H.—27.

for the purchase, protection, and development of these assets, as the books covering the period are missing, but from information gained from the reconstructed books already referred to, we are of the opinion that the cash actually advanced was in excess of £60,000. On 28th February, 1934, when Mr. J. W. S. McArthur's financial difficulties had been overcome, largely through the assistance of the Sterling Co., an arrangement was made whereby all these assets were, in effect, retransferred to him, either directly or through the agency of Wynwood Investments, Ltd., a company in which Mr. McArthur holds 9,900 out of 10,000 shares, and all the debentures, £40,000. The following is a brief statement regarding this arrangement which was investigated by the Royal Commission in Sydney, and which is referred to herein as the Sterling-Wynwood transaction. In March, 1933, Mr. J. W. S. McArthur, by the transfer of his shares in the British National Investment Trust, Ltd. (the company which had purchased the trust building in Sydney), to the British National Trust, Ltd., acquired a credit in the books of the latter company amounting to £229,600. (The facts relative to this transfer are set out in the report of the Inspectors on the affairs of the Investment Executive Trust of New Zealand, Ltd.) To pay part of this debt to Mr. J. W. S. McArthur, the British National Trust, Ltd., issued debentures in denominations of £1,000 each. Mr. J. W. S. McArthur, at 28th February, 1934, exchanged fifty-nine of these British National Trust debentures for debentures of the Sterling Co., amounting to £60,000, held by the Investment Executive Trust, In consideration of the transfer of certain assets from the Sterling Co. to the Wynwood Co. on 28th February, 1934, the debentures issued by the Sterling Co. were treated as redeemed and were cancelled. Cheques supporting the transaction were passed between the two companies, the Sterling Co. issuing a cheque for £60,000, made payable to Mr. J. W. S. McArthur personally. This cheque was banked to the credit of the Wynwood Co. and contemporaneously the latter company issued a cheque for £60,025 in favour of the Sterling Co. Later the Wynwood Co. transferred a number of the assets acquired to Mr. J. W. S. McArthur personally, who retransferred some of them back to the Sterling Co. Although this was the largest and most important transaction undertaken by the Sterling Co., involving the transfer of substantial assets upon the acquisition and preservation of which the Sterling Co., we believe, expended at least £60,000, there is no record of the transaction in the minute-book of the company, nor was any agreement setting out the details of the transaction produced to the Royal Commission in Sydney or to us. Mr. K. C. Aekins, chairman of directors and solicitor to the company, has informed us that he had no knowledge of the transaction. The only documents produced before the Royal Commission were a document known as " Annexure 3," which Mr. J. W. S. McArthur handed in as an annexure to a formal statement which he made before the Commission on 11th September, 1934, and a document known as the " Alcorn receipt." A copy of " Annexure 3 " is appended to this report as Exhibit " F." This document details a number of assets taken over by the Wynwood Co. and by Mr. J. W. S. McArthur personally, but no values are shown. We have not a copy of the " Alcorn receipt," but this was inspected by us in Sydney and appeared to be a copy of " Annexure 3 " with a receipt appended signed by C. G. Alcorn as attorney for the Sterling Co., acknowledging receipt of £60,000 in payment for the assets transferred. A. Dissection of " Annexuke 3." The following is a dissection of " Annexure 3 " previously referred to, showing the assets which were acquired by the Wynwood Co. and by J. W. S. McArthur personally from the Sterling Co. through the Sterling-Wynwood transaction. Assets transferred to Wynwood Investments, Ltd. (The amounts shown indicate the value at which the assets were, on J. W. S. McArthur's instructions, taken into the Wynwood books.) (1) All claims against Wynwood Investments, Ltd., in respect of legal expenses, rates, £ s. d. and taxes up to 28th February, 1934 .. .. .. .. .. 144 0 7 £ s. d. (2) Properties consisting of four sections in St. Stephen's Avenue .. 5,000 0 0 One section in Grey St .. .. .. .. .. 5,250 0 0 Two sections in Mount Smart Road .. .. .. .. 350 0 0 One section in Oranga Avenue .. .. ■ • . . 175 0 0 One section in Meadowbank Road .. .. .. .. 425 0 0 One section in Woodley Avenue .. . • • ■ • • 375 O 0 460 acres (approximately) at Putaruru .. .. .. .. 2,790 0 0 Four sections at Maraetai .. . .. .. .. 240 0 0 14,605 0 0 (3) Mortgage (a first mortgage over property at Putaruru from Hawke and Armstrong) .. 750 0 0 (4) 27,155 ordinary shares in Wynsel Timber Co., Ltd. .. .. .. .. 6,788 15 0 (5) 6,466 first-mortgage debentures in Wynsel Timber Co., Ltd. .. .. .. 6,4-66 0 0 (6) 6,125 ordinary shares in N.Z. Redwood Forests, Ltd. .. .. .. .. 3,426 0 0 (7) Eight debentures (£35 each) in N.Z. Redwood Forests, Ltd. .. .. .. 280 0 0 (8). Mortgage from tte Selwyn Timber Co., Ltd. (in liquidation), to N.Z. Redwood Forests, Ltd., and assigned to the Sterling Co. .. .. .. .. 9,075 0 0 (9) Claim against British National Trust, Ltd., for £8,750 (approx.), being residue of mortgage together with accrued interest for Timberlands Wood Pulp, Ltd. .. 8,750 0 0 £50,284 15 7

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