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INVESTMENT COMPANIES
AND
THEIR SECURITIES
1943 EDITION
ARTHUR WIESENBERGER
KRES;
BUS. A
UBRAi
INVESTMENT COMPANIES
and
THEIR SECURITIES
1 943 EDITION
By
ARTHUR WIESENBERGER
ARTHUR WIESENBERGER & COMPANY
MEMBERS: NEW YORK STOCK EXCHANGE ■ NEW YORK CURB EXCHANGE
61 BROADWAY • NEW YORK
Two thousand copies comprise this edition
which is available by subscription
at Ten Dollars per copy
of which this is
Copy No.
Copyright 1943 by
Arthur Wiesenberger & Company
Printed in U. S. A.
FOREWORD
This is the third annual edition of this manual. The first edition was presented
in 1941 to explain the leverage principle in securities, the marked extent to which
leverage exists in investment company shares, and the opportunity for employ
ment of this principle in order to overcome the investment hazards, especially infla
tion, which at that time were increasing in tempo and complexity. Then, as now,
the ability to think in other than popular terms was sorely needed.
This compendium has served its purpose well, for it has demonstrated to in
numerable investors, in the form of realized profits, how maximum market appreci
ation may be obtained with minimum investment and risk. This is the fundamental
theory of leverage investments, and the continued use of this theory is propitious.
Interest in investment company shares has expanded substantially as a result of
our efforts, and this enlarged demand calls for a more elaborate and exhaustive
work than has heretofore been published. Accordingly, the third edition has been
expanded to cover, more completely, the broader aspects of investment company
securities, and to provide a centralized source of data on this still neglected group
of shares which represented about $800,000,000 of asset value at the year-end.
The material contained in this book has been compiled from a number of
sources. We have had the benefit of consultation with Miss Lucile Tomlinson, a well
known writer on investment company securities, and we continue to have the
collaboration of Arthur A. Winston, research specialist on investment companies,
who previously published some of this data under his own name. Our own re
search staff has been enlarged with the expectation of maintaining a continuous
follow-up and direct contact with the many companies in this field. The result of
this continuous scrutiny is available to our clients, upon request, but it is of course
impractical to attempt to notify purchasers of this book of any changes affecting
the information or opinions presented.
It is too much to hope that there are no errors in a work of this kind. No
guarantees or representations whatsoever are made as to the data presented, and no
errors, omissions, or misstatements, whether due to negligence or otherwise, shall
give rise to any right or claim. The material is intended for reference only, and the
information cannot be guaranteed and may be incorrect. Furthermore, this presen
tation is not intended to be, and must not be construed as, an offer to sell or the
solicitation of any offer to buy any securities.
Our Firm or members of our Firm, may trade in some of the securities dis
cussed in this manual, and may have a long or short position. Information con
cerning our position, or that of our members, will be made available upon request
to anyone purchasing or selling securities through our firm.
ARTHUR WIESENBERGER & COMPANY
TABLE OF CONTENTS
Page
PART I General Discussion of Investment Companies
The Theory of the Investment Company 5
Merits and Special Uses of Investment Company Shares 6
Summary of Management Results 8
Favorable Investment Results 9
Comparison of Representative Management Investment Company Results 10
A Barometer of Optimism and Pessimism 12
Why Leverage Stocks Move Faster 13
Leverage Table 14
Comparative Leverage Projections 16
How to Value Leverage Shares 17
PART II Detailed Data on Investment Company Issues
Speculative Classifications 21
Common Stock Comparisons 22
Preferred Stock Comparisons 24
Distribution of Assets 26
The Investment Companies' Investments 27
1942 Income Results 28
Comparison of Expense Ratios 29
Tax Shelters 30
Tax Status of Investment Company Dividends 31
Portfolio Turnover 32
PART III Individual Company Analyses
Corporate History, Investment Policy, Descriptive Comments, Simplified Balance Sheets,
Management Results, Asset Values, Earnings and Dividends, Price Ranges and Trading
Volume, Leverage Charts and Portfolios
Adams Express Company 36
American Capital Corporation 40
American Cities Power & Light Corporation 44
American European Securities Company 46
American General Corporation 50
American International Corporation 54
American Superpower Corporation 58
Amoskeag Company 60
Atlas Corporation 64
TABLE OF CONTENTS (Continued)
PART III (Continued)
Page
Blue Ridge Corporation 68
Capital Administration Company, Ltd 72
Carriers & General Corporation 76
Central States Electric Corporation 80
Chicago Corporation 84
Consolidated Investment Trust 88
Equity Corporation 91
General American Investors Company, Inc 96
General Public Service Corporation 100
General Shareholdings Corporation 104
Insuranshares Certificates, Inc 108
Lehman Corporation 110
Maryland Fund, Inc 114
National Aviation Corporation 118
National Bond and Share Corporation 120
Newmont Mining Corporation 124
Niagara Share Corporation of Maryland 126
Pacific Southern Investors, Inc 130
Pennroad Corporation 134
Petroleum Corporation of America 136
Phoenix Securities Corporation 138
Quarterly Income Shares, Inc 140
Railway and Light Securities Company 144
Selected Industries, Inc 148
Shawmut Association 154
Tobacco and Allied Stocks, Inc 158
Tri-Continental Corporation 160
United Corporation 164
U. S. & Foreign Securities Corporation 168
U. S. & International Securities Corporation 172
Utility Equities Corporation 176
Addresses of Investment Companies 160
c
I
I
I
THE THEORY OF THE INVESTMENT COMPANY
A group of professional investors, working full-time and with extensive re
search facilities, should be able to handle a fund of money better than most indi
vidual investors. Furthermore, it is easier to preserve a large sum properly diversified
than a small one with an unbalanced assortment of securities, and through the
medium of an investment trust this diversification can be obtained at no additional
cost. These two axioms underlie the theory of the investment trust or the investment
company, as it is now usually called. The actual performance of the investment com
panies, in good markets and bad markets, substantiates these statements. This per
formance record is detailed in subsequent pages.
Ignorance of these facts has given a good many investors a low opinion of
investment company securities. They only recall the flagrant errors on the part
of some of the more publicized funds in the 1929-32 era. Some exaggerated fears
still exist because of a few past cases of managerial abuse which led to the now
strict regulatory Investment Company Act of 1940. And they confuse the perform
ance of some investment company securities in declining markets with the manage
ment performance of the fund itself.
It should be noted at the outset and always borne in mind that while an in
vestment company may increase its common stock list when it thinks the market is
low and lighten it when the top seems near, these funds are generally committed to
a policy of continuous investment. They are not such magicians of financial prac
tice that they can show increasing assets when markets are falling. Nor, if their
portfolios are well diversified, can they pluck fantastic profits in rising markets.
Their shares are just like any other general market investment. They are to be
bought when the investor thinks the general market is low, sold when he feels it is
high, unless he is willing to accept the investment as a permanent position in stocks.
In recent years although some investment company managements had very
favorable results and others have had difficulty bettering the market averages, the
differences between the two extremes are not startling. However, in these compa
nies there exists a wide range of capitalization which provides extremes in value
and risks as well as portfolio specialization. There are bonds that rank with the bet
ter type of investment issues. There are common stocks that even at $1.00 have
seemed too high. In industrial, utility, and railroad securities there occasionally
comes a time when a certain security may be said to be "undervalued". It is true
that upon occasion certain investment company issues are "undervalued" in that
they have fallen out of line with other issues as measured by the definite appraisal
yardsticks which this book will explain. But in general, it may be said of investment
company securities that they are a perfect example that all things being equal, the
investor in the stock market gets what he pays for, no more. Their prices represent
a balance between chance of appreciation and risk of depreciation. The only excep
tion may be the very low priced leverage shares which can show fanciful profits in
a rising market. The buyer must always consider, "What risk am I willing to as
sume?"—either risk of capital or risk of income. Knowing that answer, he can find the
"tailor-made" security in this field.
This book does not attempt to give to everyone the complete answer of what
to buy. We endeavour to present the pertinent data on which a decision may be
based. We endeavour to instruct the reader on how to use that data. However, each
investor has different needs and he should find herein proper guidance to his in
vestment problems as they pertain to investment company securities.
[5]
MERITS AND SPECIAL USES OF
INVESTMENT COMPANY SHARES
The merits of investment company shares are determinable by applying the
same principles as are used for evaluating securities in general. However, they
possess their own features which may be utilized to solve particular investment
problems in a manner not otherwise possible.
ADVANTAGES OF THE TRUSTS
The general advantages of this type of investment are as follows:
1. Diversification. Even the more "compact" of the portfolios of the companies
studied contain more securities than the individual can thoroughly study. This af
fords protection.
2. Good Management. The tables on management performance will show
that many of the companies have consistently done better than the Dow-Jones aver
ages. To a speculator or novice, this might seem a rather negative statement. But a
professional investor realizes it is a difficult achievement unless undue risks are
taken. Some of the funds are managed by banking and investment houses for
whose services an individual would have to pay, were they available, a substantial
compensating fee.
3. Supervision. Constant supervision of the S.E.C., which prescribes even
how annual reports will be presented, assures honest administration and these
funds can no longer be used for "inside" profits at the expense of the shareholder.
4. Tax Shelter. Some of the companies included in this study are able to pay
non-taxable dividends which are considered by the Internal Revenue Bureau to
be return of capital and not income. This is because securities losses have been
utilized to offset current income from dividends and interest. Some companies still
have such large unrealized depreciation that considerable rise in the portfolios'
values can result before capital gains are created. (See page 30.)
5. High Yields. Certain investment company preferred shares offer relatively
high yields, although rising prices have recently caused some reduction. Those com
mon and preferred shares with non-taxable dividend payments also provide un
usually high yields because of the net income provided.
6. Bargain Prices. Ably managed non-leverage trust shares have been avail
able at attractive discounts from net asset values. These discounts have usually
allowed for the total expenses of administering the fund so the shareholder has, in
effect, received competent investment supervision at no cost.
7. No Margin Calls. For the buyer of leverage shares there is satisfaction in
the fact that adversity will not bring a margin call (see page 13). Some of these
shares afford an opportunity of buying listed shares for only a nominal "margin."
8. Special Uses. Some investment company shares solve numerous invest
ment problems, a few are detailed on the next page.
[6]
THE DISADVANTAGES OF THE TRUSTS
1. Losses. Trusts cannot sell short, and with very few exceptions, most trusts
consider it their function to be more or less fully invested at all times. So in a de
clining market investment company assets must decline and no immunity in the
prices of their securities can be expected.
2. Reverse Leverage. In a declining market, leverage shares will decline with
what may seem startling abruptness. This is due to the same mechanical principles
which make the reverse true in a rising market. Unfortunately, this has given trusts
in general a bad name. For since 1929, when trust-forming was at its height, we
have had more years of declining markets than rising markets.
3. Expenses. Cost of supervision is a factor of importance. Average expenses
are shown on page 29. They are not unreasonably large, especially since most, if
not all, non-leverage shares are currently available at discounts.
4. Marketability. The large investor may find difficulty buying or selling
sizable amounts, especially in a slow market. Trading volume is given on pages 23
and 25 and it will be noted that many issues were surprisingly inactive through
the year. However, the increased interest in these securities during 1942 has re
duced this element. Large blocks of shares frequently change hands by private
sales among several brokers and dealers who specialize in these securities, and
those firms should be consulted when large transactions are contemplated.
SPECIAL USES
1. "Hedging Against Inflation." It is to be hoped there will be no serious infla
tion. And it cannot be said stocks offer a sure protection by any means. But many
people who are not holding large amounts of common stocks, either through tem
porary or fundamental policy, are haunted by the fear of missing an inflationary
stock market. Highly geared leverage investment company shares offer a good pro
tection or hedge at low cost. A few thousand dollars in one of these low priced stocks
will bring as much gain in an inflationary market as several times as much in stand
ard "blue chips."
2. Exit "Cats and Dogs." Most people own some "cats and dogs"—low-priced
stocks that any counsellor would say to avoid, but which they hate to sell because
they seem so low. The leverage investment company shares offer ideal replace
ments for this type of stock. The low-priced stocks only do well against a favorable
market background, and in a good market the diversification of the investment com
panies guarantees participation. Such a switch seems much sounder procedure
than selling 100 shares of a stock that cost $50 at $5, and buying 10 of another that
now sells at $50.
3. Little Man's Hope. Experience of Wall Street has been that the small inves
tor, unless he has some friendly competent professional advice cannot do as well
as the large investor. The well-run non-leverage and mutual funds offer a good
solution, as well as insurance against the usually ruinous practice of the "occa
sional flyer."
4. Haven for Idle Money. There is often a time when idle money worries an
investor. He may just have sold a large holding and has not determined what to
buy. Or he senses the stock market is going up and cannot decide what to buy.
In this case, investment company shares offer a good temporary haven, enabling
participation in the general market until a new direct investment is found.
5. High Yields. The better high-yielding preferreds offer good opportunities
for the investor who must have income. They also provide suitable replacement for
other high-yielding securities which have been held for the yield alone, judgment
to the contrary.
[7]
SUMMARY OF MANAGEMENT RESULTS
BY TYPES OF INVESTMENT COMPANY
Leverage Non-Leverage Combined
Companies Companies Mutual Funds Companies Dow-Jone
No. Av. No. Av. No. Av. No. Av. Composit
Year of Cos. % Chge. of Cos. % Chge. of Cos. % Chge. of Cos. % Chge. Stocks
1926 4 +3
ANNUAL RESULTS
3 + 11 7 + 6 +7
1927 5 + 22 3 + 39 8 + 28 +25
1928 5 + 35 3 + 55 8 + 43 +31
1929 9 -1 1 + 10 5 -7 15 -2 -3
1930 19 -24 6 -21 10 -22 35 -23 -30
1931 20 -38 6 -34 11 -32 37 -35 -54
1932 20 -10 6 0 12 -5 38 -8 -16
1933 21 + 18 6 +38 16 +29 43 +25 +49
1934 21 +9 7 + 16 18 + 8 46 + 10 -1
1935 21 +50 8 + 33 19 +41 48 +44 +41
1936 23 +33 8 + 28 19 + 38 50 + 34 + 32
1937 23 -37 8 -27 19 -35 50 -35 -34
1938 23 +22 8 + 18 20 + 24 51 + 22 +29
1939 23 -3 8 -7 21 -2 52 -2 +3
1940 23 -9 8 -7 21 -8 52 -8 -10
1941 23 -8 8 -3 21 -8 52 -7 -10
1942 23 + 16 8 + 14 21 + 16 52 + 16 + 15
Combined
COMBINED PERIOD RESULTS
Periods
incl.
1930-1942 19 -20 6 + 12 10 + 25 35 -1 -40
1931-1942 20 + 5 6 + 39 11 + 5 37 + 25 -15
1932-1942 20 + 69 6 + 116 12 + 119 38 + 92 + 87
1933-1942 21 + 91 6 + 117 16 + 117 43 + 104 + 122
1934-1942 21 + 60 7 +69 18 + 62 46 +62 + 48
1935-1942 21 + 47 8 + 47 19 +57 48 +51 + 50
1936-1942 23 -3 8 + 11 19 +7 50 + 3 + 6
1937-1942 23 -27 8 -12 19 -20 50 -22 -20
1938-1942 23 + 16 8 +21 20 + 21 51 + 18 +22
1939-1942 23 -5 8 +2 21 -2 52 -3 -5
1940-1942 23 -3 8 + 2 21 -1 52 -1 -7
1941-1942 23 +7 8 + 10 21 +7 52 +7 + 3
Bull Mkt.
1933-1936 21 + 155 6 + 144 16 + 162 43 + 156 + 176
Bear Mkt.
1930-1932 19 -57 6 -45 10 -48 35 -52 -73
Note: Averages have been adjusted for capital changes and for interest and dividends paid.
Dividend adjustment for the years 1926-1929 was based on an arbitrary dividend
return of 3%; in later years the actual dividends paid each year were used.
[8]
FAVORABLE INVESTMENT RESULTS
The average man in Wall Street has a poor opinion of the management rec
ord of investment companies, although the figures contained in this book afford
factual proof that this opinion is wrong. The most important reason for this erroneous
conception is failure to distinguish between the management performance in han
dling the portfolio and the performance of the securities themselves. Tri-Continental
is one of the large investment companies listed on the New York Stock Exchange,
and one of the best-known. Although its management performance has been good
and considerably better than the Dow-Jones Averages, the general impression is
that it has been terrible. We believe this is due to the fact that in 13 years of gen
erally declining markets Tri-Continental common stock, due to high leverage, has
suffered a drastic decline. This is just one of similar examples where uninformed
persons have expected the impossible of these securities. In a declining market,
investment companies can only liquidate the more speculative of its holdings and
can at best take a defensive position, because like a savings bank it must earn a
regular income from dividends in order to pay dividends on its own outstanding
shares. Thus, where there is leverage the junior securities will always go down
faster than the market as a whole. Other reasons contributing to the general im
pression about investment companies are memories of the occasional notorious
errors and abuses in the late 1920s. This has been reflected in wide discounts for
many non-leverage shares, but a changing attitude is gradually narrowing these
discounts.
THE RECORD SPEAKS
Last year 52 leading investment companies included in our general review
(total assets $782,000,000) showed an average asset appreciation of 16%. This com
pares with a 15% advance in the Dow-Jones Composite Stock Average (in this dis
cussion and throughout the book, where results are compared with the Dow-Jones
Composite Stock Average, the Average is adjusted for an arbitrary 3% dividend
return annually from 1926 to 1929 inclusive and for actual dividends thereafter and
investment company results are adjusted for interest and dividends paid and for
capital changes). So 1942 was the third successive year when the companies as a
whole performed better than the averages, and it must be remembered this is an
average result and some companies have fared relatively better. As seen by the
accompanying figures, the leading companies for which data is available from 1926
on did better than the Averages in 12 out of the 17 years, running at an average
of 1%% better, per annum. In the 1930-32 bear market, 33 out of 35 companies did
better than the Averages. During the 1933-36 bull market, however, only 17 out of
43 companies whose records are available did better.
Individual managements, even if mediocre, can have brief runs of good luck
during short intervals, or may benefit by a broad movement in the type of securities
they happen to favor, but these figures are of the entire group and therefore signi
ficant from the viewpoint of the average investor. While managements may change,
or basic policies may be altered, as a rule long-term management results can be
taken as an indication of what might be expected in the future.
Despite the fact that several hundred investment companies were in existence
prior to 1929, it was not until 1930 that it became a general practice to issue reports
in sufficient detail to permit an appraisal of results by outsiders. The summary of
management results presented on the opposite page and the specific detailed
results on pages 10 and 11 conclusively prove that management of leading invest
ment companies has been better than general stock market movements.
L9]
A BAROMETER OF OPTIMISM AND PESSIMISM
MARKET MOVEMENT OF LEVERAGE INVESTMENT COMPANY STOCKS
COMPARED WITH GENERAL STOCK MARKET
The common shares of leverage investment companies are a sensitive index to
the hopes and fears of the market place. The above graph shows their changing
relationship with average stock prices. Note how in 1930 the investment shares
buoyed by the hope that the "good old days" would soon return, held at high levels,
and rose again above average stocks in the bull markets of 1932-34 and 1934-1937,
only to sink to new relative lows as pessimism again held sway.
In recent months the spread seems to be narrowing and investment company
shares are tending to regain their former position above the averages.
For the reader who likes to keep his own charts we have provided the inset
where monthly changes may be plotted by reference to Standard & Poor's monthly
figures. To the serious market student, these figures may suggest a new forecasting
system, for the nature of leverage shares is such that their chief buyers and sellers
are largely persons of financial sophistication. But they are presented here only as
a graphic demonstration of the characteristics of these stocks.
112]
WHY LEVERAGE STOCKS MOVE FASTER
In our dealings in investment company shares, and especially in shares of
the leverage type, it has amazed us to note how many people of normal intelligence
feel there is some secret about the market action of these stocks to which we and a
few other "professionals" alone possess the key. The cause of their characteristic
market action is simply the factor of leverage, which should be easily understood by
anyone with moderate financial or business experience. Without this knowledge,
it is still possible to make money in these securities by buying them low and selling
them high, but their performance will remain mysterious, and correct switching
when values get out of line will depend upon luck alone. It is important, therefore,
that holders of leverage shares or prospective purchasers should fully comprehend
the reasons why these shares move faster than the market.
A "SURE THING"
We have mentioned the characteristic market action of leverage shares.
This is merely the time tested certainty that the stocks in question will rise faster in
a rising market than will the Dow-Jones average, or any other selected group aver
age, and will drop faster in a declining market. It has been said there is no "sure
thing" in the securities business. Be that as it may, no surer fact is known to us than
"leverage stocks move faster."
TALE OF TWO TRUSTS
The reason for this greater sensitivity is that every dollar placed in a lever
age investment company share has additional dollars working for (or against) it.
The importance of understanding this is so great that it will be expressed in the most
elemental terms by comparing two hypothetical investment companies, A and B.
This is the set-up of Company A,—
ASSETS LIABILITIES
Investment portfolio $10,000,000 1,000,000 shs. Com. Stk. $10,000,000
And this is the set-up of Company B,—
ASSETS LIABILITIES
Investment portfolio $20,000,000 Bank Loan $10,000,000
1,000,000 shs. Com. Stk. 10,000,000
$20,000,000
If Company A be examined, it is evident that the common stock has an asset
value of $10 a share. And that Company B's stock has an asset value of only $10 a
share despite the larger portfolio, because only half the portfolio belongs to it, the
other half being applicable to the bank loan.
A QUESTION OF VALUE
Which of these two is the better buy, assuming that they both sell at $10?
The novice might say it depends upon the two portfolios. Unless they were extra
ordinarily different, the difference being far greater than ever normally found,
this will have no bearing on the question. Nor will the management records. Two
diversified funds will fare about the same over any one market movement of even
large proportions.
TRUST B HAS "IT"
An inquiry into what will happen under different conditions gives the clue.
Company A's shares will rise and fall almost exactly with changes in the average
of the market. Company B's shares will move much faster because the bank loans
provide the magic of leverage.
A 20% market rise will lift the portfolios of both companies equally, but Com
pany A's shares will then be worth $12, or a gain of 20% whereas Company B's
[13]
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shares W^l be worth $14, a gain of 40%, because the bank loan remains constant.
Thus while the buyer of A shares has $10 worth of stocks working for each share,
or $1 for every $1 put in, the buyer of B's shares has $20 at work for each share, or
$2 is working for each $1 of his investment.
In a declining market the reverse performance may be expected. If the two
portfolios shrink 20%, A's shares will be worth $8, but B's will be worth only $6, or
a 40% loss, for the identical reasons.
OPTIONS ENTER IN
Thus if the buyer expects a rising market and is willing to take a risk, B's
shares are the better buy because they will do better. Actually, at the moment when
the portfolios were worth $10,000,000., and $20,000,000., the two stocks would not sell
at their true asset values of $10. A non-leverage trust issue usually sells at a discount
to compensate for management expenses, income taxes to the corporation, and
because this type of share currently suffers from lack of popularity. Probably $8
would be the ruling price for A's shares. On the other hand B's shares, despite the
larger risk, might be selling at $13. This is because the advantage of buying more
dollars of working power is something of real desirability although not of tangible
value. It's like buying an option on additional dollars, and options, whether on
stocks, real estate, manuscript, or anything else, command a price because of the
extensive profits inherent in them. In other pages of this book it will be seen that
even some extreme options command a price.
NOW LEVERAGE SHOULD BE CLEAR
Instead of a bank loan, the leverage may be created by a bond or other
indebtedness, or preferred stocks, or a combination of them. Where the leverage is
extreme, a leverage stock may sell at prices that first seem astounding. The junior
preferred stock of Selected Industries sold at $7 this year when it had no asset value
at all, because the buyers felt prices of securities were rising and knew the large
amount of dollars they'd have working for them if they bought this stock.
A SAFE MARGIN ACCOUNT
The mechanics of this factor of leverage are those of a margin account, a fac
tor not mentioned before because the word is such an anathema to so many people,
even though some of them buy stocks of greatly over-capitalized companies or put
themselves into debt for other purposes. But unlike a margin account, most of the
existing investment companies have pretty little practical chance of being wiped
out because where the leverage is high, a large part of it is represented by outstand
ing preferred stocks which have no claim for repayment during the company's life.
Temporary errors of judgment in the purchase of leverage securities will not be
fatal (unless the buyer is such a shoe-string operator that he buys these volatile
issues on margin).
TWO TYPES OF SECURITIES
It is to be emphasized that there are two types of investment company securi
ties, those that are bought for investment and those that are bought for speculation.
In the former group, management experience and the other data presented in this
book is important. In the latter, it is merely a question of leverage, or the mechanics
of capitalization. A wide scale of risks is offered in the many leverage commons and
preferreds. The buyer should determine the degree of risk he desires and then find
the right media. He must always remember to think of this speculation not as so
many shares of such and such a company, but a stake in securities which move
faster than the market, up and down. If he understands leverage and is "right on
the market" the speculation should be profitable. If he does not understand lever
age, we trust he will not venture into this field without very competent counsel.
[15]
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HOW TO VALUE LEVERAGE SHARES
To value leverage investment company shares properly it is important to
recognize that they fall into several categories:
Typical Example
1. Conservative Leverage General American Inv. Common
2. Moderate Leverage American General Common
3. High Leverage Selected Industries Common
Conservative leverage shares are slightly more speculative than the straight
non-leverage issues, the degree of speculation being dependent upon the ratio of
senior capital to the total assets. This type of leverage shares must be valued on a
basis of (1) management record, (2) asset value, (3) income and dividend return.
They should only be held for capital appreciation for despite their designation as
"conservative" it is impossible for securities of this type to resist a market decline.
During recent years these shares have been available at 35% to 50% discounts from
asset value which in our opinion have been excessive and largely due to the ad
verse publicity directed towards the entire field of investment company securities,
much of which was unjustified. The spread between asset value and market price
has been steadily growing smaller with more intelligent observation on the part of
the investing public and with growing confidence in the upward trend of the mar
ket. It is conceivable that with further extension of public interest and continued
strength in the market most or all of the discount may be eliminated. It must be
realized however that the marginal type of investment which is inherent with all
leverage shares carries hazards of sharper than average declines in the event of
any general market reaction. Non-taxable dividends have been paid on some of
the more conservative leverage shares, such as Adams Express Common; these
payments are considered return of capital which is a tax advantage to investors
with large income. (Refer to discussion of taxes on page 31.)
Moderate leverage shares are merely a more volatile extension of the con
servative group. As with the former, management and asset value are determining
factors, but the feature of greater leverage places income and dividend return in
lesser importance. In this category one also finds shares such as American General
common which have been receiving non-taxable dividends.
High leverage investment company shares are comparable to options, for
their value is almost entirely dependent upon the participation which they have in
the future appreciation of the fund's portfolio. Management record, income and
dividend payments, are of minor importance and many of these shares were with
out asset value, in fact represented large deficit values at the year-end. They are
in effect a "hope" in the future improvement of the general market as some will be
without asset value even at 200 in the Dow-Jones Industrial Averages and yet have
some worthwhile value at present purely as "future options." To calculate their
value it is necessary to figure out the "working assets" applicable to each share and
correlate that figure to the asset value or deficit value of the stock. As an example
we can examine two typical high leverage shares of different quality: U. S. & For
eign Securities common and Selected Industries common.
[17]
U. S. & Foreign Securities common sold at the year-end for $4.75 Per share
when its asset value was $3.07,—however the stock represented working assets of
about $50 per share at that time, so each dollar of market price represented a par
ticipation in about $10 worth of assets of which about 60 cents was actual asset
value and the balance of $9.40 represented a "participation value". This call on
$9.40 worth of additional market assets was therefore available at 40 cents which
obviously is a cheap option cost for what is in effect a permanent "call" or option.
If the market advances and the portfolio shows an improvement of say 30% the
actual asset value would probably increase to about $10.00 and the total working
assets might be $65 per share at that point. The stock should then be worth $10 plus
5 to 10 percent of the "participating assets" of $55 or $2.75 to $5.50 additional,—a
total market value of $12.75 to $15.50. This shows the extreme price movement of
high leverage shares for a 30% increase in the general market would probably
result in a price increase of 150 to 200%, and conversely any reaction in the general
market would probably create the reverse result.
Now if we look at Selected Industries common, we find a so called "deep
under water" share, or as more affectionately called among professionals a "sub
marine" leverage issue. At the year-end this stock showed a deficit value of $12.22
per share. It would require an increase of 100% in total assets of the fund to bring
this stock into an asset value. Obviously its only conceivable worth to the investor
today is its option value, for these shares (2,056,940 total outstanding) had a partici
pation at the year-end in a portfolio of $26,500,000 equal to about $13 per share. If
we apply the previous price theory to the option value, that is 5 to 10% of the work
ing assets, we find a present value of 65 cents to $1.30. By projecting the asset value
of the portfolio to 250% of year-end levels, we find total assets of some $66,000,000
which after allowing for prior claims shows an asset value for the common of about
$7.50 per share. At that point the common stock would have total working assets of
$33 per share, so applying the price theory above, we would have $7.50 of actual
asset value and $25.50 of "option value," which might be worth $1.25 to $2.50 in
addition to the asset value, so that Selected common at that point might be selling
in the market at $8.75 to $10.00 or 55 times its year-end price, while the total assets
have increased only 2 Vi times, truly the extreme example of high leverage.
These are purely theoretical calculations and various other formulae may
be used to evaluate the worth of high leverage shares. Active traders in these secu
rities should maintain constant revision of the figures shown in the opposite table
due to changing asset values and market prices, for among the lower priced issues
each quarter point variation can considerably affect the status of the respective
issues.
[18]
)
:
PART II
!
i
INTRODUCTION
In studying the following tables, it is important
to bear in mind that the figures are as of December
31, 1942. Important changes have occurred since
then, owing to the advance in the market. But the
relative positions are in most instances essentially
unchanged. Our organization maintains continu
ous study of the statistics and may be consulted
by clients for later data. More data on the indivi
dual companies may be found in Part III, and the
reader who is unfamiliar with the subject is again
referred to the explanatory articles in Part I.
SPECULATIVE CLASSIFICATIONS
As a guide to the degree of risk in the various issues analyzed in this study, we classify them
below in groups. The grouping does not attempt to appraise the ability of the management, but
represents an opinion based on the fundamental corporate setup under present market conditions.
Changes in the general price level may alter materially the classification of individual issues; reduc
tion of bank loans, retirement of debentures or preferred shares may have a similar effect.
The classification should also not be considered as a "rating", or a table of values, but more as
a demarcation line of various types of securities, such as "speculative", "medium-grade" or "conser
vative" issues. Definitions like these can only be relative, and in some cases they may even appear
arbitrary; but in order to enable the investor to become acquainted with all the varieties available
in the market, they should serve their purpose.
Stocks which represent participation in companies invested in one industry or limited to a few
special situations are shown in ifaJics. Those issues which are inactively traded are designated with
an * asterisk.
COMMON STOCKS
* Consolidated Invest. Tr.
Insuianshares Certii.
Lehman Corp.
Maryland Fund
Adams Express Co.
* American European Sec.
American General Corp.
American International
American Cities P. & L., CI. 'B'
Blue Ridge Corp.
* Capital Administration CI. 'A'
(1) Minimum Leverage
National Aviation
National Bond & Share
Newmont Mining
Pennioad Corp.
(2) Medium Leverage
* Amoskeag Co.
Atlas Corp.
Carriers & General
(3) High Leverage
Chicago Corp.
Equity Corp.
* General Shareholdings
Petroleum Corp. of America
Quarterly Income Shares
Shawmut Association
* Tobacco * Allied
General American Investors
Niagara Share Corp. CI. 'B'
* Railway & Light Sec.
Phoenix Securities Corp.
Pacific South. Investors CI. 'A'
Tri-Continental Corp.
U. S. & Foreign Securities
(4) Options
(Warrants and stocks "deep under water")
American Capital CI. 'A' & 'B'
American Superpower
* Capital Administration CI. 'B'
General Public Service
Pacific South. Investors CI. 'B' United Corp.
Selected Industries United Corp., Wrts.
Selected Indus., Purch. Wrts. U. S. & Int'l Securities
Tri-Continental, Wrts. * Utility Equities Corp.
* American Capital Corp.
$5V2 Pr. Pfd.
* American European Sec.
$6 Cum.
Amer. General Cv. $2.00
* Amer. General Cv. $2.50, $3.00
Blue Ridge $3 Cum. Cv.
Preference
* Capital Admin. $3 Cum. 'A'
* Amer. Capital Corp. $3 Cum.
Amer. Cities P. & L. $3 & $2.75
American Superpower
$6 Cum. 1st
PREFERRED STOCKS
(1) Conservative
* Amoskeag Co. $4.50
Atlas Corp. 6% Cum.
* General Amer. Inv.
$6 Cum. Pfd.
(2) Moderate Risk
Chicago Corp. $3 Cv.
Preference
* General Shareholdings
$6 Cum. Cv.
(3) Speculative
American Superpower
$6 Preference
Equity Corp. $3 Conv.
* General Public Service $6
* Niagara Share Corp.
'A' 6% Cum.
* Railway & Light Sec.
6% Cum. 'A'
U. S. & Foreign Sec. $6 1st Pfd.
Phoenix Sec. $3 Conv. 'A'
Selected Ind. $5'/2 Cum. Prior
Tri-Continental $6 Cum.
U. S. & Int'l Sec. $5 1st Pfd.
* Utility Equities $5'/2 Priority
* Pacific South. Inv. $3 Cum.
Selected Ind. $1% Conv.
United Corp. $3 Cum. Prefer.
* U. S. & Foreign $6 2nd
DEBENTURES
(1) Conservative
* Adams Express Co. Coll. Tr. 4% Bonds due '47 & '48
* Adams Express Co. 10-year AlA% Debentures due 8/1/46
* Amer. British & Cont'l 5% Gold Debentures due 2/1/53
(assumed by Equity Corp.)
Amer. International 20-year hYi% Debentures due 1/1/49
* Carriers & General 15-year 5% Debentures due 11/1/50
Niagara Share Corp. 20-year 5V2% Debentures due 5/1/50
* Railway & Light Sec. Coll. Tr. 3Vt% Bonds, due 12/1/55
* Tri-Continental 5% Cv. Debentures Ser. 'A' due 1/1/53
(2) Medium-grade
* General Public Service 5% Cv. Debentures due 1/1/53
(3) Speculative
Central States Elec. 5% Conv. Debentures, Ser. due 1948
Central States Elec. Opt. 5Vi% Debentures, Ser. due 1954
[21]
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[23]
PREFERREDSTOCKCOMPARISONS
AsofDec.31,1942*
Thesefiguresgivethepertinentdataonthecompaniesdiscussedinthisstudy.
Inaddition,theyenableonetogaugetherelativeyields,asset
protectionandspeculativemeritsofthevariousissues.
AmountofNo.Shares
Current Yield(f)
7.1% 4.5
9.7(i) 9.6(i)
7.1 7.1 5.9 7.7 7.8
7.9(j)
6.8 5.9 0
11.7(j)
6.5 14.3 6.6 10.8 0 8.8 16.8 7.1
14.3(j)
8.3 5.1
SafetyFactor(e)
2.5 2.0 2.3 2.5 1.7 3.3 2.7 1.8 1.9 1.5 2.3 2.8 2.4 1.7 5.6 2.0 2.3 1.5(d)
1.8 1.7 1.7 4.6 1.8 1.8
Discount(c)
22% 48 57 60 15 44
Premium
29 23 32 57
Premium
58 41 8 50 9 31
Premium
32 40 15 65 44 43
Market 12/31/42
78 13% 15% 14% 85 28 50% 38% 38% 38 22% 101%
293/4
51% 92 21 91 51
35/e
68 17% 85 35 60 49
Asset Value
$194.51 26.10 35.67 35.67 142.08 92.83 138.01 70.74 74.73 55.96 51.79 283.26 71.56 87.02 518.54 42.02 205.83 74.38
(d)14.72
122.08 29.71 146.54 160.41 107.57 85.88
CallPrice(b)
$105 52% 55 52% 110 52% 55 55 55 65 52% 105 110 105 105 52% 125 110Non-C.
110 55 105 105 105 110
of
ThisIssue 24,298 88,000 119,383 86,870 50,000 137,835 344,719 334,412 43,400 475,790 200,854 66,000 18,120 90,750 25,210 62,915 21,136 243,800 424,317 141,380 2,488,712 172,319 50,000 239,200 73,414
Prior
Obligations(a)
none
$2,429,800 3,660,000 3,660,000 1,800,000 2,000,000
none
4,800,000 1,300,000
none
3,000,000
none
2,369,000 3,000,000 6,886,000 3,000,000 4,000,000 7,900,000 32,280,000 8,360,000
none none
17,231,900
none none
TotalNetAssets
$4,726,184 4,726,184 11,016,942 11,016,942 8,903,903 17,451,588 47,574,020 28,456,221 4,543,444 26,627,175 13,403,017 18,694,865 3,680,740 10,896,717 19,958,444 5,643,865 8,350,424 26,032,832 26,032,832 25,619,063 73,932,650 25,252,290 25,252,290 25,730,372 6,304,648
CompanyandIssue
AmericanCapital$5%Prior
AmericanCapital$3
AmericanCitiesP&L'A'$3
AmericanCitiesP&L$2.75
AmericanEuropeanSecur.$6
AmericanGeneralCorp.$2
AtlasCorp.$3
BlueRidgeCorporation$3CapitalAdministration$3
ChicagoCorporation$3
EquityCorporation$3
GeneralAmer.Investors$6
GeneralPublicService$6 GeneralShareholdings$6NiagaraShareCorp."A"6%
PacificSouth,Inv.$3
Railway&LightSecur.6%
SelectedInd.$5.50Pr.
SelectedInd.$1.50Conv.
Tri-ContinentalCorp.$6
UnitedCorporation$3
U.S.&For.Sec.$61st U.S.&For.Sec.$6.2nd U.S.&Int'l.Sec.$51st
UtilityEquities$5.50
*Dow-JonesIndustrialAveragewas119.40onDecember31st,1942.
Forfurtherfootnotesseepage25.
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[25]
DISTRIBUTION OF ASSETS
as of December 31, 1 942
Company
Adams Express Company
American Capital Corp.
American Cities P. & L.
American European Sec.
American General
American International
Atlas Corp.
Blue Ridge Corp.
Capital Adminstration
Carriers & General
Chicago Corporation
Consolidated Investment Tr.
The Equity Corp.
General American Investors
General Public Service
General Shareholdings
Insuranshares Certif.
Lehman Corp.
Maryland Fund(h)
National Aviation
National Bond & Share
Niagara Share Corp.
Pacific Southern Investors
Petroleum Corp. of America
Quarterly Inc. Shares (j)
Railway & Light Sec. (k)
Selected Industries
Shawmut Association
Tobacco & Allied
Tri-Continental Corp.
United Corporation
U. S. & Foreign Securities
U. S. & Int'l. Securities
Utility Equities Corp.
Straight Averages
CLASSIFICATION OF TOTAL
ASSETS (x)
Subs.S SECURITIES
Cash& Other Pfd. Com.
Govts. Items Bonds Shs.
29%
12
2
5
8
18
12
3
16
6
13
3
2
12
24
10
0
10
8
20
9
2
21
7
4
9
4
12
2
7
12
3
9
11
— 8%
— 0
— 23
10(a) 2
35(b)
3
4
1
6
2
18 (c) 1
5(d) 9
5(a) 3
— 7
— 8
— 12
— 0
— 7
— 6
— 0
— 2
— 19
— 0
— 1
— 4
— 42
— 15
27(g) 0
— 0
3(f) 10
— 0
— 9
— 6
— 8
3%
8
3
41
2
5
16
16
11
6
6
9
1
11
7
6
0
6
4
5
15
17
5
0
8
12
23
5
7
0
4
7
12
Shs.
60%*
79*
95t
31
78*
74
32*
80*
66
86
62*
74
88t
70
61
71*
100
76
80
75
73
61*
74f
92
84
37
55*
54
91
56*
84*
78*
69
10% — 6% 9% 72%
COMMON STOCKS
Indus- Public Rail- Financ. Invest,
trial Utility road Inst. Comp.
Shares Shares Shares Shares Shares
88% 3% 9%
80 5 2 9 4
— 72 — — 28
68 32 — —
57 1 3 5 34
92 3 5 _
80 8 1 4 7
69 19 2 9 1
86 6 6 2 —
76 13 9 2 —
54 15 1 26 4
93 4 — 3 —
27 — — 29 44
75 9 13 3
79 20 1 — —
63 30 2 2 3
100 — — —
88 4 1 7
82 4 14 — _
100 — — — —
89 5 6
70 22 2 3 3
56
inn
3 2 4 35
1UU
87 5 8 — —
79 14 6 1 _
72 5 11 9 3
91 9 —
100 — — —
71 4 9 11 5
5 95 _
97 2 1
92 2 — 6
86 7 3 4
75% 12% 3% 5% 5%
(x) Where percentages do not equal 100% balance repre
sents receivable and accruals.
* Includes Investment Company holdings of less than 10%
of total assets.
+ In»/Ud?S Investment Company holdings of more than
10% of total "-»»'-
(a) Subsidiary and Associated Cos.
(b) Subsidiary and Other Assets.
(c) Associated Cos. and Equities.
(d) Real Estate.
(f) Subsidiaries.
(g) Controlled banks.
(h) November 30th. 1942.
(j) Jan. 15th, 1943.
(k) Jan. 31st. 1943.
Pfds.
[26]
THE INVESTMENT COMPANIES' INVESTMENTS
Although it is generally believed that many investment companies have large sums concen
trated in "special situations" it is surprising what unanimity exists in the bulk of their selections. Their
preferences are for the same sound common stocks that most individual investors also recognize as
the leaders in both the market and industry. The following table is based upon the portfolios of 44
investment companies and lists the shares held by 13 or more companies at the end of last year.
STOCKS HELD BY 13 OR MORE INVESTMENT COMPANIES AT END OF 1942*
No. of Total
funds shares
holding held
33 Montgomery Ward 223.600
No. of
funds
holding
Total
shares
held
No. of
funds
holding
Total
shares
held
32 InH Nickel 283,350
32 Stand Oil. N J 234.837
29 Chrysler 149.900
28 North Am Co 598,300
27 Kennecott Copper 149,500
25 General Motors 171.100
25 Union Carbide 100,600
24 Am Rad & Std San 329,300
24 Am Gas & Elec 216,650
24 General Electric 150,200
24 US Steel 104,625
22 Detroit Edison 100,714
21 Deere & Co 215.400
21 ContlOil 192,900
21 Texas Company 181.438
21 Nat'l Dairy Pr 172,100
21 Pennsylvania RH 167,100
20 Intl Harvester 90,300
19 Pure Oil 279.100
19 CommT Inv Tr 129,140
19 Sears. Roebuck 102,200
19 Ches & Ohio 86,400
19 Great North pfd 71,900
19 Westinghouse Elec 59,200
18 Socony-Vacuum 502,300
18 Loew's Inc 167,200
18 Stand Oil. Calif 127,600
17 Goodyear T&R 63,300
16 Paramount Pict 252,180
16 CraneS Co 127.400
16 Gulf Oil 110,300
16 Commonwlth Ed 108.800
16 Bethlehem Steel 68.725
16 Phelps Dodge 51,150
16 Borg Warner 49,100
15 Anaconda Corp 64.700
15 United Aircr 59,100
15 Am Tobacco B 46,400
IS Youngstn Sh & T 33,725
15 Johns-Manville 33,050
14 Niagara Hud Pow 401,600
14 Marshall Field 107,100
14 Atchison 104,300
14 Stand Oil, Ind 71,100
14 Armstrong Cork 46,100
14 Allis-Chalmers 38,400
13 20th Cent-Fox 151,500
13 Amerada Corp 89,500
13 Phillips Pet 59,600
* Based on Dec. 31, 1942, portfolios of 44 investment companies.
How these holdings are spread by industries and how they were changed last year is indicated
in the following analysis of the assets of 12 companies.
DISTRIBUTION OF INVESTMENT COMPANY ASSETS
Combined Holdings of 12 Companies*
Total assets .
Cash and equi
Industry:
Market No. of Market No. of % change
valuet COS. valuet cos. % in Barron's
Dec. 31, hold- Dec. 31, hold- change group av.
1942 ing 1941 ing 1942 in 1942
$422,220 12 $372,557 12 + 13.4
47,683 12 31,820 12 + 49.8
54,478 12 46,226 12 + 17.8 + 18.0
24,704 11 29,639 11 - 16.6 -12.4
22,411 12 20,524 12 + 9.2 + 12.0
20,417 12 21.110 11 - 3.3 + 1.5
19.721 11 25,763 12 - 23.4 - 1.0
19.241 10 20,398 10 - 5.7 415.961 12 12.226 12 + 30.5 + 20.2
14,961 11 7,202 11 + 107.7 414.918 11 15.052 11 - 0.9 + 2.7
14.083 11 10,563 10 + 33.3 + 3.6
13.664 10 9.405 10 + 45.3 + 44.4
13.652 9 10.134 10 + 34.7 413.492 11 9,703 10 + 39.0 4
12.240 9 10.004 10 + 22.4 411,766 11 8,064 12 + 45.9 + 28.0
11.388 12 10.716 12 + 6.3 + 27.4
10.427 10 7,747 9 . . • •
9.018 9 13,844 11 - 34.8 -11.3
7.253 9 7,863 9 - 7.8 + 2.0
6.319 9 3,375 10 + 87.2 +40.9
5,278 9 4.859 9 + 8.6 - 7.4
4.762 8 4.093 7 + 16.3 + 13.5
4,732 5 5.889 7 — 19.6 4
4,438 7 9.922 11 - 55.3 -20.4
3,803 7 3,088 7 + 23.1 + 5.8
3.487 5 2.547 5 + 36.9 + 13.0
3,479 8 1.050 4 +231.3 + 23.1
3,189 7 4.929 7 - 35.3 4
3,116 8 703 S + 343.2 + 94.6
3,090 7 2.881 6 + 7.3 -10.1
2.757 9 3,714 12 - 25.8 -10.2
1.428 4 974 6 + 46.6 - 0.4
1.004 5 95S 3 + 17.4 -15.0
615 2 679 2 - 9.4 + 4.9
Merchandising
Utilities, pfd
Building
Rail bonds (defaulted & 2nd grade, mainly)
Railroads, com
Foods & beverages
Autos & trucks
Bank & finance
Motion picture &
Steel
Tobacco
Office equipme:
Containers
Aircraft mfg . .
Drugs & soaps .
Gold
Rubber & Tires . . .
Heavy machinery
Insurance
* Based on portfolios of Adams Express, American International, Blue Ridge, General American
Investors, Incorporated Investors, Lehman Corp., Massachusetts Investors Trust, Quarterly Income
Shares, Selected Industries, State Street Investment Corp., Tri-Continental Corp. and United States
& Foreign Securities. # Index not available. tOOO's omitted.
Individual portfolio holdings are shown with the company analyses which appear in Part III.
Last year the companies in general bought defaulted and secondgrade rail bonds and motion picture
shares and sold steels, shipbuilding, and other "war issues" as well as chemicals. The trusts are of
course, not infallible and all have made errors, but their combined judgment may be considered
egual to that of the better statistical services and the large investment advisory organizations. In
addition they benefit from the specialized knowledge of their executives which arises from large
concentrated investments in many industries and also enjoy the advice of their directors who bring
in much additional experience and contacts in finance and industry.
(The above tables reproduced through the courtesy of Barron's, the National Business & Financial Weekly)
[27]
1942 INCOME RESULTS
As a whole, investment company income did not quite reach the average income on the
Dow-Jones Composite Stocks last year. However, this was a satisfactory showing in view of the
fact that about 10% of the total year-end assets were represented by cash and a small quantity of
government bonds and that an average of 72% was invested in common stock. The largest income,
it will be noted, was reported by those companies heavily interested in utility securities.
In comparing these income figures, it should be considered that the investment policy of some
companies may be influenced to seek a high return by their need of income to make regular pay
ments on their own outstanding securities—others may be more concerned with possibilities of capital
gain—others with preservation of capital by carrying substantial amount of cash during periods of
uncertainty, etc. These comparisons should be reviewed in connection with the distribution of assets
shown on page 26 and the individual company analyses.
Net Assets
Gross Income* Average in 1942 Gross Income Yield
Company 1942 1941 (000 ommited) 1942 1941
Adams Express Co. $ 1,331,529 $ 1,596,826 $ 25,840 5.2% 6.2%
American Capital Corp. 293,242 299,642 4,481 6.5 6.7
American Cities P. & L. 891,213 1,115,553 10,013 8.9 9.3
American European Sec. 641,649 909,635 8,853 7.2 9.6
American General Corp. 658,602 908,260 17,279 3.8 4.9
American International 1,001,334
Atlas Corp. 1,394,794
Blue Ridge Corp. 1,954,132
Capital Administration 242,553
Carriers & General 333,165
Chicago Corporation 1,555,495
Consolidated Invest. Tr. 807,541
The Equity Corp. 413.715
General American Investors 1,195,197
General Public Service 158,150
General Shareholdings 775,965
Insuranshares Certif. 164,588
Lehman Corp. 2,989,796
Maryland Fund (a) 333,748
National Aviation 404,645
National Bond & Share 326,630
Niagara Share Corp. 955,349
Pacific South. Investors 279,225
Petroleum Corp. of America 699,199
Quarterly Income Shares (b) 1,073,804
Railway & Light Sec. 485,580 (c)
Selected Industries 1,729,733
Shawmut Association 330,845
Tobacco & Allied 257,106
Tri-Continental Corp. 1,439,240
United Corporation 4,335,071
U. S. & Foreign Securities 1,622,176
U. S. & Int'l Securities 1,413,204
Utility Equities Corp. 333,271
Combined Average
Dow-Jones Composite Stocks—(estimated)
* From interest and dividends; does not include profits
or losses on security transactions.
982,211 15,831 6.3 6.3
1,959,089 47,272 3.4 3.9
2,147,523 26,744 7.3 7.9
272,177 4,383 5.5 6.0
338,826 4,728 7.0 6.9
1,633,701 25,527 5.8 6.2
819,748 12,421 6.5 6.7
459,314 12,681 3.3 3.5
1,381,950 18,511 6.5 6.3
223,511 3,708 4.3 5.8
957,835 10,667 7.3 8.1
179,393 4,422 3.7 3.9
3,321,508 55,735 5.4 5.8
335,263 4,550 7.3 6.9
434,124 7,113 5.7 5.7
404,806 7,159 4.6 5.4
1,175,462 20,313 4.7 5.2
331,739 5,620 5.0 5.6
966,923 13,277 5.3 6.7
1,114,466 15,716 6.9 6.6
486,710 (e) 8,456 5.7 (c) 5.8
1,996,689 25,640 6.7 7.3
372,359 6,113 5.4 6.1
278,585 4,271 6.0 6.6
1,662,169 24,713 5.8 6.5
7,454,715 71,045 6.1 7.6
1,795,316 26,028 6.2 6.2
1,555,089 24,773 5.7 6.3
382,758 5,978 5.6 6.4
5.7% 6.4%
6.3% 6.7%
(a) Years to Nov. 30
(b) Years to Oct. 15
(c) Year to 10/31/42
(e) Estimated
[28]
COMPARISON OF EXPENSE RATIOS
A controversial question to which there seems to be no final answer is: How much should it cost
to operate an investment company? The larger the fund, the lower one would expect to find the ratio of
expense; but this does not necessarily follow.
