INVESTMENT TRUST

Evening Star, Issue 22327, 1 May 1936, Page 13

INVESTMENT TRUST

DEBENTURE HOLDERS MEET LIQUIDATION DISAPPROVED OF STATEMENT ON VALUE OF DUNEDIN SHARES [Per United Press Association.] WELLINGTON, April 30. Called by the Public Trustee, a meeting of debenture holders interested in the J. W. S. M‘Arthur properties was held to-day at which the Public Trustee (Mr E. 0. Hales) presided over about 80 debenture holders and their representatives from all parts of New Zealand. Mr E. P. Hay attended as counsel for the Public Trustee. The debenture holders were checked in, and even the Press representatives, who were admitted by the passing of a resolution, had to give an assurance of their hona tides. Dr F. Louat moved—“ That in view of the fact that the Investment Executive Trust debentures held by the Sterling Investment Company are held internally for the benefit of the debenture 'holders by one of the companies being liquidated such debentures be disregarded for the purpose of this meeting, and! that it is the wish of this meeting that no vote be recorded in respect of them.” ■ Mr E. P. Hay, speaking on behalf of the Public Trustee, ruled the motion out of order, citing the decision of Mr Justice Blair. _ , As liquidator for the Sterling Investment Company, the Public Trustee said he could exercise his vote if he wished to. Mr E. E. Hammond, who represented a number of people present, said that the debenture holders were in ignorance at present about where their property was and' whether the other property could be considered with it. The position had beeil allowed to go on for two years without the' debenture holders being told anything about it. In connection with the sale of shares in Dunedin, Mr M. V. Bates, public accountant, Auckland, said he would like the Public Trustee to inform the meeting at what price, to whom, and when the shares were sold. The Public Trustee replied l that the shares were sold, at £3 15s fid per share free of brokerage to some of the directors of the Trustees Executors and Agency Company. They were disposed of about February 20, negotiations having been opened with the company on February 18. The whole parcel was sold in one lot. Mr Bates said that the interests which he represented were prepared to pay 50 per cent, more than the Public Trustee accepted. The Public Trustee: I can only say that if your principals were prepared to pay 50 per cent, more it is a peculiar thing you made no inquiries between September and March, when yon learned that the shares had been sold.

Dr Louat: Perhaps you will tell us what steps you did take to get the full value of these shares? The Public Trustee said he knew the whole of the buyers. On February 18 the company in Dunedin approached him for the sale of the shares. It had been said that they were on the market for £3 10s, but those concerned l were told that they were not on the market at- that price. .He asked £3 16s 6d, and after three days’ negotiations they were bought at that price. Since that date the directors had" tried to get various members of the company to take up the shares, and they had not been successful at the price. Mr Norman Levy said he wanted to enter a vigorous protest concerning this transaction. He submitted that their best interests had not been primarily served. ■ A Debenture Holder: The only safe place for your assets is with the Public Trustee. This remark was greeted with cries of “No,, no,” and - one debenture holder said he strongly protested. STATEMENT BY M'ARTHUR. Mr J, W. S. M'Arthur, amidst applause, rose and said that there were certain facts about this matter which the meeting had a right to know. He asked the chairman’s permission to proceed. One of the debenture holders said he would like to know what was Mr M‘Arthur’s standing at the meeting. The Public Trustee explained that he was present as a proxy holder for the M'Arthur Trust of Queensland. This was quite in order. ,Mr M‘Arthur proceeded: “At the time of liquidation and until, I understand, some few weeks ago the debenture holders had as one of their assets 4,500 shares in the Trustees, Executors, and Agency Company, of Dunedin. The value of this asset to yourselves and to all the other debenture holders had no relation whatever to the market price. That price to-day is about £3 5s a share, hut because the Investment Executive Trust’s interest in the shares amounted practically to a controlling interest the shares we held had a very much higher value. The Dunedin company has assets of a total value of about £4,500,000. “ From a very early stage in its life the Investment Executive Trust held a certain number of shares in the Dunedin company, and in 1933, because of certain information which came to the knowledge of the directors of your company, they decided to increase its holding by every means passible. The information which we received from a reliable source was that the New Zealand Insurance Company, of Auckland, had embarked on secret negotiations with this Dunedin trustee company with the object of purchasing the whole of the issued share capital of the company, making payment in New Zealand Insurance Company shares. “ During 1933 and the first half of 1934 the directors of the Investment Executive Trust pushed forward energetically a plan to acquire a controlling interest in the southern company for the benefit of the debenture holders. The shares were actually bought by the Transport Mutual and General Insurance Company, which was owned wholly by the Investment Executive Trust. By June, 1934, we had in this way acquired a total of shares representing oyer 45 per cent, of the total share capital of the Dunedin company. VALUE OF THE SHARES. “ I understand,” Mr M'Arthur continued, “ that these shares have now been sold by the Public Trustee. I have not yet been able to find out—nor have I met anyone else who has—who are the fortunate purchasers of these shares or what steps the Public Trustee took to see that he was realising on your behalf their enormous potential value. 1 have said that they arc worth a very great deal and much more than the market value as established in the liquidation. What they would have been worth if the special legislation passed by the Coates Government had not destroyed the Investment Executive Trust yon can imagine from the fact that £4.500.000 worth of investments are controlled by

