Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1914-01-20

mfTtee questions tine proprlety OF
ever having used the Kauai Electric
stock as collateral The agents are
upheld in their redemption OF the
| loan.
Charge N. This relates 10 the
calling in OF the 100000 bond is
sue in existence in 1909 and the is
suance of $4,000. 900 of new bonds.
Suggestions Made.
This Is discussed at great length
and the policy Of the agents in gen.
eral upheld, a number of suggestions
being made. The committee COM
ments: In the opinion of your COM
mittee. the $50, 900 per annum curhu-
lative sinking fund provision of the
new BOIL issue is the real cause OF
complaint by Mr.. Kinney against your
| agents"
Continuing, the committee says in
! part:
| The present bond issue. with its
$50, 000. 90 per annum cumulative sink
ing fund feature, is a distinct adVan-
| tage TO the owners of the capita!
stock Of the company, either common
Or preferred, as compared with the
provisions of the original issue.
"The refund issue in no way de-
! traeted from the value of the COM
mon or preferred stock. except pos
| sibly in so far as the speculative
value of the latter class OF stock Is
| concerned, but, on the contrary, II
anything, added to the value thereon.
eff it were practicable today to re-
| store the rate Of interest on the pres
ent bond issue 10 six per cent per an
mum. and at the same time get RID OF
the $4,000 per annum cumulative
! sinking fund feature. substituting
therefor the provision Of the old bond
issue for a sinking fund OF 10 per
cent of the yearly profits, as has oeen
suggested by Mr.. Kinney, your COM
mittee, would strongly dissuade the
stockholders against such course
| as being detrimental to their own In
terests and the interests of the PLAN
| tation. : -
'IJnder but one contingency does 1t
annear that it might have been better
to have allowed the old six per cent
issue TO have remained und1sturbed,
| and that affects the preferred STOCK
| holder only. If the prospects lmmeol-
| a.eiy succeeding the reissue iphcatea
| that the plantationtrwould make pro-
| fit at about $4,000 q year, exclusive
of interest, for the next two or three
years succeeding, and II the extrem
! ity of the preferred stockholder was
| so great that dividend upon ms pre-
| ferred stock for a couple OF years
was more important to him than was
| establishing its permanent future by
| decreasing the, obligations OF the
| plantation, then and in that case only
| would Il have been an advantage 10
! him to have aliowe,i the old issue to
lave remained undisturbed.
| at il needless to add that in con-
sidering or adopting policy to Dc
pursued by any corporation, consider.
arion must be given to a policy that
will result in the most good to the
largest number Of stockholders ra-
tber than a policy which, while pos
sibiy benefiting minority interests
! temporarily, would, In the end' We:
| tract from the value of the whole
property" e.
Some Slight Criticism. So
The committee also, in discussing
the preferred stock, says that Insofar
as kinney and his friends and Alex
| ander & Baldwin are concerned, 1t IS
unfortunate that the stock was ever
| issued although its issue was a dis
t;uct advantage 10 the common STOCK
| holder" On this point the commit
{ tee says: - -
There is every evidence that not
only MIR. Kinney and his friends, but
! Messrs. Alexander & Baldwin, Ltd.'
figured that if in any one yeaer there
was a net profit over operating eA,
penses and interest and sinking 1und
on bonds, that such profit would De
available for dividends upon preferred
stock and also upon the common STOCK.
Your committee has already expressed
the opinion that such dividend was
| unwarranted. for the following rea-
sons:
Capital Account.
Under the provisions OF your
amended articles of association, the
preferred stock, when issued TO hqul-
date some of the floating Indebtedness
of the plantation, became a part OF
the capital of the plantation and mad
to be treated as such; and, Whlle
provision provides tor the payment or
per cent dividend out of the net
profits or surplus, there has been, lii
the opinion of your committee, no net
profits or surplus since this issue OF
stock. The annual report of 1911
shows under assets debit to profit
and loss account of $413,743.6S, and an
installation account, which account
can only be regarded as a profit and
loss account, Of $369,64O9S, or ap-
proximately three-quarters OF a mil
lion dollars standing to the debit or
profit and loss, which represents capt.
tai which has been actually lost or dis
sipated in the operation of the COM
pany. Therefore, it would appear that
no dividend could be justified until
profits had been made sufficiently
large to offset this profit and loss &C
count. and thus restore the original