BANK OF NEW ZEALAND. SPECIAL MEETING. DRASTIC RECOMMENDATIONS.

Te Aroha News, Volume VI, Issue 305, 6 October 1888, Page 3

BANK OF NEW ZEALAND. SPECIAL MEETING. DRASTIC RECOMMENDATIONS.

; , - I Auckland, October 3. * A special . goneral "meeting of shareholders in the Bank of New Zealand was held at 2 o'clock this afternoon. /There wasa large and representative attendance. Mr George Buckley (President) • occupied the , chair. " ■ -.--', The Chairman said that in order to see that the meeting was properly constituted, > it would be necessary before business com- «• raenced to see that the requisite number of shares were represented by those present. Subsequently, the Chairman said that it had just been reported to him that over 50,000 shares were represented, and, bhey would therefore proceed with the meeting. "Mr Murray, general, manager, then read - the advertisement convening the meeting. He also read the minutes of the previous meeting.

REPORT OF THE SPECIAL COMMITTEE. Theunanimous report of the Shareholders' Committee was read by Mr* Justice Gillies, Chairman of Committee, as follows : — Gentlemen, — When at oar last meeting * you appointed, us a Committee of Investi- , gation into the, affairs of the Bank, we naturally feit,,that such an appointment implied a widespread anxiety on, the part of. the shareholders to have independent assurances as to the Bank's real position, an anxiety justified by recent circumstances ~'in"its history. ■ • "Thanks to the prevision of the inspector, and the efficiency of the Bank staff, our work was facilitated and we were soon able to assure- ourselves of the^soundness of "the Bank in respect of its ability to meet all its liabilities — a conviction which further examination confirmed ; but « r e at the same time found the position of things such as must be eminently unsatisfactory to shareholders, and that we were face to face with circumstances which necessitated a somewhat enlarged interpretation of our commission, mature consideration, ' and comprehensive measures in your interests.** Hence unavoidable delay in the v presentation of our report and recommendations. , - "Our examination disclosed a mass' of securities, taken in support of weak accounts, the value of which had fallen greatly, and many accounts in liquidation, or which ought to be so, the cover for which had become obviously inadequate ; altogether involving losses which the directors had not faced, but which, upon a rigorous examination, we feel convinced will absorb not only the whole of the Reserve Fund, but also nearly one-third of the paid-up capital of the Bank— say, £800,000 in all. "The data supplied to us are of a'clear and exhaustive character, amply authenticated ; and after a, minute and careful examinationof the variousaccounts and assets, . we are satisfied that, under good management and judjcious realisation of securities, the amount named should cover all losses. " You will naturally and properly expect from us something in -elucidation of a state of things.so startling, and which we had so, little .right to expect. "It is obvious to us that for years past the *T3ank has been paying a rate of dividend which ought not to have been paid. Securities have been held, and accounts kept, going, in the vain hope of a recovery of the values placed upon them in what was, in fact, a period of inflation ; and supervening upon this, within the last two or three years, heavy losses in Australia brought matters to the climax, which we are now under the unpleasant of facing. "The principal Australian losses have been made in Sydney and Adelaide," where the selection of managers was in each case, . to say the least, unfortunate. In Sydney* r after a gambling, career long known to most people, the manager was convicted* of embezzling the Bank's funds ; and in Adelaide, money appears to have been advancedi or rather squandered, in a way which can only be characterised as reckless and disastrous. ■ " North Island, New Zealand : In Auckland' we regret to find* that, though the Head Office of the Bank.is there, and its affairs - under the immediate eye of the directors, the general character of much of" the business carried on has v been most objectionable and the policy pursued open to grave censure. Inflated schemes or proposals coming from, or influenced by, certain persons, appear to have met with ready support, by lavish advances, to companies and individuals without adequate security or warrantable prospect of advantage, or even safety to the Bank. Such advances not only account for more than half the whole loss now disclosed, but the securities held, being more or less unproductive, curtail the earning power of the Bank, pending their realisation. " South Island, New Zealand : In tlie South of New Zealand, heavy losses in the past, incurred to a large extent through rash or dishonest management, have been so far previously written off and provided for, but securities, in themselves of a sound enough character, have been held without adequate allowance for fall in values, and the deficiency has now to be recognised. "And, finally, we find that advances have been made to some of the directors upon insufficient security, and from these advances heavy loss has arisen, estimated by us as over £160,000, while cettain transactions have come under our notice calling for the gravest censure if not for more specific action. " The connection between the Bank and the New Zealand Loan and Mercantile Agency Company, by the chief and other officials of the Bank acting for the Loan Company,, and being interested in the working.of both, has not, for many reasons, been advantageous to bhe Ban^and should, on no account, be allowed to continue, as we' copsider the Company has been unduly favpurejd by.the Bank. a'VAsfiregards the responsibility for this state;- *6f things, the directors, »s your nominees, entrusted with full power over all the officials and affairs of the Bank, are no doubt primarily responsible ; and beyond remarking that the real control of the Bank's policy. appears to have been for many years in the ,hamla;of a limited circle, with k which the late" General Manager was intimately associated, we should probably have said no more on this head, but for the circumstance that on application to that gentleman for explanation of certain accounts, he referred' us to the Inspector, who he alleged had been de facto General Manager for five years, i.e., since 1883. We have been at jspme pains to clear; > up this question, and we are o'f opinion that Mr Murdoch's allegation is not only unsupportedi by, the Bank , records, but is distinctly negatived by the Board -minutes and other evidence: We find, -further,* that up to 1886, ; when the Holt frauds were .brought to dight by Mr ' Murray, Mr, Murdoch was. the only official from' the head office, of the. Bank who ever inspected or i repoi*ted,upon^the branches in ' , Australia, and that the effective control of , J that tmsines's, as w.ell,as of the, accounts in *- New Zealand which caused the bulk of the ; .leases we.'now' deplore/ did not pass to Mr "Murray* till the'Bank's money had been adWanced, and the eyil done. We : ? think it pnly Sue to him andihe other senior to "acknowledge .their loyal .'adher-

