other reason whatsoever, shall cease to collect the gross tobacco revenues, the fiscal agents shall
have'the right to appoint in agreement with the Republic a company now in
existence or to be organized, firm or responsible individual to take over the
entire collection of the gross tobacco revenues. In the event of the appointment
of such company, firm, or individual, the Republic shall immediately transfer
to such company, firm, or individual and will cause the Caja and any other
collecting agency for the collecting of the gross tobacco revenues, to transfer
to such company, firm, or Individual all the facilities for the collection and
control of the gross tobacco revenues. From the sums collected, said company,
firm, or individual shall, after deducting all Its or his reasonable expenses,
including an allowance for its or his own reasonable compensation and the
expenses and compensation of the trustee and the fiscal agents, remit to the
fiscal agents in New York the amount of the service of interest and amortization of the bonds of 1927 as more fully set forth in sections 9 and 10 of Article
1 of this agreement, and remit the balance, if any, to the Republic. In the
event that the fiscal agents shall apoint a company for the purposes above mentioned, the Republic shall have the right to name one of the members of the
board of directors of such company and, in the event of bis death, resignation,
or inability to act for any reason, a successor.
5. The obligation of the bankers to purchase the bonds of 1927 hereunder is
subject to the condition that on or before the date for the delivery of and payment for the bonds:
(a) All acts, events, and proceedings required by sections 3 and 4 of this
Article I I shall have been performed, shall have happened and shall have been
taken and the Republic shall have delivered or caused to be delivered to the designated representative of the bankers in Peru duly authenticated copies of all
laws and decrees or other instruments authorizing the execution of this agreement and the trust agreement and the creation, issue, and sale of the bonds of
1927 by the Republic;
(b) The bankers shall have received an opinion in form and substance satisfactory to them of Peruvian counsel designated by them, approving the pro-
SALE OP FOREIGN BONDS OB SECURITIES
1373
ceedings of the Republic to authorize the execution of this agreement, the trust
agreement, the creation, issue and sale of the bonds of 1927 in accordance with
the terms hereof and thereof, and the sufficiency of all action taken for said
purposes, and stating that this agreement, the trust agreement and the bonds of
1927 and the coupons appurtenant thereto in the hands of holders of whatever
nationality or residence when executed and delivered in accordance herewith,
wilt be the valid and binding obligations of the Republic:
(c) The bankers shall have received an opinion of their counsel in New York
aproving the form of the trust agreement and of the bonds of 1927 and the coupons appurtenant thereto; and
(d) The Republic shall have furnished to the Bankers the letter signed by
its minister of finance or other duly authorized representative, setting forth
such information as the bankers may request, as provided in section 2 of this
Article II.
6. A t any time prior to the date for the delivery of and payment for the bonds
of 1927 the bankers shall have the absolute right to terminate their obligation
under this agreement (a) if in their opinion the security markets in Europe
or America are so affected by political, financial or economic conditions as to
render the offering of the bonds of 1927 for sale inadvisable; or, (5) if there is
any objection on the part of the Department of State of the United States to the
offering of the bonds of 1927 in the American market. If this agreement shall
be terminated in accordance with the right of withdrawal above provided,
the Republic covenants to pay all expenses of the character specified in section
9 of this Article II to be paid by the Republic incurred to the date of such
termination.
7. If the Republic shall fail or be unable to make delivery of the bonds
within the time and under the conditions specified in this agreement—
( a ) the obligation of the bankers hereunder to take and pay for the bonds
of 1927 may, at their option, be terminated by written or cabled notice to the
Republic, and thereupon, the obligation of the bankers to take and pay for the
bonds of 1927 and of the Republic to deliver the same under the terms of this
agreement shall cease and terminate; and
(&) the Republic shall forthwith, upon receipt of such notice of termination,
pay to the bankers the sum of $50,000 to reimburse the bankers for expenses
incurred in connection with the matters covered in this agreement, and as
liquidated damages.
8. The Republic will, at the request of the bankers, make application to list
upon the New York Stock Exchange all the bonds of 1927 purchased by the
bankers and use its best efforts to supply all information necessary for that
purpose.
9. The Republic will pay the cost of printing this agreement and the trust
agreement, of printing or engraving, executing and authenticating the temporary
and definitive bonds of 1927 and interim certificates, the expense (if any) of
exchanging the interim certificates for the temporary or definitive bonds of
1927, of exchanging the temporary bonds of 1927 for the definitive bonds of 1927
and the expense of listing the bonds on the New York Stock Exchange. The
Republic will also pay the expenses and compensation of the trustee, of the
fiscal agents, of the representative of the fiscal agents in Peru, and of the special
collections agency, as set forth in the trust agreement. The Republic will also
pay all stamp taxes and other duties and taxes, if any, to which under the
laws of the Republic or of any political subdivision or authority thereof or
therein this agreement or the trust agreement, or the bonds of 1927, temporary
or definitive, may be subject.
The Republic will also reimburse the bankers for the cable expenses and
for the fees and disbursements of counsel for the bankers in Peru.
10. The bankers, in their sole discretion, may determine when the bonds
of 1927 shall be offered to the public and may choose and have in the purchase
of the bonds of 1927 and in any offering to the public such associates as they
may deem fit.
11. The Republic .agrees that it will not issue or offer, in the United States
of America, any bonds or other obligations, or any bonds or other obligations
guaranteed by it, within the period of six months after the date of delivery
of the bonds of 1927 hereunder, without the written consent of the bankers.
In consideration of the purchase of the bonds of 1927 hereunder and of the
services rendered and to be rendered by the bankers pursuant to this agreement,
1374
SAIiB
OF FOREIGN" BONDS OR SECURITIES
the Republic hereby agrees that in case the Republic shall at any time or
from time to time desire to sell any bonds of other series to be issued under
the trust agreement, it will first negotiate in regard thereto with the bankers,
and the Republic agrees that, if it wishes to issue any additional bonds of other
series, it will notify the bankers from time to time of the terms of such issue
and the price thereof and shall give the bankers an option for 60 days to
purchase such bonds on such terms. If the bankers, or either of them, do not
elect to exercise such option within such 60-day period, the Republic may
within 90 days thereafter sell such bonds to any other banking institution
upon the same conditions or conditions more favorable to the Republic. In
the event that the Republic does not sell such bonds to any other banking
institution within such 90-day period, it shall prior to any sale of such
bonds, again offer such bonds to the bankers as above set forth.
ABTICIE I I I
Any notice, request, or instruction, required or permitted to be given hereunder by one party to the other, shall be deemed sufficient if given in English
in writing or by cable confirmed in writing, as follows:
(a) If from the bankers or fiscal agents to the Republic, over the signatures
of the bankers or fiscal agents addressed to the minister of finance of the
Republic at Lima, Peru.
(&) If from the Republic to the bankers or fiscal agents, over the signature of
the minister of finance of the Republic, delivered to the bankers of the fiscal
agents, as the case may be, in care of J. & W . Seligman & Co.* New York, N. Y.
ARTICLE I V
Any reference in this agreement to the bankers shall be deemed to mean and
include any successor corporation, joint stock association or partnership
continuing the respective businesses of J. & W. Seligman & Co. and F. J. Lisman
& Co.; any reference in this agreement to the fiscal agents shall be deemed to
mean and include any successor corporation, joint stock association or partnership, continuing the business of J. & W. Seligman & Co.; and any reference in
this agreement to the Republic shall be deemed to mean and include any
successor government which may at any time during the life of this agreement
govern the territory now embraced within the territorial limits of the Republic.
ARTICLE V
This agreement may be executed in both the English language and the
Spanish language, but the English text thereof shall govern; may be executed
in one (1) or more counterparts each of which shall be deemed to be nn original;
and shall be interpreted and construed in accordance with the Laws of the
State of New York, United States of America, as though it had been made
and were to be performed wholly within the territorial limits of said State.
In witness whereof, Republic del Peru (Republic of Peru) has caused this
agreement to be executed on Its behalf in three counterparts, by his excellency
the Hon. Manuel G. Masias, its minister of finance, thereunto duly authorized,
and J. & W . Seligman & Co. and F. J. Lisman & Co. have respectively caused
this agreement to be signed in a like number of counterparts, on behalf of
each of them respectively, all as of the day and year first above written.
REPUBLIC DEL PERU,
B y M . G . MASIAS.
[SEAL.]
JV & W . SEUOMAX & Co.,
B y SAMUEL A . MAGINITIS,
Attorney
in fact.
F . J . LISMAN & C A ,
B y MAURICE M . MANASSE,
A partner.
S A L E OF F O R E I G N B O N D S OR
EXHIBIT B.—Table of
amortization
AppliSemiannual Interest cable to
payment payment sinking
fund
$600,000 $525,000
600,000 522,515
600.000 519,925
600,000 517,265
600,000 514,500
600,000 511,648
600,000 508,708
600,000 505,663
600,000 502,513
600,000 499,275
600,000 495,915
600,000 492,433
600,000 488,863
600.000 485,153
600,000 481,320
600,000 477,365
600,000 473,270
600,000 469,053
600,000 464,695
600,000 460,180
600,000 455,525
600,000 450,695
600,000 445,725
600,000 440,580
600,000 435,260
600.000 429,783
600,000 424,095
600,000 418,233
600,000 412,178
600,000 405,913
600,000 399,455
600,000 392,770
600,000 385,858
600,000 378,718
600,000 371,350
600,000 363,720
600,000 355,845
600,000 347,708
600,000 339,290
600,000 330,610
600,000 321,633
600,000 312,358
600,000 302,768
600.000 292,845
600,000 282,608
600,000 272,038
600,000 261,100
600,000 249,813
600,000 238,140
600,000 226,065
600,000 213,605
600,000 200,725
600,000 187,425
600,000 173,670
600,000 159,460
600,000 144,778
600,000 129,588
600,000 113,908
97,720
600,000
80,973
600,000
63,665
600,000
45,798
600,000
27,318
600,000
8,225
600,000
1927.,
1928..
1928.
1929.,
1929..
1930..
1930..
1931..
1931..
1032..
1932..
1933..
1933..
1934..
1934..
1935..
1935..
1936..
1936..
1937..
1937..
1938..
1938-.
1939..
1939..
1940..
1940..
mi..
1941..
1942..
1942..
1943..
1943..
1944..
1944..
1945..
1945*1946..
1946..
1947..
1947..
1948..
19-18..
1949..
1949..
1950..
1950..
1951..
1951..
1952..
1952..
1953..
1953..
1954..
1954..
1955..
1955..
1956..
1956..
1957..
1957..
1958..
1958..
1959..
1375
SECURITIES
$75,000
77,485
80,076
82,735
85,500
88,352
91,292
94,337
97,487
100,725
104,085
107,567
111, 137
114,847
118,680
122,635
126,730
130,947
135,305
139,820
144,475
149,305
154,275
159,420
164,750
170,217
175,905
181,767
187,822
194,087
200,545
207,230
214,142
212,282
228,650
236,2S0
244,155
252,292
260,710
269,390
278,367
287,642
297,232
307,155
317,392
327,962
338,900
350,187
361,860
373,935
386,395
399,275
412,575
426,330
440,540
455,222
470,412
486,092
502,280
519,027
536,335
554,202
572,682
591,775
Principal
amount
of bonds
to be retired
$71,000
74,000
76,000
79,000
81,500
84,000
87,000
90,000
92,500
96,000
99,500
102; 000
106,000
109,500
113,000
117,000
120,500
124,500
129,000
133,000
138,000
142,000
147,000
152,000
156,500
162,500
167,500
173,000
179,000
184,500
191,000
197,500
204,000
210,500
218,000
225,000
232,500
240,500
248,000
256,500
265,000
274,000
283,500
292,500
302,000
312,500
322,500
333,500
345,000
356,000
368,000
380,000
393,000
406,000
419,600
434,000
448,000
462,500
478,500
494*500
510,500
528,000
545,500
235,000
EXHIBIT NO. 6
TRUST AGREEMENT BETWEEN REFUBLICA DEL PERU (REPUBLIC OP PERU) AND
CENTRAL UNION TRUST CO. OF NEW YORK, TRUSTEE, DATED AS OF MARCH 1,
1927
Trust Agreement, dated as of March 1, 1927, between Republica del Peru
(Republic of Peru), hereinafter called the Republic, acting by his excellency
the Hon. Herman Velarde, ambassador of the Republic of Peru to the United
92928—32—pt3
8
1376
SAIiB
OF FOREIGN" BONDS OR SECURITIES
States of America, thereunto duly empowered, party of the first part, and
Central Union Trust Co. of New York, a corporation duly organized and
existing under the laws of the State of New York, United States of America,
as trustee, hereinafter called the trustee, party of the second part.
Whereas in order to provide funds for the development of the business of
the national monopoly of the manufacture and sale of tobacco and its products
in Peru (hereinafter called the monopoly), the Republic has heretofore made
an internal issue of its bonds known as its 8 per cent tobacco monopoly bonds
of 1924 (hereinafter called the 8 per cent bonds of 1924) of which an aggregate
principal amount of not exceeding £P38o.000 (Peruvian pounds) are outstanding at the date of this trust agreement; and
Whereas in order to provide for the retirement of the S per cent bonds of
1924, and to provide funds for the purchase of machinery and the construction
of plants for the manufacture of cigars and cigarettes, for the construction of
railroads and irrigation and sewage systems and for other lawful purposes, the
Republic by Law No. 5654, enacted by the Congress of the Republic February 4,
1927, as amended by Law No. 5743, enacted by the Congress of the Republic
March 12, 1927, has authorized the creation of an external loan limited to the
aggregate principal amount of £5,000,000 (English pounds sterling), or
$24,332,500, the equivalent amount in United States dollars at par of exchange,
to consist of bonds, hereinafter called the bonds, ,to be issued from time to time
in series, to be the direct obligations of the Republic and to be secured by a
direct first lien and charge upon the gross revenues of the Republic from the
monopoly; and
Whereas the Republic by such Laws Nos. 5G54 and 5743 has also authorized
the creation of a short-term loan, to be retired out of the proceeds of the sale
of the first series of the bonds, and pursuant to such authority, the Republic has
issued its notes known as its four months 6 per cent secured gold notes, dated
March 1, 1927, and maturing July 1, 1927 (hereinafter called the secured gold
notes); and
Whereas the Republic has, by virtue of Law No. 5746. enacted by the Congress
of the Republic March 14, 1927, transferred to the Caja de Depositos y Consignaciones, hereinafter called the Caja, a corporation duly organized and
existing under the laws of the Republic, the collection of the gross revenues
of the Republic from the monopoly; and
Whereas in ordet to provide for the retirement of the secured gold notes
and to provide other funds as aforesaid, the Republic desires presently to
issue a first series of the bonds to be limited to $15,000,000. principal amount,
to be known as the secured 7 per cent sinking fund gold bonds, 1927, of the
Republic, hereinafter called the bonds of 1927, and has under and pursuant to
the provisions of said Laws Nos. 5654 and 5743 and other applicable provisions
of law duly determined to establish the terms and conditions on which the bonds
may be issued by the execution and delivery of this trust agreement; and
Whereas the execution of this trust agreement and the creation and issue of
the $15,000,000, principal amount, of the bonds of 1927 have been duly and
validly authorized by the Republic; and
Whereas the text of the bonds of 1927 and of the coupons for interest to
be annexed thereto, and of the trustee's certificate of authentication to be
indorsed thereon, are to be substantially as follows, with appropriate insertions, omissions, and variations:
[Form of definitive bond]
REPUBUCA DEL PEBTT (REPUBLIC OF PERU) SECURED 7 PER CENT SINKING FUND
GOLD BOND, 1 9 2 7
Dated March 1, 1927. Due September 1,1959.
Republica del Peru (Republic of Peru), hereinafter called the Republic,
for value received, promises to pay to the bearer of this bond on September 1,
1959, the sum of
dollars, and to pay interest thereon from March lf
1927, until the principal of this bond shall be paid In full, at the rate of seven
per cent (7 per cent) per annum, 'semiannually on March 1 and September 1
in each year, but, until the maturity of this bond, only upon presentation and
surrender of the coupons hereto annexed as they severally mature. The
principal of and interest on this bond and the premium payable upon the
redemption hereof as hereinafter provided shall be paid in the borough of
Manhattan, in the city and State of New York, at the office of J.' & W . Selig-
SALE OP FOREIGN BONDS OB SECURITIES
1377
man & Co., fiscal agents, or their successors, in gold coin of the United States
of America of or equal to the standard of weight and fineness existing on
March 1, 1927, and shall be paid in every case free from and without deduction or diminution for any taxes, assessments, charges, or duties of any nature
now or at any time hereafter levied or imposed by the Republic, or any State,
Province, municipality, or other taxing authority thereof or therein, and shall
be paid in time of war as well as in time of peace and whether the holder be a
citizen or a resident of a friendly or of a hostile state.
This bond is one of the bonds of series designated secured 7 per cent sinking fund gold bonds, 1927, herein called bonds of 1927, limited to $15,000,000,
principal amount, at any one time outstanding duly authorized by Law No. 5654,
enacted by the Congress of the Republic February 4, 1927, as amended by
Law No. 5743, enacted by the Congress of the Republic March 12, 1927, being
the first series of an external loan of the Republic consisting of bonds limited
to the principal amount of £5,000,000 (pounds sterling) or $24,332,500, at
any one time outstanding. All the bonds of said loan, herein called the bonds,
are issued or to be issued under and secured by a trust agreement, herein
called the trust agreement, made by the Republic and Central Union Trust
Co. of New York, as trustee, dated as of March 1, 1927, and are equally and
ratably secured by a direct first lien and charge upon the gross revenues of
the Republic from the manufacture and sale of tobacco and its products and
from any tuxes and duties now or at any time hereafter imposed on the
cultivation, manufacture, and sale of tobacco and its products, subject and as
set fortli in the trust agreement. The Republic may, from time to time,
in accordance with the provisions of the trust agreement, issue additional
bonds under the trust agreement, but 110 bonds of any series in addition to
the bonds of 1927 shall be isued by the Republic under the trust agreement
unless and until the pledged revenues, calculated on a gold basis, shall have
averaged for the three years ending on the last day of the calendar month
next preceding the date of issue of such additional bonds, and shall have
equaled for the last of such years, at least one and one-half (1*6) times the
maximum amount necessary in any year to meet all charges for the service
of interest on and amortization of the bonds of all series outstanding at the
time of such additional issue and on the additional bonds to be issued. For
a description of the nature and extent of the security for the bonds, the rights
of the holders of the bonds with respect thereto, and the terms and conditions
upon which the bonds are and may be issued, received, and held, reference is
hereby made to the trust agreement, to all the provisions of which the holder
hereof assents by the acceptance hereof.
The bonds of 1927 are subject to redemption, at the option of the Republic,
in whole or in part, on September 1, 1927, and on any interest payment date
thereafter at 105 per cent (105 per cent) of their principal amount plus accrued
interest to the date of redemption, upon notice given by publication once a week
for six successive weeks, the first publication to be not more than 90 and not
less than 60 days prior to the redemption date, in a daily newspaper, printed
in English, of general circulation in the borough of Manhattan, in the city and
State of New York, all as more fully set forth in the trust agreement.
The bonds of 1927 are entitled to the benefit of a cumulative sinking fund
calculated to retire all the bonds of 1927 by maturity, to be applied on each
semiannual interest payment date to the redemption of bonds at 105 per cent
(105 per cent) of their principal amount and accruedl interest to the date of
redemption, upon notice given by publication once a week for three successive
weeks, the first publication to be not more than 45 days and not less than 30
days prior to the redemption date, in a daily newspaper, printed in English,
of general circulation in the borough of Manhattan, in the city of New York,
all as more fully set forth in the trust agreement.
The Republic hereby certifies that all acts, things and conditions prescribed
by the constitution and lawg of the Republic which are necessary to make
this bond a valid and binding obligation of the Republic in accordance with
its terms have been done and have happened.
The Republic pledges its good faith and credit for the prompt payment of
the principal of, and the premium and interest on, this bond as and when the
same shall become due and payable, and for the due and punctual performance
of all the other covenants and agreements contained in this bond and in the
trust agreement to be performed or observed by it.
The Republic covenants that it will not reduce, abolish, or in any manner
impair, or permit the reduction, abolition or impairment of, the pledged
1378
SAIiB
OF FOREIGN" BONDS OR SECURITIES
revenues, or in any other manner impair, or permit the impairment of, the
security of this bond.
In case an event of default as defined in the trust agreement shall happen*
the trustee shall have the right to declare the principal of all the bonds then
outstanding (if not already due and payable) to be immediately due and
payable and to appoint a special collections agency with the sole right to
administer the collection of all the pledged revenues, all as more fully set
forth in the trust agreement.
The Republic recognizes that the trustee, or its successor or successors,
acting as the representative of the holders of the bonds issued under the
trust agreement, may represent said holders and may institute and carry
on for them in its own name all actions and proceedings, whatever be the
grounds thereof, without being required to produce any of the bonds in any
court or elsewhere or to prove its agency for, or authority from, said holders.
These provisions are of the essence hereof and of the trust agreement and any
instruments supplemental thereto, and the holder of this bond, by acceptance
hereof, irrevocably confers upon the trustee the authority a f o r e s a i d .
As provided in the trust agreement, bonds of 1927 of the denominations of
$1,000 and $500, at any time outstanding, when surrendered with all unmatured
coupons attached, and upon the payment of charges provided for in the trust
agreement, may be exchanged for an equal aggregate principal amount of
bonds of 1927 of the other denomination, of numbers not contemporaneously
outstanding, with all unmatured coupons attached.
This bond and the coupons appertaining hereto shall pass by delivery.
This bond shall not become valid or obligatory for any purpose until it
shall be authenticated by the certificate of the trustee hereon indorsed.
In witness whereof Republica del Peru (Republic of Peru) has caused this
bond to be engraved with the facsimile signature of the Minister of Finance
of the Republic, and to be manually signed by his excellency, the Hon.
Hernan Velarde, the Ambassador of the Republic to the United States of
America, or other representative of the Republic thereunto duly empowered
and the facsimile seal of the Republic to be engraved hereon, and the coupons
for said interest bearing the facsimile signature of the Minister of Finance of
the Republic to be annexed hereto.
Dated, as of March 1, 1927, New York, United States of America.
REPUBLICA DEL PEBU,
[Form of trustee's certificate]
This is to certify that this bond is one of the secured 7 per cent sinking
fund gold bonds, 1927, described in the within-mentioned trust agreement.
CENTRAL UNION TRUST C o . o r N E W
By
, Authorized Officer.
YORK,
Trustee.
[Form of coupon 3
On
, 19—, unless the bond hereinafter mentioned shall have been
called for previous redemption and the moneys to effect such redemption duly
provided, Republica del Peru (Republic of Peru) will pay to bearer the sum
of
dollars, at the office of J. & W. Seligman & Co., fiscal agents, or their
successors, in the Borough of Manhattan, in the city and and State of New
York, in gold coin of the United States of America, of or equal to the standard
of weight and fineness existing on March 1, 1927, free from and without deduction or diminution for any taxes, assessments, charges, or duties of any nature
now or at any time hereafter levied or imposed by Republica del Peru or any
State, Province, municipality, or other taxing authority thereof or therein, in
time of war as well as in time of peace, and whether the holder be a citizen or
a resident of a friendly or of a hostile State, being six months' interest then
due on its secured 7 per cent sinking fund gold bond, 1927, No.
.
REPUBLICA DEL PEBU.
Whereas all acts, conditions, and things required by the constitution and
laws of the Republic necessary to make this trust agreement a valid and binding
agreement for the security of the bonds and to make the bonds of 1927 the
valid and binding obligations of the Republic, have been done and performed
and have happened;
SALE OP FOREIGN BONDS OB SECURITIES
1379
Now, therefore, this agreement witnesseth that in consideration of the
"premises and in consideration of the acceptance of the bonds by the holders
thereof, the Republic has covenanted and agreed and does hereby covenant
and agree with the trustee for the equal and proportionate benefit of all present
and future holders of the bonds at any time issued and outstanding under this
trust agreement, as follows:
ARTICLE 1.—SECURITY
SECTION 1. The bonds shall constitute direct liabilities and obligations of the
Republic and the Republic hereby pledges its good faith and credit for the
prompt payment of the principal of, and the premium and interest on, the bonds
as and when the same shall become due and payable, and for the due and punctual performance of all the covenants and agreements in this trust agreement
and in the bonds contained to be performed or observed by i t ; and covenants
that in case the revenues pledged as security for the bonds shall prove insufficient to make any payments to be made as provided herein or in the bonds It
will make up such deficiency out of its other revenues.
SEC. 2. As security for the payment of the principal of, premium and interest
on, and sinking fund for, the bonds and for the payment of the expenses for the
service of the bonds and of all other amounts which may become due and payable under this trust agreement, the Republic hereby specifically pledges, and
creates a direct first lien and charge on, the gross revenues of the Republic
from the manufacture and sale of tobacco and its products and from any taxes
and duties now or at any time hereafter imposed on the cultivation, manufacture, and sale of tobacco and its products, hereinafter collectively sometimes
called the pledged revenues, subject only to the lien or charge of ( a ) the 8 per
cent bonds of 1924, and (.6) the secured gold notes.
The Republic covenants that, out of the proceeds of the sale of the secured
gold notes, it has provided for, and will effect, the payment or purchase of the
8 per cent bonds of 1924, and that, at or prior to the issue of any bonds of hereunder, it will pay or purchase all outstanding secured gold notes, or will deposit
with the fiscal agents an amount equal to the principal amount of all such
notes to be withdrawn only upon the payment or purchase thereof. The Republic further covenants that all 8 per cent bonds of 1924 and all secured gold
notes so paid or purchased will be canceled as soon as practicable after the
execution of this trust agreement, and shall not be renegotiated nor reissued,
and that no bonds or notes of said issues respectively shall be issued in lieu
of any thereof.
The Republic covenants to pay all the administration and operating expenses
of the monopoly and all the expenses of collecting the pledged revenues out of
other revenues of the Republic.
Sea 3. So long as any of the bonds are outstanding the Republic will furnish
to the trustee from time to time at the request of the trustee a report or statement signed by its Minister of Finance or other responsible official, showing
in reasonable detail the gross receipts of the Republic from the pledged revenues
and the expenditures in connection therewith during the period specified in
such request.
ARTICLE 2.—AMOUNT,
FORM, AND EXECUTION OF BONDS
SECTION 1. From time to time and at any time after the execution of this
trust agreement the Republic may execute and deliver bonds of 1927 to the aggregate principal amount of $15,000,000 to the trustee, who shall thereupon
authenticate and deliver the same to or upon the order of the Republic. The
aggregate principal amount of bonds of 1927 to be issued under this trust agreement shall be limited, except as provided ih section 7 of this article 2, to
§15,000,000, principal amount. From time to time the Republic may issue additional bonds of other series under this trust agreement, but only as provided
in section 5 of this article 2.
SEC. 2. The bonds of 1927, the coupons appurtenant thereto and the trustee's
certificate of authentication indorsed on such bonds shall be substantially in
the fo*m hereinbefore set forth; and such provisions and legends may be
indorsed on, or placed upon, the face or back of the bonds of 1927 as may be
necessary or proper to conform to the rules or requirements of any stock
exchange or committee thereof and as may be approved by the trustee. The
bonds shall be in coupon form, payable to bearer; shall be dated March 1,
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OF FOREIGN" BONDS OR SECURITIES
1927; shall mature oil September 1, 1959; shall bear interest from March 1,
1927, at the rate of 7 per cent per annum, payable semiannually on March 1
and September 1 in each year; shall be issued in the denominations of §1,000
and $500; and shall be payable as to principal, premium, and interest in the
Borough of Manhattan, in the city and State of New York, at the office of
J. and W. Seligman & Co., fiscal agents, or their successors, in gold coin of
the United States of America of or equal to the standard of weight and
fineness existing on March 1, 1927, in every case, free from and without
deduction or diminution for any taxes, assessments, charges, or duties of any
nature now or at any time hereafter levied or imposed by the Republic or any
State, Province, municipality, or other taxing authority thereof or therein,
and shall be payable in time of war as well as in time of peace and whether
the holders of the bonds of 1927 be citizens or residents of a friendly or of a
hostile State. The text of the bonds of 1927 and the coupons shall be in the
English language.
SEO. 3. All bonds of 1927 to be issued under this trust agreement shall bear
the facsimile signature of the present, or any future, Minister of Finance of the
Republic and/or shall be manually signed on behalf of the Republic by its
ambassador to the United States of America at Washington or other representative or representatives of the Republic thereunto duly authorized. The
coupons to be annexed to the bonds of 1927 shall be authenticated by the
engraved facsimile signature of the present, or any future, Minister of Finance
of the Republic. Both the bonds of 1927 and the coupons shall be otherwise
executed and shall be in such form as to comply with the listing requirements
of the New York Stock Exchange.
The Republic may adopt and use the engraved facsimile signature of any
person who shall have been such minister notwithstanding the fact that be may
have ceased to be such minister at the time when such bonds of 1927 shall be
actually authenticated, delivered, and issued. In case any official or representative who shall have signed any of the bonds of 1927 shall cease to be such
official or representative of the Republic before the bonds of 1927 so signed shall
have been actually authenticated and delivered by the trustee, such bonds of
1927, upon request of the Republic, may nevertheless be authenticated and delivered as though the person who signed such bonds of 1927 had not ceased to be
such official or representative of the Republic; and any bond of 1927 may be
signed on behalf of the Republic by such person as at the actual date of the
execution thereof shall be the proper official or representative of the Republic,
although at the date of the bonds of 1927, such person shall not have been
such official or representative of the Republic.
Only such bonds of 1927 as shall have indorsed thereon a certificate of
authentication substantially in the form hereinabove set forth and executed by
the trustee, and only the coupons appurtenant to such bonds of 1927, shall be
or become valid or obligatory for any purpose or IKS secured by, or be entitled
to the benefit of, this trust agreement; and such certificate executed by the
trustee shall be conclusive and the only evidence that the bond of 1927 so
authenticated and the coupons appurtenant thereto have been duly issued hereunder and that the holder thereof is entitled to the benefits of this trust
agreement.
Before authenticating and delivering any bond of 1927, all coupons appurtenant thereto then matured shall be detached and canceled by the trustee and
delivered to a representative designated by the Republic for that purpose in
the city of New York, or sent by registered mail to the embassy of the Republic
in Washington, at the risk and expense of the Republic.
SEC. 4. Bonds of 1927, in definitive form, of the denominations of $1,000 or
$500, at any time outstanding, when surrendered with all unmatured coupons
attached, and upon the payment of the charges hereinafter provided, may be
exchanged for an equal aggregate principal amount of bonds of 1927 of the
other denomination, of numbers not contemporaneously outstanding, with all
unmatured coupons attached. Whenever any bond or "bonds of 1927 shall be
presented for exchange under this section 4, with all unmatured coupons attached, the Republic shall execute, and, upon surrender to it of such bond or
bonds of 1927 and coupons, the trustee shall authenticate and deliver IN
exchange therefor, the bond or bonds of 1927 which the bondholder making the
exchange shall be entitled to receive. All bonds of 1927 so surrendered for
exchange and the coupons appurtenant thereto shall be canceled by the trustee
and delivered to a representative designated by the Republic for that purpose
in the city of New Xork, or sent by registered mail to the embassy of the
SALE OP FOREIGN BONDS OB SECURITIES
1381
Republic at Washington, at the risk and expense of the Republic. Upon every
exchange of bonds of 1027 the Republic may make a charge therefor sufficient
to reimburse it for any tax or taxes or other governmental charge required to
be paid in connection therewith and in addition may charge a sum not exceeding
$1 for each new bond of 1927 issued upon any such exchange.
The Republic agrees that it will at all times and from time to time, when
and as requested by the trustee, and in advance of the actual need therefor,
provide the trustee with a sufficient number of bonds of 1927 of each denomination, duly executed by the Republic, and which when authenticated, exchanged,
and delivered pursuant hereto, shall constitute the valid and binding obligations
of the Republic, to take care of exchanges of bonds of 1927 as herein provided,
which bonds of 1927, however, shall in no event be authenticated by the trustee
unless and until required in connection with any such exchange.
SEC. 5. Unless an event of default as defined in section 2 of Article V I I hereof
shall have occurred and be subsisting, the Republic may, subject to the provisions hereof, from time to time issue additional bonds under this trust agreement by creating additional series of the bonds in accordance with the provisions of this section 5 ; provided that the bonds of all series shall be limited,
except as provided in section 7 of this Article II, to the aggregate principal
amount of £5,000,000 English pounds sterling, or $24,332,500, the equivalent
amount in United States dollars at par of exchange, $4.S065 for £1. The
bonds of each series shall be distinctively designated by the number of the
year in which issued or by letter or in any other manner desired by the
Republic and satisfactory* to the trustee. All bonds of the same series shall
be identical in form and substance except that they may be of different denominations and may be in coupon or registered form and except that as
between bonds of different denominations and as between coupon bonds and
registered bonds there may be such appropriate differences as may be determined by the Republic and approved by the trustees • at or before the issue of
the respective series. The several series may consist of different aggregate
principal amounts, and the maximum principal amount of bonds of any series
issuable shall be limited, and such limitation shall be expressed in the bonds
of such series. The bonds of each series shall bear interest from such date,
at such rate, and payable on such dates and shall mature on such date after
January 1, I960, as at the time of the crcation of such series shall be fixed
by the Republic and stated in said bonds. A cumulative sinking fund shall
be created for each series of the bonds of not more than 1 per cent per annum
to be applied to purchase of bonds at such prices or to the redemption of bonds
at their principal amount or at such premium or in such other manner as the
Republic may provide at the time of the creation thereof. The princixial and
interest of each series of the bonds shall be payable in gold coin of the United
States of America or, If the Republic shall so provide at the time of the creation
thereof, in British gold coin, or both, at the rate of exchange hereinbefore provided. The Republic may provide in the creation thereof that the bonds of any
series may be redeemed at its option in whole or in part before maturity at their
principal amount or at a premium plus accrued interest, and such provisions
shall be expressed in the bonds of said series. Except as aforesaid, the terms
and provisions of all additional series of the bonds shall be substantially identical with the terms and provisions of the bonds of 1927. All bonds of any
series issued hereunder shall be entitled to share in the security of the pledged
revenues equally and ratably with the outstanding bonds of the same and all
other series issued hereunder.
No bonds of any series in addition to the $15,000,000, principal amount, of
the bonds of 1927 shall be Issued by the Republic or authenticated by the
trustee unless and until the pledge revenues, calculated on a gold basis, shall
have averaged for the three years ending on the last day of the calendar
month next preceding the date of issue of such additional bonds, and shall have
equalled for the last of such years, at least one and one-half times the maximum
amount necessary in any year to meet all charges for the services of interest
on and amortization of the bonds of all series outstanding at the time of such
additional issue and of the additional bonds to be issued.
Whenever requesting the authentication and delivery of any bonds in addition to the
000,000, principal amount, of the bonds of 1927, the Republic shall
deliver to the trustee a certificate signed by its Minister of Finance or other
responsible official stating (a) the average annual pledged revenues, calculated
on a gold basis, for the three years ending on the last day of the calendar
month next preceding the date of such additional issue, (&) the pledged
1382
SAIiB
OF FOREIGN" BONDS OR SECURITIES
revenues, calculated on a gold basis, for the last of such years, (c) that the
average annual pledged revenues, calculated on a gold basis, for the three years
ending on the last day of the calendar month next preceding the time of such
additional issue, are at least one and one-half times the maximum amount
necessary in any year to meet all charges for the service of interest on and
amortization of the bonds of all series outstanding at the time of such additional issue and of the additional bonds to be issued pursuant to such request,
and {d) that the pledged revenues, calculated on a gold basis, for the last of
such years were at least one and one-half times such maximum amount. The
trustee may rely upon such certificate in authenticating any additional bonds
hereunder and shall be absolutely protected in so doing. The trustee may,
however, in its discretion, require such further certificate or certificates or may
make such further investigation as it may deem necessary to determine that
such additional issue will comply with the requirements of this section 5. The
trustee, however, shall be under no obligation to require any such further
certificate or certificates or to make any such further investigation unless
requested so to do by the holders of 10 per cent of the bonds then outstanding
hereunder, and unless tendered security and indemnity satisfactory to the
trustee against any and all costs, expenses, and liability.
If the Republic shall at any time request the authentication of any additional
bonds hereunder, the Republic shall, prior to the authentication of any such
additional bonds, execute and deliver to the trustee such supplemental agreements hereto as the trustee, being advised by counsel, may deem requisite to
provide for all matters in connection with the creation of any new series of
bonds and the issue of any additional bonds hereunder as provided in this
section 5. All such supplemental agreements shall be duly authorized and
executed in conformity with the constitution and laws of the Republic.
SEC. 6. A temporary printed or typewritten bond or bonds of any series with
or without coupons, and with or without the facsimile seal of the Republic,
and of any denomination or denominations, substantially of the tenor of the
definitive engraved bonds of such series with such omissions, additions, and
variations as may be appropriate, may be executed by the Republic, authenticated by the trustee and issued hereunder, subject to all the terms and conditions hereof, and in such form as may be approved by counsel for the trustee,
exchangeable for a definitive engraved bond or bonds of the same series of like
aggregate principal amount and substantially of the same tenor, upon surrender
of such temporary bond or bonds with all unmatured coupons, if any, to the
trustee, when definitive engraved bonds are ready for delivery, and notice
thereof is given by the trustee; and the surrender of such temporary bond
or bonds with all unmatured coupons, if any, shall be a full acquittance to tlie
trustee for the delivery of the definitive bonds and the trustee .shall cancel
the temporary bond or bonds and coupons so received and deliver such cancelled
temporary bond or bonds and coupons, if any, to a representative designated
by the Republic for that purpose in the city of New York, or send the same by
registered mail to the embassy of the Republic in Washington, at the risk and
expense of the Republic, and shall be under no further obligation and have no
further duty with reference to said temporary bond or bonds. The temporary
bond or bonds of any series of the bonds at any time issued hereunder shall
bear the facsimile signature of the present, or any future Minister of Finance
of the Republic and/or shall be manually signed on behalf of the Republic
by its ambassador to the United States of America at Washington, or other
representative of the Republic thereunto duly authorized.
SEC. 7. If any bond shall become mutilated or be lost, stolen, or destroyed,
the Republic shall execute and thereupon the trustees shall authenticate and
deliver a new bond of the same series and denomination and having attached
thereto corresponding coupons, in exchange for such mutilated bond and coupons or in substitution for such lost, stolen, or destroyed bond and coupons.
In case of loss, theft, or destruction, the applicant shall furnish the Republic
and the trustee and the fiscal agents with evidence satisfactory to each oi
them of such loss, theft, or destruction and shall also furnish each of them
such security and indemnity as the Republic and the trustee and the fiscal
agents may respectively require in their absolute discretion. At the time of
the delivery of any new bond pursuant to the provisions of this section *
the owner of such mutilated, lost, stolen, or destroyed bond shall reimburse
the Republic for any reasonable expense incurred by the Republic, including
any counsel fees and any charges made by the trustee in connection with the
execution, authentication, and delivery of such new bond, and also for any
SALE OP FOREIGN BONDS OB SECURITIES
1383
United States stamp tax or United States governmental charge incident to the
execution, authentication, and delivery of such new bond. The provisions of
this section 7 shall apply to any temporary bonds that may be issued hereunder.
SEC. 8. The Republic, the fiscal agents, and the trustee, and each of them
may deem and treat the bearer of any bond or coupon as the actual owner
of such bond or coupon for the purpose of making payment thereof and for
all other purposes whatsoever and neither the Republic nor the fiscal agents
nor the trustee nor any one of them, shall be afliected by any notice to the
countrary. The Republic agrees to indemnify and save the trustee and the
fiscal agents harmless from and against any and all liability, costs, charges,
or expenses incurred by so treating any such bearer.
ARTICLE 3 . REDEMPTION OF BONDS
SECTION 1. The bonds of 1027 are subject to redemption, as a whole or in
part, at the option of the Republic, at the office of the fiscal agents in the city
of New York, on September 1, 1927, and on any interest date thereafter, at
105 per cent of the principal amount thereof and accrued interest to the
redemption date payable in gold coin of the United States of America, of or
equal to the standard of weight and fineness aforesaid.
In case at any time the Republic shall desire to redeem the bonds of 1927
as a whole or in part, the Republic shall so notify the fiscal agents in writing,
specifying the interest date (which shall not be less than TO days after such
notification) on which it desires to make redemption and the principal amount
of the bonds of 1927 which it desires to redeem. As soon as practicable thereafter the fiscal agents shall, on behalf of the Republic, give notice of such
redemption, by publication once a week for six successive weeks, the first
publication to be at least 60 days, and not more than 90 days, before the
redemption date, in at least one daily newspaper published in English in the
borough of Manhattan, in the city of New York, specifying the date of such
proposed redemption and the redemption price, and, in case of partial redemption, the numbers of the bonds of 1927 to be redeemed, and requiring that
the bonds of 1927 so called for redemption and all coupons appurtenant thereto
maturing on and after sucli redemption date be surrendered on or after such
redemption date at the office of the fiscal agents in the borough of Manhattan,
in the city of New York, for redemption at said redemption price, and stating
that interest on such bonds of 1927 shall cease on such redemption date; and
upon such redemption date the bonds of 1927 so called for redemption shall
become due and payable as aforesaid.
In case of partial redemption, the fiscal agents shall determine by lot in
any usual manner, deemed fair by the fiscal agents, the numbers of the bonds
of 1927 to be redeemed. A representative of the Republic may be present at
any such drawing, if the Republic so elects.
The Republic shall, at least 30 days prior to the date so fixed for such
redemption, deposit with the fiscal agents a sum of money sufficient to pay
the redemption price of the bonds of 1927 so called for redemption together with
the accrued interest thereon to the date of redemption, and the fiscal agents
shall pay out of such deposited moneys the principal of, and premium and
accrued interest on, all such bonds of 1927 presented for surrender and redemption on and after said redemption date. From and after the date so designated
for redemption, the notice aforesaid having been published and the deposit
aforesaid having been made, all bonds of 1927 so called for redemption shall
cease to draw interest and upon presentation and surrender of said bonds
of 1927, in accordance with said notice, with all appurtenant coupons maturing
on and after the date designated for redemption, said bonds of 1927 shall be
paid by the Republic at the redemption price aforesaid plus accrued interest to
such redemption date. If not so paid on presentation, said bonds of 1927 shall
continue to bear interest at the rate of 7 per cent per annum upon the principal
amount thereof until paid. Any moneys set aside pursuant to subdivision (a)
of section 4 of article 4 hereof for the payment of the Interest due and payable
on the date designated for redemption on the bonds so called for redemption
shall be credited against the obligation of the Republic to deposit such accrued
interest as aforesaid.
SBO. 2. All bonds of 1927 paid and redeemed under the provisions of this
article 3 and all coupons appurtenant thereto shall immediately upon such payment and redemption be delivered by the fiscal agents to the trustee, and the
trustee shall forthwith cancel and deliver the same to a representative desig-
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SAIiB
OF FOREIGN" BONDS OR SECURITIES
nated by the Republic for that purpose in the city of New York, or send the
same by registered mail, to the embassy of the Republic at Washington, at
the risk and expense of the Republic. No bonds of 1927 shall be issued in
place of such bonds of 1927 so redeemed and canceled.
ABUCLE 4.—PAYMENTS BY OK ON BEHALF OF THE REPUBLIC
SEO. 1. Until all the bonds of 1927 shall hare been redeemed or paid, the
Republic shall pay semiannually to the fiscal agents for the semiannual service
of interest on and amortization of the bonds of 1927, the sum of $000,000 in
gold coin of the United States of America of the standard aforesaid, which
semiannual sum is calculated to pay ali interest charges on the bonds of 1927
and to retire the entire issue thereof by maturity as shown by the table of
amortization, wThich is annexed hereto and marked Exhibit A. Such sums
shall be paid by the Republic in monthly installments as hereinafter in section
2 of this article 4 provided and shall be appiied by the fiscal agents, upon receipt
thereof, in the manner hereinafter in section 4 of this article 4 provided.
SEC. 2. The Republic will pay, so long as any of the bonds of 1927 shall !>e
outstanding, to the fiscal agents at their principal office in the city of New York,
in gold coin of the United States of America of the standard aforesaid, the
following amounts:
(o) The sum of $100,000 in March, 1927, and monthly in each calendar month
thereafter. Said sum is equal to one-sixth of the amount nrcessnry for each
semiannual installment for the service of interest on and amortization of the
bonds of 1927 as hereinbefore in section 1 of this article 4 provided. Such
monthly payments shall be made in the following manner: On the first Monday
of each calendar month, beginning with the first Monday in March, 1927, and
on each Monday thereafter all amounts collected by or on behalf o f the Republic
from the pledged revenues during the preceding week shall be paid by or on
behalf of the Republic to the representative of the fiscal agents in Peru (appointed as hereinafter in section 1 of article 12 provided and hereinafter called
the Peruvian representative), until the entire amount of the monthly payment
aforesaid shall have been received by the Peruvian representative. Such weekly
payments shall be made either in dollars of the United States of America, or,
with the consent of the fiscal agents, in Peruvian pounds and in the event that
such payments shall be made in Peruvian pounds, the amount thereof shall be
applied by the Peruvian representative, as soon as practicable after the receipt
thereof, to the purchase of dollars for account of the Republic. All such dollars
so paid or purchased shall, at the direction of the fiscal agents, forthwith be
remitted by the Peruvian representative to the fiscal agents in the city of
New York.
(6) Such sum on or before the last day of each calendar month, commencing
with March, 1927, as may be necessary to make up the deficiency, if any, by
which the pledged revenues of the Republic, paid over for the service of interest
on and amortization of the bonds of 1927 as in paragraph ( n ) above provided,
shall not be sufficient for the full payments therein specified to be made in
respect of each such calendar month.
Any such consent of the fiscal agents to the payment by the Republic to the
Peruvian representative in Peruvian pounds as in subdivision ( a ) of this section 2 provided, may at any time be revoked by the fiscal agents by notice in
writing addressed and sent by registered mail to the ambassador of the Republic
at Washington, and thereupon such payments to the Peruvian representative
shall be in dollars of the United States of America.
SEC. 3. The failure of the fiscal agents to secure the services of a bank, FIRM*
corporation, or responsible individual to act as its representative in Peru or
the failure of the fiscal agents to appoint such representative in Peru, shall
not relieve the Republic of its obligation to make the full monthly payments
provided in section 2 of this article 4, and the Republic agrees that in such
event it will make such payments in dollars directly to the fiscal agents in the
city of New York.
SEC. 4. The fiscal agents shall apportion and apply the moneys received by
them pursuant to the provisions of section 2 of this article 4 as follows:
(a) The fiscal agents shall set aside out of such moneys received by them to
each calendar month one-sixth of the amount necessary to pay the interest due
and payable on the next succeeding interest payment date on "the bonds of 192*
outstanding on the preceding interest payment date and shall apply the same
to the payment of such interest on such next succeeding interest payment date
SALE OP FOREIGN BONDS OB SECURITIES
1385
on presentation and surrender of the coupons for such interest in accordance
with the terms thereof.
(&) The fiscal agents shall set aside the balance of such moneys received by
them in each calendar month as a sinking fund for the redemption of bonds of
1927 on behalf of the Republic on the next succeeding interest payment date and
shall apply the same to such redemption on such interest payment date in the
manner hereinafter in section 1 of article 5 hereof provided.
AHTTCLE 5 . — S I N K I N G
FUNO
SECTION 1. The moneys set aside by the fiscal agents in each six months'
period pursuant to subdivision (&) of section 4 of article 4 hereof, together with
any amounts carried forward form the next preceding six months' period pursuant to section 2 of this article 5, shall be applied by the fiscal agents to the
redemption on the next succeeding interest payment date (the first application
to such redemption to be made September 1, 1927, and the subsequent applications to be made on interest payment dates thereafter) of bonds of 1927 at the
redemption price of 105 per cent of the principal amount thereof and accrued
interest thereon to such interest payment date at the office of the fiscal agents,
in the Borough of Manhattan, in the city and State of New York, in gold coin of
the United States of America of or equal to the standard of weight and fineness
aforesaid; and the fiscal agents are hereby authorized and empowered to redeem
bonds of 1927 with such moneys in the manner and at the redemption price
aforesaid on each interest payment date in the name and on behnlf of the
republic and at its expense. The serial numbers of the bonds to be redeemed in
each case shall be selected, and notice of each such redemption shall be given,
in the same manner as in the case of partial redemption of bonds of 1927 by the
Republic, as provided in section 1 of article 3 hereof, except that notice of
redemption for the sinking fund shall be published once a week for three successive weeks prior to the date on which such redemption is to be made, the first
publication to be made not more than 45 days and not less than 30 days prior to
such redemption date. From and after the date so set for redemption, notice
having been given by publication as aforesaid and the moneys required for such
redemption having been paid to the fiscal agents, all bonds of 1927 so called
for redemption shall cease to draw interest and upon presentation and surrender
of said bonds of 1927 in accordance with said notice, with all appurtenant
coupons maturing on or after the date designated for redemption, said bonds of
1927 shall be paid and redeemed by the republic at the redemption price aforesaid and accrued interest to the date of such redemption. If not so paid on
presentation thereof, said bonds of 1927 shall continue to bear interest at the
rate of 7 per cent per annum on the principal amount thereof until paTd.
Accrued unpaid Interest on bonds of 1927 redeemed for the sinking fund
shall not be paid by the fiscal agents out of the moneys set aside for the sinking fund pursuant, to subdivision ( 6 ) of section 4 of article 4 hereof nor out of
any other moneys in the sinking fund, but shall be paid out of the moneys set
aside pursuant to subdivision (a) of said section 4 of article 4 hereof for the
payment of interest on the bonds of 1927.
SEC. 2. Any fractional amounts of moneys applicable to the redemption of
bonds of 1927 for the sinking fund which can not be so allied by reason of the
fact that there are no bonds of 1927 in denominations smaller than $500 and
which thus remain in the hands of the fiscal agents after any semiannual
interest payment date shall be carried over and applied with the moneys set
aside for the sinking fund during the next succeeding six months' period to the
redemption of bonds of 1927 on the next succeeding interest payment date.
SEC. 3. All bonds of 1927 paid and redeemed for the sinking fund pursuant
to section 1 of this article 5 and all coupons appurtenant thereto shall Immediately upon such redemption be delivered by the fiscal agents to the trustee and
the trustee shall cancel and deliver the same to a representative designated by
the Republic for that purpose in the city of New York, or send the same by
registered mail to the embassy of the Republic at Washington, at the risk and
expense of the Republic. No bonds shall be issued in place of such bonds of
1927 so redeemed.
SEC. 4. No expenses of any character Incurred by the fiscal agents in connection with the administration of the sinking fund shall be charged against the
sinking fund or paid out of any moneys in the sinking fund, but all such
expenses shall be borne by the Republic and shall be paid by the Republic to
the fiscal agents upon their written request
1386
SAIiB
OF FOREIGN" BONDS OR SECURITIES
ARTICLE 6.—PARTICULAR COVENANTS OF THE REPUBLIC
The Republic covenants and agrees as follows:
SECTION 1. The Republic will duly and punctually pay the principal of, and
the premium and the interest upon the bonds, according to the tenor thereof and
hereof, in every case free from and without deduction or diminution for any
taxes, assessments, charges, levies, or duties of any nature now or at any
time hereafter levied or imposed by the Republic or by any State,, Province,
municipality, or other taxing authority thereof or therein. The Republic will
make payment of such principal, premium, and interest in time of war as well
as in time of peace and whether the holders of the bonds and coupons be
citizens or residents of a friendly or of a hostile State.
The interest on coupon bonds shall be payable, until the maturity thereof,
only upon presentation and surrender of the several coupons for such interest
as they respectively mature. The interest on temporary bonds, if issued without
coupons, shall be payable only upon the presentation thereof for the notation
thereon of such payment The interest on registered bonds shall be payable
only to the registered holders thereof. When and as paid, all coupons shall
forthwith be delivered by the fiscal agents to the trustee and the trustee shall
cancel a'nd deliver the same to a representative designated by the Republic
for that purpose in the city of New York, or send the same by registered mall
to the embassy of the Republic at Washington, at the risk and expense of the
Republic.
The Republic will not directly or indirectly extend or assen* to the extension
of the time of payment of any coupon or claim for interest on any of the bonds,
and will not directly or indirectly be a party to or approve such extension by
purchasing or refunding such coupons or claims for interest, or in any other
manner.
The Republic covenants that it will pay the stamp taxes and other duties
and charges, if any, to which, under the laws of the Republic this trust agreement or the bonds, temporary or definitive, may be subject.
SEO. 2. The Republic covenants that, so long as any of the bonds shall be
outstanding, it will maintain ari office or agency in the borough of Manhattan,
in the city and State of New York, where notices, requests, or demands in
respcct of the bonds or interest coupons, or of this trust agreement, may be
served, and from time to time the Republic will give written notice to the
trustee of the location of such office or agency. In case the Republic shall
fail to maintain such office or agency or to give the trustee notice of the location
thereof, such demands may be made, and such notices and requests may be
served, at the principal office of the trustee in said borough of Manhattan.
SEC. 3. The Republic covenants that it will not permit the authentication and
delivery of any bonds hereunder in addition to the $15,000,000, principal
amount, bonds of 1927, other than bonds issued to effect exchanges of bonds or
to replace mutilated, lost, stolen, or destroyed bonds as provided in sections 4
and 7 of article 2 hereof, except in accordance with the provisions of section 5
of article 2 hereof.
SEC. 4. The Republic covenants that it will, from time to time upon the
request of the trustee, furnish the trustee with a report or statement signed by
the minister of finance or other responsible official of the Republic, showing in
reasonable detail the receipts and expenditures of the Republic each month
during the period specified in such request, and that it will furnish any other
information which the trustee may request a^ to any other matters pertaining
to its revenues or affecting the service of the bonds or the performance of its
covenants contained in this trust agreement.
SEC. 5. The Republic covenants that the pledged revenues are free from all
liens or charges whatsoever except such liens or charges as are specifically
excepted in section 2 of article 1 hereof, and the Republic further covenants
that, so long as any of the bonds are outstanding, it will not create or suffer
to be created any lien or charge upon the pledged revenues prior or equal to the
lien and charge of the bonds issued hereunder.
SEC. 6. The Republic covenants that, so long as any of the bonds are outstanding, it will not reduce, abolish or in any manner impair, or permit the
reduction, abolition, or impairment of, the pledged revenues, or abolish or
impair the monopoly or in any other manner impair, or permit the impairment
of the security of the bonds.
,
SEC. 7. The Republic covenants that, at tlie election of the fiscal agents and
so long as any of the bonds are outstanding, one person designated by the fiscal
SALE OP FOREIGN BONDS OB SECURITIES
1387
agents shall be a member of the board of directors (consejeros) of the caja
or, as the case may be, of any successor company which shall be designated by
the Republic to collect the pledged revenues, and one person designated by
the fiscal agents shall be an alternate member of such board to act in the place
and stead of such member in case of such member's death, resignation or
Inability for any reason to act; and the Republic covenants that at all times
such member, or, in case of such member's death, resignation, or inability to
act, such alternate member, shall have the same rights and powers, in so far
as are concerned all matters relating to the manufacture and sale of tobacco
and Its products and the collection of the pledged revenues, and shall be
entitled to the same compensation, as other members of such board. In case
of the death, resignation or inability for any reason to act of such member
so designated, the alternate member shall act in such member's place and stead
until the fiscal agents shall similarly designate the successor of such member
and the Republic covenants to elect or appoint, or to cause to be elected or
appointed, as soon as practicable thereafter, such successor a member of such
board. In case the successor so designated shall be the person previously
designated as alternate member, or in case of the death, resignation, or inability for any reason to act, of the alternate member, a successor of such alternate
member shall be similarly designated by the fiscal agents and the Republic
covenants to elect or appoint, or to cause to be elected or appointed, as soon as
practicable thereafter, such successor an alternate member of such board.
If, at any time so long as any of the bonds of 1927 shall be outstanding,
the Republic shall withdraw from the caja or any successor thereto, the collection of the pledged revenues, or the caja or such successor either by virtue
of the operation of paragraph 9 of article 2 of the law of the Republic No.
4500 (law creating the Banco de Reserva del Peru) or for any other reason
whatsoever shall cease to collect the pledged revenues, the fiscal agents in
agreement with the Republic may In their discretion, but shall not be obligated to, appoint a company, now in existence or to be organized, firm, or
responsible individual to take over the entire collection of the pledged revenues. In the event of the appointment of such company, firm, or individual,
the Republic shall immediately transfer to such company, firm, or individual
and will cause the caja and any other collection agency for the collection of
the pledged revenues to transfer to such company, firm, or individual all the
facilities for the collection and control of all the pledged revenues and, thereupon such company, firm, or individual shall collect the pledged revenues and
shall, from the sums collected, after deducting all its or his reasonable expenses, including an allowance for its or his reasonable compensation and the
expenses and compensation of the trustee and fiscal agents, remit to the fiscal
agents in New York the amounts for the service of interest on and amortization of the bonds of 1927 as set forth In paragraph ( a ) of section 2 of article
4 hereof.
In the event that the fiscal agents shall appoint a company for the purpose
above mentioned, the Republic shall have the right to name one of the members of the board of directors of such company and, in the event of the death,
resignation, or inability for any reason to act of such member, a successor.
SEC. 8. The Republic covenants that It will apply the proceeds of the sale
of the bonds of 1927, to the payment of the secured gold notes outstanding at the
date of this trust agreement, to the construction of plants and the purchase of
machinery for the manufacture of cigars and cigarettes, to the construction
of railroads, irrigation, and sewage systems and for other lawful purposes.
SEC. 9. The Republic covenants that all acts, conditions and things prescribed by the constitution and laws of t-lie Republic, which are necessary to
make this trust agreement and the bonds of 1927 the valid and binding obligations of the Republic, have been done and performed and have happened.
AETXCLE 7.—REMEDIES OF TRUSTEE AND BONDHOLDERS
SECTION 1. Neither ( a ) any coupon which shall have been extended in contravention of the provisions of section 1 of article 6 hereof, nor <&) any coupon which in any way, at or after maturity, shall be transferred or pledged
separate and apart from the bond to which it is appurtenant, shall be entitled,
In case of default hereunder, to any benefit from this trust agreement, except
after the prior payment in full of the principal of, and premium upon, all the
bonds and of all the coupons not so extended, transferred, or pledged.
1388
SAIiB
OF FOREIGN" BONDS OR SECURITIES
SEC. 2. If one or more of the following events, herein called events of default,
shall happen, that is to say—
(а) Default shall be made in the prompt payment of the principal of, or
the premium upon, any of the bonds, or any part of such principal or premium, as and when the same shall become due and payable, whether at maturity, by proceedings for redemption, or otherwise, as therein and herein
provided; or
(б) Default shall be made in the payment of any instalment of interest on
any of the bonds, as and when the same shall become due and payable, as
therein and herein provided, and such default shall continue for a period of
30 days; or
(c) Default shall be made in any payment to the fiscal agents for the service
of interest on and amortization of the bonds, as and when the same shall become due and payable, as herein provided, and such default shall continue for
a period of 30 days; or
(d) Default shall be made in the performance of any other covenant in the
bonds or in this trust agreement contained, and such default shall continue for
a period of 30 days after written or cabled notice to the Republic from the
trustee specifying the nature of such default;
then, and in each and every such case, during the subsistence of such event
of default, and whether or not a special collections agency has been appointed
as hereinafter in section 3 of this article 7 provided, the trustee may, and,
upon the written request of the holders of not less than one-fourth in principal amount of the bonds then outstanding, shall, by written or cabled notice to
the Republic, declare the principal of all the bonds then outstanding (if not
already due and payable) to be immediately due and payable, and upon any
such declaration the principal of all the bonds then outstanding shall immediately become and be due and payable, anything in the trust agreement or in
the bonds to the contrary notwithstanding.
This provision, however, is subject to the condition that if at any time after
the principal of the bonds shall have so become due and payable, and prior to
the date of the maturity thereof stated in the bonds, all arrears in payment of
the interest on and amortization of all of the bonds, with interest at the rate
of 7 per cent per annum on any overdue payments, and the expenses of the
trustees and of the fiscal agents, shall be paid by the Republic, and every other
default in the observance or. performance of any covenant or condition of the
bonds or of this trust agreement shall be made good or be secured to the satisfaction of the trustee, or provision deemed by the trustee to be adequate shall
be made therefor, then and in every such case the holders of a majority in
principal amount of the bonds then outstanding, by a written notice to the
minister of finance of the Republic and to the trustee, may waive the default
by reason of which the principal of the bonds shall have so become due and
payable, and may rescind and annul such declaration and its consequences;
but no such waiver, rescission or annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
SEC. .3. In case any one or more of the events of default mentioned in section
2 of article 7 shall have happened and be subsisting, and whether or not the
principal of all of the bonds then outstanding shall have been declared due and
payable as hereinbefore in section 2 of this article 7 provided, the trustee may,
and, upon the written request of not less than one-fourth in principal amount of
the bonds then outstanding, shall appoint, and the Republic shall be obligated to
consent to the appointment of, and the Republic hereby does consent to the appointment of a special collections agency, which shall be a company, bank, firm,
or responsible individual designated by the trustee with the sole right to collect,
at the expense of the Republic, the pledged revenues. In the event of the appointment of a special collections agency, the Republic shall immediately transfer to such agency and will cause the caja and any other collecting agency for
the collection and control of the pledged revenues to transfer to such special
collections agency all the facilities for the collection of the pledged revenues and
thereafter all moneys payable to the Republic and/or any other collecting agency
from the pledged revenues shall be paid to such special collections agency. The
special collections agency shall acknowledge receipt of all moneys received by it
by issuing receipts in such form as it shall determine and the Republic covenants that such receipts, and only such receipts, shall be full acquittance for the
payment of any moneys due and payable to the Republic and that if requested
by the special collections agency such receipts shall be countersigned on behalf
of the Republic by its Minister of Finance or other duly authorized representa-
SALE OF FOREIGN" BONDS OE SECUBITIES
1389
tive. From the sums collected, the special collections agency shall, after deducting all its reasonable expenses, including an allowance for its own reasonable
compensation, retain and remit to the trustee in New York the remainder thereof
until the full amount then due on the bonds and coupons for principal, premium,
and interest and otherwise, under the trust agreement, including the expenses
and compensation of the trustee, the fiscal agents and their representatives,
shall have been fully paid and discharged, and shall then, if any of the bonds
remain outstanding, retain and remit to the fiscal agents in New York from
time to time as required the amounts required for the service of interest on and
amortization of such bonds and all other amounts payable under the trust agreement as aforesaid when and as the same shall become due and payable. The
Republic shall pay all the costs and expenses of administration of the monopoly
out of other revenues of the Republic. Any balance of the collected revenues
not required by the special collections agency for the purposes above specified
shall be paid over to the Republic.
SEO. 4. In case any one or more of the events of default mentioned in section
2 of this article 7 shall have happened, and such default shall be continuing, the
trustee may, in its discretion, and upon the written request of the holders of
one-fourth in principal amount of the bonds then outstanding and upon being
indemnified to its satisfaction shall proceed by due and appropriate proceedings
under the laws of the Republic of Peru or otherwise, as it may be advised by
counsel and as may appear to it to be desirable or necessary, to enforce the
terms and provisions of this trust agreement, and otherwise to take all necessary and proper steps for the collection of the amount then due and payable in
respect of principal, premium and interest, and interest upon interest, upon all
of the bonds and coupons, and all other amounts that may then be due and payable under this trust agreement. The trustee is hereby irrevocably appointed
the special agent and representative of the holders of the bonds and vested with
full power and authority on their behalf to enforce this trust agreement for the
benefit of the bondholders, with full power and authority to bring and defend,
as such trustee, for and on behalf of such bondholders, and each of them, any
action or proceeding in the Republic or elsewhere for the interpretation and
enforcement of this trust agreement; but, anything in this trust agreement contained to the contrary notwithstanding, the holders of a majority in principal
amount of the bonds then outstanding, in case any one or more of the events of
default mentioned in section 2 of this article 7 shall have happened, Jlnd such
default shall be continuing, shifll, in so far as may be lawful, have the right,
from time to time, to direct and control any proceedings for the collection of the
amounts due and payable upon the bonds, or any of them, or any other proceedings taken by virtue of any provisions of this trust agreement; but they shall
have no right or power to involve the trustee in any personal liability of any
kind without first and from time to time indemnifying it to its satisfaction.
SEO. 5. In case the trustee shall declare the principal of the bonds issued
hereunder to be immediately due and payable as provided in section 2 of this
article 7, or in case the trustee shall appoint a special collections agency as
provided in section 3 of this article 7, the fiscal agents shall forthwith pay to
the trustee all interest and sinking-fund moneys and redemption moneys paid
to them prior to such declaration or to such appointment and remaining in their
hands, and the trustee shall apply such moneys ratably to the bonds of the series
in respect of which such interest and sinking-fund moneys and redemption
moneys were paid to the fiscal agents.
SEa 0. In case of any payments to the trustee by the special collections
agency, or the collection of any funds for the benefit of the holders of the bonds
by the enforcement of this trust agreement, the amounts collected or received
by the trustee, together with all other funds which may then be in its possession
and be distributable, exccpt funds received from the fiscal agents as provided in
section 5 of this article 7, shall be applied as follows:
(1) To the payment of the costs, expenses, fees, and other charges of any
proceedings whatsoever taken by the trustee pursuant to section 4 of this article
7 and the reasonable compensation of the trustee, its agents and attorneys, to
the payment of all expenses and liabilities incurred and advances or disbursements made by the trustee, and to the payment of all expenses incurred by the
fiscal agents and the Peruvian representative;
(2) Any amount then remaining to the payment:
(a) If the principal of all the bonds shall not have become due and payable,
of the whole amount of interest, if any, then due and unpaid upon the bonds
outstanding, ratably according to the aggregate of such due and unpaid interest
1390
SAIiB
OF FOREIGN" BONDS OR SECURITIES
with interest on all overdue instalments of interest at the same urates respectively borne by the bonds the interest upon which shall be in default, and any
amount then remaining to the principal then due and unpaid, if any, of the
bonds outstanding, ratably according to the aggregate of such due and unpaid
principal, and any amount then remaining to the payment to the fiscal agents
of any payments then due and unpaid for the service of the bonds, for interest,
sinking fund, or otherwise, such payments to be applied by the fiscal agents to
the payment of the interest and sinking fund of each series of the bonds ratably
in proportion to the aggregate amount then due and unpaid for interest and
sinking fund of each such series; or
(&) If the principal of all the bonds shall have become due and payable, of
the whole amount due and unpaid upon the bonds, for both principal and interest, with interest on all overdue instalments of interest at the same rates
respectively borne by the bonds the interest upon which shall be in default; and
in case the amount so applicable shall be insufficient to pay in full the whole
amount so due and unpaid upon the bonds, then to the payment of such principal
and interest ratably according to the aggregate of such principal and unpaid
interest without preference or priority of principal over interest, or of interest
over principal, or of any instalment of interest over any other instalment of
interest;
(3) If the principal of all of the bonds shall not have become due and payable, any amount then remaining to the payment to the fiscal agents of the
amounts required for the service of interest on and amortization of the bonds
when and as the same shall become due and payable.
SBO. 7. No remedy herein conferred upon, or reserved to, the' trustee is
intended to be exclusive of any other remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing under the laws of the
Republic or of the United States of America, or otherwise. The Republic
recognizes that the trustee, or its successor or successors, acting as the representative of the holders of the bonds issued hereunder, may represent said
holders and may institute and carry on for them in its own name all actions
and proceedings, whatever be the grounds thereof, without being required to
produce any of the bonds in any court or elsewhere, or to prove its agency
for, or authority from, said holders. These provisions are of the essence of
this trust agreement and of any agreement or instrument supplemental hereto
and the respective holders of the bonds, by 'their acceptance of the bonds,
irrevocably confer upon the trustee the authority aforesaid.
SEC. 8. In case the trustee shall have proceeded to enforce any right under
this trust agreement, and any such proceeding shall have been discontinued
and abandoned for any reason, or shall have been decided adversely to the
trustee, then and in every such case, the Republic and the trustee shall severally and respectively be restored to their former position and rights hereunder and in respect of the pledged revenues, and all rights, remedies, and
powers of the trustee shall continue as though no such proceeding had been
taken.
SEC. 9. No delay or omission of the trustee, or of any holder of any of the
bonds, to exercise any right or power accrued hereunder upon any event of
default, shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; nor shall the action
of the trustee or of the holders of the bonds, in case of any default or in case
of any default and the subsequent waiver of such default, affect or impair the
rights of the trustee or of such holders with respect to any subsequent default
on the part of the Republic, or impair any right resulting therefrom, and
every power and remedy given by this article 7 to the trustee or to the holders
of the bonds, respectively, may be exercised from time to time, and as often
as may be deemed expedient, by the trustee or by such holders.
ARTICLE 8.—BONDHOLDERS' ACTS, HOLDING AND APPARENT AUTHORITY
SECTION 1. Any demand, request, notice, direction, consent, waiver, appointment, removal, or other instrument required or permitted by this trust agreement to be signed or executed by holders of bonds may be in any number of
concurrent writings of similar tenor and may be signed or executed by such
holders in person or by agent appointed in writing. Proof of the execution of
such demand, request, notice, direction, consent, waiver, appointment, removal,
or other instrument, or of the writing appointing any such agent, and of the
SALE OF FOREIGN" BONDS OE SECUBITIES
1391
•ownership by any person of bonds or of coupons, shall be sufficient for any
purpose of this trust agreement and shall be conclusive in favor of the trustee
or of the Republic with regard to any action by them, or either of them, taken
under such instrument, if such proof be made in the following manner:
(1) The fact and date of the execution by any person of any such instrument may be proved by the certificate under his official seal of any notary
public or other officer in any jurisdiction, who, by the laws in force in such
.jurisdiction, has power to take acknowledgments or proofs of deeds to be
recorded within such jurisdiction, certifying that tlie person signing such
instrument did acknowledge before him the execution thereof, or may be
proved by the afiidavit of a witness of such execution.
(2) The fact of the holding by any person of bonds and coupons and the
amounts and numbers of such bonds, and the date of his holding the same,
may be proved by a certificate executed by any trust company, bank, banker,
or other depositary (wherever situated), if such certificate shall be deemed by
the trustee to be satisfactory, showing that at the date therein mentioned
such person had no deposit with, or exhibited to, such trust company, bank,
banker, or other depositary the bonds and coupons described in such certificate. Such ownership shall be presumed to continue until written notice to
the contrary is served upon the trustee.
ARTICLE IX—CONCERNING THE TRUSTEE
SECTION 1. The trustee for itself and its successors hereby accepts the trusts
•created by this trust agreement, but only upon the terms and conditions hereof,
including the following, all of which shall bind tlie Republic and the holders
of the bonds and coupons appertaining thereto:
It shall be no part of the duty of tlie trustee to see to any recording, registering, or filing of this trust agreement or to give anj^ notice thereof or to see to
the payment of or be under any duty in respect of any tax or assessment or
other governmental charge which may be levied or assessed against the interest
of the trustee or of the holders of the bonds in the pledged revenues or against
the owners or holders of the bonds or coupons or to see to the payment or
discharge of any other or prior liens upon any of the pledged revenues or to
see to the performance or observance of any of the covenants or agreements
hereof on the part of the Republic.
Unless and until the tmstee shall have received written notice to the contrary from the holders of not less than 10 per cent in principal amount of
the bonds outstanding, the trustee need not take notice of any default or
•event of default and the trustee may for all purposes conclusively assume that
no default or event of default has occurred or is continuing and may so assume
unless the said notice shall distinctly specify the default desired to be brought
to the attention of the trustee and the continuance thereof.
Tlie trustee shall not be required to take any action in respect of any default
or event of default which, in the opinion of the trustee, will be likely to involve
it in expense or liability, or to take any action toward the execution or enforcement of tlio trusts hereby created or to institute, appear in, or defend any
action, suit, or other proceeding in connection herewith, unless requested so to
do by an instrument or concurrent instruments in writing, signed by the holders
of not less than 10 per cent, in principal amount of the bonds outstanding and
delivered to the trustee, and unless tendered security and indemnity satisfactory
to the trustee against any and all costs, Expenses, and liability, anything herein
contained to the contrary notwithstanding: but neither any such notice or
request, nor this provision therefor, shall affect any discretion herein given to
the trustee, or any method herein provided of determining whether or not the
trustee will take action with respect to such default or event of default or
whether or not it will take action without such request or indemnity.
