REPORT OF THE AGENT GENERAL
FOR REPARATION PAYMENTS
BERLIN, June 10, 1927

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Introduction

Berlin, June 10, 1927.

TO THE REPARATION COMMISSION,

Sirs:

I have the honour to present herewith an interim Report, as Agent General for Reparation Payments, with respect to the execution of the Experts' Plan during that part of the third Annuity year which has already elapsed.

The purpose of this Report is to give the latest available figures for reparation payments and transfers, and at the same time to review in a preliminary way the further development of the German economy in relation to the operation of the Experts' Plan. The third Annuity year began September 1, 1926, and the figures for reparation payments and transfers are now at hand for the first nine months of the year, ended May 31, 1927. In considering the development of the Plan in its other relations, and the course of the German economy as a whole, this Report will cover, in substance, the period of about six months that has elapsed since the presentation of the previous Report.

The progress of the Plan itself has been characteristically normal. In other respects, however, the past six months have provided an unusually interesting record, particularly in relation to the development of the German budget and in the sphere of credit conditions. Both budget and credit conditions are discussed in the following pages somewhat more fully than usual.

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I. The Administration of the Plan.

The execution of the Plan is proceeding normally, Germany has made all the payments required of her during the first nine months of the third Annuity year, and deliveries and payments for the benefit of the creditor Powers have gone forward regularly and without interfering with the stability of the German exchange.

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a. The Payment of Reparations by Germany.

Germany has paid during the period September 1, 1926 to May 31, 1927, a total of 983,895,425.61 gold marks, of which 930,800,000 gold marks were payments on account of the third Annuity, while the balance represented payments in completion of the second Annuity which fell due in September, 1926.

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1. The Composition of the Payments.

The Annuities payable by Germany in the successive, years of the Plan are shown graphically in the table which is attached to this Report as Exhibit I. There has been no change in the composition of the Annuities since the last Report.

The third Annuity rises to a total of 1,500 million gold marks, consequence of the agreement that was made last year for the settlement of the supplementary budget contributions. This agreement, which was described at length in the previous Report, substituted a single definite payment of 300 million gold marks, to be made during the third Annuity year, for the two contingent budgetary contributions of not exceeding 250 million gold marks each that would have had to be paid during the fourth and fifth Annuity years, depending upon the yield of the controlled revenues. The composition of the third Annuity, as thus modified, may be summarized as follows:

The payments that go to make up the third Annuity are not distributed evenly through the year, and the period of nine months covered by this Report, though representing three-fourths of the Annuity year in point of time, covers but little more than three-fifths of the year in point of reparation payments. This uneven division is due principally to the arrangement of the payments on account of the supplementary budget contribution and the interest on the industrial debentures. It will be recalled that the supplementary contribution from the German budget is payable in seven instalments, October to April inclusive, of 18 million gold marks each, and five instalments, May to August inclusive, of 34.8 million gold marks each, the last two instalments being, both payable in August. The interest on the industrial debentures, moreover, is payable on April 1, and August 25, in equal instalments of 125 million gold marks. Two payments on account of the third Annuity will not become due and payable until the first month of the fourth Annuity year, namely, the final instalment of the year's interest on the Railway bonds, amounting to 55 million gold marks, which comes due on September 1, 1927, and the balance of 20 million gold marks on account of the transport tax, which falls due to be paid on September 15, 1927, out of the yield of the tax for the third Annuity year.

During the first nine months of the third Annuity year, in addition to the receipts on account of the third Annuity itself, there have been payments to the amount of 53,095,425.61 gold marks in completion of the second Annuity. These payments have already been noted in the previous Report, but they must naturally be taken into account in considering the reparation receipts that have become effectively available for expenditure during the period covered by the present Report.

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2. Payments on Account of the Third Annuity.

