American Telephone and Telegraph Company by the share capital or the capital advance notes of such companies.

A part will be used for extensions to plant (Long Distance service) of the American Telephone and Telegraph Company outside of the State of New York, and a part to maintain the cash balances now being drawn upon for all the above purposes.

Reference to the Annual Report for 1910, end of page 7 and page 8, under head of "Depreciation," sets forth the great advantage and economy of advance construction. Advance construction must be planned and cared for, and the cash provided in advance, if it is to be done in the best and most economical way.

The charges of this proposed issue on this year's revenue will be hardly appreciable. As a matter of fact, the usual yearly dividend on the whole amount could be met out of this year's revenue and still leave a surplus.

The business of the current six months of this year will show a continuation of increases in gross and net, although the toll and longdistance business as usual shows the effect of business depression.

The increase of subscribers' stations directly connected with the systems of the associated companies shows an increase over any previous year. The year will probably show a greater increase of stations, including those of connected or sub-licensed independent companies, thar any previous year.

In any comparisons with the figures so far of the present year, consideration should be given to the fact that the year's surplus earnings will be reduced at least $150,000 by increased charges against it, due to conversion of bonds into stock, and also about $315,000 by the decrease of interest income, due to the exchange of capital advance notes of the associated companies held by the American Telephone and Telegraph Company into capital stock of such companies, upon which no dividends as yet have been credited.

All the above facts taken in connection with the growing and more favorable sentiment of the community, which is evidenced by the passage in some states, and general advocacy and favorable consideration in others, of bills allowing opposition telephone companies to merge, together with the very broad and exhaustive decisions in supporting our contentions in the very few cases where we have had to go to the courts for protection against adverse legislation, presage for the next and future years a continuation of our past prosperity.

THEODORE N. VAIL,

President.

STOCKHOLDERS' RIGHTS

Form of Assignable Warrant Evidencing Right of Stockholder to Subscribe to New Stock.

Face of Warrant

Void and of no Value After Close of Business November 15, 1915

THIS IS TO CERTIFY that on the terms and conditions of the Resolutions of the Board of Directors, adopted October 5, 1915, is entitled

to the rights hereinafter stated in respect of a subscription privilege for .... ... Dollars of the Seven Per Cent. Cumulative Preferred Capital Stock of the American Coal Products Company. This warrant, and all rights represented hereby, are transferable by assignments, whereupon the holder thereof will be entitled, on surrender hereof, to all rights of the original holder. In cases where warrants are part "subscribed" and balance "assigned" same must be presented at the Registrar and Transfer Company, 32 Nassau St., New York City, to be re-issued in separate warrants.

This warrant, and other warrants for amounts aggregating full shares and multiples thereof, shall be presented and surrendered at the office of the Company, 17 Battery Place, New York City, N. Y., on or before the close of business November 15th, 1915, together with payment of twenty-five dollars ($25.00) per share of stock subscribed for (same being twenty-five per cent. of the total amount to be paid) in order to participate in the issue. Warrants not so presented are void and of no value. The balance of seventy-five dollars ($75.00) per share subscribed for is due and payable December 20, 1915. Pay

ments on these warrants not subject to interest or participation in dividends. No subscriptions for a fraction of a share will be accepted. Engraved Certificates of Stock will be issued on and after January 17, 1916, in exchange for all full paid subscription receipts.

By order of the Board of Directors

AMERICAN COAL PRODUCTS COMPANY

To the AMERICAN COAL PRODUCTS COMPANY

The undersigned hereby subscribes for the stock mentioned in this warrant under conditions therein stated and agrees to make payments as therein provided.

Dated....

Residence..

Post Office Address. ..

ASSIGNMENT

FOR VALUE RECEIVED the within warrant and all rights evidenced thereby are hereby transferred to

WITNESS:

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the warrant in every particular. without alteration, enlargement or any change whatever. When assignments are executed by administrators, executors, trustees, guardians, attorneys, etc., proper evidence of their authority so to act must be on file with the Company.

1

CONSOLIDATION 1

VALUATION OF DISSENTING STOCKHOLDER'S STOCK

Proceedings were instituted under section 7 of the Business Corporations Law (Consol. Laws, c. 4) for the consolidation of two domestic corporations, the Yellow Taxicab Company and the MasonSeaman Transportation Company, under the latter name.

