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BOARD OF DIRECTORS.

Equitable Building, 17th and Stout Sts.

195 Broadway

Dooly Block

Kishia

John K. Gilliat & Co., Crosby Square LONDON, ENGLAND.

To the Stockholders of

The Denver and Rio Grande Railroad Company:

The income of your Company during the fiscal year ended June 30th, 1905, including $192,133.68 interest and dividends received, was $17,223,641.01, an increase of $562,860.82 as compared with the previous year.

The gross earnings from operation were $17,031,507.33, being an increase of $585,072.23. The operation expenses were $10,168,960.61, being an increase of $110,516.83, and the net earnings were $6,862,546.72, an increase of $474,555.40. The percentages of increase were, in gross earnings 3.56 per cent. in expenses 1.10 per cent., and in net earnings 7.43 per cent. After providing for all charges against income, including two semi-annual dividends of 21 per cent. each upon the preferred capital stock of the Company, and contributing $120,000.00 to the Renewal Fund, there remained a surplus from the year's operations of

From which appropriations were made for: Betterments during the year $133,915.30

Ten standard-gauge freight locomotives

to be delivered in July, 1905.

Surplus carried to Profit and Loss.

$562,452.13

150,000.00 283,915.30 $278,536.83

For detailed information you are referred to the statements and statistics prepared by the Comptroller and the General Auditor and submitted herewith.

There are bonds and stocks in the treasury of the Company at par value amounting to $27,861,670.00 (exclusive of certain shares of Western Pacific Railway Company capital stock as hereinafter explained), which are carried on the books at $24,340444; also bonds at par, and cash in the Special Renewal Fund, amounting to $435,237.94, carried at $335,451.69, and bonds and stocks deposited with the Morton Trust Company as collateral for certain First Consolidated Mortgage Bonds of The Rio Grande Western Railway Company, amounting at par value to $16,614,000.00 and carried at $9,768,063.52. A statement in detail covering these securities will be found on page 26 of this report.

There were no unpaid vouchers at the close of the fiscal year except those for June, payable in the ordinary course of business during the succeeding month.

The independent examination of the accounts of the Company, required by the by-laws, was made by Mr. Warren G. Purdy, who has for several years acted in that capacity, his selection being again decided upon by the Committee appointed at the last annual meeting of the stockholders. His certificate will be found on page 12 of this report.

Under the terms of the Equipment Trust, explained in the last annual report, two semi-annual payments were made, amounting to $209,062.50, of which $136,000.00 was paid out of the Special Renewal Fund and the balance, $73,062.50, out of the General Fund and charged to Profit and Loss.

In January your Company finished the construction of and put in operation an extension of its Loma Branch, 71⁄2 miles in length, extending northwesterly from Pictou Station, near Walsenburg, to serve additional coal mines in that District. For convenience it was built under the Charter of The Rio Grande

Railroad Company, the stock of which is owned by your Company.

The Copper Belt Railroad, 4.16 miles long, connecting the various mines in the Bingham Mining District in Utah with the

Bingham Branch of The Rio Grande Western Railway, was acquired during the year; also the Dalton & Lark Railroad, 3.88 miles in length, extending to the Dalton & Lark Mines from a connection with the Bingham Branch. There were issued on account of these purchases $160,000.00 par value of Rio Grande Western First Consolidated Mortgage Bonds, which, together with $450,000.00 of bonds held in the Treasury, have been sold.

The work of laying heavy rail, 85-lbs. weight per yard, in place of lighter rail, in the main track of the Rio Grande Junetion Line, used jointly with the Colorado Midland Railway, commenced in the previous fiscal year, was completed.

At the close of the fiscal year the work of laying 85-lbs. steel rail on the entire main line of The Denver & Rio Grande Railroad from Denver to Grand Junction, referred to in last annual report, was continued. The substitution of 85-lbs. steel rail will be completed at an early date, and the lighter rail released is being used on other parts of The Denver & Rio Grande Railroad.

It is proposed to replace, during the next fiscal year, with 85-lbs. rail, nearly all of the 65-lbs. rail remaining in the main track of The Rio Grande Western Railway, about 140 miles. The remaining 20 miles of 30-lbs. rail on the Crested Butte Branch of the Third Division were strengthened with 65-lbs. second-hand rail transferred from standard-gauge main line.

Mutually satisfactory arrangements were made with The Santa Fe Central Railway Company for convenient joint station facilities at Santa Fe, New Mexico. They consist of a brick passenger depot, frame freight house and necessary tracks and appurtenances. Your Company's share of the expenditure was $14.289.87.

Plans for enlarged facilities at Grand Junction, to meet the growing importance of that City as a commercial center, have been prepared and the construction of a new brick passenger depot, brick freight house, and suitable tracks and appurtenances, estimated to cost $75,000.00, was commenced and $16,372.41 expended during the year.