"The concessionary is to hand over to the Imperial Government as soon as possible a trace of the probable line of Railways to be built.

"Par. 2.-For every find which is made within the districts covered by Par. 1 and which must be proved in its natural deposit, the concessionary shall be granted a field limited by perpendicular planes the demarcations for which are to be indicated on the one hand by the railway-line and a line parallel to it at a distance of 30 li and on the other hand by two lines six kilometers apart from each other running rectangularly to the railway line.

"After expiration of the time provided for by Par. 1 the monopoly of the concessionary to prospect and locate shall cease and the Imperial Government may grant such rights to other persons or corporations as well.

"Par. 3.-Within ten years after expiration of the time provided for in Par. 1 methodical working of mines must have been started and shall thenceforth be continued by the concessionary his successors or assigns upon the field granted to them or if three or more fields should have been granted at least upon one field in every three.

"Should they fail to comply with this obligation and should the omission of or interruption to such work be contrary to prevailing reasons of public interest the Imperial Government may withdraw the grant of mining rights for such fields. No claim for compensation of any kind shall be admitted in such case.

"The grant of mining rights can however not be withdrawn on account of not having maintained proper operating of mines unless notice to maintain such operating has been ineffectively given twice whereof the second notice cannot be handed in before at least half a year has elapsed after the first notice having been given.

"Should the concessionary his successors or assigns with reference to a mining field show special cause which made it impossible to begin the proper operating of mines within the stipulated time then the limit of time may be extended once for a reasonable period. If the concessionary his successors or assigns prove to the satisfaction of the Imperial Government that the observance of this limit of time or the continuation of proper operating of the mines has been rendered impossible by force majeure then in the first case the limit of time shall be extended for a reasonable period and in the second case the grant of mining rights shall not be withdrawn provided the concessionary his successors or assigns resume, after removal of the hindrance caused by force majeure, the proper operating of mines within such reasonable time as may be fixed by the Imperial Government.

"Par. 4.-If at the expiration of twenty years counted from the day of granting the concession the extent of the mining fields granted to the concessionary should prove to exceed half of the total area of the Thirty-li Zone' the Imperial Government is entitled to revoke the mining rights in as much as they are granted in excess of the area mentioned. No claim for compensation of any kind shall be admitted based on such revocation. It is however left to the concessionary to point out the fields for which his mining rights or the mining rights of the Companies (Par. 5) formed by him shall cease. If the concessionary does not comply with the request transmitted to him by the Imperial Government to point out such fields, within six months after the day the request has been delivered to him, the Imperial Government shall decide upon such fields.

66

'Par. 5.—The concessionary shall form one or more German-Chinese Companies (one at least within three months after the earliest date law will permit) having the status of a Colonial Company' (Kolonial Gesellschaft) in the meaning of the law with reference to the legal affairs of Protectorates dated 15 March 1888 and he shall transfer to such Companies the rights and obligations granted to him by the concession. The rules of these Companies shall be submitted to the Imperial Government for approval.

Every Company formed in accordance herewith shall establish its siege in Tsingtau within six months after the resolution of the Federal Council concerning the juristic quality to be granted thereto. In case the dates set as above are not adhered to, the Imperial Government may if unwilling to extend the terms declare that the rights and obligations granted to the concessionary or to the Company by virtue of the concession shall be null and void, and no claim for compensation based on such an action shall be admitted.

'Par. 6.-Proper steps have to be taken that both Germans and Chinese may be able to participate in the public subscription of shares for each of the Companies formed. Especially for this purpose subscription of shares shall also be opened at suitable trading places of Eastern Asia and the amount subscribed there shall receive adequate consideration. "Par. 7.-The concessionary his successors or assigns are bound when called upon by the Imperial Government, to satisfy out of the coal produced by them in the first instance the requirements of the Imperial Navy and to allow for all coal thus purchased a preference price being 5% below market price ruling at Tsingtau for coals of same quality.