The arrangements for the payment of the third Annuity were fully described in the preceding Report. The payments for the first nine months of the year have been made promptly when due, exactly in conformity with the agreed arrangements. The sources of the payments, and the amounts received from each source during the period, may be summarized as follows:

The transport tax payments during the third Annuity year are being made in accordance with the arrangement described in the last Report, at the rate of 22.5 million gold marks a month beginning with September, 1926, and continuing throughout the year. This will mean total payments of 270 million gold marks by the end of August, 1927. The total payment for the year, as contemplated by the Plan, should amount to 290 million gold marks, and the 20 million gold marks additional that are required to make up this total are to be paid on September 15, 1927, according to the actual yield of the transport tax for the year. The following table shows the figures for the yield of the transport tax during the first eight months of the year, as reported by the Finance Minister of the Reich, in comparison with the monthly sums received from Germany during the same period under the agreed arrangements for the payment of the tax:

These figures indicate that the actual yield of the tax is keeping slightly ahead of the agreed monthly payments, but some further improvement will have to be shown in order to cover the full year's contribution.

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3. The Arrangements for the Fourth Annuity.

The fourth Annuity payable under the Experts' Plan amounts to 1,750 million gold marks, made up as follows:

It will be observed from the foregoing sum that he fourth year for the first time there will be included the additional one per cent for amortization on the Railway bonds and industrial debentures, and that the contributions from the Railway bonds, the industrial debentures and the transport tax are all at their standard levels in the fourth year. The Annuity as a whole increases by a further 750 million gold marks in the fifth or standard Annuity year, but this increase falls entirely on the contribution from the German budget, which rises from 500 million gold marks in the fourth Annuity year to 1,250 million gold marks in the fifth Annuity year.

By way of preparation for the fourth Annuity year, the Agent General for Reparation Payments has recently concluded a new agreement with the German Railway Company for continued monthly payments on account of the service of its reparation bonds, subject to a discount at the rate of 5 per cent per annum on all payments made in advance of the legal due dates. This agreement has now been approved by the Reparation Commission, acting in behalf of the creditor Powers, and it has also received the assent of the Government of the Reich. It gives new evidence of the friendly cooperation of the German Railway Company and of the German Government, and it will greatly facilitate the orderly development of payments and transfers under the Experts' Plan.

Previous Reports have described the agreement that was reached with the German Railway Company in 1925 for monthly payments of interest during the second and third Annuity years and for advance payments during the month of August, 1925. This agreement is still in course of practical execution but it comes to an end, according to its terms, with the expiration of the third Annuity year. Without some new arrangement, therefore, the payments on account of the service of the reparation bonds of the Railway Company would have reverted automatically to their legal due dates, that is to say, March 1st and September 1st in each year, beginning with the fourth Annuity year. The agreement which has now been made for continued monthly payments follows substantially the same lines as the previous agreement, but at the same time differs from it in two important respects. In the first place, the rate of discount to be allowed under the new agreement on payments made in advance of the legal due dates is reduced from 6 per cent to 5 per cent per annum. This will mean a material saving to the Annuity. Secondly, it is to be observed that whereas the first agreement with the Railway Company covered only a limited period the new agreement for monthly. payments will continue automatically from year to year after the fourth Annuity year unless the Agent General for Reparation Payments, on the one hand, or the German Railway Company, on the other, gives notice before the 31st of May in any year of a desire to alter the rate of discount or to modify the method of payments for the ensuing Annuity year. This provision makes it unnecessary to have negotiations each year for a new agreement, but at the same time protects the position of the parties in the event that either side should desire for any reason to modify or denounce the agreement for the next ensuing year.

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b. The Distribution of the Annuity

The distribution of the reparation payments received from Germany has proceeded regularly throughout the first nine months of the third Annuity year.

The actual distribution made during the period under review is summarized below and appears with additional detail in the chapter referring to the work of the Transfer Committee.

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1. The Basis of Distribution.

