which is estimated at three years from the actual beginning of the works, a longer period, however, being allowed for the completion of the section from Ichang to Kweichowfu in consideration of the engineering difficulties to be encountered. Work shall be commenced simultaneously at Wuchang, Changsha, Kwangshui, and Ichang within six months after this agreement has been signed, within which period the banks shall notify the Ministry of Posts and Communications that the sum of £600,000 sterling has been placed at its disposal, in case funds should be required for survey or construction purposes, or for ordering of materials, and for the resumption by the Imperial Chinese Government of the portion of these lines already constructed by the Provinces concerned, the said sum to be held in Europe and/or in the United States of America or remitted to China as the Ministry may direct as a first instalment on account of the proceeds of the loan. This amount of £600,000, or whatever portion thereof is actually advanced, together with interest thereon at the rate of 6 per cent per annum, shall be deducted from the first proceeds of the sale of the bonds.

It is understood that the lines of railway already constructed by the two Provinces of Hupei and Hunan prior to the signature of this agreement with capital provided by those Provinces themselves, together with the property of those two provincial railways, shall henceforward be taken over by and incorporated in the Canton-Hankow and the Szechwan-Hankow Government Railways Administration, and further that any supplementary funds which may be furnished in the future by the Ministry of Posts and Communications on account of a deficiency in the amount required for the construction of the Canton-Hankow and Szechwan-Hankow main lines within the boundaries of the two Provinces of Hupeh and Hunan, as provided for in Article XV of the present agreement, shall also rank as capital of the Canton-Hankow and Szechwan-Hankow Railway main lines within the boundaries of the two Provinces aforesaid. But the returns due upon such capital shall not in any manner impair the arrangements for payment of interest and repayment of principal of the present loan.

ART. IV. The rate of interest for the loan shall be 5 per cent per annum on the nominal principal, and shall be paid to the bondholders half-yearly. The said interest shall be calculated from the date on which the loan is issued to the public, and shall be paid by the Imperial Chinese Government during the time of construction either from the proceeds of the loan or from other sources, and afterwards, in the first place, out of the revenues of the railways, and then from such other revenues as the Chinese Government may think fit to use for the purpose, in half-yearly instalments according to the amounts specified in the schedule attached to this agreement, and 12 days before their due dates, Western Calendar, as calculated half-yearly from the date on which the loan is issued to the public.

ART. V. The term of the loan shall be 40 years. Repayment of principal shall commence after the expiry of 10 years from the date of the loan and except as provided in article VI hereinafter, shall be made by yearly amortization to the banks in halfyearly instalments out of the revenues of the lines, or such other revenues as the Chinese Government may think fit to use for the purpose, according to the amounts specified in the schedule attached to this agreement, but 12 days before their due dates, Western Calendar, as calculated half-yearly from the date on which the loan is issued to the public.

ART. VI. If at any time after the lapse of 10 years from the date of the loan the Imperial Chinese Government should desire to redeem the whole outstanding amount of the loan or any part of it not yet due for repayment in accordance with the schedule of repayment hereto attached, it may do so up to the end of the seventeenth year by payment of a premium of 2 per cent on the face value of the bonds, that is to say, by the payment of £102 10s. for each £100 bond, and after the lapse of 17 years without premium: but in each and every case of such extra redemption the Imperial Chinese Government will give six months previous notice in writing to the banks and such redemption shall be effected by additional drawings of bonds to take place on the date of an ordinary drawing as provided for in the prospectus of the loan.

When the loan has been fully repaid this agreement will immediately become null and void. Bonds and interest coupons which have matured will be collected in due order and cancelled by the banks as they are presented for payment and will be delivered by them to the Chinese Ministers in Great Britain, Germany, France, and the United States of America. The banks will refund in full to the Imperial Chinese Government the amounts of any drawn bonds and/or interest coupons which have not been presented for payment within 30 years from the respective due dates for redemption or payment of interest.

ART. VII. The half-yearly payments due for amortization and interest referred to in articles IV and V shall be made in accordance with the amounts of the schedule attached to this agreement, and 12 days before their due dates as fixed by articles IV

and V, in equal share to the banks by the Ministry of Posts and Communications, which shall hand to the banks in Shanghai or in Hankow, 12 days before the said due dates, funds in Shanghai "Kueiyuan" sycee or Hankow "Yang-li" sycee and/or coin of the national currency (so soon as the said currency shall have been effectively established) sufficient to meet such payments in gold in Europe and the United States of America, exchange for which shall be settled with the banks on the same day, the Ministry of Posts and Communications having, however, the option of settling exchange with the banks simultaneously at any date or dates within six months previous to any due date for the payment of interest and/or principal. These payments may, however, be made in gold in Europe and/or in the United States of America 12 days before their due dates if the Imperial Chinese Government should happen to have gold funds bona fide at their disposal in Europe and/or in the United States of America not remitted from China for the purpose, and desire so to use them. In reimbursement of expenses connected with the payment of interest and repayment of principal of the loan the banks will receive from the Chinese Government a commission of per cent on the annual loan service.