Net Assets Ratio of Expense to
TOTAL EXPENSE * Average in 1942 Average Net Assets
Company 1942 1941 (000 omitted) 1942 1941
Adams Express Co. $ 177,546 $ 212,976 $ 25,840 0.69% 0.83%
American Capital Corp. 69,637 85,170 4,481 1.56 1.90
American Cities P. & L 89,682 129,325 10,013 0.90 1.08
American European Sec. 33,072 39,017 8,852 0.37 0.41
S American General Corp. 129,605 147,270 17,280 0.75 0.80
American International 161,146 174,011 15,831 1.02 1.12
Atlas Corp. 807,481 1,030,310 47,272 1.71 2.04
Blue Ridge Corp. 193,714 214,840 26,744 0.72 0.79
Capital Administration 37,881 43,485 4,383 0.86 0.96
Carriers & General 47,695 60,116 4,728 1.01 1.23
Chicago Corporation 220,139 238,518 25,527 0.90 1.13
Consolidated Invest. Tr. 67,179 60,983 12,421 0.54 0.50
The Equity Corp. 79,272 94,235 12,681 0.63 0.72
General Amer. Investors 198,497 279,179 18,511 1.07 1.27
General Public Service 48,602 54,810 3,708 1.31 1.42
General Shareholdings 82,338 87,567 10,667 0.77 0.74
Insuranshares Certif. 20,701 22,230 4,422 0.47 0.48
Lehman Corp. 420,142 495,602 55,735 0.75 0.87
Maryland Fund (a) 42,699 49,664 4,550 0.94 1.02
National Aviation 79,924 97,120 7,113 1.12 1.28
National Bond & Share 35,782 38,922 7,159 0.50 0.52
Niagara Share Corp. 161,745 187,556 20,313 0.80 0.82
Pacific South. Investors 85,061 108,797 5,620 1.51 1.83
Petroleum Corp. of Amer. 70,557 82,452 13,277 0.53 0.57
Quarterly Inc. Shares (b) 137,689 171,574 15,716 0.88 1.01
Railway & Light Sec. 72,200 (c) 79,688 (d) 8,456 0.85 (c) 0.87 (e)
Selected Industries 192,117 238,465 25,640 0.75 0.88
Shawmut Association 39,640 45,821 6,113 0.65 0.75
Tobacco & Allied 24,817 34,460 4,271 0.58 0.81
Tri-Continental Corp. 192,967 221,926 24,713 0.78 0.86
United Corporation 308,953 326,051 71,045 0.43 0.33
U. S. & Foreign Securities 180.660 325,000 (e) 26,028 0.70 1.13(e)
U. S. & Int'l Securities 155,006 242,198 24,773 0.63 0.98
Utility Equities Corp. 54,699 60,356 5,978 0.92 1.01
Combined Companies $4,718,845 $5,779,734 $579,861 0.81% 0.92%
It is interesting to note that expenses in 1942 were about 19% lower than in the previous year,
and that this percentage decline just about equalled the percentage decline of net income for the
same period.
' Includes all expenses and all taxes (except income taxes and interest)(a) Years to Nov. 30
(b) Years to Oct. IS
(c) Year to 10/31/42
(d) Thirteen months ended 1/31/42
(e) Estimated
[29]
TAX SHELTERS
Unrealized Portfolio
Depreciation as of Market Value of
1942 % of Div. Dec. 31, 1942** Net Assets as of
Company and Issue Div. Paid Non-Taxable* Amount Per Share Dec. 31. 1942
Adams Express Common $0.45 100 $ 9,460,593 $6.46 $26,617,050
American Capital Corp. $5.50 Prior 5.50 45.14 2,323,784 95.64 4,726,184
American Capital Corp. $3 Pref. 0.60 100 2,323,784 26.41 4,726,184
Amer. Cities P. & L. 'A' $3.00 none — 15,310,529 74.23 11,016,942
Amer. Cities P. & L. 'A' $2.75 none — 15,310,529 74.23 11,016,942
Amer. European Sec. Common 0.50
Amer. European Sec. $6 Pref. 6.00
American General Corp. Common 0.15
American General Corp. $2 Pref. 2.00
American International Common none
100 2,486,490 7.01 8,903,903
100 2,486,490 49.73 8,903,903
100 5,092,587 3.65 17,451,588
100 5,092,587 30.59 17,451,588
— 2,982,729 2.98 16,707,016
Atlas Corp. Common 0.50 100 9,500,207 3.94 47,574,020
Atlas Corp. $3 Pref. 3.00 100 9,500,207 27.56 47,574,020
Blue Ridge Corp. $3 Pref. 3.00 47 6,079,740 18.18 28,456,221
Capital Administration $3 Pref. 3.00 59.18 317,750 7.32 4,543,444
Carriers & General Common 0.225 100 1,968,761 3.49 4,861,294
Chicago Corp. $3 Pref. 3.00 87.81 3,788,591 7.96 26,627,175
Consolidated Invest. Tr. Common 2.00 71.663 none none 12,827,207
Equity Corp. $3 Pref. 1.50 48.45 120,169 0.60 13,403,017
General Amer. Investors Common 0.40 0 424,142 0.33 18,694,865
General Amer. Investors $6 Pref. 6.00 0 424,142 6.43 18,694,865
General Public Serv. $6 Pref. none — 1,308,407 71.38 3,680,740
General Shareholdings $6 Pref. 6.50 2.43 5,097,388 56.17 10,896,717
Insuranshares Certif. Common 0.20 0 54,334 0.11 4,382,886
Lehman Corp. Common (c) 1.25 (c) 5/336/396 2.70 58,301,958
Maryland Fund Common 0.25 Cg) 2,839,859 2.53 4,565,955 (f)
National Aviation Common 0.625 0 none none 6,962,293
National Bond & Share Common 1.00 100 none none 7,269,167
Niagara Share Corp. 'A' 6% Pref. 6.00 100 59,923,228 2,376.96 19,958,444
Niagara Share Corp. 'B' 0.15 100 59,923,228 46.09 19,958,444
Pacific South Investors $3 Pref. 3.00 100 397,657 6.32 5,643,865
Petroleum Corp. of Amer. Common 0.35(a) 100 1,708,691 0.92 13,216,114
Quarterly Inc. Shares Common 0.37 35.6914 7,255,559 3.09 16,426,098 (h)
Railway & Light Sec. Common 0.75 30.32 130,579 (b) 0.80 8,732,932 (b)
Railway & Light Sec. 6% Pref. 6.00 0 130.579(b) 6.18 8.732.932(b)
Selected Industries, Inc. $5.50 Pr. 5.50 2 3,748,956 15.38 26,032,832
Shawmut Association Common 0.65 0 799,182 (e) 2.22 6,455,792
Tobacco & Allied Common 3.70 0 123,033 1.84 4,270,996
Tri-Continental Corp. $6 Pref 6.00 100 13,339,732 94.35 25,619,063
United Corp. $3 Pref. 3.00 6.5834 83,042,200 33.37 73,932,650
U. S. & Foreign Secur. $6 1st Pref. 6.00 0 2,109,960 12.24 25,252,290
U. S. & Foreign Secur. $6 2nd Pref. 63.00 0 2,109,960 42.20 25,252,290
U. S. & Int'L Secur. $5 1st Pref. 5.00 42.34 17,250,400 72.12 25,730,372
Utility Equities Corp. $5.50 Pref. 2.50 100 1,294,042 17.63 6,304,648
* These figures are in many cases only tentative and
subject to final decision of the Bureau of Internal
Revenue.
** These figures should be checked with respective com
panies, as cost for tax purposes may be different.
(a) Plus 1/5 share Consolidated Oil Corp.
(b) As of January 31st, 1943.
(c) Fiscal years end June 30lh—Dividends paid July 7th,
1941, October 6th. 1941, April 7th, 1942 and June
30th, 1942, were non-taxable. Decision on remaining
1942 dividends will be rendered later, but tentative
decision of October 8th, 1942, taxable.
(e) Other than bank stocks owned.
(f) November 30th, 1942.
(g) March, June and September 15th dividends 51.79%
non-taxable; December 15th dividend 100% taxable,
subject to later determination of tax exemption.
(h) January 15th, 1943.
[30]
TAX STATUS OF INVESTMENT COMPANY DIVIDENDS
For the first time in the history of these companies, the Revenue Act of 1942 recognized the
urgent necessity of equalizing the federal income tax burden for investment company stockholders as
against that of direct investors. As the law stands now, a company electing to qualify as a "regulated
investment company" under the 1942 Act is in a position where its stockholders are treated substan
tially the way they would be treated if they were doing their own investing, instead of using the invest
ment company as a medium, that is, if at least 90% of net ordinary income is paid out in dividends,
the regulated investment company pays no income tax on the income so paid out.
TAX ADVANTAGES
As a matter of actual fact, at the present time most closed-end investment companies are not
electing to be so treated, because their stockholders are even better off if they elect to be taxed as ordi
nary corporations. The reason for this is that they have reservoirs of unused portfolio losses which
can be offset against investment income in determining the taxability of their dividends. As ordinary
corporations, these investment companies are subject to the 24% normal tax and 16% surtax, a total
tax of 40%. However, under the general tax law corporations are generally given a tax credit of 85%
of dividend income derived from holdings of common and preferred stocks. For an investment com
pany that holds only stocks in its portfolio, this means a tax of 40% on only 15% of its income, or an
effective tax rate of 6% on such income. This is a good deal lower than individual income tax rates
which start at 19%. The other tax advantage applies when capital gains are realized and this is dis
cussed below.
BASIS OF NON-TAXABLE DIVIDENDS
In order that dividends will be non-taxable to the stockholders, an investment company must
have an excess of realized losses over realized profits for the year to the extent of its net income.
Investors who are interested in the non-taxable aspect of some investment company securities can
obtain a fair idea of which companies are likely to be able to continue to make fully or partially non
taxable payments by examining the amount of unrealized depreciation shown by the company. The
published figures, however, are based on book costs, which are not always the same as tax costs,
and it is a good idea to check the figures by inquiry to the individual company. Another thing to keep
in mind is that a company may still have sizable losses in specific holdings, even though little or no
depreciation is shown for the fund as a whole.
However, for many companies a substantial rise in the general level of security prices would
mean that the advantage would be on the side of qualifying as "regulated investment companies."
Once an investment company so elects, it cannot ever afterwards make its dividends non-taxable to
its shareholders. This is specifically stated in the law.
Investors who receive investment company dividends that are wholly or partially non-taxable
must consider them as return of capital and deduct them from the cost of their shares, paying a capital
gains tax if and when they sell the shares at a profit over the revised cost. A considerable tax advan
tage still remains, however, under present capital gains tax laws, and the higher the individual's top
surtax bracket, the greater is the ultimate advantage of receiving income on this basis.
TREATMENT OF CAPITAL GAINS
Special provision has also been made for investment companies under the Revenue Act of 1942
in connection with realized capital gains that are not offset by capital losses. "Regulated investment
companies" may now distribute net long-term gains in the form of "capital gains dividends", paying no
tax on capital gains so distributed. The shareholder treats these special dividends in his own tax re
turn as long-term capital gains. The companies are not forced, however, to pay out such capital gains,
the law leaving them the option of paying a flat 25% tax themselves.
So long as an investment company has a backlog of unrealized depreciation, however, no tax
on capital gains needs to be paid either by the company or by the shareholder, (so long as he holds
his shares) which is an important feature in certain investment company securities. Investment com
panies are now subject to substantially similar laws on capital gains and losses as those applying to
individuals: six months is the dividing line between short-term and long-term gains and losses; a net
long-term capital gain is taxed at a rate not in excess of 25%; short-term and long-term capital gains
and losses can be offset against each other, but neither a net short-term nor a net long-term capital
loss can be deducted by the companies from regular income for tax purposes. However, any excess
of long and short-term capital losses over long and short-term capital gains realized in one year can
be carried over and used to offset subsequent capital gains during the following five years.
Through the medium of an investment company with a substantial backlog of unrealized
depreciation, therefore, the investor can avoid paying taxes on capital gains until the fund exhausts
its unrealized depreciation or until he sells his own shares of the fund at a profit.
Unrealized portfolio depreciation at the end of 1942, and the tax status of 1942 dividend pay
ments, are shown on the opposite page. If a company elected this year to be taxed as a "regulated
investment company", future payments must, of course, be 100% taxable. It will be noted, however,
that few companies so elected.
[31]
PORTFOLIO TURNOVER
Only during the past few years has it been possible to collect data on the security transac
tions of leading investment companies, as this information was not previously disclosed in most
annual reports. It is too brief a period for correlating trading activity and performance results but the
percentage of total turnover to average net assets is tabulated for comparative purposes.
As a matter of general interest, we show below the total transactions reported for 1940, 1941
and 1942 together with the turnover of securities on the New York Stock Exchange during these
three years. The lower trading volume indicates that trust managers just about followed the general
market in trading activity last year.
Ratio of Total
1942 1941 Transactions to
>
Purchases Sales Purchases Sales Average Net Assets
(000 Omitted) (000 Omitted) 1942 1941 1940
Adams Express Co. $ 3,146 $ 6,777 $ 2,592 S 3,903 38% 25% 41%
American Capital Corp. 973 1,090 1,474 1,179 46 59 69
American Cities P. & L. 151 1,418 587 1,486 16 17 31
American European Sec. 213 650 544 544 10 11 20
American General Corp. 1,483 4,464 449 525 34 5 25
American International 953 2,630 4,297 2,570 23 44 49
Atlas Corp. 1,808 6,589 13,961 14,818 18 57 46
Blue Ridge Corp. 4,124 3,501 6,183 6,205 29 45 39
Capital Administration 736 843 1,354 1,306 36 59 59
Carriers & General 970 777 936 680 37 33 57
Chicago Corporation 2,331 3,192 4,066 4,069 22 31 51
Consolidated Invest. Tr. 979 887 777 928 15 14 12
The Equity Corp. 381 985 1,262 1,229 11 19 22
General Americ. Investors 1,999 3,852 3,575 7,333 32 50 44
General Public Service 1,104 1,348 844 363 66 31 68
General Shareholdings 1,986 2,447 2,508 3,073 42 47 41
Insuranshares Certif. 161 211 171 544 8 16 (e)
> Lehman Corp. 9,246 7,741 13,406 13,022 30 46 40
Maryland Fund Inc. (c) 315 175 180 233 11 8 (e)
National Aviation 428 832 2,006 603 18 34 69
> National Bond & Share 3,656 2,766 4,166 4,094 90 110 161
Niagara Share Corp. 488 2,016 409 702 12 5 11
Pacific South. Investors 1,142 1,132 1,028 1,269 40 39 54
Petroleum Corp. of Amer. 595 900 761 751 11 11 21
Quarterly Inc. Shares (f) 1327 946 2,071 2,423 15 28 (e)
Railway & Light Sec. 1,318 (b) 530(b) 1,665 (a) 639 (a) 22 (b) 27 (a) 23
Selected Industries 6,468 7,060 8,346 8,867 53 63 83
Shawmut Association Not available Not available Not available
Tobacco & Allied 23 371 913 15 9 22 6
Tri-Continental Corp. 5,695 5,905 7,157 7,822 47 58 54
United Corporation none none none 80 Nil Nil Nil
U. S. & Foreign Securities 16 2,574 82 49 10 0.5 35
U. S. & Int'l. Securities 928 543 96 12 6 0.4 52
Utility Equities Corp. 817 1,144 921 512 33 24 46
Combined Companies $55,960 76,296 $88,785 $91,856 23% 29% 36«
Total Transactions 1942 1941 1940
Above mentioned companies $133,756,000 $180,641,000 $252,175,000.
New York Stock Exchange 125,677,963 shs. 170,603,363 shs. 207,599,749 shs.
(a) Ten months ended October 31st. (e) Not reported.
(b) Year ended October 31st. (f) Year ended October 15th.
(c) Years ended November 30th.
[32]
L
PREFACE
In the following pages detailed company anal
yses are presented. It should be obvious that in
general the length of the discussion has no bear
ing upon our opinion of the company: Newmont,
for example, is easier to describe than Adams
Express. Some pages are intentionally left blank
to aid in orderly presentation of the material, and
to provide space for the reader's notes and calcula
tions. Leverage calculations and/or operating re
sults were omitted for a number of companies due
to space limitations but these are shown in the sum
mary on pages 16 and 10 respectively.
The portfolios are reprinted from Moody's Inves
tors Service, whose courtesy in this we herewith
acknowledge.
ADAMS EXPRESS COMPANY
BACKGROUND
Originally formed in 1854 as an express company, Adams Express became a general man
agement investment company in 1929. Its New York charter as a Joint Stock Association provides for
continued existence until July 1, 1948, unless two-thirds of the holders desire dissolution, or dissolution
is approved by two-thirds of the shares represented at any special meeting called for that particular
purpose. Any near-term dissolution is extremely unlikely as the outstanding collateral trust bonds
and 10-year debentures, due from 1946 to 1948, are non-callable. In 1948, the charter can be extended
by a vote, as has been done on several previous occasions.
Until the death in 1937 of Charles Hayden, senior partner in the Stock Exchange firm of Hayden,
Stone & Co., this company was considered to be largely dominated by him and his associates.
A partner of Hayden, Stone & Co. and a partner of Hallgarten & Co. serve on the Board of Managers
(corresponding to the usual Board of Directors). In answer to stockholder criticism at the last annual
meeting. President Henry Smith announced that the company was completely independent of any
brokerage or investment banking domination. Mr. Smith, Chairman of the Board, assumed the
Presidency in 1941. He serves without salary or traveling expenses, but is resident and spends
much of his time in Jamestown, N. Y., where he is Chairman of the Art Metal Construction Co..
Chairman of the Marlin Rockwell Co. and President of the First National Bank. He is reported to be
one of the largest individual holders of Adams Express Common with 26,100 shares reported in the
annual proxy statement.
POLICY
At the year-end, about 29% of this fund was in cash and governments, the largest cash position
of any of the companies reviewed in this analysis, and nearly twice the total of the previous year.
The company's current investment policy appears to be concentration of its funds in the common
stocks of leading corporations which are paying fairly good dividends, with the oil industry account
ing for about a quarter of all common stock holdings. During 1942 Adams added substantially to its
holdings of second-grade and defaulted railroad bonds, and these totaled 8% of year-end assets.
One of the largest holdings is 281,600 shares of American International Corp. (28.2% of that
fund's common stock) which amounted to 5% of year-end assets and, because it is a leverage stock,
adds somewhat to Adams' own leverage factor. This large holding, with a market value of $1,337,600
at the year-end, represents presumptive control of American International, but operations of the two
companies are considered to be independent of each other. Eventual merger or consolidation of the
two companies would appear to be a logical development, but no statement of intentions regarding
its American International holdings has ever been made by the Adams Express Management.
After two successive years in which results were decidedly better than the average, last year's
operations were less favorable than the average due to the adoption of a very cautious attitude
toward the market not far from the lows of 1941 and 1942. The management record in recent years has
been about average, results exceeding those of the Dow-Jones Composite Average in seven of the
past 13 years but the over-all result for the entire period since 1930 has been very much better.
The gross yield on the entire fund last year was 5.2% and about $265,000 less than in 1941,
the decline being due to the smaller invested position last year. Expenses were below average,
totaling .69% of average assets, a decline of $35,430 from the 1941 figure. Portfolio turnover was
somewhat above average last year. Combined purchases and sales amounted to 38% of year-end
assets, compared with a rate of 25% in 1942.
SECURITIES
The Collateral Trust 4's and Debentures 4H's with a year-end asset coverage of 2.8 times, are
non-callable. Interest was covered 2.9 times last year. These bonds have traded around par for the
past five years, fluctuating at times as much as seven to eight points within a year, although fluctua
tions have narrowed to about five points in the last two years. The bonds are rather inactive on the
New York Stock Exchange where the annual turnover has been about 350 bonds during the past
three years.
The Common stock of this company is one of the more conservative of the leverage group and
may appeal to investors who seek capital appreciation plus some degree of investment income.
Leverage, of course, will be reduced so long as a high proportion of cash and governments is re
tained. Dividends have been paid at various rates since 1936, when they were resumed after omission
in 1932. The 1942 payments totaled 45c, compared with 60c paid in 1941, and like the dividends paid
in 1940 and 1941 have been declared 100% non-taxable for Federal income tax purposes. The com
pany has sufficient unrealized depreciation to warrant the expectation that dividends may continue
to be non-taxable for a while longer, barring a very sharp advance in security prices or a radical
change in existing corporate tax law. This is a distinct feature for investors in higher income brackets
who are seeking a current high rate of income. As these dividends are treated as a return of capital
eventual sale of these shares will determine a final capital gains tax.
Although the company has no consistent policy of retiring its stock, and purchased none last
year, it did buy 36,600 shares in 1941 from agents of the British government (average net cost $5.93)
and has made occasional other purchases in previous years. The shares are listed on the New York
Stock Exchange where they enjoy a fairly good market and at the year-end were selling at a dis
count of 34% from asset value, yielding 5.9% on the basis of 1942 payments.
Since Adams Express is a voluntary association, its stock is subject to personal liabilities; but
the Company advised its stockholders some years ago that since it has been in existence the tech
nical liability of stockholders has never been a matter of importance, and this is especially true at
this time, when it is not engaged in active transportation operations. Liability to the common stock
holders with respect to the company's bonds is eliminated by the indentures of the bond issues.
[36]
ADAMS EXPRESS COMPANY
Simplified Balance Sheet
As of December 31, 1942
ASSETS
$2,179,685 11%
800,975 5
Cash, U. S. Gov't Bds.. etc.
Investments, at market*
Bonds
Preferreds
Common
Ind. $14,167,015 88%
P.U. 47,500
R.R. 456.713 3
Inv. Co. 1,455,725 9 16,126,953 84
100%
Miscellaneous 96,519
$ 7,806,452 29%
* Cost Price $28,572,413
f Capital Surplus $20,814,726
Earned Surplus $ 4.302.497
100%
Total $27,010,584 100%
19,204,132* 71
LIABILITIES
Payables incl. Accruals
& Reserves $ 393,534
Capitalization
Total Funded
Debt: 9,500,500(o0
Common Stock.f
nop.v. 17.1 16.550(b)
(1,463.400 shs.)
$27,010,584
(a) 4% Collat. Trust Bds. $1,241,500
due 1947
4% Collat. Trust Bds. $1,375,500
due 1948
414% Debentures $6,883,500
due 1946
(b) Applicable to Common at 12/31/42
Funded Debt
Common Stock
SUMMARY OF CAPITALIZATION
Entitled to
in liquidation
$9,500,500
Balance
Assets
Applicable
$26,617,050
17.116,550
Coverage
280%
$11.70
OPERATING RESULTS
1942
% Net Change in Market Value of Assets
1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
+ 11 +1Adams Express
Dow-Jones Com
posite Stocks (c) + 15 -10 -10
-5 -11
+ 3
+25 -38
+29 -34
+51 +52 0
+ 32 +41 -1
+ 72 -9
+49 -16
-55
-54
% Net Change in Market Value of Assets for Various Periods Inclusive
Adams Express
Dow-Jones (c)
(c) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
-31
-30
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
+ 13 +7 -4 + 19 -26 + 12 +296 -72 -17
+ 3 - 7 -5 +22 -20 + 6 + 176 -73 -40
STOCK DATA
Per Common Shared 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income SS .48 .67 .46 .29 .16 .62 .50 .09 Nil d. 13-
Dividends .45 .60 .40 .25 .20 .60 .55 Nil Nil Nil
Net Asset Value
at year-end 3/5?3S11.70 10.62 11.12 12.64 15.42 11.61 22.84 13.04 6.10 6.40
Price Range .
High l\'
Low 7 4
Last j l
8Vs 9 11%
6%
8V2
12% 22%
7%
8V2
15%
9%
15V4
11% 11%
6
13>/«
5'/2 4% 6%
10%
4>/4 3
Annual Volume
Trading N.Y.S.E.
(000 omitted)$02
7% 7V* 6>/2 11% 7%71/2
147 286 209 265 342 514 843 820 554 1.332
[37]
ADAMS EXPRESS COMPANY
ASSET VALUE
PER SHARE
100 I
COMMON STOCK
10
.10
-.10
-I
-10
-100
$32.96
$25.00
$11
"^^^
$6.03
$2.14
-50% -25% D^4231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st, 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF ADAMS EXPRESS COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the
December 31, 1942 portfolio position. Leverage figures were adjusted for estimated increase or decrease in asset value
of American International Common Shares owned by Adams Express.
Applied to Common Applied to
In Event of Shares owned all Assets
Rise of 10% $13.49 $14.41
25% 15.51 17.51
50% 18.67 22.68
100% 25.00 32.96
Fall of 10% 11.08 10.28
25% 9.19 7.18
50% 6.03 2.14
[38]
ADAMS EXPRESS COMPANY
Shares
64,300
16.200
20,000
24,000
18,700
135,000
7,900
60.000
13,600
14.700
15.200
32,000
22.700
16.300
5.100
281.600
17,500
1,080
6,450
33,500
13,500
30,600
1,000
3,400
6,400
3,600
15.800
38.500
18,700
30.580
10,600
30,200
3,950
2.200
6.500
1.100
4,500
11.100
6.100
4.200
7.000
12.700
8.800
19.200
18.200
15.700
1.000
2U.S00
5.800
1.400
3.500
2.000
2.200
1.400
800
11.100
31, 1342:
STOCKS
(Common, unless otherwise stated) Market
Oil Value
Consolidated Oil $442,063
Gulf Oil Corp. 615,600
Culfboard Oil 0)10,000
Mid-Continent Petroleum 459,000
Ohio Oil 219.725
Petroleum Corp. or Amer 813,600
Phillips Petroleum Co. 355,500
Pure Oil 675,000
Standard Oil (N. J.) 637,300
Mining
Anaconda Copper Mining 860,150
Hudson Bay Mining 349,800
International Mining 113,000
International Nickel 658.300
Kenneeott Copper 472,700
dge Corp 135,588
1,337,600
118.125
168,300
387,000
201,000
476,000
493,425
375,500
78,200
518,400
American International
Atlas Corp.
U. 8. ft Foreign Sec 1st $6 pfd
U. 8. ft Intl. See. 1st $5 pfd. *.»..
Building
Amer. Radiator ft Stand. San
Lone Star Cement
Otis Elevator
Chemical
Allied Chemical ft Dye
Amer. Agricultural Chem.
Union Carbide ft Carbon..
Machinery and
AUls-Chalmers Mfg.
Deere ft Co.
Joy Manufacturing
National Supply Co.
Senel, Inc.
96,800
428.575
335.125
105.188
Pictures 662,965
20th Century-Fox Film 149,725
Iron ft Steel
Cliffs Corp. 292,000
Hanna (M. A.) Co. 01101,713
Jones ft Laughlin Steel 42,350
National Steel 838,000
Retail Trade
Best ft Co. 93,788
Bond Stores, Inc. 77,063
Green (H. L.) 355,200
Montgomery Ward 204.350
Office Equipment
National Cash Register 81.375
Remington Rand 91,000
Underwood EUlott Fisher 541,338
Shipping
American Hawaiian Steamship 286.000
Atl. Gulf ft West Indies 8.8 345,600
Aviation
Curtlss-Wrlght. A 398,125
National Aviation 125,600
United Alreraft Corp. 5% pfd 92,875
Railroad
Canadian Pacific Ry. 167,663
Delaware, Lackaw. ft Western 18,125
Brie R.R. 5% pfd 55.300
Pennsylvania R.R. 82.250
Heading Co. 41,325
Southern Pacific Co. 34,650
Union Pacific R.R. — 112,700
Wabash R.R. 4%% pfd. 18.900
Automotive
Mack Trucks 310,800
Drug
8,500 McKesson ft Bobbins 131.750
1.000 Merck ft Co. 0328,875
8.100 United Drug, Inc. 61.76:5
Railroad Equipment
1.200 Amer. Car ft Foundry 7% pfd. 78.600
4.200 Pullman, Inc. 110,775
Rubber
1.700 B. F. Goodrich 44,626
2.000 Goodyear Tire .ft Rubber 51,750
1.200 United States Rubber 31,050
Public Utility
10,000 Middle West Corp. 47,500
U. 8. Government Obligations
Prin. Amt.
(000 omitted)
$1,500 Treas. Bills, due Jan. 13, 1943 1.499.900
300 Treas. Bills, due Jan. 27, 1943 299.935
700 Treas. Bills, due Feb. 10, 1943 699.743
500 Treas. Bills, due Feb. 17, 1943 499.785
200 Treas. Bills, due March 24, 1943 199,850
1,000 Treas. Bills, due March 31. 1943 999.135
760 Ctfs. of Indent. 0.65%, due 5-1-43. 750.000
500 Ctfs. of Indent. 0.875%, due 12-1-43 600.156
50 Treas. Tax Notes, C, due 1945 50,025
500 Treas. 2%s, June 15, 1962-67 500,625
500 Treas. 2%s, Sept. 15. 1967-72 503.906
Bonds
300 Central Pacific Ry. 4s. 1949 249.750
300 Chicago. Mil*, ft 8t P. 4s. 1989 131.625
512 Chicago, Milw. ft St. PC 4V4s. 1989- 227,840
1,345 Chicago, K. I. ft Pac. 4V|S, 1960 55,481
115 Chicago. R. I. ft Pac. 4s, 1988 38,669
200 Chicago, R. I. ft Pac. 4s, 1988 reg.. 62,000
500 Erie R.R. 4s, 1995 466,250
343 Krie K.K. inc. 4«6s, A. 2015 189.508
360 III. Cent, ft Chic. St. L. ft N. 0. jt.
5s, A, 1963 168,000
294 N. Y.. Chicago ft St. L. R.R. C, 4%s,
1978 189,630
16 N. Y. State, 3% Sept. 15. 1945 0116.900
310 Northern Pacific 6s, 2047 206,925
210 St. L., Iron Mt. Ry., River ft Gulf
Div. 1st 4s, 1933 160,913
82 St. Louis-Sad Fran. A 4%s, '78 e/d 16,195
[QOver the counter.
Classification off Catisolidattd Assets (at
market values), as of Doc. 31:
1942 1941
Stocks: Amount 01% Amount Q]%
Oils $4,217,787 15.6 $3,517,858 13.7
Buildings 1,169,425 4.3 1,215,738 4.7
Mining 2,078,338 7.7 2,882,138 11 2
Invest, co. 2,011,025 7.5 1,319,244 5.2
Iron ft steel — 774,062 2.9 1,452.128 5.8
Drug ft bev. .. 222,387 0.8 200,500 0.8
Mrhy., etc 871,788 3.2 1,780,263 6.9
Office equip. .. 713,712 2.6 695,561 2.7
Amasement 812,690 3.0 639,760 2.5
Aviation 616.600 2.3 1,806,063 7.1
Chemicals 872,100 3.2 1,438,325 5.6
R.R. ft equip. . 720.288 2.7 1,363,613 5.3
Retail trade _. 730,400 2.7 846,625 3.3
Shipping 631,600 2.3 1,094,840 4.3
Automotive ... 310,800 1.1 392,663 1.5
Advertising ... __ 36,150 0.1
Rubber 127,425 0.5
Pub. utility .. 47,500 0.2 „
Total stocks 16.927,928 62.6 20.681.4U5 80.6
Bouds 2,179,685 8.1 550,040 2.2
®Total sec. — 19,107,613 70.7 21.231,505 82.8
Cash 1,212.574 4.5 3,738,330 14.6
U. 8. secur. .. 6.503.O60 24.1 500,313 1.9Adamex, sec. . 96,519 0.4 97,43ii 0.1
Acer, income - 50,136 0.2 50.721 0.2
Rec.. sec. sold. 40,683 0.1 14,603 0.1
Total $27,010,584 100.0 $25,632,910 100.0
li] Percentage of total assets at market value.
BCost: 1942, $28,572,413; 1941, $37,450,805.
[39]
AMERICAN CAPITAL CORPORATION
BACKGROUND
This fund was formed in 1928 with a public underwriting by Bonbright & Co. and W. C. Langley
& Co. It operates as an independent management investment company affiliated with another invest
ment company: Pacific Southern Investors, which owns 28.36% of its $3 preferred, 12.85% of its
Class 'A' and 11.85% of its Class 3' shares. Pacific Southern also owns 60% of the capital stock oi
Mitchum, Tully & Co., a well-regarded West Coast underwriting firm of which American Capital
owns 40%.
The five directors of the fund include two attorneys and Jonathan B. Lovelace, who is president
of the management company, which services both American Capital and Pacific Southern, and is
also president of The Investment Company of America, an open-end fund controlled by Pacific
Southern.
POLICY
American Capital's management is located in Los Angeles, and the portfolio of the company
includes a number of West Coast investments in addition to a fair amount of "special situations,"
none of them, however, forming any large portion of total assets. About 80% of the fund was spread
over a long list of common stocks at the year-end, and the fund's income from dividends and interest
showed a gross yield of about 6.5% in 1942.
Performance has been among the best, operating results exceeded that of the Dow-Iones Com
posite Stock Average in nine of the last 13 years and were considerably better for the over-all period
1930 to date.
Turnover of investments has been above average, total purchases and sales last year amount
ing to 46% of year-end total net assets, compared with 59% in 1941 and 69% in 1940. Expenses have
been heavier than those of most other management companies, amounting to about 1.56% of aver
age total assets last year, compared with 1.90% in 1941.
SECURITIES
The $5.50 Cumulative Prior Preferred, on which full dividends are being paid, yielded about 7%
at the year-end and was available at a discount of 22% from its value in liquidation. Total net assets
were 2Y2 times the year-end market price. This issue may be termed a good "business man's invest
ment," although its thin market on the New York Curb must be taken into account in appraising it.
The $3 Cumulative Preferred has been more of a speculative equity in recent years rather than
the conventional preferred stock type of issue. It showed a year-end yield of about 4.5% on the basis
of the 60-cent dividend paid in 1942 and1941 and sold for slightly more than half of its breakup value
and for less than its arrears of $18.30 at the year-end. It possesses substantial leverage due to the
senior preferred issue. A total of 24,961 shares (28.36%) of the $3 Preferred is held by Pacific Southern
Investors. These shares have received dividends at varying rates each year since issuance except
1932, average dividend paid during the past 8 years equaling about $1.50 per share.
Dividends were stated to be 45% tax free on the Prior Preferred and 100% tax free on the $3
Preferred, last year. Unrealized depreciation is substantial, so that continuation of at least partially
tax free dividends appears possible.
The company has a policy of repurchasing both preferred stocks from time to time, but pur
chases of stock junior to the Prior Preferred are not permissible if asset value of the Prior Preferred
would be reduced below $190 (a total of $4,616,620), and securities junior to the preferred may not
be repurchased if this would reduce its coverage below $70 (a total of $6,160,000). Approximately
35,000 shares of the Prior Preferred (60%) and about 33,000 shares of the Preferred (26%) have been
retired since issuance. Last year 720 Prior Preferred shares were repurchased at an average cost
of $67.05 per share.
Both the 'A' and 'B' stocks, on which no dividends have been paid for the last 12 years, are
extremely speculative since it would require a rise to about 220 in the Dow-Jones Industrial Average
to create any equity for them. These stocks must therefore be regarded purely in the "option" cate
gory. Their prices should be carefully appraised in relation to the $3 Preferred stock as occasionally
the ratio of values becomes disproportionate. These shares are traded on the New York Curb and
also over-the-counter, but are extremely inactive. As noted before. Pacific Southern Investors owns
14,200 (12.85%) of the 'A' and 75,000 (11.85%) of the 'B' shares.
[40]
AMERICAN CAPITAL CORPORATION
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Bonds
Preferreds
Common
ASSETS
Simplified Balance Sheet
As of December 31, 1942
$ 588,567 13%
15,900
390,163 9%
Ind.
P.U.
R.R.
Fin.
Inv.
$2,986,479
191,875
90,438
351,747
Co. 130,000
80%
5
2
9
4
100%
3,750,539 91
100%
4,156,602 87
LIABILITIES
Payables $ 18,985
Capitalization: f
$5.50 Cum. Prior
Pref. Stk. 2,429,800
no. p.v. stated val.
$95 per sh. ent. in
liq. to $100 a sh.
(24.298 shs.)
$3 Cum. Pref. Stk. 2,296,384 (b)
no p.v. stated val.
$10 per sh. ent. in
liq. to $50 a sh.
plus $18.30 ace div.
(88.000 shs.)
Class 'A' Com. Stk. 0
10# p.v.
(110.472 shs.) (a)
Class 'B' Com. Stk. 0
10# p.v.
(632.662 shs.) (a)
Total $4,745,169 100% Total $4,745,169
* Cost price $6,880,387.
t Capital Surplus $4,103,031.
Earned Surplus 84.315.
(a) Class 'A' entitled to $32 a share in
liquidation,—then Class 'B' entitled
to $10 a share; thereafter share and
share alike.
(b) Applicable to $3 Preferred at
12/31/42.
$5'/2 Prior Preferred
$3 Preferred
'A' Common
'B' Common
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable
$2,429,800 $4,726,184
6,010,400 2,296,384
3,535,104 (c) d 3,714,016
(c) d 7,249,120
(c) See Note (a) above.
OPERATING RESULTS
(See Page 10)
STOCK DATA
Coverage
$194.51
26.10
d 33.62
d 11.46
Net Income1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Prior Preferred 8.77 8.57 6.14 5.11 2.77 9.12 10.49 2.96 3.54 1.43
Preferred .89 .87 .18 d .11 d .74 .95 1.25 d .63 d .48 d 1.08
CI. A and CI. B — — — No Net Income Available — — —
Dividends
Prior Preferred 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 8.25
Preferred .60 .60 1.00 1.25 1.50 3.00 2.25 1.50 3.00 .75
CI. A and CI. B — — — No Dividends Paid — — —
Net Asset Value
at year-end
Prior Preferred 194.51 169.31 188.70 216.41 241.00 200.61 345.89 264.39 183.49 164.90
Preferred 26.10 19.57 25.09 32.58 38.11 26.09 61.40 40.43 20.48 17.17
CI. A d 33.62 d 36.90 d 30.60 d 23.40 d 18.22 d 28.24 2.88 d 15.83 d 32.94 d 36.01
CI. B d 11.46 d 12.03 d 10.93 d 9.67 d 8.77 «i 10.52 d 5.09 d 8.35 <i 11.34 d 11.88
Price Range
Prior Preferred
High 80% 68 Va 80 75 70% 89 Vi 91% 87 Va 68 59
Low- 65y2 59y2 65 64% 56 61 86 Va 76 58 30%
Last 78 59y2 68 Va 72% 67% 61 88 Va 87 68 59
Preferred
High 13 Va 11% 20% 23 24 V2 42 36% 28 21% 19
Low V/2 6 8% 15 10%20l/2
27 16 Va 15% 4%
Last 13% 6% 10% 20% 23 Va 23 26 >/2 27 18 19
CI. A
High Va 1% 2% 3% 4'/2 11 9 5 2% 3
Low Va % 1% 2 2% 4% IVa 1% 1
Last % % % 2Vi 2Va 3 7% 5 1% 1
CI. B
High %« %2 %6 % Va 1% 2 % % \V%
Low Va %A Vs % Va Va %6
Last %2 y* Va % % V* % Va %
Annual Volume of
Trading N.Y.C.E.
Prior Preferred 2,050 1,300 1,250 1,050 1,150 850 1,450 900 1,250 3,050
Preferred 5,000 5,200 4,800 4,800 5,700 4,400 7,100 5,100 8,300 13,700
CI. A 4,600 3,600 4,700 1,600 2,700 10,900 6,900 5,200 2,200 3,700
CI. B 7,000 3,900 7,000 10,900 14,100 26,000 40,600 17,300 11,600 14,650
[41]
AMERICAN CAPITAL CORPORATION
(Cuntn
Shares
Advertising, Prlntlm and1 .1100 CuliiailiU Broadcasting B-2,noo funis Publish, p pr. pfd.
(DMerket of*ot.Value
Doailai AUvekbeed
(MM 1.04
66.000 l isU.1M 0.53
•i.i25 i.n
Automobile fasti and Accessories
5.000 Alruworlh Mff. Oxr.500 O.U8.000 Campbell, Wyant t Cum. 48.000 1.011,300 Clark Equipment 54.181 1.151,000 Cleve. Graphite Bronu 30.250 0.64900 Eaton Manufacturing 18,115 0.88
1.500 Electric Auto-Lite 43,000 0.1)51.000 Motor Wheel ll,r>00 0.241.500 Hpleer Manufacturing 61.000 1.081.000 Stewart Warner 7.125 0.16
111.(11
Automobile Tint ami Rabber OoossGeneral Tire A Rubber 15.115Goodrich (B. f.) 15 pM 0)1(430
500 Bank of The Mesttltlan Co.—1.000 Chaae National Bank2.000 Marine Midland Corp.2,000 Seeurlty-lst Nat Ik., L. a..*00 Hun Ufa Aawr. of f60 - - -
Bofldlng and1,500 Amirtcaa teatlnf1.500 Olotex Carp. ..1,300 Detroit Steel "500
2.000 Partfine Cue.. Inc.2.000 Raymond Concrete P1.200 Bobertean (H. H.)600 Buberold Co.
1.879 True Co.
M.4U12.M211.75088.12511.00078.23028.300
Bl1.000
Electrical2.000 Elertrvrmasur. Inc.2.000 Line Material Co. ..1.000 Berrel. Inc.1.600 Zenith Badle Corp.
DD8.00014.75011.00020.818
1.000 roararrtUI Credit Co.20.000 Oenenl Araer. Inrestora1.000 Mtfe. Guarantee, L. A. fjl5.800 By. * Util. In. 68.50 fid.. 91'
18450180.000"14.000IMM
7.2001.000300
2.5004.0003,0110
1.S448.000600
l.bOOI.OOO8,000
11002.200i.ooo1.5003.0001.0003.PO01.500
5.000
Toed Producta andBlreley's, Inc. ........Burden Co. —.—.....California PickirnCanada Dry Olnfer Ale..Creamertee of America.National Dairy Product!Pepat-CoU Co. ..—....
10.80022.75011.08385.625
0)13.50043.87514.015
Atlaa Imperial MewlAirlsnn ManufacturingDullard Co.Byron Jackaon —Caterpillar TractorDresser ManufaeturlnfKolie, Inc .—Loane-Wells Co.Natl. Supply 82 pfd —Natl. Bupply 5%% pr. pfd.New lilra. Inc.Northwest Engineering
Bred Boiler Bit -Sundstrand Machine Tool-
Medicine. Drop aSharp A lKihne ...Squibb (B. I.J A
46.1600114.400
Metala and Metal500 Anaconda Copper
2.500 Mueller Braes Co. -"■OH Phelps Dodge Corp.
Miscellaneous Industries1.000 Armstrong Cork2.500 Crown Cork a Seal3.300 Davison I'hcmlralI .ooo Fraehauf Trailerl.ooo Kalamaioo Steve a Furnace500 Stapes Cons. Mff.100 Mohawk Carpet Mllla
1.000 PaclBc Mllla
1.000 r. 8. Leather
30.50046,03841.56117.000
3)13.1253)12.750
1.80018.876
0)4.000
(.19
IJI
11.475 0.6T
Ml•.IT0.580.131.651.210.48
107,4(1 4.88
14.750jt.OM27.7506.250
71.00057.00010.160
Ml0.270.46MlMl
0.440.22
0)14.0*8 0.8O
WJM -54*
Ml0.110.21Ml
68.668 LSI
MO1.75Ml1.04
121.560 4.60
8.230 480.230.710.290.83Ml
152.238 3.21
0)8.400(08.73011.62316.(0041.00047.6250)140014.30013.875
0184.00030.000
0)20.00083.000
0)20.025
LIT0.210.240 580.871 010.030 300.201.780830.421.330.44
401.000 1.48
Ml
60.660 1.11
12.2606447512.318
1.160.26
78,131 1.67
Ml0.87on0 36Ml027M4Ml
Ml
Motion Pictures A Amusements1,300 General Precision Equip1,500 Loewe. Inc.
in 000 Paramount Pictures ..3.000 20lh Century-Fin. Film4.000 Walt Disney 0% pfd
18.529 0.1180.000 1.41167.500 1.6142.375 O.N
0)25.500 0.64
Office 6 Business Equlpm1 ,300 Artdressearsph Multlgrspb1.500 Merchant Caleul. Mack. .
322400 1.14
11.011 0.400120460 O.U
Oil Producing and BiHonolulu Oil Corp.Humble Oil I BanningMission Corp _Ohio Oil Co.8hcll Union OU Corp. -Shelly Oil Co.Standard Oil of CalStandard Oil (Ind )..SUndard OU (X. J.)..Tide Water Assoc. OU.
1.0001.500(.7,103,01101.0001.0001.000500
1,132500
4,00071,000
200 Intl. Paper 5% pfd. ..500 Bayouler. Inc.500 kayonler. Inc. 12 pfd.
■allrooda500 Ateh., Top. a Hanu Fe...
3.000 Great Northern By. 16 pfd..
D. I. Co. ...
0115.00000.37590.45035.25018.37510.25017.7301445052.2145.000
27.000140.600
Ml1.911.910.760.19(44IJIMl1.11Oil0.57Ml
(06.514 11.16
1.0756.000
0113.000
1.110.130.28
28475 0.60
2141167.500
0.48141
(0.411 1.91
1.0001.20112,000500
l.ooo2,0001000
Railroad EquipmentAmerican Steel Foundries.. 40,000Franklin By. Supply 0)17.700General By. Slfnal 24,750National Malleable 7,125New York Air Brake 0)26. 2.-.0Pittsburgh Forginp 17.250Toungstown Steel Door 17.750
0.850370.520)50 5011.370 38
150,825 3 20
Assoc. Dry Gds. 2nd pfd...Broadway Dept. StoreBullock's. "
1003.000500 Bullock's. Inc.600 Glmbel Brothers 40 pfd
3.000 Marshall Field2.000 Montgomery Ward500 Murphy (G. C. I
2.000 Western Auto Supply
_]5.700
J27.7881 16.50034.20029.25067.000
0)31.511039.250
0 Itii :>:)oar,0.720.112142O.rtO0.83
1.3001.0001.8001.0002.500
8.0003.000701
5002.0002.000
Steel and IronCrucible Steel nf America...United Stales Steel CorpWestern Pipe A SteelWheeling Steel Corp.Woodward Iron Co.
251.188 5.31
42.25047.250
[3)26.10017.02543,750
0 891.000.5.'i0370.93
176.975 3 71Utilities
Amrr. A Fgn. Pr. 86 pfd... 12.300Greyhound Corp. 113.000Niagara Hudson Power 5.625l'ugrt Sound Pr A Lt. 85 pr.
pfd. 70.303Pujet Sound Pr. A Lt. 36 pf. 22.500Southeastern Uiohound ... 0131,250Sou. Calif. Edison 42.000'
Other Investments2.000 Mllchum, Tully A Co.Face
(20.000 Araer. A Fin. Pr. 5s 2030.
lot I
0.262 3K0.12
1.49l) is0 fir,0.S9
297.038 6 29
102.031 2.10
15.900 034
4.15G.603 87 95569.582 12.05
4.726.185 100.00
rjDValaes based on stock exchange quotations exreptwhen otherwise noted, and the reported sale price nn Dee.31. 1942 is used as basis of valuation; or in absence ofrecorded sales, tbe bid price on that day.
[JjValue* based on over-the-counter quotations; bid priceat close of business Dec. 31. 1942
an orf Dos. 11et value of securities):1942 r
1941-
AdvertisingAircraftAutomobile* .Auto, access. .Banks at ins.-BuUdlrtK, etc..Container* ..Dec. equip. ..Financerood at bever.Machinery —MedicineoMetal*Mine, induat...Amusement* .OfflcaOU ...PaperRailroadsRail, equip. -.Retail trade ..Steel & iron..UtilitiesOther invest—BondsMet cash
%of * ofAmount fund Amount fund149450 1.0 132400 0.811.125 1.7 156.138 3.7
11(413 U324.163 14 270 925 1.4207.4*3 44 215.875 5.12544*8 5.4 150.025 3 6
m 41.700 1.0544(3 14 149425 35221450 47 144 050 34152438 3.2 126450 3.0401.000 8.5 252 620 60
•0480 1.3 93487 2278438 1.7 145.125 3.4
185.550 3 9 67.938 1.1323.900 6.8 287487 64394(3 94 1.1
(06.514 124 386894 9.1
14,075 M 27.938 07
90.438 1J 135.(25 32150426 14 147.450 3.5251,188 5.3 251,1(3 5.912(475 3.7 210425 50297,038 6.3 190.550 4.4102,884 2.2 116.269 2615.900 03 44.930 1.1
5(9482 14.1 425476 1M
1I84M 141 Total 14.726.185 100.0 34.235.689 100.0
[42]
AMERICAN CAPITAL CORPORATION
a* e*J Dm. 11. 1M2I
DJMarket ofValue
Adrertlslng. Printing end1 .11(10 Columbia itroaileutliw B...anew earth i-ubllah. 13 pr. pfd—
MM11.0001.5001.000too
1.300'1.0001 .5001.000
Dowglai ALockheed
Aircraft .
firi.iso o.si34 .1100 0.72
10.290 1.04
Aircraft .68.00023.126
11.125
AatoatMlc Parti urj tararia
Alruwortb Mfg. 0127.500Campbell. Wyant A Cannon. 48.000Clark Equipment 04,182Clere. Graphite Bronse S0.'a5(lKulon Manufacturing 12,125Kleetrle Auto-Lite 45.000Motor Wheel 11,500Spleer Manufacturing 51.000Stewart Warner T.125
202.M8
Automobile Tim urj labbcr1.000 General Tlrt 1 lubber200 Goodrich (B. P.) $5 pfd.
500 Bank of The Maabeltaa Co.1.0002,000 Marine Midland Cm*. .2.000 Securlty-lst Nat. lb.. L. A..MO Bun Life Aanr. of ' '50
Banding and1,500 American Boatlnf1.500 Celotei Carp. ..1.500 Detroit Steel Pr500 Johne-Manrllle ..
2.0002.0001.200
15,1250)16450
Paraflne Coo.,Raymond Cooeretoiobertaon (H. H.)
1,210 True Co. .
Electrical2.000 Electreouater, lac.2.000 Line Material Co. _1.000 Serrel. lac1.500 Zenith Radio Corp.
Finance and laftataacnt1.000 Commercial Credit Co.
20. OIK) General Amer. Inreatora1.000 Mtfe. Guarantee, U A. .S.hOO If. * Ulll. lnr. W.50 pfd..
7.2001 .0011500
2.5004.0003,0110
1.3443.IMI0
Alio1.0001.0008.000HOO
3.2001 .11001.5003.0001.0003,0001.500
Medicine. Druta A5.000 Sharp A Dohme300 Squibb (B. I.) A Bona...
Metals and Metal Fabricator!500 Anaconda Copper Mining —
2.500 Mueller Braoa Co.."•on Phelps Dodge Corn.
Miscellaneous Irataatrlci1.000 Armstrong Cork2.500 Croon Cork A Seal3.300 Dart-on ChemicalI .mm Pniehauf Trailer1 .000 Kalamaaoo Store A Furnace500 Mapei Cone. Mfg.100 Moiurrk Carpet MIIU
1.000 PaclOc MIIU1.000 1°. 8. Leather
40.150(914.400
1 180.52
1.fl
Ml1.011.160.040.380.050 211.080.1a
0.10
MI
31.475 ».«T
221.550 4.69
rood Producta and BererageiBlreler'a. Inc 10.800 0.23Borden Co. 22.750 0.48California Packing 11.002 0.22Canada Dry Ginger Ale 25,025 0.T5Creamerica of America 0)13.500 0 29National Da lnr rroducta 43.875 0.03PeprJ-CoU Co 14.635 0.21
152,238 8.22Machinery
Atlaa Imperial Dteeel 018.400Alelson Manufacturing 019.750Bullard Co. 11.635Byron Jaelnon 26,800Caterpillar Tractor 41,000Drrvier Manufacturing 47.625Kobe. Inc 011.200Lnane-Wella Co. 14.300Natl. Bupply 82 pfd 13.875Natl. Bupply 5ft% pr. pfd. 0184.000New Idea. Inc. 39.000Northwest Engineering 0120.000Bred Roller Bit 63.000SuiHlstrand Machine Tool— 0120.625
0.170.210.240580.871.010.030 300.291.780.836.411.380.M
401,000 (.48
O.MMl
60,650 111
11.25064.ITS12.313
1.180.26
78,138 1.67
30.50045,93941.58317.000
[E13.I250112.750
1.80018.878
014.000
I.M0.870.M0360280 271.MO.M
Ml
Motion Plcturei A Amusement!1.300 General PrecLrton Equip1.500 Loew'a, Inc.
