Note.

On June 10, 1910, the Ching Hsing Mines entered into the following mortgage indenture with the Banque de l'Indo-Chine:

Mortgage of Ching Hsing Mines to Banque de l'Indo-Chine, June 10, 1910. THIS INDENTURE made this 10th day of June, 1910, at Tientsin, in the Empire of China.

BY AND BETWEEN THE CHING HSING KUANG WU CHU (Ching Hsing Mines) an Association formed by the CHIHLI CHING HSING MINING ADMINISTRATION, and the CHING CHING GESELLSCHAFT m.b.h. a limited liability joint stock company registered under the German law in the German Consulate at Tientsin, under the terms of an agreement between the said Administration and the said Company dated the 14th day of April, 1908, and which received Chinese Govermental sanction by Imperial Rescript on the 5th day of August, 1908, to own and operate certain coal mines in the said District of Ching Hsing in the Province of Chihli, of the Empire of China, party of the first [part] hereinafter referred to as the KUANG WU CHU and the BANQUE DE L'INDO-CHINE, a banking society organized under the laws of France and having a branch office at Tientsin aforesaid, hereinafter referred to as the BANK, WITNESSETH THAT:

WHEREAS the aforesaid agreement of association forming the Kuang Wu Chu by Article VI thereof, empowers the Chinese and foreign managers of the said Kuang Wu Chu, acting conjointly to borrow money for the purposes expressed in said agreement, and, by Article X thereof, limits the liability of the parties to said agreement to the actual investment of the said parties in the said Kuang Wu Chu for the time being, and excludes all liability for further contribution by the said parties. The Articles VI & X of the Agreement of association between the Chihli Ching Hsing Administration and the Ching Ching Minen Gesellschaft m.b.h. forming the Kuang Wu Chu and referred to above are to be part of this Mortgage Indenture and read in accordance with the original agreement as follows:

"ARTICLE VI.-If in the course of time the funds of the Mines' should prove to be insufficient to carry on the business and if new funds must be provided for, this might be done by increasing the Capital of The Mines' and in such a case the 'Administration and the Company' shall have each to provide one-half of this increase or the Mines' shall be authorized to supply the necessary funds by raising a loan. Which of the two ways will have to be adopted shall be a matter to be mutually decided by the two co-managers.

46

ARTICLE X.-It is understood and agreed that all financial obligations between the 'Administration' and the Company' provided for in this agreement, shall be a first charge upon the property and assets of The Mines' and in such a case such properties and assets should prove insufficient to repay the share-value or interest thereon or any part of such share-value, no residual liability shall rest with the Chinese Government or Authorities nor with the members of the shareholders of the 'Administration' or the 'Company' beyond their interest in The Mines' themselves" and,

WHEREAS the Kuang Wu Chu by resolution of its Chinese and foreign managers has authorised a loan of Tientsin Hongping Hupao Taels Seven hundred and Fifty thousand (Tls. 750,000) secured by bonds to be issued in three series of Tls. 250,000 each, the first series on the first day of July, 1910, the second series on the first day of July, 1912, and the third series on the first day of July, 1914, or as to the second and third series at such other times as the Chinese and foreign co-managers may determine upon the following conditions, that is to say:

(a) The said Bonds and the interest thereon are payable at the Offices of the Kuang Wu Chu in Tientsin in Hupao Silver by weight in Tientsin Hongping Taels, or if the same be not then current, in the reformed Imperial Chinese silver coin when the same is established, at the rate per Tientsin Hongping Hupao Tael in force in the Imperial Government mints at the respective times of payment.

(b) The said Bonds bear INTEREST at the rate of SEVEN per centum per annum, payable at the Offices of the Kuang Wu Chu in Tientsin semi-annually on the first days of January and July in each year after the year of issue.

(c) The said Bonds shall be issued to bearer only.

(d) Repayment of the principal sum of the said Bonds shall begin on the first day of July, 1916, and shall be completed by the first day of July, 1923, the designation of the Bonds to be repaid in each year being made by lot, but at any time within the eight year period of repayment so provided, the Kuang Wu Chu has the right to redeem at par on six months notice published once a month for six months in the official organ of the French Municipality at Tientsin, and in one English newspaper published in Tientsin, the whole sum of Bonds, principal and accrued interest, then outstanding.

