BANK OF N.Z.

Dominion, Volume 7, Issue 1936, 19 December 1913, Page 5

BANK OF N.Z.

MEETING OP SHAREHOLDERS.

RECENT LEGISLATION.

!r. • .... . -■~■: SPEECHES BY THE DIRECTORS.

BOUNTIFUL SEASON AHEAD.

Interesting references to tlis recent banking legislation were , made at yesterday's half-yearly ' meeting of the shareholders of the Bank of New Zealand by the chairman of directors (Mr. -Harold Beauchamp). In tho , course of his remarks • tho ■chairman.'said: "Our' half-year genoral' meeting, at which, as you know, there is no statement of accounts to be submitted, usually takes place early in the month of December. Tho lateness of tho dato fixed on this occasion was duo to our desiro to\givc ample time for the passage, of "legislation affecting tho bank, ..which was in contemplation whenlast, wo met' you. That legislation is now, as you are aiyarb, an accomplished' fact.'. Every 'shareholder will' shortly be. furnished with -'si, print''of the Act. I do not, therefore, propose to take up. your time by discussing , the details of the measure. I will merely refer to ■ the more-salient features of. it, which are, that the- £1,000,000 4 per . cent, guaranteed stock maturing on July 19 next will bo renewed for a further period /of twenty years,, with tho Government guarantee; and the board lias authority, with the consent of tho Minister of Finance, to raise, now capital for tho bank, to the extent of £3,000,000, of which £1,000,000 is to be B preference ; shares which the Government is to have the-option to take up; and £2,000,000 : to -be ordinary shares, which the ordinary shareholders are to have the option .to take up in proportion to their cx- ' " -istirig" holdings. ' • "Thus, the'hew'legislation .has satisfactorily defined and conserved tho interests 'alike of the'bank,' the shareholders, and the State, and.l congratu--; ■ late.you on this result of Parliamentary i ;• actjon. The board proposes to issue, as , '', soon 'as. convenient, one-fourth-of the ■ . £3,000,000 authorised, that is to say, .'£750,000, as 'follows: —£250,000 in 87,500 B preference shares of £6 13s. 4d.' each; to the Crown; nnd £500,000 in 7.5,000 ordinary shares of £6 13s. 4d. each, to the ordinary shareholders, at a premium of 50 per cent, in each ease. The B preference shares will be offered to the Government in accordance with - the provisions of the Statute.' The 75,000 ordinary shares will be offered . ~,to. .the ordinary shareholders in the proportion of one now sharo for every /two existing ordinary shares' held, .but • do fractions of shares will be issued. ' Payabls In Instalments. "The capital and premium will be payable in instalments-as follows;—,: . To bo allocated. 1 ; "' u ' On application,•'■ To . To ' - i - not later ■ Amount.capital..premium. -■'■' Tthan— .:•£ si;dw 'ifis.il. April 1,1914... 1 ; 0.16. 8 ro' 8 i July 1, 1914... .1. 5 0 0"lli : 8 . 0 8 4 Oct. 1, 1914..." -1-, 5.. 0.. CUli 8 0 8 4 Jan. 1, 1915... I's'o" 016 8 0 8 4 ' 'April 1,1915... 1 5- 0 . 016 8. 0 8 4 . July 1, 1915 1 a (I - 016 8 0 8 i Oct. 1, 1915 ... 1.5 0 01G 8 0 8 1 Jan. 1, 1911 i... 1 5 0 016 8 0 8 i 10 0 0 6 1.3 i '3 G 8 "No rebate will bo allojved on', any mounts, paid..before, .due"-'date, hut, • .shareholders will have, ihe'iplyif'Bi 1 prepaying all'or any of the above Jnstalr . n,ents'in full ; on any of the dates pre-, scribed," and the capital amounts in- - eluded in- such .prepayments "will .'rank for.'proportionate'"dividend..as., from • ■ the-.date of. prepayment,' proyided'that the proportionate amount of premium ■relating, to' such, instalments,, as mentioned 'above, be simultaneously'.'