ART. VIII. The Imperial Government of China hereby engages that the interest and principal of this loan shall duly be paid in full and should the revenues of the railways and/or the proceeds of the loan not be sufficient to provide for the due and full payment of interest and repayment of principal, the Ministry of Posts and Communications shall memorialize the Throne and the Imperial Government of China will thereupon make arrangements to ensure that the amount of deficiency shall be met from other sources and handed over to the banks on the date upon which funds are required to complete full payment of interest and repayment of principal.

ART. IX. The present loan of £6,000,000 sterling, together with the second series thereof, provision for the issue of which is made under the terms of article XV hereinafter, is hereby secured, in respect to both principal and interest, as a first charge

upon

1. Hupeh general likin amounting to 2,000,000 Haikwan taels a year.

2. Hupeh additional salt tax for river defence amounting to 400,000 Haikwan taels a year.

3. Hupeh new additional two-cash salt tax of September, 1908, amounting to 300,000 Haikwan taels a year.

4. Hupeh collection of Hukuang interprovincial tax on imported rice, to the amount of 250,000 Haikwan taels a year.

5. Hunan general likin amounting to 2,000,000 Haikwan taels a year.

6. Hunan salt commissioner's treasury regular salt likin to the amount of 250,000 Haikwan taels a year.

The above provincial revenues, amounting to a total of 5,200,000 Haikwan taels a year, are hereby declared to be free from all other loans, charges, or mortgages.

So long as principal and interest of this loan are regularly paid, there shall be no interference with these provincial revenues; but if principal or interest of the loan be in default at due date, then, after a reasonable period of grace, likin and other suitable internal revenues of the Provinces of Hupeh and Hunan sufficient to provide the amounts above stated shall forthwith be transferred to and administered by the Imperial Maritime Customs in the interests of the bondholders. And so long as this loan or any part thereof shall remain unredeemed, it shall have priority, both as regards principal and interest, over all future loans, charges, and mortgages charged on the aforesaid provincial revenues. No loan, charge, or mortgage shall be raised or created which shall take precedence of or be on an equality with this loan, or shall in any manner lessen or impair its security over the aforesaid provincial revenues, and any furture loan, charge, or mortgage charged on the said provincial revenues other than the second series of the present loan provided for in article XV aforementioned shall be made subject to this loan, and it shall be so expressed in every agreement for every such future loan, charge, or mortgage.

After redemption of the existing gold bonds referred to in article II of this agreement it is understood and agreed that, so long as this loan is unredeemed, the railways shall, under no circumstances, be mortgaged nor their receipts given as security to any other party.

In the event of the Chinese Government, during the currency of this loan, entering upon definite arrangements for the revision of the Customs tariff, accompanied by stipulations for the decrease or abolition of likin, it is hereby agreed, on the one hand, that such revision shall not be barred by the fact that this loan is secured by likin and provincial revenues, and, on the other hand, that whatever likin is required to provide the security of this loan shall neither be decreased nor abolished except by previous arrangement with the banks and then only in so far as an equivalent is substituted for it in the shape of a first charge upon the increase of customs revenue consequent upon such revision.

ART. X. The banks are hereby authorized to issue to the subscribers to the loan bonds for the total amount of the loan in gold, for such amounts as may appear advisable to the banks. The form and language of the bonds shall be settled by the banks in consultation with the Ministry of Posts and Communications or the Chinese Minister in Berlin, London, Paris, or Washington: they shall bear the facsimile of the signature of the Minister of Posts and Communications and of his seal of office, in order to dispense with the necessity of signing them all in person, and the Chinese Minister in Berlin and/or London and/or Paris and/or Washington, at the option of the banks, shall, previous to the issue of the 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. The representatives of the banks in Berlin, London, Paris, or New York, as the case may be, shall countersign the bonds as agents for the issue of the loan.

In the event of any bond or bonds issued for this loan being lost, stolen, or destroyed, the group and/or bank or banks concerned shall immediately notify the Ministry of Posts and Communications and the Chinese Minister in Berlin, London, Paris, or Washington, as the case may be, who shall authorize the group and/or bank or banks concerned to insert an advertisement in the public newspapers notifying that payment of such bond or bonds 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 any bond or bonds be destroyed or should such lost or stolen bond or bonds not be recovered after a lapse of time to be fixed by the group and/or bank or banks concerned the Chinese Minister in Berlin, London, Paris, or Washington, as the case may be, shall seal and execute a duplicate bond or duplicate bonds for a like amount and hand the same to the group and/or bank or banks representing the owner or owners of such lost, stolen, or destroyed bond or bonds, which group and/or bank or banks shall pay all expenses in connection with such delivery and execution of such bond or bonds for the account of the owner or owners of such bond or bonds.

