The Express.
London, England, 1849-05-03 00:00:00

EASTERN COUNTIES RAILWAY.,

THE DIRECTORS AND THE Cum._
INVESTIGATION.
The following is the reply to the report of the com-
mittee of investigation by the board of directors. An
unusual press of matter precluded ear publishing it
yesterday. It is entitled " Observations of the Di-
rectors of the Eastern Conntim Railway Company
upon the Report of the Committee of Investigation."
'rho directors have carefully iconsidered the report of the
committee of investigatiou, and would be wasting in their
duty to the shareholden were they to delay for a ids& day
making known to them the sentintenie they entertain with
regard to its chief recommendations.
They have no wish to 'intonate their trended in respect to
those matten where blame can be plead upon the board as
a body, while they regret that they did act earlier oppose the
influence which led to erroneous measures. The facts are be-
fore the proprietors, who can form their own opinion. They
will bear in mind, however, the circumstances under which
Mr. Hudson was Invited by the shareholders to take the un-
controlled direction of the undertaking, the expectations he
held out of great increase of revenue from the opening of
the Byston and Peterborough line, which lave not been
realised ; and that, whenever Mr. Hudson was thwarted in
his views, he threatened to leave the direction of the com-
pany, and it was considered that it would not be agreeable to
the proprietors that he should do so. Therefore ha wishes
were concurred in and carried out by the board. That various
sums. which ought to have been charged to revenue, have
been carried to capital, now unquestionably appears ; but at
the same time it is undeniable, that to state the sin mats
charged to capital, as improperly so charged, at 320,5721. is a
great eassmeration. It is true for instance, that sums to the
extent of 84,0001. and upwards, forming portion of the
320,6721., bays been charged by the directors to capital
instead of revenue, as the tittereat of unproductive capital.
But whether this be right or wrong, it has been a practice
pursued by all other railway eampeeiss ; it is defensible
upon substantial grounds, sad the shareholders have them-
selves been parties sanctioning the charms. Many other sums
also, forming an aggregate of upwards ef 100,0001. also form-
ing poetise of the 320, 6721., and chiefly esenected with the
rolling stock, have been treated during the last three yeses es
chargeable to capital which they properly were. Throe
sums the committee of inustigatioe seek to brim hack
spinet. the past revenue, whereas the true complaint
on their part should, in the opinion of the digesters,
have been that no depreciation fund had, during this
period, been formed Gut of the revenue. As to this plat,
the directors have to remind the shareholders that, be-
fore Mr. Hudson joined the boast, the principle of s
depreciation hind had been established, at the credit of
which stood the sum of 8,3451., and it was the intention
that • half-yearly addition should be made to this sum;
but Mr. Hudson disapproved of the principle ; the matter
was dimmed at the general meeting of -February, 1846; and
the shareholders having then adopted Mr. Hudson's view of
the subject, all further additions to the fund were abasiesed
and the existing reserve of 6,3451. was, in the following US
year, mail use of, 'on the face of the printed acertart In e, '
assisting to pay the dividend. The matter was, learner,
forted upon the eoneideration of dui board when they had to
Prepare a financial statement of the company, in November
Jut, and they considered that they ought not to avoid men-
tioning the question of the depredation fund, sad they
brought it forward contrary to the wishes of the thee chair-
man. The 1 e used on this subject, in the financial
statement, is as fo :
It is impossible not to foresee, that, at intervals in a series
of years, the net revenue will be called upon to contribute
more than ordinary gams for the replan-meat of the perish-
able portions of the permanent way and working stock. The
only practicable method of dealing with this contingency is
the creation of a depreciation fund, if the proprietors think
fit ; or to leave the shareholders of the cloy, when the extra
, outlays are made, to bear them."
There is not even yet any positive experience as to the
n extent dutch reserve, but suing upon the wind-
, pie laid wn in the financial statement, the board did, in
their report of February last, propose to lay aside a sum of
