Cornell University Library HG2051.G3G7 Report to theBoardo,agncu.ture3.d, Cornell mew IPorft Stati a^dvio..^:.^ xnntve t8tt^ agriculture ^-t-*s SlOI Xibrari? OF THE 2 College Of i i yw^ \c^\ ■^k: Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924014050581 rii Tg T HE B O A m 15 Q I AG R I G U B T tJ R E A N D fiIheries OP A K^ a :n- Q U 1 K T Il^TO GO-OlEfilTIGI II G " ^'^ 'K^-iii IvriTH BY J. EG A HILL. Ptmntd to t»otb vl^i^ of Pailiam^nt by C^inintiKt of His tnajcst^ LONDON: PUBLISHED BY HIS MAJESTY'S STATIONERY OFFICE. To be purchased, either directly or through any Bookseller, from ' JW^YMAN AND'^^ONS, Limited, Fetter Lane, E.G., and 32, Abingdon Street, S.W., ,,/''•" '' and -^V St. Mary Street, CARDIFF; or ;il.Mr. STATIONERY OFFI(|e! (Scottish Branch), 23, Forth Street, Edinburgh; or ■ E. 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Sir, The Eeport which I have the honour to present herewith contains the results of the investigation which I was commissioned by the Board of Agriculture and Fisheries to undertake in order to obtain full information in regard to the organisa- tion and actual working of the systems of agricultural credit, agricultural co-opera- tion, and live stock insurance in Germany. In no modern State does organised effort for safeguarding and promoting the economic interests of agriculture appear to have been so persistent and so successful as in Germany, more especially in the direction of providing the farmer with facili- ties for obtaining credit, for acquiring the instruments of production, and for disposing of his produce on the most favourable terms. In the present Eeport I have endeavoured to set out in considerable detail the principles and practice, together with the results of the working, of the three groups of organisations that owe their existence to this organised effort in German agriculture. The Report is based essentially upon knowledge obtained by personal enquiry and upon the study of original documents. With the view of obtaining first-hand acquaintance with each of these subjects, I not only visited the managers of the most representative organisations of each kind and discussed the principles and methods of working, but I also made use of the facilities so generously afforded of obtaining an insight into matters of ordinary business routine, by attending general or committee meetings of societies, being present at their auditing, &c. Throughout the Report will be found detailed descriptions of typical institutions; and these accounts, based upon the notes made at the time of visit will, it is hoped, help to present their outstanding features with more vividness than is possible in a general exposition. It should perhaps be mentioned that, as regards non-mortgage credit, I have limited myself to reporting upon local and central co-operative banks. Commercial sources of credit are as numerous as in the United Kingdom, and, despite the growth and increasing concentration of German great banks, are still far less highly centralised ; but, apart from the vastness and intricacy of the subject, I have conceived my mission to he rather to give an account of what German farmers had evolved for themselves, to their own great advantage, than to draw comparisons between two banking systems which have grown up to suit the needs of commerce and industry in their respective countries. In Germany landowners can obtain mortgage loans through a variety of special institutions for mortgage credit : at the present time the total outstanding loans obtained through such agencies may be estimated at approximately £400,000,000. The organisation of institutional mortgage credit in that country has been greatly facilitated by its complete system of registration of title and by the clearness of its mortgage law. Compulsory registration of title, as it exists in Germany, Austria, Hungary and Russia, or, at least, compulsory registration of deeds (as in France, Belgium, Holland, and other European countries as well as in America and British India) appears an indispensable prerequisite for the foundation of a system under which landowners may obtain mortgage credit on suitable terms by the creation of land bonds which would rank as first-class securities in the general market. Herr von Miquel, the late distinguished Minister of Finance in Prussia, declared some seventeen years ago in Parliament : " This must be our goal — ^to have a co-operative loan bank in practically every parish of the whole monarchy." That goal has now been nearly reached. There are in Germany 17,000 agricultural co- operative banks with a total membership of over one and a half millions. In 1910 the total turnover of 14,729 such banks amounted to £261,665,000; at the end of that (25574—6.) Wt. 12764—20. 3000. 3/13. D & S, a 2 IV year the loans outstanding for fixed periods, together with overdrafts, amounted to £93,034,000, while the savings deposits totalled £92,429,000, and the deposits on current account £10,865,000. The success and sound management of these societies are evidenced by the fact that in the 16 years 1895 to 1910 only 19 rural credit societies were involved in bankruptcy : a remarkable record when it is recollected that since 1901 there have been over 10,000 (and since 1909 over 15,000) societies of this kind in Germany. Comparing them with other banking and credit under- takings, one German writer of authority has computed that the frequency of bank- ruptcy per 10,000 such undertakings over the period 1895-1905 was 55 times more frequent than with the credit societies. About 90 per cent, of these Raifleisen banks are affiliated to central banks, which are organised according to Provinces or States, At the end of 1911 there were affiliated to 37 central banks 17,668 societies of all kinds, of which 14,508 were credit societies; and the total turnover of these central banks in that year amounted to £410,391,000. Since 1895 there has been in Prussia a central bank for the central banks : namely, the Prussian State Co-operative Central Bank. The State has endowed this bank with a total capital of £3,750,000. The great system of German rural co-operative credit as we now see it has not been created in a day, and it is hardly to be expected that the work of establishing a similar system would progress more rapidly in England. On the other hand, there seems to be no reason why it should progress more slowly in this country than in Germany, especially if a similar intensive and penetrating propaganda could be set in operation. Only through such local organisations would it seem possible to establish the close contact that must exist between lender and borrower if small farmers are to be in a position to obtain credit on suitable terms. Considerable time and trouble have been devoted to endeavouring to make the Appendices of practical value. I have translated the most important laws relevant to the matter in hand : the articles of association, company agreements, and statutes of representative organisations; business rules, audit regulations, specimen audit report, model balance sheets and forms of various kinds, and other documents likely to be of use to co-operators in this country. On the first of the two maps, which have been prepared in accordance with the data furnished by me, will be seen, for each Prussian Province and German State, the proportion of the cultivable area which is owned by its cultivators, and in the second the percentage of land occupied by holdings not exceeding fifty acres. On both maps are inserted the names of all places where Mortgage Credit Associations, Joint Stock Mortgage Banks, Co-operative Unions, Central Co-operative Banks and Trading Societies, have their headquarters. For official introductions and other help I wish to express my thanks to the Foreign Office and His Majesty's Diplomatic and Consular Representatives in Germany. I have also to acknowledge the ready assistance given to me by the Prussian Ministry of Agriculture and by the Ministries in other States which have charge of agricultural affairs, especially at Carlsruhe, Dresden, Munich, and Stutt- gart. Dr. Heiligenstadt, the President of the Prussian State Co-operative Bankj was good enough to receive me on two occasions and to devote a considerable time to explaining to me the whole organisation and methods of that remarkable institu- tion. I wish to express my indebtedness to the directors of those Land Mortgage Credit Associations, State, Provincial and District Mortgage Banks, Joint Stock Mortgage Banks, Savings Banks, institutions for land improvement credit, and other mortgage credit organisations visited, all of whom were good enough to afford me every assistance I desired ; and in particular to Dr. R. Leweck, of the East Prus- sian Landschaft, Konigsberg; to Herr von Klitzing, President of the Prussian Central Land Credit Company, Berlin; to Dr. F. Schulte, of the Bavarian Handels- bank, Munich ; and to Herr Getting, Secretary of the Federation of Savings Banks. To the directors of the Chambers of Agriculture in all the Prussian Provinces and similar bodies in other Federal States I am greatly indebted for a great mass of information respecting the agricultural condition generally of their areas, as well as for information concerning co-operation and live stock insurance. As regards agricultural co-operation, my sincere thanks are due to Herr Haas, General Director of *the Imperial Federation, who afforded me the greatest facilities, and to Dr. Grabein, the General Secretary of the Imperial Federation; to Herr Dietrich, General Director, and to Herr Buchrucker, General Secretary of the Raiffeisen Federation. Dr. H. Crliger also kindly discussed matters with me. I wish also to express my gratitude for the kindness I received from every Union visited, but especially to Herr Johannsen, Herr Bussen, and Herr Ocker, of the Hanover Union; to Dr. Rabe and Dr. Pietsch, of the Halle Union; to Herr von Brockhausen, Dr. Hoffmann and Herr Sparr, of the Pomeranian Union ; to Herr von Kries and Herr Krause at Dantzig ; to Herr Bach at Dresden ; to Dr. Biernatzki, of Kiel; to Herr Quabeck, at Miinster; to Herr Rexerodt and Herr Mahnke, at Cassel; to Herr Bunz and Dr. Riehm at Carlsruhe; to Herr Baier at Stuttgart; to Graf von Andlau and Herr Petri at Strassburg; to Dr. Nolden and Herr Kaulen at Ludwigshafen, and to Herr Katholy at Landau; and to Baron von Sodon, Baron von Cetto, Herr Hohenegg and Herr Stern at Munich. To the Imperial Federation, the Raiffeisen Federation, and the Schulze-Delitzsch Federation, as \vell as to the Bavarian National Union, the Hanover Union, the Pomeranian Union, and the Halle Union I am indebted for permission to publish various document^ framed and issued by them. I wish to thank Mr. H. W. Wolfi, to whose writings and efforts agricultural co-operation in this country is so deeply indebted, for giving me several useful letters of introduction ; and also Mr. Nugent Harris, of the Agricultural Organisa- tion Society. I desire in an especial manner to thank Mr. A. A. Wotzel for reading a great portion of the proof sheets. In conclusion, I would express the hope that the present volume may prove to be a source from which those interested in schemes for building up the economic and social structure of rural life in this country may, without too much trouble, be able to obtain an abundant supply of serviceable material. I have the honour to be, Sir, Your obedient Servant, J. R. CAHILL. 25574 „ 3 VI GENERAL REPORT AGRICULTURAL CREDIT. 1. MORTGAGE (LONG-TERM) CREDIT. In the number and variety of the agencies through which they can obtain long- term mortgage credit on relatively easy conditions, landovv^ners in Germany, both large and small, enjoy signal advantages as compared vi^ith the corresponding classes in this country. Setting aside for the moment the Joint Stock Mortgage Banks, the vvhole of these agencies are in the nature of governmental, non-profit seeking institu- tions — using the v\rord " governmental " in a sense that would comprise the State, provincial, district, municipal (or communal) authority as well as those corporations of landowners which rank as public bodies. The various agencies may be divided into three main classes according to the purposes for which their loans are granted. In the first class there are four groups of institutions, namely, the Land Mortgage Credit Associations (Landschaften), the State, Provincial, and District Mortgage Credit Banks, the Joint Stock Mortgage Banks, and the Savings Banks, all of which grant mortgage credit without requiring, in ordinary circumstances, any declaration as to the purpose of the loan. The second group comprises the Land Improvement Funds, the Land Improvement Annuity Banks, the Provincial Aid Banks, and the Imperial Insurance Institutions, all of which grant loans mainly for specific land improvement or building undertakings. The third group is that of the Rent Charge Banks, which are concerned with loans in connexion with the creation and equip- ment of small holdings. , By far the most important class is the first : at the present time the total value of the outstanding loans granted on landed properties by the institutions comprised in it approaches £400,000,000. The Land Mortgage Credit Associations and the Savings Banks are represented in this total by about £170,000,000 each. With the exception of the Savings Banks and of the relatively unimportant Prussian Land Improvement Funds, all these mortgage credit organisations obtain funds mainly (when not exclusively) by the issue of land mortgage bonds. Thus the German land- owner, by virtue of his institutional mortgage credit, is enabled to mobilise, as it were, a high proportion of the value of his landed property by the creation of bonds that flow into the general system of securities, so that instead of only being able, like the English landowner, to provide an individual mortgage security of very limited currency, he possesses facilities for converting a mortgage charge into a sefiurity realisable at any time in the general market. The Land Mortgage Credit Associations, twenty -three in number, of which six were founded in the period 1770-1790, and the remainder between 1825 and 1896, are associations of borrowers for the purpose of procuring loans by the issue of bonds secured by the collective mortgage charges registered against their landed properties. These bonds are not secured by specific mortgage charges, but by the body of mortgage charges of each particular Association, supplemented by its reserves and the accumulated sinking fund payments of mortgagors. They are non-profit- seeking organisations, and, except in two cases, they possess no share capital. The Prussian Associations limit their operations to a single Province, extending them occasionally over portions of an adjoining Province or State; the areas of the non- Prussian Associations coincide with those of their respective States. These Associations rank as public corporations (in Prussia their officials have a status similar to those employed by provincial authorities); they are subject to State supervision through a Royal Commissioner, and their articles of association and regulations require the sanction of the Crown or the Minister of Agriculture. They possess*certain special privileges, such as the authority to vu distrain without having recourse to the ordinary civil procedure. They are administered by a Central Board, which includes at least one permanent salaried official who has passed the State examination qualifying for the office of judge. This Board is subject to the control of a Committee or Council of Administration, and of a General Assembly, both elective bodies. Directors are also elected for the chief divisions of the areas of the Associations, and a further decentralisation is secured by the District Committees. A landowner becomes a member of an Association when such an Association acquires a mortgage on his land; membership ceases with the cancellation of the mortgage. Landowners living within the area covered by an Association and ful- filling the conditions imposed by its articles of association, may not be refused loans ; and they may claim them up to the amount for which their estates after valuation furnish the security required by the particular regulations. The earliest Associa- tions admitted to membership only large owners holding under specific tenures, but, especially within the last generation, and particularly as a result of the great Agrarian Conference of 1894, and the subsequent action of the Prussian Government, which urged the individual Associations to devote more attention to the needs of the smaller proprietors, sma,ll landowners have been brought within the range of eligibility. That quite small owners may now obtain loans is evidenced by the fact that one Association, lending up to half the value of estates on first mortgage, fixes the minimum loan at £15, some others fixing it at £25; at the end of 1911 one Association had loans outstanding upon 284 properties of under 12 J acres; another granted (in 1911) 34 loans upon properties of less than 2 J acres, and 1,480 loans on properties of over 2 J acres but not exceeding 25 acres. The maximum limit to the amount to be lent upon estates is fixed by most Prussian Associations at fths or frds of their value as a first mortgage charge ; in the non-Prussian Associations one-half is the usual limit. The loans are, as a rule, made not in cash, but in bonds, which the borrower either realises independently, or takes to the Ijoa,n Bank of his Association (if such a Bank has been established), the latter selling them on his behalf or making him an advance on their security. Intending 'borrowers may choose the rate of interest to be paid, the rates most usually open to their choice being 3, 3 J, 4 and 4^ per cent. ; at the present time bonds in circulation carry predominantly 3^ and 4 per cent. Bonds of various denominations are issued : there are bonds of £3 15s., £5, £7 IO5., £10, £15, £20, £25 and up to £150, some Associations issuing those of £250, and the Central Association those up to £500. These bonds, which are not redeemable by holders, have consistently maintained a strong position iri the market ; thus at the time of the Napoleonic wars, when Prussian 4 per cent, stock sank to 20, Silesian land bonds never fell below 50. The loans granted by these Associations are not subject to recall; the rate of interest is as moderate as possible, being closely related to the prevailing market rates for money, and cannot be raised; and while annual payments are required until at least a certain percentage of the capital debt has been accumulated in a sinking fund, repayment may be made by additional instalments at the mortgagors' convenience. Costs arising in connection with valuation and other preliminary expenses are kept as low as possible, and are often waived by the well-established Associations; the necessary contributions towards the cost of administration of the Associations are, moreover, relatively inconsiderable, as the office holders, apart from the Syndics, usually give their services gratuitously. Proper consideration of loan applications is secured by the fact that these organisations are thoroughly conversant with agricultural conditions, and are in a position to appraise the value of estates and the business capacity of owners through their local representatives, who are themselves agriculturists and members. Through these local representatives, who as members are directly interested in the good management of their Association, the Associations are also enabled to secure continuous supervision of the mortgaged security without incurring expense. Of the sixteen Mortgage Credit Banks, which have been established for the whole of a State, Province, or District within a Province, and whose liabilities are guaranteed by the public authority of such areas, only one, namely, that at Hanover, restricts its mortgage loans to those on rural property. The original purpose of many of these institutions was to assist medium and small landowners, by loans on reducible mortgages, to redeem burdens or servitudes 25574 „ 4 VIU which still attached to the possession of their holdings at the time when the emancipatory legislation declared such charges to be commutable. They have lost this special character, and have all developed into institutions for mortgage and communal credit. The total of their outstanding loans amounts to about £100,000,000, of which half has been lent on mortgage security. Funds are mainly obtainedby the issue of bonds, which are recognized as trustee securities, but working capital is also provided by deposits, payments by borrowers into sinking fund accounts, accumulated funds, and grants or loans from the State or other Authority concerned. The bonds of these Banks are, in most cases, redeemable by the Banks themselves (but not by the holders) by drawings, but as a rule a certain period must elapse after the issue of bonds before a Bank may include them in a drawing. Most Banks pay their loans in cash, not in bonds, as in the case of the Landschaften. These Banks have served in an especial manner the needs of medium and small landowners, and afforded them facilities for obtaining loans at moderate rates of interest, not subject to recall, and repayable in small, fixed annual instalments (with power to make additional repayments on giving notice of from three to six months). Sums as low as £15 are lent by at least six of these Banks; and one Bank grants loans as small as £2 IO5. The rates of interest usually range at the present time from 3 J to 4 per cent. ; and there is, in addition, an annual charge for cost of administration (usually j to J per cent.). Sinking fund payments are com- pulsory in most cases, and the minimum amounts are variously fixed at \, f or 1 per cent. Repayment may be made by the presentation to a Bank of its bonds bearing the same rate of interest and the same nominal value as bonds issued to the mortgagor in respect of a loan. These Mortgage Credit Banks are usually exempted from stamp duties and court fees. They have also the advantage of the co-operation of the local revenue authorities, or other public officials {e.g., officials of public savings banks). Some Banks appoint private persons resident in different parts of their areas as their agents, in order to be in a position to obtain further information with respect to borrowers. They are thus enabled not only to secure the necessary local information and supervision, but can also bring credit "facilities within the convenient reach of farmers throughout their areas. It is worthy of notice that these Banks do not hesitate to endeavour to attract clients, whether borrowers or depositors, by advertise- ments in daily and other papers. There are in Germany 37 Joint Stock Mortgage Banks (excluding the Hessian State Joint Stock Mortgage Bank), which are commercial undertakings, constituted, in accordance with the Imperial Mortgage Bank Act of 1899, for the purpose of lending money on mortgage security. Instead of being associations of borrowers, like the Landschaften, they are associations of lenders, which were largely modelled upon the Credit Fonder of France. The last-named was founded in 1852; of the 37 German Banks one was established in 1858, 27 in the period 1862-73, and 8 in the period 1894-96. But, unlike the Credit Fonder, which possesses a monopoly for the whole of France, the German Mortgage Banks represent a decentralised system, in which any of the Banks is free to extend its business over the Empire. Their business has greatly developed : thus in 1880 the total of their outstanding loans covered by mortgages on urban and rural property amounted to £77,385,000, in 1900 to £337,882,000, and in 1911 to £554,870,000. They fall into two classes — " pure " and " mixed " Mortgage Banks. The former, 29 in number, restrict their business to the following : loans on mortgage and issue of mortgage bonds; the acquisition and sale of, and lending on mortgage security; the grant of loans to public bodies and to light railway undertakings; the purchase on commission of stocks and shares; the collection of bills and cheques; safe-deposit business, and the acceptance of deposits at interest. The " mixed " banks engage in ordinary banking business, but speculative business is prohibited. All Joint Stock Mortgage Banks require the special authorisation of the State ; and are subject to State supervision in every branch of their business, each Bank being assigned a Commissioner who, before any bond is issued, has to certify that it is duly covered, and who, jointly with the Bank, has the custody of all its books, documents and cash in hand. Only about 6 per cent. (£34,000,000) of the total mortgage loans outstanding at the end of 1911 were secured by mortgages on rural estates; and in 1909 91 per cent, of the total loans outstanding (3!i rural mortgages had been granted by one Prussian and seven Bavarian Banks. The Act requires that, in so far as bonds are issued upon IX the security of rural mortgages, half of the total amount of this class of loans, which are advanced by any Bank, must be made subject to annual sinking fund payments of at least one-quarter per cent. ; the majority of Banks require such payments in respect of all their rural loans, and fix the minimum at one-half per cent. Rural mortgagors must be accorded the right to repay loans in whole or part before the stipulated period under the sinking fund scheme, and may only waive such right for a period not exceeding ten years from the date of loan. Moreover, although the annual payments on account of interest remain unchanged, regardless of the progressive diminution of the capital debt by payments to sinking fund, yet the interest falling upon the amounts credited to sinking funds is annually applicable to that fund. No agreement permitting a Bank to call in a loan is valid. Minimum loans are fixed by some Banks — the Bank showing at present the largest total of rural loans fixes it at £50 ; and the maximum loans may not exceed three-fifths of the ascertained value on first mortgage, or, with the concurrence of the State concerned, two-thirds of such value. Loans must be paid in cash as a rule : payment in bonds is only permissible if the articles of the Bank expressly permit it, and the borrower gives his assent. In the latter event specific authorisation must be entered in the contract for the borrower to repay in cash or in bonds of the Bank, at his discretion. Bonds of various denominations are issued; the minimum nominal value appears to be £5, and the maximum £250. In 1909 58"48 per cent, of the value of the bonds bore 4 per cent, and 3965 per cent. 3| per cent.; since that date bonds have been issued mainly at 4 per cent. Except in the case of six Bavarian Mortgage Banks, these bonds are not recognized as trustee investments, but almost without exception they are accepted as first-class security by the Imperial Bank. Mort- gage bonds may not be issued to an unlimited extent; pure Mortgage Banks may issue only up to 15 times the amount of their paid-up capital and reserves, unless previous to 1900 a Bank held the right to issue in excess of that multiple, when a maximum multiple of twenty is fixed. Mixed Mortgage Banks are limited to a lower multiple. Adequate publicity is secured by statutory provision, every Mortgage Bank being obliged to publish, not later than in February and August of every calendar year, in the Official Gazette and in the newspapers selected for its regular advertisements, detailed statements showing its position. German Savings Banks are mortgage credit institutions of very great import- ance for farmers; in 1910 their total investments in rural mortgages may be esti- mated at £170,000,000. At that date Prussian Savings Banks alone, out of the total of their invested funds, which amounted to £579,000,000, had £115,000,000 outstanding on the security of rural property. They are pre-eminently, especially in Western Germany, the sources of mortgage credit for small and medium farmers, whom they accommodated also at a time when no other mortgage institutions were open to them; and they now provide, in effect, nearly every district with a public mortgage credit institution. There are no Post-Office savings banks in Germany. The great majority of public savings banks are institutions established, managed or supervised, and guaranteed by the communal, district, or urban authorities, apart from whom they do not exist as legal entities. At the end of 1910 there were 2,844 public savings banks in Germany (excluding Brunswick) with 7,404 branches or agencies, and 228 other savings banks with 294 branches. The total deposits of all these banks reached the substantial sum of £840,000,000; in 1890 and 1900 the corre- sponding figures were £257,000,000 and £442,000,000. It may be noted in passing that the deposits of English savings banks. Post Office and other, did not amount in 1909 to 30 per cent, of the German total. While German public savings banks do not usually accept deposits of less than one shilling, the maximum deposits receivable in respect of any one account often reach a very high figure. In Prussia in 1909 there were 395 out of 1,506 public savings banks which fixed no limit, and for 291 banks the limit ranged from £500 to £2,500. As a result, these banks tend to be used as deposit banks by the well-to-do classes. Their attractiveness consists not only in the security afforded, but in the relatively high rate of interest paid. Being institutions independent of a central authority they are not obliged to accord a rate of interest fixed for all savings banks, but can fix and vary their rates according to the local circumstances. Thus some find it necessary and profit- able to pay 3f or 4 per cent., while others obtain ample deposits at 3 and 3| per cent. The magnitude of German savings bank deposits is also to be explained on other grounds. Although private banks, both large and small, are very numerous in Germany, great joint stock deposit banks have not as yet attained the same development as in the United Kingdom, where, at the end of 1910, the number of branch banks amounted to 7,151, whereas the total of branches, agencies and deposit offices of large banks in Germany in 1911 amounted to about 1,200. Investment by small capitalists in the shares of joint stock and limited liability companies being less easy owing to the fact that shares of the former may not be less than £50, or of the latter £25, their money is deflected to savings banks. Private insurance, so common as a form of investment of savings m England, does not appear to have developed to the same extent in Germany. The spread of communal and district banks, which serve more particularly the rural population, has been promoted by the Central Authorities, especially those responsible for agricultural matters, who have also constantly urged these banks to adapt their conditions of loan to suit the farming class. The special advantage of these banks is that they provide farmers with a public mortgage credit institution m their immediate vicinity, and facilitate personal relations between borrower and lender. As a consequence of its local knowledge, a savings bank may generally dis- pense with a special valuation and its attendant costs, which, for a central credit institution, might be out of proportion to the amount of loan. The cost of super- vision is also saved. For the small farmer the procedure proves far simpler than when bonds have to be obtained and marketed, and other formalities satisfied, as in the case of the Landschaften. Their disadvantages consist in a higher rate of interest, liability to a rise in the rate or to the recall of the loan, and the limited facilities for reducible mortgages. As to the rate of interest : in 1909 the predominant rate of interest payable on the bonds of the Landschaften was 3^ per cent., on those of the State and Provincial Mortgage Credit Banks ^\ and 4 per cent., and on those of the Joint Stock Mortgage Banks 4 and 3^, whereas in the same year 355 per cent, of the mortgage loans made by the savings banks were at 4 per cent., and 5509 per cent, at over 4 but not exceeding 5 per cent. Loans are liable to be recalled owing to the circumstance that savings banks must be in a position to realise their assets if necessary at short notice; and they reserve the right to raise the rate of interest in order not to be losers in the event of an increase in the rates paid for deposits rendering unremunerative a former rate fixed at a time when the deposit rate was lower. With respect to reducible mortgages there occurs the same difficulty of lending money for a longer period than that for which the lender has received it; but in recent years there has been a considerable increase in the volume of rural mortgage loans granted subject to sinking fund payments. In 1909 nearly 25 per cent, of the outstanding rural mortgage loans granted by Prussian savings banks were granted on these conditions. Most savings banks restrict their mortgage investments to property situate in their own or neighbouring districts, or lend less upon a property not within such limits; and a Prussian Ministerial Order enjoined that the lending of money on mortgage security outside the area of the bank should only be admissible when a fixed period of redemption is stipulated, and when such mortgages do not exceed the fourth part of its total mortgage investments. Under present circumstances, the greater part of the money collected within the particular areas is thus devoted to investment within the same areas. Savings banks usually fix the limit of mortgage loans at from one-half up to two-thirds of the ascertained value of the property. Many banks, however, with a view to encouraging the creation of small holdings and allotments, are prepared to lend up to three-fourths or even five-sixths of the value of newly purchased holdings situated within their district, provided that at least one-half per cent, of the capital is to be repaid annually; in special circumstances this sinking fund payment may be waived for a period of two years. In most Prussian Provinces there are Land Improvement Funds or Land Improvement Annuity Banks, which form in fact branches of the provincial administration. They were founded as a result of the demand by agricultural organisations for the provision of credit for land improvement which should be adequate in amount, not subject to recall, amortisable, and bearing moderate interest. In Saxony, Bavaria, Hesse, and Oldenburg Land Improvement Annuity Banks also exist. But these institutions have not developed any great volume of business, nor have loans been usually made to individuals, except in Prussia, where, down to the end of 1908, £250,000 out of £565,000 lent had been granted to large land- owners holding under family or other special settlements, and an additional £20,000 to other landowners within the same period. In Bavaria and Saxony, where these Banks show greater activity, tfte great bulk of the loans have gone to communal XI authorities for water supply and for local schemes of drainage and road construc- tion. The Bavarian Legislature has recently (1908) extended the scope of the Bavarian Bank to the loan of money for promoting the production and supply of electric light and power, especially in country districts, as well as the erection of dwellings for rural and other workpeople and the settlement on the land of agricultural labourers ; and at the same time the limit of value of bonds (for which the State is guarantor) in circulation was raised from £1,500,000 to £2,500,000. T'he Prussian Provincial Aid Banks grant credit mainly to bodies of a public or semi-public character — ^to communes, unions of communes (Kreise), school and ecclesiastical organisations, and co-operative societies, especially those for land improvement. In two or three provinces, however, loans on mortgage security are made rather extensively to individual owners. Like the Prussian Land Improvement Banks they are conducted as a department of the provincial government. Under a Prussian Act of 1850 seven Rent Charge Banks were created, each to serve one or more provinces, and authorised to issue bonds to landowners in settlement of charges and servitudes due to them (but declared by an Act of the same year to be commutable), and to collect from landholders thus relieved annuities composed of interest and sinking fund payments. The special duties thus assigned to them appear to have lapsed with the redemption of the liabilities involved, and the Banks were suspended in 1881. Ten years later they were re-established for the special purposes of the new policy of settling small and medium holders on the land. Their present functions are : — (1) to issue bonds on certain conditions to vendors upon the sale of their property for conversion into small holdings up to, three-quarters of the selling price, and to collect the annuities due thereon; (2) to make advances in connexion with the creation of small holdings (for paying off charges, erecting dwellings and farm buildings, &c.); and (3) under certain conditions to settle by cash payments with co-heirs to properties coming under the Small Holdings Acts. These Banks are, in effect, the financial departments of the State organisations, known as the General Commissions, in connexion with the creation of small holdings. The Small Holdings Acts, by virtue of which State credit (that is, through these Banks) is granted, allow any person or body to undertake the division and settle- ment of a property, but require, before State credit is granted, that plans for division, equipment, settlement, &c., must be approved by the General Commission having jurisdiction. It should be observed, however, that these Banks, which from 1891 to 1909 had issued bonds of the total value of £5,600,000 in respect of small holdings, do not represent the entire extent of State action in Prussia as regards land division and settlement. In the provinces of West Prussia and Posen, where these Banks do not operate, the Settlement Commission — a State organisation with some 600 officials which was created in 1886 and has been amply endowed with funds — stated at £30,000,000 down to 1911 — ^purchases, divides, and distributes estates, and undertakes all the necessary financial transactions connected therewith. Finally, under the Imperial Invalidity Insurance Act there exist thirty-one Insurance Institutions, each with an independent legal status, and operating within a particular State, groups of States, Province, or District. These institutions receive the contributions of, and pay the benefits to, all persons insured under the Act against invalidity and old age. The Act authorises a certain proportion of the funds to be invested for purposes of general social welfare within the districts of the various institutions; in 1909 £14,025,000 was invested in loans for the housing of the working classes and £5,143,600 in loans for agricultural purposes. Under the latter heading are included loans for light railways in rural districts, for land improvement, and for the improvement and construction of roads. Loans are usually made to or through non-profit-seeking co-operative societies, employers-, or to com- munes; seldom to individuals. Mortgage security is generally required, loans are subject to recall at three or six months' notice, and sinking fund payments are obligatory, while facilities for additional repayments of debt appeared to be allowed. The predominant rates of interest now charged range from 8 to 3f per cent. Insurance Companies have invested nearly three-quarters of their funds in mortgages, but only an insignificant proportion in rural mortgages; in 1907 only 790 loans of the total value of £2,435,000 were outstanding on rural mort- gages, as against £162,710,000 on urban mortgages. Even this small total of tran- sactions is decreasing. Such companies are legally permitted to make loans up to xu three-fifths or two-thirds of the valuation, but special rules prescribe that they must not, as a rule, lend over £10,000, and in the case of loans of over £5,000, special valuations must be made. From the foregoing summary of the organisation of German mortgage credit it will be seen that German landowners, both large and small, are amply provided with credit agencies which, mainly of a public character and non-profit-seeking, grant loans up to one-half or two-thirds of the valuation on first mortgage at im)derate and unchangeable rates of interest, not subject to recall, and repayable by small annual instalments to sinking funds, with facilities to make additional repayments on giving short notice. The Joint Stock Mortgage Banks form an exception in respect of profit-seeking, but the Mortgage Bank Act secures certain important advantages for landowners; and the savings banks, although in theory they are debarred from granting loans not subject to recall, do in fact lend a considerable amount against reducible mortgages (which are not subject to recall), and, as regards the balance, are seldom forced to exercise their right of recall. Although not aiming at profits, these organisations are able to realise surpluses, the State and other Pro- vincial or District institutions, as well as the savings banks, contributing considerable sums annually to their guaranteeing authority for public purposes; while the Land- schaften, especially as a result of ancillary business {e.g., their Loan Banks), are able to apply substantial sums to the relief of the indebtedness of their members. The organisation of German mortgage credit presents the further important feature of decentralisation. The savings banks provide nearly every district with a public mortgage credit institution; and the special organisation or organisations for mortgage credit in each Prussian Province, or in each State, bring their services within the convenient reach of farmers throughout their areas by. their system of local representatives. Except in the case of the saving banks, capital is mainly obtained by the issue and sale of land mortgage bonds, for whose interest and capital the particular institution undertakes the responsibility. The Landschaften alone appear to leave to the borrower the realisation of these bonds, facilitating this, however, through their loan banks; the other institutions pay the borrower in cash at a rate slightly below the current market rate, realising the bonds on their own account at the same time or at some suitable future date. The borrower has usually to pay from 3 to ^ per cent, as commission for this service. Loans by the issue of bonds are advantageous as not being subject to recall or to an increase in the rate of interest on the part of the lender, and as allowing the borrower to repay his debt by the purchase and presentation of bonds of the same class and issued by the same institution when such bonds are low in price. Their principal disadvantage consists in the possible depreciation in value at the time of loan, although the borrower is liable to pay interest on and to redeem the loan at the amount of the nominal value of the bonds (or must purchase and present such bonds when higher prices prevail). The organisation of institutional mortgage credit in Germany has been immensely facilitated by the complete system of registration of title in that country. The uniform system, based on the Prussian model and introduced for the Empire in 1900, provides for obligatory registration of title, priority of each registered charge in the order of its registration, and freedom of inspection of the registers. These registers, drawn up for small areas and maintained by them, describe each estate and recite all personal charges {e.g., usufructuary rights) and other charges; and, in general, no claims against such estates not duly registered are valid in a court of law. It may be added that the total costs in connexion with the registration or cancellation of mortgages are moderate. The registration of a mortgage charge for £500 in Prussia costs £2, and its cancellation half that amount, including in each case the notarial and court fees. Compulsory registration of title as it exists in Germany, Austria-Hungary, and Russia, or at least compulsory registration of deeds (as in France, Belgium, Holland, North America, and elsewhere), appears an indispensable prerequisite for the foundation of a system under which landowners may obtain mortgage credit on suitable terms by the creation of land bonds which would take their place as first-class securities in the open market. In Ireland registration of deeds has been in force since the eighteenth century, and by reason of the transactions under the Land Acts, registration of title has taken place with regard to a great portion of the countrjr; in Scotland there is registration of deeds; but in England the systefh of registration of deeds appears to be in operation only for Middlesex and Yorkshire, and of registration of title only for London. Xlll PERSONAL (SHORT-TERM) CREDIT. Under this heading is considered credit based mainly on the security of the general standing of the borrower, or of the borrower and his surety, as well as on an implicit estimate of his or their assets in the event' of ultimate default, as distinct from credit based on the definitely assigned security of real property. The former credit tends to have the further distinction of being sought and granted for relatively short terms. For the provision of this form of credit in adequate amount and on suitable conditions as to interest and repayment farmers, especially medium and small farmers, require a different credit organisation from that which has been evolved for merchants and manufacturers; and for certain rather obvious reasons. The out- standing feature of the agricultural industry is the length of period of production. Within limits the manufacturer can hasten at will the process of production, and repeat his products, or the trader can restock his store several times within the year ; for the farmer the time of beginning and the time of finishing production are fixed by nature. Although the duration of the period of production may be shortened to some extent, artificial hastening processes are not applicable in most cases, and lack the effectiveness of the machine in industry. In certain important branches of agriculture the period of production may extend over several years : thus a foal requires three or four years, and a calf two or three years before becoming utilisable or marketable. And the returns of agricultural production are more uncertain than those of commerce, and industry owing to accidents of harvest, risk of disease, perish- ability of produce, and other causes. Another peculiarity — ^making due allowance for depressions and for numerous seasonal trades outside agriculture — is the irregu- larity of monetary returns from year to year or their tendency to fall in certain months or periods in each year. Unless his farming is mixed the farmer obtains his main receipts in autumn, when he sells his crops. Under these circumstances a banl?:ing system which aims at a rapid turnover of funds and grants credits of three and four months, with one or two renewals for like periods, is of very little advantage. Urban bankers, being naturally more conversant with commercial or industrial undertakings, are less capable of judging the standing of a farmer and his business capacity. Credit implies confidence and facility of supervision; but the banker is unacquainted with farming, and farms are comparatively isolated units, usually more or less remote from the banking office. Ordinary commercial tests are not often applicable, especially where smaller farmers, whose bookkeeping is apt to be very incomplete and unmethodical, are concerned. The same difficulty presents itself as to any proposed sureties, who are also likely to be farmers. Other banking security is often out of the question; and the procuring and bringing of sureties to the bank involves great possible loss of time and expense. The world in which the banker or bank manager moves is not that of the farmer, so that personal knowledge is infrequent. The whole situation is rendered even more unfavourable by the supplanting of small country bankers by branches of great banks, Avhich are directed on fixed lines from headquarters, and whose managers are frequently changed . Commercial banks cannot, moreover, be brought nearer than small towns : even a branch ofl&ce (as distinct from a mere depositing office) entails a minimum expendi- ture for salaries and office of from £300 or £400 per annum. The smaller farmers offer also little attraction to the ordinary commercial banks as borrowers, and, apart from other disadvantages, pay for the small loans they require an unduly high percentage as interest and commission. As a result farmers cannot obtain from banks organised mainly to serve industry and commerce credit in suitable amount, at reasonable interest, and on the security which they can usually provide. Yet, while commercial banks have become less satisfactory from the standpoint of the farmer, his need for working capital has greatly increased. More scientific and intensive farming, made necessary by competition which has been facilitated by improved and cheapened transport, refrigeratory processes, and other causes, requires more capital expenditure on labour, fertilisers, feeding-stuffs, and machinery; payment in kind is being gradually entirely superseded by payment in currency, while money wages are higher; and other expenditure, including cash payments to the State and other public authorities, has increased. German farmers have advanced very far towards the solution of the problem of obtaining adequate credit at moderate rates of interest and on convenient terms XIV of repayment by means of the 17,000 local co-operative banks established and conducted by themselves, such banks being further organised in central co-operative banks. The membership of 14,993 local banks existing on January 1, 1910, totalled 1,447,766 persons, a figure which represented one-sixth of the agriculturally occupied population of Germany in 1907; the total turnover in 1910 of 14,729 societies amounted to £261,665,000, and, at the end of that year, the loans out- standing for fixed periods, together with overdrafts, to £93,034,000, while at the same date the savings deposits totalled £92,429,000, and the deposits on current account £10,865,000. At the end of 1911 there were affiliated to 37 central banks (omitting the Prussian State Co-operative Bank) 17,668 societies of all kinds, of which 14,508 were credit societies; and the total turnover of these central banks in that year amounted to £410,391,000. Different German co-operators employed the same phrase in giving to the writer the reason for the growth of rural credit societies : " they are the children of necessity {die Kinder der Not)." Individual small farmers must, in fact, rope themselves together with more or less stable bonds in order to be able to present to lenders and depositors a security which the latter can accept as a guarantee that their money will be repaid in the ordinary way and without the exercise of legal pressure. And such local associations can lend money to persons not providing " banking security," as they know their trustworthiness and can judge their business capacity, while supervision is automatically brought into play within their restricted areas of operation. In ordinary commercial banking facilities it is probable that German farmers of the present day are better off than British farmers. As in England the great German Joint-Stock Banks tend to become greater, and their branches or agencies more numerous, but banks working only in one locality, one district, or one province are far more numerous in Germany. There are over 200 small joint-stock banks, besides the urban co-operative banks, about 1,200 in number, and private bankers are estimated by leading writers on German banking to number from 4,000 to 6,000. In nearly every country town in Germany may still be found one or more substantial banking firms; and from these, if only by reason of proximity, freedom of action of managers, relatively good knowledge of agricul- tural matters and persons (as being often established in country district centres) and of competition among themselves, it might have been expected that farmers could have obtained credit on suitable terms. Despite this multitude of Raiffeisen banks, their large membership and business. Professor Riessef, the most eminent authority on German commercial and industrial banking, writing in 1912, observed that much still remained to be done and must be done in this direction, as " agriculture requires a credit system adapted to the special nature of the conditions of its production." And a distinguished Prussian Minister of Finance, in the course of a parliamentary debate on the budget of the Prussian State Central Co-operative Bank, for whose foundation he was directly responsible, declared : " This must be our goal — to have a co-operative loan bank in practically every parish of the whole monarchy." Raiffeisen (1818-1888), with whose name rural co-operative banks have become associated, began his co-operative career in the winter of 1847-8 with the founda- tion in a small village of a benevolent society for obtaining corn and potatoes and selling them at low. prices to the poorer inhabitants; this society was one of many of the same type founded in Germany about this time, when very serious distress prevailed. Two years later he founded, in another village, a society which at first bought cattle and sold them to poorer landholders, but which later lent money on surety directly to the latter for this purpose. Upon his transference as burgo- master to Heddesdorf, near Neuwied on the Rhine, he founded a third benevolent society with various objects, but especially for the procuring of cattle for, and the granting of credit to, poorer farmers. This society, which gradually became merely a loan society, was composed of well-to-do inhabitants living in or near the village of Heddesdorf, who lent to less fortunate inhabitants of the area, obtaining capital on the security of their collective unlimited liability. The assisted persons had nothing to do with the society, whose members acted as guaranteeing intermediaries between the capitalist and themselves. The first association founded by Raiffeisen, in which the fundamental co-operative idea of the collective liability of the borrowers themselves appears, was that ofi»Anhausen (1862). There were already in existence co-operative societies with unlimited collective liability, which had been created by XV Schulze of Delitzsch, a small town in the Province of Saxony, for the purpose of procuring credit for their members, who were mainly artisans, small employers of labour, and small shopkeepers. But Raiffeisen had in view the needs of agricul- turists. At the present time the majority of Raiffeisen banks in Germany may be said to present the following features : — limitation of area, so as to secure mutual personal knowledge on the part of members ; low shares; permanent indivisible reserve fund ; unlimited liability of the members ; loans only for productive or provident purposes ; loans only to members ; credit for relatively long periods with facilities for repayment by instal- ments ; the determination every year by the members of each society of the maximum credit that may be held by individual members at any time as well as of the maximum total of saving deposits receivable and of loans that may be taken up by the society; absence of profit-seeking, dividends if paid being usually limited, as a maximum, to the rate of interest paid by borrowers for loans ; office holders, with the exception of the secretary, not paid for their services ; promotion of the moral as well as the material advancement of members, and in particular the purchase of agricultural requisites for sale to members and often the procuring of agricultural machines and implements for letting on hire to members. Compared with the ordinary urban credit societies of the Schulze-Delitzsch type, which were originally organised for the special purpose of furnishing credit to small traders, employers and artisans in towns, many important differences appear. The areas of the banks of the latter kind are not narrowly limited; shares are high, being rarely less than £15, and sometimes reaching £75 and £100 ; there is no indivisible reserve ; loans are usually made only for terms of three months, when they are subject to renewal, and are repayable in a lump sum; dividends, sometimes very high dividends, are paid; regular banking offices are maintained with at least two permanent paid officials, who form the committee of management, while the members of the board of supervision receive remuneration ; the banks confine themselves to pure banking business; and their offices are usually in towns. At the beginning of 1912, out of a total membership of 641,429 members in 1,002 credit societies, 26"61 per cent, were returned as " independent farmers,- gardeners, foresters, and fishermen." In certain districts farmers are attached in large numbers to these societies, which had spread, notably in the smaller towns of the Eastern Provinces of Prussia, before the Raiffeisen movement was introduced in those parts. Thus for 85 Schulze-Delitzsch societies in East and West Prussia,, having at that date a total membership of 60,391, 29,278 were returned as belonging to the four classes just mentioned; for 34 in Posen 11,136 out of a total of 22,233; and for 80 in Silesia 18,451 out of a total of 59,039. In many cases where a note- worthy percentage of such members is returned, they .are to a great extent large farmers, the particular society meets the special needs of landowners by making loans for longer terms than the majority of Schulze-Delitzsch banks do, allows easy terms |>f repayment, and in other ways adopts the usual principles of the Raiffeisen societies. There is also a certain number who become members, not with a view to borrowing, but merely for the sake of investment of savings, either as shares or as deposits, at a high rate of interest — shares are frequently as high as £75, and dividends at 6 or 7 per cent, not uncommon — this is probably especially true of a large proportion of the women members returned as belonging to this group and who numbered 13,203 out of a total of 170,673, or 77 per cent., in 1911 As it is a principle of the Schulze-Delitzsch system that the area chosen should be of a kind to allow of the development of a regular banking business capable of supporting a salaried staff of at least two persons and of yielding substantial divi- dends on shares, these societies are established in towns or must cover fairly wide areas. The feasibility of the minute supervision of their credits is thus diminished and their usefulness to smaller farmers seriously impaired. Their large membership renders impossible personal relations between members: in 1911 the average mem- bership was 623, and there were societies with 11,650 members, 8,987 members, and XYl several with from 2,000 to 5,000. Their business attains sometimes immense pro- portions : some banks visited by the writer showed annual turnovers of £21,000,000, £10,700,000, £6,700,000, and £3,600,000. Their credit is dearer and for shorter periods than that granted by the Raiflfeisen banks. They represent in a large measure commercial, profit-seeking undertakings, being rather companies of lenders having as their primary object the earning of dividends rather than the provision of cheap credit. Many have developed into ordinary commercial banks, others have been absorbed or converted into branches of large joint-stock banks. The smaller societies tend, however, by reason of their being localised institutions with organs of administration composed of many persons representative of the various producing classes of members, to be in a better position than proprietary or joint-stock banks to judge the character and standing of such persons, and thus aid small men unable to furnish ordinary banking security. The general unsuitability of this type of society for German farmers is shown by the circumstance that, while they have made no progress in country districts the Raiifeisen type continues to spread in these districts. The principal functions of Raiffeisen banks are : (1) to meet the needs of their members for supplementary personal credit or current working capital, (2) to pro- mote thrift among the rural population by receiving their savings as well as the savings of non-members and paying interest thereon, and (3) to act in general as the village banker. They are not meant to supply members with their entire working capital but to supplement it; and, speaking generally, they supply such credit mainly on personal security and for productive or provident purposes. Loans are also frequently granted for part or full payment for holdings in those parts of Germany where small holdings predominate ; and a certain number of credit societies have carried out, with good results, the purchase and breaking up of fairly large properties. German rural societies, nearly all of which bear the double title of Savings and Loan Banks, derive the greatest part of their working capital, in fact, over 90 per cent., from the deposits of members and of non-members resident within their own areas. Among the advantages they offer to the rural population as savings banks are almost absolute security, attractive interest, and proximity. The security of depositors' money is safeguarded in ordinary circumstances by the fact that the rural society confines its business to a small area and to simple, well-secured transactions; by the regular examination of the state of its business by the board of supervision (whose members bear a special responsibility under the Act); by the general knowledge of the affairs of the society being common to the bulk of the members; by regular outside audits; and if all these should fail, through the joint and several liability incurred by members. This liability is unlimited in the case of 92 per cent, of the societies. The legal provision that the total amount of the savings deposits that may be accepted, and of the loans that may be contracted by a society, as well as the provision that the limits of the advances that may be made to individual members, must be annually fixed by the general meeting of members, prevent the extension of business beyond the collective solvency of the members comprising the society. The history of Gferman rural credit societies has demonstrated the excellence of the security offered : it is affirmed that depositors have never suffered loss. And in the sixteen years 1895 to 1910 only 19 rural credit societies were involved in bankruptcy proceedings : a striking record when it is considered that since 1901 there have been over 10,000 societies and since 1909 over 15,000 societies of this kind in Germany. Compared with other banking and credit undertakings — one German writer has computed the frd^uency of bankruptcy per 10,000 undertakings over the period 1895-1905 as being fifty-five times more frequent with them than with the credit societies. These societies pay from 3 to 4 per cent. — ^at least 70 per cent, appear to pay 3^ per cent, and over — on deposits; and they endeavour to obtain deposits not only from members, but from non-members of every age and class. Savings boxes are distributed, savings stamps and savings cards of various values are sold, and every suitable means taken to collect the uninvested money of the community. As a result of their success in this respect the savings of rural communities are utilised for the purpose of further wealth production in the same area. Local societies are able to grant loans to their members at from 4 to 5 per cent. ; rates not exceeding 4 J per cent, predominate except in the Eastern provinces of Prussia, where the population being thinner, and less prosperous, deposits are less abundant, and higher interest has to be paid on them, while the credit of the central XVll banks has to be more frequently invoked. The central banks lend money to credit societies at rates which vary according to market conditions; but the normal rates of interest for advances within the ordinary credit, as allotted periodically to each society, range from 4| to 5 per cent, A small commission of -x\ o^ A P^r cent, is also usually charged yearly or half-yearly on the amount of credit taken up: The local societies generally levy a single commission of xV to | per cent, (most usually ^ifj) on the majority of loans; on advances for property purchase or settle- ment with co-heirs a higher commission is usual. The cheapness of this credit appears more striking when it is recollected that ordinary commercial credit in Germany is dearer than in England. Loans are secured for the most part on personal bonds backed by sureties, but mortgage security is not uncommon in certain districts. The committee usually asks the purpose of the loan, and usually enters this in the minutes of the transaction. Many of the more developed societies do not ask the question, being only concerned with the standing of the borrower and of his sureties. Although rural societies are developing their loan business on current account, the majority of loans are still granted for definite periods; at the end of 1910 loans outstanding on current accounts granted by 82 per cent, of all rural credit societies amounted in value to about 28 per cent, of their total loans then outstanding. Current account loans are especially prominent in the two provinces of Saxony and Pomerania, where the majority of societies have adopted limited liability as well in the societies with unlimited liability in Silesia and Brandenburg. Care is exercised that loans on current account do not become, in fact, standing loans. Most societies insist that there shall be a real movement in these accounts by requiring a certain percentage at least of the overdrafts to be repaid into the account within each half-year or year ; otherwise they call in the whole amount at once, or reduce the credit, or raise the interest. As to the loans for definite periods, such periods are determined as far as possible in accordance with the desire and position of borrowers; they are granted usually for at least a year, when they are generally renewed on application ; they may run for two, three, four, or five years, but those for longer periods are far from rare. Societies reserve the right to recall loans on notice of from one to three months. Easy terms of repayment are a marked feature of Raiffeisen societies. When arranging for loans borrowers submit to the committee the length of time for which they require accommodation, and their proposed method of repayment; and they are usually allowed to repay in instalments of equal amounts spread over a period of years. It is a not unusual plan to fix the instalments according to the number of years for which the loan is granted; thus where a loan is granted for two, four or five years there is due each year from the borrower fifty, twenty-five, and twenty per cent, of the loan respectively. Borrowers are always allowed to make additional repayments on giving notice — usually one to three months' notice is required — to the society of such intention. Repayments of loans appear to be maintained in satis- factory relationship to fresh loans : in 1909 and 1910 the societies in the Imperial Federation (to which over 80 per cent, of all rural credit societies are affiliated) granted fresh loans of the value of £15,075,000 and £16,910,000 respectively, while the repayments on outstanding loans amounted respectively to £9,270,000 and £10,990,000. In the same years the amounts paid in by members on current accounts amounted to £29,878,000 and £33,518,000, while the amounts paid out to members on the same accounts amounted to £30,683,000 and £34,130,000 respectively. But it may be asked : what course is taken when deposits are insufficient (oi even non-existent, as upon the establishment of a society) or when they are over- abundant? As a rule credit is obtained, or any excess of deposits over current needs lodged, at la central co-operative bank. From the beginning Raiffeisen recognized the necessity for combination among rural credit societies so as to provide them with a permanent centre at which depositing and borrowing might be advan- tageously transacted by non-profit-seeking organisations which at once understood and took account of the special financial structure of co-operative societies and of the conditions of their business. At the present time over 90 per cent, of fhe rural credit societies are shareholders or members of co-operative central banks, of which there are nearly fifty (including as separate banks the twelve branches of the Raiffeisen Central Loan Bank) in Germany. These central banks are organised according to provinces or States. The German Agricultural Central Loan Bank, founded by Raiffeisen in 1876, extends its opera- 2»574 xvm tions over the whole of Germany, but it has decentralised its business by the creation of 12 branches, which hmit their operations to fixed areas co-extensive with a pro- vince, part of a province, or adjoining provinces, a State or congeries of small States, and which form in fact provincial banks. The other central banks in Prussia are attached to the Prussian State Central Co-operative Bank, which occupies in regard to them in some respects the same position as the Raiffeisen Bank occupies in regard to its branches. The scheme of organisation for Prussian societies is, therefore : (1) local societies balancing as far as possible monetary supply and demand among their members ; (2) provincial banks adjusting similarly the needs of their constituent local societies; and (3) larger organisations at Berlin (namely, the State Bank and the Raiffeisen Central Loan Bank) balancing supply and demand among the central banks, obtaining necessary credit, and making necessary investments on the money market, for them. Outside Prussia no State Central Co-operative Bank has been established, but in all the larger States the central banks are in receipt of State advances or credit to assist them when the monetary demands of the local societies are in excess of the deposits of the latter and of other available capital. Commercial banks urge that the granting of loans for the long periods required by agriculturists would not be advisable, as their capital would be unduly tied up. Such banks naturally wish to realise profits by the frequent turnover of their capital : they often operate on small margins ; and the bulk of their customers, who are traders and manufacturers, do not as a rule leave money for long periods on deposit with them. Rural co-operative societies are not profit-seeking speculative undertakings; and German rural societies have found that the capital on which they mainly depend, namely, savings deposits of members and non-members, tends to remain with them for long periods. Should a sudden call come, which they are unable to meet out of their immediate resources, their solvency is practically assured through their central bank; in the last resort only would they be obliged to exercise the right, which they reserve, to call in loans. No English agricultural credit society established under the Friendly Societies Act — ^the small number existing have all been established under this Act — may grant on loan to any member, to be held at any one time, a total exceeding £50. German registered credit societies are only restricted to the extent that every society must fix for each year by resolution of a general meeting of members the maximum of the total advances that individuals may hold at any one time. Some societies fix this maximum at a very high figure — occasionally up to £5,000 and more; a large number of societies do not allow the committee alone to grant the maximum thus authorised, but require the additional assent of the board of supervision, and often fix a lower figure for the committee alone. The advantage of this facility is that societies are enabled to adapt their credit business to the needs of their members and to the state of development of their own resources. The actual amount of credit extended to individuals is, of course, dependent on the standing, character, and other security furnished by each applicant ; and the bulk of the loans granted by rural societies are for sums not exceeding £50. Taking as fairly representative of German rural credit societies the 4,000 societies now attached to the Federation founded by Raiffeisen, it is found that, in the years 1908, 1909 and 1910, about 45 per cent, of their loans outstanding, which totalled 360,000 to 376,000 (1910), were for sums up to £15, a further 16 per cent, for sums over £15 up to £25, and a further 17 per cent, for sums over £25 up to £50. Ten per cent, of the total were for sums of over £100. It is sometimes contended in England that, as farmers have a considerable reluctance to letting neighbours know that they require credit, they are not likely to borroysT from a credit society. Practically considered, such objection should carry little weight. If a small farmer borrows from a bank he must explain his position and bring usually two sureties. These sureties are generally his neighbours, and the occasion often the market day, when other neighbours also travel to the particular town. And banking offices in small towns are wont to be established, not in remote streets but hard by the market places. Further, a countryside is a small world where every farmer knows his fellow-farmers' position or can deduce it from external evidence. In the ordinary Grerman village bank the granting of a small loan does not imply meeting the whole committee ; application is usually made to the secretary. XlX and the transaction usually carried through without any further formalities. Abso- lute secrecy is imposed upon the secretary and other office-holders, and, given the small area, such secrecy is more easily enforced. In Germany it is rather the diffi- culty of the sureties which holds chief place ; many societies with limited liability now assign to members an open credit up to three-fourths of their liability without further security. And, as regards the whole matter of borrowing, it is one of the aims of a rural credit society to bring home to members that farmers, like other producers, require to have credit at their command, and that it is no blot on their business repu- tation to be borrowers. As regards the co-operative credit movement in England, the view appears to be not uncommonly held that the predominance of tenancy, instead of ownership, is a chief obstacle to its development ; that the collective liability of a society composed of persons who are mostly tenant farmers cannot offer adequate security to depositors or other suppliers of working capital, and that the security offered by the individual borrowing tenant to his society is necessarily weaker. The decisive importance of ownership in this connexion may fairly be con- tested. To take the matter of the society. All members are liable to their society either up to a certain fixed amount under limited liability or up to the full extent of their assets under unlimited liability. In the ordinary course the committee and board of supervision of a society will draw up and periodically revise an estimate of the means of each member, based on the valuation of each member's holding, on the rent paid, possibly on the income tax assessment voluntarily furnished to them, on the stock held, or on other supplementary tests of well-being; and in this way the maximum security offered by their members is ascertained. In Prussia it may be noticed this valuation, which is undertaken at regular periods (and duly rectified, if necessary, in the intervals), is submitted to the local surveyor of taxes, who is authorised to correct, if necessary, the sum total, but not the individual valuations placed opposite the name of each member. But this sum total would naturally not be taken as representing the ordinary security of the society for the purpose of credit: it suffices that a small percentage be taken. The Prussian State Co-operative Bank lends up to a maximum of 10 per cent, of the assets of members as returned and checked by the local surveyors of taxes in the case of societies of unlimited liability, while it grants societies with limited liability an ordinary maximum credit of 75 per cent, of the collective liability of their members. The Raiffeisen Central Loan Bank grants to its societies (all with unlimited liability) in Prussia a normal credit of 10 per cent, of their assets, and to those outside Prussia, where the returns are not usually checked by the surveyors of taxes, a normal credit of 5 per cent. The Saxon and Pomeranian Central Co-operative Banks fix the maximum credit at 75 per cent, of the collective liability of each of the affiliated societies; the latter have adopted a liability limited to £10 or £12 10s. per share held, and their members, speaking generally, are obliged to take up one additional share for every £100 of assessed value over the first £300, so that the maximum credit rests on the security of, roughly, the tenth part of the taxable property of members. It does not appear that any appreciable risk would be involved in giving to a society a maximum credit of five per cent, of the collective worth of its members as returned on the combined authority of the committee and board of supervision. Societies will naturally require a period of notice before resignation of member- ship may take effect — the German Act fixes the minimum period at three months and the maximum at two years; members, though tenants, will not all be simultane- ously desirous of resigning ; their leases do not all expire at the same time ; and they will not be all in debt with their society or all generally insolvent. Or another basis might be adopted. When Prussian societies do not furnish a detailed statement of the assets of their members, the Prussian State Bank allots to each such society a maximum credit of from £5 to £15, at its discretion, per head for each member ; and a South German Bank, in estimating the credits allotable to the rural credit societies in business relations with it, assesses the value of each society, in case it should be necessary to recover any claims, at the rate of £10 per member. The Prussian Bank does not confine its rule to rural societies : urban societies come within its scope. It will hardly be questioned that English rural societies, even those composed entirely of tenants, offer a sounder security on such a basis than do those urban societies of small tradesmen and artisans to whom the Prussian Bank finds it safe to lend money when organised in a registered co-opera- tive society. 25574 h -l XX As to the nature of the security obtainable by the society from tenant borrowers, it may be recalled that the aim of a co-operative society is to furnish supplementary working capital on personal security, that is, upon the security of the general standing of the borrower and of his business reputation, supported, if necessary, by sureties, the ultimate security implicitly involved being the realisable value of the assets of the borrower or of those of both borrower and sureties. In Germany this ultimate security consists mainly in property, and in so far members are able to provide a better underlying security. But tenants have leases, and cannot leave at a moment's notice ; they possess personal property, stock, machines ; their busi- ness capacity and character is known in their neighbourhood; and it is always open to them to provide sureties, who need not be members of their society. _As societies do not pretend to furnish the entire or major part of members' working capital, but merely to supplement it, the amount of credit which the members may be allowed on these bases is likely to be in keeping with their needs as well as within the limits of safety for the society. The supervision automatically exercisable by reason of the narrow limits of the area of rural societies minimises risk of loss, a risk which is further reduced by the power, to be retained by the societies, to call in their loans at short notice, when there is good evidence of their capital being endangered. It can hardly be anticipated that co-operative credit societies will increase at first with great rapidity in England. But English farmers are not alone in being highly conservative and distrustful of fresh projects; in Germany the success of the movement was largely the result of the intensive propaganda carried on continuously from many sides as well as of the effective assistance of the State. The same persistent and penetrating propaganda work will be required in England; and progress will probably be slow, as in Germany. There are now nearly 17,000 rural credit societies in that country; but twelve years after (1874) the first Raiffeisen bank was established there were only about one hundred of that type in existence, and in 1890 — nearly forty years after — their total number was 1,729. Among the chief agencies which promoted the movement, apart from the State (including the Emperors William I. and William II., who showed their approval by donations to the Raiffeisen Central Loan Bank, and rulers of Federal States) and the Co-operative Unions, which have acted in their several districts as the intelligent organisers and advisers of co-operative effort in all its branches, may be mentioned : (1) the agricultural organisations, and especially since their creation under the Prussian Act of 1894, the Chambers of Agriculture in Prussia, and similar bodies in other States ; (2) clergymen ; (3) teachers and communal officials in rural districts ; (4) larger landowners ; and (5) various educational institutions. Raiffeisen, the mayor of a small, remote district, was first given the opportunity of putting his ideas into practice outside his own restricted area by the Agriculturial Association of the Rhine Province. His book describing his system appeared in 1866, when he had already founded five credit banks, and attracted in the same year the attention of the Association which was considering means for improving credit facilities for the farmers of the province. In 1868 Raiffeisen was com- missioned by the Association to establish credit societies within its area, and within a year he founded 12 new societies. Shortly after he was placed in charge of the Aid Department for Loan Banks established by the Association as a branch of its work. Similar associations throughout Germany took up gradually the active furtherance of the credit society movement. Unlike Schulze-Delitzsch, who conceived his societies as purely business organi- sations, Raiffeisen always laid stress upon the moral as well as the material aims of his societies, which " rest upon a Christian foundation " and " aim at promoting the moral and material welfare of members." Clergymen of all denominations in most parts of Germany have given their constant and active support to the Raiffeisen banks since their inception. At the present time large numbers of clergymen are to be found acting as chairmen or members of committees of management and of boards of supervision, and in some cases they undertake the duties of secretary. Rural teachers and communal officials have rendered great services to the Raiffeisen societies, not only by encouraging their establishment and becoming members, but also by accepting in large numbers the most responsible offices such as those of chairpan of committee and of secretary. Agricultural colleges of every grade, which are more numerous in Germany than in England, usually include in their curriculum a course of lectures on agricultural co-operation, XXI while at several universities {e.g., Berlin, Halle) special courses of lectures on co- operation by various professors are given each year. Larger landowners have also taken a considerable part in the extension of the village banks, not only by promoting their establishment and accepting office, but also to a certain extent by depositing with and borrowing from them. The chairman of the committee of management of 50 out of 305 Pomeranian societies in one year was a large landowner ; in another year out of 720 Silesian societies there were 209 large owners holding this office. In the less onerous position of chairman of the board of supervision they are even more numerously represented; and they are very generally found as ordinary members of both organs of administration of a co-operative society in those parts of the country, that is, chiefly in the Eastern provinces of Prussia and in the Kingdom of Saxony, where large landowners consti- tute a noteworthy proportion of all landholders. Various reasons account for the more limited participation of large holders in the society as depositors and borrowers. Although limited liability is regarded by many very competent authorities in Germany as most suitable in the case of societies which contain a considerable proportion of large holders, unlimited liability has not (since 1889) been a chief obstacle : the difficulty lies mainly in the dislike of a social superior to reveal his position to a committee of two or three of his smaller neighbours or to submit an application for credit to them, as well as in the difficulty for a small local society to grant credit to such members to the extent that may be required, without exhausting their own working capital to the prejudice of their other members, or without risking an unduly high proportion with a single member. In Pomerania and Saxony (Province of), as well as in Silesia, a considerable number of large landholders are reported as transacting business with the local societies ; in Pomerania out of 376 local societies, all with limited liability, there were 107 which fixed their maximum total loans to individuals at from over £1,000 up to £2,500, 27 at from over £2,500 up to £5,000, and 9 at from over £5,000 up to £10,000. In many cases outside Pomerania, Saxony, and Silesia large landowners obtain their agri- cultural requisites through the local society of which they are members, and in this way, but seldom otherwise, they often obtain credit from co-operative credit societies. It may be conceded that local credit societies are less necessary to large than to medium and small holders : they can usually obtain credit more readily and on better terms than the latter from commercial banks, although in common with other farmers they usually require such credit for longer periods than are customary in commerce. And in Germany, at least, such bank credit is far dearer than co-operative credit, and repayable under more unfavourable conditions. That even large holders in England do not obtain all the credit they need at their banks appears clear from the consider- able volume of credit which is at present extended to farmers by dealers and factors for periods of a year or more. AGRICULTURAL CO-OPERATION. Principal Branches. Although credit societies still constitute the backbone of the modern co-opera- tive movement among German farmers, there are many other important and highly organised groups of co-operative societies for production and distribution. Co- operative action for economic purposes is, of course, very old in their agricultural life, the original agricultural scheme among the Germanic peoples being based upon common ownership and common farming operations. Even after the completion of the evolutionary process from communal to private ownership, co-operative action, either of a compulsory or a voluntary kind, persisted in many impor- tant matters in village communities. As a consequence of the land reform, the emancipation of holders from feudal conditions, the introduction of absolute owner- ship of property, and the disappearance of the compulsory relationships by which individuals, both in town and country, were perforce united in close associations which regulated their whole activities, individualism emerged prominently in the first half of the nineteenth century. But the need for co-operation was soon felt. If the smaller farmers were to hold their own with the larger, they had to adopt modern methods of intensive farming, employ manures, feeding-stuffs, modern implements and machinery, obtain suitable breeding stock, and put their wares on the market in sufficient and graded quantities without incurring undue cost. Apart frdm the circumstance that many such requirements were dear and not 25.574 * 3 XXll utilisable to their full capacity by the individual, such as large machines and good breeding stock, or were unduly expensive when bought in small quantities, all meant the command of working capital, which was scarce in the country districts and for isolated farmers hard to obtain. Accordingly a new co-operative movement, differing from the old in being voluntary, and, for the persons involved, only binding as regards the particular objects aimed at, came into existence. The birth- place of the new movement was in the Ehine Province, where small holdings prevail. As contemplated by Raiffeisen, the local society was apparently to repre- sent a co-operative organisation which primarily furnished credit to its members, but which also bought their agricultural requisites, sold their produce, provided machines for common use, and even engaged in production {e.g., in dairy operations) ; in the society were to be concentrated in effect the economic forces of the village community. Experience proved that, while especially the supply of agricultural requisites may be suitably carried on as a department of the village bank, other co-operative undertakings, involving technical skill in their management and con- siderable capital liabilities, are best taken in hand by societies independently consti- tuted. The two most important groups of registered agricultural co-operative societies, after that of the credit societies, are the supply and dairy societies. Among the remaining groups may be mentioned the electricity, cattle-selling and machine societies (all of which have developed with remarkable rapidity in recent years), as well as the corn-selling and egg-selling societies. Swpfly. — The value of the agricultural requisites (mainly fertilisers and feeding-stuffs) supplied annually by co-operative agencies to German farmers may be estimated at about £15,000,000; in 1910 it was over £13,000,000. The total annual expenditure of Germany on such agricultural requisites is estimated at about £60,000,000. In addition to over 2,400 registered local supply societies there are about 12,000 other local societies (credit societies represent about five-sixths of this total) which supply their members with these goods; numerous unregistered Farmers Associations; the German Agricultural Society (modelled on the English Royal Agricultural Society but undertaking many business functions for its members) ; and the Agrarian League. Through these organisations even the smallest holder is now enabled to obtain at moderate prices goods of guaranteed quality. The local societies usually operate over areas comprising one, two, or three parishes, but in some provinces, where large landholders are numerous, considerable areas are covered. Thus in Pomerania, which is twice the size of Yorkshire, there are thirty societies for supply : in the case of twenty-two of these business is extended over one or more of the 28 administrative divisions of the province ; and in East Prussia there are 20 supply societies, the majority of which extend over similar areas, some having depots at suitable centres within their boundaries. In Pomerania the smaller farmers obtain their supplies from these societies, not directly but through their village banks, which are members of these societies, collect the orders of their members and transmit them on their own account to the supply society concerned. Large societies are more useful for big landholders, who require quantities in excess of what the financial strength of the small local society perhaps allows it to order without unduly straining its credit capacity. Large areas mean more complex business, imply the employment of a permanent paid official or officials, and probably the necessity of maintaining a warehouse, and in general involve fixed establishment charges that can be met only with difficulty unless a large and constant business is assured. They tend to place the small farmer at a disadvantage : his single orders may be so small that when goods are bought by him alone from the large society most of the advantage of combination as regards price is lost; and his credit with a society at a distance is apt to be weaker, as supervision over its humbler members is less easily exercised. It is, of course, essential that the fixed area of a society should be capable of furnishing a membership able to provide orders of sufficient importance to obtain the advantages of purchasing in bulk. Local societies provide admirable agencies for bringing the people of a neighbourhood into touch, and they promote a knowledge of the use and relative value of the various agricul- tural requirements as well as a sense of community of interests. As the advantages of combination for the purchase of agricultural requisites are not fully realisable by local societies covering small or even more extended areas, central organisations hane been formed, which cover provinces or States, to serve as their sources of supply. In many provinces numerous large landowners Xxiii are directly attached to these central societies. The latter have been further organised for the purchase of certain commodities into associations whose area of operations is co-extensive with Germany. Thus the Supply Association of German Farmers, whose shareholders are the central co-operative trading bodies, and other large agricultural associations {e.g., the German Agricultural Society, the Agrarian League) has purchased in a single year 620,000 tons of basic slag for its members at preferential rates, and the Potash Supply Company, founded by the Imperial Federation of Agricultural Go-operative Societies, supplied its members in 1911 with 120,000 tons of purified potash salts. The sale of goods to non-members is permitted under the Co-operative Societies Act to " agricultural distributive societies which, not maintaining an open store, supply goods destined from their nature for the business of farming." The majority of small local societies maintain no store; orders are collected periodically or after notice to members, and each member takes delivery of his order at the place appointed by the committee. Where a store is kept the member selected to act as storekeeper usually attends once or twice each week at fixed hours for the sale of commodities. Dairying. — The number of registered dairy societies grew from 693 in 1890 to nearly 3,500 in 1912; on January 1, 1910, the number of members in 3,193 societies Avas 288,699. There are in addition 600-800 unregistered societies. The value of the sales of both groups now amounts to about £20,000,000 annually. Many direct advantages have resulted to farmers from co-operative action in this branch of their business : better utilisation of the raw material, better product, better prices, with saving of time spent in marketing, saving of time on the farm, a source of regular income; and perhaps in many cases it constituted the only agency through which farmers have been able to make their cattle keeping profitable. As contrasted with the isolated production of former times, the tendency of co-operative action in dairying has been to improve and increase the milk production, and to exercise a remarkable influence upon the breeding and maintenance of stock, especially in small-holding districts. There are three principal types of dairies. About four-fifths of the total are those in which the cream is separated and butter made, but the separated milk and butter-milk in most cases are returned to the suppliers in fixed percentages of milk delivered. Those which sell the new milk, or which utilise the new milk for making butter and full and half cheeses, and the separated milk and butter-milk for making other cheeses and mast for pigs, are not numerous; they necessitate larger capital outlay, and more skilled and expensive management, while the commercial side of the undertaking is more difficult. The third group, known as cream depots, and which are either independent societies or branches of a dairy, only separate the cream, which is then despatched to a central dairy or to the towns. Unless a regular supply of milk from a minimum number of 300 to 400 cows is guaranteed, co-operative Unions do not usually collaborate in founding a dairy society. Members must deliver all milk not required for their own domestic or farm use, and undertake not to make butter or sell milk. The transport of the milk to the dairy is carried out by the society or by the members. In the small- holding districts, where members own from two to ten cows, the societies usually undertake the delivery, dividing their area into sections and employing members resident in the various sections for this work. One dairy visited, with a membership of 850 distributed over 14 villages, twelve of which were over two miles distant, employed fourteen carriers, who collected the cans (left on the roadside nearest the individual farms) and returned them to the members, together with the separated milk and any butter and cheese purchased by the members. When the society does not undertake the delivery, members of the same localities arrange to deliver in turn to the dairy for a week, fortnight, or month ; when farmers keep large numbers of cows, they make their own deliveries. The predominant practice as regards payment is to pay by fat-content alone, or to allow a fixed payment per litre — usually less in amount than half the normal price for good milk — plus a further- payment based' upon its fat-content. Milk deliveries of each member are regularly subjected to three or four alcoholic tests per month, and members are paid according to the average of these tests. In some districts milk-selling societies have been established. These under- takings are generally constituted by combinations of milk producers for the purpose of sending milk to a central cooling station or for the establishment of urban centra] sale stations. In the former case the object is to secure the production of pure 25574 b 4 XXIV milk in the individual farms and to despatch milk of a guaranteed quality to the towns. Like the credit and supply societies, dairy societies have founded to a certain extent central organisations. A few Unions composed exclusively or almost exclu- sively of dairy societies, exist, which, in addition to auditing and advising, organise the purchase of dairy requisites or the sale of dairy produce. There are other Unions of dairy societies which occupy themselves only with the technical and commercial side of their business : they supply dairy necessaries (machines and materials), inspect dairy machinery, aim at securing standard qualities in the produc- tion of butter, and undertake its sale. The number of societies attached to central organisations of this kind is small, amounting in 1910 to less than 5 per cent, of the total. One of these Unions, which has shops at Breslau and three others in Silesian industrial towns, does a considerable business with urban co-operative stores. Corn-Selling and Granary Societies. — State aid has been given in several German States (Prussia, Bavaria, Baden, Wiirtemberg, Saxony) to promote the co-operative corn-selling or granary societies. The preamble to the Prussian Act (1896) under which £150,000 — another £100,000 was voted under a second Act in 1897 — was allotted for the construction and equipment of corn-houses, expressed the advantages which, it was hoped, would accrue to farmers from their development as follows : — (1) Improved facilities for cleaning, drying, grading, and mixing the various qualities of corn delivered so as to furnish commodities at once good, homogeneous, and easily marketable. (2) The possibility of regulating prices by only putting corn on the market according to actual demand — in other words, the reservation of supply. (3) The possibility for farmers to obtain credit on fair conditions on the security of their warehoused corn. (4) The abolition or reduction to as great an extent as possible of the charges of middlemen and reduction of the cost of transport. In Prussia 36 granaries were built by the State between 1896 and 1906; of these 13 were built in Pomerania, six in Hesse- Cassel, and three in the Provinces of Saxony and Westphalia. They were leased to co-operative societies at a total charge of 8 per cent, of the cost spread over five years, or should profits be realised, a maximum annual payment of 3 per cent, was to be paid to the State. Results in Prussia showed that there had been technical defects in machinery equipment; the silos had often been built too large for local conditions; the spots for their erection had been injudiciously chosen; the areas of the societies were too large; com- pulsory delivery was not insisted upon; and in many cases no subsidiary branches of business such as the sale of agricultural requirements had been taken up. The Bavarian Government has made very considerable grants and advances, and given other substantial assistance to co-operative corn-selling societies, especially by arranging for the State Departments to buy preferentially from them. Compared with Prussian warehouses, those in Bavaria are upon a small scale, and each ia designed to serve only a small area. Between 1895 and 1911 166 granaries were built at a total cost of £166,000. The great majority are not conducted by special corn-selling societies : in 1911 94 were managed by single credit societies, 20 by groups of co-operative societies, 38 by granary and by supply and sale societies, and the balance by various organisations and single persons (in two cases) . The sale of corn has been centralised to a considerable extent. In Bavaria there is a union of 36 granaries; and the majority of the provincial central trading organisations are ready to undertake the sale of corn for their societies, whether special corn selling, credit, supply and sale, dairy or other societies as well as for individual members forwarding quantities of sufficient bulk. Three central trading societies in Eastern Prussia — at Stettin, Dantzig, and Posen — sell very large quantities of corn; in 1911 these societies showed respectively sales of 2,728,000, 2,145,000 and 1,033,000 cv^. There are few, if any, private firms or companies in Germany which reach the total of the Stettin or Dantzig societies. Cattle-Selling Societies. — Germany produces about 95 per cent, of the meat consumed by its inhabitants; and in 1907 more than 60 per cent, of the cattle and more than 70 per cent, of the pigs bred in Germany were held by farmers with hold- ings of not riiore than fifty acres. Despite the great eflEective demand for meat, it is contended that German farmers do not obtain proper prices for their stock owing to the present market coifQitions, under which supplies are gathered by a series of intermediaries and despatched to great centres, where cattle-markets and JfXV slaughter-houses are combined, and a few salesmen and slaughterers command the trade and determine prices. The growth of great cities and the results of the legis- lation prescribing that animals intended for human food must only be killed in public slaughter-houses, have brought about that not only these great cities but also the areas within the sphere of their economic influence draw their supplies in a large measure from the same sources. The system is a reproduction upon a smaller scale of the American concentration for slaughter and distribution. Attempts made to bring producers and consumers into more direct contact by the estab- lishment of co-operative slaughter-houses, after the model of the Danish slaughter- houses, have not met with success ; and the present movement aims at elimin- ating unnecessary intermediaries by the despatch of cattle directly to the sale and slaughter markets, where they are handled and sold by special agents. The various Chambers of Agriculture and co-operative organisations have established central depots at large markets : thus the depot of the Schleswig-Holstein Chamber, which is also utilised by the Hanoverian societies, is at Hamburg. The Berlin Central Co-operative Cattle-Selling Society, of which the majority of local cattle-selling societies and Chambers of Agriculture are members, owns a large cattle-market at Berlin, and has its agents at several important centres throughout Prussia. On January 1, 1910, there were 145 cattle-selling societies, with a total membership of 33,375; their present number is probably about 200. These local societies usually fix as area a political district comprising roughly a number of communes within a radius of ten miles; in some cases two such areas are included. It is sought to secure that one full waggon-load at least may be regularly despatched every week or fortnight, so that freight and other charges may be proportionately lighter, and that greater numbers being marketed, more influence on prices may result. By frequent despatches members are enabled to sell single animals when ready for market and to avoid direct loss by feeding stock beyond the period when they are ripe for slaughter. Store or breeding cattle are rarely sold by co-operative societies, which deal principally in pigs and calves. Large cattle sold by or through co-operative agencies are mostly sent by individual large landowners to the Berlin Society or the Hamburg depot. Local societies find that the very great differences in size and quality of large cattle lead to great variations in price and make it no easy task to satisfy members with the prices they pay or obtain for them. The majority of the societies have adopted the method of selling on commission, the members receiving payment for their stock within the same week, but there are many important societies which purchase calves and pigs directly from the members. Practically all societies, except those in Bavaria, compel members to sell all calves and pigs only to or through their agency, although often an exception is made when animals are sold for consumption in the immediate district. All animals are insured against damage in transit and unforeseen losses by total or partial condemnation at the abattoirs by meat inspectors. The majority of societies either maintain their own insurance fund, or insure with the Berlin Central Society. Although the movement has been vigorously promoted only during recent years, it has already achieved great success. The value of the cattle sold by Prussian co-operative agencies increased from £1,300,000 in 1906 to £2,229,000 in 1910 and to £3,445,000 in 1911. The total sales of 94 Hanoverian societies in 1911 amounted to £1,720,000; and 12 Pomeranian societies sold cattle to the value of £363,400. In addition to the assistance given by the Prussian Chambers of Agriculture, the Prussian Minister of Agriculture has provided the funds for the appointment of two officials, one for the western and the other for the eastern provinces, whose sole duties are to further the organisation of co-operative cattle-selling. Egg-Selling Societies. — The value of the imports of eggs into England and Germany in 1911 amounted to almost the same total, namely, eight million pounds sterling. For many years agricultural organisations have made efforts to bring home to farmers the importance of this market, and pointed out that to obtain satisfactory returns from this branch of their business individual farmers must combine to bulk, grade, and send their eggs in a fresh condition to market without the interposition of superfluous agents. The number of German registered poultry and egg-selling societies is not large, 145 societies with 13,554 members existing on January 1, 1910, according to the official returns. There are also numerous unregistered societies of this kind, and many dairy and supply and sale societies sell eggs for their members. These societies also promote poultry breeding by selling to members suitable breeds of fowls at low prices, advising as to the introduction xxVl of fresh blood, and giving attention to suitable housing and feeding. Co-operative egg-selling, like co-operative cattle-selling, has flourished especially in Hanover; in 1910 there were 146 societies attached to the Hanover Union, about two-thirds of which were registered under the Act, and the total amount paid to members of 122 societies after the deduction of all expenses and charges, amounted to £84,690. for the sale of 27,499,124 eggs. Electricity Societies. — One of the most noteworthy recent developments _ in German co-operation has been the rise and rapid extension of societies for providing rural districts with electric light and power. In 1900 there was not a single registered electricity society; in 1907 there were 16; at the present time their number may be estimated at between 600 and 700. The use of electric light and power is to be noticed in even quite small villages in most parts of the country, and electric motive power is considerably utilised by large owners in many of the more Eastern Prussian provinces. Its use by farmers has been stimulated by the marked increase in the employment of large and small agricultural machinery; thresh- ing machines, hoes, cultivators, mills, milk centrifugal machines, &c., are now very commonly driven by electricity. The dearth of farm labour has been another concurrent factor. Apart from the advantage of saving or replacing the labour, whether of man or beast, electricity is advantageous for farmers through the low cost of maintenance of the electric apparatus, the absence of running expendi- ture when not being utilised, the rapidity with which it can be put in operation, its simplicity for handling, the facility with which the motor can be applied to the working of several machines simultaneously, its precision, its cleanliness, its freedom from danger of fire, and, under normal conditions, its comparative cheap- ness. Smaller farmers are making an increasing use of electric power. There are three principal groups of societies : (1) those producing and distributing electricity; (2) those erecting their own conductor installation but obtaining their supplies from others; and (3) those representing merely combinations of persons for obtaining electric supplies by guaranteeing a minimum purchase of current or to obtain reduced rates therefor. The great majority of the present societies fall in the latter category. By co-operative action cheap electricity is now obtainable by small farmers, even in remote villages of Pomerania. In one small village in that province, six or seven miles from a railway line, members paid 2^d. per kilowatt-hour for power and 4:^d. for light, but the charge for power was reduced as low as l^d. for large consumers. One member, a small farmer who had electric light in his house, stables, and outhouse, and worked three small machines simultaneously with one motor (5^ h.p.), stated to the writer that his electric installation saved him the labour of one man and one horse. His payments for light (eight lamps) and power in August, September, October, and December in 1910 amounted to 13s., 9s. 2d., 8s. Qd., and 18s. 7d. respectively. Public authorities (Provincial, District, Local, as well as the State Railway authorities) have materially assisted the movement to bring electricity within the reach of the inhabitant of country districts. In the Province of Saxony a large number of communes and districts have become shareholders and consumers in co-operative control stations, and thereby given considerable solidity to the particular undertakings. Such participation is especially important for electrical under- takings depending largely on agricultural consumers, who require power for only a few months in the year, although they use it then to such a considerable extent that the conducting lines and substations must be upon a considerable scale. In Pomerania it was decided in 1910 that the province and the interested districts should contribute a third of the cost of establishing central electrical works, while the private persons interested were to find the remaining third. Pomerania was divided into five zones, in each of which an overland central station was to be erected' (if not already existing), so that electricity could be brought within the reach of all the rural districts in the province. In other parts of Germany provinces, rural districts, and communes have erected electrical works or otherwise participated in such undertakings. Machine Societies. — Co-operative machine societies which purchased machines for joint use by their members numbered on January 1, 1910, 571, with 12,441 members ; of these 423 and 32 societies (with 10,158 and 360 members) were respec- tively threshing-machine and ^team-plough societies. But it may be observed that a large number of credit societies, as well as numerous supply, dairy, and corn- xxvu selling societies, also purchase for hire to their members various machines such as rollers, drillers, hoers, grist mills, pressing machines, and weighing machines. The predominance of threshing-machine societies in this group is due to the circumstance that it is not usually possible for individual small and medium land- holders to procure them owing to their high price (say, £400 to £600), as well as to their unprofitableness due to their being employed only upon a small bulk of produce, while they require skilled handling and proper shed accommodation. Ordinary small credit and other societies are also unwilling to incur liability to such an extent for objects foreign to their main object. Other Societies. — Vine groivers' societies (in January, 1910, 194 with 10,995 members), which, however, have little importance from an English standpoint, purchase the grapes of their members at prices fixed by the general meeting according to the classes as determined every year. In one Palatine village visited, the committee of the vine growers' society, appointed for the purpose, divided the grapes usually into five or six classes, but in 1905 twelve classes Avere distinguished. In 1909 another society could only distinguish two classes. The members are then paid either in full, or, as is now more usual, receive a large proportion of the price, the societies usually borrowing the money from the local village bank. The grapes are then pressed, their juice subjected to the necessary processes, and the wine sold by the society. On the whole these societies have not achieved success. The general meetings of members tend to vote unduly high rates of payment for their grapes, so that the societies are often unable to obtain corresponding returns upon the sale of their wine. In the latter matter even greater difficulties arose owing to the organised opposition of the wine trade and the inferior commercial capacity of the society, both as regards internal and external organisation as well as in the presentation and variety of their wares. Larger landholders, especially those in Eastern Prussia, have established distilling societies for the construction of distilleries to manufacture spirit from potatoes, which, produced in great quantities, are often hard to sell at remunerative prices. These local societies, the owners of private distilleries, and the organisation of spirit producers have united to form the Sale Union of German Spirit Producers. A group of societies which have recently been created, and are likely to attain importance are the potato-drying societies. It is estimated that about 10 per cent, of the total German production of potatoes is lost, especially through decay; and as the potato supply cannot be entirely utilised in its natural state for human and animal food, or for producing spirits or starch, these societies aim at making a durable feeding-stuff out of them. In 1909-10 there were reported to be 254 potato-drying establishments of all kinds which handled 333,000 tons of potatoes, and produced 87,500 tons, of which 69,800 tons were potato flakes. Nearly 90 per cent, of the potatoes were dried for return to the farmers supplying them. There are only one or two registered co-operative ibeet-sugar factories in Germany, but a number of factories under the legal form of joint-stock companies are practically co-operative undertakings, as they oblige shareholders to deliver their beet crops, and profits or losses are divided over these suppliers. These factories also produce dried beetroot slices, which are considered a valuable feeding-stuff, and the refuse from the sugar-production process forms a valuable top-dressing.* Breeding ^Societies, which are obviously of special utility in areas where small and medium holders predominate, are very numerous, although the registered societies are relatively few (262 with 14,219 members in January, 1910). They provide suitable breeding stock, advise on breeding questions and markets, establish and keep herd-books, and hold shares, usually in conjunction with other local societies. They receive encouragement and financial assistance in most German States from the official and semi-official agricultural bodies. Certain pasture societies either rent or purchase land for pasturing the animals of members, and public aid is also granted to them, notably in South German States. The purchase and settlement of agricultural land by land purchase and settle- ment societies, whose members are themselves the purchasers or the settlers of land dealt with, is rare in Germany, although a certain number of local credit societies have undertaken the purchase and breaking up of estates in their localities for sale to their members, and there are some Polish societies which, in close association with Polish credit societies, also engage in this work. As regards the purchase * See notes on visit to beet sugar factory in Appendix, p. 200. xxAun 01 land for settlement by farmers there are a number of limited companies, one joint-stock company, and one co-operative society with limited liability. There is t/r 1 ^1^^^ company for Pomerania, East Prussia, Brandenburg, Hanover, Hesse, and Mecklenburg, while in Schleswig-Holstein there is a co-operative society. The Land Bank,* a purely commercial undertaking, is constituted as a joint-stock company. COMBINATIONS OF CO-OPERATIVE SOCIETIES. The unit of the German co-operative organisation is the individual society, an association of at least seven persons for the pursuit of common business ends, who, under the Act, must take shares and bind themselves in a joint and several liability either to a fixed limited amount per share or to the extent of their whole property. In the further pursuit of their business ends groups of such individual societies have been formed, namely, central banks and central trading bodies for provinces or States; and these have become further organised by the creation of central banks and central trading bodies which operate over Prussia or Germany. Apart from this organisation for business purposes, over 90 per cent, of all rural societies are attached to central organisations which serve their common as distinct from their particular business objects. Such bodies, which usually operate over whole provinces or States, are entitled Unions, and, while their main business is to undertake the audit and inspection of their affiliated societies, they act m general as the intelligent organisers and regulators of co-operative effort in all its branches within their areas. Between the local societies and the Unions is now generally found a rather loose grouping of societies which lie close together into Sub-Unions; and above the Unions are the Federations, to which are directly attached the Unions as well as the central banks and central trading bodies. Finally there is the International League of Agricultural Co-operative Societies founded by Herr Haas in 1907, and to which are attached (1912) the great co-operative organisations of Germany, Russia, Austria, Hungary, Italy, Denmark, Holland, Finland, Roumania, Servia, Bulgaria, and Japan. In point of date the central banks and trading bodies have been in almost every case posterior to the Unions, having been established by the latter. The present position may be said to be the direct result of the Co-operative Societies Act of 1889, which prescribed an obligatory audit for all registered co-operative societies once within every two years, permitting duly authorised Unions of co- operative societies to carry out this audit. It provided that such Unions must not conduct any purely business operations, such as banking or the purchase or sale of agricultural commodities. Previous to 1889 Unions often undertook such' business in addition to the work of promoting the general interests of their members, although the expediency of removing such economic functions from the sphere of their activity was recognised in many instances. These Unions, and those subsequently established which became authorised to conduct the audit, created in due course central banks and central trading bodies to serve their affiliated societies. Their legal status is that of a registered association, which implies that they do not carry on profit-seeking business; membership of such an association does not involve any mutual liability of its members. Apart from audit and inspection and the establishment of central business organi- sation for the benefit of their societies. Unions undertake regular propaganda and advisory work : issue model articles of association, business rules for use by credit and other societies, general manuals of instruction for officials of local societies, leaflets on various subjects; and in 1911 28 Unions alone published news- papers, mostly every fortnight, of which the total circulation was 248,190 copies. They compile and publish annual statistics respecting their societies, to each of which they furnish a copy. All the most important Unions have instituted special annual courses of instruction for office-holders in local credit societies, such courses lasting a month, a week, five, four, three, and two days. In nearly every case public assistance is specially given to the Unions for this pur- pose, and the latter usually pay in whole or in part the expenses of those attending the courses. Many Unions have made agreements with important insurance companies, under which members of their affili^ed societies may effect insurance (fire, life, accident, *- See Appendix. XXIX liability, fidelity, cattle) on preferential terms. Legal advice is regularly given by a number of Unions, all of which are also able to give technical advice on banking, insurance, and on most matters relating to agricultural business (e.g., dairying, manures, feeding-stuffs, machinery, fixing of electricity rates, marketing of produce, &c.), as they have at their disposal the services of their own officials as well as of those employed by their central bank and their central trading societies. Unions also take an active part in promoting projects of rural social welfare. They obtain funds to carry on their work from three principal sources: the annual contributions from their affiliated local and central societies, the annual grants (in practically all cases) from the State or from the Provincial Governments, and grants (or their equivalent by assignment of services, or both) from the semi- State Chambers of Agriculture in Prussia and the corresponding bodies in other States. There are two Federations of rural co-operative societies, namely, the Imperial Federation and the Eaiffeisen or General Federation. Membership of the Imperial Federation is normally open to Unions and to central trading bodies serving co- operative purposes. It is expressly stated in the articles of association that " the independence, internal organisation, and administration of these organisations shall be in no way interfered with as the result of their association in the Imperial Federation." Since 1905 the Raiffeisen Federation and each of its constituent Unions and other central bodies have been affiliated to the Imperial Federation; and at the present time four-fifths (20,500) of all German rural registered co- operative societies are included in its membership. The gross total of members in all its societies is over 1,900,000. The object of the Federation is to centralise all the rural co-operative forces for their general purposes under a system of provincial or State autonomy which admits of administration for the provincial or State areas being more effective and less costly than under a purely centralised system, facilitates co-operative work of a more intensive character by reason of local knowledge and local patriotism, and gives scope for development along lines most suited to the idiosyncrasies of the various areas as regards landholding, nature of their agriculture and general economic position. It has exercised a remarkable influence upon the extension and' improvement of all branches of co-operative organisation — business methods, management of individual societies as well as organisation for business objects — upon agricultural insurance, banking, statistics and education. Among its estab- lished activities may be mentioned : its Training School for Co-operative Officials, which holds courses every year in Darmstadt from October till March; its central organisations for the purchase of potash salts (it has formed a company which represents a total of about 1,500,000 persons) and of basic slag ; its year-book, with complete annual report and statistics of its affiliated societies ; its series of works on agricultural and co-operative topics, its co-operative handbook, and its newspaper, published twice monthly. The Federation also audits the accounts of the Unions and of the central trading bodies at their request; has made arrangements for insurance, and adopted various other suitable measures in the interest of its members. The Raiffeisen Federation undertakes the general supervision and the care of the interests of its Unions, devotes special attention to the maintenance of a uniform and thorough system of audit by its Unions, to the giving of legal advice to it!! societies, to insurance, and to projects of rural social welfare. AUDIT AND INSPECTION. Over 90 per cent, of German rural co-operative societies are audited by auditors appointed by Unions; the alternative course open to a society is to apply to the district court for the appointment of an auditor on each occasion of audit. Co-operative societies are never audited by a State or other public authority. The frequency and scope of the audit is defined by the Co-operative Societies Act, which lays down that " the organisation of the society and the administration of its business in all branches must be submitted in every second year at least to examina- tion by an independent expert auditor." The committee of management must allow the auditor to inspect all books, documents, cash in hand, stocks, shares, and other goods belonging to the society; the board of supervision must take part in the "Examination, and its results must be laid before the next general meeting of members. XXX As carried out by most Unions auditing is not merely an accountancy audit, but rather a general audit and inspection of all the circumstances of a, society. German experience is in favour of audit being entrusted to Unions of co-operative societies authorised for the purpose. Audits carried out by appointees of courts are apt to be perfunctory and not fruitful towards bettering unsatisfactory societies, because such auditors are not usually professional auditors or co-operators; and, once the particular audit is over, it is no longer their natural interest or business to see that their recommendations are followed. But Union auditors are professional co- operators whose interests and life work are linked with co-operation, and who are concerned to raise the level of good management and promote the success of their societies, while their familiarity with co-operative principles and practice and their training provide a certain guarantee of eflScient and rapid work, as well as of their capacity to give sound advice. CO-OPERATIVE LEGISLATION. Co-operative societies in Germany are subject to a special Imperial Act, which defines the nature and general powers of registered co-operative societies, and covers fully the position of such societies. Three types of society are . recognized : those with unlimited, unlimited contributory, and limited liability. Registration is effected not at a central ofl&ce, but at that of the court of the district in which the particular society has its seat. To qualify for registration an association must comprise at least seven persons, must have as its object the furtherance of the economic interests of its members, and must possess written articles of association. Every society must have a committee of management (of at least two members), and a board of supervision of at least three members, both of which are elected by, and generally subject to, the meeting of members, which must be duly convened at least once every year. Shares are obligatory, but no minimum is fixed, except that in societies with limited liability they must not be less than the liability; the tenth part must be paid up at once or by regular instalments; and all share capital is withdrawable by members on retirement from the society. Reserves must be formed out of profits. Apart from the obligatory audit every two years, every society must publish annually in duly designated newspapers its balance sheets as well as any other of certain changes made. The circumstances under which dissolution must take place or proceedings in bankruptcy commenced, and the procedure therein are fully set out in the Act. AGRICULTURAL CO-OPERATION AND PUBLIC AID. Eor nearly a generation the systematic furtherance of rural co-operation has been a matter of settled policy in the various German Federal States ; and public aid has been liberally granted for this purpose. Financial assistance has usually taken the form of small grants to cover the expenses of establishing credit societies, con- tributions to Unions towards the cost of auditing, of propaganda, and of courses of instruction for persons holding ofl&ce in rural societies, advances of capital at low rates to central banks, or endowments of capital, or grants towards establishment expenses of such banks, or both ; occasionally it has taken the form of assisting central societies to secure advantageous terms at large banks. Direct financial assistance has also been given to rural productive or trading societies of various kinds. The co-operative movement has been substantially promoted by the district governors, agricultural inspectors, rural teachers, and other public ofl&cials, while one of the primary aims of the semi-official Chambers of Agriculture in Prussia, and of the similar bodies in other States, is the spread of co-operation among farmers. The most signal acts of the Prussian Government in this respect have been : in 1895 the establishment of the State Central Co-operative Bank, which has received up to date a total capital of £3,750,000; in the period 1896-1906 the construction and equipment of granaries at a total cost of £250,000; and in 1902 a loan of about £80,000 to the Berlin Central Cattle-Selling Society at 3| per cent, interest, subject to an annual sinking fund payment of 1 per cent. At the present time annual grants are made by •nearly all the Provincial Governments; and the Chambers of Agriculture established in each province usually work in close asso- XXXI ciation with the co-operative Unions, give to the latter the constant or temporary services of their officials free of charge, or make money grants, or do both. In Bavaria the State has, among other things, made a loan of £200,000 at 3 per cent, to the Central Loan Bank to serve as v^orking capital, and arranged for this Bank a credit at the Royal Bank of up to £50,000 at 1 per cent, below the official rate of that Bank (but not at less than 3 per cent.); it has advanced to the Bavarian Agricultural Bank, a co-operative society with limited liability, £50,000 without interest and £200,000 at 3 per cent., besides providing £3,000 towards its establishment expenses; and advances and grants on a considerable scale have been accorded to granary undertakings, breeding societies, and vine growers' societies. The co-operative granaries obtain support in an especial measure from the State. Since 1904 the Bavarian National Union has received annually £1,700 towards the cost of audit; and other grants are made for general co-operative purposes in Bavaria. It may be added that the insurance societies for live stock also receive considerable State assistance. In Saxony, Baden, Hesse, Wiirtemberg and Alsace-Lorraine substantial public aid is also accorded; in each of these cases, except in that of Hesse, central credit or central trading organisations, or both, obtain financial support from the State. Note on Position of Agricultural Co-operation in Principal European States. Germany and Denmark are not alone in having developed a vigorous co-operative movement ; co-operation in agriculture is a world movement to-day, and corresponds to similar movements among other producing classes. In other branches of economic activity the development is in the direction of larger producing units, and these larger units tend to form unions of various types for business purposes. In the face of this modern concentration of forces, farmers could not remain isolated as producers. Co-operation became for them a necessity if they were to obtain the raw materials for their industry at reasonable prices and of good quality, if they were to secure many of the advantages of large-scale production, and if they were to exercise any influence upon the formation of prices for their products. The following Table,* which shows for the countries indicated (1) the number of persons engaged in agriculture with the respective percentages of total population, (2) the number of co-operative societies, (3) the number per 10,000 of such persons, and (4) to how many acres there is on an average a co-operative society, affords a comparative view of the present position of agricultural co-operation in the most important countries of Europe. A better criterion than the mere numbers of societies per 10,000 persons would be that of their membership, but unfortunately such data of a trustworthy kind are available in only a few cases. Number of Percentage of Number of Number of Persons such Persons to Total Number Societies Acres of Country. occupied in Total " occupied " of Societies. per 10,000 such Cultivated Area Agriculture. Population, Persons. per Society. Great Britain 1,508,767 9-2 520 3 28,375 Ireland 871,989 44-7 970 11 3,378 Austria 8,205,574 60-9 10,515 13 2,531 Belgium 697,372 22-7 3,844 55 943 Bulgaria 1,739,181 82-6 693 4 13,816 Denmark 53(1,689 48-2 1,920 23 5,287 France 8,843,761 42-7 7,200 8 8,226 Germany 9,883,257 35-2 26,026 26 3,058 Holland 592,774 30-7 1,376 23 1,606 Hungary 6,055,390 69-7 5,006 8 7,110 Italy 9,666,467 59-4 8,630 9 3,964 Eussia 18,245,287 58-3 11,192 6 — Switzerland 481,649 30-9 5,366 111 ~ * The most recent official returns have been taken as regards population and cultivated area total number of societies given relates in almost every case to 1911 or 1912. the XXXll LIVE STOCK INSURANCE. The two main branches of German live stock insurance are life and slaughter insurance. By the former is meant the insurance of cattle owners against loss by death or by compulsory slaughter; by slaughter insurance is meant insurance against loss arising through the condemnation of the whole or part of a carcase as unsuitable for human food. The latter branch of insurance has developed as a result of the stringent modern requirements as to the suitability of meat for human consumption. The whole question of cattle life insurance has been greatly simplified by the veterinary measures adopted to prevent the introduction or extension of cattle disease as well as by the circumstance that liability for compensation arising out of loss through the execution of these measures is taken over by the State. Under the Imperial Cattle Diseases Act, which came into force in 1912, compensa- tion for cattle affected with tuberculosis is now to be paid under certain conditions by the State Treasury. Cattle life insurance is mainly undertaken by small local societies, the number of which may be estimated at about 10,000 ; but the extent of their business is not even approximately known. Larger cattle owners insure with large mutual cattle insurance societies ; at the end of 1909 27 of these had policies outstanding in respect of 464,858 animals of a value of £10,333,000. German writers agree that this branch of insurance is little developed in Germany, and that small and medium holders, who have,- the greatest interest in insuring their stock, make the least use of insurance. No joint-stock company is stated to undertake cattle life insurance in Germany. It has been recognized by the authoritative agricultural organisa- tions that life assurance is most suitably undertaken by local organisation of a mutual or co-operative character, through which effective valuation of animals, effective supervision of animals when insured, and proper steps in case of anything occurring can be best carried out. To meet the disadvantage of risk being borne by too limited a number of persons and over too small an area, re-insurance is recommended. As to slaughter insurance, nine mutual societies insured in 1909 1,838,548 animals to the value of £16,344,658, and seven commercial undertakings insured 880,403 animals for £5,615,872. Efforts made to establish an Imperial Cattle Slaughter Insurance institution did not meet with success. In the Kingdom of Saxony, however, compulsory slaughter insurance in respect of all cattle of over three months has been in force smce 1900. The organisation of cattle insurance, both life and slaughter, has been taken up by the State in Baden and Bavaria. The latter has built its structure upon mutual local societies voluntarily formed, which are offered the advantages of payment of half the compensation due when its model articles are adopted. Under the Baden Act of 1890 as finally amenaed in 1910, every communal (that is, roughly, parish) authority is obliged to establish and administer a mutual cattle insurance institution when at a meeting of those cattle owners resident within its area two-thirds of those present vote therefor, and their decision is ratified by the district authority. An important feature of both the Bavarian and Baden schemes is that the central organisation, after approval of the reports of the local units, pay in the first instance the full amount of the compensation due to insured persons, and recovers later the proportion due by these units on whose behalf payment was made. XXXIll DETAILED REPORT, CONTENTS. Agricultural Credit. 1. Mortgage {Long-Term) Credit. Page. I. — Land Mortgage Credit Associations ... ... ... ■•. ■■• ■•• ••• ■■• 1 Number and Business — Character — Guarantee of Bonds — Bonds not secured by specific Mortgage Charges — Area of Operations — Central Association — Hanoverian Institutions — Bavarian Agricultural Bank — State Grants — State Supervision — Adminis- tration — Membership — Procedure — Entrance Fees — Other Payments by Borrowers — Tendency to make small Properties eligible for Loans — Services to Small Land Owners — Limitation of Mortgage Loans — Special Concessions to Small Owners — Right to Loan — Object of Loan — Method of Valuation — Reducible Mortgages — Loans not subject to Recall — Recovery against Defaulters — Payment of Loans — Choice of Bonds — Consistently good Market for Bonds — Nominal Value of Bonds issued — Interest on Bonds — Special Merits of these Associations — Mortgage Credit Association Loan Banks — Other Auxiliary Business — Active Modern Policy of Associations. 2. State Provincial and District Mortgage Credit Banks ... ... ... ... ... ... 18 Number — Business — Area of Operations — Prussia — Other States — General Features — Administration and Supervision — Capital — Loans Minimum and Maximum — Limitation — Method of Payment — Interest — Reducible Mortgages — Nominal Value of Bonds — Interest on Bonds — Rural and Urban Mortgage Loans — Success of Banks — Notes on Banks at Hanover, Cassel, and "Wiesbaden. 3. Joint Stock Mortgage Banks 30 Number — Total Business — Rural Mortgage Business — History — Legislation — Legal Form — State Authorisation and Supervision — Two Classes — Organisation — Capital — Loans — Minimum Loans — Rural Mortgage Loans by principal Prussian Bank — Ilepay- ment — Reducible Mortgages — Other Legal Provisions —Value of Bonds — Redemption of Bonds — Mortgage Register — Bonds as Trustee Investments — Interest borne by Bonds — Publicity — Paid-up Capital and Reserves — Dividends paid by Mortgage Banks — Notes on Prussian Central Land Credit Joint Stock Company and Lorrach District Mortgage Bank. 4. German Savings Banks ... ... ... ... ... ... ... ... ... ... 3& Their Importance to Farmers as Suppliers of Credit — History — Kinds of Savings Banks — Colhscting Agencies — Number in Germany — Legislation — Minimum and Maximum Deposits — Interest on Deposits and Investments — Conditions for Mortgage Loans by Savings Banks — Loans on Reducible Mortgages — Limits of Loan on Mortgage Security — Special Regulations respecting Small Holdings — Amount of Mortgage Loans by Savings Banks — Restriction of Area for Mortgage Investments — Personal Credit — Loans to Co-operative Societies — Tables. ■5. Credit for Land Improvement ... ... ... ... ... ... ... ... ... 50 Nature of such Credit — Special Institutions existing. Prussia : (1) Land Improvement Funds ; (2) Land Improvement Banks — Objects, Privileges — Procedure on part of Borrower, Loans, Interest and Sinking Fund, Security required, Supervision of Loans. Saxony — Bavaria : General Provisions of the Bavarian Act. Hesse — Oldenburg. Results. 6. Prussian Provincial Aid Banks 55- Functions — Administration — Existing Banks — Silesian Bank : Bonds guaranteed by Province, no Loans from private persons. Term and Security of Loans, Direction and Supervision, Allocation of Profits — Loans to Individuals by Banks — Profits — Limited Utility of Banks, i 7. Rent Charge Banks 58 Their Institution — Existing Banks — Their Functions and Powers — Not independent Agents — General Commissions — General Conditions — Interest — Repayment — Loans in connexion with Small-Holdings — Value of Bonds issued — Importance of Rent Charge Banks. 8. Insurance Institutions and Agricultural Credit 61 1. State Invalidity Insurance Institutions — Investment of Funds — Conditions for Loans — Rate of Interest— Total Mortgage Loans. 2. Insurance Companies : Urban and Rural Mortgages — Special Rules — Loans. 25574 c XXXIV II. Personal (Short Term) Credit. ' Page. 1. Local Co-operative Banks 63 Their Importance — Geographical Distribution — Age and Increase in Number of Credit Societies — Members not exclusively Agriculturists — Condition of Member- ship — Average Number of Members per Society — Range of Membership — Differences in Various Districts — Area of Operation of Credit Societies — Objects of Limitation of Area of Operations — Functions of Rural Banks — Trading in Agricultural Requisites by Credit Societies — Advantages of such Combination of Functions — Sale of Agricultural Produce by Credit Societies — General Social Activities — Achievements of Societies in this Sphere — Rural Banks as Credit Institutions — Agricultural Personal Credit — Other Sources of Credit for German Agriculturists : Public Savings Banks — Urban Banks — Urban Co-operative Societies — Dealers — Provision of Working Capital — Mortgage Transactions — Mortgage Loans in con- nexion with Land Transfer — Land Purchase by Co-operative Societies — Amount of Loans — No Statutory Limit to Amount of Loan by Societies — Form of Loan — Object of Loan — Period of Loan — Repayment of Loan — Relation of Repayments to Fresh Loans — Interest charged for Loans — Relative Cheapness of Co-operative Credit — Current Account Business — Repayment of Loans on Current Account — Stimulation of Thrift by Rural Credit Societies — Savings Boxes — Advantages as Savings Banks — Convenience — Safety of Deposits — Amount of Savings Deposits — Interest paid on Deposits. Collective Liability as Credit Basis — Increased need for visible Capital — 80 Liability — Meaning of Unlimited Liability — of Unlimited Contributory Liability — of Limited Liability — Duration of Liability of Past Members — Unlimited versus Limited Liability — Little Danger from Unlimited Liability in Rural Credit Societies — Limited Liability as practised in (a) Prussian Saxony, (6) Pomerania — Form of Liability : Adaptability to English Conditions — Working Capital — Shares — Par Value of Shares — Tendency to raise Value of Shares — Actual Payments effected — Entrance Fees — Reserves. Organs of Administration — (1) Committee of Management — Number of Members 91 — General Powers and Duties — Meetings — Chairman — Social Classes Represented — Remuneration of Committee — Secretary — His Membership of Committee — Duties — Remuneration — Social Classes Represented — (2) Board of Supervision — Duties — Meetings — Membership — Remuneration — Social Classes Represented — Liability to Remissness on part of Boards — (3) Meeting of Members. Progress and Present Position — Tables showing (1) Ranges in Volume of 99 Turnover of Societies — (2) Operations of Rural Credit Societies of Imperial Federation, 1905-10— and (3) General View of Position of 95 per cent, of German Rural Credit Banks on January 1st, 1911. Accounts of Credit Societies visited : Arheilgen — Auerbach — Augsburg — i02 Bretleben — Brotzingen — Coethen — Cosel — Eggenstein — Elxleben — Fischenich — Griesheim — Gross-Urleben — Guxhagen — Gross-Umstadt — Hambach — Nieder-Weisel — Rakow — Rinkerode — Sinzheim — Schifferstadt — Wallhausen — Zemitz. 2. Central Banks 133 Function of Central Banks — First Beginning of Central Banks — Present Number and Membership — Organisation — " Book " Banks — Legal Form — Membership — Shares and Liability — Liability attached to Shares — How far the Liability undertaken is Excessive — Working Capital — Form and Extent of Loans — Exclusive Banking Relations — Credit for Fixed Periods — Current Account — Business Done — Payments to and Deposits by Affiliated Societies — Rates of Interest on Deposits and Loans — Cost of Management — Profits — Table. Special Accounts of : Agricultural Central Loan Bank for Germany — Bavarian 144 Central Bank — Hanoverian Central Bank — Pomeranian Central Bank — Saxon (Halle) Central Bank. Agricultural Co-operation (other than for Credit). 1. Supply Societies : — (1) Local Societies. Scope of Business — Other Societies undertaking Supply — 161 Importance of other Co-operative Agencies — Value of Goods supplied by all Co-operative Agencies — Advantages of Co-operative Purchase : (a) Guarantee of Quality ; (b) Lower Prices — Educational Influences — Territorial Distribution of Societies — General Develop- ment — Shares — Amount Paid-up — Nature of Liability Adopted — Amount of Liability attached to Shares — Number of Members — Area of Operations — Collection of Orders and Delivery of Goods — Stores — Value of Purchases per Member and per Society — Nature of Goods Purchased — Obligation upon Members to Purchase — Dealings with Non- Members — Fixing of Prices — Payment for Goods by Members — Payment for Goods by Societies — Profits — Table — Sale of Agricultural Produce — Note on Gross- Umstadt Supply Society. (2) Central Societies. Advantages of Combination of Local Societies — Special 172 Advantages : Combinations of <^er 1,000,000 Purchasers— Purchase of Machinery — Local Societies safeguarded in Various Respects — More Impartial Attention to Special XXXV Requirements — Educational Efforts — Area of Operations — Membership — Table — Legal PAGE Form — Shares — Table — Exclusive Dealing with Central Organisations — Payment for Goods — Table — Expenses of Managements — Profits — Sale of Agricultural Produce by Central Supply Organisation. 2. Dairy Societies : — (1) Local Societies. Extent of Movement — Causes of its Growth — Advantages of 179 Co-operative Dairying, especially for Small Holders as regards (a) Equipment and Utilisation of Raw Material ; (&) Saving of Time in the Farm ; (c) Better Product; (d) Better Prices with Saving of Time in Marketing ; (e) Economy of Milk ; (/) Source of Steady Income ; (g) Influence on Breeding and Maintenance of Stock — Types of Co-operative Dairies — Territorial Distribution of Co-operative Dairy Societies — Member- ship and Liability — Shares— Reserves — Preliminary Requisites for Establishment of Dairy Society — Delivery of Milk at Dairy — Methods of Payment — Regular Tests of Milk Supplied — Auxiliary Businesses — Sale of Fresh Milk — Milk-selling Societies — Taxation of Co-operative Dairies — Growth and Present Position of Societies within the Imperial Federation of Agricultural Co-operative Societies — Notes on Societies Visited — Apolda Society — Gross-Umstadt Society — Ostheim Society — Zemitz Society. (2) Centralisation 192 3. Corn Selling or Granary Societies... ... ... ... ... ... ... ... ... 193 Number and Membership — State Action — Decentrislisation of German Corn Trade — Co-operative Movement — Lessons from Experience in certain States — Prussia : Legisla- tion — Construction — Leasing — Pomerania — Hesse Cassel — Province of Saxony — Halle Society — Silesia — Bavaria ; Exceptional Importance in — State Aid — Shares — Methods of Payment — Results — Wiirtemberg — Baden — Centralisation — General Points — Com- pulsory Delivery — Methods of Payment — Supply of Agricultural Requisites — General Results. 4. Cattle Selling Societies 204 German Meat Production and Consumption — Importance of Small Holders in Meat Production — Advantages — Raiffeisen's Efforts — Present Market Conditions — Failure of Co-operative Slaughter Houses — Present Movement — Societies : shares, liability, area of operations — Mainly Pigs and Calves handled — Sales only through or to Society — Methods of Payment — Mode of Operation — Managers — Insurance — Suitable Conditions for such Societies — Centralisation — Business by Prussian organisations — Hanover — Eastern Prussia — Pomerania— Bavaria — Notes on Societies visited — Bergen — Janowitz — Schivelbein — Stolp — Anklam. 5. Egg Selling Societies 214 Importance of Egg Market — Advantages of Co-operation — Title and Objects of Egg Selling Societies — Shares — Area and Mode of Operation — The Market Problem — Pay- ment for Eggs — Centralisation — Notes on two Hanoverian Societies. 6. Electricity Societies 218 Large Consumption of Electricity by German Agriculturists — Advantages to Farmers — Recent Rapid Development of Electricity Societies— Kinds of Societies — Sources of Supply — Membership — Liability — Sources of Capital — Cost to Farmers — Public Furtherance in Pomerania, Province of Saxony and other parts of Germany. 7. Machine Societies 222 Object — Number and Membership — Reasons for Co-operation — Liability — Shares — Threshing Machine Societies — Utilisation of Machines by Members — Notes on Societies — Steam Plough Societies — Other Societies. 8. Other Societies 225 Distilling — Potato Drying — Fruit Growing and Fruit Disposal^Common Pasture — Water Supply — Land Purchase and Settlement — Land Improvement. Combinations of Co-operative Societies 228 Vast Majority Organised — Present Groups — Early Groups — Centralisation versus Decentralisation. I. Unions :— 230 Number — Area of Operations — Legal Status — Legal Provisions affecting — No Mutual Liability involved — Objects — Summary of their Work — Special Courses of Instruction for Co-operative Officials. — Membership — Administration — Officials — Sub- »• Unions or District Councils — Overlapping — Sources of Income — Contributions of Affili- ated Local and Central Societies ind of Public Authorities. II. Federations : — Imperial Federation — History — Objects — Membership— Organs — General Position 236 and Work— Established A ctivities (1) Publications, (2) Training School for Co-operative Officials, (3) Auditor for Central Organisations, (4) Central Organisations for Machinery XXXVl Pagh. ConBtruction and Purchase, for purchase of Potash Salts and Basic Slag — Sources of Income — Membership in 1912. Raiffeisen Federation — History — RaifEeisen and Imperial Federations — Objects — 244 Removal to Berlin — Activity of Federation — Sources of Income — Present Position. III. International League of Agricultural Co-operative Societies *^° Audit and Inspection ••• ^^^ Auditing the main Business of Unions — Meaning of Audit — History of Co-operative Audit — Legal Provisions respecting — Agencies : (1) Authorised Unions, (2) Auditors appointed by District Courts — Actual Position — Advantages of Audit by authorised Co-operative Organisation — Official View of Nature of Audit — Two principal Con- ceptions — Frequency — Time Occupied — Notice : Surprise Audits — Results — Means of enforcing Compliance with Recommendations — Liability of Unions — Costs — Experts as Auditors — Previous experience of German Auditors — Remuneration of Auditors — Central Organisations^-Importance of Auditing. Co-operative Legislation : — I. History 260 II. Present Position 262 Agricultural Co-operation and Public Aid : — I. Public Aid to Movement as a whole. Early Attitude of State — Recent Attitude— 266 Nature and Extent— Prussia — Pruseian Provinces — Bavaria — Baden — Wiirtemberg — Kingdom of Saxony — Grand Duchy of Hesse — Alsace-Lorraine. Note on Prussian Chambers of Agriculture 272 II. The State and Co-operative Credit : — 1. Prussian Central Co-operative Bank : — A. History and Principles of Business B. Volume of Business C. Attitude of Co-operative Organisations D. Services of the Bank to Agricultural Co-operation 2. Other German States 273 283 287 291 291 Live Stock Insurance. Two main Branches— State Action— Extent of Cattle Insurance— Importance for Small-Holders — Difficulties — Local Organisations with Re-insurance most suitable. Bavaria: State organisation of Cattle Insurance— Grants to Cattle Insurance Institutions— Payment of Compensation — Supervision of Local Societies- Arbitration Board— Model Articles — Slaughter Insurance— Table — Results of State Action — Organisation of Horse Insurance. Baden : (1) State Scheme— Table. (2) Outside State Scheme — Table. Wurtemberg — Hesse — Alsace-Lorraine — Kingdom of Saxony. 292 APPENDICES. ■ For details of Appendices, see facing page 302. BIBLIOGRAPHY. MAPS. INDEX. AGRICULTUEAL CREDIT. I.— MORTGAGE (LONG-TERM) CREDIT. 1. Land Mortgage Credit Associations (Landscha/ten) . 2. State and Provincial Mortgage Credit Banks, 3. Joint Stock Mortgage Banks. 4. Savings Banks. 5. Credit for Land Improvement. 6. Prussian Provincial Aid Banks. 7. Rent Charge Baaks. 8. Insurance Institutions and Agricultural Credit, L LAND MORTGAGE CREDIT ASSOCIATIONS. Number and Business. — There are in Germany 23 associations organised upon a co-operative basis for the purpose of procuring loans for their members by the issue of bonds secured by mortgages of rural property. Of these 22 issue bonds on rural mortgages only, but one, namely the Wiirtemberg Credit Association, issues on urbnn as well as on rural mortgages. There is also the Central Association, instituted for the issue of bonds on behalf of a number of Prussian Associations (see below) ; including the issues of this Association "^the value of the mortgage bonds of these institutions in circulation at the end of 1910 amounted to about £170,000,000, in which sum the Wiirtemberg Association was represented by five millions. Eighteen (including the Central) Associations are situate in Prussia, and two in Saxony ; Bavaria, Wiirtemberg, Mecklenburg, and Brunswick have one each. Character. — These institutions, which in Prussia are commonly designated Land- schaften, are not co-operative credit associations in the ordinary sense ; apart from being non-profit-seeking, they have no share capital (except in two cases) and the assets which they accumulate in course of time are destined not for lending, but to cover possible deficits. The two exceptions are the Bavarian Agricultural Bank, which, as a co- operative society with limited liability registered under the Imperial Co-operative Societies Act of 1889, must constitute a share capital, and the Agricultural Association of Saxony, which, although not registered under that Act, was organised in 1866 on the same lines as an ordinary co-operative credit society with shares. All these Associations may be regarded as highly-organised associations of borrowers, with collective guarantee, for obtaining capital from third persons : by issuing bonds secured by mortgages on the properties of all the members they create a security realisable at any time, and far superior therefore to a mere individual mortgage security. Guarantee of Bonds. — As originally created by Frederick the Great they were compulsory associations of all large or manorial landowners within a province, the estates of all such proprietors, whether borrowers or not, being compulsorily involved in the guarantee of the bonds of the Association of that province. Thus the Associations founded for Silesia in 1770, for Pomerania in 1781, for West Prussia in 1787, and for East Prussia in 1788 included all large estate owners within their respective provinces ; but this collective liability was not imposed in the case of the Kur and Neumarii Manorial Credit Institute founded at Berlin in 1777, At the present time the four first- mentioned Associations retain, nominally, the guarantee of all estates capable of being lent upon {hepfandhriefungsfdhige Giiter) — in Silesia the Crown lands, in East Prussia the Crown lands and forests, are included in this guarantee ; but, in point of fact, exceptions arise in all four cases. In Silesia and West Prussia certain bonds issued in respect of properties lent upon in excess of the half of their ascertained value are not covered by the general guarantee of the incorporated properties, while properties in that part of Pomerania added subsequently (in 1871) to the area of the Association are also excluded. Some exceptions are also provided for in the Articles of the East Prussian Association. Non -borrowing guarantors are, however, little likely 25574 A ^ MORTGAGE CREDIT. to be called upon, as these Associations possess, in addition to claims upon mortgagors, abundant reserves and sinking fund payments of mortgagors to cover any possible deficits. The other Associations are guaranteed only by those properties upon which loans have been made ; they also possess, of course, special security and reserve funds, and hold the sinking fund payments of mortgagors. In some few cases (e.^., those in the provinces of Westphalia and Saxony and one in Schleswig-Holstein) a limited liability for supplementary contributory payments, amounting to from 5 to 10 per cent. _ of indebtedness incurred, applies to members of an Association. The two co-operative societies, in Saxony and in Bavaria, respectively, fix the liability at £50 per share, the number of shares to be compulsorily taken being graduated according to the amount of loan granted. Bonds not secured by specific Mortgages.— Formevlj mortgage bonds were secured by mortgage upon specific property with concurrent guarantee by the Associations, but since the middle of the nineteenth century this system has been gradually abandoned, and bonds represent claims upon the Associations which are founded upon mortgage claims of like amount. In legal terms holders of bonds issued since the second half of the nineteenth century (the change was for the most part effected between 1858 and 1872) possess no rights against any particular real property but only a right to recover from the Associations. The old bonds conferring specific claims have been almost entirely withdrawn from circulation. Conformity between bonds and mortgage claims is, however, fully secured ; bonds do not become legally valid documents until completed either by the Control Commission in the case of the older, or by the Directorate and Board of Supervision in that of the newer Associations, it being incumbent upon these bodies to ascertain by inspection of the public register of title that a like amount is thus secured by mortgage upon property and that such mortgage claim is also definitely assigned to meet the bond claim. By this assignment the registry official, under the German system of registry of title, may only cancel the mortgage charge On proof that bonds of like value have been withdrawn from circulation. Bond-holders have not, however, claims against specific properties thus mortgaged and earmarked ; the method indicated merely guarantees that there are never more bonds in circulation than are covered by mortgages, and that other credit operations likely to weaken the security of the bonds are not undertaken by the Associations. Area of Operations.-^S^eakmg generally, the areas covered by Land Mortgage Associations in Prussia coincide with those of provinces, but some Associations extend into portions of adjacent provinces. That of Berlin covers not only Brandenburg, but also certain districts in Pomerania and Prussian Saxony ; the West Prussian Association includes a portion of the Province of Posen ; the Prussian Saxon Association includes (since 1909) Anhalt, a small State which is an enclave in the Province of Saxony ; and the Westphalian Association includes the small principalities of Waldeck and Pyrmont and some districts in the adjacent Rhine Province. On the other hand each of the three Hanoverian institutions restricts its business to distinct portions of the Province of Hanover., The Credit Institute of Upper and Lower (Prussian) Lusatia extends its operations nominally over parts of the Administrative Districts of Liegnitz and of Frankfort-on -the- Oder, but its business appears now to be quite unimportant, and is stated to be confined to Lower Lusatia. The non- Prussian Associations extend their operations over the whole of their respective States. The following Table shows the names of the various organisations, the date of their foundation, the area of their operations, with the population of such area, and the nominal value of bonds in circulation with their respective rates of interest in 1910. Name of Association and Registered OfSoes. Date of Foun- da- tion. Area of Operations. Approxi- mate Acreage. Popula- tion in 1910. Total nominal Value of Bonds in Circulation in 1910. Value of Bonds bearing Interest of 3 per cent. per cent. 4 per cent. In Prussia : — Silesian Mortgage Oradit Association at Breslau. 1770 Silesia 10,085,000 5,225,962 A '(fi) Upon large estates 20,497,626 ■ (J) Upon small estates ,10,767,343 7,387,683 2,085,168 & 11,656,679 7,286,515 1,463,364 1,395,660 LAND mortgage; credit ASSOCIATIONS. Name of Association and Registered Offices. Date of Foun- da- tion. Area of Operations. Approxi- mate Acreage. Popula- tion in 1910. (Dec. 1.) Total nominal Value of Bonds in Circulation Value of Bonds bearing Interest of 3 3i 4 in 1910. per cent. per cent. per cent. In Prussia— core*. £ £ £ Kur and Neumark 1777 Brandenburg 9,960,000 4,092,616 843,717 3,666 834,496 5,555 Manorial Mort- with portions of (Branden- (Branden- gage Credit Insti- Pomerania and burg only). burg tute at Berlin. Saxony. only). Pomeranian Mort- 1781 Pomerania 7,533,000 1,716,921 12,838,576 (3,005,944 9,791,303 — gage Credit Asso- and 41,329 ciation for Large at U 7J. Owners at Stettin. West Prussian Mort- 1787 West Prussia 6,388,000 1,703,474 6,223,753 626,195 5,597,558 — gage Credit Asso- with part of (West (West ciation at Marien- Province of Prussia Prussia werder. Posen only). only). East Prussian Mort- 1788 East Prussia 9,250,000 2,064,175 22,995,185 933,190 17,940,615 4,119.380 gage Credit Asso- ciation at Konigs- berg. Manoral Ore lit In- 1790 Liineburg 2,835,000 546,405 813,330 _« 697,320 116,010 stitute at Celle, Calenberg - Gottin- 1825 Administrative 2,768,000 1,316,112 1,336 502 — 1,038,827 297,675 gen-Grubenhagen- Districts of Hildesheim Man- Hanover, orial Credit Associ- Hildesheim. ation at Hanover. Bremen Manorial 1826 Administrative 1,698,000 429,355 521,959 — 521,959 — Credit Association District of at Stade. Stade. Posen Mortgage 1857 Province of 7,348,000 2,099,831 16,461,660 305,685 11,396,545 4,759,430 Credit Association Posen. at Posen. New West Prussian 1861 Province of 6,388,000 1,703,474 10,235,368 499,755 9,273,753 461,860 Mortgage Credit West Prussia. Ass ociation at Marienwerder. Mortgage Credit 1864 Province of 6,893,000 8,089,275 8,558,744 2,534,524 3,858,421 2,165,799 Association for Saxony and the Province of Anhalt. Saxony at Halle. Credit Institute; for 1865 Portions of 1 1 13,512 — 12,900 612 Prussian Upper Administrative and Lower Lusatia District of at Gorlitz. Liegnitz and Frankfort-on- Oder. New Brandenburg 1869 Brandenburg 9,960,000 4,092,616 (^Issues only Central Association iunds.y Credit Institute at BerUn. New Pomeranian 1871 Pomerania 7,533,000 1,716,921 1,026,175 66,720 959,455 — Mortgage Associa- tion for Small Owners at Stettin. Westphalian Mort- 1877 Westphalia 5,055,000 4,125,096 4,110,860 272,655 2,188,685 1,649,520 gage Credit Associa- tion at Miinster. Mortgage Credit 1882 Schles wig- 4,755,000 1,621,004 2,352,770 85,125 1,545,135 722,510 Union for the Pro- Hols tein. vince of Schleswig- llolstein at Kiel. Schleswig - Holstein 1895 Schleswig- 4,830,000 1,621,004 2,422,803 430,568 1,899,927 92,308 Mortgage Credit Holstein and Association at Kiel, Lubeok. Central Mortgage 1873 (iSee text, p. 4) — — 22,279,148 6,273,530 15,955,948 49,670 Credit Association for the Prussian State at Berlin. In other States : Mecklenburg Man- 1818 Duchy of 3,283,000 639,958 2,075,365 — 2,052,865 22,500 orial Association Mecklenburg- at Rostock. Sohweriu. Wiirtemberg Credit 1827 Wurtemberg 4,878,000 2,437,574 4,984,160 — 3,399,930 1,584,230 Association at Stuttgart. Erbland Manorial 1844 Saxony 3,748,000 4,806,')61 3,281,306 125,955 2,907,838 182,9iO Credit Association of Saifony at Leipzig. Manorial Credit As- 1862 Brunswick 918,000 494,339 586,450 — — 586,450 sociation for the Duchy of Bruns- wick at Wolfen- biittel. Agrioaltural Credit 1S66 Saxony 3,748,000 4,806,661 7,816,014 691,635 6,140,565 983,814 Association for the Kingdom of Saxony at Dresden. Bavarian Agricul- 1896 Bavaria 18,968,000 6,887,291 6,746,358 — 4,452,593 2,293,765 tural Bank at (end 1911). (3f 7o)- (4i 7„). Munich. 25574 A 2 4 MORTGAGE CREDif . With the exception of the Rhine Province and the Province of Hesse-Nassau, the Municipal District of Berlin and the enclave in Wiirtemberg known as HohenzoUern Land (with an area of some 280,000 acres and a population of 71,011 in 1910), all provinces in the Kingdom of Prussia are provided with distinct co-operative Mortgage Credit Associations. As regards the Rhine Province certain districts within it are eligible for mortgage credit transactions with the Westphalian Association, while the greatest and most progressive of the State or Provincial Mortgage Banks is established at Diisseldorf for this Province. The Province of Hesse-Nassau possesses two independent mortgage credit institutions, one at Cassel for the District of Cassel and one at Wiesbaden for the other portion of the province {see special accounts of these two organisations, pp. 26-30). Of the other larger German States only Baden, Hesse, Oldenburg, and Alsace-Lorraine possess no co-operative mortgage credit associations for agriculturists ; but, as will be seen on reference to the section of State and Provincial Mortgage Credit Banks, suitable organisations have been created in these States, with the exception of Alsace-Lorraine. Central Association. — Eight Prussian Associations are at present ajBfiliated to the Central Association. The latter organisation was constituted in 1873 by the combination of eight Land Mortgage Credit Associations and one mortgage institution with communal guarantee which lent upon urban as well as rural property, and was granted the right of a special corporation with the power to issue central mortgage bonds. The Central Association is managed by directors chosen from the leading officials of the affiliated Associations. Its business was to consist in the issuing of central bonds on behalf of its members, who retained, however, full authority to continue as before to issue their own bonds : in fact, it simply enabled the provincial Associations, who were its members, to issue central bonds in addition to their own. The pre-requisite conditions for the issue of central bonds were the same as those for the issue of bonds of the provincial institutions : that is, they had to represent the value of mortgage claims upon property situated in the particular areas of Associations on whose behalf such central bonds were issued, and the basis upon which the security for the bonds was founded was determinable according to the Articles of Association, rules for valuation of property, and other current practices obtaining for each particular provincial Association. The object in view in establishing the Central Association was to open a wider market for the bonds of the provincial Associations. It was expected that bonds issued by a central institution would find a better market, not only in Germany, but also in foreign countries, than bonds associated with merely provincial institutions. The bonds were to be printed in several languages. By obtaining a wider market they would be less exposed to fluctuations, as bad harvests and other possible evils are usually only local, and their occurrence, while it might affect seriously bonds of provincial Associations, would not affect those resting upon a broader basis. About the period (1870-75) when the Central Association was founded the market prices of the bonds of several Associations were low and unstable. For some time after the establishment of that Association prices improved ; but the Association has not met with the success anticipated. The prices for its bonds did not finally maintain superiority over those of the provincial Associations, and the value of central bonds in circulation (1911) does not exceed that of those of either the Silesian or East Prussian organisations. About one- seventh of the total value of bonds circulated by Prussian Land Mortgage Credit Associations is represented by central bonds, and by far the greatest part of these have been issued on behalf of the Berlin Associations (that is, the old and new Associations operating mainly in Brandenburg), which appear to issue central bonds almost exclusively, and in whose hands the actual management of the current affairs of the Central Association rests, while a certain proportion is issued on behalf of the Saxon and Schleswig-Holstein Associations. In 1911, in addition to these four bodies, the old and new Pomeranian, and the old West Prussian Associations, together with the Upper and Lower Lusatian (Prussian) Institute were still members of the Central body, while the East Prussian and new West Prussian Associations had withdrawn. The want of success is attributed to two principal causes : (1) the unwillingness of the pro- vincial Associations to renounce any of their independence in favour of a central body, and (2) the general historical development of these Associations — the market for their bonds has always been mainly provincial, bonds of particular Associations finding their chief sale in their own provinces, and being in many cases only quoted on one or two exchanges in addition to that at their own centre, while in the case of the largest organisations, e.g., that of Silasia and East Prussia, the German market was already at their disposal. ^ The Hanoverian Institutions. — Some points of difference between the three Hano- verian Institutions and other Associations may be noticed. Two of these pay loans in LAND MORTGAGE CREDIT ASSOCIATIONS. cash instead of in bonds. Such loans are not subject to recall, while bonds may be redeemable by holders at six months' notice. Only properties of a substantial value — in one case £900, in another £750, and in the third only such as are registered as under special conditions as to succession or transfer — are eligible. On the other hand, the maximum extent to which properties are loanable is lower than in the case of most other Associations ; one institution does not lend more than £3,000 on a single property, except in very unusual circumstances, and when the object of the loan is stated ; another only lends up to a maximum of two-thirds of the ascertained value, when sinking fund payments in excess of the normal rate of J per cent, are stipulated. The ordinary rate of interest charged is in one case 5 per cent. ; in another at least 4 per ceut. upon loans up to half the valuation, and at least 4 J per cent, for loans above that limit ; in the third case the rate of interest is based upon the cost of the loan to the institution with an addition for cost of administration. All mortgages are reducible by annual sinking-fund payments : in one case fifteen such consecutive payments are obligatory before the amount thus accumulated is cancelled against the mortgage claim. The amount of sinking fund payments may be increased by mortgagors, who may also repay in full or partly, either with or without a certain period of notice. The bonds issued by these Associations appear to be subject to redemption at six months' notice on the demand of the holders ; on the other hand the loans to mortgagors are not subject to recall by two of the Associations in normal cases. All three institu- tions have at their disposal the accumulated sinking funds of mortgagors, but to provide against sudden notice on the part of bondholders one institution also retains the right to charge mortgagors the same rate each year as it pays for loans. Bavarian Agricultural Bank. — Some account may be given here of the Bavarian Agri- cultural Bank, which occupies a special position among German Land Mortgage Associations, as being (1 ) the only mortgage credit association constituted under the Imperial Co-operative Societies Act, (2) the only co-operative society registered under that Act which is empowered to issue mortgage bonds, (3) practically foimded and capitalised by the State, and (4) the only registered co-operative society whose business is supervised by a Royal Commissioner. The Bank was founded in 1896 with the object of procuring mortgage credit, especially for small Bavarian landowners. Its "shares are fixed at £5 each carrying a liability of £50 ; and all borrowers of over £250 are obliged to take up additional shares, one for each additional £250 borrowed. On December 31st, 1911, 42,221 shares with a liability of £2,111,050, were held by 20,803 members ; of these only 829 representing 1,718 shares with a liability of £85,900 were held by non-borrowers. The maximum number of shares that may be taken by one member is 200 ; the maximum loan is, there- fore, fixed at £250 x 200 or £50,000, and carries with it a liability of £50 x 200 or £10,000. Loans are only made to landowners on the mortgage of property situated in Bavaria, but no mortgage security is required in respect of loans to communes. Loans granted are not subject to recall, but annual payuients to sinking fund must be made. Capital is obtained by (1) share capital (2) advances or grants by the State, and (3) the power to issue mortgage or communal bonds. The paid up share capital at the end of 1911 amounted to £211,105, and the total reserves to £55,997. The State has advanced £250,000, on £200,000 of which 3 per cent, interest is paid, the balance being held without interest. At the end of 1911 the total of the mortgage loans to landowners amounted to £6,746,358, of which £4,452,593 carried 3| per cent, interest. The net profits for the year amounted to £i 6,465 ; of this sum £8,065 was devoted to paying interest on shares at 4 per cent., £5,000 to special reserve, and £1,646 to statutory reserve. State Grants. — Government grants were made to the earliest Associations, but they were inconsiderable in amount, and were rather advances to meet general initial expenses of organisation and establishment. Thus the Kur and Neumark Credit Institute obtained £3,000. After the Napoleonic wars certain assistance appears also to have been granted in a few cases, but the amounts were not large. State Supervision. — The Mortgage Credit Associations are supervised by the State. In Prussia, with one or two exceptions, supervision of their ordinary current business is exercised by the Royal Commissioner, usually the Governor of the province, the final super^dsing authority since 1874 being the Ministry of Agriculture ; in other States supervision is also exercised by the Ministry within whose jurisdiction agricultural matters lie. The Bavarian Agricultural Bank in Munich, as a co-operative society registered under the Imperial Co-operative Societies' Act of 1889, is subject to legal audit once within every two years, but is also supervised by a Royal Commissioner ; and the Agricultural Credit Association at Dresden, also a co-operative society, though not subject 25574 A 3 o MORTGAGE CREDIT. to the Act of 1889, has been recognised by the Saxon Government as a public mortgage credit institution and is subject to State supervision. The Prussian Associations rank as public corporations, and have authority to take over compulsorily the management of estates of defaulting borrowers, or to effect their sale. Their officials rank as semi-state officials, having a status similar to that of those employed by provincial governments. The leading officials are appointed by election of the members of each Association, but confirmed by the Crown or by the Minister of Agri- culture, except in Posen when the Crown directly appoints the members of the Directorate, l^ublic control is' also effectively exercised by the necessity for approval by the Crown and the Minister of Agriculture in Prussia — in other States the Minister to whom the charge of agricultural affairs is assigned — of any alterations in the articles of association, in methods of valuation, and in business regulations. Administration. — Of the five old Associations four still retain a decentralised administration, the area covered by the Association being divided into sections, each section having its own Directorate and representative body. In the West Prussian and the Kur and Neumark Associations these sub-administrations are not independent but merely a devolutionary expedient, while in Silesia and Pomerania each unit has its own constitution and assets. In Silesia there are nine such constituent Associations (so-called Furstentums-Landschaften) ; the details as to valuation and credit to be extended are determined by them, subject to revision by the central office before the issue of its bonds ; in West Prussia the area of the Association is divided for this purpose into four depart- ments, each of which has its separate directorate (at Dantzig, Marienwerder, Bromberg and Schneidemiihl). The East Prussian Association abolished its " departments " in 1858, and has only one office (at Konigsberg) for its mortgage credit business. It has however about 50 agents appointed to give information as to the Association, as well as to receive deposits for its Loan Bank. The Kur and Neumark Credit Institute, for convenience of administration, divides its area into four " provinces " ; the Pomeranian Association into four " departments " ; the Schleswig-Holstein Association into eight " districts." In these cases and in the case of the remaining Associations indeperident sectional administrations are unknown, and the valuation and fixing of credit are either carried out directly on instructions from the central office or are regularly and thoroughly revised by it. Administrative Organs. — The business of an Association is carried out, under the supervision of the Royal Commissioner and under the control of its General Assembly and Select Committee, both elected by members of the Association, by a Board consisting of a Director-General, other members {e.g., in East Prussian Associations four, in Silesian, in West Prussian, and in Kur and Neumark Associations three, in Pomeranian Associa- tions two) chosen to represent different districts, and other non-voting legal members called Syndics. The latter must have passed the State examination qualifying for the office of judge or magistrate (Eichter) ; they are permanent, paid officials, who must have no other professional occupation ; and they conduct the current business of the Associa- tions, carrying through all the necessary legal formalities, adjustment of claims, cancel- lation of mortgages, &c. Documents executed by them have the value of notarial documents ; and on their attestation the summary process privileges of the Associations are executable. Their number varies ; it is one in West Prussia, Pomerania and Saxony ; two in Silesia ; three in East Prussia, and in Brandenburg (the Kur and Neumark Credit Institute). Apart from the Syndics, only owners of property within the area of the Association and whose property is not indebted beyond a certain percentage, usually one-half of its valuation, are eligible for election to the Board ; and, like other members who are office-holders, they are not usually paid. Besides the Central Board of Directors, local directors are elected for the various divisions of the area of the Associations. Such directors must be property holders in, and resident in, their respective divisions for the greater part of the year. They are members of the valuation- revision committee ; and, besides other duties, they must notify to the Central Board any irregularity or circumstances coming under their notice which is likely to impair the value of the claims of ttie Association upon mortgaged property. A further decentralisation is represented by the District Committee. The councillors elected to the District Committees must reside and be property-holders in the district which they represent. Their business is to assist in the valuation of properties to be lent upon, and to supervise properties already lent upon or compulsorily managed on behalf of their Association. It is their duty also to report to the latter any circumstances likely to impair the value of property mortgaged to it. Council of Administration. — A representative body, variously entitled Committee, Select Committee, Council of Administration, Plenary Board {Plenar- Collegium), stands LAND MORTGAGE CREDIT ASSOCIATIONS. 7 between the General Assembly and the Directorate. As the General Assembly is not summoned regularly, owing to difficulties of distance and expense, this body is intended to serve to represent the general body of members and to exercise supervision over the Directorate. Meetings take place at least once in each year. Before such meetings are usually laid reports concerning valuations and loans made during the year, bonds issued and redeemed, compulsory administrations of property, and the state of the reserves and special funds ; it is also usual to leave to its decision the determination of the rates at which bonds shall be issued within certain periods. For eligibility for election to this body, certain special conditions are often imposed by the Articles of the various Associa- tions. The members of the Council of the (Province of) Saxony Association, which consists of nine members, must all be mortgage debtors to the Association for 'the sum of at least £1,500 : the members of the Council of the Westphalian Association, also nine in number, must own or be the legal representatives in respect of land upon which the Association has registered, or may register, a mortgage of not less than £1,000 ; in one of the two Schleswig-Holstein Associations where the Council members also number nine, it is provided that four members must possess landed property upon which a mortgage of at least £1,000, and five members property upon which a mortgage of at least £500 is or may be raised ; in Posen members (also nine in number) must each possess property valued at a minimum of £2,500, and must be elected by members each possessing property of a minimum value of £750. The members of the Central Directorate and of the Department Directorates usually sit on this body, with or without the power to vote ; and ttie members who preside over divisions or districts are often regular members. Service on the Council may not be refused except on good grounds : the Articles of the East Prussian Association exempt (1) persons over 60, (2) persons who have already held similar office for six years, (3) persons who have the actual administration as guardians of at least three estates, and (4) persons holding ofiice under the Crown. General Assembly. — The General Assembly is a body representative of the members ; it is not, as might be expected from its title, an assembly of the whole of the members. In Silesia where the Association is constituted out of nine, more or less autonomous sub- associations, its membership is composed of (1) the directors of the sub- Associations with their respective Syndics, (2) deputies chosen by all the members from among those eligible for election as representatives for smaller districts, each sub- Association district being authorised to send from two to four deputies, and (3) the members of the Central Association ; only representatives of the sub- A ssociations may, however, vote. In West Prussia it comprises the directors of the Central Association and of the sub- Associations, with a deputy from each smaller district ; all present may vote except the Syndics. In East Prussia it is composed of the Directorate, the Director of each of the three divisions into which the area of the Association is divided, and their deputies from each of the small divisions or districts. The General Assembly of the Kur and Neumark Credit Institute is composed of the Directorate, with nine representatives from each of three " provinces," and three from the fourth "province." The Posen General Assembly contains 27 members besides the directorate and the Council of Supervision ; two-thirds of the 27 members are elected, the remaining third appointed by the State Commissioner. The majority of the Associa- tions do not appear to hold regular General Assemblies, but meet when summoned either by the Eoyal Commissioner, the Select Committee, or the Directorate. The Articles of the East Prussian Association require meetings wdthin the first three months of every third year ; those of the Silesian, West Prussian, Pomeranian, and Posen Associations and the Kur and Neumark Institute fix no periods ; those of the Associations for Saxony and Westphalia, and the two Schleswig-Holstein Associations require annual meetings. Membership : Procedure. — Individuals become members of a Mortgage Credit Association when such an Association becomes a mortgagee of their property. Mem- bership ceases with the redemption of the mortgage. An intending borrower applies to the district agent of the Association, himself a member and therefore necessarily a mortgagor, or to the divisional agent (also a member), or to the Directorate, sending in a copy of the registry of title referring to his property, a copy of the land tax claim and insurance policy, with other documents showing the ecclesiastical. State or other burdens on his property. The Association undertakes at cost price any necessary enquiries, and procures documents, &c., on behalf of the applicant. If the latter desires a loan beyond the proportion of the value usually granted without a special valuation, the Association undertakes the valuation, as a rule, at his cost. Thus, the scale of charges of the Saxon Association for valuation on the basis of the land tax (net yield assessment) is £2 10s. for assessments up to £50, £3 for those over £50 up to £100, £3 15s. up to £150, £6 up to £250, £9 up to £500, and 10s. or 1 per cent, for each £50 land tax net 25574 A i « MORTGAGE CREDIT. yield assessment over £500, with a maximum of £30. If another method of valuation is made Is. per acre with a minimum of £5 is reckoned. But while the Association may increase these charges by 50 per cent, in case of exceptional expenditure of time or money, it may also reduce them by 50 per cent, when the valuation is simple. The New Pomeranian Association makes no special charge for valuation expenses, meeting such out-of-pocket expenses out of the general expenditure fund (raised by a charge of ^ per cent, per annum to the borrower) ; if, however, no loan is made within six months, the applicant must pay these charges. Borrowers have only to pay (apart from the ^ per cent.) the cost of the deed, the stamp duty, and the cost of the bonds and registration fees. Entrance Fees. — Some Associations reserve the right to charge intending borrowers an entrance fee. The amount of this fee is fixed either according to the amount of the loan accorded, the valuation arrived at, or the size of the property to be mortgaged. Thus, the Posen Association levies a fee of Is. on properties of 45 acres, Is. 6d. up to 62J acres, 3s. up to 125 acres, Qs. up to 250 acres, 9s. up to 375 acres, 18s. up to 625 acres, and for each additional 375 acres a further 9s. The Mortgage Credit Union of Schleswig-Holstein and the Saxon (Halle) Association require immediate payment of Is. per £50 of the loan demanded. Such definite entrance fees do not appear to be at all general. It is more usual to require simply an advance payment of a certain sum, pro- portionate to the size of the property to be mortgaged or the land tax thereon, to meet the cost of valuation. Thus, the New West Prussian Association requires an immedia,te payment of from £l to £10, according to the amount of the land tax assessment upon the property. The Silesian Association requires a " suitable preliminary payment " towards the cost of valuation, and indicates 3s. to 12s. for properties up to £1,500, 95. to 15s. up to £7,500, and 15s. to 30s. above that limit as the range of fees to be charged in respect of corres- pondence and negotiation for valuation, in addition to daily allowances of from 6s. to 9s. for each person engaged in taking the valuation ; but in practice the former charges are not levied, and the latter are only levied to the extent of half the stated amount. The Brandenburg Institute has the right to levy an advance payment towards costs, but is authorised to waive the right. In most cases the Associations provide for granting advances to borrowers to meet these payments if levied. Other Payments by Borrowers. — Besides the interest on loans and the percentage payments to sinking fund, both of which are usually payable half-yearly, borrowers contribute towards the cost of administration. Payments on this account vary greatly both in amount and in method of calculation and levy. Thus in Silesia no charge is made when properties are lent upon up to half their value ; over that proportion only -j\ per cent, per annum is normally charged by the provincial corporations constituting the Association, but half of these constituent corporations waive the charge. In East Prussia ^ per cent, of the loan is charged to borrowers in respect of expenses of prepara- tion of bonds and other documents and the stamps thereon ; contributions for the general costs of administration of the Association are payable at the rate of ^ per cent, for each of ten years, but in the case of loans upon reducible mortgages— this Association makes sinking fund payments obligatory only in case of loans exceeding half the valuation — this payment is not charged separately but covered out of the sinking fund payments. The New Pomeranian Association charges simply I per cent, per annum, no other payment being normally charged beyond the interest and redemption payments. The Saxon Association requires a payment of j per cent, for each of the six years following the issue of the bonds to mortgagor. The New Brandenburg Credit Institute levies yV P^r cent, per annum until the loan is repaid. Borrowers from the Kur and Neumark Credit Institute (for large land-holders) are chargeable with \ per cent, per annum, but owing to this organisation being managed in common with the New Brandenburg Institute, the percentage is, in practice, reduced to ^q. The same percentage (yL.) ig also payable by members of the Mortgage Credit Union of Schleswig-Holstein. The Schleswig-Holstein Association charges ^q P^^ c^'i*' (with certain exceptions in which no payment is required). The Posen Association charges | per cent, towards its administration funds, and, as regards its preliminary costs, Qd. for the first £150 worth of bonds, Is. for the second, Is. 6d. for the third, 2s. for the fourth, and 2s. Qd. for each further £150 worth of bonds (thus for bonds issued to a borrower having a total value of £900, 10s. would be payable) as well as the entrance fees already noticed above. The Westphalian Association and the Bavarian Agricultural Bank fix the charge for administration at J per cent, payable annually until the loan is extinguished. The great differences apparent in the charges made are due mainly to the age and general position of the Associations and to their sources of income apart from their mortgage business. The older Associations, such as the Silesian and the East Prussian, LAND MORTGAGE CRElilT ASSOCIATIONS. » can remit or reduce payments owing to their accumulated funds and profitable banking business. The Manorial Kur and Neumark Credit Institute conducts also a profitable banking business, and its original capital of £3,000 granted by Frederick the Great has grown to about £400,000, apart from its real property, which is valued at over £200,000. The Bank of the Posen Association paid nearly 12 (11-97) per cent, on its capital of £150,000 in 1908 and 9-31 per cent, in 1909, assigning to the Association out of the profits in the latter year the sum of £13,969. The newer Associations, particularly those not specially endowed (as are, for example, the Bavarian Bank, which received its capital from the State and the vSchleswig-Holstein Association which was granted special funds out of certain monastic and manorial properties) are, of course, often obliged to charge higher rates than some of the older Associations. Tendency to make small Properties eligible for Loans. — As already noticed, the original Associations only admitted to membership owners of large or manorial properties, and only at a later date did some {e.g., the Silesian and East Prussian) admit smaller property owners, while others {e.g., those of Pomerania, West Prussia and Brandenburg) created special organisations for them. But certain limitations still hold good. Eligibility for membership is determined by the possession of property showing either a fixed minimum net yield as assessed for the land tax or a fixed minimum value as determined by valuation. The minimum net yield was fixed by the new Pomeranian Association for Small Landowners successively at £12 (1871), £5, and £3 (1896), at which it now stands; in Brandenburg at £7 10s. and £5, but since 1896 at £3 15s.; in Silesia at £1 10s., now 15s. ; in Saxony it was reduced in 1896 from £7 10s. to £4 10s. ; in Westphalia on its foundation in 1877 at £7 10s., in 1882 at £5, in 1885 at £3 15s. and in 1896 at £2 10s., the minimum loan being fixed at £25 ; by the Mortgage Credit Union for Schleswig-Holstein at its foundation in 1882 £7 10s., in 1895 at £5, and in 1899 at £2 10s., and by the second Association of Schleswig-Holstein (founded in 1892) also at £2 10s. in 1907. The New Brandenburg Credit Institute lends upon properties with a net yield of £5, and upon those with a net yield of £3 15s. provided they constitute holdings from which the possessor obtains his livelihood. Properties with fixed minimum valuations of £75 were made eligible by the East Prussian Association in 1808 : the minimum of the new West Prussian Association was reduced in 1896 from £225 to £150, and the Posen Association, which at its foundation in 1857, originally only considered properties with a minimum value of £750, reduced this figure in 1879 to £300, in 1884 to £200 and in 1896 to £150. The three Hanoverian Associations still maintain a considerable, minimum ; thus the minimum of one is £900 and of another £740. On the non-Prussian Associations the Wiirtemberg Credit Association, which lends up to half the value of property, reduced the minimum loans in 1896 from £50 to £25 and in 1902 to its present figure of £15 ; the Erbland Manorial Credit Association in Saxony, which also lends up to half of the value as assessed by it, does not lend less than £150 as a first loan upon any property, while the Bavarian Agricultural Bank, which it lends up to half the ascertained value, has fixed a minimum of £25. The Agricultural Credit Association of Saxony, which lends up to |ths of the ascertained value, especially keeps in view small landowners. It will be observed from the above particulars that practically throughout Germany small owners are now eligible to become members (that is, borrowers) of such Associations. In some cases, especially in Silesia, Westphalia, Schleswig-Holstein, East Prussia, Wurtemberg and Bavaria, very small properties; have been brought within the range of eligibility. Services to small Landholders. — It is of especial interest for the purpose of this Report to give some indication as to how far these Associations are utilised by small land- owners. The early Prussian Associations were created exclusively for large landholders, but in course of time the need was felt for the extension of their scope so as to include small owners. The East Prussian Association took the first step : in 1808 it removed the limitation of lending only to large owners. In 1849 the Silesian Association created a special department for small landholders and issued special bonds relating to loans to them. The remaining three of the early Associations created in 1861, 1870 and 1871 (as will be seen in the Table) new Mortgage Credit Associations which were independent bodies, the management of these oflfshoots being retained by the parent institutions. The three Associations in Hanover have preserved their character as institutions for large land- holders ; in some important respects also, as has been noticed, they differ from other Associations. The remaining Prussian organisations created since 1857 do not distinguish between large and small landholders, although one of the Associations in Schleswig- Holstein was intended originally to serve larger landowners almost exclusively. 10 MORTGAGE CREDIT. In general, therefore, the older Associations have either established special Associations or, as have also the more recently-created Associations, made quite small owners eligible for membership. Figures on this point covering a number of Associations are not easily obtained, but some illustrations will suffice. The East Prussian Association, founded in 1788, which was the first to make small properties eligible for loans — ^in 1808 those of a minimum value of ^75 were made loanable — had loans outstanding in 1910 upon 15,600 properties, of Avhich 12,575 were small and medium holdings, thus distributed : — 2,885 properties of not more than 50 acres. 6,240 ,, of over 50 up to 125 „ 3,450 ,, „ 125 „ 250 „ In the thirteen years 1897-1909, 10,400 valuations for loans were made, of which 5,900 were for properties of not more than 125 acres, 2,200 for those of from 125 to 250 acres, and 2,300 for those of over 250 acres. The New Brandenburg Credit Institute (1869) designed to lend upon non-manorial and smaller properties had at the end of 1910 a total of 10,345 loans outstanding of the combined value of over £7,000,000. The following Table shows the distribution of these loans according to the size of properties lent upon, with the total value of loans falling to each group : — Acreage of Number of Total value of loans properties. properties lent upon. upon such properties 56,440 Under 12 J 284 12^ and under 50 3,571 1,236,980 50 „ „ 125 4,252 2,530,070 125 „ „ 1871 1,340 1,246,750 187^ „ „ 250 464 623,520 250 and over 434 1,454,880 Total 10,345 7,148,640 The following Table shows the distribution according to amount oj the loans outstanding at the end of 1910 : — Eange of Loans. Number of properties Aggregate amount lent upon. of loans outstanding in each group. £ & £ Up tc To 46 2,980 Over 75 Up to 150 765 102,196 • 1 150^ „ 300 2,665 635,117 300 „ 500 2,481 1,011,762 500 „ 1,000 2,704 1,925,090 1,000 f„ 1,500 924 1,141,440 1,500 „ 2,500 451 875,857 2,500 „ 5,000 238 797,082 5,000 „ 10,000 58 374,547 10,000 „ 15,000 7 85,625 15,000 „ 25,000 4 77,202 25,000 Tota 1 ... 2 119,742 10,345 7,148,640 A comparison of the average of the loans made by this Association shows a very marked downward tendency. The averages at the following dates were : 1875, £1,682 (only 23 loans were then outstanding); 1880, £l,986 (93 loans); 1885, £1,095 (1,377 loans) ; 1890, £885 (4,195 loans) ; 1895. £795 (6,649 loans) ; 1900, £727 (9,007 loans) ; 1905, £713 (9,93f loans) ; and 1910, £691 (10,345 loans). LAND MORTGAGE CREDIT ASSOCIATIONS. 11 The outstanding mortgage loans of the Wiirtemberg Credit Association amounted on January 1, 1911, to £5,192,496 and were distributed as follows : — £ £ 456 loans of from 15 up to 50 3,599 over 50 „ 250 2,383 1,580 1,054 250 500 „ 1,000 500 „ 1,000 „ 2,500 271 70 „ 2,500 „ £5,000 „ 5,000 9,413 Of these loans 3,884 of the total value of £936,492 (or au average of £241 per loan) were granted upon rural property. The great majority of landholders in Wurtemberg are small holders ; and most of the loans up to £250 have been granted to them. The Bavarian Agricultural Bank has granted from the date of its establishment in 1896 down to the end of 1911 the following loans on mortgage : — 1896-1911. Range. Number of Percentage of Total Amount Percentage of Loans. Number of Loans. in each. Group, Total Amount. £50 and under 1,835 7-24 £ 70,710 0-86 Over £50 up to £150 ... 7,885 31-13 851,590 10 37 „ £150 „ £250 ... 6,599 26-06 1,373,130 16 72 „ £250 „ £500 ... 5,566 21-98 2,098,150 25 54 „ £500 „ £1,000 ... 2,449 9-67 1,777,375 21 64 „ £1,000 „ £2,500 ... 822 3-24 1,221,640 14 87 „ £2,500 „ £5,000 ... 129 0-51 454,080 5 53 „ £5,C00 42 0-17 366,700 4-47 Total 25,327 100-00 8,213,375 100-00 Corresponding figures for the single years 1910 and 1911 were as under Range. Number of Loans. Total Amount in each Group. Percentage of Total Amount. 1910. 1911. 1910. 1911. 1910. 1911. £50 and under Over £50 up to £150 „ £150 „ £250 „ £250 „ £500 „ £500 „ £1,000 „ £1,000 „ £2,500 „ £2,500 „ £5,000 „ £5,000 178 763 588 513 204 82 11 4 226 871 746 646 283 82 13 3 £ 7,410 82,100 123,085 193,545 151,140 122,290 38,750 26,500 £ 9,195 94,750 158,480 245,070 205,725 122,050 51,530 17,600 0-99 11-02 16-53 25-99 20-29 16-42 5-20 3-56 1-02 10-48 17-52 27-10 22-75 13-49 5-69 1-95 Total 2,343 2,870 744,820 904,400 100-00 100-00 In 1911, out of a total of 2,265 loans made by the Bank for the first time on the respective properties, 34 loans were made on properties not exceeding 2^ acres, 1,480 on properties of over 2^ and not exceeding 25, while 745 loans were on properties of over 25 and not exceeding 250 acres and 6 on .properties of over 250 acres. Limitation of Mortgage Loans. — Some of the first Associations, e.g., the West Prussian, Silesian, and Kur and Neumark Associations, only lent up to half of the valuation of the property upon first mortgage, but in Pomerania and East Prussia a maximum of two-thirds was the rate. Most of the Prussian Associations raised this maximum to two-thirds (or -^ths inthe West Prussian) between 1850 and 1870 (e.^., the Silesian and Brandenburg in 1858, the East Prussian in 1866, and the West Prussian (to fths) in 1868) but the three Hanoverian institutions, and most of those outside Prussia, still retain a limit of one-half. 12 MORTGAGE CREDIT. Some Associations {e.g., the Kur and Neumark Manorial Credit Institute) require, how- ever, that when loans are made over J and up to | or f of the value, increased annual payments to sinking fund (up to 1 per cent.) must be made in respect of the excess over one-half the value. The principal bases adopted to arrive at values for purposes of loan are the land-tax assessment, or a special assessment undertaken by the Association, in which regard is especially had to the land-tax assessment, and the actual yield of the property. If loans required by borrowers do not exceed in amount the value of the land- tax assessment multiplied by the normal multiple accepted for this purpose by the particular Association, they are forthwith accorded, and borrowers prefer to accept this basis of valuation, as being much less expensive than a special valuation. Thus, if the required loan does not exceed a certain multiple (varying from 15 in East Prussia to 36 in West Prussia) of the net yield as assessed for land-tax, the Association lends without undertaking any special valuation. But if loans exceeding this standard are demanded, a special valuation is made. In general only arable and pasture land is reckoned, forest land being only considered in connection with properties containing cultivated land, and at such a value as it would represent when cultivated, trees, &c. not being taken into account. Special Concessions to small Proprietors.— hi the case of small properties it may be noted that they are lent upon by some Associations to a higher percentage than the larger properties. In assessing smaller properties, dwellings and farm buildings, and stock, are often included. Thus, the East Prussian Association resolved in 1910, in respect of properties not exceeding 45 acres, to allow, in addition to the valuation of the land, up to 25 per cent, of the value of buildings as estimated by the East Prussian Fire Insurance Society, when (1) the value of buildings amounts to at least -^ of the valuation of the land, or (2) the buildings and the stock each amount to \ of the value of the land as assessed, or (3) the total valuation for lending purposes is not raised more than 25 per cent, by the addition of the value of the buildings. Similar consideration for smaller landowners is also given by at least the West Prussian and Pomeranian Associations and by one of the Schleswig-Holstein organisations. The East Prussian Association at the same time, however, increased the annual sinking fund payment on loans made under these conditions from ^ to 1 per cent, and increased tht total of the sinking fund payments necessary before withdrawal or cancellation can take place, normally fixed at 5 per cent, of capital debt, to 10 per cent. All Associations, the writer was informed by a leading authority and official of one of the largest Associations, now adopt the practice of adding to the value of arable lands certain percentages as additions to the value arrived at by multiplying the net yield assessment by a certain figure, e.g.., 15 to 36, in different cases. The assessment of net yield for the purposes of the land tax having been made in Prussia in the first few years following the Act of 1861, and in other parts of Germany even earlier, and the value of agricultural land having increased to a very marked extent, the Associations have felt justified in taking this step. Thus in 1908 the West Prussian Association was authorised to add to its valuation made on the old lines upon arable land in a large number of districts a percentage of iQ, and when sufficient cause is shown, a percentage of 40. A further Ministerial Order to this Association in 1909 fixed the highest possible valuation at which the two most productive classes of arable land might be assessed at £36 6s. and £33 per hectare (about 2^ acres). The East Prussian Association similarly adds per- centages of 15, the new Pomeranian Association percentages of from 5 to 50, and the new Brandenburg Credit Institute percentages of from 5 to 15. The latter indicates the following considerations for justifying such extended credit on properties : (1) exception- ally convenient situation {e.g., near railway, &c.) or with good adjacent markets ; (2) advantageous consolidation of the property ; (3) well situated and well-built dwelling and farm buildings ; (4) exceptionally good proportion of meadow and pasture lands ; (5) permanent facilities for procuring copious supply of natural manures elsewhere than on the estate ; (6) proper drainage system ; (7) essential improvements or transformation effected in the farm and in farming operations since the assessment for land tax (this assessment dates back about 50 years). Right to Loan. — Mortgage Associations may not refuse loans to landowners fulfilling the conditions imposed by the articles of association, and to that amount for which their property after valuation furnishes the security required by their regulations. Other institutions Uke public savings banks, public mortgage and communal banks, and joint- stock mortgage banks, may simply refuse to lend without assignment of reason. Mortgage Associations must comjjaunicate the result of their valuation to the intending borrower and, in the event of refusal of loan, show cause why they cannot issue bonds. LAND MORTGAGE CREDIT ASSOCIATIONS. 13 Object of Loan.— The manner of employment of loans does not concern the Associations ; their articles at least do not appear to include any provision requiring any statement of, or their assent to, the proposed manner of employment, except in one or two cases where an exceptionally high loan in proportion to the value of the property may be required. Method of Valuation. — Valuation of property by an Association is usually entrusted to a Commission of two or more members, one living in the same district as the intending borrower, and the other or others belonging to neighbouring districts. In many cases two is the number chosen, and the directorate may send an expert and a Syndic, or representative of the latter, if necessary. Care is taken, when the Commission is composed of only local landowners, that they are not connected by family or other close relationship with the intending borrower, and that landowners do not make mutual valuations, e.g., that one has not already valued the land of the other for the purpose of loan. The result of the enquiry is sent to the central office where an examination is made, and if necessary, the Board of Directors may require the director of the division (or larger district) of the area of the Association to undertake a fresh valuation, the cost of such fresh valuation being usually borne by the Association. Reducible Mortgages. — The obligation to redeem loans by annual payments to a sinking fund was only introduced in 1821, w^hen the Posen Credit Association— finally dissolved, partly for political reasons, in 1857 — was established and imposed this obliga- tion upon all its members. Other Associations for the most part adopted this principle within the succeeding 30 years, but in several cases it was again expressely abandoned and reintroduced. Thus the East Prussian Association abandoned reducible mortgages in 1843, reintroducing them in 1866, but leaving considerable freedom to mortgagors {see below) ; in West Prussia the principle was introduced in 1832, abandoned in 1844 and reintroduced in 1859 ; and in Pomerania it was conceded in 1836, but was only carried into effect in 1858. The minimum amount of the annual reduction generally ranges from \ to three-quarters per cent., the Mecklenburg Association, however, fixing the minimiim at J per cent. Borrowers may covenant for larger annual payments, and are at liberty on giving the necessary notice of three, six, or eight (in one case at least) months to make additional contributions (usually only minimum fixed amounts or percentage (J) are accepted), or to repay the loan in full. But even such notice is not always required, the Brandenburg Association for Small Landholders and that for Upper and Lower Lusatia, for example, dispensing with it. The New Pomeranian Association for Small Land- holders, which fixes the minimum payment at h per cent., allows mortgagors to postpone sinking fund payments for four years. When 10 per cent, of the debt is repaid, debtors are generally permitted to claim cancellation of the capital debt to that extent in the registry of title. In the case of many older Associations, especially in Prussia, the amortisation system is prevented from being really effective in extinguishing indebtedness ; payments may not be obligatory after a certain percentage of the debt is thus equalised by sinking fund payments, or debtors may be allowed on cancellation of mortgage indebtedness to a certain amount to borrow again to the extent of the cancellation. Thus the Pomeranian Association permits borrowers to exempt themselves from further sinking fund payments when five per cent, of the capital has been paid into sinking fund, provided that all right to claim the disposal of these accumulated payments for other purposes is renounced. In East Prussia loans not amounting to half of the value of the property need not be amortised, but loans in excess of such value must be amortised yearly by at least J per cent, and not more than one per cent. ; when five per cent, of the original debt has been accumulated in the sinking fund, the debtor may apply for cancellation to that extent, and free himself from the interest and sinking fund due in respect of it. The borrower may then obtain a fresh mortgage loan to the extent of the amount redeemed, provided that the property has suffered no deterioration. A more usual regulation in this respect requires that borrowers shall only have the right to cancel indebtedness and (when they happen to have exhausted the credit allowed in respect of the ascertained value of their estates) obtain another loan when ten per cent, of the loan has been amortised. The regulations adopted by the Associations respecting amortisation differ to such a great extent that it is difficult to generalise. It is, however, the general rule, as in the case of the reducible mortgages of the Prussian Public Savings Banks, that the contributions towards redemption are not applied to the immediate reduction of the debt but accumulated in a special fund. But the fact that most Associations allow the withdrawal of accumulated contributions or grant fresh mortgages equal to fixed percentages of the debt when cancelled prevents the proper aim — complete removal of indebtedness — from being realised. On the other hand, it is urged that, unless such facilities, are granted, landowners may be obliged to seek mortgage credit elsewhere and on more unfavourablt 14 MORTGAGE CREDIT. terms. Various proposals have been made to secure removal of indebtedness of members of these Associations, but they can be only alluded to here. Two have obtained especial prominence : that of Dr, Hecht by which the mortgagor should pay an insurance rate for a redemption policy in addition to the sinking fund, and that of the East Prussian Association by which the sinking fund contributions should be devoted to life insurance policy. In the latter case the burden on the mortgagor is lighter. From the point of view of the Associations the importance of the sinking fund consists in the fact that it provides reserve security for the bonds in case of loss. The Associations have no paid-up capital, and accordingly might have to make a levy on members to cover losses were it not for the sinking fund payments, which thus are, in effect, a form of reserve. Some German writers take the view that the original purpose of the State in pressing the formation of sinking funds by the old Associations was not in order to reduce the mortgage indebtedness of landowners, but rather to increase the security of the bonds. In support of this contention Herr Mauer points to the circumstance that the State assented to the abandonment of reducible mortgages by the East Prussian, West Prussian, and Pomeranian Associations in favour of similar contributions to the " Special Fund " or owned fund of the Associations. Payments to sinking fund are due half-yearly, and are subject to the same conditions for recovery of arrears as obtain for arrears in interest. Loans not subject to Recall. — Loans granted by these Associations are not subject to recall, provided the borrower fulfils his obligations, though borrowers may repay their loans at any time or on giving a certain period of notice. Associations do, however, reserve the right to recall loans partially or entirely ; when {e.g., in East Prussia) the value of the property deteriorates as a result of inferior farming, or reduction in farm area, in farming operations, or in stock, or of decay of buildings, of excessive disafforestation, of neglect to insure buildings, &c., the Associations may claim repayment of a suitable proportion or of the whole of the loan. But otherwise loans may not be recalled. Recovery against Defaulters. — The Associations possess the right of summary process against the property of their members ; of compulsory administration and of compulsory sale. Loans to mortgagors in arrears of payments are not forthwith recalled, but most Associations charge an increased rate of interest (usually 5 per cent.) upon payments in arrears ; and as security a further charge is entered in the registry of title against the estate. Payment of Loans. — Loans are paid in bonds, not in cash, except in a few cases. The borrower either disposes of these in the market himself, or, in those cases in which Loan Banks have been established in connection with the Associations, takes them to such a bank, which sells them on his behalf or makes him an advance upon their security. When the market price of the particular bonds is below par, some Associations at the request of the borrower grant an additional sum equal to the diflference but not exceeding a certain percentage, varying from 4 to 10 per cent, of the loan. Such loans made by the Silesian Association are subject to 4 per cent, interest, and the agreed annual payments to sinking fund for the entire loan are increased by ^ per cent, until this additional cash loan is cleared, all amortisation payments being applicable to the repayment of the latter. In the case of such loans, which may not be granted when the credit already accorded exceeds one half of the assessed valuation of the property, the East Prussian Association charges 5 per cent, interest, and retains the right to raise the interest upon the whole capital debt to 6 per cent, until the additional sum is repaid ; repayment must be effected in ten successive half-yearly instalments. Choice of Bonds. — Intending borrowers indicate at what rate they wish to borrow. The rates most usually open to their choice are 3, 85, 4 and ij per cent, and in a few cases 5 per cent. ; at the present time, as may be seen from the Table at the beginning of this section, the bonds in circulation are practically all of 3, 3^ and 4 per cent., SJ per cent, being distinctly predominant. If the borrower of a loan of £100 at the present time chooses 4 per cent, bonds, he obtains at the predominant market rates (say) £100"6 to sBlOl'G for his bonds on sale, if he selects 3J per cent, bonds he obtains £92, and if 3 per cent, bonds he realises £84 ; in each case he pays interest and sinking fund instalments upon the nominal amount of the loan, and thus, with 3 per cent, bonds, though he receives only £84, he pays interest on £100 and his sinking fund payments are likewise based on this latter sum. He is entitled, however, to repay the loan by re-purchasing similar bonds in the open market and returning them to the Association. While mortgagors obtain the advantage of a rise in value of bonds, they may, of course, suffer loss through an unf||vourable market at the time of selling their bonds. If the bonds are sold, however, above par, mortgagors gain the balance, being only obliged to repay the nominal value ; and should they repay their loan by purchasing such bonds LAND MORTGAGE CREDIT ASSOCIATIONS. 