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we turned down pending the submission or a full financial
statement which they promised but have not hitherto produced.
5.
Now their accountants have come forward with a
proposal that the annual appropriation to the Capital
Reserve Fund should be increased from $92,577 to $170,164.96.
They state that the whole of the Capital Reserve Fund which
amounted to $880,279.03 on the outbreak of war has been
absorbed by war losses, and that the increased appropriation
is necessary to enable the capital to be amortized over the
perioa for which the franchise has still to run. They go
further than this. They request that when we amend the
Ordinance we should not specify the exact sum that may be
placed to Reserve, but should merely allow to go to reserve
annually such appropriations as shall amortize the authorised
(sic) capital over the remaining period of the franchise.
The background to this proposal is that the Company will
probably wish to increase their capital which would increase
the annual appropriation but they point to the possibility
of receiving some tning in the way of compensation for war
damage, which would reduce it.
6. In the absence of any statement of the Company's
financial position it is impossible to say whether the
Royalties will be affected now, but as the Company gets on
its feet again they certainly will be reduced.
7.
If we are asked to forego part of our Royalties
on the profits it does not seem to me that we should continue
to receive only $4 on each exchange line which, now that
charges have been increased, represents a smaller proportion
of the total than in 1940. In other words, I feel that we
should not agree to one amendment unless the whole agreement
is reviewed.
8. Against this, it can of course be argued that
Government has accepted the principle that the Company should
be allowed to amortize its capital over period of the