and-a-quarter per Cent. Government Bonds at par. Remonstrances were addressed to Mr. Seddon, but his reply was that no alteration in the Act was possible, and that it would be very impolitic to revive the whole question during the next session of Parliament.*

The Committee did not feel they could recommend the Debenture-holders to accept £150,000 in a security which would probably stand at a discount, but at the same time, in view of the advice of their Agents in the Colony, they could not take the responsibility of advising the rejection of the offer. They accordingly determined to place the whole situation before the Bondholders in a circular, and ask them to state whether or not they were inclined to accept the £150,000 in Bonds. The result was a large majority in favour of acceptance. The Receivers in London and the Colony have accordingly taken steps to complete the necessary formalities in the Courts, and it is hoped. that it may be possible soon to make a distribution amongst the Debenture-holders.

SANTO DOMINGO.

A new revolution has again delayed matters, but the Council are able to report with much satisfaction that an Agreement was signed in January last between the Governments of the United States and Santo Domingo, under which the matters in dispute between the Improvement Company and the Dominican Government were to be referred to international arbitration.

Towards the end of last year the Governof Great Britain and Germany determined to demand redress from the

VENEZUELA. ments

*According to a telegram which has appeared in the papers on the eve of the publication of this Report, it is stated that the New Zealand Government is proposing to pay the £150,000 in cash.

Government of Venezuela on account of injuries inflicted on their subjects. A blockade of the Venezuelan ports followed. Protocols were subsequently signed at Washington which provided for the settlement of the various claims. preferred against the Venezuelan Government. Although it is undoubtedly disappointing that the Bondholders' claims have been placed in the third rank, and behind those of individuals and industrial companies-especially as, in order to satisfy the latter claims, a preferential charge on the Customs has been established-yet it is satisfactory to find that the Venezuelan Government have given a distinct undertaking to the Powers to come to an arrangement with the External Bondholders. The Agent of the Venezuelan Government is now in Europe, and the Council hope that before long an honourable understanding may be arrived at. The nett receipts of the Council of the Ottoman Public Debt during the financial year ending 1-13 March last, amounted to £T.2,459,438, being the highest on record. This was principally due to the payment by Bulgaria of the arrears of the Eastern-Roumelian Annuity, for the years 1900-1, 1901-2, together with the sum due in respect of 1902-3, at the reduced rate which is accepted by the Debt Council under protest, viz.: £T.114,000 a year, making for the three years, a total payment of £T.342,000. It is satisfactory to state that the Bulgarian Government have continued the payment of the Annuity during the current financial year.

TURKEY.

In view of the fact that the receipts for the past financial year were more than sufficient to cover the payment of interest at the rate of 1 per cent., the question of distributing to the Bondholders an increased rate, which the Council of Foreign Bondholders had so frequently

urged, could no longer be delayed, and the matter came before the Debt Council early in the present year. The expectation of the increase in the rate of interest and the consequent rise in the rate of amortisation from 66% to 75 per cent. had the effect of bringing about an immediate revival of the proposals for the Unification of the Debt, and the negotiations which had been opened by M. Rouvier in 1902 and broken off shortly after the publication of the Council's last Report, were taken in hand by a group of French Banks. The Turkish Government, however, disputed the right of the Debt Council to increase the rate of interest for the coupon of March last to 1 per cent. per annum, and it was therefore arranged that the question should be submitted to arbitration, in accordance with Article XIX. of the Decree of Mouharrem. The Arbitrators failed to agree and, after various delays had been interposed by the Turkish Government, the matter was referred to the Lord Chief Justice of England for final decision.

His Lordship's award was made public on the 23rd July, and upheld the right of the Debt Council to pay an additional per cent. per annum interest.

Meanwhile negotiations had been proceeding at Constantinople, but for a considerable time their fate hung in the balance. Mr. Babington Smith had, with the approval of the Council of Foreign Bondholders, submitted to the Turkish Government a counter-proposal which offered to the Government the main advantage proposed by the Unification Scheme, viz., a division between themselves and the Bondholders of the assigned revenues over and above a certain fixed amount. At the same time Mr. Babington Smith's scheme preserved intact the

important rights as regards amortisation secured to the Bondholders by the Decree of Mouharrem, and avoided the heavy charges and expenses involved in the Unification project. The Council of Foreign Bondholders feel bound to express their regret that Mr. Babington Smith's offer was finally put on one side in favour of the proposals of the combined Banks.

On 2nd June the Sultan issued an Iradé approving the plan of Unification, which was embodied in a Draft Decree to be annexed to the Decree of Mouharrem. This document was officially communicated to the Council of Foreign Bondholders, on 10th June, by the Syndicate representing the French holders of Turkish Bonds, who at the same time stated that it had been approved by them, and requested the adhesion of the Council as one of the Syndicates whose consent was necessary under Article VII. of the Decree of Mouharrem.

The Council regret that, during the entire progress of the negotiations commenced by M. Rouvier and afterwards carried through by the Consortium of Banks, no attempt was made to ascertain the views of the English Bondholders.

On receipt of the proposed terms of arrangement, the Council at once proceeded to call a Public Meeting of Turkish Bondholders, and a strong representative Committee was chosen to examine the scheme. The Committee, after careful consideration of the whole situation, though much preferring Mr. Babington Smith's proposals, did not feel it desirable, having regard to all the circumstances, to assume an attitude of uncompromising antagonism towards the Unification, and they therefore decided to recommend the Bondholders not to oppose

B

the scheme provided certain modifications were introduced. The views of the Committee were duly communicated to the various Syndicates and Committees representing the Continental Bondholders, with the request that they would co-operate in obtaining the moderate concessions demanded.

The Continental Syndicates, however, were prepared to accept the Unification Scheme as it stood.

At the end of July, a Conference of Delegates of the Syndicates was held in Paris, when it was, suggested that the representative of the Consortium of Banks should proceed to Constantinople and, in conjunction with Mr. Babington Smith, should negotiate with the Turkish Government in order to arrive at a solution of the matter. The suggestion was approved by the Committee, and the Council are now awaiting the result of these negotiations.

The Council have to report that Mr. Babington Smith has tendered his resignation of his post on the Debt Council, having accepted a Government appointment in this country. Mr. Babington Smith has rendered most important services to the Bondholders, and has displayed remarkable tact and ability under extremely difficult circumstances. It is with deep regret that the Council have accepted his resignation, and they feel sure that the holders of Turkish Bonds in this country will fully recognise that their interests could not have been placed in better or more capable hands.

The Council have to record with deep regret the death of their colleague, Mr. H. R. Grenfell: the vacancy has been filled by the appointment of Mr. J. J. Cater by the Central Association of Bankers.