ART. X1. 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 banks in consultation with the Chinese Ministers in Berlin, London, Paris, and Washington. The banks are 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 Berlin, London, Paris, and Washington to cooperate with the banks in any matters requiring conjoint action, and to sign the prospectus of the loan.

ART. XIII. This loan of £6,000,000 sterling shall be issued to the public in one amount as soon as possible after the signature of this agreement, and not later than 12 months from the date thereof. The price of the bonds to the Imperial Chinese Government shall be 95 per cent of their nominal value. Subscriptions will be invited by the banks in Europe, in the United States of America, and in China from Chinese, Europeans, and Americans on equal conditions, preference being given to the application of the Chinese Government, provided such application be made not less than four days before the issue of the prospectus to the public. Seven days' notice of the issue of the prospectus will be given by the banks to the Imperial Chinese Government.

ART. XIV. The proceeds of the loan shall be placed to the credit of a "Hukuang Government Railways Account" with the Deutsch-Asiatische Bank, the Hongkong & Shanghai Banking Corporation, and the Banque de l'Indo-Chine in China, Berlin, London, or Paris, as the case may be, and with the American Group in New York or such banks in China as from time to time shall be designated by the American Group, the International Banking Corporation being now so designated. Payments of the loan proceeds into the credit of this account shall be made in installments and on dates conforming to the conditions allowed to the subscribers to the loan.

Interest at the rate of 3 per cent per annum shall be granted on the credit balance of the portion of this account kept in Berlin, London, Paris, or New York, and interest on the credit portion kept in China by the above banks will be allowed at the banks' rate for current accounts to be arranged.

Subject to the payments and deductions to be made from the loan proceeds in terms of articles II and III of this agreement the banks will hold the net balance with accrued interest to the order of the Ministry of Posts and Communications.

Transfers of the loan funds to China in amounts not exceeding £200,000 sterling transferred in any one week, will be made by the Ministry of Posts and Communications at its discretion, the transfers being effected through the Deutsch-Asiatische Bank, the Hongkong & Shanghai Banking Corporation, the Banque de l'Indo-Chine and/or the

bank or banks to be designated by the American Group, the International Banking Corporation being now so designated.

Transfers of the loan funds to China from the banks in Europe and America, and transfers from the banks in China to the Chinese banks which are hereinafter designated shall be made as nearly as possible in equal amounts from each of the banks, the rate of exchange for each transfer from Europe and America being settled simultaneously with the transferring banks either on the day on which such transfer is to be made, or at the option of the Ministry of Posts and Communications, on any date or dates within six months previous to the day on which the transfer is to be made. In the event of equal transfers being found to be impracticable, a mutually satisfactory procedure for making the transfers above referred to shall be arranged between the Ministry of Posts and Communications and the banks.

The transferred funds, to the extent of one-half of the net balance of the loan proceeds above referred to, may, at the discretion of the Ministry of Posts and Communications, be deposited in a Hukuang Government Railways Account with the Bank of Communications (Chiao-Tung Bank) and/or with the Ta-Ching Government Bank, which banks have been designated by the Ministry of Posts and Communications as its agents for this purpose, and the Imperial Chinese Government hereby declares itself responsible for all the funds of this loan deposited with the said Chinese banks.

The Ministry of Posts and Communications shall from time to time make transfers from the loan funds held in China by the banks and by the designated Chinese banks to the credit of a construction account for the Hupeh section of the Szechwan-Hankow Railway Line with the Deutsch-Asiatische Bank and of a construction account for the Hupei-Hunan section of the Canton-Hankow Railway Line with the Hongkong and Shanghai Banking Corporation, in amounts sufficient to cover one month's construction estimates in advance, so as to insure the uninterrupted continuance of construction. The Ministry of Posts and Communications shall hand to the banks, for the information of the auditors (hereinafter referred to), quarterly statements of the loan funds held on deposit by the aforesaid designated Chinese banks, and these funds shall not be withdrawn from the said banks except for the purpose of transfer to the construction accounts above named. Funds shall be drawn from these construction accounts in sycee by the managing director as hereinafter provided, and it will rest with the managing director under the instructions of the Ministry of Posts and Communications to make all necessary arrangements for the distribution of such funds through Chinese banks or otherwise to the points where they are required. Requisitions upon these construction accounts will be drawn in amounts to suit the progress of construction of the railway lines by orders upon the Deutsch-Asiatische Bank or the Hongkong & Shanghai Banking Corporation signed by the managing director of the lines concerned or, in his absence, by his duly authorized representative, who shall moreover, two days previous to the presentation of such order, issue in duplicate a certificate stating clearly the object for which the funds are to be drawn, handing one copy to the auditor concerned (hereinafter referred to) and one copy to the bank concerned. If the auditor should find that there are irregularities in the payments to be made, he may in the first place ask the managing director for specific explanations, and if the managing director is unable to furnish definite explanations, the auditor may refer the matter to the Ministry of Posts and Communications for its instructions.

