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Governtments upon the projects, and learn what measure of support

if any, we may expect to receive from them.

Mr. Tsen has always impressed u on us the necessity of

privati as keeping the negotiations as possible until an irrevocable agreem ment has been actually signed, lest local Chinese newspapers and disaffected persons might by distorted versions of the negotiations stir up popular but ignorant and misguided opposition to the

formal completion of the agreement. From the point of view of

our own personal interests we are equally anxious to keep the

matter a private one.

The Hukuang Loan Agreement has been taken as the basis

of the arrangement, but with the following as the chief points

of difference:=

(a) A Sterling Loan squivalent to $20,000,000.- shall be issued

to the Military Gobernment at 95.

(b) The Loan shall bear Interest at the rate of 8 per cent per

annum payable half-yearly, repayment of Principal to commence after

the expiry of 10 years by half-yearly instalments.

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No repayment of Principal shall be allowed for 10 years

after the issue of the Loan but repayment of the whole or any part

of the Loan may be made between the 10th and 18th year after issue

by the payment of a premium of 3 percent.

after 18 years without payment of premium.

Repayment may be made

(d) Security of the Loan shall be the Railway Line and the Revenue

derived from the working of the same, together with the general

security of the Military Government without the further hypothe¬

cation of any special additional rexenues.

(e) The Line shall be contructed by the Ministry of Communicatione in the Military Government but under the supervision of a Chief Engineer and Chief Auditor recommended by W. R. Loxley and Con-

pany.

(f) After completion of Construction, the Line shall be operated by the Ministry of Communications but the Military Government

Agrees/

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