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(c) The cashier will keep a cash book for recording all payments made by him. At the close of each day he will hand to the foreign accountant a copy of his cash account for the day, accompanied by all vouchers for entry in the cash book kept by the foreign accountant, together with a statement of his balance, and will, if desired, produce his cash for inspection by the auditor.

(d) All checks shall be prepared by the foreign accountant and shall be certified as correct by his signature. He will then present them, together with the relative documents, to the managing director for his approval and signature.

After the managing director has signed the checks they will remain in the charge of the foreign accountant who will be responsible for the safe delivery of the checks or their proceeds to the payees.

(e) Funds required for land purchase as shown in the engineer-in-chief's monthly forecast shall be paid by check to the Land Office in amounts to meet immediate requirements, and the relative land transfer certificates must be sent by the managing director without delay to the foreign accountant for comparison and entry.

5. The expenditure of the director-general's establishment will be a fixed monthly sum of $15,000 to be paid against the receipt of the director-general.

The salaries and allowances of the managing director's establishment, not including the foreign accountant's department, shall also be a fixed monthly sum to be arranged from time to time with the auditor concerned, and to be approved by the director general.

This amount will be paid against the receipt of the managing director.

MEMORANDUM REGARDING CONSTRUCTION AND PURCHASE OF MATERIALS.

1. In order to secure efficiency of construction of the railways, which at present form the sole security for the loan, all executive work comprised under the ten main heads of the form of monthly forecast approved by the director general and attached hereto, will be carried out by the engineer in chief, and all orders for the purchase of materials shall be prepared by him, subject always to the authority and approval of the managing director.

2. In the case of all orders for the purchase of materials (except Chinese materials and goods manufactured in China on which no commission is chargeable) copies of requisitions relating thereto shall be handed to the purchasing agents without delay in order to enable them to make the necessary arrangements for calling for tenders or placing the orders on the open market, under the terms of article 18 of the loan agreement.

PEKING, 12th September, 1913.

Appendix 9.-SSUPINGKAI-CHENGCHIATUN RAILWAY.

AGREEMENT FOR CONSTRUCTION.1

[Translation of the Chinese text.]

This agreement is made at Peking on the 29th day of December, 1915 (4th year of the Republic, according to the Chinese chronology, and 4th year of Taisho, according to the Japanese chronology).

The Chinese Government (hereinafter called the Government), represented by the Minister of Finance and the Minister of Communications, of the one part, and the Yokohama Specie Bank (hereinafter called the Bank), of the other part, have concluded between themselves the present agreement on the basis of the agreement in principle which was arranged between the Chinese and Japanese Governments on October 5, 1913 (2d year of the Republic, according to the Chinese chronology, and 2d year of Taisho, Japanese chronology).

ARTICLE 1. The Government authorizes the bank to issue a 5 per cent gold loan in the sum of 5,000,000 yen. The loan will bear the date of the day of issue, and will be known as the Chinese Government 5 per cent Loan for the Building of the Ssupingkai-Chengchiatun Railway.

ART. 2. The present loan is for the building of a railway from Ssupingkai to Chengchiatun. After the completion of a survey, the route will be fixed by the director general of the road and the bank, and submitted to the Ministry of Communications for approval.

ART. 3. The capital obtained from the loan above mentioned is set apart exclusively for the building of the road, including the payment for the expropriation of land, acquiring rolling stock and other necessary equipments (or materials), and also expenses for the operation of the road and for the payment of interest on the present loan during the period of construction of the said road.

The work must be started not later than six months after the signing of this agreement, and must be finished, if possible, within two years of the day of starting the same. Before the end of six months the bank will place at the disposition of the director general of the road a sum not to exceed 200,000 yen as an advance upon the loan, which money will be deposited in Japan or remitted to China in accordance with the instructions of the director general. The sum so advanced, together with the interest which will be charged on the account at a rate not over 7 per cent per annum, will be withheld by the bank from the proceeds of the first bonds issued. The advance will be paid in Shanghai taels.