15 in the market and returning them to the Association, at a tinae when the bonds have decUned in price, they obtain the advantage of both premium and discount. Associations make it a regular practice to buy in their own bonds when the market is favourable. Consistently good Market for Bonds. — It may be observed that the bonds of these Associations have consistently maintained a relatively strong position on the market. The quotations of the majority of these appear to remain from under 1 to about 2 per cent, lower than Prussian or Imperial Government Stock bearing the same rates of interest. More than a century ago they proved their strength : the writer was informed by the director of one Association that 4 per cent. Prussian stock in 1802-5 stood at first at 83, then at 50, and in 1808 at 20, yet that Silesian Association bonds did not sink below 50. Nominal Value of Bonds issued. — The bonds issued by Associations have various nominal values. No bonds of provincial Associations appear to exceed £250 in value, but they are issued as low as £3 15s. The Silesian Association has in circulation o, 3 J a,nd 4 per cent, bonds of £5, £7 10s., £10, £15, £25, £50, £75, £150 and £250 ; the Westphalian Association issues bonds bearing 3 and 4 per cent, of £5, £10, £25, £50, £100 and £250, or 3^ and 4^ per cent, of £5, £10, £20, £40, £100 and £200 ; the Prussian Saxony Association of £3 15s., £7 10s., £10, £15, £25, £50, £150 and £250 ; the Pomeranian (Old) Association of £3 15s., £7 lOs., £15, £75 and £150. The Central Association bonds have the nominal value of £5, £7 10s., £lO, £15, £25, £30, £50, £75, £150, £250 and £500. Interest on Bonds. — It has been stated that bonds bearing interest at 3 per cent, and upwards are issued, but for a number of years the market has been very unfavourable for bonds at 3 per cent. As in the case of bonds of all other mortgage credit organisations the proportion of value represented by their 3 per cent, bonds has considerably declined (in 1900, 22"76 per cent., in 1909, 14'80 per cent.) while that of those at 4 per cent, has doubled (1900, 6-11 per cent., 1909, 12"60 per cent.) and of those at 3J per cent, shows a slight increase (1900, 70-49 per cent., 1909, 7229 per cent.). The rates of interest of the bonds of these Associations have necessarily conformed to general market conditions. At the end of the 'thirties 3^ per cent, bonds predominated ; later there was an upward tendency which culminated in the 'seventies in the issue of even 5 per cent, bonds, but these together with those at 4 J per cent., were not long in circulation. Until the middle of the 'eighties 4 per cent, bonds predominated, their place was taken by those at 3^, and at about 1894-95 3 per cent, bonds were largely in circulation. In 1897 only about 3 per cent, of the bonds in circulation were for 4 per cent, or over. Since that date there has been a very slow, but at the same time almost steady rise in the rates ; thus the average of the interest borne by all bonds of these institutions in circulation has increased from 3-42 in 1900 to 3-49 in 1909 (Schulte). Special Merits of these Associations. — It will be convenient here to summarise the principal merits attaching to these Mortgage Credit Associations as agencies for meeting the requirements of mortgage or long term credit for landowners. (1) They enable landowners to mobilise, as it were, their landed possessions by the creation of bonds passing into the general system of securities ; instead of only being able, like English landowners, to provide a mortgage security of very restricted currency, German landowners have the advantage of being able to convert a mortgage charge into a security realisable at any time in the general market. (2) The loans granted are not subject to recall. (3) The rate of interest is as moderate as possible, being as closely as possible related to the prevailing market rates for money. (4) The bonds being irredeemable by the holder, the rate of interest may not be raised. (5) The right is conceded to reduce the debt by payments made at the mortgagor's convenience. (6) The necessary extinction of the capital debt is accomplished gradually. (7) The costs for valuation and other charges are low. (8) Their administration is at once relatively inexpensive and their office-holders highly qualified for their work. The advantages of this system over that of the ordinary commercial mort- gage are very great. Landholders are not usually in a position to repay mortgage loans in lump sums ; and when the whole of a loan is called in at one time they may be obliged to borrow elsewhere, thus burdening them- selves with further costs, loss of time and possibly other disadvantages. The rate of interest payable on commercial mortgages is generally higher than the rate of interest payable upon first-class securities— such as are the bonds of these Associations. Freedom from the liability of an increased rate of interest, such as is always a possible demand in the case of commercial mortgages, is fundamentally important. Furthermore, repay- ment by instalments at the will of the borrower or the acceptance of small annual payments {e.g.., J per cent.) to a sinking fund are rarely conceded by private persons or ordinary commercial institutions. An advantage of perhaps less magnitude but none the less 16 MORTGAGE CREDIT. desirable is that of economy in expenses. By virtue of their Associations being mutual associations not aiming at profits, borrowers obtain the full advantage of low initial charges for valuation and other necessary expenditure. Owing to the system of administration by which the directors at the central office are themselves landowners and borrowers holding honorary office, the management is at once inexpensive and efficient, the directors being thoroughly conversant with the needs of landowners, and the value of landed property ; and similar advantages arise from the circumstance that the local representatives — who are likewise honorary — ^are also borrowing landowners, and thus in a position to judge the farming conditions of estates and the business capacity of their owners, as well as to secure supervision over the mortgaged properties. As a result of adequate accumulated funds, some Associations are enabled to grant loans almost without any charge beyond such as is necessary to meet the actual out-of-pocket expenditure incurred. An indirect advantage realised by landholders arises from their being made acquainted in a minute way with the value and properties of their lands, by means of the valuations carried out by the Associations, the results of which are always communicated to them. This knowledge, now that the Associations have lowered the standard of eligibility to admit quite small properties, can hardly fail to have beneficial results upon farming operations. Mortgage Credit Association Loan Banks. — The Land , Mortgage Credit Associa- tions, as such, are only concerned with mortgage credit transactions and the issue of bonds in connection therewith, but many have established, as independent organisations, Loan Banks which are designed to support the work of their respective Associations and to furnish members of the latter with non- mortgage or short term credit. Their special business may be said to be to grant advances to borrowers on the security of the bonds of their particular Association as well as or other security (bonds backed by sureties, bills, deposit of collateral), and to undertake the sale of bonds issued to members or their purchase, the payment of interest, and all the general brinking business of their Association. In addition they are open to transact all banking business for outsiders, with the exception of such business as involves risk or speculation. The first bank of this kind was established by the Silesian Association at Breslau in 1848 ; similar banks were founded by the East Prussia Association .it Konigsberg in 1869, by the Kur and Neumark Institute at Berlin in 1873, by the West Prussian at Dantzig in 1876, by the Posen at Posen in 1890, by the Pomeranian at Stettin in 1885, and by the Province of Saxony Association at Halle in 1898. la Berlin, Dantzig, and Stettin, these banks act for both Associations (for large and small owners) which have their offices in these cities. The necessary capital was subscribed by the Associations : thus the Silesian Association, in founding under the direction of its own General Directorate its Loan Bank in 1848 provided it with a capital of £120,000 ; in 1868 when the Bank was transformed into an independent institution this was raised to £150,000 and in 1895 to £250,000. The capital of the Berlin Bank at the end of 1909 was £207,237, of the West Prussian £90,000 (subscribed in special shares by the old and new Associations) ; of the East Prussian, Pomeranian, and (Prussian) Saxony £200,000 ; and of the Posen Bank £150,000. The Silesian Bank has its main office at the seat of the Association in Breslau, but has branches at each of nine other places in the Province where the seat oi the constituent Associations is established. The East Prussian Loan Bank is developing a very large business ; it has fifty collecting stations or offices, some of the latter being situate in the best business centres in Konigsberg, others with two officials in places in the province, while landowners also act as agents. The Bank of the Kur and Neumark Credit Institute at Berlin, which transacts probably the largest business of all, differs from the others in that it is under the guarantee and management of the Institute and not an independent organisation. All these banks in Prussia, having been recognised as places of deposit for trustee funds, attract considerable deposits through the prestige thus conferred. The Banks realise considerable profits. The net profits of the East Prussian Loan Bank in 1909-10 amounted to £16,968 : after writing £466 to Savings-Deposit Eeserve and £3,300 to the General Bank Reserve, £13,202 was paid to the Association. The Bank of the Kur and Neumark Credit Institute had a turnover about three times greater than that of the East Prussian, and that of the Silesian Bank was also considerably greater than that of the latter at the same date. After appropriations to reserve, the whole of the substantial profits that are realised are applied to the advantage of members. Thus the mortgage indebtedness o^ members may be reduced by the application of profits ; since its foundation the Kur and Neumark Loan Bank has written £200,000 to the sinking funds of members. Apart from such participation in profits, however, owing to LAND MORTGAGE CREDIT ASSOCIATIONS. 17 the facts that these banks are not commercial undertakings aiming at maximum returns and that their directors are especially conversant with agricultural credit, members have the advantage of getting better terms than they would obtain at ordinary banks. Other ancillary Operations. — Two other branches of business undertaken by some Associations may be noticed. The Associations of East and West Prussia established special societies for insurance of the property of their members against fire ; but the East Prussian Association recently amalgamated the business of its society with the public provincial society for fire insurance. An important movement has recently secured the support of several Prussian Associations. In 1910 the East Prussian Association decided to establish an independent institution to carry on all kinds of life insurance. Not only was it to aim at reducing indebtedness by introducing, instead of payments to sinking fund, the payment of such amortisntion contributions as premium upon life insurance policies, the value of which was to be devoted, on the death of mortgagors, to clearing the mortgage indebtedness, but profits were to be applied towards the furtherance of the plans of the Association for the removal of indebtedness on landed property. The Association endowed the undertaking with a capital of ^50,000, gave it free offices, the use of the whole organisation of the Association both central and provincial, including the fifty offices and agencies of the Loan Bank through the province, and certain advances towards initial expenses. Other Associations have also established insurance institutions, in some cases in conjunction with the Provinces. Thus in the first half of 1911 the Silesian Association had allotted £25,000, and the Province the same sum as capital for the Silesian Insurance undertaking of this character ; the Posen Association had allotted £15,000 and the Pomeranian Association £25,000, being supported in both cases by their respective Provinces. It is proposed that the remaining Associations, having established similar organisations in their areas, should form a great Federation and a separate central company entitled "Germany." Active Modern Policy of Associations. — Within the last generation these Associations have, in general, shown themselves to be quite alive to progressive ideas. They have extended eligibility for membership so as to include owners of small properties ; they have increased the proportionate loan which may be granted upon the security of property ; they have introduced new branches of allied activity {e.g., banking and insurance) ; and they have adopted more flexible business methods, although always consistent with absolute security for bondholders. This general awakening is due to many causes, but not the least has been the influence of the joint stock mortgage banks. As a result, it no longer occurs that a leading German organisation of agriculturists, in high dissatisfaction with the backwardness of these Associations, energetically advocates (as happened in the 'sixties) the foundation of joint stock mortgage banks. The Associations practically without exception show increasing business year by year, and the newer Associations have succeeded in winning the confidence of the landowners in their districts. That they are still both relatively and absolutely much more important in the East than in the West or South of Germany is partly because they have been longer established in the East, and were originally constituted with especial reference to the large properties which predominate in those parts, and partly because in the West local public savings banks had already established a firm footing as regards mortgage loan business among the medium and small owners who there predominate, while in the South {e.g.., in Baden, Bavaria, and Wiirtemberg) not only local public savings banks but also joint stock mortgage banks have long ofi'ered similar (though, it may be remarked, not equal) advantages to the agriculturists of their respective States. A textual translation of the Articles of the Mortgage Association of Westphalia., which were newly codified as recently as 1909, is printed in the Appendix. The Articles of this Association were selected for translation, not only hy reason of important points of likeness between conditions obtaining in Westphalia and in many English districts as regards the pre- dominance of the manufacturing and mining industries, and custom of property succession, dfc, of their recent codification and of their admitting quite small landowners to membership, but also because they resemble in essential features the Atticles of at least two other Associations, namely, the Association of the Province of Saxony and the Schleswig-ffolstein Credit Union. A translation of the Articles of the Bavarian Agricultural Bank will also be found in the Appendix. 355T4 18 2. STATE, PROVINCIAL AND DISTRICT MORTGAGE CREDIT BANKS. Number ; Business. — There are 16 institutions in Germany which have been established for the whole of a State, or a Province, or an Administrative District within a Province, part of whose regular business it is to make loans to individual landowners on mortgage security. The liabilities of such institutions are guaranteed by the public authority (State, Provincial or District), which either directly manages or minutely supervises their management, and to which the surpluses realised from the business appear, with one exception, to revert. The total of the loans made by these Banks, which were outstanding at the end of 1909, amounted to £97,108,197 ; of this sum £48,548,167 was lent to individuals on mortgage security and £40,272,583 to communal authorities, while for the remaining £8,287,447 outstanding no specific allocation is given in the published statistics. Area of Operations. — The following Table shows, for the 16 existing institutions of this type, the date of foundation and the area of operations, together with the populations of such areas : — Prussian Districts or Provinces, and Date of Foundation : — Cassel, 1832 Sigmaringen, 1834 Wiesbaden, 1840 Hanover, 1842 Rhine Province, 1883 Westphalia, 1894 Saxon Province : — Bautzen, 1844 ... States : — Brunswick, 1765 Hesse, 1890 and 1903 {see text p. 21) Oldenburg, 1883 Saxe-Altenburg, 1792 Saxe-Coburg-Gotha, 1853 Saxe-Meiningen, 1849 Schwarzburg-Rudolstadt, 1855 Schwarzburg-Sonderhausen, 1883 Saxe-Weimar, 1869 ... This Table is of interest as illustrating the decentralisation of German public institutions for providing long term credit to landowners. For purposes of comparison with conditions in England it may be well to recall that the area of Yorkshire, the largest English county,! is 3,889,851 acres, or approximately three-quarters the size of Westphalia. The areas of operations of the Brunswick and Saxe-Weimar Banks are not very different from the area of Sussex (932,409 acres) or of Kent (968,975 acres). Similarly the area of operations of the Bank of Saxe-Meiningen compares with Dorset, of Saxe-Coburg-Gotha with Oxfordshire, of Saxe-Altenburg with Bedfordshire, and of Schwarzburg-Rudolstadt and Schwarzburg-Sonderhausen with Huntingdon. In regard to population that of Yorkshire (3,969,151 in 1911) corresponds roughly to that of WestphaUa, and the population of Kent (1,019,870 in 1911) to that within the area o£ the Cassel bank, while the populations of Saxe-Weimar and of Brunswick are each about one-third more than that in Sussex (666,876 in 1911). This feature of decentralisation is also apparent in. the case of other long-term credit institutions in Germany, such as the Mortgage Credit Associations, the Land Improvement Banks, and other organisations. The public savings banks, in effect, provide almost every district with a long-term credit institution, although necessarily, owing to the conditions on which they hold their funds, they are imperfect long-term credit organisations. Except in the case of the three Banks in Gotha, Altenburg and Bautzen, loans by the above Banks may only be granted on the security of mortgages upon land situate within the area for which the Bank has been created, the public authorities of * Conversions have been made at the ratio 1 hectare — 2^ acres, which is sufficiently accurate for the present purpose. t The particulars for English counties relate to administrative counties, with associated county boroughs, at the census of 1911 (preliminary figures). Area of Operations Acres.* Population of such Area : (1910). 2,520,960 285,565 1,404,465 1,008,053 71,011 1,212,968 9,627,390 2,942,436 6,749,478 5,054,585 7,121,140 4,125,096 617,500 443,549 918,000 494,339 1,922,000 1,607,250 1,282,051 483,042 331,000 216,128 494,250 257,177 617,000 235,000 215,500 902,750 278,762 100,702 89,917 417,149 STATE, PROVINCIAL, AND DISTRICT MORTGAGE CREDIT BANKS. 19 which area guarantee the liabilities. The Altenburg Bank may under certain conditions lend money throughout Germany on other than mortgage security, while the Bautzen Bank may lend in the Kingdom of Saxony on the ordinary security accepted by banks and may, like the Gotha bank in this respect, lend money on the security of mortgages upon real property not situate within its State. The oldest foundation is that of Brunswick, which was originally established in 1765 as a savings bank under supervision of the Ducal Government, but was transformed in 1832 into a state institution for granting credit on mortgage to individuals, as well as for making advances to public bodies. It should be remarked however, that from its foundation the Bank had given loans on mortgage. It was authorised also in 1832 to accept deposits and to act as the place of deposit for public money. The Altenburg Bank, founded in 1792 as a loan bank, was given an extended scope under state guarantee in 1818 and in 1837. State guarantee from the time of their foundation was possessed by the Banks in Hanover, Cassel, Wiesbaden, Meiningen, Oldenbarg, Rudolstadt, Sonderhausen and Hesse ; but in some instances at least {e.g., Hanover) this guarantee did not extend to a large sum. Prussia. — Six of these institutions exist in Prussia, and are to be distinguished from the Prussian Provincial Aid Banks (whose main function is to advance money to public bodies for purposes such as the erection of public buildings, roads, land improve- ment, extinction of debt, &c., or to co-operative organisations for land improvement and other objects) as well as from the five Prussian Provincial Land Improvement Banks (which lend money practically only for purely improvement works) and from the seven Prussian Rent-Charge Banks (see pp. 58-61). In the older Prussian Provinces, as will be seen on reference to the previous section dealing with the Land Mortgage Credit Associations (Landschaften) co-operative organisations of all landowners holding large properties within a single province, began to be formed in the reign of Frederick the Great. Large holdings predominated in these provinces, but elsewhere conditions were different ; the creation of similar co-operative organisations for mortgage credit did not follow in other parts and was perhaps not possible. Prussian policy was adverse to the foundation of State-guaranteed institutions for mortgage credit, the Prussian Constitution of 1850 actually prohibiting the State from guaranteeing an institution which had the authority to contract loans not limited in amount. In 1866, however, the Kingdom of Hanover, the Electorate of Hesse-Nassau, and the Duchy of Hesse were annexed to the Kingdom of Prussia, and each of these possessed institutions under the guarantee of the State. These institutions were accordingly transformed into institutions under the guarantee of the Union of the Communes of the Province, in the case of the Hanover Bank, and into institutions under the guarantee of the Unions of the Administrative Districts (Edgierungs-Besirke) in the case of Cassel and Wiesbaden Banks, the two former States having been merged in the single province of Hesse-Cassel. Of the three remaining Prussian Banks of this type one was established in 1883 at Diisseldorf to serve the Rhine Province, and a second in 1894 at Miinster to serve the Province of Westphalia ; in both cases the establishment was effected by the transformation of the existing Provincial Aid Banks, and in both cases the liabilities were guaranteed by the communes of the Province. The third Bank, at Sigmaringen, is primarily the public Savings Bank of HohenzoUern, under the guarantee of the communes constituting the Administrative District of Sigmaringen, but this Bank fulfils the function of a mortgage credit institution and has one of the distinguishing marks of the other banks (which ordinary savings banks do not possess), namely, the right to issue bonds. As for the other eight Prussian provinces, where no banks belonging to this group exist, the needs of agriculturists are similarly provided for by the provincial Mortgage Credit Associations (see pages 1-17) most of which now meet the requirements of quite small landowners. Previous to the period when the latter were admitted to these Associations, Rent-Charge Banks had been created for the Prussian Provinces to fulfil the same functions as were originally assigned to many of the Banks now being described. In one or two provinces, however, especially in Silesia, the Provincial Aid Banks (see pages 55-58) grant loans on similar conditions to farmers, although in general the main function of such banks is to supply credit to corporate bodies (communes, communal organisations, &c.) Other German States. — No public mortgage banks exist in Bavaria, Baden, Wiirtem- burg, Alsace-Lorraine, Waldeck, or the two Principalities of Reuss and Lippe. Bavaria has, however, long been rich in great mortgage banks organised as companies, whose success was promoted by the sympathetic attitude of the Government, and which lend to a considerable extent on mortgages of agricultural land (see chapter on Joint Stock Mort- gage Banks, pages 30-39) ; and in 1896 the State made a grant of £250,000 as working 25574 B 3 ao MORTGAGE CREDIT. capital to a co-operative society specially established for lending money to farmers on mortgage security, as well as making other money grants and actively supporting its foundation and progress. In Baden the government made a contract in 1892 with a Baden Mortgage Bank under which the latter established a special department, subject to State supervision, for the granting of mortgage loans to landowners ; under this agreement loans must be granted to landowners " at cost price," that is, at the rats of interest payable by the Bank on bonds issued in connection therewith, plus consideration for expenses of assessment and necessary charges, but in no case may commission cr management fees be extracted from landowners in this connection. The minimum loan is fixed at £15. In Wiirtemberg the Wiirtemberg Savings Bank, founded in 1818 under royal protection, lends largely to agriculturists on mortgage, as do the 72 public district saving banks, while agriculturists have also at their disposal the Wiirtemberg Credit Association established in 1827, which possesses the privilege of issuing bonds. Alsace-Lorraine possesses no special facilities, through government action, for mortgage credit ; and, except for the public savings banks, mortgage credit is supplied to its farmers by mortgage banks commercially organised and by private persons. There is at Strassburg an important mortgage bank with power to issue mortgage bonds, but its loans to agriculturists are relatively inconsiderable (e.g., end of 1909 out of a total of £8,450,640 outstanding against registered mortgages only £248,666 was lent on mortgages of rural property), and Bavarian, Baden, Gotha, and other outside mortgage institutions operate in that State. As to the small States of Anhalt and Waldeck, the Land Mortgage Credit Association of Saxony comprises Anhalt (which forms an enclave in the province) within its area, and the similar Association in Westphalia lends also upon property situated in W^aldeck. It may not be out of place to observe here that many other countries have followed the example of Germany as regards the establishment of mortgage banks under State or provincial guarantee, especially Austria- Hungary and Switzerland, but also Luxemburg, Norway, Sweden, Servia, Bulgaria and Russia. In Austria alone there are 15 such Banks, apart fi-om eleven (1910) public Savings Banks, with power to issue mortgage bonds. In Switzerland there are eleven Banks under cantonal guarantee, which, as part of their ordinary business, lend money on mortgage security. General Features. — In some cases, e.g., in Hanover, Cassel, Wiesbaden, Meiningen, and Rudolstadt, the original purpose of these Banks was to assist medium and smaller landowners, by loans on reducible mortgages, to redeem burdens or servitudes which still attached to their holdings at the time when the emancipatory legislation declared such charges to be commutable. They have nearly all lost this special character, and have developed into State or provincial institutions for mortgage and communal credit. Considerable differences occur in the general constitution, method of management, and scope of business of these Banks at the present time, so that generalisations are liable not to be applicable in every case. Most of the following features are, however, common to all : — (1) Guarantee by the State, province, or district which they may serve. (2) The privilege of issuing their own bonds, except in the case of the Banks of the Rhine Province and of Westphalia, which issue bonds of the provinces in which they are situate. (3) The recognition of such bonds as trustee investments. (4) Authority to distrain upon debtors by summary process without recourse to ordinary civil procedure. (5) Absence of mere profit seeking, all profits remaining after meeting expenses of management being devoted to public purposes, or for the benefit of borrowers. (6) A certain community of interest as between Bank and borrower {e.g. in some cases if bonds issued in respect of a mortgage loan are sold above par, the difi"erence is applied towards reduction of capital debt ; or the rate of interest payable on a loan by a borrower may be reduced or raised for any year when the business of the Bank allows, or requires, this course — see account of Hanover Bank). (7) The grant of loans to individuals on mortgage of both urban and rural property — except in the case of the Hanover Bank, which lends to indi- viduals only on mortgage of rural property. (8) The principle that their mortgage charges on any property, as a rule, take precedence of all other mortgage claims. (9) The grant of loans, subject to regular sinking fund payments, to communes and other public cqjjporations, and often to certain co-operative undertakings {e.g., for irrigation or drainage purposes), without mortgage security. STATE, PROVINCIAL, AND DISTRICT MORTGAGE CREDIT BANKS. 21 (10) The payment of loans, either to a great extent or wholly, in cash (instead of in bonds realisable by the borrower in the open market, as in the case of loans granted by the Land Mortgage Credit Associations (see p. 14). (11) Freedom of loans from the possibility of being recalled, so long as the conditions of such loans are fulfilled, (12) The requirement that loans granted without being subject to recall must be reduced by annual payments into sinking fund. (18) The freedom of borrowers to repay in whole or in part, on notice of from three to six months. (14) The tendency to keep in vieAV the interests of small borrowers. (15) The absence of restriction of loans to owners of property of a certain minimum area, or held under certain tenures, although loans may not be less, as a rule, than fixed minima (see below p. 22). (16) Exemption from stamp duties, as a rule, and often from Court fees. (17) Co-operation of the local or district revenue authorities for the collection of interest and other payments, as well as for the receipt of applications and the giving of information as to the standing of intending borrowers. (18) A certain decentralisation of business by (a) the utilisation of the officials alluded to in (17), and {b) a system of confidential agents, honorary or otherwise, appointed in various parts of the districts covered by the Banks. A large number of these Banks (e.^., those at Brunswick, Bautzen, Gotha, Cassel, Meiningen, Rudolstadt, Diisseldorf and Miinster) also accept deposits. The Hanover Bank is the recognised place of deposit for court and trustee funds. The Meiningen Bank accepts deposits at interest at 13 places in the State of Saxe- Meiningen, the inland revenue offices serving as the places of deposit. The Banks at Altenburg and Bautzen conduct practically all branches of banking, the latter issuing notes, while those at Diisseldorf and Miinster have also an extensive scope ; besides taking deposits, they lend money to individuals on mortgage, on bonds with surety, and the deposit of securities, and make loans to communal, church and other organisations, to public institutions, to co-operative societies, and for the building of light railways. It may be noticed that many of these Banks endeavour to attract clients, whether borrowers or depositors, by regular advertisements in ordinary daily or other papers. Administration and Supervision. — These Banks are usually managed by a special Committee. In some cases the Committee is appointed by the State, and the affairs of the Bank are conducted within the offices of a Ministry ; in other cases the Committee is wholly or partly elected by the Assembly or Council of the public authority guaranteeing the liabilities of the Bank. The Acts constituting the Banks of the Rhine Province and of the Province of Westphalia require that the governing body (Kuratorium) or Committee in each case shall be composed of the Governor of the Province, the director of the Bank, and five members chosen by the Council of the Province, the latter body being, however, the final authority in matters connected with the Bank. In Hanover the administration is in the hands of a Committee of three, elected by the Provincial Assembly, one of whom gives his whole time to this work. The Assembly of the Administrative District of Wiesbaden appoints three members of the Directorate of the Wiesbaden Bank. The control exercised by the supervising or responsible authority may be far more than merely formal. In many cases the rules to be observed in the general conduct of business, the appointment, number, and requisite qualifications of the officials, the rates of interest to be charged upon loans and to be paid upon bonds issued, the form of presentation of annual statements of accounts and balance sheets, and other matters, have to be decided by the controlling authority. In Oldenburg, Saxe- Weimar, Saxe- Meiningen, and Altenburg, supervision is exercised by the Ministry of Finance or of Home Affairs. The Gotha Bank is a State institution, guaranteed and supervised by the State, but it possesses a separate legal status and management. In Bautzen the Communal Assembly exercises the ordinary supervising authority, subject to the final supervision of the State. In Wiesbaden, Cassel, Hanover, Rhine -Province and Westphalia, supervision lies with the Assemblies of the respective Administrative Districts or Provinces. There are two Mortgage Credit Banks at Darmstadt for the Grand Duchy of Hesse. One of these was established in 1890 and the second in 1903. Since the establishment of the latter the business of the former, which is a State institution forming a department in the Ministry of Finance^ has been restricted essentially to granting loans for the same objects as ate those granted by the Land Improvement Banks (see pp. 51-55). The Hessian Public Mortgage Bank, however, established by virtue of a special Hessian Act of 1 902 occupies 25574 B 3 22 MORTGAGE CREDIT. a unique position among the institutions dealt with in this chapter. It is a Mortgage Bank Company, subject to the Imperial Mortgage Bank Act of 1899 (see chapter on Joint Stock Mortgage Banks) but all its shares are held by the State, communes and public savings banks ; and the State guarantees its bonds. Like other banks established under the Act of 1899 it is under State supervision, but it differs from them in that its business is not conducted with the view to obtaining the highest possible profit. A complete translation of its Articles will be found in the Appendix. It may be noticed here that its object is stated therein to be "the promotion of rural and urban mortgage credit and the relief of the indebtedness of rural and urban property in the Grand Duchy of Hesse, by the grant of loans, not subject to recall, but reducible by sinking fund payments, at a moderate rate of interest, especially to smaller landowners and business folk ; also the promotion of communal credit in the Grand Duchy of Hesse by the grant of loans to communes and to other communal organisa- tions." Its paid up share capital at the end of 1911 amounted to £450,000, and its statutory reserves to £19,200. Capital. — Working capital is mainly obtained by the issue of bonds, all of which are recognised as trustee securities. In Hanover, Oldenburg, and Gotha only bonds redeemable by the Banks are issued ; bonds, both redeemable and irredeemable, are issued in Bautzen, Brunswick and Altenburg ; in Cassel, Wiesbaden, Meiningen, Rudolstadt, Sonderhausen only bonds redeemable by the Banks by drawing by lot are issued. But, as a rule, a certain period must elapse after the issue of bonds before the particular Bank may include them in a drawing. The Weimar bonds are irredeemable by the holders, but the Bank may buy them in on giving at least three months' notice. The Banks in Miinster and Dusseldorf do not issue their own bonds, but bonds of the province in which each is situated. Apart from periodical redemption, bonds may be bought up in the open market by the Banks in some cases, but such purchases of bonds so generally effected by the Mortgage Credit Associations and the Joint Stock Mortgage Banks are not practised to the same extent by the public mortgage credit Banks. Funds for this purpose are, however, available through the normal (that is, to sinking fund) and exceptional repayments of capital made by borrowers. Other working capital is derived from deposits, from the repayments to sinking fund accounts, from accumulated funds, and . from grants or loans by the State or province concerned. In Hanover the State formerly accorded the bank an advance up to £15,000 ; in Cassel between 1833 and 1867 the deposits of the State at the end of each year ranged from £2,900 to £76,000. When the Bank at Dusseldorf took over the liabilities and assets of the Provincial Aid Bank, the foundation fund of £150,000 and the reserves of the latter were transferred to it ; the Bank at Miinster also took over the Habilities and assets of the former Provincial Aid Bank with its foundation fund. Loans ; Minimum and Maximum. — There is usually a minimum amount fixed for loans. In Saxe-Meiningen this minimum is as low as £2 10s. ; in Bautzen and Oldenburg it is £5 ; in Wiesbaden £7 10s. ; in Gotha and Scliwarz burg- Sonderhausen £10 ; in Gotha £15 ; and in Hanover £30. All institutions appear to grant mainly loans of moderate amount. Thus it was reported in 1907 that the loans granted by the Oldenburg Bank averaged from £200 to £250 ; by the Brunswick Bank £250 ; by the Gotha Bank £80 ; by the Sonderhausen Bank £200 ; by the Hanover Bank from £550 to £650 ; and by the Westphalian Bank at Miinster £1,250 to £1,450. The average of 30,001 loans on mortgage upon agricultural property due to the Cassel Bank at the end of 1909 was £135. In 1911 the Hessian Mortgage Bank granted a total of 1.201 loans on mortgage security ; of these 134 were sums not exceeding £50, 137 were between £50 and £100, 171 between £100 and £150, 137 between £150 and £200, and 132 between £200 and £250. In other words 22'5 per cent, of the loans of this bank did not exceed £lOO, nor 48'2 per cent. £200. The maximum of individual loans is usually determined by the value of the land to be mortgaged, but in Weimar the highest loan that may be granted to an individual is fixed at £500. Limitation of Loans. — The Acts under which the Banks are regulated fix the limit to the advances that may be made upon property. It is usually fixed at at least one-half of the assessed value, or at a multiple of the net yield as determined for the purposes of the land tax. The Bank of the Rhine Province lends up to two-thirds of the assessed value of agricultural property and up to half of the assessed value of any buildings thereon, or up to 25 times the amount of the net agricultural yield ; the Bautzen, Oldenburg, Altenburg, and Brunswick Banks fend also up to two-thirds of the assessed value of agricul- STATE, PROVINCIAL, AND DISTRICT MORTGAGE CREDIT BANKS. 23 tural property. The Meiningen Bank lends, as a rule, up to one-half of the assessed value, and in exceptional cases up to three-fifths ; the Gotha Bank fixes the maximum also at three- fifths. Mortgagors must concede to the Banks prior rights over other possible mortgagees. Many of these Banks also accept stocks and shares as security for loans. The Bank of the Rhine Province lends up to 7-5 per cent, of their market value, and even accepts bonds backed by sureties as supplementary security for moderate amounts not covered by the two-thirds value of the property (or the twenty-fifth multiple of the net yield). In Brunswick certain securities are lent upon up to nine-tenths of their market value. Method of Payment of Loans. — Loans are granted mostly in cash. In Weimar, Bautzen and Altenburg practically all loans are made in cash ; but in Cassel a maximum of £120 is fixed for loans in cash. When not given in cash, the borrower is paid in bonds realisable either by himself or by the Bank in the open market. Interest payable on Loans. — In order to cover the expenses of administration the interest charged to the borrower is higher than the interest payable upon the bonds by the Bank. This margin is fixed according to circumstances, but usually varies from J to J per cent. In Cassel the present margin appears to be usually 0'35 per cent, as com- pared with J per cent, formerly ; in Weimar and Schwarzburg-Sonderhausen it is J per cent. In 1910 and 1911 the Hessian Mortgage Bank issued only 4 per cent, bonds ; the rate of interest charged to borrowers in each year was 4^, a small varying charge in addition for procuring the payment in cash, &c., bringing the annual payments, over the usual period (54 years) for paying off the loans, to 4"29, and 4"31 per cent, for loans made within these two years. The majority of Banks maintain the rate o£ interest as fixed on loans at the time of their grant until they are paid off ; but a few charge their rates accord- ing to circumstances. Thus, in Hanover the rate of interest payable by borrowers each year upon loans is fixed according to the average of the rates paid by the Bank for its loans during the previous year, further charges of ^th and xV^ii psr cent, being made for administration expenses and reserve fund. It is usual for the representative body of the State, or Province, or Administrative District which guarantees the Bank, or the head of the State (as in Weimar) to fix the rate payable on loans. Reducible Mortgages. — Annual payments to sinking fund are not in every case obligatory. The Darmstadt State Bank of 1890 and Hanover Banks require at least § per cent, per annum of the loan to be repaid into a sinking fund ; the Cassel and Schwarzburg-Sonderhausen Banks a minimum of ^ per cent. ; in Weimar the rate is by arrangement, except in case of loans for improvement purposes when it is at least 2^ per cent., but first payment may be postponed for three years ; the Munster, Dusseldorf and Wiesbaden Banks require annual sinking fund payments in respect of all loans not subject to recall. In Sigmaringen all such loans, which constituted 99 per cent, of the total in 1909, are advanced on reducible mortgages. In Hesse (Mortgage Bank of 1903), Rudolstadt, Saxe-Meiningen, Gotha, Brunswick, Saxe- Altenburg and Oldenburg such regular sinking fund payments are permissible, but not obligatory ; in practice the vast majority of the loans on agricultural property are arranged subject to these conditions. The Hessian Bank has granted only reducible mortgage loans up to the present, although the Act of 1902 establishing the Bank authorises also non- reducible mortgages ; in 1910 and 1911 the average percentages of such loans paid to sinking fund — an annual payment of \ per cent, being obligatory — amounted to "73 and "81. In Saxe-Meiningen only amortisable mortgage loans were formerly made, with a minimum of 1 per cent, per annum ; attheendof 1909 aB3,666,821 outof£3,759,175 outstanding was similarly lent. In 1907 the interest was 4'3 per cent, and the annual payment to sinking fund was normally fixed at 1 per cent. Payment is made half-yearly, and the balance of surplus interest accruing through the progressive amortisation of the capital debt is credited to the borrower. Loans made beyond the half of the value of the property must, however, be completely redeemed within fifteen years. In Saxe- Altenburg the sinking fund payments may vary from 1 to 5 per cent, as may be arranged. In Oldenburg such payments must amount to at least 1 per cent, in the case of loans upon rural property. The actual percentages arranged with this Bank down to 1907 were very various : ly^, IJ, 2, 2^*0, ^, 3, 4, 5, h^, 6, 8, 8^, 10, 11, 13|;, 15 & 25 per cent., the last few rateg, however, having been stipulated only in rare cases. About half of the mortgage loans of this Bank are granted upon rural property (in 1910, £749,694 was lent on urban and £758,279 on rural property) and therefore necessarily reducible. In Schwarzburg-Rudolstadt in 1909, £412,767 out of a total of £477,140 was outstanding subject to regular repayments to sinking fund. In Bautzen most loans are given without being subject to such payments ; in 1909 loans to the amount of £3,336,600 out of a total of £3,663,262 were not on the reducible basis. In Schwarzburg-Rudolstadt in 1909, loans for £412,767 out of total loans of £477,140 were amortisable. 25671 B i 24 MORTGAGE CREDIT. Most Banks appear to permit borrowers to make repayments in excess of those specified in the sinking fund scheme. Due notice of from three to six months must be given, and minimum amounts for such repayments are fixed ; thus, the Weimar Bank does not accept sums of under £l 5 in part repayment. Nominal Value of Bonds.— Th.Q bonds issued by these Banks bear various nominal values. The Hanover Bank may issue bonds of the value of £30, £45, £75, £150, £750, and £1,500, and the Cassel Bank those of £7 10s., £15, £80, £75, and £150. The Weimar Bank is authorised to issue the denominations of £10, £15, £25, £50, and £150 ; it was stated to be not improbable that it will issue bonds of £5, in order to bring its bonds within the reach of the smallest investors. Interest paid on Bonds. — The bonds issued bear interest at the rate of 3, 8^, 3^, 3|-, Sf, 3| or 4 per cent. Since 1900 bonds at under 3 J per cent, have not been issued to any appreciable extent by these institutions, while the proportion of those in circulation at 4 per cent, have increased by over 100 per cent. ; and those at 3| per cent, have increased from 1*32 per cent, to 8"81 per cent, of the total bond circulation. The following Table compiled from the figures published by Dr. Schulte shows for 1900 and 1909 the proportion of bonds in circulation at the close of these years bearing the rates of interest indicated. Interest Value of Bonds end of Percentage to Total Value end of borne. 1900. 1909. 1900. 1909. 3 3i 3* 3i 3A 3i 4 £ 2,652,615 4,303,405 729,180 28,346,909 514,290 6,609,175 £ 2,300,780 3,114,860 706,350 44,787,800 1,311,900 7,842,575 28,869,735 6-1 10-0 1-7 65-8 1-3 15-1 2-6 3-5 •7 50-4 1-5 8-8 32-5 43,155,574 88,934,000 100-0 100-0 Judging from the case of those Banks whose reports for 1910 and 1911 are available, this tendency to issue bonds bearing rates of over 3 J per cent, has continued to a marked extent. In the period from 1900 to 1909 the average rate payable upon all bonds in circulation issued by all Banks considered in this section increased from 3-52 to 3"66 per cent. Rural and Urban Mortgage Loans. — The value of the bonds in circulation, issued by these mortgage Banks, amounted to £43,215,574 in 1900 and to £88,934,000 in 1909. The total of the loans outstanding at the same dates were £49,764,936 and £97,108,197, of which £27,417,687 and £48,548,167 respectively were definitely assigned to mortgage loans, while £12,334,197 (1900) and £40,272,582 (1909) were classed as communal loans and £10,013,056 (1900) and £8,287,446 (1909) were not particularised (Schulte). It is not possible to distinguish the proportion failing to loans on mortgages upon agricultural property, but in some cases the figure is very considerable as may be seen from the following instances relating to individual Banks, for which the particulars are available : — Bank. 1900. 1909. Kural Mortgages. ' Urban Mortgages. Rural Mortgages. Urban Mortgages. £ £ £ £ Hanover 3,229,561 None 3,403,549 None Cassel 2,690,230 2,002,526 4,051,482 3,458,075 Rhine Province 2,836,629 988,848 6,418,310 3,043,509 . Saxe- Weimar 1,101,110 314,894 861,906 251,598 Saxe- A-ltenburg 2,895,155 1,914,194 2,573,369 3,189,234 Oldenburg — — 757,223 750,750 Sonderhausen 51,002 18 21,944 99. 78,810 19 45,847 )8. BrnnBwick 1,3#,215 1,101,853 1,894,321 1,532,820 STATE, PROVINCIAL, AND DISTRICT MORTGAGE CREDIT BANKS. 25 Success of these Banks. — These State, or semi- State, banks have fulfilled their purpose with success. They were created in parts of Middle and North- West Germany at a time when practically no suitable institutions existed for the grant of long term credit to farmers. They have served in an especial manner the needs of medium and small landowners who predominate in their respective areas and afforded them the advantage of being able to obtain loans at moderate rates of interest, not subject to recall, and repayable in small annual instalments. The principle of compulsory reduction of debt by annual payments to sinking fund, which was not adopted by the Mortgage Credit Associations till comparatively late in their history (about 1820-40), was applied apparently universally by these institu- tions from the beginning ; and, unlike many credit associations of the older type, they did not frustrate, in fact, the reduction of mortgage charges by permitting borrowers to utilise accumulated sinking fund payments towards removal of indebtedness and to charge forthwith their property to the old amount. The relative freedom from excessive indebtedness enjoyed by medium and small landowners in Brunswick, Hanover and Cassel is attributed partly to this compulsory system of paying off mortgages by convenient instalments. Its educational influence in this direction was not confined to actual borrowers firom these institutions. They have shown also that mortgage credit in the most favourable terms may be afforded on sound business lines not only to large but also to small and medium landowners. By their business organisation at once centralised and decentralised (see the special accounts of the Hanover, Cassel and Wiesbaden Banks) they secure not only the necessary supervision over their borrowers, but also bring their benefits more easily within the reach of farmers in every district. Not aiming at profits beyond the payment of expenses, although, in fact, considerable sums are usually allocated to public purposes as the result of theii* operations, they grant loans more cheaply than the joint stock mortgage banks. The majority of the latter do not find it profitable to lend at all upon small properties ; and other institutions, which possess the advantage of being accessible for small farmers without incurring expense, namely, the public savings banks, not only charge higher rates but may grant only loans subject to recall, and only agree to gradual amortisation for a limited portion of their loans. Certain drawbacks are associated with the management and the control of the Banks now being considered by the State or public Assemblies of Districts or Provinces. Thus the necessity of obtaining the sanction of a representative Assembly for changing the rate of interest payable on bonds or chargeable on loans, the strict adherence to formal rules (e.g., as regards lending over 50 or other percentage of the assessed value), for whose alteration similar authority is required, may often prove disadvantageous in practice. Other drawbacks inseparable in the popular mind from official administration are also imputed to them ; and, of course, it cannot be gainsaid, they do not possess the great merit of the Mortgage Credit Associations, namely, the merit of being organisations of landowners governed by landowners which confine their business to rural mortgages, and are better able to take in consideration all the conditions in arriving at their decisions. The following notes upon three public mortgage credit Banks are added : — The Hanovee Provincial Mortgage Credit Bank. This institution is unique within its group in that it restricts its mortgage loans to those upon rural property. It appears also to be the only State or provincial mortgage credit bank handing over no profits for pubhc purposes : it applies any profits remaining after cost of administration and other necessary charges {e.g., reserve fund) have been met for the benefit of its borrowers. The Bank was established by Hanover in 1840 primarily for the purpose of assisting landholders to extinguish charges upon them and their properties in respect of servitudes and tithes, by granting loans on reducible mortgages ; but in 1842 its scope was enlarged to cover loans for the purpose of cancelling all kinds of charges falling upon property as well as loans for other objects. Loans were to be granted in cash up to half of the value of estates whose net rental value was assessed at not less than j630 ; this limit was reduced shortly to £15, in 1846 to £9, and finally in 1875 even this restriction was removed. The Kingdom of Hanover undertook to guarantee the habilities of the Bank up to £75,000, and, of course, creditors (that is, bond holders) had the ordinary security for their loans in the form of the mortgage claims against borrowers and any assets gradually accumulated by the Bank. The Exchequer also undertook to make advances up to £15,000 at 3 per cent. There were already in the Kingdom three land mortgage credit Associations, which still exist : these were founded in 1790, 1825, and 1826 respectively, but all of them limited their operations to special areas, and granted loans only on rather larger properties. In the first Articles of the Hanover Mortgage Credit 26 MORTGAGE CREDIT. Bank it was provided that loans should not be made upon properties which were loanable by these Associations, but in 1851 this restriction was removed. At a later period (1870) the Bank obtained, and still possesses, authority to make loans upon rural property of all sizes and held under various tenures, but not upon urban property. The authority and obligation of the Bank to make advances for the cancellation of charges and servitudes resting upon land was abolished at the same date. Its business is thus confined to first mortgage loans upon rural properties ; but since 1842 it has also been authorised to make loans to public bodies. Upon the absorption (in 1866) of Hanover in the Kingdom of Prussia the Bank was placed under government and guarantee of the new Province, to be managed in accordance with the resolutions of the Provincial Assembly. The Act of 1869, which regulated the position of the Bank, fixed the guarantee at the same amount as before, namely, £15,000. At the present time the Bank makes loans, on first mortgage only, up to half the value of rural property situate in Hanover ; although the value of buildings may not, as a rule, be taken into account in arriving at such assessments, when it is permissible to include them with the landed property, they may be lent upon up to half their value as assessed for insurance or to half the multiple (15) of their rental value. All loans are annually subject to sinking fund payments of at least f per cent., to contribution of | per cent, for administration, and of j^g P^i" cent, for appropriation to reserve, and bear a variable rate of interest. As the Bank seeks no profit for itself, borrowers are only charged the rate of interest which is paid for its capital. The rate of interest payable may, therefore, be raised or lowered from year to year, the actual percentage charged being based upon the average of the cost to the Bank of its loans in the previous year. In 1910 mortgagors paid 3f per cent, as interest, Loans are made in cash, and may not be called in, provided the borrower meets his engagements. The minimum amount advanced is fixed at £30 ; the averages of the total loans made annually appear fairly high, ranging usually (as reported in 1907) from £550 to £650 per loan. They may be repaid by extraordinary payments over and above those to sinking fund on giving six months' notice, but such payments must amount to fixed sums — at one time such minimum payment was fixed at £3 15s. The bonds issued by the bank may be either bearer or other bonds ; the denominations issuable are £30, £45, £75, £150, £750 and £1,500. No limit is fixed to the amount of bonds to be issued by the Bank. They may be called in at six months' notice, but the rule has obtained not to call them in for a period of at least five years after issue, and to fix stated periods. Interest on bonds is payable yearly or half-yearly as agreed, but borrowers pay their annuities (interest, sinking fund, and contribution to cost of administration) in half- yearly instalments. The management is entrusted to a Board of three directors, two of whom exercise their functions without giving their whole time to this work, while the third, the actual principal of the Bank, also holds the power to vote in the Provincial Directorate on all matters concerning the Bank, with the exception of those directly afi'ecting the actual management. The offices of the Bank are in the city of Hanover, but the Bank secures the advantages of decentralisation by the appointment of numerous agents throughout the Province. Directors of the Hanoverian public savings banks are stated to constitute the bulk of such agents ; they receive applications, issue the necessary forms, pay loans to and collect annuities from borrowers, and generally act for the Bank. In 1903 (the latest year for which such figures are available) the total cost of administration amounted to £6,910. As already noted, it makes no contribution to public purposes ; alone among the category of Prussian institutions, omitting two Provincial Aid Banks, no contribution by it for government purposes is recorded for 1903. At the end of 1909, there were outstanding mortgage loans amounting to £3,403,549 and other loans to communes and other public corporations amounting to £4,236,252 ; the bonds in circulation bore the value of £7,612,345, 3J per cent, being payable upon £3,412,405, and 4 per cent, upon £4,199,940. In 1910, the Bank contracted loans (for lending to its clients) amounting to £259,^70, the total valtie of its bonds in circulation at the end of that year being £7,894,379. The Nassau Distkict Mortgage Credit Bank. This Bank was originally founded in 1840 by the Duchy of Nassau as a State institution, and conducted ordinary banking business. It was designed especially " to give communes and landowners the means for redeeming old debts, for redeeming servitudes and other charges, an# for purchasing property by procuring for them the necessary capital at moderate interest and without the costly interposition of third STATE, PROVINCIAL, AND DISTRICT MORTGAGE CREDIT BANKS. 27 parties ; and to assist merchants and manufacturers in their business undertakings by credit advances." It was also intended that the Bank should serve as the banker of the Duchy. In 1849 a new Act altered its constitution and gave it more regular povt^ers. It continued to develop as an institution for personal credit. In 1853 a third Act was passed. After the annexation of the Duchy by Prussia an Act of 1869 (amended in 1883, 1899 and 1902) changed its character from that of a State institution into that of an institution guaranteed and managed by the Communal Union of the new Administrative District of Wiesbaden. It was given a separate legal status, although managed on behalf of the Administrative District under its supervision and in accordance with the regulation passed by the Assembly of the District. It possesses the right to recover summarily from its debtors without reference to the Courts. Its area of operation was limited to the District ; its functions were henceforward practically confined to those of lending money on mortgage of rural and urban property, and to communes and land improvement societies approved by the State authorities. The Act authorised the Bank to lend money on mortgage up to half of the ascertained value. The minimum loan was fixed at £7 10s. ; and since 1872 all loans are given only in cash (not in bonds). Loans may be given with or without the obligation to effect regular sinking fund payments. As a rule, borrowers arrange to reduce the capital debt by such payments ; over 90 per cent, of the loans outstanding in each of the years 1890 to 1898 were made subject to them, and the same tendency has continued, especially as regards loans on rural property. The minimum payment is fixed at J per cent., but debtors are entitled at three months' notice to repay in full or to make additional contributions to the sinking fund. Loans were formerly liable to be called in, but since 1899 loans to small and medium holders are granted by the Bank free of this liability. The margin of interest between that paid by the Bank and by the borrowers must not be less than ^ per cent. Bonds payable to bearer, redeemable by holder or Bank, or only redeemable by Bank, may be issued. At the present time bonds bearing interest at 3, 3g, 3f and 4 per cent, are in circulation. Up to 1900 only those at 3 and 3^ were in circulation ; but in that year 4 per cent, bonds, and in 1907 3f per cent, bonds, were issued. The business of the Nassau Savings Bank is under the direction of the Nassau District Mortgage Credit Bank. At the end of 1909, the deposits of the former institution amounted to £5,973,586 of which £4,090,546 were invested in mortgages (in urban mortgages £3,575,535, £2,718,138 being reducible mortgage loans ; in rural mortgages £497,637, £482,832 being reducible mortgage loans). Since its foundation the Bank has endeavoured to meet the needs of the rural population within its area in which small holders absolutely predominate. In 1892, 14,594 out of 15,013 loans outstanding were for sums under £500, and totalled only £1,343,470, or an average of £92 per loan. In 1902 the Bank had granted a total of 14,370 upon agricultural holdings, amounting to £1,955,000, or an average of £136 per loan, while in 1908 the number of loans was 19,530, amounting to £2,795,000 or an average of £143 per loan. The Bank, while providing for farmers loans which are not subject to being called in, which are amortisable by convenient annual payments, and which bear a moderate rate of interest, is able to make substantial contributions to the revenues of the District out of the profits derived from its business. In 1903 such contributions amounted to £29,968. In the same year — no later figures are available on these points — it expended on administration, including maintenance of properties, £21,946. Loans were repaid during the year to the amount of £385,595 and granted to the amount of £431,613. The total of the outstanding loans against mortgage amounted in 1909 to £5,847,458 and of those to communes and other bodies to £818,175. The bonds in circulation amounted to £6,071,385, of which £4,436,405 bore 3J per cent, and £1,056,860 bore 4 per cent. The foundation capital has stood at £297,940 since 1899 ; from 1879-1898 it stood at a figure of over £309,500 ; in 1869, when its reconstitution was effected by a special Act, it was £220,450. In 1845, five years after its creation, the capital amounted to £943 ; in 1855 this had grown to £52,037 and in 1863 to £158,477. The reserves — which must be brought up to 2 per cent, of the liabilities — amounted to £136,611 in 1909. Like the similar institutions existing at Cassel for the other part of the Province of Hesse-Nassau and at Hanover for the Province of Hanover, this Bank possesses to a considerable extent the advantages of a decentralized administration. Its office is at Wiesbaden, but in almost every judicial district {Amtsgerichibezirk) it has appointed agents, usually revenue officials, who receive applications, pass judgment thereon, receive 28 MORTGAGE CREDIT. and pay money on behalf of the Bank ; these agents are stated to number 27. In addition to these, the Bank has other regular advisors in various parts of the Administrative District. Mortgage Crepit Bank fob the Administrative District of Cassel. This Bank was founded in 1832 as an institution under State guarantee and supervision to grant mortgage loans on property situate in the Electorate of Hesse- Cassel and owned by subjects of that Electorate. It aimed in the first place at furnishing means for the redemption of charges resting on or arising out of the tenure of landed property (tithes, rent charges, servitudes) ; the Act establishing the Bank was passed on the same day as the Act which regulated the abolition of such charges and burdens. In 1869 it was transformed, by a Prussian Act, into an institution managed and guaranteed by the District Union of the Administrative District of Cassel. The present scope of its business embraces mortgage loans on rural and urban property, and loans to public bodies and to certain categories of co-operative societies for land improvement. In 1909 there were outstanding : loans against mortgage of rural property £4,051,482, against mortgage of urban property £3,458,074, and "to communes, corporations and public associations " £948,841. Although loans against rural mortgages have always formed the most important part of the business of the Bank, in the course of the last two decades loans have been granted to an increasing proportion on mortgages of urban property. Throughout its nistory it has rendered especial services to the small landowners who predominate within the area covered by its operations. The original Act expressly provided that consideration should be given in the first instance to small borrowers. In 1869 the official memorandum issued in connection with the new Prussian Act pointed out that over two-thirds of all ithe loans then outstanding were for sums of under £75. For the ten years 1869-1878 the total loans outstanding at the end of each year ranged from 68,587 (in 1869) to 61,130 (1878) and their average amount from £47 (1869) to £64 (1878) ; in 1879-1888 similarly the outstanding loans ranged in number from 59,304 (in 1879) to 42,775 (in 1888) and their average amount from £65 (in 1879) to £100 (in 1888) ; and ui the nine years 1889-1897 the loans ranged in number from 41,159 (1889) to 34,160 (in 1897) and the average amount fi'om £104 (1889) to £137 (1897). The average for 34,335 loans outstanding at the end of 1909 was £219. An analysis of the loans outstanding on rural and urban property in that year, however, shows that the average of the 30,001 loans upon rural property was £135, while the average for 4,334 loans upon urban property was £798. In that year 1,765 loans were made, averaging £237 per loan ; 464 loans ranged from £5 to £o i ; 910 from £50 to £250 ; 332 from £250 to £1,000 ; 46 from £1,000 to £2,500 ; and 13 exceeded £2,500. Of these loans 66 amounting to £39,265 (average £595) were made to communes; 196 loans amounting to £122,178 (average £623) to individuals against urban mortgages and 1,503 loans amounting to £256,690 (average £171) to individuals on rural mortgages. It is clearly seen from these figures that the institution continues to foster small loans to agriculturists. Working capital was obtained at the beginning by the issue of bonds, by the receipt of funds paid by the Electorate towards redemption of charges on land, by deposits and by loans at interest (at a maximum of 3^ per cent.) fiom the State ; at the present time working capital is obtained in the main by the issue of bonds, but it is also provided by the repayments to sinking fund in respect of loans outstanding and by deposits of savings banks, provincial and other authorities. The Bank is recognised as a place of deposit for trustee funds. Loans granted by the Bank are not subject to being called in, but annual payments to sinking fund are obhgatory. Since 1892 loans are given in cash up to £125, over that amount bonds, not redeemable, are issued. These bonds are issued at the nominal value of £7 10s., £15, £30, £75 and £lnO. Bonds have been issued at 3, 3^, 3^ and 4 per cent. ; at the end of 1909 bonds in circulation at these rates represented the values of £171,220, £3,114,860, £2,908,570 and £2,206,360 respectively. _ Like other German bond-issuing institutions the Cassel Bank has found that bonds bearing less than 3| per cent, do not find a ready market ; and those at lower rates are no longer issued. In 1909 4 per cent, bonds formed the main part of those issued ; in that year the market quotation for these bonds averaged lOl'SO, while for the two series of bonds at 3J per cent, the average market prices were 94-40 and 94-90. The Communal Assembly of the Cassel Adminis- trative District fixes the rale of interest payable upon the bonds and by borrowers. A margin of =35 per cent, over the rate payalV; by the Bank upon its bonds appears to be STATE, PROVINCIAL, AND DISTRICT MORTGAGE CREDIT BANKS. 29 the rule in respect of loans against the issue of bonds, but at an earlier period it was one-half per cent. In 1909 the Council of the District approved a reduction to ^ per cent, in the case of the 4 per cent, bonds for new borrowers, as the market value stood over par. Loans in cash may not bear less that 3^ or more than 4J per cent, interest. At the end of 1909 out of the total of 35,976 loans outstanding 19,497 produced 3-60 per cent., 10,393, 3'85 per cent., and 4,155, 4"35 per cent. A minimum of ^ per cent, is payable towards the sinking fund, and is due half-yearly until* complete redemption is effected, but in the case of loans for drainage purposes at least 4 per cent, must be paid for each year after the lapse of the first year. Repayments in whole or in part, as distinct from sinking fund payments, are accepted, subject to six months' notice of intention to effect such payment. Mortgage security is required for all loans to individuals ; the property must lie in the Administrative District of Cassel, and is only loanable on first mortgage up to one-half of its assessed value. Buildings upon agricultural land are mortgageable, but only in conjunc- tion with the mortgaging of the land to which they belong and up to one-third of their assessed value. It is interesting to note that for 205 properties voluntarily sold in 1909, and upon which the Bank had lent money, the total prices I'ealised amounted to £147,067 and the valuation to £145,430 ; the average of the loans made on these properties by the Bank amounted to 39"3 per cent, of the prices thus realised. It may be added that in the same year 36 compulsory sales were made at the instance of the Bank, about ^V per cent, of the total number of loans outstanding. The right to distrain upon its debtors, without procedure through a Court, was granted to the Bank in 1899. Arrears in payment of interest and sinking fund are inconsiderable. At the end of 1908 and 1909 only 0"35 per cent, of the sums due had not been paid ; and this percentage was reduced by nearly one-half by the payments effected up to the middle of the following February. The necessary procedure for obtaining a loan on mortgage is as follows : Intending borrowers are instructed to apply to the nearest agent of the Bank — -the Bank having appointed as its agents the collector of inland revenue in nearly all (if not in all) of the 24 judicial districts, into which the Administrative District of Cassel is divided — and to forward a copy of the folios of the local registry of title referring to the property to be mortgaged, with an extract from the taxation roll respecting the property ; a valuation of the property drawn up and signed by a local, officially appointed valuer and certified by the local mayor ; if buildings are in question a copy of the fire insurance policy ; and a statement as to whether the applicant is married or is a ward or minor, the legal consent of guardians being required in the last two cases. It is also recommended to the applicant to furnish any documents showing purchase price or any documents indicating the exchange value of the property at any date, such as deeds of gift, wills, &c. This application with the opinion of the agent is forwarded to Cassel. In order, when desirable, to obtain further material for judgment, apart from the data thus supplied by the intending borrower and the district revenue officer, the Bank has appointed confidential agents in different districts. Recourse was had to their judgment in less than 10 per cent, of the applications made in 1909, and in almost every case their opinions proved to coincide with those of the revenue officers. In normal circumstances from three to four weeks elapse between the date of application and the date of the conclusion of the transaction, that is, the day on which the mortgage charge is entered against the property in the local registry of title. The expenses are slight — no com- mission is charged by the Bank, and the costs are confined to the cost of copy of entry in registry of title, of its certificates, a small fee for local valuation, postage, and the fee for registry of the mortgage. The Prussian fee for registry of a mortgage in the registry of title depends upon the amount of the charge placed on the property — thus between £6 and £10 it is Is. ; between £10 and £15, Is. 44^. ; between £15 and £27 lOs., Is. lO^d. ; up to £80 can be registered for 4s., and between £80 and £105, 4s. 9d. In 1909 bonds to the value of £129,427 given in payment to the Bank were ■cancelled and bonds to the value of £43,235 bought by the Bank in the open market were cancelled, making a total cancellation of £172,662. Bonds were issued to the total nominal value of £339,745, the excess of issue over redemption thus being £167,083. The nominal value of the bonds in circulation at the end of 1909 was £8,401,812. The reserve, which, under the Amending Act of 1 909, must be not less than one per cent, of the bonds in circulation, amounted to £84,248 at the same date. The total cost of management in 1909 amounted to £14,820 ; of this sum £6,114 was paid in "salaries and permanent remuneration" to officials; £1,500 towards the •costs of the Central Government and £3,450 towards those of the revenue offices ; 30 MORTGAGE CREDIT. £1,554 for the printing and stamping oF bonds ; and the balance to other charges, such as pensions, general office expenses, &c. The profits were £32,033, o£ which £17,500 was paid to the Administrative District for public purposes. 3.-J0INT STOCK MORTGAGE BANKS. Number ; Total Business. — The Banks which are included under the above title are purely commercial undertakings, constituted, in accordance with the Imperial Mortgage Bank Act of 1899, for the purpose of lending money on mortgage security. Excluding the Hessian Mortgage Bank, which is a State institution not aiming primarily at profits, although also estabhshed under the Act, there are at present in Germany 37 mortgage banks of this kind. Their business has attained an enormous development ; at the end of 1911 the total of their outstanding loans covered by mortgages amounted to £554,870,000 as against £337,882,000 in 1900, or an increase of over 64 per cent, withm these 11 years. In 1880 and 1890 respectively the totals amounted only to £77,385,000 and £155,825,000. Rural Mortgage Business. — The proportion of this total granted in respect of mort- gages upon rural property is, however, small ; at the end of 1911 it was only about 6 per cent., or £34,000,000 out of £555,000,000. The proportion has sunk from about 10 per cent, in 1897. Some Banks do not grant loans on such security, and others only do so in exceptional cases. The two principal Banks, however, engage in this business to a note- worthy extent, although it represents in neither case the most important part of their transactions. The Prussian Central Land Credit Joint Stock Company had such loans outstanding at the end of 1909 to the value of £10,542,536 (as compared with £26,513,916 on urban mortgages), and the Bavarian Mortgage and Exchange Bank to the amount of £11,270,962 (as compared with £40,281,429 on urban mortgages). Apart from the single Prussian bank just cited, rural mortgage loans are practically only made by South and Central German Mortgage Banks, those in Bavaria being of outstanding importance in this connexion. The seven Bavarian Banks had issued £17,475,215 in respect of such mortgages at the end of 1909, three Banks representing ^|ths of this total. Thus 91 per cent, of all rural mortgage loans were granted by one Prussian and seven Bavarian Banks ; and further, one Baden Bank had lent against similar security £554,179, the Strassburg Bank £248,666, one Wiirtemberg Bank £134,676 and the Meiningen Bank £235,018. Although the majority of these Banks, therefore, find it more advantageous to cultivate urban rather than rural business, yet it is clear from the example of the Prussian Central Land Credit Joint Stock Company and of the Bavarian banks that commercial mortgage banks may serve the needs of landowners with profit to themselves while giving loans at reasonable rates of interest, for the most part not subject to recall and reducible by annual sinking fund payments. It is worth adding that this Prussian Bank has considerably increased its rural mortgage loans since 1909 ; at the end of 1910 and 1911 respectively such loans totalled £11,694,800 and £12,806,000, while those of the Bavarian Mortgage and Exchange Bank had increased to £11,539,600 and to £11,953,700 at the same dates. Several reasons may be suggested for the rather one-sided development of these mortgage Banks. Agriculturists in most parts of Germany had a,lready at their service a large number of institutions which either confined themselves solely to lending upon agricultural property, such as the Mortgage Credit Associations, or which devoted special attention to this branch of mortgage business, such as the numerous State or Provincial Mortgage Credit Banks, or Land I mprovement Banks, or institutions, which were within a convenient distance, such as the public Savings Banks. The possibility of development in this direction was, therefore, limited. The institutions just alluded to were, moreover, public institutions, not profit-seeking in the ordinary sense, and being without share-capital on which dividendshad to be paid, they were able to grant credit at a cheaper rate than the joint stock mortgage banks. The organisation of the latter was not capable of sufficient decentral- isation (consistent with adequate returns upon the expenses incurred) by the maintenance of local representatives or offices necessary for such business. In the case of the other banks which limit their operations to a province or to a small district, adequate knowledge of intending borrowers and supervision over mortgaged estates is more easily secured, and the general expenses of administration are reduced, by the fact that their administration, apart fi-om those actually in permanent office employment, is largely honorary. Nor were the mortgage banks inclined to seek such business, when abundant urban business con- sequent upon the great development of German urban centres, was within easy reach. Rural property valuation was more difficult, and large transactions were comparatively tew, for, except in the Provinces oLPrussia, East of the Elbe, and in Saxony, where rural mortgage credit was already organised to a high degree, small and medium landovmers JOINT STOCK MORTGAGE BANKS. 31 predominate in Germany. An annual (1909) report of the larojest mortgage Bank (which, out of 57,896 loans upon properties of all kinds, had 40,940 loans varying from £^o to £500 upon rural properties) alludes to the difficulty for a centralised commercial mortgage bank of lending upon such estates. " Small landed properties are more unstable than is supposed, and require, owing to their various peculiarities of tenure and their shifting exigencies (registration and cancellation of charges, regulation of servitudes, postponement of payment, repayment of sinking fund accumulation, &c.), an amount of labour and time quite out of proportion to their profitableness." Landowners on their side did not seek their services, partly because their credit was dearer than that of the existing institutions, and partly because other conditions {e.g., Joint Stock Mortgage Banks do not allow borrowers to dispose so freely of accumulated sinking fund payments as the Mortgage Credit Associations) were not granted by them. History. — Commercial banks for granling mortgage credit first arose in Prussia in 1824, when a Pomeranian bank (die pommersche ritterschaftliche Privat-Bank) was created. But their establishment only received a marked impetus subsequent to the foundation of the Credit Fonder in France in 1852. Of the 37 Banks at present existing, 27 were created in the period 1862-1873, and eight in the period 1894-96 ; one Bank was established in 1886, and the remaining one, dating from 1858, has not transacted fresh mortgage business by way of issue of bonds since 1899. There are 14 Prussian Banks, six of which are in Berlin, three in Frankfort-on Main, two in Cologne, one in Breslau, one in Konigsberg, and one in Hildesheim ; seven Bavarian banks, of which four are in Munich, one in Nuremberg, one in Wurzburg, and one in Ludwigshafen ; two in Wiirtemberg, both at Stuttgart ; and three in Saxony, one being at Dresden, and two at Leipzig. The others are established in various other States at Hamburg, Brunswick, Meiningen, Greiz, Mannheim, Schwerin, Weimar, Gotha, Strassburg, Sonderhausen and Neustrelitz. Legislation. — ^Prussia is the only State which issued regulations relating especially to the actual business of Joint Stock Mortgage Banks. The first Regulations were issued in 1863, and were amended by similar Regulations in 1864, 1867, 1873, and 1893. Other States issued laws which dealt mainly with the securing of an adequate basis for the issue of mortgage bonds. In 1868 it was proposed to introduce legislation for the whole of Germany ; a second effort was made in 1879 when a bill for the regulation of all German Mortgage Banks was laid before the Reichstag ; it was reintroduced with slight changes in 1880, but time did not permit of its being passed into law. In the succeeding period the matter was not taken in hand, largely owing to the preparation of the great Civil Code and the expectation that proposed provisions for the security of mortgage holders might run counter to the provisions of the Code. In 1897 the question was again taken up ; a bill presented in 1899 was passed in the same year and took effect as from 1st January, 1900. This Act, of which a full translation will be found in the Appendix, does not cover all German mortgage banks, but only those mortgage banks which are ordinary joint- stock companies, or joint-stock companies with limited partnerships, and are authorised to issue bonds ; it does not, therefore, affect the other kinds of mortgage credit organisations, such as the I^and Mortgage Credit Associations, and State or Provincial Mortgage Banks, which are described in this Report, and which remain subject to the special laws or regulations of their particular States. Its scope is, however, comprehensive. It contains provisions respecting the type of commercial organisations that may issue mortgage bonds, the scope of business permitted, the regulations as to State supervision ; the conditions of issue of mortgage bonds ; their cover ; the principle for the assessment of property to be lent upon ; the establishment and maintenance of the mortgage register ; the keeping of the books, the preparation of balance sheets and annual reports, and the issue of public advertisements ; the securing of the mortgage bond creditors, and the satisfaction of their claims in case of bankruptcy ; and other matters. The Act, however, leaves to the individual States in which the Banks may have their registered office^, authority to supervise the Banks, to sanction their Articles and principles of assessment, and to refuse certain extensions of business. Legal Form. — Mortgage banks must be constituted as ordinary joint stock companies (AktiengeseUschaften) or as joint stock companies with limited partnership {Kommandit-Gesellschaften Ixuf Aktien). Ordinary unregistered trading companies, companies with limited partnership, companies with limited liability, registered co- operative societies, and individuals are expressly prohibited from undertaking business within the meaning of the Act. But this provision is not applicable to co-operative societies which were registered societies on 1st January, 1900 (when the Act came into force), and which previous to 1st May, 1898, were transacting business in mortgage 32 MORTGAGE CREDIT. credit by the issue of mortgage bonds. At the present time all mortgage banks registered under the Act are ordinary joint stock companies (Aktiengesellschaften). It is not possible in this place to discuss the special legal position of such joint stock companies in German law, but it may be mentioned that the shares of such companies must have a minimum value of £50 (save in exceptional cases) that they are not divisible, and that no liability beyond the value of shares taken is recognised by law. State Authorisation and Supervision. — ^The Banks must obtain a concession from the State and are subject to State supervision. This supervision is exercised by the State in which their chief office is situated, and extends to every branch of their business. The State representative may inspect all books and documents of the Bank at any time, require information from the administration on any point connected with the business, send a representative to the general meeting of shareholders, summon a general meeting of the latter or of the organs of administration, and prohibit the carrying out of resolutions or orders contrary to the Act, the articles or other binding instruments ; the supervising authority may appoint a commissioner and fix the scale of his remuneration. To each Bank is assigned an official (Treuhdnder) whose duty it is to certify before issue that each mortgage bond is properly covered, to confirm each cancellation of a mortgage charge, to hold in common custody with the Bank all relevant mortgage documents and securities, and to examine all books, documents and cash in hand of the Bank. Any conflict of opinion between this official and the Bank is decided by the supervising authority. The amount of his remuneration, if not settled by consent, is fixed by the same authority. Two Classes. — The Banks fall into two main classes — pure and mixed Mortgage Banks. The pure Mortgage Banks, which are ^8 in number, restrict their business to loans on mortgage, the issuing of mortgage bonds, the acquisition and sale of, and the lending upon, mortgages, the grant of loans to public bodies and for light railway construction, the purchase on commission of stocks and shares ; the collection of cheques and bills ; safe-deposit business ; and the acceptance of deposits at interest. The mixed mortgage Banks, which are nine in number, also transact ordinary banking business^ except business of a speculative nature involving the granting of credit. Four of the most important of these Banks are Bavarian. Such Banks, having carried on ordinary banking business previous to the Act of 1899, were authorised to continue it, but they were placed under restrictions that did not afi"ect the pure mortgage banks : thus they could not issue mortgage bonds beyond tenfold the amount of the paid-up share capital and reserves (whereas the others may issue them up to 15 times that amount), unless they possessed the right on 1st January, 1900, to issue to a higher amount ; in which case it was limited to 20 times the amount of the paid-up share capital on May 1, 1898 ; and if, at the date of the Act taking effect, the bonds of a Bank in circulation did not then exceed tv\ice the paid-up share capital, it was restricted to issuing them in the future up to an amount not exceeding twice its paid-up share capital and reserves. Of the nine mixed Banks two only fall within the latter category ; and one of these appears not to have made any fresh loans by issue of mortgage bonds for some years past. It is not anticipated that any additional Mortgage Banks of this character will be established in Germany. The sanction of the Federal Council of the Empire is required for their establishment ; and it is thought unlikely that this sanction will be given. Since the passing of the Act one Bank only has been established subject to its provisions, but this Bank, the Hessian Mortgage Bank, founded in 1903, which has been ignored in this section, is a State institution and not a commercial profit-seeking institution. Organisation. — Although the great majority of Mortgage Banks do not maintain branches, they have regularly appointed agents throughout the State or Empire. These agents receive appHcations for loans and transact other business for their principals. Applicants do not pay them any commission, but their remuneration, usually by commis- sion, is paid by the Bank. The Prussian Central Land Credit Joint- Stock Company, already alluded to, has over 400 agents of this kind. In addition. Banks with consider- able rural mortgage business appoint, in an honorary capacity, local fiduciary agents ( Vertrauens-mdnner) to whom they have recourse, e.g., for the verification of information received from other sources, or for supervisory purposes of a general nature. Capital. — Mortgage Banks are authorised to accept deposits at interest, but may only accept such deposits up to an amount not exceeding the half of their paid-up capital. Banks, however, which previous to 1898 had carried on this business beyond the limits are not afi'ected by this provision of the Act. The paid-up share capital and reserves of these banks are in many instances very large. Taking those that lend to a considerable extent on rural mortgages, the ^aid-up share capital and reserves of the Bavarian JOINT STOCK MORTGAGE BANKS. 33 Mortgage and Exchange Bank at the end of 1911 amounted respectively to £3,000,000 and £2,870,913 ; at the same date the paid-up share capital of the Prussian Central Land Credit Joint Stock Companv amounted to £2,^20,000 and the reserves to £870,055 ; of the Bavarian Union Bank "(1909) to £2,250,000 and £900,978 ; of the South-German Land Credit Bank (1909) £1,350,000 and £526,796. Loans. — These Mortgage Banks have absolute freedom as regards the granting of credit on rural mortgages. Such loans, however, in so far as mortgage bonds are issiued on their security, must consist, to the extent of half their value, of loans subject to annual payments to sinking fund of at least \ per cent. Loans may only be made on property situate in Germany, and must not exceed three -fifths of the value on first mortgage, but any State government may authorise banks to lend upon landed property up to two-thirds within the whole or part of its territory. The Prussian Ministry of Agriculture has authorised Prussian Mortgage Banks to lend up to this limit, but the Bavarian government only authorises up to one-half of the value, except in unusual circumstances, and with the concurrence of the State Commissioner. The gross value taken as basis must not exceed the value, carefully estimated ; only the permanent properties of the land and the yield accruing from ordinarily careful farming are to be considered ; in the case of timbered property, for example, the value of the land only, not of the trees, is reckoned. Mortgages made upon property not likely to be permanently productive, and especially upon mines and quarries, are excluded from consideration as cover for mortgage bonds. Each Bank must issue its special regulations for assessment, and such regulations are required to be approved by the supervising authority. Should a Bank lend on mortgage of property siraate in a State other than its own, these regulations must also be submitted to the government of that State. Mortgage loans must be given in cash as a rule ; exception is only permissible if the articles of the Bank expressly permit it and the borrower gives his assent. In the latter event specific authorisation must be entered in the contract for the borrower to repay the loan either in cash or in bonds of the Bank, at his discretion. Minimum Loans. — A minimum amount for loans is fixed by some Banks : thus the Prussian Central Land Credit Company does not grant loans of under £50. But no minimum is fixed as regards the kind of holding on which mortgage loans may be made, the Mortgage Banks differing in this respect from many Mortgage Credit Associations. Agricultural Loans by principal Prussian Mortgage Bank. — Loans are not confined to large landowners by those Banks that devote attention to rural mortgage loans. The Bavarian Mortgage banks, being established in a State where comparatively few large properties exist, lend to a considerable extent to smaller and medium landholders, and the Prussian Central Land Credit Joint Stock Company also lends largely to these classes. The distribution of the rural mortgage loans of the last-named, at the end of each of the years 1909, 1910 and 1911, upon property situate in Prussia — about nineteen-twentieths of its rural loans are upon Prussian property — is set out in the following Table : — Classified according to Net Yield for Land Tax Assessment. 1909. 1910. 1911. Described as Number of Pro- perties Lent upon. Their Average Size. Average A m ount of Loan. Number of Pro- perties Lent upon. Their Average Size. Average Amount of Loan. Number of Pro- perties Lent upon. Their Average Siae. Average Amount of Loan. Small Properties | Medium „ < Large „ | Very large „ | e, s. £, s. 1 to 3 3 I „ 4 10 4 11 „ 7 10 7 11 „ 15 15 1 „ 37 10 87 11 „ 75 75 1 „ 150 150 1 and over 1,029 662 1,052 1,549 1,590 711 351 316 Acres. 19-7 29-2 42-0 61-2 104-7 195 370 1,249 & 154 228 320 493 978 2,157 4,281 13,631 1,104 699 1,097 1,604 1,622 726 358 331 Acres. 19-7 29-7 42-3 61-0 105 198-2 362-7 1,276-2 £ 159 238 327 508 1,009 2,220 4,347 14,115 1,209 748 1,177 1,700 1,713 755 375 356 Acres. 20-3 30 42-7 61-7 106-5 197-5 369 1,282 £ 166 249 339 539 1,065 2,311 1,600 14,632 All Properties ... 7,260 139 1,420 7,541 139-7 1,458 8,033 140-5 1,522 Eate of Interest and other Charges. — The rate of interest charged to the borrower is mainly dependent upon the general market conditions, that is, upon the rate which the Banks find necessary to pay at the time upon bonds to be issued. The Act lays down that they may not issue bonds at a lower rate than that they receive upon the mortgage. For some years most Banks have found that bonds bearing less than 4 per cent, are not easily marketable, and the usual rates payable upon loans are accordingly 4 per cent, plus a margin of about ^ per cent. The cost of valuation and other expenses also fall upon 36574 34 MORTGAGE CREDIT. the borrower, and these, which may amount, in the case of agricultural loans, to two or three per cent, are deducted from the loan. The Prussian Central Land Credit Joint Stock Company charges Qd. per £50 of loan — with a minimum of 6s. and a maximum of £l 10s. — under the heading of " examination and clerical expenses," and 25. per £50 of loan, with a minimum of £l 10s. and a maximum of £15 for valuation charges. The intending borrower must furnish at bis own expense the purchase deed ; a copy of the complete entries in the registry of property respecting the property to be mortgaged ; an extract from the land tax register, from which may be ascertained the area of the property with a recapitulation of the different crops and grades of land, the assessed net yield and the amount of the land tax payable ; an extract from the buildings tax register with the assessed utilisable value and the amount of the building tax ; the records of the fire insurance or the policy ; the documents as to previous valuations (if any) ; and a true statement concerning any State, provincial, district, or communal charges resting upon the property, as well as of any charges (school or ecclesiastical, servitudes, &c.) falling thereon. No commission on the loan is charged by the Bank. Repayment. — Mortgagors must be given the right to repay the loan in whole or in part before the stipulated period, but in the contract they may waive this right for a period not exceeding ten years. With a maximum period of notice of nine months they may repay in whole or in part, but Banks are not obliged to accept any instalment of less than ten per cont. of the capital debt remaining after the lapse of that period. Annuities stipulated and paid may only contain the interest and the sinking fund payments as arranged between the mortgagor and the bank. Ko agreement permitting a Bank to call in the loan is valid. Reducible Mortgages. — As to reducible mortgages the commencement of payments to sinking fund may not be postponed for more that ten years. While the Act provides that the sinking fund payment shall amount to at least ^ per cent, per annum, most Banks require a minimum of J per cent. The most usual payment arranged is | to 1 per cent. The diflPerence in the amount paid annually as interest upon the original capital sum and the amount actually due by reason of the reduction through sinking fund payments is to be written to the credit of the mortgagor. The right of the latter to make part repayments over and above the annual sinking fund payments is so limited that the Bank may refuse any repayment not sufficient in amount to reduce the period still necessary for redemption by at least one or more years. If, however, the debtor proposes to pay ten per cent, of any balance, and requires that the subsequent annuities be reduced, while retaining the same redemption period, this provision of the Act is not applicable. The Bank is obliged to inform each debtor on request, after the publication of the annual balance sheet, of the amount of the debt cancelled in the financial year. All loans on rural mortgages made by Bavarian Banks must be by reducible mortgages (with a minimum annual payment of ^ per cent.) ; exception is only permissible with the express sanction of the State Commissioner or when it is doubtful whether the land in question is predominantly urban or rural. The Prussian Central Land Credit Joint Stock Company also grants loans upon rural property only against reducible mortgages. Other Provisions. — The Act provides in the interest of the mortgagor that loan prospectuses and loan application forms must show all regulations respecting the manner of payment of the loans, the deductions of any kind to be made by the Bank, the amount of interest, the dates of payment, and the loss entailed by the borrower in case of failure to meet engagements at the proper time, as well as other monetary obligations incurred ; they must show the date of the beginning of any sinking fund payments, the term of notice and other conditions of repayment. It is also enacted that when depreciation occurs which is not due to bad manage- ment on the part of the mortgagor the Bank is only entitled to satisfaction in respect of the amount by which the value of the parcel of land has depreciated, and to which extent it is no longer covered in accordance with the Act or its own Articles ; over and above this amount it may not stipulate the right to demand repayment of the mortgage before the agreed time on the ground of depreciation. Further, the Bank in the event of the sale of a portion of the land, and provided that such sale is determined by the competent authorities not to prejudice owners of rights over the property, may not stipulate any rights other than those legally appertaining to it for securing or obtaining settlement of its claims. Banks are also debarred from inserting in the deed of mortgage any stipulation by which, in case of their dissolution, they might require repayment of a mortgage before the expiry of the term arranged. Mortgage Bonds. — The totaf value of mortgage bonds in circulation must always be covered to their full nominal value by mortgages at least equal to such amount and JOINT STOCK MORTGAGE BANKS. 35 bearing at least the same rate of interest. In the case of agricultural mortgages the cover must consist to the extent of at least one-half, of reducible mortgages ; and if a Bank is obliged to appropriate a parcel of land mortgaged to it, only half of the value at which this land was estimated previous to its acquisition may be brought into account for the purpose of cover. Should the cover by mortgage be deficient, and its restoration to its full amount not be possible either by fresh mortgages or the redemption of bonds in circulation, the Banks must replace the deficient mortgage cover by temporary holdings of Imperial or State bonds or by cash. Such bonds may be brought into account by Banks at a maximum of 95 per cent, of their nominal value. Mortgage bonds are not secured upon specific property (with respect to a loan upon which they may be issued) but are secured by the total bulk of all mortgages as well as all other assets recoverable by each Bank. Mortgage bonds may not be issued by pure Mortgage Banks to more than fifteen times the amount of their paid-up share capital and of the reserve fund assigned specifically to cover losses shown in the balance sheet or to secure mortgage bond- holders, unless previous to 1900 a Bank held the right to issue in excess of this multiple ; in the latter case a maximum multiple of twenty is fixed. But as already indicated " mixed " Mortgage Banks are limited to an issue of up to ten times this figure, unless previous to 1900 they were empowered to issue to a higher multiple, and to twice the amount should a Bank in 1900, when the Act came into force, not have had in circulation mortgage bonds of twice the value of its paid-up share capital. Most Banks have outstanding loans considerably in excess of their bond issues, because, of course, they have the use of their share-capital, any surpluses that accrue from their business, and deposits. Value of Bonds. — The bonds issued are of various denominations down to as low a sum as £5. No legal enactment or other regulations fix the nominal value of bonds issuable, but bonds under £5 or over £250 are rare. The Prussian Central Land Credit Joint Stock Company issues bonds at £5, £15, £25, £50, £100 and £250. Redemption of Bonds. — Mortgage Banks may not issue irredeemable bonds nor renounce the power to redeem them beyond a period of ten years. Bond holders may not be conceded the right to redeem them at any determined period. Mortgage Register. — The mortgages destined to serve as cover for mortgage bonds issued must be registered in the mortgage register, and a copy of this register, certified by the fiduciary agent, must be presented twice each year to the supervising authority. Mortgage Bonds as Trustee Investments. — The bonds of these Banks, with the exception of those issued by six Bavarian Banks, do not possess the privilege of being- recognised as trustee investments, but almost without exception they are accepted as first-class security by the Imperial Bank. Inter est borne by Bonds. — At the end of 1909 the Joint Stock Mortgage Banks had in circulation mortgage bonds to the value of £487,619,459, apart from those amounting to £11,535,830 in Communal bonds. Of the total 58'48 per cent, bore 4 per cent, interest and 39'65 per cent. 3|- per cent., 98"13 per cent, thus bearing these two rates ; the balance was practically confined to those at 3| per cent, and 4J per cent. It was more than once remarked to the writer by directors of these Banks that for some years bonds at less than 4 per cent, were practically unsaleable. A comparison of the figures of 1900 with those of 1909, made by Dr. Schulte, affords complete confirmation of this statement. The total value of the mortgage bonds in circulation in 1900 amounted to £318,128,233 ; and their Communal bonds to £3,501,445 ; 61'77 per cent, of these bore 3^ per cent, (as against 39'65 in 1909) and 38'03 per cant, bore 4 per cent, (as against 58"40 per cent, in 1909). Regular Publication of Statements showing Position of Bank. — Adequate publicity is secured by statutory provision, the Mortgage Banks being obliged to publish regularly detailed statements showing their position. Thus not later than February and August of every calendar year they must publish in the Official Gazette and in the newspapers selected for the adveitisements of the Bank the total amount of mortgage bonds in circulation on the last day of the previous half year, the total amount of mortgages entered in the mortgage register after deduction of all repayments and other diminutions, and also the amount of money actually in the hands of the fiduciary agents, as well as the total amount of the securities entered in the registry at the same date. If securities, or such mortgages as are entered in the mortgage register are not such as are available to cover the full amount of the bonds, it must be stated in the published notice to what extent the securities or mortgages are taken into account as cover. The annual balance sheet must show separately— (1) the total value of the mortgage bonds and securities set aside as cover for the mortgages; (2) the arrears of interest upon 26574 2 36 MOETGAGE CREDIT. mortgages ; (3) the total value of land actually being administered by the Bank, with a separate note as to the value of the Bank buildings ; (4) the total amount of the balances in cash, bills and securities, and, under a separate head, the amount of the mortgage or communal bonds of the Bank itself ; (5) the total amounts receivable by the Bank in respect of loans on pledged effects ; (6) the total amount of credit balances at other banks ; (7) the total amount of mortgage bonds in circulation, according to their nominal value, dividing them according to their rates of interest; (8) the liabilities of the Bank in respect of deposits received. In the profit and loss account are classified the total amount of interest earned by the Bank on mortgages, by commission upon loans, by supplementary payments {e.g., fines for arrears and commission for premature repayments of mortgages), as well as the total amount of interest on bonds to be paid by the Bank during the financial year. Moreover, the annual report or the balance sheet must specify, among other points, the number of forced sales by auction or of cases of compulsory administration effected on the initiative of the Bank or in which it was concerned, the number of cases in which the Bank itself took over administration with the result of sales of such properties, and the arrears of interest due in respect to mortgages, showing these arrears according to the years for which they are due. In all these items details must be shown separately for mortgages upon urban and rural property. Paid-up Capital and Reserves. — The total paid-up share capital of these Banks amounted at the end of 1909 and 1910 to £38,359,996 and £39,820,100, and their reserves to £l(S,081,607 and £20,209,350 respectively. The " mixed " Banks represented in 1909 £14,024,286 of the above capital, and £7,371,832 of the above reserves. The mortgage loans of all Banks at the same date amounted to £511,378,947, of which £30,743,500 were upon rural property and £471,883,160 upon urban property. Of the total of these loans somewhat over one-quarter (£139,423,432) were subject to annual payments to sinking fund, but the bulk of the loans upon rural property were reducible in this way. The two largest Banks, already alluded to as making rural mortgages a considerable feature in their business, have lent two-thirds of all their loans, both urban and rural, on reducible mortgages : of £52,262,943 lent by the Bavarian Mortgage and Exchange Bank £33,992,921 was amortisable, and of £37,792,588 lent by the Prussian Central Land Credit-Company of Berlin £26,961,209 was similarly lent. Another Bavarian Bank showed 70 per cent, mortgage loans as amortisable, viz., £14,935,919 out of £21,166,445. On the other hand some large Banks show only a small proportion of amortisable mortgage loans ; the Mannheim Bank only £868,129 out of £25,897,797, and the Meiningen Bank only £2,391,106 out of £26,570,914. Dividends paid hy Mortgage Banks. — Substantial dividends are paid by these Banks the great majority paying regularly at least 7 per cent, upon their capital. Examining only those that lend to some extent upon rural property we find the following : — The Prussian Central Land Credit Joint Stock Company has paid from its foundation in 1870 to 1911 :— 1870, 7 per cent. ; 1871-1879, 9^ per cent. ; 1880, ^ per cent. ; 1881-1887, 8| per cent. ; 1888, 9J per cent. ; 1889-90, 10 per cent. ; 1891-1894, 9^ per cent, ; 1895-1909, 9 per cent. ; and 1910-11, 9J per cent. The Bavarian Mortgage and Exchange Bank has paid over 12 per cent, since 1890 ; in 1890, 12'03 per cent. ; 1891-96, 12-367 per cent.; 1897-1906, 12-95 per cent; and 1907-1911, 13 per cent. According to the figures published by Dr. Schulte the Bavarian Union Bank and the Rhenish Mortgage Bank of Mannheim paid at least 9 per cent, in each of the ten years 1900-] 909 ; the South-German Land Credit Bank (Munich) paid 7^ per cent, in 1900-1901 and 8 per cent, in 1902-1910 ;. the Bavarian Bank of Commerce 8*05 per cent, in each year from 1900-1909, and the Meiningen Bank 7 per cent, throughout the same period. The Strassburg Bank paid 8"5 per cent, in 1900, 9 per cent, in the years 1901-1907, and 10 per cent, in 1908 and 1909. A special note on two commercial mortgage Banks is added. The Lorrach Bank is not subject to the Act of 1899, but an account is given of it owing to its special position as a district mortgage Bank on commercial lines. The Prussian Central Land Credit Joint Stock Company, This Bank, to which frequent reference is made in the above section, has become the most important Joint Stock Mortgage Bank in Germany for making loans to landowners • and the history of its foundation and development offers several features of interest. In 1867 three great private banking firms in Frankfurt, Berlin and Cologne respectively, and one banking conjj)any in Berlin, approached the Chancellor of the North German Confederation (Prince Bismarck) with a view to establishing a central mortgage JOINT STOCK MORTGAGE BANKS. 87 credit bank for the territory covered by that Confederation. In 1870 the present Bank was constituted and authorised to issue bonds on mortgages of urban and rural property, as well as communal bonds. The Prussian State Bank (entitled the Seehandlung) participated in the original capital, but it does not now possess any share interest. Among the members of the first Council of Administration was the Governor of the Credit Fonder of Paris. There existed at that date sixteen German mortgage banks of the same kind, but neither these, the Land Mortgage Associations, nor the other institutions appeared adequate to the needs of the period, when the lack of facilities for adequate long term credit on the security of agricultural property was especially keenly felt by landowners in the Eastern Prussian provinces. It was proposed to provide a remedy by the creation of this Bank, well equipped with capital and in command of a larger market for its bonds than the Mortgage Credit Associations whose markets were confined for the most part to single provinces. The original intention of the founders of the Bank, which also found expression in its Articles of Association, was to make special agreements with the various Mortgage Credit Associations (Landschaften) and with other mortgage credit institutions, by virtue of which central bonds were to be issued on behalf of such organisations and in place of their bonds by the Prussian Central Land Credit Joint Stock Company. But this intention was not realised. (Compare the history of the Central Mortgage Credit Association, p. 4). Until 1885 the Company limited its operations to certain Eastern and Western provinces (East and West Prussia, Pomerania, Posen, Silesia, Brandenburg, Saxony, Hanover, Schleswig-Holstein) and to the Kingdom of Saxony ; in 1886 the Rhine Province and Province of Westphalia were included ; in 1891 Hesse-Nassau and Hesse-Darmstadt, and in 1892 Baden, Brunswick and Alsace-Lorraine were added. At the present time the operations of the Bank extend over the whole of Germany. Although it has only one office, in which separate departments for urban and rural mortgages are maintained, it has appointed over 40U agencies throughout Germany, and in a large number of rural districts it has unpaid confidential agents. With the object of furthering rural mortgage credit through this Bank the State accorded to it special privileges, not possessed by the other Prussian Joint Stock Mortgage Banks. To it alone among these was attached a special Royal Commissioner, who, subject to the authority of the Ministry of Agriculture, supervised the business of the Bank, and to whom were also given the functions of fiduciary agent (see Mortgage Bank Act, sections 29-38) . The duty of the Commissioner is to authorise the issue of bonds. When the opinion of the valuation experts satisfies the directors, the borrower executes a mortgage ; this mortgage is handed to the Commissioner or to one of the Bank's three auditors (who are appointed by the shareholders for three years — they must not be members of the Board of Supervision, or, of course, of the Directorate) and if approved by him after their examination, he authorises the Bank to issue the bonds. He has the right to require a fresh valuation, or to refuse to accept mortgages, but cannot fix the amounts to be lent upon them. The president and directors of the Bank, after election by the council of administration, require to be confirmed in their appointment by the Crown. A privilege of importance was also accorded at its establishment by the authorisation to proceed to a valuation of both rural and urban property submitted for mortgage, and to make loans involving the issue of bonds on the basis of such valuations. Down to 1893 only one other Prussian Mortgage Bank of this group was granted this authority ; the other Banks were only permitted to make loans on the basis of a fixed multiple of the official assessment of the net yield for land tax (or of that of net yield of buildings for purposes of buildings tax), or up to two-thirds of any valuation that had been made on behalf of a Land Mortgage Credit Association (Landschaft) . Not only the fact that the special object of its foundation was the provision of credit for agriculturists and that the Bank cultivated this business, but also the presence of the Royal Commissioner in its administration and the confirmation of its leading officials in their appointment by the Crown, tended to secure the preference of landowners for this Bank. What was not less important, the effect of the last-named circumstances was to secure the confidence of the investing public in its bonds. The possession of the power of making independent valuations was also a very great material advantage ; although land was increasing considerably in value other companies were bound by the assessments made for land tax in the early sixties or by valuations made by the provincial Mortgage Credit Associations, which valuations tended to be extremely rigid and careful and considerably below actual values. For the first seventeen years of its existence its total loans made on rural mortgages exceeded those on urban : in 1873 the totals were — rural, £2,447,138 ; urban. £585,118 ; in 1880 £4,849,638 and £3,452,532 ; in 1887, £5,466,725 and £5,278,750. ' Since that 25B7* C 3 38 MORTGAGE CREDIT. date the urban mortgage loans have far exceeded the rural ; in 1911 the latter numbered 9,909, with a total value of £12,806,031, and the former numbered 11,162 with a total value of £28,138,434. The relative decline in its rural business is partially explained by the fact that in the last fifteen years of the nineteenth century a large number of the Tiand Mortgage Credit Associations operating in provinces where this Bank transacted considerable business, brought more properties within their scope and, accepting higher valuations than formerly, increased their loans to landowners. No other German Joint Stock Mortgage Bank shows, however, so high a value or proportion of rural mortgage loans. Compared with the greatest Mortgage Credit Associations its total of rural mortgage loans is surpassed only by those of the Silesian, East Prussian and Posen Mortgage Credit Associations ; its registered mortgages at the end of 1911, without deduction of sinking fund payments, amounted to £15,335,245 ; those of the Silesian Association to £31/286,595 (April 1, 1911), of the East Prussian to £22,825,458 (April 1, 1911), and of the Posen to £18,819,085 (January 1, 1911). The total of the loans granted upon rural property by the Bank during the decade ending at the dates indicated amounted to £6,341,8S4, those of the Silesian Association to £5,119,881, of the East Prussian to £4,856,250, and of the Posen to £4,285,165. The Bank is a pure Mortgage Bank within the meaning of the Imperial Mortgage Bank Act. Apart from its mortgage business, and loans to public bodies, and for light railway projects, it is also entitled to lend money upon, to deal in, and redeem mortgages ; to sell and buy stocks and shares ; to take deposits up to one-half of its paid-up capital ; to collect bills and similar instruments ; and to invest surplus funds with other banks or in stocks and shares. All speculative business is prohibited. Loans as low as £50 are granted. They are granted up to two-thirds of the value of agricultural property, except in the case of vineyards and woodlands, which are lent upon up to one-third of their value. Agricultural property is valued either on the basis of its agricultural net yield as assessed for the land tax or on its renting or selling value. No minimum limit of area is necessary for eligibility for loans. About two-thirds of the total loans upon both urban and rural property, and nearly all upon the latter, are subject to annual sinking fund payments, the minimum rate being J percent. At one-half per cent, the loan is cancelled in 56^ years, at 1 per cent, in 44 years. The interest arranged continues unchanged regardless of the reduction in capital debt by the sinking fund payments, but theamount falling upon the accumulated sinking fund payments is annually applicable to that fund beginning from the end of the first year. After ten years borrowers may make repay- ments as allowed in the Mortgage Bank Act. Loans not thus amortisable may be repaid in a lump sum or in instalments. The difference between the rate of interest paid by the bank on bonds and the rate paid by borrowers has amounted in recent years to almost ^ per cent. ; while the costs preliminary to the grant of a loan amount to between 2 and 3 per cent. The original capital of the Company was £1,800,000, of which 40 per cent. (£720,000) was paid up in 1870 ; an additional ten per cent, was called up in each of the years 1889, 1892, 1895, 1897, 1902, and 1905. The capital was raised by £180,000 in 1905, and by a further £240,000 in 1910, these augmentations bringing the total present capital to £2,220,000. At the end of 1911 the reserves amounted to 39'2 per cent, of the capital. The value of the bonds in circulation, which were covered by mortgages, amounted at the same date to £39,394,293 or 17'7 times the amount of the paid-up share capital. In addition, communal bonds to the value of £8,713,640, or 3*92 times the amount of the share capital, were in circulation. The Company is authorised, on the basis of its original capital of £1,800,000, to issue mortgage bonds and light railway bonds up to a combined total circulation of twenty times that capital, with an addition of four times that amount in respect of the issue of communal bonds ; on the basis of the amount of its increased capital it may issue its mortgage bonds and light railway bonns to a further fifteen times the amount of such increase, with an addition of three times in respect of issue of communal bonds. The cost of administration in 1911 amounted to £64,576 inclusive of £9,019 paid in State taxes and £13,782 in local taxes ; other establishment charges aggregated £39,783. The net profit for the year was £293,720. The average dividend paid upon share capital, apart from any bonuses, for the forty-two years since its establishment is 9' 13 per cent. : in the first year 7 per cent, was paid, and only on one other occasion has it been less than 8f per cent., the latter rate having been paid in seven years. LoKEACH District Mortgage Bank. Lorrach is a small town in^aden near the Swiss borders, and the Lorrach District Mortgage Bank, founded in 1 868, occupies a unique position among German mortgage GERMAN SAVINGS BANKS < 39 Banks. It is not subject to the German Mortgage Bank Act, nor is it an undertaking of a public authority. It is a private bank, which took for its models banks such as are found in most Swiss Cantons, and its organisation was especially modelled after the B&le Mortgage Bank and the Land Mortgage Credit Bank {Landschaftliche Bank) in Tiestol near Bale. The District {Kreis) Administration of Lorrach, with a view to improving the bad condition of rural credit then prevailing within its area, founded the Bank and took shares to the value of £2,000, but disposed of them some years later. Three members of the District Council are still elected to the Board of Supervision without the right to vote, and the Bank serves as place of deposit for the funds of the district authority. Not being a Bank recognised under the Imperial Mortgage Bank Act it may not issue mortgage bonds, but it is authorised to issue certificates signed by the fiduciary agent (Treuhdnder) stating that a mortgage to a value corresponding to that represented by the certificate has been effected. These certificates are not guaranteed by the district ; they are merely ordinary certificates running in the name of an individual but issued by the Bank and secured also by its funds. The object of the company is stated in the articles to be " assistance of the land- owners and house-owners, primarily those of the Lorrach District, by procuring for them, on mortgage security, such loans as they require." The scope of business includes, apart from mortgage loans, the gi'ant of non-mortgage loans to public bodies, the grant of loans on first-class securities, the purchase and sale of securities on commission (no speculative business being undertaken however) and the undertaking of the management of estates." Other ordinary bank business is not permitted ; no cheque, bill or promissory note business, for instance, being authorised. It is further stated that " smaller borrowers are to have preference over larger borrowers." Loans on property must not, as a rule, exceed one-half of the value of the security, and the claims of the Bank must be accorded precedence over all others. In 1910 4^ per cent, was charged for mortgage loans. They are made for undetermined periods or for five years. Loans subject to sinking fund payments are made, especially in the case of: rural mortgages. About one-half of the mortgagors are farmers ; the proportion was formally far greater, and there were far more small loans to farmers, but the great extension of co-operative rural credit societies in neighbouring districts has reduced this business. The share capital amounts to £80,000, divided into 2,000 shares of £20, 400 of £60 and 320 of £50. At the end of 1910 the reserves amounted to £35,700. The net profit for the year was £11,700. In 1908, 1909 and 1910 the dividends were 7^ per cent. Besides the share capital working capital is obtained by the issue of redeemable bonds or certificates and by the opening of current and deposit accounts. At the end of 1910 the mortgage certificates of the Bank then in circulation amounted to £739,500, about two-thirds of such certificates bearing interest at the rate of 4 per cent., and about one- third 4jper cent. Deposits of all kinds amounted to £214,950 : in 1910 3 per cent, was paid on deposits at call, 3-g per cent, on those at four weeks' notice, and 4 per cent, on those at six months' notice. 4. GERMAN SAVINGS BANKS. Their Importance to Farmers as Suppliers of Credit. — As regards agricultural credit, especially mortgage credit, German savings banks are institutions of very great importance. Their deposits at the end of 1911 amounted to £879,000,000 (as against £840,000,000 at the same date in 1910) ; and £515,000,000 of the total was invested in mortgages, In some States over three-quarters of the total deposits are thus invested. No complete analysis of the investment of their funds in 1911 is at present available, but at the end of 1910 Prussian Savings Banks held investments of the total value of £579,000,000, of which £229,000,000 was lent on mortgages of urban and £115,000,000 on mortgages of rural property. In Bavaria, where savings bank deposits amounted to £29,000,00() in 1909, between £8,000,000 and £9,000,000 were stated to be invested in rural mortgages ; in Saxony in 1909 £69,600,000 out of £81,000,009 were invested in mortgages; in Baden in 1910 £31,300,000 out of £42,900,000 ; and in Wiirtemberg (1909) the great Wiirtemberg Savings Bank (with some 600 agencies) £5,335,000 out of £9,550,000, and the other public district savings banks (70 in number) £16,256,000 out of £23,966,000. The amounts falling to urban and rural mortgages are not distinguished in these cases. Taking the figures available for Prussia and Bavaria respecting investments of total funds in rural mortgages, which represent approximately 20 and 30 per cent, respectively, and estimating an investment of 20 per cent, in the case of the remaining States of the Empire, the total investments by savings banks in such mortgages may be placed at about £170,000,000. 25574 C i 40 MORTGAGE CREDIT. Loans on personal security are not granted to any great extent by these banks. The Prussian savings banks lent, however, £9,000,000 in 1909 on bonds with or without sureties, of which it is calculated that perhaps one-third went to landholders. In addition, four millions sterling were advanced on bills, part of which, undoubtedly, went to agriculturists, particularly to the larger holders in the Eastern provinces, and the same class probably received part of the five and-a-half millions lent upon the security of stocks, shares, or crops pledged. As will be seen later, the authorities have not ceased to urge upon the banks to extend this means of investment especially for the benefit of the agricultural classes. In view, therefore, of the importance of these institutions as a source of credit (as well as convenient places of deposit) for German farmers, no account of agricultural credit in Grermany would be complete without some description of their organisation, methods of working, and results. It may be observed that they are of especial importance as the institutions from which, for the most part, small and medium landholders obtain mortgage loans. History. — The earliest German savings banks were founded to serve as institutions for safeguarding the poorer classes against absolute poverty by providing a place for the safe deposit of small sums of money until such should be required in bad times. Established in connection with the efEorts to reform the poor laws, they were to be regarded rather as philanthropical institutions. The first was founded at Brunswick in 1768, and the second at Hamburg in 1778, these being followed by banks at Oldenburg (1786), at Kiel (1796), at Altona, Limburg, and Gottingen (1801), at Carlsruhe, Baden, Schleswig and Limberg-on-Iiohr (1816), at Gliicksburg, Liibeck and Kappeln (1817), and at Berlin, Stuttgart and Apenrade (1818) ; further urban banks were established in rather rapid succession. But the savings banks lost this character of philanthropy early in the nineteenth century, and have developed along the more general lines of institutions for the furtherance of thrift. They have been established usually by and under the guarantee of public authorities ; and in normal cases do not aim at profits beyond the obtaining of an adequate interest upon money deposited with them and the payment of the expenses of management. Any surpluses remaining after meeting these charges and making suitable appropriations to reserve are applied to objects of public welfare. In primary aim they are distinguishable from banks in the ordinary sense of the term : they seek deposits not in order to be in a position to grant credit for their own profit but to foster thrift and only to utilise deposits for investments in the interests of the depositors themselves. But while there is this distinction in their aims, German savings banks constitute, by reason of their unexampled development and fi-eedom of investment, credit sources of great importance. Not being obliged to deposit their funds at interest with the State Treasury or invest in stocks and shares only, as such banks are constrained to do in some other countries, but seeking to obtain on investments the best returns consistent with the absolute security of their funds, they have lent a very large percentage of their deposits on mortgages, a considerable proportion of which have been on rural property. Kinds of Savings Banks : Prussia. — There are no Post Office Savings Banks in Germany. The great majority of savings banks are communal, district, or urban ; and are public institutions established, supervised, or managed, and guaranteed by these governmental units, apart from which they do not possess a separate legal status. In Prussia there were at the end of 1910, 1,711 savings banks ; in 1909, when the number was 1,692, 1,500 were comprised within three groups, 268 being communal, 465 district, and 767 urban banks. There are six other banks which have been also established by public provincial organisations. The communal and district banks serve the rural classes more directly than the urban banks, and it is interesting to note the part played by the public agricultural authorities in the extension of these institutions in rural districts. The first rural district savings bank was opened in 1831, a few more being established in the succeeding twenty years. In 1850 the l^ational Advisory Council to the Prussian Ministry of Agriculture recom- mended the extension of the savings bank system, and a Ministerial Circular to the local officials of the central government issued shortly after supported their recommendation. A Commission which at this period was conducting an enquiry into the credit institutions of Prussia also included in their investigation the question of savings banks. The report of the Commission published in 1851 was followed almost immediately by a Ministerial Decree urging the establishment of such banks, and from this time the communal and district savings banks increased rapidly in Prussia, their extension being promoted by the provincial and district governoai. The course of development in Bavaria, Saxony, Wiirtemberg, and Baden was affected by similar influences. GKRMAN SAVINGS BANKS. 41 In addition to the 1,506 public savings banks mentioned above as existing in Prussia in 1909, there were 186 banks described as "Association or Private" Savings Banks, which are not guaranteed by any public authority. The great majority of these were in Schleswig-Holstein, the Rhine Province, Silesia, and Hesse-Nassau which possessed 75, 45, 25, and 13 respectively at that date. In Schleswig-Holstein there were also 135 public savings banks, but the others, many of them dating from an early time in savings bank history, are highly important, and since the passing of the Civil Code a large number have submitted to State supervision by acquiring the legal status of corporations. In the Rhine Province and Silesia a considerable proportion of those existing have been established by industrial concerns (mines, ironworks, textile mills). Besides these factory, mine and other savings banks, there are various groups such as rent, taxation, old age, school and children's savings banks, and not a few of these are worked in close connection with the public savings bank of the locality. Some great private savings banks, however, exist, e.g., those at Aix-la-Chapelle (founded in 1834), at Altona (1801), at Frankfort-on-Main (1822), and at Hanover (1875), but the majority are relatively unimportant. The following Table shows the number of savings banks in Prussia in each of the years 1904-1910, with other information including an analysis according to kind of bank in the year 1909 : — Prussian Savings Banks. Centres for Deposits of Savings. Savings Bank Books. Savings Total Savings Banks. Square To Deposits at Number. Miles to every Centre. Number. every 100 In- habitants. end of Tear. 1904 1,564 4,766 184 10,211,976 27-71 388,096,500 1905 1,583 4,964 176 10,642,961 28-50 414,72ii,00() 1906 1,606 5,113 171 11,095,276 29-24 439,419,500 1907 1,639 5,450 160 11,484,139 29-78 456,025,000 1908 1,678 5,744 152 11,842,692 30-22 478,569,000 1909 1,692 5,934 147 12,362,156 31-04 516,634,671 1910 1,711 6,330 138 12,900,304 32-08 555,339,500 Analysis according to kind of Bank in 1909 :— 1. Urban Savings Banks 767 1,246 — 7,152,675 — 262,339,080 2. Rural Commune 268 359 — 525,131 — 34,475,170 3. District 465 3,756 — 3,387,494 — 170,778,841 4. Provincial 6 254 — 591,828 — 17,754,147 5. Association and Private 186 319 705,128 — 31,287,433 Other States. — In Bavaria there were (in 1909) 373 public savings banks, of which 155 were under district and 218 under communal guarantee ; in Saxony (in 1910) 361 public savings banks ; in Baden (in 1910) 158 savings banks of which l45 were under communal guarantee ; in Hesse (1910) 32 district and urban banks ; and in Wiirtemberg (in 1910) 71 district savings banks in addition to the great Wiirtemberg Savings Bank, established in 1818 under royal protection, which has some 600 agents throughout the State. In the smaller Federal States of Oldenburg, Brunswick, Reuss (Younger Line), and Lippe liability for the obligations of the savings banks is undertaken by the State. In Alsace-Lorraine 60 out of 130 savings banks were guaranteed by some public authority, but all such banks, which may be established under Imperial Order, are subject to State supervision. In any case the banks have had up to the present time little importance for agriculturists in Alsace-Lorraine, because they did not possess freedom of investment, being obliged, .as under the French legislation, to deposit with the State Treasury. Collecting Agencies. — In order to facilitate the deposit of money the public savings banks maintain in many cases branches and collecting or deposit agencies. In Prussia in 1909 there were 719 branches and 3,523 agencies belonging to the 465 district banks. In Bavaria the 373 banks had 399 branches and agencies. The Wiirtemberg Savings Bank, with its head office in Stuttgart, had in 1909 620 agencies of different grades, and the 70 district bants had 1,428 similar agencies. German Empire. — The number of public savings banks in Germany (exclusive of Brunswick) was 2,844 at the end of 1910 (as against 2,774 in 1908), and the total of all 42 MORTGAGE CREDIT. savings banks was 3,072 (in 1908, 3,006). In addition there were in 1908 and 1910 respectively 6,743 and 7,404 branches (Filialen) of the public saAdngs banks, the totals for all savings banks being 7,055 and 7,698 ; under this description are included presumably both branch offices and collecting or deposit agencies. The number of savings accounts in all savings banks was 19,845,329 in 1908 and 21,534,034 in 1910 ; of these 18,354,006 and 19,885,046 respectively were in public savings banks. The deposits at the end of each of these years totalled £728,000,000 and £840,000,000. As indicative of the expansion of the business of German savings banks, it is worthy of note that the amount standing to the credit of depositors in 1880 was £131,000,000 ; in 1890, £257,000,000 ; in 1900, £442,000,000 ; and in 1911, £879,000,000. Legislation. — No Imperial legislation has been passed respecting savings banks. The Act giving eiFect to the Civil Code (1896) expressly declared that any legislation or regulations of the separate States concerning savings banks remained unaffected. One clause of the Code, however, enacted that trustee funds might be deposited with a savings bank provided that the State in which it was situate declared it to be suitable for this purpose. As to State legislation no Savings Bank Acts have been passed in Prussia, Bavaria, Saxony or Wiirtemberg, but in Hesse, Badem, Alsace-Lorraine, and Brunswick there have been enactments of a general character, usually leaving much freedom to the pubhc authorities and to the banks. When no Acts exist, savings banks are subject to "Regulations" or Ministerial Orders having the force of law. The earliest of such regula- tions date from 1838, when those still applicable in Prussia were drawn up. These lay down only general rules concerning establishment, organisation, administration, business and State supervision, leaving details to be fixed by the articles of the bank, which are subject to the approval of the supervising State authority, and by the general orders to be issued by the supervising communal and State authorities. New regulations for Bavarian savings banks were issued in 1911 to replace those of 1874. Minimum and Maximum Deposits. — German savings banks for the most part do not accept deposits of less than one shilling. In 1909 out of 1,506 Prussian public savings banks 1,397 had fixed this sum as a minimum, and of the remainder 83 accepted deposits as low as sixpence. The new (1911) Bavarian State Regulations, as well as the model articles issued by the Wiirtemberg Union of Savings Banks, recommend a minimum of one shilling, but many banks, while adopting this minimum, endeavour to encourage the saving of smaller amounts by issuing savings stamps and savings boxes, or by accepting smaller sums but not allowing interest or withdrawals until a certain amount has been reached. As to the highest amounts receivable from a single depositor the special laws or State regulations generally leave this to be settled by the body guaranteeing the deposits of the bank ; deposits of public money or of trustee funds are usually not restricted in amount. In Prussia the public savings banks tend to distinguish between ordinary and extraordinary maxima ; that is, the highest amount that may be accepted in respect of one private account in ordinary circumstances, and the absolutely highest amount that may not be exceeded under any circumstances. In 1909 out of 1,506 Prussian public savings banks the ordinary maxima receivable from depositors was under £50 in 30 banks, from £50 to £150 in 257 banks, from £150 to £500 in 533 banks, and from £500 to £2,500 in 291 banks, no limit being fixed by 395 banks ; as extraordinary maxima the amounts fixed by 16 banks ranged from £150 to £500, by 291 banks from £500 to £10,000 (in 60 of these the range was from £1,250 to £3,000), but in 1,199 cases no limit was fixed. The Saxon Government restricts the total deposits of a single depositor to £ 1 50, or to £250 for certain categories of public institutions and trustees. The Alsace-Lorraine Act of 1912 also fixes the limit for deposits by individuals at £150. The Articles of the great Wiirtemberg Savings Bank and the Model Articles issued for the Wiirtemberg District Savings Banks fix the maximum at £250 per depositor, and prescribe that " a husband, wife and children under 14 years residing together shall be regarded for this purj)ose as one depositor." The early German savings banks limited deposits to certain classes of the population, or, by refusing to accept considerable sums, restricted their business, in fact, to the less well-to-do classes. It will be observed from the foregoing figures that large deposits are now accepted, especially by Prussian savings banks, and these institutions accordingly have become deposit banks also for the well-to-do classes. Large deposits, costing less for management and investment, the banks are unwilling to reject them, and the danger arising through sudden and extensive withdrawals by large depositors is guarded against by regulations requiring fixed periods of notice which vary according to the amount to be withdrawn. Thus the specimei* articles for savings banks in the Province of H anover prescribe on this point that, in the absence of specific arrangement, no claim for the GERMAN SAVINGS BANKS. 43 immediate withdrawal of any sum exceeding £2 10s. will be recognised, and that claims to withdraw up to this limit may not be made more often than once in two weeks. Withdrawals up to £5 may be made after two weeks' notice, up to £25 after four weeks, and up to £50 after three months' notice ; for the withdrawal of all larger sums six months' notice is required. These regulations, while not usually applied in normal conditions, constitute a useful weapon of defence in times of monetary pressure. The attractiveness of the savings banks consists not only in the security afforded, but in the relatively high interest paid. Being autonomous institutions they are not obliged to accept a rate fixed by the central authorities for all savings banks, but can fix and vary a rate according to the local circumstances. Thus some savings banks find it necessary and profitable to pay 3| or 4 per cent., while others obtain ample deposits at 3 and 3J per cent. A partial explanation of these enormous deposits is also to be found in the fact that great joint stock deposit banks have not as yet attained the same development as in England, although private banks, small and large, are very numerous ; and the fact that shares of German joint stock companies may not be less than £50, or those of limited liability companies less than £25, may also influence the deposits. Investment by small capitalists in such concerns being less desired, or owing to their large share units less facile, their money is deflected to the savings banks. Private insurance also does not appear to have attained the same development in Germany. Interest on Deposits and Investments. — The following Table shows the average of the percentage rates of interest paid by Prussian savings banks on deposits and received by such banks on investments in each of the y^ars 1900-1909 : — Rate of InteroBt. Year. Rate of Interest. Year. Paid on Received on Paid on Received on Deposits. Investments. Deposits. Investments. Per cent. Per cent. Per cent. Per cent. 1900 3-30 4-04 1905 3-28 3-97 1901 3-42 4-12 1906 3-29 4-00 1902 3-39 4-08 1907 3-35 4-07 1903 3-31 4-02 1908 3-49 4-16 1904 3-28 3-99 1909 3-50 4-16 In 1909 the average rate of interest on deposits for the three very important and populous provinces of Westphalia (population in 1910 4,125,000), the Rhine province (7,121,000) and Hanover (2,942,000), as well as for Schleswig-Holstein, Posen and Hesse-Nassau were higher than the average for Prussia as a whole, being (in the ..ffder of recital) 3'77, 3'64, 3"88, 3"61 and 3"53 per cent. In the Eastern and Central provinces, on the other hand, the rates were lower — in Pomerania 3'45 per cent.. East Prussia 3*42, West Prussia 3"41, Saxony 3"19, Brandenburg 3'15, and Silesia 3'08 per cent. The savings banks in the Berlin District showed an average rate of interest on deposits of 3*12 per cent. It will be observed from the Table that between the rates of interest paid and received an average yearly margin varying from "66 to "74 per cent, was maintained in this decade. Of the 361 savings banks in the Kingdom of Saxony in 1910, 265 (78"4 per cent.) paid interest on deposits at the rate of 3 J per cent., 15 paid 3J, 50 paid 3^ and 29 paid 3 per cent. There has been a distinct rise in the rates paid in Saxony, for example, in 1900 and the five years 1905-9 the percentage proportions of these banks paying 5 J per cent, were respectively 51'8, 53"6, 587, 61*1, 71*5 and 74*5. The same tendency is very marked in Bavaria : the banks paying 3^ per cent, and over in the four years 1906-9 represented 38, 43, 58 and 64 per cent, respectively of the total ; or, looked at in another way, the percentage of the total deposits receiving 3^ per cent, and over grew from 29 '5 per cent, in 1906 to 51 '7 per cent, in 1909. The great Wiirtemberg Savings Bank has, since 1901, paid 3| per cent, on deposits, and out of the 72 public district savings banks in Wiirtemberg on January 1st, 1911, four paid 3|^, sixty-one of, one 3"8 and six 4 per cent. It may be noted that interest on deposits usually dates from the first or fifteenth day of the month — whichever follows next upon the deposit — and ends on the first or fifteenth of the month prior to withdrawal. In recent years, however, it has become fairly common to credit interest as from the day succeeding deposit up to that of withdrawal. Interest on loans is charged from the day of payment to that of repayment. 44 MORTGAGE CREDIT. As to the rates paid to Prussian savings banks upon loans secured by mortgages upon rural property, which practically alone are of interest for the present purpose, they show a steady increase in recent years. The following Table shows, for each of the five years 1905-9, the amount of the loans advanced on rural mortgages according to the rates of interest, and their respective percentages of the whole. 3 per cent. and under. Above 3 per cent. and under 4 per cent. i per cent, Above i per cent. and under 5 per cent. 5 per cent. Above 5 per cent. 1905 . £ Per cent. 106,000 0-11 14,351,500 15-78 51,576,000 54-79 27,012,000 28-70 582,000 0-62 70 0-01 1906 . £ Per cent. 123,000 0-18 16,293,000 16-57 52,756,000 58-65 28,492,000 28-98 665,500 0-68 225 0-00 1907 . £ Per cent. 84,500 0-08 13,583,000 18- S9 48,193,500 47-50 38,538,500 37-99 1,046,500 1-03 8,000 0-01 1908 . £ Per cent. 87,500 0-08 9,152,500 8-8S 35,094,500 83-81 57,891,000 55-77 1,554,000 1-50 17,000 0-02 1909 . £ Per cent. 97,000 0-09 8,015,000 7-87 38,627,000 35-60 60,608,000 55-09 1,472,000 1-S5 4,000 0-00 It will be observed that in this period the percentage of the mortgage loans at under 4 per cent, fell by over one-half (15"89 to 7'46), and that those at exactly 4 per cent, fell from over one-half in 1905 to one-third in 1908, slightly recovering in the following year ; on the other hand the loans at over 4 per cent, have increased from 29-35i to 56-44 per cent, of the total. The Wiirtemberg Savings Bank lent in 1909 £753,590 on mortgages upon rural property at 4 and 4j per cent. In the Kingdom of Saxony, where the savings bank? tend to invest four-fifths of their deposits in mortgages, the predominant rates are from 4 to 4J per cent., thus showing a higher level than ten or twenty years earlier when they averaged about 4 per cent. (4-01 in 1890 and 4-07 in 1900). In Baden loans on the mortgage of rural property were usually granted by these banks in 1909 and 1910 at about 4^ per cent, and in 1911 at about 4^ per cent. The writer found cases in Baden in which, when a reduction was made in the rate of interest charged for mortgage loans, such reduction . was made applicable to outstanding loans at a higher rate by the writing of the difference between the rates to the credit of the borrowers concerned. Conditions for Mortgage Loans by Savings Banks. — Compared with mortgao-es effected with other institutions for agricultural credit in Germany the mortgage loans made by savings banks are usually subject to certain disadvantages. Receiving deposits which are for the most part liable to withdrawal at short notice the savings banks are not in a position, except to a limited extent, to grant mortgage loans not subject to recall nor, for the same reason, are most of the mortgages redeemable by instalments. Mortgages of the latter kind are, however, coming into greater vogue, especially in Prussia, where in 1909 over 25 per cent, of the mortgages effected on landed property had been made subject to annual sinking fund payments. Since the middle of the 'nineties, in connection with their efforts to remedy the excessive mortgage indebtedness upon agricultural property, the State authorities have strongly urged upon the banks the application of this policy in the case of agricultural loans. From the point of view of the borrower a certain difficulty arises owing to the fact that, the rate of interest charged by savings banks being rather high, the addition of a sinking fund payment might make the annual ' total charge beyond his power. Occasionally this difficulty is partially surmounted by fixing the rate of interest upon those mortgage loans subject to a sinking fund payment at a lower figure than that upon other mortgages. It is usual, when no sinking fund arrangements have been made, to retain the right to call in a mortgage at three or six months' notice. In practice the liability of savings bank mortgages to be called in is not of great consequence, as, unless in very exceptional circumstances, banks do not exercise their nght. Borrowers on mortgage security from savings banks are exposed, however, to the risk of an increase in the r^ of interest, which could not occur in the case of the mortgage loans granted by the Mortgage Credit Associations, the State Provincial GERMAN SAVINGS BANKS. 45 or District Mortgage Banks, or the Joint Stock Mortgage Banks. As a result of the financial crisis of 1907-8 a large number of savings banks found themselves obliged to increase their rates of interest for deposits, say, from B^ or 3^ to 3f or 4 percent., and could not therefore continue their mortgage rate at the old figure. Many mortgage borrowers were faced with the alternative of either repaying the loan or submitting to an increase of interest, and owing to the stringency of the market the latter course was necessarily chosen in most cases. On the other hand, savings banks are free to reduce the rates of interest payable on loans contracted at a period when money was dear, or to supply in some other way the difference in interest to the advantage of the borrower {e.g., writing off a corresponding portion of the capital debt) . Loans on Reducible Mortgages. — Like the Mortgage Credit Associations and other institutions for mortgage credit described in this Report, the savings banks, although it is not in tfieir case compulsory, also grant mortgage loans subject to annual repayments of a percentage of the capital sum in addition to the interest payments. The other institutions just alluded to combine with gradual amortisation non-liability to the calling in of loans ; savings banks, owing to the necessity of their being in a position to realise their assets if necessary at short notice, are unable to concede these two advantages to borrowers. But the fact that non-liability to being called in cannot be conceded does not preclude the adoption of reducible mortgages. The Prussian banks have been repeatedly urged by the Central Government to encourage repayments of mortgage loans by annual instalments, the provincial and district officers of the Grovernment being requested to exercise their influence upon the banks with this object. A circular of the Prussian Minister of the Interior in 1886 advised the provincial governors to further the adoption of measures by the savings banks to assist landowners, and especially smaller landowners, to transform already existing mortgages into mortgages subject to sinking fund payments, and to encourage the latter class of mortgage being adopted by future applicants for loans. At the same time it was urged — with the view of enabling landowners in case of exceptional temporary need to obtain money without burdening their property with further mortgage charges — that, so far as it was feasible, borrowers should be allowed the free disposal of such sinking fund accumulations. To lessen the difficulties of borrowers in meeting the payments both of interest and sinking fund, it was suggested in a Ministerial Order of 1893 that the savings banks might charge a lower rate of interest upon mortgages made subject to sinking fund payments than upon other mortgages owing to the fact that the indebtedness of the former was annually reduced, and that the sinking fund in the possession of the banks grew gradually larger. Such reduced rates of interest should, however, only be granted to those borrowers who undertook not to exercise any claim upon their accumulated sinking fund payments until the latter reached the fifth part of the capital indebtedness, and to cede priority respecting any part of the capital remaining over any other mortgage loans raised. It was further recommended that, while savings banks must necessarily reserve the right to call in mortgage loans on due notice, yet borrowers on reducible mortgages should be favoured to the extent that, should banks be obliged to call in mortgages, those not subject to sinking fund payment should be called in first. In order to make it possible for borrowers in exceptional circumstances to obtain the return of the sinking fund payments, such payments — to be at least ^ per cent, per annum, of the loan— should, in accordance with this Order, be entered to a separate account and should be credited with interest in the same way as other deposits ; when a tenth part of the capital debt has been thus accumulated, it should be open to the mortgagor to apply to the bank for its withdrawal, but it is recommended that the banks should always retain the right to refuse such applications. These efforts did not meet with the desired success in all provinces, but in the Western provinces and in Posen the savings banks began to grant reducible mortgages to a very considerable extent. In 1901 the Ministry of Agriculture issued a circular to the semi-official Chambers of Agriculture urging them to use their efforts in their respective provinces to secure that the rate of interest upon payments to sinking fund should be the same as those paid by. mortgagors upon loans, instead of the rate paid upon ordinary deposits, holding that such payments represented a reduction of the capital debt, which, merely on grounds of expediency, was not in fact effected. It was, of course, recognised that in cases in which borrowers withdrew and applied accumulated payments to purposes other than to the reduction of the mortgage charge, a retrospective reduction of the rates to those paid on ordinary savings deposits should be made. In several provinces savings banks have now adopted the practice of allowing either the same rate of interest upon sinking fund payments as is charged upon the capital debt 46 MORTGAGE CREDIT. or a higher rate than that paid on ordinary deposits. Many banks also allow debtors to effect reductions of their indebtedness when the sinking fund payments total a fixed percentage of the loan ; thus the Articles approved for Pomeranian savings banks provide for successive 10 per cent, reductions out of accumulated sinking fund payments. On the other hand, the same Articles lay down that debtors may only withdraw the sinking fund payments for paying off mortgage indebtedness. The following Table shows for Prussian savings banks the total of the loans outstanding on reducible mortgages both urban and rural at the end of 1909 : — Amount. Percentage of Total Mortgage Loans. Percentage of Total Loans on Urban Mortgages. Percentage of Total Loans on Bural Kingdom of Prussia Provinces : — East Prussia , West Prussia Brandenburg Pomerania Posen Silesia Saxony Schleswig-Holstein Hanover ... Westphalia Hesse-Nassau Rhine Province Hohenzollern According to kinds of savings banks : — Urban Rural Commune District ... ■ Provincial or Union Association and Private... £ 55,601,000 877,000 1,002,000 1,975,000 1,933,000 3,111,000 3,112,000 2,274,000 202,000 11,039,000 9,938,000 8,213,000 12,513,000 412,000 15,506,000 5,666,000 29,677,000 4,431,000 251,000 17-37 15 19 9 12 50 9 8 27 15 51 19 98 9 20 28 49 1 92 77 34 51 45 64 33 75 83 10 50 09 47 67 98 30 09 40 13-75 13 17 3 6 46 4 6 16 15 41 15 99 25 21 52 78 51 70 99 44 35 77 99 48 47 18 41 26 84 51 94 24-40 21 23 21 20 59 20 10 37 14 76 37 98 13 16 33 40 2 36 66 96 99 32 81 24 49 53 33 14 64 27 04 55 96 77 87 55,601,000 Of the total sum outstanding against mortgage security both urban and rural only 17*37 per cent, or £55,601,000 was amortisabie by regular sinking fund payments. In the case of mortgages upon rural property, however, 24-40 per cent, or £26,557,000 out of £108,822,000 was subject to such payments. In some Prussian provinces, it will be observed, the proportion of reducible rural mortgages forms a very high percentage of the total rural mortgages. Thus in 1909 in Hanover 87*53 per cent, of the total loans against rural mortgages, or £8,028,000 out of £21,391,000 was in respect to those on the reducible system ; in the Rhine Province the percentage was 37*64, reducible mortgages comprising £4,087,000 out of a total of £10,859,000 on rural mortgages ; in Posen the percentage ivas 59*32 (£1,136,000 out of £1,915,000), in Hesse-Nassau it was 76*13 (£3,585,000 out of £4,709,000). In the small government district of Hohenzollern, a Prussian enclave in the Kingdom of Wurtemberg, almost the whole of the rural mortgages were on the reducible system, £340,000 out of £346,000, or 98*27 per cent, being on this basis. Limits of Loan on Mortgage Security. — The maximum amount that may be lent upon any particular parcel of land is not definitely fixed, but in practice the limit may be said to be between 50 and 66 per cent, of the ascertained value. The methods of valuation adopted in Prussia are various. A common basis is the assessment of the net annual yield returned for the purposes of the land tax ; the valuation which determined this net yield in Prussia was made over 50 years ago (about 1860). In differeut Prussian provinces — model Articles have been approved for savings banks by the respective provincial authorities — the banks adopt different absolute multiples of such yield, or different multiples according to the size or value of the particular property ; thus the multiple taken as maximum appears as 22^, 24, 25, 30, and even up to 45 times the value of the net annual yield as appraised for the land tax. The Pomeranian Savings Bank Articles vary the multiple from 30 to 45 times the net yield according to the size or approximate value of real property in two of the three administrative districts into which Pomerania is divided ; in the third the multiple is from 25 to 40. Property GERMAN SAVINGS BANKS. 47 situated within the district of the particular bank concerned may be lent upon up to an additional five times the net yield, while property outside Pomerania may not be lent upon beyond 30 times the net yield. In general, buildings upon agricultural property, that is, dwellings for the occupiers, or for farm servants, and ordinary farm buildings, are not taken into special consideration apart from the property, but, should there be at the same time other buildings, such as dwelling houses or buildings for industrial purposes, these buildings may be separately estimated at a low multiple of the assessment made for the building tax. Valuations made by Mortgage Credit Associations (Landschaften) , Provincial or District Mortgage Credit Banks, or similar public institutions, by most insurance companies, special village courts and commissions appointed by the authorities of the administrative unit represented by the bank, are also generally accepted. Respecting such valuation the law enacts that, for the investment of trustee funds, mortgage loans may be regarded as secure, in the case of agricultural property, when the loan does not exceed two-thirds of the value thus determined, or in the case of urban property, one-half of such valuation. Valuations by village courts may not be accepted for properties exceeding £750 in value. The banks usually provide in their Articles that valuations may be made by special valuers appointed by the bank, by two members of the Committee of Management or two other persons appointed as advisory members of the banks. Two special valuers are usually required, but one may be accepted as sufficient when the services of two or more would entail expenses out of proportion to the value of the property. Special Regulations respecting Small Holdings. — Many savings banks provide in their Articles that loans upon rural properties up to two-thirds of their valuation may be made only within the district covered by the bank, and when sinking fund payments of at least one half per cent, per annum are included in the terms of the mortgage. But, with the view of encouraging the creation of small holdings and allotments, many savings banks are prepared to lend up to three-fourths and even five-sixths {e.g., some in the province of Hanover) of the value of newly-purchased holdings situated within their district, provided at least half per cent, of the capital is to be repaid annually ; in special circumstances this sinking fund payment may be waived for a period of two years. Tlie Amount of Mortgage Loans hy Savings Banks. — Although it is an undisputed fact that the mortgage credit afforded by savings banks is especially beneficial to the small and medium landowners, no precise statement of the usual or average amount of mortgage loans granted by them is available. A report issued in 1906 by the Saxon Government — the Saxon savings banks, it may be explained, constitute in many respects the most developed group of savings banks in Germany — showed that the average amount for 92,649 mortgage loans outstanding at the end of 1903 for 319 savings banks was £545, while the seven Saxon institutions for mortgage credit showed (at the end of 1904) an average of £1,180 for 24,351 loans. For the five years 1905-9 the average of the mortgage loans granted by Saxon savings banks amounted to £590, £610, £620, £625 and £635 respectively. The report just alluded to states that the average in the case of many of the banks of the smaller or less populous rural districts sank to £150 or £100, while for those in the larger towns the average mortgage loans were very high. As far back as 1898 the average of the mortgage loans of the banks in Leipzig, Dresden and Chemnitz, were respectively £2,735, £2,040, and £1,175 ; and the entire tendency of the loans of urban savings banks since that date has been in an upward direction. An enquiry was made into the savings banks of the Prussian Province of Brandenburg, in which large and fairly large landowners predominate — by Dr. von Altrock, who collected detailed figures respecting about two-thirds of the loans on rural mortgages in that province which were outstanding at the end of 1897. The total loans on rural mortgages amounted to £3,275,000 ; details obtained for loans representing £2,146,700 of the amount gave the following results : — Loans. No. Percentage. Amount. Average, Up to £75 From £75 to £150 From £150 to £1,500 Over £1,500 2,821 2,108 2,819 159 36-7 26-7 35-6 2-0 £ 130,000 250,000 1,204,000 562,700 £ 46 118 427 3,539 7,907 100 2,146,700 271 48 MORTGAGE CREDIT. The average of all loans was £271. The above details show clearly how important these institutions are for the smaller holders in Brandenburg, 63"4 per cent, of the loans granted in that year having been for sums not exceeding £150. Restriction of Area for Mortgage Investments. — Savings banks are not restricted — either by laws or by regulations — to the lending of money on mortgage of property within their respective districts. It is, however, highly disadvantageous for an ordinary savings bank that the property mortgaged should lie at a distance, owing to the expense and difficulty involved in the periodic investigation necessary to ensure that no depreciation has taken place ; and a Prussian Ministerial Order declared that the lending of money on mortgage security outside the district of a bank should only be admissible when a fixed period for redemption is arranged and when such mortgages do not exceed the fourth part of the total mortgage investments of a bank. In their articles most banks either limit such investments to their own or adjacent districts, or lend less upon a property situated beyond these areas ; or such investments are restricted to the province (if in Prussia) or state to which they belong. Savings banks having small and moderate areas or in predominantly rural districts may not, of course, find it an easy matter to invest their deposits in first mortgages within their immediate district. Personal Credit. — Besides the two main categories of investment, namely in mortgages and stocks and shares, which constitute about 85 per cent, of the investments of German savings banks, investments are made by loans on bills, scrip and bonds, with or without surety. Loans on bills or scrip need not be discussed here, as the former are not currently employed by the majority of agriculturists, especially by the smaller landholders, nor are paper securities held by them in large quantities. As to loans on bonds or promissory notes, the Government has not ceased to urge the savings banks to help the smaller men by such loans. In 1856 a Prussian Ministerial Decree stated that the savings banks " could and should help the small man in cases of need by loans on bond with surety. . . To assist such borrowers facilities should be granted to repay in instalments or by payments into a sinking fund The adoption of this kind of business cannot be too warmly recommended, and it is requested that the provincial governments, district governors, and local authorities make it their aim to encourage this form of investment." In 1896 the Minister of Agriculture recommended the newly-established Chambers of Agriculture to use their influence in their respective provinces to induce the savings banks to grant credit on personal security in those localities when personal credit could not be satisfied by co-operative credit societies. Loans to individuals on bond with or without sureties are only admissible for residents within the area served by the bank ; they may also be given to local co-operative organisations. The amount of the loans to one individual on bond with sureties is generally fixed in rural or semi-rural savings banks at a maximum of £150, £200, or £300 ; two sureties must usually guarantee capital interest and any costs arising. Repayments must be made within six, or less usually, twelve months : but the fixed period may be prolonged a fixed number of times, but rarely, however, exceeding a total period of five years. Such loans are also made subject to regular repayments, lisually of at least 10 per cent, per annum. On personal bond without surety loans lower in amount are granted. A Ministerial Decree recommended such loans provided that they did not exceed £150 in amount, were granted with the unanimous consent of the committee of management, only up to a period of six months and subject to be called in at a week's notice, as well as that such loans did not total more than 10 per cent, of the reserves or 1 per cent, of the liabilities of the particular savings bank. The Hanoverian Model Articles issued in 1911 provide that the period should be fixed for six months with a maximum prolongation for their like periods, or that they be made subject to six-monthly repayments of 10 per cent, of the loan ; the Pomeranian Model Articles fix the amount at £150 in normal cases and allow a period of six months with one prolongation for a like period. At the end of 1909, £768,000 was owing to Prussian savings banks on bonds without surety, and £8,090,000 on bonds with surety. Of the former sum £510,000 was lent by district savings banks, and £71,000 by (rural) communal banks, while on bonds with surety £2,822,000 was lent by district and £1,432,000 by (rural) communal savings banks. Two years later (1911) loans on bonds with surety had risen to £9,800,000. Advances on bonds with sureties are made mainly by banks in certain provinces : of the total (£8,090,000) thus lent in 1909, £2,632,000 was lent by banks in Schleswig- Holstein, £1,371,000 by those in the Rhine Province and about £950,000 by those in each of the three provinces — Hanover, Westphalia and Hesse-Nassau. The new (1911) Bavari^ Regulations for savings banks contain provisions respecting loans on bond with surety ; they require that the advances made on such GERMAN SAVINGS BANKS. 49 security must not exceed 5 per cent, of the assets of a savings bank. A translation of the text of that portion of these regulations dealing with the investment of savings bank funds, with the official annotation thereto, will be found in the Appendix. The reader is also referred to the translation of the Articles of a typical Prussian district savings bank, clause 28, which will also be found in the Appendix. Loans to Co-operative Societies. — The question of loans by Prussian savings banks to co-operative societies first came into prominence in the course of the 'nineties. In 1896 a Ministerial Decree prohibited savings banks from lending to these societies ; in 1899 a similar decree authorised them to lend to any co-operative society with unlimited liability ; and finally in 1901 the decree at present in force authorised them to lend to co-operative societies with limited or unlimited liability, with the exception of credit societies. When special security (e.g., by deposit of securities or by way of mortgage) is not furnished, loans may be granted to societies with unlimited liability only to the maximum amount of 10 per cent, of the collective value of the property of members, but societies with limited liability may be granted loans to the extent of 75 per cent, of the collective liability undertaken by their members. As regards the A^al nation for this purpose of the property of members of societies with unlimited liability the list. of members supplied by the society is submitted to the local Inland Revenue Office which is authorised to furnish a summary statement — no details respecting individuals may be given — of the total of the income and supplementary land tax paid by the members. No credit in excess of a maximum of £5 per member may be granted to any society with limited liability without special enquiry ; that is, a higher credit is only to be accorded when the return of the Inland Revenue authorities shows that the total assets of the members amount to at least ten times the amount of the liability. Borrowing societies must be situated within the district served by the bank, or in an adjoining district ; they must undertake to forward their annual balance sheet with a list of members admitted or retired during the year ; they must be affiliated to an authorised Audit Union of Co-operative Societies, and must forward the reports of the audits carried out by the officials of the latter. As to savings banks their Articles must expressly authorise the grant of loans to co-operative societies ; the loans must be made subject to annual sinking fund payments in addition to interest, and the right to call them in at six months' notice must be reserved ; further, at least once in every three years the committee of any savings bank which has made loans to societies must undertake a minute examination of the financial condition of the societies concerned. The amount outstanding in 1908 as lent to private corporations (that is, co-operative societies, associations, &c.) by Prussian savings banks was £1,514,000 ; of this sum £l,065i,000 was lent by district and rural communal savings banks. Two Tables are added : the first shows the development of the deposit and mortgage loan business by Prussian savings banks since 1860, and the second the percentage distribution of their investments in each of the years 1904-1910, as also the actual amounts under each head according to the kuid of bank at the end of 1909. Peussian Savings Banks. i. Development of Deposit and Mortgage Loan Business, 1860-1910. No. of Banks. Total Deposits. Total Funds Invested. Of wMnli Year. in Rural Mortgages. In Urban Mortgages. 1860 1870 1880 1890 1900 1910 1911 471 932 ljl91 1,393 1,490 1,711 1,727 £ 7,569,000 24,782,500 79,731,000 164,078,500 287,789,000 555,339,500 591,630,000 £ 7,685,500 25,373,500 82,021,000 170,867,000 298,752,500 579,447,500 616,450,000 £ 1,842,000 7,220,500 22,517,500 44,754,500 74,336,500 115,142,500 £ 1,789,500 6.576,500 23;280,500 47,875,000 100,010,000 229,340,000 370,900,000 2557i 50 MORTGAGE CREDIT. Prussian Savings Baisks— continued. ii. Distribution of Investments, 1904-1910. Total of Percentages of Total Investments in the Six Tears 1904-10. Mortgages. Bonds Year. Funds On Urban Property. On Rural Property. with To invested. Securities. and Bills, Pledged Public 1 Other. Of which subject to Of which subject to without Effects. Bodies. Total. Sinking Fund payments. Total. Sinking Fund payments. Sureties. 04 ... £ 406,311,500 36-24 4-40 22-02 4-40 26-90 2-02 0-98 1-17 9-85 0-82 05 ... 434,691,000 37-01 4-65 21-65 4-43 26-27 1-90 0-97 1-06 10-26 0-87 06 ... 459,041,500 37-97 4-75 21-42 4-62 25-20 1-84 0-83 1-03 10-78 0-92 07 ... 474,536,500 39-11 5-08 21-38 4-78 23-83 1-78 0-71 1-04 11-20 0-95 08 ... 500,063,500 39-13 5-33 20-76 4-80 23-85 1-71 0-68 1-02 12-00 0-85 09 ... 538,266,000 39-23 5-40 20-22 4-93 24-16 1-65 0-75 1-02 12-10 0-87 10 ... 679,447,500 39-58 5-59 19-87 5-06 23-63 1-61 0-93 0-91 12-35 1-12 Actual Amounts invested, end of 1909, by : Urban Savings Banks £ 129,363,402 £ 11,438,401 £ 31,876,774 £ 4,157,427 £ 72,760,269 £ 2,895,011 £ 1,602,060 2,236,622 £ 31,397,765 £ 1,699,45'; Rural Commune Savings Banks. District Savings 13,347,954 3,405,680 13,657,393 2,260,325 4,221,139 1,503,725 20,422 185,671 2,388,227 223,42c 49,281,437 10,810,458 55,503,697 18,846,662 37,745,144 3,331,969 1,020,282 1,407,763 27,618,459 1,339,99s Provincial Savings 6,204,045 3,280,419 2,821,867 1,150,476 6,653,466 401,361 70,612 482,917 1,948,349 188,373 Association and Private Savings Banks 12,988,397 108,834 4,963,008 142,328 8,686,283 726,585 1,326,656 1,184,774 1,765,657 1,225,734 Total 211,185,235 29,043,792 108,822,739 26,557,218 130,066,301 8,858,651 4,040,032 5,497,747 65,118,457 4,676,984 5. CREDIT FOR LAND IMPROVEMENT. Nature of such Credit. — The most important improvements in connection with agricultural land are concerned with drainage, irrigation, the construction and main- tenance of dykes and protection of river banks. Most landholders must seek credit for the execution of these often costly undertakings, which, however, where carried out properly upon suitable land, yield a large return. Credit for land improvement may be said to stand midway between personal and mortgage credit. Its basis rests upon the capacity and reliability of the borrower and upon the additional value which the land is expected to acquire through the improvement. Owing to the nature of agricultural production it is desirable, in the interests of the landholder, that such loans should be of adequate amount, should bear a moderate rate of interest, and should not be liable to be called in, while sinking fund payments should be obligatory. Private capitalists, whether individuals or institutions, are rarely justified in lending money for this purpose on these conditions ; they are not usually qualified to investigate the plans and probable return of such works, nor are they in a position to supervise the property at a later period. Private persons rarely, and ordinary banking institutions almost as rarely, are ready or able to waive the right to call in a loan or to accept repayment in instalments spread over a number of years. These requirements can only be satisfactorily met by co-operative organisations, or by public authorities working alone or in conjunction with such organisations. Special Institutions existing. — In Prussia a State Central Land Improvement Fund was established in 1850 ; and its total resources amounted in 1875 to about £175 000. In 1876 the bulk of this sum was handed over to the administration of the Provinces, the majority of which now possess Land Improvement Funds. In 1879 an Act was passed authorising each Province to establish a Land Improvement Bank, and up to the present time five such institutions have been established. Similar banks have been erected by law in Saxony (1861), Bavaria (1884), Hesse (1880 and 1890), and Oldenburg (1885). Prussia. (1.) Land Improvement Funds. — It will be convenient to deal first with the Prussian Land Improvement Funds, and in the second place with with the Prussian Land Improvement Banks. These Funds, which are usually administered either by the Committee of the Province or by the Governor of the Province, are obtained CREDIT FOR LAND IMPROVEMENT. 51 and supplemented by money raised by the Province in accordance with its budget, or by endowments {e.g., the amount allotted by virtue of the distribution of the Central Fund in 1876), or by raising capital by loans subject to gradual redemption. There are considerable divergencies in the conditions as to interest, sinking fund, repayment, and security in the different provinces ; but the chief points may be noted. The application for loans must set out the amount, the exact purpose for which it is required, and the method of repayment proposed. In some provinces the amount loanable is limited ; thus in East Prussia not more than £100 may be granted in a single loan ; in Brandenburg a sum over £750 requires the assent of the Committee of the Province ; in Saxony and Westphalia (Paderborn Fund) it must not exceed three-quarters of the cost of the improvement. There is sometimes a condition that landholders may only obtain loans when they show that they cannot carry out the improvements by their unaided resources, or that the holdings must exceed a certain value. As to interest and redemption, in Brandenburg the annual payments of interest and sinking fund must not be less than 5 per cent., and in case of irrigation works not less than 7 per cent., of which 3^ per cent, in both cases is interest, and the balance sinking fund ; reductions to under 5 or 7, or increases to 6 or 8 per cent., may be made by the Provincial authorities. In East Prussia no interest is charged for the first three years, after the expiry of which period 2| per cent, is charged, while the sinking fund payment is fixed at 1 per cent. ; in exceptional cases free grants not exceeding £250 may be made. In Pomerania 37 annual payments (covering interest and redemption) of 4 J per cent, of the loan are required, except in the case of irrigation works when 7 per cent, is payable for 19 years. In Silesia such loans are granted " at moderate rates or free " ; borrowers in every case are granted liberal facilities for repayment ; it is permitted either to make separate payments, apart from the amounts due as interest and sinking fund, or to increase the annual payments to sinking fund. Minimum additional payments are sometimes fixed : thus, in Pomerania no instalment of less than £15 is accepted j and additional annual payments to sinking fund must usually not be less than J per cent, of the capital sum. Throughout the period of repayment interest is paid as on the full sum originally borrowed, but as the capital debt decreases the difference between the interest due upon the whole sum and upon the balance is written to the sinking fund. As guarantee for the repayment of the loan, mortgage security is usually required. In addition, in Brandenburg, in exceptional cases, mortgage claims, first-class securities and bills with good sureties may be accepted, while in East Prussia mortgage and first- class paper securities may be accepted in normal cases, and personal bonds and bills with sureties in exceptional cases. The payment is made, according to the discretion of the Provincial authority concerned, in one sum or by instalments. In Pomerania it is provided that loans of over £60 shall be paid in the latter manner. Supervision of the estates upon which loans have been made for improvement purposes is exercised by the Provincial authorities. In Pomerania, for instance, the Governor of the small administrative unit, known as the Kreis, is required to perform this duty by the Provincial Government. On January 1, 1912, the total of the outstanding loans granted out of seven funds, for which particulars are available, amounted to £354,700. Of this total £118,000 and £108,000 came respectively from the Brandenburg and Pomeranian Funds. (2.) Land Improvement Banks. — Five Land Improvement Banks have been created in Prussia under the Law of 1879 : for the Province of Silesia (in 1881), Schleswig- Holstein (1881), Posen (1885), Westphalia (1894) and East Prussia (1904). Down to the end of 1908 these five institutions had lent a total of £565,869, of which nearly half (£272,283) fell to thq Silesian Bank. Schleswig-Holstein and Posen had made loans aggregating respectively £187,625 and £83,951, while East Prussia and Westphalia only lent £21,160 and £860 respectively. Of the total sum about two-thirds was leni for drainage purposes. The participants in the loans were thus distributed : Individual landowners holding under family or other settlements, £253,477 ; other individual landowners, £1,005 ; water supply societies, £101,475 ; dyke societies, £25,000 ; afforestation societies, £1,450 ; societies for manuring with marl, £112,735 ; water- supply societies, £1,050 ; and urban and rural communes, £575. Objects. — The Prussian Act states that Land Improvement Banks may be established for lending money towards : — 1. The furtherance of land cultivation and especially the execution of drainage and irrigation works, the laying out and maintenance of roads, forest cultivation, the reclamation of land and the founding of new farm holdings. 2. Works for the protection of river banks. 25671 D a 52 MORTGAGE CREDIT. 3. The constraction, wideniBg and maintenance of dykes, and the security and improvement of works appertaining thereto. 4. The establishment, use or maintenance of water-courses or basins, the construc- tion or improvement of water ways, and other works of construction in con- nection with navigation. The existing Banks have not in every case adopted all the foregoing objects in their statutes. In Schleswig-Holstein the promotion of drainage works is excluded ; in Posen the objects are confined to drainage and irrigation ; and in East Prussia funds may be given only for drainage improvements. The Banks in Silesia and Westphalia embody in their sphere of operations all the activities provided in the Act. A complete translation of the Prussian Act and of the statutes of the most important Bank founded under its provisions, viz., that of Silesia, is printed in the Appendix, to which the reader is referred for full information. The sahent points touching these Banks are, however, briefly treated in the following paragraphs. Privileges. — The privileges accorded to the Prussian Banks are : (1) the right to issue bonds of £250, £100, £50, £25 and £10 up to the amount of the loans granted, the bonds being irredeemable by the holders, but redeemable by the bank by periodical drawings ; (2) freedom from all stamp duty ; (3) freedom from fees for registration in the registry of title, and (4) the right to proceed to summary execution for recovery of debt without the intervention of the courts. Procedure on part of Borrower. — Intending borrowers must send to the Directorate a plan of the proposed works, the time likely to be occupied on them, an estimate of cost by an expert, and, when mortgages or charges upon land are to be furnished as security, a certified copy of the folio of the register of title with a certified extract from the original land assessment roll and the assessment (if any) as made by the Land Mortgage Associa- tion of the particular Province. If the assessment presented is not accepted the Bank appoints a Commission of one or two agricultural experts from the Committee of the District (Kreis) in which the land is situate, or from the local committee of the Land Mortgage Association, together with a representative of the Bank (to be a director or pro- vincial ofiicial of the same) ; and the final assessment is determined by the directorate on the basis of this valuation. The Directorate is authorised to take into consideration the increase of value obtained or to be obtained from the improvements in the property to be mortgaged. The costs arising out of any investigation that may be required are borne by the intending borrower. Appeal against any decision of the Directorate lies to the Provincial Committee. Loans. — The Bank pays the borrower in cash or in its own bonds at their nominal value. The nominal value of such bonds must be either £250, £100, £50, £25 or £10 ; and they must bear the same interest as is payable by the borrower. The bonds are holder bonds, and are irredeemable by the holder, but the Bank is bound to redeem as many bonds every half-year as it may be possible to pay for out of the payments of borrowers. !No borrower may be allotted bonds whose nominal value exceeds the amount of the loan granted. Any profit on the sale price of the bonds goes to the reserve fund, which must be brought up to 5 per cent, of the loans outstanding and restored to this amount should any drafts have been made upon it. Loans may be called in (at six months' notice) only if the debtor defaults as regards interest and sinking fund, or becomes bankrupt, or if the property is assigned or the mortgage title impugned, or if a successor in the ownership refuses to accept the obligation of the original borrower. Interest and Sinking Fund. — The Act fixes the maximum interest payable at 4^ per cent. : within this limit it is left to the Articles of each Bank to determme the rate. As to the sinking fund the annual payment must, under the Act, amount to at least ^ per cent, and in the case of drainage loans to at least 4 per cent, in ordinary cases, while the Bank may add a sum not exceeding I per cent, per annum of the loan to meet the cost of administration of the bank. In East Prussia interest is charged at the rate of 4 per cent, plus -i\ per cent, for administration expenses, and 4 per cent, at least— this bank only gives loans for drainage purposes - as sinking fund. In Posen the rate of interest is determined specially in each particular case, a charge of } per cent, being made for administration, and the sinking fund payment, which is also determined in each individual case, must amount to at least 4 per cent, (apart from the legal obligation where drainage is concerned) when the property is already charged with prior mortgages. In Silesia interest at 4 per cent, plus } per cent, for administration is payable, and the sinking fund payments are arranged in each case with a minimum of J per cent. In Westphalia the lates of interest is 3, 3J and 4 per cent, plus ,'u per cent, for administration, with sinking fund payments as in Silesia. I9 Schleswig-Holstein interest at 3, 3^ and 4 per cent, is j^ayable, plus i per cent, for administration ; and at least 1 per cent, is required towards CREDIT FOR LAND IMPROVEMENT. 53 the sinking fund. In all the Banks repayment in full or by instalments of not less than £25 in cash or bonds of the Banks is permitted at any time. The interest fixed is paid upon the full sum, without regard to the progressive redemption of the loan, but the difference between the amount due on the original capital sum and the capital as reduced is credited to the redemption of the loan. Security required. — As security for the capital a mortgage claim is entered for the amount in the registry of title. The Act provides that the security may be regarded as adequate if the capital sum does not exceed 25 times the amount of the land tax assessment or half of the valuation arrived at by a Mortgage Credit Association, or by a special assessment of the Bank. But if the resultant increase in value is taken into account, the security may be regarded as adequate if it does not exceed f of the prior value or half of the final value (after the improve- ment). The mortgage claim of a land improvement bank in Prussia does not possess, however, any right of priority over other mortgages on the same property. No security by way of mortgage claim is required from urban or rural communes, water supply societies (constituted under a special Act of 1879), dyke societies (with corporate rights) or forest societies (under Act of 1875). The Act provides that the owner of the land is obliged to maintain the drainage works in good condition for the period of the annuity and that the Bank must see that this duty is fulfilled. Supervision of Loans. — In Posen the supervision of the execution and maintenance of the improvement is placed in the hands of the Posen Land Mortgage Credit Association ; in Silesia the statutes provide for supervision by special commissions ; in Schleswig- Holstein and Westphalia by an agent of the Governor. In practice direct supervision is only required in the case of loans to individuals ; in other cases the co-operative societies or communes undertake the supervision. Saxony. — The Land Improvement Annuity Bank of Saxony was the first Bank of its kind in Germany. It was established as a State institution by an Act of 1861. At first its operations were hmited to providing capital to co-operative undertakings for irrigation and draining purposes, but in 1872 a second Act extended its sphere to the grant of loans to local authorities for drainage works and road building. Up to 1888 interest was fixed at 4 per cent., and the annual sinking fund payment at 1 per cent. ; since that date the interest has been 3^ and sinking fund payment 1 i- per cent. The period for redemption is 38 years. As security for the loan a mortgage claim for the amount is entered in the registry of title, and this claim has priority over all other charges against the property. No special limit to the amount loanable on a property is fixed in the Act. The Bank deals with applications for loans for agricultural improvement through the Local Government Ofiice at Dresden. This body examines cases, and transmits the final proposals to the Bank. Down to the end of 1909 (from 1862) the Saxon Bank had granted loans aggregating £2,604,315 in bonds and £21,213 in cash. The loans were distributed thus: £66,291 for 1,510 loans repayable by annuities to 59 co-operative water-course improvement undertakings ; £740,522 for 5,196 loans for 3,217 agricultural irrigation and drainage works, and £1,818,715 for 31,738 loans for 1,983 local authorities for drainage works and road works. At the same date 32*24 per cent, of the loans had been paid off. At the end of 1909 the market price of the bonds issued previous to 1888 and bearing 3-g^ per cent, interest stood at 94"69, and of those at 4 per cent, (issued after 1888) at 102-59. Bavaria. — The most recent German legislation dealing with Land Improvement Banks has been enacted by Bavaria which passed in 1908 an Amending Act to the Act of 1884 (amended previously in 1900) considerably extending the functions of the existing Bank. Apart from the purposes already indicated as within the scope of the Prussian Land Improvement Banks, and previously adopted in the main by the Bavarian Bank, this Act specifically includes the granting of loans for the laying down and improvement of vineyards ; the erection of works for providing drinking and other water in rural com- munes J the erection of dams and works, as well as reservoirs, by small rural com- munes and public water-supply co-operative societies for the predominant purpose of producing and providing electric power for small industrial undertakings and for agriculture ; and the erection and sanitary improvement of dwellings for the poorer classes of the population and for the settlement of agricultural labourers upon holdings. The institution enjoys considerable popularity among Bavarian agriculturists., Between 1884 and 1904, 1,561 applications were made for loans, of which 1,506, amounting to £838,818, were granted. Seventy-two per cent, of the total was devoted to water- supply undertakings, and 14 per cent, to irrigation and drainage purposes. The activity of the Bank has shown a considerable increase in the last decade. The number of loans. which in 1900 was 100, increased to 212 in 1905 and to 248 in 1910. The number of holdings affected by the loans rose from 949 in 1900 to 2,271 in 1910 ; the average ioau 25574 I) 3 54 MORTGAGE CREDIT. per holding between 1904 and 1909 ranged from ^91 to £238, and in 1910 was £164 10s. Down to the end of 1909 £1,997,736 had been lent by the Bank ; of this sum £1,458,638 was granted for 1,045 water supply undertakings and 196,371 for 962 drainage and irrigation projects. General Provisions of the Bavarian Act. — Applications for loans are made to the district authority within whose area the proposed works are to be executed, and are forwarded with the necessary documents and opinion to the Commission in Munich. Loans are made up to one-half of the assessed value of the property. They are payable in cash or bonds ; if the amount of the loan does not tally with the exact value of the bonds the difference is always payable in cash. When large sums are involved payments may be made by instalments only, in accordance with the progress of the works under- taken. The nominal value of the bonds issued may be £250, £50, £25, £10 or £5. Interest is payable half-yearly, and may be at the rate of 3|, 3 J or 2| per cent., with annual redemption payments of J, f and 1 per cent, respectively ; the annuity, therefore, may amount to 4^, 4 and 3f per cent, of the capital sum. Loans for the erection of dams, works and reservoirs in connection with the production of electricity must, as a rule, pay interest ^ per cent, higher, and an annual sinking fund payment of 1 per ceiit. At the request of the borrower higher payments to sinking fund may be fixed in the case of water supply or other works which are likely to require renewal after a short period. Debtors are free, at three months' notice, to redeem their debt or to make partial payments towards its reduction, but such partial payments must be of sums not less than £2 10s. The amount payable in interest remains as fixed at the contraction of the loan, but the difference between the sum due on the original loan and on its progressively reduced amount is written to the sinking fund. Loans may not be called in, unless by default or other weakening of the security. Security must be furnished by way of mortgage ; if a property is already mortgaged, such mortgage creditors must yield priority of claim to the Improvement Bank. Communes and corporations under State supervision are, how- ever, exempt from the obligation to furnish mortgage security. The holders of the bonds are not entitled to demand repayment, but the Bank is obliged to buy in or pay off the bonds out of sinking fund payments unless its income is required for the issue of fresh loans at the same rate of interest. The State is guarantor of the bonds. The Act of 1884 limited the value of the bonds permitted to be kept in circulation by the Bank to £100,000 ; in 1904 this figure was raised to £1,500,000 and in 1909 to £2,500,000. No fees (such as court fees, stamp duties, registry of mortgages, &c.) receivable by the State Treasury are payable in matters arising in connection with the Bank. The State undertakes the cost of administration of the Bank, in so far as the payment to sinking fund and reserves (to be formed out of any agio profits) do not suffice. These administration expenses comprise the cost of the Land Improvement Bank Commission, the remuneration of the officials, the cost of producing the bonds, commission to banks, &c., and are said to be estimated at from £750 to £1,000 per annum. Inasmuch as the State grants loans at ^ per cent, below the interest it pays to the bond-holders, except in the circumstances alluded to above, the borrowers thus obtain a bonus to that extent. In 1908 and 1909 the amounts made good by the State in consequence of this difference were £3,730. Hesse and Oldenburg. — A Land Improvement Bank was established in 1880 for the Grrand Duchy of Hesse, but in 1890 its functions were transferred to the State Credit Bank established by law in that year. Upon the establishment in 1903 of the Hessian State Mortgage Bank the operations of the Bank of 1890 were practically restricted to loans for improvement purposes, although loans might be made to communes to build houses for the poorer classes, and loans are granted especially for reclamation, irrigation and drainage purposes. Individual landowners are now rarely granted loans ; these are generally made to communes. Capital was previously obtained by issuing 3 J per cent, bonds guaranteed by the State, but for a number of years no bonds have been issued, and the necessary funds are provided by the normal or exceptional payments to sinking fund by borrowers, as well as by the £200,000 State Loan under the Act of 1899 and the sum of £25,000 provided in the Hessian budget for this purpose. The sums lent by the Bank have tended to decrease, and whereas in the years previous to 1902 about £100,000 per annum was lent (and largely to individual landholders) only about one-third of that amount is now lent. The general provisions of the Hessian Act correspond with those of the Bavarian and Saxon Acts. Mortgage loans are granted up to |- of the assessed valae ; the claim of the Bank has priority over others ; the sinking fund must be at least | per cent. ; and the*interest is based on the actual yield of the 3^ per cent. bonds at the current market rate, plus -fV per cent, cover. The loan is paid in cash ; it PRUSSIAN PROVINCIAL AID BANKS. 55 is not subject to being called in, but over and above the sinking fund loans may be repaid by cash payments on three months' notice, and the balance of interest (as the debt progressively decreases by payments to sinking fund) is written to sinking fund. In Oldenburg the Land Credit Institution [Bodencreditanstalt), established by Act in 1883, includes among its objects the furtherance of land improvement works. Results. — From the above account of these Banks specially created for land improvement it will be gathered that their success, judged from the standpoint of the volume of money lent, has not been remarkable, although in Bavaria and Saxony the results have been more important than elsewhere. Yet for individual holders they have been of little consequence even in these States ; in Bavaria in the period 1884-1909 about nine-tenths of the total loans went to communal authorities, for water improvement purposes for the most part, and in Saxony, in the period 1861-1909, two-thirds were devoted to local schemes of drainage and road construction. In Prussia down to the end of 1908, £250,000 out of £565,000 lent had been granted to landowners holding under family or other settlements with an addition of £20,000 to other individual agriculturists. Several reasons account for the apparent lack of success, especially in Prussia, where the majority of provinces have not even established such Banks. The purposes for which loans are granted are too restricted, only two of the five banks adopting all the objects allowed under the Act. The existing institutions, viz., the Provincial Aid Banks or the Land Improvement Funds are also apparently adequate for the needs. It is also ascribed to the ignorance among the country population of the existence of such institutions, or' to the knowledge that loans are only rarely advanced to individuals. Further, the loans on mortgage obtainable by landholders at numerous other institutions, such as the Mortgage Credit Associations and the public savings banks, are devoted to land improvement as well as to other purposes ; and for the individual land- holder these sources of credit probably offer greater convenience and are equally advantageous as regards interest and sinking fund payments. For the smaller land- holders the pubhc savings banks would appear to be far more convenient, even though their mortgage loans have the defect of being liable to be called in at a few months' notice. A further obstacle is the low limit of value up to which loans may be granted upon properties in the hands of individuals, although co-operative societies composed of persons equally indebted may obtain loans irrespective of such mortgage indebtedness already existing. Their potentiality for usefulness, however, is indicated by the demand, made in 1910 by the National Advisory Board of the Ministry of Agriculture, that the State should establish these Banks in all the provinces of Prussia, or should empower the Eent- Charge Banks to make loans for land improvements and the creation of small holdings. The extension of the scope of operations of the Bavarian Bank in 1908 to the loan of money for promoting the production and supply of electric light and power especially in country districts, as well as the erection of houses for rural and other labourers, and the settlement of agricultural labourers, also shows recognition of the value of these institutions for modern agricultural policy. 6.— PRUSSIAN PROVINCIAL AID BANKS. Functions : Administration. — The main function of these Banks is to supply credit to bodies of a public or semi-public character — to communes, communal groups (Kreise), school and church organisations, and co-operative societies, especially societies undertaking land improvement. In some provinces, however, considerable loans appear to be made by them also to individual landowners on mortgage security, although one Bank at least does not lend to individuals at all, and others lend to individuals only for purposes of land improvement. These Banks are conducted as branches of the provincial government administration, and are usually subject to the direction and supervision of the Provincial Councils. The latter must in particular determine the business regulations, annual budget, and the rate of interest payable for loans ; and they delegate the management to small honorary committees elected for a term of years and presided over by the provincial presidents (Landeshauptmann). The current business is transacted by the staff of the Provincial Councils in conjunction with the provincial financial departments. Existing Banks. — The first Bank of this kind was founded in 1831 for the province of Westphalia, and by about 1850 similar institutions appear to have been formed throughout the territory of Prussia as then constituted either for whole provinces or for parts of provinces. The Westphalian Bank, and that founded later for the Rhine Province, were subsequently transformed into the present Provincial Mortgage Credit Banks {see pp. 18-30) ; but Provincial Aid Banks still exist for each of the provinces of East Prussia, West Prussia, Posen, Silesia, Pomerania, and Saxony, for the administrative district of Wiesbaden, and for the district of Altmark in the province of Saxony, while in 2B574 D 4 56 MORTGAGE CREBIT. the province of Brandenburg there are three, for theNeumark, Kurmark, and N iederlausitz Districts. The operations of these banks, with the exception of those m Silesia, Posen, and East and West Prussia, are, however, inconsiderable. The following Table shows, so far as data are available, the amount of loans outstanding at the end of 1910, with the various rates of interest applicable : — Loans Amounts of loans Loans Amounts of loans Bank. outstanding outstanding at each rate Bank. outstanding outstanding at each rate Dec. 31, 1910. of interest. Dec. 31, 1910. of interest. £ £ % £ £ % East Prussia ... 8,215,365 6,140,808 ^ Silesia 9,041,066 117,149 3^ 2,074,557 4 209,070 118,835 3i West Prussia ... 934,001 13,594 3 2,263,615 3|* 17,365 3i 3,379,673 31 114,042 3| 485,315 4 634,801 4 707,650 4A 153,409 H 1,600,658 H 790 4i 159,081 4| Brandenburg ; 20 5 Neumark ... 14,797 14,797 3 Wiesbaden — — — Kurmark ... 38,262 38,262 3 Saxony ... 215,112 30,467 ^ Niederlausitz 13,005 13,005 3 7,095 3A Pomerania ... 153,242 128,825 3i 1,000 ^l 21,198 4 5,717 3to 2,610 H 78,678 31 609 free. 3,797 74,525 f Posen 2,785,919 2,785,919 3i,3|.3|, 4,4j,4i and 5* 3,500 10,185 149 tt 4i Altmark . . . — * The sum on which, interest is payable being reduced every six months by the amount added to sinking fund. It will be observed that these Banks, with three or four exceptions, are not important as sources of credit. In the middle of the nineteenth century the Prussian government distributed a total of £375,000 as foundation capital for all Provincial Aid Banks, each receiving a sum according to_ the area, population, and amount of direct taxation paid. The combined capital of the Brandenburg, Saxon, Pomeranian, and Wiesbaden banks was stated in 1910 to reach the small total of £450,000. But the remaining banks (those of Silesia, Posen, East Prussia and West Prussia), having obtained authority to issue bonds, are enabled to procure sufficient capital for a considerable volume of transactions. Silesian Bank. — Considerable differences of detail occur in the general organisation, methods and scope of the existing banks. An account may be given of the Silesian institution (which, though closely followed by the East Prussian Bank, has the largest business of these Banks) which may be taken in most respects as representative of the more developed banks in this group. The articles of this Bank state that " with the object of facilitating by loans the provision of works and institutions for the public welfare, the carrying out of communal undertakings, amortisation of communal debts, the improvement of land and industrial undertakings, as well as the maintenance of persons in possession of their property, the improvement of mortgage credit, and in general the furtherance of their financial transac- tions, an Aid Bank shall be established for the Province of Silesia." The capital consists of the original foundation fund of £100,000 and its increase since its grant in 1847, but the Bank was authorised in 1866 and at various subsequent dates to issue bonds, being finally (in 1909) authorised to issue bonds at 3, 3J, 4 and 4|- per cent, up to a total value of £10,000,000. The bonds are issuable at the nominal value of £5, £10, £25, £50, £100, and £250 ; but bonds of £5 must at no time exceed 2 per cent, of the total value of bonds in circulation. In each year at least one per cent, of the bonds in circulation must be redeemed, either by purchase in the open market or drawings. The Bank retains the right to call in all bonds. Bonds Guaranteed by Province. — The security of these bonds and interest thereon consists in the foundation capita^ (the original amount of which was £100,000) reserves mortgage claims and the Province "with its whole assets and taxing power," The Bank PBUSSIAN PROVINCIAL AID BANKS. 57 is also authorised to borrow money out of provincial funds as well as out of funds belonging to the districts (Kreise), communes, savings banks, and public institutions of the province, and to lend it for purposes within the sphere of the bank's activities. No Loans from Private Persons. — No loan, capital or deposits may be taken from private persons — a restriction which, it may be remarked, appears to apply also to the Banks of other provinces {e.g., that of Saxony). Term and Security of Loans. — Loans at interest may be made either for undetermined periods or subject to annual sinking fund payments. If loans are made for an unde- fined period they may be recalled by the Bank or repaid by the debtor on six months notice by either party. A minimum of £5 is fixed for loans, which are payable in cash or bonds, but in so far as the funds at the disposal of the Bank allow, individual borrowers are usually paid in cash. As regards loans to individuals the articles of the Bank state, after enumerating as eligible for loans provincial and communal bodies, and other corporations, as well as registered and public co-operative societies, that loans may be granted also " to urban and rural landowners for increasing the value of their land, for useful agricultural undertakings for the removal of indebtedness, for the betterment of their business position, and for maintaining them in the possession oE their property. Loans to individuals must be fully secured by mortgage, land being loanable up to two-thirds of its valuation or to 36 times the net yield as assessed for the land tax and buildings not employed as the dwelling of owner, his family, servants or workmen, or as farm buildings up to 25 times the net yield for the buildings tax. In the case of properties worth over £500 special valuation must be made. Properties under ten acres are not eligible for loans. To small owners in certain backward or distressed districts in the Province specially favourable terms are allowed : loans may be made up to |ths of the valuation and stamp duties are remitted. Private borrowers must give a notarially attested undertaking that in case of default they will submit to summary process of distraint. As a rule only reducible mortgage loans are granted to individuals by all Banks, the rate being a matter of arrangement, but a minimum of J per cent, as annual payment to sinking fund appears permissible in Silesia and Posen, although similar Banks elsewhere maintain a minimum of 1 or 1^ per cent, A maximum period for repayment of loan is fixed : thus small owners in certain distressed districts are allowed up to 40 years. (Other Banks fix the maximum at 30, 32, 41 years.) Borrowers are generally allowed to repay instalments at six months' notice. Most Banks charge a small percentage of ^ or J per cent, for a period of years to cover cost of administration ; the preliminary costs if not included in this fall on the borrower. The rate of interest payable in 1910 will be seen from the above Table ; 3^ per cent, bonds being down 8 to 9 points in 1911, there was tendency to issue 4 per cent, bonds in preference. Direction and Supervision. — The Bank is subject to the direction and supervision of the Provincial Council. In particular the latter must fix the business regulations, annual budget and the rate of interest payable. The immediate management is in the hands of a committee of four, composed of the Provincial President (Landeshauptmann) and three persons elected for six years by the Provincial Assembly, their office being honorary. The current business is transacted by the staff of the Provincial Council in conjunction with the provincial Treasury. The Bank is obliged to publish once every year a full statement of its financial position. The administrative authorities in the Province, including district governors (Landrdte), local authorities and police authorities, are required to answer enquiries made by the Bank, and even to volunteer information when it comes to their knowledge that loans of the Bank granted to persons within their areas are endangered. In each case of loan, the district governor, mayor, or village clerk concerned is duly apprised by the Bank. Allocation of Profits. — The net profits, after the annual allocation of £2,000 to reserve until the latter reaches 5 per cent, of outstanding loans, and of £1,000 to a special reserve for the buying in of bonds, are payable to the provincial government of Silesia. Loans to Individuals by Banks. — The totals of the loans granted by Provincial Aid Banks to individual landowners are not considerable. By far the largest amounts are those advanced by the Silesian Bank which in 1908 lent £275,000 to individual landowners. In 1899, out of the total of 7,836 loans amounting to £3,608,735 outstanding, 2,132 of the value of £388,620 were due by rural owners, apart from 3,649 loans of the value of £267,010 granted under special conditions to small owners in certain distressed areas of Silesia. The East Prussian Bank had total loans of about £6,900,000 outstanding at the end of 1908, of which only about £300,000 were due by individual landowners for land improvement purposes ; in 1907 of the total of £2,700,000 58 MORTGAGE CREDIT. due to the Posen Bank only £185,000, and in the same year out of £900,000 due to the West Prussian Bank only about £75,000 was due by individual landowners. Profits. — The net profits of these Banks are in some instances considerable. In the year 1903 — the last year for which details on this point are available — ^there were paid to the provincial administrations by their respective banks the following sums as the result of the year's working :— in Silesia, £7,524 ; in Posen, £6,638 ; in West Prussia, £3,362 ; in East Prussia, £2,301 ; in Saxony, £2,685. The Banks for each of the three divisions of Brandenburg yielded a profit to their administrations of £1,357, £462, and £265 respectively. Limited Utility of Banks. — In general, these Banks, in so far as they have served individual owners, have been principally beneficial in promoting land improvement within their districts. The Posen Bank grants for improvement purposes loans up to even three-quarters of the valuation, and the East Prussian Bank grants for drainage purposes loans up to five-sixths and even up to the full valuation subject to increased payments to sinking fund. In Silesia, Posen and East Prussia the Banks have also granted credit to owners for other purposes, although the conditions in these provinces give ample scope for improvement loans. Two Banks formerly in this category, having developed considerable business other than loans to communes, church and school unions and registered and public co-operative societies, and to individuals for land improvement, were transformed into Provincial Mortgage Credit Banks, and, in fact, in many respects the position of Provincial Aid Banks empowered to issue bonds is analogous to that of these two Provincial Mortgage Credit Banks, 7.