THE FARMERS' CO-OPERATIVE ASSOCIATION.

Press, Volume LXI, Issue 18425, 4 July 1925, Page 16

THE FARMERS' CO-OPERATIVE ASSOCIATION.

TO tht; editor of "the pbess." Sir. —With your permission I would like to add a few remarks on the above correspondence. First, under the circumstances, I believe the management has placed fair proposals before its shareholders, namely, that ;«!1 shareholders should bear some portion of the sacrifices needed to place the institution on a better footing. Evidently, "Preference Shareholder" thjnks the ordinary shareholder should be squeezed to the last shilling before he should be touched. The very fact that we ale a co-operative concern is a reason that we should not only share in its profits, but help to bear its losses, and I contend the ordinary shareholder is hit the hardest. I am not^ one of those who can boast of receivijig biir dividends for a number of years, larger portion of my shares being invested in recent years, when the ordinary share was at a premium of 10s per share. So if a person invested £lO9 in shares, ho received forty shares at £2 each, and received interest on £SO paid up capital. Since then they have been written down 10s per share, and a further proposal of another 5s per share reduces the original £IOO to £SO. To protect that £SO he is called upon to contribute another 10s per shaje, which means a payment of £4O, and while all this has been goincr on, like '•'Preference Shareholder" he has received no dividend, whereas "Preference Shareholder's" capital remains intact, and he is asked only to forgo 2i years' interest. Let preference shareholders just consider that self-interest is not the lughest law of life, resolutions from the Chamber cf Commerce notwithstanding. The probity of pledges is not an; inexorable b.w. If it is, it provides Shylock with a sumptuous table, leaving the other fellow the crumbs. If the ordinary shareholder withdraws his business support, where ■would stand? Wo should bo thankful that we h?.ve such a man at the head, and therefore it is for us to bo loyal, and rjot engage in wrangles for the full pound of flesh regardless of the other fellow. —Yours, G ANOTHER ORDINARY SHAREHOLDER.

TO THE EDITOE OF "'THE PEESS."

Sir,—ln view of the further correspondence in this matter, a few words of explanation are probably due. The withdrawal of the proposal for the extinguishing of cumulative rights on preference shares after January Ist, 1925", has removed the greatest objection to the directors' proposals. With others concerned, and, I might add, competent to judgc v I have carefully examined the position from the shareholders' viewpoint, and have found it necessary to support the proposal to extinguish the accumulated dividends on preference shares up to last January. Various suggestions for providing for eventual payment have been closely canvassed. Capitalisation of tho amount is impossible, as the liability for dividends is contingent upon thero being profits. In this case there is nothing to capitalise, as the profit and loss account is in debit for over £IOO,OOO. The possibility of limiting dividends on ordinary shares, and applying any available excess in compensating preference shareholders has been gone into very thoroughly with the Association's executive, and has been found inadvisable. It is considered essential for the welfare of tho Association and shareholders of both classes that the proposals for simultaneously writing oft' the accumulated dividends and the capital loss of £IOO,OOO, be carlied, and anything which would prejudice this should be averted. The object of the motion I will move is to provido legal machinery making it possible in the future, should the pros perity of the Association so warrant, to recompense preference shareholders for their present contribution to the position. If this provision is made it will then rest with preference shareholders to see that directors are appointed who will watch their interests in the matter. I am fully alive to the fact that the restoring of capital now written off will be long postponed, or possibly may never happen, but my motion will serve the purpose of permanently recording tho preference shareholders-' present loss, and permit of their sharing in a return to better times. At the same time, I might add, it is very probable that any future benefits to ordinary shareholders will be on the Hues of capitalisation. Of necessity the Association must for many years restrict dividends to the minimum, ai<d build up a large reserve. The meeting of the huge bond and other indebtedness makes this • imperative. Assuming a large reserve has been established, the Association could, without weakening itself in any way, transfer out of same to capital an amount equal to the ordinary share loss now to be written off. 1 hold that b'efore this is done tho preference shareholders' present loss should be met. —Yours, etc., T. X. ,GIBBS. Christchurch, July 3. io thj editor or "the pbjsss." Sir, —I should like to add my thanks to those you have already published in correspondence column re above. lue various levters for and against the proposals are a great help to the uninitiated. To many who mav have invested "their all" in the "Farmers" there lias oee-n a lot written that is cheering, and it should clear up a lot of talk. As ah ordinary- shareholder for t*e past 10 years, anj bondholder from l'J2l, I have "stuck up" for the "Farmers" through atl adverse criticism, and I am sure my trust is going to be .justified.—Yours, etc..

