PUBLIC RECORD OFFICE
Reference :-
ILLICO. 882
6
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH—NOT TO
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fixed so as to include a very large margin for issue only in case of need, was based upon serious considerations.
In regard to the Governor's opinion that the loan should be issued in instalments of not more than £500,000 each, we beg to point out that there are objections to the adoption of this course.
Every issue will be the subject of negotiation with the Chinese, and the oppor- tunity to them of making demands and creating obstruction, even to the point of causing a suspension of operations by blocking the issue of bonds. It seems, there- fore, to us that the number of such opportunities should be limited as much as possible.
The Corporation having to take the loan at fixed price, the state and feeling of the market for Chinese securities is an important consideration, and if in the first instance £1,000,000 of the loan were placed, the Corporation's obligations would be reduced, and the construction of the railway, so far as ways and means are concerned, practically assured.
To prolong the period and increase the number of emissions not only involves the Corporation in extra expense, but also increases the risks of the market. On the other hand, the Corporation might benefit by this course, although, in our opinion, the prospect of such benefit does not offset the risk of loss.
Notwithstanding these objections, we are willing, in order to meet the Governor's wishes, to take the risk of trouble with the Chinese and the risk of the market, and we will agree to issues of not exceeding £500,000, provided that the first two emissions shall, at our option, be not less than £500,000 each, and that the Government of Hong Kong will not require the amount which is to be specially set aside (as per Article 10, Working Agreement) for rolling stock and working capital to come out of the first £1,000,000 of bonds.
As the period to which these details would relate is only of a brief and passing character compared with the duration of the Agreement, and as circumstances might arise which would make it the wish of all parties to vary them, we venture to suggest that instead of stereotyping them into the Agreement, we should, on the conclusion of the negotiations with the Chinese, give a separate undertaking to exercise our rights under Article 1 only to the extent agreed upon in the negotiations and approved by the Governor of Hong Kong.
We are, &c.,
THE BRITISH AND CHINESE CORPORATION, LIMITED,
W. KESWICK,
Francis A. Campbell, Esq., C.B.,
Foreign Office.
DEAR SIRS,
Chairman.
3, Lombard Street, London, E.C., December 15, 1905. Canton-Kowloon Railway.
On the 13th instant we received your telegram :—
'Canton-Kowloon Railway. C. H. Ross will proceed to Canton to-morrow afternoon to interview the Viceroy of Canton's Deputy with the object of discussing Loan Contract.
"Referring to your letter, No. 50, of 3rd March, referring to our letter, No. 4, from Peking, what will be the amount of loan? The English Consul at Canton says that the Viceroy of Canton hostile to you, and though forced commence negotiations for, he will do his utmost try and cancel Agreement with."
to which we replied yesterday :—
"Referring to your telegram of the 13th, we will see Colonial Office, will
reply as soon as possible.”
The enclosed figures, which are practically the same as those we gave Mr. Ross, were submitted to the Board yesterday, and show how we reckon loans of 14 millions and 2 millions respectively would work out.
The Board would prefer, as we have previously mentioned, that the loan should be agreed at not exceeding 2 millions, but only so much to be issued as required,
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which would probably be 14 millions in one or two instalments, leaving the balance in reserve for developments.
Having regard, however, to the representation in Mr. Ross's letter, referred to in your telegram, that the Chinese would conclude the line was to cost two millions, the Board decided, subject to the approval of the Colonial Office, to wire you to seek the concurrence of the Governor of Hong Kong, and, if obtained, to make the loan £1,500,000, plus the amount to be inserted in Article 7 for the provision of land. Also to insert after line 17, page 6, of the draft Agreement, the provision you will find in Article 2 of the draft Soochow-Hangchow-Ningpo Railway Agreement, viz. :—
"In the event of the proceeds of this loan being insufficient for the comple- tion of the railway, the amount of the deficiency shall be provided by a supplementary issue of Bonds with corresponding Net Profit Certificates, such Bonds to be upon the same terms and subject to the same conditions in all respects as in the case of this loan."
We hope our Chairman will be able to see the Colonial Office, and that we may be able to wire you early next week.
Yours, &c., For THE BRITISH AND CHINESE CORPORATION, LIMITED, A. N. FREWER,
Messrs. Jardine, Matheson and Company,
Hong Kong.
Secretary.
THE BRITISH AND CHINESE CORPORATION, LIMITED.
Rough Estimate of Amount of Loan required for Canton-Kowloon Railway (Chinese section).
Loan at 90
Deduct Interest and Service of Loan during construc-
tion-2 years at 5 per cent, and per cent.
Add Interest on Loan Funds pending expenditure at
24 per cent.
Construction and Equipment, including commission to British and Chinese Corporation on materials :- Construction and Equipment £979,059 Commission
20,341
Balance for Land, Working Capital, Expenses of Board of Commissioners and Office, and margin for con- tingencies, such as extra cost and for longer period of construction
If Interest is allowed on Loan Funds at 3 per cent.,
balance would be increased by
$ £1,500,000 1,350,000
£2,000,000
1,800,000
150,376
200,500
£1,199,624 £1,599,500
32,493
54,539
£1,232,117 £1,654,039
£1,000,000 £1,000,000
£232,117
£654,039
6,728
to
£238,845
11,256
£605,295
If interest is allowed on Loan Funds at 8 per cent.,
balance would be increased by
£13,532
£22,692
to
.245,649 £676,671