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Decision Removes Confusion and Uncertainty "A dangerous weapon in the hands of The decision in the Missouri Pacific-Iron

guerillas who hang about the outskirts of Mountain case will unquestionably assist in

reorganizations and endeavor to levy tribute doing away with a great deal of the uncer

as a condition of abating the nuisance of tainty and confusion which was introduced

their presence, and that even to this day, in reorganizations by the Monon and Boyd

reorganizers stand in more or less terror of cases. The cloud which was cast over all

the Monon case, and it looms up as a perreorganizations by these cases very mate

petual spectre in their path." rially affected the opportunities of stock

It has been earnestly hoped by reorganizaholders to participate in reorganizations con

tion managers and their counsel that the trolled by mortgage bondholders for the

Supreme Court would hand down a decision reason that the only way for a committee of

which would not only dispel the various mortgage bondholders to avoid the dangers

views held as to the dictum in the Boyd case, and uncertainties of the Monon and Boyd

but would also supplement the Boyd case to cases was simply to completely exclude the

the extent of establishing some fixed prinstockholders and thus obtain the right to

ciples which shall be the basis for making exclude unsecured creditors.

provision for unsecured debt in reorganiza

tion plans and reorganizations brought about This, however, was very unsatisfactory, because stockholders usually are very anx

by the foreclosure of mortgages, which plans

offer participation to stockholders. Although ious to participate in such reorganizations,

the Missouri Pacific-Iron Mountain case does and committees representing bondholders

not accomplish this, it, nevertheless, repreusually prefer to have them participate. In

sents an endeavor to create the proper mafact, it is necessary oftentimes that they

chinery to be contained in a final decree of should participate in order to secure new

sale under which machinery there may be capital by appealing to the desire of the

determined the fairness of the offer made stockholders to retain their interest in the

under the reorganization plan.
property by paying an assessment upon their
stockholdings and thus obtaining more fa-
vorable terms upon which to participate in
the new company than are obtainable by

UNION TRUST CO. OF PITTSBURGH the investing public wbo have no interest in Impressive totals are shown in the June the old company. Bondholders committees

30th statement of the Union Trust Company are not only unwilling, but are often unable, of Pittsburgh. "Resources aggregate $143,to admit stockholders upon terms which re 293,000; U. S. Government securities, $21,quire the payment of unsecured claims in 970,000; cash on hand and in bank, $13,077,cash. Since the Monon and Boyd cases 000; real estate and vault, $6,680,000; debankers and lawyers having to do with re posits are $93,688,000. The capital is $1,500,organizations have proceeded upon the prin 000; surplus, $37,500,000 and undivided profciple that some offer of securities meeting its, $1,561,454. The trust department reports the requirements of these cases must be trust and estate funds of $154,776,000. The made.

company acts as trustee under corporate The uncertainty caused by the Monon case

mortgages aggregating in value, $388,663,is shown by the following sentence of Mr.

000; holds securities thereunder amounting Justice Lurton, which is contained in his

to $66,536,000 and acts as transfer agent and dissenting opinion in that case:

registrar for securities at par value of $655,

225,000. "The consequences which may result from the decision to the numerous reorganizations of railroad companies which occurred about


ST. LOUIS the time of this reorganization or since, are

Total resources of $79,741,000 are shown to my mind alarming."-(Louisville Trust

in the June 30th statement of the National Company vs. Louisville Railway Company,

Bank of Commerce in St. Louis inclusive of 174 U. 8. 674The Monon case.)

cash and exchange of $16,082,000; U. S. A very distinguished member of the Bar bonds and certificates, $9,709,000; bonds, who perhaps had more to do with railroad stocks, etc., $5,952,000; loans and discounts, reorganizations than any other lawyer of his $44,338,000; bank building, $2,900,000. De time at least, in referring to the opinion of posits total $59,202,000; capital is $10,000,Mr. Justice Brewer in the Monon case char 000; surplus and undivided profits, $5,119,acterized it as


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To Insure Profits

Plan Your Budget on
Sound Cost Accounting

It is one thing to make the Plan
quite another to work the Plan

PROFIT, in a large measure, is the
elimination of LOSS. To be eliminated,
Loss must be accurately detected.
Adequate Cost Accounting-Account-
ing Control-locates Loss, shows where,
how, when, and in what amount it oc-
curs, and points out the remedy.
Only thru Cost Accounting can the
factors that enter into the Budget-
always planned to insure Profits-be
determined and controlled.
Present business conditions demand
adequate and sound Cost Accounting,
devoid of frills, and administered by a
competent organization of experts of
wide and varied experience.

