BANK OF NEW ZEALAND.

Dominion, Volume 6, Issue 1794, 5 July 1913, Page 3

BANK OF NEW ZEALAND.

SHAREHOLDERS MEET. STATE CURB DEPRECATED. STRONG COMMENT. 'INCREASE OF CAPITAL WANTED. An important meeting of shareholders t>f the Bank of New Zealand was held Yesterday morning, when proposals dealing with control of the bant and capital issue were discussed. A series of resolutions bearing on these matters was ■unanimously carried, and a coinmittae of shareholders was set up to confer with, and advise, the shareholders' representatives on the board, with a view to safeguarding the interests of the shareholders in the steps to be taken _ in connection with the contemplated legislation'for inbreasing the capital. There were '41 shareholders present, representing 11,500 votes. A telegram from Mr. John Studholme, 'Ashburton, to Mr. Watson, was read, stating that Mr. Studholme greatly appreciated his and Mr. Kennedy's efforts to secure for shareholders the legitimate control of their own property.

'Mr. Kennedy takes the Chair. The meeting' was called for 11 o'clock, s»nd shortly after that hour Mr. Kennedy said that, as the chairman of the board, Mr. H. Beauchamp, was not present, regarding-'the meeting as informal from his i point of view, the duty devolved upon him (Mr. Kennedy) to take tne chair, as under the articles of association the eonior director took the chair in the absence of the chairman. Proceeding, Mr. Kennedy said that those present would realise that the meeting, so to speak, was the one that had been convened by the shareholders under the deed of settlement, because the board refused their application to convene that When ho said the board, he meant the Government nominees, who were in a majority. The shareholders' representative, Mr. Watson, dissented from their action then, end from every subsequent action which was,inimical, or arbitrary, to the wishes, of tho shareholders.. In addition, the meeting was tho adjourned annual meeting, adjourned from last week. At Mr. Kennedy's Tequest, the secretary read the resolution calling the meeting, and the correspondence wliioh had passed between ' Mr., Kennedy and Mr. Beauchamp since tho meeting. In replying to tho resolution passed on the motion of Mr. Kirltcaldie. calling on the board to place before the shareholders at the meeting on July 4, tho proposals _ sot before the Government, regarding increase of capital, Mr. Beauchamp stated that tha Minister for Finance (Hon. J. Allen) had no objection to the 6chome _ being made publio at the meeting, but it was to be understood that tho Government had not then dealt with tho recommendation. Mr. Kennedy, continuing, said that before Jie asked whether tho proposals placed before the Government should be read, in view of their having been published, ho would say that: Mr. Beauchamp at the annual meeting told the shareholders he could not placo the proposals before them until the Gove .ament had como to a decision, on the scheme. Mr. Allen, through Mr. Beauchamp, told them that he had no objection to it being put before the shareholders, although the Government had not considered it.

"Now I say," went on Mr. Kennedy, "Mr. Beauchamp has again infringed the rights of the shareholders, and has gone beyond what Mr. Allen said. He said he (Mr. Allen) had no objection to the proposals being put before the shareholders at this meeting. Then Mr, Beauchamp published it in the newspapers. Why should he assume that wo did not want those proposals kept confidential? Instead of that he takes it on himself to publish them. It is another arbitrary action, for he did not consult his colleagues, Mr. Watson and myself. I say we had a righlt, not a courtesy, but it was an obligation on his part to consult us. , ■

Continuing, Mr. Kennedy asked that , they should keep clear or politics or ( party politics, in discussing the matter. ( There had been no evidence of politics , being introduced, but he assured them, . as being responsible for initiating the | discussion in London, that whatever Gov- . ornment bad been in power, he would ' have taken the same steps. It was quite . obvious, the way the board was consti- i tuted, leaving two-third's of the i6hareholders out of consideration, that it was never intended to last. The Act said that so long, as liability on the part of the Crown to the bank existed there ■was no right .to 'ask for-a reconstruction. The time had arrived, but they would no doubt realise by what they read in the papers that day, that not only did the board ask for 10 years' renewal, but they asked for 20 years' renewal. That had come as a surprise to him. He would not enlarge on the matter, because he did not want to anticipate the speeches of other speakers. The pricipal business' bofore the meeting would bo consideration of the resolutions that were refused by the board, and which had been given notice of in a legal way by. Mr. Skerrett. Speech by Mr. C. P. Skerrett. Mr. Skerrett said that his object in giving notice of the motions which stood in his name was to give the shareholders an opportunity of discussing matters of vital interest to tho bank in the new aspect of its affairs which had, arisen. He held that it was o> right of shareholders to discuss all mat- , ters of policy affecting interests of the bank, providing thpy observed the necessary secrecy. He held, too, that it was a duty of the bank to carefully consider and weigh the wishes of shareholders. He claimed that those who were then moving had the support of a-large majority of the shareholders. That was evidenced by the attendance at the meetingj and by the number of proxies received. Shareholders would remeinter the attitude of the chairman (Mr. Deauchamp) at tho recent meeting. The chairman had said that he would not oven listen to tho Bhareholden oij important matters, and would not consider their opinions ( or be a medium of communication with the Government. Tho only course, therefore, was for tho shareholders to take the matter into their own hands to see that thoir interests were fairly represented to the Government, and that their interests wero safeguarded. Thoy would remember that tho chairman of directors had declined to take the shareholders into his oonfidence—to tell them of the proposals to the Government. ■ To let'the shareholders know the details of tho scheme after it had been fixed up with the Government was to make them known when it was too late—such a proceeding was farcical. It was absurd to say that this discussion could prejudice the interests of the bank or of the shareholders. On the contrary, the discussion wis on tho assumption that the bank could now discharge every penny of liability to the Government, .and the debate was to concern the course to be taken. It was admitted on all hands that the bank was in a. position to pay off its liabilities guaranteed-by the Government, and that the Government need not be liable for n single sixpence unless they desired it. The position now was that tho Government held a splendid investment of half a million preference shares in tho bank, on which it had drawn ten per cent, interest. To-day they had reached a stago in the life of the bank when there must bo a review of the relationship in which the bank stood to the Government. Ho desired to briefly review tho history of tho bank. What was it exactly, he asked, that the Government gavo in assistance to the bank, and what did they stipulato for in return? How and in what mannor had the Government secured tho predominance it possessed on tho bank, and how Ion" was it contemplated it should last? Was there, on tho passing of the Act of ' 1903, a distinct and honourable understanding that it would in the future seek no further interest in the profits of tho bank and wero tho shareholders, if that bo tho position, not entitled to say that that honourable understanding was binding on the Government to-day as in tho pastf Three Propositions. Mr. Skerrett then proceeded to review tho history,of tho bank. I he result of • hfofcorv. Ho was that at too ' timo when" the liability of the Governmenb was greatest, the Government had