140001., as the nucleus for a depreciation fund.
!the directors, having thus stated their views upon some
of the charges made in the report of the committee, will
abstain from comment en any questions touching individual
eondact. Them will be best dealt with at the public meet-
ing ; when snob personal explanations as may be required
willbe given. In reference to an expenditure, however, of
7,6061., which is referred to in the committee's report, the
directors think it right to say that it was made to bring about
, important benefits for the company, by assisting a committee
in April, 1846, called the Sire-lane committee, formed for
the purpose of carrying out the scheme of analgamatka with
the Eastern Counties and London and York in-
, tenets, which bad been proposed by Mr. Hudson at
the meeting is 1846, and which had been received with each
unbounded satisfaction by the shareholders; and of that
committee Mr. William Cash was • member. Had the
objects of that committee succeeded, an enormous amount of
expenditure, parliamentary and otherwise, would have been
saved ; and that these objects were legitimate and prop '
are sufficiently established by the feat that a gentleman of
such respectability acted upon the committee.
The directors deem it unnecessary to trouble the share-
holders with remarks upon some of the matters in the report,
which have obviously been constantly before the board.
They have always been anxious toeless the capital account at I
the earliest possible period, andto introduce every practicable
economy in the working
.of the railway. They have also
not been insensible to the importance of reducing the legal
expenses, and stepping all expenditure not absolutely
neeemery.
Referring also to the capital and liabilities of the Com-
pany, the directors, with confidence, appeal to the &lucid
statement issued on 21st November, 1848, as giving a de-
scription of these, to accurate that it cannot be refuted,
although there are passages in the committee's report which
appear to differ from the results of that statement.
The careful consideration by the committee of the question
of amalgamation with the Norfolk Company having led to
the conclusion that it should be carried out, the directors
abstain from further notice of that subject.
In reference to the vital question of dividend for the last
half-year, the directors having deeply considered the subject,
and having regard to the interests of the shareholders and
the permanent stability of the property, find themselves
obliged to arrive at a conclusion directly opposed to the
report of the committee, and they will now proceed to give
their reasons for thinking that the shareholdeiN should de-
aler* inch a dividend as has been unquestionably earned.
Upon this subject the directors are necessarily more than
anxious, because the last half-yearly account of revenue is
the first since July, 1846, over which they exercised control ;
and they believe it to be strictly and in every figure correct ;
and not impugnable in the manner stated in the report of the
committee.
The directors consider that they ought first, in the very
language of the committee, to quote the pawage from their
report which pronounces the opinion that no dividend should
be paid, and which charges the errors in the last half-yearly
account as amounting in the aggregate to 97,3641. It is as
follows (p. 16) :
" But, perhaps, the object of the most immediate inte-
rest under this head of the report, is the true state of the
working account of the last half-year. That account, as
presented to the late general meeting, exhibited a sum of
103,6871. 13s. as the net profit of the half-year; but your
committee regret they cannot acquiesce in its correctness,
payments to the amount of 97,3641. 14s. W., which ought to
have been defrayed from the current income having been put
to the debit of capital account, which, if properly charged in
the hooka of the company, would have diminished the
balance of the hairiest to 6,3231.85. 7d. Be that the real
result of the half-year's Waffle account, ending 4th January,
1849 shows that the balance remaining is too small for any
dividend, and must be carried forward towards that of the
next half-year. The items of which this 97,3641. consists, as
furnished by Mr. Quilter, are the following:
wages in carrying department paid by Mr. Moseley 66m0
Lem receipts to ditto
/2,297
Role of old material LH]
of permanent way, London sad Stratford ------- 13,635
amines 1,851
two
2,343

