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our permanent revenue upwards of £17,000 a year, which in itself
would suffice for the payment of I would say a liberal dividend. It
probably has occurred to you, gentlemen, how very different our present
position would have been but for the very grave disadvantages under
which we have laboui^ for many years past ; that is, the- lock-up in
Bombay, and our inability to realise these funds, and that when these
are removed, even to a partial extent, our position will be most materially
and most substantially improved. It was doubtless satisfactory to you to
learn, gentlemen, that aU our financial requirements to the end of 1878
were provided for, that we had made the proceeds of the call available
for business in Csdcutta, and although probably you are assured that no
further call can or will be necessary, or is in contemplation, it will be
satisfactory to you to be told that such was the fact in the terms which
you find in the report. Referring, gentlemen, to paragraph 5 in the
report, it gives you the result of Sie working of our tea estates for the
present season, as far as we have been enabled to ascertain it, and which I
have no hesitation in saying is in the main satisfactory, sdthough even
there it is not quite equal to the expectations I formed before the com-

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36 Land Mortgage Bank of India,

menoement of the present seasou. You may perhaps like to have some
further information which I am able to give you. From our latest
adyices the present manufacturing season has given us 544,000 lbs.
of tea, equal to 68,011 maunds. We haye every reason to believe
before the close of the season in Assam and Cachar that our
manufacturing tea will considerably exceed this, and that we
shall, at all events, get from 7,000 maunds from our tea estates in various
parts of India. Of this tea 265,000 lbs. in round numbers has arrived,
69,000 is in iranaitUy a small portion has been sold at Calcutta, and there
is a balance still of 210,000 lbs. to be shipped, with such increase over
that manufacturing at the date of our last advice from India as may be
available for shipment. I think we have already sold 218,000 lbs. of tea
for prices which give us a better average by a considerable amount than
the average realised by the sale of our last year's teas, and we have every
reason to believe from the samples that we have of that tea, and from the
report upon that tea which is now in U-ansUu^ and some other portions that
have not yet been shipped, that the crop yet to come forward will realise
an average in the London market quite equal to tiiat which the tea already
sold has given us. The profit from the working of the tea estates from
the season of 1871, as the report tells you, was i^3,498, and I think I may
state, and with some considerable degree of confidence, that the gross of
the present year's profits from that portion of our undertaking will exceed,
and by a substantial amount, the net proceeds of the last year's crop.
The report that we last had from our manager and general superintcmdent,
upon whose judgment we placed very great reliance, upon our Darjeeling
properties was most satisfactory. They were graduiUly, I may say rapidly,
increasing in value, his statement to us being that according to the b^
judgment that he could form, Darjeeling estates alone could be sold at
present for upwards of 6,000 lacs of rupees, upwards of £60,000. They
form a large portion of the entire blocks of land planted in tea which we
hold in various parts of India, but inasmuch as three or four ^ears ago
these estates were almost imsaleable at any price, the marked improve-
ment which this state of things exhibits cannot be otherwise and certainly
ought to be a subject for congratulation and satisfaction to you. He has
informed us of the policy which he intends to pursue as to the future
management of those estates, the instructions he has given for improving,
the filling up of vacancies and other matters which will give material
additional value to those properties, and we are quite satisfied his con-
clusions have been in the main sound, and that their results cannot be
otherwise than most beneficial to your interests in giving increased value
to those properties ; and I say idso, gentlemen, that I look to these pro-
perties by and by, and to the increased value which I think they will attain
over the amount at which they stand to debit of block in our books ; I
look to that increase as a very substantial means of reducing our losses
in respect to other estates, more especiaJly in Bombay. He left Calcutta
some two months since, to visit our estates in Assam and Cachar, and we
have not yet received his report, but we have had some information
from him in connection wiih some of our properties there which
is also of a decidedly satisfactory character, and warrants me, I think,
in stating that, in that part of India, also, your properties are improving
in value — most decidedly improving in value. This is the more
satisfactory, gentlemen, as you will probably remember, in 1869,
when I returned from India, it was a very great hardship, a subject
of very great Tegret, that we had been oblig^ to take over these proper-
ties, failing the possibility of finding a sufiOident market for them. The