.paid. • All arrangements will bo completed so that the new capital may be subscribed as at the commencement of cur succeeding financial year, , viz., April 1 next, and the amount .then paid up will consti- .. tiite additional capital as from that date.. . .Tlio necessary documents in con- ,- i.nection with the, subscription of the now ; papjty'al .will be furnished to''.shareholders ..ili due course. . '.The 'share; 1 registers will 7. ."'ho closed some limo iivMarch'next, and the shareholders', .then : updn ''the" regis-: . . .iers will bo thoso, entitled tb participate ,'..ih tho proposed new capital issue. To . them' the application papers will "be sent, • f which", must "be returned 'tin'"or before . ■ nest, together with application moneys'-, as above .-mentioned. Arrange?. ....'niehts'will be made by which proprietors who do not propose to tako-'up their , 'quota of, shares may assign their '..'..'rights' to others.' The prospects of ' tho bank are extremely good; and the settlement of the proprietary interests ■ on what I believe) to be a fair and equitable basis constitutes in my- opinion a substantial addition to the value of jour property. The Money Market. "When I.last had tho pleasure of addressing you, I reviewed at some, length the financial situation and outlook, and remarked that!T ;was not sanguine.of an early return to' easier .-'monetary 'conditions. The views I then expressed havo been justified by events, and the tight-a-ness'ill ..the market i then prevailing still continues. Tho, Bank of England rate, ,'.;s'hjch'had been 'rdduced,'to:,4s,per cent., was raised again on October 2 to 5 per cent., at which figure it still stands. The'rate of the Imperial Ban]; of Germany is.s.per cent., and that of the Bank of France 4 per cent. You will ■ ' thus see that the 'dearness of capital is ■ uot confined to .London alone: it is the . . jondition of the whole commercial world, and it is-safe to say that there is little present prospect of money becoming more accessible on easier terms.. The enormous expenditure on armaments 6hows_ no sign of diminution, notwithstanding the drain on capital thereby treated; hut one of.the greatest causes .. of. the continued dearness is the demand from all countries for development purposes.' Th 6 moment there appears to be the. least relaxation of tension, the mar- . kot is flooded With applications fpr loans ■ literally "from every'quarter'.of''the globe, ■i. We■ cannot, therefore,, expect to find a •"'■' very'free market for our municipal, and other'; loans. ■ This . bank _ has been en- ' : trusted with the negotiations of a largo .' total of such, to bo placed as soon as cir;iimstances admit, but the prospects of favourable flotations, for the reasons already,stated, do not seem ,at all en- ■ co'uraging. There ' is, however, little dQubt that money in reasoiiablo amounts can bo obtained, provided that the borrower is prepared to pay the lender's price. Wo,shall have to choose ti\c most favourable moment to approach tlie marketj'and, as the unexpected sometimes happens,-we may perhaps'hope that it will occur in our near experience, in which case it will certainly bo gratifying. Owing to the stringency during the whole of the half-year, we have effected no loan flotations in London for any local bodies during tho period. Tho market has latterly been in a most pessimistic mood, and those corporations whose finances would not admit of postponement of their applications havo had to submit to onerous terms in. order to raise: tho funds they required. ■ Public Shy of Ovsrsoa Securities. "The general investing public appear - to be shy of oversea securities,- as the , • greater--part of colonial- municipal and other loans floated during the,, half-year has had to bo taken up by .tho underwriters, who at ono time bccamo so heavily loaded with stocks'.that they had to call a' halt and absolutely decline to consider any further issues until they

