friendly consideration the auditor wishes to express his full appreciation. In conclusion, the thanks of the auditor are due to the civil governor and the members of the Commission for their cordial and sympathetic support, which is a constant inspiration to greater effort and better results. Respectfully, The SECRETARY OF WAR. A. L. LAWSHE, Auditor. The CIVIL GOVERNOR OF THE PHILIPPINE ISLANDS. The PHILIPPINE COMMISSION. APPENDIX. THE SUBIG BAY NAVAL RESERVATION, SIR: I have the honor to submit the following report of the financial transactions of the governor of the Subig Bay Naval Reservation during the fiscal year 1903. This territory was detached from the provinces of Zambales and Bataan under the order of the President of the United States, dated November 9, 1901, its limits being defined in General Orders, No. 61, of the Navy Department. Lieut. Col. O. C. Berryman, U. S. Marine Corps, by direction of the senior squadron commander, assumed control of affairs on January 21, 1901, and was relieved May 15, 1902, by Commander U. R. Harris, U. S. Navy, as governor of the reservation. The Executive order cited placed this territory outside the jurisdiction of the War Department and insular government, but under instructions of the President the auditor for the islands was later charged with the duty of settling and adjusting the accounts arising under the government of the reservation. The reservation was abolished by Executive order of the President May 9, 1902, but the governor was not relieved from duty until November 15 following. The account is here stated from July 1, 1902, to the extinction of the reservation as a separate government: PRINTING FURNISHED BY THE BUREAU OF PUBLIC PRINTING UNDER ALLOTMENTS. In addition to the printing and binding executed for cash by the bureau of public printing, it furnished under allotments to the various departments, bureaus, and offices of the insular government printing and binding to the value of $192,316.96, United States currency, distributed as follows: STATEMENT RELATIVE TO THE THREE CONCESSIONS GIVEN BY THE SPANISH GOVERNMENT TO THE EASTERN EXTENSION AUSTRALASIA AND CHINA TELEGRAPH COMPANY (LIMITED). At the request of the honorable secretary of finance and justice this office undertook to ascertain the amounts due to and from the government under the concessions held by this company from the Spanish Crown, provided the same were recognized by the government of the islands. Correspondence ensued with the company relative to the matter, which was in abeyance at the time the report for the fiscal year 1902 was submitted, pending the receipt of the company's complete records from the home office in London. The result of the investigation thus requested is set forth in the following statement relative to the three concessions given by the Spanish Government to the Eastern Extension Australasia and China Telegraph Company (Limited): THE FIRST CONCESSION. In 1879 the Spanish Government granted to the Eastern Extension Australasia and China Telegraph Company (Limited), an exclusive privilege for the construction, establishment, and operation of a submarine cable between Hongkong and Cape Bolinao for the period of forty years from the date of the first dispatch transmitted. The company was to receive a subsidy of $4,000 per month for the first ten years and the immunities conceded by existing laws to items of a public work as to the materials required for the construction on Spanish territory of the aerial line, and also as to the apparatus and other instruments. The Government was to have the privilege of priority in transmission and free transmission of all official correspondence during the entire forty years. Under article 16 of the schedule of conditions, dated December 14, 1878, which was the basis for proposals, the official correspondence of the Government was to enjoy the privilege of priority and free transmission during the term of the subsidy, and afterwards priority and transmission at half the established rates. Bids for proposals were opened February 14, 1879. On February 21 Mr. William Warden Morice, as authorized attorney for the company, submitted an official communication to the minister of the colonies in which he proposed, in the event of the acceptance of his tender, to agree to the amendment of article 16 to read as follows: "The official correspondence of the Government will be transmitted free of charge through the cable and with right of priority during the forty years of the concession." On February 22, 1879, the royal warrant of adjudication was issued granting the concession to Mr. William Warden Morice, as representative of the company, "under the conditions contained in the schedule approved on the 14th day of December last and subject to the modifications which he has offered on behalf of the said company at the time of the competition for the contract and subsequently." On March 8, 1879, the final agreement was subscribed by the interested parties. In this agreement it is stated that the carrying out of the work is to be "in conformity with all that which appears in the schedule of conditions and in the letter copied in this instrument * and with the modifications in favor of the State which the said William Warden Morice, on behalf of said company, has offered.” The first message was transmitted May 8, 1880. The concession extends to May 8, 1920. The period of the subsidy expired May 7, 1890. * * THE SECOND CONCESSION. In April, 1897, the company was granted a second concession for the construction, establishment, and operation of the cable lines connecting the islands of Luzon, Panay, Negros, and Cebu for a period of twenty years from the date the cables were taken over in perfect working order. Under this concession the company was entitled to (a) exemption from custom dues on the submarine telegraph cables, (b) an annual subsidy of £4,500 payable in monthly installments during the period of the concession, and (c) 50 centimes of a franc per word for telegrams transmitted over the cables. The State was entitled to (a) priority and half rates in the transmission of official matter; (b) a surtax of 5 centimes of a franc per word, except on telegrams transmitted over the Government land lines in Panay, Negros, and Cebu; and (c) 10 per cent of receipts in excess of expenses, such expenses being limited to £6,000 per annum. The concession is not exclusive, and the cables are stated to have been opened for traffic in October, 1897. There is no specific grant of land for office sites, but the same might be implied from the terms of article 7 of the concession. THE THIRD CONCESSION. A third concession, modifying and practically canceling the first concession, was granted March 30, 1898, for the purpose of changing the terminal of the HongkongBolinao cable from Bolinao to Manila. Under this concession the company was entitled to extension