Nang'wam Ltd has a financial year end of 31 January. The company has the following share capital structure: Authorised share capital: 500 000 ordinany' shares 200 000 10% preference shares Issued share capital: 350 000 ordinary shares valued at R550 000, 150 000 of these shares remained unchanged for the full year while the remainder was allotted and issued on 1 January 2018 at a consideration of R400 000 by an underwriter at a 1.50/0 commission which was paid on the same date. However, 210 000 applications were received for these shares. 120 000 10% preference shares, 60 000 of these shares remained unchanged for the full year and were issued for R 120 000 while the remainder were allotted and issued on 31 July 2017 at a consideration of 000. On 31 January 2018, the board of Nang'wam Ltd decided to issue capitalisation shares to ordinary shareholders in the ratio of 1 share for every 4 ordinary share held at R2,20 per share. The capitalisation issue to ordinany' shareholders was funded from retained earnings. The preference shareholders were paid a cash dividend According to the company's solvency and liquidity test, it had sufficient cash and retained earnings to pay the dividends to ordinary and preference shareholders.