— RENT-CHARGE BANKS. Their Institution. — In order to facilitate the regulation of certain burdens attaching to the holding of land two Prussian Acts of 1850 abolished or declared commutable, certain charges and servitudes obtaining in connection with land tenure, and created seven State Rent-Charge Banks, some of which were to serve one and others more than one province. These Banks were authorised to issue bonds to landowners in settlement of their claims and to collect from the landholders thus relieved annuities composed of interest and sinking-fund payments. In most of the other German states, as in Saxony, Bavaria, Baden, Wiirtemberg, Hanover, and the Electorate of Cassel (see the chapter upon State Mortgage Credit Banks, pp. 18-30) similar banks had already been or were subsequently created with the same object, or State Exchequers provided the necessary facilities. The special services which the Prussian Rent- Charge Banks and similar institutions were called upon to render appear to have lapsed owing to the general redemption of the liabilities involved. But although the Prussian Rent- Charge Banks, closed and re-opened at different times, were suspended by an Act in 1881, they were re-established in 1891 for an indefinite period for the special purposes of the new policy of settling small and medium holders on the land. Further regulations in this connection were contained in the Acts passed in 1896, 1900 and 1911. Existing Banks. — There are seven Rent- Charge Banks : one at" Berlin for the province of Brandenburg and the district of Berlin ; at Stettin for the provinces of Pomerania and Schleswig-Holstein ; at Magdeburg for the provinces of Saxony and Hanover ; at Miinster for the provinces of Westphalia, Hesse-Nassau and the Rhine province ; at Breslau for the province of Silesia ; at Posen for the province of Posen ; and at Konigs- berg for the provinces of East and West Prussia. Each Bank is managed by a director, advised by two assessors, one of whom is usually the chief official of the pro-\nncial inland revenue office ; and the business is carried on under the guarantee of the State. Their Functions and Powers. — The present functions of these Banks are : — (1) To issue bonds on certain conditions to vendors upon the sale of their property for conversion into small holdings up to three-quarters of the selling price, and to be responsible for the annuities due in respect of the purchase of such holdings (Act of 1891); (2) To grant loans for land settlement, either to pay off preliminary charges, &c., or for the erection of dwellings and farm buildings, upon the first establishment of such holdings, such loans being repayable by yearly instalments of interest and sinking fund collected by the Banks ; and (3) Under certain conditions to settle, by cash payments, with co-heirs to properties coming under the Home Colonisation Acts. In respect of the first two of their above functions the services of the Banks have been considerably utilised. Down to the end of 1909 they had issued bonds to the value of about five and a-half miUions aterling under the Act of 1891. These bonds rank as a government security, and are officially recognized as a trustee investment. RENT-CHABOE BANKS. 59 Not independent Agents. — But although, they constitute separate entities they are not independent bodies, being rather merely the financial departments of the " General Commissions " (see next paragraph) in connexion with the creation of small holdings. They do not determine the amount to be paid to the vendor nor the amount of the annuities to be paid to them by the purchasers ; these matters are determined by the particular " General Commission " having jurisdiction. General Commissions. — There are eight " General Commissions " (at Breslau, Frankfurt-on-Oder, Konigsberg, Merseburg, Hanover, Cassel, Diisseldorf and Munster), and their approval is required previous to any action on the part of the Rent- Charge Banks. The functions of these " General Commissions," which are State organisations, are rather comprehensive. Within their competence fall the settlement of questions connected with charges upon landed property, rights of every kind, such as rights of common, pasture and fishing, wood rights, turbary, foldage and pannage ; the consolidation of small properties and scattered parcels of land belonging to the same owner ; land improvement ; acquisition and re-afforesting of moor and waste lands ; the creation of small holdings ; the formation of co-operative societies for irrigation and drainage purposes ; registration of lands held under special tenure, &c. In the work of different Commissions some of these duties assume special prominence ; thus the General Commission established at Frankfort-on-the-Oder has been most prominently identified with the small holdings or settlement movement, as its area extends over Brandenburg and Pomerania where numerous colonies have been founded. A broad distinction may be made between the work of these bodies in Western and Eastern Prussia ; in the West their functions largely consist in the consolidation of small scattered parcels of land, while in the East they are largely occupied in superintending the division of large properties and in general land improvement works. In addition to their administrative functions they are invested with a certain judicial authority, being in most cases courts of first instance (in Hanover for some matters also courts of second instance) as regards matters coming within their administrative competence. The General Commissions maintain branches called Special Commissions at convenient centres within their area ; thus the General Commission for Brandenburg and Pomerania has its chief office, with a large official and technical staff, at Frankfort-on-Oder, and has established 12 Special Commissions in Pomerania (2 being in Stettin, Kolberg and Stolp, and 1 in each of 6 other towns) and half that number in Brandenburg, each with a State official and staff of technical and clerical officials (^e.g. surveyors, draughtsmen and land improvement experts). General Conditions. — It is not possible to enter here into details concerning the part taken by the State in Prussia in furthering the creation of small holdings. It may be stated, however, that, except in West Prussia and Posen where the Settlement Commission — a State organisation created under the Act of 1886 to promote the settlement of Germans in these provinces — directly purchases large estates, divides and distributes them, the State limits its action to granting credit through the Rent-Charge Banks, and to making small grants and affording certain facilities as regards costs, &c. The Annuity Holdings Acts, by virtue of which State credit (that is, through the Rent- Charge Banks) is granted, allow any person or body to undertake the division and settle- ment of a property, but require, before State credit may be granted, that plans for division*, equipment, settlement, &c. must be approved by the General Commission. Upon such approval it is provided that vendors of land to be divided into small and medium holdings may receive in settlement, according to arrangement, either 27 times the amount of the annuity in 3J per cent, bonds of the Rent-Charge Banks at their nominal value, or 23f times the amount in 4 per cent, bonds of the same Banks, receiving in cash any balance that is not exactly coverable by bonds. Such bonds may only be issued by the Banks in respect of the creation of holdings "of medium and smaller extent"; eligible holdings are elsewhere defined as " rural holdings from which the occupier can obtain his livelihood, and for the farming of which his presence is necessary, although he may at odd times find work in the neighbourhood." Different standards of size have been adopted by different General Commissions ; one has fixed the minimum at 2^ acres, and the maximum at 75 acres ; another at 7^ and 175 acres, and a third at 5 and 45 acres. General Commissions may not authorise the Banks to issue bonds unless the annuity claim takes precedence of all other charges upon the property, and adequate security appears to exist for the regular payment of such annuity. Security may only be admitteg as adequate when 25 times the amount of the annuity does not exceed either (1) SO times the amount of the annual net yield at the most recent assessment for land tax, including half the value of the buildings as accepted for an insurance policy, or (2) three-quarters of any valuation of the land made by a Land Mortgage Credit Association, or special valuation to be made through the General Commission. If a special valuation is made 60 MORTGAGE CREDIT. the value of the necessary dwellings and farm buildings to be erected may be taken into consideration. The market price of the bonds has been for a considerable time several points under par. In order to cover the veodor against loss a certain addition is made to the price agreed, if not represented by the price receivable for bonds, and more bonds are issued to him if necessary to bring up the amount. Interest. — The new landholders must pay either (1) 4 per cent, upon the nominal value of the bonds issued at 3^ per cent, and upon any cash payments made as supple- mentary to the bond issue, or (2) 4^ per cent, upon bonds issued at 4 per cent, and upon any supplementary cash payments. The annual payments of 4 per cent, must be made for a period of 60^ years, and those of 4^ per cent, for hQ-^^ years. It is left to the Ministries (of Finance and of Agriculture) responsible for the execution of the Act to determine whether 3^ or 4 per cent, bonds shall be issued, but " so long as the market price of 4 per cent, bonds remains at the nominal value or beneath it, '6^ per cent, bonds may only be issued with the assent of the vendor." Up to the present such bonds have borne 3^ per cent, interest. Capital due may not be called in by the Banks, if holders meet their liabilities. The competent General Commission may require the Bank to wai\^e the annuity for the first year of the creation of the holding if the holder makes an application in that sense ; the amount of the postponed payment is then added to the capital debt, and the amount of the annuity is based upon this increased sum for the respective periods of either 50| or 56^2 years. Thus if the original sum amounted to £100 the future annuity would be payable upon either £104 or £104 10s. It is expressly provided in the Act that no arrears in annuities, apart from those of the first year, may be added to the principal. It is also provided that no subdivision of a holding may be legally eflPected without the assent of the competent General Commission. The latter also require borrowers to insure dwellings, farm buildings, cattle, &c., and also their crops against damage from hail. Repayment. — Excepb \Fith the approval of the General Commission the Banks may not accept repayment (beyond the sinking fund payments) until after the lapse of ten years. Loans in connection with Small Holdings. — A special Act of 1900 gave authority to the Rent-Charge Banks, on the recommendation of the General Commission, to grant cash loans to clear off debts and burdens upon property to be split up for settlement, or separated from other property for the same object, and to set up the first necessary dwelling and farm buildings. Under the Act the funds for these loans were to be drawn from the reserves accumulated by the Banks and not to exceed a total of £500,000. The reserves amounted to£75j&',000 at the end of 1898 and to about £1,200,000 at the end of 1909. An Act of 1911 increased the maximum to be applied in this way to £750,000 and extended the potential application of loans to purposes of land improve- ment or other expenditure expedient for the administration or equipment of land intended for settlement. • These cash loans may be granted not only to the prospective small holders but also to persons or bodies undertaking the establishment of small holdings. The Prussian State Bank {die Seehandlung, Berlin) is the responsible agency for distributing loans out of this fund and obtaining their repayment, but it acts in general upon the advice of the General Commissions. It is an accepted principle that the general plan of the proposed settlements must be approved by the General Commission and that a fair number of contracts must have been made for the purchase of the contemplated new holdings. No maximum loan is fixed for individual undertakings, its amount being dependent upon the security for its repayment, i.e. the value of the property. The rate of interest is fixed at a low figure, usually 3^ per cent. Value of Bonds issued. — The total value of bonds issued by Prussian Rent-Charge Banks since 1850 amounted to about £31,500,000 at the end of 1909, bonds of the value of about £14,500,000 being still in circulation. The total issued since 1891 in respect of small holdings amounted to £5,600,000. The services of these Banks have been especially utilised in the Eastern Prussian Provinces ; to a noteworthy extent in Pomerania, to which Province about one-half of the loans issued for land settlement since 1891 have fallen. Land settlement in Posen, it may be remarked, has been far more extensive than in Pomerania, but a special authority, the Settlement Commission, created in 1886 and amply endowed with State funds (reported to have reached in 1911 a total of £30,000,000), fulfils the function of rent-charge banks for Posen and West Prussia, in addition to functions connected with the actual establishment of small holdei's' colonies. INSURANCE INSTITUTIONS AND AGRICULTURAL CREDIT. 61 Importance of Rent- Charge Banks. — The importance o£ these Banks for agricultural policy consists in the fact that they are the agencies by which the State, while leaving the actual settlement of land by small and medium holders to private enterprise and risk, yet gives them the advantage of its credit. By their instrumentality the persons of this class are enabled to enter into possession of land and to obtain loans for establishment expenses at rates which, inclusive of sinking fund payments, amount to probably quite J per cent, less than they would pay for credit elsewhere. Landowners desirous themselves of dividing their estates into small holdings or who hand over this task to others may also, under certain conditions, reap advantage from the fact that they receive an immediate and final settlement in State bonds. 8. INSURANCE INSTITUTIONS AND AGRICULTURAL CREDIT 1. State Invalidity Insurance Institutions. Investment of Funds. — Under the Imperial Invalidity Insurance Act 31 Insurance Institutions {^Landes-Versicherungs\ Anstalten), apart from 10 Recognised Funds (Zugelassene Kassenelnrichtungen) of insured persons drawn mainly from railway, mining and seafaring groups, have been established. Such Institutions, which are public corporations, each with an independent legal status, have been created for each of the Prussian Provinces and for the Berlin District ; in Bavaria there are eight, and elsewhere each Institution serves a single State or groups of States. All insured persons occupied within the area assigned to each of these corporations must pay their contributions to and receive their benefits from them. The funds received by these corporations must be invested especially in readily realisable securities as laid down in the Act, which recommends Imperial and State stocks, stock of State-guaranteed railways, communal bonds and mortgage bonds, after which loans to communes and finally mortgages, but which authorises a certain proportion to be invested for purposes of general social welfare within the districts of the various Institutions. At the end of 1909 over 50 per cent, of the total invested funds (£78,705,550) of the 31 Institutions and 10 Recognised Funds were invested in undertakings of this character, £14,025,900 being in respect of houses for working men, and £5,143,600 being devoted to agricultural purposes. Under the latter heading are granted loans for light railways in rural districts, for land improvement, and for the improvement and construction of roads ; while for the housing of the working classes loans are granted to building societies, to communal organisations and to employers, and, indirectly, that is usually through local authorities or co-operative societies, to insured persons for the purpose of building or improvement of dwellings. Conditions for Loans. — The conditions to be fulfilled in order to obtain the grant of loans for "agricultural" purposes need not be given in detail here, as such loans are made only to communal or other public or semi -public corporations. Loans are granted for the improvement of housing or for new erections, whether for the benefit of rural or urban workpeople. They are, however, rarely granted to individuals, being, as a rule, accorded only to non-profit seeking co-operative societies or to employers, or to communes. The Posen Institution only lends to an individual through the intermediary of a communal organisation (that is, as a rule, the District or Kreis) ; in this way local supervision of the loan is secured. In some cases a limit is set to single loans : thus the Weimar Institution does not make a loan to a single borrower of more than £250 ; similarly the Baden Institution, as well as that at Wurzburg in Bavaria, does not lend over £350. Mortgage loans are usually made up to from 50 to 75 per cent, of the value of the land and building hold by the borrower. Mortgage security is required, and in most cases loans are subject to sinking fund payments, usually at a minimum of 1 per cent, per annum. In Baden, however, 2J per cent, is the minimum ; and in Oldenburg there is a regulation to the effect that one-half of the loan must be repaid within 12 years, loans there being made for new buildings only. The Institutions reserve the right to call in any loan on giving a fixed period of notice : this period is usually three or six months, but the Dantzig Institution allows one year. The same Institution allows mortgagors, on giving four weeks' notice, to repay loans wholly or in instalments of £15. Similar facilities for repayment appear to be granted by all Institutions. Rate of Interest. — The predominant rate of interest charged for loans now ranges from 3 to 3| per cent. Loans were formerly given by some institutions at 2J and 2| per cent, and predominantly at 3 per cent., but in more recent years 3 J to 4 per cent, has been a Hot uncommon rate. 62 MORTGAGE CREDIT. Total Mortgage Loans. — The total of the mortgage loans o£ all these organisations amounted to £17,205,000 at the end of 1908 against £13,105,000 at the end of 1905. The most important Institutions from this standpoint are those in Westphaha, the Rhine Province, Hanover and Brandenburg. 2. Private Insurance Companies. Urban and Rural Mortgages. — Insurance Companies conducting business in Germany possessed at the end of 1909 invested capital to the value of over £300,000,000 and nearly three-quarters of this sum was lent upon mortgages ; investments in securities, in loans against policies or other security were thus of quite secondary importance. The investments in mortgages have more than doubled since 1900, when their amount was £118,775,000, although the actual percentage of the funds invested in mortgages has only advanced about three points. "German com- mercial insurance companies, like the bulk of German Joint Stock Mortgage Banks (see pp. 30-39) find agricultural mortgage business less attractive than similar urban business, and for like reasons. The proportion of the above total falling to rural mortgages is insignificant : in 1907, 91 companies reporting to the Imperial Supervisory! [Office for Private Insurance had outstanding in respect of rural mortgages only £2,435,000 as against £162,710,000 upon urban mortgages. Of the total sum outstanding on the security of rural mortgages to one company alone, established at Gotha, £1,400,000 was due, so that the remaining companies only lend about £1,000,000 on such security. The total number of loans of the former kind was only 790 : and these were to the extent of nearly four-fifths for sums exceeding £2,500. Even this small total of transactions was decreasing : in 1905 fifty-seven loans of the aggregate value of over £150,000 were granted, but in 1908 only 24 loans totalling one-third of this amount were made. Special Rules. — Certain special rules have, however, been recently issued by the Imperial Supervisory Office in respect of loans upon rural property. Such loans must not, as a rule, be granted upon individual properties for sums over £10,000. In the case of loans over £5,000 the valuation of the land must be carried out by two expert valuers, preference to be given to valuers proposed by the Mortgage Credit Association or State or Provincial Mortgage Credit Bank, or Chamber of Agriculture competent within the particular area ; if obtainable, the valuation of the credit institution itself is to be taken. Insurance companies are authorised by law to lend up to three-fifths of the valuation, or up to two-thirds in those States which specifically permit them to do so. In Prussia a special valuation is not obligatory when the sum to be loaned does not exceed twenty times the net yield, as assessed for the land tax. Loans. — Loans are paid in cash. They are, in the main, of two kinds : either they are not subject to being called in until after the expiry of a period of years, when they may be either renewed or paid up, or they are subject to three or six months' notice of recall usually as at the end of a quarter or half year. Insurance companies do not possess the right to issue mortgage bonds. Few reducible mortgages appear to be granted : in 1907 their total was less than J per cent, of all mortgage loans, although 3 per cent, of the rural mortgage loans outstanding at that date were subject to regular amortisation payments. The average of the rate of interest payable on mortgage loans made by insurance companies amounted in 1908 to 4'2 per cent., but the average for the loans granted in that year was considerably higher, being nearly 4'4 per cent. In addition to interest mortgagors are usually charged a commission of at least one per cent, of the loan : this amount, being payable in advance, is deducted from the loan. 63 II.— PERSONAL (SHORT-TERM) CREDIT. 1.— LOCAL CO-OPERATIVE BANKS. Their Importance. — No branch of Grerman rural co-operation has attained such remarkable success as that of co-operative credit. On January 1, 1913, there existed in the German Empire, according to the return of the Imperial Federation, 26,576 registered rural co-operative societies, which were grouped into : 98 central societies (central banks and central trading organisations), 16,927 credit societies, 2,409 supply societies, 3,313 dairy, and 175 milk-selling societies, and 3,654 societies of various other kinds. The rural banks thus represent two-thirds of the total. Their absolute number has increased more than ninefold since 1890, when there were 1,729. The membership of the 14,993 societies of this kind existing on January 1st, 1910 totalled 1,447,766 persons. The significance of this total is enhanced by the consideration that the bulk of these members are the heads of households. Considered further from the point of view of business done, the importance of the village banks may be appreciated from the fact that in 1910 the total turnover of 14,729 societies (95 per cent, of the whole) amounted to £261,665,000, and, at the end of the year, the loans outstanding for fixed periods, together with overdrafts, to £93,034,000, while at the same date the savings deposits totalled £92,429,000 and the deposits op current account £10,865,000. Geographical Distribution. — The distribution of rural credit societies over the various parts of Germany is uneven. As might be anticipated on historical grounds they are found in greatest density in the West, where the rural bank movement was originated by Raiffeisen about sixty years ago. The Imperial Federation of Agricultural Co-operative Societies has calculated the average population and acreage served by all kinds of agricultural co-operative societies for the whole Empire as well as for each German State and Prussian Province. As already remarked, credit societies constitute two-thirds of the total. Taking Germany as a whole, there existed in June, 1912, one registered rural co-operative society per 2,494 inhabitants and per 3,365 acres of cultivated land. In the Rhine Province (with over 7,000,000 inhabitants and great manufacturing industries) there was one rural society for every 3,286 inhabitants and for every 1,415 acres of agricultural land ; in Hesse for every 1,489 persons and 1,427 acres. In Baden, Alsace-Lorraine, Wiirtemberg, Bavaria (Right of Rhine), and the Palatinate there was one for every 1,704, 2,543, 1,427, 1,353, and 1,244 inhabitants respectively ; taking these States in the same order, there was one society to every 1,695, 3,170, 1,822, 2,467, and 1,127 acres. Age and Increase in Number of Credit Societies. — In these parts of Germany medium and small landholders predominate, the holdings rarely exceeding sixty acres, and, for the most part, containing under thirty acres. It was not until the nineties, and especially after the foundation of the Prussian State Central Co-operative Bank, that the movement, which was about forty years old in the West, showed signs of distinct progress in the East, where large holdings predominate ; but since then rural banks have been established in great numbers in the East. Their remarkable development is indicated by the following Table, showing the number of such societies in the more Eastern provinces of Prussia in the years 1890, 1894, 1898, 1901, 1911, and 1912 :— Province. 1890. 1894. 1898. 1901. 1911. 1913. Brandenburg 10 27 H04 382 816 820 Prussian Saxony 35 61 219 316 696 740 Pomerania 2 4 159 202 500 508 West Prussia 8 19 132 182 287 291 East Prussia 51 86 240 269 402 407 Posen 9 17 327 401 535 568 Silesia 35 137 783 1,048 1,596 1,665 In 1890 there were 754 rural credit societies in Prussia, and 975 in other parts of the Empire. Of the Prussian societies 237, 168, 137, and 67 (a total of 609) were situated respectively in the Rhine Province, Hesse-Nassau, Westphalia, and Hanover ; while of those in other parts of the Empire, 290 were in Bavaria, 288 in Wiirtemberg, 125 in Baden, and 140 in Hesse, the total of 843 societies in these four states forming 86 per cent, of the total in the Empire outside of Prussia. The striking increase between 1894 and 1898 in the eastern Prussian Provinces is attributable to various causes, not the least important of which were the facilities for credit accorded by the Prussian State Co-operative Bank specially created in 1895, the organised support given to the movement by thf; 64 PERSONAL CREDIT. Government in the way of propaganda, the efforts o£ the quasi-ofl&cial Chambers of Agriculture created after 1894, and behind all, of course, the necessities of the agricultural classes. At the present time the credit societies have established themselves firmly in all parts of Prussia, and are utilised to some extent by the large landholders in Pomerania, Silesia, and other provinces. For details of the distribution of rural banks in the various parts of Germany in 1912 reference should be made to the Table in this section, in which such societies are classified according to the nature of liability adopted, as well as to the Table (also in this section) in which, for nine Prussian Provinces, is shown the percentages of holdings occupying various acreages with the average acreage of holdings in each group. The following Table shows the periods within which rural credit societies (excluding central societies) existing in the German Empire on January 1st, 1909, were established : — Tablk showing Periods of Establishment of Rural Credit Societies existing in THE German Empire on January 1st, 1909 (Central Societies excluded). Total number of With unlimited liability. With unlimited contributory liability. -With limited liability. Period of establiahment of societies. i •3 o w OQ 1 1 m ! -1 ' -3 o 03 S a 1 1 02 i o OS t-l 1 * o ® 1"! 1. Up to 1866 2. From 1867 to 1888 .. 3. From 18S9 to 1894 ... 4. From 1895 to 1903 ... 5. From 1904 to 1908 30 1,253 2,657 7,589 3,067 7,646 220,721 32S,291 675,993 157,809 28 1,243 2,622 6,940 2,668 7,484 215,789 322,887 632,100 139,238 2 16 1 855 1,299 94 2 8 35 633 398 162 4,077 5,404 42,594 18,477 36 677 19.000 148,852 45,645 1,790 k01,6.55 248,777 2,476,773 791,760 Total . 14,596 1,390,460 13,501 1,317,498 19 2,248 1,076 70,714 214,210 3,720,755 * By the term '• additional " is meant shares held by members beyond the single obligatory share. Members not exclusively Agriculturists. — It may be noted that membership in these societies is not confined to persons whose principal occupation is agriculture, all persons resident within the fixed area of the particular society being admissible on application to, and approval by, the committee. Besides farmers and farm-hands, local shopkeepers, master and other artisans, local officials and others are to be found among the members of nearly all societies ; many of these, it should be observed, have small holdings which they cultivate in their spare time. Official statistics divide co-operative credit societies into two classes : those predominantly rural and those predominantly urban in character. In some parts of Germany the percentage of members of rural societies whose principal occupation is other than agricultural is considerable. The writer found this condition marked in districts mainly industrial in character, such as in the Rhine Province (par- ticularly in the Saar mining region and round Cologne and Diisseldorf), Westphalia, Saxony and in parts of Silesia, Baden, and Hesse. With the tendency of industrial under- takings to seek rural sites, and the extensive use of the bicycle by German workmen, as well as the system of workmen's trains, villages often contain many inhabitants working in a local factory or travelling to a factory in the neighbourhood. A large proportion of these men rent or own holdings, the cultivation of which is in large part carried on in their absence by their families. No figures are published showing the occupations of members of rural credit societies as a whole : such as are available relate to s small proportion, and date back fourteen or fifteen years. In 1897 the percentage of agriculturists in 320 Westphalian societies with 41,495 members was 44"26, of journeymen and master artisans 25* 17, of labourers (agricultural and industrial) 17*76, of traders 7*86, and of other classes 4-95 per cent. Westphalia cannot, however, be regarded as typical, manufacturing and mining being extensively carried on in the province. In 96 Brandenburg societies with 3,597 members it was found about the same time that 67'65 per cent, were agriculturists, while 6-7 per cent, were clerks of various kinds, and 13 per cent, journeymen or master-artisans. An enquiry made by von Altrock in 1898 respecting 133 societies with 3,913 members in the same province showed that 57 "2 per cent, of the members consisted of landowners with from 5 to 250 acres, 3*4 per cent, of owners with over 250 acres, and Tl per cent, of tenant farmers, but 13-2 per cent, of persons with other principal occupations held over 5 acres of land. Experience gathered in the «ourse of this enquiry left the impression that in the northern and eastern provinces generally the percentage of landholding members whose LOCAL CO-OPERATIVE BANKS. 65 main occupation was agriculture amounted to about 75 per cent., and that in the normal society elsewhere they represented between 60 and 70 per cent. Conditions of Membership. — Membership in a rural credit society is open to all persons, including corporate bodies, who are capable of binding themselves by contract and who live within the area fixed by the society for its business, subject to their acceptance by the society and the fulfilment of certain conditions. Women are eligible, but the Act allows the articles of association to determine whether they may take part in the general meetings of the society. It makes an exception in their favour in regard to voting by authorising them to vote by proxy at such meetings. Other co-operative societies established within the same area, such as supply societies or dairy societies, frequently become members of co-operative credit societies. The admission of members of other credit societies with unlimited liability is usually made conditional upon their withdrawal from such other societies. In regard to this matter the German Agricultural Co-operative Congress in 1905 resolved that "the simultaneous membership of one and the same person in several co-operative credit societies or similar institutions must, on principle, be prohibited by the articles of association. Exceptions require the expressed authorisation of the credit societies involved." It is, of course, the aim of a society to acquire as large a number of members as possible, and especially to attract the better-to-do inhabitants who are less likely to borrow than to bring substantial deposits. But there is no compulsion upon a society to accept any applicant nor to state reasons for his rejection. The word " unrestricted " — it may perhaps be explained — in the definition of a co-operative society as being " societies whose membership is unrestricted " does not imply that membership is open to every applicant, but merely that its numbers may not be permanently limited. Further, a society reserves to itself the right to exclude members who become insolvent, are in arrears for unduly long periods with payments on share capital, of interest due or of capital borrowed, or who in any serious way impair its general interests or prestige. Members who move out of the area to which a society confines its operations are usually called upon to resign at the earliest convenient date. In case of death membership is held to cease at the end of the year in which the member died, the membership being continued till that date by his legal heir. Every member may retire at the close of a financial year provided he has given due notice ; by the Co-operative Societies Act this period of notice may be fixed at not less than three months and at not more than two years. Actual commencement or cessation of membership obtains legal validity by the entry in or deletion from the list of members of a society, as kept at the proper district court, of the name of the person afi'ected. Detailed statements enumerating the various duties and rights of members of co-operative credit societies will be found in the model articles of association printed in the Appendix. Average Number of Members per Society. — The average number of members at the end of 1910 in 12,787 societies (82'1 per cent, of all rural credit societies) within the Imperial Federation was 94 as compared with an average of 87 in 10,999 societies in 1905 (83-4 per cent, of all those then existing). If the societies affiliated to the three Unions (the Treves, Baden and Wiirtemberg Unions), which are not attached to the Federation, are taken into account, we find the average number of members for 14,729 credit societies at the end of 1910 to be 97. Range of Membership. — The following Table shows the range of membership of all German rural credit societies according to the official returns relating to January 1st, 1910 :— Range of Membership. Total Number of With TTnlimited Liability. With Unlimited Contributory Liability. Wich Limited Liability. Societies. Members. Societies. Members. Societies. Members. Societies. Members. 7 8 to 10 ... 11 „ 20 ... 21 „ 30 ... 31 „ 40 ... 41 „ 50 ... 51 „ 60 61 „ 70 ... 3 39 531 1,047 1,443 1,582 1,389 ],304 19* 365 8,786 27,313 51,482 71,706 76,721 84,972 2 38 470 879 1,256 1,413 1,267 1,202 12 355 7,777 22,920 44,821 64,088 69,971 78,319 3 3 2 137 170 135 1 1 61 168 18V 166 119 100 7 10 1,009 4,393 6,658 7,481 6,580 6,518 * One society returned less than seven members (which is the legal minimum number for a co-operative society). 25574 E 66 PERSONAL CREDIT. Witli Unlimited With Unlimited With Limited Liability. Contributory Liability. Liability. Range of Membership, Sooietiea. Members. Societies. Members. Societies. Members. Societies. Members. 71 to 80 ... 1,068 79,200 1,009 74,771 1 72 58 4,357 81 , 90 ... 914 77,878 867 73,851 — — 47 4,027 91 , 100 ... 806 76,544 769 73,030 — — 37 3,514 101 , 125 ... 1,473 165,265 1,409 158,121 3 348 61 6,796 126 , 150 ... 1,013 139,157 972 133,585 1 128 40 5,444 151 , 175 ... 630 102,018 616 99,721 — — 14 2,297 176 , 200 ... 449 83,744 440 82,114 — — 9 1,630 201 , 300 ... 866 208,270 851 204,863 2 434 13 2,973 301 , 400 ... 231 79,395 227 77,952 — — 4 1,443 401 , 500 ... 100 44,254 95 42,026 — — 5 2,228 501 , 1000 ... 96 60,200 86 53,700 1 668 9 5,832 1001 , 2000 ... Totals ... 9 10,477 8 9,075 — — 1 1,402 14,993 1,447,766 13,876 1,371,075 16 2,092 1,101 74,599 Differences in Membership in Various Districts. — There are considerable variations in the a-verage membership of credit societies as grouped in provincial or State Unions in diiFerent parts of the Empire, which may be ascribed in large measure to the division of property that may happen to obtain and the consequent density or sparseness of popu- lation. The largest average membership in 1910 occurred in the societies of the Wormditt Union (East Prussia) which embraces a fertile district called the Ermland, occupied mainly by small and medium farmers ; the figure for this district was 190 for 70 societies. This Union was followed by that of Konigsberg (East Prussia) with an average of 174 members in 300 societies and by the Westphalian Union with 166 (535 societies). In the Rhine Province, the Coblentz Union showed 148 (389 societies), the Bonn Union 144 (114 societies), the Cologne Union 99 (543 societies), and the Treves Union (outside the Imperial Federation) 106 (346 societies). In the Administrative District of Hesse-Cassel the Cassel Raiffeisen Union returned an average of 129 (383 societies), the second Cassel Union an average of 96 (71 societies), the same figures for one Nassau Union being 124 (123 societies), and for a second (Raiffeisen Federation) Union 86 (176 societies). Outside Prussia the average for 407 societies in Hesse was 126 ; for 2,495 societies afiSliated to the Bavarian National Union 84 ; for the 249 societies (most of which are in the Palatinate and Hesse) of the Ludwigshafen Union (Raiffeisen Federation) 129 ; and for the 473 societies of the Nuremberg Union (Raiffeisen Federation) 86. In Alsace- Lorraine the average membership was 121 for 448 societies in the Strassburg Union ; and in Oldenburg 110 for 57 societies. In the independent Wiirtemberg and Baden Unions the averages were 113 for 1,141 societies, and 146 for 416 societies respectively. In practically all these parts of Germany small holders are in an absolute predominance, notably in Wiirtemberg, Baden, Hesse, the Palatine and Alsace-Lorraine, as well as in the Rhine Province, and the province of Hesse-Nassau. Societies with a smaller number of members are found in Brandenburg, where 476 societies in one Union show an average of 48, and 481 societies (in Brandenburg Pomerania and Mecklenburg) in another Union an average of 56 ; in Pomerania the average membership of 374 societies in the Stettin Union was 65 ; in the Proyince of Saxony for 641 societies it was 54, and in Schleswig-Holstein for 326 societies it was 63, In the Kingdom of Saxony the average for 256 societies was 58 ; in the Grand Duchy of Mecklenburg for 34 societies it was 33 ; and in the Grand Duchy of Brunswick for 1 55 societies 46. In these districts large and medium holdings predominate. Area of Operation of Credit Societies. —The area of operation of a rural credit society is strictly limited. As a rule, one large village or two or three small villages lying closely together are fixed as the area within which all members must reside. Raiffeisen considered that areas with a minimum population of 400 and a maximum population of 2 000 should be chosen. In 1890 the Congress of the present Imperial Federation of Co-operative Societies, to which the Raiffeisen Federation was then not a party, passed the following reso- lution with regard to the area of credit societies : — " In districts with a predominance of medium and small landholders co-operative societies for credit and supply should only be established, as a rule, for areas extending over a single commune, or at most one parish or a number of contiguous communew The establishment of such societies with a larger area is only to be recommended when, other conditions of landholding obtaining, some departure LOCAL CO-OPERATivE BANKS. 67 from this rule is called for on general grounds, or when otherwise no co-operative organisation of enduring vitality can be established." Agricultural credit societies almost without exception observe these limitations of area, although it is not possible to adduce statistical evidence bearing on this point. The Raiffeisen Federation, however, publishes details concerning the number of inhabitants within the area of its affiliated societies, which are established throughout Germany ; and these may be taken as fairly representative of Grerman rural credit societies. The following Table shows, for each of the three years 1908-1910, the number of these societies with ttie percentages found in areas containing the ranges of population indicated : — Total Societies Percentage in areas containing : — Up to 2,000 inhabitants Over 2,000 up to 3 000 inhabitants „ 3,000 „ 5,000 „ 5,000 „ 10,000 „ ,, 10,000 inhabitants 1908. 4,184 72 11-8 9-6 4-6 2-0 1909. 4,154 72 12 9 5 2 1910. 4,165 72 12 9 5 2 In 1908 the number of persons in the areas covered by 4,184 societies amounted to to 9,800,000, showing an average of 2,342 per society. But this average is raised above the normal by the inclusion of societies in large towns : thus there are included four societies in towns with over 100,000 inhabitants, 10 societies in towns with from 75,000 to 100,000 inhabitants, 16 societies in towns with from 20,000 to 7.5,000 inhabitants, aud 19 with from 15,000 to 20,000. The vast majority cover areas with under 2,000 inhabi- tants, 38 per cent, being established in those with under 1,000 souls ; and in those cases in which a society is established in a large town the area of the society is always confined to one narrowly limited locality within it. Objects of Limitation of Area of Operations. — This limitation of area constitutes one of the essential principles of co-operative rural credit societies. By this means a certain security is guaranteed. The members are intimately acquainted with each other : they know the means and capacity of each other ; they know that such an one is industrious and farms well, that another is intemperate or a bad farmer whose circumstances are gradually becoming worse. When loans are proposed, the management can thus gauge correctly not only the capacity for credit of the intending borrowers, but also how far they are deserving of them. Capable and hardworking members with little capital may be in this way helped without risk. Loans are most usually made on bonds backed by sureties. The latter being naturally for the most part relatives or friends of the borrower living in the same commune, the society can readily judge their financial soundness. The supervision of the use to which the loan is put is also facihtated, while the general management of the society can be observed by the members. If business is extended over several communes the cost of administration is increased, and the scrutiny of details is necessarily less eifective. When business becomes so large that it is necessary to employ a trained official or officials giving their whole time to the work, the societies can no longer work cheaply, as salaries and other expenses must be earned either by increasing the interest on loans or decreasing that on deposits. If loans become dear the principal reason for the exist- ence of a rural bank is destroyed. Banks with extensive business are also compelled to conduct that business on ordinary commercial lines. Loans for long periods, arrange- ments for easy repayments and other conveniences of essential importance to farmers that the rural society provides, cannot be provided by banks covering wide areas. The meetings of the committee of management and of the board of supervision are likely to be less well attended when distances have to be traversed to reach the meeting place. Representation on these bodies is also facilitated: complaints may well arise, when the area is large, that certain villages or communes are not fairly represented on the committee or on the board of supervision. Another important advantage of a restricted area is that savings deposits, which constitute the bulk of the working capital of these societies, are more conveniently lodged by members. In regard to area, the rural societies are distinguished from the co-operative credit societies established on Schulze-Delitzsch principles. The articles of association of the latter do not, as a rule, contain a provision determining any limited area within which members must live, and these societies may thus have a wide sphere of operations. The close supervision by the administrative organs of the employment of loans and an 26671 s 2 68 PERSONAL CREDIT. intimate knowledge of the circumstances of individual members, as well as the honorary management by the Committee, may be therefore rendered unattainable, with the result that the society must adopt the ordinary methods of a commercial bank with technically trained officials working on the ordinary banking lines as to acceptable security, length of periods of advances, commission, &c. Functions of Rural Banks. — The principal functions of rural credit societies are (1) to meet the needs of their members for supplementary personal credit or working capital ; (2) to promote thrift among the rural population by receiving their savings and paying interest thereon ; (3) to act in general as the village bankers. In the development of rural credit societies two main conceptions have emerged as to the proper limitations of the activity of such societies ; and the special points of view naturally find expression in the model articles of association issued by the great organisations. Those recently published by the Imperial Federation, of which Herr Haas is President, define the object of the society as " the conducting of a Savings and Loan Bank to foster banking and credit transactions as well as to promote thrift." In this view the society restricts itself to acting as the village banker without undertaking any further functions. But in another publication the Federation recommends that, in the absence of a special supply society in the locality, the credit society should also become the agency for the supply of agricultural requirements to its members. The model articles of association issued by the Raiffeisen Federation provide for more varied activities ; sections 2, 3, 4 run : — (2) "The object of the society is to procure the necessary capital for furnishing loans and credit to members, and otherwise to effect the betterment of their economic conditions, especially by (a) the purchase in common of farming requisites, {b) the preparation and sale of agricultural products and of the products of rural industry for members, (c) the procuring of machines and other objects of utility on their joint account for letting on hire to members." (3) "The society aims less at realising profits from its operations than at strengthening such o£ its members as are economically weak and at promoting their intellectural and moral welfare. Its activities must, therefore, extend to (a) the furtherance of thrift, {b) the accumulation of an indivisible common fund (foundation fund) for the advancement of the economic condition of members, (c) the organisation of means for the promotion of rural social welfare and of love of home, {d) the establishment of conciliation courts for the diminution of legal disputes, (e) vigorous opposition to such transactions in real property as are against the public good, and such participation in the relief of landed property from indebtedness as may be expedient, and (/) the holding of instructive lectures and the exchange of practical experience at the meetings of members." (4) " The society rests upon a Christian and patriotic foundation. At meetings and in all the activities of the society opinions and measures of a religious or political character are absolutely prohibited." Raiffeisen, whose general principles are expressed in these articles, may be said to have recognised only this kind of society. The individual rural society was not only to accept savings deposits and lend money to members for the purposes of their business, but was also to buy manures and other farm requirements, sell agricultural products, purchase and maintain machinery on the joint account of members, and, if advisable, carry on the business of dairying, buying and selhng cattle, &c. as part of its activity. This enlarged scope of the functions of the village bank, and the refusal on the part of Raiffeisen to acknowledge other societies, led at an early date to disagreements in German rural co-operation and to secessions from the Raiffeisen Federation. Other leaders held that the business of banking should be separated from other business which should be undertaken by societies independently constituted. Experience has, in part justified their contentions. Dairies and other co-operative undertakings requiring technical management and considerable capital cannot be suitably carried on as a mere department of a village credit society. As to the supply of agricultural requisites and the sale of agricultural products the principle of separation was laid down by the opponents of Raiffeisen, but has not proved realisable in practice, especially in regard to the supply of agricultural requisites. Trading in Agricultural Requisites by Credit Societies. — Not only the credit societies affiliated to the Raiffeisen Federation, but the greater number of those attached to other organisations act as the regular medium for the purchase of manures, feeding stuffs, &c. It may not be amiss to emphasisq^that only agricultural requisites are supplied, the sale of groceries and provisions, for instance, not being undertaken by these societies. In the LOCAL CO-OPERATIVE BANKS. 69 Kingdom of Saxony the most frequent title of these societies is " Savings, Credit, and Supply Societies." The model articles issued by the Bavarian National tJnion, which includes some 2,500 credit societies, state the object of these societies (apart from their deposit and credit business) as " the purchase from members of their agricultural produce and the supply of purely agricultural requisites, inclusive of machines and other implements to be obtained for hiring or selling to members." The Pomeranian and Saxon model articles also add as the third object, after the loan and deposit business, " the obtaining of agricultural requisites." The most important Union outside the Imperial Federation of Agricultural Co-operative Societies, namely, the Wiirtemberg Union at Stuttgart (with nearly 1,200 affiliated credit societies), states in its model articles for such societies that, apart from credit and loan business, they " may undertake on behalf of members the joint purchase of agricultural requisites as well as the joint sale of agricultural produce." But no reference is made to the extension of their functions to purposes affecting the moral, intellectual, or general social welfare of their members. On the other hand, the Baden Credit Union (425 societies), also independent of any other organisation, gives in its model articles larger scope for these societies : " The object of the undertaking is the conduct of a Savings and Loan bank. The society aims especially at procuring for its members the capital necessary for their business, as well as at facilitating the investment of money lying without interest ; and in this way, as well as by the adoption of other suitable measures, it aims at improving the condition of its members in every respect." Advantages of such Combination of Functions. — One of the principal difficulties operating against the creation of a separate agricultural supply society in a village in which a credit society is already established is the dearth of suitable men to fill the responsible offices in two societies. The advantages of amalgamation are, moreover, considerable. The credit society need not raise special capital in order to be able to carry on the business of a supply society as it either has cash at disposal, or, by reason of its credit at the co-operative central bank, can settle accounts through that agency. The recovery of sums due by purchasers is assured by the knowledge of the financial condition of members possessed by the committee of management. The small percentage added to the cost price by the society constitutes a useful source of revenue to meet the cost of management and strengthen the reserves ; and, when this business is large, enables perhaps the rates for loans and deposits to be respectively lowered and raised. This extension of business, of course, increases the work of the management. In most cases, ho^never, the society confines itself to collecting orders from members, transmitting these to the central trading society, advising members of the arrival of theii' goods, carrying out the necessary book-keeping, and recovering the payments from members on receipt of goods. When the society is very large, and the members make great use of these facilities for obtaining reliable commodities at reasonable prices, either additional remuneration is paid to the member who acts as secretary, or a store is maintained, the work in connection with which is often allotted to another member, who receives payment in return for his services. Sale of Agricultural Produce by Credit Societies. — As a regular part of their work the collection and sale of agricultural products by credit societies does not appear to have attained noteworthy dimensions, except in Bavaria, including the Palatinate, and, to a less extent, in Wiirtemberg. In Bavaria, where especially the business of co-operative corn selling has been energetically taken up by a number of these societies, there is a minimum of risk involved, owing to the support of certain great State departments which purchase supplies preferentially from co-operative societies. Individual societies were met with elsewhere by the writer which undertook for their members the sale of corn, cattle, eggs, and fruit ; but such transactions are in most cases merely occasional, and the societies, generally selling directly to their central trading organisations, are spared the pains and risk of finding a market. General Social Activities. — As may be observed from the quotation from the Raiffeisen model articles of association already given, rural societies of the Raiffeisen Federation aim not only at the material welfare, but also at the moral, intellectual and general social welfare of their members. Similar efEorts are made by other large groups of rural banks. Thus the model articles approved by the Westphalian Union (having 540 credit societies in 1912) lay down : " The object of the undertaking is the conduct of a Savings and Loan Bank (1) to facilitate the deposit of money and to encourage thrift, and (2) to grant loans to members for business purposes. The whole organisation and business of the association should be governed not by the desire for profit, but by the desire to help such members as are economically weak, and, with the view of improving the material welfare of members, especial attention should be paid 25574 B 3 70 PERSONAL CREDIT. to their moral elevation. To this end, regard should be had not only to the capacity for credit of intending borrowers, but also to their worthiness for credit ; before approval of loans their intended employment should be ascer- tained, and subsequently the application of same should be supervised so far as possible." The model articles for credit societies issued by the Bavarian National Union (2,500 credit societies) contain also a clause to the effect that the administrative organs of these societies should pursue such a policy that " by the supervision of the employment of loans, by accustoming members to punctuality, business habits and thrift, as well as by encouragement of public spirit their moral improvement may be effected," The same ideal objects are associated "nath the rural credit societies of other Unions, although their expression in the articles may not be so definite. Yet it must not be taken that undue prominence is attached to these aims. The essential objects are first and foremost to furnish rural dwellers with suitable means for depositing money and obtaining loans, and then to pursue less material objects as far as may be compatible with sound business achievement. German rural co-operation in all its branches is advancing steadily as regards commercial development, but many men who have lent no slight impetus to the co-operative movement are loth that the ideals which animated leaders like Raiffeisen should be entirely lost, and that rural co-operation should merely represent a form of business organisation. Achievements of Societies in this Sphere. — It is not without interest to enquire how far the co-operative credit societies do, in fact, endeavour to promote the general social, intellectual, and moral welfare of their members apart from that economic welfare which is their primary aim. As already noted, a very large proportion of the societies insert in their articles of association clauses to the effect that subventions from the profits of the society shall be accorded for the betterment of their members in these respects. The Eaiffeisen Federation instituted in 1908 an enquiry into these activities of its affiliated societies, and the reports received show the way in which measures towards such ends, either initiated or supported by the societies, had materialised. The returns showed ; — 1. For raising the level of Popular Education : — 458 libraries. 237 continuation schools. 96 "Raiffeisen" evening clubs. 23 juvenile clubs. 24 village institutes (meeting halls, &c.) 2. For the Benefit of Children : — 108 infant schools. 181 children's savings banks. 3. For the Sick : — 357 village nurses, 20 ambulance corps and Samaritan funds. 32 sets of surgical appliances. 4. For the general Benefit of Members : — 329 death benefit lunds. 103 cattle insurance societies. 109 accident funds. 13 sick funds. 5. For various objects of Public Utility : — 130 fire brigades. 49 telephone services. 20 veterinary pharmacies. 70 hearses. 53 cases where protection or help (veterinary and other) in the event of disease, &c., was afforded. 6. Appliances for use in Cultivation, on Steadings and in Barns : — 3,870 machines, implements and other agricultural equipment. As to actual amounts expended by these societies it may be stated, by way of illustration, that the oOO credit societies attached to the Raiffeisen Union at Breslau applied to these objects in 1911 a total of £1,557. But, as has been noted, schemes of this nature are not confined to the 4 200 credit societies attached to the Raiffeisen Federation. Societies visited by the writCT which were affiliated to other organisatioas had wietituted arMtration courts a^ hbraries • had provided for mambers telepholft servioes, -weighing machines, agricultural machinery and implements ; had furnished maps to schools ; supported local cattle shows ; given LOCAL CO-OPERATIVE BANKS. 71 money bounties to farm hands who had remained a certain number of years in the same service ; supplied co-operative papers free to members ; organised evening circles for reading and acting ; and held regular meetings in which instructive lectures on co-operation, agriculture and other topics were delivered. In Bavaria, Hesse and Baden, as well as in the case of the societies attached to the Unions established at Cologne, Miinster (Westphalia) and Treves, considerable attention is devoted to these activities. The General Secretary of the Hanoverian Union reported in 1912 that in the two previous years, as far as was ascertained, the societies affiliated to that organisation had contributed a total of £2,894 for various objects for the benefit of the members or of agriculture generally in the locality. In 1908, 1909 and 1910, one society granted £50 to the local agricultural association which had originally brought the society into existence ; and a second gave in the same years £30 14s., £37 10s. and £40 17s., to a similar local association. In 1909 and 1910 one village bank allotted £25 for the purchase of manure for distribution among its members. Hanoverian societies made grants also for continuation schools, village libraries, gymnastic societies, bathing establishments, singing societies, cattle and poultry breeding societies, fire brigades, cattle transport waggons, weighing machines, nursing sisters, churches (for bells, pulpits, general restoration), creches ; for the betterment of roads — one society gave £250 for this purpose ; subscriptions on the occasion of a mining disaster (a total of £320) ; to assist two struggling credit societies (total of £68) ; and for other numerous objects. The Pomeranian Union made an inquiry in 1911 among its affihated credit societies on the same subject. From the report by Herr Sparr it appears that, as regards : (1) existing public institutions : — 41 credit societies subscribed to public libraries. 26 „ ,, local nursing sisters or women and infant aid asso- ciations. 9 „ „ continuation schools. 2 „ „ for lighting the roads. 2 ,, „ . for providing church bells. 2 „ ,, towards a telephone service. And others subscribed to a bathing establishment, for heating church, for a cripples' home and to an anti-consumption society. (2) independent undertakings for the public welfare : — 3 societies have formed a general fund for public objects out of 25 per cent, of the annual profits. 5 „ „ established libraries. 4 „ „ „ telephone service in their villages. And other societies have severally acquired a medical chest, a surgical chest, a hearse, and musical instruments for the village school. (3) measures for the benefit of members : 28 societies have acquired one or more machines and implements of different kinds. Rural Banks as Credit Institutions. — The village banks aim at meeting the need for credit, especially for working capital, on the part of their members. Savings deposits are accepted from non-members as well as members, but loans may not be made to the former. The Co-operative Societies Act states that co-operative societies having as their object the granting of credit may not extend this part of their business to non-members, except when it is done by way of investment of idle funds. Agricultural Personal Credit. — It is of great importance that due account be taken, when working capital is advanced to agriculturists, of the special conditions of their industry. Money borrowed by them does not usually bring in a rapid return. Corn sown in autumn, after much ploughing and manuring of the land, is reaped in summer, threshed and sold perhaps some months later. If money required for the purchase of manures and seeds, the payment of labour, the keep of horses, the maintenance of machinery, &c,, is borrowed in whole or part, the return that it yields may not come in for quite a year. Money borrowed to purchase a calf is returned within perhaps two or three years, that is, when the animal is grown ; if a loan is employed to buy a foal an even longer period must usually elapse before any benefit from the purchase can be realised. Not only length of time necessary to the process of production or slowness of return upon expenditure, but also accidents of harvest, risk of disease, serious fluctuations in price, and other circumstances make the returns from the farming industry more uncertain than those in commerce and manufacturing industry. Agriculturists thus need long credits. Short credits of three months with renewals up to six or nine months, which are the practice in commercial life, do not meet their 26574 E 4 72 PERSONAL CREDIT. requirements. The co-operative societies of the Schulze-Delitzsch type use this method of short credits, which is perhaps one of the chief reasons of their failure to satisfy medium or small holders possessing little capital. But the rural credit societies are able to grant without difficulty loans for periods fixed according to the needs of the borrower, for one, two, three, five, even ten years, and to allow repayment by instalments. Other Sources of Credit for German Agriculturists : Public Savings Banks. — Before the institution of village credit societies, medium and small farmers possessed no regular convenient channel through which their temporary credit needs might be met. The public savings banks were at that time few in number, and the great bulk of their advances were only given on mortgage security. It was not their practice, nor were they organised suitably, to carry out efficiently the business of personal credit. Their number has immensely increased, and in recent years their scope of business has been enlarged, but their operations, in so far as personal credit is concerned, remain com- paratively restricted. The statistics of the Prussian Savings Banks for 1907, 1908, 1909 and 1910 show that only 1-78, 171, 1*65 and 1-61 per cent, respectively of the deposits were invested in advances on personal bonds, with or without surety, while for the same years only 0'71, 0-68, 0-75 and 0-93 per cent, of the deposits were advanced on bills of exchange. Further, of these totals for advances on bonds and by discount, amounting to roughly 2J per cent, of the total investments, probably not oue-half fell to landholders. In the same four years an average of 20"56 per cent, of the deposits was advanced on mortgages of rural property and an average of 39'26 per cent, of deposits was lent on mortgages of urban property, while an average of 23'86 per cent, was secured on stocks and shares. Urban Banks, Urban Co-operative Societies, and Dealers. — The banks established in the towns did not adapt their conditions to meet the needs of smaller agriculturists, who for the most part kept no regular banking account ; and the same was true of the bulk of the credit societies of the Schulze-Delitzsch type, with the exception of those in certain Eastern provinces where large landholders predominate. Circumstances thus compelled the smaller class of farmers to seek credit from dealers in the country towns or from the small bankers, often to be more correctly described as professional money- lenders. Such relations opened the way for the gravest exploitation of the economic position of the farmers. Not only was the credit dear, but it also led to the loss of independence. The extent and ravages of the usury practised upon them in various parts of Germany have been described by many writers, notably in the volume of the Association for Social Eeform entitled " The Personal Credit of Small Landed Proprietors in Germany," and in " Usury in the Country." Dealers were generally willing to make advances, but onerous conditions were attached. Interest of at least one to two per cent, above the normal rate was charged, its amount being deducted at once from the loan or credit allowed. Commissions were also charged in most cases. If renewals were granted, they were often only made at higher interest or on payment of a commission. When business transactions were carried on between farmer and dealer, the former was forced to accept prices below the current rates for his produce, and was likely to pay more than unindebted customers for manures and other farm necessaries. One writer reporting for Hesse speaks of dealers who, before granting a loan, would insist upon the borrower devoting up to fifty per cent, of its amount to the|purchase of commodities sold by them. In the districts where small proprietors predominate, as in Hesse, Wiirtemberg, Bavaria, Baden, and the Rhine Province, such exploitation was not confined to dealings in corn, manures and feeding stuffs, but was also rife in connection with property transactions and cattle-dealing. As to the latter an illustration of the methods in vogue may be given. In the West and South of Germany small landowners often obtained young animals from dealers at a certain price, but without paying cash, on the condition that they should feed the stock till ready for market. The dealers retained a lien on the animals and fixed the sale price, the difference between the first and second prices falling to the farmers, who bore the whole risk, during the fattening period, as well as the cost of feeding and tending the animals. In those cases in which animals were obtained with borrowed money, dealers were in a position to press other sales upon the borrowers by threatening to foreclose the loan. Rural credit societies have contributed more than any other factor towards the almost complete disappearance of these gross forms of usury. Excessive rates of interest and unfavourable conditions may still be imposed upon farmers, but those either of good standing or worthy of credit are able to obtain all necessary working capital on reasonable terms from the 17,OftO co-operative societies established and managed by themselves. At the end of 1910, 14,729 such societies, with a total membership of LOCAL CO-OPERATIVE BANKS. 73 1,445,900 persons had the immense total of £93,000,000 outstanding with members, of which £67,000,000 was lent for fixed periods and £26,000,000 took the form of overdrafts. The rate of interest most generally paid ranged from 4 to 5 per cent. Provision of Working Capital. — The principal aim of these societies is not to supply the entire personal credit needed by farmers, but rather to supplement it. Far less is it their purpose to advance money for permanent improvements, buildings, &c., from which the return on capital outlay is likely to be spread over a large number of years. Loans are granted, as a fixed general rule, only for current productive or provident purposes. Under the former heading would be classed advances to purchase stock, fertilisers, feeding stufi^s, machinery and implements, or to pay wages of workpeople, &c. ; under the second, advances to enable farmers to hold over cattle or corn instead of selling, through need of ready money, under disadvantageous market conditions. Loans may of course be granted in order to clear off debts or to reduce liabilities resulting from previous credit transactions. Thus members indebted for agricultural requisites and paying perhaps six or seven per cent, interest may be given loans to cancel their debts ; and societies frequently assist mortgagors by advancing money to pay off fixed mortgages at a high rate of interest, substituting repayment by instalments and a lower rate of interest. Mortgage Transactions. — Speaking generally, the German societies have confined their business to providing supplementary credit on personal security for productive or provident purposes. In some districts, however, especially in South and West Germany, many societies advance money on mortgage security ; and in some cases at the risk of unduly tying up their capital, the bulk of which is composed of deposits at three or six months' notice, this means of investing their funds has reached considerable dimensions. The chief motive of this policy is to secure better rates of interest ; they find that it is more profitable that such sums as are not required for loans to members should be invested in mortgages rather than sent to the central provincial banks. Four to five per cent, is readily obtained on mortgages, whereas only three to four per cent, is usually obtainable from the banking centre. The Prussian State Central Co-operative Bank pays only three per cent, for surplus funds deposited by the provincial central banks on behalf of their constituent societies, although these central banks have in fact to pay more to these societies. Mortgage security, in default of other sufficient security, is of course often demanded from members even though the particular loans may not be of the permanent nature of mortgage loans. Such " caution " or security mortgages, as distinguished from loans granted for more or less long periods for purposes that yield slow returns, e.g.^ for improvements in drainage, building operations, &c. are especially frequent in Hanover, Schleswig-Holstein, Westphalia, the Rhine Province, Hesse and Bavaria. Mortgage Loans in connection with Land Transfer. — Mortgage security is very frequently taken by the village banks when money is advanced for part or full payment for holdings in those parts of Germany where small holdings predominate. On the death of a small farmer, the property usually passes to, or is taken over by, one of his sons, who has to settle with other members of the family in cash ; and the necessary amount of ready money is borrowed from the village bank. In one Baden village the writer was informed by the keeper of the Registry of Title that about ten per cent, of the property in the immediate district changed hands in the course of a year. Under such and similar conditions of frequent transference of property in those parts of Germany where small proprietors predominate, the credit societies are afforded abundant opportunity for investing their funds in this way. Holders also who wish to increase their farms are frequently accommodated with the necessary advance. In both these cases the charging of the land with a " security " or " caution " mortgage is common. But loans made for these purposes are in most cases repayable in regular annual instalments, which are usually five or six in number and only rarely exceed ten. Societies find the business of advances for property purchases profitable, while the members obtain far better conditions than elsewhere, paying 4 J to 5 J per cent, with a commission of ^ to 2 (usually about 1) per cent., whereas interest at 6 to 8 per cent, with a commission of about 5 per cent, would be charged by other lenders in connexion with such transactions. No complete statistics are available showing how far loans on mortgage security are granted ; and the figures published do not generally distinguish whetlier such loans are pure mortgage loans or merely " caution " mortgage loans. The Imperial Federation obtained information on this head from the banks in less than half the Union districts that furnished reports for 1909 ; and this information was stated to be quite incomplete. It showed, however, that a total of £10,970,000 was lent upon mortgage security, plus £3,922,000 lent in respect of property purchases. Mortgage and property transfer business appears to be on the increase ; the totals supplied by those groups of societies 74 PERSONAL CREDIT. chat reported on these points both for 1905 and 1910 grew (for mortgages) from £4,599,000 to £8,803,000 and (for property transfers) from £2, 223,000 to £3,445,000. Land Purchase by Co-operative Societies. — The cutting up of larger properties into small holdings has also been carried out with good results by some rural credit societies. In such cases a mortgage charge is entered against the holding in the Registry of Title in favour of the particular society. When properties come into the market, land speculators, usually from towns, often buy and divide them, exploiting the " land hunger" of the small holders in order to obtain high prices. The prevalence of these transactions which tended to increase further the already heavy indebtedness upon small landed property, led the Bavarian legislature to pass an Act in 1910 by which special privileges in the way of purchase were given to co-operative societies in the case of property sales in rural districts (see p. 149 o£ this Report) ; and, as will be seen in the account of the Bavarian Central Co-operative Bank, which has formed a special department to deal with this business, it is anticipated that credit societies, in conjunction with it, will develop into important agencies for the transfer of landed property in Bavaria. The Erfurt Union has also recently established a similar land transfer department : in 1911 it dealt with properties of the total value of £5(j,000, and created 11 new small holdings. For an illustration of the procedure of rural credit societies in this matter the reader is referred to the reports upon the Savings and Loan Banks of Fischenich, near Cologne, of Elxleben and of Gross-Urleben, both in Thuringia, to be found appended to this section. Amount of Loans. — The majority of the loans granted by rural credit societies are for relatively small amounts. Particulars on this point covering all rural societies are not published, but the Eaiffeisen Federation furnishes information for over 4,000 of its afl&liated credit societies. The classification, according to amount, of loans outstanding at the end of 1908, 1909 and 1910 is shown in the following Table : — Amounts of Loan. Number of Loans outstanding at end of Percentage of Total Number. 1908. 1909. 1910. 1908. 1909. 1910. lTpto£5 Over £5 up to £15 „ £15 „ £25 . „ £25 „ £50 . „ £50 „ £100 . „ £100 „ £250 . „ £250 62,685 102,867 56,726 58,807 40,217 27,459 9,541 63,069 101,878 57,756 61,005 42,731 30,302 10,539 61,070 102,556 59,176 63,889 44,764 32,814 11,749 17-5 28-7 15-8 16-4 11-3 7-6 2-7 17-2 27-7 15-7 16-6 11-6 8-3 2-9 16-2 27-5 15-7 16-9 11-9 8-7 3-1 Total number of loans ... 358,302 367,280 376,018 100-0 100-0 100-0 Number of societies re- porting. 4,223 4,154 4,165 — — — It will be noted that the small accounts are by far the most numerous. In these years about 45 per cent, of the loans outstanding were for sums up to £15, and in a further 16 per cent, for sums exceeding £15 up to £25. Three-quarters of the total number of loans were for sums not exceeding £50. The loans for £250 and over, and also for those over £100 to a considerable extent, are often made in connection with land purchase, settlement with co-heirs, or mortgage transactions for investment purposes. There appears to have been a notable increase in the large accounts between 1908 and 1910. No Statutory Limit to Amount of Loan by Societies. — No English agricultural credit society established under the Friendly Societies Act — all existing English societies have been registered under this Act — may grant on loan to any member, to be held at any given time, a total exceeding £50. In this respect German societies are only restricted to the extent that every society must fix for each year at a General Meeting the maximum of the total advances that individual members may hold at any one time. By virtue of this facility every society is enabled to adapt itself to the needs of its members and to the state of ctevelopment of its own resources. In illustration of this point may be cited the limits set by 376 Pomeranian credit societies (all of which possess XOCAL CO-OPERATIVE BANKS. 75 limited liability) to the credits that might be granted to individual members ic the year 1911 : the maximum was fixed by — 103 societies at up to £500. 130 „ over £500 to £1,000. 107 „ „ £1,000 to £2,500. 27 „ „ £2,500 „ £5,000. 9 „ „ £5,000 ,, £10,000. The actual amount of credit extended to individuals by German societies is of course dependent on each particular case : on the standing and character of the applicant and the security he can give (whether sureties or other). In the Pomeranian and Prussian Saxon societies with limited liability each member is normally entitled to a fixed credit without further security on the basis of his share holding in the society ; in the majority of societies with unlimited liability each application for a loan is separately examined by the committee. No unsecured credit is given to individuals by German co-operative societies ; and under the Act loans may be granted only to members. Form of Loan. — Loans are granted most usually on promissory note or personal bond (Schuldschein) backed by two or more sureties. The rules of most societies require at least two sureties, and in many cases societies only accept one surety, say per £50 of loan, considering that in case of default it is sufficiently onerous on a surety to be obliged to make good such an amount. New loans numbering 91,191 to the value of £4,864,642 were granted in 1910 by the 4, 165 societies of the Raiffeisen Federation, and the security furnished was reported as follows : — t;, r q -i. Number of Amount of rorm oi oecunty. j ^ Loans. Sureties Mortgage Sureties and mortgage Pledging of mortgage Other security . . . No specified security* Total Loans. £ 65,727 ... 2,573,914 18,187 ... 1,805,935 2,346 ... 182,251 claims and scrip 2,832 ... 222,027 1,939 ... 77.728 160 ... 2,787 91,191 ... 4,864,642 In the limited liability societies in Pomerania and Prussian Saxony borrowers sign a bill entitled sole-bill. These bills, which run for three years, are not negotiated, but remain with the society until the debt is cleared. No sureties are normally required when the credit extended does not exceed three-fourths of the liability undertaken by the borrower in respect of his share holding in the society ; for credit in excess of that amount sureties or other security must be forthcoming. Object of Loan. — The purpose for which the loan is required is usually asked by the Committee, and is usually entered in the minutes of the transaction. Many of the more developed societies do not, however, ask this question, being only concerned with the standing of the borrower and of his sureties. Period of Loan. — Loans are granted by rural societies for at least a year : in most cases probably they run up to two, three, or five years. Loans for longer periods are, however, fer from rare. According to returns received by the Kaiffeisen Federation in respect of 91,191 loans granted by its affiliated societies in 1910, 14,903 loans, of a total value of £563,925, ran for periods not exceeding one year ; 69,410 loans, aggregating £3,588,989, from one up to ten years ; 3,482 loans, of a total value of £429,635, were for over ten years ; 3,396 loans, for £291,096 in all, were repayable by annual sinking fund instalments equal in amount to the stipulated interest. But for their protection societies reserve the right to recall loans granted under any form of security at from four weeks to three months' notice : the latter is that by far the most usually given in practice. . Repayment of Loans. — Easy terms of repayment are a distinguishing feature of Raiffeisen societies. Borrowers are rarely obliged to repay the whole loan in a lump sum, but are allowed to repay in regular annual (or six-monthly) instalments. When arranging for loans borrowers submit to the committee the length of time for which they require them, and their proposed method of repayment. So far as the experience of the writer went, the most usual plan is to fix the annual (or six-monthly, but far less frequently) instalment at equal amounts based on the number to be effected : thus if a loan is * Jjoans to public bodies, &c, 76 PERSONAL CREDIT. repayable in five years, an annual repayment of one-fifth is due from the borrower ; if in four years, of one-fourth. Committees insist rigorously upon the punctual keeping of the terms of the contract, unless it is clearly shown that special circumstances have adversely affected the income or expenditure of the borrower. Thus in the case of a drought such as occurred in 1911, which compelled German farmers to incur unusual expenditure upon feeding stuffs, extension of periods of payment would be allowed as far as the resources of the credit society would permit ; or in the case of the outbreak of foot and mouth disease, which also ravaged many districts in 1911, a postponement of the sinking fund payment would be allowed to those who were direct sufiferers. But while such remission is granted no society permits borrowers to postpone the payment of interest, or the addition of arrears of interest to the capital sum. On the other hand, it is always permissible to anticipate repayment wholly or partially ; most societies require, however, a certain period of notice — usually one to three months — of such intention. Relation of Repayments to Fresh Loans. — In 1910, 13,365 societies granted loans for fixed periods of £16,910,300, and were repaid £10,990,000 in respect of such loans due to them ; in 1909 the corresponding figures for 13,030 societies were respectively £15,076,000 and £9,270,000. That is, roughly, two-thirds of the value of the fresh loans for fixed periods were repaid in these years. Taking separately the loans of the societies of the Raiffeisen Federation (included in the foregoing), 64 per cent, in 1910, and Q7 per cent, in 1909, of the value of fresh loans was covered by repayments. Interest charged for Loans. — So far as could be ascertained by the writer the rates of interest for loans charged by rural societies range generally from 4 to 5 per cent. Exact information on this point covering all societies is not published, but the rates charged by the 4,000 societies of the Raiffeisen Federation in 1908, 1909 and 1910 for loans on promissory notes, mortgages, and title deeds, show an overwhelming predominance in the rates not exceeding 5 per cent. Rates from 3J to 5 per cent, inclusive were charged by 86 per cent, of the societies in 1908, 95 per cent, in 1909, and 95*9 per cent, in 1910. Seventy-two per cent, of the societies in 1 908, 76 per cent, in 1909, and 76*6 in 1910 charged rates ranging from 4 to 5 per cent. Money being more abundant in 1909 and 1910 the rates for deposits and for loans were rather lower ; in 1909 only 1"2 and in 1910 0*9 per cent, of the societies charged 5^ per cent., and over, but in 1908 5*2 per cent, had charged such rates. A commission on the amount loaned is charged in addition by a considerable proportion of the societies : for the great bulk of them it is small in amount, -^^ ^, or |- per cent, (most usually -^-q) on loans on bonds and caution mortgages, but when money is advanced on title deeds {Kaufschillinge, Giiterzieler) a commission of about 1 per cent, is usual. Relative Cheapness of Rural Co-operative Credit. — The rates quoted show that members of rural credit societies usually obtained capital at from 4 to 5 per cent, in these three years. Even in times of dear money, such as prevailed in 1907, they were able to borrow at low rates. The rates charged for loans on bonds with sureties in that year by the societies in Silesia which were attached to the Breslau Raiffeisen Union, as well as by those which were attached to the Raiffeisen Unions in Berlin and Cassel, may be cited in illustration : — Souieties in Bates for Loans, Silesia. (Breslau Union.) Brandenburg, Mecklen- burg, and Pomerania, (Berlin Union.) Hesse-Cassel. (Cassel Union.) Up to and including 4 per cent. 4i per cent. 4.1 aj „ „ 5 „ „ 5; ,, ,1 0-^ „ „ ••• •••• 5| „ „ Over 5| per cent 65 39 189 37 87 5 21 3 1 55 16 181 27 75 11 31 3 3 88 42 136 31 54 2 2 4 Totals 447 402 359 The average for the Silesian societies was 4-6 per cent. Yet the Imperial Bank Rate rose to 7 per cent., showing an average for the year of 6'04 ; and the current market rate for some time was 7 to 8 per cent. Sfhe Breslau Union reports that at the end of 1907 the outstanding loans of the societies amounted to nearly £2,350,000, and that, allowing a tOCAL CO-OPERATIVE BANKS. if difierence of 1^ per cent, between this average rate and the current average rate, the total saving to borrowers in interest for the year would amount to about £30,000. " As a fact the saving must have been still greater : for in that period of tight money no private individual obtained money at the discount rate, at least 1 per cent, above it being paid in addition to the usual commission charges." The rural banks are in a position to provide this cheap credit, even in times of stringency, by reason of their large deposits, their non -speculative business, their com- petence for supervision, their low cost of management, the absence of aim at high dividends, their organisation (provincial central banks. State or other large banks), and, of course, the good eventual security offered by borrowers, who are for the most part landholders. Current Account Business. — Eural societies are developing their loan business on current account ; at the end of 1910 such loans, granted by societies attached to the Imperial Federation, amounted in value to about 28 per cent, of the total loans outstanding. In the societies with limited liability in the Prussian provinces of Saxony and Pomerania most of the loans take the form of overdrafts — in 1910 in the former province £2,085,000 was paid to members on current accounts as against £247,000 in loans for fixed periods, the corresponding figures for the Pomeranian societies being respectively £1,760,000 and £17,600. As regards societies with unlimited liability those attached to the Provincial Union in Silesia only lend by way of overdrafts on current accounts, 738 societies having thus outstanding with members at the end of 1910 a total of £2,849,100 ; in the Brandenburg Union with 476 societies the figures were £1,515,000 as against £393,600 in definite loans ; in one Posen Union with 294 societies £1,361,000 against £176,300 ; in the Palatine Union with 267 societies £1,081,600 against £448,800 ; and in the Oldenburg Union with 57 societies £299,500 against £144,300. Compared with 1905 the total payments on current account in 1910 to members of the rural banks attached to Unions within the Imperial Federation (within these years such banks represented from 82 to 83*4 per cent, of all existing (ierman rural credit societies) showed an increase of over 100 per cent, (from £16,679,500 to £34,130,594), the average amount per bank and per member in 1905 being £2,148 and £24, and in 1910 £3,036 and £35. As to loans for fixed periods, the total increased from £10,792,900 in 1905 to £15,539,559 in 1910 or about 45 per cent, with an average amount per bank and per member of £1,122 and of £12 in the former and of £1,599 and £15 in the latter year. Repayment of Loans on Current Account. — Care is taken to prevent loans on current account, that is, overdrafts, from becoming in fact standing loans. The rules of most societies holding current accounts with members provide that a certain percentage at least of the overdraft must be repaid into the account within each half-year or year, and that if such payment is not effected, the whole amount may be called in at once, the credit reduced, or the rate of interest raised. Societies find that under the rules adopted for their current account business they are afforded not only a better insight into the financial position of their members, their incomings and outgoings, but that their own resources are also maintained in a more liquid state. On reference to the Table on page 100 it will be observed that payments to members and payments by members on current accounts in each of the six years 1905-1910 were maintained in satisfactory relationship. Stimulation of Thrift by Rural Credit Societies. — Credit societies, which, it may be noted, bear almost universally the double title of " Savings and Loan Bank," aim at stimulating the practice of thrift. It is their first interest to do so, the success of their work as lenders being largely dependent upon their success in attracting sufficient deposits. Not only are members urged to bring in their savings, but the savings of non-members are also welcomed ; and efforts are made to reach all ages and classes in the district. Farm hands and servants are recommended by masters to deposit part of their wages with the society ; teachers in schools distribute savings books ; savings boxes are given out 6*66 of charge ; and in many cases societies employ collectors who make weekly visits to houses for the sale of savings cards of different denominations (from Qd. up to 5s.). At Arheilgen in Hesse, which was visited by the writer, the society paid £20 a year to a collector, who, assisted by two sons, sold each week cards to the total value of between £45 and £50. At another village (Grriesheim) near Darmstadt two collectors are paid £10 each per annum for the same work ; in 1908 they sold cards to the amount of £3,850 in this manner. This plan of obtaining deposits has been especially developed among the societies attached to the Hessian Union; in 1908 a total of £114,000 was thus obtained by some 180 societies, this sum representing 10 per cent, of the total deposits held at the end of the year by the 402 societies in this Union. Savings Boxes. — Owing to the success of the savings boxes distributed by many credit societies and public savings banks, the Pomeranian Union of Agricultural Societies, 78 PMSONAL CBEDlT. considering that those on the market were too costly (2s. to 7s.) to come into general use, arranged for the manufacture of small savings boxes. These were sold cheaply (for 2J(i.) to affiliated societies for introduction into their respective localities. They met with great success and have been circulated among societies throughout Germany. In three years, 1908-10, about 250,000 were sold by the Union ; during 1911 over 200,000 were ordered. The boxes are usually distributed by the societies gratuitously among children. When at least one mark (one shilling) has been collected in the savings box it may be brought to the secretary of the society to whose charge the keys of the boxes are entrusted. He opens the box, extracts the contents, credits the amount in a savings book, fastens and returns the box to its owner. Advantages as Savings Banks. — Convenience. — Among the advantages offered to the rural population by these societies in their functions as savings banks are proximity, almost absolute security, and adequate interest. Although there are about 3,000 public savings banks, besides numbers of other deposit banks, they are mainly situated in places with over 3,000 inhabitants, and thus cannot adequately serve the rural population, while the 17,000 rural credit societies reach the small villages. It is true that there are about 6,000 receiving agencies in connection with the public savings banks, but the importance of these agencies is not considerable, the representatives of the banks being persons with other principal occupations (teachers, parish officials, tradespeople, &c.), and in many districts it is a debated subject as to whether the deposits obtained by them are remunerative. Accordingly, by utilising the services of the rural credit society the country depositor saves not only a good deal of time, but also the cost of the journey to the nearest town and other necessary or incidental expenses which may reduce to very little the balance obtained in interest. Before village banks were widely established, the idea of depositing at interest was unfamiliar to the majority of country dwellers ; and the societies have thus not only spread the idea of money being itself an instrument for the acquisition of further wealth, but have provided suitable means for its realization. Money was previously either hoarded in the farmhouse, or was only deposited, perhaps at considerable intervals, in the nearest savings bank, so that even when money was so deposited, not a little interest was usually sacrificed by retaining money till a suitable occasion arrived for its deposit. Deposits may be lodged with the vast majority of country credit societies at almost any time ; in the case of most of the numerous societies visited by the writer the secretaries were willing to accept deposits whenever they were at home (the offices of these societies are mostly in the houses of the secretaries). The times most favoured by depositors appeared to be the mid-day interval, the evenings, and Sundays from twelve to two. Some societies fix certain hours on one or two days in the week. Safety of Deposits. — The security of depositors' money is safeguarded (a) by the fact that the society confines its operations to a small area and to simple well-secured transactions ; (6) by the fact that its management is controlled by the board of supervision ; (c) through a general knowledge of the affairs of the society being common to the bulk of the members ; (rf) through regular outside audits ; and (e) finally, if all these safeguards should fail, through the individual and collective liability incurred by the members. This liability is unlimited in the case of 92 per cent, of the rural credit societies, while, when limited liability is adopted, although members are only liable up to the fixed amount attached to each share held by them, the committee of management is boun^ to move for the opening of proceedings in bankruptcy when the indebtedness of the society as disclosed in its balance sheet exceeds the assets by a fourth of the total amount of the collective liability represented. This provision serves as a safeguard against the ultimate non-recovery of claims. The further legal provision that the total amount of the savings deposits that may be accepted and of the loans that may be contracted by a society, as well as the limits of the totals of the advances that may be granted to individual members, must both be fised each year by the general meeting of the members, prevents the extension of business beyond the collective solvency of the members composing the society. It has been the boast of German rural societies of the Raiffeisen type that no money has ever been lost by them ; this statement has not meant that the societies, as such, have not lost money on rare occasions by fraud on the part of officials and by loss of interest, or of capital advanced, but that depositors or creditors have never lost their money. When sureties, or other security taken for loans, were insufficient to meet the debt of a defaulter, the ordinary assets, such as reserves and share-capital, were drawn upon, and, finally, the liability of members, when realised, always proved adequate. This boast has remained justified to the present time ; as regards depositors, one eminent Union director with a long and special experience pf credit societies remarked to the writer that no case had come to his knowledge in which depositors in rural credit societies had suffered loss. LOCAL CO-OPER'ATIVB BANKS. 79 Amount of Savings Deposits. — The savings deposits held by 14,729 credit societies at the end of 1910 amounted to £92,429,100, showing deposits per society and per member of £6,275 and £64 respectively. It must be recalled, however, that the deposits of non- members with these societies are included in the total. Some societies receive very considerable deposits ; one society visited by the writer which was attached to a RaifFeisen Union showed at the end of 1910 a total of £116,727,. another, also within the RaifFeisen Federation a total of £48,715 ; the average per society for the 4,165 credit societies of this Federation at that date was £6,460 as against £5,998 for 4,154 societies in 1909. In some provinces the average of the savings deposits per society is considerably greater ; thus for 1910 the average for the 454 credit societies affiU&ted to the Hanoverian Union was £10,668 (in 1909 £9,697 for 434 societies) ; for 535 societies in Westphalia £18,015 (1909, £16,838 for 533 societies) ; for 114 societies in the Bonn Union £19,023 (1909, £17,273 for 113 societies); for 389 societies in the Coblentz Union £10,179 (1909, £9,775 for 389 societies) ; and for 70 societies in the Ermland (East Prussia) Union £25,324 (1909, £22,397 for 70 societies). As to the amount of individual savings deposit accounts no comprehensive statistics are available. The following Table shows, however, for the societies in Pomerania and Westphalia, two provinces with widely divergent conditions especially as regards land- holding, mining and manufacturing industries, and density of population, the ranges of their savings deposit accounts at the end of 1910 (and also of 1911 in the case of Pomerania). It may be noted that all the Pomeranian societies have adopted limited liability, and all the Westphalian societies unlimited liability. Pomeranian Credit Societies. Westphalian Credit Societies. Number of savings deposit accounts. Number of savings deposit accounts. 1910. 1911. 1910. £ S. £ S. Up to 1 ... From 1 to 2 10 „ 2 10 „ 5 „ 5 „ 15 „ 15 „ 25 „ 25 „ 50 Over 50 17,572 10,342 8,424 13,813 5,617 5,710 6,814 17,934 10,891 9,223 15,211 6,397 6,320 7,945 £ s. £ s. Up to 10 ... From 10 to 1 „ 1 „ 2 10 „ 2 10 „ 5 „ 5 „ 10 ... „ 10 „ 25 „ 25 „ 50 Over 50 ... 29.820 18,372 26,190 23,589 29,595 41,487 30,824 45,514 Total number of accounts ... 68,292 73,921 Total number of accounts... 245,391 Total savings deposits £1,357,300 £1,574,500 Total savings deposits £9,638,400 Number of societies 372 376 Number of societies 535 Average per society £3,649 £4,187 Average per society- £18,016 In both these provinces the depositors of over £25 form a noteworthy percentage of the total number, but the figures show prominently to what a remarkable extent these societies are utilised by small depositors. In this Table are given only the savings deposit accounts held by the societies ; they do not include deposits by members on current account, which, it may be stated, amounted in the Pomeranian societies at the same dates to £462,275 and £529,025 respectively, and in the Westphalian societies to £564,043. Interest paid on Deposits. — The rate of interest paid by the societies is largely influenced by the rate paid by the public savings bank in the neighbourhood. It exceeds that rate as a rule by from J to one-half per cent., although public savings banks now tend to accord more generous rates than formerly. The average rates paid in 1908 and 1909 by all Prussian savings banks were 3"45 and 3'49 per cent, respectively. Figures showing the rates of interest paid on deposits are not available for all rural co-operative credit societies in Prussia, but 4,219 of the credit societies attached to the Kaiffeisen Federation paid in 1909 rates ranging from 3 to 5 per cent., as compared with rates of from 3 to 5^ per cent, paid by 4,154 similar societies in the previous year. The percentage classification of societies in the RaifEeisen Federation according to the rate of interest paid in 1908, 1909 and 1910 is shown in the following Table : — 80 PERSONAL CREDIT. Rate of Interest. Percentage of Societies paying the rates of interest stated. 1908. 1909. 1910. 3 to 3| inclnsiTely (at S\) Over 3i to 3| inclusively »» ^z it ^ )> 4 4i i> ^3 ... ... ... 30-8 (21-8) 20-5 32-9 12-6 3-2 46-5 (SI -4) 21-6 25-0 6-2 0-7 48-3 24-5 5-3 0-4 100-0 100-0 100-0 The public savings banks, as has been stated, paid averages of 3-45 and 3-49 per cent, respectively in the tvro years given above ; the above figures for over 4, 100 credit societies, which in this respect may be taken as fairly representative of all rural credit societies, show, therefore, higher rates in 91-0 per cent, of the cases in 1908 and in 84-9 per cent, of the cases in 1909. Eates exceeding the average rates of the public savings banks by up to ^ per cent, were paid by 53-4 per cent, of the societies in 1908 and by 46*6 per cent, of the societies in 1909. In 1910 51*7 per cent, of the societies paid over 3g per cent, interests on deposits. The general lowering of the rates paid by these co-operative societies in 1909 was due to the abundance of money which compelled their central bank to reduce rates, and thus made it necessary for them in turn to lower their rates ; in 1910 deposits being again abundant, a further decline is observable. It is noticeable that the rate of interest paid by co-operative societies in the Eastern and North-Eastern provinces tends to be higher than in the remaining parts of Prussia and indeed of Germany. Out of the 235 societies in the Raiffeisen Federation which paid over 4 per cent, in 1910, 186 belonged to the two Unions in East and West Prussia. The societies of the Pomeranian Union, which is uot affiliated to that Federation, paid 3^ to 4 per cent, for savings deposits (as well as for deposits in current account) in 1910 and 1911. In the West and South of Germany rural co-operative societies tend to allow about ?)\ to 3| per cent. The competition of the public savings banks, which, as a rule, possess the guarantee of the district or town in which they are established and are authorised to take trust and other monies on deposit, is keenly felt by the societies. Latterly also these public banks have adopted a more active policy. A large number advertise regularly for deposits in the newspapers not only of their own, but of more remote localities, and many have extended their business in new directions, such as by the opening of current accounts, the issue of cheque bDoks, and discounting of bills, &c. (For Public Savings Banks, see pp. 39-50.) Collective Liability as Credit Basis. — It was the distinctive merit of the founders of modern German co-operation to have introduced into business a new form of financial security, namely, the collective liability of persons as organised in a co-operative society. Raiffeisen considered that this unlimited collective liability was adequate to secure from outsiders, whether bankers, members, or non-members, or depositors, the advances required, without any further share-capital. His opinion has been so far justified that rural societies continue to obtain over 95 per cent, of their working capital on this collective liability, whether unlimited, as in the case of 92 per cent, of the rural credit societies, or limited. The Prussian State recognised its validity by building up its system of credit for co-operative societies upon the foundation of the liability undertaken by members. But Raiffeisen did not fail to see that it was advantageous for societies to possess in addition visible resources upon which credit might be obtained. His indivisible foundation fund and the reserve fund had &i their object the formation of adequate assets, so that in time the society might be free from the necessity of using its collective liability as its only basis of credit. The urban societies of the Schulze-Delitzsch type have laid great stress from the beginning upon the creation of considerable share-capital : they adopt shares of high nominal value and insist upon regular instalments until full payment has been reached unless adequate capital is otherwise obtained. Increased Need for visible Capital. — The increase of co-operative business and the consequent increased influence of commercial principles in co-operative circles, combined with the general substitution oPthe use of currency for barter and payments in kind in. rural districts, have made more clear the desirabihty of possessing sufficient share and LOCAL CO-OPERATIVE BANKS. 81 reserve capital as distinguished from loan capital. Most of the leaders of the movement exercise their influence in this direction, and the Prussian State Central Co-operative Bankfhas issued special recommendations to the societies on the point (see Appendix). Before proceeding to discuss the question of working capital, it is perhaps advisable to consider the all-important matter of liability. Liability. — The financial basis of credit societies is the collective liability of their members ; and it is open to them, as to all co-operative societies, to choose one of three forms : unlimited, unlimited contributory, or limited liability. The following Table kindly furnished to the writer by the Imperial Federation, shows the distribution of rural credit societies in the German Empire, according to the nature of the liability adopted, on June 1st, 1912 :— Table Showing the Distribution according to Liability of the Rural Credit Societies in the German Empire on June 1st, 1912. Number of Credit- Number of Credit Societies with. Total. Societies with. If Unlimited Contributory Liability. 13 >. -S3 t3 ,■ Unlimited Contributory Liability. Total. Prussia. Mecklenburg- East Prussia 401 — 6 407 Strelitz 12 — 2 14 West Prussia 286 — 5 291 Saxe-Weimar Brandenburg ... 774 10 36 820 Eisenach 131 — 2 133 Pomerania 139 — 369 508 Oldenburg 119 — 5 124 Posen 544 — 24 568 Brunswick 151 3 4 158 Silesia 1,649 1 15 1,665 Saxe- Meiningen 56 — 1 57 Saxony 126 — 614 740 Saxe - Altenburg 42 — 5 47 Schleswig- Saxe-Coburg- Holstein 351 — 9 360 Gotha 59 — 9 67 Hanover 477 2 27 506 Anhalt 1 — 32 33 Westphalia 470 — 15 485 Schwarzburg- Hesse-Nassau ... 804 — 17 821 Sonderhausen 28 — — 28 Rhine Province 1,449 1 13 1,463 Schwarzburg- Hohenzollern ... 48 — — 48 Rudolstadt ... 17 — 4 21 Walrlfifk 42 1 4^ Prussia 7,518 14 1,150 8,682 TV cliU,0^ii. ... Reuss Older JL TiJ Line 7 — 1 8 Bavaria. Reuss Younger Right of Rhine... 3,333 1 24 3,358 Line 13 — 1 14 Left of Rhine Schaumburg- (Palatinate) ... 494 - — 3 497 Lippe 2 — — 2 Lippe tiubeck Bremen 10 3 13 2 Bavaria 3,827 1 27 3,855 2 — 1 — 1 2 Saxony 298 1 15 314 Hamburg 4 — 2 6 Wurtemberg 1,274 — 10 1,284 Alsace - Lorraine 680 — 3 683 Baden Hesse 540 510 4 8 544 518 __ German Empire 15,664 19 1,291 16,774 Mecklenburg- = 92-2 = 0-1 = 7-7 = 100 Schwerin 120 ~ 1 121 per cent. per cent. per cent. per cent. Unlimited liability has, therefore, been adopted by over 92 per cent, of these societies. Comparing this percentage with the corresponding figure for other principal groups of registered agricultural co-operative societies it may be observed that at the same date 53" 7 per cent, of supply societies, 65*8 per cent, of dairy societies, and 29'7 per cent, of societies of all other kinds had chosen this form of liability. Pomerania and Prussian Saxony are distinguished in that 76 per cent, of all German rural credit societies with limited liability are established in their area. Meaning of Unlimited Liability. — In a society with unlimited liability the members, over and above the liability to pay in full the nominal value of the obligatory single share — only one may be taken — undertake liability for the engagements of the society to the society and to its creditors directly, to the extent of the whole of their property ; and this liability is individual and collective. In the event of bankruptcy any deficit is recoverable by a per capita levy upon the members. Proceedings by creditors against individual members for the enforcement of claims against the society are, under the 25574 r 82 PERSONAL CREDIT. Co-operative Societies Act, only permissible when, after the lapse of three months from the date on which the contributory levy upon members is declared executable, such claims have not been satisfied. In the ordinary course this period would suffice for the society to make arrangements with its creditors. But should judgment be obtained by a creditor of the society against any member, the latter retains his right to sue the society for restitution of the amount he has been compelled to pay. He becomes a creditor of the society, and if ultimately his claims are not duly met by the society, he may proceed against any other solvent member or members. A further form of unlimited liability, which was introduced by the Act of 1889, is entitled unlimited contributory liability. The position of societies adopting this form differs in no way from those possessing ordinary unlimited liability except in case of bankruptcy. In that event the property of individual members of a society with the latter form of liability, as has been shown in the preceding paragraph, may, after three months, be individually attached by unsatisfied creditors, whereas, when unlimited con- tributory liability has been adopted, per capita contributions may be levied, but no direct proceedings against single members may be taken by creditors. Detailed pro- visions concerning bankruptcy procedure in the case of these societies may be read in the Co-operative Societies Act (see Appendix) ; it may be noted here that contributions not recoverable in the first or subsequent levies from individual members owing to their insolvency are to be distributed in equal amounts over the remaining members. But in considering German co-operation this form may be disregarded, since it has been adopted by only one-tenth of one per cent, of all credit societies existing in 1912. The possibility of such lengthened and tedious procedure for enforcement of claims being obviously not calculated to improve the credit of societies, the disinclination to adopt this form of liability may be readily understood. Meaning of Limited Liability. — In a society with limited liability a member under- takes, over and above liability for the'payment in full of the nominal value of the share or shares held by him, a liability for the payment of a fixed sum on each share held. The amount of this fixed sum, constituting the liability attaching to each share, as well as the maximum number of shares that may be held by a single member, must be determined by the general meeting of members upon the establishment of the society, and must be stated in the registered articles of association. The" amount, as well as any alteration of the amount, must be duly published. Any increase requires for its legal validity the sanction of three^fourths of the members present at a general meeting convened in due form ; and further provisions on this point may be included in the articles. Statutory provisions have also to be observed in regard to any reduction of this share-liability ; thus, notice must be published three times in the papers fixed by the articles of the society for its usilal notifications, creditors must be informed, and have the right to claim settlement, and if not satisfied refuse their assent, &c. Moreover it is legally provided that the annual balance sheet must show the number of members the amount by which the paid up share capital, and the total amount of the liability incurred by all members, have increased or diminished during the financial year, and must state the total actual liability represented at its close. Such precautionary measures are necessary for the protection of third parties, because the basis of credit of a co-operative society is the amount of the collective liability undertaken by the members. No member may take up 'an additional share before his previous share or shares have been paid up in full ; and upon each share taken up a member incurs a distinct and fresh liability for the amount determined in the articles of association as share liability. Thus the nominal value of a share being fixed at 10s. with a liability of £o a member holding ten shares undertakes over and above liability for £5 in respect of the total value of the ten shares, a further liability to the extent of £50. As to the deter- mination of the amount of liability upon a share, the only statutory restriction provides that it may not be less than the nominal value of the share itself. In the two provinces of Saxony and Pomerania, where 76 per cent, of all German rural credit societies with limited liability are situated, the actual amount of hability is in most cases forty and nearly forty-two times respectively the amount of the share value (5*. with £lO liability in Saxony, and 6s. with il2 iOs. liability in Pomerania). But by a very important provision in the Act the actual liability of members is, in effect, considerably reduced. When, apart from suspension of payment, the indebtedness of a society is disclosed in the balance sheet at 25 per cent, of the collective liability assumed by members in respect of their holdings in shares, the^Committee of Management must move the court for the commencement of proceedings m liquidation ; in other words, one-fourth of the liability undertaken is risked in normal cases of default. LOCAL CO-OPERATIVE BANKS. ^3 As to actual payments recoverable from members to meet claims made good as against the society by creditors in bankruptcy proceedings, no contribution in excess of the liability attaching to the share or shares held may be claimed from a member. Contributions proportional to the share holding of each member must be levied from all members, irrespective of the importance of their share holdings, unless the articles have adopted some other principle for apportioning contributions in cases of losses not covered by share-capital and reserves. Duration of Liability of past Members. — If a society dissolves within six months after the retirement or exclusion of a member, such cessation of membership is null and void, and such person must contribute to cover any deficit arising from obligations incurred up to the date of cessation of membership, as well as for those incurred within six months therefrom. When, moreover, the claims of bankruptcy creditors have not been met by a society with unlimited liability within six months after the supplementary contributions have been declared executable by the court, the property of past members who have left the society within two years from the opening of proceedings in bankruptcy may be attached, but only in respect of obligations incurred within the two years preceding the date of their leaving the society. Unlimited versus Limited Liability. — The respective merits of unlimited and limited liability for credit societies have long been matter for discussion in Germany. Apart from the fact that until 1889 only unlimited liability was possible, and that the founda- tions of modern rural co-operation were laid before that date and therefore development tended to take place along these lines, unlimited liability for rural credit societies has very solid grounds in its favour. By offering as security for its engagements the full amount of the property of its members a society with this form attracts savings deposits more readily, and improves its credit in the eyes of bankers and others from whom it may be necessary to borrow. Societies with limited liability may only be lield responsible up to the aggregate of the special liability (as stated in their articles) attaching to each share taken up by members ; but it cannot be readily known to what extent that aggregate may be already exhausted by reason of prior claims. Depositors, therefore, or other creditors {e.g., for agricultural requisites supplied) may find in case of default that the amounts due exceed what is recoverable under the terms of the liability of members. Kural co-operative banks work with considerably over ninety per cent, of loan capital in the shape of deposits from members and non-members and advances from their central organisations ; but these resources may not be obtainable, if their eventual recovery does not appear absolutely secured. The management and supervision on the part of the organs of administration and of the members is likely to be more careful, when there is the consciousness of unlimited liability. While, too, the equality of the members as members is emphasized — each member may legally take up only one share — the vigilance of the more substantial is kept more alert by the knowledge that not merely a fixed, and perhaps for them not a vitally large amount, but their whole possessions are involved. EaifFeisen and Schulze-Delitzsch were both convinced advocates of unlimited liability. From the beginning up to the present time all credit societies affiliated to the Federation founded by Raiffeisen are constituted upon this basis. The Schulze-Delitzsch Federation has not entirely abandoned the same principle. Its present leader holds that the question of the superiority of unlimited over limited liability may not be determined absolutely ; that it depends upon conditions prevailing in particular places, but that in the first instance, until a society has reached a certain degree of development, unlimited liabilit_y is in general to be preferred. Schulze-Delitzsch died in 1883, but it was not until 1895 that the organisation founded by him formally admitted to membership societies with limited liability. The proportion of such societies in that Federation has continuously increased since that time, but the relative strength of rural credit societies with unlimited liability has undergone little variation since 1900. The Imperial Federation of Agricultural Co-operative Societies recommends the latter form on the ground that it assures to a higher degree to a society the requisite credit. Little Danger from Unlimited Liability in Rural Credit Societies. — While for members of large urban societies such as are those affiliated to the Schulze-Delitzsch Federation, unlimited liability may present certain dangers, there is, in fact, little risk of members incurring great loss by reason of unlimited liability in a rural credit society. Its area is limited to at most a few parishes ; the members are acquainted with the general character and circumstances of their fellow-members ; supplementary working capital to a moderate amount is mainly advanced on the security of promissory notes backed by sureties, on mortgages, or on deposit of first-class securities, so that if the borrower proves insolvent the loan is well covered ; the collective knowledge possessed by the committee of management and the board of supervision and their collective surveillance are not likely 25574 F 2 84 PERSONAL CREDIT. to prove at fault. There is no incentive to undertake speculative or risky business^ speculative business is, in fact, expressly forbidden by the rules of the majority of societies — with a view to large profits, dividends being either not paid at all or being at the most quite small, and working expenses inconsiderable. The committee and the board are, in the first instance, legally responsible to the society to the full extent of their property when losses occur as the" result of their not exercising the " prudence of ordinary business men " to the affairs of the society ; and, finally, there is the further safeguard of the audit which must be carried out at least once within every two years. The history of rural credit societies affords conclusive evidence upon this point. During the period of sixteen years from 1895 to 1910 the total number of rural credit societies, whether with unlimited or limited liability, that were involved in bankruptcy proceedings amounted to only nineteen. According to the year-books of the Schulze-Delitzsch Federation in five years no case of bankruptcy of a rural credit society occurred, and in five other years there was only one in each year. Such figures are convincing when one recalls that since 1901 there have been over 10,000 registered rural credit societies ; in 1909 and 1910, in which years considerably over 15,000 such societies existed, no society with unlimited liability and only three with limited liability — one in 1909 and two in 1910 — became bankrupt. Compared with urban co-operative credit societies in this respect their record is very favourable : between 1895 and 1908 sixty-nine cases occurred in that gi'oup, although the total number of such societies has not, over the major portion of that period, exceeded the tenth part of that of rural societies. The record of German rural credit societies stands in still stronger relief when it is compared with that of ordinary commercial banking and credit undertakings. According to figures quoted by Dr. Grabein from the oflScial bankruptcy statistics there occurred between 1895 and 1905 a total of 386 bankruptcies among some 6,000 such businesses. Calculating the frequency of bankruptcy per 10,000 undertakings for rural co-operative banks and private credit institutions over this period the same writer computes that failures were fifty-five times more frequent among the latter than among the former. Limited Liability as practised in Prussian Saxony and Pomerania. — Limited liability had been adopted in 1912 by only 7'7 per cent, of German rural credit societies, and, as already observed, 76 per cent, of the societies (983 out of 1,290) with this form of liability were situated in the Provinces of Saxony and Pomerania. In the small vState of Anhalt also there were thirty-two such societies as against one with unlimited liability. It is worth enquiring what were the reasons that led to the establishment in these districts of societies with limited liability in this preponderating measure, and to explain the scheme adopted. For this purpose, Anhalt, which is almost an enclave in the Province of Saxony, may be regarded as having come within the influence of the Saxon movement. (a) In Saxony. — When the Imperial Co-operative Societies Act was passed in 1889 there were but few rural credit societies existing in Prussian Saxony, although it was in this province that the first German urban co-operative credit society was established by Schulze-Delitzsch. The landholders had grown distrustful of such societies because many of those founded in the province on the principles of Schulze-Delitzsch had by their collapse involved many farmers to a very serious extent by reason of unlimited liability. The burden of settling with creditors had fallen with especial severity upon land-holding members, whose assets were more tangible and not capable of surreptitious transfer to others. The rural co-operative movement did not, therefore, show signs of much progress, although the Raiffeisen Federation had succeeded in establishing by 1890 a certain number of credit societies with unlimited liability. It is noteworthy, as indicating the former mistrust of the Saxon landholders towards co-operative credit societies, that, while in most parts of Germany credit societies were the first to be established, in Saxony productive and supply societies preceded credit societies. By the Act of 1889 the adoption of limited liability was first made possible, and dairy and other societies were then founded in Saxony on this basis. The movement for the erection of credit societies followed about 1893. To overcome the mistrust of the agricultural classes limited liability was adopted. In societies with unlimited liability cash payments upon shares are the same for all members, but the liability in case of failure may fall much more heavily upon the larger than the small landholders or other members. In Saxony large, medium and small properties are fairly evenly distributed ; and it was decided to adopt a method that should take account of the actual circumstance of each member. The wealthier members were not to be burdened with liability for the benefit of those less well-to-do, or the latter for the default of the former, while the advantages were apportioned roughly according to liabilities undertaken and share capital paid-up. Thus each member was obliged to take one share of 5«. for every shilhng of supplementary land tax (payable upon estates of over £300 assessed value) LOCAL CO-OPERATIVE BANKS. 85 levied, and to undertake liability o£ £10 in respect of every share taken. In order, however, to prevent members exceeding in the amount of their liability their actually realisable assets, a limit is set to the number of shares that may be held ; and the credit accorded to each member is fixed on the basis of his liability. A member with 20 shares undertakes a liability of £200 ; his share holding implies that the capital value of his property is at least £2,000 as assessed for taxation. He is allowed three-fourths of £200 (or £150) as credit without further security on his own sole bill (not negotiable). If a member holds 5 shares he is normally allowed in the same way three-fourths of £50 multiplied by 10, or £375. When members require a higher credit, or their own position appears rather unsound, sureties or other securities are of course demanded. It may be noted in passing that as regards practical working, this system has the great advantage that sureties need not be procured for small advances. {b) In Pomerania. — In 1890 there were two, and in 1894 four, rural credit societies in Pomerania. The movement, therefore, taking root subsequent to the Act of 1889, credit societies were able to adopt limited liability. The leaders of rural co-operation were strongly influenced by the Saxon point of view and example, and in many respects had to provide for the same conditions. The most influential pioneers of the Pomeranian movement were convinced supporters of limited liability. Herr von Knebel-Doberitz, its leader, considered that in a district like Pomerania, where large, medium and small land- holders, together with clergymen, officials, teachers, artisans, shopkeepers and others were to become members of the same society, it was more expedient to adopt limited liability. The wealthier inhabitants of a commune would not readily undertake an unknown amount of liability on behalf of smaller people, so that if the participation of the larger landholders who are strongly represented in that province was to be secured this was more likely to be attained by the adoption of limited liability. It was also more equitable ; more substantial landowners, as being likely to require larger credits, should be subject to a greater proportional liability than, say, a small allotment holder, when losses were to be met, instead of being assessed at an equal figure. In Pomeranian credit societies with limited liability the shares are fixed at 6s., and members are obliged to take one share for each 4s. (or part thereof) of State income tax or for each Is. (or part thereof) of supplementary land tax as in Saxony. « To each share held attaches a liability of £12 10s. The usual limitation to number of shares to be held by a member is 25, so that the utmost liability undertaken by a member would be £312 10s. As in the Saxon societies it is the accepted practice to lend in normal circum- stances up to three-fourths of the liability undertaken by the borrowing member on his own bill without sureties. It is usually urged as a principal objection against limited liability that the credit of a society, that is, its power to obtain deposits and other working capital, is likely to be weaker under this form. The experience of Saxony and Pomerania has not shown that their societies have suffered on this ground. In fact, this form of liability constitutes in the circumstances and as practised in these provinces a credit basis approximately equal to that of unlimited liability. The security represented by a society with limited liability in which members are required to take up shares and liability in proportion to their means represents an effective value closely approximating to that of a society with unlimited liability. In these two provinces the economic situation of the bulk of the members strengthens this efEective value ; in Saxony, which contains probably the most extensive consolidated area of rich agricultural laud in Germany, the societies have attracted medium and larger landholders in considerable numbers ; and the Pomeranian societies also include a noteworthy proportion of the more substantial inhabitants of their districts. (See details below respecting social classes engaged in their management.) In both provinces the societies succeeded almost from the first in attracting con- siderable deposits ; and the Unions at Halle and Stettin respectively, which are both among the most efficient in Germany, have brought their Central Banks (formed in 1893 and 1895 respectively, to serve primarily as banks for co-operative credit societies — for a special account of each of these Banks, see pp. 152-160) into a position of great strength. The Stettin Bank has shown considerable credit balances at the end of each financial year since 1901 (see p. 155) ; and the Halle Bank is among the most important central co-operative banks in Germany. As to the maximum credit granted to a society by its central bank this amounts to three-quarters of the collective liability represented on the same principle as is followed by single societies in giving credit to their members ; for credit beyond this limit deposit of securities or special bills must be deposited. The Prussian State Central Co-operative Bank, as a rule, advances money to societies with limited liability up to a maximum of 75 per cent, of the collective liability undertaken. 25674 F s 86 PERSONAL CREDIT. It appears hardly open to doubt that the spread of limited instead of unlimited liability in Saxony and Pomerania was due to special circumstances and influences rather than to any causes arising out of the conditions of the distribution of landed property or other special inequalities in the social economy or economic position of the rural popula- tion in these provinces. That it was inherently impossible to create societies with unlimited liability is disproved by the fact that in 1912 there were in Saxony 126, and in Pomerania 139, rural credit societies with unlimited liability. These provinces are, more- over, not unique in Germany in point of distribution of landed property. The following Table shows for nine Prussian Provinces in 1907 the distribution of agricultural holdings according to size with the average acreage of the holdings within each group. The number of rural credit societies with their respective liability is also added in each case for the year 1912. Table Showing (for 1907) the Agkicultural Holdings in Nine Prussian Peovinces Grouped according to Size ; the Percentage of the Total Number in Each Group and the Average Area of Each Holding in Statute Acres ; as also the Number of Co-operative Societies with Limited and Unlimited Liability in Each Province in 1912. (a) = percentage of total cultivated area : (b) = average acreage per holding. Province. Under 5 Acres. 5 Acres to 12^ Acres. 12i Acres to 50 Acres. SO Acres to 250 Acres. 350 Acres and over. No. of Societies with Unlimited Liability. No. of Societies with Limited Liability. Saxony : (a) (6) ... . Pomerania : (a) ... (b) ... . Bast Prussia : (a) • West Prussia : (a) Brandenburg : (a) (6) Posen : (a) (b) ... . Silesia : (a) (6) ... . Schleswig Holstein : (a). (6). Hanover : (a) (6) ... . 14 1 2 1 2 1 3 1 3 1 2 1 4 1 2 1 5 1 •0 ■55 •9 ■60 •3 •37 ■0 ■47 •7 ■*7 •8 •62 •0 ■95 •9 ■17 •7 ■82 6-0 10-25 3-0 10-25 4-1 10^25 3-9 10-0 5-5 11-75 4-0 10-0 9-8 10-25 3-7 10-25 11-2 12^0 23 29 18 31 17 31 23 36 22 37 25 34 28 29 20 33 37 42 •5 •75 •3 •75 •5 ■75 •2 ■0 •1 ■26 •7 -0 •7 ■0 •0 ■76 ■5 ■25 31-5 118 ■ 25 22^7 123-76 37^8 122-5 33-1 130-26 33 132 21 107-75 20 117 57 1 75 7 114-25 39 161 7 75 25-0 897-25 53^1 1322-0 38^3 936-28 36-8 982-5 35^4 1452-76 46-0 1214-76 37^4 1107-25 15-7 708-5 5-9 702-0 \ 126 I 139 I 401 I 286 I 774 I 544 j 1,649 I 351 477 ) 614 369 6 5 36 24 15 9 27 It will be observed that in most of these provinces there is a mixture of large (above 250 acres), medium and small holdings which is not dissimilar to that prevailing in Saxony and Pomerania, but that the country population has not been deterred' by inequality of risk from adopting unlimited liability. That, too, the more substantial elements have not held aloof from these societies will be illustrated from the particulars given elsewhere of the social composition of the various organs of administration for over 700 societies with unlimited liability in Silesia as well as for similar groups in other parts of Germany. Form of Liability: Adaptability to English Conditions.— The question may perhaps be summed up in this way. The adoption of unlimited liability is not a matter of principle but of expediency. It maywell be the case in England that unlimited liability, having been long abandoned in business, may appear so far-reaching in its possible consequences that to secure its general adoption might present almost insuperable difficulties to the extension of the co-operative movement. As already observed,- the likelihood of rural credit societies restricted to a narrow area and under conditions of management and inspection such as are applied in Germany, involving their members in serious losses, is extremely remote ; but for practical purposes consideration might be extended to the prevalent disinclination in this r^pect. The essential point is that members should incur such liability that, in rough proportion to their means and to their utilisation of the LOCAL CO-OPERATIVE BANKS. 87 services of the society, their interest in its success, as well as an adequate basis of credit for the society, should be secured. This object is attained under the system of limited liability in Saxony and Pomerania. Working Capital. —The working capital of a credit society is made up of (1) the owned capital of the society, consisting of share capital, entrance fees, and reserves ; (2) the deposits of members and non-members ; and (3) specific loans from individuals or banks, especially credit at the central co-operative banks. The last-named banks are dealt with in a separate section ; and the question of deposits having been already discussed, that of owned capital may now be examined. Shares. — Although the basis of the credit of the village banks consists in the liability undertaken by the members (iollectively, yet experience shows that the creation of adequate visible capital is extremely desirable. This may be done either by writing to reserve most or all of the profits, or by increasing the value of the share. Raiffeisen adopted the first plan, and advocated the formation of an indivisible permanent foundation fund. The general tendency in recent years has been to raise the value of the shares, while not neglecting due appropriations to reserve. The payment of large shares by medium and small landholders is difficult, but it is now generally considered that shares should be made as large as possible, having regard to the circumstances of the particular locality, and that easy regular instalments should be insisted upon until the whole or the greater part of a share is paid up. Better-to-do inhabitants generally pay the amount in full. When interest is paid — although it is usually laid down that the rate of interest shall not exceed the rate paid by members for loans — many non- borrowing persons may be led to join a society, with the view to the investment of their savings. In this way they obtain higher interest than if they place their money on deposit or in an ordinary sa-fe investment, while the society obtains cheaper capital than it might perhaps borrow, and in any case it obtains working capital of a more permanent kind than mere deposits. When large shares are paid up there is also an additional stimulus to the interest of members in their society. Members of registered co-operative societies with unlimited liability may not legally acquire either more or less than one share ; members of societies with limited liability may acquire any number up to a maximum to be determined by the general meeting of members, and inserted in the articles of association. But the law prescribes that in a co-operative society no member may exercise more than one vote, so that, although the larger shareholders in a society with limitedliability may acquire greater personal influence than the smaller, yet in the decision of all matters of importance, which by law are bound to be placed before the general meeting of members, all members have an equal voting power. Nominal or Par Value of Shares. — The par value of shares in rural credit societies shows great variations. True to the principles of Raiffeisen, who advocated low or even merely nominal share-values, the societies of the Raiffeisen Federation still maintain low shares ; in 1908 only 1 per cent, that is, some forty out of four thousand of these societies, had adopted shares exceeding 10s. Several reasons seemed to justify his stand- point. Persons, who would become members chiefly in order to obtain loans, would be kept away by shares of high denomination. Ready money was scarce in the rural districts at the time of Raiffeisen's greatest activity, rural Germany having passed at a relatively late period from payments in kind to payments in currency. Shares of twenty or fifty shillings would have been simply out of the question for the majority of the peasant proprietors in the West of Germany, especially in those economically backward districts where Raiffeisen began his work. If the shares were high, shareholders would expect dividends, and the desire of gain would thus be introduced into the business of the association ; and this would have been contrary to his ideas respecting the moral aims of the society. But there was another important reason. His societies rested upon the combined unlimited liability of their members, who were mostly possessors of at least a small property ; and this basis afforded sufficient ultimate security for advances. The Imperial Act of 1889 provided that societies must have shares, of which one-tenth of the par value must be paid-up, but no maximum or minimum amount was prescribed, nor was any period laid down within which this tenth part must be paid. The following Table shows the denomination of the shares of all German Co-operative Credit Societies, with special details respecting rural credit societies, as on January 1st, 1909. No complete figures of more recent date have been published. 25574 E i 88 PERSONAL CREDIT. Table showing the Nominal Yalue of the Shares of all German Co-operative Credit Societies on January 1st, 1909. All Credit Societies, Urban and Df which Rural Credit Societies Rural. Graduation of Totals. With Unlimited Liability. With Unlimited Contributory With Limited Liability, Liability. Shares. fc. . i S .2 GO U CD DQ i .s a ■^ a CoUee iabilit cieties i i .£ 1 eg 1 4^ •i o J2 3 =a * Total tion I of Sc Tip to Is 128 14,141 126 13,449 77 10,639 49 2,810 27,264 £ 219,010 Over Is. to 2s. ... 229 27,670 229 27,670 171 24,241 — — 58 3,429 15,769 239,582 „ ■2s. „ 5s. ... 3,134 279,590 3,131 279,178 2,459 242,827 1 108 671 36,243 113,414 1,746,260 5s. „ 10*. ... 4,795 479,913 4,767 453,132 4,620 444,805 7 600 140 7,727 28,082 357,134 , 10s. „ iOs. ... 260 32,573 252 27,805 236 26,272 8 468 8 1,065 6,562 134,695 , 20s. .,, £2 10s. 1,309 121,302 1,239 107,573 1,207 105,238 1 228 31 2,107 5,1 B2 140,442 , £2 10s. to £5 2,887 343,605 2,614 255,751 2,585 251,611 — — 29 14,140 2,253 155,257 , £5 to £10 ... 1,109 200,607 714 57,345 691 52,645 1 73 22 4,627 2,613 240,682 , £10 „ £15 ... 60i 220,520 133 16,207 122 14,105 2 806 9 1,296 420 38,195 , £15 „ £20 . 71 30,558 13 2,069 13 2,069 — — — — — — , £20 „ £25 ... 1,215 275,632 846 81,462 840 79,798 — — 6 1,664 277 117,125 , £25 „ £30 ... 173 112,335 6 2,157 4 1,738 — — 2 419 3 16,710 , £30 „ £40 ... 19 15,096 1 912 1 912 — — — — — — , £40 „ £50 ... 111 73,610 11 1,509 10 1,443 — — 1 66 — 3,300 , £50 „ £100 39 39,114 1 84 1 84 — — — — — — , £100,, £250 17 6,511 1 174 1 174 — — — , £250 2 1,861 — — — — — — — — — — Total 16,106 2,274,833 14,084 1,326,477 13,038 1,258,601 20 2,283 1,026 65.593 201,839 3,481,392 * By additional shares are meant all shares taken by members over and above the single obligatory share. The Model Articles of Association framed by the Raiifeisen B'ederation in 1910 for adoption by its 4,200 affiliated societies, fix 10s. (to be fully paid-up at once or within a short period) as the value of the share. The Imperial Federation recommends in its model articles for credit societies, whether wdth limited or unlimited liability, that the shares should be fixed at as high a value as possible, but in no case at less than £5, and that the articles should provide for their payment in full within ten years. At the Congress of that Federation in 1909, it was unanimously resolved that "on legal, economic and co-operative grounds, it is an imperative duty of rural societies to aim at strengthening adequately their share and reserve capital by increasing the value of the shares and the amounts assigned- to reserve." Herr Quabeck, secretary of the Westphalian Union, proposed and carried a motion that for rural credit societies the denomination of shares should not be less than £6, and, if possible, as high as £25, with obligatory pay- ment of £2 10s. within a short period. The Prussian State Co-operative Bank exerts its influence in the same direction, e.g., it fixes as the normal maximum of credit for a central bank the assets of such bank represented by its paid-up share capital and reserves (c/. p. 91). Tendency to raise Value of Shares. — Several Unions have carried through within recent years an increase in the value of shares of affiliated credit societies. Up to 1911, the shares of the credit societies in one Posen Union did not exceed lOs. ; it has now been decided that they are to be raised to £5, with one-fifth or one-tenth part paid-up on admission to membership, and the remainder in regular instalments. One Breslau Union in 1909 raised the denomination of its shares to £5, 10s. to be paid-up, and the balance by yearly instalments of 3s. to 5s., while it was stated that a second Union in Breslau, whose societies now have shares of 5s. to 10s., proposes to take a similar step in the near future. In Westphalia the shares have also been raised in value from 3s. or 5s, to 30>«. and 50s. In the Treves Union, which is not attached to the Imperial Federation, shares which until recently were from bs. to 10s. are to be gradually raised to £2 10s. In Baden, where shares were formerly low, no new societies with shares under £2 10s. have been founded for a number of years ; and many societies founded with low shares have increased them to £2 10s. and £5. Although a very considerable number of the societies in the Bavarian National Union have lower shares than £5, the majority of societies founded since 1900 have adopted this figure and their ne^(1911) model articles of association contain it. The credit societies in the Palatinate attached to the Landau Union have now, almost without LOCAL CO-OPERATIVE BANKS. 89 exception, shares of £25 ; in Hanover the shares are now mostly £2 10s. ; in Kiel practically all are £5 and over, while in the Bonn and Darmstadt Unions the societies have, for the most part, shares of from £15 to £25. Actual Payments effected. — The amounts actually paid up on large shares fall far short of the nominal value, whereas in the c'ase of shares up to ten shillings the full amounts are now usually paid up either on admission to membership or by regular instalments. Thus of the twelve Unions now comprised in the RaifFeisen Federation, which has in recent years set 10s. as the standard share denomination, six showed at the end of 1909 an average share payment of 10s. per member of individual societies, two an average payment of 9s., two of 8s., and two of 7s. The Act only only insists upon the payment of a tenth part, but it prescribes that members of societies with limited liability may not take an additional share before the previous holding of shares have been fully paid. Taking all credit societies reporting to the Imperial Federation the average amount paid-up per member at the end of 1910 was 19s. P'or the seven years 1904-1910, during which period the number of members of credit societies so reporting increased from 954,000 to 1,209,000, this figure ranged between 17s. and 19s. The inequalities in the averages for the separate Unions are striking. In 1910 the highest average was £5 3s., this being provided by 16,242 members in the Bonn Union, and the lowest 4s. in the case of 88,987 members in the Westphalian Union. After the Bonn Union came the Hessian with £4 8s. for 51,138 members ; one Union in Nassau with £3 14s. for 15,306 members ; the Brandenburg Union with £2 16s. for 22,999 members ; one Union at Posen with £3 2s. for 30,287 members ; and one in Silesia with £l 35. for 56,438 members. Of the two Unions which comprised only credit societies with limited liability, the average for 34,734 members of the Prussian Saxony Union was £l, and for 24,260 members, of the Pomeranian Union also £l. In 1908 the Hanoverian societies with 38,539 members showed an average payment per member of 9s., but two years later the figure stood at 13s. for a membership of 44,608. An average of lis. per member was returned by two Unions with 65,378 members, of 10s. by eight Unions with 252,212 members, of 9s. by four Unions with 144,104 members, of 8s. by six Unions with 186,728 members, of 7s. by two Unions with 63,554 members, of 6s. by one Union with 6,243 members, and of is. by one Union with 88,987 members. Taking the co-operative Unions attached to the Imperial Federation, which comprised at the end of 1910 82 per cent, of all rural credit societies then existing in Germany, we find that at that date the average amount paid up per member on account of shares did not exceed lis. in the case of 66*8 per cent, of the members of all these societies, an additional 8*6 per cent, attaining average payments of 13s. The average payments per member of the societies in the Wiirtemberg, Baden, and Treves Unions may be seen in the Table on page 101. Entrance Fees. — It is a very common practice now for rural credit societies to levy a small entrance fee. The Raiffeisen Federation, however, is opposed to the charging of any entrance fee, its model articles for credit societies recommending that no such fee be levied. The object is not to raise any barriers that might deter persons from becoming members. The Imperial Federation sanctions entrance fees, leaving their amount to be fixed by each society, and assigning the receipts on this account to the reserve fund. The levy of an entrance fee of moderate amount appears quite justifiable in the case of established societies. The founders have incurred trouble, expense, and risk in establish- ing and placing the society upon a firm footing ; and it is reasonable that a new member should contribute a small amount seeing that he has the advantage of the reserves already iccumulated as security against losses, of the low rates of interest for loans, and of any other benefits provided by the society as the result of previous good management. Despite the smallness of the entrance fee — which is not reimbursable on a member leaving the society — the necessity of its payment tends to deter members from resigning, as they might were re-entry facile and gratuitous. As to amount, rural credit societies rarely fix the entrance fee at more than 5s., the predominant range being from 2s. to 4s., and 3s. probably the most accepted amount. In Hanover it is almost invariably fixed at 3.s\, perhaps twenty societies levying a higher amount ; in Westphalia it is 2s. to 3s. ; in the Pomeranian societies with limited liability it is usually Is. to 3s., these limits being accepted as minimum and maximum ; in the Province of Saxony Is. per share taken up, or a fixed sum of 3s. to 5s. is required. In Bavaria the model articles issued by the National Union fix the entrance fee at 3s. In Wiirtemberg the societies have chosen sums of from 2s. to 5s., while of 422 rural credit societies in Baden reporting for 1910, 117 had an entrance fee of 2s., 148 of 3s., 59 of 45., 48 of 5s., 7 of 6s., 3 of 8s,, 9 of 10s., and 3 of 20s. For the twenty or so remaining societies the amounts were either Is., Is. 6d., 2s, 6d. or 3s. Qd. 90 PERSONAL CREDIT. Reserves. — From a business standpoint it is a weakness of co-operative societies that members are free to resign at will, although such resignation may, by the articles ol: association, be made ineffective before the expiry of two complete financial years from the beginning of the year succeeding the date of notification of withdrawal. Retiring members have a right to the share capital standing to their credit, so that if many members withdraw simultaneously the capital of a society may be seriously reduced. In the case of rural credit societies with a low average amount of paid-up share capital such withdrawal would not be serious, but the society might suffer a greater injury by the withdrawal of the amount of the liability in respect to the share or shares held by such retiring members. On this account the legal status of "company," rather than of "co-operative society," has been adopted by several organisa- tions that are co-operative in aim. To meet this difficulty was the main purpose of the indivisible "foundation fund" of Raiffieisen ; the creation of a permanent inalienable asset of the society. But on the retirement or death of a member no legal claim can be asserted to a share in the reserve fund. This method of building up capital is open to all societies, and their power to do so is increased by the legal provision that members are not entitled to receive any part of the profits : Section 20 of the Act states that the articles may prescribe that profits be not divided but written to reserve. It is also left to the articles to determine the method of forming the reserve fund of the society and the proportion of profits to be devoted thereto, the Act merely stating that reserves are to serve to cover any losses disclosed in the annual balance sheet. No uniform practice is in vogue among rural credit societies in respect of the formation of reserves. The model articles issued by the Raiffeisen Federation for their adherent societies, state as to appropriation of profits : " In the first place the paid-up share capital, if it has been diminished by losses, is to be restored to its former amount. A sum not exceeding one-fifth of the balance may be devoted by resolution of the members to objects of public utility. The remainder shall be written to reserve until a sum amounting to is reached (a footnote here states that for small associations £500 suffices as reserve fund, for large societies the amount must be fixed on the basis of the number of its members and of the volume of its business). This reserve shall be used to meet losses appearing in the balance sheet. When the requisite reserve has been accumulated the reserve known as the " indivisible foundation fund " is to be further strengthened. The purpose of this foundation fund is to make the association gradually independent, and to render possible (or support) objects of common utility for the improvement of the position of members. The accumulation of profits in the foundation fund shall be maintained until this fund and the reserves together have reached such an amount that in combination they suffice as working capital for the association. Until this position is reached interest on the foundation fund may be added to the capital amount or applied in some suitable manner by resolution of the members ; after that the interest and further profits must be applied to objects for the common welfare of members. When the reserve fund is inadequate to meet losses in the balance sheet, the foundation fund may be drawn upon, but only after the- paid-up share capital has been exhausted." The model articles issued by the Imperial Federation for credit societies run : — " The reserve fund shall be formed by the entrance fees, the fines payable according " to the articles, and the payment of at least ten per cent, of the annual net profits. It " shall be brought up to and maintained at a figure representing twenty per cent, of the " total working capital as shown in the balance sheet, and in no case shall it be less than " a sum corresponding to the fully paid-up share capital. In addition, for extraordinary " purposes to be decided upon by the general meeting, but especially to meet losses " occurring on business transactions, a special working reserve shall be accumulated by " the appropriation of at least ten per cent, of the net profits, as well as by other " appropriations to be determuied by the members. This working reserve shall be brought " to twenty per cent, of the total working capital, as shown in the balance sheet, or to at " at least the total amount of the shares when fully paid up, and shall be maintained at « that level." The net profits obtained in 1909 by 11,544 credit societies in the Imperial Federation amounted to £414,976 as against losses by 970 societies of £64,170, while 100 societies showed neither profit nor loss in their balance sheets. Thus the net profit of all these societies in that year amounted to £360,806. Only a small proportion of profits are distributed as dividend upon share capital, such dividends being low (usually three to four per cent.), only paid by a relatively small number of societies, and as often as not placed to the credit of members' shares not fully pa^. The bulk of it, roughly seven-eighths, was written in 1909 to reserves, which increased, as compared with 1908, by a total of £364,094 including entrance fees and fines and stood at the end of the former year at £2,548,934. Similarly in 1910, when the net profits for 11,795 societies amounted to £441,920,911 LOCAL CO-OPERATIVE BANKS. 91 societies showing losses of £88,273 (two societies accounted for £26,291 of this total), and 90 societies neither profits nor loss, the reserves were further strengthened by a total of over £300,000. In 1910 the average amount of reserves per society and per member, taking a total of 14,790 societies with a membership of 1,447,913, was £221 and £2 5s. respectively. These figures show, that the average reserve per society and per member were more than double the average paid-up share capital per society and per member ; in 1910 the average paid-up share capital per society and per member amounted to £108 and £l 2s. In the societies with limited liability in Prussian Saxony and Pomerania the averages in 1910 were — Prussian Saxony £84 12s. per society and £1 lis. per member for 641 societies with 34,734 members, and in Pomerania £92 18s. per society and £1 8s. per member for 374 societies with 24,260 members. At the same date the average paid-up share capital in Saxony was £55 per society and £l per member ; in Pomerania £64 per society and £l per member. The usual ratio of share capital and reserves to liabilities shewn in the balance sheets of co-operative societies is considered far too low by the co-operative authorities in Germany ; and the regulations already quoted from the model articles for credit societies issued by the Imperial Federation and by the Raiffeisen Federation show that the great central organisations seek to remedy this unsatisfactory condition. The Prussian Bank has also advised (see Appendix) the societies to bring their share and reserve capital up to 10 per cent, of their liabilities, and to do this as far as possible within two years of their foundation. For a general view of the relationship of borrowed capital to share capital and reserves in co-operative credit societies in 1910 the reader is referred to the Table at the end of this section (page 101). Organs of Administration. — The organs of administration are three : (1) the Committee of Management, (2) the Board of Supervision, and (3) the General Meeting of Members. The authority and relationship of each of these are formulated, as to their essential points, in the Act, which leaves other matters of procedure and practice for regulation by the society in its articles of association and business rules. Committee of Management — Number of Members. — The Committee of Management must legally consist of at least two members who must be elected by the General Meeting of Members. Although such election by the general body of members is obligatory, the Act expressly permits the articles of association to provide special methods of nomination : thus, the articles may determine that appointments to the Committee may only be made by the Meeting of Members on the motion of the Board of Supervision. In most credit societies the number of members is most usually fixed at three or five. It is considered advisable that there be at least three, owing to the legal provision that all documents to be binding on the society, require the signature of two members of the Committee ; and if the body should consist of only two, the absence or inability to act of one might considerably hamper business. Its restriction to two members may, moreover, throw an undue burden upon men who usually undertake such duties voluntarily and without recompense. In many societies the articles of association require at least three members (chairman, deputy chairman, and another) to sign all documents giving an undertaking on the part of the society. When more than five are elected, the object usually is to secure representation of a number of different villages or occupations. Election to the Committee is generally for a period of four years, certain of its members retiring by rotation every year or every two years, but being eligible for re-election. Their appointment is cancellable at any time by the Board of Supervision, subject to confirmation by the Meeting of Members. General Powers and Duties. — The general powers and duties of the Committee of Management are defined in the Co-operative Societies Act, Sections 24-35 {see translation of Act in Appendix), but the salient points of these provisions may be here enumerated. The Committee represents the society both judicially and otherwise ; and all engagements entered into by it are . binding upon the society. But the articles of association or a resolution of the General Meeting may limit the extent of its authority ; thus it is a common practice for credit societies to fix a limit up to which loans may be granted by the Committee to individual members, and to require the assent of the Board of Supervi- sion or of the General Meeting for the loan of higher amounts. If the Committee exceeds its authority the society can sue its members for recovery of any resultant losses. As regards third parties, of course every transaction of the Committee legally executed binds the society. The Act also states : — " The members of the Committee must exercise the prudence of ordinary business men ; members who fail in this respect are responsible to the society jointly and severally for any losses hereby sustained to the society." This joint responsibility is intended to ensure the interest of all members of the Committee 92 PERSONAL CREDIT. and to prevent the conduct of affairs falling into the hands of perhaps one man. Such a tendency is also safeguarded against by the provision that at least two members must sign in the name of the society. The granting of a loan by the Committee to any of its own members, in so far as it is at all permissible under the articles of association of the particular society, requires the approval of the Board of Supervision, whose sanction must also be obtained before a member of the Committee may be accepted as surety for a borrower. The Committee is also responsible for the publication of the annual accounts within six mouths from the close of the financial year, for the execution of the obligatory legal audit within the statutory period and for the fulfilment of all necessary legal formalities as to registration of the articles, notification of new members, change in the personnel of the Committee, or Board of Supervision, &c. For a detailed description of the duties incumbent upon the Committee the reader is referred to the Model Articles for German credit societies printed in the Appendix. Meetings. — Meetings of the Committee are usually held once each month, except in the case of societies with considerable business, whose Committees meet once a fortnight or even once a week. A favourite time for holding meetings is on Sundays after church, or in the evening on weekday's. Chairman ; Social Classes represented. — The Chairman of the Committee holds the most responsible position in the society, and upon his energy and capacity its success largely depends. It is his duty to summon meetings both of the Committee and of the general body of members ; to see that the records and books are properly kept and safely preserved ; to sign, in ordinary cases, on behalf of the Comnaittee, and in a word, to supervise the entire practical working of the society. For this position, which, in the great majority of cases, is an honorary one, the societies endeavour to secure a landholder with business aptitude, or some public official (village burgomaster, parish clerk, revenue collector, postmaster, &c.), a teacher, or clergyman, but a not inconsiderable number are drawn from the shop-keeping, inn-keeping, and small employers class owing to their greater familiarity with book-keeping. The latter function is apt to present itself as abnormally difficult to the farmer, who is consequently loth to undertake it. In the credit societies attached to the Halle Union, out of 627 chairmen in 1910 there were 10 large land- holders, 130 medium landholders, 306 small landholders, and 13 tenant farmers these groups forming 73 per cent, of the total ; there were 34 clergymen, 23 schoolmasters and 31 shopkeepers, inn-keepers, employers of labour, while 80 described as belonging to other social classes included officials, persons of independent means, &c. The Province of Saxony forms one of the richest agricultural areas in Germany, and its agricultural population, whose three classes, small, medium, and large landholders, hold almost equal shares of its territory, supplies an abundance of persons qualified for such responsibility. In the South and West of Germany, where peasant proprietors constitute the bulk of the farming class, other occupations are more numerously represented. Thus in Wurtemberg in 1909, of the chairmen of 1,148 credit societies there were 448 village burgomasters, 217 public officials of various kinds, 172 shop-keepers, inn-keepers and small industrial employees or artisans, 148 peasant proprietors, 14 medium and 7 " large" landowners, 52 clergymen, 30 teachers, 3 members of parliament, 11 doctors and lawyers and 46 who came under various descriptions.' In those parts of Germany where the larger landholders are found they appear to be fairly well represented so far as this responsible task of acting as chairman is concerned. Figures for Prussian Saxony have already been cited. In 1905, in Pomerania in 50 out of 305 societies the chairmen were " large " landowners, while in 209 out of 720 Silesian credit societies affiliated to one of the three Breslau Unions in 1909 the chairmen were "large" landowners, and in 171 other societies the chairmen are described as peasant proprietors (Bauer) and smallholders. Among other classes represented in this office in this group of Silesian societies may be mentioned 40 clergymen, 38 teachers 61 officials, 8 doctors and lawyers, and 159 persons engaged in commercial or industrial occupations. It may be explained that by " large " landowners are meant in Germany those possessing over 250 acres of land. Remuneration of the Committee. — According to the Act payment may or may not be made to the members of the Committee for their services. The area of operations of societies and their membership being in most cases small the volume of business is not usually so great that members require to devote so much time to their work on the Committee as to require payment for their services. In the 4,200 societies of the Raiffeisen Federation no member of the Committee may receive any payment, apart from reimbursement for expenses incurred on behalf of th* society. In a number of other Unions which are not attached to that Federation, as for instance in the 550 credit societies of the Westphalian LOCAL CO-OPERATIVE BANKS. 93 Union, the 2,500 societies of the Bavarian Union, and the 1,200 societies of the Wiirtera- berg. Union, the same principle of non-payment is observed. But in those cases in which a member of the Committee is also the secretary of the society, such secretary-member, in the great majority of cases, receives payment. The model articles issued by tbe Imperial Federation include the secretary in the Committee, and state that his remuneration is to be fixed by the Board of Supervision. " The other members of the Committee shall exercise their office gratuitously ; in special cases the Board of Supervision may also assign remuneration to them in proportion to services rendered." In many societies which elect their secretary to the Committee the regular supervision of the accounts is assigned to another member who is not the chairman. This supervisor or " comptroller " is usually obliged to be present with the secretary on the one or two days or afternoons in the week when the office is open, and to go through the accounts at regular periods. He also receives an annual fee, which may amount to from one-fourth to one-half of the remuneration of the secretary. The chairman, or director as he is often termed, occasionally receives in such cases also a fixed annual payment. When payment is made to chairmen it varies of course according to the extent of the business of the society and of the routine work undertaken by them. As to the actual practice in rural credit societies at the present time it would probably be correct to say that in sixty per cent, of these societies the secretary is not a member of the Committee and that payments are not made to any of its members, while in the majority of the remaining societies, apart from the secretary, the chairman alone receives remuneration. In many societies however, small sums of from 6d. to 25. are allowed to members for each sitting attended. Such remuneration may hardly be regarded in the light of regular payment, since during a whole year, it will not amount to more than, say, 10s. to 30s. The tendency to allow remuneration of some kind to Committee members appears, however, to be on the increase. Secretary : Membership of the Committee. — The current business of a society is transacted by a member who is elected by the Greneral Meeting of Members, and who is called the accountant {Rendant, Eechner) but whose duties correspond to those usually undertaken by a secretary of an ordinary society or club in England. In the societies (4,300) affiliated to the Raiffeisen Federation and in other societies that adhere closely to the original Raiflfeisen principles (e.g. 550 societies in Westphalia, 2,500 in Bavaria, 1,200 in Wiirtembtirg, 425 in Baden, 552 in the Cologne Union and 350 in the Treves Union) the secretary may not be^a member either of the Committee of Management or of the Board of Supervision, although he may be present and take part without a right to vote in the discussions of either body. He appears indeed to be invited to be present at the ordinary Committee meetings of the majority of those societies whose statutes formally exclude him from membership. In those societies belonging to Unions which have been guided in their development by the general principles of the organisation now entitled the Imperial Federation— for instance, the Unions with their headquarters at Darmstadt (to which are affiliated 410 credit societies), at Hanover (487 societies), at Kiel (355 societies), at Halle (694 societies), at Stettin (^384 societies), one of the two Unions with headquarters at Posen (305 societies), one of those at Berlin (487 societies), one of those at Breslau (764 societies) and the Dresden Union (299 societies) — the secretary is usually a member of the Committee, The presence of the secretary on- the Committee has the advantage of convenience as regards routine work ; every receipt and document requiring the signature of two members of the Committee (in many cases as aheady noted the articles require three), three persons (secretary and two of the Committee) or even four (secretary and three members of the Committee) may thus be obliged to participate in such a small transaction as a receipt for the deposit of a few shillings. In practice it is arranged that the secretary gives a provisional receipt, the necessary signatures being afterwards secured. Apart from the question of convenience it is also considered that the feeling of responsibility and the prestige of the secretary in the eyes of the members are increased by his inclusion in the Committee. It is objected on the other hand that the Committee is liable to be less free in its action towards borrowers and others, and in its supervision of the details of the routine business when one of their number is thus employed. The duties of secretaries are regulated by their contract of appointment by which they undertake to carry out the provisions of the articles of association and of the business rules, to follow the instruction of the organs of administration, and to make good any losses due to their want of care or infringement of the articles, rules or instructions. They are appointed for indefinite periods, subject to three or six months' notice on either side. Security must be furnished by them, either by bond backed by surety, the deposit of cash or scrip, or in some other approved form. 94 PERSONAL CREDIT. Duties; Remuneration. — As to the duties of the secretary, the reader is referred to the model articles for rural banks, translations of which are printed in the Appendix. Although the nature of hi? work may be very simple, yet its volume is often by no means inconsider- able ; keeping the ledger and account books, entering every payment and receipt, drawing up monthly and annual statements, carrying on correspondence with the co-operative central bank, preparing documents and agenda for meetings of the Committee and of the Board of Supervision, as well as for the General Meeting of Members, attending at the same, and (in about two-thirds of all credit societies) looking after the supply of agricultural requisites, must, even in small societies, involve the expenditure of much time. In the majority of societies the secretary is remunerated for his work, the amount of his remuneration being determined by the Board of Supervision on the recommendation of the Committee of Management,. It may be fixed, or it may be reckoned as a percentage of the total business done, of the payments or of the disbursements or of the gross or net profits. Fixed payments predominate, and the model articles drawn up by a large number of Unions for the guidance of their affiliated societies provide that secretaries may not be paid accord- ing to either business done or profits. By the former method of payment any temptation to increase the book turnover or to seek profits by unwise transactions is removed. A common standard adopted in determining the amount of the remuneration is to take the total number of accounts in the ledger or the number of depositors' accounts alone, and to allow a fixed sum per account. The statement of any general average, or predominant range of salaries paid to secretaries of German rural credit societies would be misleading unless accompanied by a large amount of explanation or reservation which would render the statement of little value. The amounts are, however, on the whole small. In ordinary societies with from 80 to 120 members the secretary will receive from £lo to £40 per annum according to the volume of business, the number of members, the capacity of the individual secretary, the generosity of the members and other circumstances. Actual figures bearing on the point and covering any representative proportion of these societies are not available. The following statement shows the payments made in 1905, 1909, 1910 and 1911, to the secretaries of 282, 366, 372 and ol& Pomeranian rural credit societies, but for reasons given later, these payments are probably inferior to those ordinarily made to secretaries 1905. 1909. 1910. 1911. No remuneration ; 74 50 35 33 Up to £2 10s 51 22 27 20 Over £2 10s. to £5 48 67 64 51 „ £5 „ £10 50 77 78 87 , £10 „ £15 22 64 69 65 , £15 „ £20 9 37 36 57 , £20 „ £25 14 14 25 23 , £25 „ £50 11 25 26 30 , £50 „ £150 3 9 12 8 , £150 — 1 — 2 282 366 372 376 In 1905 the total cost of management of these societies — the remuneration to the secretary amounts to about two-thirds of the whole — was £2,100, or an average of £7 95. per society ; m 1909, £7,601 or £20 15s. per society ; in 1910, £9,713 or £26 25. per society ; and in 1911, £11,095 or £29 lOs. per society. In explanation of the apparent inadequacy of the payments summarised as regards "the secretaries of these Pomeranian societies with limited liability, it may be mentioned that the membership of these societies averaged only 60 in 1909, 65 in 1910 and 67 in 1911, whereas the average membership of 14,790 rural credit societies in 1910 throughout Germany was 98 ; and there were provincial Unions in which the average membership of affiliated credit societies averaged at the same date, e.g., 190, 174, 166, 148 144, 129 (two Unions), 126, 124 and 121 members. The figures are also influenced in a downward direction by the fact that owing to the comparative thinness of population consequent upon the prevalent conditions of land distribution — Pomerania is one of the classic provinces of large properties in Germany — the non-members' deposit business is relatively inconsiderable, while these credit societies also for the most part do not purchase agricultural requisites for their members to any great extent, there being 22 supply societies in the various Pomeranian districts which undertake this business. It will be observed that a conwderable proportion of the secretaries received either no payment or merely nominal payment — over 27 per cent, receiving not more than LOCAL CO-OPERATIVE BANKS. 95 £5 in 1911 — this is explained by the circumstance that in Pomeranian societies there is an unusual number o£ larger landholders, as well as of clergymen and others, who prefer to accept no payment for their services as secretary. Dr. Grabein, the General Secretary of the Imperial Federation, states that the average salary paid in 1902 to secretaries of 2,071 credit societies attached to^the Bavarian Union amounted to only £5 lis., and to the secretaries of 140 credit societies in the Schleswig- Holstein Union to £7 16s. All Unions furnish particulars of the cost of management of their affiliated societies, without, however, distinguishing the amount paid to secretaries. But in respect of most credit societies the greater part of such expenses of management may be ascribed to the payment of salaries to seCTetaries and of allowances to them for office accommodation — in most cases the secretaries set aside a room in their own dwellings for this purpose — and the amount stated under " cost of management or administration " enables the approximate remuneration of secretaries to be estimated. The following Table shows the average expenses of management of rural credit societies in 1900, 1901 and 1904-10, with the number of societies to which the figures relate, and their proportion to all existing rural credit, societies in each year : — Year. 1900 1901 1904 1905 1906 1907 1908 1909 1910 Cost of Management per Society. £ s. 17 18 18 4 20 17 20 6 22 12 24 17 27 7 29 16 33 1 Number of Societies to which the figures relate. 7,326 9,528 12,010 12,660 13,083 13,436 13,675 14,171 14,909 Percentage such Societies form of all Societies Existing at end of Year. 74-8 90-8 95-6 96-1 96-0 95-4 93-7 94-5 96-2 It will be observed that the average cost of management shows a steady increase in the period under review. As to the proportion of this amount falling to secretaries, it may perhaps be conjectured that about two-thirds of the amount entered as expenses ot management are assigned to them as salary and rent of office. As to office expenditure, the provision of the necessary safe (which may cost from £15 to £30) and of office books and stamps constitutes the most serious outlay. In the majority of cases the Union concerned arranges for the supply of a safe, debiting its cost to the account of the particular society with itself or with the central bank which, the society having likewise joined, has accorded a fixed credit at a normal rate of interest. The debt is liquidated by instalments at regular periods. The initial expenses of establishment are very frequently met either by the Union out of its own funds or out of funds granted by public authorities for the encouragement of agricultural credit societies. Current administrative expenditure consists mainly, after the remuneration of the secretary, in the cost of audit, subscription to Union, postage and stationery. Occupations represented. — The success of a society depends mainly upon the capacity and integrity of the secretary and of the chairman of the Committee of Management. The relations of the members and non-members depositors with the society are, however, principally those with the secretary, who, if he has not a high reputation for discretion and capacity, is not likely to secure their confidence and support. The field of choice is some- times restricted. Farmers, especially the smaller landholders, not being accustomed to book and account keeping, tend to be reluctant to undertake the work, which also offers little attraction to the more substantial members, whether, engaged in farming or in other occupations. At an earlier period the village schoolmaster and minor public officials (village or parish clerks, &c.) constituted the largest single classes among the secretaries ; and they are still very nftmerously represented. Of recent years the public authorities have been less willing in certain parts of Prussia to sanction the acceptance (especially by schoolmasters) of that office ; but the teaching profession is still very largely represented, especially in Silesia, in Thuringia, and in the West and South of Germany. Secretaries who are landholders are stated to be increasing. Shopkeepers, small industrial employers, and artisans, chosen owing to their familiarity with account keeping, form a larger element than might be expected from the proportion of the membership represented by them. In Wiirtemberg in 1909, of secretaries of 1,145 rural credit societies 151 were schoolmasters, 255 were public officials (other than schoolmasters and burgomasters), 90 were village burgomasters, 349 were shopkeepers, innkeepers, small industrial employers and artisans 96 PERSONAL CREDIT. 205 were peasant proprietors and 23 were medium proprietors, while there were 67 to whom no occupations were assigned. One member o£ parliament, one clergyman, one solicitor, and two doctors were also included among the holders of this office. In Wtirtemberg small proprietors preponderate. In the Province of Saxony which, as already mentioned, is an area of great agricultural richness and prosperity, where the land is occupied in almost equal parts by small, medium and large holders, the secretaries of 620 credit societies in 1910 were distributed in various social classes as follows : — Large land- owner, 1 ; fairly large owners, 44 ; medium owners, 175 ; tenants, 2 ; clergymen, 22 ; teachers, 112 ; shopkeepers, industrial employers, artisans, &c., 180 ; and those in other occupations including officials, 86. As secretaries of 372 Pomeranian credit societies in 1910 there were 154 teachers, 31 clergymen, 12 dairy managers, 121 persons under the description of "medium proprietors, small industrial employers and artisans {B andwerker) and small proprietors," and 54 belonging to unclassified employments. In the Province of Silesia, of the secretaries of 722 credit societies there were 287 teachers, or teachers and organists, 190 engaged in commercial or industrial occupations, 53 officials of various kinds, 64 large landholders, 95 medium and small holders and 22 described as house owners. In Silesia there were in 1911 some 1,600 credit societies, and it was stated that in the societies not included among those just dealt with the occupations of teaching and of farming are equally strongly represented. In the densely populated Kingdom of Saxony, where manufacturing and mining industries predominate, there were, in 1911, 286 rural credit societies ; of the secretaries of 257 of these societies 118 were large and medium landholders, 82 were engaged in commercial and industrial occupations ; there were 21 teachers, 14 officials, and 4 clergymen. In the same year of the secretaries of 2,160 societies attached to the Bavarian National Union, 4i^5 were teachers, and 291 clergymen. Board of Supervision. — Duties. — -The Committee of Management is responsible for the conduct of business, and the Board of Supervision is responsible for the supervision and general control of the activities of the Committee. The Co-operative Societies Act provides that the Board " must supervise the Committee in its conduct of business as regards all branches of administration, and to this end must keep itself informed of the progress of the affairs of the society." It may at any time require from the Committee a report upon the state of business, and, individually or collectively, its members may examine all books, documents and records, cash in hand, &c. The Board of Supervision must examine the yearly accounts and balance sheets, and proposals for the assignment of profits and losses, and must present the same to the General Meeting of Members for approval. It may also convene an extraordinary general meeting when it deems such to be necessary. It may suspend the Committee at its discretion and undertake the business of the society until the General Meeting passes the necessary resolutions with respect to its further administration. The conclusion of agreements on behalf of the society with the Committee, and any legal action on the part of the society against, the Committee must be undertaken by the Board. Other obligations may be imposed upon it by the articles of association. The Act further requires its members, in the discharge of their duties, to exercise the prudence of ordinary business men, and makes them jointly and severally liable for any losses due to their negligence. All loans to members of the Committee, or the acceptance of a member of the Committee by the society as a surety, requires the approval of the Board. For the general rights and duties of the Board as laid down by the Co-operative Societies Act, and as further imposed by societies in their articles of association, the reader is referred to the Appendix (Co-operative Societies Act, Sections 36-41, 63) and the model articles issued by co-operative central organizations. One of the most important duties of the Board in credit societies — to examine the merits and standing of members who have received or who apply for loans and the security offered by intending borrowers —may be especially noticed. In this respect the intimate knowledge of its members in the small area of the normal credit society is of great value. It is usual to elect to the Board members representing different classes of occupation as well as different villages, when several villages are comprised within the area of operation. In most societies the Meeting of Members authorises the Committee of Management to make loans only up to a certain amount, making the grant of loans of higher amount subject to the approval of the Board of Supervision. Decisions which are thus based upon the collective local knowledge of at least five members up to usually nine or ten members, are not likelyto prove wrong in many cases. All members of the Board, as also all members of the Committee and the secretary, are bound by the articles, under LOCAL CO-OPERATIVE BANKS. 97 pain of fine, to absolute secrecy in all matters coming to their knowledge by virtue of tbeir holding oflGlce in the society. Meetings. — The actual number of meetings held in the course of a year by the Board of Supervision in a credit society is not great. The Committee has to hold frequent meetings for the execution of ordinary business, but only when cases arise needing decisions reserved to the Board or when the annual business statement has to be examined is it necessary for that body to meet. Most model articles require at least four regular meetings in the year ; in certain cases {e.g. those of the Eaiffeisen Federation and of the Westphalian Union) the articles add one extraordinary meeting for a general audit and inspection of the affairs of the society. A not uncommon practice is for the Board to hold its meetings jointly with those of the Committee. Membership : Remuneration. — The Board of Supervision must consist of at least three persons, and election to the Board must be made by the Meeting of Members. The number chosen is usually six or nine. The model articles issued by the Imperial Federation recommend a multiple of three, and those of the Raiffeisen Federation that it should consist of from three to nine, and that " the number should always be divisible by three." A multiple of three is chosen because it is generally provided in the articles that the members are to be elected for three years, and that one-third of the members retire each year. The Act lays down that none of the members of the Board may be at the same time members of the Committee of Management, or act as permanent substitutes for members of the latter body, nor may they act as employees of the society. As to payment, remuneration based upon profits or business done may not be allowed, but otherwise there is no restriction. In most cases remuneration is not ofEered, although some societies allow fees per meeting attended, and for time expended, as well as re-imbursement for out-of-pocket expenses. Occupations Represented. — The persons elected to serve on the Board are usually drawn from the most substantial residents who happen to be members. In the Western, Southern, and Central districts of Cermany it is very common to find that the chairman is a clergyman ; in the East and North-East large and medium landowners constitute the most numerously represented class among the chairmen, but clergymen and ofiicials are also frequently found in this position. In Bavaria in 1911 the chairmen of 488 (out of a total of 2,160) societies were clergymen. In 600 societies in the Province of Saxony in 1910, 16 large, 98 medium, and 242 other landowners, and 8 tenant farmers were chairmen of Boards of their societies ; there were also holding this oflfice 66 clergymen, 37 teachers, 46 shopkeepers or industrial employers and artisans, and 87 persons following various other occupations. In the Kingdom of Saxony in 1910, of the chairmen of the Boards of 257 societies 142 were large and medium landowners, that is, 54 per cent, i 32 were officials of various kinds ; and there were 15 clergymen, 4 teachers, and o3 shopkeepers, industrial employers and artisans. In Silesia agriculturists of all classes are also very strongly represented : in 1909 there were, as chairmen of the Boards of 722 rural credit societies affiliated to the Provincial Union, 44 owners of manorial estates (Rittergutsbesitzer) , 135 large (but non- manorial) land holders, 165 medium and small land holders, agriculturists constituting thus 48 per cent, of the total ; of other occupational groups there were 88 clergymen, 48 teachers, 84 public officials, 138 engaged in commerce or industry, 7 belonging to liberal professions (mostly doctors), and 23 who may be described as retired professional or business people. In Wurtemberg in the same year there were as chairmen of the Board of Supervision in 1,144 societies, 100 clergymen, 40 teachers, 99 village mayors, 166 public employees of various descriptions (post-office, communal, excise, and other officials), 336 shop and inn-keepers, industrial employers and artisans, 255 peasant proprietors, 18 medium and five large proprietors, and 94 were described as of various occupations not comprised in those already cited or as retired from business, while there were 20 doctors, lawyers and surveyors, an^ one member of parliament. As compared with the Kingdom of Saxony and the Province of Silesia, the prominence of clergymen, village mayors and other public officials, and of those occupied in commerce and industry, is noteworthy in the case of Wiirtemberg, and may be held to reflect the conditions obtaining as a result of the respective differences in the distribution of property. Liability to Remissness on part of Boards. — That the Board of Supervision is liable to view its duties rather lightly is apparent from the repeated comments of auditors and the attention given by the Unions to urging greater activity on their part. Members of the Board are found to be too ready to leave things to the Committee, and to accept its advice without much enquiry. Their apathy is due to many causes, among which 25674 G 98 PERSONAL CBEDIT. perhaps the most important are the disinclination to examine too closely the work done by persons with whom they are in neighbourly relations, and the fact that many have but little business knowledge, while a proportion o£ the members of the Boards are often elected to ofBce as lending local prestige to the society. A certain general supervision is, however, in most cases assured by the responsibility attaching to the members to make good all losses shown to be due to their failure to carry out their duties "with the prudence of ordinary business men." Meeting of Members. — The rights of individual members are exercised through the Meeting of Members, or General Meeting as it is most usually termed. In the General Meeting rests the supreme authority of the association. No member may possess more than one vote. Women, who, though admitted to membership, are usually prohibited by the articles of association from participating in a General Meeting, and corporate bodies, exercise their vote by proxy, but it is provided that no member may act as proxy for more than one such person or body. Other votes must be exercised in person. The Act provides also that " a member may not vote upon any motion which releases him from any liability as regards the society {e.g., a member o£ the Committee may not vote upon a motion touching the hability of the Committee arising out of its conduct of business) or which relates to the conclusion with him of a contract binding upon the society {e.g., the conclusion of an agreement with a member for the loan of money to the society)." General Meetings are usually convened by the Committee. In ordinary cases a week's notice must be given to the members, and the purpose of the meeting must be stated at the time of summons ; if notification of a resolution to be proposed is not given three days in advance, such resolution may not be put to the vote of the meeting. One annual General Meeting must be held, and this usually takes place early in the year — the annual accounts must be presented to the members within six months of the close of the last financial year. As a rule, two ordinary General Meetings are held each year. If one-tenth of the members (or a less number, if so provided in the articles of association) submit a written request for a Meeting, giving their reasons therefor, the Meeting must be at once summoned, and upon similar application a notification of the agenda must be furnished. All resolutions passed by a General Meeting must be recorded in the minutes of the society, the inspection of which must be permitted to any member upon request. The following matters are usually subject to the decision of the General Meetings, either by virtue of the Act or of the articles of association adopted by societies : — 1. Alterations of and additions to the articles of association. 2. Approval of and alteration in the working rules (business regulations). 3. Dissolation and liquidation of the society. 4. Approval of the annual accounts and assignments on account of profit or losses. 5. Elections to the Committee of Management and to the Board of Supervision. 6. The institution of legal proceedings against members of the Committee or of the Board. 7. Removal from office of members of the Committee or of the Board. 8. The interpretation of the articles and of the decisions of the General Meeting itself. 9. The fixing of the amount of the share and of the liability attaching to it, and of the instalments of shares to be paid. 10. The levy of entrance fees. 11. The determination of the maximum amount of the loans and deposits to be accepted by the society. 12. The determination of the minimum deposits to be accepted by the society. 13. The determination of the total of the loans to be made to members. 14. The determination of the rates of interest for loans and deposits. 15. The determination of fines to be levied upon ofiicials of the society for violation of business secrets. 16. The acceptance or rejection of the report of the legal audit presented by the auditor. As to (4) the Act provides that the annual accounts and balance sheet must be posted up, at least one week before the Meeting which is to vote upon them takes place, in the regular office of the society, or in another suitable place to be duly indicated by the Committee, or otherwise brought to the knowledge of members. As a rule, the notice of meeting and the accounts are published in the local newspaper or in that of the Union to which the society is affiliated. On application any member is entitled to have made at his own expense a copy of the balance sheet and of the annual statement of accounts. LOCAL CO-OPfiRATIVE BANKS. 99 Participation in the General Meetings of rural credit societies offers little difficulty to members owing to the narrow area covered by the societies, and by prohibiting voting by proxy (except iii the cases already alluded to) the law aims at securing the actual presence o£ members, and maintaining in this way an essential characteristic of a co-operative society as a combination of persons for the purpose of achieving by united action a common purpose not attainable by individual effort, as distinct from a mere union of capital as exemplified in a joint stock or other company. By providing that no person shall possess more than one vote the law also seeks to prevent concentration in a few hands of influence on the affairs of the society. The number of members in a rural soci'ety is rarely so large that the members are unknown to each other, and the business of the society is seldom or never so extensive and complicated that the members cannot realise the points obviously at issue. Yet it is a not uncommon complaint that the meetings are poorly attended, and in very many cases societies exact fines {Qd. or Is.) from members absent without cause. The usual agenda of a Meeting, being concerned only with the reading and passing of the accounts, the fixing of rates of interest, of maximum totals of deposits receivable and of loans to be granted, election of officers and other business matters of a formal nature, possess little attraction for the ordinary members who regard the just decision on such points as more properly within the competence of the Committee and Board of Supervision of the society. With a view to stimulating interest in the Meetings special addresses are given in a large proportion of societies sometimes by members, sometimes by outsiders, on subjects likely to be of interest, either on general, agri3ultural, educational, legal, economic, moral or social topics. In the model articles of the Raiffieisen Federation it is stated that " the Members' Meetings should also especially conduce to the strengthening of friendly relations among the members and to the extension of business knowledge through the reading of instructive papers and towards the interchange of practical experience." Political and religious subjects are rigorously banned at General Meetings. An impression may be left upon readers that the system of government of a rural co-operative society is somewhat complicated and unwieldy, with its Committee of Management, Board of Supervision and General Meeting ; but this three-fold machinery works easily and smoothly in practice without loss of efficiency. The business of the ordinary village society is exceedingly simple in its nature and limited in extent. Indeed the actual time to be necessarily spent by the members of the Committee in examining applications for loans and signing receipts for deposits, which is the principal part of their business, is small, while the Boards of Supervision usually find four to six meetings in the year quite ample for the adequate discharge of their obligations. It is generally arranged that the meetings of the Committee and the Board shall be held more fi-equently in the months from November to March when a village population has more leisure. Finally, while it is proper for the General Meeting to keep its control effective, actual recourse to its decision on the points enumerated above does not entail any very serious expenditure of time, two Meetings in the year, each occupying perhaps two hours, being generally found adequate. Progress and Present Position. — The recent progress and present position (down to January 1, 1911) of the rural credit societies attached to the Imperial Federation of Agricultural Co-operative Societies may be seen from the General Table below, which gives the most important results of each year's working from 1905 to 1910. The statistics may be taken as representative of all German rural credit societies, inasmuch as for each year over 80 per cent, of all existing societies are taken into account. Similar detailed figures covering the remaining societies are not available to the writer. This General Table may, however, be suitably preceded by the following, which shows the range in volume of turnover for a large percentage of all rural credit societies in the years indicated : — Busiueas Done. Number of Societies to which figures relate in 1900. 1905. 1906. 1907. 1908. 1909. 1910. Up to £2,500 Over £2,500 up to £5,000 „ £5,000 „ £25,000 „ £25,000 „ £50,000 „ £50,000 „ £100,000 --„ £100,000 1,127 1,107 1,850 185 49 16 1,568 2,177 5,986 812 308 34 1,561 2,255 6,147 925 325 122 1,405 2,070 6,527 1,088 380 148 1,291 1,856 6,199 1,477 511 176 1,274 1,949 6,940 1,462 511 248 1,105 2,169 7,150 1,409 590 273 Totals 4,334 10,885 11,335 11,618 11,510 12,384 12,696 2S674 G 2 100 Personal CREDlf. It will be observed that there is a steady increase in the aggregate of societies doing a business of over £5,000, and that those banks with a turnover of from £5,000 to £25,000 number considerably more than half of those reporting to the Federation in the years 1905-10. Rural Credit Banks of the Imperial Federation of Agricultural Co-operative Societies. Comparative Table* showing the most important Statistical Results of their Operations for the Years 1905-1910. 1905. 1906. 1907. 1908. 1909. 1910. Imperial Pederation Banks reporting — per cent, of all rural banks 83-4 83-4 82-0 82-0 83-2 81-9 Banks, number 10,999 11,373 11,669 12,161 12,614 12,797 Total membersbip 959,717 1,015,108 1,059,348 1,111,174 1,163,186 1,208,997 Average por bank 87 89 91 91 92 95 Turnover, amount * 139,904,087 158,703,442 179,029,103 196,27?,076 222,808,076 247,000,195 Per bank ... & 12,719 13,954 15,390 16,139 17,663 19,301 Per member ... & 146 156 . 169 176 191 204 Total working capital ... & 63,519,943 71,286,699 78,015,588 86,520,399 96,776,163 106,394,910 Per bank ... & .6,775 6,268 6,688 7,114 7,672 8,319 Per member ... & 66 70 73 78 83 88 Working capital owned & 2,357,548 2,634,825 3,098,854 3,233,721 3,666,975 4,060,806 Per bank ... & 214 231 265 266 295 317 Per member ... * 2-5 2-6 2-9 JJ-9 3-1 3-3 Of which : (a) Paid-up share capital £ 814,964 881,483 962,448 1,048,880 1,117,921 1,202,367 Per bank ... £ 74 77 82 86 88 94 Per member ... & 0-8 0-8 0-9 0-9 0-9 •9 Ci) Reserve £ 1,542,582 1,753,341 2,004,961 2,184,840 2549,053 2,858,439 Per bank ... £ 140 154 172 179 203 223 Per member ... £ 1-6 1-7 1-9 1-9 2-2 2-3 Borrowed working capital £ 61,116,397 68,651,874 75,048,175 83,286,677 93,109,188 102,334,132 Per bank ... £ 5,560 6,036 6,431 6,848 7,381 7,996 Per member ... £ 63 67 71 75 80 85 Of which : (a) Deposits on current account at end of year ... £ 6,807,882 7,709,734 8,026,175 .9,421,932 9,453,892 10,326,523 Per bank ... £ 959 845 880 1,104 1,145 1,739 Per member ... £ 11 10 11 12 12 13 (b) Savings deposits at end of year £ 49,417,880 55,363,701 59,988,800 66,915,879 72,780,923 82,953,667 Per bank ... £ 4,493 4,912 5,142 5,502 5,769 6,482 Per member ... £ 51 54 56 60 62 68 Sums outstanding with members on cur- rent account at end of year ... £ 15,203,633 17,254,578 18,542,662 20,570,945 21,299,770 23,271,269 Per bank ... £ 2,143 1,891 2.266 2,061 2,201 2,324 Per member ... £ 25 24 ■ 25 23 24 24 Sums outstanding with members on loans for fixed periods at end of year ... £ 35,758,401 40,688,552 44,789,299 48,375,830 54,122,319 59,548,394 Per bank ... £ 3,547 3,805 4,259 4,818 5,252 5,985 Per member ... £ 40. 42 47 48 53 58 Payments on current accounts to members during the year £ 16,679,502 19,468,324 22,105,561 24,154,419 30,683,192 34,130,594 Per bank ... £ 2,148 2,255 2,511 2,715 3,096 3,378 Per member ... £ 24 24 28 29 34 35 Loans granted for fixed periods during the year £ 10,762,985 12,217,722 13,295,051 12,843,885 14,374,195 15,539,559 Per bank ... £ 1,122 1,202 1,450 1,302 1,480 1,599 Per member ... £ 12 13 14 14 14 15 Total payments to members during the year as loans and on current accounts £ 27,442,487 31,686,046 35,400,612 36,998,304 45,057,387 49,670,153 Per bank ... £ 2,612 2,922 3,186 3,196 3,572 3,881 Per member ... £ 29 32 34 34 38 41 Payments by members on current ac- counts during the year £ 14,840,795 17,943,334 19,847,184 23,070,492 29,878,650 33,518,820 Per bank ... £ 1,911 2,136 2,254 2,594 3,015 3,367 Per member ... £ 21 22 25 28 32 34 Repayments of loans for fixed periods during the year £ 6,733,582 7,741,676 8,431,443 8,580,548 9,405,547 10,060,013 Per bank ... £ 706 762 919 910 965 1,026 Per member ... £ 7-5 8-2 9-4 9-6 9-5 9-9 Total of all payments by members on loan and current accounts during the year £ 21,574,377 25,685,010 28,278,627 31,651,040 39,284,197 43,578,333 Per bajik ... £ 2,053 2,418 2,548 2,734 3,106 3,405 Per member ... £ 23 25 27 29 34 36 Savings deposits during year ... £ Per hank ... £ 17,970,449 1,720 19,607,857 1,808 20,704.178 1,865 22,652,390 1,957 25,267,984 2,003 27,080,443 2,116 Per member ... £ . « 19-2 18-8 20-1 22-0 21-7 22-4 • This Table has been compiled from the Yearbooks of the Federation, the figures there given being merely changed into English currency at the rate of 20 marks to the £. LOCAL CO-OPERATIVE BANKS, 101 1905. 1906. 1907. 1908. 1909. 1910. Cost of administration £ Per bank ... £ Per member ... £ 257,414 24-0 0-27 257,705 24-4 0-27 296,436 26-8 0-30 340,708 28-0 0-32 287,884 31-9 0-35 443,891 34-7 0-36 Value of agricultural requisites supplied £ Per bank, reporting £ 2,354,084 461 (6,187 banks) 2.646,369 439 (6,020 banks) 3,029,617 490 (6,172b!inks) 3,936,770 544 (7,231 banks) 4,443,285 615 (7,217 banks) 4,272,573 561 (7,611 banks) Reserve, average per cent, of total turn- over Total working capital per cent, of total turnover 1-1 45 1-1 45 1-1 44 1 1 44 M 43 1-1 43 Percentage of total working capital on an average, formed by — Reserve Paid-up share capital Working capital owned by banks Borrowed working capital 2-5 1-3 3-8 96-2 2-4 1-2 3-6 96-3 2-6 1-2 3-8 96-2 2-6 1-2 B-8 96-2 2-6 1-2 3-8 96-2 2-7 11 3-8 96-2 The working capital owned by banks stands to the borrowed working capital in the relation of 1 to 26 26 25 27 25 25 Net profits per cent, of — The paid-up capital of members The total working capital 34 0-4 32 0'4 33 0-4 31 0-4 32 0-4 37 0-4 The following Table gives a general view of the position of 95 per cent, of the German rural credit societies on 1st January, 1911. Although the credit societies attached to the Polish Union at Posen are not usually classified as belonging to agricultural credit societies of the ordinary type for certain reasons — e.g., they work with large shares, pay good dividends, operate over larger areas, grant mostly loans for short periods though renewable, usually have skilled and paid management — particulars respecting them are here added on account of the fact that two-thirds of their members are returned as landholders. General View of the Position of 95 per cent, of the German Rural Credit Banks, with that of the Polish Co-operative Credit Banks, on January 1st, 1911.* Imperial Federation (including Wurtem- berg Union. Baden Treves Agrarian League, Berlin. Totals respecting Polish Union Raiffeiseu Federa- Union. Union. Columns 2 to 6. at Posen. tion). (1) (2) (3) (*) (5) (6) (7) (8) Number of banks affiliated 12,978 1,168 422 356 106 15,030 265 Number reporting 12,797 1,164 422 346 61 14.790 265 Membership of societies reporting... 1,208,997 132,494 63,325 36,753 4,344 1,445,913 125,108 Average membership 95 114 150 106 71 98 472 Owned capital : — £ £ £ £ £ £ £ Total 4,060,806 302,646 409,805 82,259 10,812 4,866,328 1,804,258 Per bank 317 260 959 238 177 322 6,810 Per member 3-3 2-3 6-4 2-2 2-5 3-3 14-4 Of which (a) Paid-up share capital 1,202,367 121,730 250,743 11,843 6,568 1,593,251 1,188,313 Per bank 94 103 595 34 108 108 4,488 Per member •90 •9 3-9 0-3 1-5 1-1 9-5 (6) Reserve 2,858,439 180,916 158,862 70,616 4,244 3,273,077 615,945 Per bank 223 155 365 204 70 221 2,324 Per member 2-3 1-4 2-4 1-9 1 2-6 4-9 Borrowed capital : — Total 102,334,132 4,804,502 3,661,331 2,471,162 ~^ 113,271,127 (14,729)* 11,626,456 Per bank 7,996 4,127 8,676 7,142 — 7,690 43,873 Per member 85 36-2 57-8 67-2 — 78-5 92-9 Of which (a) Savings deposits ... 82,953,667 3,875,686 3,216,327 2,433,415 — 92,479,095 (14,729)* — Per bank 6,482 3,329 7,621 7,035 — 6,278 — Per member 68 29-2 50-8 66-2 — 64-1 (i) Current deposits ... 10,326,523 445,391 55,765 37,747 — 10,865,426 (14,729)* — Per bank 1,739 380 132 109 — 738 — Per member 13 B-36 0-88 1-03 — 7-53 — Liabilities : — Total 106,394,938 5,107,149 4,128,994 3,026,960 — 118,658,041 (14,729)* — Per bank 8,470 4,387 9,794 8,748 — 8,056 — Per member 88-0 38-5 65-2 82-3 — 82-3 — Assets : — Total 106,748,692 5,128,558 4,156,601 3,053,643 281,162 119,368,456 13,431.716 Per bank 8,342 4,483 9,849 8,826 4,609 8,071 50,685 Per member 88-3 38-6 66-6 183-1 64-7 82-5 107-4 * In computing the averages per society and per member in this Table the tolal number of societies and members given as reporting has been taken as divisor. The figures in brackets in column 7 indicate the number of societies included to find general average (the corresponding deduction of members having been also made in these oases) where the Wiirtemberg Union or the Agrarian League or both, do not report. S6674 G 3 102 PERSONAL CREDIT. (1) Imperial Federation (including UaifEeiseu Federa- tion). (2) Wlirtem- berg ITuion. (3) Baden Union. w Treves Union (5) Agrarian League, Berlin. (6) Totals respecting Columns 2 to 6. (7) Polish Union at Posen. (8) Loans and overdrafts outstanding at end of year : — Total Per bank Per member Loans and payments to members on current accounts during year : — Total Per bank Per member Repayments of loans and payments on current accounts by members : — Total Per bank Per member Savings deposits made during year : — Total Per bank Per member 82,819,663 6,470 68-5 49,670,153 3,881 41 43,578,333 3,413 36 27,080,443 2,116 22-4 4,458,022 3,830 33-7 3,273,918 7,758 51-7 995,485 2,358 15-7 737,160 1,746 11-6 915,431 2,169 14-4 2,482,965 7,176 67'6 818,882 2,366 22-3 641,848 1,855 17-4 753,318 2,1T7 20-5 93,034,568 (14,729)* 6,316 64-5 51,632,868 (13,565)* 3,805 39-4 44,956,341 (13,565)* 3,314 34-3 28,749,192 (13,565)* 2,119 21-9 10,401,382 39,250 83-1 * See note, page 101. The attention of the reader is particularly directed to the following accounts of individual rural banks, selected from among those which were personally investigated by the writer. They present concrete pictures of agricultural credit societies at work, and exhibit in each case some noteworthy special feature. In any summary statement respecting them their individuality would be entirely lost. Many fresh points of some importance, as well as illustrations of statements made in the foregoing pages, will be found in the accounts of several of these banks. Included are accounts of two societies of the Schulze-Delitzsch type, namely, the Augsburg Agricultural Credit Association and the Cosel Advance Association. Arheilgen Savings and Loan Bank. Arheilgen is a Hessian village about two-and-a-half miles from Darmstadt, with a population of about 5,000 persons. On the initiative of certain inhabitants of Arheilgen this Bank was formed in 1865 as an independent bank {freie Kasse), and did not join any Union until compulsory audit in 1889 caused it to become affiliated to the Hessian Union. The membership has grown from 50 in 1865 to 380 in 1910. Less than one-third of the members are engaged in agriculture as their principal occupation, but many of the remaining two-thirds (small employers of labour, shopkeepers, artisans and other workpeople employed in or near Darmstadt) have small holdings or allotments. The ordinary farmers have small properties; the largest cultivated about 50 acres, and the majority from 6 to 12 acres. Rye, oats and potatoes are largely grown; and cattle (stall fed) and pigs are kept by the smallest holders. The shares are of £2 10s. nominal value, and the liability is unlimited. The manager stated that there was no intention of raising the value of the shares, as the society had a reserve fund of £4,030. In 1909 a dividend of 5 per cent, was paid. Loans for fixed periods up to £50 are granted to members on promissory note, backed by at least two sureties; in 1909 and 1910 4f per cent, interest was charged. Repayments should be made in five annual instalments payable on January 1st; the Society, however, is not, in practice, stringent upon this point, as for some years it has received abundant funds. The Committee has authority to grant loans to members on current account (overdrafts) up to £150, and, with the assent of the Council of Supervision, up to £200. For higher amounts the vote of the members must be taken in each case. Overdrafts of £500 and £750 have been sanctioned by the members. At least two sureties, who must be resident in the village, are required. The authority to overdraw may be cancelled and repayment demanded at three months' notice. The interest charged on such loans had been 4| per cent, for a considerable period. LOCAL CO-OPERATIVE BAKkS. 103 Loans on mortgage are granted at 4 J per cent.; and advances are also made for the purchase of real property {e.g., when in consequence of death a property is auctioned for division of proceeds among the heirs and is bought perhaps by one of them) at 5 per cent, plus a small commission, and for the rent of land at the same rate but with a higher commission (2 J per cent.). Advances on mortgage are given for an amount not exceeding 60 per cent, of the estimated value of the property in question. The valuation is generally made by the Committee, which includes the mayor and the clerk of the village, who are cognizant of the taxable values. It may here be remarked that in societies in which these officials do not happen to be members of the Committee of Management, the latter body has only to send a member to the office of the local authority, where all information is kept as to all landed property, the charges thereon, &c., in the land register. In Arheilgen the Register of Title was established in 1910. Loans on mortgage and for purchase of property are made to both members and non-members. No advances are made upon the security of pledged goods {e.g., corn, cattle). Deposits receive 4 per cent, interest, which is reckoned by the calendar month from the first of the month following its receipt. The rate for many years had been 3| per cent. All deposits receive the same rate of interest irrespective of the period for which they are made. The secretary said that it was not to the interest of the society to pay higher rates for money at three, six, or twelve monthly terms, as it had abundance of money; and, if need should arise, the society could borrow from its central bank in Darmstadt. The Society had not yet introduced the home savings boxes, but had the intention of doing so. It has achieved great success by the sale of savings-cards, which have been sold by it since 1865. A collector is paid £20 per annum to make the round of the village every Sunday to sell cards valued at 6(1., 2^., 3^., and 5^., The proceeds are paid in on the following Wednesday, when fresh supplies of cards are obtained. On the day of the writer's visit the collector procured cards of the value of £55 for sale on the following Sunday. The secretary stated that from £45 to £50 in deposits were obtained in this way each week. Interest on such deposits is paid from the beginning of the next quarter. As bank connection the Society uses the central provincial co-operative bank, and binds itself to carry on no business with any other banking institution. The Society is a shareholder in the central bank, which measures the maximum amount of credit it is willing to grant according to the number of shares — at the rate of £400 credit for each £50 share held. The Society does not often need such outside capital. The Council of Supervision numbered twelve, and was composed of four farmers, two carpenters, and one man with no occupation, the other five being in various employments (master-mason, hardware dealer, tax collector, compositor, and cooper). The Committee of Management consisted of six persons : the chairman was secretary to the village mayor, the controller of accounts, a compositor, the secretary, a teacher; the others were, the mayor, a farmer and a book- binder. These members of the Committee with no further official duties received the yearly remuneration of £2 10s., the chairman received £5, the controller (who was always obliged to be present on Wednesday afternoons when the office was open and to check the books weekly), £17 10s., and the secretary, £57 10s. per annum. The Council of Supervision receive no remuneration. The expenses of management in 1909 amounted to a total of £180. Among the items (apart from those just detailed) were : taxes, £15 ; rates, £21 ; books, stationery, &c., £8. The Society has only paid rates and taxes for the four years since loans to non-members were first granted. Further, £10 was paid to the Union as annual contribution and another £10 for a minute audit by the Union. The annual contributions of the Society to the Union consist of a fixed amount of 15s., plus a rate determined by turnover, with a total maximum of £10. This payment gave a right to free legal audit and to a copy of the Union paper. For a minute audit of all the accounts of the society additional charges are made by the Union. The Society has had such an audit carried out in each year since 1902, the cost having been : in 1902, £6 18s.; in 1903, £7 4s.; in 1904, £8 5s.; in 1905, £9 12s. ; in 1906, £10 2s. ; in 1907, £6; and in 1908 and 1909, £10. Out of the profits of the Society in 1909 the directors gave £2 10s. to a drawing school, £11 7s. to the public school (for atlases, sewing-machine, &c.), and £6 10s. to the district cattle show. 26574 a 4 104 PERSONAL CREDll. The position of the Society at the end of 1909 was as follows : — membership, 360; paid-up share capital, £922; reserves, £4,030; savings deposits, £67,084; out- standing on current account, £11,127, and in loans for fixed periods, £57,882. In 1909 £9,442 was paid out on current account, and £9,164 paid in; £9,659 was paid out in loans for fixed periods, and £7,010 paid in on such accounts. The amount of savings deposits paid in during the year was £17,483. There are four other co-operative societies in Arheilgen. (1.) A supply society for agricultural requisites. This society sells manures, seeds, fodder, &c., but keeps no shop. It collects and transmits the orders of its members to the central society, and upon arrival of commodities at the railway station the members concerned carry away their goods. The society, which was founded in 1880, with unlimited liability, had in 1909 90 members, a paid-up share capital of £9 10*., and reserves of £161. The goods received in 1909 amounted in value to £945, and the cost of management to £27 10^. (2.) A co-operative threshing-machine society. This society was originally an association of farmers, and on its founda- tion as such borrowed £1,250 on current account at the co-operative village Bank. In 1904 it was coiiverted into a co-operative society, with shares of £2 10s. each and with unlimited liability. It possesses a threshing machine, locomobile, and a threshing hall upon its own piece of land. It threshes for members and non- members at the same rate of l^d. per minute. At the end of 1909 the membership was 27; the paid-up share capital, £72; the reserves, £9; the book value of assets, £705; and the management and working expenses for the year, £282. (3.) A refuse co-operative society. This society was formed for the acquisition for manure purposes of the sewage and refuse from Darmstadt. Its members number fifty, and its shares are £5. (4.) A distributive co-operative society. This society, which had about 400 members, is concerned with the sale of provisions, &c. AuERBACH Savings and Loan Bank. Auerbach is a village with 2,500 inhabitants situated ten miles from Darmstadt on the main line of railway between Frankfort and Basle. It is regarded as a small summer resort, and attracts about 2,000 visitors each year. The farmers cultivate for the most part small holdings of from 10 to 15 acres; and fruits, grapes, potatoes and beet are largely grown. The Bank was founded in 1883 with' 27 members; in 1903 the number of members had grown to 188, and in 1910 to 231. The nominal value of the shares, which carry unlimited liability, is set at £25, £2 10s. being paid up. The most numerous class of members are independent artisans; after them the farmers, and then the small shopkeepers. The Board of Supervision consists of nine persons ; the chairman is the village mayor, who is an innkeeper and winegrower; there are two farmers, two master- masons, a master- joiner, a glazier, a shoemaker, and a cork-cutter. The Committee of Management contains six members : the director (a farmer), the supervisor and the secretary (who are teachers), a carpenter, a brickmaker, and the village tax collector. The ordinary members of the Committee are paid 2s. per meeting; the director receives an annual sum of £10, the supervisor £15, and the secretary £50. Deposits at call not exceeding £75 receive 4 per cent, interest; above that amount 3^ per cent. Current account deposits, open only to members, receive 4 per cent, up to a sum of £100, and 3| per cent, above that amount. No collections are made by savings cards, or home savings banks, or stamps. Loans are granted almost exclusively on current account at 4 J per cent. The total amount of loans outstanding may not exceed £35,000 ; until 1909 the limit had been fixed by the Meeting of Members at £25,000. The normal credit for members backed by sureties is fixed at £150, but with the consent of the Board of Supervision it maybe extended to £300. Two sureties at least are always required, and not more than two, provided that they are good for the amount in question. Non-members may become sureties, but they must live in Auerbach or in the village of Hochstalt, IJ miles distant. If a surety leaves these villages another surety must at once be found. A surety may not withdraw at will, but he may notify the directors of his wish to withdraw, stating his reason; the member is then informed, and requested to find another surety or repay the society within three months. One person may become surety for two members, the Gemmittee deciding as to whether his means appear adequate to cover the amount. tOCAL CO-OPERATIVE BANKS. 