2
Government from its own resources under the provisions of Article 5 of the Loan Agreement, and the funds will be duly remitted to credit of construction account, with the Hong Kong and Shanghae Bank at Shanghae, so as to permit of the uninterrupted continuance and conclusion of the work of construction.
Commission on Materials.
It was mutually agreed in May last that the Corporation's claim for 5% commission to the 31st December, 1906, on local purchases at Shanghae—about 47,000 taels—should be settled by the payment of 35,000 taels, the Corporation agreeing to this compromise with a view to amicable settlement of the whole question. It has since been agreed that commission on local purchases, from the 31st December, 1906, to the date upon which the modified system of control comes into effect, shall be similarly calculated—that is to say, the Corporation's full claim will be reduced in the proportion of 47 to 35. It is understood that the outstanding accounts will now be settled on this basis.
Upon and after the introduction of the modified system of administration it is agreed that the Corporation, acting as the Railway Administration's agents, will charge 5 per cent. commission on all materials, plant, and goods of foreign origin. With a view, however, to meeting the Railway Administration's objection to payment of commission for the maintenance and general equipment of the railway on small purchases of foreign materials, which might possibly be more economically made locally, it is agreed that no commission shall be charged on urgent local purchases involving an expenditure of not more than 2,500 taels for any one order, on the understanding that such local purchases of foreign materials shall always be economically advantageous to the railway, and that for amounts exceeding 2,500 taels tenders shall always be called for through the agency of the Corporation.
It is understood, however, that the Railway Administration shall have the right, while paying the above stipulated commission to the Corporation in respect of purchases of foreign materials, to avail itself of the services of other agents in China or abroad, should it see fit to do so.
No commission will be payable on purchases of materials of Chinese origin.
As regards the procedure and conditions under which the modified system of administration and control is to come into effect, I have the honour to refer your Excellency to the concluding paragraphs of my letter of the 31st December, 1906. Subsequent to the date of that letter, the matter was further discussed with his Excellency Tong Shao Yi in an interview, at which the British Minister was present, and the conclusions are on record.
In dealing with this important question the Corporation fully realizes and appreciates the causes which have led the Imperial Chinese Government to desire a modification of the system of control by Board of Commissioners, and desires, so far as possible, to give effect to the Chinese Government's wishes. At the same time the Corporation, as trustees for the holders of Shanghae-Nanking Railway bonds and profit certificates, would render itself liable to heavy penalties were it to acquiesce in any change of the terms of the Loan Agreement or any limitation of the rights and interests of the bondholders as defined by that Agreement. For this reason the Corporation, recognizing the position of the Board of Commissioners under the Loan Agreement, has suggested the following procedure as calculated to attain the ends desired by the Imperial Chinese Government.
The Board of Communications will select and appoint, as a member of the Shanghae-Nanking Railway's Board of Commissioners, an official of suitable rank and qualifications, who, being accepted by the Corporation, will thereafter be elected Chairman by the Board of Commissioners. The Resolutions necessary to authorize the modification of the system will be passed at a formal meeting of the Board of Commissioners, and, all proper arrangements having been made (especially as regards defining the respective functions of the heads of departments), the Board will then delegate to its newly-elected Chairman, as Managing Director, its duties of authority and responsibility in connection with the working and construction of the railway, it being understood that, in exercising the authority thus delegated to him by the Board, the Chairman would administer the railway, consulting the Traffic Manager in regard to matters connected with the operation of the line, the Engineer-in-chief on construction, and the Chief Accountant on matters financial; at the same time, it will be stated that the modification of the system is experimental, and that, in the event of serious emergency or results prejudicial to the interests of the bondholders and/or the Corporation, the Board of Commissioners will resume its corporate functions.
3
The object which the Corporation has in view is to meet the wishes of the Chinese Government wherever possible, and to promote those amicable relations which are essential to the satisfactory working of the railway, and the Board of Directors hope that, appreciating this object, your Excellency may take all possible steps to insure that, under the modified system, the provisions of the Loan Agreement will be strictly observed.
Awaiting the favour of your Excellency's reply, I have, &c.