10.000 Paramount Pictures3.000 20lh CenturyTui Film4,000 Walt IHaney 1% pfd
Office A Raalneae Equipment1,200 AiMreaaceraph-Nultlgraph __1,500 Merchant Caleul. Mach.
1K.3250B.000167.50041471
0125.500
OU Producing and leaningHonolulu UU Corp.Humble Oil A Refining ....Mlaelon Corp _Ohio Oil Co.Shell Union OU Corp.Shelly 01Standard
Oil Co.
1.0001,5006.7001,0001.0001,0001.000500
1,132500
4,00076,000
200 Intl. Paper 5% pfd.500 Rayonier, Inc. .5M Rayonier, Inc. 12 pfd.
Railroad!500 .Men . Top. A Hani* re...
3,000 Great Northern Ry. M if*..
I of CalOil (Ind IOU (N. J.|
Tide Water Aim. Oil.Transveatem OilD. S. Petroleum Co. .
1.0756,000
HUN
1003.900500600
3.0002.000500
2.000
Retail TradeAnoc Dry Gdi. 2nd pfd..Broadway Dept. StoreBulloek'i. Inc.Glmbel Brother! 16 pfd.—Marshall FieldMontgomery WardMurphy (G. ~C.I
2.000Face
Other InvestmentsMltchum. Tully A Co.
120.000 Amer. A Fgn. Pr. 5s 2030.
Xat iTotal securities
0.391.Ml.MOMM4
322,900 6 14
11.0110120,250
0115.00090.37590.45035.2501847510.254)17.75014,25052.2145.000
27.000
MlMl
I.M1 911.910 16Ml1441 86MB111Oil0.57
6M.514 11.18
1.110.130.28
28,075 0.60
2243867.500
0. 4K
1.M
90.428 1.91Railroad Equipment
2.000 American Steel Foundries.. 40.000 0.851.200 Franklin Ry. Supply QOl',700 0.372.000 General Ry. Signal 24,750 0.52500 National Malleable 7,125 0.15
1.000 Near York Air Brake 0126.250 0 562,000 Pittsburgh Forgtngs 17.250 0.371000 Toungstown Steel Door 17.750 0 38
150.H23 3 20
B5.70027,788
1 10.50034,20029.25067.000
0131.30039.250
n 120.330 3-|0.720.1121.420 i;tiO.rtf
231.188 5.31Steel and Iron
1,300 Crucible Steel of America.. 42.2301.000 United States Kteel Corp 47.2501.800 Western Pipe A Steel (£26,1001.000 Wheeling Steel Corp. 17.0252.500 Woodward Iron Co 43.750
176.973Utilities
300 Amer. A Fgn. Pr. 26 pfd... 12,3008.000 Greyhound Corp. 113.0003.000 Niagara Hudson Power 3,625701 Pugrt .Sound Pr A Lt. 15 pr.
pfd. 70.303300 Puget Bound Pr. A Ll. 10 pf. 22.500
2.000 Southeastern Greyhound ... 0131.2502.000 Sou. Calif. Edison 42.000"
0.891.000.550370.93
3 74
0.262 300 .12
1.400 ISo mi0.S9
297.038 6 29
102.034 2.10
15.000 0 34
4. 130.603 87 93509.382 12.03
1.726,183 100 00
[ijValues based on stock escbange quotations exceptwhen otherwise noted, and the reported sale price nn Dee.31. 1942 is used as basis of initiation; or In absence ofrecorded sales, the bid price on that day.
IjFJValues based on over the-coonler quotations; bhl priceat close of business Dec. 31. 1942.
Clmoalmcntlam of Nat Aaaa-ts. are of Dnc 21(baaed on market value of aecurities);
-1M1-
AdvertUing . .AircraftAutomobiles .Auto, acceaa..Banks & inc..Building, etc..Container*E3ec. equip. ..FinanceFood (t never.MachineryMedicine*Metal*Ml*c. induat...Amuaementa -OtTice equip..OUPaperRailroads
113.510 Ml
Rail, equip. .Retail trade .Steel & iron..UtilitieaOther fBondsNet cash
Total
•hot
Amount fund Amount fund
149.250 1.0 132400 0.881.125 1.7 158.138 3.7
_ 116,813 2.8324.113 69 270 925 64207.463 4.4 215.875 5.1254MS 54 150.025 36
"58.563 fi41.700 1.0149425 35
221.550 4.7 144 050 3.4152.238 32 126.250 3.0401.000 8.5 252 620 6060.650 1.3 •3487 2.278.938 1.7 145.125 3.4
185.550 3 9 67.938 16322.100 6.8 287.887 6839263 M 47413 1.1606414 12.9 386.894 9.1
28.075 M 27.938 1.190,438 1.9 135.625 3.2150425 3.2 147.450 3.5
251,188 5.3 251,163 59178475 3.7 210425 50297,038 6.3 190.550 4.4102,034 2.2 116.269 2615.900 03 44.930 1.1
509482 12.1 425476 10.1
14.726.185 100.0 14.235.689 1000
[42]
NOTE
[43]
AMERICAN CITIES POWER & LIGHT CORPORATION
BACKGROUND
Formed in 1928 by Central States Electric Corporation, this company was part of the complicated
investment and holding company pyramid whose primary objective was control of the North Amer
ican utility system and which also included Blue Ridge Corp., Shenandoah Corp. and Electric Share
holdings (now General Shareholdings). Control of American Cities, through 70% common stock
ownership, is still held by Central States Electric, which is now in receivership, and ultimate control
of the company will depend upon the outcome of the Central States reorganization. Two of the present
four directors of American Cities are trustees appointed by the court to administer the Central States
reorganization. Together with Central States Electric, American Cities holds 73% of the common stock
of the Blue Ridge Corporation, whose directorate is identical with its own.
POLICY
The chief holding has been North American Co., of which 487,030 shares were owned at the
year-end and which, together with 77,200 shares of American Gas & Electric, accounted for approxi
mately 58% of the total assets. The company also owned 3,165,963 shares of Blue Ridge Corp., a vola
tile leverage security which accounted for an additional 27% of total assets. The portfolio value has
been mainly influenced by the price trend of utility stocks and the record of performance has been
poor, when comparison is made with the Composite Average, but it is necessary to consider that
the past history of this company was closely involved with the control of a large utility holding
company and performance should be viewed in that light. Portfolio changes have been infrequent.
Last year about $1,418,000 of securities were sold, principally to reduce the bank loan. Expenses last
year were about average, at .90% of average assets, and were $39,643 lower than in 1941. Gross
income on portfolio last year was a little over 8.9% of average assets. Performance was outstanding
with the sharp upturn in utility share prices — this fund has the largest increase in asset value in
1942 with an increase of 41% compared with an average gain of about 15%.
SECURITIES
American Cities Power & Light escaped by only a narrow margin from following Central States
Electric into receivership last year. The sharp decline in utility stocks, which carried North American
down to 6V2 and American Gas & Electric to 13Vi, accompanied by a low quotation for Blue Ridge
common, left only about a 30% margin in the market value of the company's assets over its bank
loan in the spring of 1942. In reflection of this, prices of the outstanding securities fell to extremely
low levels, both preferred issues dropping to below $5 a share. Since that time, however, American
Cities has paid off about 25% of its bank loans and is steadily reducing the remainder; price rises
in utility stocks, as well as in Blue Ridge common shares have already brought the company well
out of danger. As a result, the company's issues have advanced very sharply.
The $3 Cumulative Convertible Class 'A' stock at the year-end was selling at about a 57%
discount from net asset value. High leverage is provided both by some $3,660,000 senior obligations
in the form of bank loans and by the character of the company's investment holdings. Conversion
feature is of no present value, as each share is convertible into 1.43 shares of Class 'B.' A dividend
of 37'/2<f a share was declared payable May 1, 1943, at which time dividend arrears will total $4.87 Vi.
The $2.75 Cumulative Class 'A' stock, ranking equally with the $3 preferred, was issued in
1936 at $47.50 a share with warrants to buy 1 common share of North American Co. at $40 on or
before July 1, 1941. It possesses the same leverage as the $3 preferred and was also selling about 60%
below year-end asset value. These shares should sell at least one and possibly two points lower than
the $3 Conv. Class 'A' stock, but throughout most of the past year both issues sold at about the same
price. Dividend arrears on May 1, 1943 will be $3.78Vs after distribution of 343/stf on May 1, 1943.
Both issues of Class 'A' stock rate equally as to assets and dividends but it should be noted
that the $3 stock (known a the "old" stock) is entitled in redemption or in liquidation to $55 per share
whereas the $2.75 stock is entitled in redemption to $52.50 per share and in liquidation to $50 per
share. Regular dividends were paid until February 1, 1942, when directors deferred action due to
the asset value falling below statutory requirements, but as noted above partial payments were
recently resumed. Net income last year equalled $3.25 per share compared with $4.25 in 1941.
The company has an announced policy of purchasing its preferred shares although none were
acquired last year. About 75% of the original issue of the $3 class 'A' shares and about 40% of the
$2.75 Class 'A' shares have been retired to date. Both issues are listed on the New York Curb.
Although Common stock I Class 'B'l had no asset value at year-end, its low valuation in
relation to total working assets gives it considerable leverage. Since utility stocks would probably
be one of the stronger groups in a real "peace market" this stock can be considered as a speculative
hedge against sudden ending of the war, and is a good switch from certain holding company shares
about whose ultimate value serious doubt exists. Each share of common represented about $2.71
of year-end value of utility securities—plus about 1.1 shares of Blue Ridge,—subject to preferred
claims. It is listed on the New York Curb. A total of 2,037,547 shares (70%) is held by Central States
Electric Corp.
Portfolio, as of Dee. 31, 1942:Common Stocks Market
Shares Value■487,030 North American Co $4,870,300
3,165,963 Blue Ridge Corp 2,968,09077,200 American Gas & Electric 1,486,100
26,100 American Light & Traction 339,30095,500 Niagara Hudson Power 179,063
4,000 Pacific Gas & Electric 92,50011,600 Peoples Gas Light & Coke 553,600
40,725 United Light & Pr. A 10,18128,957 United Light & Pr. B 7,239
Total com. stocks $10,486,373
Preferred Stocks15,500 United Lt. & Pr. $6 1st $348,750
[44]
AMERICAN CITIES POWER & LIGHT CORP.
Cash, Receivables, etc.
Investments, at market *
Preferreds
Common
P.U. $7,518,283 72%
Inv. Co. 2,968,090 28
100%
ASSETS
Simplified Balance Sheet
As of December 31, 1942
$ 228,291 2%
$ 348,750 3%
10,486,373 97
100%
10,835,123 98
Total $11,063,414 100%
* Average book price (at cost or prices at April 19, 1933 ii acquired prior to this
date) $26,145,652.
t Capital Surplus $11,723,682; Earned Surplus $2,885,522.
LIABILITIES
Payables & Res. $ 46,472
Capitalization: f
Notes Payable
(secured) 3,660,000
Preferred Stock(b) 7,356,942 (a)
$3 Cum. Conv. CI. 'A'
Stk., $25 p.v. ent. in
liq. to $55 plus $3.75
accr. div. (119,383 aha.)
$2.75 Cum. CL 'A'
Stk., $25 p.v. ent. in
liq. to $50 plus $2.75
accr. div. (86,870 shs.)
Class 'B' Stk. 0
$1 p.v. (2,901.940 shs.)
Total $11,063,414
(a) Applicable to Preferred at 12/31/42.
(b) Both issues oi Class 'A' Stock rank
equally as to assets, and dividends
but are treated variously in liquida
tion as noted above.
Notes Payable
$3 'A' Preferred
$2.75 'A' Preferred
Common (CI. *B')
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable
$3,660,000 $11,016,942
7,013,751
4,582,392
Balance
7,356,942
d 4,239,201
Coverage
301%
$35.67
d 1.46
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
American Cities
D.-J. Utility
Stocks (c)
+ 41 -36 -25 -1 +15 -43 +12 +80 +8 -22 -4 -36 -24
+ 12 -24 -18 +17 +20 -29 + 23 + 78 -40 + 20 -7 - 46 -29
% Net Change in Market Value of Assets for Various Periods Inclusive
(c) Above percentages adjusted for actual dividends paid each year. AH figures are approximate.
STOCK DATA
Net Income
Common CI. B
Dividends Paid (e)
$3 conv. pfd. CI. A
$2.75 2nd pfd. CI. A
Common CI. B
Net Asset Value
at year-end
Pref. 'A' (both issues)
Common •
Price Range
$3 conv. pfd. CL A
High
Low
Last
$2.75 pfd. CI. A
High
Low
Last
Common CI. B
High
Low
Last
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
$3 pfd. CI. A
$2.75 pfd. CI. A
Common CI. B
(e) Preferred shareholders have the option to receive dividends in "B' shares instead of in Cash.
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
3.25•4.25
4.01 3.28 3.26 5.49 4.70 6.61 5.20 3.09
0.03 .10 .08 .03 .04 .26 .19 .19 .12 .01
Nil 3.00 3.00 3.37 V2 1.87 Vi 3.00 3.00 3.00 3.00 3.00
.68% 2.75 2.75 2.75 2.06 Va 2.75 .68% Nil Nil Nil
Nil Nil Nil Nil Nil .30 .20 Nil .10 .15
35.67 20.52 46.62 69.94 65.16 55.44 116.98 163.45 90.51 88.28
i 1.46 d2.35 d .31 1.33 1.07 .26 6.71 5.72 1.86 1.75
17 Vs 28 Vi 35 35 Vi 30 Vi 41Vi 48 Vi 47 34 Vi 36%
43/810% 25 Vi 27 16 23 Vt 38 Vi 29 29% 24%
15'/2 Nil 28 31% 28% 24 Vi 40 Vi 45 Vi 31 26
17Vi 265/b 33 Va 34 Vi 30 Vi 47 47 Vs j
4 9 22Va 25 Vi 16 Vi 22 Vi
45 |
> issued in 1936
14 Vi Nil 26% 29 27 22%
% % IVa 2% 3Vi 8 9 6V4 4Vi GVi
Vu Va Vi 1% 1% 2 5Vi % 1% IV2
% % % 1% 2 27s 6Vi 5% 1% 1%
21 13 9 *17 11 22 22 33 14 23
14 13 10 23 29 34 15 issued in 1936
66 57 62 '60 79 152 269 281 142 237
[45]
AMERICAN EUROPEAN SECURITIES COMPANY
BACKGROUND
Formed in 1925 to take over the assets held in the United States by a Swiss company formed
in 1910, this fund operates as a leverage type of investment company. Directorate of nine includes
three members of leading Swiss banking firms in Geneva, three of the others are connected with
Electrical Securities Corp. of New York (wholly-owned subsidiary of General Electric) and the Presi
dent is a partner of the New York Stock Exchange firm of Dominick & Dominick. The company states
that no interruption in the operation of its affairs has been occasioned by the fact that five of the
nine directors are in Switzerland, where a substantial portion of the stock is held.
POLICY
Originally an investment company with only electric and other utility holdings, these types of
securities still predominate in the portfolio, comprising about 78% of total assets. Utility bonds
amount to 24% and utility preferreds account for about 44%. The list of common stocks owned is
unusually compact embracing only 22 issues. Entire portfolio showed a gross yield of 7.2% last year
which was substantially less than in 1941, the decline being partly due to important receipts of
dividend arrears on utility preferred shares in the earlier year.
Management results have been about average, bettering the Dow-Jones Combined Stock
Average in 8 of the last 13 years, and showing a moderately better result from 1929 to date, which
is impressive in view of the preponderance of utility holdings. Little trading activity was shown in
the portfolio last year, total purchases and sales being $862,616, or only 10% of net average assets,
compared with 11% in 1941. Operating expenses have been far below average, amounting to slightly
over V3 of 1% of last year's average assets, a decline of $5,945 from 1941.
SECURITIES
The $6 Preferred stock is protected by a good margin (year-end coverage about 1.8 times its
market price). This stock was originally offered in Switzerland and is listed on the Geneva Stock
Exchange. It is also traded occasionally over-the-counter in New York but is extremely inactive due
to the small supply in this country. It was available at 85 or a 15% discount from value in liquidation
to yield about 7% at the year-end.
Preceded by both preferred stock and bank loans (the latter incurred during the first half of
1941 to replace funded indebtedness) the Common stock appears to possess a high degree of leverage,
but the leverage is somewhat less than appears at first sight since about half the total portfolio con
sists of medium grade utility bonds and preferreds. The common stock is inactively traded on the
New York Stock Exchange where its year-end price represented a premium of 5% above asset value.
A substantial percentage of the common stock is held in Switzerland where it is listed on the Geneva
Stock Exchange. Atlas Corp. holds 38,000 shares. The first dividend payment on the common shares,
amounting to 40^, was paid on December 20, 1941, and 50^ was paid last year. As stated above,
income from investments was substantially smaller in 1942 than in 1941. Earnings per common share
amounted to $0.53 compared with $1.41 in the year before.
There are also issued and outstanding option warrants entitling holders to purchase at any
time 20,500 shares of common, at $12.50 per share. These warrants are held by two of the directors.
Common and Preferred dividends paid in 1941 and in 1942 have been tentatively declared
100% non-taxable. Since a considerable portion of this company's own income is derived from interest,
and therefore taxable, the fund is one which may logically be expected to qualify as a "regulated
investment company"; this would be of advantage for the company, from a tax point of view, but,
on the other hand, would end all non-taxable dividends for the shareholders.
[46]
AMERICAN EUROPEAN SECURITIES COMPANY
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investment, at market *
Bonds $2,093,738 24%
Preferreds 3,735,688 44
Common
Ind. $1,881,562 68%
P.U. 877,625 32
LIABILITIES
$ 499,844 5%
100%
2,759,187 32
100%
8,588,613 95
Total $ 9,088,457 100%
* Book value at cost $11,075,102.
tBook Surplus $2,138,985; Reserve $2,096,291.
Payables
Capitalization: f
Bank Loan 2%
(Sec. due
6/1/46)
$6 Cum. Pref.
Stk., no p.v.
ent. in liq. to
$100 a sh.
(50,000 shs.)
Common Stock,
no p.v.
(354,000 shs.)
Total
$ 184,554
1,800,000
5,000,000
2,103,903 fa)
$9,088,457
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Bank Loans
$6 Preferred
Common
Entitled to
in Liquidation
$1,800,000
5,000,000
Balance
Assets
Applicable
$8,903,903
7,103,903
2,103,903
Coverage
495%
$142.08
5.93
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
American European +9 -5 -1 +14 +19 -35 +34 +82 +7 -10 '-21 -44 -24
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
American European +4 +3 +17 +39 -9 +22 +135 -67 -28
Dow-Jones (b) +3 -7 -5 +22 -20 +6 +176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income
Preferred 9.74 15.98 13.41 9.32 7.09 8.69 7.41 4.57 4.38 5.35
Common 0.53 1.41 1.05 0.47 0.15 0.38 0.20 (d) (d) (d)
Dividends
Preferred 6.00 12.00 13.50 9.50 6.50 8.00 7.00 3.00 Nil Nil
Common .50 .40 Nil Nil Nil Nil Nil Nil Nil Nil
Net Asset Value
at year-end
Preferred 142.08 137.97 163.98 181.37 166.79 140.13 258.23 187.35 81.37 75.03
Common 5.93 5.36 8.18 9.57 7.02 3.19 19.57 9.43 d 5.10 d 5.14
Price Range (c)
Common
High 7V2 6>/2 65/s 6V4 7 V* 17 145/s 9>/4 10% 13
Low 3V433/4
3%43/4
4 5 9%23/4
4 3%
Last 6V4 5 3»/4 5 QVe 55/s 12% 9% 4»/4 5»/4
Annual Volume of
Trading N.Y.S.E. (c)
(000 omitted)
Common 8 10 5 5 4 12 23 14 10 43
(c) Figures tor price range and trading activity of Preferred shares are not available.
[47]
AMERICAN EUROPEAN SECURITIES COMPANY
Securities Owned, as of Dec 31, 1M2:
Bunili
Principal
A II i oil lit
Amer. ft Ksn. Pr. 5s. 2030 $400,000
Amcr. Pr. ft L. 0s, 2016 250.000
Cltlei Service 5s cv. 1050 350,000
Cities Serv. Pr. ft L. 5%s. '49— 50.000
Cities Serv. Pr. ft L. SVfes, '52— 150.000
Contl. lias ft Elec. 5s A. '58 150.000
Electric Pr. ft L. 5s, 2030 350,000
New Kris. Gas ft El. 5s, 1947 12,000
New Eng. Gas ft El. 5s, 1048 Ki.ooo
New England Gas ft El. 5s. 190U— 22.000
New Eng. Power 5s, 1948 60,000
New England Power SVjS, 1054— 100.000
Pecos Vul. Pr. ft L. Us non-cum.
inc/deb., 1950 50.000
Stand. Gas ft El. 6% nts., '48— 114.000
Std. Gas. ft El. C% cv. nts., '48— 27.000
Stand. Pr. & I,. 6s. 1957 200,000
United Lt. ft Rys. 5MfS, 1952 — 207,000
Preferred Stocks
Share*
Alabama Power Co. $7 1,800
Alabama Power Co. $6 600
Amer. ft Foreign Pr. $7 3,500
Amer. ft Foreign Pr. $6 2,500
Amer. Power ft Light $6 1,000
Amer. Power ft Light $5 4,000
Arkansas Pr. ft Lt. $6 1.000
Cities Service Pr. ft Lt. $6 5,000
Common*, ft Southern $6 7,000
Consol. Edison, N. Y. $5 91
Cont. Gas ft El. 7% prior 3,200
Electric Bond ft Share $6 5,000
Electric Pr. ft Light $7 3,000
Florida Pr. ft Light $7 5,000
Foster Wheeler 6% prior 2,000
Georgia Power Co. $6 500
Georgia Power Co. $5 500
Louisiana Pr. ft Lt. $6 1,650
Mississippi Pr. ft Lt. $6 1.500
National Pr. ft Light $6 2,000
New England Power 6% 1.500
New Eng. Pub. Scrv. $7 pr. lien. 1.500
New Eng. Pub. 8erv. $6 200
United Gas $7 — 6.500
Common Stocks
Building
Otis Elevator Co. 2,500
Pittsburgh Plate Glass 1,000
United States Gypsum 500
Market
Value
$319,000
238,125
3<IO,r>t>3
42.K25
128.025
123.187
308,000
5,985
8.000
10. .son
45.900
80,500
5.000
73,103
17.077
127,50025U,ti.r,S
$181,800
55,800
160,750
102,500
18,750
66.500
78,500
377,500
259,000
45,500
240.000
214.375
99,750
405,000
32,500
49,000
43.500
166.656
102,000
177,000
38,438
71,250
1,250
739.375
40,313
85,750
30,500
Chemical
United Carbide ft Carbon 1,000
United Carbon 1.000
Electrical Equipment
Crucial Electric Co. 5.000
WvxfillgllMUse Elec. & Mfg. 2.500
Metal and Mining
International Nickel
Oil
Amerada Petroleum
Humble Oil ft Keflnlng
Louisiana Land ft Explor.
Public Utility
American Gas & Electric
Commonwealth Edison
Consolidated Edison of N. Y.
North American Co.
Pacific Gas ft Electric
Tobacco
Reynolds ( R. 1. ) Tobacco B
Miscellaneous
81.000
56.000
152.500
2U4,:i:r.
6.000 174.000
4.000
2,500
51,000
15.000
9.000
15.000
12.000
2.000
276.000
150,025
261,375
28s,:r,n
190.125
232,500
120,000
4«,2'.0
4.500 111.938
American Viscose
llabcock ft Wilcox
Caterpillar Tractor
Loew's, Inc.
Timken Roller Bearing
Classification of Not
(based on market value)
194i
1.000
2.500
1.000
2,000
1,000
Assets, as of
33.000
49.088
41.000
92.000
41,500
-1941-
Amount % Amount %
P. U. bonds $2,093,738 23.8 $2,220,858 25.2
Pfd. stocks 3,735,687 42.0 3,728.000 42.4
Common stock* :
Building 156.562 1.8 106.625 1.2
137,000 1.5 196,550 2.2
Elec. equip. 356,875 4.0 325.938 S.7
Metal, etc. 174,000 2.0 198.250 2.3
OIL 688.000 7.7 531,125 6.0
Utilities 877,625 9.9 985,750 11.3
Retail _ _ 102.375 1.2
111.938 l.S 117,563 1.S
Mlscel. — 257,187 2.9 301.875 8.4
Tot. com. stks. 2,759.188 31.0 2,866.050 32.6
Total 8,588.613 96.5 8.814,958 100.2
Cash, etc. (net). 315,290 3.5 dr 16,544 dr 0.2
Total $8,903,903 100.0 $8,798,414 100.0
[48]
NOT
[49]
AMERICAN GENERAL CORPORATION
BACKGROUND
In 1935, United Founders group of companies was consolidated in the formation of this com
pany, which is controlled by the Equity Corp. through stock ownership. (See latter.) A partner of
the New York Stock Exchange firm of Reynolds & Co., serves on the Board of Directors, which con
sists of a compact board of six, one of whom, Ellery C. Huntington, Jr., is currently serving as a
Lieut.-Colonel in the Army of the U. S. David M. Milton, president of Equity Corporation is also presi
dent of American General Corporation.
POLICY
About 7V2% of total assets was in cash at the year-end and around 54% in a broad assortment
of listed securities, consisting mainly of common stocks. The remaining assets were in other com
panies in the Equity Corp. sphere; i.e., Utility Equities (19 V*% of preferred, 52V2% of common, with
$805,606 year-end market value). First York Corp. (87% valued at $4,702,071) and Foundation Indus
trial Engineering Co. (73^2% of preferred, 693/4% of common, all valued at $794,424). This latter
company was formed in late 1942 to merge the General Investment Corp. and the Foundation Co.,
with the announced intention of entering the industrial engineering field.
First York Corporation, holdings of which accounted for 27% of American General's year-end
assets, and which is entirely owned by American General and Equity Corp., was started in 1937 as
a medium for entering "special situations" and for holding securities of a more speculative character
than American General and Equity usually retained in their own portfolios. "Special situations"
accounted for something less than half of First York's assets at the end of 1942, and included a 66%-
owned shipbuilding corporation, started in February, 1942, to build boats for the government, 56.5%
ownership of National Postal Meter Company, and some real estate holdings. Gross income from all
holdings in 1942 was 4.2% of assets.
During 1942, First York loaned to the International Minerals & Chemical Corp. $1,502,000, which
was secured by five-year convertible 3*/2% debentures. These debentures were redeemed in January,
1943, and as provided in the Indenture securing the debentures First York received warrants to pur
chase to February 1, 1947, 184,86 ll/2 Int'l. Minerals common shares at $8'/s per share. Of the warrants
received, 25,000 have been sold at $7 each and options were granted to the purchasers, under an
agreement dated February 11, 1943, to purchase an additional 125,000 warrants at prices (not less
than $7 per warrant) to be determined in accordance with the formula set forth in said agreement.
The appreciation resulting from this transaction was not shown in the year-end asset value nor was
it included in the calculation of operating results. At $7 per warrant the appreciation is about $1,300,-
000 equivalent to 80 cents per share on each share of American General common.
American General's own management record has not been impressive, performance having
been considerably poorer than the Dow-Jones Composite Stock Average for the period since its
organization. A considerable part of the decline in asset value, however, may be attributed to the
large holdings of other investment company leverage shares, which accentuate the momentum of
decline in a falling market and conversely add to the volatility of rise in an ascending market. Gross
income in 1942 was 3.8%. Expenses last year were slightly below average, amounting to .75% of
average assets. They were $17,665 less than in 1941.
SECURITIES
The Cumulative Convertible Preferred f$2, $2.50 and $3 series! of which Equity owns 8.68%,
has several virtues. Current earnings ($2.83 per share last year, which does not include an additional
47^ a share received from First York Corp. which was used to write down the cost of that stock) pro
vide ample coverage for the dividend, which afforded an attractive yield (7.1%) at year-end prices
on the $2 Preferred. At that price, the discount from value in liquidation was 44%. In addition, under
lying assets were about 3V3 times the market price. Conversion feature is unimportant as each share
of preferred is convertible into only two shares of common. Dividends on the preferred shares have
been paid regularly since their issuance. Preferred dividends paid in 1942 were 100% non-taxable.
All preferred series rate alike as to assets and dividends. The $2 and $2.50 series (call price,
$52.50) are listed on the New York Curb, and the $3 series is very inactive "over-the-counter."
At the end of 1942 the Common stock of American General could be bought some 42% under its
asset value. 901,159 shares (64.5%) are owned by Equity Corp. The common stock possesses con
siderable leverage due to the company's capitalization, and this is increased through the aforemen
tioned leverage of the investments in associated companies. For this reason, it has considerable
speculative appeal. In appraising its present value the potential profit in the International Minerals
& Chemicals must be considered as a factor of importance. Dividends of 15^ each were declared in
1942 and 1941, the first since an initial 50^ dividend was paid in 1936. The common dividends paid
in 1941 and 1942 were 100% non-taxable. The stock is listed on the New York Curb Exchange, but
is only moderately active. Occasionally there are sizable transactions "over-the-counter."
Both the common and the preferred have been bought in substantial amounts by the company
from time to time at large discounts, which has been of considerable benefit to common shareholders,
and the current announced policy indicates further purchases. Approximately 58,000 preferred shares
have been repurchased, 25% of the original amount issued, and about 359,000 shares of common,
representing about 20% of the original issue. Last year the company bought 4,700 shares of common
at an average cost of $2.06 and 1,725 shares of the $2 Preferred at an average cost of $25.88.
[50]
/
AMERICAN GENERAL CORPORATION
$ 1,353,080 8%
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, Receivables, etc.
Securities, at market *
Bonds $ 345,210 4%
Preferreds 357,725 4
Common
Ind. $7,714,110 86%
P.U. 214,654 3
R.R. 374,650 4
Fin. 639,816 7
100%
8,943,230 92
100%
Securities of Subsidiary &
Associated Cos. (c)
Preferred 1,841,759 28%
Common 4,870,571 72
100%
9,646,165 54
6,712,330 38
Total $17,711,575 100%
* Book value (at cost or prices at November 22, 1935, if acquired prior to
this date) $13,616,171.
f Book Surplus $20,238,122.
(c) Valuation based on underlying net asset value.
8,322,660
LIABILITIES
Payables & Reserves $ 259,987
Capitalization: f
Notes Payable to
Banks (secured) 2,000,000
$3 Conv. Pref.
Stk. $1 p.v.
(7,503 shs.)
$2.50 Cv. Pref.
Stk. $1 p.v.
(21,115 shs.)
$2 Conv. Pref.
Stk. $1 p.v.
(137,834 shs.)
Common Stock,
10^ p.v.
(1,395,993 shs.) 7,128,928 (W
Total $17,711,575
(a) All preferred issues have equal priority
as to assets and dividends and all are
convertible into two common shares per
preferred share.
(b) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable Coverage
$2,000,000 $17,451,588 873%
8,322,660 15.451,588 $92.83 (e)
Balance 7.128,928 5.11 (e)
(e) Does not include proportional profit share on warrants (held by 87% owned First York Corp.) to buy International Minerals
common stock; would add S3.62 for the value of each preferred stock and $0.43 for each common stock (based upon prices
of International Minerals common shares as of Dec. 31, 1942.)
Notes payable
Conv. Preferred
Common Stock
OPERATING RESULTS
(See Page 10)
STOCK DATA
Net Income
/fr* 1942 1941 1940 1939 1938 1937 1936 1935
Preferred U% 2.83 4.27 3.59 2.86 1.48 2.49 2.60 —
Common .09 .26 .18 .08 0 .05 .06 —
Dividends
$3.00 Pfd. 3,o • 3.00 3.00 3.00 3.00 3.00 3.00 3.00 —
$2.50 Pfd. 2.50 2.50 2.50 2.50 2.50 2.50 2.50 —
$2.00 Pfd. 2.00 2.00 2.00 2.00 2.00 2.00 2.00 —
Common .15 .15 Nil Nil Nil Nil .50 —
Net Asset Value
at year-end
Preferred 92.83 83.23 96.72 116.67 131.45 101.55 184.06 139.04
Common 5.11 3.97 5.60 7.79 9.42 6.10 16.11 11.18
Price Range
$2.50 Pfd.
High 33 33 34% 33 33 42 43% —
Low 27 Vi 28 26 Vi 27 25 27 36 Vi —
Last 32Vz 28 Vi313/4
30 27 Vi 27% 38 —
$2.00 Pfd.
st*<High 31 30 31% 29 28 Vi 36 Vi 39 Vi 33
Low fit 24 Vi 25 22% 24 23 22 Vi 30 Vi 30
Last 28 26 29% 25 24 V* 245/s 34 Vi 30
Common
Highit
3% 3Vs 4 6 5% 12 12 8%
Low $\ 1% iy2 2% 3Ve 2Vi 4 7% 7
Last 3 i% 3 3% 4% 4 HVi 7%
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
$2.50 Pfd. 1 2 2 1 1 2 4 —
$2.00 Pfd. 6 11 15 9 14 24 36 2
Common 27 53 43 50 60 140 227 14
[51]
AMERICAN GENERAL CORPORATION
ASSET VALUE
PER SHARE
100.
COMMON STOCK
10
.10
.10
-I
-10
-100
$17.33
$14.86
$5 II .i—H
/i
/ f
—/ *
/ »
1 iI i
f •
II
d $0.6
1
V
d $I.J 5
-50%-25% D^;231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF AMERICAN GENERAL COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the December
31st, 1942 portfolio position. The leverage figures have been adjusted for estimated increase or decrease in asset value of
Utility Equities Corp. Common Stock.
Applied to Common Applied to
In Event of Shares Owned all Assets
Rise of 10% $ 5.25 $ 5.43
25% 6.74 7.17
50% 9.21 10.33
100% 14.86 17.33
Fall of 10% 3.27 3.10
25% 1.79 1.36
50% d .68 d 1.55
[52]
AMERICAN GENERAL CORPORATION
Prlne. Ami. Public Authority
(000 omitted)
$49 Trlborougb Bridge Ss, 1961 —
PubUc Utilities
46 Cities Service deb. 5s. 1950
14 Cities Service deb. 5s, 1958
103 Standard 0. * B. codv. 6s, '48 (eit.)
155 Stand. Oas ft El. 6s, 1948 (ext.) -.
15 Stand. Oas A EL deb. 6s, 1951 —
48 Stand. Oas ft EL 6s, 1957 (assumed)
5 Stand. Pr. k Lt. 6s, 196T
Railroad
78 Dels, k Hud. Co. 4s, 1948
Preferred Stocks
Snares Industrial
200 Intl. Minerals k Cbem., 4%
Public Utilities
7,700
5,600
450
1,000
625
500
500
800
600
1,490
1,300
400
18,800
16,800
0,400
500
3,000
200
15,100
1,400
1,000
500
2,500
5,700
7,300
9,800
4,500
500
800
1,700
2,500
800
3,900
4,300
4.000
4,200
2,700
600
6,800
500
too
900
14,700
U00
* U., 85
Lt.. $6
American Pwr.
American Pwr. k
Amer. Superpower, 80, 1st
Elee. Bond ft Snare, $6
No. Amer. Li, ft Pr., $6 _
United Lt. ft Pr., $6, 1st
St,
list VaL
$41,099
39,503
11.830
65.148
99.894
9.600
30.600
8.188
44.850
11.000
128.018
105,000
20,776
42.875
82,818
11,260
Industrials
Addressograph-Multlgrapb 7,818
Air Reduction 81,800
Allied Chemical ft Dye 72,600
Aluminium, Ltd 180,748
Amerada Petroleum 89.700
American Airlines .**»2$2
Amer. Machine ft Fdry. 172,600
American Badlator
Armitrone Cork 195400
Bebeoek ft Wilcox ..5-52!
Bethlehem Steel 188,750
Berg-Warner Corp. ,,MS2
Burroughs Adding Machine
CaterpQUr Tractor Co. 67,400
Celanese Corp. of Amer. 28,128
Cleveland Graphite Brans* 15455
Congoleum-Nairn i5'?;5
Consolidated Oil .5S422
Continental Oil (Del.) J2f"222
Crane Co. 183,688
Deere ft Co. 122,063
Distillers Corp.-Seagrams ......... 10,875
Dow Chemical 106,400
duPont (B. I.) 228,660
Eastern Air Lines 80,988
Eaton Manufacturing 29,000
Electric Auto-Lite 117,000
General Electric 131,150
General Motors 177,500
Goodrich (B. I\) 116,250
Goodyear Tire ft Rubber 69,862
Hercules Powder Co. 44,400
Hudson Bay Mining 156,400
Industrial Rayon 17,312
Interchemieal Corp. . 4,500
Intl. Minerals 10,687
International Nickel 426,800
Johns-Manvllle 93.925
100
1,400
9,400
9,400
500
12.000
11.900
10,000
200
32.500
2,900
1,600
10,800
500
5,500
28.200
3.000
7.900
9.200
9.200
1,500
4,600
2.300
9,100
2.300
4,000
500
4,700
300
2,000
2,400
7,100
164
7,100
8,200
12,000
2,900
5,300
700
4,200
200
1,500
1,500
7,300
1,700
1,800
611
2,000
Mclntyre Porcupine 3,900
Monsanto Chemical 121.100
Montgomery Ward 314,900
National Gypsum 58,750
National Distillers 12,875
National Lead Co. 165,000
Noranda Mines, 377,825
Otis Elevator 161.250
Outboard Marine ft Mfg. 5,500
Pantepec Oil 117.812
Phillips Petrolcunf 180,500
Pure Oil 18.000
Republic Steel 151,200
Schenley Distillers - 10.500
Sears. Roebuck ft Co 840.312
Socony-Vacuum Oil 289.050
Sperry Corp. 72,000
Standard Oil (N. J.) 864,387
Texas Co. 381,800
20th Century-Fox 129,950
Union Carbide k Carbon 121,500
United Air Lines Trans. 88,550
U. 8. Industrial Aleohol 69.000
U. 8. Rubber 253'1S2U. 8. Steel 108-BIS
Vanadium Corp. $0,500
Walker (Hiram) G. ft W. 19.760
Western Auto Supply 92,237
Westinghouse Elee. 24,525
Youngstown Sheet 60,500
Public Utilities
Amer. Gas ft Blec. 46,200
Columbia Gas ft Elee. 18,312
Detroit Edison 2.829
Niagara Hudson Power 13,312
North American 82.000
North. States Power (Del.) A 57,000
Railroads
Chesapeake ft Ohio 98,600
Great Northern 119,250
Louisville ft Nashville 42,000
Pennsylvania R.R. 98,700
Union Paeifle R.R. 16,100
54,000
56,025
206,225
54,400
100,425
26,578
70,000
71,662
Bankers Trust
Chemical Bank ft Trust ..
Commercial Credit
Commercial Invest. Trust —
Cont. HI. Natl. Bk. ft Tr..
Empire Trust
Manufacturers Trust
2,500 National City Bank (N. T.)
Summary of
Owned, at of
Bonds
Preferred 8teeks:
Industrials
Public utll.
Railroadi
Oeneral
II (at market
1942-
Amount
$845410
_ Securities
values):
1941
Amount %
$517,565 4.4
11,000
846,725
0.1
8.0
181,618
561,275
284,075
1.5
4.8
1.8
Total pfd._ 857,725 8.7
Common Stocks:
Industrials 7,714,110 80.0
PubUc utll. .. 214,664 8.8
Railroads 874,650 8.0
Bin. Ins.. etc. 689,816 6.0
•76,863 8.2
7,901,948 67.2
178,960 1.5
1,687,163 18.1
662,075 5.6
Total com. 8,048430 92.7 10.280,180 87.4
Tot. see. . $9,646,160 100.0 $11,774,658 100.0
[53]
AMERICAN INTERNATIONAL CORPORATION
BACKGROUND
Formed in 1915, principally by Frank A. Vanderlip of the National City Bank, for the purpose
of financing international trade and foreign enterprises, American International abandoned its orig
inal field of activity during the 1920's. Since then it has functioned as an investment company of the
general management type, confining its investments to American securities, with the exception of
a minor amount of Canadian issues. The Board of Directors of nine includes partners of Hayden,
Stone & Co., R. W. Pressprich & Co., and Scott and Stringfellow, of Richmond, Va., all members of
the New York Stock Exchange. Among the other directors are four members of the Board of Managers
of Adams Express Company, one of whom is also president of the International Mining Company.
Mr. Harry Arthur, president of American International, has been with the company since 1916.
Adams Express Company owns 28.2% of the common stock. This concentrated holding has
given rise to various theories of eventual merger with or absorption by Adams Express, but no state
ments have been made by either company regarding a future relationship.
POLICY
The portfolio consisted, at the year-end, of a broad list of high-grade common stocks which
comprised 74% of the net assets and a small quantity of bonds and preferred stocks; 18% was in
cash and Government bonds. Gross income for 1942 amounted to 6.3%, and in dollar amount was
slightly above that of 1941. The management record has been about average; in eight of the last
13 years, the company did better than the Dow-Jones Composite stock average and for that entire
period had a somewhat better result. During the past three difficult years, operating results have been
among the best in the industry. Expenses are somewhat above average, totaling about 1 % of average
net assets last year, a drop of $12,865 from the 1941 figure. Security transactions were considerably
less last year than previously equalling 23% of total assets compared with 44% in 1941, and
49% in 1940.
SECURITIES
The SVi % Debentures, due January 1, 1949, were covered 1.87 times by assets at the year-end,
and were selling at 104VS on the New York Stock Exchange to give a return of 5.3%. They are a
direct obligation of the corporation but not secured by any collateral. These bonds were issued in
1929 in the amount of $25,000,000 by a syndicate headed by Lazard Freres. A steady repurchase by
the company has reduced the issue. There is no sinking fund and the bonds are callable at 105.
Interest coverage last year was 1.67 compared with 1.57 in 1941.
The Common stock was available at a 39% discount from year-end asset value and may be
classified as a "medium leverage" security. No dividends were paid from 1937 through 1942, the
Debenture indenture prohibiting payment of dividends as long as assets are less than 200% of par
value of debentures outstanding. A dividend of 25^ a share, however, was declared payable April
5, 1943. It is possible that this payment may be non-taxable as the company is believed to have
unrealized losses which may be used to offset income. Thirty-three cents a share was earned last
year compared with 29 cents earned in 1941. Payments this year could be made out of both last year's
and the current year's earnings.
In 1932 and 1936 relatively small amounts of the stock were bought by the company and
retired, but in recent times the policy seems to be to make gradual retirements of the debentures,
which, at December 31, 1942, were outstanding in the amount of $8,938,000. The same indenture pro
visions restricting the payment of dividends, also prohibits the repurchase of common stock unless
a minimum coverage of 200% is provided for outstanding debentures.
The shares are listed on the New York Stock Exchange and have a fairly good market. As
noted above, 281,600 shares (28.2% of the outstanding issue) are owned by Adams Express Co.
[54]
AMERICAN INTERNATIONAL CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments at market *
Bonds
Preferreds
Common
Ind. $11,546,235
P.U. 315,625
648,125
$ 3,103,014 18%
472,330
904,231
3%
7.
R.R.
92%
3
5
100%
12,509,985 90
100%
13,886,546 82
$16,989,560 100%
* Book value (at cost or prices at Dec. 31,
$16,869,275.
t Earned Surplus $7,219,061.
Capital Surplus 2,531,185.
Total
1932, if acquired prior to this date)
LIABILITIES
Payables $ 282,544
Capitalization: f
5%% Debentures 8,938,000
(due 1/1/49)
Pref. Stk.—
250,000 shs.
(none issued)
Common Stock,
no p,v.
(1,000,000 shs.)
7,769,016 (a)
Total $16,989,560
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
5%% Debentures
Common Stock
Entitled to
in Liquidation
$8,938,000
Balance
Assets
Applicable
$16,707,016
7,769,016
Coverage
187%
$7.77
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
American
Int'lCorp. +18 -3 -8 -10 +26 -39 +36 +39 +13 +7 -15 -35 -21
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Varous Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
American Int'l Corp. +15 +5 -5 +19 -27 -1 +129 -57 -28
Dow-Jones (b) +3 -7 -5 +22 -20 +6 +176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Shar&V^ 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income ,37 .33 .29 .08 .06 .22 .25 .20 .01 .02 .09
Dividend ySO Nil Nil Nil Nil Nil Nil .40 Nil Nil Nil
Net Asset Value
at year-end llMl 7.77 5.69 6.66 8.66 11.21 7.45 19.06 12.04 5.57 4.08
Price Range
5%% Deb. 1949
High 104*4 1031053/4
104% 102%1063/4
106% 103% 87% 86%
Low 93 97% 91945/8
80 86% 101% 85% 67% 65
Last 104% 99 103 104 102 95% 105% 101% 86 67
Common
High 5% 4% 6% 983/4
17% 15% 11% 11 15%
Low 2% 2% 3 3% 4% 5% 9% 4% 4% 4%
Last W* 3 3% 6 7% 6% 14 10% 6% 7%
Annual Volume of
Trading N.Y.S.E,
(000 omitted)
5%% Deb. 1949 965 1,040 1,101 1,325 910 1,337 3,001 3,456 1,709 1,756
Common 98 152 110 154 158 272 519 415 361 1,152
[55]
AMERICAN INTERNATIONAL CORPORATION
This chart shows the potential rise or fall in asset values oi the above stock which should take place with any
change in market conditions from December 31st. 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF AMERICAN INTERNATIONAL CORPORATION COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the December
31st. 1942 portfolio position:
Applied to Common Applied to
In event of Shares owned all Assets
Rise of 10% $ 9.02 $ 9.44
25% 10.90 11.95
50% 14.02 16.12
100% 20.28 24.48
Fall of 10% 6.52 6.10
25% 4.64 3.59
50% 1.51 d0.58
[56]
AMERICAN INTERNATIONAL CORPORATION
SI. IMfe
(Common Stocks unless otherwise stated)
Shares Company
Oils. etc.
4.500 Amerada Petroleum $310,500
8.500 Continental Oil 232.687
15.000 Creole Petroleum 243.750
7,000 Gulf Oil 266.000
10.000 Gulfboard Oil [310,450
5.000 Phillips Petroleum 225,000
12,000 Pure Oil 135.000
29,000 Socony-Vacuum Oil 297,250
10.000 Standard Oil (N. J.) 461,250
10.000 Texas Co 415.000
Metals and Mining
10,000 Anaconda Copper 245,000
6,000 Dome Mines 93.000
20,000 Hudson Bay Mining 460.000
8,000 International Nickel 232,000
13.000 Kennecott Copper 377,000
2,500 Mclntj re Porcupine 97,500
4.000 Newmont Mining 107.500
10,000 Noranda Mines 03320,000
Steel and Iron
3,500 Allegheny Ludlum Steel — 63,000
10,000 Dominion Steel & Coal "B" 67,500
4,000 National Steel 208,000
10.000 United States Steel 472,500
10.900 Woodward Iron 190,750
4,000 Youngstown Sheet & Tube. 121,000
Utilities
1,700 Amer. & Fgn. Pwr. $7 pfd.- 82,450
5,000 Assoc. El. 4V2s 1953. 151.182
5.000 Assoc. G. & E. 4s & 4V2s '78 [14337
3J00 El. Bond & Share $6 pfd.. 141,487
1.100 Elec. Pwr. & Lt. $7 pfd. 36,575
3,000 N. Eng. P. S. $6 pr.ln. pfd. B]133,500
20.000 North American Co 200.000
5.000 Pacific Gas & Electric
8,000 United Lt. & Pr. 1st pfd. A 180,000
Railroads
3,000 Atchison Topeka 137,625
$300,000 Missouri Pacific 5s A 1965,
F 1977. I 1981 107,007
11,000 Pennsylvania R R. 258.500
14.400 Texas and Pacific 252,000
$200,000 Tex. & Pac. 5s C 79 & D '80 135,932
Food Products
13.000 National Dairy Products — 190,125
4.200 Pepsi-Cola 122,850
1,900 South Porto Rico Sugar — 38 950
11.000 Swift & Co -----— 251,625
6,800 Wesson Oil & Snowdrift -. 119,000
22,000 Wilson & Co 96,250
Industrial & Electrical Equipment
1,500 Allis-Chalmers Mfg 40,125
10,000 Buda Co. 0185.000
6.000 General Electric 183,000
15,000 Joy Manufacturing 123,750
5,000 Mueller Brass 108.750
2.600 National Lead 35,750
5.300 National Supply 29,812
9.500 National Supply $2 pref. — 131,812
Chemicals
2.600 Allied Chemical St Dye 377.000
2,000 Hercules Powder 148.000
2,500 Union Carbide & Carbon.. 202,500
Motors, etc.
4,500 Borg-Warner 128,250
8,000 General Motors 355,000
6.000 Mack Trucks 168,000
Agricultural Equipment
9,000 Deere & Co 244,125
3,500 International Harvester .. 208,687
4.000 Oliver Farm Equip. 118,500
Motion Pictures
9,000 Paramount Pictures 150,750
22,700 20th Century-Fox 320,637
Retail Trade
3.000 Green (H.L.) Co. 160,000
8,500 Montgomery Ward 284,750
Building Equipment
13,500 Amer. Rad. & Std. San. 81.000
6,000 Congoleum-Nairn 109.500
20.500 National Gypsum 128,125
Aviation
1,500 Curtiss-Wrlght 10,125
2.000 Douglas Aircraft 112,000
5.900 National Aviation 47.200
2,000 Pan American Airways 51,250
2,000 United Aircraft 51,000
Paper
5,000 Champion Paper 8c Fibre.. 88,750
3,000 Mead Corp. $5.50 pfd. B ww 174,000
Railroad Equipment
2,500 Lima Locomotive Works .. 62,500
4.500 N. Y. Air Brake Co 117,000
4.000 Youngstown Steel Door ... 35,500
Rubber
8,000 Goodyear Tire & Rubber .. 207,000
Tobacco Products
9.300 Lorillard (P.) 153,450
Shipbuilding
7.700 Newport News Shipbldg 132,825
Investment Company
550 Phoenix Securities 33 pi. A 24,406
Other Securities
3390,845 Rio Grande Water Pr. inc.
deb. 5s. 1976 (S35.000
Misc. sec.—at nominal val- (SI
]Over-the-counter quotations in New York.
0 Valuation assigned by Board of Directors.
Classified Statement of Assets, Dec 31
(based on securities at market or appraised
values) :
1942 1941
% of % of
Amount Total Amount Total
0113, etc $2,596,888 15.29 $2,231,313 14.53
Metals & mng. 1,932,000 11.37 1,944,250 12.66
Steel 4 iron. 1,122.750 6.61 1,245.063 8.11
Chemicals 727,500 4.28 739.200 4.81
Motors, etc.. 651,250 3.83 532,625 3.47
Bldg. equip.. 318,625 1.88 288,438 1.8S
Motion pict. 471,388 2.77 289,750 1.89
Railroads ._ 891,065 5.24 1,003,119 6.53
Shipping .. [TJ132,825 0.78 372,500 2.43
Rail, equip.. 215,000 1.27 248,500 1.62
Paper 262.750 1.55 238.750 1.55
Utilities 1,084,027 6.38 1,009,303 6.57
Agrle. equip. 571.313 3.36 373,938 2.44
Food 818,800 4.82 969,750 6.32
Ind. k el. eq. 738.000 4.34 715,600 4.66
Retail trade. 444,750 2.62 395,250 2.57
Aviation ... 271,575 1.60 645,375 4.20
Rubber 207,000 1.22 101,250 0.66
Finance 24,406 0.14 145,250 0.95
Tobacco 153.450 0.90 98,875 0.64
Misc. 35.001 0.21 35,001 0.23
Total see. $13,670,362 80.46 $13,623,097 88.72
Cash 1,448,773 8.53 1,392.098 9.07
Inf. Allied M. 216.184 1.27 208,890 1.36
U. 8. see 1,601,491 9.43
Receivables . 52.750 0.31 130,323 0.85
Tot. assets $16,989,560 100.00 $15,354,408 100.00
fiJShlpbulldlng.
[57]
AMERICAN SUPERPOWER CORPORATION
BACKGROUND
This investment company was formed in 1923. In 1929 it exchanged its holdings in Public
Service Corporation of N. J. and United Gas Improvement shares for securities of United Corporation.
