ending June 30, 1900, amounted to $5,482,448.45. The receipts for the six months ending June 30, 1900, as compared with the corresponding six months of the preceding year, show an increase of $1,785,496.26. The revenues will not, however, be sufficient for the construction of the roads, the harbor improvements, the railroad, and the establishment of necessary schools as rapidly as those undertakings ought to progress.

I recommend that provision be made by Congress either for a loan to the insular treasury, to be repaid out of the revenues of the island hereafter, of a sufficient amount for the building of the proposed railroad, or that authority be granted for the issue of bonds for that purpose constituting an obligation of the insular government secured by a lien upon the road.

A civil service board has been constituted by the commission, and a civil service law has been enacted by the commission providing for the application of the merit system to appointments in the island. . . .

Much embarrassment has been caused by the condition of the currency in the islands. Under Spanish control the business of the islands was transacted almost entirely by the use of the Mexican silver dollar of 377.17+ grains. The people of the country practically know no other currency, and it is impossible to transact business generally with American currency among a people to whom its value is unknown. Our soldiers who receive their pay in American currency and wish to spend it in the islands, our quartermasters and commissaries who wish to purchase supplies, and all other persons who come into the possession of American money which they desire to use in the islands are obliged to purchase Mexican dollars. These are worth in the neighborhood of fifty cents American money, but their price continually fluctuates with the market price of silver.

The present disturbances in China have caused a scarcity in the supply, which has sent the price up to the neighborhood of fifty-two cents, while the insular government which, of course, has been obliged to follow some established rule for the payment of its employees—has been receiving them at fifty cents. This condition, while it is profitable to the bankers of Manila, is the cause of constant loss and annoyance to all other people, and, both because of the scarcity and the fluctuation in value, is a serious injury to business.

Two remedies have been suggested: One that we should ourselves coin a dollar for use in the islands of the same weight and fineness as the Mexican dollar, which shall be permitted equally with that coin to take its chances with the fluctuation of the market, but which would relieve us from an embarrassment caused by a limited supply of coin bearing the Mexican stamp. The other suggestion is that we should coin an insular dollar which we shall undertake to redeem in gold at fifty cents, and which, being substantially the same in value and appearance as the Mexican dollar, would pass current in the islands, and would, as rapidly as it became the medium of exchange, bring the islands to a gold basis.

FINAL MILITARY OPERATIONS IN THE PHILIPPINES Extract from the Report of the Secretary of War for 1901 1

At the date of my last report (November 30, 1900), formal and open resistance to American authority in the Philippines had practically terminated, and the Filipino insurgent forces had adopted a system of guerrilla warfare, closely approaching brigandage. To contend successfully against this condition and to suppress it, to afford protection to the peaceful and unarmed inhabitants, and to reestablish local civil governments had necessitated the distribution of our forces to 1 Page 31.

more than four hundred stations. This process continued until a maximum of five hundred and two stations were occupied, holding every important town and strategic point in the archipelago. The scattered guerrilla insurgent bands obtained funds and supplies from the towns and the country in the vicinity of their operations. The people thus contributing to the support of these guerrillas had been rarely interfered with. Prisoners taken in battle had been disarmed and immediately released.

This policy had been adhered to in the hope that it might make friendly neighbors of the natives, but, on the contrary, they seemed suspicious of this beneficence, and looked upon it as an evidence of weakness. It was therefore decided to apply more rigidly to the residents of the archipelago the laws of war touching the government of occupied places. Notice of this intention was given by a proclamation issued by the military governor, December 20, 1900, fully explaining the law, supplemented by letters of instruction, and followed by more vigorous field operations. It was followed immediately by the deportation to the island of Guam of about fifty prominent Filipino insurgent army officers, civil officials, insurgent agents, sympathizers, and agitators. .

The field work of the army was continued with renewed vigor from each of the five hundred stations and was conducted simultaneously throughout the entire archipelago with such telling results that, with the exception of Lukban in Samar and Malvar in southern Luzon, all prominent insurgent leaders with their commands were captured or surrendered.

These field operations were prosecuted notwithstanding the withdrawal from the Philippines and return to the United States of the volunteer army, comprising one regiment of cavalry and twenty-five regiments of infantry, a total of nearly 1,400 officers and 29,000 enlisted men, whose transfer

across 8,000 miles of sea to San Francisco, where they were mustered out of service as required by law, was accomplished without loss.

The most important single military event of the year in the Philippines was the capture of Aguinaldo, successfully accomplished by Brigadier-General Frederick Funston, U. S. A., under the supervision and guidance of his department and division commanders, Major-Generals Wheaton and MacArthur. Soon after his capture Aguinaldo voluntarily subscribed to the oath of allegiance and issued a proclamation to the Filipino people, urging the termination of hostilities, that “lasting peace might come to them under the glorious banner of the United States." His capture was soon followed by the surrender of such prominent Filipino leaders as Tinio, Aglipay, Trías, and Cailles, with their entire following.

The operations of the field forces were so vigorous and unrelenting that more than 1,000 encounters occurred between our troops and the insurgents from May, 1900, to June 30, 1901, in which the insurgent casualties were: killed, 3,854; wounded, 1,193; captured, 6,572; surrendered, 23,095; with a total of 15,693 rifles and nearly 300,000 rounds of smallarms ammunition captured and surrendered. Our casualties during the same period were: killed, 245; wounded, 490; captured, 118; missing, 20.

I cannot speak too highly of the work of the army in the Philippines. The officers and men have been equal to the best requirements, not only of military service, but of the civil administration with which they were charged in all its details from the date of our occupancy in August, 1898, until the inauguration of a civil governor on July 4, 1901.

The recent disturbances in Samar and southern Luzon are of minor consequence, and are being stamped out by the vigorous operations of the troops. Small disturbances of this character are, unfortunately, to be expected, but will be con

trolled and guarded against by every means possible. The difficulties of this description are not more but less than were anticipated when my report of last year was written.

The army in the Philippines has been reduced since my last report from 2,367 officers and 71,727 enlisted men to 1,111 officers and 42,128 enlisted men. When the organizations now remaining in the Philippines shall by the force of ordinary casualties and expiration of enlistments be reduced to the numbers established by the order of May 8, 1901, . the total enlisted strength of those organizations, exclusive of hospital corps, will be 32,079 men.

The policy indicated in my report of last year, of creating a native Philippine force which shall in time release a large part of the American army from the necessity of remaining in the Philippines, has not been neglected. The authority then asked was granted by section thirty-six of the act of February 2, 1901, Congress in that provision wisely empowering the President to proceed in his discretion by successive steps, beginning with a simple organization of scouts, and continuing, when the proper time should arrive, with the more complicated and fully officered organization of the regular army. Pursuing this policy, the small bodies of scouts mentioned in my last report have during the year been enlarged and multiplied until there are now 4,973 in the service. As command in these bodies requires special qualifications for dealing with the native soldiers, all the appointments of officers (ninety-eight in number) have been made upon the recommendations of the commanding officer in the Philippines. . .

Reduction of Expenses. The War Department has realized the importance and the duty of following the improved conditions by a reduction of expenditures and the enforcement of economy. War always and inevitably tends toward extravagance. The conditions of active military operations