had been able to dispose of a reasonablo proportion of their burdens. With conditions as they stand to-day, 1 am bound to recommend New Zealand local bodiesj having loan issues in prospect,' to postpono any,action in the meantime, and to avoid making any commitments for outlay. J he New Zealand Government placed a redemption loan of £3,500,000 at 4 per cent, in October last, in the shape of ten years' debentures convertible into, inscribed stock _ at £101. The issuo price was £9S 10s. In this connection it is . interesting to note the terms on .which other recent colonial Government loans have been floated :— Issue price. £ New South Wales, £3,000,000 ■ at 4 p.c. in March, 1913 98 New South Wales, £1,500,000 at 4 p.c. in August, 1913 9"i Victoria, £2,000.000 at 4 p.c. ill September, 1913 98 Canada, £3,000,000 at- 4 per cent. in September, 1913 98 West Australia, £1,000.000 at i p.c. in November, 1913 . 97 Canada, £4,000,000 at 4 p.c. in December, 1913 97 "It will be seen that the New Zealand Government was able to obtain for its loan the highest price of the year. All things considered, therefore, the Government of this Dominion may well bo congratulated on the success of the operation. Turning now to the more local aspect of tho matter and the i money supply on this side of the world, wo find that Australia is anticipating a. good season, and rates for money are said to be weakening there somewhat, lenders being prepared to advance ' on mortgage at fully one-half per cent, less than they were demanding a few' months ago. , Promise of Bountiful Soason. ' "In New Zealand the season, owing to the excellent, winter, promises to be perhaps the most bountiful ever experienced, and as prices are on the whole good, the net yield should b8 most sat-; isfactor.y. In point of fact, I anticipate that at the end of tho current produce season, covering a period of twelve months, our total escorts Will approximate £25,000,000. Both in Australia and New Zealand, however, monetary ease resulting from tho excess of exports is not likely to be experienced to ally creat extent, because, though exports have lamely increased, imports have increased in even greater ratio. For permanent relief, therefore, we can ' look onlv to the Central Market of the world, and until London money becomes definitely cheaper, there seems small prospect of much ease in the Dominion. Tho Staff and Its Pay, "In the course of tho discussion which took place in Parliament ' when the Bank's Bill was under debate, reference was made by some' of tho speakers to tho pay of our staff, which is apparentlv considered inadequate. In view of this, I have had some comparisons made between the position in 1900 and 1913, and I quote thom below for your information: — In 1900. In 1913. Number of officers employed 553 957 Average salary paid £171 11 £195 2 Total of Provident'„ Funds ....' £148,163 £293,747 Maximum pension i, payable £350 £500 Minimum pension • : payable £100 £150 Bank's subsidy ...... — £10,522 Staff's contribution £2,610 £4,965 ''During the period under review, i.e., from 1900 to 1913 (both inclusive), the board has 'contributed to the Provident Fund an-aggregate of £71,732, whilst the concurrent contributions of the staff themselves . have amounted to £49,396. _ In addition to the improvement which th<j. .qyidcncc, the bank has paii a -■ steady annual j bonus .commencing with,' and including, tho year 1904. llio rate of tho bonus has been o per cent, of salaries, except in 191,1—tho: bank's jubilee year—when 10 per cent, was'paid. Tho actual amount of bonuses distributed year by year, has been as follows: — "Year ended March 31, 1904, £5534: 1905, £5793; 1903, £6146; 1907, £6717; 1908, £7077: 1909. £7280; 1910, £7485; 1911. £15,491; 1912, £8415: total, £69,938. More Liberal Increases of Salary. "No bonus was paid as at March 31 last, the staff having been informed on the occasion of tho last distribution in 1912 that it would :probably be discontinued, and that the board would, in all likelihood,_ prefor to-make'more' liberal increases in the salaries of deserving officers, rather than pay a bonus iii which deserving and undeserving share equally. The current year is the first on which the bonus has been missed, but I may mention on the other hand that the salary increases granted as at March 31, 1912, were unusually liberal. Some two years ago a scheme for improving the position of the junior staff was formulated, and adopted by the board. Under this scheme, youths, the bank's service at, say, seventeen years of ago, after completing their six months' probation, commence at a salary pf £60 per annum, and rise by yearly increases until, in their seventh year of-service, they receive remuneration at tlie rate of '£150 per annum. Thereafter, further steady annual increases, if merited, are granted. ' Tho bank has also established a fund for the pension of its aged messengers, and is gradually endowing another, fund, which will eventually be available for the relief of specially necessitous cases. From the foregoing it, will be seen that the position of the bank's employees is an improving one: that the board is not unmindful of tho interests of its deserving servants,, and that the advantages offering in the bank's employ should attract to its service men of a satisfactory anr', efficient class.' • Other Matters. "Wo now come to tho actual business of the meeting, the first of which is the ■election of a representative on tho board.. Mr. Martin Kennedy is the rc-> tiring director" on this occasion, and, being eligible, has offered himself for reelection.'. As there is no other candidate for the appointment, 1 have much pleasure in declaring him duly elected. The next business is the interim dividend. The profits for tho half-year ended September 30 last, while somewhat below those of the corresponding half of 1912, are still very ample, and we have every reason to oxpec.t that those for the current ,half-year will prove satisfactory. Tho board has therefore decided upon making the customary distribution. A dividend at the rate of 6 per cent, is declared accordingly, and will bo payable in Wellington tn.-morrow, Drcombor 19, and at. branches on receipt of advice. I do not think there is, anything more calling for remark .by me, and, as' Christmas is at hand, I will conclude by wishing yoli all the compliments of tho season." Shareholders' Interests. Mr. Martin Kennedy also addressed tho meeting, and expressed his grateful thanks to shareholders for tho honour they liavo done him in again re-electing him unopposed as ono of their two representatives oil the board for the ensuing twoyears. Continuing, Mr. Kennedy said: —"As the chairman has informed you, tho legislation which ho mentioned was in prospect at the annual general meeting in June last, and which caused some keen feeling amongst us. has since become law, and, although 'differing from him "in regard to some of the provisions of tho Act, you will, I am sure, join with ine in offering him our congratulations on tho fact that tho Bill was passed into law in .i shape practically almost tho same as that in which it had been 1 drafted in terms of his proposals. The shareholders' interests at stake in the

