COMPANY MEETING

ALEXANDER.S DISCOUNT COMPANY

REVIEW OF MONEY MARKET CONDITIONS DIVIDEND OF 17 PER CENT MR. COLIN F. CAMPBELL'S ADDRESS

THE seventieth ordinary general meeting of shareholders of Alexanders Discount Company, Limited, was held on January 19th, at Southern House, Cannon Street Station, London, E.C., Mr. Colin Frederick Campbell, the Chairman of the Company, presiding.

The Secretary (Mr. P. C. Tong) 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 year under review bears a considerable degree of resemblance to that of 1936, inasmuch as the discount market has been contending with a similar set of adverse circumstances. It is no exaggeration to say that for several years past we, as a member of the London money market, have been unable to pull our weight in its affairs, not because we are unwilling to do so but because the conditions now prevailing do not permit of our doing so. We hear of sympathy for us and we hear of hopes expressed that we should exercise patience until times become more normal, but in the meantime, we are forced to a great extent into the position of a spectator.

You may ask why this is so, and the answer is that conditions in the money market are now determined to a considerable degree by the Government requirements. Their policy is to maintain cheap money ; I do not wish you to think for a moment that I am question- ing the wisdom of this policy, but the result for us is that our discount business consists in the main of obtaining money from the banks at per cent. and employing it in the purchase of Treasury Bills at a price which averaged in 1937 9-z6ths of I per cent. Even this small margin was only secured through the banks lending us money at this low rate and subsequently frisking their purchase of Treasury Bills through us. I need hardly tell you that a margin of about Is. 3d. per cent. does not cover our working expenses, let alone provide a dividend for our shareholders.

HOLDING OF SHORT-DATED SECURITIES.

We are therefore driven into holding large blocks of short-dated Government securities which return to us a satisfactory margin of profit always assuming that they do not fall in capital value. This investment of money derived from the banks, and other financial houses, has been a highly profitable business for a number of recent ; years and we have been able to provide from it no less a fund than £300,000, as I have told you on several occasions, constituting a reserve against a fall in capital value. There is no reason that this ' method of investment should not continue during the next few years with an annual profitable result but the risk of capital loss continues, consequently only those possessed of substantial reserves can under- take it with any degree of safety.

What I am saying to you is elementary to those who are familiar with the affairs of the London money market, but I have to keep in mind those shareholders who have no access to this information, and who may wish to have a clear understanding of the nature of the business in which their capital is invested.

THE DIVIDEND.

You are all aware of the small reduction of If per cent. in the interim dividend paid last July, which was recommended by the Board. The reason for this was that a material fall in the value of securities took place between December 31st, 1936, and June 30th, 1937, so that it was not improbable from the outlook at that time that it would be necessary to draw upon the reserve of £300,000. Happily a substantial recovery took place in the second half of the year, so that no such transfer was required, but as your Directors could not possibly foresee the future in June when considering the interim dividend, they decided to recommend a small reduction in the rate as a reminder to the shareholders of the nature of the business now being undertaken.

On this occasion the outlook seems sufficiently clear to justify a final dividend of so per cent., being the same as a year ago, making a return for the year of 574 per cent., which I have no doubt will cause satisfaction in the minds of the shareholders.

DISCOUNT MARKET OUTLOOK.

I have dwelt a good deal so far on the abnormal conditions which now prevail so that you will perhaps expect me to say something as to the outlook for the discount market in the future. Neither I nor anyone else can prophesy what is going to happen but I am one -of those who believe that if we exercise patience we shall work our way through our present difficulties and that ultimately inter- ; national trade will revive and with it the sterling bill- on London. t (Hear, hear.) There is already a slight improvement in the foreign trade of this country which should be encouraged and developed with all our power notwithstanding the fact that many of our important industries are actively employed in meeting the require- ments for rearmament and the demands of the home trade. There is no solid foundation for the assumptiob that our manufacturers are too busily engaged to be able to deal With the needs of overseas markets.

The prosperity which has prevailed in this country generally is indicated in a striking manner from the figures issued by the London Clearing House running into thousands of millions of pounds, which constitute a record. We must also keep in mind the negotia- tions which are about to take place with the object of securing an Anglo-American Trade Treaty The benefits of such a Treaty would have a far-reaching effect of a favourable nature, not only for the British Commonwealth of -Nations but for the whole world. We most earnestly hope, therefore, that some satisfactory solution of this difficult problem may be ultimately arrived at.

THE ACCOUNTS.

Turning now to the accounts which have been in your hands for several days, you will notice from the balance-sheet that our holding of British and Indian Government securities amounts to L53,950,000 as against £13,439,000 a year ago. The bulk of the securities continue to be short-dated with only a few years to run. The Bills Discounted amounting to £15,387,000 consist almost entirely of Treasury Bills, and there are no obligations outstanding relating to foreign governments or foreign municipalities. (Hear, hear.) The remaining figures in the balance-sheet call for no specia comment.

With regard to the Profit and Loss Account, the Current Expenses at £37,195 are slightly higher than in the previous year when they amounted to £34,762. Rebate has been increased froin L14o,249 to £152,748 and the Gross Profits amount to £350,319 as against £345,769 in 1936. It will be observed, however, that this year the gross profits are arrived at after provision for Income Tax, National Defence Contribution and transfer to Contingency Account, whereas on the last occasion provision for income tax had been charged to Contingency Account.

I have already referred to the interim dividend of 74 per cent., which was paid in July, and the final dividend now recommended to the holders of the ordinary shares is so per cent., thus making 17i per cent. for the year. The preference shareholders, of course, receive their usual dividend of 6 per cent. per annum.

It only remains for me to testify to the successful manner in which the affairs of the company have been conducted by Mr. Newcomb once again, and to thank the Sub-Manager and those working with him for the loyal and excellent work carried cos_ throughout the year. (Applause.)

The report and accounts were unanimously adopted.