Tlie trustee shall not be required to recognize anyone as a holder of bonds
issued herennder, unless and until the bonds claimed to be held are submitted
to the trustee for inspection and title thereto established to its satisfaction.
The trustee shall not be compelled to do any act or to make any payment
hereunder or in respect hereof, unless put in funds for the purpose. Whenever
any provision is made herein for the payment of moneys by the trustee at any
time, the trustee shall in no event be liable beyond the amount of moneys
deposited with it for such purpose.
92928—32—PT
9
1392
SAIiB OF FOREIGN" BONDS OR SECURITIES
All representations and recitals contained in this trust agreement and in
the bonds and coupons (save only the certificate of authentication of the trustee
upon the bonds) are made by and on behalf of the Republic; and the trustee
(save as aforesaid) is in no way responsible therefor or for any statement
therein contained or for any action or thing by it done, suffered, or permitted
by reason of any representation made by the Republic or any of its officials
or representatives. Tlie trustee makes no representations as to the value of the
pledged revenues or as to the sufficiency of the security purported to be created
thereby for the benefit of the holders of the bonds and the trustee purports to
have no knowledge in respect thereof.
The trustee shall not be responsible for the execution or validity hereof or
of the bonds, and makes no representation in respect thereof. The trustee shall
not be under any duty or obligation to give notice to any person of the making
of this trust agreement or to see to the application of any payments made to
it, except as herein provided, or of the sale or disposition of any bonds at any
time authenticated by it hereunder.
The trustee shall be protected in acting upon any notice, demand, waiver,
request, consent, opinion, certificate, report, statement, list, communication,
letter, telegram, cablegram, or radiogram, bond or other paper or document
believed by it to be genuine and to have been signed, sent, or presented by the
proper party or parties.
The trustee shall be under no obligation to make any investigation as to any
statement made in any certificate or other document filed with tlie trustee.
The trustee may exercise its powers and perform its duties by or through,
and may select and employ in and about the execution of the trusts hereby
created, attorneys, appraisers, accountants, agents, and other employees, whose
reasonable compensation shall be deemed part of the expenses of the trustee.
The trustee shall not be answerable for the act, default or misconduct of any
cotrustee, or copledgee, or depositary hereunder, if any, or of any attorney,
appraiser, accountant, agent, or other person employed or approved by it pursuant to the provisions hereof if selected with reasonable care; nor shall the
trustee be liable for any action whatever taken by it hereunder, except its own
willful misconduct.
The trustee may advise with American, Peruvian, or other foreign counsel
(who may be counsel for tlie Republic) and the opinion of counsel shall be full
protection and justification to the trustee for anything done or omitted or
suffered to be done by it in accordance with such opinion.
The trustee or any company in which it may be interested or any officer,
stockholder, or director of the trustee or of any such company, in its or his
individual or fiduciary capacity, may acquire, hold, or dispose of bonds and
coupons, or may engage in or be interested in any financial or other transactions
with the Republic, and the trustee may act as depositary, trustee, or agent
for any committee or body of holders of bonds or securities, whether or not
secured hereby, all with the same rights as though the trustee were not trustee
hereunder.
Any moneys at any time received or held by the trustee under any of the
provisions of this trust agreement, whether trust funds or otherwise, may be
treated by it as a general deposit, without any liability for interest save such
as during that time it shall agree with the Republic to pay thereon. So long
as none of the events of default specified in section 2 of article 7 hereof shall
have happened and such default shall be continuing, all interest allowed by
the trustee as aforesaid shall be paid by it from time to time to the Republic
or upon its order. The trustee shall not be under any duty to invest any funds
held by it or subject to its control.
Any action taken by the trustee upon the request, consent, or authority of
any holder of any bonds shall be conclusive upon all future holders or owners
of any bonds, and of any bonds issued in exchange therefor or in place thereof,
in respect of which such request, authority or consent was given.
SEC. 2. The trustee shall be entitled to compensation for services rendered
by it in the execution of the trusts hereby created, at the rate of $750 per
annum, and the Republic agrees from time to t me on demand to pay such
compensation (which shall not be limited by any provisions of law with respect
to compensation of fiduciaries or of a trustee of an express trust) and-to reimburse the trustee and save it harmless against any and all liability and expenses, including reasonable counsel fees, which it may at any time incur hereunder ; and the charges and expenses of the trustee and of its counsel and all
liability by it so incurred shall be secured by this trust agreement, and, if
SALE OF FOREIGN" BONDS OE SECUBITIES
1393
the Republic shall fail, neglect, or delay to pay the same promptly, they shall
be paid from and out of any funds in the hands of the trustee and/or from
and out of the pledged revenues prior to any payment therefrom to or upon the
order of the Republic or of or 011 account of any of the bonds or coupons.
Whenever uuder any of the provisions of this trust agreement the trustee shall
be required or shall deem it necessary to be informed as to any facts or conditions preparatory to taking or omitting to take any action required or permitted by this trust agreement, and no provision is contained in this trust
agreement for proving or evidencing to the trustee such fact or facts or conditions, the existence of such fact or facts or conditions shall be deemed conclusively proved and evidenced to the trustee when stated in an affidavit by the
Minister of Finance of the Republic delivered to the trustee, or in any document,
letter, or certificate received or obtained by the trustee through the State Department of the United States of America or any embassy, legation, or consular
office of the United States in the Republic, or through any embassy, legation, or
consular office of the Republic; but this provision shall not be construed as
limiting or restricting the right of the trustee to rely upon and be protected by
any of the foregoing provisions of this trust agreement.
Whenever in this trust agreement provision is made for evidencing to the
trustee any fact or facts or conditions preparatory to or as a condition of the
taking or omitting to take by the trustee of any action under this trust agreement, the trustee may accept the evidence so provided for and any or all statements contained therein as conclusive and sufficient evidence of such fact or facts
and condition or conditions, and shall not be liable for any action taken or
permitted on the faith thereof; but, notwithstanding this or any other provision
in this trust agreement to like effect, the trustee in its discretion and at its option
may require the Republic to furnish further proof in respect of such fact or
facts or conditions; and if further proof thereof satisfactory to the trustee be
not furnished within the time fixed therefor by it, the trustee, at the expense
of the Republic, may proceed to make an independent investigation into the
truth or accuracy of the statements contained in the evidence theretofore furnished to it, and in case it shall after such independent investigation be satisfied
that any such statements are inaccurate, the trustee may in its discretion take,
refuse to take or refrain from taking all or any action predicated thereon or may
take action predicated upon the facts and conditions as reported to it as a result
of such independent investigation. The trustee may accept, as conclusive evidence of the due and regular adoption of any law or resolution or decree of the
Republic or of any official thereof, the certification of a copy thereof by the
Minister of Financc of the Republic.
The trustee shall not be liable for any error of judgment nor for any act done
or steps taken or omitted by it, nor for any mistake of fact or law, nor for
anything which it may do or refrain from doing in connection herewith, except
only for its own wilful misconduct.
SEO. 3. The trustee or any successor or successors hereunder may resign and
be discharged of the trusts created by this trust agreement by executing an instrument in writing resigning such trusts, specifying the date when such resignation shall take effect, and filing the same with the Republic at least 30 days
(or such shorter time as may be accepted by the Republic as adequate) before
such resignation is to take effect. Such resignation shall take effect on the
day specified in such instrument, unless previously a successor trustee shall be
appointed as hereinafter provided, in which event such resignation shall take
effect immediately upon the appointment of such successor trustee.
The trustee or its successor hereunder for the time being (subject to the right
to compensation and indemnification and reimbursement as herein provided)
may be removed at any time by an instrument or concurrent instruments in
writing, executed by the holders of two-thirds in principal amount of the bonds
then outstanding and filed with the trustee, and at any time prior to the
authentication and delivery of any bonds or, if at any time all of the bonds
previously authenticated and delivered shall have been surrendered to the trustee and no bonds shall be outstanding hereunder, the trustee or its successor
for the time being, may be removed by an instrument in writing executed by the
Republic and filed in like manner; and in such last mentioned case the Republic
may appoint a successor to the trustee so removed.
In case at any time any trustee, or any successor or successors, shall resign
or shall be removed by holders of the bonds or shall otherwise become incapable
of acting, a successor or successors to such trustee in the trust may be appointed
by. the Republic, if at the time of such resignation, removal, or other incapacity
1394
SAIiB OF FOREIGN" BONDS OR SECURITIES
the Republic shall not be in default in any of its covenants herein expressed. If
the Republic shall be in default, then such successor or successors shall be appointed by the holders of a majority in principal amount of the bonds then
outstanding by an instrument or concurrent instruments in writing signed by
such holders of the bonds or their duly authorized attorneys in fact and filed
with the Republic *, provided, nevertheless, and it is hereby agreed and declared
that in case of any such resignation, removal, or other incapacity, the Republic
may, notwithstanding the existence of such default, appoint such successor or
successors, until a successor trustee shall be appointed by the holders of the
bonds as herein authorized. The Republic shall publish notice of any such
appointment by it made at least once in each calendar week (in each instance
upon any day of the week) for four successive weeks in a daily newspaper
printed in the English language and published and of general circulation in the
borough of Manhattan, in the city and State of New York; but any new trustee
appointed by the Republic shall immediately and without further act be superseded by a trustee appointed by the holders of the bonds in the manner above
provided.
If in a proper case no appointment of a successor trustee shall be made
pursuant to the foregoing provisions of this article 0 within 60 days after the
resignation or removal of any trustee hereunder shall have taken effect or after
any trustee hereunder shall have become incapable of acting, any holder of
bonds or the retiring trustee may apply to any court of the United States (State
or Federal), having jurisdiction, to appoint a successor trustee, and such court
may, if it deems it proper, appoint a successor trustee.
Every trustee at any time appointed in succession to the trustee hereunder
shall be a bank ,or a trust company having an office in the borough of Manhattan in the city of New York and having a paid-up capital and surplus aggregating not less than $5,000,000, unless there be no such bank or trust company
fully authorized and qualified and willing to discharge the duties of the trustee
hereunder.
SEC. 4. If at any time or times in order to conform to aiiy legal requirement
in the Republic, and the trustee shall deem it desirable, the trustee shall have
the power to appoint and, if required by the trustee, the Republic shall unite
in the execution and delivery of all instruments and the performance of all acts
necessary or proper to appoint, some bank, company, firm, or responsible individual or individuals who may, if required, be residents of the Republic,
selected by the trustee, as cotrustee or cotrustees, or copledgee or copledgees
hereunder, jointly with the trustee originally named herein, or its successor or
successors, or to act as a separate trustee or trustees, or pledgee or pledgees
of the revenues at any time pledged hereunder and in either case with such of
the rights, powers, duties, and obligations herein conferred or imposed upon
the trustee as shall be stated in such instrument or instruments of appointment, the same to be exercised either jointly with the trustee or separately as
any such instrument may prescribe, and the Republic hereby irrevocably appoints the trustee its agent and attorney, without any further act by the
Republic to appoint any such cotrustee or copledgee and to execute, deliver, and
perform any and all instruments and agreements necessary or proper in connection therewith. The Republic will pay the reasonable fees and disbursements of any such cotrustee or copledgee.
Any new trustee appointed hereunder shall execute, acknowledge and deliver
to its or his cotrustee or cotrustees, or copledgee or copledgees, if any, and
also to the Republic and to the retiring trustee, if any, an instrument in
writing accepting such appointment hereunder and, thereupon, such new trustee,
without any further act, deed, or conveyance, shall become and be fully vested
with all the properties, interests, rights, powers, trusts, duties, and obligations
of his or its predecessor in the trust or, if a cotrustee hereunder, with all such
thereof as shall be described or set forth in the instrument of its or his appointment, with like effect as if originally named as trustee herein and hereby vested
with the same properties, interests, rights, powers, trusts, duties, and obligations ; but any trustee ceasing to act shall, nevertheless, on the written request
of the Republic, or of the new trustee, execute and deliver at the expense of the
Republic an instrument transferring to such new trustee, or to such new
trustee and its or his cotrustee, if any, upon the trusts herein expressed, all
of the interests, rights, powers, and trusts of the trustee so ceasing to act and
shall duly assign, transfer, and deliver all property and moneys held by or for
the account of such trustee to the new trustee. Should any instrument in
-writing from the Republic be required by the new trustee for more fully and
SALE OF FOREIGN" BONDS OE SECUBITIES
1395
certainly vesting in and confirming to such new trustee such properties, interests, rights, powers, and duties, or any thereof, any and all such instruments
in writing shall, on request, be executed, acknowledged, and delivered by the
Republic, but the execution, acknowledgment and delivery to the new trustee
of all such instruments in writing shall in no manner change or increase the
obligations incurred by the Republic under this trust agreement. In the event
of any resignation or removal of the trustee hereunder and the appointment
of a new trustee, the trustee shall (upon request of such new trustee or tlie
Republic) take such legal proceedings as may be required under the laws of
the Republic, either alone or in conjunction with the Republic and/or with
the new trustee for the purpose of divesting its interest as exclusive representative of the bondholders hereunder and vesting such interest in the new trustee.
Any trustee or trustees hereunder may, so far as may be lawful, at any time,
by an instrument in writing, constitute any other trustee hereunder its, his,
or their agent and attorney in fact, with power and authority, to the full
extent which may be permitted by law, to do all acts and things and exercise
all discretions hereunder in behalf and in the name of the trustee or trustees
executing such instrument.
SEC. 5. Any corporation into which the trustee, or any successor to it in the
trusts created by this trust agreement, may be merged or with which it, or any
successor to it, may be consolidated, or any corporation resulting from any
merger or consolidation to which the trustee, or any such successor to it, shall
be a party, provided such corporation shall be a bank or trust company authorized to transact business in the borough of Manhattan, in the city and State of
New York, shall he the successor trustee under this trust agreement without
the execution or filing of any paper or other act on the part of either of the
parties hereto, anything herein to the contrary notwithstanding. If any legal
proceedings are required under the laws of the Republic in order that any
successor corporation arising as a result of a merger or consolidation of the
trustee may succeed to the interest of the trustee herein to the pledged revenues,
the trustee shall take such legal proceedings, either alone or with the Republic
or in conjunction wtih such successor corporation as may be necessary to vest
in the successor corporation the interest of the trustee and the Republic covenants that if requested by the trustee it will take such legal proceedings either
alone or in conjunction with the trustee and/or such successor corporation as
in ay be necessary to vest in the successor corporation the interest of the
trustee. In case any of the bonds shall have been authenticated but not delivered, any such successor trustee may adopt the certificate of authentication
of the trustee or of any successor or successors to it as such trustee hereunder
and may deliver such bonds so authenticated; and in all such cases such
certificate shall have the full force which it is anywhere in said bond* or in
this trust agreement provided that the certificate of the trustee shall have.
SEC. G. Whenever, according to the provisions of this trust agreement, any
notice, request or instruction or order for the payment of money or delivery of
securities may be required to he given by one party to the other, it shall be
deemed sufficient notice, except as otherwise herein expressly provided, if
given in wilting in English, or in Spanish, as follows:
(а) If from the trustee to the Republic ( 1 ) by registered letter or (2) by
cablegram or radiogram and confirmed by registered letter, addressed to the
Minister of Finanec of the Republic at Lima, Peru.
(б) If from the Republic to the trustee ( 1 ) by registered letter or (2) by
cablegram or radiogram and confirmed by registered letter, addressed to the
trustee at its principal office in the city of New York over the signature of tbe
Minister of Finance of the Republic.
SEC. 7. The foregoing provisions of this Article I X are intended only for the
protection of the trustee and shall not be construed to effect any discretion or
power given to the trustee by any provision of this trust agreement.
ARTICLE
X
CONCERNING THE FISCAL AGENTS
SEC. 1. The Republic hereby confirms the appointment of J. & W . Seligman &
Co., a co-partnership doing business in the city of New York, as fiscal agents for
the service of the bonds. Any successor co-partnership, bank, bankers, or trust
company carrying on the business of the fiscal agents shall be deemed to be the
fiscal agents. The fiscal agents may resign their functions, powers, rights, and
1396
SAIiB OF FOREIGN" BONDS OR SECURITIES
duties hereunder and become and remain fully discharged from all further duty
and responsibility hereunder, upon (1) giving 30 days1 notice thereof in writing
sent by registered mail addressed to the Minister of Finance of the Republic, or
such shorter notice as the Republic may accept as sufficient, and (2) upon the
payment to their successors of any money on deposit with them under any provision of this trust agreement If the fiscal agents, or their successors, shall be
disqualified from acting as such by ceasing to exist, ceasing to do buiness or
ceasing to maintain an office in said borough of Manhattan, or shall resign as
fiscal agents, their successors shall thereupon be designated by the trustee.
In the event that the trustee shall fail to perform its duty to designate the
fiscal agents as aforesaid, then all the functions, powers, rights, and duties of
such fiscal agents shall devolve upon and be exercised by tlie trustee, and in
that case the trustee shall be entitled to the same compensation as is herein
provided for such fiscal agents, in addition to its fees for acting as trustee as
herein provided, and shall have the benefit of all the other provisions of this
trust agreement relating to the fiscal agents. The trustee shall incur no liability
for any action taken by it in such capacity, save for its gross negligence or
wilful default.
SEO. 2. All the usual expenses incurred in good faith by the fiscal agents in
connection with the drawing or purchase of bonds, and/or for the payment of
the principal of, and/or the premium or interest upon, the bonds, or otherwise
in the service of the bonds, including counsel fees, the cost of cabling, and the
publication of notices, etc., shall be paid by the Republic from time to time on
demand.
The Republic agrees to pay to the fiscal agents as compensation for their
services as such agents one-quarter of 1 per cent of all amounts paid to the
fiscal agents, for the sinking fund or for the payment of the principal of and
the interest and premium on any of the bonds, at maturity or by call for
redemption or otherwise, and also the reasonable expenses of the fiscal agents
in connection with such agency. Such compensation shall be payable at the
office of the fiscal agents in the city and State of New York semiannually on
the 1st day of March and the 1st day of September in each year, but such
expenses shall be paid from time to time upon demand of the fiscal agents. The
fiscal agents shall render to the Republic a statement or account at least 30
days prior to March 1 and September 1 in each year, setting forth in reasonable
detail all receipts and all payments and expenses made or incurred, or expected
to be made or incurred, by the fiscal agents in connection with such agency up
to and including the next succeeding March 1 or September 1, as the case may
be, together with a calculation of the sums due or to become due to the fiscal
agents for expenses and as compensation for their services as such fiscal agents,
rendered or to be rendered up to and including such date. Adjustment will be
made in each subsequent statement for any overpayments or underpayments
in respect of any estimated expenses previously paid.
Any moneys received by the fiscal agents or their successors under any provision of this trust agreement (anything herein to the contrary notwithstanding)
may be treated by them, until they are required to pay out the same conformably herewith, as a general deposit, and they shall not be required to segregate
any moneys deposited with them.. The fiscal agents shall allow to the Republic
on all deposits received by the fiscal agents for the service of the bonds of 1927,
interest at rates customarily allowed by banks or trust companies in the city
of New York on similar deposits under the rules of the New York Clearing
House. Such interest shall be allowed for the period or periods commencing
with the first day of the calendar month next succeeding the receipt of each
such deposit and ending on the date when such deposits are required to be disbursed in accordance with this trust agreement.
The general accounts connected with the bonds of 1927 and with the service
of the bonds of 1927 will be kept by the fiscal agents in the city of New York,
in dollars.
SEO. 3. The fiscal agents shall not incur any liability to anybody in acting
upon any notice, request, resolution, consent, certificate, note, communication,
telegram, cablegram, radiogram, bond, document, or paper believed by them to
be genuine and to have been signed by the proper person.
The fiscal agents shall be protected in relying upon a translation of any document executed in the Spanish language, if certified to them by the Minister of
Finance of the Republic or by the consul general of the Republic at New York
to be a correct translation of the original; but, in the absence of such certificate.
SALE OF FOREIGN" BONDS OE SECUBITIES
1397
the fiscal agents shall not be liable for any action or failure to take action by
them based upon a mistake in the translation of any such document.
The fiscal agents, save for their willful default, or for their gross negligence
after personal notice and distinct specification in writing thereof from some
person interested in the trust, shall not be personally liable to anybody.
The fiscal agents may select and employ in and about the execution of any
of the duties incumbent upon them hereunder, suitable agents, employees, and
attorneys and for their nets, defaults, and misconduct, if selected with reasonable care, the fiscal agents shall not be in any wise responsible.
The fiscal agents shall not be chargeable with notice or knowledge of any
default on the part of the Republic except upon delivery to them of a distinct
specification in writing of such default by some person or persons Interested
in the trust, whose interest, if required, must be proved to the reasonable
satisfaction of the fiscal agents.
The fiscal agents shall not be compelled to do nny act or to make any payments hereunder or in respect hereof, unless put in funds for the purpose.
Whenever any provision is made herein for the payment of moneys by the
fiscal agents at any time, the fiscal agents shall in no event be liable beyond
the amount of moneys deposited with them for such purpose.
SEC. 4. The recitals and statements herein and in the bonds and coupons
contained shall be taken as statements by the Republic and shall not be considered as made by or as imposing nny obligation or liability upon the fiscal
agents, nor shall the fiscal agents be held responsible for the legality or validity
hereof or of the bonds or coupons or of any supplemental agreement or of any
instrument or pledge or conveyance under any provisions of the laws of the
Republic or otherwise.
It is expressly understood that the fiscal agents shall not be under any duty
•or liability in respect to' any tax which may be assessed against them or against
the owners of the bonds hereby secured in respect of their interests in the
pledged revenues referred to in this trust agreement, nor shall the fiscal
agents be under any duty to p a y o r see to the payment of any such tax, or take
any notice of the assessment thereof or give any notice thereof to the holders
of the bonds secured hereby or to any other person.
SEO. 5. Whenever in this trust agreement the existence of any situation,
matter, conclusion of fact of any character, or the sufficiency or validity of
any instrument, paper, or proceeding, or of any proof or evidence of any fact
shall be prescribed as a condition of, or in any manner with respect to, any
action or proceeding on the part of the fiscal agents, or shall be deemed necessary or convenient to be ascertained by the fiscal agents, a certificate of the
Republic signed by its Minister of Finance shall in the discretion of the fiscal
agents be sufficient evidence of any such fact, situation, matter or conclusion,
and shall be complete protection to the fiscal agents for any act or proceeding
done or suffered on their part upon the faith thereof; but the fiscal agents
may in their reasonable discretion require other evidence.
The fiscal agents or any member of any firm or any officer of any corporation constituting the fiscal agents, may become the owners of bonds and coupons secured hereby or may engage in or be interested in any financial or other
transactions with the Republic or may act as depositary, trustee, or agent
for any committee or body of holders of bonds or securities, whether or not
secured hereby, all with the same rights which they would have if they were
not fiscal agents.
SEC. 6. The foregoing provisions of this Article X are intended only for the
protection of the fiscal agents, and shall not be construed to affect any discretion or power given to the fiscal agents by any provision of this trust agreement
ARTICLE 1 1 . — M O N E Y S HELD BT FISCAL AGENTS OB TRUSTEE
The Republic Irrevocably authorizes and directs the fiscal agents of the trustee, as the case may be, to pay, out of the moneys paid to them as hereinbefore
provided, the interest on the bonds to the bearers of the coupons upon presentation and surrender of such coupons and to pay the principal of the bonds at
maturity or, upon prior redemption, the principal of, and premium upon, the
bonds, to the bearers of the bonds on presentation and surrender thereof, and
to apply the moneys in the sinking funds to the redemption of the bonds as
hereinabove provided, and to make every such payment without further formal-
1398
SAIiB
OF
FOREIGN"
BONDS OR SECURITIES
ity except as the fiscal agents or the trustee may be advised to be necessary to
comply with some law of the State of New York or of the United States of
America. Any moneys so paid to the fiscal agents or the trustee which shall
not be required for the purpose for which such deposit was madef and any such
moneys remaining unclaimed by the holders of such bonds or coupons for six
years after the date of the maturity of the bonds or coupons, shall be paid by
the fiscal agents or the trustee, as the case may be, to the Republic, and the
holders of such bonds or coupons shall .thereafter be entitled to look only to
the Republic for payment thereof, provided that the fiscal agents or the trustee,
before being required to make any such payments may, at the expense of the
Republic, cause to be published once a week for not more than four successive
weeks in a daily newspaper printed in the English language and published and
of general circulation in the borough of Manhatton, in the city and State of
New York, notice that said moneys remain unclaimed as aforesaid, and that
after a date named therein, unless claimed by those entitled thereto they will
be returned to the Republic. If the trustee or the fiscal agents have knowledge
of the existence of any event of default or if the Republic is in default in the
payment of interest on any of the bonds, any moneys held by them and subject
to payment, repayment, or reversion to the Republic need not be so paid or
repaid, but may be held by the trustee or the fiscal agents as part of the trust
estate until such default or event of default has been remedied or waived pursuant to any of the provisions of article 7 hereof.
ARTICLE 12.—CONCERNING THE SPECIAL COLLECTIONS AGENCY AND THE PERUVIAN
REPRESENTATIVE
SECTION 1. In various portions of this trust agreement certain powers arevested in the "special collections agency." That term shall be construed to
mean the individual, firm, company, or corporation designated for the purposes,
and with the duties, among others, provided in article 7 hereof, by the trustee
in writing addressed to the Republic at its embassy at Washington. In various
portions of this trust agreement certain powers are vested in the 14 Peruvian
representative." That term shall be construed to mean the individual, firm,
company, or corporation similarly designated by the fiscal agents for the purposes, and with the duties, among others, provided in article 4 hereof. Any
special collections agency may, upon 60 days' written notice, delivered to the
trustee at its principal office in the city and State of New York, resign its trusts
and duties hereunder, and the trustee shall have the right to terminate the appointment of any such special collections agency upon giving 60 days' notice in
writing of its intention so to do to the then special collections agency hereunder,
and to the Republic. Upon any such resignation or termination of appointment
the trustee shall have the right to designate in the manner herein provided for
original appointment, a successor or successors for the special collections agency,
which shall have resigned or whose appointment shall have been terminated.
The Peruvian representative may upon 60 days' written notice deliver to
the fiscal agents at their principal office in the city of New York and State of
New York, resign its trust and duties hereunder, and the fiscal agents shall
have the right to terminate the appointment of any such Peruvian representative by giving 60 days' written notice in writing of its intention so to do to the
then Peruvian representative hereunder and to the Republic. Upon any such
termination the fiscal agents shall have the right to designate in the manner
herein provided for original appointment, a successor or successors to the
Peruvian representative who shall have resigned or whose appointment shall
have been terminated.
SEC. 2. The Peruvian representative shall give, if requested by the Republic,
a bond of a responsible surety company in favor of the Republic in the sum of
$100,000 as surety for the faithful discharge of his or its duties hereunder.
The expense of any such bond shall be paid by the Republic.
T h e special collections agency shall, if requested by the Republic, give a bond
of a responsible surety company in favor of the Republic in the sum of
$500,000 as surety for the faithful discharge of its or his duties. The expense
of any such bond shall be paid by the Republic.
SEO. 3. The Republic agrees to pay to the Peruvian representative as compensation for Its services in receiving and remitting deposits for the serviceof the bonds hereunder a commission of three-eigtlis of 1 per cent on the same
SALE OF FOREIGN" BONDS OE SECUBITIES
1399
•deposited with the Peruvian representative pursuant to this trust agreement,
-and will also pay all the reasonable expenses incurred in good faith by the
Peruvian representative in connection with its proper duties under this trust
agreement, such commission to be paid upon the deposit with the Peruvian
representative of any and all sums hereunder, and such expenses to be paid
upon demand.
The Republic agrees to pay to the special collections agency (if any) reasonable compensation for Its services, and also to pay all the reasonable expenses,
including the cost of the bonds provided for in section 2 of this article 12,
incurred in good faith by the special collections agency (if any) in connection
with its proper duties under this trust agreement, such compensation and
expenses to be retained out of pledged revenues collected by said special
collections agency (if any).
Any money received or collected by the Peruvian representative or by the
special collections agency under any provision of this trust agreement (anything herein to the contrary notwithstanding) may be treated by them, until
they are required to pay out the same conformably herewith, as a general
deposit, and they shall not be required to allow any Interest thereon to the
-Republic*
SEC. 4. Neither the Peruvian representative nor the special collections agency
shall incur any liability to any body in acting upon any notice, request, resolution, consent, certificate, note, communication, telegram, cablegram, radiogram,
bond, document, or paper believed by them or either of them to be genuine and
to have been signed by the proper person.
The Peruvian representative and the special collections agency shall be protected in relying upon any translation of a document executed in the Spanish
language, if certified to them by the minister of flinance of the Republic to be
a correct translation of the original; but, in the absence of such certificate,
neither the Peruvian representative nor the special collections agency shall be
liable for any action or failure to take action by them based upon a mistake
in the translation of any such document
Neither the Peruvian representative nor the special collections agency, save
for their wilful default, or for their gross negligence after personal notice and
-distinct specification in writing thereof from some person interested in the
trust, shall be personally liable to anybody.
The Peruvian representative and the special collections agency may select
and employ in and about the execution of any of the duties incumbent upon
them hereunder, suitable agents, employees, and attorneys, and for their acts,
defaults, and misconduct, If selected with reasonable care, the Peruvian representative and the special collections agency shall be in no wise responsible.
SEC. 5. The recitals and statements herein and In the bonds and coupons
contained shall be taken as statements by the Republic and shall not he considered as made by or as imposing any obligation or liability upon the Peruvian
representative or the special collections agency, nor shall the Peruvian representative or the special collections agency be held responsible for the legality
or validity hereof or of said bonds or coupons or of any instrument of further
•assurance under any provisions of the laws of the Republic or otherwise.
It is expressly understood that the special collections agcncy shall be under
no duty or liability in respect to any tax which may be assessed against them or
against the owners of the bonds hereby secured in respect to their interests
in the pledged revenues, nor shall the Peruvian representative or the special
collections agency be under any duty to pay or see to the payment of any such
tax, or take any notice of the assessment thereof or give any notice thereof
to the holders of the bonds secured hereby or to any other person.
Neither the Peruvian representative nor the special collections agency shall
be chargeable with notice or knowledge of any default on the part of the
Republic except upon delivery to them of a distinct specification in writing of
such default by some person or persons interested in the trust, whose interest,
if required, must be proved to the reasonable satisfaction of the Peruvian
representative and the special collections agency.
SEC. 6. Whenever in this trust agreement the existence of any situation,
matter, conclusion:^ fact of any character, or the sufficiency or validity of
any instrument, paper, or proceeding, or of any proof or evidence of any fact
shall be prescribed as a condition of or in any manner with respect to any
action or proceeding on the part of the Peruvian representatives or the special
1400
SAIiB
OF FOREIGN" BONDS OR SECURITIES
collections agency or shall he deemed necessary or convenient to be ascertained
by the special collections agency, a certificate of the minister of finance of the
Republic shall, in the discretion of the Peruvian representative or the special
collections agency, be sufficient evidence of any such fact, situation matter or
conclusion, or of the sufficiency or validity of any such instrument paper' or
proceeding, and shall be complete protection to the Peruvian representative,
or the special collections agency for any act or proceeding done or suffered
on their part upon the faith thereof; but the Peruvian representative and the
special collections agency may in their reasonable discretion require other
evidence.
The Peruvian representative, or the special collections agency or any member of any firm or officer of any corporation constituting the Peruvian representative, or the special collections agency, may become the owner of bonds
and coupons secured hereby or may engage in or be interested in any financial
or other transaction with the Republic or may act as depositary trustee or
agent for any committee or body of holders of bonds or securities* whether or
not secured hereby, all with the same rights which they would have if they
were not such Peruvian representative, such special collections agency, such
members, or officers.
SEO. 7. The foregoing provisions of this article 12 ate intended only for the
protection of the Peruvian representative and the special collections agency,
and shall not be construed to affect any discretion or power by any provision
of this agreement given to the Peruvian representative or to the special
collections agency.
ARTICLE 13.—DEFEASANCE CLAUSE
If the principal of, and premium and interest upon, all the bonds and all
costs, charges, and expenses incurred by the trustee a n d the fiscal agents
in relation thereto and all other sums payable hereunder by th e Republic shall
be well and truly paid at the times and in the manner in the bonds and herein
expressed, according to the tenor and effect thereof, this trust agreement shall
cease and determine, and upon proof being given to the reasonable satisfaction
of the trustee that all such payments have been made, or if at the maturity
of the bonds, whether by expiration of time or by call for redemption, the
Republic shall deposit with the fiscal agents for the benefit of the holder or
holders thereof the amount of the principal of, and preminum upon, all the
bonds and all the coupons then outstanding, together with all costs, charges,
and expenses incurred by the trustee, the fiscal agents, the Peruvian representative and special collections agency (if any), and all other sums payable
hereunder by the Republic, the trustee shall, upon the written request of the
Republic, cancel and satisfy this trust agreement and all agreements supplemental to this trust agreement.
ARTICLE 14.—SUNDRY PROVISIONS
SECTION 1. Whenever used in this trust agreement the word u trustee " shall be
held and construed to mean Central Union Trust Co. of N e w York, or its successor hereunder for the time being; the words "fiscal agents" to mean
J. & W . Seligman & Co., or their successor hereunder for the time being; the
words "Peruvian representative" to mean the individual, fl^ company, or
corporation constituting for the time being the Peruvian representative, as
hereinbefore defined in section 1 of article 12 hereof; the words "special
collections agency " to mean the individual, firm, company, 0 r corporation constituting for the time being the special collections agency, us hereinbefore
defined in section 1 of article 12 hereof; the words "fiscal'agents," "bond,"
" holder " and " bondholder," respectively, to include the plural as well as the
singular number; the word " holder " to mean the bearer of a n y bond or of any
coupons, and the word "coupons" to refer to the interest coupons attached
to the bonds; and the word "person" used with reference to a bondholder to
include firms, companies, or corporations owning any of said bonds.
SEC. 2. Payments of any and all sums of money pursuant to "any of the
provisions of this trust agreement shall be made in the city % n d State of New
York in gold coin of the United States of America of or equal to the standard
of weight and fineness existing on March 1,1927, unless t i e contrary Is clearly
expressed or otherwise appears from the context of such provisions.
SALE OF FOREIGN" BONDS OE SECUBITIES
1401
SEC. 3. This trust agreement may be executed in both the English language
and the Spanish language, but the English text thereof shall govern. It may
be executed in one or more counterparts, each of which shall be deemed to be
an original.
SEC. 4. In case any one or more of the covenants and agreements contained
in this trust agreement or in the bonds should be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining
covenants and agreements contained herein and in the bonds shall be in no
wise affected, prejudiced, or disturbed thereby.
SEC. 5. This trust agreement is entered into in the city of New York, in the
State of New York, in the United States of America, and shall be deemed tobe a contract executed under the laws of New York, United States of America,
and the provisions thereof shall be interpreted and construed in accordancewith the laws of the State of New York, as though it were to be performed
wholly within the territorial limits of said State.
SEC. G. Wherever reference is herein made to the Republic, it shall be deemed
to mean and Include any successor government which may at any time during
the life of this trust agreement govern the territory, or the greater part thereof,
now embraced within the territorial limits of the Republic.
In witness whereof Rcpublica del Peru has caused this trust agreement to be
signed in its name by his exccllency, the Hon. Hernan Velarde, the ambassador
of the Republic to the United States of America, or other representative of the
Republic thereunto duly empowered, and Central Union Trust Co. of New York
has caused this trust agreement to be executed in its corporate name by its
president or an assistant vice president and its corporate seal to be hereunto
affixed and attested by its secretory or an assistant secretary as of the day
and year first above written.
REPUBIICA DEL PERU,
B y HERNAN VELARDE.
Signed and delivered by Rcpublica del Peru in the presence o f :
PHILIP E . BRADLEY.
J. MILLER WALKER.
CENTRAL UNION TRUST CO. OP NEW YORK,
By F. WOLFE, Assistant Vice President.
Attest:
[SEAL.]
J. T. HARRIDAN, Assistant
Secretary.
Signed, scaled, and delivered by Central Union Trust Co. of New York in
the presence o f :
F . E . EGLY.
R . P . MCGUIRK.
STATE OF NEW YORK,
County of New York, ss;
On the Gth day of April, in the year 1927, before me personally camc his
excellency the Hon. Hernan Velarde, to me known and known to mc to be the
ambassador of Rcpublica del Peru to the United States of America, and to be
the person who signed the above instrument on behalf of Rcpublica del Peru,
and he acknowledged to me that he had executed the above instrument as the
act of the Republica del Peru.
Witness my hand and notarial seal this Gth day of April, 1927.
[NOTARIAL SEAL.]
T . J . HAUGH,
Notary Public, Queens County No. 125.
Certificate filed in New York County No. 379.
Term expires March 30, 1929.
New York registered No. 9317.
STATE OF NEW YORK,
County of New York, ss:
On the Gth day of April, in the year 1927, before me personally came F. Wolfe,
to me known, who being by me duly sworn, did depose and s a y :
That he resides in Merrick, Long Island; that he is an assistant vice president of Central Union Trust Co. of New York, the corporation described in and
which executed the above instrument; that he knows the seal of said corpora-
1402
SAIiB OF FOREIGN" BONDS OR SECURITIES
tion * that the seal affixed to said instrument is such corporate seal; that it was
so affixed by order of the board of trustees of said corporation; and that he
signed his name thereto by like order.
Witness my hand and notarial seal this 6th day of April, 192*.
[NOTARIAL SEAL.]
.
T . J . HATTOH,
Notary Public, Queens County
1
Certificate filed in New York County No. 379.
T e r m expires March 30, 1929.
'Exhibit-A.—Table
N e w Y o r k register No. 9317,
of amortization
Semian
nual pay- Interest
payment
ment
Sept. 1, 1927
Mar. 1, 1928
Sept. 1,1928...
Mar. 1, 1929
Sept. 1,1929
Mar. 1,1930
Sept. 1, 1930
Mar. 1, 1931
Sept. 1,1931—
Mar. 1,1932
Sept. 1, 1932
Mar. 1, 1933
Sept. 1, 1933. —
Mar. 1,1934
Sept. 1, 1934...
Mar. 1,1935....
Sept. 1, 1935
Mar. 1, 1936
Sept. 1,1936
Mar. 1,1937....
Sept. 1, 1937..
Mar. 1, 1938
Sept. 1,1938
Mar. 1, 1939
Sept. 1, 1939
Mar. 1,1040
Sept. 1, 1940
Mar. 1, 1941
Sept. 1,1941
Mar. 1,1942...
Sept. 1,1942
Mar. 1, 1943
Sept. 1,1943
Mar. 1,1944
Sept. 1,1944
Mar. 1, 1945
Sept. 1, 1945..
Mar. 1,1946
Sept. 1,1916
Mar. 1,1947
Sept. 1,1917.
Mar. 1,1948
Sept. 1,1948
Mar. 1,1949
Sept. 1,1949
Mar. 1,1950
-
-
-
-
-
——
—
—
-
-
-
—
-
i
;
-
_
—
„ . _ —
SS^'MS?
Mar. 1,1951
Sept. 1,1951
Mar. 1, 1952
Sept. 1,1952
Mar. 1,1953
Sept. 1, 1953-...
Mar. 1,19a4<. -
—:
s?pt. £ 1954
S
^ - i '1,J 1955
SS
Sept.
-
Mar. 1,1956
SP^HSS
-
Mar. 1,1957
sept.i,i9*r
Mar. 1,1958
Sept.
Mar. 1,1958
1,1959
_____
No. 725.
Applicable to
sinking
fund
Principal
a-nount Bonds outof bonds
standing
to be
retired
75,000
525,000
77,485
522,515
80,075
519,925
82,735
517,265
85,500
514,500
88,352
511, G48
91,292
508,708
94,337
505,663
97,487
502,513
100,725
499,275
101,085
495,915
107,507
492,433
111, 137
488,863
114,847
485,153
118,680
481.320
122,635
477,3G5
126,730
473,270
130,947
469,053
135,305
464,695
139,820
460,180
144,475
455,525
149,305
450,695
154,275
445,725
159,420
440,580
164,740
435,260
170,217
429,783
175,905
424,095
181,767
418,233
187,822
412,178
194,087
405,913
200,545
399,455
207,230
392,770
214,142
385,853
221,282
378,718
228,650
371,350
236.280
363,720
244,155
355,845
252,292
347,703
260,710
339.290
269,390
330,610
278,367
321,633
237,642
312,358
297,232
302,768
307,155
292,845
282,608 317,392
327,962
272,038
338,900
261,100
WOOO 249,813 350,187
361,860
238,140
600,000
373,935
226,065
600,000
386,395
213,605
600,000
399,275
200,725
600,000
412,575
187,425
600 000
426,330
173,670
: : : 600,000
440, MO
159,460
600 OOO 144,778
455,222
: : : : : : : : : 6 0Z0 0f 0Z
470,412
0
129,588
600,000
486,092
113,908
eoo qoO
502.280
97,720
619,027
80,973
600 000
536,335
63,665
600 000
564,202
45,798
;::
672,682
27,318
600 000
591,775
8,225
600 000
600,000
W0,000
—
600,000
600,000
000,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
.
600,000
600,000
600,000
600,000
600.000
600,000
„ _ _ 600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
______ 600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
, 600,000
600,000
600.000
600,000
:::::::::::: aSSS
71,000
74,000
70,000
79,000
81,500
84,000
87,000
90,000
92,500
90,000
99,500
102,000
106,000
109.500
113,000
117,000
120,500
124,500
129,000
133,000
138,000
142,000
147,000
152,000
156,500
162,500
167,500
173,000
179,000
184,500
191,000
197,500
204.000
210,500
218,000
225,000
232,500
210,500
248,000
256,500
265,000
274,000
233,500
292,600
302,000
312,500
322,500
333,500
345,000
356,000
368,000
380,000
393,000
406,000
419,500
434,000
448,000
462,500
478,500
494,500
510,500
528,000
545,500
235,000
14,929,000
14,855,000
14,779,000
14,700,000
14,618,500
14,534,500
14,447,500
14,357,500
14,265,000
14,169,000
14,069,500
13,967,500
13,861,500
13.752,000
13,639,000
13,522,000
13,401,500
13,277,000
13,1*8,000
13,015,000
12,877,000
12,735,000
12,588,000
12,436,000
12,279,500
12,117,000
11,949,500
11,770v 500
11,597,500
11,413,000
11,222,000
11,024,500
10,820,500
10,610.000
10,392,000
10,167,000
9,934.500
9,694,000
9,446,000
9,189,500
8,921500
8.650,500
8,367,000
8,074,500
7 772,500
7.460,000
7,137,500
6,804,000
6 459,000
6,103,000
5,735,000
355,000
4 962,000
4.556,000
4,136,500
3 702,500
3 2M.500
2 792,000
2 313,500
1 819,000
1 308,500
'750,600
235,00°
SALE OF FOREIGN" BONDS OE SECUBITIES
1403
EXHIBIT NO. 7
BOND PURCHASE AGREEMENT BETWEEN REPUBLICA DEL PERU (REPUBLIC OF PERU)
AND J. & W . SEUGMAN & Co. AND THE NATIONAL ClTY CO., DATED DECEMBER
10, 1 9 2 7 — $ 5 0 , 0 0 0 , 0 0 0 PERUVIAN NATIONAL LOAN, C PER CENT EXTERNAL SINKING FUND GOLD BONDS, FIRST SERIES
Agreement, dated December 19, 1927, between Republica del Peru (Republic
of Peru), hereinafter called the Republic, acting by his excellency, Senor Don
Manuel G. Masias, the Minister of Finance of the Republic, thereunto duly
authorized by supreme resolution dated December 18, 1927,' issued with the
approval of the council of ministers, and J. & W . Seligman & Co., a copartnership of the city and State of New York, United States of America, acting by
Broderiek Haskell, jr., thereunto duly authorized, and the National City Co.,
a corporation duly organized and existing under the laws of the State of New
York, United States of America, acting by Claude \\\ Calvin, thereunto duly
authorized, hereinafter collectively called the bankers.
The Republic makes the following representations:
The Republic has entered into a fiscal agency ami loan agreement, dated as
of December 1, 1927, with J. & W . Seligman & Co. and t h e National City
Bank of New York (hereinafter called the 11 seal agency aiul loan agreement) f
a true and correct copy of which is annexed hereto, made a part hereof, and
marked " Exhibit A , " providing for the creation of an external loan to be known
as the Peruvian national loan (hereinafter called the loan) to consist of bonds
to be issued in series, and for the issue of a first series of the bonds of the
loan limited to the principal amount of $50,000,000 in gold coin of the United
States of America, the bonds of said first series to be known as the Peruvian
national loan 0 per cent external sinking fund gold bonds, first series (hereinafter called the first series bonds), on the terms and conditions in the fiscal
agency and loan agreement set forth.
The Republic desires to Issue and sell to the bankers and the bankers desire
to purchase from the Republic said $50,000,000, principal amount, of first series
bonds upon the terms and conditions hereinafter in this agreement set forth.
Now, therefore, this agreement witnesseth that, in consideration of the
premises and of the mutual covenants and agreements hereinafter contained,
the parties hereto have agreed, and do hereby agree, as follows:
ARTICLE I
SECTION 1. Subject to all the terms and conditions of this agreement, the
Republic agrees to sell and deliver to the bankers and the bankers agree to
purchase from the Republic and pay for, all said $50,000,000, principal amount
of first-series bonds, to be issued under and in accordance with said fiscal
agency and loan agreement, at the price of S6 per cent of the principal amount
thereof plus accrued interest to the date of delivery of the first series bonds
to the bankers or to the date of the issue of interim receipts pursuant to the
provisions of this agreement, whichever date shall be earlier, plus one-half of
the amount (if any) by which tlie price at which the first-series bonds are
offered by the bankers for public subscription, exclusive of accrued interest,
exceeds 92*£ per cent of the principal amount thereof. Delivery of and payment for tlie $50,000,000, principal amount, of first series bonds shall be made
at the office of J. & W . Seligman & Co., in the Borough of Manhattan, in the
city and State of New York, on a date to be specified by the bankers in a cable
notice to the Republic to be sent at least three days previous to the date so
specified and which specified date shall be not less than 10 days nor more than
20 days after the date on which the bankers' advertisement publicly offering
the first-series bonds for subscription appears in a newspaper in the city of
New York, provided that by mutual agreement between the Republic and the
bankers the time for the delivery of and payment for said first series bonds
may be advanced to such earlier date or extended to such later date as may be
fixed by such agreement. The bankers agree, subject to all the terms and conditions of this agreement, to make such public offering on or before January
31, 1928, provided, however, that the bankers may make such public offering
on a "when, as and if issued and received by the bankers and subject to the
approval of Peruvian and American counsel" basis.
SEC. 2. Delivery of the first-series bonds shall be made either in the form of
one temporary bond In the denomination of $50,000,000, or if the bankers so
1404
SAIiB
OF FOREIGN" BONDS OR SECURITIES
request, in the form of temporary, bonds in such denominations and such proportions of each denomination as the bankers may request, and in either case
exchangeable for definitive engraved first-series bonds when ready for delivery.
First-series bonds in definitive engraved form shall be executed and be in such
form as to comply with the listing requirements of the New York Stock
Exchange.
Payment for the first-series bonds shall be made by crediting the amount of
the purchase price therefor (less an amount estimated by the bankers to be
sufficient to cover the expenses agreed to be paid
the Republic as hereinafter
in section 4 of Article III hereof provided) with the fiscal agents of the Republic, appointed under said fiscal agency and loan agreement, for the account of
the Republic. The Republic agrees to instruct the fiscal agents to retain out of
the amount so credited to the account of the Republic, an amount equal to the
monthly payments for interest and amortization on the first-series bonds accrued
thereon from December 1, 1927, to the date of said deposit and to apply such
moneys to the service of the first-series bonds in accordance with the provisions
of the fiscal agency and loan agreement. The t balance so credited to the
Republic shall be held by the fiscal agents and disposed of by them from time to
time as provided in section 8 of Article V of the fiscal agency and loan
agreement.
SEC. 3. If the first-series bond or bonds in temporary form are not delivered
on the date specified in such notice by the bankers in accordance wTith section
1 of this article and the bankers shall extend the time for delivery of the firstseries bond or bonds in temporary form, the bankers may issue or cause to be
issued interim receipts exchangeable for first-series bonds, in temporary or
definitive form, when, as, and if issued and received by the bankers and subject
to the approval of their Peruvian and American counsel. Said interim receipts
shall also provide that if for any reason the Republic shall fail to deliver the
temporary first-series bond or bonds within the period of any extended time
for such delivery granted by the bankers in accordance with the terms of this
agreement, the holders of the interim receipts shall be entitled to receive a
refund of the retail purchase price of the first-series bonds represented thereby
(including the accrued interest paid as a part of such purchase price) with
interest at the rate of C per cent per annum on the principal amount of the
first-series bonds represented thereby from the date of the issue of the interim
receipts until the date fixed for such refund; and in case such interim receipts
are issued and the Republic fails to deliver the first-series bonds within the
period of any extended time granted by the bankers for the delivery of firstseries bonds hereunder, the Republic hereby covenants and agrees to pay to the
bankers on demand, for account of the holders of such interim receipts, the full
amount of such interest.
If the Republic shall deliver one temporary first-series bond in denomination
: Of $50,000,000, the bankers may issue or cause to he issued interim certificates
representing pro rata interests in such temporary first-series bond exchangeable
for definitive engraved first-series bonds when prepared and exchanged for
said temporary first-series bond.
ARTICLE I I
SECTION 1. The obligation of the bankers to purchase and pay for the
$50,000,000, principal amount, of first-series bonds as provided in Article I of
this agreement is subject to the conditions that on or before the date for the
delivery of and payment for the first-series bonds:
(a) All acts, deeds, and proceedings required by the constitution and laws
of the Republic and by the provisions of said fiscal agency and loan agreement
precedent to the issue of the first-series bonds and to render said first-series
bonds, said fiscal agency and loan agreement and this agreement, the valid and
binding obligations of the Republic in accordance with their terms shall have
been performed, shall have happened, and shall have been taken, and the
Republic shall have delivered or caused to be delivered to the designated representative of the bankers in Peru duly authenticated copies of all laws ana
; decrees or other instruments authorizing the execution of this agreement and
of said fiscal agency and loan agreement and the creation, issue, and sale of
the first-series bonds;
(ft) The bankers shall have received an opinion of their American counsel
and of their Peruvian counsel (in form satisfactory to their American counsel)
approving the proceedings of the Republic taken to authorize the execution of
SALE OF FOREIGN" BONDS OE SECUBITIES
1405
this agreement and of said fiscal agency and loan agreement, the creation of the
Peruvian national loan and the creation, issue, and sale of the first-series bonds
in accordance with the terms of said fiscal agency and loan agreement and this
agreement, to entrust to the Caja de Depositos y Consignaciones the collection
or deposit of revenues pursuant to law No. f>931 of the Republic, and in performance of all other matters to be performed precedent to the issue of the first
series bonds, as provided in said fiscal agency and loan agreement, and approving the sufficiency of all action taken for said purposes, and stating in substance
that said fiscal agency and loan agreement is the valid and binding obligation of
the Republic in accordance with its terms and that all the first-series bonds and
the coupons appurtenant thereto, in both temporary and definitive form, when
executed and delivered in accordance therewith, will be the valid and binding
obligations of the Republic in the hands of holders of any citizenship or residence
whatsoever, in accordance with their terms, and that this agreement, when executed and delivered as herein provided. will be the valid and binding obligation
of the Republic in accordance with its terms, and approving all other legal details in connection with the creation of the loan and the issue and sale of the
first series bonds;
(o) The Republic and the reserve bank shall have entered into an agreement
in form satisfactory to the bankers* counsel to cooperate fully in stabilizing the
Peruvian currency at approximately the level of exchange existing at the date
of this agreement until such time as the fiscal agents and the Republic shall
agree upon a plan of stabilization;
(<Z) The Republic shall have outlined fully for the bankers' information its
public works program for the 3-year period commencing on the date of this
agreement with ail such supporting data as the bankers may request
SEC. 2. The bankers shall have the absolute right at any time to terminate
their obligations to make a public offering of the first-series bonds and to purchase and pay for the first-series bonds under this agreement, by written or
cabled notice to the Republic, if, in their opinion, political, financial, or economic
conditions render it inadvisable to offer the first-series bonds to the public in the
United States of America or in Europe. If the obligations of the bankers shall
be terminated in accordancc with the right of termination reserved in this section, the Republic covenants that it will forthwith pay or reimburse the bankers
for all expenses of the character specified in section 4 of article 3 hereof to be
paid by it, incurred to the date of such termination.
SEC. 3. If the Republic shall fail or be unable to make delivery of the first
series bonds within the time and under the conditions specified in this agreement, Including any extended time which may be granted by the bankers for
such delivery:
(а) The obligation of the bankers to take and pay for the first series bonds
may, at their option, be terminated by written or cabled notice to the Republic,
and thereupon the obligation of the bankers to take and pay for the first series
bonds, and the obligation of the Republic to deliver the same under the terms
of this agreement shall cease and terminate; and
(б) The Republic shall forthwith, upon receipt of such notice of termination, pay to the bankers the sum of $200,000 in cash to reimburse the bankers
for their expenses incurred in connection with the matters covered in this
agreement and as compensation for their services rendered to the Republic to
the date of such termination.
ARTICLE 3
SECTION 1. As soon as practicable after the execution of this agreement the
Republic will deliver or cause to be delivered to the bankers a prospectus letter
or letters signed by the Minister of Finance of the Republic or other representative of the Republic satisfactory to the bankers, containing such informaton concerning the resources and financial condition of the Republic, including
its debts, income and expenditures, financial administration and such other
matters as the bankers may request, and in such form as may be satisfactory
to the bankers* counsel, for use in connection with the offering or sale of such
first-series bonds in the United States of America and elsewhere, and the
prompt receipt by the bankers of such prospectus letter or letters shall be a
condition precedent to the obligation of the bankers to make the public offering
of the first series bonds as in article 1 of this agreement provided.
SEC. 2. If the sale and purchase of the first-series bonds shall be consummated
as herein provided, the Republic will, at the request of the bankers, and at
its own expense, make application to list all the first-series bonds purchased
1406
SAIiB OF FOREIGN" BONDS OR SECURITIES
by the bankers upon all the first-series bonds purchased by the bankers upon
the New York Stock Exchange and such principal European stock exchangesas the bankers may request, and the Republic will furnish when and as required
such information and data as may be necessary for such purpose.
SEO. 3. The bankers, in their sole discretion, may choose and have in the
purchase, of the first-series bonds and in any offering thereof to the public such
associates as they may determine.
SEC. 4. The Republic will pay the cost of printing this agreement and thefiscal agency and loan agreement, the cost of printing or engraving, executing,
and authenticating the temporary and definitive first-series bonds and the interim,
receipts or interim certificates which may be issued (if any), the expenses of
exchanging interim receipt or interim certificates for temporary or definitive
first-series bonds or for cash, the expenses of exchanging the temporary firstseries bonds for the definitive first-series bonds and the expense of listing the
first series bonds on the New York Stock Exchange and the principal European
stock exchanges on which the first-series bonds may be listed. The Republic
will also pay all stamp taxes and other duties and assessments, if any, to
which under the lawrs of the Republic or of any foreign country in which any
of the first series bonds are issued by the Republic or sold by the bankers or
their associates, or of any political subdivision or authority thereof or therein,
this agreement, the fiscal agency and loan agreement, tlie first-series bonds,,
temporary or definitive, or the interim receipts or the interim certificates may be
subject. The Republic will also reimburse the bankers for all their expenses,
exclusive of marketing expenses, in connection with their negotiations with the
Republic for the creation of the Peruvian national loan and the sale to them of
the first-series bonds, including their cable expenses and the fees and disbursements of their Peruvian and American counsel, provided that the amountof such reimbursement as provided in this sentence shall not exceed one-half
of 1 per cent of the total principal amount of the first-series bonds.
SEC. 5. The Republic agrees that if the sale and purchase of the first-seriesbonds shall be consummated as in this agreement provided, it will not offer for
sale any issue of bonds or notes, or permit any issue of bonds or notes guaranteed by it to be offered for sale, in the United States of America, in Canada,
or in Europe, within a period of 12 months after the date of the public offering:
of the first-series bonds without the written consent of the bankers.
SEO. 6. In consideration of the purchase of the first-series bonds and of the
services rendered and to be rendered by the bankers pursuant to this agreement,
the Republic hereby grants to the bankers a preferential right to purchase the
bonds of any and all additional series of the Peruvian national loan which may
be issued during a period of three years from the date of issue of the first-scries
bonds, on the most favorable terms to the bankers which the Republic is willing
to- accept from any other purchaser or purchasers, and the Republic further
covenants that it will not within such 3-year period issue or offer for sale any
bonds of any additional series of the Peruvian national loan without first giving to the bankers a 45-day option to purchase such bonds on terms at least as
favorable to the bankers as the Republic is willing to accept from any otherpurchaser or purchasers.
ARTICLE 4
SECTION 1. Any notice, request, or instruction required or permitted to be
given hereunder by one party to the other shall be deemed suflicient if given
in the manner expressly provided herein, or, if no manner be expressly provided,,
in English in writing, or by cable confirmed in writing, as follows:
(a) If from the bankers to the Republic, over the signature of J. & W.
Seligman & Co. and addressed to the Minister of Finance of the Republic at
Lima, Peru; and
(&) If from the Republic to the bankers, over the signature of the Minister
of Finance of the Republic delivered to J. & W. Seligman & Co., at No. 54 Wall
Street, New York, N. Y., U. S. A.
SEC. 2. Any reference in this agreement to^the bankers shall be deemed tomean and include any successor firm, association, or partnership continuing the
respective businesses of J. & W . Seligman & Co. and the National City Co.
The bankers may associate with themselves in the purchase of the first series
bonds such other banks or banking firms as they may desire. Any reference in
this agreement to the Republic shall be taken to mean and include any successor
sovereign government which may at any time during the life of this agreement
1407
SALE OF FOREIGN" BONDS OE SECUBITIES
govern tlie major portion of tlie territory now embraced within the territorial
boundaries of the Republic.
SEC. 3. This agreement shall be executed in the English language and may
be executed in one or more counterparts, each of which shall be deemed to be
an original. There shall be attached to each executed counterpart a duly
authenticated copy of the supreme resolution hereinabove mentioned.
This agreement shall be interpreted and construed in accordance with the.
laws of the State of New York, in the United States of America, as though
it had been made and were to be performed wholly within the territorial limits
of said State.
IN WITNESS WHEREOF the Republica del Peru (Republic of Peru) has caused
this agreement to be executed on its behalf in three counterparts by his excellency Sefior Don Manuel G. Masias, the Minister of Finance of the Republic,
thereunto duly authorized, as aforesaid^ and J. & W\ Seligman & Co. has caused
this agreement to be signed on its behalf in a like number of counterparts by
Broderick Haskell, jr., its attorney in fact, thereunto duly authorized, and
the National City Co. has caused this agreement to be executed on its behalf in
a like number of counterparts by Claude \V. Calvin, its attorney in fact, thereunto duly authorized, all as of the day and year first above written.
REPUBLIC DEL PERU,
B y M . G . MASIAS,
Minister
of
Finance.
J. & AY. SELIGMAN & Co.,
B y BRODERICK HASKELL, Jr.,
Attorney
T H E NATIONAL CITY
B y CLAUDE W . CALVIN,
Attorney
in Fact.
CO.,
in Fact.
EXHIBIT NO. S
AGREEMENT BETWEEN REPUBLICA DEL PERU (REPUBLIC OP PERU) AND J. & W .
SELIGMAN & Co. AND THE NATIONAL CITY BANK OF NEW YORK, DATED AS OF
DECEMBER 1, 19127—PERUVIAN NATIONAL LOAN FISCAL AGENCY AND LOAN
AGREEMENT
Agreement, dated as of December 1, 15)27, between Republica del Peru (Republic of Peru), hereinafter called the Republic, acting by hisr excellcncy, Senor
Don Manuel G. Masias, the Minister of Financc of the Republic, thereunto duly
authorized by supreme resolution dated December 18, 1927, issued with the
approval of the council of ministers, and J. & W . Seligman & Co., a copartnership of the city and State of New York, United States of America, acting by
Broderick Haskell, jr., thereunto duly authorized, and The National City Bank
of New York, a corporation duly organized and existing under the national
banking laws of the United States of America, acting by Claude W . Calvin,
thereunto duly authorized, hereinafter collectively called the fiscal agents.
The Republic makes the following representations:
(а) The Republic has outstanding at the date hereof external loans and obligations in the aggregate principal amount of approximately $01,708,321, currency of the United States of America (the principal amount of loans and
obligations payable In other currencies having been converted into dollars for
the purpose of this computation at approximately the current rates of exchange), some or all of which loans and obligations are secured by liens or
charges upon various of the revenues and assets of the Republic. The gross
amount of the annual charges for the service of all such external loans and
obligations at the date hereof is approximately
(>20,417, similarly computed*
(б) The Republic has outstanding at the date hereof internal loans or obligations in the aggregate principal amount of approximately 3,927,064 Peruvian
pounds, some or all of which are secured by liens or charges on various of the
revenues of the Republic. The gross amount of the annual charges for the
service of all such internal loans and obligations at the date hereof is approximately 364,013 Peruvian pounds.
(c) There are outstanding loans or obligations guaranteed by the Republic,
or on which the Republic is in some manner contingently liable, in the aggregate
92928—32—PT 3
10
1408
SAIiB OF FOREIGN" BONDS OR SECURITIES
principal amount of $1,500,000, currency of the United States of America (the
principal amount of loans and obligations payable in other currencies having
been converted into dollars for the purpose of this computation at approximately
the current rates of exchange).
(d) The Republic desires (1) to refund all its existing external secured loans
and obligations, (2) to stabilize the value of the Peruvian national currency,
(3) to provide funds to subscribe for shares which it may be eligible to hold in
the Mortgage Bank of Peru (Banco Hipotecario del Peru), which the Republic
proposes immediately to establish by law, (4) to provide for its capital investment program, including the improvement and construction of the Callao harbor
dock and shipping facilities, and (5) to provide for its other present and future
governmental requirements; and in order to provide funds for such purposes
the Republic has determined to create, and by law No. 5930, enacted December
17, 1927, and promulgated December 18, 1927, has duly and validly authorized
the creation of an external loan, to be known as the Peruvian national loan and
to consist of bonds which shall be issued from time to time in series.
(e) In order to provide for its immediate requirements for the purposes hereinbefore in paragraph (d) referred to, and to repay the sums advanced or to be
advanced and otherwise payable in respect of the short-term credit granted to
and availed of by the Republic under an agreement dated as of December 1,
1927, between the Republic and the bankers, which moneys have been, or will
be, largely used for such purposes, the Republic desires presently to issue a first
scries of the bonds of the loan limited to $50,000,000, in gold coin of the United
States of America, aggregate principal amount, the bonds of which first series
shall be known as Peruvian national loan, 6 per cent external sinking-fund gold
bonds, first series.
,
Now, therefore, this agreement witnesseth that, pursuant to said law No.
5930 and in consideration of the premises and of the mutual covenants and
agreements hereinafter contained, the parties hereto have agreed, and do
hereby agree as follows:
ARTICLE 1—ISSUE, AUTHENTICATION AND DELIVERY OP BONDS—-CREATION OF
FIRST SERIES BONDS
SECTION 1. The Republic will forthwith, in conformity with its constitution
and laws, create an external loan to be known as the Peruvian national loan
(herein called the loan), to consist of bonds (herein called the bonds), which
shall be issued in series as hereinafter provided. The bonds of the loan shall
be issued in accordance with law No. 5930 of the Republic, enacted December
17,1927, and promulgated December 18,1927.
SEO. 2. From time to time and at any time after the execution of this agreement, the Republic may execute a first series of the bonds, to the aggregate
principal amount of $50,000,000, and deliver the same to the fiscal agents,
who shall thereupon authenticate the same as hereinafter provided and deliver
them to or upon the order of the Republic. The bonds of said first series shall
be known as Peruvian national loan, 6 per cent external sinking-fund gold
bonds, first series (hereinafter called the first series). The aggregate principal amount of first series boiSds Issued and outstanding under this agreement shall not at any time exceed the principal amount of $50,000,000, except
as provided in section 11 of this article.
*SEC. 3. From time to time the Republic may issue, and the fiscal agents may
authenticate and deliver, or cause to be authenticated and delivered, additional series of bonds of the loan, subject, however, to all the terms, restrictions, and covenants relating to such additional series of bonds in this agreement contained.
SEC. 4. The first-series bonds shall be in coupon form, payable to bearer,
shall be dated December 1,1927, shall mature December 1, 1960, and shall bear
interest from December 1, 1927, at the rate of 6 per cent per annum, payable
on June 1 and December 1 in each year. First-series bonds shall be of the
^denominations of $1,000 and $500 and, if the fiscal agents so request prior to the
time of issue thereof, in other denominations, and in such amounts of each
denomination as the fiscal agents may so request; and such first-series bonds
of any or all such denominations may be made interchangeable for first-series
bonds of any or all the other such denominations, as the fiscal agents may so
request and as shall be specified in such first-series bonds.
SEC. 5. The principal of, and interest upon, the first-series bonds shall be
payable, at the option of the holders, in the borough of Manhattan, in the city
SALE OF FOREIGN" BONDS OE SECUBITIES
1409
and State of New York, United States of America, at the principal office of
either of tlie fiscal agents, in gold coin of the United States of America, of or
equal to the standard of weight and fineness existing December 1, 1927: Provided, however, That the fiscal agents may arrange, and the bonds may specify,
that first-series bonds and the interest coupons annexed thereto are payable
alternatively, at tlie option of the holders, in such other place or places, at
the office or offices in such place or places of paying agents (appointed as hereinafter provided), in such other foreign currency or currencies as the fiscal
agent shall so arrange, at the bankers* buying rate for dollar sight exchange on
the city of New York at the time of presentation for payment in such place
or places.
Sea 6. The principal of, and interest upon, all the first series bonds, shall
be paid in time of war as well as in time of peace and irrespective of the
citizenship or residence of the holders thereof, and shall be paid free from and
without deduction or diminution for any taxes, assessments, charges, levies, or
duties of any nature, now or at any time hereafter imposed, levied, or assessed
by the Republic, or by any province, district, municipality, or other taxing
authority thereof or therein.
SEC. 7. The text of the definitive engraved first series bonds and of the
coupons to be annexed thereto and of the certificate of authentication to be
indorsed on the first series bonds shall be substantially as set forth in Exhibit
A annexed hereto and made a part hereof, with such variations, additions, or
omissions consistent with the provisions of this agreement as may be required
by the fiscal agents prior to the issue thereof. The text of the definitive engraved bonds of each additional series of the loan and of the coupons to be
annexed thereto and of the certificate of authentication to be indorsed on such
bonds shall, so far ns appropriate, be substantially similar to the text of the
first series bonds set forth in said Exhibit A, with such variations, additions,
or omissions as to series designations, denominations, currency, or currencies in
which payable, manner and place or places of payment, language or languages
in which prepared, and otherwise, not inconsistent with the provisions of this
agreement, as may be required by the fiscal agents.
All bonds of the loan In definitive or engraved form shall bear the facsimile
signature of the present Minister of Finance of the Republic or of any future
Minister of Finance of the Republic or other duly designated representative of
the Republic satisfactory to the fiscal agents, shall be manually signed on behalf
of the Republic by its ambassador to the United States of America or other
representative of the Republic thereunto duly authorized and shall bear a
facsimile of the coat of nrms of the Republic as a seal of the Republic. The
bonds of each series of the loan of each denomination shall be consecutively
numbered in any usual manner approved by the fiscal agents. The coupons to
be annexed to each of the bonds of the loan In definitive engraved form shall
bear the facsimile signature of the present Minister of Finance of the Republic
or of any future Minister of Finance of tlie Republic, or other duly designated
representative of the Republic satisfactory to the fiscal agents.
SEO. 8. Only such bonds of the loan, whether in temporary or definitive form,
as shall bear Indorsed thereon a certificate of authentication substantially of
the tenor set forth in Exhibit A hereto attached, with appropriate variations
for the respective series, executed by the fiscal agents or one of them, as authenticating agent (or, in the case of bonds issued and made payable in a currency
other than United States of America dollars, executed by the fiscal agents or
one of them, or by one of the paying agents appointed as hereinafter provided
for the country in tlie currency of which such bond is payable, as authenticating agent), shall be valid or become obligatory for any purpose or entitled to
the benefits of this agreement, and such certificate shall be conclusive and the
only evidence that any such bond has been duly issued hereunder and that the
holder is entitled to the benefits of this agreement
SEO. 0. Pending the preparation of definitive engraved bonds of the loan of
any series one or more temporary typewritten, lithographed, or printed bonds
similar in tenor, but with such omissions, insertions, and variations as may
be appropriate and of such denomination or denominations as may be convenient, payable in one or more foreign currencies, and at one or more places,
and with or without coupons, as may be required, may be-issued, and* if issued,
shall be exchangeable when ready for delivery without expense to the holders
for a like aggregate principal amount of definitive engraved bonds of the same
series payable in the same currency or currencies. Bonds In temporary form
shall be manually signed on behalf of the Republic by Its Minister of Finance,
1410
SAIiB OF FOREIGN" BONDS OR SECURITIES
or by its ambassador to the United States of America, or by any other appropriate representative of the Republic thereunto duly authorized, satisfactory
to the fiscal agents, and all bonds of the loan in temporary form shall be impressed with the coat of arms of the Republic as a seal of the Republic, or
with the seal of the embassy of the Republic in Washington or with the seal of
some other appropriate embassy or legation of the Republ.c, or bear a facsimile
of any such seal; all as shall be found convenient, and be agreed upon by the
Republic and the fiscal agents. The coupon or coupons, if any, annexed to
bonds in temporary form, shall bear the facsimile signature of the Minister
of Finance of the Republic or other representative of the Ropublic thereunto
duly authorized satisfactory to the fiscal agents.
SEC. 10. Whenever any bond or bonds of the loan expressed to be interchangeable for a bond or bonds of the loan of the same series of another denomination or denominations of the same issue shall be presented for exchange,
with all unmatured coupons attached, the Republic shall execute, and, upon surrender to them of such bond or bonds and coupons, the fiscal agents shall authenticate and deliver, or cause to be authenticated and delivered, in exchange
therefor, a bond or bonds of the same series payable in the same currency as
the bond or bonds surrendered, to a principal amount equal to the principal
amount of the bond or bonds surrendered for exchange. All bonds so surrendered for exchange and the coupons attached thereto shall be canceled by
the fiscal agents and delivered to a representative of the Republic for that
purpose or sent by registered mail to the nearest embassy or legation of the
Republic, at the risk and expense of the Republic. Upon every exchange of
bonds the Republic may make a charge therefor sufficient to reimburse it for
any tax or taxes or other governmental charge required to be paid in connection
therewith, and in addition may charge a sum not exceeding $1 for each new
bond issue upon any such exchange.
The Republic agrees that it will at all times and from time to time, when and
as requested by the fiscal agents, and in advance of the actual need therefor,
provide the fiscal agents with a sufficient number of bonds of the loan of the
appropriate series and payable in the appropriate currency, duly executed by the
Republic and which when authenticated, exchanged, and delivered pursuant
hereto shall constitute the duly authorized obligations of the Republic, to take
care of exchanges of bonds as herein provided, which said bonds, however, in
no event shall be authenticated and delivered by the fiscal agents unless and
until required in connection with any such exchange.
SEC. 11. If any bond of any series of the loan, with the coupons thereunto
appertaining, shall become mutilated or be destroyed, stolen, or lost, the Republic shall execute, and thereupon the fiscal agents shall authenticate and deliver, or cause to be authenticated and delivered, a new bond of the same series
and denomination and payable in the same currency in exchange for such
mutilated bond and coupons or in substitution for such lost, stolen, or destroyed bonds and coupons. In case of destruction, theft, or loss the applicant
shall furnish the Republic and the fiscal agents, and any one or more of the
paying agents (appointed as hereinafter provided) which may be affected
thereby, with evidence, satisfactory to each of them, of such destruction, theft,
or loss and also furnish each of them such security and indemnity as the
Republic, the fiscal agents, and such paying agents may respectively require in
the absolute discretion of each of them. At the time of the delivery of any new
bond pursuant to the provisions of this section, the owner of such mutilated,
lost, stolen, or destroyed bond shall reimburse the Republic for any reasonable
expense incurred by the Republic, including counsel fees and the charges of the
fiscal agents in connection with the execution, authentication, and delivery of
such new bond, and also for any stamp tax or governmental charge incident to
the execution, authentication, and delivery of such new bond.
