Depreciation: T stated last year that reserves for depreciation on, [buildings were adequate. It Las now been considered advisable, however, fo make a further provision this year of $215,091.04.
In the past it has been considered that the hidden reserves, arising. from increased property values, more than offset the depreciation in bulld-Ings, but owing to the decline in property values this Is no. longer. the case, and your directors have therefore' adopted the sounder policy of building up a depreciation reserve which "will amortize the buildings during their "estimated life periods, fand in the case of leasehold property, during the lease periods, As explained {0 you last year, seme of our properties have been written up to assessed values, and others written down to the same: evel, so that all properties now stand. fu our books at assessed value. On this basis, and an adequate deprecia tion fund having been established to cover the life period of the buildings, the company is in a sound position with the value of its net assets slight ly exceeding the amount of its Issued capital.
Interest: This item has. increased during the year by $289,000.43, This is due to an incvaase of our overdraft by $2,103,205.52 largely on account of the amount required for the completion of Grosvenor House, and Grosvenor Gardens. and to the fact that interest on the cost of this development has been provided out of the revenue account as from of July 1, 1935, whereas previously such interest had been capitalized in. a cordance with usual practice, Furthermore, as 1 have already mentioned, there are arrears of interest due to lus on mortgage loans, which are being carried in suspense until actually received.
There will be a considerable reduetion in, interest charges during 1936, due to the fact that our bankers have enabled us to make a substantial saving by converting our loan from them to sterling. at a reduced rate of interest of 5 per cent, as compar= fed with 6% por cent. which we were paying formerly. This conversion has been made at a rate of approximately Plant and Machinery: $285,130.35, against $21.598,80 in last year's a counts. In the past separate heating installations were operated In Cathay Flats and Cathay Mansions. As there was ample space available in the basement of Grosvenor House it was decided to put in a larger plant to supply hot water and heating to Grosvenor House, Grosvenor Gardens, Cathay Mansions and Cathay Flats. and the fact that all the buildings on this estate are now supplied from tone source will result ina consider: able saving.
As regards loans to subsidiary companies, these are all adequately 20e-
The balance available for appro: Priation, at the end of the year's working. amounts to $66:383-82, which your directors propose should be ar-Hed forward.
Text read from the printed page and cleaned; old type leaves the occasional error.