IMAGE EVALUATION TEST TARGET (MT-3) 1.0 HI- i^ I.I 1.25 22 m ^ u^ 2.0 U IIIIII.6 V] <^ /}. W > > >^ ^ iV « \ \ # % \ #:vt ;\ LP. .<$> i° P. CIHM/ICMH Microfiche Series. CIHM/ICIVIH Collection de microfiches. Canadian Institute for Historical Microreproductions Institut Canadian de microreproductions historiques 1980 Technical Notes / Notes techniques The Institute has attempted to obtain the best original copy available for filming. Physical features of this copy which may alter any of the images in the reproduction are checked below. v/ D D D Coloured covers/ Couvertures de couleur Coloured maps/ Cartes gdographiques en couleur Pages discoloured, stained or foxed/ Pages d^color^es, tachet^es ou piqudes Tight binding (may cause shadows or distortion along interior margin)/ Reliure serrd (peut causer de I'ombre ou de la distortion le long de la marge intdrieure) L'Institut a microfilm^ le meilleur exemplaire qu'il lui a 6X6 possible de se procurer. Certains ddfauts susceptibles de nuire d la quality de la reproduction sont not^s ci-dessous. D D D D Coloured pages/ Pages de couleur Coloured plates/ Planches en couleur Show through/ Transparence Pages damaged/ Pages endommagdes Th po of filr Th CO or api Th filr ins Mi in up bo fol D Additional comments/ Commentaires suppl6mentaires Bibliographic Notes / Notes bibliographiques n Only edition available/ Seule Edition disponible Bound with other material/ Reli6 avec d'autres documents Cover title missing/ Le titre de couverture manque Plates missing/ Des planches manquent Additional comments/ Commentaires suppldmentaires D D D Pagination incorrect/ Erreurs de pagination Pages missing/ Des pages manquent Maps missing/ Des cartes g^ographiques manquent The images appearing here are the best quality possible considering the condition and legibility of the original copy and in keeping with the filming contract specifications. Les images suivantes ont 6t6 reproduites avec le plus grand soin, compte tenu de la condition et de la nettetd de I'exemplaire film6, et en conformity avec les conditions du contrat de filmage. The last recorded frame on each microfiche shall contain the symbol —»- (meaning CONTINUED"), or the symbol V (meaning "END"), whichever applies. Un des symboles suivants apparaitra sur la der- nidre image de cheque microfiche, selon le cas: le symbole — ► signifie "A SUIVRE", le symbole V signifie "FIN". The original copy was borrowed from, and filmed with, the kind consent of the following institution: National Library of Canada L'exemplaire filmd fut reproduit grSce & la gdn^rositd de I'dtablissement prdteur SMivant : Bibliothdque nationale du Canada Maps or plates too large to be entirely included in one exposure are filmed beginning in the upper jnft hand corner, left to right and top to bottom, as many frames as required. The following diagrams illustrate the method: Les cartes ou les planches trop grandes pour dtre reproduites en un seul clich6 sont film^es d partir de i'angle sup6rieure gauche, de gauche d droite et de haut en bas, en prenant le nombre d"images n^cessaire. Le diagramme suivant illustre la mdthode : 1 • 2 3 1 2 3 4 5 6 CB ONE SHILLING. O v\ \ ■ ^J^^ CX.,^jd T^....^ fG^^-occ.^ GRAMD TRUNK RAILWAY OF CANADA: J\ gfiiianciar '^Icxnctw — ^>-^— s^. — ('oN'l'KNTS : — Capital. Trakkic PiV'.ckipts. Workinc i'.xpKNsKs. Profits. Controlled Piailways. Net Revenme Chkdits. Pre-prrfeke\ce Chau(;ks. Dividends. Renewal Accounts. Invi;stmi:nts. , Competition. -i¥T'- N' C' ..- »«., v^6 « IJ^' LONDON : Effingham Wilson & Cu., Ruyat. Exchanok. 1887. .5; THE <}RAND TRUNK RAILWAY OF CANADA: A. iFiisr^nsroi^ij i?.E^iE"Vsr. TABLE OF CONTENTS. / /; "Capital ... Traffic Receipts Working Expenses Profits ... controlltod railways ., Net Revenue Credits .. Pre-preference Char(;es Dividends Renewal Accounts Investments Competition r AU K. 5 7 9 10 10 12 18 IB 18 28 26 1 P R E V A ( ' I : I In order to arrive at u clear uuclcrstandiiif,' of the financial position of the Grand Trunk Railway of Canada, it is generally necessary to wade throu-h several years of Reports and Balance-sheets. With a view of obviating this trouble on each occasion when one's memory requires refreshing, I requested a skilled accountant, who has gained a reputation in the investigation of Grand Trunk and otlier accounts, to dissect and set cut in a i)lain and easily understandable manrer the more important details of the business operations and various financial arrangements of {\\% Company during the last fonr years. The Review is intended to be entirely without bias either in favour of or against the Company— simply a colourless statement of its past working and present position. BeHeving that a statement of this character will be interesting and useful to holders of Grand Trunk Securities and to investors generally, I have had it printed, and venture to ofier it to the Public. 