H.—3o,

92

for the value of dwellings apart from the value of the works, consequently it shows that Vestey Bros, have got the works for £189,545. In September of this year your directors asked these two experts to state what in their opinion the value of the works would be allowing for depreciation and the changed condition of the market, and their reply, dated Ist October, 1923, is as follows : — "Re valuation of September, 1921 : Have carefully considered values as then given compared with present date. Buildings : Depreciation for period, £12,000. Against this is to be set increased cost of buildings, £8,508. This sum is arrived at in comparing contracts let by us in 1921 and in present year. This is accountable through the rise in timber, pumice, and labour being more than reductions in steel, iron, and cement. Machinery : In going through these items we find reductions just about equal advanced costs in other directions. Providing machinery has been kept in thorough repair, we do not feel justified in writing anything off for depreciation, as our values were very conservative at that valuation. We can state with confidence your works, cottages, and exceptionally low temperature water-supply make them one of the most efficient and economical and could not be reproduced for £400,000." The following further telegram was received next day from Mr. C. J. McCarthy:— " Reference our valuation assets : We omitted include your efficient cold-water supply, which we consider shows your works an annual saving of more than 1,000 tons coal over other works your district, which capitalized 5 per cent, represents £60,000 apart from cost of about 25 per cent, additional freezing plant and labour necessary if water service same as elsewhere in district. The present coalconsumption Taruheru approximately three times Waipaoa works." From this it will be seen that the works have been sold at less than half their true value. It is only right to point out that in the books of the company the works were considerably undervalued in consequence of writing off for depreciation, &c. Your directors have no hesitation in saying that had the company been given time and allowed to carry on they could have pulled through quite satisfactorily without any loss whatever to anybody concerned, and the directors further state that they do not consider the bank would have taken this course had it not been for the immediate prospect of selling the works to Vestey Bros. At the same time the directors desire to make a distinct statement to the shareholders that the bank had never at any time intimated that they contemplated, taking any extreme action, and it came as a shock to the directors to learn of the course adopted by the bank. The directors quite recognize, of course, that finances were in a strained condition, and they did everything possible to economize and meet the position, and they expected that with the efforts to get in the uncalled capital substantially reducing the bank's liability it would enable the company to carry on its business. The depression experienced by this company is common throughout the Dominion in connection with more or less all businesses, and your directors think it only fair to point out that neither the chairman nor any of the directors have taken any remuneration for their services for the last three years. The directors desire to further point out that, notwithstanding the fact that the company was established during the war, since its inception it has made a profit every year except last year and this year. Since 1916 of the first balance-sheet —the company has made a total profit of £60,211, after writing off for depreciation £38,797, and spending in repairs and renewals £54,225. These savings represents an average profit of £19,166 for the eight years of the company's existence. Regarding the earnings of the steamer " Admiral Codrington " from the date of the purchase until she left Falmouth on the 13th January, 1923, on her last voyage, where she had been tied up for about seven months waiting for the last season's freight to be available, it shows a loss of £5,958 14s. 2d. Since then she has earned another freight, and, as shown in the balance-sheet, there is a credit balance of £10,363 12s. 10d., but as against this there will be disbursements made at Home that will absorb the whole. Considering the disadvantages the boat has laboured under, and the loss of time in insulating here, as well as the loss of time through the several accidents that have happened, and that only one trip a year has been done with her when she could have done two trips a year, and the fact that there has been no back loading —under all these circumstances it might fairly be claimed that the result shows that if back loading could be obtained and two trips a year run the working of the boat would show a substantial profit. In addition it might be pointed out that out of the earnings of the ship the sum of £13,700 had been written off the steamer for depreciation, and £14,728 for work in connection with the steamer ; consequently the actual running-costs of the steamer from the date of its purchase with all its disadvantages shows a profit. In the meantime the directors consider it would be advisable to reduce the capital of the company so as to make a substantial reduction in the annual license fee, and this course the directors recommend and in the meantime keep the company in existence until matters are further settled. The retiring directors are Messrs. B. Richardson and George Witters, who, being eligible, offer themselves for re-election. Mr. C. Matthews resigned his seat on the Board in October, and the directors have this day accepted his resignation. Mr. Tullock resigned some time back, and there has been no appointment made in his place. These are the four directors whose places have to be filled at the annual meeting. The directors desire to place on record their highest appreciation of the management and staff for the excellent work that they have done in connection with the company. They have given entire satisfaction, and as shown by the financial results, considering all the adverse circumstances, the results are satisfactory. The directors would like also to record that for the last two off seasons all the permanent staff have cheerfully accepted a 20 per cent, reduction in their wages. W. Douglas Lysnab, Gisborne, 26th November, 1923. Chairman of Directors.