1925-8% Skoda Loan II

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1 1925-8% Skoda Loan II Bearer Bonds Denomination Series No. Issued Serial Nos. CHB Reference KUHL , , /8SKO/ 5/IBC ,604 3,402-8, /8SKO/ 10/IBC ,000 8,006-14, /8SKO/ 50/IBC ,030 14,006-20, /8SKO/ 100/IBC ,200 20,036-22, /8SKO/ 500/IBC 704 1, ,800 22,236-27, /8SKO/ 1000/IBC 705 Scroll down or click link for Illustration KUHLMANN KUHLMANN Misprint KUHLMANN KUHLMANN - 701(E) Coupons KUHLMANN KUHLMANN KUHLMANN KUHLMANN Currency Note: Prior to decimalisation, the pound sterling was divided into 20 shillings and each shilling into 12 pence, making 240 pence to the pound. The symbol for the shilling was "s."; not from the first letter of the word, but from the Latin word solidus. The symbol for the penny was "d.", from the French denier and from the Latin denarius (the solidus and denarius were Roman coins). A mixed sum of shillings and pence such as 3 shillings and 6 pence was written as "3/6" or "3s. 6d." and spoken as "three and six". 5 shillings was written as "5s." or, more commonly, "5/-". The stroke (/) indicating shillings is also known as a solidus, and was originally an adaptation of the long S which represented that word. The Skoda Loan II of 1925 was for the capital sum of 6,866,046 10/10. The loan was issued subject to and with the benefit of an agreement dated 14th November 1922 and a Supplementary Agreement dated 30th September 1925 between the Chinese Minister of Finance, representing the Chinese Government and the Italian Bank for China formerly known as the Sino-Italian Bank. The Italian Bank for China was acting on behalf of the bond holders of the succession loans to the Skoda Loan I in 1911, which were referred to as the 1912 Arnhold Karberg Loans I & II, the 1913 Arnhold Karberg Loan III, the 1913 Austrian Loans I & II, and the 1914 Austrian Loan III. New 1925 Skoda Loan II bonds, to the face value of 150, were issued for every 100 due on the 1911 Skoda Loan I, and the succession loans listed above. The financial institutions which participated in the loan were the Italian Bank for China, Credito Italiano Bank of London, and J. Hambro & Sons in London. Bearer bonds of six different denominations were issued as listed in the table above. The Skoda Loan II was guaranteed by the securities 1 detailed on the original Skoda Loan I and the succession loans listed above. It was further secured by a first charge upon the tax on the Transfer of Property and Title Deeds. The coupons were payable on 30th June and 30 December each year. For each of the six denominations of bonds issued, there were ten different redemption dates and in consequence different numbers of coupons were attached to each bond depending upon the redemption dates. These variations within each denomination effectively means that there are a total of 60 different variations of the bonds issued under the Skoda Loan II. The original 1911 Skoda Loan I was for the capital sum of 750,000 and was offered to the Chinese Goverment by Arnhold, Karberg & Co. The purpose of the loan was to purchase arms for naval and military use from the Skoda Works factory in Pilsen, Czech Republic 2 1 The earlier Skoda Loan I was secured against salt taxes and the surplus revenues from the Salt Gabelle. The Arnhold Karberg Loans I & II were secured on the Peking Octroi, a local tax on the movement of goods into and out of Peking. The Arnhold Karberg Loan III and the Austrian Loans I, II & III were secured upon the tax on the transfer of property and title deeds. 2 Prior to 1918, Pilsen, and indeed all of Czechoslovakia, was part of the Austrian- Hungarian Empire. In October 1918 Czechoslovakia became a sovereign state in Central Europe and remained so until it separated into the Czech Republic and Slovakia on 1 st January Page...241

2 and also from the Monfalcone Shipbuilding Yards in Italy. Hence the common name of the loan as the Skoda Loan. Arnhold, Karberg & Co Arnhold, Karberg & Co. was founded by Jacob Arnhold, a German businessman, and Peter Karberg, a Danish merchant, as a Germanregistered trading company in September The company was initially located on Honam island, opposite to the city of Canton in China. The firm opened its first branch in Hong Kong in 1867, and later opened a branch in Shanghai on 1 st January By 1901, Arnhold, Karberg & Co had 37 branches throughout China. When the Skoda Loan I was floated in 1911, it was during a period of dramatic change in China with the overthrow of the Chinese Imperial Government and the establishment of the Republic of China, headed by Dr. Sun Yat Sen as President. In 1912 Dr. Sun Yat Sen was replaced as President by Yuan Shi Kai, who had strategic military support from Chinese army factions. It is therefore not surprising that Arnhold, Karberg & Co. renegotiated new loan agreements in which completely redeemed the original 1911 Skoda Loan I. These new loan arrangements were known as the 1912 Arnhold Karberg Loan I ( 300,000), 1912 Arnold Karberg Loan II ( 450,000) and the 1913 Arnhold Karberg Loan III ( 300,000). Subsequently, the Arnhold Karberg Loans I, II & III were completely redeemed by the 1913 Austrian Loan I ( 1,200,000), the 1913 Austrian Loan II ( 1,500,000) and the 1914 Austrian Loan III ( 500,000). In 1925, the Austrian Loans I, II & III were fully redeemed by the Skoda Loan II. Data Anomalies Any collector of these bonds will immediately notice certain unusual features and obvious data anomalies contained on the actual bond documents. The first of these is the capital sum which is denoted as a very precise figure of pounds, shillings and pence. This is very unusual as most loan agreements are specific to a large sum rounded up to quite large figures. Despite extensive research the authors are unable to ascertain the reason for this and can only suggest a possible explanation which might be that the capital sum was derived from the outstanding amounts of principal and interest owing from the Skoda Loan I and the succession loans. Redemption Sums The next data anomaly that arises is that the sums to be redeemed on the ten dates specified are all expressed as precise figures of pounds, shillings and pence, but the total of these ten amounts do not correspond to the total capital figure 6,866, /10 listed on the bond. There is a discrepancy of 12 shillings and 2 pence. A further data anomaly is that the annual sums to be redeemed when calculated using the face values of the bonds listed as due for redemption on a specific date, does not correspond to the specific capital sum listed for that date. For example the total capital sum to be redeemed on 31st December 1925 is listed as 686, /2, but when the face value of all the bonds to be surrendered on that date is calculated it gives a total value of 686,600. There is a discrepancy of 4. 12s 2d. Page...242

