MR KENNEDY’S REMARKS

New Zealand Times, Volume XXXVII, Issue 8608, 19 December 1913, Page 9

MR KENNEDY’S REMARKS

WATCHING THE SHAREHOLDERS’ INTERESTS. Mr Martin Kennedy said:—“l rise to express my grateful thanks to shareholders for the honour they have done me in again re-electing me unopposed as one of their two representatives on the board of tho bank for the ensuing two years. If, after my nineteen years of service in that capacity, any incentive were wanting to lead me to use my best efforts in your behalf, this renewal of your confidence would supply it. But, gentlemen, no incentive is needed, and I can unreservedly say that, as a director, 1 have at all times done my best in the interests of the bank as a whole, and I need hardly assure you that you may rely upon, my continuing to do so. as long as you do me tho honour of electing me to be one of your representatives on the bank’s board. “As the chairman has informed you, the legislation which he 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 the Act, you will, I am sure, join with me th offering him our congratulations on the fact that the bill was passed into law in a shape practically almost the same as that in which it had been drafted in terms of his proposals.

"Tho shareholders’ interests at stake in tho proposed legislation were recognised by my colleague, Mr Watson, and myself as being so vital that wo doomed it prudent to invite the cooperation and assistance of the local shareholders. Accordingly, at a duly convened special general meeting a committee of shareholders, consisting of fifteen members, was appointed to co-operate with us. This committee rendered valuable aid and advice in the negotiations, and we were fortunate in having as one of its members .Mr C. P. Skcrrett, K.C., whose assistance was of very great service to us. Tho result was a compromise between tho shareholders' committee and the board of the hank, which compromise was adopted by the Hon. Mr Alien, Minister for Finance, who had charge of tho bill before Parliament. COMPROMISE ARRIVED AT. “Tho compromise consisted in the following mutual concessions being made between the shareholders and the Government: Your representatives agreed:—(l) That the Government would bo entitled to take up one-third of tho £3,000,000 new capital of tho bank, tho other two-thirds going to holders of tho ordinary shares, tho terms of issue as to price, premiums, etc., and also tho dividends payable on such new shares frm time to time, to bo tho same hoik for tho Crown and for tho ordinary shareholders, but tho Crowira shares to be nreferenoo as to capital, and to be paid for by tho Government issuing debentures or Consolidated Stock bearing 4 per cent, interest. (2) That our claim- for a re-constitution of the board, giving the shareholders’ additional representation on tho directorate, would bo relinquished, though we in no way acknowledged that tho demands of shareholders ought not to have been conceded. “The Government, on its part, agreed:—(ll That tho bill would become a Government measure, thus preventing its mutilation in its perilous -passage through both Houses of Parliament. (2) That the uncalled capital on tho existing shares, namely £3 6s 8d per share (£500,000 in all) is to ho called up, on the terms provided for in tho Deed of Settlement, within seven years from tho date of the passage of the Act, or sooner, if m the opinion of the board the position and earning power of the hank justify such calling up. Any resolution of tho board calling up the capital would, of course, be subject to the approval of the Minister for Finance; and I may here mention that, having that in view, I, on September 25th last, waited upon the Hon. Mr Allen and obtained his assurance that, if the board saw fit to make the 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 the agreement entered into on September 16th, notwithstanding that the Public Accounts Committee had deleted from tho liTTI, -as submitted to Parliament, clause 10, which conferred upon you the whole interest in the reserve fund of the bank in event of winding up. SUBSTANTIAL ADVANTAGE. “Gentleman, though not securing all we ..contended for, we have obtained a substantial advantage in the undertaking to call up this £3 6s 8d per share of uncalled capital, and viewing all the circumstances. I think the ordinary shareholders may congratulate themselves upon tho terms of the settlement arrived at. “And now, I hope .1 have made Jt clear to you that Mr Watson and my., self, as your representatives, have done the very best we could in your interests throughout the negotiations,. The loss which we most of all regret is that of the increased representation for shareholders on the board. This I say with all due regard and respect for past and present members of the board; hut, notwithstanding our regret, I affirm and repeat my satisfaction with the past management of the bank under the hoard as hitherto constituted. I may add that I entertain every confidence that the Govern-or-in-Council of this Dominion (who appoints the Government representatives on the board) will, so long as our Parliamentary representation is maintained at its present high level, appoint only capable and honourable men to he directors of the hank. Nevertheless, I have the conviction that a greater proportion of shareholders’ elected representatives on the hoard would have been in the best interests of the bank, giving greater stability in its control, and consequently a greater measure of public confidence.LIBERAL TERMS. “ As regards the authority given to tho bank’s board to increase tho capita] of the bank by an amount not exceeding £3,006,000, the chairman has informed you that tho board has decided To offer immediately £750,000 of that amount, which, with the premium of 50 per cent., brings the amount payable for each share of £6 13s- 4d up to £lO, making a total of £1,125,000, of which the Crown’s share will ho £375,000, and the ordinary shareholders’ £750,000. “Whatever views may be held regarding the amount of the premium the hoard has resolved to charge in this case, tho terms of payment, namely, eight quarterly instalments of 25s each per share, will, I anticipate, he 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 Ist, or thereafter on any instalment day. I may just remark that while I would have preferred that tho whole of this £lO per share should have lieen made capital, thereby ranking for dividends, there is some consolation in the knowledge that the £375,000 premium goes to swell the already large reserve of the bank, at present £1,375,000, which will no doubt continue increasing, and by the year 1020 should reach at least £2,320,000. Vou will not, I hope, regard my forecast as too sanguine when I saj T I anticipate the dividend can be maintained at recent level, for the 15 per cent, will equal not more than 71 per cent, on _ the then combined reserve and paid-up capital. Tho capital by that time -will have grown, I anticipate, to £2.2,0 by the addition of the £500.000 un. called capital, at present outstanding, bufc to be called up within that time. FUTURE ISSUES. “ In reply to shareholders’ further inquiry as to the future issues of the remaining £2,250,0UU of unissued authorised capital, I may say that is a matter in the discretion of the board of the hank, subject to tho assent of the Minister for Finance, and no doubt will depend upon the prospects of the bank finding profitable employment for such. And here i may say that, in the past, due weight has always been given to the views of your representatives by the Government members of tho board, and I hare no doubt the same good feeling will always continue between ns. 1 unhesitatingly say I