the Dunedin company. I had caused inquiry to bo made about the methods of management of the Dunedin company, and wo were fully satisfied that methods could have been devised to produce nearly double the profit at that time being earned by it. There was no doubt that the Dunedin company’s business was capable of very considerable expansion. Its business at that time was, and as far as J know still is, almost entirely confined to Otago. A policy of enterprise and vision applied to this management could rapidly have increased the spread of its business over a large part of the Dominion. In addition, you, as debenture holders, would have had the added strength and security which would have resulted from having your controlling interest in this company supporting your debentures. “ I have tried to show what the prospects were in the plan to acquire these shares,” added Mr M‘Arthur, “ and what their value was when they wore sold a short time ago. They still have the value that I have described and the persons, whoever they arc, who have been fortunate enough to buy a .block of practically half the shares in this Dunedin company have now got the benefit of this special value instead of yourselves as debenture holders.” A woman debenture holder wanted to know what was the reserve price on the “ famous Sydney white elephant.” The Public Trustee replied that it was £273,000. LIQUIDATION DISAPPROVED. At this , stage the following motion, moved by Mr Norman Levy and seconded by Mr J. T. Paul, of Dunedin, was open for discussion: — “ That as the existing legislation for the liquidation of the assets of the company was passed without obtaining any expression of opinion from the debenture holders, this meeting declares that the realisation and sale of the assets of the company is not in the best interests of the debenture holders, against which course this meeting emphatically protests.” Speaking in support of the resolution, Mr M'Arthur said that it drew attention to the fact that the forcing of this company into liquidation was carried out without any expression of opinion from the debenture holders. The only complaint he had about this portion of it was that it understated the fact. The liquidation was actually forced upon them as debenture holders in direct defiance of a representative body of opinion among the debenture holders whose views were actually sought by the Government of New South Wales. In this connection Mr M'Arthur referred to the ballot taken of all debenture holders in the Southern British National Trust, which, he said, was exactly similar m organisation to the Investment Executive Trust, with the difference that it was situated in Australia. The result of the ballot was a clear majority against liquidation. There could be no doubt that this position represented not only the views of the Australian debenture holders, but the views of those in the Dominion as well. Meetings of debenture holders in the Investment Executive Trust had expressed by an overwhelming majority a protest against any proposed liquidation and a demand that the business of the company should be allowed to be carried on. Mr J. T. Renton said he had been instructed by a number of Canterbury debenture holders to oppose the motion. Liquidation was the only safe way to proceed. A motion was also proposed—“ That this meeting views with apprehension the possibility of the sale of the trust building in 'Sydney at less than the reserve ‘ price fixed by' the court, and requests the Public Trustee to communicate with the Public Trustee in New South Wales urging him on behalf of the Executive Trust debenture holders to withhold the building from sale at less than the reserve price.” Several debenture holders urged that more could be gained by a reorganisation of the companies than by liquidation. The first motion was carried by an overwhelming majority on a show of hands. A demand was made for a ballot, but it was decided to postpone the ballot until after the discussion on the second motion. The chairman ruled that the ballot would be decided on the number and value of the votes, proxy votes having to be taken into consideration. The second motion was carried on the voices with little discussion, _ and a ballot then taken on both motions. Tim meeting then considered the following motion: —“ That in order to give effect to the foregoing resolutions, and as previous endeavours by the debenture holders to have effept given to their wishes have been rendered fruitless through difficulties of finance, the meeting requests the Public Trustee to settle in consultation with a committee of three debenture holders to be elected at the meeting a scheme of arrangement whereby such object will be carried out by preservation of the assets for the benefit of the debenture holders.” The Public Trustee said he had no information as to a scheme for preserving the interest of the debenture holders. It was not part of his duty as liquidator to carry out the work entailed if the motion was passed, and he was not prepared to undertake the. responsibility. However, if the debenture holders could bring down something concrete to go before the court as a proposed system of reorganisation he would facilitate having the scheme put before the court. > An amendment that the committee be of five debenture holders instead of three was carried op. a show of hands, A ballot was demanded amid protests at the time it would take. After a lengthy discussion the nominations were reduced to seven, and a ballot taken on the following candidates :—J. W. S. M’Arthur, J. T. Paul, J. T. Renton. O. A, Bridgewater, N. Levy, L. H. Herd, and >V. T. Richards. The following motion was carried on the voices and then voted on by ballot: —“ That the costs of this meeting and any further costs involved in carrying out these resolutions be borne by the Investment Executive Trust Company.” The Chairman announced that the counting of the votes on the ballots would take several hours, and he adjourned the meeting till to-morrow evening.