proposed legislation woro recognised by my colleague, Mr. Watson, and myself as being so vital that v>o deemed it prudent to invite tho co-operation and assistance of the local shareholders. Accordingly, at a duly convened special general meeting a (Jommittoo of bliarcholders, consisting of fifteen members, was, appointed to co-operate with us. This committee rendered valuable aid and advice in the negotiations, and we wero fortunate in having as ono of its members i\lr. <J. I'. bUorrett, K.C., whose assistance was of very great service to us. The result- was a compromise between tho Shareholders' Committee and tho board of tho bank, which compromise was adopted by the Hon. J. Allen, ;Minister of Finance, who had charge of the Bill before Parliament. The Compromise. "The compromise consisted in the following mutual concessions being made between tho shareholders and the Government : —Your representatives agreed: (1) That tho Government would bo entitled to take up one-third of tho £3,000,000 new capital of tho bank, the other two-thirds going to holders of tho ordinary shares, the terms of issuo as to price, premiums, etc., and ijlso tho dividends payable on such new shares from time to time, to be the samo both for tho Crown! and for tho ordinary shareholders, but tho Crown's shares to be preference as to capital, and to be paid for by the Government issuing debentures or consolidated stock bearing 4 per cent, interest. (2) That our claim tor a reconstitution of tho board, giving the shareholders additional representation on. the directorate, would bo relinquished, though wo in no way acknowledged that the demands of shareholders ought not to have been conceded.