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Land Mortgage Bank of India. 37

result has proved hitherto that that which we looked upon as matter for
regret we must now look upon as decidedly matter for oongratnlation.^
inasmuch as the result of these properties, I have no doubt whatever, will
help to meet our losses. Keferring to paragraph 10, gentlemen, it gives
the result of the call you initiated, and which was subsequently made,
and which has been upon the whole satisfactory. You will find that our
report tells you that 4,622 shares have been forfeited for the non-payment
of calls. Perhaps it is unnecessary that I should draw attention to a fact
which doubtless has been patent to you, that the forfeiture of these shares
is a very considerable advantage to the bank, inasmuch as it reduces by
£18,488 the bank's liabilities to its shareholders in respect of paid
capitaL The last paragraph, gentlemen, is perhaps one of the most
important, and that is oxa estimate of the probable results of the
present year's working, and, looking at that, you will be pleased to
bear in mind that that includes the previous earnings from our teas,
and that there is a considerable quantity yet to come forward for sale.
Upon the groimds that I have already mentioned to you, we have
every reason to believe that every pound of tea that has yet to be sold
will realise prices that will give on the whole an average equal in
amount to that of the tea already sold, and that that result will be,
as we tell you here, a credit balance of profit and loss, between £9,000
and £10,000. It is not much — not so much as you all possibly look
for and expected, and had a right to expect, but still, if we bear in
mind our position three years ago, I think it may be fairly looked upon
and be pointed out to you as a satisfactory footing at the present time.

A Shareholder — ^Is it a possible 2 per cent, dividend ?

The Chairman— I will come to that presently, sir. There is only one
other point, gentlemen, on which I need trouble you with any remarks,
and that is how the amount which we hope to find at the credit of our
profit and loss accounts, when they are closed for the present year, shall
be disposed of. We have given the subject a great deal of consideration,
and we have arrived at the conclusion that, subject to certain arrange-
ments which we propose to make for adding to the reserve fund— and look-
ing at our constitution, and at the character of our business, of the long
period for which our debentures have to run, until which time no actual lia-
bilities occur, beyond the annual drawings and the payment of our deben-
ture interest, we have satisfied our minds that we should be justified in
paying you a small dividend, a very small one it will be, if you ultimately
determine it should be paid at all, out of the profits of the present year.
This is hardly the proper time for discussing this matter, and I hesitated in
making any remarks upon it, or in drawing your attention to it, but I did
so on precisely the same grounds on which 1 referred to a similar subject at
the last meeting, and that was to give the fullest poaaible information rela-
tive to our position, and to prevent shareholders from parting with their
shares at what I then considered, and am stiU disposed to consider, less than
their fair market value. Whatever may be the amoimt of profit and loss,
there will be two ways of dealing with it. One would be by passing the
whole amount on to the credit of reserve fund. (Cheers, and cries oi
^ No, no.") The otiier would be by passing to credit of reserve fund
a sum of between £2,000 or £3,000, paying a dividend of 1 per
cent., and carrying forward the trifling balance that would remain to
next year's account. We have to cr^t of reserve fund already, in
round numbers, £20,000 ; and a calculation which we have made war-
tants me in telling you, that sum accumulated at compound interest, at
5} per cent., together with a further annual payment of £2,357 per



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38 Land Mortgage Bank of India.