have sufficient confidence in the board, to believe that further Issues of capiliavo sufficient confidence in the boaid is reasonably convinced that any sum so I to be issued can he profitably employed in Die business of tho bank and lor the benefit of the proprietors. It is well to remember, in this conncctiqu. that the l«nk’s capital -and- reserves, in course of tho next seven years, vdl probably amount to over five and a half millions. 1 put it thus:—- £ Bank’s paid-up capital ...... ’ 2,250,000 Bank's reserve (estimate for years 1915 to 1920 at £70,000 yearly) 2,320.000 Guaranteed stock 1,000,000 £5.570,000 With this largo amount of proprietors’ money available in the_ business, you will no doubt agree with ms that there is little probability of any further capital issues becoming necessary tor tome years to come. ADVICE IT) LONDON SHAREHOLDERS. “Before-resuming my-scat I would like to mention that, owing to _ the difficulties in the way and the mn g delay in bringing matters to a. point,aiy colleague, Mr Watson, and I apprehended that the value of the bank’s shares in the London market might Ini prejudicially affected, and that, whilst negotiations were in progress, some of tho London, . shareholders might he led to sell their shares, nt a sacrifice. Wo therefore deemed it prudent to warn shareholders in London against selling oat, and wo cabled accordingly to Mr H. W. Snow, the chairman of the London shareholders’committee. Again, after adoption by the board of the circular which, will be issued to you immediately after this meeting, ’we further telegraphed Hie shareholders’ committee that shareholders should await the arrival of the circular before selling their shares. I trust our action will have been effective in preventing any _of Hie London shareholders sacrificing their shares. “in conclusion, I desire to say that owing to the circumstances and nature of (lie negotiations from -which tho ahovo-montioned arrangements have resulted, it was inevitable that . a good deal of feeling should be displayed ■on both ■ sides, and some acrimonious discussions have taken place between tho representatives of tho conflicting interests. But now that it is all over, we mean to let bygones bo bygones, and the directors, . irrespective of the interests they represent, will unite in the future, as they have always done in the past, in promoting the prosperity of the hank as a whole,. by which means the respeotivo interests of the Government and the ordinary shareholders will, of course, bo best advanced, there being really now no diversity of interest at all. With tho increased resources which the fresh capital will place at tho board’s command, I believe the hank will enter upon an era of renewed 1 and Increased prosperity, evengreattV'tliiiJi that which it bus experienced in the recent past, I take tho opportunity of saying that it is my own individual opinion that tho shares of the bank are to-day of more value than they have been at any time during the last twenty years.”