I.—Ba.

It is not just that the paid-up capital of the Kaihu Company should be forfeited. I propose that, in the event of the Government'purchasing the company's property, this sum (£7,250) should be added to the amount of purchase-money, and the total be reckoned as the cost of the line ; that the net earnings, after paying interest on debentures, should be divided pro raid, the sums received from sale of land and timber being carried to the credit of this capital account. The directors have not received any honorarium, the office has been provided free of charge, and the secretary's salary has been almost nominal. Estimate of Traffic. Haulage of Kauri Timber.— Say, 50,000 ft. per diem for five days per week, and for fortyeight weeks out of fifty-two per annum (allowing for holidays, &c.) = 12,000,000 ft. per annum, which, at Is. 3d. per 100 ft., including discharge (Government rate would average Is. 4d.) ... ... ... ... ... ... £7,500 (Mr. Knorpp's estimate of 270,000,000 ft. of kauri timber to be hauled on this line would supply this rate of traffic for twenty-two years ; and there are, in addition, large quantities of kahikatea, totara, puriri, tawa, &c.) Other Traffic. —Passenger, gum, stores, "&o. (judging from business on unfinished line) ... £2,000 £9,500 Estimate of Expenses. Double the amount of running one train daily sixteen miles and a half would come to £3,000, allowing a large margin for repairs beyond present cost, included in above, say ... ... ... ... ... ... ... £4,000 Net revenue ... ... ... ... ... ... ... £5,500 Deduct interest on debentures ... ... ... ... ... 2,350 £3,150 After sale of land and kauri on endowments, the only further capital would be the sum of £7,250 contributed by present proprietors : profit on that would be over 40 per cent.

Thursday, sth September, 1889.—(Mr. Macakthuk, Chairman.) Mr. E. C. Baestow examined. 1. The Chairman.] You are the Chairman of the Kaihu Valley Bailway Company ?—Yes. 2. You have placed this printed statement in the hands of the Committee?—l have. 3. The Committee want you, as shortly as possible, to give them information as to what the company seeks, and what its position is in respect of the Government, and with respect to other creditors ; what claim they consider they have upon the colony for consideration ; and what is the present position of the company?— The two grounds which we allege as entitling us to consideration at the hands of the Government are : the variation made in the selection of the land for which we applied, and also the selling by the Government of land closely adjoining the selection granted to us at a very much lower rate than we were entitled to charge. These are two grounds upon which we think we are entitled to consideration at the hands of the Government. The selection of the land was made chiefly by myself and our engineer after an inspection made in December, 1887. It was ratified by Mr. Percy Smith, then Assistant Surveyor for the Auckland District, in the presence of the Minister for Public Works and in my presence in August or September, 1888. Mr. Percy Smith very shortly afterwards left this colony for Australia to attend a meeting of an institute there. Mr. McKerrow, who was then Surveyor-General, objected to the choice which we had made on the ground that we had severed and taken parts of several sections. He sent back altered boundaries. It was pointed out to Mr. McKerrow that these would be very inconvenient, and he again altered and sent back a plan to us very much larger. 4. You have accepted the Crown grant of it ?—That is what I wish to explain to you. It was shown to him that these were in excess of the land we were entitled to take, and several substitutions were made by ourselves and by the Survey Department. At last certain boundaries were agreed upon, but by some accident or mischance in the Survey Office when the Crown grant was prepared different boundaries were assigned. The very thing which Mr. McKerrow had objected to —that of cutting sections in two—was carried out in the Survey Office; whereas, there was one section of which we had no right to take the whole, the balance that we could take was given to us, and another section subdivided. The effect of that subdivision was to cut the kauri forest—our great object, perhaps, in first making the line—into two parts. This main kauri forest is situated upon the Waima River and its tributaries, and the way of bringing it down to the railway would be by floating the logs, or drawing them rather, which is done by making clams near the head-water and so sending the logs down to where they could be taken on to the railway. 'Now, it is evident that a man having the lower portion timber might, by erecting a dam to drive his timber, prevent the owner of the upper portion from utilising it. The consequence would be that the upper timber would be valueless to any one except the person owning the lower timber. That upper timber must be 12,000,000 ft. of 15,000,000 ft., and worth from £6,000 to £8,000. I remonstrated most strongly with Mr. Percy Smith, but he said the Crown grant had been prepared and it was too late to make the change; that when the line was completed we should be in a position to select the remainder of the land with the timber upon it.

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