The funds from the 150,000 new shares issued early this year, as was fully explained in the circular letter to shareholders dated sth December, were required partly to finance cei fain rebuilding and. extensions, und the balance was merged in our working capital; but when we are working full time at all three mills we shall still have to depend on facilities from our bankers. The problem of working capital in these days of depreciated exchange and tight money Fequires very careful consideration.
T'draw your attention to the item, Sundry Creditors and Credit Balances, which is shown as approximately $2,400,000. This. is greater than last year. But we have to remember that all our figures, turnover, profs, stocks etc, are much higher' in terms of the" depreciated dollar generally this year. 'This sum includes, figures for stocks of cotton, stores, deposits ele., and of course 0 great' portion of these have been liquidated since these accounts were $11,400,000 Against Stocks We have a very large gute against stocks, stocks in process and transit—about $11,400,000, Our stocks of raw materials at the end of 1038 were actually Jess than at the end of 1937, yet their total value was almost the same, due, as I have already said, to the depreciated ox-change, The quantity of Mnished goods on the other hand was larger than in the previous year. The reason for this was that our mills In Yangtszepoo were not producing at the end of 1937 although deliveries were freely taking place, whereas at the end of 1938 we were working day and night shirts, and congestion at various ports, and curtailment of transportation facilities generally, were keeping back much cargo which would otherwise have been cleared.
The value of our stocks is likely to increase rather than decrease ax Jong ax exchange remains around its present level; and now that we have to rely largely upon foreign grow cotton it fs necessary to keep larger quantities for each of our mills. T do not think our stock position therefore need cause any undue alarm. But it iMustrates very clearly the portance of ample working capital in these dimeult times espociaity if the company is to continue to do a large turnover in its various enterprises, think the only other item which calls for any comment is our cash position. "You will notice we have Decounts in foreign currencies, These are earmarked against specific toms such as machinery, wool tops, cotton and all, In the profit and loss accounts you will see the amount of $68,116.96 de-ited {0 interest, During the earlier part of 1938 it was extremely diftcu fo obtain money on demand. You consulting committee and general maneyers decided, "und" 1 consider rightly, to take o'detinite offer of a oan of $1,000,000, which was reduced to. $800,000 later, from the Hongkon Shanghai Banking Corporation in March until the end of the year rather than run the risk of having {to curtail production because of lack of funds to finance raw materials 'Actually owing to satisfactory liveries the money was not used for the major part of the time. But terest paid especially if we remem Ber the scale of the business and pronts at stake, may' be regarded ax Insurance premium paid against 0 shortage of funds, It was conserva tive policy, but in view of the situs-Hon, amply justified.
During the year under review the ofice alfowange paid to the general managers was increased in accordance with Article XVII Section 2—Sub-Section (a)—of the Articles of Association, Previously this was Tls. 10 000, In September 1938 it' was Increased to Tls. 158,000 with the approval and sanction of the consulting committee.
Text read from the printed page and cleaned; old type leaves the occasional error.