(Signed)
J. O. P. BLAND.
591
2
Government from its own resources under the provisions of Article 5 of the Loan Agreement, and the funds will be duly remitted to credit of construction account, with the Hong Kong and Shanghae Bank at Shanghae, so as to permit of the uninterrupted continuance and conclusion of the work of construction.
Commission on Materials.
It was mutually agreed in May last that the Corporation's claim for 5 commission to the 31st December, 1906, on local purchases at Shanghae-about per cent. 47,000 taels-should be settled by the payment of 35,000 taels, the Corporation agreeing to this compromise with a view to amicable settlement of the whole question. It has since been agreed that commission on local purchases, from the 31st December, 1906, to the date upon which the modified system of control comos into effect, shall be similarly calculated-that is to say, the Corporation's full claim will be reduced in the proportion of 47 to 35. It is understood that the outstanding accounts will now be settled on this basis.
Upon and after the introduction of the modified system of administration it is agreed that the Corporation, acting as the Railway Administration's agents, will charge 5 per cent, commission on all materials, plant, and goods of foreign origin. With a view, however, to meeting the Railway Administration's objection to payment of commission for the maintenance and general equipment of the railway on small purchases of foreign materials, which might possibly be more economically made locally, it is agreed that no commission shall be charged on urgent local purchases involving an expenditure of not more than 2,500 taels for any one order, on the understanding that such local purchases of foreign materials shall always be economically advantageous to the railway, and that for amounts exceeding 2,500 tacis tenders shall always be called for through the agency of the Corporation.
It is understood, however, that the Railway Administration shall have the right, while paying the above stipulated commission to the Corporation in respect of purchases of foreign materials, to avail itself of the services of other agents in China or abroad, should it see fit to do so.
No commission will be payable on purchases of materials of Chinese origin.
As regards the procedure and conditions under which the modified system of administration and control is to come into effect, I have the honour to refer your Excellency to the concluding paragraphs of my letter of the 31st December, 1906. Subsequent to the date of that letter, the matter was further discussed with his Excellency Tong Shao Yi in an interview, at which the British Minister was present, and the conclusions are on record.
In dealing with this important question the Corporation fully realizes and appreciates the causes which have led the Imperial Chinese Government to desire a modification of the system of control by Board of Commissioners, and desires, so far as possible, to give effect to the Chinese Government's wishes. At the same time the Corporation, as trustees for the holders of Shanghae-Nanking Railway bonds and profit certificates, would render itself liable to heavy penalties were it to acquiesce in any change of the terms of the Loan Agreement or any limitation of the rights and interests of the bondholders as defined by that Agreement. For this reason the Corporation, recognizing the position of the Board of Commissioners under the Loan Agreement, has suggested the following procedure as calculated to attain the ends desired by the Imperial Clunese Government.
The Board of Communications will select and appoint, as a member of the Shanghae-Nanking Railway's Board of Commissioners, an official of suitable rank and qualifications, who, being accepted by the Corporation, will thereafter be elected Chairman by the Board of Commissioners. The Resolutions necessary to authorize the modification of the system will be passed at a formal meeting of the Board of Commissioners, and, all proper arrangements having been made (especially as regards defining the respective functions of the heads of departments), the Board will then delegate to its newly-elected Chairman, as Managing Director, its duties of authority and responsibility in connection with the working and construction of the railway, it being understood that, in exercising the authority thus delegated to him by the Board, the Chairman would administer the railway, consulting the Traffic Manager in regard to matters connected with the operation of the line, the Engineer-in-chief on construc- tion, and the Chief Accountant on matters financial; at the same time, it will be stated that the modification of the system is experimental, and that, in the event of
serious
3
emergency or results prejudicial to the interests of the bondholders and any (or) the Corporation, the Board of Commissioners will resume its corporate functions.
The object which the Corporation has in view is to meet the wishes of the Chinese Government wherever possible, and to promote those amicable relations which are essential to the satisfactory working of the railway, and the Board of Directors hope that, appreciating this object, your Excellency may take all possible steps to insure that, under the modified system, the provisions of the Loan Agreement will be strictly observed.
Awaiting the favour of your Excellency's reply, I have, &c.
(Signed)
J. O. P. BLAND.
591
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