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8440.00 5.00
THE HONGKÔNG WEEKLY PRESS AND
to
September 1, 1(0.
SAILORS AND SOLDIERS' CHINA paying departments. Whether or not some-being of the concern under their care
thing can be done to meet the requirements by RELIEF FUND.
utilising the small strip of land on the Reclama- tion is a matter for our early and anxious con- sideration, but already the question, so far as the dining room is concerned, has become urgent. Since the foregoing statement was prepared the Board have received the following letter, signed by thirty-five shareholders, having an aggregate holding of nearly 7,000 shares :---
THE HONGKONG HOTEL COMPANY, LIMITED.
The ordinary half-yearly meeting of share. holders in the above company was held at noon on Tuesday, the 28th ult., in the Hotel. Mr. R. C. Wilcox presided and there were also present Messrs. E. Osborne, W. Parfitt (directors), G. M. Bain, V. H. Deacon J. E. Gomes, Erich Georg, A. A. Guttierrez, W. Hutton Potts, F. Hender- son, J. H. Cox, Henry Humphreys, R. Hutton Potte, W. A. Cruickshank, C. N. Young, N. G. Evans, T. F. Hough, A. C. Van Nierop, A. H. Skelton, A. G. Morris, ('. J. Gonsalves, G. C. Moxon, S. Rustomjee, G. T. Veitch, J. C. Peter, Dr. D. E. Peterson, R. 8. Philpott, E. 8. Kelly Ho Fook, Ho Kom Fong, Lo Cheung Shin, Ho U Shang, Wong Ki Sam, Chan Chan Nam, Sang Kee, Leung King Shan, How Chok Lin, Leung Pui Chi, and C. Mooney (Secretary),
The SECRETARY having read the notice con- vening the meeting, -
The CHAIRMAN said-Gentlemen, With your permission, I propose to take the report and accounts, which have been in your hands upwards of a week, as read. The business of the Hotel during the past six months compares favourably with that of previous years, though it shows only a small advance on that for the same period of 1899. That, however, was our record, and it is very satisfactory that we have now beaten it, though by a merely trifling sum. We had hoped for a much better result, but the last two months showed a rather unexpected falling off, due no doubt to the tendency Paris. wards of the tide of travellers this year.
Be that as it may, we have the pleasure of laying before you what we take leave to consider a grati- fying statement, and it is with much satisfaction your Directors are able to recommend an eight per cent. dividend. This is the highest in. terim dividend we have yet paid, and we should not feel justified in proposing it were not the prospects of the current half-year such as to warrant the belief that we shall be able to re- commend an equal amount for the final dividend, making a return for the year of sixteen per cent. on the paid up capital. The Chairman at the last half-yearly meeting, on the 27th March, gave you an informal assurance that if business continued as it was then, we should be able to fully maintain this dividend, and I feel pretty safe in repeating this assurance. But I do not think we could safely promise to pay more. It is true that we have made a large sum of money, and that we have a small Reserve Fund, but we feel bound, as a measure of common prudence, to go on building up this fund, which will now stand at $60,000. We must also provide liberally for depreciation, for wear and tear increases pari paseu with the increase in visitors, and, I am sorry to add, the cost of replacing almost every article will be greater. The South African War has caused a rise in the prices of all goods imported from Great Britain, and recent changes in the Philippines, while largely augmenting the passenger traffic, have seriously enhanced the local cost of labour and of various articles of food, still further aggravated lately by the hostilities in North China. Last half- year nothing was set aside against repairs and renewals, and we have therefore felt compelled this half to devote the sum of $10,00 to that purpose. I must ask you to remember, too, that the current: half has always been regarded as the lean half of the year. Fortunately for us there is now no such striking difference in the receipts for the two half-years 25 formerly obtained. But we cannot, in the ordinary course, expect to do better than we did last year, and on that occasion a large sum had been carried forward, which materially swelled the amount available for appropriation. Mention is made in the Report of the fact that, while the business of the Com- pany continues to progress, there are some directions in which much further expansion will be impossible in the existing Hotel premises. I allude to the bars, billiard and dining rooms. These unfortunately are inelastic, which is the more to be regretted since they are our best
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Hongkong, 17th August. The Board of Directors, Hongkong Hotel Co,
Ld.
44
Dear Sirs,-We understand that it is your intention to declare an Interim Dividend of $4 at the meeting of the shareholders convened for the 28th inst. Taking into consideration the appreciation in the value of land conjoint ly with that of building materials, we do not deem it necessary for the Company to set aside large sums of money for reserve or depreciation, and therefore request that you will see your way to increase the dividend to $5.
We are, dear sirs,
Yours faithfully."
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paramount consideration, they cannot co tiously see their way to increase the dividend from 34 85 share as requested. Of cour
per it is pen to any of the shareholders to an amendment to the report to that effect, when we shall have to abide by the decision of t majority, but I trust I have said suficient convince you of the unsoundness of such policy. However, we must leave the matter in your hands. If you decide to vote a larger dividend the responsibility will rest with you. Meantime I shall be pleased to answer any ques tions or give any further information within my power.