3 Total Face Value of Bonds Issued under Skoda Loan II Denomination No. Issued Serial Nos. Total Amount 5 3, ,401 17, ,604 3,402-8,005 46, ,000 8,006-14, , ,030 14,006-20, , ,200 20,036-22,235 1,100,000 1,000 4,800 22,236-27,035 4,800,000 6,866,045 Another data anomaly relates to the face value of the bonds that were issued. Again the total face value of the bonds issued does not correspond to the total capital sum of 6,866,046 10s 10d listed on the bond. It can be seen the total face value of bonds issued is 1. 10s 10d short of the capital sum as can be seen from the table above. Wilhelm Kuhlmann also commented 1 on a duplication in the various loan amounts listed at the top of the bond and recorded the fact that the sum of 500,000 of the loan dated 27th April 1914 (Austrian Loan III) had in fact been listed in error as that specific sum had already been included as part of the earlier Loan of 2,000,000 dated the 10th April 1913 (Austrian Loan II). A further idiosyncrasy of these bonds is the statement contained on the bond which states: bearing interest at the rate of 8.-/- per cent per annum, This again is something of an anomaly as clearly the percentage rate should not have been expressed in pounds, shillings and pence, but rather as just a figure 8 to denote the specific interest rate which was applicable to the loan. Denomination Labels Another strange feature of these bonds is that there is a denomination label affixed to the top-right corner of each bond using some form of adhesive. The denomination of each bond is clearly printed on the bond at seven separate positions and it remains something of a mystery as to why it was considered necessary to provide an additional label to identify the denomination of the bond. Given all of these various anomalies it appears that there was a lack of care taken in the preparation of the content of the documents and subsequent proof-reading of the original printing samples of the documents, or maybe there were unknown conditions and stipulations which were not recorded on the bonds. But perhaps the simplest explanation is that the Italian banking staff struggled with the arithmetic and the English! 1 Footnote to Page 120, China s Foreign Debt by Wilhelm Kuhlmann. Page...243

4 1925 Skoda Loan II Bond for Denomination /8SKO/ 5/IBC : KUHLMANN Page...244

5 1925 Skoda Loan II Bond for Denomination 5 Example of a Misprint 1925/8SKO/ 5/IBC/MIS : KUHLMANN - 700MP The misprint on the above bond is on the right-hand serial where No. is printed upside-down. Page...245

1925 Skoda Loan II Bond for Denomination 10

6 1925 Skoda Loan II Bond for Denomination /8SKO/ 10/IBC : KUHLMANN Page...246

1925 Skoda Loan II Bond for Denomination 10 Coupon Sheet 1925/8SKO/ 10/IBC : KUHLMANN - 701(D) Coupon Sheet The number of coupons attached to 1925 Skoda Loan II bonds varied according to the

7 1925 Skoda Loan II Bond for Denomination 10 Coupon Sheet 1925/8SKO/ 10/IBC : KUHLMANN - 701(D) Coupon Sheet The number of coupons attached to 1925 Skoda Loan II bonds varied according to the redemption date. The above example shows a coupon sheet from a 10 bond, Serial No , which had a redemption date of 31st December As such, there were only seven coupons attached to the bond. Page...247

1925 Skoda Loan II Bond for Denomination 50

8 1925 Skoda Loan II Bond for Denomination /8SKO/ 50/IBC : KUHLMANN Page...248

1925 Skoda Loan II Bond for Denomination 100

9 1925 Skoda Loan II Bond for Denomination /8SKO/ 100/IBC : KUHLMANN Page...249

10 1925 Skoda Loan II Bond for Denomination /8SKO/ 500/IBC : KUHLMANN Page...250

1925 Skoda Loan II Bond for Denomination 1,000

11 1925 Skoda Loan II Bond for Denomination 1, /8SKO/ 1000/IBC : KUHLMANN Page...251

Pricing Supplement. This document constitutes the Pricing Supplement relating to the issue of Notes described herein.

Pricing Supplement. This document constitutes the Pricing Supplement relating to the issue of Notes described herein. Pricing Supplement 28 March 2012 Howes Capital Limited Issue of U.S.$600,000,000 4.75 per cent. Guaranteed Notes due 2017 Guaranteed by Shangri-La Asia Limited under the U.S.$3,000,000,000 Medium Term