Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-06-08
BANKERS APPROVE PUBLICATION
OF INVESTMENT TRUST DATA
Complete Reports of Operations, Together
With Listings of Securities Held,
Favored by u. S. Association.

even in the past have proved of advan-
tage to an investment trust. the prac-
tice is fraught with danger and the pos
sibility of misconstruction. and such
transactions. if they occur at all, should
always be entered into with the great
est reserve on the part both of the
sponsoring house and the investment
trust itself This phase of the manage
ment of an investment trust portfolio is
fundamental"
Purchase of Securities.
The report makes extended recon-
mendationS as to a trust reacquiring it's
own securities and as to its dividend
policies, and adds that these recon-
mendationS are based on two funda-
mental principles, namely:
81. That the managers Of an invest
ment trust are trustees in the highest
sense. and that in investing funds de-
rived from sale of stock to the public
their policies should be able to with
stand the test applicable to trusteeshipS.
2. That the management of an invest
ment trust must be willing to take the
public into its confidence through the
publication Of complete information, in
GLIDING the policies and practices of
the management"
Referring to fixed trusts. the report
lildhCS pOIllbtu COIIlIIlGIlG. OIL uGSEIlDllge
circulars and advertisements of fixed
trusts. as follows:
"A large part Of the criticism direct
ed at certain fixed trusts has been due
to the descriptive circulars Offering fixed
trust shares. The inherent structure of
the fixed trust is so complicated that
the average investor is unable to deter
mine the amount of the loading charges
and the circulars have frequently failed
TO make this information clear Com
plete information should be given re-
garding the responsibility of the trus-
tee as to the underlying shares and in
the issue Of the fixed trust shares them
selves. Where the trustee has a limited
responsibility specific statements to that
effect should be made in order that the
investor may realize exactly to what ex-
/ tent he can depend upon this trustee
ship,
The committee does not approve of
certain advertising practices now in
vogue. In a few instances advertising
material has indicated the profits that
would have accrued to a holder Of the
fixed trust shares had they been pur-
chased at time prior to the organiza
ton OF the trust. In some cases it is
difficult to believe that the sponsors
who have selected the underlying prop
erty of the fixed trust would have had
sufficient foresight to select these in
vestments at the time of the hypotheti-
cal formation Of the trust. In certain
cases the trust indenture contains re-
quirements for the elimination of the
underlying securities which would have
made it necessary for the trustee TO
dispose of some CT the shares that are
assumed to have been held in the trust
during the entire period covered by
the advertisement. This being the case
it is a clear deception to assume that
the underlying property would have re-
manned in the portfolio of the fixed trust
during the whole period covered in the
/ analysis"
/ Reports to Stockholders.
/ The report points out that where
fixed trusts make distributions as a
result of stock dividends and split-ups
I shareholders should be advised that
/ they are receiving a return of capita
rather than current income The re-
/ port also sees danger in legislation OF
any sort at this time because. the re-
/ port says, it would be based on INSULT
4 Gent experience and because laws aimed
at undesirable features would probably
be certain to preclude incorporation OF
! good features in future trusts. The
ideal the report adds. which thc
( investment banker should establish fol
himself is the exercise of such care il
the creation Of these trusts and in the
marketing Of the shares that the public
Will be fully protected without the
necessity of any controlling legislation.
! The Investment Companies Commit.
tee. which made the report. is composed
I OF Robert o. Lord. Guardian Detroit
Co. Inc, Detroit. chairman: Robert E
Christie. jr, Dillon, Read & Co. New
York; Paul w. Cleveland. John Burn
nam d Co, Inc, Chicago: Charles D
. Dlckey. Brown Bros. Hartman &
Co.. Philadelphia; Arthur H. Gilbert
/ Spencer Trask g. Co., New York; Coli,
Mitchum. Mitchum, Tullv e. Co. Sar
Francisco; Harry F. Silk. StiX & Co., ST
Louis; Joseph r. walker, ir.. Shavrnllt
Corporation of Boston. Boston = Don G
wheaton, Harris, Forbes & Co., New
York.