SEO. 12. Before authenticating and delivering any bonds of the loan all
coupons appertaining thereto at the time matured shall be detached and canceled by the fiscal agents and delivered to a representative of the Republic for
that purpose or sent by registered mail to the nearest embassy or legation of
the Republic at the risk and expense of the Republic.
ARTICLE 2.—PAYMENTS FOR THE SERVICE OF INTEREST AND AMORTIZATION
FIRST SERIES BONDS
ON
Until all the first series bonds shall have been paid or redeemed, the Republic
shall pay,' or cause to be'paid, in each semiannual period, beginning with
the semiannual period commencing on December 1, 1927, to the fiscal agents,
SALE OF FOREIGN" BONDS OE SECUBITIES
1411
at the office of J. & W . Seligman & Co., in the Borough of Manhattan, city and
State of New York, United States of America, for the semiannual service of
interest and amortization of the first series bonds, the sum of $1,750,000 in
gold coin of the United States of America of the standard aforesaid, which
semiannual sum is calculated to be sufficient to pay all interest charges and
provide a cumulative sinking fund to retire all the first series bonds at or before
maturity by semiannual drawings of bonds for redemption at their principal
amount All sums payable hereunder for the service of interest and amortization of the first scries bonds in respect of each semiannual period shall be
paid in monthly Installments as hereinafter in article 7 provided, and the fiscal
agents shall apply or cause to be applied such monthly installments to the
payment of interest upon, and as a sinking fund for the purpose of redemption
of, the first series bonds in the matter in said article 7 provided.
ARTICLE 3.—EXTRAORDINARY REDEMPTION
SECTION 1. The first series bonds shall be subject to redemption at the option
of the Republic, on June 1, 392S, and on any interest payment date thereafter, as
a whole or in part, at 100 per cent of their principal amount and accrued
interest to the date designated for redemption, on CO days previous notice,
as provided in section 2 of this article.
Bonds of additional series of the loan may be made subject to redemption,
at the option of tlie Republic, either as a whole or as a whole or in part, at
such time or times, but only on an interest payment date or dates, and at such
redemption price as the Republic may determine at the time of issue thereof
and specify in the bonds of such series.
SEC. 2. In case at any time the Republic shall desire to redeem the bonds of
the loan of any series which by their terms arc redeemable, either as a whole
or as a whole or in part, the Republic shall so notify the fiscal agents in
Writing, specifying the interest payment date (which shall not be less than 90
days after such notification) on which it desires to make redemption and the
principal amount of the bonds of each series which it desires to redeem. In the
case of partial redemption of any series wiiich has been issued in more than
one currency the fiscal agents shall determine the principal amounts of bonds
of such series originally issued in each currency which shall be redeemed, by
allocating, so far as may be practicable, to the redemption of bonds of such
series issued in each currency a proportion of the redemption moneys equal
to the proportion which tlie aggregate principal amount of all bonds of such
series issued in such currency bears to the aggregate principal amount of all
bonds of such series originally Issued in all currencies. In case of partial
redemption, the fiscal agents shall also determine, or cause to be determined,
by lot, in any usual manner deemed fair by*the fiscal agents, the numbers of
the bonds to be redeemed, and furnish, or cause to be furnished, a notarial
certificate thereof to the Republic. As soon as practicable thereafter the fiscal
agents shall, on behalf of the Republic, give or cause to be given, in each city
in which any of the bonds to be redeemed shall be payable, notice of tlie intention
of the Republic to pay and redeem such bonds, by an advertisement published
once a week for at least four consecutive weeks in each Instance upon any day
of the week, each publication to be made in at least one daily newspaper
published and of general circulation therein, the first publication to be at least
CO days, and not more than 90 days, before the date so fixed, specifying the
date of such proposed redemption and tlie redemption price, and, in case of
partial redemption, in the case of each city, tlie numbers of the bonds which
are to be redeemed and which may be presented therein for payment and
requiring that the bonds so called for redemption with all coupons maturing
on and after the redemption date annexed thereto be surrendered on or after
such redemption date, at the office of either of the fiscal agents or of any of
the paying agents at which such bonds may be presented for payment, for
redemption at said redemption price, and stating that the bonds so called for
redemption shall, on said redemption date, become due and payable, and, that,
unless default shall be made by the Republic in providing the moneys necessary
for such redemption as aforesaid, interest on such bonds shall cease to accrue
on such redemption date.
SEC. 3. The Republic shall, at least 30 days prior to the date so fixed for such
redemption as provided in the preceding section of this article, deposit with the
fiscal agents, at their principal office or offices in the city and State of New
York, a sum of money, in gold coin of the United States of America of the
1412
SAIiB
OF FOREIGN" BONDS OR SECURITIES
standard aforesaid (converting into dollars the amounts in other currencies
required for the redemption of the bonds issued and made payable in said
currencies at the gold parity of exchange existing at the date of issue of said
bonds), sufficient to redeem and pay the bonds so called for redemption at the
redemption price thereof together with the accrued interest thereon to the date
fixed for redemption, and the fiscal agents shall redeem and pay, or cause to be
redeemed and paid, but only out of such deposited moneys, all such bonds presented and surrendered for redemption on and after said redemption date at
the redemption price thereof together with accrued interest thereon to said
redemption date. Any moneys set aside, pursuant to subsection (a) of section
1 of article 7 hereof for the payment of interest maturing on said redemption
date on any first-series bonds which may be so called for redemption shall be
credited against the obligation of the Republic to deposit such accrued interest
as a part of the redemption price for first-series bonds. Similarly, any moneys
set aside for the payment of interest maturing on said redemption date on the
bonds of any other series of the loan which may have been called for redemption
shall be credited against the obligation of the Republic to deposit such accrued
interest as part of the redemption price for such bonds of such, series. The
Republic shall also pay to the fiscal agents, on demand, such additional sum*in
gold coin of the United States of America of the standard aforesaid, as may be
required in connection with the redemption of bonds of any series issued and
made payable in another currency at said gold parity of exchange, by reason uf
the fact that the cost of purchasing the required amount of the other currency
exceeds the equivalent in the United States of America gold coin of such
amount of the other currency at the gold parity of exchange existing at the
date of issue of said bonds, provided, however, that all savings in the amounts
required for the redemption of such bonds by reason of the fact that the cost
of purchasing such.other currency is less than the equivalent in United States of
America gold coin of such amount of the other currency, shall be credited to the
Republic by the fiscal agents.
SEC. 4. From and after the date so designated for redemption, the notice aforesaid having been published and the deposit aforesaid having been made, all
bonds so called for redemption shall cease to bear interest and, on presentation
thereof in accordance with said published notices at the office of the fiscal agents
or any of the paying agents at which such bonds are payable, together with all
coupons maturing on and after said redemption date, said bonds shall be paid
by the Republic at their redemption price and accrued interest to such redemption date, as above provided. Bonds issued and made payable in United States
of America dollars which are called for redemption and presented for payment
at the offices of paying agents for the bonds in cities outside the United States
of American shall be paid by such paying agents at the banters* buying rate
for dollar sight exchange on the eity of New York at the time of presentation
in the respective cities, and such paying agents shall reimburse themselves for
such disbursements by means of sight drafts drawn on the fiscal agents in the
city of New York in dollars for the amount of the redemption price, which said
drafts the fiscal agents shall pay on behalf of the Republic upon presentation
thereof out of the moneys set aside for such redemption. The fiscal agents shall
notify each of the paying agents by cable when sufficient moneys have been
deposited by the Republic and set aside by the fiscal agents for the payment of
the redemption price of the bonds so called for redemption, and the respective
paying agents shall not pay or redeem any bonds called for redemption pre*
seated to them unless they shall have received the proper notification by cable.
If any bonds so called for redemption shall not be paid on presentation thereof,
said bonds shall continue to bear interest at the rate per annum specified in
such bonds, upon the principal amount thereof until payment. If tiny bond
presented for redemption shall not be accompanied by the coupon maturing on
the redemption date, then said bond shall be paid at the redemption price
aforesaid less the face amount of such coupon. All bonds redeemed under
the provisions of this article, and all coupons thereto appertaining, shall immediately upon such redemption be canceled by the fiscal agents or paying agents
through whom such redemption is made and be delivered at convenient periods
to a representative of the Republic for that purpose, or sent by registered mail
to the nearest embassy or legation of the Republic, at the risk and expense of
the Republic, provided, however, that all bonds redeemed at the office of a paying agent shall first be sent by registered mail to the fiscal agents at the risk
and expense of the Republic. No bonds of the same series shall be issued in lieu
of such bonds so redeemed and canceled.
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1413
ARTICLE 4 . — I s s u e o r BONDS OF ADDITIONAL. SEBIES
SECTION 1. The Republic may at any time or from time to time issue additional bonds of the loan under this agreement by creating additional series of
bonds of the loan as hereinafter provided. The bonds of each series shall be
distinctively designated by the number or letter of tlie series or by the number
of the year in which issued or in any other manner desired by the Republic
and satisfactory to the fiscal agents. All bonds of the same series shall be
identical iu form and substance except that they may be issued and made payable in different currencies and in different places and may be in different languages and of different denominations and may be in coupon or registered form,
and except that as between bonds of different denominations and as between
coupon bonds and registered bonds there may be such appropriate differences
as may be determined by the Republic at or before tlie creation of the series
and approved by the fiscal agents. If the bonds of any series are issued in
more tlian one denomination the bonds of such scries of any denomination may
be made exchangeable for bonds of such series of any other denomination or
denominations, but payable in tlie same currency, of an equal aggregate principal amount upon payment of any tax or taxes or other governmental charge
in connection therewith, and a charge of not exceeding $1 for each new
bond issued. The several series may be made payable in United States of
America dollars, or in any other foreign currency, or in any two or more foreign currencies, and in such principal amount in each such currency as the
Republic may determine at the time of issue thereof, provided that the maximum principal amount of bonds of any scries issuable by the Republic shall
be limited, and such limitation shall be expressed in the bonds of such series.
Additional bonds of the loan shall be payable in such place or places a s the
Republic may determine and provide in the bonds at the time of issue thereof,
provided that all bonds of the loan issued and payable in United States of
America dollars shall be payable in the city and State of New York, United
States of America, at the principal office or offices of the fiscal agents, and
may also be made payable, at the option of the holders, at the office or offices
of such paying agents in such other place or places in such other foreign currency or currencies, at such rate or rates of exchange as the Republic may determine and provide in tlie bonds at the time of issue thereof, and provided,
also, that all bonds of the loan issued and payable in any other foreign currency
shall be payable in a principal city or cities of the country of such currency,
at the office or offices of paying agents for such bonds appointed as hereinafter
provided, and may also be made payable, at the option of the holders, at the
office or offices of the fiscal agents in the city and State of New York, United
States of Amorica, in United States of America dollars, at such rate or rates
of exchange as the Republic may determine and provide in the bonds at the
time of issue thereof. Any additional bonds of the loan may provide that all
payments in respect of such bonds shall be made in gold coin of the currency
in which such bonds are issued or are payable of the standard of weight and
fineness existing at the date as of which such bonds are issued. The bonds of
each additional scries shall bear interest from such date at such rate and
payable on such dates and shall mature at such date as at the time of the creation of such series shall be fixed by the Republic and be stated in the bonds
of such series. A cumulative sinking fund calculated to be sufficient to retire
the entire issue by maturity by redemption shall be created for each series
of the bonds to be applied to the retirement or redemption of bonds at such
prices and in such manner as the Republic may provide at the time of the
creation and issue of such series of bonds. The Republic may provide at tHe
time of the creation and issue of any series of the bonds that such bonds shall be
redeemable at its option as a whole, or as a whole or in part, at any time or
from time to time before maturity (but only on an interest-payment date or
dates) at their principal amount, or at their principal amount together with a
premium, plus accrued unpaid interest, provided that such provision shall be
expressed in the bonds of said series. Except as aforesaid, the terms and
provisions of all additional series of the bonds shall be substantially identical
with the terms and provisions of the first-series bonds herein described. All
the bonds of each series at any time outstanding shall be entitled to share in
the security of the revenues or assets which may at any time be pledged or
charged as security f o r the bonds equally and ratably with the outstanding
bonds of all other series.
1414
SAIiB OF FOREIGN" BONDS OR SECURITIES
SEC. 2. No bonds of the loan of any series in addition to the $50,000,000 principal amount of the first series bonds shall be issued by the Republic or authenticated by the fiscal agents or any paying agent of the loan unless and until
the gross revenues of the Republic, calculated (as provided in section 5 of this
article) on a gold basis, collected by or deposited with the Caja de Depositors
y Consignaciones, hereinafter called the caja (or such other successor collection agency as may be appointed as hereinafter provided), shall have averaged for the three fiscal years next preceding the date on which it is proposed
*to issue the bonds of such additional series at least one and three-quarters
time the amount necessary to meet the maximum charges, similarly calculated
on a gold basis, in any year for the service of interest and amortization of the
bonds of all series of the loan outstanding at the time of such proposed additional issue including the additional bonds to be issued and of all other funded
debt, external and internal, issued, assumed, or guaranteed by the Republic,
;and secured by the revenues so collected by or deposited with the caja, but
excluding any such external funded debt to the extent represented by bonds
which have been purchased by the fiscal agents for account of the Republic
and are then being held by them pending the retirement of such bonds.
SEC. 3. No bonds of the loan of any series in addition to the $50,000,000 principal amount of the first series bonds shall be issued by the Republic or authenticated by the fiscal agents or any paying agent of the loan unless and until
the gross revenues of the Republic calculated (as provided in section 5 of this
article) on a gold basis, however, or by whomever collected, shall have averaged
for the three fiscal years next preceding the date of issue of the bonds of such
additional series at least three times the maximum chargcs, similarly calculated on a gold basis, in any year for the service of the entire funded debt,
external and internal, issued, assumed, or guaranteed by the Republic, including the bonds of such additional series of the loan to be issued, but excluding
such part of any external funded debt represented by bonds which have been
purchased by the fiscal agents for account of the Republic and are then being
held by them pending the retirement of such bonds.
SEC. 4. For the purpose of determining whether the gross revenues of the
Republic collected by or deposited with the caja, as provided in section 2 of this
article, and whether the gross revenues of the Republic however collected, as
provided in section 3 of this article, are sufficient at any time or from time
to time to permit the issue of bonds of additional series of the loan, the fiscal
agents may rely upon a certificate signed on behalf of the Republic by the
Minister of Finance of the Republic setting forth the facts regarding the
amounts of the gross revenues of the Republic collected by or deposited with
the caja, or otherwise collected, as the case may be, the calculation thereof
on a gold basis, the average thereof for the three fiscal years ftext preceding
the date on which it is proposed to issue the bonds of such additional series,
.the amounts required for the service of interest and amortization of the bonds
or funded debt of the Republic referred to in said section 2 and said section
3, respectively, and the amount and designation of the external funded debt of
the Republic represented by bonds which have been purchased by the fiscal
agents for account of the Republic and are then or thereafter to be held by
them, pending the retirement of such bonds.
SEC. 5. For the purpose of calculating the amount of gross revenues of the
Republic and the amount of service charges on funded debt of the Republic,
in each case on a gold basis, as provided in section 2 and section 3 of this
article, such revenues and charges shall be calculated at either (1) the average rate or rates of exchange during the three fiscal years next preceding the
date on which bonds of an additional series of the loan are proposed to be
issued, or (2) the average rate or rates of exchange during the three calendar
months immediately preceding the calendar month in which the Issue of bonds
of an additional series of the loan is proposed to be made, whichever of said
average rates shall purchase the smaller amount of United States of America
gold coin of the standard of weight and fineness existing on December 1, 1927,
or in lieu thereof fine gold, and the fiscal agents may rely upon the certificate
of the Reserve Bank of Peru or the caja as to such average rates.
ARTICLE 5.—PARTICULAR COVENANTS OP THE REPUBLIC
SECTION 1. The Republic pledges its full faith and credit for the due and
punctual payment of the principal of, interest upon, and the sinking fund
payments in respect or, the bonds of the loan, of all series at any time issued,
SALE OF FOREIGN" BONDS OE SECUBITIES
1415
as, ami wlien, the same shall become due and payable, and for the due and
punctual performance of all the other covenants and agreements in this agreement and in the first series bonds contained and in the bonds of each additional
series to be contained, to be performed, or observed by it.
SEC. 2. The Republic will duly and punctually pay the principal of, and the
Interest upon, the bonds of the loan of all series at any time issued, according
to the tenor thereof in every case free from and without deduction or diminution for any taxes, assessments, charges, levies or duties of any nature, now
or at any time hereafter imposed, levied or assessed by the Republic, or by any
province, district, municipality or other taxing authority thereof or therein.
The Republic will make payment of such principal and interest in time of war
as well as in time of pcacc and irrespective of the citizenship or residence of the
holders of any such bonds.
SEC. 3. The Republic will not, directly or indirectly, extend or assent to the
extension of the time of payment of any coupon or claim for interest on any of
the bonds of the loan, of any series at any time issued, and will not directly
or indirectly, be a party to or approve such extension by purchasing or refunding such coupons or claims for interest or in any other manner.
SEC. 4. The Republic will pay the stamp taxes and other duties and charges,
if any, to which, under the laws of the Republic, this agreement, or the bonds
of the loan, temporary or definitive, of any series, may be subject.
SEC. 5. So long as any bonds of the loan, of any series, shall be outstanding,
the Republic covenants that it will not create, issue, assume or guarantee any
loan or obligations secured by a lien or charge upon any of its revenues or,
except with the consent of the fiscal agents, upon any of its assets, or secured
by a lien or charge upon the assets or revenues of any of its political subdivisions, or assign any such revenues or, except with the consent of the fiscal
agents, any such assets, as security for any loan or obligations, unless prior
thereto such revenues or assets shall have been subjected to a lien or charge
in favor of all the bonds of the loan of all series then outstanding and which
shall thereafter be outstanding, subject only to the liens existing at the date
of this agreement and which are still in force, if any; and that the lien or
charge on such revenues or assets created in favor of such loan or obligations
shall be expressly made subject to a prior lien or charge in favor of all the
bonds of the loan of all scries then outstanding and which shall thereafter be
outstanding.
SEC. 6. The Republic covenants that if, so long as any bonds of the loan of
any series shall be outstanding, the Republic shall create, issue, assume or
guarantee any funded debt, secured or unsecured, whereby the maximum
service charges, calculated on a gold basis (in like manner as provided in
section 5 of article 4 h e r e o f ) , in any year on the entire funded debt, external
and internal, of the Republic (but excluding such part of its external funded
debt as may bo represented by bonds which have been purchased by the fiscal
agents for account of the Republic and are then being held by them pending
the retirement of such bonds) shall be increased to an amount in excess of
one-third of the average annual gross revenues of the Republic, similarly calculated on a gold basis, for the three fiscal years next preceding the date of such
creation, issue, assumption or guarantee, then and in such case all revenues
at the time collected by or deposited with the caja or its successor pursuant to
tliis agreement shall thereupon automatically be and become subject to a lien
and charge in favor of the bonds of the loan of all series then outstanding or
which may thereafter be outstanding, subject only to liens existing at the date
of this agreement and which are still in force, if any.
SEC. 7. The Republic covenants that, so long as any bonds of the loan of any
series shall be outstanding, the total expenditures of the Republic, both ordinary and extraordinary, but exclusive of those for capital investment for
public works, shall not in any fiscal year exceed the revenues provided for in
the budget for the same fiscal year and collected in due course, except in case
of a national emergency; and the Republic further covenants that it has
enacted or established or will enact or establish such legislation or budgetary
procedure as may be necessary to effect this end, and that such legislation and
budgetary procedure will be at all times strictly followed and observed in the
preparation of its budget and in making all disbursements.
SEC. 8. The Republic covenants that the net proceeds of the first series bonds,
i. e., after deducting from the gross proceeds an amount sufficient to pay any
expenses to be borne by the Republic in connection with the issue and sale of
the first scries bonds, shall forthwith upon the Republic's becoming entitled to
1416
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OF FOREIGN" BONDS OR SECURITIES
such proceeds be deposited with the fiscal agents for account of the Republic
to be disposed of by them for account of the Republic as follows:
(ft) Up to but not exceeding $23,930,000 shall be applied by the fiscal agents
(1) to the purchase at not exceeding their redemption prices plus accrued
interest, of such bonds or notes of external loans or obligations issued or
guaranteed by the Republic from time to time outstanding, as the fiscal agents
in their absolute discretion may select, whether or not the same are by their
terms presently redeemable, or (2) to the redemption at their redemption prices
of any or all outstanding bonds or notes of any or all external secured loans
or obligations of the Republic, which by their terms are presently redeemable
at the option of the Republic, as shall be selected by the fiscal agents in consultation with the Republic. Pending such application all such moneys shall
remain on deposit with the fiscal agents. Bonds so purchased may be resold
by the fiscal agents for account of the Republic when deemed advisable by
them and authorized by the Republic, and such authority may be general or
specific, and the proceeds of such sales shall revert to and become a part of
the fund created by this subdivision (a). The fiscal agents may charge to or
pay from the fund created by this subdivision (a) the customary stock exchange
commissions on all such purchases and sales, and such commissions shall not
be included in the purchase or sale prices. All interest received by the fiscal
agents upon bonds or notes purchased and held by them as aforesaid, and all
moneys, if any, received by the fiscal agents upon the redemption of such
bonds or notes, and also all savings arising from purchases of such bonds or
notes which are called for redemption as above provided by reason of the
fact that such bonds are purchased below the prices at which, they are respectively called for redemption shall be for account of the Republic and be
disbursed as the Minister of Finance of the Republic may direct;
(&) Up to but not exceeding $4,000,000 shall be held and utilized by the
fiscal agents as a gold exchange fund in such manner and for such period,
not less than one year, commencing with the date of this agreement, as the
executive power of the Republic may deem advisable, to effect the stabilization
of the Peruvian national currency as contemplated by section 13 of this article.
After the termination of such gold exchange fund any balance remaining in the
hands of the fiscal agents shall be paid over to the Republic;
(c) Upon the creation by law of the Mortgage Bank of Peru (Banco Hipotecario del Peru, up to $2,000,000 may be withdrawn by the Republic for the
purpose of providing or reimbursing the Republic for the payments then to
be made by. it upon the subscription which the Republic will be obligated to
make to the share capital of said Mortgage Bank of Peru (Banco Hipotecairo
del Peru).
{d) Up to but not exceeding $2,820,000 may, at the option of the Republic,
be applied to the construction and improvement of Callao Harbor dock and
shipping facilities and may be withdrawn by the Republic from time to time
by drafts drawn to the order of the contractors undertaking such development
and in accordance with the terms of the contract therefor and any modifications
thereof, if any;
(e) The residue shall be applied by the fiscal agents as follows:
(1) To the repayment of all sums advanced under the short-term bank credit
granted to or procured for the Republic under an agreement dated as of
December 1, 1927, between the Republic and J. & W . Seligman & Co. and the
National City Co., the interest due on said short-term bank credit and all other
sums repayable in respect thereof as provided in said agreement, and to the
extent that the sums advanced under said short-term bank credit shall have
been applied at the date of receipt of the proceeds of the first series bonds to
the purposes hereinbefore specified in subdivisions (a), (ft), (c), and {d) of
this section 8, the amounts specified in said subdivisions to be applied by the
fiscal agents for such purposes shall be reduced accordingly;
(2) The residue remaining after making the payments provided in subdivision (1) above shall remain on deposit with the fiscal agents and be withdrawn by the Republic from time to time in installments at the rate, determined from December 1, 1927, of not exceeding $750,000 per month for the
purpose of carrying forward the public works under construction at the date
of this agreement.
The Republic hereby irrevocably authorizes the fiscal agents to apply the
proceeds of the first series bonds deposited with them for account of the
Republic to the purposes, in the amounts, and at the time or times hereinabove
in this section specified, and the Republic covenants and agrees that such
SALE OF FOREIGN" BONDS OE SECUBITIES
1417
proceeds shall remain on deposit with the fiscal agents until disposed of by
them for account of the Republic for the purposes and in the amounts so
specified.
SEC. 0. The Republic covenants that, until all of the outstanding external
secured loans and obligations of the Republic shall have been paid or redeemed
or called for redemption and the funds necessary for such redemption deposited with the respective fiscal or paving agents therefor, it will not. except
with the consent of the fiscal agents, issue any bonds of any additional series
of the loan except for the purpose of. and that it will apply the entire net proceeds of the bonds of such additional series of tlie loan solely to, either
the purchase or redemption of such external loans of the Republic, or for
capital expenditures for public works to bo specified in the Republic's budget or
in I he acts of the Congress of the Republic or in the agreement or agreements
pursuant to which such bonds of such additional series are to be issued or
sold, which capital expenditures shall not in the aggregate exceed $0000.000
In any fiscal year, exclusive of an aggregate of $0/300.000 for the development
of the Callao Harbor pursuant to a program for such development in process
of being carried out at the date of this agreement: and the Republic further
covenants that such net proceeds shall be deposited with the fiscal agents;
and that such portion thereof as is applicable to capital expenditures other
than for the Callao Harbor development will not be withdrawn by the Republic at a rate in excess of S750.000 per month, and that such portion thereof
as is applicable to the development of the Callao Harbor will not be withdrawn
by the Republic except by drafts drawn to the order of the contractors
undertaking such development and in accordance with the terms of the contract therefor and any modifications thereof, if any, a copy of which and of
all such modifications shall be furnished to the fiscal agents by the Republic.
The Republic further covenants that, until all of the external secured loans
of the Republic outstanding and callable at the date of this agreement shall
have been paid or redeemed, or called for redemption and the funds necessary
for such redemption deposited with the respective fiscal or paying agents
therefor, it will not begin any public works not at the date of this agreement in the course of construction, excepting the Callao Harbor development;
and that the Callao Harbor development shall be financed solely with the
proceeds of bonds of the loan and that the Republic will promptly impose such
port dues or tariffs as shall at nil times be sufficient to reimburse it for the
service of such financing and, in connection with the use of such proposed
harbor facilities when completed, as shall be sufficient to make the same
rfelf-sustaining.
SEC. 30. The Republic covenants that so long as any of the bonds of the
toan, of any series, which by their terms are payable in dollars, shall be
outstanding, it will maintain an office or agency in the borough of Manhattan, in the city and State of New York, where notices, requests, or demands
In respcct of such bonds or interest coupons may be served, and where such
oonds and interest coupons may be presented for payment.
SEO. 11. The Republic covenants that it will from time to time upon request of the fiscal agents furnish, or cause to be furnished, to the fiscal agents,
a report or statement signed by the Minister of Finance or other responsible
official of the Republic, showing in reasonable detail the receipts and expenditures of the Republic during the period specified in such request, and that
it will furnish any other information which the fiscal agents may request as
to any other matters pertaining to its revenues or affecting the service of
the bonds or the performance of its covenants contained in this agreement.
SEC. 12. The Republic covenants that, when and as requested by the fiscalagents, it wilt by executive decree or other appropriate action, call for
redemption and redeem all or such part, at the earliest permissible date or
dates thereafter of such of its external secured callable loans and obligations
issued and outstanding at the date of this agreement as shall be specfied by
the fiscal agents and apply to the redemption thereof such part of the proceeds of the first-series bonds as is applicable thereto, pursuant to the pro-»
visions of this agreement, or present for cancellation the bonds of such external secured callable loans purchased for account of the Republic by the fiscal
agents and held by them pending such cancellation, pursuant to the provisions
of this agreement; and the Republic further covenants that the bonds so
redeemed or presented shall be canceled and that no bonds of such external
secured callable loans shall be issued in place thereof.
1418
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OF FOREIGN" BONDS OR SECURITIES
SEC. 13. The Republic covenants that it will cooperate with the Reserve bank
of Peru (Banco de Reserva del Peru) and with tlie fiscal agents in working out
a plan for stabilizing the Peruvian currency, and that it will cooperate fully
with the Reserve Bank of Peru (Banco de Reserva del Peru) and with the
fiscal agents in carrying out such a plan.
SEC. 14. The Republic covenants that prior to the issue of the first series
bonds, it will elect or appoint, or cause to be elected or appointed, one person,
designated by the fiscal agent, as a member of the board of directors of the
caja and as the tenth director on the board of directors of the Banco de Reserva del Peru (Reserve Bank of Peru), hereinafter called the reserve bank,
and one person, designated by the fiscal agents, as an alternate member to act
in the place and stead of such member in case of such member's death, resignation or inability to act for any reason; and the Republic covenants that the
fiscal agents shall have the absolute right at all times, so long as any bonds of
the loan shall be outstanding, to dismiss, and designate the successors to, such
persons or their successors, and that at all times, so long as any of the bonds
of the loan shall be outstanding, one person designated by the fiscal agents
shall be a member of the board of directors of the caja and the tenth director on
the board of directors of the reserve bank, and one person designated by the
fiscal agents shall be an alternate to act in the place and stead of such member
as above provided, and that such member or, in case of such member's death,
resignation or inability to act for any reason, such alteri^ate member, shall have
the same rights and powers in respect of all matters relating to the collection
of the revenues of the Republic, at the time entrusted to the caja for collection
or deposit, and the same rights and powers in respect to the management and
direction of the affairs of the reserve bank, as the other members of said
boards, respectively. The Republic hereby agrees that the reasonable compensation and expenses of such member and alternate, not to exceed $15,000 per
annum, shall be included in the expenses of the fiscal agents and shall be paid
by the Republic to the fiscal agents from time to time upon demand. The fiscal
agents agree to designate to the Republic, and otherwise as may be required
by law No. 4500 of the Republic, in writing or by cable as soon as practicable
after the execution of this agreement, two persons to be such member and alternate member, respectively, of both said boards. In case of the death, resignation, or inability to act for any reason of such member so designated, the
alternate member shall act in such member's place and stead until the fiscal
agents shall similarly designate the successor of such member, and the Republic
covenants to elect or appoint such successor, or cause such successor to be
elected or appointed, as soon as designated by the fiscal agents, a member of
both said boards. In case the successor so designated shall be the person previously designated as alternate member or in case of the death, resignation, or
inability to assume the duties of a member of said boards of the alternate
member, a successor of such alternate member shall be similarly designated by
the fiscal agents, and the Republic covenants to elect or appoint such successor
or cause such successor to be elected or appointed, as soon as designated by the
fiscal agents, an alternate member of both said boards. In case the Republic
shall transfer the collection of any of its revenues provided by this agreement
to be collected by or deposited with the caja or its successor, the Republic will
cause a member of the board of directors or one of the managers of such agency
and an alternate member or manager, designated by the fiscal agents, to be
elected or appointed similarly.
SEC. 15. The Republic consents and agrees that the fiscal agents, or either of
them, or their successors, acting as the representatives of the holders of the
bonds of any or all series of the loan at any time outstanding, may represent
said holders and may enter into any agreements with the Republic in connection
herewith or supplemental hereto pursuant to section 1 of article 9 hereof, and
may institute and carry on, in their own name or names, for the benefit of such
holders, all actions and proceedings, whatever be the grounds thereof, to enforce
any of the obligations or undertakings of the Republic set forth in or contemplated by such bonds, this agreement or any agreements executed in connection
herewith or supplemental hereto, without being required to produce any of
such bonds in any court or elsewhere or to prove its agency for or authority
from said holders. These provisions are of the essence of the bonds and of this
agreement and any agreements executed in connection herewith or supplemental hereto, and the holder of any bond of any series of the loan, by his
acceptance thereof, shall be deemed to have irrevocably conferred upon the fiscal
agents, and each of them, or their respective successors, the authority aforesaid.
SALE OF FOREIGN BONDS OB SECTJB1TIES
1419
ARTICLE G—COLLECTION* OR DEPOSIT OF REVENUES
SECTION 1. The Republic covenants that prior to the issue of any of the first
series bonds, it will, pursuant to the provisions of article 9 of law No. 5931,
enacted December 17, 1927, enter into an agreement with the caja, whereby the
caja shall be irrevocably authorized and directed by the Republic, and the caja
slmll covenant and agree:
(а) To collect all present and future revenues of the Republic of whatever
origin and denomination with the sole exceptions o f :
(1) the revenues given at the date of this agreement as specific guaranty
of external loans of the Republic and irrevocably intrusted, so long as such
external loans are outstanding, to special entities other than the caja for
collection, and
(2) until such date as the executive power of the Republic may judge convenient, the revenues of posts and telegraphs, and such customs revenues as
ate not at the date of this agreement given as guaranty for external, loans of
the Republic, and
(3) the consular revenues of the Republic collected in foreign countries;
(б) To collect the revenues given at the date of this agreement as specific
guaranty of external loans of the Republic and irrevocably intrusted, so long
as such external loans are outstanding, to special entities other than the caja
for collection, as soon as such revenues are, respectively, freed from such
guaranty, and the revenues of posts and telegraphs, and such customs revenues
as are not at the date of this agreement given as guaranty for external loans
of the Republic, as soon as the executive power of the Republic may judge
convenient; and
(c) To receive the deposit, as soon as the Republic is entitled to receive the
same of—
(1) nil moneys payable to the Republic in respect of each and every revenue
given at the date of this agreement as specific guaranty of an external loan
or loans of the Republic and intrusted, so long as such external loan or loans
are outstanding, to an entity or entities other than the caja for collection, and
(2) all consular revenues of the Republic collected in foreign countries, which
shall be deposited to the otder of the caja with such first-class banking institutions as the caja may select pursuant to the provisions of article 4 of said
Law No. 5931—
and in and by such agreement the Republic shall irrevocably authorize
and direct the caja, and the caja shall covenant and agree to apply the moneys
collected by or deposited with it as aforesaid in each month to the payment
to the fiscal agents of the monthly proiwrtion, that Is to say, one-sixth of the
semiannual service charges of the bonds of the loan of all scries at the time
outstanding, equally and ratably for each series, before making any disbursements of such moneys for any other purpose whatsoever, and to apply such
moneys and to make each and every such payment in accordance with the conditions of the loan agreements under which the bonds of each series of the loan
are respectively issued; provided, however, that in the case of moneys collected
by or deposited with the caja in respect of revenues at the date of this agreement given as guaranty for an outstanding loan of the Republic and so long
as such loan is outstanding, the caja shall first apply the moneys collected
or deposited in respect of each such revenue for the payment, so far as
required, of the service of each such loan in accordance with the terms of the
agreement under which such loan was contracted.
SEC. 2. The Republic covenants that if, so long as any of the bonds of any
series of the loan shall be outstanding, the caja shall cease to collect, receive,
or apply the revenues intrusted to it pursuant to Law No. 5746 and Law No.
6931, or any other law, or if it should fail to comply in any respect witli the
obligations provided in Law No. 5930 authorizing the creation of the loan,
or in any agreement entered into between the caja and the Republic with
Aspect to the service of the bonds of any series of the loan as in section 1 of
this article provided, or for any reason the caja should cease to exist, the
executive power of the Republic, in agreement with the fiscal agents, shall
immediately organize or appoint a special collecting agency, acceptable to the
fiscal agents, which shall immediately upon such organization or appointment
automatically assume all the rights and obligations of the caja in connection
with the collection, receipt, or application of tlie revenues vf the Republic
pursuant to said Law No. 5931 and any agreement entered into between the
Republic and the caja as in section 1 of this article provided; and that the
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SAIiB
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expenses incurred in the organization of said special collecting agency and its
expenses and compensation in and about the collection, receipt, and application
of such revenues shall be borne by the Republic. The Republic further
covenants that if such special collecting agency, or any successor, should cease
to collect, receive, or apply such revenues, or to comply in any respect with
such obligation, or for any reason should cease to exist, the executive power
of the Republic, in agreement with the fiscal agents, shall immediately in
the same manner organize or appoint a successor special collecting agency,
acceptable to the fiscal agents, which shall immediately upon its organization or
appointment automatically assume all the rights and obligations of the special
collecting agency so ceasing to collect, receive, or apply such revenues or to
comply with such obligations or to exist; and that the expenses incurred in
the organization of such successor special collecting agency and the expenses
and compensation of such successor special collecting agency in and about the
collection, receipt, and application of such revenues shall be borne by the
Republic.
ARTICLE VII—APPIJCJATION OF REVENUES TO INTEREST AND AMORTIZATION PAYMENTS OP THE FIRST SERIES BONDS
SECTION 1. The payment to be made by the Republic to the fiscal agents in
respect of each semiannual period for the semiannual service of interest and
amortization of the first series bonds, as provided in article 2 of this agreement,
shall be made in the following amounts and in the following manner:
(a) The sum of $291,666.00% in December, 1927, and monthly in each calendar month thereafter, said sum being equal to one-sixth of the amount necessary
for the installment for the service of interest on, and amortization of, the first
series bonds in respect of each semiannual period as in said article 2 provided.
Unless and until otherwise agreed upon by the Republic, the caja and the fiscal
agents as representatives of the first series bondholders, such monthly payments
shall be made in the following manner: On the first Monday in December, 1927,
and on each Monday thereafter, the gross amounts of the revenues of the Republic collected by or deposited with the caja (or any successor special collecting
agency, appointed as in section 2 of article 6 provided), during the preceding
week, remaining after deducting from the revenues which are pledged at the
date of this agreement to secure any existing loan of the Republic, the payments
for the service of interest and amortization and all other moneys due and payable in respect of the bonds of such loan at the time outstanding and not previously provided for, shall be paid by the caja, on behalf of the Republic, to the
Peruvian representative of the fiscal agents, appointed as hereinafter provided,
until the amount required to make available to the fiscal agents in New York. in.
gold coin of the United States of America of the standard aforesaid, the full
monthly payment aforesaid, shall have been received by the Peruvian representative. Such weekly payments shall be made either in dollars of the UnitedStates of America or, with the consent of the fiscal agents, in Peruvian pounds,
and in the event that, any such payment shall be made in Peruvian pounds the
amount thereof shall be applied by. the Peruvian representative as soon as practicable after the receipt thereof to the purchase, at the expense and for the
account of the Republic, of dollar sight exchange on New York. All such dollars so paid or purchased shall be forthwith remitted by the Peruvian representative to the fiscal agents in the city of New York in such a manner as they*
shall direct, but at the risk and expense of the Republic.
(&) Such additional sum, on or before the last day of each calendar month,
commencing with December, 1927, as may be necessary to make up the deficiency, if any, by which the revenues of the Republic collected by or deposited
with the caja, or its successors, and paid over to, or for account of, and received
by, the fiscal agents in New York, for the service of interest on, and amortization of, the first series bonds as in subsection (a) above provided, shall not be
sufficient for the full payments therein specified to be made in respect of each
such calendar month, and such sum on or before June 1 and December 1 in each.
year, commencing with June 1, 1928, as may be necessary to make up the deficiency, if any, by which the moneys paid over to, or for account of, and received
by, the fiscal agents, in New York, in respect of the current semiannual payment, as provided in article 2 hereof, shall not be sufficient for the full payment
therein specified- to be made. , .
.
.
Any consent of the fiscal agents that the payments by the Republic to the
Peruvian representative may, be made in Peruvian pounds, as in subsection (<*)
SALE OF FOREIGN" BONDS OE SECUBITIES
1421
of this section provided, may at any time he withdrawn by the fiscal agents by
notice in writing or by cable addressed and sent to the Minister of Finance of
the Republic and the caja, and thereafter such payments to the Peruvian representative shall be in dollars of the United States of America until the fiscal
agents again consent that such payments may be made in Peruvian pounds.
The failure of the fiscal agents to secure or retain the service of a bank, firm,
corporation, or responsible individual to act as its representative in Peru or the
failure of the fiscal agents to appoint such representative in Peru or the failure
of tlie Peruvian representative to transmit any sums paid over to it to the fiscal
agents in New York or the failure of the fiscal agents to receive any such sums
in New York shall not relieve tlie Republic of its obligation to make the full
payments provided in this section, and the Republic agrees that in such event,
it will make, or cause to be made, such payments in gold dollars directly to the
fiscal agents in the city of New York.
SEO. 2. The fiscal agents shall apportion and apply the moneys received by
them pursuant to the provisions of section 1 of this article as follows:
(a) The fiscal agents shall set aside out of such moneys received by them
in each semiannual period the full amount necessary to pay the interest maturing on the next succeeding interest payment date on the first-series bonds
then outstanding, and shall apply or cause to be applied such moneys to the
payment of such interest maturing ou such next succeeding interest-payment
date. Interest coupons of first-series bonds presented for payment at the
offices of the paying agents for the first-series bonds in cities outside the
United States of America in accordance with the terms of such bonds or this
agreement shall be paid by such paying agents at the bankers' buying rate
for dollar sight exchange on the city of New York at tlie time of presentation
in the respective cities, and such paying agents shall reimburse themselves for
such disbursements by means of sight drafts drawn on the fiscal agents, payable in the city of New York in dollars for the amount thereof, which said
drafts the fiscal agents shall pay on behalf of the Republic upon presentation
thereof out of moneys set aside for such interest. The fiscal agents shall notify
each of the paying agents by cable when sufficient moneys have been paid by
the Republic and set aside by the fiscal agents for the payment of the interest
maturing on each interest payment date on all the first-series bonds at such
time outstanding in accordance with the provisions of this agreement, and the
respective paying agents shall not pay any interest coupons presented to them
unless they shall have received the proper notification by cable.
(&) The fiscal agents shall set aside the balance of such moneys received by
them in each semiannual period as a sinking fund for the redemption of the
first-series bonds on behalf of the Republic on the next succeeding interest
payment date and shall apply the same, or cause the same to be applied, to
such redemption on such succeeding interest payment date in the manner
hereinafter In section 3 provided.
SEO. 3. The moneys set aside by the fiscal agents in each semiannual period,
pursuant to subsection (&) of section 2 of this article, together with any
amounts carried forward from the next preceding semiannual period, pursuant
to section 5 of this article, shall be applied by the fiscal agents to the redemption of first-series bonds on the next succeeding interest payment date (the
first application to be made on June 1, 192$, and subsequent applications to
be made on each interest payment date thereafter) at the redemption price of
100 per cent of the principal amount thereof and accrued, unpaid interest
thereon to such interest payment date in the manner and at the places hereinafter in this section provided; and the fiscal agents are hereby authorized and
impowered to redeem with such moneys at said redemption price on each such
interest payment date and at the places and in the manner hereinafter in
this section provided, in the name and on behalf of the Republic, and at its
expense, a principal amount of first-series bonds equal to the amount of such
sinking-fund instalment, plus any such amounts carried forward. The fiscal
agents shall determine, by lot, in any usual manner deemed fair by the fiscal
agents, the serial numbers of the first-series bonds to be redeemed, and furnish
a notarial certificate thereof to the Republic. Notice of each such redemption
shall be given by the fiscal agents on behalf of the Republic in each city in
which any of the first-series bonds which are to be redeemed may be pre*
sented for payment, at the times and in the manner specified in the case of
partial redemption of bonds of the loan at the option of the Republic in
section 2 of article 3 hereof. From and after the date so set for redemption,
notice having been so given by publication, aud the moneys sufficient for such
1422
SAIiB OF FOREIGN" BONDS OR SECURITIES
redemption having been paid to the fiscal agents, the first-series bonds so
called for redemption shall cease to bear interest and, upon presentation and
surrender in accordance with said published notices, at the office of either of
the fiscal agents or such paying agents at which such first-series bonds may be
presented for payment, or such first-series bonds, together with all coupons
thereto appertaining maturing on and after said redemption date, said firstseries bonds shall be paid by the Republic at the principal amount thereof and
accrued interest to such redemption date. Bonds called for redemption and
presented for payment, of such first-series bonds, together with all coupons
in cities outside the United States of America in accordance with the terms
of such bonds or this agreement shall be paid by such paying agents at the
bankers' buying rate for dollar sight exchange on the city of New York at the
time of presentation in the respective cities, and such paying agents shall reimburse themselves for such disbursements by means of sight drafts drawn on
the fiscal agents in the city of New York in dollars for the amount of the
redemption price, which said drafts the fiscal agents shall pay on behalf of
the Republic upon presentation thereof out of moneys set aside for such
redemption. The fiscal agents shall notify each, of the paying agents by cable
when sufficient moneys have been paid by the Republic and set aside by the
fiscal agents for the payment of the redemption price of all first-series bonds
so called for redemption, and the respective paying agents shall not pay or
redeem any first-series bonds presented to them unless they shall have received
the proper notification by cable. If any first-series bonds so called for redemption shall not be paid on presentation thereof, said first-series bonds shall
continue to bear interest at the rate of 6 per cent per annum upon the principal amount thereof until payment. If any first-series bond so presented for
redemption shall not be accompanied by the coupon thereto appertaining
maturing on the redemption date, then said first-series bond shall be paid at
the redemption price aforesaid, less the face amount of such coupon.
SEC. 4. Accrued unpaid interest on first series bonds redeemed for the sinking
fund shall not be paid by the fiscal agents out of moneys set aside for the sinking fund, pursuant to subsection (6) of section 2 of this article, nor out of any
other moneys in the sinking fund, but shall be paid out of moneys set aside
pursuant to subsection (a) of section 2 of this article for payment of interest
on all the first series bonds.
SEO. 5. Any odd amounts of money applicable to the redemption of first series
bonds for the sinking fund amounting to less than the sum required to redeem
one first series bond of the smallest denomination outstanding and which can
not therefor be applied to the redemption of first series bonds on the next succeeding interest payment date, shall be carried over and applied with the
moneys set aside for the sinking fund during the next succeeding six months
period to the redemption of first series bonds.
SEO. 6. All first series bonds redeemed for the sinking fund, pursuant to the
provisions of this article, and all coupons thereto appertaining, shall immediately upon such redemption be canceled by the fiscal agents or the paying
agents through whom such redemption is made and delivered at convenient
periods to a representative of the Republic for that purpose, or sent by registered mail to the nearest embassy or legation of the Republic at the risk and
expense of the Republic: Provided, however, that all bonds redeemed at the
office of a paying agent shall first be sent by registered mail to the fiscal agents
at the risk and expense of the Republic. No first series bonds shall be issued
in place of first series bonds so redeemed and canceled.
SEO. 7. No expenses of any character incurred by the fiscal agents or the paying agents in connection with the administration of the sinking fund shall be
charged against the sinking fund or paid out of any moneys in the sinking fund,
but all such expenses shall be borne by the Republic and shall be paid by the
Republic to the fiscal agents or the paying agents upon their written or cabled
demand.
ARTICLE VIII.—CONCERNING THE FISCAL AGENTS, THE PAYING AGENTS AND THE
PEBTJVIAN REPBESENTATIVE
SECTION 1. The Republic hereby appoints J. & W . Seligman & Co. and the
National City Bank of New York as fiscal agents of the Republic in accordance
with the provisions of law No. 5930, enacted I>ecember 17, 1927, and the provisions of law No. 4500, enacted March 9,1922, and said J. & W . Seligman & Co.
and the National City Bank of New York are, by virtue of said office, appointed
SALE OF FOREIGN" BONDS OE SECUBITIES
1423
as fiscal agents for the service of the bonds of the loan of all series, which
appointment J. & W . Seligman & Go. for itself and the National City Bank of
New York for itself hereby accept. Any successor firm, association, or corporation carrying on the business of either J. & W . Seligman & Co. or the National
City Bank of New York shall be deemed to be one of the fiscal agents. The
fiscal agents may each of them resign their functions, powers, rights, and duties
hereunder and become and remain fully discharged from all further duty and
responsibility hereunder upon giving GO days' notice thereof in writing sent by
registered mail addressed to the Minister of Finance of the Republic, or such
other notice as the Republic may accept as sufficient, and upon payment of any
moneys or securities or deposit with, and upon delivery of any bonds of tlie loan
intrusted to them under any provision of this agreement to their respective
successors. If either of the fiscal agents, or its successor, but not the other of
them, shall be disqualified from acting as such by ceasing to exist, ceasing to
do business, or ccasing to mautain an office in the borough of Manhattan, in the
city and State of New York, or shall resign as one of tlie fiscal agents, the other
fiscal agent, or its successor, shall assume all the duties of both fiscal agents
and no successor to the fiscal agent, or Its successor, which shall have been so
disqualified or have resigned shall be designated by the Republic. If both the
fiscal agents, or their respective successors, shall be so disqualified or have
resigned, a successor or successors shall be designated by the Republic as fiscal
agents (which shall in every case be a bank or trust company having a paid-in
capital and surplus of at least $10,000,000 and having a principal ofiiee in the
borough of Manhattan, city and State of New York), and the Republic shall
forthwith publish notice of such appointment at least once a week for at least
four successive weeks in every city in which any of the bonds are payable, in
each instance upon any day of the week, in a daily newspaper published and of
general circulation in each of said cities.
SEC. 2. The Republic, at the request at any time or from time to time of
the fiscal agents, shall appoint such banks or banking firms in one of more city
or cities outside the United States of America as paying agents for the firstseries bonds or for the bonds of any one or more additional series of the loan
as shall be nominated by the fiscal agents and be satisfactory to the Republic.
Each of the paying agents, now or hereafter appointed, may resign its or their
functions, powers, rights, and duties hereunder and become and remain fully
discharged from any further duty or responsibility hereunder upon giving 60
days* notice in writing sent by registered mail to the Minister of Finance of
the Republic and to the fiscal agents, or such other notice as the Republic
and the fiscal agents may accept as suflicient, and upon payment of any moneys
deposited with and upon delivery of any bonds of the loan intrusted to it or
them under nny provision of this agreement, to the fiscal agents or to Its or
their successor or successors. If any such paying agent, or any successor, shall
be disqualified from acting as such by ceasing to exist, ceasing to do business
or ceasing to maintain an office in the city in which appointed to act, or shall
resign as such paying agent, a successor nominated by tlie fiscal agents and
satisfactory to the Republic shall be designated by the Republic, and the
Republic shall forthwith publish notice of any such designation by it made at
least once a week, for at least four successive weeks, in each instance upon any
day of the week, in a daily newspaper printed in the official language of the
city in which such paying agent is appointed to act and published and in
general circulation in such city.
SEC. 3. The fiscal agents and the paying agents, and each of them, shall be
protected by the Republic in acting upon any notice, demand, waiver, request,
consent, opinion, certificate, report, statement, list, communication, letter, telegram, cablegram or radiogram, bond, coupon, or other paper or document believed by them to be genuine and to have been signed, sent, or presented by the
proper party or parties.
SEC. 4. The Republic, the fiscal agents, and the paying agents, and each of
them may deem and treat the bearer of any bond of any series which shall not
at the time be registered as to principal, and the bearer of any coupon for
interest on any bond, whether such bond shall have been registered or not, as
the absolute owner of such bond or coupon for the purpose of receiving payment thereof and for all other purposes whatsoever and neither the Republic,
the fiscal agents, nor the paying agents nor any one of them shall be affected
by any notice to the contrary. The Republic, the fiscal agents, and the paying
9292S—32—pt 3
11
1424
SAIiB
OF
FOREIGN"
BONDS OR SECURITIES
agents, and each of them, may deem and treat the registered owner of any
bond which is registered as to principal, as the absolute owner of such bond
for all purposes except the payment of coupons, and neither the Republic, the
fiscal agents, nor the paying agents shall be affected by any notice to the contrary. The Republic agrees to indemnify and save harmless the fiscal agents
and the paying agents, and each of them, from and against any and all liability,
costs, charges, or expenses incurred by so treating any such bearer or registered
owner.
SEC. 5. The fiscal agents and the paying agents may each of them exercise
their powers and perform their duties by or through such attorneys, appraisers,
accountants, agents, and other employees, as they may deem advisable, and the
compensation of such persons shall be deemed a part of the expenses of the
fiscal agents and the paying agents, respectively. The fiscal agents and the
paying agents shall none of them be answerable for the act, default, or misconduct of any such attorney, appraiser, accountant, agent, or other person
employed or approved by them, respectively, if selected with reasonable care;
nor shall the fiscal agents or the paying agents, or any of them, be liable for
any action whatsoever taken by them hereunder, except each for its or their
own wilful misconduct.
*
SEO. 6. All the usual expenses incurred in good faith by the fiscal agents, or
the paying agents, or any of them, in connection with the drawing of bonds
of any series of the loan or the payment of the principal of, or interest upon,
such bonds, or otherwise in the service of such bonds, including counsel fees,
cost of cabling, and the cost of publishing notices, etc., shall be paid by the
Republic from time to time on demand of the fiscal agents.
SEC. 7. The Republic agrees to pay to the fiscal agents as compensation for
their services one-quarter of one per cent (*4 per cent) of all amounts paid
to the fiscal agents for the payment of interest on bonds of the loan of any and
all series at any time or times outstanding and one-quarter of one per cent
(y 4 per cent) of all amounts paid to the fiscal agents for the sinking fund or
sinking funds in respect of, and for the payment of the principal of, at their
maturity, or upon the redemption of, or otherwise, bonds of the loan of any
and all series at any time or times outstanding, and also the expenses of the
fiscal agents in connection with such agency. Such compensation shall be
payable at the principal office or offices of the fiscal agents in the city and
State of New York semi-annually and shall be added to the last monthly
installment of each semi-annual payment for the service of interest on, and
amortization of, the bonds of each series in respect of which such compensation is payable, but such expenses shall be paid from time to time upon demand
of the fiscal agents. The reasonable expenses of the paying agents in connection with such agencies shall be added to the expenses of the fiscal agents and
paid by the Republic to the fiscal agents from time to time upon their demand
and shall by them be paid over to the paying agents when received.
SEC. 8. Any moneys received by the fiscal agents and the paying agents, or
their successors, under any provision of this agreement (anything herein to
the contrary notwithstanding) may be treated by them, until they are required
to pay out the same conformably herewith, as a general deposit, and they
shall not be required to segregate any moneys deposited with them. The fiscal
agents shall allow to the Republic on all deposits received by them for the
service o£ bonds of the loan of any and all series interest at the rates customariy allowed by banks or trust companies in the city of New York on
similar deposits under the rules of the New York Clearing House Association.
Such interest on deposits received by the fiscal agents shall be allowed for the
period or periods commencing with the first day of the calendar month next
succeeding the date of the receipt of such deposit and ending on the day next
preceding the interest payment date on which such deposits are required to
be disbursed in accordance with this agreement.
The general accounts connected with the service of the first-series bonds
and generally with all the bonds of the loan shall be kept by the fiscal agents
in the city and State of New York in United States of America dollars.
SEC. 9. The fiscal agents, the paying agents and each of them, shall be protected in relying upon a translation of any document executed in the Spanish
language if certified to them by the Minister of Finance of the Republic or by
any consul general of the Republic, to be a correct translation of the original;
but in the absence of such certificate the fiscal agents and the paying agents
shall none of them be liable for any action or failure to take action based upon
a mistake in the translation of any such document.
SALE OF FOREIGN" BONDS OE SECUBITIES
1425
SEC. 10. Tlic fiscal agents and the paying agents shall none of them be personally liable save each for its or their own willful default or gross negligence,
and none of them shall be personally liable for the obligations, acts or omission*
of any of the others.
SEC. 11. Neither the fiscal agents, nor the paying agents, nor any of them«
shall be compelled to do any act or to make any payments hereunder or in
respect hereof unless put in funds for the purpose. Whenever any provisioa
is made herein for the payment of moneys by the fiscal agents, or by the paying
agents, or by any of them, at any time, the fiscal agents and paying agents shall
none of them in any event be liable beyond the amount of moneys deposited
with them, respectively, for such purpo.se.
SEC. 12. The fiscal agents, the paying agents, or any member of any firm or
any officer of any corporation constituting the .same, may become the owners
of the bonds and interest coupons of the loan, of any series, and may engage
in or be interested in any financial or other transaction with the Republic or
may act as depositary, trustee, or agent of any committee or body of the holders
of the bonds of the loan, of any series, with the same rights which they would
have if they were not fiscal agents or paying agents or a member of any firm
or an officer of any corporation-constituting the same.
SEC. 13. The fiscal agents, and each of them, as the representatives of the
holders of the bonds of any or all series of the loan at any time outstanding,
shall not be under any obligation to take any action in respect to the execution
or enforcement of any of the obligations or undertakings of the Republic set
forth in or contemplated by any of the bonds of any series of the Joan, this
agreement, or any agreement executed in connection herewith or supplemental
hereto, which, in their or its opinion, would be likely to involve them or it in
expense or liability, unless one or more of the holders of such bonds shall, a*
often as required by the fiscal agents, or either of them, furnish adequate
security or indemnity against such expense or liability; and the fiscal agents,
and each of them, shall not be required to take notice of any default in the
payment of any of the bonds, or in the observance or performance of any of
the covenants contained in the bonds, or this agreement, or any agreement®
executed in connection herewith or supplemental hereto, or that any event of
default has happened, and the fiscal agents, and each of them, may assume
that no such default has occurred unless notified in writing of the hapepening
of such default by the holders of at least 25 per cent in amount of the bonds
of any or all series of the loan then outstanding; and the fiscal agents, and
each of them, shall not be required to take action in respect of such default
involving expense or liability except upon the written request of the holders
of not less than 25 per cent in amount of the bonds of any or all series of the
loan then outstanding and unless tendered adequate security and indemnity, as
aforesaid, anything herein contained to the contrary notwithstandig; but neither
such notice or request nor the absence thereof shall affect any discretion herein
given to the fiscal agents, or either of them, to determine whether they, or either
of them, shall take any action in respect of any such default, or to ,take any
action without such request.
SEC. 14. The term " Peruvian representative " as used in this agreement fihaU
be construed to mean the company, firm, or responsible individual designated by
the fiscal agents to act as such with the duties, among others, provided i s
article 7 hereof. The Peruvian representative may, upon GO days writtee
notice, delivered to the fiscal agents, resign its trust and duties hereunder and
the fiscal agents shall have the right to terminate the appointment of any suck
Peruvian representative by giving 30 days written notice of their intention soto do to such Peruvian representative and to the Republic and to the caja or
its successor. Upon any such termination the fiscal agents shall have the right
to designate, in the manner herein provided for original appointment, a sueeessor or successors of the Peruvian representative who shall have resigned
or whose appointment shall have been terminated.
The Peruvian representative shall give, if requested by the Republic; a bond
of a responsible surety company in favor of the Republic in a sum not exceeding
$300,000 as surety for the faithful discharge of its duties hereunder. The
expenses of any such bond shall be paid by the Republic.
The Republic agrees to pay to the Peruvian representative as compensation
for its services in receiving and remitting deposits for the service of the bond*
of the loan of any and all series outstanding hereunder a commission of one*
quarter of 1 per cent on the sums deposited with the Peruvian representative
for such purpose and will also pay all reasonable expenses incurred in good
1426
SAIiB
OF FOREIGN" BONDS OR SECURITIES
faith by the Peruvian representative in connection with its proper duties under
this agreement, such commission to be paid upon the deposit with the Peruvian
representative of any and all sums hereunder and such expenses to be paid
Upon demand.
Any moneys received or collected by the Peruvian representative under any
provision of this agreement shall be treated by it, until required to pay out the
same conformably herewith, as a general deposit and it shall not be required
to allow any interest thereon to the Republic.
The Peruvian representative shall not be personally liable save for its own
willful default or gross negligence.
ARTICLE IX—GENERAL PBOVISIONS
SECTION 1. The Republic, in conformity with its constitution and laws, and
the fiscal agents, from time to time and at any time, subject to any restrictions
of this agreement, may, and w?hen so required by the procisions of this agreement shall, enter into one or more agreements supplemental hereto and which
shall thereafter form a part hereof, for any one or more of the following
purposes:
(a) To provide for the creation and issue of bonds of additional series of
the loan, to set forth tlie terms of such bonds, to provide for payments for the
service thereof, to state the security therefor, if any, and otherwise generally
to provide therefor.
(ft) To provide for the creation and enforcement of such liens or charges on
revenues or assets of the Republic as may be required pursuant to the covenants
of the Republic set forth in sections 5 and 6 of Article V hereof and in general
to make such additional covenants supplemental to or in furtherance of the
covenants made by the Republic in Article V hereof or otherwise under this
agreement or under any agreement supplemental hereto as may be necessary.
(c) To add such other limitations to be thereafter observed to the limitations
on the creation and issue of bonds of additional series of the loan, the application of the proceeds thereof, or otherwise, as may be advisable; or to add to
the covenants and agreements of the Republic for the protection of the bondholders, or otherwise, as may be advisable.
(d) To make such further agreements in respect to the collection or deposit
of revenues of the Republic as may be required by the provisions of Article VI
hereof.
(5) To make such other provisions in regard to matters or questions arising
under this agreement, or any agreements executed in connection herewith or
supplemental hereto, as may be necessary or desirable and not inconsistent
with the provisions of this agreement and which in the opinion of the fiscal
agents shall not impair or endanger any engagements or undertakings of the
Republic in respect to the bonds of the loan of any series.
The fiscal agents are hereby authorized to join with the Republic in the
execution of any such supplemental agreements, to agree to the further stipulations which may be therein contained, and to accept as the representative of
the holders of the bonds of the loan of all series the further engagements and
undertakings of the Republic that may be made therein. In case of the delivery
of any such supplemental agreement or agreements, express reference thereto
may be made in the text of the bonds of any additional series of the loan
created thereafter.
Any such supplemental agreement shall be construed in connection with and
as a part of this agreement and the covenants thereof shall be deemed, as to the
subject , matter of such covenants, covenants of this agreement.
SEC. 2. Whenever, according to the provisions of this agreement, any notice,
request, or instruction, or order, for the payment of money or delivery of
securities or otherwise may be required to be given by one party to another,
it shall be deemed sufficient notice, except as otherwise herein expressly provided, if given in writing in English or in Spanish, as follows:
(a) If from the fiscal agents to the Republic (1) by registered letter or (2)
by cablegram or radiogram, and confirmed by letter, addressed to the Minister
of Finance of the Republic at Lima, Peru, ot to the ambassador of the Republic
to the United States of America, at Washington, in the District of Columbia,
United States of America, oyer the signature of both the fiscal agents which may
be . signed by one of them.
(b) If from the Republic to the fiscal agents (1) by registered letter or (2) by
cablegram or radiogram, and confirmed by letter, delivered to the fiscal agents
SALE OF FOREIGN" BONDS OE SECUBITIES
1427
at the office of J. & W . Seligman & Co., No. 54 Wall Street, In the city and
State of New York. United States of America, or at such other address as may
be designated by the fiscal agents from time to time, over the signature of the
Minister of Finance of the Republic, or his representative, or over the signature
of the ambassador of the Republic to the United States of America.
SEC. 3. This agreement shall be executed in the English language and may be
executed in one or more counterparts, each of which shall be deemed to be an
original. There shall be attached to each executed counterpart a duly authenticated copy of the supreme resolution hereinabove mentioned.
SEC. 4. In case any one or more of the covenants and agreements contained
in this agreement or in the bonds should be invalid, illegal, or unenforceable
in any respect, the validity, legality, and enforceability of the remaining covenants and agreements contained herein and in the bonds shall be in no wise
affected, prejudiced, or disturbed thereby.
SEC. 5. Whenever reference is herein made to the Republic, it shall be deemed
to apply to any successor sovereign Government which may at any time during
the life of this agreement govern the major portion of the territory now embraced within the territorial boundaries of the Republic.
SEC. C. This agreement shall be interpreted and construed in accordance
with the laws of the State of New York in tlie United States of America as
though it had been made and were to be performed wholly within the territorial limits of said State.
In witness whereof, Republics, del Peru (Republic of Peru) has caused this
agreement to be executed on its behalf in four counterparts by his excellency,
Senor Don Manuel G. Masias, the Minister of Finance of the Republic, thereunto duly authorized, as aforesaid, and J. & W , Seligman & Co. has caused
this agreement to be signed on its behalf in a like number of counterparts by
Broderick Haskell, jr., its attorney in fact, thereunto duly authorized, and the
National City Bank of New York has caused this agreement to be signed on
its behalf in a like number of counterparts by Claude W . Calvin, its attorney
in fact, thereunto duly authorized, all as of the day and year first above written,
REPUBLICA DEL PERU,
B y M . G . MASIAS,
Minister
of
Finance.
J . & W . SELIGMAN & Co.,
B y BBODERICK HASKELL, J r . ,
Attorney
in Fact.
T H E NATIONAL CITY B A N K OF NEW YORK,
B y CLAUDE W . CALVIN,
Attorney
EXHIBIT
in Fact.
A
[Form of first-series bonds]
REPUBLIC OF PERU (REPUBLICA DEL PERU) PERUVIAN NATIONAL LOAN 6 PER CENT
EXTERNAL SINKING FUND GOLD BOND, FIRST SERIES
Dated December 1, 1927. Due December 1, 1960.
Republica del Peru (Republic of Peru), herein called the Republic, for value
received, promises to pay to the bearer of this bond on December 1, 1960, the
sum of ( $ — — ) in gold coin of the United States of America of the standard
of weight and fineness existing on December 1,1927, and to pay interest thereon
from December 1, 1927, until the principal of this bond shall be paid, in like
gold coin, at the rate of 6 per cent per annum, semiannually on June 1 and
December 1 in each year, upon presentation and surrender of the coupons hereto
annexed as they severally mature. Such principal and interest shall be paid,
at the option of the holder hereof, in gold coin of the United States of America
of the standard aforesaid, in the borough of Manhattan, in the city and State
of New York, United States of America, at the principal office of either of the
fiscal agents of the Republic, J. & W . Seligman & Co. and The National City
Bank of New York, or their respective successors, or in English pounds sterling,
in the city of London, England, at the principal office of either of the London
paying agents, Seligman Bros, and The National City Bank of New York, or
their respective successors, or in Dutch guilders, in the city of Amsterdam.
1428
SAIiB
OF FOREIGN" BONDS OR SECURITIES
Holland, at the principal office of any of the Amsterdam paying agents, Pierson
& Co., Netherlands Trading Society, and Mendelssohn & Co., or their respective
successors, or in Swiss francs, in the cities of Zurich or Basle, Switzerland, at
the principal office in each of said cities of the Swiss paying agent, Credit
Suisse, or its successor, in each case except the first at the bankers* buying
rate for dollar sight exchange on the city of New York at the time of presentation for payment in such cities. Such principal and interest shall be paid in
every case free from and without deduction or diminution for any taxes, imposts, levies, or duties of any nature now or at any time hereafter imposed,
levied, or assessed by the Republic or by any province, municipality, or other taxing authority therein or thereof, and shall be paid in time of war as well as in
time of peace and irrespective of the citizenship or residence of the holder
hereof.
This bond is one of a series of bonds which have been designated " 6 per
cent external sinking fund gold bonds, first series " (herein called the first series
bonds), limited to $50,000,000, principal amount, at any one time outstanding,
duly authorized by law No. 5930, enacted by the Congress of the Republic, dated
December 17,1927, being the first series of bonds of a loan designated " Peruvian
national loan" (herein called the loan) duly authorized by said law. The
first series bonds have been issued under a fiscal agency and loan agreement
dated as of December 1,1927, between the Republic and tlie fiscal agents of the
Republic, J. & W . Seligman & Co. and the National City Bank of New York
(herein called the fiscal agents), to .which reference is hereby made for a statement of the terms and conditions upon which the first series bonds have been
issued, a statement of the restrictions upon the issue of bonds of additional
series of the loan, and a statement of the covenants made by the Republic in
respect to the security and service of the first series bonds, to the benefit of
which covenants the holder of this bond is entitled.
, The first series bonds are subject to redemption, in whole or in part, at the
option of the Republic, on any interest payment date at their principal amount
plus accrued unpaid interest to the date designated for redemption upon notice
given in each city in which the first series bonds are made payable, by publication once a week for at least four successive weeks, in each instance on any
day of the week, each publication to be made in at least one daily newspaper
published and of general circulation therein, the first publication to be made at
least 60 days, and not more than 90 days, prior to the date designated for
redemption, as more fully provided in said fiscal agency and loan agreement.
Until all the first series bonds shall have been paid or redeemed the Republic
will pay, or cause to be paid, semiannually to the fiscal agents for the semiannual service of interest and amortization of the first series bonds the sum of
$1,750,000 in gold coin of the United States of America of or equal to the
standard aforesaid, which semiannual sum is calculated to be sufficient to pay
all interest charges and to provide a cumulative sinking fund sufficient to retire
all the first series bonds at or before maturity by semiannual drawings for
redemption at their principal amount. The fiscal agents shall apply such
moneys received by them in each semiannual period to the payment of interest
maturing on the next succeeding interest payment date on the first series bonds
then outstanding and shall apply the balance of such moneys so received in
each semiannual period to the redemption by lot of first series bonds on the
next succeeding interest payment date at their principal amount on notice
given in each city in which the first series bonds are made payable, by publication once a week for at least four successive weeks, in each instance on any day
of the week, each publication to be made in.at least one daily newspaper published and of general circulation therein, the first publication to be made at
least 60 days, and not more than 90 days, prior to the date designated for
redemption, as more fully provided in said fiscal agency and loan agreement.
The Republic covenants that so long as any of the first series bonds shall be
outstanding it will maintain an office or agency in the borough of Manhattan,
in the city and State of New York, where the first series bonds and interest
coupons may be presented for payment and where notices or demands in respect
of the first series bonds and interest coupons may be served.
Subject to the provisions of said fiscal agency and loan agreement, the holder
hereof, by the acceptance hereof, constitutes and appoints the fiscal agents, and
each of them, the representatives or representative of the holder for the purpose of entering into any agreement or agreements supplemental to said fiscal
agency and loan agreement not incosistent therewith and which in the opinion
of the fiscal agenis shall not impair or endanger the agreements and under-
1429
SALE OF FOREIGN" BONDS OE SECUBITIES
takings of the Republic set forth therein, and for the purpose of enforcing all
obligations of the Republic set forth herein and in the coupons appertaining
hereto and in said llscal agency and loan agreement and any agreement supplemental thereto for the benefit of the holder hereof, to which appointment the
Republic hereby consents and agrees.
This bond and the coupons appertaining hereto shall pass by delivery.
This bond shall not become valid or obligatory for any purpose until it shall
be authenticated by the certificate of the National City Bank of New York as
authenticating agent hereon endorsed.
In witness whereof, Republica del Peru has caused this bond to be prepared
bearing a facsimile of the coat of arms of the Republic as a seal of the Republic
and a facsimile of the signature of its Minister of Finance, and has caused this
bond to be manually signed on its behalf by its ambassador to the United States
of America, or other representative of the Republic thereunto duly authorized,
and the coupons for said interest bearing the facsimile signature of its Minister
of Finance, to bo hereto annexed.
Dated, December 1, 1027.
By
REPUBLICA DEL PERU,
.
FORM OF AUTHENTICATING AGENT'S CERTIFICATE
This is to certify that this bond is one of the Peruvian national loan 6 per
cent external sinking fund gold bonds, first series, described in the withinmentioned fiscal agency and loan agreement.
T H E NATIONAL CITY B A N K OF NEW YORK,
By
,
Authorized Ofliccr.
Authenticating
Agent,
FORM OF COUPON
On
, 10—, unless the bond hereinafter mentioned hall have been called
for previous redemption, Republica del Peru (Republic of Peru) will, on
surrender hereof, pay to bearer, at his option, in gold coin of the United
States of America of or equal to the standard of weight and fineness existing
on December 1, 1927, in the borough of Manhattan, in the city and State of
New York, United States of America, at the principal office of either of the
fiscal agents of the Republic, J. & W\ Seligman & Co. and the National City
Bank of New York, or their respective successors, or in English pounds sterling,
in the city of London, England, at the principal office of either of the London
paying agents, Seligman Bros, and the National City Bank of New York, or
their respective successors, or In Dutch gilders, in the city of Amsterdam,
Holland, at the principal office of any of the Amsterdam paying agents, Pierson
& Co., Netherlands Trading Society, and Mendelssohn & Co., or their respective
successors, or in Swiss francs, In the cities of Zuuich or Basle, Switzerland,
at the principal office in each of said cities of the Swiss paying agent, Credit
Suisse, or its successor, in each case except the first at the bankers* buying
rate for dollar sight exchange on the city of New York at the time of presentation in such cities, ($
) in gold coin of the United States of America
of the standard aforesaid, in every case free from and without deduction or
diminution for any taxes, imposts, levies, or dutibs of any nature now or at
any time hereafter imposed, levied, or assessed by the Republic of Peru or
by any State, Province, municipality or other taxing authority therein or
thereof, in time of war as well as in time of peace and irrespective of the
citizenship or residence of such bearer, being six months* interest then due on
its 6 per cent external sinking fund gold bond, first scries, due December 1,19G0,
No.
REPUBLICA DEL PERU,
By
,
Minister of Finance.