: "ence to, the Bank and,theuCeflbris to conserve your interests under circumstances of very exceptional difficulty. ', , " Having how communicated to you the c l'esult'bf our investigations,, we have next to explain the measures which, upon conference with the directors, we think should be adopted to rehabilitatethe Bank. ,< ' , t "Considering how much a bank's prosperity depends on its repute, and on the - confidence reposed in it by its shareholders, and the public, the necessity for' radical changesin theadministrationandfor increase of the > capital of our institution became immediately apparent to us. And we may here observe that through deaths and retirements, the ' directorate and chief management" have been virtually already recoh stituted, and what we have further to say we ask you to xggard as the joint statement and recommendation of the directors and ourselves. v So much of the capital having been lost, it must necessarily be written off, and the shares reduced from £10 to £7 paid up, otherwise no * dividends could be paid till the amount lost had been replaced out of future profits. This would leave the paid-up capital £700,000, and the reserve liability £1,000,000. We have obtained the advice of London counsel that this writing off can be legally done, and you will be asked to give the requisite authority. We shall, however, ask your authority to apply for statutory confirmation of the alteration, and for power to the directors at their discretion to accept at some future time from shareholders who may be willing to repay' the £3 per share written off, thus reinstating their shares at the t original paid-up amouiit, without increase ;of the. reserve liability already attaching to the shares. The expadiency of increasing the capital is so obvious that we need not occupy your time in discussing that point further than to say that it is not due to financial need of the' money, but to the necessity for an increased 1 amount of capital sufficient to ensure* stability to the Bank and confidence to its depositors. "It is proposed- to take authority to create 100,000 new 'shares, and to issue 50,000 — which would make the paid-up Capital £1,200,000 and the reserve liability £1,500,000 — and we are pleased to be able to announce that applications have already been secured in London for 20,000 shai'es, by firms and persons of the very highest financial standing; which not only ensures the success of the operation, but gains for* the Bank new connections in the best financial circles — connections which the directors value highly, and will do their utmost to strengthen. Applications could have been secured for a larger number, if not, indeed, • ; the whole issue, but it has been deemed better to »reserve at least half for the colonies. Probably 25,000 will. be offered in London at £1 premium, and 25,000 in the colonies at par. . - " We may say that our conclu5iqns,as to what should be done, and how it should be done, have been arrived at after months of anxious consideration, and after consultation with the London directors of the Bank, and with otherpersons there of high standing, and in seeking your authority for what' we propose, we ask you to bear in mind that) we are shareholders like yourselves, that' your interests are our interests, and that, while ■ the circumstances of the Bank require decided and well-considered action, it is not desirable to discuss publicly the details or the various considerations which have led us to the conclusions now laid before ydu. ' ' " We ,will'only add that, notwithstanding the character,. of our report, we see no occasion for despondency ahout the future of the ,Bank, or to doubt that the shares you hold, or those you may take up, will be a good investment. ' _ "Finally, as regards the Bank) itshouM be borne in mind that the ordeal of such, an investigation, at a time of depression so extreme," is one vvhjch would be trying to 'any institution. Other banks, "now strong and. prosperous, have hail 1 trying episodes"in their .history, and the trenchant character of our report may be taken as evidence that we have determined to face and disclose all the facts. The goodwill of the Bank's business is of great value. It has in the past divided among shareholdei s over> and above 10 per cent, dividends, sums which aggregate nearly double the amount of the capital we now find to be lost, and while desiring to guard against the creation of • unduly inflated expectations, \ve are in a position to say, frpm the figures of the half-year just closed, that even now the f Bank's legitimate business is capable of 'yielding* good dividends, notwithstanding the serious* drawbacks under which it has of late been wonting. When time has been given to enable the directors to get rid of unproductive and,, to develop the Bank's legitimate operations, still better results may be confidently expected. On its. merits, therefore, the investment is one which, it appears to us, may be expected to yield satisfactory returns, and within a short period to command a considerable premium. " And it is to be observed that the Bank's business is by no means confined to New Zealand. In London there is a large and valuable deposit connection and exchange business, irom which virtually no losses are ever made. In Australia there is business of a strictly legitimate character, represented by assets and liabilities aggregating over £3,000,000 sterling, and contributing a material proportion of the available' profits to which we have alluded. And even as regards New Zealand there is no inherent reason why it should not be as prosperous and wealthy as any other colony of the Australasian group. J s it inferior to any of the en in climate, fertility, or naturalresources ? In its borrowing proclivities, which have been the subject of so much adverse'eomment, it is not singular ;, and in so far as these have been excessively indulged in, that is but a passings incident in national history, the temporary! conse-' quences of which have been too sharply brought home to the people of the colony to permit of the lesson being sqon forgotten. We are, Gentlemen, Yours faithfully, , Thomas B. Gillies, Chairman, Geo. Buckley, , W. H. Cqlbeck, John McLean, Auckland, October 3rd, 1888." The Chairman ' said that unless any of those present wished to speak to the report he would proceed to move the special resolution. Mr Ewington suggested that they should be allowed a little time to consider the report.