ART. 4. The interest on the present loan will be calculated at the rate of 5 per cent per annum on the nominal value of the bonds from the day of issue of the loan, and the payment of interest to the bondholders will be made semiannually. During the period of the building of the road, the Government will pay the interest either from the principal of the loan or from other sources, at its discretion, and when the building is finished the interest will be paid first from the revenue of the road and thereafter from other State revenues at the discretion of the Government. Interest, which as above stated will be computed from the day the loan was issued, will be payable 14 days in advance of the expiration of each half-yearly term in accordance with the amortization table annexed to the agreement.

ART. 5. The term of the loan shall be 40 years. The amortization of the principal shall begin from the eleventh year from the day of issuing the loan, and shall be carried out by means of half-yearly installments, 14 days in advance, in accordance with the amortization table (except in the case anticipated in the sixth article of the agreement), and will be paid from earnings of the road or from other Government revenues at the discretion of the Government.

ART. 6. The Government reserves to itself the right, upon notice to the bank in writing six months in advance, beginning with the eleventh year after the issue of the loan, to pay off, if it desires, before maturity, all or part of the principal, which has not been amortized, upon condition that the holders of the bonds are to be paid

1 From the Far Eastern Review for May, 1917.

a premium at the rate of 23 per cent above the par value of the bonds, that is, upon each bond of 100 yen will be paid 102 yen 50 sen. At the end of the twentieth year after the day of issue of the loan, the Government may increase the amounts of the amortization payments, without paying a premium over and above the par value. Such payments before maturity will be carried out by means of a supplementary drawing of bonds upon the days fixed in the prospectus of the loan for the usual drawings.

ART. 7. The Government binds itself to make the payments of the interest and principal of this loan, in accordance with articles 4 and 5 of this agreement, to the bank through the director general, according to the attached amortization table, but 14 days in advance. For payments to be made before maturity in accordance with article 6, the Government likewise engages to make the required payments 14 days in advance. All of the above-mentioned payments are to be made by the Government to the bank at Shanghai, in Shanghai taels (or in new Government money, if such has been introduced into circulation) at the current rate of Japanese exchange. The rate of exchange will be arranged by agreement with the bank either on the day of payment or, as the Government may prefer, on any day not more than six months previous to the day of payment. The Government shall have the right to make such payments in gold if they have such funds in Japan (upon condition, however, that those gold funds shall not have been acquired especially for the purpose of making this payment), and such payment in gold must also be made 14 days in advance. For its services in making the payments upon the present loan the bank will receive a commission at the rate of per cent on all payments effected through it.

ART. 8. The Government guarantees the regular payment both of the interest and of the principal. In case the amount of the loan or the revenue from the road shall not be sufficient for the above-mentioned payments, the Government will adopt the necessary measures to insure these payments from other sources, which payments must also be effected 14 days in advance of the stated term.

ART. 9. The present loan is secured upon all movable and immovable property belonging to the railway, or which may belong to it in the future, and also upon the revenues of the road. In case a supplementary loan is concluded according to clause 1 of article 15 of this agreement, the said property and revenues of the road will also serve as security for such supplementary loan. The security of this loan may not be pledged for any loan other than as above stated.

ART. 10. The bank has the right to issue bonds for the full amount of the loan, and the nominal value of the bonds will be determined by the bank. The form of the bonds will be determined by the bank in agreement with the Minister of Communications or with the Chinese Minister at Tokyo. The bonds shall be printed in the Chinese and Japanese languages, and the signature of the Minister and the seal of the Ministry of Communications shall be engraved thereon. Previous to the issue of the bonds, the signature and the seal of the Chinese Minister at Tokyo shall be engraved on each as proof that the issue has been effected with the permission of the Government and under its responsibility. The bonds will also be signed by the representative of the bank. If bonds are lost, damaged, or stolen, the bank will immediately notify the Minister of Communications or the Chinese Minister in Japan, who shall authorize it to advertise in the press that payments upon the same will not be made, and also to take the necessary measures in conformity with the laws of the said country. If the lost bonds are not discovered before the date fixed by the bank, the Minister of Communications or the Chinese Minister at Tokyo will deliver to the bank duplicate bonds with the proper signature and seals, and all expenses for printing these bonds will be borne by the bank.

ART. 11. During the whole currency of the loan, the bonds and coupons, and also all operations connected with the payment of the principal and interest, will be exempted from Chinese taxation.

