Physical Condition

The property of the company has been maintained during the year at the same high standard
of efficiency. Outside of the completion of your Company's portion of the high speed line to
Newark, New Jersey, no new work was undertaken during the year except the construction of an
additional platform at the Erie Station, where the increase of traffic and the necessity for improve¬
ment in operating conditions made an additional platform essential. This work has been begun and
should be completed during the Summer of 1912.

Newark Rapid Transit Line

On April 18, 1906, your company and the Pennsylvania Railroad Company entered into an
agreement for the establishment of a joint through train service between the Hudson Terminal and a
new station to be built by the Pennsylvania Railroad Company in Newark. Each company furnishes
the track and facilities for its part of the line and its proportion of equipment for its operation, and
the earnings and expenses are prorated on an equitable basis.

On the 1st of October, 1911, the first trains began to run between the Hudson Terminal and
Manhattan Transfer, and on the 26th of November, 1911, the service was extended into the new
station at Park Place, Newark. Since then the Pennsylvania Railroad Company has discontinued a
large number of its steam trains between Manhattan Transfer and its old station at Exchange Place,
in Jersey City. All Pennsylvania Railroad trains to the downtown section of New York are now
scheduled to and from the Hudson Terminal, which has become, in effect, the downtown New York
terminal of the Pennsylvania System. One of the important stations on this line, namely, at
Summit Avenue, Jersey City, has not yet been completed, but a temporary facility at that point was
opened for public use on the 14th of April, 1912. It is expected that the permanent station
(which, under the agreement, is being built by the Pennsylvania Railroad Company) will be
completed about the 1st of August, 1912. The Public Service Corporation, of New Jersey, is build¬
ing a commodious and excellent terminal adjacent to the Summit Avenue station, and purposes to
operate a large number of its existing lines to that point. Under this plana new and distinctively
advantageous service between the residential district of Jersey City and downtown and uptown New
York will be provided. It will put this district within eight minutes of the Hudson Terminal and
within nineteen and one-half minutes of 33rd Street and Broadway, giving it a marked advantage in
point of time and convenience of access over any other residential district in and around the principal
centers of New York City, which should result in a rapid growth of the entire Bergen Hill section of
Jersey City. The Newark Rapid Transit Line also provides a frequent and rapid through train
service to New York, the running time from Park Place, Ntwark, to Hudson Terminal being only
twenty minutes. Its effect upon the future of Newark will he more pronounced as time goes on.
The traffic results have thus far been entirely satisfactory and give promise of large future growth.

Car Equipment

On August 1st, 1911, your company purchased thirty-six additional steel passenger cars,
being its portion of the equipment required for the joint service to Newark, under a purchase agree¬
ment with the Guaranty Trust Company of New York, which company has issued its Car Purchase
Certificates, Series C, against this equipment. The principal is payable in semi-annual instalments
upon a similar plan to that of Series A and Series B, Car Purchase Certificates, heretofore issued.

Hudson Terminal

The value and importance of the Hudson Terminal has increased during the year. The office
buildings have retained their popularity to such an extent that all available space was rented during
the year.    The demand for space has exceeded the supply.

In order to meet this demand and to more fuUy protect the buildings on the west, it was
considered desirable to purchase from Hudson Companies additional real estate between Dey and
Cortlandt Streets, adjoining No. 30 Church Street on the west, and an additional lot on Dey Street,
adjoining No. 50 Church Street on the west, and to erect thereon two six story structures. The work
was begun in the Fall of 1911, and the buildings will be ready for occupancy on or about May 1st,
1912.    Eighty-five per cent. (85%) of the space in these additions has been rented, and it is expected