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With Trust Department of The Chase National Bank of New York


(EDITOR'S NOTE: The suggestions and examples presented in the following article as to conserving or increasing earning power of an investment list are applicable to investments of banks and trust companies as well as to individual investors. The subject is one of practical interest.because of the numerous elements that enter into the investment situation at the present time.) X investment list requires occasional

securities, over an equivalent change in revision and periodical detailed ex

basis levels, fluctuates several times the amination in order that its earning

number of points that it does on short life power may be maintained at the highest

issues, it is evident that an investment list point compatible with safety. Earning power

should be arranged in anticipation of these is not developed to the highest degree if

movements if its earning power is to be measured only by the income received on the

fully maintained. basis of the original investment. After safety of principal, the primary requisite, consid

Major Movements of the Market eration should be given to the arrangement The major movements of the market are of the list, so that loss through depreciation as inevitable as the tides and, unlike the day may be reduced to the minimum and profit to day fluctuations, can be predicted quite through appreciation obtained in the maxi accurately by the proper consideration of mum.

fundamental conditions. Expansion of credit Those charged with the responsibility of leads to stringent money conditions and high inresting funds will readily admit that su interest rates, with consequent decreasing pervision with this end in view is essential, security values and high yields. Such condi. nevertheless, it is evident from any several tions eventually reach a point beyond which lists selected at random that many do not it is impossible to continue without a period rerise them to the full extent demanded. of panic. Universal restriction of credit and That they do not take advantage of oppor adjustment of business endeavor along more tunities to improve their investment posi conservative lines subsequently result in tion is usually due to lack of time or facili falling interest rates, with appreciating seties and because they hesitate to act on curity values and corresponding low yields. opinions they believe likely to be biased. As There are many indications when the apa result, except for securities replacing ma proximate limit of a major movement caused tured items, many lists remain unchanged by these changing conditions has been year after year. Since few investments can reached. If current financing is at the exbe safely dismissed from mind indefinitely, tremes of rate and time, in counter combinaowing to the many changes in economic con tion, i.e., exceptionally high rates for short ditions and intrinsic values, the cost of in terms or low rates for long terms, it is eviability or neglect to act is inestimable.

dent that conditions must change. Capital Practically all securities, other than those will not be advanced indefinitely at decreassufficiently short to command money rates ing rates nor can business prosper for long or influenced by some unusual features or with continually advancing rates. condition, fluctuate on equivalent basis val Corporations, when issuing securities, are ues according to the respective classes, or governed by principles contrary to those that divisions of the classes, in which they are should govern the investor. The former plan commonly placed. Since a comparison of to pay the least for the use of money borthe schedules contained in any table of "bord rowed, while the latter wish to obtain the values" shows that the market on long life most for the money loaned. Does not consis


tent reasoning then suggest the advantage Thus, instead of holding the original inof making short life investments during pe. vestment with an income yield of only 4 per riods of high prices for securities and con cent., the earning power has been developed versely of long life investments during pe to a rate of nearly 12.50 per cent. for 14 riods of low prices? Does it not also follow years. that, in the absence of funds for investment,

Conserving Resources by Limiting short life securities should be substituted for

Depreciations long life bonds and vice versa in conform

When the market has reached a point that ance with the probable future trend of in- is considered to be the approximate top of vestment levels?

the upward movement, possibly a 4 per cent.

level, the procedure followed above should Illustration of Maintaining Earning Power

be reversed short bonds substituted for With the above facts in mind, a single il- long. This is the policy of placing the list lustration of maintaining earning power at in position to conserve resources by limiting its highest point will demonstrate the prin depreciation. Reference to the basis schedciple. Assume that in the municipal division ule above shows that from a 4 per cent. to a of the "legal class," 'a 4.75 per cent. level 4.75 per cent. basis, in 14 years, the long rules, that this level is decided to be about 4s would decline 14.17 points as against 2.40 the low point of the downward movement, points on the short 4s, a difference of 11.77 and that the upward movement carries to a points in favor of the latter. Substitution 4 per cent. level in a year and one-half. Fol of the short bonds in the high market would lowing is a schedule covering fifty year and therefore conserve resources to the extent five year 4 per cent. bonds on from a 4 per of $11,770 in the event of such a decline, at cent. to a 4.75 per cent. basis, and a similar the end of which movement the list must be schedule 142 years later when the bonds have revijed again. Although the illustration is 4842 and 342 years life respectively.