animm, aocumiilated in like maimer, will, at the expiratioiL of twenty-
three years, amount to a sufficient scim to cover the estimated loeaes in
Bombay, of £172,000. This fond wonld, therefore, with these periodical
additions to it, suffice to meet these losses, apart from another source to
which I have just now called your attention, and that is not only the
possible, but what I may term the probably, increased value of some of our
estates, the tea estates, over the amount which they now represent in our
books, towards meeting those losses, and there would, ^erefore, be a
double security to provide for them. I have had the advantage of con-
ferring with various shareholders upon this point, as to whether the present
year's profits should be passed whoUy to credit of reserve, or whether they
should be dealt with in the manner I have last mentioned to you, and I
think that the general feeling seems to be that the more satisfactory mode
to the general £>dy of shareholders would be to pay this small dividend
of 1 per cent — (cheers) — and the conclusion seems to have been arrived
at, not from the miserable amount that the payment of this dividend would
involve, but upon the ground that the payment of any dividend at all
would be looked upon as a substantial evidence of improving, and mig^bt
be looked upon as an earnest of better things to come ; and I hope at a
very early date in the following year it would have a very substantial effect,
not only upon our shares, but upon our position and status generally.
However, gentlemen, that is a point which need not be decided upon now.
The proper time for disposing of it will be when the aecounts of the
present year are placed before you, which will probably be in March or
April next. They cannot be made up, of course, until shortly after the
end of the year ; time will be occupied in their transmission to England,
and the necessary arrangements consequent on closing the books here
and placing the then position of our affairs before you, but for the reason
I have just mentioned I have thought it right to mention the subject to
you now, and give you an opportunity of coming at the proper time and
expressing your opinion as to the proper mode of dealing with this oooi-
templated fund. Perhaps it is not desirable to make remarks that are
founded upon " ifs," but if we could realise a small portion of our Bombay
assets, and if we were successful in investing only a moiety of the
amount we now have available for that purpose, our position in 1873, 1
think, will undoubtedly be such as to enable us to offer you a much
better dividend than 1 per cent. 1 may say, gentlemen, we had
thought it right after full consideration to raise the price of our deben-
tures. I think I may say that they are a favourite investment with the
public ; there is great difficulty in purchasing them in the open market,
and we have thought it right, looking to the result which a further issue
at 87 would involve, to increase the price to 90. We do not think it will
interfere in any measure with our getting our debenture capital when we
require it, and just at present I shall be as well pleased if there is no
further issue of debentures, at all events until we have been successful in
placing the whole of our available funds. Our debenture liability has
been moderately decreased. You may perhaps remember, or some of you
may perhaps, that at our meeting in 1868 we pledged ourselves not to
increase the amount of our current debentures beyond that which was
then current. The total of our debentures current on the 31st Becember,
1867, was £672,460 ; the amount now current is £560,100, so that we
have in the interim decreased our liability by a sum of £123,800. It
has been remarked before on more occasions than one, the decrease of
debenture is not a cause of unmitigated satisfaction, inasmuch as the
payment of debentures reduces to an equal extent our earning capacity.



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Land Mortgage Bank of India. 39

but poMibly it nmy oeonr to yon that so laige a portion of our working
means is still available for inyestmenty and that is not altogether a
subject for dissatisfaction. I think, gentlemen, those are the only re-
marks with which I need trouble you upon the present occasion, and I
haye to moye, " That the report be reoeiyed and adopted."