of the monopoly as to Hongkong-Manila cable for twenty years, until May 8, 1940, and exclusive landing rights as to cables in the Spanish possessions in the Pacific for twenty years from the date the new cable was opened for transmission of messages. In the royal decree this latter privilege is stated to be "for the purpose of joining all the Spanish possessions in the Pacific Ocean and of connecting them with other countries." The purpose, as far as the company was concerned, would appear to be the protection of its monopoly as to existent lines by excluding possible competition. No subsidy was granted in this concession, and by referring to the offers of the company upon which the concession is based the landing right was evidently intended as a partial substitution for a subsidy. The payment of one-fourth and onehalf rates by the Government during a large part of the concession period instead of free transmission, to which entitled under the original concession, was an additional substitution for the subsidy. The company was also entitled to exemption of its employees and property from certain taxes and to land for an office site. The State was entitled, under this concession, to the right to redeem the exclusive landing privileges at any time by the payment of £5,000 annually for the years of the grant which remained unexpired at the revocation of the privilege; priority of transmission of official matter at all times; free transmission for the first ten years (until April, 1908), one-fourth the ordinary tariff for the ten years following, and half the same until the expiration of the concession, May 8, 1940; a terminal tax or rate levied by the Government on telegrams sent or received. The authority for levying and collecting this terminal rate is stated by the superintendent of the company in letter of June 28, 1902, to be article 6 of the HongkongManila concession of 1898: "The Government and the company in the working of the cable shall apply the regulations annexed to the International Telegraph Convention in force." The International Telegraph Convention of 1896 stated that the amount "due the Government of Spain, Philippine Islands, on ordinary international traffic passing over the Hongkong cable is 25 centimes of a franc per word." The superintendent's letter further states that on press international traffic the terminal rate is reduced to 9 centimes of a franc per word. A telegram of the civil governor, in accordance with resolution of the Philippine Commission of October 27, 1901, sanctions this terminal tax over the Hongkong-Manila cable "without prejudice to pending questions of difference." RESULT IF THE CONCESSIONS ARE RECOGNIZED. If the concessions are recognized in so far as they were in force and binding upon the Spanish Government at the date of its relinquishment of governmental authority in the Archipelago, it is concluded that the following rights and obligations inure to the company and to the United States: Under the third concession, which is regarded as taking the place of the first, practically canceling same, the company is now entitled to exclusive cable privileges between Hongkong and Manila until May 8, 1940; exclusive landing rights as to cables in all the islands of the Pacific formerly belonging to Spain until April 30, 1918; privileges of State telegraphers to company employees and exemption of company property from taxas and local imposts (which, however, is not regarded as granting freedom from customs dues), and land for an office site. The Government is now entitled to priority in transmission at all times; refundment of amounts paid the company for official telegrams over the Hongkong cable from date of American governmental responsibility in the Archipelago, and free transmission of official matter until April 30, 1908, one-fourth regular rates being payable for the next ten years and one-half afterwards until May 8, 1940; redemption of the exclusive landing privileges by the payment of £5,000 annually until April, 1818; terminal tax of 25 centimes of a franc per word on ordinary fully paid international traffic and 9 centimes of a franc per word on international press traffic, provided such tax is desired by the Government, and the right to apply to the company's telegraphers and employees the rules and regulations as to telegraphers in the Philippines. Under the second or Visayan concession the company would be entitled to the accrued monthly installments of subsidy from the date of American governmental responsibility in the islands and the continued payment thereof until October, 1917, at the rate of £4,500 per annum; exemption from customs dues of submarine telegraph cables, and the right to charge a uniform rate of 50 centimes of a franc per word. The Government would be entitled to priority in transmission; half the established rate on official matter; a surtax of 5 centimes of a franc per word except for messages transmitted over the Government land lines in Panay, Negros, and Cebu, which tax is claimed by the company's superintendent to have been regularly collected and paid to the Government; and a tax of 10 per cent on receipts in excess of expenses, such expenses not to exceed £6,000 per annum, from date of American governmental responsibility to October, 1917. In addition to giving the Government priority of transmission and the half-rate privilege over the Visayas cables, the company has deposited the following sums with the insular treasurer for the period from March 1, 1899, to June 30, 1903, on account of the surtax on messages over the Visayan cables and the terminal tax on messages sent and received over the Hongkong-Manila line, the latter beginning November 15, 1901. Deposits in Mexican currency have been reduced to United States currency at the ratio prevailing at the date of deposit: March 1 to December 31, 1899.. January 1 to December 31, 1900. January 1 to December 31, 1901, including terminal tax beginning November 15, 1901.... January 1 to December 31, 1902. January 1 to June 30, 1903.. $1,209. 78 1, 923.59 6, 066.75 34, 161.57 17,067.73 34, 368.00 94, 797. 43 Terminal charges collected on messages sent from abroad prior to November 15, 1901, deposited June 9, 1903.... Total...... Based upon a recognition of the concessions, the following amounts, approximately, were due the Government and the company, respectively, to June 30, 1903: Which total, reduced to United States currency at $4.866 to the pound sterling, equals $94,887. DUE UNITED STATES. Refund of amounts paid August 21, 1898, to June 30, 1903, as per company's statement: August 21 to December 31 Total... Which total, reduced to United States currency at $4.866 to the pound sterling, equals $144,917.57. The company has stated its readiness to pay the 10 per cent tax on the gross receipts from the Visayas cables after deducting £6,000 per annum for expenses, as follows: |