To our Shareholders

The utility industry across the country has slowly been put through a process
referred to as deregulation. What has happened to the telecommunications
business is gradually now occuring in the gas and electric industry.  In
short, it is the process of pulling apart the services traditionally provided
by one utility, which is referred to as unbundling of services and then
repackaging in such a manner that several businesses will provide separate
pieces of the service pie to each customer.  The net result, hopefully, will
be increased competition leading to more choices with better service at
lower prices to the end user.  Deregulation of the gas and electric business
has been slow ot evolve due to the serious ramifications of reliability of
supply and provider of last resort issues.  Furthermore, the competitively
slim profit margins available for marketers have created a certain amount
of reluctance to serve small commercial and residential customers.

This new direction of serving the customer and the injectionof competition
has initiated more than just discussion throughout the utility industry.  Our
reaction has primarily centered on the concept that we must embrace change,
as change will inevitably be the constatn.  Not only will we change the way
we handle the utility business, but we must also change the way we service
customers as well as reconsider the types of service we will provide. These
concepts utilimately lead to diversification and that is the focus of this
report to shareholders.  There is an automobile advertisement that states,
"This isn't your father's Oldsmobile." If our Company is to improve and grow
we must recognize that it can not continue as a traditional local gas
distribution company.  The following information will explain the results of
the Gas Corporation and the Appliance Corporation over the past year and will
also explore the efforts management has taken toward growth through
diversification.

Let's review the overall results of the Company for the year ended September
30, 1999.  Consolidated earnings were $.95 per share, which is down from
$1.39 per share the prior year.  Some areas of the Company produced
excellent results while others were disappointing.  Net earnings of the Gas
Corporation were $219,700 vs. $391,500 in 1998, while the subsidiary
company's net earnings were $218,300 vs. $248,700 in 1998.  First, we will
examine the results of the parent (Gas) corporation during 1999 and then we
will review the Appliance Corporation and wholly owned entities.  For the
second consecutive year the number of degree days recorded in the northeast
U.S. were less than the fifteen-year average.  Warmer temperatures resulted
in lower than forecast gas deliveries to the Company's firm and
transportation customers.  Total gas deliveries during 1999 were 682,000
dekatherms more than the total for 1998. However, the Company has contracts
with two major customers that were negotiated at a fixed revenue level that
accounted for 707,000 additional dekatherms of these deliveries.  Thus, we
actually delivered slightly less gas to those customers who pay according
to volumetric use.  This is somewhat surprising considering that the prior
year(1998) established the record as the warmest year in our history.  To
further exacerbate depressing earnings, the Company was required to record
a net loss of $61,000 at the end of the year due to the mandated method of
accounting for lost and unaccounted for gas.  During the prior year the
Company had a sizable gain in this area thus the turnaround accounts for a
significant change in net income from one year to the next.

In last year's report we reviewed several areas of economic development in the
Corning area.  Several of the new housing projects are just now swinging
into high gear.  In the Erwin area there are currently 160 new apartments
and townhouses in the beginning construction phase with many new single
family homes completed and underway. The Corning Incorporated Sullivan Park
Science Research Center, also located in Erwin, has physically doubled its
size over the past two years and continues its expansion program here.  As
As Corning Incorporated officials predicted, this facility has more than
doubled its gas usage while Corning Incorporated has employed over two hundred
new scientists and additional support staff at the research center to
invigorate its thrust into new technologies.  Our Company provided a five year
graduated rate program for this facility as part of a package to encourage
economic development in New York State.

As our Company progressed throughout last winter it became clear that it
would be increasingly difficult to move forward without some rate relief.  We
have managed to survive on a very small increase in rates of only $212,000
during the past even years.  We have been able to cut costs in some areas
and have done what is possible to stabilize expenses in other areas, but
inflation, albiet moderate, has finally taken its toll.  On June 22, 1999 the
Board of Directors voted to file a major rate application at the beginning
of 2000, which will not become effective until approximately January, 2001.
Due to the restructuring of the utility industry, this filing will be
rather complex thus a more complete review of this issue is provided
further on in this report.  At this point we will review the results of the
Company's subsidiary and its three limited liability corporations(LLC's).

