Your Corporation and its subsidiaries on June 30, 1932
owned 53% of the outstanding Preferred Stock and 70% of the
outstanding Common Stock of the Brooklyn and Queens Tran¬
sit Corporation. Because your Corporation and its subsidiaries
owns the controlling interest in the surface companies, there is
attached to this report a copy of the Third Annual Report of the
Brooklyn and Queens Transit Corporation, which report sets
forth in detail the results of operations of the surface and bus
lines during the past fiscal year.

There were paid, during the fiscal year, on the outstanding
Preferred Stock of your Corporation, four quarterly dividends of
$1.50 each, and on the outstanding Common Stock, four quarter¬
ly dividends of $1 each.

The Board of Directors at their meeting on June 20, 1932,
declared a quarterly dividend of $1.50 per share on the outstand¬
ing Preferred Stock payable July 15, 1932, to the holders of
Preferred Stock of record on July 1, 1932.

In 1928 and 1929 your Company purchased $17,000,000.00
in principal amount of New York Rapid Transit Corporation
Refunding Mortgage 6% Bonds, all of which were issued against
capital improvements made by the New York Rapid Transit
Corporation under Contract No. 4. These bonds were purchased
with the proceeds of bank loans and other funds of the Corpora¬
tion. Subsequently your Corporation was partially reimbursed
by the sale of $10,000,000.00 of One Year Notes which were re¬
funded and your Corporation was additionally reimbursed by
the sale of $13,500,000.00 Three Year 63^% Notes due August
1, 1932.

In view of the maturity of these notes on that date and of the
uncertainty as to the trend and duration of the existing world¬
wide business depression and the improbability at that time of
an early improvement in the market for long term securities,
your Board of Directors considered it the part of prudence and
wisdom and for the ultimate benefit and advantage of the stock¬
holders to conserve the Corporation's earnings. Before any divi¬
dend can be declared on the Common Stock in any one fiscal
year, dividends for that entire fiscal year must be declared on the
Preferred Stock. Just prior to the maturity of these notes on
August 1, 1932 it did not seem prudent to commit the Company
to the cash outlay involved in the declaration of four quarterly
dividends on the Preferred Stock and consequently no dividend
on the Common Stock was declared payable July 15, 1932, to
stockholders of record July 1, 1932.