Answer. The amounts applicable to the St. Lawrence River Power Co. ranged from $2,376,245 to $5,413,753 for the years 1923 to 1929; those applicable to St. Lawrence Valley Power Corporation amounted to $798,806 for 1924, ranged from $1,423,841 to $4,275,894 for years 1925 to 1927, and from $7,331,023 to $7,704,281 for the years 1928 to 1930; those applicable to the St. Lawrence County Utilities, Inc., amounted to $146,243 for 1923, $810,504 for 1927 and ranged from $2,257,657 to $2,429,790 for the years 1928 to 1930. Examiner BENNETT. We will take a recess of 10 minutes.

(At this point a short recess was taken, after which proceedings were resumed as follows:)

By Mr. RHODES:

Question. We will now take up the stock acquisitions. You have stated that investments in stocks of subsidiary companies have constituted the fixed assets of St. Lawrence Securities Co. and that up to the close of the calendar year 1922 the value of such investinents had risen to $4,149,463. Will you describe briefly the acquistions of these stocks, naming the companies?

Answer. In 1906 the company acquired the outstanding stock of St. Lawrence County Electric & Water Co. at a cost of $137,000 and most of the outstanding stock of The St. Lawrence River Power Co. at a cost of $1,542,525.12. In 1907, as a result of the liquidation of St. Lawrence County Electric & Water Co. acquired the year previous, the Securities Co. acquired The Massena Electric Light & Power Co.'s outstanding stock, which it valued on its books at $45,666.67, and The St. Lawrence Water Co.'s outstanding stock, which it valued on its books at $91,333.33, the values entered for both stocks totaling the $137,000 paid for the liquidated company. In 1907 the Securities Co. also acquired the outstanding stock and outstanding bonds of The Massena Terminal Railroad Co. at a cost of $134,126.73 and the outstanding stock of Pine Grove Realty Co. at a cost of $36,380.98. In 1921 The St. Lawrence Water Co. issued additional stock, of $150,000 par value, which the Securities Co. acquired at par, and it also acquired additional stock of The St. Lawrence River Power Co. at a cost of $10,280 in 1907, 1908, and 1910, and at a cost of $1,930,066.50 in 1913. In 1922 it acquired the outstanding stock of Ogdensburg Gas Co. at a cost of $91,267.93 and the outstanding stock of Ogdensburg Power & Light Co. at a cost of $118,316.14, which acquisitions added to those previously acquired, minus a $500 adjustment in the cost of The St. Lawrence River Power Co. stock entered in 1914, gives the $4,149,463.40 shown for investment in securities of subsidiaries at December 31, 1922.

Question. On what page of your report is this information shown? Answer. On page 27.

Question. During this period were any other securities acquired? Answer. In 1907 the outstanding stock of the first St. Lawrence Transmission Co. was acquired, at a cost of $7,000, and disposed of in 1915. In 1907 the outstanding stock of Long Sault Development Co. was also acquired, at a cost of $250,000, and disposed of in 1917. In 1913 certain shares of Northern Power Co. were acquired, at a cost of $158,000 and disposed of in 1914. The books also showed $175,000 as expended at the close of 1913 for advances to The Hannawa Falls Water Power Co., in consideration for 50-percent of the outstanding stock of that company. This investment was disposed of in 1914.

Question. How is the increase in investment in securities of subsidiaries to $19,158,713.97 at December 31, 1928, accounted for?

Answer. The investments already referred to as held December 31, 1922, were also held at the same value on December 31, 1928, except that the $45,666.67 investment in stock of the Massena Electric Light & Power Co., the $91,267.93 investment in the stock of Ogdensburg Gas Co. and the $118,316.14 investment in the stock of Ogdensburg Power & Light Co. was surrendered in 1923-together with additional stock of the Massena Electric Light & Power Co. acquired at a cost of $157,000, additional capital stock of Ogdensburg Gas Co. acquired at a cost of $63,000, additional capital stock of Ogdensburg Power & Light Co. acquired at a cost of $119,900, and the outstanding stock of Potsdam Electric Light & Power Co. acquired in 1923 at a cost of $88,400-for the outstanding stock of equivalent aggregate par value-namely, $683,550.74 of the newly formed St. Lawrence County Utilities, Inc. Additional stock of this new company was acquired at a cost of $1,705,900 in 1927, and $1,424,400 in 1928, which increased the total to $3,813,850.74 at the close of 1928. In 1923, the outstanding stock of the Hannawa Falls Water Power Co. was acquired at a cost of $300,000, and the outstanding stock of the new St. Lawrence Transmission Co. at a cost of $2,709,300, which stocks were surrendered in 1924 for stock of equivalent value of the newly formed St. Lawrence Valley Power Corporation. Additional stock of this new company was acquired at a cost of $922,000 in 1924, $917,500 in 1925, $1,936,100 in 1926, $1,000,000 in 1927, and $3,292300 in 1928, giving a total of $11,077,200 at the close of 1928. In 1927, $222,000 was paid for the outstanding stock of Norwood Electric Light & Power Co. and an additional $2,647.14 in 1928 to cover expense of acquisition; and in 1928 the outstanding stock of Antwerp Light & Power Co. was acquired at a cost of $148,803.43. This accounts for the investment at the close of 1928.