In consideration of and upon the transfer to it of the right to collect or
receive deposits of revenues of the Republic as contemplated by article 6 of the
foregoing fiscal agency and loan agreement, Caja de Depositos y Consignaciones hereby covenants and agrees with the fiscal agents, for the benefit of the
holders of the bonds of any and all series of the Peruvian national loan at
1430
SAIiB OF FOREIGN" BONDS OR SECURITIES
any time or from time to time outstanding, that it will collect, or receive
deposit of, such revenues in accordance with the provisions of law No. 5746
and law No. 5931, of the Republic, and in accordance with the provisions of an
agreement which, pursuant to article 9 of said law No. 5931, will be entered
into between the Republic and the caja to carry out and give full effect to the
provisions of said laws, and that it will duly and punctually apply and pay
over, out of the revenues of the Republic which may be collected by or deposited
with it pursuant to said law No. 5746, law No. 5931 and such agreement with
the Republic, at the times and in the manner and amounts specified in article 7
of the foregoing fiscal agency and loan agreement and in the applicable provisions of any agreements executed in connection therewith or supplemental
thereto, the sums required for the service of interest and amortization of
the bonds of any and all series of the Peruvian national loan at any time
or from time to time outstanding and all other sums payable in resepect thereof,
and will otherwise act in conformity with and comply with the provisions of
said laws and such agreement with the Republic.
CAJA DE DEPOSITOS Y CONSIGNACIOXES,
B y PEDRO LAKRANAGA, GERENTE.
[SEAL.]
EXHIBIT NO. 9
[Stamp—Ministerio de Hacienda y Comercio del Peru]
Agreement, dated December 29, 1927, between Republica del Peru (Republic
of Peru), hereinafter called the Republic, represented by his excellency, Sefior
Don Manuel G. Masias, Minister of Finance of the Republic, thereunto duly
authorized by supreme resolution dated December 29, 1927, issued with the
approval of the Council of Minister, of the first part, and the Caja de Depositos y Consignaciones, hereinafter called the caja, represented by its manager, Sefior Don Pedro Larranaga, of the second part, pursuant to the provisions of article 9 of law No. 5931.
ARTICLE 1. The Republic hereby charges the caja with the collection of all
the revenues of the Republic of whatever origin and denomination, with the
sole exceptions for the present of (1) the revenues given as specific guaranty of
external loans of the Republic, the collection of which revenues, so long as the
respective loans are outstanding, is irrevocably entrusted to special entities
other than the caja, and (2) until such time as the executive power may judge
convenient, the revenues of posts and telegraphs and such customs revenues as
are not now given in guaranty for external loans of the Republic.
The caja shall begin on January 1, 1928, to collect the revenues intrusted to
it pursuant to this article, such collection to include everything which may be
collected from that date, including taxes when due. The revenues which the
caja shall begin to collect on January 1, 1928, together with the amounts collected during the fiscal year 1926 and the ofiices, agencies or organizations now
collecting the same, are set forth in Exhibit 1 hereto annexed and made a part
hereof.
ART. 2. The Republic further authorizes and directs the caja to collect the
revenues which are now given as specific guaranty for external loans of the
Republic and whose collection is intrusted, so long as such external loans are
outstanding, to entities other than the caja, as soon as such revenues are,
respectively, freed from the liens now imposed upon them, and also to collect
or receive in deposit as soon as the executive power may judge convenient, the
revenues from posts and telegraphs, and such customs revenues as are not now
given in guarantee for external loans of the Republic. The caja shall also
collect, subject to the provisions of existing external secured loan contracts, all
Imposts, taxes, duties, and charges which may be established by the Republic in
the future for whatever cause and denomination and all other revenues from
whatsoever source which may hereafter be created by or may accrue to the
Republic, the caja to being such collection immediately upon the establishment,
creation or accrual thereof to the Republic.
ART. 3. The Republic further authorizes and directs the caja to receive for
account of the Republic, commencing January 1,1928, of (1) all moneys payable
to the Republic in respect of each and every revenue given as specific guaranty
of an external loan or loans of the Republic, the collection of which revenue, so
SALE OF FOREIGN" BONDS OE SECUBITIES
1431
long as such loan or loans arc outstanding, is irrevocably entrusted to an entity
or entities other than the caja and (2) all consular revenues of the Republic
collected in foreign countries, the moneys from which consular revenues shall be
deposited to the order of the caja with such first class banking institutions as
the caja may select in agreement with the fiscal agents, and such revenues thus
deposited shall be under the control of the caja, as provided in article 4 of said
law No. 5931.
The Republic represents that it has in the case of each revenue so given as
specific guaranty for an external loan or loans of the Republic, directed and
will cause the entity collecting such revenue to deposit with the caja all
moneys payable to the Republic in respect thereof upon the Republic's becoming entitled to the same. Each such revenue, together with the external loan
or loans for which such revenue is given as guaranty, the auuual amount required for the service of such loan or loans and the entity entrusted with the
collection of such revenue, is set forth in Exhibit 2 hereto attached.
AKT. 4. The Republic will cause the offices, agencies, and organizations entrusted with the collection of revenues to be transferred, in conformity with
tlie provisions of said law No. 5931 and this agreement, to the caja, to deliver
to the caja all moneys held for account of the Republic, which the caja shall
place to the order of the director of the treasury, all bills, tax bills, and
amounts receivable, which the caja shall take over for collection, ail other
assets held for account of the Republic and, at least 15 days prior to date
for any such transfer, all receipts, invoices, registers, archives, lists, and other
data necessary or useful to collect or receive the deposit of such revenues.
AKT. 5. The caja hereby covenants and agrees with the Republic and with
the fiscal agents, hereinafter referred to, to collect or receive the deposit of
the revenues of the Republic in accordance with the provisions of the foregoing articles of this agreement, said law No. 574G and iaw No. 5931. The
caja further agrees immediately to enlarge its collection department for such
purpose and covenants and agrees with the Republic and the fiscal agents that,
so long as any bonds of any series of the Peruvian national loan shall be outstanding, theby-laws and in general the legal organization of the caja shall
not be modified or altered without the express consent rf the fiscal agents given
by their representative on the board of directors of the caja.
ART. 0. Attached hereto as Exhibit 3 is a photostatic copy of the fiscal agency
and loan agreement, dated as of December 1, 1927, between the Republic, J. &
W. Seligman & Co. and the National City Hank of New York, hereinafter
referred to as the fiscal agency agreement. The caja declares that it is
familiar with the provisions of said agreement and the obligations assumed by
the Republic thereunder. The caja further declares that it is familiar with
the provisions of law No. 5930, authorizing the creation of the Peruvian .national
loan, law No. 5740 and law No. 5931.
In accordance with the provisions of law No. 5931 and said fiscal agency
agreement and commencing January 1, 192S, and thereafter so long as any
bonds of any series of the Peruvian national loan shall be outstanding, the
Republic hereby authorizes and directs the caja, and the caja hereby covenants
and agrees, to apply the gross amounts of the revenues of the Republic collected by or deposited with It pursuant to said law No. 5746, law No. 5931 and
this agreement, in cach month to the payment to the fiscal agents, or their
successors, of (1) the monthly proportion, that is to say, one-sixth part, of
the semiannual service charges of the bonds of the Peruvian national loan of
all series at the time outstanding, equally and ratably for each series and
(2) all other amounts payable to the fiscal agents pursuant to the terms of the
fiscal agency agreement and of the respective loan agreements under which
the bonds of the respective series of the Peruvian national loan shall be issued,
before making any disbursements of such moneys for any other purpose whatsoever, and to apply such moneys and to make each and every such payment
in accordance with the provisions of said fiscal agency agreement and of the
loan agreements under which the bonds of each series of the Peruvian national
loan shall respectively be issued: Provided, hoiccver, That in the case of
moneys collected by or deposited with the caja in respect of revenues now given
in guaranty, as shown in Exhibit 2 hereto attached, for an outstanding loan of
the Republic and so long as such revenues remain so pledged, the caja shall
first apply the moneys collected or deposited In respect of each such revenue
for the payment; as far as required, of tlie service of such loan in accordance
with the terms of the agreement under which such loan was contracted.
1432
SAIiB OF FOREIGN" BONDS OR SECURITIES
The caja further agrees to pay from time to time to the fiscal agents; or to
their successors, out of the moneys so collected or deposited with it, any other
amounts which may be designated from time to time by the executive power
of the Republic in order that the payments provided for in said law No. 5931,
or in said fiscal agency agreement, or in any of the above mentioned loan
agreements may be fully made.
Tlie balance of the moneys so collected or deposited, after making the application of moneys and payments aforesaid, and after deducting monthly the
administration and collection expenses and the commission of the caja, the
interest due from the Government on the guaranty fund in accordance with
article 6 of said law No. 5740, and the amounts required for the service of
the internal debt of the Republic of 18S9, 1898, and 1918, shall be placed by
the caja to the order of the Director of the Treasury of the Republic.
AP.T. 7. The obligations assumed by the caja pursuant to the provisions of
law No. 5931 or this agreement, are limited to the revenues of the Republic
which may be collected by or deposited with the caja hereunder, law No. 5746
and law No. 5031; and, accordingly, the caja shall not be liable in any case
to pay out of its own moneys, or out of the judicial, or administrative deposits from time to time in its custody, any sums on account of such obligations.
This agreement and any other agreement which may be entered into by the
caja with the Republic in connection with the collection, deposit, and application of revenues of the Republic pursuant to said law No. 5746 or said law No.
5931, shall be exempt of all kinds of imposts, taxes, duties, or contributions,
created or to be created.
ART. 10. Subject to the provisions of said law No. 5931, this agreement and
said fiscal agency and loan agreement, the caja shall have full discretion in
connection with the administration of the revenues of the Republic to be collected by or deposited with the caja pursuant to said law No. 5746, law No.
5931, or this agreement, and the Government shall not grant any concessions
to other agencies or individuals to manage any part of such revenues, and
shall immediately cancel and repeal any and all contracts granting any such
concessions inconsistent with said laws, said fiscal agency agreement or this
agreement.
The caja will receive as full compensation for its services relating to the
collection, deposit, and application of the revenues of the Republic, in accordance with law No. 5746, with law No. 5931, and with this agreement, the
following annual commissions: On all amounts collected from £p. 1 to £p.
3,000,000, the commission will be 1 per cent; if the total amount collected should
be more than £p. 3,000,000 and less than £p. 5,000,001, the commission will be
1 per cent on £p. 3.000,000, and three-fourths per cent on the balance from
£p. 3,000,001 up to £p. 5,000,001; and if the total amount collected should be
in excess of £p. 5,000,001, the commission for the caja shall be 1 per cent on
£p. 3,000,000, three-fourths per cent on the balance from £p. 3,000,001 up to
£p. 5,000,001, and one-half per cent on any amount over £p. 5,000,001.
ART. 8. As provided in article 10 of law No. 5931, the fiscal agents shall have
the right, during the life of the Peruvian national loan, or while any bonds
of any series of said loan are outstanding, to appoint an additional director
on the board of directors of the caja, and his alternate, who shall enjoy,
respectively, the same prerogatives, rights, and privileges enjoyed by the
statutory directors of the caja. The term "fiscal agents,1* as used in this
agreement, refers to J. & W . Seligman & Co., and the National City Bank of
New York, fiscal agents of the Republic, and includes any successor, firm,
partnership, or corporation carrying on the business of either J. & W . Seligman
& Co., or of the National City Bank of New York.
ART. 9. If the caja, for any reason whatsoever, shall fail to make the payments specified herein, in said law No. 5931, ©aid fiscal agency agreement, or
in any other agreement which may be entered into by* the Republic in connection with the issue and sale of any series of the bonds of the Peruvian
national loan, the fiscal agents, or their successors, shall not be under any
obligation to enforce rights against the caja, but shall also be entitled to demand
such payments directly from the Republic. It is understood that if at any time
the caja shall cease to collect, receive, or apply the revenues entrusted to it, or
should fail to comply in any respect with its obligations in connection therewith, or should cease to exist, the executive power of the Republic, in agreement
with the fiscal agents, shall immediately organize a special collecting agency,
1433
SALE OF FOREIGN" BONDS OE SECUBITIES
acceptable to the fiscal agents, in the manner and for the purposes provided
in article 8 of said law No. 5931.
ART. 11.—The caja, having organized the special collection department provided for in article 1 of law No. 574G and being required by law No. 5931 to
enlarge the same, shall be at liberty to retain present employees, to replace
employees, to abolish offices, to change salaries and duties, and to designate
new employees without any further restriction than that of excluding employees and replaciug those against the employment of which the government
may raise objection by written notice to the caja.
Tlie employees to which this contract refers shall not come within the
provisions of tlie employment law.
The government, in agreement with the caja, will present to congress a bill
for the creation of a special fund which shall be devoted to covcr the losses
or damages arising from the misconduct or misfeasance of employees, the
expenses in connection with gratuities, illnesses, or funerals of employees, the
exjKmscs of old age, retirement, and other similar pensions for such employees.
ART. 12.—So long as any bonds of any series of the Peruvian national loan
shall be outstanding, the authorizations and directions of the Republic to the
caja herein set forth to collect or receive the deposit of, and to apply, the revenues of the Republic, as well as the covenants and agreements of the caja
herein contained, shall be irrevocable, and during such time this agreement
may not be changed, modified, or rescinded in any respect exccpt with the
express consent of the fiscal agents: Provided, however, That the caja, upon
six months' previous notice to the Republic and to the fiscal agents, may
terminate its obligations hereunder and, after the organization by the executive power of the Republic, in accordance with article 8 of said law No. 5931,
of a special collecting agency acceptable to the fiscal agents, which shall, immediately upon the termination of the obligations of the caja as herein stated,
automatically assume all the rights and obligations in connection with collecting, receiving, or applying the revenues of the Republic pursuant to said
law No. 5931 and this agreement, and after payment to the Republic and to
the fiscal agents of all sums respectively due to the Republic and the fiscal
agents hereunder or und^r the agreement dated March 30, 1927, mentioned
in article 15 hereof, the caja shall be relieved from its duty to collect, receive,
and apply the revenues of the Republic. Upon any termination of this agreement, unless provision therefor satisfactory to the caja shall be made, the
Republic shall pay to the caja all sums then due to it under the provisions
of the said agreement dated March 30, 1927.
ART. 13.—The fiscal agents are parties to this agreement only for the
purposes provided in articles 5, 6, 8, 9, and 12 hereof.
ART. 14.—Law No. 574G and law No. 5931 are hereby incorporated into, and
shall be considered as a part of, this agreement and said agreement dated
March 30, 1927.
ART. 15.—Clauses 2, 3, 4, 5, 7, 9, 10, 14, 15, 16, and 23 of the agreement
dated March 30, 1927, between the caja, the supreme government of Peru, and
J. & W . Seligman & Co., as fiscal agents, are hereby canceled. All other provisions not inconsistent with this agreement shall remain in full force and
effect and shall apply to the functions of the caja hereunder and to all the
revenues hereby transferred for collection or deposit, or provided to be transferred for collection or deposit, to the caja.
REPUBLICA DEL PERU,
B y M . G . MABIAS,
Minister
of
Finance.
CAJA DE DEPOSITOS Y CONSIGNACIONES,
B y PEDRO LARRANAGA,
Manager.
J . & AY. SELIGMAN & Co.,
B y BRODERICK HASKELL, Jr.,
Attorney
in
Fact.
T N E NATIONAL CITY B A N K OF N E W YORK,
B y CLAUDE W . CALVIN,
Attorney
[Stamp—Ministerio de Hacienda y Comercio Peru.]
in
Fact.
1434
SAIiB
OF FOREIGN" BONDS OR SECURITIES
EXHIBIT NO. 1 0
BOND PURCHASE AGREEMENT BETWEEN REPUBLICA DEL PERU (REPUBLIC o r PERU)
AND J. & W . SELIGMAN & Co. AND THE NATIONAL CITY CO., DATED OCTOBER
1 , 1928-^PEBUVIAN NATIONAL LOAN, 6 PER CENT EXTERNAL SINKING FUND
BONDS, SECOND SERIES.
Agreement, dated October 1, 1928, between Republica del Peru (Republic of
Peru), hereinafter called the Republic, acting by His Excellency, Senor Don
Manuel G. Hasias, the Minister of Finance of the Republic, thereunto duly
authorized by supreme resolution dated October 19, 1928, issued with the approval of the Council of Ministers, and J. & \V. Seligman & Co., a co-partnership
of the city and State of New York, United States of America, acting by Henry
C. Breck, thereunto duly authorized, and the National City Co., a corporation
duly organized and existing under the laws of the State of New York, United
States of America, acting by Alexander J. Robertson, thereunto duly authorized, hereinafter collectively called the bankers.
The Republic represents:
(1) That it has executed and delivered a valid fiscal agency and loan agreement dated as of December 1, 1927, with J. & W . Seligman & Co. and the National City Bank of New York (hereinafter called the fiscal agency and loan
agreement) providing for the creation of an external loan to be known as the
Peruvian national loan (hereinafter called the loan), and lias validly created
the loan and issued a first series of bonds of the loan:
(2) That it has entered into a valid agreement dated October 1, 1928, with
W . Seligman & Co. and the National City Bank of New York supplemental
to the fiscal agency and loan agreement (hereinafter called the supplemental
agreement), a true and correct copy of which is annexed hereto and marked
" Exhibit No. 1," providing for the issue of a second series of the bonds of the
loan (hereinafter called the second series bonds) limited to $50,000,000, in gold
coin of the United States of America or the equivalent amount (in part) in
English pounds sterling, to be known as the Peruvian national loan, 6 per cent
external sinking fund gold bonds, second series (with appropriate changes for
second series bonds payable in pounds sterling), and be payable as the Republic
may determine prior to the issue thereof, (a) in New York in dollars and at any
other place or places, if any, in the currency of the place of payment at the
buying rate for dollar sight exchange on New York at the time of payment
(hereinafter called the second series dollar bonds), or (&) in London in pounds
sterling and in New York in dollars at the rate of $4.8665 for £1 and at any
other place or places, if any, in the currency of the place of payment at the
buying rate for dollar sight exchange on New York or the buying rate for
sterling sight exchange on London at the time of payment (hereinafter called
the second series sterling bonds), all as more fully set forth in the supplemental
agreement; and
(3) That the Republic is not in default or in arrears in the payment of any
amounts due for principal, interest, or amortization or otherwise with respect
to any of the external or internal loans or obligations, secured or unsecured,
issued or guaranteed by the Republic and outstanding at the date of this
agreement.
The Republic desires to issue and sell to the bankers and the bankers desire
to purchase from the Republic certain of the second series bonds upon the
terms and conditions hereinafter in this agreement set forth.
Now, therefore, this agreement witnesseth that, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the
parties hereto have agreed, and do hereby agree, as follows:
ARTICLE 1
SECTION 1. Subject to all the terms and conditions of this agreement, the
Republic agrees to sell and deliver to the bankers and the bankers agree to purchase from the Republic and pay for, $25,000,000, principal amount of second
series dollar bonds, to be issued under and in accordance with the fiscal agency
and loan agreement and the supplemental agreement at the price of 86 per
cent of the principal amount thereof plus interest accrued from the date of said
second series dollar bonds to the date of delivery thereof to the bankers or to
the date of the issue of interim certificates pursuant to the provisions of this
agreement, whichever date shall be earlier, plus one-half of the amount (if
SALE OF FOREIGN" BONDS OE SECUBITIES
1435
any) by which the price at which said second series dollar bonds are offered
by the bankers for public subscription, exclusive of accrued interest, exceeds
92% per cent of the principal amount thereof.
Subject to all the terms and conditions of this agreement, the Republic also
agrees that It will, if the bankers so elect by written or cabled notice to the
Republic sent at least two days prior to the date of the public offering of said
second series dollar bonds hereinafter provided for, sell and deliver to the bankers, at the purchase price or prices hereinafter provided for, all or such part as
the bankers may elect of an additional $10,000,000, principal amount, of secondseries bonds which, at the option of the bankers to be exercised at the time of
and specified In the above written or cabled notice, shall be wholly second series
dollar bonds or wholly second series sterling bonds, or part second series dollar
bonds and part second series sterling bonds as the bankers may specify in such
written or cabled notice. If the bankers elect to take any part or all of the
above additional $10,000,000, principal amount, in second series sterling bonds,
the amount so to be taken shall be converted into pounds sterling at the rate of
$4.86G5 for £1 and the principal amount of second series sterling bonds to be
purchased shall be the largest multiple of the smallest denomination in which
the bankers may request second series sterling bonds to be delivered contained
in such converted amount. The purchase price of any such second series dollar
bonds shall be the same as that above provided for said $25,000,000, principal
amount, of second series dollar bonds. The purchase price of any such second
series sterling bonds shall be SO per cent of the principal amount thereof plus
interest accrued from the date of such second series sterling bonds to the respective installment payment dates hereinafter referred to, plus one-half of the
amount (if any) by which the price at which said second series sterling bonds
are offered by the bankers or their associates for public subscription exceeds
92% per cent of the principal amount thereof.
Delivery of all of the second series bonds to be purchased hereunder shall be
made at the office of J. & W. Seligman & Co., 54 Wall Street, in New York, on a
date to be specified by the bankers in a written notice to the fiscal agents and in
a cable notice to the Republic, which notices shall be sent by the bankers at least
three days previous to the date so specified and which specified date shall be not
less than 10 days nor more than 20 days after the public offering of the second
series dollar bonds to be purchased hereunder, provided that by mutual agreement between the Republic and the bankers the time for the delivery of the
second-series bonds to be purchased hereunder may be advanced to such earlier
date or extended to such later date as may be fixed by such agreement.
Payment of the second serie? dollar bonds to be purchased hereunder shall be
made against delivery thereof to the bankers on the delivery date fixed as above
provided by crediting the amount of the purchase price therefor (less an amount
estimated by the bankers to be sufficient to cover the costs, taxes, expenses, and
other items agreed to be paid by the Republic as hereinafter in section 4 of
article 3 hereof provided) to the account of the Republic with the fiscal agents
of the Republic.
Payment for the second series sterling bonds to be* purchased hereunder shall
be made by depositing the purchase price therefor In three installments as hereinafter provided (less any amount of the costs, taxes, expenses, and other items
above referred to not deducted from the purchase price of the second series
dollar bonds) for account of the Republic with such bank or bankers in Jiondon,
England, as the fiscal agents may select. The installments of the purchase
price shall be deposited at times and in amounts as follows: First installment,
30 per cent of the aggregate purchase price (exclusive of accrued interest), plus
interest accrued on 30 per cent of the principal amount of the second series
sterling bonds from the date thereof to the first installment payment date, less
any amount of the costs, taxes, expenses, and other items above referred to not
deducted from the purchase price of the second series dollar bonds, not later
than 14 days after the public offering in London of the second series sterling
bonds; second installment, 30 per cent of the aggregate purchase price (exclusive
of accrued Interest) plus interest accrued on 30 per cent of the principal amount
of the second series sterling bonds from the date thereof to the second installment payment date, not later than 42 days after the public offering in London of
the second series sterling bonds; and last installment, 40 per cent of the aggre*
gate purchase price (exclusive of accrued Interest) plus interest accrued on 40
per cent of the principal amount of the second scries sterling bonds from the
date thereof to the last installment payment date, not later than 34 days after
the public offering In London of the second series sterling bonds.
1436
SALE OF: FOREIGN BONDS: OR SECURITIES
The Republic agrees to instruct the fiscal agents prior to the delivery date for
the second-series bonds to retain out of -the proceeds of the second series dollar
bonds to be credited to the account of the Republic, an amount equal to the
monthly payments for interest and amortization on all of the second series
bonds to be purchased hereunder accrued or to accrue thereon from the date of
the second-series bonds to the end of the calendar month in which such credit
shall have been made and to apply such moneys to the service of said secondseries bonds in accordance with the provisions of the supplemental agreement.
The proceeds of the second series sterling bonds and the balance of the proceeds
of the second series dollar bonds to be credited to or deposited for account of the
Republic as aforesaid shall be held by the fiscal agents or such bank or bankers
and disposed of by them from time to time as provided in section 3 of article 4
of the supplemental agreement.
The bankers agree, subject to all the terms and conditions of this agreement,
to make such public offering of the second series dollar bonds to be purchased
hereunder on or before December 31,1928, and to give the Republic at least two
days' notice of the date selected for such public offering, provided, however,
that the bankers may make such public offering on a " when, as, and if issued
and received by the bankers and subject to the approval of Peruvian and American counsel" basis, and provided further, that the bankers may, if they deem
advisable, postpone such public offering from time to time (but not later than
December 31, 192S) by sending cable notice thereof to the Republic.
The bankers also agree, subject to all the terms and conditions of this agreement, to make or cause to be made, such public offering of the second series
sterling bonds as may be purchased hereunder in London on or before December
31, 1928, and to give the Republic prompt notice of the date on which such
public offering is made, provided, however, that the bankers may, if they deem
advisable, postpone such public offering from time to time (but not later than
said December 31,1928) by sending cabled notice thereof to the Republic.
SEC. 2. Delivery of the second series dollar bonds to be purchased hereunder
shall be made in the form of one or more temporary bonds of such denomination
or denominations and in such proportions of each denomination as the bankers
may request, and exchangeable for definitive engraved second series dollar
bonds when ready for delivery. Delivery of the second series sterling bonds to
be purchased hereunder shall be made in the form of one temporary bond in
such form as the bankers may request and as may be necessary to comply with
the custom of the London market and exchangeable for definitive engraved second series sterling bonds when ready for delivery. Tlie second series dollar
bonds to be purchased hereunder shall be payable in New York and in such
other place or places, if any, as the bankers may request prior to the public
offering thereof. The second series sterling bonds to be purchased hereunder
shall be payable in London and in New York and in such other place or places,
if any, as the bankers may request prior to the public offering thereof. The
second series dollar bonds to be purchased hereunder in definitive engraved form
shall be of such denominations and in such amounts qt each denomination as
the bankers may request and shall be executed and be in such form as to comply
with the listing requirements of the New York Stock Exchange. The second
series sterling bonds to be purchased hereunder in definitive engraved form
shall be of such denominations and in such amounts of each denomination as
the bankers may request and shall be executed and be in such form as to comply
with the listing requirements of the London Stock Exchange.
The Republic agrees to execute and deliver to the fiscal agents in New York
the temporary second series dollar bonds and second series sterling bonds to be
purchased hereunder at least one day prior to the date fixed by the bankers for
the public offering of the second series dollar bonds and at the time of such
delivery to irrevocably instruct the fiscal agents in writing or by cable to
authenticate and deliver to the bankers said temporary second series dollar
bonds and second series sterling bonds on the delivery date therefor against
payment for the second series dollar bonds as provided in section 1 of this
article.
-SEC. 3. If the second series dollar bonds to be purchased hereunder are not
delivered on the date specified in such notice by the bankers in accordance with
section 1 of this article, or if any of the conditions set forth in section 1 of
article 2 hereof have not been complied with before the date for the delivery of
and payment for the second series dollar bonds to be purchased hereunder, arid
the1 bankers shall extend the time for delivery of said second series dollar bonds,
the bankers may issue of cause to be issued interim certificates exchangeable
SALE OP F015EIGN BONDS OK SECURITIES
1437.
for second series dollar bonds, in temporary or definitive form, when, as, and if
issued and received by the bankers and subject to the approval of their Peruvian
and American counsel. Said interim certificates shall also provide that if for
any reason the Republic may fail to deliver said temporary or definitive second
series dollar bonds in accordance with the terms of this agreement, the holders
of the interim certificates shall be entitled to receive a refund of the retail purchase price of the second series bonds represented thereby (including the
accrued interest paid as a part of such purchase price) with interest at the rate
of G per cent per annum on the principal amount of the second series bonds
represented thereby from the date of the issue of the interim certificates until
the date fixed for such refund; and in case such interim certificates are issued
and the Republic fails to deliver said sccond scries bonds the-Republic hereby
covenants and agrees to pay to the bankers on demand the full amount of such
interest.
If the Republic shall deliver nnc or more temporary second series dollar bond
or bonds of large denomination or denominations, the bankers may issue or
cause to be issued interim certificates exchangeable for definitive engraved
second series dollar bonds when ready for delivery.
Pending the delivery of the second series sterling bonds to be purchased hereunder, in definitive form, the bankers, or any bank or bankers associated with
them, shall be, and hereby are, authorized to issue in the name and on the
behalf of the Republic scrip certificates exchangeable for said second series
sterling bonds and in such form as may be necessary to comply with the custom
of the London market, or of any other market in which said second series
sterling bonds may be offered for sale, and the Republic agrees at the request
of the bankers to deliver to the bankers or such bank or bankers associated
with them on or before the date of the public offering of said second series
sterling bonds such letter or letters as the bankers may require and in such
form as may be satisfactory to counsel for the bankers, or their said associates,
authorizing the bankers, or their said associates, to issue such scrip certificates
in the name and on the behalf of the Republic. The public offering price of
said second scries sterling bonds may be made payable in installments on such
dates and in such amounts on each such date as the bankers, or their associates,
may determine: Provided, however, That the last of such installments shall be
payable within three months of the date of such public offering. Each such
scrip certificate shall have annexed thereto an interest coupon payable on the
interest payment date for said second series sterling bonds next succeeding the
date of issue of such scrip certificates, entitling the bearer to interest on the
several installments paid in respect of the public offering price therefore at the
rate of G per cent per annum from the respective dates specified for the payment
of such installments to such Interest payment date which interest shall be paid
by the bankers or their associates out of the first semiannual payment of interest
payable by the Republic on the second series sterling bonds on April 1, 3020,
when received.
ARTICLE II
SECTION 1. The obligation of the bankers to purchase and pay for the second
series dollar bonds to be purchased hereunder and for the second series sterling
bonds to be purchased hereunder, as provided in article 1 of this agreement, is
subject to the conditions that on or before the public offering date for the second
series dollar bonds:
{a) All acts, deed*, and proceedings required by the constitution and laws
of the Republic and by the provisions of the fiscal agency and loan agreement
and the supplemental agreement precedent to the issue of said second series
bonds and to render said second series bonds, the supplemental agreement and
this agreement, the valid and binding obligations of the Republic in accordance
with their terms shall have been performed, shall have happened and shall have
been taken and the Republic shall have delivered or caused to be delivered to
the designated representative of the bankers in Peru duly authenticated copies
of all laws and decrees or other instruments authorizing the execution of this
agreement and of the supplemental agreement and the creation, issue, and sale
of said second series bonds.
(6) The bankers shall have received an opinion of their American counsel
and of their Peruvian counsel and, if second series sterling bonds are purchased
hereunder, of their English counsel (the last two in form satisfactory to their
American counsel) approving the proceedings of the Republic taken to authorize
1438
SAIiB
OF FOREIGN" BONDS OR SECURITIES
the execution of this agreement and of the supplemental agreement, the creation, issue, and sale of the second series bonds to be purchased hereunder in
accordance with the terms of the fiscal agency and loan agreement, the supplemental agreement, and this agreement, and in performance of all other matters
to be performed precedent to the issue of said second series bonds, as provided
in the fiscal agency and loan agreement and the supplemental agreement, and
approving the sufficiency of all action taken for said purposes, and stating in
substance that the supplemental agreement is the valid and binding obligation
of the Republic in accordance with its terms, and that all the second series
bonds to be purchased hereunder and the coupons appurtenant thereto, in both
temporary and definitive form, when executed and delivered in accordance
therewith, will be the valid and binding obligations of the Republic in the hands
of holders of any citizenship or residence whatsoever, in accordance with their
terms, and that this agreement is the valid and binding obligation of the Republic in accordance with its terms, and approving all other legal matters in
connection with the issue and sale of said second series bonds.
(c) The Republic shall have delivered to the bankers at least two days
before the public offering of the second series dollar bonds the prospectus letter
or letters referred to in section 1 of article 3 hereof, and shall also have
delivered to the fiscal agents at least one day before the public offering of the
second series dollar bonds the temporary second series dollar bond or bonds
and the temporary second series sterling bond, and shall have irrevocably
instructed the fiscal agents to authenticate and deliver the same to the bankers,
in each case at the time and in the manner provided in section 2 of article 1
hereof.
SEO. 2. The bankers shall have the absolute right at any time prior to the
day fixed for the delivery of and payment for the second series dollar bonds to
be purchased hereunder to terminate their obligations to make a public offering
of, and to purchase and pay for, (a) the second series dollar bonds to be purchased hereunder, or (6) the second series sterling bonds to be purchased
hereunder, or (c) both said second series dollar bonds and said second series
sterling bonds, by a written or a cabled notice to the Republic, if, in their
opinion, political, financial, or economic conditions in Europe or America render
it inadvisable to offer said second series dollar bonds or said second series
sterling bonds, or both said second series dollar bonds and said second series
sterling bonds, as the case may be, to the public. If the obligation of the
bankers in respect of either the second series dollar bonds or the second series
sterling bonds or both shall be terminated in accordance with the right of termination reserved in this section, the Republic covenants that it will forthwith
pay or reimburse the bankers for all expenses of the character specified in
section 4 of article 3 hereof to be paid by it, incurred to the date of such termination in respect of such second series dollar bonds or second series sterling
bonds or both, as the case may be.
SEC. 3. If the Republic shall fail or be unable to make delivery of the second
series bonds to be purchased hereunder within the time and under the conditions specified in this agreement, including any extended time wThicli may be
granted by the bankers for such delivery:
(a) The obligation of the bankers to take and pay for said second series
bonds may, at their option, be terminated by written or cabled notice to the
Republic, and thereupon the obligation of the bankers to take and pay for said
second series bonds, and the obligation of the Republic to deliver the same
under the terms of this agreement shall cease and terminate.
(b) The Republic shall forthwith, upon receipt of such notice of termination,
pay to the bankers the sum of $150,000 in cash to reimburse the bankers for
their expenses incurred in connection with the matters covered in this agreement and as compensation for their services rendered to the Republic to the
date of such termination.
ARTICLE 3
SECTION 1. As soon as practicable after the execution of this agreement, the
Republic will deliver or cause to be delivered to the bankers a prospectus letter
or letters signed by the Minister of Finance of the Republic or other representative of the Republic satisfactory to the bankers, and addressed to the bankers
or to such of their associates as the bankers may specify, or cause a representative of the Republic satisfactory to the bankers to approve a prospectus letter
or letters, containing in each case sur:h information concerning the resources
SALE OF FOREIGN" BONDS OE SECUBITIES
1439
and financial conditions of the Republic, including its debts, income and
expenditures, financial administration and such other matters as the bankers
may request, and in such form as may be satisfactory to the bankers' counsel,
for use in connection with the offering or sale of the second series bonds to be
purchased hereunder in the United States of America and elsewhere. Titer
Republic agrees that, since the bankers are relying on the statements contained
in said prospectus letter or letters and on the representations set forth in this
agreement, the fiscal ngency and loan agreement and the supplemental agreement in purchasing said second series bonds, and will make use of such pro*
spectus letter or letters and representations in disposing of said second series
bonds, it will indemnify the bankers and their associates and hold them harmless against uny damages, claims, or liability which the bankers or such associates may incur by reason of any error or misstatement contained therein.
SEC. 2. The Republic will, at the request of the bankers, and at its own expense, make application to list said second series bonds upon the New York
Stock Exchange and such principal European stock exchanges as the bankers
may request, and the Republic will furnish when and as required such information and data as may be necessary for such purpose.
The Republic, at the request of the bankers, shall also enter into agreements
with any such stock exchanges as the bankers may specify to offer at the
Republic's expense duplicates of all bonds which may be discarded by such
exchanges because of inferior quality of paper or engraving and shall also
enter into such other agreements as may be required in connection with any
such listing.
SEC. 3. The bankers, in their sole discretion, may choose and havQ in the
purchase of the second series bonds to be purchased hereunder such associates
as they may determine and may make any offering thereof or cause any offering
thereof to be made to the public either by themselves or others and in their
own names or in the names of others.
SEC. 4. The Republic will pay the cost of printing this agreement and the
supplemental agreement, the cost of printing or engraving, executing and authenticating the temporary and definitive second series bonds and the interim
certificates and scrip certificates which may be issued (if any), the expenses
of exchanging interim certificates or scrip certificates for temporary or definitive
second series bonds or for cash, the expenses of exchanging temporary second
series bonds for definitive second series bonds and the expense of listing the
second series bonds to be purchased hereunder on the New York Stock Exchange and the principal European stock exchanges on which said second series
bonds may be listed; and Including also all stamp taxes and other duties and
assessments, if any, to which under the laws of the Republic or of any foreign
country in which any of said second series bonds are issued by the Republic or
sold by the bankers or their associates, or of any political subdivision or authority thereof or therein, this agreement, the fiscal agency and loan agreement
the supplemental agreement, said second series bonds, temporary or definitive,
or the interim certificates or the scrip certificates may be subject
The Republic will in addition pay to the bankers an amount equal to 1 per
cent of the total principal amount of all second series bonds which the bankers
shall purchase hereunder, In consideration of which the bankers agree to bear
all their cable expenses, the fees and disbursements of their Peruvian, American
and English counsel, and all their other expenses in connection with their
negotiations with the Republic for the sale to them of said second series bonds
SEC. 5. The Republic agrees that if the sale and purchase of said second
series bonds shall be consummated as in this agreement provided, it will not
offer for sale any issue of external bonds or notes, or permit any issue of external bonds or notes Issued or guaranteed by it to be offered for sale, and
will not stamp or indorse all or any part of any issue of internal bonds or
notes Issued, assumed or guaranteed by it to permit their being offered f o r
sale in the United States of America, In Canada, or in Europe, within a period
of 12 months after the date of the public offering of the second series dollar
bonds without the written consent of the bankers.
SEC. 6. In consideration of the purchase of said second series bonds and of the
services rendered and to be rendered by the bankers pursuant to this agreement,
the Repiiblic hereby grants to the bankers a preferential right to purchase the
bonds of nny external loans issued or guaranteed by the Republic which may
be issued during a period of three years from the date of issue of said second
series bonds, on the most favorable terms to the bankers which the Republic
.92028—32—PT 3 -
12
1440
SAIiB OF FOREIGN" BONDS OR SECURITIES
is willing to accept from any other purchaser or purchasers, and the Republic
further covenants that it will not within such 3-year period issue or offer for
sale any bonds of any external loans to be issued or guaranteed by the Republic
without first giving to the bankers a 45-day option to purchase such bonds on
terms at least as favorable to the bankers as the Republic is willing to accept
from anv other purchaser or purchasers.
SEO. 7. The Republic agrees that it will at any time, at the request of the
bankers, execute an agreement supplemental to the fiscal agency and loan
agreement providing that no second series bonds in addition to the second
series bonds at the time outstanding shall thereafter be issued except as provided in section 11 of article 1 of the fiscal agency and loan agreement.
ARTICLE 4
SECTION 1. Any notice, request, or instruction required or permitted to be
given hereunder by one party to the other shall be deemed sufficient if given in
the manner expressly provided herein or, if no manner be expressly provided,
in English in writing, or by cable confirmed in writing, as follows:
(a) If from the bankers to the Republic, over the signature of J. & W . Seligman & Co. and addressed to the minister of finance of the Republic, at Lima,
Peru.
(b) If from the Republic to the bankers, over the signature of the minister
of finance of the Republic and delivered to J. & W . Seligman & Co. at No. 54
Wall Street, New York, N. Y., U. S. A., or such other address as may be specified
to the Republic by the bankers for that purpose.
SEC. 2. Any reference in this agreement to the bankers shall be deemed to
mean and include any successor firm, association, or partnership continuing the
respective businesses of J. & W . Seligman & Co. and the National City Co. Any
reference in this agreement to the Republic shall be taken to mean and include
any successor sovereign government which may at any time during the life of
this agreement govern the major portion of the territory now embraced within
the territorial boundaries of the Republic.
SEC. 3. This agreement shall be executed in the English language and may
be executed in one or more counterparts, each of which shall be deemed to be
an original. There shall be attached to each executed counterpart a duly
authenticated copy of the supreme resolution hereinabove mentioned.
This agreement shall be interpreted and construed in accordance with the
laws of the State of New York, in the United-States of America, as though it
had been made and were to be performed wholly within the territorial limits
of said State.
In witness whereof Republica del Peru (Republic of Peru) has caused this
agreement to be executed on its behalf in four counterparts by his excellency,
Senor Don Manuel G. Masias, the minister of finance of the Republic, thereunto
duly authorized, as aforesaid, and J. & W . Seligman & Co. has caused this
agreement to be signed on its behalf in a like number of counterparts by Henry
C. Breck, its attorney in fact, thereunto duly authorized, and the National
City Co. has caused this agreement to be executed on its behalf in a like
number of counterparts by Alexander J. Robertson, its attorney in fact, there
unto duly authorized, all as of the day and year first above written.
REPUBLICA DEL PERU,
B y M . G . MASIAS,
Minister of Finance
J. & W . SELIGMAN & Co.,
B y HENRY C. BRECK,
Attorney
in Fact.
TNE NATIONAL CITY Co.,
B y A . J. ROBERTSON,
Attorney
i?i Fact.
SALE OF FOREIGN" BONDS OE SECUBITIES
1441
EXHIBIT NO. 1 1
AGREEMENT BETWEEN REPUBLICA DEL PERU (REPUBLIC OF PERU) AND J . & W .
SELIGMAN & Co. AND T H E NATIONAL C m - B A N K OF NEW YORK, DATED
OCTOHER 1, 1928—AGREEMENT SUPPLEMENTAL TO PERUVIAN NATIONAL LOAN
FISCAL AGENCY AND LOAN AGREEMENT
Agreement, dated October 1, 1928, between Republica del Peru (Republic
of Peru), hereinafter called the Republic, acting by bis excellency, Seiior
Don Manuel G. Masias, the minister of finance of the Republic, thereunto
duly authorized by supreme resolution dated October 19, 192S, issued with
the approval of the council of ministers, and J. & W . Seligman & Co., a copartnership of the city and State of New York. United States of America, acting
by Henry C. Brock, thereunto duly authorized, and the National City Bank
of New York, a corporation duly organized and existing under the national
banking laws of the United States of America, acting by Alexander J. Robertson, thereunto duly authorized, hereinafter collectively called the fiscal agents,
supplemental to the Peruvian national loan fiscal agency and loan agreement,
dated as of December 1, 1927, between the Republic and the fiscal agents.
The Republic makes the following representations:
(а) The Republic lias entered into a valid fiscal agency and loan agreement
dated as of December 1, 1927. with J. & W . Seligman & Co. and the National
City Bank of New York (herein called the fiscal agency and loan agreement)
providing for the creation of an external loan to be known as the Peruvian
national loan (hereinafter called tlie loan) and has validly created the loan
and issued a first series of the bonds of the loan.
(б) The Republic desires presently to create a second series of the bonds
of the loan in accordance with the terms and conditions set forth in the
fiscal agency and loan agreement and in this agreement supplemental thereto
and from time to time to issue bonds of such series, in order to provide funds
for its proper governmental purposes.
Now therefore, this agreement witnessctli that, in consideration of the
premises and of the mutual covenants and agreements hereinafter contained,
the parties hereto have agreed, and do hereby agree as follows:
ARTICLE 1—CREATION, ISSUE, AUTHENTICATION, AND DELIVERY OF SECOND SERIES
BONDS
SECTION 1. The Republic hereby creates a second series of bonds of the
Peruvian national loan (hereinafter called the second series bonds) to be
known as Peruvian national loan. 6 per ccnt external sinking fund gold bonds,
second series, if payable in gold coin or if not so payable as Peruvian national
loan, 6 per cent external sinking fund bonds, second series, limited (except
as provided in section 11 of article 1 of the fiscal agency and loan agreement)
to the principal amount at any time outstanding of $50,000,000 in gold coin
of the United States of America or the equivalent of all or any part thereof
in English pounds sterling. For the purpose of such limitation, the principal
amount of any second series bonds payable in pounds sterling shall be converted into dollars at the rate of $4.S(>05 for £1. From time to time and at
any time after the execution of this agreement, the Republic may issue second
series bonds as hereinafter provided.
If at any time the Republic shall desire to issue any second series bonds,
the Republic shall deliver:
(a) To the fiscal agents a certificate signed by the minister of finance of
the Republic or other duly authorized representative of the Republic in such
form as shall be satisfactory to the fiscal agents stating that the proposed
issue of such second series bonds will comply in all resj>ects with the provisions
of article 4 and section 9 of article 5 of the fiscal agency and loan agreement;
and
(&) To the fiscal agents an opinion of counsel satisfactory to the fiscal
agents that the issue of such second scries bonds and the execution and delivery
of this agreement have l>een duly authorized and that this agreement will be
a valid and binding obligation of the Republic in accordance with its terms
and that such second series bonds will be validly issued under and entitled
to all the benefits of the fiscal agency and loan agreement, this agreement and
1442
SAIiB OF FOREIGN" BONDS OR SECURITIES
any other agreements supplemental to the fiscal agency and loan agreement
appertaining thereto; and
(c) To the fiscal agents, or, if the fiscal agents shall so request, to any of
the paying agents appointed as provided in section 2 of article 8 of the fiscal
agency and loan agreement, such second series bonds duly executed by the
Republic; and the fiscal agents shall authenticate and deliver or cause such
paying agents to authenticate and deliver such second series bonds to or upon
the order of such person or persons and at such time or times as may be
designated in a written or cabled order of the Republic signed by its minister
of finance or its duly authorized representative.
The fiscal agents may rely upon any such certificate or opinion and shall be
fully protected in so doing. The fiscal agents may, however, in their discretion
require such further certificates or opinions or may make such further investigation as they may deem necessary to determine that the issue of such second
series bonds will comply with the provisions of the fiscal agency and loan
agreement, but shall be under no obligation to require any such further certificates or opinions or to make any such further investigation unless requested
in writing, so to do by the holders of at least 10 per cent of the bonds of all
series then outstanding and unless tendered security and indemnity satisfactory
to the fiscal agents against any and all costs, expenses, and liabilities.
SEC. 2. The second series bonds may be payable in whole or in part as the
Republic may determine prior to the issue thereof, (a) in New York in dollars
in gold coin of the United States of America!; of or equal to the standard of
weight and fineness existing on the date of the second series bonds, and in
such other city or cities, if any, as the Republic may determine prior to the
issue thereof in the currency of the place of payment at the buying rate of
the paying agent making such payment for dollar sight exchange on New York
at the time of such payment (hereinafter called the second series dollar bonds),
or (5) in London in pounds sterling, and in New York in dollars at the rate
of $4.8665 for £1 in gold coin of the United States of America of or equal to
the standard aforesaid and in such other city or cities, if any, as the Republic
may determine prior to the issue of such second series bonds in the currency
of the place of payment at the option of the holders, either at the buying
rate of the paying agent making such payment for dollar sight exchange on
New York, or at the buying rate of such paying agent for sterling • sight
exchange on London, at the time of such payment (hereinafter called the
second series sterling bonds). The principal of, and interest upon, all the
second series bonds payable in New York shall be payable, at the option of
the holders, in the borough of Manhattan, in the city and State of New York,
United States of America, at the principal office of either of the fiscal agents.
The principal of, and interest upon, all the second steries bonds payable in
any other city or cities, shall be payable at the office or offices therein of such
paying agent or paying agents as may be appointed as provided in section 2 of
article 8 of the fiscal agency and loan agreement. If any second series bonds
are payable in more than one city, payment of the principal of and interest
upon such second series bonds shall be made, at the option of the holders, in
any of the cities in which such second series bonds are payable.
SEC. 3. The second series bonds shall be payable to bearer, shall be dated
October 1, 1928, shall mature October 1, 1961, and shall bear interest from
October 1, 1928, at the rate of 6 per cent per annum, payable on April 1 and
October 1 in each year. The definitive second series bonds shall be in coupon
form. The definitive second series dollar bonds may be of the denominations
of $1,000 and $500 and the definitive second series sterling bonds may be of
the denominations of £1,000, £500, £100, and £20.
SEC. 4. The principal of, and interest upon, all the second series bonds, shall
be paid in time of war as well as in time of peace and irrespective of the
citizenship or residence of the holders thereof, and shall be paid free from
and without deduction or diminution for any taxes, assessments, charges,
levies or duties of any nature, now or at any time hereafter imposed, levied or
assessed by the Republic, or by any province, district, municipality or other
taxing authority thereof or therein.
SEO. 5. The text ofi the definitive second series dollar bonds and of the coupons to be annexed thereto and of the certificate of authentication to be
indorsed on the second series bonds shall be substantially in the forms of the
bond, coupon, and certificate of authentication for the second series dollar
bonds annexed hereto and marked Exhibit A with such variations, additions
or omissions consistent with the provisions of the fiscal agency and loan
SALE OF FOREIGN" BONDS OE SECUBITIES
1443
agreement and of this agreement as may be required by the fiscal agents prior
to the issue thereof.
The text of the definitive second series sterling bonds and of the coupons
to be annexed thereto and of the certificate of authentication to be indorsed
on the second series sterling bonds sball be substantially in the forms of the
bond, coupon, and certificate of authentication for the second series sterling
bonds annexed hereto and marked Exhibit B, with such variations, additions, or
omissions consistent with the provisions of the fiscal agency and loan agreement and of this agreement as may be required by the fiscal agents and the
paying agents for the second series sterling bonds prior to the issue thereof.
ARTICLE II.—PAYMENTS
FOE THE SERVICE OF INTEREST AND AMORTIZATION OF
SECOND SERIES BONDS
SECTION 1. Until all the second series bonds shall have been paid or redeemed
the Republic shall pay. or cause to be paid, in each semiannual period, the first
semiannual period to commence October 1, 192S, to the fiscal agents, at the
office of J. & W . Seligman
Co., in the borough of Manhattan, city and State
of New York, United States of America, for the semiannual service of interest
and amortization of the second series bonds, such sum in gold coin of the
United States of America of the standard aforesaid as, calculated by the fiscal
agents, as hereinafter provided, will be sufficient to pay all interest charges
upon, and to provide a cumulative sinking fund to retire at or before their
maturity by semiannual redemptions at their principal amount, all the second
series bonds issued hereunder. Upon the Issue of any second series bonds, the
fiscal agents shall calculate the sum so required to be paid in each semiannual
period for the service of interest and amortization of such second series bonds
as aforesaid from October 3, 192$, if issued during the first semiannual period
or, if issued thereafter, from the interest payment date next preceding the date
of issue thereof, uuless issued on an interest payment date, in which case such
sum shall be calculated from such interest payment date; and upon the issue
of any additional second series bonds, the amount payable in each semiannual
period, including the semiannual period in which such additional second series
bonds are issued, shall be increased by the amount so calculated to be required
for the service of interest and amortization of the additional second series
bonds issued. In case any second series bonds arc issued on a date other
than interest payment date, the fiscal agents shall calculate the proportion of
the first semiannual payment for the service of interest and amortization on
such second series bonds accrued or to accrue at the end of the calendar
month in which such second series bonds are issued and such amount shall
be deducted from the proceeds of such second scries bonds and deposited at
the date of issue thereof with the fiscal agents. For the purpose of determining
such amounts, the principal amount of any second scries sterling bonds shall
be converted into dollars at the rate of $4.SGG5 for £1 sterling. All sums
payable hereunder for the service of interest and amortization of second series
bonds in respect of each semiannual period, excluding in the case of second
series bonds issued on a date other than an interest payment date the proportion of the first semiannual payment for the service thereof to be deposited
with the fiscal agents out of the proceeds thereof as aforesaid but including
the residue of such semiannual payment not so deposited, shall be paid in
monthly instalments as hereinafter in article »5 provided.
SEO. 2.—The moneys paid by the Republic pursuant to section 1 of this article
shall be applied to the payment of the interest due and payable on the next
succeeding interest-payment date on the second series bonds then outstanding
on presentation and surrender of the coupons for such interest in accordance
with the terms thereof, and the balance of such moneys shall be applied as a
sinking fund for the redemption of second series bonds on behalf of the Republic on the next succeeding interest-payment date in the manner hereinafter in
article 6 hereof provided. The Republic irrevocably authorizes and directs the
fiscal agents and the paying agents for the second scries bonds so to apply
such moneys without any further formality except such as the fiscal agents or
the paying agents may deem advisable or necessary in order to comply with any
law of the place of payment.
SEC. 3. The Republic will pay to the fiscal agents at least 30 days before the
maturity of the second series bonds such sum in gold coin of the United States
of America of the standard aforesaid, in addition to the semiannual sum then
payable pursuant to section 1 of this article, as may be required to pay the full
1444
SAIiB OF FOREIGN" BONDS OR SECURITIES
principal amount of any second series bonds then outstanding and tlie interest
thereon maturing on the maturity date.
SEO. 4. The fiscal agents shall make such arrangements with the paying agents
for the second series bonds as they may deem advisable so that the moneys paid
to the fiscal agents pursuant to sections 1 and 3 of this article may be available
to make payment of the second series bonds and coupons presented to the paying agents for payment.
SEC. 5. In addition to the payments made as provided in sections 1 and 3 of
this article, the Republic shall also pay to the fiscal agents on demand (or the
fiscal agents, at their option, may deduct from any moneys of the Republic then
on deposit with the fiscal agents and not specifically appropriated for other purposes) such additional sum in gold coin of the United States of America or in
pounds sterling as may be required in connection with the service of interest
and amortization and the payment of principal and interest at maturity of
second series sterling bonds by reason of the fact that the cost of purchasing
the required amount of pounds sterling or the required amount of United States
of America gold coin of the standard aforesaid exceeds the equivalent of such
amount in United States of America gold coin or in pounds sterling, as the case
may be, at the rate of $4.8665 for £1 sterling, provided, however, that all savings in.the amounts required by reason of the fact that the cost of purchasing
such pounds sterling or United States of America gold coin is less than the
equivalent of such amount in United States of America gold coin or in pounds
sterling, as the case may be, at the rate of $4.8005 for £1 sterling shall be credited from time to time to the Republic by the fiscal agents.
SEC. 6. The Republic shall pay in pounds sterling sucli part of the moneys
to be paid to the fiscal agents pursuant to sections 1 and 3 of this article as
the fiscal agents may request at any time before payment of such moneys is
made to them and shall make any such payment to such paying agent or paying
agents for the second series bonds as the fiscal agents may request. Every
such payment in pounds sterling shall reduce the amount payable in dollars
pursuant to sections 1 and 3 of this article, and for the purpose of determining
the amount of such reductions, pounds sterling shall be converted into dollars
at the rate of $4.86G5 for £1.
SEC. 7. All transfers and exchanges of funds between the fiscal agents and
the paying agents shall be made at, as nearly as reasonably practicable, the current rates of exchange at the time of such transfers and exchanges and in
addition to the payments to be made as provided in sections 1, 3, 5, and 6
of this article, all expenses incidental to such transfers and exchanges shall
be paid by the Republic to the fiscal agents on their written or cabled demand
or the fiscal agents, at their option, may deduct the amount thereof from any
moneys of the Republic then on deposit with the fiscal agents and not specifically appropriated to other purposes.
SEC. 8. Any paying agents may publish, at the expense of the Republic, such
notices of the payment of interest as may be customary in the city in which
such paying agent is acting or required by any stock exchange on which the
second series bonds may be listed.
SEC. 9. The payments by the Republic to the fiscal agents, or to the paying
agents, pursuant to sections 1, 3, 5, and 6 of this article, shall not release
the obligation of the Republic to the holders of the second series bonds and
coupons to pay the principal and interest of the second series bonds when and
as the same shall become due and payable in accordance with their terms,
whether at maturity or on redemption for the sinking fund or on extraordinary redemption.
ARTICLE 3.—EXTRAORDINARY REDEMPTION OF SECOND SERIES BONDS
SECTION 1. The second series bonds shall be subject to redemption, at the
option of the Republic, on April 1,1929, and on any interest payment date thereafter, as a whole or in part, at 100 per cent of their principal amount and accrued
interest to the date designated for redemption, on notice given in the manner
provided in section 2 of this article. The provisions of sections 2, 3, and 4 of
article 3 of the fiscal agency and loan agreement shall not apply to the second
series bonds, but such redemption shall be made in the manner provided in
sections 2, 3, and 4 of this article.
SEC. 2. In case at any time the Republic shall desire to redeem, as a whole
or in part, the second series bonds, the Republic shall so notify the fiscal
agents in writing, specifying the interest payment date (which shall not be
SALE OF FOREIGN" BONDS OE SECUBITIES
1445
less than 90 days after such notification) on which it desires to make redemption and the principal amount of the second series bonds which it desires to
redeem.
In case of each partial redemption of the second series bonds the fiscal
agents shall determine the principal amounts of second scries dollar bonds and
second series sterling bonds to be redeemed by allocating so far as may
be practicable to the redemption of second series dollar bonds a proportion
of the redemption moneys equal to the proportion which the aggregate principal
amount of second series dollar bonds at the time outstanding bears to the
aggregate principal amount of all the second series bonds at the time outstanding, and to the redemption of second series sterling bonds a proportion of the
redemption moneys equal to the proportion which the aggregate principal
amount of second scries sterling bonds at the time outstanding bears to the
aggregate principal amount of all the second series bonds at the time outstanding. The fiscal agents shall forthwith notify the paying agents in London
for the second series sterling bonds of the principal amount of second series
sterling bonds to be redeemed.
In case of partial redemption, the fiscal agents shall also determine by lot
in any usual manner, deemed fair by the fiscal agents, the numbers of the
second series dollar bonds to be redeemed, and furnish a notarial certificate
thereof to the Republic, and the fiscal agents, or such paying agent in London
as the fiscal agents may select, shall determine by lot in any usual manner
deemed fair by the fiscal agents or such paying agent, as the case may be,
the numbers of the Second series sterling bonds to be redeemed, and furnish a
notarial certificate thereof to the Republic. The fiscal agents shall promptly
notify the paying agents for the second scries dollar bonds of the second series
dollar bonds to be redeemed, and the fiscal agents or such paying agent in
London, as the case may be, shall promptly notify the fiscal agents and the
paying agents for the second series sterling bonds of the numbers of the
second series sterling bonds to be redeemed.
As soon as practicable the fiscal agents shall, on behalf of the Republic,,
give or cause to be given notice of redemption of second series dollar bonds
in the city of New York by ail advertisement published once a week for at
least four consecutive weeks in each instance upon any day of the week,
each publication to be made in at least one daily newspaper published and of
general circulation therein, the first publication to be at least 60 days and
not more than 90 days before the date so fixed for redemption, and also
in each of the other cities in which the second series dollar bonds may be
payable by an advertisement published at least once in at least one daily
newspaper published and of general circulation therein, such publication or
publications to be made at least 10 days and not more than 40 days before
the date so fixed for redemption. The fiscal agents shall also give or cause
to be given notice of such redemption of second series sterling bonds in London
and also in each of the other cities in which the second series sterling bonds
may be payable by an advertisement published at least once in at least one
daily newspaper published and of general circulation therein, such publication
or publications to be made at least 00 days and not more than 90 days before
the date so fixed for redemption. Each such notice shall specify the date
fixed for redemption, the redemption price and the second series dollar bonds
or the second series sterling bonds, as the case may be. to be redeemed which
may be presented for payment in the city in which such notice is published,
and, in the case of partial redemption, shall set forth the numbers of thesecond series dollar bonds or the second series sterling bonds, as the case
may be, to be redeemed. Each such notice shall in addition require that the
second series bonds thereby called for redemption be surrendered on or after
such redemption date, together with all coupons appurtenant thereto maturing
on or after such redemption date, at the office of either of the fiscal agents
or of any of the paying agents at which such second series bonds may be
presented for payment, for redemption at said redemption price and shall state
that the second series bonds thereby called for redemption shall upon said
redemption date become due and payable and that, unless default be madeby the Republic in providing moneys for such redemption as aforesaid, interest
on such second series bonds shall cease to accrue on such redemption date.
SEC. 3. The Republic shall, at least 30 days prior to the date so fixed for
such redemption, deposit with the fiscal agents at their principal office or offices
in the city and State of New York a sum of money in gold coin of the United
States of America of the standard aforesaid (converting into dollars the amount
1446
SAIiB
OF FOREIGN" BONDS OR SECURITIES
in pounds sterling required for the redemption of the second series sterling
bonds at the rate of §4.8665 for £1) sufficient to redeem and pay the second
series bonds so called for redemption at the redemption price thereof, together
with the accrued interest thereon to the date fixed for redemption, and the
fiscal agents shall redeem and pay, or cause to be redeemed and paid, but only
out of moneys deposited with the fiscal agents for that purpose, all such second
.series bonds presented and surrendered for redemption on or after said redemption date at the redemption price thereof, including accrued interest thereon to
said redemption date. The fiscal agents shall make such arrangements with
the paying agents for the second series bonds as they may deem advisable so
that the moneys so deposited with the fiscal agents may be available to make
payment of such second series bonds and coupons as may be presented to the
paying agents for payment. The Republic shall deposit in pounds sterling
such part of the moneys to be deposited with the fiscal agents as above provided, as the fiscal agents may request at any time before such deposit is made
with them, and shall make any such deposit with such paying agent or paying
agents for the second series bonds as the fiscal agents may so request Every
such deposit of pounds sterling shall reduce the amount required to be deposited
with the fiscal agents in dollars as above provided, and for the purpose of determining the amount of such reductions, pounds sterling shall be converted
into dollars at the rate of $4.8665 for £1. The Republic shall also pay to the
fiscal agents on demand (or the fiscal agents, at their option, may deduct
from any moneys of the Republic then on deposit with the fiscal agents and
.not specifically appropriated for other purposes) such additional sum in gold coin
of the United States of America or in pounds sterling as may be required in
connection with the redemption of second series sterling bonds by reason of
the fact that the cost of purchasing the required amount of pounds sterling
or the required amount of United States of America gold coin of the standard
aforesaid exceeds the equivalent of such amount in United States of America
.gold coin or in pounds sterling, as the case may be, at the rate of $4.8665 for
£1 sterling, provided, however, that all savings in the amounts required by
reason of the fact that the cost of purchasing such pounds sterling or United
States of America gold coin is less than the equivalent of such amount in
United States of America gold coin or in pounds sterling, as the case may
be, at the rate of $4.8665 for £1 sterling shall be credited from time to time
to the Republic by the fiscal agents.
Any moneys set aside pursuant to section 2 of article 2 hereof for the payment of interest maturing on said redemption date on any second series bonds
<which may be called for redemption shall be credited against the obligation
of the Republic to deposit such accrued interest as a part of the redemption
price for second-series bonds.
SEC. 4. From and after the date so designated for redemption, the notices
-aforesaid having been published and the deposit aforesaid having been made,
all second-series bonds so called for redemption shall cease to bear interest,
and upon presentation thereof, in accordance with said published notices, together with all coupons maturing on and after said redemption date, said
second-series bonds shall be paid by the Republic at the principal amount
thereof and with accrued interest to such redemption date as above provided.
If any second-series bonds so called for redemption shall not be paid on presentation thereof, such second-series bonds shall continue to bear interest at
the rate of 6 per cent per amium upon the principal amount thereof until
payment.
If any second-series bond presented for redemption shall not be accompanied
by the coupon maturing on the redemption date, then said second-series bond
shall be paid at the redemption price aforesaid less the face amount of such
coupon. All second-series bonds redeemed under the provisions of this article
.and all coupons thereto appertaining shall immediately upon such redemption
be canceled by the fiscal agents or paying agents through whom such redemption is made and be delivered at convenient periods to a representative of the
Republic for that purpose or sent by registered mail to the nearest embassy
or legation of the Republic at the risk and expense of the republic: Provided,
Jioicever, That all second-series bonds redeemed and canceled at the office of
the fiscal agents or of any paying agent, which shall not have been authenticated by the fiscal agents or the paying agent making such payment, shall first
3)e sent by registered mail to the fiscal agents or to the paying agent, as the
'Case may be, who shall have authenticated such second-series bonds, at the
risk and expense of the Republic. No second-series bonds shall be issued in
lieu of any second-series bonds so redeemed and canceled.
SALE OF FOREIGN" BONDS OE SECUBITIES
ARTICLE 4.—PARTICULAR COVENANTS OF THE REPUBLIC WITH
SECOND-SERIES BONDS
1447
RESPECT TO THE.
SECTION 1. The Republic pledges Its full faith and credit for the due and
punctual performance of all the covenants and agreements in this agreement
and in the second-series bonds contained to be performed or observed by it.
SEC. 2. The Republic will pay the stamp taxes and other duties and charges,
if any, to which under the laws of the Republic this agreement may be subject
SEC. 3. The Republic covenants that the net proceeds of the second-series
bonds, that is, after deducting from the gross proceeds an amount sufficient to
pay or reimburse for any exi>enses to be borne by the Republic in connection
with the issue and sale of the second-series bonds and the service charges on
the second-series bonds accrued to the end of the calendar month in which
such second-series bonds are issued, shall forthwith upon the Republic's becoming entitled to such proceeds be deposited with the fiscal agents or, at the
request of the fiscal agents, with any paying agent for any of the second-series
bonds, for account of the Republic, to l>e disposed of by them for account of
the Republic as follows:
(a) To the extent permitted by law, to repayment of all sums advanced, the
interest due thereon, and all other sums payable at the date of issue of the
second-series bonds, under the fifth credit, pursuant to the fifth-credit agreement dated August 10, 1928, between the Republic and J. & W . Seligman & Co.
and the National City Bank of New York, but such repayment shall not be
deemed to terminate such fifth credit, which shall continue in force in accordance with the terms of the fifth-credit agreement.
(&) Up to but not exceeding $18,906,000 shall be applied by the fiscal agents
(1) to the purchase at not exceeding their redemption prices plus accrued
interest, of such bonds or notes of external secured loans of the Republic from
time to time outstanding, as the fiscal agents in their absolute discretion may
select, whether or not the same are by their terms presently redeemable, or
(2) to the redemption at their redemption prices of any or all outstanding
bonds or notes of any or all external secured loans of the Republic, which by
their terms are presently redeemable at the option of the Republic, as shall be
selected by the fiscal agents In consultation with the Republic. Pending such
application all such moneys shall remain on deposit with the fiscal agents or^
if the fiscal agents shall so request, with one of the paying agents. Bonds so
purchased may be resold by the fiscal agents for account of the Republic when
deemed advisable by them and authorized by the Republic, and such authoritymay be general or specific, and the proceeds of such sales shall revert to and
become a part of the fund created by this subdivision ( 6 ) . The fiscal agentsmay charge to or pay from the fund created by this subdivision (d) the customary stock exchange commissions on all such purchases and sales, and such
commissions shall not be included In the purchase or sale prices. All interest
received by the fiscal agents upon bonds or notes purchased and held by them
as aforesaid, all moneys, if any, received by the fiscal agents upon the redemption of such bonds or notes, but only to the extent that the moneys for the
redemption thereof have not been provided by withdrawals from the sums on
deposit under this subsection (&), all savings arising from purchases at less
than their respective redemption prices of any such bonds or notes called for
redemption and accepted in lieu of the redemption moneys therefor, and alt
losses arising from sales of any such bonds or notes at prices less than those
paid for the same, shall be credited or charged, as the case may be, to the general account of the Republic with the fiscal agents, and any excess of the
amounts so credited over the amounts so charged may from time to time be
disbursed for account of the Republic for such purposes as the Minister of
Finance of the Republic may direct.
(c) Up to but not exceeding $2,120,000 may, at the option of the Republic,,
be applied to the construction and improvement of Callao Harbor dock and
shipping facilities and may be withdrawn by the Republic from time to time bywritten or cabled drafts drawn to the order of the contractors undertakingsuch development and in accordance with the terms of the contract therefor
and any modifications thereof, if any.
(d) The residue remaining after making or providing for the payments
provided in paragraphs ( a ) , (&)» and (c) above shall remain on deposit with
the fiscal agents or, if tlie fiscal agents shall so request, with one of the paying
agents, and be withdrawn by the Republic for the purpose of carrying forward
the public works under construction at the date of the fiscal agency and loan.
1448
SAIiB
OF FOREIGN" BONDS OR SECURITIES
agreement from time to time in installments at the rate of not exceeding
$750,000 per month, determined from December 1, 1927, and including for the
purposes of such determination all amounts withdrawn out of the proceeds of
the first series bonds and all amounts advanced under the fifth credit for
such purpose.
The Republic hereby irrevocably authorizes the fiscal agents to apply the
proceeds of the second series bonds deposited with them for account of the
Republic to the purposes, in the amounts and at the time or times hereinabove
in this section specified, and the Republic covenants and agrees that such proceeds shall remain on deposit with the fiscal agents or with such paying agents
until disposed of by them for account of the Republic for the purposes and in
the amounts so specified.
In making any payment out of the proceeds of the second series bonds the
fiscal agents may use the proceeds deposited with them and the proceeds, if
any, deposited with any paying agents in such proportions as the fiscal agents
in their discretion may determine. Such paying agents are authorized and
directed to pay the funds so deposited with them to or upon the written or
cabled order of the fiscal agents. All transfers and exchanges of funds in
connection with such withdrawals shall be made at, as nearly as reasonably
practicable, the current rates of exchange at the time of such transfers and
exchanges and all costs and expenses of such transfers and exchanges shall be
paid by the Republic to the fiscal agents on the written or cabled demand of
the fiscal agents. Neither the fiscal agents nor any such paying agents shall
be under any responsibility or duty to make any inquiry or investigation with
respect to the application of the proceeds of the second series bonds deposited
with the fiscal agents or with any such paying agents.
SEC. 4. The Republic covenants that as soon as possible after the execution
of this agreement it will, by executive decree or other appropriate action, call
for redemption on the earliest permissible redemption date or dates and redeem when and as presented for redemption all the bonds of the Peruvian
sterling 5 % per cent loan of 1909 and the Peruvian sterling 5 per ccnt bonds
of 1920 outstanding at the date of this agreement. The Republic further covenants that, when and as requested by the fiscal agents, it will, by executive
decree or other appropriate action, call for redemption and redeem all or such
part, at the earliest permissible date or dates thereafter of such of its other
external secured callable loans issued and outstanding at the date of this
agreement as shall be specified by the fiscal agents and apply to the redemption thereof such part of the proceeds of the second series bonds as is applicable
thereto, pursuant to the provisions of this agreement, or present for cancellation the bonds of such exernal secured callable loans purchased for account of
the Republic by the fiscal agents and held by them pending such cancellation,
pursuant to the provisions of this agreement; and the Republic further covenants that the bonds so redeemed or presented shall be cancelled and that no
bonds of such external secured callable loans shall be issued in place thereof.
ARTICLE 5.—APPLICATION OF REVENUES TO INTEREST AND AMORTIZATION
MENTS FOR BONDS OF THE LOAN
PAY-
SECTION 1. The provisions of section 1 of article 7 of the fiscal agency and
loan agreement are and shall be superseded by the provisions of section 2 of
this article 5.
SEC. 2. The payments to be made by the Republic to the fiscal agents in respect of each semiannual period for the semiannual service of interest and
amortization of the first series bonds as provided in article 2 of the fiscal
agency and loan agreement and of the second series bonds, as provided in
article 2 of this agreement, and of any other series of bonds which may be
issued under the fiscal agency and loan agreement shall be made in the following amounts and in the following manner;
(a) The sum of $291,660.06% in December, 1927, and monthly in each calendar month thereafter, said sum being equal to one-sixth of the amount necessary for the installment for the service of interest on, and amortization of,
the first series bonds in respect of each semiannual period as in article 2 ot
the fiscal agency and loan agreement provided.
(&) In the calendar month next succeeding the date on which the first issue
of second series bonds is made hereunder and monthly in each calendar month
thereafter, the sum equal to one-sixth of the amount necessary for the in-
SALE OF FOREIGN" BONDS OE SECUBITIES
1449
stallment for the service of interest on, aiul amortization of, the second series
bonds in respect of each semiannual period as in article 2 hereof provided.
(c) In such months, and In each calendar month thereafter, as may be provided in any agreements supplemental to the fiscal agency and loan agreement
providing for the issue of additional series of bonds, the sum equal to onesixth of the amount necessary for the installment for the service of interest on
and amortization of the bonds of each such additional series in respect of each
semiannual period for each such series as may be provided in such supplemental agreements.