NOW THEREFORE, for the better security of the said Bonds, the Kuang Wu Chu hereby mortgage to the Bank, its successors or assigns all its property of whatsoever description, movable or immovable, corporeal or incorporeal, situated within the District of Ching Hsing or elsewhere, now owned by the Kuang Wu Chu or hereafter acquired,

ON CONDITION, HOWEVER, that so long as the Kuang Wu Chu shall well and truly pay all instalments of interest and principal of the said Bonds as and when they fall due, the Bank shall not enter into possession of the said property nor in any manner interfere with the operation of the Kuang Wu Chu but in the event that the Kuang Wu Chu shall continue for ten days in default in the complete payment of any sum due according to the terms of any of the said Bonds outstanding when such payment is due, then the right of the Bank to take possession on behalf of the Bondholders of_the_propThereerty hereby mortgaged shall at once mature and shall be exercised by the Bank. after, in such event the Bank shall, so soon as may be, by four weeks' notice published once a week for four weeks in the official organ of the French Municipality at Tientsin, and in one English newspaper published in Tientsin, call a meeting of the holders of the outstanding Bonds and shall act in accordance with the instructions of any committee selected by such meeting, but not otherwise than to operate the mines of the Kuang Wu Chu and to employ its other property with the sole object of recovering by such operation and employment, after payment of all expenses, the balance due upon the Bonds then outstanding, and the interest thereafter accruing, after which recovery in full the property taken into possession by the Bank shall be returned to the Kuang Wu Chu. The committee appointed at the first meeting may be replaced in whole or in part, and the instructions given by the committee to the Banque de l'Indo-Chine may be modified, at any subsequent meeting:

For the first meeting, the holders of a simple majority of the Bonds then outstanding shall constitute a quorum, and all resolutions shall be binding which are carried by a majority of the Bonds represented by those present. In the event of a failure of a quorum, the meeting shall stand adjourned to reconvene four weeks later, when any number of bonds represented shall form a quorum.

The first meeting provided for in the paragraph next above shall establish rules for the calling of subsequent meetings and fix the powers of such meetings.

At any time during the possession of the mortgaged property by the Bank, the Kuang Wu Chu may redeem the same by paying in full all amounts then due on account of the principal and interest of the Bonds then outstanding and the outlay of the Bank in the expense of taking possession and of operation and maintenance so far as such outlay has not been recovered from profits of operation.

No sale of the mortgaged property nor any part of it by the Bank, whether privately or by auction, shall be valid without the sanction of the Imperial Government, excepting always current sales of mine products and sales of disused or useless plant and materials, while the property is in the possession of the Bank.

During the life of this mortgage, the Kuang Wu Chu shall make no sale of any of the mortgaged property, excepting always sales of its mine products and of disused or useless plant and materials, without the consent of the Bank.

So soon as all the Bonds, principal and interest secured by this mortgage, and all outlay of the Bank on their behalf are fully paid this mortgage shall be null and void, and each party shall cancel and deliver up to the other the original executed copy held by it, otherwise it shall remain always in full force.

Neither the Kuang Wu Chu, nor either party to the agreement of association forming the Kuang Wu Chu, nor anyone holding a share therein derived of either such party, nor the Imperial Chinese Government Central, Provincial or Local, shall be liable for any deficit after the exhaustion of the property hereby mortgaged, but the Bondholders shall look to such property alone and the operation of the mines hereby mortgaged for repayment of principal and interest.

The Bank shall have no liability whatever to the Bondholders in respect of any payment due by the Kuang Wu Chu or in respect of any act of the Bank in pursuance of the provisions of this mortgage, or, so soon as the Bank in the event of default by the Kuang Wu Chu has issued a call for a meeting of Bondholders, for any omission of the Bank.

The Kuang Wu Chu covenants that it is the sole proprietor of the mortgaged property and that it has good right to mortgage the same.

The Kuang Wu Chu further covenants that the mortgaged property is free and unencumbered and that this mortgage constitutes a first mortgage upon the mortgaged property having priority over all other claims whatsoever, saving Imperial Chinese Government taxes which taxes the Kuang Wu Chu covenants always to pay as and when they become due.

