the company by a two-thirds vote of its common stockholders may issue, if needed for additional capital, preferred stock; wages to be a first claim. upon the assets, and the dividends to capital stock to have the first claim upon the net earnings, and to be cumulative at a rate fixed by agreement. After the payment of such dividends as are first charged upon a net part of the business, 20 per cent. of the net profits then remaining shall be set aside in a contingent fund, and the balance of the annual net profits then remaining shall be held in the business,-one-half for the benefit of the stockholders, and one-half for the employees (under certain agreements and restrictions to be explained). Thus the surplus earnings in excess of the regular cash dividends would continue to be accumulated in the business, and so increase the security of the original investment, while the power of the stockholders to control the management of the concern would be in no way diminished or endangered.

DISPOSITION OF SURPLUS EARNINGS.

This will be fected, Mr. Purves explains, by the following method: It is proposed that, after the regular cash dividends have been paid to capital, and a percentage set aside for the contingent fund, the annual stock dividends shall be declared, covering the amount of the surplus earnings, which are to be held in the business; that the certificates issued for these stock dividends shall be in the nature of deferred stock debentures, which will have no voting power, and which shall be subordinate in every respect to the common stock, both as to dividends and principal, so that these deferred stock debentures shall not be entitled to any dividend interest whatsoever, except when earned during the then current year, and not until after the dividends upon any preferred stock shall have been paid or set aside, nor until the agreed sum (equal to 60 per cent. of the established average net earnings) shall have been paid or set aside for the dividends upon the common stock, and a contribution made to the contingent fund. These deferred stock debentures are to receive dividends at a rate not exceeding 6 per cent. per annum when earned in the then current year, and in no sense are these dividends to be cumulative. In the event of liquidation or dissolution, the common and preferred stock shall be paid in full before any pay. ment shall be made upon the deferred stock debentures; but the debentures shall then receive all of the assets remaining after the payment in full of the preferred and common stock and of all outstanding indebtedness, and the debentures shall always be subordinate to the general creditors of the company.

STOCK DEBENTURES HELD IN TRUST FOR

EMPLOYEES.

These deferred stock debentures are all to be issued to a trustee,-one half to be held in trust for the benefit of the common stockholders; and one-half to be considered as extra wages, and to be held by the trustee for the benefit of the employees. Cash dividends. on all deferred stock debentures when declared are to be paid to the trustee, who will disburse them, -one-half to the holders of the common stock pro rata, and one-half to the employees in proportion to the prospective (or respective ?) amounts standing to their credit on their debenture books. Mr. Purves explains the workings of his scheme by the following illustration: Supposing the capital of the concern to be $1,000,000, and the net earnings for several years to have averaged $200,000 a year. Sixty per cent. of these earnings, or $120,000, would be the amount agreed on as the annual cash dividend to capital represented by the common stock ; 20 per cent. of the balance of these earnings, or, say, $16,000, would be the amount to be paid into the contingent fund, and at the end of the first year of the operation of the plant the balance, or sum of $64,000, would be held in the business; but de ferred stock debentures to cover this amount would be issued to the trustee,-$32,000 to be held for the use of the stockholders, and $32,000 as extra wages to be held for the employees. At the end of the second year, after the payment of the dividends to the common stock and a percentage to the contingent fund, a dividend would be declared upon the $64,000 of deferred stock debentures, and for the balance of the net profits still remaining another issue of deferred stock debentures would be made to the trustee, and so on from year to year. Thus the effect of the arrangement would be that the surplus earnings of the corporation would be capitalized in the form of deferred stock debentures, and held in trust for the joint interest of the original owners or their assigns and their employees. The amount of deferred stock debentures to which each employee is entitled would be ascertained each year by determining the proportion that his wages for the year bears to the whole salary list for that period. This amount is then set down in the debenture book of the employee, and on this sum he is entitled to receive through the trustee, when earned, dividends not exceeding 6 per cent. per annum uncumulatively and subject to certain limitations. These limitations, as set forth by Mr. Purves, secure the management fully against any usurpation of its control of the business, confirm its authority to employ

years. While it is generally understood that the line adopted by the canal commission for the purposes of its plans and estimates was the route selected by the Panama Canal Company, several features of that route, as described by Professor Burr, are not matters of general knowledge. The route as outlined by Professor Burr is as follows: "Starting from the six-fathom contour in the harbor of Colon, the line follows the low marshy ground adjoining the Bay of Limon to its intersection with the Mindi River; thence through the low ground continuing to Gatun, about six miles from Colon, where it first meets the Chagres River. From this point to Obispo the canal line follows practically the general course of the Chagres River, although at one point in the marshes below Bohio it is nearly two miles from the farthest bend in the river at a small place called Ahorca Lagarto. Bohio is about seventeen miles from the Atlantic terminus, and Obispo about thirty miles. At the the latter point the course of the Chagres River, passing up stream, lies to the northeast, while the general direction of the canal line is southeast toward Panama, the latter leaving the former at this location. The canal route follows up the general course of a small stream, called the Camacho, for