Although the company is in the Morgan-Bonbright-Drexel axis, it is considered an independent opera
tion. Its directorate includes John W. Hanes, a former partner of Smith, Barney & Co., who has also
served as Commissioner of the S.E.C. and Under Secretary of the Treasury.
POLICY
To escape provisions of the Public Utility Holding Company Act, American Superpower sold
its 50% interest in Italian Superpower and reduced its 14.2% interest in Commonwealth & Southern
to under 10% by selling 1,500,000 shares at an average price of 2%. The largest current holdings are
89,240 shares of United Corporation preferred, 871,800 shares of the common and 958,100 warrants;
79,000 shares of Consolidated Edison; and 3,254,900 shares of Commonwealth & Southern. These three
holdings comprised 60% of the fund at the year-end values, and must be considered as static
holdings.
The company had unrealized losses of almost $20,000,000 at the year-end against current values
of $7,338,000. Expenses are very low; including taxes, they amounted to .15% of average net assets
last year.
SECURITIES
The $6 First Preferred on which arrears were $18 at the year-end has been subject to a retire
ment policy by purchase and exchange offers. During the last five years 62% of the First Preferred
shares outstanding at the end of 1937 have been retired. In 1942, 13,720 were received in exchange for
41,160 shares of United Corporation preferred, and 1,055 were bought in the market. At the end of
1942, 70,125 homm shares were outstanding. The indicated asset value at the year-end was $104.21
against a market price of 59 Vz, a discount of 43%. Although dividends are unlikely, in spite of divi
dend coverage, this discount offers the possibility of an attractive appreciation.
The $6 New Preference stock (actually a second preferred) with arrears of $64.50 offers an
interesting utility speculation. At year-end figures these shares provided a participation in about $30
of utility securities which at the then prevailing market of 2% was like buying a call on $12 of utility
shares for $1.
There are 8,293,005 Common shares outstanding which must be regarded as extreme options.
All these securities are traded on the New York Curb Exchange.
PORTFOLIO AS OF
December 31, 1942
PrincipalAmount
UNITED STATES GOVERNMENT SECURITIES
MarketValue*
$ 20,000
495,000
ity Credit Corporation, l'/8% Notes,
"G", due February 15, 1945.CommoditySeries "G", due February 15,
U. S. Treasury Discount Bills, due January
20, 1943
Total
19,954.25
494,898.25
$ 514,854.50
CORPORATE BONDSPrincipal MarketAmount Value'
$ 400,000 American & Foreign Power Co., Inc., 5%
Gold Debenture Bonds, due 2030 $ 319,000.00
PREFERRED STOCKSNumber of MarketShares Value*2,000 Columbia Gas and Electric Corporation, Se
ries "A", 6% Cumulative $ 80,500.005,000 The Commonwealth & Southern Corporation,
it. Series, Cumulative 185,000.002,000 Niagara Hudson Power Corporation, 5% Se-
series, First Preferred, Cumulative 112,000.0089,240 The United Corporation, $3. Cumulative
Preference 1,595,165.00
Total * 1 ,972.665.00
COMMON STOCKS AND OPTION WARRANTSNumber of MarketShares Value*29,000 American Gas and Electric Company $ 558,250.0040,000 Brazilian Traction, Light and Power Com
pany, Ltd. , Ordinary
3,254,900 The Commonwealth & Southern Corporation2,721,447 The Commonwealth & Southern Corporation,
Common Stock Option Warrants (Perpetual)
79,000 Consolidated Edison Company of New York,
465,000.00
915,440.62
42,522.60
50,750 Electric Bond and Share Company
8,767 General Telephone Corporation, CommonStock Option Warrants (Expire 1 1/1/48) . . .
2,400 National Power and Ligto Company39,100 Niagara Hudson Power Corporation
94,000 Niagara Hudson Power Corporation, OptionWarrants, Class "A" (Expire 10/1/44)
5,000 Pacific Gas and Electric Company871,800 The United Corporation958,100 The United Corporation, Common Stock Op
tion Warrants (Perpetual) .
" ' "Pen"A"
167,700 United Light and Power Company, Cla
19,565 United Light and Power Company, Class"B"
1,224,550.00107,843.75
5,100.0073,312.50
115,625.00299,681.25
14,970.31
41,925.00
4,891.25
Total $ 3,869, 1 1 2 28
Total Market Value at December 31, 1942 $ 6,675,431.78
•The figures for market value were arrived at by using the closing sales prices of December 31, 1942 and bid prices where no sales
were recorded.
[58]
AMERICAN SUPERPOWER CORPORATION
Simplified Balance Sheet
As of December 31, 1942
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Corporate Bonds
Preferred Stocks
Common Stocks
ASSETS
$ 319,000 5%
1,972,665 32
3,869,112 63
100%
Total
$1,178,061 16%
6,160,777 84
$7,338,838 100%
LIABILITIES
Payables $ 31,052
Capitalization: f
$6 First Pfd. 7,307,786 (a)
(70,125 no p.v. shs.)
$6 Preference 0
(235,207 no p.v. shs.)
Common 0
(8,293,005 no p.v. shs.)
Total $7,338,838
* Book value $317,455 for Bonds, $2,988,449 for Preferied Shares and $21,637,579
(cost $74,720,626 less reserve $53,083,047) for Common Shares,
t Boole Surplus $13,570,450.
SUMMARY OF CAPITALIZATION
(a) Applicable to First Preferred at
12/31/42.
$6 First Preferred Stk.
$6 Preference Stk.
Common Stock
Entitled to
in Liquidation
$ 8,274,750
38,691,551
Balance
Assets
Applicable
$7,307,786
d 966,964
d39,658,515
Coverage
$104.21
d 4.11
d 4.78
STOCK DATA
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income
First Preferred
Preference
Common
6.17
.05
d .17
2.50
d 1.26
d .21
5.61
d .17
d .17
4.57
d 1.09
d .20
3.48
d 1.86
d .22
5.01
d .77
d .19
4.27
d 1.86
d .22
1.86
d 4.35
d .29
1.29
d 5.40
d .34
2.00
d 5.59
d .33
Dividends
First Preferred
Preference )
Common j
Nil Nil 1.50 7.50 4.50 6.00 11.00
No Dividends Paid
1.00 6.00 6.00
Net Asset Value
at year-end
First Preferred
Preference
Common
104.21 73.14
d 4.11 d 14.02
d 4.78 d 4.89
130.46
10.40
d 4.06
137.60
26.19
d 3.41
146.60
34.33
d 3.01
145.31
35.12
d 2.82
221.70
108.09
d .58
184.21
88.47
d .97
105.75
6.59
d 3.17
127.68
36.82
d 2.38
Price Range
First Preferred
High
Low
Last
61%
33%
59%
60%
42%
45
75
48
50
80% 75 99
75
75
100
82
93
86
44
82
70 75%
67 55% 49% 48
Preference
High
Low
Last
73 67 53% 50
2%
1%
2%
8 17
6
27
13
15
27%
8%
20
59%
6%
13%
633/441%
7%
41
33
8%
12%
50
1%
2
32 12%
Common
High
Low
Last
7%453/4
12%
%2 %
%i
%
%
%
1 1%
%
%
3 4%
2
3%
%
2%
4%
1
9%
1%
2%
%
%
%
Vu fa % 2% 1%
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
First Preferred
Preference
Common
14 24
60
585
25
62
462
11
107
490
9
73
624
24
70
1,347
34
137
2,254
48
127
1,573
23
28
1,472
34
36
2,557
38
237
[59]
AMOSKEAG COMPANY
BACKGROUND
This company was formed in 1911 as a New Hampshire Voluntary Trust Association and its
principal holding was Amoskeag Manufacturing, a textile enterprise which fell into bad days in the
1920s. Now the company functions as an investment trust. Its trustees include several prominent
Bostonians such as Charles Francis Adams, F. C. Dumaine, G. Peabody Gardner, F. R. Sears, Jr.
Mr. Dumaine is considered to have considerable influence over portfolio changes.
POLICY
At one time heavily committed to rail shares, Amoskeag now has an unusually long list of
securities in relationship to the money involved. Most of the holdings are below $100,000 and many
below $50,000. A small amount of other investment company securities is held, but not sufficient in
total value to weight the general list. The company is not very generous with information about itself
and despite its obvious status, disclaims that it is an investment company. Last year the portfolio
showed the high yield of about 8% and expenses were only .50% of net coverage assets.
SECURITIES
At the end of the year 70,533 shares of $41/2 no par Preferred stock were outstanding. The
company bought 844 shares at an average cost of $71 in 1942, and invites offers for further repurchases.
The stock is entitled in liguidation to $100. Earnings were $10.44 in 1942 and $9.80 in 1941. Dividends
have been paid regularly. The stock might be considered attractive for investment were it not for its
lack of marketability. At the year-end it was available at a 54.5% discount and a yield of 6.6%.
89,911 shares of Common are outstanding. Dividends during the last two years were $3.00.
Earned income in 1942 was $4.66. The yield at the year-end price of 19% was 15%, and the discount
from asset value was 48%. The preferred and a moderate bank loan give these shares fair leverage.
The market in them is of course thin.
[60]
AMOSKEAG COMPANY
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments at market *
Total
$1,200,411
11,107,231
10%
90
$12,307,642 100%
* Book value $15,248,440.
f Book Surplus is contained in the item "Balance for shareholders
and profit and loss $14,610,377".
LIABILITIES
Payables $ 638,475
Bank loan 1,200,000
Capitalization: f
Preferred no par value
(70,533 shs.) 7,053,300
Common no par value
(80,911 shs.) 3,415,867 (a)
Total $12,307,642
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable Coverage
$4.50 Preferred $7,053,300 $10,469,467 $148.40
Common Balance 3,416,167 37.95
STOCK DATA
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income
Preferred
Common
10.44
4.66
9.80
4.20
9.34
3.87
8.29
3.07 ,
6.83
1.89
10.71
5.03
6.95
1.98
6.12
1.43
6.35
1.64
6.56
1.83
Dividends
Preferred
Common
4.50
3.00
4.50
3.00
4.50
2.50
4.50
1.50
4.50
2.00
4.50
3.50
4.50
1.25
4.50
1.25
4.50
1.50
4.50
2.00
Net Asset Value
at year-end
Preferred
Common
148.40
37.95
136.97
29.35
149.41
39.48
154.83
44.42
150.92
41.25
133.65
27.26
151.34
39.68
116.20
14.36
123.41
20.75
121.36
18.95
Price Range (b)
Preferred
High
Low
Last
74
63
67%
74%
69%
72%
73
66%
68
67
60
66 %
62% 84% 81 65
42
42
64
45
58
55
27
45
54 60 42%
81
Common
High
Low
Last
60 60
21
19
24 23
17%
16
22
16
22
21
11
18
46% 43
9
43
22%
7%
7%
26
12
14
22
17
22
19% 20
193/419 20
(b) Bid prices.
[61]
AMOSKEAG COMPANY
31,1842:
IndicatedShares Value
lL»0o Aldred Invest. Tr. V&%, 1067 $10,000
1,000 Allegheny Corp. 422
000 Alum. Co. of Amer. 51,500
3,000' Auivicx Holding Corp. 4^,375
3,000 Amer. Agric. Chen. 00.000
1.000 Amer. Kelt Co. 0% pfd. 70,000
000 Aner. ft foreign 1'r. $7 pfd. 24,200
400 Amer. ft Foreign Pr. »0 pfd 10,400
100 Aner. 4 Kgn. fr. $7 2nd pfd 800
1,000 Aner. Gas * Elec. 19,250
1,000 Amer. .News Co., Inc. 20,375
3.500 Amur. l'r. ft Lt. Co. $5 pfd. A 08.188
K.OOO Amer. Hulling Mill Co. 80,875
2,500 Amer. Smelting 92,500
500 Amer. Tobacco Co. 21,125
1,000 Amer. Water Work* 3,500
1.100 Amer. Water Worki $6 lit pfd 69,129
LL1$50 A.P.W. Paper 6% inc. notes, 1955. 12,600
1,200 A.P.W. Properties, A 2,700
200 Assoc. Dry floods 8% 1st pfd. 14,100
1,100 Atch. Topeka ft Santa Ke 00,403
1,000 Atl. Q. ft W. 1. Lines 5% pfd 44,000
000 Atlas Corp. pfd. 25,438
1,000 Bankers Trust Co. 64,000
1,600 Blgelow-Sanford Carpet 45,000
420 Bird ft Hon, Inc. 3.990
m$536 Boston ft Maine inc. 4%% 1970— 212,390
1,500 Boston B R. Holding 4% pfd. 12.000
200 Bristol-Myers 7,600
400 California Packing 8,850
1,000 Canadian Pacific Ky 6.375
1,000 Caterpillar Tractor 41,000
1,500 Central Aguirre Associates 26,818
500 Central Hanover Bk. ft Tr 36,375
3,000 Chase National Bank 84,000
700 Chicago, R. I. ft Pac. 7% pfd. A 625
500 Chrysler Corp. 83,938
600 Col. Gas ft Klec. 6% pfd. A 24,150
200 Commonwealth Southern 66
2,000 Commonwealth Edison 42,260
1.500 Cons. Edison N. T. 23,250
500 Cons. Edison N. T. $6 pfd. 46,500
5,000 Cons. Investment Trust 142,600
m$U Cons. By. deb. 4s, 1954 3,300
ffl$5 Cons. Ry. dtb. 4», 1955 1.500
B$7 Cons. Ry. deb. 4s, 1956 2,100
500 Com Products Kenning 27,813
1.000 Deere ft Co 27.125
2,300 Deere ft Co. pfd. "S'i??.
140 Detroit Edison .A'iil
0,300 Eastern das ft ruel 6% pfd 120.488
1.000 East. Oas ft ruel 4%% pr. pfd.™ 43.000
800 Eastern Mass. St. By. 6% 1st pfd.. 74,400
550 Eastman Kodak 82.225
2,000 El Paso Natural Gas 46.500
500 Electric Bond ft Share ..l-XS:
6.000 Elec. Bond ft Share $6 pfd. 257 .250
8,000 Employers' Group Assoc. 1?5,i5?
5,000 Engineers' Pub. 8erriee .... 14.875
1 370 Engineers' Pub. Sen. 86 pfd. — 84.840
1.000 Engineers' Pub. Serr. $5Vi pfd. .- 107.825
7.900 Krie R R. «8.138
7 100 Srte 1.1. C.B.I. 69.468
'500 Sedeiitea Dept. 8t. i*% a. pfd. 88.600
1.150 J*st National Bank Boston 82,888
200 First National Stores 0.150
000 Florence Stove 18,000
8,367 flair (Robert) Co. 13,596
1.900 flair (Robert) Co. 6% pfd. 17,100
01*19 flair (Robert) Co. 6% notes, 1072 12.730
1.000 Uen. Aniline ft Filn A 51,600
2.000 Oeneral Electric
600 Goodyear Tire 85 pfd. 45,063
1.000 Guaranty Trust N. Y. 233,000
2,000 flulf Oil Corp. T6.000
1.500 Holland Furnace Co. li'liz
900 Houston Ltg. ft Pr. Co. 39,375
500 International Harvester 22'fin
2.500 International Mining «!'iSS
1.000 International Nickel H'?Si
7.000 Irvlug Trust Co. li'Yz,
700 Island Creek Coal Jz'JSJ
1.000 Kansas City So. 4% pfd 19.375
1,200 Kennecott Copper 5i**«X
500 Liggett ft Myers 30.<50
4,000 Liquid Carbonic «2.000
1.000 Loew s. Inc. 4b.OOO
2.000 Lone Star Cenent ..... 76.000
1.000 Long Island Light. 6% pfd. B 20.000
6.000 Louisiana Lund ft Explor. 2vi„„
500 Louisville ft Nashville 30.000
500 Lynch Corp. »••>«"
2.500 Mack Trucks '°-000
43,000
25,000
[08130
1,000
1,500
1,000
153
55
1,000
2,000
3,400
1,800
500
2,000
0,0110
1,000
11,000
2,000
10,000
00
200
(II $52
B$77
Q]$104
. m$5
E$20
E$29
E$00
141
1.000
1.000
1,000
15,000
1,800
250
64.300
4,400
500
1,500
505
500
1.000
800
600
7.100
2,500
2,000
2.500
2.500
2,500
500
1.000
2.700
3,000
1.500
2,794
1.088
OD$50
2.500
1,500
500
500
10.208
2,562
1.000
500
2.000
500
1.000
100
1,500
1,000
600
500
400
1.000
20.000
1.000
1.500
1.500
300
400
200
150
350
50
7.000
Muguire (J. P.) v.t.c. (cost) 700,000
Maguire (J. P.) 0% pfd. v.t.c.
( cost ) — 2,500.000
Maine Central 4s, 1960
Martin Rockwell
Moss, lioud. Ins. _______
Mathieson Alkali
Mercantile Stores
Mercantile Stores 7% pfd
Midland Steel Prod.
Midland Steel $2 dlv. stk.
Missouri-Kansas-Texas
Missouri-Kansas Texas 7% pfd. —
Missouri Pacific 5% pfd.
Motor Wheel Corp.
Nash-Kelwnator
National Cash Register
National Dept. Stores
National Distillers
National Lead
Natl. Pr. ft Lt. $6 pfd. (stpd.) —
N. Y., N. H. ft II. BR. 7% pfd.—
N. Y.. N. H. ft H. deb. 3Vis, '47—
N. Y., N. H. ft H. deb. 3V4s, '54—
N. Y.. N. H. ft H. del). 3*4*. '66.-
N. Y., N. H. & H. deb. 4s. '47
N. Y., N. H. ft H. deb. 4s, '55
N. Y., N. H. ft H. deb. 4s, '56
N. Y., N. H. ft H. deb. 6s, '48
Niagara Hudson Power ..
North American Co.
North American Co. 5%% pfd
Ohio Match Co.
Old Colony Trust Assoc.
Otis Elevator
Penney (J. C. )
Pennroad Corp.
Pennsylvania R.R.
Penna. Water ft Power
Phillips Petroleum
Pond Creek Pocahontas
Puget 8d. Pr. ft Lt. $5 pr. pref
RCA $3Vi conv. pfd.
Remington Rand $4% pfd. w.w. —
Reynolds (R. J.) B
Richfield Oil Co.
Seovlll Mfg. Co.
Sears, Roebuck
Selected Industries
Selected Industries $5% pr.
Selected Industries wts.
Sierra Pacific Power
Soeony-Vacuum Oil —-
Sou. Calif. Ga< 6% pfd. A
Southern Pacific Co.
Southwest. Pub. Serv.
Sprtngneld Ry. Cos. 1926 pfd. —
Springfield St. Ry. (cost)
Standard Gas ft Elec. 6s, 1951 —
Standard Oil Calif.
Standard Oil (N. J.)
Sterling Drug, Inc.
Stone ft Webster
Suncook Mills —
Suncook Mills prior pfd.
Swift A Co.
Swift International
Texas Co.
Tidewater Assoc. $4% ev
Timken Roller Bearing ...
Tri-Continental $6 pfd. .
Tybor 8tore«. Inc.
Underwood Elliott
Union Pacific R.R.
United Air Lines
United Carbon Co.
United Corp.
pfd.
United Corp. ?3 Pfd-
United 8hoe Maehy.
U. 8. ft Fgn. Sec. 16 1st pfd
U. S. ft Fgn. See. $5 1st pfd. w.w.
United States Smelting
United States Tobaeeo
Vlck Chemical Co. ...
West Penn Elee. 7% pfd.
We«t Penn Elec. 6% pfd.
Westlnghouse Elec. partie. pfd
Wilson-Jones Co.
61,100
48,125
97,875
21,000
2,831
5,390
20,250
30,500
2.703
6.075
125
23,000
31,250
19,375
77,000
51.500
137,500
4.325
325
15,470
24.255
32,700
1.613
6,500
9,353
18,750
264
10.000
74.250
9.750
195,000
29,025
20,250
225,000
103,400
25,500
67,500
9.090
60,188
58,750
65,200
14.925
63,250
62.188
123,750
391
127,500
~6~688
10,250
85.050
47.250
8,063
8,382
174
32,000
73.125
69.188
31,000
2.875
122,496
76.860
22.875
14.600
83.000
47,875
41,500
6.800
375
42.625
48,300
9,625
22,400
344
857.500
62,375
127.500
90.000
13,800
8.600
8,275
9,938
19.600
5,856
65.625
Following securities of uncertain value are
carried nominally at $1:
1,000 Carpenter Hotel pfd.
510 Connecticut Ry. ft Ltg. Co.
B$250 Russian Govt. 5%s, 1921
3.010 Moore's Falls Corp.
EPar value, 000 omitted.
[62]
O T E
[63]
ATLAS CORPORATION
BACKGROUND
The present Atlas Corporation was formed in 1936 to consolidate a group of investment com
panies but the original predecessor company, which has been guided from its inception by well-known
Floyd Odium, goes back to 1923. The company was small until the early 1930's, when Mr. Odium
embarked upon an ambitious program of buying control of, and usually consolidating with the Atlas
Corp., a large number of other investment companies whose securities were available at considerable
discounts from the market value of their underlying assets. In all, about 20 companies, including the
famous Goldman Sachs Trading Corp., were merged or absorbed, and at the high point at the end of
1933 total assets of the Atlas Corp. amounted to over $121 million. Since 1936, however, no new com
panies have been acquired and a steady contraction of the company has taken place through the
purchase and retirement of its own securities, with the result that total assets were below $50 million
at the end of 1942. It is believed that this plan of contraction is now completed. The company con
tinues to be largely dominated by Floyd Odium. A five-man directorate includes Harry M. Duming,
Collector of the Port of N. Y.; a partner of the New York Stock Exchange firm of Moore & Schley; and
Samuel Zemurray, president of the United Fruit Co.
POLICY
This management has stated its objective most clearly: i.e., to see that results are better than
would be realized "merely from the ebb and flow of the tides of price levels." Income on holdings is
considered of secondary importance if it is offset by possibilities of capital growth. Atlas Corp., accord
ingly, has gone heavily into special and controlled situations in which it takes an active part, watching
management policies and directing reorganizations. At the end of 1942 about 66% of total assets were
so invested, the principal item being the 76% ownership of the Ogden Corp., representing the reorgan
ized Utilities Power & Light Corp., an investment then carried at $4.00 a share, or $10,336,640. Ogden
Corp., which has filed a voluntary plan of reorganization with the S.E.C., had a reported asset value
at the year-end of $6.48 a share. The next largest "special situation" was Radio-Keith-Orpheum, in
which Atlas held about 44% of the Preferred Stock and 46% of the common ($7,715,849). Of year-end
assets, 12% consisted of cash, 22% general market securities, and the remainder of 66% was in
special and controlled situations.
It is impossible, because of the various mergers and consolidations, to compute performance
of Atlas Corporation by our methods for the years prior to 1937.
As a whole, the portfolio showed a gross yield of about 3.4% last year, which low return is
accounted for by the lack of current income from a number of the "special situations." Expenses of
this fund have consistently been very high, amounting last year to 1.7% of average net assets, com
pared with 2.04% in 1941. Among the reasons for this are the large executive salaries and legal
expenses. The latter together with auditing expenses averaged over $175,000 a year from 1937 through
1940, and while considerably smaller in the past two years,, were still very much above the level of
other large funds. The unusually large concentration in special situations, which has required much
expert legal and auditing talent accounts for the higher expenses in comparison with general port
folio funds.
SECURITIES
The 6% Cumulative Preferred stock afforded an attractive yield (5.9%) at the year-end but
opportunities for appreciation were limited. While asset coverage was high, amounting to 271%, it
should be noted that preferred dividends have exceeded net investment income in every year since
1937 and that dividends have been paid out of book profits on securities held to the extent of $3,190,000
since October 31, 1937. Earnings of $1.45 a preferred share in 1942 compared with $2.49 in 1941. Divi
dends in 1942, as in 1941, were reported 100% non-taxable.
The Common stock, which was selling at a 46% discount from year-end asset value, is not
really comparable with the other leverage securities discussed in this book. Because of the heavy
investment in a few special situations, the asset value of the fund will tend to fluctuate more in line
with the evolution of those situations than in direct relationship to the stock market. At times very little
change has taken place and this has been reflected in the stock's comparatively narrow price move
ments. However, a spectacular result in a single special situation can have a dynamic effect on the
common stock and this must be taken into account in appraising it. This was illustrated early this year
when signs appeared that long-awaited results in the two major special situations, Ogden Corp. and
Radio-Keith-Orpheum, might soon be realized and the price of Atlas Corp. stock rose sharply. It should
be noted that each share of Atlas common represents in effect a participation in Yt share of R.K.O.
common and 1 share of Ogden Corp. and sharp fluctuation in these shares should influence the price
of Atlas accordingly.
Dividends have been paid regularly since 1935, with 50 i distributed in each of the last four
years, but payments, amounting to $7,212,000 since October 31, 1937, have been made entirely out of
capital surplus. 1942 payments were 100% non-taxable, as were those of the previous year. The yield,
based on the year-end price, was 7.4%.
Preferred and common stocks are both listed on the New York Stock Exchange where they have
a fair market.
The company, as previously mentioned, has been repurchasing large quantities of both the
preferred and common stock for retirement. In the past five years it has expended nearly $15 million
for stock retirement. During 1942, 28,496 shares of preferred (average cost of $48.70) and 61,449 shares
of common (average cost $6.59) were purchased in the open market.
There are outstanding Perpetual Warrants to purchase 1,951,073 shares of common stock at
any time at $25 a share. Selling at the year-end on the New York Curb at 7/16, these warrants sold
as high as 4 in 1937 when Atlas common had an asset value of about $19 a share.
[64]
ATLAS CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments at Market *
General Mkt. Securities
Bonds
Pfds.
Common
Ind. $6,251,023 71%
P.U. 654,338 7
R.R. 155,625 2
Inv.Co. 1,145,899 13
Fin. 635,640 7
$ 5,928,438 12%
$ 607,054 6%
1,385,092 13
100% 8,842,525 81
Special Situations
Bonds
Pfds.
Common
Ind. 6,271,566 92%
P.U. 555,224 8
100% 10,834,671 22
LIABILITIES
Payables & Res. $1,339,455
Capitalization f
6% Pref. Stk.
(Cum.) $50
p.v. ent. in
liq. to $50 a sh.
(344,719
shs.) 17,235,950
Common Stock,
$5 p.v.
(2,408,960
shs.) 30,338,070 (a)
1,590,931 11%
6,521,542 44
100% 6,826,790 45
100% 14,939,263 31
Investments & Receivables from majority owned
Subsidiary companies 16,963,103 35
Other Assets 248,000
Total $48,913,475 100%
* Cost price (or price of Oct. 31, 1936, if acquired prior to this date) $37,542,541.
t Book Surplus $27,793,476.
SUMMARY OF CAPITALIZATION
6% Pfd.
Common
Entitled to
in Liquidation
$17,235,950
Balance
Assets
Applicable
$47,574,020
30,338,070
Total $48,913 475
(a) Applicable to Common at
12/31/42.
Coverage
$138.01
12.59
OPERATING RESULTS
Operating Results, as shown for other companies in this review could not be
presented as figures were unavailable due to various mergers prior to 1937.
STOCK DATA
Net Income
Preferred
1942 1941 1940 1939 1938 1937 1936 1935 1934
1.45 2.49 2.38 .25 1.53 3.87 7.08 1.36 1.38
Common d.24 d.09 d.12 d.41 d.20 .12 .28 d.10 d.10
Dividends .75 1
Preferred 3.00 3.00 3.00 3.00 3.00 3.00 (b) 2.25 Si (b) 3.00 (b) 3.00
Common .50 .50 .50 .50 .50 .80 (c) .80 (c) .30 Nil
Net Asset Value
at year-end
Preferred 138.01 125.84 131.18 136.08 140.40 (e)43.61 (e)227.12 (b)289.65 (b)224.48
Common 12.56 11.42 12.26 12.80 12.44 (e) 13.96 (e) 18.77 (c) 15.25 (c) 10.66
Price Range
Preferred
High 51 51% 51 483/s 48% 52% 55 54 49%
Low 46% 47% 43% 435/s 38% 39% 50 47 39
Last 50% 48% 49 47 43% 40% 51% 52 48%
Common
High 7 7% 9% 93/s 9% 18% 17% 14 15%
Low 6% 6% 7 7 5% 7% 11% 7% 7%
Last 6%63/4
7 8% 8% 7% 17 13% 9%
Warrants
High % 'We 2% 1% 1% 4 4% 4% 6%
Low % % % % % % 2% 1% 2%
Last Tie %6 % % % 3% 3% 3
Annual Volume of
Trading (f)
(000 omitted)
Preferred $ 23 37 70 31 39 64 66 39 35
Common 132 260 368 338 371 607 1,083 1,064 703
Warrants 89 164 292 104 115 261 442 244 187
(b) On predecessor's S3 pfd.
(c) On predecessor's common.
(e) October 31.
(f) Preferred and Common traded on N.Y.S.E., Warrants traded on N.Y.C.E:
[65]
(
ATLAS CORPORATION
Amounts
fl.S00.000
1.195,000
250.000
4.800
272.000
350.000
126.000
45.000
55,000
Shares
23,000
28,600
29,800
10,000
1,000
1.092
1,500
300
1.000
1.000
149.207
3.500
2.340
156
2,000
1.350
56,400
2.000
3,000
3.500
5.000
8.000
18.978
1.000
18,700
1.800
3.000
30,000
5.000
38,000
5.000
15.000
6.500
4,000
4,000
3.000
5.000
31.650
128.520
5,000
352,000
8.500
5.000
5.000
5.000
5.000
in P*rtf*li«v, at Dm. St. 1M2:
Bonds Market
Amer. ft Fgn. Pr, 3s, 2030 $1,036,750
Assoc. Electric. 4^1, 1953 554,181
Assoc. O. ft EL, 4s, 1978 37.812
Cent. States Pr. ft Lt.. 5s, '44 3.744
Interstate Power, 6a, 1952 95.200
Laclede Oas Lt., C, SHs, 1953. 309,750
Laclede Gas Lt., D. 5%s, 1960. 110,880
New Eng. Gas ft EL. 5s, 1947... 22.443
New Eng. Gas ft EL, 5s. 1950... 27,225
Total bonds „. $2,197,985
Preferred Stocks
Amalgamated Sugar, 5% $168,875
Amer. ft Fgn. Pr., $7 1st 1,887.100
Amer. ft Fgn. Pr., $6 1,221,800
Amer. Superpower, $6 2nd 23,750
Armour ft Co. (HI.), $6 45,500
Central States Pr. ft Lt., $7— 4,914
Electric Pr. ft Lt., $7 49.875
Electric Pr. ft Lt., $6 9.262
Goodrich (B. F.), $5 81,750
Goodyear Tire. $5 90,125
Hearst Cons. Pub., 7%, A 895,242
International Paper, 5% 158,812
Interstate Power, $7 1,755
Interstate Power, $6
Long Island Lighting, 6%, B— 40.000
North Amer. Lt. ft Pr. Co., $6— 70,875
Radlo-Ketth-Orpheum, 6% 8.017,400
Spiegel, Inc. $4.50 — T2.500
Standard Gas ft EL, $7 30.750
20th Century-Fox, $1.50 91.000
United Corp.. $3 89,375
I'nlted Light ft Power, $6, A 180,000
Walt Disney Productions, 6% 123,357
Wilson ft Co.. $6 57,500
Total preferred stocks $7,906,634
Common Stocks
Adams Express $142,587
Allls-Chalmers Mfg. 48.150
Aluminum Co. of America 309,000
Amalgamated Sugar , 82,500
Amerada Petroleum 345.000
Amer. European Securities 218,500
American International Corp. — 23,750
American Badlator 90,000
American Smelting ft Refining — 240,500
American Tobacco. B 172.000
American Viscose 132,000
Archer-Danlels-Midland 105,750
Atlantic Beflnlng 93,750
Bendlx Home Appliances, A 333.418
Bendlx Home Appliances 192,780
Bliss (E. W.) .51515
Blue Ridge - M9-522
Bridgeport Machine 14,8T5
Cerro de Pasco Copper 166.250
Chrysler Corp. — 832?I5
Cities Service 184?S
Commercial Investment Trust — 160,000
10 "..000
62.000
5.000
5.000
7.500
10.000
1.500
660
1.745
20,000
35.000
4.500
5,000
3.000
5.500
5.000
199.887
1.000
35.000
10.000
10.000
5.000
5.000
17.400
277,612
20.000
1.000
15.000
4.000
5.000
33.000
10.000
33.000
14.600
30.000
24.395
2.000
5.000
1.324.853
327.811
12.000
5.000
36.091
3.000
10.000
3.000
3.200
15.000
5.000
30.000
10.000
100.000
15.000
T5.000
50.000
23.000
2.000
25.000
3.000
5.000
Cnmmonaealih ft Southern 29.531
Commonwealth ft South., war... 968
Continental Can 135.000
Crane Co. 71.875
Crown Zellerhach 83.437
Curtiis-Wrlght 67.500
Deere ft Co. 40.687
Detroit Edison 11.385
Discount Corp. of N. T. 125,640
Electric Bond ft 8hare 42.500
General Amer. In test on J27.500
Goodyear Tire ft Rubber 116.437
Howe Sound 151.250
International Harvester 178.875
International Petroleum 77.687
International Tel. ft Tel 33.125
Italian Superpower. A 12.492
Kearney ft Trecker 20,000
Lehigh Coal ft Navigation 148.750
Madison Square Garden . 102.500
Manufacturers Trust Co. (N. T.) 350.000
McKesson ft Robbtns 77,500
Mld-Contlnent Petroleum 95.625
Middle West Corp. 82.650
Mississippi Valley Barge Line... 555.224
Molybdenum Corp. of America .. 85.000
Montgomery Ward 33.500
N. T. Central R.R. 155.625
Niagara Hudson Power 7.500
Nilee-Bement-Pond 43,125
North American Co. 330.000
Northrop Alrerart. A 47.500
Northrop Aircraft, warr. 8.250
Oliver Farm Equipment 482.525
Paramount Pictures 602.500
Permntlt Co. 149.419
PhiUo Morris 157.500
Phillips Petroleum - 225.000
Rartlo-Kelth-Oroheum 4,638.985
Radlo-Ketth-Orpheum. warr. ... 61.464
Republic Aviation 86.000
Reynolds (R. J.) Tobacco. B .. 124.375
Securities Core. General 24.812
Skelly Oil 90.750
Soconv-Vacuum Oil — - 102.500
Standard Oil find.) 85.500
Standard Oil (N. J.) 147.600
Texas Pacific Coal ft Oil 127.500
Thompson Products 134.375
TrI-Contlnental Corp — 60.000
20th Century-Fox 'il l.
I'nlted Corp. J!•215
I'nlted Fruit *?T-522
I'nlted Oas Corp. Bl-55?
I'nlted Lt. ft Pr., A 12.™0
I'nlted Lt. ft Pr.. B MM
Polled Mereh. ft Hits., f.t.e.— 82.500
V. 8. ft Fen. Securities UM55
Wesson Oil ft Snowdrift M-JOO
White Motor Co. — - 65.000
Total common stocks $15.669.315
Total $25,173,934
\
[66]
O T E S
[67]
BLUE RIDGE CORPORATION
BACKGROUND
Formed in 1929 by Shenandoah Corp., which originally owned 83% of its common stock. Blue
Ridge Corp. was part of the complicated holding company pyramid of which Central States Electric
was the apex. Blue Ridge, however, has always been more nearly a general investment company
than other parts of the system were. It is now jointly controlled by Central States Electric Corp. (in
receivership) and American Cities Power & Light, which together own 73% of the common stock.
Ultimate control of this fund, as of American Cities Power & Light, will depend on the outcome of
the Central States Electric reorganization. Meanwhile, the directorate of Blue Ridge is identical
with that of American Cities and two of the four directors are trustees appointed by the court to
administer the Central States reorganization.
Chicago Corporation owns slightly over 10% of the outstanding common stock, while Atlas
Corporation holds about 5%. These holdings, together with those of Central States and American
Cities, account for 88% of the outstanding common stock.
POLICY
About 80% of the fund at the year-end was in common stocks of the standard type, with about
55% in industrial and 15% in public utility issues. Another 10% was in fairly volatile utility pre-
ferreds. Greater concentration of investments than is usual with other investment companies appears
to be a persistent policy. Largest holdings comprise Bendix Aviation ($1,417,800), United Light &
Power and United Light & Railways preferreds ($2,120,811), Chrysler Corp. ($1,547,550), Commercial
Investment Trust ($1,696,000) and North American Co. ($1,674,000). Gross income on investments last
year was about 7.3%.
The company's long term management record has been poor, bettering the Dow-Jones Com
posite Stock Average in only five of the past 13 years and equaling it in one. Poor performance,
especially in the earlier years, is at least partially attributable to large holdings of utility holding
company common stocks and high leverage investment company issues, notably Central States
Electric common stock, which last year was written off as a complete loss. Management of this fund
has been under various dominations since its inception, — in its early days Waddill Catchings and
Goldman Sachs directed its affairs, subsequently (1933-1935) Atlas Corp. took over the supervision,
then it passed to the Tri-Continental group. Since Dec. 1939 the present administration, which is
generally regarded as independent of past alliances, has taken the helm. Operating results in 1942
were outstanding in relation to those of other funds and were better than in any other year since 1935.
Expenses last year were a little below average, totaling .72% of average net assets. This was
$21,126 less than in 1941. Combined purchases and sales of its investments were 29% of average
assets, against 45% in 1941.
SECURITIES
The $3 Cumulative Convertible Preferred stock, was selling at the year-end at a 29% discount
from the $55 a share to which it is entitled in liquidation and returned a yield of 7.7%, fairly well
covered by net income (1.6 times last year). Of the dividends paid in 1942, 47% were non-taxable.
The preferred stock is convertible at any time prior to redemption into \ Vz shares of common,
which obviously is now of little importance. Preferred shareholders also have the option to accept
1/32 of a share of common (worth about 6^) instead of the regular 75$f quarterly dividend, which
brings back memories of what these leverage common stocks sold at prior to 1929!
Substantial purchases and retirements of preferred shares have been made and the company
has stated its intention of purchasing additional shares from time to time. Last year 7,950 shares were
purchased at an average price of $36.24, while in 1941 a total of 42,390 shares were bought in.
While the Common stock, on which no dividends have been paid since 1937, was selling above
its break-up value at the year-end, a fairly high degree of leverage is present. The fact that this low-
priced stock has been showing earnings (about 7$ a share last year), plus the advantages accruing
from the present investment policy of the management which appears to be one of full investment
in volatile common and preferred shares makes it attractive as a low-priced leverage share in a
rising market. It should be noted that the floating supply of the stock is rather small, because of the
concentration of 88% in the above mentioned holdings of controlling and other interests. The balance
is held by some 12,000 stockholders.
Warranis to purchase 228,301 common shares at $20 were issued to Shenandoah Corp. in 1930;
this option right was never exercised, and these warrants are now owned by Atlas Corp.
The common and preferred issues are both listed on the New York Curb Exchange, where
turnovers are moderate. They are also listed on the Boston Stock Exchange.
[68]
BLUE RIDGE CORPORATION
Simplified Balance Sheet
As of December 31. 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market*
Bonds $ 272,500
Preferreds 4,468,835
Common
Ind. $15,826,050 69%
P.U. 4,385,368 19
R.R. 558,075 2
Inv. Co. 172,000 1
Fin. 2,053,000 9
$ 818,389 3%
1%
16
100%
22,994,493 83
100%
LIABILITIES
Payables & Res. $ 97,996
Capitalization:f
Notes Payable
to Bks. 4,800,000
(secured, due
2/24/43)
$3 Conv. Cum.
Opt. Pref. 18,392,660
no p.v.; stated
value $25; ent. in
liq. to $55 a sh.
(334.412 shs.)
Common Stk., 5,263,561 (a)
$1 p.T.
(7.489.483 shs.)
27,735,828 97
Total $28,554,217 100% Total $28,554,217
* Book value at cost $33,815,567.
t Capital surplus $10.'330.343.
Earned surplus 3.653,671.
Notes Payable
$3 Pfd.
Common Stock
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$ 4,800,000
18,392,660
Balance
Assets
Applicable
$28,456,221
23,656,221
5,263,561
Coverage
593%
$70.74
.70
OPERATING RESULTS
% Net Change in Market Value of Assets
Blue Ridge
Corporation
Dow-Jones Com
posite Stock (b)
1942
+ 15
1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
-10 -13 -3 +23 -37 + 28 +53 -7 + 19 -4 -41 -27
-10 -10 +3 +29 -34 +32 +41 -1 + 49 -16 -54 -30
mge in Market Value of Assets for Various Periods Inclusive
BullMkt. BearMkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
+ 10 -5 -8 + 14 -28 -8 + 115 --59 -36
+ 3 -7 -5 + 22 -20 +6 + 176 --73 -40
Blue Ridge
Dow-Jones (b)
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferred 4.72 5.36 3.97 3.60 2.20 4.44 3.67 2.16 1.68 1.93
Common .07 .10 .05 .03 d .04 .08 .04 d .05 d .10 d .08
Dividends
Preferred 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Common Nil Nil Nil Nil Nil .15 .10 (c) Nil Nil
Net Asset Value
at year-end
Preferred / 02iff 70.74 58.51 66.18 80.05 85.09 69.46 119.73 95.66 62.08 66.03
Common .69 .15 , .56 1.31 1.61 .78 3.72 2.33 .54 .98
Price Range
Preferred
High 40%383/4
45 42% 44 48% 53 46 39% 37%
Low 27 29 33% 34 34 34% 43% 35% 30% 21%
Last 38% 30 37% 39% 38 37 46% 44 37% 29
Common
High 1% % 1% 1% 1% 4% 4% 4% 3% 4%
Low %6 % % % 1% 25/a 1 1% 1%
Last %> % % 1% Wa 3% 3% 1% Wa
Annual Voluine of
Trading N.Y.C.E.
(000 omitted)
Preferred 20 25 18 16 18 31 52 59 49 113
Common 57 73 54 82 96 156 258 163 86 287
(c) 1/10 Central States Elec. Corp. Common share.
[69]
BLUE RIDGE CORPORATION
ASSET VALUE
PER SHARE
IOOi
COMMON STOCK
10
.10
.10
-I
-10
-100
$4.50
$3.77
/ /
d $0.8
/
d $1.20
-50% -25% D^;231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st, 1942 when the Dow-Jones Industrial Average stood at 113.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF BLUE RIDGE COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the December
31st, 1942 portfolio position.
Applied to Common Applied to
In Event of Shares owned all Assets
Rise of 10% $1.01 $1.08
' 25% 1.47 1.65
50% 2.24 2.60
100% 3.77 4.50
Fall of 10% .40 .32
25% d .07 d .25
50% d .83 d 1.20
[70]
BLUE RIDGE CORPORATION
of Dec 31, 1942:
Prln. Amts. BONDS Mkt. Values
$100,000 U. S. Treas. l%s, 1948 $100,000
500.000 Alleghany Corp. 58, 1950 (Income) 272,500
Shares PREFERRED STOCKS
2,500 Amer. Cities P. k L.. A, Dlridend
Series $38,T50
2.500 Amer. Cities P. t L.. A. 1936 35,625
350 Celanese Corp., 2nd 7% 33,862
3.200 Commonwealth * Southern, $6 118,400
2.000 Electric Bond t Share $5 82,000
2.000 Electric Bond k Share $6 85,750
4,!»00 Illinois Iowa Power, 5% 123,725
1.250 North Amer. L. & P., $6 65,625
11.616 United Aircraft, 6% 1,078.836
2,700 United Gas Corp.. $7 - 307,125
67,200 United L. ft P., $6. 1st 1,512,000
2,279 United L. ft Rys., 6.36% 188,017
5.179 United L. ft Rys., 6% 420,793
3.700 U. S. Rubber, 8% 378,326
COMMON STOCKS
Industrials
10,000 Armstrong Cork $305,000
5,000 Atlas Powder 263,125
41.700 llcndlx Aviation 1,417,800
22,800 Chrysler Corp. 1,547,550
53,000 Commercial Investment Trust 1,696.000
31.435 Cramp Shipbuilding 314.350
8.000 Deere ft Co. 233,275
8.000 Holland furnace 255,875
8.200 Intcrchcmlcal Corp. 184,500
8,040 Kalamazoo Store ft Furnace 105.525
15.000 Locw's Inc 690.000
18.500 Montgomery Ward 619,750
12.100 Morris (Philip) k Co., Ltd. 952.875
6,000 National Steel 312.000
43.000 Pan American Airways 1,101,875
7,400 Pepsi-Cola 216,450
16.800 Scars. Roebuck 1,039.500
22.400 United Aircraft 571.200
7,500 U. S. Rubber 194,062
Mining and Metals
2,850 Aluminium Limited 250,087
9.600 Climax Molybdenum 374,400
36.400 Hudson Bay Mining 837,200
15,300 International Nickel 443,700
24,000 Nowmont Mining — 645,000
Oils
10.100 Paclfle Western Oil _ 90.900
7.500 Phillips Petroleum 337.500
12,000 Skelly Oil — 363.000
70.000 Socony-Vacuum Oil 717,500
18,000 Standard Oil (N. J.) 830.250
4.000 Standard Oil (Ohio) 147,000
11,200 Texas Company 464,800
Public Utilities
34.000 Amer. Gas & Electric 671,825
76,000 American Light k Traction 905,800
74,200 American Water Works k Elec. 259.700
3.951 Derby Gas & Electric 57.289
53.900 Niagara Hmlson Power 101.062
167,400 North American Co. 1,674.000
40.370 Ogclcn Corp. 105,971
6.900 Pacific Gas & Electric 159,562
6,300 Peoples Gas Light k Coke 289,800
3,500 Public Service Co. of Indiana 45,062
49,500 United Light & Power A 12,375
51.677 United Light k Power B 12.930
Railroads
8,400 Chesapeake k Ohio 285,600
17,300 Southern Pacific Co. 272,475
Investment Companies
50,000 Chicago Corporation 100,000
8,000 Phoenix Securities Corp 72,000
Banks
10.200 Manufacturers Trust Co. of N. T. — 357,000
Warrants for Purchase of Common Stock
10,700 Cramp Shipbuilding
Classification off Assets Owned, as off Doc. 31
(market value):
1942 1941
% of % of
Amount Total Amount Total
Bonds $372,500 1 30 $155,070 0.62
Pfd. stks. 4,468,835 15.65 2,547,867 10.14
Com. Stocks:
Banks 357.000 1.25 320.588 1.28
Indust. 12.020,712 42.10 10.488,238 41.72
Mg. k metals 2.550.388 8.93 2,723.638 10.84
Invest, cos. . 172.000 0.60 50.024 0.19
Utilities 4.385,367 15.36 4,243.212 16.88
Railroads 558.075 1.95 598,250 2.78
Oils 2,950,950 10.33 2,304,313 9.17
TtL cm. stks. 22,994.492 80.52 20,828,263 82.86
Total lnvs. _
Cash k rec
27,835,827
718,389
97.48 23,531,200
2.52 1,603,436
93.62
6.38
Total $28,554,216 100.00 $25,134,636 100.00
[71]
CAPITAL ADMINISTRATION COMPANY, LTD
BACKGROUND
Formed in 1928 by the New York Stock Exchange firm of Maynard, Oakley and Lawrence,
this relatively small company has been controlled since June 1932, by Tri-Continental Corp., owner
of 166,200 of 240,000 outstanding shares of the 'B' stock which elects two-thirds of the Board. Three
partners of J. & W. Seligman & Co. and two partners of the New York Stock Exchange firm of Stillman,
Maynard & Co. are directors. Also represented on the Board of 13 are members of Ames, Emerich &
Co., (Chicago investment bankers and one of the original underwriters); Halladay & Co., (Members
of New York Stock Exchange); officers of the Brooklyn Trust Co.; officers of Central Hanover Bank &
Trust Co.; also a partner of the law firm of Sullivan & Cromwell, who act as general counsel for the
company. The group of investment companies of which Capital Administration is a member had total
net assets of $81,180,000 at the end of last year.
POLICY
Cash and government bonds were maintained at about the same level as a year ago, consti
tuting about 17% of the total fund at the year-end, while about 66% of the assets were in a broad
fist of common stocks. The balance of the portfolio consisted of bonds and preferreds. The entire fund
showed a gross yield of around 5V2% last year, with about $29,600 less income than in 1941. The man
agement record has been good, exceeding the Composite Stock Average in seven of the past 13
years and equaling it in two. However, the record of the past six years or so has been much less
impressive than that of the earlier years. Expenses were average, amounting to 0.86% of average net
assets and a reduction of about $11,000 from 1941. Security transactions were somewhat less numer
ous than in the other companies of the Tri-Continental group, amounting to 36% of the average assets
compared with 59% in 1941 and 59% in 1940.
SECURITIES
The $3 Cumulative Preferred issue, available at the year-end at a 23% discount from liqui
dating value had 149% asset coverage and afforded the good yield of 7.8%. Earnings equalled $4.04
per share last year compared with $4.43 in 1941. The 1942 dividend has been tentatively ruled 40.82%
taxable and 59.18% non-taxable. The small issue accounts for its relative inactivity; the shares trade
only occasionally on the New York Stock Exchange.
No stock has been bought for retirement since 1932.
The Class 'A' Common stock was available at a 40% discount from its asset value of the
year-end. It possesses high leverage and moves sharply in relation to the general market. It has
usually been available at a better price ratio than comparable leverage shares due to its limited
marketability caused by the small outstanding issue. It is listed on the New York Stock Exchange. No
common dividends may be paid which would reduce the asset value of the Class 'A' common stock
below $21.12 a share (requires about $6,500,000 of net assets). Common dividends are shared as a
class, 70% for the Class 'A' stock and 30% for the Class 'B' stock. Due to these charter provisions,
common dividends were paid only in 1936 and 1937. Twenty-two cents per share net earnings per
'A' share was reported last year, compared with 30 cents in 1941.
The Class 'B' Common stock was originally subscribed for by Security Management Co., (now
Broad Street Sales Corp.), its directors, the bankers and associates. Tri-Continental Corp. owns 166,200
out of 240,000 shares. The stock received dividends of 25.6 cents and 12.8 cents per share in 1936
and 1937 respectively, but none since. This stock is occasionally traded over-the-counter.
[72]
CAPITAL ADMINISTRATION COMPANY, LTD.
Simplified Balance Sheet
ASSETS
As of Dec. 31, 1942
Cash & U. S. Gov't Bds., etc.
Investments, at market*
$ 794,962 17%
Bonds
Preferreds
Common
Ind. $2,635,003
R.R. 170,475
P.U. 198,900
Fin. 73,925
$ 283,083
496,376
7%
13
86%
6
6
2
100%
3,078,303 80
100%
3,857,762 83
Total
* Book Value at cost $4,174,979.
f Book Surplus $2,663,957 plus Reserve of $317,432.
$4,652,724 100%
LIABILITIES
Payables & Reserves $ 109,280
Capitalization^
2% Bank Loans
(due 9/30/44) 1,300,000
$3 Cum. Pref. Stk.,
$10 p.v. ent. in liq. to
$50 a sh.
(43,400 shs.) 2,170,000
Class 'A' Stk.,
$1 p.v. ent. in liq. to
$20 a sh. in pref. to
CI. 'B' Stk. and thereafter
as a Class, to 70% of
remain, net assets
(143,405 shs.)
Class 'B' Stk.,
• (240,000 shs.) 0
Total $4,652,724
(a) Applicable to Class 'A' at 12/31/42.
1,073,444 (a)
SUMMARY OF CAPITALIZATION
Bank Loans
$3 Preferred
CI. 'A* Com.
CI. 3' Com.
Entitled to
in Liquidation
$1,300,000
2,170,000
See Bal. Sheet
See Bal. Sheet
Assets
Applicable
$4,543,444
3,243,444
1,073,444
d 1,794,656
Capital
Administration
Dow-Jones Com-
1942
OPERATING RESULTS
% Net Change in Market Value of Assets
1941 1940 1939 1938 1937 1936 1935 1934
Coverage
349%
$74.73
7.49
d 7.49
1933 1932 1931 1930
+ 16 -6 -10 -2 +16 -29 +32 +37 +16 +15 -3 -23 -14
posite Stocks (b) +15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% TTet Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
Capital
Administration
Dow-Jones (b)
7*
Net Income
Preferred Ifi
'A' Common
'B' Common $4
Dividend
Preferred
'A' Common ^
*B' Common /3'"
Net Asset Value
at year-end
Preferred
'A' Common
'B' Common
Price Range
Preferred—High
Low
Last
'A' Com.— High
Low
Last
Annual Turnover of
Trading N.Y.S.E.
