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CONTINENTAL TRUST COMPANY

OF WACO, TEXAS

Authorized Capital, One Million Dollars

Will do a General Trust Company Business

Offers the Best, Safest and Most Profitable Investment in the Shares of its Capital Stock at $105 per Share (par $100), on the following terms: $30 Cash with Subscription and Balance in three equal Semi-Annual Payments of $25 each, due in 6, 12 and 18 months

The financial statistics of this country for the past twenty years have demonstrated beyond a doubt that those who have invested in Trust Company stock at the time the companies were organized have made a great deal more money than in any other kind of investments. There is no safer or more profitable investment than the stock of modern trust companies, purchased at their organization and retained during the first few years of their existence. Such investments, in dividends, surplus, undivided profits and premiums, yield on an average of from 25 per cent. to 30 per cent. profit a year. The average profits of fourteen trust companies, large and small, for 1911 was 42.5 per cent.

"Trust Company stock is at all times a cash asset. It is better than a bank deposit, because its value grows and it is cash on sale or loan, because the dividends it draws is equal to interest and its accumulating surplus and profits increase its value. Trust Company stock and bank stock are in a class to themselves, because their safety and value are hedged about by the inspection and supervision of the State Banking Commissioner and his inspectors. It is both safe and profitable."-A Financial Journal.

THE CONTINENTAL TRUST COMPANY of Waco, Texas, has an authorized capital of one million dollars, divided into 10,000 shares of par value of $100 each. There is no promotion, bonus or watered stock in this company. It is all one class and will be issued fully paid and non-assessable.

WE ARE PREPARED TO CASH YOUR VENDOR'S LIEN NOTES, STOCK BONDS, OR OTHER APPROVED SECURITIES IN PAYMENT FOR STOCK IN OUR COMPANY.

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Trust Companies

A Monthly Magazine devoted to TRUST COMPANY, BANKING and

FINANCIAL Interests of the United States

Endorsed by the Executive Committee of the Trust Company Section, American Bankers' Association

Vol. XV.

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THE COMING PRESIDENTIAL ELECTION AND BUSINESS

N the eve of another presidential election it is both proper and timely to direct attention to certain primal forces in the material growth of this nation which have in the past and will, in the future, survive the uncertainties of political changes, legislative sophistries and artificial embargoes. The eternal, dominant spirit in American citizenship makes for independence not only in personal relationship but also in business. The respective platforms of the Republican, Democratic and Progressive parties were a unit in emphasizing the pledge that nothing would be attempted which might disturb business conditions or interfere with the legitimate development of corporation activities. It matters not who is elected to the presidency, this doctrine will have to be followed and the people will not tolerate any untried or dangerous experiment. Furthermore, the fact is not generally appreciated that during the last two or three years there has been a marked change in business and financial policies, a general adjustment of policies and methods to the fair requirements of law. The banks and trust companies of the country have given a most inspiring demonstration of conservatism, of proper use of available funds to the real business requirements instead of to speculation, during this fall. In Wall Street, the phrase "high finance" is something that can be used only in the past tense. The speculative element in the New York Stock Exchange is confined to a small, impotent group of professionals. Big manipulations in stocks, "bull movements," and reckless underwritings are but echoes and afflictions of former days. Banks and financial institutions, corporations, big and small, conduct their affairs with a view to permanent growth. A new, chastened conception of business ethics has spread over the land-an outgrowth of bitter experiences, of panics and depression. It may seem to be a bold statement but it is a solid fact, nevertheless, that any man or group of men who attempt nowadays to create fictitious stock values, to buy up a chain of banks for promotion purpose or pursue a high-handed policy of rule or ruin, meet with scant encouragement in the councils of the great men of finance and business. The "get-rich-quick" adventurer is up against a stone wall these days and his prospects are barren.

Government supervision of corporations is futile unless its provisions are in accord with the immutable laws of progress and economy. The panacea for corporate ills which will be most effective and practical will recognize that cooperation is proper, that competition must eliminate waste, that men of financial

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genius and creative power must be encouraged to labor for the larger advancement of this country as a world factor. Tariff discussion we will also have with us for many years to come. Neither the stand-pat protectionist nor the free trader holds a brief from Providence. The only tariff schedules which will hold water will make due allowance for the rights of the consumer as well as the producer, will be adjusted to the requirements of the home and foreign markets. Every fair-minded citizen must realize that there are infant industries which require protective tariffs and that there are other industries that have outgrown swaddling clothes. It is, therefore, of the utmost importance, from the standpoint of foreign trade expansion and reducing the high cost of living, that tariffs should be adjusted according to the demands in home markets and the possibilities of extending trade in foreign markets.

To cure the evils of corporation growth two proposals are made which call for serious consideration. The first and most important reform is to make uniform the laws governing corporations in the various States. At the present time the conflicting requirements of the various States, the comparative elasticity of the laws in such commonwealths as Delaware, Maine and Arizona afford unscrupulous men the avenues and subterfuges which they require. The second proposal which meets with approval from many of the corporation managers who want to follow the golden rule, is Federal incorporation for units engaged in interState commerce, The provisions of a Federal incorporation law should provide against improper capitalization, against unfair competition and at the same time take into consideration the larger requirements of corporations in furthering the material welfare of this country as a whole. The tendency toward consolidation and the creation of large units in industry, business and banking resources would become a blessing instead of an evil making for social discontent and unrest. With uniform State laws and a wise Federal law there will come standardization of values and income, honest underwriting and fair distribution of profits between employer and employees.