10, Throgmorton Avenuk, J. i:. LTLT.KY. London, E.C, November, 1887. THE GRAND I'ltUNK RAILWAY OF CANADA: A FINANCIAL REVIE^A^. Capital, SOth June, 1887. Loans and Debentuuks — Terminable 6 percent, lioucls £1,472,700 jEOuO Maturei], but not piiiil oft'. Ailt.si.noo duo 1st Uocembcr, IHD". .ti:iU,;iUO due Ist January, IDlit. 5 per cent. Debentures ... 7,027,475 4 per cent. do 2,()3(),72l Prkferrnce Stocks — 4 per cent. " Guaranteed " 5,219,794 5 per cent. First Preference 3,218,149 5 per cent. Second Preference 2,827,795 4 per cent. Third Preference 7,1G8,055 £10,530,896 Ordinary Stock Canadian Government Advances Total Capital 17,933,793 20,157,075 8,111,500 £51,739,804 ]t is proposed in the following few pages to present an impartial statement of the more important facts bearing 6 j)i>rtii>n to Heceipts). First Half. Sccoiia Half. ... 72-1 per cent. 68-0 per cent 73-0 7G-G 70-5 70-1 >> >• >> 73-1 7G-0 G9-4 G7-1 >) Whole Year. 60 9 per cent. 73-1 „ 76-3 „ 69-9 „ ,, (3 months). A careful examinjition of these figures leads to the conclusion that the liailway has come to be more eco- nomically worked during the latter part of the period covered by the above dates. Thus, for the whole of 1886 the percentage of expenses was no higher than for 1883, although the receipts were about ^£8,000 per week less. Again, for the first half of 1887 the rate was 70-1 per cent, as against 72-1 for the corresponding half of 1883, although receipts were £5,800 per week less. For the first three months of the second half of 1887 receipts were .£500 per week more than for the corresponding period of 1883, and expenses were at the rate of 67*1 per cent., which compares with 67*3 per cent, in 1883. It seems reasonable, therefore, to assume that, if the average 10 •of 18H8 receipts be rcacliotl and maintained, either for the remainder of 1887 or in the future, workmg expenses may be at a somewhat lower rate than for that year. (3) Profits. — The subjects of Traffic Piecoipts and Working Expenses having thus been touched upon, there comes in natural sequence the (piestion of Profits, the amounts of which were as follows : — 1883 1884 1885 1880 1887 First Ualf. £ 511,909 4H-1,B18 383,120 459,320 500,898 Suconil H;ilf. £ 057,752 489,904 391,450 585,827 Wholo Year. 1,109,721 924,282 724,570 1,045,153 331,310 (3 months). Some of these figures will have to be referred to presently. (4) Controlled Railways.— The two controlled railways, as distinguished from the unhmVuirn lines — the figures of which last are incorporated in the Grand Trunk accounts — are those of the Chicago and Grand Trunk, and the Detroit, Grand Haven, and Milwaukee Companies, the relations of which to the Grand Trunk require to be defined in order rightly to estimate the importance of their earnings to (J rand Trunk revenue. The Grand Trunk Company guarantees the payment of the interest on the whole of the bonded debt of the Chicago and Grand Trunk in consideration of certain traffic arrangements between the two Companies. For the year 1885 the net earnings of the Chicago Company were only £70,014, and, adding a balance of £402 brought forward from the previous year, were insufficient by £93,728 for the requirements of interest on its bonded debt and other net 11 revenue charges, which amounted to £170,744 ; and this deficiency was met out of Grand Trunk revenue for 1886, as sliowu in the accounts of that Company to 30th June, 188(5. Although, therefore, it is clearly a mistake (which is, however, often made), to treat the Chicago and Grand Trunk earnings as so much addition to the rcvenu of the Grand Trunk Company, this latter has a material interest in the question of those oaraings being sufficient to enable the Chicago Company to meet its own bond interest and other charges. The parent Company has, moreover, a direct interest in the welfare of the Chicago Company, as bDiug the holder of a small amount of its First Mortgage Bonds, and about £570,01)0 of its Second Mortgage Bonds, the half-yearly interest on which, to the amount of £14,rM8, appears regularly, whether received or not, amongst net revenue credits in the Grand Trunk accounts. The Grand Trunk