The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1931-05-09
LAHR GIVES VIEWS
ON INVESTMENT IN
TRUST SECURITIES
Local Man Says Argument Is
Raging on Two Different
Types of Offerings

With two different forms Of fixed
trust shares being offered in the mar
ket and increasing popular interest in
this form Of investment it Is becom-
ing daily more necessary for the in
weston to know the principles upon
which they operate, F. A. Lair of the
Investors Mortgage Security COM
pany, said Saturday. The local firm
is distributor in this territory for Cor
porate Trust Shares, one of the lead
ers In the trust investment group.
Because they make 1t unnecessary
for the small investor to put all his
eggs in one industrial or commercial
basket, the trust-share form Of in
vestment Is becoming more popular
and sales of fixed-trust issues have
been advancing rapidly despite the
current sluggishness Of the general
security market, he said.
The fixed-trust Is one in which the
stocks upon which the issues Of trust
shares are based are always the same
and not subject to change at the dis
cretion Of the managing company.
They represent an interest in q spec
flied number and definite selection
of underlying stocks placed by the
depositing company in the hands Of
a trustee for the duration of the trust.
The market value of the trust shares
varies with the value of the shares
upon which they are based but gen.
orally are steadier because of the fact
that not all classes of shares rise or
fall in the same proportion.
The argument which now Is raging
regarding the operation Of these trust
is m relating to their method Of
operation. On M side is the maxi
mum distribution trust" which re-
turns to the trust shareholders the
greatest possible dividend On his in
vestment. Whenever a stock-dividend
or other accretion is made in the
stocks held by this trust, the excess
shares are sold and the proceeds dis
tributed to the shareholders. Several
of these trusts have succeeded, over
a period of years, in making a sur
prisingly high return to their inves-
tors, Lair said.
In the case of the cumulative trust,
however, the aim Is to offer an invest
ment which will pay q moderate divi-
dend but which will, at the end Of a
specified period, show an increase in
capital value. Stock dividends and
other unusual accretions are held in
the trust and the proceeds are not
distributed until the end of the trust
period.
In purchasing investment trust
shares, Lair said, the question which
each individual must decide Is wheth-
er he wishes to purchase q security
which will remain approximately
standard In value but which will yield
a high return or one which will pro-
duce a more modest return but which
is more likely to appreciate in value.
The holder of the distribution type
Of trust shares, may, If he wishes to
do SO. reinvest his excess earnings in
additional shares. Lair pointed out
and thus reap the benefits claimed
for the cumulative type. At the same
time, he has access to more money
II he needs 1t for current use. Thus
he has the option of putting back into
investment channels all, part o none
Of his proceeds.
It would appear, Lair said, that the
holder of the maximum distribution
type Of trust shares Is not only in
position to reap larger immediate re-
turns from his investment but to add
to his holdings by re-investment If he
chooses to do 50.