THE CHAIRMAN'S ADDRESS.

Colonist, Volume LVI, Issue 13494, 13 June 1914, Page 2

THE CHAIRMAN'S ADDRESS.

A SATISFACTORY YEAR

Mr. H. Beauchamp, chairman of directors, presided. The chairman, in moving the adoption of the report of the. directors and balance sheet, said:

The report and balance sheet having been distributed some days ago, the result of the year's working is known to you. I think you will agree with me that the position they disclose inus't be regarded as very satisfactory. You will observe that the sum available for distribution is £291,608, and that the directors propose to pay the usual dividend, and to transfer £175,000 to the reserve fund, leaving a balance of £51,608 to bo-carried forward to next year. Following our usual practice, I will review briefly the principal items in the balance sheet.

Capital.—The capital of the bank, as at 31st March last, was as under:— Authorised: 4' per cent guaranteed stock, £1,000,000; "A" preference shares, £500,000; "B" preference shares, £1,000,000; ordinary shares, £3,000,000. Total; £5,500,000. ' Subscribed : 4 per cent, guaranteed stock, £1,000,000; "A" preference shares, £500,000; ordinary shares,' £1,000,000, paid up to £3 6s 8d per share, £500^000. Total, £2,000,000. The issue of new 'capital (viz. : 37,500 "B" preference shares at, £6 13s 4d each, and 75,000 ordinary shares at £6 13s 4d each), which was in contemplation' when we last met you, has since been successfully carried through. You will be interested to learn that nearly every shareholder has applied for the quota to which he was entitled, and that,- in the great majority of cases, the whole of the instalments have been paid up in full. The board will shortly consider what will be the most satisfactory method of dealing with the comparatively small number of shaves for which, application has not heen wade, and due notification ni \ts mtent\on wi\\ \>e gVven.

The Reserve Fund. — This fund, by the addition of tho £175,000 which I have stated the board proposes to transfer from profits, will then stand at £1,550,000. With the sum proposed to be carried forward, namely, £51,608, the reserve fund and undivided profits will amount to £1,601,608. As you are aware, the premium of 50 per cent, on the issue of capital recently made has to be credited to the reserve fund, and fron'i tin's source the fund will, after adjustment, benefit to the extent of £375,000.

Notes in circulation stand at £989,882, as compared with £994,680 a year ago.

Deposits (£18,070,613) show the substantial increase of £1^655,974 as compared with the figures of 1913, this movement being due principally to larger Government balances. Ordinary deposits, however, also show an increase.

Bills payable and other liabilities exhibit an increase of £36,375 on the figures as at 31st March, 1913, and now stand at £1,403,456. Coin and cash balances (£3,261,510), and bullion (£115,674) together " show an increase of £228,255 as compared with the figures of the previous year, while the item money at call and short notice, Government sectiritie-s and other securities in London, also exhibits a substantial increase (£995,710), and now stands at £5,076,748. The larger Government balances, already referred to, account for the greater part of this increase. I may mention that the 0 totals under this heading, together with, the amount of bills receivable and investments in the Colonies, are equal to 61.52 per cent, (or 12s 3d in the £) of the total liabilities of the bank to the public. ■ Bills receivable, in London and in transit, are more by £316,955 than at the corresponding date last year, and now stand at £3,164,081. The increase is due mainly to an expansion in the volume of the Dominion's exports. Investments in the colonies (£972,----170) exhibit an increase of £14,902 as compared with the figures at 31st March, 1913.