based on 142 years, it is not intended that 48


any particular period of time shall be an50 years 6 years

4842 years

34 years ticipated. 100.00 100.00 4.00% 100.00 100.00 It is evident, of course, that the measure 94.83 98.88 4.25% 94.88 99.19 of success attained when changing a list in 90.08 97.78


90.17 98.39 the manner suggested depends on accuracy 85.72 96.70 4.75% 85.83 97.60 of judgment as to the approximate top and

bottom levels of market cycles. No scheme 14.28* 3.30* 75%* 14.17 2.40* or system is infallible, nor can one be de(*Fluctuation between 4% and 4.75% matically. Interest rates are subject to

vised for securities which will operate autobasis levels.)

many uncertainties and sound judgment In view of the probable future trend of must be used in forecasting their course. the market the policy to follow should be to Ordinary precedents may well be misleading place the list in position to take advantage

in the present abnormal state of world afof increased' values, without sacrificing se fairs. curity of course.

The principle demonstrated—investing and If $100,000 five year 4s (cost 100) are revising in accordance with the probable fuheld they could be disposed of on about a ture trend of the market-is applicable to 4.75% basis (96.70), a temporary loss of any investment list. It has the merit of $3,300 being taken. The proceeds will buy definite procedure requiring alertness and 112 fifty year 4s on a 4.75% basis (85.72) will prove valuable if followed carefully. which, when the market has reached a 4% level 112 years later, would have a value of $112.000. The earning power is then shown


Substantial gains are shown in the June

30th statement of the Chase National Bank Value 112M 4842 yr. 46. @ 100, $112,000 of New York. Resources total $487,308,000, Value 100M 342 yr. 4s @ 100. 100,000 with cash resources of $208,676,000; bills dis

counted, $94,555,000; time loans, $109,264,

$12,000 000; U. S. Government securities, $34,087,142 yr, interest on 112M 48....... 6,720 000; other securities, $24,299,000; accep

tances, $11,511,000; deposits total $425,689,Tharned in 14 yrs. on original invest

000; capital is $20,000,000; surplus, $15,000,ment of $100,000.....12.48%..... $18,720 000, and individed profits, $6,503,000.



A change in policy has recently been in large volume of individual and corporate augurated by the Trust Company of Cuba trusts. With the change , in policy a more in Havana which was the first institution of systematic and intensive development of trust. the kind established in that island republic. business will be conducted. It has been decided to retire from the field Coincident with this change of policy is the as a bank of deposit and discount and in fu announcement of the retirement of Mr. O. A. ture to concentrate efforts on the further de Hornsby, who had been an officer of the Trust velopment of trust business proper, paying Company of Cuba for the past sixteen years, special attention to trusteeships, executor becoming its president in 1916. Mr. Hornsby ships, administration of estates and various will shortly take up his new duties as a other services of a fiduciary nature. The joint agent of the Royal Bank of Canada, Real Estate and Insurance Departments will New York City. be conducted as heretofore.

Mr. R. G. Muirhead, the new president of In determining upon this policy the man the trust company, is a Canadian by birth, agement of the Trust Company of Cuba is and an old Royal Bank man, but during the actuated by the exceptional opportunities greater part of the past ten years, and prior in Cuba for greater expansion of trust busi to going overseas during the war, was conness and the enhanced prestige which is de nected with several well known financial rived from the refinement of trust service. firms in Montreal. Previous to his arrival Since the Trust Company of Cuba was or in Havana, a few weeks ago, Mr. Muirhead ganized in 1905 the idea of confiding estates was manager of the office of the Royal Bank and trusts to a corporation instead of indi of Canada, in Paris. viduals has steadily gained ground because The Trust Company of Cuba affords an of the record established by this institution. example of the adaptability of the principle The company already has on its books a of corporate trusteeship to all lands and

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