(d) Unless and until otherwise agreed upon by the Republic, the Caja and
the fiscal agents as representatives of the bondholders, such monthly payments
shall be made in the following manner: On the first Monday in December, 1927,
and on each Monday thereafter, the gross amounts of the revenues of the
Republic collected by or deposited with the Caja de Depositos y Consignaciones
(herein called the Caja), or any suecessor special collecting agency appointed
as in section 2 of article C of the fiscal agency and loan agreement proeided,
during the preceding week, remaining after deducting from the revenues which
were pledged at the date of the fiscal agency and loan agreement to secure
any then existing loan of the Republic, the payments for the service of interest and amortization and all other moneys due and payable in respect of the
bonds or notes of such loan at the time outstanding and not previously provided for, shall be paid by the Caja, on behalf of the Republic, to the Peruvian
representative of the fiscal agents, appointed as provided in the fiscal agency
and loan agreement, until the full amouut required to be made available to
the fiscal agents in New York for the service of the bonds of the loan of all
series at the time outstanding, the full monthly payments specified in subsections (ff), (0) and (c) of this section, shall have been received by the
Peruvian representative. Such weekly payments shall be made either in dollars of the United States of America or, with the consent or at the request
of the fiscal agents, in Peruvian pounds or in any other currency in which any
bonds of the loan of any series may be payable. The moneys so paid to the
Peruvian representative shall us soon as practicable after the receipt thereof
be remitted, or applied to the purchase of sight exchange or cable transfers
and remitted, by the Peruvian representative in such manner as the fiscal
agents shall direct, at the risk and expense of the Republic, to the fiscal agents
in New York in dollars, or to such paying agents of the bonds of the loan of
any series and in such currencies, as the fiscal agents may request pursuant
to the provisions of section G of article 2 hereof, or pursuant to the provisions
of any other agreement supplemental to the fiscal agency and loan agreement.
(e) Such additional sum, on or before the last day of each calendar month,
commencing with December, 1927, as may be necessary to make up the deficiency, if a 113% by which the revenues of the Republic collected by or deposited
with the Caja, or its successors, and paid over to, or for account of, and
received by, the fiscal agents in New York, and by the paying agent in the
respective cities In which they are appointed to act, for the scrvice of interest
on, and amortization of, the bonds of all series as in subsection (dt) of this
section provided, shall not be sufficient for the full payments specified to be
ma'de in subsections (r/), (&), and (c) of this section in respect of each such
calendar month, and
if) Such additional sum on or before each interest date for each series of
the bonds as may be necessary to make up the deficiency, if any, by which the
moneys paid over to, or for the account of, and received by, the fiscal agents
in New York, and by the paying agents in the respective cities in which they
are appointed to act, in respect of the current semiannual payment for each
series of the bonds, as provided in article 2 of the- fiscal agency and loan
agreement and in article 2 hereof and as may be provided in any such supplemental agreement, shall not be sufficient for the full payment therein specified
to be made.
The fiscal agents shall apply or cause to be applied all amounts paid to
them or to the paying agents as provided in this section to the service of
each series of the bonds of the loan pro rata according to the amount which
may be due and payable to the fiscal agents at the time of each such payment
in respect of the service of each series of the bonds of the loan.
Any consent or request of the fiscal agents that the payments by the Republic
to the Peruvian represeentative may l>e made in any currency other than dollars as in subsection (<i) of this section provided, may at any time be withdrawn by the fiscal agents by notice in writing or by cable addressed and
1450
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sent to the Minister of Finance of the Republic and the Caja, and thereafter
such payments to the Peruvian representative shall be in dollars o fthe United
States of America until the fiscal agents again consent or request that such
pavments may be made in another currency.
The failure of the fiscal agents to secure or retain the service of a bank,
firm, corporation, or responsible individual to act as its representative in Peru,
or the failure of the fiscal agents to appoint such representative in Peru, or
the failure of the Peruvian representative1 to transmit any sums paid over to
it to the fiscal agents in New York or to such paying agent as the fiscal agents
may request in the respective cities in which such paying agents are appointed
to act, or the failure of the fiscal agents or such paying agents to receive any
such sums in New York or in such cities, or the failure of the Peruvian representative or the fiscal agents or any such paying agent to make transfers or
exchanges of funds or payments as contemplated by the fiscal agency and loan
agreement or this agreement, or any agreement supplemental to the fiscal
agency and loan agreement, shall not relieve the Republic of its obligation to
make the full payments provided in this section, and the Republic agrees that
in such event it will make, or cause to be made, such payments or any deficiency therein in gold coin of the United States of America directly to the
fiscal agents in the city of New York or in pounds sterling directly to the
paying agents in the city of London, or in such other currency or currencies
in which bonds of the loan at the time outstanding shall be payable, directly
to the paying agents for such bonds, to the end that both the principal of and
interest upon all bonds of the loan at the time outstanding shall be duly and
punctually paid at the times and in the manner and at the places therein
provided.
ARTICLE 6—SINKING FUND FOR SECOND-SERIES BONDS
SECTION 1. The moneys set aside and apportioned by the fiscal agents in each
semiannual period, pursuant to section 2 of article 2 hereof, for the redemption
of second-series bonds, together with any amounts carried forward from the next
preceding semiannual period pursuant to section 3 of this article, shall be applied to the redemption of second-series bonds on the next succeeding interest
payment date (the first application to be made on April 1. 1929, and subsequent
applications to be made on each interest payment date thereafter) at the redemption price of 100 per cent of the principal amount thereof and accrued
unpaid interest thereon to such interest payment date in the manner hereinafter
in this section provided; and the fiscal agents and the paying agents are hereby
authorized and empowered to redeem with such moneys at said redemption
price on each such interest payment date and at the places and in the manner
hereinafter in this section provided, in the name and on behalf of the Republic,
and at its expense, a principal amount of second-series bonds equal to the amount
of such sinking fund installment plus any such amounts carried forward. The
sinking-fund moneys shall be allocated to the redemption of second series dollar
bonds and to the redemption of second series sterling bonds, the numbers of the
second-series bonds to be redeemed shall be determined, and such redemption
shall be made in the manner and with like notice as is provided in section 2. of
article 3 hereof in the case of partial redemption, except that in the case of the
notice of redemption of second series dollar bonds to be given in the city of New
York, the first publication shall be made at least 30 and not more than CO days
before such redemption date and in the case of all notices of redemption of second series sterling bonds the publication or publications shall be made at least
10 days and not more than 40 days before such redemption date. From and
after the date so set for redemption, notice having been so given by publication
and the moneys sufficient for such redemption having been paid to the fiscal
agents, the second series bonds so called for redemption shall cease to bear interest and, upon presentation and surrender in accordance with said published
notices, at any office of the fiscal agents or paying agents at which such secondseries bonds may be presented for payment, of such second-series bonds, together
with all coupons thereto appertaining maturing on and after said redemption
date, said second-series bonds shall be paid by the Republic at the principal
amount thereof and accrued interest to such redemption date. If any secondseries bonds so called for redemption shall not be paid on presentation thereof,
said second-series bonds shall continue to bear interest at the rate of 6 per cent
per annum upon the principal amount thereof until payment. If any secondseries bonds so presented for redemption shall not be accompanied by the coupon
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thereto appertaining maturing on the redemption date, then said second-series
bonds shall be paid at the redemption price aforesaid, less the face amount of
such coupon.
SEO. 2. Accrued unpaid interest on second-series bonds redeemed for the sinking fund shall not be paid by the fiscal agents out of moneys set aside for the
sinking fund, pursuant to section 2 of article 2 hereof, nor out of any other
moneys in the sinking fund, but shall be paid out of moneys set aside pursuant
to section 2 of article 2 hereof for payment of interest on all the second-series
bonds.
SEC. 3. Any odd amounts of money applicable to the redemption of secondseries bonds for the sinking fund amounting to less than the sum required to
redeem one second-series bond of the smallest denomination outstanding and
which can not therefore be applied to the redemption of second-series bonds on
the nest succeeding Interest payment date, shall be carried over and applied
with the moneys set aside for the sinking fund during the next succeeding six
months period to the redemption of second-series bonds.
SEO. 4. All second-series bonds redeemed for the sinking fund, pursuant to the
provisions of this article, and all coupons thereto appertaining, shall immediately upon such redemption be canceled by the fiscal agents or the paying agents
through whom such redemption is made and delivered at convenient periods to a
representative of the Republic for that purpose, or sent by registered mail to the
nearest embassy or legation of the Republic at the risk and expense of the Republic, provided, however, that all second-series bonds redeemed and canceled at
the office of the fiscal agents or of any paying agent wiiich shall not have been
authenticated by the fiscal agent or by the paying agent making such payment
shall first be sent by registered mail, at the risk and expense of the Republic, to
the fiscal agent or to the paying agent, as the case may be, who shall have authenticated such second-series bonds. No second-series bonds shall be issued in
place of second-series bonds so redeemed and canceled.
SEC. 5. No expenses of any character incurred by tlie fiscal agents or the paying agents in connection with the administration of the sinking fund shall be
charged against the sinking fund, or paid out of any moneys in the sinking fund,
but all such expenses shall be borne by the Republic and shall be paid by the
Republic to the fiscal agents or the paying agents upon their written or cabled
demand.
ABTICLE 7,—GENERAL PROVISIONS
SECTION 1. The provisions of this agreement shall supplement the provisions
of the fiscal agency and loan agreement and, to the extent that the provisions
of the fiscal agency and loan agreement are expressly superseded or modified
by the provisions of this agreement, shall supersede and modify the provisions
of the fiscal agency and loan agreement; but, except as so superseded or modified, the provisions of the fiscal agency and loan agreement shall remain in
full force and effect, and the bonds of all series of the loan shall be entitled to
all of the benefits and shall be subject to all of the provisions of this agreement
and the fiscal agency and loan agreement as so superseded or modified.
Srn 2. The sum held by the fiscal agents at the date of this agreement out
of the proceeds of the first scries bonds as a gold exchange fund as provided
in subsection (&) of section 8 of article 5 of the fiscal agency and loan agreement shall be held to be utilized for the purpose therein specified for such
additional period not less than one year from December 1, 1928, as the executive power may deem advisable. After the termination of such gold exchange
fund any balance remaining In the hands of the fiscal agents shall be paid
over to the Republic.
SEC. 3. The Republic hereby agrees that the reasonable compensation and
expenses of the member of the board of directors of the Caja and the alternate
member designated as provided in section 14 of article 5 of the fiscal agency
and loan agreement up to an aggregate amount which shall not exceed $20,000
per annum, during the calendar year 1929 and each subsequent year thereafter,
shall be included in the expenses of the fiscal agents and shall be paid by the
Republic to the fiscal agents from time to time upon demand.
SEC. 4. The Republic hereby agrees that the reasonable compensation and
expenses of the paying agents for all scries of the bonds of the loan shall be
included in the expenses of the fiscal agents to be paid by the Republic as
provided In section 7 of article 8 of the fiscal agency and loan agreement.
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SAIIB OF FOREIGN" BONDS OR S E C U R I T I E S
SEC. 5. Whenever, according to the provisions of this agreement, any notice,
request, or instruction, or order, for the payment of money or delivery of securities or otherwise may he required to be given by one party to another, it
shall be deemed sufficient notice, except as otherwise herein expressly provided, if given in writing in English or in Spanish, as follows:
( a ) If from the fiscal agents to the Republic (1) by registered letter or (2)
by cablegram or radiogram, and confirmed by letter, addressed to the minister
of finance of the Republic at Lima, Peru, or to the ambassador of the Republic
to the United States of America at Washington, in the District of Columbia,
United States of America, over the signature of both the fiscal agents which
may be signed by one of them.
(&) If from the Republic to the fiscal agents (1) by registered letter or (2)
by cablegram or radiogram, and confirmed by letter, delivered to the fiscal
agents at the office of J. & W . Seligman & Co., No. 54 W a l l Street, in the city
and State of New York, United States of America, or at such other address as
may be designated by the fiscal agents from time to time, over the signature
of the minister of finance of the Republic, or his representative, or over the
signature of the ambassador of the Republic to the United States of America.
SEC. 6. This agreement shall be executed in the English language and may
be executed in one or more counterparts, each of which shall be deemed to
be an original. There stall be attached to each executed counterpart a duly
authenticated copy of the supreme resolution hereinabove mentioned.
SEC. 7. In case any one or more of the covenants and agreements contained in
this agreement or in the bonds shall be invalid, illegal, or unenforceable in any
respect, the validity, legality, and enforceability of the remaining covenants
and agreements contained herein and in the bonds shall be in no wise affected,
prejudiced, or disturbed thereby.
SEC. 8. Whenever reference is herein made to the Republic, it shall be
deemed to apply to any successor sovereign government which may at any time
during the life of this agreement govern the major portion of the territory now
embraced within the territorial boundaries of the Republic.
SEC. 9. This agreement shall be interpreted and construed in accordance
with the laws of the State of New York in the United States of America as
though it had been made and were to be performed wholly within the territorial limits of said State.
In witness whereof, Republica del Peru (Republic of Peru) has caused this
agreement to be executed on its behalf in four counterparts by his excellency,
Senor Don Manuel G. Masias, the minister of finance of the Republic, thereunto duly authorized, as aforesaid, and J. & W . Seligman & Co. has caused
this agreement to be signed on its behalf in a like number of counterparts by
Henry C. Breck, its attorney in fact, thereunto duly authorized, and the National City Bank of New York has caused this agreement to be signed on its
behalf in a like number of counterparts by Alexander J. Robertson, its attorney
in fact, thereunto duly authorized, all as of the day and year first above
written.
REPUBLICA DEL PERU,
B y M . G. MASIAS,
Minister
of
Finance.
J. & W . SELIGMAN & Co.,
B y HENBY C. BRECK,
Attorney
in
Fact.
THE NATIONAL CITY BANK OP NEW YORK,
B y ALEXANDER J. ROBERTSON,
Attorney
in
Fact.
EXHIBIT A
[Form of second series dollar bond]
REPUBLIC OP PERU (REPUBLICA DEL PERU), PERUVIAN NATIONAL LOAN, 6 PES
CENT EXTERNAL SINKING FUND GOLD BOND, SECOND SERIES
Dated October 1,1928. Due October 1, 1901.
Republica del Peru (Republic of Peru), hereinafter called the Republic, for
value received, promises to pay to the bearer of this bond on October 1, 1961,
the sum of
in gold coin of the United States of America of the stand-
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ard of weight and fineness existing on October l f 1928, and to pay interest
thereon from October 1, 1928, until the principal of this bond shall be paid, in
like gold coin, at the rate of 6 per cent per annum, semiannually on October 1
and April 1 in each year, upon presentation and surrender of the coupons
hereto annexed as they severally mature. Such principal and interest shall be
paid at the option of the holder hereof in gold coin of the United States of
America of the standard aforesaid, in the borough of Manhattan, in the city
and State of New York, United States of America, at the principal office of
either of the fiscal agents of the Republic, J. & W\ Seligman & Co. and the
National City Bank of New York, or their respective successors, or in pounds
sterling in the city of London, England, at the principal office of either of the
London paying agents, Seligman Bros. (Ltd.) and the National City Bank of
New York, or their respective successors, or in Dutch guilders, in the city of
Amsterdam, Holland, at the principal office of any of the Amsterdam paying
agents, Pierson & Co., Netherlands Trading Society, Mendelssohn & Co. and
De Twentsche Bank, or their respective successors, or in Swiss francs, in the
cities of Zurich or Basle, Switzerland, at the principal office in each of said
cities of the Swiss paying agent, Credit Suisse, or its successor, in each case
except the first at the buying rate of the paying agent making such payment
for dollar sight exchange on the city of New York at the time of such payment.
Such principal and interest shall be paid in every case free from and without
deduction or diminution for any taxes, imposts, levies, or duties of any nature
now or at any time hereafter imposed, levied, or assessed by the Republic or by
any province, municipality, or other taxing authority therein or thereof, and
shall be paid in time of war as well as in time of peace and irrespective of the
citizenship or residence of the holder hereof.
This bond is one of a series of bonds which have been designated Peruvian
national loan, C per ccnt external sinking fund bonds, second series (hereinafter called the second series bonds), limited to the principal amount at any
one time outstanding of $50,000,000 in gold coin of the United States of America
or the equivalent of all or any part thereof in English pounds sterling, duly
authorized by law No. 5930, enacted by the Congress of the Republic, dated
December 17, 1927, being the second series of bonds of a loan designated
Peruvian national loan (hereinafter called the loan) duly authorized by said
law, of which bonds of the first series in the principal amount of $50,000,000
have heretofore been issued. The second series bonds have been issued under
a fiscal agency and loan agreement dated as of December 1, 1927, between the
Republic and the fiscal agents of the Republic. J. & W . Seligman & Co. and
the National City Bank of New York (hereinafter called the fiscal agency and
loan agreement) and an agreement dated October 1, 192S, between the Republic
and said fiscal agents supplemental thereto (hereinafter called the supplemental
agreement) to both of which agreements reference is hereby made for a statement of the terms and conditions upon which the bonds of the loan have been
issued, a statement of the restrictions upon the issue of bonds of additional
series of the loan, and a statement of the covenants made by the Republic in
respect to the security and service of the first series bonds and second series
bonds, to the benefit of which covenants the holder of this bond is entitled.
This bond together with all other second series bonds payable as above provided have been designated Peruvian national loan, 6 per cent external sinking
fund gold bonds, second series, and are hereinafter called the second series
dollar bonds.
The second scries bonds are subject to extraordinary redemption, in whole
or in part, at the option of the Republic, on any interest payment date at their
principal amount plus accrued unpaid interest to the date designated for redemption upon notice given, in the case of second series dollar bonds, in the
city of New York by an advertisement published once a week for at least four
consecutive weeks, in each instance upon any day of the week, each publication to be made in at least one daily newspaper published and of general circulation therein, the first publication to be made at least 60 days and not more
than 90 days before the date fixed for redemption, and also in each of said other
cities in which the second series dollar bonds are payable by an advertisement
published at least once in at least one daily newspaper published and of general
circulation therein, such publications to be made at least 10 days and not more
than 40 days before the date fixed for redemption, as more fully provided in the
supplemental agreement.
Until all the second series bonds shall have been paid or redeemed the Republic will pay, or cause to be paid, semiannually to the fiscal agents for the
1454
SAIIB
OF FOREIGN" B O N D S OR
SECURITIES
semiannual service of interest and amortization of the second series bonds such
sum in gold coin of the United States of America of or equal to the standard
aforesaid as, calculated by the fiscal agents as provided in the supplemental
agreement, will be sufficient to pay all interest charges upon, and to provide
a cumulative sinking fund to retire at or before their maturity by semiannual
redemptions at their principal amount, all the second series bonds issued under
the fiscal agency and loan agreement and the supplemental agreement. The
fiscal agents shall apply such moneys received by them in each semiannual
period to the payment of interest maturing on the next succeeding interest payment date on the second series bonds then outstanding and shall apply the
balance of such moneys so received in each semiannual period to the redemption
by lot of second series bonds on the next succeeding interest payment date at
their principal amount on like notice, in the case of second series dollar bonds,
as above provided in the case of extraordinary redemption, except that in the
case of the notice of redemption to be given in the city of New York, the first
publication shall be made at least 30 days and not more than 60 days before
such redemption date, as more fully provided in the supplemental agreement
The Republic covenants that so long as any of the second series bonds shall
be outstanding it will maintain an office or agency in the borough of Manhattan,
the city of New York, where the second series bonds and interest coupons may
be presented for payment and where notices or demands in respect of the second
series bonds and interest coupons may be served.
Subject to the provisions and restrictions of the fiscal agency and loan agreement, and the supplemental agreement the holder hereof, by the acceptance
hereof, constitutes and appoints the fiscal agents, and each of them, the representatives or representative of the holder for the purpose of entering into any
agreement or agreements supplemental to the fiscal agency and loan agreement
and the supplemental agreement, and for the purposes of enforcing all obligations of the Republic set forth herein and in the coupons appertaining hereto
and in the fiscal agency and loan agreement, the supplemental agreement and
any agreement supplemental thereto, for the benefit of the holders of the bonds
af the loan, to which appointment the Republic hereby consents and agrees.
This bond and the coupons appertaining hereto shall pass by delivery.
This bond shall not become valid or obligatory for any purpose until it
shall be authenticated by the certificate of the National City Bank of New
York, as authenticating agent, hereon indorsed.
In witness whereof, Republica del Peru has caused this bond to be prepared
bearing a facsimile of the coat of arms of the Republic as a seal of the Republic
and a facsimile of the signature of its Minister of Finance and has caused
this bond to be manually signed on its behalf by its consul general in the
city of Newr York, United States of America, or "other representative of the
Republic thereunto duly authorized, and the coupons for said interest bearing
the facsimile signature of its Minister of Finance, to be hereto annexed.
Dated October 1, 1928.
REPUBLICA DEL PEEU,
[Form of authenticating agent's certificate!
This is to certify that this bond is one of the Peruvian national loan, 6 per
cent external sinking fund gold bonds, second series, described in the withinmentioned fiscal agency and loan agreement and supplemental agreement.
THE NATIONAL CITY BANK OF N E W YORK.
(Authenticating Agent.)
Authorized
Officer.
[Form of coupon]
On
, 19—, unless the bond hereinafter mentioned shall have been
called for previous redemption, Republica del Peru (Republic of Peru) will
on surrender hereof, pay to bearer, at his option, in gold coin of the United
States of America of or equal to the standard of weight and fineness existing
on October 1, 1928, in the borough; of Manhattan, in the city and State of New
York, United States of America, at the principal office of either of the fiscal
agents of the Republic, J. & W . Seligman & Co. and the National City Bank
of New York, or their respective successors, or in pounds sterling, in the
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1455
city of London, England, at the principal office of either of the London paying
agents, Seligman Bros. (Ltd.) and the National City Bank of New York, or
their respective successors, or in Dutch guilders, in the city of Amsterdam,
Holland, at the principal office of any of the Amsterdam paying agents, Pierson
& Co., Netherlands Trading Society, Mendelssohn & Co., and D e Twentsche
Bank, or their respective successors, or in Swiss francs, in the cities of Zurich
or Rasle, Switzerland, at the principal office in each of said cities of the Swiss
paying agent, Credit Suisse, or its successor in each case except the first at
at buying rate of the paying agent making such payment f o r dollar sight
exchange on the City of New York at the time of such payment, $ —
in
gold coin of the United States of America of the standard aforesaid, in every
case free from and without deduction or diminution for any taxes, imposts,
levies, or duties of nny nature now* or at any time hereafter imposed, levied,
or assessed by the Republic of Peru or by any State, Province, municipality,
or other taxing authority therein or thereof, in time of war as well as in time
of peace and irrespective of the citizenship or residence of such bearer, being
six months' interest then due on its Peruvian national loan, 6 per cent external sinking fund gold bond, second series, due
, ID—, No.
.
REPUBLICA DEL PERU,
Minister
of
Finance.
ExniBiT B
[Form of second scries sterling bonds]
REPUBLIC OF PERU (REPUBLICA DEL PERU)—PERUVIAN NATIONAL LOAN, 6
CENT EXTERNAL SINKING FUND BONDS, SECOND SERIES
PER
Dated October 1, 1928. D u e October 1, 19G1.
Bond to bearer f o r £
.
This bond is one of an issue of bonds consisting of like sterling bonds amounting in the aggregate to £
of the following numbers and denominations, v i z :
Bonds numbered
to
, inclusive, of £1,000 each.
Bonds numbered
to
, inclusive, of £500 each.
Bonds numbered
to
, inclusive, of £100 each.
Representing a total nominal amount of £
.
Republica del Peru (Republic of Peru), herein called the Republic, for value
received,.promises to pay to the bearer of this bond on October 1, 1961, the
sum of £
, and to pay interest thereon from October 1, 1928, until the
principal of this bond shall be paid, at the rate of 0 per cent per annum, semiannually, on April 1 und October 1 in each year, upon presentation and surrender
of the coupons hereto annexed as they severally mature. Such principal and
interest shall be paid in London in sterling at the office of either of the London
paying agents, Seligman Bros. (Ltd.) and the National City Bank of New York,
or their respective successors, or at the option of the holder, in New York, in
gold coin of the United Stales of America of the standard of weight and fineness existing on October 1, 192S, at the principal office of either of the fiscal
agents of the Republic, J. St W . Seligman & Co. and the National City Bank, of
New York, or their respective successors, at the exchange rate of £1 equals
$4.8665. Such principal and interest shall be paid in every case free from and
without deduction or diminution for any taxes, imposts, levies, or duties of any
nature now or at any time hereafter imposed, levied, or assessed by the Republic
or by any province, municipality, or other taxing authority therein or thereof,
and shall be paid in time of war as well as in time of peace and irrespective
of the citizenship or residence of the holder thereof.
This bond is one of a series of bonds which have been designated Peruvian
national loan, 0 per cent external sinking fund bonds, second series (herein
called the second series bonds), limited to the principal amount at any one time
outstanding of $50,000,000 in gold coin of the United States of America or the
equivalent of all or any part thereof in sterling. The second series bonds have
been duly authorized by law No. 5930, enacted by the Congress of the Republic,
dated December 17, 1927, and constitute the second series of bonds Issuable in
series of a loan designated Peruvian national loan (herein called the loan)
duly authorized by said law. of which bonds of the first series in the principal
92928—32—PT 3
13
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SAIIB OF FOREIGN" B O N D S OR
SECURITIES
amount of $50,000,000 have heretofore been issued. The second series bonds
have been issued under a fiscal agency and loan agreement dated as of December
1, 1927, between the Republic and the fiscal agents of tlie Republic, J. & W.
Seligman & Co: and the National City Bank, of New York (herein called the
fiscal agents), and an agreement supplemental thereto dated October 1, 1928,
and made between the same parties to both of which agreements reference is
hereby made for a statement of the terms and conditions upon which the bonds
of the loan have been issued, a statement of the restrictions upon the issue of
bonds of additional series of the loan, and a statement of the covenants made by
the Republic in respect to the security and service of the first and second series
bonds, to the benefit of which covenants the holder of this bond is entitled.
This bond together with all other second series bonds payable as above provided
are hereinafter called second series sterling bonds.
The second series bonds are subject to redemption, in whole or in part, at the
option of the Republic, on any interest payment date at their principal amount
plus accrued unpaid interest to the date designated for redemption upon giving
60 days previous notice-by advertisement.
The second series bonds are entitled to the benefit of an accumulative sinking
fund of 1 per cent per annum to be applied semiannually to the redemption of
second series bonds, commencing April 1, 1929, at their principal amount and
accrued unpaid interest thereon to the date designated for redemption. The
bonds to be redeemed will be determined by drawings, and notice of the second
series sterling bonds to be so redeemed shall be given by advertisement not more
than 40 or less than 10 days prior to the date on which such bonds are to be
redeemed.
Notice of any redemption1 of second series sterling bonds under either of the
last two preceding paragraphs, specifying in the case of a partial redemption
the "numbers of the sterling bonds to be so redeemed, shall be given by advertisement in at least one daily newspaper of general circulation published in London.
Should any of the second-series bonds or coupons be lost, mutilated, or destroyed from any cause, a new second-series bond or coupon, as the case may be,
of like tenor and denomination will be issued to the holder upon payment of the
expenses occasioned by their substitution, after having had all such evidence as
may-be required by the Peruvian Government as to the loss, mutilation, or destruction of the bond or coupon and the rights of the claimant, and after all
necessary formalities have been complied with, all as more fully provided in
the fiscal agency and loan agreement.
Subject to the provisions and restrictions of said fiscal agency and loan
agreement and said supplemental agreement, the holder hereof, by the acceptance hereof, constitutes and appoints the fiscal agents, and each of them, the
representatives or representatives of the holder for the purpose of entering into
any agreement or agreements supplemental to the fiscal agency and loan agreement and said supplemental agreement, and for the purpose of enforcing all
obligations of the Republic set forth herein and in the coupons appertaining
hereto and in the fiscal agency and loan agreement, the supplemental agreement
and any agreement supplemental thereto, for the benefit of the holders of the
bonds of the loan, to which appointment the Republic hereby consents and
agrees.
This bond shall not become valid or obligatory for any purpose until it shall
be authenticated by the certificate of the National City Bank of New York
as authenticating agent hereon indorsed.
In witness whereof, Republica del Peru has caused this bond to be prepared
bearing a facsimile of the coat of arms of the Republic and a seal of the
Republic and a facsimile of the signature of its Minister of Finance and
has caused this bond to be manually signed on its behalf by
representative thereunto duly authorized, and the coupons for said interest
bearing the facsimile signature of its Minister of Finance to be hereto a n n e x e d .
Dated October 1, 1928.
By
REPUBLICA DEL PERU,
—.
[Form of authenticating agent's certificate]
This is. to certify that this bond is one of the Peruvian national loan, 6 per
<:ent external sinking-fund bonds, second series, .described in tlie within-men-
- S A L E OP F O R E I G N B O N D S OR S E C U R I T I E S
1457
tioned fiscal agency and loan agreement and'the \vi thin-men tioned supplemental
agreement.
AUTHENTICATED AGENT,
By
,
Authorised
Officeri
[Form of coupon]
NO;
PERUVIAN NATIONAL L O A N — 0 FEB CENT EXTERNAL SINKING FUND BONDS. SECOND
SERIES
Coupon for £
Being half-year's interest due
Unless the bond to which this coupon was originally annexed shall have been
called for previous redemption, payment will be made in sterling at the offices
of Seligman Bros. ( L t d . ) , or the National City Bank of New York, London, or,
at the option of the holder, in dollars (calculated at the fixed rate of exchange
of $4.SG6o equals £1) at the offices of J. & \V. Seligman & Co., or the National
City Bank of New York, N. Y., up^n surrender hereof.
Caja de Depositos y Consignaclones hereby declares that it is familiar with
the terms of the foregoing agreement, dated October 1, 192S, between Republica
del Peru (Republic of Peru) and J. & W . Seligman.& Co. and the National
City Bank of New York, as fiscal agents, supplemental to the fiscal agency and
loan agreement between the same parties and dated as of December 1, 1927, and
hereby covenants and agrees with said fiscal agents, for the benefit of , the
holders of the bonds of any and all series of the Peruvian national loan at any
time or from time to time outstanding, that it will collect, or receive deposit of,
revenues of the Republic in accordance With the provisions of Law No. 5740 and
Law No. 5931 of the Republic, and in accordance with .the provisions of an agreement dated December 2 9 , 1 9 2 7 , entered into between the Republic and the caja
to carry out and give fnll effect to the provisions of said laws, and that it will
duly and punctually apply and pay over,, out of the revenues of the Republic
which may be collected by or.deposited with it pursuant to said-Law No; 5740,
Law No. 5931, and said agreement dated December 29, 1927, at the times and in
the manner and amounts specified in article 7 of the above-mentioned fiscal
agency and loan agreement, as amended by. article 5. of the above-mentioned
agreement dated October 1, 1928, supplemental to said fiscal agency and loan
agreement, and in the applicable provisions of any agreements executed in
connection therewith or supplemental thereto, the sums required f o r the service of interest, and amortization of the bonds of. any and all series of the
Peruvian national loan at any time or from time to time outstanding and all
other sums payable in respect thereof, and will otherwise act in conformity
with and comply with the provisions of said laws and its agreement with the
Republic dated December 29,1927, and any agreements supplemental thereto.
CAJA DE DEPOSITOS Y CONSIGN'ACIONES,
B y PEDRO LARRAXAGA.
Dircctor-Gwcntc.
EXHIBIT N o . 1 2
AGREEMENT BCTWEEN REPUBLIC OP PEBU AND CAJA DE DEPOSITOS Y CONSIGNACIONES WITH INTERVENTION o r j . & W . SELIOMAN & Co. AND THS NATIONAL
CITY BANK OP NEW YORK, FISCAL AGENTS, DATED OCTOBER 22, 1928—SUPPLEMENTAL REVENUE COLLECTION AGREEMENT
Agreement, dated October 22, 1928, between the Republic of Peru (hereinafter
called the Republic), acting by his excellency Sefior Don Manuel G. Masias, the
Minister of Finance of the Republic, thereunto duly authorized by supreme resolution dated October 22, 1928, Issued With the approval of the council of
ministers, and the Caja de Depositos y Consignaciones (hereinafter called the
caja), acting by its managing director, Senor Don Pedro Larrafiaga, pursuant
to the provisions of article 9 of L a w No. 5931.
Whereas the Republic h a s by Law No. 5930 duly created the Peruvian national
loan and authorized the issue of an aggregate of $100,000,000 of the bonds of
said loan in series and. pursuant to said law, has entered into a fiscal agency
smd loan agreement^ with J. & W . Seligman & Co. and the Naitional City Bank
1458
SAIIB
OF FOREIGN" BONDS OR SECURITIES
of New York, as fiscal agents, dated as of December 1, 1927, providing for the
issue of the first series of the bonds of said loan; and
Whereas the Republic by Law No. 5746 and Law No. 5931 has duly provided
for the collection by or deposit with the caja of certain revenues of the Republic
and for the application by the caja of said revenues to the service of the bonds
of all series of said loan and, pursuant to said Law No. 5931, has entered into
an agreement with the caja, dated December 29, 1927, whereby the caja has
covenanted to collect or receive the deposit of said revenues and to apply the
same in accordance with said law and said fiscal agency and loan agreement;
and
Whereas the Republic has entered into an agreement with the fiscal agents,
dated October 1, 1928, supplementing and, to the extent therein stated, superseding and modifying said fiscal agency and loan agreement and providing for
the issue of a second series of the bonds of said loan; and
Whereas pursuant to said law No. 5931, the Republic and the caja desire
to enter into this agreeent supplementing said agreement between the Republic
and the caja dated December 29, 1927;
Now, therefore, in consideration of the premises and of the mutual covenants
hereinafter set forth the parties hereto have agreed as follows:
J l . The caja declares that it is familiar with all the terms and provisions of
said agreement dated October 1,1928, between the Republic and the fiscal agents
supplementing and, to the extent therein stated, superseding and modifying
said fiscal agency and loan agreement dated as of December 1, 1927.
2: The Republic irrevocably authorizes and directs the caja to, and the caja
covenants and agrees with the Republic and the fiscal agents that it will, so
long as any bonds of any series of the Peruvian national loan are outstanding,
duly and punctually apply and pay over the amounts of the revenues of the
Republic collected by or deposited with the caja pursuant to said law No. 5746,
law No. 5931, and said agreement dated December 29, 1927, in accordance with
the provisions of said agreement dated December 29, 1927, and said fiscal
agency and loan agreement as supplemented, superseded or modified by said
agreement dated October 1, 1928, and will effect the service of any additional
series of said loan with the revenues which it collects or receives for account
of the Republic, in accordance with the provisions of any further agreement or
agreements hereafter made, in conformity with said law No. 5746 and lawNo. 5931, by the Republic with the fiscal agents supplemental to said fiscal
agency and loan agreement and pursuant to which any bonds of the Peruvian
national loan may be issued.
In witness whereof, Republica del Peru has caused this agreement to be
executed on its behalf by his excellency, Senor Don Manual G. Masias, the
Minister of Finance of the Republic, thereunto duly authorized as aforesaid,
and the Caja de Depositos y Consignaciones has caused this agreement to be
executed on its behalf by Senor Don Pedro Larranaga, its managing director,
and the fiscal agents of the Republic, J. & W. Seligman & Co. and the National
City Bank of New York, have subscribed their names hereto, all in conformity
with the provisions of article 9 of said law No. 5931.
REPUBLICA DEL PERU,
B y M . G . MASIAS,
Minister of Finance.
CAJA OF DEPOSITOS Y CONSIGNACIONES,
B y PEDRO LARRANAGA,
Dirccior-Gerente.
J. & W . SELIGMAN & Co.,
B y HENRT C. BRECK,
Authorized Representative.
THE NATIONAL CITY BANK OF NEW YORK*
B y A . J. ROBERTSON,
Authorized
Representative.
JANUARY 16, 1932.
EXHIBIT N o . 13
MEMORANDUM—PERU TOBACCO LOAN AND PERUVIAN NATIONAL LOAN, FNTST
AND SECOND SERIES
As testified by Mr. Strauss (p. 850 of the transcript) and Mr. Breck lp.
^
of the transcript) the Peruvian business was brought to J. & W . Seligman «
- S A L E OP F O R E I G N
BONDS
OR S E C U R I T I E S
1459
Co. by F. J. Lisman & Co. and was surcharged with promoters' commissions
previously agreed to be paid by F . J. Lisman & Co. Attached are copies of
various documents evidencing agreements to pay and payment of compensation
and commissions to these promoters:
. (a) Letter addressed to Messrs. F . J. Lisman & Co., by Bolster & Co., dated
January 6, 1926.
{b) Unsigned "Memorandum of conversation between Messrs. Bolster, Corbin, Bailie, and Haskell, 1 " dated January 11, 1927.
(c) Receipt, dated April 7, 1927, signed by Juan Leguia.
(d-J) "Memorandum for Files/' dated May 3, 1927, signed " H e n r y C.
Breck."
(tt-2) Unsigned "Memorandum of Agreement," dated April S, 1927.
( e - I ) "Memorandum for Files," dated M a y 3, 1927, signed " H e n r y C.
Breck."
(c-B) Unsigned " M e m o r a n d u m of Agreement," dated April 8, 1927.
if) Letter dated April 12, 1927, addressed to Bolster & Co. by F . J. Lisman*
& Co. and acknowledged by Bolster & Co. ( I n c . ) .
(g) " Memorandum of Agreement," dated November 21, 1927, signed " Henry
C. Breck."
(lir-1) Letter dated January 24, 1929, addressed to Messrs. J. & W . Seligman
& Co. and Juan Leguia, Esq., by Madge Kennedy Bolster, individually and as
executrix of the last will and testament of Harold Bolster, deceased.
(hr-2) Indemnity bond signed and acknowledged by Madge Kennedy Bolster,
individually and as executrix to the estate of Harold Bolster, deceased, and
National Surety Co.
(i~l) Letter dated June 25, 192S, addressed to Mr. Earle Bailie of J. & W .
Seligman & Co. by F. J. Lisman.
(i-2) Letter dated June 23, 1928, addressed to Thomas V. Salt by F. J.
Lisman & Co., approved by Kenneth M. Spence and approved and accepted by
T. v . Salt.
(i-5) Letter dated June 25, 1928, addressed to Thomas V. Salt by F. J.
Lisman & Co.
( / ) Release dated July 5, 1928, signed and acknowledged by T . V . Salt.
Transcript of accounts of Juan Leguia with J. & W . Seligman & Co. follow
this Exhibit 13, as Exhibit 14.
The basic agreement respecting commissions was the letter from Bolster &
Co., of New York, to F. J. Lisman & Co., dated January 0, 1920, document ( a )
referred to above. It will be noted that this letter evidences an agreement that
Bolster & Co. and its " associates " were to receive commission or compensation
on any financing carried out by F . J. Lisman & Co. in Peru during a period
of five years from the date of the agreement. The amount of commission or
compensation was left to be mutually agreed upon from time to time in respect
of each piece of business.
As testified by Mr. Strauss and Mr. Breck (pp. 85G, 857, and 85S of the transcript) it was learned only subsequently that Juan Leguia was one of the associates of Bolster & Co. in Peruvian business. Mr. Breck testified in substance
(pp. 876, 877 of the transcript) that the agreements respecting the exact
amounts of the commissions and compensation payable to members of the group
of promoters, which amounts were not determined by the basic agreement with
Bolster & Co., were verbal. The first verbal understanding readied after the
basic agreement was made was an understanding reached about January 11,
1927, respecting the incidence of Mr. Harold Bolster's commission, that is,
Bolster & Co. (Inc.), which is recorded in document (b) referred to above.
Subsequently, during the early part of April, 1927, a series of conversations
took place in New York between these two promoters, Harold Bolster and Juan
Leguia, and between these two promoters and representatives of J. & W .
Seligman & Co. and F. J. Lisman & Co. In these conversations agreements
were reached with respect to.the exact amount of commissions and compensation to l>e paid to. the promoters by the bankers and as to the division of the
commissions among tlie promoters inter se. T h e results of these conversations
are summarized below.
In a conversatirn between Mr. Juan Leguia and Mr. Henry C. Breck, of J. &
W. Seligman & Co., held on April 5, 1927, an understanding was reached with
respect to the amount of commissions payable to Mr. Juan Leguia on the
tobacco loan. This agreement provided for payment by J. & W , Seligman & Co.
and their associates of $50,000 to Juan Leguia for services and expenses in
connection with the original issue of tobacco loan bonds and notes, and included
1460
S A L E : OF FOREIGN 'BONDS'-' OR S E C U R I T I E S
ft proinise to pay one-Mlf bf l per ccmt'on the principal amount of any future
issuesj of bonds of the tohacco-loan;I ' 0
//
F? " .J
On April17i 1927, J / & W. Seligman & Qo. inade payment> of $50,000 to Juan
Leguia in accordance with the above-mentioned agreement, and Juan Leguia
signed a receipt, documents (6) above ^referred to. -Payment was not made an
cash but was made by crediting that amount to an account of Juan Leguia.
on»the books of J. & W. Seligman & Co.'which' was opened for' the purpose.
On April 8, 1927, Mr. Breck dictated''a ^memorandum-of his understanding
of that part of the agreement which, had been reached on April 5, 1927, relating
to commissions and com^pensa tiontpayable to Juan Leguia; on any future issues
of bonds of the tobacco loan. This memorandum is document ( d - I ) above
referred to." On May^3, 1927; Mr, Breck dictatedia:" Memorandum for files"
(document '{d-2)referred to above); whictf he :attached to the memorandum of
agreement of April 8, 1927 (document ( d - i ) ) .
On ApriLTy 1927," iri- New"York,an oral agreement was reached between the
promoter^ Juan iLeguia and-Harold Bolster; (of Bolster & Co.) on the one hand,
and J. & W. Seligman & Co., acting onr behalf of the bankers' group; defining,
theiamouht.'of the'eommiss-onsjand compensation to which the'promoters would
become entitled in the event of the consummation of a Peruvian refundingloan. On April 8, 1927, Mr. Breck dictated his: understanding of the agreement
(document
) and on May 3;: 1927, dictated.a "Memorandum for files"
(documen l i e - l i b relating to this I agreement.
On AprlL i l , 1927, an oral, agreement was made between Juan: Leguia, Harold
Bolster, F. J. Lisman & Co., and J. & W. Seligman & Co, relating to settlement
of Mr. Bolster's claim for commission on the tobacco loan. It was agreed that
Mr. Bolster should receive fromrF; J. Lisman & Co. $15,000 as his compensation
and commissions in connection with the tobacco:loan; Mr. Bolster's right to
receive one-eighth of a1 iwint rout of the commission of five-eighths of a point
to be paid the two 'promoters in the event of the consummation of a Peruvian
refunding loan (see document (e-2)) was confirmed. Mr. Bolster further agreed
to cancel his existing arrangement with'F. X Lisman & Co. (see document •(«))
in relation to Peruvian business in return for the above-mentioned payment of
$15,0001 casli' aiid 'an- agreement ' by F; J. • Lisman' &. Coj:to pay him a; further
$25,000 cash-when, as, ahd if F-. J: t Lisman & -Co: 'should 'consummate the purchase of and offer to the public any securities of. any company formed to acquire
and operate the gasoline ^'monopoly of ^Pera;> a prospective piece of business in
which J; & W. Seligman'&'CoV were1)not'-concerned/ The' settlement witlrMr.'
Bolster was'carried out on April 32;>il927'!j(seo document i1))>J Subsequently
J. & \V; Seligman - & ? Co;;' as syndicate managers, reimbursed F. J. Lisman & Co.
for $10,000 GV the $15,000 payment above ^mehtioneil an recognition of a readjustment of F; J. Lisman & Cd.'s interest in the bankers' group.
On or about November-21; 1927; the oral. Agreement niade with Juan Leguia
and Harold Bolster on April 7, 1927 (see d o c u m e n t / a b o v e mentioned),
was modified by a further oral agreement made in New Y o r k between Juan
Leguia and Mr. Breck; acting on behalf, of the bankers' group. On that date
Mr. Breck dictated his-understanding of the-modified'agreement for the files
of J. & W. Seligman & Co. (see document (#) ). No further agreement was
entered into with'Mr. Bolster at this time due to the fact that Mr. Bolster died
on the preceding August 3, 1927.
After the conclusion of the purchase of the first'series of the Peruvian
national'loan in December/1927, and again after the conclusion of the purchase
of the second series of the Peruvian national loan in October, 1928, the commissions payable to Juan Leguia and/or Harold Bolster in accordance with the
agreements above referred to 'were paid by crediting< the amount of such commissions "to thaaccounts of Juan Leguia " and (on the first series only) Juan;
Leguia reserve f o r Bolster-claim," a s shown by the transcripts of accounts
which have been furnished to1 thef committee (Exhibit 14). The commission.
payable to Harold Bolster, or his estate, was ultimately paid to the estate of
Harold Bolster, as evidenced by documents (ti-1) and (K-2) above referred to.
Td ! the extent tliat the'statements-in this memorandum and the documents;
attached hereto may be inconsistent with any testimony given by Mr. Breck
from memory,Mir. Breck desires that his' testimony before the committee be
considered corrected and amended.1 *>1* m 1
Some time prior to'June 23,1928, Mr: Thomas V. Salt; who had been a former
employee5 o f : J . Lisman : & Co., and?who Mr. ! Breck testified (p. 869 of the1
transcript) had gone to Peru in 1926 as an employee of F . ! J; Lisman & Co*
after Mr. Bolster first went, asserted a claim for commissions and compensation;
- S A L E OP
FOREIGN
BONDS
OR
1461
SECURITIES
in connection with the Peruvian financing (that is, the tobacco and national
loans) pursuaut to an alleged prior agreement with F. J. Lisman & Co. covering
the terms of his employment, and commenced suit to enforce his claim. His
claim was disputed on various grounds by both F . J. Lisman & Co. and J. & W .
Seligman & Co., but on June 23, 192S, F, J. Lisman & Co. entered into a settlement with Mr. S a l t by which Mr. Salt's claims both with respect to Peruvian
business and certain domestic business were compromised and settled. This
settlement is evidenced by documents (i-2) and ( t - 5 ) .
At the time of the settlement with Mr. Salt, J. & W . Seligman & Co., on behalf
of the group, agreed to assume and pay and did pay one-half of the sum of
$20,000 referred to in documents ( i - 2 ) , ( i - 5 ) .
BOLSTER & Co.
Xcw
York,
(INC.),
January
6, 1926.
Messrs. F . J. LISMAN & Co.,
Xcw York
City.
DEAR SIRS: T h e following is our understanding of the conference held to-day
at your office, a t which the following were present: Messrs. F. J. Lisman,
Mitchel May, A . O. Corbin, A . Mendes, T. V. Salt and Col. B . F. Castle, and
Harold Bolster.
Whereas we have approached you for the purpose of iuteresting you in certain business that we have in process of negotiation through our associates in
the Republic of P e r u ; and
Whereas owing to the limitation of time before sailing we have agreed to
certain arrangements, which arrangements a t a later date are to be embodied
in a written agreement to be executed between us, it is understood, as follows:
You have agreed to send a representative with our Mr. Bolster to Peru
to investigate the business that w e have proposed to you, and provided you
decide to do business in Peru, it is understood and agreed as follows:
That a corporation will then be created to handle such selected business as
might arise from our introductions to your representative and that we will
first present to you all Peruvian business which might come to our attention,
in order that it m a y be handled by you directly or through the said corporation.
The shares of the proposed corporation arc to be divided between you, ourselves, and associates in a proportion to be mutually agreed upon. The amount
and character of the capital (probably nominal) of the corporation and its
organization shall be mutually agreed between us.
As a further consideration it is understood and agreed that we and our
associates are to receive a commission or compensation on any financing carried out by you, except business done through the above-named corporation
in Peru. T h e amount of said commission or compensation is to be mutually
agreed upon f r o m time to time in respect of each piece of business.
It is further understood that this agreement is to be effective for a period
of five years, unless your representative, Mr. T . V. Salt, within 60 days after
his arrival a t Liina, Peru, finds reasonable grounds for believing that our
representations are Incorrect as to the character of our connections in the
Republic of Peru.
The terms of this agreement shall be embodied in a formal contract within a
reasonable time a f t e r the expiration of the said period of GO days.
Please indicate below your acceptance of the terms of this letter.
Yours very truly,
BOLSTER & Co.
JANUARY 1 1 , 1 9 2 7 .
MEMORANDUM
OF CONVERSATION
BETWEEN MESSRS.
AND HASKELL
BOLSTER,
CORBIN,
BAILIE,
The question of M r . Bolster's interest in Peruvian business that may be carried out between J. & W . Seligman & Co. and F . J. Lisman & Co. was talked
out this afternoon, arid it has been clearly understood that any interest of Mr.
Bolster's is strictly through F . J. Lismnn & Co. and that any compensation
accruing to him through this interest is a matter oX decision between Mr.
Bolster and F . J . L i s m a n & Co., and will be deductible from the share of profits
from such business belonging to F . J. Lisman & Co., I t is understood that Mr.
1462
SAIIB OF FOREIGN" B O N D S OR S E C U R I T I E S
Bolster makes no claims of any sort against tlie profits that may accrue to
Messrs. J. & W . Seligman & Co. or to other persons arising out of these businesses.
Mr. Bolster clarified his relationship with F. J. Lisman & Co. by explaining
that he holds a 5-year contract with them, in which they recognize his right
to a fair commission, in any Peruvian business which they may do during the
period. Rather than have any definite understanding as to the amount of this
commission, Mr. Bolster was disposed to wTait until such time as any deals were
completed and a picture could be had of their success and the profits resulting
therefrom. This, of course, is a strictly personal arrangement of Mr. Bolster
with F. J. Lisman & Co. and is no concern of ours. Mr. Bolster made it clear
that he had no call of any kind upon J. & W. Seligman & Co. because of his
right to part of the Lisman profits arising through Peruvian deals.
B. H.
E. B.
*
J. & W . SELIGMAN & Co.,
New York, April 7, 1927,
I acknowledge receipt from J. & W. Seligman & Co., who arc acting on behalf
of themselves and their associates, of the sum of $50,000 in United States currency in full payment for my services and expenses in connection with the purchase by J. & W. Seligman & Co. and F. J. Lisman & Co. of $3,000,000 four
months 6 per cent secured gold notes and $15,000,000 secured 7 per cent sinking
fund gold bonds, 1927, of the Republic of Peru.
JUAN LEGUIA.
MAY
3, 1927.
MEMORANDUM FOB FILES
Attached hereto is a copy of a memorandum setting forth the agreement
reached between Juan Leguia and J. & W. Seligman & Co., concerning the payment to Leguia of one-half of 1 per cent of the principal amount of additional
issue of the tobacco monopoly bonds. This agreement was reached in a conversation between Mr. Leguia and Mr. Breck of J. & W. Seligman & Co., in Mr.
Leguia's apartments in the Ritz Towers, New York, on April 5f 1927.
Copies of this agreement were not signed by anyone, but a copy of it was
handed to Mr. Leguia by Mr. Breck at Mr. Leguia's apartments in the Ritz
Towers, New York, on April 13, 1927.
H. C. B.
HENRY C . BRECK.
APRIL 8, 1927.
MEMORANDUM OF AGREEMENT
"We agree to pay you for your compensation, commission, and expenses onehalf of 1 per cent on the principal amount of any further issues of bonds the
purchase and delivery of which to us is concluded under the terms of the option
granted us in section 11 of article 2 of the agreement covering the purchase of
$15,000,000 secured 7 per cent sinking fund gold bonds of 1927. This amount
is to be the only payment which we shall owe you for compensation, commission, or expenses in connection with such further issues, and will be paid by
crediting your account with us three days after the termination of a group
formed to offer such obligations to the public. In consideration of our agreement to pay such amount, you agree to render all possible aid and assistance
to us in connection with any issues of bonds wiiich we may wish to purchase
under the terms of the aforementioned option and that you will at all times
place your services to that end at our'disposal exclusively.
MAY 3,1927.
MEMORANDUM FOR FILES
The attached memorandum embodies the agreement reached between Juan
Leguia and J. & W. Seligman & Co., and, £o far as it concerns him, with Mr.
Harold Bolster, concerning the payment of
& W. Seligman & Co. of a commission in connection with the Peruvian refunding loan they hope to obtain. This
- S A L E OP F O R E I G N
B O N D S OR S E C U R I T I E S
1463
agreement was reached at a luncheon attended by Mr. Leguia and Messrs.
White, Bailie, and Breck of J. & W . Seligman & Co. on April 7; at the Midday
Club.
A copy of this agreement was handed to Mr. Leguia by Mr. Breck a t Mr.
Leguia s apartments in the Ritz Towers, New York, on April 13, 1927, with
the statement that Air. Breck would, if agreeable to Mr. Leguia, mail a copy
of it to Mr. Bolster. Mr. Leguia stated that this was entirely agreeable to him
and Mr. Breck accordingly, on the following day, mailed a copy to Mr. Bolster
at 54 Riverside Drive, New York.
HENRY C . BREOK.
H . C. B.
MEMORANDUM OF AGREEMENT
APRIL 8 , 1 9 2 7 .
1. You agree to use your best endeavors to the end that w e may at the earliest possible date be granted an exclusive option to negotiate during the year
1927 a financial operation which has for its purpose the refunding of all or
a part of the outstanding indebtedness of your country and that you will
cooperate exclusively with us in every way to the end that this financial
operation may be concluded during the life of such option.
2. W e agree that if, before January 1, 192S, either as a result of the option
mentioned above, or, failing such option, as a result of a preferential position
which you secure for us, we procure the issue, sale, and delivery to us of such
refunding obligations, we will pay you as compensation, commission, and expenses, an amount in cash equal to five-eighths of 1 per cent on the principal
amount of any and all such obligations so sold and delivered to us, upon the
understanding that out of this five-eighths of 1 per cent we are to retain and
pay to Mr. Harold Bolster for your account one-eighth of 1 per cent, so that
the net payment to you will be equal to one-half of 1 per cent of such principal amount. W e understand that it will not be necessary for us to pay
any other compensation, commission, or expenses in order to obtain this business, except payment to our own representatives or employees. It is understood that the one-half of 1 per cent to which you will be entitled will be
paid by crediting that amount to your account with us three days after the
termination of a group formed to offer such obligations to the public, and that
at the same time we shall pay to Mr. Bolster the one-eighth of 1 per cent he
is to receive as above stated.
3. You agree to cooperate at all times with us and with any of our representatives who may be endeavoring to arrange the above-mentioned matters.
APRIL 12, 1927.
Messers. BOLSTER & Co.,
In care of Messrs. Bennett, Post d Coghill (Inc.), Kciv York, N. Y,
DEAR SIRS: WTe hand you herewith our check to your order for the sum of
$15,000 in full settlement of all obligations of ourselves and our associates to
you for compensation, commissions, and expenses in connection with the negotiations which resulted in the purchase by us and our associates of §15,000,000,
principal amount, of the secured 7 per cent sinking fund gold bonds, 1927, of
the Republic of Peru, secured by the revenues of the tobacco monopoly of
Peru.
W e also confirm that we have agreed, and hereby do agree to pay to you a
commission of $25,000 in cash in case we shall conclude the purchase of any
securities to be issued by the company to be formed to administer the gasoline
monopoly of the Republic of Peru, such payment, to be made at our office
within three days after the termination of any group formed by us to offer any
or all of such securities to the public for subscription.
In consideration of our payment to you of the $15,000 above mentioned, and
of our entering into the agreement respecting a commission on the gasoline
monopoly business as above set forth, and of your acceptance of such payment
and agreement, we confirm that you and we have further mutually agreed, and
hereby do agree, to cancel and terminate any and all agreements (except those
expressed in this letter) which are o r have been existing between you and us
respecting our obligation to pay and your right to receive commissions, compensation, or expenses in connection with Peruvian business of any nature
whatsoever or respecting obligations on your part to first present to us any
and all Peruvian business which may come to your attention, and that you
1464
SAIIB OF FOREIGN" B O N D S OR
SECURITIES
and we have eacli further agreed to, and hereby do, for each of us and our
respective legal representatives and assigns, release and forever discharge the
other, and his or their legal representatives and assigns, of and from all
claims and demands, actions, liabilities, and obligations of every name and
nature, which either of us has had, now has, or hereafter may have, against
the other, under, arising out of, or in connection with, any such agreements
(other than agreements expressed in this letter) relating to any such Peruvian business, or arising out of or in connection with any negotiations had in
respect of business in or relating to Peru.
.Your: confirmation at the foot of the duplicate original of this letter will
constitute this letter an agreement between us.
Very truly yours.
F . J . LISMAN & Co.
Messrs. F. J. LISMAN & Co.,
New York, V. Y.
DEAR SIRS: I acknowledge receipt from you of your check to my order in the
sum of $15,000 in full payment of all commissions, compensation, and expenses
due me in connection with the Peruvian tobacco monopoly loan, and also confirm the agreements and release expressed in the foregoing letter.
Very truly yours,
BOLSTKR & Co. (INC.),
By HAROLD BOLSTER. Pres.
HENRY C . BRECK.
APRIL 12, 1927.
MEMORANDUM OF AGREEMENT
NOVEMBER 21, 1927.
The following is a statement of the modifications of the agreement between
you and ourselves embodied in a memorandum dated April 8, 1927, to which
you and ourselves have agreed.
1. In view of the fact that it has been .necessary for us and our associates
to increase the purchase price for the bonds of the first series of $50,000,000
of the Peruvian national loan from 85 to 86, you have agreed to accept in full
for your compensation, commission, and expenses in connection therewith, an
amount in cash equal to one-half of 1 per cent on the principal amount of
$50,000,000, in lieu of an amount equal to five-eights of 1 per cent on such principal amount and to take care of, out of your one-half of 1 per cent, any
amounts which may be due for compensation, commission, or expenses to the
estate or next of kin of Mr. Harold Bolster, growing out of the arrangements
with Mr. Bolster referred to in the memorandum of April 8, 1927.
2. You have further agreed that, as to the second series of bonds of approximately §50,000,000 of the Peruvian national loan which it is contemplated vre
and our associates may purchase within approximately the next 18 months, the
amount which we are to pay you and you are to accept, in case such bonds are
sold and delivered to us, for your compensation, commission, and expenses in
connection therewith shall be an amount equal to one-half of 1 per cent on the
principal amount of such bonds, sold and delivered to us, provided that the
spread between the purchase cost to us of such bonds and the retail offering
price shall be at least five and one-half points net. If for any reason the
spread is less than five and one-half points net you have agreed to consent to
a reduction in the amount payable to you for compensation, commission, ana
expenses. The amount of this reduction is to be agreed upon between us, depending on the net spread in the business, but in no event shall the said amount
payable to you be less than thre^eighths of 1 per cent of the principal amount
of the second series bonds.
3. In respect to all additional series of the Peruvian national loan which may
be sold and delivered to us and our associates you have agreed to accept for
your compensation, commission, and expenses an amount equal to three-eighths
of 1 per cent on the principal amount of such bonds.
4. W e have confirmed our earlier understanding with you that you will receive from us for your compensation, commission, and expenses in connection
SALE
O F F O R E I G N B O N D S ' O R SECTTRLTIES
1465
with any bonds of the Mortgage Bank of Peru and/or tlie Agricultural Intermediate Credit Bank of Peru which may be sold and delivered to us after these
banks are organized and commence business, a sum which is to be agreed upon
between you. and us. You and we recognize that it is impractical at this time
to fix the amount of such compensation, commission, and expense money, but it
is now intended that it shall be equal to approximately 15 per cent of 'our net
originating profits on the business.
5. It was agreed that no other, compensation or commissions in connection
with the above-mentioned pieces of financing are to be payable by us.
6. Furthermore, it was agreed that our obligations to make payments to you
for compensation, commissions, and expenses as above stated shall be purely
personal and shall terminate'in the: event of your death before the payments
are due and made, and is, of course, conditional upon your cooperating at all
times exclusively with us and with any of our representatives who;may be
endeavoring to arrange the above-mentioned matters.
7. Except as modified above, the memorandum of April 8, 1927, is to remain
in effect.
HENRY C . BRECK.
Messrs. J. & W. SELIGMAN & Co.,
New York, A\ Y.
JANUARY 24, 1929.
JUAN LEGUIA, E s q . ,
Care of Messrs. J. d IV. Belignum d Co.,
New York, N. Y
DEAR SIRS : I, the undersigned, Madge Kennedy Bolster, individually and as
executrix of the last will and testament of Harold Bolster, deceased, in consideration of the payment to me as such executrix by J. & W Seligman & Co.,
for the account of Mr. Juan Leguia of the sum of $57,373.6S, plus interest thereon
at the rate of 2 per cent per annum from January 24, 1928, to the date of this
letter, amounting to $1,147.47, and making a total of $58,521.15, the receipt of
Which is hereby acknowledged, do hereby confirm that 1 have agreed, and do
hereby agree, with you and each of you, that the amount of compensation, commission, and expense moneys due to said Harold Bolster and/or his estate and/or
others claiming through him in connection with or arising out of the recently
created Peruvian national loan and any and all other Peruvian financing, past
;or future, including interest on such amount at* the rate and for the period
Aforesaid, is said sum of $58,521.15, receipt of which I have acknowledged, and
I, said Madge Kennedy; Bolster, individually and as such executrix, in consideration of such payment, do hereby further agree to' exonerate, indemnify, and
hold harmless said J. & W Seligman & Co., its/assigns, and any successor firm
or; corporation, and. Juan Leguia, liis heirs,' executors; administrators, and
"assigns, jointly and severally, to the uniount of $58,521.15 against any and all
claims and demands which have been or which may be made against or upon
you, or either of you, at any time by any party or parties arising out of any
a&sigument or otherwise of all or any part of the compensation, commission,
land expense moueys .to, which said decedent; Harold Bolster or his estate or
others claiming with or through him was at any time entitled in connection
with or arising out of said Peruvian national loan and'any and all such other
Peruvian financing, past or future, and 1, said Madge Kenney Bolster, individually and as such executrix, in further consideration of said payment do
hereby forever release and discharge said J. & W . Seligman & Co., its assigns,
and any successor firm or corporation, and said Juan Leguia, his heirs, .executors, administrators and assigns, jointly and severally, of and from any and
all claims or rights of action which I, individually and as such executrix, now
have or may hereafter have against said J. & W, Seligman & Co. and/or said
Juan Leguia in respect of any compensation; commission, and expense moneys
at any time due to said Harold Bolster or to his estate or to others claiming
.with or through him in connection; with or arising out <xf said Peruvian national
loan and any and all such other Peruvian financing, past or future.
Very truly yours,
'
MADGE KENNEDY BOLSTER,
Individually, and as cxccutrix of the Inst will and testament of Harold Bolster,
deceased.
1466
SAIIB
OF FOREIGN" B O N D S OR
SECURITIES
Knoyv ail men by these presents that we, Madge Kennedy Bolster, of the city,
county, and State of New York, individually and as executrix of the estate of
Harold Bolster, deceased* and National Surety Co., a corporation, having a
principal office for the transaction of business at No. 115 Broadway, city, county,
and State of New York, are held and firmly bound unto Messrs. J. & W. Seligman & Co., of No. 54 Wall Street, city, county, and State of New York, and Juan
Leguia, Esq., of Lima, Peru, in the sum of $53,500, good and lawful money of the
United States, to be paid to the said J. &. W. Seligman & Co. and Juan Leguia,
their successors, executors, administrators, and assigns, for which payment we
.do bind ourselves, our heirs, executors, administrators, and successors, jointly
and severally, firmly by these presents.
Sealed with our seals and dated this 22d day of January, 1020.
Whereas the above named J. & W. Seligman & Co. and Juan Leguia, at the
special instance and request of the above-bounden Madge Kennedy Bolster, individually and as executrix of the estate of Harold Bolster, deceased, and upon
her promise and upon the obligation of the said National Surety Co. to indemnify
and save harmless the said J. & W. Seligman & Co. and Juan Leguia to the extent of $58,500 in the premises, have paid to the said Madge Kennedy Bolster,
individually and as executrix, the sum of $57,373.68, with interest at 2 per cent
from January 24, 1928, in full payment of compensation, commissions, and expenses due to Harold Bolster, deceased, from Messrs. J. & W . Seligman & Co. and
Juan Leguia, Esq., and either of them arising out of recently created Peruvian
national loan and any and all other Peruvian financing past, present, and
future, and
Whereas there are certain other claimants for compensation, commission and
expenses or part thereof, basing claims upon the services of Harold Bolster,
deceased, in effecting the consummation of said financing, including Clarence
L. Chester, who claims directly against J. and W. Seligman Co., and Benjamin
F. Castle, who claims against Mr. Bolster's estate, and Bennett, Bolster &
Coghill (Inc.), and Albert F. Jaeckel, Esq.
Now, the condition of this obligation is such that if the above-bounden Madge
Kennedy Bolster, individually, and as executrix of the estate of Harold Bolster,
deceased, her heirs, executors, administrators and successors, and National
Surety Co., and its successors, or any of them, shall well and truly indemnify
and save harmless to the extent of $58,521.15 the said J. & W. Seligman & Co.
and Juan Leguia, their successors, executors and administrators, from and
against any liability within said amount by reason of the said claims of said
Clarence L. Chester, Esq., Benjamin F. Castle, Bennett, Bolster & Coghill
(Inc.), and Albert F. Jaeckel, Esq., against J. & W, Seligman Co. and Juan
Leguia, or either of them, for compensation, commission, or expenses arising out
of the negotiations for or floatation of the Peruvian national loan or any other
Peruvian financing, and deliver or cause to be delivered releases from Clarcncc
L. Chester, Benjamin F. Castle, Bennett. Bolster & Coghill (Inc.), and Albert
F. Jaeckel, to J. & W. Seligman Co. and Juan Leguia, or obtain an adjudication of the claims of Clarence L. Chester, Benjamin F. Castle, Bennett, Bolster
& Coghill (Inc.), and Albert F. Jacckel against the estate of Harold Bolster,
deceased, J. & W. Seligman Co. and Juan Leguia, and satisfy the same, and
when and as soon as the same shall be released or adjudicated, and satisfied,
then this obligation is to be void, otherwise to remain in full force and virtue
for the period of 10 years.
MADGE KENNEDY BOLSTER,
[L. s.l
individually and as executrix to the
estate of Jfarotd Bolster, deceased.
Attest:
[SEAL.]
NATIONAL SURETY Co.,
B y ARTHUR P . WEST,
N . V . TYNAN.
STATE o r NEW YORK,
County of New York, ss:
On the 23d day of January, 1929, before me, came Madge Kennedy Bolster,
to me known to be the individual described in and who executed the foregoing
instrument, and acknowledged that she executed the same.
[SEAL.]
FRANK J . DILLON,
Notary Public, New York County.
New York County clerk's No. 258, registration No. 0288; Kings County clerk's
No. 162, registration No. 310; Bronx County clerk's No. 34, registration No.
3002A. Term expires March 30, 1930.
- S A L E OP F O R E I G N B O N D S OR S E C U R I T I E S
STATE OF NEW YORK,
County of New York,
1467
88:
On this 22d day of January, 1929, before me personally appeared Arthur P.
West, vice president of the National Surety Co., with whom I am personally
acquainted, who, being by me duly sworn, says that he resides in the county
of New York, that he is the vice President of the National Surety Co., the
corporation described in and which executed the within instrument; that he
knows the corporate seal of said company; that the seal aflixed to the within
instrument is such corporate seal; that it was aflixed by order of the board of
directors of said company, and that he signed said instrument as vice president
of said company by like order. And said Arthur P. W e s t further said that
he is acquainted with N. V. Tynan and knows him to be the resident assistant
secretary of said company; that the signature of the said N. V. Tynan subscribed to the said instrument is in the genuine handwriting of the said N. V.
Tynan and that the superintendent of insurance of the State of New York
has, pursuant to chapter 33 of the. laws of the State of New York for the
year 1909 constituting chapter 2S of the Consolidated Laws of the State of
New York known as the insurance law, as amended by chapter 182 of the
laws of the State of New York for the year 1913, issued to the National Surety
Co. Ills certificate that said company is qualified to become and be accepted
as surety or guarantor on all bonds, undertakings, recognizances, guaranties,
and other obligations required or permitted by l a w ; and that such certificate
has not been revoked.
[SEAL.]
TRACY A . CLUTE,
Notary Public, Nassau
Certificate filed in New York County, No. 900, Register No. 0-000.
Certificate filed in Bronx County, No. 58, Register No. 3 0 6 2 - A .
Certificate filed in Kings County, No. 211, Register No. 475.
Certificate filed in Queens County, No. 1148.
Also in Suffolk, Richmond, and Westchester Counties.
(Join mis si on expires March 30, 1930.
County.
COPY OF BY-LAW
Be it remembered, that at a special meeting of the board of directors of the
National Surety Co., duly culled and held on the . 3d day of October, 1922,
a quorum being present, the following by-law was adopted:
ARTICLE 13.—EXECUTION
OF BONDS AND UNDERTAKINGS
SECTION. 1. Signatures required.—All
bonds, recognizances, or contracts of
indemnity, policies of insurance, and all other writings obligatory In the nature
thereof, shall be signed by the chairman, vice chairman, president, a vice
president, a resident vice president, or attorney in fact, and shall have the
seal of the company aflixed thereto, duly attested by the secretary, an assistant
secretary, or resident assistant secretary. All vice presidents and resident vice
presidents shall each have authority to sign such instruments, whether the
president be absent or incapacitated, or not, and the assistant secretaries and
resident assistant secretaries shall each have authority to seal and attest such
instruments, whether the secretary be absent or incapacitated, or not; and the
attorneys in fact shall each have authority, in the discretion of such attorneys
in fact, to affix to such instruments an impression of the company's seal
whether the secretary be absent or incapicitated, or not, or to attach the
individual seal of the attorney in fact thereto, or to use the scroll of the
attorney in fact, or a wafer, wax, or other similar adhesive substance affixed
thereto, or a seal of paper or other similar substance affixed thereto, by mucilage
or other adhesive substances, or use the word " S e a l " or the letters 4 'L. S . "
opposite the signature of such attorneys in fact, as the case may be.
STATE OF NEW YORK,
County of New York, ss:
I, N. V. Tynan, resident assistant secretary of the National Surety Co.,
have compared the foregoing by-laws with the original thereof, as recorded In
the minute book of said company, and do certify that the same is a correct
1468
SALE; OF FOREIGN! BONDS: OR; 5 E C U B I T I E 5
and true transcript therefrom, and of the whole of article 13, section 1 pf said,
original by-law.
.
Given under my hand and seal of the company, in the county of New .York,
this 22d day of January, 1929.
»
«- • •
[SEAL.]
; '
N. V TYNAN,;
Resident Assistant Secretary.
NEW YORK, June 25, 1928.
Mr. EAEL BAILIE,
, , .
::
Care of Messrs. J. & W. Seligman,
New York City.
DEAR MB. BAILIE : ; Herewith ; copy of letter exchanged W i t h Mr. Salt and
copy of letter .accompanying our check.
Very truly yours,
F , J . LISMAN.
JUNE 23, 1928.
Mr- THOMAS V. SALT,
'New York City:
DEAR MB. SALT: I hereby take pleasure in confirming our conversation in;
accordance with which we: will agree to pay you at once $20,000 in full settle-:
ment of all your claims against us or any syndicate we are in, for compensation in any Peruvian business now or hereafter.
We also agree to pay'you, if and when the now pending merger of the General Vending Corporation into the Consolidated Automatic Merchandising Corporation becomes effective, the sum of $50,000 for your holdings of 1,945
shares of General Vending Corporation stock allotted to you, now under escrdw
agreement and your interest of 2,177-shares lii'the option of the General
Vending Corporation stock whifch we now'hold; This obligation to become
absolute on the day on which we pay for the shares of the Consolidated Automatic Merchandising Corporation to the Central Union Trust Co. and the
payments thereunder are to be made; $5,000 within 10 days after the date of
such issue and the balance to your order at the rate of $5,000 per month.
This purchase.of General Vending stock; if made, will not only settle the General Vendingmatter, but Will also include whatever claim you may'have against
us in the Chicago Traction situation in 'case our negotiations there Should be
successful, and in all other matters.
Will you kindly confirm?
Very truly yours,
F . J.T LISMAN
Approved.
Approved J and accepted.
Co.
KENNETH M i SPESCE.
•T.,V. ^ait.
.
. . .
M r / T H O M A S V . SALT,
' ,, '
.
'
June 25, 1928.
}
KetcYork
City.{
DEAB:MR. SALT : In accordance tvith. our letter of Saturday which has been
approved by .your5good self and [your counsel, we hand y o u herewith our
check for $20,000,> in, full settlement of .vourclaim^ against us or any syndicate
we are in, in connection] with, any .Peruvian business we have had* heretofore
or which we: may have hereafter.
Kindly acknowledge receipt of this; arid oblige.
Very truly yours,''
F . ' J . LISMAN & CoInclosed, check $20,000.
