shall not be disposed of in any way by hire, lease, or sale to any party for any purpose whatsoever without the written consent of the Chinese Government, except only in the event of the Chinese Government failing to pay the interest or principal of the bonds and then in accordance with the powers in the deed of mortgage. The lands thus bought shall be free from all encumbrances, liabilities, and entanglements, and shall be conveyed by full and sufficient deeds of assignment according to Chinese law, all of which are to be kept and recorded by the representative of the trustees, and are to be held by them as a first-mortgage security for the bonds under the provisions of this agreement until such time as the principal and interest of the bonds, together with all indebtedness, shall have been paid off, when the same shall then be returned to the Chinese Government, except only in the case of the Chinese Government's failure to pay the interest or principal of the bonds and consequent action of the trustees under the powers of the mortgage security.

For the further protection of the first-mortgage security the Chinese Government undertakes that until the bonds shall have been redeemed no part of the lands comprised in the mortgage security or the railway with its appurtenances shall be transferred or given to another party or shall be injured, and that the rights of the first mortgage shall not be in any way impaired unless with the consent in writing of the trustees, which shall only be given if in the opinion of the trustees the interests of the bondholders will not be affected.

And further, that until the interest and principal of the loan and all the indebtedness shall have been paid off or unless with the express consent in writing of the trustees the Chinese Government shall not again mortgage the above properties to another party, whether Chinese or foreign.

ART. IV. It is agreed that if the half-yearly interest on the bonds is not paid on any due date thereof, or if the principal of the loan be not paid in accordance with the amortization schedule hereto attached, the whole railway, with all its appurtenances herein mortgaged to the trustees for the bondholders, shall be handed over to the trustees, to be dealt with by them according to law in such manner as will insure the proper protection of the interests of the bondholders, provided, however, that if the failure to make payment at any one date be due to causes beyond the control of the Chinese Government, and if the Chinese Government request the trustees to postpone the taking over of the railway for a reasonable period of grace, which shall not exceed six months, the question shall be amicably discussed and decided between the Chinese Government and the representative of the trustees. When the whole loan and the interest due thereon and all the indebtedness shall have been paid off, the railway, with all its appurtenances in good working condition, shall revert to the possession and management of the Chinese Government according to the provisions of this agreement.

ART. V. The interest on the bonds is to be paid every half year on the first day of June and the first day of December, and it is hereby agreed that the amount required for the payment of interest and the repayment of principal, together with the sum of a quarter of 1 per cent on such amounts to cover commission to the contractors or their assigns who are hereby appointed the agents for the entire service of paying the loan, shall be paid to the contractors or their assigns 14 days before the due dates. During the time of construction the amounts necessary for the payment of the interest on the loan, together with the commission of a quarter of 1 per cent above referred to, are to be paid over to the agents for the entire service of repaying the loan out of the proceeds of the loan on deposit with the issuing bank 14 days before the due dates and on the requisition of the contractors or their assigns. The accruing interest from any proceeds of the loan not used during the period of construction and the earnings derived by the Government from the working of any sections of the railway as they are built are to be used to make up the amount required for the payment of the said interest and if any deficiency remains it is to be met from the proceeds of the loan. When the construction of the railway is wholly completed the interest on the bonds, together with the commission for the service of the loan, is to be paid from the income or earnings of the railway received by the Government to the contractors or their assigns 14 days before the due dates in sterling in London. The Chinese Government unconditionally undertakes and hereby promises to pay the principal of the loan and the interest on the loan on the due dates fixed therefor. If at any time the earnings of the railway, together with the funds available from the proceeds of the loan, are not sufficient to meet the interest on the bonds and the repayment of capital in accordance with the amortization schedule hereto attached, the Government shall take measures to make up the deficiency from other sources and then be ready to pay off the indebtedness so that the required amount may be placed in each case at least 14 days previous to the due dates of such payment in the hands of the contractors or their assigns.

ART. VI. The bonds shall be bonds of the Government of the Republic of China. ART. VII. The duration of the loan is fixed at 40 years, commencing from the date of the issue of the loan, but no interest shall be paid on any bond which may be redeemed or canceled under the terms hereinafter mentioned after the redemption or cancellation thereof. On the face of each of these bonds shall be expressed the value thereof in the sum of £100 or any such different amounts as the Chinese Minister in London, in consultation with the contractors or their assigns, may sanction.