Company also holds about £1,160,000 of Chicago and Grand Trunk Ordinary Stock. The rentals, bond interest, and other net revenue charges of the Chicago Company amounted last year (1886) to £178,446, being an increase of £41,478 as compared with 1888, when the amount was £186,968. As against this amount of £178,446 the net earnings amounted to £140,825, and the deficiency of £37,621 had to be charged against the net revenue of the Grand Trunk Company. For the first half of 1887 the net earnings were insufficient to cover not revenue charges by £2,915. This deficiency will, in all probability, be made good in the second half of the year. Should there be a surplus, which is very likely, a payment will, no doubt, be made to the parent Company on account of former advances. As regards the Detroit, Grand Haven and Milwaukee Company, the Grand Trunk has an interest therein, as 12 being the holder of the Avholc of its Ordinary Stock — about ^2300,000. The interest charges of the Detroit Company amounted in 1886 to £07,498, which compares with £50,117 for 1883— an increase of £11,381. Till these charges are covered by net earnings there can, of course, be no dividend for the Ordinary Stock held l)y the Grand Trunk Company. In 1883 the surplus of profit over interest charges was £21,057. In 1880 the surplus of net earnings over interest charges allowed of a dividend amounting to £9,213 on the Ordinary Stock. The amounts thus receivable during those two years from the Detroit Company appeared amongst net revenue credits in the accounts of the Grand Trunk Company. For the first half of 1887 the net earnings were insufficient to balance interest charges by £9,041; but the profit of the first three months of the second half of the year shows a surplus of about £4,000 over and above interest charges. (5) Net Revenue Credits.— These consist mainly of interest on capital invested in the Stocks of other Companies (with the object of controlling traffics, &c.), in addition to which they sometimes include certain special receipts, such as the amounts paid by the Canada Southern Company in 1883 and 1884 in settlement of the disputed claim for the use of the International Bridge ; or the proceeds of the sale, of certain lionds or other assets belonging to the Company. Irrespective of such special additions the net revenue receipts since 1882 have been as follows : — 1883 1884 1885 1886 1887 First Half. £ 61,320 43,242 24,871 85,307 40,455 Second Half. £ 70,170 36,959 35,242 54,625 Whole Year. £ 121,490 80,201 60,113 89,932 (6) Pre-preferenoe Charges.— These form a very important part of the Grand Trunk Company's accounts, the more so because they have increasecl to a serious extent sirce 1883. They may be set out under four heads, thus : — Rentals, Leased Lines Debenture Interest Bond Interest ... . Interest, Subsidiary Lines 125,850 1883. 1886. Incrraae <>r DccreBse. £ £ £ 100,010 .. . 150,710 .. -15,270 375,930 .. .432,430 .. . + 56,500 93,285 .. . 88,405 .. . - 4,880 125,350 . . 1()1,200 .. . + 35,850 700,575 . . 832,775 .. . + 72,200 For the first half of 1887 the total was £415,576, as against £414,262 in 1880. . This growth of pre-preference charges has been con- tinuous, the largest increase being observable for the year 1884, when the amount was very nearly £50,000 more than that for 1883. The larger amount of debenture interest is the result of fresh issues, year by year, of Deben- ture Stock. The total of Debenture Stock in existence at 31st December, 1880, was £9,059,879, which compares with £7,044,475 at 31st December, 1882, showing an in- crease of £2,015,400. These issues have involved, during the four years, charges to capital for discounts and com- missions, amounting to £223,360. (7) Dividends.— The foregoing remarks on the various sources of income and modes of expenditure lead up to the question of the final result in the shape of dividends. By gathering up the various threads of the subject, the following synopsis is arrived at :— 14 1883. 1884. £ 1885. 1886. iramc Receipts • 3,888,435 3,434,095 3,053,t320 3,470,1)94. Working Expenses •2,718,714 2,509,813 2,829,060 2,425,541 Profit 1,109,721 Net Reve- ") -,01 ^nn nue Credits} ^21,490 924,282 92,055 724,570 00,113 1,045,153 89,982 Pre-pref. Charges 1,291,211 • 700,579 ) - ... ) 1,016,937 810,437 784,683 822,043 1,135,085 832,774 Chicago and ■" G. T. Co.'s Deficiencies 57,555 (Defy) . 