105 Loans are also granted on mortgage, but mainly to non-members. The Co- operative Societies Act permits loans to non-members by way of investment of surplus funds. The rate of interest is usually 4 J per cent. Advances to pay for property purchased are common, and are found very profitable by the Society. Such advances, usually repayable in six yearly instalments, are charged 4^ or 5 per cent., plus a single commission charge of about 1| per cent., and are secured by mortgage claim upon the property, this being cancelled when the last payment is made. Sometimes the whole of the purchase money is advanced, but as a rule only up to 60 per cent, of the assessed value of the property. The Society owns six shares of £50 in its central bank, which allows it a credit not exceeding £3,000 at the rate of 4 J per cent. (1910). This credit is rarely utilised to its full extent. The Society was able to make several donations out of its profits after payment of a dividend of six per cent, upon the shares. Thus, the local school for children under six years old received £2 10*., and the cattle insurance society £3 10s., while a further £5 was devoted to other public objects. A total of £1,400 has been placed to reserve. The position of the Society at the end of 1909 was as follows : — membership, 207; paid-up share capital, £540; reserves, £1,417; savings deposits, £19,245; monies paid out on current account, £5,650 ; and paid in, £5,973 ; loans granted for fixed terms, £3,323; and repayments on such loans, £2,513; savings deposits made in the course of year, £6,141, and cost of management, £121. Augsburg Agricultural Credit Association. This Society, which is affiliated to the Schulze-Delitzsch Federation, possesses several distinguishing features. Its area of operations is not confined to a small district but extends over the kingdom of Bavaria; and there is probably no society (other than central societies) in Germany with so large a sphere of action. Nor has any co-operative credit society so large a membership; in 1910 it amounted to over 12,000. A noteworthy feature of the Society is its system of local representa- tives, of whom there are some 300 distributed in every district of Bavaria. The Society was founded in 1868 with the object of serving agriculturists at a time when great agricultural depression prevailed in parts of Bavaria. The provincial government then lent some £260, and a grant of about £110 towards first expenses was made out of district funds. Business was commenced in a room in the provincial government building. Its success was so rapid that after the first year no further aid was required, and the above-mentioned loan was repaid after two years. In 1872 its area, hitherto confined to two Bavarian provinces (Swabia and Neuburg) was extended to cover all Bavaria. On its estab- lishment 185 members had joined; a year later the number had grown to 965, in 1878 to 7,228, in 1888 to 10,627, and in 1909 to 12,586. In 1907 landholders formed 625 per cent, of the members. The shares are fixed at £50 with unlimited liability, but at present not more than £25 may be paid up. Each member must pay up one-tenth of the nominal value either on admission or in successive monthly instalments of at least 2s. There is an entrance fee of four shillings. Dividends are payable upon each com- pleted tenth-part of the full share value. Members wishing to retire from the Society must give written notice at least three months before the end of the year, that is, not later than in September; otherwise their retirement only takes effect at the end of the succeeding year. The Committee of Management is composed of three directors, who are paid officials giving the whole of their time to the business of the bank. The permanent clerical staff consists of about twenty persons. The Board of Supervision contains nine members. Of these one is described as an agriculturist, another as farm bailiff or agricultural manager (Oekonom), four as men of independent means, two as manufacturers, and one as a lawyer. To act as substitutes in the absence of any of these nine members, six persons are elected, of whom one may be an agriculturist (Oekonom). Nine of these fifteen are residents of Augsburg. The bulk of the business is in fact transacted with non-agriculturists who are mostly resident in Western and Southern Bavaria, although the society has also many members resident in Augsburg. Formerly the Bank had a larger business with agriculturists, for whom it was originally created, but at the present time only about one-fifth of its loans are made to this class. Within the last twenty- 106 PERSONAL CREDIT. five years about 2,500 new societies, designed for the special purpose of meeting the particular needs of agriculturists, have sprung up in Bavaria, and this side of the society's business has not therefore expanded to such an extent as its urban business. Until 1886 the Association remained exempt from taxation as an agricultural co-operative society; but between 1886 and 1908 its annual payments in taxes fluctuated between £108 and £845. In order to handle its business outside Augsburg, the Society maintains no branches, but appoints agents — stated in 1911 to number almost 300 — in the larger villages and small towns of Bavaria. These agents are mostly tradespeople. Their business is to obtain new members, receive deposits, transmit proposals for loans and investments, collect bills, &c.; no authority is given to them to grant advances, nor may they give other than provisional receipts for monies received on account of the society. In forwarding proposals, whether for membership, loans, or any other matter, they are required, for instance, to express their opinion of the intending borrower and of his proposed sureties ; and they are held responsible for the authenticity of all signatures to bills and other documents passing through their hands. As to cash, they may not retain monies received for the society in excess of £6. As remuneration for their services these agents are paid a per- centage upon the business transacted through them, and half of the same percentage upon that transacted directly by the Society within their allotted district. In addition to these ordinary agents the bank appoints confidential agents, usually unpaid, for areas embracing the districts of several ordinary agents. No public intimation is given of their functions, no signs being posted up stating that they are agents of the society, as is done for the other agents. Their principal duty is to examine and note loan proposals, which must be sent to them by the local agents, before they are forwarded to Augsburg. As another means of organising its business the Society authorises in its articles of association the formation of district committees, when at least sixty members of the societies are resident within a given district, the limits of which are deter- mined by the Committee of Management at Augsburg. These Committees may also be elected by a minimum number of sixty members living in one commune, or in at most three adjoining communes. Their duty is to supervise the business done by the agent, to examine proposals for loans, and generally to safeguard and advance the interests of the Society. Any member of this body, when so authorised unanimously by the Committee, has the right to inspect the books and all documents of the Society. District Committees have no power to grant loans or to enter into any engagement binding upon the Society without its express authority. Loans are granted on (a) securities, (&) bonds and bills backed by sureties, (c) mortgages, and (d) pledging of goods, (a) Securities are loaned upon up to 90 per cent, of their current market rate, but should they decline in value below the amount advanced on them, additional security must be furnished. (&) The amount lent on bills depends upon the soundness of the borrower and of the sureties, (c) Sums are lent on mortgages to the extent of not more than one-half of the value of the property, and in the case of second mortgages must be secured by supplementary surety. Mortgage loans are rarely made, (d) Loans on goods are given up to a maximum of two-thirds of the current market value of such goods. No loans under £1 are granted, and no repayments of under that amount are accepted. In 1911 the loans outstanding with members ranged in amount from £5 to £1,500 and £2,000, but loans to single members of up to £15,000 are authorised. The purpose for which loans are required must usually be stated by the borrower and verified by the local agent. Loans are made for the most part on bills backed by sureties (who may be members or non-members), run for three months, and are renewable for periods of three months, with a maximum period of 18 months. If the loan is not then repaid, further security is required. But the Association grants only supple- mentary^ capital, not permanent capital. After 18 months the capital sum should be repaid, because the loan of money, especially of larger sums, to individuals for too long periods, may frustrate the object of the Association, namely, to help its members in accordance with their individual needs. The management is not, however, rigid as to this point, and, provided instalments of the debt are repaid, the loan may be allowed to ru%up to perhaps three or four years. The bills are not negotiated, but are always retained by the Society till maturity. LOCAL CO-OPERATIVE BANKS. 107 The rate of interest charged, compared with the rates of the vast majority of RaifEeisen societies, is not low, the Lombard rate of the Imperial Bank, which is 1 per cent, over its discount rate, being taken as basis. For advances against the deposit of securities the bank charges the current Lombard rate of the Imperial Bank, plus ^ per cent, commission; against bills backed by sureties a rate not exceeding | per cent, over the Lombard rate, with | per cent, commission when the advance is made, and ^ per cent, if its period is extended, while against bills with sureties, but with renunciation of extension, the same rate with ^ per cent, commission is charged. If loans are taken up for periods shorter than three months, the commission is less, and if the loan transaction is carried out without the services of the local representative, which is not usually the case in their agricultural business, no commission is charged when the bill is discounted. The average Lombard rates of the Imperial Bank for the six years 1905-1910 were respectively 5"20, 641, 7'01, 617, 507 and 538, or an average of 57 per cent, over this period. If a borrower, therefore, wanted a loan of £100 for one year from the Society through its local representative on a bill backed by sureties, it may be estimated that he paid (taking the average for the above period and adding ^ per cent.— the Society as already stated, charges up to ^ per cent, over the Lombard rate) about £6 as interest, 5s. as commission at time of grant, and 6s. 8d. at each renewal, or a total sum of about £7 5s. for the loan. Both interest and commission are payable in advance. Deposits are taken from members and non-members. According to the state of the market 2 to 2| per cent, is allowed on deposits at one month's notice, 2| to 3| per cent, at three months, and 3 to 4 per cent, at six months, while at twelve months an unvarying rate of 3 J per cent, is allowed. On cheque accounts and on deposits at eight days an unvarying rate of 2 per cent, is paid. The Schulze-Delitzsch societies do not bind themselves to deal exclusively with any central bank, but carry on business with any bank that suits their convenience. When large credits are needed by this Society it obtains them, generally by drawing a bill which is accepted by the Dresdener Bank, with whom the Federa- tion has entered into an arrangement. The Dresdener Bank does not extend credit upon the basis of the collective liability of the members of a co-operative society, but on the ordinary security currently accepted in commerce. The Society is audited by a professional auditor appointed by the Bavarian Union of the Schulze-Delitzsch Federation to audit the Bavarian societies — about sixteen in number. The examination, which extends to tests of accounts, vouchers and securities for loans by selecting at random a number of such items, lasts usually from three to five days. The general position of the Augsburg Agricultural Credit Association at the end of 1909 may be seen from the following figures : membership, 12,586, of which 7,000 obtained credit during year; paid-up share capital, £72,900 ; reserves, £66,181 : outstanding against bills, £182,245; deposits at over three months' notice, £67,285, at utfder three months' notice, £1,738; credit balances at banks, £13,106; and value of its owned securities, £7,920. The cost of management amounted to £5,107, the net profits to £4,343, and the dividend paid on the share capital to 4 per cent. Bretleben Savings and Loan Bank. Bretleben, a village situated upon a minor railway line in the Thuringian section of the Prussian province of Saxony, about forty miles west of Halle, has a population of 900. The holdings are of the most varied size. The largest, a manorial estate of 280 acres, is occupied by a tenant. The members of the Society farm holdings which range from 6 to 160 acres. The Society was founded in 1904 with shares of 5s., each of which carried a liability of £10. This share liability has since been increased to £20. The secretary stated that the farmers of the locality could never have been induced under any circumstances to join a society having unlimited liability. Fifty shares are the maximum that may be acquired by a single member; no member holds, in fact, more than twenty. The number of shares which members are expected to take is proportioned according to the supplementary land tax paid by them. (Supplementary tax of Is. per £100 is paid by landowners upon all property over a fixed minimum assessed value of £300.) The membership of the Society in 1910 was 48. The Committee of Manage- ment is composed of two farmers (one of whom is secretary) and an inn-keeper. 108 PERSONAL CREDIT. The secretary alone is paid, receiving -^ per cent, of the turnover. The Board of Supervision has also three members, of whom two are farmers and the third is a miller. Loans are given almost exclusively in the form of overdrafts, but since 1909 the granting of loans for fixed periods has been introduced. Sureties are not ordinarily required. Members obtain, without specific security, advances to the extent of three- fourths of the amount of the liability of the shares which they hold. The Society does not, however, bind itself to this, the individual circumstances being in all cases taken into account. When the member does not appear good for such an amount, or if, being good to this extent, he wishes to obtain a higher credit, sureties or " security " mortgages may be required. The conditions of repay- ment are made to suit each applicant. The rate of interest on advances is 5 per cent. On deposits 4 per cent, interest is paid. It was stated that the rate is so high because the society has to pay a higher rate (4J per cent.) for money obtained from their central bank, and, further, because the agency of the district savings bank pays 3^ per cent. The banker of the Society is the Halle Co-operative Bank, in which it is obliged to take shares and with which it has to transact all its banking business. Its shares have a par value of £15 and carry a liability of £300 ; for each share which it holds a society is entitled to a maximum credit of £225, but the Bank usually fixes the credit upon the basis of three- fourths of the collective liability of the shares of the members. The Bank paid 4| per cent, for deposits at the beginning of 1909, and 3 J per cent, at the end of that year; at the same periods it charged 5 to 5| per cent, and 4 J per cent, (in December) respectively for loans. A commission of rV P^r cent, on the total of the larger side of the account is deducted for maintenance of the account. The Society pays a fixed contribution oi 155. per annum to the Union, plus a percentage upon the business done. When the audit is carried out, 125. per day occupied in audit is paid. In 1910 the audit lasted four days. The books may also be minutely audited in Halle at the special audit office of the Union, in which case a further charge is made. The position of the Society at the end of 1909 was as follows : — membership, 45 ; paid-up share capital, £46; reserves, £67; savings deposits, £1,698; outstanding overdrafts, £3,275; ordinary current account deposits, £367. Overdrafts paid in 1909 amounted to £1,738, repayments upon such accounts to £732, and savings deposits to £1,148. The working expenses during the year amounted to £13. Brotzingen Rural Credit Association. Brotzingen, till a year or two ago an independent commune about a mile and a half from the centre of Pforzheim, the Baden town well known for its extensive manufacture of jewellery and trinkets, has since been incorporated with that town. It had already lost its rural character and become a manufacturing quarter with a resident population predominantly industrial. Within its area, however, is still found a sprinkling of small freeholders or leaseholders, and some allotment holders. When the society was founded in 1890 its membership was mainly composed of men wholly or partly occupied in agriculture, but the general transformation of the commune wrought a similar change in the callings of the members. The .Society commenced operations with 110 members, who adopted shares of £5 nominal value and unlimited liability. The shares, if not paid up at once upon admission to membership, were to be paid by yearly instalments until such instalments, added to dividends accruing, attained the full nominal value. The entrance fee amounts to Ss. The present Committee of Management is composed of two agriculturists, an insurance agent, and the former mayor (for 15 years) of Brotzingen, who was stated to have been at an earlier date_ a gold- worker. The last-named, who is termed the director, attends the office daily and is paid a salary of £80 per annum, while the other members receive an annual fee of £3 for their services. On the Board of Supervision there are three agriculturists, a master-carpenter, a retired jewellery worker, and a master-joiner, all of whom also receive an annual sum of £3. The two bodies hold joint meetings every fortnight, which last about two hours. The secretary, who is not a member of the foregoing organs, and who was formerly a gold- worker but^s now a grocer, is paid £100 per annum, and must attend the office from 3 to 7 every week day. Local co-operative banks. 109 Loans are mostly given on bond with, surety. The period of loan, which at one time was generally one year with the option of renewal, is now usually five years. If repayment is not made within this period, the sureties are notified, and if good reasons for extension are not found, the loan is called in. Loans of £1,500 and £1,000 have been given, but it was stated that only about one-third of the entries in the books were for sums over £50. If sureties cannot be procured by the borrower, or if he is unwilling to obtain sureties, mortgage security is accepted. Only first mortgages are taken, and these only up to 60 or 70 per cent, of the assessed value of land and buildings. When loans are made on mort- gages upon buildings in course of erection, repayment must be made upon their completion. In the case of loans on bond three sureties must give their guarantee when the sum lent is over £50, and the wives of borrowers must also add their signature. Overdrafts on current accounts are also accorded upon similar security. Cheque books are issued, but are little employed; only twelve members at the date of visit had obtained them. Bills are also discounted for members, but are never negotiated, being retained by the society until maturity. Advances for purchase of property — the deed of purchase is pledged to the society — are not infrequent. The purpose for which the loan is required is always asked if the Committee is not already aware of it. The risk of defaulting borrowers or sureties is not great, it being a condition that all members and their sureties should be residents of the Brotzingen quarter of Pforzheim. The members of the Committee and of the Board of Supervision, eleven in all, are old members who reside in the same quarter, so that by reason of their combined local knowledge mistakes do not often occur in their appraisement of character and general circumstances of borrowers and sureties. The completeness of the local registry of title affords a further valuable safeguard when there is question of mortgage security. For overdrafts interest at the rate of 6 per cent, is charged, but for many years 5 per cent, has been the rate for loans for fixed periods. Advances for the purchase of property are made at 4, 4^ and 5 per cent, with a commission, the amount of which is determined by the rate of interest agreed upon and the length of time within which repayment is to be effected. If the loan is to be repaid by three yearly instalments 3 per cent, commission is charged, if by five instalments, 5 per cent. In one case in which £800 was advanced at 5 per cent, interest, a commission of 10 per cent, was charged, because the repayment was spread over 16 years. The Society pays 4 per cent, upon deposits for fixed periods and 3^ upon those on current account. Interest is reckoned by half -monthly periods of fifteen days. The Society issues savings books to depositors, but no savings boxes, savings stamps or cards are in use as a means of encouraging thrift among members. The public municipal savings bank is a strong competitor of the society, as it has the guarantee of the town for its obligations. The books of the association are sent to Carlsruhe for legal audit, and the same auditor has examined the books for a long period of years. When the books have been gone through by him, he pays a visit to the Society to confer with the Committee and Board of Supervision upon any points that may have arisen. The association pays to the Union a fixed annual contribution of 15s., a further annual sum based upon its turnover — in 1910 £5 — and a fee of £4 for audit. The position of the Society at the end of 1910 was as follows : — Membership, 454; paid-up share capital, £1,285; reserves, £6,097; outstanding assets : in loans against bond, £35,605; against mortgage and for property purchase, £7,276; in overdrafts, £706, at the bank, £3,184; liabilities : savings deposits, £47,897; deposits in current account, £34. The profits for the year were £559; the amount paid as interest, £1,835, and received as such, £2,247. Loans for fixed periods were granted to the amount of £42,191, and repayments in such loan accounts were made to the amount of £34,786. Mortgage and property purchase loans aggregated £2,041, while repayments on such accounts totalled £2,457. Savings deposits received amounted to £47,685, and deposits repaid to £39,812. Receipts from commission and entrance fees came to £266. The cost of management was £465. In 1909 the society paid £32 in local taxes and £10 in State taxes. The Society has an open credit of £3,500 at the Mannheim Mortgage Bank, the banker of the Baden rural societies, but it rarely has recourse to it. Among its assets the Society held at the time of visit 3| per cent . mortgage bonds of this Bank to the value of £5,000. 110 PERSONAL CREDIT. CoETHEN Savings and Loan Bank. Coethen is a town of 23,000 inhabitants, in the Duchy of Anhalt, which is ahnost an enclave in the Prussian Province of Saxony. As a rural co-operative credit society the Coethen Society presents some unusual features. Its sphere of action is rather extensive; in 1910 it covered 62 villages within a radius of about ten miles from Coethen, where its office is situated. It agrees to accept as members any farmer within this area (if suitable) upon the basis of the registry of title and his assessment for purposes of taxation. Members may be millers, farriers, &c., but they must at the same time be farmers. An exception is made in the case of the secretary, who is an insurance agent. The Committee of Management consists of three persons, two farmers and the secretary. The latter keeps his office open daily from 8 to 12 and 2 to 6, and receives £180 per annum for salary and expenses. Meetings of the Committee are held monthly. The nine members of the Board of Supervision, which meets four times in the year, are, of course, all landholders. The shares are fixed at 5*., with £10 liability per share. An entrance fee of Is. per share is levied and paid into reserve. The credit business done is almost exclusively on current account. Loans of definite amounts for fixed periods are made usually on mortgage, though occasionally to public bodies on promissory note. In one case a large sum was lent on this security to a commune. The possession of a certain number of shares normally entitles the holder to a fixed maximum overdraft without further security, as in all the limited liability credit societies in Pomerania and Prussian Saxony. Sureties need only be furnished in exceptional cases, when the credit desired exceeds the normal limit or the general position of a borrower does not warrant the grant of credit without outside security. The interest charged is 4^ per cent, with com- mission of one-tenth per cent, per annum reckoned on the debtor side of the account. Three per cent, is allowed on credit balances on current account. No cheque business is done, chiefly owing to the recent tax on cheques, which strangled its development. Surplus money is sent to the Central Bank in Halle, which pays 3^ per cent, on deposits on current accounts. The Society has never had occasion to borrow from the latter, although it holds 15 shares (of £15 each), carrying a liability of £4,500 and entitling it to a credit of £3,375. These shares, which must be fully paid, receive dividends at 4 per cent. Losses have been very rare; in one case about £300 was lost by the default of one borrower, the balance sheeet showing a deficiency of £15 on the year's opera- tions. The Society pays the maximum contribution of £15 to the Agricultural Co-operative Union at Halle, and 12^. per day for audit, which generally occupies two or three days. At the end of 1910 there were exactly 200 members in the society, holding 2,663 shares. The paid-up share capital amounted to £665 15^., and the collective liability upon the shares to £26,630. At the same date there were 140 members with total credit balances of £30,728, and 79 members with debit balances of £16,868, leaving credit balances at £13,860. Loans, apart from ordinary over-drafts normally authorised on current accounts, against bonds and bills, amounted to £2,810; the amount due against mortgage security to £9,046. As to savings deposits, £6,860 was paid in, £7,685 paid out, and £940 written to accounts as interest, leaving the total deposits at end of the year at £33,766. On current account with its banker (The Central Co-operative Bank at Halle) its credit balance on December 31, 1909, was £33,551; during 1910 £48,226 was paid in and £48,922 withdrawn, leaving on December 31, 1910, a credit balance of £32,855. The total assets and liabilities of the Society at the same date were respectively £67,673 and £67,385. Its reserves amounted to £1,167, in addition to £805 as working reserve. The Society holds two shares of £15, each carrying a liability of £100, in the Central Agricultural Supply Society of Halle. By virtue of this holding it may purchase at Halle for its members agricultural requisites up to a value of £1,000 per year. The Society charges a commission of Is. per £15 (or part thereof) worth of goods purchased on their behatf. In 1910, purchases amounting to only £38 were thus made. LOCAL CO-OPERATIVE BANKS. Ill CosEL Advance Association. Cosel, a small country town of 7,500 inhabitants situated on the left bank of the Oder in Upper Silesia, was formerly the capital of a duchy, and was fortified down to 1874. It is now a centre in a district predominantly agricultural. The railway line from Liegnitz (60,000 inhabitants) to Kandrzin serves the town, which is about four miles from the main line from Breslau to Vienna. The Advance Association, founded in 1860, is, apart from the public savings bank, the only banking undertaking in Cosel. Its special interest arises from the fact that, although established on the principles of Schulze-Delitzsch, sixty per cent, of its members are landholders. Its success in an agricultural district is due to its adapting itself to the special requirements of farmers, especially in regard to the length of time for which credit is granted and the method of its repayment. The majority of the banks of the Schultze-Delitzsch type are urban, and are calculated to meet the needs of traders and small employers of labour. The usual term for credit granted by these societies, namely, three months with the option of renewal for two further three-monthly periods, is of little use to farmers, who require at least a year, and find it highly advantageous not to be obliged to repay in a lump sum, but to have the option of repayment by instalments. This bank has given loans to farmers for periods of ten years, repayable in ten instalments; and terms of three, four and five years are frequently allowed. The director mentioned that much of the money advanced to agriculturists was employed for the purchase of modern agricultural machinery, land improvement, erection of buildings, &c., the district being still comparatively backward as regards general agricultural equipment. The Society limits its operations in practice to a district of about ten square miles, although its articles of association do not assign any fixed area within which members must live. Apart from its Cosel office there is one sub-office in an out- lying centre managed by the widow of a local shopkeeper who transacted this business for the society for twenty years till 1910. Deposits are received, advice given to intending borrowers, the necessary forms, &c. kept, but no independent authority is given to grant loans. Several agents who undertake the same duties have also been appointed in different parts within the area of the society. The shares are fixed at £60 ; they must not be paid in full in one sum but by instalments not exceeding £6 in any one year. Payments of from Is. to 10s. per month, as arranged, are obligatory upon members until the sum of £6 has been reached. Although many persons desire to make the full payment upon admission, regarding the transaction as an investment at good interest, the Society always rejects the offer. At an earlier date full payment was accepted, the object of large shares having been to attract more substantial men as well as share capital. Members of small resources would have taken a considerable time to supply the necessary capital either by paying the full amount of the share or by deposits, while more substantial persons when enlisted as members not only paid up their share in full, but also brought deposits and prestige. For a large number of years the Association has felt no need to seek additional share capital, its present paid-up share capital and reserves having attained a total sufficient for probable needs. Savings deposits, which are obtained in abundance, constitute cheaper capital than share capital. IDividends paid on shares from 1895 to 1910 have always stood at 5 per cent., and from 1886 to 1894 at 6 per cent., whereas only 3 to 3^ per cent. was paid on ordinary savings deposits. Dividends are due to members on their share from the time when one-tenth part of its nominal value has been reached. The liability attaching to each share is unlimited. New members pay an entrance fee of three shillings, which is placed to the reserve fund. The membership, which amounted to 26 in 1861, 298 in 1871, and 853 in 1891, had become 3,145 at the end of 1910. At that date the classification of members in eight groups showed the following result : — 1. Landholders, Foresters, and Market Gardeners 2. Manufacturers and Builders 3. Independent Master Artisans 4. Factory Hands, Journeymen, Artisans 5. Independent Shopkeepers and Dealers 6. Carriers, Boatowners, and Innkeepers "dumber. Percentage, 1,906 606 74 23 437 139 89 2-8 149 47 163 51 112 PERSONAL CREDIT. Number. Percentage. 7. Doctors, State, Communal and other salaried employees 306 lO'O 8. Independent Persons and Pensioners 19 06 3,143 100 Persons holding land form the most numerous class. Large landholders, also are members, the bank being in a position to meet all their requirements. By " independent master-artisans " is meant master-carpenters, painters, farriers, &c., while the large number of employees shown include all teachers, those employed in the post office and on the railway, and in other institutions. About 70 per cent, of the members are Polish-speaking. The Committee of Management consists of three persons, two of whom are paid officials devoting their whole time to the business of the Bank. The Board of. Supervision, which numbers twelve persons, contains one landowner, one secondary school teacher, one printer, two law court officials, two master-artisans, two shop- keepers, and a miller, a chemist, and an innkeeper. The Board meets every month to examine the business position, giving about six hours to the enquiry. In the Schulze-Delitzsch banks this body exercises many of the functions that fall to the Committee of Management in most Raiffeisen banks, where the Committee is not daily occupied with current business. Each member of the Board receives an annual fee of £6. Credit is mainly accorded on bills and' bonds backed by sureties and on mortgages. The Poles are especially inclined to mortgage their holdings, disliking to ask acquaint- ances to become sureties. Very little credit without security is given. A certain amount of caution-credit is allowed; this is granted, e.g., to persons engaged in rail- way, mining or State undertakings, and to distillers who wish to postpone payment of taxes till their spirits are sold. The object is to guarantee the payment of fine for non-fulfilment of contract in the first cases,^and of the taxes due in the case of the distillers. For such guarantee the bank charges only 1 per cent., as it is really a risk premium, not a loan. A great part of the business done with landholders consists in lending money on mortgage security, as well as on bonds backed by sureties for the purpose of reducing mortgage indebtedness already existing. The mortgages thus cleared are nearly always second mortgages. The Prussian mortgage credit asso- ciations, in this case the Silesian Association, only grant first mortgage loans, and the highest amount loanable may not exceed two-thirds of the taxed value of the property to be mortgaged. But this maximum is rarely conceded, nor is the increase in value of land since the old assessment fully taken into account. As second mortgages are made generally with private persons, they have the disadvantage of being subject to fore-closure. The Society advances the money to pay off such private mortgages ; the borrower obtains the loan at a lower rate of interest and is allowed to reduce his debt by instalments. The bank, preferring to lend its money on good security in its immediate district, is not averse to such transactions. It is unusual for Schulze-Delitzsch societies to grant mortgage credit. The opinion strongly held by successive leaders of the Schulze-Delitzsch Federation has been that credit should not be given for a longer period than the period of notice of withdrawal of the deposits held. But this is largely mere theory, because savings tend to remain longer than the period of notice of withdrawal, and to a large extent for a long time, nor are they taken out in a great mass at once. To make the position more secure, however, the director of this society takes a larger proportion of deposits than he would otherwise take at a year's notice of withdrawal. A recent Congress of the Federation (at Freiburg) passed a resolution that real credit up to an amount not exceeding the owned capital (share capital and reserves), or at least up to the total of their deposits at one year's notice, might be granted without danger. The maximum single credit which may be granted to one member is £5,000; within this limit the amount is fixed according to circumstances. There is no regular assessment of members based on their assets. The great bulk of credit is made on sole bills, that is, bills kept at the bank till maturity and not circulated. At the end of 1910 there was £148,000 outstanding on bills, and £19,000 on mort- gages. In 1909 and 1910 Ihe bank charged 4J per cent, to members whose borrowings did not exceed £50, and 5 per cent, upon higher sums, without any commission. LOCAL CO-OPERATIVE BANKS. US The Society is affiliated to the General Federation of Self -Help Co-operative Societies (Schulze-Delitzsch), which audits the business and supplies co-operative and statistical information and legal and technical advice on banking matters. The Federation levies a charge of 1^ per cent, of the net profits (subject to a maximum of £7 IO5.) for auditing, and 1 per cent, of the net profits, but not more than £5, for other services. In this province there are no professional co-operative auditors for these societies as in the West and South of Germany, the audit being carried out by the chief officers of other societies within the province. Thus, four officers (including the director of this society) have been nominated to audit the 80 to 90 Silesian societies, 40 to 45 per year. This " audit " is chiefly directed towards impressing upon the Board of Supervision the necessity of learning their duties and of performing them. There is no minute examination of individual items such as is generally made by auditors of rural societies attached to the agricultural Unions, nor would the task be so light having regard to the fact that these urban societies carry on a much larger business. The audit occupies about one day, and consists of little more than a mere investigation as to whether the prescriptions of the law have been duly observed by the administrative organs and the business has been generally conducted in accordance therewith. The Society is not affiliated to any central co-operative bank. If credit is required — which is extremely rare owing to the abundance of deposits — it is obtained from the nearest branch of the Imperial Bank, with which a deposit of £250 not bearing interest has been made, this amount being determined in accordance with the business done with the Imperial Bank. Business is also done with an important Breslau co-operative bank. But no such exclusive relations exist between the Cosel bank and any other bank as usually obtain between rural credit societies and their central banks. The arrangement made with the Dresdner Bank by the federation to which it belongs means, in effect, only that the collection of bills and clearing of cheques shall be mutually undertaken by that Bank and its branches for the societies and by the latter for the Bank. The Society, true to the practice of the Schulze-Delitzsch societies, does not carry on any sale or supply business for its members. The position of the Society at the end of 1910 was as follows : — Members, 3,145; paid-up share capital, £22,723; reserves, £21,616; savings deposits, £193,228; percentage of owned to borrowed capital, 229; amount of advances outstanding £147,878; amount outstanding on mortgage security, £19,150. The total turnover in the year was £2,892,130; the net profit, £1,833; the cost of management, £1,810; the amount paid in interest upon all deposits, £6,299. Savings deposits paid in aggregated £162,919, and those withdrawn £146,103. The amount of 1,677 new advances was £63,224, and of 7,551 extensions of loans £511,736. There is a public Savings Bank in Cosel, but the director of the Advance Association, who is also a leading official of the savings bank, holds that the two organisations do not compete, inasmuch as, while the main object of the Association is to grant credit of a personal kind, that of the savings bank is to take savings and furnish mortgage credit on a basis of first mortgages. Eggenstein Savings and Loan Bank Association. Eggenstein is situated about seven miles from Carlsruhe. Its population of 2,300 is mainly composed of small freeholders, farming less than 30 acres. There are, however, two small factories, and some inhabitants go to work daily in the Baden capital. This village bank was the first of its kind to be established in Baden. It was founded in 1873 by the district agricultural instructor, and was constituted by 60 members who pledged their unlimited liability, but subscribed no shares. When shares were made obligatory by law in 1889 small shares were introduced; and in 1910 their nominal value was raised to £2 10s.. of which 5s. must be paid upon entry, further annual instalments being levied until the shares are fully paid. Dividends are paid, but are appropriated to the individual shares until they have been fully paid up. The first year's working of the Society showed that members deposited £605 and borrowed £995. Being absolutely isolated, without banking connection, and with their credit basis, which consisted in the joint and several unlimited liability of members, quite unfamiliar to the« ordinary business world, considerable difficulty was found in obtaining the funds to lend. The Society was finally able to procure 25574 H 114 PERSONAL CREDIT. the necessary money from a credit society of the Schulze-Delitzsch type in a neighbouring town, which, however, charged 5 J per cent, interest, in addition to commission and costs, which raised the price of the loan to 6 per cent. Borrowers paid 6^ per cent, interest, and depositors received 4 per cent., which at that date was the current normal rate paid by banks in Germany. The confidence of the population grew, and after a time the deposits exceeded the demand for money. The investment of the idle money became a matter of difficulty, particularly as banks only gave the society at the most the same rates as it gave to its depositors. Co-operative central banks- had not then been created, except one which was still in its first stages of development. A considerable source of income was, however, found in dealing with the contracts for property transfers, upon which the society advanced money at the normal rates of interest but charged a commission. As there was no share capital the whole of the profits were, in accordance with the statutes, paid to reserve, which grew year by year. The progress of the Society in the first fifteen years of its existence may be seen from the following Table, in which, for purpose of comparison, the figures for 1897, 1910 and 1911 are also included : — No. of Income from Paid as Net I'ear. Reserve Members Commissiou Turnover. Profite. Fund. Interest. and Entrance Fee. Interest. Expenses. £ £ £ £ £ £ £ 1873 77 21 30 13 25 2,445 47 1 — 1874 92 84 12 54 17 5,775 14 97 1875 107 124 12 87 33 7,250 20 23 1876 121 182 17 117 36 7,533 42 44 1877 110 242 17 151 34 11,230 73 87 1878 153 246 26 174 43 11,174 79 160 1879- 166 245 19 165 39 11,283 74 239 1880 176 240 37 153 37 14,175 91 313 1881 172 259 22 164 50 11,601 70 405 1882 179 224 28 199 45 12,004 76 475 1883 216 213 26 214 47 13,200 57 551 1884 217 233 11 174 56 10,887 33 609 1885 217 212 15 137 54 10,005 33 642 1886 a26 218 11 139 55 10,503 35 671 1887 226 2515 8 165 56 8,516 39 711 1897 241 328 5 242 68 16,603 54 938 1910 250 446 2 354 78 18,655 63 1,042 1911 247 475 1-4 335 92 — 43 1,050 In 1880 the Society joined the then existing Hessian Union, but, similar societies in Baden having in 1883 made an agreement with a Baden bank to serve for their banker, the Eggenstein Society, with 27 other societies, associated them- selves in 1884 in the Baden Union of Credit Societies. In 1909 the total contribu- tions of the Society to this Union amounted to £2 85. 7d., of which 15s. was the fixed contribution, while the remaining £1 IZs. Id. represented f per cent, upon the commission, interest, and entrance fees received by the society. Previous to the obligatory audit imposed upon all societies by law in 1889 the Eggenstein Society was regularly audited : in the years 1881-1883 by the Hessian Union, and since 1884 by the auditors nominated by the Baden Union. The same auditor was usually appointed for a number of years for this society, thus from 1883-6, and from 1887-1898 the same auditor investigated its accounts. The following notes on the practical working of the Society at the present time were made at the time of visit in the autumn of 1910 : — The Committee of Management of the Society consists of three persons : the chairman, who is village mayor and a member of the Baden Parliament, has a brickworks in the village, while one of the two others is a small landowner, and the third combines rope-making with farming. The chairman receives £10 and the others £4 to £5 per annum. The Board of Supervision is composed of three small holders, who receive nominal fees. The secretary, who has held this office in the society since 1873, is the village clerk and registrar of the local registry of title. He is paid by the society £40 as saMry and £2 IO5. as office rent. The office hours are not fixed, but customers are received whenever the secretary is at home. Local co-operative banks. 115 Loans are granted, only on personal bond backed by surety. No current accounts are kept, so that overdrafts are not granted. Loans are given for twelve months and then extended at the request of the borrower, provided the surety or sureties are willing to continue to act. The rate of interest has been 5 per cent, since 1904, previous to which year it stood at 4J per cent, for a long period. Larger sums are still lent at the latter rate. The amounts lent vary greatly : the writer saw in the books sums of 25s., £5, £9, £15, £20, &c., but most of the amounts ranged between £10 and £35. The purpose for which the loan is required is not asked : the essential point for the Committee is whether the surety is good for the amount. There is considerable difficulty or disinclination to find sureties, but prospective borrowers are informed that sureties must be furnished, as the Society does not lend as a rule on mortgage security. When the sum is over £100 two sureties must be procured in all cases, otherwise one is sufficient, provided the surety proposed is considered an adequate guarantee for the amount. Money is sometimes lent to members on mortgage, but this is not as a regular part of the business of the Society, but rather as a channel for the investment of surplus deposits in order to provide interest thereon since its Bank only pays 4 per cent. The interest charged for mortgage loans is 4 J to 5 per cent. No fixed periods are usually arranged, but the condition is inserted in the mortgage deed that three months' notice of repayment must be given to the Society. The difficulty of finding remu- nerative investment for surplus funds in more recent years has also led to advances being made for the purchase of property. In addition to interest at 4 J to 5 per cent. 1 per cent, commission for larger sums, and IJ to 2 per cent, for smaller sums, is also charged for such advances. Deposits, subject to three months' notice of withdrawal, received 4 per cent, interest from 1905 to 1910; in 1910 it was reduced to 3| per cent. Interest is reckoned from the first of the month following deposit. In some cases as much as £100 has been deposited at one time by individuals. Owing to the absence of public guarantee it is not permissible for trustee monies to be deposited with the Society, but the commune frequently makes deposits of its money, obtaining the current rate of interest. In 1908 over £700, and in 1909 over £7,500, were thus received from the commune. The interest paid on deposits in 1909 totalled £492. The Society has an account with the Mortgage Bank in Mannheim, which acts as banker to the Baden rural credit societies upon special terms arranged by contract with the Union. The Eggenstein Society has an open credit up to £2,500 with this bank, which is ample for its needs. The interest charged by the Bank upon overdrafts is 4^ per cent, and a half-yearly commission of one-tenth per cent, upon the total of the amount overdrawn. The Society receives 4 per cent, upon deposits. Apart from making deposits of its surplus monies with this bank, the Society endeavours to find borrowers among its fellow societies, to whom it lends at 4 J or 4| per cent, plus the very trifling commission of one-tenth per cent. Up to the present the Society has not lost a penny in bad debts. In 1910 it granted loans to the value of £4,428, and was repaid loans amounting to £3,982; as interest it received £446, and paid away £354 on deposits; it took up loans amounting to £4,525 and repaid such loans to the value of £4,201. The totals of all receipts and payments for the year were respectively £9,211 and £9,444. It may be mentioned that in the village there is also a local Cattle Insurance Association, a Horse Insurance Association, and a Co-operative Retail Store. Elxleben Savings and Loan Bank Association. Elxleben is situated some eight miles from Erfurt in a rich agricultural district of Thuringia. The largest holding occupied by a member of the village bank is 185 acres, and there are a few of 30, 40 and 60 acres, but the majority contain from 12 to 18 acres. The shares of the Society, which was founded in 1899, are 105. each, with unlimited liability; in 1910 there were 235 members. Its field of operations embraces Elxleben and two villages lying one or two miles distant in different directions. _ Three members of the Committee of Management live in Elxleben, and one in each of the other villages. The chairman is a pastor, and save one, who is a teacher, the others are farmers. A fee of sixpence is paid for each committee meeting attended. The chairman of the Board of Supervision is a teacher, the remaining eight members being farmers; five live in Elxleben and two in each of the other villages. No remuneration is paid to the Board. The 25574 H 2 116 PERSONAL CREDIT. secretary, who is never a member of the Committee of Management in societies on the pure Eaiffeisen system, is a teacher and receives a fixed salary of £21 per annum. There is no store, but the member v^ho superintends the supply business carried on by the Society is paid a fee based upon the sales. In 1909 the total cost of management of the Society amounted to £113. Most loans are granted for fixed terms on bonds backed by sureties, but loans on current account (overdrafts) are increasing, and those on mortgage are not incon- siderable. At the end of 1909 the total of the 118 loans for fixed terms w^hich were outstanding amounted to £4,777; of these : — 11 were for sums not exceeding £5 29 „ „ over £5 up to £15 15 „ „ „ £15 „ £25 32 „ „ „ £25 „ £50 23 „ „ „ £50 „ £100 7 „ „ „ £100 „ £250 1 was for more than £250. At the same date a total of £1,150 was outstanding as overdrafts. Of the 20 loans for fixed periods granted in 1909, two were for a period up to one year, and 18 for periods exceeding one year, but not exceeding ten years; generally the period is five or ten years. The interest charged for loans on bond or on mortgage, is 4 J per cent, plus a commission of xV to J per cent. ; if the loan is to be paid off in ten years it is the latter sum; for less periods the rate is correspondingly less. Women may be members of the Society, but cannot vote except by proxy. In the case of all loans the wife of the borrower must add her signature. The interest paid on deposits was 4 per cent. The Society does all its banking business with its central bank, which is the Erfurt branch of the Raiffeisen Central Loan Bank; in 1910 the latter paid 3J per cent, for deposits at call and 3f at six months' notice, while it charged 4l^ per cent, for " normal " credit, and 4f for credit over and above this normal fixed amount allotted by it to the Society. The Society owns three shares of £50 in this bank, and five shares of £25 with £100 liability per share in the central supply society of the Thuringian Union at Erfurt. The sales effected with members amounted in 1909 to £3,259, of which £2,308 was for feeding-stuffs, £326 for manure, and £295 for coal. These commodities are sold by the sack or by the centner (110 Ibs.J. Five per cent, interest is charged upon accounts not settled within six weeks after receipt of goods. The audit is carried out every year ; five days were occupied at the work on the last occasion, the cost being £2 15^. The Society pays a contribution to the Union in proportion to its turnover. The Society bought recently a property of 45 acres, and sold it to members who were required to pay immediately one-sixth of the purchase money in each case, the balance being secured on mortgages redeemable in a fixed number of years. The land was mortgaged up to £3,500, and the owner — a local mill-owner — offered it to the Society for £4,000. The Society paid off the mortgages, handed £500 to the vendor, and m^de a profit of £40 on the whole transaction. The secretary mentioned that a neighbouring society had also bought a property of some 65 acres which they resold to its members upon similar conditions. At the end of 1909 the membership was 213, the paid-up share capital, £109 ; reserves, £571, savings deposits, £7,688, and outstanding loans, £6,435. Loans for fixed periods were granted in the course of the year for £757, while £597 of such loans was repaid; payments and withdrawals on current accounts amounted to £523 and £935 respectively, and savings deposits to £3,785. FiscHENiCH Savings and Loan Bank Association. Fischenich is a large village with 2,400 inhabitants. It is situated about six miles from Cologne, which is rapidly extending towards it, and with which it is connected by a steam tramway. The holdings are small, the majority ranging from 11 to 2^ acres, though a few cover as much as 18 or 20 acres. These small holdings are not always entirely owned, part being sometimes rented. Agricultural land fetches very high prices in the whole district; in 1905 one agricultural property close at hand was sold at the average price of £320 per acre, and when the Society bought 137 acres in the same year at the average price of about £133 per acre it was declared a very low price. (See details below.) Prices have risen since 1905. The production of vegetable^is the chief agricultural pursuit, and the conditions LOCAL CO-OPERATIVE BANKS. 117 are so favourable that three or four crops may be obtained by the most skilful cultivators. The produce is brought regularly to the Cologne market by the wives of the holders. Attempts to organise the sales upon a co-operative basis have met with the resistance of these women, who are stated to prefer to go to market. There are, however, in the neighbourhood one or two co-operative societies for the sale of such produce. The Fischenich bank began operations in 1894 with 19 members and attained a turnover of £30 in its first year. In 1909 the turnover amounted to £43,000. The Society was established by the central RaifEeisen organisation of Neuwied, but with about 100 other societies in the Rhine Province broke away seven years later and joined the present Cologne Union. The nominal value of the shares remained at 10s. till 1907, when it was raised to £5. The liability is unlimited. No entrance fees are levied. The Committee of Management consists of five persons who are farmers, and who receive no remuneration for their services on the Committee. In 1910 there were thirty-one committee meetings. The Board of Supervision, which consists of nine persons, is representative of various callings, four of its members being farmers, three workmen, one a master artisan, and one a shopkeeper, who also farms a small holding. In the ordinary course of events meetings are held four, five, or six times a year. The secretary, who is the head teacher at the village school, receives a fixed salary of £50 per annum, and, in consideration of his extra work due to the purchase of the estate, 1 per cent, on the annual receipts in connection therewith. Interest on deposits is reckoned from the first day of the month following their receipt. Loans are given mainly on personal bonds backed by sureties, but they are also granted without difficulty on mortgage. Advances for the purchase, or to aid in the purchase, of property are common. In the latter case interest at the rate of 5 per cent., plus a single payment of 1^ per cent, commission, is charged. For loans on mortgage 4 J or 5 per cent, is usually charged, but there is no commission, although formerly 1 per cent, commission Avas also charged for such transaction. In 1910 no deposits were received, nor was any credit granted, on current account. Loans, the object of which must be stated by the intending borrower, are generally for the purpose of buying manures, fodder for cattle, a cart or horse, a head of cattle, implements, out-houses or land. The Society has two hundred savings boxes in circulation, and although they give a deal of trouble to the secretary, he thought that it was well worth while to promote their use. They are distributed to the school children free of charge. The maximum credit allowed to the Society by the Central Bank at Cologne, to which it is affiliated, was raised in July, 1910, from £7,500 to £11,250. Shares must be acquired in the latter undertaking ; each share is £50 (to be fully paid up) with a liability of £300 upon each share taken, and holders are entitled to a maximum credit of £750 per share. In 1909 the Cologne Union was paid £4 16s. as contribution from the Society, the amount being determined according to the total assets or liabilities. The audit of the accounts is carried out entirely in Fischenich, no books being sent to the Union offices. In 1909 the audit occupied five days as compared with twelve days on the previous occasion. The Society pays for each day of audit a 'fixed sum and the out-of-pocket expenses of the auditor. Several measures worthy of mention have been undertaken by the Fischenich Bank for the benefit of its members. The Society erected at the station a large weighing machine for waggons, for the use of which members pay l^d. and non- members Sd. A large threshing machine and two sowing machines, one worked by hand, the other by horse-power, have also been purchased. The Society owns a warehouse in which fodder, manures, and seeds (but not coal) are stocked. Members are not obliged to order in advance, unless their orders are large. Except as regards seeds, the minimum quantity sold is 110 lbs. The warehouse-keeper, who is also a member of the Society, is paid £3 monthly; he also takes care of and operates the threshing machine, for which he is paid l^d. per hour of threshing, and is given one-third of an acre of land rent free. The Society sells to the vege- table growers some four or five thousand baskets every year at a cheaper rate than they would obtain them elsewhere. It was also intended in 1911 to establish a free library. A most interesting institution of the Society is the Legal Protection Commis- sion, composed of nine members representing different occupations {e.g., farmers, shopkeepers, artisans) who are chosen by the general meeting of members. The 25574 H 3 118 PERSONAL CREDIT. object of the body is to endeavour to prevent disputes going into court. All manner of disputes are dealt with; for example, the damages due to a man who has been? kicked by a horse, or the interpretation of a dispute relating to contracts are equally the concern of the Commission. If in any case a settlement is not reached and the matter comes into court, half the expenses of a member are paid in cases in which members and non-members are involved. The Society also provides six or seven lectures each year on economic and agri- cultural subjects, and outsiders are very often invited to deliver them. The position of the Society at the end of 1910 was as follows : — Membership,, 264; paid-up share capital, £117; reserves, £2,500; savings deposits, £10,228; out- standing loans for fixed periods, £24,487; loans granted in 1910, £7,119; amounts repaid on loan accounts, £7,050; and savings deposits made £3,333. The most conspicuous achievement of the Society has been the purchase and division among its members of a property of 137 acres. The property, which had been rented for many years previously, came into the market in 1901. Various offers up to £18,000 made by professional property dealers, as well as a proposal of the Society to pay £20,000, were rejected by the owner, who would not accept less than £23,000. Four years later the Society obtained the land for £18,250. The purchase money was obtained at 4J per cent, from its Central Bank in Cologne, £4,500 being paid to the vendor on signature of the agreement, and the balance within a fortnight. The whole matter was settled within a short time : the Committee of Management submitted it to the Board of Supervision, who approved, and, before signature, the General Meeting authorised the purchase. The land was sub-divided according to plans of a member of the Committee of Management — a gardener by occupation. The plots were of 25, 50 and 100 poles, and on each size of plot was set minimum prices of £25 and £30, £65 and £70, and £100 and £110 respectively, the higher prices in each case applying to plots in the more favourable positions. Three auctions were held at intervals, the unsold land being rented. In December, 1910, 56 acres were still unsold. If a member (only members could purchase lots) bought one lot at the auction he was free to acquire the lot parallel thereto or directly in front of it at the rates given above ; thus, if he bought a third or fifth lot he was free to purchase the fourth or sixth lot, as the case might be, in the same manner. In order to cover possible loss, the cost of two roads, of survey, sub-division and of valuation, and other incidental expenses (court fees, &c.), the society added 10 per cent, to the purchase price when fixing its sale prices. The conditions of payment were made easy. Purchasers paid down 5 per cent, of the purchase money (instead of the 10 per cent, usual in ordinary business); the remainder might be paid immediately, within a short term of years, or in twenty annual instalments. These instalments were to be made up of 5 per cent, interest (to be reduced to 4J per cent, when the " over normal " credit obtained from the Central Bank in order to carry through the purchase, had become normal, the Society having to pay a higher interest for the former) and 3^ per cent, sinking fund, or 8| per cent, falling later in the ordinary course to 8 per cent. By 1910 many purchasers had already paid up in full. When it occurred that, through no fault of his own, a member was unable to make the payments when due, the society accepted the interest alone. Of 190 members of the Society 76 became purchasers of 80 acres in the aggregate. An average price of £158 per acre was obtained, giving a gross profit of £25 per acre on the purchase cost. This average was extremely low for the district, in which no land was then purchasable under £200 per acre, and the normal price was stated to be £240. The remaining 57 acres were let to members, who were not in a position to purchase, at a low rental. It was determined that no profits were to be aimed at ; the rent was to be fixed at the sum paid in interest upon the purchase price, plus 10 per cent. As already mentioned, 10 per cent, had been spent in the general costs, which were incurred especially in meeting the cost of the land utilised for two roads, 16 and 26 feet in breadth, laid out through the whole property. The effect of the Society upon the general economic condition of the village has been happy. One pastor is reported to have said that in Fischenich the villagers formerly used dogs for draught purposes, and then oxen, while now they could afford horses. The old houses had been improved or rebuilt, the holdings were better cultivated, those formerly rented were becoming the property of the LOCAL CO-OPERATIVE BANKS. 113 occupiers, the general habits and moral tone had improved, the people had grown well-to-do out of great poverty— and in all this evolution {the secretary said) the most influential factor had been the village bank. Griesheim Savings and Loan Bank. Griesheim is a large village with 5,900 inhabitants, about four miles distant from Darmstadt, with which it is connected by a steam tramway. A large propor- tion of the population are workpeople with small holdings, who are employed in Darmstadt. The locality is noted in the district for its market-gardening. The Bank, founded' in 1888 with 71 members, had 170 members in 1910. The secretary estimated that half of the members were artisans, small employers of- labour and tradespeople, one-fourth were workmen, and about one-fourth persons whose sole occupation was farming. Many in the first two general groups also had market gardens and kept cattle and pigs. The prosperity of the village is attri- buted to this combination of agriculture with industry; the wives and children of the workmen and others look after the holdings, while the men work at other occupations either in the village or at Darmstadt. The vegetables and potatoes are sent to the neighbouring cities. On certain days in the week the women, carrying immense baskets into Darmstadt, are so numerous as to fill several cars of the steam tramway. The holdings of the farmers are not large, few having as many as 25 acres. The shares were formerly £2 IO5., but were subsequently raised to £5 and then to £5 10^. ; they will be gradually raised to £7 IO5. or £10. The Society adopted unlimited liability. The paid-up share capital which amounted in 1888 to £170, was returned in 1910 at £800. The dividend paid in 1909 was 10 per cent. 5 per cent, of which was added to the share capital of individual members and 5 per cent, paid in cash. Deposits receive 3 J per cent, interest, and three months' notice of withdrawal is supposed to be given, but the bank is always willing to pay out on demand all save very large sums. The rate of interest is largely determined by the policy of the public savings bank about three miles away, which is the great competitor of the Society. A large amount of deposits are obtained by the sale of cards. Two collectors make their rounds till mid-day on Sunday selling tickets of the value of 3d., Qd., Is., and 2s. Each collector receives £10 per annum for this work. The sums annually received by this means amount to about £4,000. The workmen living in Griesheim make great use of this method of saving. In 1909 the Society introduced the home savings banks. Every child in the village school received a savings bank free of charge. In the nine months of 1909 during which this method of collection was in operation a sum of £66 was received. Loans on current account (overdrafts) are given on bonds backed by sureties for sums not exceeding £250. One surety must be furnished for each £50 of credit granted; such surety must be resident either in Greisheim or in the other village included in the area of the Society, and must be a landowner. The Society formerly gave higher credit per surety, but found that in case of default £50 was a sufficiently large sum to claim from a single person. All credits above this sum are only granted against other security (land, stocks, &c.). It is a rule that all such credits are subject to three months" notice, and that at least one-tenth of the overdraft must be returned in the course of the year. Loans on bond for fixed periods are also given (one surety to be provided for each £50 of credit advanced) and on mortgage (only first mortgages being accepted) . As a rule property is lent upon up to 55 per cent, of its value as estimated by the local valuation court. Advances for the purchase of property at auction upon decease of owners or otherwise are common. Loans on gilt-edged securities are given up to 85 per cent, of the current market price; but on livestock, as an additional precaution, sureties must also be furnished. Loans up to £250 may be granted by the Committee; for higher amounts the Council of Supervision must give its assent. In 1910 there were only some thirty loans for fixed periods given on bond with surety ; about 230 were granted on current account, while there were about 400 and 350 advances respectively outstanding on mortgages and for property purchases. There were 2,000 deposit accounts. Different rates of interest are charged. Overdrafts in 1909 and 1910 were charged 4 J per cent., with a commission. The same rate was charged for loans 25574 H 4 120 PERSONAL CREDIT. on mortgage, while for loans for fixed periods on bond with surety it was 5 per cent., and for the purchase of property 5 per cent, plus a commission of about 1 per cent, of the purchase money. Loans for fixed periods on bond are mostly granted for one year, ten years being the maximum, and if for more than a year must be repaid in equal yearly instalments ; loans for the purchase of land are usually repayable in six yearly instalments; for those on mortgage arrangements are generally made for amortisation at rates agreed upon between the Society and the borrower. The object of loans is not enquired; the Committee only takes into considera- tion the sum applied for and the security offered. In the case of sureties, if one gives notice of withdrawal, a substitute or security of another kind must be immediately obtained. Although no surety may undertake a liability of over £50, he may, of course, be surety for two or more persons provided that the total sum for which he stands surety does not exceed this amount. Sureties may not legally withdraw at will from their obligations. Loans are made to non-members as much as to members, and sureties may be non-members, but in both cases residence within the area of the Society is essential. The secretary, who is assisted by a clerk, attends the office every day. He has been engaged over twenty years in co-operative work, first in a distributive society, and afterwards at the Co-operative Union. He receives a salary of £125, plus office and house allowance. The supervisor or controller is a teacher, and receives £30 per annum; and the director (a farmer and master- joiner) £10. The super- visor in this society, as in other similar societies in Hesse, has generally a good deal to do; he attends during office hours once a week as a rule and checks the accounts every week. The management expenses amount to £325 per annum. The Society has a credit on current account with its Union Bank, that is, power to withdraw, up to £10,000. Until recently, however, the limit was set at £6,250. The present conditions are that for every £500 credit up to £2,500 one share (of the value of £50) must be taken; and for every further £250 credit a further share. From 1908 to date of visit interest at the rate of 5 per cent, had been paid to the Union Bank for overdrafts, the interest being reckoned daily according to the amount overdrawn. The position of the Society at the end of 1909 was as follows : — Membership, 167 ; paid-up share capital, £763 ; reserves, £2,571 ; deposits, £72,889 ; outstanding in current account, £15,206; in loans for fixed periods, £65,819. During 1909 £21,572 was paid out on current account, and £22,433 paid in ; £14,440 was paid out in loans for fixed periods, and £13,289 repaid on the same account. Savings deposits received during the year amounted to £21,654. Gross-Urleben Savings and Loan Bank Association. Gross-Urleben is situated about 20 miles from Erfurt and five miles from a railway station ; with Klein-Urleben it has a population of about 600. The area of operation of the credit society includes two other villages, one of which (with 250 inhabitants) is over a mile, and the other (with 300 inhabitants) two miles distant. Practically all the members are farmers, some working only their own property, others renting additional land, and others (few in number) being purely tenants. The holdings vary greatly in size; some are only 6 acres; the largest holder in the society farms 125 acres. The secretary considered that the predominant size ranged from 15 to 20 acres. This Society, founded in 1893 with 120 members (in 1910 it had 172 members), has shares of 10s. each with unlimited liability. There is no entrance fee. The State gave no grant towards meeting the initial expenses. The books, safe, &c., were supplied by the Union, who debited them to the new society, which undertook annual payments of 5 pei- cent, inclusive of interest and sinking fund. The Committee of Management consists of five persons, all farmers, two of whom live in Gross-Urleben, and one in each of the three other villages. The Board of Supervision has nine members, all farmers ; three are taken from Gross-Urleben, and two from each of the other villages. By this means the responsible organs are thoroughly conversant with the conditions in each centre. No payments are made to members of these bodies. The secretary, who is also a farmer, receives a fixed salary of £22 105. per annum, the articles of the Society forbidding payment according to percentage of buisness done o» of profits. The object of this prohibition, frequently met with in rural credit societies, is to prevent all possibility of the manipulation of £15 „ £25. £25 „ £50. £50 „ £100. £100 „ £250. LOCAL CO-OPERATIVE BANKS. 121 accounts (to provide a greater gross turnover vi^ithin the year) or speculative business. The secretary also undertakes the charge of the sale of agricultural requisites, for which he is paid his out-of-pocket expenses and commission amounting to about 3*. per 10 tons. There are no fixed office hours the secretary sets apart a room in his house as an office — ^but members come generally in the evenings and on Sundays. No store is kept and the members themselves transport the goods from the station. The cost of management in 1909 amounted to £46. The credits granted are mostly direct loans for fixed periods, the loans being given on personal bond backed by sureties, and, to a limited extent, on mortgage. In 1909 fourteen loans of the total value of £1,002 were granted on bonds backed by sureties, one loan of £45 without any specific security, and two loans amounting to £196 on mortgage. One surety suffices for small loans. The sum of £4,250 was outstanding on 55 loans at the end of 1909. Of these — 3 loans were for amounts not exceeding £5. 10 „ „ over £5 up to £15. 8 11 7 15 1 loan was for over £250. As already noted the period of repayment of loans is always fixed, and the number of instalments equals the number of years for which the loan is granted. Loans on mortgage must also be gradually paid off by yearly payments. In 1909 ten of the 17 loans were for periods of over one year and not exceeding 10 years, five were for oyer 10 years, and only two for periods under one year. The interest charged in 1910 and for some years previously was 4 per cent. ; it was raised to 4^ per cent, in 1911, as in connection with the purchase alluded to below the society had to find a large sum, and to borrow from the Central Bank at 4j per cent, with one-tenth per cent, commission. No bill business is done, and there is no loan business on current account. The Society obtains credit when necessary and deposits its uninvested funds at the Erfurt branch of the German Agricultural Loan Bank, in which it is the holder of one share of £50 fully paid up, with a further liability of £50. In 1910-11 it paid for loans up to the amount reckoned as normal credit (about 5 per cent, of the value of the total assessed property of members) 4| per cent, and for loans in excess of the normal credit 4| per cent. Each depositor receives a savings book, but there are no savings boxes, cards, or stamps. Small amounts (up to £15 or £25) may be withdrawn at any time. In 1910 3 1 per cent, interest was paid on small deposits; at the end of the year the total deposits amounted to £7,608 and the interest paid for the year to £270. The Erfurt Union receives as annual contribution from the Society a sum equal to one-tenth per cent, of all deposits and payments made in the year. The books of the Society are not sent to the Union headquarters for a minute accountancy audit, but are thoroughly examined in Gross-Urleben by the Union auditor. The audit carried out in 1910 lasted five days and cost £2 15*. The paid-up share capital of the society at the end of 1909 was £79 ; the reserves, £183; the total turnover in the year, £35,759; the sums lent for fixed terms, £1,243, and sums thus lent which were repaid, £1,089 ; deposits and withdrawals on current account, £835 and £829; the savings deposits made during the year amounted to £3,158; and the total savings deposits at the end of year to £7,608. In 1909 the Society sold fertilisers to the value of £2,679; feeding stuffs, £2,013; coal, £44, and seeds, £39. The whole of the goods sold were received by the Society in four consignments at intervals within the year. The Society took an important step in 1909 in connection with the sale of a property of about 300 acres. The owner having approached the Central Bank in Erfurt with a view to disposing of his estate, its official visited Gross-Urleben, and the Co-operative Society being assured of adequate credit from the Central Bank, it agreed to lend money to members who wished to purchase lots. The property realised about £20,000 when sold, the prices obtained ranging from £25 to £80 per acre. The Co-operative Society paid 4^^ per cent, to the Central Bank for advances and charged 4^ per cent, to the members. Thus the central bank paid the whole purchase money to the vendor after the sales, advancing the greater part of it, and was in the position to secure continuous local supervision of the debt through the Society which bore the legal responsibility for the advances to its members. 122 PERSONAL CREDIT. GuxHAGEN Savings and Loan Bank Association. Guxhagen is a village with 1,450 inhabitants situated in Hesse-Cassel, about 12 miles from Cassel by rail; it is situated about two miles from another station, which is on the main line between Frankfort and that town. The area of the Society covers eight hamlets or villages, all within three miles of Guxhagen, and the total population within the area, in 1910, was 5,600, distributed among 1,030 households. The holdings rarely exceed 65 acres, the largest being of 185 acres, and the greatest number ranging from 6 to 18 acres. WJieat is extensively grown, and Other important crops are rye, oats, peas, and potatoes, with a little barley. The Society began its career in 1881 with 17 members, who took shares of the nominal value of threepence, with unlimited liability. The capital in hand at starting amounted to £1. No Government grant was received to meet the first expenses. In 1886 the shares were raised to their present value of 55., to be fully paid up. No entrance fee is charged; and no dividends are paid — a principle observed in all credit societies of the pure Raiffeisen model. In 1909 the member- ship was 532, the paid-up share capital £133, and reserves £1,722. The Committee of Management is large, consisting of 12 members. The chairman is the village head teacher, and the other members are all farmers. Four members belong to Guxhagen and the others to the different villages. The chairman receives £17 10s. per year, and the other members Is. each for every meeting attended. The Board of Supervision has also 12 members; five are farmers, and among the others are a labourer, a smith, a painter, an innkeeper, a forester, and a clerk of the commune. The object of this large Board is to secure the representation of as many callings as possible, ■ as well as that of the various places served by the Society. Four live in Guxhagen, and the remainder are distributed over the villages. There are about six meetings held in the year, and each member receives 1^. per meeting attended. The secretary, a joiner and farmer with 12 acres of land, had occupied his position for 29 years. He is paid £40 per annum, this sum including his payment for the provision of an office, for which, in fact, he utilises a room in his house. The office hours are from 12 to 4 o'clock on Mondays, Wednesdays and Saturdays. By the articles of associa- tion the secretary is required to furnish caution-money or security. In 1909 the total cost of management of the society amounted to £147. For a number of years 3f per cent, has been paid on deposits. In 1909 £12,226 was paid in, leaving the total deposits at the end of the year at £45,900. At the same date £35,550 was outstanding in 732 loans for fixed periods, and £6,640 in overdrafts. Of the 732 loans— 78 were for sums not exceeding £5. 200 „ „ over £5 up to £15. £15 „ £25. £25 „ £50. £50 „ £100. £100 „ £250. £250. which amounted, as stated above, to £35,550, £10,750 was secured by mortgage. In 1909 55 loans for fixed periods to the value of £3,957 were granted; 42, amounting to £2,795, were granted on personal bonds backed by sureties; 3, of the value of £137, on deposit of scrip; and 10, for £1,025, on mortgage. The period of loan was up to one year in 2 cases, representing £60; between one and two years in 43 cases, representing £2,872; and for various longer periods in ten cases, representing loans of the value of £1,025. The last- mentioned are mostly on mortgage, and very frequently the sinking fund is fixed at 1 or 2 per cent, of the original capital sum until the loan is paid off. Debtors are always permitted to pay more than the amount stipulated by the condi- tions of the loan towards the reduction of amount due. The rates of interest on overdrafts are higher than on loans for fixed periods; in 1909 and 1910 the rate on the former was 4^ per cent., and on the latter 4 per cent. A commission of 1 per cent, is charged in both cases. Many of the loans on mortgage are advanced for the purchase of property. In 1909 £4,232 was lent by way of overdrafts on current account and £2,608 was repaid; in loans for fixed periods £3,957 was lent and £2,580 repaid. Part of the surplus fund^ are deposited at the branch of the Central Loan Bank at Cassel and part invested. The Central Bank pays 3^ per cent, for deposits 196 91 109 46 12 Of the loans for fixed periods LOCAL CO-OPERATIVE BANKS. 123 at call, but charges ^V per cent, commission on the amount on the larger side of the account; with six months' notice of withdrawal 3f per cent., and with twelve months' notice 4 per cent, is paid without commission. The Society pays 4| per cent, for advances within the allotted, credit, and 4|^ for advances beyond that amount. At the date of visit the Society had a balance of £6,100 at the Central Bank, in which it owns six paid-up shares of £50 (with an additional liability of £50 per share), yield- ing 3| per cent, interest. The Union receives a contribution of 305. from the Society, plus 2 per cent, of the net profits, and makes a charge of 12s. per day occupied in the audit. In 1909 this occupied about four weeks, the normal period for such a society when an item-by- item audit is made being up to three weeks. (It will be remembered that the auditor works single-handed.) There are no fewer than eight ledgers for savings accounts and six for loans, besides the accounts for agricultural requirements supplied to members. The societies in this Union, like those in all Unions of the RaifEeisen Federation, are audited locally and with great thoroughness. Different auditors are sent on each occasion of audit. The Society obtains from the Union every fortnight 150 copies of its co-operative paper, which gives a large amount of general and special information of use to farmers. The cost of 150 annual subscriptions is £5 12^. The Society sold agricultural necessaries to the value of £3,805 in 1909; of this sum manures represented £1,167; feeding-stuffs, £2,123; coal, £278; seeds, £220, and implements, £12. A store is kept at the railway station, and there the goods not directly delivered to the consignees are stored. The secretary for this branch of the Society's business is paid £20 per annum, and the storekeeper receives 1 per cent, upon value of goods sold at the store, which is open three afternoons in the week. Three months' credit is allowed, although the Society must meet its bills for goods received in thirty days. Supplies are obtained from the Central Supply Society, to deal with which it is obliged to become a member. In 1910 it held three shares of £50, each carrying a liability of £50. Several measures for the benefit of the members and the public have been adopted by the Society. Relatives of a member of at least five years' standing in the Society receive from the Society's funds 305. on the death of such member; 205. is paid when the deceased's membership has lasted from two to five years. A telephone' IS placed at the disposal of members free of charge in the case of district calls. The Society paid in 1910 the expenses of a two weeks' course of seven hours pet day in ironing for any women who cared to take advantage of it, as well as of an afternoon course of cookery instruction for six weeks. The competition experienced of late years by rural credit societies was mentioned in the course of the visit. In the smaller country towns, where small bankers usually already exist, larger town banks are now establishing agencies or branches, and are seeking deposits with great energy. The public communal or district savings banks also compete for the savings of the country people, and the number of these organisations is also increasing. Gross Umstadt Savings and Loan Bank. Gross Umstadt lies in an essentially agricultural district, where beetroot especially is largely cultivated. It is 12 to 15 miles distant from any large town, but has direct railway connections with Aschaffenburg, Mayence, and Darmstadt. Its population in 1910 amounted to 3,500. A large sugar factory, which was started on a co-operative basis in 1895 is still successfully carried on in a co-operative spirit, though under the legal form of a company. There is, in addition to two co-operative credit societies, a co-operative dairy, and a supply society. The single agricultural school in the Grand Duchy of Hesse is situated in Gross Umstadt. A public district savings bank is also established here, but its credit business is practically confined to loans on mortgage. The Society was founded in 1897 v^ith 18 members; in 1910 there were 142. The shares have a nominal value of £25 with £5 — formerly £2 IO5. — to be paid up, and carry unlimited liability. The members include shopkeepers, small employers of labour, artisans, officials, clerks, the few local professional men (doctors, lawyers), and landholders, these latter forming one-third of the total. The Board of Supervision consists of six and the Committee of Management of five members. Of the five the secretary, who was formerly an artisan but is now employed in a public office, and acts also as secretary to the Gross Umstadt Agricultural Supply Society, receives from the bank an annual sum of £47 IO5., 124 PERSONAL CREDIT. including his allowance for the rent of a room to serve as office. The supervisor, a draper, is paid £10 a year for his services. On deposits at daily call interest of 3| per cent, is allowed ; at six months 4 per. cent., and at twelve months 4| per cent.. Deposits are taken from non-members at the same rates. Advances are made almost exclusively on current account, but loans for fixed periods are also given repayable in yearly instalments, not exceeding ten in number. Bonds for overdrafts up to £250 require endorsement by at least one surety, and over that amount, but not exceeding £500, by at least three, while for loans from £500 up to £750 adequate mortgage or other first-class security is required. In the case of mortgage security, amounts up to 70 per cent, of the assessment, as made by a special local court composed of inhabitants of the district, may be advanced, but actual mortgages are not frequent, the particular property being made merely contingently liable. Sureties need not be members of the Society, but must be residents of Gross Umstadt or its immediate neighbourhood. Loans of all kinds usually cost 5 per cent. The period for repayment is not fixed by rule, but in the case of overdrafts the Society always insists upon one-fifth being paid back within a year, overdrafts not being permitted to remain permanently at their limit. In addition to the interest a small yearly charge is made for loans on current account, ostensibly for the purpose of covering the cost of keeping accounts. Loans for fixed periods are only rarely made for terms of over ten years. In the case of advances of purchase money for buying land or house property in Gross Umstadt^ a commission of about 1 per cent, is charged; such advances are frequently made to non-members. No credit is given without security, which may take the form of sureties, mortgage, or scrip. The Society pays to the Hessian Union at Darmstadt £10 annually, this sum including the cost of the regular legal audit. In 1910 a voluntary minute accountancy audit cost an additional sum of £3 7*. The position of the Society at the end of 1909 was as follows :— Membership, 139; paid-up share capital, £489; reserves, £193; savings deposits, £7,841; out- standing on current account, £5,873; and in loans for fixed periods, £3,456. In 1909 £13,188 was paid out on current account, and £12,550 paid in. The amount paid out in loans for fixed periods was' £5,118, and that repaid on the same account was £4,257. Deposits paid in totalled £4,214. The cost of management was £81. Hambach Savings and Loan Bank Association. Hambach, a village with 2,300 inhabitants, is situated less than two miles from Neustadt, the centre of the Palatinate wine trade. Most of the holders own five to 12 acres, but there are a considerable number with less than five acres. In only three or four cases do the properties contain as many as fifty acres. Apart from vegetable and potato growing, vine-growing is the almost exclusive branch of agriculture in the district. The Society was founded in 1892 with a membership of 37; in 1910 it had grown to 256, this figure including not only farmers but artisans, shopkeepers, clerks, &c. The nominal value of the shares, which is 10^., must be paid up in full ; and the liability is unlimited. The Committee of Management is composed of five members, all but one of whom are vine-growers. The Board of Supervision consists of nine members, eight of whom are vine-growers, and is presided over by a clergyman. The secre- tary, who is also a small proprietor, is paid £55 a year inclusive of allowance for office expenses. The office hours are from 11 to 3 on Tuesdays, Thursdays and Saturdays. The Committee meets thirty to forty times, and the Board of Super- vision five times a year (every quarter and once for an extraordinary meeting); the General Meetings of members is held twice in the year. The advances to members are made more by way of loans for fixed periods than of overdrafts. The purpose of the loan is always asked, and is entered in the minutes of the transaction. The sums most usually lent do not exceed £25 or £30, but as much as £500 has been granted in a single loan. One surety is required, and when he does not suffice as security, mortgage security must be furnished. In case of mortgage, loans are made up to two-thirds of the estimated value of the property; the highest amount thus secured was £250. When money is required to purchase land the full purchase money is often advanced if money is abundant. In 1909 advance^of £270, £150 and £335 were made for this purpose. The interest charged for loans has stood at 5 per cent, for a great number of years; lOCAL CO-OPERATIVE BANKS. 125 for overdrafts the interest begins two days previous to date of dravping and terminates two days after the date of repayment, and for advances of purchase money 1 to 1^ per cent, commission is charged. The periods within which repay- ments must be effected are made to suit the convenience of the borrower as far as possible. They run up to ten years, although even longer than this period is sometimes granted. If it extends over several years the repayment is by equal instalments due annually ; thus loans for ten and five years are repayable respectively by yearly instalments of 10 per cent, and 20 per cent, of the capital sum. Advances of money to purchase property are always, however, repayable in a maximum of five yearly instalments. The Society pays 4 per cent, interest upon savings deposits subject to three months' notice of withdrawal. The public savings bank in Neustadt, less than two miles away, was stated to pay the same rate but to require four to six months' notice of withdrawal. Each member has a savings-book, but no savings tickets or stamps are now sold by the Society, as the supervision and clerical work involved proved too burdensome to justify their continuance. The Agricultural Central Loan Bank for Germany, through its provincial branch at Ludwigshafen, acts as exclusive banker of the Society, which holds three shares of £50 in the Bank. The maximum credit open to the Society, based upon the assets of the members, is £7,000, or 5 per cent, of the assessed value of the assets of members. This credit is generally fixed every three years. The Society rarely utilises its credit, except in the autumn, when for a time about two-thirds of its credit is exhausted, mainly by the local Vine-growers' Co-operative Society, which is a member, and which then requires a considerable amount of money to meet its purchases of grapes. The Union receives a fixed contribution and a percentage upon the business done when such exceeds £2,500; in 1909 the Society paid the total sum of £2 19^. Qd. For audit an additional sum of 12s. per day occupied in the work is paid ; as a rule five to six days are required for the audit of this Society. The audit is carried out with great thoroughness, all entries, the solvency of sureties, and the general condi- tions and conduct of business being subjected to examination. No dividends are paid upon shares, but each member receives, free of charge, a copy of the " Eaiffeisen Messenger," the fortnightly organ of the provincial Union. Like the majority of the village banks, the Hambach Society sells various agricultural requirements to its members, such as manures, fodder, coal, flour, &c. About 5 per cent, is added by the Society to the original cost of the goods. In 1909 the business done amounted to about £7,500. There is a store, managed by a storekeeper who is paid £27 10^. for this work, for delivering the co-operative paper and for summoning meetings. The Society owns and conducts an inn, attached to which is a large festival hall, in which plays are given, and dances and other social meetings are held. The building is kept by a man and his wife, who receive free lodging and £5 per 220 gallons of wine sold. Only house and insurance taxes are paid in respect of the undertaking. The accounts of the Society for the year 1909 showed the following position : — Membership at end of year, 266; paid-up share capital, £132; reserves, £674; sums outstanding as overdrafts, £1,161, and as loans for fixed periods, £4,380; savings deposits, £7,764; and deposits on current acount, £392. During the year £1,238 was paid out, and £660 repaid on current accounts. Loans for fixed periods were granted to the amount of £1,181, while repayments on such account totalled £691. Into the savings account £2,773 was paid. The cost of management of all its under- takings for the year was £234. Nieder-Weisel Savings and Loan Bank. This village, with a population of 1,800 inhabitants, is situated close to the main railway line between Frankfort and Marburg, about 30 miles from the former. Small landholders predominate, few farms containing more than 25 acres. The bank was founded in 1880 with 79 members ; in 1910 the membership was 263. The shares were fixed at £10, with unlimited liability, and as a rule the members pay their shares in full as the interest is attractive. Profits have generally been 10 per cent., and on one occasion 11 per cent., but the Society pays 10 per cent, of net profits to reserve and the same percentage to working reserve. The Committee of Management is composed of five persons, of whom three are communal officials. The director, who is also the village mayor and postmaster, is paid £6 10s. per annum; the " controller " or supervisor, who owns a farm of 15 acres and a grocery (managed by his wife), receives £13; and the secretary, 126 PERSONAL CREDIT. formerly a small farmer and joiner, receives £45. The latter is the third person since 1880 to occupy the post, his two predecessors having been a teacher and a shop- keeper. Of the remaining members one is clerk to the village and possessor of a small holding, and the other a baker, also with a small holding. Their services are given gratuitously. The bulk of the work naturally falls upon the secretary, but the supervisor is obliged to attend every Saturday at the office provided by the secretary — a room in his house — to receive deposits, consider applications for advances, and check accounts. The Board of Supervision consists of six members. The chairman is a farmer and deputy-mayor; three are farmers who have ceded their holdings (or the_ working thereof) to their children; another farms his. small property, and the sixth is a cart- wright. They receive no payment. Loans up to £50 are given on bonds backed by two sureties, and up to £1,000 when backed by four adequate sureties. The sureties must as a rule belong to the village or its neighbourhood. The Society aims more and more at granting credit on current account instead of in definite loans. Larger amounts may be lent on mortgage of land or houses within the area covered by the Society: up to three-fifths of the net value of farm land and half of the value of dwelling houses. The Committee, whose members are all old resi- dents and thoroughly acquainted with local values, determines the assessment. The establishment of registry of title for the village in 1908 simplifies such transactions by making clear the exact title and charges upon any particular property. Money is also advanced for the purchase of holdings, the proportion of the purchase sum to be decided by the Committee. No credit is given upon the security of produce or of live stock. The interest charged for loans on mortgage (4^ per cent.) has been cheaper for three years 1907-10 by ^ per cent, than for loans or over-drafts backed by sureties (4f per cent). These rates were to be reduced by ^ per cent, in January, 1911. Advances for purchase of property are charged 4| per cent, with ^ per cent, com- mission. To stimulate thrift the sale of cards of the value of one, three and five shillings was introduced in 1906, and about £500 yearly is collected in this way. But a member of the Committee remarked that this way of saving was instituted for the " smaller folk," meaning the farm hands and servants. The seller of these cards, who is also employed by the society to summon meetings of the Committee, Board of Supervision, and of members, makes a weekly round, and is paid for all his duties £8 15s. annually. The interest upon sums thus collected begins from the first day of the next quarter following purchase. The secretary found that these card accounts involved a good deal of trouble, as the card buyers were constantly with- drawing their deposits. The rate paid for deposits with three months' notice is 3-| per cent. In ordinary circumstances, however, deposits are repaid on demand if the requisite cash is in the office, or within three days. The Society had formerly made an agreement to deal exclusively with the Bank of its Union, but it was renounced some years previous to 1910, as better terms were obtained from a bank in a small town about two miles distant. Business is still done, however, with the Union Bank. The sum of £10 paid annually to the Union entitles the Society to the legal audit without extra payment. All credit societies in this Union pay a fixed sum of 15s. plus Is. per £50 of turnover, with a maximum of £10. A detailed audit of all the accounts must, however, be specially paid for ; in 1909 such an audit, covering the previous three years, cost £16. At the end of 1909 the position of the Society was as follows : — Members, 265 ; paid-up share capital, £2,640; reserves, £1,126; assets, £46,535; liabilities, £46,167; outstanding in loans on current account, £17,159, and in loans for fixed periods, £16,767 ; total savings deposits, £39,470. In 1909 there was lent on current account £14,336, and in loans for fixed periods, £3,002, while on each of these accounts respective repayments of £11,577 and £3,035 were made; savings deposits amounted to £8,168; and the cost of management was £94. The Society is exempt from taxation as no credit business is done with non- members. RaKOW S.4VINGS AND LOAN BaNK. Rakow is situated in a^region of large and medium farms in Western Pomer- ania, about 18 miles from Greifswald. LOCAL CO-OPERATIVE BANKS. 127 On its foundation in 1895 the Society consisted of 14 members. Limited liability was chosen, and the shares were fixed at 4s. with £12 10s. liability. Mem- bers were obliged to take shares according to their taxable assessment ; when busi- ness was commenced 90 shares with a total liability of £1,125 were taken by the 14 members. An entrance fee of Sd. per share, with a minimum payment of Is. and a maximum of 3s. was required from each member. The Ministry of Agriculture made a grant of £4 towards the initial expenses. Only residents in Rakow and its immediate neighbourhood were eligible for membership. Members belonging to other credit societies, or who were sureties for persons not members of the Society, were obliged to renounce such membership or obligations. Up to the time of the establishment of this Society there had been little co-opera- tive experience in Western Pomerania ; and difficulties in management were experi- enced. People held aloof through mistrust and through thinking that their financial position would become generally known, or that higher taxation would result. Gradually, however, both large landholders and labourers joined. At first only loans for fixed periods were granted, but gradually the current account business was substituted. The investment of surplus deposits at remunera- tive interest was not easy. The Union Central Co-operative Bank allowed under 4 per cent, between 1896-1898; and it was necessary to invest in mortgage and other securities. After ten years' existence (in 1905) the Society consisted of 75 members holding 521 shares with a total liability of £6,512. The paid-up share capital, which received interest at the rate of 3J per cent., was £104. The members were composed of 8 large owners or tenants, 13 clergymen, teachers or clerks, 26 medium farmers, 16 small employers, and 12 small allotment owners or labourers. The Committee of Management consisted of five persons, and was composed of a clergy- man (who was chairman), a teacher (who was secretary), and three farmers. Meet- ings were held every month. The Board of Supervision consisted of six persons, and met four times a year to examine the accounts. A combined meeting of these two bodies was held to fix the maximum overdrafts to be allotted to each member and to arrange other agenda for the General Meeting. The charge made for overdrafts is 4^ per cent, with a commission, which was reduced successively from ^ to ^ per cent, and in 1904 to ^V per cent. The interest paid on balances on current account is 3 J per cent. ; members and non-members receive 3 per cent, on savings deposits at call, and 3| per cent, on deposits subject to six months' notice of withdrawal. The savings deposits amount in 1895-6 to £333, in 1905 to £7,670, in 1909 to* £10,835. In 1905 £240 was paid as interest on the saving deposits. In that year depositors paid in 34 separate sums of over £50, 23 sums from £25 up to £50, and 30 sums £15 up to £25. The Society had at the end of the year 1905 a balance at their Central Co-operative Bank of £5,330, of which £4,000 was not at call. The whole of the share capital was deposited at the Central Bank. For four years previously the Society had had no occasion to borrow money. The Society has not undertaken the purchase of agricultural requisites as the majority of members belong to a supply and sale society in the neighbouring town of Grimmen. At the end of 1909 the Society showed a membership of 85; paid-up share capital, £186; reserves, £351; outstanding as overdrafts, £8,424; as loans for fixed periods, £1,832; deposits on current account, £3,382; savings deposits, £10,835. During the year 1909 £13,173 was lent by overdrafts, and £907 in loans for fixed periods. The amount paid into current account was £12,413, and as savings deposits, £3,424. The cost of management was £56. RiNKERODE Savings and Loan Bank. Rinkerode, a village of 1,400 inhabitants with railway connection, is situated a few miles from Miinster. Like many villages in Westphalia with their scattered homesteads built upon the holdings and their hedgerows, it recalls in a measure an English countryside, although the houses architecturally are of the peculiar West- phalian character, and the old hearths, without chimneys proper or grates, and with big log fires, are still found in the bulk of them. The holdings are rather large ; the predominant size was stated to be 60 to 90 acres, with a fair number of holdings of from 15 to 18 acres. It is the custom for the eldest son to inherit the holdings. Beet for cattle, rye, wheat, barley, oats, beans, peas, and potatoes are all grown. Cattle are stall-fed save for two months in the year. The shares of the Society, which was founded in 1897, are 15s. (3s. to be paid up), with unlimited liability. Members must pay an entrance fee of 3s. The present 128 PERSONAL CREDIT. Committee of Management consists of three farmers — one of whom is chairman — a teacher and an innkeeper. None of these are paid. Meetings are held on the second Sunday of the month after church. The Board of Supervision is also presided over by a farmer, and includes a second farmer, a teacher, a forester, a farrier, and a master artisan — six members in all. Meetings are fixed to take place every three months, also on a Sunday. The secretary is the village postmaster, who also keeps a tavern. He is paid a salary of £35, and is required to lodge £100 as caution money. Loans for fixed periods amount in value to about five times those granted as overdrafts. At the end of 1909 the former totalled £9,250, and of these: — 3 were for amounts not exceeding £2 10s. 2 „ „ over £2 lO*. up to £5. 7 „ „ „ £5 up to £10. 9 „ „ „ £10 „ £25. 12 „ „ „ £25 „ £50. 49 „ „ „ £50. Forty-eight of the above loans, of the total amount of £7,500, were secured by mortgage, the others being secured by sureties or securities. The periods for which loans were granted were very varying; in two cases (one was a loan for £75) the period was 100 years, and loans for 60, 45, 32, 95, 70, 16, &c., years were seen in the books of the Society. Repayments are arranged in every case to suit as far as possible the convenience of the borrower. Fixed proportions of the loan must, however, be redeemed in yearly instalments. The interest charged is 4 per cent, with a commission of I per cent, paid at the time of taking up the loan. At the end of 1909, there were 39 advances outstanding on current account of the total value of some £1,900. A considerable portion of this sum was secured by mort- gage or " security " mortgage charges. Four and a quarter per cent, is charged as interest, with a yearly commission of ^ per cent, upon the debit side. The Committee is authorised to grant loans not exceeding £50 ; for higher amounts the approval of the Board of Supervision must be obtained. Savings deposits, subject to three months' notice of withdrawal, receive 3^ per cent, interest. Deposits may be withdrawn, as a rule, at the will of the depositor, but if the due notice is not observed, a commission of ^ per cent, is deducted. In 1909 the deposit items ranged in amount as follows : — 53 up to 10s. 45 over 10s. up to £1. £2 105. £5. £10. £25. £50. The audit imposed by law once in two years is here carried out almost every year. In 1909 the special fee paid for this work to the Union was 155 ; the annual contribution, calculated upon the turnover, amounted to 34s. The Union also under- takes at the request of the Society the minute audit of the books at headquarters, which costs about 25s.; but this is not obligatory. The Society has an exclusive banker the Union Co-operative Bank, of which it is a member. The Bank's shares are £25 with a liability of £250 per share; one share gives a claim to a maximum credit of i£l,000, and each additional share to a further credit of £500. It is a condition of membership of the Bank that surplus monies must be deposited with it and all loans obtained from it. The Society received from the Bank 4 per cent, for deposits at the beginning and 3^ per cent, at the end of 1909; while the rates for loans at the same periods were 5 and 4 per cent, respectively. A commission of jV per cent, is charged upon one side (whichever is the greater) of the account. The position of the Society at the close of 1909 was as follows : — Membership, 112; share capital £18; reserves, £205; total savings deposits, £14,000; ordinary deposits, £800; loans outstanding for fixed periods, £9,250, in current account, £1,900. In 1909 £2,500 was paid out on current accounts and £2,650 paid in; £1,050 was granted in loans for fixed periods and £150 repaid upon such items. Savings deposits amounted to £8,600. The cost of management during the year was £38. • _ There is also a co-operative dairy and a co-operative supply society in the village. The latter had in 1909 a membership of 66, with paid-up share capital of 58 , , £1 64 , , £2 10s. „ 71 , , £5 84 , , £10 65 , , £25 63 , , £50. LOCAL CO-OPERATIVE BANKS. 129 £11 and reserves of £370. The value of goods supplied in 1909 was £3,400; the cost of management was £115 and the book value of stock, &c., £15. SiNZHEiM Savings and Loan Bank. The village of Sinzheim is about six miles distant from Baden-Baden, and is situated on the main line of railway from Carlsruhe to Strassburg. The popula- tion of the commune of Sinzheim, which covers an area of 5,750 acres, amounts to 4,000. The vast majority are small or peasant proprietors, who rarely hold more than 5 to 10 acres of land, the largest farm containing 50 acres. Small ownership has existed in the commune for two hundred years, and the registry of title, of which the secretary of the society is the present keeper, was established in the early years of the eighteenth century. Church property, extensive especially in the southern parts of Baden, does not exist in the commune. The principal branches of agriculture followed are vine-growing, corn-growing, market gardening, cattle-breeding and dairying. There is a small brewery, but apart from this no factory undertakings are carried on in the village. The freeholders are not so heavily indebted in this part of Baden as in the vine-growing districts, where they are dependent on one crop; here the farming is mixed. Founded in 1880 with 114 members, the membership of the village bank in 1910 was 675. The shares, at first fixed at the nominal value of £5, were subse- quently increased to £10. Each member must pay at least one-tenth (£1) within the first year after his admission, and 5^. in each succeeding year till the share is fully paid. Larger instalments or immediate payment in full are permitted, and very many members pay the full amount on entry. For a large number of years a dividend of 6 per cent, has been paid upon fully-paid shares. When shares are not fully paid, dividends due on the amounts actually paid up are credited towards completion of the shares. The Committee of Management consists of two small-holders, a market gardener, a communal clerk, and a foreman field-drainer. The chairman now receives £5 per annum, but the office was formerly without any emolument. The other members are unpaid. The Board of Supervision has six members, and com- prises four small-holders, a market gardener, and the accountant of the commune. The secretary, who in Baden is rarely a member of the Committee of Management, is by profession a clerk in the communal office, and part of his work is to keep the Registry of Title. He is also a small proprietor. He has held the same office in the society since its foundation. As secretary he is paid at the rate of 4fc?. per £100 of turnover, which means an annual sum of £90 to £100, but he finds it necessary to employ an assistant. The office hours for the business of the Society are from one to two o'clock every day, the business being transacted at the secretary's house. Loans are made for the most part on promissory notes backed by sureties, and the most usual period (when it is fixed) is three or four years. The Union to which the Society is affiliated always advises that the loans should not be accorded for more than three years. As a rule, however, no period for repayment is fixed, but the loan is renewable yearly. The rate of interest has been 4| per cent, for the last 20 years. When the bank was started it was 6 per cent., subsequently 5 and 4 per cent., but the last-named rate proved to be unprofitable, and 4J per cent, was adopted. When overdrafts are allowed the interest varies between 4 and 5 per cent., with a commission of -^ per cent, on amounts outstanding at the close of the financial year. One or two sureties may be required according to the amount and the standing of the sureties. The wives of sureties must in every case add their signature. The object of the loan is not inquired into, but as a rule it is known to the management. The amounts boftowed range for the most part from £5 to £50, but about 30 per cent, exceed £50. The Committee, with the concurrence of the Board of Super- vision, may grant single credits up to £1,500 without seeking the authority of the General Meeting of Members. Mortgage loans are not made as a rule, but occasionally, when the financial position of the borrower or that of his surety weakens, a mortgage is effected upon his property. The Society, however, frequently advances money for land purchase, especially when there are plenty of funds available. About 10 per cent, of the freeholders (according to the keeper of the local Registry of Title) sell or transfer their property every year, and a considerable amount of ready money is required 25674 I 130 PERSONAL CREDIT. by purchasers. As a rule the Society lends the money in its ordina,ry way on surety; but when the title deeds are handed over as security an additional ^ per cent, commission is charged. The sums advanced in this way for the purchase of land amount to between £1,000 and £1,500 every year. No loans may be made to non-members, and it is compulsory that members live within the commune. Sureties, however, are accepted who live outside this area. Deposits, which are received also from non-members, obtain 4 per cent, interest No cheque-books are issued to members or other depositors. Only savings books are in use, no savings stamps, cards, or money boxes being issued. Stamps were formerly sold, but the keeping of accounts under this system, proving too troublesome, was given up . The commune has an annual current account ranging from £1,000 to £1,500, and since the foundation of the society has deposited from £500 to £750 in the latter half of every year. The district authority at one time had a sum of £5,500 on deposit with the Society. Communes in Baden may, with the assent of the district authority, deposit funds temporarily with the rural co-operative credit societies with unlimited liability. The Society borrows when necessary from, and deposits its uninvested funds with, the Rhenish Mortgage Bank at Mannheim, with which its Union has made a special agreement. The societies are not obliged to take shares in this bank, whose other business is purely concerned with mortgages. This Society has an open credit up to £5,000 which is estimated upon the basis of the number of members (about £10 being allowed per member), but this credit has never been drawn upon to its full extent. Drafts on this credit at the Mortgage Bank are subject to 4| per cent, interest, and a commission of jV per cent, is charged upon amounts outstanding at the end of each half-year. The position of the Society at the close of 1910 was as follows : — Membership, 675 ; paid-up capital, £4,336 ; reserves, £6,056 ; outstanding loans for fixed periods, £67,693; overdrafts, £3,577; loans for land purchase {i.e., of title deeds), £3,727. Owed by the Society : to its central bank, £2,844; to depositors for fixed terms, £65,392; and to depositors on current account, £4,645. In 1910 there were : deposits received, £15,374; loans repaid, £6,231; instalmenfs (of purchase money advanced), £1,295; paid into current accounts, £3,299; interest, £3,697; commission and entrance fees, £620. Outgoing payments during the year comprised : ordinary deposits withdrawn, £13,065; loans made, £9,480; advances for land purchase, £1,792; paid out by way of overdrafts, £7,836; and interest, £3,025. The cost of. administration was £275. The Society paid about £50 in taxes. (In Baden co-operative societies are subject to taxation when their reserve fund attains £2,500.) SCHIFFERSTADT LOAN SOCIETY. Schifferstadt lies about seven miles west of Ludwigshafen. Its population of 8,000 is principally composed of workmen employed in and around Ludwigshafen, and of railway servants. Many of these men have small holdings; and there are also large numbers of farmers living in Schifferstadt itself. The Society, founded in 1892, had 213 members in its first year. In 1910 the membership was 860. No grant was made by the Government towards initial expenses. The shares were originally of 10s. each, with unlimited liability, but were subsequently raised to £3 in consequence of losses incurred in connection with a productive society in 1907. The bank has been very well housed since 1904, and employs two regular officials. The Committee of Management is composed of seven members, four of whom are farmers, one an innkeeper, one a master-mason, and one a railway employee. The chairman receives an annual fee of £10. Meetings are held once a month. The Board of Supervision, which meets six times a year, has'twelve members, including farmers, shopkeepers, and factory workers. The secretary, who was formerly employed in the offices of the Union to which the society belongs, receives a salary of £115 a year, with lodging, the rental value of which is estimated at £25 a year. The office is open daily. Deposits of members receive a higher rate of interest than those of non-members ; in 1910 4 per cent, was paid on the former and 3J per cent, upon the latter.' Deposits for fixed periods obtain J per cent, more in both cases. The bank has adopted no special method of^ollecting savings beyond the selling of stamps worth l^d., which are bought for the most part by children. LOCAL co-operative; BANKS. 131 There is a public communal savings bank in Schifferstadt, which inevitably dravi^s away a certain amount of savings from the Society. The former pays only 3 J per cent, on deposits. Loans and overdrafts may be accorded up to a maximum of £1,500 without the approval of the General Meeting of members. As a rule one surety may not guarantee over £50, and additional sureties must be furnished for each further; sum of £50. But in practice it depends upon circumstances : if the surety is good for the amount he is allowed to guarantee perhaps £200 or £250. The surety must be an owner of land, or must have sufficient deposits, or must hand over securities; or two or all of these conditions may be required. The highest single loan which has been granted up to the time of the present enquiry was £750. Loans are given on mortgage security in ordinary cases up to 50 per cent, of the taxable value of the property, in exceptional cases up to 70 per cent. But this business, as well as advances for the purchase of property, is small compared with that on bonds with surety. No unsecured loans are granted under any circum- stances. The interest charges for advances on bonds or on mortgage security in 1910 were 5 per cent., and for overdrafts 5 per cent, plus | per cent, per annum as commission. The bulk of the loans, with the exception of those for small amounts, are usually repayable in ten instalments, which are generally extended over four, five, or six years. Overdrafts are given for indefinite periods, but care is taken that a real movement of funds is effected in the particular accounts. The Society has a maximum open credit of £50,000 with the Ludwigshafen branch of the Raiffeisen Central Loan Bank. This credit is based upon the value, as assessed for taxation, of the real property of the members. A statement of the means of each of the members must be regularly sent to the Central Bank. The Society holds five fully-paid shares of £50 each in the latter. An annual contribution of £10, plus l^d. for each £50 of credit business, is paid to the Ludwigshafen Union, and in addition 12s. per day is paid for the period which the auditor spends in the audit of the accounts at Schifferstadt. The total expenses of management in 1909 were £730. The turnover in the year amounted to £135,000; the sums outstanding in loans for fixed periods at the close of the year to £43,250, and in overdrafts to £11,250, while the deposits at the same date were £43,750. The credits given in the year on current account (overdrafts) totalled £18,750, and the sums paid in on the same account £19,650; the loans given for fixed periods amounted to £15,200, and the repayments of such loans to £12,400. The paid-up share capital was £2,325, and the amount of the reserve £1,204. Wallhausen Savings and Loan Bank. The Wallhausen Society, established in 1904, had, in 1910, 56 members. The shares are of 5^. each with £10 liability. The maximum number of shares to be held by any person is fixed at 50, but, as a matter of fact, no member actually holds more than four. In 1910 65 shares with a liability of £650 were held. The operations of the society are limited to Wallhausen and its immediate neighbourhood. The village is situated in Prussian Saxony, in the very fertile district known as the Golden Plains (Goldene Aue), not far from the Kyffhauser. The holdings are of all sizes; one farmer rents a property of 1,000 acres, and the other farms range from 5 up to 200 acres. Sugar beet, the normal gross yield of which in this area is about 23 tons per acre, is largely cultivated, and there are several sugar factories in the district, including one organised as a registered co-operative society with limited liability. Advances are made for the most part by way of overdrafts on current account. Three-fourths of the liability incurred, that is, £7 IO5. per share, is advanced to members on application without their having to find either surety or security. For higher credits the bill must be signed by the member and backed by a surety. According to the statutes of the society a portion of the amount must be paid off annually, but this is not rigorously insisted upon, provided the interest is regularly paid. The lowest advance in 1910 was £35, and the highest £100. No mortgage loans are granted. Deposits on current account obtain 3 per cent, interest, and those subject to three months' notice of withdrawal ^\ per cent. The Society has to compete for deposits with a communal and a district savings bank, both of which are situated within easy distance of Wallhausen. It is at a disadvantage in two respects ; in the first place, the other savings banks are guaranteed by the commune or by the district, 25574 I 2 132 PERSONAL CREDIT. and may receive trust and public moneys on deposit; and, in the second place, many country people do not care to leave money with a co-operative society because there is often still an unfounded fear that the extent of their savings may become almost common knovpledge. In 1909 the Society paid 35^. to the Union, 155. as fixed contribution and the balance as y\^ per cent, of the total turnover. A further payment of 125. per day is charged for audit, vphich on the last occasion occupied If days. One share of £15 M^ith £300 liability in the Union Co-operative Bank at Halle is owned by the Society, which, on the basis of the liability of the shares of its members, is entitled to a maximum open credit of £500. It undertakes to deposit its surplus funds in the Central Bank and to obtain credit there only. The normal interest paid for deposits by the Central Bank is 3J per cent., while the normal interest for overdrafts is 4^ per cent. The sale of feeding stuffs, manures, coal and seeds, but not of machines, is carried on by the Society, which, however, does not maintain a store. The members send orders to the secretary, who obtains the supplies from Halle, and advises his customers of the date of arrival of their goods at the railway station. Two shares are held in the Central Supply Co-operative Society of Halle; they are of £15 each, with a liability of £100 per share, and each entitles the holder to order goods to the extent of £500 from the organisation. Goods must be paid for by the society within a period of from 14 to 21 days of delivery. The Wallhausen Society also buys fruit from members for sale in North Germany. The Committee of Management is composed of a farmer, an innkeeper (who is also the village mayor), and a grocer, who acts as the secretary and treasurer. The Board of Supervision contains five farmers and one master- joiner. The secretary alone is remunerated for his services, being paid at the rate of y\, per cent, of the total turnover of the society. The position of the Society at the close of 1909 was as follows : — Membership, 53; paid-up share capital, £19; reserves, £10; savings deposits, £424; outstanding as overdrafts, £296; as fixed loans, £148; current account deposits, £201. Sums paid out on current accounts during the year amounted to £998, and those paid in to £833 ; in loans for fixed periods £350 was paid out and £372 repaid ; and savings deposits amounted to £150. Working expenses during the year came to £24. Zemitz Savings and Loan Bank. Zemitz, a colony of small holders settled in 1902, lies in an isolated situation in Western Pomerania close to the Baltic Sea, and six miles from the nearest town (Wolfgast). Previous to its occupation by the present settlers Zemitz consisted of one estate of 1,750 acres with the farm hands. Within 11 years the property was stated to have been held by seven persons, all of whom apparently were unable to make it yield a satisfactory profit. A colonising company bought it and resold it in lots to 52 families, mostly drawn from Pomerania. Of the heads of these, 26 had previously been labourers, 19 artisans or tradespeople, and 7 farmers. The credit Society was established at the same. time as the settlement. The population of the area of the Society, which extends over seven villages, one being five miles and the others one or two miles distant, was 1,326 in 1910. Zemitz included 276 of this total. The shares of the Society were fixed at four shillings with a liability of £12 10^. The Society commenced operations with 87 members representing 142 shares with £1,775 liability. The growth of the bank may be seen from the following Table showing the position at the end of each year, so far as data are available ; — 1904. 1907. 1909. Membership Liability on shares Turnover Balance at central bank Savings deposits Debts on current account Balances on current account Reserves Paid-up share capital Total liabilities * Total assets 93 £ 2,262 7,658 850 645 810 1,050 101 £ 2,835 11,530 3,400 1,500 800 2,470 107 £ 3,060 14,950 3,950 1,710 1,840 3,965 59 48 5,782 5,808 CENTRAL CO-OPERATIVE BANKS. 133 The savings deposits are mostly from non-members; members of the Society- deposit usually on current account, as is the practice in the 380 credit societies with limited liability in Pomerania. Interest at 3-^ per cent, is allowed upon all deposits, and on overdrafts 4^ per cent, is charged plus I per cent, commission. Each member is entitled to an overdraft based upon the number of shares acquired, and if he requires a larger amount adequate security (sureties, scrip, or contingent mortgage rights) must be given. The members are obliged to take a certain number of shares, according to the amount of income tax paid, the maximum number being 25. Two members held 25 in 1910, but the majority had from two to five shares. Loans of definite sums for fixed periods are not granted, only current accounts being held with members. The Committee of Management consists of three persons, including the secretary (a teacher), who receives £15 annually. The other members, one a settler and the other a larger farmer, are paid 25s. The Board of Supervision contains six members and is composed of a large landowner, a medium farmer, two settlers, the pastor and a teacher. In 1909 the total cost of management amounted to £25. The Society does not sell farming necessaries, as the bulk of the members are attached to a large sale and supply society in a town some eight miles distant. There is also a co-operative dairy in Zemitz with 48 members (1910), who received £2,199 for milk delivered in 1910. 2. CENTRAL CO-OPERATIVE BANKS. Function of Central Banks. — The business of a village bank is normally con- ducted upon the basis of the local deposits being adequate to meet local credit requirements and of the latter being approximately sufficient to absorb the deposits. But if deposits tend to be abundant and demand insufiicient, or vice versa, an invest- ment for idle money, or a source of credit, is essential. The rural society operating over a very limited area, and the bulk of its members deriving the main part of their income from agricultural pursuits, the supply of money and the demand for it are apt to occur to a great extent at different times of the year. To these drawbacks arising from limitation of area and siniilarity of occupation of members are added those of isolation or of inconvenient remoteness from banking towns. If societies are to fulfil their functions in a proper manner they must have within reach sources of support for enabling their legitimate requirements to be readily and effectively met. In the circumstances co-operative societies have almost necessarily adopted the plan of forming combinations and creating central co-operative banks on a broad territorial basis, by which means local inequalities may be adjusted and the neces- sary financial assistance given by organisations which at once understood and took account of the peculiar structure and conditions of the various affiliated societies. When over 4,300 societies are combined for this purpose, as in the case of the Central Raiffeisen Bank, or 2,400, 900 and 800 as in the Bavarian, Halle and Breslau Central Banks respectively, or even in combinations of fewer societies, as found in other parts of Germany, individual inequalities are likely to be more or less completely redressed within the groups. Of the societies constituting these central banks, some have reached a condition of permanent prosperity ; others are situated in districts in which their members have the advantage' of better soil, better means of transport or better marketing opportunities; in the case of others the principal crops or the time of their yield may differ ; in still other cases the farming may be more mixed, with the result that returns may be more equalised throughout the year. In general on this broader basis the incomings and outgoings are likely to be almost balanced : the well-to-do societies are enabled to invest their deposits, and the needy (whether merely temporarily or continuously) to obtain loans on suitable terms. First Beginnings of Central Banks. — Raiffeisen was quick to recognise the neces- sity for combination among his first societies. Many found difficulty in investing their deposits, and many_ others in procuring capital. As an illustration of the posi- tion of isolated unorganised village societies without a central bank may be cited the procedure of a Bavarian group of societies, which is adduced by Professor Wygod- zinski. Their Union made an agreement with a provincial newspaper to the effect that, in return for the insertion of co-operative advertisements by the Union, the newspaper should publish free of charge the monetary needs of its societies. Thus, when one village bank had money to invest the announcement ran : X. hamlet offers 25571 I 3 134 PERSONAL CREDIT. £40; or, when another wished to borrow, Y. village needs £50. In many instances no recourse was had to advertisement, but societies corresponded in order to ascertain their mutual needs. The present writer met with a society — in a district in which no central co-operative bank has been regularly organised — which, when it had money to invest, enquired of its fellow societies whether they wished to borrow. These haphazard and irregular methods of conducting business were naturally most unsatisfactory. Ten years after the foundation of the first rural credit society of the Raiffeisen type at Anhausen (1862) Eaiffeisen established a central co-operative bank at Neuwied under the title of the Rhenish Agricultural Co-operative Bank. There existed at that date about 100 rural co-operative credit societies ; and in 1873, 21 of these were members of the Bank, which had adopted the form of a co-operative society with unlimited liability. Two more central banks were founded by him — in Hesse and in Westphalia — and all were united in 1874 to form the German Agricul- tural General Bank, a registered society with unlimited liability. Opposition then arose on certain grounds, e.g., that the constituent societies thus undertook a double unlimited liability (their own as well as that of the societies composing the bank) ; and the organisation was dissolved. In 1876 the Agricultural Central Loan Bank was founded by Raiffeisen as a joint stock company, and this institution has continued to serve as the central bank for the credit societies (now numbering over 4,300) affiliated to the Federation founded by him. Numerous other central banks were subsequently established, as will be seen later in this chapter ; and at the present time almost all credit societies, and a considerable proportion of other societies, are affiliated to a central co-operative bank. Present Number and Membership of Banks. — The North-German Co-operative Societies Act of 1868 contained no provision prohibiting corporate bodies, such as companies or co-operative organisations, from becoming members of co-operative societies, but after the failure of Raiffeisen's attempt no efforts were made to found co-operative organisations themselves composed of co-operative societies. Subsequent to 1889, when limited liability was permitted by law, and one of the clauses of the Act implicitly permitted the formation of societies com- posed wholly or partly of societies, numerous central societies were founded. On January 1, 1912, 36 central banks for rural societies were affiliated to the Imperial Federation, while outside it there were, among others, the two important central banks in Wiirtemberg and in Treves, the former with about 1,200 and the latter with about 360 affiliated societies. The 425 rural credit societies in Baden have not established an independent central bank, but have made an agreement with a mortgage bank to act as their banker. The total number of rural co-operative societies organised in central banks (including those in Baden) on January 1, 1912, amounted to over 18,000. Statistics of the central banks in the Imperial Federation show that the membership of these banks at that date consisted of 15,745 co-operative societies, 75 other associations and bodies, and 662 individual members. Of the co-operative societies 13,362* were credit societies, these con- stituting^ about 98 per cent, of all credit societies attached to the Imperial Federa- tion ; there were 869 supply societies, 664 dairies, and 850 societies of a miscellaneous character, representing respectively, 38, 31, and 39 per cent, of such societies affiliated to the Federation. Of the 1,186 members of the Wiirtemberg Central Bank at Stuttgart on January 1, 1911, 1,125 were credit, and 35 were dairy societies. Organisation. — The central banks may be said to be organised by provinces or States. The German Agricultural Central Loan Bank (founded by Raiffeisen) extends its operations, indeed, over the wholeof Germany, but its 12 branches limit their business to fixed areas co-extensive with a province or parts of adjoining provinces, a State, or congeries of small States, and form, in fact, provincial banks. The other provincial central banks in Prussia are attached to the Prussian State Bank,t which serves as their banker, and occupies in many respects roughly the same position in regard to them as the German Agricultural Central Loan Bank occupies towards its 12 branches. The scheme of organisation for Prussian societies is, therefore : (1) the local societies, (2) the provincial banks to serve as places of monetary adjustment between these local societies, and (3) * A total of about 300 credit societies in Bavaria and Posen hold membership in two central banks, but maintain business relations with one only (and about 2 per cent, of the credit societies are not affiliated to a central bank). This explains how the total number of credit societies within the Imperial Federation at this date*was 13,325, while there were 13,362 credit societies returned as members of central banks within the Federation. t For this Bank see under Agricultural Co-operation and Public Aid (pp. 273-391). CENTRAL CO-OPERATIVE BANKS. 135 larger organisations at Berlin (viz., the Prussian Central Co-operative Bank and the Central Loan Bank) to balance supply and demand, to obtain necessary credit, or to make necessary investments on the money market, on behalf of the provincial institutions. The societies in Saxony, Bavaria, and Wiirtemberg all have central banks which are subsidised by the State; the Bavarian Bank, in addition to permanent large advances at a low rate of interest, has the further advantage of preferential rates on a considerable open credit at the Royal Bank. The arrangement made by the Baden credit societies has already been mentioned; in addition the State grants a fixed credit to their organisation as well as to another Union (see page 270) . In Alsace- Lorraine the Government extends credits at a moderate rate of interest to tw^o central organisations. The societies of the Raiffeisen Federation established in other than Prussian territory {e.g., in Alsace-Lorraine), are in direct relations with a branch of the German Agricultural Loan Bank. " Book " Banks. — At an earlier period in the history of co-operative central banks there were numerous banks called " Buchkassen," that is, banks whose func- tions were restricted to acting as intermediaries for the deposit of money with the Prussian Central Co-operative Bank or other large bank, or for the transmission of money from such banks to individual societies affiliated to them. , Such " book " banks, of course, had an independent legal status, being co-operative societies with limited liability. But they handled no cash, all cash business being carried out by those banks with whom special arrangements had generally been made. When the Prussian Central Co-operative Bank was created in 1895, these " book " banks, although unsatisfactory, were almost a necessity, rural co-operation being in most parts of Germany still in the early stages of its development. At the end of 1896 their number was almost equal to those handling cash, about 12 of each being in existence. The " book " banks have now, almost without exception, been transformed into cash banks (Geldkassen) : so far as the information of the writer goes, only two now exist, one with about 70 adhering societies, and the other with over 500. It is considered probable that these will soon undergo the same trans- formation. The increase in the business of the central banks and the necessity for them to maintain adequate cash in hand, and, therefore, to hold cash deposits them- selves without having to refer, say, to Berlin — which involves for them a relatively considerable loss of time and increases their account-keeping, postage, and other expenses — places book banks at so great a disadvantage that the continuation of business on such lines in a developed stage of co-operation seems quite impracti- cable. This system involves also a duplication of operations in some respects, and from the standpoint of the head central bank (e.g., Prussian Bank), this method of business can hardly be satisfactory owing to the amount of detail work imposed upon it by the receipts and payments of multitudinous small items. When the central co-operative bank is a cash bank it is relieved of this work, and deposits and remit- tances are united in one account, viz., that of the central provincial bank. Legal Form. — The central banks, with the exception of the Agricultural Central Loan Bank, the Imperial Co-operative Bank, and the Hessian Bank, which are joint stock companies, are all organised as co-operative societies with limited liability. The Miinster Bank, founded as a joint stock bank in 1884, was trans- formed into a co-operative society in 1^00. The position of the Prussian State Bank is fully set out in the special section devoted to it. The following Table shows for the 36 banks within the Imperial Federation of Agricultural Co-operative Societies (including that of Windhuk in German South- West Africa, which has only one affiliated society), for the two important banks of Wurtemberg and Treves, and for the Co-operative Central Bank of the Agrarian League and of the Baden Peasant Associations, which are outside the Federation, (1) the head- quarters of the bank, (2) the year of foundation, (3) the par value of shares, (4) the liability attaching to each share over and above the share value, (5) the maximum amount of credit granted per share held, (6) the maximum number of shares that may be taken by any one member, (7) the number of credit societies attached, (8) the total number of all co-operative societies attached, and (9) the total of all members, whether co-operative societies, other organisations or individuals. 26574 I 4 136 PERSONAL CREDif. Agricultural Central Co-operative Banks (January 1st, 1912). Maximum Total Year Par Amount Maximum Number Number of all Headquarters of of Value of Credit to be of Co-opera- Total Organisation. Founda- of Liability per held Credit tive of all tion. Shares. per Share. Share. per Member. Societies attached. Societies attached. Members. 1. Within Imperial Federation. (a) Go-operat ive Societies with Limited Liability. £ s. £ £ s. Wormditt 1892 75 750 750 6 70 73 73 Konigsberg 1896 10 100 75 500 None 27 31 Neumark 1897 25 200 150 50 None 16 19 Dantzig 1897 10 100 75 300 None 73 112 Berlin I.' 1894 2 10 75 50 300 493 557 567 Berlin II.' 1902 10 100 75 1,000 None 23 28 Stettin 1895 15 200 150 500 380 514 524 Posen I.' 1895 2 10 25 25 500 303 395 400 Posen II.i 1899 10 100 — 300 182 301 328 Breslau I.i 1895 2 10 50 50 300 755 834 847 Neisse 1890 50 500 500 50 319 366 372 Breslau II.' 1899 10 100 60 300 None 80 93 Halle 1893 15 300 225 50 667 912 923 Erfurt 1899 10 100 75 200 None 3 9 Kiel 1896 25 .0 200 200 200 348 361 388 Hanover 1890 25 300 500 60 466 506 532 Mtinster 1884 25 250 £1,000 for first and £500 for others. 20 537 540 566 Cassel I.' 1893 10 50 50 200 73 85 90 Cassel II.' 1897 10 100 75 1,500 None 14 21 Wiesbaden 1894 2 10 50 33 7 300 139 177 202 Bonn 1892 5 50 50 200 114 285 305 Cologne I. 1892 50 300 750 50 548 712 723 Cologne II.2 1901 10 50 250 2,000 8 10 23 Munich 1893 10 50 400 300 2,259 2,403 2,417 Landau 1907 25 500 £750 for Credit Societies. 20 271 290 294 Ludwigshafen 1899 10 100 50 — None 16 27 Dresden 1897 5 100 500 50 267 437 442 Carlsruhe 1900 5 50 100 100 2 373 468 Uustrow 1896 50 100 £250 per Share for first two £125 for others. 20 34 44 60 Oldenburg 1897 12 10 125 250 50 66 85 91 Strassburg I 1901 1 100 75 1,500 None 7 16 Strassburg II.' 1904 5 100 150 500 183 194 234 Windhuk (S. W. Africa) 1907 12 10 250 500 100 1 2 127 Berlin — (b) Joint Si ^ock Companies. German Agricultural 50 60 See text — 4,468 4,468 4,468 (Raiffeisen) Central 1876 Loan Bank. Darmstadt — Imperial Co-operative 1902 50 50 200 — None 37 48 Bank. Darmstadt Hessian 1883 50 — £500 per — 409 525 613 Bank. Share for first five £250 for 13,362 15,745 16,482 others. 2. Outs IDE IMP] 3RIAL Federation. Central Go-opera Hve Socie ties with Limited L iahility. Stuttgart^ 1893 5 50 250 10 1,125* 1,181* 1,186* Treves 1895 50 500 — — 345 362t 363t Berlin — Co-operative Central 1896 5 50 — — ? 241t 249t Bank of Agrarian League. m Freiburg (Baden) 1906 5 100 ~ ? 5t 25t 1 In each of these centres two distinct Unions have each their central bank. * On January Ist 19U 2 This bank belongs to same organisation as Cologne I. + On January 1st! 1910* » Assesses credit at *5 per member of societies seeking credit, but latter must take up one share per *260 of creditthuB extended. CENTRAL CO-OPEEATIVE BANKS. 137 It will be observed in the Table that the German Central Loan Bank has only credit societies as members; by the articles of the company only credit societies established on Raiffeisen principles (unlimited liability, restricted area, &c.) may be accepted as shareholders, that is, as members. It may also be noticed that 10 banks show no credit societies. Eight of these banks have been founded by the Eaiffeisen Federation to serve as central banks for the affiliated societies not eligible (that is, non-credit societies) to join the German Central Loan Bank; one bank only, the Imperial Co-operative Bank, does not accept local societies as members, while the Neumark Bank is composed only of other than credit societies. Membership. — ^The membership of a central bank is generally open (1) to all registered societies situated in the area covered by the particular Union to which the bank is attached, (2) to individuals elected to the Committee of Management and the Board of Supervision of the bank, (3) to individuals resident in Union area who find it impossible or inconvenient to join a local society, (4) to public or benevolent institutions, associations, &c. connected with agriculture, such as the Chambers of Agriculture and District Agricultural Associations. Individual members are not, however, important elements in the actual membership : on January 1, 1912, out of 16,482 members in the 36 Banks of the Imperial Federation only 662 individuals, of whom 127 were members of the single South- West African Society, and the bulk of the others were officials of the Banks. Corporate bodies other than registered co-operative societies numbered only 75, of which 19 were the small district associations in Alsace-Lorraine, and the remainder are mostly com- posed of the co-operative Unions themselves, Chambers of Agriculture, and Agricul- tural Associations. The average number of members in the central banks of the Imperial Federa- tion in 1911 was 484, the corresponding :^gures for each of the years 1905-10 being 280, 275, 287, 301, 305 and 332. It will be noted in the Table on the previous page that the range in membership is great. Excluding the Banks that contain no credit societies, the Raiffeisen Central Loan Bank, the Imperial Co-operative Bank, which is mainly composed of central trading associations, and the African Windhuk Bank (one society), we find that for 24 Banks the average was 478, while five of these show a far greater membership. The 12 provincial branches of the Raiffeisen Central Loan Bank, which may be regarded for all practical purposes as provincial central banks, had in January, 1912, an average of 354 societies, the four branches showing the largest numbers being at Breslau (502), Berlin (485), Erfurt (458), and Strassburg (456). Shares and Liability. — The par value of the shares shows extremes of 10s. and £75. The law fixes no limit, whether maximum or minimum, in this respect'; only providing that the liability over and above the share value must not be less than the share value. The amount of the share is, therefore, fixed according to the particular circumstances. Although for German co-operative societies the essential basis of credit is constituted by the liability per share undertaken by the members, all banks now aim at making the share capital as high as possible, without deterring membership, in order to have an adequate owned capital and to increase their credit. The same general influences, as explained when dealing with the local credit societies, are at work towards the raising of the share values of the central banks. Among the banks that have raised their shares since 1897 may be mentioned : Neumark from £2 10s. to £25; Berlin (Brandenburg Union), Posen (Provincial Union) and Breslau (Provincial Union) from £1 to £2 10^.; Stettin and Halle from £5 to £15; Hanover and Kiel from £5 to £25; Cassel from £1 to £10; Bonn from £1 to £5; Oldenburg from £1 5s. to £12 10s.; Giistrow from £5 to £50; Darmstadt from £10 to £50; and Munich from £5 to £10. The shares are usually paid up in full upon the admission of the societies to membership. In some cases they may be paid up by fixed instalments, which are generally four in number extending over a period of one or two years. The Imperial Co-operative Societies Act provides that further shares may not be taken in a society with limited liability until all previous shares have been fully paid. It is a not uncommon practice, especially in the case of newly founded societies, for the central bank to which they attach themselves to debit the amount of the share or shares taken up to the account of the society as a loan at the rate of interest charged for loans. When further shares are taken by societies the same procedure is often followed. Such debts are subsequently paid off at the convenience of the societies concerned. 138 PERSONAL CREDIt. The average number of shares held by 34 provincial central banks ia the Imperial Federation at the end of 1911 was 5,082, and the average amount of paid-up share capital per bank was £37,758; for 1909 the same averages for 35 banks were respectively 4,317 and £30,675. At the former date the paid-up capital in many of these banks was more than double the average (£37,758) : in the bank of the Hessian Union at Darmstadt it amounted to £125,000; in the Kiel Bank to £116,875 ; in the two Posen Banks to £97,172 and £86,000 respectively ; in one Breslau Bank to £93,116, and in another (Neisse) to £81,570; in the Stettin Bank to £86,985; in the Halle Bank to £81,666, in one Cologne Bank to £82,240, and in the Munich Bank to £73,090. Two more Banks, in Berlin and Hanover, respectively, had a paid-up capital of over £44,000. The paid-up capital of the two co-operative banks whose operations extend over the Empire and not merely over a State or province, viz., the German Agricultural Central Loan Bank, established by Raiffeisen, and the Imperial Co-operative Bank, amounted respectively to £430,925 and £250,000. Liability attached to Shares. — The liability incurred in respect of each share held in the central banks organised as co-operative societies is observed from the above table to be in several cases very great; and occasionally appears to be almost tantamount to unlimited liability. In two cases it reaches one hundred times, in one case thirty times, in eight cases twenty times the value of the share, and in eighteen cases have made it ten times the amount of the share value. (See Table on page 136.) The object of such high liability is to increase credit capacity. The Prussian State Bank (see section thereon) gives credit mainly upon the basis of the liability represented, making certain deductions. To obtain sufficient credit, therefore, it became desirable to assume a liability of adequate dimensions. It is not always practicable to secure the payment of large sums by way of share capital, and accordingly a liability, large in proportion to share capital, is often assumed, this requiring no additional payments, unless losses occur. The law limits to a certain extent the danger incurred by members of societies with a proportionately large liability by the provision that bankruptcy proceedings must be commenced by the Committee of Management when the debts exceed one-quarter of the amount of the accepted liability of members. The final liability is thus limited in effect to one-fourth of the amount nominally accepted, so that a nominal twenty-fold liability practically means a five-fold liability. How far the Liability undertaken is excessive. — In the Table (page 142) it will be noticed that 545 members in one Berlin Bank undertook a total liability of £1,229,550, 832 members in one Breslau Bank a liability of £1,753,600, 890 members in the Halle Banks a liability of £1,566,900, and 489 members in the Stettin Bank a liability of £1,093,400; and there were five other cases in which the liability incurred exceeded £500,000. The question thus arises, from the point of view of a bank's depositors, bankers, and other creditors, whether these immense liabilities are really tangible, and whether, in the event of great losses, the central societies are good for such amounts. And in general the answer is in the affirmative. These members undertaking such liabilities are not individuals; they are societies, and over 70 per cent, of them are credit societies. The bulk of the members of all kinds of socities are landowners, whose liability for the debts of their societies is amply secured. The societies affiliated to the banks already cited (Berlin, Breslau, Halle and Stettin) which undertake the largest absolute liabilities among the German central banks, are just those which include, to a greater extent than other such groups, both medium and large landowners. The business of the banks with their societies is carried out upon safe lines, and gives rise to little danger of rash investment. Even in the last resort, in the event of the full liability being recoverable owing to great losses, a state of affairs which is almost impossible under the Co-operative Societies Act, the realisation of the amount due is absolutely certain. Taking the Banks already cited we find that the average liability per member (that is, in effect per co-operative society) in the Berlin Bank amounted in 1910 to £2,256, in the Breslau Bank to £2,107, in the Halle Bank to £1,761, and in the Stettin Bank to £2,236. The gross liability undertaken by members in 1910 amounted to £13,993,575, which is equivalent to a liability per society of £884. The average number of members in over 14,000 rural credit societies in 1910 w^as ascertained to be 97, so that the average liability undertaken by individual members of societies in respect of their central banks amounted on this reckoning 1# about £9 2^. Remembering that with few excep- tions the central banks are co-operative societies with limited liability, which are CENTRAL CO-OPERATIVE BANKS. 139 bound by law to commence proceedings in bankruptcy when the annual (or other) balance sheet discloses losses amounting to one-fourth of the liability, the effective liability works out at less than £2 10s. per individual member. It may be here observed that the amount of liability attached to shares of the agricultural central banks has not been increased, and that the tendency is to limit this liability to ten times the share value, unless the share value is placed at a very low figure. Shares tends to be of higher value, and a tenfold liability may be regarded as the present standard for new societies. The new provincial central banks of the Raiffeisen organisation for other than credit societies have adopted this principle. Thus, while the assumption of excessive liability is at present deprecated, the share values incline to higher amounts. Working Capital. — The working capital of the central banks is composed of tlieir paid-up share capital and reserves, the deposits of members, and their credit at their banking centre (that is, for the majority, at the Prussian State Bank). Deposits are also taken from non-members, who, however, are not eligible for loans. Deposits of large amounts are usually accepted at three or six months' notice of withdrawal, but most deposits are placed at interest on current account. Form and Extent of Loans. — Credits are for the most part given in the form of overdrafts on current account. Each member is allowed a certain credit which is based in most cases upon the number of shares held in the central bank. The details of the maximum credits thus measured may be seen in the Table given above, where it will be observed that the banks show considerable difference in this respect. The Eaiffeisen Central Loan Bank applies a different method from other co-operative central banks in assessing the credits to be allotted to single societies. There are at present twelve provincial branches of this Bank, and its shareholding societies in each branch district must send in an annual return showing the collective assets of the members, as attested by the Committees of Management and the Boards of Supervision. In Prussia and in other States where the supplementary property tax is in vogue, the amount paid by each of the members must be stated, while elsewhere {e.g., in Bavaria and in Alsace-Lorraine) a valuation of the property of each member of a society as estimated by the managers of the society must be furnished. With these particulars and other supplementary information of a general kind as basis a maximum limit of credit is allotted. In States in which the supplementary property tax is not payable, and exact data are not therefore to hand, a normal credit of 5 per cent, of the assets of members is granted, and a super-normal credit of 10 per cent., while for societies whose members pay the supplementary tax a normal credit of 10 per cent, and a super-normal credit of 15 per cent, is accorded. Each branch bank is authorised to advance the normal credit, but the issue of a super-normal credit requires the authorisation of the central office. Credit in excess of the regular super-normal credit can only be granted on the authority of the Council of Supervision of the Central Bank. For every £250 credit taken, societies are expected to take up one share in the Bank, but this course is not rigorously enforced. All credit business between a branch bank and the societies within its area of operations is transacted, as a rule, on current account. Exclusive Banking Relations .—The societies affiliated to central banks must undertake not to maintain banking relations with any other banking institutions either for the deposit of money or for the obtaining of credit. For the purchase of stocks and shares they are also expected to make use of the services of their central bank. Credit (1) for Fixed Periods. — Although normally credit is accorded on current account, many of the central banks advance capital for fixed periods for building- (e.g., of dairies and warehouses) and for other purposes (e.g., advances for property purchases), but in such cases the right to foreclose is retained and fixed repayments by instalments are obligatory. Indeed, in all cases, the central banks retain the right to withdraw credit at short notice when due cause is shown. (2) On Current Account. — In 1911 less than one-half of the Central Banks granted loans otherwise than by way of overdrafts on current accounts; and the proportion of business in this form is very much greater than that in loans for fixed periods. The sums borrowed in the latter way from the central banks by their affiliated societies amounted at the end of the year to £535,500, while their borrowings on current account totalled £14,598,300. Nine Banks only had advanced money for fixed periods. As to deposits by societies with their Central Banks for fixed periods, the 140 PERSONAL CREDIT. disproportion is considerably less : at the same date the deposits of the members on current account at about twenty Banks (exclusive of the Central Loan Bank) amounted to £8,632,800, while those for fixed periods reached £6,842,600. There is an increasing tendency on the part of Central Banks to allow more attractive rates of interest on deposits for periods of over six months. Business done. — The business done by the Central Banks has reached enormous dimensions. In 1910 the turnover of 36 banks (34 provincially organised banks and two whose operations extend over the Empire) within the Imperial Federa- tion of Agricultural Co-operative Societies amounted to £324,000,000; in 1911 their turnover was nearly £400,000,000. The average turnover per provincially-organised bank was £7,312,400 in 1910, and £9,326,400 in 1911, while the turnovers of the Raiffeisen Central Agricultural Loan Bank and of the Imperial Co-operative Bank in 1911 amounted respectively to £59,130,000 and £30,501,000. The positioB of these Banks, which are provincially organised, at the end of the years 1906-1911 are shown in certain respects in the following table : — Balances of Indebtedness of Balances of Indebtedness of Tear. Sooietiea at Societies at Central Banks at Central Banks Central Banks. Central Banks. other Banks. at other Banks, £ £ £ £ 1906 9,831,550 11,108,250 1,203,000 2,584,000 1907 9,946,350 12,364,150 631,901 3,533,800 1908 11,918,350 12,669,400 932,724 1,331,050 1909 13,882,350 13,394,000 1,351,450 1,283,150 1910 15,633,250 13,071,550 2,158,250 944,950 1911 15,475,500 15,133,900 1,365,700 1,375,200 Of the money employed by these Central Banks in 1910 the deposits of the affiliated co-operative societies represented 943 per cent. The percentages in 1908 and 1909 amounted respectively to 896 and 916, but in 1907, a year of severe financial crisis, it declined to 726 per cent. The percentages for the year 1896, 1898, 1900 and 1902-6, were, in due order, 345, 615, 682, 879, 91, 921, 81-8 and 79*2. Payments to, and Deposits by, affiliated Societies. — ^The payments made to, and the cash deposited by, co-operative societies affiliated to the Banks of the Imperial Federation, excluding the Raiffeisen Central Loan Bank and the Imperial Co- operative Bank, in each of the years 1902-1911 in their business with these Banks, are shown in the following Table : — Payments to Year. Co-operative Societies. £ 1902 14,327,200 1903 15,026,700 1904 17,802,600 1905 22,190,400 1906 25,832,700 1907 28,533,500 1908 32,230,800 1909 36,635,800 1910 36,314,100 1911 44,016,500 Deposits of Co-operative Societies. £ 15,138,126 15,560,676 17,741,040 21,196,768 25,895,900 27,178,587 32,557,717 37,556,500 36,760,441 42,530,300 Rates of Interest on Deposits and Loans. — The principal reason for a local society belonging to a central bank being to secure a permanent centre at which depositing and borrowing may be advantageously transacted, it is of interest to observe the rates of interest charged or allowed by central banks to their members. It may be noted, respecting these rates, that alterations are normally made only quarterly or half-yearly. Central banks pursue the policy of maintaining the greatest possible stability in their rates : in 1910 and 1911 about two-thirds of their number made no changes. The following Table shows these rates at the beginning and end of 1910 and 1911 for the banks within the Imperial Federation and for the organisations in Baden and Wurtemberg : — CENTRAL CO-OPERATIVE BANKS. 141 liATES OF Interest of Central Co-operative Banks. Rates of Interest on Deposits. Rates of Interest on Loans. Com- 1910. 1911. 1910. 1911. mission Headquarters of Organisation. Yearly tj ;-4 frt U (or Half- E? ^ & CD £;> ■a yearly). Es ^ e8 ^ C3 S C3 a 3 8 a> s 0^ s 1^ d a a |4 s s • a « s 03 C3 ^ l-s fi l-J O >-> a l-= Q 1. "Within Imperial Per Per Per Per Per Per Per Per Per Federation. cent. cent. cent. cent. cent. cent. cent. cent. cent. (a) Societies with limited liabili ttj. Wormditt 4 4 4 4 4i 4i ^ 4i iV Konigsberg 4 3f 3| 4 4i 4^4i H-H 4i-5i f-A Neumark .. 3 3 3 3 4| 4i 4f 5 1 TT7 Danzig .. 3i 4 4 4 41 ,^ 5 5 tV Berlin I .. 3-6 3-6 3-6 3-6 4-2 4-2 4-2 4-2 ifV Berlin II 4 — — 3i-4i .51-6 4|-5 4|-5 4f tV Stettin - H-ii H-H 3|-4i 4-H 41-5 4i-5i 4i-54 4i-5i 4-A Posen I .. i-ii 4-4A 4 H 41-5 41-5 41-5 41-5 tV Pcsen II .. 4 4 4 4 4i-5 4i-5 4i-5 4i tV Breslau I .. 3i-4 3i-4 3i-4 3i-4 4, 41 5 4-5 4-5 4-5 1 Neisse :; V 3|-4 3|-4 31-4 4-41 4-4^ 4-4| 4-41 1 Breslau II H-H 3i-3| 4i 4i 4i ^ 1 TIT Halle 3i 3i 3i 4 44 4i ^ 4i tV Erfurt .. 3| H 3i ^ 4| 5 5 5 Kiel .. 3i 3i 3i 3i 4i 5 5 5 Hanover .. 3| 31 3f 4 4 44 4i 44 iV Miinster 3i 3i-3| ^-^ 3f-4 4 4 4 4|r tV Cassel I .. ^ 3i 31 3i H H 4i 4i ^v Cassel II 4 3i-4 4i-4| 41-54 1 TIT Wiesbaden .. 3i 3 3 3i 4i 4i 4* 41-5 1 TO Bonn 2h-H 21-31 2i-3i 4-41 4 4 4 tV Cologne I .. 3|-4i 3-6-3-8 3-6-3-8 3-7-3-9 ■ ^ — — 4^ ^V Cologne II •• 31-4 3i-4 3^-4 31-4 ^ 5 5 Munich .. H,H 3i-3f 3|-3| 31-4 4 4 4 4 — Landau 31-4 3i-4 3i-4 4i 4i 4J 4i * Ludwigshafen 4 4 4 4 5 5 5 5 1 TT7 Dresden .. 3| 3| 3| 3| 41 41 4i 4i 1 ■5TT Carlsruhe .. 4-4i 3I-4J 3f-4J 3|-4i 4^ 4, 4| 44 1 T'ff Gtlstrow .. 3-4 3-4 3-4 3-4 4i 4i 41 4i Oldenburg • • 4-4i 4-4i 4-4i 4-4i 5 5 5 44-54 A Strassburg I. .. 3i-3| 31-31 3i-3| 3i-4i 4i 4i 4i 4i iV Strassburg II. 3J 3i 3| 4 4i 4i 4i 4i Windhuk .. 2-3 3 3 8 8 8 — (&) Joint Stock Companies. Darmstadt : Imperial Co-operatii 76 3-3i 31-31 3|-3| 3-3i 3^-4, 5 3i-5 3i-5 4-5 1 Bank. Hessian Union Bar ik 4 4 4 4 5 5 5 5 tV Berlin : RaiflEeisen Central Loe m 3i-3| 3i-3i 3^-4 3i-4 4i-4i 4i-4i 4^41 41-44 tV Bank. 2. Outside Imperial Federation. Stuttgart: Wtirtemberg Central C 0- 3i ^ 34 ^ 4i 4i 4i 4i tV operative Bank. Mannheim : Baden Credit Societi es 4 4 4 4 4i 4J 4i 4i 1 TIT as per agreement with Rhenif 5h Mortgage Bank, It is seen that co-operative societies were able to obtain generally 3| to 4 per cent, for deposits — the latter rate is usually allowed for deposits at six months' or more notice— and to borrow for the most part at the rates of from 4J to 5 per cent. The averages for the 33 banks, leaving the African Bank (Windhuk) out of account, organised on a provincial basis, were 863 for deposits and 4"7l for loans at the beginning of 1910, and 340 and 455 at its end; in 1911 the corresponding percentages were 340 and 455 ; and 367 and 457. It may be added that the average German Imperial Bank rate in 1910 was 435 per cent., and in 1911 440 per cent. 142 PERSONAL CREDIT. The following Table, published by the Imperial Federation of Agricultural Co-operative Co-operative Banks, for 1910 (end) : with Totals for these Banks Total >-opve. lentral erman Loan ■§ Working j^ o^S'S Headquarters of Ban ci o 1 k. 1 o o 1 1 3 !2i Number of Shares acquired Total paid up Share Capital. Total Liability incurred on Shares. Capital owned by Banks. (Paid-up capital and Reserves.' Total Borrowed Capital. Deposits by Members at Call. Deposits by Members for Fixed Periods. Loans to Members on Current Account. to Mem- bers for Fixed Periods. Balances at Impl. Bank, Prussian JO Co-opve. Bank, and Central Agrioultu: Bank. 1. 2^ 3. 4. W 5. 6. 7. 8. 9. 10. 11. (a) Regional or Provincial Ban ks. 1910. £ £ A £ £ £ £ £ £ 1. Wormditt ... .. 1892 73 122 9,075 91,500 12,122 100,019 752,027 — 51,693 — 6,000 2. Konigsberg .. 1897 31 2293 23,100 229,300 27,056 187,713 23,088 — 88,907 — — 3. Neumark ... .. 1897 23 220 3,162 44,000 4,159 17,518 2,229 — 9,619 — — ■ 4. Danzig .. 1897 102 1489 15,270 148,900 20,783 257,121 80,903 — 165,476 — 10,709 5. Berlin I. ... .. 1894 545 16394 41,907 1,229,550 49,621 576,873 556,098 — 393,688 — 96,921 6. Berlin II. ... .. 1902 27 713 7,135 71,300 8,923 79,956 32 — 83,812 — 515 7. Stettin ... .. 1895 489 5467 83,085 1,093,400 101,299 1,111,435 432,646 526,650 615,724 — 25,459 8. Posen I. ... .. 1895 392 35007 89.255 875,175 99,065 319,115 218,638 195,705 417,532 — — 9. Posen II. ... .. 1899 143 3007 32,298 800,700 47,550 384,409 20,758 — 297,732 — — 10. Breslau I. ... .. 1895 832 35072 87,578 1,753;600 103,106 984,071 506,339 455,572 803,266 — 183,408 11. Neisae .. 1890 365 1535 76,955 760,750 82,605 403,462 296,204 106,870 442,923 — 21,951 12. Breslau II. .. 1899 83 — 23,706 246 900 27,838 134,764 11,319 — 151,920 22,439 — 13. Halle .. 1893 890 5223 77,157 1,566,900 104,346 1,133,315 813,091 319,224 654,427 144,595 22,619 14. Erfurt .. 1899 11 200 1,817 10,000 2,494 12,197 1,490 — 6,365 — 6,647 15. Kiel .. 1896 377 4120 103,550 82,400 112,698 388,463 141,139 110,104 298,172 3,150 461 16. Hanover ... .. 1890 516 2048 40,365 614,400 45,269 399,659 366,304 — 374,973 — 16,540 17. Munster ... .. 1834 561 1817 36,977 454,250 50,018 970,127 433,641 320,000 764,221 — — 18. Cassel I. ... .. 1893 88 1873 18,870 93,650 19,620 27,115 21,532 — 45,973 — — 19. Cassel II. ... .. 1897 20 808 8,800 80,800 12,393 70,653 24,560 25,599 84,013 — 283 20. Wiesbaden .. 1894 197 5790 14,475 289,500 17,733 99,132 2S,578 35,537 78,982 — 6,000 21. Bonn .. 1892 303 6804 33,495 340,200 44,245 167,771 77,988 70,231 126,568 44,598 — 22. Cologne I.,.. .. 1892 722 2084 72,575 625,200 85,440 841,615 514,991 276,200 682,309 5,210 — 23. Cologne II. .. 1901 23 700 350 35,000 1,335 27,913 27,913 — 28,934 — — 24. Munich. ... .. 1893 2216 6509 65,090 325,450 101,205 1,765,834 671,868 908,814 815,774 — — 25. Landau (Pfalz) .. 1907 289 602 8,662 301,000 14,359 448,713 297,447 104,855 183,528 — — 26. Ludwigsbafen .. 1899 35 4108 6,313 410,800 11,713 178,664 1,376 — 177,855 — — 27. Dresden ... .. 1897 426 3258 19,290 325,800 22,534 466,987 315,116 — 121,177 179,020 229 28. Carlarube ... .. 1900 439 1362 5,387 68,100 7,644 134,209 14,316 77,181 122,075 — 669 29. Darmstadt... .. 1883 fi06 3380 125,000 125,000 150,000 760,039 405,359 290,900 520,882 — 214,676 30. Giistrow ... .. 1896 61 295 1,318 29,500 1,828 40,595 4,353 31,187 — — 17,065 31. Oldenburg .. 1897 81 800 1,000 145,000 3,236 111,249 56,208 55,022 67,328 27,640 1,395 32. Strassburg I. .. 1904 209 723 3,845 72,300 5,842 171,067 90,678 67,299 121,882 7,159 — 33. Strassburg II. .. 1901 16 1930 1,930 193,000 2,566 57,620 — — 57,468 — — 34. Windhuk ... .. 1907 125 125 1,007 31,250 1,757 37,319 10,065 14,483 22,326 8,875 — Total 11319 155878 1,136,079 13,312,925 1.400,413 13,062,108 6,538,284 3,991,433 8,841,932 392,668 628,350 (J) 35. Impl, Oo-opv Bank, Darmsta 36. German Agrit e. 1902 it 48 5000 250,000 250,000 255,733 712,105 222,274 434,574 543,961 — — ,1. 1876 4463 8613 430,650 430,650 459,199 4,583,833 4,440,705 3,187,607 105,817 1,206 Central Loan Bn k. Grand Total in 191 — 15830* 169491 1,816,729 13,993,575 2,115,345 18,358,046 6,760,558 4,426,007 12,573,101 498,485 629,558 1911. (a) Totals, Banks 1-5 4 . — 11966 172796 1,283,768 15,414,575 1.589,976 14,769,285 6,399,796 4,270,631 10,492,605 406,993 549,56r (J) Impl. Co-op. Ban k — 48 5000 250,000 250,000 256,700 662,350 209,560 375,762 518,076 . „ German Agric. Ce Q- — 4468 8634 430,925 430,925 465,198 4,263,534 2,023,466 2,196,286 3,587,667 118,572 — tral Loan Bani " Grand Total in 191 1 — 16482* 186430 1,964,693 16,095,500 2,311,874 19,695,169 8,632,822 6,842,679 14,598,348 525,565 — Wiirtemberg Centri ll 1893 1186 2654 10,595 132,700 160,029 402,089 339,857 185,355 14,999 Bank. * ■* In 1910 the membership was composed of 15,107 registered co-operative societies (of which 12,832 were credit sooietieB) CENTRAL CO-OPERATIVE BANKS. Societies affords a detailed survey op the position and business of G-ekman AS WELL AS FOR THE WtJRTEMBERG CENTRAL BanK, FOR 1911 (eND). 143 Central bilitiea at Imperial Co- perative Bank, Prussian leBtral Co-operative Bank, nd German Agricultural 'antral Loan Bank. i pq 1 o 1 o w '.a 1 li fl u m o go •1 1 .2 o 1 o ■3 1 o J 1 a .s -a . §.g as 1 -a 1.3 1 ■a > o H -3 g CD a a o 1 'i so 43 O) C3 CU <30 Is cS -3 « .gs 4^ o "g 2 j-jr^ f^TS o I'd go h3 P5 s M 1-^ E-i H fL| <1 -< H o o 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. £ & £ £ £ & £ £ £ £ £ £ 20,297 — — 50,820 — 112,693 112,141 551 278,493 217,073 1,141,316 272 0-023 1 65,938 305 — — 70,519 216,367 214,769 1,597 1,309,992 1,297,633 6,304,786 968 0-014 2 3,236 — — 210 — 21,882 21,678 204 66,671 65,776 960,656 109 0-011 3 — 64,883 50 — 176,168 280,551 277,905 2,646 — — 13,044,500 1,575 — 4 — 4,252 — 251 14,713 629,887 626,494 3,392 1,249,173 1.709,214 5,547,618 2,014 0-036 5 48,619 652 — 225 27,305 80,899 84,879 1,029 91,093 94,315 2,028,746 533 0-026 6 — 12,258 — 325,561 70,320 1,216,137 1,212.734 8,402 2,786,422 2,487,133 12,384,584 3,218 0-025 7 94,319 3,594 25 133 3.464 622,858 618;i60 4,676 206,166 2,161,943 9,495,110 2,396 0-025 8 71,447 — — — 274,253 435,810 431,909 3,900 1,750,011 1,742,925 12,127,546 3,208 0-028 9 — 9,089 — 14,185 206,603 1,091,845 1,087,177 4,667 2,086,639 2,011,937 11,168,064 3,161 0-026 10 125 7,360 — — — 487,453 486,067 1,386 800,276 807,671 4,033,362 1,964 0-049 11 42,045 10,381 — — 81,400 164,853 166,603 2,250 189,840 2C1,165 3,147,968 958 — 12 — 66,967 — — — 1,248.868 1,237,662 11205 3,685,489 3,646,554 22,488,820 3,342 0-014 13 — — — — 10,707 14.824 14,691 132 53,711 54,813 332,477 52 0-016 14 — 1'53,261 1,281 — 65,739 507,820 501,161 6,658 2,896,867 2,895,418 18,923,251 1,924 0-010 15 — 3,324 23,023 — 9,210 448,413 445,518 2,894 2,518,054 2,449,549 16,979,973 2,684 0-015 16 149,298 753 1,675 — — 1,025,035 1.020,145 4,889 2,348,184 2,480,353 20,046,409 2,415 0-012 17 5,527 — — — 55 47,716 46,735 981 99,892 99,268 454,245 18 10,091 6 — — — 84,398 83,047 1,351 392,430 362,569 1,425,000 19 7,206 3,253 25 512 3,255 117,505 116,866 639 — — 2,138,890 1,097 0-051 20 9,716 1,429 2,250 — — 213,473 209,916 2,557 2,002.297 2,015,131 7,965,339 1,255 0-015 21 46,231 3,098 — — — 931,465 927,055 4,434 2,222,922 2,187,150 12,760,945 2,747 0-021 22 — — — — — 29,344 29,248 96 — — 168 23 — 380,603 2,829 — 164,326 1,873,752 1,867,044 6,708 2,982,451 3,157,560 29,432,626 3,395 0-012 24 — 85,688 32,049 115,705 6,721 464,626 463,072 1,553 539,537 511,298 3,742,756 1,805 0-048 25 143,565 — — 3,986 30,393 190,966 189,877 1,088 67,758 39,327 417,676 253 0-061 26 — 1,283 101 15,376 151,703 491,374 489,522 1,851 1,043,621 1,011,089 4,675,892 164 0-034 27 3,057 486 — 100 30,000 142,571 141,854 717 167,422 159,179 1,284,796 325 G-025 28 — — 50 5,907 28,802 917,'i95 910,040 7,655 2,304,477 2,177,573 15,790,793 3,457 0-041 29 — 133 — 23,943 8,000 42,538 42,424 114 — — +254,556 78 0-031 30 — 14,970 — — — 114,766 114,480 286 708,340 702,687 3,872,899 472 0-012 31 — 15.343 10,132 — — 177,520 176,909 6,063 — — 2,390,663 906 0-038 32 52,821 — — — 4,759 60,374 60,186 188 38,416 36,493 260,773 123 0-047 33 12,752 391 — — — 40,056 39,106 950 24,316 31,293 +1,144,113 1,0)8 0-090 34 786,293 843,770 106,691 556,915 1,278,928 14,550,343 14,463,111 87,232 36,760,441 36,312,088 248,667,106 52,541 0-021 __ ~~' 5,279 47,293 — — 978,513 967,837 10,675 — — 30,501,042 7,021 0-023 35 4,676 679,671 — — 26,901 5,055,994 5,043,432 15,462 — — 35,030,000 34,949 0-078 36 790,969 1,528,720 153,985 556,915 1,305,827 20,587,351 20,473,982 113,369 — — 324,198,148 94,511 — — 1,021,650 401,861 310,210 811,666 1,758,050 16,445,029 16,359,261 85,708 42,530,327 44,016,514 317,099,109 60,480 0-020 — 2,701 42,305 — — 928,253 919,050 9,202 — 22,973,972 3,499 0-015 _ 411,631 1,053 32,691 4,749,796 4,728,733 21,063 ~ — 59,130,000 38,559 0-065 — — 816,193 353,668 — — 22,123,078 22,007,044 116,033 — - 399,203,081 102,538 — — — 3 61,379 — — — — 2,635 1,144,985 1,290,048 11,188,147 976 — — 163 other organizations and 560 individuals ; in 1911 the corresponding figures were 15,745 (13,36 J credit), 75 and 662. 144 PERSONAL CREDIT. Cost of Management. — The cost of management of 33 central banks in 1911, excluding the Eaiffeisen Central Loan Bank and the Imperial Co-operative Bank, amounted to £60,480, an average of £1,833 per bank; or 002 per cent, of the total turnover. The expenses of the Eaiffeisen Central Loan Bank were £38,559 (0 065 per cent, of the turnover), and of the Imperial Co-operative Bank £3,499 (0015 of the turnover). The ranges of percentage of turnover for the thirty-three provincially organised banks are wide; the lowest is 0009 and the highest 0098. For their actual cost of administration, and the percentage which such cost bears to the turnover of each of these Banks, the reader is referred to the Table showing for 1910 the principal results of the operations of the Banks. It may be remarked, however, that the figures purporting to repre- sent cost of management often include considerable voluntary contributions to the Unions of the societies with which these central banks are connected. These contributions sometimes amount to £300 per annum, and often to higher sums. Profits. — The Central Banks are not profit-making undertakings in the strict sense of the word. Dividends are paid upon the share capital, but it is generally provided in the articles of association, or in the company agreement, that such dividends may not exceed a moderate percentage, usually 4 or 5 per cent. The actual rate paid in most cases range from Z\ to 5 per cent. For 1910 and 1911 every bank showed a profit on the year's trading. {See Table.) The total profits for 33 banks pro- vincially organised — ^the Windhuk Bank is excluded — amounted to £86,282 and £84,788 respectively, showing an average per Bank of £2,615 and £2,569. The total paid-up share capital of these Banks was £1,135,072 and £1,282,496 ; the profits for each of these years represented therefore 76 and 66 per cent, of the total paid-up capital. The Banks devote a large proportion of their profits to strengthening their reserves. The average owned capital (that is, share capital and reserves) of all Bank within the Federation has continuously increased. In 1900, 1905, 1910 and 1911 the average of owned capital for 21, 35, 34 and 34 (including Windhuk) Central Banks were respectively £6,800, £20,011, £41,200, and £46,764. The Table on pp. 142-3 sets out a full statement of the position of the Central Banks within the Imperial Federation for the year 1910, together with the totals for the 34 banks previously organised, the separate figures of the Eaiffeisen Central Loan Bank and of the Imperial Co-operative Bank, and for the Wiirtemberg Central Bank, for 1911. Special accounts of five of the largest Banks are added : — Agricultural Central Loan Bank for Germany. Founded by Raiffeisen: History. — This Bank, founded by Eaiffeisen in 1876, is at once the oldest and — apart from the Prussian Central Co-operative Bank, which is a State institution — ^the most important of the German Central Co-operative Banks. It has already been noticed in treating of the central banks that Eaiffeisen founded in 1872 a bank for the Ehenish credit societies at Neuwied, and in 1874 two more banks to serve for the Westphalian and Hessian societies respectively. Almost immediately after the creation of the two latter banks it was decided that all three should combine in one institu- tion to be called the Agricultural General Bank, of which they should constitute the sole shareholders. With the Bank was to be connected the " Arminia German Mutual Life Insurance Society for Agriculturists," in order to acquire funds to carry on the banking business and for the further development of the co-operative organi- sation, as well as to make the advantages of life insurance more accessible to the rural classes than was possible by any other means. The original plan of Eaiffeisen was, in his own words, " to found such a bank in each province of the two largest German .states (Prussia and Bavaria), and in each medium state, to include the societies in smaller States in one of these banks, and by this organisation to meet the need for personal credit on the part of the rural population in the whole Empire." Without having commenced business this bank was dissolved by the courts in 1876 as a result of an interpellation in the Eeichstag by Schulze-Delitzsch who protested against the long credit granted by Eaiffeisen societies, the absence of shares, &c. The Bank for the Ehenish societies, which had then been working four years, was transformed from a co-operative society with unlimited liability into a joint stock company under the name of Agricultural Central Loan Bank; the other two Banks ceased at once or shortly after to exist. For the first 23 years o^ts existence the Bank served as the banking institution for the rural credit societies of the Eaiffeisen Federation, but in 1899, when it took RAIFFEISEN CENTRAL LOAN BANK. 14o over the business of the trading company of Raiffeisen & Co., it extended its opera- tions to the purchase and sale of agricultural requirements and products, not only for the credit societies but also for the others. In 1909, however, it vs^as resolved at the general meeting held in Breslau that all trading business should be discontinued, and only banking business should be henceforth carried on. At the present time the head office is in Berlin, to which city it was removed in 1910, and the 11 branches are in Breslau, Brunswick, Cassel, Coblence, Dantzig, Erfurt, Frankfurt-on-Main, Konigsberg, Ludwigshafen, Nuremberg, and Strass- burg. The business of the branch of the Bank established in Berlin has been amalgamated with that of the central office since the latter was removed to Berlin. The capital of the Bank was originally £12,500, but was raised in 1881 to £25,000, in 1892 to £250,000, and in 1900 to £500,000. The shares, which have a nominal value of £50, must be paid up in full on being taken up, or in instalments covering a short period, and are all held by credit societies attached (or at one time attached) to the Raiffeisen Federation. They may be transferred from one society to another only with the assent of the Supervisory Board; and the Bank only accepts the return of a share when another society is willing to become its purchaser. Only credit societies adopting the strict Raiffeisen principles (unlimited liability, small area, honorary management (save for the secretary), accumulation of indivisible reserve or foundation fund, no payment of dividends, furtherance of the moral, as well as the material welfare of members) are eligible for membership. Although a company it is not an ordinary profit-seeking organisation; it does credit business only with its members, and dividends may not exceed the percentage charged to members for loans. It was recognised by the Federal Council of the Empire in 1901 as an institution serving objects of public social welfare ; the Prussian Ministry of Agriculture allotted to it annual grants for a long term of years for purposes of rural social welfare ; and the Emperors William I. and William II. made donations of £1,500 and £1,000 to its funds. The working capital of the Bank is constituted, apart from its paid-up share capital, of its reserves; the deposits of the credit societies; loans taken up for considerable periods; and the issue of bonds irredeemable by the holders. The articles of the company provide that, after meeting the cost of management of the Bank, and any deficits arising in the cost of administration of the Raiffeisen Federa- tion, 20 per cent, of the profits shall be placed to reserve, as well as any sum remaining after the payment of a dividend, such dividend not to exceed the interest paid by borrowers for loans from the Bank and only to be paid upon the shares actually paid up. Present Position. — At the end of 1910 the deposits of the 4,165 societies affiliated to the Bank amounted to £4,266,000, as compared with deposits of £3,898,000 by 4,154 societies at the end of the preceding year. At both dates the amount deposited on current account was £2,300,000, the balance of deposits being at six months or longer notice. In 1909 and 1910 the societies deposited a total of £7,339,400 and £7,660,900 respectively on current account, and withdrew a total of £6,817,900 and £7,478,900 respectively. At the end of 1911 there was a total of £4,220,100 on deposit, of which £2,023,000 was at call, £2,034,600 at six months' and £162,500 at a year's notice. Loans outstanding at the end of 1909, 1910, and 1911, amounted to £2,500,000, £2,900,000, £3,400,000, respectively. The aggregate turn- over of the banking department was £39,350,000 in 1909, £45,300,000 in 1910, and £59,130,000 in 1911. Administration. — The Committee of Management of the Bank, which represents the company judicially and otherwise, formerly consisted of the heads of the central office and of the branches; in 1909 (and until 1911) there were 13 branches. A standing sub-committee of four persons chosen from the larger body conducted the current business. In 1910 the Committee was reduced to two persons, and in 19ll to one; and the directors of the existing 12 branches are now constituted into an Advisory Council to the Committee of Management, that is, at the present time, to the General Director. The Council holds two regular meetings each year. The Board of Supervision, which must be convened at least once in each year, comprises representatives from each of the branch districts. At the end of 1910 five districts each had their delegates, five had two, two had four, and one had one. As to occupations exercised by the 34 members, there were 14 clergymen of various denominations, 14 landholders, 2 public officials, 2 persons of independent means, 1 manufacturer and 1 estate manager. By a still more recent arrangement each 25574 K 146 PERSONAL CREDIT. branch area appoints two delegates to the Board, half of whom at the present time are clergymen. The articles of association of the company provide for the payment to members of the Board of out-of-pocket expenses and daily allowances only, except in so far as attendance at board meetings entails direct monetary loss, in which case compensation to the extent of the loss may be made. Each Union (that is, branch) area has its own Advisory Committee, which is comprised of the members elected to the Supervisory Board from the particular area, other representatives of the societies situate in the district, the director of the branch and his colleagues on the Committee of Management of the branch. By virtue of this representative system the central bank is enabled to supervise and obtain all necessary information as regards the general conditions obtaining in each of the branch areas, and the branches are enabled to keep close touch with their sub-districts by a similar representative organisation. An account of the method by which the Bank assesses the maximum amount of credit to be allotted to affiliated societies is given in the chapter dealing with central banks, and its relations to the Prussian State Co-operative Bank are described in that on the State and co-operative credit. A full translation of the most recently published articles of the Bank is printed in the Appendix, to which the reader is referred for further information. The following Table affords a general view of the development of the Bank from its transformation by Raiffeisen in 1876 down ta the end of the year 1911 : — Table showing the Development of the Centual Bank (Agricultural Central Loan Bank foe Germany) Founded by Raiffeisen in 1876. =H 2 OQ d Total Rate of Interest. i < amount paid up thereon. 1 a .a a o Turnover. Assets. Liabilities. Profits. Reserve Capital Year. On Deposits. On Loans. & Per cent. Per cent. Per cent. Per cent. £ £ £ £ £ 1876 — 244 1,220 — 44 54 i — — — — — 1877 248 1,240 — 44 54 1 3 — — — — 11 1878 258 1,290 5 44 54 i 26,145 7,924 7,831 93 39 1879 53 308 1,540 5 44 54 i 27.879 8,208 8,079 129 96 1880 77 398 1,960 5 44 54 i 56;233 15,648 15,530 118 160 1881 85 503 2,515 ii 4i-4 5i-5 i 100,357 25,554 25,354 195 291 1882 91 510 2,550 4 4 5 i 135,318 21,338 21,033 275 540 1883 105 51o 2,575 4 4 5 f 142,133 32,833 32,552 275 766 1884 120 596 2,980 4 4 5 168,139 36,632 36,308 323 2,622 1885 188 686 3,430 4 3| 4i ■J 159,464 43,749 43,384 360 2,854 1886 148 736 3,867 4 3F3i 41-44 ^ 199,708 50,881 50,435 446 3 231 1887 161 800 4,000 4 34 45 ^ 198,395 53,886 53,250 636 3,772 1888 183 910 4.550 4 34 44 1 248,206 52,950 52,108 842 4,507 1889 290 1,000 5.000 3J 34 44-4i 1^ 383,553 72,226 71,800 426 4,822 1890 484 1,000 5,000 3J 34 4i A 496,640 103,206 102,788 468 5.170 1891 710 1,000 11,965 3i 34 4i tV 598,943 148,919 147,934 984 6,002 1892 886 ? 29,305 3i 3f 4J-4i -k 788,224 233,499 231,904 1,594 7,705 1893 1,032 1,073 31,117 3i 3} ii-ii ^o 1,031,835 270,423 268,271 1,647 8,344 1894 1,293 2,105 56,092 34 3| 4i-44 T-iT 1,393,115 331.364 327,305 4,054 9,817 1895 1,850 2,676 65,812 3 3f-3i 3A-4i 1^ 3,157,943 779,073 777,161 1,912 9,520 1896 2,356 3,837 75,202 3 '1 3| 1 t\> 6,713,956 892,209 890,150 2,054 10,485 1897 2,679 3,8!7 85,790 from 1 June 34 34 34 from 1 Deo. 31 3i } ^* l\j 4,613,383 1,264,391 1,261,422 2,969 10,757 1898 2.872 5,000 101,772 ( 3 3t% I'a 5,870,618 1,591,001 1,588,659 2,341 11,496 1899 3,023 5,000 246,002 *{ 1 3^4i A 7,584,614 1,929,199 1,923,342 .5,758 12,966 ( 3A^ 1900 3,095 5,337 266,337 ' from 1 Sept. 4 1 Sept. to 31 Dec. ■" -^ 8,900,000 2,059,099 2,045,499 13,100 15,091 1901 3,160 6,335 316,485 1 4 4 44 44 11,500,000 227,041 2,196,334 11,257 17,926 1902 3,461 7,698 383,600 ''l 4 from 1 Jan. to 31 March 44 1 Jan to 31 May 1 13,000,000 2,681,102 2,668,653 12,449 21,039 1903 3,675 8,200 408,750 3^ 3J from 1 Apr. 34 44 1 June to 31 Dec. 4 4 15,350,000 3,240,603 3,228,560 12,032 24,049 1904 3,898 8,484 422,725 34 17,450,000 3,648,679 3,671,441 24,049 9,626« 1905 4,015 8,579 427,262 3i 34 4i 1 To 19,400,000 3,671,907 3,652,270 19,632 61,437 9,625* * These funds are marked as '' del credere funds." BAVARIAN CENTRAL CO-OPERATIVE BANK. 147 OQ i O Total amount paid up thereon. 1 Rate of Interest. d o i Turnover. Assets. Liabilities. Profits. Reserve Capital. Year. On Deposits. On Loans. £ Per cent. ( Per cent. 1 Jan. to 31 May Per cent. 1 Jan. to 31 May Per cent. £ £ £ £ £ 1906 4,147 8,587 427,612 [ H 1 June to 31 Dec. 3i 1 Jan. to 30 July 3f 1 Aug. to 30 Nov. 4-4i 1 June to 31 Dec. 1 Jan. to 30 April 4i-44 1 May to 31 July ■t\ 17,950,000 3,879,289 3,858,906 20,383 11,284 14369* 1907 4,2i0 8,586 427,800 3J 4 1 Dec. to 31 Deo. 1 Jan. to 30 April 44-42 1 Aug, to 30 Nov. 4|-5 1 Deo. to 31 Deo. 5J-54 1 Jan. to 30 April •I'o 18,650,000 4,349,102 4,327,615 21,477 16,658 19,792* 1908 4,272 8,596 427,800 \ 1 May to 31 Deo. 4 5^-54 1 May to 31 Dec. 4|-5 ■tV 37,900,000 4,095,643 4,078,658 17,034 20,917 4,436* [ 1 Jan. to 1 Jan. to 30 April 30 April 1909 4,399 8,587 429,050 H< 34-31-4 1 May to 31 Deo. 4J-41 1 May to 31 Dec. 1 T5 39,350,000 4,619,064 4,603,999 15,064 15,064 10,932* 3i-3| 4i-l4 '1 Jan. to 1 Jan. to H' 31 Dec. 30 Dec. 1910 4,463 8,620 430,650 3i 4i-44 I'iJ 45 030,003 5,091,365 5,070,904 15,462 28,049 (at 6 months) 3* 1 Jan. to != 1 Jan. to 31 Deo. 31 Dec. 34 ii-U 1911 4,468 8,(i34 430,925 3i- (at 6 months) 3i (at 12 months) 4 •tV 59,130,000 4,749,796 4,728,733 21,063 28,960t * These funds are marked as " del credere funds." t £34,950 after writing amount (provided by articles) out of profits for 1911. The Bavarian Central Co-operative Bank. Foundation — Membershif — Three Departments. — Simultaneously with the foundation of the National Bavarian Union in November, 1893, the Bavarian Central Loan Bank was founded to serve as central bank for the credit societies of the Union. Forty-eight members were affiliated to the Bank at the beginning of 1894; at the end of 1911 the membership was 2,417, of which 2,259 were credit, 7 supply, 119 dairy, and 16 other co-operative societies, with two Bavarian central banks provincially organised, and 14 individual members. Until 1899, when dairy societies were made eligible, only credit societies were admissible to the member- ship of the Union, and therefore of the Bank; and only in 1905 were all kinds of rural co-operative societies admitted. No society other than those with unlimited liability may become members; and only persons elected to the Committee of Management and Board of Supervision are eligible as individual members. Since the German Central Loan Bank of the Raiffeisen Federation decided (in 1909) to cease to under- take supply and sale business for its members, this Bank and the Imperial Co-opera- tive Bank remain the only important co-operative central banks which combine banking with trading. The latter branch of activity was taken up in 1899 when the Union, which had carried on this business since its foundation, on becoming a registered association, and as such prohibited from trading, transferred it to the Bank. A special department for the sale of corn was established, and a large granary was built in 1900 at Moosach, a few miles from Munich. By reason of subsequent enlargement this granary possesses at present a capacity of about 38,000 cwt. in 24 silos, in addition to four store-rooms with a capacity of about 18,000 cwt., with subterranean accommodation for warehousing fertilisers and feeding stuffs. The 25574 K 2 148 PERSONAL CREDIT, Bank acts as agent for the Bavarian Granaries Association, to which 36 granaries are (1911) aflfiliated. A special land department (for the purchase and sale of holdings in accordance with the Bavarian Act of 1910) has been recently added. State Aid. — The Bavarian Government gave and continues to give very effective assistance to the Bank; for details the reader is referred to the section on State Aid to Co-operation. As to the total credit of £200,000 granted by the State, it may be here remarked that the Bank had drawn upon this credit for only £30,000 at the end of 1901 ; at the same date in 1909 for £35,000, in 1910 for £150,000, and in 1911 for the whole amount. Shares — Share Liability — Credit Allotment. — The original value of the shares was fixed at £5 with a liability of £50, and not more than 10 shares might be held by any member. The present nominal value of the shares is £10 with the same liability as before, and the maximum number that may be taken by a single member is 300. At the end of 1911 7,309 shares had been taken up and fully paid by 2,417 members. Societies requiring credit up to £400 are not obliged to hold more than one share, but an additional share must be acquired in respect of each further £400 credit or part thereof. The actual amount of credit allotted to a society is based upon the taxation paid by its members. The value of the land and buildings, as well as the income or capital of members, is calculated from the assessments made for purposes of taxation, and credit is ordinarily allowed up to 5 per cent, of this estimate. If credit beyond this percentage is required the Committee and Board of Supervision of the society must furnish a list of its members, setting forth after each name the number of acres held or owned, the estimated selling value of the property, any charges against it, and other relevant details as to means. Additional credit up to a limit of 5 per cent, of the net assets of the society, after deducting charges, is then allowed. A further credit representing 20 per cent, of the owned capital of the society, that is, paid up share capital and reserve, -may also be allowed. In exceptional cases a super-normal credit of 10 per cent, of the net means of the members is given without special security. By affiliation to the Bank societies give it the right to examine the reports made by the auditors of the Union, as well as other documents concerning them which may come into the possession of the Union. Loans and Deposits. — The Bank in its business rules stipulates that advances to societies are intended to be applied only to cover temporary monetary needs for productive purposes: thus societies are expected in ordinary circumstances not to apply it to lending to members for land purchases, when the repayment would be spread over a long term of years. Advances to societies are made on current account, overdrafts being repayable within a maximum period of five years; should an extension be granted, an extra charge of ^ per cent., over and above the interest is payable upon the balance. The Bank reserves the right to call in all loans, in case of crisis or for other urgent reason, at three months' notice. Deposits by members may, in ordinary circumstances, be withdrawn on demand, but the business rules provide that the Bank is at liberty to withhold payment of over £500 for five days, of over £1,000 for 10 days, and of over £2,000 for 20 days. Three distinct rates of interest are paid upon deposits : (1) on deposits in current account, (2) on deposits at three months' notice, and (3) on deposits at six months' notice. From November, 1910, till October, 1911, the three rates were fixed respectively at 3^, 3^, and 3f per cent. : at the beginning of 1909 the corresponding rates were 3f , 4, and 4^ per cent. Interest on deposits is calculated from the next week-day following the day of receipt. The rates for advances within the normal credit allotted (see above) has ranged for some years from 4 to 4|^ per cent. ; from November, 1910, to April, 1912, it was fixed at 4 per cent., the same as a year earlier, although at the beginning of 1909 it stood at 4|^ per cent. Interest on loans is reckoned as from the date of despatch of loan. Management. — The Committee of Management consists of six persons. The chairman in 1910 was a professor; of the other members two are permanent directors of the Bank, one is director of the corn department, and another of the purchase department of the Bank — ^the remaining member being the general secretary of the Union. The members of the Committee receive fixed salaries which are determined by the Board of Supervision, The latter contains nine members, of whom the chairman is the director of the Union. Among the other members in 1910 were a lawyer (also director of the Palatinate Union) ; two clergymen ; three who were at once members of Parliament and mayors; and a landowner. Members of the Board of Supervision receive no remuneration for thdr services. The respective duties of these two bodies are the same as those of any omer co-operative society. BAVARIAN CENTRAL CO-OPEKATIVK BANK. 149 Position (a) of Banking Department. — The following Table gives a survey of the position of the banking department in 1895, 1901, 1909, 1910, and 1911. More com- plete figures for 1910 will be found in the Table, p. 142-143 :— 1895. 1901. 1909. 1910. 1911. Membership Number of shares held Paid-uj) capital... Reserves Total collectiTe liability of members Business with societies on current account during year. Owed by societies on current account end of year. Owed to societies on current account end of year. Business with banks and non-members Owed to banks and non -members by Bank at end of year. Owed by banks and non-members at end of year. Total turnover ... Cost of management ... Net profit 330 £ 1,111 50 836,988 1,655 3,114 £ I 8,265 188 155,700 3,218,469 95,047 433,076 180,875 542,504 396,660 2,365,697 43,245 15,120 10,159 2,400,682 198 9,782,092 898 4,413 2,157 6,089 £ 60,890 14,877 304,450 6,029,477 725,380 1,583,364 7,751,038 170,285 377,150 31,618,968 3,728 5,919 2,216 6,509 £ 65,090 15,860 325,450 6,140,022 815,775 1,580,683 11,902,900 185,256 380,603 29,432,627 3,395 6,708 2,417 7,309 £ 73,090 17,084 365,450 6,470,931 1,1.57,467 1,477,755 11,377,625 242,734 119,330 30,330,693 6,121 (b) Of Supply and Corn Departments. — The supply department of the Bank sold to its affiliated societies in 1911 : manures to the value of £238,867; feeding stuffs, £215,303; seeds, £14,653; coal, £7,675; machines, £14,953; other materials, £976; total, £492,427, as compared with £328,381 in 1910 and with £233,456 in 1909. The corn department sold on its own account in 1911 457,589 cwt. of grain (including 151,394 cwt. of oats and 168,563 cwt. of barley), as against 345,332 cwt. in 1910 and 441,230 cwt. in 1909, while the Associated Granaries, numbering 36 at end of 1911, for which the Bank acts as central office, sold through the department 848,734 cwt. in the business year 1910-11, as against 1,042,129 cwt. and 1,063,667 cwt. in the two preceding business years. The net profits of the corn department in 1911 amounted to £2,666. (c) Of Land Department. — In 1910 the Bavarian G-overnment recognised the Bank as an institution of public utility under the Bavarian Act of 1910 dealing with the sale of agricultural holdings. Under the terms of this Act, upon the sale of an independent agricultural holding (defined as holdings of at least 12^ acres which for three years previous to the sale fortned one unit — by ministerial order holdings of at least 7| acres may be included for special districts) to a dealer in real estate, the com- mune in which it is situated or the rural credit society existing in that commune, or other legal person indicated by the Minister of the Interior, is entitled to exercise a prior right of purchase, provided it is exercised within three weeks after the sale. The Act states that co-operative societies or legal persons may not be brought within the meaning of the Act when their articles allow the payment of dividends exceeding 5 per cent, or the payment to members, in case of dissolution, of more than they paid as share capital. The Bank has come within the scope of the Act as a society fulfilling the required conditions. Down to December 31, 1910 — only a few months after the passing of the Act — the Bank had acquired 12 holdings, and was still in negotiation for purchase with nine owners. In 1911 503 holdings were offered to it; of these, 60 were purchased, and 66 rejected, and in 377 cases negotiations were still proceeding at the end of the year. Notice of right to purchase was made to the Bank in respect of the sale of 257 holdings, but the right was exercised in only 13 cases, partly because the agree- ments of sale contained provisions that rendered purchase difficult if not impossible, partly because in some cases it was merely a question of exchange of holdings, or the area of the holdings were less than the legal minimum, or information was not' forwarded in good time. The purchase price of the 73 holdings purchased amounted to £193,585, and the profit realised in 1911 by this department was £2,866. Bavarian local credit societies also purchased, as far as was known to the Bank, a further 20 holdings under the same Act. It is anticipated that the local credit societies and the Bank will, in the future, develop into important agencies for the transfer of agricultural property in Bavaria. 25574 K ;? 150 personal credit. The Hanoverian Central Co-operative Bank. History and Membership. — This Bank was founded in 1890 to serve as the central bank for the rural credit societies in the province of Hanover. The first rural credit society established in Hanover dates from 1873, although many co-operative dairy societies had at that time been in operation for some years; for another decade no further credit societies were created, and it was only towards the end of the eighties that their number began to increase considerably. Their slowness in spreading in this province, compared, for instance, with the adjacent provinces of Westphalia and the Rhine, was perhaps to some degree attributable to the presence there of numerous district and communal savings banks, as well as of many societies of the Schulze- Delitzsch pattern. The Royal Agricultural Society in Hanover by appointing a special travelling instructor was a considerable factor in their eventual increase. In 1890, when the Bank was founded, there were in the province 209 registered co-operative societies, of which 67 were credit, 32 were supply and 91 were dairy societies; and the Bank began with a membership of 59, viz., 54 co-operative societies and five individual members. Since then there has been a continual increase in membership, which at the end of 1911 had reached the total of 532, comprising 466 co-operative credit, 18 supply, 8 dairy, and 14 other societies, 22 individual persons and four corporate bodies, including the Chamber of Agriculture for the province. (Figures showing the details of increase, year by year, will be found in the accompanying Table.) Of the 494 co-operative societies referred to, 482 were in Hanover, seven in Brunswick, two in Lippe-Detmold, two in Waldeck-Pyrmont, and one in Hamburg. Not all of the credit societies, and but few in other groups of societies affiliated to the Hanoverian Union are members of the Bank ; this is readily seen from the fact that in 1911 the Union comprised 473 credit, 193 supply, 316 dairy, and 386 other societies. The principal, indeed, the absolutely predominant, element in its member- ship is therefore the credit society; and over 98 per cent, of the credit societies within the Union have acquired membership of the Union Bank. Public A id : Share Value and Liability. — On the foundation of the Bank the pro- vincial government advanced it a loan without special security, and made a consider- able grant towards the expenses of its establishment. The legal form of a co-operative society with limited liability was chosen, and the shares were fixed at £5 with a liability of £100 per share taken; not more than ten shares could be held by one member. At the present time the nominal value of the share is fixed at £25, the liability per share at £300, and the maximum number of shares to be held at 60. Of the 532 members in 1911, 151 held one share, 100 held two, 69 three, 51 four, 41 five, 29 six, and 21 seven shares; only 20 held over 15 shares, the total number of shares taken up being 2,335. In twenty-two years (1890-1911) a dividend of 4 per cent, upon the share capital has been paid fifteen times, 4:^ and 5 per cent, once, and no dividend five times. The maximum amount of credit to be granted per share taken up has remained at £500 throughout the period of the Bank's existence. In 1911 the total of the fixed credits allotted amounted to £1,167,000, while the collective liability represented by the shares taken was £700,500. Of the 47,936 members of 470 societies with unlimited liability situated in Hanover and attached to the Bank, 33,814 were exempt in 1911 from the payment of the supplementary property tax (payable in respect of each £100 of assessed property over £300), the remaining 14,122 paid taxes upon property assessed at £38,673,700. Adequate security existed, therefore, in respect of the liability undertaken. The average membership per society for all societies attached to the Bank in 1910 and 1911 was 101 and 106 respectively. Business. — The business of the Bank on current account with its affiliated societies since its foundation showed the following averages per year : — £ In the five years 1890-1894 131,000 1895-1899 614,500 1900-1904 1,416,500 1905-1909 3,613,000 In the single years 1909, 1910 and 1911 this business amounted respectively to £5,101,250, £4,987,600 and £6,312,500. The history of the Bank shows that payments tend consistently t(^exceed withdrawals in certain months (e.g., January, February, October, and November), while the reverse is the case in other months HANOVERIAN CENTRAL CO-OPERATIVE BANK. 151 (March, April, June, September, and December). The monthly averages of pay- ments and withdrawals in current account in the six years 1905-10 were as follows : — Average Monthly Average Monthly Payments. Withdrawals. 1905 98,502 93,098 1906 120,309 124,229 1907 138,835 141,767 1908 184,984 175,577 1909 208,889 216,219 1910 209,838 204,129 Interest on Loans and Deposits; Commission. — Alterations in the interest chaxged for loans and paid on deposits are avoided as far as possible by the Bank, although it must, of course, take into account the condition of the market. The Imperial Bank rate changed 25 times in the period from January 1, 1905, to December 31, 1909, but the rate charged by the Hanoverian Co-operative Bank for loans and deposits was changed only five times in the same space of time. The rate of the latter for overdrafts was fixed at 4 per cent, on January 1, 1904, and was not altered till June, 1907, when it was raised to 4 J per cent.; in August it was again raised to 5^ per cent.; it was reduced to 4f per cent, on April 1, 1908, to 4^ per cent, in July, 1908, and to 4 J per cent, on January 1, 1909. The rates for credit balances were 6 per cent, less than those for overdrafts, except from August, 1907, to April, 1908, when the margin was 1 per cent. (All members other than credit societies are charged j per cent, more than the above rates, but receive the same interest on deposits.) It may be noted that the Imperial Bank rate stood as high as 6 per cent, at different times in 1905 and 1906, while it touched 7 per cent, at the beginning of 1907 and 7|- per cent, at the end of 1907. In 1911 the average of the interest charged by the Hanoverian Bank to credit societies for overdrafts was 444, and the average of the interest paid by it upon deposit at daily call was 38 per cent. From 1901 to 1909 the Bank levied, besides interest, a commission of Is. per £50 upon withdrawals, even when accounts were not thereby overdrawn, but since the latter date this has been suppressed. (Of the 35 provincial or other co-operative central banks in Germany which were affiliated to the Imperial Federation in 1910 26 levied a commission varying from 2V to ^ per cent.) {See Table, page 141.) It was also decided as from January 1, 1909, to increase the margin between the rates of interest paid on deposits and overdrafts from 06 per cent., at which it had stood for many years, except for above-mentioned interval, to 075 per cent. Relations with the State Central Co-operative Bank. — At the end of 1911 the Hanoverian Bank held an interest of £15,690 in the share and reserve capital of the Prussian Central Co-operative State Bank in Berlin. Having signed, in 1903, a declaration to deal exclusively with the latter, the Hanoverian Bank deposits there all surpluses not required in current business and obtains any necessary credit from this source only. Taking the five years 1905-1909 — in 1905 it required credit for three months, and in 1906 for ten months, the account being over £250,000 overdrawn in the month of July; at the end of 1907 (when the Imperial Bank rate was 7 J per cent.) it had again a credit balance, but in 1908 considerable credit was again required, while, although in the first two months of 1909 it held a large credit balance, in March a small overdraft was required, which increased to £180,000 at the end of September, and, though reduced later, was not extinguished at the end of the year. Difficulty has arisen with the Prussian Bank with respect to the agreement of exclusiveness on the part of the societies affiliated to the Hanoverian Bank. The former desired that all affiliated societies should give a written undertaking to deal exclusively with their co-operative central bank when the latter has obtained preferential rates from the Prussian Bank. The Hanoverian Bank naturally finds it difficult to force voluntary self -governed associations to surrender their freedom of action; and a considerable number of prosperous credit societies which possessed permanent credit balances were un- willing to bind themselves in this way. The Prussian Bank did not press the point to a final issue, and in 1909 only 289 (out of 476) societies had signed an undertaking to this effect, although another 100, without having done so, had in fact deposited money at, or obtained credit from, the Hanoverian Bank only. At the end of 1910 the Bank held credit balances of £28,000 at the Prussian Bank, but a year later its account was overdrawn to the extent of £64,000. The 25574 K 4 l^'^- PERSONAL CREDIT. demand for credit by Hanoverian agriculturists was exceptionally great in 1911 mainly owing to the outbreak of cattle disease in the province, which almost cut off this important source of revenue, and to the very great dryness in the summer of 1911, which resulted in a shortness in the ordinary supplies of fodder. Between July 1 and October 1 the money demand was so great that the Bank required a credit of £340,000 at the Prussian Bank. For £225,000 of this total the latter institution charged 5 J per cent, as interest, while the Hanoverian Bank lent this money to its societies at 4 J to 4f per cent. Societies availing themselves of exceptional credit gave bills to the Hanoverian Bank, which transmitted them to Berlin as security for the exceptional credit extended to it. As to the credit extended by the Prussian Bank, it is apparently felt that the proportion granted at preferential rates is not sufficiently high. On this point the reader is referred to the section dealing with the Prussian State Bank, from which it will be seen that such rates are only granted in respect of about one-third of the total credit — which may not exceed £250,000 without the deposit of special security — allotted to a central bank, and that beyond this one-third the rates charged offer little or no serious advantage to a strong central bank. The question arises, therefore, whether, in order to obtain a maximum credit of about £80,000 at preferential rates (that is, 3 J per cent.) it is worth while to renounce the power to deposit elsewhere surpluses at a higher rate than 3 per cent, (which is the rate paid by the Prussian Bank) or to obtain credit from other sources at rates more nearly approaching the market rate than the Imperial Bank rate. Management. — The Hanoverian Bank, as a registered co-operative society, is administered by a Committee, subject to the supervision or control of a Board of Supervision and the General Meeting of members. The Committee, in accordance with the articles of association, is elected by the General Meeting, and is composed of five members, of whom one must be a professional banker. At the time of visit there were two professional bankers, the other members being the general secretary of the Hanoverian Chamber of Agriculture, the general secretary of the Hanoverian Co-operative Union, and the secretary of a large rural credit society. The Board of Supervision, which must consist of eight members to bei elected by the General Meeting for four years, contains at the present time (1912) six landholders, while one of the other two members is the director of the Hanoverian ■Union. The cost of management was £2,671 in 1909, £2,685 in 1910, and £3,090 in 1911. The Bank makes special efforts to familiarise the rural population with the use of cheques and bills, towards this end issuing pamphlets and holding conferences of the officials of the rural credit societies in country centres. The number of cheques handled by the Bank increased from 470 in 1900 to 2,983 in 1908, but the tax on cheques has caused a set-back since 1908; the number of bills dealt with increased from 330 in 1900 to 4,001 in 1909. Development of Bank, 1890-1911. — The Table on page 153 shows the develop- ment of the Bank from its foundation in 1890 to the end of 1911. The Pomeranian Central Co-operative Bank. Foundation — Public Aid. — Although co-operative action on the part of agricul- turists was late in Pomerania compared with the West of Germany, and even with the most Eastern province, namely, East Prussia, where the movement had taken root early in the seventies, the Pomeranian Central Co-operative Bank has developed into one of the most prosperous and progressive of German central banks for agricultural societies. The Union of Pomeranian Agricultural Co-operative Societies was founded in 1892 by only eight societies, all of which were supply societies. Two years later, when the Union began to promote the establishment of credit associations, there existed only four rural credit societies in the province. At the end of 1895 29 credit, 12 supply, and three central societies belonged to the Union. In February of that year the Central Bank was founded as a co-operative society with limited liability, the Provincial Government undertaking to guarantee the bank for a sum not exceeding £15,000. It began as a " book " bank, that is to say, it did not hold or pay cash, but effected receipts or payments of cash from or to members through the agency of the banking institution with which arrangements were made. Share Value: Share Liability; Membership. — The face value of the shares was originally fixed at £5, withji liability of £200 per share taken up; the maximum holding was 300, so that the highest participation in share capital per member could oo Hanoverian Central Co-operative Bank. Number of Members. Collective Business in On 3lBt i Total December. '-3 00 1 o o la 1 1 g & o o 1 liability. Current Account. Bills. SecuritieB. Other. Business. £ £ £ £ £ £ 1890 ... 