10
1]
(i) The Advisory Committee endorse this view. These proposals throw a great responsibility on the Board of Trustees in the matter of selection; but they will possess and acquire information and experience which the Advisory Committee have not got at their disposal.
(2) As regards the expenditure of the Investment Fund (referred to below), the set out in proposals of the Delegation and the method of its application are paragraphs 45-46; and the recommendations of the Advisory Committee follow after paragraph 46.
IL-DIVISION OF FUNDS (pp. 15, 82, 83, &c.).
43. The Delegation propose that the whole of the funds, some eleven millions in all, should be utilised for the various educational and other objects which are considered worthy of support, as detailed below, and that, by means of an endowment, provision should be made for carrying on the work thus initiated, after the Indennity payments have come to an end in 1945. They therefore consider that the total fund should be divided into two parts: (a) as annual income for immediate expenditure, and (b) as capital for the formation of an Investment Fund.
44. As regards (a) Annual Expenditure, they advise that a sum of about £350,000 (out of an average of £500,000 accruing annually from the funds frer December 1926) be made available every year for expenditure on direct grants and subsidies in aid of the various objects approved; and that this £350,000 should be drawn directly and in whole from the instalments of the Indemnity Funds themselves, and perhaps later be in part supplemented from the profits on the invested capital (see next paragraph). These grants would continue until 1945 (p. 82).
45. As regards (b) Investment Fund, the Delegation advise that the necessary financial arrangements be made to raise a sum not exceeding £5,200,000 and not less than £3,500,000 during the years 1927-32 for the purpose of a permanent investment. They recommend that this capital sum be applied to some useful National reproductive undertaking directly advantageous to the interests of the people of China. Some or all of the profits on this investment may be used up to 1945 for supplementing the grants out of annual income (see preceding paragraph).
46. After the complete amortisation of the China Indemnity in 1945, the proceeds from such investment should be devoted to the purpose of carrying on in perpetuity the educational and other work, supported by the Indemnity Funds. The Delegation (p. 83) are of opinion that the money available for investment should, in the first instance, be devoted to railway construction. If, for any reasou, this is not found feasible, it should be applied to river conservancy work. If neither railway nor river conservancy schemes are, in the opinion of the Board of Trustees, suitable for investments, the annual instalments are to be invested in gilt-edged securities.
(i) The Advisory Committee agree with, and endorse the proposal for, the division of the Indemnity Fund into two parts: (a) Annual Expenditure; (b) Investment Fund.
(ii) The Advisory Committee propose :---
(a.) That an annual sum of about £350,000 should be devoted at once to carrying out the decisions to which the Board of Trustees may come as regards expenditure on educational, agricultural, medical and scientific objects. This would involve a total sum of about six and a half millions, spread over nineteen years. They also contemplate that the amount available for these purposes might be increased in the circumstances set forth below. (b.) That the adjustments between (a) and (b) and necessary financial arrangements should be made, so that a capital sum of about five millions should be available by, or before, December 1945 for the purpose of a permanent Investment Fund.
(iii) The Advisory Committee appreciate the importance of the Delegation's proposal that the Capital Fund should be invested in some useful reproductive under- takings, such as railways or river conservancy schemes, directly advantageous to the interests of the people of China. On the other hand, they cannot but recognise that the essential element in an endowment scheme should be security, and they note that the Delegation had the same consideration in mind in attaching to their recommendations certain provisos and safeguards, which are summarised in paragraphs 72-75 of this Report,
(iv.) The Advisory Committee are of opinion, therefore, that, initially, the Investment Fund, so far as it is at present available, together with the annual
instalments received and the accumulating interest, should be invested in Chinese Government or other Government securities. The security in the case of the Chinese Government loans is the revenue of China itself, and the purchase of the bonds would improve the national credit.
(v.) It would, however, be open to the Board of Trustees, if at any time it seemed to them safe and desirable to do so, to invest funds in connection with railway or river conservancy schemes, probably by the purchase of bonds issued for the purposes of these reproductive undertakings. The Advisory Committee endorse the view of the Delegation that it would be very advantageous if the funds could be satisfactorily invested in connection with railway development, or failing suitable railway projects, in connection with river conservancy undertakings (see paragraphs 76 and 77),
(vi.) If investment as indicated in the foregoing paragraphs (iv) and (v) is duly carried out, there would be available after December 1945 (when the instalments of the Fund will cease) a permanent income which would then be applied in perpetuity to the educational and other objects which have, by experience, been found to be the most worthy of continued support.
(vii) The nucleus of the Investment Fund would be the unexpended amount received from the instalments of the Indemnity between December 1922 and December 1926. The credit balance in question (including accumulated interest) should be about a million and three-quarters. Further, the balance of the annual instalments (£150,000 a year, after the payment of the £350,000) would also be paid into the Fund, the capitalised value being about £2,850,000.
(viii) Whether invested in Government securities or in connection with reproductive railway or river conservancy schemes, the total accumulated Investment Fund will, by December 1945, amount to considerably over five millions.* The Board of Trustees will, therefore, be in a position to increase the grants under (a), if they were satisfied that the Investment Fund would, by December 1945, produce a permanent income sufficient to carry on the educational and other work when the instalments of the Indemnity Fund had ceased.
III. PROPOSALS FOR IMMEDIATE EXPENDITURE.
47. The Delegation propose that the annual sum to be applied immediately for purposes of mutual benefit should be divided in the following proportions (p. 46) :-
(1.) Agricultural Education and Improvement (in-
cluding 5 per cent. for Famine Relief and Rural Credit)...
(2.) Scientific Research..
(3.) Medicine and Public Health
(4.) Other educational purposes
30 23
per cent.
17
13
30
The Advisory Committee endorse this proposal. As already stated (paragraph 41),
the Board of Trustees can, at their discretion, somewhat vary these percentages.
(1.) AGRICULTURE.
48. Under this head the main recommendations-definite or alternative-are as follows:-
(a.) Agricultural Education and Improvement (p. 47).
(1.) Agricultural Colleges (p. 49).
(2.) Sericulture (p. 49).
(3.) Forestry (p. 50).
(4.) Institute of Rural Economics (p. 51).
(b.) The Delegation also propose that a certain proportion of the 30 per cent.
allotted to Agriculture should be applied-
(1.) To Famiue Relief; and
(2.) To the establishment of a Central Bank for Rural Co operative
Credit.
• The initial interest on the accumulated unexpended balance would amount to some £100,000 to £120,000 a year. If the capital sum, or the interest, were not applied to other purposes, and the interest were reinvested, a capital sum of about £5,000,000 would have accumulated by December 1945. If the annual instalments of £150,000 a year from December 1926 (balance of £500,000 a year after deducting £350,000) for 19 years were not applied to any other purpose, and the interest were reinvested, the total sum would, by December 1945, amount to rather over three millious.
[15217]
0 2
441