A N N U A L R E P O R T

O , T HE T RUST EES O ,

HE MA C KA Y C O MP A N IES

T O T HE SHA REHO LD ERS T H E M A C KA Y C O M P A N I E S

, , IC RS O E .

C H M CK Y P ESID EN T . R N C . LA E E A A , R

- G EO RG G . A R , IC E P ES ID EN T . E W D , R

R C P S E . A . EA UR E DW D LATT, TR R K B R B C S EC ET A Y . AL E T E , R R

K G N E A L O UN SEL I I M . C E C W LL A W OO , R

S TRUS TEE .

C R N C H M CK Y LA E E . A A , I I M C K W LL A W. OO . G RG G R EO E . WA D. R C P EDWA D . LATT ,

R B R . SMIT H O E T A . H N RY , M R I H E . E ED T , M R LT O B CK . M N W . LA A T HE MA C KA Y C O MP A N IES

To T HE SHAREHOLDERS :

Your Trustees make the following report :

Your companies were never in better condition physiw fi ffi u the cally, nancially or in the e ciency and enth siasm of

staff .

The twelve million dollars reali,ed about two years ago from the sale of American Telephone and Telegraph s r Company stock is till prese ved intact, in cash and in the u u New highest class of sec rities , incl ding York City bonds , f and this great und is ready for emergencies , extensions u or the taking p of a new line of business .

The gross income of your telegraph and cable 1 1 companies in 9 0 was the largest in their history . In 1 1 1 u 9 , notwithstanding the temporary interr ption of your , u x telegraph company s b siness to and from Te as, Arkan O e sas , klahoma and parts of the adjoining stat s by reason o f the action of a Texas Telegraph Company ,whose wires formerly worked with your wires ,in connection with ffi u its Bell Telephone a liations , your Tr stees are pleased to

report that the gross income of your companies, sepa

ratel 1 1 1 y or combined, was almost exactly the same in 9 as

1 1 0 . in the preceding year 9 As to the expenses , however, E such a satisfactory report cannot be made . xpenses have s increa ed , principally by the higher wages paid to the skilled e a s and s s ce Op r tor other employees engaged in the fa t ervi , which the Postal Telegraph Company inaugurate d and n upon which it depe ds for publicfavor. This fast service has preserved to the company its full share of the general u telegraph business . Yo r Trustees believe that the public desires the greatest speed and accuracy obtainable in the ul u to u reg ar service . The res lts would seem j stify this belief. A night letter service was inaugurated by the West

ern Union Company two years ago . The Postal Telegraph t Company is giving this kind of service bu is not seeking it . Careful study of its cost to the telegraph company as com u pared with the average toll received, convinces yo r Trus tees that it is carried on without a profit and probably

at a loss . The night letter originated in France .

It has been in use in that country for several years .

u r The res lts there correspond with ou estimate of it here .

They have been unsatisfactory . An authoritative statement recently published in France is to the effect that the night u be lettergram contains many nnecessary words, simply u be u ca se they may sent witho t any extra charge, and that , ffi th , the rate is insu cient to pay for e working expenses. u It is f rther stated that .

The letter telegram is the outcome of a ve ry plausible u , u ex en idea ,to tili e during several ho rs of the night, p

sive lines from which , until now , practically no revenue e e e But e the has be n d riv d . it app ars that

conditions were not sufficiently taken into account . There are instruments which wear out ,there are employees to be paid at both ends of a line to be een operate d . The depreciation of the material has not b e considered , the employees appear to have be n a negli gible ,uantity ,the only thought seems to have been to , get more out of them .

, The day letter is still another form of service . That is a propo sition to transmit in the day time a telegram of fifty words in plain language at one and a half times

the regular day rate, the company retaining the right to defer the transmission until after other day telegraph mes

e sages are transmitt d . The Postal Telegraph Company

e , a a declined to adopt it, although r cogni ing the f ct th t it was really a cut rate fo r long telegrams . The Postal Tele , graph Company s objection to it is partly the same as to u the night letter . It encourages a wastef l use of words and slows down the service by reason of the time re,uired u fi an d detri for its transmission . It is npro table in itself ffi a mental to the regular tra c . This would have been fat l to the very fast service which the Postal Telegraph Com pany believes is the proper object of a telegraph company . Lines loaded with fifty word day letters cannot render fi v f unex ef cient public ser ice when , as so o ten happens , pected events make a sudden and great demand fo r ih stantaneo us communication . The essence of a good tele graph service and its real value to any community is its t s capaci y to send me sages and receive answers in the short an est possible time and accurately . It is evident that it is agency which above all others should be in such a state of preparedness that it may be relied on for this efficient New service in cases of great urgency and emergency . business is created when the telegraph company makes its u e service so prompt that the largest n mber of messag s , ,uestions and answers can circulate in the shortest possible ur time . A telegram carries with it the idea of gency and no telegraph company should lose sight of that fundamen tal character of urgency in a telegram .

