The Perpetual Trustees Company

Southland Times, Issue 21732, 18 June 1932, Page 10

The Perpetual Trustees Company

Forty-eighth Annual Meeting

The Chairmans Address A

Satisfactory Expansion of Business Disclosed

The forty-eighth annual meeting of the Perpetual Trustees, Estate, and Agency Company of New Zealand Ltd., was held in the board room of the company, Dunedin, on Friday, June 10. Mr W. E. Reynolds, chairman of directors, presided, and he was supported by the following:—Messrs Edgar C. Hazlett, C. Stanley Smith, George Black, Robert J. Gilmour (Southland), Edward G. Kerr (South Canterbury), and Charles H. Hewlett (Christchurch), directors of the company, and the general manager (Mr A. Ibbotson). The meeting was well attended, and apologies were received from Messrs James Begg and Robert K. Ireland (North Otago), Directors, and James Brown and T. Somerville.

The Chairman said: The forty-eighth annual report and balance-sheet of our company having been printed and circulated amongst shareholders, I have no doubt you will agree to take them as read. Touching upon financial matters generally, one may say “much water has passed under the bridge” since I had the pleasure of meeting you a year ago, and, while some attempt has been made to adjust the flow, the waters unfortunately are still turbulent. How many are ever seeking the cause must be made apparent to anyone who reads our newspapers regularly. What appears to me to confuse so many of us is the attempt we so frequently make to deal with internal and external finance at one and the same time. The subject appears to many so complicated and so many hypothetical questions may be raised in discussing it that one must be careful not to be diverted from the object one has set out to explain. For instance, “If” there had been no war! Or, again, “If” we were a country without any debt and without trade with other countries we might perhaps be able to establish some better system of finance more suitable to our needs, though I may be forgiven for saying that personally I doubt it. However, the fact remains we are very much a debtor country, and at the same time dependent upon trade with other countries for our existence. It must also be remembered that in trading with other countries we do not, in the strict sense, pay in gold, but in products, which are stated in terms of gold value for convenience, and, further, we must realise that all we do actually provide in gold is the difference between what we realize for our products and what we pay for our imports whenever the , latter exceed the former—plus the interest we are called upon to provide on borrowed money. This is clearly where the shoe pinches and in this connection it is, I think, important to note there never was a war yet which did not cause prices for natural products to advance promptly with prices for manufactured articles following more slowly. Exactly the reverse applies at the termination of a war. Products fall first in price, and manufactures follow downwards slowly. We have, however, already received some compensation by reason of this process, and in my opinion we will find such compensation becoming more substantial as time advances. Many people, it would appear, fail to see why we should be called on to pay our adverse external trading balances in gold. The answer is simple. Gold has a worldwide value, while “paper” money of whatsoever kind is “created” money, and therefore has very definite limits. It costs nothing, and therefore is worth nothing except in so far as it is supported by the credit of the country issuing it. Being a debtor country, we have insufficient credit to make our paper money worth anything like face value in other countries. Britain, being a substantial creditor nation, has a world-wide credit, and it is this credit which has stood her in such good stead of late. Nevertheless, the British Government are far from satisfied with the position as it is to-day, as will be seen from the following taken from the Otago Daily Times of February 27, under the heading ‘The Official British Note,’ which deals with the “release of gold hoards”:

“The British Government are in entire agreement with the experts’ view that ‘a movement of capital from countries having credit balances to markets showing a deficit is an essential preliminary condition of European reconstruction’. The drastic reduction in the volume of foreign lending is, in common with other symptoms of the crisis, due to profound disturbance of the economic life of the world caused by the unprecedented fall in the price level, which has made it difficult or impossible for debtors to honour their obligations. This fundamental cause of the crisis can, in the opinion of the British Government, ‘be remedied only by appropriate action on the part of those countries which have accumulated abnormal supplies of gold.’ ” This, I think, is evidence of the fact—of which I personally am convinced—that the Great War is primarily responsible for the world-wide financial difficulties which we find present with us to-day. One point which I desire to stress more than any other is that the question before us is not really one of the world’s finance having broken down, as most people seem to interpret it, but rather of mankind, by reason of the war, having ruthlessly upset the equilibrium of the world’s finance. Almost every country in Europe bought freely from America upon credit, thereby contracting debts which ultimately had to be paid for in gold. Hence the reason why America has vajt hoards of gold locked up in her vaults. Again, it must not be lost sight of that America’s belated entry into the war caused a further substantial rise in the value of all her natural products. Instead of adjusting the position at the close of the war, as she should have done, by facing and meeting the fall in values, she weakly and unwisely increased the duties on imports. In the face of such action on her part it is not to be wondered at that unemployment within her borders is quite as much in evidence as it is elsewhere. Not only has she acquired unto herself the great bulk of the world’s gold, but over and above this she has made it impossible—or almost so—for European countries to trade with her. I mention this because so many people apparently cannot understand how unemployment can be prevalent in America in the face of the vast quantities of gold she is possessed of. It should be noted that it is in reality not gold which makes a country rich, but rather its volume of trade both inwards and outwards. This, however, does not alter the fact that some substance of valtie must be recognized as a standard or measure by which bal-