93,728 302,311 37,621 Net Revenue 530,032 206,500 131,093 (Defy) 264,690' These figures show for the four years a total of net revenue apphcable to dividends, of £870,729, apart from abnormal receipts or " plums," and an average dividend earning power of ^£217, 682 per annum, which is only JE9,000 more than is required for full dividend on the ** Guaranteed" Stock. As a matter of fact, the revenue of the four years was supplemented from other sources as follows : — Net Revenue, as above ... ... .,, Special Receipts from Canada Southern ) Company, 1883 Do. do do. 1884 Do. Chicago and Grand Trunk Company on account of advances previous to June, 1882 Drawn from Revenue in 1883 Do. do. 1884 Compensation received from City of Grand \ Haven ... J Proceeds of Sale of Grand Trunk, Georgian | Bay, and Lake Erie Bonds ... j Amount Realised, North Shore Railway ... £870,729' 20,500 86,000 10,274 39,285 70,138 11,472 37,045 26,000 £1,121,433 15 , • By tliis meitiis dividends to an aggrcf,'ate amount of £1,120,P2G were distributed for the four years 1883-4-5-6, and the average rates of dividend on the several par- ticipating Stocks during the four years indicated were, — '• Guaranteed," £'6 per cent. ; First rreference, £2 Os. 7U\. per cent. ; Second Preference, £1 5s. per cent. ; Third Preference, 8s. l|d. per cent. " Guaranteed" Stock was dividendless for one year ; First Preference, two years ; Second and Third Preference, three years, out of the four. These four years seem to afford a fair basis for an average calculation, one of them (1883) having been very good ; one good, (1886) ; one bad, (1884) ; and one very bad, (1886). It is not here intended to pronounce any opinion on the policy of the Board of Directors in declaring and paying these dividend" , but the fact should be stated that during the four years in which dBl, 120,000 was thus distributed, as compared with ^£870,700 earned by the operations of the period, the reserve funds, which at the end of 1882 stood at £'205,508,- were entirely absorbed, and that the raising of money by continuous issues of Debenture Stock resulted in an addition of £'56,500 to the direct annual interest charges of the Company, whilst the burden of similar charges in connection with the subsidiary lines also increased to the extent of £35,800 per annum. A consideration of these facts is calculated to give point to the remark made above as to the connection between the * In the Report for December, 1883, there appenred the followjig statement:— •' In aJiHtion to the Insurance Fund of £2,05 1 15s. lid., tlie Great Western Reseryo Fiinils amounted, at the date of Union, to £137,Ofiii lis. lid., and tlic same amount stands to the credit of those funds in the general balauoe-sheet of 31st December, 1883." The accounts at August, 1882, the date of Union, s-howed the following particulars of the Renewa' Funds:— Ferry Stoanier, £36,023 12s. 8d. ; Locomotive, £104,889 6s. 3d. ; Car, £28,417 6s. 5d. ; Rail and Bridge, £n.5-19 Gs. 8d. ; Insurance, £2,054 158. lid.; Total, £175, 034 7s. lid. 10 civcumstaiice.s of tlie present and the occurrences of the past. It is lor the liolclers of the Dchenture and otlior Stocks of the Company to assess the importance of what is here bimply noted, and to calcuhite how far the dividend-earning power of the liailway has been per- manently weakened. As hearing on tliis vital question of dividend-earning power, it is important to notice that, on account of the addition of .£72,200 to the annual amount of pre -preference charges, and the absence of any assistance to revenue by drafts on reserve, or by such other special receipts or sale of capital assets as are noted above, (except possible payments by the Chicago Company on account of its old indebtedness,) a much larger amount of profit on working is now required than in 188B to yield an equal net result. Kct revenue was supplemented in 1883 to the extent of about J£59,800 from the sources here alluded to, irre- spective of the repayment made by the Chicago Company ; and, adding this sum to the .