54 5 59 3,850 75,000 — 10,000 59,600 144,500 1891 ... 58 7 — 65 4,750 100,000 — — 62,500 162,500 1892 ... 72 9 — 81 6,400 118,500 — — 63,500 182,000 1893 ... 83 7 — 90 14,000 152,500 — 18,000 105,000 275,500 1894 ... 103 8 — 111 19,400 209,000 — 7,500 126,500 343,000 1895 ... 135 9 — 144 27,400 328,500 — 5,000 181,500 515,000 1896 ... 185 20 — 205 40,300 501,000 — 37,500 448,500 987,000 1897 ... 222 22 — 244 157,500 637,000 — 1,500 553,500 1,192,000 1898 ... 246 25 — 271 175,500 770,000 5,000 23,000 603,000 1,401,000 1899 ... 267 24 — 291 205,500 837,500 46,000 — 802,500 1,686,000 1900 ... 295 23 L 319 236,700 963,500 12,500 147,500 1,367,000 2,490,500 1901 ... 302 24 2 328 246,900 1,305,000 79,500 160,000 1,522,000 3,066,500 1902 ... 317 24 3 344 261,900 1,463,000 87,500 151,000 1,484,500 3,186,000 1903 ... 333 24 3 350 287,400 1,532,000 55,500 215,500 1,758,000 3,561,000 1904 ... 336 25 4 365 303,000 1,821,000 113,000 179,500 2,086,500 4,200,000 1905 ... 357 25 4 386 352,500 2,315,500 280,000 329,000 2,741,500 5,666,000 1906 ... 390 24 4 418 401,100 2,930,000 525,000 360,000 5,450,000 9,265,000 1907 ... 419 25 4 448 457,500 3,367,000 382,500 298,500 7,395,500 11,443,500 1908 ... 455 23 4 482 501,300 4,352,000 458,000 1,466,000 8,061,000 14,337,000 1909 ... 476 23 4 503 556,500 4,601,000 352,000 1,526,500 9,762,000 16,841,500 1910 ... 490 22 4 516 614,400 4,987,500 358,500 1,051,000 10,583,000 16,980,000 1911 ... 506 22 4 532 700,500 6,312,500 1,006,500 793,000 11,296,000 19,398,000 1 Interest on &'& On 31st December. Paid-up Share Capital. Reserves. Total. Cost o.f Adminis- tration. Profit. Loss. o ■s Over- drafts. Deposits in current account. Average Imperial Bank Rate £ £ £ £ £ £ % % % % 1890 ... 241 200 441 154 — 35 3-6 3-3 4 52 1891 ... 301 165 466 152 52 — 4 h ^ 3 75 1892 ... 383 195 578 158 200 — 4 4:: 3| 3| 3 20 1893 .. 447 185 632 185 — 128 — 4- 4 07 1894 ... 589 185 774 206 565 — 4 4; 3| 3 12 1895 ... 83S 530 1,368 317 477 4 4 3^ 3 14 1896 ... 1,246 451 1,697 435 — 369 — 3| 3i 3 66 1897 ... 1,692 411 2,103 619 84 — 4 4 3i 3 81 1898 .. 1,335 — 1,335 690 — 555 — 3-9 3-3 4 27 1899 ... 2,258 — 2,258 760 — 1,821 — 4 si 5 04 1900 ... 2,609 — 2,609 836 960 — 4 H 5 33 1901 ... 2,696 340 3,036 901 1,010 — 4 4-3 4 4 10 1902 ... 2,923 713 3,636 997 1,045 — 4 4j 4 3i 3 32 1903 ... 3,230 1,108 4,338 1,031 984 — 4 3i 3 84 1904 ... 3,493 1,438 4,931 1,286 1,023 — 4 4 3i 4 22 1905 ... 21,345 1,902 23,247 1,416 1,260 — 4 4 3-4 3 81 1906 ... 24,740 2,658 27,398 1,876 1,975 — 4 4 3-4 5 15 1907 ... 29,863 3,295 33,158 2,246 2,651 — 5 4-6 3-8 6 03 1908 ... 32,513 3,814 36,327 2,287 2,468 — 4 4-5 4 4 76 1909 ... 35,963 4,431 40,394 2,671 2,091 — 4 H 3i 4 415 1910 ... 40,365 4,904 45,269 2,685 2,895 — 5 ^ 3| 4 35 1911 ... 46,795 6,365 53,160 3,095 3,519 ^ 4i-4i 3|-4 4-39 not exceed £1,500, whilst the highest amount of liability was £200 x £300, or £60,000. A maximum credit of £150 per share held was allotable to each member. At the end of 1896 158 members held shares representing £6,060 in paid-up capital and 154 PERSONAL CREDIT. a liability of £242,400; of these members 125 were credit societies, 21 supply and sale societies, 3 dairies, one central society, 5 other societies, and 3 individual members. The nominal value of the shares was raised in 1902 to the present figure (£15) with a liability of £200 per share. At the end of 1911 524 members held 5,652 shares representing a paid-up share capital of £84,780, and a liability of £1,130,400 in respect thereof. These 524 members, it may be explained, comprised 380 credit, 34 dairy, 24 supply and sale, 9 distilling, 7 cattle- selling, 2 electricity-producing societies and 19 electricity supply and machine societies, 4 Unions (Pomeranian Union, Dairy Union, Meat-selling Union, and Butter-selling Union), and 41 co-operative and other organisations, but only four individual persons. All the credit societies affiliated to the Union are members of the Bank, but only about one-fourth of some 120 societies of the Pomeranian Dairy Union, which is administered in the closest connection with the Pomeranian Union, have joined. Many of these societies are, however, members of the local credit societies. Credits allottahle to Societies. — The maximum credit allotted to members has, ever since the establishment of the Bank, remained at £150 per share held, but while a maximum of £150 may be accorded, the normal credit granted is less in amount. Respecting credit societies, which constitute the backbone of the membership, the following rules are applicable : — Those whose collective liability amounts to £1,000 have a normal credit in current account of £500 (50 per cent.), those with £1,500 liability £600 (40 per cent.), those with £2,000 liability £700 (35 per cent.), and those with £2,500 liability £750 (30 per cent.), while those with over £2,500 liability obtain 25 per cent, of the particular total. For special reasons the maximum credit of £150 (75 per cent, of the liability) per share may be accorded without any further security, but for any credit beyond this proportion, security by way of deposit of stocks, the registry of contingent mortgage, or good sureties must be furnished. Scope of Business. — The Bank states the scope of its business to be as follows : — 1. The keeping of current accounts. 2. The acceptance of savings and deposits, at daily call or at other periods of notice to be agreed upon. 3. The granting of credit upon grain, flour, and all kinds of commodities. 4. The purchase and sale of all home and foreign stocks and shares on the most favourable terms. 5. The discounting of bills. 6. The collection of bills, cheques and securities notified for redemption. 7. The payment of all home and foreign interest and dividend warrants, mostly 14 days before due date. 8. The obtaining of books of coupons. 9. The investigation as to share issues or allotments — for which no charge is made. 10. The effecting of insurance against disagio. 11 . The payment of money at all home and foreign centres. 12. The receipt of subscriptions for new loans, undertaken on the original terms made by the banks of issue. 13. The exercise, purchase, or sale, of rights to charges in connection with the issue of shares. 14. The custody of open and barred deposit accounts. 15. The issue of letters of credit upon the principal European and other centres. 16. The redemption of mortgages with a view to transferring such mortgage charges to the Pomeranian Mortgage Credit Association (Landschaft) . 17. The exchange of foreign monies. 18. The collection of monies through the post ofiice for dairy societies. 19. The renting of safes for deposit in fire and burglar-proof chambers. 20. The supply of technical information on all banking matters. 21. Cheque business. Business with Non-members. Branches. — The Bank places its services for the transaction of the aboje kinds of business at the disposal of the public. Its head offices are situated at one of the most important and busy points POMERANIAN CENTRAL CO-OPERATIVE BANK. 155 in Stettin, and it has established one branch at Anklam, and three agencies at Neustettin, GoUnow, and Stralsund, four suitable centres in the province. It also established in 1909 a joint stock bank in Stolp, an important country town near the Baltic; this bank, in its second financial year ending September, 1911, paid a dividend of 5 per cent, after adequate appropriation to reserve. The substantial surplus deposits of the affiliated credit societies enables the Bank to extend credit to productive and distributive societies — especially to the supply and sale societies which require large sums for the purchase of agricultural requirements for their members and of agricultural products from them — when necessary and in sufficient quantity; and they also enable the Bank to maintain a stable rate of interest almost independent of market fluctuations. By reason of the surpluses and needs of the rural producing classes, which constitute its membership, falling at seasons different from those in which to a large extent similar conditions arise in industry and commerce, the Bank is enabled by extending its business among other classes, always, of course, refraining from speculative opera- tions, to utilise its resources in the most remunerative manner. It is liable to taxation, however, owing to this extension of business with non-members. Relations with State Bank. — In the same year in which the Pomeranian Bank commenced business the Prussian State Central Co-operative Bank was established, and the former entered into relations with the latter on the footing of a " book " bank. The support of the Prussian Bank during the first years of the existence of the Pome- ranian Bank proved of the highest value. During the last ten years, however, the Pomeranian Bank has held large surplus deposits from its affiliated credit societies, and has attained such a strong position as to be almost independent of outside resources. The following Table, showing the position of the accounts of these credit societies with the Bank on July 1 in each year from 1899 to 1911, together with the figures for March 1 and May 1 in 1912, is of considerable interest : — Number of Co-operative Banks witb — Balances — Net Balances (Debit — , Credit -f-). Year. Debit Credit Of Debtor Of Credit Balaoces. Balances. Societies. Societies. £ £ £ 1899 94 38 32,699 5,649 - 27,050 1900 82 58 36,651 11,266 - 25,385 1901 73 89 30,134 30,849 + 715 1902 75 112 26,550 96,919 + 70,369 1903 88 140 41,965 130,010 + 88,045 1904 73 177 40,194 203,775 + 163,581 1905 70 217 35,728 375,370 + 339,642 1906 69 243 51,397 464,620 + 413,223 1907 91 244 70,118 506,058 -1- 435,940 1908 111 245 107,465 442,724 + 335,259 1909 98 265 65,670 648,339 + 582,669 1910 87 288 58,446 812,931 + 754,485 1911 72 313 49,787 990,551 + 940,764 1912 (March 1)... 51 335 30,320 1,224,705 + 1,194,385 1912 (May 1) ... 55 332 36,918 1,189,4^0 + 1,152,502 These figures show at the close of each business year since 1901 a surplus of credit balances held by these credit societies at their central Bank, together with, in each year save one, a remarkable increase in the amount of this surplus each year. It may be added that the monthly credit balances for the sixteen months February, 1911, to May, 1912, never fell below £915,213, and on nine occasions (September, 1911, to May, 1912) exceeded £1,000,000, the highest figure within this period being reached on March 1, 1912. The Bank has signed an agreement to deal exclusively with the Prussian Bank as regards the deposit of its surplus not required in current business and the taking up of credit, and has participated in its capital to the extent of £5,000. The Prussian Bank lays stress upon all societies affiliated to the Pomeranian Bank undertaking also to deal exclusively with the latter in order that it may thus possess a survey of the liabilities of the affiliated societies. These societies being all societies with limited liability — that is, the collective liability of each society limited to an exact sum — and the credit extended to the central Bank being based upon the liability undertaken by its constituent societies, the Prussian Bank wishes to have 156 PERSONAL CREDIT. information of their liabilities. It is also to the interest of the Pomeranian Bank that societies should deal with it alone. This exclusive dealing is not, however, rigorously insisted upon in the case of all societies. The Prussian Bank assigns a maximum credit of £250,000 to the Pomeranian Bank; of this sum about £80,000 is obtained by ordinary overdraft at preferential rates (by virtue of the exclusive dealing agreement), about £50,000 more against bills, also at preferential rates (that is, I per cent, below the current Imperial Bank rate), and the balance against bills at rates which follow closely the Imperial Bank rate. The amount accorded by overdraft on current account represents a distinct advantage to the Pomeranian Bank, but the additional credit at preferential rates cannot be said to offer any special advantage. Ordinary bankers would lend against bills to a bank in its position at the best Berlin market rate, which showed over the .ten years 1901-10 an average rate lower than that of the Imperial Bank rate by 1'04, taking the average of the differences between the respective average rates in each year of the period. Interest on Loans and Deposits by Pomeranian Bank. — Interest has been paid for a number of years at the rate of 4 per cent, on deposits on current account, and at 4| per cent., on deposits with three months' notice of with- drawal. Deposits are accepted from non-members. For credit within the normal limit 4 J per cent, and above that limit 4| per cent is usually charged. A society may not, of course, place money at three months' notice of withdrawal at 4 J per cent, and at the same time borrow money at 4j per cent. ; if a society has made such a deposit and requires money it must withdraw from the sum deposited. In such cases of withdrawal of money deposited at three months' notice without that notice being given, a commission of Is. per £50 is charged; otherwise the commission is at the rate of M. per £50 of the total of the larger side of the account, as made up half-yearly. Administration. — The Committee of Management consists of five members elected by the General Meeting of members. In 1911 the chairman was also director of the Union, the other members being a large landholder, a lawyer, and the two directors who conduct the regular business of the Bank. The articles of association provide for the remuneration of members of the committee. In 1911 the total cost of management of the Bank was £8.045. The Board of Supervision consists of nine members who may not receive a salary or commission on business done, although out-of-pocket expenses and fees for time given may be voted by the General Meeting. In 1911 there were on the Board six large landowners, two clergymen, and a person of independent means. The following Table shows the development of the Bank from its foundation in 1895 to the end of the year 1911 :— Development oe the Pomeeanian Central Co-operative Bank, Stettin. Financial Year. Number | Paid-up of I Share Members. Capital. Collective Liability. Business done (one side of the Ledger). Current Account Business. Bill business. Reserve. Profits. (July to June) 1895-6 1896-7 1897-8 1898-9 1899-1900 ... 1900-1 1901-2 1902-3 1903-4 1904-5 1905-6 1906-7 1907-8 1908-9 1909-10 ... (Jan. to Dec.) *1911 136 158 158 154 158 188 236 283 323 368 401 430 463 475 485 524 £ 2,500 6.060 6,405 6,820 7,650 7,950 11,300 50,805 59,475 57,705 61,095 65,430 77,595 83,715 82,005 84,780 £ 115,200 242,400 256,200 272,800 306,000 319,800 452,200 677,400 793,000 769,400 814,600 872,400 1,034,600 1,116,200 1,093,400 £ 333,583 673,591 963,882 903,704 2,287,868 2,956,223 4,022,473 4,253,033 4,286,603 5,281,778 5,938,147 6,308.800 10,010,591 12,022,951 14,315,394 1,130,400 I 21,935,635 £ 537,591 1,021,040 1,360,047 1,646,341 3,681,503 4,863,694 6,513,696 6,729,860 7,278,224 9,426,562 10,573,673 11,303,096 16,761,874 20,666,880 24,072,067 36,833,932 £ £ — 27 — 233 6,059 577 10,769 793 517,971 1,039 710,619 1,271 922,877 2,004 1,119,022 3,182 535,543 5,494 211,087 6,813 267,928 8,119 387,461 9,726 2,257,323 11,399 1,597,985 14,149 1,423,908 17,104 1,934,906 20,412 £ 27 306 585 377 450 464 1,053 1,686 4,598 4,000 3,903 4,356 4,867 6,242 6,722 5,490 As from 1910 the financial year was a^red to coincide with the calendar year : the figures relating to the half-year July to December, 1910, are here omitted. SAXON (halle) oentbal co-opebative bank. 157 The Saxon (Halle) Central Co-operative Bank. The Union of Agricultural Co-operative Societies of the Province of Saxony and of adjacent States was constituted in November, 1889, by 11 dairy societies, and obtained the right to conduct the audit as prescribed by law in the following June Within the same month the Union founded at Halle the Central Agricultural Co- operative Supply Society, to which one credit, 15 supply, and 6 dairy societies attached themselves before the end of the year (1890); and three years later it established the Halle Central Co-operative Bank, which was joined within the first business year by 6 credit, 12 dairy, 11 supply, 2 other societies, and 10 individual members. Out of these small beginnings the Bank had grown, at the end of 1911, to have a membership of 923, comprising 667 credit, 126 dairy, and 119 other societies, with 3 other organisations and 8 individual members. The membership is open to — (1) All societies belonging to the Union, (2) Agricultural corporations as well as registered associations, and (3) Individuals, provided they have been elected to the Committee of Management or Board of Supervision. Notice of resignation of membership must be given a year in advance, and only takes effect as from the end of the next financial year. Share Value: Share Liability: Credit Assessment. — Like the vast majority of central banks, the Halle Bank is a co-operative society with limited liability. It may be observed that of the 692 credit societies affiliated to the Halle Union only two have adopted unlimited liability; the Pomeranian Union at Stettin and the Halle Union have been conspicuous by their adoption of limited liability, even for credit societies. The nominal value of the shares of the Bank, originally fixed at £5 with a liability of £300, was raised in 1906 to £15, the amount of the liability or guarantee per share taken up remaining unchanged. At the end of 1911, 5,521 shares were held by the 923 members; the paid-up share capital was £81,666, and the collective liability or guarantee in respect of shares held to £1,651,300. At the end of its first financial year the Bank returned only 53 shares (held by 41 members) with a paid-up capital of about £212 and a collective liability of £15,900. The maximum normal credit per share is fixed at three-quarters of the amount of the liability or guarantee, that is, at £225. To obtain credit in excess of this sum an additional number of shares corresponding with the credit required must be taken up, but not more than 50 shares may be allotted to one member. The maximum participation in the capital of the Bank is therefore £750, and the highest credit that may be normally allowed to a single member is £11,250. A loan exceeding 75 per cent, of the liability per share may, however, be granted with the approval of the whole Committee, subject to the provision of proper additional security. The General Meeting of members of the Bank fixes an absolute limit, irrespective of whatever additional security may be furnished, which may not under any circumstances be exceeded. Members of the Bank are obliged to under- take not to deposit surplus money with, or obtain credit from, any other credit institution. Public Aid: Prussian Bank. — The first difficulties of the Bank were partly overcome by a loan of £30,000 at 4 per cent, granted by the Provincial Aid Bank (see pages 55-58 for description of such institutions); as security for the loan the Halle Bank was required to deposit bills accepted by its members, such bills being drawn for double the amount of the credit allotted to each, and further endorsed by several members of the particular society contracting a loan. When in 1895, however, the Prussian State Central Co-operative Bank was founded, and opened for the Halle Bank a maximum credit of £250,000, this loan from the provincial authorities was terminated, but in the years 1899 and 1900 the Bank was allocated by the latter a special sum of £25,000 at 3'6 per cent, interest for the purpose of encouraging dairy and other productive co-operative societies in the more backward districts of the province by the grant of loans reducible by regular instalments. This loan was repaid in 1901. The Bank, when it entered into business relations with the Prussian Bank, did not become merely a " book " bank (Buchkasse) but retained its character as a " cash " bank {Geldkasse), that is, instead of being merely a responsible registry of transactions as between the Prussian Bank and its own members, it received, held, and paid cash to them. The soundness of this policy was confirmed in later years by 158 PERSONAL CREDIT. the fact that practically all Prussian central co-operative banks that became " book " banks were subsequently transformed into "' cash " banks. The balance sheets of the Bank show for the seven years, 1895 to 1901, in regard to the Prussian Bank, debit balances of £62,669, £108,180, £95,071, £81,415, £117,043, £102,055, and £88,658 successively, but in 1902, 1903, and 1904 there were credit balances of £13,138, £156,239, and £72,384 respectively. In 1903 the Bank was in a position to meet all claims out of its own resources, and at one period in 1904 its credit balance with the Prussian Bank was. over £200,000. In that year the Committee and Board of Supervision decided to recall the declaration of exclusive dealing given to the Prussian Bank; only 3 per cent, was being paid by the latter upon deposits, while the Halle Bank was paying 3 J per cent, for deposits to its members. The Halle Bank, while no longer entitled to obtain preferential rates from the Prussian Bank, did not, however, withdraw from all dealings with the latter. It wished to maintain its independence and to utilise the services of the State Bank only in case of necessity. It is doubtful whether deposits by constituent societies would have developed if it had not been able to allow at least S^ per cent, interest; surplus savings deposits of the local societies would necessarily hayp, gone elsewhere, or such savings would not have reached the local societies at all, because even the Saxon public savings banks almost without exception grant over 3 per cent., which is the rate allowed on deposits by the Prussian Bank. The business done with the latter in 1909 was : payments £791,699, and withdrawals £790,759, but in 1911 these figures amounted only to £287,985 and £289,648 respectively. Since 1893 the Halle Bank has maintained relations with another bank in Halle. It keeps also an account with the Imperial Bank; in 1909 and 1911 the credit side of the latter account showed payments of £1,935,580 and of £693,572, and the debit side withdrawals of £1,935,778 and of £691,778 respectively. Interest and Commission upon Deposits and Loans. — The rates of interest are fixed by the Committee of Management, which aims at maintaining them as stable as possible. The interest upon deposits in current account since 1893 has been at least 3 J per cent., except in the years 1896-9, while. the rates for loans have been from 4 to 4 J per cent., on rare occasions rising for short periods to 5 or 5 J per cent. During whole years the Bank has not altered its rates; in 1909, 1910, and 1911 (till October) 3^ per cent, was paid on credit balances and 4 J per cent, charged on overdrafts. In October the deposit rate was raised to 4 per cent., but no change was made in the charge for overdrafts. The margin between the rates for loans and for deposits has varied from | to 1 per cent. A commission (up to I per cent., at present j-V P^^" cent.) is charged only in respect of current accounts, and only upon the debit side of the accounts. Affiliated societies must furnish the Bank with a certified list of members, a copy of their articles, and a fiUed-in question paper dealing with shares held and other relevant matters, and must send in every year a statement of the changes made in the membership, in the number of shares held, and in the composition of the Com- mittee and the Board of Supervision. The Bank reserves to itself the right to have special audits (apart from the legal audit) carried out at its request by the Union, and to send a delegate to the General Meetings of the local societies. As security for every loan made the Bank requires a society to deposit a bill for the whole amount, payable in 8 days, signed by the society and by some of its members accepted as sureties by the Bank. These bills are not circulated. Sums up to £2,500 are paid by the Bank within two days, and sums over that amount within four days. Following is a translation of special regulations drawn up by the Bank relative to transactions with members : — (a) Granting of loans subject to sinking fund payments. — Section 46. — ^Loans subject to sinking fund payments may be granted to individual societies for a period of from 12 to 15 years. The granting of loans for longer terms requires the unanimous assent of the Committee of Management. The sinking fund payments fall due on December 31 of each year, and the interest is payable in half-yearly instalments. All such loans are liable to be called in at three months' notice. Repayment in full or by instalments is always permitted. (b) Grant of loans for short fixed periods. — Section 47.Br-Loans for fixed periods of from three to six months are accorded; they may be prolonged for a period not exceeding one SAXON (halle) central co-operative bank. 159 year. Repayment in instalments is always permitted. The Bank reserves the right to give three months' notice of recall in every case. Section 48. — In case of prolongation the Committee of Manage- ment must see that all interest due is paid. (c) Opening and conduct of current accounts for credit.-^ Section 49. — Credit on current account is granted normally for a period of one year; on the lapse of this period a new order must be made. The Committee is, however, entitled to close existing credit accounts at any time at its discretion, subject, however, to the approval of the Board of Supervision. Section 50. — The capital sum, that is, the amount of the credit utilised, must be turned over at least once in the year; otherwise the Committee reserves the right to make a reduction according to the circumstances in the credit granted, or to raise the rate of interest charged. In the case of newly-established societies this provision is not applicable. Section 51. — ^Any balance due by the holder of a current account at the end of the year must be cleared within two months, unless a new order has taken effect. (d) Loan capital and deposits. — Section 55. — The assent of the Board of Supervision is necessary before taking up a loan from institutions, banks, or other persons. Section 56. — The Committee determines the rate of interest upon monies deposited by societies with the Bank. Interest is paid from the next week-day succeeding the day of deposit, but repayments are made only upon the first or fifteenth of the month. Section 57. — Notice of three months, reckoned from the day of notice, is required for the repayment of deposits. Application for repayment at an earlier date may be refused, but sums may be repaid without notice in so far as disposable cash is to hand. In such event a commission of one-fifth per cent, shall be charged against the account. Section 58. — Interest shall be reckoned up to December 31, and shall be at the disposal of depositors from that date. Extracts of accounts showing deposits shall be only made once, at the close of the year. Section 59. — Interest upon credit balances on current account are fixed by the Committee according to circumstances. Section 60. — Credit against security of stocks and shares may only be granted in respect of securities recognised by the Imperial Bank or of trustee securities. Exceptions are only permissible with the sanction of the whole Committee. They may only be lent upon up to three-quarters of their market value. Section 62. — The pledging of mortgage deeds is to be, as a rule, inadmissible; only in exceptional cases and with the approval of the Board of Supervision may credit be granted against such security. The society concerned must effect the necessary assignment by notarial document. Section 63. — Changes in the rates of interest and of commission may be made at any period, and must be communicated to the societies, with the dates thereof. Administration. — The Committee of Management consists of five persons, two of whom are permanent officials of the Bank. Of the remainder (in 1911) one was a large landowner, another a manufacturer, and the third an insurance agent, as well as the secretary of a large local credit society in business relations with the Bank. Meetings of the Committee take place as required, ten to twelve sittings usually being held in the year. One member of the Committee, excepting the two professional members elected by the General Meeting for an indefinite period, retires each year, but is eligible for re-election. It is provided in the articles that the members may receive remuneration in proportion to their services, such remunera- tion to be fixed by the Board of Supervision. The Board of Supervision comprises nine members ; of these (in 1911) five were landowners, a sixth member being tenant of Crown land; the seventh was a clergy- man; the eighth member was in commercial employment, and the ninth, the 160 PERSONAL CREDIT. chairman, was director of the Union, as well as of the Chamber of Agriculture for the Province of Saxony. In addition to periodical audits of the business of the bank, the Board holds two regular meetings in the course of the year. Ordinary Tnembers of the Committee or Board of Supervision are eligible for loans against the deposit of good security or on bond with surety, but members of the Committee who are the permanent paid officials of the Bank are ineligible, and in the case of the other members the approval of the Board is required. The articles provide that suitable remuneration for loss of time, in addition to out-of-pocket expenses, may be made to the members of the Board, who " may not receive remuneration on the basis of business done, and hold an honorary office." Cost of Management. — The cost of management in the first seven years of the Bank's existence amounted to £105, £314, £468, £450, £448, £640, and £831 ; in 1900 it was £1,042, and in 1909, 1910, and 1911 respectively £3,003, £3,341, and £3,647, or in each of these three years 014, 014, and 016 per cent, respectively of the total business done. Profits. — The first three years closed with losses, although the sums lost amounted to only £203, £117, and £273 respectively. Since 1896 profits have resulted, rising from £413 in that year to £3,089 in 1901 ; in 1909, 1910, and 1911 they amounted to £11,260, £11,205, and £11,862. The articles provide that one- half of the profits shall be devoted to the reserve fund until the latter attains, as a minimum, the amount of the paid-up share capital, while the other half may be written to special reserves. Four per cent, is the usual dividend paid upon the shares. Present Position. — The Table on pages 142-3 shows the most important figures bearing upon the position of the Halle Bank on December 31, 1910. It may be noted here that on that date the deposits of societies on current account amounted to £813,091, and those for fixed periods to £319,200, as against £654,425 lent to societies on current account, and £144,596 for fixed periods, but subject to regular amortisation payments. On December 31, 1911, the deposits on current account amounted to £652,690, and for fixed periods to £284,904, as against £641,287 owed by members on curreiit account and £172,194 for fixed periods. 161 AGEICULTURAL (^0-OPEBATION/ 1. Supply Societies. 2. Dairying „ 3. Corn Selling and Granary Societies. 4. Cattle Selling „ 5. Egg Selling „ 6. Electricity ,, 7. Machine „ cS. Other 1. SUPPLY SOCIETIES. (1.) Local Societies. Scofe of Business. — These societies confine themselves almost exclusively to supplying their members with fertilisers, feeding-stuffs, seeds, agricultural imple- ments and machinery, coal and other miscellaneous articles (such as oils, cart- grease, &c.). Only in rare cases do they extend their business to include groceries, provisions, hardware and other household requisites. The writer met with societies dealing in these articles only in the East, in connexion with colonies of smallholders more or less recently established, in one district in Middle Germany (in the case of five societies) and in a few isolated instances. The Agricultural Co-operative Unions discourage any extension of business in these directions, only favouring it in particular localities when unduly high prices are continuously charged to the population by retail dealers. By far the greatest part of their business is the supply of fertilisers and feeding-stuffs, the combined annual value of which constitutes about eighty per cent, of their sales. In 1912 (June) there were 2,417 societies registered as agricultural supply and sale societies under the Co-operative Societies Act. The bulk of these societies are purely supply societies, their usual additional description as sale societies being adopted in order to allow them, should occasion arise, to sell agricultural products for their members without violating the law. In certain districts, however, notably in Pomerania, East Prussia, and Posen, and to a less extent in Hanover, the Rhine Province, and the Kingdom of Saxony, both functions are more or less regularly undertaken. Other Societies undertaking Sufply. — Apart from these societies established for the purpose, other registered co-operative societies regularly undertake the purchase of agricultural necessaries for their members, the most important groups of such other organisations being credit, dairy, and granary societies. As to credit societies there were 6,359 returned at the end of 1911 as members or share- holders in the central trading associations attached to the Imperial Federation ; and there were the 4,000 credit societies directly attached to the Agricultural Central Loan Bank (about half of which were not attached to provincial supply organisations) which have always included this as part of their functions. It may be noted also that since 1904 the returns of the credit societies in the Imperial Pederation (over 80 per cent, of German rural credit societies) show a remarkable increase in the value of goods purchased; their value rose from £1,677,850 for 1904 to £4,272,578 for 1910. A large number of the 1,200 Wiirtemberg rural credit societies also obtain supplies for their members through the central organisation at Stuttgart. Attached to provincial central trading bodies within the Imperial Federation at the end of 1911 were also 393 dairy societies and 420 societies classed as miscellaneous. All credit, dairy, and other societies that purchase agricultural requirements for their members are not necessarily attached to the central trading societies, but their membership generally implies that they undertake this business. On the other hand, there are many such societies that purchase supplies without becoming attached to any central organisation of this kind. The number of non-supply societies undertaking supply as a subsidiary part of their business may be estimated at about 12,000. Importance of other Co-operative Agencies. — German farmers also obtain their supplies through many other agencies which, although of a co-operative character, have not assumed the legal status of registered co-operative societies. The most * Excluding the particular subject of co-operation for the purpose of credit, which has been treated under Agricultural Credit. 2557i L 162 AGRICULTURAL CO-OPERATION. numerous of these organisations are the Peasant Proprietors' Associations, stated to number between 2,000 and 3,000, which are most numerous in Baden, Bavaria, parts of Alsace-Lorraine and of the Rhine Province, as well as in Westphalia and Silesia. Moreover, there are two great central organisations, the German Agricultural Society and the Agrarian League, which carry on an immense supply business, more especially with the larger landowners throughout Prussia. Value of Goods supplied by all Co-operative Agencies. — -As to the money value of the supplies obtained by German farmers through co-operative organisations, no precise statement is possible. Returns from 2,120 registered supply societies for 1910 showed the value of goods supplied to their members to be £5,863,294, while in so far as details were furnished on this point by the 7,611 credit societies which reported to the Imperial Federation the sales of these societies amounted to £4,272,578. Adding the sum of £171,927, the value of goods supplied as reported for 1910 by the credit societies in the independent Wiirtemberg Union, the total definitely ascertained for these two groups of registered co-operative societies exceeded £10,300,000. To this amount must be added the value of the sales by the dairy (in 1910 those reporting to the Imperial Federation purchased supplies to the value of £392,000) granary, and other societies, as well as the considerable purchases by large landowners direct from central co-operative trading bodies. It may be here remarked that at the end of 1910 there were 4,193 individual members, as distinct from organisations, who were shareholders in central provincial supply organisations, such individual membership being noteworthy in the organisations established in districts where large farming predominates, e.g., in Brandenburg, East and West Prussia, and Silesia. Making due allowance for those channels of supply in regard to which no statistics are available, the total value of agricultural requisites fur- nished by registered local co-operative societies at the present time may perhaps be estimated at £12,000,000 ; and when to this sum is added the value of goods supplied by the extremely numerous Peasant Proprietors Associations as well as to individuals by central societies, by the German Agricultural Society (about £750,000) and the Agrarian League (about £300,000), the total value of supplies obtained by co-operative means is seen to reach a much higher figure. Advantages of Co-operative Purchase: (a) Guarantee of Quality. — Considerable benefits have accrued to German farmers through combination for the purchase of agricultural requirements. In the first place the commodities supplied by their co-operative societies are of good quality. Manures, feeding-stuffs, or seeds sold by dealers were not usually guaranteed to contain those constituents in that pro- portion which made them valuable for their purpose; nor, in those cases where a guarantee was furnished, were the purchasers, especially the purchasers of small quantities, able (partly owing to the cost and trouble of having analyses made and partly owing to the absence of appreciation of the value of precise chemical content) to secure that such commodities were in fact of that quality which they purported to be. A small holder, buying from a dealer, for instance, manures to the value of £3, could hardly afford to expend from 65. to 10^. in having them examined at a testing station. Co-operative organisations have taken proper precautions in this respect; and most of the central societies have stipulated in their contracts with the sources of wholesale supply for the right to free analyses of commodities and for com- pensation for deficiency thus ascertained. Upon the arrival of goods, the local society takes and forwards samples for analysis. The importance of this proceeding is illustrated by the following Table, which shows the results of tests of goods delivered made by or on behalf of 27 central supply associations in 1911 with the amount of compensation paid in respect thereof. The totals for 1908, 1909 and 1910 as regards tests by 25 such central supply associations are also added. This Table, which is published by the Imperial Federation, is unfortunately incomplete in some particulars, but, taking the mere totals for the number of tests made, and for the inferior samples found, irrespective of their application to the particular societies, for the four years 1908, 1909, 1910 and 1911, it is seen that of the samples submitted to analysis about one-third proved defective in 1909 and 1911, while in the other years the proportion was about one-half. Considering that goods defective to such a proportion were supplied to co-operative societies by firms aware of the stringent examination to which they were likely to be subjected, it may well be conceived that goods supplied to ordinary country dealers, and sold by them to farmers, are not unlikely to be defective to a much higher degree. local supply societies. 163 Gross Eesults op Tests made by Twenty-six Central Societies in 1911. Number of Value of re-imbursement for Organisation in Samples tested. Inferior samples found. Manures. Feeding stufes. Seeds. Total. Mehlsack Insterburg . Neumark Berlin Stettin Posen I Posen II Breslau I Breslau II Breslau III Halle... Erfurt Kiel ... Osnabruck Hanover Miinster Cassel Wiesbaden Bonn... Munich Cologne Neustadt Dresden Carlsruhe Friedburg Bruns-wick Strassburg .. 1,450 33 357 4,147 1,098 680 1,627 3,500 910 1,450 1,840 4,731 306 1,870 3,050 931 2,681 103 ? 918 25 289 309 567 283 998 457 160 92 1,139 2,093 877 56 967 ],200 950 119 694 77 81 194 £ 436 27 333 537 238 340 206 147 446 983 47 2,867 927 0-6 698 1,801 480 173 38 57 192 £ 13 130 63 37 317 135 43 13 1,068 18 15 464 706 8 6 49 £ 1 46 219 12 7 7 £ 436 207 40 333 667 238 2,907 403 244 510 1,084 581 1,245 60 1,165 3,947 952 15-6 1,162 1,801 1,186 181 710 600 38 63 248 Totals, 1911 31,672 . 12,627 10,973-6 3,085 292 21,023-6 in 191 190 190 (25 Centi Societie 9 S al 0- 21,822 32,897 18,886 10,911 10,011 8,736 7,838 7,951 10,103 1,903 2,210 2,366 236 118 73 15,034 14,509 14,345 Dr. Grabein, writing in 1908, cites many instructive cases vphich tend to show that, despite all the efforts of the Chambers of Agriculture and of the other numerous organisations that ceaselessly warn and advise agriculturists on this point, non-co-operative purchasers are still only too frequently supplied with goods of inferior quality. In dealing with this topic he writes : — " In the autumn of 1905 there was sold in the Administrative District of Erfurt cotton seed meal which, instead of containing the normal 50 to 60 per cent, of proteids, proved to contain 34' 11 per cent. The price was about the same as for the normal article, so that the dealer made an extra profit on it of about 80 per cent. Mixtures for manurial purposes afford especial opportunity for seriously deceiving inexpert purchasers. According to a report from the Grand Duchy of Hesse in 1906, a retail dealer sold a manure for grass land prepared ' from his own recipe,' which contained 23 per cent, total phosphoric acid, and 174 per cent, potash, at 3^. per cwt., while the invoice value of the commodity ex factory was 4:^d. per cwt. The dealer had in this case added to the bill, on account of mixing and retailing expenses, exactly 700 per cent. Almost as profitable was the business of a Frankfurt manure company dealing in animal nitrogenous manures. It sold a preparation of this descrip- tion at 4s. Qd., whereas, taking the value of its content, it was worth, at most, one shilling, according to the estimate of the Posen Experiment Station. Dis- tinctly audacious, but unfortunately achieving their purpose owing to the lamentable ignorance of many farmers, are prices quoted by Westphalian dealers who recommend basic slag with a content up to 11 per cent., subject to testing by one and all of the German experiment stations. ' IJp to ' implies no guarantee at all— if on any subsequent analysis only one-tenth per cent, of phosphoric acid were shown, it would suffice, however, to cover any liability 25574 L 2 164 AGRICULTURAL CO-OPERATION. arising out of their statement. With an especially outrageous instance, which occurred recently in Silesia, this anthology may close. At a time when the market price of Chili nitrates stood at lis. Qd., it was offered to a co-operative society at 10s. M. Puzzled at the great difference in price a sample was ordered and delivered. In the meantime the cheap purveyor, fearing that the matter might be thrashed out, sent word that an oversight had occurred, and that the sample was Stassfurt bath salt. Analysis showed that the stuff was potash salts, in fact, carnalite, which, free on rail, was worth d^d. per cwt. in bulk, or I5. in sacks. The farmers, therefore, were to have paid 10s. Gd. for it under the guise of Chili nitrates. The little ' oversight ' would have brought the dealesr a return of over 900 per cent." (b) Lower Prices. — Goods purchased through co-operative agency tend also to be lower in price. By purchasing in large quantities from its central organisation or from the producer or wholesale merchant directly, a society is in a better position than the individual farmer to obtain favourable prices, as well as to secure advantages as regards cost of freight. The majority of German societies that supply goods to their members, whether pure supply societies or others, such as credit societies, do not maintain stores, and only order goods in accordance with the needs of their members, either expressly stated by them or approximately calculated on the basis of previous experience. On this account neither the cost of renting (or of erecting) and maintaining a store, nor the balance of losses arising through the non-sale or depreciation of stock, have to be considered in fixing the prices for their members. Moreover, as societies do not aim at making the largest profit possible, as in the case of the private dealer, but merely add a low percentage to the cost to cover the small expenses of management, to form a reserve, and perhaps to pay a moderate dividend (usually not over 4 or 5 per cent.) upon the share capital, a very important factor in the determination of prices by the ordinary trading concern becomes of minor significance. One illustration of the effect on prices of co-operative combination among land- holders may be given. In " Agricultural Co-operation in Pomerania " (1911), Herr Sparr quotes von Knebel-Doberitz, the founder of agricultural co-operation in that province, as follows : — " When (1889) we established our society we found we had to pay 25. Zd. for cattle salt; after its establishment we supplied it at Is. d^d., and made a good profit. Kainit was sold at 2s., but we were able to sell it at Is. Ad., and make a net profit of 3 per cent. The small farmers were buying super-phos- phates at 9*. Qd. without guarantee, while we were able to sell it retail at 5s. 7^d. with guarantee, a gain, therefore, of nearly 4s.. per cwt. Basic slag was being sold at too high a price, and contained only 7 instead of 18 per cent, phosphoric acid, and palmnut cakes at 5s. were too dear." Many other instances might be quoted; and co-operative papers and speakers do not cease from pointing this moral by constant illustration drawn from actual experience. Even those farmers who do not belong to a co- operative society have reaped advantage from the existence of such organisa- tions. Dealers have become sensible of the strength of the movement ; and either the actual existence of a society in their locality or the possibility of its establishment exercises a salutary effect upon their methods of business both as regards price and quality of goods. When, over and above the tendency of co-operative agencies to charge lower nominal prices, the superior productivity of good manures, feeding-stuffs, seeds, and other objects over those of inferior quality is considered, a further element of cheapness is evidently introduced. (c) Educational Influences. — Considerable educational influence has been exercised by co-operative supply societies, whether pure supply societies or credit, dairy and other societies undertaking this work. Among the farming classes, especially among small and medium landholders, they have done much to promote the knowledge and use of suitable manures, seeds, feeding-stuffs, implements, &c., and to their credit may be placed a part in the immense progress noted by German observers in the practice of agriculture by these classes . At the meetings of their societies oppor- tunities are furnished to members for discussions of the relative values of various articles and for the dissemination of useful information. The habit of inquiring about the quality is fostered and the necessity of quality is brought home to their minds. Being for the most part affiliated to large central -organisations whose managers are conversant with ^11 new methods and commodities in their province, and possess facilities, e.g., through the officials of the Union, for spreading a know- LOCAL SUPPLY SOCIETIES. 165 ledge of them, local societies are enabled to keep their members abreast of all new developments. The widespread practice of requiring orders in advance, together with the in- sistence upon cash or short term payments, exercise an influence in the direction of improving business habits among the rural population. Eailfeisen strongly urged that payments should be collected as soon as possible after receipt of goods to avoid the running up of accounts that might finally overwhelm the farmer. Dealers on the other hand being disposed to extend credit with a view to other business, farmers are easily led into unbusinesslike indebtedness and dependence. Territorial Distribution. — The distribution of the registered supply societies in 1890, 1901, and 1912 may be seen from the following Table, which shows that the majority are established in the South- West, West, and North- West of Germany. In 1912, 67 per cent, of the total numbers were situated in Baden, the Palatinate, Hesse, Hanover, Westphalia, and the Rhine Province. But it may be noted that, though fewer in number, the societies in Pomerania, in East and West Prussia, and Posen, are of great importance. Alsace-Lorraine shows only three registered societies in 1912, but supply on co-operative lines is highly developed there by the 23 district associations, each of which extends its operations over an administrative district (Kreis), while the majority of about 460 rural credit societies attached to the Raiffeisen Union in Strassburg also supply their members with agricultural requirements. Registered Co-operative Supply and Sale Societies in Geemany in 1890, 1901, AND 1912. State or Province. 1st July, 1890. 1st July, 1901. 1st June, 1912. East Prussia West Prussia Brandenburg Pomerania ... Posen Silesia Saxony Schleswig-Holstein Hanover Westphalia... Hesse-Nassau Ehine Province ... Hohenzollern Bavaria {i. Prussia... Palatinate ... 2. Right of Rhine Saxony Wurtemberg Baden Hesse Mecklenburg- Sch-werin ... Saxe- Weimar Eisenach ... Mecklenburg-Strelitz Oldenburg... Brunswick Saxe-Meiningen Saxe-A-ltenburg Saxe-Coburg Gotha Anhalt Schwarzburg-Sonderhausen Schwarzburg-Rudolstadt Waldeck ... Reu ss-Older Line Reuss- Younger Line Schaumburg-Lippe Lippe Liibeck Bremen Hamburg Alsace-Lorraine Germany 25574 1 1 4 4 36 32 2 24 7 120 62 4 5 193 104 36 11 1 537 14 3 9 24 29 5 37 45 123 97 81 111 578 188 39 30 14 207 157 51 12 2 1 3 7 1,294 20 15 18 30 96 64 46 101 217 239 94 214 1 1,155 197 52 92 18 541 225 4 1 2 88 14 2 1 5 5 1 ] 2 2,417 L 3 166 AGRICULTURAL CO-OPERATION. General Development. — The general development of registered supply societies in Germany may be seen from the following Table, which shows the period of estab- lishment of these societies which were in existence on January 1, 1909. It will be observed that, while not keeping pace, in point of number, with the credit and dairy societies {see under their respective sections), their growth has been remarkable. The preference for limited liability appears in the case of societies created after Table Showing the Period of Establishment of Registered Co-operative Agri- cultural Supply Societies Existing on January 1, 1909, Exclusive of Central Societies. Total Number of With UTi limited liability. With unlimited contributory liability. With limited liability. Period of EBtablishment. i •3 o i o 09 1 1 .a 1 •1 o CO i 1 * Additional shares taken up. Total accepted liability. From 1867 to 1888 From 1889 to 1894 From 1895 to 1903 From 1901 to 1908 257 276 785 601 28,667 37,915 70,497 43,685 256 198 367 241 28,238 20,688 29,733 15,400 1 1 199 149 1 77 417 360 429 17,028 40,615 28,285 745 36,747 60,227 14,076 £ 8,805 658,754 1,437,405 620,652 Total Jan. 1, 1909 1,919 180,764 1,062 94,059 2 348 855 86,357 111,795 2,725,616 '" By the term additional shares is meant all shares held by members beyond the single obligatory share. Shares.— The nominal value of the shares of co-operative supply societies is for the most part small. In 1908 the shares adopted by 1,841 agricultural supply societies were in 546 per cent, of the societies under 10s., 278 per cent, returning their shares at between 2s. and bs., 3'7 per cent, shares at between Is. and 2^., and 46 per cent, shares of under Is. Twelve per cent, of the total had shares of from 10s. to 20s., 149 per cent, shares of from 20s. to 50s., and 139 per cent, shares of from 50s. to £5. In the case of societies with unlimited liability, with shares of over 10s., only a portion of the sum, generally one-tenth, is paid up; societies with limited liability with low shares often require their members to take more than one in given circumstances, and the latter are legally bound to pay a previous share or shares in full before they may acquire additional shares. In 1908, 1,023 supply societies (555 per cent.) were subject to unlimited and 816 societies (44'3) to limited liability, the few remaining having adopted unlimited contributory liability. Of the group with limited liability 45'5 per cent, returned their shares at values not exceeding 5s., 16 "3 per cent, at over 5s., but not exceeding 10s., 69 per cent, at from over 10s. to 20s., and 138 per cent, at from over 20s. to 50s., while 89 per cent, showed ranges from over 50s. to £5, and 5'8 per cent, from over £5 to £10. Shares in societies with unlimited liability showed a considerably higher level : in 28'6 per cent, of the societies they were of not more than 5s., in 204 per cent, from 5s. to 10s., in 16 per cent, from 10s. to 20s., in 158 per cent, from 20s. to 50s., and in 178 per cent, from over 50s. to £5. The model articles for supply societies issued by the Imperial Federation recom- mend that the shares in societies with either form of liability should be made as high as possible, in no case less than £5, with the payments so arranged that the full value of the share should be paid up within ten years. As to societies with limited liability, which may require members to take up more than one share, it is further suggested that members might be placed under obligation to take a number of shares in accordance with the area of the cultivated land held by them, or with the amount of goods purchased by them through the society. The society at Stolp, in Pomerania, which is the largest non-central agricultural co-operative supply society in Germany (having over 3,000 members), requires all landholding members to take one share, which is fixed at Is., for every £10 of the combined taxable assessment of their land and buildings. Another very successful Pomeranian society at Anklam imposes upon landholding members the taking of one share (which amounts to 10s.) per £15 of such taxable assessment; upon members that are societies or companies with limited liability, one share per £2,000 (or portion thereof) of collective liability represented by their members, and for other co-operative associations one share per £2,000 of their annual turnovef. LOCAL SUPPLY SOCIETIES. 167 Amounts paid up. — The average sum paid up in respect of shares per member at the end of each of the six years 1905-10 were in due order 13s., I65., 18s., 21s., 23s., and 19s., these figures being based upon returns made to the Imperial Federation from 1,815, 1,925, 1,983, 1,970, 2,081, and 2,120 societies in these years respectively. The average paid-up share values show, therefore, continuous increase down to 1909. Analysing the position at the end of 1909, it is found, however, that, out of these 2,081 societies, with 230,737 members, 1,549 societies with 134,639 members showed an average paid-up share value per member of not more than 9s., while in the case of 214 additional societies, with 17,458 members, the average does not amount to the general average of 23s. In Baden, for 53,325 members, in 662 societies, there was an average of 3s.; in the Palatinate, 4s. for 15,292 members, in 136 societies; in Oldenburg, 2s. for 5,024 members, in 54 societies ; in Hanover, 6s. for 16,108 members, in 169 societies; in Schleswig-Holstein, 4s. for 4,717 members, in 92 societies; in one Silesian Union, 7s. for 6,469 members, in 60 societies; in Hesse, 9s. for 13,601 members, in 168 societies; in the Bonn Union, 20s. for 11,075 members, in 138 societies; and in the Wiesbaden Union, 21s. for 5,344 members, in 66 societies. In some districts, on the other hand, comparatively high averages were reported ; in the Kingdom of Saxony the amount was 59s. for 5,267 members, in 84 societies; in the Province of Saxony, 31s. for 3,786 members, in 43 societies; in one East Prussian Union, £5 17s. for 558 members, in 7 societies; and in another East Prussian group, £9 7s. for 2,269 members, in 9 societies; in Pomerania, £2 12s. for 11,920 members, in 22 societies; in one Posen group, 65s. for 3,104 members, in 15 societies; and in a second Posen group, 43s. for 16 societies with 4,381 members. Nature of Liability adopted. — Both limited and unlimited liability have been adopted by supply societies, but of late years it has been more usual to select limited liability (see Table above showing period of establishment and liability of societies). In 1911 forty-five per cent, of these societies were registered under the latter form, which has been almost exclusively chosen in the Provinces of Pomerania, Saxony, Posen, Silesia, Rhenish Prussia, Westphalia, and the Kingdom of Saxony, but in Schleswig-Holstein, Hanover, Nassau, Hesse, the Palatinate, and Baden unlimited liability is predominant. In East Prussia the former system has been adopted by the societies in the Kbnigsberg, and the latter in those of the Insterburg Union. The percentage of societies with limited liability had increased to 46 2 of the total in 1912. In general, unlimited liability is found in the West, South, and North- West of Germany, and limited liability in the North and East. This circumstance is largely due to the fact that in the West and South the societies were either founded previous to 1889 (when limited liability was first made legally possible in the case of co-opera- tive societies) or in districts where unlimited liability was the generally accepted form for co-operative undertakings. In the Eastern Prussian Provinces, the supply societies being wont to include larger districts within their area of operations, and to maintain warehouses, limited liability is more readily acceptable than unlimited. On this point the Imperial Federation holds that limited liability is in general adequate, and " under given conditions merits the preference. In selecting limited liability — the advice of the Union should be obtained — it is recommended that the liability of the individual members should be graduated in accordance with the extent of his holding (e.^., up to 2 J acres, one share; from 2 J to 5 acres, two shares; from 5 to 7| acres, three shares, &c. ; each share bearing, of course, a fixed amount of liability). Graduation upon the basis of goods to be purchased is less to be recommended." Amount of Liability attached to Shares. — The amount of the liability attached to shares in societies with limited liability follows no uniform plan. In 1908, out of 816 such societies, 366 (44'8 per cent.) showed a liability per share of from 1 to 10- times the nominal share value, 180 (22'1 per cent.) of over 10 up to 50 times, and 270- (33'1 per cent.) of over 50 times; the averages of the number of times in the three groups were 4' 78, 20 '83, and 123 respectively. Such multiplication of share liability as in the last group seems, on the surface, extraordinary and even dangerous, but in fact the shares are low in this group, the share values being almost exclusively from a penny to 10s., with an average (1908) of 2s. per society. In the first and second groups the average share values were much higher — ^being £3 4s. and 12s. respectively. When the shares of a supply society are of 10s. and over, it is unusual to make the liability more than ten to twenty times the amount of the share. 25.574 L 4 168 AGRICULTURAL CO-OPERATION. Number of Members. — There were 2,417 registered co-operative agricultural supply societies in June, 1912; and there were 2,241, about 5 per cent, of which appear to be unregistered, which were attached to Unions within the Imperial Federation. The average number of members per society, as shown by the figures for those societies (over 90 per cent.) furnishing reports, has steadily increased. In the years 1892, 1895, 1898, and 1900 to 1910 the averages in consecutive order were respectively 78, 77, 77, 97, 100, 100, 103, 106, 101, 106, 109, 112, 112, and 114. In 1908 and 1909 the greatest number of members in a single society was shovm by the Stolp Society in Pomerania, with 3,064 and 3,095 members in each year respectively. In common with the other 21 Pomeranian supply societies, this Society extends its business over several districts each of the approximate size of an English rural district. Societies covering similar areas are also found in East Prussia, Posen, and Alsace-Lorraine, but the greater number of supply societies have under 150 members. In 1908, according to the official statistics, the average number of members in 1,841 societies was 91 ; in 1909, 95. The following Table shows the range of membership of the co-operative supply societies which furnished reports to the Imperial Federation in 1900, and in each of the six years 1905-1910. For all the years indicated its affiliated societies repre- sented about ninety per cent, of all registered supply societies, but the figures also include some unregistered societies. Members. 1900. 1905. 1906. 1907. 1908. 1909. 1910. Op to 10 3 10 10 10 6 10 8 11 „ 15 19 29 32 31 29 27 24 16 „ 20 29 52 62 55 39 39 46 21 „ 30 95 155 172 159 142 152 151 31 „ 40 129 175 193 204 190 220 217 41 , 50 141 236 226 226 234 239 234 51 „ 60 118 215 218 217 215 232 230 €1 „ 70 90 157 167 173 177 . 186 182 71 „ 80 77 114 124 137 145 146 168 81 „ 90 66 114 104 109 108 131 130 91 „ 100 54 87 96 103 112 94 162 101 „ 150 169 253 276 294 301 315 299 151 „ 200 46 83 92 102 110 124 130 201 „ 300 25 59 69 78 78 92 104 301 „ 400 10 18 22 29 30 38 36 401 „ 500 9 8 13 13 14 11 17 Over 500 21 32 35 41 38 20 39 1,101 1,797 1,911 1,981 1,968 2,076 2,177 Area of Operations. — The operations of most German supply societies are confined to small areas not exceeding one, two, or three parishes, and correspond roughly with those adopted by the village banks. Their tendency is, however, to extend over slightly larger areas than the latter, restrictions of area of opera- tions _ applicable to credit societies not being so imperative for supply societies, especially if cash payments or only short credits are permitted. Unduly large areas mean more complex business, imply the employment of a permanent paid official _ or officials, and probably the necessity for maintaining a ware- house, and in general give rise to fixed establishment charges that may only with difficulty be met unless a large and constant business is assured. It is, of course, essential that the area be large enough to allow of a membership capable of furnishing orders of sufficient importance to obtain the advantages of purchase upon a large scale, as regards price, cost of transport, &c. In some districts, and, as already observed, to a noteworthy extent in Pomerania, East Prussia, Posen, and Alsace-Lorraine, supply societies extend their business over considerable areas. In Pomerania there are twenty-two societies, each usually serving one or more of the 28 rural administrative districts (Kreise) into which the province is divided. The area of Pomerania is 7,500,000 acres, or about twice the size of Yorkshire. The smaller landholders very often obtain their goods from these societies through their village banks, most of which are members of these supply societies, while the more con- siderable landholders, being directly attached to them as members, purchase without any intermediary. These larger associations for supply offer special advantages by reason of their large membergjiip, which includes large landholders and societies giving large orders; by the fact that their business is able to support experienced LOCAL SUPPLY SOCIETIES. 169 or expert staffs; and that their members furnish a basis of liability that enables them to command adequate working capital at moderate rates when needed. Collection of Orders and Delivery of Goods. — Societies adopt different methods of collecting orders. In most local societies the Committee of Management gives notice at the annual (or other) General Meeting of members that orders must be sent in for certain commodities by certain dates. Orders are then given by members at the office of the society, or are collected at the homes of members by a messenger, or printed slips are circulated to be returned within a certain period. On receipt of orders the committee com- municates with the central society, provided that the quantities ordered are of sufficient amount. In the. case of manures, orders for less than 10 tons, or of coal for less than 20 tons, are not sent forward. As the majority of local societies maintain no store, only the quantities stated to be required are usually ordered. On arrival of the goods the society selects samples, which are sent to the central society or to an experiment station to be tested. Each member takes delivery of his supplies at the place, generally the railway station, designated by the committee. Should the purchaser not remove the goods ordered on his behalf, the committee reserves the right either to sell to another or recover their value from the defaulter. Stores. — When a store is kept by a society it is usually small, and the member of the society appointed to act as storekeeper attends as a general rule at the store once or twice each week at fixed hours to sell commodities. In only comparatively few cases is the business of a supply society sufficiently important or regular to justify the employment of a man for his whole time. In the large supply societies in Pomerania, East Prussia, and Posen, warehouses are maintained, and more or less constant stocks of most agricultural requirements are kept. But even these societies usually request their members to send in orders in good time so that they may be in a position to take advantage of any movements in the wholesale market. Value of Purchases per Member and per Society. — The average value of the purchases made per member and per society in 1910 amounted to £279 and £2,929 respectively; in the years 1904-9 the averages per member were : £13, £18, £22, £23, and £277; and per' society, £1,434, £1,375, £2,054, £2,390, £2,696, and £2,772. The following Table shows the extent of the purchases made by supply societies attached to the Imperial Federation for each of the ten years 1900-1910 : — Table Showing the Extent of the Purchases made by Local Supply Societies IN the Eleven Years 1900-1910. Percentages in Value of Purchases. 1900. 1901. 1902. 1903. 1904. 1905. 1906. 1907. 1908. 1909. 1910. 1909. 1910. Up to £125 266 297 298 324 319 321 210 219 163 147 180 7-35 9-00 From £125 to £250 195 197 244 213 292 286 268 290 257 283 259 14 15 12 94 £250 „ £500 158 201 218 230 213 269 305 283 329 284 317 14 20 15 84 £500 „ £1,000 169 200 221 242 282 274 312 323 335 382 380 19 10 IS 00 , £1,000 „ £2,000 132 172 198 237 253 262 304 296 337 424 379 21 20 IS 94 £2,000 „ £3,000 67 79 84 101 99 115 139 139 153 144 173 7 20 8 65 £3,000 „ £4,000 13 29 40 39 57 73 81 77 78 83 81 4 15 4 O.S £4,000 „ £5,000 10 10 16 23 21 28 39 52 52 60 55 3 on 2 75 , £5,000 „ £12,500 50 22 29 34 43 53 71 93 108 109 117 5 45 5 85 , £12,500 „ £25,000 10 13 11 15 22 24 26 29 21 36 37 1 80 1 85 Over £25,000 G 8 7 10 6 20 23 33 29 48 43 2-40 2-13 1,046 1.228 1,366 1,468 1,607 1,725 1,778 1,834 1,862 2,000 2,001 100-00 100-00 Nature of Goods Purchased. — In 1909 and 1910 the supply societies within the Imperial Federation sold to their members : manures, 11,768,000 cwt. and 14,269,000 cwt.; feeding stuffs, 6,135,000 cwt. and 7,549,000 cwt.; seeds, 215,000 cwt. and 235,831 cwt. Thus as regards weight, chemical manures represented over 64 per cent, of the total for these three groups of commodities, which together constitute about 80 per cent, of the value of all commodities supplied. Per member the average amount of manures and feeding stuffs sold was : 1909, manures, 67 cwt. ; 1910, 73 cwt.; feeding stuffs, 1909, 36 cwt.; 1910, 39 cwt. Obligation upon Members to purchase. — For the success of a supply society it is of great importance that members should purchase all their requirements through its agency. Moral obligation being apt to prove rather ineffective, many societies have introduced regulations binding all members to purchase either all their agricultural 170 AGRICULTURAL CO-OPERATION. requisites, or all of certain kinds, through them alone, but such compulsion is by no means universal. Dealings tvith Non-Members. — The sale of agricultural necessaries by such societies to non-members is not prohibited by law; the Co-operative Societies Act specifically exempts " agricultural distributive societies which, not maintaining an open store, supply goods destined from their nature for the business of farming," from the prohibition applicable to other distributive societies. It is not, however, encouraged by the societies, as new members are not likely to be attracted if the advantages of membership without its duties are thus obtainable. When societies have a surplus of stock, having obtained more than their members ordered or bought, they often dispose of it to non-members. Fixing of Prices. — Prices are fixed by the Committee of Management with the assent of the Board of Supervision. It is usual to add to the total cost price a small percentage to meet expenses of management and to build up a fixed reserve and a working reserve. Many societies, however, charge current prices, and at the end of the year, after making suitable appropriations to reserve and for working expenses, divide any surplus among members in proportion to the value of the goods purchased by each. This method has the advantage of tending to stimulate pur- chases by members; and, further, it enables small losses on particular sales to be distributed over the annual business. Many societies pay no other dividend apart from this " goods dividend." Payment for Goods by Members. — Members are usually allotted a fixed amount of credit, within the limits of which they may be supplied with goods. Many societies provide in their rules of business that payment must be made within 20 or 30 days from date of receipt of goods ; but a very large number appear to allow payment for most articles to be deferred for three months ; and, after the lapse of that period, to charge interest at the rate of 5 per cent., or at a higher rate, should they happen to be obliged to pay abnormal rates for their own accommodation. To stimulate speedy payment it is a not unusual practice to allow a discount of 1 to 2 per cent, to members settling their accounts within thirty days. The great majority of societies insist upon full settlement within nine months. The Congress of the Imperial Federation passed the following resolution in 1894 respecting prompt payment by members for goods : — " It is to be recommended to agricultural supply societies to lay the greatest stress upon the introduction of cash payment for goods. If credit is required by members for goods supplied, it should not be accorded for a period longer than three months. When members of these societies need longer credits, it is recommended that a savings and loan bank be established, to be joined by such members as are in need of credit." It is, of course, open to purchasers who are already members of a credit society to borrow therefrom in order to pay for goods of the kind furnished by supply societies; credit societies have as their main purpose the provision of capital for immediately productive purposes, and, in fact, modern farmers find a very large part of their circulating capital is needed for commodities such as are furnished by these societies. In many cases when supply and credit societies exist in the same locality, the former receive payment in a lump sum from the credit society in respect of members of both, the amounts being duly debited to their accounts with the latter. The cost to the farmer of postponed payments for goods, whether in account with a supply or credit society, is, however, less than it would be for credit with merchants who charge a rate of interest higher by one or two per cent. ; and in the former case no surrender of absolute independence is liable to be involved. Payment for Goods by Societies. — The financial foundations of co-operative societies are the paid-up share capital and reserves together with the collective liability undertaken by the members. In the course of time, when the share capital is fully paid up, and considerable reserves are accumulated, a society may be able to work with its own immediate resources. The majority of German supply societies are affiliated to the central supply association and to the central bank of their co-operative Union. Particulars of the shares to be taken by local societies, the value of goods that are supplied per share taken and other details will be found in the section dealing with central supply organisations on page 176, and similar information respecting central banks on page 136. When societies are affiliated to both organisations they usually settle their account by order i^on the central bank, which makes payment out of the balance of the society in question, or otherwise out of the credit allocated to such LOCAL SUPPLY SOCIETIES. 171 society. In the case of unattached societies payment is made by it directly to the supplier out of its own funds, or, if necessary, it obtains an advance from its banker. Profits. — In co-operative trading the amount of profits actually obtained on a year's working cannot be regarded as a complete test of the efficiency and success of the particular undertaking. A co-operative sale society aims in the first instance at supplying its members with the best goods at the lowest possible prices. Large profits, therefore, are not sought. The fact that relatively considerable sums are frequently appropriated to reserve tends to reduce the apparent profit on the year's working. Further, a very large number of societies make a practice of allocating bonuses to their members out of profits, the specific amounts being based upon the purchases made by the members concerned during the year. In the case of the 92 societies showing neither profit nor loss in 1910, it may be assumed that any balances were thus paid out or written to reserve. The following Table shows the financial position, at the end of 1901, and of 1908-10 of those local supply societies that reported to the Imperial Federation for these years; together with the values and quantities of goods supplied in these years : — Local Agricultueal Supply Societies. 1901. 1908. 1909. 1910. No. of Societies 1,094 1,970 2,081 2,120 Membership 125,590 220,728 230,737 241,022 Paid-up Share Capital £ 48,883 173,182 203,572 216,954 Reserves £ 92,142 279,228 315,335 349,094 Total Owned Capital £ 141,025 452,410 518,907 566,048 Liabilities £ 899,170 3,235,633 3,318,105 3,539,224 Assets £ 930,482 3,299,766 3,385,820 3,608,492 Cost of Administration £ 41,188 141,046 151,773 166,016 Book Value of Property ... £ 82,294 463,053 428,686 426,162 Profits— No. of Societies : Amount. 970 : £31,517 1,675 : £69,692 1,787 : £82,100 1,777 : £85,245 Losses — Do. do , 70 : £1,135 260: £5,559 217 : £14,325 251: £16,625 Neither Profits nor Losses... 52 — 35 — 77 — 92 — Value of Goods Supplied £ 1,632,614 5,051,978 5,544,852 5,863,294 Quantity of Manures „ cwt. 5,001,000 11,252,349 11,768,000 14,269,000 Do. Feeding StufPs „ cwt. 2,339,700 5,967,357 6,135,000 7,549,000 Do. Seeds „ cwt. 129,118 205,408 215,271 235,000 Sale of Agricultural Produce by Supply Societies. — In the first paragraph of this section it was noticed that, apart from certain districts there specified, the sale of agricultural produce was not generally undertaken by German supply societies. The returns obtained by the Imperial Federation from its affiliated societies year by year, with respect to the quantities of corn and potatoes sold and their sale prices, indicate a development of this business in these districts, but no general growth elsewhere. In 1910 222 societies reported sales of these commodities amounting in value to £3,152,365; of this total 19 Pomeranian societies accounted for £1,228,436, 7 East Prussian sQcieties for £390,767, 84 societies in the Kingdom of Saxony for £368,824, and 14 societies in Posen for £256,280, or a total for 124 societies in these four districts of £2,244,407. The following Table shows the value of those products sold by supply societies in the Imperial Federation, together with the number of societies concerned, in the years 1901, and 1908-1910 : — Year. 1901 1908 1909 1910 The following note relating to one of the local supply societies visited by the writer is appended. Gross-Umstadt Supply Society. Only farming necessaries — manures, seeds, foodstuffs, coal, machines — are handled by this Hessian society, which does not maintain a warehouse or office ; it is, in fact, simply an agency for the collection and transmission of orders. The Number of Societies. Value. £ 64 234 205 222 418,982 2,518,364 2,999,147 3,152,365 172 AGRICULTURAL CO-OPERATION. secretary, or his deputy, makes regular rounds of the farmhouses — in Hesse the farm- houses always lie together in the village, not scattered upon the separate holdings — and the orders collected are despatched to the 'central supply society. The goods are removed from the railway as soon as possible after their arrival by the members themselves, who are advised beforehand of the exact date. The working capital of the Society was composed in the first instance of the shares of the members, but the Society subsequently became a member of the local co-operative bank, which opened a credit for it of £1,500 on current account on the basis of the liability of the members. At the end of 1909 the share capital amounted to about £80 in shares of £1 each, and the reserves to £22. The members are mainly, of course, farmers, with a sprinkling of men of other occupations who joined to obtain coal, or, having a few pigs or cows, to get feeding stuffs at cheaper rates. During a year some members buy cattle foods up to the value of £100 or £150, others perhaps only up to 20^. or SOs. Payments for goods obtained must be made within three months; after which time 5 per cent, interest is charged — ^this being the same rate as is paid by the Society for overdrafts on the Co-operative Bank. The Society charges a small commission — ^d. per cwt. of coal, l^d. per cwt. of manures, &c. In 1909 the sales amounted to £1,116, and the expenses of management to £13, of which the secretary, who was also secretary of the co-operative bank, received £7 IO5. All goods delivered are tested by the State Experimental Station at the cost of the sender, and compensation is given by the manufacturer if they are not of the quality specified in the invoice of consignment. The Society does not buy from its members produce for sale. Such a business, as the secretary remarked, requires considerable working capital, as deliveries must be paid for, and a warehouse and employees must be maintained. The members, unless bound to bring all their pro- ducts — a difficult obligation to enforce — ^bring only their inferior or middling wares to the Society, selling the better quality to the dealers ; and, he added, for the inferior wares brought they demand high prices. (2.) Central Societies. Advantages of Combination of Local Societies. — The advantages of co-operating for the purchase of agricultural requirements can only be realised to the full when the local societies unite to form larger organisations. German rural credit societies find the services of central banks practically essential for their efficient working, but this need for more comprehensive organisation makes itself even more impera- tively felt in the matter of local supply societies. With producers of many very important commodities required by agriculturists combining to maintain prices, either by limiting production or by other means, wholesale merchants by similar agreements levying a further undue profit, and finally with retail dealers obliged to secure their margin, the single farmer or even the single society, unless of considerable magni- tude, is powerless to influence prices. Local societies have, therefore, formed large organisations covering provinces or States that purchase on a large scale for their constituent societies and members. These central agencies have been further organised for the purchase of certain articles required by most farmers into bodies which extend their operations over all Germany; and thus representing an effective demand of great magnitude they are enabled to exercise considerable influence upon the determination of prices as well as upon the quality of commodities required. Special Advantages of such further Organisation : German Combination of over 1,000,000 Farmers. — Apart from the general advantages already noticed as accruing to German landholders from their formation of local organisations for the purchase in common of agricultural requirements, further benefits resulting from their combina- tion in central associations may be mentioned. A local society only making purchases in limited quantities is not in a position, as a rule, to enter into direct relations with manufacturers or wholesale merchants dealing in the particular commodities required. The average total sales of goods by 7,231 credit societies in 1908 and 7,217 credit societies in 1909 amounted to £544 and £616 respectively; and in the same years the corresponding averages for 1,968 and 2,076 supply societies were £2,696 and £2,772 respectively. The average total values per supply society may appear not unimportant, but since these societies sell various kinds of mianures, feeding- stuffs, seeds, &c., their purchases of individual commodities or kinds of com- modities are apt to be relatively inconsiderable. In respect of the credit and other societies, which include sup;p!y business as a subsidiary part of their work this CENTRAL SUPPLY SOCIETIES. 173 remark applies, owing to the inferior volume of their purchases, with even more force. But the concentration of the demand of several hundred societies for each of these articles enables a central association to purchase in bulk at favourable prices; and when, as is the case respecting the purchase of certain articles, over forty large associations counting a membership of over a million farmers are united, their influence upon prices is substantial. In one year the Supply Association of German Farmers of which the Imperial Federation is a shareholder, has purchased at preferential rates 620,000 tons of basic slag; and the Potash Supply Company founded by the same Federation, which in 1911 made a five years' contract on very advantageous terms with the Potash Syndicate, purchased in the year 1911 120,000 tons (as against 105,000 tons in 1910) of purified potash salts. Purchase of Machinery . — As to the purchase of machinery the advantages secured have also been very great. Large commissions, usually payable by manu- facturers to district and local agents, and other costs, being saved, orders _ for considerable quantities being given and cash payments made, central associations are able to obtain machinery at very reduced prices, and sell to members on corre- spondingly favourable terms. Quality is guaranteed. Expert advice as to the suitability for local conditions of any particular machinery is also readily procurable by the local societies from their central organisation. Local Societies safeguarded in Various Respects — The central organisations, being conducted by persons Avith special knowledge devoting their whole time to the business, are able to safeguard local societies, which are for the most part managed by persons who only in rare cases possess special knowledge of such commodities or of general commercial practice in respect of prices, quality, transport charges, &c. As a result of their intimate acquaintance with the conditions of their business, central associations are able to profit fully by favourable junctures for the purchase of articles subject to wide fluctuations and to conclude contracts extending over long periods on exceptional terms. Further, they are able to secure a high standard of quality in their purchases. Being large dealers they can, without incurring an undue proportion of expense, have their deliveries tested. For this purpose many retain their own analysts or machinery experts, and all are in regular communication with the experiment stations main- tained either by the State or by the Chambers of Agriculture. As has been shown in reference to the local societies (pp. 162-3) the submission of agricultural requirements supplied to scientific tests appears highly desirable in the interests of the farmer. More Impartial Attention to Special Requirements : Educational efforts. — Not aiming merely at obtaining large profits the central societies have less interest in selling commodities irrespective of their suitability for special districts, and endeavour to further the employment of feeding , stuffs and manures advantageous, for instance, for special breeds of cattle or particular soils. The educational work effected directly or indirectly by these bodies is considerable. By means of addresses by their own officials or those of the Unions whose affiliated societies they serve as central trading organisation, by the distribution of leaflets and the frequent insertion of articles in the co-operative newspapers issued by Unions and Federations, they stimulate the employment of the most suitable goods and machinery. For some time four travelling instructors were attached to the Imperial Federation, whose functions were to spread in country districts by means of lectures and experiments a knowledge of the efficacy of potash salts as a fertiliser; and that stimulation on the part of, central co-operative organisations has not been ineffective may be assumed from the striking growth of their own sales of this commodity, the sales of purified potash salts in 1911 showed an increase of about 15 per cent, over those of 1910. Area of Operations. — The area covered by central supply associations corre- sponds with that of the Union to which they are affiliated. Unions having in most cases created them to serve the societies within the Union area. At the beginning of 1911 only two German agricultural associations of this kind were unattached to any Union. Their organisation is therefore, with few exceptions, upon a pro- vincial or a State basis. In many Prussian provinces, and in Bavaria, there is much overlapping. For the Ehine Province there are four central organisations, at Bonn, Cologne, Coblence, and Treves; for Silesia and Brandenburg three, with head- quarters at Breslau and Berlin respectively; and for West Prussia, Posen, and Pomerania, two each. Baden possesses two, at Carlsruhe and Freiburg; and there are four conducting business in Bavaria. The German Agricultural Central 174 AGRICULTURAL CO-OPERATION. Loan Bank formerly undertook the supply of many commodities for its societies spread over Germany; but in 1909 the establishment of independent central supply organisations for each of the Union areas within the Raiffeisen Federation was voted by the Raiffeisen Congress at Breslau, and at the end of 1911 seven such bodies (at Coblentz, Erfurt, Berlin, Cassel, Dantzig, Brunswick, Breslau) had been created. The Imperial Co-operative Bank also embraces the whole of Germany as its area of operations. The Agrarian League also supplies its members throughout Germany. In 1901 was founded the Supply Association of German Farmers, which includes among its shareholders the Imperial Federation, the German Central Loan Bank, the German Agricultural Society (this body has the same general aims as "the English Royal Agricultural Society, but extends its functions to supplying agricul- tural requirements and to other objects), and the Agrarian League; it purchases basic slag on a large scale for sale to its shareholders throughout Germany. As noted above, a similar organisation has been formed for the purchase of potash salts. A Central Machinery Purchase Office, one of the institutions of the Imperial Federation, similarly extends its operations over the Empire. Membership. — Membership in a central supply association may, as a rule, be acquired only by co-operative societies and persons who are appointed to its committee of management and its board of supervision. Many admit, however, individuals to direct membership, but only agriculturists who are precluded from, or who show adequate reasons for not, joining a local supply or other society under- taking this business. The composition of the membership of those central societies for supply, particulars of which are available, may be seen from the following Table : — Table Showing Membership of Central Supply Societies. January 1, 1912. i 1 1. le :&' Head Office. Area of Operations. •■S.2 er ■opei cieti •£i -I 1- 1^ (1). Within Imperial I ''ederation . (a) Go-operative Societies i vith L imited Lidbil ity. Insterburg East Prussia ... — 7 2 300 309 Mehlsack ») 58 2 — — 113 173 Nenmark West Prussia.. — 1 4 3 386 394 Berlin I Brandenburg.. 234 2 5 4 104 349 Berlin II )) 10 7 10 24 1,063 1,114 Stettin Pomerania 4 22 5 4 3 38 Posen I Posen as 15 — 6 119 173 Posen II „ — — — 147 99 246 Breslau I Silesia 325 — — 2 168 495 Breslan II » 156 72 5 3 50 286 Halle Saxony (Province) and Thuringia. 598 42 111 13 10 774 Erfurt Thuringia 433 2 — 2 13 450 Kiel Schleswig-Holstein 113 95 — 47 38 293 Osnabrtlck Government District of Osnabrtlck. 71 — — — 71 Hanover Hanover 33 73 4 1 415 526 Miinster Westphalia 36 205 9 27 220 497 Wiesbaden Administrative District of Wiesbaden. 44 34 1 4 83 Bonn Rhine Province 8 119 10 5 44 186 Cologne » " 144 79 17 33 338 601 Munich Bavaria 2,259 23 119 2 14 2,417 NeuBtadt Rhenish Palatinate . 15 128 — — 5 148 Dresden Kingdom of Saxony. 215 83 2 15 11 326 Darmstadt ... Hesse 35 101 1 2 9 148 Fried berg in Hesse Upper Hesse ... 3 25 2 — 7 37 Oldenburg Oldenburg 2 70 1 2 75 CENTRAL SUPPLY SOCIETIES. 175 i m 2 i 1. c3 m i S3 f Head Office. Area of Operations. si 1^ ker o-opei ooietic J2 U (3 ^-^ n jf Occ a °s O m n 1 O HH h" Within Imperial Federation : (b) Limited Liability or Joint Stock Companies. Dantzig ... ~ West Prussia 237 2 5 6 250 Berlin (Raififeisen)... Pomerania, Brandenburg and Mecklenburg. 374 7 10 9 3 403 Breslau (RaifiEeisen) Silesia 354 — — 17 5 376 Cassel Hesse-Nassau 324 9 — — — 333 Coblence Rhine Province 221 1 — 2 2 226 Bruns-wick Brunswick 86 — 2 1 — 89 Berlin (Raiffeisen German Germany 4,468* — — — 4,468 Agricultural Central Loan Bank). (c) Unions : Registered Associations. Carlsruhe Baden 5 711 72 41 829 Strassburg Alsace-Lorraine — 23 — — — 23 (2). Outside Imperial Federation : Go-operative Societies with Limited Liability. Indi- viduals All and soci- other eties. organ- isa- tions. Trevest Rhine Province : Alsace- Lorraine. — — — 62 13 75 Leutkirchf Part of Bavaria (Upper Swabia). — — — 55 86 141 Gronenbachf »> 5, — — — 66 218 284 Stuttgart Wurtemberg — — — 32 — 32 Zittaut Part of Saxony — — — — — Regensburgf Bavaria 132 8 — 15 818 973 * 2,029 of the societies attached to this organisation are also members of the central societies created since 1909 in Berlin, Breslau, Brunswick, Cassel, Coblence, Dantzig and Erfurt. See page 174 (top) and above Table, t Details given relate to year 1910. t „ „ „ 1911. Of 2,194 supply societies attached to the Imperial Federation on January 1, 1911, 88 per cent, were members of a central organisation for supply as were about two-thirds of the credit societies; but only 17"5 per cent, of the dairy societies (359 out of 2,050) belonged to such organisations. _ Legal Form. — The great majority of the organisations have adopted the form of registered co-operative societies. As may be seen from the above Table, there were societies with limited liability, companies with limited liability, joint stock com- panies, and two registered associations. Shares. — The accompanying Table affords full information relating to German central organisations for the supply of agricultural requisites as to (1) the nominal value of shares, (2) highest possible number acquirable, (3) the liability assumed (if any) per share acquired, (4) shares to be acquired per value of purchases made, (5) number of shares held, (6) the share capital paid up, (7) the collective share liability at the end of year,. (8) periods within which settlement falls due for goods supplied to members, and (9) the rates of interest charged upon accounts outstanding after such periods. The figures given for the organisations within the Imperial Federation refer to January 1, 1912. It will be observed that there is great divergence in the nominal value of the shares adopted by the various organisations, the range being from IO5. to £75, while the liability per share ranges from £2 10s. to £500. 176 AGRICULTURAL CO-OPERATION. Geeman Central Supply Organisations, January 1, 1912. • SH 0? 1 03 U**-t potash salts). Such an ordinance, when adopted, is not always easily insisted upon in co-operative organisatioift. Local societies are frequently led to purchase else- where by an apparently cheaper price being offered ; they do not pay suflBcient heed CENTRAL SUPPLY SOCIETIES. 177 to the fact that they obtain from their central organisation only guaranteed goods of the best quality, whereas no such security usually exists in the case of outside purchases. Most central societies have stipulated for analyses to be carried out at the cost of the supplier, and such analyses are regularly made ; but the right of free analyses is not usually accorded to single societies by those from whom they may pur- chase. As regards prices, apart from the question of quality, single societies are not often able to obtain better terms from wholesale or retail merchants, but it seems clear from the reports of the central societies that a great deal of business is independently done by them. In the interests of co-operation, and in the real interests of the members, their lack of loyalty is regrettable ; it lessens the volume of business of the central societies, and weakens their influence in the market, while members expose themselves to the risk of obtaining less satisfactory goods. Payment for Goods. — In order to obtain favourable rates central institu- tions must be in a position to settle with their suppliers either by cash or short term payments, and must accordingly require prompt settlement from their customers. As owned working capital they possess their paid-up share capital and their reserves. Most central societies oblige members to pay up all shares taken; and in 1910 and 1911 the reserves of the central societies in the Imperial Federation totalled over half of their share capital. But their borrowed capital amounted to about two and a half times their total owned capital. This capital is obtained from their union banks or other central co-operative banks to which they are attached, and which allot to them fixed credits based either upon the amount of the collective liability of their members, or upon some other standard {e.g., amount of paid-up share capital held in such banks, &c.). Some central societies also accept deposits from members and obtain advances in case of need from other than co-operative banks. The length of periods for settlement allowed to purchasers often depend upon the kind of commodity sold ; as for certain manures, for instance, the conditions of payment imposed upon the central agencies by their suppliers may require payment within 14 days or perhaps within three months. But in some cases payment for all commodities may be de- ferred for from three to six months by the local societies; in others 10, 14, 20, 21, 30 days or combinations of these periods are fixed {see above Table). In 1910 the rate of interest charged upon accounts after the lapse of such periods by 16 out of 29 central organisations reporting was 5 per cent., four charging between 5 and 6 per cent., and four under 5 per cent.; in 1911 {see above Table) 14 organisations charged 5 per cent., six over 5 per cent., and five under 5 per cent. The rates cited compare favourably with rates charged for similar credit allowed by ordinary business firms, while the periods of grace correspond closely, as a rule, with those accorded by the latter. The following Table shows for the central supply associa- tions attached to the Imperial Federation the amounts due to them at the end of the years indicated, in their accounts with their customers, and the amounts due by them to their suppliers : — Number of central organisa- tions reporting. Due from purchasers to central supply organisations. Due to suppliers from central supply organisations. End of the Tear. Total. Per cent, of value of goods supplied. Per cent, of total assets. Total. Per cent, of value of goods supplied. Per cent. of total liabilities. 1896 1900 1905 1906 1907 1908 1909 1910 1911 14 18 23 24 26 26 26 34 33 £ 86,726 230,677 836,135 991,252 1,377,517 1,576,265 1,497,788 1,857,379 1,902,142 13-9 16-6 20-67 20-69 22-03 22-12 14-23 15-32 12-96 56-6 55-9 63-3 64-00 62-86 60-62 54-43 55-32 55-58 54,429 98,512 397,763 320,329 836,386 953,113 948,971 945,867 1,070,351 8-7 7-1 9-8 6-7 13-37 8-92 9-02 7-80 7-29 35-2 25-4 31-9 21-56 39-50 35-03 35-56 28-78 34-28 The accounts outstanding for goods supplied to members in 1910 and 1911 were especially high in the case of those central bodies to which a large number of indi- vidual landholders are directly attached. Agriculturists usually require credit for the purchase of such commodities, and through these organisations they are able to 25574 M 178 AGRICULTURAL CO-OPERATION. obtain it on as favourable terms as possible. It may be remarked in reference to the above figures that in the last quarter of the year the purchases of manures, feeding stuffs, &c., tend to be exceptionally heavy, and this circumstance affects balance sheets, which relate to the last day of that quarter. The following Table shows the most important figures respecting the central organisations attached to the Imperial Federation at the end of each of the years indicated : — Central Supply Organisations Affiliated to the Imperial Federation. 1892. 1897. 1902. 1908. 1910. 1911. No. No. No. No. No. No. Number of central organisations 7 16 22 27 34 33 in the Imperial Federation (exclusive of the Distribution by the Central Agricultural Loan Bank). Total of societies and individual 1,181 2,785 7,659 10,384 12,764 12,738 members afBliated. Total shares held 1,607 3,838 10,100 32,260 25,148 27,867 £ £ £ £ £ £ Total share liability 56,750 262,750 649,700 1,733,155 1,825,125 1,993,525 Total assets 103,663 189,309 890,066 2,804,032 3,357,578 3,245,273 Total liabilities 101,701 173,798 866,390 2,721,046 3,287,096 3,121,740 Profit 4,868 15,511 23,675 82,985 70,482 128,379 Loss 2,906 — — 3,821 20,681 4,845 Composition of Assets : — Cash, bills, and effects 25,705 25,723 45,934 155,505 224,786 209,168 Goods 18,134 27,539 124,437 370,214 486,323 375,396 Real and movable property 7,753 9,442 101,872 388,654 414,439 411,588 Various outstanding assets ... 52,071 126,605 617,823 1,889,659 2,232,030 2,249,120 Composition of Liabilities : — Paid up capital of members 18,406 22,629 43,990 372,992 566,089 637,063 Reserve 3,622 11,970 34,201 108,379 121,002 110,410 Working reserve 1,888 7,867 32,521 174,730 215,131 212,389 Total owned capital 23,916 42,466 110,712 656,101 902,222 959,852 Borrowed capital 77,785 131,330 755,677 2,064,994 2,384,873 2,161,877 Relation of owned to borrowed 100 : 325 100 : 309 100 : 683 100 : 315 100 : 264 100 : 225 capital. (jroods Supplied during Year .- — Tons. Tons. Tons. Tons. Tons. Tons. Manures 110,620 194,258 476,928 1,240,167 1,382,680 1,613,000 Feeding stuffs 35,329 62,840 127,907 436,128 445,742 639,520 Seeds 5,056 2,103 3,019 9,362 12,701 26,844 Coal 44,004 63,793 326,731 893,534 803,815 1,220,000 Other 3,208 6,183 33,073 118,067 67,600 107,000 Total value of goods sold £ 410,151 824,083 2,424,393 10,682,599 10,430.514 14.681,680 Eocpenses of Management.— The central co-operative organisations conduct their business at a low cost. The average expenses of management for 27 of such bodies, which reported to the Imperial Federation for 1910, amounted to 134 per cent, of their total purchases and sales; in 1911 the corresponding figure was 131. In the former year the highest percentage was shown by the Strassburg Association which was 46 per cent, or £7,590; in two cases (Kiel and Wiesbaden) it was slightly over 3 per cent., or £6,270 and £725 respectively; and in five cases it exceeded 2 per cent., being in one Berlin Society 275 per cent, or £4,755, in the Regensburg Society 237 per cent, or £11,256, in the Insterburg Society 2'23 per cent, or £1,881, in the Bonn Society 2" 10 per cent, or £6,050, and in the Neumark Society 205 or £1,964. There were eight organisations whose expenses did not amount to even one per cent. : Cologne, 70 per cent., or £4,066; Carlsruhe, 70 per cent., or £2,415; Munich, 74 per cent., or £3,200; Hanover, 75 per cent., or £5,785; Mehlsack (East Prussia), "9 per cent., or £169, Stettin, "90 per cent., or £13,984; Dresden, "95 per cent., or £3,993; and Oldenburg, "94 per cent., or £1,315. Profits. — Out of thirty central bodies reporting to the Imperial Federation for 1910 twenty-eight showed a profit upon the year's working, their total profits amounting to £91,164 or 16| per cent, of their paid-up share capital at the end of the year. The total losses of the remaining two central associations that made returns amounted respectively to £19,876 and £805. The results of 1911 were still better : profits totalling £lg3,379 were reported in 31 cases, losses (£4,846) being reported by only one organisation. LOCAL DAIRY SOCIETIES. 1T9 Sale of Agricultural Products by Central Supply Organisations. — Corn and potatoes are sold by the majority of the provincial organisations; in 1911 those to which the above Table relates disposed of a total of 500,000 tons of corn and 34,000 tons of potatoes on behalf of their members. The sale of corn is especially noteworthy in the Eastern Provinces. The total value of the corn sales in that year was £4,240,217 : of this total £1,109,641 fell to the Stettin (Pomerania) Society, £860,026 to that at Dantzig (West Prussia), and £522,175 to two associa- tions at Posen (Province Posen). As regards other districts, the society at Hanover (Province Hanover) sold corn to the value of £262,838; the Halle (Province Saxony) Society, £162,523; the Dresden (Kingdom of Saxony) Society and the Carlsriihe (Baden) Societies, each £125,000; and the Munich (Bavaria) Society, £174,123. On the other hand, the sale of potatoes is carried on mainly by the societies in the West. In 1911, out of total sales of £100,936 effected by thirteen central bodies, Friedberg (Hesse) returned £26,855, Coblence (Rhine Province), £22,574, and Cologne (Rhine Province), £11.760. Of the remaining societies that at Erfurt (Thuringia) showed the highest figure (£11,678). As compared with 1911, when the combined sales of corn and potatoes amounted to £4,390,408, the totals for 1909 and 1910 were respectively £3,286,090 and £2,702,887. 2, DAIRY SOCIETIES. (1.) Local Societies. Extent of Movement. — Although co-operative dairying has not attained the same relative proportions in German as in Danish agriculture, it has become second in im- portance only to credit as a branch of agricultural co-operation. Its development in the last twenty years has been remarkably rapid; the number of registered co-opera- tive dairies has increased from 639 in 1890 to 3,482 in 1912 (December 1). The membership of 3,193 registered dairy societies on January 1, 1910, was officially returned as 288,699. In addition to these registered societies there are large numbers of dairy associations which carry on business on the same principles, but under a different legal form. Such organisations are especially numerous in Bavaria, Wiirtemberg, Schleswig-Holstein, and Oldenburg. The General Secretary of the Imperial Federation of Agricultural Co-operative Societies estimated their total in these parts of Germany, in 1908, at between seven and eight hundred. The value of dairy products sold by 1,525 co-operative societies, which reported to the Imperial Federation for 1910 amounted to £11,651,450. This number, how- ever, represented less than one-half of the total number of registered dairy societies ; and less than one-third of the societies of all kinds, both registered and unregistered ; the total sales may therefore be conservatively estimated at about £20,000,000. Causes of its Grouith. — The causes of this success of co-operative effort are not far to seek. The growth of great cities and of industrial areas with concentrated masses of population has, within the last thirty years, intensified the problem of the supply of dairy products in Germany, as in other European States, and has led to fundamental changes in the organisation of the dairy industry. It has necessitated, among other things, increase in production, more efficient utilisation of the raw material, and more perfected systems of marketing, this latter being due to the distance of markets and of the refinements of market demands. Dairying upon a factory basis has replaced home dairying. The discovery of the centrifugal milk separator in 1876, with other mechanical and scientific improvements in the handling of milk and in the making of butter and cheese, resulting from the improvement in machinery and advance of bacteriology, has changed the economic scale of pro- duction from small to large; and the isolated small or medium farmer has been placed at a serious disadvantage. He can only carry on this branch of his business with profit by combining with other producers. Before co-operative dairy societies were formed in Germany a number of so-called collecting dairies were established by capitalists in many country districts, and farmers in these districts bound them- selves for a period of years to deliver there all milk not used on their own farms. They had no responsibility for the collecting dairy and no share in its profits. The co-operative ideas which spread, especially after the passing of the Act of 1889, and the difficulties which arose between the dairy owners and the farmers, as well as the circumstance that, when such dairies ceased operations, the farmers found it irksome or unprofitable to produce butter or retail milk themselves, led to the gradual 25574 M 2 ''^(* AGRICULTURAL CO-OPERATION. widespread establishment of co-operative dairies. The predominance of small- holders in Germany and the concentration of the farmhouses in villages instead of being situated upon the farms, are factors that have aided the movement in no slight degree in many parts of the country. Advantages of Co-operative Dairying, especially for Smallholders, as regards (a) Equipment. — The essential technical and economic advantages of such com- bination or co-operation are manifold. The cost of purchase and of v^orking dairy machinery, and the inadequate employment that the ordinary farmer is in a position to give it, prevents him from procuring it; and he is not, therefore, able to obtain the best results from his raw material. By combination there is a saving in all the means of production. The relative cost of buildings or necessary room for handling dairy produce, of machinery and implements, of fuel, salt, and other requisite materials, is less when a hundred, two hundred, or perhaps eight hundred farmers (as one finds in Germany) are united for this purpose. (6) Saving of Time on the Farm. — But for the small working farmer, or, in view of the increase in the cost of labour and its diminishing supply, for other farmers also, the saving of time and of labour on his farm is highly important. When the milk is sent to the co-operative dairy, the farmer or his wife is free for other work. Hand centrifugal machines may extract an equal or a slightly higher percentage of fat than the large separators, but the time occupied, the trouble and expense of marketing, and the inferior prices generally obtained, materially reduce this problematical advantage. When no centrifugal machine is used on the farm, the yield of fat from a given quantity of milk is far inferior to that obtained by the large modern dairy separators. It is asserted that, previous to the introduction of separators, from three to four gallons of milk were required to produce one pound of butter, while in a dairy of to-day less than two-thirds of that quantity is sufficient. (c) Better Product. — Dairy-made butter is also likely to be superior. It is produced under better conditions; the stafi is composed of skilled hands with all necessary appliances and materials, and the proper environment {e.g., cleanliness, good air, space, and measures for preservation) is secured. Small and medium farmers have a score of other things to which they must give their personal attention ; their space is limited; and their daily milk supply not sufficiently large to devote time each day to butter-making, so that the milk or cream is liable to be kept too long and in unsuitable places until sufficient quantity for working is accumulated. Herr Pittius (quoted by Dr. Grabein) gives an interesting picture of the situation on a small holding where the butter is made on the premises : — " When the milk supply is not sufficient to allow of daily butter-making, the farmer's wife is in a state of constant perturbation as to how to keep it. In summer she is at her wit's-end what to do owing to the heat : if she puts the cream in the cellar it will not get thick, while in warmer places it will quickly turn sour, and cheesy butter would be the result. In winter the cream is placed generally in the kitchen — where the butter is also mostly made — and there it absorbs the odours of cooking, of the smoke of the fire, and of tobacco smoke, and transmits them to the butter. If the cream is placed in the living rooms it suffers the same fate — its aroma is lost and the butter is distasteful . When butter is made, perhaps twice a week in summer, and once a week in winter, the cream becomes too stale, bitterish and rank, and the most capable housewife cannot succeed in making table butter out of it. We thus see what labour and anxiety is continuously involved in producing good butter on a small holding. More- over, in the thunderous weather, so frequent in summer, and when all hands are engaged in harvest and other work, hours must be spent in butter-making at the cost of great exertion. Often the churning is overdone; and if the right moment has been missed no butter at all is obtained." The general result is that the products are likely to be inferior, and, therefore, to obtain a lower price than butter made under better conditions, with materials in a sounder state, and with better mechanical appliances. (d) Better Prices with Saving of Time spent in Marketing. — Not only is time saved in the making, but also in the selling of the product. The journey to the market- town, the time spent at the market, as well as perhaps the other expenses incidental to the journey, enters as a consWerable factor in the fXDst of production. The quantity being small' and the quality not the same as other butters on the market, the butter LOCAL DAIRY SOCIETIES. 181 is not readily graded; or it may be sold to a dealer in return for goods in kind, or against a running account, in which case the profit of the farmer is unlikely to be considerable. Even if the time is saved by regular visits of purchasers to the farm, the prices are apt to be lower than market prices. By membership in a co-operative dairy such losses of time are saved, and ex- perience has shown that better prices are obtained. The dairy, with a large pro- duction and managed by persons with full knowledge of markets and of market prices, can dispense with unnecessary intermediaries, and has an immeasurably stronger position than the isolated small farmer. The relative cost of production being lower, and the sale price being higher, the net profits accruing to the members of a well-managed and well-supported co-operative dairy exceed those obtainable by isolated operations. In remote districts it may well be the case that only by bulking their milk products or fresh milk any regular sales can be effected. (e) Economy of Milk. — The milk produced is also likely to be more economically employed when there is the knowledge that it has an immediate money value at the co-operative dairy. It is hardly necessary to remark that farmers should not push economy to the extent of stinting their families or of injuring their growing farm stock by depriving them of their requirements. (/) A Source of steady Income. — Co-operative dairies are particularly advan- tageous to small farmers with little capital. A regular income — ^the dairies settle their accounts monthly — extending through the year is obtained from their dairy. Other branches of their business, such as crop-raising, market gardening, and poultry-keeping, bring in returns only at certain periods of the year, but the supply of milk is more or less constant throughout. The value of a dairy to small holders in this respect was frequently illustrated in the course of this enquiry. In a Pomeranian colony of smallholders created in 1902, the writer found a telling example; the payments made by the dairy for milk in 1909 amounted to £1,650, while the rents and sinking fund of all the new holders delivering milk totalled £900. The property in question, previous to its division, had been occupied by seven different tenants, none of whom succeeded in making it yield a profit. It is worth adding that on the creation of a " colony " of small- holders the State in Posen and West Prussia, and the other agencies for colonisation elsewhere, generally set apart land free of charge for the erection of a co-operative dairy. {g) Influence on Breeding and Maintenance of Stock. — Indirectly the dairy may also exercise a great influence upon the maintenance of cattle and upon their breeding. Each gallon of milk bringing in a rapid return, and being paid for generally according to fat content, members seek to increase the productivity of their cows as well as the quality of the milk. Dairy societies encourage milk control societies, and often provide the necessary organisation for this purpose. Most co-operative dairies have fixed rules as to the feeding of the cows, their cleanly and proper maintenance, and their housing. Suitable fodder is also frequently stocked by societies for sale to their members. Types of Co-operative Dairies. — There are three principal kinds of co-operative dairies in Germany. The kind most numerously represented and forming about eighty per cent, of the whole, are those in which the cream is separated and butter made, the separated milk (and butter milk in most cases) being returned to the suppliers in fixed percentages of milk delivered. The latter, smallholders for the most part, require the separated milk for feeding their calves and pigs. Dairies which sell the new milk, or which utilise the new milk for making butter and full and half cheeses, and the separated milk and butter milk for making other cheeses and as fattening for pigs, are fewer ; out of 1,405 and 1,487 societies which reported to the Imperial Federation on this point for 1909 and 1910 respectively only 212 and 224 were of this kind. They necessitate larger capital outlay upon buildings, store- rooms, machinery and appliances, and more skilled and expensive management, while the commercial side of the undertaking is rendered more complicated and difficult. The third kind of co-operative dairy, which is comparatively rare, is found in thinly populated provinces, such as Pomerania, where the farms often lie scattered, where a sufficient volume of milk cannot be guaranteed, and where, owing to this insufficiency, fully equipped dairies lying close together would carry on an 2.5574 M 3 182 AGRICULTURAL CO-OPERATION. unremu^erative business. These establishments, which are known as cream depots, and which are either independent societies or merely branches of a dairy, only separate the cream, which is forthwith despatched to the central dairy or to the towns. The sites chosen for these depots are invariably close to a railway or within easy distance by road of the place to which the cream is consigned. Farmers resi- dent in rather isolated, thinly populated districts, apart from the advantage of a regular market for their milk, are able by this means to obtain the return of separated milk in a very fresh condition. Territorial Distribution of Co-operative Dairy Societies. — The distribution of registered co-operative dairies in Germany in 1890, 1901, and 1912 is shown in the following Table. The dairy societies affiliated to Unions within the Imperial Federation at the same dates amounted respectively to 31, 48, and 63 per cent, of the total number in the Empire. The societies in Wiirtemberg, where the dairies are for the most part quite small, and where many unregistered dairy associations exist, are not attached to the Federation, and a few smaller groups of societies or isolated societies also hold aloof in Hanover, Pomerania, and other districts. Registered Co-operative Dairies in Germany in 1890, 1901, and 1912. State or Province. Ist July, 1890. 1st July, 1901. 1st June, 1912. State. 1st July, 1890. 1st July, 1901. 1st June, 1912. East Prussia West Prussia Brandenburg Pomerania Posen Silesia Saxony Schleswig-Holstein Hanover Westphalia Hesse-Nassau Rhine Province Hohenzollern 27 30 23 39 29 26 26 139 91 28 12 7 72 88 255 104 68 44 178 163 271 93 35 226 77 125 135 216 101 112 266 262 351 108 44 225 3 Mecklenburg Strelitz ... Sax e-Weimar-Eisenach Oldenburg Brunswick Saxe-Meiningen Saxe-Altenburg Saxe-Coburg Gotha Anhalt Schwarzburg -Sender- hausen. Schwarzburg-Rudolstadt Waldeck Reuss Older Line Reuss Younger Line ... Schaumberg-Lippe Liibeck ... Bremen Hamburg Alsace-Lorraine German Empire 5 30 7 1 1 H 1 10 11 43 70 5 4 5 2 10 2 9 4 2 1 9 13 29 59 89 7 3 2 13 5 1 12 2 2 13 6 4 11 34 Total in Prussia Bavaria — (1) Palatinate (2) Right of Rhine ... Saxony Wiirtemberg Baden Hesse ... — Mecklenburg Schwerin... 477 ■ ^} 5 23 4 12 50 1,597 2 158 23 139 30 29 80 2,025 2 519 24 338 84 41 137 639 2,245 3,475 There is a tendency for these societies to be most numerous in predominantly agricultural regions, where market conditions do not favour the regular despatch of fresh milk to the towns. Of the Prussian provinces small and medium farmers predominate in Hanover, Westphalia, Hesse-Nassau, and Rhine Province; in the other provinces medium and large farms {see Table, p. 86). In Bavaria, Wiirtem- berg, Baden, Saxe-Weimar-Eisenbach, and Hesse, small holdings prevail, while in Brunswick the holdings mostly range from medium to fairly large; in Oldenburg and Mecklenburg medium and large landholders predominate. Co-operative authorities are of opinion that the participation of small and medium farmers in co-operative dairy production in Germany has in proportion far exceeded that of the larger in the last fifteen years. It is also asserted that the value of the butter production of dairies co-operatively organised, including those with another legal form, such as the free unregistered dairy associations, is at the present time approaching in the aggregate to the combined products of the dairies upon large properties, of the dairies managed as private business concerns, and of the small individual farm. Dairy societies have especially flourished in Schleswig-Holstein, Oldenburg, Hanover, and in the low-lying^ districts of North Germany, such as Mecklenburg and those parts of West Prussia which are watered by the Vistula. In these districts LOCAL DAIRY SOCIETIES. 183 the cattle-rearing industry was highly developed when the co-operative dairy move- ment began. It is stated that in 1890, 735 out of 931 co-operative dairies organised under different legal forms were in Prussia, of which 340 were in Schleswig-Holstein, the bulk of the remainder in Hanover, West Prussia, and the other regions just cited. Membership and Liability. — The following Table shows the range of member- ship and the kind of liability of registered co-operative dairy societies according to the official returns for January 1, 1910 : — Table showing Membership and Liability of Co-operative Dairy Societies, January 1, 1910. Range of MembersMp.^. Total. Witb Unlimited Liability. With Unlimited Contributory Liability. With Limited Liability. Societies. Members. Societies. Members. Societies. Members. Societies. Members. 7* 8 to 10... 11 „ 20... 21 „ 40... 41 „ 60... 61 „ 80... 81 „ 100... 101 „ 125... 126 „ 150... 151 „ 175... 176 „ 200... 201 „ 300... 301 „ 400... 401 „ 500... 501 ,,1,000... 18 73 386 649 553 366 235 217 157 100 98 214 63 37 27 121* 673 5,914 19,570 27,684 25,572 21,000 24,427 21,503 16,243 18,308 51,944 21,576 16,440 17,724 15 41 278 444 392 239 139 118 88 63 59 110 40 20 22 100* 382 4,250 13,383 19,612 16,749 12,395 13,157 12,002 10,232 11,044 27,031 13,710 8,954 14,902 4 9 5 6 5 6 5 2 5 19 7 3 66 256 252 405 444 675 716 328 897 4,469 3,088 1,676 3 32 104 196 156 121. 91 93 64 35 34 85 23 10 2 21 291 1,598 5,931 7,820 8,418 8,161 10,595 8,785 5,683 6,367 20,444 7,866 4,398 1,146 Total ... 3,193 288,699 2,068 177,903 76 13,272 1,049 97,524 * Four societies returned a membership of less than seven. Forms of Liability adopted . — The form of liability adopted by the 3,475 societies existing in June, 1912, was : limited liability, 1,118 (322 per cent.); unlimited, 2,288 (65'8 per cent.); and unlimited contributory liability, 69 (20 per cent.). There has been a tendency among the societies established in recent years to adopt limited liability to a greater extent than formerly. The question is not in itself of essential importance. On the constitution of a dairy society, capital is required for the erection or purchase of buildings and machinery, and perhaps for the purchase of a site. If the undertaking is large the sum required may range from £1,500 to £2,500 To raise this amount adequate security must be given. Many German dairies now borrow from the central bank of the provincial Union to which they become affiliated, and the conditions for credit laid down by such banks usually provide that loans may not exceed a fixed percentage of the liability incurred. For example, if the bank lends up to 60 per cent, of the liability, and the society requires to borrow £1,500, the members of the society must guarantee a liability of £2,500. Thus in the case of a limited liability society with shares carrying a liability of £25 each one hundred shares must be taken up. It is usual to provide that members must take one share per so many cows held; in this way the liability is divided fairly equally among the largest, medium, and small farmers in proportion to the services rendered to them by the society. When unlimited liability is chosen each member may take one share only. The capacity for credit may be increased under this form, but if the shares are fixed at a high nominal value the immediate individual payments may well approach those required from the larger farmers under the limited liability form. In order to secure, however, a fair division of the risk it is frequently found that societies, neglecting the basis of liability in ordinary circumstances, provide in their articles of association that the allotment of profits and losses shall be made among members in proportion to their milk deliveries. Shares of Co-operative Dairy Societies in 1909. — The following Table shows the nominal value of the shares of all German registered dairy societies on January 1, 1909 :— 25574 M 4 i,S4 AGRICULTURAL CO-OPERATION. Table Showing the Nominal Value of the Shares of German Co-operative Dairy Societies on January 1, 1909. Total number of With unlimited liability. With unlimited contributory liability. With limited liability. Graduation of Shares. 03 a a> m ■J CD 1 CO i i 1 o m S % B ' Hi is S 2 :3 ■a c8-ij 11.1 EH oS Up to Is Oyer Is. up to 2s „ 2s. „ „ 5s. „ 5s. „ „ 10s „ 10s. „ „ £1 „ £1 to £2 10s „ £2 10s. 10 £5 „ £5 to £10 „ £10 „ £15 ., £15 „ £20 „ £20 ,, £25 „ £25 ., £30 „ £30 „ £40 „ £40 „ £50 „ £50 „ £100 „ £100,, £250 „ £250,, £500 207 123 459 571 19; 562 501 135 84 11 59 11 4 32 11 9 2 2,978 16,905 9,825 47,941 50,546 15,848 54,745 37,989 7,937 7,933 593 6,735 729 63 1,373 287 384 55 134 102 225 301 97 885 401 97 61 10 48 10 3 25 7 8 2 11,280 7,803 21,149 24,675 6,934 36,355 80,113 5,204 6,711 578 5,768 712 53 1,322 207 324 55 5 2 7 16 5 10 18 3 7 2 619 670 805 3.283 898 1,289 3,157 1,118 261 449 68 19 227 254 95 167 82 35 16 1 9 1 1 7 4 1 5,056 1,352 25,987 22,588 8,016 17,101 4,719 1,615 961 15 518 17 10 ■ 151 80 10 21,523 3,881 52,481 40,659 26,420 19,122 6,628 2,395 774 21 108 59 65 131 85 £ 150,019 87,352 808,765 682,153 315,200 659,026 269,383 82,928 46,295 1,440 40,425 4,560 18,750 37,205 14,205 1,500 Totals 259,833 1,916 159,093 75 12,544 987 88,196 174,352 31,781,61 With the object of raising the owned capital to as high an amount as possible the Imperial Federation recommends in its model articles for co-operative dairies that the shares should be fixed at not less than £50, and that methods of payment should be adopted by which the full amount of the shares shall be paid up within ten years from the acquisition of membership . To prevent the inconvenient withdrawal of share capital by the resignation of members, who are entitled to take away their share-capital, the dairy societies usually make the period of notice for withdrawal eighteen months or two years. The latter period is the maximum permitted by law. This measure is especially necessary for new societies which have not had time to accumulate sufficient reserves or pay off the capital borrowed for building and equipment. Reserves. — The formation of adequate reserves is of especial importance in the case of dairy societies, where the whole business may be brought to a standstill by the resignation of a considerable body of members, who by such action would not only withdraw their share capital and liability or guarantee therewith associated, but would also deprive the dairy of the necessary raw material, namely, their supplies of milk. When reserves are adequate, the possibility of calls upon members to meet temporary losses, a proceeding which is apt to shake the credit of a society as well as to alienate the goodwill of members, is reduced to a minimum. Reserve funds are of two kinds — special reserve and working reserve. The former is derived from entrance fees, which are not generally charged upon the formation or during the first year of the society, but which are often made as high as £5 or even £25, when new members join a flourishing society, and from appropriations out of profits. The Imperial Federation recommends the placing to reserve of at least 10 per cent, of the net profits until 20 per cent, of the total working capital has been accumulated, or at least until the total value of the nominal share capital has been reached. The same recommendations are made with regard to the working reserve. Preliminary Requisites for Establishment of^ Dairy Society. — The decisive question concerning the establishment of a co-operative dairy is whether the prospec- tive members are in a position to ensure the regular delivery of a sufficient quantity of milk. Many co-operative Unions refuse to collaborate in founding a dairy society when less than 300 cows are notified, as a smaller number would not probably yield sufficient milk throughout the year to realise working expenses and interest upon capital. Members are obliged, under penalty of fine, to deliver all milk beyond what is required for their household or farm, and not to make butter or to sell milk. The situation of a dairy being of great importance, sites are chosen in close proximity to the main traffic routes, th^post office, and the railway station. Nearness to the railway means saving of expense both for the transport of produce and for the LOCAL DAIRY SOCIETIES. 185 receiving of their milk, coal, and other necessaries. Other factors to be considered in choosing the site are a liberal supply of cool water, freedom from dampness, and means for the effective disposal of waste matter. Delivery of Milk at Dairy. — The transport of the milk to the dairy is effected either by the society or by its members. In Western and South- Western Germany, where the members are smallholders with from two to ten cows, as well as in Hanover, it is usual for the society to undertake the delivery. The area of the dairy is divided into sections, and the society employs members living in these sections to collect the milk, the farmers leaving the cans usually upon the roadside nearest to their farm. One dairy in Hesse, visited by the writer, had 850 members distributed over fourteen villages, twelve of which were over two miles distant, and employed fourteen carriers, all of whom were smallholders. The vans were provided by the society, but the horses were the property of the carriers. The latter are, as a rule, paid at a fixed rate per litre (176 pints) collected, according to distance. This payment covers not only the collection of the milk, but may also include the return to the members of the separated milk, as well as butter or cheese, when purchased by the latter. When the society does not undertake the delivery, it is usual, when the members are small or medium farmers with a limited number of cows, for those living in the same village or locality to arrange that each in turn undertakes the carriage of the milk to the dairy for a week, fortnight, or month. In Pomerania, Schleswig-Holstein, and other provinces, in which the farmers keep large numbers of cows, the members deliver their own milk. One delivery daily is the rule, the milk vans arriving between seven and eleven. Except in the case of large farmers the evening and morning milkings are not usually despatched in separate cans. Methods of Payment for Milk. — There has been a change in the method of pay- ment for milk. It was formerly paid for either by weight or by measure, but at the present time the predominant practice of the dairy societies is to pay according to fat content alone, or to allow a fixed payment per litre (1"76 pints) — usually less in amount than half the normal price for good milk — and a further payment based upon the fat content. Payment by weight or by measure had the disadvantage that bulk alone counted, irrespective of the quality, and farmers had an incentive to adulterate with water or to skim their milk, or to supply their cattle with less expensive and less nutritive feeding stuffs. This procedure was not so disadvantageous when the milk was destined for direct consumption as when butter had to be produced. Regular Tests of Milk supplied. — In practice the supplies of each member are periodically examined by the Gerber test, but regular alcoholic tests are made three or four times per month, and the price accorded to the member for his milk for each month is based upon their average. When low percentages are found frequently, daily tests are made, samples from several successive deliveries being submitted to the Gerber test. The bulk of the dairies settle accounts with members every month, but in many this is done every fortnight. Ancillary Businesses. — Many German dairy societies have added with advantage subsidiary branches to their main business of butter and cheese-making and of milk selling. Apart from the tendency to enter more into the profitable business of supplying towns with fresh milk, which is dealt with below, a considerable number sell feeding-stuffs, manures, and other farming requisites, generally in places where there is neither a supply or sale society, nor a credit society which engages in this business. At the end of 1911, 393 co-operative dairies were attached, as members or share- holders, to central supply organisations; of these 111 belonged to the Halle Union, 119 to the Munich Union, 72 to the Carlsruhe Union, and 17 to the Cologne Union, while two Berlin Unions and the Bonn Union had 10 each. The actual sales to 118 dairy societies in 1909 and 119 societies in 1910 for which particulars are avail- able, amounted to £401,160 and £392,000 respectively. Dairy societies, of course, very frequently obtain their supplies of feeding stuffs, manures, &c., in the open market. The Imperial Federation mentions various other subsidiary sources of revenue of its affiliated dairies, and, although the particulars are by no means exhaustive, it can be seen that their minor activities are most diversified. In 1910 there were 179 with grist and crushing mills, 36 with bath establishments, 20 with flour milling machinery, 11 with bakeries, 3 with combined mills and bakeries, 25 with potato steamers, 14 with wood-chopping plants, 28 with egg-selling stations, 5 with corn -threshing machines, 6 with electric power stations, 32 producing fattening for pigs, 5 with public weighing machines, and a few others which had distilling plant, ice machinery, &c. 186 AGRICULTURAL CO-OPERATlON. Some dairy experts engaged in German co-operative work strongly recommend that at the time of establishment provision should be made for the carrying on of bye-industries either by the dairies or by independent societies. The same mechanical power and the same skilled staff required for its operation can be more fully utilised at little, if any, extra cost, especially as in most dairies proper dairy work is finished early in the afternoon, and the dairy waggons and carriers may also be brought into requisition for subsidiary services. Thus, carriers might collect eggs simultaneously with milk, or deliver cattle-cake, seeds, &c. at the same time as the milk cans are returned. The additional space or building necessary can be also provided on comparatively more advantageous conditions when the main establishment is being built. It seems without doubt that dairies might be utilised very frequently as the headquarters of egg and poultry societies, of societies for the sale of farming requirements and of cattle-selling societies, if the dairy society itself is unwilling to add any of their responsibilities to its own business ; while many other activities of a more restricted kind and involving little departure from the scope of their operations, such as have been enumerated above as actually undertaken by German dairies, may become a source of profit. Sale of Fresh Milk. — The sale of fresh milk is under certain conditions more profitable for co-operative dairy societies than butter-making, and more attention is being devoted to this branch of dairying. Of the 2,000 societies which reported to the Imperial Federation for the year 1910, 572 per cent, sold fresh milk or cream; in 1908 this percentage was 52"2. The proportion of the total milk delivered to that sold in a fresh state by the reporting dairies is, however, inconsiderable; for the six years, 1905-1910, the percentages were respectively 42, 6, 61, 59, 68, and 71 . In the Frankfort-on-Main and Berlin districts, in the Provinces of Saxony, Hanover, Westphalia, and Silesia, and in the Kingdom of Saxony, the co-operative societies have developed this business to the greatest extent; in all of these cases, large towns, having good railway connection with the dairies, afford valuable markets. In the Frankfort area in 1909 84'9 per cent, of the milk delivered to the two co-operative dairies reporting was sold as fresh milk; in the Kngdom of Saxony 37 per cent, of the milk delivered to 19 dairies; in the Province of Saxony 6"4 per cent, to 237 dairies; to 42 dairies in Silesia 121 per cent., and in Westphalia 13"6 per cent, to 52 dairies. But in the great towns like Berlin, Dresden, Leipzig and Hamburg, little progress has beeen made in this direction, the markets being dominated by large private undertakings. It is a prerequisite of success that the co-operative societies themselves further combine to concentrate their supplies, otherwise the working expenses are too high in proportion to their sales. In some cases good results have been obtained when the societies have been able to establish business connections with the smaller dealers in large towns, and have been saved the cost of maintaining offices, delivery vans, &c., as well as the expense of securing customers. Milk-selling Societies. — In some districts special societies have been established which undertake the sale of milk only. Such societies are generally constituted by combinations of milk producers of all kinds either for the purpose of sending milk to a central cooling station, or for the establishment of urban central sale stations. In the former case the object is to secure the production of pure milk on the individual farms, to collect this milk in local cooling stations where it is thoroughly cleansed and cooled, and to despatch this milk of a guaranteed standard quality to the towns. The members of the society undertake to adopt prescribed measures in regard to the equipment of cow sheds, the maintenance, feeding and giving to drink of their cows, their milking and the treatment of the milk. They also agree to submit their arrangements to the supervision of the officials of the society, which provides the necessary collecting and cooling station and subsequent suit- able method of transport and sale. For small dairy farmers the advantages are very great; the milk is better cleaned and better cooled, and is preserved for a longer time; the farmers are saved the cost and trouble of marketing, and obtain generally higher prices. These societies of a local character tend to join or form urban societies which establish a central dairy with branches in some large city. Such central dairies require to be adequately equipped and demand large fixed and circulating capital. The Hanover Society is a successful example of this organisation of milk producers. Another form of co-OQ^rative milk-selling society aims at combining as many as possible of the milk suppliers of a large city with a view to introducing LOCAL DAIRY SOCIETIES. 187 a uniform (and higher) price for their products. A large society of this kind was formed in 1900 in Berlin, but did not achieve success. It comprised over 200 milk- selling associations and same 500 individual producers. It also aimed at the utilisa- tion of unsold milk. A similar society exists in Munich. Taxation of Co-operative Dairies. — Dairy societies are exempt from income and trade taxes if they handle only milk supplied by members. If supplies from non-members are not merely temporarily but continuously accepted by them they are liable to both taxes. The income tax payable to the State is assessed upon the net profits, whether such profits are appropriated to reserve or divided among members, and the levy is made upon the total amount and not merely upon the percentage of profits derivable from the supplies of non-members. Deductions are only permissible in respect of the sum paid as interest upon share capital. In fixing the amount the average profits for the previous three years are taken as basis. The communal income tax is a multiple of the State income tax. The trading tax for dairies is limited to a levy upon the supplies received from non-members and the proceeds of sale of products thereof. Upon establishment co-operative dairies must pay a stamp duty of 5^. upon their articles of association if the business is limited to members, but if it extends to non-members, -gV P^^^ cent, of the paid-up business capital apart from the liability, or a minimum of 205. A stamp duty of 5s is also payable upon authorisation to set up or to alter boiler plant. Growth and Present Position of Societies within the Imperial Federation. — (1) Number and Average Membership. — The development of the German dairy societies has been distinctly satisfactory. No figures have been published giving a complete view of the ifiistory and present position of all registered dairy societies, but the statistics of those which have reported to the Imperial Federa- tion during the last twenty years may be regarded as representative of the general development. The data relating to the two groups of co-operative dairy and co-operative milk-selling societies are not, however, separated in the annual reports of the Federation. The number of dairy societies affiliated to the Federa- tion has increased from 334 in 1892 to 2,193 in 1912, representing at the latter date 63 per cent, of all registered dairy societies. The following Table shows the number of societies and the average number of members per society in each of the years indicated, in so far as they are available : — Number Average Number Number Average Number Year. ot of Year. of of Societies. Members. Societies. Members. 1892 334 44 1906 1,736 101 1895 600 60 1907 1,850 98 1900 1,034 91 1908 1,914 104 1901 1,081 96 1909 1,960 106 1902 1,152 102 1910 2,028 109 1903 1,264 100 1911 2,093 — 1904 1,368 97 1912 2,193 — 1905 1,682 97 The average number of members shows a tendency to increase. The inequalities in the various Union districts are considerable, mainly owing to the distribution of landed property that happens to prevail. In East Prussia the average number for 44 dairies in 1910 was 45, in Schleswig-Holstein it was 42 for 81 dairies. If the holding are large, a small number of members may of course suffice to assure the economic existence of a dairy society. The number of societies with large membership appears to have increased rapidly in recent years. In 1910 there were 513 societies in the Federation with a membership of from 101 to 250, and 206 societies with a membership exceeding 250 ; the corresponding numbers in the former class for the years 1905-9 were 350, 395, 413, 496, and 432, while in the second group for these years the figures were j.24, 132, 155, 159, and 189. Examina- tion of these figures would seem to reveal that a large number of societies increased their membership from under 250 to over 250 between the dates of returns. (2) Milk supplied to Dairies. — In 1909 the quantity of milk delivered by 1,762 societies (90 per cent, of those affiliated) amounted to 490,800,000 gallons; in 1910 by 1,869 (92 per cent.) to 517,400,000 gallons. The average daily delivery in 1909 was 774 gallons for 1,762 societies in 33 Unions; in the Oldenburg Union with 28 societies the average was 1,950 gallons, and for seven other Unions it was over 188 AGRICULTURAL CO-OPERATION. 1,000 gallons per dairy per day. In 1909 there were 18, and in 1910 26, dairies which were supplied with over 1,100,000 gallons of new milk; in these years' respectively 39 and 45 societies received 800,000 to 1,100,000 gallons, 68 and 76 societies between 660,000 and 880,000 gallons, 744 and 745 between 220,000 and 660,000 gallons. The societies tha,t received over 220,000 gallons in 1910 num- bered 892, or nearly 48 per cent, of the total furnishing reports. This percentage has remained practically constant for many years; in 1906, 1907, 1908, and 1909 it was respectively 47, 49, 50, and 49 per cent. (3) J^umher of Cows per Dairy. — The number of cows supplying the dairies was reported for only 730 societies — about 37 per cent. — in 1909, and for 705 societies — also about 37 per cent. — in 1908; the returns showed respective averages of 566 and 581 cows per society. The average production of 413,174 cows in 1909 was 476 gallons per cow; the highest average was found in the case of the Brunswick dairies with 602 gallons (4,091 cows), and the two lowest in Bavaria, with 315 gallons (29,800 cows), and in Baden 297 gallons (2,041 cows). For the societies in six out of seventeen other Unions which reported, the average exceeded 500 gallons (180,815 cows). (4) Sales by the Societies. — The milk sold in 1909 (by 1,079 societies) amounted to about 28,700,000 gallons, the butter produced (by 1,543 societies) to 1,650,000 cwt. or an average of 1,069 cwt. per dairy; the corresponding figures for 1910 were 36,800,000 gallons of milk (1,163 societies), 1,524,000 cwt. (1,621 societies) pr an average of 940 cwts. per dairy. As far as data are available, 79 societies in 1909 employed 2,691,000 gallons to make full cream cheeses, and 181 societies employed 14,948,000 gallons of separated milk in the manufacture of other kinds of cheese. The total receipts of 1,403 societies from the sale of all dairy products in 1909 amounted to £10,193,000; of 1,525 societies in 1910 to £11,651,000. The average prices paid to the societies in the thirty Unions reporting on this point for 1909 ranged from 4'8(^. to IVld. per Imperial gallon, the average of the figures for the thirty Unions being ^d. per gallon; the latter average increased to ^02d. for 1910. The Federation states that this great range (of over 100 per cent, both in 1909 and 1910) is largely to be explained by the fact that in some Unions the separated milk is returned without charge to members, while in others such milk is wholly or partially charged for ; and in some Unions fresh milk is sold to a far greater extent than in others. The local conditions of supply and demand and transport facilities are other elements that naturally enter into the formation of prices. (5) Prices paid to Suppliers of Milk. — The total sum paid by 1,464 societies in 1909 to suppliers of milk, whether members or not, amounted to £9,113,000, the average per society being £6,225, and the average price per gallon 5'2M. ; in 1910 the total paid by 1,525 societies was £9,953,500, the average per society being £6,526, and the average price per gallon 5'28d. The average price per gallon paid by co-operative societies within the Imperial Federation to their members has risen from about 4:S5d. in 1903 to 5-28d. in 1910. In respect of these prices paid to milk suppliers it must be borne in mind that the methods of payment vary in different societies or for whole groups of societies within a district. The greater number of societies in the districts where small landholders predominate return the separated milk either gratuitously or at low prices, so that the real prices in these cases m.ay be appreciably different. (6) Financial results. — The profits and losses of the affiliated co-operative dairy societies furnishing reports to the Federation for the year 1900 and 1906-1910 may be seen from the following Table : — Table showing Profit and Loss of Dairy Societies reporting to the Imperial Federation for 1900 and 1906-1910. Societies showing profits . Total amount of profits... Amount per society Societies showing neither ] profits nor losses ... j Societies showing losses . Total losses Amount per society T900. 19W. 1907. 1908. 1909. No. 604 1,281 1,257 1,387 1,386 £ 104,116 252,118 237,460 275,676 250,236 £ 172 197 189 199 181 No. 165 219 2.52 242 271 No. % 134 175 172 188 £ ^ 7,962 16,062 22,302 26,603 26,684 £ • 84 120 127 155 142 1910. 1,505 313,724 208 296 184 25,147 137 LOCAL DAIRY SOCIETIES. 189 As to the 296 societies that showed neither profit nor loss upon their working in 1910, 141 were situated in Bavaria, 38 in Hanover, 32 in Mecklenburg, and 20 in Pomerania. In many cases the whole profit is devoted to paying off the capital borrowed for the establishment and equipment of the dairy; in many other cases the anticipated profits are absorbed before the balance sheet takes its final form by the supplementary payments made to members according to the quantity of milk delivered by each during the year. The latter course is not infrequently adopted by the older societies that have written off the greater part or the whole of their borrowed capital and have accumulated sufficient reserves. In general it may be observed that, inasmuch as dairy societies do not aim at securing profits by buying in the cheapest market, but endeavour to pay the highest possible prices to their members for milk supplied, and inasmuch as any resultant profits return to the society, that is, to the members, their success is not to be entirely measured by the profits as shown in their balance sheets. (7) Eicpenses of Management. — The working expenses as reported for some 1,500 societies, amounted in 1910 to £1,025,229, or '55d. per gallon of milk delivered. The average amounts per dairy and per member respectively were £705 and £5 13^ The highest average expenses — three times as great as those for the societies in the majority of other Unions — namely, £3,670 per society and £56 lis. per member, were reached in the Kingdom of Saxony, but in this case many dairies carry on a retail milk trade, sometimes having shops with large staffs in the towns. Thus the dairy societies in Dresden and Chemnitz each employ over 200 persons. The average cost in Saxony was 14:5d. per gallon. In the 21 societies of the Brunswick Union the average proved to be '27d., and in eight other Unions with about 600 societies 5d. per gallon. (8) Paid-up Share Capital. — The average paid-up share capital of the reporting societies in 1907, 1908, 1909 and 1910 amounted to £201, £209, £200 and £190 respec- tively, giving an average per member of £1 18^., £1 19^., £1 17^. and £1 14s. The largest average paid-up capital per society in each year (over £1,000) was found in Saxony, where, as already noted, the societies in many cases carry on an urban retail trade. The lowness of the general average is largely attributable to the number of small dairies in Baden, Bavaria, and other parts of South and West Germany, which require little capital to be sunk in equipment, and also to the fact that when un- limited liability is adopted there has been a tendency to fix the share value at a low figure. Thus, in one Bavarian Union, the societies of which have without exception unlimited liability, the average paid-up share capital was exactly 5s. in 1907, 1908 and 1910. New dairy societies now adopt limited rather than unlimited liability, and the Unions urge that the share-capital (and the necessary payments thereon) should be as large as possible. (9) Reserves. — Great progress has been made in the direction of building up sufficient reserve funds, which now total nearly double the amount of the paid-up share capital. At the close of each of the years 1905-1910 the total reserves, the average per society and per member were as follows : — 1905. 1906. 1907. 1908. 1909. 1910. Number of societies reporting. Total reserves Amount per society Amount.per member 1,530 £ s. 561,745 367 3 4 4 1,634 £ s. 631,235 386 6 3 17 1,719 £ s. 683,250 452 10 3 17 1,771 £ s. 690,450 389 17 3 15 1,854 £ s. 776,875 419 1 4 1 1,963 £ «. 844,085 430 4 5 Taking only the two years, 1908 and 1909, great ranges are found in the average amounts of the reserve funds in single Unions. In one East Prussian Union in 1908 and 1909 the averages per society were respectively £686 and £629, and per member £19 and £16; in another Union in the same province the averages per society were £235 and £301, and per member £17 and £5; in one Silesian Union the averages per society were £640 and £540, and per member £11 and £15; and in the Pomeranian Union the averages per society £518 and £562, and per member about £7 for both years. (10) Working Capital. — The borrowed capital of the dairy societies is obtained at the present time mainly from the Central Banks of the Unions to which they are 190 AGRICULTURAL CO-OPERATION. affiliated, but capital is also obtained by mortgaging tbeir assets and by borrowing from members. The total working capital (paid-up share capital, reserves, and loan capital) in each of the years 1905-1910 is shown in the following Table : — Number of Total Working Capital Percentage Percentage Percentage Year. Societies constituted by constituted constituted by reporting. Loan Capital. by Reserves. Share-capital. 1905 1,530 £ 3,137,785 72-3 17-9 9-8 1906 1,634 3,513,435 73-2 18-0 8-8 1907 1,719 3,828,685 73-1 17-8 9-1 1908 1,771 4,063,030 74-5 17-1 8-4 1909 1,854 4,222,075 72-9 18-4 8-7 1910 1,963 4,345,286 72-4 19-4 8-2 (11) Assets and Liabilities. — The assets and liabilities of the dairy societies reporting in each of the six years 1905-1910 are shown in the following Table, which also gives the average per society and per member : — Year. Number of Reporting Societies. Total Assets. Total Liabilities. Per Society. Per Member. Assets. Liabilities. Assets. Liabilities. £ £ £ £ £ s. £ s. 1905 1530 3,316,960 — 2,168 — 22 10 — 1906 1634 3,749,495 — 2,295 — 25 — 1907 1719 4,043,845 — 2,352 — 23 6 — 1908 1771 4,312,105 4,063,032 2,435 2,294 23 6 21 11 1909 1854 4,445,630 4,222,076 2,398 2,277 22 6 21 4 1910 1963 4,634.357 4,345,281 2,361 2,213 21 10 20 10 Of the above assets their real and personal property in 1910 was £2,735,000, or an average of £1,500 per society, and £13 10s. per member. From 1904-9 the latter average has remained between £13 145. and £14, while the average per society ranged in the same period from £1,342 to £1,527 The proportion of the value of the real and personal property of the societies to their total working capital has varied in the seven years 1903-1909 from 63 to 72 per cent. The sums written ofi premises and equipment by 1,638 societies in 1910 amounted to £185,000, or about £113 per society. In the total are not included the sums written off by the Saxon societies. The following notes relating to some of the dairy societies visited by the writei are added. Apolda Co-operative Dairy Society. Apolda is a busy town of 21,000 inhabitants close to Weimar. The dairy was erected in 1905 upon its outskirts, the necessary capital having been obtained from the central co-operative Bank at Erfurt upon the security of the liability of the members. Shares were fixed at £1 per milch cow declared by each member, each share carrying a liability of £10. The farmers of the district are small and medium, and the predominant number of cows kept by them ranges from four to ten. The manage- ment set down 22 gallons per day as a normal delivery of milk to be made per cow declared, and if the supply falls considerably below this amount — the exact figure is never rigorously insisted upon — the member is liable to a fine. All members engage not to sell their milk to others or to make butter themselves. The Society undertakes the cost of carriage of the milk. A fixed sum according to distance is paid to the carriers, some of whom are small farmers ; for distances not exceeding 31 miles, 0'27<^. per gallon is paid, for each additional | mile, 054,d. is added. The cart's are supplied by the Society. There is one delivery per day. The method of payment for milk has been changed on several occasions by the Society. At first 1'64 January + 493 + 531 + 551 + 829 -1- 1,108. + 1,015 February .. + 108 + 278 + 180 + 350 + 259 + 62 March — 557 - 397 - 552 - 249 - 878 - 1,392 April — 61 - 326 - 292 - 173 - 325 - 362 May + 162 - 163 - 110 + 18 - 61 - 236 June 558 - 585 - 391 - 373 - 648 - 884 July + 203 - 89 + 102 + 282 + 374 -f- 294 August .. -1- 13 - 112 + 126 -1- 16 + 304 + 79 September — 204 - 359 - 116 - 326 - 417 - 676 October -1- 284 + 140 + • 276 -f- 110 + 313 -1- 221 November + 286 + 209 -f- 535 + 281 + 546 + 577 December — 247 - 324 + 36 + 61 - 129 - 234 To tals ... •• — 78 - 1,197 -1- 345 -1- 826 + 446 - 1,536 These figures show that, even over such a large territory as is covered by these central banks, there is a want of equilibrium between supply and demand, although it might have been expected that differences in climate and in products would bring about an approach to such equilibrium. As a fact, of course, in several co-operative districts for many year^past these banks have been working almost entirely with their own resources, and have had rarely, or only quite temporarily, to seek help PRUSSIAN STATE CO-OPERATIVE BANK. 277 from outside, while, on the other hand, there are banks that rely for a great part upon such help almost permanently. The same characteristics are discernible in the business of the Prussian Bank with its co-operative clients. Taking the same period (1906-11) as in the preceding Table, withdrawals exceeded deposits in each March, June, September, and December, but in each January, July, October, and November deposits exceeded withdrawals. The point is of such importance as regards the general banking policy of an agricul- tural central bank that the experience of the Prussian Bank over a longer period is worth setting out. In the following Table is shown the excess (+) of deposits over withdrawals, or vice versa (-), in each month from 1897 to 1911. Although the Bank opened in October, 1895, the figures for the first half-year October to March 31, 1896, and for the year April, 1896, to March, 1907, are not included, as they comprise business other than that with co-operative societies : — >^ SJ ^ U Balance h o d OJ 1 a 1 r^ i on Year's Year § •s ^ ^1 & 9 ^ f o i § Working. i-j N a Page 2 20 23 31 32 41 60 63 71 81 86 92 93 107 116 117 119 127 130 133 143 144 146 148 157 158 159 ICO 162 167 172 175 176 178 184 187 193 195 196 196 197 197 199 200 201 LAWS. Imperial Co-operative Societies Act, 1889: 1896. Acts relating" to Prussian State Co-operative Central Bank. Imperial Mortgage Bank Act, 1899. Hessian Mortgage Bank Act, 1902. Prussian Land Improvement Annuity Bank Act, 1879. THE GERMAN CO-OPEEATIVE SOCIETIES ACT, 1889, AS AMENDED IN 1896.* Chapter I. Formation of the Society. Section 1. — Societies which do not limit the number of their members, and have as their object the promotion of their economic welfare by carrying on business in common, especially : — (1) Loan and credit associations ; (2) Associations for the purchase of raw materials ; (3) Associations for the sale in common of agricultural or industrial products (sale societies, warehouse associations) ; (4) Associations for the production and sale of goods for the common account (productive societies) ; (5) Associations for the wholesale purchase in common of articles of food or of household requisites and the retailing of the same (co-operative stores) ; (6) Associations for the acquisition of implements or materials for agri- cultural or industrial purposes and for their use in common; (7) Associations for the construction of dwelling-houses; acquire the rights of a " registered co-operative society " under the provisions of this Act. Section 2.— Co-operative societies may be established : — (1) of such a kind that the individual members assume direct liability to the society and to its creditors to the full extent of their property for the engagements of the society (registered co-operative society with unlimited liability) ; (2) of such a kind that- the members are liable to the extent of all their pos- sessions, but not directly to the creditors of the co-operative society, being only obliged to pay to the latter the contributions requisite for, the satisfaction of the creditors (registered co-operative society with' unlimited contributory liability) ; (3) of such a kind that the direct liability of the members, to their society and to its creditors, for the engagements of the co-operative society is restricted beforehand to a fixed sum. (registered co-operative society with limited liability.) Section 3. — The designation of the_ society must be derived from the objects of the undertaking, and, in accordance with the kind of co-operative society contem- plated in Section 2, must include the further definitions therein set out. The names of members or of other persons may not appear in the designation of the society. The designation of each new society must be clearly distinguishable from that of every other registered co-operative society in the same place or parish. Section 4. — Seven members at least are essential for the constitution of a society. Section 5. — The articles of association must be set down in writing. Section 6. — The articles of association must contain : — (1) The style and title and the business address of the society; (2) The object of the undertaking; 1^ • The present translation is in accordance with the amended text as published in the Imperial Law Gazette of June 14, 1898, GERMAN CO-OPERATIVE SOCIETIES ACT. o (3) Regulations as to the form for the summoning of the general meeting of the members and for the authentication of their resolutions, and as to the chairmanship at such meetings; (4) Regulations as to the form in which the public notices issued by the society are to be executed and as to the newspapers in which they are to be ' published. Section 7. — The articles of association must further lay down : — • (1) whether the members are to be subject to unlimited liability, to unlimited contributory liability, or to limited liability; (2) the maximum amount which individual members may subscribe as share- holders, as well as the amount to be paid up by the individual member. The amount to be paid up must be at least one-tenth, and the limit of time, as well as the amount of each payment till the sum is reached, must be defined; (3) the principles on which the balance sheet shall be prepared and verified ; (4) the formation of a reserve fund which shall serve to cover losses as shown in the balance sheet; the method of formation of this fund, and espe- cially the portion of the yearly net profit which is to be placed to reserve; and the lowest amount that such reserve must attain before such payments to reserve 'may cease. Section 8. — The areicles of association must further contain regulations which determine : — (1) whether the society is limited to a fixed period ; (2) whether the acquisition and continuance of membership shall be depen- dent upon residence within a fixed area ; (3) whether the financial year, especially the first, shall be reckoned by a year not coinciding with the calendar year, or whether it shall be reckoned for a shorter period than a year ; (4) whether, with reference to certain matters, the general meeting shall have the power of deciding, not by a simple majority of votes, but only by a larger majority of votes or in some other manner; (5) whether business may be carried on with non-members. Societies having as their object the granting of loans may not extend their business, so far as the granting of credit is concerned, to non-members. Loans having as their sole object the investment of funds are not affected by this prohibition. Business transactions with persons who have already signed the declaration of membership and have been admitted by the society are also to be considered per- missible. Distributive societies (Section 1 (5) ) may only sell goods in the ordinary course of business to members or their representatives. This limitation does not apply to agricultural distributive societies which, without keeping an open shop, deal in goods which from their nature are exclusively for use in agricultural operations. Section 9. — The society must have a Committee of Management and a Board of Supervision. The members of both bodies must be members of the society. Should the society have registered societies as individual members, or should the society consist exclusively of registered societies, members of such constituent societies may be elected on its Committee of Management or Board of Supervision. Section 10. — The articles of association and the names of the members of the Committee of Management must be entered in the register of co-operative societies at the court within whose jurisdiction the society lies. The register of co-operative societies shall be kept by the court responsible for the maintenance of the commercial register. Section 11. — It is the duty of the Committee of Management to report for the purpose of registration. The notification must include : (1) the articles of associa- tion, which must be signed by all the members, and a copy of same ; (2) a list of the members; (3) a copy of the records concerning the appointment of the Committee of Management and the Board of Supervision. The members of the Committee of Management must at the same time sign before the court or forward their signature duly authenticated. The copy of the articles of association shall be certified by the court and returned with the certificate of registration. The other documents shall be retained by the court. Section 12. — The registered articles of association must be published in abstract by the court. The public notice must contain : (1) the date of the articles of associa- tion; (2) the designation and the address of the society; (3) the object of the under- 2r,,-,7l u 4 LAWS. taking; (4) the form in which the notifications of the society are issued and the news- papers in which they will be published; (5) the period of duration of the society in case this is limited to a certain time; (6) the financial year, in case it is reckoned for a period not corresponding with the calendar year ; (7) the names and addresses of the members of the Committee of Management. It must also be notified that the list of members of the society is open to examination by the public at any tirfie during the business hours of the court. If the articles of association contain a regulation concerning the form in which the Committee of Management make known their acts and sign on behalf of the society, such regulation is also to be published. Section 13. — The society does not possess the rights of a registered society until it has been entered in the registry of the district court. Section 14. — Each branch establishment must be notified at the court of the district in which it lies, for the purpose of registration. The notification must contain the details prescribed in Section 12. Two certified copies of the articles of association, and one copy of the list of members attested by the court having juris- diction in the place of business of the head ofiice, must be appended. The Committee of Management must also sign before the court or transmit their signatures duly authenticated. The court shall return one copy of the articles of association with the certificate of registration, and shall inform the court within whose jurisdiction the head oSice lies of the entry in the co-oper«tive register. Section 15. — After the articles have been notified at the registry of co-operative societies, it is necessary for intending members to sign a declaration of unconditional adherence. In the event of the admission of the applicant by the Committee the declaration must be sent to the court for the purpose of registration in the list of members. The registration shall be made without delay. Through such registra- tion, which takes place by virtue of the declaration and its transmission, the appli- cant acquires membership. The court must notify the member and the Committee of the registration. The original declaration of adherence shall be retained by the court. Should registration be refused, the court must return the declaration and inform the applicant and the Committee of Management. Section 16. — A change in the articles, or the continuance of a society limited to a fixed time, can only be effected by resolution of the General Meeting. Any altera- tion affecting the object of the society or the increase of the individual share requires a majority of three- fourths of the members present. The articles may lay down further conditions. For other alterations of the articles a majority of three-fourths of the members present is necessary, unless the articles of association contain other' conditions. The provisions of Section 11 of this Act are duly applicable to the notification and registration of such resolutions, but two copies of the resolution must be handed to the court at the same time. The publication of such resolutions shall only take place when they have reference to regulations mentioned in Section 12, sub-sections 2 and 4. Resolutions have no legal value before registra- tion in the local register of co-operative societies. Chapter II. Legal Status of the Co-operative Society and of its Members. Section 17. — The registered co-operative society has, as such, independently, its rights and duties; it can acquire property and other real rights over land, can we and be sued before a court. Co-operative societies are considered as traders in the sense of the Commercial Code, so far as this Act contains no prescriptions to the contrary. Section 18. —The legal status of the co-operative society and of its members are settled by the articles. The articles may vary from the provisions of this A.ct only in so far as this Act expressly authorises such variation. Section 19. — Profits or losses disclosed at the time of the approval of the yearly balance sheet are to be divided amongst the members. For the first year this division takes place in accordance with the proportion of the amount of share paid up by the member, for each succeeding year in accordance with the proportion of the amount paid up at the close of the previous financial year, such amount having been credited with any profit or debited with any loss which occurs. Profits shall be written to the accounts of members until the shares are fully paid up. The articles may lay down other rules for the division of profits and losses, as well as decide to what extent profits are to be distributed to members before the shares have been fully paid up. When the amounts paid to the credit of the shares GERMAN CO-OPERATIVE SOCIETIES ACT. O have been reduced by losses, no profits are to be paid out until the previous value of the share capital has been again attained. Section 20. — It may be laid down in the articles of association that the profits be not divided but be placed to reserve. Section 21. — ^Interest of fixed amount shall not be paid on share-capital paid up, although a member may have made higher payments than he was obliged. Members who have made more than the necessary payments cannot in case of losses claim against other members on the ground that the latter have only made the necessary payments due. Section 22. — Reduction of the amount of the share or of the instalments due on shares, or an extension of period fixed for such payments, is only permissible when the provisions obtaining for the division of the assets of the co-operative society in case of liquidation are observed. The sum paid up with respect to shares of members may not, while membership lasts, be paid out by the society to members nor accepted as security in its business with members. Arrears in instalments must not be permitted. Members cannot have the value of their share taken into account in the settlement of accounts with the society. Section 23. — Members incur liability for the engagements entered into by the society to the extent determined by this Act. All persons becoming members incur liability also for the engagements contracted previous to their entry. Any contract in disaccord with these provisions is null and void. Chapter III. Representation and Management. Section 24. — The co-operative society shall be represented legally and other- wise, by the Committee of Management. The latter shall consist of two members and shall be elected by the General Meeting. The articles may fix a larger number of members as well as another method of appointment. The members of the Com- mittee may be either paid or unpaid. Their appointment may be cancelled at any time without prejudice to claims for damages arising out of existing contracts. Section 25. — The Committee must notify its acts in the form fixed by the articles and sign on behalf of the society. If no regulation exists on the point the declaration and signature must be executed by all members of the Committee. At least two members must be appointed for this purpose. The signatories must countersign the designation of the society or of the Committee by their own signatures. Section 26. — The society obtains rights and accepts obligations through all legal transactions completed in its name by the Committee. It is immaterial whether the transaction be completed expressly in the name of the society or whether the circumstances disclose that it was to be completed for the society according to the intention of the contracting parties. An attestation of the court (Section 10) that the persons mentioned are regis- tered in the co-operative register as members of the Committee of Management is sufficient prooof of their identity as such before the authorities. Section 27. — The Committee is bound, as regards the society, to observe the limitations imposed either by the articles or by resolution of the General Meeting as to the extent of their authority to represent the society. As regards third parties no limitation of the authority of the Committee to represent the society has any legal effect. This applies especially in cases where the powers of the Committee are limited to certain business or to a certain class of business, or for a certain time or for certain areas, or where the approval of the General Meeting, of the Board of Supervision, or of any other organ of the society, is required. Section 28. — Any alteration in the composition of the Committee, or the ter- mination of the authority of any member thereof is to be notified by the Committee for registration in the co-operative register. A copy of the documents concerning the appointment or the termination of the authority of a member of the Committee is to be added to the notification and will be kept at the office of the court. The members of the Committee must sign before the court or forward their signatures in duly certified form. Section 29. — Any alteration in the composition of the Committee, the termina- tion of the representative authority of any member thereof, or the alteration of the articles as regards the form for acts of the Committee, cannot be pleaded by the society against a third party, if such changes have not been entered in the co- operative register and been published, unless it be shown that such third party 25574 U 2 'i LAWS. was cognisant of the change. After registration and publication a third party must admit as against himself such alterations or termination of authority, unless he show that he neither knew nor could have known of the same. As to business with a duly registered branch of a society, the registration of such provisions and their publica- tion by the court in whose jurisdiction such branch lies is decisive as to validity. Section 30. — The Committee must maintain a list of members and keep it up to date. Section 31. — The Committees of Management of distributive societies which keep an open shop must, for the purpose of assuring the observance of the regula- tion of Section 8, sub-section 4, notify the manner in which the members of the society or their representatives are to prove their identity to the salespeople, and must send without delay a copy of the notification to the higher local government authority which has jurisdiction in the locality. The higher local authority is authorised to constrain (by fine of not more than £15) the Committee of Management to transmit the notification, and if necessary to alter or amplify it. Appeal against the orders and fines of the higher local authority may be made within two weeks to the national central authority. Section 32. — Distributive societies or tradespeople who are in relations with dis- tributive societies for the delivery of goods to members may not give checks, or other orders not payable to persons by name, or tokens which as a substitute for cash give the members a right to obtain goods. Section 33. — The Committee is bound to take precautions for the regular keeping of the necessary account books of the society. Within six months after the expiry of each business year the Committee must publish the balance sheet, the number of members who have joined or left in the course of the year, and the number of adhering members at the end of the year. The notice is to be sent to the registry of co- operative societies. Section 34. — The members of the Committee of Management must exercise the prudence of ordinary men of business. Members who neglect their obligations are liable to the co-operative society severally and collectively for any loss thereby caused. They are, in particular, liable for the repayment of sums which they have paid out of profits or share-capital contrary to the regulations in Sections 19 and 22. Claims against them by reason of the preceding regulations lapse after a period of five years. Section 35. — Regulations affecting members of the Committee of Management hold good also for their deputies. Section 36. — The Board of Supervision consists of three members, to be elected by the General Meeting, unless the articles fix a larger number. The articles shall lay down the number requisite for passing resolutions. The members of the Board may not draw any remuneration (commission) based upon the business results of the society. The appointment to membership of the Board may be cancelled by the General Meeting even before the lapse of the period for which the election was made. The resolution of the General Meeting requires a majority of three-fourths of the members present. Section 37. — The members of the Board must not be at the same time members of the Committee of Management or their permanent deputies, and they must not be occupied as regular officials in the conduct of the society's business. Only for a period, to be fixed beforehand, the Board may appoint individual members from its body to represent members of the Committee unable to act ; during this period, and until he has been formally discharged from this duty, such member may not exercise his office as member of the Board of Supervision. If members of the Committee of Management retire they may not be elected members of the Board until their formal discharge from the Committee of Management. Section 38. — The Board of _ Supervision must supervise the Committee of Management in its conduct of business in all branches of administration, and to this end must keep itself informed of the position of the affars of the society. It may at any time require a report from the Committee upon the state of business, and may itself, or through members deputed by it, examine the books and papers of the society, as well as verify the cash in the till and the stock of securities, bills, and goods. It must examine the yearly statement, the balance sheet, and the proposals for division of profits and losses, and, before the passing of the balance sheet, report to the General Meeting upon these points. OERMAN CO-OPERATIVE SOCIETIES ACT. 7 It must summon a General Meeting when such action is required in the interests of the society. Further duties of the Board shall be fixed by the articles of association. The members of the Board may not delegate the exercise of their functions. Section 39. — ^The Board is empowered to represent the society in making con- tracts with the Committee of Management and to institute such suits against members of the Committee as the General Meeting may determine. The assent of the Board is necessary for any loan granted to a member of the Committee, provided that the articles have not laid down further requirements or distinctly prohibited it. The same conditions apply when a member of the Com- mittee of Management is put forward as surety for a loan. In actions against the members of the Board the society is represented by persons with powers of attorney who are chosen at a General Meeting. Section 40. — The Board is empowered, exercising its own discretion, to suspend members of Committee provisionally pending the decision of the General Meeting to be convened forthwith, and to take the necessary steps for the temporary conduct of business. Section 41. — The members of the Board must exercise the prudence of ordinary business men. Members who neglect their duties are liable severally and collectively for any losses that are caused thereby. In particular, they are liable to make good any payments wrongfully made in the circumstances mentioned in Section 34, sub- section 3, if these payments have been made with their knowledge and without their interference. Claims made on the ground of the preceding regulations lapse in a period of five years. Section 42. — The conduct of business of the society as well as the representation of the society in relation to the carrying on of such business may be entrusted to other persons provided with powers of attorney, or to officials of the society. In such cases the authority of such persons is fixed according to the powers delegated to them; in case of doubt these powers extend to all legal transactions which are associated with the execution of the special kind of business. The appointment of agents with general powers of attorney for the conduct of the whole business is not permissible. Section 43. — The rights which belong to members with regard to the affairs of the society, especially in relation to the conduct of business, the examination of the balance sheet and the division of profits and losses, are exercised at the General Meeting by resolution of the members present. Each member has one vote. A member cannot vote upon a resolution which discharges him from liability, or releases him from an obligation. This regulation holds good in the case of a resolution affecting a legal question between a member and the society. Members may not exercise their right of vote by proxy. This regulation is not applicable to persons incapable of voting in person, such as corporations, com- mercial companies, co-operative societies or other combinations of persons, and women, if the articles exclude women from participation in General. Meetings. A proxy cannot represent more than one member. Section 44. — General Meetings shall be summoned by the Committee of Manage- ment, unless the articles or this Act authorise other persons to do so. Apart from circumstances expressly indicated in the articles or in this Act, general meetings must be summoned when the interests of the society appear to require it. Section 45. — A General Meeting must be summoned without delay if one-tenth of the members or a smaller proportion (if so laid down by the articles) require it ; the demand signed bv them must state the object and the reasons therefor. Members are likewise entitled to demand that matters to be submitted to the decision of a General Meeting be notified in advance. In case of non-compliance the court (Section 10) can empower the members who have made the demand to call a General Meeting or to give notice of the subject or m-otion. The authorisation of the court must be published together with the summons for the meeting or the notification of the matter for decision. Section 46. — The summons for a General Meeting must be issued in the manner fixed by the articles with a notice of at least one week. The summons must at all times state the object of the meetinsr. Resolutions mav not be voted upon relating to matters, the consideration of which has not been announced at least three days before the meeting in the manner provided by the articles or by Section 45, sub- section 3. Resolutions, however, concerning the chairmanship of a meeting, as well 25574 U 3 S LAWS. as proposals for the summoning of a general meeting, are excepted from this provision. Previous notification is not required for the bringing forward of motions or for transactions not involving a vote. Section 47. — The resolutions of General Meetings must be entered in a minute book which must be open for examination to each member and to the State authorities. Section 48. — The General Meeting must pass the balance sheet by resolution and determine the amount of profit or loss to be distributed among the members. The balance sheet, as well as the statement setting forth the profits and losses of the year, must be exhibited at least one week before the meeting, either in the office of the society or in some other suitable place to be made known by the Committee of Management, for examination by members, or they must be otherwise brought to the notice of the members. Each member is entitled to demand a copy of the balance sheet as well as of the yearly account, to be made at his own expense. Section 49. — The General Meeting must determine : — (1) the total amount which the loans contracted by the society and the deposits with the society must not exceed ; (2) the limits to be observed in the granting of credits to members. Section 50. — If the articles oblige members to pay instalments upon their shares without fixing either the amount of the instalment or the periods, the decision on this point must be taken by resolution of the General Meeting. Section 51. — The resolution of the General Meeting may be impugned by way of civil action on the ground of infringement either of the Act or of the articles of association. The suit must be entered within one month. Any member present at the General Meeting is authorised to bring suit pro- vided he has declared his dissent from the resolution for entry in the minutes of the Meeting, and any member who was not present may bring a suit on the ground of being unjustifiably excluded from the Meeting, or because the Meeting was not regu- larly summoned or due notification of the subject of resolution was not given. More- over, the Committee of Management, and if the resolution had as object a measure through which the members of the Committee and of the Board of Supervision would incur a fine or render themselves liable to the creditors of the society, each member of the Committee of Management and of the Board is entitled to bring an action. The action must be instituted against the society. The latter shall be represented by the Committee of Management, unless this body be itself the plaintiff, and by the Board of Supervision. The County Court in whose district the society is situated is alone competent to take the plaint. The hearing cannot take place before the lapse of the period mentioned in the above paragraph. "When there are several plaints they must be united for simultaneous hearing and decision. The entrance of the suit and the date of hearing must be published without delay by the Committee in the papers fixed for the public notifications of the society. If the judgment declares the resolution to be legally null and void it is effective also as regards members who are not parties to the action. If the resolution has been entered in the co-operative register, the judgment must be transmitted by the Committee of Management to the court for registration ; and the public notification is made in so far as the registered resolution was publicly notified. Section 52. — For any damage caused to the society by groundless action against the resolution the plaintiffs are collectively liable, and are chargeable with vexatious procedure in bringing the plaint. Chapter IV. Audit. Section 53. — The organisation of the society and the conduct of its business in every branch must be submitted in every second year at least to examination by an expert auditor who is not a member of the society. Section 54. — When societies belong to Unions which satisfy the conditions which follow hereafter, the Unions are to be given the right of appointing the auditor. Section 55. — The Union must have as its object the auditing of the accounts of its affiliated societies, and may also have as its object the common care of their interests mentioned in Section 1, in particular the maintenance of mutual business relations. The Union may not pursue other aims. Section 56. — The objects of the Union must be indicated in its articles. The content of the articles must suffice to show that the Union is in a position to fulfil GERMAN CO-OPERATIVE SOCIETIES ACT. 9 its duty of auditing. The articles must define especially the area covered by the Union; the maximum and the minimum number of societies that it may receive as members ; the regulations concerning the selection and appointment of auditors ; the nature and extent of their audit; the address and powers of the members of the Committee of Management; and regulations concerning the other organs of the Union. Section 57. — The granting of the right to appoint auditors rests v^^ith the central authority of the Federal State, except when the area of the Union extends over several Federal States, when it rests with the Federal Council. Alterations in the articles of the Union must be transmitted to the respective authorities mentioned in the preceding sentence. Section 58. — The Committee of the Union must send the articles of association with the certified copy of the order of appointment to the courts in v/hose district the affiliated societies are situate and also to the higher authorities in whose district the Committee has its office. A list of the affiliated societies must be sent in the month of January of each year to the courts and the above-mentioned authorities. Section 59. — General Meetings of the Union can take place only within the limits of its district. Notice of such meetings with a copy of the agenda must be sent at least a week beforehand to the higher authorities in whose district the Committee has its office as well as to the higher authorities in whose district the meeting is to be held. The latter authority is entitled to send a representative to the meeting. Section 60. — The right of appointing auditors may be withdrawn from the Union : — (1) If it be guilty of illegal acts by which the common welfare is endangered, or if it pursue other objects than those indicated in Section 55; (2) If the Union be not equal to its duty of carrying out the auditing. Such withdrawal is pronounced after a hearing of the Committee of Management of the Union by the authority that gave the concession. The courts mentioned in Section 58 are to be informed of the withdrawal. Section 61. — The court (Section 10) shall appoint the auditor for societies which do not belong to a Union (Sections 55-57). The Committee of Management of the society must ask for the appointment to be made. A nomination takes place after the higher authority has given its opinion regarding the person proposed. If the authority concurs with the proposal made by the society such person is to be appointed as auditor. Section 62. — The auditor has a claim against the society for reimbursement of reasonable expenses and for remuneration for his work according to the time taken.. The expenses and remuneration of an auditor appointed by the court shall be fixed by it when an agreement cannot be reached between the parties on the point. Section 63. — The Committee of Management oi the society must allow the auditor to inspect the books and papers of the society and to investigate the cash in hand, the stock of securities, bills and goods. The Board of Supervision is to take part in the audit. The Committee must transmit to the registry of co-operative societies a certificate of the auditor to the effect that the audit has taken place and must notify the report as to the audit as a subject for resolution by the next General Meeting at the time of its summoning. At the General Meeting the Board of Supervision must make a statement concerning the result of the audit. The auditor appointed by a Union must forward a copy of the report to the Committee of the Union. Section 64. — The Imperia.1 Chancellor is authorised to issue general regulations for the drawing up of auditors' reports. Chapter V . Retirement of Individual Members. Section 65. — Every member is entitled by giving notice of withdrawal tn announce his retirement from the society. Such notice only takes effect at the end of a business year. It must be given at least three months previously in writing. The articles of association may fix a longer period of notice, but such must not exceed two years. Any agreement contrary to the above provisions is null and void. Section 66. — 'The creditor of any member who, having attempted without success during six previous months to exercise process against the assets of such member, has obtained the attachment and the assignment to himself of the sum accruing to such member if he were settling his account with the society, may, with a view to 25574 U i 10 LAWS. satisfying his claim, exercise in the place of the member the right to give notice of withdrawal, provided the debt bond is not merely provisionally executable. A certified copy of the debt bond and of the documents touching the unsuccessful attempt at execution, must be attached to the notice of withdrawal. Section 67. — ^If membership is dependent according to the articles upon resi- dence within a certain district (Section 8 (2)), a member who ceases to reside therein may declare his withdrawal from the society at the end of the business year. Simi- larly the society may inform the member in writing that he must retire at the end of the business year. The cessation of residence must be shown by certificate of a public authority. Section 68. — A member may be excluded from a society at the end of a business year if he has lost his civil rights or become a member of another 'Society which carries on a similar business in the same locality. Exclusion from a loan or credit society may also take place on account of membership in another such society, although the said society does not carry on business in the same locality. The articles may also prescribe other reasons for exclusion. The resolution which excludes a member must be communicated to him by the Committee of Management by registered letter without delay. From the moment of despatch of the letter the member is excluded from participation in the General Meeting, and cannot be a member of the Committee of Management or of the Board of Supervision. Section 69. — ^The Committee of Management is bound to transmit to the court for entry in the co-operative registry, at least six weeks before the end of the business year, the notice of withdrawal of the member or of the creditor, and also a written assurance that the notice of withdrawal was given in proper time. In the case of a notice of withdrawal by a creditor, such notice must be accompanied by the documents mentioned in Section 66 (2), as well as by a copy of the order for attach- ment and assignment. Similarly in the case of withdrawal under section 67 the Committee must transmit to the court the certified notice of withdrawal of the member or copy of same issued by the society, and, in case of expulsion, a copy of the reso- lution. These papers must be despatched within the time mentioned above, and, if the declaration of withdrawal or the resolution be made later, they are to be forwarded without delay. Section 70. — ^The motive of the retirement of the member and the year as ascer- tained from the documents, are to be at once entered in the court list of members. As a consequence of the registration the member retires at the end of the year marked on the list. If, however, the entry is only made in the course of a later year, then at the end of that year. Section 71. — Upon the motion of the member, or of a creditor when section 66 is applicable, the court at once notes in the list of members the motive of the retire- ment and the year for which it is to be reckoned. If the Committee of Management acknowledges the claim to withdrawal in a certified form, or if they are condemned by the judgment of a court to recognise it, such a fact must be added also to the statement when such recognition of with- drawal by, or judgment of a court against, the Committee of Management is trans- mitted. As a consequence of this, retirement or expulsion is considered as registered ■ on the day when the note was made. Section 72. — The court must inform the Committee and the member, and, in the case arising under section 66, the creditor, of the registration, as well as of the note inserted, or of the rejection of the demand. The documents forwarded to the court for the purpose of registration of retirement or of the insertion of the note remain in its keeping. Section 73. — The settlement of a past member with the society is determined according to the assets of such society and the number of members at the moment of his retirement. The balance sheet is taken as the basis of the settlement. The share value due to the retiring member must be paid over within six months ; he has no claim upon the reserve fund or other assets of the society. When the assets of the society, including reserves and all share capital, are insufficient to cover its debts, the retired member must pay his share of the deficit ; such a share, if there be no other regulation in the articles, is to be reckoned at so much per member. Section 74. — The legal ckim of a retired member to the payment of the share capital due to him lapses in two years. Section 75. — If the s«fciety is dissolved within six months after the retirement of a member, such retirement is null and void. GERMAN CO-OPERATIVE SOCIETIES ACT. II Section 76. — A member may, by written agreement, transfer his share to another at any time, even in the course of the business year, and thereby leave the society without making a settlement with the society, provided the other person becomes member in his place, or if already member, that his previous share capital, with the additional sum does not exceed the full nominal value of the share. The articles may preclude such transfers or attach other conditions to them. The Committee of Management must at once forward the agreement to the court, and, in case the transferee is already a member, they must give a written assurance that his previous share capital united to the additional sum does not exceed the full nominal share value. The transfer is to be registered at once in the list of members against the name of the transferring member ; from the day of entry the transfer takes effect. If the transferee is not yet a member, the registration may only be effected at the same time as his registration as a member. The regulations of section 15, 71 and 72 are applicable. If the society is dissolved within six months after the retirement of a member, the latter must, in case of bankruptcy proceedings, make good the supplementary payments for which he would have been liable to the extent that the transferee may be unable to do so. Section 77. — In case of death a member is considered to have retired from the society at the close of the business year in which he died. Till that date the heir of the deceased continues his membership. When there are several heirs the right of vote may be exercised by power of attorney. The Committee must send to the court without delay a notice of the death of the member for registration in the list of members. The provisions of Sections 70 (1) and 71 to 75 are applicable. Chapter VI. Dissolution and Extinction of the Society. Section 78. — 'The society may at any time be dissolved by a resolution of the General Meeting. Such resolution requires: a majority of three-fourths of the members present. The articles may lay down further conditions. The dissolution must be notified without delay for the purpose of registration in the co-operative registry. Section 79. — Societies whose period of existence is limited by the articles cease to be on the lapse of that fixed period. The provision in Section 78 (2) is applicable. Section 80. — When the number of members falls below seven, the court must, upon the request of the Committee of Management, or if such request be not made within six months, itself, by virtue of its official status, pronounce the dissolution of the society after hearing the Committee of Management. The order must be served upon the society, and immediate action at civil law, against such order is open to it. The dissolution takes effect from the date of the legal validity of the Order. Section 81. — If a society be guilty of illegal acts or neglect of its obligations, as a result of which the general welfare is imperilled, or if it pursues other business objects than those indicated in Section 1, it may be dissolved without any claims for indemnity arising therefrom. The procedure and the competency of the authorities is determinable in accord- ance with the provisions obtaining in the particular States for contested adminis- trative acts. If the procedure in such cases is not applicable, the provisions in Sections 20 and 21 of the Industrial Code come into force with the prescription that the decision in the first instance is taken by the higher administrative authorities in whose district the society is situated. The authority in first instance taking the decision must inform the court (Section 10) of the dissolution. Section 82. — The dissolution of the society must be at once entered by the court in the co-operative register. The liquidators must publish the fact in three issues of the papers in which the notifications of the society appear. Creditors are also to be requested in the notice to send in their claims to the society. Section 83. — The liquidation is to be effected by the Committee of Management unless by the articles or by resolution of the General Meeting it is entrusted to other persons. At least three liquidators must be appointed. 12 Laws. Upon the proposal of the Board of Supervision or of at least the tentli part of the members, the appointments may be made by the Court. The revocation of their appointment may bei effected by the court under the same conditions as those under which it appoints them. Liquidators not appointed by the court may be relieved of their appointment by the General Meeting before the lapse of the period for which they were appointed. Seotion 84. — The first liquidators must be notified by the Committee of Manage- ment for entry in the co-operative register, while any change in persons appointed or expiry of any of their powers must be notified for the same purpose by the liquidators. A copy of the papers concerning the appointment of liquidators or changes in their body is to be added to the notification and is retained in the custody of the court. The registration of appointment or revocation of appointment by the court is effected by the authorities. The liquidators must personally give their signatures before the court or transmit them duly certified. Section 85.^The liquidators must signify their acts in the form fixed at the time of their appointment, and must sign for the society. If no decision has been taken upon the point, statements and signatures must be executed by all liquidators. Not less than two may be appointed for the purpose. Such decision is to be_ notified in the co-operative registry at the same time as the notification of their appointment. Their signatures shall be effected in such form that the names of the liquidators are signed below the title of the society, to which the words " in liquidation " shall be appended. Section 86. — The provisions in Section 29 concerning the relationship to third parties hold good in the case of the liquidators. Section 87.— Till the close of the liquidation, notwithstanding the dissolution of the society, the legal status of the society and of its members is regulated according to the provisions of Chapters II. and III. of this Act, in so far as no fresh status arises out of the provisions of the present chapter and the nature of the liquidation. The position before the courts, which the society held down to the date of its disso- lution, remains unchanged until the complete partition of the assets. Section 88. — ^The liquidators must terminate current business, fulfil the engage- ments of the dissolved society, recover the debts due to it, and convert the assets of the society into cash. It is their duty to represent the society legally and otherwise. In order to close pending business the liquidators may also enter into fresh engagements. Section 89. — 'The liquidators have the rights and duties of the Committee of Management which arise out of sections 26, 27, 32 (1), 34, 44-47, 48 (2), and 51, and they are subject to the supervision of the Board of Supervision. They must imme- diately at the beginning- of the liquidation and later in each year draw up a balance sheet. The first balance must be published and the public notification thereof sent to the registry of co-operative societies. Section 90. — A division of the assets among the members may not take place until the amortisation of the debts or provision for their payment, and not before the lapse of a year from the day on which the notice to creditors has been published for the third time in the papers fixed upon for that purpose. If a creditor known to the society does not report, the amount of the debt must be set aside for him, if the right to set aside exists. In case the settlement of an engagement is not at the time feasible, or the engagement be matter of dispute, the division of the assets may only take place if security is afforded to the creditor. Liquidators who act contrary to these provisions are individually and collectively liable not only to the society but to the creditors for the making good of resultant loss. The same obligation rests upon the members of the Board of Supervision if the infractions occur with their knowledge and without their interposition. The liability towards creditors is not removed by the fact that such infraction rests upon a resolution of the General Meeting. Section 91. — The division of the assets among the members is carried out up to the total amount of the share capital arrived at on the basis of the filrst balance sheet issued by the liquidators, in proportion to their share capital. In arriving at the individual share capital the payments made thereon since the last annual balance sheet are not to be regarded for the purpose of dividing profits or losses which arise for the period between the last annual balance sheet and the first balance sheet drawn up by the liquidators. Profits arising in this period are to be written to the share value up to thf amount of its full value. Surpluses which exceed the total of this balance are to be divided per capita. GERMAN CO-OPERATIVE SOCIETIES ACT. 13 The division of the assets may be forbidden in the articles or some other pro- portion fixed for their division. Seotion 92. — Any indivisible net assets remaining at the dissolution of the society fall to the commune in which the society is situated, unless the articles had allocated it to an individual or to a corporation for a fixed object. The interest of this fund is to be applied to objects of public utility. Section 93. — After the close of the liquidation the books and documents of the dissolved society are given into the care of one of the late members, or to a third party for a period of ten years. The particular member or the third party is appointed by the court in the absence of regulation in the articles or of a resolution by the General Meeting. The court may authorise the members and their legal successors, as w^ell as the creditors of the society to examine the books and documents. Section 94. — If the articles do not contain the essential provisions on the point, or if one of these is invalid, any ordinary member, and any member of the Committee of Management and of the Board of Supervision, may move by way of civil action that the society be declared non-existent. Section 95. — In the meaning of the last section the provisions indicated in Sections 6, 7. and 131, with exception of those concerning the authentication of the resolutions of the General Meeting and the chairmanship thereof, and the principles for the drawing tip and examination of the balance sheet, are considered " essential." A deficiency in the articles of such necessary provision may be remedied by a reso- lution of the General Meeting, passed in accordance with the provisions of this Act concerning alterations of the articles. The summoning of the General Meeting, in case of the deficiency relating to the form in which the general meeting is to be summoned, ensues through insertion in the public newspapers which are appointed for the publication of the registrations in the co-operative register of the seat of the society. Should the deficiency have Reference, in the case of a society with limited liability, to provisions concerning the liability, the total amount of the liability undertaken by the individual members must not be lessened by the measures adopted by the Meeting to remedy such deficiency. Section 96. — The procedure for a suit for declaration of extinction and the legal effect of the judgment are regulated by the provisions of Section 51 (3-5), and Section 52. Section 97. — If the extinction has been registered in the co-operative registry, the provisions which obtain in case of dissolution are applicable to the winding up of its affairs. The validity of the legal proceedings undertaken in the name of the society with third parties shall not be affected by extinction. To the extent that the members have undertaken liability for the engagements of the society, they are obliged to pay the amounts required to satisfy the creditors in accordance with the provisions of the following chapter. Chapter VII. Proceedings in Bankruptcy and Liability of llemhers. Section 98. — Proceedings in bankruptcy ensue in case of suspension of pay- ment; also after the dissolution of a society when there is excess of debts over assets. After the dissolution of a society, proceedings in bankruptcy are open so long as the division of assets has not been completed. Section 99. — ^Immediately upon suspension of payment the Committee of Man- agement must move that proceedings in bankruptcy be opened. They must take .the same step when in the course of, or after, dissolution it is found from the annual balance sheet, or from a balance sheet drawn up in course of the year, that there is excess of debts over assets. The Committee of Management is responsible to the society for the repayment of any sums paid out after this date, as laid down in Section 34. Claims based on these provisions lapse in five years. Section 100. — Not only creditors but every member of the Committee of Manage- ment is entitled to propose the opening of proceedings in bankruptcy. If the proposal is not made by all members of the Committee, it is only to be admitted when the facts that motived the proposal are authenticated. The court must hear the remaining members in accordance with the regulations of the Bankruptcy Code. The opening of proceedings may not be rejected on the ground that the bankrupt estate does not suffice to meet the costs of the proceedings. 14 LAWS. Section 101. — The society is dissolved by the fact of the opening of proceedings in bankruptcy. Section 102.