Mr. B. B. Harrison — I beg to second the adoption of the report. The
chairman, gentlemen, has not noticed the result of the change m manage-
ment, probably from thinking it was not advisable to do so, or from
some other reasons with which I am not acquainted, but I may venture
to state that these changes have been very satisfactory. Our manager
in Calcutta, as you are aware, is employed principally in looking to our
tea estates ; he has devoted himself sJmost entirely to that branch of our
investment. Our sub-manager in Calcutta has cdso, on the other hand,
devoted himself to looking after the investment of landed securities in
Bengal, and from his experience I think we may confidently look for the
very best result. I may mention in one instance a loan wnich has been
very unproductive, and which has hitherto been looked upon as
bad, we have reason to expect we may derive a considerable profit
horn. That is now looked upon as good, when it was looked upon
by ail of us as lost. I may also mention that owing to some mis-
undemtaoiding on the part of the late manager, which had not
been thoroughly explained to the present manager till recently, we
had failed to invest a large amount, which we might have invested in
securities of an unexceptionable character. Some of you may be acquainted
with ^he land tenure. I refer to investments in land which have been
aj^lied for in oaosiderable amount there upon the shares of proper-
tuQS recorded separately in registers of the di£ferent collectors, though
not themselves sharoholders of an undivided estate. The late super-
intendent neglected to invest funds in these estates, and the consequence
is that we have several applications at the present moment which I have
no doubt will in a short time be made available and will absorb a con-
siderable amount of the present available capital for investment, and
upon seonrity which is undoubted. I also look upon our investment in
the tea property in a more sanguine light than the chairman. I think
tea property in India is improved everywhere, and our tea property ex-
tending over so small a space in relation to the extent of land in bearing,
we may reasonably expect these properties will increase in value to a
greater extent than we anticipate. The proceeds of our tea will enable
us to pay, I fully expect, with the increased returns which we expect
from other investments, a much larger dividend than the one you are
led to expect^ of 1 per cent., which is, I must say, a very small one.

B&. Addison — I should like to say one or two words, although you have
anticipated many of my remarks in your address. I would say, however,
on my own behalf, and on behalf of others, that the oaxlier we meet the
better. With the telegraph you have at your disposal, I hope we shall be
able to meet in March next ; that I am sure would be very agreeable to the
sharehoLdraB. A question I was going to ask is, whether you can give
any rough idea as to the net sums received, and consequently whether
you did not propose to put £18,000 derived from forfeited shares to the
reserve fund 9

The Chairman — ^We can adopt one of two courses : either cancel the
shares, which would be a beneficial course for the bank — the shares have
been forfeited, and the cancelling of these would reduce our liability to
our shareholders in respect of capital by the sum I have mentioned —
£18,000 ; we could not pass them to the credit of reserve fimd, although,



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40 Land Mortgage Bank of India*

if -we sold the Bharea in the open market, we might plaoe the proceeds to
the credit of reserve fund ; it does seem to me that a wiser and a better
conrse is that given under the provisions of our articles of association,
section 22, where we have this power (reading article). Supposing vre
sold the shares in the open market for their present market value, the
results to the bank would be most unsatisfactory, whereas, by cancellins^
them absolutely, we realise a profit of between £18,000 and £19,000.
Cheers.)

Mr. Addison — Pardon me, Mr. Chairman, I am not disputing anything
you say. I have had a good deal of experience in the direction of com-
panies, and I think you will find, that when you debit the capital with
£17,000, it is frequently done, the amount which is a positive profit ought
to be placed to reserve fund. If you diminish your share capital you ought
to do that. You will find, and I will tell you privately, in various in-
stances the London banks have done so, that any profit in diminishing
the capital is generally added to the reserve fund.

A Shareholder — That is a profit on the sale of shares.

Another Shareholder — I question the legality of cancelling shares in the
present positio4 of afijairs, notwithstanding the paragraph you have read.
Large creditors would have reasonable grounds for objecting to cancelling
your liabilities. (No, no.) Permit me ; you are still on the question of the
possible dividend. And now, with regard to the £10,000 : What would that
be ? A half a million of money, supposing you divided it. Tou have
suggested a very ingenious thing. If you are a dividend- paying company,
so that something is available for division, and you write off £18,000
from the nominal value of the shares, then I think you can legally do so.
I have no doubt you will reserve those shares, and you will not force the
sale of them at this moment, and I have no doubt, at some future period,
you will have an offer for them which you will be able to accept. I have
not the slightest doubt that that period is likely to arrive ; but don't
deceive yourselves with the opinion that, because these shares represent
£4 a share, you can reduce your liability to that amount. It would be
very unsafe for people to lend you money, if you coidd cancel your own
liabilities.

Mr. Addison — If the chairman would answer my question, as I am in
possession of the chair, I would reply to this gentleman.

