and in the event of acceptance, forward their certificates indorsed in blank to the said United States Trust Company.

I inclose herewith blank form of letter for use by those desiring to deposit their stock.

I also inclose blank form of letter addressed to the secretary of the company so that the undersigned may be advised of the receipt by you of this communication.

Respectfully,

JOHN J. MITCHELL.

The foregoing is upon the request of the parties to said agreement, submitted to the stockholders by the unanimous order of the Board of Directors.

Respectfully,

H. E. R. WOOD, Secretary.

CHICAGO & ALTON SYNDICATE

[Syndicate agreement of March 2, 1899.]

The United States Trust Company of New York is prepared to deliver on or after October 25, 1900, in settlement of Chicago & Alton purchase money certificates, for each $1,000 face value of such certificates, $375 face value of temporary certificates of interest for Chicago & Alton Railroad Company, 3 per cent. refunding 50-year gold bonds; $500 face value of Chicago & Alton Railway Company first lien 3 per cent. gold bonds; $400 face value of Chicago & Alton Railway Company 4 per cent. noncumulative preferred stock; $250 face value of Chicago & Alton Railway Company common stock; $10 cash (including adjustment of interest to July 1, 1900).

The certificates of interest for Chicago & Alton Railroad Company per cent. refunding 50-year gold bonds provide for the right of sale until July 1, 1901, of all or any part of the bonds which have been deposited with the United States Trust Company of New York, at the price of 95 per cent. and accrued interest. If the bonds remain unsold, the certificates of interest are to be exchanged for the actual bonds on and after July 1, 1901. If sold, the certificates will be redeemed in cash on or before the above date, at 95 per cent. and the accrued interest from April 1, 1900; if only part are sold, redemption will be made proportionately in cash and bonds. These 3 per cent. refunding bonds certificates of interest, as well as the Chicago & Alton Railway Company 3 per cent. coupon bonds are of the denomination of $1,000 each, and the shares are of the par value of $100 each.

་

Holders entitled to fractional amounts of certificates, bonds or shares, can either sell the fractions or can purchase sufficient to entitle them to an entire certificate, bond, or share. Holders transmitting Chicago & Alton purchase money certificates by mail or express should indicate whether they wish to sell or purchase fractional amounts, and whether they wish the securities sent by registered mail or express at their expense and risk.

New York, October 22, 1900.

CHICAGO & ALTON SYNDICATE-NEW SECURITIES

Chicago & Alton Railroad Company 3 per cent, refunding 50-year gold bonds, due 1949.-Total authorized amount $40,000,000, of which $31,988,000 par value have been issued. These bonds are secured by mortgage dated October 1, 1899, to the Illinois Trust and Savings Bank as trustee. Out of the proceeds of the bonds already issued, the prior bonds which matured during this year have been paid off, and funds have also been deposited with the United States Trust Company of New York to redeem the principal, and to pay the interest thereon until maturity of all outstanding prior bonds amounting to $6,789,850 face value.

The privilege of subscription was exercised for the syndicate in respect of its holdings at the time the refunding bonds were offered to the railroad company's shareholders. Of the bonds received for syndicate account, a sufficient amount has been sold to provide, together with dividends received, the funds for the cash requirements of the syndicate. The bonds now distributable among certificate holders represent the balance of the bonds subscribed for syndicate account.

The further issue of 3 per cent. refunding mortgage bonds beyond the first $40,000,000 is restricted to funding the existing leasehold obligations of the railroad company, now amounting to about $233,000 net per annum, and to providing funds for building, completing, or acquiring additional railroad in extension of the present property, for which latter purpose an amount not exceeding $10,000,000 may be issued, and to providing funds for future requirements and betterments undertaken or contracted for after January 1, 1900, for which purpose an additional $5,000,000 may be issued. These additional bonds, over the $40,000,000 now authorized, can only be issued when authorized by the holders of two-thirds of the outstanding preferred and common stock of the railroad company.

Of the 3 per cent. refunding mortgage bonds subscribed for syndicate account a portion has been sold, and the remaining bonds have

been deposited with the United States Trust Company of New York against which negotiable receipts in the denomination of $1,000 will be issued to the holders of Chicago & Alton purchase money certificates. The receipts provide for the right of sale until July 1, 1901, of all or any part of the deposited bonds at the price of 95 per cent. and accrued interest. If the bonds remain unsold, the receipts are exchangeable for the deposited bonds on and after July 1, 1901. If the bonds are sold, the receipts will be redeemed in cash on or before the above date at 95 per cent. and the accrued interest from April 1, 1900; and if only part of the bonds are sold redemption will be made proportionally in cash and bonds.

Chicago & Alton Railway Company securities.-The Chicago & Alton Railway Company was incorporated in April, 1900, under the laws of the State of Illinois, with a capital of $20,000,000 noncumulative 4 per cent. preferred stock and $20,000,000 common stock. The preferred stock is entitled to noncumulative preferential dividends not exceeding 4 per cent. annually, and the balance appropriated in any year to dividends goes to the common stock. The Chicago & Alton Railway Company has acquired the railroad from Springfield to Peoria, formerly owned by the St. Louis, Peoria & Northern Railway Company, and it has leased the lines of the Chicago & Alton Railroad Company for the term of 99 years from April 3, 1900, at a rental equal to the net earnings of the lines of the railroad company after payment of all fixed charges, taxes, etc. The new company has also purchased 183,224 shares of the common stock and 34,722 shares of the preferred stock of the Chicago & Alton Railroad Company (out of a total of 187,511 shares of common and 34,795 shares of preferred stock outstanding).