— The opening of bankruptcy proceedings must be at once entered in the co-operative register ; the registration is not published. Section 103. — On the opening of the proceedings a committee of creditors must be appointed by the court.. The meeting of creditors votes vi^hether it will accept those appointed or choose others. In other respects the provisions in Section 87 of the Bankruptcy Code are applicable. Section 104. — A General Meeting must be at once summoned (Sections 44-46) to decide whether the actual members of the Committee of Management and of the Board of Supervision are to be retained or others appointed. Section 105. — If the creditors are not satisfied with the extent to which their claims have been met at the final division out of the assets available at the time of the opening of proceedings in bankruptcy, the members are obliged to furnish supple- mentary payments to the estate. Such supplementary payments are to be made upon a per capita basis, unless the articles have fixed another proportional contribution. Contributions, which individual members cannot meet, are to be distributed over the remaining members. Payments made by members beyond the amounts due from them according to the previous provisions are to be returned to them out of the supplementary payments after the creditors have been satisfied. Members may put in a claim against the society as against the supplementary payments, provided the circumstances are such that they are entitled as creditors in bankruptcy to satisfaction of their claims out of the supplementary payments. Section 106. — The receiver must at once, after the deposition of the balance sheet with the court (Section 124, Bankruptcy Code), proceed to calculate the amount of contribution requisite from tha members to cover the deficit as shown in the balance sheet. In the account drawn up (Advances Account) all members are to be described by name, and the contributions to be distributed among them. The amount of con- tribution is to be estimated, however, in such a way that a deficiency in the total amount to be raised may not result through the inability of individual members to pay their share — such inability to be taken into account beforehand. The account must be sent to the bankruptcy court to obtain a declaration of execution. If the co-operative registry is not kept at the bankruptcy court, a certified copy of the statutes and of the list of members is to be attached. Section 107. — The court fixes a date, which may not exceed two weeks from that of the application, for its decision upon the account. The date is to be publicly announced, and the members mentioned in the account are to be especially summoned. The account must lie at the latest three days before the date in the office of the court for the inspection of the parties. This fact must be alluded to in the published notice and in the summons. Section 108. — On this date the Committee of Management and Board of Super- vision, the receiver, and the committee of creditors, must be heard, as well as any others of the parties with objections to raise. The court decides the objections raised, adjusts as far as necessary the accounts, authorises such adjustment and declares it executable. The decision is to be pub- lished on that day or on a date to be at once fixed, and which should not be fixed for later than a week thereafter. The account, with thei decision declaring it executable, is to be deposited in the office of the court for inspection by the parties. The decision is not open to appeal. Section 109. — ^Once the account has been declared executable, the receiver must without delay collect the contributions from the members. Distraint against a member takes effect in accordance with the Civil Procedure Code by virtue of a copy of the decision authorising execution and of an extract from the account. Section 110. — ^The payments effected must be deposited or invested as the meeting of creditors shall determine. (Bankruptcy Code, 132.) Section 111. — Each member is entitled to bring a civil action as to the account which has been declared eixecutable by the court. The suit lies against the receiver. It may only be brought within a month after the notification of the decision and only if the plaintiff has raised his cause of objection at the hearing (Section 107) or if his omission to do so was due to no fault of his own. Judgment of the court operates for or against all members bound to make contributions. GERMAN CO-OPERATIVE SOCIETIES ACT. 15 Section 112. — The suit must be brought solely in that court which declared the account executable. The hearing may not take place before the lapse of the above- mentioned necessary period. If there be more than one action against the account, these must be jointly heard and decided. (Remainder of section relating to compe- tence of certain German courts is omitted.) Section 113. — In so far as the want of means of individual members has pre- vented payment of their contributions, and the total is insufficient or the account has to be altered in accordance with the judgment or for other reasons, the receiver must draw up a supplementary account. In respect of such account the provision in Sections 106 to 112 are applicable. If necessary a further supplementary account is to be prepared. Section 114. — As soon as a commencement is made with the execution of the final division (Bankruptcy Code, 161), the receiver must estimate how much has to be paid by the members in accordance with Section 105 as a supplement or in cor- rection of the advances already reckoned and of the payments actually effected. The account (Supplementary Account) is subject to the provisions in Sections 106 to 109, 111 to 113, 106 (2), with the condition that contributions shall not be distributed over members whose inability to make payments has been proved. Section 115. — The receiver must, as soon as the supplementary account has been declared eixecutable, immediately divide among the creditors the money held according to Section 110, as well as the contributions still to be levied as they come in in ade- quate amount. These payments to creditors are made as supplementary dividends. (Bankruptcy Code, 166.) In addition to payments falling to claims mentioned in Section 168 of the Bank- ruptcy Code, such payments upon claims which were expressly contested by the Com- mittee of Management before the court at the examination must be withheld. The creditor is entitled to remove the opposition of the Committee of Management by way of suit ; if the grounds of opposition are recognised to be valid, the payments are free to be divided among the other creditors. Surpluses not required to satisfy creditors are to be paid back by the receiver to the members. Section 116. — A suspension of the proceedings in bankruptcy by compulsory composition with creditors is not permissible. A cessation of the proceedings is only allowable after the commencement of the actual execution of the final division. The concurrence of all creditors whose claims were taken into account at the last division must be produced. The Bankruptcy Court is free to decide how far the cessation requires the assent or the guaranteeing of creditors whose claims have not been settled. Section 117. — The Committee of Management is bound to aid the receiver in his duties as imposed by Sections 106 (1), 109 (1), 113, 114. Section 118. — ^The provisions in this chapter affecting members of the Committee of Management are also applicable to liquidators. Chapter VIII. Special Provisions. I. — For Societies with unlimited Liability. Section 119. — In societies with unlimited liability members may only hold one share. Section 120. — The declaration of adherence as member must expressly state that the individual members undertake liability with their whole property for the engage- ments of the society, both as towards the society and as towards its creditors within the scope of this Act. Section 121. — 'Immediately the business shows that the assets of the society, inclusive of the reserve and the share capital paid up, do not suffice to cover the debts, the Committee of Management must summon a General Meeting to decide whether the society is to be dissolved. If the meeting votes for dissolution, a vote must at the same time be taken as provided in Section 104. Section 122. — In case of bankruptcy, the society, as well as the individual members, are collectively liable with all their property to the creditors for the loss which the latter suffer at the final division of property with regard to claims that have been allowed. (Bankruptcy Code, Section 161.) After the lapse of three months from the date on which the supplementary account is declared executable, the 16 LAWS. creditors, if they have not been satisfied, may proceed against individual members. Established claims which have not been expressly contested during the period of examination by the Committee of Management or by the liquidators, cannot be con- tested by members against whom proceedings are taken. Judgment of the court which is given either for or against a claim contested by the Committee of Management or the liquidators binds all members. In reference to a claim which has remained contested in the bankruptcy pro- ceedings, the members are not condemned to pay as long as the claim remains unproved. Section 123. — Right of action of creditors against individual members lapses in two years from the end of the term fixed in Section 122 (2), unless a shorter period of limitation is applicable according to the character of the claim. The period of limitation in favour of a member is interrupted by legal proceedings taken against the society or by the society itself; it is not interrupted by legal proceedings which are taken against another member or by another member. Section 124. — Members who pay off creditors in accordance with Section 122 become possessed of the rights of the latter against the society. Section 125. — ^The provisions of Section 122 to 124 are applicable to such members as have withdrawn from the society within the two years previous to the opening of the bankruptcy proceedings and who are not already liable according to Section 75 for the engagements entered into up to the date of their withdrawal; but they are applicable in such a way that the claims of the creditors can be levied only after the lapse of six months from the date in which the supplementary account has been declared executable. This claim extends to the engagements entered into by the society up to the day of registration in the case of death of a member whose retirement has been registered after the date mentioned in Section 77 (1), unless the heirs prove that at the time of the engagement the death cf the member was known to the creditor. « II. — For Societies with unlimited contributory Liability. Section 126. — The provisions of Section 119 concerning the limitation of parti- cipation to one share, and of Section 121 concerning the convocation of a General Meeting in case of over-indebtedness, are applicable to societies with unlimited contributory liability. Section 127. — The declaration of adherence (Section 15) must expressly state that the individual members are liable with all their property to pay to the society the necessary supplementary payments for the satisfaction of the creditors. Section 128. — If in the case of the opening of bankruptcy proceedings the creditors mentioned in Section 105 (1) have not been satisfied or guaranteed after the lapse of three months from the date in which the supplementary account (Section 114) was declared executable, contributions still necessary are to be paid by members who withdrew within eighteen months before the proceedings began, and who were not already liable to the supplementary payment. Section 129. — ^The receiver must without delay draw up an account of the con- tributions due by the retired members. In this account the individual names must be cited with the contribution to fall upon each, unless the insolvency of particular members is known beforehand. For the rest the provisions in Sections 106 (3), 107 to 109, 111 to 113, and 115 are applicable. Section 130. — ^The provisions of Section 128, 129 do not affect the recovery of the supplementary payments from the members remaining in the society. The payments made by retired members must be repaid out of the supplementary payments of the latter, as soon as the satisfaction or guarantee of all the creditors, as in Section 105 (1), is effected. III. — Societies with limited Liability. Section 131.^ — ^In societies with limited liability the sum for which individual members are liable must not be lower than the share value. The amount of liability attaching to each share must be fixed by the articles on the establishment of the society. The regulation, or any alteration in same, must be published (Section 12 (16). Section 132.— In order to raise the amount of liability attaching to each share, a majority of three-fourths of those members present at the General Meeting is necessary. The articles ma^ lay down further conditions. GERMAN CO-OPERATIVE SOCIETIES ACT. 17 Section 133. — A reduction of the amount of liability attaching to each share may only be affected with due observance of the provisions which obtain for the division of the assets of the society in case of dissolution. (Section 82 (2), 90 (1-3).) The known creditors of the society must be requested by special notice to report their views. The notification of the vote of reduction is not made for entry in the co-operative registry before the lapse of the year as defined in Section 90 (1). The public notices of the resolution must be handed in with the notification. At the same time the Committee of Management must deliver the written assurance that the creditors who have notified themselves to the society and have not concurred in the reduction have been paid or have received guarantees. Section 134. — The holding of several shares by members is permitted, but the maximum number to be held by one member must be fixed. The regulation, or any alteration in the regulation, must be published. (Sections 12, 16.) Section 135. — The liability of a member who holds more than one share increases in a proportion corresponding with the number of shares he holds. Section 136. — ^Until the first share is fully paid up the holding of a second share by a member may not be permitted by the society. This provision also obtains as regards the holding of each further share. Section 137. — A member who. wishes to take up a further share must deliver an unconditional declaration signed by him. The declaration must be handed in to the court by the Committee of Management for entry in the list of members after per- mission has been given to the member to hold another share. At the same time the Committee of Management must give an assurance in writing that the previous shares held by the member have been fully paid up. The participation in fresh shares takes effect with the registration in accordance with the preceding paragraphs. In other respects the provisions of Section 15 are duly applicable. Section 138. — ^The transfer of the share- value held by a member to another member in the case of Section 134 is not valid if previous share-value added to the share- value so transferred exceeds the total sum corresponding with the highest number of shares that may be held. On this point the assurance of the Committee provided for in Section 76 must be given. In other respects the regulations in Section 137 hold good. Section 139. — With the balance sheet of each year there must be published, apart from the details given in Section 33 concerning the number of members, the total amount by which the amount of the share liability of the members has been increased or diminished, as well as the total amount of the share liability for which aU members are jointly responsible at the end of the year. Section 140. — Proceedings in bankruptcy take place, apart from the case of suspension of payment, when the debts exceed the assets, in the sense that the debts are greater than the fourth part of the* aggregate liability incurred by all the members. The Committee must move for the opening of proceedings in bankruptcy if such over-indebtedness emerges from the annual balance sheet or from a balance sheet drawn up in the course of the year. The provisions of Section 99 (23) and Section 100 are duly applicable. Section 141. — The individual members may not be called upon to make supple- mentary payments beyond the sum of their liability, nor be claimed against by the creditors in bankruptcy. In other respects the regulations in Sections l22 to 125 are duly applicable as regards the claims of creditors. Section 142. — Apart from the provisions of Section 90, the creditors of a society who cannot obtain satisfaction may make good their claims independently for repay- ment by suing the Board of Supervision, the Committee of Management, or the liqui- dators in the case that, contrary to the provisions of Sections 19 (22), the profits or share capital have been divided. The same procedure is open to creditors against the members of the Committee of Management or the liquidators for reimbursement of such sums as have been paid out after the date on which the duty to propose the opening of proceedings in bankruptcy arose. The duty of comjjensating the creditors for such payments is not removed by a plea that the transaction rests upon a resolution of the General Meeting. IV. — Conversion of Liability. Section 143.— A society with unlimited liability may be transformed into a society with unlimited contributory liability only under observance of the regulations 18 LAWS. which obtain for the division of thes assets of the societjr in case of dissolution. (Sec- tions 82 (2), 90 (1-3).) The same procedure is applicable to the conversion of a society with unlimited liability orl unlimited contributory liability into a society with limited liability. The regulations in Section 133 (2) are duly applicable. Section 144. — A resolution for the conversion of a society with unlimited deferred liability into a society with unlimited liability, or of a society with limited liability into a society with unlimited or unlimited contributory liability, requires a majority of three-fourths of the members present at the General Meeting. The articles may lay down further requirements. Section 145. — The conversion (Sections 143, 144) is also binding upon members who have withdrawn from the society before the entry of the resolution in the co- operative register. When a society with unlimited contributory liability is converted, such members cannot be made liable for the engagements of the society if their withdrawal took place more than eighteen months before the date of registration. In the case of the conversion of a society with limited liability, claims against them are only valid to the amount of their previous liability. Chapter TX. Penalties. Section 146. — Members of the Committee of Management and of the Board of Supervision and liquidators are punishable by imprisonment and with fine not exceed- ing £150 if they wittingly act against the interests of the society. The penalty of loss of civil rights may also be declared against them. Section 147. — Members of the Committee of Management and of the Board of Supervision and liquidators are punishable with imprisonment up to a period of one year and to a fine not exceeding £150 if they make false statements in the notifiica- tions, announcements, and assurances to be made to the court (Section 10), knowing them to be f §,lse, or if they knowingly make false representations in their statements, in their reviews of the financial situation of the society, of the members and of the liabilities undertaken, or in their address to the General Meeting concerning the general position of the society. Punishment by deprivation of civil rights may also be imposed. If extenuating circumstances are admitted, punishment by fine alone shall be imposed. Section 148. — Punishment by fine not exceeding £30, or with imprisonment not exceeding three months, or with both, may be inflicted upon : (1) the members of the Committee of Management and of the Board of Supervision and the liquidators if the society has been left more than three months without a Board of Supervision, or, if in the latter, the requisite number of members for passing resolutions was wanting, (2) the members of the Committee of Management or the liquidators if, contrary to the provisions of the Sections 99, 118, 140, the proposal for commencement of bank- ruptcy proceedings is neglected. This punishment is not enforced against those who prove that they were not responsible for neglect. Section 149. — Members of the Committee of Management are liable to a fine not exceeding £30 if they extendi their operations to objects of a business nature other than those mentioned in Section 1, or if they permit, or do not prevent, at General Meetings the decision of motions which relate to public affairs, whose discussion brings them under the laws concerning the right of meeting and of association. Section 150. — The members of the Committee of Management of an Audit Union are punishable by fine not exceeding £30 should they neglect to give notice of the Meeting in accordance with Section 59 (2). The fine is not imposed upon those who show that the omission was not due to their fault. Section 151. — Whoever grants or promises special advantages to anyone for voting at a General Meeting in a special way, will be punished by a fine not exceeding £150, or by imprisonment for a period not exceeding one year. Section 152. — Persons engaged in the sale 'of commodities in distributive societies are punished by a fine not exceeding £7 10s. if they knowingly, contrary to the provision in Section 8 (4) or without observance of the notice issued by the Committee of Management according to Section 31, sell goods to non-members. A like fine is imposed^pon members who hand over their card of identity, by which they are entitled to purchase goods at a co-operative store or from trades- GERMAN CO-OPERATIVE SOCIETIES ACT. 19 people working in connection with the society for the delivery of goods to its members, to another person for the purpose of obtaining goods without being authorised. Third parties who use such cards of identity for the same purpose or who by other means undertake to bring about the delivery of goods without proper authori- sation, are punishable with the same fine. Section 153. — Persons are punishable by fine not exceeding £7 10s., who dispose to non-members for consideration either of a customary or trade character of com- modities which they have obtained from the co-operative society, or from trades- people working in connection with the society for the delivery of goods. This provision is not applicable : — (1) if a member of a distributive society disposes of the goods purchased in his eating-house or to persons boarding with*him for their immediate personal use; (2) if a distributive society, being a member of another distributive society, disposes of goods bought from the latter to its own members. Section 154. — Dealings contrary to the provision of Section 32 are punishable by fine not exceeding £7 10s. Chapter X. Concluding Provisions. Section. 155. — (Deals with German judicial procedure). Section 156.^The provisions in Sections 9 to 11 of the Commercial Code are applicable to the co-operative register. The entries must be published in the German Imperial Gazette. The court must decide upon publications in other papers; for smaller societies in one other paper only. Section 157. — The notifications for the co-operative register must be effected personally by all the members of the Committee of Management or by all the liqui- dators or be presented in an authenticated form. The notifications and presenta- tion of documents prescribed in Sections 16, 28, 33 (2), 51 (5), 63 (2), 84, 85 (2), must also be effected in the proper co-operative registry for each branch. Section 158. — The registration of fresh members, the registration or the pre- liminary notification of the retirement of a member, the entry of the exclusion or of the death of a member, of the acquisition of additional shares in the list of members, must be communicated by the court (Section 10) of the headquarters of the society to the court of each branch establishment for the due rectification of the list there kept. Similarly the registration of the dissolution of a society as well as of the opening of the proceedings in bankruptcy must be duly communicated to the co-operative registry of each branch establishment. Section 159. — Fees are not charged by courts of first instance for the hearing and decision of the motions named in the preceding paragraphs, nor for registration or for preliminary notification. Fees for expenses incurred are charged in accord- ance with Sections 79, 80, and 80 (b) of the Court Costs Act. Section 160. — The members of the Committee of Management are bound under penalty of fine by the court (Section 10) to follow the provisions in Section 8 (2), 14, 28, 30, 61 (2), 63, 78 (2), 79 (2); a single fine may not exceed £15. In the same manner the members of the Committee of Management and the liquidators are bound to follow the provisions contained in Sections 33 (2), 47, 48 (2), 51 (4 and 5), 84, 85 (2), 89, 157 (2). As to procedure, those provisions obtain which prevail for the enforcement of the notifications in the Registry of Commerce as ordered in the Commercial Code. Section 161. — The necessary regulations for the execution of the provisions con- cerning the co-operative register and the notifications for same shall be issued by the Federal Council. The authorities to be understood under the description of State authorities (Section 47) and as " higher administrative authority " (Sections 58, 59, 61, 81) in each Federal State shall be announced by the central authority in each Federal State. 25574 S. 20 LAWS. ACT OF 1895 ESTABLISHING THE PEUSSIAN CENTRAL CO-OPERATIVE STATE BANK. Act establishing a Central Institution for the promotion of Co-operative Personal Credit. July 31, 1895. Section 1. — Eor the promotion of personal credit (Section 2), especially of co- operative personal credit, an Institution with its seat in Berlin, entitled the Prussian Central Co-operative Bank, shall be established. The Institution shall possess the status of a legal person, and shall be placed under the supervision and direction of the State. Section 2. — The Institution shall be authorised to car^y on the following business :■ — ♦ (1) To grant interest-bearing loans to : — ■ (a) ■ such Unions and Union Banks of Registered Co-operative Societies (under the Act of May 1, 1889) as may sue or be sued in their own name; (b) the Loan Banks of the Mortgage Credit Associations which promote personal credit; (c) similar institutions established by provinces. (2) To take money at interest from organisations within the meaning of (1). For the accomplishment of these duties the Institution shall be also authorised : (3) To take other monies by way of deposit and transfer ; (4) To accept savings deposits ; (5) To utilise cash in hand for dealing in bills of exchange, loans against deposited security, and transactions in stocks and shares ; (6) To sell and to accept bills; (7) To raise loans; (8) To buy and sell securities for organisations withiri the meaning of Section 2 (1) and their affiliated societies, as well as for such persons from whom the Institution has received money by way of deposit and transfer, deposits of savings, or loans. The sphere of business of the Institution may be extended by Royal ordinance so as to embrace, in addition to the organisations referred to in Section 2 (1), certain kinds of public Savings Banks. Section 3. — The State shall grant to the Institution during its existence a share^ capital of £250,000 in three per cent, bonds at par value. Section 4. — The Minister of Finance shall be authorised to issue the bonds. He shall determine to what amount and. under what conditions of withdrawal the bonds shall be issued. In other matters respecting the administration and redemption of the loan, and the lapsing of interest thereon, the provisions of the Act of December 19, 1869 (Collection of Laws, p. 1197), are applicable. Section 5. — The right of participation with share capital shall be reserved to the organisations within the meaning of Section 2 (1), subject to provisions to be laid down by the supervising authority. Section 6. — The net profits at the close of the year shall be applied : — (1) one-half to the formation of a reserve, the other half to the payment of interest at 3 per cent, on capital (Sections 3 and 5) ; any remainder to be placed to reserve ; (2) when the reserve amounts to one-fourth of the capital, the capital shall receive a maximum of 4 per cent, as interest and the remainder shall be placed to reserve. Section 7. — The supervising authority shall issue the business regulations for the Directorate (Section 8) as well as the service instructions for the officials of the Institution, and shall order modifications as required. Section 8. — The Institution shall be administered by, and shall be represented by, a Board of Directors. The Board shall consist of a President and the requisite number of members. Its decisions shall be taken by majority, but in its administra- tion the regulations and instructions of the supervising authority shall be observed. The President and the members of the Board shall be appointed for life by the King upon the nomination of the Minister of State. In the case of Commissioners filling such office their appointment shall lie with the supervising authority. Section 9. — The officials of the Institution shall possess the rights and duties of full State officials. Theft salaries, peirsions, and other payments for services, as well as pensions and assistance after death for their families, shall be borne by the Institution, which has also to provide for the current expenses of administration. • PRUSSIAN CENTRAL CO-OPERATIVE STATE BANK ACT. 21 The Budget of the personal and current administrative expenses shall be pre- sented annually, after April 1, 1896, before Parliament for sanction. Section 10. — The accounts of the Institution shall be subject to audit by the Public Audit Office. The form in which the accounts are to be presented shall be determined by the supervising authority. Eegulations in respect of such accounts shall be communicated to the Public Audit Office. Section 11. — The signature of the Board of Directors shall in all cases be binding on the Institution, even in those cases in which the laws require a special power of attorney, when the signatures are made by two members of the Directorate or by officials indicated as representatives of the Directorate. Section 12. — A Committee of experts shall be formed to assist by advice in the business of the Institution. In the selection of such Committee those organisations (Section 2) which are in regular business relations with the Institution, or which have participated with capital (Section 5), are as far as possible to be taken into consideration. The Committee shall meet under the presidency of the President at least once in each year, but may be summoned when necessary at other times by the President. Section 13. — Cognizance of the whole position of the business shall be given to the Committee, which shall be entitled on its part to bring forward motions con- cerning any measures that have been adopted. In particular the opinion of the Committee is to be taken as to : — (1) The principles on which credit shall be granted, especially as to the rate of interest, the term of loans, and the question of security; (2) The principles on which deposits of savings shall be accepted ; (3) The balance sheet and the estimate of profit which shall be drawn up at the end of the business year by the Board of Directors, and which, together with the opinion of the Committee thereon, shall be laid before the supervising authority for final decision. General directions for the conduct of business and instructions as to detail shall be brought to the knowledge of the Committee as soon as possible after their issue. (Section 7.) Section 14. — Further instructions concerning the composition and the business scope of the Committee shall be issued by Royal Ordinance. Section 15. — The supervising authority within the meaning of this Act is the Minister of Finance, who shall issue the necessary orders for its execution. AN ACT OF JUNE 8, 1896 , AMENDING THE ACT OF 31 JULY, 1895, ESTABLISHING A CENTRAL INSTITUTION FOR THE PROMOTION OF CO-OPERATIVE PERSONAL CREDIT. Section 1. — The sum granted to the Prussian Central Co-operative Bank by the State as*capital shall during the period of its existence be raised to £1,000,000. The additional capital shall be paid over in cash or in bonds at the price of the day. Section 2. — Section 6 (1) of the Act of 31 July, 1895, shall read as follows : — (1) After paying one-fifth towards the formation of a reserve fund, four-fifths to the payment of interest on deposits (sections 3 and 5) up to 3 per cent., any remainder shall also be paid into the reserve fund. Section 3. — The Finance Minister shall be empowered,, in order to raise this increase of capital, to issue bonds. He shall decide, when, through what channels, and in what amounts, at what rate of interest,, under what conditions of redemption, and at what price the bonds shall be issued. In other matters relating to the administration and redemption of the loan and the cessation of the interest thereon, the provisions of the Act of 19 September, 1869 (Collection of Laws, p. 1197) shall apply. Section 4. — Instructions for carrying out the regulations of Section 9, clause 1, of the Act of 31 July, 1895, especially those necessarily relating to the transfer of the legal prescriptions as to caution monies, pensions and provision for the families or dependents of officials on the State establishments, as well as those disciplinary laws relating to officials not on the judicial establishment, to the officials of the Prussian Central Co-operative Bank shall be issued as Royal ordinances. Section 5. — The Finance Minister is charged with the administration of this Act. 25574 X 2 ■n Laws. ACT OF APRIL 20, 1898, INCEEASING THE CAPITAL OF THE PRUSSIAN CENTRAL CO-OPERATIVE BANK. Section 1.— The sum granted to the Prussian Central Co-operative Bank by the State as capital shall, during the period of its existence, be raised to £2,500,000. The additional capital of £1,500,000 shall be paid over in cash or bonds at the price of the day. £1,000,000 shall be paid over at once and the remaining £500,000 shall be paid at such time as the Finance Minister shall determine. Section 2. — The Finance Minister shall be empowered, in order to raise this increase of capital, to issue bonds. He shall decide when, through what channels and in what amounts, at what rate of interest, under what conditions of notice of redemption and at what price, such bonds shall be issued. In other matters relating to the administration and redemption of the loan and to the cessation of interest thereon, the provisions of the Act of 19 December, 1869 (Collection of Laws, p. 1197), and of the Act of 8 March, 1897 (Collection of Laws, p. 43), shall apply. Section 3. — The Finance Minister is charged with the administration of this Act. ACT OF 13 JULY, 1909, AMENDING THE ACT OF JULY 31, 1895. Section 1 . — The participation by the State in the share capital of the Prussian Central Co-operative Bank for the period of its existence shall be raised to £3,750,000. The additional capital of £1,250,000 shall be paid over in cash, Treasury bonds, or in bonds at the price of the day. Section 2. — Paragraph 1 of section 6 of the Act of July 31, 1895, shall read as follows : — From the resulting net profit of the Institution at the end of the year, saving certain special placings to reserve : {a) In the first place one-fifth is to be used for the formation of a reserve fund, the four-fifths as interest up to 3 per cent, on the share capital (sections 3 and 5) ; (&) Any contingent balance shall be devoted to the payment of further interest on the participation with capital by the Union banks, &c. (section 5) as well as on the additional capital of £1,250,000 which the State, in accordance with the terms of this Act is prepared to advance, in both cases up to a maximum of Z\ per cent. ; (c) Any still remaining surplus is likewise to be credited to reserve. Section 3. — The Finance Minister is charged with the administration of this Act. He is empowered, in order to furnish the additional capital, to issue State bonds. In place of State bonds Treasury Bills may be temporarily issued. The date of maturity of the Treasury Bills is. to be stated. The Finance Minister shall be empowered to create the means of redeeming these Treasury Bills by the issue of fresh Treasury Bills and of State bonds to the necessary nominal amount. Re-issues of Treasury Bills are permitted. The Chief of the National Debt Office, under the direction of the Finance Minister, must hold ready 14 days before the date of maturity the Treasury Bills or State bonds allocated for the redemption of Treasury Bills falling due. Interest on the fresh issues shall not begin before the date at which interest on the Treasury Bills and State bonds to be redeemed ceases. The Finance Minister shall decide when, through what channels, and in what amounts, at what rate of interest and under what conditions of period of redemption and price, the Treasury Bills and State bonds shall be issued. Further, in regard to the administration and liquidation of loans, the terms of the Act relating to the consolidation of Prussian State Loans, dated 19 December, 1869, of the Act relating»to the liquidation of State debts, dated 8 March, 1897, a,nd of the Act relating to the formation of a clearing fund for the railway adminis- tration, dated May 3, 1903, come into application. 23 GERMAN MORTGAGE BANK ACT OF 13 JULY, 1899. Mortgage Banks. — Section 1. — Joint stock companies and joint stock companies with limited partnership, the object of which is the lending of money against mortgages on land and the issue of bonds on the basis of mortgages so acquired, shall require for the exercise of their business the approval of the Federal Council. If it be laid down in the articles of association of a mortgage bank, that loans on mortgage can only be granted within the boundaries of that State of the German Federation in which the bank is situate, the giving or refusal of approval shall appertain to the central authority of such State. Every alteration in the articles of association of a mortgage bank shall require the sanction of the authorities of the State to which it belongs in accordance with paragraphs 1 and 2. Section 2. — Open trading companies, companies with limited partnership, limited liability companies, registered co-operative societies, and individuals are prohibited from undertaking business of the nature indicated in Section 1, para- graph 1. State Supervision. — Section 3. — Mortgage banks shall be under the supervision of the State. Such supervision shall pertain to that State of the Federation in which the bank is situate. The supervision shall embrace the whole of the business dealings of the bank and shall remain in force even after the dissolution of the same until its liquidation shall be completed. Section 4. — The supervising authority is authorised to issue all orders which may be necessary in order that the business of the bank may be conducted in accord- ance with the law, the articles of association and any other regulations binding upon it. The supervising authority is authorised especially — 1. To inspect the books and documents of the bank and to examine the position of the cash in hand and of the securities held; 2. To require from the organs of administration of the bank information on all its business affairs ; 3. To send a representative to the General Meetings and to meetings of the organs of administration of the bank, to require the summoning of the General Meeting, the fixing of the meetings of the organs of administration as well as the giving of notice of subjects for resolu- tion, and, should these requests be not complied with, to summon, fix or give notice of such meetings at the cost of the bank itself; 4. To prohibit the carrying into effect of resolutions or instructions which offend against the law, the articles of association and any other regula- tions binding upon the bank. The supervising authority may appoint a commissioner who shall exercise the duty of supervision under its guidance. It may decree that, for the services of the commissioner, a sum shall be paid as remuneration by the bank into the State Bank, and shall fix the amount of such remuneration. Subsidiary Business. — Section 5. — Mortgage banks, beyond the granting of loans on mortgage and the issue of mortgage bonds, may only engage in the following branches of business : — 1 . The acquisition, sale and charging of mortgages ; 2. The grant of loans, not on mortgage security, to home public corporations, or on the full guarantee of such corporations, and the issue of bonds on the basis of the claims so established ; 3. The grant of loans to home light railway undertakings on the security of the railway, and the issue of bonds on the basis of the charges so established ; 4. The purchase and sale of securities on commission, transactions of a speculative kind always excepted ; 5. The receipt of money or other objects on deposit, with the provision never- theless that the total amount of such deposited money shall not exceed one-half of the paid-up share capital ; 6. The collection of bills, drafts and other similar papers. Disposable monies may be put to use by the mortgage banks by deposit with suitable banks, by the purchase of their own mortgage bonds, and of bonds issued in accordance with paragraph 1, Nos. 2 and 3, by the purchase of such bills and securities as may be purchased by the Imperial Bank under the provisions of 25674 ^ ^ 24 LAWS. « the Bank Act of 14 March, 1875, as well as by loan against securities in accordance with an instruction to be issued by the bank. Such instruction shall set out the securities on which money will be lent and the amount permitted to be so lent. The acquisition of land is only permitted to the mortgage bank for its own protection against loss or for the provision of a site for business premises. In regard to such acquisition of landed property, those mortgage banks which, though they have their head office in one State of the Federation transact business in others, shall stand in the same position as the mortgage bank doing business only in its own State. Issue of Mortgage Bonds. — Section 6. — The total amount of mortgage bonds actually in circulation must always be covered to their full nominal value by mortgages of at least equal amount and bearing at least the same rate of interest. The cover must, so far as it applies to agricultural land, consist, to the extent of at least one-half, of reducible mortgages in which the annual amount of the sinking fund paid by the debtor shall not be less than one-fourth per cent, of the capital amount of the mortgage. The bank may, however, in case such mortgages should be paid off before the time at which they are due, make use of mortgages of another kind as cover in their place, until the lapse of the normal period for redemption. If the bank have a mortgage on a parcel of land and must acquire it in order to prevent a loss on the mortgage, this shall not be brought into account as cover for mortgage bonds for more at most than the half of the amount for which it was brought into account previous to its acquisition. If, in consequence of the redemption of mortgages or for any other reasons, the above-mentioned cover by mortgage is not fully existent, and neither the comple- tion by other mortgages nor the calling in of a corresponding amount of bonds is immediately possible, the bank must replace the defective mortgage cover by the temporary purchase of Imperial or State bonds or by cash. The bonds may be brought into account at a maximum of at least 5 per cent, of their nominal value below their market price. Section 7. — ^Mortgage banks may not issue mortgage bonds to more than fifteen times the amount of their paid-up share capital and of the reserve fund assigned exclusively to cover any deficit in the balance sheet or for the security of the bond holders. Section 8. — ^In the mortgage bonds the provisions that are applicable to the legal relations between the mortgage bank and the mortgage bond holders, especially in relation to the possibility of their being called in, must be clearly set out. The mortgage bank may waive the right of calling in bonds for a period of at most 10 years. No right of redemption may be granted to bond holders. Section 9. — The issue of mortgage bonds, the redemption value of which exceeds their nominal value, is not permissible. Conditions respecting Mortgage Loans. — Section 10. — Only such mortgages may be employed as cover for mortgage bonds as comply with the conditions set out in sections 11 and 12. Section 11. — Loans on mortgage are only permitted on land within the Empire and, as a rule, only loans must rank as first charges on such land. The loan must not exceed three-fifths of the value of the land. The central authority of a Federal State may permit the mortgage of agricultural land within the area of such State, or partially within such area, up to two-thirds of its value. Section V2. — ^The value of the land as taken for the purpose of mortgage should not exceed the careful estimate of its sale price. In fixing this value only the per- manent properties of the land and of its yield are to be considered, i.e., such as the land might continue to give to any owner under ordinary husbandry. In so far as the land, previous to its mortgage, has been valued by one of the public authorities of the territory in which it is situate, the Federal Council may decide that the value accepted at the time of mortgage may also not exceed any price based upon such valuation. Mortgages on building sites taken up as cover for mortgage bonds, as well as mortgages on such new buildings as are not yet completed and capable of yielding a return, must together not exceed the tenth part of the total mortgages assigned as cover for mortgage bond^ nor the half of the paid-up share capital. Further, mort- gages on land which does not yield a permanent return, especially pits, quarries, are excluded as cover for mortgage bonds. The same shall hold good of mines. GERMAN MORTGAGE BANK ACT. 25 Mortgages on other rights to which the provisions relating to land apply are excluded from use as cover for mortgage bonds in so far as such rights do not yield a permanent return. Section 13. — The mortgage bank must under the provisions of section 12 issue a statement of the estimate of value as made. This statement requires the approval of the supervising authorities. If the bank take up a mortgage within the territory of a Federal State other than that in which its registered offices are situate, the statement of value is to be forwarded to the supervising authority of such Federal State. Any objections raised by the authorities, when a settlement cannot be arrived at in any other way, shall be determined by the Federal Council, their decision shall, on request, be transmitted through the Imperial Chancellor. Section 14. — ^Loans on mortgage shall be paid over in cash. The payment of loans in mortgage bonds of the bank at nominal value is only permissible when allowed by the articles of association of the bank and the borrower at his option, either in cash or in mortgage bonds of the bank at nominal value, of the same kind as those in which he was paid, expressly assents thereto. In this case the right of redemption of the mortgage must be given in writing to the borrower. Mortgage bonds, which are not distinguished in the official list of Stock Exchange quotations, are to be considered in the sense of this provision as always belonging to the same series. Section 15. — The fundamental conditions for the grant of loans on mortgage shall be fixed by the bank. These conditions require the sanction of the supervising authority. In the conditions must be particularly set out, the loss which the borrower will suffer from failure to pay at the proper time, as well as the given conditions on which the bank is authorised to demand repayment of the mortgage before the time agreed. Should the bank take up mortgages within the territory of a Federal State other than that in which its registered offices are situate, the supervising authorities of such State may require that the fundamental principles of the conditions on which loans are granted should be communicated to them. The provisions of section 13, paragraph 2, sentence 2, shall have corresponding application to the settlement of objections raised. The supervising authority of the Federal Council mentioned in paragraph 2 shall be provided every year on its own request with a list of the loans against mortgage effected by the bank within the territory of the said Federal State. The Federal Council may issue instructions as to the preparations and contents of such list. Section 16. — In the prospectuses and loan proposal forms issued by the bank all regulations as to the mode of paying off the loan, the deductions in favour of the bank, the amount and the dates at which interest falls due, and other obligations falling upon the borrower, the date of first payments to sinking fund and the terms of calling in and repayments, are to be given. Section 17. — In case of the depreciation of a parcel of land or its appur- tenances, not resulting from bad husbandry on the part of the owner, the provisions of sections 1133 and 1135 of the Civil Code, as to the rights of creditors to the immediate satisfaction of their claims out of the land, shall only come into opera- tion in respect of the amount by which the value of the parcel of land has depreciated and to which extent it is no longer, either in accordance with the Act or the articles of association, sufficiently covered. Over and above this amount the bank may not reserve for itself the right to demand repayment of the mortgage before the agreed time in the case of a depreciation in the value of the land. The bank, in the event of the sale of a portion of the land, and provided that such sale is determined by the competent authorities, in accordance with the State laws, not to prejudice owners of rights over the property, may reserve to itself no further rights than those legally appertaining to it for securing or obtaining settle- ment of its claims. It may not be stipulated that the bank in case of its dissolution can demand the repayment of a mortgage before the expiry of the term for which it was granted. Section 18. — The debtor shall be granted the right, and the same shall be expressed in writing, of paying off the whole or a part of the mortgage on notice given. 25574 X 1 26 LAWS. The right of repayment may not be delayed for a longer period than 10 years. This period begins with the payment of the money borrowed, and, should such payment be made in instalments, with the payment of the last instalment; in case there be an agreement as to the date of repayments, after the payment of the money borrowed, the 10-year period shall begin as from the date of such agreement. The term of notice may not exceed nine months, and in the case of mortgages which the bank may call in, the term must not exceed that allowed to the bank. In so far as the right of the borrower to repay the mortgage is not precluded by these provisions, the bank may not stipulate for a commission on repayment, or the giving of surety when such notice of repayment is made. Section 19. — In the case of reducible mortgages, a right of notice in favour of the bank may not be stipulated. An agreement, giving to the bank the right to demand repayment of the mortgage before the agreed time, for special reasons connected with the circumstances of the borrower, shall not hereby be disturbed. The annual payments to be made by the debtor may only include the stipulated interest and sinking fund payments. Section 20.-— The commencement of the amortisation must not be delayed for a period exceeding 10 years. If in such cases, owing to the postponement of the amortisation, an amount be due to the bank over and above the agreed interest, such amount shall be clearly stated in the contract of loan. From the commencement of the amortisation onwards annual interest may not be charged on any higher amount than that of the capital balance due at the end of the previous year. Any excess on the year's transactions is to be written to the sinking fund. Section 21. — ^The right of the borrower to make repayment of the mortgage loan by instalments may be so limited, in the case of reducible mortgages, that the bank shall only be obliged to accept a payment when such payment is particularized and calculated to shorten the period for redemption by one or more years, in main- taining the previous amount of the yearly instalments. This provision does not, however, apply if the amount of the payment reaches the tenth part of the remaining capital sum and the mortgagor requests that the subsequent annual payments shall be reduced whilst maintaining the original period for redemption; in this case, when mortgages of the nature set out in section 6, paragraph 2, are in question, and the annual sinking fund payment amounts to less than one-fourth per cent, on the original capital, the bank shall prepare a fresh scheme of redemption. The bank may not beforehand relieve itself from the obligation which lies upon ij^ in respect of the amounts redeemed, as regards the necessary correction of the registry of title, cancelling of the mortgage, or the preparation of a mortgage bond for the balance as laid down in the provisions of the civil law. The bank must, after the publication of the annual balance sheet communicate to each mortgagor, on request, the amount of his mortgage which has been paid ofE up to the end of the previous year. Mortgage Register. — Section 22. — The mortgages set apart as cover for mort- gage bonds issued must be individually entered in a register. In the cases mentioned in section 6, paragraph 4, the securities set apart as supplementary cover must also be entered in a register; the entries must specify the individual parcels of land. Within the first month of every calendar year a copy of the entries in the registers made during the preceding half-year as certified by the fiduciary agent appointed according to the provisions of section 29, is to be communicated to the supervising authority. The copy shall be retained by the supervising authority. Section 23. — Within the second month of every half -calendar year the bank must publish in the German Official Gazette and in the newspapers selected for the announcements of the bank, the total amount of mortgage bonds in circulation on the last day of the previous half-year, the total amount of mortgages entered in the mortgage register after deduction of all repayments and other diminutions, and also the amount of money actually in the hands of the fiduciary agent as well as the total amount of the securities entered in the register at the same date. If securities or such qjortgages are entered in the register as are not of a character to cover the full amount of bonds, it must be stated in the published notice to what extent the securities or mortgages are taken into account as cover. &EBMAN MOETGAGiB BANK ACT. 27 Sook-keeping, Balance Sheets, Reports and other Statements of Mortgage Banks. — Section 24. — The annual balance sheet of a mortgage bank must contain under separate heads — 1. The total amount of mortgage bonds and securities set apart as cover for the mortgages; 2. The total amount of arrears of interest on mortgages; 3. The total value of the land held by the bank, v\fith a separate note as to the value of the bank buildings ; 4. The total amount of the balances in cash, bills and securities and under a separate head the amount of the mortgage bonds and other bonds of the bank; 5. The total amount of the claims of the bank on loans on effects business (Lombard) ; 6. The total amount of balances at other banks ; 7. The total amount of mortgage bonds in circulation according to their nominal value show^ing bonds at different rates of interest and the total amount of each kind ; 8. The total amount of the liabilities of the bank from the taking up of money on deposit. Section 25. — Should mortgage bonds be issued below nominal value, a sum equal to four-fifths of this depreciation must be taken from the assets side of the balance sheet; the profit v^^hich the bank makes by buying in mortgage bonds below nominal value is to be subtracted from the depreciation. The corresponding entries on the credit side of the balance sheet must be written off to the extent of at least one-fourth every year. In no year may the credit entries made in the balance sheet in accordance with paragraph 1 total more than the double of the excess yielded by the interest on mort- gages for the financial year, after the interest on bonds and, further, one-quarter per cent, of the total of the mortgages, has been subtracted; the credit entries indicated must also not exceed the amount of the reserve fund exclusively set apart for the covering of deficit. The expenses of the issue of bonds, including the commission paid for their sale, are to be charged to their full amount upon the expenses of the year in which such issue takes place. Claims of the bank upon the annual payments of mortgagors falling due after the close of the financial year may not be entered on the credit side of the balance sheet. Section 26. — If mortgage bonds are issued above their nominal value and the bank have renounced the right of redemption at any time, the excess, provided it amounts to more than 1 per cent, of such nominal value, is to be written to the debit side of the balance sheet. The bank may annually employ only a fraction corresponding with the number of years for which the repayment of these mortgage bonds is exceeded. Such use is not permissible so long as a minus difference of the kind set out in section 25, paragraph 1, appears on the credit side of the balance sheet; the plus difference may at any time be employed in cancelling such minus difference as well as in covering the loss incurred by the bank in buying in bonds at above their nominal value. Section 27. — In the profit and loss account the following are to be set out under separate heads : the total amount of interest earned by the bank during the financial year on mortgages, commission on loans, and other supplementary payments by mortgagors, as well as the total amount of interest on bonds to be paid by the bank during the financial year. Section 28. — In the report, or in the balance sheet, the following are to be made clear : — 1. The number of mortgages assigned as cover for mortgage bonds, and their distribution in groups rising progressively by sums of £5,000 ; 2. The amounts which accrue therefrom, from mortgages on agricultural and other land, from mortgages subject to amortisation, and from other mortgages, from mortgages on building sites and on unfinished buildings not yet capable of yielding a return; 3. The number of forced sales by auction and also of compulsory administra- tions which have taken place during the financial year on the initiative of the bank, and also the number of the same in which the bank was otherwise concerned; 28 LAWS. 4. The number of cases in which the bank was obliged to take over parcels of land for its own protection against loss, as well as the total amount of these mortgages with the loss of profit from the resale of lands so taken over ; 5. The years which show arrears of interest due from mortgages as well as the total amount of such arrears in any one year; 6. The total amount of repayments effected on mortgages during the business year, distinguishing those paid off by amortisation and by other methods ; 7. The limitations which the bank has imposed upon itself with regard to the repayment of mortgage bonds, and set out according to the different kinds of bonds. In the particulars indicated in Nos. 3-5 agricultural and other land is to be distinguished, as well as the principal districts over which the operations of the mortgage bank extended. In the report or in the profit and loss account the plus or minus differences resulting from the issue of mortgage bonds at above or below nominal value during the financial year are to be set out. Legal Security of Bondholders. — 'Section 29. — To every mortgage bank a fiduciary agent and a deputy shall be appointed. The appointment rests with the supervising authority after consultation with the mortgage bank. The appointment may be cancelled at any time by the super- vising authority. Section 30. — It shall be the business of the fiduciary agent to see that the prescribed cover for the mortgage bonds is always existent. It is not his business to enquire whether the established value be the real value or not in so far as such value of the land mortgaged has been established according to rules approved by the supervising authority. It shall be his business to see that the mortgages and securities set apart as cover for the mortgage bonds according to the provisions of section 22, paragraph 1, have been entered in the Mortgage Register. He must attach to the bonds, before their issue, a certificate as to the existence of the cover prescribed and of the entry of the same in the Mortgage Register. No mortgage entered in the Mortgage Register, nor any security similarly entered, may be erased from such register without the consent of the fiduciary agent. This consent must be given in writing and may be effected by the fiduciary agent affixing his signature to the mark of erasure in the Mortgage Register itself. Section 31. — The fiduciary agent must retain in the joint custody of himself and of the bank the documents relating to the entry of mortgages in the Mortgage Register as well as those relating to similarly registered securities and the money set apart under section 6, paragraph 4, as cover for the bonds ; he may only surrender them according to the provisions of this law. He is bound to surrender mortgage deeds, securities or money at the request of the bank and to join in their erasure from the Mortgage Register, provided there still remain on the register sufficient registered mortgages and securities to cover the bonds or the bank have provided some other prescribed cover. If the bank be bound in respect of the mortgagor to hand over the mortgage deeds or to adopt the procedure laid down in section 1145 of the Civil Code, the fiduciary agent must also surrender the deeds provided the provisions referred to do not stand in the way ; if the mortgage be redeemed, then in the last case the money paid over is to be handed to the fiduciary agent for safe keeping as provided by paragraph 1. Should the bank require mortgage deeds for temporary use, the fiduciary agent must surrender them, nor shall the bank be bound to provide other cover in substitu- tion therefor. Section 32.- — The fiduciary agent is authorised to inspect the books and papers of the bank at any time in so far as these relate to bonds or to mortgages entered in the Mortgage Register. The mortgage bank is bound to keep the fiduciary agent constantly informed as to the repayment of capital sums on mortgages entered in the Mortgage Register as well as of all alterations, of importance to bondholders, which concern these mortgages. « Section 33. Differences between the fiduciary agent and the bank shall be settled by the supervising authority. GERMAN MORTGAGE BANK ACT. 29 Section 34. — The fiduciary agent may demand from the bank a suitable remuneration for his business services. The amount of the agreed remuneration is to be communicated to the supervising authority; in case of failure to agree the amount shall be fixed by the supervising authority. Section 35. — If bankruptcy proceedings are commenced against the assets of the bank, the claims of the bondholders on the mortgages and securities entered in the Mortgage Eegister shall have precedence over those of all other bankruptcy creditors in respect of the settlement. The same holds good of cash in the keeping of the fiduciary agent as cover for bonds. All bondholders shall, as creditors, stand on the same footing. In regard to any demand by the bond creditors for settlement of their claims out of the other assets of the bank, the provisions of the Bankruptcy Code, sections 64, 153, 155, 156, and section 168, No. 3 (Imperial Law Gazette, 1898, p. 612), applicable to preferential creditors come into operation. Bonds of the bank owned by it and which have been entered by it as securities and which belong to the estate in bankruptcy, shall, in calculating the share to be apportioned to each bond, be reckoned with the proceeds of the effects set out in paragraph 1 . During the bankruptcy proceedings against the mortgage bank, the expenses of a meeting of the bond creditors, which shall be summoned as to the common rights of the bondholders, according to law, are to be met out of that portion of the estate in bankruptcy applied to the preferential settlement of the latter. Section 36. — Fiduciary agents who intentionally act contrary to the interests of the bond creditors shall be regarded as guilty of breach of trust and punished as directed under section 266 of the Penal Code. Section 37. — Whosoever shall knowingly issue, on behalf of a mortgage bank, mortgage bonds in excess of the amount covered as prescribed by mortgages and securities entered into the Mortgage Register or by the existing funds in the keeping of the fiduciary agent, shall be punished by imprisonment for a term not exceeding one year, and a fine not exceeding £1,000. The same punishments shall apply to anyone who shall knowingly effect a sale or charge upon a mortgage entered in the Mortgage Register or on a similarly registered security, although the aforesaid registered mortgages and securities do not suffice as cover for the mortgage bonds, and also to anyone who shall neglect, contrary to the provisions of section 31, paragraph 2, clause 2, to hand over to the keeping of the fiduciary agent monies received on the redemption of a mortgage. Should there be extenuating circumstances, the punishment may be by fine alone. Section 38. — Whosoever shall issue mortgage bonds on behalf of a mortgage bank without the certificates required by section 30, paragraph 3, shall be punished by a fine not exceeding £50 or with imprisonment for a period not exceeding three months. Section 39. — Infringement of the provisions of section 2 shall be punished by a fine not exceeding £150 in amount. Charges attaching to Land. — Section 40. — For the purposes of this Act mortgages {Hypotheken) and charges attaching to land (Grundschulden) shall rank as the same. If the bank have caused a piece of land to be registered in its name as cover against loss upon an existing mortgage or charge upon it to the bank, such piece of land falling to the bank as the result of a forced sale, and the bank, in place of the cancelled mortgage or charge, cause a charge upon the land to be registered in its name, the provisions of section 6, paragraph 3, shall apply in this case. Issue of Communal and Light Railway Bonds. — Section 41. — Should a mort- gage bank issue bank issue not bonds on the basis of loans on mortgage, but bonds granted to public, home corporate bodies or on the guarantee of such bodies, the provisions of section 6, paragraphs 1-4, and of sections 8, 9, 22, 23, 25, 26, 29 to 38 apply to such bonds and to the loan conditions on which they are based. Bonds issued by the bank in accordance with paragraph 1 may not, when added to the total mortgage bonds in actual circulation, exceed in value one-fifth of the amount fixed as the maximum for these latter by section 7. Section 42. — Should a mortgage bank issue bonds on the basis of a loan to a light railway undertaking secured by mortgage of the line, the provisions set out in section 41, paragraph 1, shall apply to such bonds, and the loan conditions on which they are based. The bonds issued by the bank in the manner indicated shall, under sections 7 and 41, paragraph 2, be regarded as equivalent to mortgage bonds, 30 LAWS. It may be declared by the articles of association of the bank that, against the claims arising out of loans granted according to paragraph 1, and against the claims arising out of loans granted to a light railway undertaking on the guarantee of a public, home, corporate body, bonds of one and the same kind shall be issued to serve as cover for claims in both cases. The total amount of claims of one or the other kind is to be clearly set out in the business report or in the balance sheet. Further, the bank shall fix standard terms for the grant of loans to light railway undertakings; such terms require the approval of the supervising authority. The provisions of section 13, paragraph 2, are applicable. Final and transitional Regulations. — Section 43. — Section 17 of the Act giving effect to the Bankruptcy Code shall be replaced by the following provisions : — The provisions of the laws of individual States, under which the holders of bonds issued on the security of mortgages by credit institutions which do not fall within the category of joint stock mortgage banks, have a prior claim over all other creditors in bankruptcy, so far as the settlement of the affairs of the institution out of such mortgages is concerned, shall remain undisturbed. The provisions of the laws of individual States under which the holders of bonds issued by public corporate bodies, joint stock companies, companies with limited partnership, companies with limited liability or co-operative societies issuing bonds against loans, may be granted a prior right over those non-preferential creditors in bankruptcy whose claims arise later, to have such preferential claims registered in a public Debt Register, shall remain undisturbed. Section 44. — This Act shall come into force at the same time as the Civil Code, in so far as other enactments do not obtain by virtue of section 53. Section 45. — ^The provisions of section 1, paragraphs 1 and 2, shall not apply to mortgage banks in existence when this Act shall become operative. The provisions of section 2 shall not apply to co-operative societies registered in the co-operative register, in so far as they, previous to May 1, 1898, according to the terms of their articles of association, have carried on business of the nature set out in section 1, paragraph 1, when this Act shall become operative. Section 46. — The mortgage banks existing at the time at which this Act becomes operative shall not be subject to the provisions of section 5 in so far as they have not, up to 1 May, 1898, carried on businesses according to the terms of their articles of association beyond the limits laid down in section 5. A mortgage bank which avails itself of the more extended scope of business provided for in paragraph 1 may only issue mortgage bonds up to ten times the amount of its paid-up share capital and of the reserve fund as indicated in section 7. The authority to issue mortgage bonds is limited to double the amount of the paid-up share capital and of the reserve funds mentioned in section 7, if, at the time of the entry of this Act into force, the mortgage bonds issued by the bank do not exceed double the amount of the paid-up share capital. The amount to which hereunder a bank may issue mortgage bonds shall be interpreted in the sense of section 41, paragraph 2, in place of the maximum amount as fixed by section 7. Section 47. — ^Should a mortgage bank, which under section 46 is not bound by the provision of section 5, resolve to submit itself to these provisions and to alter its articles of association accordingly, and should a reduction of share capital take place in connection therewith, the securing of creditors, contemplated in section 289, paragraphs 3 and 4 of the Commercial Code in respect of the holders of bonds, is not necessary, provided the bonds actually in circulation are fully covered by the mortgages registered in the Mortgage Register. Section 48. — ^A mortgage bank which, at the date on which this Act comes into force, has the right of issuing bonds in excess of the amount fixed under sections 7, 41, 42 or 46, paragraph 2, clause 1, or paragraph 3, retains the right with the provision that the mortgage bonds and the bonds issued against loans to light railway undertakings shall not exceed twenty times the amount of the paid-up share capital, and that in this sense the paid-up share capital is only considered in so far as it remains within the limits, established for the share capital of the bank by its articles of association, on May 1, 1898. The bonds which the bank issues against loans not secured by mortgage to public corporate bodies or against the assumption of guarantee by such corporate bodies may not, when added to the mortgage bonds already in circulation and to the bonds issued against loans to light railway undertakings, exceed the amount to which the bank may issue mort- gage debentures by more than one-fifth thereof. &ESS1AN STATE MOBTGAGE BANK ACl\ '61 Mortgage bonds and other bonds issued on the basis of an increase of share capital entered in the Commercial Register subsequent to 1 May, 1898, may only be so issued under the provisions of sections 7, 41, 42 and 46. The reserve fund then existing and which had reached the maximum permitted by paragraph 1 shall be omitted from the calculation. These provisions, in the cases contemplated by section 46, paragraph 2, clause 2, shall not apply. Section 49. — ^The provisions of sections 6, paragraph 2, and of 10 to 12 do not apply to the covering of mortgage bonds by mortgages which were owned by a mortgage bank in accordance with the provisions of its articles of association previous to the date on which this Act comes into operation. The provisions of sections 17, paragraph 1, clause 2, and of paragraphs 2 and 3, and 18 to 21 are only applicable to agreements made after this Act shall come into operation. Section 50. — The provisions of sections 24-28 in the case of existing mortgage banks shall first apply to the balance sheet, profit and loss account, and to the business report for the financial year beginning with or during the year 1900. The provisions of section 25 shall not apply to the method of placing to account of the loss resulting from the issue of bonds at a price below their nominal value, previous to the date on which this Act shall come into force, nor to the method of placing to account the expenses of issuing mortgage bonds before the stipulated time. The bank must, however, within at least five years, write off the entries on the credit side of the balance sheet which represents the cover for such loss or expenses, unless the retention of such entries is permissible under section 25. The same shall hold good in respect of claims on the future yearly payments of borrowers entered on the credit side of the balance sheet previous to the date on which this Act shall come into operation. Section 51. — If at the date at which this Act comes into operation a State Commissioner be appointed to a mortgage bank charged with the supervision of the issue of the bonds, the obligations laid upon the fiduciary agent by sections 22, paragraph 2, and 30-34, 41 and 42 may be transferred to the Commissioner appointed under section 4, paragraph 3. Section 52. — If a mortgage bank have issued special bonds against rent charges which, previous to 1 January, 1899^ were entered in the registry of title as charges on real property, the provisions of sections 6, 22, 29 to 35 and 37, paragraphs 2 and 3, section 41, paragraph 1, and of section 51, shall apply to these bonds and to the rent charges against which they are issued. Section 53. — Existing mortgage banks must take in hand in proper time the establishment of the register prescribed in sections 22, 41, 42, 52, so that the register shall be opened on January 1, 1900. Immediately after this date they must advise the supervising authority that the register is opened. A copy of the register certified by the fiduciary agent or by the Commissioner of the supervising authority is to be forwarded to the authorities with all possible despatch. With the delivery of the notices named in paragraph 1, clause 2, the liens constituted for the holders of bonds under the laws of individual States lapse. In so far as a bank, in its articles of association or .in the conditions attached to mortgage bonds shall have taken upon itself the duty of maintaining such liens for its bondholders, the regulations specially made in respect thereof shall be of no effect upon the date named. ACT OF JULY 12, 1902, CONCERNING THE ESTABLISHMENT OF A HESSIAN MORTGAGE BANK. Article 1. — Our Government shall be empowered, for the promotion of mortgage credit in the Grand Duchy, to establish a Mortgage Bank in conjunction with the Communes or Unions of Communes throughout the State, or with those savings banks of the State which may be regarded as public in the sense of Article 1807 of the Civil Code, and of Article 125 of the Hessian Act of July 17, 1899, giving effect thereto. Article 2. — Our Government shall have placed at its disposal for this object the sum of £200,000, by the issue of bonds created for the purpose. These bonds shall be issued as required, and shall bear interest according to the state of the money market. The State shall have a prescriptive right to buy up the whole or a part of these bonds, or to give notice of their redemption by payment in 32 LAWS. specie of the capital sum. No right of notice for repayment shall appertain to the holders of the bonds. Article 3. — The Hessian Mortgage Bank shall be established in the form of a joint stock bank, to which the provisions of the Mortgage Bank Act of 13 July, 1899, shall apply. The Government is bound to provide that in the agreement of the Company there shall be a clause prohibiting any one shareholder from holding more than half the votes. For the increase of the amount of the State's share, or for the taking over or dissolution of the Bank, the consent of the Estates of the Grand Duchy shall be necessary. Article 4. — The officials of the Bank shall have the rights and duties of direct State officials. All salaries, pensions, allowances to widows and orphans and other expenses are, however, to be met by the institution. In case of dissolution of the Company, the State shall take over the responsibility for pensions, allowances to widows and orphans of officials and their survivors. Article 5. — ^The Mortgage Bank shall be free of all State and Communal taxation. Article 6. — The procedure in distraint, in the course of ordinary business, shall be exercised by the Bank in support of its claims in the same way as for those Com- munal claims which are not based on assessments or on other valuations approved by the executive authorities, or other charges of equal legal validity with Comftunal rates. Article 7. — ^Any document issued by the Bank within the area covered by its operations shall have the force of a public document, provided it be regularly signed by persons representing the Bank according to the Company agreement and have the seal of the Bank appended. A document drawn up in the form laid down in paragraph 1, in so far as it relates to the release of a property and mortgage within the province of Rhenish H^se, the legal position of which is indicated by Article 40, paragraph 1, of the Act of ICMay, 1893, or to the release from a restriction or a bar, shall have equal force with a legal or notarial document. Article 8. — ^All State and Communal authorities and officials without exception are bound to communicate to the Committee of Management of the Bank, or to persons acting on their behalf, all information as to the nature, value or charges upon the land proposed to be charged, and on| other matters affecting the area of business of the Bank, excepting as to the personal and business circumstances of the mortgagor. This provision shall affect the legal and notarial authorities only in so far as it relates to property, the charging of property, or other rights over landed property. The information may only be refused when special service considerations stand in the way. In cases of doubt the competent supervising authorities shall decide. How far such information is to be accorded gratuitously or otherwise shall be determined by the executivei regulations issued therefor by Our Ministry of Finance. Article 9. — ^The supervision of the Bank shall rest with Our Government and shall be exercised by Our Ministry of Finance. Article 10. — OurMinistry of Finance shall be charged with the administration of this Act. Given under Our own Hand and under the seal of the Grand Duchy at Darmstadt, 12 July, 19()2. (l-S.) Ernst Ludwig. LAND IMPROVEMENT ANNUITY BANKS. Act for the establishment of Land Improvement Annuity Banks, of 13 May, 1879 (Collection of Laws, p. 367), with the Amendments introduced by Article 21 of the Law for giving effect to the Commercial Code of 20 September, 1899 (Collection of Laws, p. 177). Section 1. — ^Land Improvement Annuity Banks may be established for the following purposes : — (1) The promotion oi. the cultivation of the soil, and especially the execution of drainage and irrigation works, the laying out and maintenance of PRUSSIAN LAND IMPROVEMENT ANNUITY BANK ACT. 33 roads, forest cultivation, and the reclamation of land and the founding of new farm holdings ; (2) Works for the protection of river banks ; (3) For the construction, widening, and maintenance of dykes, and the security and improvement works appertaining thereto ; (4) For the establishment, use or maintenance of water-courses or basins, for the construction and improvement of water-ways (for the floating of timber rafts), and other constructions in connection with navigation. Section 2. — Land Improvement Annuity Banks are institutions of the Provincial (Communal) Unions. Their organisation and administration shall be regulated by articles of association. Section 3. — The establishment shall depend upon a resolution of the Provincial (Communal) Qouncil for the district of the Union in question. The activities of the Land Improvement Annuity Bank may be restricted to one or more of the objects set out in Section 1. Section 4. — The Land Improvement Annuity Bank grants loans in cash or in bonds issued by it at their nominal value. The bonds are made out to holder and bear the designation " Land Improvement Annuity Bank Bonds." The nominal value of such bonds issued may not exceed the amount of the loan granted. If the loan be granted in cash, the Bank may issue such bonds to the amount of such loan. Any profit on the selling price of the bonds shall go to the reserve fund (Section 47). Such bonds must bear the same rate of interest as that which the borrower is bound to pay. Section 5. — The loans cannot be called in on the part of the Land Improvement Annuity Bank unless the following provision takes effect. The Bank has the right to call in so much of the loan as shall remain unrepaid at six months' notice if — (1) the debtor after claim made by the directorate do not fulfil the obligations imposed on him by the articles and by his contract ; (2) if the land mortgaged, or a part thereof, become liable to execution by way of sequestration, administration, or sale by order of a court, or also if any procedure of this nature be instituted, or if the legal validity or status of the mortgage granted be impugned; (3) if the borrower become bankrupt ; (4) if the successor in possession does not agree to the request of the directorate to take upon himself the personal obligations of the borrower. The rate of interest charged on loans must not exceed 4^ per cent., and the payments to sinking fund must amount to at least ^ per cent, annually. The interest fixed on the nominal value (of the bonds) is to be paid in full, without regard to the progressive redemption of the loan. Any sum not required as payment of interest shall be credited to the redemption of the loan. It is not essential that for all varieties of loans identical terms of redemption should be prescribed. The annual quota payable as sinking fund is subject in each individual case to special agreement. The sums paid as interest and sinking fund form the land improvement annuity to be paid by the borrower. Section 6. — For the loan, the land improvement annuity and any additional payments thereto (Section 34), mortgage or rent charge security on land capable of being used for agricultural or forestal cultivation, shall be furnished. The security is to be regarded as furnished if the loan do not exceed twenty-fi\e times the amount of the cadastral net value as ascertained at the last assessment for land tax, or the half of the value of the real estate as estimated by assessments made by Land Mortgage Credit Associations (ritterschaftlich und landschaftlich) or by a special assessment by the Bank. Section 7. — If the value of the real property be ascertained by special assessment; by the Bank, and if the loan be granted for the carrying out of some undertaking which has in view the promotion of the cultivation of the soil of th© said property, or of a part thereof (Section 1, No. 1), such increase in value of the said property, to be clearly shown as obtainable through the undertaking, shall be taken into con- sideration. 34 LAWS. Such increment value must be ascertained apart from the value of the property in its then existing condition. The security is to be regarded as furnished if the amount of the loan falls within the half of the ascertained gross value of the property, including the increase of value to be obtained from the improvements, or, within the first three- fourths of that value which has been ascertained for the property by the Bank's assessment. That portion of the loan which exceeds the three-fourths of the assessed value of the property in its then existing condition or exceeds twenty-five times the amount of the cadastral net yield, may be paid after the undertaking has been carried out according to plan. Section 8. — 'When the undertaking has been completed a further loan may be granted to the borrower up to the amount of expenses incurred in the undertaking, should the expenses of the work not have been covered by the loan already granted. In this case the increase of value of the property obtained by the improvement may be ascertained by a further assessment by the Bank. The security must be regarded as furnished if it be the half of the value ascertained by the new assessment. Section 9. — ^The necessary provisions for control in the interests of the Bank in the cases covered by Sections 7 and 8 for the maintenance of the improvements, the basis for the special assessments to be instituted by the Bank, the provisions to be adopted on taking into account the increase of value produced (Section 8) or to be produced (Section 7, clause 2) by the improvements, as well as those by which the com- pletion of the undertaking is to be determined (Section 52)^ are to be set out in the articles of association. Section 10. — ^Loans granted for the carrying out of drainage works may, so far as the articles permit, come under the application of the special provisions of Sections 11-31. Section 11. — If the proposed drainage works are calculated to bring about a permanent improvement of the parcel of land, the borrower may, subject to the limitations hereinafter imposed by this Act, claim that, after the completion of the works, to be taken in hand within a specified time, there shall be granted, in the case of the annuities (Land Improvement Annuity) to be registered on the parcel of land and the incidental additional payments, priority over all other charges on the parcel of land resting upon private title. Section 12. — ^The loan shall be extinguished by the payment of the annuity as registered. The annuity must fall due at least annually. It must be so arranged that it shall furnish at least 4 per cent, per annum to the extinction of the loan, besides the current interest on the whole sum borrowed. It may be determined by the articles that the annuity to be paid in the first year shall not exceed the amount necessary for interest. The portions of the annuity which exceed the amount necessary for the payment of the interest on the loan shall, in proportion to its progressive extinction, be applied to such extinction. Section 13. — Right of priority may only be granted to such amount as the amount of the loan capital to be elxtinguished by the annuity does not exceed that of the necessary expenses of the drainage works. Right of priority in respect of such parts of the parcel of land as are specially charged, may only be granted in so far as the same shall be directly affected by the improvement. Section 14. — The borrower must have registered in the Register of Title a note securing the claim upon the grant of the annuity, and at the same time move for the grant of the right of priority before the authorities competent to decide it, and produce : — (1.) A complete plan and estimate of cost of the proposed drainage works, in which shall also be stated the time within which the work will be carried out. (2.) A certified copy of the folio of the Register of Title or of the title deeds of the parcel of land, or of an extract from the Land Mortgage Register covering all still valid registered mortgages. The matter to be registered, mentioned at the beginning of this section, must be prepared from these exhibits. Section 15. — The competent deciding authority shall require, on the proposal arising therefrom, the opinion of a Commission to be appoint^ for this purpose for PRUSSIAN LAND IMPROVEMENT ANNUITY BANK ACT. 35 the province or individual districts of the same within the Provincial (Communal) Union as to — whether and to what extent the carrying out of the proposed works accord- ing to the plan is likely to produce a lasting improvement of the parcel of land — -and how far the estimate of the cost thereof is reasonable. In clear and simple cases the competent deciding authority is, nevertheless, authorised to procure this information in other suitable ways according to their judgment. Section 16. — The Commissions referred to in Section 15 shall consist of two landed proprietors domiciled within the area of the Provincial (Communal) Union who shall be elected by the Provincial (Communal) Committee for a definite period, and of one sworn expert to be nominated by the competent deciding authority.* The authority of the Commission may, under the articles of association, be transferred to such credit institution (Land Mortgage Credit Association) within the district, whose mortgage bonds under the articles are issued with the collaboration of an official directly or indirectly in the service of the State, and holding the office of notary or judge, or qualified for the higher administrative service. This transference may be limited to the case of estates on which loans have been granted by the particular land mortgage credit institutions. Section 17. — ^If the competent deciding authority considers that the proposed drainage works are clearly shown to be calculated to raise permanently the value of the property by at least the amount of the expense incurred, it shall, by public notice, call upon those who claim to have rights on the estate, to bring forward in writing any objections they may have to make against the demand for the grant of right of priority, within a period of six weeks. Section 18. — The notice to lodge objections shall indicate : — (1) The amount of the annuity taken over by the borrower, the term for which it is to run, and the parcel of land by which security is to be furnished ; (2) It shall further draw attention to the fact that the plan and estimate for the proposed drainage works, as well as the opinion given by the Com- mission thereon (Section 15), or alternatively the reliable information obtained (Section 15, clause 2, and Section 16, clause 2), may be inspected at some place named until the expiry of the term of notice ; (3) And shall give notice that on the expiry of the time given, a resolution will be arrived at, according to the circumstances of the case, as to the grant of right of priority, and that no objections entered after such resolution has been carried will be entertained. Section 19. — Notice to lodge objections is effected by a single insertion in the public notices column of the official newspaper and in that paper which is ordered to be used for the publication of the official notices by the district court within whose area of jurisdiction the land in question is situate. (Section 187 of the German Civil Process Code.) The term of six weeks set down in Section 17 shall run from the day on which the insertion in one or other of the papers named is effected. Section 20. — Copy of the notice to lodge objections must be sent within the first two weeks of the term laid down in Section 19 by post, with the endorsement "Registered," to the persons having claims on the real property (Realberechti-ger). Section 21. — 'The entry of an objection within the prescribed period on the part of persons having claims on the real property (Realberechtiger), shall preclude the grant of right of priority over the claim of the objector and of any other person with prior claims to his. An objection is to be regarded as presented in time if it be brought previous to the passing of the resolution by the competent deciding authority. Section 22. — ^After the expiry of the interval the competent deciding authority shall proceed to a resolution by which right of priority for the annuity, in the event of the proper carrying out of the proposed drainage works, shall be granted. The resolution shall have the reasons therefor attached. * Under section 39 of the articles of association of the Silesian Bank the Drainage Commiasions shall be formed for each district in cases where need arises. The election of the members is to be made by the Provincial Committee for six years. The Commissions conduct their business under the guidance of the competent deciding authority under the terms of the law. 25574 T 36 LAWS. No opposition to the same shall be valid. The competent deciding authority may, before the resolution is passed, for the purpose of setting aside any objection raised, permit negotiations between an appointed agent and the objector, of which the person seeking the right of priority shall have notice. Section 23.— On the basis of the resolution of the competent deciding authority, the Land Improvement Annuity Bank may assure the borrower that the loan sought for will be granted on production of the required security. Section 24. — ^The security shall be obtained by registration of the annuity, and of the incidental further payments, in the Eegister of Title or in the Register of Mortgages. Security for the annuity is to be estimated (Sections 6-8) in the same way as if in place of the annuity the loan capital were to be registered. At the same time as the registration of the annuity is effected by virtue of the resolution of the competent deciding authority (Section 22), a note as to the security of the claim to grant of right of priority for the annuity, is to be made in the Register. Section25. — The registration of the right of priority of the annuity in the Register of Title shall follow on a certificate of the competent deciding authority that the proper execution of the drainage works is completed. The competent deciding authority must, before the grant of the certificate, obtain the necessary information by way of opinion in the same manner as that provided for by Section 15. The decision of the competent deciding authority as to the proper execution of the work cannot be disputed. Section 26. — If the competent deciding authority certify according to the pro- visions of Section 25 that a portion of the works, as planned, have been properly carried out, and that thereby a permanent material improvement has been brought about, registration of the right of priority for a corresponding proportion of the annuity, to be determined by the competent deciding authority, may be effected. Section 27. — The registration of the note referred to in Section 24, clause 3, and of the right of priority of the annuity, may take place without the production of the documents executed as to the actual real property rights. If any such document be produced subsequently, the Registry of Title must endorse the registration upon it. Beyond the amount of the annuities as registered, the parcel of land is subject to no further liability in respect of the loan. In case of forced sale of the parcel of land, the same shall be offered for sale on condition of acceptance of the annuity charge therewith, provided the rights of the persons with prior legal claims on the pro- perty do not stand in the way. The Land Improvement Annuity Bank cannot claim the liquidation of the loan out of the purchase monies. Section 28. — ^The owner of the parcel of land charged with the annuity is bound to maintain the drainage works in goodi condition for the period of the annuity. The Bank is bound to see that this duty is fulfilled, and in case of need to use compulsion to secure this. On the motion of the Bank, or of one of the persons having legal vested interests in the property, who is granted a locus standi by the resolution passed under Sec- tion 22, the competent deciding authority must carry out any repairs that may be necessary at the cost of the person bound (to maintenance). Section 29. — 'The expenses arising out of the procedure of the competent deciding authority are to be reckoned according to the provisions for the proceedings of that body. Section 30. — If the parcel of land charged with the annuity be subdivided, the legal provisions for the division of the State tax shall apply to the annuity; never- theless, in such cases the portions of the annuity which, after this subdivision of the annuity, amount to less than one mark (shilling) per annum, must be at once liquidated by the payment of a capital sum. (Section 36.) The shares of the annuity to be charged to the individual subdivision must be arranged in such round sums that their amount expressed in pence shall be divisible by 10. Section 31. — The extinction of the annuity charge in the Register of Title or of Mortgages is effected on the motion of the Bank. This must be done as soon as the annuity is redeemed. « Section 32. — Should a loan for drainage works be granted on a property held in fee or in trust, then, so far as the holder in fee or the life tenant and the male PRUSSIAN LANB improvement ANNUITY BANK ACT. ^7 relatives are concerned, Sections 10-16 and 22-31 apply in the sense that the regis- tration of the annuity as a charge upon the property shall be granted without the consent of the above-named parties. The above-named parties have no right of objection. Section 33. — ^The requirement of security by way of mortgage or charge upon land (Section 6) may be waived, if the loan be granted : — ' (1) To urban or rural Communes; (2)— (a) To public co-operative societies in the sense of the Act of 1 April, 1879, as to the formation of a co-operative society for the supply of water ; (&) To co-operative drainage societies, endowed with corporate rights, and whose organisation is regulated by articles confirmed by the head of the State; (c) To co-operative societies in the sense of the Act of 6 July, 1875 (Collection of Laws, p. 416), as to woods planted for protection and forest co- operative societies.* Section 34. — Contributions to the cost of administration of the Land Improve- ment Annuity Bank may only be levied as additions to the land improvement annuity (Section 5), and may not exceed one-fifth per cent, of the amount of the loan per annum. Section 35. — The land improvement annuities as well as the outlay ordered for the maintenance of the improvement works (Sections 9 and 28) under the terms of the articles, may be collected by the ordinary administrative authority or otherwise forcibly collected. Section 36. — ^The borrower shall be at liberty at any time to repay the loan wholly or by instalments to the Bank in cash or in bonds of the Bank at their nominal value. In this case the land improvement annuities, inclusive of other contributions required by the articles of association, must be paid up for thei current half-year. Repayment by instalments in amounts of less than £5 is not permissible. Section 37. — The land improvement bonds shall be issued by the Directorate of the Bank in the form (A) appended, in series of £250, £100, £50, £25 and £10, consecutively numbered and bearing interest at the rate of not more than 4^ per cent. per annum, payable half-yearly. The holders shall have no right to give notice for the redemption of the bonds. Section 38. — With every bond there shall at the same time be issued an interest certificate for 10 years of the form (B) appended — furnished with talons of the form (C) appended. After the lapse of these 10 years, new interest coupons and talons to the bonds are to be delivered to the holder of the talons issued with the previous series upon giving up these latter, provided that the holder of the bonds in question shall not at the proper time raise objection at the place appointed for the delivery of the interest coupons ; in this case the delivery of the new interest coupons and talon shall be made to the person presenting the bond. Section 39. — The amount due on the interest coupons will be paid in cash by the Bank on giving up the same. Section 40. — 'The interest coupons shall be held to be out of date after the lapse of four years. This period to begin with the last day of the December following the date on which their payment falls due. Section 41. — ^The Bank is bound to redeem so many bonds every six months, or to buy them up for the purpose of amortisation, as it may be possiBle to pay for, with those monies which, up to the end of the half-year in which the redemption takes place, have of necessity been written to the redemption fund out of payments on the annuities or capital payments in cash. The numbers of the bonds redeemed, as well as the time and place of repayment, shall be made public, t Section 42. — 'The nominal cash value of the Bank bonds drawn shall be paid to the holders. From the date fixed for paying off the Bank bonds no further interest is payable. * Corporations and co-operative societies must set out, in accordance with the judgment of the directorate, a statement as to the regulation of their annual budget and their general assets. t The drawing shall take place at latest on 31st May and 30th November, and the publication of the bonds drawn up to 10th June and 10th December, the redemption on the 1st July and 1st January following the publication. 25574 Y 2 38 Laws. Section 43.— Bonds of the Bank drawn for redemption lapse in 10 years. This term is to be reckoned from the December of the year in which the redemp- tion date fell. Section 44. — If a Bank bond no longer bear interest (Section 42), the still current interest coupons thereof shall, nevertheless, be paid by the Bank at the time at which they fell due. The holder of the bond must submit to the deduction of the amount of the missing interest coupons when he presents the bond for the receipt of the capital sum. Section 45. — Bonds which have been drawn or bought in for amortisation, as well as bonds given in payment under the terms of Section 36, shall, under the instruc- tion of the Directorate of the Bank, be destroyed by fire in the presence of two delegates of the Provincial (Communal) Council and a notary. The record to be taken by the notary concerning the destruction of the bonds shall be published. Section 46. — Lost or destroyed bonds of the Bank may be declared null and void after public announcement. Public announcement is only permissible when the first coupon of a series of coupons issued since the date of the proved loss have become due, or when coupons since this time have been four years due. Public announcements are not made for recovery of talons and coupons lost or destroyed. Any person who can prove to th0 Directorate of the Bank the possession and the subsequent loss of coupons before the lapse of the term within which they become out of date (Section 40), may, after the lapse of that period, be paid the amount of the cox^pons missing up to that date. Section 47. — ^A reserve fund shall be formed from those sums which the Bank may earn by putting its current cash out at interest, by profits on exchange trans- actions (Sections 4, 41), or by the lapse of coupons and of bonds drawn for redemption.* Interest on the reserve fund shall be written to it. The reserve fund shall be accumulated up to 5 per cent, of the amount of the loans granted, and brought up again to this amount after any drafts upon it have occurred. The reserve fund shall be employed as cover for any default in payment of annuities. If the reserve fund do not suffice for this, the deficit shall be supplied by the Provincial (Communal) Union. Any excess of the reserve fund over and above the amount of 5 per cent, on the loans granted, and the balances remaining on the closure of the B ank or the complete redemption of its bonds, shall fall to the Provincial (Communal) Unions. Section 48. — 'So soon as the reserve fund shall have reached the amount indicated in Section 47, clause 3, the interest on the same is to be employed, according to the detailed provisions of the articles, to defraying the cost of administration of the !^ank by the complete or partial turnover of the sums added to the fund (Section 34). Section 49. — ^The Land Improvement Annuity Bank shall, as regards the revenue authorities, be free of all stamp duty. The registration of the securities named in Sections 6, 14, 24, 27, in the Register of Title or of Mortgages, shall be effected without fee. Section 50. — The Directorate of the Bank is bound to publish once a year a report on the financial position of the institution. Section 51. — Upon resolution of the Provincial (Communal) Assembly, and with the approval of the head of the State, the Land Improvement Annuity Bank may be dissolved, and for this purpose a term shall be fixed, after the lapse of which no further loans shall be granted by the Bank. Section 52. — ^The articles of association must contain : — (1) the objects of the Land Improvement Annuity Bank ; (2) the mode of election and composition of the Directorate, and the definition of its authority; (3) the provisions for the presentation of the request for and the form in which the objects of a loan are to be set out, as well as for decision upon the same ; (4) the basis of the assessment to be established in accordance with Sections 7, 8, 9 and 24, clause 2, and the basis to be taken in reference to any * The investment of the re^rve funds must be made in recognised trustee securities (Section 39 of the Trustee Law of 5th July, 1875) or in bonds of the Bank (Section 38 of the Silesian Articles). PRUSSIAN LAND IMPROVEMENT ANNUITY BANK ACT, 39 increase of value of the parcel of land to be improved, as well as for the proof of the execution according to plan, and the control of the maintenance of the improvement works ; (5) the amounts fixed for the interest and sinking fund of the loan and for meeting the costs of administration, and the provisions for the extra expenses of the examination of the request for a loan, and the taking up of the assessment by the Bank ; (6) the dates on which the Bank bonds are to be issued and on which the payment of the annuities shall take place, as well as the dates for the levy of interest. (7) the method of redemption, the form of repayment of the loan, the term for the drawing of the Bank bonds and for the payment of bonds so drawn, and the provisions for the investment at inteaest of the reserve fund; (8) the provisions for the formation and procedure of the Drainage Commis- sion, as well as the details of the transfer of the powers of this Com- mission to land mortgage credit associations. (9) the form which the public notices issued by the Bank shall take, as well as the public newspapers in which the same shall be inserted. Section 53. — The articles of association require the approval of the Provincial (Communal) Assembly, and the sanction of the head of the State. A. Specimen Bond of the Silesian Land Improvement Annuity Bank. Letter ' Arms of No. the Province M. of M. Silesia. Bond of the Land Improvement Annuity Bank for {in words) Marks, German Imperial currency, bearing interest at the rate of per cent, issued in accordance with the regulations laid down by the Act of 13th May, 1879 (Collection of Laws, p. 367) and of the Statutes of 22nd July, 1881. Interest will be paid to bearer at the offices of the Central Provincial Bank at Breslau half-yearly on 2nd January, and on 1st July on the due coupon hereto belonging. Claims arising out of bonds of the Land Improvement Annuity Bank lapse in ten years from the date of maturity, if the bond be not presented for payment before the lapse of the ten years. This term (term of presentation) begins with the close of that year in which the date for payment falls. If the bond be presented, claims lapse in two years from the end of the term of presentation. A judgment of a court in favour of a claim arising out of a bond is equivalent to presentation of the same. The term of presentation for coupons is four years beginning with the close of the year in which the coupon fell due. At the end of each period of ten years fresh coupons and a new talon will be issued for this bond. Payment of the capital sum will be made in the manner prescribed by the Act of 13th May, 1879, and the Statutes of S2nd July, 1881. Breslau, (date) (Seal of the Bank.) The Directorate of the Land Improvement Annuity Bank of the Province of Silesia. (Facsimile signatures of the president and one member.) Executed The Commissioner of the Land Improvement Annuity Bank. (Signature.) Hereunto attached are the coupons, Series No. with talon. Registered Marks, Letter Folio (Signature of checking official.) 25574 ^ ^ 40 LAWS. B. Specimen of Coupon. Marks. Coupon series . No. . Coupon of the Land Improvement Annuity Bond of the Province of Silesia. Letter No. for Marks Series for Marks. « Half-yearly interest payable on by (in words) Marks. Act of 13th May, 1879. Statutes of 22nd July, 1881. Breslau, (date) The Directorate of the Land Improvement Annuity Bank of the Province of Silesia. (Facsimile signatures of the president and one member.) (l.s.) Impressed seal. The four years' term for presentation lapses 31st December, C. Specimen of Talon. Talon of Land Improvement Annuity Bond of the Province of Silesia. Letter No. for Marks. The holder of this talon w^ill receive upon its surrender the series of coupons for the 10 years from to If any objection be raised at the proper time before the Directorate of the Land Improvement Annuity Bank to the issue of fresh coupons to the owner of this talon, such issue of fresh coupons will be made to the possessor of the bond. Breslau, (date) The Directorate of the Land Improvement Annuity Bank of the Province of Silesia. (Facsimiles of signatures of president and one member.) (l.s.) Impressed seal. ~ ' " ^ 41 MORTGAGE (LONG-TERM) CREDIT INSTITUTIONS. ARTICLES OF ASSOCIATION (STATUTES, COMPANY AGREEMENT) OF 1. Westphalian Land Mortgage Credit Association (Landschaft). 2. Bavarian Agricultural Mortgage Bank. 3. Hessian State Joint Stock Mortgage Bank. 4. A Prussian Savings Bank. 5. Bavarian Savings Bank Regulations (extract). 6. Land Improvement Annuity Bank of Silesia. Agreement of Baden Government vfith the Rhenish Joint Stock Mortgage Bank as to Rural Mortgage Loans. REVISED ARTICES OF ASSOCIATION OF THE LAND MORTGAGE CREDIT ASSOCIATION OF THE PROVINCE OF WESTPHALIA. MUNSTER, 1909. Chapter I. Organisation and Administration. — Supervision and Control. Section 1. Style, Object, Seat, and Rights. — Under the style of " Land Mort- gage Credit Association (Landschaft) of the Province of Westphalia," an Association of landowners of the Province of Westphalia, the Districts of Rees and Dinslaken, the urban and rural Districts of Mlilheim on the Ruhr, the urban and rural Districts of Essen-on-the-Ruhr, and the urban District of Duisburg, as w^ell as of the Prin- cipalities of Waldeck and Pyrmont, has been formed for the purpose of procuring credit on the security of the property of its members in accordance with the provisions in these articles of association. The Association is a public credit institution with its seat in Miinster, and has the status of a corporation, as well as the authority to issue, for the purpose of providing the funds necessary for loans upon land owned by persons desirous of borrowing, bonds to bearer of the form hereunto attached (A) under the designation of " Mortgage Bonds of the Land Mortgage Credit Association of the Province of Westphalia " bearing interest according to the proposal of the borrower at the rate of 4^, 4, 3^, or 3 per cent. The Association has also the right to enter into arrangements with the Central Land Mortgage Credit Association for the States of Prussia, in Berlin, on the basis of their articles of association, for the common issue of Central Mortgage Bonds. The seal of the Land Mortgage Association shall consist of an heraldic eagle bearing on its breastplate the arms of Westphalia (a horse salient), with the inscrip- tion " Land Mortgage Credit Association of the Province of Westphalia." Section 2. Members. — Any person may be admitted as a member who is the owner of agricultural or forest land in the province of Westphalia or in any of the districts of the Rhine Province named in Section 1, or of the Principalities of Waldeck and Pyrmont, which, according to the terms of the law of 21 May, 1861, for the further regulation of the land tax,, or as the result of an assessment made by a land mortgage credit association, shows a net yield of at least £2 10s. Mode of Entry. — Notification of intention to become a member must be made to the Directorate of the Association accompanied by an extract from the Land Tax Register and a complete copy of the folio of the Registry of Title relating to the parcel of land to be charged, and in addition a properly certified return of the public burdens resting on the same. The copy of the folio of the Registry of Title must clearly set out the contents of the original entry in the register at the time, and must, on the request of the Directorate, be attested. The Directorate shall decide as to admittance. Appeal against their decision may be made to the Council of Administration, which shall then decide finally. On admission an entrance fee of one shilling for every £50 or part thereof of the loan granted shall be charged. A similar charge shall be made upon members on the grant of further loans on mortgage provided it is not a matter of a simple conversion of bonds or merely a renewal of credit already granted. 25574 Y i 42 MORTGAGE CREDIT INSTITUTIONS. The acquirer of an estate mortgaged in accordance with the terms of these articles, is bound, in order to avoid penalties under Section 33 (Aa) to enter at once on the acquisition of the land into a written agreement with the Association, attested by a notary, a justice, or the syndic of the Association, and take over the personal responsibility for the indebtedness to the Association attaching to such estate. This document must be presented to the Directorate of the Association within fourteen days after demand. The payment of an entrance fee cannot be demanded in these cases. Section 3. Duties of Members in general. — Every member is bound to accept, if elected, the duties of member or member's deputy on the Council of Adminis- tration or those of a commissioner thereof, provided he have not already in a similar manner acted as such. In the case of land owners who are at the same time public officials, this regulation shall only have force in so far as no refusal of permission to serve on the part of the superior authorities stands in the way. Section 4. Retirement or 'Eocpulsion. — Retirement from the Association takes place as soon as the member has fully discharged all obligations undertaken towards the Association. On the sale of a parcel of land on the mortgage of which bonds have been issued, the personal obligations of the member in regard to it cease as soon as the documents named in Section 2, paragraph 3, have been placed in the hands of the Directorate by the new owner. The Directorate may order the expulsion of a member who has not fulfilled the conditions binding upon him under the articles of association. All claims against the assets of the Association cease on retirement or expulsion therefrom. Section 5. Administration. — Under the supervision of the Royal State Govern- ment, that is to say, of the Minister of Agriculture, Domains, and Forests, the business of the Association shall be conducted and controlled by the Directorate, the Council of Administration or the commissioners thereof, and the General Meeting. State Commissioner. — Direct supervision by the State shall be exercised by a Royal Commissioner to be appointed by His Majesty the King, whose business it shall be to see that the general State laws, the provisions of the articles of association, and the resolutions of the Association are observed. He is authorised to examine at any time the books, accounts and other official papers in the offices of the Association, as well as the cash in hand. He may take part in, and tender advice at, all meetings of the Council of Adniinistration and of the General Meeting, and may on his part summon such meetings, draw up the agenda thereof, and preside thereat. Section 6. Directorate. — The Directorate shall have its seat in Miinster. It shall consist of three members elected by the Council of Administration. Further, three deputies shall be elected by the Council of Administration who, in case of absence, sickness, or inability to attend on the part of a member, shall represent him in an order to be previously decided upon. The minute of these elections is to be drawn up either before a notary or a justice. An executed copy shall be furnished to the Directorate as proof of authority. One member pf the Directorate must at the same time be a member of the Associa- ation and one other (the syndic) must possess the qualifications for judicial office. One of the members acting as deputy on the Directorate must possess the same qualifications. The names of the members of the Directorate and their deputies shall be placed before His Majesty the King by the Royal Commissioner for the Royal approval. A fresh election in consequence of lapse of the term of office does not require such Royal approval. The first ordinary member of the Directorate shall be sworn to his duties by the Royal Commissioner, and such member shall swear in the other members of the Directorate and the other officials of the Association by hand-grip in lieu of oath. He shall act as chairman at the meetings of the Directorate, and in case of inability to attend shall be represented by the second ordinary member, and in case of his inability to attend, by the third. The Council of Administration shall determine the amount of remuneration to be paid to the directors, as well as their term of office and conditions of their appointment. The names of the directors and their deputies will be made known on the part of the Royal Government ^rough the Imperial Gazette and the official journals of the province of Westphalia and of the Administrative District of Diisseldorf , as well as by publication in the official gazette of the Principality of Waldeck. WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. 43 Other O^cials of the Association. — The other officials of the Association shall be elected and appointed by the Directorate. The amount of their remuneration, their term of office and conditions of their employment, shall be fixed by the Council of Administration. The appointments of bookkeepers, cashiers, and clerks must be con- firmed by the Council of Administration. Assistants, clerks, and employes paid by the day may be appointed and dismissed as required by the Directorate. Section 7. Syndic. — The member of the Directorate (Syndic) qualified for judicial office and entrusted with the syndical business, and, in case of his temporary inability to attend to his duties, his similarly qualified deputy, shall have the right in all matters affecting the Association to prepare and issue agreements, declarations, and negotiations with the force and effect of public documents or to attest them by impressing the syndical seal thereon. These documents have the character of notarial documents. By their authority legal distraint arising out of claims by land mortgage {landschaftlich .•; ritterschaftlich) credit institutions may be levied in accordance with the law of 3 August, 1897. (Collection of Laws, p. 388.) In the cases provided for under Section 726, paragraph 1, of the code of Civil Procedure, and Sections 727-729, 738, 742, 744; of Section 745, paragraph 2, and Section 749 of the same, a distress warrant can only issue on the order of the Royal Court of Westphalia in Miinster. The Syndic shall use as seal the seal of the Association with the addition of the words " Seal of Syndic " to the inscription under the eagle. Section 8.7-The members of the Directorate and the officials of the Association confirmed in office by the Council *of Administration may, under the conditions imposed by the law of 21 July, 1852, as to the breach of duty of officials not holding legal qualifications (Collection of Laws, p. 465), against their will and despite the terms of agreement on their appointment, be dismissed from their offices or suspended from duty. The Royal Commissioner has the right of suspension in the case of members of the Directorate with reservation of appeal to the Minister of Agriculture, Domains and Forests ; in the case of other officials the power of suspension rests with the Directorate. The procedure on dismissal shall in the case of members of the Directorate be conducted by the Royal Commissioner or by a Commissioner appointed by him according to the form of the aforesaid law and decision taken through the Minister of Agriculture, Domains and Forests. In the case of other officials the Directorate is the initiating and deciding authority; on appeal the Council of Administration shall first decide and in the last instance the Royal Commissioner. For the fixing of fines in the sense of Section 15 of the law mentioned in para- graph 1, the Minister of Agriculture, Domains, and Forests has authority if they be leviable on members of the Directorate, and the Directorate if they be leviable on other officials of the Association. Complaint to the Royal Commissioner against the punishments decided upon by the Directorate is permissible. Money fines may not exceed £7 10s. in amount in individual cases. Section 9. — ^The Directorate shall administer and conduct the affairs of the Association and shall represent it also in those cases in which the law requires special authority to represent. The Directorate is competent to pass resolutions provided three members be present, one of these at least to be an ordinary member. The resolutions of the Directorate shall be carried by a majority of votes unless there be anything to the contrary in these articles. At meetings of the Directorate, of the Council of Administration, at General Meetings, and at other meetings of the Association, the Syndic or his deputy who takes the minutes may call in a minute taker as assistant clerk. In the conduct of their business the Directorate must observe the instructions given to them by the Council of Administration and give effect to its resolutions. Against third parties any such limitation of the authority of the Directorate to represent the Association has no legal effect. Written declarations of the Directorate shall be executed over the signature " Directorate of the Land Mortgage Credit Association of the Province of West- phalia." The Council of Administration shall determine which member or members shall execute the same. Documents issued by the Directorate within their sphere of business, impressed with the seal and executed by three members of the Directorate, one of whom at least is an ordinary member, shall have the quality of public documents. 44 MORTGAGE CREDIT INSTITUTIONS, Section 10. Council of Administration. — The Council of Administration shall consist of nine members. Every member of the Council must be at the same time a member of the Association or the legal representative of such a member, and must own or represent landed property upon which the Association has registered or may register a mortgage of the value of £1,000. The members of the Council of Administration shall be elected by the General Meeting for a period of six years. Every two years these members shall retire and shall be replaced by election of the General Meeting. The order of retirement of the members of the Council of Administration shall be determined by the length of time they have served. Every two years the General Meeting shall also elect from among the members of the Association three deputies to the Council of Administration to provide against inability to attend or retirement of a member of the Council, and shall fix the order in which these deputies shall be called upon to serve. Eligibility as deputy is determined by the provisions of paragraph 1 of this section. Eetiring members of the Council of Administration and retiring deputies are eligible for re-election. The Council of Administration shall annually elect a president and vice-presi- dent from among its members. Section 11. — The Council of Administration shall control the conduct of business by the Directorate and the whole administration of the Association. It is specially bound — 1. To cause the cash accounts of the Association to be audited at least once a year by two of its members ; to receive the accounts of the Directorate, and to pass them, on the settlement of all objections raised ; 2. To present annually, to the General Meeting a statement of accounts, and to publish this in abstract in the newspapers agreed upon for the public notices of the Association (Section 41) ; 3. To prepare all instructions for the carrying out of these articles; 4. To issue the business instructions and regulation orders for the Directorate, the same to be approved by the Royal Commissioner ; 5. To settle the principles of land valuation, and 6. To give a final decision in case of appeals against the decisions of the Directorate. It shall have the right — To divide the area covered by the operations of the Association into districts and to appoint for these districts commissioners (Councillors of the Association) who shall be appointed by it from among the members of the Association or their legal representatives, and to permit the exercise by these persons of certain of its powers in the districts in question. Section 12.— The Council of Administration shall meet regularly at least twice in each year and shall hold an extraordinary meeting whenever the chairman, three of its members, or the Directorate shall require it. The directors shall take part in the meetings of the Council of Administration with deliberative voice, provided no matters are under consideration which touch the personal or service relations of the Directorate or those of its individual members. The summonses to the meetings shall be issued by the president, by means of special written circulars, at least 14 days beforehand, and the agenda shall be enclosed therewith. The day and hour of the meeting, as well as the agenda thereof, shall be at once communicated to the Royal Commissioner. The Council of Administration is competent to pass resolutions when at least five members or their deputies, including the chairman, or, in case of inability to attend, the vice-president, are present. The Syndic shall take minutes at the meetings of the Council of Administration, but the president may require that the minutes shall be drawn up in judicial or notarial form. The minutes must be executed by three members including the president or vice- president. Section 13. General Meeting. — The General Meeting shall consist of the members of the Association summoned to attend in accordance with the articles of association. Representation of a member by another person for the purpose of taking part in the General Meeting js only permitted— To wives through their husbands or through some person holding the power of attorney of the latter, WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. 45 To minors through their fathers, or in case the parental authority be exercised by the mother, through a person holding the mother's power of attorney, To wards through their guardians or tutors, and in case there be several guardians through one of these holding power of attorney to represent the others, To the joint owners of a mortgaged estate through one of the joint owners holding power of attorney to represent the others; widows and unmarried women through representatives holding power of attorney, To corporations and such combinations of persons as though not possessing the attributes of corporations yet may acquire rights and may enter into engagements {e.g., commercial companies) through their legal repre- sentative, and in case they can only be bound by the common declaration of two or more representatives, through one of these holding the power of attorney of the other. Members of the Association, who belong to any of these categories, may only appear at the General Meeting and avail themselves of their rights in the person of their authorised representative. Those who have permanent authorised representatives for the administration of their estates may be represented by these persons holding such general powers of attorney. The representatives, if their identity be unknown, shall prove the same by attested documents. No person authorised to appear at the General Meeting shall have more than one vote. The directors shall take part in the General Meeting with deliberative voice. Section 14. — The General Meeting may only pass resolutions on matters outside those expressly assigned by these articles of association, when such do not run contrary to the authority given to the Council of Administration and the Directorate under these articles. Section 15. — ^The ordinary General Meeting shall take place annually in the first half of the year; an extraordinary meeting shall only take place when the Council of Administration shall think it necessary or when it shall be proposed by the Directorate or by 20 or more members of the Association who have been members thereof for at least one year, such proposal to be made in writing to the President of the Council of Administration and to set out the objects and reasons for the meeting. If the proposal be not acceded to, appeal to the Royal Commissioner is permissible, and his decision as to the calling of a General Meeting shall be final. Summons to a General Meeting is issued by the President of the Council of Administration. Such notice is to be published in the papers selected (Section 41) for the notices of the Association, together with the agenda, at least 14 days before the date fixed for the meeting. The day and hour of the General Meeting as well as the agenda thereof are to be communicated at once to the Royal Commissioner. The General Meeting is in a position to pass resolutions, unless the case pro- vided for in Section 73 arises, without regard to the number of members of the Association present, if at least five members of the Council of Administration or their deputies be present. Motions which members of the Council of Administration wish to see placed upon the agenda must be presented to the president of the Council at least 14 days before the issue of the summons. The same interval must be observed in the case of motions which members of the Association wish to bring before the ordinary General Meeting. The Council of Administration is only bound to place such motions on the agenda as have the support of at least 20 members each of whom has belonged to the Association for at least one year. General Meetings shall be presided over by the President of the Council of Administration, or in his absence by the vice-president; in case both should be prevented from being present the oldest member of the Council of Administration present shall preside. Every matter dealt with by the General Meeting shall be made the subject of a minute by the Syndic. The minutes must be executed by the President and two other members of the Association appointed as his assessors on the proposal of the president by the General Meeting at the beginning of the sitting. 46 MORTGAGE CREDIT INSTITUTIONS. Section 16. General Regulations as to Council of Administration and General Meeting. — The proper delivery of the letters of invitation to the meetings of the Council of Administration must be certified either by delivery notes or by post office receipts, or by means of some other trustworthy form of duly signed acknowledgment. The members of the Council of Administration or their deputies shall receive no remuneration beyond daily allowances and travelling expenses. The General Meeting shall fix their amount. It is also empowered to fix a suitable remuneration for the services of the President of the Council of Administration. Section 17. — Elections are effected by ballot; election by acclamation is per- missible if there be no objection thereto. An absolute majority of those present is necessary for elections as well as for carrying resolutions of the Council of Administration and of the General Meeting. If the first round of voting gives no absolute majority, the voting among the candidates shall be narrowed in subsequent divisions by the withdrawal of the person who receives the smallest number of votes. When two or more receive an equal number of votes the President shall decide by lot who is to be excluded from further ballot, or, in the case of the final ballot, considered as elected. The casting vote of the President shall decide in cases of equality of votes on resolutions. Absent members are bound by the resolutions carried by those present. Chapter II. Issue of Mortgage Bonds. Section 18. — The mortgage bonds shall be issued in the form A attached, bearing interest at the rate of 3 per cent, or 4 per cent., for sums of £250, £100, £50, £25, £10, and £5, or bearing interest at the rate of 3^ per cent, or also 4^ per cent., in sums of £200, £100, £40, £20, £10, and £5. They shall be in German Imperial currency, and those in each series shall be consecutively numbered. The interest, payable half-yearly, shall be drawn by means of coupons for 10 years as in Form B, which are attached to the bonds and carry talons as shown in Form C. New series of coupon^ shall be issued, when the corresponding talon is not forthcoming, to the person presenting the bond to which they belong. If, however, the loss of the talon be previously notified to the Directorate and the issue of the new series of coupons prohibited, they shall be held back until the disputed claim to the new series is settled amicably or by legal process. Section 19. — The Association shall be liable for the securing of the bonds and all rights arising from them. The creditor, in so far as he cannot be satisfied out of the reserve fund, is authorised, to the extent of his claim to cause himself to be legally declared an assignee, with all the rights of such, of such claims under mortgages belonging to the Association as he may choose. In virtue of this assignment, all rights and duties which the Association may have in respect of the property or towards its owners pass to the creditor. The Association is authorised to make good its claims against its members, at its option, by attachment either of their real estate or their moveable property. Section 20. — The total amount of bonds actually in circulation and not excluded from the rights of bonds under Section 23, clause 5, may at no time exceed the total amount of claims under mortgages belonging to the Association. The members of the Directorate and of the Council of Administration shall be personally answerable for this. If the Association give notice to a debtor for repayment of the mortgage loan granted to him (Section 33), the latter, if he have not repaid, in bonds, the sums due at latest within the term, must pay in cash to the counting-house of the Asso- ciation, free of all charges at term, the par value of the same so far as it is not yet covered by his assets in the amortisation and reserve funds. When repayment Idas been madfe in cash, the Directorate has the choicie of either giving notice of redemption of the requisite amount of bonds at their par value, or of procuring them in the open market or of cancelling bonds in their own possession. In this case WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. 47 the purchase price must not exceed the par value of the bond. Any cash balance not expended is to be repaid to the debtor, and the latter shall bear the expenses of drawing, notice and redemption. Section 21. — Notice of redemption of bonds may on no account be given on the part of the holder thereof, but, excepting in the cases provided for by Section 22, may be given by the Association only for the purpose of effecting redemption in accordance with the articles. (Section 20, clause 2; Section 33, and Sections 32, 38, 39.) Six months' notice of redemption shall be given and shall be effected by adver- tising the same three times in the newspapers selected for the publication of the notices of the Association. (Section 41.) The six months shall begin with the first day of the calendar half year following the day on which the last insertion appeared. The numbers of the bonds of which notice of redemption is to be given shall be determined by lot, to be drawn by the president of the Directorate or the vice- president at a meeting of the Directorate. A minute as to the redemption shall be taken by the Syndic or his deputy. Section 22. — In case the Council of Administration and the General Meeting decide upon the conversion of one or more classes of bonds to another rate of interest, and the Royal Government approve such resolution, the Directorate of the Association has the right to give six months' notice to the holders of the bonds affected by such conversion. Such notice may only be given on 1st January or 1st July of any year, and can only apply to bonds issued after 1st January, 1900. These bonds must bear on their front page the words " Series III.," and come under the conditions set out in Section 32. The provisions of Section 21, clause 2, apply to the manner of giving notice. Section 23. — The bonds of which notice of redemption has been given to the holders by the Association must be given up on the expiry of the term, together with the coupons belonging to them which have not matured and the talons in good condition for circulation. If the bonds are not handed in within one month after they fall due, the defaulting holder has no claim upon the Association beyond the actual redemption amount ; he shall be excluded from any further rights that he may have by resolution of the Directorate. Attention must be called to this lapse of rights in the notice of redemption (Sections 21 and 22). Publication of this resolution is not necessary. The amount of any missing coupons will be deducted from the amount paid in redemption to the person presenting the bond. Three months after the calling in of the bond it becomes the duty of the Associa- tion to pay to the holder of the bond called in 2 per cent, interest for the year from the sum paid for redemption, which is to be invested at interest. Claims arising out of a bond drawn for redemption lapse in favour of the Association with the expiry of 30 years after the day fixed for payment. If it be presented before the expiry of that period, then the claim lapses in two years from the end of the period thus allowed; the assertion of a claim on the bond before a court shall be held as equivalent to presentation. After settlement or lapse of the claim on a bond called in for redemption (clause 5) the redemption money with interest goes to the " Special Fund " of the Association. (Section 37.) Section 24. — Bonds which by reason of marks, damage, or stains have become unfit for circulation, provided, however, that the essential marks of genuineness and identity are still recognisable, especially the number, the amount, the rate of interest, the date, the style and title of the Directorate, and the signatures of the executing president of the Council of Administration, as well as those of the executing directors, will be replaced at the request of the holder on giving up the damaged or defaced bond. Other bonds shall also be issued to replace completely destroyed bonds when, in the opinion of the Directorate, the fact of destruction is proved without any doubt and uncertainty. When such proof is not produced or v/hen in case of damage the essential marks on the bond are no longer recognisable, as well as in all cases in which the bond has been stolen from the owner or has been in other ways mislaid, a new bond will only be issued at the cost of the owner, when the missing bond has been previously advertised for by the latter, and its nullity legally declared. 48 MORTGAGE CREDIT INSTITUTIONS. The re-issue shall always be made for the same amount and under the same number with the addition of the word " renewed " against reimbursement of the cost of the stamp and other cash* expenses. Coupons become obsolete in four years ; there is no declaration of the nullity of coupons and talons. Chapter III. Granting of Loans; Notice of Repayment and Redemption. Association Funds. Section 25. Loans. — The Association grants loans to its members in the form of bonds issued by it at par value under the conditions laid down in Sections 26-40 following. Section 26. — Parts of estates in the ownership of more than one person cannot be mortgaged in the absence of proof of exact title. Section 27. — ^Should the holder of an estate whose ownership is limited by Hens, entail, or family settlements, intend to charge the property, those claims arising out of such limitations must be fulfilled, or their fulfilment proved, in accordance with the deeds regulating their legal position. Section 28. — ^The whole of the costs of the preparation of the execution of the loan business, and of registration of the loan, shall be borne by the borrower, and a reasonable advance as caution money for covering the same may be demanded. Section 29. — ^For the loan capital, the annual payments according to Section 31, interest on payments in arrear, expenses of notice of repayment, of suits for debt and of collection, including lawyers' fees, and all other expenses arising out of the loan business, as well as the other contributions required by the articles of association, a mortgage charge, falling within the first two-thirds of the value of the mortgaged estate and ranking as first claim on the property, must be constituted, and that entirely in accordance with Section 1115, paragraph 2, of the Civil Code, with the provision that the Association shall have the right to obtain the deed from the office of the Registry of Title. Previously registered pensions, ground rents, rights to indemnity and other permanent charges, may be estimated at the discretion of the Directorate at their capital value and deducted from the gross value of the mortgageable estate. (Section 36.) Section 30. — The borrower is bound to insure to their full value against fire, and to keep insured until the complete repayment of the loan, all buildings existing, or to be erected, upon the parcel of land to be mortgaged, and to submit to all conditions that the Directorate may regard as fit and proper for the security of the Association. Section 31. — The borrower shall have the choice of taking his loan in bonds bearing interest at 3, 3^, 4 or 4^ per cent. He has to pay interest on the capital sum borrowed as a rule at interest from the first day of that half year in which he received it, without regard to the gradual extinction of the debt up to the termination of the same, and this interest shall amount — including ^ per cent, to sinking fund and ^ per cent, annual contribution to the costs of administration — to, in the case of bonds bearing interest at 3 per cent., 3f per cent, per annum; in the case of bonds bearing interest at 3^ per cent., 4^ per cent, per annum; in the case of bonds bearing interest at 4 per cent., 4f per cent, per annum, and in the case of bonds bearing interest at 4 J per cent., 5^ per cent, per annum. In those cases in which the interest of a borrower demands it, the Directorate of the Association may delay the beginning of the payment of interest to the first day of the next half year following and reckon interest on the arrears up to that date. 'Interest is due half-yearly in advance, and is so arranged that the interest for the first half year must be paid in at the counting house of the Association up to January 5, and for the second half year up to July 5 of each year. The Directorate may only accord a postponement of the payment of interest on serious grounds and for a period not exceeding six months. On postponed interest the debtor shall pay 4 per cent, as interest in arrear. Section 32. — ^The debtor shall always be at liberty to repay to the Association the whole or a part of the capital sum borrowed; nevertheless, the interest, inclusive of the other contributions for the current half year, as laid down by the articles, must be paid. Eepayment is made — unless the case provided for by Section 20, Clause 2, arise — in bonds of the Association, bearing the same rate of interest as those in which WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. id the loan was granted at par value, with the coupons and talons belonging thereto, as from the first day of the half year next following the date of redemption. The borrower is entitled to demand, without furnishing security, a cancellation receipt for instalments paid off, or the extinction of charges to that amount, as well as authorised, on the basis of his cancellation receipt, to have the corresponding amount cancelled in the Eegistry of Title or transferred to his credit or to dispose of it in any other way ; in all cases, however, with reservation of the prior rights of the claims on the parcel of land still remaining in favour of the Association. The debtor has also the right in regard to bonds issued subsequent to 1 January, 1897, in so far as the same is not yet covered in respect of the amortisation and reserve funds by his property, to extinguish the bond on payment in cash of its par value. Such extinction can only take place on the 1st January or 1st July of each year. The debtor must in this case, if the extinction is to take place on 1st January, at latest on the 1st May previous, or if the extinction is to take place on the 1st July, at latest on the 1st November previous, present a corresponding written declaration or deposi- tion to the Directorate, upon which the Association must give notice of redemption of bonds issued subsequent to 1st January, 1897, and redeem at par value at the term of maturity to an amount equivalent to that of the sum to be extinguished. The amount in cash necessary for such extinction must be paid in to the counting house of the Association at latest on the tenth day of the month preceding the expiry of the term, and in case of default the sum shall be charged with interest at 4 per cent. Simultaneously with the notice of redemption, as a rule 2 per cent, of the amount of the bonds to be redeemed, shall be deposited in cash at the counting house of the Association. This security is forfeited if the debtor does not at latest on the tenth dav before the date fixed for the maturing of the bond — that is to say, on December 22 or June 21 — pay into the counting house of the Association the necessary amount ill cash for the satisfaction of the holder of the bonds to be redeemed, up to the amount of the expenses incurred by the Association. Bonds issued subsequent to 1st January, 1897, are to be designated by a special mark as " Series II.," but are to be marked " Series III." from 1st January, 1900, onward. (See Section 22.) Section 33. — The Association has the right : A. To call in loans granted by way of bonds at six months' notice — (a) if the person acquiring the estate on which money has been lent in bonds do not fulfil the obligations incumbent on him under Section 2, Clause 3, of the articles within the prescribed delay; (6) if the debtor do not meet the obligations imposed upon him by the articles and the terms of his agreement upon demand made on the part of the Directorate; (c) if the mortgaged estate become subject to forced administration or forced sale. B. To require a suitable partial repayment of the debt if the mortgaged estate have depreciated in value. Section 34. — If the person seeking a loan is unable to furnish precedence of claims on the property already registered (Section 29), the grant and payment of a loan is nevertheless permissible if he bind himself to liquidate such registered claims and furnishes a security against the claims of the Association thereon, in that he either deposits £15 in Westphalian bonds for every £11 55. of the claim, or deposits the amount of the claim in cash. In reckoning the amount of the claims, the rate of interest thereon, if no higher rate be claimable, shall be taken at 5 per cent., and the arrears of interest, if the settlement thereof cannot be credibly proven, shall be taken as for 4 years. Section 35. — The Directorate shall decide as to the granting and detailed condi- tions of a loan, as well as upon the calling in of the same. The Directorate is further empowered, though not bound, to arrange for the sale of the bonds for the borrower on his request, and to pay to him cash in advance on the amount to be realised on the bond. Such advances are to be charged to the borrower with at least 4 per cent, interest' The Directorate is authorised, but not bound, to arrange for the borrower, the carrying out of all other business in connection with the loan. Section 36. Valuation of Property to be mortgaged. — 'The fixing of the value of a parcel of land required by the provisions of these articles shall be based upon the assessments which were carried out by virtue of the Act of 21 May, 1861, as to the further regulation of the land tax; and such value must not be taken at more 50 MORTGAGE CREDIT INSTITUTIONS. than 33 times the amount of the cadastral net yield as estimated for the purposes of the land tax. The Directorate is, however, authorised, at the request of the person seeking the loan, if he seeks to borrow an amount exceeding two-thirds of the value determined on the above basis, to cause the value of the land put forward for mortgage to be determined on the basis of an estimate of the same to be made on the spot at the charge of the person seeking such loan. The bases of assessment to be made use of for the estimate shall be decided upon by the Council of Administration, and shall require ministerial approval. In these cases the amount of the mortgage shall be below two-thirds of the ascertained figure of value, as a rule, however, not above 30 times the amount of the net yield as assessed for the land tax. If, however, after the ascertainment of the net yield, in obedience to the requirements of the Act of 21 May, 1861, proven sub- stantial improvements or a permanent increase of value of the land put forward for mortgage have taken place, then, by unanimous resolution of the Directorate, the amount of the mortgage may be fixed at the full two-thirds of the value of the parcel of land in question as ascertained by an estimate made on the spot. In the case of a complete or partial refusal of a request for a loan, the person seeking it is at liberty to appeal to the Council of Administration, and this latter body shall, within the above stated limits, give a final decision. Section 37. Funds of the Association. — The total receipts of the Association, with the exception of the sinking fund contributions of ^ per cent., shall first be applied to meeting the current expenses of interest on bonds, cost of administration, &c., and, so far as the position of the funds will allow, to covering losses. The surplus, provided it be not carried forward to the following year by instruction of the Council of Administration, shall, to the extent of one-fifth per cent, of the capital out on loan, be written in a reserve account to the credit of the debtors every year pro rata of their debt to the Association at the time, or, under Section 40 of these articles, to the sinking funds of the debtors. Should the year's surplus not be absorbed by these appropriations, a special fund shall be formed out of the balance, which shall be the property of the Association. If this " proprietary fund " of the Association have reached 5 per cent, of the total amount of capital out on loan by way of bonds, the Council of Administration shall decide upon the use to which any amount above this shall be put. Any losses of the Association, for which every member thereof is jointly and severally liable up to 5 per cent, of his original capital indebtedness, shall be dis- tributed over the members in proportion to the capital indebtedness of each to the Association at the time, and the amount of each share of the loss shall be in the first instance written off the credit of such members in the reserve fund. If the credit of a member with the reserve fund be insufficient to meet his share in covering such loss, he must within three months make an additional payment to meet the deficit not exceeding 5 per cent, on his original capital indebtedness, the amounts to his credit held by the Association being taken into account. If a member have in this way during the period of his membership, either by writing off from his credit with the Association, or by supplementary payments in cash, contributed a total amount equivalent to one-twentieth part of his original capital indebtedness towards meeting the losses of the Association, he shall as an individual be released from further contributions towards the liquidation of losses. The provisions of this paragraph shall not touch the general liability of the Association as laid down in Section 19. Section 38. — The contributions of debtors of ^ per cent, to the sinking fund shall be written to their credit every half year without deduction in a sinking fund account. The sums credited to the sinking fund account shall, so far as is compatible with the keeping of the accounts, be employed twice a year either in buying up bonds of the Association at their price of the day or the redemption of the same at par after previous notice; the Council of Administration shall determine the manner of employment. The bonds acquired in this way are to be destroyed by fire, together with their current coupons and talons, at a meeting of the Directorate. Section 39. — When the special linking fund account (Section 38) of a debtor has reached the amount of at least 10 per cent, of the capital on which he is paying interest at the time, he acquires the same rights as those granted to a debtor WESTPHAXIAN LAND MORTGAGE CREDIT ASSOCIATION. 51 in case of payment by instalment in Section 32. He may, consequently, demand a cancellation receipt for so much of his debt as has been repaid in this way, and he is entitled on the basis of such receipt at his expense either to cause the amount of debt so extinguished to be written off in the Register of Title, or to dispose of the margin thus cleared with reservation of the right of priority of the Association in respect to its charges still resting on the estate. A fresh credit may also be granted to the debtor in bonds up to the amount of that portion of the debt which has been repaid. Section 40. — The balances of the reserve fund standing to the credit of debtors (Section 37, clause 2) shall, at the end of each year — so far as is compatible with the keeping of the accounts — be employed in the purchase of bonds of the Association for the debtors, the interest on which, as well as that on the cash balance, shall be received by the Association. If the reserve account have reached 5 per cent, of the capital on which the debtor pays interest at the time, any receipts accruing to or to be written to such account shall be transferred to his sinking fund account. The rights to the reserve and sinking funds pass over to the possessors for the time being of the property mortgaged to the Association, always and without the necessity for a special transfer, and can be neither disposed of nor mortgaged apart from the estate. \Section 41. Newspapers selected for the Paiblic Notices of the Association. — Public notices of the Council of Administration and of the Directorate shall have for members the legal operation and force of specially delivered notices, provided they are published (1) in the " Imperial Gazette " or some paper which may hereafter replace it, (2) in the " Cologne Journal," and (3) the " Agricultural Journal of Westphalia and Lippe." The Council of Administration may substitute other papers for those named in (1) and (2). Such decision is to be made known through all the papers hitherto- used for the purpose, unless they be no longer published. The Council of Administration may also order the insertion of notices in papers other than those named in (2) and (3). The validity of the notices does not depend upon their appearance in these papers. Chapter IV. Distraint and Compulsory Administration. Section 42. — The Association has the right, against its debtors, who are the owners of estates mortgaged to it, for the purpose of recovering claims on capital sums lent, interest, sinking fund instalments and other payments contem- plated by the articles, of distraint according to the terms of the law relating to distraint for the claims of land mortgage credit institutions of 3 August, 1897 (Collection of Laws, p. 388). By virtue of this right to levy distraint, the Association is authorised to distrain on the movable property of a debtor or to take the land mortgaged under compulsory administration, or to put both measures into operation together. The Directorate of the Association is the competent distraining authority. Section 43. — Coincidently with the measures set out in Section 42, the Associa- tion may carry out the legal compulsory sale of the mortgaged parcel of land. The order to distrain for debt shall be replaced by the formal proceeding for compulsory sale. The notice of compulsory sale shall set forth the parcel of land, the owner and the claim. Section 44. — ^If the debtor contest his obligation to pay the monies claimed, it is open to him to make good his rights by action at law. Section 45. — If in consequence of the action of the debtor, or because the latter neglects the necessary precautions against the actions of third parties, or against other loss and damage, a depreciation endangering the security of the claims of the Association is to be feared, the Association has authority, with corresponding appli- cation of the provisions of the Order as to procedure in compulsory administration of 7 September, 1879 (Collection of Laws, p. 591),* to cause an arrest to be put upon the movable property of the debtor, and to take the mortgaged parcel of land into compulsory administration by way of arrest. * Now the orders of 15th November 1899, and 18th March. 1904 (Collection of Laws, p. 545 and p. 36) and the administrative instructions of 28th November, 1899 and 4th July, 1904. 25574 Z 52 MORTGAGE CREDIT INSTITUTIONS. It is to be regarded equally as a depreciation of the parcel of land in the sense of this regulation when adjoining parcels thereunto belonging, over which the mort- gage rights of the Association extend, are depreciated, or, in defiance of the rules of good husbandry, have been separated from the parcel of land in question. If the debtor contest the legality of the arrest he must make good his claim before a court. Section 46. — Distraint on the movables of a debtor is carried out according to the provisions of the Order as to procedure in compulsory administration of 7 Sep- tember, 1879 (Collection of Laws, p. 591). If the distraint leads to procedure for partition of the estate, then the pro- visions of Section 8 of the law of distraint for the claims of land mortgage credit institutions of 3 August, 1897 (Collection of Laws, p. 388), apply. Section 47. — In all cases the choice of the executive officials rests with the Directorate, which directly issues the order for distraint. Section 48. — An order for compulsory administration shall depend upon a resolution of the Directorate of the Association. The institution of a compulsory administration by the Association is excluded so long as a legal compulsory administration is pending. Section 49. — In the resolution in which the compulsory administration is ordered the Directorate of the Association must prohibit the debtor from exercising any authority over the material or revenues of the estate, as well as from interference in the conduct of the business by the appointed administrator and require third parties who are interested in the revenues accruing from the estate to surrender any further yield to the administrator to be appointed. Section 50. — The resolution by which the compulsory administration is ordered shall be sent to the debtor. At the same time the office of the Registry of Title is to be requested to enter the order in the Register of Title and to send out the notices mentioned in Section 19 of the law of distraint and compulsory administration of 24 March, 1897 {Imperial Law Gazette, p. 97), on receipt of which the parties concerned are to be advised of the order for compulsory administration. Section 51. — The resolution by which the compulsory administration is ordered has the force of a sequestration order in favour of the Association. The scope, the date of coming into operation, and the effects of the sequestration, shall be governed by the provisions operative in the case of compulsory administration by a court of law. Section 52. — If the debtor at the time of the sequestration be resident upon the estate, such rooms as are necessary foi; the use of his household and are not required for the administration are to be left to him for his use. Should the debtor or a member of his household do anything to the prejudice of the estate or of the administration, the Directorate may order the voiding of the estate within a stated time, and on its lapse without such voidance, to compel the same, without further procedure, through one of the executive officials or through a bailiff. Section 53. — The administrator shall be appointed by the Directorate of the Association. The Director must hand over the land to him through an official of the Asso- ciation, in special cases with the co-operation of an expert, or he shall be vested with full authority to take over possession. Section 54. — With the transfer of the estate to the administrator, a docu- ment is to be drawn up in which shall be accurately set forth as far as possible the nature and kind of use to which up to that time the land has been put, the objects affected by the sequestration by virtue of the law, especially the buildings and movables thereunto belonging, as well as the rights over the revenues of the estate appertaining to third parties, and any considerations under leases or rentals, as well as the payments to be made according to the provisions of the law of compulsory administration out of the revenues without further procedure. If any of the conditions set out in the foregoing clause cannot be determined at the time of issue of the statement, the administrator must advise the Directorate on the matter without delay. WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. 53 The same holds good when the administrator is himself empowered to take over possession of the estate. Section 55. — The sequestration shall also be effective if the administrator demand the ownership of the estate according to Section 53. The prohibition of payments to third party debtors may be issued on the pro- posal of the administrator. Section 56.— The administrator has the right, and is bound to take all necessary steps, to maintain the estate in good agricultural condition, and to put it to proper use; he must make good the claims covered by the sequestration and convert the produce not required for the administration into money. Section 57. — If the estate previous to the sequestration have been let to a leaseholder or tenant, the agreement to let for rent or on lease is also binding upon the administrator. The latter, for the period of the compulsory administration, enters into all the rights and duties of the tenant or leaseholder, and must superintend the ful- filment of the legal and agreed duties of the tenant or leaseholder, who must lay before him and give him information, on demand made, as to the documents relating to tenancies or leases, accounts, and other papers. Section 58. — The administrator is authorised, but only with the approval of the Directorate of the Association, to change the methods of use of the parcel of land existing up to the time of the sequestration thereof. Parcels of land which have not been put to agricultural or forest use are to be utilised by renting or leasing the same; individual parcels of arable, garden, and meadow or pasture land, as well as any branches of business that are difficult of administration or of control, such as breweries, distilleries, mills, brickworks, or fishing and hunting rights, may be let or leased even if the same have not been so let or leased. The term of letting or leasing agreed by the administration in writing subject to the approval of the Directorate of the Association may not exceed one year without the consent of the debtor. If the administrator considers that any deviation from these provisions is required he must secure the decision of the Directorate of the Association. In the agreements for letting or leasing it must always be stipulated that the tenant or leaseholder, if and so far as the use and employment of the objects so let or leased are not granted to him in consequence of forced sale, cannot raise objection, and that, in case of differences between the tenant or leaseholder of the one part and the administrator of the other part in purely business matters, the Directorate of the Association shall give the final decision to the exclusion of ordinary legal jurisdiction. Section 59. — The Directorate of the Association must provide the administrator with the necessary instructions, fix the remuneration to be granted to the adminis- trator, and control the conduct of the business. The Directorate may in suitable cases transfer the supervision of the administrator to a commissioner or to another member of the Association and may associate experts with him. The Directorate is further authorised to require the deposit of a security by the administrator; to inflict fines upon him which may not in individual cases exceed £7 10^. in amount, and to dismiss him. Section 60. — The administrator is answerable for the fulfilment of the obliga- tions put upon him to all parties concerned ; he must lay an account annually before the Association and after the termination of the administration, and to this end must provide proof that the disbursements out of the receipts and any^dvances for the maintenance or necessary improvement of the parcel of land have been actually expended for this purpose. The account is to be laid before the debtor by the Directorate of the Association, and, after the correction of any errors therein, the administrator is to be discharged from all liability. Section 61. — The costs of administration, including the remuneration of the administrator, as well as the costs of the proceedings, with the exception of those connected with the ordering of their institution, are to be defrayed in the first instance out of the proceeds of the working of the estate. In other matters concerning the procedure for distribution of expenses the pro- visions which obtain in compulsory administration by the courts of law shall apply. Section 62. — Cessation of process shall follow upon a resolution of the Directorate of the Association to that effect. 2B574 Z 2 •54 MORTGAGE CREDIT INSTITUTIONS. Process shall cease — 1. When the claims of the Association have been satisfied; 2. When by reason of the suit of another creditor compulsory administration has been ordered by a court of law. Cessation of process may be ordered when the continuation of the procedure would involve exceptional expenses. Section 63. — The resolution by which process is to cease shall be communicated to the debtor. The office of Registry of Title shall be requested to remove the note of com- pulsory administration. The parcel of land shall be handed over to the debtor by an official of the Association. (Section 54 applies.) Section 64. — On all more important matters of a business nature the directors of the Association shall previously hear the debtor. The calling-in of a minute taker shall be at the discretion of the Directorate; the expenses arising therefrom shall be charged to the costs of administration. The decision of the Directorate is in all cases final. Delivery of documents shall be made through the post. The secretariat of the Association assumes the status of bailiff. Section 65. — As regards other matters, the procedure shall be regulated by an instruction to be issued by the Directorate of the Association, which shall require the approval of the Minister of Agriculture, Domains, and Forests, and of the Minister of Justice. Section 66. — The Association may on the request of the court take over the powers granted to the court with regard to land used for agricultural or forest purposes by Sections 150, 153, and 154 of the law of forced sale and compulsory administration of 24th March, 1897 (Imperial Law Gazette, p. 97). With regard to parcels of land on which the Association has itself lent money on mortgage, the Association has the right of transfer of the powers named in the preceding clause. Section 67. — In cases of compulsory administration in which the Association takes over the powers indicated in Section 66, the provisions of Sections 42-65 apply. Section 68. — On request for the taking over of the powers contemplated in Section 66 the court must inform the Directorate of the Association, forwarding a certified copy of the folio of the Registry of Title relating to the parcel of land actually under compulsory administration,, as to' whether, in what order, and to what amount^ the current interest of the mortgage creditor after it falls due is to be paid by the administrator. Section 69. — The accounts of the administrator are to be laid before the creditor who is recovering under his rights, as well as before the debtor. Section 70. — The parties concerned have no right of appeal against the decisions of the Directorate of the Association. Section 71. — In case of compulsory administration or forced sale to which the Land Mortgage Credit Association of the Province of Westphalia is a party, all claims, which according to Section 42 are subject to the rights of distraint of the Association, and in so far as they do not arise out of the Registry of Title, need not be proved either for the purpose of their consideration in fixing the reserve price or for their inclusion in the plan of partition. The execution of the plan of partition shall not be interfered with by the opposition which another person affected by such partition may raise against claims of the nature mentioned, during the negotiations over the plan of partition. It is still left to the opposing party interested in the partition to make good his rights, after payment has been made, by suit at law. Section 72. — The provisions of these articles as to the right of distraint of the Association and as to the authority of the syndic in the reception and verification of documents only apply to mortgages within the Principalities of Waldeck and Pyrmont in so far as the legislation of these Principalities is not contrary. Chapter V. Alteration of the Articles o'f Association. Section 73. Alteration of the Articles of Association. — Alteration of the articles of association can only b? effected with the approval of the head of the State, and as the result of a resolution passed in due form by a General Meeting, at which WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. 55 at least one-half of the capital out on loan at interest must be represented. If, how- ever, at such General Meeting a quorum of members be not present, and a second General Meeting be afterwards convened for the consideration of the same question, such meeting is empowered to pass resolution^ without regard to the number of members present. This fact must be expressly stated in the summons to the second meeting. A majority of three-fourths of the members present is necessary for an alteration in the articles of association. Section 74. — These articles of association, in so far as they contain alterations of hitherto existing regulations, shall come into force with the publication of the approval of such alterations by the head of the State. SUPPLEMENT. Chapter VI. Sfecial Regulations as to the Mortgaging of Heritable Estates for the purpose of Composition with Co-heirs. Section 75. — The Land Mortgage Credit Association of the Province of West- phalia has the right — over and above the mortgage loans already provided for under Sections 25-36 of the new articles of the Association— to grant loans to the owners of heritable estates (Anerbengiiter), in accordance with the provisions of this supple- ment, for the purpose of compounding with co-heirs in the sense of the law relating to the right of inheritance in landed property in the Province of Westphalia, &c., of July 2, 1898 (Collection of Laws, p. 139), in respect of composition with co-heirs — such estates must have been settled with due observance of the principles of the law cited, and have been entered in. the Register of Title. For this purpose the Asso- ciation — to such extent as the amount required for the settlement cannot be paid by the issue of mortgage bonds of the kind already provided in the articles of the Association — issues special bonds under the designation of " Letter A " Bonds of the Land Mortgage Credit Association of the Province of Westphalia, for which the appended Form D is to be used. The interest coupons and talons shall be drawn up according to Forms E and F. Section 76. — 'To the extent to which the amount required for composition shall be supplied by bonds of the Association, the owner of the heritable estate (Anerbengut) must, on contracting the mortgage, bind himself in a document to be attested by a judge, a notary, or by the Syndic of the Association, to pay annually, over and above the annual sinking fund contributions of ^ per cent, already referred to in the articles of association of the Association — ^an extraordinary sinking fund contribution of at least 1 per cent. This extraordinary sinking fund contribution shall be paid in amounts of at least j per cent, half yearly on the date at which interest falls due. Should the debtor not fulfil this obligation at the proper time, the Directorate of the Association has the right to call in the capital amount of the loan granted, at six months' notice. Section 77. — The " Letter A " bonds shall be issued against that portion of the value of a heritable estate (Anerbengut) which according to the provisions of Section 36 of the articles of association of the Association may not be charged with (ordinary) bonds, to the extent of nine-twelfths of the value as ascertained in conformity with Section 36 of the articles. An essential first condition for such charging is a unanimous decision of the directors, arrived at on the basis of reliable attestations of the business and personal circumstances of the borrower. In the case in which the value of a heritable estate (Anerbengut) is estimated according to Section 25 of the law as to heritable estates (Anerbengesetz), the Direc- torate of the Association, after careful examination of the conditions, may dispense with a new valuation, and may take the ascertained value as set down as the basis of a mortgage, unless there are grounds for prejudicing such ascertainment of value. For the rest the grant of a loan in " Letter A " bonds is regulated in the sense of Sections 25-35 of the articles of association of the Association which apply, and by Sections 83 and 84 of this supplement thereto. Section 78. — For the " Letter A " bonds debtors whose heritable estates are charged with composition loans in " Letter A " bonds are liable under Section 80, Clause 3, of this supplement over and above the mortgages which replace the compo- sitions with co-heirs. The bonds come under the special credit system A; the funds of this credit system and also a special security fund which is brought up to 25574 Z 3 56 MORTGAGE CREDIT INSTITUTIONS. the amount of £12,500 by subvention from the State and the province, and the West- phalian Peasant Proprietors' Association, are also liable. The total amount of ' Letter A " bonds issued may not exceed fifteen times that of the Security Fund. Other mortgage debtors and funds of the Association are under no liability for " Letter A " bonds, and in the same way the funds of the credit system A and the special security fund are not liable for the obligations of the Association. The provisions of Sections 18 and 19, clauses 2-4, Sections 20, 21, 22, clauses 1 and 3, Section 23, clauses 1-5, and Section 24 of the articles of association of the Association are applicable to " Letter A " bonds. Section 79. — The Special Security Fund (Section 78) is to be invested at interest in German Imperial or Prussian State securities, or in loans of the Province of West- phalia, of the Ehine Province or the Principalities of Waldeck and Pyrmont, or in public savings banks of these States, which are recognised as place of deposit for trustee funds or in mortgage bonds of Prussian land mortgage Associations — includ- ing the bonds of the Mortgage Association of the Province of Westphalia. Interest accruing shall be written to the administration fund of the credit system A (Section 80). The redemption money with interest shall, in the cases contemplated by Section 23, clause 6, of the articles of the Association, so far as it concerns " Letter A " bonds, be paid over to the special security fund for these bonds. Out of this money shall also be paid the advances mentioned in Section 35 of the articles of Association for such owners of heritable estates as have received composition loans in " Letter A " bonds. Section 80. — The organs of the Association shall administer credit system " A." The administration referred to in Section 9 of the articles of the association shall be set up on behalf of the owners of heritable property by means of a separate set of books and separate cash accounts. All receipts from the administration of this credit system, with the ordinary and extraordinary sinking fund contributions, and the interest of the sinking fund, shall be written to the administration fund formed for this purpose. From this administration fund current outgoings, interest on the bonds, expenses, &c., shall be met, and lossess covered so far as its position will allow. For the rest the provisions of Section 37, clauses 2, 3 and 4, and Section 40 duly apply with the reservation that, before the members interested in credit system ' A " can be called upon to furnish cover for losses, the security fund is to be drawn upon in case the administration fund should be exhausted. Section 81. — The control vested in the Eoyal Commissioner by Section 5 of the articles of the Association and in the Council of Administration by Section 11, shall extend also to the conduct of the business of this credit system, so that both the owners of heritable estates as well as the holders of " Letter A " bonds are entitled to lay those claims which the Directorate of the Association may not have recognised, in the first place before the Council of Administration of the association, with further appeal to the Royal Commissioner. Section 82. — No expenses of any kind may be incurred by the Association through the establishment of this special credit system and its administration The surplus at the end of each financial year shall be written to the Security Fund. The Council of Administration of the Association shall fix yearly the amount of the contribution which the administration of the special credit system shall make to the central administration of the Association according to the amount of the expen- diture , incurred. For this purpose, with the assent of the Royal Commissioner, a lump sum may be fixed by the Council of Administration. Section 83. — Loans for the purpose of compounding with co-heirs shall pay interest in the same way as the ordinary mortgage loans, in accordance with Section 31 of the articles of the Association ; however, together with the regular contribution towards sinking fund of ^ per cent., a further contribution of at least 1 per cent, will be levied (Section 76). Section 84. — Previously registered mortgages by the Association constitute no impediment to a loan for the purpose of compounding with co-heirs. The debtor must, however, in the case of a loan in " Letter A " bonds for the period of the existence of the loan ^r compounding with co-heirs, renounce his right of dis- posal of his balances in the sinking and reserve funds which havei arisen in respect of his previously registered mortgages, WESTPHALIAN LAND MORTGAGE CREDIT ASSOCIATION. 57 Up to the amount of the loan for compounding with co-heirs, including interest thereon and expenses, these credit balances, in so far as thej; are subject to the right of disposal by the debtor as prescribed in the articles, shall be applied to the repay- ment of the previously registered mortgages, for the purpose of cancelling in the Register of Title the amounts repaid. The debtor must at the same time confer upon the loan for the purpose of compounding with co-heirs precedence over all portions of previously registered charges which are being extinguished by special repayments, and must take steps to have this grant of precedence entered in the Register of Title. Section 85. — The provisions of Section 38 of the articles of the association are duly applicable as to the sinking fund. The balances of members in the sinking fund shall be applied to the repayment of loans. Section 39 of the articles of the Association is not applicable. Section 86. — In so far as this supplement makes no other provision, the provisions of the articles of the Association, in their present revised form, shall be applicable to the special circumstances of owners of heritable estates. Land Mortgage Credit Association of the Province of Westphalia. Forms of Bonds, &c. m (Form A.) Mortgage Bond. No of the Land Mortgage Credit Association of the Province of Westphalia for Marks {refeated in writing) Marks. The Land Mortgage Credit Association of the Province of Westphalia is indebted to the holder of this bond in the sum of co Marks. % 02 This amount shall, in conformity with the Articles of Association of ^ ^ the Land Mortgage Credit Association of the Province of Westphalia ^ bear interest at the rate of four per cent, (or 3%, 3-|-%, 4|^%) and is w redeemable on six months' notice, the right of giving such notice to belong < g only to the Association. Payment of interest will only be made on presen- S ^ tation of the specially issued interest coupons. ^ Miinster, (date) Impressed seal. (l.s.) The President of the Council of Administration. (Signature) The Directorate of the Land Mortgage Credit Association of the Province of Westphalia. (Signature) (Signature) (Signature) 1st member and 2nd member of the 3rd member of the President of the Directorate. Directorate, directorate. Registered in the books of the Association, Fol. No. Accountant. 26574 Z * I o 58 MORTGAGE CREDIT INSTITUTIONS. (Form B.) Series Interest Coupon No. . Series .^ No. § of the % Mortgage Bond No. ^ ^ of the Land Mortgage Credit Association of the Province of Westphalia for ^'1 Marks. O &o gj! The holder hereof will receive on the half-year s g -5^ interest on the above-named mortgage bond Marks. g^'> Miinster, (date) S § of the year in which its payment falls due. CS i — 1 )> >> t) )> >> )» )> >> >) x-ytn. )) >) >) )j J) )> )) )) >> >> j> >> J-'otn, In case of the insufficiency of the assets of the Savings Bank itself the above-named groups must contribute the portion falling to their share in these proportions. The contribution of this share by the individual communes of the respective group shall be effected on the scale applicable to the levy of their communal taxes. The liabilities of the groups and of the (individual) communes extends in a similar manner to the cost of administration of the savings bank, and holds good also in case of dissolution of the Savings Bank for all claims, which then may either exist or arise out of engagements liabilities. The recovery of arrears on any such contributions shall be effected on the motion of the Committee of Management by their official organs. II. — ^Administration. Section 3. Supervision in chief. — ^The Savings Bank is under the supervision of the Royal Provincial Governor and under him of the District Governor of the district of The District Governor is entitled to hold an audit of the cash and the account books at any time he may deem expedient. Section 4. Members of the Committee of Management and Assessors. — The administration of the Savings Bank shall be conducted by : — (a) A Committee of Management consisting of a president and two other members. (6) Seven assessors for the assistance of the Committee in accordance with Section 8. The Committee of Management, inclusive of the chairman and four assessors, shall be elected jointly by the Executive and town councillors of the town of from among the inhabitants of the town of . One assessor and his deputy shall be elected from the mayors of the communes of the parish of ; another and his deputy from those of the communes of the parish of , and a third and his deputy from those of the communes of the parish of . The Committee and the four assessors from the town of elect a deputy- chairman, as vpell as a deputy for each of the two members of the committee from among the town assessors. The election of the members of the Committee of Management and of the assessors shall take place every six years. Every three years one of the two members of committee and four or three of the seven assessors shall retire in the order named above. When a vacancy occurs an election to fill it must be held. The period of service of those elected at a supplementary election shall be the same as that which would have been completed by the retiring members. The supplementary election shall be held in the same manner as the original election. All elections require the ratification of the Royal District Governor. Members of the Committee of Management may be allowed remuneration by the assessors with the approval of the aforesaid administrative authority. The assessors shall receive no kind of compensation soever from the Bank funds. Section 5. Duties of the Committee of Management. — To the Committee of Management belongs the duty of administration of such parts of the business as are not entrusted to the book-keeper and control book-keeper (Section 9), viz. : — 1. To fix and make known the ordinary meetings, the place of business, and the office hours for the transaction of savings bank business. 2. To arrange the methods of book and account keeping and any modifi- cations thereof, and decide upon the forms of promissory notes, bond?, &c. 3. To direct the bookkeeper and control-bookkeeper; to supervise their management of the business, books and current cash; to revise their work once a month, and at least once a year to hold a special audit. 4. To make provision for the safe keeping of the monies and securities not entrusted to tne bookkeeper and the control-bookkeeper, as well as of the books and other papers belonging to the institution. Statutes of a Prussian savings bank. 73 6. To audit the annual statement of accounts and other papers relating to accounts, prepared by the bookkeeper and control-bookkeeper, with the assistance of an expert accountant, or to cause the same to be audited by an expert, and to take any further steps necessary in this respect. ; ^ 6. To secure an audit of the accounts by an auditor of the Savings Banks tJnion at intervals of at most five years. To audit the accounts of the collecting agencies commissioned by the committee at least once a year. 7. To represent the institution in outside matters, especially before the courts, and, yvhen necessary, to give power of attorney. In other matters it is left to the Committee to distribute business among its members. Section 6. Meetings of the Committee of Management. — The Committee is to hold two ordinary meetings in each month, and other meetings on the summons of the chairman whenever he shall think it necessary. In matters of less consequence, in case of urgency, the chairman may allow voting by means of a written circular; such voting has no validity should one member propose a conference. Eesolutions are passed by a majority. Minutes shall be taken of the transac- tions of the Committee. Section 7. Form and Drawing up of Documents binding the Bank. — All docu- ments relating to legal business which may bind the Savings Bank as regards third parties must be executed by two members of the Committee of Management, and the seal of the Bank affixed thereto. Section 8. Duties of the Chairman. — The collaboration of the chairman is necessary in the following business of the Committee : — {a) In the audit of accounts ; (6) In the granting of loans on mortgages which exceed 20 times the amount of the land tax net yield, and, in the case of rural properties, one-fourth, in the case of urban properties one-third of the building assessment, and in all cases in which loans on factories and industrial under- takings are in question ; (c) At the election of a bookkeeper or control-bookkeeper and of the managers of collecting agencies; {d) When resolutions are to be passed as to the remuneration to be granted to members of the committee, to the bookkeeper or to the control-book- keeper, and as to the amount of the caution money to be deposited by the latter ; (e) When resolutions are to be passed as to the use to which any surplus on the normal level of the reserve fund shall be put; in this case if the whole of the representatives of the rural communes vote against those of the urban commune, then shall it be at the discretion of the representatives of either body to dispose of the share of net profit f a-lling to them as they wish ; (/) In all other cases in which two members. of the Committee shall propose it. A quorum is formed when the chairman or his deputy and three assessors or their deputies are present. Resolutions are passed by majority, and in case of equality the chairman has a casting vote. The prescriptions as to the keeping of minutes also hold good for meetings of the Committee at which assessors are present. The chairman may also in this case allow voting by writing in matters of urgency. III. — Officials. Section 9. Bookkeeper and Control Bookkeeper ; Assistants. — For the carrying out of the current cash business, the keeping of books and accounts a bookkeeper and control bookkeeper shall be appointed for a period not fixed but terminable on six months' notice. They are to be elected by the Committee in conjunction with the assessors. The election requires the confirmation of the District Governor. The Committee in conjunction with the assessors decides, with the approval of the aforenamed administrative authority, as to the salaries to be paid to the book- keeper and control-bookkeeper, as well as the amount of the caution money to be furnished with due security by these officials, which shall provisionally be at least 26674 2 A 4 74 MORTGAGE CREDIT INSTITUTIONS. £300 for the bookkeeper and £250 for the control-bookkeeper, these amounts to be correspondingly raised as the business of the bank increases. The appointment of substitutes for officials prevented from attending to their duties is to be arranged by the Committee, in case of urgent necessity by the chairman. Assistants shall be appointed by the Committee as required at a fixed suitable remuneration. Section 10., Business Duties of the Officials. — The whole of the cash and account keeping shall rest with the bookkeeper. He shall receive deposits and aU other pay- ments to the Bank, execute payments, prepare the annual statement of accounts and the monthly abstract. The control-bookkeeper must, in common with the bookkeeper, receipt all pay- ments made to the Bank inclusive of monies received through the post, and make up the entries of repayments with him in the savings books, as well as enter all receipts and payments in the control book kept by himself. The conduct of business by officials is regulated in particular cases by the service regulations issued by the Committee. Section 11. Cash and Securities. — The bookkeeper shall keep monies received and bonds under his own key up to the amount of the caution money deposited by him. Any sums in excess of this amount up to the combined total of the caution money of the bookkeeper and the control-bookkeeper are to be kept in the safe under their joint custody. Should the amount in cash and bonds exceed that of the above-named caution money, the chairman of the Committee is to be at once informed, who must thereupon take the necessary steps for its safe keeping. The bonds received at the Bank are to be so kept that the papers themselves are in one and the coupons and dividend warrants in another fire and burglar-proof safe under triple key. The Committee has also the right to convert bonds acquired by the Bank into securities bearing its name under the terms of Article 18 of the law giving effect to the Civil Code; and to deposit them, according to the terms of Article 85 of the same or insure them against theft, and also, in so far as they consist of German Imperial or Prussian State bonds, to have them transformed by the administration in chief of the National Debt in Berlin into a registered debt (Buchschuld). The duplicate keys are to be so kept that the purloining of the duplicate key belonging to a safe at the same time as the principal key shall be rendered impossible. Section 12. Presentation of Accounts. — Within three months at latest after the end of the financial year (which shall coincide with the calendar year) the bookkeeper shall lay before the Committee a statement of accounts, prepared by himself with the assistance of the control-bookkeeper, showing the receipts and pay- ments of the Bank, together with the vouchers relating thereto, as well as a properly drawn-up balance sheet, showing the profit and loss account. In the balance sheet must be set out the securities actually in the possession of the Bank at their market price on 31st December of the business year ; if this, however, exceeds the purchase price, then this latter is to be set down as their value. The Committee shall examine the statement in conjunction with an expert in accounts appointed by it, but not one of its own body. When the audit is completed and answers given by the bookkeeper to any com- ments, the Committee must settle the matters on which comment has been made and lay the audited summary before the District Governor. After any points raised by the District Governor have been settled the book- keeper shall receive from the Committee his discharge from liability, and the state- ment of accounts shall be communicated to the assessors. The District Governor must see that the statement of accounts is presented at the proper time and duly proceed in case of any breaches of regulations. The chief results of the business done must be published each year. IV. — Conduct of the Business. A. — Savings Deposits. Section 13. Deposits. — The Savings Bank accepts deposits in amounts of not less than 6^. at interest, but has nevertheless the right, according to cir- cumstances, to refuse depoj^its wholly or in part, nor is it bound to assign reasons therefor. STATUTES OF A PRUSSIAN SAVINGS BANK. 75 Section 14. Savings Books and their Form. — Every depositor shall receive a savings book containing a copy of the statutes. The same shall bear the consecutive number in the ledger, shall be executed by two members of the Committee, and have the seal of the Bank affixed. The name of the depositor shall be entered in the ledger and also in the savings book, but this latter proviso may by special request be omitted. Section 15. Deposits Book-keeping. — The deposit books and the corres- ponding accounts in the ledger are to be so made out that all subsequent pay- ments and withdrawals, as well as the amount of interest credited, shall be recorded therein. For this purpose on each occasion of deposit or withdrawal the book must be produced. Entries in the savings books are only binding on the Savings Bank when they have been signed by the bookkeeper and control-bookkeeper. It is the business of the depositors to see that they obtain these signatures. When the account is closed by withdrawal of the whole balance, the book must be returned to the Bank as a voucher. The return of the book constitutes in itself a receipt for the whole amount shown in it. No erasures must be made in the savings book, nor must it be torn, nor entries crossed out or altered; in such case the ledger entries alone hold good. Section 16. Pirocedure on Loss of a Savings book. — In case of the loss of a savings book the depositor must admit the entries in the ledger as conclusive evidence. Any person whose savings book has been entirely destroyed or who has lost or mislaid it, must notify the loss to the bookkeeper without delav. who will make a note in the books of the Savings Bank, without prejudice to the real owner of the book. If the loser can Drove to the conviction of the Committee that the book has been com- pletely destroyed, then without further formalities his money shall be paid out to him as per his account in the ledger. In all other cases the loss of a savings book must be notified according to law, and the book declared null and void. Payments shall be withheld until such declaration of nullity has been made. Section 17. Savings Books of Trustees. — Savings books in which trust monies are entered are to be marked in the outside " Trust Money Savings Book." For the withdrawal of the capital sum the consent of the second trustee or of the Chancery Court is necessary. If the personality of the first or second trustee of the depositor be unknown, authority for the request may be demanded. Section 18. Barred Savings Books. — The closing of a savings book until a given date, or until the occurrence of certain conditions, is permissible. This is effected by the entry of a note in that sense, and such entry shall prevent the savings bank from paying out the deposited monies otherwise than in accordance with the terms of this entry. Previous removal of the bar is permitted in exceptional cases with the consent of the committee. The bar may extend to the capital sum only or to the capital sum together wdth the accrued interest. Section 19. Rate of Interest on Savings Deposits. — The fixing of the rate of interest on deposits within the limits of 2^ to 4 per cent, lies with the Committee. Any reduction or increase outside these limits requires the consent of the provincial Governor. Alterations in the rate of interest are to be made known in the public press, and especially through the medium of the district official newspaper. A diminution of the rate of interest on already existing deposits takes place at the earliest after the lapse of three months from the date of the first public notice. Those depositors who have not, at latest one month before the day on which the new rate of interest is to take effect as a consequence of notice given, notified the bookkeeper of their intention to withdraw their deposits, or with whom special terms have not been made as regards rate of interest, will be accounted to and paid interest at the new rate from the day on which, pursuant to the notice given, such new rate is to take effect. Interest on deposits begins on the 1st or 15th day of the month after the date of deposit and ceases on withdrawal on the 1st or 15th day of the month preceding the repayment.* Deposits and withdrawals made on the 1st or 15th of the month shall be entitled to interest from and up to these dates. * Amended ; see below. Addenda I. 76 MORTGAGE CREDIT INSTITUTIONS. Interest on the withdrawal of the whole sum deposited shall be paid at the time of withdrawal, but otherwise after the close of each financial year up to 15th January. Any undrawn interest shall be written to the deposit account and interest paid further thereon from the beginning of the new business year. Interest is not paid on fractions of shillings. In calculating interest sums of less than ^d. are not reckoned. If any depositor shall not report himself to the Savings Bank for a period of 30 years further payment of interest on his capital shall cease. Section 20. Notice and Repayment of Deposits. — Notice of the withdrawal of deposits is to be made to the bookkeeper and the savings book is to be produced at the time; in order to be valid, entry in the savings book is necessary. Unless arrange- ments have been specially made and the same duly entered in the savings book, repayment may be demanded — (a) Up to £2 105. on demand, but only once in 14 days ; (b) Up to £7 105. at 1 month's notice; (c) Up to £15 at 3 months' notice; (d) Larger amounts at 6 months' notice. Notice requiring withdrawal of deposits can only be given by the Bank on the authority of a resolution of the Committee and in all cases requires three months' previous notice, the same to be effected by publication in the district newspaper. The Committee is further empowered to permit the payment out of larger deposits before the expiry of the term of notice provided they are of opinion that the state of the funds of the Bank justifies it, and the person entitled to make such with- drawal before the date on which it is due is willing to pay a corresponding con- sideration, not exceeding 1 per cent., on the amount to be withdrawn for the benefit of the Bank. When monies, of which notice of withdrawal has been given, are not withdrawn on the day named, interest on them shall cease as from that day. Deposits, of which notice of withdrawal has been given, and which are not promptly claimed, may be set aside by the Savings Bank without bearing further interest, or may be sent to him by post at his own cost and risk. Section 21. Requirement of Proof. — ^The Savings Bank is entitled to pay out to every possessor of a savings book on its presentation the amount standing to his credit as therein stated with lioerty of action as to the payment of the whole sum or a part thereof. Should any objection to this payment be raised, the Bank has the right to with- hold payment until the right of withdrawal of the money is certified. Any objection to the account is to be noted. B. — Investment of Funds. Section 22. Loans. Pitting out of Money at Interest. — Disposable monies are so far as possible to be put out at interest. The various modes of investment are as under : — 1. In mortgages (Section 23). 2. In loans to communes and corporations (Section 24). 3. In loans to co-operative societies (Section 25). 4. In securities (Section 26). 5. In loans on the security of sums receivable and securities (Section 27). 6. In loans on bonds with or without surety (Secticai 28). 7. In temporary deposits (Section 29). Section 23. Loans on Mortgage. — Loans on mortgage are made according to the terms of Article 73 of the law giving effect to the Civil Code. The assessment therein prescribed may also be effected by two valuers specially appointed by the committee for the purpose, or in the case of loan within the district of by at least two members of the Committee or two assessors. When, for the security of the mortgage, any question of the value of buildings arises, mortgage certificates are to be asked for from the fire insurance company concerned, and in the case of buildings insured with the Agricultural Fire Bank of , the entry of the mortgage in the supplementary land register is to be procured. In order to encourage ^he settlement of workpeople the savings bank may grant to them loans on new holdings within the district of not exceeding £300 in STATUTES OF A PRUSSIAN SAVINGS BANK. 77 amount up to three- fourths of such value, on condition that a regular sinking fund of at least 1 per cent, of the capital originally borrowed shall be stipulated. In exceptional cases sinking fund payments may be remitted in the first two years. Loans of this kind should not altogether exceed one- fourth of the reserve fund. Section 24. Loans to Communes and Corporations. — Loans to communes and other solvent communal organisations within the State of Prussia, endowed with corporate rights, as well as to church and school communes of the government district, may be granted on bond without mortgage, if the loan be formally settled and approved by the competent authorities. _ Section 25. Loans to Co-operative Societies. — ^The grant of loans to co-operative societies with unlimited or unlimited contributory liability, as well as to societies with limited liability, to the exclusion, however, of co-operative credit societies, that is to say, to productive societies only, is permissible. The loan may be granted against a special security furnished by the co- operative society seeking it. Any pledging of goods in stock by way of such security must receive the approval of the Provincial Governor. If there be no deposit of special security the grant of credit can only be made on the folbwing terms and conditions : — A.. To_ co-operative societies with unlimited or unlimited contributory liability loans may be granted to amounts not exceeding 10 per cent, of the total property of the whole of the members belonging to the society. The establishment of the amount of the total property of the members of the society is to be effected by the production of proof of the legal registration of the society with the number of its legally registered members, of a list of its registered members prepared by the Committee of Management of the society, and a summary by the chairman of the Assessment Commission as to the amount of the year's total of income tax and supplementary land tax at which the whole of the named members of the society are assessed. B. Loans to societies with, limited liability can only be granted up to 75 per cent, of the total liability of the members; further, the total liability of the individual member shall not be taken as more than 10 per cent, of his property. The actual capacity of individual members to meet the liability attaching to them must be specially investigated and continuously supervised by the Committee of the Savings Bank to the best of their just judgment. In order to fix the basis of credit, a certificate of the court as to registration, the number of members and their shares, as well as the amount of their liability, must be produced, and also a list of the registered members prepared by the Com- mittee of Management of the society; further, after the written consent of the members of the society has been secured for requesting the chairman of the Assess- ment Commission, a certificate from the latter that the property on which the members are assessed to supplementary property tax amounts to at least ten times that of the liability undertaken by them. The grant of credit to co-operative societies without special security must only be made within the district of or to co-operative societies in the adjoining districts, and under the conditions that : — (a) It shall be the duty of the co-operative society to forward every year to the Savings Bank its balance sheet, the report of any audit by its Co-operative Audit Union, and a list of the members by name who have joined or left the society in the course of the year. (b) An amortisation of the loan shall take place which shall be fixed for a ' longer or shorter period according to the nature of the business carried on by the society and that at most six months' notice of recall is fixed. ' (c) The co-operative society seeking credit must be affiliated to an Audit Union. The total amount of loans to be granted without special security must not exceed 10 per cent, of the savings deposits. Should a credit be granted without the assignment of a mortgage or other lien on property or the operation of some other special form of security, to a co-operative society, which through a Union bank is affiliated to the Prussian Central Co-operative Baruk, notice is to be given to the Directorate of the last-named bank together with a statement; of the amount of the loan. 78 MORTGAGE CREDIT INSTITUTIONS. The Committee of Management of the savings bank must carry out a detailed examination of the position of the assets of the society at least once in every three years. Section 26. Investment in Securities. — ^Such securities may be purchased as are permitted to be held by trustees in Prussia as laid down by Section 1807 (1-4) of the Civil Code and Article 74 of the law as to the mode of execution of the same; in addition to these mortgage bonds of the Agricultural Credit Association for the Province of , and the mortgage bonds of the Agricultural Credit Association of the Kingdom of . Section 27. Loans against Deposit of Security. — Loans may be granted against the deposit of — (a) Any of the securities named in the previous paragraph up to 80 per cent, of their market value. Never, however, beyond their face value. (&) Other bearer securities, which carry interest and have a market quotation, provided they be such as are accepted by the German Imperial Bank as tangible security for loans on effects, up to but not exceeding 75 per cent, of their market price, or should they stand above par, at their face value. Should the market value fall by one-tenth a corresponding en- largement of the security deposited must be obtained. (c) The savings books of such Prussian public savings banks, as are authorised to hold trust monies, including the savings books of the bank itself, up to their face value. Payment of the loan is made as soon as the borrower deposits notice, that the bank issuing the savings book has had notice of its deposit as security. (d) Mortgages, which furnish the security set out in Section 23. Section 28. Loans on Bonds. — Loans on bonds are granted to private persons on the following conditions : — (a) Only persons living in the district of can obtain loans of this kind. (b) The security of the loan must be guaranteed by at least one good surety taking full liability for the debt. (c) No loan on bond with surety exceeding £250 shall be granted to anyone, and no individual person shall be accepted as surety unless the total amount for which he becomes surety be less than £250. (d) The repayment of these loans must take place within a year unless a regular sinking fund of at least 10 per cent, annually of the original loan have been arranged for its redemption. This period must only be extended for a like term on each occasion so that the total time of repayment may not exceed 10 years. Every extension shall require a special resolution of the Committee of Management after fresh enquiry into the goodness of the security. Every other extension must be authenticated by the borrower, and in case tide sureties have riot already, on first undertaking their duties as sureties, declared their assent to the extension of the term of the loan, by the signatures of the sureties themselves. (e) Against simple note of hand without further security, no loans may be granted except to persons of undoubted trustworthiness belonging to the district of , and then only for sums not exceeding £75, and for a maximum period of six months with reservation of a single extension of like period. If the debtor repay at least 5 per cent, of the original loan Half- yearly, an extension of six months at a time may be granted to him by the Committee of Management. For each extension a special resolution of the Committee is necessary after fresh enquiry into the goodness of the security. (/) Not more than one-fourth of the total means at the disposal of the Savings Bank may be employed in loans of the kind contemplated in this section. (a) Members of the Committee of Management, assessors, and officials of the Savings Bank, may not hold loans of this kind^ neither may they act as sureties therefor. Section 29. Temporary Disposal of Cash in hand. — Cash balances, which are temporarily at disposal, may be deposited temporarily, without deposit of security, with the Imperial Bank, the Prussian Central Co-operative Bank, or other Prussian STATUTES OF A PRUSSIAN SAVINGS BANK. 79 communal banks, provided they are authorised to accept trust monies; with other banks or business houses against deposit of an adequate security specified in Section 27. Section 30. Redemption of Loans. — In the case of loans of the kind specified in Sections 23, 24, 25, and 27, when possible, an annual sinking fund payment is to be fixed at J per cent., at least, of the original amount, reserving the right to call in the loan at six months' notice. With the approval of the Committee debtors may be permitted to repay larger amounts of the capital sum, without breach of the notice period, provided the interest on the amount repaid is paid for at least one month after such repayment. Section 31. Default in Payment of Interest. — In making loan contracts the Committee may provide against default in the payment of interest by the insertion of regulations as to fines. Section 32. Term of Notice. Maintenance of Security. — In the case of loans granted according to Sections 23, 24, 25, and 27, a maximum term of notice of six months is to be received, for others a maximum of 14 days. The Committee of Management shall exercise constant watchfulness that the security for capital out on loan is maintained invariably within the meaning of the foregoing regulations. It is not obligatory to assign reasons for the refusal of loans. C.—Sub-Offi,ces. Section 33. Establishment and authorised Business of Suh-OffLces. — The Com- mittee of Management is authorised with the approval of the assessors to establish sub-offices in suitable places within the guarantee district and to appoint managers to them. • Managers of sub-offices shall have authority to accept deposits in the name of the Savings Bank, within the limits to be laid down by the Committee of Management, against ,a provisional receipt. Within six weeks of the day following the deposit the savings book bearing the registration mark of the bookkeeper and the control bookkeeper must be obtained from the manager of the sub-office in exchange for the provisional receipt. Fourteen days after this date the provisional receipt is no longer valid as against the Savings Bank, and the owner of it in case the amount set out in such receipt has not reached the Savings Bank, can make good his claim against the sub-office manager only. The functions of the manager of a sub-office shall extend further to the receipt of notices of withdrawal, as well as to the transmission of requests for loans, provided that the officials of the Savings Bank itself alone deal with these latter so far as their acceptance and the carrying out of their further stages are concerned. When occasion requires the sub-offices may have their authority extended by a resolution of the Committee, which has been accepted by the assessors, subject to the approval of the Eoyal District Governor. The whole of the business dealings of the sub-offices shall be regulated by a code or rules to be issued by the Committee of Management of the Savings Bank. The amount of the caution money to be deposited by managers of sub-offices shall be fixed by the Committee in conjunction with the assessors in each individual case. The expenses of the appointment of the manager, as well as especially those of the establishment of the sub-office, shall be borne by the communes of the district in which such sub-office is established. V. — Surpluses and their Disposal. Section 34. Surplus, Arrears, Disposal of Surplus. — The surplus of the Savings Bank consists in its net profits as shown by the regulation balance sheet. It shall be employed in the formation of a reserve fund for covering any deficits, which shall be kept distinct from the other funds of the Savings Bank and invested in readily realisable securities of the kind set ©ut in Section 26. As soon as the reserve fund amounts to one-twentieth of the liabilities, one-half only of the surplus need be allocated to it. Any accumulation of reserve exceeding one-tenth of the liabilities of the Savings Bank is not required. Any surplus which in accordance with these regulations has not to be written to reserve may be turned over to the corporations associated in proportion to the 80 MORTGAGE CREDIT INSTITUTIONS. amount of guarantee undertaken by them (Section 2c) for use for communal pur- poses, subject to the approval of the Royal Provincial Governor. A special reserve fund may be established for the balancing of losses on the market value of securities, to which any profit which may be counted as accruing from a rise in market value shall be written either wholly or in part and used as cover for losses caused by decline in market value. VI. — Concluding Regulations. Section 35. Secrecy. — All persons appointed to the administration of the Bank or of its sub-offices are to be sworn to the faithful conduct of their business and to secrecy by the proper administrative authorities who shall bring the names of such persons to the public knowledge. The duty of secrecy on the part of members of the Committee of Management, of the officials of the Bank and the managers of sub-offices, extends to all money matters coming within their knowledge in the course of the bank's business. Section 36. Notices. — ^AU notices issued by the Bank shall appear in the official district newspaper. Section 37. Modification of the Statutes. — Modifications in these statutes may be effected by resolution of the Committee of Management with the concurrence of the assessors and subject to the approval of the Royal Provincial Governor. Section 38. Dissolution of the Savings Banks. — The Savings Bank may only be dissolved with the approval of the Provincial Governor. It may, however, be decreed by him propria motu with the concurrence of the Provincial Council. The intention to dissolve the Bank is to be made known three times with an interval of four weeks between each notice, with notice of withdrawal of the funds on a day which shall be at least three months later than the first publication of such notice. All funds, which in consequence of such notice of withdrawal through lapse of the prescribed term are not reclaimed, shall have no further interest paid upon them, but shall be held at the expense of the persons entitled to receive them. Any funds remaining after all liabilities have been met shall become the pro- perty of the guaranteeing district and shall be handed over to the associated bodies, i.e., the communes of that district, in proportion to the amount of the guarantee undertaken by each, in accordance with Section 2c of these articles of association, to be by them expended on purposes of communal utility. Section 39. — The above articles of association shall come into force. on 1st January, 1902. These articles are approved by the Provincial Governor by decree dated 27th March, 1902, No. 2621, O.P. Addenda I. Section 40. Transfer Business. — 1. The Savings Bank, on request, effects both transfers of deposits to another savings bank on depositors leaving the district, as well as the recovery of deposits from outside savings banks for persons moving into the district. 