'Par. 8.-As a contribution to the expenses of the Imperial Government for harbour works in Kiauchou Bay and to the General Administration of the Protectorate the concessionary his successors or assigns shall pay a tax on the annual net income of the mining enterprises to be calculated as follows:

If the net income available for distribution resulting out of the proceeds of a mining

enterprise would allow for a yearly dividend of more than 5% figured on the share capital paid up and expended for such enterprise the tax to be paid for that year to the treasury of the Government of Kiauchou shall be:

7% the twentieth part
8% the tenth part
10% the fifth part
12% the third part and

from the amount exceeding 5% up to
from the amount exceeding 7% up to
from the amount exceeding 8% up to
from the amount exceeding 10% up to
from the amount exceeding 12% one half.

“Par. 9.—The total or partial transfer of the concession to be granted by this instrument, and also every alteration of the Rules of Companies established in accordance with Par. 5 require the approval of the Imperial Government to be valid. A transfer of the concession itself or any part of it to a Company other than a German or German-Chinese shall not be allowed.

“Par. 10.—One copy of this instrument of concession will be handed to the concessionary as soon as the Shantung Railway Company has been properly formed.

'Par. 11.—All costs of this instrument if any, especially any stamp duty, shall be borne by the concessionary.

44

Baden-Baden, 1st June 1899.

The following is a translation (from the German text) of the Rules, dated October 10th, 1899, applicable to the Company:

Rules of Schantung Bergbau Gesellschaft.—October 10, 1899.

"I. GENERAL STIPULATIONS.

"Art. 1.-Under the style of Schantung Bergbau Gesellschaft a Kolonial Gesellschaft (Colonial Company), having established its siege in Tsingtau, has been formed by virtue of the law of the German Empire, dated 15th March 1888 and 2nd July 1899. This Company, though working under the laws and under the jurisdiction of its siege shall be subject to the jurisdiction of Courts competent for such matters in Berlin for all actions between the Company and its individual members and/or the Company and its executive bodies arising from their company relations.

66

Art. 2.-The object of the enterprise is the acquisition and the exploitation of the concession of 1st June 1899, preceding these rules, and in pursuance thereof the establishment of mining enterprises of every kind in the assigned area of the Province of Shantung particularly:

1) the prospecting for Coal and other Minerals, also for Petroleum,

2) the acquisition of mine properties by reason of the finds made,

3) the establishment and the operation of mines, foundries and smelting works, dressing works and all installations appurtenant thereto, also the purchase of raw material for the business within and without the area of concession,

4) the purchase and rent as well as sale and lease of rights to prospect and to locate as well as of mines and of metal works,

5) the acquisition and rent of land, rights to land and to water, as well as sale and lease of the above things and rights,

6) the building of branch railway lines for the purpose of forwarding the products of mines and metal works,

7) the sale of the products gained from the mines and metal works and also of other products of the country, also the establishment of sales offices within or without the Province of Shantung, for the purpose of such sale,

8) the participation in mines and metal works existing or to be established in the area of concession,

9) the establishment of other mining companies, to which part of the privileges granted by the concession of 1st June 1899 are to be transferred in accordance with Par. 5 of the conditions of the concession.

With the approval of the Imperial German Government the Company is entitled: 1) to extend its mining enterprises and operations connected therewith or its participation in such enterprises and works outside the area of concession in the Province of Shantung or outside of this Province,

2) to found branch establishments.

Art. 3.-The duration of the Company is not limited to a fixed time.

Art. 4.-The executive bodies of the Company are:

The Board of Directors (Direction)

The Supervisory Committee (Verwaltungsrat)
The General Meeting (Generalversammlung).

"Art. 5.-The notices of the Company appear with legal validity by publishing them once in the Deutscher Reichs-Anzeiger,' unless other forms or more frequent publication are stipulated by these rules. The Company, however, reserves to itself the right to publish them in addition in other papers at the decision of the Supervisory Committee, the validity however of the notices not being dependent on this publication. When time limits are published the day of the issue of the paper is not included.