ances of international trade can be safely adjusted, and gold has filled this need in the past admirably. Whether gold alone will meet the needs of the future is a question, but one thing is certain: no kind of paper money will ever do so. The Otago Daily Times of February 29 last reported Sir R. Horne as having said, when speaking at a gathering at Bradford, England:— “I am glad to see that a recent statement of the Chancellor of the Exchequer, Mr Neville Chamberlain, showed that the world required some metallic basis as the foundation of international exchange. This implies the contemplated possibility of a return to a standard composed of gold and silver, which I believe the safest method for reversing the present disastrous deflation and alleviating future difficulties.” Few, I think, will have failed to notice that many men of note in Britain are now expressing the opinion that the contract with America for repayment of war debts should not have been so hurridly concluded, while c rs have openly expressed their opinion that Britain must go back to a gold standard eventually, and the sooner the better.

My foregoing remarks may not appear to be in any way suggestive of any solution of the many difficulties which at present face us in this muchloved dominion of ours, but I trust they will help us to a better understanding of these complicated subjects. In the first place, I trust they may assist each of us individually to realise how fatal is the policy which calls upon eqch s - ccessive Government to provide for extravagant needs irrespective of how much it requires to borrow outside our dominion tc enable it to . .’ovide for these needs—or perhaps luxuries would be a better word to use. Such has been our policy since the war, and any such policy can end only in a day of reckoning similar to that which we are now experiencing and which is much to be deplored. I hope, further, what has been said may lead many to perceive how valuable gold is to our Empire at the present time, and consequently to this dominion also. By gathering gold today we are serving a double purpose— that which will most speedily assist in lifting us out of our present difficulties, and which will at the same time materially assist our Empire. With farm products down in value round .about 50 per cent, on the average, and geld enhanced in value about 40 per cent., it should be apparent to everyone how advisable it is to make the most of this opportunity.. I hold the opinion, which I am not afraid to voice, that legitimate concentrated efforts in the direction of increasing our production of gold will do more to assist us severally, unitedly, and as a country than anythii else we can do. As giving some indication of what can be done and what is actually being carried out in the matter of bona fide efforts to win gold, it is interesting and informative .o note that the export figure- for the month of December, 1931, when compared with those for December, 1930, show an increase in quantity amounting to 11,1310 z. and an increase in value of £46,259. During the first four months of 1932—viz., from January 1 to April 30, last, the gold sold to our banks was £45,200 grea'.r in value than that for the corresponding period in the year 1931. These facts should, I think, convey to us all some idea of the value of the gold industry to New Zealand. The foregoing facts may not be held to affect our company directly, but they certainl. do seriously affect us indirectly, and this I must give as my excuse—if indeed such be required—for referring to this subject. LEGISLATION. The legislation passed during the ordinary session of 1931 and the emergency session of 1932 dealt almost exclusively with measures having for their objects the relief of unemployment, the assistance of our primary industries and the re-establishment of the financial equilibrium of the cormtry. It was not to be expected in so severe a national crisis that any consideration could be given to measures bringing the law of executors and trustees into line with the more advanced ideas and requirements of modern life and business. These desirable measures must wait the advent of happier and more settled conditions, It is sufficient to state that the enactments passed during the last sessions of Parliament have imposed a severe strain on the directors and staffs of trust and agency companies, and have entailed much additional work and service.

The principal Acts affecting our business were The Unemployment Amendment Acts of 1931 and 1932. The Mortgagors and Tenants’ Relief Act, 1932, The National Expenditure Adjustment Act, 1932, and the Finance Act, 1932. The provisions of these measures which so intimately affect each one of us are now so well known to the community at large that it would be superfluous to dwell upon each of them in detail.

While no one can pretend’to view with equanimity legislation which alters contractual rights and remedies so drastically, and while severe criticism can easily be levelled against certain aspects ' oi such' legislation, the justification for its enactment must be said to be the extraordinary condition into which the affairs of this dominion and the world generally have developed. MORTGAGEES’ RIGHTS AND REMEDIES. ■ The legislation I have just referred to has, amongst other things, reduced interest rates and very materially affected and curtailed the rights and remedies of mortgagees! It is well to remember that capital represents in the main the accumulated savings of the people. These savings become avail-

