20 THE CUBA REVIEW 



limited to the completion of the above extension, and such other improvements as were 

 found absolutely necessary, such as railroad lines into new cane fields. 



During July, 1922, your subsidiary, the Eastern Cuba Sugar Corporation, created 

 a closed mortgage amounting to $10,000,000. This issue is known as Eastern Cuba 

 Sugar Corporation Fifteen Year lYi per cent IMortgage Sinking Fund Gold Bonds, and 

 is secured by a mortgage on all the fixed property of the Eastern Cuba Sugar Corpora- 

 tion. This consists of the Violeta mill with a capacity of 500,000 bags per annum, and 

 of approximately 60,000 acres of land, together with appurtenant railway trackage and 

 rolling stock. These bonds are guaranteed as to principal, interest and sinking fund 

 by the Cuba Cane Sugar Corporation which gives to the holders of the bonds the right 

 to exchange them for Cuba Cane Sugar Corporation Common Stock at the rate of $20 

 per share at any time during the life of the bonds. The bonds were offered for sub- 

 scription to the shareholders of the Company, the offer to the shareholders having been 

 underwritten by a syndicate. Concurrently with the issue and sale of these bonds, the 

 $10,000,000 loan of this Company (in favor of which certain of its Ten Year Convertible 

 Debentures subordinated their claims) was reduced to $7,500,000 and extended to 

 September 30, 1923, at the rate of 6 per cent per annum. The conclusion of these 

 refunding arrangements leaves the Company at the close of its fiscal year with only 

 $2,714,169.00 of current liabilities apart from the $7,500,000 extended loan above 

 referred to, and with $20,065,908.85 of current assets, advances to Colonos and growing 

 cane, as shown on the balance sheet. The position of the 8 per cent Convertible 

 Debentures which subordinated their claims to the $10,000,000 loan contracted 

 last year, has thus been improved through the reduction of that loan to $7,500,000, and 

 upon final payment of this loan, the subordination will be entirely relieved and the 

 8 per cent bonds will be restored to their original position, but they will continue to 

 bear 8 per cent interest against 7 per cent on the bonds which did not agree to sub- 

 ordination. 



The fixed interest charges of the Company now amount to $3,125,511.00 as follows: 



$25,000,000 7% and 8% Convertible Debentures $1,925,511 .00 



$10,000,000 Eastern Cuba Sugar Corporation 7J^% Bonds 750,000.00 



7,500,000 Extended Loan 450,000.00 



Total $3,125,511.00 



It will be observed that the earnings even during the last year of disrupted condi- 

 tions, nevertheless sufficed to meet the heavy interest charges arising from the large 

 amount of sugar the Company was compelled to carry and showed a surplus over the 

 fixed interest charges as they now exist. 



Under the provisions of the Indenture securing the Cuba Cane Sugar Corporation 

 Debenture Bonds, the issue of Eastern Cuba Sugar Corporation bonds exchangeable into 

 Cuba Cane Sugar Corporation Common Stock at $20 per chare, has operated to reduce 

 the conversion price of the 7 per cent and 8 per cent Debentures into Common Stock 

 from $60 per share to $45.88 per share. 



At the close of the last fiscal year the unsold sugars of the Corporation amounting 

 to 1,599,376 bags, were taken into the accounts at 2>4c. c. and f. less expenses but in 

 order to provide for all contingencies a reserve was set up against further declines down 

 to IYaC c. and f. The average price obtained for these sugars when they were actually 

 sold was in excess of l^^c c. and f. and the expenses considerably less than estimated, so 

 that of the reserve thus set aside there remains unusued the sum of $2,375,936.18. At 

 the same time a reserve was set up to provide for depreciation in materials and supplies 

 on hand, as prices for materials and supplies had declined very sharply and the future 

 m respect of such prices seemed very uncertain. Happily, it has proved unnecessary 

 to use the entire amount of this reserve and $524,671.35 thereof remains unused. On 

 the other hand, it has been deemed wise to set up this year some additional reserve 

 against colonos and other accounts receivable, and the sum of $500,000 has been set aside 