a very small representation on the board, and to-day they had a much greater representation. Ho pointed out that the Government did not find a single penny of the assistance to tho bank. Ho did not wish to under-rato the value of tho Government's assistance; it enabled tho bank to arrange its finances at ai critical period in its career. The assistance was given, not in the interests of the bank, but in the general commercial interests of the public at largo. Now that tho liabilities were extinguished, the shareholders had the inalienable right to havo what they claimed restored to them, the question, then, wa£: What method of raising tho further capital now required would do justice to the various interests of tho bank, the shareholders, and the State? He thought that the three following propositions should meet with tho approval of every reasonable miml:— "1. That the business and goodwill of the bank belong to the shareholders, ana that the Government have, subject to what I shall next mention, only. the rights of a shareholder in respect oi its shares. ... J'2. That when the bank or is prepared to discharge (unless the Government desires otherwise) all its obligations by the Government, the Government has only a right to take such part in the administration of the affairs oi the bank as will ensure that the business ot the bank will in future be safely and 'prudently conducted; and that the prosperity and trade of the country will not in the future be imperilled by any financial difficulties of the bank; and that the Government and its successors are bound by the honourablo understanding with the Government of 1903 that it would not in tho future seek any further interest in tho capital of the bank, beyond the ■£500,000 preference shares issued ,to it. . "3. That the Government is not entitled to exact a further interest in the capital and profits of the bank, except with the full and free consent of the shareholders."

Moral Obligation on the Government. Ueferring to his third proposition, Mr. Skerrett said that he was told (and every circumstance made it probable, so he believed it) that there was a definite understanding with the Government of 1903 to the effect that if they were given half a million preference shares they would not seek any further interest in the bank. If such was fact, there was a moral obligation binding tne Government to tho understanding. If a banker or a merchant helped a trader, what would be thought if, after the trader had discharged the liability entailed in the assistance, the banker or the merchant went along and said: "I want a share in your business"? It might be that it would suit shareholders to invite the Government to take a further interest in the bank, but he insisted that it should be on terms acceptable to tho shareholders. The Government had no right to dictate terms to tho shareholders. It must bo a. matter of free and equal bargaining. It was admitted that the bank could readily obtain tho increased capital it required elsewhere. If tho bank was going to give the Government further preference shares, it was about to givo it a great monetary advantage. The partnership with the Government, without due precautions, would be a partnership with a very powerful organisation, which had the absolute power of altering at any time, and for any reason, tho constitution and the lights of the shareholders. Might not a continued partnership be a partnership between the wolf and the lamb? So long as it suited the : wolf he. would continue to be on good terms with the lamb, but he would not hesitate to swallow the lamb when such- an operation became expedient. The shareholders must be careful not to barter away their birthright for a mess of pottage. Thej; must take care that this was not an insidious design, and they could not be sure that Parliament would contain Ministries which would recogniso the just rights of shareholders. There might be a Socialistic Government or a Government bjr caucus. If (bearing his last observation in mind) they gave the Government a further holding'in the bank, were they confident that they would be fairly and justly treated? He did not feel competent to express an opinion on these matters; he merely wished to bring them under notice. Mr. Skerrett proceeded to consider the proposal of the chairman of the board of directors (Mr. Beauchamp). 'It was, he said, the kind of proposal which one would expect from a nominee board. The vice of that scheme was that it assumed that the Government had a right to a further interest in the capital of the bank, and that tho taking of tho capital was not to be a matter of contract, but on such terms as the Government dictated. It offered, without any consultation with thn shareholders to part with their property to the Government. It offered tho now issue on better terms to tho Government than to tho shareholders. The Government wero to havo the same dividend as ordinary - shareholders, but, forsooth, were to have preference in capital. How could that bo justified? The scheme was an insidious one. It gave the right to the Crown, not only in respect of the proposed issue of threequarter of a million,' but in respect of every subsequent issue up to And if they accorded that right to the Crown" in respect of ,£3,000,000 it would bo impossible to deny it in. respect to future increases of capital. It took away all the power of the shareholders. All tho power was given to the nominated board and the Minister for Finance. The Government had some right to- see that the business of the bank was properly and prudently conducted, because the ramifications qf tho bank wero bound up to a large extent with the commerce of tho country. -But surely what tho share-holders-were: prepared to concede was enough. He .had suggested that there should bo two nominees of tho Government, with-four of the shareholders, tho auditor's suspensory power and the power of veto. If that was not adequate let them increase it reasonably. But it must stop short at the point which gavo the greater number of directors to the Government, and the lesser number to tho shareholders.' Otherwise they wero putting shareholders in the position of mere ciphers without power or authority. Ho assumed that it was desirable in every way to maintain tho connection between the Government and tho bank, but that connection would bo purchased at too dear a price if it involved handing tho business of tho bank to a board of directors controlled and nominated as at present. It had been said that tlis prosperity of the bank had beon due| to the Governmental control of tho board of directors, Was there ever such nonsense? The prosperity of tho bank had been due to quite other causes. He did not wish to in tho least degree dispnrago the Government's assistance, but all knew that the increase and prosperity of the institution was due to the goodwill of. tho bank (which Sir Joseph Ward had said, over and over again, belonged to the shareholders), to tho increased* prosperity of tho country, to the general increase in value of its assets, and last, but not leaßt, to an excellent staff.