"The Government, on its part, agreed: (1) That tho. Bill would become a Government measure, thus preventing its mutilation. in its perilous passage through both Souses of Parliament. (2) That tho "Uncalled Capital on the existing shares, namely £3 6s. Bd. per share (£500,000 in all), is to be called up, on the terms provided for in the Deed of Settlement, within seven years from tho date of the passage of the Act, or sooner, if in the opinion of the board the position and earning power of tho bank justify such calling up. Any resolution of tho board calling up the capital would, of course, bo; subject to tho approval of tho Minister of Finance; and I may hero mention that, having that in view, 1 on September 25 last waited upon tho Hon. Mr. Allen and obtained his assurance that, if the board saw lit to make tho call earlier, rather than later in tho period mentioned, he would not offer any objection. This promise on his part was followed by an undertaking on my part that the shareholders would stand to tho agreement entered into on September 16, notwithstanding that tho Public Accounts Committee had deleted from the Bill, as submitted to Parliament, Clause 10, which conferred upon you tho whole interest in' tho Reserve Fund of tho bank in event of winding up. ' "A Substantial Advantage." "Gentlemen, though not securing all we contended for, wo havo obtained a substantial advantage in the undertaking to call up this .€3 6s. Bd. per share of uncalled capital, and viewing all tho circumstances, 1 think tho ordinary shareholders may congratulate theni- . selves'upon the terms of'the settlement arrived at. And now, gentlemen, 1 hope I have made it clear to you that Mr. \Vatson and myself, as your representatives, havo done tue very best we could in your interests throughout tho negotiations. Tho loss which wo most of ail regret is that of tho increased representation for shareholders on the board. This, I say with all due regard and respect for past and present members of tho boaru; but,.notwithstanding our regret,.l affirnvand repeat my satisiaction with tho past management of tho bank under tho board as hitherto constituted. I may add that I entertain every confidence that tho Govornor-in-Council of this Dominion'(who appoints tho Government representatives on tho beard) will, so long as our Parliamentary representation is.maintained'at its present high level, appoint only capable and honourable men to bo directors of the bank. Nevertheless, I havo the conviction that a greater proportion of shareholders' elected representatives on tho board would havo been in tho best interests of the bank, giving greater stability in its control, and consequently a great l measuro of public conhdence. As regards tho authority given to tho bank's board to increaso the capital of the bank by an amount not exceeding £3,000,000, tho chairman has informed you that the board has decided to offer immediately £750,000 of that amount, which, with the premium of 50 per cent.; brings the amount payable lor each sharo of £6 13s. 4d., up to £10, making a total of £1,125,000, of which tho Crown's sharo will be £375,000, and the ordinary shareholders', £750,000. Whatever views may bo held regarding tho amount of.the premium the board has .resolved to charge in this case, the terms of payment, namely, eight quarterly instalments of .25"5. each. per . share, will, I anticipate, bo regarded as liberal, especially considering'the option given to applicants (that is, shareholders and Crown alike) to pay up in full, or in part, on April 1 or thereafter on any instalment day. Dividend can be Maintained. "While I would havo preferred that tho whole of this £10 per share should havo been made capital, thereby ranking for dividends, there is some consolation in the knowledge "that tho £375,000 premium goe's 1 to swell the already largo reserve of tho bank, at present £1,37.5,000, which will no doubt continue increasing, and by tho year 1920 should reach at least £2,320,000. You will not, I hope, regard'my forecast as too sanguine when I say 1 ; anticipate tho dividend can be maintained at recent level, for tho 15 per cent, will equal not more than 7-} per cent, on the then combined reserve and paid-up capital. The capital by that ■time will havo grown, I anticipate, to £2,250,000 by the addition of the £500,000 uncalled capital, at present outstanding, bub to bo called up within th:it time. In reply to shareholders' further inquiry as to tho future issues of the remaining £2,250,000 of unissued :authorised capital; ! may say that is a matter in tho discretion of the board, subject to tho assent of tho Minister of Finance, and no doubt will depend upon the prospects of tho bank finding profitable employment for such. And here I may say that, in the past, duo weight has always been given to the views of your representatives by. tho Government members of tho board, and I have r.o doubt tho samo good feeling will always continue between us. I unhesitatingly say I havo sufficient confidence in tho board to believe that further issues of capital will ba made only when tho board is reasonably convinced that any sum so to be issued can be profitably employed ill the. business of tho bank, and lor tlie benefit of the proprietors. It is well.to, remember, ill this.connection, that the bank's capital and reserves, in courso of tho next seven years, will probably amount to over five and a half millions. 1 put it thus:—Bank's paid-up capital, £2,250,000; bank's rcservo (estimate for years 1915 to 1920 at £70,000 yearly), £2,320,000; guaranteed stock, £1,000,000; total, £5,570,000. "With this largo amount of proprietors' money available in tho business, you will no doubt agroo with me that there is little probability of any further capital issues becoming necessary for some years to comc.

