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Oi 
 
MEMORANDUM, 
 
 On behalf of the Shareholders of the Grand 
 Trunk Railway Company of Canada, set- 
 ting forth the Basis of the Scheme of Fi- 
 nancial Assistance, which it is proposed 
 should be <>Tanted by the Government and 
 Legislature for the relief of the Enterprise, 
 for the re-establishment of its Commercial 
 Credit and to secure the permanent pros- 
 perity of the Provinces. 
 
 BY THE 
 
 HONORABLE WILLIAM NAPIER. 
 
 TottoNTo : IViiitod ni ilic L(<i(hr Offico. 
 

MEMORANDUM, 
 
 BT THB 
 
 HONORABLE WILLIAM NAPIER. 
 
 Oa behalf of the Shareholders of the Grand Trunk 
 Railway Company of Canada, setting forth the 
 Basis of the Scheme of Financial Assistance, which 
 it is proposed should be granted by the Govern- 
 ment and Legislature for the relief of the Enter- 
 prise, for the re-establishment of its Commercial 
 Credit, and to secure the permanent prosperity of 
 the Province. 
 
 PREFATORY REMARKS. 
 
 The Shareholders have learnt with regret and alarm 
 that causes, which it is useless here to detail — and some of 
 which could scarcely have been foreseen— have placed the 
 Undertaking in a position so perilous, that without prompt 
 and material aid from the Province, the interest falling due on 
 the Provincial Bonds for the accruing half year, cannot 
 be met by tiie Company ; and the most important fea- 
 tures of the scheme, viz. : the great Victoria Bridge 
 and the extension of the Line to its western terminus cannot 
 possibly be put in execution ; results, the anticipation 
 of which alone has sufficed to destroy the credit of the En- 
 terprise by reducing the market value of the shares to 50 
 per cent, discount, and to cast a cloud over the commercial 
 prospects of the most favored Colony of Great Britain. 
 
A serious jiml careful C(>ii>i<lerati(>ii of the cireumslaMces 
 of the case — not lueroly ii» view of its actual iieccss^ities, 
 but looking to the coni])reIuMisive completion and perma- 
 nent re establish uient of this the main artery, and also to 
 the future subsidiary Rnilwav Enterprise of th<; Conntrv ; 
 and with due regard to the experience ot similar LTndertak- 
 ings in other countries, wlieii in the same condition, and to 
 those means wliich iuivo heen successfully adopted for the 
 restoration of their financial credit — has led tlie Shareholders 
 to believe that the same principle of relief, if at once 
 applied by the Government and Legislature, could not pos- 
 sibly fail to ensure results mutually advantageous to the 
 Shareholders and to the Counti-y. 
 
 13ASIS OF THE SCHEME. 
 The requirements to be attained are two-fold, 
 
 1st. Capital sufficient for the completion of the Under- 
 taking, estimated not to exceed the sum of £1,6GO,000. 
 
 3nd. The rescucltation of the market value of the Enter- 
 prise ; or. in other words, the restoration of the Shares to 
 their par value. 
 
 The attainment of the former does not necessarily ensure 
 the accomplishment of the latter ; for the reasons, that the 
 prospects of the line in the Money Market have already been 
 seriously damaged, and that if left alone to its own gradual, 
 though sure development, and without any external 8upi)ort, 
 looking to the magnitude of the Enterprise and to the 
 period of time which must eliapse until the increase of traffic 
 to result from the completion of the Victoria Bridge can be 
 accomplished, it will probably be several years before the 
 profits shall aiford a dividend on the Share Capital of 5 jjer 
 cent. ; and, during which time therefore, the Company's 
 Debenture and Share Capital must necessarily remain at a 
 depreciation which is ruinous to the Shareholders and 
 damaging to the Railway development and Comme*'cial 
 Credit of the Provinces. 
 
