In spite of this appreciable growth of traffic, however, the company is in a less favourable condition now than it was a few years ago. This is chiefly a result of the enormous additions to the funded debt, which has almost been doubled since 1886, although since then the mileage operated has barely increased sixty per cent., while rentals, guarantees to branch roads, etc., have also grown at an alarming pace. There can be no doubt that the additions to the system, on account of which the majority of the present heavy charges were incurred, contributed materially towards the expansion of business which is the only bright feature of the company's condition; nevertheless these advantages were paid for too dearly, a fact which is rendered manifest by a comparison of the accounts for the last few years.

Gross Earnings and net Earnings since re-organization,

* Applicable to retirement of preferred stock and bonds. This includes $6,285,447 bills receivable on account of Chicago terminals; they are offset by a similar amount of bills payable on same account.

Until last year everything went extremely well and the company was even in a position to resume, or at any rate did resume, the payment of dividends on the preferred stock, which had received no distributions since 1884. In 1890-91, with an available net revenue of $14,099,683, fixed charges amounted to $12,188,930, so that there was a surplus of $1,910,753 above first charges, amply sufficient for a 4 p.c. dividend on the preferred shares. During the year just terminated, however, the revenue in excess of first charges amounted to only $834,887; there was an increase in gross

revenue approximating nearly half a million dollars, but first charges rose some $1,550,000, and as a result the quarterly dividends of 1 p.c. had to be discontinued in May last. What this enormous advance in first charges arises from has not thus far been revealed. The above income account shows that interest on debt rose $650,000, as was expected because of the increase in liabilities, but in addition 'general interest, sinking funds and miscellaneous' called for an expenditure of $1,823,000, nearly one million more than in 1890-91. The cause of this huge increase is not explained at the time of writing, although it will presumably be known when this volume is in the hands of the public; but it is safe to predict that some unpleasant surprise is in store. (See Supplement.)

The changes which have overtaken this company during the last few years have all been for the worse. A large floating debt has been contracted, partly in connection with the Chicago terminals, partly in consequence of the construction of hitherto unremunerative feeders; the Wisconsin Central has been leased upon terms involving a direct loss, and, last but not least, the competition of the Great Nor thern is more keenly felt in the same degree as that road approaches the Pacific coast. The over-capitalised N. P. cannot possibly compete with Mr. Hill's property, which, as we have seen before, derives its strength from a small capitalisation, technical perfection, and management of the highest order, three cardinal qualities which the Northern Pacific lacks. The effect which these differences have upon both companies is strikingly illustrated by the fact that since 1889-90 gross revenue per mile fell 11 p.c. on the Northern Pacific while on the rival line, which practically serves the same country, it is increasing fast. This contrast is so striking that it cannot be explained away even by the most liberal allowance that can be made for the decline of business sustained by the Pacific divisions of the N. P.; the real explanation is to be found in the respective rates of the two

companies. In 1890-91 the average rate on the Northern Pacific was 1.38c., the proportion of operating expenditure 59.40 p.c.; hence this company cannot move a ton of freight one mile at less than the average cost of 0.820c. In the same year the Great Northern's average rate was 1.24c., its operating expenditure 50.22 p.c., its cost of moving one ton one mile 0.623c. This simply means that the Great Northern could still make a handsome profit if it were to cut rates to such extent as to be lower than the expenses per ton-mile on the Great Northern. This fact renders further remarks relating to the influence of Great Northern competition absolutely superfluous.

Like all Pacific roads the Northern Pacific owns very extensive tracts of land, the sale of which yields a constant revenue. The company received in all 46.8 million acres, of which over 39 millions are still in its possession. In 1890-91 366,000 acres were sold for $1,450,000, and payments received on account of lands sold amounted to $1,389,517, which sum served for redemption of the preferred stock. The immense extent of these lands is often pointed to as a hopeful feature of the Northern Pacific, but only by optimists; they represent a great value, but it will require time to realise these assets. Moreover, their presence has been discounted long since by the men who are responsible for the huge capital of $214,000,000, specified below and at least $120,000,000 greater than it ought to be.

Preferred stock must be accepted at par in payment for lands and can be redeemed by the proceeds from lands sold. (See above.)