terms in conformity with those of the present Agreement for the Taokow to Chinghua line, and on the basis of the Russian Cheng-Tai Railway Agreement,1 said terms to be settled at their discretion.

The cost of construction of the line from Taokow to Chinghua Chen, including rolling-stock and monies expended by the Syndicate as estimated by the Chinese Engineer after verification of the proper accounts, is £614,600. But in order to provide a liberal sum to meet the expenses of working the line until it is fully developed, and the interest on the loan, the Director-General has fixed the amount of the loan at £700,000, in 7000 bonds of £100 each. This loan is to bear interest at 5 per cent. per annum, and to be called the Chinese Imperial Government Honan Railway 5 per cent. (gold) loan of 1905.

2. Out of the above amount of £700,000 there will be issued to the Syndicate 6829 bonds of £100 each, which the Syndicate takes firm at the price of 90 per cent. of face value, equivalent to £614,600 cash, in order to refund the above amount of capital. This will be done on the day when the line is handed over to China, and interest on the bonds will accrue from date of issue.

At the same time the Syndicate will make up and present an account with vouchers of all initial expenditure not already included in construction account, and of the sums provided by them from time to time for the ordinary working of the line from the date of opening to traffic to the time of handing over, and request the General Administration to examine and settle it. Any loss on working account after deducting earnings will be borne half and half by each. To the amount so found due will be added interest on capital from January 1st, 1905, to the date of handing over, and the total of these two items will be refunded to the Syndicate by the former issue of bonds out of the 171 surplus bonds in hand for the required amount reckoned at 90 per cent. of face value. If any bonds still remain over they will be retained by the Imperial Chinese Railway Administration for future use. If after the line is taken over the earnings of the line are insufficient to meet the payment for interest and refund of capital at due date a further loan may be obtained from the Syndicate. These bonds shall be signed in the name of the Chinese Government by the Chinese Minister in London.

The interest coupons will be paid at their face value in gold in London on the 1st of July and 1st January of each year. Coupons falling due and paid will be collected in numerical order by the Syndicate at its cost and handed over to the Chinese Minister in London.

3. The loan shall be redeemed in twenty years dating from the tenth year of issue by annual drawings, which shall be held in London at the office of the Pekin Syndicate, in conformity with the schedule hereto annexed.

The drawings will be held on the 2nd Tuesday of January of each year. The first of such drawings shall be held in the year 1916. The number of drawn bonds at each drawing will be published in four daily newspapers at the cost of the Syndicate.

4. Drawn bonds shall be paid in gold at their face value at date when the next interest falls due. Bonds presented for payment must be surrendered along with all the interest coupons not yet due. In case of shortage the sum of 1 Vide Appendix F, No. 1, p. 267

the missing coupons shall be deducted from the capital repayable. Interest on the bonds will cease on the date when the latter are repayable. Repaid bonds will be collected by the Pekin Syndicate at its cost, and handed over to the Chinese Minister in London.

5. The Chinese Government shall not be at liberty before the year 1916 to augment the amount of the annual instalments for redemption, nor to repay the whole amount of the loan, nor to convert the loan. After this date the Chinese Government shall be at liberty at any time to repay the whole amount of the loan, provided, however, that until the expiry of the Syndicate's mining concessions the rates then in force for the conveyance of minerals shall not be arbitrarily increased to the detriment of the Syndicate's business. On the other hand, the Syndicate, after having settled an equitable tariff with the General Administration, based on the practice on other lines, shall not make pretexts to lower the rates to the detriment of the fund available for payment of principal and interest.

6. Interest coupons and drawn bonds shall be repayable in gold in London at the office of the Pekin Syndicate, or of such bank as the Syndicate may appoint for that purpose.

7. Payment of interest and repayment of the bonds forming this loan are guaranteed upon the general revenue of the Chinese Government. Further, by consent of the Chinese Government, the Imperial Chinese Railway Administration hereby declares that the net earnings of the said section of railway, after payment of the ordinary working expenses, are specially reserved for payment of interest and repayment of the said bonds, as is set out in the Working Agreement 1 made between the said Imperial Chinese Railway Administration and the Pekin Syndicate, and which working Agreement is to be taken as one with this Contract. This reserve is exclusively for the purposes above set forth, and is not divertible until the final extinction of the bonds of this loan.