^72,200 increase in pre- preference charges, it follows that, with the same profit on working, dividend results would now, (ceteris panlnts, be less than in 1883 by i;'132,000. But this is not all. In 1883 the amount received in respect of dividend on the Company's investment in Detroit, Grand Haven and IMilwaukee Stock was £24,657. There appears to be no ])robability of any assistance from this quarter to Grand Trunk revenue for 1887. The Detroit Company's profits for nine months to 80th September were £'-44,796, but interest charges are now, as already mentioned, i ,7,498 per annum, and the profit for the three final months of the year are not likely to be more than sufiicient to make up this amount. Nor does there appear to be a prospect of any increase in net t) 17 receipts in other clirectioiiB, as compared with 1888, but rather tlie reverse, the amount for the first half of tliat year havinp; been, ^£51,820, and for the first half of 1887 £46,455. Consequently, as regards 1887, if the profit of 1883 could luive been attained, there would (reckoning on a receipt of some X'lO.OOO from the Chicago Company) still have been a difference of al)oui £'100,000 to il70,000 in net revenue. The balance available for dividends would thus have been sufficient, for the whole year, to cover "Guaranteed" and First Preference in full, and 2^ to H per cent, on Second Preference. On the other hand, allowance may be made, as regards the future, for expected saving of ^14,000 * per annum by the exchange of certain Obligations for Four per Cent. ♦ The exclmnge of existingiiiterest-bearing Obligations for Four per Cent. Debcu. ture Stock, under tlie provisio.is of tl.e Act of 1887, is estimated to result, wl.en com- pleted, in a saving of £GO,OUU per annum ; and tl.e President of the Company state,! at the last General Meeting that, including a prerious £55,000, the total saving of these and former conversions would be £115,000 a year. It may be worth while for persons interested in the ese savings, actual or estimated, that since 1883 the annual amount of debenture interest has increased £5C,500, and interest, subsidiary lines £35,800, there being a saving of £20,000 in bond interest and rentals. The increase in debenture interest for 188C, as compared with 1882, was £83,360, and the decrease in bond interest and rentals, £38,230. The amounts of interest subsidiary line?, cannot bo compared, as this item was not separately stated in the accounts for 1882. Then, as to the estimated fresh saving to be ett-ectod, to the extent of £G0,000 per annum, its realisation seems more or less problematical, as the hol.iers of the Securities intended to be redeemed may not consider the terms offered sufficiently favourable to induce them to surrender what they at present hold in exchange fo. another Security bearing a lower rate of interest. Take, for instance, the case of the holders of Consolidated Five per CVnt Mortgage Bonds of the Midland of Canada, who are invited to exchange them for Four per Cent. Grand Truiik Debenture Stock, at the rate of 114 per lOo. By tliis 18 Debenture Stock; also for .£17,000 rentals and interest on purchase money of lands sold by tlie Chicago Company, •which may possibly be paid over to the Grand Trunk Company. These two sums would yield a further If to 1^ per cent, on Second Preference. Beyond this there may be, in the future, an improvement in the business of the Detroit line, and as this Company has no Preference Stocks, and as all profit beyond the amount of interest charges— about .€G7,500 — is therefore available for dividend on the Ordinary Stock, it may be hoped that in the future some i:10,000 to £16,000 a-year will come in from this source. Jlenewal Accounts. — This is the heading under which a considerable sum has appeared in each of the half-yearly balance-sheets, beginning with that for 81st December, Brrangement they would give up an ivnuual interest of £5 mul receive only £4 lis. 2d. ; the alternative being tliat at the maturity, at 1st January, 1912, of the Security they now liold, tUry will be pnM off at par, and thus receive JtlOO cash at that date, instead of £114 iu Grand Trunk Debenture Stock now, the present value of whicli, at 01, is £103 15s. It has also tj be noted tliat the Securities proposed to be exchanged rank in priority to £7,(i27. 175 of Five per Cent. Debenture Stock, as well as to the Four per Cent. Debenture Stock into which by the conversion tliey would merge ; it being, however, provided " tliat tlie Securities acquired or purchased by or in exchange for the Debenture Stock nntliorised l)y tlie Acts of 1884 and 1887. shall be held as subsisting, -r 1 continuing as a seciu'ity;//v< Uoilo for the beueflt of the holders of the Debenture Si.ock." The siureuder by tlie present holders of the Securities referred to in exchange for new Debenture Stock, will thus be the nieai;h of improving the status of tlie Securities held by those who hold aloof from the conversion. Anyhow, ic still remains to be seen to wliat extent the olfer of con- version will be responded to, the time up to