Annual Report

Atixiliary operations show an increase in the net revenue of $2,550.51. All the
accounts under this head produced increases except harbor terminal transfers with a
decrease ot $117,531.09 and dining and special car service which decreased $37,622.79.

The amount of taxes accrued during the year was $5,918,482.90, equal to 5*13% of
the gross operating revenues of the year. The increase was $470,723.77, or 8'64%, due
to a general raising of the tax rates assessed on real estate. The Federal Government
tax on income of corporations amounted to $128,245.84, a very small decrease from that
paid in 1911. As in previous years, a large portion of this amount was paid under
protest. Of the suits that were instituted to recover the amounts paid on account of lessor
companies under the claim that they are not liable to this tax, those in behalf of tho
West Shore Railroad Company and the Mohawk and Malone Railway Company, selected
as test cases, were tried in the city of New York and the judgment of the court was in
favor of the two companies. The Federal Government has taken the whole question
involved to the Supreme Court where arguments have been heard and final judgment
is expected early in 1913.

In deductions from gross corporate income, rentals of leased lines have increased
$18,360.12. The rental of the Boston and Albany Railroad was larger by $22,500.00, the
amount of interest on Improvement bonds issued in 1912. The rental of the Dunkirk
Allegheny Valley and Pittsburgh Railroad decreased $6,041.68 due to the refunding of its
bonded debt at a lower rate of interest during the year 1911.

In other income an increase of $1,142,300.67 is reported in the income derived from
capital stock held by this company, due to the acquisition during the year of shares of the
New York and Harlem Railroad Company, Rome Watertown and Ogdensburg Railroad
Company and the Utica and Black River Railroad Company as stated in a previous
paragraph.

Interest on the funded obligations of this company increased $1,606,227.31, made up
of interest on securities issued during the year as follows: Gold mortgage bonds, $175,000.00:
Gold debentures of 1912, $324,583.47: Three year gojd notes of 1912, $553,125.00: Equip¬
ment trust ot 1912, $288,558.83 and an increase of $264,960.01 in the interest on three
year gold notes of 1911, the difference between nine months' interest charged in 1911 and
a whole year's interest charged in 1912.

Separately operated properties resulted in a loss of $346,612.72, being the amount of
this company's proportion of the annual guarantee to the Merchants Despatch Transporta¬
tion Company, $369,080.04, less the profit from the operation of the Dunkirk Allegheny
Valley and Pittsburgh Railroad $22,467.32, the net result being an increase of $135,919.70
in the deductions from gross corporate income. No dividend was paid on the capital
stock of the St Lawrence & Adirondack Railway Company for this year, reducing the
amount of this company's income from investments $64,600.00 and reducing deductions
from gross corporate income by the same amount.

The rate of dividend on the capital stock of The New York Central and Hudson River
Railroad Company for the year was five per cent, being the same as for the previous year.

The surplus for the year, after paying dividends, amounted to $2,743,372.35 a decrease
as compared with the year 1911 of $1,424,611.69.