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Maritime Customs in the interests of the bondholders. And so long as this loan or any part thereof shall remain unredeemed it shall have priority, both as regards principal and interest, over all future loans, charges, and mortgages charged on the aforesaid provincial revenues. No loan, charge, or mortgage shall be raised or created which shall take precedence of, or be on an equality with, this loan, or shall in any manner lessen or impair its security over the aforesaid provincial revenues, and any future loan, charge, or mortgage charged on the said provincial revenues shall be made subject to this loan, and it shall be so expressed in every agreement for every such future loan, charge, or mortgage.
After redemption of the existing gold bonds referred to in article 2 of this agreement it is understood and agreed that, so long as this loan is unredeemed, the railways shall, under no circumstances, be mortgaged nor their receipts given as security to any other party.
In the event of the Chinese Government, during the currency of this loan, entering upon definite arrangements for the revision of the customs tariff, accompanied by stipulations for the decrease or abolition of li-kin, it is hereby agreed, on the one hand, that such revision shall not be barred by the fact that this loan is secured by li-kin and provincial revenues, and, on the other hand, that whatever li-kin is required to provide the security of this loan shall neither be decreased nor abolished except by previous arrangement with the banks, and then only in so far as an equivalent is substituted for it in the shape of a first charge upon the increase of customs revenue consequent upon such revision.
Art. 10. The banks are hereby authorised to issue to the subscribers to the loan bonds for the total amount of the loan in gold, for such amounts as may appear advisable to the banks. The form and language of the bonds shall be settled by the banks in consultation with the director-general or the Chinese Minister in Berlin, London, or Paris; they shall bear the facsimile of the signature of the director-general and of his seal of office, in order to dispense with the necessity of signing them all in person, and the Chinese Minister in Berlin, London, or Paris, as the case may be, shall, previous to the issue of the bonds, put his seal upon each bond, with a facsimile of his signature, as a proof that the issue and sale of the bonds are duly authorised by and binding upon the Imperial Chinese Government. The representatives of the banks in Berlin, London, or Paris, as the case may be, shall countersign the bonds as agents for the issue of the loan.
In the event of bonds issued for this loan being lost, stolen, or destroyed the bank concerned shall immediately notify the director-general and the Chinese Minister in Berlin, London, or Paris, as the case may be, who shall authorise the bank to insert an advertisement in the public newspapers notifying that payment of the same has been stopped, and to take such other steps as may appear advisable or necessary according to the laws and customs of the country concerned, and should such bonds not be recovered after a lapse of time to be fixed by the banks, the director-general, and the Chinese Minister in Berlin, London, or Paris, as the case may be, shall seal and execute duplicate bonds for a like amount and hand them to the bank, by whom all expenses in connection therewith shall be defrayed.
Art. 11. All bonds and coupons and payments made and received in connection with the service of this loan shall be exempt from all Chinese taxes and imposts during the currency of this loan.
Art. 12. All details necessary for the prospectus and connected with the payment of the interest and repayment of the principal of this loan, not herein explicitly provided for, shall be left to the arrangement of the banks in consultation with the Chinese Ministers in Berlin, London, and Paris. The banks are hereby authorised to issue the prospectus of the loan as soon as possible after the signing of this agreement; and the Imperial Government will instruct the Chinese Ministers in Berliu, London, and Paris to co-operate with the banks in auy matters requiring conjoint action, and to sign the prospectus of the loan,
Art. 13. The loan shall be issued to the public in one amount as soon as possible after the signature of this agreement, and not later than twelve months from the date thereof. The price of the bonds to the Imperial Chinese Government shall be 95 per cent. of their nominal value. Subscriptions will be invited by the banks in Europe and in China both from Chinese and Europeans on equal conditions, preference being given to the application of the Chinese Government, provided such application be made not less than four days before the issue of the prospectus to the public. Seven days' notice of the issue of the prospectus will be given by the banks to the Imperial Chinese Government.