Repayment of principal shall commence after the expiry of 124 years from the date of the loan and shall be completed in 27 years by yearly payments to the contractors or their assigns as agents for the service of the loan under the terms of this agreement in accordance with the amortization schedule hereto attached. If at any time after the expiry of 12 years from the date of the loan the Chinese Government should wish to redeem the outstanding amount of the loan or any portion of it not yet due under the provisions of the amortization schedule hereto attached, not less than six months' notice shall be given in writing by the Chinese Government to the representative of the contractors or their assigns declaring the number of additional bonds so required to be redeemed, whereupon the representative of the contractors or their assigns shall immediately proceed to make such arrangements as may be necessary and usual for the redemption of the number of bonds specified, which, when duly redeemed after payment by the Chinese Government of the proper amount due thereon, shall be canceled and delivered to the Chinese Government.

All bonds thus redeemed in excess of the amount specified in the amortization schedule hereto attached before the expiry of 25 years from the date of the loan shall be paid for with a premium of 2 per cent over their face value (that is, £102 10s. would be required to be paid for £100), but after 25 years bonds may be redeemed over and above the amount specified in the schedule without premium upon notice being given in the manner above specified.

As soon as the loan has been completely redeemed this agreement shall become null and void and the mortgage shall be canceled.

ART. VIII. As to the form of the bonds, it is to be agreed upon by the Chinese Government or by the Chinese Minister in London and the contractors or their assigns as soon as possible after the signature of this agreement, but if hereafter the money markets in London or other countries require any modification of the form of the bonds except in anything that affects the amount of the loan and the liability of the Chinese Government (which are not to be touched at all) such slight modifications may be made to meet the views of the money markets by the contractors or their assigns in consultation with the Chinese Minister in London. Any modifications are to be reported at once by the contractors or their assigns to the Chinese Government.

The bonds are to be engraved entirely in the English language and shall bear a facsimile of the signature of the Minister of Communications 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 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 and binding upon the Chinese Government.

Such bonds are to be numbered consecutively, and as many bonds as may be needed are to be properly engraved under the supervision of the contractors or their assigns, and after they are sealed by the Chinese Minister in London as heretofore provided are to be countersigned by the contractors or their assigns.

If any of the bonds herein mentioned are lost or destroyed, a reissue of any thereof is to be made in the amounts respectively called for by such lost or destroyed bonds, but proper proof of the loss or destruction must be given in the usual form to the contractors or their assigns and the Chinese Minister in London for examination and record, and the requisite guaranty is to be obtained by the contractors or their assigns from the respective claimants concerned, who shall defray all expenses connected with such reissue of bonds lost or destroyed and who under the said guaranty shall undertake to indemnify the Chinese Government and/or the contractors or their assigns for any loss sustained by reason of the issue of bonds in the place of the bonds lost or destroyed.

ART. IX. All details necessary for the prospectus and connected with the payment of interest and repayment of the principal of this loan not herein explicitly provided for shall be left to the arrangement of the contractors or their assigns in consultation with the Chinese Minister of London. The contractors or their assigns are hereby authorized to issue the prospectus of the loan as soon as possible after the signing of this agreement, and the Chinese Government will instruct the Chinese Minister in London to cooperate with the contractors or their assigns in any matters requiring conjoint action and to sign the prospectus of the loan.

ART. X. 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 from £1,000,000 to £2,000,000 sterling as soon as possible after the signature of this agreement. The issue price of the bonds shall be fixed by the Government and the contractors or their assigns some time before the issue, taking the last price of similar bonds as a basis for fixing the market price. The prices payable to the Government shall be the actual rate of issue to the public less a sufficient amount to cover the cost of stamps on the bonds in the various countries of issue (provided always that at least 50 per cent of the bonds shall be issued in London) plus flotation charges of 4 per cent retainable by the contractors or their assigns (that is to say, a charge of £4 for every £100 bond issued).

After this agreement is signed and pending the issue of the loan, the contractors or their assigns shall deposit the sum of £50,000 with the issuing bank to the railway account, and this amount can be drawn on by the Government for survey and other necessary expenses authorized by the managing director against certificates signed by the chief accountant and engineer in chief and pending their appointment against certificates signed by the representatives of the contractors. This sum of £50,000 shall bear interest at the rate of 5 per cent per annum and shall be refunded out of the proceeds of the loan.

ART. XI. The net proceeds of the loan shall be deposited with the issuing bank to bę nominated and guaranteed by the contractors to the credit of "A Shasi-Shingyi Changteh-Changsha Railway Account" and shall bear interest at the rate of one-half of 1 per cent below the official rates of the Bank of England.

When the work of construction is ready to begin, a sum equal to the estimated expenditure in China for six months shall be transferred to a bank in China to be nominated and guaranteed by the Government and there paid to the credit of “A Shasi-Shingyi Changteh-Changsha Railway Account" to be operated upon by the Government under certificate signed by the chief accountant and 'the engineer in chief. This amount of estimated expenditure for six months shall be maintained by subsequent monthly transfers so that, as far as possible, there shall always be six months' estimated expenditure in China deposited in a bank in China to be nominated and guaranteed by the Government. The rate of interest to be paid by such bank in China to be at the ruling rates of the day in China.