IN WITNESS WHEREOF, the parties hereto have hereunto set their names and seals by their duly authorised officers at Tientsin aforesaid, the day and year first above written.

NUMBER 1908/8.

JAPAN AND CHINA.

Agreement for a Chinese-Japanese Joint Stock Lumber Company for the Exploitation of the Yalu Timber.*-May 14, 1908.

NATUNG, a Minister of the Chinese Wai-wu Pu, and Baron GoNSUKE HAYASHI, Minister Plenipotentiary of Japan, being duly authorised thereto by their respective Governments, have drawn up Regulations for a joint Chinese and Japanese Timber Company, as provided for in Article X of the Supplementary Manchurian Agreement of 1905,† as follows:

ARTICLE I.—An area shall be marked out on the right bank of the Yalu, extending from Maoerhshan to Erhshihszetaokou and measuring 60 li inland from the main stream. (A delegate shall be appointed by the Fengtien province to define the area and put up boundary marks conjointly with a Japanese delegate.) The gathering of timber within the area will be carried on with the joint capital and under the joint management of China and Japan. As a beginning, both countries shall appoint officers who shall open offices and commence work. At the end of a year, when all arrangements have been completed and agreed on, the two countries shall invite their merchants to take up the enterprise.

ARTICLE II.-The joint Chinese and Japanese Timber Company shall be styled the Yalu River Timber Company.

ARTICLE III.—The capital of the Company shall be $3,000,000, of which China and Japan shall each contribute half.

ARTICLE IV. The head office of the Company shall be established at Antung, and the Company, upon report to the Superintendent, shall open branch offices wherever they are deemed necessary.

ARTICLE V.—The Company shall protect the existing Chinese timber-cutting industry. Except the area to be marked out in accordance with Article I and in which the Company shall cut timber, all places beyond its boundaries, as well as the forests of the Hun River, shall continue as before to be worked by Chinese wood-cutters. These shall apply to the Company for loans wherewith to carry on their industry, and all timber cut by them-with the exception of sleepers for the railway companies in Kiangsu and Chekiang provinces, and timber for the use of the inhabitants along the river, which shall be purchased direct from the said wood-cutters-shall be sold exclusively to the Company. In the disposal of timber, the Company shall sell at market prices, and shall not create a monopoly.

ARTICLE VI.-When the Chinese Government, or Government offices, pur*Translation, as printed in Customs, vol. II, p. 760, from the Chinese text.

† No. 1905/18, ante.

chase under huchao timber which has either been felled by the Company or bought from wood-cutters, the Company shall sell at cost price.

ARTICLE VII.—The Company shall be allowed to carry on their business for a term of 25 years, on the expiration of which, if the Chinese Government shall be satisfied with the working of the Company, a petition may be sent to the Chinese Government for an extension of the term.

ARTICLE VIII.—The Company shall have one Superintendent who shall be the Taotai of the Eastern Circuit, appointed by the Governor of Fengtien; and two Managers, one Chinese and one Japanese, whose appointments shall be made by their respective countries. Other assistants, skilled employés, etc., shall be appointed by joint selection and consent of the managers. The managers shall not employ persons of other nationalities in connexion with woodcutting in the assigned area without the approval of the Superintendent.

ARTICLE IX.-The Company shall, at the end of each year, prepare a report on the year's business and a statement of receipts and expenditure, to be submitted to the proper authorities of the two countries.

ARTICLE X.-After the expenditure of the Company shall have been deducted from the receipts, five per cent. of the net profit shall be appropriated to the Chinese Government, and the remainder shall be distributed among the shareholders of the two countries. The disbursements of the Company shall be under due control, and periodical estimates of salaries and other expenditure shall be submitted to the Superintendent for his approval.

ARTICLE XI.-Within one month after the conclusion of this Agreement, the Governor of Fengtien and the Japanese Consul-General at Fengtien shall each appoint a delegate to draw up detailed regulations for the management of the Company, which, when agreed upon, shall become the regulations of the Company; and within three months thereafter the Company shall commence business. For new rules subsequently enacted by the Company the Superintendent's approval will be necessary.