ige tins ,_ - -
esildieme a irlualsWaborps - 1,371
=if kip-
IS aps= eigliel.-beil4. imp. fie. 7,189
lams9Blss wiry angora, treas. borarbacus. he. 64,47$

The directors feel that this statement has been made under
an erroneous impression of the facts of the case—an opinion
in which the shareholders will no doubt concur after the fol-
lowing explanations.
The first item of 2,2971 is wholly incorrect, as will be seen
front the subjoined figures.
The whole et the receipts and expenses in connexion with
Mr. Moseley's cartage account for the half-year ending 4th
January, 1849, were brought to account, than :
Mr. Weeelq expended E11.782 17 4
Mr. Davis 2,280 8 8

114,913 4 0
Kr. Yardley received 112,1192 7 6
Mr. Davis
12,932 8 0

Balance debitcess of expectliture over receipts minded
to the of traffic amount, as a deduction from
the receipts for goods, cattle, he.

Thus proved,—
Return freer Mr. Stephens of the audit
ofßee, se receipts for geode, cattle, ke £133,601 2 7
Deducted se above SIAM 16 0
„ drawbacks .. 931 18 9
9,012 16 9

espeaditure credit would have to be given for a proportion of
proceeds of the old materials to he sold acd realised.
" Rebuilding of two engines, 1,3811 ;" and" new carriese
tires and sprints, 2,3651," were sums paid in the half year
ending July, 184 m, and ought not to be introduced into the
last half year's soocunt.
" Sultritors' and parliamentary charges, 1,3711" the
directors bad thought should not be charged to revenue in
additiem to the sum of 1,0571. 6e. 2d., appearing to the debit
el the lest half revenue account. Parliamentary
imps have never by any company been placed against re-
venue' but still the direeton do not seek to change the view
taken by the Committee, that the 1,371 i. should be added.
"Repairs of malt waggons, &e., 2,9291.," is an improper
detsription, for the sharps are not for repairs. 700/. of this
amount was paid for carriages in the hall year ending July,
1848, end has nothing to do with tie last half year's
amount: and the remainder of this amount was paid for
roofing new waggons with iron roofs in lieu of sine tops,
whist haying been tried, wen found to be useless. Them
iron rook ought, to the first instant*, to have been fixed
upon the waggons, and their cost was es properly chargeable
to capital as the waggons themselves.
The item of locomotive engines, ito., 64,4781., is, whet
given in detail, as follow.;
R. Stephensont4 and Os., for engine. ordered 15th May,
la
Wilma and Cb., ter mime ordered 10th Feb., 1317 34,000 0 0
Newmarket @took of canines sad nosebleed 11,100 I •
William Hamer, for waggons ordered Stit Sept. 1248 5,347 0 II
Marriott and Co., borer and wawa springs for new
was supplied by Hamer, under order of 13th
Sept, INS.
mere. ftalgam for bargee
lAN
11 7
aatClei iffi
er malt Slat Weigoo. IAN 1
Isoltio4 arryist Meek
W. H. Clay two barges ... lOO 0 0
WapaawhoMsetahostraliding engines,
re Orr in halliser iodine JulYi
£1,331 0 0
Addideimi maw Mob be' Stratford work-
1814IL 873 1 0
2,253 2 0
Air** laid lax stomeary additions to new engines of
igndleid and Illwagliter 330 0 0
London and hails Western Company, erwiter of
V 2 11 10
Trig bee endl6.•ll mare& kr bending No. 1 and No. 1 new
Meant earrings
=lntialt Urges, menage of losotnothe engines,
wen, new dram We gaming bean tom*
373 6 2

£63,361 7 7
Less Ws el aid amine to 11. P. Bart £7so 0 0
„ canine at waggons twice charged 132 10 1
802 IS 4

£64,478 9 8
It is to be regretted, that in a case where accuracy was so
desirable, such mistakes should have occurred, as that
2,1601. Is., part of the item for roofing waggons, should be
comprised in this item of 64,4781, when it already formed
portion of the former item of 2,9291. ; and that the item of
" wages and materials, rebuilding engines, &c., 2,2531. 25.,"
should also, to the extant of 1,381., be a double chart", for
that sum is already charged, as above, in the fourth item of
the committee's report " Rebuilding two engines, 1,3811."
But irrespectivily of these errors, it will be obvious to anyone
i perusing the above details—and it is a fact—that the charges
are altogether for engines, waggons, &c., purchased as addi-
tional working. stock ; being therefore as fairly and pro-
perly chargeable to capital as any of the engines or carriages
ever purchased by the company. The payment for the en-
gines—which firms the heaviest item, viz., 41,300/.—was, as
will be observed, in rs',pect of engines ordered so long ago as
May, 1846, and February, 1847. It is true that there has
bean a depreciation going on of the general rolling stock,
but the directors have hitherto considered that this should
be met by resuming the formation of a depreciation fund, as
suggested in the financial statement of November last ; and,
although the directors are not prepared to say that a better
system than the resumption of such a fund might not be
adopted, they feel that in carrying out any other there would
be considerable difficulty.
The Item. " Unpraductive capital, bond-stamps,
7,1831.," is, in the opinion of the directors, not chargeable to
revenue for the put half-year, for the reasons stated in the
directors' report to the general meeting. It has been the
invariable practice of railway companies, as before stated, to
distinguish between their productive and unproductive capi-
tal, and to charge the interest on the latter to capital. This
practice has been pursued by the board as regards the above
sun ;of 7,1831.„ and they believe, when the facts arc ex-
amined, that the amount will not be disputed.
liilpon a review, therefore, of the whole of the above items
of 97,3641., which the report of the committee seeks to charge
against the last half-year's revenue, it would appear the direc-
tors have not been in error, and that the sum et 103,6871. 13%,
as stated by them to be the net earnings of the last half-
year, is substantially correct, being subject, of course, to such
deduction for depreciation of working stock and permanent
way as may be considered right; and with regard to this,
there is certainly some difficulty in arriving at a positive con-
clusion, but the directors think that the difficulty can be
best met by a liberal addition to the proposed reserved fund
of 14,0091.
The board regret that this view of the facts has not been
taken by the committee, because if it had, they think that a
dividend of 4s. per share at least would have been recommen-
ded, which would have left a sum for depreciation ample for
every ur
Thep directors consider it only just to themselves further to
remark in respect to this last half-yearly account, about
which they have already expressed their extreme anxiety
that it should not be impugnable, that although by the ex-
tract gives from the committee's repast it is stated that the
net earnings for the lest half-year are 6,3231. only, yet in the
first sheet of the appendix, it is reported by the accountant
employed by the committee, that these net earnings were, in
his optnioa, at least 70,8011. 7s. 108., which would pay 4s. 2d.
per share on the shares entitled to dividend. On the other
hand the directors, fur the reasons given, allege that the
balance of net revenue was in truth not lets than 103,6871,
and in conclusion, they leave the whole subject for the inves-
tigation, fair judgment, and decision of the shareholders.