Advances. — As the result of the legislation of last session of Parliament, by which the bank was empowered to increase its capital by £3,000,000 (one-fourth of which has now been issued), the institution is in a position to take its full part in providing funds for the further development of tho country, and for the requirements of increasing trade and industry. You, will observe that bills discounted and other advances (which together total £11,360,185), already show an increase of £603,157 as compared with the figures of a year ago; and, as satisfactory business offers, a further gradual increase in the total under the heading of advances may be looked for. ,In view of the upward movement in our advances, I would repeat what has been said in previous years, namely, that the greatest care and attention is given to this important branch of the business by your directors and the executive of the bank. Landed Property and Premises.— The opening of several new branches, and the necessity of providing better accommodation at points where our premises had become inadequate for our requirements, have entailed^a considerable expenditure in building during the year. I am pleased, however, to report that the Sydney property, to which I referred last year, has been sold at a satisfactory figure. After appropriation of £40,000 from profits, now made, landed property and premises stand at £449,577, as compared Avith £467,827 twelve months ago. Profit and Loss. —After the payment of £40,000 interest on guaranteed stock and the making of all necessary appropriations, including provision for the bank's annual grant to the provident fund, as well as a bonus to the staff, and the allocation of £40,000 in reduction of bank premises and furniture accounts, the net profits for the year amount to £308,490, as compared with £302,530 at 31st March, 1913. Adding the amount brought forward from last year, £43,117, and deducting the amount of interim dividend at 6 per cent, paid in December (£60,000), the sum available for-' distribution is £291,608. The directors now propose to pay a further dividend of 6 per cent, and a bonus of 3 per cent, on ordinary shares, and .a further 4 per cent on preference shares. The amount distributed to shareholders for the year will therefore be £125,000. As I have already stated, it is proposed'to transfer £175,000 to the reserve fund,, and to carry forward the balance, £51,608. While on the subject of profit, and loss, I may mention that the amount appearing under the head of; "Rates and Taxes" continues to increase steadily. Nearly the whole of thi» outgo is in New Zealand, where bur total contribution to taxation, general and local, now exceeds £57,000 per annum, or nearly £1100. per week. In fact, the general tendency for expenses under all heads is to increase in a greater ratio

thiin tho profits of tho bank; but, in this respect, we are only in the samt* position as similar institutions.

' LONDON MONEY MARKET.

You will, no doubt, expect from mo a review of oxisting financial arid commercial conditions, and I therefore now turn attention fco them for a fow moments.

The London money market underwent a sudden transformation early in tho year. The best informed financial writers in London had failed to predict the impending change. In December last there was very little prospect of any ease in the money market, yet by the middle of January it had become clearly evident that money was in abundant supply. The New South Wales 4 per cent, loan for £3,000,000, issued during the first week in January at tho price of £96, was a failure, as the underwriters were saddled 90 per cent, of it, that is to say/the public subscriptions amounted to, only 10 per cont. A fortnight later. the Victorian loan of £1,000,000, also "at 4 per cent., with a minimum issue price of £97, was subscribed threefold, and formed the first of a succession of loan issues (including one of the New Zenland Government) which were eagerly subscribed by the investors. The London "Times," commenting on the success of the. Victorian loan,' which was the first colonial issue to be fully subscribed for' many months, remarked: "What , the recovery of Imperial Consols means to our colonial kinsmen may be gathered from the cheering success of the Victorian loan. It would seem as if the long pent-up forces of investment needed but a little more encouragement to break forth into a flood of buying."

, Imperial Consols, which during 1913 had dropped to £71, and which during the first week in January stood at £71 15s, a fortnight later had risen to £74 —an advance of £2 5s in two weeks. An immediate improvement in colonial government stocks also took place, and prices, on the whole, have .since been well maintained. The upward movement in. Consols continued, and on 4th February, the quotation was £77 12s 6d, the highest recorded for a long time. This turn of affairs was very acceptable, for gilt-edged securities had suffered very severely during 1913, and the English banks had-to use over two millions of their profits to meet tho declension in values.

The Bank of England discount rate, which had stood at 5 per cent, since the beginning of October, was red\iced on Btli January to 41 per cent. On 22-nd January it was again reduced to 4 per cent., ahd on 29tl\ January to 3 per cent., at which it now stands. '

NEW ZEALAND FLOTATIONS

The buoyancy of the money market induced many governments to issue losns in London. New Zealand, and every ■ State of the Commonwealth, have been on the market, and have placed their loans successfully. The New Zealand Government 4 per cent, loan of £4,500,000, issued in January— £1,000.000 for redemption purposes, the balance for public works —was a great success. The minimum price of issue was £100-!-, as compared with £98.V for the last preceding loan- of £3,500,000 issued in October, 1913, clearly indicating the improvement that had taken place in the interim in the condition of the market. Upon the opening of the lists, a strong demand was apparent, and within an hour and 'a-half applications totalling £25,800.000 were received. The lists were then closed. _ The scrip immediately went to & premium of 1 per cent. The time for emission of the loan was well chosen, and the results no doubt exceeded all expectation. In the course of my remarks at our last meeting, I pointed out that the New Zealand Government had • been able to obtain for its October loan the highest price of the year for colonial government loans. It has maintained that position in its recent issue.