Article XII.—As to the duties payable by the Company on timber, when the discussion of the detailed regulations takes place at Fengtien (Moukden), the delegates of the two countries shall inquire into the established rates of timber taxes and shall negotiate with the local authorities with a view to a reduction of such taxes. The machinery and the implements necessary for wood-cutting imported by the Company shall be exempted from duty and likin. ARTICLE XIII.-After the inauguration of the Company the Japanese Government shall effect the removal of the timber sheds now in existence on the Yalu. Peking:

15th day, 4th moon, 34th year of Kuang Hsü:

14th day, 5th moon, 41st year of Meiji.

See Note to this document, post, p. 733.

Note.

The following is a translation from a Japanese text of the regulations agreed upon September 11, 1908, in pursuance of the provisions of Article XI:

Regulations for Sino-Japanese Yalu Timber Company, September 11, 1908.

"S. Okabe, His Imperial Japanese Majesty's Consul, and Chang Hsi-Lan, Imperial Chinese Commissioner of the Finance Department at Mukden, having received instructions from their respective Governments, have in accordance with Clause XI of the Agreement of the 14th of May, 1908, for the establishment of a Yalu Timber Company, agreed upon the following regulations for the governance of the said Company, to wit:

"1.-The Company will be conducted in accordance with the agreement between the Chinese and Japanese Governments of the 14th of May, 1908, for the joint exploitation of the Yalu Timber, and in accordance with the present Regulations it has been agreed that the Company will be established from the 25th of September, 1908.

"2. In accordance with the agreement signed in Peking the two Governments will appoint officials to establish a company.

(a) After the lapse of one year, when everything is in working order, merchants will be requested to undertake the business.

“(b) Regulations for the issue of shares will be drawn up after the inauguration of the present Company.

3.-The Capital of the said Company is fixed at $3,000,000 which on the day of the establishment of the Company is to be contributed in equal shares by the Chinese and Japanese Governments. When the Company is transferred to a merchant association, the whole of the said capital will be withdrawn.

"4.-The Capital is to be paid up in Chinese Dollars and all receipts and expenditures must be calculated in such currency. The money will be deposited partly in Chinese and partly in Japanese Banks as shall be determined by the Managers of the Company. "5.-The following shall be the officers of the Company:

1) One Superintendent

2) Two Chief Managers

3) Two or more sub-Managers
4) Experts and other officials.

(a) The Viceroy and Governor of Fengtien Province have appointed the Taotai of the Eastern Frontier as Superintendent of the Company.

(b) of the Chief Managers one shall be appointed by the Chinese and one by the Japanese.

(c) The sub-Managers shall be appointed by the Chief Managers in consultation. (d) Experts and other officials will also be appointed by the Chief Managers, but such appointments must be distributed equally between Chinese and Japanese subjects.

"6.-The salary of the Superintendent shall be $15,000 per annum, that of the Chief Managers $10,000 per annum. The salaries of the sub-Managers will be determined by the Chief Managers in consultation.

"7.-The number and salaries of the Experts and other officials will be determined by the Chief Managers in consultation with the Superintendent.

"8.-The correspondence and accounts of the Company, being of the greatest importance, will be rendered in both Chinese and Japanese. The two Governments will appoint auditors who will inspect the working of the Company and all the accounts and correspondence. They shall be empowered to demand from the Company all kinds of documents and any information as to the condition of the Company.

"9.-The accounts of the Company will be rendered in accordance with the Chinese Calendar.

"(b) When the Company is handed over to a mercantile association a final balance sheet will be at once issued.

"10.-The Company is formed from Capital supplied jointly by China and Japan. Unless by mutual agreement the Company may not of its own initiative borrow money to extend its operations.

"11.-Five per cent of the profits of the Company must be placed to a Reserve Fund. When such reserve fund has reached an amount equal to one-third of the capital of the Company, it shall remain at that amount. Just as is laid down in the preceding clause this reserve must not be used except under mutual agreement.

"12.-The Chief Managers must prepare and submit to the Superintendent for approval a statement of their estimates for the receipts and expenditures of each year. În such estimates there must be a clear discrimination between the items of expenditure and income.

13.-To all that relates to receipts and expenditures as well as in other matters involving joint calculations the Chief Managers must after consultation report their decision to the Superintendent.