Kxporiouce in Europtj aiul elsowheie, i)nrticularly in Franci-. 
 ill Snrdiiiiu, in Austria, in India and in Australia, Ims more 
 or lees proved, that one inea-surc alone is completely 
 adequate, under such circumstances, to maintain the credit 
 ot'Kailway undertakings in the vicissitudes of their infancy, 
 during their consiniction and ])ending the gradual devel- 
 opment of their traffic nj> to a certain point viz : — 
 
 The support of tluj State itself or in otlier words the 
 jjractical demonstration by the people cY the Country, of 
 confidence in their own commercial future, which is best 
 given by u Guarantee of a minimum dividend for a term of 
 years, on the share Capital invested. 
 
 The consideration lor this aid and for any possible risks of 
 temporary loss ( a risk however which has not in any one 
 previous instance resulted in any loss) has been and is, the 
 reversion of the Undertaking in absolute property to the 
 State at the expiration of a term of years — a sacrifice in re- 
 turn for the Guarantee which is cheerfully made by the in- 
 dividual Stockholders, and a boon of the greatest magnitude 
 to the Country, the more especially to a young State as 
 Canada, the magnitude of whose ultimate commercial future 
 it would be presumptuous to attempt to estimate. 
 
 Looking therefore to all the circumstancft: under wliich 
 the capital of the Grand Trunk Company \:.:^ subscribed, 
 and to the lamentable prospects of the UndertakiLg, if leftinits 
 existing condition, — the Shareholders earnestly appeal to 
 the Government and Legislature of Canada for a pledg 
 of confidence in this great national Kailway Enterprise by a 
 Guarantee of a dividend of 5 per cent, on the share capital of 
 the Undertaking, after the payment of all its fixed charges, 
 the consideration to be, the reversion of the Undertaking in 
 absolute property and in the most eflicient working order, at 
 the expiration of, say, 99 years. 
 
 Under ordinary circumstances in such Guarantees, the risk 
 
i':\ 
 
 of any possible loss is of course borne by the State, but in this 
 particular instance, remembering the great liberality of the 
 Province towards the Enterprise and tlie natural disappoint- 
 ment of the people of Canada at its present condition, and 
 looking to their own individual conviction of the ultimate 
 realisation of all the prospects originally hoped for, the 
 Shareholders arc anxious also to give a strong mark of 
 their confidence ; and propose, that should any deficiency 
 ensue during the first five ^ears after the completion of the 
 line to Toronto, in respect of the Guarantee, and wishing to 
 preserve intact the surplus revenues of the Provinces, they 
 are ready to agree and to give proper security, that all such 
 annual deficiency, during that time, shall be subscribed 
 by the Company, and be converted into Share Capital, 
 under a like Guarantee by the Provinces, and the amount 
 of which shall bo estimated and allotted pro ratA, 
 among the holders of the Stock, at tlie time of the granting 
 of the Guarantee. 
 
 The advantages which would necessarily result, are as 
 follows : — *^ 
 
 That the Commercial Credit of the Undertaking would 
 immediately be re-established. 
 
 That the unissued Share and Debenture Capital would 
 at once be realised at par. 
 
 That the interest on the Provincial Debentures would be 
 paid by the Company ; the completion of the Line to its west- 
 ern terminus and the construction of the Victoria Bridge 
 would be rapidly accomplished ; and any probable deficiency 
 during the first five yeara, in respect of the Guarantee, would 
 be provided for ; and all this without the Province being 
 called on to subscribe an additional pownd of Capital. 
 
 Tliat the doubts now existing in the Money Market, and 
 naturally arising from the existing circumstances ; from in- 
 dividual ignorance ot the commercial prospects of Canada ; 
 
and from the disappointment consequent on the published 
 accounts of the traffic receipts on the only section of the lino 
 hitherto open, will be completely removed ; and that the com 
 mercial credit of the Province will be re-established, the 
 more firmly that in the time of difficulty and of gloom, the 
 Government, the Legislature, and people of the Country had 
 shewn, not only their honor in respect of their national 
 obligations, not merely their readiness to shnre with the 
 Stockliolder the risks or profits of the great national Hail- 
 way enterprise ; but that adopting the commercial princi- 
 ples established by the railway experience of Europe, had 
 given, when appealed to, the most complete proof of confi- 
 dence in their resources and material progress. 
 
