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


missed. aL'l as 10 the latter the com
mittee questions Try propriety Of
ever having used the Kauai Electric
stock as collateral. The agents are
upheld in their redemption OF the
loan.
Charge XI This relates TO the
calling in Of the $2000,00O 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.
eraI upheld. a number Of suggestions
being made. The committee COM
ments: In the opinion OF your COM
mittee. the $4,000 per annum Cumu-
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
100000 per annum cumulative sink
ing fund feature, is distinct advan-
tage to the owners OF the capital
stock of the company, either common
or preferred, as compared with the
provisions OF the original issue.
"The refund issue in no way de-
tracted 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 thereof.
"If it were practicable today to re-
store the rate Of interest on the pres
ent bond issue to 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 been
suggested by Mr.. Kinney, your com
mittee would strongly dis3uade the
stockholders against such a course
as being detrimental to their own IN
terests and the interests Of the plan
tation.
Under but one contingency does 1t
appear that it might have been better
to have allowed the old six per cent
issue to have remained undisturbed,
and that affects the preferred stock
holder only. If the prospects lmmedl-
ately succeeding the reissue lgi1cated
that the plantation would make pro-
fit of about $4,000 a year, exclusive
of interest, for the next two or three
wears succeeding, and If the eXtrem-
ity of the preferred stockholder was
so great that a dividend upon his pre-
ferred stock for 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 it have been an advantage 10
him to have allowed the old issue TO
have remained undisturbed.
1T is needless to add that IN con-
sidering or adopting a policy to Dc
pursued by any corporation, consider
alton must be given to policy that
will result in 1.-The most good 10 the
largest number of stockholders ra-
Their than q policy which, while pos
sibIy benefiting minority interests
temporarily, would, in the end, lie
tract from the value Of the whoie
property"
Some Slight Criticism.
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 ais
tinct advantage to the common STOCK
holder" On this point the commit
tee says:
There is every evidence that not
only Mr.. 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 tuno
on bonds, that such profit would be
available for dividends upon preferred
stock and also upon the common STOCK.
Your committee has already expressed
the opinion that such dividend was
for the following rea-
sons:
Capital Account.
Under the provisions Of your
amended articles of association, the
Dreferred stock, when issued to llqul-
date some of the floating Indebtedness
of the plantation, became part OF
the capital of the plantation and had
to be treated as such; and, while
provision provides for the payment OF
a 7 per cent dividend cut of the net
profits or surplus, there has been, in
the opinion of your committee, no net
profits or surplus since this issue OF
stock. The annual report OF l9l
shows under assets" debit to profit
and loss account of $413,7436S, and an
installation account, which account
can only be regarded as profit and
loss account, of s369,64O.9S, or ap-
three-quarters of mil
lion dollars standing to the debit OF
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