COMPANY MEETING

ALEXANDERS DISCOUNT COMPANY

MR. COLIN CAMPBELL'S ADDRESS THE 71st ordinary general meeting of shareholders of Alexanders Discount Company, Limited, was held on January 18th at Southern House, Cannon Street Station, London, E.C.

Mr. Colin Frederick Campbell (the chairman of the company) presided.

The acting secretary (Mr. E. P. B. Baggallay) having read the notice convening the meeting and the auditors' report.

The chairman said : Ladies and gentlemen, I assume you will take the report as read as usual. (Agreed.) The Board of Directors has been increased by one member during the year, Mr. Mark Dineley, whose appointment you will be asked to confirm later on in this meeting. Mr. Dineley has had consider- able business experience in several directions and he is also connected with the Alexander family, who have always been the largest share- holders in the Company.

POLITICAL UNCERTAINTY

The year 1938 will be looked back upon as one of great political difficulty and uncertainty ; in fact in September we were brought to the brink of war, which happily was averted at the last possible moment. In the existing circumstances it is hardly necessary for me to say, indeed it is obvious, that a discount company such as ours has passed through periods during the year when the outlook was very disconcerting.

Our main business has continued to be on the same lines as in recent years, by which I mean that we have held large blocks of short-dated Government securities, financed with money lent by bankers and others. Our most important holding consists of 44 per cent. Conversion Loan, the running profit on which has been con- siderable. This stock can be repaid in July, 1940 ; consequently with a probable maturity only 18 months hence it is now regarded in the discount market generally as a bill rather than an investment.

You will appreciate that the earning power of the business on a holding in securities of about £9 millions, which is the amount shown in the balance-sheet now in your hands, is satisfactory, in view of the low rates now prevailing.

THE LONDON DISCOUNT MARKET

We sometimes hear it said that the discount market is no longer a necessary part of the London money market and that no great harm would result if it came to an end. I venture to think that such a view is a wholly mistaken one and that it still constitutes an impor- tant link in the general financial structure of the City of London. (Hear, hear.) It is the "cushion," if I may use that expression, between the great banks and the Bank of England and so long as it fulfils this function it is entitled by usage and tradition to borrow money on bills and certain short-dated securities on specially favour- able rates. It has a further use, inasmuch as it is the quickest and most convenient channel through which changes in money rates are effected. This became apparent during the week of crisis in Septem- ber, when the future of rates was most uncertain.

So far as our business is concerned there is, however, another factor besides that of the rate of interest at which we can borrow which has to be taken into account, and that is the fluctuation in the prices of the securities which we hold. This we cannot control, and the; movements take place very rapidly according to the political situation or the volume of money available at any one moment. It was in view of these fluctuations that we created a special reserve a few years ago, and, as the contingency for which we provided this reserve has now arisen, we have transferred this reserve to the credit of the profit and loss account.

BILL BUSINESS

Turning next to our bill business, this I am glad to say has been a little more profitable than in 1937, due in large measure to a rise in rates during the latter part of last year. We continue to turn over a very large volume of money on bills and we do our utmost to keep in touch with the many merchant houses and companies with whom we have had business dealings over a long period of time. Com- mercial bills are still scarce, though recently we have seen indications of an increase in the volume on offer and we can only hope that this improvement will develop during the coming year and become a steadily increasing quantity.

The Anglo-American Trade Agreement to which I referred a year ago is now an accomplished fact and we are fully justified in the belief that this most important agreement will result in a substantial increase in trade between America and this country and indeed the British Empire.

THE AccouNTs

Referring to the statement of accounts in your hands, you will notice in the profit and loss account that the expenses at £39,473 are rather higher, due to several special causes as well as an increase in income tax; dividends absorb the same amount as in the previous year, while the amount carried forward is increased by £2,500 and now stands at £131,000. On the credit side of the account the rebate is also increased by £10,400 and now amounts to the impor- tant total of £163,131. The figures in the balance-sheet show some interesting features. Securities at £9,755,502 are much lower than they were a year ago when the figure was £14,014,462, while on the other hand bills dis- counted and short-dated bonds are nearly £9,000,000 higher, the figure being £24,066,578 against £15,387,020. These changes in the relative position of investments and bills are due in great measure to our having transferred the holding of 4. per Cent. Conversion Loan from the former to the latter.

VALUE OF INVESTMENTS

Before leaving the subject of the investments there is one import- ant point I would like to add, which is that the result of the transfer of the £300,000 from investment reserve account is that the value of the investments in the balance-sheet is below the market price ruling on December 31st last, and I need hardly remind you that as the value in our books declines, so the return on these securities increases.

One again I can repeat what I have said on several previous occasions that there are no commitments due by foreign Govern- ments or foreign municipalities.

The money market was subject to wider fluctuations last year than in 1937, which brought about a rather higher average price for dis- counts. The rate at which the Treasury issued its bills was 12s. 2,1c1. per cent., against xis. 2d. per cent. in 1937. We were able to con- tinue to borrow from the Bank at A per cent., but even so the margin is wholly inadequate.

PRESENT POSITION

It is difficult to say what the position may be during this year, but it has to be borne in mind that the bulk of the foreign and fugitive money, which had been in London for some considerable time, has now been withdrawn.

The volume of the trade of the country, as measured by the figures issued by the London Clearing House, has not been main- tained at the high level of 1937, and the export trade has not increased as we could have wished. It may be said that this country's pro- portion of the foreign trade transacted was fairly satisfactory, but it will never reach the dimensions we so much desire until the endless restrictions on trade of one sort and another are removed and the nations of the world are permitted to trade with one another with greater freedom. This is the aim and driving force behind the policy of the Government of this country, and we can only watch the steps being taken with both hope and confidence.

In conclusion, I would like to pay a tribute to Mr. Newcomb and the sub-manager, together with all those connected with the man- agement of the business for the loyal and excellent service they have rendered during the year.

The report and accounts were unanimously adopted and the formal business was duly transacted.