(000 omitted)
Preferred
'A' Common
•A
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1941 1942 1942 1942 1936 1932 1942
+ 9 -2 -4 + 11 -22 +3 + 142 -36 + 21
+ 3 -7 -5 +22 20 + 6 + 176 -73 -40
centages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
1942 1941 1940 1939 1938 1937 1936 1935 *1934 1933
$4.04 4.43 4.07 3.80 2.54 5.39 5.07 2.54 2.97 1.91
.22 .30 .23 .17 (d) .50 .44 (d) (d) (d)
.06 .08 .06 .04 (d) .13 .11 (d) (d) (d)
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.75 3.25
Nil Nil Nil Nil Nil .50 1.00 Nil Nil Nil
Nil Nil Nil Nil Nil .128 .256 Nil Nil Nil
$74.73 64.07 74.37 90.62 96.80 82.02 137.86 106.73 67.28 54.70
7.49 4.26 7.37 12.29 14.16 9.69 24.61 17.17 5.23 1.19
(d) (d) (d) (d) (d) (d) 1.18 (d) (d) (d)
38% 41 45 43 45 52% 53 48 39 35%
32 32 36% 35 34% 37% 45% 32% 26% 25%
38% 32 39 38% 40% 37% 52% 47% 33 20%
fa 4% 3% 6 8 8% 18% 18% 14 10% 12%
1% 1% 2% 4% 4%45/8
12% 4% 5% 4%
" 4% 1%. 3 5% 8 4% 15% 13 6% 5%
1 1 5 1 1 3 7 10 6 22
18 24 16 22 18 42 55 55 23 48
[73]
CAPITAL ADMINISTRATION CO., LTD.
ASSET VALUE
PER SHARE
100
CLASS "A" STOCK
10
.10
.10
-10
-100
$33.42
$26.27
..t»"* *
% 7 49^2^1
i•i
\
V
d $3.2
-d $8.3 o
-50% -25% D^;,31 +25% +50% +75% +100%
1942
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st. 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF CAPITAL ADMINISTRATION 'A' COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the December
31st, 1942 portfolio position. Leverage figures have been adjusted for proportional share of Class 'B' stock.
Applied to Com. Applied to
In event of Stock owned all Assets
Rise of 10% $ 9.63 $10.65
25% 12.85 15.41
50% 18.22 22.33
100% 26.27 33.42
Fall of 10% 5.34 4.32
25% 2.12 d .44
50% d 3.25 d 8.36
[74]
CAPITAL ADMINISTRATION COMPANY, LTD.
tocyrittot OWMd, ntfDK.il lM*_^ U. S Governacnt SccurtiffjPrincipal *g,
(odoESU 0ra"
tSOO V. S. Trras. Is. Dm. IS. -51-41 . 1301 813
100 mV. 8. Treaa. Ctf.. E %%!. „Dee. 1. 43 100.031T» (DO. R. Trcu. C Has. Mai.
15. 4.1 15,070".0 0DU. 8 Sn. 0 2V4s. Mar 1.
18.18 48,45025 XV. 8. Hit. 0 JHi. June 1.
1054 14,100
Total C. S. Govt, securities 540.504 11.81
BondsIndustrial!
2.1 Kehenley Distillers deb 4s. '52 25,83825 Vngstn. Sheet 4 Tube 4a, '48 25.4S8
Ml
1.11
L(l
1.04
.as
.56
.54
Investment Companies8 Alleghsny Corp. 5a. 1844..
11 Alleghany Corp. (a. 1848..
Public Utilities50 ABer. 4 Pgr.. Tt. tt, 2030.75 Eiee. Pr. 4 Lt. 5(. 2030...10 Ohio Edison 4», 18tit10 Texas Pr. 4 Lt. 5a. 1850...
51.370 1.10
8.1117.873
.18
.16
15.784 .34
39,87500,18810,62510.750
RailroadsBrie R. R. Inc. 2015..Missouri Pacific A St. 1805.Mlasourt Paeltlc T 5s, 1877.Missouri PseMIe 0 5s, 18T8.Missouri Pacific H 5s, 1980.Missouri Pacific I 5s, 1981.New Orleans, Teias 4 Mexico
Ry A G%s, 1»54B 5%, 1954C 5%, 1958D414^. 1950
Pere Marquette A 5s. 195*Wabash R.R. A 4s, 1971...
Total bonds 283.083
Preferred StocksIndustrials
Coca-Cola A $3 24,800Commercial Credit 4%%.. 10.T00Central Motors $5 03,875Goodrich (B. r.) 85 33,350Intemall. Paper 5% 81,708fflTublle Chatlllofl 7% 10.900
tfhares400200noo
700
100200600:.oo200800SN
1.200500200100
l.TOO rarasKsmt PlcltsresApparel
1,000 Cluett, Pesreody
ABtossobllea a1,400 Bon Warner1.900 Chrysler Carp.1,700 General Motors
.8*1.42.23.2.1
2.74
.50
.02
.08
.13
.03
.11
.1109
..08.08.IT.50
88.485 1.90
127.438
23,2051.0731,8000,1811.4404.970
5,2.-34.0(1(13.88(13,5.™8,003
28.341
Public Ctlllt InAaet. Oas i BscAmer. Pr. k Lt. 15American Pr. k Lt. 10Consol. Edison of N. T., f5.Elec. Bond at Share 15Elec. Bond 1 Share 16Elec. Pr. * Lt. 16Elee. Pr. k Lt. ITHlNew Eng. Power 8%N. Y. Stats El. k Gas 1.10%Pacific LlthUtlf ((Filet 8d. Pr. I Lt. IS pr..
.53
.481.37.71.08.45
195.388 4.20
9.3253.32511.25045,5008.200
34.3000.175
39.90001.11510.45010.15050.198
.20
.07
.14
.98
.17
.74
.11
.8*1.81.44Jl
1.**
100,988 0.47
Total preferred stocks. _Common 8tacks
490.378 10.07
4(438
34.000
'39.900118.90*119.81*
■M
.Tt
M1.771.57
1.000 American Airlines .lJOO United Air Lines .
188,67* 4.20
55.50015,01*
100 tEQuaranty Trust ef N. T.
Bercragss1.500 Canada Dry2,390 Natl. Distillers Prodre1,500 Pepsi-Cola900 Walker (Hiram 1-0. k W. -
1*4.410 4.18
Rulldlng Equipment and lerwratlaa1,000 HolUnd Pumaee 19.0001,800 Otis Elerator _-—1,400 Sherwin-Williams .__
19.MS122.850
180.875
1.300 Air Reduction 51.075800 Allied Chen. * Dye 110.000
1.900 Amer. Cyaoamld ■ T5.TW400 E. 1. du Pont300 Hercules Powl
1.300 Union Carbide
1.700 Continental Can
Drugs1.000 CD Merck * Ca.
Electrical Equipment700 ChlcafO Flex. Shaft 45,800
2.200 General Electric (T.10*
63.80022.200
105.300
414.718
45.800
18.175
«2M1*4
1.11L4fi.a1.11.41
1.14
9.1*
IM
Finance Companies(omairrrlal Credit _.C'lmuii'iclal Invest. Trust
Oold Mining2.100 Pome Mines. Llil1.100 Homesteke Mining
I.UOO Mtlntyre r
19.77525.600
45,175
17.20H134.82539.000
.43
.35
.<0
.75
.(4
111.125 2.39
Miscellaneous Manufacluring2.000 Simmons Co
Miscellaneous MetalsAluminium, LtdInternational NickelKennecott Co]
700I .Msg1 200I.*
Kennecott Copper ...„_.__CLNoraods Mines
32.500
01.42529,00014.80052.000
2nd
1 .7(>02.01105,700700
5.000000
6.9001.1001.100
I .WW
1.1001.50011.5001.14114.800
10.9(H)3.500
177.225
Office and Bvjslswea EquipmentInternal). Bus. Machine* ... 29.900
OlaConsolidated Oil 11.688I'ondnrnlal 1)11 54.750unto Oil _ ««Phillips Petroleum 31.300Pure Oil -;.2.V(Xkelly OU 2. .225Sm-onv Vacuum — (O.i-aStandard Oil (Ind.) 62.700Standard Oil (N.J.I 50.. 38Standard Oil (Ohio) 28.400Texas Co. V»t
.70
1.1182.75
1.12
3.81
.2.11.181.44,8s
1.21.6fl.M1 3:.1.U9.6.1.Htl
499.301 10 T::
(111 Well Marhlner)Perkersburg Rig k Reel
Publle CtilllloAmer. Gas 4 ElectricCommon*/. EdisonCommon*. * SouthDetroit EdisonElec. Bond 4 ShareNlag Hudson PowerNorth Amer. Co.Peoples Gas Lt. k Coke
19.4;:.
21.17552.8133.23419.8839.77520.43833.00036.800
.481.14.or.4221.41
198.900 4.28
Radio and Electronics3.100 Phllco Corp. 47.015
Railroads1.000 Chasap. * Ohio 68.000200 Loulsrllle A Nashville 12.025400 Norfolk * Western 44.600
1.100 Psjssrjarl. R.R. lt.850
1 01
1 39M
Retail Trade4 Ca _(H. L.)
1T0.4TI !«*
cr. w.i
3.3003.200
1.000 Philip Morris
Miscellaneous500 fHUnloa Serrlce Corp.
32.61370.40037.11543.133
1 131.51.84).93
203.363 4.37
71,7*0 1.69
5.000 .11
46.17Total common stocks... 3,078.303
DOeer the eownter market In New lark.gjTsken at fair value in the opinion of the corporationEUnless otherwise Indicated, these securities are traded
In on the New York Stock Exchange or New York CurbEicbange. and market values sre based on last recordedsales on Dec. 31. 1942. or In the absence of recorded sales,the mean between the closing bid and asked prices.
Clwaslfcctiers at Assarts, Date U (at markatvalue):
1*41 . 1*41% of % of
U. S. Con. (549,564Total1181 (130.896
11MM 1.41
IndustrUls ... 11*76 1.1*Railroad . 104.269 1.14 94.488I'Ulltles 117.438 3.74 119.588
Total bonda. 183.083 608 214,277
Pref. stks.:IndustrUls 195.388 .4.20 1(9.231ItliUles 300.988 647 258.800
Total pref. . 494.376 10.67 428.051
Com. stks.iAmusemls. 43.225 *.*T 39.150Railroad 170.475 3 66 200.263Public utility.Apparel
198.900 4 28 189.72634,000 0 73 35.500
Automotive ... 288,676 6.20 129.5413Aviation 80.525 1 73 120.126Banks 23.550 0 51 22.800Beverages 194.425 « 18 80.725Bldg. equip. . 180.875 3.(1) 130.310Chemicals 424.738 9.13 113.713Containers 4.1.90(1 0 99 S7.313
29.375 0 83 31.625Elec. equip. __ 112.600 2 42 152.150Finance 45.375 0.841 28.325Gold mining _ 111.125 2 :(» 93.900Misc. mfg. ... 32.500 0.70 ......Misc. metals .. 177.225 3.91 229.776Oils 499.301 10 73 466.514orice, etc.. eq. 19.900 0.64Radio 47,025 1.01llil aaacb 19.475 0 42 8.550Retail 203.34* 4.(7 209,n38
Steels78" 7 50
122.150Tobaccos . 1*8 75.000Service 5.000 0.11 5.0O0
Total eoa. . 3.078J03 68.17 2.902.057Cash 4 rec. .. 243.398 5.17 608.831
Gisnd total . (4.632.714 100.00 74.283.912
Total*.04
2 21
5.0*
1.95(.04
9.99
(.914 684.430.833.H32 Sll11 :,i1.863 Ul10361.040.T43 060 661.19
5~3t.10.89
0 204.882.861.750 12
[75]
CARRIERS & GENERAL CORPORATION
BACKGROUND
Calvin Bullock of New York formed this company in 1929 and manages it under contract. Until
1935 it was known as International Carriers. The directors include Dr. E. W. Kemmerer of Princeton
University; executives of Calvin Bullock & Co., and a partner of the law firm of Sullivan & Cromwell
and the engineering firm of Coverdale & Colpitts. Relatively small in size, it is the only "closed-end"
fund in the Calvin Bullock group of companies, whose total investments exceed $50,000,000.
POLICY
Prior to 1935, the company's investments were restricted by charter to transportation securities.
Since then the portfolio has been diversified, and the principal groups in order of importance are
utilities, rails and rail equipments, non-ferrous metals and oils. At the year-end, about 86% of the fund
was in common stocks, 6% in preferred stocks, 2% in bonds and 6% in cash. Last year, the fund
produced a gross income of 7.0% compared with 6.9% in 1941.
The long-term management record has appeared unimpressive, largely due to the concentration
in rail investments prior to 1935. Since then, performance has been uneven as will be noted from the
facing figures. When the company was restricted to rail investments, it did better than the Dow-Jones
Rail Average. Expenses have been above average, and amounted to 1.01% of the average assets in
1942, compared with 1.23% in 1941. Portfolio turnover was about 37% of average net assets, compared
with 33% in 1941 and 57% in 1940.
SECURITIES
There are outstanding $1,872,000 of 5% Debentures due November 1, 1950. These debentures
are a direct obligation of the company but unsecured. They carry non-detachable warrants entitling
holders to purchase 50 shares of common stock at $20.00 per share, any time prior to November 1, 1950.
There is no sinking fund and they are callable at 105 prior to November 1, 1945; at 104 on November 1,
1945 and at 1% less each year thereafter to November 1, 1949.
The debentures are listed on the New York Stock Exchange and at the year-end sold at par.
Interest coverage last year was 2.70 times.
The Common stock possesses only small leverage because of the limited senior capital and at
the end of 1942 sold at the substantial discount of 40% from asset value and yielded 7.2%. Dividends
have been paid every year, the 1941 and 1942 payments being 22 Vif, and have been comfortably
covered by net earned income which amounted to 310 last year and 290 in 1941. The dividend paid in
1941 and 1942 was stated to be non-taxable.
The shares have been repurchased by the company from time to time and about 236,000 shares,
or roughly 30% of the original issue, have been retired. Only 500 shares were purchased for retirement
last year at an average cost of $2.57 per share.
The stock is listed on the New York Stock Exchange but is relatively inactive. It is also admitted
to trading privileges on the London Stock Exchange.
[76]
CARRIERS & GENERAL CORPORATION
Simplified Balance Sheet
As of December 31, 1942
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Bonds
Preferreds
Common
Ind. $3,188,175 76%
536.462 13
ASSETS
$ 309,316 6%
$ 80,475
284.750
2%
6
P.U.
R.R.
Fin.
394,350 9
98.875 2
100%
4,217,862 92
100%
4,583,087 94
Total $ 4,892,403 100%
LIABILITIES
Payables $ 31,109
Capitalization: f
5% Debentures
(due 11/1/50) 1,872,000
Common Stock,
$1. par value 2,989,294 (a)
(564,692 shs.)
Total $4,892,403
* Book value $6,601,548.
t Book Surplus $4,472,182.
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable Coverage
Debentures $1,872,000 $4,861,294 260%
Common Balance 2,989,294 $5.29
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Carriers & General +11 -4 -4 +3 +17 -42 +33 +10 +3 +75 -21 -57 -30
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Carriers & General +7 +3 +6 +24 -28 -4 +166 -76 -54
Dow-Jones (b) +3 -7 -5 + 22 -20 +6 +176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income .31 .29 .28 .22 .12 .42 .38 .23 .28 .16
Dividends .225 .225 .225 .15 .15 .35 .35 .20 .20 .20
Net Asset Value
at year-end 5.29 4.82 5.52 6.20 6.19 5.18 11.82 8.53 8.17 8.10
Price Range
5% Deb. 1950
High 103 104 101 96 95 106% 108 Y2 j
Low 99 y2 96 90 85 80 Yi 83 \02Ya SissueaT*^ - - i 1 OOF
Last 100 V* 96 Vt 99V2 92 89 80 105 |December, 1335.
Common
High 3Vi 3»/a 3»/4 4 AVi 9^293/4
BVb 12'/8 10%
Low 2V< 2»/4 2 2% 2Yi 2Vs 6% 3Vb 4y2 2%
Last 3V&2s/e
2% 2Vb V/a 3Ve 7Yi 7% 6%5S/8
Annual Volume of
Trading N.Y.S.E.
(000 omitted)
5% Deb. 1940 161 328 335 266 135 248 449 — — —
Common 37 68 54 55 61 222 247 207 171 206
[77]
CARRIERS & GENERAL CORPORATION
ASSET VALUE
PER SHARE
I00|
COMMON STOCK
10
.10
.10
-10
-100
$13.90
$12.76...
1 • • ■***£BJ|^^A^M
mm
»•••*■■
$1.56
-$0.99-*
-50% -25% D^4231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st. 1942 when the Dow-Iones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF CARRIERS & GENERAL CORP. COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the Decem
ber 31st, 1942 portfolio position:
Applied to Common Applied to
In event of Shares owned all assets
Rise of 10% $ 6.04 $ 6.16
25% 7.16 7.45
50% 9.03 9.60
100% 12.76 13.90
Fall of 10% 4.55 4.43
25% 3.43 3.14
50% 1.56 0.99
[78]
CARRIERS & GENERAL CORPORATION
Securities Owned, as of Dec. 31, 1942:Steels
Chrysler Corp. .
General Motors
Common Stocks
Automotive
Shares
1,800
1.400
BjApprni.
fflMkt. Val. %
$122,175 2.74
62,125 1.26
Chemicals
184,300 3.73
Commercial Solvents 6,000 56.250 1.14
(lu Pont (E. I.J 700 94,150 1.91
Krecport Sulphur 1.600 56.800 1.15
Gen. Aniline & Film "A" 400 20,700 0.42
1,600 129.600 2.62
Foods
357,500
■
7.24
3,200 76.000 1.54
National Dairy Products 2,000 29.250 0.59
United Fruit 1,000 66,500 1.35
Machinery & Equipment
171,750 3.48
I.rowne & Sharpe Mfg. 200 19,200 0.39
Cutler-Hammer, Inc. 1,000 15,875 0.32
Food Machinery 700 28,525 0.58
2,100 64,050 1.30
International Harvester ... 800 47,700 0.96
Westinghouse Elcc. & Mfg.. 500 40,875 0.8S
216,225 4.38
Non-Fcrrous Metals
Anaconda Copper 5,000 122,500 2.41
Bunker Hill & Sullivan 6.000 56,250 1.14
Eagle Picher Lead 4,000 28,000 0.5T
Homcstake Mining 500 15.875 0.33
International Nickel 8,500 101,500 2 05
Kcnnecott Copper 5,000 145,000 2.94
Petroleum
Gulf Oil 1,600 60.800 1.23
La. Land ft Explor. 4.000 20,500 0.43
Pure Oil _ 9,000 10.,250 2.05
Standard Oil (N. J.) 2.842 131,087 3.65
Texas Co. 3,300 136,950 2.77
450,587 9.13
469,125 9.50
Rails and Rail Equipment
Ala. Great Southern 2,000 143,000
Chesapeake & Ohio 1,000 34,000
Delaware & Hudson Co. 500 4,375
General Amer. Transport. — 1,600 60,000
Pennsylvania R.R. 5.000 117.500
Pullman Inc. 1,000 26,375
Reading Co. 6,700 95,475
Retail Trade
Crecn (H. L.) Co. 500 16.000
Marshall Field _ 5,000 48,750
May Department Stores 400 14.800
McCrory Stores 4,000 47,500
.Montgomery Ward 8,000 100,500
Murphy (G. C.) 1,000 63,625
Safeway Stores 500 17.500
Scars, Roebuck 1-600 99,000
2.90
0.69
0.09
1.21
2.38
0.53
1.93
480.725 9.T3
0.33
0.99
0.30
0.96
2.04
1.29
0.35
2.00
RethMu-m Steel ...
I'. S. Sicrl
Ynungstmvn Sheet —
2.000
3.000
2.000
112.500 2.28
141.750 2.87
oo.roo 1.22
Tobacco
American Tobacco •'!!" 800
Reynolds (R. J.) "IT 5,000
Utilities
314,750 6.37
34,400
124.375
0.70
2.51
158,775 3.21
Amer. tia* & Elec. 2,000 3S..V-0 0.78
Amor. Lt. & Traction 2.600 3:i.S<»o 0.68
Commonwealth Edison 5,000 105.025 2.14
Detroit Edison 2. .00 36.225 0.73
El Paso Natural Gas 5.000 116.250 2.36
North American Co. 5.000 50,000 1.01
Pacific Gas & Electric 2.500 57,812 1.17
Panhandle East. Pipe Line.. 3,000 98.250 1.99
Miscellaneous
American Chicle Co. 400
American Optical Co. 300
Celanese Corp. of America.. 1.500
Commercial Credit — 3.500
Congoleum Nairn, Inc. 1,500
Crown Zellerbach 3.000
Goodyear Tire ft Rubber — 3,000
Holland Furnace 1.800
Parke, Davis & Co 2.000
Timken Roller Bearing 800
536,462 10.86
40.300
9.600
42.1S7
98,875
27,375
33,375
77,625
52,200
55,250
33.200
0.83
0.19
0.85
2.00
0.55
0.68
1.57
1.06
1.12
0.67
469,987 9.51
407,675 8.25
Total common stocks .. 4,217,862 85.38
Preferred Stocks
Arkansas Nat. Gas, 6% 10,000 83,750 1.70
Burlington Mills, $2.50 500 27,750 0.56
Electric Bond & Sh.. $6 1,800 77,175 1.56
Florida Pr. & Lt., $7 600 48,600 0.98
National Supply, 5"2% ... 200 11.400 0.23
Paramount Pict., 6% 1st — 100 11,837 0.24
United Aircraft. 5% 200 18,575 0.38
United Stores, $6 100 5,662 0.11
Total preferred stocks.. 284,750 5.7S
Bonds
Par Val.
Bait, ft Ohio, 1st 4s, '48 $25,000 15.125 0.31
Col. Gas. & Elec, 5s, '61. ._ 20,000 17,450 0.38
Elec. Pr. ft Lt.. 5s, 2030 20,000 17.650 0.36
Southern Pac, 1st 4s, '55.. 25.000 17.500 0.35
Standard Gas ft El., 6s, '57- 20,000 12,750 0.29
U. S. Def. bds., ser. G 25,000 24,700 0 50
U. S. Ctfs. of Indebt., %%
Dec. 1, 1943 _ 25,000 25,000 0.51
Total bonds _ 130,175 2.64
Total Investments ... 4,632.787 93.78
Cash, etc., net 307,326 6.22
Total net assets $4,940,113 100.00
HThe market quotation used for each security Is the
last recorded sale price on Dec. CI, 1942, or. in the
absence of recorded sale, the average of the closing bid
and asked prices, except In the ease of United States
defense bonds, series G, which are priced at approximate
redemption value.
[^Approximate percentage of total net assets with In
vestments at market quotations.
[79]
CENTRAL STATES ELECTRIC CORPORATION
(in reorganization)
BACKGROUND
The corporate title suggests an operating or utility holding company but in fact this is an invest
ment company which controls American Cities Power & Light Corp. and the Blue Ridge Corp. All
three companies are classified as investment companies and had total year-end net assets, exclusive
of inter-company holdings, of about $40,000,000. These investments are in standard common and
preferred stocks, about 62% in industrial and 38% in utility issues. Combined companies hold some
723,000 shares of North American Co. common equal to about QV2% of that issue.
Central States Electric Corp. was incorporated in Virginia, May 28, 1912, as an investment
company, and control rested with Harrison Williams prior to February 26, 1942, when the Company
filed a voluntary petition for reorganization under Chapter X of the Federal Bankruptcy Act in Federal
Court for the Eastern District of Virginia. In the late Twenties, Central States Electric was the apex
of the pyramid of holding and investment companies through which Harrison Williams obtained and
maintained control of The North American Co. and other assets which at their peak values in 1929
exceeded a billion dollars. With its principal investment in a utility holding company (North Ameri
can) and in the high leverage shares of subsidiaries whose chief investments were also utility holding
companies, Central States Electric experienced one of the worst deflations after 1929 in the entire
investment company field. It avoided bankruptcy for some period by paying interest on its debentures
out of assets. By the end of 1941, however, assets had shrunk to only $1,412,201, against which the
company still had $18,103,000 in debentures outstanding, and annual interest payments of over
$900,000, so continuity of interest payments became impractical and the aforementioned bankruptcy
proceedings then ensued.
Central States Electric is now operating under the direction of two court-appointed trustees,
O. D. Dennis, and J. Floyd Kent, of Richmond, Virginia. These gentlemen were elected directors of
American Cities Power & Light Corp. and Blue Ridge Corp., immediately after their appointment, in
view of the control of these two companies by Central States. It is expected that the trustees will
shortly file a Plan of Reorganization.
The sole creditors are the bondholders, who number about 4,000. The position of the preferred
and common stockholders seems hopeless as no possible consideration can be given them in any
plan of reorganization under present equity proceedings. There were reported to be about 3,100 pre
ferred stockholders and about 30,000 common stockholders.
STATUS OF DEBENTURES
The trustees issued a report on December 7, 1942 (Trustee's Report No. 10) in which they stated
that the corporation was insolvent, that the aggregate value of its property is not sufficient to pay its
debts and that the acceptance of any plan of reorganization by the stockholders should not be
required. The two bondholders' committees have issued statements urging prompt liquidation to
avoid unnecessary costs of continuing the receivership. Simplest liquidation would be a pro-rata
distribution of the assets to the bondholders; but a recent Supreme Court decision may require that
the assets be retained in a new company the shares of which would be distributed to the holders of
the debentures. This would eventually have the same effect as a pro rata distribution of the assets
with certain additional advantages. To calculate the asset value of the debentures, it is only neces
sary to refigure the change in market prices of the assets from the year-end markets which were as
follows:
Distribution
Total Shares per S1000 Market Market Vol.
Held Debenture 12/31/42 per $1000 Deb.
2,037,547 Araer. Cities Pwr. & Lt. 'B' Stk 112.57 shs. Va $ 70
2,356,648 Blue Ridge Corp. Com. Stk 130.20 shs. 'Ms 122
1,582 Detroit Edison Capital Stk .08 sh. 17U 2
105,123 General Shareholdings Com. Stk 5.80 shs. '-j 3
68,721 North American Com. Stk 3.80 shs. 10 38
ESTIMATED ASSET VALUE PER $1000 Debenture on December 31, 1942 $235
There was in addition to the above some $25,000 of unrestricted cash but this amount plus
some reasonable extra disbursements will be required to pay for the costs of the reorganization.
LEVERAGE FACTORS
As the major value of the debentures is represented by the volatile holdings in American
Cities and Blue Ridge, the fluctuation in these shares will influence the asset value of the debentures
(and probably their market price) as follows: per Debenture
Each 1/8 pt variation of Amer. Cit. P. & L. 'B' equals $254,692 $14.14
Each 1/8 pt variation of Blue Ridge common equals 294,580 16.36
A combined fluctuation of 1/8 point in American Cities 'B' and Blue Ridge common will thus
affect the asset value of Central States Electric debentures by 3 points. A sharp fluctuation in North
American common will also have a direct and indirect effect on these debentures, most of which
however should be reflected in the aforementiond shares. By an intricate calculation it can be figured
that every point fluctuation in North American common theoretically affects the ultimate asset value
of the Central States debentures by 2.8 points.
[80]
CENTRAL STATES ELECTRIC CORPORATION
Balance Sheet (a)
As of November 30, 1942
ASSETS
2,037,547 Amer. Cities P. & L. 'B'
2,356,648 Blue Ridge Com.
2,460 Detroit Edison
105,123 Genl. Shareholdings Com.
66,521 North Amer. Co. Common
Above at Market Value
Cash, the use of which
has no restrictions $ 32,547
Cash, the use of which
is restricted
Cash, in possession of
others and subj. to
future adjudication
Total Cash
107,030
27,870
Deficit
$ 3,670,616
167,447
$ 3,838,063
15,277,346
$19,115,409
LIABILITIES
5% Conv. Deb. (due 1948)*
Accrued interest
5%% Opt. Deb. (due 1954)*
Accrued interest
Payables
Total
(a) From Trustees' Report No. 10 dated December 7, 1942.
* Rank equally a» to interest and priority except for possible claim of January 1942,
interest payment on the 5% Bonds.
$ 6,300,000
288,750
11,737,000
781,815
7,844
$19,115,409
JUNIOR SECURITIES
In addition to above debentures there are outstanding the following stocks—
7% Preferred Stock, Issue of 1912, Par Value $100
Preferred Stock, 6% Series, Par Value $100
Convertible Preferred Stk., Optional Div. Ser., Par Value $100
Convertible Preferred Stk., Optional Ser. of 1929, Par Value $100
Common Stock, Par Value $1.00
Total
Shares
68,800
94,840
15,313
31,661
10,105,023
$ 6,880,000.00
9,484,000.00
1,531,300.00
3,166,100.00
10,105,023.00
$31,166,423.00
Trading practically ceased in these issues after receivership was announced.
SECURITIES DATA
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Fixed Charges Not
. . . Times Earned Available .10 .21 .29 .19 .83 .62 .34 .25 .05
Net Asset Value
at year-end
Debentures (b) 235 72 256 461 581 550 1089 1004 466 614
7% pfd (d) (d) (d) (d) (d) (d) 48.20 2.49 (d) (d)
Price Range
5% Deb 1948
High 13% 30% 41 46 41 72% 75% 66 52% 56
Low 4 6% 25 35 23% 31 61 26 25% 25
Last 12% 8% 27 38% 35% 38% 69% 62% 31 32
5%% Deb 1954
High 13% 31 41% 46% 41 72% 78% 67% 45% 53
Low 4 6% 25% 32 23% 31 62% 25% 25% 27%
Last 12% 7% 27% 36% 34% 39% 69% 64 33% 32
Year-end prices
7% pfd. Not Available> % yie 2% 4% 12% 45 33% 2% 4%
6% pfd.ri
% 2% 7% 10 4% 19% 18% 1% 3%
Com. Opt.11
% % 2% 4% 9% 24 17 2% 6%
Com. Opt. 1929n
% %e 2% 3% 4% 19% 19% 1% 2
Commonil
%e % 1% 1% % 2
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
5% Deb 1948 1,957 2,232 1,571 1,830 2,355 2,210 6,266 8,589 4,212 3,182
5%% Deb 1954 3,909 4,095 2,844 4,468 4,404 3,924 9,746 3,227 1,747 5,886
(b) Per $1000 Debenture.
[81]
CENTRAL STATES ELECTRIC CORPORATION
AND ITS SUBSIDIARIES
(FIGURES AT DECEMBER 31, 1942)
CAPITALIZATION
ASSETS
S4.40I.I3S
DEBENTURES
OUTSTANDING
$16,037,000
PLUS
ACCR. INTEREST
OF
11,150,610
rr
BLUE RIDGE COMM.
2.356.648 Sh
AM. til P > L B-!tOC«
2.037.547 Sh
OTHER ITEMS
DEBENTURESAT MARKET$2,187,000
CENTRAL STATES ELECTRIC CORP.
ASSETS
$28,456,221 CAPITALIZATION
NET CASH 3%
INDUSTRIALS
71%
UTILITIES
26%
COMMON STOCK
EQUITY FOR
7.489.493 Sh
$5,263,561
$3 PREF. STOCK
OUTSTANDING
334.412 Sh @ 55
$18,392,660
PREFERRED
AT
MARKET
$13,000,266
BANK LOAN
$4,800,000
CAPITALIZATIONION JJ
ASSETS
$1 1.016.942
BLUE RIDGE CORPORATION
AMER. G. & E. COMM
BLUE RIDGE COMM.
3.165.963 Sh
NORTH AMER. COMM.
487.030 Sh
OTHER ITEMS
CLASS A
OUTSTANDING
206.253 Sh
AT VALUE
IN LIQUIDATION
PLUS ACCRUALS
$11,596,143
DEFICITAPPLICABLE
2.WI.W0 B Sh|
K219.20I
CLASS A
AT MARKET
$3,088,334
BANK LOAN
$3,660,000
AMER. CITIES POWER & LIGHT CORP.
[82]
NOTES
[83]
CHICAGO CORPORATION
BACKGROUND
The present Chicago Corporation was formed by the merger, in 1930 and 1932, of three companies,
all sponsored by Field, Glore and Company (now Glore, Forgan and Company), investment bankers of
Chicago, and Continental Illinois Company, former security affiliate of the Continental Illinois National
Bank & Trust Company, of Chicago. The predecessor companies were Chicago Investors' Corporation,
incorporated in 1927, The Chicago Corporation and Continental Chicago Corporation, both incorporated
in 1929. Directorate now includes the heads of Studebaker, Continental Casualty, the large insurance
agency of Marsh and McLennan, and Glore, Forgan & Co., the latter being generally considered the
financial sponsor of the fund.
POLICY
While Chicago Corporation at the end of 1942 had about 70% of its total assets invested in
marketable securities and only about 18% in "special situations," it is the latter classification which is
the most interesting aspect of this fund's policy at the present time, representing, as it does, a departure
from ordinary investment company activity. Most of this investment in "special situations" is either in
the form of direct investment in operating oil and gas properties, or in stocks and notes of majority-
owned or associated companies in the same field. Considerable speculative interest in the company's
securities has been developed by this investment. The net income of the Oil and Gas Division last year
was $270,346, (about 57<f a preferred share) before Federal income taxes, compared with $149,390 in
1941, and according to the company's annual report, operations and sales during most of last year
were severly hampered by lack of transportation facilities, a difficulty which it is hoped will be over
come this year. At the annual stockholders' meeting in March, 1943, Richard Wagner, president, stated
that net earnings of this division for the current year should be in excess of $600,000 and might be as
high as $900,000. He also declared that "in due course it is possible to foresee larger annual income."
Cash and U. S. Treasury bonds amounted to 13% of assets at the year-end. Marketable securities
consist chiefly of well-known common stocks, with, however, heavy emphasis on three Chicago bank
stocks, which accounted for 21% of all common stock holdings at the end of 1942. The management
record has been good, bettering the Dow-Jones Composite Stock Average in seven out of the last 12
years and equalling it in one. The over-all record from 1931 has been distinctly above average.
No prior debt or bank loans are outstanding. Total assets showed a 5.8% gross yield last year.
Turnover of its investments was about average, amounting to 22% of the average assets, compared
with 31% in 1941. Expenses (outside those of the operating section of the oil and gas division) were
.86% of average net assets, and $78,379 lower than in 1941, when the figure was .90%.
SECURITIES
The $3 Convertible Preferred is currently paying full dividends although only $2.68 was
earned last year. Two dollars was paid in 1941 out of $2.77 a share earned, and current unpaid
accumulations are $2.50 a share. At year-end prices, which represented a 32% discount from value in
liquidation, a return of about 7.9% was available at the $3 rate. The 1942 payment has been tenta
tively ruled 88% non-taxable. It should be noted that increased income from the gas and oil invest
ment should improve the preferred dividend coverage.
The conversion privilege is for common stock on a share-for-share basis, and is obviously of very
remote value. The company has repurchased the preferred from time to time. A total of 5,455 shares
was purchased for retirement in 1942 at an average cost of $29.49 a share.
There was no asset value at the year-end to the Common stock, on which no dividends have
ever been paid. However, the large leverage would cause sharp advances in a buoyant market, and in
addition the speculative attractiveness of the issue is enhanced by the possibilities of the oil and gas
division. This stock, in fact, can be considered a two-way speculation: first as a leverage investment
company and second as an oil and gas company, either one representing an interesting situation.
Both the preferred and the common stock are listed on the Chicago Stock Exchange and have
fairly active markets. Occasionally there are some dealings over-the-counter in New York.
[84]
CHICAGO CORPORATION
Cash & U. S. Gov't Bds., etc.
Investments, at market *
Bonds
Preferreds
Common
Ind. $8,900,360
ASSETS
311,660
1,657,823
Simplified Balance Sheet
As of December 31, 1942
$ 3,510,805 13%
1%
7
P.U.
R.R.
Fin.
Inv. Co.
2,456,179
117,500
4,411,173
707,579
54%
15
1
26
4
LIABILITIES
Payables $ 352,411
Capitalization: f
Conv. Pref. Stk.
($3 Div.) no p.v.,
Ent. in liq. to
$55 a sh. plus
$2.50 accr. div.
(475,790 shs.) 26,627. 175 (a)
Common Stock,
$1 p.v.
(3,312,296 shs.) 0
Associated Companies
16,592,791
4,906,507
71
21
100%
23,468,781 87
Total $26,979,586 100% Total $26,979,586
* Book price (based on cost or prices of Dec. 20. 1932, if acquired prior to this date).
$286,636 ior bonds, $1,862,403 for preferred shares, $20,201,826 for common shares.
tBook Surplus $15,208,721.
SUMMARY OF CAPITALIZATION
(a) Applicable to Preferred at 12/31/42.
Conv. Pfd.
Common
Entitled to
in Liquidation
$27,357,925
Balance
Assets
Applicable
$26,627,175
d 730,750
Coverage
$55.96
d .22 (b)
(b) This figure varies with company's report of 501 asset value per share,
due to their method of figuring priority of preferred at $80 plus
accruals instead of $55 value in liquidation plus accruals,
OPERATING RESULTS
% Net Change in Market Value of Assets
The Chicago Corp.
Dow-Jones Com
posite Stocks (c)
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931
+ 17 -7 -5 +1 + 17 -33 +32 + 47 + 13 +39 -22 -44
+ 15 -10 -10 +3 + 29 -34 +32 +41 -1 +49 -16 -54
Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1931 1931
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
+9 + 3 +4 + 22 -18 + 8 + 205 -66 + 9
+ 3 -7 -5 +22 -20 +6 + 176 -70 -15
The Chicago Corp.
Dow-Jones (c)
(c) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income
Preferred
Common
Dividends
Preferred
Common
Net Asset Values
at year-end y -
Preferred 7/'£»
Common
Price Range
Preferred
High
Low
Last
Common
High
Low
Last
Annual Volume of
Trading Chicago S.E.
(000 omitted)
Preferred 3 3
Common
S3S
<?.33
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
2.68 2.77 2.12 1.78 1.41 3.09 2.50 1.78 1.61 1.04
d .05 d .03 d .14 d .20 d .27 .02 d .10 d .23 d. 28 d .41
3.00 2.00 2.50 3.00 2.25 3.00 8.50 . 1.75 1.50 1.00
— ■— — No Dividends Paid —■ — —
55.96 50.76 54.41 58.85 60.19 53.11 79.25 68.48 48.01 43.20
d .22 d .98 d. 33 .46 .72 d .38 4.57 1.48 d 2.30 d 3.07
38 31% 37 38% 36 48 55% 46% 31% 34%
28 27% 25% 32% 25% 30% 44 29 22% 12%
38 28% 28 36 35 30%443/4
45 29% 23%
2% 1 1% 2% 2%63/4
6% 4% 4 5
V* % % 1% 1% 1% 4 1 IK 1
2 15/16 % 7% 2 2 5% 4% 23/e 2%
20 45 27 31 43 69 72 70 80 176
419 401 278 318 376 986 745 648 246 805
[85]
ASSET VALUE
PER SHARE
IOOi
10
.10
.10
-I
-10
-100
COMMON STOCK
$8.42
$5.22
/_
//• *
9 /
» i
» /* /
//
!/*
d $0.22ii
It#•/»
/i
3d $2.£
d $4.2 5
-50% -25% DE,^;231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values oi the above stock which should take place with any
change in market conditions from December 31st, 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result irom the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF CHICAGO CORP. COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the Decem
ber 31, 1942 portfolio position. Leverage figures have been adjusted for estimated increase or decrease in asset values of
investment companies leverage shares owned by Chicago Corp.
Applied to Common Applied to
In event of Shares owned all Assets
Rise of 10% $0.28 $0.60
25% 1.10 1.90
50% 2.47 4.07
100% 5.22 8.42
Fall of 10% d 0.82 d 1.14
25% d 1.63 d 2.39
50% d 2.83 d 4.35
[86]
CHICAGO CORPORATION
PartMta* m •# dm. n, tatts
Face BundsValue Railroads Q]Val«$77,000 Atlantic Ceast Line 4 Vfcl. '«4 MX. Ill45.000 Baltimore 4 Ohio 8a. '99 1«,MT10.000 Chicago Great Western 4a. "88 «,***
30.000 IIIUwU ('antral 4s. 'U 14.01919.000 M. f.. Chicago 4 81. L. 4 Ha. '»».. 16.11613,00* N. T.. Cham* 4 Ha. L. »Ha. T4„ 11J4JS00.000 Northern PaeatC 4A(,s. *MT I0J0040.000 Northers Psclle 8*. 104T tt.*0t40.000 Southern racHe Ce. 4tts. HI 11,10014.000 Tens 4 ParlRc 5e. TT. 10,44014.000 Tru< k Parity As. 7* 16.32012.000 Telaa 4 PacIRe la, 'M ».l«0
UtlHUaTS.MMI Chicago City far. IM (19% pel.)
Sa. 'IT SUMIll.OOO eWeago Cltjr Ry. 1st ctfa. ( 1.1% pd. 1
9a. 'li . 4.0ST83.000 Chicago Ryl lit (19% pd. ) ll. 'IT MJM8.000 Chicago Rya. IX Ufa. 119% pd. I
St. '17 1.880177,000 Chicago Rapid Transit *M,s. "44 10.17189.000 Chicago Rapid Tramlt Oa. '98 4.887
Prefered Sleeks
Shares Industrial*900 American Boiling Mill 4H% 17.119
11.224 Dille-Vorla 4. W HO 476.7881.000 Cnldblalt Brits. $1.90 81.000I.97J Farkershurg klg 4 Rati 15.90 1264)001. 100 Radio Corp of America. 83.50 64,6252.000 R.iyunler. Inc.. ?2 61.0001.000 Cnlted Airrr.fl 02.8767.100 Wilson 4 Co. $ts 411,800Ijmrn Worthlngton Pump coot. 4K% 46.000l.orro Werthlnctiin Pomp — 45,006
Ctllltles
1.500 Amer Pr 4 tt »5 S4.9S7500 Amer. Pr. 4 Lt. $(• 0.376100 Ruff.. Nlag. 4 Kwt. 15 8.300500 rilln Service 86 ... 25.500
1.coo III. Intra Pr. dl<. arra etfs. 7.8007.900 (nlted U. 4 Pr. A. $6 I77,7!i0
Cnaaoo Rtwka
Advertising. Prlntlaf aid PublishingxttOO Columbia Broadcasting A 135,718
Aircraft
3 000 Douglas Aircraft 113.0005.200 Martin (Glenn L. ) 86.10010,000 National AtlaUon 80.0008.700 Northwest Airlines ... — 140.1872,100 I'nlted Aircraft - 53,560
Automobile* and Tmeks
31.000 studebsker Corp 170.500
Automobile Parti and Tirol3.600 Rcodll Aviation 113.4009.400 liorg-Warner 2«7.9(KI
4.300 Plmtone Tire 4 Rubber 114.4875.000 Goodyear Tin 4 Rubber 192.6621.000 Midland 8teel Produrn 20.250
13.500 StraartWarner 89.0823.300 United 8Ute> Rubber 85.387
Building anil Related Lines3.500 Crane Co. 90,3113.000 Masonlte Corp 121,500
(hem leak
10.000 National Distiller* — 257.500
Food Produda0 iSOO Beatrice Creamery 238,400."i.OOO National Ualrv Products 73,12515.700 8»lft 4 Co. 358.1375.200 Wesson Oil 4 Snowdrift 91.000
Household Products and Supplies9.200 Colgate-Palmollve-Pret 166.290
Insurance and FinancialT.-.1.751 Blue Rldie Corp. 707.57910,434 City Natl Bank 4 Trust 1,142.02313,100 Continental Casualty 881,60024.600 Continental IU. Natl. Bk. 4 Tr 1,924.9501,800 Flr.t National Rank of Chleaco 512,109
2.500
1.800200
1.5002.5001.500
36.600
3.6006.0006.4003.800s.5001.5002.500
j .nrio31.8287.8005.0009.300
8.0003.000
13,0641.000
International Shoe .. 70.615
Machinery llnduelrUl and Agricultural)Allls-Chaiann «2.§W>Case (J. 1.) Co. ".JO;Drere 4 Co. - illiiDrener Mfi Co »».MJOilier Farm Equipment -!!'J5II'srketsburg Rig k Reel 375,150
Metals I Son Ferrous)
American Metal ."■?!?American Nmeltlnl 144.100Cerro de Paaco 11 !•!!!*,1 limn Molybdenum - 108.200Dome Mines (MMInternational Nickel 48.800Kennecolt Copper — 71.500
Miscellaneous
Continental Can 64,000Dlale-Vortca 810.303Dun 4 Rraditrret 171,615C.reat Lakes Dredge 4 Dock. 87,600lireirbuund Corp 181.161
Motion Pictures and AmusementsLoan's. Inc. 188.00020th Century-Fes Film 42.3T5
OU Produclni and Refining
Adami Oil 4 (las 1*1.616Amerada Petroleum
1.&O0 Pure Oil Co 18.1255.000 Hoeonr Vacuum Oil 61.25010.300 Htandard Oil (N. J.). 475.0871.8O0 Teiae Co. 74.700
Railroads■..000 PennsylranU R.R. 117.500
Railroad Equipment2.500 General Amrr. Transportation 93,750I.800 Pullman. Isc 155.612i.OOO (superheater Co 63.750Uss Wcillnghouse Air Brake 55,093
Real EstateK.001 208 S. U Salle St. Corp 254.278
Rrtall Trade1.100 Seat 4 Co 34.3121.000 Marshall P<< Is! 29.250s.f.l'M Montgomery Ward — 284.750
1.500 Sears. Roebuck 92,812
(shipping and Shipbuilding1.92U American Ship Hullding 116,8801.000 Cramp Shipbuilding warrants 50,000
Jt'JOO Nevport Neva Shipbuilding 348.450
8leel and Ironl.illiO Bethlehem Steel H0.000
18.374 Qlobc steel Tubes 174.553t.OUO Republic Steel 56.0002.000 U. 8. Pipe k Foundry 68,0003.SO0 Inited State- steel 179.63d3.000 Wheeling Stec! 51.875
Sugar Producing and Krflning8.500 Ureal Western Sugar 83.1253.1*06 South Porto Rico Sugar 79,950
Textiles and Apparel2.018 Celasese Corp. of America - 82.0G81.000 Cluett. Peabods __- 34.000
15.514 Rollins Hosier) Mill 71,753
Tobacco ami Tobacco Products.•.(iflO American Tobacco B 86,000
UtilitieslO.uoO American L:gb. k Ttaciloti 130.000II.OOU Commonwealth Lrilson 316,871LOO Kelroll Edison 28.773
I7.r,nc Ueneral Telephone 288.7302,000 Illinois Iowa Cuss. 1 2,928
213.200 Middle West Corp 1.171,0505.800 Missouri Ransu Pipe Line 24.610
27,800 North American Co — 278,0003,200 North American Ll. a Pr 4001,000 Pacific Car 4 Electric 23,1352,900 Peoples Gas Light 4 Coke 133.4003.200 PohMr Senlce of Y J 37.200
TI.771 Inited Light 4 Poster R 21.031
Stocks and Notes of Majorltr-Ovnedor Associated Companies
(Relating to nil nnd gas illusion)
Corpus CL'IslI Corp. (Delaaarei1.000 cum. iherea (lOor; or equity) $25,193
Fuel Supply Corp.8% demand note (face amount. $30,000).. 110.000 common shares 167' < af equity)... 1
OOulf Plains Corp.t;c*. rutge. notes. 1945 (lace jmt.l 437.500
1.6T»com shares (28% cf equity) 18,701l^me Star Steamship Co.
Note due July 10. 1942 (race ami.) 10.86720d com shares (22S of equity I 21.222Ca«b advance - 16.850
Ke'rrte Pipe Line Co.15,000 com. shares 1 1001 of equity)... 1
Kicbardson Petroleum CoPart. In 5% note., I'm: (fare ami.) 175.000100.000 com. snares (lonr; of equity) 81.044
stratton Pipe Line Corp. •-.000 com shares (67'; al equity) 99,186".n demand note (face aniourit I 50.000
Total $956.37)
Stocks and Notes of Ullier Majority-Ownedor Associated Companies
Fort Dearborn Mortgage Co9.600 com shares W- of rqullyl 1526.435
■Sydney Corp.
J% note uuc June 8. 1H44 (face amt.) 656.0002.000 com. shares (33% or equity) 2.000
ToUl - - $1,184,435
TValurs for securities other than those of majorlty-osmed or associated companies arr based generally en last•ales price on Dec. 31. 1942. or. In absence of sales, onthe mean of bid and asked prices, on ezebangea or overthe counter. Values for stocks and notes of majorily-.ssvned or associated companies are the values (cost orosier) at which Ibesc imesinients are carried so balance4teet.XCompany has commitment to sell $37,600 notes and
137 snares of stock for $44,350, being the coat thereof.
ClasulScatieci of Mart Assets (at mkt.). as ofDoc. 31:
1942 1941Amount % Amount %
Cash $1,290,17$ 4.84 J3.414.876 13.981,095,056 7.87811.6*0 1.17 871,316 1.79
1,(67,813 6 23 1.648.(19 034Common ftka... 16.892.791 62 32 15.088.189 61.77F.qulty In oil4 (as 2.7*6.7(1 10.1* 2.045,91.4 8.38
stocks, etc.,contrd. cos- 1.140,(06 8.04 1,883.828 7.71
Aeeta. rrc., etc. 119,974 0.47 jjfjrM* «.»6
$16.(79.58* 101.31 $34,1*0,881 101.T8851.411 1.11 434,0*8 It*
Ret assets. tl«.627.175 100.00 $14.4241.784 100 *6
[873
CONSOLIDATED INVESTMENT TRUST
BACKGROUND
Formed in 1933 as a Massachusetts Voluntary Trust, with headquarters in Boston, Consolidated
represents the merger of three enterprises originally sponsored by Kidder Peabody & Co. The Board of
Trustees of eight includes representatives of Stone & Webster, Inc. and State Street Trust Co.
POLICY
Although the Trustees are empowered to borrow up to 50% of the value of the fund, they do not
make use of this discretion at present and as there are no senior securities outstanding the stock of
this company is not in the leverage class.
About two-thirds of year-end assets were invested in a list of well-known stocks, about 26% in
"special situations," a small amount in real estate, and the remaining 3% in cash. Principal "special
situations" include Dewey & Almy Chemical (carried at $995,925), United Merchants and Manufac
turers ($921,375), and Mitchell & Smith ($541,488). "Special situations" for the most part represent
securities taken over from predecessor companies; in some of these companies Consolidated has taken
an active interest in management.
The entire fund showed a gross income of about 6.5% last year. The management record has
been outstanding, bettering the Dow-Jones Composite Stock Average in five of the last nine years,
equalling it in one, and showing a considerably better result for every "over-all" period in the accom
panying table. One of the distinguishing features of Consolidated's operations has been the low
operating expense, which amounted to only slightly more than Vi of 1 % of average net assets last year,
and was exactly Vi of 1% in 1941. It is also marked by a low turnover of securities: 15% last year,
14% in 1941 and 12% in 1940. Consolidated has the distinction of being one of the three investment
companies reviewed in this study with no backlog of net unrealized depreciation.
SECURITIES
As stated above, this Common stock has no leverage unless the Trustees decide to borrow money.
Nevertheless the stock, which has paid dividends every year, ($2.00 last year and $2.30 in 1941, after
almost identical net earnings) was available at a 24% discount from its year-end asset value of $38.29
and this excess of asset value provides a small degree of leverage. Particularly because of the manage
ment record. Consolidated common stock deserves favorable consideration as a conservative invest
ment company security. The yield, based on the 1942 payment and year-end price, was 7.0%, and last
year's dividends have been tentatively ruled 71.66% non-taxable.
