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for it in the shape of a first charge upon the increase of customs revenue consequent upon such revision.

ART. X. The syndicate is hereby authorized to issue to the subscribers to the loan, bonds for the total amount of the loan for such amounts as may appear advisable to the syndicate. The form of the bonds shall be settled by the syndicate in consultation with the director general or the Chinese Ministers in London and Berlin. The bonds shall be engraved in Chinese and English or Chinese and German as may be required; they shall bear the facsimile of the signature of the director general and of his seal of office, in order to dispense with the necessity of signing them all in person. But the Chinese Minister in London or Berlin, as the case may be, shall, previous to the issue of any bonds, put his seal upon each bond with a facsimile of his signature, as a proof that the issue and sale of the bonds are duly authorized by, and binding upon, the Imperial Chinese Government, and the representatives of the syndicate in London and/or Berlin shall countersign the bonds as agents for the issue of the loan. In the event of bonds issued for this loan being lost, stolen, or destroyed, the syndicate shall immediately notify the director general and the Chinese Minister in London and/or Berlin, as the case requires, who shall authorize the syndicate to insert an advertisement in the public newspapers notifying that payment of same has been stopped and to take such other steps as may appear advisable or necessary according to the laws and customs of the country concerned, and should such bonds not be recovered after a lapse of time to be fixed by the syndicate, the director general or the Chinese Minister in London or Berlin, as the case may be, shall seal and execute duplicate bonds for a like amount and hand them to the syndicate, by whom all expenses in connection therewith shall be defrayed.

ART. XI. All bonds and coupons and payments made and received in connection with the service of this loan shall be exempt from all Chinese taxes and imposts during the currency of this loan.

ART. XII. All details necessary for the prospectus and connected with the payment of the interest and repayment of the principal of this loan, not herein explicitly provided for, shall be left to the arrangement of the syndicate in consultation with the Chinese Ministers in London and Berlin. The syndicate is hereby authorized to issue the prospectus of the loan as soon as possible after the signing of this agreement; and the Imperial Government will instruct the Chinese Ministers in London and Berlin to cooperate with the syndicate in any matters requiring conjoint action and to sign the prospectus of the loan.

ART. XIII. The loan shall be issued to the public in two or more series of bonds, the first issue to be made to the amount of £3,000,000 as soon as possible after the signature of this agreement and not later than 12 months from the date thereof. The price to the Imperial Chinese Government of the first series of bonds shall be 93 per cent of their nominal value. The second and any subsequent series shall be issued in time to permit of uninterrupted continuance of the work of construction, in amounts to be determined by the director general, and the price payable to the Chinese Government in respect of these series shall be the actual rate of their issue to the public, less flotation charges of 5 points retainable by the syndicate (that is to say, a charge of £5 10s. Od. for every £100 bond issued). Subscriptions will be invited by the syndicate in Europe and in China from both Chinese and Europeans on equal conditions, preference being given to the application of the Chinese Government, provided such application be made before the issue of the prospectus to the public.

ART. XIV. The proceeds of the loan shall be paid to the credit of the TientsinPukow Government Railway account with the Hongkong & Shanghai Banking Corporation and the Deutsch-Asiatische Bank in China, London, or Berlin, as the case may be. Payments of loan proceeds into the credit of this account shall be made in instalments and on dates conforming to the conditions allowed to the subscribers to the loan. Interest at the rate of 4 per cent per annum shall be granted on the credit balance of the portion of this account kept in London and Berlin, and interest on the credit balance of the portion kept in China will be allowed at the banks' rates for current account or fixed deposits, as the case may be, to be hereafter arranged. After deduction of the funds required for the service of interest and for commission on this service during the time of construction, the banks will hold the net proceeds with accrued interest to the order of the director general, who, in ordering payment of any sums exceeding £20,000 shall give notice to the banks 10 days before the day on which they are required. Requisitions on the loan funds will be drawn in amounts to suit the progress of construction of the railway by orders on the Hongkong & Shanghai Banking Corporation and the Deutsch-Asiatische Bank, respectively, signed by the managing director of the railway, or, in his absence, by his duly authorized representative, and accompanied by his certificates stating the nature and cost of the work to be paid for.

