FORESTRY FINANCE

Sun (Auckland), Volume I, Issue 259, 23 January 1928, Page 8

FORESTRY FINANCE

'THE operations of Smith, Wylie and Co., Ltd., and New Zealand * Perpetual Forests, Ltd., have been exhaustively, reviewed in six articles published in The Sun, and now that the reply of the directors is before our readers we think they will agree that our case for a public inquiry has been proved up to the hilt, and that for the protection of the investing public some legislative restrictions should be devised to place further issues of the so-called “bonds” under the control of the Minister of Finance. Briefly, The Sun’s criticism is: (1) That the persons controlling New Zealand Perpetual Forests, Ltd., have failed to disclose what they are making out of the “bondholders” who have provided the money; (2) That the cost of their operations is exeessive; and (3) That the uncertainty as to the ultimate value of pinus insignis forests removes the operations of the company from the category of an investment and reduces it to one of a doubtful speculation. The lengthy reply of the directors disposes of none of these contentions. Recently, documentary evidence came into our possession that the company was about to embark on a selling campaign to unload on the public “bonds” to the value of another £500,000. In our opinion, the money can be invested with more security and with much better results in the Post Offiee Savings Bank, and our object in reviewing the operations of the company at this juncture was to enlighten those of our readers and others who might contemplate entrusting their savings to the company as to the true position. They now know, thanks to the eurious admission of the directors, that in buying a bond they are not, as they thought, providing capital to the amount of £25, secured on a freehold property which is to be cropped with timber. The transfer of their savings to the company merely represents its “business turnover”! And if in the course of turning over the proceeds of the sale of bonds the company remunerates itself so handsomely that in twenty or thirty years’ time there is nothing of any value to realise, the unfortunate bondholders will find they have no recourse. Finally, we would put this faet to prospective purchasers of bonds. The sum of £25 invested at 5 per cent, will, if the interest is compounded, double itself in 14 years. In this way £25 will become £IOO in 28 years with reasonable certainty. That the owner of an acre of standing pinus insignis will be able to get £IOO for it in 28 years’ time is problematical. We do not think he eotild do it to-day, and it is a long shot to gamble on a market a generation ahead. . '