1

8. The Imperial Chinese Railway Administration, after having taken note of the net receipts, authorises the Pekin Syndicate to convert the amount into gold, which shall be done on the most favourable terms in the interest of the Chinese Government and the Imperial Chinese Railway Administration, in order to assure the service of the loan at the next halfyearly period of payment. The remittances to the head office of the Pekin Syndicate in London shall continue until the sum necessary for the whole service of the loan at the next half-yearly payment has been realised in gold, and so that the service of the loan is assured three months at least before the half-yearly payment falls due.

The bank in which such sums are deposited will allow the best interest obtainable, for the benefit of the Imperial Chinese Railway Administration. The account in which said sums stand will be debited twenty days in advance with all the payments falling due at any half-yearly period, as provided for in this Contract, whether for interest, repayment of capital, cost of transport or commission.

9. In order to assure more fully the guarantee now given for the loan, the Imperial Chinese Railway Administration creates in favour of the bonds

1 Appendix C, No. 2, p. 240.

a first mortgage over the said section of railway line, its permanent way, rolling-stock, and earnings. This special hypothecation is made to and accepted by the Pekin Syndicate for the benefit of the bondholders.

In case the Imperial Chinese Railway Administration shall fail to carry out the engagements entered into by this Contract the Pekin Syndicate can exercise, in respect to the said railway and property, all the rights and powers which they are entitled to exercise resulting from this special hypothecation.

10. The foregoing stipulations do not militate against the responsibility of the Chinese Government in regard to this loan as specified in Article 7. The Chinese Government will devise means to provide the amount in gold necessary to supply the deficiency in case the sums accruing from the net earnings of the said section of railway, and paid over by the Chinese Railway Administration, are insufficient, after conversion into gold, to provide at least three months ahead for the payment falling due at the next half-yearly period.

In such case the Chinese Government will on demand place at the disposal of the Pekin Syndicate, fourteen days in advance of the due date, either in gold or value in some other form sufficient to produce in gold, the sum which the Syndicate may have notified as being necessary to meet the service of the loan.

11. From the monies thus received from the Imperial Chinese Railway Administration, or from the monies paid over by the Chinese Government, the Pekin Syndicate shall duly set aside beforehand the sums necessary for the next service of the loan on the basis of the requirements of the last preceding half-year.

12. The Chinese Government will pay to the Pekin Syndicate, or to the bank charged with the service of the loan, a commission of one-fourth of 1 per cent. on the amount of interest coupons paid,—that is, £25 on each £10,000, and the like commission on all bonds drawn for payment or repaid in anticipation of the due date. The amount of this commission will be taken from surplus earnings of the railway, if there are any, and in case these are insufficient it will then be paid by the Chinese Government.

13. The Chinese Government binds itself to respect and cause to be respected the privileges attaching to the bonds as stipulated for in the present convention, and to maintain the bonds themselves, the interest coupons and operations incident to the service of the loan, free from every tax and impost of whatsoever nature.

14. Coupons not presented for payment within five years from the date when they fall due will be forfeited for the benefit of the Chinese Government. In case of drawn bonds the term within which payment may be claimed is thirty years. In the case of a deceased bondholder the right will pass to his heirs, executors, etc., in conformity with the law of his own nationality.

Payment of the coupons and repayment of bonds will be made whether in time of war or peace, and irrespective of whether the holder belongs to a hostile or friendly State.

If bonds are lost, stolen, or destroyed the Chinese Government, upon

satisfactory proof of the facts of the loss and the title of the claimant, will authorise the Pekin Syndicate to issue fresh bonds to replace those lost, at the expense of the Syndicate.

15. The Chinese Government, through its Representative in London, will take the necessary steps and furnish the necessary documents so as to enable the bonds to be officially quoted on the London Stock Exchange.