Some authorities hold the opinion that the troubles 'that have of late been experienced by the bond-holders, of some foreign states (Mexico and Brazil) will operate in the direction, of enhancing the popularity of British and Oversea Dominion securities., as being, though less remunerative from the point of view of annual yield, decidedly more dependable as regards security of both principal and interest. The inference seems reasonable, and we may perhaps hope to see the stocks-and bonds, not only of the Dominion Governments, but also of the municipalities and other local bodies of the British dominions, presently increasing in public favour.

We took prompt advantage of the opportunity, afforded by the favourable market early in the year, to launch some municipal loans which wchad in hand for some time. The following were successfully placed ::—On 28th January, city of Auckland, £224,500, 4-J- per cent, at par; on 11th February, city of Christchurch, £100,000, 4£ per cent, at par; on ,20th February, city of Dunedin, £150,000, 4.J per cent, at par. The Auckland loan, being first in the market, was over-subscribed. Those of Christchurch and Dunedin, which were offered later, after the market had been flooded with other issues, were not so fortunate, and their underwriters were loaded with allotments in increasing ratio. The present disposition of the market towards colonial loans of this character has been clearly shown to be lukewarm, and we have accordingly desisted from attempts at further issues in the meantime.

Other opportunities will no doubt arise in future, and those public bodies who are contemplating an appeal to the London money market would do well-to perfect all the necessary antecedent formalities^ raid have their arrangements in such forward condition that issue of the loan can be made promptly when a favourable juncture occurs. While the treatment accorded to loans of this class is now much less favourable than that extended to them a few years ago, we in New Zealand have, I think, reason to congratulate ourselves upon the terms we are able to < obtain. When we compare our prices with those which others have to pay, our better position becomes at once evident. Each of the three loans above-mentioned was, it Avill be observed, issued at par, birt an examination of the terms of other issues made during the _ first few months of the year by municipalities in other parts' of the British Eminre, and elsewhere, shows that several towns and cities of importance, have issued 4r]- per cent, and 5 per cent, loans at prices below par— some as low as £91.

Tt is therefore clear that a municipality, which is able at the present time to issue its 4.1 per cent, bonds at a minimum of par, has eood reason to be very well satisfied with the achievement.-

Although loans, colonial and foreign, have been issued in London with considerable success during the past five or six months, and the value of money there is at present low, the terms on which flotations can be arranged remain comparatively high, and political disturbances may at any time send them still higher. Caution is no doubt being exerdlsed by British financiers, and that there is need for it is evidenced by the unsatisfactory state of affairs in Mexico, and the' financial troubles in France, China, and Brazil. According to telegraphic messages to the Press, France is under the .necessity of raising some £24^000,000 almost

immediately if she is to. be in a position to meet her obligations. China and Brazil are suffering from financial stringency, while Mexico, after a period of exhaustion from internal anarchy, is now at war with the United States. Some weeks ago the financial conditions in Mexico were extremely bad, and exchange had reached the worst point known for many years. British investors have very extensive interests in Mexico, and the "clean up" will involve -many millions sterling. The United States Government alone talks of providing war funds to. the extent of £30,000,000 sterling. There are other contingencies also that may jeopardise the money market, or at least .cause a disturbance. As one authority observes, "the immediate course of markets. must be determined mainly by the nature' of tho borrowing. Consolidation of floating loans is comparatively unimportant: fresh borrowing for new enterprises is of the greatest importance. Capital' taken off the market for the first time in loans and put into reproductive trade or unproductive armaments, must diminish the, supplies of money and tend to raise discount rates anil lower the prices of securities.''

DEMAND FOR CAPITAL,

The demand for capital supplies is pouring in from all quarters of the world, and appears to be quite insatiable. You will appreciate the immensity of the "rush" when'l tell you that the applications dealt with in the London . market during the first two months of the current year amounted to nearly 7-2-£ millions, being nearly double the amount dealt with during the corresponding periods of each of the three preceding years. Such an. enormous turnover must, if contimied, sooner or later exhaust the supplies and lead to an enhancement of money values.

