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2.

There is a disposition on the part of anyone injured,
whether by his own carelessness or not, to make a claim against
the Co. and the fear that we cannot obtain justice before the
average jury as well as the expense for counsel, makes it necessary
to make a settlement in cases where if we were sure of exact
justice, we would obtain a verdict in our favor.

In November 1888, your Directors applied to the authorities
for a branch or cross-town line, running from the intersection
of Mc Allister, Market and Jones Streets, northerly, on Jones
Street to Bush, to Hyde and thence to North Beach. On May 3d,
this was granted and we are now taking measures to speedily construct
the same. To provide funds for the cost, the Stockholders
will be asked at a special meeting to be called for that purpose,
on the 20th of September next, for authority to issue Bonds in an
amount sufficient for that purpose.

The completion of the branches of the Powell Street system
to Golden Gate Park and the Cliff House has been of benefit to
us thus far and gives promise of a steady increase in the future.

Between August 1888 and January 1st of this year, there
was unearthed a system of stealing from our receipts, which by the
written acknowledgment of the parties (conductors and receivers)
who had hitherto had our confidence, had extended back for a number
of years.