I.   Introductory Provisions

Hypothecation is the thirty-third of thirty-three (33) Administrative Elements of Trust being the pledging of an underlying asset associated with some Derivation of value as further surety to the Derivation, without delivering temporary possession or ownership of the pledged asset.

Hypothecation is one of the oldest forms of insurance and assurance bond and traditionally associated with the underwriting of values determined upon merchant vessels on voyage as “bottomry” or “pledging upon the keel of the ship”. A Hypothecation is a type of bond.

Where a Trust or Estate has established the value of its particular Capital Stock and is able to offer such Stock in lieu of a more generally accepted form of money, Hypothecation is represented by the signed pledge upon any paper instrument that upon demand or certain conditions, that such Stock may be redeemed for possession of the underlying asset underwriting the Stock.

A Hypothecation as a bond may be given with or without the payment or performance of interest payments or “coupons” as well as the promise to pay or redeem at some later maturity date.

A historic example of paper Stock derived from a Capital Stock and including a Hypothecation are Exchequer Bills of England and later the private money (notes) of the Bank of England whereby a holder could demand the value of the Bill or Note “redeemed” in some bullion of equivalent value. Until the 20th Century, virtually all money possessed a Hypothecation from the Governors of the Bank of issue.

Hypothecation is by tradition considered an essential form of underwriting and bonding wherever and whenever a Trust or Estate has established the value of its particular Capital Stock and has established a particular Fund for the issue of such Capital Stock at a common monetary value in lieu of a more generally accepted form of money.