The shares are traded over-the-counter and are relatively inactive.
[88]
CONSOLIDATED INVESTMENT TRUST
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market*
Bonds
Preferreds
Common
Ind. $8,856,422 93%
P.U. 372,500 4
RJEL 25,620
Fin. 297,500 3
100%
Real Estate, at Est. Value
$ 473,800 3%
$1,128,288 10%
1,167.331 10
9,552,042 80
100%
11,847,661 92
578,178 5
Total $12,899,639 100%
* Book price (at cost or other value) $11,627,451.
t Paid-In-Surplus $9,764,207.
Capital Gain Surplus 2,586,880.
115,647.
Payables
& Accruals
LIABILITIES
$ 72,432
Capitalization:?
Common Stock,
$1 p.v. 12,827,207 (a)
(335,055 shs.)
Total $12,899,639
(a) Applicable to Common at 12/31/42.
Common
SUMMARY OF CAPITALIZATION
Aueta applicable
$12,827,207
Asset Value
Per Share
$38.29
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934
Consolidated
Inv. Trust +13 +3 -10 +9 +15 -31 +53 +38 +10
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41 -1
% Net Change in Market Value of Assets for Various Periods Inclusive
1941
to
1940
to
1942
1939
to
1942
1938
to
1942
1937
to
1942
1936
to
1942
1935
to
1934
to
Consolidated
1942 1942 1942
Inv. Trust
Dow-Iones (b)
+ 16
+3
+5
-7
+ 14
-5
+ 31
+ 22
-10
-20
+ 38
+6
+ 91
+ 50
+ 109
+ 48
(b) Above percentages are adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income 1.97 2.26 1.83 1.52 1.37 2.56 2.87 1.46 1.70 Nil
Dividends 2.00 2.30 1.75 1.40 1.70 2.75 2.85 1.70 1.25 Nil
Net Asset Value
at year-end 38.29 35.86 36.79 42.93 40.74 38.02 60.50 43.01 32.79 30.96
Price Range
High
Low
Last
30K
23%
29
29
22
24 V4
31
23
27%
33*4
21V2
29
30 36
26
26
36
30
323/4
30
21
23
14
17
22Vi
27
14 V2
281/4 21V4153/4
[89]
CONSOLIDATED INVESTMENT TRUST
Investments Owned, as of Dec. 31, 1M2:
Shares
4.000
2,000
4.000
2.000
2.000
2,750
2.500
6.000
6,000
1.000
1.000
7.000
2.000
4.500
2,500
1,200
4.000
7,500
3.000
6,000
2.000
6.000
5.500
4.000
4,700
10,000
1,000
2.500
15.000
5.000
10,000
5,500
1.000
3.100
6,000
3,000
2,000
2,000
2,500
2.000
3,000
Investment Equities
Mkt or Est. Val.
American Smelting $148,000
American Tel. & Tel. 254,750
Caterpillar Tractor Co. 164,000
Chrysler Corp. 135,750
Continental Oil (Del.) 54,750
Dow Chemical 365,750
du Pont (E. I.) 336,250
Eastern Utilities Assoc 90,000
Eastern Utilities Assoc. conv. 4,500
Eastman Kodak 149.500
El Paso Natural Gas 23,250
General Electric 213,500
General Mills - 167,000
General Motors 199,688
Hercules Powder 185,000
Tntl. Business Machines 179.400
International Harvester 238,500
International Nickel 217,500
International Salt 118,500
Kennecott Copper 174,000
Monsanto Chemical 173.000
Montgomery Ward 201,000
Noranda Mines 176,000
North American Aviation 39,500
Oliver Farm Equipment 139.238
Pan American Airways 256,250
Phillips Petroleum 45,000
Sears, Roebuck 154,688
Socony-Vacuum Oil 153,750
Sperry Corp. 120,000
Stand. Oil Co. of Cal 292.500
Standard Oil Co. (N. J.) 253.688
State Street Trust Co 230,000
Sun Oil Co 150.350
Texas Co 249.000
Union Carbide & Carbon 243,000
United Fruit 133.000
United Shoe Machinery 124,750
United States Smelting 115,000
Western Auto Supply 39,250
Woolworth (F. W.) 92,625
$6,801,175
U. S. Governments
Principal
Amount
$100,000 U. 6. Treas. E, 12-1-43
Rail Securities
$100,000
Bonds
$60,000 Bos. & Me. ser. R.R. 4s.'60 $43,800
C. M. & St. P. Ry.:
E486.000 Gen. A 4s. 1989 213.233
[215.000 Gen. B 3>/aS. 1989 6,000
CD121.000 Gen. C. 4»,as. 1989 .— 53,8451373.000 Gen. E 4l,as. 1989 32,485
DJ32.000 Gen. F 43,is. 1989 14.240
E500.000 Chi. R. I. & Pac. 4s, '88.. 168,125
[Dl.005.000 Missouri Pac. 1st 5s. '81.. 356.775
3600,000 N. Y., N. H. & H. 6s. '48 225,000
$1,113,503
Investments in Special Situations
Shares
514 American Felt pfd $38,036
16,792 American Felt 251,880
4,500 Bigelow-Sanford Carpet — 128,250
47,425 Dewey & ALmy Chemical... 995,925
786 Gillespie, Rogers. Pyatt 786
7,740 InternationalProducts 54.180
16,630 Itabira Iron Ore 1st pref.— 1
9,000 Maiden Trust 67,500
4.000 Mitchell & Smith—$5.50 pfd. 300,000
20,124 Mitchell & Smith 241,488
7J20 Pennroad Corp. 25,620
133 Pratt, Read & Co 399
133 Sahagl Corporation 266
17,000 Selected Indus., conv. pfd... 59.500
56,700 United Merchs. & Mfrs. v.t.C. 921 .375
7,226 Waltham Watch—6% pfd. .. 137.294
5.000 Waltham Watch Co.—A 50,000
6.554 Waltham Watch Co.—B 13.108
$87,500 Rockland-Rockport Lime 6s.
1955 I "UBS
1,655 Rockland-Rockport Lime ..(
Preferred Stocks
2,000 International Paper 5%
9,000 United Corp.—$3
2,000 United Gas Corp.—n.-v. 1st
$7
1,500 United States Rubber—8%..
$3,300,483
227,500
153,375
$632,500
Investment—Wholly-Owned Real Estate
Subsidiary
Shs. or
Princ. Amt.
3,000 Minor Bldg. Assoc—capital $178,178
$400,000 Minor Bldg. Asso., 5% note 400.000
[□Defaulted bonds.
$578,178
[90]
EQUITY CORPORATION
AND ITS SUBSIDIARIES
(FIGURES AT DECEMBER 31. 1942)
ASSETSCAPITALIZATION
$13,403,017
$3 PREF. STOCK
INDUSTRIAL AT VALUE
COMMON IN LIQUIDATION
STOCKS PLUS
ACCRUED DIVIDENDS
GENERAL REINSURANCE 200.853 ShCORP.
118.12% OWNED) $10,944,543
76.7S4 Sli
FIRST YORK CORP.
A„».«NtftALPfb. $3 PREF. STOCK
AT
AMERICAN GENERALMARKET
COMMON
901.159 SKDEBENTURE
BONDSOTHER ITEMS $3,000,000
DEfltlT APPLICABLE
\ TO 4.791.269COMM Sk
EQUITY CORPORATION
ASSETS
$17,451,588 CAPITALIZATION
fr
NET CASH
SUBSIDIARY COSSTOCKS AND NOTES
COMMON STOCK
$7,128,928FIRST
YORK
CORPORATION1.395,993 Sh.
$3. $2'/2. $2
PREFERRED STOCK(AT VALUE IN LIQUIDATION)
INDUSTRIAL
COMMON
STOCKS
166.453 Sh
$8,322,660
PREF. STOCK
AT
MARKET
OTHER ITEMSBANK NOTES PAYABLE
$2,000,000
(^68%)
AMERICAN GENERAL CORP.
ASSETS
$6,906,680 CAPITALIZATION
NET CASH
yfiuTifs Ji>UITY CORP.M.IS9 PFD-298.173 COM
COMMON STOCK
1.500 ShGENERAL
PORTFOLIO
BANK NOTE PAYABLE
$1,502,000
FIRST YORK CORPORATION
ASSETS
$6,304,648
NET CASH
INDUSTRIAL
COMMON
STOCKS
OTHER ITEMS
CAPITALIZATION
$5.50 PREF. STOCK
AT VALUE
IN LIQUIDATION
PLUS
ACCRUED DIVIDENDS
73.414 Sh
$8,788,390
\ DEHCIT, I APPLICABLE |
PREF. STOCK
AT
MARKET
UTILITY EQUITIES CORP.
[91]
EQUITY CORPORATION
BACKGROUND
Formed in 1932, the Equity Corporation expanded by absorbing other investment companies
and is now the key unit of a group of four companies with total assets of approximately $40,000,000.
David M. Milton is president, and a directorate of nine manages the company's affairs. Directors
include the president of the Empire Trust Co. and a partner of the New York Stock Exchange firm of
Riter & Co. Mr. Milton owns directly nearly 5% of the common stock of Equity Corp. and through
Oceanic Trading Company, Inc., of Panama, has an indirect interest in an additional 21.64% of the
common stock. To obtain a proper perspective of this Company, the reader should refer to the
accompanying organization chart on page 91, and to the analyses of American General Corpora
tion and Utility Equities Corp.
POLICY
Equity's holdings fall into three major classifications: marketable securities (about 30% of
year-end assets); subsidiary investment companies, which accounted for 44%, and General Reinsur
ance Corp., one of the leading re-insurance companies, which is 38%-owned and accounted for 23%
of year-end assets.
The portfolio of marketable securities was 86% in common stocks, mostly of the better-known
type, with speculative bonds and preferreds making up most of the remainder. The entire fund yielded
only 3.3% gross last year, but this does not include dividends of $177,000 received on the holdings
of American General and First York which were used to write down the cost of those investments.
With this additional income the yield was 4.7%.
The management record has been poor, bettering the Dow-Jones Composite Stock Average in
only three of the last seven years and showing a poorer result for the entire period. This may be
largely attributed to the sharp decline in the values of its holdings in other investment companies,
which, as explained elsewhere in this analysis, gain momentum in falling markets and conversely
can be expected to accelerate the rise in an ascending market. The general portfolio has shown about
average results during the period. Portfolio changes last year were low in relation to total assets, they
equalled 11% of the year-end portfolio of marketable securities, not including purchases of First
York Corp. Expenses were somewhat below average at .63% of average assets.
SECURITIES
The 5% Gofd Debentures of American British & Continental Corp.. due Feb. 1, 1953, were
assumed by Equity. They are a direct obligation but are not secured and are callable at par at any
time on 60 days' notice. They were quoted 100 V2 over-the-counter at the year-end when they showed a
coverage of 447%. Interest was covered 2.06 times last year.
The $3 Cumulative Convertible Preferred stock, callable at $52.50, is one of the most specu
lative of the investment company preferreds and fluctuates in market price and asset value more like
a leverage common stock because of its direct and indirect leverage. The reduced dividend rate of
$1.50 per annum was not covered by reported net income, but on the basis of the income received
from American General and First York (see above) earnings of $1.74 a preferred share were shown.
At She year-end, $4.50 dividends were in arrears; the preferred stock was selling at a 57% discount
from liquidating value and yielded 6.8% on the $1.50 rate paid last year. That dividend was stated to
be 48.45% non-taxable.
The company has announced a policy of repurchasing its shares. Such repurchases can now be
made under the following conditions: coverage of the debentures must not be reduced below 300%
(approximately $30 per preferred share); repurchases are unrestricted as to amount as long as the
asset value is less than liquidating preference plus accrued dividends; if asset value is above liqui
dating value plus accrued dividends, only 3% of oustanding shares may be repurchased quarterly;
if asset value is below liquidating preference plus accrued dividends, repurchases can be made only
as long as dividends are being paid equal to net current income; repurchases cannot be made from
affiliated persons.
The Common stock was slightly "under-water" at the year-end but the high leverage factor
makes it extremely volatile. Due to the low price of the preferred, the position of both the preferred
and common is favored by the company's policy of repurchase of these shares at substantial
discounts.
Both issues are listed on the New York Curb and occasionally large blocks trade "over-the-
counter."
[92]
EQUITY CORPORATION
Simplified Balance Sheet
ASSETS
Cash, U. S. Gov't Bds.. etc.
General Market Securities*
Bonds $
Preferreds
Common
Ind. $3,305,786 93%
P.U. 22,625 1
R.R. 46,300 1
Fin. 180,963 5
367,821
202,518
As of Dec. 31,
$ 298,769
9%
5
1942
2%
3,555,674 86
100%
Securities of Subsidiaries
and Associated Co.
Preferreds
Common
Fin. $3,259,858 (W
Ind. 5,280,496 (a)
100% 4,126,013 30
$ 722.750(a)
8,540.354
LIABILITIES
Payables &
Reserves $ 284,869
Capitalization^
5% Gold Deb. 3,000,000
Amer. Brit.
& Cont.
(due 2/1/53)
$3 Pref. Stock, 10,403,017 (O
$1 p.v. ent. in
liq. to $50 plus
$4.50 accr. div.
(200,854 shs.)
Common Stock 0
10^ p.v.
(4,791,289 shs.)
9,263,104 68
Total $13,687,886 100% Total $13,687,886
* Book value at average cost $4,634,260.
t Book Surplus $9,843,203.
(a) Valuation based on underlying net
asset value.
(b) At market value.
(c) Applicable to Preferred at 12/31/42.
SUMMARY OF CAPITALIZATION
Debentures
$3 Preferred
Common Stock
Entitled to
in Liquidation
$ 3,000,000
10,946,543
Balance
Assets
Applicable
$13,403,017
10,403,017
d 543,526
Coverage
447%
$51.79
d .11
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936
The Equity Corporation + 20—
11 -16 -6 + 35—48 + 44
Dow-Jones Composite
Stocks (e) + 15—
10 -10 + 3 +29 34 + 32
% Net Change in Market Value of Assets for Various Periods Inclusive
1941 1940 1939 1938 1937 1936
to to to to to to
1942 1942 1942 1942 1942 1942
The Equity Corporation +6 -11 -16 + 13 -41 -15
Dow-Jones (e) + 3 -7 -5 + 22 -20 +6
(e) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income (f)1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferred .86 .94 .72 .61 .21 .82 2.68 .61 d.77 d.66
Common d.09 d.09 d.10 d.13 d.15 d.12 d.02 d.13 d.10 d.09
Dividends
Preferred 1.50 1.50 1.50 3.00 3.00 3.00 9.75 1.50 Nil Nil
Common Nil Nil Nil Nil Nil Nil .25 Nil Nil Nil
Net Asset Value
at year-end
Preferred 51.79 42.59 50.30 59.55 66.77 48.82 107.76 81.17 58.31 56.94
Common d.ll d.46 d.07 .49 .90 d. .08 3.13 1.58 .14 .15
Price Range
Preferred
High 22% 20% 25% 30 31% 42% 43% 38 29 28
Low 13% 13 19 23% 19 24 34% 20 18 20
Last 22% 14% 20 23% 27 24 40 34% 20% 20
Common
High % % 1 2% 3% 2% 2% 2%
Low Vs % % % % 1% 1% 1 1*4
Last 9i« % %6 % % 2% 1% 1% 2
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
Preferred 19 33 38 12 Not listed —
Common 121 223 189 210 229 766 807 637 267 75
(0 These
General
income figures do not include non-taxable
Corp. and First York Corp.
dividend income received from American
[93]
EQUITY CORPORATION
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF EQUITY CORP. COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the Decem
ber 31st, 1942 portfolio position.
Applied to Common Applied to
In Event of Shares owned all Assets
Rise of 10% d $ .08 d $ .03
25% .44 .55
50% 1.30 1.57
100% 3.14 3.73
Fall of 10% d .76 d .81
25% d 1.28 d 1.39
50% d 2.00 d 2.07
[94]
EQUITY CORPORATION
of Dk. 31. 1942:
Principal
Amount
$42,000
13,000
29.000
100,000
20,000
20,000
10,000
50,000
28.000
42,000
37,500
IT,000
50,000
42.000
5,000
10,000
61.000
Shares
112
900
200
1.200
1,800
500
262%
400
800
1,695
200
1,500
200
500
1.600
500
300
500
1,700
1,000
700
1.200
1.100
3,300
5,600
300
400
1,500
500
5,000
1,800
6,350
800
500
Bonds
Public Utilities
Cities Service 5s 1050
Cities Service 5s 1958
Interstate Pwr. Co. 1st 5s 1957..
New Eng. 0. & E. 5s, 1947
Stand. Gas & El. eonv. 6s '48 ( ext. )
Stand. Gas ft EL 6s '48 (ext.) —
Stand. Gas & El. A 6s '61
Util. EmpL See. 6s, 1981
Railroads
B. * 0. see. nts. 4s '44 (ext.)..
Del., k Hud. 1st * ref. 4s 1943—
Erie R.R. A 4%s 2015
Lehigh Valley Ry. 1st 4%s '50
N. T. Central C 5s 2013
N. Y.. C. k St. L., C. 4%s 1978
N. Y., C. k St. L. A, 5%s, 1974—
Pitts, k West Va.. C 4%s. I960—
Southern By., 4s, 1956
Preferred Stocks
Industrials
American Cyanamid 5%
IntL Min. k Chem. 4%
Public Utilities
Amer. Pr. * Lt,, $6
Elee. Bond k Share, $5 —
Electric Bond k Share, $6
United Lt. * Pr., 86 1st A
Railroad
Erie R.R., 5% A
Stacks
Industrials
Air Reduction
Allied Chemical
Aluminium Ltd.
Amerada Petroleum
American Cyanamid B
Armstrong Cork
Borg-VTarner Corp.
Chrysler Corp.
Congoleum-Nairn
Consolidated Oil
Continental Oil
Crane Co.
Deere k Co.
Dow Chemical Co.
Eaton Mfg. Co.
Electric Auto-Lite
General Electric
General Motors
Goodrich (B. P.)
Goodyear Tire
Gulf Oil Corp.
Hercules Powder
Hudson Bay Mining
IntL Min. k Chem.
International Nickel
Johns-Manville
Mclntyre Porcupine
Market
Value
836,067
10,985
21,713
49,875
12,650
12,825
6,400
88,625
20.020
24.150
20,718
8.967
26.437
27,090
3,856
5.350
42,090
1,274
49.500
3.750
49400
77,175
11,250
10,368
15,900
116.000
148.736
13.800
59,812
6,100
14,250
108,600
9,125
2,062
13.687
24,437
27,125
93.100
43,500
83,000
100.650
248,500
7,875
10,350
67,000
37,000
115,000
21,875
184.150
67,800
19.500
1,000
800
5,200
3.900
1,600
7,200
0,000
700
3.400
300
1.600
1,000
4,200
3,500
3,000
2,800
2,700
300
1,900
1.500
700
1.400
1.400
2.000
500
600
2.500
Merck k Co.
Monsanto Chemical
Montgomery Ward
National Gypsum
National Lead
Norancii Mines
Pantepec Oil —
Penney (J. C. )
Republic Steel
Sears, Roebuck
Socony-Vacuum Oil
Square D Co.
Standard Oil (N. J.)
Texas Co. —
Tide Water Assoc. Oil
20th Century-Fox Film
Union Carbide k Carbon
U. S. Gypsum ......
U. S. Ind. Alcohol
U. S. Rubber
U. S. Steel
Western Auto Supply
Westing. Elec. ft Mfg.
Youngstown Sheet k Tube
Public Utilities
Amer. Gas k Electric
Niagara Hudson Power
Northern States Pwr. A
28.875
69,200
174,200
24.375
22,000
228,600
18,125
56,700
47.600
18,562
16.400
35,875
193.725
145.260
80.000
39.550
218,700
18,300
57,000
38,812
33,075
27,475
114.450
60,500
9.625
1.126
11.876
Railroads
300 Great Northern 6.750
100 Louisville k Nashville 6.000
400 Pennsylvania R.R. 9,400
300 Union Pacific R.R. 24.150
Banks and Finance Companies
500 Bankers Trust Co. — 18.000
1,500 Commercial Credit Co. 42,375
1,000 Commercial Invest. Trust 32,000
200 Cont. 111. N. B. k T 15.450
950 Empire Trust Co. 41,325
500 Manufacturers Trust Co. 17,500
500 National City Bank (N. Y.) 14,312
Classification of General Market Securities
Owned. Dec 31 (at market):
1942 1941
Bonds: Amount % Amount %
Public utilities $189,141 4.6 $246,743 5.9
Railroads 178,680 4.3 181,355 4.4
Govt. (Can.) — 20,670 0.5
Total bonds
Preferred Stocks:
Industrial
Public utilities
Railroads
367,821 8.9 448,768 10.8
50,774
141,375
10,369
1.2
3.4
0.3
102.150
186.550
46.400
8.7
4.4
1.1
Total pfd.
Common Stocks:
Industrial
Public utilities
Railroads
Banks & insur.
202.518 4.9 385.100 9.2
3,305,786
22,625
46,300
180,963
80.1 3,036,584
0.5 17.088
1.1 212,713
4.4 61,975
73.0
0.4
5.1
1.6
Total com. stks. 3,555,674 86.2 3,328,359 80.0
Grand total $4,126,013 100.0 $4,162,226 100.0
[95]
GENERAL AMERICAN INVESTORS COMPANY, INC
BACKGROUND
Formed in 1929 as a merger of two investment companies (dating from 1927 and 1928), General
American is identified with Lazard Freres & Co. and Lehman Bros., both of which firms are repre
sented on the Board and are recognized as the financial sponsors. An ample board of 16 includes
six present and former partners of Lazard's; three partners of Lehman's; two members of the manage
ment; also Arthur Ballantine of the law firm of Root, Clark, Buckner and Ballantine; John R. Simpson,
Chairman of Fiduciary Trust Co. of New York; James Bruce, Vice-President of National Dairy Products;
and E. P. Farley, chairman of American Hawaiian Steamship Co.
POLICY
The assets of General American are principally invested in a diversified list of common stocks
and speculative bonds and preferreds which have appreciation possibilities. Common stocks accounted
for 70% of the assets (about one-quarter was in oil stocks) at the year-end. The balance of the port
folio was comprised of bonds (7%) preferreds (11%) cash and U. S. Treasury bonds (12%). These
assets showed a gross yield of around 6.5% last year. Expenses continue higher than average,
equalling 1.07% of average net assets last year, but were $80,682 less than in 1941. Portfolio turn
over was lighter last year than previously but still quite active, equalling 32% of average net assets
compared with 50% in 1941 and 44% in 1940. The management record is among the best, having
bettered the Dow-Jones Composite Stock Average in ten, and equalled it in one, of the last 13 years.
It will be observed that the record has been one of steady improvement rather than spectacular
performance in any one year. The over-all result since 1930 is outstanding.
Last year the company completed the retirement of all outstanding debentures, by redeeming
in August $2,346,000 of 3V4% Debentures due Feb. 1, 1952. In 1941 the company paid off $4,254,000
of Debentures. This reduction of senior capital obviously tends to reduce the speculative aspects of
the common by reducing the leverage. When taken into account with the potential dilution created
by outstanding warrants, leverage on the up-side is distinctly limited, (note our leverage projections).
SECURITIES
The $6 Preferred stock, which is being retired at the rate of 2,000 shares a year through sinking
fund operations, ranks among the highest grade investment company preferreds. Dividends were
earned 2.37 times last year. It is inactive market-wise and during the past year, with rare exceptions,
has consistently sold above par. Call price is 105.
The Common stock was available at the year-end at a discount of 30% from asset value. While
it may be regarded as among the most conservative of the leverage stocks, it can be expected to
fluctuate at somewhat more rapid rate than the market as a whole, as senior capital still amounts
to about a third of total assets. Bonds and preferred stocks held in the portfolio at the year-end were
largely of the speculative type that can be expected to fluctuate in line with common stocks.
Dividends may not be paid if the net assets are below $150 a preferred share. This restriction
seems remote as net assets at the year-end were above $283 a share of preferred, which, of course,
is no longer subject to the leverage previously provided by debentures. An initial dividend of 75$S was
paid on the common in 1936 and none thereafter until 1939 when 25^ was paid. 15<J was distributed
in 1940, 25^ in 1941 and 40^ last year. The 1942 dividend was fully taxable, as this company has
elected to be treated as a "regulated investment company," which means that the fund itself pays
no income taxes but its dividends now and henceforth must be fully taxable to the recipients. The
yield, based on the 1942 payment and year-end price was 6.15%.
These shares should appeal to investors who seek moderate capital appreciation plus some
degree of investment income, without the heavier risk inherent in more extreme leverage securities.
The excellent management record is a favorable factor.
Both common and preferred issues are listed on the New York Stock Exchange.
Warranfs good until October 15, 1953, to buy 500,000 common shares at prices ranging from
$10 to $20 a share are outstanding and were issued to the bankers when this company was organized.
These are not listed or traded. Complete exercise of the warrants would reduce the leverage factor,
since it would mean the issuance of almost 40% additional shares of common stock.
[96]
GENERAL AMERICAN INVESTORS COMPANY, INC.
Simplified Balance Sheet
As of December 31, 1942
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Bonds
Preferreds
Common
ASSETS
1,305,035
2,043,000
$ 2,282,570 12%
8%
12
Ind.
R.R.
P.U.
Fin.
$9,831,010
1,716,000
1,223,250
416,000
13
9
3
100%
13,186,260 80
100%
LIABILITIES
Payables
Incl. Reserves $ 122,000
Capitalization: f
$6 Cum. Pref.
Stk., no p.v. 6,600,000
capital $50 per
sh. ent. in liq.
to $100 a sh.
(66,000 shs.)
Common Stock,
no p.v. 12,094,865 (a)
(1,300,220 shs.)
16,534,295 88
Total $18,816,865 100% Total $18,816,865
* Book value at cost $16,964,774.•fBook Surplus $14,518,787.
$6 Preferred
Common
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$6,600,000
Balance
Assets
Applicable
$18,694,865
12,094,865
Coverage
$283.26
9.30
General Amer.
Investors
Dow-Jones Com
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
+26 -9 -9 -1 +30 -31 +32 +35 +10 +55 -5 -23 -24
posite Stocks (b) +15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936
to to to to to toi/Mrt inin injA 1 r\rf* in<n i run
General Amer.
Investors
Dow-Jones (b)
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1952 1942 1942 1936 1932 1942
+ 15 +5 + 3 + 34 -8 + 21 + 204 -44 + 57
+ 3 -7 -5 +22 -20 +6 + 176 -73 -40
42?
(,oo
Net Income
Preferred
Common
Dividends
Preferred
Common
Net Asset Value
at year-end
Preferred 3^'^°
Common
Price Range
Preferred
High
Low
Last
Common
High
Low
Last
Annual Volume of
Trading N.Y.S.E.
(000 omitted)
Preferred ^
Common / 30
toy
to *
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
14.38 13.75 9.13 7.69 4.41 11.02 11.99 3.87 4.11 3.32
.42 .40 .16 .09 d.09 .29 .35 d.13 d.12 d.16
6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
.40 .25 .15 .25 Nil Nil .75 Nil Nil Nil
283.26 235.00 270.47 313.31 326.78 238.52 390.21 293.50 206.11 190.01
9.30 7.06 9.18 11.81 12.91 8.10 17.41 11.91 6.53 5.54
104 104 105 103*4 102*4 105 *4 104*4 100*4 87 85
98 101 94 96 82 91 97 84% 73 42
101% 103 102 102 100 90 104*4 99823/4
73
7*4 5%73/4
9 9% 15*4145/8
10% 11*4 12
3% 4 5*4 4*4 5*4 8*4 5*455/8
2%
6% 4*4 5 5% 8%53/4
12% 105/s 7*4 7*4
3 1 6 3 5 8 9 10 6 8
55 103 76 82 144 203 348 287 187 394
[97]
GENERAL AMERICAN INVESTORS COMPANY INC
ASSET VALUE
PER SHARE
100
COMMON STOCK
10
.10
-.10
-10
100
$21.27
$18.02
$9 30 i——IT * *
$4.23
$2.11
-
-50% -25% DE,^;231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st, 1942 when the Dow-Tones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF GEN. AMER. INVESTORS COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the Decem
ber 31st, 1942 portfolio position. Leverage figures have been adjusted for dilution through possible exercise of warrants.
Applied to Common Applied to
In event of Shares owned all Assets
Rise of 10% $10.29 $10.69
25% 11.76 12.68
50% 14.02 15.74
100% 18.10 21.27
Fall of 10% 8.29 7.86
25% 6.77 5.71
50% 4.23 2.11
[98]
GENERAL AMERICAN INVESTORS COMPANY, INC.
as of DM. 31, 1942:
Bonds
Par Value ,
(000 omitted) EValue
$300 U. S. Treas. 2V4s 1967-73 $302,437
320 I'. S. Treas. 2'/*s 1952-55 323.900
125 .Vs.*. Klectrir i\<>* 1953 57,500
Stt-I A.ssociaivd Ga» & Eiec. 5s 1968 48,000
l.i Assoc. Gas Elec. 4Vfes 1948 1.875
338 Assoc. Gas k Elec. 4%s 1949 42.350
203 Assoc. Gas « Elec. 5s 1950 25,375
60 Assoc. Gas & Elec. 5V4s 1977 7,500
197 Assoc. Gas k Elec. 3fca 1978 QQ27.5S0
494 Assoc. Gas ft Elec. 3*s 1978 Q]7 1.630
290 Assoc. Gas k Elec. 4s 1978 BU3.500
19 Assoc. Gas k Elec. 4%s 1978 GQ2.850
200 Cities Serrice 5s conv. 1950 171,000
148 Missouri Pacific 5s A 1965 52,540
661 Missouri Pacific 5s G 1978 234,ti5.r.
523 Missouri Pacific 5s H 1980 185,665
668 Missouri Pacific 5s I 1981 237,140
73 St. L.-San Fran. pr. In. 4s 1950— 13,505
20 St. L.-San Fran. pr. In. 4s 1950 c/d 3,700
288 St. L.-San Fran. 4Hs 1978 56.160
119 8t. Louis-San Fran. 4%s 1978 c/d 22.610
Preferred Stocks
Shares
7,500 Amer. k Foreign Power $7 360,000
3.000 Commonwealth k Sou. $6 111,000
16.000 Elec Power & Light $T 528.000
7.500 Illinois Iowa Power 5% 183,750
8.000 International Paper 5% 360.000
2.000 North Amer. Lt. & Pr. $6 105,000
1,500 United Gas $7 —...— 1Z2'2«S
10.000 United Light ft Pr. $6 er. 1st 225.000
Common Stocks
10.000
12.000
10.000
4.500
4.000
23.000
4.500
13.000
5.000
3,500
3.000
3.500
7.500
8.000
10.000
2.500
20.000
2.500
4.000
5.000
10.000
7.000
Allied Stores $60,000
Amerada Petroleum 816.000
Anchor Hocking Glass 150,000
Armstrong Cork 137,280
Asbestos Corp. BJ68.000
Assoc. Dry Goods 138,000
Best ft Co. 101,250
Best Foods 110JHJO
Bethlehem Steel 280,000
Burllnnton Mills 70,000
Collins & Alkmsn 52.500
Columbia Broadcasting A ?2 -22
Columbia Broadcasting B 112,500
Consolidated Oil .?r29?
Crane Co 140,000
Crown Cork ft Seal 45,000
Deere ft Co 540.000
Eastern Air Lines M.OOO
Federated Dept. Stores 58.000
Flintkote Co. »!I'5S5
Coodrich IB. F.) fSS'SSS
Goodyear Tire ft Rubber 178.500
9.00U Gulf Oil of Pa. 337.600
4,500 Inland Steel 279,000
2,500 Lima Locomotive Works — 62,500
12.500 Marshall Field 118.750
2.500 Glenn L. Martin 46,250
10,000 Montgomery Ward 330.000
4.000 G. C. Murphy 252.000
13,000 National Cash Register 347.000
10,000 National Steel 515.000
7.000 Oliver Farm Equipment 206,500
4.000 Owens-Illinois Glass . 330.000
7,500 Pan Amer. Airways „ 191,260
10,000 Paramount Pictures 165,000
17,064 Potash Co. of America 0)469.260
5,000 Pure Oil Co 55,000
4,000 Schenley Distillers 82.000
15,000 Slmms Petroleum 15,000
10,000 Standard Brands 40,000
8.000 Standard Oil (Ind.) 224,000
20,000 Standard Oil (N. J.) 920.000
16,500 Standard Oil of Cal 478.500
10,000 Superior Oil 500,000
3,000 United Air Lines Transport 57,000
5.000 United States Steel 235,000
10,000 Western Auto Supply 195.000
Railroad
23.000 Atchison, Topeka ft S. Fe 1-945,592
21,000 Great Northern Ry. pfd. — 462.000
2.000 Louisville ft Nashville 122'225
5.000 Texas ft Pacific 87,500
Public Utility
16,000 American Gas and Electric 304,000
40.000 Engineers Public Service 100,000
26,000 Greyhound Corp. 364,000
34.500 Middle West Corp. 155,252
30,000 North American Co. _ 300,000
15,900 United Light and Power A
Finance
13.000 Commercial Investment Trust 416,000
2j.U closing bid prices, fractional quotations reduced
to the next lower half point.
CfJOn the basis of over counter quotations.
prices) :
U. S. bonds.
Other bonds.
Pfd. stocks -
Com. stocks:
Indus., etc.
Railroad -
Pub. util-
-1942-
$626,337
1,305,035
2,043,000
6,849,010
1,716,000
1,223,250
Oil 3,398,000
3.6%
7.6
11.9
39.9
10.0
7.1
19.9
31 (at bid
-1941-
$300,000 1.8%
1,110,905 7.0
2,216,500 14.0
6,640,400
2,028,000
997,000
2,571,800
41.9
12.8
6.3
16.2
Total ..$17,160,632 100.0% $15,864,605 100.0%
[99]
GENERAL PUBLIC SERVICE CORPORATION
BACKGROUND
This concern was formed in 1925 to acquire the assets of Public Service Investment Co., formed
in 1909. It operates as a general management investment company of the leverage type. Among the
directors are John A. Morris of the New York Stock Exchange firm of Gude, Winmill & Co.; Cecil P.
Stewart, head of Frank B. Hall & Co. and two attorneys. Four of the nine directors are elected by the
preferred stockholders, their privilege until accrued dividends shall have been paid.
POLICY
Despite its title, only 19% of General Public's assets is in utility preferred and common stocks,
24% is in cash and U. S. Governments, 49% in a diversified list of industrial common stocks, and
8% in speculative rail bonds. All common stocks accounted for 61% of the fund. A gross
earned yield of 4.3% was shown last year on the assets — the low return being due to a large
cash position carried throughout the year. A policy of light investment was maintained for fear that the
Company's debentures might fall into technical default (see below) and this explains why the portfolio
appreciation was below "average" last year. In only 7 of the last 13 years, has the company shown
better results than the Dow-Jones composite stock averages, and for the entire period the operation may
be considered as "average."
Turnover of investments has been quite heavy. Last year, total purchases and sales totalled
$2,452,687 or 66% of year-end total net assets, compared with only 31% in 1941. Expenses were
1.31% of average net assets last year, rather a larger percentage than most similar companies.
SECURITIES
The 5% Debentures due 1953, traded on the New York Curb, are a medium type investment with
asset coverage of 155% at the close of the year. Should assets drop below 125% of par, the bonds fall
into default, and under certain conditions become due and payable immediately. As stated above, a
large cash position was maintained for the greater part of last year and therefore income from invest
ments was reduced providing an interest coverage of only .89 times compared with 1.36 in 1941.
However, the strong indenture position of the debentures makes these bonds a good "business man's
investment" and at their price of 98 on December 31, 1942, they appeared attractive. They are converti
ble into 1 share of $554 preferred for every $100 of bonds, a privilege of no particular value under
present conditions.
The $6 and $5.50 Preferred stock, on which no dividends have been paid since 1937, may be
considered as a medium type speculation due to its large leverage and the accumulated dividend
arrears of $31.50 and $28.87 Ms per share respectively. Cash dividends may not be paid "except out of
earnings or surplus representing interest and dividends and/or profits on sales of securities and/or
other income. . . ." Such earned surplus was non-existent at the year-end, the actual figure being a
deficit of $89,442. No net cash income was available for the preferred last year, while $1.97 per share
was earned in 1941. The company has given notice that it will purchase preferred shares on the open
market from time to time, and repurchased 4,200 shares last year at an average cost of $27.04.
As long as dividends are in arrears, the preferred can elect one less than the majority of the
Board of Directors.
The $6.00 preferred stock is quoted on the New York Curb Exchange. At the 1942 year-end, the
market price showed a discount of 58% from the net asset value of $71.56; the large discount should,
however, be viewed in relation to the small and inactive market on the New York Curb Exchange.
No cash dividends have been paid on the Common sfock since formation of the present company
in 1926; stock dividends were paid in the years 1928, 1929 and 1930. The common stock possesses only
medium leverage, and this fact is further accentuated by the large cash holdings. It is currently "under
water" and has no asset value. A 30% rise in total year-end assets or a 48% rise in the common stock
portfolio would be necessary before it would acquire any asset value. The shares are listed on the New
York Stock Exchange.
[100]
GENERAL PUBLIC SERVICE CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market*
Bonds
Pfds.
Common
Ind. $1,812,425 79%
P.U. 450,475 20
R.R. 17,000 1
$ 888,254 24%
$ 300,439
249,300
11%
9
100%
2,279,900 80
100%
Total
2,829,639 76
$3,717,893 100%
• Book value (at cost or prices at Dec. 31, 1931, if acquired prior to this date)
$4,138,090.
t Capital Surplus $2,058,898. Earned Surplus Deficit $89,442.
LIABILITIES
Payables $ 37,153
Capitalization^
Conv. Deb. 5% 2,369,000
due 1953
Preferred (a) l,311,740(b)
$6 Cum. Pfd. Stk.
no p.v. ent. in liq.
to $100 a share
plus $31.50 acc. div.
(18,120 shs.)
$5VSi Cum. Pfd.
no p.v. ent in. liq.
to $100 a share plus
$28,875 accum. div.
(210 shs.)
Common Stock, 0
10c p.v. (669,886 shs.)
Total $3,717,893
(a) Both classes of Preferred Stock rank
equally.
(b) Applicable to Preferred at 12/31/42.
SUMMARY OF CAPITALIZATION
5% Debentures
$5V2 and $6 Preferred
Common
Entitled to
in Liquidation
$2,369,000
2,409,844
Balance
Assets
Applicable
$3,680,740
1,311,740
d 1,098,104
Coverage
155%
$71.56
d 1.64
OPERATING RESULTS
(See Page 10)
STOCK DATA
Net Income
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
$6 Pfd. and $5.50 Pfd d .74 1.97 1.25 d .04 d 7.27 .28 1.83 d 1.11 .33 1.22
Common d .18 d .14 d .16 d .20 d .45 d .19 d .15 d .26 d .21 d .18
Dividends
$6 Preferred Nil Nil Nil Nil Nil 18.50 15.00 Nil Nil Nil
$5.50 Preferred Nil Nil Nil Nil Nil 16.50 13.75 Nil Nil Nil
Common ■— — — No Dividends Paid — — — — —
Net Asset Value
at year-end
Preferred 71.56 59.11 71.26 94.98 107.73 83.55 210.46 151.38 71.55 78.81
Common d 1.64 d 2.22 d 1.61 d .61 .02 d .59 3.57 1.04 d 1.71 d 1.23
Price Range
5% Deb. 1953
High 100 102 102 101 98 104 V* 1035/s 100 85 75
Low 90 96 y2 94 90 75V8 82 98 74 64 54
Last 95y4 100 100 Vb 98% 97 87"/2 104 100 »/2 85 71
$6 Preferred
High 30 V2 31 48 52 53 100 Vt 93 Vb 73 57 62»/4
Low 20 19 25 V* 33% 30 37% 67 24 20185/8
Last 29% 20 Vi 29% 37 40 40 85 66273/4
24»/2
Common
High Y» Va IVa \V* 2% 5% 6% 4»/25s/s
8»/4
Low %« V* % IVb \Vt 3% 2 2
Last %2 %2 % % 1% 1% 4V4 3% 2Vb 2%
Annual Volume of
Trading (e)
(000 omitted)
5% Deb. 1953 82 109 126 236 136 127 326 212 200 160
$6 Preferred 5 3 3 3 2 2 5 6 4 5
Common 36 72 55 50 71 175 212 120 84 186
(e) 5% Debentures and $6 Preferred Stock listed N.Y.C.E.; Common listed N.Y.S.E.
[101]
GENERAL PUBLIC SERVICE CORPORATION
Securities Owned, as of Dec. 31, 1M2>
Common Stocks
Shares Industrials Mkt. Value
500 Allied Chemical $72,500
1.200 Allls-Chalniers 32.100
ti.OOO American Radiator 36.000
1.000 American Tobacco "B" 43.000
500 Anaconda Copper 12.250
2.000 Anchor Hocking Glass 30.250
1.000 Borg Warner 28.500
2 000 Bulolo Gold Dredging [217,500
700 Burlington Mills 14,203
1.000 Byron Jackson 10,623
500 Case (J. 1.) 39,000
800 Caterpillar Tractor 32,800
2,000 Celanrse Corp. 56,250
1.000 Cleveland Graphite 30.250
1,000 Container Corporation 16,250
2.000 Copperweld Sleel 10,000
2.500 Crane Co 35.038
l.'MJO Creole Petroleum 30,873
1.000 Dochler Die Casting 26,898
200 Douglas Aircraft 11.200
1.000 General American Transportation 37,500
2.000 General Electric 61,2!?r
1 000 Great Northern Iron Ore Prop. (ctfs. ) 14,87 ,i
1.000 Gulf Oil 38.000
200 lugersoll-Kand 1J.2O0
4.000 International Nickel "S'222
K00 Johiis-Manvillc .800
500 Keiinecolt Copper 15*522
1.000 Liggett & Myers B 63,000
1.000 Loew s. Inc.
1,400 Martin (Glenn L.) Z*xnn
2 000 Masonlte Corporation 67,500
500 McKesson k Robl)lns ,Hfn
2.500 Mission Corpoiatlon 33 ,7o0
2,000 Montgomery Ward 5 '2SH
400 Morris (Philip) 31.500
1.000 Myers (K. E.) 34.500
2,000 National Distillers '.'vVUi
2 500 Newport News Shipbuilding ".ISO
3.000 Ohio Oil 35,200
5.000 Pantepec Oil IS'dS
5.000 Pure Oil VS«S2
1.500 Remington Rand iS'SJE
1.000 St. Joseph Lead ,,,"!!
0,000 Standard Brands ri'155
500 Standard Oil (Calif.) H.625
2 ooo 2t)th-Century-Foi Film iooin
1.500 United Aircraft g8,250
1.300 United States Rubber
1 ooo Westlnghouse Air Brake i2'I?2
1.500 Wooiworth (F. W. ) Co. 46,313
1.000 Yale and Towne Mfg. L3,3<o
2,500
4,000
1 .000
4.000
1.000
4,000
4.000
9.000
500
1.600
4.500
1.000
1.500
500
6,000
3,000
1,200
700
800
400
1,000
Utilities
American Gas and Electric .
American Water Works
El Pasn Natural Gas
General Telephone
Louisville Gas and Electric A .
National Fuel Gas
Niagara Hudson Power
North American Co.
48.125
14,000
23.250
66.000
15.125
85,500
7,500
90,000
Northern Natural Gas 0311,750
Northern States Power A
Oklahoma Natural Gas
Pacific Lighting
Southern Natural Gas
Railroads
Chesapeake k Ohio
Principal
Amount
$50,000
25,000
75.000
50.000
50.000
50.000
50.Q0050.000
50.000
50.000
50.000
200,000
Preferred Stocks
Arkansas Natural Gas 6%
Buffalo, Niagara k Eastern Pr. 11.60..
Commonwealth k Southern $6
Engineers Public Service $5
Engineers Public Service $5.50
General Telephone $2.50
United Light k Power $6
Bonds
B. k 0. R.R. 1st 5s. 1948 (stpd.)
B. k 0. R.R. 1st 4s. 1948
Missouri Pacific 1st H 5s. 1980
N. Y., Chic, k St. L. ref. C 4 %s. '78
N. Y„ Luck, k West. 1st A 4s, 1973
Northern Pacific B 6s. 2047...
Pere Marquette 1st C 4%s, 1980—
Rio Grande Western 1st 4s, 1939. _
Southern Pacific 1st ref. 4s, 1955—
West. Pac. 1st A 5s, '46 (assented)
Wisconsin Central 1st 4s, 1949—
U. 8. Treas. ctfs. of lndebt. E, %%
due Dec. 1, 1943
□Over-the-counter in New York.
7.000
82.125
33,000
16,500
17.000
50,250
32.250
44.400
37.100
45,400
[217,400
22,500
Market
Value
$30,250
14,813
27.000
32,250
27.688
33.375
29,000
29.250
35,000
18.063
23,750
200.044
values) as of Dec. 31:
-1942-
( based on market
Common Stocks:
Industrials
Utilities
Railroads
Total com. stks._
Pfd. stocks
Bonds
Govt. sees.
Total invest.
Cash
Curt. Liab. (net)
-1941-
Amount Total Amount
$1,812,425 49.7 $1,720,496
450,475 12.3 439.501
17.000 .5 150,088
2.279.900 62.5 2.310,085
249.300 6.9 342,125
300.439 8.2 326.560
200.044 5.5
3,020,683 83.1 2,978.770
674,312 18.5 804.698
dr 57.024 dr 1.6 dr 82.451 dr 2.2
% of
Total
46.5
11.9
4.0
62.4
9.3
8.8
80~5
21.7
Total $3,646,971 100.0 $3,701,017 100.0
[102]
NOTES
[103]
GENERAL SHAREHOLDINGS CORPORAT/on
BACKGROUND
Formed in March, 1929, and originally known as Electric Shareholdings Corp., General Share
holdings until the latter part of 1938 was part of the Harrison Williams group of companies, being
controlled by Central States Electric and American Cities Power & Light. In November, 1938, an ex
change took place between these two companies and Tri-Continental Corp. and Selected Industries,
the latter two companies transferring their substantial holdings of Blue Ridge Corp. stock for 1,243,000
shares, or about 77%, of the common stock of Electric Shareholdings, whose name was subse-
guently changed to General Shareholdings. The fund is now considered one of the Tri-Continental
group; the directors now are identical with those of Tri-Continental and include three partners of
J. & W. Seligman & Co.; partners of Clark Dodge & Co. and Hornblower & Weeks; John R. Simpson,
chairman of the Executive Committee of the Fiduciary Trust Co.; Eugene W. Stetson, President of
Guaranty Trust Co.; Arthur F. White, President of Dominion Securities Corp., Ltd.; a partner of the
law firm of Cravath, de Gersdorff, Swaine & Wood and the former Under-Secretary of the Treasury,
John W. Hanes are also on the Board of Directors.
POLICY
When General Shareholdings joined the Tri-Continental group, over 50% of its assets were
invested in The North American Company, which had been its major investment since formation.
Steady reduction of this holding and increased diversification of the portfolio have been the chief char
acteristics of the investment policy since that time. North American is still the largest single invest
ment, 189,500 shares being held at the year-end, but it has been reduced to 17% of total assets. About
7% was invested in several miscellaneous utility common and preferred issues, 10% was in Cash
and U. S. Governments and the balance of 64% was principally in a diversified list of common stocks,
which, with a limited amount of bonds and preferred stocks showed a gross yield of 7% last year.
This represented $181,870 less than a year previously, largely due to the lower net income from their
North American holdings. Until recently assets have fluctuated about in line with utility stocks and
have bettered the Dow-Jones Composite Stock Average in only five of the last 13 years. Because of
the change in management and investment policy, the past record of other funds in the Tri-Continental
group is probably a better indication of management expectations than this fund's past record.
Expenses have been a little below average, amounting to .77% of average assets last year,
and about $5,000 less than in 1941. Turnover of investments as with others of the Tri-Continental group,
is active. Purchases and sales totaled $4,432,329, or 42% of average assets, against 47% in 1941.
SECURITIES
The $6 Cumulative Convertible Preferred stock (convertible into 2Va common shares) is pay
ing its full rate, and in 1940 and 1942 paid up some of the dividend arrears, which amounted to $6.50
a share as of the year-end. Net earnings of $6.92 more than covered the full dividend, but showed a
considerable decline from the $8.86 a share earned in 1941. At its year-end discount of 41% from
asset value, the stock's high yield of 11%% and leverage supplied by bank loans make it specula
tively attractive in a rising market, and conversely, hazardous in any period of decline. Dividends
paid in 1942 were only 2% non-taxable, compared with 100% in 1941, the company having decided
to be taxed as a "regulated investment company", thus future payments will be fully taxable.
The Common stock is in the "under-water" group, but possesses considerable leverage. Tri-Con
tinental owns 60% of this issue. Selected Industries holds 18I/2%, and Central States Electric about
7%; so the floating supply is relatively small. No dividends have been paid on this stock since 1931.
Both issues are listed on the New York Curb, where they are comparatively inactive.
[104]
GENERAL SHAREHOLDINGS CORPORATION
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market*
Bonds $1,340,937
Preferreds 619,502
Common
Ind. $4,931,377 63%
P.U. 2,304,709 30
R.R. 167,438 2
Fin. 163,725 2
Inv. Co. 269,700 3
Simplified Balance Sheet
As of December 31, 1942
$ 1,217,740 11%
LIABILITIES
Payables & Re-
14%
6
serves $ 118,411
100%
7,836,949 80
100%
9,797,388 89
Capitalization^
2% Bank Loans
(due 12/30/44) 3,000,000
$6 Cum. Pref. Stk.,
no p.v. stated
val. $25; ent. in
liq. to $105 a sh.
plus $6.50 accr.
div.
(90,750 shs.) 7,896,717 (a)
Common Stock
$1 p.v.
(1,602,427 shs.) 0
Total $11,015,128 100%
* Book value at coat (or prices at Dec. 31, 1936, li
acquired prior to this date) $14,894,812.
f Capital Surplus $15,280,448 Earned Surplus Deficit $6,157,518
Total $11,015,128
(a) Applicable to Preferred at 12/31/42.
SUMMARY OF CAPITALIZATION
Bank Loans
$6 Pfd.
Common
Entitled to
in Liquidation
$ 3,000,000
10,118,625
Balance
Assets
Applicable
$10,896,717
7,896,717
d 2,221,908
Coverage
363%
$87.02
d 1.39
OPERATING RESULTS
% Net Change in Market Value of Assets
General Share1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
holdings Corp. + 16 -15 -13 -2 +20 -36 + 12 + 107 -3 -36 --6 -36 -19
Dow-Jones Com
posite Stocks* + 15 -10 -10 + 3 +29 -34 + 32 + 41 -1 +49 - 16 -54 -30
% :Net Change in Market Value of Assets; for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
General 1942 1942 1942 1942 1942 1942 1936 1932 1942
Shareholdings -2 -14 -16 0 36 -29 +44 -51 -55
Dow-Jones (b) + 3 -7 -5 + 22 20 +6 + 176 -73 -40
(b) Above percentages adjusted for actual dividends paid each
STOCK DATA
year. All figures are approximate.
Net Income1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferred 6.92 8.86 7.44 7.48 6.80 11.09 8.01 6.50 (c)7.08 (c)7.52
Common .05 .16 .08 .08 .04 .30 .11 .04 (c).07 (c).12
Dividends
Preferred 6.50 6.00 8.00 6.00 6.00 9.37% 8.62% 3.00 Nil 3.00
Common — — — No Dividends Paidt
Asset Value at Dec.31
Preferred 87.02 78.10 105.20 135.05 146.91 120.90 218.35 196.76 94.64 84.51
Common d 1.39 d 1.92 d.41 1.22 1.84 .38 6.14 4.82 d 1.54 d 2.42
Price Range
i
Preferred
High 54 61 81 82 77% 98% 99 95% 52 59%
Low 35% 45 55 62% 60 60 88 40 34 34%
Last 51% 49 58% 73 77% 77 96 93% 40% 37
Common
High % Tie 1%2s/s 23/4
7% 9% 7% 4% 9
Low 9ie He % 1% Wa 1% 5 Va 1 2
Last % % Tie 1% 2 2 5;7s 5% 1% 3
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
Preferred 4 9 5 6 6 6 14 22 19 14
Common 16 29 27 32 45 80 78 57 38 44
(c) Taking into consideration North American common stock received as stock dividends on holding
of North American common shares.