"That tho necessary steps be taken to -secure that the X 1,000,000 debentures guaranteed by tho New Zealand Government be paid off at maturity in July, 1914." The.banlc, he said, was now in a position to pay off the debentures, and they should bo paid off. He had already pointed out tho risk the shareholders ran. On December 3. 1907, tho chairman of tho bank said that if tho board continued its then policy, ho was hopeful that they would be ablo to repay the X 1,000,000 debentures in 1914, without increasing tho present issue capital of tho bank. That, ho said, was a consummation devoutly to bo wished for. Now, went on Mr. Skerrett, tho sarao high authority wished to procuro an extension of tho Government guarantee for 20 years, which 'he (Mr. Skerrett) supposed was jilso a "consummation devoutly to be wished." Ho would point out that there would bo no difficulty in raising any increased capital they required. It was well-known that tho existing shareholders were anxious to increase the capital in the bank, and he ventured to say that if they wished to raiso a million they would bo able to secure it on just as good terms, without tho guarantee of the Government as with it. (Applause.) Resolution two read:—

"That it is ndvisabls that the authorised capital of the bank bo increased by an amount not less than £.1 000.000 by the issue of 300,000 ordinary shares of .EG 13s. 4d. each; and that, if necessary, tho directors or shareholders should promote tho nocos*

Mr. Skerrott's Resolutions, Mr. Skerrott then moved tho resolutions standing in liisi namo. Tho finst resolution was:—