INNER END OF HARBOR

GATUN

MEAN LEVEL 0.0

-35

ATLANTIC SECTION 14.42 MILES

NOTE.

10

11

EO LAKE SECTION

TAVERNILLA

a distance of nearly five miles, where the continental divide is found, and in which the great Culebra cut is located, about thirty-six miles from Colon and thirteen miles from the Panama terminus. After passing through the Culebra cut, the canal route follows the course of the Rio Grande River to its mouth at Panama Bay. The mouth of the Rio Grande, where the canal line is located, is about a mile and a half westerly of the city of Panama. The Rio Grande is a small, sluggish stream throughout the last six miles of its course, and for that distance the canal excava tion would be made mostly in soft silt or mud."

HARBOR IMPROVEMENTS.

The commission considered the feasibility of a sea-level route with a tidal lock at the Panama end, and it was found that the approximate cost of completing the work on that plan would be about $250,000,000, while the time required would probably be nearly or twice that needed. for the construction of a canal with locks. The commission therefore adopted a project for a canal with locks. The commission projected a canal channel into the harbor of Colon which, with the construction of the harbor itself, was estimated to cost over $8,000,000, while the annual cost of maintenance was placed at $30,000. Regarding the habor at the Pacific end of the channel, Professor Burr says:

The harbor of Panama, as it now exists, is a large area of water at the extreme northern limit of the bay, immediately adjacent to the city of Panama, protected from the south by the three islands of Perico, Naos, and Culebra. It has been called a roadstead. There is good anchorage for heavy-draft. ships, but for the most part the water is shallow. With the commission's requirement of a minimum depth of water of thirty-five feet, a channel about four miles long from the mouth of the Rio Grande to the six fathom line in Panama Bay must be excavated. This channel would have a bottom width of two hundred feet with side slopes of one on three where the material is soft. Considerable rock would have to be excavated in this channel. At 4.41 miles from the six-fathom line is located a wharf at the point called La Boca. A branch of the Panama Railroad Company runs to this wharf, and at the present time deep-draft ships lie up alongside of it, and take on and discharge cargo, as do the trains of the Panama Railroad Company. This wharf is a steel-framed structure, founded upon steel cylinders, carried down to bedrock by the pneumatic process. Its cost was about $1,284,000. The total cost of this excavated channel, leading from Panama Harbor to the pier at La Boca, is esti

mated by the commission at $1,464,513. As the harbor at Panama is considered an open roadstead, it requires no estimate for annual cost of maintenance."

THE DAM AT BOHIO.

The principal engineering feature of the route is found at Bohio, where there will be a great dam constructed across the Chagres River, forming Lake Bohio, the summit of the canal. This lake will have a superficial area during high water of about forty square miles. The water will be backed up to a point called Alhajuela, about twenty-five miles up the river from Bohio. For a distance of nearly fourteen miles, from Bohio to Obispo, the route of the canal would lie in this lake. Although the water would be from eighty to ninety feet deep at the dam, Professor Burr says that for several miles below Obispo it will be necessary to make some excavation along the general course of the Chagres in order to secure the minimum depth of thirty-five feet for the navigable canal. The Bohio dam will raise the water surface of the canal from sea level in the Atlantic maritime section to an ordinary maximum of ninety feet above sea level. This total lift is divided into parts of forty-five feet each. There will therefore be a flight of two locks at Bohio.

FORMOSA UNDER JAPANESE RULE.

