CO882-(6-8) — Page 77

PUBLIC RECORD OFFICE

Reference :--

LTC.O. 882

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PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO

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In return for this commuted commission, the Viceroy is entitled to require the Corporation to superintend the purchase of all materials required for the con- struction and equipment of the railway, which shall be purchased in the open market at the lowest rate obtainable, it being understood that all such materials shall be of good and satisfactory quality. At equal rates and qualities, goods of British manufacture shall be given preference over other goods of foreign origin. Invoice and inspector's certificates are to be submitted to the Viceroy.

With a view to encouraging Chinese industries, Chinese Government and other materials are to be preferred provided price and quality are suitable.

No commission shall be allowed to the Corporation on the purchase of materials except as above provided. All trade discounts or rebates, if any, are, during con- struction, to go to the construction account, and, after completion, to the credit of the railway.

Article 10. In the construction of the line, in the working of the railway, and in the performance of the different kinds of business connected with the railway no interference or obstruction by Chinese or foreigners will be permitted. The Chinese Government will provide protection for the railway while under construction or when in operation; and all the properties of the railway, as well as Chinese and foreigners employed thereon, are to enjoy the utmost protection from the local

officials.

The railway may maintain a force of Chinese police with Chinese officers, their wages and maintenance to be wholly defrayed as part of the cost of the construction and maintenance of the railway. In the event of the railway requiring further protection by the military forces of the Imperial or Provincial Governments, the same will be duly applied for by the head office and promptly afforded, it being understood that such military forces shall be maintained at the expense of the Government of the province.

Article 11. All receipts and carnings of the railway shall be regularly paid into the railway's account with the Hong Kong and Shanghae Banking Corporation, and on such funds, whether on daily balance or on fixed deposit, the bank's usual rate of interest shall be allowed. All expenses of working and maintaining the line shall be paid from the receipts and earnings, and any remainder thereof shall be charged with the service of the loan. If, after payment of these expenses and making due provision for payment of interest at 5 per cent. per annum on the bonds, and for repayments of principal due in accordance with the Amortization Schedule hereto attached, there remain surplus funds unappropriated and properly available for other purposes, such funds shall be at the disposal of the Chinese Government to be used in such manner as the Viceroy may decide: Provided always that after completion and opening of the line to traffic the amount sufficient for regular pay- ments of interest and repayments of principal shall be deducted from such surplus funds, if any, and shall be deposited with the Hong Kong and Shanghae Banking Corporation six months before the date at which such payments fall due.

In the event of there being no surplus funds available as aforesaid from the earnings of the railway, the amount required for payments of interest and repay- ments of principal shall be provided in accordance with the conditions of Article 14 hereinafter.

Article 12. The Corporation are hereby appointed trustees for the bondholders, and in any future negotiations respecting these loans, or matters arising in con- nection therewith, which may take place between the Viceroy and the Corporation. the Corporation shall be taken as representing the bondholders, and as such, empowered to act on their behalf.

In view of the fact that the Corporation's responsibility to the bondholders continues after construction, whereas, as stated in Article 9, its commuted commis- sion for services rendered is limited to the period of construction, and the Corpora- tion is not thereunder entitled to any further remuneration during the period of the loan, the Corporation shall receive as remuneration for its services and responsibility in acting as trustees for the bondholder the sum of £1,000 per annum, such remu- neration to commence from the date of issue of this loan and to terminate

upon complete redemption.

its

"Article 13. All materials of any kind that are required for the construction and working of the railway, whether imported from abroad or from the provinces to the scene of the work, shall be exempted from li-kin so long as such exemption remains in force in respect of other Chinese railways. The bonds of this loan,

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together with their coupons and the income of the railway, shall be free from imposts of any kind by the Government of China.

Article 14. It is agreed that during the time of the construction of the railway the interest on the bonds and on any advance made by the Corporation is to be paid from the proceeds of the loan. The accruing interest from any proceeds of the loan not used during the period of construction, and the earnings derived by the Chinese Government from the working of any sections of the railway as they are built, are to be used to make up the amount required for the payment of the said interest, and if any deficiency remains it is to be met from the proceeds of the loan. When the construction of the railway is wholly completed the interest on the bonds is to be paid, from the income or earnings of the railway received by the Chinese Government, every half-year on the 1st day of June and 1st day of December.

It is hereby agreed that the amount required for the payment of interest and the repayment of principal together with a sum of one-quarter of 1 per cent. on such amounts to cover commission to the Hong Kong and Shanghae Banking Corporation, who are hereby appointed agents for the entire service of repaying the loan, shall be paid to them fourteen days before the due dates in Hong Kong or in Canton (at the option of the Viceroy when settling exchange) in local currency sufficient to meet such payments in sterling in London, exchange for which shall be settled with the Hong Kong and Shanghae Banking Corporation, the Viceroy having the option of settling exchange at any date or dates within six months previous to any due date for the repayment of interest and principal.

The Chinese Government unconditionally undertakes and hereby promises to pay the principal of the loan and the interest on the loan on the due dates fixed therefor. If at any time the earnings of the railway, together with funds avail- able from the proceeds of the loan, are not sufficient to meet the interest on the bonds and the repayment of capital, in accordance with the Amortization Schedule hereto attached, the Viceroy shall devise means for supplying the deficiency, and should his inability to do so appear probable, he shall memoralize the Government to take measures to make up the deficiency from other sources, and thus be ready to pay off the indebtedness, so that the required amount may be placed in each case at least fourteen days previous to the due dates of such payments in the hands of the Hong Kong and Shanghae Banking Corporation.

Article 15. The Corporation may, subject to all its obligations, transfer or delegate all or any of its rights, powers, and discretions to its successors or assigns, but the Corporation, which is a Corporation formed under English law, shall not transfer its rights under this Agreement to any other nation or people of any other nationality except British or Chinese. Similarly, the Chinese Government's rights and authority under this Agreement shall not be transferred to persons of other nationality.

It is further understood that the Chinese Government will not build another line competing with this railway to its detriment.

Article 16. The term of the loan, as stated in Article 1, shall be fifty years. Repayment of principal shall commence after the expiry of twelve and a half years from the date of the loan, and shall be completed in thirty-seven and a half years by yearly payments to the Hong Kong and Shanghae Banking Corporation, as agents for the service of the loan, acting for the Corporation under the terms of this Agreement, in accordance with the Amortization Schedule hereto attached.

If at any time after the expiry of twelve and a half years from the date of the loan, the Imperial Chinese Government should wish to redeem the outstanding amount of the loan, or any portion of it, not yet due under the provision of the Amortization Schedule hereto attached, not less than six months' notice shall be given in writing by the Viceroy to the representative of the Corporation, declaring the number of additional bonds so required to be redeemed, whereupon the repre- sentative of the Corporation shall immediately proceed to make such arrangements as may be necessary and usual for the redemption of the number of bonds specified, which, when duly redeemed after payment by the Imperial Chinese Government of the proper amount due thereon, shall be cancelled and delivered to the Viceroy.

All bonds thus redeemed in excess of the amount specified in the Amortization Schedule hereto attached, before the expiry of twenty-five years from the date of the loan, shall be paid for with a premium of 24 per cent, over their face value (ie., £102 10s. will be required to pay for £100), but after twenty-five years bonds

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