During the past two days no topic has been more widely discussed in Shanghai than the proposal put forward by the directors of the Anglo-Java, Estates, Ld., in their annual report, to issue 50,000 shares at par to Messrs. J. A. Wattie & Ca. Indeed it is difficult to recall any question so excitedly canvassed since that memorable year when the mere whisper of the possibility of a new company being launched sent everybody scrambling over each other in pursuit of scrip, and shares changed hands at enormously enhanced rates before much more than the mere name of the company was known. Which reminiscences are not without their bearing on the present cause of excitement. The passage in the present report which has caused so many heart searching is best quoted verbatim. Having recorded that after payment of certain usual expenses there remains to be dealt with the sum of Tis, 234,820.39," out of which the directors propose distributing Tls. 202,500 in dividends, they continue In connexion with the foregoing recommendation regarding the final dividend, your Directors have to report that order to provide cash funds for the payment of same and to supply the Working Capital required to meet the estimated Capital Expenditure during 1916, the possible acquisition of further land, for which the Directors are now in treaty, and to finance the harvesting of the increasing crops, they consider it necessary and desirable to give effect to the agreement entered into with the Vendors on the flotation of the Company—notice of which agreement was given in the Company's Prospectus—and to issue te the Vendors the remaining 60,000 shmses in the Company at par.
At the time the Company was formed the Authorized Capital was fixed at £250,000, of which £225,000 was issued immediately. In fixing on the above sums it was estimated that the Working Capital provided by the issue of only £225,000 would be sufficient to last for three or four years, after which time it would be necessary to issue the remoaining £25,000 in order to bring the planted area into full bearing.
The full issue of the Company's capital at the time of flotation was considered inadvisable as same would entail dividend distribution on es pital which at that time could not have been profitably employed. On the basis of dividends paid to date, including the dividend now recommended, a saving of Tls. 133,150 has been effected by postponing until now the iasae of this balance of the Company's Capital.
According to the prospectus issued when the Company wae floated, UN
630 the vendors sold the estates to the Company at the ''actual purchase price free from any profits or commissions or underwriting fees. The promoters are receiving no promotion profit whatsoever but stipulate for the right of taking up at par all of the reserve capital of the Company amounting to £25,000 at the time when such stock is issued.""
Considering, however, that Anglo-Java-shares are worth more than three times their par value, it is not surprising that the shareholders demurred strongly to a transaction which promised, to Messrs. J. A. Wattie, so large an immediate profit and anything from Tls. 50,000 upwards for the remainder of time. There were other circumstances in their objection, of which more presently.
Now whether the Company needs this £25,000 or not, does not concern us. If the money were really needed, and if the agreement between vendors and company said that the latter must not go to any outside source for funds until the remaining 50,000 shares had been issued, there would be no more to say. Meanwhile the shareholders maintain that they certainly do not need it at the terms involved, in order to pay themselves a 45 cents dividend and as that dividend would absorb the bulk of the money, there seems to be justice in their position. Similarly, it is beside the question who made profits out of the company in the booming days of 1910. Messrs. J. A. Wattie might adopt the attitude that while the shareholders may agree to contrive to do without new working capital, they, Messrs. J. A. Wattie, are on-titled to their rights a6 specified in the agreement. The shareholders might reply that Messrs. Wattie & Ca. made enough in 1910 not to need any further solatium (we speak merely for the sake of argument) and Wattie & Ca. with equal justice might retaliate that the public only bought in 1910 with the idea of selling again as fast and at as huge a profit as possible. As regards arguments about profits made or not made in 1910, the dead past must be left to bury its dead. The rights and wrongs of the present dispute seem to turn entirely on what the agreement of 1910 actually says. And at the outset there is no use in complaining about the existence of this agreement. It may be
Text read from the printed page and cleaned; old type leaves the occasional error.