The basis of distribution has been fully explained in previous Reports. The service of the German External Loan, 1924, always constitutes a first charge on the Annuities. Ranking next after the service of the loan come various charges recognized by the Finance Ministers' Agreement of January 14, 1925, and consisting chiefly of the costs of administration of the various Inter-Allied Commissions, which have to be paid out of the Annuities before calculating the shares of the creditor Powers. The shares of the Powers themselves include not merely their respective shares of reparation, as divided according to the so-called Spa percentages, but also their various allowances on account of restitution, for Army costs, both current and in arrears, the allotments for the Belgian war debt, and the special share allotted to the United States of America in respect of the Awards of the Mixed Claims Commission. Since the last Report a new agreement has been concluded, under date of January 13, 1927, supplementing the provisions of the Finance Ministers' Agreement in several respects. This agreement, which was made retroactive as from April 1, 1926, has reduced the maximum expense allowances of the Rhineland High Commission and the Military Com mission of Control, modified the method of computing the costs of the Armies of Occupation, and reduced the maximum yearly allowance for such costs from 160 million to 141 million gold marks.

Tables showing the revised distribution of the second and third Annuities, after giving effect to these modifications, are attached to this Report as Exhibits II and III. The distribution of the second Annuity may now be regarded as final for all practical purposes, the only other adjustment foreseen being a comparatively unimportant one in the costs of Inter-Allied Commissions. The distribution of the third Annuity is, of course, provisional and subject to revision. It should be noted in this connection that a portion of the funds available for expenditure during the third Annuity year represents a balance remaining over from the second Annuity and follows the distribution of the second Annuity rather than the third.

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2. The Agent General's Receipts and Payments.

The interim accounts of the Agent General for Reparation Payments for the first nine months of the third Annuity year, in the form of a Balance Sheet, as of May 31, 1927, and a Statement of Receipts and Payments for the period September 1, 1926, to May 31, 1927, are attached to this Report as Exhibits IV and V respectively. There are also attached two further statements showing how the distribution of the payments in greater detail, one, appearing as Exhibit VI, which gives the distribution among the Powers of the amounts available for expenditure during the nine months' period, and the other, appearing as Exhibit VII, which analyses the payments and accounts payable according to categories of expenditure. The accounts are all kept in gold marks, on the basis prescribed in the London Agreement.

As more fully appears from the Exhibits, the total funds at the disposal of the Agent General during the nine months' period amounted to 1,079,437,682.81 gold marks, made up as follows: (1) the cash balance brought forward from the second Annuity year, as at September 1, 1926, amounting to 93,626,074.81 gold marks; (2) the receipts from Germany in September, 1926, in completion of the second Annuity, amounting to 53,095,425.61 gold marks; (3) the receipts from Germany on account of the third Annuity, amounting to 930,800,000 gold marks; and (4) the interest earned on cash balances, amounting to 1,916,182.39 gold marks. From this total must be deducted the sum of 5,128,076.64 gold marks, representing the agreed discount on advance payments of interest by the German Railway Company, and 778,368.20 gold marks for loss in exchange. The effective balance in hand for distribution among the creditor Powers and for meeting the other charges contemplated by the Plan thus amounted to 1,073,531,237.97 gold marks. Out of this balance 66,466,086.34 gold marks were required for the service of the German External Loan, 1924; 8,001,250.60 gold marks for the expenses of Inter-Allied Commissions; and 66,729.14 gold marks for the costs of arbitral bodies established under the Plan. There remained, after meeting these prior charges, a total of 998,997,171.89 gold marks for distribution among the Powers, of which 847,449,499.30 gold marks were actually spent during the period, leaving a cash balance as at May 31, 1927, of 151,547,672.59 gold marks. Against this balance there were outstanding commitments on May 31, 1927, to a total of over 93,000,000 gold marks, consisting of accounts payable to the amount of 37,836,497.82 gold marks and commitments under approved contracts for deliveries in kind to the amount of 55,255,725.70 gold marks.

