INVESTMENT TRUST COY.

NZ Truth, Issue 1262, 6 February 1930, Page 19

INVESTMENT TRUST COY.

-(By "Fiat Lux.")

. "Otago's First Investment Trut s Company" is the description claimed by the above concern, which issued a .prospectus some months ago and is still inviting public subscription for shares. THE lines on which investment trust; companies operate m Great Britain and the* United States of America are well known and have been referred to m these columns from time to time. ' , v Briefly, the idea Tof an invest- .. ■ ; ment trust is the pooling of, funds of individual investors, so en- ;' abling the small investor to secure * .■ the benefits of a spread' investment, and the opportunities that are usually only open to the large iri-V vestor. v , The concern whose prospectus is now under, ljeview has been formed for the following ; purpose : — (1) To carry on the usual business, of an investment trust company, aiming. at obtaining a higher return on , the capital employed .than is open with safety to the individual investor, and also having special regard to certain principles of investment which are well recognised but have as yet not been widely adopted m New Zealand. }■'•'"■ (2) To make advances on approved securities. (3) To acquire approved securities at a discount. The prospectus states that it is not anticipated that more than 5/- per share will require to be paid up on the ordinary shares, and the paid-up capital, if all the shares are subscribed for, will therefore be: Preference shares, £20,000; ordinary shares (5/- paid), £/5,000; total, £35,000. By means of deposits and bank overdraft it is anticipated that at / least a further £45,000 will be obtained. No indication is given as to what proportion of the company's funds will be invested m gilt-edge securities, but special mention is made of the financing of "second mortgages," and a table is given showing a balance of £2488 on an investment, of £80,000, after paying interest, preference dividend and expenses of administration. . This amount, it is stated, represents approximately 16|/2 per cent, on the ordinary paid-up . capital, and the prospectus goes on to ex- ' plain that "To this would be added the profits made on all the other classes of business open to. the company and contemplated as part of its activities. The prospectus states that thevpreshareholders will have "the truly gilt-edged assurance that £60,000 of ordinary capital would disappear, before they could lose one penny either of interest or capital." Obviously the margin of security would be lessened If preference shares are meantime allotted m excess of the ratio of one preference share to every three ordinary shares. The success or otherwise of the company will depend chiefly upon how it is managed.