Eu co - e The governments of rope, in op ration with all of the Atlantic Cable Companies , have brought about a

e e ef the change in cabl rates , designed to b n it occasional

e e f It the f s nd r o a cabl egram . is cutting o cable rates on cable messages in plain unabbreviate d language to r fi un - f ce tain speci ed co tries, to one hal the rate previously

-five charged , for example, from twenty cents a word to twelve and a half cents a word, subject to the messages being deferred . The Commercial Cable Company does not

e ffi e r gard this as a new source of tra c . It does not exp ct that fi the traf c will be either large or profitable . This expecta is out u tion borne by the ret rns to date . The reduced rate is proper because there is a large class of persons of limited means whose need of the cable service is only occa , , u e sio al, and who have no codes to compress th ir mes

s. find sage They will the new cable rate of advantage, when in times of stress or domestic affliction their nee d of

cable communication with friends abroad is urgent .

e u As a general proposition , however, r d ctions in

present cable rates cannot be expected . Cablegrams are

necessarily expensive . The cost of providing the means of transmission and of operating the means o f transmission is so great as to preclude the possibility of an se cheapness . The merc tile community by the u of highly , , speciali ,ed codes compress into a few words a mass olf necessary and important matter and the expense is part , of the merchant s Operating expense and is taken into

account in his transactions . The net cost per word is ex

tremel y small . The combination of the Bell Telephone interests with the Western Union created a temporary difficulty for your u companies in Texas and the adjoining states . Yo r land line system had a contract for the exchange of business

with the independent Texas Telegraph Company . That as contract ran for many years , and then the Tex Company passed into the control of the American . e e e e He e e e T l phon and Tel graph Company . nc , wh n lat r the American Telephone and Telegraph Company combined with the Western Union Telegraph Com

the e e e pany, so that tel phone int rests controll d both

the Western Union and the Texas Company,

fo r e e e the situation your companies becam intol rabl , and thereupon your Trustees proceeded to extend your land r has line system throughout that territo y . The work been A first- en done with phenomenal speed . class line has be K u a u . b ilt from Wichita, ansas , down thro gh the St te of the Oklahoma and State of Texas , through Fort Worth , H . Dallas and ouston to Galveston, nearly a thousand miles

e e f B R e L Anothe r lin e has b n built rom aton oug , ouisiana ,

H e . e we stward to ouston , T xas Still anoth r line is rapidly

e f m Me approaching compl tion ro a point Opposite mphis ,

e e ee L R A D e . T nn ss , to ittle ock, rkansas, and allas , T xas A A Conn e ction has b e en made with ustin and San ntonio ,

th e o f e N e in e Stat T xas . um rous spurs and branch lines have also b een completed . The result is that that vast territory has b een covered with a n etwork o f Postal

e e e lines and wir s , and competitiv service is now giv n in

h e f h It f e t e full s ns e o t e word . is a eat that is creditabl

Its in eve ry way to the Postal Te legraph Company . staff m et and successfully solved a problem which faced the company wh en it was cut o ff from the states o f

e A O o f the T xas , rkansas and klahoma , and parts adjoining

e . , e o f e the e e o f stat s ith the compl tion that syst m , r c ipts your land lin e system from tele graph busin e ss to and from that part o f the Unite d State s are incre asing rapidly and thos e re ceipts are no longe r divided with a conn e cting com

f e pany, as was ormerly the case . The str ngth and pros

erit o f e e p y your land line syst m has b en greatly increased . Among the extensions and improvements commenced by the Commercial Cable Company during the past year is the change of its cable landings adjacent to New York

an R . City, from M hattan Beach to Far ockaway This was rendered necessary by reason of the United States Gov ernm ent proc e eding to dre dge for harbor purpos e s at the

e e e B e T he point wh re the cabl s land d at Manhattan ach . changing of these cable landings from Manhattan Beach to R Far ockaway, it is expected, will be completed in the u co rse of a few months. The Commercial Cable Company has completed the removal and enlargement of its terminal facilities in Lon

. u 6 6 u don The entire b ilding, 3 and 4 Gracech rch Street, fi L which is in the heart of the nancial district of ondon, has been remodelled to accommodate the increased business of the company . During the past year three important litigations which the Postal Telegraph Company instituted on account of discriminations by the Bell Telephone and Western Union Companie s have resulted in favor of the Postal Te l e

T he P of graph Company. ublic Service Commission New York State decided that the Western Union was dis criminating in regard to messages received by the Postal Company and destined to exclusive Western Union s n points , and the Commission decided that the We ter Union must not make an extra charge against the Postal , Company in addition to the full regular Western Union

