ardization on the Prince Edward Island Railways. About 60 miles of rock ballasting has been done on the main line between Montreal and Toronto. Two new car ferries for service on Lake Michigan were ordered, one of which was put into service in December, the second one being launched January 19th, 1927. Taxes. The increase of $816,400 in this account is mainly due to a charge of $500,000 for taxes agreed to be paid by the National Railways to the Provinces of Nova Scotia, New Brunswick and Prince Edward Island, for the years 1925 and 1926, and to provision in the accounts for income taxes payable to the United States on the improved net income of the lines in the United States. Insurance. The Insurance Fund which covers the properties of both the Canadian National Railways and the Canadian Government Merchant Marine Limited amounted at December 31, 1926, to $8,666,116 as shown by the accounts. This Fund is invested either in cash or securities, chiefly Dominion of Canada obligations. After providing for losses sustained but not settled, the total surplus of the Fund at December 31, 1926, was $8,049,552. The increase during the year was $1,667,567. The losses chargeable to the Fund during the year amounted to $936,720, as compared with $1,202,893 for the year 1925. The fire losses show a decrease of $362,590. The largest fire loss amounted to approximately $21,000 and only in three other cases did any individual fire loss amount to over $10,000. Apart from these fires the other railway losses were all of small amounts. The improvement as compared with last year's position is indicative of the response to the fire prevention campaign. Grand Trunk Pacific 4% Debenture Stock. The scheme of arrangement under which Canadian National Guaranteed Stock will be issued in exchange has been assented to by the holders of about ninety per cent. of the 4% debenture stock. The Dominion Act authorizing the carrying out of the scheme, entitled "The Grand Trunk Pacific Securities Act, 1927," was passed at the present session of Parliament and became effective on February 18, 1927. The scheme was arrived at after friendly discussion between representatives of the railways and the debenture stockholders and an advisory committee composed of the Rt. Hon. Reginald McKenna, Sir George May, Mr. E. R. Peacock and Mr. D. Berdoe Wilkinson, whose services were given gratuitously and were much appreciated. The Board desires to record its gratitude to the gentlemen above mentioned. The Directors feel that the remarkably good operating results obtained in 1926 could not have been attained except through the whole-hearted efforts of officers and employees working in thorough harmony for a common cause, and are very glad to acknowledge the inestimable value of the excellent esprit de corps which obtains throughout the System, and to express their thanks for the loyal service rendered by officers and employees. CANADIAN BUSINESS AND FINANCE IN 1926 The 109th Annual Report of The Bank of Montreal as follows: ANNUAL ADDRESSES AND REPORTS OF THE BANK OF MONTREAL* The 109th Annual General Meeting of the shareholders of the Bank of Montreal was held on Dec. 6, 1926, in the Board Room at the Bank's Headquarters in Montreal, with Sir Vincent Meredith, Bart., in the chair. The Annual Report of the Board of Directors was read by the General Manager, Sir Frederick Williams-Taylor, PROFIT AND LOSS ACCOUNT Balance of Profit and Loss Account, 31st October, 1925. 596,788.31 4,978,133.38 $5,574,921.69 $4,188,338.00 4,807,505.00 $767,416.69 Since the last Annual Meeting, offices were opened at ten points and closed at twelve points throughout the Dominion. A branch was established at Tampico, Mexico, on 1st March last. September we acquired the business of the Mexico City Banking Corporation, an American banking institution located in Mexico City, and on 20th September their office became a branch of the Bank of Montreal, our second in Mexico City. The Directors have to record, with deep regret, the death of the late Sir Thomas Skinner, Bart., Chairman of the London Advisory Committee since 1893. On 17th September, His Grace the Duke of Devonshire, K.G., P.C., G.C.M.G., G.C.V.o., was appointed Chairman of the London Advisory Committee. All the offices of the Bank, including the Head Office, have been inspected during the year. Address by President *NOTE. As the balance sheet indicates, the business of your Bank during the past year has shown a satisfactory and healthy expansion, and, in consequence, the result of our operations has again demonstrated that the Bank's earning power notwithstanding the economic vicissitudes of the past few years is unimpaired. Money, at home and abroad, has been For a History of the Bank of Montreal see Supplement of The Canadian Annual Review for 1910; for succeeding Addresses and Reports see Volumes from 1911 to 1925-26. in better demand, and while the rates have not materially advanced, the larger turnover has resulted in better earnings. General Business Conditions. A broad survey of trade conditions in the year under review finds much to hearten and little to discourage. In almost every department of commerce, activity is greater and, despite keen competition, profits are larger. Confidence finds practical demonstration in increased capital investment in development of natural resources and to a lesser extent, expansion of manufacturing plants. Outstanding in this respect is the growth of the pulp and paper industry, the exploitation of mineral deposits and the harnessing of water powers, closely allied industries indigenous to Canada and in respect of which she may be said to stand unrivalled. The growth of the pulp and paper industry is remarkable and has produced large profits. In ten years our exports of wood, wood products and paper have increased from $83,000,000 to $278,000,000. The United States' consumption of newsprint is over 3,000,000 tons a year, of which Canada supplies rather more than one-half. Within the next twelve months Canadian mills now under construction will be adding about 450,000 tons a year to their present output, and unless the present rate of consumption expands, there is the possibility of a surplus of newsprint coming on the market at no distant date. The Power development on the Saguenay by the Aluminum Company of America is an undertaking of more than local interest. When completed, the plans provide for a total of about 1,100,000 H.P. (nearly 50% larger than that available at Niagara for Canada). The creation of this new industrial centre, with its model city of Arvida, will add materially to the resources of the Province of Quebec. Then we have our great mineral resources. In 1913 Canada's mineral production was $145,000,000; in 1925, $228,000,000, a gain of 57%. As a producer of gold, the indications are that we may soon rank second among the