BROKEN HILL SHARES

Evening Post, Volume CXXIX, Issue 89, 15 April 1940, Page 10

BROKEN HILL SHARES

RECENT BONUS ISSUE

CHAIRMAN'S DEFINITION

"Evening Post," April 15. The ruling of the New Zealand Commissioner of Taxes' that the value of the bonus shares issued by the Broken Hill Proprietary -Company to shareholders resident in New Zealand are liable for income tax and Social Security tax has been received »by shareholders in the Dominion with considerable concern in view of the opinion of the chairman of the company, Mr. Harold Darling, that the issue was "not a bonus issue in the ordinary sense of the term." The company capitalised the sum of £4,459,790, which sum had been subscribed in premiums, by the shareholders and the issue was in the proportion of approximately 64 shares to every 100 shares held. The chairman of the Broken Hill Company, in his annual address at the meeting of shareholders held in Melbourne on August 25, in referring to this .issue, explained that the sum of £4,459,790 above referred to stood to the credit of share premiums, which premiums were the result of shafe issues made from time to' time. "These funds," he continued, "representing as -they do additional cash put into this large undertaking over and above the amount-represented by the issue* capital of the company, have played a very important part in. the development of the steel industry; they have enabled a bold, forward policy of development to be undertaken with courage; without these there is no .doubt that a very much slower rate of progress would have taken place. "The whole of the £4,459,790 has been spent in production plant, coal, mines, steamers, and equipment, and < fully plays its part in the results being achieved today., "Your directors in considering - the capital required for the extension of the company's business have had many discussions on the question of the price at which new shares should be issued. They have considered the advisability of par issues or a smaller issue at a premium. They have felt that the//best interests of all concerned would be served, in the long run by the latter alternative, and, as you know, when new capital has been required, shares have been ■ issued at a premium. "There appears, however, to be a general misapprehension by the public about the percentage of profits on capital being made by the^ company. This is exaggerated by the fact that most of the company's shares have been issued at a substantial premium, and thus the shareholders have subscribed much more in cash to the funds of the company than is shown in subscribed capital. "The total amount of these premiums now amounts, as I have said, to £4,459,790, and, as this amount has been actually subscribed by the shareholders in cash, your directors have decided to issue shares for approximately a like amount. This will work out at about sixty-four shares for each, one hundred shares now held. Your directors are considering . two steps necessary to give effect to this decision. "Since no part of this issue would come out of past profits, it would not be a bonus issue in the ordinary sense of the term. . ... "You will recognise that it will not enable the company to earn any larger amount of profits, and that no greater amount will thereby be rendered available for dividend purposes."'