ART. XII. The contractors or their assigns (herein called the trustees) are hereby appointed trustees for the bondholders, and in any future negotiations respecting this loan or matters arising in connection therewith which may take place between the Chinese Government and the trustees, the trustees shall be taken as representing the bondholders and as such empowered to act on their behalf. In view of the fact that the trustees will continue to represent the bondholders after construction, they shall receive as remuneration for their services and duties in acting as trustees for the bondholders the sum of £1,000 per annum, such remuneration to commence from the date of issue of this loan and to terminate upon its complete redemption.

ART. XIII. When the railway is complete, if there is a surplus from the sale of bonds the said surplus shall be at the disposal of the Chinese Government either to redeem the bonds in accordance with the terms of this agreement as hereinafter stated or to be placed on deposit with a bank to be mutually agreed upon for the purpose of paying interest on the loan or for other purposes beneficial to the railway in regard to which the Chinese Government will communicate in due course with the trustees. ART. XIV. All lands that may be required along the whole course of the railway within the survey limits and for the necessary sidings, stations, repairing shops, and car sheds to be provided for in accordance with the detailed plans shall be acquired by ' the Government at the actual cost of the land, together with the necessary expenses connected with its acquirement, and shall be paid for out of the proceeds of the loan. ART. XV. Immediately after the signing of this agreement the Government will establish a head office at Changsha or some equally convenient place for the railway and will maintain the same until all bonds are paid off. This office will be under the direction of a Chinese managing director who shall, during the period of construction, be a Chinese engineer of standing to be appointed by the Government, with whom will be associated a chief accountant (hereinafter called the chief accountant), who shall be an Englishman and may be the representative of a British firm of public accountants of recognized standing, and after the completion of construction an engineer in chief (hereinafter called the engineer in chief after construction), who shall be an Englishman. These British employees and their successors in office shall be nominated by the Government and the trustees jointly and shall be appointed by the Government. The dismissal of these British employees and their successors in office shall take place only with the joint approval of the Government and the trustees, and any vacancies caused from time to time by the death, dismissal, resignation, or retirement of both or either of them or of their respective successors shall, while this article

remains in force, be filled up by the nomination and appointment, in manner aforesaid, of persons of British nationality and similarly qualified as aforesaid.

It is understood that the duties to be performed by these employees are intended to promote the mutual interests of both the Government and the bondholders, and it is therefore agreed that all cases of difference arising therefrom shall be referred for amicable adjustment between the Government and the representatives of the trustees. The salaries and other terms of agreement of the engineer in chief after construction and the chief accountant shall be arranged between the Government and the trustees and the amount of their salaries, etc., shall be paid out of the general accounts of the railway.

For all important technical appointments for the operation of the railway, Europeans of experience and ability shall be engaged, and wherever equally competent Chinese are available they shall be preferably employed. All such appointments shall be made and their functions defined by the managing director and the engineer in chief after construction in consultation and shall be submitted for the approval of the Government. Similar procedure shall be followed in the case of Europeans employed in the chief accountant's department. In the event of the misconduct or the incompetency of these European employees their services may be dispensed with by the managing director after consultation with the engineer in chief after construction and subject to the sanction of the Government. The form of agreement made with these European employees shall conform to the usual practice.

The accounts of the receipts and the disbursements of the railway's construction and operation shall be in Chinese and in English in the department of the chief accountant, whose duty it shall be to organize and supervise the same and to report thereon for the information of the Government through the managing director and of the trustees as representing the bondholders. All receipts and payments shall be certified by the chief accountant and authorized by the managing director.

The chief accountant shall so employ his Chinese staff that the principal members thereof shall have every opportunity of becoming thoroughly acquainted with the whole system and method of the accountant's department.

For the general technical staff of the railway after completion of construction the necessary arrangements shall be made by the managing director in consultation with the engineer in chief after construction and reported to the Government in due course. The duties of the engineer in chief after construction shall consist in the efficient and economical maintenance of the railway and the general supervision thereof in consultation with the managing director.

The engineer in chief after construction shall always give courteous consideration to the wishes and instructions of the Government, whether conveyed directly or through the managing director, and shall always comply therewith, having at the same time due regard to the efficient maintenance of the railway.

During the period of construction a fixed yearly sum, which shall be paid out of the proceeds of the loan, and the amount of which shall be decided between the Minister of Communications and the contractors or their assigns, shall be placed at the disposal of the Board of the Ministry of Communications to be used for office expenses at the discretion of the Minister of Communications.