 It should be added that proper security for the con- 
 version of the probable deficit in respect of the Guarantee 
 during the fii-st five years, might 1)e given to the Government 
 by many arranoeinents, one of which would be : 
 
 The Guarantee not to take effect until the probable 
 amount of the total deficit during the firet five years had 
 been agreed to between the representatives of the Govern- 
 ment and of the Company, and until the share capital re- 
 presenting that amount liad been subscribed, and a deposit 
 equal to the fii*st year's estimated deficit placed in the 
 hands of the Tnistees on behalf of the contracting parties, and 
 for the benefit of the Provinces ; and the amount necessary 
 to make good each subsequent year's estimated deficit to be 
 deposited in the like manner. 
 
 In case, after the first year, the Company should fail to 
 make such deposit as above prescribed, the deficiency to be 
 a first charge on the net profits of the Undertaking for the 
 year. 
 
 The Government to pay 5 per cent, interest on all such 
 deposits. 
 
CALOULATlOMa Oft WUICU iJUt OROCNOBO YHI fiVrUlATBi OT 
 LOSS OB OAIN IV RBBPEOT OF ▲ FJVK FER OKKT QUABAMTEE. 
 
 It remains now to show wliat is the estimated risk to the 
 Province aud to the Company in respect of any probable 
 deficiency in the Guarantee during the first five years, esti- 
 mated to be necessary for the development of the traffic, in- 
 cluding the time necessary for the completion of the Line to 
 its Western Terminus and for the construction of the Victo- 
 tia Bridge. 
 
 But In the first place, the Company would engage to com- 
 plete the Line to the Western Terminus in one and the Vic- 
 toria Bridge within three complete working seasons from 
 the date of the granting of the Guarantee, thus afibrdiiig two 
 years for the devoiopment of the through traffic, before the 
 termination of the Company's liability in respect to the 
 estimated deficit on the Guarantee. 
 
 It 18 evident then that the estimated receipts of the Line 
 must be the ba»is of the calculations as to any deficiency or 
 excess on the Guarantee of 5 per cent, on the share capital 
 during the first five years. 
 
 The estimated receipts therefore must be as carefully ascer- 
 taiuu I a!» circumstance will admit of. The experience of 
 Hallways in America in districts similarly populated and of 
 a like character, might be fairly adopted as a guide ; but it is 
 fortunate that in this instance, actual experience in Upper 
 and Lower Canada is sufiicient to afibrd data for calculations 
 of the accurac}' of which no reasonable doubts can be en- 
 tertained. 
 
 It will be seen on reference to the annexed estimates of 
 tr.ilfic (So. 1), during the first five years, that the average re- 
 ceipts are calculatod, on the Eastcjrn Section at £15 per mile 
 per week ; on the Western Sectiun, at £25 per mile per week ; 
 and that assuming the working expenses at 50 per cent, on 
 the'gross receipts, and deducting all the fixed charges of the 
 Provinces and of the Company, there remains an animal 
 balance available foi Dividend of 2.05 per cent, on the 
 share capital. 
 
or 
 
 f 
 
 Tlio Ilubilify ot'tlio Pjovinco tliurctbiv, iu utspect of the 
 5 per con t. (iiiariintoo, wonld Im 'i.Oo per eont. por annum 
 fluring tivo yeaix, which deficit would l»o annually converted 
 into share capital under a like (^uuranfeoot'fivo per cent. 
 
 The t'ollowin<; data are att'ordod by the actual exporioiu;e 
 of the Provinces: 
 
 The receipt« of the KiistuTii Section of the (Jrand Trunk 
 of 428 miles, averaged, <luring the summer months of the 
 
 past year £ 18 per milo per week. 
 