ART. 12. All details in regard to the publication of the prospectus of the loan and the payment of the principal and interest, not set forth in this agreement, shall be determined by the bank upon agreement with the Chinese Minister at Tokyo. The bank is authorized to issue the prospectus within the shortest possible time after the signing of this agreement (observing the reservation in article 13 of this agreement). The Chinese Minister at Tokyo shall be instructed to sign the prospectus of the loan and also to cooperate with the bank in all questions touching on the issue of the loan. ART. 13. The bank shall have the right to issue the entire loan either at one time or in several series, depending upon the cost of the work, and its satisfactory execution, and also upon the condition of the money market. The Government shall receive for the bonds the issue price less a deduction of 5 per cent of their nominal value, which will be retained by the bank as indemnification for the expense of issuing the loan.

ART. 14. The proceeds of the loan shall be deposited to the credit of the railway in the Yokohama branch of the bank at the times indicated in the prospectus of the loan for the subscribers to the same.

The Yokohama branch of the bank will pay upon the credit balance of these funds interest at the rate of 3 per cent per annum, and on sums transferred to China, the local branches will pay the interest that is customary on such accounts. The bank will retain, at the disposal of the director general, all sums realized from the sale of the bonds, with the interest thereon, deducting, however, the sums necessary for the payment of interest upon this loan and commissions upon such payments during the period of construction of the road. In the case of payments exceeding 200,000 yen, the director general must advise the bank 10 days before effecting the payment. The entire loan is to be expended for the building of the railway in proportion to the progress of the work and as need may arise, for which written requisitions must be presented to the bank, signed by the director general and the chief accountant, with a statement attached, showing in detail the object of the disbursement, and specifying the cost. Every month the appropriations for the building of the railway will be remitted to Shanghai according to the instructions of the director general, and will be placed to the credit of the account of the road in the said branch of the bank. The director general, in agreement with the bank, will appoint a Japanese subject as chief accountant. The chief accountant will prepare a list of the necessary Chinese and Japanese clerks for conducting the bookkeeping department, and present the same to the director general; upon his approval of the list, and upon the appointment by him of these persons, they shall be placed at the disposition of the chief accountant, for the performance of their duties under his direction. The chief accountant, under the supervision of the director general and the managing director of the road, shall have charge of all revenues and expenditures of the road during the whole term of this loan, and shall sign conjointly with the managing director of the road all documents relating to the expenditure of such sums. The accounts of the road will be kept in the Chinese and Japanese languages, according to the methods adopted for the other Chinese railways.

The management of the road will periodically publish, in the Chinese and Japanese languages, a statement showing the revenue and expenditure of the railway, for the information of the public.

ART. 15. In case the principal obtained from the floating of the present loan, together with accrued interest, is not sufficient, after deduction of the percentage necessary for the payment of the coupons, during the period of construction, for the completion of the road and for meeting the expenses connected with it, the Government must furnish, from Chinese sources, the necessary funds for the uninterrupted continuation of the work, but in case a sufficient amount is not available, the bank may issue a supplementary loan on the same terms as the loan provided for in this agreement. If upon the completion of the building of the road a surplus remains, such surplus will be carried as reserve capital, in conformity with article 18, as security for the regular payment of the principal of the present loan.

ART. 16. The building of the road and the management of the road will be entirely in the hands of the Government.

The Government will appoint the director general of the road, whose place of residence must be near the place where the road is being built, and who will be furnished with full power to act in the name of the Government within the limits of this agreement. The director general, upon agreement with the bank, will appoint as chief engineer, under contract, a Japanese subject. It will be the duty of the chief engineer, under the supervision of the director general and the managing director of the road, to make surveys, prepare plans, drawings, estimates, etc., to direct the technical part of the work, to purchase needed materials, rolling stock, etc. The chief engineer will submit for the consideration of the director general a list of the necessary Chinese and Japanese technical staff for the construction work, exactly designating their number and their functions. The director general, upon approving this list, will appoint those technicians and place them at the disposition of the chief engineer for the performance of their duties under his direction. Appointments to the minor positions, and also dismissals, will be made by the chief engineer with the consent of the director general and managing director of the road. As the construction of the separate sections of the road is completed, they will be turned over, by the chief engineer, to the director general, who will open them for operation if this is considered advisable. The traffic manager shall be a Japanese subject, and he shall discharge his duties in compliance with the instructions of the director general and the managing director of the road. The duties of the chief engineer will cease upon the completion of the building of the road. The director general shall then appoint a Japanese engineer whose duty it will be to supervise the engineering department under the orders of the

director general and the managing director of the road. The Japanese engineer and traffic manager will be appointed, under contract, by the director general, upon agreement with the bank.

