All such bonds shall be exempt from any and all taxes whatsoever, and the payment of the principal and interest thereof shall be a charge upon the consolidated revenues of the Territory.

In the discretion of the Governor and Treasurer, said refunding bonds may be exchanged at not less than their par value for an equal amount of the bonds to be refunded under the provisions of this chapter at not more than their par value, or said refunding bonds may be sold as provided by this chapter and the proceeds therefrom applied solely to the payment of the bonds to be refunded under the provisions of this chapter. All bonds so refunded and redeemed by the issue and sale or issue and exchange of refunding bonds as herein provided for shall be cancelled.

Sinking Fund

Chapter 89, Revised Laws, 1915

SECTION 1182. How made; sinking fund account. The Treasurer of the Territory is authorized and empowered to establish as a special deposit in the treasury of the Territory a sinking fund with which to pay any present or future bonded indebtedness of the Territory, and on the second interest paying date of any Territorial bond issue hereafter made, whether the same is a refunding bond issue or otherwise, and on the same date each year thereafter until all of the bonds of such issue have been called in, he shall transfer from the current receipts of the Territory and deposit to the credit of said sinking fund such a sum of money that the aggregate of such sums so annually deposited will, compounded annually at the rate of interest specified in the bonds of such issue, amount at the expiration of the term for which said bonds are issued, to the full face value thereof.

The Treasurer shall also deposit to the credit of said sinking fund, immediately upon receipt thereof, all compensation_received from any of the counties or municipal divisions of the Territory in payment for public improvements transferred by the Territory to said counties or municipal subdivisions of the Territory.

The Treasurer shall also deposit to the credit of said sinking fund, immediately upon the receipt thereof, all receipts from government land sales made by the Commissioner of Public Lands.

Except as provided by this chapter, such sums so deposited as aforesaid shall be used for the redemption or purchase of any outstanding Territorial bonds and shall not be held exclusively for the redemption or payment of the bonds used as a basis for the annual deposits.

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*

The Auditor of the Territory shall open and keep in his books a separate and special account of this fund, which shall be known as the sinking fund account and which shall at all times show the exact conditions thereof.

SECTION 1183. Redemption, notice by advertisement. Whenever the sum on deposit to the credit of said sinking fund is sufficient, the Treasurer may redeem one or more bonds; provided, however, that prior to such redemption he shall advertise in a newspaper of general circulation published in Honolulu, and in places other than Honolulu where interest payments upon said bonds are made, not less than once a week for three successive weeks that he is prepared to pay such bonds, together with all interest accrued thereon, giving the numbers, issue, date, date of payment, the date interest will cease, and such further information as may be required by the terms of the said bond or any law of the Territory of Hawaii. If said bonds so sought to be redeemed as aforesaid are not presented for payment or redemption on or before the payment date specified in said advertisement, the amount due thereon shall be held exclusively for the payment of said bonds whenever presented. All redemptions shall be made as provided by law and no notice of redemption shall be required other than that by publication as hereinbefore provided.

SECTION 1184. Purchase of bonds, when. Provided it can be shown to be to the financial advantage of the Territory, the Treasurer of the Territory, by and with the consent of the Governor, is authorized to buy in the open market any of the outstanding bonds of the Territory of Hawaii not yet redeemable whenever there are any funds to the credit of the sinking fund account in excess of the amount needed for the redemption of any bonds when redeemable, the expense of such purchase over and above the purchase price of said bonds to be a proper charge against this fund.

SECTION 1185. Temporary use of fund to pay warrants. The Treasurer of the Territory is authorized by and with the consent of the Governor of the Territory, to make temporary use of any part or portion of said sinking fund not held for the payment of bonds legally called in, for the purpose of paying the warrants drawn on the treasury for current indebtedness of the Territory, whenever the current cash in the Territorial treasury is not sufficient to pay the same; provided, however, that all sums so taken shall be redeposited to the credit of said sinking fund not more than fifteen days after the next succeeding delinquency date of property and income taxes.