eary legislation or proceedings to en- • ablo such increase of capital, and any future increase of capital which from time to time may bo thought desirable to be effected either in accordance with Paragraph 13 of tho bank's deed of settlement, or Section 5 of tho Banking Act, 1908." Tho mover understood they were nil agreed upon that, and ho would not speak further on it. Eesolution 3, ho said, was of importance, and had been considerably misunderstood. It read: "That tho issue of such now capital shall be within tho discretion of the directors; but that 150,000 shares of such new capital shall be at once issued; and shall bo offered in the first instance to all the holders of ordinary shares in proportion to the amount of tho capital held bv them at par or on such terras as shall be determined by the resolution of shareholders authorising such increase of capital." Ho wanted to point out that the resolution did not commit the shareholders to the issue of new shares at par. It said: "At par, or on such terms as shall bo determined by tho resolution of the shareholders." The point of tho resolution was tha? the shareholders were .to say on whatever terms the new capital was to bo raised, aifd he had no doubt tho best possible advice would be taken upon tho matter. It was pure fallacy to suppose there was any difference botween tho interosts of tho bank and tho Shareholders. On the question of whether the shares were to be issued at par or not, ho said it would be bad policy to issue at par if pairt was to go. to the Government. He thought they would agree with him that if the reserve of the bank required strengthening then _it should bo s'trengthened. Ho did not think tltero was a single shareholder who desired to do anything but keep up the reservo of the bank. If, however, as was the inference from Sir. Beauchamp's speech of 1907, they could pay a million without any increase of capital, it would seem that the proper inference was that the reserve fund as at present constituted was ample, and the position of the bank was such that they could keep on making yearly contributions to the strengthening of that fund. That was a technical matter on which he did not profess to speak with any authority. He wished to point out that the shareholders had a ETeat claim for consideration from the directors of the bank. The shareholders had incurred a liability of half a million on which thfcv had receivod no interest. He thought tliey should take into consideration whether some repayment could not be made in respect to the past losses Of tho shareholders. He knew it would be said that they were not the same shareholders. There were still many of the same shareholders on the _books, and new names did not necessarily mean new shareholders. Those who had purchased at a lower price tad all their rights and liabilities. The weight of the motion was that the shareholders should decide on tho issue. The Government Guarantee. The fourth proposal was:— "That in view of the fact that the Government guarantee will no longer be required and (hat tho Government will have no further liability with regard to tho bank, Cho shareholders resolve that it is desirable that legislation should bo promoted ft increase (toe representation of shareholders on the directorate of the bank to four; and to reduce the number of directors to be appointed by the Governor-.in-Council to two; the powers of the chief auditor, uider Section 17 of the Bank of Nmi Zealand and Banking Act Amendment Act, 1698, and the powers of the Governor-in-Council under Section 11 of tho said Act, to veto any resolution passed by shareholders to be maintained." Mr. Skerrett said he had already substantially discussed the matter. It was notorious in the past that Government appointments had been political appointments. He asked was that politic or safe in the concerns of a great business? Mr. Kennedy had pointed out that it was unsafe to havo the board controlled entirely by the Government. It was quite possible that the Government might bring pressure to bear to curtail private advances in tirno of stress, in order that the bank could assist the Government. The position was emphasised by tho fact that the board considered the shareholders as ciphers. The fifth resolution was formal— "That it be an instruction to the directors to take tho neoessary proceedings to give effect, to the above resolutions." The sixth required some explanation, said Mr. Skerrett. It was: "That the : directors be instructed to forthwith obtain the opinion of the Supreme Court on the following questions:—(a) Whother shareholders are entitled under tho Deed of Settlement or Section 2 of tho Banking Act, 1908, without further authorisation by •legislation to increase the capital of tho bank by the issue of further shares, and if bo,<W what class of shares, to what'extent aiid subject to what conditions, (b) Whether, in the event of such further ordinary shares ■ being issued on the terms that they shall be offered in the first instance to all the holders of existing ordinary shares in proportion to tho amount of capital held by them the Crown is, under Section 10 of the Bank of New ' Zealand Act, 1903, entitled as the holder of preference shares to be offered and take up its proportion of such further issue of ordinary shares in the same manner as holders of ordinary shares. The position was that the resolution need not be acted upon if the nominees on tho board l could make equitable arrangement -with the Government. He ventured to say tho directors in the past ought long ere this to have had the matter ascertained. It was doubtful whether the shareholders had power to increase their capital. It was quite arguable that tho shareholders had the right to issue further oapital provided they did not affect the priority given to the Government on their shares. He would not give an opinion, but that point should be determined. The second point related to preference shares. It was suggested that the Government, as holders of preference shares, would be entitled to participate with an ordinary shareholder in the issue of preference shares.' That right should bo ascertained. Ho

was assured that the section did not in-i tend to give that right to the Government. It might be a matter of importance to the public whether the Government was to become a speculator in the bank.

London Interests, In conclusion, he wanted them to remember that one-half of the ordinary shares were held in London. That would justify them in asking for fair consideration. He did not Buppose for a moment that tho Government intended to do anything unjust, but that was no reason why they should not make sure that their interests were put properly before the Government. Mr. Skerrett read an extract from the lato. Mr. Seddon's speech in 1898, at the time of tho legidation which gave control of the Board of Directors' to the Government, to tho effect that he (Mr. Seddon) quite agreed that the control should be kept quite clear from the Government. The sooner tho bank was disposed of, and was off tho hands of tho Government, the better ho would appreciate it. It was not tho way for the Government to get clear to hand it over to the shareholders. If they (the Government) did not liolp the bank to improve its position, how was it to get out of tho hands of tho Government? Tho only way, went on Mr. Seddon, was by improving its condition, so that in tho course of time, with the improved position of tho colony, they could get somo capitalists to come to the rescuo, and take it. They would never get them in any other way. Commenting on this extract, Mr. Skerrett said that it was explicit that Mr. Seddon did not want Government control of tho bank when tho bank was in a position to dischargo tho liabilities guaranteed by tho Government. (Applause.) Mr. S. ICirkcaldie seconded tho resolutions. Ho said it had been mado clear that the bank had discharged, or was in a position to dischargo, its liabilities. Ho believed they could restrict tho Government to their present holding of preferential shares if tho matter was taken to the higher court. Tho interest of shareholders could only bo preserved by complete unanimity of tho ordinary shareholders. He hoped a full report would be placed before tho London shareholders at an early opportunity, and their assistance asked. In the Dark 'Eighties. Mr. Wm. Watson, (/hsrcWdur.i' repre* sentativo on tJio board. eaidi-r'l bujjwS

the' resolutions moved by Mr. Skorrett, and do so without in any way seeking to minimise tho great help renaered by the State to the bank in 1691 and 189 a. As th<jro is much misconception regarding the position of tho shareholders, 1 liiU-iKi, beforo dealing with tho resolutions, to put on rocord,' as brieliy as possible, tho events which havo led up to tho stand we are