The condition of trade is, of course, an important element in forecasting the future of the money market. For the 'past four years, trade- has been active and money has been dear, but the boom in trade seems to have ended, and slackness may now prevail for some time. Some of the relief of the monetary tension which' has been experienced has been a consequence of this. The. British Chancellor, however, stated a few weeks ago that he did not anticipate any serious set-back in trade, and, while the phenomenal activity of 1913 was not likely to be repeated, he expected the trade of 1914 to be ut> to the average.

It will not he safe, therefore, at prosent, to count upon a prolonged period of cl\ear> mo new

Locally, there is a, tendency towards ease, but it is not at present pronounced, . and no reduction of the ruling rates for accommodation is, in the meantime, likely. We nave also to Dear in mind that the gold production of the world exhibits a shrinking tendency. The labour troubles in the Transvaal and the war in Mexico will lead to a restricted output in those countries. The total production for 1913 shows a decline of £2,204.119, or 2.3 per cent. The Transvaal, which contributes more than one-third of the whole world's .supply, appears to have reached its maximum capacity as to output, and there is no other known field at the present time offering prospects of substantially improved yields. If the production of the precious metal continues to decrease, it must ultimately have an adverse effect on the prices" of commodities.

Some authorities hold that a reduction in the gold output of the world would not be an altogether unmixed evil. They consider that the rise in the price of commodities that has taken place during the last decade has bec-n brought about by the concurrent large growth of the world's gold production. I cannot, however, myself see that the whole responsibility.for hardened prices can be laid at the door of gold production. It probably has had some influence in the matter, but the principal reasons for the increase must, I think, be sought for in other directions. The main factor, it seems to me, has been that of supply and demand following uopn the higher standard of'living that has gradually come into voeue during the last twenty years—the .oen'od throughout which the appreciation of values has been most marked. Popii■lation is increasing, asid the producing section of the community is not increasing correspondingly, either in numbers, or volume of output. Tfye producers the clamouring for, and obtaining, higher pay and shorter hours of labour, which means that the poduct of their toil can be sold in the world's markets only at a prige proportionately in advance of that at which it could be sold when the cost of production was less. Thus, every advantage that labour secures in its straggle for improvement of its conditions is

won at the expense of the community as a whole. The consumer must, in the end, pay for the cost of-producing the articles consumed, and nence, in large measure, the increased cost of living, of -which in these days we hear so much. THE DOMINION'S EXPORTS. As I have already remarked, the boom in trade seems to have ended. There is evidence furinshed by. nearly every commercial centre in tho world that trade is less active than it was. Some incline to the view that a period? of depression is setting in. So far as this Dominion is concern ed, trade, is satisfactory. Our exports for the year ended 31st March last at-* tamed a record level. The past year shows an increase of £920,964, or 4.3 per cent., as Compared with 1912-13. which year exhibited an increase of over £3,500,000 as compared with 1911----12. The increases for the past year are derived mainly from dairy produce and frozen meat.

For the year, there is a shrinkage in tho value of the wool exported amounting to £481,882, and the quantity is also less, the total being 182,854,096 lbs., against 195,782,5431'b5. The wool 'market is in a very healthy condition, prices are high., and the demand is active. Australasia has not as yet felfe much benefit from the free ndmisison of raw wool into the United States, because the American manufacturers? have been obliged to adjust their af> fairs to suit the changed conditions. No doubt American competition will presently make itslf felt in this market.

For the year ended 31st March laso there was a very substantial expansion in the exports of frozen meat, especially, in mutton and lamb. lam inclined to think that the increase in mutton and lamb is exceptional, and that next year will show a fall. Statistics seem to support this expectation. Ife appears that there has been this year an excessive export of mutton and lamb. Accordingly, it is probable that the sheep returns will disclose ai shrinkage in the flocks. If this be correct,^ a drop may be expected in the volume of next year's exports. The flocks of the Dominion are practically stationary. Any increase is quickly sent to the freezer.

A great deal of perturbation has been occasioned by the persistent rumours that the American Beef Trust has secured s footing in this Dominion. It is well known that two powerful American firms, associated with the recently dissolved organisation known. as the National Packing Company? \vave been operating; vn, "New Zealand. These corporations command immense financial resources, and while they eonfiTio themselves to buying meat for export in the usual way, their advent m the. Dominion will not occasion us any,

(Continued, on page 3.)