The Chairman — Your question, sir, as to the profit from the working
of our best estates for 1872 over 1871 is answered by my telling you that
such excess of profit is nearly £2,000. We hope, and not only hope, but
have reason to expect, an annual increase of a very considerable amount.
The other point I believe you are agreed with me in. I believe you are
agreed with the board as to the x)olicy of cancelling these shares, and I
will take care your suggestion as to the mode in which the book entry
shall be made in deeding with the amount they represent shall be fully
considered.

Mr. Addison — Then, sir, would you allow me to make a few remarks ?
First, I would deal with this qiiestion of shares. If we cancel 4,600
shares we shall cause a panic ; and I would ask any gentleman in this
room with common sense whether he, having taken debentures, would
allow you to cancel your liabilities from £500,000 to £472,000. We
are in most peculiar circumstances. I would refer you to all the
other banks in London. The Standard Bank of British South Africa
had made some bad advances in their earlier days, and afterwards they
did what I think you might do ; they got the sanction of the shareholders
to purchase ^ares in the open market, which they did to the extent of



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Land Mortgage Bank of India. 41

£100,000, and those shares cost them only £12,000 or £13,000, and the
fact of the shares being cancelled from off their capital caused the shares
to double in value.

A Shareholder — Were they fully paid up shares ?

Mr. Addison— They were fully paid up shares, sir. I mean to say this,
Mr. Chairman, that having most of our debentures placed for thirty years
I think it is a matter of great consequence to the bank to put the reserve
fund in such a position as would place the shares at par. Raise the
reserve fund at the next meeting, and then it is probable the directors,
looking at these facts, might be able to see they were justified in giving a
dividend. I say the thing has been done before, and I shall be very happy
to give the chairman and the directors the information which I possess
which I do not wish to give at a public meeting. What I allude to has
been done frequently, and it has always been of the greatest benefit. I
might refer to the National Steam Navigation Company after the disasters
of 1860L The consequence was that their shares rose from 60 to 100. Now
I wish to make a few remarks on the report. One cannot criticise the
report much without figures. I must say with all friendly feeling, hav-
ing the highest opinion of the chairman and his colleagues, that the report
is most disappointing ; on the last occasion our profits were £6,000. I was
very anxious to know how much more you estimated would come from
the tea estates. I wish to point out to the meeting on the last occasion
we had £132,000 in hand, and the chairman regretted they were not able
to use the money as fast as they got it in. You have received £96,000,
making £217,000, and the result of that brings you in about £1,300. I
confess I cannot understand it. I think it is a pity the call was made
if you could not employ the money better. I say supposing you cannot
employ your money in India, how is it you have only been able to earn
£1,300. I cannot understand it. I donH propose to go into the Bombay
assets ; they are dead things which I will leave to the board, although I
think it would be satisfactory to the shareholders to know from time to
time what reduction, if any, has been made in those bad assets. If I had
any handling in the drawing out of the balance-sheet the public out of
doors and the debenture holders would know the x)osition of the company.
It would be well if we had the amount of securities producing any interest,
the amount of securities producing a small interest, and the amount of
securities producing the full interest ; and if we saw the dead securities
were only diminished to the extent of £60,000, we should see that our
shares were steadily becoming worth par, but we do not know and we
never did hear the exact amount of reduction made in these dead debts.
That is simply a suggestion of mine, and I must say that it is not dis-
closing secrets. And another thing, we are not like a bank holding
current accounts, who, if they issue a balance-sheet like this most people
would come and take their money out. We have debentures which have
thirty years to run, and I do not see why they and the shareholders should
not know the worst in times that are bad, and the best in times that are
good. The thing that has struck me for some time is the management of
your floating capital here. We have had a great deal of floating capital
here — £200,000. If you have not employed it in India how is it lately,
with the Bank of England rate of 7 per cent., we have not made better
use of our money than to have obtained only a net profit of £1,300 ? I
cannot make it out, whether it is with their losses or expenses of manage-



Online LibraryJohn Tilden PrinceThe Bankers' magazine → online text (page 6 of 150)