2. The instructions may be given either by word of mouth or in writing; the savings book must be handed in at the time the instruction is given. A receipt is to be obtained from the Savings Bank on the return of which the new savings bank will on its part provide a new savings book with the credit duly entered. 3. Barring endorsements, trustee and guardianship arrangements, under whicn the payment of the sums to be transferred is subject to restrictions, or by which the payment is made dependent on the concurrence of third parties, are to be communi- cated by the transferring to the receiving savings bank and by it to be carried on to the new account. The transfer of credit on which there is any lien certified by a court is forbidden. 4. The receiving bank is also, on receipt of a transferred sum, bound to observe its own statutes as to the maximum which may be received as a savings deposit. 5. The transferring bank may defer the execution of a transfer in the case of deposits for the repayment of which, according to the statutes, the suspension of a term of notice may be required — ^until the expiry of such term of notice. In thie case the term of notice shall run from the date of notice to transfer on the trans- ferring bank. BAVARIAN SAVINGS BANK REGULATIONS. 81 6. The payment.of interest ceases at the old and commences at the new savings bank at the close of the day of the despatch of the money or of its being paid in by circular bill on the Imperial Bank. Payment of interest is not therefore interrupted by reason of the transfer. 7. The expenses of the transfer, including the preparation of the new savings book, shall in each case be borne by the bank at the new place of deposit. 8. Transfers can only be made between banks which have mutual manage- ments for transfer business. Section 19. — Sections 5 and 6 shall read as follows : — Interest on deposits shall begin on the day following such deposit and end on the day before repayment. , 7 May, 1908. The Committee of Management of the savings bank of . (Seven signatures.) The above Addenda are hereby approved. , 25 June, 1908. (L.S.) The Provincial Governor. The above Addenda I. come into force 1 August, 1908. , 25 July, 1908. The Committee of Management of the savings bank of . Addenda II. Section 41. Cheque, Dejoosit, and Current Account Business.' — ^The Savings Bank may within the terms of the legal regulations and of the ministerial instructions issued for giving effect thereto, and with the approval of the Provincial Governor, permit the owners of savings deposits to withdraw or transfer such deposits by means of cheques, and, further, with the approval of the Provincial Governor, may, in addition to their savings business, introduce ordinary deposit and current account business, making use of cheques and of transfer by bill according to the regulations laid down by the Minister of the Interior. The grant of credit on deposit and current accounts is permitted on the security required by Sections 23 to 29 of the articles of association, as well as the purchase of and the advance of money on bills under the preliminary conditions stipulated (Section 13, Nos. 2 and 3) by the Imperial Bank Act. The total advanced on bills must not exceed 10 per cent, of the total deposits. All liabilities of the Savings Bank as regards deposits, current accounts, and cheques and bill business are under the guarantee set out in Section 2 of the articles. Resolved unanimously by the whole Committee of Management of the Savings Bank of The Committee of the Savings Bank of — The above Addenda are hereby approved. (L.S.) 6 June, 1910. (Eight signatures.) Provincial Governor. EXTRACT FROM BAVARIAN SAVINGS BANK REGULATIONS, 1911. Extract. Investment of Savings Bank Funds. Section 24. Investment in general. — (1.) With regard to the investment of savings bank monies, in the case of communal savings banks, the provisions as to the investment of communal monies apply, with reservation of the following points. (2.) These provisions are also applicable to district savings banks. In so far as any deviations from these provisions are reserved for the approval of the State supervising authority, the approval of the Government (Ministry of the Interior) must be obtained in the case of the district savings banks. Section 25. Investment in Mortgages, &c. — (1.) The investment of the monies of savings banks in mortgages shall, in the case of savings banks which lend their 82 MORTGAGE CREDIT INSTITUTIONS. funds chiefly on real property in towns or in localities with a predominantly in- dustrial, or with a shifting, population, not exceed 50 per cent, of the total of their funds. If the area of the loan operations of a savings bank embraces principally localities with a predominantly agricultural and settled population, such invest- ments of a savings bank in mortgages may be proportionally higher, but must in no case exceed 70 per cent, of their funds. In the mortgage agreement the borrower must expressly render himself liable to immediate distraint. If the mortgage of the savings bank be not a first mortgage the savings bank must agree with the owner, that the previous mortgage, when the agreement is made in the case of ownership by a single person, shall be liquidated and a corresponding note entered in the Registry of Title. (2.) The supervising authority is authorised to fix exactly the permitted maximum for the individual savings banks within the limits of 50 to 70 per cent. (3.) Charges on the land {Grundschulden) and rent charges are to be classed as mortgages. The same provisions apply to them as to mortgages. Notes. — ■(a) The total funds of the savings banks shall be regarded here, and in the following provisions, as the total of the assets which appear at the end of the financial year in the statement of the assets as the total of the funds of the savings bank and its reserves. (&) In so far as, in the case of individual savings banks, the above-named superior limits shall at any time have been exceeded, the reduction of these investments shall only take place in proportion to the usual re- payments made thereon. The calling in of mortgages solely for the purpose of diminishing the mortgage account so as to bring it within the maximum allowed by the supervising authority may not be resorted to. This holds good equally for the maxima fixed by Section 26 and Section 27, paragraphs 2 and 4. {c) The establishment of a fixed maximum by the supervising authority is specially called for in the case of savings banks which grant credit in about equal proportions on urban and rural mortgages. Section 26. Investment in Loans to Communes or Unions of Communes. — The investment of savings bank monies with their own communes or unions of communes — whether in the form of a loan or advance or the acquirement of bearer bonds — shall, as a rule, not exceed altogether 30 per cent, of the total funds of the savings bank. Note. — ^In the case of loans and advances taken, up by the communes or districts from their own savings banks, the supervising authority must see that the interest more or less corresponds with that which the communes or unions have to pay in other similar cases for borrowed money, and that they are such as the savings bank can demand for similar loans from other borrowers. Some indulgence may be exercised when the communal indebtedness serves benevolent purposes or purposes of public utility, and the reserve security has already reached the prescribed level. Section 27 .—Specially permitted Forms of Investment. — (1.) Besides the methods of investment, which are permitted for communal monies in general, the communal and union savings banks are specially allowed to invest monies in : — (a) Loans on promissory note with surety. (6) Loans on promissory note with pledging of such securities as the bank is allowed to invest in with its own funds. (c) Bills, with at least two good endorsements, one of them to be that of a first-class firm, and the other that of one of the following banks, or of one of their branches : — The Eoyal Bank. The Bavarian Mortgage and Exchange Bank. The Bavarian Note Issuing Bank. The South- German Land Credit Bank. The Bavarian Union Bank. The Bavarian Commercial Bank. The Bavarian Agricultural Bank. The Union Bank of Nuremberg. The Palatinate Mortgage Bank. (2.) As a rule loans on promissory note with surety should not exceed 5 per cent, and loans on promissory note with pledging of securities 15 per cent, of the total funds of the savings bank. BAVARIAN SAVINGS BANK REGULATIONS. 83 (3.) The precise conditions for these investments of money are to be set out in the articles or in a special order with the approval of the supervising authority. Such approval is subject to withdravsral at any time. (4.) In the matter of the investment of the monies of savings banks in so-called auction and sale contracts — for the Government District of the Palatinate — ^the decision of the Ministry of the Interior dated 7th November, 1900, No. 22996, it remains in force with the restriction that for the purpose of reckoning the permitted maximum the monies invested in auction and sale contracts are to be reckoned with the investments in mortgages and these together must not exceed the maximum. Notes. — (A) For the more detailed regulation of the forms of investment here permitted, the following requirements are especially to be satisfied : — (1) In the case of loans with surety the rule must be observed as to the number of the sureties, their worth, as well as to the maximum amount which the bank may grant in loan of this kind to one person. Further, a term for calling in the loan at any time (Section 30) must be fixed without prejudice to the reserved rights of the savings bank, upon the expiry of which the borrower is bound at latest to repay the loan. As a rule, this term shall not be longer than three years at the most. An extension of the term may be permitted, if, after fresh inquiry under- taken by the bank, the position of the debtor and of the sureties have not altered to the disadvantage of the bank, if the debtor have already made the fixed payments, and both debtor and sureties have again acknowledged their obligations in a legally binding manner. The number of sureties shall, as a rule, be two. They must be possessed of their general civil rights in the German Empire, and must take up their suretyship under the form of personal indebtedness (with re- nunciation of any plea by which they may void it). Members of the communal or district council with whom the administration of the savings bank rests are excluded from becoming surety. (2) In the case of loans on securities deposited the limits of the loan is the first matter to be determined. Such limits must not exceed three- fourths of the exchange value or three-fourths of the nominal value of the securities. A maximum is also to be fixed beyond which loans of this kind are not to be granted to one person, as well as the period within which, with reservation of the right of calling in by the savings bank (Section 30), the loan must at the latest be repaid. This period may not as a rule exceed one year. Extensions may be granted under like conditions to those applying to loan with surety. Lastly, regula- tions are to be issued to the effect that the deposited securities must be correspondingly increased in case their exchange value falls below the limit laid down for the loan, as well as that no claim against the savings bank shall be made on account of such losses as may arise through disregard of the redemption or calling in of the deposited securities, on the part of the bank. In the case of holder securities the previous cancellation of this instruction is to be required. The savings banks must reserve to themselves the right to hand over the deposited securities to a banking institution for safe keeping and administration at the cost of the borrower. (3) The purchase of bills, their custody and collection must, as a rule, be done through a bank with which cheque or current account business is permitted to the commune. The purchase of bills and their realisatioTi may, in exceptional cases, be permitted to the savings bank, if an agree- ment with a bank on a cheaper basis is not to be obtained, and if the savings bank have an expert staff for the purchase and realisation of bills. The term of maturity of such bills should not, as a rule, exceed three months. (B) Irrespective of the foregoing regulation the ministerial notification of 13th May, 1905, clause 23, gives to the supervising authority the power to permit departure from the general provisions in yet other cases. In the case of savings banks in this connection especially come into consideration : — (1) The acquisition of parcels of land by the bank for its own business pur- poses, as well as the taking over of parcels of land under compulsory 25574 2 B 84 MORTGAGE CREDIT INSTITUTIONS. auction procedure, in cases in which the savings bank is in the position of creditor. (2) Investments in mortgages without the above-named estimate of their value. Approval in this case shall only be given, when the value of the parcel of land is officially known or also when fixed without formal estimate in a manner not open to objection (public auction taking place a short time previously, estimate by absolutely trustworthy private persons, &c.). (3) Investment in holder bonds without requirement of change of name. These shall only be approved when the bank arrangements are such that in all human probability the loss of the security is out of the question. By the depositing of securities with the Eoyal Bank the change of name may be dispensed with under the ministerial notifica- tion of 13th May, 1905, clause 16, paragraph 11. (4) The investment of monies with agricultural or industrial co-operative credit societies in Bavaria according to the more detailed instructions of the ministerial notification o:& 13th May, 1905, clause 23, para- graph 4. (5) Investment of monies on current account with other banking institutions than those generally admitted to this form of money business. Section 28. Fluidity of the Funds of Savings Banks. — ^(1) At least one- fourth part of the total funds of the savings bank must be held in legal tender or invested in a readily realisable form. As investments of such kind claims on the State of Bavaria or any other Federal State, the Imperial Land of Alsace-Lorraine or the German Empire may be cited — next the bearer obligations of the State supervised public institutions in Bavaria, investments of money with the Imperial Bank and with the Royal Bank, as well as under the ordinance of 5th May, 1905, for investments declared legally valid with Bavarian companies, co-operative societies, or associations, lastly money investments in cheques on the post office and in bills. (2) Claims on the State of Bavaria, the other Federal States, the Imperial Land of Alsace-Lorraine or of the German Empire must, in the case of savings banks, whose investments in mortgages do not exceed 50 per cent, of their tot^l funds, amount to at least 20 per cent., and in the case of other savings banks to ii least 15 per cent, of their total funds. Notes. — (a) Investments in mortgages as well as in loans on promissory note, with the exception of bankers' promissory notes, are especially not to be reckoned as readily realisable investments. (&) So long as the provisions of Section 28 are not fully carried out, the savings banks must annually, at the close of their financial year, out of the surplus of their deposited capital, invest, as compared with the same amount of the previous year, at least 40 per cent, in the cash investments named, and at least 30 per cent, of this surplus invested shall be invested in claims on the State of Bavaria, the other States of the German Federation, the Imperial Land of Alsace-Lorraine or the German Empire. The amounts for this purpose are to be drawn from current income. Sales of funded property may not be made for this purpose. Section 29. Temporary Investment of Cash. — Special attention is to be directed to providing that also merely temporarily disposable balances of the savings bank shall be always profitably invested. For this purpose investments in cheque business on current account or in bank bills are eminently suitable. Notes. — {a) Every savings bank should open a cheque account {Girochech Konto) or a current account with at least one banking institution approved for such money transactions with the communes. Savings banks which have no such approved banking institution within their district or branches thereof, and desire to deal therefrom on current account with another financial institution (including a co-operative society) nearer to the head office of the savings bank shall have the approval of the super- vising authority extended to such action as far as possible. In this case, however, the approval of the opening of current account business, unless an unimpeachable security be otherwise fur- nished, shall l5e made conditional upon the banking institution in question furnishing a corresponding specific security to the savings BAVARIAN SAVINGS BANK REGULATIONS. 85 bank. Further, a maximum is to be fixed for dealings on current account with such financial institutions, and this must not exceed the daily money needs of the savings bank. The surplus amounts, unless their immediate and permanent investment be possible, shall be invested with one of the generally approved banks. (fe) The savings banks, for the purpose of carrying on the cash business which arises out of the investment of the funds of the savings bank, shall not only itself make extensive use of the cheque business, but also urge the debtors of the savings bank to make active use of the cheque account of the savings bank for the purpose of executing their payments to the savings bank. The supervising authority shall be empowered upon request to permit the signing of cheques by two ofiicials of the bank, so far as in special cases the necessary precautions are taken to exclude the abuse of this privilege. Section 30. Terms of Notice. — (1) Savings banks must reserve to themselves, in the case of investment in mortgages and in loans on promissory notes, the right of calling in the same ; this reservation is not required for loans to its own communes or to its own union of communes. The term of notice should be, as a rule, in the case of investment in mortgages, three to six months, for investments with legal public institutions under the supervision of the State of Bavaria and in bank bills one to six months, as well as for other investments not secured by mortgage; for promissory notes the term should not exceed 14 days. (2) An amount up to 25 per cent, of the total funds of the savings bank may, however, be invested : — {a) In loans on mortgage which, with the exception of specially arranged cases, may not be called in for a period of at most 10 years. (6) In so-called amortisation mortgages, i.e., such loans on mortgage in which the debtor pays up to the end of the period for redemption equal annual amounts as interest and sinking fund, and in which notice on the part of the lender, special cases excepted, for the repayment of the loan cannot be given so long as the payments to interest and sinking fund are punctually made. (c) In loans to State-supervised public institutions in Bavaria, in which case interest, sinking fund, and notice of repayment is regulated as in (&). Section 31. Maintenance of Security. — The savings banks must supervise the continued security of invested monies according to the foregoing provisions. To this end the whole of the invested funds of the savings bank shall be sub- jected at suitable and not too long intervals (about 5 years) to a fresh examination. Section 32. ^Principles of Investment. — (1) Within the limits of these pro- visions the savings banks, in the investment of their monies, should directly meet the money needs of the population resident in their districts, and should further, so far as possible, undertakings for the common good of their district by grants of credit. (2) At the same time the savings banks shall also direct their attention to the relief of the population from debt. To this end the savings banks in their invest- ments, particularly in the case of promissory notes, shall take as much care as possible that the borrowers declare themselves willing to repay their loans by regular instalments. The accumulation of the sinking fund instalments may be made easier to borrowers, by their being paid into a savings book from which they may not be drawn, such payments to be exclusively allotted to the diminution of the debt incurred (accumulation of redemption fund). The savings banks shall lastly, over and above the regular redemption payment, accept payments in reduction of debt without previous notice. It should be arranged by agreement with the debtors that they, in place of the amount paid off on the old debt, may only seek to take up a new loan when the amounts paid off have reached a definite proportion of the original sum borrowed. ]\Jotes. '(a) While giving every benevolent consideration to the requests for loans made, the savings banks may never place the interests of the would-be borrower above the rightful claims of the depositors. One of the first duties of savings bank administration is to carefully weigh the interests of both sides. The savings, banks offer to borrowers already a great advantage, in that they can content themselves with a fairly con- stant rate of interest on deposited monies, and need only follow the vari- ations of the general money market rate of interest, when it becomes a question of somewhat serious, changes. Too frequent an alteration of 2 B 2 25574 86 MORTGAGE CREDIT INSTITUTIONS. the rate of interest asked by the savings banks for their investments corresponds just as little with the idea of their objects as a too frequent alteration of the savings bank rate of interest (on deposits) . (b) For the active furtherance of the accumulation of sinking funds it is re- commended to grant in the case of deposits, which are allocated to the formation of such funds, the same rate of interest as that agreed upon for the loan to be redeemed. This consideration should, however, be subject to the proviso that, if the deposits be not applied to the agreed purpose, this interest on these deposits shall only be reckoned, having reference for the whole period of redemption to that rate fixed for ordinary deposits. It is further recommended that an agreement be made with borrowers, that they shall not cede their claim to these deposits, and that the savings bank shall have the right to apply such deposits as cover for its own claim, if the right of claim upon them be pledged to a creditor. STATUTES OF THE LAND IMPEOVEMENT ANNUITY BANK OF THE PEOVINCE OF SILESIA. Section 1. Within the terms of the Act as to the establishment of Land Improve- ment Annuity Banks, dated 13th May, 1879 (Collection of Laws, p. 367), and on the basis of a resolution of the Silesian Provincial Assembly of 11th January, 1881, a Land Improvement Annuity Bank for the district of Silesia shall be established with its seat in Breslau, and with the style and title of " Land Improvement Annuity Bank of the Province of Silesia," whose organisation and administration shall be regulated in accordance with these statutes. Section 2. Objects. — The objects of the Bank are to support by the grant of loans, which may not be called in by the Bank so far as Section 5, clause 2, of the Act does not provide to the contrary : — 1 . The promotion of the cultivation of the soil, and especially of drainage and irrigation works, the laying out and maintenance of roads, the under- taking of forest cultivation and the breaking up of land for the plough, and the establishment of new farms. 2. Works for the protection of river banks. 3. The laying out, widening and maintenance of dykes, and the works necessary for their security and improvement. 4. The laying out, employment or maintenance of watercourses or basins, the construction and improvement of waterways (for floating timber rafts), and other works connected with water carriage. In the case of loans granted for the execution of drainage works, the special provisions of Sections 11-31 of the Act shall apply so far as the borrower may demand. Section 3. Appointment of Security. — Security must be appointed for the annuities (Section 24) and the additional payments granted by the Bank by mortgage of or rent charges on parcels of land capable of being put to agricultural or forest use, under the terms of the regulations laid down in Section 6, clause 2; Section 7, clause 3 ; and Section 8, clause 3, of the Act. Section 4. Appointment of security may be waived (Section 3) when the loan is granted to urban or rural communes or to the co-operative societies named in Section 33, No. 2, of the Act. Such corporate bodies and co-operative societies must, however, produce such information as to the state of their finances and their general position as may appear necessary to the Directorate. Section 5. Administration of the 'Bank. Election and Composition of the Directorate. — The administration of the Bank shall be carried out by the Directorate at present established for the Provincial Aid Bank for the Province of Silesia insti- tuted under the Statute of 24th May, 1853 (now that of 21st June, 1891), and the supplement to the same dated 25th November, 1869, under the supervision of the Provincial Committee and the Provincial Assembly. The said Directorate shall bear in the business of the Bank the title : " Director- ate of the Land Improvement Annuity Bank for the Province of Silesia." Section 6. The Directorate shall represent the Bank for the Province of Silesia before all authorities, as wefl as in relation with private persons, also in those cases in which by legal prescription a special power of attorney is required. It is also specially authorised, beyond the power vested in it by Section 11, 13, SILESIAN LAND IMPROVEMENT ANNUITY BANK. 87 15, 16, 18, 19, 20, 21, 22, 23, 24, and 33, to pass resolutions as to the pur- chase of parcels of land for the security of the claims of the institution and to resell the said parcels of land, to exercise the right of calling in loans under the provisions of Section 5, clause 2, of the Act, and to determine the regulations for the purchase or drawing for redemption of annuity bonds (Section 35 et seq.). Powers of attorney and deeds which involve a charge upon the Bank must be executed by the chairman or his deputy, and further by one member of the Directorate. In other matters the Directorate shall be governed by the terms of the business regulations of the Provincial Aid Bank, so far as these statutes contain no provisions to the contrary. The Directorate shall publish annually a report on the financial position of the Bank. Section 7. Appeal against the decisions of the Directorate may be made by the parties concerned to the Provincial Committee. Such complaint must, however, be notified within 14 days after the contested decision has been dealt with, and must be legally adjusted within six weeks after the named period. Section 8. Authority of Provincial Committee. — The Provincial Committee must exercise general supervision over the administration by the Directorate and especially :— 1. Must decide appeals against the decision of the Directorate. 2. Must report annually on the administration of the institution to the Provincial Assembly. 3. Must elect the members of the Commission to be appointed for expert opinion as to drainage works. 4. Must provide that the nominal value of the bonds issued by the Bank does not exceed in amount the loans granted (Section 25). 5. Must issue the necessary general executive instructions for carrying out the statutes (Instruction to "Valuers, Counting House Regulations, &c.). Section 9. Authority of the Provincial Assembly. — The Provincial Assembly shall exercise the supervision in chief over the administration of the Bank and it shall specially be their duty — 1. To pass resolutions as to modifications of the statutes. 2. To elect two delegates from their body for the purpose of the business given over to them in Section 37 of the same. 3. To amend or enlarge the existing or to introduce new bases of assessment (Section 12 et seq.). 4. To pass resolutions dealing with the dissolution of the Bank (Section 42). Section 10. Presentation and Form of Reasons for Request of Loans — Decision on the same. — Proposals for the grant of loans are to be sent to the Directorate. There must be appended to them : — 1. A complete plan of the proposed works, in which also the time shall be stated within which the work is to be executed. 2. An estimate of expenses by an appointed expert, and, further, 3. When mortgage on land is to be appointed as security for the loan, a certified copy of the folio of the register of title or title deeds of the parcel of land. 4. A, certified extract from the original land assessment roll, as well as contingently. 5. An assessment by the Silesian Land Mortgage Credit Association of the land offered as security. The information required under No. 2 can be dispensed with if it is not a case of a loan carrying the right of priority to be granted for drainage works (Section 11 et seq. of the law). Section 11. — The decision as to the granting of the loan asked for rests with the Directorate of the Bank. Appeal against the decision arrived at lies from the person seeking the loan to the Provincial Committee (Section 7). Section 12. — The value of the property to be mortgaged shall be ascertained either by the Land Mortgage Credit Association or by special assessment made by the Bank itself. Section 13. Assessments; Procedure and Basis. Land Mortgage Credit Association assessments. — If an assessment by the Silesian Land Mortgage Associa- tion of the parcel of land offered as security be produced by the person seeking the loam, the Directorate of the- Annuity Bank must examine whether changes have taken place since the estimate was made, either in the extent or agricultural conditions of 25!574 2 B :? 88 MORTGAGE CREDIT INSTITUTIONS. the property, and only then to grant the loan when it is proved that no important changes affecting the value have taken place since such estimate was made. If more than five years have passed since the assessment was made, then this proof can only be given by means of a certificate from the authorities of the Land Mortgage Association by whom the assessment was made. Section 14. — ^An assessment by the Land Mortgage Association is also to be accepted with care if the competent authorities of the Association in question, in order to avoid the making of an entirely new valuation, have revised an already existing Mortgage Association assessment and have accepted the result of such revision. Section 15. Assessment by the Institution. — A special assessment by the Land Improvement Annuity Bank shall take place (Section 7 of the Act) if the borrower demand it, and after he shall have fulfilled the conditions previously set out in paragraphs 1-4 of Section 10 of these Statutes. The proposal for the making of an assessment by the institution must be brought before the Directorate of the Bank which shall nominate an Assessment Commission in each individual case. Section 16. — -The Assessment Commission shall be formed of one or two agri- cultural experts who shall be appointed by the Directorate from the District Com- mittee of the district {Kreis) in which the parcel of land to be assessed is situate or from persons to be nominated by the Land Mortgage Association for that division' of the province, and a representative of the Directorate who shall be appointed by the chairman from among its members or from the provincial officials. Section 17. — The Assessment Commission must be guided in the formation of its estimate by the rules of the Silesian Land Mortgage Association with regard to the assessment of credit. These rules for assessment shall apply absolutely in the making of assessments by the institution, provided the increased value obtained or to be obtained by improvements do not come into consideration (Section 20). Their amendment or enlargement, as well as the possible introduction of new bases of assessment, shall be reserved to the Provincial Assembly. Section 18. — The determination of the assessment of the institution is made by the Directorate at its own free discretion on the basis of the results of the proceedings of the Commission. Section 19. — If the borrower produces an estimate made upon the basis of Section 12 et seq., the Directorate is authorised to undertake a revision of the same and to fix the assessment according to the results thereof. It is left to the discretion of the Directorate to decide whether in individual cases a new estimate should be made or whether an already existing assessment by tlie institution is to be taken as basis and in what manner in the latter case the work of revision is to be undertaken. Section 20. Basis of Assessment of the increased Value of the Land to he improved. — The Directorate is authorised, on the granting of a loan, to take into consideration the increase of value obtained (Section 8 of Act) or to be obtained (Section 7 of Act) from the improvements on the property to be mortgaged. The estimate of this increase of value is to be made separately, and is effected by the Directorate upon the following basis with due observance of the procedure ordered by the preceding paragraph. 1. The improvement of the soil anticipated must be of such a kind that its success may be evident from the nature of the improvements and of the local conditions. 2. The anticipated improvement must be so conditioned as to give a sure prospect of increased yield and also increase of value; it must be properly conceived, and the expense incurred must be in relation to the increased yield. 3. The permanent increase of annual yield as ascertained by experts in the individual case, less the cost of maintenance and amortisation of the works, multiplied by 15, shall be reckoned as capital and shall form the increased value. Section 21. Proof of Execution according to Plan. — In cases in which the Act requires proof of the execution of the improvement according to plan, the same shall be furnished, except in the cases referred to in Section 25, clause 2, of the Act, by the opinion of an expert nominated by the Directorate of the Bank. Section 22. Swpervis^n as to the Maintenance of the Improvement Works. — If on the mortgaging of a parcel of land account is taken of the increase of value obtained SILESIAN LAND IMPROVEMENT ANNUITY BANK. 89 or to be obtained by the improvement (Section 20), or under the provisions of Section 11 et seq. of the Act, the annuities are registered v?ith right of priority, it shall be the duty of the ow^ner to maintain the improvement works in good condition for the period of amortisation or of liability for the annuity, and to prove this to the Directorate at any time on request. The Directorate is bound to see to the fulfilment of the duty thus laid upon the owner through a Commission to be appointed for the purpose. Section 23. — Should the owner of the parcel of land not fulfil the aforementioned duty, notwithstanding notice given, the Directorate of the Bank shall execute the necessary repairs at his expense. In the case of a loan granted for drainage works with the stipulation of the right of priority for the annuities, the necessary repairs shall be moved for by the competent deciding authority. The expenses ordered to be incurred for the maintenance of the improvement works on the basis of the above regulation may be collected or payment recovered by summary process executed by the Bank. Issue : Rate of Interest : and Redemption of the Loans. Bank Bonds. Section 24. — Loans shall be made at the discretion of the Bank either in cash or in annuity bonds of the Bank at nominal value. They shall bear interest at 4 per cent., 3^ per cent., or 3 per cent., and in addition shall be subject to sinking fund payments. The interest fixed on the nominal value is to be paid in full without regard to the progressive extinction of the loan. The amount not required for interest shall serve for the extinction of the loan. The general sinking fund quota is in each individual case to be fixed by the Directorate before the grant of the loan and must be at least J per cent, on the capital sum lent. Interest and sinking fund contributions may be recovered from the borrower by distraint executed by the Bank. Section 25. — The Land Improvement Bank Annuity bonds are to be drawn up by the Directorate of the Bank in the form " A ' appended in series of £250, £50, £25, and £10 consecutively numbered and bearing interest at the rates of 4 per cent., 3^ per cent., or 3 per cent, per annum, payable half-yearly. The holders of the bonds shall have no right to give notice for redemption. The nominal value of the Bank bonds issued may not exceed the amount of the loans granted. When loans are granted in cash the Bank may issue bonds to the amount of such loan. Section 26. — With every Bank bond shall be issued at the same time interest coupons for 10 years of the form " B " appended furnished with talons of the form " C " appended. After the lapse of these 10 years, a fresh series of interest coupons and talons shall be issued for the bonds to the holder of the talons of the previous series issued upon giving up the latter, unless a protest be raised in due time by the holder of the bonds in question at the place appointed for the issue of the coupons ; in this case the issue of the new series of coupons and the new talon shall be made to the person presenting the bond. Section 27. — Claims arising out of the Bank bonds lapse on the expiration of 10 years from the date of maturity, unless the bond be presented for payment to the Directorate before the lapse of the 10 years. This period (term for presentation) shall begin with the close of that year in which the term for payment falls. If presentation take place, claims lapse in two years from the end of the term for presentation. A judgment of a court in favour of a claim arising out of a bond is equivalent to presentation of the same. The term of presentation for the interest coupons shall be four years. It shall begin with the close of the year in which the coupon falls due. In the case of lost or destroyed talons and coupons no public notification shall be made; the notification of lost or destroyed bank bonds is effected under the terms of the regulations set out in Section 46 of the Act and of the German Imperial Code of Civil Procedure. Contributions towards the Payment of Costs of Administration. Section 28. — As a contribution towards the expenses of administration of the Land Improvement Bank a sum of one-fifth per cent, of the original loan capital, in addition to the annuity, shall be levied annually on every borrower and paid into the Central Exchequer of the province. 26571 2 B 4 90 MORTGAGE CREDIT INSTITUTIONS. For this contribution the Provincial Union shall meet the total cost of adminis- tration of the Bank in so far as the same is not chargeable to individual borrowers (Section 30). Section 29. — So soon as the account of the reserve fund to be prepared at the end of each financial year (Section 38) shows that it has reached 5 per cent, of the loans granted, the interest accruing to the same in the next financial year shall, so far as it consists of invested capital, be reckoned as receipts to be debited to the cost of administration of this financial year, and the levy of contributions from those liable to pay the same shall be diminished to this extent. If the interest exceed the total amount to be debited to the expenses of administration the excess shall fall to the Provincial Union. Cost of examining Requests for Loans and the Making of Assessments by the Institution. Section 30. — Those expenses which arise out of the justifying and examining individual requests for loans and out of the making of assessments are to be borne by the person seeking the loan. The latter is bound to deposit with the Directorate at their request a suitable amount in advance to meet such expenses. Section 31. — The Control Commissioners (Section 22) and the members of the Directorate deputed to the Assessment Commission (Section 16) shall be allowed travelling expenses and daily allowances under the terms of the regulations in force for members of the Provincial Commission (resolution of the Provincial Assembly of 5th January, 1876), the provincial officials similarly deputed according to the regulation of 14th March, 1877, as to the special service conditions for officials. The terms of this regulation shall also apply to the valuers in such manner that— (a) When two valuers collaborate to make the estimate the rates given in No. 1 of Sections 55 and 56 of the regulations shall apply, and (b) when only one assessor is employed the rates given in III. of the paragraphs named shall apply. Section 32. Dates of Issue of Bank Bonds, for Payment of Annuities and Cessation of Interest.- — The issue of Bank bonds takes place, if security be not afforded by way of mortgage or charges on the land (Section 4), so soon as the loan is granted; in other cases so soon as the security has been registered (Section 3). Bank bonds may not, however, be issued beyond that amoun^ of the loan which comes within three-quarters of the assessed value of the property in the existing condition of the same, or within twenty-five times the amount of the assessed net yield, until after execution of the undertaking according to the plan. (Section 7, clause 4 of the Act.) The land improvement annuities (Section 24) and the payments in addition to the same (Section 28) are to be paid in to the counting-house of the Land Improve- ment Bank at half-yearly intervals, dated from 1st June and 1st December of each year, free of all charges, postage, &c. Payment of interest on the Bank bonds is made in cash at half-yearly intervals, on presentation of the coupon due, on 1st January and 1st July of each year at the counting-house of the bank. The amounts of the coupons on bonds no longer bearing interest and of lost coupons shall be paid at the time of their maturity or after the lapse of the period within which they would be out of date under the terms fixed by Sections 44 and 46 of the Act. Section 33. Plan of Redemption and Form for the Repayment of Loans. — The redemption of loans granted is effected according to Section 24 of these Statutes. If a loan be sought for the execution of drainage works (Section 2) and the borrower declares his desire to provide security with right of priority to the Bank as provided by Section 11 et seq., of the Act, the half-yearly annuity to be paid under Section 32 of these statutes, to be fixed in every individual case by the Direc- torate, must amount to at least 8 per cent, of the capital sum lent, of which 4 per cent, or 3| per cent, or 3 per cent, shall be reckoned as interest and the balance as payment to sinking fund. The same shall hold good when the loan is granted for drainage works on a fee or entail estate without the consent of the heirs and agnates thereof. The Directorate may decide at their discretion that the annuity to be paid on the loan in question in the first year shall not exceed the amount necessary for interest. Section 34. — It shall always be open to borrowers to repay the loan to the Bank either wholly or by instalments, in cash or in Bank bonds at thfir nominal value. In these cases the annuities including the other sums required h the statutes must SILESIAM LAND IMPROVEMENT ANNUITY BANK. 91 be paid up for the current half year. The payment by instalments of less than £25 is not permitted. A receipt in full discharge for the amounts paid is to be given to the borrower by the Directorate of the Bank. Drawing of Bank Bonds and Payment 0/ Bonds drawn. Section 35. — In the drawing and purchase of Bank bonds for the purpose of redemption the conditions laid down in Section 41 of the Act are to be applied. The Directorate must in the course of the months of May and November of each year : — 1. Decide to what amount Bank bonds shall be redeemed at the next redemption term. 2. Determine whether such redemption shall be effected by drawing or by purchase. 3. According to the course adopted proceed to the drawing of the bonds. Section 36. — The drawing of the Bank bonds shall take place at Breslau either at once on the above decision being taken (Section 35, No. 2) or on the days following, at latest on 31st May or 30th November of each year. The numbers of the bonds drawn, as well as the time and place of repayment, shall be published by the Directorate before 10th June and 10th December of each year. The payment of the bonds drawn shall take place on the 1st July and 1st January following the publication of the notice at their nominal value in cash at the Central Bank of the province. From and after the date fixed for the payment of the bank bonds they shall bear no further interest. Section 37. — Bonds which have been drawn or purchased for amortisation, as well as bonds accepted in payment under Section 34, shall be destroyed by fire under the superintendence of the Directorate in the presence of two delegates of the Pro- vincial Assembly and of a notary. The minute to be taken by the notary of the fact of their destruction shall be published by the Directorate in the form prescribed by the Act (Section 41). Section 38. Reserve Fund. — Section 47 of the Act shall regulate the formation, maintenance and enlargement of the reserve fund as also the appropriation of any surplus thereof. The investment of the monies of the reserve fund shall be effected by the Directorate of the Bank in trustee securities (Section 39 of the law of trusteeship of 5th July, 1875) or in bonds of the Land Improvement Annuity Bank. Section 39. Formation and Procedure of Drainage Commissions. — The Commis- sions for giving an opinion on proposed drainage works shall, should need arise, be formed for each district within the Provincial Union under the regulations laid down in Section 16, paragraph 1, of the Act. The election of the members of these Commissions, to be chosen from the Pro- vincial Committee, shall be for a period of six years. The Commissions shall act under the direction of the competent deciding authority under the regulations laid down by the Act and shall give their opinion according to their unfettered expert judgment. The powers of the Commissions may be transferred to the Silesian Land Mort- gage Credit Association upon resolution of the Provincial Assembly to that effect, should this latter declare itself prepared to take over the same. Form of Public 'Notices of the Bank and List of Papers for Publication of the same. Section 40. — All public notices relating to bonds of the Bank shall be issued by the chairman in the name of the Directorate. Section 41. — Public notices shall be effected — 1. Through the official newspapers of the Royal Government at Breslau, Liegnitz, and Oppeln. 2. Through the Silesian Gazette. 3. Through the Breslau Gazette. 4. Through the German Imperial Gazette. The aforenamed (Section 37) publication of the fact of destruction of Bank bonds is only made through the papers named m 1-3. The Provincial Committee is authorised in case one of these papers should cease to be published to appoint another to take its place. Section 42. Dissolution of the Bank.^ — ^The dissolution of the Land Improve- ment Annuity Bank is effected by resolution of the Provincial Assembly with the approval of the Head of the State. Shouldthe dissolution be decided upon, a term shall be at once fixed, after the lapse of which no further loans shall be granted by the Bank. 92 AGREEMENT OF BABEK GOVEKNMENT WITH MORTGAGE BANK. AGREEMENT MADE IN 1892 BY BADEN GOVERNMENT WITH THE RHENISH JOINT STOCK MORTGAGE BANK AS TO RURAL MORTGAGE LOANS. 1. The Rhenish Mortgage Bank in Mannheim shall establish for rural loan business in the Grand Duchy of Baden a special department to be entitled the " Land Credit Bank Department of the Rhenish Mortgage Bank." 2. The Rhenish Mortgage Bank shall grant rural loans on property within the Grand Duchy of Baden at cost price. The latter shall be fixed in accordance with the rate of interest and the market- price of bonds being issued at the time of the granting of rural loans, with proportional consideration for the general busi- ness expenses incurred by the Bank and the special business expenses which are caused through the peculiar nature of rural loan business. Commissions or fees on account of adiainistration shall be in no case reckoned by the Bank. The minimum amount of a mortgage loan shall be £15. The rate of interest at which the Bank gives the loan shall be made known from time to time by it after consultation with the Ministry for Home Affairs. 3. The Bank shall grant loans subject to annual sinking fund payments and loans which are repayable in other ways : — {a) Loans not subject to annual sinking fund payments shall be repayable in one sum or by instalments; in connection with these loans a fixed period, during which notice may not be given, may be also agreed upon and entered in the contract. When no agreement in the con- trary sense exists, the repayment of the loans or the payment of instalments may take place without any notice at the time when interest is paid. The smallest instalments may also be paid off without previous notice at the same periods. (6) In the case of loans subject to annual sinking fund payments, instalments towards reduction of the capital debt may also be made at any time without notice. These instalments must, however, reach at least the amount of a single annual payment on account of capital and interest. The complete repayment of loans subject to annual sinking fund pay- ments is permitted without exception at the date of the annual payments. At the request of the debtor loans subject to annual sinking fund payments shall be at any time and without reckoning any commission converted into loans not subject to sinking fund payments. The remainder of the loan must in this case be made into a sum divisible by a hundred. The amount already paid off by the debtor during the existence of the original loan shall be deducted when such loan is con- verted into the loan of the other class. At the date for the annual payments and for the purpose of rounding off the balance of the capital debt to a sum divisible by a hundred, the debtor may also require a conversion of a loan with a greater annual sinking fund payment, into one with a lower annual sinking fund payment, or vice versa. The Bank may refuse to convert a loan subject to annual sinking fund payments into a loan not subject to such payments, or into a loan with lower sinking fund pay- ments, if the Bank at the time of granting the loan, taking into consideration the circumstances then obtaining, shall have expressly made its grant conditional upon its repayment by fixed annuities. In this case also the borrower is then entitled to make repayment in full of a loan subject to annual sinking fund payments. 4. The Bank shall endeavour as far as possible to extend loans subject to annual sinking fund payments among the rural population, and it shall instruct its representatives in this sense. 5. As rural loans in the sense of this agreement shall be considered such loans of which the total mortgaged security, or up to two-thirds of the mortgaged security, consists of cultivated land. By cultivated land is understood by preference arable and pasture land. If the total mortgage security does not entirely correspond to these principles, a loan in exceptional cases may be granted under the conditions obtaining for rural loans, provided that the borrower declares himself ready to make an annual sinking fund payment of at least one per cent. 6. Cultivated land may be lent upon up to half of the value as recognised by the Bank. In the case of vineyards, loans shall, as a rule, be made only up to one- third of the ascertained vakie, in the case of woods and forest, the value of the forest land alone shall be reckoned. MODEL ARTICLES OF ASSOCIATION. 93 7. If the mortgage security consists solely of cultivated land, and the borrower declares himself ready to make an annual sinking fund payment of at least one per cent., the Bank shall permit a loan up to sixty per cent, of the ascertained value. 8. As the standard for the examination of the correctness of the valuations presented, the Bank shall take land tax assessments, the exchange prices of the previous years, and the values ascertained in connection with the consolidation of scattered parcels of property. The Bank reserves the right to ascertain what the selling price of the land offered as security might be, even under unfavourable conditions. It also reserves the right to examine not only the objective basis of the loan request, but also to assure itself of the worthiness for credit of the person seeking the loan. 9. The borrower is entitled, when arranging for the loan, to determine whether he wishes to pay the interest quarterly, half-yearly, or yearly. He may also, when arranging for the loan, fix the date for payment of interest. He may not, however, fix the first day of any month. 10. Interest shall be reckoned from the day on which the money was despatched by the Bank. 11. The Directorate of the Rhenish Mortgage Bank shall present within the first three months of each calendar year a report to the Ministry for Home Affairs concerning its rural loan business in Baden, and shall show in a separate appendix, without the insertion of the names of the applicants, a view of the rejected requests for loans, giving the reason for rejection in each case. 12. The Ministry for Home Affairs shall be permitted to examine, through a Commissioner, at periods deemed expedient by him, all the documents relating to requests for rural loans in Baden, not only rejected requests, but also those granted and those concerning which negotiations are still in progress. The Commissioner of the Ministry is entitled to demand the reasons for the rejection of requests for loans and the Directorate is bound to furnish him with this information. PERSONAL (SHORT TERM) CREDIT INSTITUTIONS. 1. LOCAL CO-OPERATIVE BANKS, Model Articles of Association^:— (1) As issued by Raiflfeisen Federation. (2) As issued by Imperial Federation for Societies:— (a) with Unlimited Liability. (b) with Limited Liability. (3) As issued by Schulze-Delitzch Federation (Extract). Model Service Instructions and Business Rules for Credit Societies issued by Imperial Federation. Model Business Rules (Prussian Saxony Union). Model Savings Deposit Regulations (Pomeranian Union). Model Current Account Regulations ( „ „ ). Sign Plates tor Credit Societies : (1) Hanover ; (2) Pomerania. Model Balance Sheets and Annual Statements. Specimen Bonds: (a) Bond with surety; (b) "Security" Mort- gage Bond; (c) Bond for current account credit. MODEL ARTICLES OF ASSOCIATION FOR CREDIT SOCIETIES WITH UNLIMITED LIABILITY. ' (Framed and issued by the Raiffeisen Federation in 1910.) ARTICLES OF ASSOCIATION OF THE SAVINGS AND LOAN BANK ASSOCIATION, REGISTERED SOCIETY WITH UNLIMITED LIABILITY, IN I. — Establishment of the Association. 1. The undersigned establish, within the terms of the Imperial Co-operative Societies Act, a co-operative society to promote the economic interests of its members by means of business operations in common, under the trading title of the 94 LOCAL CO-OPERATIVE BANKS. Savings and Loan Bank Association, registered co-operative society with unlimited liability. The association has its seat in 2. The object of the society is to procure the necessary capital for furnishing loans and credit to the members, and to effect by further measures the improvement of the economic situation of the members, especially by (1) the purchase in common of farm requisites, (2) the raising and sale of farm produce and of the products of rural industry for common account, (3) the procuring of machines and other objects of utility on common account for letting on hire to the members. 3. The association aims less at realising profits from its business than at strengthening those economically v^^eak, and at promoting the intellectual and moral welfare of its members. Its activities must accordingly extend to : (a) the furtherance of thrift, (&) the accumulation of an indivisible association fund (foundation fund) for the promotion of the economic conditions of the members, (c) the organisation of means for the cultivation of rural social welfare and of love of home, (d) the estab- lishment of conciliation courts of the association for the purpose of checking litiga- tion, (e) the active opposition to such transactions in real property as are against the public good, and such participation in the relief of landed property from debt, as may be expedient, (/) the holding of instructive lectures and the exchange of practical experiences at the meetings of members. 4. The association rests upon a Christian and patriotic foundation. At meet- ings and in all the activities of the association opinions and measures of a religious or political character are absolutely prohibited. II. — Membership. 1. The Acquisition of Membership. 5. Membership may be acquired : — ^(1) by persons capable of business trans- actions who have their place of residence in the Commune of , and who possess civil rights, (2) commercial companies, registered co-operative societies and other legal associations, as well as corporations, public institutions, and foundations. Persons who already belong ta another credit association with unlimited liability or unlimited contributory liability, may only acquire membership if they declare forthwith their withdrawal from such other society. Upon entry into the society, and at any time at the request of the committee of management, the new member must make a statement as to other commercial and co- operative societies to which he may belong, and the amount of liability incurred by such membership. Entrance fees shall not be paid by members. 6. After the registration of the articles of association in the Co-operative Eegister, there is required for the acquisition of membership : (1) an unconditional statement of accession signed by the intending member, (2) a resolution of the committee of management for acceptance of such person. The membership of a candidate takes effect on its registration by virtue of his statement of accession and of its presentation. The admission of commercial companies, registered societies and other legal associations, corporations, public institutions and foundations is decided by the committee of management and the board of supervision at a joint meeting : if they decline admission the general meeting may be called within four weeks. Its decision on the matter is final. If the committee of management refuses, an appeal may be made to the board of supervision within four weeks ; if the latter refuses, a further appeal within four weeks to the general meeting may be made. Its decision is final. 2. Withdrawal of Individual Members. 7. Every member has the right to declare his withdrawal from the society by due notice. Such notice only takes effect at the end of a business year. It must be pi-esented in writing at least six weeks previously. 8. A member who ceases to reside in the area covered by the association, may declare in writing his withdrawal at the end of the year, without observance of the period of notice. The society may likewise inform the member in writing that he must retire at the end of the business year. 9. Members are to be fxcluded at the end of the business year, whc MODEL ARTICLES OF ASSOCIATION. 95 {a) have not fulfilled the preliminary condition for the acquisition of member- ship, or who have lost one of the necessary qualifications therefor ; (fc) do not meet the obligations they have undertaken according to the articles, especially when they remain in arrears longer than six months with the prescribed payments of the share., or who allow distraint to be levied on account of failure to repay loans and other debts, or to pay arrears ' of interest; (c) enter into transactions at variance with the principles or the welfare of the society, especially with persons whom the committee of manage- ment consider usurers, and, in spite of warning from the committee, do business with them ; {d) are involved in bankruptcy. Commercial companies, registered societies and registered associations must also be excluded at the end of the business year if they are/ dissolved. The resolution, by virtue of which a member is excluded, must set forth the grounds upon which the exclusion is based; it is to be at once communicated by registered letter to the excluded member by the committee of management. From the date of the despatch of the letter the excluded member may not take part in a meeting of members, be member of the committee of management, or of the board of super- vision, nor act as secretary. The excluded member may contest the resolution of the committee within four weeks from the dispatch of the letter, by appeal to the board of supervision ; against the decision of the latter lies an appeal within a like period to the meeting of members, to be presented by the committee. 10. In the case of death of a member his withdrawal holds good as from the end of the year in which the death occurred. Until that date the membership is continued by the heirs. If there are several heirs the vote is exercised by power of attorney. 11. The settlement of the retiring member with the society is fixed according to the assets of the society and the number of members at the time of his retirement. The balance sheet shall be taken as the basis of settlement. The share capital of the member must be paid to him within six months of retirement ; he has no claim upon the reserves and other property of the society. If the assets of the society, inclusive of reserves and all paid-up share capital, be inadequate to meet its debts, the retiring member must contribute his share of the deficit to the association. This share is reckoned per head of membership. If the association is dissolved within six months after the retirement of the member, such retirement is null and void. III. — Eights and Duties of Members. 1. Rights of Members. 12. Each member has the right : — (1) to deposit surplus money at interest with the association, in so far as the means for employment of same exist; (2) to apply to the association for loans or credit upon the conditions laid down in the articles to the extent of the means open to the association ; (3) to participate in the common supplying by the association of farming necessaries, in the use of the machines and implements belonging to the association, as well as in its other undertakings ; (4) to be present at the meetings of members and to take part in the delibe- rations, voting and elections of the association; (5) to examine the minute book of the meetings of members ; (6) to demand, at his own cost, a copy of the balance sheet and of the annual account previous to the passing of the balance sheet by the meeting of members ; 13. Each member is bound : — (1) to undertake liability to the full extent of his property (unlimited lia- bility) for the engagements of the association to the association, and directly to its creditors, in accordance with the terms of the Co- operative Societies Act; (2) to acquire one share and to pay the prescribed instalments thereon ; (3) to observe strictly the statutory regulations and the decisions of the members' meetings, and to promote the prosperity of the association ; 96 LOCAL CO-OPERATIVE BANKS. IV. — Representation and Conduct of Business op the Association. 1. Organs of the Association. 14. The organs of tlie association are : — (1) the committee of management ; (2) the board of supervision ; (3) the meeting of members ; Only members of the association may be elected members of the committee of management or of the board of supervision. The members of the committee of management and of the board of supervision and the secretary {see section 42) are bound to observe absolute secrecy concerning the funds entrusted to the association and concerning the loans and credits granted and refused, unless the duty of disclosing such matters arises. Infractions of this regu- lation shall be punished by fine as fixed by the meeting of members, and damages sustained by the association through such action must be made good. 2. Committee of Management. (1.) Affointment and Authority of Members of Committee of Management. 15. The committee of management shall consist of five members chosen by the meeting of members (section 39 (1) ), of vs^hom one is appointed chairman, a second his deputy, and the remainder assessors. The period of appointment shall be four years. Two or three members shall retire every two years. For the first time retirement shall be decided by lot, afterwards according to length of service. Retiring members are eligible for re-election. The members of the committee of management exercise their office as an unpaid honorary office, but re-imbursement of out-of-pocket expenses shall be paid to them. Their appointment is revocable at any time. The members of the committee of management may give notice of resignation before the lapse of the period of their appointment. The notice must, however, be given in good time, so that the association may make other provision for the conduct of its business, unless an important reason exists for resignation before the period is over. If notice of resignation, without good reason, be given at an inconvenient time, the member or members concerned must make good to the association any resultant losses. In case of retirement, or of long-continued absence of members of the committee from meetings, a meeting of the members of the society must be summoned as soon as possible to hold a supplementary election. The office of the substitute appointed terminates with the lapse of the period of election of the member whom he replaced. (2.) Representation and Signature. 16. The association is represented legally and otherwise by the committee of management. The committee must make known by at least three members, and of these one must be the chairman or his deputy, its decision, and sign for the association. The signing is executedby the appending of their signatures to the trading title of the association or to the title of committee of management. 17. Members of the committee must exercise the prudence of ordinary business men. (3.) Meetings and Resolutions. 18. The committee shall meet for the transaction of business at least once each month on days arranged beforehand for regular meetings. On special notice, issued by the chairman or his deputy giving the subjects for discussion, it shall hold extra- ordinary meetings. Such meetings must be called when at least two members of the committee or the board of supervision, through its chairman, by written request to the chairman of the committee containing the object and reasons of the demand, require it. If the request be not granted the proposer has a right to lodge a complaint; if a member of committee, the complaint is made to the board of supervision ; if a member of the board of supervision, to the meetings of members. The directors shall be capable of taking a decision when more than half the members, including the chairman or his deputy, are present at a meeting called in accordance with the articl^; and such decision shall be taken by a majority of members. MODEL ARTICLES OF ASSOCIATION. 97 Resolutions and the report of the audit (section 21 (4) ) must be entered in the numbered minute book of the committee of management, and be signed by the members present. 19. At meetings of the committee of management and of the board of super- vision held jointly (sections 6 (3), 20 (6), 42 (1) ), each body has one vote. In case of disagreement a motion is rejected. (4.) Duties of the Committee of Management. 20. The committee of management must conduct the business of the association with due observance of the provisions of the law and of the articles of association, as well as of the regulations and of the resolutions of the meeting of members and of the board of supervision; they have especially : — (1) to effect in good time and in the prescribed form the notifications, pre- sentations of documents and of declarations for the co-operative registry and of the list of members for the court ; (2) to keep a list of members and maintain it in agreement with the court list ; (3) to see that the necessary books of the association are kept ; (4) to publish within six months after the close of each business year the balance sheet, the number of members who have joined or retired, and the number of members at the end of the year ; (5) to notify, as subject for resolution at the time of summoning the next meeting of members, the report concerning the audit carried out by the Union ; (6) to decide regarding the admission and the exclusion of members; and to do this in joint session with the board of supervision, if it is a question of the admission or exclusion of commercial companies, registered societies, registered and other legal associations, corporations, public institutions and foundations. 21. The committee of management must also decide concerning : — (1) the provision of working capital; the granting of loans ; the opening of current accounts; the acquisition of deeds of sale ; the granting of credit for commodities ; the purchase of personal and real property which is intended to pass into the permanent possession of the association ; the purchase in common of farming necessaries ; the sale in common of farm produce ; the fixing of the rate of interest on savings deposits, on loans, on current accounts, and for supply of commodities, after consultation with the board of supervision; the fixing of the rates of commission on loans, current accounts, and supplying of commodities, and of the charges for the use of machines belonging to the association, and other implements, breeding animals, &c. ; the costs of managenjent and the re-imbursement of out-of-pocket expenses to the members of the committee of management and to persons who have been given power of attorney in accordance with the principles laid down therefor by the board of supervision (section 30 (4) ). The committee of management must : — ■ (2) supervise the employment of loans, stimulate thrift and judicious farming, work with all their zeal towards eliminating the usurer from the area of the society, and take all measures for the accomplishment of the highest aim of the association, the intellectual and moral elevation of the members ; (3) draw up the documents that bind the association, and make written agree- ments with the secretary and other officials ; (4) supervise the cash and accounts, see to the rapid and secure investment of the money in hand and prosecute the recovery of debts ; (5) ascertain the stock in hand at the close of the year ; (6) draw up the agenda paper for the meetings of members ; (7) draw up the yearly account and the balance according to the material supplied by the secretary (section 43 (1) (4) ), and lay the same before the board of supervision not later than May 1st ; ' 98 LOCAL CO-OPERATIVE BANKS. (8) issue the notices of the association in the papers (section 64) fixed upon (9) send to the Union director the notification and information prescribed by the auditing Union. Special Duties of the Chairman. 22. The chairman must, in the first place, take care that the committee of management loyally fulfils the duties assigned to them. He must further — (1) sign alone the documents and notices of the association (unless it is a question of resolutions, which, according to section 16, require the signature of three members of the committee of management), keep the seal of the association and provide for the suitable keeping of thq books and papers of the association ; (2) supervise continuously the cash andi account-keeping, give instructions^ for all expenditure according to the business regulations and the resolutions of the committee of management, and keep himself fully informed concerning the entire conduct of business ; (3) issue the summons to extraordinary meetings of the committee of manage- ment (section 18 (1) ) ; (4) summon the meetings of members; (5) preside at the meetings of members, except in the cases named in section 38(1); ^6) make a general report upon the situation of the association at the regular meeting of the members in spring. The regulations for the chairman hold good also for his deputy vvrhen the chair- man is prevented from attending, or if his co-operation is impossible on general legal grounds. 3. Board of Supervision. (1.) Appointment of Members of Board of Supervision. 23. The board shall consist of from three to nine members chosen by the meeting of members (section 39 (1) ), one of whom is appointed to be chairman and another his deputy. The number should always be divisible by three. The term of appointment is three years. One-third retires each year. In the first two years retirement is decided by lot, afterwards by length of service. Retiring members may be re-elected. The members of the board exercise their office as unpaid and honorary, but they are entitled to re-imbursement of out-of-pocket expenses. The appointment of members of the board may be cancelled by the meeting of members before the lapse of the period for which it was made. Such resolution requires a majority of three-fourths of the members present. Members of the board may resign their office before the period of appointment has elapsed. The notice must, however, be presented in such good time that the association may provide in other ways for the conduct of its business, unless an important reason exists for early resignation. If resignation is given in without good reason, compensation must be paid to the association for resultant losses. On the retirement of a member, or when a member is for a long period prevented from attending, especially should their number sink below a quorum,, a meeting of members must be summoned as soon as possible to hold the supplementary elections. The elected members hold office till the lapse of the period of office of those whose places they have filled. 24. The members of the board may not at the same time be members of the committee of management or their deputies for a long period, and may not conduct the business of the association as its paid officials. The board may only appoint for a period fixed beforehand individual members as deputies of members of the com- mittee of management unable to act; during this period and until release from his duty as deputy, such member may not act as member of the board. When a member of the committee of management resigns he may not be elected to the board of supervision previous to his formal discharge from the former. (2.) Sittings and Resolutions. The board shall meet aibleast four times in the year at regular intervals, and hold once at least an extraordinary meeting, in order to make an examination of the MODEL ARTICLES OF ASSOCIATION. 99 management of business and to execute its other business. Moreover, meetings are to be held as often as the business of the association may require, or as the third of its members or the committee of management may propose. Such proposition is to be addressed in writing to the chairman, and must state the reasons therefor and the subjects to be dealt with. If the request be not granted the mover may appeal to the meeting of members. The summons to meet shall be issued by the chairman at least three days before the meeting, and must state the subject for discussion. The board is empowered to pass resolutions when more than half the members, which must include the chairman or his deputy, are present at a meeting held in conformity with the statutes (section 23 (1) ). Resolutions are passed by majority (of those members present). Resolutions and the results of audits must be entered in the minute book (with numbered pages) of the board of supervision and signed by the members present. (3.) Duties of the Board of Supervision. 26. The board must supervise the committee of management in all branches of administration, and to this end must inform itself of the course of business of the association. It must see that the administration is conducted in accordance with the provisions of the law, of the articles of association, of the service instructions, and of the resolutions of the meetings of members. It may at any time demand a report from the committee of management concerning the position of affairs, and itself, or members chosen from its body, may examine the books, documents, vouchers, and debt acknowledgments of the association, as well as the cash in hand and the stock of securities, bills and goods. Such examinations of the conduct of business are to take place four times a year at fixed dates, and at least once without notice. 27. The board is empowered to represent the association in the execution of contracts with the committee of management, and to bring such legal process against them as the meeting of members may resolve upon. The instruction of their choice for this purpose shall be their sufficient authority. In actions against the members of the board of supervision, the association is represented by persons having powers of attorney elected at a meeting of the members of the society. 28. The board is authorised, in its discretion, to remove members of the com- mittee of management and the secretary from their office pending the decision of the meeting of members, which is to be called without delay, and td take the necessary measures for the temporary continuance of their business. 29. The board of supervision must examine individually before May 15 the annual account, the stock in warehouse and other assets with their valuation, the balance sheet and the proposals for division of profits and losses, and make a report thereon to the meeting of members previous to their passing the balance. It must summon extraordinary meetings of members when necessary in the interests of the association. All credit grants to a member of the committee of management or to the secretary require the assent of thel board. Their assent is also required before a member of the committee of management or the secretary may become surety for a credit to be granted. 30. The board of supervision must further — (1) issue the general instructions for itself, the committee of management, and the secretary, and in case of dispute decide upon their interpretation ; (2) decide as to the bringing of actions, provided they have not to do with the recovery of outstanding debts ; (3) fix the remuneration of the secretary upon the proposition of the committee of management ; (4) draw up the regulation in accordance with which out-of-pocket expenses will be made good to members of the board, the members of the committee of management, and to their authorised agents; (5) authorise loan and credit grants of the committee of management which overstep the limits of the latter's competency, or exceed a period of ten years for repayment, as well as the purchase of movables and land which are destined to become the permanent property of the association ; 2r>57+ 2 C 100 LOCAL CO-OPERATIVE BANKS. (6) decide in conjunction with tlie committee of management as to the admis- sion to membership of commercial companies,, registered societies, registered and other legal associations, corporations, public institutions, and foundations; (7) decide in matters of complaints against the committee of management, unless they touch their conduct of business (section 41 (12) ), especially as to refusal to admit to membership or as to exclusion from membership ; (8) make a declaration concerning the result of the audit at the next meeting of members after the audit by the Union. 31. Both at the regular and at the unannounced examinations of the conduct of the business and of the cash in hand (section 26), the board must direct especial attention to the following points : — (1) whether the amount of cash in hand tallies with the books ; (2) whether the minutes of the meetings of the committee of management are kept and signed according to the articles of association ; the resolutions correctly entered in the books; and*kll the incomings and outgoings properly vouchered ; (3) whether the bank accounts were regularly balanced by the secretary and the chairman of the committee of management, and whether they are in agreement with the monthly settlements entered in the minute book and with the cash in hand ; (4) whether at any time cash exceeding needs was kept and whether the disposable cash balance was in good time and safely invested at interest ; (5) whether the maximum for the amount of loans and savings deposits to be accepted, as fixed by the meeting of members, was exceeded; (6) whether the loans and credits granted are in each case within the limits fixed by the meeting of members, whether the repayments on loans and for the purchase of commodities are punctually effected, the credits not exceeded, and whether the current account credits are made to conform with the essential requirements of credits on current account ; (7) whether acknowledgments of debt, the surety documents, and requests for credit on current account or for supply of commodities have been drawn up according to instructions, and whether the security has been duly furnished; (8) whether all claims without exception are suitably secured ; if not, it must see that the directors immediately recover on the claim if adequate security be not forthcoming ; (9) Whether the contracts with the secretary and other employees {e.g., the clerk of the warehouse) are to hand in the form prescribed, and whether the security given by them is adequate ; (10) whether the committee of management fulfil their duty as regards the court, especially (a) whether alterations in the composition of the directorate and terminations of the authority conferred on its members, as well as alterations in the articles of association, have been notified in proper time, (&) whether the papers concerning the admission or the retirement of members have been presented in good time, (c) whether the corresponding certificates and intimations of the court concerning the entries in the registry or in the list of members are to hand, and whether the list of members tallies with the court list. 32. Members of the board of supervision must exercise the prudence of ordinary business men, and may not transfer the exercise of their duties to other persons. 4. Authorised Agents and Officials. 33. The conduct of the business of the society as well as the representation of the society as regards its business may be handed over to individual members of the committee of management, also to other authorised agents or- officials of the society. In this case their authority is regulated in accordance with the power of attorney received; in case of doubt it extends to all legal transactions which the execution of such businessb usually involves. The appointment of proxies or of authorised agents for the whole conduct of business is not permissible. MODEL ARTICLES OF ASSOCIATION. iOl 5. Meeting of Members. (1.) General Regulations. 34. The rights which belong to members in the affairs of the associa- tion, especially as regards the conduct of business, the examination of the balance-sheet and the division of losses and profits, are exercised at the meeting of members in accordance with the resolution of members present. Each member has one vote. A member who, by the resolution, is to be released from his office or freed from an obligation has no vote in such matter. Nor has he any vote in case of a resolu- tion which affects the settlement of a legal matter with him. Members may not exercise their vote by proxy. This regulation is not applicable to persons incapable of transacting business, or to those bodies alluded to in section 5 (1) and (2), namely, commercial companies, registered co-operative societies, registered and other legal associations, corporations, public institutions, and foundations. Yet such bodies may only entrust their representa- tion to members of the savings and loan bank association. A proxy may not represent more than one member. 35. The meetings of members should also especially serve for the deepening of the life of the association, for the spread of economic knowledge by the holding of instructive lectures and for the exchange of practical experience. (2.) Summoning of the Meeting of Members. 36. The meeting of members shall be summoned by the committee of manage- ment as provided in sections 28, 27 (2), 36 (6), by the board of supervision. Eegular meetings of members take place twice a year, in spring and in autumn. A meeting of members must be summoned, apart from the cases expressly fixed in the articles of association, when the interests of the association require it, or when the director of the Union proposes it. It must be summoned without delay when the tenth part 6i the members demand such meeting in a petition signed by them and stating the object and the reasons. In the same manner members are entitled to demand that subjects for resolution by the meeting of members shall be notified. The notice for the summoning of a meeting of members is to be addressed to the committee of management, and, if it deals with the question of complaints against members of the committee of management, to the board of supervision. 37. The meetings of members must be summoned by — {a note here states that the precise form {by circular, newspafer notice, &c.), must be inserted) — with a notice of at least one week; the regular meetings at the time fixed beforehand, the extraordinary at latest five days after the receipt of the requisition. In cases of alteration of the articles of association the period of notice shall be at least two weeks; when the motion deals with the dissolution of the society the period must be at least four weeks. The object of the meeting of members must be always indicated at the time of summons. Resolutions may not be passed upon subjects whose discussion was not notified at least three days previous to the meeting. But exception is made as regards resolutions concerning the conduct of the meeting and motions for the summoning of an extraordinary general meeting. The presentation of motions and their discussion without resolution thereon requires no notification. (3.) The Chairmanship. 88. The chair at the meeting of members is occupied by the chairman of the committee of management or his deputy. In their absence, or during discussions of complaints against members of the committee of management, as well as in the cases mentioned in sections 28, 29 (2), by the chairman of the board of supervision or his deputy. The chairman appoints a minute- writer and at least two tellers. (4.) Elections. 39. The chairman, his deputy, and the remaining members of the committee of management ; the chairman, his deputy, and the remaining members of the board of supervision ; and the secretary, shall be elected separately by vote. In the selection of members of the committee of management and of the board of supervision special attention must be given that they as a whole possess as exact a knowledge as possible 25574 2 C 2 102 LOCAL CO-OPERATIVE BANKS. of the circumstances of the inhabitants within the area of activity of the association. The regular elections for the committee and the board shall take place at the spring meeting of members. The elections are usually made openly by standing up or remaining seated, by raising the hand or by acclamation. When the fourth part of the meeting demands it, the election must be made secretly, that is, by closed ballot papers. If the first division yields no absolute majority, a second vote is immediately to be taken for the two persons who received the largest number of votes in the first division. If more than two persons have received the highest or the second highest number of votes, that is, if they have received an equal number of votes, it shall be decided by lot drawn from the hand of the chairman which of the two is to go to second ballot. The member receiving the largest number of votes is elected. In case of equality of votes the decision is taken by lot drawn from the chairman. The period of office of those elected begins with the acceptance of election and ends with the spring meeting of members in the succeeding third or fourth year. (5.) Resolutions. 40. The meeting of members passes resolutions by simple majority of votes, except in the cases stated in sections 23 (4), 65 and 66. Resolutions duly passed at a meeting summoned according to the regulations are binding upon all, including those members who may be absent. Resolutions must be entered in a minute book with numbered pages, and signed by the chairman, the minute-writer, and two members after they have been read over and approved. Authority of the Meeting of Members. 41. The meeting of members may pass resolutions upon — (1) all matters, the decision of which is not entrusted to the committee of management or to the board of supervision ; (2) all subjects*" which have been brought forward by the board, the com- mittee of management, or upon the motion of at least one-tenth of the members ; (3) the election to the two organs of administration, their discharge from office, the carrying on of actions at law against them, and the election of persons with powers of attorney to carry on actions against the members of the board of supervision ; (4) the election of the secretary, on the proposal of the committee of manage- ment and the board of supervision ; (5) the fixing of the total amount which the loans accepted by the society and the savings deposits may not exceed, as well as of the smallest sum to be accepted as savings deposits; (6) the fixing of the limit which must be observed in granting credits to members {a) by the committee alone, [h) by the committee with the approval of the board; (7) the fixing of the date for their meetings ; (8) the passing of the balance sheet, the fixing of the amount to be paid by each member in case of losses, the discharge from liability of members of the committee and of the secretary as regards the conduct of business and their accounts ; (9) the fixing of the fine for absence from the meeting without having sent excuse or without proper reason, as well as for breach of official secrecy by members of the committee, the board of supervision, or the secretary ; (10) the alteration of the articles of association; (11) the interpretation of the articles and of the resolutions of the meeting of members; (12) the dealing with complaints as to the conduct of business by the com- mittee or by the board of supervision ; (13) the hearing of appeals against the refusal of admission to membership or exclusion therefrom ; (14) the entry of the society into other co-operative societies or into com- mercial companies ; (15) the report conceding the audit carried out by the Union ; (16) the dissolution and the liquidation of the association. MODEL ARTICLES OF ASSOCIATION. 103 (6.) The Secretary. 1. The A'ppointme7it of the Secretary. 42. The secretary shall be elected by the meeting of members for four years ; the meeting is bound to follow the proposal of the committee and the board of super- vision. The secretary may not be a member of the committee of management or of the board of supervision. It is open to the association and to the secretary to signify the termination of the agreement for the end of the calendar quarter, but notice of three months is required. Like notice on the part of the association is given by the committee of management. The secretary_ receives remuneration for his trouble; the amount is fixed by the board of supervision on the proposal of the committee of management, but must not be estimated according to projBts or the turnover of the association. _ Upon notice being given, or in case of continuous inability to carry out bis duties, a meeting of members is to be called as soon as possible for a new election , 2. Duties of the Secretary. 43. The secretary must, as book-keeper and treasurer :^ (1) keep the books and lists as prescribed in the service instructions ; (2) follow the instructions in receiving and making payments; (3) keep with great care, in accordance with the resolutions of the directors, cash, securities, and other property of value, especially mortgage deeds and acknowledgments of indebtedness upon land, savings books, as well as books, documents, vouchers, and bonds of the association; (4) draw up after the end of the business year the draft of the annual balance sheet and accounts, and present it with the vouchers duly ordered to the chairman of the committee of management not later than April 1st. The secretary should be present at the meetings of the committee of manage- ment with deliberative voice. In other matters he has only to carry out the resolu- tions of the committee. Other details of his rights and duties are regulated by the instructions of service and by the written agreement made with him through the committee. 3. Guarantee. 44. The secretary is responsible to the association for the safe custody of the funds and the punctual execution of the business entrusted to him. If he neglect his duties he is liable to the association for the resultant losses. The committee, or the board, are authorised in their discretion to relieve him temporarily of his office until the decision of the meeting of members, to be called at once, and to take provisionally the necessary steps for the continuance of business. As guarantee for the fulfilment of his duties the secretary must find at least one solvent surety or deposit adequate securities. The custody of the security lies with the committee, or in case the committee have undertaken to be surety, with the board of supervision. The Conduct of Business. (1.) General. 45. Speculative business is forbidden. (2.) Provision of Working Capital. 46. The maximum with which members may participate with capital (shares : section 13 (2) ) is fixed at ten shillings. Each member is bound to pay at once the amount of the share. The payment may be made out of the credit of the member with the association. Dividends are not paid upon the paid-up value of shares. The transference of the paid-up value of a share to another is not permitted. 47. The need of money on the part of the association is to be met, according to the provisions of the meeting of members (section 41 (5) ) by savings deposits and by loans. For the repayment thereof suitable periods of notice must be arranged, in order to avoid difficulties of repayment which might arise through sudden with- drawal of considerable deposits. 25574 ^ ^ ^ 104 LOCAL CO-OPEEATIVE BANKS. 48. The association shall become a shareholder in the Agricultural Central Loan Bank for Germany and enter into business relations with it. All surplus money of the association shall be deposited at interest with the Central Loan Bank, and the needs of the association in so far as they are not met by the savings deposits, are to be satisfied exclusively by it. 49. For the purpose of providing the necessary capital, each member authorises (by the fact of his membership) the public revenue authorities to give information to the committee concerning his means upon the basis of the tax returns. Any improper use of the information is rigorously forbidden. (3.) Employment of the Working Capital. 50. Loans may only be granted to members and only for objects of an economic character; as such may be considered as a rule only the advancement of working capital (Personal Credit). Each loan must be repaid in a period to be fixed in advance. The period of repayment is to be made suitable both as regards the purpose of its employment and the financial capacity of the borrower. Loans granted for periods exceeding one year must be repaid in at least yearly instalments to be fixed beforehand either in round sums or in hundredths of the amount ; repay- ments of loans for periods shorter than a year may be prolonged by periods of three months, but not for more than two years in all. The grants of loans must conform with the limits set by the meeting of members. Care must always be taken that the means at the disposal of the association are not unduly tied up. Before granting loans the credit capacity and the credit worthiness of the borrower, as well as the purpose of the loan, must be investigated; the due employment of the loan is to be kept continuously under observation. The borrower is entitled to repay loans wholly or in part before they are due. The association reserves to itself in all cases the right to call in a loan at four weeks' notice, and when loss is threatened through deterioration in assets of either borrower or surety the right of calling in the loan immediately. 51. Members may also open a current account, with or without power to overdraw, by which they receive the right to deposit surplus money at any time at interest with the association and to dispose of it at will, or to take overdrafts within the limit of the credit extended. In both cases an activity in the account, in keeping with the essence of current account, by repeated payments and with- drawals, is a necessary condition, otherwise overdrafts must be closed or changed into loans with gradual amortisation, and the balances placed to a savings deposit account. 52. The purchase of so-called deeds or records of sale, upon which members are indebted, is permitted, when the claim is adequately secured; if necessary the vendors are to be obliged to furnish special security. (4.) Common Supply of farming Necessaries and common Sale of farm Produce. 53. The association promotes the economic situation of the members by the common supply of farming necessaries and the common sale of farm produce. The common supply of farming necessaries should be restricted to objects used in farming, such as manure, feeding-stuffs, seeds, coal, machines, &c., and should not include manufactured articles or groceries and provisions. (5.) Security. 54. All loans and credits must be secured, so that all danger of loss to the association be rendered impossible. When guarantee by surety is accepted, only sureties are to be accepted who are known from their means as good for the amount. Advances on State securities, as well as on trust securities of a home public corporation, may be made to an amount not exceeding nine-tenths of their par value; on other safe securities up to a maximum not exceeding the half of their market value, or, if the latter stand above par, up to an amount not exceeding the half of such market value. Foreign securities may not be accepted as security for advances. When mortgage security is accepted, advances may not exceed two-thirds of the ascertained value of the property. MODEL ARTICLES OF ASSOCIATION. 105 (6.) Appropriation of Profits, Reserves, and Foundation [i^und. 55. In the first place the paid-up share capital, if lessened by losses, is to be made good. Sums not exceeding one-fifth of the balance may be devoted by the meeting of members to objects of social welfare. The remainder is to be written to reserve (until a sum of £ is reached), which serves to meet losses disclosed by the balance sheet. (Note. — For small associa- tions a sum of £500 suffices as reserve fund. 'In other societies the amount must depend upon the number of members and the volume of business.) 56. _ When this requisite reserve is attained, the reserve fund as indivisible foundation fund is to be further strengthened. The object of the foundation fund is the rendering of the association gradually independent of outside funds, and of making possible or supporting objects of general utility for the benefit of the general situation of the members. The_ accumulation of the profits as foundation fund shall be continued until the fund, with the reserves, has reached such an amount that they together suffice as working capital for the association. Until this point is reached the interest of the foundation fund may be added to the capital amount or applied in a suitable manner by resolution of the meeting of members. When this point is reached, the interest and the further profits must be applied to such objects. If the reserve fund does not suffice to cover losses as shown by the balance sheet, the foundation fund may be employed for this object after the paid-up value of the shares has been exhausted. 57. The assets of the association, inclusive of the reserve fund and the founda- tion fund, are the property of the association, upon which the individual members have no claim; nor may they demand any division thereof. Neither past members nor the heirs of past members have any claims upon the said property. In case of dissolution of the society its property is to be made over to the Agricultural Central Loan Bank for Germany, or to some institution authorised to accept trustee funds, for the purpose of adding interest to capital until one or more new associations have been formed on Raiffeisen principles covering substantially the area embraced by the former association. The examination of the question as to whether such new association or associa- tions correspond in principles with those of Raiffeisen, is the duty of the board of supervision of the General Federation of Rural Co-operative Societies for Germany, and must especially have reference to : — (1) whether the association has been founded with unlimited liability or unlimited contributory liability; (2) whether the association takes suitable measures to improve the conditions of its members in moral and material matters; (3) whether the association admits only members in a fixed area, as small as possible without prejudicing its vitality, so that one person may not be member of several associations; (4) whether the association charges entrance fee, and, as far as is permitted by law, prescribes no holding of shares, or, if such have been intro- duced, permits members to take one share only, and for this share pays a dividend at a rate of interest not exceeding that paid by members for loans, without granting any further interest ; (5) whether the members of the committee of management and the board of supervision receives remuneration over and above mere out-of-pocket' expenses ; (6) whether it accumulates out of profits an indivisible common property. For the conduct of this examination there must be sent to the board of super- vision of the General Federation of Rural Co-operative Societies for Germany, {a) a copy of the articles of association certified by the court, (&) the attestation of the court concerning the registry of the articles. In the given conditions the board of supervision of the General Federation of Rural Co-operative Societies for Germany shall cause the property of the associa- tion to be handed over to the new association or to propose that it be done. When there are several new associations the property of the society is paid over to them in proportion to the membership. If within thirty years from the dissolution of the association no new associa- tion has been formed on Raiffeisen principles substantially for the original area, 25574 2 4 2. Securities. 3. Commodities in warehouse. 106 LOCAL CO-OPERATIVE BANKS. the property reverts to the commune in which the society was situated, with the provision that the property is to be kept as a separate entity and its interest to be applied for public purposes in the said commune. If the commune declines the duty, the Audit Union (section 67 (1) ) shall take its place. 58. In case the area of the association is divided, the property of the associa- tion is to be divided among the several associations by the competent Audit Union (section 67 (1)) according to its just judgment. (7.) Business Year. Balance. 59. The business year coincides with the calendar year. The committee must, at the beginning of the conduct of business of the association, make an exact inventory of its real property, its claims and debts, the amount of its cash_ in hand, and other assets, giving further the value of the individual assets, and making a statement showing the relation between assets and liabilities. Subsequently the committee must draw up for the end of each business year a similar inventory and balance sheet. 60. In drawing up the inventory and the balance sheet all assets and liabilities are to be set down according to the value, which is to be assigned to them at the time to which the statement has reference. Doubtful claims are to be given their probable value, valueless claims to be written off. 61. The balance sheet must contain under separate heads : — I. The assets, namely : — 1. The cash in hand at the close of the year. Those which have stock exchange or market prices to be given at their maximum stock exchange or market price on December 31; in so far as these prices exceed the purchase or cost of production price at most at at such price; other securities and commodities in accordance with sec- tion 60, but at most at the purchase i or cost of production price. 4. Movable and I After writing off a suitable amount for 5. Real property. j depreciation. 6. Claims of different kinds according to section 60 (2), especially of payments of arrears on shares, for which the members are liable. (Obligatory payments.) II. The liabilities, namely : — 1. The paid-up share capital of the members. 2. The obligatory share instalments in arrears. 3. The debts according to their various kinds, inclusive of arrears of cost of administration. 4. The reserve fund. 5. The foundation fund. 6. The special placings to reserve. The surplus of assets over liabilities shows the profits, the surplus of liabilities over assets shows the losses, of the business year. Profits and losses are to be shown separately at the end of the balance sheet. 62. The inventory and the balance sheet are to be signed by all the members of the committee of management. They must be written in a special book kept for the purpose or otherwise drawn up on each occasion on separate sheets of paper. In the latter case they must be kept together and arranged carefully in consecutive, order. 63. The balance sheet, as well as the yearlv account setting out together the profits and losses of the year, should be exposed for examination by the members at least a week before the meeting of members, in the office of the association or in some other suitable place to be made known by the committee, or in some other manner to be brought to the knowledge of members. VI. General Regulations. 64. The public notifioKtions shall be made in the Agricultural Co-operative Journal published in Berlin. MODEL ARTICLES OF ASSOCIATION. 107 They must be signed, if they are to be legally binding on the association, in the form prescribed for the signature of the committee of management (section 16), otherwise they are to be signed by the chairman alone. 65. Alterations in the articles of association may only be passed by a meeting of members. In order to alter the object of the undertaking and the regulations in section 55, as well as to raise the value of the share, a majority of three-fourths of the members present is required. For other alterations in the articles, save those mentioned in the following paragraph, it is necessary that more than half the members be present and that the majority be absolute. If a sufficient number of members be not present, a second meeting of members is to be summoned, which is competent to pass resolu- tions if at least seven members are present. This regulation must be expressly alluded to in the summons for a second meeting of members. In order to alter the regulations of the articles concerning the conduct of business without fee by the committee and the board of supervision (sections 15 (3), 23 (3) ) the foundation fund (sections 56-57), the dissolution (66 (1) ), the abroga- tion of the existing articles and acceptance of a new set of articles, the trans- formation of the association, the removal or alteration of the provisions in this paragraph — the assent of all members is required. 66. The association may be dissolved by resolution of the meeting of members if less than seven members vote for its continuance. For meetings of members in which resolutions will be taken concerning dissolution of the association, written summonses must be sent to all members at least four weeks in advance, stating the objects and reasons therefor. The dissolution must be notified without delay by the committee for the purpose of entry in the co-operative register. In other respects the liquidation of the association is regulated in accordance with the provisions of the co-operative Act. 67. The association joins the Audit Union, registered association in and becomes thus member of the Sub-Union indicated by it with the resultant rights and obligations. The committee must permit the auditor to examine the books, documents, vouchers, and debt acknowledgments of the association, as well as to investigate the cash in hand, the securities and bills, and the commodities in stock. The board of supervision is at all times to take part in the audit. The director of the Union or his authorised representative is entitled to be present with deliberative voice at the meetings of members of the association and at the sessions of its organs, and at any time to address the same ; also to examine the books, writings, vouchers, and debt acknowledgments of the association and to investigate the cash in hand, the securities and bills, and the commodities in stock. The association joins at the same time the General Federation of Rural Co-operative Societies for Germany, registered association. VII. Transitional Regulations. 68. The meeting held to found the association shall elect by open vote :• — 1. The chairman for the meeting. 2. The members of the committee of management and of the board of super- vision, so that there is no need for them to observe the regulation of the articles concerning the summoning of the meeting of members and the elections. The first business year shall begin from the date of the entry of the association in the co-operative register and ends with December 31 of the same year. MODEL ARTICLES OF ASSOCIATION FOR RURAL SAVINGS AND LOAN BANKS. REGISTERED CO-OPERATIVE SOCIETIES WITH UN- LIMITED LIABILITY. (Framed and issued by the Imperial Federation of Agricultural Co-operative Societies in 1910.) I. — ^Establishment of the Co-operative Society. Section 1. — The undersigned establish, within the terms of the Imperial Co- operative Societies Act, a co-operative society to promote the economic interests of its members by means of business operations in common, under the trading title of 108 Local co-operative bAnk6. " Savings and Loan Bank Association, Registered Co-operative Society with unlimited liability." The associations has its seat in Section 2. — The object of the undertaking is the business of a loan and credit bank, to foster banking' and credit transactions as v^^ell as to promote thrift. II. — ^Membership. Section 3. — Membership may be acquired by all pers,ons (also legal persons) who are capable of legally binding themselves by an agreement, and who reside in Section 4. — After the notification of the articles of association for entry in the co-operative register, there is required for the acquisition of membership : — (1) an unconditional declaration of accession signed by the intending member; (2) a resolution of the committee of management for acceptance of such person. If the committee of management reject the application, the rejected candidate may appeal to the general meeting of members, the decision of which is final. Section 5. — ^Membership becomes effective and terminates, apart from the case of death of a member (section 10 of the Articles), as a consequence of registration in the court list of members in accordance with the terms of the Co-operative Societies Act. III. — ^Retirement of Individual Members. Section 6. — Every member has the right, by notice given, to declare his intention of leaving the society. Such notice can only be given at the end of a business year, and must have been handed in in writing at least six months previously. (Note. — The legal minimum period for such notice is three months, the legal maximum two years. As it is not advisable that the pe,riod of notification be too short, it should not be less than six months or a year.) Section 7. — A member who is giving up his residence in the district covered by the society (section 3 of the Articles) may, at the end of the business year, announce his withdrawal from the society. In like manner the society may, in writing, inform the member that he must withdraw from the society at the end of the business year. The delivery of this notice to a member who has left the district and whose present address is unknown, shall be effected by registered letter to his last known address. Section 8. — Over and above the reasons set out in the Co-operative Societies Act, a member may, on the motion of the committee of management, of the board of super- vision, or of a fifth part of the members of the society, be expelled therefrom : — ■ (1) In that he has engaged in transactions incompatible with the interests of the society, and especially if he have wittingly spread unfounded reports regarding the committee of management or the board of super- vision. (2) In that he has failed to fulfil or has broken his engagements with the society, whether as laid down by the articles of association, rules - governing the business relations of the society with its members, regu- lations of the general meeting or in special agreement or agreements in any other binding form. (3) In that he has become insolvent or incapable of the independent manage- ment of his own affairs. The expulsion takes effect at the end of the business year By resolution of the general meeting. (Section 34 (2) of the Articles.) The resolution by which the member is expelled must state the facts on which the expulsion rests, as well as any reasons based on the general law or the articles of association. The fact of his expulsion is to be made known to the expelled member without delay by registered letter. From the moment of the despatch (of this letter) the member may take no further part in general meetings, neither may he be a member of the committee of manage- ment or of the board of supervision. Section 9. — ^A member may at any time, even in the course of the business year, transfer his paid-up share, per 3. Excess receipts from pre- 1 journal. vious appropriations. ) 4. Other overdue receipts (interest, part term interest, commission). (Ab- stract II, 8, 10, 11). 5. Loss as per previous balance sheet Total of Nos. 1-5 Total of Nos. 6-12 Deduct ., ., „ 1-5 » )> " Loss £ s. pet- journal. 6. Excess payments for in-' terest. 7. Excess payments on cost of administration. 8. Excess payments on writ- ing off and losses. 9. Other overdue payments (interest, part term interest, and costs of ad- ministration). 10. Foundation fund as per previous balance sheet. 11. Reserve fund... 12. (Other) Total of Nos. 6-12 £ s. d, Total of Nos. 1-5 Deduct „ „ „ 6-12 Profit Deduct (if any) loss shown by previous balance sheet. Balance of Profit ... 26674 2 E 4 138 MODEL BALANCte SHEET. Balance Sheet, 31 December, 19 Assets. Voucher No. and Column. Liabilities. Voucher No, and Column. (a) Balances with the German-^ Cent. Agric. Loan Bank. 1 . Cash balance at end of year . . . 2. Farthing savings bank 3. Loans and advances for the purchase of property, law charges. i. Current account : — fl. Payments on shares. 2. Banking dept. (a) Current account. (&) Deposits 3. G o o d s dept. (&) Money in the hands of members. (c) Do. with (d) Real Property (land and buildings). (e) Movables (safe, office furniture, machinery, tools, &c.) (/) Securities (ff) Investments in co- operative undertakings and other. 5. Claims for goods delivered . . . 6 . Value of stock in warehouse . . . 7. Claims for farm produce 8. Sums overdue receivable (interest, part term interest, and commission). 9. Loss shown by previous balance sheet. Total assets II. 5 in. IV. 6 IV. 6 V.6 11.8 10, 11 £ s. d. 1. Farthing savings bank stamps not used. 2. Paid-up share capital of members. 3. Monies received : — (a) Savings Deposits (J) Deposits 1.6 4. Current account : — 1. Banking dept. 2. Goods dept. 3. Printing (6) Balances of members... (c) Balances (other) (a) Balances of the Ger- man Agric. ' Loan Bank. III.7 5. Sums overdue payable (interest, part term interest, and cost of administration). 6. Foundation fund from pre- vious balance sheet. 7. Reserve fund from previous balance sheet. Total liabilities Assets Liabilities Profit for 19 Loss for 19 £ s. d. Appropriation of Profits. Associations working according to the old Articles of Asso- ciation account for the appropriation of profits as under. Associations working according to new Articles of Asso- ciation account for the appropriation of profits as under. Of the Profits— Two-thirds by the Articles to Foun- dation Fund. Of the remainder — 20 per cent, written to reserve The balance of was appropriated by resolution of the General Meeting to To be taken into f Foundation Fund account therefore J Reserve Fund ... in next balance j sheet. ( £ s. d. Of the Proflts- in virtue of the Articles To Reserve Fund ... To Foundation Fund To. To be taken into ( Reserve Fund ... account therefore J Foundation Fund in the next J balance. ( £ s. d. Examined and found correct th , 19 . The Committee of Management. — 1. .2. .3. 4. . 5. The above statement of accounts, profit and loss summary, as well as the appro- priation of profit, have been examined and found correct. The Board of Supervision. — 1. .4. .7. 2. .5. .8. 3. .6. .9. 139 MODEL STATEMENT OE YEAR'S ACCOUNTS,* BALANCE SHEET* AND STATISTICS OF THE RURAL SAVINGS AND LOAN BANK OF RAKOW (POMERANIA) (REGISTERED CO-OPERATIVE SOCIETY WITH LIMITED LIABILITY) FOR THE YEAR 1909. (Issued by the Pomeranian Union of Agricultural Co-operative Societies.) Year's Accounts,* Balance Sheet* and Statistics of the Rural Savings and Loan Bank of Rakow (Registered Association with limited liability), for the year 1909. 1. The district covered by the association comprises the judicial district of Rakow, with a population of 2,500. 2. Number of members at the beginning of the business year, 8. New members admitted during the year, 1. Total, 9. Retired during the year, 0. Number of members at the end of the business year, 9. 3. The entrance fee is fixed at Sd. for each share, with a minimum of 1 shilling and a maximum of 3 shillings. 4. The amount of the share is fixed at 6 shillings. 5. The liability on each share is £12 10^. 6. The highest number of shares which a member may acquire is fixed at 100. 7. The number of shares taken up by the whole of the members is 39. 8. The total liability of the Society at the end of the business year amounted to £487 105. ^ 9. The total loan capital, inclusive of savings deposits, which may be taken up by the Society, is fixed at £1,500. 10. The limit of credit to be granted to an individual member is fixed at £500. 11. The cashier has deposited £ as caution money, and has received a sum of £2 10s. as remuneration. 12. The co-operative Society is a member of the Union of Pomeranian Agri- cultural Societies and of the Agricultural Supply and Sale Society of Grimmen. 13. Rate of interest and charges : — Interest. Commission. Interest. Commission. Per cent. Per cent. Per cent. Per cent. (a) Deposits on current 3i — (c) Overdrafts on current ^ Is. 5d. account. accounts exclusive (6) Savings deposits — of balances carried (aa) at call — — forward from pre- (&&) at three months' H — vious year. notice. (d) For loans — (cc) at six months' — — (aa) on sole bill — • — notice. (bb) on mortgage — — (dd) children's confirma- 4 — (e) Postage : withdrawals — — tion savings and from current account savings deposits. half postage. 14. In the financial year : — The following were supplied to common account : — £ s. d. ... 104 8 {a) Manures, 541 cwt, {b) Feeding stuffs ... (c) Seeds ... {d) Coal, 393 cwt... ... (e) Agricultural machines and tools. (/) Other 19 12 Disposed of on common account :- (a) Grain ... (b) Cattle (c) Eggs {d) Fruit and vegetables (e) Other £ 5. d. * The model tabular statements of turnover, of assets and liabilities, and of profit and loss for the year, have been here omitted. 140 MODEL ANNUAL STATEiMENT AND BALANCE. 15. The following outstanding credits were granted : — On current account. Loans for fixed periods. subject to notice Without special security, against deposit of sole bill only. With special security as under — (a) on personal sureties (6) on dejiosit of securities, goods, &c. ... (c) on deposits of mortgage bonds, securities on land, &c. (d) secured in other ways £ s. d. 28 1 217 10 — 16. The journal shows for the last business year 38 receipt items and 39 pay- ment items. The total business was divided amongst 3 depositors of savings, 1 child depositor, 5 persons with current accounts and borrowers. Five members shared the goods supplied. Altogether 15 home money-boxes were distributed, of which were handed in during the business year and yielded £ 17. Number of meetings held in the year reported on : — {a) Of the Committee of Management, 10. (&) Of the Board of Supervision, 4. (c) Of both bodies jointly, 2. 18. The affairs of the Society were investigated- — (a) by the Committee of Management on May 8 ; (&) by a sub-committee of the Board of Supervision on May 3. 19. At the end of the business year the following was the general position of the several accounts : — Number. Savings Accounts. Accounts Current. 1 1 1 not exceeding £1. From£l ,, „ £2 10s. „ £210s.„ „ £5. „ £5 „ „ £15. „ £15 „ „ £25. „ £25 „ „ £50. Above £50. Credit Balances. No. 2 Debit ■ Balances. No. 1 I 1 not exceeding £2 10s. From £2 10s. „ „ £5. „ £210s.„ „ £15. „ £15 „ „ £25. „ £25 „ „ £50. Above £50. Number. Loans. not exceeding £2 10s. From £2 10s. „ „ £5. )« xO ,, ., x-lo. „ £,15 „ „ db25. „ £25 „ „ £50. Above £50. 20. Changes* in the Committee of Management — retired, ; newly elected, ; as , . The chairman of the Committee is Johann Corswandt, of Rakow. The secretary, Wilhelpi Dobbert, of Rakow. Changes in the Board of Supervision — retired, ; newly elected. The chairman of the Board of Supervision is Friedrich Steufert, Bretwisch. The nearest or most suitable railway station serving the society is Rakow, on the Northern Railway. * In case of re-election to the Committee or Board, no entry to be made here. MORTGAGE BOND. 141 SPECIMEN BOND WITH SUEETY. (Bavarian Union.) The undersigned, Alfons Klein, small landowner in Auberg, in the commune of Griinau, and his wife, Anna Klein, nee Winkler, acknowledge hereby the receipt from the Loan Society of Griinau (registered co-operative society with unlimited liability) of a loan in cash of 1,800 marks, in words — eighteen hundred marks (£90). The said loan to bear interest at 4 per cent., and to be repayable in yearly instal- ments of 180 marks — one hundred and eighty marks — the first on 31st December, 1904, and the last on 31st December, 1913. At the request of the society the whole amount of the loan shall be repaid even before the expiration of the term, provided ai special previous notice of four weeks be given. The society to have the right to demand immediate payment in the event of failure to maintain the terminal payments or of cessation of membership. Griinau, 15th February, 1904. Alfons Klein. Anna Klein. The undersigned, Peter Brand, small landowner in Haid, and his wife, Sophie Brand, nee Maierhofer, bind themselves as sureties for the above-named debt, not only for interest, commission and expenses, but as several and joint debtors of the Loan Bank Society of Griinau, until the complete redemption of the same, also for any period of extension, and expressly declare that they renounce any plea by which they may void their liability. Griinau, 13th February, 1904. Peter Brand. Sophie Brand. Seen and noted for payment according to decision of the Committee. 12th February, 1904. Griinau, 13th February, 1904. Matthias Holtze, Chairman. (Extension.) The period of repayment of the instalment due 31st December, 1907, is hereby extended to 13th February, 1908, in accordance with decision of the committee of 15th December, 1907, on payment of 90 pfg. (lOfc?.) as commission. Griinau, 17th December, 1907. (Signed) Alfons Klein. Anna Klein. Peter Brand. Sophie Brand. Matthias Holtze, Chairman of Committee. MORTGAGE BOND. With Security by Assignment of a Mortgage (so-called Caution, or Security Mortgage). (Issued by Hanoverian Union.) I, the undersigned, acknowledge to have received herewith from the Savings and Loan Bank (registered co-operative society with unlimited liability), in , upon my appli- cation this day, a loan of marks (shillings), or written in full marks, and engage myself — (1) to repay the loan in instalments of marks each within years, and I admit, nevertheless, the right of the society, at any time, on 30 days' notice previously given, to call in the still outstanding debt. (2) to make a single payment of per cent, of the money lent, and interest on the outstanding capital sum at the rate of per cent. per annum in yearly amounts, to fall due at the end of each calendar year, and in so far as the society may decide according to rule during the period of the loan, to advance the rate of interest, I undertake to submit to their decision. To pay the interest at latest within eight days of its falling due, or in default thereof for any period beyond the agreed time, to pay an increase of 1 per cent, as interest by way of fine; 142 LOCAL CO-OPERATIVE BANKS. (3) to make all payments on capital and interest in cash at my own risk and cost personally to the secretary of the society for the time being, at the office of the society, without taking into account any items to my credit with the society. The seat of the society shall be the place in which all obligations under this loan shall be fulfilled. For the security of the Savings and Loan Bank, registered co-operative society with unlimited liability, in , against all claims against myself arising out of the above particularised loan for capital, interest, or charges, I hereby assign to the said society as agreed, a security mortgage within the meaning of section 1184 of the Civil Code on my landed property, situate , and set out in detail in the Eegistry of Title of , Vol. , page , together with all buildings thereon and all appurtenances thereof, against interest up to but not exceeding 6 per cent, per annum. I undertake to register this security mortgage in favour of the Savings and Loan Bank, registered co-operative society, with unlimited liability, of , in the Register of Title named, further also to send notice of the registration when effected and a simple copy of the folio of the Register of Title relating thereto, as well as of this certificate of security, to the( above-named co-operative society, and the whole of the above at my cost. the , 19 . (The signature must be witnessed before either a court or a notary.) The above signature of is hereby certified by me of , 19 . On the loan granted the following instalments have been repaid : — 1 instalment of marks on 19 . Signature of Secretary. 2 J )) )J )» 3 J iJ iJ ]) 4 ) )J J) )) 5 ) S) »> )J 6 ) Jj )> J) 7 1 J 3. J) )J 8 > )) 3» )l 9 J )3 J) >» LO J) n )j it In consideration of the repayment in full of the loan granted on 19 , this Bond is this day returned. 19 . Signature of Cashier. N.B. — Bonds, provided the loan be repayable after the expiry of not more than one year, require an ad val. stamp of -^ per cent. Such stamp duty is payable on every complete 20 pf g. of the amount. For all other loans, on each complete 50 pfg. No stamp is required on the assignment of mortgage security. Bonds to the amount of 150 marks (£7 10^.) inclusive are free of stamp duty. The stamping must be effected at the proper tax office within 14 days, reckoned from the date of the execution of the deed. For the sake of simplicity and the avoidance of expense, a simple copy of the bond, together with the certificate of registration, is to be presented at the Royal District Court. The copy, after registration, with the other documents, is returned to the society by the Court. These are to be placed with the papers of the society as evidence. BOND WITH SURETY FOR CREDIT ON CURRENT ACCOUNT. (Bavarian National Union.) The undersigned, Johann Bohm, innkeeper, of Grunau (widower), hereby acknowledges to have received with the Loan Society of Grunau (registered society with unlimited liability) an open credit on current account up to the amount of 2,000 marks (£100), or in words, two thousand marks, under the following con- ditions : — 1. Interest on drafts, until further notice, to be at the rate of 4 per cent., and on balances 3 pg: cent. A commission of ^ per cent, is to be paid over and above. CENTRAL CO-OPERATIVE BANKS. 143 ^. At the request of the society, repayment of the amount due must be made on four weeks' previous notice, and, in case of cessation of membership, immediately on demand. Griinau, 5th January, 1905. Johann Bohm. The undersigned, Peter Fichte, master carpenter in Griinau, and Rosa Fichte, his wife, nee Talk, bind themselves for all the liabilities of the debtor arising out of the above covenant, and all interest, commission and charges thereon, as several and joint debtors to the Loan Society of Griinau until the complete redemption of the same, also for any extension, and expressly declare that they renounce any plea by which they may void this liability. Griinau, 3rd January, 1905. Peter Fichte. Rosa Fichte. 2. CENTRAL CO-OPERATIVE BANKS. Prussian State Central Co-operative Bank : Recommendations respecting Maintenance of Liquidity Iby Societies. Credit toy Prussian State Bank : Its Importance : Inquiry Forms. Agreement between Baden Union and Rhenish Mortgage Bank. Company Agreement of the Raiffeisen Central Loan Bank. Wurtemtoerg Central Bank: (1) General Regulations: (2) Regu- lations respecting Business on Current Account. Regulations of Baden Central Bank. RECOMMENDATIONS ISSUED BY THE PRUSSIAN STATE CENTRAL CO-OPERATIVE BANK FOR MAINTAINING THE LIQUIDITY OF THE FUNDS OF RURAL CO-OPERATIVE SOCIETIES. To maintain the funds of the rural co-operative societies in a position of ready realisability, the following regulations appear necessary : — ■ A. For Individual Societies (especially Co-operative Credit Societies). They must be able — ^taking into account their general financial position, especially the amount of their own assets, the nature of the investments in the district covered by their asssociation, the conditions of notice of withdrawal under which the deposits are held (section A (e-d) } — ^to realise in cash at Union bank at least 20-30 per cent. of their deposits. Their open credit, therefore, together with whatever credit balance they possess at the Union bank, must amount to 20-30 per cent, of their deposits. 20 per cent, will suffice when all the conditions set out in paragraphs a-d following have been met. On the other hand, 30 per cent, must be provided if they have not all been met. (a) At least 30 per cent, of the deposits must be invested in claims which will fall due within the next harvest period. (6) The owned capital must be brought into a definite relationship with the borrowed or loan capital. With the object of accumulating reserves more rapidly, it is, moreover desirable in the case of savings and loan banks, that if dividends are paid at all they should be limited by the articles to 4 per cent. (c) Savings and other deposits of larger amounts are to be accepted only for longer periods, to be strictly adhered to in ordinary times, and at correspondingly higher rates of interest. (d) The societies must in all banking transactions deal with their Union bank and with it alone. 144 CENTRAL CO-OPERATIVE BANKS. B. For Union (i.e., Central) Banks. I. The Union banks must make it their first duty to maintain the liquidity of the funds of their co-operative societies. They must see that at all times the following are fluid : — 1. The credit balances held by the affiliated societies comprised in section A. (liquid balance). 2. Other credit balances of the societies, as well as direct deposits by indi- viduals with the Union bank. 3. Credits which have been accorded to societies though not drawn upon by them. With regard to Nos. 1, 2 and 3, Union banks must reckon with the necessity, in serious cases, of making fluid the whole amount or a very high percentage of it; with regard to No. 2, the withdrawals may not reach the same extent, and the amount (to be kept fluid) may perhaps be fixed at 30 per cent. II. The Union banks have at their disposition for this purpose — (a) their open credits with their banker (Prussian Central Co-operative Bank), for the realisation of part of which they must procure bills from the borrowing societies; (b) Such bearer securities, especially treasury bills, which have been deposited in case of crisis with their banker (Prussian Central Co-operative Bank), but which in ordinary times are not demanded as security for credit. The Union banks cannot, in serious cases, rely on other sources of credit. Open credits and bearer securities must also be made to serve as cover for liabilities included under I. As account must be taken of the fact that in times of diffi- culty money can only be raised on bearer securities up to two-thirds of their normal market value, the position may be formulated as follows : — The Union banks must hold sufficient margin on bearer securities, for the purpose of their deposit and pledging in time of crisis, that two-thirds of their value, plus the open (but unexhausted) credit, are adequate to make fluid — (a) at lefist 75 'per cent, of the so-called " fluid capital " and of the open credits accorded to co-operative societies; and (b) at least 30 per cent, of other loan capital received frorfi clients. THE IMPOETANCE OF THE CREDITS GRANTED BY THE PRUSSIAN CENTRAL CO-OPERATIVE BANK. The Prussian Central Co-operative Bank was founded for the promotion of co-operative personal credit for business purposes. By section 2 of the Act of 31st July, 1895, it acquired authority to grant loans at interest to unions of co-operative societies (so-called Union banks), and to accept deposits from them at interest. The intention of the legislature herein was to indicate the function of the Prussian Central Co-operative Bank as that of a place of adjustment of the supply and demand of money. As the development of the relations has shown, the amounts deposited with the individual societies frequently do not equal the amounts asked for in loans. The same conditions also prevail in the Union banks with regard to the requests for loans and the deposits of the affiliated co-operative societies, and finally between the Prussian Central Co-operative Bank and the Union banks. The function of the Prussian Central Co-operative Bank is, however, by no means to be restricted solely to forming the place of money adjustment for the co-operative organisations connected with it; it aims further at procuring access to the general money market for co- operatively-organised industrial groups among the middle classes that are in business relations with it. The Prussian Central Co-operative Bank thus forms an important member of the organs of public economy for the adjustment of capital among all the elements participating in the economic life of the nation. It is only natural that*lhe formation of new co-operative societies and the vigorous growth of the existing ones should make the need for money more strongly THE PRUSSIAN CENTRAL CO-OPERATIVE BANK. 145 felt. If, in this coiiiiectioii, due consideration is also to be given to the co operative credit organisations, it must be distinctly adhered to as a principle that the loans of the Prussian Central Co-operative Bank can only be granted to supplement tem- porarily the resources at the disposal of the co-operative organisations, and that, consequently, the credits granted by the Prussian Central Co-operative Bank can never be regarded as an endowment of the Union banks or even of single co-operative societies. Under sound co-operative development and the development of the co-operative spirit, the members of individual co-operative societies will deposit all money at their disposal with their society, and pay off the loans taken up as far as their means permit, in order to secure or maintain as far as possible out of their own resources the efficiency of their society. The same must hold good of the Union banks and, finally, of the Prussian Central Co-operative Bank. Only if the co-operative societiea affiliated to the Union banks, and also the Union banks themselves, hand over to the Prussian Central Co-operative Bank the whole of the capital flowing into their hands either from members or non-members, in so far as it is not required for their own co-operative purposes, and if they, having regard to the common interests and to the advantages that arise out of the co-opera- tion of all for the interests of the individual, renounce perhaps some small special occasions of profit which may, indeed, often arise, can the adjustment of needs which the Act of 31st July, 1895, had in view, be carried out for the co-opera- tive organisations in the desired manner. The Prussian Central Co-operative Bank is able, therefore, in strict observance of the intentions of the legislature, to accord all the advantages at its disposal, and especially fixed and relatively low rates of interest, exclusively to such Union banks (and to these only for such affiliated co-operative societies as also on their part give thesame undertaking) as are willing to hand over all money not necessary for their own co-operative purposes to the Prus- sian Central Co-operative Bank: In no case, however, can it be tolerated that Union banks, so long as they are still indebted to the Prussian Central Co-operative Bank, or that the co-operative societies affiliated to such Union banks, so long as they remain indebted to their Union banks,. shall dispose of funds received except for clearance of debt. Any departure from this condition must, when proved, have as result the immediate withdrawal of the credit extended. In like manner the tying-up of capital in securities by the Union banks, the affiliated co-operative societies, &c., is to be deprecated. In so far as securities are purchased, or held to an amoimt in excess of the reserves of the particular co-operative society ^^ a corresponding reduc- tion in the credit otherwise usually accorded them on the basis of their liability must be put in force. Having regard to the ever-increasing list of problems which may be best solved by co-operation, the accumulation of an adequate owned working capital must be regarded as an indispensable duty of co-operative organisations. The Act of 31st July, 1895, authorises the Prussian Central Co-operative Bank to grant only short term credit for employment as working capital; and it is, therefore, not in a position to place at the disposal of co-operative organisations credits on relatively long terms of repayment, credits for investments of a permanent nature, &c. Since suitable organisations have been created for long term or mortgage credit in the provincial mortgage credit associations, &c., and for personal credit for employment as working capital in the co-operative socities and the Prussian Central Co-operative Bank, it behoves the co-operative societies to make other provision for the satisfac- tion of that portion of the credit which lies in the borderland between credit secured by mortgages and proper working credit or capital. Further, the creation of an adequate owned working capital has an importance not to he undervalued for the economic independence of individual co-operative organisations, and for the application of independent rates of interest fitted to local circumstances. The Prussian Central Co-operative Bank has not been founded as a substitute for proved self-help, but only to render possible and to promote the practice and full development of self-help. Bearing the foregoing considerations in mind, regard shall also be had in the fixing of credits — in keeping with the practice adopted hitherto by the Prussian Central Co-operative Bank — ^to the existence of adequate owned capital by the co-operative organisations, and to a reasonable proportion between the amount of the share and that of the liability thereto attaching, unless considerable reserves are shown to exist. The credit extended to a Union bank, built up from its very foundation on the credit capacity of the individual members of the co-operative societies affiliated 146 CENTRAL CO-OPERATIVE BANKS. thereto forms one gross credit for the Union bank. The contribution of individual persons, co-operative societies, &c., to the putting together of the basis on which the credit is founded, is, in no sense, the standard by which the credit granted to the same in individual cases is to be measured. The credit which in individual cases is granted by the Union banks to its affiliated co-operative societies, and by these to individual members, must, in each case, be governed by the special circumstances existing; and precautions must be taken in every separate instance for the security from the interested parties. It is not, therefore, necessary that the credits granted by the Union banks should be in strict agreement in individual cases with the credit of the Prussian Central Co-operative Bank, built upon the sum total of the individual liabilities. The granting of credits by the Union banks need not depend on the security furnished to the Prussian Central Co-operative Bank by the individual societies, in that way, as it were, representing a simple sub-division of the credit granted, in proportion to the share of each society in the foundation of the credit, as a fixed standard (which is not the case). Such procedure cannot, even in the interests of the Union banks, be held to be judicious. It might have the effect that the services; thus, rendered to the individual co-operative societies would be made, not on co-operative principles in accordance with actual immediately justified requirements, but by way of endow- ment with capital, with the result that the idea of a monetary adjustment within the co-operative organisation disappears, and that this latter is only regarded as the channel legally necessary for the utilisation of the cheap credit of the Prussian Central Bank. Thus a development of the Union bank on co-operative lines is rendered impossible. INQUIRY FORMS. PRUSSIAN CENTRAL CO-OPERATIVE STATE BANK. Form B. (Section 7 (4) of the Regulations) for Societies with Unlimited Liability (or unlimited contributory liability.) Province : Title of Union Bank to which the Co operative Society belongs District : Number on the lists of the Union Bank : INQUIRY FORM. 1. Title and seat of the Co-operative Society 2. Number of members on , 19 . 3. Amount of the share s. d. 4. Total paid-up share capital of members £ s. d. on , 19 . 5. Amount of the reserve (including special and working reserve) on , 19 . 6. Information as to the means of the members. [ {a) Total amount of the supplementary Answer to questions 6a and 6fe is \ property tax paid by members in the optional. There is no obligation to I year : £ s. do so. j (h) Other information as to the means ' of the members, th of , 19 . Title of the Co-operative Society Signatures 1. If Form D is not sent in it will be assumed that each member may be held good for from £5 to £15, so far as it may be deduced from the circumstances. 2. If Forms K and L are not sent in or corresponding liabilities be not under- taken, then section 8 (2) and (3), and sections 12, 22 and 40 (1) of the regulations of the Prussian Central Co-operative Bank for the conduct of business with Union Banks apply. The Directorate of The Prussian CenWal Co-operative Bank. PRUSSIAN CENTRAL CO-OPERATIVE STATE BANK. 147 Form C (Section 7 (4) of the Regulations) for societies with limited liability. Province: Title of the Union Bank to which the society belongs : District: Number on the list of the Union Bank : INQUIRY FORM. 1. Title and seat of the Co-operative Society : 2. Number of members on the , 19 . 3. Amount of the share £ s. d. 4. Total of the paid-up share capital of members, £ s. d. on , 19 . 5. Amount of the reserves (including special reserve and working reserve) £ s. d. on , 19 . 6. Number of shares held and legally registered on , 19 . 7. Amount of liability attaching to each share £ s. d. 8. Total liability undertaken by members £ s. d. on , 19 . members held 1 share each. „ 2 shares each. » 3 „ ,. „ , &G. the of , 19 . Title of the Co-operative Society Signatures 1. When liability of over £15 per share is undertaken, a statement of the means of members (as per Forms E or F) must show its realisability, if regard is to be had thereto in fixing the credits. 2. (A repetition of 2 in Form B.) The Directorate of the Prussian Central Co-operative Bank. Form K. (Section 8 (2) of the Regulations) : Exclusive Banking Relations as regards Deposits. Province : Title of the Union Bank to which the Co-operative Society belongs : District : Number on the list of the Union Bank : We hereby expressly undertake that all monies coming into our hands, whether from members or non-members (in so far as such monies do not find employment according to the articles of association and rules of business), in regular business' dealings with our own members, duly entered as such in the Co-operative Societies' Register, shall be transferred only to our Union Bank {here insert title of Bank) at , or to the Prussian Central Co-operative Bank in Berlin. th of , 19 . Title of Co-operative Society Signatures To The Prussian Central Co-operative Bank in Berlin. Note.' — The above Form holds good for societies affiliated to Union Banks. For the Union Banks themselves the necessary alterations are to be inserted. Form U. (Section 8 (3) of the Regulations) : Exclusive Banking Relations as regards Credit. Province : Title of the Union Bank to which the Co-operative Society belong. District : Number of members on the list of the Union Bank. We hereby expressly undertake to entei^into business relations with no other bank than with our Union bank at (here insert title of bank), or with 25574 '^ ^ 148 CENTRAL CO-OPERATIVE BA]S[KS. The Prussian Central Co-operative Bank in Berlin, that is to say, to conduct our credit transactions, so far as our business, inclusive of deposits and savings deposits, including those of non-members, does not provide the means, as well as our dealings in securities, discount business, &c., only with these banks. We further undertake neither toj discount bills with the Imperial Bank, nor to take loans or monies, &c., under any legal title soever as personal" credit from savings banks or other sources of credit. We reserve to ourselves the right to engage in mortgage transactions elsewhere. th , 19 . Title of Society Signatures To The Prussian Central Co-operative Bank in Berlin. Note.— The above Form holds good for societies affiliated to Union banks. For the Union banks themselves the necessary alterations are to be inserted. COMPANY AGREEMENT OF THE CENTRAL AGRICULTURAL LOAN BANK FOR GERMANY (founded by Raiffeisen in 1876). Article I. Title, Legal Position, Object and Seat. Foundation. The joint stock company under the title of Central Agricultural Loan Bank for Germany with seat in Berlin has for object : — A. The carrying on of banking and credit business, and especially the adjust- ment of temporary money scarcity or surplus among the affiliated societies. B. The purchase in common of agricultural requirements (artificial manures and feeding-stuffs, implements, &c.) and the sale for common account of agricultural produce. Article II. Share Capital. Shares. Shareholders. Share Capital. 1. The share capital of the joint stock company shall consist of £250,000 divided into 5,000 non-transferable shares, each of £50. The general meeting on 27th June, 1900, decided to increase the share capital by £250,000 by the issue of 5,000 non-transferable shares of £50 each. 2. Any increase in the capital shall be subject to a decision of the general meeting. Shares. 3. Shares shall be made out to specified holders and signed by two members of the board of supervision and of the committee of management. The scrip shall be furnished with dividend coupons and talons. All claims due upon the coupons lapse, if the dividend be not claimed, within four years after maturity. Unclaimed dividends are to be appropriated to the reserve fund. Shareholders. 4. The following are eligible as shareholders : persons who belong to the com mittee of management or the board of supervision, and credit societies (loan bank associations) which — (a) have been constituted according to the terms of the German Co-operative Societies Act with collective unlimited liability of their members; (b) strive by suitable means to promote the moral and material status of their members; (c) only accept as members persons residing within a fixed area, such area to be as small as possible consistent with the economic existence of the society, and provide that no person shall be a member of several societies ; coMtANY Agreement of RAiprEisiiiN central loan bank. l4D {d) levy no entrance fee and, so far as the law allows, issue no shares, or if such are issued one share only shall be permitted to be held by each member, and on this only such dividend shall be paid as does not exceed the rate of interest charged on loans to persons so indebted to the society, but which grant no further interest ; (e) pay no salary to any official with the exception of the secretary (cashier), but only out-of-pocket expenses; (/) accumulate all profits in an indivisible common foundation fund; {g) accept and observe the instructions of the German General Federation of Rural Co-operative Societies as to the conduct of business, and the keeping of books; which submit to control by the General Federation or by an audit Union affiliated thereto, and which permit at any time audits authorised by them. Shareholders shall be entered under their names, dwelling places and occupations, as well as under the numbers of the shares held by them in the share list of the company. Transfer of shares may be made, with the consent of the board of super- vision, by simple endorsement to persons and to credit societies of the kind just indicated. The transfer shall be entered in the share list, the new owner regis- tered therein, and the previous one deleted. All persons sharing in the undertaking and who possess shares, or to whom shares have been allotted, submit themselves to the present constitution or to any modification thereof and to the business regula- tions issued by the board of supervision. Transfer of Shares. 5. It shall be the duty of the board of supervision to effect the transfer of the shares of retiring holders on their request, so far as due regard to the provi- sions of Article II. — 4 permits, and the shareholders in question have fulfilled all their obligations to the Central Loan Bank. Payments of Shares. 6. Twenty-five per cent., i.e., £12 10*., must be paid at once at the time of signature on acceptance of the allotment note. The further instalment shall be paid at intervals to be determined by the board of supervision. Against the pay- ments, non -transferable receipts ad interim shall be issued. The receipts ad interim endow the holder with all the rights of a shareholder within the terms of this constitution until the issue of the actual shares. For the signature of the receipts ad interim the regulations set out under section 3 for shares have force. Shareholders who do not pay their instalments on demand at the proper time are liable for the payment of 6 per cent, interest for delay from the date on which it became due onward, and to the payment of a regulation fine of 10 per cent, of the outstanding amount besides perpetual liability to payment of the latter. Extinction of Shares. 7. Should payments of the instalments demanded be not forthcoming after three demands made, according to the regulations laid down in the Commercial Code, the defaulting shareholder may, by a resolution of the board of supervision; be declared to have forfeited the rights he acquired on signature and of the instal- ments on shares already paid. In this case the share in question is to be publicly announced as extinguished and a supplementary share issued in the interests of the company. Article III. Organisation and Administration. Organs. 1 . The organs of the company are : — The general meeting. The board of supervision. The committee of management. The council of administration. (a) General Meeting. The rights which the shareholders have over the affairs of the company, especially in relation to the conduct of business shall be exercised by resolution of the general meeting. All shareholders have a right to take part in a general 25574 2 F 2 150 CENTRAL CO-OPERATIVE BANKS. meeting, and each share shall carry one vote. The adherent societies exercise their voting power by proxies appointed according to the constitution of the company. Every shareholder may be represented by another shareholder holding full power of attorney. The power of attorney of proxies of shareholders must be in writing, and in the case of representatives of one of the adherent societies shall be in the form laid down by the law or of the articles of their society. The proxy of a member representing a society has all the rights of a share- holder; he is also authorised to act as proxy for other shareholders. Other persons who are not shareholders may not act as proxies. The board of supervision shall decide on details as to the verification of authority to take part in a general meeting, and shall communicate their decision to the? shareholders. (b) Board of Supervision. Members of the board of supervision are to be elected by the general meeting. From the districts covered by each adherent Union two members are to be sent to the German General Federation of Rural Co-operative Societies in order to secure as comprehensive a knowledge as possible of the conditions of the neighbourhoods in question. The general meeting is bound, at the holding of an election, to the list of persons proposed by_the special committees of individual Union districts ; such lists shall contain double the number of names required to fill the places on the board of supervision. The elected members of the board of supervision must either be share- holders in the company themselves or members of adherent shareholding societies, they must also belong to the special committee of the Union district in question. The board of supervision is to be elected every five years. It elects from among its members — on each occasion for one year — a chairman and a first and second deputy chairman. The existing board shall continue to hold office until the fresh elections, to take place at the ordinary general meeting of the year 1911. (c) Committee of Management. The committee of management shall consist of one or more — not more than three — members to be appointed by the board of supervision with the consent of the council of administration. One of them shall hold the official title of managing director. The managing director shall conduct the business of the company, and in so doing shall be supported and represented by the other members of the committee. The legal position of the members of the committee shall, so far as it is not determined by law, and in accordance with this company agreement, shall be regulated by agreements to be made between them and the board of super- vision. (d) Council of Administration. The committee of management of the company and the directors of the unions affiliated to the German General Federation of Rural Co-operative Societies (registered association) shall form the council of administration pro- vided that their election has taken place in agreement with the committee and the board of supervision of the company. Branches. 2. The Central Loan Bank shall establish branches or business offices for indi- vidual provinces or States. A resolution of the board of supervision is necessary for this purpose. The branch managers are to be the heads of the branches. Their election takes place through the board of supervision after a previous hearing of the committee of management and of the members of the board of supervision of the district for which the election of a branch manager is to take place. Summons and Notice. 3. Every summons to a meeting of an organ of the company must clearly specify time, place, place of meetings and the business to be entered upon. A summons to a general meeting, as well as all public notices, must be signed or issued by the committee COMPANY AGREEMENT OF RAIFFEISEN CENTRAL LOAN BANK. 151 and be published in the " Agricultural Co-operative Journal " of Neuwied, and so far as may be legally necessary in the German Official Gazette. In case it should be necessary the board of supervision may decide upon one or more other papers in place of, or in addition to, the one named. Any such departure from rule to be notified to the court at once and published. Summonses may be sent direct by circular, in which case a public summons is not necessary. Elections, Resolutions, Tellers, Minute-takers. 4. The elections, which are held by the committee, the board, or the general meeting, if the open voting does not have a definite result, may take place by secret voting_ (ballot papers). In such case an absolute majority shall decide. If such a majority be not obtained on the first vote, in the second final vote only those two candidates shall be put forward for second ballot who have received the largest number of votes. In case of equality of votes lot must be resorted to, -taken from^ the hand of the chairman. The resolutions of the meetings above mentioned (of the committee, the board, and the general meeting) shall always be taken by the absolute majority therein, whether by open or secret vote (show of hands, standing or remaining seated, roll call or ballot paper). At elections by written paper in the general meeting the number of votes at the disposal of each shareholder must be unmistakably made known. For every vote taken in the general meeting the chairman shall appoint two tellers. The persons who are to take the minutes shall in all meetings be chosen by the chairman. At general meetings two minute- takers shall be named. Documents, Agreements and Resolutions as to the Committee. 5. The signature of documents and agreements as well as the drawing up of resolutions of the general meeting and of the board of supervision which concern the committee of management, are effected by the chairman or his deputy and another chairman. At general meetings two minute-takers shall be named. Minute Boohs. 6. There must be provided for the committee, the board of supervision, and the general meeting, a minute book with consecutively numbered pages, in which all resolutions of the meetings of any of these bodies shall be recorded. Resolutions of the committee and of the board of supervision shall be signed by the members present. After they have been read out and accepted resolutions of the general meeting are signed by the members of the committee and of the board present at the reading of the minutes as well as by the minute-takers. Article IV. General Meeting. Ordinary and Special Sittings. 1. The ordinary sittings of the general meeting are held in the first six months of each business year. Other meetings must be called, whenever the committee, the board or the shareholders demand it in writing, with a statement of the reasons therefor; the persons so demanding a meeting must together represent at least the twentieth part of the share capital. Agenda. 2. The fixing of the place of meeting in the agenda of the general meeting lies with the committee, with the concurrence of the chairman of the board of super- vision. Every shareholder has the right to place a notice of motion on the agenda. Such notices of motion can only be considered at sittings of the ordinary general meeting of the current year if they are in the hands of the committee before March 1st. Notices of motion received after this date or handed in at the meeting itself, and which are not on the agenda, with the exception of a motion for fixing another meeting, can only be discussed after a resolution of the meeting so to do, the taking of a resolution upon such late motions may be taken first in the next meeting, for which they are to be placed on the agenda. Elections. 3. The general meeting elects the members of the board of supervision at the ordinary annual sitting (III., !(&))• Retiring members are eligible for re-election. 25574 ^ ^ ^ 1^2 CENTRAL CO-OPERATIVE BANKS. Summonses. 4. Summons to the general meeting is issued by the committee under the provi- sions of Articles III., 3, VI., 2, and X., 2, if for ordinary business, two weeks, if for the purpose of alterations in the constitution, four weeks, if for the purpose of dissolution, six weeks, and should a second meeting be necessary, two weeks, before the sitting in question. Chairmanship . 5. The chairmanship and the conduct of proceedings at a general meeting falls to the chairman of the board of supervision or to one of his deputies, and in case of the inability of both to attend, to an ordinary member of the board of supervision, to be fixed upon by the board. Competence to pass Resolutions and binding Character thereof. 6. Beyond the cases stated in Article X., 2 and 3, the general meeting is competent to pass resolutions, independent of the members present, provided the summons (Article III., 3) has been issued in the prescribed manner. The resolu- tions are legally binding on the whole body of shareholders. Committee on Accounts and Discharge of the Committee of Management. 7. For the examination of the year's accounts and the balance sheet drawn up by the committee, for granting release from liability, and the control of the conduct of the business of the committee — ^the board must appoint a committee on accounts of at least three persons selected from its own body. According to the report of the committee on accounts to the board, and the report of the board to the general meeting, this latter allows release from liability to the committee, if no objection be found thereto. Article V. Board of Supervision. Supervision in General. 1. The board of supervision must watch over the conduct of business in all branches of administration, and shall inform themselves as to the whole of the transactions of the company, and, if need should arise, they are to take part in the meetings of the committee. It may at any time demand from the committee a report on the transactions of the company, and themselves, or by one of their members deputed for the purpose, investigate the books and documents of the company as well as the position of the company's funds, securities and goods. Authority and Duties in Particular. 2. The board of supervision is under the following obligations : — (a) To pass resolutions as to the election and appointment of the committee as well as the settlement of agreements with the same. (b) The drawing up of the rules of business for the whole conduct of business, and especially the scale for grants of credit to shareholders. (c) To approve the investments of money with regard to taking up, redemp- tion of and loan upon mortgages and money advances against purchases of land. (d) To examine the proposals for the distribution of profits and make a report thereon to the general meeting. (e) To decide upon the manner of testing the right of shareholders to take part in a general meeting. (/) To pass resolutions as to the founding and dissolution of branches and sub-branches. (g) To approve the acquirement of real estate and the sale of the same. (h) The fixing of the scale of salaries and the general terms of agreements made with all officials. (i) To draw up an estimate of the expenses of administration. (k) To decide upon the bringing of all actions, with the exception of such as relate to the qpllection of outstanding claims and which arise out of transactions in goods. (l) To determine the extent of the credit to be granted to the union banks. COMPANY AGREEMENT OS RAIFEEISEN CENTRAL LOAN BANK. 153 Balance Sheet and Annual Accounts. 3. The board of supervision shall examine and determine the balance sheet and the annual accounts of each completed year at latest up to the 1st May of the current year. It is the duty of the chairman of the board to see that the books made up to the 31st December, with the balance prepared up to April 1st, are placed in the hands of the special committee. Special Committees and Audit. 4. The board of supervision is authorised, for the exercise of its functions to form temporary or permanent committees of its own body, whereby, however, the responsibility of the whole of the members of the company shall not be prejudiced. The committees shall meet on summons of their chairman. Resolutions shall be adopted by the majority of those present, entered in the minute book and signed by all present. The board must, at least once in each year, permit a business and money audit of the accounts of the central office to be made by one or more members, and if really necessary with the collaboration of an expert appointed by them. The board must also undertake a thorough annual audit of the business and money transactions of the separate branches, this also, should it be necessary, with the help of a competent expert appointed by the board. Minutes must be made of the result of the audits showing accurately the position of the business and money transactions, and these shall be sent at once to the chairman of the board. Meetings — Summons — Competence to pass Resolutions 5. The board of supervision must hold a meeting at least once in the year, and beyond that whenever the chairman may think it necessary, and whenever at least three members of the board or committee shall make demand to this end of the chairman or his deputies. The summons (Article III., 3) to sittings of the board is to be issued by the chairman in writing at least eight days before the sitting ; in case of urgent necessity shorter notice may be given. The board is competent to pass a resolution when at least nine of its members are present, with the provision, however, that the appointment, suspension and discharge of members of the committee can only take place when more than one-half of the total members of the board vote in support of it. Authority. 6. The Company is to be represented by the board in agreements with members of the committee as well as in any legal process which may chance to arise against them. The execution of the business lies with the chairman. In such cases he takes the place of the committee. The authority of the board is regulated in accordance with the minutes of the general meeting concerning the election of its members, and the authority of the chairman in accordance with the minute relating to his election. Honorary Office. 7. The members of the board hold their appointment as an honorary unpaid office, and shall only receive compensation for their expenses in the form of travelling and daily allowances, and compensation for loss of business should they claim this latter. Article VI. Committee of Management. General Duties of the Committee. 1. The committee of management (Article III., 1) superintends the adminis- tration, and, indeed, all legal and administrative transactions of the company, which are not'expressly by the constitution relegated to the board of supervision or to other organs. . The committee represents the company judicially and otherwise, and so far as this representation, and especially its authority is concerned, the regulations laid down in the Commercial Code as well as those of the present articles and of the business regulations (Article V., 2 (b) ) are to be decisive. 25574 '^' ' 154 CENTRAL CO-OPERATIVE BANKS. The committee is hereby expressly forbidden to enter upon any speculations in real property. Representation of the Company. 2. Externally the company shall be legally represented by the committee, so far as the committee consists of more than two members, then by two members of the committee, otherwise by one member of the committee, and a fully empowered agent. The committee has authority, with the concurrence of the board to empower individual members of the council of administration (union directors) to undertake business or specified kinds of business; the giving of receipts, the collection of amounts due on bills of exchange, the preparation of accounts, lists by price and number as well as vouchers of receipt of securities on other matters may be signed by two officials specially invested with authority for this purpose by the committee. The members of the committee, their fully empowered agents and holders of powers of attorney are bound as regards the company in the exercise of their repre- sentative and delegated authority to abide by the limitations imposed upon them by the present constitution, their agreements as well as the regulations and instructions of the board of supervision or of the committee, and the resolutions of the general meeting, and must render full compensation to the company for the results of any failure to observe such limitations. Provisional Relief from Services and final Release. 3. Members of the committee and of the council of administration in their capacity of directors of branches or of fully empowered officials can only be tempo- rarily or entirely relieved of the duties of their office by the board of supervision — superior officials only by the committee of management with leave to appeal (in case of refusal) to the board of supervision. The removal from office of the higher officials may be effected by the managing director, that of members of the committee by the unanimous resolution of the chair- man of the board of supervision and his deputies. Such dismissal is to be com- municated within two weeks to the organ in question. The decision, however, of the competent organs must be obtained within two weeks. Article VII. Council of Administration. The council of administration shall support the committee of management in its conduct of business by the exercise of a deliberative voice, and especially also by upholding the objects of the foundation of the company and the broadening and deepening of its work. The council of administration, apart from any written advice it may see fit to issue, shall in general be summoned to meet twice in the year by the managing director as the chairman of the council. Article VIII. Conduct of Business. Keeping of the Books and Cash — business Year. 1 . The keeping of the books and the dealing with the funds is to be conducted according to the business regulations issued by the board of supervision. The business year shall be coincident with the calendar year. Balance Sheet. 2. The balance sheet shall be drawn up by setting the assets and liabilities side by side. The following are to be set down as ass6ts : — (a) The cash in hand at the end of the year. (b) The effects — securities and goods in stock, these are to be set out according to their kind, and to be brought into the account at not higher than their market value on 31st December of each year — should the market value be higher than the purchase price the latter is to be brought into account. (c) All claims divided according to their different kinds, with regard to their value at the enft of the year. (d) Real property according to its value at the end of the year. COMPANY AGREEMENT OE ftAlFFfilSEN CENTRAL LOAN BANK. 155 (e) All movable property according to its value at the end of the year. '(/) Credit balances at interest, which only become payable in the next accountancy year are to be reckoned to the end of the year (partial interest). The following are to be set out as liabilities : — (a) Liabilities in respect of capital without regard to the date on which they fall due. (b) Other debts and payments still to be made — set out according to their different kinds. (c) Position of the reserve capital and of the paid-up share capital. (d) Interest due, which only becomes payable in the next accountancy year, to be reckoned to the end of the year (partial interest). The surplus of assets over liabilities constitutes the profits, the excess of liabilities over assets the loss of the company. Estimate of Profit and Lqss. 3. The estimate of profit and loss brings the results of the year's working of individual accounts together. The individual credit and debit entries of the last business year must be set against one another and the balances must be struck there- from so that there may appear a succinct statement of the successes and failures of the different branches of the business. Establishment charges and reimburse- ments on transactions in goods (Article IX., 4-5) are to be entered on the debit side of the accounts. Article IX. Business. Scope of Business. 1. The undertaking is to be regarded as intended to serve public interests and not to satisfy the greed of gain. A maximum, therefore, of 4 per cent, of the net profits obtained in accordance with Article IX., 4 shall be distributed in dividends. Neither in the event of retirement nor of the dissolution of the company shall the shareholders receive more than the nominal value of their shares. In the event of the partition of the reserve funds of the Central Loan Bank, only those credit societies which have been particularised in Article II., 4 (a-g) shall be entitled to receive a share, namely, those societies which employ the common assets mentioned in Article II., 4 (/) for the purpose of calling into being undertakings of common utility for the improvement of the economic position of the members and appropriate the surplus of the net profits (after accumulation of profits up to the limits prescribed by the articles) to purposes of social welfare. The amounts falling to the share of such shareholders as are entitled to parti- cipate in the distribution shall be incorporated in the above-mentioned foundation funds of these societies (Article II., 4 (/) ) devoted to objects of common utility; when the accumulation of the last-named fund has reached the amount fixed by the articles, the amounts shall likewise be expended on purposes of common utility. Should a transformation of the Central Loan Bank in respect of its le^al organisation be contemplated, and for this purpose a formal dissolution of the joint stock company should become necessary, then, any distribution of the capital of the company among the shareholders shall be absolutely prohibited. The capital in this case is to pass over to the new combination provided that this latter, in the manner and scope of its activity, especially also in regard to the possible later partition of the common assets, definitely and expressly lays down in its constitution the articles set out in the present Article IX., 1. _ . , » In the general conduct of business all transactions which involve any risk of loss whatever are to be scrupulously avoided, and none such shall be entered upon by the organs of the administration. With regard to the details of the business, the board of supervision must insert in the business regulations the precautions to be observed, and all organs of adminis- tration are bound to confine themselves to the limits therein laid down. The Procuring of Funds. 2. Money other than the share capital shall be obtained : — (a) By deposits and loans (on which the longest possible period for calling in must be arranged) as well as commission and surplus interest. 156 CENTRAL CO-OPERATIVE BANKS. (b) By receipts from dealings in materials required for farming and the sale of farm produce as well as from other business which may lend itself to the objects of the institution and from incidental receipts. (c) By the issue of unredeemable bonds. The board of supervision shall have authority, through the medium of the committee, to arrange for the sanction of them, by the State, so soon as they shall deem the moment for such issue to have arrived. Employment of Funds. 3. Funds shall be employed : — (a) In loans on current account to registered societies, which hold shares in the Central Loan Bank, as well as to the Union banks founded for (the assistance of) the productive co-operative societies of the individual states and provinces. (&) For the purchase of materials required for farming and the sale of farm produce (Article I.). (c) In bill and exchange business according to the principles acted on by the Prussian Central Co-operative Bank in Berlin and by the Imperial Bank. (d) In investments in, purchase, extinction and acquirement of interests in mortgages. (e) The acquisition of real property, in case this should be necessary in the interests of the company. (/) By investment in bearer stock, issued by the German Empire or a German State, or by corporations or communes with the authority of such State, and which bear a fixed rate of interest. Establishment Charges and Reifunds on Transactions in kind. {Article IX., 4 and 5). 4. The net profit remaining after covering the establishment charges, including the expenses of the General Federation, as well as after payments of the monies refunded on transactions in kind in accordance with Article IX., 5, and carrying out the requisite writings off shall be devoted : — (a) To the accumulation of a reserve capital. 20 per cent, of the net profit shall be first devoted to this purpose. Out of the surplus the dividends (Article IX., 4 (6) ) to shareholders are to be paid. Any balance still remaining shall be also added to the reserve capital. The primary oJDJect of this is the covering of possible deficits. Before the dissolu- tion of the company this fund must be either entirely or partially divided amongst the shareholders. (b) To the payment of dividends to shareholders. Out of the profits obtained according to Article VIII., 3, and after deduction of the portion to be credited to reserve capital the board of supervision shall annually fix a percentage dividend to be paid to the shareholders. This dividend must only be calculated on the amounts actually paid up on the shares, it must not, however, exceed the percentage rate of interest to be paid by shareholders for loans (Article IX., 3 (a) ). 5. In proportion to the purchases and deliveries of goods effected in the indi- vidual branch districts, in addition to the agreed amount of refund, further refund shall be granted in proportion to the net profits made in individual branch districts on their supply of goods. Net profit first arises out of supply business after the deficiencies and the federation expenses have been met out of its proceeds. The fixing of this refund may not be less than 33^ per cent, of the surplus and is effected by the board of supervision after hearing the committee of management. The division of the refund on transactions in goods made to individual branch districts among the societies that participate in the purchase of goods or other method of disposal is carried out through the advisory council of the branch. The granting of a refund is prohibited until losses on previous years (reckoned from January, 1902, onward) ^n the purchase of goods, inclusive of the making good of the deficit in the accounts of the federation, shall have been covered. REGULATIONS OF THE WURTEMBERG CENTRAL BANK. 157 Article X. General Regulations. Comflaints. 1. Complaints of shareholders as to the conduct of business by the committee of management are to be settled by the board of supervision and seconded by the general meeting. Modifications of the Constitution. 2. The present constitution may be modified by the general meeting; in so doing the following precautions are to be observed : — {a) In general : — With the exception of the cases hereinafter set out under (&) the general meeting called for the purpose is competent to make modifications of the constitution by resolution, if more than one- half of the votes provided for under the terms of Article II., 1 {a) are represented, and more than one-half of the votes of the total number of shareholders is given in support thereof. If the requisite number of votes be not represented at the general meeting summoned for this specific purpose a second general meeting is to be called, which shall be competent to pass a resolution without regard to the number of votes. This latter point is to be clearly expressed in the second summons. One summons only is to be issued for this second meeting, and this must issue two weeks beforehand. (&) In particular : — For the modification of Article II., 4 as to the admission of shareholders, of Article IX., 4 (&) as to the amount of dividend, as well as of Article IX., 4 {a) as to the accumulation and indivisibility of the reserve fund, of the present regulations X., 2 (&) as to the modification of the constitution under particular circumstances, of the regulation X., 3 following as to the dissolution, the cancelling of the present constitution especially, and the enactment of fresh articles — the unanimous vote of the whole of the shareholders in the general meeting held in accordance with the prescribed provisions is necessary. Dissolution. 3. The voluntary winding up of the company shall require the unanimous vote of more than two-thirds of all the shareholders in general meeting duly summoned. REGULATIONS GOVERNING THE BUSINESS OF THE AFFILIATED CO-OPERATIVE SOCIETIES WITH AN AGRICULTURAL CO- OPERATIVE CENTRAL BANK. THE WURTEMBERG AGRICULTURAL CENTRAL CO-OPERATIVE BANK. Registered Co-operative Society with Limited Liability, in Stuttgart. 1. Regulations governing the business of the affiliated Co-operative Societies with the Agricultural Central Co-operative Bank. 1. All written communications addressed by the Loan Bank Associations to the Central Bank, with reference to the transmission of money, advices of payments and receipts, must, by section 11 of the Articles of Association bear the signature of the chairman or his deputy and of at least two more members of the committee of management. The Central Bank has a right to investigate the authenticity and validity of the signatures, but is not bound so to do. To enclosures with money payments, the signature of the chairman of the asso- ciation, or of the secretary, is sufficient; in other business these signatures will not suffice. 2. Quittances for money received are to be furnished immediately on receipt with the date, to be signed by the chairman or his deputy and by two further members of the committee, and returned to the central bank ; counter signature by the secretary is recommended. If there be more than eight days' delay in acknowledgment, the Central Bank shall have the right to procure these receipts at the cost of the defaulting society. 158 CENTRAL CO-OPERATIVE BANKS. 3. For the despatch of money and orders for money only the forms issued by the Central Bank should be employed. In those cases, however, in which the terms of the form do not suit, e.g., when the money of the society in question is not transmitted through the post, but is to be paid to a third party or to the bearer, the forms must not be used, but special letters must be written. 4. Communications relating to money which, by reason of additions, erasures, &c., have undergone alteration, cannot be considered. 5. At the end of each calendar year the state of their account shall be com- municated to the societies. The properly prepared advice forms are to be signed as soon as possible in the manner directed under section 2 and returned to the Central Bank. These advice forms are not to be used for other communications. 6. The Central Bank, as a rule, executes at once all requests for the transmission of money. During the great pressure which exists at the end of each month, at Candlemas (February 2), from the middle to the end of March or April, and at the feasts of St. James and St. Martin (November 11), in order that all demands may be satis- factorily discharged, it is absolutely necessary that all large amounts of money should be already ordered in such good time that between the receipt of the communication and the despatch of the money at least three days (sums of £500 and over, five days) may elapse, Sundays and public holidays not to be included. The societies cannot claim as a right the more speedy satisfaction of their claims. 7. Advices of payment to third parties are to be made in the same way as regards previous notice (see section 6). The delivery of such to strangers is to be promptly notified to the Central Bank, and at the same time the day is to be indicated on which the money is to be drawn. If the money is to be drawn from the Bank personally by some appointed agent, the order to pay and the covering letter must always be so drawn up that the money shall be payable " to bearer." Advices to named persons — unknown to the Central Bank — are not permitted, neither must payments be made subject to the fulfilment of conditions. 8. Orders for money by telegraph or telephone have no claim to execution. In so far, however, as such may, nevertheless, have been, carried out in cases of necessity, the society giving the order is responsible to the Central Bank for any resulting loss and damage. 9. When a change takes place in the composition of the committee of manage- ment, the signatures of the whole of the members must be sent anew in a special letter to the Central Bank. 10. As regards other matters, the business regulations issued, and any supplements to them, shall apply. Resolution of the Committee of Management of 1st March, 1907, and of the Board of Supervision of 12th May, 1909. 2. Regulations for the Handling of Current Accounts. 1. The Central Bank provides the means of money adjustment between the co- operative societies affiliated to it, and grants credit to them on current account. 2. The assessment of the credit to be granted to individual affiliated societies within the limits of the maximum fixed by the general meeting, appertains to the Committee of Management of the Central Bank, subject to revision by the Board of Supervision. For co-operative societies with unlimited liability the following rules are applicable : — (a) The credit amounts to so many times £5 as the credit seeking society has members ; the figure so obtained to be taken to the nearest £50. (&) For every £250 or further fraction thereof, the society shall acquire one share in the central bank, (c) A co-operative society with more than 50 members,which is satisfied with a credit of £250, is not bound to acquire more than one share. Provided the financial needs of individual co-operative societies cannot be met temporarily by the ordinary credit opened to them, the committee is empowered to grant extraordinary credit, which, however, must not exceed in amount that of the ordinary credit, and must not be granted for more than one year. The rate of interest charged shall, as a rule, be somewhat higher than for ordinary credit. • AGREEMENT OF BADEN CREDIT SOCIETIES WITH MORTGAGE BANK. 159 3. The Committee of Management may order a temporary withdrawal of credit if a co-operative society regularly transacts money business with some other financial institution, or so soon as the Committee has good reason for doubting its credit worthiness, or, if as a result of the audit, reports as to the irregular conduct of business by a society come to hand. The definite calling in of the credit shall be intimated by the Board of Supervision. In case of the calling in of credit, any outstanding debts to the Central Bank must be paid within four weeks. Should the Committee think that there is danger in delay, they may require the immediate repayment of the credit granted. 4. In case of the general recall of money on deposit as the result of commercial or political crisis or other causes, the Committee is empowered to require four weeks' notice of repayment of the deposits of the affiliated co-operative societies. 5. Payments to the Central Bank shall be credited with interest as from the next working day after receipt. Overdrafts by the co-operative societies shall be charged with interest as from the day of despatch. The rates of interest and commission shall be fixed by the Committee of Manage- ment and the Board of Supervision of the Central Bank, and from time to time announced* in the organ of the Union (Wurtemberg Weekly Agricultural Journal.) Postages and similar disbursements are borne by the individual societies. 6. At the end of each calendar year the position of their accounts shall be com- municated to the societies for their information. In this, the amounts due as interest and commission shall be written to capital, and the amount of their paid-up share capital in the Central Bank shall be communicated to each society. Objections must reach the Central Bank within four weeks. 7. Payments on shares are effected by debiting at the Central Bank the account of a particular co-operative society with the amount of each payment. When the shares are fully paid up, the payment of dividends thereon is effected by crediting the account of the society in question. 8. The co-operative societies must give notice as soon as possible to the Central Bank of any alteration in the composition of the committee of management, as well as of any change of secretary, and must send in again the signature of the members of the committee. 9. The yearly subscription to the " Union of Agricultural Co-operative Societies in Wurtemberg," shall be paid by debiting the accounts of the affiliated societies with the amount. 10. Other matters are subject to " the regulations as to the conduct of business between the Central Bank and its affiliated co-operative societies." Resolution of the Board of Supervision of 12th May, 1909. AGREEMENT BETWEEN THE UNION OF AGRICULTURAL CREDIT SOCIETIES OF THE GRAND DUCHY OF BADEN AND THE RHENISH MORTGAGE BANK AT MANNHEIM. Agreement between the Union of Agricultural Credit Societies of the Grand Duchy of Baden of the one part and the Rhenish Mortgage Bank of the other part. 1. The Rhenish Mortgage Bank of Mannheim undertakes the function of banker to the agricultural credit societies affiliated to the Union, with the conditions that the Bank undertakes obligations or obtains rights as regards the societies of the Union that enter into business with it either as depositors or as borrowers. 2. The Committee of the Union shall furnish to the Bank through the director of the Union the necessary information as to the credit capacity of the individual societies, on which the Bank bases the amount of credit to be extended to each society. Each society is only liable for the credit it may itself take up. No collective liability of one society for others is involved. 3. The Committee of the Union is obliged, at. the request of the Bank, to investi- gate at any time, through an expert, the business position of the societies which have * Notice.— The present rate of interest on credit balances of co-operative societies is 3^, on debit balances of co-operative societies, i^. Commission is charged at the rate of j^th per cent, on the heavier side of the account exclusive of sums carried forward. Stuttgart, 25th April, 1911. 160 CENTRAL CO-OPERATIVE BANKS. obtained advances from the Bank, and to report the result in due course to the Bank. 4. An account shall be opened in the books of the Bank for every society belonging to the Union. The Bank shall also keep a special register of the trans- actions of the societies which are members of the Union, inspection of which shall be open at any time to members of the Committee of the Union. 5. Interest shall be paid upon deposits by the Union societies as a rule from the day next following that on which the deposit is made. Money paid into the Bank on a Saturday will receive interest as from the following Monday. If the day following the deposit should be a holiday, it shall be credited for interest only as from the next working day following. If a society takes up a loan, interest shall become due On the day before the despatch of the money, in so far as the amount exceeds that of its own credit balance. The rate of interest for deposits shall be from time to time fixed by the director of the Union in agreement with the Bank in accordance with the financial position of the co-operative department of the Bank. 6. If, owing to the withdrawal of money, the money in the co-operative depart- ment of the Bank be exhausted, it is the duty of the Bank to advance the further amounts ncessary up to the limits of the money placed at its disposal by the sinking fund department. Such advances shall be charged by the Bank at the same rate of interest as the Bank itself has to pay to the sinking fund department. The Com- mittee of the Union shall decide what rate of interest shall be paid by the indebted societies. 7. The Bank shall furnish at the close of every calendar half-year to each society, by means of an extract from its books, a statement of the position of that society's account, which shall be acknowledged as correct by the signature of the usual (printed) form by the society in question. Objections in order to be valid must reach the Bank within, at latest, four weeks of the presentation of the abstract of accounts. At the close of every calendar half-year the Bank shall also furnish the Committee of the Union, through thei medium of the Union director, and by means of extracts from its books, information as to the business done with the societies composing the Union during the preceding half-year. 8. The Bank shall receive for its trouble a half-yearly commission of rVth per cent, on the dealings of the societies with it (that is to say, the heavier side of the current account, exclusive of the balances carried forward from the preceding half- year). Each society must, over and above this, bear all postal charges arising in its business with the Bank. 9. Any profits arising out of money transactions with the societies (surplus of interest on the amounts taken up by the societies over interest to be paid to them on deposits), will be held by the Bank at the disposition of the Committee of the Union. 10. The Committee of the Union will recommend the societies to send such funds as they may desire to send to the Bank in such good time that they shall reach the Bank the day before settling day, and in the case of funds which they may wish to withdraw from the Bank, to make such withdrawals on any day between the 2nd and the 29th of the month, also as far as practicable to give the Bank notice as to the extent of the (proposed) deposit or withdrawal. 11. This Agreement may be terminated by six months' notice on either side. Mannheim, July, 1898. The Ehenish Mortgage Bank. The Committee of the Union. (Signature) (Signature) REGULATIONS OF THE CENTRAL BANK OF THE AGRICULTURAL PURCHASE AND SALE CO-OPERATIVE SOCIETIES OF BADEN. Current Accounts. Section 1. — The Central Bank acts as agent for the adjustment of the monetary needs of its affiliated societies, grants them credit on current account, and accepts surplus cash from them, as well as from non-members, to any amount at interest. Section 2. — The measure of the credit to be granted to individual associations lies with the Committee of Management of the Central Bank within the maximum fixed by the General Meeting, subject to examination by the Board of Supervision. The extent of the credi# shall be measured according to the shares held and the form of liability adopted. REGULATIONS OF PURCHASE AND SALE SOCIETIES OF BADEN. 161 Societies with limited liability obtain a maximum credit of one-half the liability undertaken by members. The societies must make an application for a maximum credit ; such application must be signed by all the members of the committee of management. Section 3. — For every £100 or part of £100 of credit, a share in the Central Bank must be acquired. Section 4. — Money paid into the Central Bank shall be credited with interest as from the day of receipt: money paid out to the associations as from the day of despatch. ''The rate of interest shall be fixed by the Committee of Management and the Board of Supervision of the Central Blank. The present rate of interest and until further notice is : — {a) Deposits on current account, at call 4 per cent.* (&) Deposits of above £50 — (1) withdrawable at 3 months' notice 4 J „ (2) „ 6 „ 4i „ (c) On loan indebtedness of associations 4 Postages and other expenses to be borne by the societies. Section 5. — ^All deposits transmitted to the Central Bank must be post paid. Section 6. — ^The Central Bank arranges money transactions with the suppliers of goods to the members up to the amount of the credit extended to the latter, e.g. : — An individual member has a credit of £100, or a non-member, affiliated to the DistribiJtive Union, has a deposit of £100 with the Central Bank. Accounts are to hand for goods sold and delivered by one or more dealers. This society writes the Central Bank, " Debit our account (or our deposit with you, in the case of non-members) with the sum of £ to Messrs. & Co." As a rule the cost of transfer is relatively smaller than if the money be sent direct. Section 7. — ^Loans will only be granted in proportion to the available funds. Section 8. — Deposits of £500 and over are repayable at latest after one month's notice. Section 9. — Societies which exhaust the whole of the credit to which they are entitled, and do not, in the course of a year, make repayments totalling one-fourth of such credits, will be charged a commission of ^ per cent. The credit may be at the same time reduced or withdrawn. Section 10. — In case of the wholesale withdrawal of deposits, or of industrial or financial crisis, the Central Bank has the right, on giving 3 months' notice, to call in loans which have been granted. In case of retirement from the Central Bank, loans granted must be at once repaid. Section 11. — Provisional closing of credit is effected by the Committee when a society, without previous understanding with the Central Bank, transacts current money business with another banking institution, or so soon as the Committee has doubts as to its financial solidity, or if, as a result of the audit, reports as to the irregular conduct of business by a society come to hand. The Board of Supervision pronounces the definite withdrawal of credit. In case of the withdrawal of credit, all debts to the Central Bank must be paid within four weeks. If the Committee consider that there be danger in delay, they have the right to take all legal means to enforce their claim. Section 12. — ^At the end of the calendar half year a statement of the position of their accounts shall be sent to the societies for their acknowledgment. Objections thereto must reach the Central Bank within four weeks. Unclaimed interest shall be written to capital in half-yearly instalments. In the half-yearly accounts the amount of its paid-up capital shall be communicated to each society. Section 13. — Payments of instalments on shares are effected by debiting the account of the society in question with the amount due. If the shares are fully paid, the proportion of the profits due on them is paid by crediting the account of the society in question. Section 14. — Any change in the composition of its committee, as well as a change of secretary, must be notified at once by every society to the Central Bank, and the signatures of the members of the committee or of the secretary, as the case may be, transmitted afresh. Carlsruhe, July 1, 1907. *' The rates of this Bank in 1910 and 1911 are shown in the Table p. 141 of Report. 162 AGRICULTURAL CO-OPERATION (OTHER THAN FOR CREDIT.) Supply and Sale Societies' Model Articles and Rules. Dairy Societies' Model Articles and Rules. Cattle-selling Societies' Model Rules. Egg-selling Societies' Model Rules. Threshing Machine Societies' Model Rules. Note. — In order to avoid unnecessary repetition, only sections and model rules which differ in some way from those already given in full for credit societies are printed. MODEL ARTICLES OF ASSOCIATION OF AN AGRICULTURAL SUPPLY AND SALE. CO-OPERATIVE SOCIETY. Registered Society with unlimited liability. (As Framed and Issued by Imperial Federation in 1910.) I. IPSTABLISHMENT OF THE Co-OPERATIVE SOCIETY. Section 1.— The undersigned establish, within the terms of the Imperial Co- operative Societies Act, a co-operative society to promote the economic interests of its members by means of business operations in common, under the trading title of Agricultural Supply and Sale Co-operative Society, registered society with unlimited liability. The society has its seat in Section 2. — The object of the undertaking is — (1) the purchase in common of materials and appliances required in farming; (2) the sale in common of farm produce. II. Membership. Section 3. — Membership may be acquired by all persons (also legal persons) who are capable of legally binding themselves by an agreement, and who reside in Retirement of Members. Section 6. — Every member is entitled, on giving notice, to declare his intention of retiring from the society. Such notice takes effect only at the end of the business year. It must be given in writing at least six months before. (Note. — The legal minimum period of notice is fixed at three months and the masoimum at two years. The period of notice chosen should not he too short, preferably not under six or twelve months.) Section 14. — It is the duty of members : — 1 . To observe the articles and the rules of business issued in accordance there- with, which contain also the penalties in case of infringement ; 2. Not to act contrary to the interests of the society and its resolutions; 3. Neither directly nor indirectly to take part in any undertaking with the same or like object without the assent of the general meeting; 4. To procure such materials and appliances as are required in farming as they may need, and which are supplied by the society only through the society ; 5. To acquire one share in accordance with section 37 of these articles and to make the prescribed payments thereon ; 6. On admission to pay an entrance fee, to go to reserve, the amount and method of payment of which is fixed by the general meeting ; 7. To undertake liability to the full extent of their property (unlimited liability) for the engagements of the society directly to the society as well as directly to its creditors. (As regards shares, working capital, and reserve, the Imperial Federation makes the same recommendations ^s in the case of credit societies. {See their articles of association.) ) MODEL ARTICLES FOR SUPPLY AND SALE SOCIETIES. 163 Section 43. — The balance sheet must contain under separate heads — A. Assets. — 1. The cash in hand; 2. The securities; 3. The stock of commodities in hand; Such securities as have an exchange or market price are to be valued at such price as a maximum at the time the balance sheet is drawn up. Commodities, so far as the price exceeds the purchase or cost of production price, are to be valued on the latter as a maximum ; 4. Other assets are to be set down as a maximum at their purchase or cost of production price ; 5. Outstanding claims according to their different kinds and their value at the time ; 6. Land and houses at their book value less an annual depreciation of 2| per cent. ; 7. Machinery at its book value less a yearly depreciation of at least 10 per cent.; 8. Tools and implements at book value less a yearly depreciation of at least 15 per cent. ; 9. The movable property of the society at is book value less 10 per cent. yearly for depreciation. B. Liabilities. — 1 . The paid-up share capital of the members ; 2. The reserve fund; 3. The working reserve and other reserves ; 4. The existing debts according to their various kinds; and 5. Contingent business expenses still to b« met. The surplus of assets over liabilities constitutes the net profit, the excess of liabilities over assets the loss of the society. The profit or loss shown by comparison of the total assets and the total liabilities must be set out separately at the end of the balance sheet. Section 45. — Out of the net profits 10 per cent, is to be allocated to the reserve fund, as well as to the working reserve, provided these have not already reached the fixed limit, and then — after crediting the profit and debiting the loss on the working of the previous year — to interest not exceeding 4 per cent, of the paid-up share capital of the members. The balance remaining is to be allocated to the reserve fund and to the working reserve in the proportion of one-fourth to each. The disposal of the remainder rests with the general meeting. A fixed propor- tion of this is to be distributed among the members according to the amount of goods taken by individual members (goods-dividend). No cash payments to members out of profits before the amount of the share value has been paid up is permissible. (J^ote. — If before the shares have been fully paid wp profits are to be paid out to members, the articles must in this part of the text contain provisions — it is not per- missible by provisions of the articles to leave the decision of this matter to the vote of the general meeting.) Section 46. — If there be still deficits after any deficit resulting from the year's working of the business has been covered by the working reserve accumulated for the purpose and such working revenue be exhausted, this is to be covered out of the still existing society funds (reserve fund and paid-up share capital), and the general meeting must decide the question, whether, and to what extent, the reserve fund or the paid-up share capital, or both, shall be drawn upon to cover the loss. In covering the loss by requisition of the share capital, the amount written ofi from the share capital must be effected in proportion to the purchases (and sales) during the year by individual members. The Model Articles of Association of an Agricultural Supply and Sale Co-opera- tive Society with limited liability issued by the Federation, diifer from those of a society with unlimited liability in the following particulars : — Section 1. — Substitute the words " limited liability " for " unlimited liability." Section 14 (5) . — Should members be obliged to acquire more than one share the following form is given to this sub-section : " To acquire the number of shares fixed 25574 2 G 164 BUSINESS BULES FOR AGRICULTURAL SUPPLY SOCIETY. by the articles of association, section 37, and to effect the prescribed payments thereon." Section 14 (7). — The liability incurred on each share may not be less than the nominal value of such share. Section 37. — Members are permitted to hold more than one share — (It is recom- mended to fix the shares at as high a value as possible, in no event under £5; it is further recommended to fix the amounts and periods for instalments in such a way that the share is fully paid up in 10 years). The highest number of shares which a member may acquire is fixed at (Note. — Should the acquisition of more than one share he authorised, a provision to that effect should he inserted here; e.g., the numher of shares that a memher must acquire is fixed in accordance with the extent of his annual dealings with the society in the following way : — A hove £ up to £ , one further share ; Ahove £ up to £ , two further shares, &c.; or, each memher must acquire a share per fixed numher of cultivated acres comprised in his holding. MODEL RULES FOR THE CONDUCT OF BUSINESS OF AN AGRICUL- TURAL SUPPLY SOCIETY. (Agricultural Distributive Society.) (Framed and Issued by the Halle Union.) Section I. Admittance or Members. 1. Persons seeking admission must sign in duplicate the prescribed declara- tion on entry in the presence of a member of the committee of management. 2. At the next meeting of the committee the director shall read out the applica- tions for resolution as to their admission. 3. A copy of the articles and of the business regulations, on payment of the price if such has been fixed therefor by the committee, shall be handed to the accepted person. A person admitted must, immediately on admission, pay to the treasurer the entrance fee fixed by the general meeting. 4. If the candidate be rejected, the form of declaration on entry must be struck through and given back to the candidate or annulled. 5. The entry of the name on the list of members and all further formalities must be carried out by the manager without delay. Section II. Retirement of Members. 6. A copy of the prescribed declaration on retirement shall, on the retirement of a member, be sent in duplicate to the manager, to be laid by him before the next meeting of the committee, and must be presented in good time at the office of the court. 7. Should a member ask to retire in the course of the business year and another become a member in his place, the latter shall sign the declaration on entry, and both shall sign Form No. 24 (Transfer of Share Capital). The committee must then lay the matter before the board of supervision, and, when this latter shall have given its assent, shall send the documents, together with Form 27, to the court for registration. Section III. Conduct of business in General. 8. Business must be conducted within the limits of the objects of the under- taking. 9. The business consists, in the first place, of the purchase in common of materials and appliances required in farming, and especially special feeding-stuffs of all kinds, artificial manures, seeds, and seed-corn, as well as coal, agricultural machines and implements. 10. It is the duty of the committee to execute orders given by members for goods which may be purchased through the society according to resolution of the general meeting, as soon aS ^hose orders reach such an amount that a supply in common through the society is likely to be to its interest or that of the members. MODEL RULES FOR AGRICULTURAL SUPPLY SOCIETY. 165 11. On the other hand, it is the duty of members, in accordance with the articles of association, to procure through the medium of the society as far as possible such requirements in materials and implements for f arip purposes as may be procured in common for the members under resolution of the general meeting. 12. The sale of farm produce is to be organised by the committee, as soon as the interests of the members require it and the execution appears assured and profitable. In case of need special rules of business are to be drawn up for the sale in common of farm produce. Section IV. Orders of Members. 13. The committee shall keep a stock of order books, order forms, and dockets (order books may be obtained from the Union, price 1 shilling each) which are to be put before the members for the entry of their actual orders. 14. The orders of members must be in writing in the member's own hand. 15. The collection of orders, or request that orders be given, shall take place at intervals which shall be fixed by the board of supervision on the proposal of the committee. 16. Members must immediately, on request of the committee of management, send in a statement of their requirements, when orders are being collected for any period. 17. Supplementary orders are permitted to all members who have had a share in the principal order. Other supplementary orders can claim consideration only on condition that the association is put to no expense whatever, or if the member so ordering declares himself ready to bear any specially incurred cost arising therefrom. Section V. Central Society. 18. The committee must arrange to join the Central Co-operative Society for the Supply of Agricultural Requisites, at Halle-on-Saale, and is requested to pay scrupulous attention to the rules issued by that society in its business relations with it, and especially its business rules. Section VI. Purchase of Goods. 19. The committee of management must purchase, or execute the commission, on the basis of the orders entered in the books or handed in by members ; they shall not buy without previous order from members. 20. In order to make up the deliveries of goods to round figures, and to effect economy in carriage, the committee may conclude purchases beyond the amounts previously ordered by members. 21. The committee must buy according to quality (especially according to percentage content and percentage of germinating power) and on a firm offer, but not as a speculation. 22. In agreements to purchase the place of delivery and of payment for the goods is to be settled. 23. Agreements to purchase, unless made with the Central Society, shall be for cash payments and not for credit. 24. The commissions to purchase and the agreements must be in writing. Section VII. Reception of Goods. 25. On the arrival of goods it is the duty of the committee to take care that they are examined to see that the delivery is according to contract, that samples are taken for technical test according to instructions, and the test proceeded with at once. Especially in the case of all goods, the value of which depends upon their content, as established by analysis,' in feeding material, ascertained germinating power, or the like, must the prescribed samples and reserve samples be scrupulously taken. The samples are to be sent without delay with due observance of the provi- sions for such, to the Agricultural Chemical Experiment Station of the Chamber of Agriculture for the Province of Saxony at Halle. The reserve samples are to be carefully preserved until the result of the test is made known to both parties. 26. Goods below the standard or not delivered according to contract, in so far as such can be proved on receipt, are to be placed by telegram at the disposal of the sender, with due observance of the regulations bearing upon the matter. 25574 2 G 2 166 MODEL EULES Ot AGRlCUWURAL SUPPLY SOClSTY. At the same time claims for compensation against the senders for fixed losses which arise, or of losses which have to be borne later, must be made. 27. If the committee neglect to take the prescribed samples or neglect to send such samples for examination, or do not carry out the acceptance of goods according to the prescribed rules, it shall be responsible to the society and to all members concerned in the particular transaction for any loss or damage resulting therefrom. Section VIII. Giving out of Goods. 28. Goods must be accepted by members without question at the place and time appointed by the committee which should be indicated to the members for each separate delivery. 29. From the moment that the member ordering goods does not appear at the appointed place and time for the purpose of receiving the same, and does not take over the goods assigned to him, the committee is empowered to dispose of the goods in another way by public sale for cash or to warehouse the same at the cost of the member ordering. 30. The defaulting recipient is liable for all losses and expenses arising out of his failure to receive, or failure to receive at the proper time, and is under the obligation to make good the damage and expense caused by his default. Section IX. Warehousing. 31 . As regards warehousing, the committee must only make provision for the storing of suitable goods, after the special assent of the general meeting has been given thereto. 32. The management of the warehouse lies with the manager, unless the com- mittee entrusts such management to another member, or the general meeting decide to appoint a special storekeeper. 33. In the latter case the storekeeper is to be appointed by the committee, under whose guidance, supervision and responsibility he shall conduct the business entrusted to him in a conscientious manner. 34. The storekeeper shall keep special warehouse books (these may be obtained from the Union at the price of 1 shilling each), from which the entry and despatch of goods from the warehouse, and so far as possible the actual state of the stock shall be apparent. 35. The storekeeper must deposit and leave on deposit caution money in proportion to the extent of the business, or to the stock kept at the warehouse, and is liable for any deficiencies therein. 