able through various institutions and through companies such as ours, for the purpose of providing loan moneys for both primary and secondary producers. Legislative interference of a general and all-embracing nature implies that the hopelessly insolvent will remain so despite the fact that they cannot possibly meet their obligations under present conditions or even under improved conditions. Capital is sensitive to arbitrary attack as is shown by the fact that last year only fourteen million pounds was lent on mortgages in New Zealand as against thirty-four million pounds the previous year. There is always present the danger that legislative interference with existing contracts will further adversly affect the flow of money into mortgage investments. It may also have an unsettling effect in the minds of British investors, and may result in a refusal to renew existing State loans or the imposing of heavier terms. There are those who consider that legislation of the nature of that recently enacted concerning mortgage securities should not have been promoted, and that mortgagees and mortgagors should have been left to themselves to make any adjustments deemed necessary after the fullest inquiry had been made into each individual case. I think there is no doubt that in the majority of cases, and especially those of farmer mortgagors, some relief was, and still is, necessary, but the disadvantage of legislation which compulsorily affects almost all mortgage securities alike is that on the one hand relief is given to many who are not really in need of such, whilst on the other there are many to whom the relief afforded is insufficient to cope with their necessity. Because of this compulsion by law, mortgagees may hesitate to grant relief to an extent greater than the law compels, and may assume that the concessions brought about by law are sufficient to meet the needs of the mortgagor. The present period of low prices, whilst affecting all classes, is especially severe on farmer mortgagors, whose incomes have been very drastically reduced. The experience of the officers of our company, gained by daily contact with mortgagee clients, is that the great majority of the latter are fair-minded persons who are prepared to grant time, and in very many instances to make, where necessary, reasonable concessions of a temporary nature to help their mortgagors. In the case of farm mortgages, it is our experience that so long as the mortgagee receives a fair and just proportion of the revenue from the farm, based on the amount of his mortgage, and provided the farm is being reasonably well maintained and the farmer is not hopelessly involved financially, we as agent for the lender are not instructed to take drastic action. But it would become an entirely different matter if the whole of the farm revenue were to go solely to any one of the parties interested and rates and taxes were left to accumulate and to become a charge on the mortgagee’s security. LANDLORDS AND TENANTS. The provisions made under the National Expenditure Adjustment Act, 1932, for the reductions in rents are in line with those I have already referred to as affecting mortgage and other interest rates. In common with the rest of the world, New Zealand is passing through a period of trade depression with the usual concomitants of falling prices, hand-to mouth buying, lessened turnover, loss of business confidence, and, in some instances, writing down of business capital. Because of these adverse conditions it naturally follows that business firms must of necessity thoroughly overhaul all overhead charges and trading expenses. It is not to be supposed that landlords as a class are unaware of and indifferent to these adverse trading conditions. I think I am quite safe in stating that quite apart from the provisions of the above-mentioned Act, and without awaiting its being made law, many owners of properties under lease to tenants appreciated the necessity that existed to assist their tenants by reductions in rents and voluntarily did so. In some instances the reductions made exceed those provided for in the Act, whilst in others the reductions made are less than the Act stipulates for. All are, however, based strictly upon the needs of the tenant and the extent to which his particular business has suffered. I feel that rent adjustments which vary according to the needs of the tenant and his particular class of business are likely to be of much greater help to him than a fixed statutory reduction which does not and cannot take any account of his particular difficulties. The loss of trade and the consequent reduction in profits is much more severe in some lines of business than in others, and, in consequence, I think it should have been left to landlords and tenants to make adjustments according to the circumstances and needs of the parties concerned. Few, if any, landlords would during these unsettled times risk the loss of a tried and trusted tenant with a well-established business connection by refusing a commensurate reduction in rent where it could be shown beyond doubt that such was necessary. ADMINISTRATION OF ASSETS. Because of the present abnormal conditions and the consequent almost lifeless state of the property and share markets, the realization of deceased estate assets and the winding-up of deceased estates have had, in many cases, to be delayed. The difficulties associated with the administration of assets, including those arising out of the recent taxation and other legislative enactments, can be. expected to bring increased business into the care of trustee companies. It is now more difficult than ever for private trustees to undertake and efficiently carry through work of such an important and technical nature, and with the services and safegards of an expert trustee, such as the Perpetual Trustees Company, always available, the risks attendant on the appointment of inexperienced private trustees may be avoided. Neither is there the same need for one’s friends to accept and shoulder the onerous duties of a trustee. The statutory reductions in interests and rents will have their effect in depreciating the value of estate assets and in reducing the income therefrom, and in consequence we must ourselves expect a somewhat lessened return from these sources. The cost to us of administering estates has not decreased with their decline in value, but has risen by reason of extra work involved owing to altered conditions. Moreover, trust assets now require more care and attention, and many of them require to be nursed until times improve. BUSINESS CONTROLLED. A year ago I had pleasure in informing you that the value of the business controlled by the Perpetual Trustees Company amounted to over six and a-quarter million pounds, and that this amount would have been considerably larger but for the all-round decrease in the market value of almost all kinds of assets. The downward trend in market values then in evidence continued to a more or less extent throughout the year now under review, and because of this and the continual fluctuation in the market prices of most assets it is impossible to state ’with any degree of accuracy the actual pre-sent-day value of the business handled by our company. As against this, however, we have the satisfaction of knowing that the increase for the year in the volume of our business is not only in keeping with the growth of past years, but in many respects shows even greater progress. Having now been established almost fifty years, our business connections are not by any means confined solely to New Zealand, but extend into most other countries. We have many valued overseas clients