The accounts of the railways shall 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 two auditors for the Hupeh-Hunan section of the CantonHankow Railway Line, and the Hupeh section of the Szechwan-Hankow Railway Line, respectively, appointed and paid by the banks, whose duty it will be to satisfy the banks as to the due expenditure of the loan funds in accordance with the provisions of article III of this agreement, and to certify to monthly statements of the foreign materials purchased by the Railway Administration under the provisions of article XVIII hereinafter. 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 railways, which report shall be procurable by the public on application.

ART. XV. If after the deduction of the amount required for the redemption of the gold bonds referred to in article II of this agreement, and of the sums necessary for the service of interest on the loan during the time of construction, the balance of the loan proceeds, with accrued interest, should not be sufficient to complete the construction and equipment of the railway lines named in article II of this agreement, 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, and any balance then uncovered shall be supplemented by the issue

by the banks, under the terms of the present agreement, of a second series of the present loan, for an amount not exceeding £4,000,000 sterling. This second series shall be secured pari passu as an equal charge in every respect on the internal revenues specified in article IX of this agreement, and the time of its issue shall be left to the discretion of the banks. Should foreign capital still be required for the completion of the railway lines aforesaid it shall be provided by a further loan to be issued by the banks on terms to be arranged. If after the completion of the lines there should be a balance at the credit of the railways account, such unused balance will be transferred to the credit of the interest reserve fund, hereinafter mentioned in article XX, as a provision for payments for which the Imperial Chinese Government is responsible under this agreement, or will be devoted, if necessary, to the improvement of these railways or otherwise to their advantage.

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 markets and the prices of existing Chinese Government stocks are so affected as to render, in the opinion of the banks, the successful issue of this loan impossible on the terms herein named, the banks shall be granted a reasonable extension of time for the performance of their contract. If within this time limit, to be arranged, the loan shall not have been issued, then this contract shall become null and void, and any advances made by the banks under the provisions of article III of this agreement, 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 lines shall be entirely and exclusively vested in the Imperial Chinese Government. For the work of construction the Imperial Chinese Government will select for appointment a fully qualified British engineer in chief for the Hupeh-Hunan section of the Canton-Hankow railway line from Wuchang to Yichanghsien, and a fully qualified German engineer in chief for the Kwangshui-Ichang section of the Szechwan-Hankow railway line, with a fully qualified American engineer in chief for the section of that line from Ichang to Kweichowfu, at the same time informing the banks of the selection made. If the banks have objections to offer against the engineers in chief thus selected for appointment, they shall, in stating their objections, give definite reasons therefor. The said engineers in chief shall be under the orders of the director general and the managing directors of the respective lines or, in their absence, of their duly authorized representatives, and will carry out all the wishes of the Ministry of Posts and Communications with regard to the plan and construction of the lines. In their general conduct they shall pay all due respect to the Ministry of Posts and Communications, the director general, and the managing directors. The terms of their respective agreements will be arranged by the Ministry of Posts and Communications.

Whenever appointments are to be made or functions defined of the technical members of the railway staff, as well as in the case of their dismissal, the director general, the managing director or, in his absence, his duly authorized representative, will act in consultation with the engineer in chief concerned, and in the case of disagreement the matter will be referred to the Ministry of Posts and Communications, whose decision shall be final.

After completion of construction, and during the currency of this loan, the Imperial Chinese Government will continue to employ Europeans and/or Americans as engineers in chief of the said railway lines, these appointments being made without reference to the banks.

ART. XVIII. For the Hupeh-Hunan section of the Canton-Hankow railway line, and the Hupeh section of the Szechwan-Hankow railway line, respectively, (a) The British & Chinese Corporation (Ltd.), and (b) the Deutsch-Asiatische Bank will act as agents of the Railway Administration during construction for the purchase of all materials, plant, and goods required to be imported from abroad. From this category rails and their accessories are excepted; for the purchase of which the Ministry of Posts and Communications has memorialized the Throne. recommending that they should be manufactured and supplied by the Hanyang Iron Works. Their price will be settled by the Ministry of Posts and Communications with the Hanyang Iron Works, after comparison with the current quotations for rails purchased by other lines from Europe or America. No delay will be allowed, and it is understood that if the Hanyang Iron Works are unable to supply the requirements of the lines in question in such manner as to insure uninterrupted construction, the purchasing agents will be instructed to procure from abroad the additional supplies required. For all important purchases of materials tenders shall be called for by the director general or the managing director concerned; 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 railways, and shall charge the original net cost of the same, plus a commission of 5 per cent. It is understood