Know all; men by these/presents; jthat I; ^Thomas V . S a l t j of the city, county,
and State of New York, for and in {consideration i of the sum ot $20,000, law*11*
money .of the United States ;of America, tome.in hand paid, the receipt whereof
is hereby acknowledged, have remised, released, and forever discharged, ana
by these presents do for myself, my heirs, executors, administrators, and as-
- S A L E OP F O R E I G N
BONDS OR SECURITIES
1469
signs, remise, release, and forever discharge, F . J. Lismau & Co., a copartnership of the city and State of N e w York, and the members thereof, as such copartnership has been, is, or a t any time shall be constituted, J. & W . Seligman
& Co., a copartnership of the city and State of N e w York, and the members
thereof, as such copartnership has been, is, or at any time shall be constituted,
The National City Co., a N e w York corporation, the National City Bank of
New York, a corporation of the United States of America, Blytli, Witter & Co.,
a California corporation, White, W e l d & Co., a copartnership of the city and
State of N e w York, and the members thereof, a s such copartnership has been,
is, or at any time shall be constituted, and Guaranty Co. of New York, a New
York corporation, both individually and a s members of any group or groups
or of any syndicate or syndicates, and each of them, of and from all caust
and causes of actions, agreements, promises, claims, and demands whatsoever,
in law or in equity, which against the said copartnerships, members thereof,
and corporations, or a n y of them, I ever had, now have, or which I or my heirs,
executors, administrators, or assigns hereufter can, shall, or may have for
compensation, commissions, a n d / o r expenses for or arising out of any services
rendered by me in connection with any issue or issues of bonds, notes, or other
obligations of the Republic of Peru a n d / o r of any Province, District, and/or
municipality thereof a n d / o r of any corporation, association, or firm located in
the Republic of Peru, and generally in connection with any Peruvian financing,
past, present, or future, from the beginning of the world to the day of the date
of these presents.
In witness whereof, I have hereunto set m y hand and seal this 5th day of
July, 1028.
T . V . SALT.
[L. 8 . ]
Signed, sealed, and delivered in the presence o f :
WILLIAM E . LOTZ,
STATE OP N E W
Witness.
YORK,
County of New York,
ss:
On this 5th day of July, 1928, before me, a notary public in and for the State
and county aforesaid, personally came Thomas V* Salt to me known, and known
to me to be the individual described in and who executed the foregoing instrument, and he acknowledged to me that he had executed the same as in for his
free act and deed f o r the purposes therein set forth.
In witness whereof I have hereunto subscribed my name and affixed my seal
of office the day and year last above written.
GLADYS MOKENNA, Notary
[SEAL.]
Public.
My commission expires March 30, 1930.
EXHIBIT NO. 1 4
JANUARY 10, 1932.
MEMORANDUM—ACCOUNTS OF JUAN LEGUIA w r r n J. & W .
SELIGMAN & Co.
Attached hereto a r c :
(a) Transcript of the account 4 4 Juan Leguia " from the date the account was •
opened on April 8, 1927, to the present time.
ib) Transcript of the account " Juan Leguia reserve for Bolster c l a i m " from
the date the account w a s opened on January 24, 1928, until it was closed on
January 24, 1929.
(c) Transcript of the account " J u a n Leguia special reserve account" from
the date the account w a s opened on December 18, 1928, until it was closed on
May 15, 1929.
In connection with these documents, the following explanations of certain
matters disclosed by the transcripts may be informing.
1. The balance in the account " Juan Leguia " a t the present time is $73.01.
Mr. Breck, therefore, desires to correct his testimony before the committee
when, speaking from memory, he stated (pp. 863 and 808 of the transcript of
testimony) to the committee that the account had no money in it at the present
time.
1470
SALE OF FOREIGN BONDS OR SECURITIES
2. Two loans were made by J. & W . Seligman & Co. to Juan Leguia, as
follows:
( a ) On August 17, 1928, a 6-month loan of $30,000 was made, which was
repaid with interest on December 18,1928.
{b) On September 25, 1928, a 30-day loan of $15,000 w a s made, which was
repaid with interest on October 25, 1928.
Mr. Breck, therefore, desires to correct his testimony before the committee
when, speaking from memory, he stated (p. 898 of the transcript of testimony)
that he thought no credit had been extended by J. & W . Seligman & Co. to
Mr. Juan Leguia. Both the foregoing loans were made in New York while
Mr. Breck was in Peru.
3. In addition, the account of Mr. Juan Leguia was permitted to be overdrawn
from time to time, but only while he had on deposit with J. & W . Seligman & Co.
satisfactory collateral consisting of Republic of Peru 0 per cent bonds of 19C0
(which he had purchased from funds to the credit of his account) and of money
loaned on call for his account secured by stock-exchange collateral, as explained
in paragraph 4 below. From time to time varying amounts of the bonds were
sold and the proceeds applied to reduce or extinguish overdraft in the account.
Moneys placed to the credit of his account from time to time came not only
from the commissions paid to him on Peruvian financing but also from substantial deposits which he made from time to time.
4. On May 2,1928, $40,000 of the credit balance of Mr. Juan Leguia's account
was, at his request, loaned on call in New York City for his account against
stock-exchange collateral. Later, on July 11, 1928, upon his request, this loan
was called and the proceeds recredited to his account.
5. The account." Juan Leguia reserve for Bolster c l a i m " is explainable by
reference to the preceding Exhibit No. 13.
6. The account " J u a n Leguia special reserve account" was opened on the
books of J. & W . Seligman & Co. by transfers from the account " Juan Leguia "
(see p. 10 of the transcript thereof). The amounts thus transferred were
applied to meet the several payments listed in the account " Juan Leguia special
reserve account."
EXHIBIT N o . 14
JIT AN LEGUIA IN ACCOUNT WITH J. & W. SELIGMAN & CO.
Amount
Description
Deposit
Draft 1
Draft 2..*:
Draft 9
Draft 12
Draft 11
*
Draft 13
Draft 14
Draft 15/172 per cent credit interest..
Drafts 16/17
Drafts 18/19
Drafts 20
Check
Draft 21
Draft 22/24
Draft 26
Draft 27
Draft
.do.
Draft 363, 45.13, at 4.8%.
Draft 3
Draft 1
Draft 2
Draft
do
Deposit
Draft
* Credit.
Value
date
Price
Debit
$5,000.00
5,000.00
16,000.00
600.00
2,000.00
1,400,00
200.00
1,000.00
1,200.00
1,800.00
500.00
500.00
800.00
3,500.00
2,000.00
500.00
237.00
522.00
221.63
750.00
50.00
120.00
500.00
785.22
35.00
Credit
Lost
amount la
this column
is balance
of your account
$50,000.00
339.51 i $18,939.51
15,000.00
1471
- S A L E OP F O R E I G N B O N D S OR S E C U R I T I E S
EXHIBIT NO. 1 4 — C o n t i n u e d
Amount
Date
Value
date
Description
Price
Debit
1927
Nov. 3
5
7
9
10
21
22
23
28
29
30
$50.00
6.33
9.45
10.00
750.00
40.00
150.00
sa 00
50.00
15a oo
390.00
287.85
4,000.00
2f 000.00
l f 0S6.00
5oaoo
500.00
250.00
J, 703.63
i,2oaoo
Draft 7
do
Draft 8
Draft 3
Draft 4
do
do
do
do
do
do
do _
.. do
do
Dec. 2
do
3 — - do
. do
do
do
Cancellation of debit entry
Draft 5
75a 00
1,520.00
1,47a 00
18.72
17.68.
Cable chdrpM T)np ifi
27
51
28 Cable chnrrp<
£210.500 AiC^UUtak/
Rpniihlir nf
30 V****,**"*,
v&Ppj-ii
A dUAVrv>r
^Ivirv»nt
LVUt*.
1628
Ian. 4 Cheek
do
11 _
Check 6
14 2H per cent commission a/c sale of
17
24
30
„
31
Feb. 7
8
9
10
16
17
23
29
Mar. 8
14
16
23
27
,
Apr.
3
Cable pJiArvM Ton
Check 10
Check ioi
Check 100
Check 104
Check 7
Check 107/0
Check lflfi
Check 102
Check 103
Check 114
Check 8
Check iifi/K
Check HQ/120
Check 121
Check 123
Check 12J
Chppk 12A
Check 28
Check 130
Check 131
do
Cheek 1
» **
Cheek 2
Check 9
do
.
Check U5
» Credit.
7.70
193, 621.92
14
*
$i f 2oaoo
2.S6
2»ooaoo
i.ooaoo
moo
37.00
2,ooaoo
75a 00
4fooaoo
500.00
12,618.40
500.00
15a oo
2,ooaoo
i.ooaoo
% 106.00
2,soaoo
1,500.00
i,ooaoo
1,000.00
2,00a oo
3oaoo
100.00
350.00
loaoo
loaoo
150.00
loaoo
loaoo
loaoo
4a oo
l* isa oo
loaoo
146.25
8.00
moo
* Debit.
i $7,935.41
1,520.00
104.70
» 187,848.91
5,ooaoo
4.60
75a 00
ia50
Cable pharpns Jan 7
92928—32—PT 3
mi
Credit
Last
amount In
this column
is balance
of your account
5,262.50
187,50a00
SALE * OF .'FOREIGN; BONDS OR SECURITIES
M72.
EXHIBIT
No. 14~Continued
Amount
Value
date
Description
Date
1928
Apr. .17 Check
do_.
do
18
-.do.
19
H
do
21 Cost of translation of annual report of
Society Agrlcola Huayto.
Check
do
Deposit"—I—
24 $40,000 Republic of'Peru 6~per~cent—
Check
—
....do.
I
Cost of translation of 1927 report of
Hacienda Huayto.-.
26 Check 130.
| ...do
.27
i"I"do™I
Check.127 ....do
~
28 Check 129
...do™
...do
so; $65,000 Republic of Fern 6 per cent
50/93, 8/93—, 8/93—
$34,000 Republic of Peru 6 per . cent
10/93—, 22/93—, 2/93Translation of 1 document..
Check...,
May ,1 $2,000 Republic of Peru 6 per cent
Check
'""do
2 Loaned on call.... ....
Check....
ij
I
do...
....do,
.—do.....—...
Check 1...
Check 2
i.j.do...:.:....^^-^
Check 4
*8 Check 3
^ Check 5. _ . — -
,
.....
..
10
11
12
14
21
22
Check 9.
Check I25.„:;.j
Check 1.. .......
. Check 8.„..„_
_.
.
........
Price
$moo
494.00
35.00
moo
moo
273.00
17.52
200.00
9a oo
moo
ioaoo
* Credit
$2.ooaoo
38'273.33
9.60
Ml 00
550.00
100.00
35l00
60.00
139.85
2,00000
1,600.00
200.00
io,ooaoo
50.00
62,917.00
28.44
25,00a 00
"""goo'OO"
120.00
ioaoo
25l 00
40,ooaoo
93.40
10.000.00
ioaoo
sa oo
COO. 00
120.00
ioaoo
700.00
719.82
500.00
50.00
saoo
181.90
60.00
50.00
2a oo
50.00
100.00
100.00
554.76
95.00
isa oo
soaoo
165.00
3,50a00
100.00
—
... .. .
.....
_L:
$42^604.02
'"soaoo"
60.00
h l £ ± = = = = = r .
Check 1L_:
:
do
Check 200.
Check 30::
Check 40L
do
Check 50.
Credit
Debit
Last
amount In
this column
is balance
of your account
J
650.00
27a 00
325.00
128.63
150.00
45.00
225.00
100.00
4oaoo
32,471.33
1473
S A L E O F , F O R E I G N B O N D S . OR S E C U R I T I E S
EXHIBIT NO.
14—rContinued
Amount
Date;
1929
May 22
23
29
June 1
2
5
6
7
7
Description
Check 50do
do
Check 40....
„ „ ..
....
.... do...
......
...
.....do
do
....
.
.....do.__.__
.....do
.....do
.....do
-...-do—....
do
do—/.
do.... ... . . ..
.
Check 60
. . .
.....do.—
C. P. X. S, 36, 600/ Peru 6 per rent
Interest for May on loan on call.......
Check 60
Check 90. ..
Check 1
Check 60
do
.
do
;; *
do
do......
Check
.
.... ...
do
Check 200
Check
do
do........
do
Check 120
Draft 1
.
Check
do
"
. . . . .
do....;.
.....do
do.. . .
do
...do
do
do
Check 300
Check 400....
Check 500
Check
Check 750
Check
,
..
25 6 per cent debit less 2 per cent credit
interest.. .
Custody of securities to June 30
26 Check 242
Check 775
Check 850
Check
Check 225.
'
Check
*
27 Check 91
Check
Check 94...
w
Check 245
_
Check 777
29 Check
.. „
Check 8S8
July''-2
~
Check 977......;
Check 404
Check 405
Check 407
Check
1 Debit
.
Value
date
Price
Debit
$30.00
100.00
£0.00
150.00
202.00
1,000.00
50.00
100.00
200.00
21.00
60.00
5,000.00
150.00
100.00
12.00
100.00
250.00
326.50
240.00
100.00
450.00
155.00
62.15
100.00
300.00
200.00
25.00
250.00
200.00
25.00
203.00
3.85
320.00
2,000.00
100.00
250.00
101.00
1,000.00
1,215.22
100.00
50.00
50.00
100.00
190.00
800.00
410.00
2,000.00
941.00
6,000.00
150.00
270.00
185.00
270.00
1,218.32
105.50
1,000. 00
100.00
100.00
100.00
. 1,000.00
173.00 ,
50.00
60.00
500.00
200.00
444.50
, ,2,000100
100.00
200.00
250.00
U90-00
50.00
10.00
Credit
$2,055.00
173.65
Last
amount in
this column
is balance
of your account
s $15,510.27
* 15,015.27
>39,778.66
193.70
I'l-iJ-.:..
1474
SALE OF,FOREIGN BONDS. OR SECURITIES
EXHIBIT NO. 14—rContinued
Amount
Description
Check 1110...
Check 789
Check 994
Check
Check 111...
Check 431
Check..
..do_.
do
Check 1103..
Check..
-do..
-do..
..do..
.do..
.do..
$4,000, Peru 6 per cent, 1960...
$6,000, Peru 6 per cent, 1960. _
$3,000, Peru 6 per cent, 1960...
Draft 2
Amount of call loan returned..
Check
,_do..
Check 239..
Check
do..
,.do„
-do..
..do..
-do.,
.do..
,_do..
Graham-Paige Co., Washington. ...
Check
Note to order, Samuel A. Maginnis...
Check
$40,000, Peru 6 per cent, 1960
Check
Check 1
Draft 3
Check 2.
Check 5
Check 6
Check 7.
Check 8
Deposit
.
Do..:.
Interest, June 30-July 11, on money
loaned on call
Check 9
Check 9
Check 11
Check 12.
Check 3
Check 4
Check 14
Check 15
Check 16.
Check 17.
Check 18
Check 19
Check 20.
Check 21
Check 13
Check 25
Check 23
Check
Check 28
Check 26
„
$6,000, Republic of Peru 6 per cent,
1960
Check 22
Check 2000
Draft, account Graham-Paige Co
6 months' loan
® Debit.
Value
date
Price
Debit
915*
91H
mi
91
$450.00
250.00
130.00
2,000.00
50.00
1,000.00
35.45
200.00
24.00
91.00
100.00
218.55
2S9.60
497.50
4&4.S4
GO. 00
2,000.00
50.00
29.56
18,820.00
13Z00
25.00
50.00
150.00
8>000.00
50.00
4,500.00
100.00
611.67
45.00
5,000.00
50.00
40.00
50.00
2,000.00
200.00
794.00
70.00
45.00
280.00
50.00
Credit
$3.6*2.33
5,523.50
2, 76Z 25
40.000.00
36,680.00
975.00
345.00
76.53
108.00
87.50
25.00
201.49
143.30
400-00
96a 00
114.70
300.00
419.15
2oaoo
25.00
W.00
351.31
5tt 00
83.00
loaoo
75.00
isa oo
90*4
6.27
4oaoo
GIL 67
Last
amount in
this column
is balance
of your account
5,479.00
3o,ooaoo
i $1,420.05.
1475
SALE OF FOREIGN BONDS OR SECURITIES
E x n m r r No. 14—Continued
Amount
Date
Value
date
Description
Price
Debit
1028
Aug. 20 Check l
Check 27
Check 29
Draft 1
Draft l. National Road Co., Lima
Deposit
Check 2
Check 3
Check 4
Cash
Do
Check 8
Check l l
Check 13
Check 14
Cheek 7
Check
Check 12
Check 10
Deposit
Di (Terence between call price at 100
and sale price at 93M. of $1,000 Peru
6 per cent, sold Apr. 27
Sept.
Draft 16, London
Cablegrams in August
Draft 2
Draft 15
Commission on draft, account L/C
2IOS
Draft, L/C 2*08
Commission on same
do
Check
;
McVickar & Co
Check 3
Cash
Check 5
Check 36...
Check 144. _
Check 19_„
Check 4.
Check 7.
Check
Check
Check 37.
10 Check 38
Check
11 Check
13 Check 3D...
15 Check
24 Check 1
1
Credit.
3,044.65
1,669.70
200.00
1,500.00
1,000.00
100.00
135.00
705.00
149.00
117.00
1,600.00
550.00
1,000.00
6,000.00
6.03
4,000.00
1,000.00
$5,214.69
15,00a 00
68.75 1 $16,326.18
2.50
500.00
4,500.00
22.50
„
p c r u c p^ c c n t (3 (xx) a"t 90^6.000 at 90,4)
$500. Peru 6 per cent
Draft 3
Draft of Graham*Paige Co
Draft 17
Draft 23/26
Check
Check 19/20
Check 26
22 Check 22
Check 27. „
Cash
Check 28
Check
30-day note due Oct. 25, interest at 6
_ per cent
26 Cash
Check 30
'
""
Check 29-31/33
Oct.
By deposit
Check 24...
Check 35
12
$500.00
87.00
100.00
2,000.00
20,000.00
Credit
Last
amount in
this column
is balance
of your account
90K
3,000.00
611.67
1,000.00
1,653.00
2.000.00
3,500.00
100.00
1,000.00
195.00
200.00
220.00
10,000.00
150.00
17.50
850.00
150.00
8,282.25
458.67
15,000.00
5,000.00
100.00
100.00
100.00
1,106.40
600.00
50.00
224.60
4,055.46
moo
1,000.00
140.00
118.75
205.00
208.51
80.00
46.00
3,739.00
200.00
5.00
sa 00
loaoo
* 703.10
1476
SALE OF FOREIGN BONDS OR SECURITIES
EXHIBIT NO. 14—Continued
Amount
Description
Value
date
30-days note due.
30 days interest, at 6 per cent,::
Check 2_._.
—:
National City Bank.'
C/payment, J. Finlay—___._.
Check
— .
Draft 8.:.:——
Draft 9—
—
Draft 4—;
;
Draft a-:::.—-:—Drafts:--—.;™-.;::
....
National City Bank
Erie City Iron Works
—.
Charles \V. McHose
—
One-half per cent commission.
Drafts 7/8
Drafts 8/9
J
10,000, note due Feb. 17,1929, plus interest at 6 per cent
..
Transfers to special reserve account to
meet your check paid by Equitable
Trust Co, Paris
:
To meet payments under our letter of
credit in favor of Mechanical Manufacturing Co. $11,600, and commission $29.50
.
To meet 4 acceptances $380 each, favor
Chas. \V. McHose
—
To meet 4 acceptances $620 each, favor
Erie City Iron Works..,.
Draft 10
.....
Drafts 11/13
6 per cent debit less 2 per cent credit
interest
Custody of securities
-.:-—
Draft 14:
Draft 16—
Draft 17:
Cable charges..-.-.
Draft 18
-i
Draft 19
Draft 21.......
Draft 20
Draft 22
Draft 23...
Draft 24...
Draft 25.
Draft 26
14 5 per cent Federal income tax withheld on $443.8S interest on loans on
call May, June, and July, 192S.
Draft s 27-28........
:
..
.22 Draft
Draft 3
Draft 5...
--..i
23 Draft 4
Draft 29
Transfer Juan Leguia reserve for
bolster claim.
26 Draft 2.
Draft 8...
Drafts 6,7
Draft 9
National City Bank
Cable charges.:.
Dralts 10,11—
Draft 12
Draft 12
^
Draft 14
—
National City Bank
."Mar
Drafts 16—17
v.
Draft 15
Draft 18
* Credit.
Price
Credit
Debit
$15,000,0
75.00
100.00
000. OU
4,000.00
1,500.00
2,00.000
2,000.00
1.150.00
2,000.00
152.91
1,245.00
6S4-00
9.65
2,000.00
3,000.00
Last
amount in
this column
is balance
of your account
4,000.00
173,665.00
30,615.00
40,000.00
11,629.50
1,520.00
2,480.00
6,000.00
3,000.00
301.38
4.00
3,000.00
1,000.00
2,800.00
23.70
'$44,874.96
1,000.00
i.ooaoo
2,000.00
300.00
2,ooaoo
500.00
1,000.00
i,ooaoo
2,500.00
22.19
12,000.00
1,500.00
500.00
2,500.00
200.00
90.00
02.50
4,000.00
3,000.00
2,000.00
4.1
3,000.00
800.00
10,000.00
2,000.00
6,000.00
75a 00
2,ooaoo I
5,235. 98
4,000.00
8,000.00
1477
SALE OF FOREIGN BONDS OR SECURITIES
EXHIBIT NO. 14—Continued
Amount
Value
date
Description
Draft 19
Mar. 27
Deposit
......
Cable charges Mar. 26.................
Draft 20
Equitable Trust Co
Draft 21
Apr. 16
Draft 23
Chase National Bunk
..........
Draft 22
Apr. 5
National City Hank
Chase NatIon.il Hank.................
Cable cbarpcs Apr. 16 and 23
_
National City Hank...
...........
Draft 1
Draft 25
Draft 24
Draft 23
Cable charges . .
..............
Draft27-.
..
Draft 26
Draft 2S
Draft 29
2 per cent credit interest.......
Draft 30
Additional interest to June 24
Draft 40
Draft 41
Cable charges ........ .....
National City Hank
Draft 42
Royal Bank of Canada
Draft 41
Draft 43
Roval Bank of Canada
...........
Draft 45
Royal Bank of Canada........
Draft 47
Draft 46
Drafts 49-50
Draft 48
National City Bank...
Draft 51 . . . .
2H per cent interest...
Draft 52
do
Draft 53. ..
Draft 54
Draft 222.. .....
..'.
..
_
Last
amount in
this column
is balance'
of your account
Price
Debit
$619.50
0.SS
2,000.00
Credit
$2,300.00
4,000.00
4,ooaoo
2,000.00
8,000.00
50.63
2,000.00
e, 95a eo
.8,000.00
8,000.00
8,000.00
105.61
3.00
20,000.00
26.40
10,000.00
55.00
749.65
182.16
1
1,383.18
20,000.00
4,ioaoo
2,400.00
1,696.97
8,600.00
$5,922.11
72.71
2,153.75
2,000.00
246.90
4.42
106.33
3a 00
149.25
50.00
1(10.00
75.00
3.12
1
8,600.00
io,ooaoo
7,000.00
7,ooaoo
18.52
16.00
6.00
80.00
•20.00-
i 239.80
i 117.80
* 117. "SO
' ' 173.01
1.00
•
.
>
•
JUAN L£GUIA~RESEnVfi FOR BOLSTER-Ct,AIM—tN ACCOUNT WITH J; A W.
S E L I G M A N & CO.
$62,500.00
524.31
626.74
2 per cent credit interest..
—do
—
To settle claim of estate of
Harold Holster
$57,373.68
1 year's interest at 2 per
cent, to Jan. 24, 1929.*.. I,147.47
2 per cent credit interest to date..
Transfer, Juan Leguia
* Credit.
$58, £21.16;
5,235.98
106.08
$63,651; 05-
1478
SAIIB OF FOREIGN" BONDS OR SECURITIES
EXHIBIT NO. 14R—Continued
JUAN LEGUIA—SPECIAL-RESERVE A C C O U N T - I N ACCOUNT W I T H J.
SELIGMAN & CO.
Amount
Date
Value
date
Description
Price
Credit
Debit
W.
Last
amount in
this column
is balance
of your account
1928
!Dec. 18
Transfer, Juan Leguia, to meet his
check paid by Equitable Trust Co.,
Paris ^
Meet payments under our letter of
credit lavor Mechanical Manufacturing Co. for $11,800, plus commission, $29.50
Meet 4 acceptances, $380 each, favor
Charles W. McHose
Meet 4 acceptances, $620 each, favor
Erie City Iron Works
20 Mechanical Manufacturing Co
Commission on $11,800
2L Check paid by Equitable Trust Co.,
Paris, No. 18
24 2 per cent credit interest
$40,000.00
11,829.50
1,520.00
$4,300.00
29.50
4o,ooaoo
10.98 i $11,510.03
* 11.510. OS
31 Balance
1929
Feb. 14
Account favor Erie City Iron Works
Account favor Charles W. McHose
Mar. 13 Account favor Erie City Iron Works
15 Account favor Mechanical Manufacturing Co
18, Account favor Charles W. McIIose
do ..
„
Apr. IS;
Account favor Mechanical Manufacturing Co..
1 Account favor Erie City Iron Works
do
May l!J
115 Account favor Charles W. McHose—
2 per cent credit interest..
__ _
Transfer dollar account
„ __
1
2,480.00
620.00
3*0.00
62a 00
3,500.00
3*0.00
380.00
4,000.00
620.00
620.00
380.00
72.71
61.73
Credit.
EXHIBIT 15
CONTRACT OF PURCHASE SALE OF T H E BONDS
The Province of Callao, party of the one part, hereinafter called the
Province, represented by its council, hereinafter called the council, the latter
Tepresented by its syndics, Messrs. Otoniel Yillamonte and Eduardo Freundt
.and Alvin H . Frank & Co., a corporation of the State of California, United
States of America, hereinafter called the Frank Co., represented by its vice
president, Mr. Robert Edmund Moody, party of the other p a r t ; with the participation also of the Government of Peru, represented by the Director General of Finance, Dr. Francisco Quiroz V e g a ; have agreed to make a contract
of purchase and sale of bonds in the following terms:
First. The council and the Government of Peru declare that nil of the data
set forth in the contract of issue of bonds including the appendices thereto, providing for bonds of a total amount of §1,500,000 executed on this date, are
correct and exactly in accord with the facts, and that in the execution of the
said contract of issue and the execution of the present contract for the sale
•of bonds, the formalities required by the laws of Peru have been observed.
Second. The Province agrees to sell and tlie Frank Co. agrees to buy the
total amount of the bonds of a principal amount of $1,500,000, to b e issued as
rset forth i n the preceding clause, and bearing the guarantee and obligation
-of the Republic of Peru, at 9 2 % per cent of their face amount, plus interest
-accrued to the date of payment, in accordance with the conditions set forth in
t h e following clauses.
-SALE OP FOREIGN BONDS OR SECURITIES
1479
Third. Upon sucli date and at such hour as the Frank Co. may designate,
which, however, shall not be later than 30 days after the date on which the
Central Union Trust Co. and J. & W . Seligman & Co. have respectively accepted
the offices of trustee and fiscal agent of the bonds in accordance with* the provisions of the issue contract, the council shall deliver to the Frank Co., at the
principal office of the trustee in New York, the temporary bonds, and simultaneously therewith the Frank Co. shall pay the purchase price by depositing
the amount with the trustee. The trustee shall apply the amount so deposited
as follows:
1. It shall deliver to the fiscal agent:
(а) The sum of $S2,500 as a guaranty fund in accordance with the stipulations of the contract of issue.
(б) The sum of $82,500 to meet the service of the loan due on the next succeeding June 1.
(c) The sum of .$15,000 which the FrJnk Co. considers sufficient to attend
to the payment of all the expenses of issue payable in the United States by
the council in accordance with the issue contract, the fiscal agent being authorized to apply such sum to the payment of the said expenses in the United
States, for which purpose the instructions of the Frank Co. shall be sufficient.
The said expenses shall not, however, include future expenses relating to the
service of the loan or to default thereon, such as expenses of publication of
notices and others for the payment of interest, drawings, and amortizations,
nor compensation, cost, and expenses of the trustee and of the fiscal agent, all
such expenses being payable by the Province.
2. It shall remit to the Lima branch of the Royal Bank of Canada a sum
equivalent in Lima to Lp. 55,000.0.00 at the current rate of exchange with
directions that the sum so received immediately be applied by the Royal
Bank of Canada to the payment of the amounts which the Province owes to
the Banco del Peru y Londres and to the former Compania Recaudadora de
Impuestos in accordance with the instructions contained in clause ninth of
the contract of trust and fiscal agency, also designated as " Contract of issue
of bonds," and the Royal Bank of Canada shall by such payments obtain the
cancellation by the said entities of any liens or charges in their favor affecting
the properties or revenues given in guaranty of the said bonds and furnish
evidence thereof to the trustee.
3. It shall remit the balance to the Lima Branch of the Royal Bank of Canada
with instructions to place it at the disposition of the council as soon as the
cancellation of the liens and charges, as provided in the preceding paragraph,
is completed.
Fourth. The Frank Co. will procure that the expenses of the issue in the
United States will be analogous and proportionate to the expenses usual in
such operations and contracts in the United States and will account for the
same to the council, the council being entitled to the remainder or balance
if such expenses should be less than $15,000 American gold.
Fifth. The temporary bonds will be exchanged for the definitive bonds in
the manner provided in the contract of issue. Upon request of the Frank
Co. the Director General of Finance of the Republic and the council will
furnish for use in connection with the public issue of the bonds a letter in
customary form signed by the director general of finance, and the syndics of
council, describing the resources and revenues of the Province and the Republic
and giving other information relative to the bonds.
Sixth. The Frank Co. assumes no liability for the amounts in accordance
with the third clause and which remain in possession of the fiscal agent, nor
for the amounts remitted to Lima.
Seventh. If at any time up to the day of delivery of the temporary bonds
and payment therefor, any financial, political, or other conditions should, in
the unrestricted judgment of the Frank Co., render the sale or delivery of the
said bonds to the public impracticable or Inadvisable, the Frank Co. shall
have the right to withdraw from this contract and to be reimbursed by the
council to its expenses.
Eighth. The council declares and guarantees that during the period of 90 days
before the date of this contract it has not negotiated nor placed any loan
or bonds payable in American gold dollars, or in pounds sterling, and that
during the same period of 90 days after the date of this contract no loan
payable in American gold dollars or in Peruvian pounds will be issued or
negotiated.
1480
SAIIB OF FOREIGN" BONDS OR SECURITIES
, Ninth. It is expressly agreed that the Frank Co. is authorized to assign and
.transfer, all or any rights and obligations accruing to it either under this contractor under the contract of issue.
Tenth. The Government of Peru represented by the director general of
finance, Dr. Francisco Quiroz Vega, signs the present contract to express the
-approval of the same by the Government of Peru.
Eleventh. This contract is executed in the English and Spanish languages,
but the English text shall govern in the interpretation of its terms.
For the expenses in the United States relating to the contracts of issue ami
purchase sale of bonds, and to the present contract mentioned in clause
twentieth of the contract of issue and in clause third of the purchase-sale contract, but excepting future expenses relating to the service of the loan such as
those of publication of notices and others for the payment of interest, drawings, and amortizations, and expenses of the trustee and of the fiscal agent by
reason of such service, the council'contributes the sum of $15,000, it being
understood that in case of excess over the said amount, the said excess shall be
for account of the Frank Co.
LIMA, April 25 of 1927.
[SEAL.]
[SEAL.]
[SEAL.]
Fco. QUIROZ VEGA.
Director General of Finance.
EnVARDO FREUNDT.
Syndic in Charge of Disbursements.
O. VILLAMONTE.
Syndic in Charge of
Revenues.
ALVIN I I . FRANK & Co.,
B y FRANCIS F . HANDOT.PH.
Attorney
in Fact.
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU,
City of Lima:
I, George: A. Makirison, consul of the United States of America, in and for
the district of Callao-Lima, Peru, duly commissioned and qualified, do hereby
c e r t i f y t h a t F. Quiroz Vega, whose true signature is subscribed and affixed
to the attached document, was on April 25, 1027, the clay of the date thereof,
Director General de Hacienda (director general of the ministry of finance),
of Peru, and that Eduardo Freundt, whose true signature is subscribed and
affixed to' the attached document, was on April 25, 1027, the day of the date
thereof, sindico de gastos del consejo provincial del Callao (sindyc of expenses
of the provincial council of Callao, Peru), and that O. Villamonte, whose true
signature is subscribed and affixed to the attached document, was on April 25,
1927, the day of the date thereof, sindico de rentas del concejo provincial del
Callao (sindyc of incomes of the provincial council of Callao, Peru), and
that their respective signatures and seals of office as such are worthy of all
dut faith and credit.
In witness whereof, I have hereunto set my hand and official seal of office,
at Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
[SEAL.]
GEO. A .
MAKINSON,
Consul of the United States of America at Callao-Lima,
Serial No. 693, fee $2.
Peru.
STATE OF NEW YORK,
County of New York, ss:
On this 17th day of May, 1927, before me came Francis F. Randolph, to
me known to be the individual described in a certain power of attorney executed in the city of Los Angeles, State of California, on the 7th day of March,
1927, by Alvin H. Frank & Co., and said Francis F. Randolph acknowledged
that he executed the foregoing instrument on behalf of Alvin H . Frank & Co.,
pursuant to authority granted .to him in the said power of attorney.
[SEAL.]
CHAELES STEXGER,
Notary Public, Kings County.
No. 562, reg. No. 8670, cert, filed in New York County, No. 1650, reg. NoS170A. Commission expires March 30,192S.
-SALE OP FOREIGN BONDS OR SECURITIES
1481
[No. 27978]
STATE OF NEW YORK,
County of Xcw York, ss:
I, William T. Collins, clerk of the county of New York, and also clerk of the
supreme court for the said county, being a court of record, do hereby certify,
that Charles Steiger, before, or by whom, the annexed instrument was signed,
was at the date thereof a notary public for the county of New York, duly
appointed and sworn, and that full faith and credit are due to all of his official
acts as such notary public. And further, that I am well acquainted with the
"handwriting of such notary public and verily believe that the signature to
the annexed instrument is genuine.
In testimony whereof I have hereunto set my hand and affixed the seal of
the said court and county the ISth day of May, 1927.
[SEAL.]
WILLIAM T . COLLINS,
EXHIBIT N o .
Clerk.
16
PROVINCE OF CALLAO, PERU—$1,500,000 GUARANTEED AND SECURED SINKING FUND
7 % PER CENT GOLD BONDS, DATED JANUARY 1, 1927—CONTRACT OF ISSUE OF
BONDS, TRUST AND FISCAL AGENCY AGREEMENT DATED APRIL 25, 1 9 2 7
CONTRACT OF ISSUE OF BONDS
(ALSO KNOWN AS TRUST AND FISCAL AGREEMENT)
The Republic of Peru, hereinafter called the " Republic " represented by the
Director General of Finance, Dr. Francisco Quiroz Vega, and the Province of
Callao, hereinafter called the '* Province," represented by its provincial council,
and the latter in turn by its syndics, Messrs. Otoniel Villainonte and Eduardo
Freundt, hereinafter called the " council," parties of the first part: and Alvin
H. Frank & Co., a corporation of the State of California, United States of
America, hereinafter called " the Frank Co.." represented by its vice president,
Mr. Robert Edmund Moody, party of the second part; have agreed to make a
Contract of issue of bonds, also to be kuowu as a trust and fiscal agency agreement in the following terms:
1. The council declares that all the data and statements contained in
the annexed document, designated by the letter A. called " Statistical information of the provincial council of Callao," are in accordance with the facts,
that is to say, that the same are true and correct.
2. The Province, pursuant to ordinance adopted at the sessions of February
IS and March 11, approved by the Government of Peru, by supreme resolution
of April 25 and in accordance with authorizing law No. 5S01, which ordinance,
resolution, and law appear in the appendix accompanying this instrument
designated by the letter B, hereby Issues bonds, to the amount of $1,500,000,
American gold coin, of the same weight and fineness as those which now circulate in the United States of America. This total sum shall be represented
by bonds of $1,000 or $55, pursuant to the indication made at the proper time
by the Frank Co. Bonds of the denominations of $1,000 or $500 at any time
outstanding with all unmatured coupons attached may be exchanged for an
equal aggregate principal amount of bonds of the other denominations, with
all unmatured coupons attached, upon payment of $1 for each new bond issued,
to cover expenses, being the said payment of $1 on account and charge of the
asking for the exchange. The Province will pay the principal of the bonds,
the premium thereon hereinafter mentioned, and the corresponding interest in
Americal gold dollar coins of the same purity, weight, and fineness as those
which now circulate in tb*> United States in the manner and conditions hereinafter stipulated; and said bonds, premium, and coupons, that is to say, the
principal, premium, and interest, shall be paid in time of war as well as in
time of peace, irrespective of the residence or nationality of the holder of said
bonds and coupons.
. 3. The bonds shall be payable to bearer, shall bear interest at 7 { h per cent
per annum, from January 1, 1927, payable at the end of each semester, each
bond bearing the necessary number of coupons and the amount of each coupon
representing the amount of the corresponding interest. The bonds. shall be
numbered consecutively; shall bear the name: "Province of Callao, Peru, guaranteed find secured sinking fund 7 % ' p e r cent gold b o n d s " ; and the bonds, as
well as the coupons, shall be in the English language, substantially; in accord-.
1482
SAIIB OF FOREIGN" BONDS OR SECURITIES
ance with the forms attached hereto and constituting an integral part hereof.
The bonds shall bear the facsimile signatures of the persons who are on the
date of the execution hereof the two syndics of the council, and one seal of
the council, and shall be signed in the city of New York by the consul general
of the Republic in that city, who is hereby given the necessary power for that
purpose, or by any other attorney in fact whom the council may designate.
Each coupon shall bear the facsimile signature of the said two syndics. Each
bond shall bear indorsed thereon the guarantee and obligation of the Republic,
in the English language, substantially in the form attached to this minute,
which guarantee and obligation shall bear the facsimile signature of the director general of finance in office on the date of this agreement. n:id the seal of
the department of finance of the Republic, and shall furthermore he signed by
the consul general of the Republic in New York, who is hereby given the necessary power for that purpose, or by any other attorney in fart whom the said
director general of finance, in the name of the Republic, may designate. Each
bond shall be authenticated by a certificate indorsed thereon signed by the trustee hereinafter mentioned setting forth that the bond is one of those described
in this contract; and without such certificate no bond shall be valid or can he
issued. Such certificate shall be conclusive evidence and the only evidence,
that the bond has been authenticated, has been duly issued, and is entitled to
the security set forth in this contract.
4. Interest shall be paid on January 1 and July 1 of each year, beginning
July 1 of the present year, and payment shall be effected against the surrender
of the corresponding coupons. Such payments shall be made by the fiscal
agent hereinafter mentioned, at its office in the city of New York.
5. The bonds shall mature January 1, 1944, and those not then amortized
shall be paid at par. The bonds shall be amortized half yearly on January 1
and July 1 of each year, the first half yearly amortization to take place on
July 1 of the present year. The amortization shall be effected with the balance
of the half yearly fund hereinafter referred tof after providing for the service
of interest , corresponding to the then current semester. Such amortization
shall be effected by direct purchase in the market by the fiscal agent, who is
hereby authorized to acquire bonds to be amortized at the then current market
prices, making purchases from time to time in its discretion, and to pay therefor
up to 107% per cent of their face value, plus accrued interest to the date of
purchase. ,'Such interest shall be paid for account of interest and not for
account of amortization. If it should not be possible to apply all of the available amortization money to the purchase of bonds during each semester before
Jure 10 and December 10 of each year, the fiscal agent in New York shall hold
a drawing within the following five days to determine by lot tlie bonds to be
amortized. Such drawing shall be held in a manner usual in the city of New
York as determined by the fiscal agent. The result of the drawing shall he
set forth in a certificate to be prepared in quadruplicate, the fiscal agent retaining one copy, and remitting one to the 'trustee, another to the council and
another to the Minister of Finance of Peru. The bonds drawn shall be paid
on the following interest-payment date at the rate of 107% per cent of their
face value, plus interest to that date on interest account.
6. By advertisements published in English in a daily newspaper of general
circulation twice within a period of eight days in the city of New York, designated by the fiscal agent (the first publication to be made not less than 10 days
before the date fixed for payment), the holders of the bonds drawn sball be
notified of the place where and day when the principal of the drawn bonds shall
be paid; and said advertisements shall state the numbers of the bonds drawn.
The bonds acquired in the market for amortization shall cense to bear interest
from the date of their purchase, and all unmatured coupons thereto attached
shall be canceled; bonds drawn for amortization shall cease to bear interest
from the date designated for their amortization.
Coupons paid and bonds amortized shall be duly annulled by the trustee and
shall be sent by it to the council together with unmatured coupons which shall
also be annulled.
7. As security for the payment of tlie principal of the bonds, of the premium
thereon, and of the interest, and as security for the other obligations set forth
in this contract, the Province constitutes a first mortgage on the following real
property belonging to it:
(a) General slaughterhouse of Callao with an area of 10,000 square yards,
the first property record of which appears at folio 539 et seq. of the property
registry, liber 5, in the registry of real property of Callao.
-SALE OP FOREIGN BONDS OR SECURITIES
1483
(&) Market of the city of Callao fronting on Lima Street, now Saenz Pefia
Avenue, with an area of 12,340 square meters, 15 square decimeters, occupying
an entire block, the first property record of which appears on folio 5S7 of the
property registry, liber 5, in the registry of real property of Callao.
(c) Two-story building situated at the corner of Teatro and Colon Streets,
with numbers 19 to 35 on the former and numbers 27 to 33 on the latter, recorded on folio 203 of liber 3 of the registry of real property of Callao, its area
being 2,178 square meters, G9 square decimeters.
(d) Real property used for the refuse and garbage department and municipal
disinfecting station with four fronts, on Constitution, Ayacucho, Junin, and
Manco Capac Streets, registered at folio 209 of liber 8 in the registry of real
property of Callao, in which record it appears with an area of 4,752 square
meters, 25 square decimeters hut its real and actual area is even greater and
such real area will be recorded by the council in the registry in accordance with
the procedure provided by law.
(e) Real property on which the municipal theater is located, situated in the
second lot of Teatro Street and having numbers 4S, 50, and 52, and adjoining
property Nos. 54 and 50 on the same street, which together with the theater
form a single piece of real property, recorded at folio 97 of the property registry
liber G of the registry of real property of Callao.
( / ) Real property known as machinery house situated to the south of the
customhouse of Callao, with an area of 15,090 square meters, recorded at folio
277 of the property registry, liber 13. of the registry of real property of Callao.
The mortgage so constituted is a first mortgage and is imposed on each piece
of real estate for the full amount of the bond issue of $1,500,000 with interest'
and premium, and to secure the other obligations of the Province hereunder,
and includes in each piece of real property the area, building, free spaces, uses,
customs, easements, and other rights thereto appertaining without reservation
or limitation, and without the right to exclude therefrom at the time of foreclosure, anything whatever then existing, because of its having been placed or
constructed thereon after the making of the present contract.
The Province expressly agrees that in case the general slaughterhouse, the
market or the municipal theater should be transferred to another locality, the
new buildings and pieces of real property where said municipal dependencies
may be installed shall be mortgaged in the same manner as herein stipulated
for the security of the bonds of this issue. It is also expressly agreed that in
case the council should desire to exchange for other real property any of said
parcels of real property, the slaughterhouse, market or municipal theater, the
new properties taken in exchange shall have an estimated value equal to or
greater than the parcels now mortgaged and given in exchange; and for such
exchange it shall be necessary to have in the contract the consent and intervention of the trustee as representative of the bondholders, and the new parcel
of real property so acquired by exchange shall be mortgaged as security for the
bonds of this issue in the manner herein stipulated. For the purposes referred
to, the Province shall deliver to the trustee a certificate signed by the two
syndics of the council and approved by the manager of the depositary in Peru
as hereinafter described, stating the true values of the properties proposed to
be exchanged, and in such case, the trustee shall accept such certificates as
sufficient proof of such values and ground for consent to the exchange without
any obligation on its part to make investigations or to obtain any other
appraisal. Upon so giving its consent to the contract of exchange the trustee
is hereby authorized on behalf of the bondholders, to cancel the mortgage on
the real property which shall cease to belong to the Province by virtue of the
exchange.
Until the bonds of this issue shall be totally and completely canceled, the
Province will keep all of said properties and buildings in repair, and will not
enter into any contract nor do any act which will diminish or in any manner
unfavorably affect the securities constituted by this contract.
Until the bonds of this issue shall be completely canceled, or provided for,
and from the date of the execution of the present contract, the Province agrees
to keep insured against fire and in insurance companies of good standing, the
buildings constructed on the mortgaged premises for the full value thereof. In
case of loss, the council shall immediately advise the trustee and the fiscal agent
thereof and shall collect the insurance. The sum so collected shall be deposited
in the hands of the depositary in Peru with the option to the council to have
the same added to the amortization moneys for the current semester, or to apply
it to the reconstruction of what has been destroyed, or to the acquisition of new
1484
SALE OF FOREIGN BONDS OR SECURITIES-
real properties. Until the Province shall exercise such option the amount referred to shall remain in the hands of such depositary as additional security for
the bonds. In case the council should elect to add said amount to the amortization moneys, such depositary shall pay the amount referred to to the fiscal
agent so that the latter may add the same to the then current sinking fund.
In case the council desires to invest the sums so collected in new construction,
council shall file with the trustee and with the fiscal agent a certificate containing the corresponding project signed by the syndics of the council and approved
by the manager of the depositary in Peru which document shall contain an outline of the proposed new construction and be accompanied by drawings and
plans signed by the architects and constructors. Such filing shall be sufficient
to authorize the fiscal agent through depositary in Peru to pay against vouchers approved by the syndics of the council all weekly accounts representing
laborers' wages and material used to the extent of the sums so collected. On
completion of the new building and on making the respective application for
inscription in the registry of the properties, it shall be stated that the new
building replaces the former and is hypothecated under the same terms and
conditions as set forth in the present mortgage to the extent of $1,500,000, withinterest, premium, and other expenses. If the value of the new construction
should be greater than the amount retained in possession of the depositary in
Peru derived from insurance, the excess shall be supplied directly by the council
through the payment of the first weekly pay rolls for material and wages so
that in any case the new construction will be completed and finished by means
of the money derived from the insurance. In case the council desires to apply
the sums so collected to the purchase of new proi>erties, the council shall file
with the trustee and with the fiscal agent a certificate containing the project
of purchase signed by the syndics of the council and approved by the manager
of the depositary in Peru, and such filing shall be sufficient authority to authorize the fiscal agent through the depositary in Peru to pay from the sums so
collected the purchase price set forth in the corresponding contract, which shall
constitute a mortgage on the property for the total of $1,500,000. together with
interest, premium, and other expenses on the same terms and conditions as the
mortgage constituted by the present document, which said contract shall be
recorded in the proper mortgage registry. Neither the trustee nor the fiscal
agent nor the depositary shall be responsible for the application of the sums sa
collected and paid out. The new property acquired by the council shall be purchased and acquired free of all other mortgages, censos. capellanias, and any
other lien, act, or contract in limitation of ownership, so that the mortgage
constituted as security for the said issue may be a first mortgage.
The Province agrees immediately to record this instrument in the proper
mortgage registry and to send to the trustee in New York a certificate of the*
registrar, duly authenticated by a United States consul or vice consul, evidencing such record. Even before the receipt of such certificate, the trustee is hereby authorized to authenticate the bonds upon receiving from the manager of the
depositary in Peru, or from any other bank in Lima which the fiscal agent may
designate, a cablegram advising it that said record has been made.
8. In addition to the mortgage guarantee referred to in the preceding clause,
the Province grants a first lien on and pledges as securitv for the bonds of this
issue, interest and premium thereon and its other obligations hereunder, all
and every one of the dues, taxes, rights, and other revenues receivable by it,
specifically set forth in the attached list designated by the letter C and called
" Revenues of the Province given in pledge of the issue." Said pledge shall also
apply not only to said revenues but also to such other revenues, taxes, or imposts of the Province as may be hereafter created until the total amount of all
pledged revenues calculated upon the collections of the preceding calendar year
shall be at least equivalent in Peruvian pounds at the then rate of exchange to
$350,000 in American gold per annum, such revenues, taxes, or imposts being
covered by said pledge from the moment of their creation. In case thereafter
the pledged revenues, taxes, and imposts shall in any calendar year fail to
produce at least the equivalent in Peruvian pounds at the then rate of exchange'
of $850,000 American gold per annum then said pledge shall also apply to all
other revenues, taxes, or imposts of the Province thereafter created until theannual yield of the total pledged revenues shall again be at least equivalent in
Peruvian pounds at the then rate of exchange to $350,000 in American gold per
annum. The council at the end of each year shall send a statement to the fiscal
agent showing the amounts of the pledged revenues collected during that year
as well as the aggregate income and expenditures of the Province.
-SALE OP FOREIGN BONDS OR SECURITIES
1485
9. The Province declares that tlie issue to which the present Instrument,
refers constitutes its first anil principal debt and obligation, for which the properties and rights mentioned in clauses 7 and 8 are specifically encumbered, and
that such properties and rights are not encumbered in favor of any debt, obligation, act or contract limiting ownership, inasmuch as its only debts of such
nature consist of Lp. 48,000.0.00 more or less owing to the Banco del Peru y
Londres, as balance of the loan of Lp. 100,000.0.00 and Lp. 7,000.0.00 more or
less owing to the former Conipanfa llecaudadora fie Impuestos as balance of
the loan of Lp. 14,000.0.00; the Province agrees that said two debts will immediately be canceled with part of the proceeds of the sale of the bonds.
The Province covenants that while any bonds of the present issue remain
outstanding, all and every one of the revenues given in pledge will continue in
effect, and that it will make no change, modification, or alteration in any of
said pledged revenues which might cause a reduction of the total amount of
all pledged revenues calculated on the collections of the preceding calendar
year below the equivalent in Peruvian pounds at the then rate of exchange of
$350,000 American gold per annum, and that it will not grant terms of periods
of grace for the payment of the revenues, taxes, or imposts and other revenues
given in pledge.
While any bonds of this issue remain outstanding and unprovided for, the
Province shall not make any contract for advances or loans on account of the.
revenues given in pledge, nor any other agreement or contract which may imply
a limitation of the free right it now has to collect and receive the said revenues,
taxes, and imposts*in the manner and on the conditions to-day existing, under
penalty of nullity and of having all unpaid bonds declared matured as provided;
in clause 15.
10. The Republic of Peru constitutes itself guarantor of and joint and several
obligator with the Province and as such guarantees and jointly and severally
obligates itself for the punctual payment of the interest and principal of the
bonds and of the above-mentioned premium of 7*4 per cent thereon in the
manner agreed, and to that end it pledges its full faith and credit. In order,
that this guarantee and obligation shall appear on each bond, the Republic will
cause the form of guarantee and obligation referred to in clause 3 to be indorsed and signed on each bond. The Republic further obligates itself to devote
from its general revenues annually the sum of Lp. 24,000.0.00 in monthly payments of Lp. 2,000.0.00 each and to include this as an item in its general budget
during tlie life of the Issue, and until its complete cancellation, without prejudice to its general liability and obligation with respect to the total of the issue
as guarantor and joint and several obligor. Such sum of Lp. 2,000.0.00 per
month shall be deposited by the Republic monthly beginning June 1, 1927, and
from and after that date the Republic shall on the 1st of each month deliver
that amount to the depositary in Peru for account of the fiscal agent, in order
that the same may be used for the service of interest and amortization.
11. The Government of Peru which hns charge of the collection and receipt
of all the revenues of the Province pledged for the issue, and as to present
revenues, specified in the appended list mentioned in clause 8, and which
will take charge of the collection and receipt of any other revenues, taxes,
or imposts of the Province hereafter created—to which the pledge referred to
in clause 8 may apply—will deposit, as they are collected tlie entire proceeds
of such revenues, taxes, and Imposts during each month, beginning June 1 of
the present year, with the depositary In Peru; as representative of the fiscal
agent in New York, until the sums so deposited during such month, shall
amount to the sum of $13,750 American gold, at the rate of exchange on New
York current on the date of the last deposit. If in any month the sums so
deposited do not aggregate the said amount then the deficiency shall be made
up from the proceeds of such revenues, taxes, and imposts received during the
months next succeeding. After the deposit in each month of the said amount
and of any additional amounts necessary to make up the deficiencies in similar
deposits for prior months, the revenues later collected by the government in
each month shall remain at the disposal of the council. Said sum of $13,750
American gold shall include what the Republic is obligated to pay for its
own account in accordance with the preceding clause, but it is nevertheless
specially agreed that without prejudice to the guaranty and joint and several
obligations of the Republic and the obligation undertaken by it to pay Lp.
2,000,0.00 monthly in accordance with the preceding clause, all the revenues
appertaining to the Province set forth in Appendix O, hereto and all revenues
hereafter created to which the pledge referred to in: clause 8 may apply are
1486
SAIIB OF FOREIGN" BONDS OR SECURITIES
encumbered and shall be available for payment to and deposit with the depositary in Peru of the said total monthly sum of $13,700; so that in any case
said depositary shall in each semester have received the sum of $S2,500 for the
service of amortization and interest, without prejudice to the delivery upon
payment for the bonds of a like amount to the fiscal agent in New York to be
retained by it as a reserve and guarantee fund as hereinafter stipulated.
The amounts so deposited with the depositary in Peru shall be remitted by
the latter to the fiscal agent in New York at the end of each quarter in
sufficient time to place the total amount required for the payment of the
semiannual interest and amortization on July 1 and January 1 in the hands
of the fiscal agent in New York at least 30 days prior to such dates—that
is to say, the said quarterly remittances shall be in the hands of the fiscal
agent in New York on March 1, June 1, September 1, and December 1 of each
year. With respect to the moneys required for the service of the interest and
sinking fund of the loan, the fiscal agent shall allow the Province on such
moneys received by it in New York, interest at the rate of 2 per cent per annum
from the date of receipt of such moneys up to 15 days before the semiannual
coupon and sinking fund date for which such moneys shall have been remitted,
the moneys after such 15 days to be free of interest in its hands as above.
With respect to the moneys in the above mentioned reserve fund, it shall semiannually allow the Province on such moneys held by it, interest at a rate of
1 per cent less than the average rate for the previous 6 months for 6 months'
prime commercial paper offered in the city of New York. All sums lying
with the fiscal agent may be treated by it as a general deposit. The fiscal
agent shall be paid a sum equal to one-eighth of 1 per cent on all amounts
disbursed by it for principal, premium, and interest. The fiscal agent shall
also be entitled to prompt reimbursement, vouchers attached, for all expenditures reasonably made by it from time to time in connection with its functions
as fiscal agent.
In case, by reason of variation in the rate of exchange, the amounts deposited
with the depositary in Peru should not be sufficient to permit that depositary
to place quarterly in the hands of the fiscal agent in New York, the sum of
$41,250, the amount lacking shall immediately be supplied by the Province or
the Republic.
12. In case the Government of Peru or the Province should entrust a corporation with the collection of its revenues, they shall include in the respective
contract a provision requiring such corporation to obligate itself to make, for
account of the Government of Peru and of the Province, the deposits of money
referred to in the preceding clause.
13. The funds received by the fiscal agent In New York in accordance with
the provisions of the preceding clauses shall be applied by the latter on the
proper dates to the payment of interest and to the amortization of bonds,
either by purchase in the market or by drawings, as aforesaid.
The Republic of Peru as guarantor and joint and several obligor and the
Province in its own right each reserves to itself the right to make special
redemptions of the whole or part of the issue, on any interest payment date, at
107% per cent and accrued interest, upon at least 45 days* written notice to the
fiscal agent, and by depositing with the fiscal agent in New York at least 33
days before the proposed redemption date, the funds required for that purpose.
If it should be proposed to redeem less than all of the bonds then outstanding,
such notice shall state the amount of bonds to be redeemed, and the bonds
so to be redeemed shall be determined by lot, drawings to be made as provided in clause 5. Notice of intention to redeem with the numbers of the bonds
drawn, shall be given by publication as provided in clause G, except that such
publication shall be made three times prior to the redemption date, and the first
publication shall be not less than 30 days before such date.
The fiscal agent is not obliged to make any advance or provision of funds
for the service of interest and amortization or for its expenses incurred in its
functions as fiscal agent, all of tfhich shall be effected only with money previously delivered to it in accordance with the stipulations of the foregoiug
clauses.
14. From the proceeds of the sale of the bonds there shall be set aside in
the first place the amount necessary to cancel the debts of the Province
mentioned in clause 9.
Furthermore, from the same proceeds of the sale of the bonds there shall
be deposited with the fiscal agent in New York the amount of $82,500 American gold as a reserve and guaranty fund for the service of interest and
-SALE OP FOREIGN BONDS OR SECURITIES
1487
amortization. This fund shall always remain on deposit with the fiscal agent
in New York and if it should at any time be reduced (because of the failure
of the fiscal agent to receive from the Province or the Republic at the proper
time the amount required for the service of amortization and interest, and
because as a consequence thereof, the fiscal agent has used such guaranty
and reserve fund to cover such services), there shall be deposited immediately
with the fiscal agent the amount required to restore and cover said total of
$82,500 American gold, which full amount shall always and constantly remain on
deposit with the fiscal agent and without prejudice to the continuance of the
regular deposits for the service as indicated in clause 11.
Furthermore, from the proceeds of the sale of the bonds there shall be
retained in the hands of the fiscal agent in New York an amount equal to
the service of the loan due on the next succeeding June 1.
The balance of the proceeds of the sale of the bonds remaining after the
setting aside of the amounts specified in this clause and after all other expenses
shall have been paid, shall be applied by the council to the following works:
1. Increase of the water supply for the city af Callao.
2. Placing of water and drainage pipes in the serttes of Callao where none
are at present.
3. Paving with asphalt concrete at least 50,000 square meters of street.
4. Construction of at least 30,000 square meters of hydraulic concrete sidewalks.
5. Construction of 200 more or less small houses for employees and laborers.
6. Acquisition of modern material for sprinkling and sweeping the city and
collection of garbage.
7. Construction of a furnace for cremation of garbage with a minimum
capacity of 30 tons.
8. Construction of a city hall and of other works of adornment and embellishment.
15. In case the Republic or the Province should fail to make punctual payment of interest and amortization on the dates stipulated or should fail in
complying with any other obligation set forth in this contract, and if such
failure or omisison should continue for thirty days, the trustee may, if it deems
proper, and upon written request of the holders of 25 per cent of the bonds
outstanding shall declare all unpaid bonds matured, and by virtue of such
declaration said bonds shall thereupon mature and become immediately payable
at 107% per cent of their face value with interest accrued to that date. Ifc
such case, the trustee may, if it considers advisable, enforce, in accordance with
the laws of Peru, the mortgages and pledges constituted by this instrument,
and the fiscal agent may, but is under no obligation to, appoint a company
or depositary to collect the taxes, dues, rights, and other revenues pledged
under article 8 hereof and administer them for the benefit of the holders of
bonds issued hereunder, including the meeting of the costs of such collection
and administration. On the written petition of bondholders representing at
least 25 per cent of outstanding bonds, the trustee (or any other trustee
appointed for that purpose as hereinafter provided in this clause) shall
proceed in the manner stated, but only after having received, to its satisfaction,
the amount required to cover its costs and expenses, including its own compensation, or after having recevied satisfactory security and indemnity therefor. In all cases referred to in this clause it is agreed that all expenses
caused by such proceedings, including the compensation and expenses of
the trustee, shall be for account of the Province and of the Republic.
Anything in this clause or elsewhere in this contract to the contrary notwithstanding, if in the opinion of the trustee it shall be necessary or desirable
or requested in writing by the bondholders representing a majority of outstanding bonds, the Province and the trustee shall join in the execution of all
instruments and agreements necessary to appoint any one or more individuals
or corporations, approved by the trustee, to act hereunder, whether as co-trustee
or co-trustees jointly with the trustee or as separate trustees hereunder. The
individuals or corporations so appointed, upon acceptance thereof in writing,
shall possess the rights and powers and be subject to the duties specified in
such appointment for the term therein designated.
In the event of a distribution of funds applicable to the said bonds by the
trustee after default, such funds shall be applied by the trustee: ( a ) to the
payment of such proportion as may be chargeable to the said bonds, of the
cost and expenses of any proceedings taken by the trustee, including reason92028—32—PT 3
15
1488
SAIIB
OF FOREIGN" BONDS OR SECURITIES
abte compensation of the trustee, its agents, representatives, and counsel, and
all expenses, liabilities, or advances made or incurred by tlie trustee in connection therewith, and of all fees and expenses of the trustee and of the fiscal
agent under this agreement, (&) to the payment of overdue interest on all said
bonds then outstanding and unpaid interest on such overdue interest at tlie
rate of 7 % per cent per annum and, (o) to a pro rata payment computed in
United States gold dollars of principal on all outstanding bonds. Any partial
payments of interest or principal shall be noted upon the coupons or bonds
respectively and any balance remaining due and unpaid shall continue to be
obligations of the Province and the Republic.
16. The trustee in its own name or by its nominee shall represent all the
bondholders for all the purposes of the present contract and is empowered to
enforce judicially or extrajudicially compliance with the stipulations of this
instrument, but the trustee shall not be obliged to act as such representative
nor will it incur liability by reason of its failure so to act.
17. The Central Union Trust Co. of New York is hereby appointed trustee
and the firm of J. & W. Seligman & Co. is hereby appointed fiscal agent, each
with the powers, rights, and duties set forth in this instrument and the instrument of acceptance executed by them, it being understood that such appointmeints shall take effect from the moment when said Trust Co. and said firm
accept said offices. Such acceptances may be by separate document to be
executed in New York, which will be sent to tlie council to be attached to
and made a part hereof. Said acceptances shall be executed substantially in
the form attached hereto designated as "Appendix D," and made a part hereof,
and all the terms and provisions thereof shall be binding upon the parties
hereto and upon the holders of the bonds at any time issued and outstanding
with the same force and effect as if said acceptance Appendix D were fully
set forth herein. The Lima branch of the Royal Bank of Canada is hereby
appointed depositary in Peru. All the stipulations of the present contract
relative to said trustee, to said fiscal agent, and to said depositary in Peru,
respectively, shall be understood as applying to the corporation Central Union
Trust Co. of New York and to the firm of J. & W . Seligman & Co. and to the
Lima branch of the Royal Bank of Canada, and shall be considered to continue
in force whatever be the modifications which said corporation or said firm
or said Lima branch may undergo in personnel or legal structure. The fiscal
agent may at any time and from time to time appoint a substitute depositary
in Peru to assume the duties and functions hereunder of said Lima branch of
the Royal Bank of Canada, such new depositary to be satisfactory to the
Province. The • depositary in Peru shall allow such interest on moneys of
the Province on deposit with it as shall be agreed upon between it and the
council.
18. Pending engraving and execution of the definitive bonds, the Province
shall issue and the Republic shall guarantee and obligate itself on temporary
bonds in English substantially in the same form as the definitive bonds, bat
only with one or two coupons. Neither said temporary bonds nor their coupons
shall require any facsimile signatures engraved or printed or any seal, it being
sufficient that the bonds and the guarantee and obligation endorsed thereon be
signed by the consul general of Peru in New York in representation of the
Province and of the Republic, respectively, and that the coupons bear the
printed name of said official. Ample and sufficient power for this purpose is
hereby granted to said consul general. Said temporary bonds shall be authenticated by the trustee in the same manner as the definitive bonds and may be
issued in the denominations indicated by the Frank Co. The temporary bonds
shall be exchanged for definitive bonds as soon as the latter are ready ana
upon making the exchange the temporary bonds shall be canceled by the
trustee in the presence of the consul general of Peru in New York or a notary
public of the State of New York. The definitive bonds shall be engraved ia
the form required by the New York Stock Exchange to permit their listing on
that exchange, and shall be prepared as soon as possible and in any case before
the 1st day of September of the present year. Upon being executed by the
Province and by the Republic in the form aforesaid they shall be delivered to
the trustee to be authenticated by the latter and exchanged for temporary
bonds. The temporary bonds upon being authenticated by the trustee shall be
delivered by the latter in accordance with the terms of the contract of purchasesale of the bonds and such instructions as the council may give. It is expressly agreed that neither the trustee nor the fiscal agent, nor the purchasers
of said bonds assume any obligation and that they shall not at any time o
-SALE OP FOREIGN BONDS OR SECURITIES
1489
in any manner be responsible for tlie application given by tlie council to the
balance of the purchase price of the bonds delivered to it.
19. The principal, premium, and interest represented by the bonds and coupons of the issue shall be free in Peru from all kinds of imposts, taxes, and duesF
now existing or hereafter created whether local or national and whatever betheir nature, without any reservation or exception.
20. The council shall be liable for the payment of all the costs of the present contract, the cost of recording mortgages, the cost of a notarial copy for
the trustee, the judicial and administrative costs, the fees of the lawyers of theFrank Co., and the trustee in Lima and in the United States, the compensation of the trustee and of the fiscal agent, the printing of the temporary airetf
engraving of the definitive bonds, cable expenses, insurance and postal remittances of the bonds, costs and fees for the listing of the bonds in New York,
whether in the official exchange, or in the market in lists outside of the official exchange, costs of publication of advertisements and other costs for the
payment of interest, drawings and amortization, and any other expenses until
the present contract shall have been totally and definitely perfected and the
bonds of the issue shall have been totally and definitely canceled or provided
for.
21. In case of theft, loss, mutilation, or destruction of any bond or of its
coupons, duplicates shall be issued in place thereof upon the receipt by the Republic, the Province, and the trustee of the usual proofs and guarantees insuch cases and upon observing the usual procedure for that purpose.
22. The Province declares that the loan represented by the said bonds constitutes a direct debt and obligation of the Province independently of the aforesaid guarantees, and the Province hereby pledges its full faith and credit f o r
the punctual payment of the principal, premium and interest of the said loan,
and of all amounts relating to its service and for compliance with all and
every one of the obligations set forth in this contract
23. This contract is executed in the English and Spanish languages, but the
English text shall govern in the interpretation of its terms. For the purpose
of legally constituting and recording the mortgage herein refewed to, a Spanish
copy of this contract or so much of it as the parties may agree, or a separate
mortgage instrument if preferred by the Province, shall be executed before a
notary and placed on record at tlie expense of the Province.
24. The Province, the trustee and the fiscal agent and their respective
successors, each in its discretion, may deem and treat the bearer of any bond
or coupon as the absolute owner thereof, whether such bond or coupon shall be
overdue or not, for the purpose of receiving payment thereof and for all other
purposes whatsoever, and neither the Province, the trustee nor the fiscal agent
nor their respective successors, nor any of them, shall be affected by any notice
to the contrary.
Lima, April 25, 1927.
[SEAL.]
[SEAL.]
[SEAL.]
Fco.
Director
QUIROZ
VEGA,
General of
Finance.
EDUARDO FREUNDT,
In charge of
disbursements.
O . VILLAMONTE,
In charge of
revenues*
ALVIN H . FRANK & Co.
B y FRANCIS F . RANDOLPH,
Attorney
in fact»
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU,
City of
Lima.
I, George A. Makinson, consul of the United States of America, at CallaoLima, Peru, duly commissioned and qualified, do hereby certify that F. Quiroz
Vega, whose true signature is subscribed and affixed to the attached document,
was on April 25,1927, the day of the date thereof, Director General de Hacienda
(Director General of Finance), of Peru, and that Eduardo Freundt, whose true
signature is subscribed and affixed to the attached document, was on April 25v
1927, the day of the date thereof, Sindico de Gastos del Concejo Provincial
del Callao (Sindyc of Expenses of the Provincial Council of Callao, Peru), and
that 0 . Villamonte, whose true signature is subscribed and affixed to the
1490
SAIIB
OF FOREIGN" BONDS OR SECURITIES
attached document was on April 25,1927, the day of the date thereof, Sindico de
Rentas del Concejo Provincial del Callao (Sindyc of Incomes of the Provincial
Council of Callao, Peru), and that their respective signatures and seals of
office are worthy of all due faith and credit.
In witness whereof I have hereunto set my hand and official seal of office, at
Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
[SEAL.]
GEO. A . MAKINSON,
Consul of the United States of America at Callao-Lima, Peru.
Service No. 688. Fee §2.
STATE OP NEW YORK,
County of New York, ss:
On this 17th day of May, 1927, before me came Francis F. Randolph to me
known to be the individual described in a certain power of attorney executed in
the City of Los Angeles, State of California, on the 7th day of March, 1927,
by Alvin H. Frank & Co., and said Francis F. Randolph acknowledged that he
executed the foregoing instrument on behalf of Alvin H. Frank & Co. pursuant
to authority granted to him in said power of attorney.
CHARLES STEXOEB.
Notary Public Kings County, No. 562, Register No. 8670.
Certificate filed in New York County, No. 1650, Register No. 8170A.
Commisison expires March 30, 1928.
STATE OF NEW YORK,
County of New York, ss:
I, William T. Collins, clerk of the County of New York, and also clerk of the
supreme court for the said county, being a court of record, do hereby certify,
that Charles Steiger before or by whom the annexed instrument was signed
was at the date thereof a notary public for the county of New York, duly
appointed and sworn, and that full faith and credit are due to all his official
acts as such notary public. And further, that I am well acquainted with the
handwriting of such notary public and verily believe that the signature to the
annexed instrument is genuine.
In testimony whereof I have hereunto set my hand and affixed the seal of
the said court and county the 18th day of May, 1927.
[SEAL.]
WILLIAM T . COLLINS,
Clerk
PROVINCE OP CALLAO, PERU, GUARANTEED A?TD SECURED SINKING FUND 7 % P ®
CENT GOLD BONDS
[Form of bond]
Due January 1, 1944.
The Province of Callao (hereinafter called the Province) for value received
promises to pay to the bearer of this bond on the 1st day of January, 1944, the
sum of $
($
) in gold coin of the United States of America, of or
equal to the standard of weight and fineness existing January 1, 1927, at tne
office of J. & W. Seligman & Co. (hereinafter called the fiscal agent), in the
borough of Manhattan, city of New York, State of New York, and to pay interest thereon at the rate of 7 % per cent per annum, in said United States poift
<;oin, semiannually, on the 1st day of January and July of each year, according
to the tenor and effect of the coupons hereto attached, upon presentation ana
surrender thereof as they severally fall due.
f
Principal, premium, and interest shall be paid in times of war, as well as oi
T>eace, and irrespective of the residence or nationality of the holder, without
deduction for any taxes now or at any time hereafter imposed, levied, or eoi^
leeted by the Republic of Peru, or by the Province of Callao, or by any
authority thereof or therein, and whether such taxes be on this bond or upon
the income derived therefrom or upon the holder by reason of his ownership or
possession thereof.
.
This bond is one of an authorized issue of bonds for an aggregate princlp^.
amount of $1,500,000 issued by the Province under authority (a) of a provincial
resolution passed by the council of the Province on February IS and March I*'
-SALE OP FOREIGN BONDS OR SECURITIES
1491
1927; (&) of a supreme resolution dated April 25, 1927; and (c) of law No.
5801 enatced by tlie Peruvian congress, and under and in pursuance of a trust
and fiscal agency agreement dated April 25, 1927, between the Province, the
Republic of Peru, and Alvin H. Frank & Co., and accepted by the Central Union
Trust Co. of New York, as trustee, and by J. & W . Seligman & Co., of New York,
as fiscal agent, by instrument dated April 25, 1927; and secured by a first mortgage upon the properties of the Province in the city of Callao and by a first
lien and charge upon certain revenues of the Province as specified in said trust
and fiscal agency agreement For a statement of the nature and extent of the
security, the rights of the holders of the bonds and coupons issued pursuant
thereto, and of the trustee and fiscal agent with reference to such security, and
tlie terms and conditions upon which said bonds are issued and secured, reference is hereby made to said trust and fiscal agency agreement and said instrument of acceptance thereof, to all of the terms and provisions of which the
holder hereof consents by acceptance hereof.
The Province declares this bond to be its direct liability and obligation; and,
for the prompt payment of this bond, with interest, in accordance with its
terms and of the coupons attached thereto, the full faith and credit of the
Province are hereby irrevocably pledged, irrespective of any security therefor.
The Province has agreed in and by said trust and fiscal agency agreement,
and as therein more fully set forth, that there shall be remitted to the fiscal
agent for service of the bonds during each six months the sum of $S2,500 for
interest and sinking fund, and that any part of such amount in excess of the
amount required for interest shall be used for the purchase of bonds at current market prices not exceeding 107% per cent and accrued interest, or for
redemption of bonds by lot at said price.
