Evening star., 1932-01-02
INVESTMENT TRUST
+. POSITION CHANGED
Portfolios of Many Compa-
nies Affected by Decline
in Securities.
s,.c,.I Dispatch to The Star.

Special Dispatch TO The Star.
NEW YORK, January 1.-The posi-
tion Of the general MANAGEMENT invest
ment trusts and fixed trusts at the end
of the year is quite different from that
of the commercial banks. savings banks
and insurance companies, In that VOL
unfairly or involuntarily, they adopt the
practice of writing their portfolios OF
securities down to market instead OF
carving them in their statements at
costs or at the levels now permitted by
the Federal Reserve and State banking
and insurance officials.
This practice shows up the actual
amount OF depreciation that has oc-
Cured in their investments since the
last report and has the value OF per-
hitting comparisons between the mar
ket prices OF the trust stocks and the
asset worth Of such issues.
.. Securities Prices.
Unfortunately, the year just closing
witnesses most securities at or near the
lowest point during the period OF de-
preston. At the end Of March quar-
terly statements Of the trusts showed
up better In some respects than those
for December 81, 1880, as the price gains
last January and February offset the
I6dCJlOtlS III h1dlG1l OulIC oboN
were not so good, for in April and May
there was a heavy fall in prices, though
the exhibit improved materially between
the first week in June and the end OF
the month. September quarterly state
ments had to carry the full erect OF
three months Of declines, which aver
aged nearly SO points in listed stocks
Inasmuch as most trusts have low
percentage Of bonds, they. viii not oe
greatly affected by the fall in bond
quotations in the December quarter, but
again they reflect the shrinkages in all
classes Of common and preferred stocks
during the period. Altogether, there
fore, the gross totals Of trust securities
at the end of this year will be by far
the smallest, when measured by current
market values of any term in the MS
tory of these financial corporations.
This is indicated in the prices to
which their own common stocks ana
senior securities have dropped In recent
months. Many Of them are now men,
bers Of that growing list known as
penny stocks" which includes tnose
selling below ST. Not a few are quoted
in low fractions, which two years ago
were In great demand between $50 and
s75 a share. Some that are now avail
able at So and SO a share we're sought
after in the Summer OF 1929 from S75
TO over 500 a share.
Trading Profits" Few.
The investment trust that has sim
pie financial structure involving only
one class of capital stock, has no prob
lem other than waiting patiently for
recovery in markets which Will brlng
up the vaIues of its portfolio and there
by increase the market and asset value
of its stock. On the other hand, those
with senior shares and debentureS are
In an uncomfortable position. They de-
pended in the past for appreciation IN
their portfolios, or to trading profits"
to pay dividends on their common
stocks and to strengthen the status OF
their preferred stocks and bonds. Ine
income from their portfolios in the form
Of dividends on stocks owned and IN
terest on bonds was used TO cover the
dividends on their own preferred shares
and the fixed charges on their oeoen-
lures
This income has steadily been de-
creasing as the number of corporations
lowering or emitting dividends has run
into the hundreds The reduction in
earned income of the trusts is making
it difficult for tl1em to pay dividends on
their own preferred stocks. 1t Is eX-
pected that the number OF those sun
maintaining dividends will be material
ly reduced in the next few months. the
problem of continuing interest on de-
benturss is not, 50 far, serious one.
The embarrassing condition IN respect
to trust debentures is in maintaining |
the proper ratio between debentures
outstanding and total company assets
Usually this is fixed in the indenture CT
125 per cent Of assets to debentureS
issued. It is known that already some |
trusts have been unable to maintain
this proportion, but that trustees have
not exacted any penalty under the pres
ent abnormal conditions
Shifting of Securities.
During the year there has been a
great deal OF shifting of securities by
the investment trusts, resulting in losses
that are indicated in quarterly state
nlents bat at the same time Strengthening
the permanent investment status OF the
corporation. Issues that have poor
future have been sold; others Of more
promising character bought. number
of the larger trusts have added to tHeir
cash items, though these are relatively
small compared with the amounts that
were at the disposal Of the trusts as
late as the end Of 1880.
While in general the trusts are in
discredit with the public which lost so
much money In them, there Is coIfl-
dence that with a return to better con-
ditions in markets there will be a re-
yival of activity In the common stocks
of the better managed organizations and
that this 5000 100000 adventure INTO
q new field of finance in the United
States will Justify itself in about the
ssr,a 70 tio ae others that W9r7 initiated