Art. 14. The proceeds of the loan shall be paid to the credit of a "Hukuang Government railways account" with the Deutsch-Asiatische Bank, the Hong Kong and Shanghae Banking Corporation and the Banque de l'Indo-Chine in China, Berlin, London, or Paris as the case may be. Payments of loan proceeds into the credit of this account shall be made in instalments and on dates conforming to the conditions allowed to the subscribers to the loan. Interest at the rate of 3 per cent. per annum shall be granted on the credit balance of the portion of this account kept in Berlin, London, and Paris, and interest on the credit balance of the portion kept in China will be allowed at the banks' rate for current accounts, to be arranged. Subject to the payments and deductions to be made from the loan proceeds in terms of articles 2 and 3 of this agreement, the banks will hold the net balance, with accrued interest, to the order of the director-general. Transfers of the loan funds to China in amounts conforming to the actual construction requirements will be made by the director-general on his sole authority, the transfers being effected through the Deutsch-Asiatische Bank, the Hong Kong and Shanghae Banking Corporation, and the Banque de l'Indo-Chine as the case may be; ten days previous notice will be given to the bank concerned of the transfer of any sum exceeding 20,000%, and the transferred funds shall remain on deposit with that bank until required for railway purposes. The director-general shall,
at his discretion, make transfers from the loan funds held in China by the banks to the credit of a construction account for the Hupei section of the Szechuan-Hankow Railway line with the Deutsch-Asiatische Bank, and of a construction account for the Hupei- Hunan section of the Canton-Hankow railway line with the Hong Kong and Shanghae Banking Corporation. Requisitions upon these construction accounts will be drawn in amounts to suit the progress of construction of the railway lines by orders upon the Deutsch-Asiatische bank or the Hong Kong and Shanghae Banking Corporation, signed by the managing director of the line concerned, or, in his absence, by his duly authorised representative, who shall, moreover, two days previous to the presentation of such order, issue in duplicate a certificate stating clearly the object of the funds to be drawn, handing one copy to the auditor (hereinafter referred to) and one copy to the bank concerned.
The accounts of the railways will be kept in Chinese and English, and (or) German in accordance with accepted modern methods, and will be supported by all necessary vouchers. During the period of construction the said accounts and vouchers will be open at any time to the inspection of two auditors for the Blupei-Hunan section of the Canton-Hankow Railway line and the Hupei section of the Szechuan-Hankow railway line respectively, appointed and paid by the banks, whose duty it will be to satisfy the banks as to the due expenditure of the loan funds in accordance with the provisions of article 3 of this agreement, and to certify to monthly statements of the foreign materials purchased by the railway administration under the provisions of article 18 hereinafter. The railway administration will publish annually upon the close of its financial year, a report in the Chinese and English languages showing the working accounts and traffic receipts of the railways, which report shall be procurable by the public on application.
Art. 15. If after the deduction of the amount required for the redemption of the gold bonds referred to in article 2 of this agreement, and of the sums necessary for the service of interest on the loan during the time of construction, the balance of the loan proceeds, with accrued interest, should not be sufficient to complete the construction and equipment of the railway lines named in article 2 of this agreement, the amount of deficiency shall be provided, in the first place, from such Chinese funds as may be available, so as to permit of the uninterrupted continuance of the work of construction, and any balance then uncovered shall be supplemented by a further foreign loan for the amount required, to be issued by the banks. The interest and other conditions of such supplementary loan or loans will be the same as in the present agreement, and the price payable to the Chinese Government in respect to these supplementary loans, shall be the actual rate of their issue to the public, less flotation charges of five and one-half points retainable by the banks, that is to say, a charge of 51. 10s, for every 1001. bond issued. If, after the completion of the lines there should be a balance at the credit of the railways account, such nuused balance will be transferred to the credit of the interest reserve fund hereinafter mentioned in article 20 as a provision for payments for which the Imperial Chinese Government is responsible under this agreement,
Art 16. If, before the publication of the prospectus for the issue of the loan, any political or financial crisis should take place by which the markets and the prices of existing Chinese Government stocks are so effected as to render, in the opinion of the banks, the successful issue of the loan impossible on the terms herein named, the banks
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