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3. The Use of the Funds by the Creditor Powers.

During the first nine months of the third Annuity year the creditor Powers have utilized the funds available to them for expenditure in the following manner:

(1) France. The share available to France amounted to about 516,687,000 gold marks, of which 46,212,000 gold marks were brought forward from the second Annuity year. France has taken about 41,455,000 gold marks for the expenses of her army of occupation in the Rhineland, and about 55,688,000 gold marks through the operation of the Reparation Recovery Act, in the franc equivalent at the Banque de France. France has also received cash transfers amounting to 56,993,000 gold marks, of which 56,707,000 gold marks were transferred in foreign currencies and 286,000 gold marks represented re payments in settlement of balance for services rendered by the German Government prior to September 1, 1924. Of the remainder of the French share, about 161,323,000 gold marks were expended for the purchase of coal., coke and lignite, and for transport thereon; 34,124,000 gold mark for chemical fertilizers; 18,623,000 gold marks for timber; 7,417,000 gold marks for agricultural products; 4,373,000 gold marks for sugar; 2,173,000 gold marks for dyestuffs and pbarmaceutical products; and about 57,013,000 gold marks for miscellaneous payments and deliveries of great variety. The above items total 439,182,000 gold marks., leaving an unexpended balance of 77,505,000 gold marks. Of this balance about 43,168,000 gold marks were held committed on May 31, 1927, to meet payments provided for in approved contracts for deliveries in kind but not yet called for, owing mainly to delays in delivery.

(2) The British Empire. The share available to the British Empire amounted to 204,242,000 gold marks, of which 1,073,000 gold marks were brought forward from the second Annuity year. Great Britain has received during the nine months' period 15,673,000 gold marks towards the expenses of its army of occupation in the Rhineland; 23,618,000 gold marks as cash transfers in foreign currencies; and 51,000 gold marks in miscellaneous payments. Great Britain has also taken the sum of 164,795,000 gold marks through the operation of the Reparation Recovery Act, in the sterling equivalent at the Bank of England. The unexpended balance of the British share on May 31, 1927, amounted to only 105,000 gold marks.

(3) Italy. The Italian share amounted to about 74,398,000 gold marks, of which 10,251,000 gold marks were carried over from the second Annuity year. During the nine months the Italian Government has taken 45,627,000 gold marks for coal and coke, and transport thereon; 2,456,000 gold marks for coal by-products; 2,528,000 gold marks for dyestuffs and pharmaceutical products; and 8,845,000 gold marks for miscellaneous payments and deliveries. In addition Italy has received cash transfers in foreign currencies amounting to 8,005,000 gold marks. There remained at May 31, 1927, an unexpended balance of 6,937,000 gold marks of which 1,121,000 gold marks were held committed under approved contracts for deliveries in kind.

(4) Belgium. The share of Belgium amounted to about 72,161,000 gold marks, of which 9,496,000 gold marks represented an unexpended balance from the second Annuity year. The expenses of the Belgian army of occupation in the Rhineland have taken 3,278,000 gold marks, and Belgium has received cash transfers in foreign currencies amounting to 6,218,000 gold marks In addition, 4,369,000 gold marks have been expended for coal, coke and lignite, and for transport thereon; 7,710,000 gold marks for chemical fertilizers; 2,157,000 gold marks for timber; 4,354,00 gold marks for dyestuffs and pharmaceutical products; and 22,815,000 gold marks for miscellaneous payments and deliveries of great variety. Altogether, Belgium has received in the nine months a total of 50,901,000 gold marks. The unexpended balance of the Belgian share on May 31, 1927, amounted to 21,260,000 gold marks, of which 5,285,000 gold marks were held committed under approved contracts for deliveries in kind.