Tn u t , rate . California the Co rt held that neither the Wes ern Union nor the Railroad Company could prevent the Postal Company condemning a right of way fo r its tele graph line on a railroad even though the Western Union

e e the , e e n had a contract with the railroad , wh r by st r Union was given a monopoly of the railroad right of way f o r u . n u r I 1 1 2 telegraph p rposes O jan a y , 9 , the Bell Telephone Companies surrendered on the ,uestion in liti gation hetween the Postal Telegraph Company and the

e e e e the Cumb rland Tel phon and T legraph Company, as to right of the latter to compel the Postal Company to give to the telephone company a percentage of the receipts of the telegraph company on telegrams delivered or received over se the telephone . The United States Court decided in that ca that the exaction was illegal and discriminatory against the

Postal Company.

u u As to the telephone sit ation, yo r land line system

o ut proposes to work a comprehensive plan, by which it will string heavy copper wires on its poles in any part of u e s a the co ntry, where independent telephon companie c re s to lease telephone circuits between cities and town , and where such wires will be useful to your land line system t u for elegraph purposes , in case any of s ch independent telephone companies should discontinue such leases by

reason of their being purchased by Bell telephone interests . Considerable progress has already been made in this dire c , O f tion, thereby utili ing the space on the poles your land s line system , and at the same time bringing in a sub tantial revenue, and rendering aid and assistance to the inde

e pendent t lephone companies .

Ou 15 1912 the P e e o f the January , , ostmast r Gen ral United Stat e s announce d that in his Opinion the Gove rn m ent should purchas e all the tel e graph line s in the country

e th P ffi D e and Op rate them through e ost O c e epartm nt . This announc em ent has not m et th e approval e ith e r O f the

P e e f e e r sid nt o the Unit d States or o f the Am rican p eopl e . It undoubte dly would involve soon er or late r the taking

e of the e e e e the e has e e ov r t l phon lin s also , sam as happ n d

e B U e e e in Gr at ritain , and this in the nit d Stat s would m an the incurring of a national debt o f som ething over two bil

o f the e e e o f the e e e e lions dollars , pr s nt valu t l graph and t l

e e f e e phon lin s, to say nothing o necessary xt nsions which are re,uired in the telephone business from year to year at , an appalling rate . The Postmaster General s plan has met u with little p blic response .

u The Mackay Companies has no debts . Its o tstanding preferred shares have not been increased u five l t d ring the past ye ars. s outstanding common shares have not been increased during the past

No u seven years . bonds , notes or stock have been iss ed an d no debts incurred during the year and yet there has been substantial growth of your ocean and land line sys Du ex tems . ring the present year important tensions and improvements to your system will be made on land and

sea. The income Of the subordinate companies of The Mackay Companies is greater than is re,uired to pay the O f but dividends The Mackay Companies, its policy is to Obtain from its subordinate companies only enough money Of to meet those dividends . The physical properties the subo rdinate companies are maintained in excellent condi

e u . tion . All r constr ction is charged to operating expense All extensions and improvements have been paid for from u u in ex s ad ann al receipts, incl ding the new lines T a and

b . j oining states. NO debts have een incurred Your Trus tees feel that your system is in so strong a position that the stability of your investment is assured .

The employees of The Commercial Cable and Postal Telegraph systems continue to invest thei r say ings ve ry largely in the shares of The Mackay Companies , their hold

ings being over two million dollars par value .

The accounts of The Mackay Companies are audited

s. u 8: monthly by Messr Barrow, Wade, G thrie Company, ou e L ac Chartered Acc ntants of N w York and ondon , and companying this report will be found the balance sheet

u I 1 1 2 . and profit and loss account as of Febr ary , 9

D u I 1 1 2 . ated , Febr ary 5, 9 , R T HE R EE O T UST S ,

E E A KAY LAR N C H. C C M ,

President.

PRO , IT A N D LO S S A C C O UN T

, O R T HE Y EA R , E B UA RY 1 1 9 1 1 T 0 , EB RUA Y 1 1 9 1 2 R , , R ,

RECEIPTS

Income from investments in other Companies

DISBURSEMENTS

Dividends paid on The Mackay Companies Preferred shares Common shares

x e lu Operating e pens , inc ding s R s Transfer Agent , egistrar , , Auditors and Trustees com

ensation Offi s p , ce rent, salarie , certifi stationery, engraving of

s . cate . etc

Balance carried forward B A LA N C E SHEET

ET ASS S.

vestments in other Companies . ash

-5I

LIABILrT E I s .

referred shares issued

i u 1 ss ed 4 , 9 51

-51

, e have audited the book account and vouch er o f The Macka s, s s y b anies and have al o examined its ecu itie and he eb ce tif that mp , s s r s , r y r y e above Profit and Loss Account and Balance Sheet correctly set forth c ndition o f Th Macka om a i on a e e C n e ,eb u l st 1912. o y p s r ry ,

B A m ow, , D,: GUTHm CO. ,

Chartered Accountants .