61

H.—44a

in each company, is a rate of just over 5 per cent., out of which the industry has to make provision for return to the shareholders by way of interest and a large part of the insurance against the risks associated with the industry, as well as providing a considerable part of the depreciation and sinking-fund charges. It is clear that, judged by the current rates in finance during the period, this return does not constitute a fund sufficient for these purposes. Passing from dividends and companies' gains to the question of the actual net gain of shareholders we were confronted by difficulties too great to be overcome in the time at our disposal in attempting an exact estimate of these over the period. The subject, however, is so important that we offer a few remarks by way of definition of this particular return, and suggest the form in which the results of such an inquiry may be summarized. This latter is done by the heads of the blank Table 78 which follows.

Table 78.—To summarize Shareholders' Net Gains.

The average rate obtained means the percentage of gain that would have fallen to all the shareholders if they had subscribed to the shares at par (in the first case) or at the actual price received by the companies, and had either kept their shares ever since or had sold them for the price they bad given. Ft is the gain that would have been reaped if all the capital invested had remained the property of a single shareholder. As a matter of fact, however, shares change hands at varying prices above and below their original price, and to the individual holder the annual profit is the percentage yield to him at the price he gave. But it is impossible to determine the figure showing general percentage of yield over all the period unless the price at which every share was sold during the period is known, and this knowledge is not available. Nor does it seem necessary for the particular purpose to take account of the rise and the fall in the market value of the shares, for the reason that the price which is paid for shares to a previous holder of them does not form any part of the working capital of the business ; the only price that provides capital for the company is the original price paid. The rate quoted, therefore, may be accepted as the truest possible expression of the profits of investors in mining companies over the period. It represents, as Sir William Ashley says, writing of a similar figure for German engineering businesses, " the surplus share of the product which went to those who contributed capital, who undertook the limited risk involved in the investment and exercised the amount of control which falls to the ordinary shareholder- the share, that is to say, remaining after all the working-expenses had been met, including the remuneration both of directors and managers, and the interest on borrowed money. The surplus went to somebody ; and, if it did not go to shareholders who entered later and bought these shares at an advanced price from previous holders, it went to those who had sold out at the capitalized value of the expected dividends." In estimating the return to the capital invested in coal-mining as a whole, as distinct from the return to the owners of capital invested in particular mines, it is necessary to take account of the capital lost in the mines that have been closed down as failures. A large amount of capital was shown in evidence to have been lost in this way in New Zealand, but before the period under review. The fact of such losses, however, is relevant to this inquiry, in so far as it should affect the estimate of the amount necessary to insure against the risks of coal-mining in the Dominion. 2. PROFITS IN DISTRIBUTION, (i.) Transport. The first phase of the distributive process considered was transportation. Transportation is undertaken by the Government railways and by shipping companies. It is impossible to ascertain the profits made by the railways from the carriage of coal on all lines in New Zealand, since separate records of the cost of handling the different classes of traffic cannot be kept. On the lines connecting large collieries with the coal-ports the traffic in coal naturally returns a high profit. Representatives of the coal companies generally express themselves as satisfied with the facilities provided by the railways for the carriage of their coal and the working of the mines, but express no opinion as to the reasonableness or unreasonableness of the railage charges, which are paid in most cases by the dealers, who, of course, pass them on to consumers.

Total Caj Japital. ipital. Shareholders' lleceipts. Sharel ■ihareholdc Le: era' Losses IS. Shareholders' Profit. Profit. p. 7 'S3 Bates ol Company. Totals Nominal Paidup. (1.) Actual Paidin. (20 i oj i KB Total. I g * 8 flis (3.) (4.) (60 d*3 OS ft («.) S I . o go go (7.) o Pi o 43 —j * 0) (8.) 1 Total. Total. Excess of (5) over (9). (10.) CI <- P . ■ 1S33 (11.) I ?] lis O O Bat o (12.) I i