Capital, but Shareholders growth of Shanghhi has been phenomenal, and it therefore behoves your Board to look well ahead and to ome extent realize not only what the future of Shanghai will be but to the future successful working of the company. In short, gentlemen, L. if the company is to advance with the times and secure its opportuni-when they arise, further capital ig essential. Your Board feel that the time has now arrived when that capital is necessary in order to secure those opportunities in land deals which must from time to time occur, otherwise it means a state of stagnation in the affairs of your company. From the following figures you will understand that the position of the company is absolutely sound:
5.—To relieve our debenture posi-jon. We have at present outstanding debentures amounting to Tis. £487,000, and a further amount of Egsingt thee we have hypothecated Is. "500,000 provi (or,
estates to a value of considerably more than twice the amount of the total debenture issue. "This position has occurred by estates. increasing in value very greatly since the dates of the various debenture issues in ghe following manner. An hypothecated estate increases, say, threefold in value and your Board decides to take advantage of the increase in value and sells. This estate is consequently taken out of the trust and another substituted. Here is the rub; the substituted estate has to be of equal value to that realized on the sale and consequently of three times the value of the original security.
of the property sold has to be mi other words, the enhanced vales food by the replacement. of ther Had the Directors decided to] make a further issue of debenture instead of allotting new shares, would have taken a considerable Ant "ortisages amaant- HUN, portion' of our free estates cover a large enough issue. This would handicap us seriously in the fature finance of the company and might create a difficult. position vis the debenture holders in event of the company wish the following po to: take advantage of opportunities Bank overt The estate costs, as you will readily observe, are' Tis..7,600,000 over and above the capital of the company. When I say the estate book cost of Tls. 11,500,000, I mean that this sum actually' represents the capital outlay on your property. The value to-day stands at a substantially higher figure and there can, therefore, be no doubt that the company fs very much: under-capitalized.
Your Board now proposes to issue 39,000 new shares of Tls. 90 each, payable next June 30,.whieh. will allow of additional funds amounting to Tls. 9,510,000. Of this sum Tis, 1,950,000 becomes, dividend-bearing share capital and 'Tls. 1,560,000 will go to reserve, capable of being reinvested for' the benefit of shareholders. The chief reasons which have Jed your Board to bring for-Ward this proposal are:—
1.—To reduce our bank overdraft. Our present commitments by the time the new capital is subseribed, bring our overdraft with " our bankers approximately Tls. 1,800,000, for which accommodation we have to pay interest. It is not reasonable to expect our bankers to continue indefinitely financing us to such a large extent. Referring to this, T for proffable sales, By' the issu of new shares the question solved in the company's favour. Before it is necessary to make a further issue time expired debentures will have been redeemed, estates freed and other estates Jdeveloped or purchased, and the company's finances generally will be Jon a more liquid footing.
has been stated that these new! shares are being offered at too high 'a. premium. At the time that the directors arrived at their decision the shares of the company were unobtainable at Tls. 118. JOld shareholders therefore of acquiring 28" per premium is not too evidenced by the fact that to-day' Jour total invested funds are costing tus, on a 12 per cent. dividend and fa 4 per cent, bonus, 8 per cent. per' Jannum, When our new capital faubscribed on the basis of a Tls. 40 premium, the average cost on the whole, allowing for the same jond and bonus, will be 84 per per annum, The new shares will participate in the full amount lof the final dividend and any bonus which may be declared as the result of the 1925 year's work, but will not rank for dividend in respect to any interim dividend for 1925.
As our shared have invariably been regarded as gilt-edged secur-T|ity, your Board have maintained a remarked in iny annual speech' to shareholders last March that during the current year we should be more heavily indebted to the bank, our overdraft with our bankers December 31, 1923, being Tie. 948,157:35.
2.—To enable us to profitably redevelop already partly carried out work." "Referring to this feature, think I made the matter clear in speech Inst Match when id "A further 'Block of 160. Chinese Routes onthe Chwang' Hoong Estate Rar'ow'been taken fu hont' andas Som es this be completed another block conus sual sie wi be commenced: shut agra och wi ate nell i they have been Under this point the following not without interes and includ consistently conservative policy and in bringing forward this resolution have carefully weighed the future prospects of the company and the general interests of all sharehold-Jers, the greater proportion of whom smalleinvestors who we venture! to think require a solid stock, with the market value of their holdings at a steady figure and their income or dividend practically assured on the basis of the last two years. If] /wevhad formulated our proposal at 'a lower premium, we venture to think that the market value of the shares would: receive a momentary' inflation with more than an equal set-back if it was eventually proved that the company. was unable to maintain. ite recent dividends' on. new issue of shares, which, at a lower premium than Tls. 40 per share, your Board are of opinion would be difficult. In any case, Development. whatever dividend the company are in a position to pay, say, on a Tls. 25 premium, they would be in a position to pay 1 per cent, more on 2 Tls. 40 premium.
Text read from the printed page and cleaned; old type leaves the occasional error.