Question. Were any other stocks acquired during this period?

Answer. Fifty-four shares of stock of the Hammond Light & Power Co. were acquired at a cost of $16,068.96, but this was recorded as other investments and not as part of the investment in stocks of subsidiary companies.

Question. What change in the investment in stocks of subsidiaries took place in 1929?

Answer. The investment in the stock of the St. Lawrence Water Co., valued at $241,333.33, was disposed of, and the outstanding stock of Ogdensburg Street Railway Co. was acquired at a cost of $23,134.68, resulting in a decrease in these investments to $18,940,

515.32.

Question. What were the changes in 1930?

Answer. The investments in the St. Lawrence River Power Co., the Massena Terminal Railroad Co., and Pine Grove Realty Co., recorded at an aggregate value of $3,652,879.33, were disposed of, leaving as the recorded value of the remaining investments a total of $15,287,635.99?

Question. Was there any change in 1931?

Answer. No, sir.

Question. Are the details with respect to the organization of St. Lawrence County Utilities, Inc., in your report?

Answer. Yes, sir.

Question. The details with respect to the organization of St. Lawrence County Utilities, Inc.?

Answer. Pardon me; there is a separate report being prepared on this company and it will be introduced later.

Question. How about the new St. Lawrence Power Corporation? Answer. The same thing is true in regard to that company.

Question. We come now to investments in subsidiaries. The first is St. Lawrence County Utilities, Inc., of the subsidiaries of St. Lawrence Securities Co. at the time control passed to Niagara Hudson Power Corporation, which was first acquired by the Securities Co.? Answer. St. Lawrence County Utilities, Inc.

Question. When and under what circumstances was this company

formed?

Answer. The company was incorporated under the laws of the State of New York, September 29, 1923, as a consolidation of the Massena Electric Light & Power Co., Ogdensburg Power & Light Co., Ogdensburg Gas Co., and Potsdam Electric Light & Power Co.

Question. Were the predecessor companies owned by St. Lawrence Securities Co. at the time of formation of the new company?

Answer. Yes, sir.

Question. What did the books of St. Lawrence Securities Co. show as the aggregate cost to it of the stocks of the predecessor companies? Answer. $683,550.74.

Question. Was that the figure entered for cost of stock of the new company?

Answer. Yes, sir.

Question. What was the basis of exchange of stocks of the predecessor companies for stock of the new company?

Answer. The 2,070, $100-par shares of the Massena Electric Light & Power Co., valued on the books at $202,666.67, together with the 1,699, $100-par shares of Ogdensburg Power & Light Co., valued on the books at $238,216.14, and the 884, $100-par shares of Potsdam Electric Light & Power Co., valued on the books at $88,400, were exchanged for an equivalent number of $100-par shares of the new company. The 3,260, $50-par shares of Ogdensburg Gas Co., valued on the books at $154,267.93, were exchanged for 1,630 shares of the new company or on the basis of two for 1.

Question. The exchange gave the Securities Co. how many shares of the new company of $100 par value each?

Answer. Six thousand two hundred and eighty-three.

Question. And these shares, you have stated, were entered on the books at a value of $683,550.74. Is that correct?

Answer. Yes, sir.

Question. Did the Securities Co. acquire additional shares of the Utilities Co.?

Answer. On February 5, 1917, it acquired 17,059 additional shares at the par value of $1,705,900; and on October 3, 1928, it acquired 14,244 more shares at the par value of $1,424,400.

Question. From whom was this additional stock acquired?
Answer. From the issuing company.

Question. What did the books show regarding the considerations for this stock?

Answer. The consideration in each case was credited to the open account with the holding company.

Question. Did the equity of St. Lawrence Securities Co. in St. Lawrence County Utilities, Inc., comprise the entire stockholders' equity during the period covered by your report?

Answer. Yes, sir.

Question. What was the total cost to the Securities Co. of its investment in the stock of the Utilities Co.?

Answer. $3,813,851.