The Chicago & Alton Railway Company has also created an issue of $22,000,000 first lien 3 per cent. gold bonds maturing July 1, 1950, but redeemable at par at any time on six months' notice. These bonds are secured by a mortgage to the Farmers' Loan & Trust Company of New York, as trustee, mortgaging the railway line and the entire corporate property of the railway company, including leaseholds and pledging 34,722 shares of preferred stock and 183,224 shares of common stock of the Chicago & Alton Railroad Company, certificates for which have been deposited with said trustee. This mortgage provides that the railway company as owner of stock of the railroad company will not give its consent to the issue of any of the refunding 3 per cent. bonds of the Chicago & Alton Railroad Company in excess of the $10,000,000 now authorized, except when such additional issue is expressly authorized by a three-fourths vote of the entire Board of Directors of the railroad company and approved by a

three-fourths vote of the entire Board of Directors of the railway company. All the bonds and the entire capital stock of the railway company have been issued with the exception of 4,572 shares of common and 4,560 shares of preferred stock, which have been reserved to acquire, if practicable, the 4,287 shares of common stock of the Chicago & Alton Railroad Company outstanding in the hands of others than the railway company.

The position of the Chicago & Alton Railway Company at this time is as follows:

Interest on $31,988,000 Chicago & Alton R. R. Co. 3 per cent. refunding mortgage bonds (assumed under lease)

Annual net rentals of the Chicago & Alton R. R. Co.. Interest on $22,000,000 Chicago & Alton Ry. Co. first lien 3 per cent. bonds...

Total requirements for fixed charges, including
rentals

$959,640.00

233,030.00

770,000.00

1$1,962,670.00

The gross earnings of the Chicago & Alton Railroad Company for the year ending June 30, 1900, during which year the road lacked much needed improvements and betterments which are now progressing, and suffered from want of equipment now acquired and in course of delivery were $7,796,450; net earnings, $2,964,628.

In the two months of the current year ending August 31, the gross earnings increased over 1899, $432,551; and the net earnings increased over 1899, $151,783.

In the above figures the earnings of the line from Springfield to Peoria are not included.

New York, October 25, 1900.

'The railroad and railway companies have agreed to take over on or before January 1, 1904, if previously not otherwise disposed of, the terminals in the city of Chicago, Ill., leased on October 1, 1898, to the St. Louis, Peoria & Northern Railway Co. by the Chicago Terminal Transfer Co., upon the terms and conditions of the agreement of lease between the two companies as modified by the supplemental agreement of May 25, 1899.

CONDEMNATION OF CHICAGO-ALTON

RECAPITALIZATION1

Now it appears that for many years before the road was acquired by this syindicate in 1899, Mr. Blackstone had managed the Chicago & Alton Railroad; that it had been exceedingly prosperous; that it had paid exceeding 8 per cent. dividends to its stockholders; that it had a low capitalization; that it was a model railroad, as we all understood it in the West, in capitalization and in management. To be accurate, the book cost of the road, as it appeared by the books of the Alton Company, was $34,153,927. It had other assets of a little over $5,000,000. Its total capitalization, including stock, funded debt, and other liabilities, was $33,951,407. It owned over 843 miles of railroad, 6,377 cars, 232 locomotives, and 148 passenger cars. In less than seven years these gentlemen had expanded that indebtedness, according to the last report of the Alton, to about $122,000,000; but as it is claimed there are some duplications, I will take the lowest figures shown by these reports. They had expended it to $113,894,356, an increase of about $80,000,000. And out of this increase they had spent upon the property but $18,000,000, of which $3,000,000 was for a railroad that the men who reorganized it sold to the Alton Company. In other words, they increased its liabilities about $62,000,000 or $65,433 a mile on 946.66 miles of road owned by the company, for which they did not give the company one dollar-not one dollar-of property or money expended.

Now, in all this time it had only increased its mileage 103 miles, and 58 of that was the $3,000,000 road bought of Harriman and his associates; only increased its locomotives 18, its passenger cars 69; and its freight cars 3,730. I have no doubt it improved the quality of this equipment; but to say that it was necessary to expand the liabilities of this company any such sum as that for the purpose of adding $18,000,000 to a road which had a credit so good that its bonds then were selling on a basis of a little over 3 per cent., is to my mind incredible. I do not believe it. Why, the amount of money that these gentlemen added to this capitalization without giving it a dollar of assets is more than the capitalization per mile of the majority of the great western lines of road-the Milwaukee, with $32,000 and a little over per mile; the Northwestern, with $32,000 per mile; the Burlington, about the same or a little more; the Rock Island, $45,000; the Great Northern, $38,000. Of course there are other roads in the United States that far exceeded that.

1 From the report of the oral argument of Frank B. Kellogg, attorney for the Interstate Commerce Commission, before that Commission, April 5, 1907.