which excliauges can be effected on the terms proposed by the Directors being tlie 14th December, 1887. Wlien the pro- posed conversion of prior Securities into Pour pi.r Cent. Debenture Stock is completed, the saving of £C0,000 per annum to be effected thereby will, it is said, practically cover the capital expenditure involved in doiiliMng the main line from Montreal to Toronto-a distance of :V6Z miles, of whicli it is expected that 45 miles will be completed during the coming winter. In the meantime, it would appear that the only slaving that can be taken into account, as reducing pre-preference charges, is £ll,(iOO per annum arising out of the conversion of Oreat Western Equipment Bonds. 10 1883. Tho amount at that date was Jt22,lG7, and liaa since varied as follows : — 80th June. Slnt December. £ & 1884 100,838 ... 89,053 1885 40,4G5 ... 20,840 188(5 80,828 ... 21,(518 1887 22,001 ... — Presumably, such an item as this, appearing in a balance-sheet amongst assets, would represent expenditure over and above the sum fairly chargeable to revenue up to the date for which the balance-sheet was drawn up. Whether such a simple explanation can be accepted with regard to this item in the balance-sheet of tlie Grand Trunk Company is, however, open to some doubt by reason of tho apparently contradictory statements made from time to time by the President. On 29th March, 1883, Sir Henry Tyler is reported to have spoken as follows : — " We have considered the question of dealing as a whole with the steel rails over the united system. Mr. Ilickson and the engineers have been making elaborate calculations as to what will be required in the next fifteen years to maintain the joint system in a perfect state of efficiency ; and as the result of their calculations, we shall charge £56,000 a-year as an average for that purpose, and a charge has been made during the present period to commence that system. In the same way with the bridges. The bridges on the Grand Trunk section have been so extensively renewed of late that it is not neces- sary to consider the necessity of a fund in connection with them at all. There will be nothing wanting but the ordinary repairs from year to year. But on the Great Western section there are still a great many bridges that will want renewal from time to time in more sub- stantial material, stone and iron in place of wood ; and there is a certain amount of work that will require to be done over the next fifteen years on that account. The total amount so required in fifteen years would be £350,000. In making these renewals, of course, it is fair to charge a portion to capital and a portion to 20 revenue. The amount which han been charged to capital on t Great Western system hithcito is one-lialf ; and that is about a fau amount, because a stone and iron bridge costs about twice as much as a wooden one In that country. Therefore, we deduct G175,000 from the £3r)(t,()00, and it leaves £17."),0l)() to be cha.ged to revenue, or £ll,r)U() a-year as an average over the next fifteen years, foi the renewal of wooden bridges on the Great Western system." From those reiiiirks it would appear that in consequence partly of the neglect of the Great Western section i>reviou.s to its fusion with the Grand Trunk, it was determined to spend A'50,000 a-year for fifteen years, beginning with 1888, in renewing rails on the combined systems, and .£23,000 a-year for the same period on renewals of Great Western bridges— one half of this latter outlay to be charged to revenue, and half to capital. Instead, however, of an apparent increase of 1'67, 500 a-year in expenditure for renewals, the amounts charged to revenue under the head of renewals and repairs ■■'• during the years 1888 to 188G compare with that for 1882 as follows : — 1882. 1883. 1884. 1885. 1886. i'4;-!ear from the renewal account. A part of this £l(i(,000 will, I have no doubt, be charged out, in this present half-year. How much more will be added /o // I don't know •, thst depends entirely upon how Irtr further expenditure may be found to be immediately necessary on works of renewal, bridges, cars, and so on, or how far they may be postponed. I do hope that this £10(»,000 hux arrived at a iiiaxitnum, and that we shall not come to a higher figure ; but I cannot be certain on that subject, because, of course, it will depend on circumstances. But, at all events, I trust we shall charge it off as soon as possible, for, speaking for myself,! do abominate suspense and renewal funds of all descrip- tions. I