AFFORESTATION BONDS

Sun (Auckland), Volume I, Issue 226, 13 December 1927, Page 12

AFFORESTATION BONDS

COMPARED. WITH INSURANCE MILLIONS INVESTED The need for greater enlightenment as to the financial standing of business methods of afforestation companies was made by Mr. G. C. Creagh, chairman of the Auckland Stock Exchange, in his annual address to members this morning. “A good deal of criticism has recently been levelled at the business methods of forestry companies,” said Mr. Creagh. “In many cases this criticism has undoubtedly been fully justified, particularly with regard to the statements made to induce the public to invest in the bonds. For instance, the assertion that forestry bonds are better than endowment life insurance and will give holders a very much higher return is, not to use much stronger language which one might well do, unmitigated nonsense, but when made by a clever and plausible share-canvasser, is calculated to mislead those who, not being forewarned, fall very easy victims.” Mr. Creagh quoted from a London financial journal supporting his views. “While on the subject of afforestation companies I would draw attention to the disinclination on the part of the directors of certain of these concerns to afford shareholders the fullest information regarding revenue and expenditure,” said Mr. Creagh. One organisation, he continued, had, according to its balance sheet, bondholders to the extent of £2,170,000. Many people had subscribed in the belief that £25 at the end of the period given would yield a return of at least £SOO. The investment assumed the form of an insurance combined with speculation as to gifts the future might provide. With insurance the law insisted upon the issue of a great deal of statistical information and certain valuations. This was available to policyholders. and they obtained details regarding income and expenditure. The fact that one New Zealand organisation had enlisted the support of bondholders for a capital sum of £2,170,000, much of which had still to be paid, directed attention to the necessity that existed that these companies should have to issue, at least annually, details of revenue and expenditure. “A bare balance sheet is not sufficient,” concluded Mr. Creagh. “The fact that the thrift of the people is being drawn upon ahead to such a large extent justifies provision of the kind.”