36. If goods are taken out of store on payments in cash, the storekeeper must render a weekly account of such receipts to the secretary. In case goods are sold on credit the warehouse-keeper shall furnish the secretary with a weekly account therefor, so that the account may be sent out. 37. Goods are to be stored in such a way as not to be liable to deterioration, and must, as far as practicable, be protected against fire. 38. The committee must take care that the warehouse is insured. 39. Against possible failure to compensate for loss on the part of the store- keeper, special stipulations are to be made with him. 40. The storekeeper must under no conditions stock goods at the warehouse for his own account or on commission, or deal with goods with which the society is dealing or negotiating — for his own account or on commission. Section X. Fixing of Prices. 41. The prices of goods shall be fixed by the committee in such a way that an addition to their actual cost (i.e., the amount of the invoice plus transport, weigh- house charges, &c.) shall be brought into account, such addition to be settled by the committee of management with assent of the board of supervision. 42. This addition is to be so arranged that the business charges and the charges which are not directly met out of establishment expenses, as well as a profit, can be obtained, as a contribution to the reserves, interest or share capital, and the possible grant of a rebate. 43. The cost of warehouse maintenance must be charged upon the price of goods in store. . 44. The sale price of goods in store shall, as far as practicable, coincide with the market price at the time. MODEL ARTICLES OF DAIRY SOCIETY. 167 Section XI. Sending out of Accounts and Payments. 45. It is the duty of the committee to take care that the price of commodities is fixed in good time, and on this basis, immediately on delivery of the goods to the members, or at latest on receipt of the sender's invoice, to send out to the members an invoice of the goods received. 46. The invoice must bear the date on v^^hich at latest the member must make payment. This day of payment shall not be deferred beyond 20 days after issue of the account. Chile saltpetre (nitrates) is excluded from this rule as being subject to ready-money payment. 47. Accounts not paid on the day on which they fall due, or on which credit has been asked for and granted, shall be handed over by the committee to the Co- operative Societies' Bank at Halle for payment to the suppliers, namely, " the Central Society for the Supply of Agricultural Requisites." Those members who do not pay on the day on which the money falls due, in other words do not make payment through the society or the Co-operative Societies' Bank, must bear their share in the interest and commission charged by the latter. 48. In so far and so long as the business relations of the individual society with the Co-operative Bank are not broken off, it is the duty of the secretary to see that the dates of payments are punctually kept. Defaulting payers are to be charged, from the day on which payment falls due, for every month entered upon a whole month's interest, the rate of which is to be fixed by the committee with assent of the board of supervision. 49. Credit beyond months is not to be given under any circumstances. Section XII. Cash and Account Keeping. 50. The Committee must take care that the accounts of the Central Co- operative Society for the Supply of Agricultural Requisites at Halle are paid at latest on the day on which they fall due, and that the secretary deposits all surplus monies with the banking centre of the Union — ^the Co-operative Bank at Halle — whether to current or deposit account. 51. The secretary must be careful than an amount corresponding with the extent of the business (working cash) as fixed by the committee is always available, and that the unnecessary cash exceeding such requirements shall be at once used for the payment of accounts or deposited at interest with the Co-operative Bank at Halle. 52. The secretary shall, every quarter, prepare an " Arrears Account," on which defaulting members and their outstanding accounts shall appear. This Arrears List is to be handed to the manager, who shall lay it before the committee for decision and further action. The above business regulations are approvecf for the Agricultural Supply and Sale Society of , in accordance with resolution of the general meeting. Date The Committee : ARTICLES OF ASSOCIATION OF A DAIRY CO-OPERATIVE SOCIETY. Registered Co-operative Society with unlimited liability in I. — Formation of the Society. Section 1. — The undersigned, on the basis of the Imperial Law as to Co-opera- tive Societies, form a society for the promotion of the industry and business of its members by working a business in common under the style of " Dairy Co-operative Society, registered society with unlimited liability." The society has its seat in Section 2. — 'The nature of the undertaking is the handling and sale of milk for common account and at common risk. II.— Section 3. — The membership may embrace all persons engaged in the milk industry (also corporations) capable of executing a binding agreement, and who 168 MODEL ARTICLES OF DAIRY SOCIETY. reside in . The admission of persons, not engaged in the milk industry, but who satisfy the conditions set out in section 1, requires the previous consent of the board of supervision. Ill — Retirement of Individual Members. Section 6. — ^Every member has the right on notice given to declare his intention of leaving the society. Such notice may take place at the end of a business year and must be given two years in advance. ]Slote. — The minimum period fixed by law for notice of withdrawal is three months and the maximum two years. Too short a period of notice should not be adopted; it is desirable to select the maximum. Section 14. — It is the duty of a member — (1) to observe the articles and the rules of business issued in accordance there- with, which contain also the penalties in case of infringement ; (2) not to act contrary to the interests of the society and its resolutions ; (3) neither directly nor indirectly to take part in any undertaking with the same or like object without the assent of the general meeting. The delivery of milk to others, either to individuals or to societies, and the making profit out of milk, is expressly forbidden; (4) to acquire one share in accordance with section 37 of these articles, and to make the prescribed payments thereon ; (5) on admission to pay an entrance fee to go to reserve, the amount and method of payment of which is fixed by the general meeting ; (6) on becoming a member to make a declaration of milch cows kept on his farm, and not to reduce the declared number without assent of the committee of management. Any contingent increase in the number of of cows is, as soon as possible, but at latest in the first month of the business year next following such increase, to be notified to the committee; (7) the total amount of milk produced on his farm, with the exception of that directly consumed by his household, or necessary for the feeding of his domestic animals, must be delivered daily to the society in accordance with the prescriptions of the business and milk delivery rules, or the special instructions based on them and issued by the committee of management. The obligation to deliver extends also to the milk of those cows which the member keeps over and above the declared number ; By resolution of the committee of management a member may, under exceptional circumstances, for a fixed period be wholly or par- tially released from^the obligation to deliver. The giving up of the farm (sale, letting on lease or any form of surrender of the dairy business) does not release the member from the obligation to deliver milk. The committee of management can, however, in the last case — with the previous assent of the board of supervision, before whom the exceptional conditions for the avoidance of possible hardships have been laid — permit release from the obligation to deliver milk. The quantity of milk delivered annually to the dairy by such mem- ber shall not be less than kilog (22 lbs.) per head of cows declared. Should this minimum quantity not be reached, the member in question shall pay to the society for each kilog of milk in default the sum of In like manner every member, if he improperly keep back any new milk, or if he use the milk for butter-making, with intent to sell the same, shall pay a fine not exceeding £5, to be fixed by the committee of management for each offence. If any member become altogether irregular in his daily delivery of milk according to the regulations, he becomes further liable to a fine for breach of contract, leviable forthwith, of shillings for each day of such failure to deliver, provided the delivery have not been rendered impossible by exceptional disturbances of business, such as by fire, disease, the running dry of the cows, or other unavoidable circum- stances. In these caSes the committee of management must be notified without delay. MODEL ARTICLES OF DAIRY SOCIETY. 169 The regulations in clauses 6 and 7 come into operation against members who have been accepted on the basis of section 3 (2) of the articles so soon as they, subsequent to their admission, engage in the dairy business ; (8) for the delivery of adulterated milk, at the discretion of the committee of management, a money compensation not exceeding £25 shall be paid in every individual case of offence; (9) in case of infectious disease on his farm, either among the covins or the members of his household, the member must at once notify the com- mittee of management of the dairy, and for any infringement of this duty of notification or of the ordinances of the committee of manage- ment which are applicable to the case, he shall pay a money compensation for each individual offence, at the discretion of the committee, but not exceeding £25 ; (10) to undertake liability for the engagements of the society, directly to it as well as to its creditors, to the full extent of his property (unlimited liability). Section 16. — (A note to the text recommends that the committee should not consist of more than jive or less than three members.) VII. — Working Capital of the Society. — Shares. Section 37. — The amount up to which individual members may participate with capital, and in accordance with the following provisions must so participate, is fixed at £ . (It is recommended to fix the amount of the\ share at as high a figure as possible, preferably not below £50. It is further recommended so to arrange the amounts and periods of payment that the share may be fully paid up in 10 years.) Each member is entitled to pay up the full amount. Every member is bound to pay in, either at once, one-tenth of the share value, to wit, pounds, or in monthly instalments of at least shillings. The fixing of the amount and period for the further instalments of the share to be paid is decided by resolution of the general meeting. (This section may also be given the following form : — Every member is bound to pay in a tenth part of the share, that is, pounds, within the first year after his admission, and in each following year a further tenth part, at least pounds, unless this amount has already been written to the credit of the share out of dividends, supplementary payment for milk delivered or otherwise.) The payments made upon the share, inclusive of the appropriation of profits to share capital, and the writing-off of loss thereon, constitute the share capital of a member. This share capital may not be paid out by the society or charged with liability in the course of business as long as the member has not retired from the society. Arrears of instalments may not be remitted. In settling accounts with the society a member cannot set off his share capital against any claims upon him by the society. Reserve Fund. Section 38. — A reserve fund shall be formed to serve as cover for any loss as shown by the balance sheets. Such reserve fund shall be formed from entrance fees, fines accruing to the fund under the business rules and by the turning over to it of at least 10 per cent, of the annual net profits. The reserve fund should be brought up to the amount of at least 20 per cent, of the total working capital as shown in the balance sheet, but as a minimum to the same amount as the share capital, and be kept at this level. Working Reserve. Section 39. — A working reserve shall be accumulated by the turning over for the purpose of at least 10 per cent, of the annual net profits, as well as by other appro- pria,tions to be settled by the general meeting. Such working reserve is to be used for meeting special purposes to be decided by the general meeting, and especially expenses connected with the conduct of business. 25574 2 G 4 170 MODEL BUSINESS RULllS OF DAIRt SOCIETY. The working reserve should be brought up to the amount of 20 per cent, of tke working capital, as shown by the balance sheet, but as a minimum to the same amount as the share capital and to be kept at this level. Conduct of Business. Section 40. — The general meeting must decide upon the formation, extension or limitation of the whole business of the society and the working of individual branches of such business. The committee of management shall prepare for this purpose a series of rules of business and of regulations as to milk delivery governing the whole conduct thereof, as well as, should occasion arise, special regulations for each separate branch. Such rules, after previous consideration by the board of supervision, require the assent of the general meeting. The specimen articles of association of a dairy society with limited liability differ from those of a society with unlimited liability in the following particulars : — Section 1. — ^Substitute the words " limited liability " for " unlimited liability." Section 4. — In case the acquisition of more than one share is made obligatory on members on certain conditions, this sub-section should read as follows : — " To acquire the number of shares fixed by the articles of association, section 37, and to effect the prescribed payments thereon." Section 14. Sub-section 10. — The liability incurred on each share may not be fixed at less than the nominal value of the share. Section 37. — It is permissible for a member to acquire more than one share. The highest number of shares that may be acquired by a member shall be (Note. — If it be made an obligation on members to acquire more than one share, a provision on this point should be here inserted. The number of shares to be acquired by individual members is suitably fixed in accordance with the number of cows held by members.) RULES FOR THE CONDUCT OF BUSINESS OF A CO-OPERATIVE DAIRY SOCIETY (Halle Union). Section 1. — The working of the society's dairy shall be under the conduct and management of a dairyman, who shall be under the supervision of the committee of management. He shall keep an accurate register of the milk delivered at the dairy, as well as of the dairy produce returned to the members, and also of all butter, &c., sold. He shall make all entries in the record of production with the greatest carei and take part in the monthly settlement of accounts with the members. The dairyman is not to be entitled to a vote; he must not deliver milk; and shall hold his appointment on the terms of a quarter's notice on either side. The committee of management and the board of supervision, with the assent of the general meeting, shall settle the amount of his salary, his commission and payments in kind. The committee of management must satisfy themselves that the manager carries out his duties punctually, and shall advise the board of supervision from time to time as to the conduct of the business. Section 2. — Every member must, at the begiiming of the business year, advise the committee of management as to the number of cows he will probably keep in the coming year. Section 3. — The members of the society must not sell any milk or dairy produce elsewhere. It is, moreover, their duty to hand over to the society the whole of the milk produced on their farms excepting so much as may be used for their ovm needs. Any infraction of this regulation may carry with it, by virtue of a resolution of the committee of management and of the board of supervision, a fine for breach of regulations not exceeding £2 10*. Appeal against this to the general meeting is permitted. • MODEL flUSlNligS KUtfiS OF DAIKY SOCIETY. 171 No member may be relieved, either wholly or in part, from the obligation of daily delivery of milk, except by resolution of the general meeting. The committee of management may grant a temporary relaxation of this rule, but only by reason of the outbreak of cattle disease or of illness in his household, &c., on the certificate of a veterinary surgeon or on some other qualified authority. Section 4. — All milk to be delivered at the dairy must be cooled after milking. In so far as mid-day and evening milk is not delivered at once, but only with the morning milk on the next day, these shall be kept in a cool chamber, the air of which is pure, the cans open and standing in cold water. The produce of different milkings is not to be mixed before delivery at the dairy. The greatest cleanliness is to be observed in milking ; the udders of the cows must be carefully cleaned before milking. It shall be a matter of duty with members to see that the milk-pails, &c., are clean. Every member is responsible for delivery to the dairy of pure and unadulterated milk ; that is to say, of milk from which the cream has not been removed and to which no addition of water or skim milk has been made. Should the contrary be proved against him he shall pay a fine for breach of regulations not exceeding £50, to be fixed by the general meeting — even should he have no personal knowledge of the adulteration. Section 5. — The members of the society are bound to deliver their milk punc- tually at the appointed time at the dairy, or to have it ready for removal by the dairy carts. Section 6. — Members must take back the whole of the separated and butter milk produced from the milk delivered by them if the profitable working of the business require it. The price of dairy produce taken by members for their house- hold requirements shall be fixed by the general meeting. Section 7. — Payment for new milk delivered is made monthly, and is based upon (1) weight and (2) fat content. 1 kilog. milk is reckoned as 1 litre (176 pints). Sampling is effected as follows : — ^A member of the committee of management by turns on days, the date of which is not to be disclosed, shall take a sample from the mixed milk of each member, and the dairy manager shall perform the examination without knowledge of the name of the persons delivering. The testing vessels must be numbered. The method of calculation is as follows : — After the milk of each member has been examined three or four times in the course of the month and the individual results entered in a book, the total number of kilogs. of milk delivered is multiplied by the average fat content. The total fat percentages thus obtained are then added together and the sum is used to divide the amount which, after deduction of expenses, &c., may be allotted. In this way the value of the milk, according to the percentage of fat, is arrived at, and also the proper amount which each member has to claim for milk delivered. Section 8. — If a cow have freshly calved, her milk shall not be delivered to the dairy before the lapse of four days ; neither shall the milk of cows due to calve within four weeks be delivered. Infractions of these regulations shall be visited by the same consequences as the adulterations mentioned in section 4. Section 9. — ^Milk delivered at the dairy in a sour condition is credited at only ^d. per kilog. It may also be refused. Section 10. — Cans for the transport of milk may be procured at the dairy and purchased by members for cash. Members must take care that the cans are imme- diately and thoroughly cleaned after each delivery on their return from the dairy. If the cleansing is repeatedly found to be defective, it will be done in the dairy at the cost of the member. For the carriage of new milk to the dairy, spring-carts should, as far as possible, be employed. Section 11. — The committee of management may demand details as to the feeding of the cows, and, in the interests of the dairy, which can only work at a profit on the delivery of the best and most reliable produce, may demand a change in the mode of feeding. The committee have the right from time to time to inspect the cow byres, and to satisfy themselves that the regulations are observed. 172 MODEL BUSINESS RULES OF CATTLE- SELLING SOCIETY. Section 12. — These rules of business form a part of the articles of associatioiij and have the same force. No alteration in them may be made except by the general meeting. Place: Date: The Committee of Management of Registered Society with limited liability. MODEL RULES FOR THE CONDUCT OF BUSINESS OF A CATTLE- SELLING SOCIETY (Hanoverian Union). Registered Society with Limited Liability. Manager. Section 1. — ^A manager shall be appointed whose duty it shall be to conduct the whole business of the society, the receipt and despatch of consignments of cattle, the keeping of the books, the payment of money, the preparation of the annual accounts, &c. The manager is responsible in the first place to the committee of management; his appointment rests with the committee subject to the concurrence of the board of supervision. He shall receive over and above the repayment of out-of-pocket expenses a suitable remuneration for his work, the amount of which shall require the assent of the board of supervision. Section 2. — -The manager must look after the interests of the society in every respect to the best of his knowledge and ability. The holder of the office must not, under any circumstances, traffic privately in cattle. The manager shall not make journeys to slaughter markets except on the special instruction of the committee. If the manager takes journeys on the instruction of the committee he shall receive, in addition to his travelling expenses, a daily money allowance, the amount of which shall be fixed by the committee in concurrence with the board of supervision. Section 3. — The manager shall, in accordance with instructions given, keep the account books and cash of the society, as well as a letter-book in which all out-going letters and documents shall be copied. He shall preserve all receipts and vouchers in an orderly manner. As security for the proper conduct of his business he shall deposit caution money to the amount of £250 either in cash or in securities of like value. He shall be entitled to the interest on such deposits. Sale of Cattle. Section 4. — Cattle belonging to members are to be sold through the society on commission. Members are obliged to sell the whole of their fat stock, till further notice all cattle (pigs, sheep, calves and horned cattle), through the medium of the society only. In the first year members may be released by the committee from the obligation to sell all cattle through the society. The proceeds of the sale at the slaughter markets shall be paid over to the members, less the expenses. Section 5. — Members who sell elsewhere cattle which should have been consigned to the society, or consign cattle, not their own, to the society, must pay a regulation fine of 10s. per head of such. The following are exempt from compulsory sale to the society :— (a) Animals damaged in such a way that there is fear that they will not survive to the next delivery of animals to the society. (b) Animals slaughtered for the use of the members' own household. (c) Animals sold for slaughter to private persons or to slaughterers in the neighbouring towns and villages within the district covered by the operations of the society. If a member subsequently sell a beast already advised to be taken by the society for slaughter in the towns or villages of the neighbourhood, he must pay to the society for every head of largelbeasts 10s., and 3s. for calves, sheep or pigs. MODEL BUSrNESS RULES OE CATTLE -SELLING SOCIETY. ] 73 If a member think that he has been made unjustifiably to pay a fine, it is open to him to make complaint to the board of supervision. The decision of the board shall be final. Section 6. — Every member is obliged to notify the authorised agent appointed by the general meeting for each locality, of his intention to dispose of cattle through the society. The manager advises the agent of the day of dispatch. Notifications by members must reach the agent at least seven days before the day of dispatch. The agents are to advise the manager at least six days before the dispatch of cattle. If there be already a full wagon load, the dispatch of the last notified beasts shall have first place on the next dispatch day, unless there be at least an additional half load. If the manager postpones the dispatch day, he must advise the agents of this at the earliest possible moment. The manager must take care that, as far as possible,, only full loads are dis- patched, so as to make the best use of the freight. With the assent of the committee, in order to make the best use of the freight, the cattle of non-members may be loaded with those of members, but the owners of such cattle must pay, over and above all costs and charges that they could be called upon to pay as members, a further 1 per cent, on the gross expense to the society. Reception of Cattle. Section 7. — ^The reception of cattle at the railway station must be so arranged that the despatch may take place on the day before the market day at the market centre (for instance, Berlin, Cologne, Essen, Frankfort, &c.), so that the cattle may be rested and fed. When there are several loads the cattle are to be sorted according to quality, inasmuch as they are paid for solely and entirely on quality. The individual trucks can, according to circumstances, be sent to different markets. Cattle are received in the different localities by an agent appointed by the committee. The animals are to be separately weighed, marked and numbered. Swine are to be branded, large beasts and calves clipped on the left hind leg. The manager must prepare an accurate list of the animals to be sold on com- mission, showing the name of the owner, kind of animal, live- weight, numbers and marks. A copy of the list must be sent at once by post to the agent of the Central Co-operative Society for Cattle-Selling at the slaughter market, so that he may have it at hand when the animals are unloaded. In the case of the larger cattle (bullocks, bulls, cows and steers), a man in charge must be sent with the truck as far as the slaughter-house. In the case of mixed loads (pigs, calves, sheep, goats), a man in charge is not requisite. If seven head of large cattle are loaded on one truck, and the full load is to be supplemented, as far as possible, with small cattle, they are to be separated from the large cattle by a trellis partition. Partitions are supplied by the railway authorities on request. Expenses for conveying the cattle received from the sheds are to be paid by indi- vidual members in proportion to the animals sent by them. Section 8. — ^Cattle are regarded as received when they have been marked and weighed. From the moment of reception all animals are insured, not only against damage in transit but also against objections to or condemnation by the slaughter- house and meat inspection authorities. Insurance in Transit. Section 9. — The society bears the risk of insurance in transit. The present rates are Qd. per head of small and 2s. per head of large cattle. If cattle die or suffer damage in transit which diminishes their value as cattle for slaughter, the sender receives the average price of the market to which they were sent for the corresponding quality from the society, or the amount of depreciation is made good. Damage in transit must be notified. Damage in transit must be recognisable on arrival at the receiving station and be at once confirmed by certificate of a vete- rinary surgeon, or by voucher of the local superintendent, or the railway superin- tendent. If it can bp demonstrated that the dead animal was clearly ill already, or 174 MODEL BUSINESS RULES OF CATTLE- SELLING SOCIETY. that death arose from over- feeding, the owner thereof must not only bear the loss, but also all cost of the investigation. Cattle must not be fed on the day of despatch. If, however, they are delivered over in the afternoon, a moderate feed is allowable. Slaughter-House Insurance. Section 10. — ^AU animals received, are taken by the society under slaughter- house insurance, the premium payable to the society therefor being Qd. per head of small and 5s. per head of large cattle. Section 11. — The transport of sick, or presumably sick, cattle to the slaughter- house is interdicted. Interdicted cattle are only taken with others at the risk and cost of the owner. Sale at the Slaughter Market. Section 12. — Sale at the slaughter market takes place through the medium of the Central Co-operative Cattle-Selling Society in Berlin, or of one of its agents at the particular market. The manager, so soon as the notices of cattle for the next day of despatch are in, with a statement of kind, number of head and quality of the cattle to be delivered, must put himself in communication with the Central Society in Berlin, which then informs him by return of post as to the best probable market for the particular kind of beast and the place to which the cattle should be sent. Freight is to be paid in advance by the manager. The superintendence of the sale is effected through the offices of the central society. If the manager have special reasons for considering his presence at the sale to be necessary, he must obtain the approval of the committee for the journey. (Section 2.) The Central Society arranges that the money for the cattle delivered shall be sent to the society as soon as the market is over, with a detailed invoice of expenses, and a statement as to the proceeds of the sale of each beast. Making Out Accounts. Section 13. — ^The expenses incurred for freight, food, insurance, commission, &c., must be reckoned separately for each consignment and then proportionately dis- tributed over the total proceeds of the sale of the cattle. What amounts are to be put under the head of general expenses, excepting expenses for the administration of the society's business, shall be determined every half year by the board of supervision, according to the proposals of the committee and of the manager. Payment. Section 14. — On receipt of the money proceeds of the sales, the manager must fix the proportion of the expenses and calculate the net amount to be credited to the individual animals. This calculation must, in all cases, be laid before the members who sent cattle for sale, and the balances are to be paid out to them. If a member sending sattle for sale have not received the money proceeds of such sale on the appointed day, the manager must send it to him by Post Office Order within eight days. The P.O. receipt shall serve as receipt for the money. Section 15. — The committee assigns to the manager the necessary money for meeting the cost of freight, and is liable for the outlay of the money according to instructions. If these funds cannot be supplied from the deposits of members, they are to be procured through the medium of the savings bank at Section 16. — In order to be able to procure the advance of the money necessary for the expenses of the business, members must on joining, at once pay in the sum of 5s. on every share held by them. Section 17. — In order to facilitate the carrying on of the business, in every locality in which a member resides agents shall be appointed who must support the manager on his request in every way. Section 18. — The afore-given business regulations have been agreed to by a general meeting of the society held on , after examination by the board of supervision, and they are binding on all members. The following provisions^fire found in the business regulations adopted by other societies, either in addition to, or as siibstitutes for, the foregoing : — MODEL BUSINESS RtJLES OJ? EGG-SELLING SOCIETY. 175' Members are only obliged to deliver pigs of 165 lb. and over, and calves of over 132 1b. Swine must never be fed on day of delivery to the society. The manager, a valuer, and a member of the committee compose the commission of reception, and the classification of animals according to quality rests w^ith them. Members are not exempted from selling through the society animals intended for use in the district. Transit insurance is fixed at ^ per cent, of the gross receipts for the cattle. RULES FOR THE CONDUCT OF BUSINESS OF A CO-OPERATIVE EGG-SELLING SOCIETY (Hanoverian Chamber of Agriculture). Registered Society with Limited Liability. Section 1. — The business must be conducted within the limits of the objects of the undertaking, which consists in the sale in common for profit of the eggs delivered by the members. Section 2. — The handling and delivery of eggs at the collecting station is regulated as follows : — {a.) Every member is obliged to deliver the whole of the eggs produced on his farm with the exception of those required for his own use or for the purpose of breeding, at the collecting station designated by the committee. (&.) The collecting stations shall only receive such eggs as have been produced on the farms of the members. (c.) Eggs, which in summer are more than three days (four days) or in winter more than six days (eight days) old, must not be delivered. They are to be used on the member's own farm, inasmuch as such eggs have no longer any title to be called fresh eggs, and can prejudice the repu- tation of co-operative egg selling. (d.) The holding back of eggs, in order to make a subsequent delivery at the collecting station, is not permitted. (e.) The eggs must be taken daily from the nests and kept in a cool well- ventilated place until the time of delivery. Eggs which have been also for one day only under a sitting hen must not be brought to the collecting station. Porcelain eggs are to be used as nest eggs. The eggs delivered must be clean and free from attached dirt. Dirty eggs will be rejected at the collecting station. In order to make the pro- duction of clean eggs possible, the cleanliness of the hen-roosts and of the nests should be especially kept in view. (/.) All eggs must be stamped. Egg stamps are furnished by the society, and each member must pay for the stamp assigned to him. The stamps remain the property of the society, and must on cessation of member- ship be returned to the society. If the stamp is still fit for use, a sum equivalent to the value of the stamp will be refunded. Every stamp bears the trade mark which the Chamber of Agriculture has registered, and, further, the device of the club or society, expressed by certain letters, and the number by which the member is registered in the egg receipt book. (g.) Every egg is to be examined at the collecting station by an egg lamp or some other suitable egg tester. Eggs that fail to pass the test will not be reckoned as delivered. (h.) Rejected eggs shall be indicated at the collecting station by a special mark. (i.) Payment for eggs is made either by number or by weight, If paid for by number, eggs of a less weight than 45 grammes (50 grammes) are not to be delivered (57 grammes = 2 ozs.). (j.) If a member infringe the regulations that only fresh and sound eggs shall be delivered, a deduction shall be made from the payments due to him of pence for each bad egg so delivered. (k.) If a member is proved to have sold eggs to a merchant or to some other person directly, he must pay a fine of shillings. 176 MODEL BUSINESS RULES FOR THRESHING SOCIETY. (l.) Repeated infractions of the regulations as to the delivery of eggs may be punished by the expulsion of the member involved by the society, (m.) It is the duty of the person in charge of the collecting station to draw the attention of members to any defects in the eggs delivered. Section 3. — For the conduct of the business of the society, a manager shall be appointed by the committee, who, under the instruction and guidance of the com- mittee, shall carry out the duties imposed upon him in a conscientious manner. Section 4. — The position of the manager shall be regulated by contract. Section 5. — ^The committee shall furnish the manager with the necessary funds for carrying on the business, and is responsible for its use for the purposes intended. Section 6. — The manager shall keep the necessary books of the society in an orderly manner, and make the entries of eggs received in the proper books . He shall further take care that the eggs are handled and packed in an expert fashion, and, above all, he shall see that only fresh and odourless packing material is used. The eggs must be packed in a clean, light and well-ventilated room, in which no malodorous material shall lie. In consideration of the fact that the eggs, from the moment of delivery to that of despatch, may lie in the packing room at least one and frequently more days, this room must be in a cool situation. The manager shall be responsible for loss sustained by the society through neglect of these regulations. Section 7. — ^The book-keeping shall be carried out on commercial principles. The following books are to be kept : — Eggs received, eggs despatched, egg ledger and egg journal. In large societies a ledger for debtors and creditors must be kept in addition. Every member shall receive a small account book in which the manager enters at each delivery the numloer of eggs received. In agreement with this a corresponding entry must be made in the eggs received book. The account book bears the name of the member to whom it is issued ; in addition, an impression of the egg-stamp, showing the member's number. Section 8. — ^Accounts shall be made up monthly. Members may receive the amount due for eggs delivered in the previous month after the 10th of each month; on request, and, with consent of the committee, payments on account may be made. The price to be paid for the eggs shall be established by deducting the monthly expenses and an amount representing the cost of general maintenance from the total receipts for eggs. The accounts shall be made up by two members of the committee, or, in case of their inability, by other members nominated by the committee, together • with the manager. The manager shall previously prepare the statement of accounts by calculation of the quantities of eggs delivered. The manager shall receive, as remuneration for book-keeping, paying out of monies, preparation of the year's accounts, receiving, packing and despatch of eggs, a sum based on a percentage of the turnover; the percentage to be fixed beforehand by the committee at the beginning of the year. Section 9. — Should one collecting station not suffice, further stations may be set up within the district covered by the society, from which the eggs shall be sent to a special central station. For the temporary storage of eggs in the sub-stations the regulations of section 6 shall hold good. The conduct of business in the sub-stations shall be governed by regulations specially drawn up by the society. ♦BUSINESS RULES FOR CO-OPERATIVE THRESHING SOCIETIES. 1. The steam-threshing machine shall, whilst at work, be under the care of a mechanic appointed for the purpose by the committee of management of the co-operative society. • Specimen business rules isBu*i by Union of Agricultural Societies of the Province of Saxony and the neighbouring States, registered Association at Halle. MODEL BUSINESS RULES FOR THRESHING SOCIETY. 177 His duties, as well as his wages, shall be fixed by a special service agreement, which latter shall require the approval of the general meeting. 2. Members are under obligation to use only the threshing machine of the society for the purpose of steam threshing. 3. Every member is bound, for each share held in the society, to employ the steam-threshing machine for hours annually. Infringements of this regulation shall be punished by a fixed fine, the amount of which shall be determined by the general meeting. 4. The right of use of the plant by the members shall be regulated as follows : — {a.) In the period from the beginning of harvest up to September 20th of each year, every member is entitled to use the threshing plant for half the number of hours to which he is bound by the terms of section 3. (&.) In order to avoid unnecessary moving of the machine backwards and for- wards, the members in each locality must make use of it in turn within the period stated under {a). (c.) Use of the machine after September 20th shall be a matter of yearly arrangements. If an agreement cannot be reached as to the locality in which the machine is to be first employed, the same shall be decided by lot. 5. Any person desiring to use the threshing machine must himself provide for its transport. Immediately upon completion of the work he must again return the machine to a highway. The transport of the machine from one place to another shall be a common charge on the society. 6. Requests for the hire of the threshing machine must be sent to the secretary. The order in which the requests shall be complied with shall be settled by the com- mittee of management as a whole. The charge for hire shall be settled by the general meeting. 7. Fuel and binding twine shall be paid for by the user of the machine. The materials will be delivered by the society at cost price. The user must provfde for the necessary water supply. 8. The return of the machine after hire shall be the business of the user. The above business regulations are approved by the general meeting of , the (date) , 190 . The Co-operative Steam Threshing Society , registered society with limited liability. The Board of Supervision The Committee of Management 178 FEDERATIONS OF AGRICULTURAL CO-OPERATIVE SOCIETIES. 1. IMPERIAL FEDERATION OF GERMAN AGRICULTURAL CO-OPERA- TIVE SOCIETIES : REGISTERED ASSOCIATION AT DARMSTADT. Articles of Association. Title and Territorial Sphere of Operations. — Section 1. — Under the title of " Imperial Federation of German Agricultural Co-operative Societies " an asso- ciation of Agricultural Co-operative Unions is formed whose sphere of operations embraces the German Empire and its dependencies. Offices. — Section 2. — The Federation has its seat in the place of residence for the time being of the General Director, now in Darmstadt. Objects. — Section 3. — The objects of the Federation are : — 1. The promotion and extension of agricultural co-operation. 2. The protection and representation of common interests, especially in matters of legislation and administration. 3. The development, strengthening and improvement of co-operative organisation and effort in all its branches. 4. The advising and assisting the affiliated Unions and societies in all co- operative, legal, and economic matters. 5. The taking in hand and working out of co-operative, legal, and economic problems. 6. The execution of the audit required by law of the accounts of the central organisations and co-operative societies directly affiliated to the Imperial Federation according to section 5, paragraph 2. Structure of the Federation. — Section 4. — Within the limits of the Kingdom of Prussia the Imperial Federation shall consist as a rule of provincial Unions; in other parts of the Empire of State Unions. The independence, internal organisation, and administration of these Unions shall in no way be interfered with as the result of association in the Imperial Federation. Membership. — Section 5. — Membership of the Imperial Federation is possessed by : — 1. The provincial and State Unions directly affiliated to it. 2. The co-operative societies attached to such affiliated provincial and State Unions. Direct membership may be granted : — (a) by the General Committee to such central trading bodies possessed of legal status, as serve the purposes of agricultural co-operative societies, whose activity extends over a considerable area, embracing the districts of all or of the greater number of provincial and State Unions, (6) by the Council of Administration to such as serve the purposes of agricul- tural societies in German protectorates as well as co-operative and other societies in foreign countries which possess a German legal status, and in accordance with German law are entered in the registers of German courts or consulates. Rights of Members. — Section 6. — Unions, individual co-operative societies, and central organisations attached as members to the Imperial Federation have the following rights : — 1 . To make use of the machinery set up in the general interest by the Imperial Federation. 2. To require assistance by advice and by action on the part of the General Director and of the other organs of the Imperial Federation. 3. To take part in the proceedings of the Agricultural Co-operative Congress through a representative with ri^ht of vote. 4. To submit proposals for the agenda of the Agricultural Co-operative Congress within the period laid down in the business regulations ; and, in so far as it relates to single co-operative societies, to do so through the agency of the competent Union. Duties of Members. — Section 7. — It shall be the duty of members : — 1. To promote the interests of the Imperial Federation and of its members and to give mutual support. 2. To pay the contry?utions to the expenses of the Imperial Federation as fixed by the General Committee. IMPERIAL FEDERATION. 179 3. To take, according to the terms of the resolutions of the General Com- mittee, the newspaper selected for the publication of the proceedings of the Imperial Federation and to supply themselves with its Year- Book. 4. To deliver punctually the statistical reports and information required by the General Director. Admission. — Section 8. — ^Admission to the Federation is open to all Unions of agricultural co-operative societies, as well as to the central organisations and individual co-operative societies named in section 5. They should as a rule represent a district of a province or of a State. Notice of desire to join must be given to the General Director; acceptance as member depends upon a resolution of the Council of Administration or of the General Committee. (Section 5.) If, at the time the notice of request for membership is given, there already exists in the province or in the State a Union affiliated to the Federation, the acceptance of the new member shall not take place as a rule without the assent of such Union. Retirement. — Section 9. — Membership of the Imperial Federation may be terminated by notice on the part of the affiliated Union, central organisation, or co-operative society. Such notice can, however, only take effect at the end of the calendar year and must, in order to be effective at this date, be handed in at latest by 1st July of the year in question. With the cessation of membership of a Union the relations of its component co-operative societies with the Federation also cease without further formality. Expulsion. — Section 10. — Expulsion from the Federation may be decreed against an affiliated provincial or State Union, against a central organisation or against a co-operative society, in case of gross neglect of the duties of membership, on the proposition of the Council of Administration by resolution of the General Committee with two-thirds majority of those present and entitled to vote and actually voting. With the resolution of expulsion of a Union the membership of the co-operative societies affiliated thereto terminates immediately. Section 11. — Unions and central business institutions which Jaave resigned or have been expelled are bound to pay their contributions up to the end of the current calendar year, but have nevertheless no claim upon the funds of the Federation. Organs of the Federation. — Section 12. — The organs of the Federation are ;— 1. The German Agricultural Co-operative Congress. 2. The General Committee. 3. The Council of Administration. 4. The General Director. German Agricultural Co-operative Congress.— Section 13. — The German Agricultural Co-operative Congress (Meeting of Members in the sense of section 32 of the Civil Code) consists of the delegates of the component Unions, co-operative societies, and central organisations. Every Union, every co-operative society within a Union, and every central organisation, has the right to send a delegate entitled to vote at the Co-operative Congress. Further, representatives of Unions and members of co-operative societies may take part in the deliberations of the Co-operative Congress in any number, but not in the resolutions thereof. Section 14. — The Co-operative Congress has the final decision in all business of the Imperial Federation, and especially as regards : — 1. The deliberation and passing of resolutions upon all co-operative and like questions allied to agricultural co-operation. 2. Decision in the case of complaints against the organs of the Federation. 3. The passing of resolutions as to alterations in the articles of association and as to the dissolution of the Federation. 4. The settlement of its rules of business. 5. The election of the General Director and of his deputy. (Section 32.) The authentication of the resolutions of the Co-operative Congress is effected by their entry in the minutes and the signature thereof by the General Director and the minute-keeper. Section 15. — The proceedings of the Congress are open to the public, unless the Cpngress itself by resolution declares in each particular case that the public be excluded. , Section 16. — The delegated representative at the Co-operative Congress cannot be represented by a deputy at a vote. 25574 2 H 180 FEDERATIONS OF AGRICULTURAL CO-OPERATIVE SOCIETIES. Section 17. — The Co-operative Congress shall meet regularly each year, with constant change of venue as regards the individual provincial and State Union districts. The Congress shall be convened by the General Director by virtue of a resolution of the Council of Administration. The summons is to be brought to the notice of the Unions and societies at least four weeks previously by insertion in the organ of the Imperial Federation—" The German Agricultural Co-operative Press." Section 18. — The agenda of the Congress shall be drawn up by the Council of Administration, and is to be made known with the summons to the meeting. Every affiliated Union, every co-operative society affiliated to such Union, and every central organisation has the right to propose matter for inclusion in the Agenda, an individual society through the Union to which it is attached. The Council of Administration shall decide on the admissibility of proposals of this kind, which must be in the hands of the General Director at least 8 weeks before the holding of the Congress, if they are to obtain consideration. If the proposal is agreed to, the Union, the co-operative society, or the central organisation in question, is bound to appoint a reporter for the particular matter. Section 19. — The Union district in which the ordinary Co-operative Congress is to be held shall on each occasion be fixed upon by the Congress of the preceding year. Section 20. — Extraordinary Co-operative Congresses are to be summoned when : — 1. The General Committee shall so decide, or 2. At least one-fifth of the affiliated Unions, or one-tenth of the members of the societies, demand it. The place of meeting of an Extraordinary Co-operative Congress shall be settled by the Council of Administration. Section 21. — The Co-operative Congress shall be opened by the General Director. The chairmen and secretaries shall be nominated by the General Committee. The General Committee may nominate temporary presidents. General Committee. — Section 22. — ^The General Committee shall consist of : — 1. The General Director. 2. The Directors of the provincial and State Unions holding membership of the Federation. These latter shall in case of inability to attend be represented by their regular deputies. 3. Six representatives of central co-operative societies, of whom three are to be representatives of the special committees named in section 28 {a), two representatives of the special Committees named under (&). 4. One representative for each of the central organisations attached to the Federation under section 5, paragraph 2. The General Committee shall elect from its own body a chairman and a deputy- chairman for five years. It may fix another term of election. The General Director is eligible for the office. Section 23. — The General Committee is competent : — 1. To consider in advance, and in cases of urgency to decide upon, all co- operative questions of general interest and all matters affecting the Imperial Federation, as well as to carry out the instructions given to it by the Co-operative Congress. 2. To lay proposals before the Co-operative Congress. 3. To audit and pass the year's accounts, as well as to approve of the annual estimates of the Imperial Federation. 4. To fix the annual contributions. 5. To take all necessary steps for the election of the General Director and of his deputy, and to lay proposals as to such election before the Co-operative Congress. 6. To fix the duties of the General Director and of his deputy ._ 7. To decide upon complaints against the Council of Administration or the General Director. 8. To decide upon the setting up of Committees and^ Commissions other than those already provided for by these articles of association (Section 28) fo»» permanent or temporary purposes, as well as upon the election of the members thereof. IMPERIAL FEDERATION. 181 9. To accept new members under section 5, paragraph '2. 10. To pass resolutions as to the expulsion of members. (Section 10.) Section 24. — The General Committee must be called together at least twice annually. Summons is to be issued by the chairman at least two weeks before the meeting, and except in case of urgency the agenda shall accompany the summons. The General Committee must meet if at least 10 of its members demand it. Council of Administration. — Section 25. — The Council of Administration consists of : — 1. The General Director as chairman. 2. His two deputies. 3. Seven members to be elected in the General Committee from its body. The election of the members named in paragraph 3 shall take place every five years. Section 26. — The especial duties of the Council of Administration, on which the General Director shall serve as permanent adviser, shall be as follows : — 1. The drafting and fixing of the agenda of the Co-operative Congress and decision as to its summoning. 2. The taking of decisions on those matters of administration which the Congress or the General Committee may assign to it for carrying out, or which the General Director may put before it. 3. The examination of the annual accounts and the drawing up of the report thereon to the General Committee. 4. The consideration of the draft annual estimates and the drawing up of a _ report thereon to the General Committee. 5. Decision as to expenses which exceed the estimates. 6. The approval of the employment contracts made with the superior officials of the Imperial Federation. 7. The approval of all other contracts which involve the Imperial Federation in permanent responsibilities. 8. The laying of proposals before the General Committee as to the expulsion of members. (Section 10.) Section 27. — The Council of Administration shall meet as often as may be necessary. Summons is to be issued by the General Director accompanied by the agenda, and shall be sent out, except in case of urgency, at least one week before the meeting. The Council of Administration must be summoned when three of its members so demand. Special Committees. — Section 28. — Special Committees are to be formed for the following societies attached to the affiliated Unions : — * (a) Central Co-operative Credit Societies. (b) Central Supply and Sale Co-operative Societies. (c) Central Butter-selling and Dairy Co-operative Societies. Section 29. — Each spedal Committee shall consist of : — 1. The General Director or one of his deputies as chairman. 2. A representative of the central co-operative societies handling the special branch of business concerned. Section 30. — The business of the special Committees is : — 1 . To advise on business matters affecting the common interest of the branches of business involved. 2. The bringing forward of motions before the Co-operative Congress. 3. The election of representatives on the General Committee. Section 31 . — The regulations of section 24 hold also for the special Committees, with the provision that a special Committee is to be called together when the repre- sentatives of one-third of the central co-operative societies or business organisa- tions belonging to it so demand. The General Director. — Section 32. — The General Director and two deputies for him shall be elected by an absolute majority of the Co-operative Congress on the proposal of the General Committee for five years. The Congress may, on the proposal of the General Committee, decide upon election for a different period. • In the year 1905-6 four new special Committees of analogous composition were formed, viz., for co-operative granary, cattle-selling, vine-growing and machine-selling societies. 25574 2 H 2 182 FEDERATIONS OF AGRICULTURAL CO-OPERATIVE SOCIETIES. Section 33. — The General Director constitutes the Committee of Management of the Imperial Federation in the sense of section 26 of the Civil Code. He represents the Federation legally and otherwise, both within and outside the Federation, especially before the authorities, carries out its business independently according to the articles of association and the decisions governing the business regulations. The scope of the business to be conducted by the General Director includes especially : — 1 . The promotion of German Agricultural Co-operation and of its individual branches in every direction, by speech and writing, especially also as regards legislation and administration. 2. The communication of intelligence and advice on all matters to the affiliated Unions, co-operative societies and central organisations, as well as the representation of their interests at their request. 3. The arrangement and summoning of the Co-operative Congress and the sittings of the General Committee, of the Council of Administration and of the special Committees. 4. The execution of the resolutions of the Co-operative Congress, of the General Committee, of the Council of Administration, and of the special Committees. 5. The administration of the general organisation and of the undertakings of the Imperial Federation. 6. The collection, the compilation and the publication of co-operative statistics and of an annual report. 7. The administration of the accounts and finances of the Imperial Federa- tion. 8. The laying of the year's accounts and draft estimates before the Council of Administration. 9. Taking part in the Congresses of the affiliated Unions. The General Director is authorised, in case of personal inability to attend, to cause himself to be represented by one of his deputies, another member of the Council of Administration, or by one of the officials of the Imperial Federation. 10. The appointment of the higher officials of the Federation with the consent of the Council of Administration. 11. The appointment of the necessary staff for the transaction of office business consistent with the means estimated and placed at his disposal of the purpose. Audits. — Section 34. — The Imperial Federation, under section 53 et seq of the Co-operative Societies' Act, possesses the right of appointing auditors, and must undertake, in the case of the directly affiliated central organisations and co-operative societies specified in section 5, paragraph 2, the audit of the general organisation and conduct of business in all branches of administration in the manner prescribed by the Act, by a skilled auditor not belonging to the co-operative society in question. At the request of the co-operative society or on the instructions of the General Director, special audits may be undertaken at any time. The extension of the audit beyond the limits required by the law may at anv time be decided upon by the General Committee. Section 35. — The Committees of Management of the central organisations and co-operative societies directly affiliated to the Imperial Federation must permit the Federation auditor to inspect the books and papers of the society, to examine the position of the society's cash balances, as well as of the securities, business documents and goods. Section 36. — The audit service shall be regulated according to the provisions of the law and the regulations giving effect thereto by means of a series of service regulations. Section 37. — For the carrying out of the audit, the Imperial Federation may appoint one, or if necessity require, more Union auditors. Section 38. — The number of co-operative societies directly affiliated to the Imperial Federation for the purposes of audit shall be at least three, and shall not exceed one hundred. Expenditure. — Section 39. — In so far as no other receipts may exist, the expenses of the Imperial Fejipration shall be met by annual contributions. The affiliated Unions are bound to make these contributions. IMPERIAL FEDERATION. 183 The amount and the scale on which these contributions are to be levied shall be, fixed by the General Committee. The amount of contribution due from directly affiliated central organisations shall be fixed in each individual case by resolution of the General Committee. Contributions become payable at the beginning of the year on demand of the General Director. Eeductions in the amount to be contributed may, on special grounds and in individual cases, be arranged by the Council of Administration. Section 40. — The financial year shall coincide vs^ith the calendar year. The annual accounts must be laid by the General Director before the Council of Adminis- tration at latest during the May of any given year together with the vouchers. Daily Allowances and Travelling Eaypenses. — Section 41. — The daily allowances and travelling expenses of the Council of Administration, of the General Director and of his deputies, as well as of officials of the Imperial Federation shall be paid out of the Federation funds. Their amount shall be fixed by the General Committee. The daily allowances and travelling expenses of members of the General Com- mittee and of the special Committees shall be at the charge of the bodies they represent. The amount of the daily allowances and travelling expenses of the representa- tives of special Committees on the General Committee shall be fixed by the General Committee, and shall be borne in common by the affiliated central co-operative societies concerned in the branch of business involved. The manner in which these expenses are to be apportioned shall be settled by each special Committee independently. Power to pass Resolutions. — Section 42. — When summoned to meet in the ordinary manner : 1. The Co-operative Congress, when any number of members entitled to vote are present ; 2. The General Committee, the Council of Administration, and the special Committees, provided more than one-half the members are present — are entitled to pass resolutions. Votes and Elections.! — Section 43. — Voting shall take place by the members rising in their places or remaining seated. Elections shall take place by means of voting papers. Election by acclamation is permissible, provided no objection be raised. Absolute majority of votes shall decide an election. If the first vote yields no absolute majority, then the two names which have received the largest number of votes shall be put up again to the vote. If two or more of the names to be put up again have received an equal number of votes, a decision as to which of them shall be put up a second time for election shall be obtained by lot drawn by the chairman. Alteration of the Articles of Association. — Section 44. — ^An alteration of the articles of association may only be decided upon by the Co-operative Congress if — 1. The contents of the draft amendments are made known at latest at the same time as the summons to the Congress ; 2. At least three-quarters of the delegates present and entitled to vote support it; 3. The delegates voting in support represent more than one-half of the total affiliated Unions. Dissolution. — Section 45. — The Imperial Federation may be dissolved by vote of the Co-operative Congress. The resolution shall, however, be only valid in law when three-fourths of the Unions affiliated to the Imperial Federation and one-tenth of the co-operative societies attached to them are present at the Congress, and three-fourths of the members of each of the named groups vote in support. Section 46. — In case of dissolution the settlement takes place in respect of the funds of the Imperial Federation in accordance with the terms of the Civil Code thereunto applying, unless two-thirds of the Congress deciding upon the dissolution, adopt other resolutions. Entry in the Associations Register. — Section 4!7. — The Imperial Federation shall by registration in the Associations Register of a court acquire the rights of a registered association. 25574 2 H 3 184 2. THE GENERAL (RAIEFEISEN) FEDERATION OF RURAL CO-OPERA- TIVE SOCIETIES IN GERMANY: REGISTERED ASSOCIATION IN BERLIN.* Articles of Association (Extracts). Description — District, Legal Form, Seat and Object. — Section 1. — The General Federation of Rural Co-operative Societies for Germany, established in accordance with the Imperial Co-operative Societies' Act, section 53 et seq. shall extend over the German Empire and its Dependencies. Section 2. — The smallest number of societies vs^hich the General Federation may embrace is fixed at 20 ; the largest at 20,000. Section 3. — The General Federation shall by the fact of registration in the Register of Associations enjoy the rights of a registered association. Section 4. — The General Federation has its seat in Berlin, t Section 5. — The objects of the General Federation are : — (a) The establishment of independent Audit Unions in the individual Provinces and States. It shall be the primary business of these Provincial or State Unions to undertake the audit of the accounts of the component societies according to the prescriptions of the law; they must be members of the General Federation. (b) The drawing up of uniform regulations for the carrying out of these audits. (c) The supervision of the Unions with regard to the observance and carrying out of these regulations. (d) The audit of the conduct of business by the Unions. (e) To undertake the audit as prescribed by law of the accounts of such societies as are precluded from membership of an Audit Union attached to the General Federation. (/) The preservation and upholding of the RaifEeisen principles as laid down in section 6, paragraph 2, clause 1 of these articles and in the articles of the Unions. (g) To devise or support arrangements for the formation of capable officials for co-operative societies, and especially of trustworthy auditors. (h) The furtherance of the material welfare of the people, but pre-eminently of their moral and spiritual welfare, through the deepening and quickening of the desire to promote the common interest on Christian principles. To this end the General Federation shall : — (aa) support all efforts which are directed towards the extension of rural co-operation ; (bb) by stimulating and instructing in speech and writing, promote the com- prehension and spread of the co-operative principles represented by it and their sound development, and especially render assistance in the field of rural social welfare; (cc) afford information and advice in all co-operative matters to its affiliated Unions and societies as well as to their members. Section 6. — Membership: Conditions for Admission. — The following may become members of the Federation : — I. The Audit Unions of the Raiffeisen Organisation mentioned in section 5 (a). II. The following members of these Unions : — (1) Societies doing business either in money or goods (Savings and Loan Bank Associations) which have been founded in accordance with the German Co-operative Societies' Act with either unlimited or unlimited contributory liability, and have been legally registered; as well as further such societies as by virtue of their articles of association : — (n) aim in the first place, by the adoption of suitable measures, to improve the position of the economically weak, and side by side with the material progress of the members assist their spiritual and moral advancement. * At a meeting of the General Federation held in Breslau on 24th June, 190*), it was decided that the seat of the Federation Bhoul|^he removed from Neuwied to Berlin at latest by 1st July, 1910. I The removal of the seat of the General Union to Berlin took place on 1st February, 1910, GENERAL (rAIFFEISEn) FEDERATION. 185 {h) accept as members only those who dwell within the area of operations of the society, such area to be as limited as possible consistent with its enduring vitality, and refuse membership to those who belong to any other co-operative credit society with unlimited liability or with unlimited contributory liability, (c) pay no dividend on shares which shall exceed the rate of interest paid by borrowers from the society for loans, and do not permit the possession of more than one share by any member, {d) pay to none of the organs of the society, with the exception of the Manager (Secretary), any compensation for trouble taken beyond mere monies out of pocket, {e) accumulate from the net profits an indivisible common capital of the association (foundation fund). (2) Other registered co-operative societies (productive societies) which seek to improve the economic position of their members, as, for example, societies for the purchase and sale of goods, wine-growing, dairy, granary, hop and tobacco cultivation, distilling, dealing in spirits, cattle, &c. (3) The centres for financial adjustments (regional co-operative banks — co- operative banks) established in the individual districts for the co-operative societies mentioned in preceding paragraph. (4) Companies with limited liability, as well as central business institutions, which serve social purposes of an economic kind without aiming at profit, provided they have a legal status, and their activity be extended over a considerable area. III. Any associations falling under II. if they are precluded from admission to an Audit Union. Section 15. — Board of Supervision. — The Board of Supervision shall consist of the members of the Board of Supervision of the German Central Agricultural Loan Bank. It shall have the same period of office and shall be similarly organised as regards President and Standing Committee. Section 24. — Audit and Supervision of the Audit as conducted by the Unions. — The audit service shall be regulated by the business regulations issued in accordance with the provisions of the Act and with the Regulations of the Executive in relation thereto. The nature and scope of these audits shall be regulated by the directions of section 25 (c-f). For the carrying out of the audit the General Federation shall appoint one auditor, or in case of need more, satisfying the conditions of section 25 (b). Section 25. — The General Federation has the right and the duty of supervising the carrying out of the audit as carried out by the Provincial or State Unions attached to it. To this end it may itself undertake audits among the Unions and require the entire minutes of an audit and the recommendations tendered by the Unions to be sent to it for examination. The chief task of the General Federation in this direction is the observance and carrying out of a uniform method of audit on the uniform principles prescribed as follows in the articles of association of all the Unions attached to it : — (a) Duty of Audit. — The Union undertakes the duty of subjecting its affiliated societies at least once in every second year to an audit by one of its permanent auditors, and to do what it can to remove any deficiency discovered. (&) Auditors. — Only such persons shall be put forward as candidates for the office of auditor as — (1) are in every respect irreproachable, (2) who have thoroughly grasped the co-operative question in all its aspects, as well as the distinctions between the different kinds of societies and especially the importance of the Raifieisen principles, and (3) whose health is such as will withstand the bodily wear and tear involved in country auditing. No person shall be entrusted as auditor with the examination of the accounts of a society of which he is a member. The training of young auditors is effected in accordance with a plan of instruction to be drawn up by the Committee of Manage- ment of the General Federation. According to its provisions independent audits 25674 2 H i 186 FEDERATIONS OF AGRICULTURAL CO-OPERATIVE SOCIETIES. shall only be handed over to them after they have conducted several audits under the supervision of an experienced auditor or of the head auditor (Secretary of the Union) and have shown themselves competent and trustworthy. Appointment as auditor depends upon the result of an examination. This is held by a Commission consisting of the Director of the Union, the head auditor (Secretary of the Union), and one other person selected from the Committee of the Union. The special super- vision of the auditors and the working up of the minutes of audit prepared by them shall be under the control of the Director of the Union through the head auditor (Secretary to the Union). Before the appointment the head auditors must also prove their qualification for the office according to the regulations laid down therefor by the General Federation. (c) Audits. — Audits shall be carried out according to the specimen audit report drawn up by the Committee of the General Federation or in accordance with the service regulations issued by it. They shall not be limited to an examination of the arithmetical accuracy and adjustment of the office books and the balance sheets of the societies. The auditor must further carefully determine whether the adminis- tration has been carried out in all particulars in accordance with the prescriptions of the Co-operative Societies Act, the articles of the society itself, and the instruc- tions given by the Committee of the General Federation. Auditors have the right (section 63 of the Act) to inspect the books and documents of the societies, to check the monies in hand against the books, as well as to determine the existence of the presumed stock of securities, commercial papers and goods. The administrative organs of the society must participate in the work of the auditors. (d) Minutes of Audit. — In every audit a complete duplicate minute according to the prescribed model shall be prepared, which must be signed by the auditor, the members of the board of supervision and of the committee, and by the secretary. The auditor shall hand one copy to the society for adoption at the next general meeting, the other to the Director of the Union for examination and working out, with a view to the removal of possible deficiencies therein. (e) Audit Certificate. — The auditor must furnish the society with a certificate to the effect that the audit has been carried out in the prescribed manner; the Committee shall forward this certificate to the competent court. (/) Rights and Duties of Auditors. — Auditors have the right to attend and to speak at meetings of the committee and of the board of supervision, as well as the general meetings of the societies affiliated to the General Federation. In the case of gross dereliction of duty on the part of the organs of adminis- tration, which endangers the credit or existence of the society as well as the honour of the Union, the auditor must without delay report to the Director of the Union so that this latter may summon a general meeting, according to the rules laid down by the articles, for the consideration of the necessary fresh elections. The legal rights of the society in respect of the displaced organs of administration shall not be disturbed thereby. (g) Rights of the Director of the Union. — The Director of the Union has the right to order at any time special audits of the societies of his district. Section 26. — Contributions. — ^The General Federation shall levy no contributions. The business year and the calendar year shall be coincident. At its close the General Directors shall prepare and lay before the Board of Supervision the year's accounts and a statement of assets. Section 27. — Dissolution of the General Federation. — The dissolution of the General Federation is not permissible so long as 20 societies remain members of it. The existing property of the General Federation at the time of its dissolution shall fall to the German Central Agricultural Loan Bank. 18? MISCELLANEOUS. Specimen Audit Report. Scheme of Audit. Forms for Statistical Returns for:— (1) Credit Societies. (2) Supply and Sale Societies. (3) Dairy Societies. (4) Other. Contributions to Co-operative Unions. List of Agricultural Requisites supplied by a Central Trading Organisation. Notes on Visit to Beet Sugar Factory. Land Bank, Berlin. MINUTES OF AUDIT OF THE LOAN BANK ASSOCIATION OF GRUNAU, Drawn up by the Union Auditor, Albert Osterkorn, 3rd February, 1904. 1. Has the association, in respect of Yes. the admission of members, kept within the limits laid down in its articles? *Section 1. (Section 8 C.A.) 2. Do members belong to other co- operative credit societies; if so, how many and who? (Section 7, V. (2).) 3. What members? is 4. Is the list of members properly kept, and is it kept in agreement with the Court list ? Section 13 I (1). (Sec- tion 30 C.A.) 5. Have all the notifications made by the court upon registration in the co- operative register, especially on the ad- mission or retirement of members, been preserved ? 6. Has the retirement of members been effected according to law? Sec- tions 77 and 13 I. (Sections 69 and 70 C.A.) 7. Has the Court been notified when members have left the district, resigned or been excluded? Section 13 I (4). (Section 69 C.A.) 8. Has the death of a member been at once notified to the Court of Registry? Section 13 I (5). (Section 77 C.A.) Member No. 14 is also a member of th^ Agricultural Credit Association in Augsburg. the present total of 45. Yes, Yes. So far no occasion for such has arisen. No occasion for such notification has thus far arisen. Yes. * The references without brackets refer to the clauses of the Articles of Association of the Society ; C.A. stands for the Co-operative Societies Act. l88- SPECIMEN AUDIT REPORT OF LOCAL BANK. 9. Has the position of the society been No. considerably changed by the retirement of members, and especially has the amount paid as taxes, on which credit granted by the Central Loan Bank is based, been diminished? 10. — (a) What is the amount of the (a) Of the share (£5) every member share? Are the instalments punctually has paid up the required tenth (10s.). paid? Sections 6-2 and 29. (Sections 7-2 and 50 C.A.) (b) Is the list of paid-up share capital (&) Yes. in order ? (a), (b) and (c) These elections are not yet due; 11. Have elections to — (a) the committee of management, Sections 9 and 10; (&) the board of supervision, Sec- tions 16 and 17; (c) the secretary. Section 24 ; taken place at the proper time ? 12. — (a) Have the notices to the court (a) and (6) No omissions because the of registry as to fresh elections of mem- members of the committee of manage- bers of the committee of management ment elected at the general meeting at been made at the proper time? Section 13 I (6). (Section 28 C.A.) (6) Are the notifications of the court on the registration of changes in the committee of management placed with the archives? which the society was founded are still in office. 13. — (a) Has the committee of management with the assistance of the secretary held the requisite meetings, especially for the granting of credits? Sections 15 I, 26 I. (b) Were the whole of the members of the committee of management summoned to the meetings ? Section 15 II. (c) Do the minutes contain a state- ment to this effect? Section 15 III. (a), (b) and (c) Yes. 14. Are all the resolutions adopted at the meetings of the committee of management fully recorded in the minutes, especially as to the grant of loans as well as the conditions under which they were granted, the grant of further time for payment, the taking up of loans, and the admission of members, &c., &c. ? Section 15 III. 15. Do the members of the committee of management or of the board of super- vision receive any remuneration ? If so, what? Sections 9 IV., and 16 V. 16. — (a) What is the amount of loans and deposits fixed by the general meeting to be taken by the association? Section 21 II. 6a. (Sections 49 C.A.) • (b) Is this amount exceeded? Yes. No remuneration. (a) £1,500. (b) No. SPECIMEN AUDIT REPORT OF LOCAL BANK, 189 17. — (a) Has the association. >siifficient funds on deposit to meet demands for loans ? (b) What rate of interest does it pay for such deposits ? (c) Is the period of notice long enough (at least three months) ? 18. — (a) Are the papers concerning loans taken up by the association and the entries in the savings books properly drawn and signed ? Section 13 I (7). (b) Is a savings bank combined vrith the loan bank ? (c) How are these deposits and other receipts supervised? (d) Is the savings bank day book and the ledger kept in an orderly manner, or what errors were found ? 19. In the granting of loans : — (a) are the limits laid down by the statutes, Section 32; (&) the prescribed instalments, Sec- tion 32; (c) the maximum amounts allowed to a member by the general meeting adhered to? Sections 21 II 6b and 32. (Section 49 C.A.) (d) What is this maximum? (e) Has any overstepping of the amount been approved by the general meeting? 20. Are loans secured in the manner laid down by the articles, and how ? 21. Have the documents of indebted- ness on loans — (a) Been properly prepared? (b) Are they quite complete? (c) Are they also signed by the wives of the borrower and sureties ? 22. — (a) Do the documents deposited as security call for any comment? (b) Have the revenue stamps been affixed as required by law? (c) Is a securities register kept ? (d) Are the securities kept under double key ? ' 23. Are sureties living outside area of society accepted, and is their solvability sufficiently known and ascertained ? 24. Are members of the committee of management borrowers or sureties; ia such position approved, and entered on the minutes by the board of supervision before loans are granted or sureties accepted? Sections 12 lib, 32 II. (Sec- tion 29 C.A.) (a) At present these are not altogether adequate; for this purpose the credit of the Central Loan Bank has been tempo- rarily drawn upon. (b) 3 per cent. (c) Yes. (a) and (b) Yes. (c) Deposits are supervised by the chairman of the committee in that he himself sees on each occasion that the receipts in the savings bank books are entered under their proper heading and appear correctly in the day book of the association as receipts. Further, at the close of the year, the whole of the ledger accounts are laid before the depositors in question and other account holders for their inspection and acknowledgment by signature. (d) Both books agree exactly. (a), (b) and (c) Yes. (d) The committee is empowered to lend £100 to a member. Larger amounts up to £250 may be lent on the joint reso- lution of the committee of management and board of supervision. (e) No overstepping of the amount has occurred. Loans, so far as may be, are secured, either by personal sureties, mortgage, or the deposit of securities. (a), (b) and (c) Yes. (a) No. (b) and (c) Yes. (d) This will be done when the safe arrives. {See answer to question 41 (a).) Answer to both questions : Yes. Yes, approved and entered on the minutes 190 SPECIMEN AUDIT REPORT OF LOCAL BANK. 25. — (a) Are non-inembers of the asso- ciation debtors to it and to what extent 1 (Section 8 (2) C.A.) (b) What is the amount of the out- standing loans granted for the purchase of property? (c) What is the amount of the loans granted ? (d) What is the amount of balances on current account? (e) What is the rate of interest on loans ? 26. Are all loans and the instalments on them punctually repaid, or are exten- sions granted according to regulations and with the signed agreement of the sureties thereto ? 27. Are there any considerable arrears of interest, and in what years ? 28. What is the difference between the rate of interest on deposits and on loans? Is it sufficient to permit of the gradual accumulation of a reserve fund ? If commission is charged, what is the yate? 29. — (a) Was a quorum of the board of supervision always present at the meetings ? Section 20 (1). (b) Did the quarterly investigation of loans and securities take place ? Section 19 I (3). (c) Were the prescribed surprise ex- aminations of the business and cash ac- counts carried out ? Section 19 I (3). (d) Are these matters recorded in the minutes of the board ? Section 20 III. (a) No. (b) These are dealt with as loans and accounted for under that head. (c) £621. (d) £200 Is. Od. (e) 4 per cent. Yes. No arrears of interest. Thfr margin of interest (1 per cent.), together with the commission of ^ per cent., is adequate, and the more so as the association has a handsome profit in prospect from the property transactions at present in hand. (a), (b), (c) and (d) Yes. 30. Are the following carried out at the proper time and in accordance with the articles ? — (a) Summonses to the general meeting. (b) Notification of the agenda. Section 22. (a) and (b) Yes. 31. Was the balance sheet and annual statement of accounts posted for inspec- tion of members a week before the general meeting, and where? Section 27 V. (Section 48 C.A.) Did the members receive information of this? 3^. Has the statutory general meeting taken place? Do the minutes thereof contain the whole of the business done and the resolutions passed? Sections 22 and 23 III. (Sections U and 47 C.A.) The statutory general jneeting in which the balance sheet and annual ac- counts are made known only takes place for the first time in the month of March. See answer to previous question. SPECIMEN AUDIT REPORT OF LOCAL BANK. 191 33. Has the board of supervision con- firmed the report of the general meeting on — (a) the annual accounts and balance sheet, and the proposals as to the appropriation of profit or loss? Section 19 I (2). (b) As to the result of the audit of the previous year's accounts? Section 19 I (4). (a) See answer to 31 and 32. (b) The present is the first audit. 34. Are the annual accounts and the (a) and (b) Yes. balance sheet^ — {a) properly drawn up ? Section 27 (Section 7 (3) C.A.) (6) Have they been drawn up or examined by the committee of management and the board of supervision? Sections 13 I (9), 19 I (2). (c) When was the balance sheet pub- (c) This has not yet occurred, but will lished ? Has public notice been not be neglected. communicated to the court of registry? Section 13 I (10). (Section 33 C.A.) 35. In the resolutions adopted as — (a), (b) and (c) These matters will be (a) to the appropriation of profits the subject of resolution at the forth- were the prescribed limitations coming general meeting, observed? Section 30. (b) Were the proportions laid down by the articles written to the foundation or reserve funds? Section 30. (c) And especially in regard to any payment of interest on paid-up capital, were the limi- tations laid down by law observed ? 36. Has the secretary furnished the caution money required by the articles in a satisfactory manner ? Section 24 I. Arranged by surety. 37. Has the secretary a — ■ (a) credit on current account with the society ? (b) If so, are such withdrawals effected only on the instruction of the chairman? (a) No. (&)- 38. — (a) What form of book-keeping (a) The books are kept according to is in use ? the system of the National Union. (b) Are the books properly kept (6) The books are kept by the secre- according to the rules for guidance in tary in the most perfect order, the book of instructions? 39. — (a) Have errors in the accounts (a) Of no consequence, as the indi- been noted at audit ? vidual small errors which had crept into the accounts had already been corrected by the secretary himself. 192 SPECIMEN AUDIT REPORT OP LOCAL BANK. 39 — cont. (b) Are there vouchers to cover all entries of payments ? (c) Are the archives and the accounts of the association, together with papers relating thereto, preserved and in proper order ? (d) Was the cash in order ? What were the total receipts ? What were the total payments? What is the balance in hand ? (e) How are any differences to be ex- plained 1 40. — (a) Is the monthly balancing of receipts and payments in the day books regularly carried out by the chairman or his deputy and the secretary and signed ? And in doing this was the actual cash in hand always checked ? (b) Are these monthly balancings con- tained in the minutes of the committee of management? Section 14 (2). 41. — {a) Is a fire and burglar-proof safe provided in which both books and documents may be kept ? (b) Does the chairman and the com* mittee keep a control book or duplicate of the day book ? 42. Are the following properly drawn up and kept : — (a) The lists showing date of maturity. Section 33 I. (b) The lists of debtors and sureties. Section 33 I. Does it appear therefrom that the same names occur on opposite sides of the account as debtors and sureties in such a way as to cause misgiving? 43. — (a) Have purchases for comm6n account been properly entered, and is the cash account of these transactions in order ? (b) Have arrears arisen therefrom and are they correctly stated ? If so, to what amount and in what years ? (c) Werie the funds of the associa- tion temporarily used for some other pur- pose? If so, what? 44. — (a) Were surplus funds depo- sited in proper time with the Central Bank ? Section 31 I. (b) Is the cross account with the same in order, and are the requisite vouchers to hand ? (c) Does the credit taken from the Central Bank appear secured, or what objections may be raised against the credit granted ? (b) and (c) Yes. (d) Strictly in agreement books as closed as under : — Eeceipts £252 8 Payments 222 10 with the 9 Balance in hand.. £29 18 9 (e) No occasion for explanation. (a) and (6) Yes. (a) A fire and thief -proof safe is not yet provided — one is on order and its arrival is daily expected. (6) The chairman of the committee keeps a duplicate of the day book. (a) and (6) Yes. The names of borrowers are not found to any serious extent as under- taking surety responsibilities for other borrowers. (a) Yes. (6) The arrears are correctly set out. These amount at this date to £4 18s. from 1903. (c) For the acquisition of titles of property-purchases. (a) and (&) Yes. (c) Absolutely no suspicion exists as to the solvency of the association on this head. SCHEME OF CREDIT OF RAIFFEISEN FEDERATION. 193 45. Is the association affiliated to the Central Loan Bank, or to what other co- operative banking institution? Does it maintain besides banking rela- tions with other banks or loan societies ? 46. When was the association founded and when affiliated to the National Union ? 47. What form of articles has the association, and what modifications has it made in them ? 48. — (a) Have the instructions result- ing from last year's audit been carried out? (h"^ Was the board of supervision pre- sent at his present audit? Section 19 1(4). _ (c) Was the report of audit commu- nicated to the, court of registry ? 49. What period did the audit cover reckoned from the date of foundation or from the last audit? 50. For what further remarks does this audit give occasion? Griinau, 3rd February, 1904. The association is affiliated to the Central Loan Bank and has no money dealings with any other bank. The association was founded on 8th September, 1903, and affiliated to the National Union 30th September, 1903. The new Bavarian Normal Articles without modification. (a) The present audit is the first. (b) Yes._ (c) It will be as soon as completed. The period from the foundation of the association (8th September, 1903) to the present date. None. Albert Osterkorn, Union Auditor. Secretary. Alois Schwarz. (The undersigned) certify that they have been made acquainted with the contents of the above minutes of audit. Board of Supervision. Joseph Hiller. Leo Jager. Heinrich Bauer. Karl Freund. Xaver Braun. JOHANN MaIER II . Joseph Merk. Kaspar Lang. Committee of Management. Matthias Holzl. Virgil Falk. August Jorg. Urban Schopf. Alfons Klein. SCHEME OF AUDIT OF THE ACCOUNTS OF THE RAIFFEISEN ASSOCIATIONS. (As Framed by the Raiffeisen Federation in 1908.) The principles of audit of the Raiffeisen Associations are as follows : — A. The Duties of Auditors are : 1. The inventory of the cash balances, stock of securities, and the balance of goods on hand. 2. The examination of the book-keeping as to its completeness and conformity with instructions. 3. The examination of the accounts and of the balance sheet with reference to extracts from the books and the annual statement. 4. Testing whether the recommendations made at the last audit have been carried out. 5. The examination of the lists of debtors and sureties. 6. Checking the debtor and creditor accounts by comparing selected items with the returned pass books. 194 SCHEME OF CREDIT OF RAIFFEISEN FEDERATION. 7. The examination of all accounts, with the personal collaboration of members of the administrative organs, viz. : — (a) The loan account in respect of — (1) the securities furnished; (2) the payments of instalments and interest. (&) Current accounts in respect of — (1) the securities furnished and the maintenance of the limits of credit to be granted; (2) the activity in the accounts; (3) whether the sums carried forward are correct after com- parison with both sides of the account, (c) The goods account in respect of — (1) the securities furnished and the maintenance of the limits of credit to be granted; (2) payments. 8. The testing of the liquidity of the society's funds. 9. Examining the conduct of the business and its agreement or otherwise with legal provisions and the articles of association, and also with the resolutions of the general meeting : {a) As regards committee of management — (1.) The holding of meetings and the due entry of resWutions in the minutes thereof. (2.) Dealings with the court registry. (3.) Granting of credits and maintenance of the limits of credit as laid down. (4.) Maintenance of the limits of borrowing by the society. (5.) Eeport on the audit by the Union and removal of the as of the goods in stock. (6.) Preparation of the balance sheet at the proper time and in the correct manner. {b) As regards the board of supervision — (1.) The holding of meetings and the due entry of resolutions in the minutes thereof. (2.) Supervision of the acts of the committee of management and of the secretary. (3.) Examination of outstanding claims. (4.) Examination of the statement of accounts and balance sheet. (5.) Report on the audit by the Union and removal of the deficiencies noted. (6.) Maintenance of the maximum credit limits. (7.) Approval of all grants of credit to members of the committee of management or to the secretary, as well as of the sureties offered in each such case. (c) As regards the general meetings — (1.) The summoning and holding of meetings according to regu- lations, and the due entry of resolutions in the minutes thereof. (2.) The elections to the organs of administration. (3.) The carrying out of alterations in the statutes in a regular manner. (4.) The fixing of limits for the taking up of loans and the granting of credit. (5.) Approval of the statement of accounts and the balance sheet, release of the committee of management and of the secretary from their liabilities in respect thereof, the taking of decisions as to appropriation of profits and losses. 10. The holding of a meeting in common with the organs of administration at the close of the audit; the discussion in detail of the results of the audit with the report of the audit before them. B. The Duties of the Unions are : — 1. Drawing up the reports of audits, preparation of letters of advice based on the results of audits, and supervising the observance and carrying out of such advice. FORMS FOR STATISTICAL RETURNS. 19-T 2. In grave cases to order a more frequent visitation of the co-operative society, and the drawing up of written reports on its position to the organs of administration. 3. In case of continued mismanagement of a co-operative society, to threaten it with expulsion from the Union and, in case of need, to make a motion for its expulsion before the competent organ of the Union. The audit of the books is, as is well known, made entry by entry. For a past business year for which the statements of accounts and balance sheet, with the appended vouchers, are already to hand, an alteration has been made to the effect that the entry-by-entry audit of the books may, at the discretion of the audit Union, be omitted; an exact audit of all vouchers must be retained as a matter of course. If the entry-by-entry audit of the books is omitted for the past business year, then the audit is to be extended to the following : — 1. Additions of the items in the day book. 2. Checking of all entries by the secretary in the books of payments and receipts. 3. Checking of the year's balance as shown by the day book. 4. Checking of the agreement of the abstract of accounts with the account books (previous and final balances and sum of the accounts). 5. Checking of the addition of the abstract of accounts. 6. Checking of the statement of accounts and balance sheet with the abstract of accounts and the statement of the year's working. FOEMS FOR STATISTICAL RETURNS (as used by Imperial Federation). A. Savings and Loan Banks. B. Agricultural Supply and Sale Societies. C. Dairy Co-operative Societies. D. Other Co-operative Societies. A. Savings and Loan Banks. 1. The seat of the society : 2. The name (title in full) : 3. The nature of the liability : 4. The year of foundation : 5. The number of members at the end of the year : 6. The total assets (exclusive of any deficit) at the end of the year : £ 7. The total liabilities (exclusive of net profits) at the end of the year : £ 8. Profits of the year (difference between (6) and (7) ) : £ , or 9. Losses of the year (difference between (7) and (6) ) : £ 10. Outstanding credits to members on current account at the end of the year : £ 11. Accounts outstanding with members for fixed term (on promissory notes, bonds, and other loans granted) at the end of the year : £ . Under this head : — (a) Credit granted on mortgage security : £ (6) Advances on real property transactions : £ 12. Deposits of members with the society on current account at the end of the year : £ 13. Savings deposits with the society at the end of the year : £ 14. Reserve fund and working reserve (special fund) at the end of the year : £ 15. Share capital (sums credited to members' accounts included) of the members at the end of the year : £ 16. Total capital proper {i.e., 14 -i- 15) at the end of the year : £ 17. Total turnover (incomings and outgoings together) : £ 18. Total amount of payments to members on current account during the year : £ 19. Total amount of loans for fixed term to members during the year (on promissory notes, bonds, &c.) : £ Under this head : — (a) Credit on mortgage security : £ (b) Advances on property transactions : £ 25574 2 I 196 FORMS FOR STATISTICAL RETURNS. 20. Total payments by members on current account in the year : £ 21. Total amount of repayments by members on loans for fixed term during the year : £ Under this head : — (a) Credits on mortgage security : £ (b) Advances on property transactions : £ 22. Total amount of savings deposits made during the year : £ 23. Establishment charges for the year — salaries, postage, allowances, travel- ling expenses and the like, but not including carriage of goods or dividends r £ 24. Value (purchase price) in the year of the agricultural requisites sup- plied by the society : £ 25. Liabilities arising out of engagements to collect bills : £ B. Agricultural Supply and Sale Societies. 1. Seat of the society : 2. Name (trading title in full) : 3. Nature of liability : 4. Year of foundation : 5. Number of members at the end of the year : 6. Total assets (exclusive of any deficit) at the end of the year : £ 7. Total liabilities (exclusive of net profits) at the end of the year : £ 8. Profits of the year (difference between 6 and 7) : £ ; or 9. Losses of the year (difference between 7 and 6) : £ 10. Reserve fund and working reserve (special fund) at the end of the year : £ 11. Share capital (paid-up share capital) of the members at the end of the year : £ 12. Total capital proper (that is, 10 + 11) at the end of the year : £ 13. Value (purchase price) of goods supplied during the year : £ ■ 14. Quantity of manures supplied during the year — in cwts. : 15. Quantity of feeding-stuffs supplied during the year — in cwts. : 16. Quantity of seeds supplied during the year — in cwts. : 17. Value (sale price) of the agricultural produce of members sold during the year : £ 18. Quantity of corn sold during the year : cwts. 19. Quantity of potatoes sold during the year : cwts. 20. Establishment charges for the year (salaries, , postages, allowances, travel- ling expenses, and the like, but exclusive of carriage of goods or dividends) : £ 21. Book value of the property (land, buildings, implements, tools, and of other live and dead stock, and supplies in hand) : £ C. Dairy Co-operative Societies. 1. Seat of the society : 2. Name (trading title in full) : 3. Nature of liability : 4. Year of foundation : 5. Number of members at end of the year : 6. Total assets (exclusive of any deficit) at the end of the year : £ 7. Total liabilities (exclusive of net profits) at the end of the year : £ 8. Profits of the year (difference between 6 and 7) : £ ; or 9. Losses of the year (difference between 7 and 6) : £ 10. Reserve fund and working reserve (special fund) at the end of the year : £, 11. Share capital (paid-up share capital) of the members at the end of the year : £ 12. Total capital proper (that is, 10 -i- 11) at the end of the year : £ 13. Number of cows (notified by) all members and persons delivering milk : 14. Are all branches of dairy work carried on, or are the operations limited ? Is any subsidiary business done ? 15. The quantity of milk delivered at the dairy during the year — in kilos, or litres. 16. Quantity of milk, sold (new milk) during the year — in kilos, or litres (1-76 pints) : • 17. Quantity of butter produced during the year — in kilofc (2'2 lbs.) : 60NTRiBUTI0NS TO CO-OPERATIVE UNIONS. 197 18. Quantity of new milk converted into cheese — in kilos, or litres : 19. Quantity of separated milk made into cheese or worked up as curds — in kilos, or litres. 20. The gross receipts of milk and dairy products during the year — {a) in case of the return of separated milk to members without payment ; (6) taking into account the value of the separated milk returned to members, at d. per litre. 21. Gross receipts as an average per kilo, or per litre of milk delivered. 22. Amount paid for the total milk in the year, inclusive of supplementary payments — {a) when the separated milk is returned free to the members ; (&) by adding the value of the separated milk at d. per kilo, or per litre. 23. The money yield of the milk per litre or per kilo : £ 24. Office and dairy expenses during the year, exclusive of cost of transport to dairy : £ . 25 Office and dairy expenses per litre or per kilo of milk : £ 26. Payments for delivery of milk at the dairy : £ 27. Written off under depreciation for the year : £ 28. Book value of the property ;(site, buildings, machines, implements, and other live and dead stock at the end of the year) : £ 29. Value (purchase price) of the agricultural raw materials supplied through the dairy for members : £ . D. Other Co-operative Societies. 1. The seat of the society : 2. Name (trading title in full) : 3. Nature of the liability : 4. The year of foundation : 5. Branch of activity of the co-operative society : 6. Number of members at the end of the year : 7. Total assets (exclusive of any deficit) at the end of the year : £ 8. Total liabilities (exclusive of net profits) at the end of the year : £ 9. Profits of the year (difference between 7 and 8) : £ 10. Losses of the year (difference between 8 and 7) : £ 11. Reserve fund and working reserve (special fund) at the end of the year : £ 12. Share capital (paid-up share capital) of members at the end of the year : £ 13. Total capital proper (that is, 11 -i- 12) at the end of the year : £ 14. Total turnover (incomings and outgoings together) : £ 15. Value (sale price) of goods sold by the Co-operative Society to or for their members : £ 16. Office expenses and expenses of working for the year : £ 17. Book value of property (land, buildings, implements, tools, and of live and dead stock, and goods in hand, belonging to the society at the end of the year : £ CONTRIBUTIONS OF AFFILIATED SOCIETIES TO UNIONS. (1) Pomeranian Union of Agricultural Co-operative Societies at Stettin. On 17 June, 1912, the General Meeting of the Pomeranian Union resolved as follows : — 1. To levy the following contributions from the affiliated co-operative societies : — {a) The Pomeranian Provincial Co-operative Bank, £375; the Pomeranian Agricultural Central Society, £375; the Pomeranian Spirit-Selling Society, £75; the Sale Union of North-German Dairies, £50; the Pomeranian Colonisation Company, £50. (6), Agricultural Sale and Supply Societies a fixed contribution of £5 plus a contribution of ^V P^r cent, on all transactions beyond £2,500, -^-Q per cent, on grain-selling business above £2,500 and 1 per cent, of net profits, with a maximum contribution of £150. {c) The contributions of the rural savings and loan banks to be composed of l\d. per £50 of total turnover plus 1 per cent, on the profits of the 25574 2 I 2 1.98 CONTRIBUTIONS TO C6-6pMftATlVE UNlONS. business (gross profit) with a combined minimum contribution of 15^. and a maximum of £7 10^. {d) Distilleries with an output of not more than 14,250 gals., £3 155. ; for every 190 gallons above this amount one shilling additional up to a maximum of £10. {e) Starch factories ^^ per cent, on the total turnover, with a minimum of £5 and a maximum of £25. (/) Societies of independent artisans (Handwerker) a fixed contribution of £1 10s. and aVP^^^ cent, on goods sold. (g) Building societies, £1 IO5. (h) Machine factories ^ per cent, on the goods sold, with a minimum of £5 and a maximum of £25. (z) The electric power stations of : Massow, £15 ; of Lottin and Schojow, £5 each ; and of Krussow, £2 10s. (k) Steam ploughing societies, £2 10s. (l) Limestone works, £5. (m) Cattle-selling societies, £2 10s. (n) Emery factory at Treptow a.E., £1 10s. (0) Inn society of Belgard, £1 10s. Ip) Horse-breeding societies and others not otherwise specified, 15s. (q) Stolper Bank, £15. 2. Co-operative societies founded in the course of a financial year, shall pay for that financial year, as well as for the next ensuing, only the fixed contribution; the same may, however, on application, be altogether remitted to individual societies for the first year by the committee of the Union in considera,tion of their business position, upon proposal made, and reduced for the same year. 3. The results of the working of the last financial year shall be taken for fixing the amount of the Union contributions for 1912. 4. Such co-operative societies and companies as cannot become members of the Union but have bound themselves to present to the competent court of registry that expert as auditor whom the Union shall decide upon, and fulfil the other duties incumbent on members — shall have the amount of their contribution fixed by the committee of the Union. By a resolution of the General Meeting on July 10, 1910, all co-operative societies are bound, upon the request of the director of the Union, to submit their business books to accou.ntancy audit at the book-examining office of the Union — unless such examination shall take place at the office of the local society. (By similar resolution of April 20, 1900, a charge for an accountancy examination of books at the office of the Union was fixed at 6s. per day of 8 hours, while for a like examination at the office of the local society a charge of 12s. per day, plus travelling expenses, was authorised.) (2) Union of Agricultural Societies in the Kingdom of Saxony. " The levy of the year's contribution of the co-operative societies of the Union shall be made on the following basis : — I. The Union contribution shall fall due in June in each year. II. Co-operative societies founded between 1st January and the. date of levy shall pay a contribution of 10s. III. Co-operative societies founded in the period between the last levy date ana 1st January of the current year shall pay a fixed annual contribu- tion, viz., 15s. ' IV. All other co-operative societies which do not appear in the last Union report — reckoned from the date of levy — shall pay £1. V. All co-operative societies which have published a balance sheet in the report of the past year shall pay 25s., provided a higher contribu- tion is not leviable on the basis of the following regulations : — 1. Loan and savings bank associations, 15s. fixed contribution with Is. additional for every £500 of turnover. 2. Savings, credit and supply associations contribute on the same basis as loan and savings bank associations. 3. Supply and sale co-operative societies, 15s. fixed contribution with M. additional for every £50 worth of goods supplied and for every £50 worth of agricultural produce sold. Goons SUPPLIED BY CENTRAL ORGANISATIONS. 199 4. Dairy co-operative societies, 155. fixed contribution and 6d. additional for every 2,200 gals, of milk delivered to the dairy. 5. Miscellaneous co-operative societies, 15^. fixed contribution with 6^. additional for every £50 of turnover. VI. All co-operative societies which hold a loan of State money exceeding £500 shall pay Is. additional for every £50 of such State money." (3) The Berlin Union of the Raiffeisen Federation. The societies affiliated to this Union pay contributions on the following basis :— 1. Savings and loan bank associations pay a fixed contribution of £1 and a supplementary amount of OlSd. for every £5 of turnover. 2. Dairy co-operative societies receiving ah annual supply of 165,000 gals, of milk pay 30*., with a supplement of 10s. for every further 55,000 gals., with a maximum of £5. 3. Threshing, horse-breeding, potato-meal manufacturing, distilling, cattle- selling, electricity selling, building societies, &c., pay 10s. Larger concerns pay up to £2, and very large concerns up to £5. AGRICULTURAL REQUIREMENTS SUPPLIED BY UNION ORGANISATIONS. Union of Agricultural Co-operative Societies of Wurtemberg (Registered Association). Depot. Agency for the supply of Agricultural Requirements. From repeated inquiries made by individual associations it appears that there is continual uncertainty as to the goods which can be supplied through our agency.. The following list of goods is therefore published : — 1. Artificial manures : — Basic slag, superphosphate, kainit, potash salts, saltpetre, ammonium sulphate, nitrate of lime, bone meal, lime, gypsum, &c., &c. 2. Feeding Stuffs :— All kinds of oil cake, maize, feeding meals, lime phosphate for feeding, &c., &c. 3. Peat dust and peat litter. 4. Coal, coke and briquettes. 5. Copper sulphate and sulphur. 6. Safes. 7. Agricultural machines of all kinds : — Ploughs, harrows, two-wheeled hoes, rollers, cultivators, dung distributors and drills, hay and corn mowers, hay-makers, horse rakes, swathe rakes, cattle-food and beet-root cutters, grist mills, oil-cake breakers, potato steamers, hand, horse and steam-threshing machines, traction engines, straw and hay presses, band and circular saws (port- able or fixed). Screens and winnowing machines, motors, liquid manure distributors, plant waterers, wine and fruit mills and presses (also hydraulic ditto). Fruit and vegetable desiccators, cattle — floor and bridge — weighing machines, portable bakeries, smoking stoves, windlasses, hay and corn stackers, &c., &c. 8. Dairy appliances and machinery : — Complete dairy installations, conversion of hand into power instal- lations, separators, milk and cream coolers, milk heaters, milk scales, skim milk separators, milk pumps, milk basins, measuring buckets, cans for milk conveyance, butter machines, butter workers, milk analysis apparatus, butter boxes and parchment paper, &c., &c. The depot is always in a position to supply goods of the best quality at the lowest prices with a full guarantee, and no one derives any profit whatever out of its business except the associations themselves, 25m 2 J. 3 200 GROSS UMSTADT BEET SU6AK FACTORY. The depot will not supply individuals, but only the co-operative societies, asso- ciations, communes, &c., which take up orders for their members and deal with the depot as personal purchasers. Stuttgart (Urbanstrasse 12), 15th December, 1909. GROSS UMSTADT SUGAR FACTORY. The Gross Umstadt factory, which cost about £70,000 for erection and equipment, has a capacity of about 500 tons per day. '(" Larger " factories are estimated to deal with 900 to 1,400 tons per day.) The total sugar output in the " campaign," which lasts from October to December, amounts to 100,000 centner sacks (a centner is 110 lbs., or nearly equal to a cwt.), representing the production of about seven times that weight of the beet-root used. At the Gross Umstadt factory there are about ninety men employed in the full season: many are agricultural labourers, others artisans and workers of various principal occupations. At the end of December only the mechanics and a few others are retained to overhaul the machinery and to clean thoroughly the whole works. The undertaking was organised in 1895 by the present director, then a teacher at the Gross Umstadt Agricultural School, as a co-operative society with limited liability, and its membership rose to 881 . But a crisis in 1901 serious affected the society, which was bound by agreements with its customers. A competing company was started close at hand, which by paying higher rates for the beet-roots, drew away the suplies of the society when the same prices were refused by the board of supervision. Two hundred members left, and the co-operative society went into liquidation. The factory was then bought by a number of the members, who formed a limited liability company with a capital of £30,000. The seceding members had, of course, to pay their share of the losses, and were not accepted as members of the new concern, not long after the formation of which the rival company went into liquidation. The members are bound to deliver all their beet-root, and must under- take to sow at least IJ acres with this crop. At the present time about 2,500 acres are devoted to its cultivation by the members. In the district about 12 tons net (that is, trimmed) is considered the normal yield per acre, but capable cultivators obtain up to and over 16 tons per acre. Many shareholders are small capitalists living in the neighbourhood. The director remarked that the undertaking was note- worthy as an instructive example of the inapplicability of the co-operative principle for undertakings requiring a large sunk capital as well as command of ready money for payment of wages and material. The Co-operative Societies Act allows members to withdraw with their share capital and its attendant liability, giving only a maxi- mum period of two years to the society to postpone the coming into effect of their notice to withdraw, but large undertakings such as a sugar factory, large dairies and combinations to secure threshing machines, where large capital is necessary, must be secure from such sudden withdrawals, and must be able to look ahead and calculate upon a fixed basis of capital. Payment in full is made on three days each week during the season, the prices being fixed by the board of supervision on the basis of the actual and probable future prices. The profits, after the payment of 4^ per cent, interest upon borrowed capital, are divided among the members who deliver beet- root. These payments vary between l^d, and 2^d. for each cwt. Non-members who deliver beet-root do not share in the profits. The bulk of the supplies comes from the neighbourhood, but some deliveries come from as great a distance as 40 miles. Upon arrival half a cwt. of roots are taken from a truck load (or corresponding quantity), and, after washing, the samples obtained from five to six roots, by means of a special sampling rod, are tested. The smaller roots are found to yield more sugar : the larger give 15 to 16, the smaller 17 per cent, of sugar. The factory disposes of the exhausted slices of beet-root, which are specially dried and made fit for sale, at 55. per cwt. They are used as feeding stuff, either alone, or with hay or straw, cotton-seed oil, or other oil foods for cattle. Four per cent, of the amount delivered is given without charge to the suppliers of roots. They are also at liberty to cart away the residue from the process' of clarifying the beet- juice, which contains a large proportion of lime, and forms a valuable dressing for the land* 20l EXTRACTS FROM STATUTES OE THE LAKD BANX* BERLIN. I. — General Regulations. Article 1.— The Joint Stock Company " Landbank " shall have its chief office in Berlin. The existence of the Company is not limited to a fixed period. Article 2. — The objects of the undertaking are : — (a) The acquirement and sale of real estate in the German Empire for its own account and the account of others. (6) The farming of property acquired as well as the erection and exploitation of any works of any kind soever thereon or the leasing of such property. (c) The formation, on its own real estate or that of others, of holdings subject to annuity payments and the settlement thereof. (d) Other business for the furtherance of agricultural interests. Article 3. — Real estate which is wholly or in part the property of members of the directorate or of the supervisory board of the company may not be acquired by the company. Article 4. — The notices of the Company shall be valid as the result of a single publication thereof in the " German Imperial Gazette," provided the law or these articles of association do not require more frequent publication. The company, however,_ reserves to itself the right, over and above the aforenamed notices, of publication in newspapers to be selected from time to time by the supervisory board, of which two shall be Berlin newspapers. The legal validity of such notices shall not, however, depend upon publication in these newspapers. The form of the notices shall be regulated by articles 16 and 17 of these articles of association according as the notices in each case are issued by the directorate or the board of supervision. II. — Capital. — Shares. — Bonds. Article 5. — The capital of the Company shall amount to £750,000 divided into 15,000 shares to holder of £50 nominal value. Article 6. — The capital of the Company may be increased to any amount by resolution of the General Meeting. Article 7. — In case of an increase of the capital the Supervisory Board shall decide — without prejudice to the provisions of the law — the price of issue, the term of payment, and the amount of the instalments, as well as other matters connected with the issue. Provisional receipts to holder shall be executed for the payments made; shares shall only be delivered on the completion of such payments. Should the required payments not be made in due time, 6 per cent, interest on arrears from the date on which the payment became due, together with a regulation fine of 10 per cent, of the outstanding amount, is to be levied. The regulation fine may be reduced or remitted by the supervisory board on reasonable grounds. The Directorate is authorised with the consent of the Supervisory Board and according to the provisions laid down in the Commercial Code — after claiming payments three times without effect — to declare the defaulting shareholders to have forfeited their rights to the allotment and to the sums already paid, in favour of the company. In place of the provisional receipts issued for the instalments paid, which latter shall be publicly announced by their numbers as annulled, new receipts shall be issued and disposed of to the best advantage. For any loss thereon the defaulting shareholder — or the predecessor in his rights — remains liable to the company. Any surplus on the sale above the amount of the payments in arrear shall fall to the reserve fund of the Company. Article 8. — The Company is authorised, on resolution of the Supervisory Board, to issue bonds. Such bonds shall be personal and to banker's order unless bearer bonds by special privilege are permitted. The nominal value of the bonds, the rate of interest, the details as to terms of maturity and amortisation, shall from time to * This Bank, which appears to be the only German commercial undertaking including as part of its regular business, the purchase and sale of landed estates for the purpose of division into small holdings on the annuity principle, was founded in 1895. At the close of 1911, when its share capital stood at £1,000,000 and its bond issue at the same figure, it had purchased for its own account 370 properties with a total of 600,000 acres, 559,500 acres of which it had already sold. In addition it had bought for others on commission 48,500 acres. It has five provincial branches, namely, at Stettin, Dantzig, Konigsberg, Breslau, and Hanover. The extracts here translated are taken from the statute? as issued in 1905. 36574 2 14 ^^'^ LAND BANK (STATUTES). time be settled, and made known by the Directorate subject to the approval of tke Supervisory Board. The calling in of the bonds requires the consent of the Supervisory Board. Article 9. — The set form of all shares and bonds, provisional receipts, dividend certificates and coupons, shall be determined by the Supervisory Board. This body may also decide that the necessary signatures shall be partially executed in facsimile. Article 10. — Publication of the loss or destruction of shares, bonds, or pro- visional receipts, shall be made as the law directs. After notice of annulment made in due legal manner fresh papers shall be executed at a charge to be fixed by the Supervisory Board. The expenses of the procedure shall fall not upon the Company but upon the shareholder. Should shares, bonds, provisional receipts, dividend certificates, coupons, or talons, become unfit for circulation in consequence of damage or defacement, pro- vided the essential contents and the distinguishing marks of the document can still be recognised with certainty, the person entitled may claim from the company the issue of fresh papers on surrendering those damaged or defaced. He must bear the expense thereof "and make payment in advance. With the exception of these cases, the execution and issue of new shares, pro- visional receipts or bonds in the place of others which have been damaged or lost, is only permissible when the nullity of the same has been announced in due legal form. Article 11. — The Company recognises one holder only of each share, bond, or provisional certificate, and has the right, but is not bound, to require the bearer of shares, bonds, provisional receipts, talons, coupons, or dividend certificates, to prove his right to them. Article 12. — By allotment or acquirement of shares or provisional certificates, the shareholder submits himself to the ordinary legal position of the Company in all disputes with the Company or the organs thereof. Article 13. — Dividend certificates on shares and the coupons of bonds are invalid if they are not presented for payment within four years reckoned by the 31st December of that year in which they fell due, and the amounts in question fall to the credit of the company. Mislaid or destroyed dividend certificates and coupons cannot be declared void by process of advertisement. If a dividend certificate or coupon be mislaid or destroyed, and the then holder have notified the loss to the company before the expiry of the four years presentation term, he may after expiry of the term demand payment from the company. The claim is excluded if the mislaid certificate or coupon is presented to the company for payment or the claim to the certificate or coupon is made good before a court of law, it may then be that the presentation or legal proof of the claim may be made after the expiry of the term. Right of claim lapses in four years. A formal legal announcement of damage to or loss of talons is not allowable. Fresh talons to a share or bond shall not be issued to the holder of the talons qualifying for the right to dividend certificates or talons, if the holder of the share or bond have objected thereto. The talons are in this case to be issued to the holder of the share or bond when he presents the said share or bond. Ill .■ — ^Administration. (a) Directorate {Committee of Management). Article 14. — The Directorate (committee of management) has all the rights and iuties which pertain to the committee of management of a limited liability company dnder the Commercial Code. Article 15. — The Directorate shall consist of two or more members nominated by the Supervisory Board. The nomination is made as a notarial document and must be published. The Supervisory Board may direct the necessary appointment of deputies for the members of the directorate, as well as the appointment of authorised substitutes or agents. The names of the deputies or authorised substitutes, whose nomination is to be drawn up in notarial form, must be published. (b) Supervisory Board. Artcile 17. — The Supervkory Board shall consist of at least eight, but of not more than fifteen members elected by the General Meeting. LAND BANK (STATUTES). 203 The election of the same shall take place, as a rule, at the ordinary General Meeting at an interval ending with the fourth ordinary General Meeting following the election. Two members at least shall retire annually in as far as possible regular succession. Until the order of retirement is arranged it shall be decided by lot. Retiring members are eligible for re-election. So long as as the number of members of the Supervisory Board stands at eight or more, a fresh or supplementary election need not be held. Article 18. — The members of the Supervisory Board receive no salary. They may be reimbursed expenses incurred in the execution of their duties and receive a commission under article 32 of these Statutes. The distribution of this amount to the members is governed by a regulation to be decided upon by the Supervisory Board. Article '212. — In addition to the general supervision of the business of the bank and other duties assigned by this Statute, the following matters appertain to the competence of the Supervisory Board (without prejudice to any legal enactments) : — 1. The appointment and dismissal of directors and officials to whom powers of attorney have been granted, as well as approval of same. 2. The approval of the annual salaries account as submitted by the Directorate, as well as the confirmation of the nomination of all officials receiving a salary of £150 and over, appointed for a period of over three years, or respecting whom a period of notice of over three months has been arranged, as also the grant of extraordinary remuneration, commis- sions or pensions to the directors or office officials. 3. The issue of instructions for the Directorate in which the rules for governing their common counsels and resolutions, the principles for the conduct of business, and the bases of monetary transactions shall be laid down, as well as of provisions concerning the acquisition and sale of real estate not exceeding £750 in value; the acquisition, sale, pledging, and cancellation of capital entered in the mortgage register ; 3lans for working and new works; and the execution of contracts. 4. To detail one or more members of the Board for special departments of their business, especially for audits; to appoint one or more sub-com- mittees out of its body, and to transfer by special proxy special businesses or categories of business to such committee or committees; to appoint to the directorate, out of its body, but only for a period determined before, a substitute for any member of the directorcite unable to act. 5. To acquire and dispose of real property exceeding £750 in value. 6. To examine the balance sheet and profit and loss accounts for submission to the General Meeting; to move the appropriation out of profits for special reserve and the dividend to be paid. 7. To dispose of the special reserve in accordance with section 34. Article 32. — Out of the net profits yielded shall be written : — • 1. Five per cent, to the legal reserve fund, so long as this shall not exceed 10 per cent, of the capital. 2. Further, such reserve monies as the Supervisory Board may propose, to the special reserve (article 34), or to other reserve funds still to be formed. 3. To a fund to be established by the Company for the grant of subsidies for supplementary expenditure in the settlement for distribution among the shareholders. 4. From any surplus still remaining : — (a) Four per cent, dividend to shareholders, (&) Ten per cent, of the balance to the Supervisory Board, (c) Any balance as supplementary dividend to shareholders. Payment of dividends shall be made at latest in the course of the July following the close of the financial year. Article 33. — The reserve fund to be formed under Article 32, Section 1, is to be solely devoted to the covering of any losses shown by the balance sheet. To it shall also be written such profit as may arise from an increase of the total capital by the issue of shares at above their nominal value. Article 34. — By resolution of the Supervisory Board extraordinary loss or expenditure may be debited to the special reserve formed in accordance with' Article 32. 204 BIBLIOGRAPHY. MOETGAGE CREDIT. Land Mortgage Credit Associations. Articles of association, valuation rules, reports or other publications of the Associa- tions in: Silesia; Brandenburg; Pomerania; West Prussia; East Prussia; Llineburg (Celle); Hanover-Hildesheim ; Posen; Saxony (Province of); West- phalia; Schleswig-Holstein; Wiirtemberg; Saxony (Leipzig and Dresden); and Bavaria. Hecht, F. : Die Landschaften und landschafts-ahnlichen Kreditinstitute in Deutsch- land. Vol. I. Leipzig. 1908. Gierke, O. : Das deutsche Genossenschaftsrecht : Rechtsgeschichte der deutschen Genossenschaft. Vol. I. Berlin. 1868. Weyermann, W. : Zur Geschichte des Immobiliar-Kreditwesens in Preussen. pp. 239. Carlsruhe. 1910. von Brlinneck, W. : Die Pfandbriefsysteme der preussischen Landschaften. pp. 344. Berlin. 1910. Mauer, H. : Das landschaftliches Kreditwesen Preussens agrargeschichtlich und volkswirtschaftlich betrachtet. pp. 206. Strassburg. 1907. Schulte, F. : Die deutschen Bodencreditinstitute, 1900-1909. pp. 43. Leipzig. 1911. St(ite, Promncial, and District Mortgage Credit Banks. The laws, statutes, rules, reports or other publications of the Banks for : Hanover, Rhine Province, Cassel Administrative District, Grand Duchy of Hesse, Saxe- Saxe-Meiningen, Saxe- Weimar, Saxe-Coburg-Gotha, and Bautzen (Kingdom of Saxony). Hecht, F. : Die Organisation des Bodenkredits : Die staatlichen und provinziellen Bodenkreditinstitute in Deutschland. 2 vols. 639 and 486 pp. Leipzig. 1891. Der Europaische Bodenkredit. pp. 452. Leipzig. 1900. Jahrbuch des europaischen Bodenkredits. Leipzig. 1909. Troch, E. : Die vpirtschaftliche Bedeutung der staatlichen und provinziellen Boden- kreditinstitute in Deutschland fiir den landlichen Besitz. pp. 152. Jena. 1905. Franken, C. : Der Staat und die Hypothekenbanken in Preussen. Leipzig. 1904. Schulte, F. : Die deutschen Bodenkreditinstitute, 1900-1909. pp. 43. Leipzig. 1911. Joint Stock Mortgage Banks. Imperial Mortgage Bank Act. 1899. Company agreements, valuation rules, reports or other publications of : Preussische Zentral Bodenkredit- Aktiengesellschaft (Berlin^ ; Bayerische Hypotheken-und Wechselbank (Munich); Bayerische Handelsoank (Munich); Siiddeutsche Bodenkreditbank (Munich); Aktiengesellschaft fur Boden und Kommunal- kredit (Strassburg); Pfalzische Hypothekenbank (Ludwigshaf en) ; and Rheinische Hypothekenbank (Mannheim). Hecht, F. : Die Organisation des Bodenkredits in Deutschland : Die Hypotheken- banken. Vol. VI. •Berlin. 1901. Schulte, F. : Die deutschen Bodenkreditinstitute. See above. BIBLIOGRAPHY. 205 Savings Banks. Prussian Regulations : Bavarian, Saxon, Hessian, and Alsace-Lorraine Laws. Statutes and rules of numerous banks as well as model statutes authorised for various Prussian provinces. Die Sparkasse. Organ of the German Savings Banks' Union. (Twice monthly.) Der deutsche Sparkassenkalendar. Die preussischen Sparkassen im Rechungsjahre, 1909. G. Evert. Berlin. 1911. Getting : Der Geschaftsverkehr der offentlichen Sparkassen. pp. 48. Hanover. Miiller, G. : Handbuch fiir die sachsischen. Sparkassen. pp. 209. Leipzig. 1908. von. Knebel-Doberitz, H. : Das Sparkassenwesen in Preussen. pp. 228. Berlin. 1907. Credit for Land Improvement and Prussian Provincial Aid Banks. Laws in Prussia, Bavaria, Saxony, Hesse, and Oldenburg. Statutes of Silesian Land Improvement Annuity Bank. Wesche, G. : Die Organisation des Meliorationskredits im Deutschen Reiche. pp. 461. Halle. 1907. Heiligenstadt, G., and Kautz : Landlicher Meliorations und Baukredit im Deutschen Reiche. pp. 232. Berlin. 1907. von Haag : Bayerische Landeskulturrentenanstalt. pp. 205. Munich. 1911. Rent Charge Banks. Die preussischen Rentengutgesetze und Bestimmungen. Insurance Institutions . Heiligenstadt, C., and Kautz : Bau-und Meliorations Credit in Deutschen Reiche. pp. 232. Berlin. 1907. Kapp : Report to the Meeting of the East Prussian Mortgage Credit Association in 1910. AGRICULTURAL CO-OPERATION. Official. Mitteilungen zur deutschen Genossenschaftsstatistik. Annual. Prussian Statistical Office. Die preussische Central Genossenschaftskasse von 1895-1905. Festschrift, pp. 150. 1906. Berlin. Die preussische Central Genossenschaftskasse. Annual reports. Die Massnahmen auf dem Gebiete der landwirtschaftlichen Verwaltung in Bayern. Denkschrift. pp. 485. Munich. 1905. Geschaftsbericht des Grossherzoglich Badischen Ministerium des Innern. 1897- 1903. Vol. II., pp. 620. Carlsruhe. 1905. Die Landwirtschaft und die Landwirtschaftspflege in Wiirtemberg. Denkschrift. pp. 591. Stuttgart. 1908. Publications of Federations, Unions, and Central Business Organisations. Imperial Federation : Jahrbiicher. 1895-1912. Die Festschrift zum 25 jahrigen Bestehen des Reichsverbandes. 1883-1908. pp. 306. ,. Taschenbuch fiir landwirtschaftlichen Genossenschaften. pp. 557. 1910. Die deutsche landwirtschaftliche Genossenshaftspresse. (Twice monthly.) Deutsche landwirtschaftliche Genossenschafts-bibliothek. (20 volumes.) Model articles and rules for all kinds of co-operative societies : collection of rules for court transactions. Raiffeisen Federation : Jahresberichte. 1900-1912. Das landwirtschaftliches Genossenschaftsblatt. (Twice monthly.) Raiffeisen Kalender. (Annual.) Raiffeisen-Bibliothek. (17 volumes.) 203 BIBLIOGRAPHY. Raiffeisen Federation — continued. Model articles and rules for all kinds of Societies. Handbook for Conduct of Business of Raiffeisen Savings and Loan Bank Asso- ciations. 9tli Edition. Neuwied. 1906. Wuttig, A. : F. W. Raiffeisen. pp. 84. Neuwied. 1907. Schulze-Delitzsch Federation : Jahrbiicner. 1892-1912. Blatter ftir Genossenschaftswesen. (Weekly.) Unions : Bavarian National Union : Instruktionsbuch f iir die dem bayerischen Landesverbande angeschlossen Genossenschaften. 2 vols. 3 Ed. 1907. Westphalian Union : Quabeck, A. : Handbuch fiir die Spar- und Darlehnskassen-vereine im Verbande landlicher Genossenschaften der Provinz Westphalen. pp. 445. 2 Ed. Munster. 1906. Treves Union : Faust, R. : Anleitung zur Verwaltung von Spar- und Darlehnskassen- vereine. pp. 421. Treves. 1910. Model Articles and Rules for various societies issued by the Unions at Bonn, Carlsruhe, Darmstadt, Dresden, Freiburg^in-Breisgau, Halle, Hanover, Kiel, Regensburg, Stettin, Stuttgart, and Treves. Central Banks and Central Trading Organisations : Articles, rules of business, and annual reports of some twenty organisations of these two classes. Books. Gierke, 0. : Das deutsche Genossenschaftsrecht. 3 vols. Berlin. 1868-1881. Verein fiir Socialpolitik : Der Wucher auf dem Lande. pp. 354. Leipzig. 1887. Zeidler : Geschichte des deutschen Genossenschaftswesens der Neuzeit. pp. 478. Leipzig. 1893. Verein fiir Socialpolitik : Der Personalkredit des landlichen Kleingrundbesitzes in Deutschland. 2 vols. pp. 414 and 456. Leipzig. 1896. Heiligenstadt, C. :Die Preussische Central Genossenschaftskasse. pp. 102. Jena. 1897. Ertl, M., and Licht, S. : Das landwirtschaftliche Genossenschaftswesen in Deutsch- land. pp.989. Vienna. 1899. Miiller, F. : Die Geschichtliche Entwickelung des landwirtschaftlichen Genossen- schaftswesens in Deutschland von 1848 bis zur Gegenwart. pp. 552. Leipzig. 1901. Fassbender, M. : F. W. Raiffeisen in seinem Leben, Denken, und Wirken. pp. 285. Berlin. 1902. Criiger, H. : Vorschuss- und Kreditvereine als Volksbanken. 7. Ed. pp. 426. Berlin. 1904. Leonhard, R : Komhauser und Getreidehandel. pp. 201. Munich. 1906. Sochting : Das landwirtschaftliche Genossenschaftswesen in der Provinz Sachsen. pp. 341. Halle. 1906. Hugenberg, A. : Bank und Kreditwirtschaft des deutschen Mittelstandes. pp. 121. Munich. 1906. Criiger, H. : Einfuhrung in das deutsche Genossenschaftswesen. pp. 397. Berlin. 1907. Zimmermann, K. : Die " Bank Przemyslowc6w " in Posen. pp. 148. Posen. 1907. Grabein, M. : Wirtschaftliche und sociale Bedeutung der landlichen Genossen- schaften in Deutschland. pp. 195. Tiibingen. 1908. Lindecke, 0. : Das Genossenschaftswesen in Deutschland. pp. 144. Leipzig. 1908. Sohnrey, H. : Wegweiser ftir landliche Wohlfahrts- und Heimatspflege. 3. Ed. pp. 494. Berlin. 1909, btfeLIOGftAPHY. 207 I'lnck, II. : Das Schulze-Delitzsch Genossenschaftswesen und die modernen genossenschaftlichen Entwickelungstendenzen. pp. 368. Jena. 1909. Bussen, F. : Landwirtschaftliches Genossenschaftswesen. pp. 136. Hanover. 1909. Bernhard, L. : Das polnische Gemeinwesen im preussischen Staat. 2. Edit. pp. 620. Leipzig. 1910. Sparr, K. : Das landwirtschaftliche Genossenschaftswesen in der Provinz Pommern pp. 200. Stettin. 1911. Wygodzinski, W. : Das Genossenschaftswesen in Deutschland. pp. 284. Berlin 1911. Schonitz, H. : Der Kleingewerbliche Kredit in Deutschland. pp. 542. Carlsruhe. 1912. Parisins und Criiger, H. : Das Reichgesetz, betreffend die Erwerbs-und Wirtschaft? genossenschaften. Berlin. 1911. LIVE STOCK INSURANCE. Imperial Laws : Gesetz iiber die privaten Versicherungsuntersichmungen. 1901. Gesetz iiber den Versicherungsvertrag. 1908. Viehseuchengesetz. 1909. State Laws : Bavaria : Viehversicherungsgesetz. 1896 (as finally amended in 1912). Pferdeversicherungsgesetz. 1900 (as finally amended in 1910). Baden : Viehversicherungsgesetz. 1890 (as finally aimended in 1910). Saxony : Gesetze, die staattiche Schlachtviehversicherung betreffend, 1898 and 1906. Model statutes adopted by organisations in various parts of Germany. Rules of the Prussian Saxon Re- Insurance Union. Festschrift der bayerischen offentlichen Landesanstalten flir Brand, Ilagel, und Viehversicherung. Munich. 1906. Die Landwirtschaft in Wiirtemberg. Stuttgart. 1908. Reports of the Bavarian and Baden local organisations over a period of years. Ehrlich, H. : Die Viehversicherung im Deutschen Reiche. 560 pp. Leipzig. 1901. Manes, A. : Versicherungslexikon. 2 vols. Tubingen. 1909. Das Versicherungswesen. pp. 146. Leipzig. 1911. Moldenhauer, P. : Das Versicherungswesen. pp. 151. Leipzig. 1905. Luck, G. : Die Viehversicherung in Siiddeutschland. pp. 164. Tubingen. 1908. GENERAL WORKS OF REFERENCE. Handworterbuch der Staatswissenschaften. 8 vols. Jena. 1909-10. Worterbuch der Volkswirtschaft. 2 vols. Jena. 1911. Meitzen, G. : Der Boden und die landwirtschaftlichen Verhaltnisse des preussischen Staats. 6 vols. Berlin. 1868-1906. Roscher, W. : Nationaloekonomik des Ackerbaues. 13. Edition, by H. Dade. pp. 864. Stuttgart. 1903. Buchenberger, A. : Agrarwesen und Agrarpolitik. 2 vols. (pp. 615 and 641). Leipzig. 1892-93. von der Goltz, T. : Agrarwesen und Agrarpolitik : 2. Edition, pp. 330. Jena. 1904. Hecht, M. : Die Badische Landwirtschaft am Aufang des XX Jahrhunderts. pp. 262. Carlsruhe. 1903. Kautsky, K. : Die Agrarf rage, pp.451. Stuttgart. 1899. David, E. : Sozialismus und Landwirtschaft. Vol. 1. Die Betriebsfrage. pp. 703. Berlin. 1903. Bankenquete Kommission, 1908/9. 3 vols, (especially volume : Materialien zur Frage des Depositenwesens. pp. 304). Berlin. 1910. Riesser, J. : Die deutschen Grossbanken und ihre Konzentration in Zusammenhang mit der Entwickelung der Gesamtwirtschaft in Deutschland. 3. Ed. 715 pp. Berlin. 1910. 208 feifeLioGfeAPfit Greneral Work of Reference — continued. Statistiche Jahrbiicher for : The German Empire, Prussia, Bavaria, Saxony, Hesse, Baden, Wurtemberg, Alsace-Lorraine . WORKS IN ENGLISH. Nicholson, Sir Frederick A. : Report regarding the possibility of introducing Land and Agricultural Banks into the Madras Presidency. 2 vols. (pp. 408 and 291). Madras. 1895-1897. Smith, Herbert G. : The best methods of organisation for Agricultural CoK)pera- tion and Credit, pp. 102. Dublin. 1903. Montgomery, H. de F. : Notes on Agricultural Co-operation and Co-operative Agricultural Credit in Germany, pp. 108. Dublin. 1906. United States National Monetary Commission : Miscellaneous Articles on German Banking, pp. 478. Washington. 1910. Interviews on the Banking and Currency Systems of England, Scotland, France, Germany, Switzerland and Italy, pp. 541. Washington. 1910. International Institute of Agriculture : Monographs on Agricultural Co-operation in various countries. Rome. 1911. Fay, C. R. : Co-operation at Home and Abroad, pp. 403. London. 1908. Plunkett, Sir Horace : Ireland in the New Century. London. 1905. Pratt, E. A. : The Organisation of Agriculture, pp. 443. London. 1905. The Transition in Agriculture, pp. 340. London. 1906. Russell, G. W. : Co-operation and Nationality, pp. 104. Dublin. 1912. Wolff, H.W.: People's Banks : A Record of Social and Economic Success, pp. 587. 3rd Edition. London. 1910. Co-operative Banking, pp. 301. London. 1907. Co-operation in Agriculture, pp. 378. London. 1912. 21Q GERMANY, Area : 211,273 square miles. Population December 1,1910 : 64,925,993. Density per square mile : 307 • 3. Occupations according to Occupational Census of June, 1907. Agriculture Manufactures Commerce Domestic Service . . Public Services . Percentage of Number. Occupied Population 9,883,257 36-8 11,256,254 41-9 3,477,626 13-0 471,695 1-8 1,738,530 6-5 26,827,362 100-0 Agricultural Holdings,* 1907. Holdings. Number. Percentage. Acreage. Percentage. Under IJ acres li acres to 5 acres 5 „ tol2i„ m „ to 50 „ 50 „ to 250 „ 250 „ to 500 „ 500 „ and over 2,084,060 1,294,449 1,006,277 1,065,539 262,191 10,679 12,887 36-3 22-6 17-5 18-6 4-6 0-2 0-2 1,547,665 4,682,340 10,766,053 34,421,302 31,557,527 5,604,145 19,187,183 1-4 4-3 10-0 32-0 29-3 5-2 17-8 5,736,082 100-0 107,766,215 100-0 * Taken from Landwirtschaftliclie Betriebestatistik, Part 2b, published by the Imperial Statistical OfHce, 1912. EAST oMehlsack \ P R U S S I 1.. /' Insterbupg^ V \ REFERENCE. 100 Miles Showing Percentage of total eultivated area oaeupied by Holdings of 50 Aeres and under. Where 70°/^ and over 60°U to 69-9 50°U „ 59-9 40% „ 49-9 399 SO"!, under 29' 9" U OrUnarux- Sufyey; Sou±haJnptoiL,JB13. GERMAN EMPIRE N EMPIRE EAST i P R U S S I A ■ l-^. / Insterbupg^ ) V \ ^ \ ^ St. <^ REFERENCE. 20 Scale of English Miles 20 40 60 80 100 Miles Showing Percentage of total cultivated area occupied by Holdings of 50 Acres and under. Where 70°!^ and over 60°U to 69-9 50°L „ 59-9 40°k ., 49-9 30"!^ „ 39-9 under 29-9°U Ordnance Survey. Souihajnptoit.,J323. GERMAN EMPIRE ^ V ^ A^-v;^"' Friedbepgj o Co r' / ^•~ -'' Wiesbaden o cv:-v, — -~- ^ \_y^-x • • Trankf upt Mayenee \ CO • o Dafmstadt UJ s '^ /--'■•. ^- LudwigshafencRManjjKeim Neustaft C ^,. . ^■—■^ oWurzbupg A f. \ \ / s B A o Nuremberg V A R V I A o Stuttgart ( ^ r^W URTEMBER d'^"' maping^n / < \ °j ® Gponenbaoh 20 VIPIRE S.-uih,n.-.nt--,. I'Ji'i. 211 INDEX. A. Page Abattoirs 206 Agrarian League, the 101-102, 162 Agricultural Central Co-operative Banks {Table) 136 Agricultural Central Loan Bank : Administration 145 Branches 145 Capital 145 Company, Agreement of App. 149 Development of (TaftZe) 146-147 Head Office 145 Management 145 Present position 145 Raiifeisen founds 134,144,244 Supervision, Board of 145 Unions, contributions to ... ... ... 236 Working capital 145 {Gf. also " Central Loan Bank.") Agricultural Co-operation 161 et seq, {Gf. " Breeding Societies," " Cattle Selling Societies," " Corn Selling or Granary Societies," "Dairy Societies," "Distill- ing Societies," " Egg-selling Societies," "Electricity Societies," "Fruit-growing and Fruit-disposal Societies," "Land Improvement Societies," " Land Pur- chase and Settlement Societies," " Ma- chine Societies," "Pasture Societies," "Potato -Drying Societies," "Supply Societies," " Water-Supply Societies.") Agricultural Co-operation and Public Aid : Co-operative organisations, attitude of ... 266 Nature and extent of, in : Alsace-Lorraine 272 Baden 270 Bavaria ... ... ■.- ••• ... 270 Brandenburg 267 Hanover 268 Hesse-Cassel 269 Hesse, Grand Duchy of 272 Hesse-Nassau 269 Pomerania... ... ... ••■ .•• 268 Posen 269 Prussia 267 Prussia, East 269 Prussia, West 269 Prussian Saicony 268 Rhine Province 269 Saxony, Kingdom of 272 Schleswig-Holstein 268 Silesia 269 Westphalia 268 Wurtemburg 271 State, the early attitude o^towards ... 266 State, the, recent action o^towards ... 266 Agricultural Co-operative Societies : Contributions to Unions 234 et seq. Agricultural Co-operative Societies of Saxony and adjacent States, Union of. Constitution of 157 Agricultural Credit 1 et seq. Agricultural electricity societies ... 218 et seq. Agricultural holdings, the Bavarian Central Bank and •• 149 Agricultural loans by Prussian Joint Stock Mortgage Bank ... •.■33 Agricultural machine societies •-• iM-iiii^ Agricultural personal credit 71 Agricultural produce, sale of, by Central supply organisations 1'" 25574 Page Agricultural produce, sale of, by credit societies 69 Agricultural requisites, Dr. Rabe's experience on sale of 197 Agricultural requisites, supplied by a central trading organisation ... ... App. 199 Agricultural requisites, supply society for, in Arheilgen 104 Agricultural requisites, trading in, by credit societies ... ... ... ... &% et seq. Agricultural Societies, Congress of ... 218, 238 Agricultural supply societies... ... 1^1 et seq. Agricultural Supply and Sale Societies, model articles and rules of association App. 163 et seq. Agricultural Supply and Sale Societies, forms for statistical returns for... App. 196 Agriculturists, German, large consumption of electric light and power by 218 Agriculturists, German, sources of credit for 72 Aid banks, Prussian provincial 55 et seq., 157 Alsace-Lorraine, cattle insurance in ... 302" Alsace-Lorraine, co-operative Unions and State aid 271 Alsace-Lorraine, State aid in ... 227, 272, 291 Altenburg Bank, the ... ... ... ... 19 Anklam, branch of the Pomeranian Central Co-operative Bank at ... ... ... 155 Anklam, cattle-selling society of ... . . 213 Anklam Supply and Sale Society, the ... 214 Apolda Co-operative Dairy Society 190 Arheilgen and rural credit ... 77 Arheilgen, co-operative societies in... ... 104 Arheilgen Savings and Loan Bank, special account of its working 102 Arheilgen Threshing-machine Society, notes on the 104,225 Audit, administrative 253 Audit and inspection App. 249 et seq. Audit contributions of co-operative societies 234 Audit departments 254 Audit report, specimen of App. 187 Audit, scheme of -A-pp. 193 Auditing Unions 230,251 Auerbach Savings and Loan Bank, ac- count of ... 104 Augsburg Agricultural Credit Association : Affiliated to the Schulze-Delitzsch Federa- tion 105 Agents for 106 Area, extended ... ... ... ... 105 Deposits 107 Interest 107 Loans 106 Management, Committee of 105 Membership 105,107 Proiats 107 Austria-Hungary, mortgage banks in ... 20 B. Baden-Baden, Congress of International League at 249 Baden, cattle insurance in : Cattle Insurance Union, operations of {Table) 300 Communal institutions 300 Communal institutions, union of 300 2 K 212 INDEX. Page Baden, cattle insurance in — cont. Insurance undertakings, private, number of (Table) 301 State scheme of insurance 299 Baden Central Bank, Regulations of App. 161 Baden, co-operation and State aid in 270 et seq. Baden, co-operative corn selling in 202 Baden Credit Union, the ...~ 69 Baden, Eggenstein Savings Bank, the first of its kind in... 113,271 Baden Government, Agreement of, with Rhenish Joint Stock Mortgage Bank App. 92 Baden Peasants' Association, the 202 Baden, State aid for granaries ... 193, 202 Baden, State aid in 291 Baden, the first village bank in (see " Eggen- stein Savings and Loan Bank Associa- tion "). Baden Union of Credit Societies, levy by ... 236 Baden Union, the ( r« We) 101-102 Baden Union, the, Agreement with Rhenish Mortgage Bank App. 160 Bank, Prussian Central Co-operative 273 et seq. Banks, Central co-operative ... 133 et seq., 275 Central co-operative banks within the Imperial Federation (T^afiZe) .... 142,143 (Gf. also "Banks, Central, co-operative.") Banks, co-operative rural (see " Co-operative Banks, Local "). Banks, District Mortgage Credit ... 18 et seq. Banks for Land Improvement (see "Land Improvement Banks ") 51 Banks, Joint Stock Mortgage ... 30 e^ seq. Banks, Prussian Provincial Aid (see " Prus- sian Provincial Aid Banks ") 55 et seq., 157 Banks, Rent-charge 58-61 Banks, Urban ... ... ... ... ... 72 Basic slag, purchase of 173,241 Bavaria, cattle-selling societies in ... ... 211 Bavaria, Cattle Insurance Institution in : Administration of cattle insurance institu- tions in 294 Animals, disposal of 297 Arbitration, Board of 295,297 Banking business of Institution 295 Benefits of 296 Compensation 295, 296, 297 Horse insurance 298 Horse Insurance Institution, the ... 298, 299 Insurance 296 Insurance payments 296 Local Societies for 295, 297, 299 Membership of societies, rules ... ... 295 Model articles of 295 Notification 296 Privileges 295 Representation of societies 295 Slaughter insurance 292,297 Societies connected with, number of (Table) 298 State action, results of 297,298 State grants 294,298 State organisation of cattle insurance ... 294 Veterinary assistance 296 Bavaria, co-operation and State aid in 270 et seq. Bavaria, co-operative corn-selling in ... 198 Centralisation of granaries in 200 Cereals, sale of (Table) 200 Development of, exceptional 198 Granaries, number of (Table) 199 Payment for cereals, method of 199 Shares of societies 199 State aid for 198-199 Success of Bavarian co-operative corn- selling 200 Bavaria, corn selling societies in #.. ... 198 Bavaria, distribution of property in ... 198 Page Bavaria, liability of rural credit societies in (Table) 81 Bavaria, public savings banks in 41 Bavaria, small holdings in (Table) 198 Bavaria, State aid for breeding societies ... 227 Bavarian Agricultural Bank, the 5 Bavarian Agricultural Bank, loans granted by 11 Bavarian Agricultural Bank, State aid to ... 270 Bavarian Agricultural Mortgage Bank, arti- cles of Association of -A-Pp. 60 Bavarian Agricultural Council, the 212 Bavarian Central Bank, the : Banking department, position of 149 Corn department 149 Credit allotment 148 Foundation of 147 Land Department, position of 149 Loans and deposits 148 Management, Committee of ... ... 148 Membership of 147 Share liability 148 Shares ., ... 148 Social welfare, measures for 147 State aid 148,207,291 Supply department 149 Bavarian Central Co-operative Bank, the ... 74 Bavarian co-operative corn selling, the success of 200 Bavarian granaries, development of (Table) 200 Bavarian granaries, State aid for 193, 198-199 Bavarian granaries, Union of 200 Bavarian Land Improvement Bank, the ... 53 Bavarian Savings Bank Regulations (extract) App. 81 Bavarian Union, the, activities of ... ... 232 Bavarian Union, the, and its societies ... 236 Bavarian Union, the, model articles of ...69, 70 Bavarian Union, State aid towards 270 Bavarian Union, the, specimen bonds of App. 142, 143 Bavarian Union, the, sub-unions of .. . ... 229 Beet sugar factory, a, notes on a vist to App. 200 Benefit funds instituted by the Imperial Federation 242 Bergen, the Cattle-selling Society of, notes on 212 Bergenheim, granary at 201 Berlin, area covered by land mortgage credit associations in 2 Berlin, butter auctions in 192 Berlin, Butter-selling Union in 193 Berlin, Central Cattle-selling OfBce and Store Cattle Market in 273 Berlin, Central Cattle-selling Society, the 207, 209, 211-267 Berlin, Central Co-operative Cattle-selling Society, the 209-210 Berlin Exchange, rates of interest (Table) ... 286 Berlin, head ofBce of the Agricultural Central Loan Bank... ... ... ... ... 145 Berlin, headquarters of General Federation 267 Berlin, headquarteraj)f Central Cattle-selling Society ... * 267 Berlin, Land Bank at, extracts from statute of App. 201 Berlin, seat of the Prussian State Central Co- operative Bank ... ... ... ... 278 Berlin, seat of the Raiffeisen Federation ... 247 Berlin Store Cattle Market, the, State aids for 210 Berlin Unions, rates of contributions for societies 235 Bonn Union, the, and its dairy expert ... 233 "Book "banks 135,152,155,157,158 Brandenburg Cattle-selling Society, the, State aid for 267 Brandenburg, co-operation and public aid ... 267 Breeding societies 226 INDEX. 213 Page Breslau Butter-selling Union, the 193 Breslau, co-operative corn selling at ... 198 Breslau, the first mortgage credit association loan bank founded at 16 Breslau, the Silesian Raiffeisen Union at 76, 198 Breslau Unions, audit-fee for 235 Bretleben Savings and Loan Bank, account of 107-108 Brockhausen, Herr von. President of the Pomeranian Union of Agricultural Societies 195 Brotzingen Rural Credit Association, notes on a visit to 108-109 Brunswick, the first savings bank founded at 40 " Buchkassen " (see " Book " Banks) 135, 152, 155, 157, 158 Budapest, International League Congress at 248 Bulgaria, mortgage banks in 20 Butter 180,185 Grabeiu, Dr., on dairy-made 180 Butter auctions in Berlin ... ... ... 192 Butter-selling Unions 193 C. Calves mainly dealt in by cattle-selling societies ... ... ... ... ... 207 Carlsruhe, Union of egg societies at ... 216 Cassel Bank, the 275 Oassel, Mortgage Credit Bank for the Ad- ministrative District of ... ... ...28-30 Outstanding loans ... ... ... ... 28 Cassel Union, the ... ... ... ... 196 Cassel (Raiffeisen) Union, the social activities of 232 Cattle, advantages to small -holders of ... 205 Cattle, breeding and maintenance of ... 181 Cattle-breeding societies 226,227 Cattle Insurance Institution, Public, in Bavaria 294 Cattle, Insurance of (see "Live Stock Insurance") 222 et seq. Cattle insurance societies, number of ... 292 Cattle-selling Societies : Anklam 213, 214 211 209 212 207 207 Bavarian ... Berlin Central Co-operative Society, the. Bergen Breeding-cattle rarely handled by Calves chiefly dealt in by Cattle- and pig-breeding, advantages to small-holders of -.• 205 Central depots for sale of cattle 206 Centralisation 209 Conditions suitable for such societies ... 209 Germany, East 211 Germany, the present co-operative move- naent in ■ ... ... ... .•• ••■ 206 Hanoverian -•• 210 Insurance of animals 209 Janowitz ... •.• ... ... ••• 213 Managers of : remuneration 209 Market conditions, present 205 Meat production and consumption . . . 204 Meat production, importance of small- holders in 205 Meat production of large and small holders 204 Meat production of large and small holders — Table of cattle and pigs owned ... ... ••• -•■ ••• 205 Model rules of App. 168 e^ seg. Operations, area of 207 Payment, methods of : direct purchase . . . 207 Payment, methods of : sale on commission 208 Pigs, breeding of 204 25574 Page 207 211 211 210 205 207 213 205 207 212 267 213 " Bavarian . . . 147 et seq. " Hanove- 150 et seq. Cattle-selling Societies — cont. Pigs chiefly dealt in by Pomeranian ... Prussian, Eastern Prussian organisations, business done by Raiffeisen banks and cattle purchases Sales to or through society Schivelbein Shares and liability 207,210 Slaughter-houses, co-operative, failure of 206 Small-holders, advantages to, of cattle and pig-breeding Societies, number of Societies visited, notes on ... State grants to Stolp Central Bank for Bavaria (see Central Bank") Central Bank of Hanover (see rian Central Bank) Central Bank of Pomerania (see " Pomer- anian Central Co-operative Bank ") 152 et seq. Central Co-operative Bank of Halle, the 157 et seq. Central Co-operative banks founded by Raiflieisen 134, 144, 275 Central Co-operative Banks (see " Banks, Central Co-operative "). Central Loan Bank, the ... 134, 144-147, 161, 236, 244, 275, 279, 284, 286, 288, 289, 290. (Gf. also " Agricultural Central Loan Bank" and " Co-operative Banks.") Central Mortgage Credit Association, the ... 4 Central supply associations attached to the Imperial Federation (Table) Central supply organisations affiliated to the Imperial Federation (Table) .., Central supply organisations, sale of agri- cultural produce by Central supply organisations, shares, Table regarding ... Central supply societies, membership of (Table) 174-175 Centrifugal milk separator, discovery of the 179 Chambers of Agriculture in Prussia, Notes on ... ... ... ... ... 266 et seq. Cheese-making (see " Dairy Societies") 185 et seq. Cheques and bills, efforts of Hanoverian Bank to popularise ... ... ... 152 Coblence Union of co-operative societies, audit fee for 235 Coethen Savings and Loan Bank, unusual features of, as a rural credit society ... 110 Collective liability 80 Common Pasture Societies ... ... 227-228 Co-operation and electricity ... ... 218 et seq. Co-operative agricultural supply societies 161 et seq. Co-operative audit and inspection : Actual position of ... ... ... ... 251 Advantages of 252 Agencies for : Auditors appointed by the Court ... 252 Authorised unions ... ... ... 252 Audit, meaning of 250 Audit, notice of 255 Audit of co-operative central organisations 259 Audit of societies, frequency of 254 Audit, two principal conceptions of ... 253 Auditing, importance of 259 Auditing the main business of Unions ... 249 Auditors, experts as ... 258 Auditors, previous experience of 258 Auditors, remuneration of... ... ... 259 Conceptions governing ... ... ... 253 Confidential reports 256 Co-operative organisations, advantages of audit by 252 Cost of 257 2 K 2 177 178 179 176 214 INDEX. Page Co-operative audit and inspection. — cont. Experts as auditors 258 Frequency of audit of societies 254 History of 250 Inefficiency of appointees by Court ... 252 I.egal provisions respecting 251 Meaning of 250 Means of enforcing compliance with re- commendations of Unions ... -■- 257 Notice of audit 255 Number of audits (annual) by single officials 257 Official view of nature of audit 252 Prussian Ministry for Home Affairs and 252 Raifteisen organisations, reports of 255, 256 Results of 256 Surprise audils 255 Time occupied in 254,255 Unions, liability of, regarding 257 Unions, means of enforcing compliance with recommendations of ... ... 257 Co-operative Banks, Central : Agricultural Loan Bank for Germany ... 144 Audit of 259 Banking relations, exclusive 189 Banks outside Imperial Federation ... 136 Banks within Imperial Federation ... 136 Bavarian Central Bank ... ... ... 147 " Book " banks ... 135, 152, 155, 157, 158 Business done 140 Credit for fixed periods 139 Current account 139 First beginnings of 133 Function of ... 133 Halle Central Co-operative Bank 157 Hanoverian Central Co-operative Bank 150, 153 Interest, rates of (Table) 141 Interest, rates of, on deposits and loans ... 140 Legal form of 135 Liability, how far excessive 138 Loans, form and extent of 139 Management, cost of 144 Membership 137 Number and membership of, present ... 134 Organisation of ... ... ... ... 134 Payments to, and deposits by, affiliated societies ... ... ... ... ... 140 Pomeranian Co-operative Central Bank . . . 152 Position of ( Tables) 136, 142-143 Profits 144 Shares and liability 137 Shares, liability attached to 138 Working capital 139 (Of. Appendix for documents re Central Banks.) Co-operative Banks, Local : Achievements of, notable 70-71 Advantages of such societies as savings banks 78 Advantages of undertaking supply business 69 Administration, organs of : Board of Supervision 96-98 Committee of Management 91-96 General Meetings 98-99 Age of the movement 63 Agricultural holdings (Table) 86 Agricultural personal credit 71 Agricultural produce, sale of, by 69 Agricultural requisites, trading in, by ... 68 Agriculturists, German, other sources of credit for ... •.. ■•• ••• ■•• 72 Arheilgen Savings and Loan Bank ... 102 Auerbach Savings and Loan Bank ... 104 Augsburg Agricultural Credit Association 105 Baden Credit Union, model articles ... 69 Banks, rural, as credit institutions ... 71 Bavarian National Union, model auiicles of 69, 70 Bretleben Savings and Loan Bank ... 107 Co-operative Banks, Local — cont. Brotzingen Rural Credit Association Coethen Savings and Loan Bank... Collective liability as credit basis... Cosel Advance Association Cheapness of rural co-operative credit . Ciurent account business Current account, repayment of loans on. Dealers Page 108 110 80 111 76 77 77 72 Deposits, amount of savings ... 78,79 Deposits, interest paid on 79 Deposits, safety of 78 Eggenstein Savings and Loan Bank Associ- ation 113 Elxleben Savings and Loan Bank Associ- ation ... ... ... ... ... 115 Entrance fees ... ... ... ... 89 Establishment periods of (Table) 64 Fischenich Savings and Loan Bank Associ- ation , 116 Functions of 68 Geographical distribution of ... ... 63 German Agricultural Co-operative Con- gress, resolutions as to membership, &c. 65, 66 German credit societies, general view of position of (T^afife) 101 Griesheim Savings and Loan Bank ... 119 Gross Umstadt Savings and Loan Bank ... 123 Gross- Urleben Savings and Loan Bank ... 120 Guxhagen Savings and Loan Bank Associ- ation 122 Hambach Savings and Loan Bank Associ- ation 124 Hanoverian Union, report on ... ... 71 Imperial Federation and 83, 89, 90, 91, 93, 95, 97, 99, 100, 101 Importance of 63 Increase in number of ... ... ... 63 Increased need for visible capital ... 80 Land purchase by ... ... ... ... 74 Land, transfer mortgage loans in connec- tion with ... ... ... .. ... 73 Liability 81 Liability, duration of, in case of past members 83 Liability, form of : adaptability to English conditions... ... ... 86 Liability, limited 81,82 Liability, limited, in Pomerania 85 Liability, limited, in Saxony 84 Liability, unlimited ... ... ... 81 Liability, unlimited, contributory ... 82 Liability, unlimited, little danger from ... 83 Liability, unlimited, versus liability, limited 83 Loan, form of ... 75 Loan, no statutory limit to amount of ... 74 Loan, object of 75. Loan, period of 75 Loans, amount of 74 Loans, fresh, relation of repayments to ... 76 Loans, interest charged for ... ... 76 Loans, mortgage, in connection with land transfer 73 Loans, outstanding (yafefe) 74 Loans, repayment of 75 Membership 64 Membership, average ... 65 Membership, conditions of 65 Membership in various districts, differ- ences in 66 Membership, range of (Table) 65,66 Mortgage loans in connection with land transfer 73 Mortgage security 73 Mortgage transactions 73 .Nieder-Weisel Savings and Loan Bank ... 125 Operation, area of ... ... ... ... 66 INDEX. 215 Page Co-operative Banks, Local — cont. Operations, area of, object of limitation of 67 Polish co-operative credit banks {Table) 101 Pomeranian Credit Societies : Table of savings deposit accounts ... 79 Pomeranian Union, achievements of ... 71 Progress and present position of societies 99 Public Savings Banks 39-50,72 Eaiffeisen Federation, model articles of 68, 88, 89, 90, 97, App. 108 Eaiffeisen Federation, returns ... 70, 79, 80 Rakow Savings and Loan Bank 128 Reserves ... 90 Rinkerode Savings and Loan Bank ... 126 Rural banks as credit institutions ... 71 Rural banks, functions of 68 Savings banks, advantages as 78 Savings boxes 77 Savings cards 77 Savings deposits, amount of 78 Schifferstadt Loan Society 130 Shares 87 Shares, actual payments effected ... ... 89 Shares, nominal or par value of . . . ... 87 Shai'es, nominal value of {Table)... ... 88 Shares, tendency to raise value of ... 88 Sinzheim Savings and Loan Bank ... 129 Social activities, general ... ... ... 69 Social activities, achievements by societies 70 Thrift, stimulation of .. 77 Trading in agricultural requisites ... 68 Urban banks ... ... ... 72 Urban co-operative societies ... ... 72 Wallhausen Savings and Loan Bank ... 131 Westphalian credit societies : Table of savings deposit accounts... ... ... 79 Westphalian Union, model articles ... 69 Working capital ... ... ... ... 87 Working capital, provision of ... ... 73 Wurtemberg Union, model articles ... 69 Zemitz Savings and Loan Bank ... ... 132 {Gf. Appendix for documents re Local Societies " Co-operative Banks, Central.") Co-operative banks, rural {see " Co-operative Banks, Local ") &'d et seq. Co-operative cattle-selling societies ... 204 et seq. Co-operative Corn-Selling or granary societies 193 et seq. Co-operative Credit and the State {see " Prussian Central Co-operative Bank "). Co-operative Dairy Societies : Centralisation 192-193,230 Local ... ." 179-192 Unions of 192-193,230 {See also " Dairy Societies.") Co-operative egg-selling societies {see " Egg- selling societies ") 214: et seq. Co-operative electricity 218 et seq. Co-operative federations {see "Federations of Co-operative Societies "). Co-operative land purchase 228 Co-operative Legislation : History of : Accounts, audit of ... ... ... 261 Central Co-operative societies, forma- tion of 261 Committee of management ... ... 260 Co-operative society, definition of ... 260 Dealings with non-members 261 Foundation Fund 261 Liability of members, realisation of ... 260 Limited liability, recognition of ... 260 Membership of societies 261 Raiffeisen founds co-operative society 261 Schulze-Delitzsch and 260, 261 35574 Page Co-operative Legislation — cont. History of^cont. Shares 261 {See also "Co-operative Legislation, Present position of.") Present position of : Audit 264 Bankruptcy, procedure in case of ... 265 Dissolution of societies ... ... ... 265 General meeting of members ... ... 264 Management of co-operative societies . . . 264 Membership ... ... ... ... 263 Publicity : 265 Registered and unregistered societies ... 262 Registered co-operative societies, three recognised types of ... ... ... 262 Registration ... ... ... ... 263 Registration, pre-requisites for .. . ... 263 Reserves 264 Shares 264 {See also " Co-operative Legislation, History of.") Co-operative machine societies ... 222 et seq. Co-operative movement, the, and Public aid 2&%etseq. {Gf. " Agricultural Co-operation and Public aid.") Co-operative milk-selling {see " Dairy Societies" and "Milk.") Co-operative mortgage credit association loan banks ... ... ... ... let seq. {See also " Mortgage credit associations. Land.") Co-operative newspapers ... ...123,125,231 Co-operative officials, special courses of instruction for ... ... ... ... 232 Co-operative purchase, advantages of ... 162 Co-operative slaughter-houses, failure of ... 206 Co-operative societies and the purchase of agricultural machinery ... ... ... 222 Co-operative societies (Central; with limited liability {Table) 136 Co-operative societies, combinations of : Audit and inspection {cf. " Co-operative Audit and Inspection ")... ... 24'^ et seq. Centralisation versus decentralisation ... 229 Early groups... ... ... ... ... 229 Federations : Imperial Federation {cf. " Imperial Federation of German Agricultural Societies") 2ii6 et seq. International League {cf. " International League of Co-operative Societies") 248 et seq. Raiffeisen Federation {cf. "Raiffeisen Federation of Rural Co-operative -Societies") 244: et seq. Haas, Herr, and ... 68, 229, 234, 236, 237, 244, 245, 249 Present groups ... ... ... ... 229 Raiffeisen and 66, 68, 80, 83, 87, 90, 133, 134, 138, 144, 146, 165, 205, 229, 231, 237, 244, 245, 261, 267, 274, 275, 278. Schulze-Delitzsch and 83, 144, 229, 250, 260, 261, 266, 274, 275 Unions {cf. " Co-operative Societies, Unions") 230 et seq. Vast majority organised 228 Co-operative societies, land purchase by ... 74 Co-operative societies. Public aid to... 266 et seq. Co-operative societies, forms for statistical returns App. 197 Co-operative societies. Unions : Administrative organs of ... ... ... 232 Audit contributions... ... ... ... 234 Audit contributions of credit societies : Baden 236 Bavaria ... ... ... ... ... 236 Berlin 235 2 K ,S 216 INDEX. Page Co-operative Societies, Unions — cont. Audit contributions of credit societies — cont. Breslau 235 Coblence 235 Dantzig ... ... ... ... ... 235 Hanover 235 Pomerania 235 Posen 235 Saxony 235,236 Westphalia 235 Wiirtemberg 236 Committee of Management 233 Contributions : Annual 234 Audit 234 From Public sources 236 Levied upon individual affiliated societies 234 To Unions by Central organisations ... .236 Co-operative officials, courses of instruc- tion for ... 232 District Councils 233 Income, miscellaneous sources of... ... 233 Income, sources of „. 234 Independence of affiliated societies ... 231 Legal provisions affecting audit of ... 230 Legal status of 230 Management, committee of ... ... 232 Membership, conditions of 232 Number of 230 Objects of 231 Officials of 233 Operations, area of ... ... ... ... 230 Overlapping of 233, 240, 241 Raififeisen Federation, objects of ... 231,246 Registration of 230 Social activities of 228-229,240-241, 247-248. Sub-Unions 233 Summary of their work ... ... 228-229 {Gf. also " Federations of Co-operative Societies.") Co-operative societies with limited liability {Table) 136. Co-operative supply societies ... ... l&l et seq. Co-operative threshing machine society at Arheilgen 104 Co-operative union banks and the State Bank 284, 285 Co-operative Unions, Government and other grants to 267 Corn and potatoes, sales of 171, 179 Corn department of the Bavarian Central Bank 149 Corn-selling or Granary Societies : Agricultural requisites, sale of, by ... 203 Centralisation of 200,202 Co-operative movement, advantages of ... 194 Co-operative societies : Baden 202 Bavarian 198-201 Halle Granary Society 197 Hesso-Cassel .. 196 Nordhausen 196, 197 Pomeranian 194-196 Prussia , = . ... 194 Saxony 196, 197 Silesia 197 Wiirtemberg 201 Corn, compulsory delivery of 203 Corn sold, quantity and value of 203 General results 204 German corn trade, decentralisation of ... 194 German granaries, general results ... 204 Grabein, Dr., on co-operative corn-selling 204 Membership ... ... ••• ■•■ ... 193 Number of « ... 193 Payment, methods of 203 Page Corn-selling or Granary Societies — cont. State action 193 State-built granaries 196 Steinbrlick, Prof., on State granaries ... 204 Cosel Advance Association : Credit and caution-credit 112 Established on Schulze-Delitzsch prin- ciples Ill Landholding members a special feature of Ill Membership, classification of Ill Mortgages 112 Operations, area of Ill Cosel, public savings bank in 113 Cow clubs 294 Cows (c/. " Dairy Societies ") ... 11% et seq Cream depots ... ... ... ... .. 182 Credit Associations, Land Mortgage (see " Mortgage Credit Associations, Land ") 1 et seq. Credit Associations, Mortgage, table of ... 2-3 Credit Banks, Mortgage 18-25 Cassel, District of 28 Hanover Provincial 25 Nassau District 26 Credit for Land improvement {see "Land improvement. Credit for") ... 50 e< seq. Credit societies and agricultural requisites 68 et seq. Credit societies in Pomerania ...74, 79, 94, 96 Credit societies, forms for statistical returns App. 195 Cruger, Dr., on Auditing 252 D. Dairies, co-operative, centralisation of .,. 192 Dairies, co-operative, types of 181 Dairy co-operative society, model rules of App. 168 Dairy societies. Co-operative, Unions of 192, 193, 230 Dairy Societies (Local) : Advantages of co-operative dairying, especially as regards : Better prices 180 Better produce 180 Equipment 180 Income, a source of steady ... ... 181 Influence on breeding and maintenance of stock 181 Milk, economy of 181 Saving of time in marketing 180 Saving of time on the farm 180 Ancillary businesses 185 Apolda Co-operative Dairy Society, the... 190 Assets and liabilities 190 Bye-industries recommended 186 Co-operative dairies, taxation of 187 Co-operative dairies, types of 181 Cows, number of, per dairy 188 Financial results 188 Gross - Umstadt Co - operative Dairy Society 191 Growth, causes of 179 Growth of societies within the Imperial Federation 187 Liability {Table) 183 Liability, forms adopted 183 Management, expenses of 189 Membership {Table) 183 Milk, delivery of, at dairy 185 Milk, methods of payment for 185 Milk, prices paid to suppliers 188 Milk, regular tests of 185 Milk, sale of fresh 186 INDEX. 217 Dairy Societies (Local)— oont. Milk-selling societies Milk supplied to dairies Movement, extent of Number and average membership Ostheim Co-operative Dairy Society Paid-up share capital Position of societies within the Imperial Page 186 187 179 187 191 189 187-190 establishment 184 188 184,189 189 128 188 183, 184 ... 181 App. 196 ... 182 ... 189 133, 192 180 267 230 21 239 235 269 72 225 226 Federation Preliminary requisites for of dairy society ... Profit and Loss {Table) Reserves Reserves, total (Table) Rinkerode Sales by societies Bharea (Table) State aid for Statistical returns, forms for Territorial distribution of (Table) Working capital Zemitz Dairy Society Dairy-made butter Dairy societies, co-operative, State grant to Dairy union in Oldenberg Darmstadt, mortgage credit banks at Darmstadt, the present seat of the Imperial Federation... Dantzig Union of Co-operative Societies ... Dantzig Union, the. State grant to Dealers ... Distilling Societies Distilling Societies, allied branches of Distributive Co - operative Society at Arheilgen ... ... ... ... ... 104 District Mortgage Credit Banks (see " Mort- gage Credit Banks ") IS et seq. Drilling machines 222 E. East Prussia and agricultural supply societies 161 East Prussia co-operative societies and State aid 269 East Prussian Mortgage Credit Association, loans on small properties ... ... 10 Eastern Prussia, cattle-selling societies in ... 211 Educational influences of co-operative supply societies 164 Educational work effected by agricultural central supply societies 173 Eggenstein, cattle insurance association in... 115 Eggenstein, co-operative retail store in ... 115 Eggenstein, horse insurance association in... 115 Eggenstein Savings and Loan Bank Associa- tion : Deposits 115 First Baden society 113,271 Foundation of 113 Loans... ... ••• ... ••• ••• 115 Notes on a visit to ... ... ... ... 114 Original members subscribed no shares... 113 Progress of society (J'a We) 114 Egg-selling societies : Centralisation of ... ... ... ... 216 Co-operation, advantages of 214 Egg market, importance of ... ... 214 Eggs, collection of ... ... ... ... 215 Eggs, payment for ... ... ... ... 215 Market problem, the 215 Model rules App. 176 Objects of 214 Operations, area and method of ... ... 21-1: Shares 214 Title 214 Visselhovede Society, the 217 Electric ploughs Electricity Societies : Agriculturists and the electric light and power Capital, sources of ... Electricity, many uses of ... Extension of... Farmers, advantages to Farmers, cost to German agriculturists, large consumption of electricity by ... Germany, use of electricity in Groups of, three main Installation, cost of, to members ... Liability of ... Membership of Pomerania and the spread of electricity Public furtherance of Rabe, Dr., on... Rapid spread of Saxony and such undertakings Societies : three groups of... Supply, other sources of ... Supply societies (Table) ... Threshing machines Works societies (Taft'e) Page 218 218 220 218 218 218 220 218 222 219 221 220 219 221 221, 222 ... 218 ... 218 ... 221 ... 219 ... 219 ... 219 ... 2)8 ... 219 Erfurt Union, the ■ ... 74,230,233 Elxleben Savings and Loan Bank Society... 115 Banking business of ... ... ... 116 Property, purchase of, by ... ... ... 116 Farmers and electrically-driven machinery Cost to farmers Dr. Rabe cited Federations of Co-operative Societies : Imperial Federation of German Agri- cultural Co-operative Societies ... 236 e< International League of Agricultural Co-operative Societies ... ... 248 et Raiffeisen Federation of Rural Co- operative Societies ... ... 244 ei Feeding-stuffs and the agricultural supply societies Feeding-stuffs for cattle ... Fertilisers supplied by agricultural supply societies Fire insurance, societies for ... Fischenich Savings and Loan Bank Effect of, on the general economic condition of the village Foundation of Lectures on economic and agricultural subjects Legal Protection Commission, the Property, purchase of, by ... Social welfare, noteworthy measures of ... Freiburg-in-Breisgau, granary at Fruit-growing and Fruit-disposal societies... 218 220 218 seq. 161 225 161 17 116 118 117 118 117 118 117 202 226 Wettruf Society, the 416-217 26674 G. Geldkasse 157,158 "General Commissions" ... ... ... 59 (Cf. " Rent-charge Banks.") General Federation of German Agricultural Co-operative Societies, the 237 Gerber test for milk, the ... ... ... 185 German Agricultural Co-operative Congress, the 65,66 German Agricultural Co-operative Societies, Association of 236,237 German Agricultural Co-operative Societies, General Federation of (see " Imperial Federation") 2'i6etseq. 2 K4 218 INDEX. Page German Agricultural Society, the 162 German agriculturists : their use of elegtricity 218 German Central Co-operative Banks, Totals for 1911 (2^a&Ze) 142,143 German Co-operative Bank, the 275 German Co-operative Credit Societies, Table showing nominal value of shares ... 88 German co-operative dairy societies, value of shares of . . . ... ... ... . . ■ 184 German Co-operative Societies Act ... App. 2 German cnrn-trade, decentralisation of ... 194 German Empire, number of rural credit societies in {Tables) ... 64, 65, 66, 67, 81 German Empire, number of savings' banks in 41 German Imperial bank rate in 1910... ... 141 German Rural Credit Banks, general view of position of (I'a&te) 101,102 German Savings Banks : Brandenburg, Prussian Province of, Table of loans on rural mortgages ... ... 47 Collecting agencies 41 Deposits, minimum and maximum ... 42 German Empire, number in ... ... 41 History of 40 Importance of, to farmers ... ... ... 39 Interest on deposits and investments ... 43 Kinds of : Prussia 40 Legislation concerning ... ... ... 42 Loan on mortgage security, limits of ... 46 Loans on reducible mortgages ... ... 45 Loans to co-operative societies ... ... 49 Mortgage loans, amount of 47 Mortgage loans, conditions for ... ... 44 Other States 41 Persona] credit 48 Prussian Savings Banks, Tables concerning 41, 43, 44, 46, 49, 50 Regulations respecting small holdings ... 47 Restriction of area for mortgage invest- ments ... ... •-. 48 Their importance to farmers as suppliers of credit 39 German States, mortgage banks in 19 Germany, Agricultural Central Loan Bank for 14Aetseq. Germany and its meat supply ... ... 204 Germany, annual imports of eggs 214 Germany, East (see " East Germany "). Germany, electricity in' ... ... ... 222 Germany, Insurance Companies in ... ... 62 Germany, Joint Stock Mortgage Banks in 30 et seq. Germany, Land Mortgage Credit Associations in 1-17 Germany, Mortgage Credit Banks in 18-30 Germany, the Land Improvement Annuity Banks 53 GSttingen, unregistered electricity societies in 220 Grabein, Dr 84, 95, 163, 180, 204 Granary Societies, Co-operative (see " Corn- selling or Granary Societies ") ... 193 et seq. Granary societies and railway rates... ... 270 Griesheim and rural credit 77 Griesheim Savings and Loan Bank, account of 119 Gross-Umstadt Co-operative Dairy 191 Gross-Umstadfc Savings and Loan Banks, notes on a visit to ... ... ... 123 Gross-Umstadt sugar factory, notes on a visit to App. 200 Gross-Umstadt Supply Society 171 Gross-Urleben Savings and Loan Bank : Account of ■m ••• 120 Property, purchase of ... ... ... 121 Page Guxhagen Savings and Loan Bank Associa- tion 122 Agricultural necessaries, sale of 123 Inception of ... ... ... ... ... 122 Social welfare; measures for 123 H. Haas, Herr ... 68, 229, 234, 236, 237, 242, 245, 249 Halle, Central Agricultural Co-operative Supply Society' of 157 Halle Central Co-operative Bank : Administration ... ... ... ... 159 Co-operative with limited liability ... 157 Credit assessment 157 Current accounts, opening and conduct of 159 Deposits, interest and commission on ... 158 Loan capital and deposits 159 Loans, interest and commission on ... 158 Loans, regulations regarding 158 Management, cost of 160 Present position 160 Profits 160 Public aid 157 Share liability 157 Halle Granary Society, the ... ... ... 197 Dr. Rabe on the non-success of 197 Halle, the electrical department in ... ... 221 Halle Union, the, and credit societies ... 85 Halle Union, the, and limited liability ... 157 Halle Union, the, permanent officials of ... 233 Halle Union, the, model rules for agricul- tural supply and sale society ... App. 165 Halle Union, the, model rules for co-opera- tive dairy society... ... ... App. 171 Hambach Savings and Loan Bank Associa- tion, special account of its working 124-125 Hanover, area covered by land mortgage associations in 2 Hanover, cattle-selling societies in ... ... 210 Hanover, egg-selling societies in ... 214, 216 Hanover, electricity societies in ... ... 219 Hanover Provincial Mortgage Credit Bank, the 25 Management ... ... ... ... ... 26 Outstanding loans 26 Hanover, Royal Agricultural Society of ... 150 Hanover, sign-plates for rural credit societies in App. 135 Hanover Union, contributions to 235 Hanoverian Central Bank : Business of the ... ... ... ... 150 Commission 151 Deposits, interest on 151 Development of the (2V<&tes) ... 152,153 History of 150 Liability 150 Loans, interest on 151 Management... ... ... ... ... 152 Membership 150 Public aid 150 Share value 150 State Co-operative Central Bank, relations with ... ... ... ... ... 151 Hanoverian Chamber of Agriculture, rules for egg-selling society App. 176 Hanoverian co-operative societies and State aid 268 Hanoverian egg-selling societies ... 214,216 Hanoverian Union, the, and social welfare. Hanoverian Union, the, model rules for cattle-selling society ... ... App. Hanoverian Union, the, specimen bond issued by -A-PP- Hesse, Grand Duchy of, cattle insurance in Hesse, co-operation and State aid in 71 173 142 301 272 INDBX. 219 Page Hesse, dealers and borrowers in 72 Hesse, establishment of a Land Improvement Bank in ... ... ... .. ... 54 Hesse, Raiffeisen founds central bank in 134, 144 'Hesse, the State Credit Bank 54 Hesse Cassel co-operative unions. State aid to 269 Hesse-Cassel, corn-selling societies in ... 196 Hesse Land Improvement Bank 54 Hesse-Nassau and its State grants 369 Hessian Public Mortgage Bank, the ...21, 30 Hessian State Mortgage Bank Act, 1902 App. 31 Hessian State Mortgage Bank, Articles of Association of App. 63 Hessian Union of Agricultural Supply Societies, the 236 Hoers (see " Machine Societies") ... 232 et seq. Holiday hostels, co-operative 242 Home savings banks 103,119 Horse-breeding societies, State grants to ... 267 Horse Insurance Institution of Bavaria, the 298 Horse insurance societies 298, 301, 302 Imperial Bank, the 275 Imperial Bank, rates of interest (Tables) 153, 286 Imperial Co-operative Societies Act, 1889- 1896 App. 2 Imperial Federation of German Agricultural Co-operative Societies, the : Activities — Auditor for central organisations ... 241 Basic slag, purchase of ... ... 173,241 Benefit funds 242 Hostels 242 Insurance ... ... ... ... ... 242 Lectures 241 Machine const ruction ... ... ... 241 Machinery, purchase of 241 Potash salts, purchase of ..." ... 241 Publications 240 Special courses (lectures, etc.) ... ... 241 Training school for officials ... ... 240 Administration, Council of ... ... 239 Articles of Association ... ... App. 179 Committees, general ... ... ... 238 Committees, special 239 Composition of ... ... ... ... 238 Congress, the 238 Development of (Table) 237 General position and work of 239 Haas, Herr, and ... 68, 229, 234, 236, 237, 242, 245, 249. Income, sources of ... ... ... ... 242 Legal status of 238 Members, rights and duties of 238 Membership, conditions of 238 Membership of (TaSZe) 243-244 Model Articles App. 94, 163 Model Service Instructions and Business Rules for Credit Societies ... App. 120 Objects of 238 Organs of 238 President and vice-presidents of 239 Raiffeisen organisation and ...234, 236, 239 (Gf. also " Raiffeisen organisations.") Seat of Federation 239 Societies affiliated to 236-237, 242, 243, 244 Unions in, number of 237,242-244 Work of 239 Imperial Federation (cf. also 63, 65, 66, 68, 73, 81, 83, 89, 90, 91, 93, 95, 97, 99, 100, 101, 102, 134, 135, 136, 137. 138, 140, 141, 142-3, 151, 161, 162-163, 166, 167, 168, 170, 174, 175, 176, 177, 178, 179, 182, 186, 187, 188, 192, 202-3, 204, 206, 231, 247, 259, 267, 287, 288 Page Imperial Mortgage Bank Act, 1899 ... App. 23 Insurance, fire .. ... ... ... .. 17 Insurance Institutions and Agricultural Credit : Insurance Companies, Private .- Loans 62 Mortgages, urban and rural ... ... 62 Rules, special ... ... ... ... 62 State Invalidity Insurance Institutions •• Funds, investment of ... ... ... 61 Interest, rate of ... ... ... ... 61 Loans, conditions for ... ... ... 61 Mortgage loans, total 62 Insurance, life ... ... ... ... ... 17 Insurance of animals (cf. also " Live Stock Insurance") 209 Insurance, the Imperial Federation and ... 242 International Co-operative Alliance, the ... 248 International League of Agricultural Co- operative Societies, the ... ... ... 229 Congresses 249 History of 248 Membership of * ... 249 Object of 249 J. Janowitz, Cattle-selling Society of ... ... 213 Johannsen, Director of Hanoverian Union 268 Joint Stock Mortgage Banks 30 e^ seq. K. Kiel, egg-selling in 216 Kiel Union, the, its permanent jfBcials ... 233 Konigsberg Agricultural Union and its State grant 266 Kur and Neumark Credit Institute ... 1, 6, 16 L. Land Bank, Berlin, Extracts from statutes of App. 301 Land Credit Institution for Oldenburg ... 55 Land department of the Bavarian Central Bank ■•• 149 Land for common pasture societies ... ... 227 Land Improvement Annuity Banks App. 32 Land Improvement Banks 51,54 Bavarian Act, general provisions of ... 54 Bavarian Land Improvement Bank ... 53 Credit for. Nature of 50 Hesse Land Improvement Bank 54 Nature of credit for... ... ... ,., 50 Oldenburg, Land Credit Institution for ... 55 Prussian Land Improvement Banks ... 51 Interest and Sinking Fund 52 Loans ... ... ... ... ... 52 Loans, supervision of ... ... ... 53 Objects 51 Privileges of 52 Procedure on part of borrower 52 Security required... ... ... ... 53 Prussian Land Improvement Funds ... 50 Results of 55 Saxony, Land Improvement Annuity Bank of 53 Special institutions existing for ... ... 50 Land improvement societies ... ... ... 228 Land improvement societies. State grants to 267 Land mortgage credit associations (see " Mortgage Credit Associations, Land ") 1-17 220 TNDBX. Page Land mortgage credit associations, 'Table of 3, 3 Land Purchase and Settlement Societies ... 228 Land purchase by co-operative societies ... 74 Landschaften (see " Land Mortgage Credit Associations") 1 ei seg-., App. 41 Land transfer, mortgage loans in connection ■with ... ... ... ... ... 73 Lectures given by Imperial Federation ... 241 Legal advice and the RaifiEeisen Federation 248 Liability, collective 80,81 Liability, limited, meaning of 82 Liability, limited, the Halle Union and ... 157 Liability, limited, the Pomeranian Union and 157 Liability of rural credit societies. Table showing 81 Liability, unlimited contributory 82 Life insurance ... ... ... ... ... 17 Live Stock Insurance : Agencies 292 Alsace-IiOrraine, organisations in... ... 302 Baden, Private insurance undertakings in 301 Baden, 'State scheme of insurance ... 299 Bavaria, Cattle insurance in ... 294 et seq. Cattle insurance, extent of... ... ... 293 Cattle insurance societies, number of ... 292 Difaculties of 293 Hesse, Grand Duchy of, cattle insurance societies in 302 Local organisations, vyith re-insurance most suitable 293 Pomerania, insurance associations in ... 294 Prussia, cattle insurance in 293 Re-insuranco by local societies ... ... 293 Saxony, cattle insurance in ... ... 302 Slaughter insurance 292,297 Smallholders, importance of, for 293 State action concerning 293, 394, 298, 299, 301, 302. Wiirtemberg, cattle insurance in 301 (0/. 209.) Loan banks (Of. " Co-operative Banks ") 63 et seq. Loan banks, mortgage credit association ... 16 Loans granted by rural credit societies ... 74 Lombard credit ... ... ... ... 282 Long-term credit ... ... ... ... 1-62 Long-term credit institutions ... App. 41 LOrrach District Mortgage Bank 38 Luxemburg, mortgage bank in 20 M. Machine construction, central organisation for 241 Machine Societies : — Arheilgen Threshing Machine Society 104, 225 Co-operation, reasons for 222 Liability of ... . . 222 Membership of threshing-machine socie- ties 222, 223 Number of threshing-machine societies ... 222 Objects of 222 SchifiEerstadt Steam Threshing Society ... 224 Shares of 222 Shares, Table showing par value, total and liability 223 Societies which purchase small agricul- tural machines ... ... ... ... 225 Steam-plough societies 222,225 Threshing machine, cost of ... .. 223 Threshing machine societies 104, 220, 222, 224, 225 Threshing machine, utilisation by members ... ... ... ■■■ m ••• ^^^ Weighing machines 117 Page Machinery, purchase of 241 Machinery purchased by central agricultural societies 173 Mannheim, granary at ... ... ... 202 Manures, sale of 177 Meadow rollers 222 Meat production and consumption in Germany ... "ZOi^etseg. Mecklenburg, co-operative dairying in 192, 230 Mecklenburg, dairy union in 230 Milk 179-181 Milk, delivery of, at dairy 185 Milk, fresh, sale of 186 Milk, new 181 Milk, payment for 185 Milk, regular pests of 185 Milk-selling societies 186 Apolda Co-operative Dairy Society ... 190 Gross-Umstadt Co-operative Dairy Society 191 Ostheim Co-operative Dairy Society ... 191 Zemitz Dairy Society 192 Milk, separated 181 Milk separator, the centrifugal 179 Milk supplied to dairies 187 Milk, suppliers of, prices paid to 188 Milk, testing 185 {Gf. " Dairy Societies.") Model Articles of Association {see Appendix). "Money" banks 157,158 Moosach, granary at 147,200 Mortgage Banks, Joint Stock : — Bonds, interest borne by ... ... ... 35 Bonds, mortgage 34, 35 Bonds, mortgage, as Trustee Investments 35 Bonds, redemption of ... ... ... 35 Business Total 30 Capital 32 Dividends paid by 36 History of 31 Interest borne by bonds 35 Interest, rates of 33 Legal form of 31 Legislation affecting ... ... ... 31 Loans " 33 Loans, agricultural, by Prussian Mortgage Banks 33 Loans, minimum 33 Lorrach District Mortgage Bank 38 Mortgage banks (pure and mixed) ... 32 Mortgage banks, dividends paid by ... 36 Mortgage bonds 34 Mortgage bonds as Trustee investments 35 Mortgage register 35 Mortgages, reducible 34 Number of 30 Organisation of 32 Paid-up capital and reserves 36 Provisions of Act ... ... ... ... 34 Prussian Central Land Credit Joint Stock Company, the 36 Publication of accounts, statutory provision for 35 Repayment 34 Rural mortgage business 30 State authorisation and supervision ... 32 Mortgage Credit Associations, Land : — Active modern policy of 17 Administration ... ... ... ... 6 Administration, Council of ... ... 6 Administrative Organs 6 Ancillary operations 16 INIDTIX. 221 Page Mortgage Credit Associations, Land — cont. Area of operations ... ... ... ... 2-3 Articles of Association App. 41 Bavarian Agricultural Bank ... 5, 11, 370 Bonds, choice of 14 Bonds, guarantee of 1 Bonds, interest on 15 Bonds, market value of ... ... ... 15 Bonds, nominal value of 15 Bonds not secured by specific mortgage ... 3 Borrowers, payment by 8 Central Association, the 4 Character of 1 Defaulters, recovery against ... ... 14 East Prussian Association, the 10 Entrance fees ... ... ... ... )S General Assembly, the ... ... ... 7 Hanoverian Institutions, the ... ... 4 Loan banks ... ... ... ... ... 16 Loan, object of ... ... ... ... 13 Iioan, right to 13 Loans not subject to recall ... ... 14 Loans, payment of 14 Membership ... ... ... ... ... 7 Merits of, special ... ... ... ... 15 Mortgage loans, limitation of ... ... 11 Mortgages, reducible 13 New Brandenburg Credit Institute, the ... 10 Number and Business ... ... ... 1 Operations, area of ... ... ... ... 3-3 Procedure ... ... ... ... ... 7 Progressive policy of ... ... ... 17 Small landholders, services to ... ... 9 Small properties eligible for loans ... 9 Small proprietors, special concessions to 13 State grants to ... ... ... ... 5 State supervision of ... ... ... 5 Valuation, method of ... ... ... 13 Westphalia, model articles of association App. 41 Wiirtemberg Credit Association, the ... 11 Mortgage Credit Banks : — Administration and supervision 31 Area of operations ... ... ... ... 18 Bonds, interest on ... ... ... ... 34 Bonds, nominal value of ... ... ... 24 Brunswick, the oldest 19 Business of ... ... ... ... ... 18 Capital of 33 Cassel, Mortgage Credit Bank for Adminis- trative District of 38 Darmstadt, mortgage banks at 31 Decentralisation ... ... ... ... 18 Foundation of ... ... ... ... 18 General features of 30 German States, mortgage banks in ... 19 Hanover Provincial Mortgage Credit Bank 35 Loans, interest on 22 Loans, limitation of 33 Loans, method of payment of 33 Loans, minimum and maximum 33 Loans, security for 33 Mortgage loans, rural and urban 34 Mortgages, reducible 33 Nassau District Mortgage Credit Bank ... 36 Number of 18 Operations, area of 18 Prussian 19 Rural and Urban mortgage loans 34 State, provincial and district ... 1& et seq. Success of 35 Table, showing existing institutions, area of operations and population 18 Mortgage loans and land transfer 73 Mortgage loans, rural and urban 34 Motor threshing machines 318 Munich Union, the : its legal expert ... 233 Page N. Nassau District Mortgage Credit Bank, the 26-38 Nassau Savings Bank, the 27 Nassau Savings Bank, outstanding loans ... 27 Neumark, dairy union at ... ... ... 192 Neusalz, granary at 197 Neuwied, printing works of RaiflEeisen Federation at 248 Neuwied, Raiffeisen establishes central co-operative bank at 134,144 Neuwied Union of Rural Co-operative Societies, founded by Raiffeisen ... 244 Neuwied Union of Rural Co-operative Societies, Societies affiliated to . . . ... 245 New Brandenburg Credit Institute, the, loans by 10 Newspapers, co-operative ... ... ... 231 Nieder-Weisel Savings and Loan Bank, Notes on a visit to ... ... ... 125-126 Non-co-operative purchasers. Dr. Grabein on 163 Nordhausen, corn-selling in ... ... ... 197 Nordhausen, granaries in ... ... 196, 197 North German Butter-Selling Union, the ... 193 Norway, mortgage bank in 30 Oldenburg, dairy union in ... ... ... 230 Oldenburg, egg-selling societies in ... 214, 216 Oldenburg, Land Credit Institution for ... 55 Oldenburg, Union of egg-selling societies in 216 Ostheim Co-operative Dairy Society ... 191 " Overland " central pov/^er stations... 319, 330, 331 P. Pasture societies, common 327 Peasant Proprietors' Associations ... ... 162 Personal Credit {see " Co-operative Banks, Central " and " Co-operative Banks, Local") 63-160, App. 94 Pforzheim 108 Piacenza, Congress of International League at 349 Pig-breeding, advantages to small-holders ... 385 Pigs and calves principally dealt in by cattle- selling societies 307 Ploughs, electric 318 Ploughs, steam-driven ... ... ... 325 Polish Union at Posen, the 101, 102 (Cf. " Posen.") Pomerania and supply societies ... ... 161 Pomerania, cattle-selling societies in ... 311 Pomerania, corn-selling and granaries in : Brockhausen, Herr von, on ... ... 195 Central Purchase and Sale Society, the ... 195 Payment for corn, methods of ... ... 195 Provinces conspicuous in co-operative movement... ... ... ... ... 194 Results 195 Pomerania, credit societies in 74, 79, 94, 96 Pomerania, electricity in ... ... ... 331 Pomerania, electricity stations in ... ... 331 Pomerania, granaries in ... ... ... 194 Pomerania, limited liability in ... 84, 85, 86 Pomerania, live stock insurance societies in 394 Pomerania, sign-plates for rural credit societies in App. 135 Pomerania, Union of co-operative dairies in 192,230 Pomeranian Central Co-operative Bank : Administration ... ... ... ... 156 Branches ... ... ... ... ... 154 Business, scope of 154 Business with non-members 154 222 INDEX. Page Pomeranian Central Co-operative Bank — cont. Credits allottable to societies 154 Deposits 156 Development of 156 Foundation of 152 Loans, interest on ... ... ... ... 156 Membership 152 Public aid 152 Share liability 152 Share value ... ... ... ... ... 152 State Bank, relations with .. . ... ... 155 Pomeranian Co-operative Societies and the Union levies 229,232,233 Pomeranian co-operative societies, State aid to 268 Pomeranian credit societies, loans 75 Pomeranian credit societies, number of savings deposit accounts 79. Pomeranian Union of Agricultural Societies and the manufacture of savings boxes... 77 Pomeranian Union, the, and its social activities 71, 80, 152 Pomeranian Union, the, Model current ac- count Regulations App- 134 Pomeranian Union, the, Model savings deposit regulations ^PP- 131 Pomeranian Union, the Model statement of accounts, &c App. 140 Posen, agricultural supply societies in ... 161 Posen co-opera.tive societies and State aid . . . 269 Posen, State aid for co-operative dairy ... 181 Posen, the Polish Union at 101, 102 Posen Union, the 235 Posen Unions, State aid towards 263 Potash salts, purchase of 173,241 Potash Supply Company, the 173 Potato-drying societies 226 Potatoes, manufacture of spirit from ... 225 Potatoes, sale of 171,179 Poultry-breeding societies 214 Prenzlau Union of dairying societies 193, 23U Provincial Aid Banks, Prussian 55 et seq., 157 Provincial Mortgage Credit Banks (see " Mortgage Credit Banks ") ... 18 et seq. Prussia, areas covered by land mortgage associations in ... ... ... ... 2 Prussia, East {f-ee " East Prussia "). Prussia, granaries in 194 Prussia, liability of rural credit societies in {Table) 81 Prussia, list of Laniisc/ia/fen in 2-3 Prussia, live stock insurance societies in ... 293 Prussia, Mortgage Credit Banks in 19 Prussia, West (see " West Prussia"). Prussian cattle-selling societies 210 Prussian Central Land Credit Joint Stock Company, the ... ... ... ...36-38 Capital of 38 Loans by 37 Table of Distribution of rural mortgage loans 33 Prussian Chambers of Agriculture : Activities of 273 Establishment of 272 Functions of 272 Membership of 272 Taxes ' 272 (iSee also "Agricultural Co-oporation and Public Aid" under the various Pro- vinces.) Prussian co-operative organisations and cattle-dealing 210 Prussian granaries. Slate aid for ... ... 193 Prussian joint stock mortgage banks ... 31 | Prussian Land Improvement Banks 50 et seq. | Prussian Land Improvement Funds ..^ ... 50 Prussian Ministry for Home Affairs, regula- tions as to Audit 252-253 Page Prussian mortgage banks, loans by 33 Prussian Provincial Aid Banks : Administration 55 Banks, existing 55 Banks, existing : Table showing outstand- ing loans 56 Banks, limited utility of 58 Bonds guaranteed by Province 56 Direction and supervision 57 Functions of 55 Loans, restrictions on ... ... ... 57 Loans, security of 57 Loans, term of 57 Loans to individuals by 57 Profits... 58 Profits, allocation of 57 Silesian Bank, the 56 Prussian Land linprovement Annuity Bank Act, 1879 App. 32 Prussian Savings Banks ... 39 e^ seq., App. 71 Prussian Savings Banks, Tables relating to 41, 43 44, 46, 47, 49, 50 Prussian Saxony, electricity in 219 Prussian Saxony, limited liability of credit societies in 84 Prussian Saxony, public grants to co-opera- tive societies . 268 Prussian Saxony Union, Model Business Rules App. 128 Prussian State Co-operative Central Bank, Acts relating to ... ... ... App. 22 Prussian State Central Co-operative Bank, the : Acceptances ... ... ... ... .. 282 Accounts, quarterly... ... ... ... 283 Acts relating to ... ... ... App. 22 Administration, cost of 287 Berlin, the seat of ... ... .. ... 278 Bill business 282 Bill collection 282 Business, volume of 283 et seq. Business with co-operative societies ... 279 Business with co-operative union banks 284, 285 Business with public savings banks ... 279 Capital of 278 Capital, interest on ... ... ... ... 278 Central Federation, the, and 289 Cheap credit, extent of ... ... ... 286 Cheque business 282 Clients, composition of (TaftZe) 283 Clients, co-operative and other ... ... 283 Co-operative central banks in 1894 ... 275 Co-operative organisations, and ... 287 et seq. Co-operative union banks, development of business with 284 Co-operative union banks, principles of business with 279 Credit allotted 284 Credit allotted, maximum ... ... ... 281 Credit by Prussian State Bank: its im- portance ... ... ... ... App. 145 Credit, form in which given ... ... 281 Credit, valuation for 279 Deposits and withdrawals (Central Banks) {Table) 276 Deposits and withdrawals (Prussian Bank) 277 Existing institutions, unsuitability of ... 275 Federation of distributive societies ... 289 Foundation of 63,157,273 Foundation of, reasons for 274 Freedom of action 283 General Federation, the, and 289 German Co-operative Wholesale Society, the, and 289 INDEX. 223 Page PrusBian State Central Co-operative Bank, the — cont. Grounds of complaint against 290 Halle Bank, the, and 157 Hanoverian Bank, the, and 151 History and principles of business 273 et seq. Imperial Bank 153,275,286 Imperial Federation, the, and 287 Inquiry form App. 160 Interest, rates of 281,286 Legal status 278 Loans on efEects 282 Lombard credit 282 Management of 278 Non-co-operative business of ... 283, 285 Objects of 276 Operations, scope of 278 Pomeranian Bank, the, and 155 Profits 286 Public Savings Banks, business with ... 279 RaifEeisen Federation, the, and ... 287, 289 Recommendations respecting maintenance of liquidity of societies App. 144 Rural and urban business 284 Savings banks, business with 279 Seat of 278 Services of 291 State Bank, attitude of, towards central banks 289 Supervision exercised by 281 Territorial extension of ... ... ... 284 Turnover 273,285 Volume of business 2SSetseq. Public Aid (see " Agricultural Co-operation and Public Aid," also " State Aid.") Public Mortgage Credit Banks : Cassel 28 Hanover ... ... ... .. ... 25 ((7/. " Mortgage Credit Banks," 18 et seq.) Public Savings Banks 72 Purchase Societies, agricultural 161 Q. Quabeck Herr, secretary of the Westphalian Union ... ... ... ... ... 88 R. Rabe, Dr 196,197,203,218,268 RaifEeisen, 66, 68, 80, 83, 87, 90, 133, 134, 138, 144, 146, 165, 205, 229, 231, 237, 244, 245, 261, 267, 274, 275, 278. RaifEeisen banks 6S et seq. (Cf. ''Cooperative Banks, Local.") RaifEeisen Central Loan Bank (see "Agricul- tural Central Loan Bank "). RaifEeisen (or General) Federation of Rural Co-operative Societies, the : Activities : Insurance 248 Legal advice 248 Publications 247 and the Imperial Federation ... 242, 245 Berlin, removal to 247 History of 244 Income, sources of ... ... ... ... 248 Members, duties of 246 Membership of 246 Model Articles of Association App. 108, 186 Model balance-sheet App. 136 Objects of 246 Page RaifEeisen (or General) Federation of Rural Co-operative Societies, the — cont. Organs of 247 Present position of . . . ... ... ... 248 Printing works ... ... ... ... 248 Publications of ... ' 247 Seat of 247 (Gf. also " RaifEeisen organisations.") RaifEeisen organisations, 66-70, 74-76, 79, 80, 87-92, 97, 99, 133, 135, 137, 141, 144 et seq., 198, 229, 232, 234, 237, 239, 241, 242, 266, 267, 272, 273, 278-280, 289. Rakow Savings and Loan Bank, account of... 128 Model balance-sheet of App. 148 Refuse co-operative society of Arheilgen ... 104 Rent-charge Banks : Bonds issued, value of 60 Existing banks ... ... ... ... 58 Functions and powers of 58 " General Commissions " 59 General Conditions ... ... ... ... 59 Importance of ... ... ... ... 61 Institution of 58 Interest payable ... ... ... ... 60 Loans in connection with small holdings... 60 Not independent agents ... ... ... 59 Repayments, term of ... ... ... 60 Rhenish Agricultural Co-operative Bank, the 134,144 Rhenish Joint Stock Mortgage Bank, Agree- ment with Baden Government ... -A-pp. 92 Rhenish Mortgage Bank, Agreement with Baden Union App. 160 Rhine Province, the, agricultural supply societies in ... ... ... ... 161 Rhine Province, the birthplace of modern rural co-operation ... ... ... 269 Rhine Province, the, co-operative societies in, and their State grants ... ... ... 269 Rinkerode, co-operative dairy of ... ... 328 Rinkerode, co-operative supply society of 128 Rinkerode Savings and Loan Bank, special account of its working ... ... 126-128 Rolling-machines (see " Machine Societies "). Rostock, Union of dairy societies at ... 192 Rural banks as credit institutions ... ... 71 Rural credit banks, general position of (Table) 101-102 Rural credit banks of the Imperial Federa- tion 100-101 Rural credit societies ... ... ... 6'd et seq. Rural credit societies, sign-plates for App. 135 Rural credit societies (Table) ... , ... 86 Rural districts and electricity ... ... 222 Rural mortgage business of joint stock mortgage banks 30 Russia, mortgage banks in , 20 S. " Savings and Loan Banks " 77 Savings banks, home- 103,119 Savings banks, Prussian (see " Prussian Savings Banks ") '69 et seq. Savings banks, public 72 Savings-books 77, 119, 121, 125, 130 Savings boxes 42,77,103,117 Savings-cards 77,103,119,126 Savings, Credit and Supply Societies of Saxony 69 Savings stamps 42 Saxon Union of Co-operative Societies, the 196 Saxony, agricultural supply societies in ... 161 224 INDEX. Page Saxony, areas covered by land mortgage associations in 2 Saxony, cattle insurance in 302 Saxony, co-operation and State aid in 272, 291 Saxony, electrical undertakings of 219, 220, 221 Saxony, granaries in : Creation of ... ... ... ... ... 196 Halle Granary Society, the ... ... 197 Nordhausen Granary Society, the ... 197 Organisation of ... ... ... ... 196 Rabe, Dr., on 197 Saxony, Kingdom of, contributions of co-operative societies 235 Saxony, limited liability of credit societies in 84 Saxony, Province of, credit societies' con- tributions to Union ... ... ... 235 Saxony, " Savings, Credit, and Supply Societies" 69 Saxony, the Land Improvement Annuity Bank of 53 SchifEerstadt Loan Society, account of 130-131 SchifiEerstadt Steam Threshing Society, notes on a visit to the ... ... ... 224 Schivelbein Cattle-Selling Society ... ... 213 Schlesv?ig-Holstein, Co-operative Union of, and its State grant 268 Schleswig-Holstein, electric stations in ... 219 Schleswig-Holstein Union of Agricultural Co-operative Societies, rates of con- tributions 234 Schulze-Delitzsch ... 83, 144, 229, 250, 260, 261, 266, 274, 275 Schulze - Delitzsch Federation, Model Articles of App. 118 Schulze-Delitzsch societies... 67, 72, 75, 80, 83, 84, 105, 107, 111, 144, 229, 237, 250, 260, 266, 274, 275, 279, 289 Servia, mortgage banks in 20 Settlement (or Home Colonisation) Com- mission, the 269 Short-term credit (see " Co-operative Banks, Central " and " Co-operative Banks, Local") 63-160, App. 94 Silesia, co-operative mortgage credit associa- . tions in ... ... ... ... •-. 1 Silesia, electric stations in 222 Silesia, granary in 197 Silesia, Land Improvement Annuity Bank of , statutes of App. 86 Silesian co-operative unions and their sub- ventions 269 Silesian Provincial Aid Bank, the 56 Banks, limited, utility of 58 Bonds guaranteed by Province 56 Direction and supervision of 57 Loans, restriction of 57 Loans, term and security of 57 Loans to individuals 57 Profits 58 Profits, allocation of 57 Sinzheim Savings and Loan Bank, special notes concerning 129,130 Slaughter-houses, co-operative 206 Slaughter insurance 292,297,302 Small-holders, advantage of co-operative corn-selling for 204 Small-holders and cattle 205 Small-holders and meat production... 204, 205 Small-holders and pig-breeding ... 204,205 Small-holders, especial advantages of co- operative dairying for 180 Small-holders, importance of, in meat pro- duction ^^05 Small-holders, influence of, on co-operative dairying • 180,181 Small-holders, meat production of ... 204, 205 Page Small holdings in Bavaria (Taftte) 198 Small holdings, loans by rent-charge banks in connection with ... ... ... 60 Small landowners and loans 9 Small proprietors, special concessions to ... 12 Sowing machines (see " Machine Societies ") 222 Sparr, Herr 71,164,224,227 State aid ... 5, 18 e^ sp^., 32, 59 State aid and the Co-operative movement (see " Agricultural Co-operation and Public Aid") ... 266 et seq. State a,id for Baden granaries ... ... 193 State aid for Bavarian Central Bank . . . 148 State aid for Bavarian granaries 193, 198-199, 202 State aid for Berlin Store Cattle Market ... 210 State aid for breeding societies ... 226-227 State aid for corn-selling and granary societies ... ... ... ... 123 et seg. State aid for dairies 181 State aid for Halle Central Co-operative Bank 157 State aid for Halle granary societies ... 196 State aid for Hanoverian Central Bank ... 150 State aid for Hesse-Cassel granary societies 196 State aid for Nordhausen granary society ... 196 State aid for Pomeranian Central Co-opera-. tive Bank 152 State aid for Pomeranian granaries ... ... 194 State aid for Prussian granaries ... 193, 194 State aid for the Imperial Federation ... 242 State aid for Worbis granary, society ... 196 State aid for Wtirtemberg granaries... 193, 201 State Bank for co-operative societies 273 et seq. State-built granaries 196,197,201 State grants to corn-selling or granary societies 193 State Invalidity Insurance institutions 61 et seq. State Mortgage Credit Banks (see " Mortgage Credit Banks ") ... ISetseq. State organisation of cattle insurance 294 et seq. State, Provincial and District Mortgage Credit Banks 18 e^ seq. State supervision ... ... ... ... 5 State, the, and co-operative credit : Alsace-Lorraine 291 Baden 291 Bavaria 148 Prussia 273 et seq Saxony 291 Wtirtemberg ... ... ... ... ... 291 (Cf. also " Agricultural Co-operation and Public Aid.") Statistical forms for returns ... App. 195 et seq. Steam ploughs (see " Machine Societies ") 222 et seq. Steam-plough societies 222,225 Steam-threshing Machine Society of Schifferstadt, the 224 Steam-threshing machines 218 Steinbruck, Professor, on granaries 204 Stettin, Central Purchase and Sale Society in 195 Stettin, Pomeranian Central Co-operative Bank, the 154-156 Stettin, Pomeranian Union at, and limited liability 157 Stettin Union, the, and credit banks ... 85 Stettin, Union of co-operative dairy societies in 192,230 Stolp, cattle-selling society of 213 Stolp Supply Society, the 168 Straw-pressing machines 222, 225 Stuttgart, the Wtirtemberg Union at 69, 101 Sugar factory at Gross-Umstadt ... App. 200 Supply and corn departments of the Bavarian Central Bank 149 Supply Association of German Farmers, the 174 Supply department of the Bavarian Central Bank 149 INDEX. 225 Page Supply Societies (Central) : Advantages of combination of local societies 172 Advantages of further organisation ... 172 Audit of 256 Central Supply Societies : Table of membership 174 Central Supply organisations af&liated to the Imperial Federation 178 Central Supply organisations, Table re- garding 177 Educational efforts of 173 Goods, payment for 177 Legal form of 175 Machinery, purchase of 173 Management, expenses of ... ... ... 178 Membership 174 Membership, 7'a6Z(3 showing ... 174,175 Operations, area of 173 Profits of 178 Safeguards for local societies 173 Sale of agricultural products by ... ... 179 Shares 175 Shares, tabular information aa to... ... 176 Societies' exclusive dealings with ... 176 Special requirements, attention to ... 173 (See also " Supply Societies, Local.") Supply Societies (Local) : Advantages of 162,164 Analyses of commodities, Table of results of Tests 163 Agricultural products, sale of by (Table) 171 Arheilgen 104 Business, scope of 161 Collection of Orders 169 Development, general ... ... ... 166 Educational influences of . . . ... ... 164 Establishment of Registered Co-operative Agricultural Supply Societies (Table)... 166 Goods, delivery of 169 Goods, lower prices of, through co-opera- tion 164 Goods purchased, nature of 169 Goods, value of 162 Grabein, Dr., on non-co-operative purchase 163 Gross-TJmstradt Supply Society 171 Guarantee of quality by co-operative pur- chase 162 Importance of other co-operative agencies 161 Liability, nature of adopted by 167 Members, number of 168 Membership, yafiZe showing range of ... 168 Non-members, dealings with 170 Obligation upon members to purchase through 169 Operations, area of 168 Other societies undertaking supply 161, 225 Payment for goods by members 170 Payment for goods by societies 170 Profits 171 Registered societies in Germany (Table)... 165 Shares 166 Shares, amount paid up 167 Shares, liability attached to 167 Societies reporting to Imperial Federation, position of (TafiZe) 171 Stores 169 Territorial distribution (Table) 165 Tests made by Central Societies (Table)... 163 Value of purchases per member 169 Value of purchases per society (Table) (see also " Supply Societies (Central) ") 169 Supply and sale societies, model articles and rules App. 163 Sweden, mortgage banks in 20 Switzerland, mortgage banks in 20 T. Page Territorial distribution of registered co- operative dairies (Table) ... ... 182 Territorial distribution of registered supply societies (Table) 165 Threshing machine at Fischenich 117 Threshing-machine societies 104,220, 222, 224, 225 Threshing machine societies' model rules App. 177 Threshing-machine society at Arheilgen ... 104 Threshing machines (see "Machine Societies" and " Electricity Societies "). Threshing machines, capital required . . . 223 Threshing machines, motor ... ... ... 218 Threshing machines, steam ... ... ... 218 Thrift, savings banks and the furtherance of 40 Thrift, stimulation of, by rural credit societies 69, 77, 103, 126 Training schools for co-operative officials ... 240 Treves Union, the (raSfe) 101,102 U. Union contributions ... ... ... App. 197 Union of agricultural societies . . . 230 et seq. Unions of co-operative societies (see " Co- operative societies. Combinations of "). Urban Banks 72 Urban Co-operative Societies 72 Usury, excessive, and rural credit societies 72, 205 V. Visselhovede Egg-selling Society, special notes regarding the ... ... ... 817 W. Wallhausen Savings and Loan Bank, account of 131-132 Water supply societies ... ... ... 228 Weighing machine for waggons 117 Weighing machines (see " Machine Societies "). West Holstein Union of dairy societies ... 192 Westphalia, first provincial aid bank founded in... ... ... ... ... 55 Westphalia, land mortgage associations in ... 2 Westphalia, Raiffieisen founds Central Bank in 134,144,244 Westphalia, Union of dairy societies in 192, 230 Westphalian Bank, the 18 -30, 55 Westphalian co-operative societies. State aid for 268 Westphalian credit societies, number of savings deposit accounts 79 Westphalian Mortgage Credit Association (Landschaft), Articles of Association of App. 41 Westphalian Union, the, and general social activities 69 Westphalian Union, the contributions of co- operative societies to 235 West Prussia, co-operation and State aid ... 269 West Prussia, union of dairying societies in 192 West Prussian Association, the, areas covered by land mortgage 2 226 INDEX. Page Wettruf Egg-selling Society, th£ 216 Wiesbaden, the Agricultural Co-operative Union at 269 Worbis, granary at 196 Wormditt Bank, the 275 Wiirtemberg, cattle insurance in 301 Wtirtemberg, cattle insurance in. State aid... 301 {Gf. " Live Stock Insurance.") Wurtemberg Central Bank, the {Table) 142-143 Wtirtemberg Central Bank, Regulations App. 158, 159 Wurtemberg, co-operation supported by State aid in ' 271 Wiirtemberg Credit Association, the out- standing mortgage loans of ... ... 11 Wiirtemberg, granary societies in, special notes concerning 201-202 Wiirtemberg granary societies, State aid for 193, 201 Wurtemberg Savings Bank, totindation of the Wiirtemberg Savings Banks, Articles of the Wiirtemberg, State aid in Wiirtemberg, State aid for breeding societies Wiirtemberg Union, the Page 20 42 291 227 233 Wurtemberg Union at Stuttgart, the 69, 101-102 Zemitz, co-operative dairy in 133 Zemitz Dairy Society 133, 192 Zemitz Savings and Loan Bank, special account of 132-133 tUtiitaitw—cont. :. ESTABHSHWBNTS; ' WaE :^ Parti. Expeditionary Force. jl913.^ f8«iif/ Part V. EeBerye, Dep&t, and otlwr EegifflaentilUnits maintained at Home after Mobilization^ (Provi- Biosal). id. jPINATION PapEKS :— ■^»Mf Entrance :— R.M. Academy, R.M. 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