June 12, 1905.]
be given away to the new Company to enable them to buy out the much-quoted Concession, to say nothing of our other written down and valuable assets! It is a wonder, under the circumstances, that we were offered in the liquidation proposal a distribution of the un- divided profits of the current half year; and it is to be hoped that there will be sufficient dis- senting hareholders at the Confirmatory Meet- ing to vote down and prevent this enforced sacrifice of our interests and thus prevent the necessity of testing its legality-Yours truly.
D. E BROWN. Hongkong, 6th June, 1905.
(TO THE EDITOR OF THE DAILY PRE88.")
SIR,- We do not know that the letter appear- ing in your issue of yesterday over the signature of Mr. D. E. Brown requires any reply from us, as it is practically a repetition of a carefully written speech delivered by the 8.me gentleman at the meeting of the Company held on the 3rd inst., bút as some of Mr. Brown's facts are inaccurate and several of bis arguments based upon insufficient or imperfect knowledge of the actual facts we have thought it right to make some reply through the
medium of your paper,
In the fist place Mr Brown in the third paragraph of his letter stats that all that shareholders in the old Compaay are promised in return for their shares is a one third interest in ti e new Company or $25,000 in shares out
of $750,000.
On the contrary, at the meeting above referred to, it was distinctly stated by the Chairman that shareholders in the old company applying for any further shares in the new Company over and abore the allottment they are entitled to under the proposed reconstruc tion would be given a preference.
In the same paragraph, Mr. Brown continues speaking of the new company whose only hope of a revenue return for the next thres or possibly four or five years will be the revenue earned by the present Company and we will have to remain satisfied with a division of only one third of these profits." Apart from the ques- tion of there being possibly two opinions as to the length of time required to make the new line, the last statement is inaccurate. The shares in the new Company issued to the shareholders of the old Company will be fully paid up and entitled to dividends on the full amount of $10.0 per share from the formation of the Company On the other hand the remaining shares will only be entitled to dividends on the amount paid up on them for the time being which will certainly not exceed $5.00 per share for the first year and may be less So that if $5.00 only be called up on 50,000 shares the dividend would go half to the holders of the fully paid up shares and half to the others, and on the basis of earnings of six per cent on the full capital of $750,000.00 this would be equivalent to 90 cents per share in the new Company or $18.00 per share on each share in the old Company, actually $3.00 more per share than was paid last year.
Mr.
Again in paragraph 7 of his letter Brown saya "But why not let well alone? The old Company is strong enough and surely doing well enough. Let the new Company go head with their brand-new concession and build their new liue and operate against us for a few years, &c.'
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We could not contemplate in the same light hearted manner as Mr. Brown. the construction of such a line working opposition for many reasons. The new tram- way which is to be a double track would be capable of running a five minute service It will have a terminus in the Queen's Road, thus securing all the casual traffic. It will be able to try wore passengers in each -car and have the further advantage over the old line of running through a populous district, and if we had not acquired the concession would have been in a position to carry Peak residents free for the reason that it is estimated that the traffic from its intermediate stations would have more, than paid expenses. The old Company would have been faced with the loss of its casual traffic and, its intermediate traffic being insignificant would have had to depend entirely on the Peak residents. It could not have earned dividends by carrying these for nothing. Mr. Brown also forgets that if the new Company had remained
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CHINA OVERLAND TRADE REPORT. a separate interest and made the new line, the policy of the General Managers and Consulting Committee the old Company would have been to cut down dividends to the lowest point in order to strengthen the Company's position and enable it to meet, as favourably as possible the competition of the new line. This would mean that for the whole period during which the new line was being built and for as long as it continued to run, always supposing as Mr. Brown does that the old Company was successful in ruining the new, instead of being itself ruined, say eight or nine years, the shareholders in the old company would certainly not have received more than $15 per share per annum in the form of dividends and probably under the circumstances less, so that in taking $200 as the price to be paid under the reconstruction scheme for the shares in the old Company we are of opinion that they are being taken at a fair value. As to Mr. Brown's contention that because the Company has shown its ability in the past (in the absence of any opposition) to earn satisfactory dividends on a Market price of $325 per share, the shares are still worth this price under present conditions, we cannot think he intended it to be taken seriously.
Mr. Brown says iu conclusion: "I will not be found antagonistic to any proposal that is going to benefit the old Company and my attitude now is only protection of the interests of the share holders, one of whom I am."
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The Consulting Committee and ourselves when deciding on the amalgamation scheme held ths of the company's Capital. Does Mr. Brown suppose that we, being by far the largest share- holders, would have brought forward any scheme which would not in our opinion benefit the Company! We suppose as shareholders ought to be grateful to Mr. Brown for his attitude of protection of our interests, but it. strikes as rather as an attitude of obstruction and we consider we are justified in so regarding it. Mr. Brown has been a shareholder in this At the time Tramway Company for 22 days. he bought shires, the scheme for the reconstruc tiou of the old and formation of the new company was practically decide upon and, in its broader outlines, was generally known in the Colony. even if the precise details were not. Surely before investing for the first time in shares of a company in whose affairs it was common knowledge great changes were likely to take place, it would have been an ordinary precaution to enquire what was going on? Did Mr. Brown enquire? If he had asked us for information as an intending investor we would gladly have
told him all we knew.
