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JARLIC

PECORD OFFICE

Prference -

1111111 C.O.882/12

PUBLIC RECORD OFFICE, LONDON |

| ALLY WITHOUT PERMISSION OF THE

BE REPRODUCED PHOTOGRAPHK - || COPYRIGHỊ PHOTOGRAPH-NOT 10|

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(c) That the Secretary of State is prepared to arrange a conference, and that in the event of no satisfactory proposal being made by your Company thereat, for securing the necessary finance (independent of financial assist- ance from H.M. Treasury, the Federated Malay States Government, or the Colonial Development Fund), the Secretary of State trusts that your Directors will be prepared to refrain from opposing the immediate appoint- ment of a Receiver.

3. You have instructed us to report to you what would be the effect of the appointment of a Receiver, and generally.

4. Before reporting as requested we would point out to you:-

(a) That there is at the present moment no ground upon which the holders of any of the Securities created in the Company could appoint, or apply for the appointment of a Receiver, there being at present no default on the part of the Company, of which these security-holders could take advantage; (b) Your Board would not be justified in refraining "from opposing the immediate appointment of a Receiver," because, in our opinion, it is the duty of your Board to protect as far as possible the various security- holders, and also the unsecured creditors and shareholders of the Com- pany, by using every means in their power to avoid the disaster resulting from the appointment of a Receiver, and not to precipitate that disaster.

5. The only parties who could apply for the appointment of a Receiver, if aud when default arises under the terms of the Deeds creating and securing the various securities, are either:-

(a) The Trustees for, or a holder or holders of, the five per cent. Guaranteed Debenture Stock and/or the seven per cent. Participating Debenture Stock;

*

(b) The Federated Malay States Government in respect of the £850,000 Loan;

and

(c) The Trustees for the five per cent. Guaranteed Stock who would, under

the terms of the Deed securing that Stock be compelled to appoint a` Receiver on being requested in writing so to do by His Majesty's Treasury, in the events specified in Clause 17 of that Deed.

6. The effect of the appointment of a Receiver by or on the application of or on behalf of any of the security-holders above specified would be:-

(a) That all principal moneys and interest in respect of the various securities

would immediately become due and payable;

(b) That the Guarantee given by His Majesty's Treasury for the due payment of the principal moneys, viz., £1,250,000, the amount of the Guaranteed Debenture Stock, and the interest thereon, would be immediately enforce- able, and the £1,250,000 and accrued interest would have to be provided by His Majesty's Treasury;

(c) The Receiver would take immediate possession of all the Company's under-

taking property and assets here and in the East;

(d) A Receiver can, of course, be appointed under the provisions of the various Trust Deeds, but if he is appointed by the Court he would by virtue of that appointment be an officer of the Court. In view of the various interests involved the appointment is almost certain to be one made by the Court, as any debenture stockholders of any of the series issued can apply to the Court to have the appointment so made;

(e) The Receiver would be appointed as Manager and authorized to manage the

undertaking only for a limited time;

(f) The Receiver would not be entitled, or allowed, to pay any of the unsecured debts of the Company, except such as are regarded as preferential, these preferential debts being of a very limited nature, such as income tax, rates, wages, &c.;

(g) No payment of interest on the securities would be permitted whilst the Management continued, even though the revenue collected might be in excess of the expenditure in carrying on the undertaking;

(h) The Receiver would necessarily require to have competent and independent

expert representatives in the East;

+

7.

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(i) The legal charges and disbursement in connexion with the proceedings which would have to be instituted for the appointment of a Receiver, and the remuneration of the Receiver and his independent expert representa- tives both here and in the East would be very considerable as, in proceed- ings of this description and in connexion with the Management, the Receiver would have to be continually applying to the Court for leave to deal with the matters which would repeatedly arise, and in addition, representatives of the various securities would have to be made parties to the proceedings and would undoubtedly obtain leave to attend same; (j) We would point out that owing to personal liability any Receiver would be reluctant to enter into long-term contracts for supply of power, and in the event of his failing to do so, this might be treated as a breach of the Concession;

(k) The above points are not exhaustive but they will enable you to form some

idea as to the consequences which would result from the appointment of a Receiver.

You can judge better than we can what effect the appointment of a Receiver would have upon :—

(a) The present consumers;

(b) The prospect of obtaining further consumers; and

(c) The question of how the undertaking would suffer if (as undoubtedly would be the case) the Receiver were only permitted to expend what was absolutely necessary to keep the plant, &c., in working order during the Receivership.

8. With regard to the suggestion made by the Secretary of State, that the only means of raising the money necessary to finance the Company would be by the appoint- ment of a Receiver, we would point out that the Receiver could only procure finance by it ranking in priority to the five per cent. Guaranteed Stock, and it would be limited to the purpose of carrying on and managing the undertaking, but not for the purpose of providing funds for other essential objects. On the other hand, assuming that the Company is permitted (that is, without the appointment of a Receiver) to raise the amount now required to carry on and manage as well as for other essential objects upon as favourable terms as would be available to the Receiver, the Company should be able to raise all finance that is now necessary upon reasonable terms.

9.

We feel bound to point out to your Board that, in our opinion, if there is any possibility of a Receiver being appointed, having regard to the disastrous results

which would necessarily ensue, it is the duty of your Board :—

(a) To lay the whole facts before the various security-holders and explain the efforts you have made to avoid disaster, and what has brought about the present position, viz., the slump in the tin industry; and

(b) To submit to the various security-holders proposals for procuring the finance which is now requisite, and for dealing with the various provisions which now become necessary having regard to the present situation.

In laying the facts before the various security-holders (and we think also the unsecured creditors and shareholders) the consequences of any scheme submitted being rejected will, of course, be made clear. By this means the security-holders and unsecured creditors and shareholders would have been informed in due time of the position, and they will have been afforded an opportunity of protecting their assets with a view to their preservation for their benefit, pending the return of normal trade. The Board will then have discharged the duty which, in our view, it undoubtedly holds towards the Company's security-holders and unsecured creditors and shareholders.

Having regard to the considerable amount of money which has been expended upon the undertaking, and the fact that the British Government and the Federated Malay States Government are so largely interested, and that the £1,350,000 seven per cent. Participating Debenture Stock ranks behind these interests, in addition to the Preference and Ordinary Shares, we cannot, in conclusion, too strongly urge that, if it is at all possible every effort should be made to avoid the necessity of a Receiver, as we are confident that the unfortunate results which we have endeavoured to make plain would ensue.

Yours, &c., MAYO, ELDER, AND RUTHERFORDS.

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