504
THE HONG KONG GOVERNMENT GAZETTE, APRIL 4, 1941.
The balance of the surplus after setting aside the policyholders' portion is $528,428.32 and as this is less than 10% on the paid up capital per annum for five years Art. 151 does not come into operation and the final apportionment of the total distributable profit is :-
To Shareholders
To Policyholders
E
528,428.32 114,894.70
The Shareholders have already received $320,000.00 during the quinquennium so they are entitled to a further $208,428.32 while interim bonuses amounting to $31,299.45 have been received by the policyholders so they are now entitled to $83,665.25; the addition of these two sums disposes of the whole valuation surplus.
In Mr. CULLEY'S Valuation assuming the sum of $56,768.16 is the proportion applicable to Paid up Capital of the sum of $95,302.76 shown in the accounts as depreciation of furniture, fixtures and buildings, no proportion of the item of $332,069.29 being Exchange losses shown in the Consolidated Revenue Account as having occurred during the quinquenniun is treated as a "loss by depreciation on Assets representing Paid up Capital" for purposes of distribution to Shareholders under Article 150(b) of the Company's Articles of Association.
The effect of this is to increase the amount to "be set aside (so that the Policyholders receive no share thereof)'' under Article 150(b).
Mr. CULLEY'S Valuation shows an amount distributed during the quinquennium of $351,229.45, although the amount brought forward from the last Valuation, and which was therefore the maximum amount available for distribution under the Articles of Association during the quinquennium, was $238,090.43.
Subject to the above and to the following remarks, the Valuation surplus shown in Mr. CULLEY'S Valuation as at 31st December 1939 after the distribution of the above sum of $351,229.41 was $292,093.51 of which $208,428.32 was available for distribution to Shareholders and $83,665.25 was available for distribution to Policyholders and these sums may be distributed (on the assumption in Mr. CULLEY'S Valuation) at any time between 31st December 1939 and the date of the next Valuation, but no further sums may in any case be distributed under Articles 150 and 151 until the results of the next Valuation are known.
The results of Mr. CULLEY'S Valuation under Heading IX of the Fifth Schedule, and the foregoing comments are based on the assumption that the true value of the Life Insurance, Child Endowment Assurance and Accident Insurance Funds was, as stated in the Balance Sheet as at 31st December 1939, $1,372,546.57.
Reference, however, to the Auditors' report attached to the Balance Sheet as at 31st December 1939 seems to indicate that in the opinion of the Auditors the true value of the Assets representing the Paid up Capital and other Funds may have been considerably less than the value stated in the Balance Sheet. If this was in fact the case and, in the absence of any reduction of Capital, the Insurance Funds were considerably less than stated in the Valuation Balance Sheet. It is not clear whether the Reserve adjustment made under Heading VII of the Fifth Schedule is intended to offset this, but, if so, the adjustment would appear inadequate.
To the extent to which the Insurance Funds were in fact less at 31st December 1939 than the figure stated in the Valuation Balance Sheet (after allowing for any adjustment made on this account in Heading No. VII of the Fifth Schedule), the true surplus as at 31st December 1939 would have been reduced (or a deficit shown). If the surplus had been so reduced or a deficit shown for the reason stated the results of the Valuation shown under Section IX of the Fifth Schedule would have been materially modified and the distributable surplus would have been reduced or eliminated.