[This Document is the Property of His Britannic Majesty's Government.]
AFFAIRS OF CHINA.
CONFIDENTIAL.
82
[December 29.
SECTION 8.
C.
6753
(30 22 JUN 07/
[43613]
Sir,
No. 1.
Chinese Central Railways, Limited, to Foreign Office.-(Received December 29.)
110, Cannon Street, London, December 28, 1906.
I AM instructed to acknowledge the receipt of your letter of the 24th instant, notifying my directors that the substance of their communication to the Foreign Office, dated the 17th idem, relative to the suggested participation of Japanese financiers in the company, would be cabled to Sir John Jordan, and asking for information in regard to the words "preponderating control" mentioned in the last paragraph of that communication.
In reply, I am instructed to state that the present division of voting strength in the Chinese Central Railways, Limited, is as follows:---
100,000 ordinary shares 1,000 deferred shares
Votes.
100.000
100,000
Total
200,000
British Group-
Votes. Votes.
47,500 ordinary shares
550 deferred shares
French Group-
42,500 ordinary shares
450 deferred shares
47.500 55,000
102,500
42,500
45,000
87,500
Belgian Group-
10,000 ordinary shores
Total ..
10,000
200,000
By Clause 6 of the Agreement it is stipulated that the Chairman, who has a casting vote, shall be a British subject.
There are thus 102,500 British votes, plus the Chairman's casting vote, as against only 97,500 votes held by the combined French and Belgian groups.
This is the British "preponderating control," namely, a voting strength in excess of the combined votes of all the other signatories to the Agreement, which my directors desire to see maintained, though not necessarily in the same proportion, in the event of Japanese participation being agreed to.
The French proposal is that the Japanese should receive the 7,500 ordinary shares to which the Americans were entitled had they chosen to exercise their option. To this there can be no objection, but it is clear that, if the present relative voting strengths of the British on the one side and of the other signatories to the Agreement on the other is not to be disturbed, some adjustment of shares will be necessary.
A simple solution would be for the French to exchange fifty of their deferred shares for 7,500 ordinary shares, which the British would transfer to the Japanese.
In other words, the British are prepared to sacrifice a portion of their financial interest in the syndicate in exchange for such an increment out of French votes as shall suffice to maintain the present balance of control.
Should this plan be agreed to, the shares and votes will then be divided as follows:--
British Group-
40,000 ordinary shares
Voles. Votes.
Votes.
40,000
600 deferred shares
60,000
100,000
French Group~-
42,500 ordinary shares
42,500
400 deferred sharos
40,000
82,500
Belgian Group--
Ordinary shares Japanese Group--
Ordinary shares..
10,000
7,500
100,000
Totul
:
200,000
[2203 --8]
b.