The Appliance Corporation

The Appliance Corporation continues to make substantial contributions to
consolidated earnings, yet 1999 income of $180,000 does not compare well
with the prior year's level of $236,000.   The rental portion of the
business provided the majority of net income as revenues derived from
rental appliances remained relatively stable. Sales of merchandise and service
revenues were 4 1/4 percent less than the prior year.  Overall gross margins
were also reduced to meet more sever competition while uncontrollable cost
increases, such as pension expense, all combined to produce depressed earnings
from this side of the business. Several adjustments are being implemented to
assist in improving results in this area during 2000.


Tax Center International

In its first full year of operation after purchasing this Company in April,
1998, net income of $75,000 were produced on gross revenues of $275,000,
an impressive 27 percent return on revenues.  Under the direction of Vice
President, Ms. Firouzeh Sarhangi, this business was expanded from a base of
600 clients to over 1,000 clients in the past year.  This organization,
consisting of five full time employees, provides monthly accounting, payroll
and consulting services to small businesses and professional offices and
tax services to businesses and individuals.  Looking forward, the primary
objective will be to secure additional qualified accounting personnel to
allow for expansion.

Foodmart Plaza

This small retail plaza, which was originally constructed in 1956 as the
area's leading grocery store produced net income of just over $40,000 during
our first full year of ownership.  The earings and revenue levels are
precisely on target with our expectations.  The plaza, which consists of
eight various businesses, is 100 percent rented.  One store is currently
empty but has an active lease through 2004.  The Plaza has a property
tax assesment court case in process, which, if successfull, will produce a
reduction in expenses of approximately $20,000 annually.  Improvements were
made to the exterior of the buildings and to the expansive parking facilities.
The property is well maintained and its overall condition remains very good.

Prudential Ambrose & Shoemake Real Estate

On December 3, 1998 the Company completed an agreement to purchase the
region's largest and most successful real estate company(Ambrose & Shoemaker
Better Homes & Gardens). This company was immediately merged with the
Prudential Marketplace (Real Estate Company), which the Company purchased
just eight months prior to Decemver 1998 to form this area's largest
residential real estate organization, Corning Realty Associates that maintains
between 55-60 percent of the market.  The Company has 15 employees and 70
liscensed sales agents who operate out of four sales offices located in
Elmira, Corning, Horseheads and Watkins Glen.  The Company has been highly
successfull in terms of total commissions produced but recorded a net loss
of $77,000 through September 1999, due, in part, to indirect acquisition and
start up costs.  A comprehensive budget has recently been implemented and
some further restructuring of the organization is moving forward to position
this business to contribute toward consolidated earnings during 2000.  This is
a full service real estate business offering residential and commercial
listing and sales services as well as auction, rental and property management
services.

Overview:While financial results for 1999 did not meet expectations, a great
deal was accomplished to position the Company for a brighter, more diversified
future.  As we move into a more competitive arena, the Company has put in
place a fine staff of personnel coupled with a mix of service oriented
businesses that position us to survive and prosper as we move forward.  We
remain committed in our policy to pay dividends to our shareholders as we
paid $1.30 per share over the past year.  The February 2000 dividend will
reflect 47 years of consecutive quarterly dividend payments.  We are
grateful to all the Company's employees who have been highly supportive in
our goal to diversify as so many have taken on additional responsibilities
to make this possible.  We look forward with enthusiasm to a more interesting,
productive organization that no longer must depend primarily on cold weather
for its success.  The Board of Directors is appreciative of the dedication
of the employees, the support given by shareholders and the loyalty of
its many customers.


Thomas K. Barry
Chairman of the Board,
President and CEO