A school for the education of Chinese in railway matters shall be established by the managing director subject to the approval of the Government.

The provisions of this article shall take effect and remain in force not only during construction, in so far as they apply, but thereafter as long as any of the bonds are outstanding and unredeemed.

ART. XVI. Immediately after the signing of this agreement the Government shall appoint for the period of construction a British firm of consulting engineers (hereinafter called the consulting engineers) of recognized standing to be selected solely by the Government provided that the contractors shall have the right to object when such selection is, in the opinion of the contractors, detrimental to the construction or to the interests of the bondholders, and in that case the contractors shall put their reasons for objecting in writing so that the Government may reconsider the matter. The representative in China of the consulting engineers, who shall be an Englishman, shall be the engineer in chief during construction (hereinafter called engineer in chief during construction) and shall be associated with the managing director. The removal or dismissal of the consulting engineers and/or their successors in office shall only take place with the joint approval of the Government and the trustees, and fresh appointments of consulting engineers, who shall also be of British nationality and recognized standing, shall only be made in the manner aforesaid.

The engineer in chief during construction shall supervise the efficient construction of the railway by the contractors in the interests of the Government and the bondholders in accordance with the terms of this agreement.

It is understood that the duties to be performed by the consulting engineers and the engineer in chief during construction are intended to promote the mutual interests of the Government and the bondholders, respectively, and it is therefore agreed that all cases of difference arising therefrom shall be referred for amicable adjustment between the Government and the representative of the trustees. The salaries and other terms of agreement of the consulting engineers and the engineer in chief during construction shall be arranged between the Government and the trustees, and the amount of their salaries, etc., shall be paid out of the general accounts of the railway.

The consulting engineers and the engineer in chief during construction shall always give courteous consideration to the wishes and instructions of the Government, whether conveyed directly or through the managing director, from whom they shall receive technical instructions and shall always comply therewith, having at the same time due regard to the efficient construction and equipment of the railway so that it may form good security for the bondholders.

The plans and specifications and all type drawings of the railway are to be prepared by the consulting engineers subject to the supervision and approval of the managing director, having due regard to the future earning power of the capital to be expended in construction and equipment, to the local conditions and requirements, to economical construction, and to the probable amount of traffic of the railway-keeping in mind that an economically designed line of efficient construction, earning power, and equipment is required in the interests of the Government and so as to form good security for the bondholders.

A sufficient amount of rolling stock, including locomotives for the operation of the railway, shall be provided and the engineer in chief during construction, in consultation with the managing director, shall decide the specifications both as to quality and quantity of the same, having due regard to the probable amount and nature of the traffic of the railway.

ART. XVII. Should the Chinese Government adopt a unified system for railway operation and accounts, and a general standard for equipment, permanent-way material, and steel sections, the management of the railway shall comply with such system and standards, provided that the adoption of such system and/or standards does not conflict with the interests of the bondholders.

ART. XVIII. The contractors are hereby appointed the agents of the Government of the Republic of China for the construction and equipment of railway and works, and as such agents the contractors shall in a good and workmanlike manner and with good materials and to the reasonable satisfaction of the managang director and the engineer in chief during construction, construct and complete the railway and works according to the specifications and plans. The contractors shall locate the railway in accordance with the instructions of the Government conveyed through the managing director and to the satisfaction of the engineer in chief during construction.

The contractors are hereby appointed as agents for the Railway Administration during construction for the purchase of all material, plant, and goods required to be imported from abroad. For all important purchases of such materials tenders may be called for by the managing director, and the decision with regard to the acceptance or refusal of such tenders shall rest with the managing director subject to the approval of the engineer in chief during construction. 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 same together with the remuneration specified in Article XXI of this agreement. It is understood that no orders for materials shall be executed or any expenditure incurred without the approval of the managing director and the engineer in chief during construction.

The contractors shall arrange for inspection before shipment of all materials purchased abroad and shall charge the actual cost of such inspection.

The managing director and engineer in chief during construction shall arrange for the inspection of all important materials purchased in China, and no materials shall be accepted without their joint approval.

ART. XIX. The contractors shall appoint a competent and duly authorized agent, who shall be reasonably satisfactory to the Government, to reside on or near the works to represent them (the contractors) and have on their behalf charge of the railway and works during construction, and also as many competent and responsible engineers, inspectors, foremen, superintendents, subagents, overseers, and laborers as they may deem to be from time to time necessary. The contractors shall also provide all the necessary medicines and medical attendance for all persons employed on the railway and works.

The contractors undertake on their part that their foreign staff shall observe the usages of courtesy, together with due respect to the established institutions of the