STILL ANOTHER SHAREHOLDER. Christchurcli, July 3rd, 1923. TO THE EDITOR OP "THE FEESS." Sir,—As a shareholder of both preference and ordinary shares, I have read very carefully the correspondence which has appeared in your journal, because it has given me the opportunity to weigh the pros and cons before attending the meeting to be called by the directors and management. In the main, the letters all indicate confidence in the earning capacity of the concern which was amply demonstrated for so many years, and, furthermore, indicate a genuine desire to help the concern. However, the test of loyalty is determined, not by mere desire or sympathy, but by the adoption of 6ome practical form of help, and T, for one, am out to assist the authorities to give, effect to the modified proposals. At first blush I felt indignant and considered my preference rights were being wrongfully attacked, but after "a few days of calm reflection and a close study of the share market, I came to the conclusion that if thi "modified" suggestions are adopted, mv shares are going to increase in value, further, the adoption of the proposals will permeate the atmosphere with a greater feeling of confidence and encourage the executive officers in tho discharge of their onerous task.

I am afraid that I. like a good many others, had overlooked the "world slump" which inflicted an unprecedented influence on all commercial undertakings, necessitating desperate remedies. Moreover, as one of your correspondents recently hinted, it is a wonder something * much more drastio

did not eventuate. Tho N.Z.F., despite the perennial curbstone critics, is making headway and, with the loyalty of its shareholders, can soon get back to the old order of things. The executive leaders are working hard and earnestly, and it would be a fatal move, to my 'mind, if w© were to disregard their suggestions which they have presented for adoption. My 15s of ordinary capital has already gone "west," and if I can preserve my preference, capital and merely lose what I really never possessed, "the unearned interest," I feel that my "conversion" to the modified proposals is a cold business decision. As an avowed co-opera-tor it is my duty.—Yours, etc., CONVERTED B PREFERENCE SHAREHOLDER. TO HI'S EDITOR OF "THE PEESS." Sir, —Your correspondent, Mr T. N. Gibbs, has done good work by drawing attention, through, your columns, to the manner in which the preterence shareholders in the N.Z. Farmers' <Jcoparative Association of -Ltd., are aireete'd by tho proposals thac have been put forward by the directors. 1 now see that the directors have, modified these proposals; so that, as the position stands, the preterence shareholders merely relinquish thenclaims to dividends accrued to January the 31st last, whereas ordinary shareholders have their share capital materially reduced. It seems to me that by withdrawing their second proposal that the preterence shareholders should extinguish tlieir cumulative rights for the tuture, the directors have upset the balance of relationship as between the preference and ordinary shareholders, and I think that now the latter are being hardly done by, inasthe preterence' shareholders will still De getting their dividends on the original amount of their capital. In consideration of the .preference shareholders retaining their right to cumulative dividends in the tuture, they should certainly be prepared to have their capital reduced by, say ten shillings per share, to establish an equitable basis, as between the two classes of shareholders.

If, however, the present proposals of the directors are carried, the ordinary shareholder has his capital reduced, loses his back dividends, receives a smaller dividend in the future (owing to reduced capital), and also has hia chance of any future dividend reduced by the cumulative rights of' the preference shareholder being retained. The .preference shareholder, however, merely loses a few back dividends. I would draw your attention to the Farmers' Union Trading Company'of Auckland, which has recently found themselves in a similar position to the Farmers' Co-op here, and their proposals are to let cumulative rights stand, and pay back dividends owing as they are able to; and to write preference share capital Sown as well as ordinary share capital, although to not quite the same extent.—Yours, etc.,

AV. M. EVEREST.