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The remarks made in my previous annual report apply with equal force to the year under review. The expenditure for the year ending 31st March, 1934, exclusive of part payment for new equipment (£10,012) amounted to £38,548, which was not sufficient to maintain the existing equipment in a serviceable condition, as a result of which certain essential repair work has had to be temporarily postponed. The increased demands for naval and military co-operation mentioned last year have been fully sustained, and in some cases it has not been possible to arrange for air co-operation. As regards naval co-operation, a very valuable set of exercises was carried out by the Fairey lIIf aircraft from Hobsonville in conjunction with the Seagull flying-boats of the Royal Australian Air Force during the visit of H.M. Australian Naval Squadron between 23rd and 31st August. During February and April, 1934, the normal co-operation duties were carried out with the New Zealand Division of the Royal Navy. These exercises included observation of fall of shot and torpedoes, attack exercises, and fleet reconnaissance. Army co-operation duties with Territorial formations during the annual training season between January and May have been carried out from both Air Force Stations. These have included artillery reconnaissance with light, field, and medium batteries and close reconnaissance, &c., with infantry and mounted units. The reorganization and re-equipment of the Royal N.Z. Air Force, approved by the Government, entails the establishment of four flights of Service aircraft of a type suitable for co-operation in Coast Defence, and for extended seaward reconnaissance. Two flights of Yickers Vildebeest.e bomber' aircraft (landplanes) have been, ordered and will be delivered before the end of the year. The new equipment involves additional hangars, workshops, and quarters as well as increases in the flying and maintenance personnel. Flans and specifications of the buildings are practically complete and the work is to be commenced immediately. (b) New Zealand Ant Fobce. The strength of the New Zealand Air Force, which comprises the New Zealand Air Force Wing of four squadrons, totals seventy-five officers, approximating the maximum number of flying personnel which can be adequately trained. As explained in my previous reports, the efficiency of this unit is closely related to the strength of the Royal N.Z. Air Force. As the latter develops so will the facilities for the flying and technical training of the former be increased. In due course it is intended to provide for the enlistment of " other ranks " for both technical training and maintenance duties. The policy of granting commissions to Aero Club pilots which was temporarily suspended last year will be continued and a limited number of vacancies will be filled by competitive examination. It is worthy of mention that at present 40 per cent, of the officers of the New Zealand Air Force have received their initial flying training in the local aero clubs. At the same time it must be borne in mind that there is an increasing number of officers in the Dominion who have completed a five years' engagement with the Royal Air Force, and provision must be made for refresher training either by absorption in the New Zealand Air Force or by other means. The annual squadron camps each of ten days' duration were held at WigranV Aerodrome, Christchurch, during the months of January, February, and March, 1934. These camps were attended by fifty-nine officers, who carried out an aggregate of 760 hours' flying on the training-machines and Bristol fighters. The air work comprised front and rear gun firing, bombing with the 8| lb. practice bomb, formation flying, air pilotage, wireless, and radio telephony. In addition, during the past year week-end courses were carried out by each squadron which were attended by forty-nine officers, who carried out a further 256 hours' flying training. The value of these short courses has been reflected in a marked improvement in the standard of training during the annual camps. Provision has been made under the scheme approved by the Government for the re-equipment of the New Zealand Air Force with aircraft of the advanced trainer type suitable for the complete range of instruction in all Service duties. (c) Aircraft and Equipment. The Service aircraft at the two Air Force Stations are as follows : — R.N.Z.A.F Base, Hobsonville : — Service type : Two Fairey lIIf seaplanes. Training and communication types ; One Cutty Sark flying-boat, one D.H. Moth seaplane, two D.H. Moth landplanes. Wigram Aerodrome, Christchurch : — Service type : Five Bristol Fighters. Training and communication types : Two Gloster Grebe S.S. Fighters, three Hawker Tomtits, 3 D.H. Moths, 1 D.H. Puss Moth. It is hoped to maintain Bristol Fighters in a serviceable condition for at least two further training seasons, pending their gradual replacement by Advanced Trainer Aircraft, and with this end in view advantage was taken of the disposal of Falcon 111 engine spares by the Royal Air Force to secure certain spares at a greatly reduced figure. During the greater part of the year only one Fairey lIIf has been in commission, the other machine is being reconditioned as time permits and spares arrive. (d) Royal N.Z. Air Force Aerodromes. The two Air Force Aerodromes at Auckland and Christchurch have been maintained in good condition.

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