countries of the world, and there can be no doubt as to the vastness of our potential mineral production in general. Rapid as has been the development of these sources of national wealth in recent years, no limit can reasonably be put upon their progression. There is, indeed, the frequently discussed question of the extent of our pulpwood and timber resources and the danger of production in excess of current demand, but a growing sense of the vital importance of forest conservation bids fair to act as a deterrent to excess, and I hold the conviction that these mainstays of Canadian commerce will long flourish. In the leather and footwear trade, branches of industry depressed of late, improvement has set in. The textile industry has enjoyed moderate prosperity. Iron and steeel works have been fairly well employed. Building operations throughout the country have been active, but in some cities house construction would seem to have overtaken demand and a slowing down in this trade would not be surprising. The lumber business in Eastern Canada has not been prosperous. In British Columbia lumber manufacturers are moving a reasonable volume, but the prices are too low to show a real profit. The greater use of substitutes for lumber, such as cement, steel, patent roofing, etc., cannot but have an injurious effect on the industry. Labour. Coincident with the improvement in business has come a decrease in unemployment. Not since 1920 have the ranks of out-of-works been so thin as now. I refer to the country at large, as in some trades and in a few cities a slight reduction in the number of hands employed is recorded. There are, of course, seasonal variations in the demand for labour, but the encouraging fact is that unemployment is now less than at any period during the past six years. Instalment Sales. A phase of modern business worthy of comment is the rapid extension of instalment sales, which in some instances, notably automobiles, now characterizes the bulk of transactions. Opinions differ as to the permanent advantage of the method, alike to buyer and seller, and admittedly there are two sides to the question. The buyer assumes a debt which may prove an awkward encumbrance and which he may be unable to discharge, but on the other hand he is, if honest, compelled to a course of thrift, and, pending the payment of the purchase price, has the advantage of use of the commodity, and it is a fact that the extension of instalment sales has not halted the accumulation of savings deposits in the aggregate, nor reduced purchases of life insurance. The seller who employs this method undoubtedly incurs risk unless he has taken adequate safeguard and precaution against loss, and this is the crux of the whole question. Conducted within prudent lines on the part of both buyers and sellers, the method has merit. It unquestionably aids business, bringing to the merchant customers otherwise unavailable. Nor is the principle new. Most houses are built or bought on the instalment plan, that is to say, upon mortgage, and credit is as old as the hills. The danger lies in excess. Experience in the automobile trade has shown that the percentage of cars returned to the dealer diminishes as the initial payment rises, a lesson not to be lost by those who sell on the instalment plan. The subject is of keen interest to bankers, who deal in credit, and my conclusion is that the method should not be condemned where cautiously conducted, which means when the standing of the buyer is carefully considered, an ample down payment is exacted and the balance spread over a limited period. Canada's Foreign Trade. The aggregate of Canada's foreign trade still expands, having had a value of $1,290,500,000 in the seven months ending October 31st, or $42,000,000 more than in the corresponding period last year. The character of the trade, however, is changing, imports having increased and exports decreased, as a consequence of which the favourable balance has diminished. Taking the seven months' period, there was last year an excess of $181,300,000 of exports over imports, while this year the excess is only $95,800,000, and it is possible that this margin may be further reduced in the near future. On the other hand, while we are not shipping abroad the same volume of dairy products as last year, we still have a dominating trade in cereal exports to counterbalance rising imports, with a steadily enlarging market in the United States for newsprint and pulp, so that the diminishing tendency in our favourable trade balance need not give immediate concern, though its significance cannot be ignored. Better domestic business accounts for the growth of imports, which had a value in the seven months to October 31st of $597,331,000, being greater than in 1925 by $63,785,000, and larger than in any like period since 1920; and of this increase no less than $23,531,000 consisted of iron and its products. Also, in a considerable measure, the stream of foreign capital coming into Canada for investment is an offset. While it would be preferable to have Canadian capital available for Canadian development, it is impossible for a young country to supply the needed money for this purpose, and infinitely better is it to have this development brought about by foreign capital, to the primary and ultimate advantage of our people, than to have our resources lie dormant. A point of importance not remotely related to the balance of trade is the large holding of Dominion securities by our own people. I know of no more striking example of the reserve wealth of the Canadian people than their investment in Dominion Government bonds. Before the war, of a Federal debt of $330,000,000, much the larger part was held abroad, but of the present debt of about $2,500,000,000, no less than $1,964,000,000, or nearly 80% is held by Canadians, who receive and employ interest on this immense sum. There need be no fear of the financial stability of a people who in twelve years have invested nearly two billion dollars in their own Government bonds. Business in the United States. As no man, so no country can live unto itself, and to better business the world over must be attributed some of the improved conditions in Canada. The United States has enjoyed a year of abounding prosperity, resulting largely from the ever-multiplying demands for many commodities of a fully-employed population. Possessing, as it does, one-twelfth of the world's consumers and one-half of the world's gold supply, its own territory furnishes an ever-expanding market. The people are consuming less than they produce and savings continue to show a surprisingly substantial increase. Inflationary tendencies are well controlled. The establishment of the Federal Reserve system has so altered the character of the monetary and credit structure of the country that there is no reason to fear the former |