The Sun.
London, England, 1868-01-06 00:00:00

AFIAIRS OF THE CALEDONIAN RAILWAY.

This time last year a holder of ordinary Caledonian
stock congratulated himself upon a dividend of 7a per
cent. and an enhanced value of his capital to the amount
of 24 per cent. During the first nine months of the year
the Caledonian participated in the common depression of
railway property, and in October it fell with a rapidity
which was not to he explained by sympathetic action, and
which, in the judgment of most observers, could only be
accounted for by causes to be sought for in the actual con-
dition of the railway itself. The movement continued;
and last week the ordinary stock of the company sold for
as little as 69. Accordingly, a few months ago Mr.
Thomas Richardson, Mr. George Smith, and Mr. William
Spens,.of Glasgow, and Mr. Charles Cowan, of Edinburgh,
were appointed a committee of inquiry. These gentlemen,
three of whom are merchants and the fourth an actuary,
have gone thoroughly into the accounts of the last two
years, personally examining the books and examining the
auditors and officials of the company, besides availing
themselves of the assistance of eminent professional men
to report both on the accounts of the company and its ma-
terial property, the permanent way and rolling stock.
The result shews that, apart from fluctuations in market
value and adverse operations of the Stock Exchange, there
were good grounds for the demand for an investigation
and that it has not taken place a moment too soon. On
the other hand, the report, while exposing much that is
unjustifiable in the past policy of the directors, and in parti-
cular an erroneous and delusive method in dealing with
the accounts, establishes in a most satisfactory manner the
inherent soundness of the property. The question now
uppermost in the mind of every shareholder is, Have
the divividends been fairly entered ? The answer
must be—No ; very far from it. The account-
ants chew that in the Caledonian Railway Com-
pany capital has been debited with expenditure
which ought to have been charged to revenue, which, on
the other hand, has been over-credited. The committee
still find that the deductions which ought to be made from
revenue, and the additional charges which ought to be
made against it, amount, for the two years under review,
to £207,580. The total deficiency on revenue account
during those years is, according to the accountants,
£301,820. The committee make some considerable deduc-
tions from this sum, which reduce it to £200,267, and
this sum, added to the deficiency applicable to the period
prior to 31st July, 1865, gives a total of £312,703 impro-
perly paid in dividends to the shareholders. The com-
mittee's judgment, as it affects the excess of dividend, may
be thus stated:—

Year ending Year ending
July 1866. July 1867.

Dividend as distributed
by the directors ...... £7 7 6 pr. et. £5 17 6 pr. ct.
Dividendactually earned 52 0 ~ 218 2 ~

Excessive payment to
shareholders ............ £2 5 b £2 19 4
The calculations on which these conclusions are basea,
and the principles of railway finance which have
been applied in assigning expenditure to capital and
revenue and capital respectively, will of course be well
considered by the shareholders, and may not improbably
be challenged by the directors, whose administrat ion is
thus impugned. It is to be observed, however, that the
committee have been less strict in their judgment upon
these matters than the accountants, and that their deliver-
ance is that of gentlemen interested in the remunerative
character of the line.

The working of the line, the committee have satisfies
themselves, is in good hands. The permanent way and
the works generally are in good order, and have been
efficiently and economically maintained. The authorita-
tive opinion of Mr. Hawkshaw is, that with such excep-
tion as may be taken to the state of the Scottish North
Eastern Section and four small branches of the Scottish
Central Division, " the lines of the Caledonian system are
equal in condition to the best of our English railways."
The rolling stock, again; is ample. The efficiency of the
stock is in great measure due to the addition during the
last four years of new engines, when a sounder policy
would have adapted or replaced the old. Bnt the new en-
gines might be, and were, paid for out of capital, whereas
repair or replacement of the old ones must have been
charged to revenue.
The recommendations of the committee have reference
to placing capital and revenue in a truer relation to each
other, not accepting the results of past errors, but, as fax
as practicable, reforming them ; to the establishment of a
more thorough and responsible system of audit ; to the
abandonment of all works which can be relinquished with-
out evident injury to the undertaking; to the substitution
of agreements with other companies for disastrous compe.
tion and rivalry; and, as a security for the" adoption
of a better policy, a reconstruction of the board of
directors. We have seen that. the lowest sum at which
the amount erroneously paid .to the shareholders in
the shape of dividends can be tak-enis £312,703. Of this
sum the committee propose that £112,436, the deficiency
hich existed in July 1865, when the company was recon.
strutted, loe recognised as a cllarje to capital ; that £98,228,
the balance remaining at the credit of the premium
account, be transferred to the credit of the deficiency ;
and, finally, that the balance, £102,039, be repaid to capital
out of revenue by half-yearly payments of £7,300 each,
spread over a period of seven years. We do not
know, says the Daily News, what height of self-denial
the virtue of the Caledonian proprietors is capable of
attaining, and "No money returned" has hitherto
been the rule of shareholders ; but we are sure that if a
body of shareholders who are told by a committee of their
own number that they are earning less than £3 per cent.
per annum will, upon that spewing, appropriate £14,600
a year to the repayment of slams taken from capital, they
will in that way, although the money represents only
eighteen-pence in the pound on the amount available for
dividend, do more than can be done by any amount of de-
clamation to convince railway directors that making things
appear pleasanter than they really are is not the way to
recommend themselves to their constituents.

Mr. Davenport Bromley, M.P., has received the
Queen's permission to change his nacre to Bromley-Daven•
port, in ptirsuance of the will cf his cousin, Mr. Arthur
Henry Davenport, decosed.