SECTION 1186. Transfer of other funds to sinking fund. All funds available for the payment of bonded indebtedness under the

provisions of Section 373 shall be transferred from time to time to the sinking fund account herein created and be subject to all the conditions of this chapter.

EXEMPTION FROM TAXATION

Principal and interest are exempt from any and all taxes of the Territory. Exempt from Federal Income Tax. Exempt from Federal stamp duties.

The Treasurer of the Territory of Hawaii, when inviting proposals for the 4 per cent. Public Improvement bonds under date of September 1, 1914, and again when inviting proposals for $1,750,000 Refunding Bonds in 1916 made the following statement:

"These bonds are exempt from taxation under the Federal income tax law and by a recent decision of the United States Supreme Court are exempt from taxation by any State in the United States or any municipal or political subdivision of any such State, the same as bonds or other obligations or securities of the United States." (See Farmers & Mechanics Savings Bank of Minneapolis vs. State of Minnesota, 232 U. S. Supreme Court 516, Feb. 24, 1914.)

BOND ISSUES MUST BE APPROVED BY PRESIDENT

While the United States is not liable for the bonds of Hawaii, it does determine, however, under what conditions debt may be incurred, as no bonds may be issued unless the issue is approved by the President.

SPECIAL MARKETS

Bonds of the Territory of Hawaii are legal investments for the savings banks of the States of New York, Michigan, New Hampshire and Rhode Island, and for trust funds in New York.

The United States Treasury Department authorizes the statement that until further notice these bonds will be accepted as security for public deposits at their market value, but not exceeding their par value, when further deposits are made. A legal investment as security for Postal Savings funds.

GENERAL CONDITIONS

The Report of the Governor of Hawaii for the year ended June 30, 1915, draws attention to seven problems which the Territory is facing. These problems may be briefly summarized as follows:

First: Public lands.

Nearly all of the land designated as "arable agricultural land" is under leases long since made, but beginning to expire in 1917. A considerable portion of these lands is valueless because of the difficulty of obtaining water to irrigate them. The area of lands of value is stated to be 1,142,456 acres. These lands are divided into forest lands, 565,015 acres valued at $2,750,000, and lands suited to agriculture, 577,440 acres valued at $6,489,192. A very large proportion of the agricultural lands is however put down as not cultivable but adapted only to use as pasture. The total arable, cultivable land belonging to the government comprises 59,044 acres.

Second: Population.

This has already been referred to under the heading of Population and Area. It is interesting to note that since 1910 the total increase in population had been 21.34%. The increase in Army and Navy accounted for 4.04%, the increase in the Civilian population for 17.30%. This increase is divided as follows: Japanese, 7.01; *Hawaiians, 1.00; Portuguese, .70; Chinese, .05;

*Decrease.

American-British-German-Russian, 1.55; part Hawaiian, 1.20; Porto Rican, .10; Spanish, 1.16; others, 6.53. The rapid increase of the Oriental races is noticeable.

Third: Birth increase and rate.

Attention is called to the fact that although the proportionate increase to the total births would indicate Japanese births for 1915 should have totaled 2,442, their actual increase was 4,606. The Portuguese rate indicated a ratio of 552, while the actual was 883.

Fourth: Food supply.

In this connection attention is drawn to the fact that while green and uncured products can be grown, it has been found difficult to date to produce commercially, except in a restricted degree, those of a character which require curing, such as the world generally depends on.

Fifth: Education.

Much attention is given in the Territory to the matter of education. Out of 36,529 children enrolled 17,931 were Orientals, 8,360 Hawaiians or Part Hawaiians, 7,631 of the Latin races and 1,894 Saxon and Germanic. Of the remainder the largest portion was Filipino.

Sixth: Business control.

In the number of independent businesses, not in volume, the Japanese exceed all other nationalities. Then come the Chinese, then American, British and German.

The seventh and last problem referred to by the Governor, that of Commerce, is not elaborated because the necessary data was not available at the time when the report went to press, but a study of the statements of imports and exports, together with a study of a statement in regard to the agricultural development of the