Question. Did it remain at that figure to December 31, 1931?
Answer. Yes, sir.

Question. And how much equity had the Securities Co. in the undistributed surplus of the Utilities Co. at the close of the years 1928 to 1931, inclusive?

Answer. $1,596,132 at the close of 1928; $1,835,234 at the close of 1929; $1,719,157 at the close of 1930; and $1,758,934 at the close of

1931.

Question. What were the rates of earnings of St. Lawrence County Utilities, Inc., on the average investment in the company of St. Lawrence Securities Co., including its equity in the undivided profits, for the years 1929, 1930, and 1931?

Answer. 5.05 percent for 1929; 8.27 percent for 1930, and 7.12 percent for 1931.

Question. Are these the rates before deduction of Federal income taxes?

Answer. Yes, sir.

Question. What were the rates after deduction of Federal income taxes?

Answer. 4.51 percent for 1929; 7.41 percent for 1930; and 6.56 percent for 1931.

Question. How were the average investments obtained upon which these rates were computed?

Answer. By adding together the investments at the beginning and end of the respective years and dividing by 2.

Question. How is the variation between 1929 and the two later years accounted for?

Answer. It is accounted for largely by the fact that interest was not recorded on intercompany advances in 1929; whereas, interest on such advances was recorded in 1930 and 1931.

Question. You have stated that The Massena Electric Light & Power Co. was one of the subsidiaries of St. Lawrence Securities Co. consolidated with other companies to form St. Lawrence County Utilities, Inc. When was that predecessor company formed?

Answer. It was incorporated under the laws of the State of New York, in February 1899.

Question. How and when was the company acquired by the Securities Co.?

Answer. According to the books, direct control was acquired on June 29, 1907, through liquidation of St. Lawrence County Electric & Water Co., which latter company was acquired by the Securities Co. on September 4, 1906.

Question. Was the entire outstanding stock of the Massena Co. acquired from the liquidated company?

Answer. Yes, sir.

Question. At what value was it entered on the Securities Co.'s books?

Answer. $45,666.67.

Question. How was this value determined?

Answer. The liquidated St. Lawrence County Electric & Water Co. was acquired at a cost of $137,000 and its assets at the time of acquisition consisted of 500 shares of capital stock of The Massena Electric Light & Power Co. and 1,000 shares of stock of St. Lawrence Water Co. The stocks of the two last mentioned companies were taken over at liquidation and the $137,000 was allocated on the basis of the ratio of the number of shares of each to the total number of shares.

Question. When was St. Lawrence County Electric & Water Co. formed?

Answer. It was incorporated July 31, 1899, under the laws of the State of New York.

Question. This was the first company acquired by St. Lawrence Securities Co., was it not?

Answer. Yes, sir.

Question. And it was a holding company, holding the outstanding stocks of The Massena Electric Light & Power Co. and St. Lawrence Water Co. Is that correct?

Answer. Yes, sir.

Question. In what business was the Massena Electric Light & Power Co. engaged?

Answer. It was engaged in supplying electric current to the village of Massena, N.Y., holding a perpetual franchise for that purpose. Question. From whom did St. Lawrence Securities Co. acquire the stock of St. Lawrence County Electric & Water Co.?

Answer. From T. A. Gillespie, R. B. Mellon, and E. B. Bumsted. Question. What was the consideration?

Answer. $137,500 was the total amount of consideration. Cash to the amount of $77,300 was paid at date of purchase; and notes were given for the balance of the purchase price, as follows: $26,000 to T. A. Gillespie which were subsequently prepaid at a discount of $500; $25,000 to R. B. Mellon; and $9,200 to E. B. Bumsted.

Question. Did these three men, T. A. Gillespie, R. B. Mellon, and E. B. Bumsted, hold this stock for somebody else-for the Aluminum Co. of America, say?

Answer. I did not find in the record that they did.

Question. How was the $500 of discount treated on the books? Answer. It was credited to the cost of the acquired stock, reducing the cost to $137,000.

Question. How were the notes settled?

Answer. They were paid by Aluminum Co. of America and the amounts credited to open account with that company.

Question. When St. Lawrence County Electric & Water Co. was liquidated, did the Securities Co. acquire any other value from the liquidated company in addition to capital stocks which you have testified were transferred at the cost of the stock of the liquidated company?

Answer. In addition to the stocks, the Securities Co. received a liquidating dividend of $56,844.44-$54,891.44 in cash and an account receivable for $1,953.

Question. Going back to the Massena Electric Light & Power Co., what does your report show regarding the acquisition by the Securities Co. of additional shares of stock of that company?