The Richmond Virginian. (Richmond, Va.) 1910-1920, 1920-02-25

issued, the income from which was hht
Guaranteed. These so-called Income
bonds depend for their earnings On
the company issuing them earning SUI
fcient to pay the interest when due
In tho eyent of a poor year, holders OF
such bonds receive no returns on Their
investment Income bonds take niece
d.I ce over nreferrd stock In til mat
tar of dividend payments because az
We have seen, stockholders are own
lers. whereas bodhoiders arc creditors,
OF course, IL the company failed to. re-
pay the principal when. under tie
terms of the contract it was dueT~-the
holders OF income bonds would have
THE same right to action as the ho3ters
OF AIRY other pledge.
Opportunity for sharing in the grow.
ing prosperity of corporation is
sometimes offered TO its bondholders
BY the issuance of what are known
as convertible bonds. Such bonds Of
Ter the holder. at his option, and OF
course under certain restrictions the
right TO turn in his bonds and take
in return for them stock of the COM
pany. commos or preferred, according
to the terms agreed upon. If bond
were bearing interest at S per cent and
the common stock were earning per
cent the advantages of snch privi-
ilege are obvious. OF course the bond~
have to forego his rights as creditor
ard accept the responsibilities of own
,ership
Individual holders Of any bond series
mirht be. and usually are, scattered
over large territory. so that common
action for the protection of their in-
terests would be difficult to arrange,
and perhaps involve great loss OF
time. In order that the interests OF
sueh bondholders may be properly
cared for at all times. 1t Is the custom
IN the case OF each issue of bonds to
have trustee. usually a trust COM
pany or other organization legally
qualified to act in trust capacity.
The trustee in such a case would b
charged with the care OF the mortgage
o. whatever blanket instrument COW
cred the individual bond issued n
thu event of failure to meet interest
payments or other conditions called
for by the terms OF the bond or Its
covering instrument. the trustee, &C.
cordins to the terms OF the instru-
naent, would be empowered and by law
compelled to enter suit or take what
ever action the circumstances required.
TIE development Of trus.eeship of this
character is one of the phases OF mod
teru financial method which make pos
sibie the large scale financial opera
items with which We have become ia
iniliar.
buyers Of bonds are often offered
their choice between registered and
coupon bonds. Registered bonds ars
bonds whose ownership is recorded
with registrar. usually a bank or
trust company. Interest payments are
usually made by check drawn to the
order of the owner as recorded, and
mailed or otherwise dispatched TO htr,
By the corporation itself or by the
bank or trust company appointed 10
perform that service. Registered bonds
iare thus practically secure against
theft and other loss, for they can be
replaced IL necessary. When owner
ship of such bonds changes, certain
formalities must be complied with. and
record OF the change noted on the
books of the registrar Some bonds
can only he registered as to principal
the interest being paid by means Of
coupons.