[105]
GENERAL SHAREHOLDINGS CORPORATION
ASSET VALUE
PER SHARE
lOOr
COMMON STOCK
10
.10
.10
-10
-100
$5.41
$3.50
/
/ t
*
d $2.6
d $3.0
-50% -25% D^;231 +25% +50% +75% +100%
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st. 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF GEN. SHAREHOLDINGS CORP. COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the Decem
ber 31st, 1942 portfolio position:
Applied to Common Applied to
In Event of Shares owned all Assets
Rise Of 10% d $0.90 d $0.71
25% d 0.16 0.31
50% 1.06 2.01
100% 3.50 5.41
Fall of 10% d 1.88 d 2.07
25% d 2.61 d 3.09
50% d 3.83 d 4.79
[106]
GENERAL SHAREHOLDINGS CORPORATION
. a* •* Ok. SI.
trim. V. 8 G*reroaenl SecuritiesAat. %(000 CDMst. of Onaoaltled ) Value AssetsHit 0. H Trau. Is. IMMI JS3I.40O 6.01100 IT 8 ctr of tndebt . K. *,s. '42 [7)100.031 .0150 0. 8 Wor bonds. 0. IHs. 10U IT4S.450 .4450 V. 8. «u bonda. 0. lVii. 1*64 (040.400 .49
.100 Snider Parklni K.2501.500 Walker (Hlraa)-G. 0 «... 59.250
Total U 8. Oott we.. 7r,0.2H7 ( II
Industrials
Allied Mm 4 Hi. 1051Goodrich (8. P.) 414a. MM.Intfnutloiul hKi 51. 104T..MeKcison 4 Bobbins Ittl. '50Noll. Dairy Prod !%s. '00..Notl DMHIers den. llii. '40Paramount Ptel 4s. 1050Nchenley Ulstlllen 4 1. 1051..Simmons Co. 4», 1051Slurlehaker Corp. 8l. 1045...Towtttstown Sheet 4s. 1*48..-
0410088nionrvo
innMl18
25Vtri
150 Aaer. FfB. Pf. 51. 1030.
il.rsoloa.m100.00818.0S8100,15081.TS0101.00051.875ts.eu15.040ro.aos
>»*
Of.01.14.00.4t.M.4T.n.14,n
110.815 100
M Chleaao * N. W. 4s, 'Of (an-iu»p«l) _ 6. TOO .00
10 Chicago 4 N. «. 5>. 198T(strap**) 1.400 .08
15 Chicago Un. 8U. E. 3\t, '81 17.000 .1550 Erie II. 1 It. 10M 40.018 .415? trie I S 4Hi. 1018 2T42S .1515 Great Northern A 4Kl. '01.. 1T481 .1511 Mluourl Pu. A 5l, '85 11.081 .10139 Mluourl Pie. P St, TT: 50,040 48f 1 Mleoooet Pie. O Si, '71 25.738 .1301 Missouri Pic H 5i, '80 11.110 .1071 Mnmrl Poc. I St, 11 15.105 .2315 New Enilind R I 4l. 1845.. 14.010 .1110 N. Ori.. Tel. a Mn. A 5V4s.
1884 8.0T! .0811 N. Ori.. Tor 4 Mn. I It. 14 7.500 .07II N. Ori.. Tel. 4 Mm C So. '80 5.818 .0811 N. Ori.. Tn. 4 Hex. D 4Hi.
1050 8.681 .0550 0rc*on-Wtth. I.I. 8 Nastf. A
4t. 11 61.188 .4810 81. L -Sin PrtB. A 41. '60 5,816 .0851 Hi. L -Ban Pru. 8 5i. '80 10.806 .1080 Rt. L -San Prtn. A «*i. 'T6.. 5.915 .0855 Wtbuk A 41. 'Tl 46.868 .4118 Wabaah A 40, 11 7.MO .0T10 Wtttem Ptcinc A St, '48 (at-
•00tod) 10488 .10Whoo Issued contracts with re
speet to 175,000 principalamount Chicago 4 R. W. Wf.in 4 ten atit A 2%l-4s.1888 msi.m .ii
510,4H 4.71
Total boa* 1440.8*T 11.11
Preferred 8toeks
Industrials
200' Coca-Cola A IS 11,400 .11400 Oeneral Moton |5 61.100 .46600 Goodyear Tire $5 45.088 .41100 Great Wettern Sucar 7%.. 41.616 .88
1.100 Inlernatl. Paper 5% 58,988 .64100 McKema 4 lobblm 5*% 11.088 .10100 Pblllp Morris 4V4% 10.800 .10
Public UttUUet
400 American Pr. 4 Lt. 13400 American Pr. 4 LL 88
1.900 Electric Pr. 4 Lt. 186.700 Electric Pr. 4 Lt. IT500 Near Mind Pr. 0%100 H. Y.-ltate-M. 4 Oat IJO*
181.114 1.10
7.60058.003
175.It*
S0.6T6
Jlli(SOI.
Total pfd. xtka 018.601
Common Stock!
Afrkaltaral Equipment
Deere 4 Co. 88.100
Aauieaents
10.100 Paraaount PieUtrea 109.175
Appartl
400 Cluett. Peabwfr 18.'
AatoaoMlot and Accttaaitt■ort-Wamr Cm*. 70.860Chrysler Corp 4 2 7.0 ISOeneral Moton 190.375
mil
United 'Air Llnei 31.175
Rutldlni Equipment and teatrattaat tl.500
SM.10O87.760
184.350
M.07Jl
1.01.50.18
8.81
1,400
1.7006.MO0.000
S.700
1.5001.1001,000
1.14
.800 .11
.181.811.88
1.51
1.0001,400
1.0001.0004.000
. 8Hercules Poodot. r ... , -Union Carbide 4 Carbon...
174,000150,600
181
Electrical
Electric
finance Coapanlei
Coaaerelil CreditCoaaer. Iniejt Trait
047400
45.750
81.01570.800
i68.ruPoodi and Beseractt
Canada Dry Glnfer Ale 41.T80National Distillers 61.600Pepil-Cota 117.000
1.44
41
278.750Gold Mlnlnf
1.500 Melutrrt Porcupine 58.600
Intestment Coapanlei
10 Christiana Securities H)21.S00124.200 Trt-Cnnttnrntal Corp 248.400
1.100
.07
.64
2.53
41
19U4
900 International Nickel900 Kennecett Copper __
1.000 Noranda Mine*
87.750 .7926.100 .1410.100 .24
[F(i5,000 .5P
204.950 1.86
Office and Builneu I
400 Internatl. ITatnia kUch... 69.800
OIU
31,000 Consolidated Oil 211.1153.300 Continental OU 904381.500 Phillips Petrolena 07.500
10.000 Pure Oil 112.5001.800 Skelly Oil 84.70014.000 SoeonyVaeuua 04 141.5005.600 Standard OU (Ind.) 151.7501.800 Standard Oil (N. J. )_ 119.0151.000 Standard Oil (Ohio) 30.7501.500 Teias Co. „ 61.150
1.087.338Public CtllHItt
8.500 Aaer. Lt. I Trie 110,50015.400 Detroit Edison 263,650
189.500 North American Co -, 1.895.000700 People! Gai Lt. 4 Coke ' 31400600 United LL 4 Pr.. A 160
4.100 United Lt. 4 Pr.. B 1.100
1404.10*ladle and Electronics
1.000 PhOec Corp 11,800
Railroads and Other Transportation
1.000 Atlantic Coast Line 27.2501.700 Chesapeake 4 Ohio 57,8005.500 Crryhound Corp. 77.088200 Pennsylianla R.I. 4.700
187,438Retail Trade
700 Best 4 Co., lie 18.0111.1*0 Green Co. (H. L.) 67.200500 Scars. Roebuck 30.918
1.400 Tfoolwortb (P. «.) 43425
157 ,S76
1.17
.1*41.701M
1.43
15.100 Newport Rttrt Shipbldg... 006.475 I.N
Teitllts
5.000 Burllnita■ Mllb) 101,875 41
Tobaccos
40* Philip Miirrts 31.500 41
IN Inlon 8errtee Corp
... .*
X5.000 M
Total «•on tucks 7.830.940 iTIo
(EOier-the-eeouter atrket In New York.STaken at .air ralue la the opinion of the corporation.
Unlets otherwise lndteatea. these securities arttraded In on the Now Tork Stock Eiehange or New TorkCurb Eiehanie. and aarket raluet are based on lastrecorded sales on Dee. 31. 1941. tr In the ahtenee ofrecorded sales, the attn between the cletlm bid andnaked prices.
1 *« Dtx. 11 (at
0. 8. tee. IT60487
700.880119.625510.432
Total1.81
I4t1.004.ri
Total Ma.
Pfd. stacks:Industrials
1,340.817 13.17
111.114311,388
1101.81
Total ptd
COB. stocks:Afrit, equip.—
611.601 5.61
ApparelAatoawhUtt .Arial Ion ..Bet. 4 food.Bld|. equip. .Chemicals ...Containers _.DrutiEire, equip.PlnaneeGoldIn>. ete. ...
aft .
08.100169,17511.000
901.08851.975
278.750886.350647.300
0.591.541.118 210 472.531.515.88
tailsRetailSblabulldlni .tteeltTntUa
Mlseell.
Total c<Caah 4 rec.
43.730158.72658.500
269.70034.115
104.93059.800
1.087.31814*4.700
18.5001*7.438157.378•05.475
"ToT.87531.3005,000
0.411.440 532 150.811.880.549.87
10.010.261.511.435.50
"ooi0 29005
1*41-
Aaount totalSM6.878 Ml
156.035 1:4059.H25 0.57
310,17* 1.05
727.826 841
178,803 1.76299.700 1.86
478.563 1.55
51.000 %M146.450 1.8*U.200 0 14
434.925 4 13109.038 1 0490.125 0.8«
167.875 1.5*822.400 7.8130.000 0.2879.003 0.7594.850 0 90106476 14145.000 043
157.412 1.80
106.800 1*0
1,077.8641.044.4*6
10.U15.11
81.001151.188886.175104.01593.00010.000148"
0 701 398 42l.t*0*00.110.06
7.836.949 71.10411.454 4.24
Total 111.015.129 100.00 110.388.333 100.00
[107]
INSURANSHARES CERTIFICATES INC.
BACKGROUND
The company was formed in October, 1929 through the consolidation of five open-end invest
ment funds. It operates as a closed-end, non-leverage investment company, specializing in insurance
stocks. Directors include the two managers of the stock brokerage firm of Middendorf & Co. Inc., of
Baltimore; officers of the Chase National Bank of New York and the Equitable Trust Company of
Baltimore; and the Presidents of the First Boston Corporation and the Niagara Share Corporation of
Maryland, which owns 12% of the common stock.
POLICY
While the company may invest in general market securities, it holds only stocks of representa
tive insurance companies. According to the year-end report, 20% of the assets were in casualty
and surety insurance companies and 80% in fire insurance companies. Some 27 insurance companies
were represented in the portfolio, with the larger holdings being in Hartford Fire Insurance Co. ($930,-
000), National Fire Insurance ($429,000) and Phoenix Insurance ($404,000). The company keeps its
funds fully invested, holding a negligible amount of cash. Gross income on investments last year
was 3.7% of average net assets compared with 3.9% in 1941.
The management record of the company has been about average, bettering the Dow-Jones
Composite Stock Average in seven of the last 13 years and equaling it in another. Portfolio turnover
is small, amounting to only 8% of average net assets last year, compared with 16% in 1941.
Expenses are below average, the company showing the third smallest expense ratio (0.47%
to average net assets last year) of any company analyzed in this study.
SECURITIES
At the year-end, the capifal stock of Insuranshares was available at a discount of 26% from
its then asset value of $8.90. There is no direct leverage, although the available discount would act
as a form of leverage in a rising market. The stock represents a diversified investment in the insur
ance held, and as the insurance companies themselves are large holders of all kinds of securities,
actually a tremendous amount of diversification is indirectly provided. There is an additional feature
in this issue as most of the holdings are unlisted but it is listed on the New York Stock Exchange
although trading volume is small. Dividends have been paid in every year since formation except
in 1933. Since 1936, the stock has paid 20f per share annually, on which basis the stock sold to yield
3% at the year-end. Income has been larger than dividends (usually by about %), amounting to 28?
last year and 30^ in 1941.
The company has followed a policy of repurchasing its own stock for retirement and last year
14,100 shares were repurchased at an average cost of $6.27. A block of 60,000 shares is held by
Niagara Share Corp. of Maryland.
Portfolio, as oi Doc. 31. 1942:
Casualty and Surety Inauranco Companies:
" Market
Value
1,258 Aetna Cas. & Surety3,844 Amer. Re-Insurance Z7'8ZZ
3,300 American Surety 171 ,6001,566 Fidelity & Deposit Co. of Md t IJ*.gg510 General Reinsurance Corp 21,802
2,597 Hartiord Steam Boiler Insp 107,1262,000 Protective Indemnity 1 10.000
115 U. S. Guarantee 9,142
Fire Insurance Companies
313 Aetna Insurance if'12,1,255 Agricultural Insurance 83,457
1,189 Automobile Insurance t 42,209225 Boston Insurance 116,32566 Buffalo Insurance t 20,130
300 Continental Insurance \ l|.5?j>
1,040 Federal Insurance ,TJ'I22,195 Fire Assn. of Philadelphia JJ.489
2,2181/2 Fireman's Fund Ins 1*0 ,2871,000 Great American Ins -S'SK
10,330 Hartford Fire In»- „■•••• v ■ ■•; VZ'JSS.4,259 Insurance Co. of North America oVS??655 Merchants Fire Insurance jS'SS
7,900 National Fire Ins. . . «8,575
2,480 National Union Fire Ins tS iX1,274 Northwestern National Ins I ■g-ij'4,867 Phoenix Insurance Co IS'ijl530 St. Paul Fire & Marine Ins sS'iS
2,550 Security Insurance Co KJ.ia
Total R367.930
(New York Stock Exchange quotations.t Over the counter quotations from reliable brokers.
All other stocks at published over the counter bid prices.
[108]
INSURANSHARES CERTIFICATES, INC.
Simplified Balance Sheet
As of Dec. 31, 1942
ASSETS
Cash $ 14,956
Investments, at market *
Common Stocks
Casualty & Surety Ins. $ 869,406 20%
Fire Insurance 3,498,524 80
100%
4,367,930 100%
Total
* Book value at cost $4,422,263.
t Book Surplus $3,246,051; Undistr. Income $661,563.
$4,382,886 100%
LIABILITIES
Capitalization: t
Capital Stock,
$1 p.v.
(492,700 shs.) $4,382;
Total
(a)
$4,382,886
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to Assets Asset Value
in Liquidation Applicable Per Share
Capital Stock $4,382,886 $4,382,886 $8.90
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Insuranshares Ctfs. +3 +1 +4 +11 +25 -24 -1 +50 +45 +6 -20 -51 -30
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Insuranshares +3 +7 +19 +49 -M3 +12 +127 -72 -29
Dow-Jones (b) +3 -7 -5 +22 -20 +6 +176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income .28 .30 .28 .26 .16 .24 .22 .21 .17 .15
Dividends .20 .20 .20 .20 .20 .20 .20 .15 .10 Nil
Net Asset Value
at year-end 8.90 8.80 8.47 8.19 7.33 5.94 7.70 7.95 5.44 3.85
Price Range
High
Low
Last
6s/s
6%
7Ve
6
7>/2 5% 5»/4
3S/8
6 7%
5
7V2 4%
2Vb
4%
3%
IVi
2V4
4s/s
GVi
4>/4 3%
3%
4
Annual Volume of
Trading N.Y.S.E.
(000 omitted)
GV* 5% 4% 55/s 7
16 57 74 74 82 104 66 70 47 46
[109]
LEHMAN CORPORATION
BACKGROUND
Lehman Brothers founded this non-leverage company in 1929, and until presently, a large .
number of its directors have been partners of that firm, or affiliated with it. However, due to the require
ments of the Investment Company Act of 1940, a new Board was elected in October 1941, which *"
placed the Lehman partners in the minority, but Lehman partners together with Lehman Corporation
fund since they were originally issued. Partners of the Firm own a very substantial percentage of the
outstanding stock and practically all the transactions of the fund flow through the partnership.
pUUQU IUU IjdllllUll ^UlUIWB 111 IUO IIIIIIVI II Jj UUI ^UUMH KI^OllHH WILLI UMUUUU VAJI^UIUUUU m
executives still comprise nine of the fifteen members. Among the new directors were Wendell L.
Willkie, and J. Herbert Case. Thomas A. Morgan, President of Speny Corp., was elected a director in "~
February 1942. This fund is controlled and dominated by Lehman Brothers in every respect, a feature ~ '
of importance to stockholders who have received better than average results on the shares of this
t _1 _ • >1 ■ • % r% ■__ _ * _ Tl- 1 ■ • • _ 1 ■_ _ _ t ^™ I
r
L
:
r
POLICY
The portfolio policy has been one of wide diversification among sound income producing
equities which can provide a continuity of dividend income for disbursement in turn as regular
dividend payments. About 76% of the fund was in common stocks, about 13% in bonds and pre-
ferreds, and the balance of 10% was in cash as of the year-end. There is some participation in special
situations, including a large holding in Potash Co. of America, part of which was disposed of through
public offering in the last quarter of 1942. A gross yield of 5.4% was shown last year.
The management record is among the best, having bettered the Dow-Jones Composite Stock
Average in eight, (and equalled it in one), of the last thirteen years. It might be pointed out that the
management record has been better in bear markets than in bull markets due to the generally con
servative investment policy followed. Asset value record of the stock has been substantially improved
by large purchases of the stock by the company at times when it was selling at big discounts.
Expenses have run about average, amounting to .75% of average assets in 1942 and .87% in
1941. Turnover of portfolio last year was 30% of average net assets, compared with 46% in 1941.
The Management agreement between Lehman Corp. and Lehman Brothers provides that the
latter firm shall receive 8 Va % of the net realized profits of the corporation. This compensation, however,
is to be paid only to the extent that net profits for the period in question exceed 4% a year on the
invested capital plus any deficiency in net profits for any prior period below 4% a year on invested
capital not previously deducted. Unrealized profits are not taken into consideration and unrealized
depreciation is deductible in determining net profits under the agreement, unless the whole manage
ment agreement is terminated. Under the terms of this agreement, substantial payments were made to
Lehman Bros, in 1936 and 1937; none have been called for since then. Lehman Brothers received in
1942 $93,453 brokerage fees and $18,457 compensation for rent.
SECURITIES
With a consistent record of dividends, ($1.25 paid in 1942, of which 25^ was an extra), the one-
class Common stock deserves consideration from investors who are seeking a conservative common
stock which will afford the protection of diversification plus a chance of working out better in the
long run than the general market. The stock was selling at a discount of about 15% and since this
discount would probably tend to narrow in a rising market and increase in a declining market, the
market price of the stock could be expected to move with somewhat more acceleration than the
market averages.
Dividends paid for the fiscal year ended June 30, 1942 were reported as non-taxable at the end
of last year. The stock yielded 5%. The treatment of subsequent payments will depend on the income
of the Fund during the fiscal year ending June 30, 1943 and cannot be determined until after that date.
Substantial purchases of its own shares for retirement have been made by the company from
time to time and it is the announced intention of the directors to continue this policy. A total of 14,400
shares were purchased for retirement in 1942 at an average cost of $21.62 per share. In the previous
year 80,103 shares were repurchased at an average cost of $20.68 per share.y
In 1937, the stock was split three for one. The shares are listed on the Ne/v York Stock Exchange.
[110]
LEHMAN CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Bonds $ 3,909,147
Preferred 3.814,481
Common
Ind. $39,805,984 88%
P.U. 1,934,748 4
R.R. 573,425 1
Fin. 2,966,996 7
Real Est. 35,000
$ 6,282,605 11%
7%
7
100%
45,316,153 86
100%
53,039,781 89
Total $59,322,386 100%
* Book value at average cost $58,340,184.
t Capital Surplus (after deduction of loss on securities and special dividends
paid) $56,993,278. Undistributed net income $4,859,199.
LIABILITIES
Payables &
Reserves $1,020,428
Capitalization :t
Common Stock,
$1 p.v. 58,301,958 (a)
(1,973,877 shs.)
Total $59,322,386
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Common Stock
Assets Applicable
$58,301,958
Asset Value
Per Share
$29.54
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Lehman Corp. +16 -7 -7 -1 +20 -29 +32 +30 +13 +44 +2 -25 -9
Dow-Jones Com
posite Stocks (b) +15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Lehman Corp. +7 0 -2 +17 -17 +9 +179 -38 +43
Dow-Jones (b) +3 -7 -5 +22 -20 +6 +176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Shaze^ 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income (c) 1.28 1.45 1.10 .91 .66 1.29 1.40 .96 .91 .78
Dividends (c) /, jt J 1.25 1.20 .80 .80 .90 4.67 1.67 .88 .80 .80
Net Asset Value 9 « ^
at year-end (c) T$29.54 26.74 29.64 32.72 33.97 29.38 45.73 37.11 29.44 26.84
Price Range (c)
High 32
Low
25 24 Vi
19
24%
15 Vi
20%
273/429 45%
22%
24 Vi
41Vi
29%
39%
31%
22%
31%
26 26 Vi
17% 20 19% 21»/2 12 V4
Last 3 O 25 20V* 225/s 27 24 21%
Annual Volume of
Trading N.Y.S.E.
(000 omitted) /V0 113 194 250 254 268 193 133 165 145 319
(c) Adjusted for the three for one split effective May 29, 1937.
[Ill]
Securities Owned
LEHMAN
31. IMfe
Fare Value
(000 omitted) U. S. Government Obligations
$500 U. 8. Treas. ctfs. Feb. 1. »48
4X0 I). K. Treas. %% ctfs. Auk. I. '43
900 U. S. Treas. %% ctfs. Nor. 1 . '43
300 U. S. Treas. *4% notes. 1944, D
920 U. S. Treas. \'A% notes '45, C
000 U. S. Treas. l%s June 15, 1948
520 U. 8. Treas. 2s Dec. 15. 1951-49
50 U. S. 2%s Svrs. bds. Mar. 1, '54
(Defense) G
50 U. 8. 2>4s Svgs. bds. July I, '54
(Defense) G
Other Bonds
Public Utilities
8 All America Corp. inc. 4s, '69. B
115 Ainer. It Kgn. Pr. deb. 5s. 2030—
90 Amer. Pr. k Lt. deb. 6s. 2016,
American series
1.500 Amer. Tel. k Tel. deb. 3s, 1956
300 Assoc. Elec. 4%s, 1953
200 Assoc. Gas k Elec. 8s, 1940
300 Contl. Gas 4 Kl. deb. 5s, 1958, A
180 Electric Pr. * Lt. deb. 5s. 2030
43
90
100
T
5
114
572
285
69
363
60
Railroads
Gulf Mobile k Ohio 5s, 2015, A
Missouri Pacific 4s, 19T5
Northern Pae:fle 6s, 204T. B
Northern Pacific 5s, 2047, C
Northern Pacific 5s, 2047, D
Miscellaneous
Baldwin Locomotive 6s, 1950
Cities Service deb. 5s, 1950
Distillate Production 5% nts., '47
Golden Queen Mining Co. note..
Gulf Plains mtge. 6% notes, 1945
United Drug deb. 5s, 1953
Shares
1,600
600
3,000
1.900
900
15.700
2.800
BOO
200
5.000
950
250
100
150
3.500
Total other bonds
Preferred Stocks
Public Utilities
Amer. k Fgn. Pr. $6
Amer. k Fgn. Pr. $7
Amer. Power * Light $5
Amer. Power k Light $6
Buffalo. Niagara It East. Pr. $1.60
Commonwealth k South. $6
Engineers Public Service $5
Engineers Public Service $5.50—
Engineers Public Service $6
Illinois la. Pr. Co. 5% ($50 par)
Portal Telegraph, non-cum
Public Service of N. J. $5
Public 8ervtce of N. J. 6%
PubUe Service of N. J. 8%
United Gas Corp. $7
S.Market
Value
S]$000,095
W * HO.509
§900.549
298,875
920.863
® 500.93 8
IS 52 1,950
[950.000
B50,000
4,223.778
0)7,020
91,713
85,725
1,605,000
139,125
0)168.000
246,375
158,400
2,501,358
22,764
9.900
66,750
3,850
2,750
106.014
124,545
491,205
5)285,000
IS 15.000
01326,250
59,775
1,301,775
3,909.147
65.600
29.100
49.875
35.625
9.675
580.900
148.400
34.050
12,400
126,250
17.694
18,875
8,575
16,075
398,125
1,551,719
CORPORATION
Amusements
14,:i00 Paramount Pictures, Inc :l2'55r'
3->.265 Rarilo-Kelth-Orphcum 12?\?j£
29.771 Radl>Kelth-Orpheum opt. wtrr.
10.000 Twentieth Centu.-y-Fox .- IJi'SXH•20.000 Warner Bros. Pictures - IS0-000
669,785Automotive and Rubber
9,:i00 Burg-Warner a55,?Jfi
2.200 Campbell. Wyant * Cannon „?2'?»,i:i.900 ChryMer Corp. 9i„'ln„
3.000 Cleveland Graphite Bronze S0,'*,"
2.000 Eaton Manufacturing .,.„■„;;;!
11.400 Electric Auto-Lite ?i2'??S
K.lOO Firestone Tire & Rubber ISMi?.
31.200 General Motors —- '•SSSoTi
11.900 Goodyear Tire k Rubber - s2i*?i2
2.300 Llbhey-Owens-Ford Glass „IHI«
10.000 UnltKil states Rubber 258.7)0
3.924,588Aviation
2.100 American Airlines U5'5?2
80.775 Aviation Corp. - - fiinin
5.000 BendU Aviation uu'vul
6.000 Eastern Air Lines J?HnX
20.000 Pan American Airways ?,„'???
27,000 United Air Lines Transport 519, dO
1,500 Atchison, Topeka 5% 99,000
1.900 Gulf Mobile * Ohio $5 48,450
147.450
Industrials
3,000 Allied Stores 5% 219,000
225 Amer. Cyanamld 5% ($10 par) 0)2.588
7.1)00 Genl. Realty k Util. $6 opt 235.600
2.000 Gillette Safety Razor Co. $5 118,000
1.600 Gimbel Brothers $6 — — 91,200
2.100 Goodyear Tire 4 Rubber $5 189,263
3,000 International Paper 5% 136,125
3.100 Paramount Pictures 6% lit— 861,925
1.950 Radio Keith-Orplieum 6% 104,325
3.500 United Aircraft 5% 325,063
2.900 United 8tates Rubber 8% 296,525
357 Uniris Lens 5%% 0)35.700
2,115,313
Total preferred stocks 8,814,481
Common Stocks
Agricultural Machinery
2.000 Case (J. I.) 156,000
12.000 Deere k Co. 325,509
13.000 International Hun ester 775,125
5,000 Oliver Farm Equipment — 148,125
1,404,750
7,100
4,440
5,888
1,000
2.500
300
3.000
35,000
15.000
6.860
Banking and Finance
Chase National Bank of N. T
Commercial Investment Trust —
Commercial Natl. Bk 4 Tr. N. T.
Cont. IU. Natl. Bk. 4 Tr. Chicago
Corn Exchange Bank Trust
First Natl. Bank, Chicago
Guaranty Trust of New York
Marine Midland Corp.
National City Bank of N. T
Puhllc Natl. Bk. k Tr. of N. T—
Building and Construction
18,600 American Radiator
1.700 Armstrong Cork
5,000 Congoleum-Nairn
17.300 Crane Co.
16,700 Flintkote Co.
3.000 Holland Furnace
8,500 Johns-Manvllle
13.600 Otis Elevator
1.300 Pittsburgh Plate Glass
3.000 Sherwin-Williams Co.
2,000 United States Gypsum
5.000 United States Plywood
Cans and Containers
8,900 American Can _ _
8,700 Anchor Hocking Glass
1.000 Continental Can
10,000 Owens-nilnots Glass
1.000
3.000
2.300
2.000
31,296
12,800
8.300
10,000
2,600
9,500
15.000
18,000
12,500
8,000
5,000
35.000
10,000
4,000
12,600
Chemicals
Allied Chemical k Dye
American Cyanamld B
duPont (I. I.) _
Monsanto Chemical
Potash of America
Union Carbide and Carbon..!
Foods and
California Packing
Canada Dry Ginger Ale
Coca-Cola Co -
Corn Products .
General Foods
National Dairy Products.
Pepsi-Cola
Snider Packing
South Porto Rico Sugar.
Standard Brands
Swift * Co.
Swift International" C<£
United Fruit
Industrial Machinery and Equipment
5,000 Doehler Die Costing
5.000 Fairbanks, Moot
5,200 Food Machinery _.
4,000 General Electric .
5,000 Tim ken Roller Bearing
9.000 Westlnghouse Electric k Mfg. ~
1.785,6
50197.913
142,080
01947.968
fl)7f,850
92,800
J84.600
9699.000
109.875
0)429.37.1
0)186,935
2,966,996
111,600
51,850
91,250
248,688
263,025
86.250
614,125
219,300
111.475260.2.r»0
122.000
162,500
2,343.313
638,575
131.588
27,000
676,250
1,873,413
145,000
119,625
809.350
173,000
0) 860.640
1.086,800
3,644.416
188,638
142,600
227,600
528,438
534,375
268,250
365,625
132,000
102,500
144,375
338.760
116.000
887,900
3,806.850
126,878
171,250
211,900
122,000
207,500
785,750
1,575,276
[112]
LEHMAN CORPORATION
12.000
3.000
14,000
500
2,200
4.500
15,000
20.000
2.001
3.600
785
5.400
t».800
4.300
2.450
4.500
7,000
13.594
10.000
16.800
15,000
4.900
8.800
ti.100
7.000
7,000
8,000
18.300
9.000
8.000
5.200
18,000
12.000
8.500
10.000
2,500
3,150
148,250
2,800
2.300
12.400
3.800
5.000
10.900
9.000
2,500
17,200
9,100
24.000
10.800
75
16,000
1,404
9.000
14,500
19.000
10.800
54,250
13.000
12,000
35.000
1.000
23,400
16,600
10,600
14,800
14.000
6,500
75,467
1.770
9,600
4,900
20,900
300
85,000
81,600
5.800
18,900
16,800
5,100
7,800
7.200
14,600
8.900
Oils
Amerada Petroleum
Barber Asphalt .
Continental Oil
Creole Petroleum
Distillate Production
Gulf Oil
Gulf Plains Corp. v.t.e
Humble Oil ft Refining—
Phillips Petroleum
Pure Oil Company
Seaboard Oil of DeL
Slmms Petroleum _.
Socony Vacuum Oil —
Standard OU (Calif.)-.
Standard Oil (N. J.)~
Superlor OU ( Calif. )-
Texas Co. , „„
Tide Water Associated Oil.
Manufaeturing, etc.
American Bank Note 102,000
American Home Products 166,875
Cnlgate-Palmollve-Peet 286,250
Columbia Broadcasting A — 7,625
Eastman Kodak 328,900
Electric Boat — 45,583
Gillette Safely Rasor 71,250
Greyhound Corp. 282,500
International Business Machines.. 299,150
International Silver 126.000
Keeshin Freight Lines, fdrs. stk.. [£785
Sterling Drug 334.800
Stone & Webster 56,350
SylvanU Electric Products 101.050
Sylvania Industrial 3J50.838
United Drug 34.313
United States Foil. B _18>375
Inlvls Lens 0)27,188
I'nivis Lens option warrts 3)7,500
2,297.310
Merchandising
Allied Stores 107.100
American Stores - 176.250
Associated Dry Goods - 29,400
Federated Dept. Stores 130,900
Ginibel Brothers 29,738
Grant (W.T.) 217,000
Jewel Tea 192.500
Kress (S.H.) 182,000
Kroger Grocery k Baking 494,100
McCrory Stores 10M'S
McKesson k Bobbins 124,000
Marshall Field .S2'IS5
Montgomery Ward 603.000
Penney (J. C.) 972.000
Sears, Roebuck
Woolworth (F. W.) 808,750
4,249.125
Metals and Mining
Aluminium. Ltd.
Aluminum Co. of America 324,450
Anglo-Huronian 18281,675
Climax Molybdenum 109.200
Hudson Bay Mining 52.900
International Nickel S?5'S22
Kennecott Copper } 10.200
Mueller Brass i5H?5
Phelps Dodge
St. Joseph Lead 2'5'552
Texas Gulf Sulphur 98.500
2.183,563
1,186.800
118,750
657,000
175,500
3)1,875
608,000
0)84,240
542,250
652,500
218,750
175,500
74,594
133,260
851.000
1.614,375
50,500
917,100
166,000
7,771,984
Public Utilities
American Cable 4 Radio 89,750
American Gas k Electric 284,900
Arkansas Natural Gas, A 15,750
Commonwealth Edison 137,313
Commonwealth k Southern 21.225
Detroit Edison 30.533
El Paso Natural Oas 223.200
Electric Power * Light 6,125
Engineers ruoue service — 60,088
Houston Lighting k Power 3)18,875
Middle West Corp 166,250
Mission Oil (Kansas) 01868,400
National Power k Light 12,325
Niagara Hudson Power 85,438
North American Co 168,000
Peoples Gas Light k Coke 234,600
Postal Telegraph 0)8,190
United Gas Corp. 4,950
United Light 4 Power, A 3,650
Western Union Telegraph 105.788
1,934,748
Pulp and 1
Container Corp. oT America
Crown Zelleruarh
International Paper
Mead Corp.
Union Bag k Paper
Railroads
Atchison, Topeka
Chesapeake Corp.
Chesapeake It Ohio ...
Great Northern Ry. pfd..
Pennsylvania R.R
Railroad Equipi
Gen. American
10,000
15,000
1.900
5,000
18.000
8,200
8.000
200
800
7.300
10,000
T.700
6.000
6.000
18.800
10,000
8,000
8.700
2.000
4,974
7.350
8,000 American Tobacco, B.
5.000 Philip Morris
Total
162,500
166,875
15.438
30.000
102.375
Steels
Bethlehem Steel
Copperweld Steel
Republic Steel
United Stales Steel
Textiles
American Viscose
Burlington Mills
Celaoese Corp. of America
Cluett, Peabody
North American Rayon, A
North American Rayon, B
477,188
376.175
31800
6.800
18,000
171.550
573.425
375.000
433.125
57.000
84.000
652.050
1.226,175
830.000
163,000
104.063
68,000
119.376
176,400
•60,839
344.000
393,750
737,750
845,281.153
fflUnless otherwise indicated, securities are traded In
on the N. T. Stock Exchange or N. Y. Curb Exchange.
Market values are based on the but reported sale on
Dee. 81, 1942, or if no sale was reported, and in the
ease of Over-tbe-Counter quotations, on the bid price
at the close of business on that day. Securities which are
not currently quoted are taken at fair value in the
opinion of the directors.
QjValue based on over-the-counter quotations.
BJTaken at fair value in the opinion of the directors—
not currently quoted.
fflTaken at face value.
of Assets, as of Dec. SI (
thereof,
value in opinion of directors):
-1942 1941-
mirke5?Talues or, in absence
on
fair
%of
Gross
Amount Assets
Cash k ree. $2,044.8:4 3.4
U. 8. Govt. obi. 4,223.778 T.1
Other bonds ..
Preferred stk*..
3.909.147 6.6
Common stocks:
8,814,481 6.4
Agile, machy. 1,404.750 14
Amusements. 669,784 1.1
Auto., etc— 3,924,088 6.6
Aviation 1.785.6C6 8.0
Bkg. k tin...
Blag., etc.
2.966.996 6.0
2.342.S12
1,373,413
8.6
Cans, etc. SJ
Chemicals 3,644,415 4.6
Food k bev._ 8,806,850 6.4
Machy., etc.- 1,575,275 S.T
Mfg., etc. .. 2,297,810 8.8
Mereband. — 4.249,125 T.8
Met. ft mng. 2,183,563 S.T
Oils 7,771,684 18.1
Pub. utiL .. 1,934,747 8.8
Pulp ft paper 477.187 0.8
Railroads __ 573,425 1.0
R.R. equip. - 375.000 0.6
Steels 1,226.175 S.1
Textiles 960.889 1.6
Tobaccos 737,750 LI
Amount
85,654,677
2,581,841
8.870,454
8.160.888
%of
Gross
Assets
10.4
4.8
T.l
M
812.512 1.5
21258,700
1,184,825
3,680.262
898,900
1,091,500
4,069,985
8.008,850
1,109,850
1,613,813
4.043,025
3,428,288
6.444,885
3,139,280
893,188
1,884.675
485,950
1,731,125
514.688
606.250
4.3
11
4.6
1.T
2.0
T.6
16
8.8
10
T.4
4.5
11.9
8.9
O.T
16
0.8
3 2
16
1.0
Total com. stk.
Inv. In r. e.
Misc. tor., etc.
845.281.158
85,000
13,973
76.8
0.1
0.1
Liabilities
359,383.886 100.0
1,030.438
$83,879,494 71.6
125.000 0.3
1T.886 0.1
$54,880,079 166.0
1.133,158
Net assets 858.301.988 858,166,921
mincluded in manufacturing, etc. In 1841.
[113]
MARYLAND FUND, INC.
BACKGROUND
Formed in 1934 by Administrative and Research Corporation, Maryland (subsequently changed
to Maryland Sponsors, Inc.),— the background and policies of this fund are almost identical to
those of Quarterly Income Shares, Inc., which was formed two years earlier under the same spon
sorship and is much the larger of the two funds (see description of that company). The Maryland
Fund, Inc., likewise operated as an "open-end" company until 1940 when its repurchase agreement
was terminated. There is no leverage and the company is prohibited by its charter from borrowing
money or mortgaging or pledging any of its assets. Officers and directors are the same as those of
Quarterly Income Shares, Inc., and investment supervision is also furnished by Administrative and
Research Corporation (New York) with which it has a management contract.
POLICY
On November 30, 1942, the end of the company's latest fiscal year, assets were principally
invested in common stocks. Of the total assets 84% was in common stocks and two speculative pre
ferred stocks, 6% was in second grade and defaulted rail bonds, and 10% was in cash. Investments
are limited to a list of "eligible companies", and under the charter one company can be added each
fiscal quarter after thirty days' notice to the stockholders. Management record in the past three years
was slightly better than the Dow-Jones Composite Average and showed a considerable improvement
over a previously unimpressive record.
A gross yield of 7.3% was obtained on investments in the fiscal year ended Nov. 30, 1942.
Expenses have been about average, amounting in the latest fiscal year to 0.94% of average assets,
compared with 1.02% in the preceding fiscal year. Portfolio turnover recently has been low, the total
of purchases and sales in the year ended last Nov. 30th, being less than 11% of assets compared with
8% in the previous year.
SECURITIES
The Capital stock at the year-end was available at a 32% discount from its then liquidating
value of $4.27. As previously stated there is no leverage, except that provided by the excess of asset
value over market price. There is the possibility that this discount would tend to narrow in a rising
market so that the price of the stock could advance somewhat more sharply than its asset value, and
conversely the spread might increase in a declining market trend. In past periods the discount has
run as high as 40%.
Dividends have been paid in every year since 1934, including a 100% stock dividend in 1936
and small stock dividends were paid from 1935 through 1938. During the calendar year 1942 pay
ments totalled 25^ a share, which amounted to 8.6% yield on the 1942 year-end bid price of $2.90 or
7.2% on the asked price of $3.45. Tax status of 1942 payments is as follows: the first 18^ paid has
been tentatively ruled 52% non-taxable; the remaining 7^ is tentatively held 100% taxable, subject
to adjustment after the close of the 1943 fiscal year. The company has sufficient unrealized depreci
ation to warrant the expectation that dividends may continue to be non-taxable for a while longer,
barring a very sharp advance in security prices or a radical change in existing corporate tax law.
This is a distinct feature for investors in higher income brackets who are seeking a current high rate
of income. As these dividends are treated as a return of capital eventual sale of these shares will
determine a final capital gain tax. The amount of unrealized depreciation at the year-end was
$2,839,859 equal to $2.54 per share, a feature of particular importance in considering this security.
The stock is dealt in over-the-counter and is also listed on the Chicago Board of Trade. Prior to
the termination of the repurchase agreement in 1940 the stock sold at or close to its liquidating value,
a factor to keep in mind in examining the price range of this issue prior to 1940. No repurchases have
been made by the company since 1940.
We have been notified that, beginning June 24, 1943, common shares may be tendered by
stockholders at 80% of the net asset value and will be accepted by the company as long as a surplus
for such repurchases will be available; this will provide a floor which will limit the discount for the
shares to 20%.
[114]
MARYLAND FUND, INC.
Simplified Balance Sheet
As of Nov. 30, 1942
ASSETS
Cash and Receivables
Investments, at market *
Bonds
Preferreds
Common
Ind. $3,058,981 82%
P.U. 126,938 4
R.R. 533,787 14
100%
$ 283,370 7%
207,750 5
* Cost prico $7,229,824.
t Book Surplus $8,548,165.
Capital Stock
3,719,706 88
100%
Total
$ 445,302 10%
4,210,826 90
$4,656,128 100%
Payables &
Accruals
LIABILITIES
$ 90,173
Capitalization: t
Capital Stock, 4,565,955 (a)
10<* p.v.
(1,119,922 shs.)
Total $4,656,128
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$4,565,955
Assets
Applicable
$4,565,955
Asset Value
Per Share
$4.08
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935
Maryland Fund + 15 -10 -8 -7 +17 -40 +27 + 30
Dow-Jones Composite
Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41
% Net Changi9 in Market Value of Assets for Various Periods Inclusive
1941
to
1940
to
1939 1938
to to
1942 1942
1937 1936
to to
1942 1942
1935
to
19421942 1942
Maryland Fund
Dow-Jones (b)
+ 3
+ 3
-5
-7
-12 +3
-5 +22
-38 -22
-20 +6
+2
+ 50
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA (c)
November 30 1942 1941 1940 1939 1938 1937 1936 1935 1934
Net Income .26 .26 .17 .12 .13 .31 .31 .18y2 .07
Dividends
(Cal. Year) .25 .30 .40 .21(e) .14(f) .32 V* (g) .35(h) .27 Yi .07
Net Asset Value
on Nov. 30 4.08 4.05 4.67 5.38 5.84 5.76 10.25 8.66 7.66
Price Range (1)
High
Low
Last
3.30
2.55
2.90
3.50
2.45
2.55
5.20
2.85
3.40
6.15
3.95
5.10
6.37
4.36
6.12
10.91
5.49
5.15
10.75
8.80
10.16
9.44
6.92
8.97
7.85
6.85
7.79
(c) Net Income, Dividends, Net Asset Values, and Prices
from 1933 to 1936 were adjusted for distribution of 100%
Stock Dividend paid on July 20, 1936.
(e) and 3% in stock dividend
(f) and 6% in stock-dividend
(g) and 6% (adjusted 4Vz%) in stock dividend
(h) and 6% (adjusted 4'/2%) in stock dividend
(1) bid prices for calendar year
[115]
MARYLAND FUND, INC
Holdings, Nov. 30, 1942: % ^
Market Net
Stocks- Share* Value Assets
Mr Reduction - 1.000 $37,500 .82
Allis-Chalmers 2.500 60.312 1.32
Amer. Gas & El 4,000 77,500 1.70
American Radiator 8.000 48.000 1.08
Am. Water Works 2.500 7.812 .IT
Anaconda Copper -. 4.200 106.575 2.M
Atch. Topeka ft SanU Fe— 2,500 108.437 2.38
Bethlehem Steel 1.000 53.750 1.18
llUw-Knox 2.400 14.400 .82
Caterpillar Tractor 1.700 64,175 1.41
Chesapeake & Ohio 2.000 69.500 1.62
Chrysler Corp. 1.500 97,125 2.18
Continental Can 1,000 25,750 .56
Continental Oil 2,800 72.800 1.69
Electric Auto-Lite 2.000 67.750 1.27
Fairbanks, Morse ft Co 2.200 70.950 1.65
General Amer. Transport.... 1.000 37.000 .81
General Electric 1.200 35.100 .77
General Motors 2,000 81,000 l.TT
Gulf Oil Corp 2.000 T4.000 1.62
Ingersoll-Rand 900 82.125 1.80
Inland Steel 1.000 57.125 1.25
Intl. Paper, 5% pfd 2,500 108.750 2.38
Johns-Manvtlle 1.300 86.612 1.90
Jones & Laughlin 1,700 82.300 .71
Jones ft Laughlin pf. A 1.800 99.000 2.1T
Kennecott Cupper 8.200 86,800 1.90
Lima Locomotlre 5,200 127,400 2.79
Locw's Inc. 1.300 57,037 1.26
Lone Star Cement 1.300 60,050 1.10
MesU Machine 2,200 58,712 1.28
Mtnn.-Honeywell „ 800 43,400 .95
Montcomery Ward 2.500 85,312 1.8T
National Acme 6.500 81,812 1.79
National Supply 1.500 6.750 .16
N. Y: Air Brake 2.600 62,500 1.8T
New York Central 7,600 88,3o0 l.M
North Amer. Co. ... ^.000 ,10.000 ^28
^S^acR.R":::::::. moo 97900 ni
ReSiic stce.r:::::::—. 4.000 55.000 in
Hovpre Cod ft Brass 5,250 89,531 .go
sfars Ro«!^:::..-- 2.000 124.000 8.T8
Skelly Oil 4.500 126.000 3.T6
Southern Railway ---
20th Century-Foi
Union Carbide
I'nion Pacific
United Gas Improre.
11. S. Gypsum
0. S. Steel
Westinch. El. ft Mfg.
Youngstown Sheet
Bonds:
Baltimore ft Ohio:
Ref. ft gen. A 5s, '95
Ref. ft gen. C 6s, '95
Ref. ft gen. D 5s, 2000 ..
Ref. ft gen. F 5s. "86....
Illinois Cent. 4fcs, 1966..
Missouri Pacific:
1st ft ref. A 5s, '65
1st ft ref. F 5s, '77.—
1st ft ref. G 5s, '78
1st ft ref. H 5s, '80
1st ft ref. I 5s, '81
N. Y. Central A 4%«. 2013.
Sou. Pac. Co. 4%s, 1969..
Sou. Pac. Co. 4V4s. 1981..
Investable cash (lncl. receit.)
Total
HIO00 omitted.
Classification of
Amusements .....
Automotives
Bldg. equip. .
Chemicals
Containers .
Elec. equipment -
Indus, equipment
Merchandising ..
Metals
Oils
Paper
Rails
Rail bonds .
Rail equipment ..
Steels
Utilities
Cash (net)
Total
6.400 89.«00 1.96
4.500 65.250 1.43
1.000 74,750 1.64
1.000 80,000 1.75
2.000 8.750 .18
1.000 58,875 1.29
1,700 79.262 1.74
800 61.000 134
2,600 75,075 1.64
IDPar Val. Mkt. %$50 $13,437 M
54 16.605 .86
73 18,980 .48
68 18.112 .40
100 41,135 JO
SO 6.925 .10
80 27,800 .01
80 6.975 .11
20 6.975 .18
60 20.925 .46
100 46.750 1.02
50 28,070 .62
08 30.690 .67
355,127 T.T8
$4,565,954 100.00
1942
2.68%
5.17
6.29
2.46
0.56
2.11
9.30
5.90
648
10.68
2.38
11.68
6.20
7.47
10.21
2.78
7.78
100.00%
Nov. 30:
1941
ill*4.35
2.03
10.55
5.88
7.14
9.93
0.61
10.51
646
7.88
1032
3.49
10.75
100.00%
[116]
NOTES
[117]
NATIONAL AVIATION CORPORATION
BACKGROUND
National Aviation was formed in 1928 to invest in the securities of established companies in
the various divisions of the aviation industry, and to develop and underwrite new projects. It has
expanded by acquiring similar companies. Directorate of eight includes officers of Bankers Trust,
Adams Express, the President of Freeport Sulphur and a partner of the former Stock Exchange firm
of G. M.-P. Murphy & Co. (recently merged with Hornblower & Weeks), considered as the financial
sponsor. Frank F. Russell, President of the company, is highly regarded in aeronautical circles.
POLICY
The portfolio falls into four divisions. Some fourteen leading aviation manufacturing company
common stocks accounted for about 50% of the market value of year-end assets. Ten airline oper
ating common stocks comprised about 26%. Investment in a subsidiary, (National Aviation Research
Corp.) accounted for 1%; 3% was in securities without ready markets and the remaining 20% was
in cash and Treasury bills. A gross yield of 5.7% on average assets was shown last year. Airports
shown in previous reports were sold to the Federal Government last year. In its 1942 report, the
company stated it would continue to specialize in aviation securities, believing that "attractive
investment opportunities in that field still exist." This would not prevent the company from making
other-than-aviation purchases if and when conditions warrant such a change.
The management has been able in its investment policies. The year-end asset value of $15.58
(or $15.11 after provision of 47^ per share for estimated taxes on unrealized appreciation) compares
with $11.54 on December 31, 1929. Assets advanced 4% last year which compares with a 20%-decline
in aircraft manufacturing stocks and a 40% gain in air transport stocks, as measured by Barron's
Group Stock Averages. Yearly expenses amounted to 1.12% of average assets which is above the
average of all companies.
SECURITIES
The Common stock, listed on the New York Stock Exchange, was available at a discount of
about 47% from actual asset value at the year-end and on the basis of last year's dividend yielded
8%. These shares have the distinction of being one of three investment company securities reviewed
in this study with portfolio asset values above cost at the year-end.
National's management has demonstrated its ability to invest profitably in the aviation indus
try, and the stock is attractive for investors wishing a long-range position in this industry but unwilling
or unable to undertake the diversification and constant supervision needed in the field. Lacking lever
age, it should fluctuate with aviation securities in general, although in the event that such securities
again enter a rising price period it should move faster than the averages as the excess asset value
provides a certain degree of leverage and the prevailing discount would probably tend to narrow.
Dividends of 62 were paid last year out of earnings of 67$ per share.
The company has expressed its intention to repurchase its own shares in the open market as
conditions may warrant. 30,800 shares were repurchased last year at an average cost of $7.89. No
repurchases were made in the six preceding years.
Portfolio, as of Dec. 31, 1742:
Securities With Readily Ascertainable Market Values
Manufacturing Companies Market
Shares Value
29,500 Bell Aircraft Corp $344,6255,000 Bendix Aviation 170,000
6,000 Cessna Aircraft 46,50017,500 Boeing Airplane 262,500
19,200 Consol. Aircraft 309,600•20,000 Cont. Aviat. & Eng 72,500
25,000 Curtiss-Wright 168,75020,000 Curtiss-Wright A 437,5007,000 Douglas Aircraft 392,000
10,000 Grumman Aircraft 102,50020,000 Lockheed Aircraft 335,000
5,000 Thompson Products 134,375• 3,000 Parker Appliance 31,500
18,500 United Aircraft 471,7501,600 United Aircraft 5% pfd 148,600
4,000 Vultee Aircraft 27,5001,400 Vultee Aircraft, pfd 26,950
$3,484,150
Average
Cost
$453,651
190,262
59,587278,552211,732
65,000
238,850414,916
447,203146,679
316,320
144,22543,957
545,187160,000
36,031
34,962
$3,787,113
Air Transport Companies
2,800 American Airlines $155,400•13,000 Braniff Airways 112,125
• 4,700 Chicago & Sou. A. L 35,250
•10,750 Chicago & Sou. v.t.c 80,625
5,800 Eastern Air Lines 187,775•17,000 Mid-Cont. Airlines 53,125
15,000 Northwest Airlines 236,25010,000 Pan Amer. Airways 256,250
17,300 Perm.-Cent. Airlines 185,975• 4,200 Penn.-Cent. Air. pfd 106,050
9,000 Transcon. & West 147,375
14,000 United Air Lines 269,500
1,825,700
$115,840
55.09B
32,14765,167
88,24868,043
165,247191,405
191,60799,090110,612
182,516
1,365,019
$5,152,132$5,309,850
Securities Without Readily Ascertainable Market Value
Est Value Cost
1,500 Am. Exp. Lines pf. w. w.2,755 Chandler-Evans
4,325 Vidal Research
' Traded on the over-the-counter market.
