Enclosure 1.
(1)
The Honourable
C. Clementi, Esquire,
323
0 O
Kanaging Directors Office.
Canton, 11th. May, 1911.
Colonial Secretary,
Hongkong.
Doar Mr. Clementi,
27469
Brot 21 AUG
I beg to acknowledge the receipt of your letter o
the 20th. ultimo, No. 2 in 2802/1907, the contents whereof have had
thorough perusal and consideration.
******** 1 quite concur in your suggestion that, **
for convenience anke, before a detailed schome for the provision of
Rolling Stock is perfected, we should have another meting in order
discuss the matter and to settle the principle upon which the scheme
should be based. Wo vill later on appoint a convenient time and place
for pur meeting.
With regard to the division of fures, in the first
part of paragraph 2 of your above letter you seem to have entirely
misunderstood the principle I adopted in my memorandum, but further on and in that same paragraph you seem to have accepted the principle
with certain modifications.
As regards the observation contained in the first
part of paragraph 2, I wish to state that my calculations do not pro- -coed from the hypothesis that the receipts from traffic on the Bri-
-tish and Chinese Sections of the Canton-Kowloon Railway will be
equel. They proceed from the hypothesis that:-
(a) Given equal mileage, the volume of traffic might be assumed to be
the same (i.a. through traffic, which is the only traffic we are con-
-cerned with in deciding the through rates); in other words the volume of through traffic per mile may be assumed to be the same on both sections.
(b) That working expenses per mile will be the same.
From this hypothesis I have deduced the principle that nett earnings notgrosa e-rnings, should be in proportion to the Capital Costs per
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