66

"II.-CAPITAL.

'Art. 6.-The capital of the Company amounts to Marks 12,000,000.-equal to Francs 15,000,000.-equal to Pounds Sterling 600,000.-divided into 60,000 shares of the value of Marks 200. each-equal to Francs 250.-equal to Pounds Sterling 10. On each share 25% are paid up in Marks.

"Further_payments or full payment of the shares in Marks shall, with approval of the Supervisory Committee, be called in by the Board of Directors giving four weeks notice of such calls. The Supervisory Committee is authorised to lay down the conditions, under which the full payment of shares before due date will be allowed.

"An increase of the capital can only be decided upon by a General Meeting. The resolution shall also contain the conditions, under which the new shares will be issued.

66

Art. 7.-The original subscribers of the shares to be issued and thereafter their successors or assigns form the Company. The shares are indivisible; they possess the quality of movable property. Individual members may not sue for divisions of property.

"Art. 8.-For the obligations of the Company, the Company's assets will only be liable to the creditors.

'Art. 9.-The original subscriber of a share is responsible for the payment of the full face value thereof.

Beyond the full payment no further responsibility rests on the members of the Company. "Art. 10.-The share certificates are made out to bearer; they will be issued in denominations of one, five or ten shares, according to the decision of the Supervisory Committee.

"The share certificates will be issued only after payment of the full face value. For the instalment-payments receipts will be given on an interim certificate bearing the name of the holder.

"The interim certificates are transferable by endorsement, without prejudice to the responsibility laid on the subscriber of the share by virtue of Art. 9; by a resolution of the Supervisory Committee however interim certificates for the first instalment of 25% may be transfered in such a way that the new owners take the place of the original subscribers. Wherever in these rules shares of the Company are mentioned, interim certificates take their place until the share certificates have been issued.

66

Art. 11.-Dividend coupons for ten years with renewal slips shall be attached to the shares.

'At the end of the last year new dividend coupons for ten years will be issued against delivery of the renewal slips. If a profit is divided before issue of the shares, the interim certificates will be stamped accordingly upon payment of such dividends.

86

Art. 12.-Those liable, but failing to render part payments due, shall be requested by the Board of Directors by notice stating the numbers of the shares on which payment is overdue, to pay same together with interest at 5% within a time to be fixed at not less than four weeks.

66

"Whoever allows this time to elapse without making payment as aforesaid, forfeits a fine of 10% of the amount due besides the interest, and the Board of Directors may force him by legal proceedings to pay the instalment due together with interest, fine and costs. Instead of this procedure the Board of Directors, after having given once more a notice to the defaulting subscribers to complete the overdue payments within a further delay of four weeks and after having warned them at the same time that they will be excluded, if they do not comply with the request, may pass, after this period has ineffectually elapsed, a resolution that the subscribers shall lose in favour of the Company the privileges arising from the subscription as well as all payments made. Such declaration shall be advertised publicly, and new scripts will be issued in place of that which is declared to be cancelled, such scripts to include the part payments made already and the instalment last asked for. The defaulter shall remain responsible for any loss suffered by the Company in the sale of such shares.

"Art. 13.-The original subscribers of the share capital described in Art. 6, Section 1, who have floated the enterprise, shall receive one bonus share on every one share subscribed, i. e., 60,000 bonus shares in all. They shall be issued in the name of the owner in denominations of one, five or ten bonus shares. The privileges of the bonus shares are laid down in Art. 18, Art. 39 and Art. 40.