The respondent, who is the owner of 173 shares of the preferred and 640 shares of the common stock of the Yellow Taxicab Company, objected to the consolidation. Three appraisers were thereupon appointed, as provided in section 8, for the purpose of determining the value of his stock. After numerous hearings, they filed a report in which they determined the value of the preferred to be $88.43 per share, or $15,298.39, and the common stock of no value. The report, upon motion of the respondent, was confirmed, and the Transportation Company directed to pay to him, upon the surrender of his common and preferred stock, the sum of $15,298.39. From this order the Transportation Company appeals.

1. The appraisers determined the assets of the Yellow Taxicab Company, as of March 9, 1914, the date when the respondent objected to the consolidation, to be $1,201,728.14, which included the valuation of the good will at $366,707.52. The appellant urges that the appraisers erred in fixing the value of the good will. The Yellow Taxicab Company commenced business on May 21, 1912, and the appraisers found that the net earnings of the company, for the year ending May 21, 1913, were $203,766.43, and for the subsequent period ending March 9, 1914, $15,239.48, making the total net earnings during the period mentioned $219,005.91. They divided the total net earnings by 212, approximately the number of months during which the corporation had been in business, and found the average monthly profit to be $10,186.32, and the average yearly profit $122,235.84. They then multiplied the yearly profit by 3, and took the result, $366,707.52, as the value of the good will.

The general method adopted in determining the value of good will is that suggested in Von Au v. Magenheimer, 115 App. Div. 84, 100 N. Y. Supp. 659, where it is stated that:

"The value of good will may be fairly arrived at by multiplying the average net profits by a number of years, such number being

1 Opinion in case of Seaich v. Mason-Seaman Transp. Co., 156 N. Y. S. 579, December, 1915.

suitable and proper, having reference to the nature and character of the particular business."

The appraisers, however, did not, as suggested on the second trial of the Magenheimer Case, 126 App. Div. 257, 110 N. Y. Supp. 629, affirmed 196 N. Y. 510, 89 N. E. 1114, deduct from the average net profits interest on the capital invested in the business, and of this the appellant complains. I am of the opinion that interest should have been deducted. There are several authorities which indicate that interest on capital invested ought to be deducted from the average profits of a business before using such profits as a basis for determining good will. Von Au v. Magenheimer, supra; Matter of Ball, 161 App. Div. 79, 146 N. Y. Supp. 499; Matter of Board of Water Supply, 81 Misc. Rep. 19, 142 N. Y. Supp. 83; Matter of Keahon, 60 Misc. Rep. 508, 113 N. Y. Supp. 926.

It is impossible to accurately determine from the record before us the capital upon which interest should have been allowed; but I think substantial justice will be done to both parties if interest be allowed on the value of the assets as determined by the appraisers on March 9, 1914, excluding the value of the good will. If this be done, then the value of the assets on the day named was $835,020.62. Six per cent. interest on that sum for one year is $50,101.24. If this amount be deducted from the average yearly profit, then that amount would be $72,134.60, instead of $122,235.84, as found by the appraisers; and multiplying this profit by 3, the method adopted by the appraisers, the value of the good will was $216,403.80, instead of $366,707.52, and the assets of the corporation were $1,051,424.42, instead of $1,201,728.14.

2. The appellant also urges that other reductions should have been made; but only one of them, I think, requires serious consideration, viz., the one relating to the value of the taxicabs. In ascertaining that value, the appraisers first determined their value on May 21, 1912, the time when the corporation commenced business, to be $539,100. From this amount they deducted for depreciation and obsolescence at the rate of 10 per cent. per annum. The finding of the appraisers that the value of the taxicabs was $539,100 on May 21, 1912, is sustained by the evidence; but, when all of it is considered, I am of the opinion that 20 per cent. per annum, instead of 10, should have been allowed for depreciation and obsolescence. If this be done, then the value of the taxicabs on March 9, 1914, was $362,275.20, instead of $446,374.80. The assets of the corporation on March 9, 1914, as determined by the appraisers, as already indicated, were $1,201,728.14. From this amount they deducted the con