In reviewing the negotiations in January 1925, the Municipal Coun-"il made the following Statement (inter alia)
"It has been suggested by certain correspondents that the increased charges ure required. In order to a the Company to finance its capital ovt= lay out ofts current revenue, The Council wishes, it to be clearly under= food thud awe a revalutio The' Company's future en pital require:
willie' financed: el the share oF debenture ice between these. two. methods will Fast on financial expediency and th Titerenta of the aubseribers wt distin from the shareKoldere, Now, it is almost beyond comprehension that the—Munfeipal Council should make such a statement as this when the two last annual accounts (Years ending March 31/25 and 26) show that the Telephone Company made a charge out of its current revenue to, meet its capital outlay called by the misleading name of "Depreciation Reserve" of Tis, 280,092.40 and Te, 269,438.42 respectively. the inception of the Company no Jess a sum than Tis, 1,587,161.65 been contributed byl the subscribers under this heading which together with general and other reserves aside out of 2,106,60: This we will call mounts in all to Tis.
Subscribers' Capital on the liability Company ts maintained in thorough good order and condition out of revenue and the cost of replacements and renewals are defrayed year by year out of revenue what is the meaning of further razing the sub-reubers with a Depreciation Reserve? It could not possibly be to meet some heavy loss in the future such as a typhoon next year or the year efter destroying a whole section of telephone Tecause no fund hi specifically for the "Depreciation Reserve" and consequently does not} exist even in name.
I wish to make it perfectly clear to you that I consider that Depreciation Reserve in the case of a public utility Company is by.no means on "all fours" with that "of ordinary trifling Company formed for of gain. In the latter case it is a very sound proposition for the Directors in a pros-Teroug year to set aside out of the profits a sum for "future capital outlay by way of expansion, as it thereby increases the value of the ig shares as well as saving the necessity of the calling up of fresh Capital; bat in the case of the Tele-rhone Company, the process i the very reverse. We subscr for the [debentures at 6 or 7 per cent. to meet all future capital outlay stead of being razed with it out revenue at 25 per cent, increase our. subscriptions.
Everyone knows that the capital outlay of the Telephone Company through rapid expansion has been very considerable every year, Never theless the Company has been a position to meet it, without ising fresh capital because they ty meet the annual capital outlay hat subscriptions had to be inereas-
Now, in order to show what I consider to be: the position of affeirs on March 31/26—that is the holder and the subscriber as joint-owners I will set out the Balance Tis, 1073,172.68 of which Tls. 449,611.89 has been contributed by levy on the subserib ers since the inception of the Con pany to 31/3/25 (and so ject there was in writing down the Value of this permanent structure year by year, so that at the pre-Sent time it is shown on the books {ter deduction of its proportion of the depreciation reserve) at Tittle-over one-half of its original} cost. It will be maintained in good] order and condition out of revenue for the next 100 years and thoussh during that period it may be replace ed like the Irichman's gun—lock, stock and barrel—it is the same gun or rather T should say the same "Shanghai & Pootung Aerial Cons-fon" and "so in all other 15
Text read from the printed page and cleaned; old type leaves the occasional error.