This bond is subject to redemption on any interest payment date, either
through the sinking fund or otherwise, at 1 0 7 % per cent of the par value
thereof, and accrued interest, upon publication of notice of redemption in a
daily newspaper of general circulation printed in the English language and
published in the borough of Manhattan, city and State of New York. Such
notice shall be published, in case of redemption through the sinking fund,
twice in a period of 8 days, the first publication to be not later than 10 days
prior to the date of redemption and in case of redemption other than through
the sinking fund, three times, the first publication to be not later than 30 "days
prior to the date of redemption; all in accordance with the provisions of the
trust and fiscal agency agreement above mentioned.
In the event that default shall happen the principal of the bonds may be
declared due and payable in tlie manner and subject to the conditions provided
in said agreement
It is hereby certified, recited, and declared by the Province that all acts,
conditions, and things required to be done, to happen, or to exist prior to th*
issuance of this bond, have been done, have happened, and exist in due and
strict compliance with the laws and constitution of the Republic of Peru
and of the Province of Callao.
This bond shall pass by delivery, and payment thereof to bearer shall fully
discharge the Province in respect of the principal and interest therein
mentioned.
This bond shall not be valid until it shall have been authenticated by the
signature of the trustee to the certificate hereon endorsed.
In witness whereof, the Province of Callao has caused this bond to be
engraved with the facsimile signature of two of its syndics, and to be signed
by the consul general of the Republic in the city of New York duly authorized
for that purpose, and the interest coupons bearing the engraved facsimile
signatures of said two syndics to be hereunto affixed.
Dated January 1, 1927.
[SEAL.]
PROVINCE OP CALLAO,
By
,
Consul General of the Republic of Peru in the City of
New York, duly authorised representative of said Province.
[Trustee's certificate)
This bond is one of the bonds described in the trust and fiscal agency agreement herein referred to'.
By
CENTRAL UNION TRUST Co. op NEW YORK,
.
Trustee.
1492
SAIIB
OF FOREIGN" BONDS OR SECURITIES
[Form of coupon]
On the
day of
, 19—, unless the bond hereinafter mentioned
shall have been called for previous redemption and payment thereof duly provided for, the Province of Callao will pay to the bearer of this coupon at the
office of J. & W . Seligman & Co. (fiscal agent), in the borough of Manhattan,
city and State of New York, the sum of $37.50 in gold coin of the United States
of America of or equal to the standard of weight and fineness existing January
1, 1927, without deduction for Peruvian taxes as specified in the bond hereinafter mentioned, being six months* interest then due on " Province of Callao,
Peru, guaranteed and secured sinking fund 7 % per cent gold bond " No.
.
Syndica of the Provincial Council
[Form of guarantee]
The Republic of Peru hereby guarantees, and jointly and severally with
the Province of Callao obligates itself for the punctual payment of principal,
premium, and interest of this bond on the dates when they respectively fall
due, and the punctual compliance by the Province of Callao with all and every
one of the obligations set forth in this bond; and to that end it pledges the full
faith and credit of the Republic.
In witness whereof, the Republic has caused this guarantee to be engraved
with the facsimile signature of its present Director General of Finance; to
be sealed with the seal of its ministry of finance; and to be signed in its
name by the consul general of Peru in New York, the 1st day of January, 1927.
Lima, April 25 of 1927.
[SEAL.]
F c o . QUXROZ VEGA,
Director
{SEAL.]
General of Finance.
EDUAROO FREUNDT,
Syndic in Charge of Disbursements.
[SEAX-]
O . VLLLA IF ONTE,
Syndic in Charge of Revenues.
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU,
City of Lima.
I, George A. Makinson, consul of the United States of America, at CaliaoLima, Peru, duly commissioned and qualified, do hereby certify that F. Quiroz
Vega, whose true signature is subscribed and affixed to the attached document,
was on April 25,1927, the day of tlie date thereof, Director General of Finance,
of Peru, and that Eduardo Freundt, whose true signature Is subscribed and
affixed to the attached document was, on April 25, 1927, the day of the date
thereof, syndic of expenses of the provincial council of Callao, Peru), and
that 0 . Villamonte, whose true signature is subscribed and affixed to the attached document was, on April 25, 1927, the day of the date thereof, Syndic
of incomes of the Provincial council of Callao, Peru), and that their respective
signatures and seals of office are worthy of all due faith and credit.
In witness whereof I have hereunto set my hand and official seal of office at
Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
[SEAL.]
Service No. 074. Fee, $2.
GEO. A . MAKINSON,
Consul of the United States of America at
Callao-Lima, Peru.
ISSUE OF BONDS OF THE PROVINCLVL COUNCIL OF CALLAO FOB
§1,500,000 UNITED STATES GOLD COIN
APPENDIX A
STATISTICAL INFORMATION OF THE PROVINCIAL COUNCIL OF CALLAO
The council declares that the population of the Province of Callao in a c c ?*jj
ance with the results of the latest census and the present data of the section
of statistics of the department of public development of the Republic, is estimated at more than 60,000 Inhabitants.
-SALE OP FOREIGN BONDS OR SECURITIES
1493
Tlie council likewise declares that the amount of the revenues received from
all sources and which appears in its annual budgets has been as follows:
Tear:
192 1
192 2
192 3
192 4
1925
192G
Lp.53, 31$. 3. 03
oS, GS5. 5. 41
63.104. 0.04
GS, 130. 0.02
74, 464. 2. 22
86,104. 9.40
The council likewise declares that the calculation made of its revenue for
the year 1927, is Lp.S4,027.3.59 including the amount of Lp.24,000.0 which
the Government of Peru will pay to assist the council in the service of amortization and interest of the bonds, gives a minimum total of Lp.108,027.3.59.
Lima, April 25, 1927.
Fco.
QUIREZ VEGA,
Director General of Finance.
EDUARDO FREUNDT,
In Charge of
[SEAL.]
Disbursements.
O . VILLAMONTE,
In Charge of
Revenues.
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU,
City of Lima.
I, George A. Makinson, consul of the United States of America, in and for
the district of Callao-Lima, Peru, duly commissioned and qualified, do hereby
certify that F. Quiroz Vega, whose true signature is subscribed and affixed to
the attached document, was on April 25, 1927, the day of the date thereof,
Director General of the Ministry of Finance of Peru, and that Eduardo Freundt,
whose true signature is subscribed and affixed to the attached document, was
on April 25, 1927, the day of the date thereof, syndic of expenses of the provincial council of Callao, Peru, and that O. Villamonte, whose true signature is
subscribed and affixed to the attached document, was on April 25, 1927, the day
of the date thereof, syndic of incomes of the provincial council of Callao, Peru,
and that their respective signatures and seals of office as such are worthy of all
due faith and credit.
In witness whereof I have hereunto set my hand and official seal of office, at
Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
GEO. A . M AKIN SON.
Consul of the United States of America at Callao-Limat Peru.
Serial No. 677. Fee, $2.
ANNEX
B
RESOLUTIONS OF THE COUNCIL, OF THE REPUBLIC OF PERU APPROVING AND AUTHORIZING THE CONTRACT FOR THE ISSUE OF BONDS AND THE PURCHASE SALE OF BONDS
AND THE CORRESPONDING LAW AUTHORIZING SALE
Resolution of the council.—Sessions, of the 18th of February and the 11th
of March of 1927.
The minute book of the sessions of the provincial council of Callao, for the
year 1927, on page 29, reads as follows: "Session of Friday, the 18th of Feb*
ruary, 1927, mayor, Dr. Carlos A* Roe presiding. In continuation the mayor
said that the council would proceed to discuss the basis of a loan of $1,500,000.
Be then proceeded to read the following report of the syndicate <here follows
inserted in the act, the report of the syndicate and the plan of the contract
which consists: Of a contract for a bond issue, called alike an agreement of
trust and fiscal agency, composed of 24 paragraphs, in which the bond and
coupon formula, material to the issue, forms an integral part in conjunction
with the guarantee formula of the Peruvian Government in Appendix A giving
a statistical report of the provincial council of Callao with information on the
1494
SAIIB
OF
FOREIGN"
BONDS OR SECURITIES
population of the Province and its revenues since 1921; an Appendix B in
which should be inserted, in the final contract, the ordinance approved by the
council, the ordinance approved by the Government, and the law authorizing it;
an Appendix C entitled 11 Revenues of the council given in pledge for the loan,"
in which all the revenues which the council collects under any* title are included ; an Appendix D, which contains the contract or document by virtue of
which the Central Union Trust Co., of New York, and J. & W . Seligman of
New York, respectively accept the office of trustee and fiscal agents, which
contract or document contains 15 paragraphs marked by letters from A to N,
inclusive; and a purchase-sale contract of bonds, to be subscribed by the firm
of Alvin H. Frank & Co., of the State of California, United States of North
America, containing 11 clauses.) After reading and discussing each one of
these clauses of the contract in reference and commenting upon them, these
were approved by a verbal vote in which the following took part; the mayor,
Fernandez, Villamonte, Freundt, Arana, Ferraro, MacLean, Morante, Pollard,
Raztto, Krasalja, and Tavolara; Messrs. Ego Aguirre and Castaneta reserved
their vote on. the grounds that they had not been able to study the matter
owing to their recent election to the council. It was then a quarter past 9 p. m.
In the same record book of the sessions of the provincial council of Callao,
corresponding to the present year of 1927, on page 84, there is an entry which
reads: " Session of Friday, March 11,1927: The Mayor, Sr. Dn. Carlos A. Roe,
presiding, the list of changes and additions to changes which the syndicate had
introduced in the proposed §1,500,000 loan project, were read. Dr. del Mar
considered in *his opinion it would be convenient before approving the changes
which had just been read that the syndicate should give some explanation of
this matter in order that those councilors who had not had an opportunity to
study the contract, should become acquainted with the reasons for the proposed
changes. The mayor read an explanation of the motives which induced the
syndicate to support the loan project. (Here follow in the minutes certain
opinions of the councilors and the complete list of changes which introduced and
inserted in the contract, given in the minutes of the session of February 18,
1927, leave the said contract and appendices in the same terms and conditions
as signed by the syndics of the provincial council of Callao with the same date
as that on which is signed this copy of the contents of the minutes of the session of the council). The mayor pointed out that it was necessary to authorize
the syndics to draw up and sign the contracts in final form, instead of making
them provisional, which would be done as soon as the supreme Government
approved the contracts previously mentioned and promulgated the respective
law authorizing them, also to obtain the corresponding acceptance of the contract, and authorizing opportunely, in conjunction with the Government, the
Peruvian consul in New York, to sign the provisional bonds, and to issue likewise the respective mortgage deed and to receive the value from the sale of
the bonds, in conformity with the agreement; and finally, in drawing up and
signing the final contract to introduce the necessary and indispesable changes.
This was passed unanimously.
LAW OF AUTHORIZATION NO. 5801 FBOII ANNEX B
ABTICLE 1. The executive power is authorized to guarantee jointly and severally with the provincial council of Callao and obligate Itself for the loan
projected by the said council up to the amount of §1,500,000. American gold.
ABT. 2. The interest of the said loan shall not exceed 7 % per cent per annum
and the rate of placing the loan shall not be less than 9 2 % per cent, to be
amortized in 17 years, being represented by bonds, the amortization price of
which shall.not exceed 107% per cent
ABT. 3. The said loan shall be guaranteed by a first mortgage on the real
property of the provincial council of Callao and the pledge of all or part of its
revenues existing or hereafter created; and in this case in order that the pledge
may be legally constituted, the legal precept shall not be necessary that the
pledge be and remain in possession of the creditor. The executive power is
authorized to obligate itself to pay monthly from the the general revenues of
the State, the sum of Lp. 2,000.0.00 on account of the service of amortization
and interest until the cancellation of the loan, for which purpose the corresponding annual item of Lp. 24,000.0.00 shall be included in the general budget
of the Republic.
-SALE OP FOREIGN BONDS OR SECURITIES
1495
ART. 4. The executive power is fully empowered to designate the official to
represent it in the respective contract with the provincial council of Callao and
to agree and stipulate with the lenders as to all the terms, conditions, and
details of the said loan and of all contracts and acts concerning the same, including its form, conditions, manner, procedure, and dates of payment, interest,
and amortization ordinary and extraordinary and, in general, all other points
relating to the loan contract ; and to approve and agree upon the application
to be given by the provincial council of Callao to the said loan, authorizing
the latter to apply the funds for the carrying out of the proposed public works
in accordance with the plans and estimates which will be drawn up in the
Ministry of Fomento, and which shall be charged against the special account
of the municipality of Callao.
ABT. 5. The loan, the bonds and coupons and all contracts and acts concerning the same shall be free of all kinds of imposts, taxes, and dues now existing
or which may be created.
Let this be communicated to the executive power for its necessary compliance.
Given in the Hall of Congress in Lima on the 11th day of April in the year 19*27.
E. de la Piedra, president of the senate; Jesus M. Salazar, president of the
chamber of deputies; M. D. Gonsalez. secretary to the senate; N. Perez Velasquez, secretary of the chamber of deputies. Accordingly let this be printed,
published, circulated and duly executed. Government Palace, Lima, on the
13th day of April, in tlie year 1927.
A . B . LEGUIA,
M . G . MASIAS.
SUPREME RESOLUTION OF APPROVAL
LIMA, April 25, 1D27.
In view of the contracts approved by the provincial council of Callao for the
execution of law No. 5S01, between the Republic, represented by the Director
General of Finance, Dr. Francisco Quiroz Vega; the Province of Callao, represented by its provincial council, and the latter by its syndics, Messrs. Otoniel
Villamonte and Eduardo Freundt; and Alvin H. Frank & Co., of the State of
California, in the United States of North America, represented by its vice president, Mr. Robert Edmund Moody; One for an issue of bonds for $1,500,000,
American gold, containing 24 paragraphs in duplicate in English and Spanish,
and the other for the purchase-sale of bonds, consisting of 11 paragraphs also
in duplicate, English and Spanish, for each part.
These contracts being in conformity with the requirements of law No. 5801:
It is resolved the above-mentioned contracts are approved, and especially
the joint and several guarantee of the Republic in favor of the Province of
Callao and the monthly payment of £2,000 Peruvian (Lp. 2,000.0.00), which
will be obligatory as long as this issue is in force and until its total cancellation.
The director general of finance is authorized to sign these contracts in the
name of the Republic and to carry out all other necessary acts; and the
Peruvian consul in New York is also authorized to sign the bonds and coupons
in the name of the Provincial Council of Callao and of the Republic.
Let this be published and registered. Seal of the President of the Republic.
MASIAS.
Lima, April 25, 1927.
F c o . QUIROZ VBGA,
Director
General of
Finance.
EDUABDO FREUNDT,
In Charge of
Disbursements.
O . VILLAMONTE,
In Charge of
Revenues.
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU, City of Lima.
I, GeoTge A. Makinson, consul of the United States of America, in and for
the District of Callao-Lima, Peru, duly commissioned and qualified, do hereby
eertify that F. Quiroz Vega, whose true signature is subscribed and affixed to
the attached document, was on April 25, 1927, the day of the date thereof,
director general of the ministry of finance, of Peru, and that Eduardo Freundt,
1496
SAIIB
OF FOREIGN" BONDS OR SECURITIES
whose true signature is subscribed and affixed to the attached document, was on
April 25, 1927, the day of the date thereof, sindyc of expenses of the provincial
council of Callao, Peru, and that O. Villamonte, whose true signature is subscribed and affixed to the attached document, was on April 25, 1027, the day
of the date thereof, sindyc of incomes of the provincial council of Callao, Peru,
and that their respective signatures and seals of office as such are worthy of
all due faith and credit:
In witness whereof I have hereunto set my hand and official seal of office, at
Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
[SEAL.]
GEO. A . MAKINSON,
Consul of the United States of America at
Serial No. 681. Fee §2.
Callao-Limaferu.
APPENDIX C.—REVENUES OF THE PROVINCE GIVEN IN PLEDGE OF THE ISSUE
Water, supplied to ships in the bay, less 10 per cent; water, domestic supply
and meters; water, for drainage; public lighting and garbage collecting;
rents of buildings and theater; ambulant sellers; gasoline stations; billiards
and dog collars; pawnshops; slaughterhouse; electric railway; peace courts;
goodwill of the market place; kiosk licenses; ballast, less 10 per cent; licenses,
less 10 per cent; railway lines and sidings; market place; alcohol transit tax;
fines; occupation of public ways, by cars; occupation of public ways, by materials; poles; weights and measures; advertising boards; shoe-cleaning stands;
pavements and sidewalks; temporary huts; examination of pigs; wheel-tax
plates; wheel tax, examination and chauffeurs* titles; wheel tax, railways;
ramada del aromito; excise on foodstuffs; retail liquor sales; drainage; fencing; shows, 5 per cent pertaining to council; unforseen revenue; interest; water
supply to ships, after deducting 10 per cent; ballast, 10 per cent of proceeds;
industrial licenses, 10 per cent of proceeds; wheel tax, 10 per cent of proceeds; pawnshops receipts; moving-picture films; unoccupied lands; gasoline;
property in ruinous condition; tax on house rents.
The names appearing on this list are precisely those which have been given
to the various dues, taxes, rights, and other revenues received by the council,
according to the budget for the whole of the year 1926.
Lima, April 25, 1927.
[Seal of the Director General of Finance.]
[Seal of the Syndic in Charge of Disbursements.]
[Seal of the Syndic in Charge of Revenues.]
Fco. QUIROZ VEGA.
EDUARDO FREUNDT.
O. VILLAMONTE.
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU,
City of Lima.
I, George A. Makinson, consul of the United States of America, in and for
the District of Callao-Lima, Peru, duly commissioned and qualified, do hereby
certify that F. Quiroz Vega, whose true signature is subscribed and affixed to
the attached document, was on April 25, 1927, the day of the date thereof,
director general of the Ministry of Finance of Peru, and that Eduardo Freundt,
whose true signature is subscribed and affixed to the attached document, was on
April 25,1927, the day of the date thereof, syndic of expenses of the provincial
council of Callao, Peru, and that O. Villamonte, whose true signature is subscribed and affixed to the attached document, was on April 25, 1927, the day
of the date thereof, sindico de rentas del Concejo provincial del Callao, Peru,
and that their respective signatures and seals of office as such are worthy of all
due faith and credit.
In witness whereof I have hereunto set my hand and official seal of office at
Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
[SEAL.]
GEO. A . MAKINSON,
Consul of the United States of America at Callao-Lima, Peru.
Serial No. 685. Fee, $2.
- S A L E OP F O R E I G N
BONDS
OR
SECURITIES
1497
APPENDIX D.—ACCEPTANCE OP TRUSTEE AND FIBCAI. AGENT
Whereas by instrument executed in the city of Lima, Republic of Peru, on
the 2th day of April, 1027, by and between the Republic of Peru, the Province of Callao, Peru, and Alvin H. Frank & Co., the said Province agreed to
make a bond issue of $1,500,000 and appointed the undersigned corporation,
Central Union Trust Co. of New York, as trustee, and the undersigned firm of
J. & W\ Seligman & Co. as fiscal agent of the said bond issue.
The said trustee and the said fiscal agent, each for itself and its successors,
hereby accepts tlie trusts and assumes the duties imposed upon them respectively by the said agreement but only on the following terms:
(a) As compensation for its services under the said agreement the trustee
shall be entitled to receive a fee of $1,550, payable $1,125 forthwith and the
balance of $425 in 17 equal annual instalments of $25 each on the 1st day of
January in each year beginning 1928; in case the entire issue should be redeemed before the end of 17 years, any unpaid balance shall immediately become due and payable. In case of default by the Province in the service of
the interest and sinking fund or otherwise under the said agreement, the trustee shall likewise be entitled to its expenses and a reasonable fee in connection
with any action it may take as representative of the bondholders.
ib) The fiscal agent and the trustee shall be entitled to prompt reimbursement for expenses, including fees of counsel, reasonably incurred or actually
disbursed under tlie said agreement.
(c) The trustee and the fiscal agent may become the owners of any of the
bonds with the same rights as any bondholder.
(d) All interest allowed the Province by the fiscal agent shall be credited
to the service of the loan. The fiscal agent shall once in every semester
advise the Province of the amounts credited by it under this paragraph.
(e) Neither the trustee nor the fiscal agent shall be answerable for the
default or miscondut of any agent, depositary, or attorney appointed by them,
or by either of them, to carry out any of the provisions of the said agreement,
if such agent, depositary, or attorney shall be a bank or bankers and shall
have been selected with reasonable care, nor in any respect except for the
failure to exercise good faith.
(f) Neither the trustee nor the fiscal agent shall be under any obligation
to take any action toward the execution and enforcement of any of the provisions of the said agreement, which, in their opinion, will be likely to involve
them in expense or liability, unless some one or more of the holders of the
bonds shall, as often as required by the trustee or by the fiscal agent respectively, furnish them security and indemnity satisfactory to them against such
expense or liability.
(g) Neither the trustee nor the fiscal agent shall incur liability to any
one in acting upon or in accordance with any notice, request, opinion, consent,
certificate, bond, telegram, cablegram, radiogram, or other instrument or paper
believed by either of them to be genuine and to have been signed, sent, or
presented by the proper person, and to have been duly authorized.
(70 Neither the trustee nor the fiscal agent shall be responsible for the
validity of said agreement or of any bonds issued pursuant thereto, or for the
validity or efficiency of the security provided for in said agreement All
representations and recitals contained in said agreement and in the bonds
and coupons shall be deemed to be made by the Province. The trustee and the
fiscal agent may advise with legal counsel in Peru and in the United States of
America and shall be fully protected in any action taken or suffered to be
taken by them on the advice of any such counsel.
(t) The trustee shall not be under any d u t y a t a n y time to record said agreement or any mortgage o r additional agreement supplemental thereto, or to g i v e
any direction therefor, o r to g i v e a n y notice to any one of the existence thereof,
it being expressly understood and agreed t h a t all liability and responsibility in
this regard has been by the terms of said agreement expressly assumed by t h e
Province.
(;) The trustee shall not be under any duty, obligation, or responsibility to
see to the insurance of any of the properties referred to in said agreement and
mortgaged by the Province as security for the bonds, or to effect or maintain
any such insurance.
1498
SAIIB OF FOREIGN" BONDS OR SECURITIES
(fc) The trustee and the fiscal agent or either of them may resign and be
discharged from their duties hereunder by giving to the Province 60 days'
notice in writing of such resignation and to the holders of bonds notice by publication once in each week for three successive weeks in two daily newspapers
of general circulation, published in the Borough of Manhattan, City of New
York, United States of America, the first publication to be at least 50 days prior
to the effective date of said resignation. In case the trustee or the fiscal agent
or any successor, by reason of resignation or for any other reason, shall cease
to act as such, a successor shall be appointed by the Province. Any such successor trustee shall always be a bank or trust company having its principal
office in the borough of Manhattan, city of New York, and having a capital of
at least $2,000,000. Any such successor fiscal agent shall he a banking firm,
bank, or trust company approved by the retiring fiscal agent without responsibility.
(Z) All notices from the trustee or the fiscal agent to the Province in connection with said agreement and this instrument may be given at their option by
written communication or by cable delivered at the office of the consul general
of Peru in the city of New York, or addressed to the provincial council of
Callao, Callao. Peru.
(II) All such notices to the Republic may be given by written communication
or by cable delivered at the office of the consul general of Peru in the city of
New York, or addressed to the Minister of Finance of the Republic of Peru,
Lima, Peru.
(m) All notices from the Province or the Republic to the trustee may similarly be given delivered at the principal office of Central Union Trust Co. of
New York, 80 Broadway, New York.
(n) All such notices to the fiscal agent may similarly be given delivered at
the office of J. & W . Seligman & Co., 54 Wall Street, New York.
Lima, April 25, 1927.
[Seal of the Director General of Finance.]
Fco. QUIROZ VEGA.
[Seal of the syndic in charge of disbursements.]
EDUARDO FREUNDT.
[Seal of the syndic in charge of revenues.]
O. VILLAMONTE.
J. & W , SELIGMAN & Co.
CENTRAL UNION TRUST Co. OF NEW YORK,
B y F. WOLFE,
Assistant
Attest:
[SEAL.]
Vice President.
J, Assistant
Secretary.
AMERICAN CONSULAR SERVICE
REPUBLIC OF PERU,
City of Lima:
I, George A. Makinson, consul of the United States of America, in and for
the District of Callao-Lima, Peru, duly commissioned and qualified, do hereby
certify that F. Quiroz Vega, whose true signature is subscribed and affixed to
the attached document, was on April 25, 1927, the day of the date thereof,
Director General of the Ministry of Finance, of Peru, and that Eduardo
Freundt, whose true signature is subscribed and affixed to the attached document, was on April 25, 1927, the day of the date thereof, syndic of expenses of
the provincial council of Callao, Peru, and that O. Villamonte, whose true
signature is subscribed and aflixed to the attached document, was on April 25,
1927, the day of the date thereof, syndic of incomes of the provisional council
of Callao, Peru, and that their respective signatures and seals of office as such
are worthy of all due faith and credit.
In witness whereof I have hereunto set my hand and official seal of office, at
Callao-Lima, Peru, aforesaid, this 27th day of April, 1927.
[SEAL ]
GEO. A . MAKINSON,
Consnl of the United States of America at Callao-Lima,
Serial No. 689. Fee $2.
Peru.
1499
-SALE OP FOREIGN BONDS OR SECURITIES
STATE OP NEW YORK,
County of New York, ss:
On the ISth day of May in the year 1027 before me personally came F .
Wolfe to me known, who, being by me duly sworn, did depose and say that
he resides in Merrick, Long Island, N. Y . ; that he is an assistant vice president
of Central Union Trust Co. of New York, the corporation described in and
which executed the above instrument; that he knows the seal of said corporation ; that the seal affixed to said instrument is such corporate seal; that it was
so affixed by order of the board of trustees of said corporation, and that he
signed his name thereto by like order.
[SEAL.]
M . A . BOBGES,
Notary Public No. 277, New York
My commission expires March 30, 1920.
County.
STATE OP NEW YORK,
County of New York, ss;
On this 18th day of May, 1927, before me personally came Francis F. Randolph, to me known and known to me to be one of the members of the firm of
J. & W . Seligman & Co. described in and who executed the foregoing instrument and he thereupon acknowledged to me that he executed the same as and
for the act and deed of said firm.
[SEAL.]
M . A . BOBGES,
Notary Public No. 277, New York
My commission expires March 30, 1929.
County.
STATE OF NEW YORK,
County of New York, ss:
I, William T. Collins, clerk of the county of New York, and also clerk of
the supreme court for the said county, being a court of record, do hereby
certify that, M. A. Borges before or by whom the annexed instrument was
signed was at the date thereof a notary public for the county of New York,
duly appointed and sworn, and that full faith and credit are due to all of his
official acts as such notary public. And further, that I am well acquainted
with the handwriting of such notary public and verily believe that the signature
to the annexed instrument is genuine.
In testimony whereof I have hereunto set my hand and affixed the seal of
the said court and county the 18th day of May, 1927.
[SEAL.]
WILLIAM T . COLLINS.
EXHIBIT NO. 1 7
JANUARY 16, 1932.
MEMORANDUM—PROVINCE OF CALLAO GUARANTEED AND SECURED SINKING
7 % PER CENT GOLD BONDS OP 1 9 4 4
FUND
This business was brought to J. & W . Seligman & Co., by Hunter, Dulin & Co.,
investment bankers of the city of San Francisco, to whom the business was
brought by Alvin H. Frank & Co., Investment bankers of Los Angeles. Alvin
H. Frank & Co., in turn, negotiated the business in Peru through a Mr. George
A. Helfert, an American having business in Peru, to whom a commission of
one-half per cent on the principal amount of the loan was promised. A s the arrangements for the commission were made by Alvin H . Frank & Co., all documentary evidence in connection therewith would be in their files.
W e attach hereto copies of the following:
(a) Letter, dated July 19, 1927, from J. & W . Seligman & Co., to Alvin H Frank & Co.
(b) Letter, dated September 19, 1927, from Alvin H. Frank & Co., to J. & W .
Seligman & Co.
(c) Receipt of George A. Helfert, dated September 16, 1927.
(d) Statement referred to in letter of September 19,1927.
(e) Night letter, dated September 19, 1927, from Alvin H . Frank & Co., to
J. & W . Seligman & Co.
if), Letter, dated September 27, 1927, from Francis F . Randolph of J. & W .
Seligman & Co., to R. E . Moody of Alvin H . Frank & Co.
1500
SAIIB OF FOREIGN" BONDS OR SECURITIES
The above letters indicate that certain sums were advanced to Mr. Helfert
on account of his commission, and that the full amount finally paid him, including the advances, was $7,500. Ralph M. Roberg, referred to in the statement {d) above, was a resident of San Francisco, Calif. The letter of September 19, 1927, refers to a " commission " payable to Doctor Gallagher. This
was an erroneous description of the item. Doctor Gallagher is a Peruvian
lawyer, who acted as counsel for the bankers. He was entitled to a fee for
professional services, plus his disbursements, not a commission.
JULY 19, 192T.
Messrs. ALVIN H. FRANK & Co.,
Los Angeles, Calif.
(Attention Mr. Robert E. Moody.)
DEAR SIRS : As you know, certain sums were paid by us upon your instructions to Mr. George A. Helfert on account ot the $7,500 commission due him for
services rendered in connection with the Province of Callao guaranteed and
secured 7 % per cent sinking fund gold bonds prior to the time when he was entitled to receive his commission. These sums were debited on our books to your
account
W e have this day debited the Province of Callao original purchase group
account $2,000 with interest from May 23, the date of the advance payment,
as of June 10, the date »of our payment for the temporary bonds, and credited
your account with a corresponding amount W e have also debited the original
purchase group account $2,000, the amount of our second advance, as of June 8,
the date of that advance, and credited your account with that amount.
Very truly yours,
X & W . SEUOMAN & Co.
ALVIN H . FRANK & Co.,
MUNICIPAL AND CORPORATION BONDS,
Los Angeles, September
19% 1921.
J. & W . SELIGMAN & Co.,
Neto York Cityt 2T. Y.
GENTLEMEN: Inclosed please find receipt of G. A. Helfert in full for the
$7,500 commission due him for the origination of the $1,500,000 Province of
Callao, Peru, guaranteed and secured sinking fund 7 % per cent gold bonds.
W e are Inclosing herewith a statement showing exactly how this money has
been paid out by us, all upon due authorization by G. A. Helfert and this final
receipt covers his release to us of all claims in the connection.
W e would appreciate your forwarding us a check to cover these payments
made by us at your early convenience.
W e wired you to-day quoting week-end letter from Gallagher regarding his
commission, as per inclosed copy, and expect to have instructions from you
as to just how to handle this matter over the wire to-morrow.
Trusting that ere this letter reaches you these matters will have been adjusted
to the point where this account can be finally closed, believe us to be
Faithfully yours,
R. E. MOODY, Vice President.
SAN FRANCISCO, September 16t 1927I hereby acknowledge receipt from Alvin H. Frank & Co. of the sum of
.$1,409.16, being the balance of all sums due me for commission or otherwise
in connection with the recent issue of Province of Callao, Peru, guaranteed
and secured sinking fund 7 % per cent gold bonds.
In view of the said payment I hereby release Alvin H . Frank & Co. and all
•persons, firms, and corporations associated with Alvin H . Frank & Co. lQ
making purchasing or selling the said bond issue, from all claims whatsoever
in connection with said issue, whether by me, or by persons claiming through
me or under me.
GEORGE A . HELFEBT.
-SALE OP FOREIGN BONDS OR SECURITIES
May 13.
May 24.
G. A. Helfcrt debit memo No. 1 for cables
G. A. Helfcrt debit memo No. 2 for expenses Callao loan contract...
May 27.
Jane 3..
Do.
June 18.
Sept. 15.
Do.
Draft from Palaro Valley National Dank, account G. A. Helfert
Charge by J. \V. Seligman <fc Co. for draft, account G. A. Helfert
Payment to Bank of California, account G. A. Helfert
,
Charge by J. & W. Seligman <fc Co. for draft, account G. A. Helfert.
Paid to G. A. Helfert for commission
Paid to Ralph M. Roberg for commission, account G. A. Helfert....
1501
202.58
2,000.00
1,000.00
2,ooaoo
1,409.16
1,000.00
7,611.74
Do..
Balance due us
111:74
7,500.00
Debit
7,611.74
[Western Union night letter]
ALVIN H . FRANK & Co.,
Los Angeles, Calif., September 9f 1927.
J. & W . SELIGMAN & Co.,
New York City, N. Y.:
W e are to-day in receipt of following week-end cable letter from Gallagher.
" V e r y disappointed about discussions regarding fee. Not accustomed discuss
tvith clients consequently admit $2,000. Total amount expenses paid personally
are 50 Peruvian pounds, typewriters, Spanish, and English, plus 118 Peruvian
pounds, other expenses according my letters to Mignard, June 21, including
vouchers. Please cable authorizing me draw against Frank per equivalent 168
Peruvian pounds, total expenses plus import my fees, but having received 1,000,
you will determine balance.*' W i l l you kindly wire Gallagher direct with instructions as to just what to do advising us action taken in matter Helfert
final receipt mailed you to-day?
ALVIN H . FRANK & Co.
SEPTEMBER 27, 1927.
R. E. MOODY,
Vice President Alvin E. Prank & Co.
DEAR MR., MOODY : I returned yesterday from my vacation and found your
letter of September 19, relating to the Helfert commission.
In accordance with the account and discharge, I inclose herewith check to
order of Alvin H. Frank & Co. for $3,500, making a total of $7,500 paid through
your company to Mr. H e l f e r t This commission has been charged to the original purchase account in the purchase of $1,500,000 Province of Callao, Peru,
guaranteed and secured sinking fund 7 % per cent gold bonds.
I trust that in accordance with the exchange of telegrams you are proceeding
with the settlement of the Gallagher fee and expenses, and that we will hear
from you in due course as to the exact amount.
With best regards, faithfully yours.
FRANCIS F . RANDOLPH.
EXHIBIT No. 1 8
JANUARY 16, 1932.
MEMORANDUM—STATE MORTGAGE BANK OP YUGOSLAVIA 7 PER CENT SECURED SINKING FUND GOLD BONDS OF 1957
This business was brought to J. & W . Seligman & Co. by Seligman Bros.
(Ltd.), of London, to whom the business was brought by a promoter, Mr. Marc
Wilenkin, of London. I t w a s agreed that Mr. Wilenkin w a s to receive one-half
of 1 per cent of the principal amount of the loan f o r bringing the business.
Mr. Henry C. *Breek stated in his testimony before the Finance; Committee of
1502
SAIIB
OF FOREIGN" BONDS OR SECURITIES
the Senate (p. 916 of the transcript) that the commission in this business was
paid to Mr. Kagan. Mr. Kagan assisted in the negotiations for the loan, and
Mr. Wilenkin shared with him one-half of his commission. Mr. Breck wishes
his testimony on this point to be amended accordingly. As this business was
brought to J. & W. Seligman & Co. by Seligman Bros. (Ltd.), all documentary
evidence in connection with the arrangements with Mr. Wilenkin would be with
Seligman Bros. (Ltd.). The payment to Wilenkin above referred to, which
amounted to $60,000, is evidenced by our having credited Seligman Bros. (Ltd.)
on our books with that amount on May 11, 1927.
Attached hereto is copy of cablegram, dated Slay 11, 1927, from Seligman
Bros. (Ltd.) to J. & W . Seligman & Co.
[Cablegram]
M A Y 11, 1927.
From SELIGMAN BROS., London.
SEUGCON, NEW
YORK:
When do you expect to credit us with one-half of 1 per cent due to Wilenkin,
enabling us to pay him.
EXHIBIT 1 9
CRAVATH, HENDERSON & DE GERSDORKF,
Washington, D. C., April 2, J037.
SIR: Our clients, Messrs. J. & W . Seligman & Co., contemplate the purchase
from Credit Foncier du Royaume des Serbes Croates et Slovenes (State Mortgage Bank of Yugoslavia), an issue of $12,000,000 secured 7 per cent sinking
fund gold bonds, 1957, and before the consummation of the purchase of the
bonds is informing the department of the proposed flotation of said issue in the
American market so that the department may have the opportunity of saying
that there is or is not an objection thereto.
The bonds will mature in 30 years, will bear interest at the rate of 7 per cent
per annum, will be payable in New York City at the office of Messrs. J. & v\•
Seligman & Co., as fiscal agents, in gold coin of the United States, will be retirable by a cumulative sinking fund calculated to retire the entire issue by maturity, and shall be redeemable on any interest date at their principal amount
and accrued interest. The bonds are to be secured by the pledge of a principal
amount of secured obligations equal to the principal amount of the bonds at the
time outstanding.
Our clients are advised that the State mortgage bank wishes to raise these
funds in order to make loans secured by mortgages on real estate, chiefly agricultural lands, and loans to cities, particularly a loan to the city of Belgrade
for the purpose of improving its sanitation works, waterworks, electric works,
and street-car system, and for improvement and construction of other public
works.
W e would appreciate such an expression on your part as you are disposea
to give that the Department of State has no objection to the making of such
loans.
Very truly yours,
CRAVATH, HENDERSON & DE GERSDORFF.
T h e SECRETARY OF STATE.
Washington, D. C.
TESTIMONY OF GE0BGE MUBNANE, REPRESENTING LEE, HIGG0S0N & CO., NEW YORK CITY
(The witness was duly sworn by the chairman.)
The CHAIRMAN. Whom do you represent?
Mr. MURNANE. Lee, Higginson & Co.
The CHAIRMAN. HOW long have you been with that company?
Mr. MURNANE. I joined thefirmin 1928, at the beginning of 1928,
four years ago.
-SALE OP FOREIGN BONDS OR SECURITIES
1503
The CHAIRMAN. Senator Johnson, you may inquire.
Senator JOHNSON. Y O U represent whatfirm?
Mr. MURNANE. Lee, Higginson & Co.
Senator JOHNSON, llave you got your list?
Mr. MURNANE. Yes, sir. There is a longhand memorandum summing it up. It is in two forms, Senator. The top one covers the issues we have originated, and underneath that, the issues in which
we participated, originated by others; and there is a summary of the
situation.
The CHAIRMAN. The lists will be put in the record at this point.
(The list of foreign issues originated and participated in by Lee,
Higginson & Co., January 1, 1014, to December 31, 1931, is here
printed in full, as follows:)
$5,000,000 CENTRAL BANK OF GERMAN STATE & PROVINCIAL BANKS ( I N C . ) —
FIRST MORTGAGE SECURED GOLD SINKING FUND BONDS, SERIES A , 6 PER CENT
Dated August 1, 1027. Due August 1, 1052. Sinking fund sufficient to retire
entire issue by maturity.
Interest February 1 and August 1. Principal and Interest payable in United
States gold coin at offices of Lee, Higginson & Co. in Boston, New York,
and Chicago, without deduction for any German taxes present or future. Coupon bonds only In $1,000 and $500 denominations. Callable only for the sinking
fund prior to August 1, 1937, and as a whole or In part on any interest datei on
or after August 1. 1937, upon three months* notice, at par and accrued interest.
Not callable prior to August 1, 1937, except for sinking fund.
Preussische Zentralgenossenschaftskasse, Berlin, trustee.
The following information has been summarized • from the accompanying
letter signed by the board of management and the chairman of the central
bank and by Landrat a. D., Rudolph von Bitter, representing the guarantor
banks.
Business.—Central Bank of German State & Provincial Banks (Inc.) was
organized in 1923 by various State, provincial, and other banks owned by
public bodies; one of its purposes is to simplify the raising of money for its
members by Issuing its own bonds and loaning the proceeds to them.
Purpose of issue.—The proceeds of these bonds will be loaned to 11 of the
member banks, all of which are owned by State, provincial or other public
bodies and will be used by them solely to acquire first mortgages on new
residential and apartment house property at not in excess of 40 per cent of
the value represented by the appraised value of the land and the cost of tlie
building.
Security.—These bonds will be the direct obligation of the central bank secured by a pledge with the trustee in Germany of first mortgages described
above payable in gold marks. The indenture will provide that the amount of
mortgages so pledged and cash in the hands of the trustee, both taken at par
of exchange, must never be less than tlie amount of bonds outstanding.
Guaranties.—In addition prompt payment of the bonds in gold dollars is
guaranteed by each bank receiving any of the proceeds of this loan and in the
proportion in which such proceeds are received. The engagements of each of
such participating banks are in turn unconditionally guaranteed by the State,
Province, or taxing authority by which such bank is owned.
The States, Provinces, and taking authorities guaranteeing the respective
obligations of the participating banks will be: The Rhine Province, and the
Province of Westphalia (which together include the important Ruhr industrial
territory), the State of Thuringia, the Province of Upper SUesia and 69 municipalities in Upper Silesia, the State of Hessen, the Province of Schleswig-Holstein, 500 municipalities and 28 districts in the State of Saxony, the district of
Cassel, and the States of Oldenburg, Llppe-Detmold, and Brunswick.
The population of the districts thus responsible for the payment of these
bonds exceeds 23,000,000 or about 37 per cent of the population of Germany.
92928—32—PT 3
16
1504
SAIIB
OF
FOREIGN"
BONDS OR SECURITIES
Sinking fund.—The indenture will provide for an annual cumulative sinking
fund, first payment in 1029, sufficient to retire all series A bonds at or before
maturity.
We recommend these bonds for investment. Price on application.
One million five hundred thousand dollars of the above bonds have been purchased by Higginson & Co., London, for sale in Great Britain and on the continent of Europe. Bonds offered when, as and if issued and received by us and
subject to approval of counsel. All legal matters passed upon for the bankers
by Messrs. Linklaters & Paines, London, and by Dr. Friedrich Kcmpner, Berlin,
as to matters of German law.
LEE, HIGGINSON & Co.
CENTRAL BANK OF GERMAN STATE & PROVINCIAL BANKS
(INC.),
Berlin, July 23,1921.
Messrs. LEE, HIGGINSON & Co.,
Boston, Mass.. U. S. A.
DEAR SIRS : With reference to the purchase by you of $5,000,000 first mortgage
secured gold sinking fund bonds, series A, 6 per cent of Central Bank of German
State & Provincial Banks (Inc.) (Deutsche Landesbankenzentrale A. G.), we
have pleasure in giving you the following information:
CENTRAL RANK OF GERMAN STATE & PROVINCIAL 1IANKS
(INC.)
The Central Bank of German State & Provincial Banks (Inc.) (hereafter
called the central bank) was formed in 1923 for the purpose of coordinating the
activities and promoting the interests of a large number of German State banks,
provincial banks, and other banks owned and controlled by public bodies
(Offentlich Rechtliche Kreditanstalten). The official character and the strength
of these banks is shown, by the fact that their bonds have always been legal
investments for trustee funds in Germany.
One of the objects of the central bank is to simplify the raising of money
for the benefit of its members by issuing its own bonds and lending the proceeds
to them.
The present capital of the central bank is 1,000,000 reichsmarks fully paid.
It is about to be increased by 4,000,000 reichsmarks of which 25 per cent will be
paid in immediately. The shares which are transferable only with the approval
of the board of directors, are held as to 40 per cent by the Preussische Zcntralgenossenschaftskasse (a banking organization instituted and controlled by the
State of Prussia) and as to 60 per cent by 35 member banks.
PURPOSE OF THE LOAN
The proceeds of the bonds will be distributed among the 11 banks mentioned
below. These banks will apply their proportions of the proceeds solely in
granting loans on first mortgages on new apartment-house and residential
property for not exceeding 40 per cent of the cost of the building and of the
appraised value of the ground. It is estimated that there will be constructed
out of the proceeds of this loan housing accommodation for about 5,000 families.
The maximum amount which may be lent on any single mortgage must not
exceed 200,000 gold marks ($50,000).
The raising of this loan and its purpose have been passed upon by the Federal
Advisory Council of the German Republic.
SECURITY
These series A bonds will be a direct obligation of the central bank and wiH
in addition, be secured by:
(a) The pledge of the first mortgages mentioned above which will be assigned
to and deposited with the Preussische Zentralgenossenschaftskasse as trustee
and held by it for the benefit of the bondholders. The trust indenture will provide that the principal amount due under such mortgages, together with any
cash in the hands of the trustee, must never be less than the equivalent of the
amount of the bonds outstanding.
Principal and interest on these mortgage loans will be payable in terms ot
gold marks (on the basis of 1 gold mark being the equivalent of 1/2T90 kg.
-SALE OP FOREIGN BONDS OR SECURITIES
1505
of fine gold) and their annual scrvice, including interest and sinking fund, will
provide for the annual service on tlie bonds.
(&) The unconditional guaranty for the payment in gold dollars of principal,
interest and sinking fund on these bonds by the I I State, provincial, and other
banks who participate in the loan, each bank being liable proportionately to
its share in the proceeds of the loan.
The States, Provinces, or other taxing authorities owning and controlling
these banks are respectively unconditionally liable for the engagements of these
banks.
GUARANTORS
The 11 banks who jointly guarantiee this loan, the States, Provinces, and
other taxing authorities who are respectively liable for the guaranty of- these
banks, and the proportion of the loan which each bank guarantees are given
below:
V n w „ nt
.
Name of guarantor banks
Provincial Bank or the Rhine Province
Provincial Bank of Westphalia
State Bank of Thuringia
Provincial Bank of Upper Silesia
State Bank of Hessen
Provincial Bank of Sclilcswie-Holstcin
Credit Bank of Saxon Municipalities
State Bank of Brunswick
Credit Bank of Cassel
State Credit Bank of Oldenburg
State Bank of Lippe
Name of State, Provlnee or other authority
liable far the guarantee of the banks
j Rhine Province
Province of Westphalia
j SUte of Thuringia
.
Province of Upper Silesia and 09 municipalities
* in Upper Silesia.
..
: State of Hessen
J Province of Schleswig-llolslein.
] 500 municipalities and 2S district* In Elate of
Saiony all jointly and sorerally liable for
I debts of Credit Hank.
*
' State of Brunswick
District (Hepmingsbetirk) of Cassel
... j Plate of Oldenburg
: Slate of Lippe-Detmold
Proportion of
loan
guaranteed by
each
back
Per cent
25
15
15
10
7.5
7.5
7.5
5
5
L5
1
The above States, Provinces, districts and municipalities who are thus indirect guarantors for the present loan have each authority, in the event of
revenues from other sources not being adequate, to raise taxes within their
respective areas for the purpose of meeting their obligations.
The aggregate population of the above-mentioned States, Provinces, districts,
and municipalities is more than 23,000,000 or about 37 per cent of tlie total
population of Germany.
MISCELLANEOUS PBO VISIONS
These bonds are free of all present and future German taxes and will be redeemed at par by August 1, 1052, by means of an annual cumulative sinking
fund which will commence in 1029 and will operate to retire series A bonds by
drawings at par. The Central Bank reserves the right to surrender bonds to
the trustee for cancellation in satisfaction of the whole or any part of the sinking fund payment, the bonds for this purpose being taken at their par value.
The Central Rank also reserves the right to redeem the bonds as a whole or in
part on any interest date on or after August 1, 1937, at par and accrued interest
upon giving not less than three months previous notice.
Very truly yours,
DEUTSCHE LANDESBANKENZEJSTRALE A . G.,
GILESES, Geheitnerflnanzrat,
Managing
Directors.
LEHMANN,
DR. FELIX BUSCH, Staatssekrctar z. D., Chairman*
RUDOLF VON BITTES, Landrat a. D.
Managing Director, Verband
Dcutscher,
Gffcntlich
Rcchtlicher,
Krcditanstalten
E. V.
Berlin.
1506
SAIIB
OF FOREIGN" BONDS OR SECURITIES
$2,000,000 BROWN COAL INDUSTRIAL CORPORATION " Z U K U N F T "
INDUSTRIE-AKTIENGESELLSCHAFT ZUKUNFT) SINKING FUND
BONDS, SERIES A
PER CENT
(BKAUNKOHLENMORTGAGE GOLD
Dated April 1,1928. Due April 1,1953.
Sinking fund sufficient to redeem entire issue at or before maturity.
Interest April 1 and October 1. Principal and interest payable in United
States Gold Coin at the offices of Lee, Higginson & Co., in Boston, New* York,
and Chicago, without deduction for any German taxes, present or future. Coupon bonds in §1,000 and $500 denominations. Callable for sinking fund on any
interest date on 30 days' notice and otherwise than for sinking fund, on and
after April 1, 1933, as a whole at any time or in part on any interest date on
three months' notice, at par and accrued interest in each case.
Direction der Disconto-Gesellschaft, Berlin, trustee. T h e National Park Bank,
of New York, authenticating agent.
CAPITALIZATION
(TO RE OUTSTANDING UPON COMPLETION OF PRESENT FINANCING)
Funded debt: Sinking fund mortgage gold bonds, $6,000,000 authorized, series
A 6 % per cent (this issue), $2,000,000. Capital stock: Preferred stock, $243,950; common stock, $3,570,000.
The principal amount upon which annual
. charges under the Dawes plan were last assessed Is $65G,000.
CONTROL
Brown Coal Industrial Corporation " Z u k u n f t " is controlled by the RhiueWestphalia Electric Power Corporation which d e r a t e s one of the largest electric
systems in Europe. The outstanding capital stock of the Ilhine-Westphalia
Electric Power Corporation at present quotations has an indicated market value
of over $60,000,000.
From their accompanying letter officials of the company further summarize as
follows:
BUSINESS
Brown Coal Industrial Corporation " Z u k u n f t " Is one of Germany's large producers of brown coal briquettes, a domestic fuel produced f r o m brown coal and
used extensively in Germany, France, Holland, Belgium, and Switzerland. Capacity of the company's briquetting plants is being increased from 600,000 tons
to 900,000 tons annually. Coal reserves are estimated to be sufficient for more
than 90 years' operations at the increased capacity. Coal unsuitable for briquetting is used to generate electricity.
The company owns a power plant with an installed capacity of 18,000 horsepower and operates under contracts extending to 1972, two plants with combined capacity of 75,000 horsepower. About 22 per cent of the electricity generated' is used by the company itself, 31 per cent sold to industrial consumers
and 47 per cent sold at wholesale to community-owned distribution companies
which in turn supply a territory having a population of approximately 700,000,
situated to the north and west of Cologne.
SECURITY
These series A bonds will be secured, in opinion of counsel, by a mortgage
(Grundschuld) in terms of gold marks or fine gold, to be a first lien (subject
only to the prior lien securing payments to be made tinder the D a w e s plan, the
principal amount of which, on the basis of the last assessment, is $656,000)
upon substantially all of the fixed properties of the company now owned,
including its briquetting factories, coal reserves, and power plant. Mortgaged properties, appraised in February, 1928, have a conservative valuation
of over $10,000,000. An additional $4,000,000 of bonds of other series may be
issued for additions to mortgaged property under the restrictions of the
indenture.
Earnings: Net earnings, after depreciation and depletion, for the three
years and nine months ended December 31, 1927, averaged $587,394 or over
two and three-fourths times the combined annual requirement of $211,004 for
annuities payable under the last assessment under the D a w e s plan, interest on
1507
SALE OK FOItKIGX BOXDS Oil SECURITIES
these bonds, and present fixed charges payable under the lease of one power
plant. For the nine months ended December 31, 1927, such earnings were at
an annual rate of over three and three-fourths times this requirement. Approximately two-thirds of the company's earnings are derived from the production of briquettes and one-third from the operation of power plants.
Purpose of issue: Proceeds received from the sale of these series A bonds
and of additional common sioekf the issue of which has been underwritten,
will bo used to complete construction now under way and to retire all current
indebtedness.
Equity: The company's common stock, based on present market quotations,
has an indicated mnrket value of over $6,000,000. Dividends at the rate of 10
per cent per annum have Invn paid in each of the past three years.
Sinking fund: The indenture will provide for an accumulative sinking
fund payable semiannually, beginning October 1, 1928, in bonds or cash, sufficient to retire all bonds of this series at or before maturity.
PRICE ON APPLICATION
Legal matters passed upon by Messrs. Hopes, Gray, Boyden & Perkins in
the United States, and by Dr. Friodricli Kempner in Germany. Listed on Boston Stock Exchange.
LEE,
HIGGINSON &
Co.
HIGOINSON & Co., London.
MAY, 1928.
BROWN COAL INOUSTRIAL CORPORATION " Z U K U N E T , "
Wcisswcilcr, Gcrnuinit, March 10, 1928.
Messrs. LEE, IIIGOINSON & Co.
DEAR SIRS : In connection with the issue of $2,000,000 sinking-fund mortgage
gold bonds, series A, GV6 i>er cent, of the Brown Coal Industrial Corporation
" Z u k u n f t " we submit the following information:
BUSINESS
Tlie Brown Coal Industrial Corporation " Zukunft," founded in 1913. is one
of the large companies engaged in mining the extensive brown coal (lignite)
deposits of the Khine Valley in Germany and the production therefrom of
briquettes, an excellent household fuel. Such briquettes are used extensively
in Germany, France, Holland, Belgium, Switzerland, and other countries. Production of brown-coal briquettes in Germany has increased from approximately 22.000,000 tons in 1913 to over 30,000,000 tons in 1927.
Brown coal not suitable for the production of briquettes makes a satisfactory and economical fuel for power plants. The company owns a steam-power
plant with an installed capacity of 18,000 horsepower. It operates a second
steam-power plant, with an installed capacity of 57,000 horsepower, under a
lease extending to 1972. This lease provides that the company shall pay all
operation expenses and interest on the interest-bearing indebtedness of the
corporation owning the steam-power plant and dividends at tlie rate of 6 per
cent per annum on its common stock, now outstanding in the amount of
$511,700, plus an additional one-half of 1 per cent for each 1 per cent over
G per cent paid in dividends by the company on its own shares. In addition,
an 18,000 horsepower hydroelectric plant, used principally at times of peak
load, is oi>erated under a contract extending to 1972. which provides that
receipts from the sale of electricity produced by the plant shall be divided
equally between the company and the corporation owning the plant.
About 22 per cent of the electricity generated is used by the company in mining and briquetting operations, about 31 per cent is sold to industrial consumers and about 47 per cent is sold at wholesale to community-owned distribution companies which in turn supply a territory having a population of
approximately 700,000, situated to tlie north and west of Cologne.
1508
SAIIB OF FOREIGN" BONDS OR SECURITIES
CAPITALIZATION (TO BE OUTSTANDING UPON COMPLETION OP PRESENT FINANCING)
Funded debt: Sinking-fund mortgage gold bonds, 50,000,000 authorized, series
A
per cent (this issue), $2,000,000. Capital stock: Preferred stock, $243,950; common stock, $3,570,000. The principal amount upon which annual
charges under the Dawes plan were last assessed is $650,000.
SECURITY
These series A bonds will be secured, in opinion of counsel, by a mortgage
(Grundschuld) in terms of gold marks or fine gold, to be a first lien (subject
only to the prior lien securing payments to be made under the Dawes plan,
the principal amount of which, on the basis of the last assessment, is $56,000)
upon substantially all of the fixed properties of the company now owned, including its briquetting factories, coal reserves, power plant, and railroad lines.
In addition the company will covenant that the two contracts under which the
power plants are operated will not be modified prior to the maturity of any
bonds issued under the indenture without the consent of the trustee.
The property serving as security for these series A bonds has been conservatively valued in an appraisal completed in February, 3928, at more than
$10,000,000, of which over $6,316,000 represents the value of plants and equipment and $3,684,000 the value of the coal reserves.
PURPOSE OF ISSUE
Proceeds received from the sale of these series A bonds and of additional
common stock, the issue of which has been underwritten, will be used to complete construction now under way, retire all current indebtedness, and add to
the working capital.
EARNINGS
Sales, charges for depreciation and depletion, and net earnings after such
charges, for the three years ended March 31, 1927, and for the nine months
ended December 31, 1927, were:
!
Year ended Mar. 31
Net sales
Net earnDepreda- ings after
tion and lj deprecia*
dcpletionj! tion and
depletion
$1,907,919 $109,707
153,032
2,167,231
2,293,089 253.294
2,378,023 256,787
1925
1926
1927
Nine months ended Dec. 31,1927.
$451,122
536,216
599,765
615,596
For the 3 years and 9 months ended December 31, 1927, net earnings, after
charges for depreciation and depletion, averaged $587,394 or more than 2%
times the combined annual requirement of $211,004, consisting of $39,360 for
annuities payable under the last assessment under tlie Dawes plan, $130,000
for interest on these bonds, $30,702 for the fixed dividend on the stock of the
corporation owning the steam power plant, and $10,942 for interest on a
loan contracted by the steam power plant and guaranteed by the company.
For tlie 9 months ended December 31, 1927, such net earnings were at an annual rate of more than 3 % times this requirement. Approximately two-thirds
of the company's earnings are derived from the production of briquettes and
one-third from the operation of power plants.
SINKING FUND
The indenture will provide for an accumulative sinking fund payable semiannually, beginning October 1, 1928, in bonds or cash, sufficient to retire all
bonds of this series at or before maturity. Cash will be applied to purchase
series A bonds at or below par and accrued interest or, if not so obtainable, or if
the company so directs, to call series A bonds for redemption at par and
accrued interest.
-SALE OP FOREIGN BONDS OR SECURITIES
1509
BALANCE SHEET
Statement of assets and liabilities based on interim balance sheet as of
December 31, 1927, adjusted to show the results of this financing and the
issue of additional common stock
Assets:
Property, plant, and equipment
Less reserve for depreciation and depletion
Current assets—
Cash
Accounts receivable
Inventories
$5,541,873
256, 787
68,768
864,686
72,578
Deferred assets, etc
$5,285,086
1,006,032
268,140
6,559,258
Liabilities:
Funded debt—
Sinking fund mortgage gold bonds, series A 6 %
per cent (this issue)
Current liabilitiesAccounts payable
Dividends payableCapital stock—
Preferred stock
Common stock
2,000,000
16,182
3,035
243,950
3,570,000
Surplus—
Legal reserve
Profit and loss
321,338
404,753
19,217
3,813,950
726,091
6,559,258
This balance sheet does not show the principal amount of $656,000 upon
which annual charges, under the Dawes plan, are at present payable. The
company has a contingent liability through the guarantee of a 5 per cent loan
now amounting to $218,846 contracted by the corporation owning the steam
power plant. The company intends in the near future to borrow some $550,000
from banks and loan it to the steam power plant corporation to enable the
latter to pay for improvements now being made. When deemed expedient, it is
expected that the corporation owning the steam power plant will repay this
loan by calling for payment of $67Sf300 on its partly paid stock.
CONTBOL AND EQUITY
Control of the company recently has been acquired, through the purchase of
over 50 per cent of its stock, by the Rhine-Westphalia Electric Power Corporation which operates one of the largest electric systems in Europe. The company
thus constitutes a unit in the nation-wide electrification of Germany which is
being carried out in connection with the " rationalization " of industry. The
outstanding capital stock of the Rhine-Westphalia Electric Power Corporation
at present quotations has an indicated market value of over $60,000,000.
The common stock of the Brown Coal Industrial Corporation "Zukunft,"
based on present market quotations, has an indicated market value of over
$6,000,000. Dividends at the rate of 10 per cent per annum have been paid in
each of the past three years.
PROPERTIES
The company's two briquetting plants have a present annual capacity of
800*000 tons which is now being increased to 900,000 tons. These plants are
most modem in design, practically all the operations including the loading of
the briquettes for shipment being accomplished by automatic machinery. The
1510
SAIIB
OF FOREIGN" BONDS OR SECURITIES
coal unsuitable for briquetting is carried by belt conveyors direct to the boilers
of the power plants and used without further preparation. Sufficient moisture
is obtained from the briquetting process to furnish the power plants with a
high-grade water supply, thus rendering them independent of the water supply
usually required.
The company's proved reserves of brown coal, occurring in seams averaging
about 70 feet in thickness and covered by a layer of earth averaging not more
than 90 feet in depth, amount to over 300,000,000 tons. These reserves underlie
an area of over 4,000 acres and are estimated to be sufficient for more than 90
years' operations at the increased capacity contemplated. A f t e r stripping tlie
overlying earth and mining tlie coal by automatic machinery, the coal is carried
to the combined briquetting and power plants by the company's own railroad.
DESCRIPTION OP BONDS
These sinking fund mortgage gold bonds, series A
per cent will be
secured by a mortgage (Grundschuld) in terms of gold marks or fine gold, to
Direction der Disconto-Gesellschaft, Berlin, as trustee and attorney for the
bondholders. They will be dated April 1, 1928, due April 1, 1953; interest will
be payable semiannually April 1 and October 1 ; and they will be coupon bonds
of §1,000 and $500 denominations. Series A bonds will be callable on 30 days1
notice for sinking fund on any interest date and otherwise than for sinking
fund on and after April 1, 1933, as a whole at any time or in part on any
interest date on three months' notice, at par and accrued interest in each case.
Principal and interest will be payable in United States gold coin of the present
standard of weight and fineness in Boston, New York, and Chicago at the offices
of Messrs. Lee, Higginson & Co., fiscal agents for the service of this loan, without deduction for any German taxes, present or future.
An additional $4,000,000 of bonds of other series may be issued under the
restrictions of the indenture. Up to $2,000,000 of this amount may be issued
for 100 per cent of the cost or fair value of additions to the mortgaged property,
the remaining $2,000,000 being issuable for 6 6 % per cent of the cost or fair
value of electrical property installed or acquired, and/or f o r 40 per cent of the
cost or fair value of briquetting plant and coal reserves acquired, when such
property is subjected to the lien of the indenture.
No additional bonds may be issued under the indenture unless average
earnings after depreciation and depletion, for the two years ending within
three months preceding the date of application for the issue of new bonds,
shall have been three times the following:
(А) Annual service of the Dawes plan obligations.
( б ) Interest on all bonds outstanding including those proposed to be issued.
(o) Guaranteed dividends on outstanding stock and interest on all interestbearing indebtedness of the corporation owning the leased power plant, which is
a liability of the company.
The company covenants that it will not assume liability for dividends on any
increase in capital stock or for any increase in the interest-bearing indebtedness of the corporation owning the leased steam power plant unless the earnings
of the company as defined above shall have been for two years three times the
above fixed charges, including the fixed charges on the proposed increase of
debts or capital of the leased steam power plant.
Very truly yours,
DR. ROBERT FRANK,
Cbeneraldircktor.
Confirmed and approved, May 15, 1928.
RICHARD MEYER,
HEINRICH STEINMEYER,
Directors.
$2,000,000, CLOSED ISSUE, PROVINCE OF LOWER AUSTRIA, SECURED SINKING-FUSD
1 % PER CENT GOLD BONDS
Dated December 1,1925. Due December 1, 1950.
Interest payable June 1 and December 1. Principal and interest payable in
New York at the office of J. & W . Seligman & Co., fiscal agents of the loan, ana
in Vienna at the Niederosterreichische Escomptegesellschaft, in United States
gold coin of the present standard of weight and fineness, without deduction fo*
any present or future taxes or duties of the Province of Lower Austria, the
-SALE OP FOREIGN BONDS OR SECURITIES
1511
Republic of Austria, or any faxing subdivision thereof, in time of war as well
as in time of peace, irrespective of the nationality of the holder.
Redeemable at the option of the Province as a whole or In part on any semiannual interest-payment date to and including December 1, 1920, at 105; thereafter to and including December 1, 1927, at 104; thereafter to and including
December 1, 1929, at 103; thereafter to and Including December 1, 1931, at 102;
thereafter to and including December l, 11*33, at 101M»; thereafter to and including December 1, 1935, at 101; and thereafter at par in each case with accrued
interest to the date of redemption. Callable also for the sinking fund at par.
Central Union Trust Co. of New York, trustee.
Coupon bonds In the denominations of $1,000 and $500 registcrable as to
principal.
Information regarding the Province, these bonds, and the security therefor is
given in a letter to the bankers by Iturescli, Governor of the Province of Lower
Austria. This information is summarized in part as follows:
General.—The Province* of Lower Austria surrounds the federal district of
Vienna and is one <»f the largest, wealthiest, and most important of the autonomous political units of Austria. Its area is 7.420 square miles and its population 1,480,000. Austrian currency wns stabilized In November, 1922, and has
since been maintained at par. At present the gold reserve against notes in
circulation is 04 per cent. The recently adopted currency, the schilling, has a
par value of 14% cents, and conversions Into dollars in this statement are made
on this basis.
Security.—These bonds nre the direct obligation of the Province of Lower
Austria. They are specifically seen red by pledge of the provincial real-estate
tax, the yearly current yield of which is over seven times the amount required
for the service of this loan. This tax takes precedence over first mortgages and
all other liens. Provision will be made for the automatic specific pledge of
additional taxes enumerated in the trust agreement <ct) to. an extent sufficient
to maintain the yield of the pledged taxes at a minimum of four times the
amount required for the service of the loan; (h) in case the Province hall at
any time pledge any taxes for any purpose whatsoever other than that of this
loan, then to an extent sufficient to maintain the yield from the pledged taxes
at not less than ten times the amount required for the service of the loan. For
the year 1924 these additional taxes yielded $3.S44.000, or approximately twentytwo times the service of the loan. As additional security the Province will
create a mortgage on real estate valued at $2,000,000, registcrable in case of
default.
Sinking fund.—The trust agreement will provide for the payment in equal
semiannual Installments to the fiscal agents beginning June 1, 1920. as a cumulative sinking fund of amounts calculated to retire the entire issue of bonds at
or before maturity. All moneys thus paid to the fiscal agents are to be used to
purchase bonds at not exceeding par and accrued interest, and, if not so obtainable within the period set by the trust agreement, are to be used to redeem
bonds at par and accrued interest on the next succeeding interest-payment date.
Purpose.—To finance additional investment by the Province of Lower Austria
in the Lower Austrian Hydroelectric Power Co. (Newag), of which tlie Province and the city of Vienna are principal shareholders. This company has been
doing a rapidly increasing business and requires additional capital in connection
therewith.
Price on application.
The Province of Lower Austria has agreed to apply for the listing of these
bonds on the New York Stock Exchange.
$2,500,000 DEPARTMENT OF CAT CA VALLEY, DKPAUTMF.NTO DET. VALUE: DEL CAUCA,
REPUBLIC OF COLOMBIA, 2 0 - Y E AH 7VJ PEB CENT SECURED SINKING-FUND
GOLD BONDS
Dated October 1, 1920. Due October 1, 1940.
Authorized, $4,000,000. Amount of this issue, $2,500,000. Interest payable
April 1 and October 1. Principal and semiannual interest payable in United
States gold coin at the office of J. & W, Seligman & Co., New York, fiscal agents,
free of all taxes, present or future, of the Department of Cauca Valley, the
Republic of Colombia, or any taxing subdivision thereof. Coupon bonds in
denominations of $1,000 and $500, registerable as to principal only. Callable as
a whole or in part for the sinking fund at 103 and accrued Interest on any
semiannual interest date.
1512
SAIiB
OF FOREIGN" BONDS OR SECURITIES
All of these bonds to be retired by lot at 103 and accrued interest through a
cumulative sinking fund operating on each semiannual interest date, commencing April 1, 1927. Central Union Trust Co. of New York, trustee.
The issuance of these bonds has been approved by the Government of the
Republic of Colombia.
. The following information has been summarized from the statement of Dr.
Manuel A. Carvajal, governor of the Department of Cauca Valley:
Cauca valley.—The Department of Cauca Valley (Department del Valle del
Cauca) is located in the western part of the Republic of Colombia, fronting on
the Pacific Ocean. It has an area of 7,960 square miles and a population of
approximately 300,000.
Cauca Valley occupies an important commercial position through possession
of the port of Buenaventura, the only deep-sea port of the Republic of Colombia
on the Pacific, advantageously located within 340 miles of the Panama Canal.
Practically the entire Pacific coast trade of Colombia, including approximately
one-third of all the coffee exported from the Republic, passes through Buenaventura.
Cauca Valley is rich in agricultural resources and in mineral deposits. Sugar,
coffee, tobacco, bananas, plantains, cacao, corn, and other agricultural products
are grown in substantial quantities within the Department. Large areas of
good pasture land available make cattle and livestock raising an important
industry. Coal is mined in the neighborhood of Call, the capital, where large
undeveloped coal reserves exist.
The Department contains nearly one-fourth of the entire railroad mileage of
Colombia and more than any other Department of the Republic. The Pacific
Railroad crosses its entire length and breadth and is constructing a line eastward which will eventually link up Bogota, the capital of Colombia, with
Buenaventura. This development should greatly augment the trade passing
through that port and stimulate the further growth and development of Cacao
Valley..
Security.—*These bonds will be the direct obligation of the Department of
Cauca Valley and will be specifically secured by a first charge and lien on
(1) all of the revenues derived from the tobacco tax; (2) SO per cent of the
revenues derived from the tax on slaughtering of cattle; (3) SO per cent of
the taxes or revenues derived from the manufacture and sale of liquor.
The Department agrees in certain contingencies to increase the taxes or
revenues securing the loato or to add other taxes or revenues as additional
security.
The trust agreement provides, among other restrictions, that the Department
of Cauca Valley shall not issue any of the remaining authorized bonds unless
the combined annual interest and sinking fund charges on the bonds theretofore issued and on such additional bonds shall, during the three preceding
fiscal years, have been covered at least four times by the average yield of the
revenues securing the present issue.
Revenues.—The total receipts from the said revenues or taxes for the seven
years ended June 30, 1926, averaged $1,819,952 annually, of which the proportion securing these bonds is equivalent to over six and four-tenths times the
combined annual interest and sinking fund requirements of $246,490 on this
issue. For the fiscal year ended June 30, 1926, the revenues or taxes totaled
$2,775,047, of wiiich the proportion securing these bonds is equivalent to more
than nine and eight-tenths times the annual interest and sinking fund requirements on this issue.
The Department has agreed that the respective proportions of the total receipts from the said revenues or taxes securing these bonds shall be deposited
as collected with the branch of the Royal Bank of Canada at Cali, the capital
of the Department, or such other bank as may be agreed upon by the Department and the fiscal agents, which shall remit monthly or oftener from the revenues so deposited until the amount necessary to meet the next ensuing semiannual interest and sinking fund payments on these bonds is on deposit with
the fiscal agents.
Purpose of loan.—The proceeds of this loan will be partly used to retire
approximately $750,000 bonds, being the external debt now outstanding, but
principally to extend and improve the railroad and highway system throughout
the Department.
Finances.—The present Issue of bonds will constitute the only funded debt,
external or internal, of the Department and will be outstanding at the relatively low rate of approximately $8 per capita.
S A L E OF FOItKIGX
BOXDS OR SECURITIES
1513
The Department, during the past nine years, has shown a surplus of receipts
over expenditures.
All conversions to United States dollars made heroin are at par of exchange,
which for the Colombian dollar or j>eso in equivalent to $0.1)733. During the
past three >vars the Colombian dollar has maintained a high degree of stability,
remaining al>ove or approximately at parity, and at the present time is at a
premium against the United States dollar.
These bonds are offered when, as. ami if Issued and received by us, subject to
prior sale and subject to the approval of counsel, Messrs. Cravath, Henderson &
de GersdorfT, and associate Colombian counsel, for the bankers, and Phanor J.
Eder for the Department.
Interim receipts or temporary bonds deliverable in
the first insUinee.
Application will l»e made to list these bonds on the New York Stock Exchange.
Price SXHi and interest to yield 7.00 per cent to final redemption.
J . & \V. STXLGMAN & CO.
BAKKH, IvraxoGCt & Co. (INC.)
The following statement; as to Cauca Valley and the loan has been made to
us by Dr. Manuel A . Carvajnl. governor of the Department of Cauca Valley;
and as to the Republic of Colombia by Dr. Enrique Olaya llerrera, Colombian
Minister to the United S t a t e s :
CAUCA VALLEV
The Department of Cauca Valley is located in tlie western part of the Republic of Colombia, fronting on the Pacific Ocean. It has an area of 7.960
square miles and a population of approximately 300,000. Tlie capital. Call,
with a population of G8.000 is lonited on the Cauca River and on the Pacific
Railway, both of which tire important transportation mediums, and is the
center "of a large commercial district. Tlie Department, which was formed
in 1911, enjoys local autonomy under the national government, with power
to impose and colect taxes and administer its domestic affairs. Its status
corresponds broadly to that enjoyed by the various States in the United States
in relation to the Federal Government, except that while its assembly is elected,
its governor is appointed by the President of the Republic.
Cauca Valley occupies an important commercial position through possession
of the port of Buenaventura, the only deep-sea port of the Republic of Colombia
on the Pacific, advantageously located within 340 miles of the Panama Canal.