 During the winter montlis 
 
 of the jnist year £V2 '* " 
 
 Thus giving agenend aver- 
 ago ot £ 15 " " 
 
 Without adding one ])ound sterling for the development of 
 tho traffic reasonably to be ex[)eeted during the first live yeam, 
 the receipts on the Eastern Section are only calculated at tho 
 past experience of .£15 per mile per week. As regards tho 
 Western Line of 500 miles, on the section from Montreal to 
 Brockville of 125 miles, passinc: through a district which 
 is rather under the average of the whole, the receipts during 
 the Winter from the opening of tho Lino on the 17th Nov. 
 last year, to tho Ist April, averaged £ 12 per mile per week, 
 and Avere for tho last week of that period JE18 per mile per 
 week. On the Toronto and Hamilton Line of forty miles, open- 
 ed on the 10th Nov. last, tho receipts for Passengers alone luive 
 averaged during the Winter, £ 30 per mile, per week ; the 
 mean receipts th.erefor per mile, per week, during the Winter 
 months, on the Eastern AiuljWcstern extremities of the entire 
 AVestern section have been |£ 21 por mile per week. Tlie esti- 
 mated average during the five yeara is only placed at £25 
 por milo per week, which calculation is thus subdivided, 
 
 Passengers, say £10 'per mile, per week. 
 
 Mails 3 " " 
 
 Goods 12 " " 
 
 Total, £25 " " 
 
( \ ! 
 
 10 
 
 ill 
 
 These are the retisuiiable datti uii which is calcuhvted the 
 uiaximiim annual (^>eticit of 2.95 per cent, on the share 
 capital during the lirst five ., < ars, and which it is proposed 
 for that time to convert into sliarc capital under a like 
 Guarantee of 5 per cent, bv the Provinces, , 
 
 By reference t.» the estimate of traffic i()r the second 
 period of five y<iars, dnrin;;- which time the through traffic, 
 and much subsidiary local traffic would be fairly developed, 
 the receipts are modestly stated for the Eastern section at an 
 increase to £20 per mile per week ; for the Western section to 
 £35 per mile, per week ; which it will be secii by the an- 
 nexed estimates for the second period of five years (No. 2), 
 will more than cover the Guarantee of 5 j^er cent, on the 
 share capital. 
 
 For the third period of five years,the receipts are placed, for 
 the Eastern Section at £25 permile, per week ; for the Western 
 Section at £40 per mile, per week, estimfites, (No. 3}, the 
 correctness of which cannot reasonably be disputed, and 
 which leave a surplus of 2.80 per cent, on the share capital. 
 
 GENERAL APPLICATION OF THE GUABANTKE PKINCIPLE. 
 
 In conclusion, the Shareholders wonkl urge upon the Go- 
 vernment and Legislature, the application of the principles 
 of a minimum Guarantee lor the same consideration, to all 
 the subsidiary Railway Enterprise which shall receive an 
 especial recommendation for the same, by the sanction of 
 the Legislature, as undoubtedly profitable and necessary for 
 the local development of tiie Provinces, when not in com ■ 
 petition with, and where constituting profitable feeders to 
 the National Trunk Line 
 
 Tlie risk of the Guarantees on such local Railways, 
 though assumed by the Government, should be sliared 
 in duo proportions by the Municipalities ot the Districts 
 through which the Lines would j^ass, or if as feeders to the, 
 main Trunk Line, in duo proportions by the Municipalities 
 and by the Grand Trunk Company. 
 
11 
 
 It is evident that the risk on the actual amount guaranteed 
 by the Provinces on tlie Main IVunk, and on the subsidi- 
 ary local Enterprise, would not be represented by the total 
 amount of the capital invested ; for as soon as the through 
 traffic from "West to East, on the Main Line, and the local 
 traffic sliall have become developed, the Guarantee on the 
 Trunk would become merely nominal, and would remain 
 only on the subsidiary Railways, which would also in time 
 cover their own liabilities. 
 
 The examination to a\ liich each independent local Rail- 
 way or tributary feeder to the Grand Trunk Line, request- 
 ing such a Guarantee would be subjected by the Legislati^re 
 —(the nmnicipality or the Grand Trunk Company, as the 
 case might be, appearing in evidence for or against the 
 same,) Avould be sufficient protection to preclude any abuse of 
 the privilege, while on the other hand English Capital would 
 thus be obtaiiied to any amount for such a secure invest- 
 nient,and an extraordinary and incalculable commercial impe- 
 tus wo Id \)Q given by the development of the inexhaustible 
 lesources of the country in AVlieat, in Timber and in Min- 
 erals. 
 
