MORTGAGE BONDS

Grey River Argus, 14 May 1935, Page 5

MORTGAGE BONDS

THE CORPORATION Question of Interest on Shares (Per Press Association). WELLINGTON. May 1;;. “From statements which had read cd him." said the acting Mini ter of Finance, me Hon. Adam Harm ton, “it appeared that «ome peop’e wer still under a misapprehension e- torn financial position of the Mortgag Corporation. when it commence business." It should be realised, bow ever, to achieve its purpose of borrov ing money on the best possible term for lending on mortgage securities, th Corporation must be a financial sue cess, and pay a full dividend of feu and a-ha’f per cent, on the shares fror the outset. The transfer of mortgage from the State will place the Corpora tion in business on a large scale as soo; as it commences operations. It mu> be emphasised, however, that the term upon which the .£50.000,000 of niortg ages are to be transferred from th State are such as to impose no risk o loss on the Corporation. First of a 1 it is to give bonds for a safe portioi of the amount only, leaving the bal ance to rank as a contingent Habilitv on which the only return that will !•< paid to the State is the net profit after paying a full dividend on th< sharp capital. Furthermore, any capital losses n respect of any of the State mortgage: will be borne by the State, and noby the Corporation. To show how safe is the dividends on shares froir the outset, I mav mention that the in terest received by the State Advance.' Office and the Lands Department dur ing the financial year 1933-34 on th< mortgages that wi’l be transferred t< the Corporation amounted to £2.148. 000, equal to over 80 per cent, of th< amount due for that vear. The figu res for 1934 35 are not available a present, but it is known that they art as good, if not better, than the one; quoted. The financial arrangemen for handing over the mortgages ar* matters to be discussed with the Board after it is appointed, but if the bond* issued tn the State in exchange foi mortgages were equal to 80 per cent of the latter and amounted to sar £40.000.000. and bore interest as higl as three and a half per cent, per an num. the bond interest would amoun to £1.400.000 per annum. Deductin', this from the mortgage interest re ceipts mentioned above, leaves .£ . 18. 000 to cover administration cost, divi dend on shares and return to the Stat* on the contingent porti<»a of the Stat* mortgages administration. The cost r>t the State Advances Office and e the Discharged Soldiers’ Settlemen Account amount tn <157.060 per rm num, and the full dividend on eap*> t will be £45.000 per annum. _lt wil thus be seen how wide a margin then is to safeguard the dividend on th. shares, quite apart from new bust ness and the revenue earned by th. direct investment of the capital.