(5) Serb-Croat-Slovene State. The Serbian share amounted to about 37,737,000 gold marks, of which 5,642,000 gold marks were carried over from the second Annuity year. The Serbian Government has received 30,229,000 gold marks in miscellaneous payments and deliveries, and 1,897,000 gold marks for the first payments on account of the construction of the bridge across the Danube between Belgrade and Pancevo. Practically the whole of the unexpended balance of the Serbian share, amounting to 5,611,000 gold marks on May 31, 1927, was held committed under approved contracts for deliveries in kind .

(6) The United States of America. The share of the United States amounted to about 68,888,000 gold marks, of which 19,090,000 gold marks represented an unexpended balance brought forward from the second Annuity year. The United States Government has received during the nine months 33,539,000 gold marks in cash transfers on account of its priority for Army costs in arrears, under Art. 3A(1) of the Allied Finance Ministers' Agreement of January 14, 1925. It has also received cash transfers in foreign currencies amounting to 3,579,000 gold marks, on account of its regular 2 1/4 per cent share in the Annuities. Practically all the remainder of the American share, amounting to about 31,770,000 gold marks, has been taken, in the dollar equivalent, under a special agreement with the German Government for regular monthly payments on a basis substantially analogous to the financing of deliveries in kind.

(7) Rumania. The Rumanian share amounted to about 8,284,000 gold marks, of which 285,000 gold marks were brought forward from the second Annuity year. Rumania has received cash transfers in foreign currencies amounting to 950,000 gold marks, and 7,141,000 gold marks in miscellaneous payments and deliveries. The unexpended balance of the Rumanian share on May 31, 1927, amounted to 193.000 gold marks.

(8) Japan. The share available to Japan amounted to about 9,826,000 gold marks, of which 4,436,000 gold marks were carried over from the second Annuity year. Japan has used 2,745,000 gold marks for chemical fertilizers and 2,803,000 gold marks for miscellaneous deliveries in kind, and has also received cash transfers in foreign currencies to the amount of 640,000 gold marks. The unexpended balance to the credit of Japan on May 31, 1927, amounted to 3,638,000 gold marks.

(9) Portugal. The Portuguese share amounted to 5,426,000 gold marks, of which 61,000 gold marks were brought forward from the second Annuity year. Of this sum Portugal received 326,000 gold marks as a cash transfer in foreign currencies and expended 4,936,000 gold marks for miscellaneous deliveries in kind, leaving a current balance of 164,000 gold marks.

(10) Greece. The Greek share amounted to about 2,922,000 gold marks, of which 97,000 gold marks represented a balance brought forward from the second Annuity year. Practically the whole of this sum was expended for miscellaneous deliveries in kind.

(11) Poland. The Polish Share, which arises entirely on account of restitution, amounted to about 229,000 gold marks of which 93,000 gold marks were carried over from the second Annuity car. Poland has received during the nine months 39,000 gold marks in the form of cash transfers, of which 16,000 gold marks were in foreign currencies and 23,000 gold marks represented payments in settlement of balances owing for deliveries made or services rendered by the German Government prior to September 1, 1924. Practically the whole of the remainder of the Polish share has. been expended in the purchase of horses and for the incidental expenses incurred in that connection.

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c. The Management of the Annuity.

The routine administration of the Annuity has continued along the lines already established, and every effort has been made, as in the past, to secure and maintain the most business-like arrangements for the handling of reparation payments and their distribution among the creditor Powers.

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1. Regulation of Programmes.

The Agent General has continued the practice of arranging regular monthly programmes of deliveries and payments, and of presenting the draft programmes for periods of three months to the Reparation Commission and the Transfer Committee sufficiently in advance to assure their consideration of the various classes of expenditure as contemplated by the Plan. In this way, also, the creditor Powers receive notice of their credits for the ensuing months in time to enable them to make their own arrangements.

