FINANCE AND BUSINESS 



299 



paid io £-i) are at the time of writin-^- 

 asking 22s. 3d., on which the return is 

 i^5 6s. per cent. This is probably about 

 a minimum yield, for the preference 

 holders have no interest in the assets 

 after payment of their dividends and 

 their capital. They have, however, a 

 comfortable margin of security, for the 

 excess of assets over preference ca|)ital 

 is ;£'5 28,000. This belongs to the ordi- 

 nary shares (500,000, £1 fully paid), 

 and is just over 21s. i:)er share Pur- 

 chasers at the current selling ijrice, 22s. 



gd. (yielding £6 3s. per cent.) are ac- 

 cordingly paying very little for good- 

 will and internal reserves. The essence 

 of the investment lies, however, not so 

 much in what the year 191 2 earned as in 

 what the profits will be when the busi- 

 ness expansion meditated in the pros- 

 pectus has become a fact. The company 

 has over ^^"400,000 in funds available 

 for that expansion, and should have no 

 great difficulty in putting it to a profit- 

 able use, which makes the ordinary 

 shares rather attractive buying. 



THE PERPETUAL TRUSTEE CO. LTD. (N.S.W.). 



With each successive year this trustee 

 company steadily increases its financial 

 strength. At the beginning of the )-ear 

 1900 its reserves did not amount to 

 more than ;^ 16,700, while its net pro- 

 fits for that year were only about ;£4500. 

 At December, 191 2, however, the re- 

 serves had risen to over ^^90,000, and 

 the net earnings exceeded ;^ 1 4,300. 

 Though this growth is decidedly satis- 

 factory from a security point of view, 

 there are shareholders who feel that 

 that viewpoint has received rather much 

 consideration. The}' argue that there is 

 not the necessity for reserves of over 

 ^90,000 while the paid-up capital is 

 only i,\c;o,ooo, and that portion of such 

 reserves might with safety be capital- 

 ised to ma <e the £\o shares paid up 

 to a larger sum than the present lOs. 

 They further contend that more might 

 be paid away in dividends. This con- 

 tention, quite a common one with share- 

 holders, is no doubt based on past re- 

 sults. In the period of thirteen years 

 compared above, the aggregate earnings 

 were over X 110,000, and of this the 

 shareholders received only ^^36,500 in 

 dividends, less than one-half of the 

 amount added to the reserves. 

 * ' * * 



Fortunately, however, the policy of 

 the Board is not governed by such 

 views. That policy is firmly founded 

 on the paramount principle of security, 

 a principle not in keeping with generous 

 dividend distributions. Neither is it 

 consonant with a solid capitalisation of 

 reserves, for payment of uncalled capi- 



tal by such a method necessarily reduces 

 the reserve power inherent in the un- 

 called liability on the shares. It may 

 seem hard for the shareholders to see 

 the reserves receiving the greater part of 

 the earnings, but after all security is 

 absolutely the first consideration in any 

 business, and especially is it in a trustee 

 company. Such a concern must be 

 strong be)'ond criticism, and its man- 

 ag-ement cannot afford to weaken its 

 reserves in any degree whatever. 



The net earnings of ^,14,344 last year 

 were about iJ"900 less than those of 

 191 1, but then the profit for that period 

 was a record. That there should have 

 been a decline at all seems rather 

 strange, for there was a very solid 

 growth of nearly ;^940,ooo in the trust 

 business to over /:9,790,ooo, which 

 would suggest an increased profit and 

 not a reduced one. The reason for this 

 and other movements in the earnings, 

 irrespective of the trust business growth, 

 might v>'ith advantage be explained by 

 the directors in their reports. 



The appropriation of the year's pro- 

 fits, after X'2637 had been added to the 

 reserved commission account, was much 

 the same as usual. The dividend was 

 the ordinary 10 per cent, per annum, 

 requiring ^,5000, while a like sum was 

 added to the reserve fund, ^'looo to the 

 dividend equalisation account, and the 

 balance to the profit and loss account. 