Such amounts as may be required for expenditure in China may be transferred by the managing director, at his discretion, to Shanghai, the transfers being effected through the Hongkong & Shanghai Banking Corporation and the Deutsch-Asiatische Banks, respectively, and the transferred funds shall remain on deposit with those banks until required for railway purposes.

The accounts of the railway will be kept in Chinese and English in accordance with accepted modern methods, and will be supported by all necessary vouchers. During the period of construction the said accounts and vouchers will be open at any time to the inspection of an auditor, appointed and paid by the syndicate, whose duties will be confined to certifying to the syndicate to the due expenditure of the loan funds in accordance with the provisions of article 3 of this agreement, and to certifying to a monthly statement of the foreign materials purchased by the railway administration under the provisions of article 18 hereinafter. He will arrange with the Railway Administration that his inspections shall take place on such dates and at such intervals as will enable him to efficiently carry out his duties as herein provided. The railway administration will publish annually upon the close of its financial year, a report, in the Chinese and English languages, showing the working accounts and traffic receipts of the railway, which report shall be procurable by the public on application.

ART. XV. If during the time of construction the net proceeds of the present loan with accrued interest should, after deduction of the sums necessary for the service of interest on the loan, not be sufficient to complete the construction and equipment of the railway line, the amount of deficiency shall be provided, in the first place, from such Chinese funds as may be available so as to permit of the uninterrupted continuance of the work of construction, any balance then uncovered being supple mented by a further foreign loan for the amount required to be issued by the syndicate. The interest and other conditions of such supplementary loan will be the same as in the present agreement, and the price will be determined as in the case of the second and subsequent issues of the present loan. If after the completion of the line there should be a balance at credit of the railway account, such unused balance will be transferred to the credit of the interest reserve fund hereinafter mentioned in article 21 as a provision for payments for which the Imperial Chinese Government is responsible under this agreement.

ART. XVI. If, before the publication of the prospectus for the issue of the loan, any political or financial crisis should take place by which the market and the prices of existing Chinese Government stocks are so affected as to render, in the opinion of the syndicate, the successful issue of the loan impossible on the terms herein named, the syndicate shall be granted further extension of time, but not beyond 18 months from the date of this agreement, for the performance of their contract. If within this time limit the first series of the loan shall not have been issued, then this contract shall become null and void, and any advances made by the syndicate under the provision of article 3 shall be repaid by the Chinese Government with accrued interest, but without any other compensation or remuneration whatsoever.

ART. XVII. The construction and control of the railway will be entirely vested in the Imperial Chinese Government. For the work of construction of the Northern and Southern sections, respectively, the Imperial Chinese Government will select and appoint fully qualified German and British chief engineers acceptable to the syndicate. In the event of the syndicate objecting to any proposed appointment, the cause of such objection shall be definitely stated. These two chief engineers shall be under the orders of the managing director, or, in his absence, his duly authorized representative, and will carry out all the wishes of the railway administration with regard to the plan and construction of the line. In their general conduct they shall pay all due respect to the director general and the managing director. The terms of their respective agreements will be arranged by the director general on his sole authority. Whenever appointments are to be made or functions are to be defined of the technical employees on the railway staff, as well as in the case of their dismissal, the managing director, or, in his absence, his duly appointed representative, will act in consultation with the chief engineer of the section concerned and, in the case of disagreement, the matter will be referred to the director general, whose decision shall be final.

After completion of construction the Imperial Chinese Government will administer both sections as one undivided Government Railway and will appoint an engineer in chief who during the period of the loan shall be a European-without reference to the syndicate.

