PANAMA RAIL ROAD COMPANY


 New York November 30, 1933

To THE STOCKHOLDERS:
 I respectfully submit for your consideration a report of the Company's business and resulting financial condition for the twelve months from July 1, 1932, to June 30, 1933.
 In that connection I would call your particular attention to the suboined detailed statements that cover the operation and maintenance of the Company's property.
 The operation of the railroad and its appurtenances jointly with the steamship line resulted in a not income of $889,230.13, a decrease of $10,277.11 under last year. From this must be deducted profit and loss adjustments affecting previous years' operations, amounting to $14,768.35. This leaves a gross surplus of $874,461.78; deducting therefrom an 'additional dividend of $5,281.25 paid during the year makes a net surplus of $869,180.53, which is the amount added to the Company's surplus.
 This result is arrived at after meeting all costs of operation, and allow. ing for charges to income aggregating $23,211.13 and depreciation of rolling stock, floating and plant equipment of $654,514.23. While the operating revenues were not as high as in the previous years, the profits accruing from railroad and business operations are satisfactory, considering the world-wide depression affecting business. The net income was 1.14 per cent less than in 1932.
 In accordance with provisions in the War Department Appropriation Act, approved July 14, 1932, your company deposited in the Treasury of the United States special dividends aggregating $2,800,000 to be applied to the maintenance and operation of The Panama Canal. These funds were expended on the construction of the Madden Dam. The amount withdrawn from the funds of your Company was far in excess of its net earnings during the year and of necessity came from surplus and reserves. The accumulation of reserves for necessary replacements has been a fundamental policy of your Company, which has operated successfully under both private and Government ownership, and the strength, reliability and initiative of the Company in its many important services have rested upon conservative principles of management. It is important that its capital be not so depleted by further detachments for unrelated uses as seriously to weaken the Company and render it less capable of performing its services for the Panama Canal and the Government of the United States.

 Respectfully submitted,


JL. SCHLEY,


President.