Under the circumstances, we can only conclude that Mr. Brown bought the shares as a specula. tion and, looked at in this light, the assumption by him as a shareholder of such short duration of a protective attitude towards sha eholders of long standing who want no protection, strikes somewhat strained. Your obedient
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servants,
JOHN D. HUMPHREYS & SON.
TO THE EDITOR OF THE DAILY PRESS.
SIR,-The controversy which has arisen over the proposed conversion of the High Level Tramways Company into the Peak Tramways Company, whereby the old Company is to be wound up-" voluptarily" as it is called---and a new Company brought into being, has aroused the greatest interest. In their letter dated the 7th inst, Messrs. John D. Humphreys and Son endeavour to refute the arguments of Mr. D. E. Brown as presented in a previous letter and in his speech at the meeting last work. They i ave accused him of distorting the facts and submit- ting arguments based on an imperfect know. ledge of the actual conditions, and proceed to question the accuracy of his statement that the only hope of revenue return for the next three years will be that earned by the present Com- pany. The explanation given by the general managers is of such a nature that it might be characterised as no explanation at all. Mesars. Humphreys assume that a dividend of 6 per cent. will be obtained on a cpital of $75,0000 -that is to say, there will be interest received on that sum to the amount of $45,000, and, so far as I can understand, it will be distributed as follows, viz, 822,500, being 90 cents per share on 25,0 $10 shares, fully paid up, in the old Company; and 822,500, being 45 cents per share
365
on 50,000 new shares on which $5 is paid up, Where do the and 85 remains to be called. general managers get this $45,000 from? That is an exceedingly important question. If the general managers count on the old Company to bring in that sum, then the old Company when it comes to a distribution of their profits among the shareholders could have given them $36 per share on the old shares (or $1.80 per share on the new shares of the amalgamated concern) But, wisely enough, they have been giving $15 per share ou the old shares jor 818,750, and strengthening the assets by carrying forward the balance of $26,250. Now, is it fair and just that the general managers should. take all the profits of the old Company and propose to divide them en bloc on the money I. called up on the old and new shares alike? that a fair and reasonable reply to Mr. Brown's argument that the old shareholders are being done out of their rights P I submit it is not. Why should a shareholder of the Hongkong High Level Tramways, who does not believe in the roseate prospects of the new scheme, be called upon to sacrifice nearly two-thirds of his rightful returns in order that new shareholders, who had nothing to do with the existing With regard to the tramway, may benefit? statement that the general managers and the majority at the meeting hold two-third of the shares of the Company. there is a very simple answer to that. The interest of the general managers is not alone confined to the dividends the company pay, but they bave the much greater interest in reckoning the commission they will receive when the Companies are amalgamat.d. So that their interests are not to be considered as on the same plane as those of the shareholders who look to the dividends alone. The larger the capital the greater the commission received by But, also, the same the general managers. principle does not apply where the share- hollers are concerned. It comes to this-it is proposed to distribute 6 per cent,
which is the total return anticipated by the new Company, among the shareholders. But for years the shareholders of the old Company have been content to fake 15 per cent. instead of the $36 per share to which they were en- titled if they had not followed the wise plan of building up a reserve. Who benefits by the sacrifice! Not the shareholders of the old Company. if the new scheme is carried out. No; it will be the new shareholders who will earn dividends on an undertaking with which they had nothing to do. And where will the reserve fund go? Probably to build up the dividends required until the new tramway is I think that constructed and paying its way
lt is unfair the scheme is altogether wrong. to the shareholders of the old Company. It is inequitable and unjust; it is robbing Peter that reed may be satisfied. and I hope that Paul's we have not yet heard the end of it all. I am, etc.,
FAIR LAY
Hongkong, 9th June.
•
THE CANTON MURDER CLAIM.
THE AMERICAN GOVERNMENT COMPENSATES THE WIDOW.
On Tuesday, June 6th, the widow of the murdered No 3 Compradore of the B. & S. steamer Kansu was to receive $3,000 Mex. from
the American Government, through the Consul, Genoral Lay.
This was the full amount claimed by the woman, whose husband was drowned by some unidentified member of a shore-party of American sailors from the Helena, on Septem- ber 26th, 1904. The affair caused a painful sensation at the time, Chinese comments being Although the American particularly bitter. Government failed to fix the guilt on any individual for punishment, it is now hoped that the Chinese may recognise that Western justice is not a negligible quanlity.
WORK FOR H.M.S. "RAMBLER"
His Majesty's ship Rambler left Hongkong on June 12th. She is going on a seven months surveying cruise, to be spent off the coasts of Borneo.
It will be January next year before she returns to Hongkong.