The importance of the general principle of monthly programmes has been emphasized from the very beginning of the Plan. At the same time, it is necessary to remember that the monthly programmes themselves depend upon the monthly income,, that the payments from Germany are not distributed evenly over the year, and that it is accordingly impossible in any year to make anything like an equal apportionment of the Annuity over the twelve months. In the third Annuity year, for example, the payments from Germany are relatively much larger during the last five months of the year than in the first seven, and the monthly programmes have had to be adjusted accordingly, in order to correspond with actual income. The third Annuity as a whole amounts to 1,500 million gold marks, and if it could be exactly apportioned would provide for monthly programmes of 125 million gold marks throughout the year. In actual fact, however, on the basis of available receipts, the programme for September, 1926, the first month of the year, amounted to only 85 million gold marks, of which about 53 million gold marks represented second Annuity income., while for the next live months, through February, 1927, the programmes averaged only about 94 million gold marks a month. In March, 1927, the seventh month, the monthly programme rose for the first time in the year to nearly 100 million gold marks. For the last five months of the year, the programmes become much larger but show even greater variations, owing chiefly to the payments on account of the interests on the industrial debenture in April and August. In April, for example, the monthly programme amounted to about 214 million gold marks, and in August the available credits will be even larger, amounting altogether to about 271 million gold marks because of the industrial debenture interest and the extra payment in that month on account of the supplementary budget contribution. For the intervening months, May, June and July, 1927, the income of the Annuity is more regular and the monthly programmes will be in the neighborhood of 110 million gold marks per month.

These variations in the monthly programmes have naturally had the effect of producing a somewhat similar unevenness in the deliveries and payments to the creditor Powers during the period covered by this Report. At the same time, their tendency is to encourage increased deliveries and payments in the last five months of the year, and this in turn should be helpful in preparing the way for the larger programmes of the fourth Annuity year.

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2. Settlement of Old Accounts.

Further progress has been made since the last Report in the settlement of old accounts. In accordance with the provisions of Article 19 of the Finance Ministers' Agreement of January 14, 1925, the Reparation Commission has drawn up an account, as of September 1, 1924, showing for each Power the amount received in excess or in arrears of its share, in consequence of the distribution of Germany's payments and deliveries before the coming into force of the Experts' Plan. Under Article 20 of the Finance Ministers' Agreement the Powers with excess receipts are obliged, commencing September 1, 1926, to make repayments to the Powers in arrears, and the preparation of the excess and arrear accounts made it necessary for the Reparation Commission, as a matter of accounting between the Powers, to determine the valuation of substantially the whole of Germany's reparation payments and deliveries prior to September 1, 1924. This was a task presenting many complications, but the Commission was nevertheless able to prepare the accounts and fix the amounts to be repaid by the Powers having excesses, and the provisional distribution of these amounts between the Powers in arrears, in time for inclusion in the first programmes for the third Annuity year. Only Italy and Serbia were found to have had receipts in excess of their shares. Repayment of these excesses is now being made by the deduction of 10 per cent from their respective shares in the third Annuity, and will continue until the debt is entirely repaid, with interest at the rate of 5 per cent per annum, as required by the Finance Ministers' Agreement.

Since the last Report, moreover, improved arrangements have been made for the valuation of German furnishings and contributions to the Armies of Occupation under Articles 8 to 12 of the Rhineland Agreement. The Financial Regulations of May 5, 1925, which prescribed the procedure for determining these valuations., had presented many complications in actual. practice, and in November, 1926, a Joint Organizing Committee was appointed, under the Chairmanship of M. Patijn, to suggest amendments to the regulations that would accelerate the procedure and at the same, time make proper provision for putting at the disposal of the German Government the funds required to cover its expenditure under these articles of the Rhineland Agreement. The Committee made its report on January 19, 1927, recommending two addenda to the original Regulations which are designed to effect a considerable simplification in the procedure. These addenda were promptly accepted by all the Governments concerned, and it is hoped that the valuation of these furnishings and contributions will now be effected expeditiously and on a regular monthly basis.