now taking. In the 'sixties and 'seventies of last century outside money was imported very largely into Aow Zealand by the Government and others; employment was plentiful, development tapid, and prospects generally lavourable. liosides the Dank of New Zealand, other banks and many lending institutions, with British capital and money borrowed in Britain, were established, whilst private British investors sent largo sums to bo invested in properties and mortgages, under theso conditions landed estate of all descriptions rose to high values, considering tliat at tho timo tho dairying and frozen meat industries were not in existence. In tho 'eighties a woetul change took place. Prices "of our staple products felt very low; the pest of rabbits sadi} reduced • the production of wool, and tue lessened expenditure on public works to about one-iourth of what ic was previously took away trom tho working classes the power to purchase goods or to pay their debts. Bankruptcies .were tho ruie rather th*ui th© exception, Alaiiy iuiiholders, farmers, merchants, and tradeis of all sorts wero ruined, and landed property tocamo in many cases impossible to realise at half its lormer value, in these circumstances a purely Now Zealand institution such as our bank could not hope to escape trouble. Nomoney-lenuiug institution of New Zealand did. Ihc Natioual Bank, tho Colonial Bank, the Loan and Mercantile Co., tho National Mortgage ' Co., tho Otago and Soutnlanl investment Co., the Colonial Investment Co., and others, wero more or less disabled. In those days the Bank ol New Zealand, in common with others, took a large amount of deposits m Britain, and the state of aifairs in the colony caused the British depositors to make what was practically a run on the bank in London. In New Zealand—tlianko to tho bank's staff—the deposits were more firmly held. But the bank and its credit were now in jeopardy, the hope of a revival of prosperity was too long deterred, and in 1888 it became necessary to tacetho position. A oommittee of unareholders was appointed in that, year to go carefully into the affairs of the bank, and on their recommendation tho whole of tho reserve fund, amounting to Xt>2o,ooo, plus ,£300,000 of the paid-up capital, was written off; ,£500,000 new capital was .raised, but although at the time this drastic measure was considered reasonably sufficient, a further fall in tho values of assets proved it to be altogether inadequate. In 1890 the Bank of New Zealand Lstates Company was formed to take over tho uinliquid assets, and liberate part ot tho locked-up funds by tho issue ot debenture* at a high rate of interest to tho extent of ,£1,500,000. 'Iho bank itself took up shares in tjie Mm l)any lor. Ji1.850,000, tho balance of book value ot assets transferred. It was part ot this arrangement that the head ofhee of the bank was transferred to London on July 22, 1890. .£300,000 further was written oil the capital, which left it at £900, 000. Circumstances did not improve, however, and in four years the position again becarno acute. Tho authorities of the bank, being at the end of their resources, decided, as the only alternative to stoppage, to appeal to the Government of tho colony lor in -view tho history o_f tho institution, the circumstances which had brought about its difficulties, and the extent to which the fortunes of tho oolony were bound up with tho bant, it was considered that such an appeal was justified, and inasmuch as time only was necessary to turn the corner without saddling tho colony with any eventual liability, the appeal was granted. Legislative 'authority was given for an issuo by tho bank of 000,000 4 per cent stock, carrying the Government guaranteo lor principal and interest. The head omco was transferred from London to \Vellington, and, upon thorough investigation of the bank's affairs by,tho new board. i!f was found necessary to write on all the capital and reserve fund amounting to .£915,000, to make and write off a call on tho reserve liability of ,C 3 Gs. Bd. per share, which amounted to JE457,0G6 more, to make a further call on the reserve liability of .£3 os. Bd. per share to furnish the present shareholders' capital of .£500,0000 (leaving the remaining Gs. Bd. as uncalled capital), to issuo ,£500,000 in preferred shares bearing 3i per cent to the' Government, and to set up the Assets Board which took over tho New Zealand Globo assets paying tlio bank in debentures for book value guaranteed by the Government.

Errors of Judgment, "Notwithstanding that tho colony and the bank had passed through more than ten years of national calamity and disaster, it became the fashion amongst somo to cast all the blame for the bank losses on the directors and tho executive. Eeference to my evidence before the Parliamentary Commission in 1895 will show that I did not hold this view, although no doubt in continuing to pay high dividends, arid in trying to keep up certain assets, errors of judgment were made. But the main trouble was beyond their power to avert. Practically the shareholders' inpney had been used to develop the resources of the colon}', and tho return was postponed beyond the endurance of the investors. The foregoing brings lis down to the ?nd of 1895, and the amount actually paid in under all headings by shareholders was .£'.2,733,473, for which they have now only iaOO.OOO bearing dividends. But it must bo remembered that they retained tho goodwill which was very valuable, and was the source from which tho subsequent accumulations of profits were derived. It is theso accumulations and tho goodwill which have raised the value of the shares to over J2ll,'' the expectations beira that future benefits would compensate for former losses, and the many years of no dividend. "The .£500,000 preferred shares, bearing 3J per cent., were paid off in 1900, I believe, because tho Government wished it, and for a few years the State held no share interest in tho bank. Under tho law as it stood then, theso shares were held by the bank, available for re-issue at tho board's option, in the first instance to the ordinary shareholders rateably. Tho Act of 1903 altered all that, and by it the shareholders were placed in a very much worse position than before.