Mr. VEITOH said-The past half-year's work ing, resulting in a balance of 394,794.71 for pre- sent appropriation, is a matter for congratula. tion, and shows the steady progress the company is making. When I come to consider the manner in which the directors propose making the ap- propriation I must confess to a feeling of dis- appointment. For the half-year ending 31st December, 1899, with somewhat smaller profits, shareholders received a 10 per cent, dividend. I see no substantial reason why a similar or even larger dividend should not now be paid, without in any way weakening the company's position. The amounts to be written off as recommended in the report appear somewhat excessive. For instance, it is proposed to write down Furni- ture and Fittings by 820,000, reducing the book value to $13,273.52. This means some- thing over 13 per cent. Now, gentlemen, I read in the report for the half-year 3 th June, 1896: "The Directors consider that quite 10 per cent. should be yearly writ- ten off Furniture subject to such excessive wear and tear as that in the Hongkong Hotel.”. If at that time when the Furniture and Fittings of the Hotel were in an infinitely worse con- dition than at present 10 per cent, was considered sufficient to write off, surely there is no need with such an improved state of affairs as at pre- sent (and also bearing in mind that during the last two years a sum of 848,440.82 has been written off, and the very substantial sum of $99,560.81 expended in additions to furniture) to write off $20,000 as recommended in the report. This is too large a sum, and I think $10,000 would meet all the requirements of the case. I will take repairs and renewals, Although over $7,000 was expended during the last six months, the average half-yearly expenditure under this heading for the last two years has been $5,743; is there any necessity to now set aside $10,000 ? To me there is no such necessity. With a heav ier expenditure than usual during the first half, the repairs for the current half-year should at any rate not be more than the average. It was only in 1898 that more than $14,000 was ex- pended in what was described as special repairs in painting the Hotel premises, so that no further outlay under this head should be re- quired for some time to come. I think 87,000 a sufficient amount to set aside against repairs and renewals of reserve fund. Seeing that $15,000 was transferred as per last report, if we now set aside $10,000 ample provision will be made under this heading. Now, gentlemen, $10,000 furniture, $3,000 repairs, $5,000 reserve less than recommended in the report give us an ad- ditional $18,000 or $1.50 per share more for dividend which might be distributed as dividend, making it $53 instead of 84 as recommended in the report. I therefore beg to suggest that the balance of $94,794.71 be appropriated as follows :--
[Here follow 35 signatures.] Now, gentlemen, we fully appreciate the im- portance of this communication, signed as it is by so large a proportion of the shareholders. But I note that it was written before the ap- pearance of the Report, and I cannot help thinking that, with a fuller understanding of the position of the ompany, many of those signatures would not have been appended, and possibly the letter might not have been written at all. I hope that all of you have the perman- ent good of the Company at heart, and that you would prefer to see it placed on a solid and en- during basis rather than adopt the vicious policy of squeezing the last cent out of it in dividends. I see you have not overlooked the fact that this is the interim and not the final dividend we are dealing with, but I would remind you that you cannot eat your cake and have it. If you take $5 now it is not likely that you will get the same for the final dividend. Let us first see how the year pans out before increasing the dividend. Our correspondents ask us to take into consideration the appreciation of land conjointly with that of building materials, and this I can assure them we have done. But as we are now not likely either to buy or sell land we cannot regard the appreciation as any argument in favour of larger dividends. Moreover, this appreciation may not be altogether permanent, especially when our existing buildings no longer command an unrestricted view of the harbour. As for the rise in price of building materials, we find in that a cogent reason for carefully piling up a reserve fund, so that when we come to build on our reclamation we may not feel the enhanced cost of erection quite so severely. The wisdom of maintaining a Reserve Fund ought to be apparent to all business men. This remark applies with equal force to the setting aside of a sum to provide for Repairs and Renewals, In the former case we should have a Reserve to meet possible serious opposition and to provide for dividends when perhaps profits have, by such a cause, been reduced. In the latter case it is imperative to make ample provision for the repairs and renewals necessary in an old build- ing, where both wood and plaster are perpetually requiring renewal. White ants have to be fought; dry rot is always going on silently in some part or other; and repairs to plaster are simply continuous. With regard to Furniture and Fixtures, we have, it is true, made an apparently liberal allowance in the present in-absorbing. stance, but if you come to take into account the large increase in the value of this asset you will find the appropriation is far from exces- aive. This will be self-evident when I tell that the Furniture and Fixtures now stand in our books at $150,273, as compared with $115,239 on the same date last year, $99,153 on the 30th June, 1898, and 881,863 on the 30th June, 1897, I may add that in the same half-year of 1899 we wrote off $15,000, and for the corresponding six months of 1898 we wrote off $10,000. As I have already remarked, the wear and tear has far more than doubled, and replacing prices are much higher. The disposal of the profits was not recommended, gentlemen, without most careful thought and discussion; and, under all the circumstances, your Directors feel that, as business men, to whom the permanent well.
To pay a dividend of $5.50 per share
$66,000.00 To write off from value of Furniture and Fittings,
10,000.00 To set aside for repairs and renewals, 7,000.00 10,000.00 To addition to reserve fund, you
To carry forward to new account. 1,794.71
894,794.71
Mr. CRUICKSHANK—I have much pleasure in endorsing the remarks Mr. Veitch has let fall. I notice that the directors say in their report that "the wear and tear, consequent on the increase in the company's business, renders it necessary to make ample provision for deprecis- tion in the furniture and fixtures, which, more- over, owing to the general rise in prices for manufactured goods, can only be replaced at a higher figure." It appears to me that we have spent during the last two years 899,000, or
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