16. The price of all land taken up for the railway having been included in the loan, the Syndicate will in the first place hand over the title-deeds to the Imperial Chinese Railway Administration, so that a list may be made which, after being stamped by the Magistrates of the several districts concerned, will be retained for record. The Railway Administration will then return the deeds to the Syndicate for custody, having first impressed on each a stamp indicating that they are not to be sold, pledged, or mortgaged. When the term has expired, or when the loan is fully repaid, the Syndicate will thereupon hand over to the Railway Administration all the original title-deeds, to be held by them as owners of the property. During the continuance of the term the Syndicate shall not assign the deeds to others, whether by way of sale, mortgage, or pledge.

17. This Agreement and the rights under it being made with the Pekin Syndicate, which is of British nationality, the said Syndicate, besides conforming as hereby required with the several articles of the Agreement, shall not either openly or secretly alienate the said rights to persons of another nationality, and shall not substitute persons of another nationality in the management of the railway affairs. A breach of this stipulation will entitle the Imperial Chinese Railway Administration to take the management out of the hands of the Syndicate, and entrust it to another company, and in that case the Syndicate shall have no claim for compensation.

The foregoing places no restriction on the holding of shares in the Pekin Syndicate by persons of another nationality, nor on the holding of bonds of this loan, both of which may be freely bought and sold on the market at the convenience of the holders.

18. In the accounts of this section there has been included an item for preliminary survey expenses, as also the cost of partial surveys of the second section which have already been made by the Syndicate, the result of which will be submitted to the Director-General.

19. All plant and materials necessary for the repair and working of the line will be purchased by the Syndicate as agents, but in placing such order the Syndicate will do their best to get the most favourable terms. A list of articles required shall be submitted to the Director-General for approval before the order is given.

It is understood that articles which China herself can manufacture, if quality and price are the same, are not to be ordered from abroad. The workshops and mines controlled by the Director-General Sheng ought more especially to have the preference in supply of such articles, provided that in quality and price the articles are equivalent to what can be imported from abroad. By price is meant the cost in the foreign country plus freight and insurance. All materials imported from abroad shall be exempt from customs duty, and from likin in transit to the interior.

20. In case of difference of opinion arising between the Pekin Syndicate and the Chinese Government, or the Imperial Chinese Railway Administration, the matter in dispute shall be discussed and settled between a member of the Wai Wu Pu and the British Minister. If these cannot agree the Wai Wu Pu and the British Minister will appoint an Arbitrator, whose dėcision will be final.

21. This Agreement is executed in duplicate, one copy to be kept by the Imperial Chinese Railway Administration and the other by the Pekin Syndicate. In case of doubt or ambiguity of meaning between the two texts, the English version shall be deemed the standard. This Contract shall be submitted to the Throne by the proper authority, who will request ratification. After ratification the Wai Wu Pu will officially communicate the fact to the British Minister at Peking for record, and so that the Syndicate may conform to the articles hereby agreed upon.

All the above must be done within one month from date of signature.
Signed and sealed at Peking the 3rd July 1905.

Signature and Seal of

SHENG HSUAN-HUAI,

Director-General of Railways.

(Signed) G. JAMIESON, Agent-General,
Pekin Syndicate Ltd.

APPENDIX C.-No. 2.

WORKING AGREEMENT MADE BETWEEN HIS EXCELLENCY SHENG, DIRECTOR GENERAL OF RAILWAYS,

BEING THERETO SPECIALLY

AUTHORISED BY THE CHINESE GOVERNMENT, AND G. JAMIESON,
C.M.G., AGENT-GENERAL OF THE PEKIN SYNDICATE LIMITED.

1. THE Imperial Chinese Railway Administration, under the authority of the Imperial Government, authorises the Pekin Syndicate, which will appoint a General Manager for the purpose, to manage, administer, and work the Taokow-Chinghua section of railway for profit on behalf of the said Railway Administration. Notice of the appointment of the General Manager shall be communicated beforehand to the Director-General for his information and confirmation.

2. As soon as this section of the line is completed the Pekin Syndicate will report to the Director-General, and after being definitely taken over by him the Pekin Syndicate will take charge of it for working. The section is to be completely provided beforehand with all the rolling-stock necessary for working, as also with a supply of tools, furniture, and funds for working