"Your . interests demand - that there should bo no misconception regarding tho manner in which your representatives on the board, and the general manager of the bank at that time, were forced to agree to the conditions imposed in 1903. Legislation was sought early in that year for a partial renewal of the assistance given in 189-1 and 1895, to enable tho bank to renew half the guaranteed stock, and the remainder of tho Assets Board debentures. The Government at first asked to be allowed to purchase .£500,000 in ordinary shares—the bank doing well then—and to get a commission of 1 per cent, per annum on the amounts guaranteed. That was objected to, and the Government delayed coming to any agreement until so late in the session that there was no time to appeal to the shareholders, and when the demands were modified they had to be accepted. At the present juncture no guarantee, or monetary assistance whatever, is necessary, and your representatives deemed it to be their strict duty to put tho whole matter clearly before you, and in good time, so that your expressed opinions may have duo weight. They regret that tho present chairman of tho board evidently regards their carrying- out this duty as being antagonistic to himself. The Present Proposals. "The Act of 1898 took away from shareholders tho appointments of the majority of tho Board of Directors, the Act of 1903 provided for infringement upon their revenues from the goodwill and reserve fund—all this without the sanction of tho shareholders—w'hile tho conduct and business of the bank were progress,ing favourably, and there was always ,£1,000,000 of the shareholders' capital and liability between the State and loss. In fact, tho shares stood at a premium in 1903, and there was no question at all of loss to the State. The present proposals of tho chairman of the board would eat still further into the rovenuo of the shareholders, thus proceeding, at their expense, gradually in tho direction of making the Bank of" New Zealand a Slate bank. If such' Is Intended, it should be dono by purchase outright at an actuarial valuation of the surplus assets and goodwill, anil not by gradual encroachment on tlio property of the shareholders. "It is unthinkable, however, that, the facts being known, such encroachment should bo allowed to prevail, and in conn'ctiou with this, mhl tlio chairman of ths bwl'fl dosiro to. shut out thjj eliaro-.

holders from having any say as to tho legislation of this session, 1 cuunot do belter lluul read from 'Hansard' ot November la, 1903, soino of tho remarks made in Parliament by the Hon. iIT. Ma&sey, now Prime Minister. Ho said:

'"As far as tho shareholders aro concorned, 1 am inclined to think that they have not been properly consulted with regard to what is proirosed. Tlio l'lt'mier said ho had received no objections, but how is it possible that ho could have had any when tho shareholders are scattered right throughout Now Zealand, and up to yesterday had not the slightest opportunity of knowing what was intended to be dono? It is of course a fact that wo guaranteed tho debentures of the bank, but wo did not guarantee tho debentures to save the bank; we guaranteed tho debentures thinking of ourselves, and to savo the colony from disaster, an<l tho mere fact of our having guaranteed the debentures does not give us tho right to demand a partnership in the bank now that prosperity has returned'. Sir, 1 may be told that tho shareholders have been consulted' through their representatives on tho board of directors. That may bo tho case—l know nothing at ail of tie opinions of tho representatives of the on the board; but I do say again that 1 believe the shareholders should have had a better opportunity of expressing their opinion with regard to this Bill. Then wo have to remember the constitution of tho board of directors. There are six directors, four of wihoin represent the oolony, and only two represent tho shareholders. I believe tho 6hareholrters havo good iea£on to complain, and that they will complain when .they cqiiio to understand what is being done, This Bill should havo been circulated weeks ago, ..and every shareholder given an opportunity of expressing his opinion thereon. I am very sorry indeed that the bank has not seen its way to stand alone, and cut tho conned/ion with the {state for good -and all. I believe it would have been better for both the bank and the colony had they been able to make an arrangement in that direction. In that case something might havo been done in the way of appointing an auditor who, in Hie interests of the colony, would havo safeguarded tho people from the possibility of mismanagement on tho part of the bank.'

"Further, he said:— " 'But with the Eight Hon. the Premier at the head of affairs there is no knowing what may happen or what expedient he may resort to if ho should become short of money, and is unable to raise it in other directions. Most of us who havo been taking any notice of the financial arrangements of tho Government kiiow that tho Government have already made considerable use of tho Bank of New Zealand in connection with our financial operations. I havo only to refer to what happened with regard to the last loan. It has been admitted from the Treasury benches that the Bank of New Zealand were lite underwriters of about $500,000 of the last loan. We know that our stocks havo been going down over since that timo, and in all probability the bank holds our debentures still. If so, it is an arrangement that is satisfactory neither to tlio bank nor to the colony. Then, if my memory serves me correctly, and I believe it does, two or three years ago tliie bank took up .£IOO,OOO or ,£500,000 'Of short-dalied dlebemtures, so that at tho present time we probably owe the bank something like .£1,000,000. Now it is proposed as a sort of set-off to take "'o .£500,000 preference shares!' Question of Rsnewal. "In regard to the first resolution before you, it has been brought to my notice that a newspaper in tho south quoted mo lately as saying, on December 4 last, that the £1,000,000 guaranteed stock should bo renewed. It omitted, however, to quota my saying at the same timo thait 4 per cent, was as much as tho bank should have to pay for it. Now the outlook' is quite against our being able to renew in London at a price to cost us only 4 per cent, per annum, and, besides that, mature consideration has convinced me that the London, shareholders were right in resolving that it would be best paid off.