NOT

OT all Americans are aware that Japan, for the past seven years, has had to deal with conditions in her dependency of Formosa not unlike those which are now confronting the United States in the Philippines. Formosa was conceded to Japan as a result of the war with China in 1894-95. After the cession the island passed through a period of military government corresponding with our own administration in the Philippines; and after the military rule was ended a civil governor was appointed, who was made entirely responsible for the civil administration of the island. Thus far there have been in succession four governor-generals and three civil governors. At present, Baron Kodama is governor general and Dr. Shimpei Goto civil governor of Formosa. Dr. Goto has visited the United States during the present summer, for the purpose of studying our institutions. During his visit he contributed an account of the Japanese administration of Formosa to the Independent of July 3. To this article we are indebted for the following facts:

As in the Philippines, the population of Formosa is made up of various racial elements. According to the statistics for 1899, the total number of natives in the island was 2,725,041;

over a period of twenty years, together with a project for establishing government monopolies of industries. These undertakings, as described by Dr. Goto, include (1) the laying of a trunk-line railway extending over the whole length of the island; (2) the surveying of lands; (3) the construction of harbors, and (4) the building of government offices and residences. To meet the expenditures required for these works, the Formosan government was authorized to raise loans to the amount of 35,000,000 yen, of which the principal and interest was to be paid out of the revenues of the island. It is estimated that the railroad work alone will require 28,810,000 yen, the construction of the harbor of Kelung 2,000,000, the land-surveying 3,000,000, and the building of government offices and residences 1,200,000. It is believed that the railroad will be finished much within the ten years' time originally assigned to the work, and that it will have a remarkable effect in stimulating industries on the island. Revenues accruing from the part of the island now open to traffic are greater than they were expected to be. The completion of an accurate land survey will confirm rights over land, will make landed property secure, and will greatly facilitate transfers. This work, by the way, was undertaken by the Chinese governor some years ago, but without success. As to the projected harbor works at Kelung, this is only the beginning of improvements for that port which will involve the expenditure of tens of millions of yen. It is the intention of the government to make this the chief port of Formosa, and it is believed that the growing industry and commerce of the island justify all the expenditures that have been projected. In the erection of public buildings great care has been taken in regard to sanitary arrangements, and the structures already built or in process of completion will serve as models for the whole island.

GOVERNMENT MONOPOLIES.

With a view to the gradual abolition of the pernicious habit of opium smoking, the Japanese government has established a monopoly of the article in Formosa which yields an annual rev enue at present of about 4,000,000 yen. Under the restrictions established by the government, only those who have been already poisoned by opium to such an extent that they are unable to abandon the habit of smoking without great pain are allowed, by special warrant of the government, to use it as a medicine. The formation of the habit is absolutely forbidden, or, in fact, its continuation in cases where poisoning has not advanced so far as to make abstention impossible. There is also a salt monopoly yielding

700,000 or 800,000 yen, and this commodity is now exported to Japan in considerable quantities. It is produced by permitting salt water to flow into fields, and then causing it to evaporate by the heat of the sun. Almost the whole supply of camphor of the world comes from Formosa. When Japan acquired Formosa a camphor monopoly was established, with a view to protecting the camphor trees, improving the methods of manufacturing, and putting the industry on a secure basis. The production is now regulated according to the demands of the world's market. The revenue yielded by the monopoly is now about 4,000, 000 yen. The present governorgeneral has also formed a plan for eventually making the Formosa finances entirely independent of imperial aid. The imperial government began the administration of Formosa with a grant of nearly 6,900,000 yen, and this grant has been annually diminished until the present time. According to Baron Kodama's project, which was adopted by the Diet, the grant will be steadily decreased until it will entirely disappear in 1910.

As

The possibility of this gain of financial independence may be seen when we consider the re cent remarkable increase of the revenue,—from 5,000,000 yen in 1897 to 14,000,000 yen at present, with the probability of an increase to 20,000,000 yen in two or three years, this increase being largely secured as a result of the operation of the monopolies, the adjustment of the land tax, and other financial reforms. the total expenditure incurred by Japan in connection with Formosa up to the end of the last fiscal year, March 31, 1901, amounted to 150,000,000 yen, including the military expenses, while in the same period the revenue amounted to only 40,000,000 yen, the financial burden to be charged to Formosa may be reckoned as 110,000,000 yen in all. As the annual revenue derived from Formosa is now from 14,000,000 to 20,000,000 yen, it may be said, as Dr. Goto points out, that the capital invested by the imperial government is bearing interest at the rate of 15 to 20 per cent. The import of Japanese commodities into Formosa is now about 15,000,000 yen. Supposing the profit of this trade to be at the rate of 20 per cent., the annual gain of Japan is about 3,000,000 yen, which nearly covers the present amount of the grant which the Formosan government receives from the imperial government.

RESOURCES OF THE ISLAND.

Among the more important products of Formosa named by Dr. Goto are tea, rice, sugar, hemp and flax, indigo, paper, silk, minerals, cattle, and marine produce. Dr. Goto predicts that