TRUST DEFENDED

Poverty Bay Herald, Volume LXI, Issue 18500, 12 September 1934, Page 5

TRUST DEFENDED

INVESTMENT METHODS

SYDNEY INVESTIGATION

McArthur’s evidence

DEBENTURES SECURED

(Klee. Tel. Copyright —United Press Assn.) SYDNEY, Sept. U.

When the Royal Commission which is inquiring into the activities of 19 tiust companies continued its investigations to-day, J. V*\ 75. McArthur ci-mineiieod his .evidence.

Mr. Justice liaise Rogers presided as lOiiimissioner, Mr. . \\. \v. Monahan, K.C.. and Mr. J. B. Collier appeared as counsel assisting the cuminis.-iou, Mr. KWindeycr. K.< ~ and Mr. B. fuller fin the Investment Executive Tiust of New Zealand, Limited, and the Southern British National Lust, Limited, and Dr. F. Louafc for, three oilier companies. McArthur presented a lengthy statement to' the ' commission, lie said-that-every penny- of the debenture-holders money was fully protected and secured ~y sound investments, which cm ceded _in value the stun charged upuii them. The total amount 'subscribed, by the publu for debentures in Southern British, and ,n the Investment Trust amounted to £548.194,' while the book value of the •investments at cost was £649,153. Ihe present market value of the investments held on behalf of the debenture-holders was much higher than the value setagainst them in the company’s -books. The debentures of British National Trust were supported by a great deal more in the way of substantial assets than the Trust building alone.

INTEREST ON DEBENTURES

After dealing with the gciieial, plan of the Investment Trust and Southern British National Tiust, McArthur said that one clause of the debenture provided that 95 per cent, of the annual act earnings should he set aside for the holders of debentures as interest. 'J he security given io subscribers to these trusts was a first mortgage debenture, which must always take precedence over creditors of every class, no matter what kind of charge or mortgage the directors of the trust might attempt to create over any of the assets. 11l- had attempted to plan the operations of the trusts in such a way as eventually to.return t-o the debentureholders a* rate of profit exceeding that of interest on an ordinary investment trust debenture. An indication of the success which the trust had achieved was that after less than 3.) years’ activity, the Investment Executive Trust had boon able to pay debenture holders a total of 26 per cent, by way of return on the capital invested by them.

McArthur contended that the affairs of the companies were being investigated at an incomplete stage of their development. He admitted that, on a general view the relations of the various companies with one another might- seem to have been needlessly, even purposely, involved. Many matters had their <*>•- nlanation in the conditions under which the Investment Executive Trust had been compelled to operate. ANT A( VON IST It! FORCES

It was necessary to understand the nature oi the forces working against tins crust since its inception. There lwil been "strong influence at every point of.'the atianciai and political hie oi Z'ea,au«t against bust companies,” and a ‘-‘deliberate attempt'to injure the Investment Executive 'trust by making it appear that its debentures had been nought below par value.” Suggestions bad been made during the inquiry.- that the financing of the Trust .mnd.ng involved tome misuse of the money subscribed by the public, and that portion of that money had been transferred from the debenture fund to Alcorn and himself. There was not the faintest foundation for any such suggestion. McArthur, continuing!, said the primary function of the Sterling company nad been to conserve the interests of the debenture-holders by doing what the Investment Trust Company was not able-to do for itself. The Sterling company in the early stages of the life of the main company, had been used to purchase certain assets of his, and at the same time, take over liabilities secured in them in order to frustrate those who desired to strike at the Investment Trust by accomplishing his own financial ruin. A further purpose for which the .Sterling company had been employed on lienaif of the debenture holders had been in a few cases to purchase debentures from individuals who, for one reason or mother, woie threatening action against the Investment Executive Trust. Ihe hostile conditions with which the trust was surrounded had made it even more important that no weapon should he given to its opponents with which they could stampede dehcntuie-.holdeis.

PACIFIC EXPLORATION

Referring to the case of Miss Smith, ot Christchurch, McArthur said the Guardian Trust and Executors Company of New Zealand had obtained control ot her estate, and a writ had been issued against the Investment Executive Trust seeking to recover the securities which bail been transferred by Miss Smith to the trust in payment of debentures. The directors knew that whatever the issue of the trial might he, the ultimate result would he to injure the company and the debeiilure-liolder.s. The claim accordingly had been settled for £29,000, which represented substantially the value of the securities originally transferred to the investment Executive Trust, and the amount by which they had appreciated. McArthur said the Guardian Trust was connected with the other companies with which lie had bail to contend during the Redwood Forests negotiations. Continuing, McArthur said that Mrlimes, during his three years service as director of the selling system in Now Zealand on behalf of the Investment Trust had carried out his duties faithfully.

McArthur declared that the accounts of alb the companies were now in order. Referring to (he assets of the Pacific Exploration Company, lie said it possessed 27.020 acres of freehold land in North Auckland, which contained rich and extensive deposits of kauri gum. lOn a conservative estimate the quantity ol ..urn on the. area was worth £3,000,000 gross. This asset was set down in the ’molts of the company at £4700, being the cost of the land to the company. The commission adjourned till tomorrow.