"Tho desirability of Resolution 2 is evident. I should not object to tho amount of authorised capital being increased by .£3,000,000 instead of .£2,000,000.

"It is also highly desirable to pass Kesolution 3. The chairman's idea that the first issue should bo at 50 per cent, premium is well known, but where is the necessity for suoh a chargo which would bo likely to prevent shareholders from over recovering their money, howover valuable their goodwill? And' with the strength of tho present reserve fund, and every prospect of handsome yearly additions why should shareholders, after all their past burdens, bo coerced into bearing such nnother heavy one to further augment it? It has to be considered that many shareholders may not be in a position to pay so high a premium as 50 per cent., and their options to take shares might have to be sacrificed). To those dealing with tho bank it cannot matter whether tho shareholders'_ funds are under tho headings of capital or reserve fund so long as the total amount is the same, and tho investments are the same.

Fraught With Danger, "The importance' of tho adoption of Resolution 1 cannot bo too strongly urged. Apart from the unprecedented anomaly and injustice to a body of shareholders, owning two-thirds of an institution, and —under compulsion—having only a minority vote at the board of directors, continuance of the present arrangement— provided arbitrarily, and ostensibly to suit a position which-no longer exists—is fraught with danger to all concerned. Under tho present system it is more than possible for Governments to appoint majorities of tho board in reward for political support; also to drop them out for independent action or speech. It is more than possible, too, for appointees of ono Government to lose their seats on tho advent of another. All this, and the fear connected with it, is bad for the bank, bad for the staff of offioers, and especially bad for the shareholders who are in the outer circle without means of protecting themselves. No such body of shareholders would ever be satisfied with such a system.. It seems to me that undefined responsibilities exist in the prosent arrangement of tho board, hardly to bo noticed, or lightly considered, in tho prosperous years since 1898, but sure to be prominent and insistent in a time of serious depression. Surely having the appointments of two directors and tho chief auditor, as well as the veto of tho Governor-in-Council, should be sufficient security to tho State. Mr. Mossey on August 5, 1898, spoke in Parliament on this subject as follows:— " 'Then it provided that instead of three directors being elected by the shareholders, as at present, and ono director and the president—who is also a director being appointed by tho Governor-in-Coun-cil, we are to have, if this Bill becomes law, six directors, four of _ whom will bo appointed by tho Governor-in-Council, and two by the shareholders, thus bringing tho Bank of New Zealand completely under tho control of whatever Government may happen to bo in office. Sir, if there is one institution more than another which should bo kept separate from party or political influenco that institution is tho Bank of New Zealand, backed up as it is by over five millions of money belonging to tho people of this colony. "Bearding Resolution 0, I think it is highly advisable that all parties should know clearly by a declaration of the Supremo Court what their present rights are. It is particularly, essential at this juncture."

"Daylight Robbery." Mr. A. Macintosh said there was one matter not sufficiently emphasised, with, regard to tho profcrciico shares. That as that tho preference shares were obtained bv the Government at par, and without any liability. When tho action was being thrashed out by Cabinet, ho did not hesitate to say that tlio action of tho Government, in tho way in which they secured that interest in the bank, was at best downright daylight robbery. Dr. C. P. Knight said that tho timo the Government got bank made a profit of ,£h-,'loo. That i showed quite clearly that tho bank had recovered, and ifi was only a question of timo for it to go on as it had done since then. It was not duo to the Government. They had a good board at tho time, and it was quite clear when the Government interfered and made a majority control by their nominees, there was 110 need for such action. The bank had turned the corner. In tho course of a reply to Mr. Brown, Mr. Kennedy said that in regard to repayment of a million pounds it did not mean that a million pounds would bo withdrawn from here. It would bo withdrawn from London. 1' urthor, having como to 4ho conclusion that as long as til tit liability wnn out ftp}' could not MB Jor & rgooaftrufltioiii deoidsi Mf. to.,

take any renewal without reconstruction giving tho shareholders a majority on tho board.