INCREASE OF CAPITA!* Copies of the report having been circulated, ' ' The Chairman then moved the following resolution : — " That the directors be authorised to^ increase 'the capital of the Bank by one million by the creation of 100,000 further additional shares at £10 each, and .that the Board of Directors be and- are x hereby empowered to iss"ue, dispose of, and -allot ' five thousand shares, or so many of them as. hey see ,fit, '"on-such 'terms and conditions and payable at. such, time,- arid: either, s wibh or -without premium, as the Board of Dilrectors may determine."- " , „; i , * -s 7 "^} 1 ""< "r 4 4 ,f Mi?Ch'er.ry''ayfe I ed^ to/ lirave the resolution - re&d'again^a'request' with; which the Chaiimah'compliedii'?'.(* ■< *-"> l^/M - *'f^^^ ■' ' ~ -"-

r Mr v Reader ' ,L\Vpod f/' thought "that' they, were" going, too. "fast. > -Tney should first consider r the;j report i^of - Jbh6 Com-, mittee, 'which' had "been siibinittecl^ to them. He asked the ruling of 'thelphairiiian upon'' the^ question of considering tfie report. ■ ' „ ., " Mr Justice ,Gillies explained .tha^-,nothjlng . done to-day would be binding until conformed at A a Subsequent meeting. He referred to , the .report., , The proposal to in--crease the capital would take effect, but the • alteration of the management would require 'corifirmation and more careful consideration.- With rega'rd to increasing the capital, instant • action was necessary, in order to secure the London connection. . Mr Cherrry said he thought it would not*be jus'tice'to the Committee for the shareholders - to.- pass the report over without discussion:The^Chairman said that other meetings would necessarily be held after this. At a meeting which would be called this day week the ' report could be further con sidered. The resolution was then put and carried.

DEED OF SETTLEMENT. The Chairman moved that the words " should not,"in the deedof settlement bo deleted, and the word " may " substituted. He explained that , at present under the deed oi settlement any new shares must be paid for in one instalment. The proposed alteration was to allow them to be paid for by one or more instalments. Mr W. .Wilson seconded the resolution, which was agreed to without discussion. The Chairman further informed the meeting that a larger number than 50,-00O shares \Vex*e represented 'in the room.

DIRECTORS. ' The Rev. Shirley Baker proposed that Messrs Butkley, William Henry Colbock, and .fc'x'ederiek Nelson George, being the only candidates for the vacant seats at the Board of Directors, be duly elected. Mr L. D. Nathan seconded the motion. The motion was then adopted. Mi* F. G. Ewington moved a hearty vote of thanks to the committee for their report. Mr S. Browning seconded the resolution which was carried unanimously. Mr Justice Gillies, Chairman of Committee, • acknowledged the vote. It had been suggested that this vote would be taken as an acceptance of the report, but he looked upon tihe vote rather as an acknowledgment of the Committee's labours. He was sure that every member of the Committee would feel gratified at receiving the thanks. The principal work had been done by Messrs Buckley and Colbeck at 'the * same time others who had less time to spai'e had verified the figures. 1 On behalf of the Committee he acknowledged the vote of thanke. Thanks were also due to Mr Walter Johnson, whose services in London had been of great value. This concluded the business, and the Chairman announced that there would be a confirmatory meeting held a week hence. Mr Murray then read the rough minutes,' and, being confirmed, the meeting terminated.