Practically the entire Pacific coast trade of Colombia, including approximately
one-third of all the coffee exported from the Republic, passes through BuenaVentura. T h e growing importance of this port is indicated by the fact that,
as compared with 7 per cent in the pre-war period, in 1922 it handled 15.3
per cent of the total foreign trade of Colombia; in 1923, I S per cent; in 1924,
21.1 per r e n t ; while in 1925, the percentage of tlie total foreign trade had
increased to 22.2 per cent. Seven important steamship lines now make Buenaventura a regular port of call. T h e extension of the Pacific Railway eastward,
which will eventually link tip Bogota, the capital of Colombia, with Buenaventura, and the first section of which is nearing completion, should greatly
augment the trade passing through that port and stimulate the further growth
and development of Cauca Valley.
The Department is rich in agricultural resources and in mineral deposits.
Sugar, coffee, tobacco, bananas, plantains, cacao, corn, and other agricultural
products are grown in substantial quantities within the Department. Large
areas of good pasture land make cattle and livestock raising an important
industry. Coal is mined in the neighborhood of Cali, where large undeveloped
coal reserves e x i s t
These coal deposits, readily accessible through direct rail
and water transportation, h a r e great possibilities of future development because of their proximity to the Panama Canal and Pacific coast regions, where
there is a large demand f o r coal for shipping and other purposes.
From the standpoint of transportation facilities, Cauca Valley has an outstanding advantage, containing the greatest railroad mileage of any Department in the Republic and nearly one-fourth of the entire railroad mileage of
Colombia. T h e Pacific R a i l w a y traverses the entire length of the Department
from north to south and from east to west, and together with the Cauca River,
which is navigable throughout the whole length of the Department, provides
1514
SAIiB Of FOREIGN" BONDS OR SECURITIES
not only a ready means of transport to markets for its own products, but makes
Cauca Valley the natural trade route for the rich coffee growing areas and gold
and mineral producing regions adjoining.
SECURITY
These bonds will be the direct obligation of the Department of Cauca Valley,
and will be specifically secured by a first charge and lien on ( 1 ) all of the
revenues derived from the tobacco tax; (2) 80 per cent of the revenues derived
from the tax on slaughtering of cattle; (3) 80 per cent of the taxes or revenues derived from the manufacture and sale of liquor.
These three taxes or revenues constitute the principal sources of income of
the Department, and have shown a stable or steadily growing tendency during
the past 15 years.
Tlie Department agrees that, in the event that the proceeds of the taxes
or revenues securing these bonds are reduced at any time during the life of
this loan so that they produce less than five times the annual service of the
loan, it will take action to increase such taxes or revenues so that they will
yield at least five times such annual service.
The Department further agrees that in case these three taxes or revenues
should in any year be less than twice the annual service of the loan, the Department will, at the request of the fiscal agents or trustee, designate additional revenues as security for the loan sufficient to cover such deficit, until
the revenues originally pledged again reach twice the service of the loan.
The trust agreement provides, among other restrictions, that the Department
of Cauca Valley shall not issue any of the remaining authorized bonds unless
the combined annual interest and sinking fund charges on the bonds theretofore
issued and on such additional bonds shall, during the three preceding fiscal
years have been covered at least four times, by the average yield of the revenues securing the present issue.
REVENUES
The total receipts from the taxes or revenues securing these bonds have
been as follows:
Tobacco
Fiscal year ended June 30:
1020
192 1
1922
1923
1924
1925
192 6
$476,549
410,708
509,061
525,493
614,715
722,595
1,090,602
Slaughter
Liquor
$33,994 $1,063,465
1,109,002
86,609
840,587
100,891
937,253
112.032
927,015
123,144
1,196,824
124,641
1,545,455
133,990
The receipts from the revenues or taxes as shown above, for the seven years
ended June 30,1926, averages $1,819,952 annually, of which the proportion securing these bonds is equivalent to over 6.4 times the combined annual interest and
sinking fund requirements of $246,490 on this issue. For the fiscal year ended
June 30, 1926, these revenues or taxes totaled $2,775,047, of which the proportion securing these bonds is equivalent to more than 9.8 times the annual interest
and sinking fund requirements on this issue.
The department has agreed that the respective proportions of the total
receipts from the said revenues or taxes securing these bonds shall be deposited
as collected with the branch of the Royal Bank of Canada at Cali, or such
other bank as may be agreed upon by the department and the fiscal agents, which
shall remit monthly, or oftener, from the revenues so deposited until the
amount necessary to meet the next ensuing semiannual interest and siukiug
fund payments on these bonds is on deposit with the fiscal agents. The
department has also agreed that it shall maintain on deposit with the fiscal
agents at all times during the life of the loan an amount equivalent to 5 per
cent of the total amount of bonds at any time issued, which is in excess of b
months* interest and sinking-fund requirements on the bonds presently to be
issued.
SALE OP FOREIGN BONDS OR SECURITIES
1515
SINKING FUND
The trust indenture provides for the retirement of all of these bonds by lot
at 103 and accrued interest through a cumulative sinking fund operating on
each semiannual interest date, commencing April 1, 1927.
PURPOSE OF LOAN
The proceeds of this loan will be partly used to retire approximately $750,000
of external debt now outstanding, but principally to extend and improve the
railroad and highway system throughout tlie department.
FINANCES
The present issue of bonds will constitute the only funded debt, external or
internal, of the department and will be outstanding at the relatively low rate
of approximately $8 per capita.
The department, during the past nine years, has shown a surplus of receipts
over expenditures.
The issuance of these bonds has been approved by the Government of the
Republic of Colombia.
All conversions to United States dollars made herein are at par of exchange,
which for the Colombian dollar or peso is equivalent to $0.9733.
THE REPUBLIC OF COLOMBIA
Colombia is the nearest in distance to the United States of the South American Republics. Lying at the gateway of the Panama Canal, with a coast line
both on the Atlantic (Caribbean Sea) and the Pacific, its geographical situation is most favorable from a commercial standpoint.
It has an area of
about 475,000 square miles, or greater than that of all the States of the
Atlantic Coast from Maine to Florida, and a population of about 6,300,000.
AVhile fifth in area, it ranks third in population among the South American
Republics and is one of the two South American States with a seat on the
Council of the League of Nations, Chile being the other.
Colombia, primarily an agricultural nation, possesses an abundance and
variety of natural resources. It is the second largest producer in the world
of coffee, and the largest producer of mild coffee, of which it exports large
quantities yearly to the United States and other foreign markets. Among its
other valuable agricultural products are bananas, sugarcane, and tobacco.
Large areas of good pasture land make cattle raising an important activity.
The Republic is also rich in mineral resources, ranking as the largest producer
of platinum and emeralds in the world, and possessing valuable deposits of
coal and petroleum. Gold mining is one of the oldest industries in the country,
gold ranking second to coffee as a source of exports. Active development of
Colombian oil fields is now under way under the leadership of important
American oil interests owning large areas of proven acreage in the country. A
pipe line to transport the petroleum products from the interior to the coast
was recently completed and should prove a stimulus to the further expansion
of the industry. The pipe line is 350 miles in length and has a daily carrying
capacity of 30,000 barrels, which, it is reported, will be increased to 50,000
barrels daily. First exports of crude petroleum from Colombia occurred in
July this year and amounted to about 795,000 barrels, valued at about $1,044,500.
Of this total, 700,000 barrels, valued at $1,459,654, were exported to the United
States.
The United States paid to Colombia, under the treaty settling questions arising out of the establishment of Panama as a separate Republic, the sum of
$25,000,000 in annual installments of $5,000,000, the last of which was paid
on September 1, 1926. Part of this payment has been used under the guidance
of a commission of experts headed by Dr. E. W . Kemmerer o f Princeton
University, to establish a central bank organized along the lines of the Federal
reserve system of the United States with exclusive power of note issue. The
remainder of the payment has been used to establish an agricultural .mortgage
bank, for railroad construction, and for debt retirement. Since the establishment of the Central Bank in 1923, Colombian exchange lias ruled at or above
the par of exchange, and the administration of the currency by the Central
Bank gives every assurance of its continued soundness,
1516
SAIiB OF FOREIGN" BONDS OR SECURITIES
External debt of Colombia as of June 30, 1926, amounted to approximately
only $14,000,000 and internal debt to $10,000,000, making an aggregate debt of
$24,000,000, equivalent to the low rate of $4 per capita.
Foreign trade has grown from $62,000,000 in 1913, to $122,000,000 in 1924,
and to $170,000,000 in 1925. In every one of the past 20 years, with but two
exceptions, Colombian trade has shown an excess of exports over imports.
The greater part of the foreign trade of tlie country is with the United States,
which imports annually from Colombia large quantities of coffee and other
products, exporting in return various manufactured goods.
$1,500,000
HOUSING & REALTY IMPROVEMENT Co. FIBST MORTGAGE
SINKING FUND 7 PEE CENT GOLD BONDS (CLOSED MORTGAGE)
20-YEAB
Dated November 15, 1926. Due November 15, 1946.
Interest payable November 15 and May 15. Coupon bonds in denominations
of $1,000 and $500, registerable as to principal. Principal and interest payable
in New York City at the office of J. & W . Seligman & Co., fiscal agents, in
United States gold coin of the present standard of weight and fineness, without
deduction for any German taxes, and payable in time of war as well as in
time of peace, irrespective of the residence or nationality of tlie holder.
The payment of interest, sinking fund, and principal at maturity, is insured,
jointly and severally, by German insurance companies.
Cumulative sinking fund beginning May 15, 1927, sufficient to redeem the
entire issue by maturity through semiannual drawings at par and accrued
interest. In lieu of sinking fund payments the company may deliver, at par,
outstanding bonds of this issue. Not redeemable except for the sinking fund
before November 15, 1929; redeemable on November 15, 1929, and any interest
date thereafter to and including May 15, 1931, at 110; thereafter to and including May 15, 1934, at 103; thereafter to and including May 15, 1936. at
102; thereafter to maturity at 100, in each case with accrued interest.
Guaranty Trust Co. of New York, trustee; Dresdner Bank, Berlin, German
trustee.
The following information has been summarized by Dr. Bernliard Francke,
managing director of the company, from his accompanying letter:
PBOPERTY
The Housing & Realty Improvement Co. was organized for the purpose of
erecting and operating on an entire city block in Berlin 23 apartment houses
containing 1, 2, 3, and 4 room apartments, greatly needed because of the
housing shortage there. The land is located on Kurfurstendamm, which is
the main avenue of traffic in the western section of the city, served by subways,
surface cars, and bus lines, and traversing the center of the residential district.
The site contains 363,000 square feet with a frontage of 36S feet on Kurfurstendamm, and is the only vacant block of land in this neighborhood. The
buildings will be placed on it in the form of a hollow square, with stores, a
caf6 with ballroom, and a restaurant accommodating 1,500 people, facing the
Avenue Kurfurstendamm, and with apartment houses having a total of 973
rooms on the other three sides. Facilities for sports and other recreations will
be located within the block.
SECURITY
These bonds, in the opinion of counsel, will be secured, on the completion
of this financing, by a closed first mortgage* on the four parcels of land comprising the site, on the leases thereof, and on the buildings to be erected
thereon. The land is owned in fee by Felicia Laehmann-Mosse, owner and
publisher of the Berliner Tageblatt, one of Germany's leading newspapers,
and she has leased each parcel to a separate subsidiary of the borrower for a
term expiring after the maturity of the bonds.
A mortgage will be executed by Felicia Lachmann-Mosse and by each of
said subsidiaries and will be registered in gold marks under the German stable
value mortgage law, on tlie two most important parcels and leases thereof for
an amount equivalent to 10 per cent in excess of the entire principal amount
of the bonds and on the other two parcels and the leases thereof for smaller
amounts. There will also be pledged, pursuant to the trust agreement, as
further security, the stock of each of these lessee subsidiary companies.
1517
SALE OP FOREIGN BONDS OR SECURITIES
VALUATION
The insurance companies before agreeing to insure the payment of these
bonds appraised the land at $2,272,019. The cost of the buildings is estimated
at $1,904,762, making the total valuation of the land and buildings $4,177,381.
This loan represents only 36 per cent of the total valuation of the land and
buildings upon completion. There will be second mortgages held by the city
of Berlin aggregating approximately $430,000, running for 50 years, on the
two largest parcels and on the leases thereof.
INSURANCE COMPANIES' OBLIGATION
The payment
insured, jointly
are the Allianz
$30,000,000, and
of the interest, sinking fund, and principal at maturity is
and severally, by German insurance companies, among which
Insurance Co., founded in 1S90, whose resources alone exceed
the Munchener Reinsurance Co., founded in 1880.
EARNINGS
The net rental income based upon a conservative rental schedule and after
making allowance for vacancies, maintenance, and operating charges, including
taxes, insurance, depreciation, etc., is estimated at $320,000 per annum, or
over three times the annual interest charges on this loan. The company's
earnings, and the land and buildings, are not subject to any charges under
the Dawes plan.
PURPOSE OF ISSUE
The proceeds from the sale of these bonds will, by agreement between the
insurance companies and the borrower, be deposited with the Dresdner Bank,
Berlin, and be disbursed for the construction and development of the properties
and to the payment of the existing mortgages thereon.
All conversions from German to United States currency have been made at
the rate of 4.20 marks to the dollar. Price 98 and accrued interest to yield
7.19 per cent.
These bonds are offered when, as, and if issued and received by us, subject
to prior sale and subject to the approval of counsel in New York and associate
German counsel. Temporary bonds or interim certificates of Guaranty Trust
Co. of New York will be delivered in the first instance.
J. & W . SELIGMAN &
Co.
The statements contained herein are received from sources believed to be
reliable but are not guaranteed, and are in no event to be construed as
representations made by us.
HOUSING & REALTY IMPROVEMENT CO.,
Berlin,
J. & W . SEUOMAN & C o . ,
E. H . ROLINS & SONS,
FOREIGN TRADE SECURITIES C o .
November
15,1926.
(LTD.),
New York, N. Y.
GENTLEMEN : In connection with your purchase of $1,500,000 first mortgage
20-year sinking fund 7 per cent gold bonds, due November 15, 1946, we submit
the following information:
PROPERTY
The Housing & Realty Improvement Co. was organized for the purpose of
erecting and operating on an entire city block in Berlin a building unit consisting of apartments and stores which are greatly needed because of the housing shortage. The land is located on Kurfiirstendamm, which is the main avenue of traffic in the western part of the city. The site contains 363,000 square
feet with a frontage of 368 feet on Kurfiirstendamm, is in the heart of the
residential section of the city, and is the only vacant block in this neighborhood.
It is served by subways, surface cars, and bus lines.
The plan for the buildings is original in architectural design and practicability. They will be built in the form of a hollow square, with apartment houses
on three sides containing 1, 2, 3, and 4 room apartments. Facing the Avenue
Kurfiirstendamm will be stores, a caf6 with ballroom, and a restaurant accom-
1518
SALE OF FOBEIGN BONDS OB SECURITIES
modating 1,500 people. A sport and recreation center having covered tennis
courts and other ahletic facilities (the only institution of its kind in Berlin)
will be located within the block.
SECURITY
These bonds, in the opinion of counsel, will be secured, on the completion of
this financing, by a closed first mortgage on the four parcels of land comprising
the site, on the leases thereof, and on the buildings to be erected thereon. The
land is owned in fee by Felicia Lachmann-Mosse, owner and publisher of the
Berliner Tageblatt, one of Germany's leading newspapers, and she has leased
each parcel to a separate subsidiary of the borrower for a term expiring after
the maturity of the bonds.
A mortgage will be executed by Felicia Lachmann-Mosse and by each of said
subsidiaries, and will be registered in gold marks under the German stablevalue mortgage law, on the two most important parcels and leases thereof for an
amount equivalent to 10 per cent in excess of the entire principal amount of
the bonds and on the other two parcels and the leases thereof for smaller
amounts. There will also be pledged pursuant to the trust agreement, as further security, the stock of each of these lessee subsidiary companies.
INSURANCE COMPANIES' OBLIGATION
The payment of the interest, sinking fund, and principal at maturity is insured, jointly and severally, by German insurance companies, among which are
the Allianz Insurance Co., founded in 1890, whose resources alone exceed
$30,000,000, and the Mtinchener Reinsurance Co., founded in 18S0.
VALUATION
The insurance companies before agreeing to insure tlie payment of these bonds
appraised the land at $2,272,619. The cost of the buildings is estimated at
$1,904,762, making the total valuation of the land and buildings $4,177,381.
This loan represents only 36 per cent of the total valuation of the land and
buildings, upon completion. There will be second mortgages held by the city of
Berlin aggregating approximately $430,000, running for 50 years, on the two
largest parcels and on the leases thereof.
RENTAL DEMAND
The curtailment of new construction during and since the war has caused a
pressing demand for apartment houses and amusement accommodations such as
this program contemplates. Because of a rising tendency in rents, leases on
the theaters, shops, and the sport center will be granted for 10 years only, and
leases on the apartment houses for not exceeding 5 years.
EARNINGS
The net rental income based upon a conservative rental schedule and, after
making allowance for vacancies, maintenance, and operating charges, including
taxes, insurance, depreciation, etc., is estimated at $320,000 per annum, or over
three times the annual interest charges on this loan. The company's earnings,
and the land and buildings, are not subject to any : charges under the Dawes
plan,
PURPOSE
The proceeds from the sale of these bonds will, by agreement, between the
insurance companies and the borrower, be deposited with the Dresdner Bank,
Berlin, and disbursed for the construction and development of the properties
and to the payment of existing mortgages thereon.
MANAGEMENT
The board of directors (Aufsichtsrat) of the issuing company is composed of
Ludwig Sachs, Arthur Hoffman, Curt Meyer, and Herman Korytowski, of whom
the first three are prominent bankers. The management of the b u s i n e s s ana
properties is under the supervision and direction of experienced business men
thoroughly familiar with enterprises of this character.
SALE OP FOREIGN BONDS OR SECURITIES
1519
DESCRIPTION OP THE BONDS
The bonds are to be'dated November 15, 1926, arid will be'due November 15,
1946. Interest is to be payable November 15 and May 15. Principal arid interest
are to be payable at the offices of the fiscal agents, J. & "W. Seligman & Co., of
New York, in United States gold coin of or equal to the present standard of
weight and fineness, without deduction or diminution for any taxes, past,f
present or future, of the German Republic, or of any Statei, province, community, municipality or other taxing authority therein or thereof, and payable in:
time of war as well as Jn time of peace irrespective of the residence or nationality of the holder. The bonds are to be in coupon form iu denominations of
1
§1,000 and $500, registerable as to principal only.
Not redeemable except for the sinking fund before November 15, 1929;
redeemable on November 15, 1929, and any interest date thereafter to and
including May 15, 1931, at 110; thereafter to and including May 15, 1934, at
103; thereafter to and including May 15, 1936, at 102; thereafter to maturity
at 100, in each case witli accrued interest.
SINKING FUND
The indenture under which these bonds are to be issued will provide for a
cumulative sinking fund beginning May 15, 1927, sufficient to retire tlie entire
issue by maturity through semiannual drawings at 100 and accrued interest
In lieu of sinking-fund payments the company may deliver, at par, outstanding
bonds of this issue.
All conversions from German to United States currency have been made at
the rate of 4.20 marks to the dollar.
Very truly yours,
WOHNHAUS-GRUNDSTUCKS-VERWERTUNGS A . G.,
A M LEHNINEE PLATZ (BERLIN),
DR. BERNIIABD FRANCKE, Managing
Director.
$8,000,000 REPUDLIO OK COSTA RICA EXTERNAL SECURED SINKING FUND 7 PER
CENT GOLD BONDS, 1926
Dated November 1, 1926. Due November 1, 1951.
Interest payable May 1 and November 1. Principal and Interest payable in
United States gold coin of the present standard of weight and fineness, in New
York City at the office of J. & W, Seligman & Co., fiscal agents, free from any
Costa Rican taxes present or future. Coupon bearer bonds in interchangeable
denominations of $1,000 and $500, redeemable on November 1, 1936, and on any
interest date thereafter, in whole or in part, at 100 and accrued interest. Not
redeemable prior to November 1, 1936, except for the sinking fund. A cumulative sinking fund will be provided, calculated to retire all these bonds by
maturity, operating by purchase in the market at or below 100 and accrued
interest or, if bonds are not so obtainable, then, by drawings at 100 and accrued
interest. After November 1, 1936, the Republic may, at its option, increase the
amount of any payments to the sinking fund. Central Union Trust Co., of
New York, trustee.
Don J. Rafael Oreamuno, envoy extraordinary and minister plenipotentiary
of the Republic of Costa Rica to the United States, has summarized his accompanying letter as follows:
General.—The Republic of Costa Rica adjoins "Panama on the north, and
extends from the Atlantic to the Pacific, with railroads linking up the ports
on both coasts. More than half the country lies between two to six thousand
feet above sea level, so that the climate Is generally temperate and healthful.
Most of the population is white and of European descent.
Costa Rica is rich agriculturally, being one of the largest producers of
bananas and high-grade coffee. Cacao, sugarcane, tobacco, and rice are also
grown in commercial quantities. The forests are extensive and valuable, producing cedar, mahogany, oak, and other cabinet woods.
The currency system was stabilized on a gold basis in 1924 at the rate of 4
eolones for one United States dollar. Revenues of the Republic have exceeded
9292$—32—PT 3
17
1520
SAIiB
OF FOREIGN" BONDS Or SECURITIES
0
expenditures by a substantial margin in each of the past four fiscal years.
Exports have exceeded imports in every year but one since 1913.
Purpose.—The proceeds of this loan will be used to the extent of approximately $5,900,000 to retire internal indebtedness, effecting an appreciable saving
in interest. The Republic plans to devote the remainder of the proceeds to
productive public purposes.
Security.—1These bonds will be the direct obligation of the Republic of Costa
Rica and will be specifically secured by a direct lien or charge upon (1) the
gross revenues of the Republic from customs duties, subject only to the lien of
an external 5 per cent sterling loan of 1911 involving an annual charge not
exceeding $583,200, and (2) the gross revenues of the Republic from its monopoly of alcohol and liquors, subject only, after completion of this financing, to
the lien in favor of an external 5 per cent franc loan of 1911, involving an
annual charge not exceeding $113,000. The Republic has now on deposit sufficient funds to retire the outstanding balance of this franc loan under the terms
of an offer which has already been availed of by about three-fourths of the
former bondholders, pursuant to which the Republic is purchasing the bonds
at a price of $50 for each 500-frane bond. After such retirement the bonds of
this issue will be a first lien on the alcohol and liquor revenues, which alone
in 1925 amounted to nearly two times the annual service of these bonds.
The Republic may pledge additional revenues and may issue additional bonds
provided the revenues available as security for all the bonds are at least three
times the service charges thereon, and may modify or abolish its alcohol and
liquor revenues upon substitution of other equivalent revenues satisfactory to
the trustee, all as more fully set forth in the trust agreement.
Revenues.—For
the four years ended December 31, 1925, the gross yield from
the revenues pledged as security for these bonds averaged $3,811,224 annually*
After deducting $696,200, the annual prior charges above mentioned, the balance
available for these bonds averaged four and one-lmlf times the annual interest
and sinking-fund requirements. The balance available for the year 1926, similarly calculated, based on returns for the first 10 months of the year, will
approximate five times the annual service of these bonds.
Tlie revenues pledged to secure these bonds are to be deposited daily during
each month with the trustee's representative in Costa Rica for remittance to
New York until the monthly service of these bonds has been covered.
All conversions of colones into United States dollars have been made at the
rate of 4 colones to 1 dollar.
These bonds are offered when, as, and if issued and received by us, subject to
prior sale and subject to the approval of our counsel, Messrs. Cravath, Henderson & de Gersdorff and associate Costa Rican counsel. Interim receipts or
temporary bonds will be deliverable in the first Instance.
Application will be made in due course to list these bonds on the New York
Stock Exchange.
Price 9 5 a n d interest, to yield about 7.40 per cent.
J. & W . SELIGMAN & Co.,
BLYTH, WITTER & Co.,
MARSHALL FIELD, GLORE, WARD & Co.,
F . J. LISMAN & Co.,
HEMPHILL, NOYES & C o .
REPUBLIC OF COSTA RICA
The following letter has been addressed to the Central Union Trust Co. of
New York, which negotiated this loan, and to its associates, Messrs. J. & W.
Seligman & Co., Blyth, Witter & Co., Marshall Field, Glore, Ward & Co., F. J.
Lisman & Co., and Hemphill, Noyes & Co.
DEAR SIRS: In connection with the issue and sale of $8,000,000 external
secured sinking fund 7 per cent gold bonds, 1926, I am pleased to submit the
following information:
GENERAL
The Republic of Costa Rica adjoins Panama on the north and extends from
the Atlantic to the Pacific. The area of the Republic is 23,000 square miles,
vimriv three times the size of Massachusetts. More than half the country is
SALE OP FOREIGN BONDS OR SECURITIES
1521
elevated land lying between 2,000 to 6,000 feet above sea level, so that the
climate, notwithstanding, tropical belts- along the coast, is generally temperate
and healthful. The population of approximately 600,000 is chiefly white and of
European descent.
The form of government is republican and is composed of legislative, executive, and judicial branches.
Costa Rica possesses port facilities on both its coasts. On the Atlantic is
located the port of Limon, from which regular passenger and freight service is
maintained with New York and other ports by the United Fruit Co., and on the
Pacific is situated Puntarenas, which is a port of call for vessels of the Pacific
Mail Steamship Co. Railroad lines cross the country from east to west, linking
up the ports on the east and west coasts with each other and with San Jose,
the capital.
Fertility of soil and favorable climatic conditions have made Costa Rica rich
agriculturally. It is one of the largest producers of bananas and of high-grade
coffee, and other agricultural products grown in commercial quantities are
cacao, sugarcane, tobacco, and rice. The forests are extensive and valuable,
producing cedar, mahogany, oak, and other cabinet woods. Gold, silver, and
manganese are the principal items of mineral wealth. According to recent estimates, over §60,000,000 of foreign capital is invested in the country, distributed
approximately as follows: United States, $28,000,000; Great Britain, $26,000,000; France, $4,200,000; Germany, $2,500,0U0. The United Fruit Co. owns a
large acreage of improved land devoted to the cultivation of bananas and cacao,
in addition to reserve holdings of undeveloped land, railroads, and other properties, the total investment being estimated at $15,000,000.
Exports have exceeded imports in every year but one since 1913. The principal exports are coffee and bananas, world-wide food staples the steady demand
for which imparts great stability to the foreign trade of the Republic. Over
88 per cent of the export trade is with the United States and England.
PURPOSE OF THE IX)AN
The proceeds of this loan will be used to the extent of approximately $5,900,000 to retire internal indebtedness, effecting an appreciable saving in interest.
The Republic plans to devote the remainder of the proceeds to productive public
purposes.
SECURITY
These bonds will be the direct obligation of the Republic of Costa Rica, and
will be specifically secured by a direct lien or charge upon (1) the gross revenues of the Republic from customs duties, subject only to the lien of an
external 5 per cent sterling loan of 1911 involving an annual charge of $583,200;
and (2) the gross revenues of the Republic from its monopoly of alcohol and
liquors, subject only, after completion of this financing, to the lien in favor of
an external 5 per cent franc loan of 1911 involving an annual charge not
exceeding $113,000. The principal amount of this loan outstanding on October
1, 1926, was 9,000,000 francs, and the Republic has now on deposit sufficient
funds to retire this amount under the terms of an agreement described below.
After such retirement the bonds now to be issued will be a first lien on the
alcohol and liquor revenues, which alone, in 1925, amounted to nearly two times
the annual service of these bonds.
The Republic will covenant that, during the life of these bonds, it will not
reduce, abolish, or in any manner impair the yield of the revenues now or at
any time pledged to secure the loan: Provided, however, That the Republic may
modify or abolish the monopoly of alcohol and liquors after substituting to the
satisfaction of the trustee, other security which, for the three years, prior to
such substitution, shall have produced average annual gross revenues available
to secure this issue, after deducting prior charges, if any, at least as great as
the corresponding revenues from the monopoly of alcohol and liquors during that
period, all as more fully set "forth in the trust agreement.
The Republic, in agreement with the trustee, may subject additional revenues
to the lien of the bonds, and may issue additional bonds, secured ratably with
these bonds, whenever the gross revenues available as security for all the bonds,
after deducting prior charges, if any, shall have averaged for the three years
next preceding at least three times the service charges on all the bonds to, be
outstanding, all as more fully set forth in the trust agreement
1s22-
SALE ; OP FOREIGN BONDS; OR SECURITIES.
. The revenues available as security for these bonds are to be deposited with
the trustee^ : representative in Costa Rica daily during each month as the
revenues are collected, until the monthly service of these bonds shall have been
covered.
In addition to such monthly service, there is to be similarly deposited each
month for two years, a sum which at the end of that period will aggregate
three months' service charges on these bonds, said sum to remain on deposit in
New York with, the fiscal agents as additional security for these bonds.
.Deposits made with the representative of the trustee in Costa Rica are to be
promptly remitted to New York.
In the event, of a default on these bonds, the trustee may, subject to the rights
of the holders of any outstanding bonds with, a prior lien on the revenues
pledged, appoint a special agency to collect the revenues pledged for the service
of these bonds, all as more fully provided in the trust agreement.
REVENUES
Total receipts from the revenues pledged as security for these bonds have beon
as follows (in colones, 4 colones being equal to one United States dollar).
Customs
duties
1922
1923
1924
1925
8,783,631
10,264,268
11,841,831
13,419,829
Alcohol
and liquors
monopoly
3,643,249
3.796,917
4,285,520
4,971,330
Total
12,426,680
14,061,1S5
16,100,361
18,391,159
For the four years ended December 31,1025, the gross yield from the revenues
pledged as security for these bonds averaged 15,244,806 colones, equivalent
to $3,811,224, annually. After deducting $696,200, the annual prior charges
above mentioned, the balance available for these bonds averaged 4 % times
the annual interest and sinking fund requirements. The balance available for
the year 1926, similarly calculated, based on returns for the first 10 months
of the year, will approximate 5 times the annual service of these bonds.
CURRENCY AND FINANCES
The monetary unit of Costa Rica is the colon. The currency system was
stabilized in 1924 on a gold basis at the rate of one dollar for four colones.
Since that time, exchange has fluctuated narrowly about this rate. The old
unsecured bank notes are being gradually retired and new notes may be issued
only against a corresponding amount of gold, or its equivalent, on deposit in
New York.
Stabilization of the currency has greatly strengthened the finances of the
country. In each of the past four fiscal years revenues of the Government
have exceeded its expenditures by a substantial margin, as evidenced by the
following figures (in colones, 4 colones being equal to one United States dollar):
Revenues
1922.
1923.
1924.
1925.
Expenditures
$18,971,023 $17,311,165
20,520,547 18,205,368
23,259,050 19,549,401
25,781,231 23,767,551
Surplus
$1,659,858.
i315,l7»
3,709.649
424,592
These favorable results are attributable also to a reorganization, simultaneously with the currency reform, of the method of control over governmental
expenditures. A commission of control was created, appointed by congress, to
cooperate with the treasury in the preparation of the budget and in other related financial matters, and a system of internal control and check was established, with results which have proved highly satisfactory.
1523
SALE OP FOREIGN BONDS OR SECURITIES
DEBT
The external debt, in addition to these bonds, consists of a 5 per cent external
sterling loan of 1011, of which £1,763,700 is at present outstanding, and of a 5
per cent external franc loan of 1011, of which less than 9,000,000 francs is at
present outstanding. The sterling loan is being redeemed through a cumulative
sinking fund.
The external franc loan of 1911 was originally issued in the principal amount
of 35,000,000 francs. The Republic has regularly paid the current interest on
this loan in French currency. After French currency had depreciated severely
following tlie war, the French bondholders claimed payment of interest in
gold francs instead of currency. The Republic claimed the right to continue to
make payments in French currency as it had always done. This disagreement
was settled by an agreement dated March 20, 1925, between the Republic and
the National Association of French Bondholders providing for the purchase by
the Republic of the bonds of the loan, than outstanding in the amount of
32,702,000 francs, at the rate of $50 per bond of 500 francs plus accrued interest.
This settlement represented an agreement to pay the bondholders at the rate of
10 cents (United States currency) per franc, although the franc was at that
time quoted at only 5 cents in the foreign exchange markets. In accordance
with this agreement, bonds aggregating 23,102,000 francs principal amount had
been retired up to October 1, 102(5, leaving outstanding on that date only about
9,000,000 francs principal amount, for the retirement of which the Republic has
the necessary funds on deposit.
After applying the proceeds of the bonds which you have purchased to the
retirement of internal indebtedness, as provided in the trust agreement, the
Republic will have outstanding total indebtedness, both external and internal,
of approximately §17,500,000, without deducting the outstanding amount of the
franc loan of 1911, the retirement of which has been provided for as above
explained.
REDEMPTION* AND SINKING FUND
The bonds are not redeemable prior to November 1, 1930, exccpt for the sinking fund, and are redeemable on any interest date thereafter, in whole or in
part, at the option of the Republic, upon 60 days' notice, at 100 and accrued
interest
The trust agreement provides for a cumulative sinking fund, sufficient to
retire all these bonds by maturity through purchases in the market at or below
100 and accrued interest, or if not so obtainable, through redemption by lot at
100 and accrued interest on each semiannual interest date. After November 1,
1936, the Republic may, at its option, increase the amount of any payments into
the sinking fund.
ARBITRATION
The trust agreement provides for referring any disagreement between the
Republic and the trustee to a justice of the Supreme Court of the United States
as the sole arbitrator.
All conversions herein from colones into United States dollars have been made
at the rate of 4 colones for $1.
Envoy Extraordinary
J. RAFAEL OREAMUNO,
and Minister
Plenipotentiary.
$15,000,000 REPUBLIC OF PERU SECURED 7 PER CENT SINKING FUND GOLD BONDS,
1927
A substantial amount of this issue has been reserved for sale in Europe,
through Seligman Bros., and The National City Co., London, and through
Pierson & Co., Netherlands Trading Co., and Mendelssohn & Co., Amsterdam.
Dated March 1,1927. Due September 1, 1959.
Interest payable March 1 and September 1. Principal, premium, and interest
payable in United States gold coin of. the present standard of weight and fineness, in New York City, at the office of J. & W . Seligman & Co., fiscal agents, free
from any Peruvian taxes present or future. Coupon bearer bonds in inter-
1524
SAIiB
OF FOREIGN" BONDS OR SECURITIES
changeable denominations of $1,000 and $500, redeemable on any Interest date, in
whole or in part, at 105 and accrued interest.
A cumulative sinking fund will be provided, calculated to retire all these
bonds by maturity through semiannual drawings at 105 and accrued Interest.
Central Union Trust Co., of New York, trustee.
His excellency, H. G. Masias, Minister of Finance of the Republic of Peru,
has summarized his accompanying letter as follows:
General.—The Republic of Peru is the third largest country in South America,
with a population estimated at 6,000,000. It is rich in minerals and in agricultural resources. It is the world's third largest producer of silver and for many
years It has exported large quantities of low-cost copper. Its petroleum resources, considered of great potential value, are being rapidly developed by
American and other foreign capital. A wide range of climatic conditions results
in diversified agricultural production, the chief products being cotton and sugar.
Purpose of the loan.—The proceeds of this loan will be used to the extent of
approximately $3,000,000 to retire outstanding indebtedness, and the balance for
the purchase of machinery and plants for the manufacture of tobacco products
and for construction of railroads and irrigation and sewage systems.
Security.—These bonds will be the direct obligation of the Republic and, after
the retirement out of the proceeds of this loan of the $3,000,000 Indebtedness
above mentioned, will be secured by a first lien on the gross revenues of the
Government tobacco monopoly. These bonds will be the first series of an
authorized issue of £5,000,000 sterling or the equivalent In dollars, $24,332,500,
at par of exchange. Bonds of other series may not be Issued to mature prior
to these bonds, nor unless the gross tobacco revenues during the three years
immediately preceding shall have averaged, and for the year immediately preceding shall have equalled, at least one and one-half times the maximum
^service charges on all the bonds to be outstanding.
Revenues.—1The revenues pledged to secure these bonds averaged annually for
the three years from 1924 to 1926, inclusive, LP. 1,077,957, equivalent to $4,279,490
at the average rate of exchange prevailing during the period ($3.97 per Peruvian
pound). This sum is more than three and one-half times the annual interest
and sinking fund requirements on these bonds.
These bonds are offered when, as, and if issued and received by us, subject to
prior sale and subject to the approval of our counsel, Messrs. Cravath, Henderson and de Gersdorff, and associate Peruvian counsel. Interim receipts or
temporary bonds will be deliverable in the first Instance.
Application will be made in due course to list these bonds on the New York
Stock Exchange. Price 9 6 ^ , and accrued interest. Average yield 7.48 per cent
J. & \V. SELIGMAN & Co.,
E . H . ROLLINS & SONS,
F . ,T. LISMAN & Co.,
T H E NATIONAL CITY CO.,
GRAHAM, PARSONS & Co.,
AMES, EMERICII & Co. (Inc.)
REPUDUC OF PERU,
March
15,1921.
Messrs. J. & W . SELIGMAN & Co., T H E NATIONAL CITY Co., E . H . ROLLINS & Soss,
GRAHAM, PARSONS & CO., F . J. LISMAN & Co., AMES. EMERICH & Co. ( / n c . )
DEAR SIRS : In connection with the issue and sale of $15,000,000 secured 7 per
cent sinking fund gold bonds, 1927, of the Republic of Peru, I am pleased to
submit the following information:
GENERAL
The Republic of Peru is the third largest country in South America, with an
•area of approximately 550,000 square miles and a population estimated at
6,000,000. Construction of the Panama Canal reduced the distance from New
York to Callao, its chief port and one of the most Important in South America*
from 9,000 to less than 3,500 nautical miles.
Mining and agriculture are the principal activities of Peru. Peru is the
world's third largest producer of silver, and for many years has exported large
-quantities of low cost copper. The principal American mining companies operating in Peru are the American Smelting & Refining Co. and the Cerro de
SALE OP FOREIGN BONDS OR SECURITIES
1525
Pasco Copper Corporation. Tlie petroleum reserves, considered of great potential value, are being rapidly developed by American and other foreign capital.
The Standard Oil Co. of New Jersey, through its subsidiaries, is active in this
field. A wide range of climatic conditions results in diversified agricultural
production, cotton and sugar being the two chief products. Most of the world's
supply of alpaca wool comes from Peru.
It is estimated that more than $325,000,000 of foreign capital is invested in
Peru, of which about $125,000,000 is American, and a like amount British.
Exports of the Republic have exceeded imports in every year but two since
1892. In 1926 exports amounted to about $SS,044,000, comparing with imports
of $68,430,000. Approximately one-third of the Republic's foreign trade is
with the United States.
PURPOSE OF THE LOAN
The proceeds of this loan will be used to the extent of approximately
$3,000,000 to retire outstanding indebtedness of the Republic, the balance being
used for the purchase of machinery and plants for the manufacture of tobacco
products and for construction of railroads and irrigation and sewage systems.
SECURITY
These bonds will be the direct obligation of the Republic of Peru and, after
the retirement out of the proceeds of this loan of the $3,000,000 indebtedness
above mentioned, will be secured by a direct first lien on the gross revenues
of the Government tobacco monopoly. Tlie Republic will covenant to pay all
.the expenses of the tobacco monopoly from its other revenues.
These bonds are the first series of an authorized issue of £5,000,000 sterling
or the equivalent in dollars, $24,332,500, at part of exchange, to be secured
equally and ratably by the pledge of the revenues above mentioned. Bonds of
other series may not be issued to mature prior to the maturity of these bonds,
nor unless the pledged revenues during the three years immediately preceding
the proposed (late of issue shall have averaged, and for the year immediately
preceding shall have equaled, at least one and one-half times the maximum
service charges on the bonds then outstanding and those proposed to be issued.
The Republic will covenant that while any of the bonds remain outstanding it
will not reduce, abolish, or in any manner impair the revenues pledged as
security for the bonds.
Under a special law for the purpose, the Republic is to turn over the entire
collection of the revenues from the tobacco monopoly to Caja de Depositos y
Consignaciones, a Peruvian corporation, the capital stock of which is owned by
the following banks: Banco del Peru y Londres, Banco Italiano, Banco Internacional del Peru, Banco Popular del Peru, and Banco Aleman Transatlantic.
The board of directors of the caja is made up of the presidents and general
managers of these banks. The Republic covenants that during the life of these
bonds such board shall include a member designated by the fiscal agents. If
the Republic withdraws the collection of such revenues from the caja or the
caja for any reason ceases to collect them, the fiscal agents, in agreement with
the Republic, may appoint another collection agency, all as more fully to be
set forth in the trust agreement.
The trust agreement will provide that in the event of a default on these
bonds the trustee may appoint a special agency to collect the revenues pledged
for the service of the bonds, all as more fully therein to be provided.
The revenues available as security for these bonds are to be deposited weekly,
as collected, with the representative of tlie fiscal agents in Peru for transmission to New York until the monthly service charge is covered.
REVENUES
Total receipts from the revenues pledged as security for these bonds have
been as follows: 1924, $3,931,594; 1925, $4,162,660; 1926, $4,744,214.
The revenues pledged to secure these bonds averaged annually for the three
years from 1924 to 1926 inclusive, £P1,077,957; equivalent to $4,279,490. This
sum is more than three and one-half times the annual interest and sinking
fund requirements on these bonds. For the year 1926 the revenues covered the
annual charges almost four times. These revenue figures have been converted
at the average rate of exchange for the three years from 1924 to 1926 inclusive,
$3.97 per Peruvian pound.
0:526
•SALE:-OF FOREIGN BONDS OR SECURITIES
CURRENCY AND FINANCES
During 1924 and 1925, the budgetary revenues totaled $33,905,805 and $33,.
864,210 respectively, while budgetary expenditures amounted to $31,581,664 and
$34,920,591 respectively. Included in the expenditures for both years are sums
invested for productive public purposes, which amounted in 1925 to $2,208,000.
The budget for 1926 balances at $35,928,000. In the same year capital expenditures totaled about $8,654,000 for investments in railroad, bridge, and highway
construction, irrigation works, and similar projects.
Peru remodeled its banking system in 1922, following the pattern of the
Federal reserve system in the United States. The Reserve Bank of Peru, in
addition to its rediscounting functions, was given the sole responsibility for
the regulation of the currency of the Republic. It is obliged to maintain a
minimum gold reserve of 50 per cent (part of which may be held abroad)
against its outstanding notes. As of December 31, 1926. the ratio of gold to
paper currency in circulation was 80.54 per cent.
The national debt of Peru, as of December 31, 1926 was approximately
$73,481,000 or about $12 per. capita, of which about $45,S05,500 represented
external debt.
REDEMPTION AND SINKING FUND
The trust agreement will provide for a cumulative sinking fund sufficient
to retire all these bonds by maturity through semiannual drawings at 105 and
accrued interest.
The bonds will also' be subject to redemption in whole or in part on any
interest date, at the option of the Republic, at 105, and accrued interest, upon
60 days' notice.
All conversions herein made from Peruvian pounds into United States dollars
have, unless otherwise stated, been made at $3.68 per pound. Conversions
from pounds sterling into dollars have been made at par of exchange.
M.
G.
Minister
MASIAS,
of
Finance.
$ 1 2 , 0 0 0 , 0 0 0 STATE MORTGAGE BANK OF YUGOSLAVIA—SECURED 7 PER CENT SINKING
FUND GOLD BONDS
A substantial amount of this issue has been reserved for sale in Europe.
Dated April 1, 1927. Due April 1, 1957.
Interest payable April 1 and October 1. Principal and interest payable in
United States gold coin of the present standard of weight and fineness, in
New York City at the office of J. & W. Seligman & Co., fiscal agent, free from
and without deduction for any Yugoslavian taxes. Coupon bearer bonds in
interchangeable denominations of $1,000 and $500. Redeemable on any interest
date, at the option of the bank, in whole or in part, at 100 and accrued interest.
A cumulative sinking fund will be provided calculated to retire all these
bonds by maturity by purchase at not exceeding 100 and accrued interest or
by semiannual drawings at 100 and accrued interest.
By the laws under which the bank is organized the Government of Yugoslavia guarantees the payment of the principal and interest of these bonds.
Messrs. Aron Alcalay, acting manager, and Dr. Rudolf Sardelic, director,
have summarized their accompanying letter to us as follows:
General.—JThe State Mortgage Bank of Yugoslavia was founded in 1S62 as
a state institution for the management of public funds and in 1898 became a
central mortgage bank under Government supervision. It is the largest mortgage bank in the country and the only one for whose obligations the Government is responsible. When the country was occupied by hostile armies
during the World War, the Government paid the interest on all the bonds ana
notes issued by the bank, although sinking-fund payments were suspended.
Its chief business is to make loans on farm properties and other real estate
and to the Government and political subdivisions, all under restrictions imposed by law. It obtains funds for this purpose from deposits and from the
issue of its own bonds and notes.
Yugoslavia is predominantly an agricultural country, 85 per cent of the population being farmers. Raising of livestock, forestry, and mining are important
SALE OP FOREIGN BONDS OR SECURITIES
1527
industries. Much of its annual production is exported, and, with the great
improvement in conditions on the continent during recent years, tlie country's
foreign trade has increased 75 per cent since 1022. Exports have exceeded
imports in each year after 1923.
In each of the past three fiscal years the revenues of the Government have
exceeded its expenditures. The currency has been stable since the latter part
of 1925.
Security.—Tlie bonds will be the direct obligation of the bank and will be
secured by the pledge of obligations, all of which are secured by mortgages
on real estate, received by the bank against loans made by it. The bank will
covenant to maintain the pledged obligations at an amount, calculated on a
gold basis, equal to tlie principal amount of bonds at any time outstanding.
By the laws under which the bank is organized the Government of Yugoslavia guarantees the payment of the principal and interest of these bonds.
Every loan made by the bank, except those made to the State or to political
subdivisions, is secured by first mortgages on farm property or other real
estate and must not, under the law, exceed 50 per cent of the appraised value
of the mortgaged real estate. In practice they have averaged only about 33
per cent of such appraised values. All loans to political subdivisions are
secured either by mortgages on real estate or by the pledge of revenues or
taxes and all loans to the State by the pledge of budget appropriations. The
bank is not permitted by law to issue its own bonds and notes to an amount
in excess of the outstanding principal amount of tlie loans held by it. The
bank's losses on its loans have i>een less than three-thousandths of 1 per cent
(.003 per cent) of all the loans it has made.
These bonds are offered when, as, and if issued and received by us, subject
to prior sule and subject to the approval of our counsel, Messrs. Cravath,
Henderson & de Gersdorf and associate counsel in Belgrade. Interim receipts
or temporary bonds will be deliverable in the first instance.
Application will be made to list these bonds on the New York Stock Exchange.
STATE MORTGAGE B A N K OF YUGOSLAVIA
STATE MORTGAGE BANK
OF YUGOSLAVIA,
April
2.5,
1927.
Messrs. J . & W . SEUGMAN & Co., DILLON, BEAD & C o .
DEAR SIRS : In connection with the issue and sale of the §12,000,000 secured
7 per cent sinking fund gold bonds of the State Mortgage Bank of Yugoslavia,
we are pleased to submit the following information:
GENERAL
The State Mortgage Bank of Yugoslavia was founded in 1802 as a State
institution for the management of public funds and in 189S became a centralmortgage band under government supervision. It is the second largest bank in
the country, the largest mortgage bank, and the only mortgage bank for whose
obligations the government is responsible. When the country was occupied by
hostile armies during the World War, the government paid the interest on
all the bonds and notes issued by the bank, although sinking fund payments
were suspended. Its chief business is to make loans on farm properties and
other real e state and to the government and political subdivisions, all under
restrictions imposed by law. It obtains funds for this purpose from deposits
and from the issue of its own bonds and notes.
Management of the bank rests in a board of directors, composed of 11 members, 5 of whom are elected by parliament, 1 by the national bank. 2 by the
commercial and agricultural council, 1 by the State council, and 1 by the University of Belgrade; the eleventli being the director general of the bank. There is
also a board of supervision composed of 5 members, appointed by the minister
of commerce and industry.
SECURITY
The bonds will be the direct obligation of the bank and will be secured by
the pledge of obligations, all of which are secured by mortgages on real estate,
received by the bank and against loans made by it. The bank will covenant
1528
SAIiB
OF FOREIGN" BONDS Or SECURITIES
to maintain the pledged obligations at an amount, calculated on a gold basis,
equal to the principal amount of bonds at any time outstanding.
By the laws under which the bank is organized, the Government of Yugoslavia guarantees the payment of the principal and interest of these bonds.
Every loan made by the bank, except any made to the State or to political
subdivisions, is secured by first mortgages on farm property or otiier real estate
and must not, under the law, exceed 50 per cent of the appraised value of the
mortgaged real estate. In practice they have averaged only about 33 per
cent of such appraised values. All loans to political subdivisions are secured
either by mortgages on real estate or by the pledge of revenues or taxes and all
loans to the State by the pledge of budget appropriations. If in any case the
security depreciates in value the bank may declare the loan in question due
and payable. The bank is not permitted by law to issue its own bonds and
notes to an amount in excess of the outstanding principal amount of the loans
held by it. The bank's losses on its loans have been less than three thousandths
of 1 per cent of all the loans it has made.
The total assets of the bank, as of April 1, 1927, adjusted to give effect to
this financing were $38,866,48. On April 1, 1927, the bank had outstanding
$20,639,595 of loans made by it, including $2,455,465 of loans to the Government
and political subdivisions, and held deposits of $14,067,071.
The bank has outstanding two post-war issues of franc bonds in the Swiss
market, totaling $4,401,951 at par of exchange, whicii are currently quoted on
the exchanges of Zurich and Basel at prices which yield from 7.3S per cent to
7.46 per cent to maturity. Prior to the World W a r the bank contracted loans
in the French market where they sold to yield as low as 4.70 per cent. Of
these bonds, 57,969,500 French francs are now outstanding. Interest and sinking-fund payments are being made in French currency, pending the negotiation
of a settlement with the French bondholders who claim payment in gold
francs. By law passed in 1922, the Yugoslav Government is obliged to pay
any amounts required for such settlement beyond the amounts being paid
currently by the bank.
YUGOSLAVIA
Yugoslavia has an area of 96,134 square miles, more than one and one-half
times the area of Austria and Hungary combined. It has an estimated population of 13,000,000, equal to a density of 135 inhabitants per square mile. Approximately 85 per cent of these people are farmers, which is an important
factor in the stability of the country. The country lies for the most part in the
fertile valleys of the Danube, Morava, and Save Rivers.
Yugoslavia leads all European countries in the production of corn, and has
an important livestock industry. Fruit raising, forestry, and mining are also
important industries. One of the most essential requirements of the country
is funds to repair the destruction of capital during the W o r l d W a r and to
facilitate development of its agriculture and industries, to which purpose the
proceeds of the present loan will be largely devoted.
Trade relations between Yugoslavia and neighboring countries have improved
greatly in recent years. The numerous commercial traties with the surrounding States and with England and other foreign countries have stimulated
Yugoslavia's international trade, which has shown an increase since 1922 of
75 per cent. Exports have exceeded imports in each year after 1923.
The public debt of Yugoslavia, both internal and external, converting the
latter at par of exchange, totals about $562,000,000. In addition there are
war debts due to Great Britain and France of £33,000,000 and Frs.1.700,000,000,
respectively, which are expected to be funded in the near future. Prior to the
World War, Serbian securities were highly regarded by European investors
and sold on the Paris Bourse in 1911 to yield as low as 4.43 per c e n t
The balanced budget of the past three fiscal years and the surplus of exports
during the last three, have served to minimize fluctuations in the currency.
The dinar has been stable at 0.0177 since the latter part of 1925, after a steady
rise from $0.0100 in 1923.
Revenues of the Government of Yugoslavia have exceeded expenditures in
each of the past three fiscal years. In each period the surplus has, for the
most part, been expended in construction of public works. T h e actual figures
have been as follows:
SALE OP FOREIGN BONDS OR SECURITIES
Fiscal year ending Mar. 31—
1925
1926
1927*
1529
Revenues
Expenditures
$153,303,766
208,789,650
91,638,315
$144,937,620
203,710,415
S3.5G6,330
Surplus
$8,366,136
5,079,235
6,071,985
i Figures for first 6 months only.
These figures have been converted at tlie following average rates of exchange: For 1925, $0.0174, and for 192G and 1927, $0.0177 per dinar. Elsewhere
in tills circular conversions of dinars into United States dollars have been made
at the current rate of exchange of $0.0177 per dinar. The dinar at par of
exchange is equivalent to $0.1930.
Very truly yours,
RUDOLF SABDELXC.
Director.
AEON ALCALAY,
Acting
Manager.
$1,500,000 PROVINCE OF CALLAO, PERU, GUARANTEED AND SECURED SINKING FUND
7V£» PER CENT GOLD BONDS
The Republic of Peru is guarantor of, and joint and several obligator with
the Province on these bonds.
Dated January 1, 1927. Due January 1, 1944.
Interest payable January 1 and July 1. Principal and interest payable in
United States gold of the present standard of weight and fineness, in New York
City at the office of J. & \\\ Seligman & Co., fiscal agents, free from any
Peruvian taxes present or future. Coupon bearer bonds in interchangeable
denominations of $1,000 and $500, redeemable on any interest date upon prior
notice in whole or in part, at 107% and interest. Central Union Trust Co. of
New York, trustee.
A cumulative sinking fund is provided, calculated to retire at least $1,465,000
principal amount of these bonds before maturity, operating by purchase in the
market up to 107% and accrued interest or, if bonds are not so obtainable, by
drawings at 107% and accrued interest
Dr. Francisco Quiroz Vega, Director General of Ministry of Finance of Republic of Peru, Mr. Eduardo Freundt and Mr. O. Villamonte, syndics of provincial council of Callao, have summarized their accompanying letter as follows:
General.—The Province of Callao includes the city of Callao, which is the
principal port and second largest city of Peru, and the port and shipping center
for Lima, the capital and the largest city, located only 8 miles distant. The
Province has a population of about 60,000, and the metropolitan district including and surronnding Callao and Lima has a population of about 250,000.
In 1925 over 60 per cent of the imports and more than 27 per cent of the exports of Peru, including the copper, silver, and vanadium from the Cerro de
Pasco mining district, passed through the port of Callao. It is a regular port of
call for 11 steamship lines; about 1,500 ships enter and clear the harbor
annually.
The Republic of Peru is the third largest country in South America, and has
a population estimated at about 6,000,000. The principal industries of Peru
are mining and agriculture. The chief mineral products are petroleum, copper,
silver, gold, vanadium, and coal and the principal agricultural products are
cotton, sugar cane, coffee, cocoa, wheat, rice, tobacco, olives, and maize. Peru
is one of the largest sources of low-cost copper and the third largest prducer
of silver in the world. It has extensive petroleum reserves which are being
developed on a large scale and it now ranks as the second largest producer of
oil in South America. It is estimated that more than $300,000,000 of foreign
capital is invested in the country.
Since 1892 exports of the Republic have exceeded imports in every year but
two. In 1926 exports amount to $88,044,000 as compared with imports of
$68,430,000.
Security.—*These bonds will be the direct obligation of the Province of Callao
and by a law of authorization, dated April 13, 1927, the Republic of Peru has
constituted itself guarantor of, and joint and several obligor with the Province
1530
SAIiB
of
FOREIGN"
BONDS OR SECURITIES
on the bonds. They will be specifically secured by a first charge on all the
ordinary revenues and taxes of the Province at present In effect, and by the
pledge of any revenues, taxes, or imposts of the Province hereafter created
until the total amount of all pledged revenues, calculated upon the collections
of the preceding calendar year shall be equivalent in Peruvian pounds at the
then rate of exchange to $350,000 annually. A s further security the Republic
of Peru obligates itself to devote annually for the service of the bonds 24,000
Peruvian pounds (about $88,320 at tlie present rate of exchange) in equal
monthly payments from the general revenues of the Republic and to include
this amount in its general budget during the life of the bonds. In addition, the
bonds will be secured by a first mortgage on certain real estate owned by the
Province in the city of Callao.
A reserve fund equivalent to six months' service charges on the bonds is to
be deposited with the fiscal agent, to be held on deposit as security for the
service of these bonds.
The loan contract provides that the Government of Peru, which has charge
of the collection of all revenues of the Province pledged as security for these
bonds, shall deposit as collected the entire proceeds of the pledged revenues of
the Province during each month with the representative of the fiscal agent in
Peru until the monthly proportion of the service of these bonds shall have been
covered, this sum to include the monthly payments to be made by the Republic
on its own account. The loan service will be remitted quarterly to the fiscal
agent in New York.
Revenues.—Total
receipts from the revenues specifically pledged as security
for these bonds for the five years from 1922 to 1920 inclusive, averaged $258,000
annually which, together with the annual payments of 24.000 Peruvian pounds
provided for the service of the bonds out of the general revenues of the Republic
of Peru, is equivalent to approximately $34G,000 or over 2 times the annual
interest and sinking fund requirements of $105,000 on these bonds. For 1926,
the available revenues, on a similar basis, were equivalent to 2.4 times such
requirements.
Purpose of the loan.—The proceeds of this loan will be used in part to retire
outstanding debts amounting to approximately $192,500, after which these
bonds will constitute the only funded debt of the Province, external or internal.
The remainder of the proceeds will be devoted to specified municipal purposes,
including water slupply, drainage, housing, street paving, and sanitary improvements.
All conversions herein, except where otherwise noted, from Peruvian pounds
into United States dollars are made at the current rate of exchange of $3.6S
per Peruvian pound.
These bonds are offered when, as and if issued and received by us, subject
to prior sale and approval of counsel, Messrs. Curtis, Mallet-Prevost, Colt &
Mosle. Interim receipts or temporary bonds will be deliverable in the first
Instance. Price 99 and interest yielding 7.60 per cent.
APRIL 25, 1027.
Messrs. J. & W . SELIGMAN & Co.,
HUNTER, DULIN & Co.,
ALVIN H . FRANK & Co.
BEAR SIRS: In connection with the offering of $1,500,000 Province of Callao,
Peru, guaranteed and secured sinking fund 7 % per cent gold bonds, we are
pleased to submit the following information:
GENERAL
The Province of Callao includes the city of Callao, which is the principal
port and second largest city of Peru and the port and shipping center for Lima,
the capital and the largest city, located only 8 miles distant. T h e Province has
a population of about 60,000, while the metropolitan district surrounding and
including Callao and Lima has a population of about 250.000.
The taxable
valuation of all real property in the Province is about $25,000,000. Its industrial establishments comprise foundries, flour mills, distillery, and lumber,
furniture and miscellaneous pants.
In 1925, over 60 per cent of the imports and more than 27 per cent of tlie
exports of Peru, including the copper, silver and vanadium from the Cerro de
Pasco mining district, passed through the port of Callao. I t has an excellent
harbor with facilities for the accommodation of large steamers and is a regular
SALE OP FOREIGN BONDS OR SECURITIES
1531
port of call for eleven steamship lines. About 1,500 ships enter and clear tlie
harbor annually. The Panama Canal, which reduced the shipping distance
from Callao to New York from over 9,000 to less than 3,500 nautical miles,
has been a simulating factor in the continuing growth and development of
Callao as a port and a commercial and industrial center.
The Republic of Peru, situated on the west coast of South America, has an
area of about 550,000 square miles, or larger than France, Italy and Germany
combined, and is the third largest country in South America. The population
is estimated at 0,000.000.
The principal industries of Peru are mining and agriculture. The chief
mineral products are petroleum, copper, silver, gold, vanadium and coal. Peru
is one of the largest sources of low cost copper, and the third largest producer
of silver in the world. It has extensive petroleum reserves which are being
developed on a large scale under the leadership of interests controlled by the
Standard Oil Co. of New Jersey, and it now ranks as the second largest oilproducing country in South America. The principal agricultural products are
cotton, sugarcane, coffee, cocoa, wheat, rice, tobacco, olives, and maize. The
production of both cotton and sugarcane, the two most important products,
has increased very materially in recent years. Most of the world's production
of alpaca wool'comes from Peru. Manufacturing activity has increased notably in Peru In recent years. In addition to smelters for the treatment of
copper and other mineral ores, and oil-refining plants for the treatment of the
increasing production of crude petroleum, there are a large number of factories
engaged in the manufacture of sugar, textiles, leather, shoes, glass, cement,
paper, and miscellaneous products.
The Province covenants that while any of these bonds remain outstanding all
of the revenues pledged as security will continue in effect and that it will
make no change, modification or alteration in these revenues which might
cause a reduction in the total amount calculated upon the collections of the
preeding calendar year, below the equivalent at the then rate of exchange of
$350,000 annually.
It is estimated that more than $300,000,000 of foreign capital is invested in
the country, of which about $125,000,000 is American capital, and a like amount
British.
Standard Oil of New Jersey (through its subsidiaries), Cerro de
Pasco Copper Corporation, American Smelting & Refining Co., and Vanadium
Corporation of America are among the American corporations having large
interests in Peru.
Since 1892 exports of the Republic have exceeded imports in every year but
two. In 1920 exports totalled about $88,044,000 as compared with imports of
about $08,430,000. About one-third of the total foreign trade is with the United
States.
SECURITY
These bonds will be the direct obligation of the Province of Callao and by a
law of authorization, dated April 13,1927, the Republic of Peru has constituted
itself guarantor of, and joint and several obligor with the Province on:the
bonds. They will be specifically secured by a first charge on all of the ordinary
revenues and taxes of the province at present in effect, and by the pedge of any
revenues, taxes, or imposts of the province hereafter created until the total
amount of all pledged revenues, calculated upon the collections of the precedingcalendar year, shall be equivalent in Peruvian pounds at the then rate of
exchange to $350,000 annually. A s further security the Republic of Peru obligates itself to devote annually for the service of these bonds 24,000 Peruvian
pounds (about $88,320 at the present rate of exchange) in equal monthly payments from the general revenues of the Republic and to include this amount IK
its general budget during the life of the bonds. In addition, these bonds will be
secured by a first mortgage on certain real estate owned by the Province in the
city of Callao, including the municipal slaughterhouse, market and theater.
The loan contract provides that the Government of Peru, which has charge at
the collection of all revenues of the province pledged as security for these
bonds, shall deposit, as collected, the entire proceeds of the pledged revenue*
of the province during each -month with the representative of the fiscal agent
in Peru until the monthly proportion of the service o f these bonds shall have
been covered, tUis sum to include the monthly payments to be made by the
Republic on its own account. The loan service so deposited will be remitted
1532
SAIiB
OF FOREIGN" BONDS Or SECURITIES
quarterly to the fiscal agent in New York to be held for the payment of the
semiannual interest and sinking fund on the bonds.
A reserve fund equivalent to six months' service charges on the bonds is to be
deposited with the fiscal agent, to be held on deposit as security for the service
of these bonds.
In the event of a default on these bonds, the fiscal agent may appoint a special
agency to collect the revenues pledged for the service of these bonds, all as
more fully provided in the loan contract.
SEVENTIES
Total receipts from the revenues specifically pledged as security for these
bonds have been as follows:
1922—
1923
1924
192 5
192 6
$215,901
232,444
250,718
274,028
316,866
-
. These revenues for the five years from 1922 to 192G inclusive, averaged
$258,000 annually which, together with the annual payments of 24,000 Peruvian
pounds provided for the service of these bonds out of the general revenues of
the Republic of Peru, is equivalent to approximately $346,000 or over two times
the annual interest and sinking fund requirements of $1(55,000 on these bonds.
For 1926, the available revenues, on a similar basis, were equivalent to two
and four-tenths times such requirements.
PURPOSE OF THE LOAN
The proceeds of this loan will be used in part to retire outstanding debts of
the Province, amounting to approximately $192,500, after which these bonds
will constitute tlie only funded debt, external or internal, of the Province.
The remainder of the proceeds will be devoted to specified municipal purposes, including water supply,, drainage, housing, street paving, and sanitary
improvements.
FINANCES AND DEBT OF THE REPUBLIC OF PERU
During 1924 and 1925, the budgetary revenues of the Republic of Peru totalled
$33,905,805 and $33,864,210, respectively, while budgetary expenditures amounted
to $31,581,664 and $34,920,591, respectively. Included in the expenditures for
both years are sums invested for productive public purposes, which amounted
in 1925 to $2,208,000. The budget for 1926 balances at $35,928,000. In the
same year capital expenditures totalled about $8,654,000 for investments in railroad, bridge, and highway construction, irrigation works, and similar projects.
The banking system of Peru was remodeled in 1922 along the lines of the
Federal reserve system in the United States. The reserve bank of Peru (banco
de reserva del Peru) was created and, in addition to its rediscounting privileges,
was invested with the sole responsibility for the regulation of the currency of
the Republic. It is obliged to maintain a minimum gold reserve of 50 per cent
(part of which may be held abroad) against its outstanding notes. As of
December 31, 1926, the ratio of gold to paper currency in circulation was 80.54
per cent
r The national debt of Peru, as of December 31, 192G, was approximately
$73,481,000, or about $12 per capita, of which about $45,805,500 represented
external debt.
All conversions herein, except where otherwise noted, from Peruvian pounds
into United States dollars, are made at the current rate of exchange of about
$3.68 per Peruvian pound. Conversions from pounds sterling into dollars have
been made at par of exchange.
Director
D r . FRANCISCO QUIROZ VEGA,
General of Ministry of Finance
of Republic
of
Peru.
M r . EDUARDO FREUNDT AND M r . O . VILLAMONTE,
Syndics
of Provincial
Coiyicil of Callao.
SALE OP FOREIGN BONDS OR SECURITIES
1533
$1,500,000 DEPARTMENT OF CAUCA VALLEY, REPUBLIC OF COLOMBIA 20-YEAR
PER CENT SECURED SINKING FUXD GOLD BONDS
7%
Dated October 1, 1920. Due October 1, 1940.
Authorized, $4,000,000. Retired by sinking fund, $28,000. To be outstanding,
including this issue, $3,972,000.
The Department of Cauca Valley, fronting on the Pacific Ocean, occupies an
advantageous trade position within the Republic of Colombia.
It possesses the port of Buenaventura, located within 340 miles of the Panama
Canal, the only deep-sea port of Colombia on the Pacitic. The dock facilities,
which are owned by the National Government, are capable of accommodating
ocean-going steamers at lowest tide and have direct rail connection dockside
permitting freight to be transferred directly from ship to railway cars.
Over 20 per cent of the entire foreign trade of Colombia, and one-third of all
the coffee exported from the country, passes through this port.
The improved facilities at Buenaventura, together with the extension and
improvement of the transportation system, are stimulating the development of
the Cauca Valley, and promoting a steady increase in its population, which is
now estimated at 325,000.
Cauca Valley contains more railroad mileage than any other Department in
the Republic and nearly one-fourth of the entire railroad mileage of the country.
In addition to railroads, the Department has good water transportation, the
Cauca River being navigable throughout the entire length of the Department.
The Pacific Railway is being extended eastward with the object eventually
of linking up Buenaventura with Bogota, the capital of Colombia, a development
which will stimulate tho further growth of Cauca Valley. The first section of
this railroad was recently completed.
Further extension of its highway system is one of the major policies of the
Department. In 1923 it built 93 kilometers of new highways and 25 new
bridges, in addition to improving and repairing an additional 330 kilometers of
highways.
These additional $1,500,000 of bonds are being issued principally further to
extend and improve the highway and railway system throughout the Department.
The Department raises a wide diversity of agricultural products, and htis
large areas of good pasture land. Sugar, coffee, bananas, cacao, and other
products are raised in large quantities.
Call, the capital of tlie Department, located at tlie junction of the Pacific
Railway and Cauca IUver, is considered one of the most advanced cities in the
Republic, and is the distributing center for a large part of the adjacent territory.
In the neighborhood of Cali, there are large coal deposits, readily accessible
to markets, which have great possibilities of future development, In view of
their advantageous location In such close proximity to the Panama Canal and
Pacific Coast regions where there is a large demand for coal for shipping, railroad, and other purposes.
The bonds constitute tlie only funded debt of the department, and will be
outstanding at the low rate of approximately $13 per capita.
The bonds will be secured by a first charge and lien on all the receipts
from the tobacco tax and on SO per cent of the receipts from the slaughter
and liquor taxes or revenues, constituting the principal items of income of
the department. Receipts from these sources have shown a consistent increase
over a period of several years.
The total receipts from the said revenues or taxes for the seven years
ended June 30, 1926, averaged $1,819,952 annually, of which the proportion •
securing these bonds is equivalent to approximately four times the combined
annual interest and sinking fund requirements of $396,130 on these bonds.
For the fiscal year ended June 30, 1920, the revenues or taxes totaled $2,775,047,
•of which the proportion securing these bonds is equivalent to more than six
and one-tenth times the annual interest and sinking fund requirements on these
bonds, and for the 10 months ended April 30, 1927, the available revenues or
taxes were at the annual rate of seven and five-tenths times such requirements.
The department has agreed that the respective proportions of the total
receipts from the said revenues or taxes securing these bonds shall be deposited as collected with the branch of the Royal Bank of Canada at Cali,
or such other bank as may be agreed upon by the department and the fiscal
agents, which shall remit monthly or oftener the revenues so deposited until
the amount necessary to meet the next ensuing semiannual interest and
1534
SAIiB OF FOREIGN" BONDS OR SECURITIES
sinking fund payments on these bonds is on deposit with the fiscal agents.
A sum equivalent to 5 per cent of the total amount of the bonds at any time
issued, which is in excess of six months' service charges on the bonds presently
to be outstanding, will remain on deposit with the fiscal agents during the life
• of the bonds.
During the nine fiscal years ended June 30, 1926, the department showed a
surplus of receipts over expenditures.
The trust agreement provides for a sinking iund sufficient to retire all the
bonds issued by lot at 103 and accrued interest. This provision gives an
attractive speculative feature to the issue since bonds called for redemption
during the first few years will give an unusually high yield.
Thus, although the approximate yield to final redemption is 7.77 per cent,
the average yield is 7.95 per cent, and the yield on the bonds redeemed at
the next sinking fund date is 17.85 per cent, all yields being calculated as
from April 1, 1927. Table of yields to each redemption date will be found
on the reverse hereof.
The Republic of Colombia, of which Cauca Valley forms a political subdivision, has enjoyed a long period of stable government. Its debt is outstanding at a low rate per capita; its banking system is modeled along the lines
of our own Federal reserve system; and its monetary unit, the dollar or peso,
has been above or approximately at par of exchange for the past few years.
Colombians the second largest coffee producer in the world. It has a large and
growing foreign trade, and has shown an excess of exports over imports in
18 out of the past 21 years.
Approximate yield to various redemption dates, based on offering
and accrued interest, and payment of called bonds at 103 and
price of 98
interest
[Yield calculated as from April 1, 1927]
Per cent
Per cent
Oct. 1,
Apr. X,
Oct. 1,
Apr; 1,
Oct. 1,
Apr. 1,
Oct. 1,
Apr. 1,
.Oct. 1,
Apr.
Oct.
Apr.
Oct.
Apr.
Oct.
Apr.
Oct.
Apr.
Oct.
Apr.
1927
1928
1928
1929
1929
1930
1930
;
1931
1931
1, 1 9 3 2 _ _ 1, 19321, 1933
1, 1 9 3 3 — 1, 1934
1, 1934
1,1935
-
.. 12.60
-
—
10.01
__
9.50
9.16
8.92
8.74
~
-
„
-
„
—
—
10.87
-
__
„
1, 1935—
1, 1936
1, 1936
1, 1937
17.85
-
«.
8.60
8.49
8.39
8.32
8. 26
8.20
8.15
8.12
8.08
8.05
8.02
a oo
Oct 1, 1937
Apr. 1, 1938
Oct. 1, 1938
Apr. 1,1939
Oct 1, 1939
Apr. 1, 11M0
Oct. 1, 1940
Apr. 1, 1941
Oct. L 1941
Apr. 1,1942
Oct. 1, 1942
Apr. 1, 1943
Oct 1, 1943
Apr. 1, 1<M4
Oct 1, 1044
Apr. 1, 1945
Oct 1, 1945
Apr. 1, 1946
Oct. 1,
Average yield
7.9>
7.9u
7.93
7.91
7.90
7.S8
7.87
7.86
' -85
7.83
7.82
7-82
7.81
-—
il
7. <8
7. (7
<*'I
7. tt>
$8,000,000 REPUBLIC OF COSTA RICA EXTERN AT. SECURED SINKINO FUKD 7 P*»
CENT GOI.D BONDS, 1 9 2 6
REPUBLIC OF COSTA BICA
Location.—Costa Rica adjoins Panama on the north and extends from the
Atlantic to the Pacific, with a port on ea
@FedFRASER