Mr. Skerrett's motions were then nut to tho meeting, and unanimously carried amid applause. The Capital. Dr. Knight moved, and Mr. 11. B. Jackson seconded, that proceedings be taken to altor Paragraph 22 of tho Deed of Settlemeht so as to increaso the maximum number of shares in the capital of the company which may be held by any ono person from three thousand to six thousand shares. '• Tho motion was carried. Mr. S. Kirkcaldie moved: "That proceedings bo taken to amend' Subsection 2 of Section 14 of the Bank of New Zealand Banking Amendment Act, 1898, by increasing the maximum number of proxies which any ono proxy-holder is qualified to exercise from 250 votes to 2000 votes." Mr. J. A. Plimmer seconded the resolution, which was supported by Mr. Watson ; Mr. Kennedy said that ho was not satisfied with the position that had arisen in connection with tho proposals made to tho Government. Tlieso proposals had gone before the public as tho recommendations of tho Board of Directors, whereas Mr. Watson had dissented from tho proposals and lie (tho speaker) had not been present when they wore framed. The proposals had been published without it being stated that there was any dissent whatever. He had therefore taken steps to havo a meeting of the board called for Tuesday next, and at that meeting he would bo able to secure that a minority report on the proposals was mado; The motion won carried. Mr. _N. J. Barnett moved: "That the following shareholders be appointed to consult with and adviso tho representatives of the shareholders on the board, with a view to safeguarding the interests of the shareholders in the stops to be taken in connection with tho contemplated legislation for increasing the capital of the bank: Messrs. P. Drummond, J. B. Harcourt, M. Kebbell, G. M. Kebbell, M. J. Kilgour, S. Kirkcaldie, Dr. C. P. Knight, W. W. Knowles, A. E. Nabin, A. Macintosh, A. Maguire, M. O'Connor, J. A. Plimmer, J. Russell, C. P. Skerrett, and N. J. Barnett." Mr. Mabin seconded the motion, and it was carried. "Gilding the Lily." Mr. Kennedy said that after the speeches which had been mado there was little left for him to add. Anything he could say would bo largely in the way of repetition of his remarks at the annual meeting. The resolutions which had been passed wero the main things. To add anything to Mr. Skerrett's remarks would bo simply "gilding the lily." He was not by any means satisfied that the Government had encouraged the chairman to proceed in the direction ho had dono, but until the Government took a hostile attitude in regard to the proposals, it was their (tho shareholders') duty to assume that they would be a party. Surely, they wero all interested in the good name of the Government, but where would that good name be if they repudiated an honost contract?

Continuing, Mr. Kennedy said that he wanted to speak with every respect about Mr. Beauchamp. They knew he liked to advertise himself, but while he (the speaker) didn't object to his advertising himsolf as Harold Beauchamp, he objected to his advertising himself as the chairman of the Bank of New Zealand. Ee believed that all the proposals had originated with Mr. Beauchamp. If "he (Mr. Kennedy) hadn't known Mr. Beauchamp he would have held his hand. He had the matter in mind in London, but did not disclose it to tho newspapers. He would not have been doing his duty if 'he hadn't. warned the shareholders of the kind of directors they had. All that was necessary, to felt, 1 wa3 to put before the shareholders a full knowledge of tho position, and the danger to the bank if they allowed the present position to go on.

Dr. Knight deprecated tho appointment of nominees on the board for two years. He thought it would be far better :f the term was five years. Mr. Kennedy asked how thoy could have security without an independent board? A claim was put forward against giving authority of management to the board because of the failure of the bank in the past. What wis the failuroof tho bank in the past due to? By advancing large rams on largo areas of undeveloped land, which had not proved payable prior to 1894, and also by large advances in Australia, including West Australia, Adelaide, Melbourne, Sydney, and Newcastle. Why, more than half tho actual losses of tho bank was due to the latter causes. Those conditions cannot bo repeated, for tho arens of such land are not available in the Dominion, and the bank has withdrawn from Australia, as regards advance business, and in any case the chief auditor could stop any Tisky business. Further, he objected to any man putting on "hob-nailed boots to his colleagues. Tho constitution of the board to-day encouraged a man to do that, unless he was not inclined to swelled head. Tho present wan an absolutely rotten method of appointing a board. He had no hesitation m saying that. If ho did not have a large interest in tho bank ho would not sit on the board. Mr. Beauchamp's action had proved their case that they had not an iota of independence.

Mr, Macintosh and a Past Cabinet. Mr. Kennedy, continuing, remarked that he had told the Hon. Ilr. Alien certain things. Ht. Eebbell: I thought politics were barred at this meeting? Mr. Kennedy: I am not talking party politics. Mr. Kobboll: I don't mind. I am just reminding you. Mr. Kennedy: I am not blaming Mr. Allen in any wav. I am just telling you what I said to him. Mr. A. Macintosh said that he' wished to point out what the shareholders could be subjected to by a board constituted as at present. He recollected what occurred when it was proposed to pay the. first dividend to the shareholders aitor the passing of the 1891 Act. Ho maintained that the passing of that dividend did more to restore the bank than anything else did. Small as it was, that 5 per cent, dividend marked the turning point. "And," continued Mr. Macintosh, "when I mado that recommendation to tho Government—l am not committing any breach of faith, it is a'matter affecting the policy of the bank, and I think there.should bo no reticencejudge my surprise on being summoned by the then Premier to his residence, and informed that Cabinet had decided not to permit the payment of the dividend, and that in that they were supported by the chairman of the board." , Mr. Kennedy: Nor .tho present chairman? Mr. Macintosh: No, but he was.a member of the board. Continuing, Mr. Macintosh said that shareholders would realise the difficulty which was experienced in getting that dividend passed. But the position was so brought homo to the Government that they could not get away from it. However, if tho matter had been left to the board tho shareholders would not have got tho dividend. That went to show the mercy of the Government for the shareholders. "The Government," he concluded "forced tho shareholders to give them an interest in tho batik, which they were no more entitled to than I.aoi* . Tho meeting concluded with a vote ot thanks to Mr. Kennedy, and his colleague (Mr. Watson) for their services to the shareholders.