think that, when a large line like this has to be kept in rej air, a sufficient sum should be charged upon it every year to keep it in thorough order, and that th re ought to be no complication of suspense accounts and renewal accounts, c r anything of that sort ; 1 ut, if there could be any justification for them, it would be, c f cours in a case of this kind, where we have taken over the Great Western not in s uch good order as the Grand Trunk line. The expense of renewals must be met in this way. You cannot charge thtm to one or two, or even a few half-years, but they must be spread over a number of years I only hope we shall spread them over as few years as possible. I don't know wheth.r I need go into the details of these expenditures, which I have prepared, upon permanen - way, and upon bridges i nd upon cars ; but if anyone is anxious for inform- ation upon that subject, I can easily ";ive it. I think I need not 22 trouble the whole body of shareholdtrs with all these details. That is the general 'explanation.' In these remarks it seems as if the 4'57,000 expenditure which a year and a lialf previously had apparently been referred to as an annual charge to revenue for fifteen years, is treated as if, with the £43,000 car renewals, it were (within some reasonable amount) the total oi" the necessary expenditure— with the cursory remark by way of qualifi- cation, " How much more will l)e added to it I don't know." Now, if the intention of expending i;67,5U0 per annum has been abandoned, so much the better if it can be done with safety, but if the contemplated outlay has oxily lieen postponed it may have to be incurred at a time when it would come upon the proprietors as an unpleasant surprise, or when it would be especially inconvenient. If only for this reason a clear and authoritative explanation seems very desirable. Commencing at 31st December, 18bl, there has appeared in each half-yearly Report up to BOth June, 1887, a short statement of the position of the Renewal Accounts ; the amounts of the " Car Renewal Accounts " and "Bridge Renewal Accounts " being stated, and the amount or balance of "Renewal Funds" deducted therefrom; the resulting balance, with the exception of a discrepancy at Slst December, 1884, being the same as that shown in the general balance-sheet. But these half-yearly notes are not explicit as to whether the amounts stated as " Car Renewal Account " and " Bridge Renewal Account " represent the expenditure under those heads, or are merely balances, and are entirely wanting in any explanation as to where the "Renewal Funds" come from. Neither is it stated whether th^ renewal expenditure referred to is J n 23 distinct from, or included in, the amount entered in the schedule of Maintenance and Kenewals. Cash Invested in Securities not Charged against Capital Expenditure and Securities on Hand, — These two items may be taken together, l)eing almost identical in character. In fact, they were not separately stated in the puhlibhed balance-sheets till June, 1884. In tlie Report for that date reference was made to the former of these items in the following terms : — " The most import- ant itei-i standing at the credit of the Company in the general balance-sheet is that of ' Cash Invested in Securities not Charged against Capitrl Expenditure, i;906,243,' " and a statement, from which the following list is drf wn, was given of the details comprised in this total. iit«2,780,500 (£572,524) Chicago and Grand Trunk Second i\rortgage Bonds, .*2,112,113, or £488,995 X' 120,800 Consolidated 5 per cent. Mid- laui of Canada Mortsaf'c Bonds .. $692,800 (£142,850) International Bridge Stock $080,000 (£139,720) North Shore Rail- way Stock $894,900 in connection with tlie Central Vermont Railway ... 111.070 142,356 34,981 183,888 £900,241 (A tlifferejiee of P,-2 is I'auspil bv tlio omission of oild shillings,) 24 The amount of ^6183,883 was explained to consist of— $821,023 (£05,903) on account of an authorised expenditure of $401,500 (£82,500) for— $120,000 (£24,057) l£t>^ \ Mortgage Bonds . Consolidated ' Eailroad of Vermont J $202,000 (£41,507) Preferred Stock ... $400,000 (£82,192) Common Stock $500,000 (£102,740) Common Stock Central Vermont Railroad $578,870 (£117,920), a long-stanu^.g debt of the Central Vermont Rail- road Company to the Grand Trunk Company, to represent which the latter held — Acceptances of the Vermont Company £23,584 £117,920 Ibt Mort. 5 per cent. Bonds Consolidated Rail- road of Vermont, valued at 94,380 £05,903 117,920 £188,883 These details explain the item of t'900,243, Securities not charged to Capital. An explanation of the item of £244,129, Securities on hand, in the same balance-sheet- June, 1884— was given in nn Appendix to the Report of the Proceedings at the October Meeting of that year, but which considerations of space preclude from being repeated here. 25 No other easily intelligible list of Securities has since been set out in any of the half-yearly Eeports, but two Hsts were given in that for December, 1885, in which may be traced several of the Securities specified above. The International Bridge Stock appears as $1,490,400 in place of $092,800, as at June, 1884, and an especially noticeable feature in one of the lists is that tlie total mithorised amount of Consolidated Eailway of Vermont Stock is stated at $300,000, although the amount actually held by the Grand Trunk Company had been previously put down as $400,000. In other respects the details furnished at December, 1885, are difficult of comparison with the totals stated in the balance-sheet, especially as the various Securities are not classed under the same heads as in the balance-sheets, the distinction being between (1) Investments in the J3onds of other Com- panies, the interest on which is included in net revenue credits, and (2) Investments in the Preferred and Ordinary Stocks of Companies whose receipts and expenses are not included in the Grand Trunk accounts, —a distinction which it is rather difficult to appreciate. In short, it would appear as if the Board had not taken the proprietors completely into its confidence with respect to these admittedly most important parts of the Company's accounts. The questions have, indeed, been pubhcly raised but never answered, whether the Vermont Company's acceptances for £23,584 have been paid ; if so, when, and how the payment was included in the pnbHshed accounts. These points appear to be worth clearing up. . The following statement shows the fluctuations in the 26 items under consideration as they appear in the balance- sheets of the several dates specified :— June, 1883 Dec, „ June, 1884 Dec, „ June, 1885 Dec, ,, June, 1880 Dec, „ June, 1887 Cash Invested in f^fcurities not chargoil to Capital Exijoiiditure. Soeurltios on liaud. •• 900,214 ... 244,129 •• 922,749 ... 138,492 •• 922,749 ... 170,923 ... •• ««9,549 ... 1.58,902 ... •• 890,570 . 165,560 ... • 967,210 ... 178,307 ... •• 903,272 ... irs,28d ... It seems very desirable that an explanation given of these fluctuations, and of the plan on Securities are valued for the purposes of the balance-sheets. Totals. £ 1,079,275 1,207,528 1,150,373 1,001,241 1,102,072 1,048,451 1,050,142 1,140,523 1,130,561 should be which the periodical Com2JetUion,--On this subject not much can be said with precision. That competition exists and will continue appears to be cerlain, but what will be its extent, or what Its practical efiect on the net revenue of the Company is altogether uncertain. At the General Meeting in October 1885, the President estimated the net loss to the Grand Trunk during the preceding half-year, in consequence of the competition of the Ontario and Quebec section of the Canadian Pacific Eailway, at £32,000 net. In that year the Grand Trunk suffered very severely indeed from general competition and excessive cutting of rates At the last General Meeting in October, 1887, the President again made some observations on this subject, especially on the -further expected competition " referred to in the June Report. His conclusion was that the only thing to 87 be feai-ea was a cli»t«rbanco of rates, but that, so far as the Canadian Pacifte was concenied, he did not thiut hat that railway eould cut rates any more than the Gmnd Trunk, and that, as regards American lines although Uiore will always be more or less cutting o rates and abstraction of traffic, there can never again be the conditions which were produced in the disastrous years of 188-1 and 1885-times which ■' have passed away, never to return." It would appear, in fact, that the question is now not so much whether there shall be a recurrence to those bad times, as whether the good time such as the Company experienced in 1888, shall a-ain ' return, and if so, what will be tlie practical result to" the proprietors. It is hoped that the details set out in the preceding pages may prove of service in enabling a correct opinion to be formed on this point. T ^ LONPOX: Crown Printino (Iompany; CfeowN Court, Milton Strekt, E.G.