whose business has been entrusted to our care and management throughout many years. BRANCHES. The progress made at our branch offices during the year has, I am pleased to be able to say, been satisfactory. A considerable amount of new business has been entrusted to our care and given the same close and constant attention to the interests of our clients which has always been a feature of the work of the members of our staff, and which, I am sure we may safely rely upon in the future, this new business will be managed with results satisfactory to o-ur clients and our company alike. I desire to express our thanks in this connection to our Branch Directors, Messrs C. H. Hewlett and C. J. Ronaldson (of Christchurch), Mr E. G. Kerr (of Timaru), Mr R. K. Ireland (of Oamaru), and Mr R. J. Gilmour (of Invercargill), as well as to the members of branch staffs. THE BALANCE-SHEET. It will be seen from the balancesheet that the paid-up capital stands as formerly at £22,500, but consequent upon last year’s appropriation of £1,500 to the reserve fund, that fund now stands at £22,500, and is therefore now equal to the paid-up capital of the company. It is now proposed to set aside out of the year’s profits the sum of £2,500, which sum will be transferred to investments fluctuation account. The cash in bank, at £3,894 15s 2d, shows an improvement over last year, when there was a small overdraft of £505 6s sd. The investments in debentures and mortgages also show a slight increase when compared with last year, the increase being £650 approximately. Since last year the balances due by the company have decreased by £314 and the balances due to the company have decreased by £4,388.

Coming to the profit and loss account, it is very gratifying indeed in these difficult times to find that the net profit of the company at £6,515 12s lid is only £491 18s 2d less than that of last year. This result has been achieved partly by economies which were made during the year, but the economies were offset to some extent by unavoidable increased charges in some directions. The existing depression is considerably decreasing the earning power of the company, mainly through the decreased value of assets controlled by the company, and also the reduced income produced by those assets. Our scale of charges remains to-day exactly the same throughout as it stood when readjusted and reduced in the year 1905, and it is entirely due to the increased volume of business done during the year that such a satisfactory result has been shown. The available balance, as shown in the annual report of the Directors, is £8,305 11s 9d, which it is proposed to deal with as shown in that report. I now move the adoption of the report and balance-sheet. Mr C. Russell Smith said he had pleasure in seconding the motion for the adoption of the report and balancesheet. Their chairman had given them a comprehensive and interesting review, both of the affairs of the company and world conditions generally. “You will notice from the profit and loss account of the company,” said Mr Smith, “that the profit is slightly less than last year. Now, that is a matter that can give us no concern whatever in a company like this. In connection with the balance-sheet, there is one item which does not appear there, probably due to the modesty of the directors and management of the company—that is the matter of good-will. That goodwill, if it were carefully assessed, would probably be found to exceed the paid-up capital of the company. That goodwill has been built up since 1884, when this company was established, by laborious, conscientious, and efficient work. The company has always been blessed with a careful, conscientious, and competent staff; and the staff in a business of this sort can either, make it or mar it. At the present time the company has a staff that is able and courteous, obliging and efficient, and it is quite a pleasure for those of us who have business with the company to come and deal with members of the staff. (“Hear, hear.”) The motion was carried unanimously, without further discussion. RETIRING DIRECTORS.

The re-election of the retiring directors (Messrs Edgar C. Hazlett, George Black, and C. Stanley Smith) was moved by Mr J. Sutherland Ross, and unanimously agreed to. AUDITORS RE-ELECTED.

The following auditors were re-elect-ed:— Messrs William Brown and Co. and George Blyth and Co. (Dunedin), Leggett and Allport (Timaru), F. A. Webb (Invercargill),, and W.- E. Best and Wilkinson (Christchurch). THANKS TO STAFF AND DIRECTORS. “I wish to move a sincere vote of thanks to the management and staff for the careful and capable manner in which the company’s business has been carried on during the past trying year,” said Mr J. R. Lemon. 'Tn addition to the difficulties created by the continued financial crisis, the company has been faced with the complexities of the novel and experimental legislation dealing with mortgages and with rates. This has enormously increased the work and responsibility of

both management and staff, and they are to be congratulated on the very efficient manner in which their onerous duties have been carried out.” This was supported by other speakers and unanimously carried. Chairman and General Manager replied. (Published by Arrangement)