 Under the. system of Guarantee applied to the Main Trunk 
 Line, the Company in its own interest would not hesitate to 
 nuikc : rrangenients with, and lease and work on equitable 
 terms, local llaihvays already constructed or in course of 
 constrnction,aiid which lefc to their own unaided support, have 
 not hitherto proved i-emimerative, looking even to the fact, 
 that the profits anticipated are sought f.om the local 
 development of their districts, rather than from anj' return 
 upon the Capital invested. 
 
 FINALLY. 
 
 It will certainly be admitted on investigation of liie au 
 nexed Estimates of Traffic (Nos. 1, 2, 3), that they by no 
 means bear a relative proportion in their increase, during a 
 term of fifteen years, to the increase to be anticipated iu 
 
12 
 
 i! 
 
 ;;n 
 
 that time to the population — ^the assessed value — the pro- 
 ductions and Revenue of tlie Provinces — at least, if the 
 experience of the last fifteen yeai*s may be accepted as an 
 indication of the future prosperity of the country ; and if 
 this presumption be justified, it ])roduce8 a double eft'ect in 
 favor of the Guarantee Scheme, for while the probabili 
 ties of any deficit on the Guarantee after the first five yeare 
 would be lessoned, the Revenues of the Province would be 
 the more able to bear any moderate loss. 
 
 Surely also, if, as is undoubtedly true, tlie branch lines of 
 railway now made, and proposed, are subscribed for, less as 
 an investment by the resident inliabitauts, than for the 
 profit wliich will accrue to each individual by the facili- 
 ties to be afforded for traftic and business, and by the 
 increased value to be expected in the whole district and in 
 the towns and villages to be travei-sed by the railways ; and 
 if Municipalities are justified in raising fnnJs for such pur- 
 pose for the benefit of the connnon propertv ; surely in like 
 manner the Provinces may reasonabl}^ aff^ord to run some 
 trifling risk for the general good ; a risk whicli is undoubt- 
 edly reduced to a minimum, and even if incurred after the 
 fifth year, would certainly find its equivalent in the increased 
 prosperity and happiness of the ])opulation due to the rapid 
 material progress always induced by railway development. 
 
 These suggestions are respectfully submittefl to the con- 
 sideratio". of His Excellency tlie Governor General, of the 
 Government, and of the Canadian Board of Directors 
 as the basis of a compreliensive and enlightened scheme 
 which in the opinion uf the Shareholders would prove 
 mutually beneficial to the Grand Trunk Companv and 
 to the Provinces, and which would confer lasting 1 lor 
 on tlie Ministry, who should propose and on the Members 
 of the Legislature who should put tlie same in execution by 
 an Enactment, applying the Guarantee principle to the 
 Grand Trunk Railway Company, and to all Railways espe- 
 cially recommended by the Legislature. 
 
18 
 
 It has thus been shewn that the effect of a 
 minimum guarantee of 5 per cent, dividend on 
 the share capital of the Company would be. 
 
 That the credit of the enterprise would be 
 raised to par. 
 
 That the Undertaking, including the exten- 
 sion of the Line to its western terminus, and 
 the Victoria Bridge, would be rapidly com- 
 pleted. 
 
 That the Confidence of the Provinces in their 
 commercial future would be asserted and 
 established before all the world. 
 
 And all this without calling upon the Prov- 
 inces to raise one shillino^ — resultina: in a com- 
 bination of mutual advantages to the Provinces 
 and to the Company, which, it is respectfully 
 submitted, no other Scheme can possibly 
 present. 
 
 On helialf of the SlmrelioVJers of the Grand 
 2'runh Raihvay Company of Canada. 
 
 WILLIAM NAPIER. 
 
 Toronto, 22nd April, 1856. 
 
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