ART. XVIII. For the Northern and Southern sections of the railway, respectively, the Deutsch-Asiatische Bank and the Chinese Central Railways (Ltd.) will act as

agents of the railway administration during such construction for the purchase of all materials, plant, and goods required to be imported from abroad. For all important purchases of such material, tenders shall be called for by the managing director; and in the case of all tenders, indents, and orders for the importation of goods and materials from abroad, the said agents shall purchase the materials required on the terms most advantageous to the railway, and shall charge the original net cost of the same plus a commission of 5 per cent. It is understood that no orders for materials shall be executed or any expenditure incurred without due authorization by the managing director.

In return for payment of commission as above stated, the Deutsch-Asiatische Bank and the Chinese Central Railways (Ltd.) as agents within their respective sections, shall be prepared to superintend the purchase of all foreign materials required for the construction and equipment of the railway, which shall be purchased in the open market at the lowest rate obtainable, it being understood that all such materials shall be of good and satisfactory quality and that the railway administration shall have the right to reject on arrival in China materials which do not come up to specifications. At equal rates and qualities goods of German and British manufacture shall be given preference over other goods of foreign origin for the Northern and Southern sections, respectively. The railway administration reserves the right, while paying the above stipulated commission to the said agents in respect of all purchases of foreign materials, to avail itself of the services of other agents in China or abroad should it see fit to do so. Original invoices and inspector's certificates are to be submitted to the managing director; all return commissions and rebates of every description shall be credited to the railway; and all purchases made by the agents on behalf of the railway shall be supported by manufacturers' original invoices and inspectors' certificates.

No commission shall be paid to the agents except as above provided, but it is understood that the railway administration shall provide out of the railway funds for the remuneration of consulting engineers whenever their services are engaged.

With a view to the encouragement of Chinese industries, preference will be given, at equal prices and qualities, over British, German, or other foreign goods, to Chinese materials and goods manufactured in China. No commission will be paid on purchases of such materials and goods.

It is understood and agreed that after the construction of the line is completed, the Deutsch-Asiatische Bank and the Chinese Central Railways (Ltd.), within their respective sections, will be given the preference for such agency business during the currency of the loan for the supply of foreign materials as the railway administration may require, on terms to be hereafter mutually agreed upon.

ART. XIX. Branch lines in connection with the railway line mentioned in this agreement that may appear profitable or necessary later on shall be built by the Imperial Chinese Government with funds at their disposal from Chinese sources, and if foreign capital is required preference will be given to the syndicate.

ART. XX. By the preliminary agreement under imperial sanction a participation of 20 per cent of the net profits of the railway had been promised to the syndicate in remuneration for their general responsibility and services. In commutation of this participation in net profits the syndicate is granted the right to retain £200,000 out of the first issue of this loan, in installments and on dates based on, and in proportion to, the terms of the subscription to the loan as stated in the prospectus. No further payment in respect of commutation of profits will be allowed on any subsequent series of the loan, or on any supplementary loan.

ART. XXI. After payment of interest and repayment of principal of the loan for any current year, the railway administration will deposit with the Deutsch-Asiatische Bank and the Hongkong & Shanghai Banking Corporation in Shanghai or Tientsin any surplus of the net revenue of the railway line for that year up to the amount required to pay the following year's installments of interest on the loan, the rate of interest on the deposit being arranged with the banks from time to time with due regard to the conditions of the market.

ART. XXII. The Deutsch-Asiatische Bank and the Chinese Central Railways (Ltd.) may, subject to all their obligations under this agreement, transfer or delegate all or any of their rights, powers, and directions thereunder to any German or British company, directors, or agents with power of further transfer, and subdelegation, such transfer, subtransfer, delegation, or subdelegation to be subject to the approval of the director general.

ART. XXIII. This agreement is signed under authority of an imperial edict dated the 10th day of the 12th Moon of the 33rd year of Kuang Hsu, corresponding to the

13th day of January, 1908, Western Calendar, which has been officially communicated to the ministers of Great Britain and Germany in Peking by the Waiwupu.

ART. XXIV. Five sets of this agreement are executed in English and Chinese, three sets to be retained by the Imperial Chinese Government and two by the syndi

cate.

In the event of any doubt arising regarding the interpretation of the contract the English text shall rule.

