PANAMA RAIL ROAD COMPANY.

New York, N. Y., November 1, 1914.
To THE STOCKHOLDERS OF PANAMA Ratt ROAD COMPANY:

I respectfully submit, for your consideration a report of the Company’s
operations and resulting financial condition for the twelve (12) months
from July Ist, 1913, to June 30th, 1914.

In this connection I call your particular attention to the subjoined
statements of Operation and Maintenance of the Company’s property; to
the details of the attached Exhibits that show Income and Profit and Loss
Account; General Balance Sheet; and to statistical tables, which having
been audited by certified public accountants, furnish complete information
concerning the financial aspect of the Company’s business, together with
the Subsistence Officer’s report of his operation of the Company’s Com-
missary Department and the resulting earnings. :

The status of the indebtedness of $38,247,332.11 to the United States —
Government referred to in my report of last year remains unchanged. ,

The business of the Company was carried on during the fiscal year
under conditions that have long prevailed, but the approaching completion
of the Panama Canal and the logical diversion to be expected from rail
to water-borne transportation across the Isthmus of all cargo for points
beyond on the Pacific Ocean, together with the necessity that all possible
means at the disposal of the United States Government be availed of to
insure a successful operation of the completed Canal required that any
disturbing competition that would follow a continuance of the Rail Road’s
through-billing relations with its numerous foreign and domestic connect-
ing Steamship Lines on both oceans be avoided. It was, therefore, ar-
ranged that the stipulated notice to discontinue those relations be served —
upon all such carriers to become effective ninety (90) days after the
practical oocme of the Canal, that subsequently occurred on August 15th
last.

In order to facilitate Canal operation and develop the Rail Road’s
earning capacity in other directions than from its continued local and
through business to Panama City it was decided to push to completion
improvements at its terminals on both oceans to effectively furnish berth-
ing facilities for the loading and discharging of vessels, cargo handling,
transfer services, fuel, material and supplies, and for necessary repairs
to vessels using the Canal, at prices slightly in excess of cost.

It is to be expected that the very important revenue returns that have
annually accrued through the independent operation of the Rail Road
will be very materially reduced by the diversion of its traffic'to the Canal,
whose revenue will be correspondingly increased so that no material loss
will result thereby to the United States Government, as Owner of both
properties.

In order to perfect economies and secure rarer aaney for both
interests, the reorganization and consolidation, as far as possible, under
Canal operation of all Officers and employees with similar duties was
provided for. |