r.—6

LIV

During the years subsequent to 1890, owing to the fall in agricultural produce, in wool, and in frozen meat, the Estates Company's properties steadily depreciated in value, until they were no longer able to pay interest on the debentures which had been created. They thus became a heavy burden on the bank, and at the 31st March, 1895, the pro forma combined balance-sheets of the Estates Company and the Auckland Agricultural Company showed a deficiency, after writing down the book-value of the properties to the level of the latest valuation received, of no less than £1,764,383. By the legislation of 1895 the Estates Company's properties (£4,026,162 book-value) were divided into two parts. Properties of the book-value of £2,731,706 were transferred to the Realisation Board. The trading concerns, freeholds beyond New Zealand (£53,174 book-value), shares (£214,080), and sundry other assets, amounting in all to £1,294,456 were retained by the bank. Since that time realisations to the amount of £90,497 have already taken place ; the deficiency on the latest ascertained value being £2,332. In addition to that, there are uncompleted sales to the Government Land-purchase Board of property valued at £99,028; the deficiency on the latest valuation of these properties will be £23,801. The trading concerns retained by the bank have, during the year ending 31st March, 1896, paid 6-56 per cent, on their book-cost (£451,242), and 9-11 per cent, on their latest ascertained value (£317,820). The Committee consider it undesirable that the bank should engage in commerce, and recommend that the trading concerns should be realised as soon as possible. To effect this the directors estimate from two to three years will be required. The Committee have carefully inquired into the properties now held by the Realisation Board, and the evidence brought before them shows that the realisation will probably not fall far short of the estimates placed before the Joint Committee in 1895. On the other hand, it seems unlikely that these properties will all be realised within the eight years now remaining. The Committee consider that the speedy realisation of these properties is in the interest of the bank and the colony, and have no doubt that the Board appointed are doing their utmost to bring this about. AUCKLAND AGRICULTURAL COMPANY. The Auckland Agricultural Company was formed in 1881, its nominal capital being £800,000. The Bank of New Zealand held shares in this company, but transferred its interest to the Estates Company, although, for book-keeping purposes, the Auckland Agricultural Company continued as a separate entity. Its assets, amounting to £636,162 on. the 31st March of that year; were handed over to the Realisation Board under the legislation of 1895. Most of the properties were in the Auckland District. Its debentures outstanding were directed to be paid off by debentures issued by the Assets Realisation Board under the legislation of 1895. This was done on the 15th May, 1896. The Committee have been unable to obtain details of the present values of the Auckland Agricultural Company's properties. The Committee recommend that these properties should be realised as soon as possible. ADJUSTMENT OF STATION ACCOUNTS. The Committee have taken evidence in respect to the adjustment of station accounts as between the Realisation Board and the Estates Company, provided for by clause 16 of " The Bank of New Zealand and Banking Act, 1895." The Government Auditor gave his certificate authorising the issue of debentures to the amount of £2,810,000 ; the Colonial Treasurer refused to approve. Messrs. Kember and Smith were instructed to investigate, and reported that the issue of debentures should not exceed £2,593,819. Further investigation took place, and resulted in the Government Auditor by a second certificate authorising the issue of debentures for £2,680,000. Owing to these difficulties, delay has taken place in the issue of the debentures authorised by the legislation of 1895. The Committee find also that the sum of £42,000, liabilities of stations on overdrafts and otherwise to the bank, was not taken into account by the Committee of 1895 in forming their estimate of the deficiency in the Estates Company. Against this, however, there are assets amounting to £30,000. The Committee recommend that the debentures be issued as soon as possible, in accordance with the Government Auditor's latest certificate. BANKING LEGISLATION. 1889. During the session of 1889 a private Bill, " The New Zealand Bank Act 1861 Amendment Act, 1889," was passed with the assistance of the Government of the day. Your Committee deem it advisable to call attention to its provisions, since by subsection (3) of section 5 of this Act the Bank of New Zealand was permitted to pay dividends without provision being made for losses on its estates. Section 6 was restrospective, and validated the payments of dividends, and'anything which was done by the Bank or Board, from October, 1888, to August, 1889. 1893. During the session of 1893 the Government, at the request of the Bank of New Zealand, introduced the Bank-note Issue Bill, which subsequently became law. This Act authorised the Governor to guarantee, under certain circumstances, the note-issue of any bank doing business in New Zealand. Previous to its introduction a conference was held, at which representatives of all the banks doing business in the colony were present. They agreed that it would be prudent to pass the Bill, in view of the danger of the Australian banking crisis extending to New Zealand. On the 9th of October, 1893, the Colonial Treasurer (the Hon. Mr. Ward), having noticed that the Bank of New Zealand coin reserve was below the legal limit, called the attention of the bank authorities to the matter, The General Manager contended that the law had been complied with. The Colonial Treasurer, although not accepting the bank's view of the law, did not,