"Before resuming my scat I would like to mention, that, owing to the difficulties in the way and'the long delay in bringing matters to a point, my colleague, Mr. 'Watson, and I apprehended that tlio value of-the bank's snares in tlio London market mighty be prejudicially affected "and that, whilst negotiations wo.ro in progress, some of Uio London shareholders might be led to sell tbeir shares

at a sacrifice. We therefore deemed it prudent to warn shareholders iii London against selling out, and we cabled accordingly to Mr. 11. W. Snow, the chairman of tho London Shareholders' Committee. Again, after adoption by . the board of the circular which will bo issued to you immediately after'this meeting, we further telegraphed tho shareholders' committee that shareholders should await tho arrival of the circular before selling their shares. 1 trust 0111' action will have been effective ill preventing any of the London shareholders sacrificing their shares. Let Bygones bo Bygones, "In conclusion, 1 desire to say that owing to the circumstances and nature of tho negotiations from which the above-mentioned arrangements have resulted, it was inovitabie that a good (leal of feeling should be displayed on both sides, and some acrimonious discussions' have taken placo between the representatives of the conflicting interests. But now that it is all over, we mean to let bygones bo bygones, and the directors, irrespective of the interests tliey represent, will unite in tho future, as they have always done in tho past, in promoting the prosperity of the bank as a wholo, by which menus the respective interests of the Government and the ordinary shareholders will, of course, bo best advanced, there being really now no diversity of interest at all. AVith the increased resources which the fresh capital will place •at the board's command, I believe tho bank will enter upon an era of renewed and increased prosperity, evdn greater than that which it has experienced in the recent past I take the opportunity of saying that it is my own individual opinion that the shares of tho bank are to-day of more value than they have been at any timo dining the last twenty years." ■ The Principal Concession. Dr. I'rcndergast Knight, as chairman of the Shareholders' Committee, desired to say a few words of congratulation to tho bank on the passing of tho Bank of New Zealand Act, 1913, and to inform the shareholders that they Would receive tho report of their committed at the same timo as tho report of that meeting reached them. He did not wish to enter into any controversial subject, but only to say that the comrnitteo did its best to secure further representation on the board for tho shareholders, and failed. Thoso who had read the Act might say that the committee mado much cry for little wool. But the main success of the. committee's effort was not to be seen in this Act, itself, but in the memorandum, which was sot out at length in the report of the committee. Tho principal concession which had been obtained was tho promise on the part of the board to call up tho uncalled £3 6s. Bd. per share (on the present existing ordinary shares) within seven years, or sooner, if tho circumstances of the bank permit it to bo done. The other point, on which the committee had succeeded, was the alteration of tho deed of settlement, so as to secure freedom of speech and criticism to shareholders at meetings- of tho bank's proprietors. He thought that all would agree that the committee had acted wisely in coming, to an ngrccmcnt with the board of tho bank and tho Minister of Finance, so that Parliament could bs approached with a Bill, which they had all agreed to-accept. In arriving at a satisfactory compromise, tho committee Had been strengthened by tho addition of Messrs. Lanier, Auckland; H. F. Christie, Wanganui; C. Y. Fell, Nelson; and John Studholmo, Canterbury. It was therefore a larse and representative committee. As it was not, recorded in tho report c-f the committee, lio desired to mention that the committee at different times passed vote.", of thanks to Messrs. S. Kirkealdie, J, Mac- , intosli, John Studholmo, C. P- Skerrett, K.C., and the chairman for their exceptional services to the committee. The shareholders' directors had taken an active part in the proceedings of ithe ■ committee and rendered it the fullest assistance in their power. Mr. Kennedy added a word in reference to his interview with the Hoi). Jas. Allen. Ho should, he said, have mentioned that his colleague (Mr. Watson) was not well at that particular time, or he would have taken part in the interview also. A Now Zcalandsr in London. ' Mr. T. S. Weston spoke 6f the action of Messrs. Kennedy and Watson in cabling to the London shareholders as a good move. There was at the time a good dc."(l of anxiety as to what was going to happen, especially as thero was a fall in t!ie bank shares about that time. Tho action of the directors did a great deal to reassure the shareholders. Mr. Weston went on to mention that he and a number of other shareholders, who had been in London this year, agreed that shareholders and members of the board were,-to be congratulated in having on the staff of tho hank in London a man, who was a New Zealander, and who knew all about New Zealand affairs. Mr. Mill, to whom he referred, could not do enough for tlicrn and the.v all endorsed most cordially the movo in appointing him to tho position.

'i'lie chairman explained that Mr. Weston had been referring to tho assist-ant-manager in London. He (the chairman) was very pleased to hear that Mr. Weston and his friends had formed swell a high opinion of him.

This closed the proceedings,

, A report was afterwards circulated among members giving details of tire understanding arrived at between tho directors and tho committee of tho shareholders in regard to the recent legislation beforo tho Bill was brought up in Parliament. This .report stated that the costs of tho shareholders in connection with recent originating summons and the proposed legislation as certified by tho chairman of the Shareholders' Committee were to be paid by the bank'.. '