B. 13a

It was finally agreed between the Minister of Finance and the Corporation that this basis should be followed, and stock to the value of £29,800,000 was accordingly issued to the Minister of Finance on behalf of the Crown, the balance of £8,883,794 13s. lOd. being carried to the Contingent Liability Account. This stock carried interest at 3§ per cent., and the maturity dates and the amounts of the inscriptions were as follows : — £ Ist August, 1960 .. .. .. 4,800,000 Ist August, 1963 .. .. .. 5,000,000 Ist August, 1966 . . . . . . 5,000,000 Ist August, 1969 . . . . . . 5,000,000 Ist August, 1972 . . . . . . 5,000,000 Ist August, 1975 . . . . . . 5,000,000 Further mortgages previously authorized by the State Advances Board completed and executed in the name of the State Advances Superintendent, after the Corporation had commenced to function, were later transferred, and additional stock to the value of £140,000 was issued to the Minister of Finance, making a total stock issue under this heading of £29,940,000. The discharged soldiers settlement and other mortgages held by the Lands Department have not as yet been transferred. The statute provided that the stock issued to the Minister of Finance should carry interest at the same rate as the first issue of stock and debentures to the public, and it was therefore necessary for the Board of Management to place on the market at an early stage of its career an issue of stock and debentures for the purpose primarily of fixing the lending-rate of the Corporation. An issue of £500,000 was accordingly made on the 26th August, 1935. The Board of Management, after careful consideration of the terms and conditions, finally decided to offer for public subscription this issue of £500,000 bearing interest at 3f per cent, and for a currency to Ist September, 1960, with an option to the Corporation to redeem the securities at any time after Ist September, 1955. The issue was fully subscribed. Following the first issue of stock and debentures to the public, the next step was for the directors to determine the lending-rate of the Corporation for new loans. The statute provided that the margin between borrowing and lending rates should not exceed 1 per cent., and the Board at a meeting in August, 1935, came to the conclusion that a margin of f per cent, should suffice. Accordingly the lending-rate was fixed at 4J per cent., which was, generally speaking, well below the Dominion average at the time, even after allowing for the contribution of 2 per cent, to the Reserve Fund. By adopting a lending-rate of 4-|- per cent, the Corporation fixed a new standard for mortgage finauce in this country, and that this has been appreciated by borrowers is evidenced by the very large numbers of applications which the Corporation has received since it commenced its active lending business early in September, 1935. An important factor also is that the lending-rate of other lending institutions has largely been influenced by the rate charged by the Corporation for new loans. Incidentally reference may be made to the fact that the rate charged by the State Advances Office in respect of newloans for two years prior to the Corporation coming into existence was 5| per cent., reducible to 5 per cent, for prompt payment. When the Corporation was in a position to deal with new loan applications an announcement to this effect was made in the press, and a modest advertising programme was put into operation. Special forms of application for both rural and urban and suburban loans were prepared and were made available to applicants through our Head Office and branches and all post-offices in New Zealand. Explanatory pamphlets dealing with the activities of the Corporation were also issued for the guidance of applicants, and were also distributed through similar channels. I think this service has been appreciated by borrowers. The following classified statement shows the number of applications and the amount applied for under the various headings from September, 1935, to the 31st March, 1936.

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