NO RISK OF LOSS

Ashburton Guardian, Volume 55, Issue 180, 14 May 1935, Page 7

NO RISK OF LOSS

THE MORTGAGE CORPORATION. MINISTER EXPLAINS POSITION. (Per Press Association). WELLINGTON, May 12. From statements which had reached him, said the acting-Minister of Finance, the Hon. Adam Hamilton, it appeared that some people were still under a misapprehension as to the financial position of the Mortgage Corporation when it commences business. "It should be realised, however," he said, "that to achieve its purpose of borrowing money on the best possible terms for lending on mortgage securities the Corporation must be a financial success and pay a full dividend on four and a half per cent on shares from the outset. The transfer of mortgages from the State will place the Corporation in business on a large scale as soon as it commences operations.

■ "It must be emphasised, however, that the terms upon which the £0'0,000,000 of mortgages are to be transferred from the State are "511011 as to impose no risk of loss on the Corporation. First of all, it is to give only, leaving the balance to rank as a bonds for a safe portion of the amount contingent liability on which the only return that will be paid to the State is the net profits after paying a' full dividend on the share capital.. Furthermore any' acpital losses in respect of any of the iState mortgages will be borne by the State and not by the Corporation. ."To show how safe is the dividend on shares from the outset, I may mention that the interest received by the State Advances Office and the Lands Department during the financial year 1933-34 on the mortgages that will be transferred to the Corporation amounted to £2,148,000 equal to oyer 80 per cent of the amount due for that year. The figures for 1934-35 are not available at present, but it is known that they are" as good as, if not better than the one quoted:. "The financial arrangements for handing over the mortgages are matters to be discussed with the board after jt is appointed, but if the bonds issued to the State in exchange for mortgages were equal to 80 per cent oi the latter and amounted to say £40,000,000 and bore interest as high as three and a half per cent per annum the bond interest would amount to £1,400,000 per annum. Deducting this from the mortgage interest receipts mentioned above leaves £748,000 to cover administration cost, dividend on shares and return to the State on the contingent portion of the State mortgages. Administration costs of the State Advances Office and of the Discharged Soldiers' Settlement Account amount to £157,000 per annum, and the full dividend on capital will be £45,000 per annum. ' "It will thus be seen how wide a margin there is to safeguard the dividend on shares, quite apart from new business and the revenue earned by the direct investment of the capital.

INQUIRY FOR SHARES. DUNEDIN, May 13. On the Stock Exchange to-day Mortgage Corporation shares were sought at Is "premium, but sellers asked 4s premium. The inquiry, as was the case when applications for the Reserve Bank snares were made, will be nnofhml. The list of applications for the MortCorporation does not close until May 24 but the Minister has reserved the right to close it at an earlier date The payment on application is 2s 6d per share, and the final payment of 10s per share is not due till June 1,193 b. It is stated on the prospectus that "except with the special consent of the Minister of Finance, no transfer of shares allotted to any person will he iecognised pending incorporation.