Unfortunately, no progress whatever seems to have been made in fixing the valuation of requisitions and damages under Article 6 of the Rhineland Agreement. This is a question which has been pending since the beginning of the Plan, and from time to time it has been the subject of negotiations between the Allied Governments concerned and the German Government. The amount involved is relatively not very large, but it is none the less desirable that some basis of settlement should be found in the near future. With this in view, the Agent General for Reparation Payments suggested to the Reparation Commission, on February 23, 1927, that in default of any progress through negotiations it would be advisable either to appeal to the good offices of a disinterested mediator or to arrange in a more formal way for the arbitration of the issues that may be in dispute.

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3. Administrative Organization.

A summary of the present status of the organization established. for the administration of the Experts' Plan, which now numbers 129, is attached to this Report as Exhibit VIII. As will be observed, this summary includes the staff of the Agent General for Reparation Payments, the Transfer Committee, and the several Commissioners and Trustees, as well as the general administrative services of the Office for Reparation Payments.

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d. Arbitration Proceedings.

The preceding Report recalled the fact that only one question was then pending before the Arbitral Tribunal constituted under the London Agreement to hear and determine "disputes which may arise between the Reparation Commission and Germany with regard to the interpretation either of the agreement concluded between them, the Experts' Plan, or the German legislation enacted in execution of the Plan". On January 29, 1927, the Arbitral Tribunal decided the question at issue in favor of the Reparation Commission, and embodied its decision in the following award:

"The Annuities prescribed by the Experts' Plan as payable to the Agent General for Reparation Payments do not Comprise: Compensation paid since the 1st September 1924, or which may be paid in the future by the German Reich to German nationals in respect of the retention, liquidation or transfer of their property, rights or interests---on whatever date such measures may have been taken---such payments being made in execution of the Treaty of Versailles and particular under the following Articles of the Treaty---that is to say Articles 297(i), 74, 145, 156 (2nd paragraph) read with paragraph 2 of the Protocol signed at Versailles on the 28th June 1919, and 260."

In giving the foregoing award, the Tribunal made the following statement: "It seems to the Tribunal to be essential to remember that it is here solely concerned with this question whether compensation paid or to be paid to German nationals after the 1st September 1924, for the retention, liquidation or transfer of their property, rights or interests, is to be comprised in the annuities, and to distinguish between this question and the entirely different question which is not submitted to it by the Terms of Submission, namely whether credits given or to be given to Germany after the 1st September 1924 for the value of property, rights or interests of German nationals, retained, liquidated or transferred, are to be deducted from the annuities." It is understood that the German Government has now raised this latter question with the Reparation Commission, with a view to presenting it, if necessary, to the Arbitral Tribunal for decision.

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e. The German External Loan, 1924.

The German External Loan was issued as of October 15, 1924, and the third loan year began October 15, 1926. A statement in the usual form, showing the condition of the loan as of April 15, 1927, at the end of the first half of the loan year, is attached to this Report as Exhibit IX. The Agent General for Reparation Payments, acting for the Trustees of the Loan, has continued to provide the. funds required for the service of the loan out of the Annuity, as contemplated by the Plan. About 45 million gold marks were advanced for this purpose during the first half of the third loan year, practically all in foreign currencies.

The appreciation of the bonds in the markets of the world has made it more and more difficult for the Trustees to secure bonds in the market for sinking fund purposes at prices not exceeding those fixed for redemptions by drawings. The Trustees have continued, however, to make such purchases wherever possible, and have succeeded during the first half of the present loan year in buying bonds up to approximately the full limit of funds available in the case of the Italian tranche, and to a much smaller extent in the, case of the American tranche. The capital saving thus effected accrues to the benefit of the Annuity.

It was contemplated, at the time the loan was issued, that arrangements should be made, after the lapse of two years, for the quotation on the London Stock Exchange of the bonds of all tranches of the loan which are payable in sterling. The bonds of all the sterling tranches have now been officially admitted to quotation on the London Stock Exchange, and also in Amsterdam.

Section II, The Transfer Committee

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