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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 SAIJ3 OP 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. 1300 SAIJ3 OP 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 OP 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 OP 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? 1316 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. 1318 SAIJ3 OP 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 1320 SAIJ3 OP 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 ? 1322 SAIJ3 OP 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 ? 1324 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, 1380 SAIiB 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- 1384 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. SALE OF FOREIGN" BONDS OE SECUBITIES 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 SAIiB 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 SAIiB 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 1420 SAIiB OF FOREIGN" BONDS OR SECURITIES 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 SAIIB OF FOREIGN" B O N D S OR SECURITIES 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 SALE OF FOREIGN" B O N D S OE SECUBITIES 1451 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. 1452 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- SALE OF FOREIGN" BONDS OE SECUBITIES 1453 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 -SALE OP FOREIGN BONDS OR SECURITIES 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 1456 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