To the Editor of the "Nontu-Cuina Datty News"
Sm—In view of the many refer-fences of late in your columns reference to the rights of shareholders, and in justice to those, representing, very large number of Preference shares, who assisted in defeating the resolution submitted at the meeting of this class of shareholders held yesterday, it is desirable that Should be a more extended reference to their reason for doing so than appears in your account of the proceedings in to-day's issue, Those particularly referred to are all tu favour of the merger of the two companies and. their spokesman at the meeting expressed their appreciation of the efforts made by the Directors to effect it and cons gratulated them on the successtil Conclusion of their prolonged negotiations. Tt was pointed out, however, that' the Directors had apparently' overlooked the fact that a very large number of these shares had been purchased as an Investment for public funds by those who assumed Trustee responsibility in respect of them.
Preference shares and Debentures of well established dividend earn ing, commercial enterprises may be considered as suitable investments for such funds whilst ordinary shares could not be so regarded. "Preference carry certain guarantees largely eliminating the speculative elemen'. The dividend return is fixed of a ower rate than the Ordinary Shareholders take a chance on hoping to realise. These guaranteey are intended to operate in just, con: tingency as has arisen in respect of the New Engineering Company. will be seen that a vital principle is Ordinary shares. of 4 speculative nature in which trust funds cannot be invested are offered substitution for the abrogation of special rights which those who hold present Preference Shares believe, rightly or wrongly, fully protect their present investment, 'A. proposal was submitted to tie Directors to. make an adjustment which would retain the present status of the Preference Shareholders and ne Yeason has been advanced by there, satisfactory to this class of share: holder, to convince them that the sul gested' adjustment is impossible, Much has been said as to the ex: cellent prospects for the new Compony, It is obvious that this strength. optimism is well founded it will add to the value of the Ordinary Shares, The Preferred Shareho of concerned with the prospects for big dividends. Their main considers. tion-{s security and an ordinary interest return on the investment rather than taking a speculative chance on large profit returns, 'The defeat of the resolution yesterday, does not signify that the Directors' efforts to effect the merger have failed. It simply means that an opportunity has been provided for a reconsideration of the offer made to the Preference Shareholders by the Ordinary Shareholders of their' own company and this is a matter of no concern to the Shareholders of the Dock Company.
This phase of the situation was plained at the meeting by one who spoke on behalf of those responsible for a very substantial investment of fiduciary funds in the Preference Shares of the New Engineering and Shipbuilding Works, Their objection to the present offer implies criticism of the managentent who Hay not have realized, until too late, to submit the alternative proposal to the Ordinary Shareholders, the extent to which fiduciary funds had been invested in Preference Shares solely fon account of the special security they offered as such.
Shanghai, Nov. 21,
Text read from the printed page and cleaned; old type leaves the occasional error.