Signed at Peking by the contracting parties the 10th day of the 12th Moon of the 33rd year of Kuang Hsu, corresponding to the 13th day of January, 1908, Western Calendar.

[Stamp of the official seal of the Waiwupu.]

[Deutsch-Asiatische Bank.]

LIANG TUN YEN.

[Chinese Central Railways (Ltd.)]

H. CORDES.

[blocks in formation]

Appendix 7.-PAULING & CO. LOAN.

AGREEMENT PROVIDING FOR THE FINANCING AND CONSTRUCTION OF A RAILWAY FROM A POINT ON THE YANGTZE RIVER OPPOSITE SHASI, VIA CHANGTEH, YUANCHOW, AND KWEIYANG, TO SHINGYI, IN THE PROVINCE OF KWEICHOW, WITH A BRANCH LINE CONNECTING CHANGTEH WITH CHANGSHA.

This agreement is made at Peking on the 25th day of the seventh month of the third year of the Republic of China, being the 25th day of July, 1914, and the contracting parties are the Chiao Tung Pu, duly authorized by the Government of the Republic of China (hereinafter sometimes referred to as "the Chinese Government” and sometimes as "the Government"), on the one part, and Messrs. Pauling & Co. (Ltd.), of 26 Victoria Street, London, S. W. (hereinafter termed the contractors), of the other part.

Now it is hereby agreed by and between the parties thereto as follows:

ARTICLE I. The contractors or their assigns agree to issue on behalf of the Government of the Republic of China a sterling loan bearing interest at the rate of 5 per cent per annum (hereinafter referred to as the loan) for the amount of £10,000,000 sterling. The loan shall be of the date on which the first series of bonds are issued and shall be called "the Chinese Government Railways 5 per cent Gold Loan of 1914" [for the railways from a point on the Yangtze River opposite Shasi to Shingyi in the Province of Kweichow and a branch line from Changteh to Changsha].

In the event of the net proceeds of the loan being insufficient to defray the entire cost of the construction and equipment of the undermentioned railways (including interest on and commission for the service of the loan during construction as hereinafter provided) the total amount of the loan may be increased by a further amount not exceeding £2,000,000 sterling ranking pari passu with the present loan.

ART. II. The proceeds of the loan are designed for the construction and equipment of the railways from a point on the Yangtze opposite Shasi to Shingyi in the Province of Kweichow, together with a branch line from Changteh to Changsha (hereinafter called the railway), and for all necessary expenditure appertaining thereto and for the payments of the amounts agreed upon as compensation to the contractors for the cancellation of previous agreements as set forth in the supplementary agreement made this day between the Government and the contractors and as set forth in letters exchanged this day between the Government and the contractors.

ART. III. The payment of the interest and the redemption of the capital of the loan are guaranteed by the Government of the Republic of China and by a special lien upon the railway.

This special lien constitutes a first mortgage in favor of the contractors or their assigns acting on behalf of the bondholders (hereinafter called the trustees) upon the railway itself as and when constructed and on the revenue of all descriptions derivable therefrom and upon all materials, rolling stock, and buildings of every description purchased or to be purchased for the railway.

Should there be default in payments on the dates fixed of all or part of the halfyearly interest or amortization payments, the trustees shall have the right to exercise on behalf of the bondholders all the rights of action which may accrue to them from the special mortgage.

This special mortgage is to be executed by a deed in accordance with this article. But subject to the guaranty and mortgage thus given by the Chinese Government it is hereby declared that this railway is in fact a Chinese property. The title deeds of the land for the use of the railways shall be free from all encumbrances and entanglements and shall from time to time as soon as secured be registered in the name of the railway. Notices of all purchases of land for the railway within the survey limit, together with the corresponding title deeds, are to be transmitted by the railway head office to the representative of the trustees for record and for the purpose of establishing the first-mortgage security. Until the time when the same are to be returned to the Government as hereinafter in this article provided, all lands the title deeds of which are lodged with the trustees as part of the first-mortgage security for the loan

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