ART. 17. For the purpose of guarding the railway line, there shall be maintained a Chinese guard detachment under the command of Chinese officers. All expenses connected with the maintenance of the detachment shall be paid from the amount destined for the building and maintenance of the road. The numerical strength of the detachment shall be determined by the director general upon agreement with the bank. If the detachment proves to be insufficient, the management of the road shall request the Government to send as guards a detachment of troops of either the central or provincial Government, and the expense for their maintenance shall be borne by the corresponding authorities.

ART. 18. The income of the railway shall be deposited in the bank on either short or long term deposits, and the bank shall pay interest at rates arranged by mutual agreement between it and the Government. The expenses of operation and upkeep of the road will be paid from the revenue of the road; the net balance of the revenue will first be applied toward the payment of the principal and interest on the loan, in accordance with the annexed amortization table, and the surplus remaining after the above-mentioned payments shall be held at the free disposal of the director general. After the completion of the building of the line and its opening to traffic, the amounts designated for the payment of principal and interest on the loan shall be handed over to the bank six months in advance of the dates specified in the amortization table. In case the revenue of the road is insufficient to cover the expenses for the payment of interest on the loan and the liquidation of the principal, these payments shall be secured by the means indicated in article 8 of the present agreement.

ART. 19. During the period of the building of the road, a person designated by the bank shall act as the agent of the road for the purchase abroad of all necessary building materials, rolling stock and other articles. The more important of these purchases will be made by the director general by means of tenders. It will be the duty of the agent, who will act as middleman, to furnish the required materials on the terms most advantageous to the road, and as compensation for this service he shall retain for himself 5 per cent of the net cost of materials procured in this way from abroad. All supply contracts shall be made through the chief engineer with the approval of the director general. It shall be the duty of the agent, who will be responsible for the strictest inspection of the materials obtained, to select materials of the best quality; the management of the road has the right to refuse to accept materials 1: they are not in accordance with the specification previously adopted. Building materials, rolling stock, and other articles of Japanese origin will be given preference before merchandise of other origin if the Japanese merchandise is of the same quality and the same price; after Japanese materials, preference shall be given to foreign merchandise recommended by the agent. Original bills for purchases of materials, and customs certificates, must be presented to the director general; in case discounts are allowed from the established prices, these amounts must be credited to the account of the railway; the agent is required to present all vouchers, certificates of manufacturers, etc., required by the management of the road.

Aside from the above-mentioned commission the bank shall not retain for its own profit any other sums. In case the management invites, for consultation, additional experts and engineers, all expenses in this connection will be charged to the account of the road.

To encourage Chinese industry, materials and merchandise of native origin, if the qualities and prices are the same as similar goods of foreign origin, shall be given the preference; for the purchase of such merchandise, of Chinese origin, the bank shall not receive a commission. Upon the completion of the building of the road the person designated by the bank shall continue as agent of the road, for supplying necessary materials, during the whole period while this agreement is in effect, under conditions which shall be arranged later.

ART. 20. If, in the future, the Government deems it advantageous or desirable to extend the railway line or to build a branch, this work can be done with money obtained from Chinese sources; if, however, foreign capital is wanted for that object, the Government is obliged to give the preference to the bank. The length of these additional lines shall be determined by the Government.

ART. 21. The bank, being the agent of the bondholders, shall deal with the management of the road in all matters concerning the railway, as the representative of the bondholders.

ART. 22. Should any events of a political or economic character in the country during the period between the signing of the present agreement and the issuing of the prospectus of the loan, which would have an injurious effect on the money market and cause a decline in Chinese securities, and in consequence cause the bank diffi106229°-19-22

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