At the formation of other mining companies in accordance with Par. 5 of the Concession dated 1st June 1899 and Article 2, ad. 9 of these Rules, the aforesaid original sub

scribers are entitled to participate, proportionately to their share of capital in the Schantung Bergbau Gesellschaft, as original subscribers in raising of the share capital of each of those companies up to one half, by taking over the shares at par, plus the proportionate foundation costs. The original subscribers of the share capital of those companies shall receive one bonus share on every one share subscribed. On these bonus shares a share of the profits shall be distributed in the same ratio in which the proprietors of the bonus shares of the Schantung Bergbau Gesellschaft participate according to Art. 18.

66

Art. 14.-By resolution of the General Meeting and with approval of the controlling authorities, the Company is authorised to issue debentures payable to bearer.

"The nominal value of the debentures, the rate of interest, the conditions of recall and repayment shall be fixed and made public in every instance by the Supervisory Committee with approval of the controlling authorities. The recall of the debenture requires the approval of the Supervisory Committee.

"Art. 15.-When shares or other documents issued in accordance with the regulations of Art. 10, 11, 13 and 14 have become damaged or otherwise unserviceable, but preserved in their essential parts to such an extent as to admit no doubts as to their genuineness, then the Board of Directors is authorised to draw up and hand out new equivalent documents in exchange for the damaged documents, costs to be borne by the owner.

"Excepting this contingency, new documents may be prepared and delivered in place of those damaged or lost only after judicial invalidation of the latter.

"Dividend coupons are not cancelled judicially: they become invalid, unless collected within four years, counted from the 31st March of that year in which they have become due, the respective dividends revert to the Company. To such one, however, who gives notice to the Board of Directors of the loss of dividend coupons before expiry of the said term of four years, and who proves their former possession by production of the share certificates or otherwise in a reliable way, the amount due on such coupons (given notice of and not yet presented) shall be paid against receipt after lapse of the said term. "No judicial declaration of invalidity shall take place as well for damaged or lost renewal slips.

"When the owner of a share before the issue of new dividend coupons protests against the delivery thereof to the presenter of the renewal slips and this presenter however insists upon delivery the dispute shall be carried to Court for a decision, the new series of dividend coupons shall be withheld until the case has been decided.

"When a renewal slip has been lost, the dividend coupons shall be delivered against receipt to the owner of the respective share after expiry of the date set for payment of the third of those dividend coupons which should have been received against delivery of the renewal slip. The possession of the respective renewal slip does in this case not entitle to the receipt of the dividend coupons.

"Art. 16.-By subscription or purchase of shares, interim certificates and bonus shares, the members submit to the jurisdiction of the competent lower Court for commercial matters in Berlin for all disputes arising between the Company and themselves in consequence of their business relation. (Par. 1).

"III.-FINANCIAL STATEMENT, ASCERTAINING AND DISPOSAL OF THE PROCEEDS, Reserve Fund.

“Art. 17.-The business year begins on 1st April and ends on 31st March of the fcllowing year. The first business year in accordance with these rules ends on 31st March 1900.

"The financial statement shall be drawn up by the Board of Directors as for 31st March for the business year last passed. It shall be presented to the General Meeting annually not later than 30th September together with the Profit and Loss Account and with a report of the Board of Directors showing the property and the situation of the Company, and also with the audit to be brought in by the Supervisory Committee.

"It is understood that net profits mean, profits in hand after the writing off on the property has taken place to such an extent as the case may require.

Five per centum per annum interest may be debited to Development Account during the development period, but not beyond the business year 1903/4; possible working profits during the development period shall however in this case be credited to Development Account. The Development Account shall also be debited by the remuneration due to the Supervisory Committee in accordance with the conditions of Art. 46.

By

"The approval of the financial statement is reserved to the General Meeting. giving the approval, the executive bodies of the Company are discharged regarding their management during the respective year.

Art. 18.-On proposal of the Supervisory Committee the General Meeting decides on the amount of net profit resulting from the financial statement.

"Of the sum to be calculcated on not less than 5% and no more than 15% have to go to the Reserve Fund.