Another important consideration in connection with the political situation is the question of improving the National banking and currency laws. The present laws are obsolete and retroactive. No monetary reform will be effective unless it recognizes the principles of centralization of reserves and the creation of an elastic currency based upon banking credits or approved collateral instead of upon Government bonds. In time the people will come to realize that the banker is the most capable judge as to currency and banking reform. The action of the American Bankers' Association at Detroit also indicates that the bankers themselves realize that no radical change, as proposed in the so-called Aldrich bill, can be passed and that reform must be gradual with the existing Clearing House system as a practical nucleus. The extension of Clearing House functions has been a mighty factor during the last five years in bringing about a higher standard of conduct and clean practices in the general conduct of banking. The laws of the various States in regard to State banks, trust companies and private banking are being improved and rendered more uniform. But the suggestion which has been recently made and which seems worthy of adoption is that the practical bankers and the business men of this country should form a national alliance to consider and push currency reform plans which will receive the immediate consideration of the members of Congress.

THE TRUST COMPANY AS A POTENT FACTOR IN SAFEGUARDING INVESTMENTS OFFERED TO THE PUBLIC

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AREFUL study of the respective platforms adopted by the Republican, Democratic and new Progressive parties shows conclusively that there is at least one issue, the paramount importance of which all political factions recognize, and that is the adoption of more enlightened methods in government regulation of large business units. Regardless of whichever party is successful at the polls next November it is a foregone conclusion that questions affecting the control of large corporations or "big business" will receive major attention. Each party has its own definition of abuses practiced by large corporations and various methods are also proposed as to their correction. But the history of government control of corporations reveals very clearly that reliance for real improvement in the standard of corporation conduct and industrial policies must be placed upon the men who manage "big business" and not upon the lawmakers. The clear-headed voter realizes that the platforms of the political parties consist largely of sophistries and attractive theories which are designed mainly to catch votes. He realizes that corrective measures in our industrial system will come through personal initiative and the fact that honesty in all undertakings, large and small, is the policy which alone makes for continued gro.vth and sustained profits.

Closely allied to the question of government regulation of large corporations and the purging of our industrial systems from unwholesome elements, is the issuing of new securities. The value of corporate property in this country is given as approximately $60,000,000,000 as compared with $15,000,000,000 in 1900. For annual refunding at least $500,000,000 is required. Corporate financing is increasing at a remarkable rate. The fiscal requirements of railroads, industrial corporations and manufacturing properties for the first half of 1912 aggregated $1,557,146,000, representing a gain of 26.6 per cent. over the new securities output for the corresponding period in 1911. These figures do not include about $400,000,000 raised by States. municipalities, towns, public and quasi-public corporations. It is not difficult to comprehend that such vast issue of new securities bears an intimate relation to questions regarding proper control and expansion of industries and railways. It also suggests the question as to what safeguards exist to protect the investor in new securities and what methods are employed to discourage improper financing.

In attempting to reply to the question as to what protective agencies. exist in the placing of new securities upon the market the trust company becomes the most important consideration. It may be stated without a shadow of doubt that the trust company is today the most practical and powerful agent in discouraging inflation of values, in offering protection to investors against unjustifiable issue of new securities. As between the public which absorbs bond and other investments and the corporation which issues them

there is the trust company who is the disinterested third party who assumes moral, if not legal responsibilities in acting as trustee under corporate mortgages, in assuming the functions of registrar and of transfer agent. There was a time when trust companies of a certain type, now extinct, were intimately associated with large corporate enterprises in underwriting bond or stock issues; when the proper functions of the trust company were abused and the name of such institution used as a bait to secure subscriptions. But the laws regarding trust company participation in underwriting agreements and loans to one corporation have changed this. But more important than the enactment of such laws has been the attitude which trust companies now assume in undertaking trusteeships. There are trust companies which have always preserved a most conservative and irreproachable policy in acting as trustee under corporate mortgages; where they have applied most searching appraisement of values and of responsibilities involved before allowing themselves to undertake such functions. In fact it has come to be recognized as a cardinal element of success in trust company administration to reject all appointments as trustee which involve the slightest element of danger and risk. No trust company today, worthy of the name, will allow its name to be appended to any bond offering or stock issue which contains elements of uncertainty and do not come up to certain well-defined standards.

It is true then that the trust company is the most powerful factor in preventing over-issue of new securities and in assuring investors of the tangible value of property back of new securities issued. It is estimated that the trust companies of the United States act as trustee for corporation issues amounting to the immense sum of $27,000,000,000. Although there are a number of large corporations which maintain their own transfer departments the great majority employ trust companies. The New York Stock Exchange, for example, lays down the rule that corporations whose shares are admitted to dealings upon the Exchange are required to maintain a transfer agency and registry office in the city of New York. In issuing new securities a corporation is forced to employ the services of a trust company as trustee of the mortgage which is deposited with the company to secure such new obligations.

Although the courts have clearly defined the duties and responsibilities of trustee in acting for corporations it is a fact that trust company managements voluntarily assume moral obligations which go further than the law requires in safeguarding new issues. No reputable trust company will accept an appointment as trustee without assuring itself from the best sources of information available as to the value of the property covered by the trust deed. No trust company management, moreover, wishes to place itself in a position where it must foreclose a mortgage or engage in litigation to protect bond holders in payment of principal or interest on coupons maturing. All this means protection for the investor and the assurance which is derived from a trust company which is jealous of its good reputation and sound methods.

As registrar and transfer agents trust companies also exert a powerful leverage in safeguarding new issues. The courts have not clearly defined the legal obligations of trust companies, but trust companies of their own accord assume responsibilities which have the effect of legal safeguards. While it is clearly set forth in the trust agreement that the trust company

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