More significant is the second kind of real estate activity which is the acquisition, improvement, and sale of raw acreage. In this instance we are not primarily interested in building structures but in selling land. The construction of commercial or industrial plants on the land we sell is a service that we are willing to perform for our clients but we do not insist upon it. Home building we leave to others. Nor do we buy land primarily for speculation in the hope that it will increase in value by a change of price in the market place. We buy land when we see an opportunity to cause it to change in value by some action or service on our part. This may be as simple as converting farm land to higher uses or as complicated as manufacturing useful land where none now exists. For example, in South San Francisco we leveled a mountain and spread it over marsh land; in Alameda we dredged sand from the bottom of the Bay and filled tidelands. Time does not permit discussion of individual land projects, but they have been described in the fact booklet presented to you. We own or control some 10,000 acres in California and are confident that our present value is substantially in excess of our cost. However, I would like to express the caution that our ultimate success in our land development activities will rest upon our ability year after year to prove that we can, like any successful merchant, continually repeat the process of buying our merchandise and reselling it at a profit. Our confidence in our ability to do this does not rest so much upon the potential profit already existing in our present inventory as it does upon our faith in the experience and know-how we have acquired in this field. 8 Hydraulic Dredging The manufacture of land led us into hydraulic dredging, and we have available to us two of the most modern, powerful dredges in the world. We expect to use these dredges primarily in contract work, utilizing them on our own land projects when they might otherwise be idle. In this way we hope to minimize the idle time cost which is the principal problem to be overcome in contract dredging. To date, our dredging operations have lost money, and our 1960 results are badly depressed by a dredging contract with the Corps of Engineers on the Delaware River. However, the District Engineer has found that "changed conditions" exist, and this means that we are entitled to "equitable relief," but so far we can't agree on what constitutes "equity." Since we never anticipate any relief that we may receive from pending claims, we continue to record losses based on the original contract price. Thus far all of my remarks have been directed to the earning power of activities added to our company in the last decade. These assets enabled us to report a consolidated profit of $4,400,000 in the first half of this fiscal year, the highest level in our history, and only the Iron Springs Mine contributed to profits in 1949, when its earning power was about a fifth of the present rate. Construction Our straight contract construction, virtually the sole source of our livelihood for the first 50 years of our corporate existence, made a small contribution to profits in 1959, lost money in the first half of 1960, and may or may not overcome this deficit in the last half of the year. 9