"Of the remaining sum a dividend of 5% on the paid-up share capital shall be allowed to the members of the Company,

"The balance shall be distributed as follows:

33 per centum to the bonus shares

66% per centum on the paid-up share capital as super-dividend,

after having deducted as well 10% for the Supervisory Committee and the contribution to the Government provided for in Par. 8 of the instrument of Concession of 1st June 1899. "The General Meeting may not pass a higher amount as net profit to the members of the Company nor a lower contribution to the Reserve Fund than proposed by the Supervisory Committee. Within four weeks after the resolution of the General Meeting the members of the Company will receive the dividend due to them, and the owners of the bonus shares their share of profit, and also the contribution to the Government provided for in Par. 8 of the instrument of Concession of 1st June 1899 has to be paid.

"In the event of the dividend to the members and the share of profit to the owners of the bonus shares being paid in Francs or Pounds Sterling, the amount of the dividend or of the share of profit due in Marks shall be calculated at the rate of 81.- Marks = 100 Francs and 20.40 Marks 1 Pound Sterling.

Art. 19.-The Reserve Fund serves to cover extraordinary expenses or losses. Its disposition is decided on by the Supervisory Committee.

"After the Reserve Fund will have reached 15% of the share capital, further contributions thereto shall cease. Upon proposal of the Supervisory Committee, however, the General Meeting may resolve a further increase of the Reserve Fund, if extraordinary circumstances occur. In the event of payments out of the Reserve Fund, further contributions have to be made thereto until it reaches again the amount fixed.

"IV. ADMINISTRATION.

"a) Board of Directors.

"Art. 20.-The Board represents the Company and acts on its behalf in all legal and other affairs including those requiring a special power of attorney by law. The Board is independent in question of administration, save in those for which by these rules cooperation of the General Meeting or Supervisory Committee is required. In transacting affairs the Board is bound to follow the instruction given by the Supervisory Committee or such of its members as have been delegated by it. This restriction, however, has no legal effect toward third parties.

"Art. 21.-The Board of Directors consists of two or more Directors, appointed upon conditions settled by the Supervisory Committee.

"The Supervisory Committee regulates the distribution of business amongst the Directors, their relations to each other, as well as the rules for their joint deliberations and resolutions. It nominates substitutes if required and may appoint from its midst a member as substitute. Such substitute shall not act on the Supervisory Committee while cooperating with the Board of Directors.

66

"Art. 22.-By resolution of the Supervisory Committee Directors may temporarily be ordered to China for inspection of the administration there and other purposes.

66

Art. 23.-Documents and declarations of the Board are binding on the Company, if they are signed under the name of Schantung Bergbau Gesellschaft' by two Directors or by one Director and one Acting Director (substitute) or by two Acting Directors (substitutes) or by one Director or Acting Director (substitute) and by one officer of the Company authorised by the Supervisory Committee to sign conjointly.

"Art. 24.-The nomination of Directors, of their substitutes (Acting Directors) and the officers of the Company authorised to sign documents conjointly, shall be recorded notarially and made public. The record serves as legitimation.

"b) Supervisory Committee.

"Art. 25.-The Supervisory Committee consists of not less than 12 but not more than 25 members to be elected by the General Meeting from the number of the shareholders. At least five members of this Committee shall reside in Berlin and including those at least three quarters of all members at the time shall be German subjects residing in the German Empire.

66

As a rule the election shall take place at the ordinary General Meeting for a term up to the fourth ordinary meeting following.

"Every year at least three members resign in as regular succession as possible and are replaced by new elections. Until a rotation has been formed for the resignations, they shall be decided by lots. The resigning members are re-eligible. If a member retires in the meantime, the remaining members are authorised to elect a substitute with validity till the next ordinary General Meeting. The final election of a substitute will be done by the General Meeting holding good for the unexpired term of the resigning members.

"If an election of members to the Committee should have taken place in an extraordinary General Meeting, the time from the date of the latter to the next ordinary General Meeting shall count as a full year, as far as the term of office of those elected is concerned.