$150,00027,550
38,925
$216,475
$150,00027,550
38,925
$216,475
[118]
NATIONAL AVIATION CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Securities without readily as
certainable market value at
cost (a)
Investment in Nat'l. Aviation
Research Corp., at cost
Total
20%
76
$1,417,588
5,309,850
216,475
50,000
$6,993,913 100%
1
* All common stocks except for $175,550. The book price
for securities with "readily ascertainable market values"
is $5,152,132.
t Book Surplus $4,661,241.
(a) Preferreds $150,000; balance common stock.
LIABILITIES
Payables $ 31,620
Capitalization: f
Common Stock, $5 p.v. 6,962,293 (b)
(446,474.6 shs.)
Total $6,993,913
(b) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Common
Common (after reserve for
taxes on unrealized ap
preciation)
Assets Applicable
$6,962,293
6,746,222
Asset Value
Per Share
$15.58
15.11
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income .67 .69 1.87 .95 .05 .27 1.79 .68 d .35 d .27
Dividends .62% .55 .75 .75 Nil Nil 1.00 Nil Nil Nil
Net Asset Value
at year-end 15.11 14.41 16.68 17.31 17.47 12.77 16.07 14.95 12.24 13.33
Price Range
High
Low
Last
9%
6%
8
11 16*4
9
10
15145/8
6
18%
6%
9%
15% 14%
6%
14
13%
5%
10%
9%
10%
6%
7%
7% m
Annual Volume of
Trading N.Y.S.E.
(000 omitted)
13% 14% 14 8%
99 88 300 229 314 125 229 151 102 1
[119]
NATIONAL BOND AND SHARE CORPORATION
BACKGROUND
National was formed in February, 1929, as ah investment company of the non-leverage type,
having but one class of capital stock and no debt. It has always been closely associated with the New
York Stock Exchange firm of Dominick & Dominick and formerly all of its directors were partners or
special partners of that firm. Pursuant to the Investment Company Act of 1940, a majority are now not
so affiliated: recently elected directors include George L. Burr, former partner of Lazard Freres, Stanley
W. Duhig, Vice President and Treasurer of Shell Union Oil Corp., William V. Griffin, executor of the
Estate of James C. Brady and Bemon S. Prentice, director of Fulton Trust Co. and a former partner of
Dominick & Dominick. A management contract between National Bond & Share and Dominick &
Dominick exists but no compensation has ever accrued or been paid on it, since this contract pro
vides for compensation only after 10% is realized on the stated capital in any one year the require
ment being cumulative.
POLICY
This is primarily a common stock fund, despite the corporate title. On December 31, 1942,
only 2% of its assets were invested in corporate bonds, 9% in cash and Treasury bonds. About
15% of the portfolio was in preferred shares and about 73% in a broad list of common stocks. Based
on last year's average assets, the yield on the entire fund was about 4.6%. This relatively low yield
was due to the fact that a substantial proportion of assets was held in cash and governments during
a good part of the year. Purchases were made gradually from June 30 to the end of the year, how
ever, and at the end of 1942, cash and government bonds amounted to only 9% compared with 24%
on December 31, 1941.
The company's over-all operating record has been good, although it has been better in bear
markets than in bull markets. The decline in assets from 1930 to 1932 was far less than average and
in 1937 it was almost the only investment company of any size which liquidated a substantial part
of its portfolio before the sharp decline which got under way in the latter part of the year. Since
1938, however, the performance has been much less spectacular, failing to equal that of the Com
posite Average in three of the five years. In spite of this, over-all record, since formation in 1929, is
still decidedly better than average, and at the end of 1942 National Bond's asset value was only
about 27% less than the offering price of the stock in February 1929.
Turnover of the company's assets has consistently been the most frequent of any of the com
panies reviewed in this analysis, although last year's purchases and sales totaling $6,421,675, or
90% of average net assets, compared with a 1941 rate of 110% and a 1940 rate of 161%.
Expenses of the company are very low, amounting last year to only Y2 of 1% of average net
assets. A large part of this is due to the absence of salaries to the principal officers who are partners
of Dominick & Dominick, but it should be noted that the company's high rate of turnover creates a
large commission expense, which is not included in the expense ratio figures. If they were, National
Bond & Share's total expenses last year would have been close to the average expenses, which,
including commissions, were around 1% of average assets for all companies.
SECURITIES
The capital stock, which is a conservative investment company security, was selling at the
year-end about 18% below liquidating value of $20.19. This discount provides a small amount of
leverage in a rising market, but competent management and low cost of supervision would be the
primary reasons for purchasing this type of fund.
Dividends have been paid every year since 1929 and have been at the rate of $1.00 a year
since the stock was split two-for-one in 1938. Based on the $1.00 dividend and year-end price of IGY2.
the yield was 6%. Of last year's payments, about 23^ a share was paid out of accumulated surplus.
\ The 1942 dividend was 100% non-taxable. Continuance of a non-taxable dividend would not appear
a strong possibility in the case of this company, since the 1942 year-end report showed a small
unrealized appreciation in the market value of portfolio securities.
The company has made no repurchase of its own capital stock since 1935, although in its last
reports it has signified its intention to do so. Shares are listed on the New York Stock Exchange where
they are quite inactive.
[120]
NATIONAL BOND & SHARE CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Investments, at market*
Bonds $1 184,750 3%
Preferreds
Common
Ind. $4,745,650 89%
P.U. 268,500 5
Fin. 329,200 6
100%
* Book value at cost $6,587,573
f Book Surplus $2,759,804
Common
5,343,350 81
100%
Total
6,596,837 90
$7,367,566 100%
LIABILITIES
Pay<
& Reserves
Cash, U. S. Gov't Bds., etc. $ 770,729 10% Payables
%
1,068,737 16
$ 98,400
Capitalization:f
Common Stock,
no p.v.
(360,000 shs.) 7,269,166 (a)
Total $7,367,566
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Assets Applicable
$7,269,166
Asset Value
Per Share
$20.19
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
+9
National Bond
& Share
Dow-Jones Com
posite Stocks (b) +15
-8 -9 0 +11 -20 +29 +39 +2 +24 +1 -21 -6
-10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
National Bond & Share 0 -9 -9 + 1 -19 +5 + 127 -25 +38
Dow-Jones (b) + 3 -7 -5 + 22 -20 + 6 + 176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA (c)
Per Common Share *3
Net Income (e)
Dividends /t0 0
Net Asset Value
at Year-end $3>i>?
Price Ranqe _ . A-
High %fy
Low /(> %
Last ) f
Annual Volume of
Trading N.Y.S.E.
(000 omitted) £. 0
(c) Net income, dividends, net asset values and prices for the years 1933 to 1938 were adjusted for the two for one solit-UD
' effective August 30th, 1938. *
(e) Net income for the years 1933, 1934 and 1935 refers to the fiscal years ended on February 28, of the following year- net
income for 1936 refers to the ten months period from March 1st to December 31, 1936.
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
.76 1.00 .89 .94 .69 .79 .95 .70 .63 •56
1.00 1.00 1.00 1.00 .62% 2.00 2.12% .62% .50 .50
20.19 19.58 22,20 25.36 26.45 24.45 31.10 26.76 20.37 20.29
16% 17% 20% 23% 25% 29% 27% 22% 18 19%
12% 12% 15% 17% 18% 19% 21% 14% 14% 10
16% 12% 16% 19% 23 20% 25% 21% 14% 15%
14 26 20 16 13 12 19 27 17 25
[121]
NATIONAL BOND AND SHARE CORPORATION
Securities He 1*42:
Shares
3.000
3.000
5.000
5.000
2.000
5.000
1.000
2.000
1.500
2.000
2,000
1,000
T.500
5,000
2,000
5.000
3.500
1.000
6,000
4.000
5.000
2,000
5,000
500
1,000
3.000
1,000
10.000
5.000
5,000
2,000
3,000
5.000
2.500
1.000
1 .000
5,000
K.000
2.500
•-..000
100
2.500
2.000
4.000
500
1.000
2,000
2,000
1.000
500
1.000
2,000
2,000
2.000
300
COMMON STOCKS
Industrials
Market
Value
Amerada Petroleum Corp $207,000
American Airline* ... 166,500
American Cyanamld, B 197.500
American Viscose 165,000
Atlas Plywood 32,000
Aviation Corporation 15.000
Bethlehem Steel 66,000
Borden Company 45,000
Case (J. I.) 117.000
Chrysler Corporation 135,000
Climax Molybdenum 78,000
Commercial Investment Trust 32.000
Commercial Solvents 67,500
Continental Oil 135,000
Corn Products Refining 111,000
Creole Petroleum Corp 80,000
Curtiss-Wrifht, A 75.250
Eastman Kodak 149.500
General Electric - 183.000
General Motors 176,000
Goodrich (B. F.) 130,000
Humble 011 * Refining 120,000
International Nickel 145.000
Johns-Manvllle 86,000
Kennecott Copper 29,000
Kroger Grocery * Baking 81,000
Llbbey-Owens-Ford 32,000
Louisiana Land and Exp. 52,002
National Dairy Products 72.500
National Distillers 127.500
New Jersey Zinc 118.000
Pan American Airways 76,500
Pantepec Oil 17.500
Parke. Davis ft Co. - 68.750
Phelps Dodge 24,500
Pullman Inc. — 26.000
Radio Corp. of America 22.500
Reynolds (R. J.) Tobacco. B 147.000
Srovlll Manufacturing 61,250
Shell Union Oil 90,000
Singer Manufacturing Co. 17.300
Square D Co 88.7.10
Standard Oil (Ind.) 57.000
Standard Oil (N. J.) 184.000
Sun Oil Co 24.250
Superior Oil (Cal l J0.500
Thompson Products. Inc. 55-9.X.
Union Carbide * Carbon 1".?9!1
l ulled Shoe Machinery $2,500United States Gypsum SO.500
United States Plywood
United States Steel ?2"222United States Tobacco — ,"•9°"
Westlnghouse Electric ft Mrg. lflM)u,2
Wrlgley (Wm.) Jr. Co 17.100
Public Utilities
American Gas and Electric
Commonwealth Edison
North American Co.
95,000
73,500
100.000
Guaranty Trust Co., N. T. Q]94,200
National City Bank, N. T Q]203,000
PREFERRED ST0CK8
American Bank Nate 6% 23.250
American Cyanamld 5% [97,187
American Viscose 5% 67.750
Atlas Plywood $1.85 QJ12.250
Consol. Edison of N. T., $5 91.000
Consumers Power $4.50 26.700
Goodrich (B. W.) $5 83,000
McKesson * Robblns 5*% 110.000
North American Co. 6% 49,500
North American Co. 5*4% 40.500
Ohio Edison Co. $6 27,000
Philip Morris 4H% 54,500
Pure Oil Co. 5% 92,000
Pure Oil Co. 6% 82,100
Schenley Distillers 5%% 48,000
Standard Brands, Inc. $4.50 50.750
United Gas Corp. $T 113,500
United States Steel T% 112,000
Wilson * Co. $6 28,750
5,000
3,500
10.000
400
7,000
500
625
500
500
1,000
300
1,000
1.000
1.000
1,000
300
500
1.000
300
500
500
1,000
1.000
500
race Val.
(000 omitted)
$100 Amer. ft for. Pvt. deb. 6s, 8080 79,500
60 Amer. TeL k Tel. deb. Ss, 1956 53,500
50 Superior OU (Calif.) deb. 3%s, 1956 51,750
U. 8. GOV. OBLIGATIONS
100 Trees, bonds 2%%, 1952-1955 101.100
100 Treas. bonds 2%%, 1968-1967 100.100
100 Trees, etfs. %%. Aug. 1. 1943 100,000
200 Treas. ctfs. %%. Dm. 1, 1943 200,000
50 Sav. bonds series G, 1954 48,900
Q]Value based on over-the-counter quotations.
Classification off Nat Asserts (at market),
Dec. 31:
1942 194 1
% %Amount of Total Amount of Total
Bonds — $184,750 8.5 $153,760 2.1
U. S. Govt. tecs.-. 650,100 T.5 188.000 8.6
Pfd. stocks 1,068,737 14.6 849,388 11.9
Common Stocks:
Ind. 4,777.650 64.8 3,820,000 53.6
Pub. utU. 268.500 3.7 127.250 1.8
R.R. __ _ 41,850 0.6
Banks 897,800 4.0 410.000 5 8
Tot. com. stks. .. 5.343.850 T8.5 4,898.500 61.8
Cash. etc. 220,630 3.0 1,541.410 81.6
Total $7,367,567 100.0 $7,124,043 100.0
Tax., dlvs., etc... 98.400 _. W.600
Net assets $7,269,167 _. $7,048,443
[122]
NOTES
[123]
NEWMONT MINING CORPORATION
BACKGROUND
This company was formed in 1921 by William Boyce Thompson, famous mining engineer and
entrepreneur whose widow is now a director. Albert H. Wiggin, former chairman of the Chase Na
tional Bank, is a member of the board. The operation is independent of customary banking or broker
age affiliations so far as is known.
POLICY
Newmont specializes in mining ventures, and copper and oil properties constitute the major
part of its investment at present. The investment risk is well diversified in these industries and is spread
over several countries (U. S. A., Canada and South Africa). At the end of last year it had $29,000,000
(at market values) invested in general securities. Over one-third of this amount was accounted for
by holdings in Continental Oil, Hudson Bay Mining, Phelps Dodge and Kennecott. The company has
placed some $9,000,000 (directors' estimate of fair market values) in special situations, of which
$3,300,000 is in O'Kiep Copper (66% owned), a South African producer, and $1,300,000 in Grey Eagle
Copper, (almost wholly owned), a California property not yet in production. The remainder is in com
panies wherein Newmont is assumed to have a directing influence. In quite a few instances the New
mont management has shown outstanding ability in exploring, developing and extending mining
enterprises.
Income from dividends and interest amounted last year to 7% of the portfolio assets which is
close to the average yield obtainable from mining stocks during 1942. Expenses (not including Fed
eral income taxes) were about 1% of average net assets. Portfolio turnover has been sizeable during
the last few years and the management has not been afraid of taking considerable losses, if neces
sary. In 1942 losses on assets sold were $1,131,760, partly offset by profits of $485,085. Last year New
mont made some large sales including, 50,100 shares of Phelps Dodge, 50,000 shares of Kennecott
Copper, 36,000 shares of Hudson Bay, and 10,600 shares of Hecla Mining Company; on the other
hand holdings of U. S. Government bonds were increased by $3,000,000. A sum of $1,050,000 was
loaned to Grey Eagle during the year.
CAPITAL STOCK
Newmont's sole capitalization consists of 1,063,000 Common shares, which at the year-end sold
at 26% or a 36% discount from the estimated net asset value of $42 and yielded 6l/2% based on the
dividends of $1.75 paid last year. Earnings of $1.22 last year were after a 60^ loss on securities sales.
The stock must be regarded as a participation, under excellent management, in the mining industry
with emphasis on copper. The shares which were split two-for-one in 1940 are listed on the New York
Stock Exchange. A number of investment companies own large amounts of Newmont Mining shares.
Blue Ridge Corp. holds 24,000 of these shares.
PORTFOLIO AS OF DECEMBER 31, 1942
Stocks Listed on Domestic and Foreign Exchanges
No. ofCommon Stocks Shares
Amerada Petroleum Corporation .... 29,600
The American Metal Company
(Limited) 30,100Berens River Mines Limited 1,497,935
Continental Oil Company 235,610Hudson Bay Mining and Smelting Co.,
Limited 221,582Island Mountain Mines Company,
Limited 616,494Kennecott Copper Corporation 156,000The Louisiana Land and Exploration
Company 51,000Magma Copper Company 64,800
Amount at which
carried in theBalance Sheet.
Value based onMarket
QuotationsDecember 31, 1942
% 2,042,400.00
602,000.00795,223.73
6,449,823.75
5,096,386.00
349,103.29
4,524,000.00
261,375.001,296,000.00
No. ofShares
Negus Mines Limited 86,060
Northern rJmpire Mines Company,Limited 41,605
Phelps Dodge Corporation 184,551Polaris Mining Company 180,000Rhodesian Anglo American Limited. . 483,934South African Land & Exploration Co.,
Limited 3,250Texas Gulf Sulphur Company 31,000
Various —
Amount at which
carried in theBalance Sheet.Value based on
MarketQuotations
December 31, 1942
34,265.64
73,624.204,544,568.37
67,500.001,562,138.95
50,405.971,147,000.00
10,138.20
$28,905,953.10
Portfolio continued on Page 125.
[124]
NEWMONT MINING CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Canadian Gov't Bds.
Listed Sec. at Market *
Misc. Sec. at fair value
Other Assets
$ 6,656,436 15%
114,480
29,905,953 64
9,303,375 21
14,117
LIABILITIES
Payables
Capitalization: f
Common Stock
$10 p.v.
(1,063,292 shs.)
$ 189,303
44,805,058 (a)
Total $44,994,361 100%
* Cost price $29,832,281.
f Capital Surplus $ 4,321.757.
Earned Surplus $30,276,269.
Total $44,994,361
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Common . Stock
Assets Applicable
$44,805,058
Asset Value
per share
$42.14
STOCK DATA (b)
1942 1941 1940 1939 1938 1937 1936 1935 1934
Net Income 1.22 1.68 1.76 2.11 2.28 2.70 1.90 1.20 1.01
Dividends 1.75 2.00 2.00 1.75 1.50 1.50(c) 1.87% .75 .50
Net Asset Value
at year-end 42.14 42.78 43.59 49.30 58.30 45.48 73.29 86.01 54.30
Price Range
High
Low
Last
30%
22%
26%
31%
22%
27%
37%
20%
29%
42%
28%
35
44% 68
25%
27%
67%
37%
66%
38%
17%
38
29
18
19
21
Annual Volume of
Trading N.Y.S.E.
(000 omitted)
38
77 99 52 45 93 79 113 202 131
1933
.15
Nil
28%
5%
26
(b) 100% stock dividend was paid on June 28, 1940; net
prices for the time preceding this distribution have been
(c) Also 1/20 share Phelps Dodge Common stock.
i. dividends, net asset values, and
adjusted accordingly.
PORTFOLIO AS OF DECEMBER 31, 1942 (continued)
Miscellaneous Stocks of, and Loans to. Corporations, and Other Undertakings
SharesOwned Proportion
Present Status and Loans Owned Fair Value
Common Stocks (except as noted)Aguilar Corporation—Preferred Producing 873 8.8% $ 175,000.00Aguilar Corporation—Common Producing 3,367 3.8% 80,000.00
Alder Oil Company ActiveShares 432,352 100.0% 432,352.00
Demand Note—without interest $384,000 386,000.00Empire Star Mines Company, Limited Stand By 42,332 36.5% 846,640.00Getchell Mine, Inc Producing 279,900 18.6% 1,000.000.00Gilt Edge Mining Corporation Inactive 56,963 35.2% 1,000.00
Gray Eagle Copper Company In DevelopmentShares 49,978 99.9% 249,890.00
6% Demand Note $1,100,000 1,100,000.00Gunn-Quealy Coal Company (and affiliatedcompanies) Producing 38,184 50.0% 100,000.00
Idarado Mining Company ... Inactive 166,000 28.9% 83,000.00Telluride Black Bear Mines, Inc Inactive 800,772 47.1% 35,000.00O'Okiep Copper Company, Limited Producing
Shares 642,120 66.3% 1,602,823.155% (Deferred Interest) convertible PromissoryNotes (South African) £428.1*0 1,736 917.00
Resurrection Mining Company Class "A" Shares .. Producing 629,000 33.3% 1,258,000.00
Tombill Gold Mines Limited Inactive 651,203 42.8% 130,000 00
All Other Undertakings (including shares) notabandoned 86,753.27
Total Value—as shown by the Balance Sheet $9,303,375.42
[125]
NIAGARA SHARE CORPORATION OF MARYLAND
BACKGROUND
Formed in June, 1929, as successor to a company started in 1925, Niagara absorbed four other
companies during 1929 and 1930. In 1930 Schoellkopf, Hutton & Pomeroy, Inc. was acquired for com
mon stock and subsequently part of this interest was distributed in 1935 to the common shareholders.
Niagara operates as a leverage type of investment company with emphasis on "special situations."
Represented in the Board of Directors are members of the investment broker firms of Doolittle,
Schoellkopf & Co. and Schoellkopf, Hutton & Pomeroy, Inc., who are generally recognized as the
sponsors of this trust. Other directors include the presidents of Bell Aircraft; Dunlop Tire & Rubber;
Hewitt Rubber; Edward H. Letchworth, Chairman of the Executive Committee of the Marine Midland
Corp.; and Reginald B. Taylor, a director of the National City Bank of N. Y. While the corporate office
is in Baltimore, Md., the management is directed from Buffalo, N. Y.
POLICY
About 50% of the present market value of assets is invested in "special situations" and the
remainder of the portfolio comprises a diversified selection of better grade common stocks. Largest
special investments include the following, shown at year-end market or stated value:
Niagara Oil Corp. 6% Notes $3,500,000
Niagara Oil Common Stock 602,550
Schoellkopf, Hutton & Pomeroy 5V4% Pfd 3,003,900
Niagara Hudson Power Common Stock 1,562,613
Oklahoma Natural Gas Common Stock 638,750
California Public Utilities Pfd 511,818
Niagara Oil, 50%-owned, is a producer in Pennsylvania and reported consolidated net income
of $400,000 for 1942, but no part of this was included in the Niagara Share report. Included, however,
was interest income of 6% on its holding of Niagara Oil Corp. notes. Schoellkopf, Hutton & Pomeroy,
Inc. is one of the leading underwriting and investment firms in Buffalo but its business has suffered
with the general decline in its field and the dividend on the preferred stock, all of which is owned
by Niagara Share, was reduced in 1941 from $4.12 to $1.37^2 and no dividend was paid last year.
Net current asset value of this stock at the year-end was $103 per share.
Operating results to date have been poor; investments have only shown better results than the
Dow-Jones Composite Stock Average in four of the past 13 years and equalled it in three others. The
over-all results since 1930 have shown considerably greater decline than the Dow-Jones figure. This
unfavorable past record may be at least partially attributable to the large interest in Niagara Hud
son and other special situations including the large investment in the stock of its sponsors. The total
fund returned a gross income yield of about A3/*% last year, compared with 4% in 1941. No substan
tial changes in portfolio were reported in 1942, total purchases and sales amounting to $2,503,810
or 12% of year-end total net assets. Expenses have been about average; in 1942 they totalled .80%
of average assets, compared with .82% in 1941.
SECURITIES
The 5'/2% Debentures due in 1950 are well secured and benefit by a consistent repurchase
policy of the company. Interest coverage was 1.94 last year compared with 2.09 in 1941. Some $67,000
of debentures were purchased last year at an average cost of 102.16 and $1,200,000 were called for
redemption on May 1st, 1942 at 102%. Approximately 60% of the original issue of $15,000,000 has
been reacquired to date. The funds are a direct obligation but not secured by collateral. There is no
sinking fund and they are callable at 102 to May 1, 1945 and at 101 thereafter. They are listed on
the New York and Boston Stock Exchanges.
The 6% Preferred stock, due to its large asset and earnings coverage, appeared attractive as
an investment medium at the year-end price of 92 when the yield was 6'/2% and the asset coverage
was 5.6 times the market price. Earnings per share were $15.44 last year compared with $19.44 in 1941.
The large investment in special situations, which have remained more or less static in the past
few years, and which are largely of undynamic and unliquid nature, reduces the apparent leverage.
This probably explains the fact that the Common or "B" stock was available at the year-end at
the considerable discount of 62% from asset value. It should be noted that investment cost was
$59,923,228 greater than market values at the year-end, thus providing a large pool of reserves for
future tax-free appreciation, equal to about $46 per share on the common. Dividends have been paid
in each year since formation except for 1933, 1934 and 1935, with 15$ paid last year against earnings
of 18$ per share. On this basis the common stock, at the year-end price, yielded almost 5%.
Dividends paid on both preferred and common stock during 1942 were non-taxable, and
were so declared for 1941 also.
The company has maintained a policy of repurchasing its preferred and common stocks for
retirement—last year, 1335 shares of preferred were bought at an average cost of $88.28 and 79,700
shares of common, at an average cost of $2.99. Both issues are listed on the New York Curb.
[126]
NIAGARA SHARE CORPORATION OF MARYLAND
Cash, U. S. Gov't Bds., etc.
Investments, at market*
Bonds
Preferreds
Common
Ind. $8,721,219
ASSETS
$3,938,676
3,571,063
Simplified Balance Sheet
As of December 31, 1942
$ 487,293 2%
20%
18
P.U.
R.R.
Fin.
Inv. Co.
2,744,282
276.847
318,725
397,500
70%
22
2
3
3
100%
12,458,573 62
LIABILITIES
Payables & Res. $ 497,161
Capitalization^
5%% Debentures,
due 1950 6,886,000
6% Cum. CI 'A'
Pref. Stk. 2,521,000
$100 p.v. ent. in
liq. to $100 a sh.
(25,210 shs.)
Class 'B' Common
Stock $5 p.v.
(1,300,000 shs.) 10,551,444 (a)
100%
19,968,312 98
Total
* Cost price 579,891.371.
f Capital Surplus $2,800,167; Earned Eurplus $1,380,164.
$20,455,605 100% Total $20,455,605
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Debentures
6% Pfd. 'A'
*B' Common
Entitled to
in Liquidation
$6,886,000
2,521,000
Balance
Assets
Applicable
$19,958,444
13,072,444
10,551,444
1942
OPERATING RESULTS
% Net Change in Market Value of Assets
1941 1940 1939 1938 1937 1936 1935 1934
Coverage
290%
$518.54
8.12
1933 1932 1931 1930
Niagara Share
Dow-Jones Com-
-10 -10 -5 +10 -32 +33 +42 -4 -22 - 17 -32 -30
-10 -10 + 3 +29 -34 +32 +41 -1 + 49 - 16 -54 -30
Ihange in Market Value oi[ Assets for Various Periods Inclusive
Bull Bear
Mkt. Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
-2 -11 -16 -7 -37 -16 + 42 -60 -64
+ 3 -7 -5 + 22 -20 +6 + 176 -73 -40
Niagara Share
Dow-Jones (b)
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferreds 15.44 19.44 25.11 15.09 18.39 36.05 37.00 9.17 4.88 13.34
Common .18 .26 .37 .18 .25 .61 .63 .06 d .01 .14
Dividends
Preferred 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
Common .15 .20 .30 .25 .25 .60 .60 (c) Nil .10
Net Asset Value
at year-end
Preferred 518.54 471.49 583.44 687.75 766.63 696.98 1,259.15 910.12 553.93 629.47
Common 8.12 7.15 9.33 11.74 13.60 12.21 23.59 16.33 9.15 10.42
Price Range
5%% Deb. 1950
High 104 104% 104% 103% 97 104 104 100 72% 74
Low 101% 101 96% 94 82 75 96% 62% 50 48
Last1023/4
101 102% 103 94% 95 103% 99 62 50
Pfd.— High 92 93 99% 94% 89% 98 Inact. 82 50 56
Low 86 86 85 86 79% 91% Inact. 82 34 34%
Last 92 86 91 94% 83% 91% 97 82 50 40
Com.—High 3% 455/8
6% 7% 16 15% 9% 7 9
Low 2% 2% 3% 3% 3% 4% 7% 2% 2% 2%
Last 3% 2% 3% 5% 5% 5% 14% 7 2% 3%
Annual Volume of
Trading (e)
(000 omitted)
5%% Deb. 1950 471 676 968 1,137 611 1,476 3,468 3,844 2,070 2.539
Preferred 1.9 1.2 .7 .5 .2 .5 Inact. .1 Inact. .3
Common 116 69 37 54 67 149 266 116 61 116
(c) 1 share Schoellkopf, Hutton & Pomeroy, Inc., common on each 5 shares.
(e) Debentures are traded on New York Stock Exchange, Preferred and Common Stock on New York Curb Exchange.
[127]
NIAGARA SHARE CORPORATION OF MARYLAND
Portfolio, as of Dm. 31, 1942:
(Securities traded in on tbe New York Stock Exchange
or the New York Curb Exchange—unless otherwise indi
cated by designating letter.)
Principal Valuation
Amount Bonds, Notes and Mortgages Dee. 31, 1942
$100,000 Baldwin Loco. deb. 6s, 1950 $109,250
5,000 Central PubUc Utll. 5%s, 1952 0D25
320,00031Coast Terml. Co. 5% demand nt. B] 180,000
13.167 Erie Equity Owners 2nd mtge. 5s ~
80,000 Erie R.R. gen. A, 4%s, 2015...
10.000 Greater Rochester Prop. 6s, 1932
100,000 Gulf Plains Corp. 6% notes, '45
10.000 Marine Elevator 5s. 1952.
3,500,000!SM«gara Oil 6% notes, 1945-47
Stocks
El
44,200
E 2,000
EUOO.OOO
IS3.200@]3,500,000
Shares
4.000
3,000
7,500
2,500
7.000
2.500
1,500
3,000
1,000
60,000
99.000
32.300
7,475
69
7,000
3.500
3,900
8.000
1,000
2,700
3.000
4.900
1.000
5,100
6.000
5,500
5,000
2,000
5,000
1.500
6,100
2,500
5,000
2,000
5.000
9,600
5,000
5.000
6.600
30.300
1.200
828
Agricultural Implements
Allls-Chalmers Mfg.
International Harvester
Automotive
Chrysler Corp.
Electric Auto-Lite
General Motors
Timken Roller Bearing
Yellow Truck k Coach B
Aviation
Bell Aircraft Corp.
Penn.-Cent. Airlines, $1.25 pfd.-
Banking and Investment
Insuranshares Ctfs.
Marine Midland Corp.
Schoell., Hutt. k Pom. 5V4% Ptc
Schoellkopf, Hutton k Pomeroy—
Reynolds Rcaliz. Corp.
Building Materials
American Rad. k Stand. San
Johns-Manville
Lone Star Cement
National Gypsum
Sherwin-Williams
U. 8. Gypsum
Chemicals
Air Reduction
duPont (E. I.)
Hercules Powder
Union Carbide k Carbon
Electrical Equipment
General Electric
Westinghouse Elec. k Mfg. —
Merchandising
Montgomery Ward
Penney (J. C.)
Sears, Roebuck
Woolworth (F. W.)
Mining
Anaconda Copper
Dome Mines
Holllnger Consolidated
Homestake Mining
Hudson Bay Mining
International Nickel
Kennecott Copper
Noranda Mines
Uhodeslan Selection Tr.
Sylvanite Gold Mines
U. S. Smelting
Utilities Coal
Oils
3,930 Forest Petroleum
367 Giilf Plains Corp.. T.t.c.
19.000 Messer Oil
. $107,000
178,875
509,063
75,000
S10.625
103,750
19.125
35,250
[D25.500
397,500
309,375
[£3,003,900
SI
rj]i7
42,000
252,875
148,200
50,000
86,750
164,700
119,250
659,050
74,000
418,100
183,000
449,625
167,500
162.000
309,375
46,313
149,450
88,750
36.250
63,500
llfi.000
278,400
145.000
EJ157.500
DD7.425
[D33.330
55.200
S8.283
78,600
14,680
190,000
6,500 Niagara Oil Corp. - I£ii02.550
Kails and Rail Equipment
■1.000 American Steel Foundries
3.000 Chesapeake k Ohio
4.500 Great Northern Ry.
3,000 Pennsylvania R.R.
4.000 Pullman Inc.
1!»,823 Seabo.;rd Airline
Steel3,GOO Bethlehem Steel
4.000 National Steel
500 Republic Steel. 6% pr. pref. _.
3,000 Republic Steel
3,700 U. S. Steel 114,825
Tobacco
2,500 American Tobacco B
1,000 Liggett k Myers B
1,000 Philip Morris
2,500 Reynolds (R. J.) (new B)
Utilities
2,200 American TeL k Tel.
4.250 Cal.-Pac. Utll. 5% 1st pfd
6.«90 Cal.-Pac. Utll. 5% 2nd pfd
640 Cal. -Pacific Utilities
4,300 Commonwealth Edison
4,000 Cons. Edison, N. Y.
200 Detroit Edison
S33.394 Niagara Hudson Power
298.317 Niagara Hudson Pr. A warr.
10.000 North American Co. .--
35,000 Oklahoma Natural Gas 638,750
Sundry
9,332 Abstract Title k Mortgage „ S9,5^
50 Buffalo Broadcasting B1! 0?0
1.000 Eastman Kodak ^illl'SSx
25.000 Ford Hotels ffi2??'222
5,000 Garlock Packing ^y! ?'^
75 Gredag Corp.
2,700 Owens-Illinois Glass l^i'j'
15.000 St. Regis Paper m.oo--
6.500 Skenandoa Rayon LJJ"
2.200 Sterling Products JwinXS
500 United Steamship Cfl2o.000
tSOver the counter market.
glDeemed by directors to be fair value at Dec. 31, 1942.
^Guaranteed to extent of 50% of principal and interest.
SSeeured by general mortgage.
SO, 000
102.000
101,250
70.500
105.500
3,007
202.500
208,000
3G.250
42.000
107.500
63.000
78.750
62,188
280.225
282.789
222,624
QD6.405
90.S38
62,000
3.450
1.562.614
(21
100,000
Classification of Cask
Dec. 31 (at market):
-1942
Investments, as of
Bds. and notes
Stocks:
Agric. equip. .
Automotive -
Aviation
Bank & inv..
Bldg. mater. .
Chemicals
Amount
S3.938.676
285,875
1,017,563
60,750
3,710,793
744,525
1,265.400
632,625
685,187
Mining 1,088,088
Oils 885,830
Rail & equip.. 462347
Steel 663,575
Tobacco 311,438
Utilities 3,249,695
Miscellaneous 965,944
Elec. equip.
Merchandise
%
193
1.4
5.0
0.3
18.3
3.6
6.1
S.l
3.4
5.3
4.3
2.3
3.3
1.5
15.9
4.7
1941-
Amount
$5.403375
223,125
730,794
78375
3,883,241
558,075
1,266.125
591,650
578,000
1,047.046
990,820
394.478
720,925
322,375
2.896,950
923,908
To
25.8
1.1
S3
0.4
18.5
2.7
6.0
13
23
5.0
4.7
13
3.4
1.5
13.8
4.4
Total stks.. $16,029,636 78.6 $15,206,388 72.5
U. S. bonds „ 110,000 0.5
324373 1.6 347390 1.7Cash
Total $20,402,885 100.0 $20,956,953 100.0
[128]
NOTES
[129]
PACIFIC SOUTHERN INVESTORS, INC.
BACKGROUND
Pacific Southern was formed in 1928 as the Southern Bond & Share Corp. and the present title
was adopted in April 1932, at which time Pacific Investing Corp. was absorbed. In 1938, Pacific
Southern investors acquired the assets of Pacific Investors, Inc. and dissolved that corporation. It is
affiliated with American Capital Corp., (see latter) and Investment Co. of America, a mutual fund of
which it owns 37%, and whose president is a director of Pacific Southern and president of its man
agement corporation. The headquarters of these companies are in Los Angeles. Its directorate includes
heads of Missouri-Kansas-Texas Railroad Co., The Investment Co. of America, and several West Coast
industrialists.
POLICY
This trust had the second largest year-end cash position (21% or 18% after deduction of "Pay
ables") of any of the companies reviewed in this analysis, — part of which may have been considered
expedient in view of the bank loan. Slightly over 50% of the company's assets were invested in a long
list of common stocks, including a number of West Coast concerns. Twenty per cent of the fund was
represented by a holding in The Investment Co. of America, 6% in shares of American Capital Corp.
(representing ownership of 28% of preferred outstanding, 13% of Class 'A' and 12% of Class 'B'), and
3% was invested in Mitchum, Tully & Co., a well-regarded West Coast underwriting firm acquired
last year. On the whole, the portfolio showed a yield of about 5% gross on average assets last year
compared with 5.6% in 1941. Expenses during 1942 amounted to 1.51% of average net assets, higher
than most similar companies, although a reduction from 1.83% reported in 1941.
Management record has been about "average" with performance better than the Dow-Jones
Composite Stock average in five out of the past 10 years and the over-all results have been better for
the entire period since 1933.
Portfolio turnover has been above average with this fund — total purchases and sales amounted
to $2,273,933 or 40% of average assets. This figure was 39% in 1941 and 54% in 1940.
SECURITIES
The $3 Preferred stock at the year-end was selling at 50% of its asset value and yielded almost
15%; however, it must be considered that net cash earnings were only $1.78 per share last year.
It should be observed that wide fluctuations will accompany market movements due to the leverage
caused by the large bank loan of $3,000,000 due July 2, 1945. A provision of this loan is that the securi
ties pledged as collateral shall at no time be less than 130% of the principal amount less cash then on
deposit in collateral account. The dividend paid last year was stated to be non-taxable.
The company has announced its intention to repurchase its preferred shares, and 5,658 pre
ferred shares were bought last year in the open market and through tenders by shareholders, at an
average cost of $18.86. These shares were retired.
The Class 'A' stock was without asset value at the year-end, but less than a 10% rise would
place it "in the black." The large leverage factor makes this issue one of the most interesting low
priced speculations at present levels for the optimistic investor.
The Class 'B' stock was also without asset value at the year-end, but so much so, that a rise of
over 100% in the company's assets would be required to wipe out the existent deficit. It is obviously
only a long-range, radical leverage speculation and its price should be carefully appraised in relation
to the Class 'A' shares as occasionally the ratio of values becomes disproportionate.
The common and preferred shares are traded over-the-counter.
[130]
PACIFIC SOUTHERN INVESTORS, INC.
Simplified Balance Sheet
As of December 31, 1942
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Preferreds
Common
Ind. $2,452,808
ASSETS
$1,277,668 22%
$ 267,350 6%
P.U.
R.R.
Fin.
Inv. Co. (a)
145,750
68,375
184,952
1,503,639
56%
3
2
4
35
100%
4,355,524 94
100%
4,622,874 78
Total $5,900,542 100%
* Book value (upon "first-in, first-out" method) $5,020,531.
f Book Surplus $2,194,830.
(a) Includes $345,752 market value of American Capital $3 Pid., 'A' and 'B' common
with underlying asset value of $524,181.
LIABILITIES
Payables
Capitalization^ $ 256,677
2%% Note
Payable 3,000,000
(due 7/2/45)
$3 Pref.
Cum. Stk., 2,643,865 (0
no p.v. ent. in
liq. to $50 a sh.
stated value $10
(62,915 shs.)
Common Stk. (b) 0
Class 'A' $1 p.v.
(163,856 shs.)
Class 3' 10c p.v.
(536,865 shs.)
Total $5,900,542
(b) Class 'A' entitled to $2 annual
cumulative dividends, amounting
to $8.50 at Dec. 31, 1942. In liqui
dation 'A' gets $30 a sh., then 'B'
gets $10 a sh.; 'A' and 'B' share
remaining assets equally and pro
rata per share, provided how
ever, that when there shall have
been declared and paid to the
holders of 'A' and 'B' for a period
of two consecutive yrs. dividends
of not less than $4 per sh., per
yr., preferences and priorities of
Class 'A' (in all respects) shall
cease to exist.
(c) Amount applicable to Preferred
at 12/31/42.
SUMMARY OF CAPITALIZATION
Notes Payable
Preferred
Class 'A' Com.
Class 'B' Com.
Entitled to
in Liquidation
$3,000,000
3,145,750
4,915,680 (e)
(e)
Assets
Applicable
$5,643,865
2,643,865
d 501,885
d 5,417,565
Coverage
188%
$42.02
d 3.06
d 12.68
(e) See references in note (b) to balance-sheet above; coverage of TJ' shares calculated in taking
$8.50 accumulated dividends on 'A' shares into consideration.
OPERATING RESULTS
(See Page 10)
STOCK DATA
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income
Preferred
CI. A Com.
CI. B Com.
1.78
d .47
d.75
1.99
d .42
d .74
.57
d 1.02
d .92
.29
d 1.13
d .96
d .39
d 1.42
d 1.04
5.72
1.12
d .29
1.24
d .72
d .89
d 1.66
d 1.90
d 1.28
d 1.37
d 1.78
d 1.24
d 1.30
d 1.75
d 1.25
Dividends
Preferred
CI. A Com.
CI. B Com.
3.00
Nil
Nil
3.00
Nil
Nil
3.00
Nil
Nil
3.00
.50
Nil
3.00
1.00
Nil
3.00
2.00
Nil
3.00
2.25
.50
4.50
Nil
Nil
3.75
Nil
Nil
2.25
Nil
Nil
Net Asset Value
at year-end
Preferred
CI. A Com.
CI. B Com.
42.02 32.00 41.22
d 3.06 d 7.53 d 3.67
d 12.68 d 13.44 d 11.65
60.23
4.28
d 8.61
71.83
9.14
d 6.67
55.80
2.38
d 8.97
121.60
29.39
d .20
90.28
16.40
d 4.53
48.88
d 1.07
d 10.35
40.31
d 4.86
d 11.61
Bid prices at
year-end
Preferred
CI. A Com.
CI. B Com.
21 15 27
3'/2
Vb
30 29
8%
26
7Yz
V*
38
17
41
13
3
30 V*
3
19
3l3/43/4
7%
15^ 10^ %3/4
3'/2 Vi Mi
[131]
PACIFIC SOUTHERN INVESTORS, INC
Partfell*, m wf Dm. It, IMli
(Cobboo BUM unless othirwlta stated)
AdTertulng, Printing and Pobluhlog
miUrket oTTot.Shim value Iwu1.000 ColuBbU Broadcasting. B— 115,150 0.171.000 Curtii Publish., 13 pr. pfd. 11,000 0.80
8001,500
DowUi AircraftLockheed
Alrcnltsum mi
Aircraft .44.80085.198
AutoBoblle ram tad AecuwrlM
5.000 Alniworth Mf| 81,6001.000 Campbell, w> ant k Cannon. 16,0001.000 Clark Equipment 86,188500 Clete. GraphlU Bronie 15.1JB
1.000 Eaton Ml(. 88 2501.500 Electrle Auto-Lite 45.0001.000 Motor Wheel 11.6001.500 Splcer Manufacturing 61,0008,000 Stewart Warner 14,850
861,150
Automobile Tlret and Rubber Goads
i (B. r.), 85 pfd... 84,611r Tire 16,615
40,060Banla and Inssjrtoea Coapanics
8,000 Marine MldUnd 6.160136 Sao Ufa Ami. of Canada. 015,660
81.8O0Building and Related Unet
8.000 American Radiator 18 0001.100 Detroit Steel Products 30,450500 Johns Msnrllle 86,125300 Linn' Slur Cement 11,400
l.ooii Paratlrx Cos . Inc. 86 626
550 Raymond Concrete Pile B)T.i«T1.000 Kubrrold Co 20.500
164.88TElectrical Kqulpaent
2.000 Elrctromaster. Ine [TjS.OOOI.h(K) (irn.-ral Electric 30.5002.200 l.lnc Material 16 2151 .000 Henri. Inc. ll'flOO500 Wrsllnghousc Elee. k Mfg.. 40.8T5
1.500 Zenith Radio 20,818
131.418Kood Prmfuels and Beverages
500 Armour (III.), ».-, pfd. 81.T509.000 Hlrrlcy's. Ine. rjFJlS 500son California Parking ll!o62
1.500 Canada Dry filmier Ale 21.875S.FMHl Creameries of America 18 168
rilill Prp-IColi 14.626
86.476Marhlnrry
2.500 Ax.-lson Mfg E8.1251 .500 Byron Jsckson 24 8373.000 lh-.-v.rr Manufacturlnf 47.6251 ,0(KI Kobe. Ine 3)3 0001.0(10 National Supply Co . $2 pfd. 1.18751.5(10 Natl Supply, .',"4'; pr. pfd. 84.0002.000 Near Idea, Int. .. 16.0001.000 S'nrthwnt Engineering 10.0003 (100 Bred Roller Bit _ 63 0001.500 Kundstrand Machine Tool. 20.625
310.187Medlclnci. Drugs and Coaaetlea
5.000 Hharp k Dohae 46.350200 Siiulbb (K. R l k Hons 9.600
55,850Miirrtlaneous Industrie*
1 .110(1 Armstrong Cork 30 5003(H) Continental tiln BR900
2.500 Crown Cork • Heal 45.9372.000 Davison Chemical 23,7601,000 Frurhauf Trailer 17,0002.500 Mueller Brass 64,3752.000 Rayonlrr, Inc. 24.000
202.461
era0.46
68,816 1.14
4-47
Ml0.38
Ml
046
0.210.640.640.200650.130.36
1.73
0 050 548.88Lit0 720.53
2.32
0 40M40 200380230.36
1.71
1.140.44034O.OS0 251.46(.410.351 120.37
5.49
6.810.17
1.001.000 Uri'i. Inc.9.000 Paramount Picture!1,500 20th Century-Fox4,000 Walt Disney. 6% pfd. ..
Office and
1.200 Addrmograph-Multlgraph __1.300 Marchant Calculi! Maeh ..
Oil Producing and
1.000 Humble OU k Refining .2.000 Ohio Oil1,000 Shell Union OU
3.38
14,150 0.2546.000 0.82
l.r.0,750 1.67
31.187 0.38CD23.500 0:45
257,687 4.57
17.55017,550
0 310.31
83,100 0.62
60.15623.50018.375
1 070.42033
1.000 Skcllr Oil3.000 Standard OU of Calif2.000 8tandard OU (Ind.)1.540 Standard Oil <!». J.) .2.000 Traniwntern Oil
114.000 D. S. Petroleum
Railroad!1.000 Ateh., Topekj k Santa F«1.000 Great Northern Ij., 14 pfd.
80.150 0.6467.760 1.5667.000 1.0171,032 1.3618.600 0.14
HJ210.9OO 3.74
671.657 10.16
46,871,13.600
Railroad EquipmentAmur. Steel roundrieiBaldwin Locomotive, t.Lefranklin Rj. SupplyGeneral By. SignalN. T. Air Brake ....Pittsburgh "Pullman. "To
Ml0.40
68,876 1.11
1.500800
1.3001.0001.0001.0001.0001,000
Retail Trade100 Am. Dry Od!., ind 7% pfd.600 Olabet Brothen, 86 pfd..
1.000 Marshall Field1.000 Montgoaary Ward ..1,600 Western Auto Supply
8 1Ml and Iran700 Crucible Steel of Aaariea_600 United Statu Stael
1.500 Wheeling Stael1.500 Woodward Iran
80,0008.236
0)17,70014,75036,1501745016,8756.875
0.530 060.310.440.470.30Mr0.16
154,415 1.74
6.70084,30018,60067.00018.487
MO6.610.351.190 63
166,187 1.77
11,76018,61614,48741.760
MtOil0.470.78
Textile! and Apparel
1,000 Aaerlcan Vlaeosa .500 Burlington Mills, 31.60 pfd.500 Paclflc Mills
111.661 1.0T
18,00027.6009,437
0.680.490.17
69.037 1.24
11466 0.229f,878 1.7546,875 0.88
Utilities
300 Aaer. 4 Fgn. Pr., 16 pfd...7.00(1 Greyhound Corp.3,000 Southeastern Greytaound ..
158,060Other Investaents
64,104 Invest Co of Aaer. coa.net aa\cl ralue 1,157,887
24,961 Aaer. Capital Corp.. $3 pfd.;14,200 aha class A coa.:and 75.000 aba. of elan Bcoa. (net asset rskae.3524.181) (0346,752
Mltchua, Tully k Co.. valuedat net asset value 153.051
Total securities 14.622,873Net cub assets 1.020,991
8.84
3.000
%ofTe
6.13
1.7131 9118.09
Totsl net assets 86.648,865 100.00
rjlValurs based on stock exchange quotations exceptalien otherwise noted, and the reported sale price onDec. 31. 1943 Is used as the bast! of valuation; or la theabsence of recorded sales, the bid price on that day.
rfJYalue* based on over-the-counter quotations; bidprice at close of business Dec. 81, 1943.
BlValued at last tale or closing bid prices on N. T.Curb Exchange.
ClSMltscsrtsM trl Not Atsstl. as at Owe 11 (atmarket value or net asset value):
1*42% of
Amt TotalAircraft 369.925 1.2Advertising 32464 0.6Autot 17.004 0.3Auto, parts .. 252.764 4.5Banks It Int. 31.900 0.6Building, etc.. 164.388 2 7Container! . . 45.938Elec. equip. . 131.413Food prod .. 96.475Houae. turn . 30.508Machinery . . 310,184Metals 64475Medicines ... 66.864Misc. ind 34.654Amusement . 257.688Office equip. . 36.140Oil 572468Paper 24,000Railroads 68476Rail equip. .. 154.423Retail trade . 166.838Rubber 40.064Steel & Iron. 116463Textiles 69.938Utilities 168.4S0
082.31.70.55 51.01.00.54.1M1040.41.21.714072.11.2ta
1941-
Amt.
1132475
9V.625153.15030.125164.86740.0001446642,17553,625177,65060,62578.60410.675
235.56364.80034842010,750146460124488166.688
154,75413.750
162,400
OU1
1.4
i.i2.7052.90.70.30.71.0321.11.40.2441.0M042.614M
Li0.32.1
Total stock. 2.066.183 52.6 2.475.509 44.3ITJInv. Co. of A. 1,157487 20.5 1,133.465 20.2
CaP'Ul S45.752 6.1 184.774 3.3Mitch , T A Co. 163,052 2.7 174.404 3.1g°nd* - . 14494 0.3Net cash 1.020.902 18.1 1.611.950 28.8
Total 15,643.865 100.0 *S494494 100.0
[ENet asset value
[132]
NOTES
[133]
PENNROAD CORPORATION
BACKGROUND
On April 24th, 1929, the Company offered 5,800,000 shares of its stock to stockholders of the
Pennsylvania Railroad at $15 a share on the basis of one share for every two shares of Pennsylvania.
The offering was popular and later in the year Pennroad sold at $30.
Although the logical assumption is that the Pennroad was to make investments beneficial to
the Pennsylvania, the railroad has always contended that no collaboration ever existed, however,
Pennroad's early investments included large blocks of Boston & Maine, New Haven and Seaboard.
Benjamin F. Pepper of Philadelphia has been President of the Corporation since May 14, 1941.
On January 1st, however, he was granted leave of absence to enable him to take an active part in
the war effort as President of Triumph Explosives, and Herbert W. Goodall was made chairman of
Pennroad to serve as chief executive officer. The 13 directors include George W. Bovenizer a partner
of Kuhn, Loeb & Co. who are traditional bankers of the Pennsylvania and Herbert W. May of
Pittsburgh, who has been identified with the Mellon interests.
POLICY
In recent years Pennroad has been a fairly static situation with concentrated holdings and
nominal purchases and sales. One of the chief investments is in 245,329 shares (99.9%) of Detroit,
Toledo & Ironton R.R. Co., valued by the directors at $19,941,791. This property was bought in June,
1929 from the Ford interests. In addition, Pennroad owns $8,126,000 of the Detroit, Toledo & Ironton
R.R. Company's first mortgage bonds which were carried at the year-end at $7,634,907. Other un
listed investments include stock in Canton Company which owns approximately 1,200 acres of land
acquired 50 to 100 years ago (mostly industrial property, improved and unimproved including piers,
warehouses and waterfront) within the city of Baltimore and adjacent thereto, carried in the books at
$7,918,809; moreover 223,230 shares of Pittsburgh & West Virginia with a year-end market value of
$1,646,321 and $3,000,000 in notes of that road.
These investments totalled $41,608,913. Another $2,686,505 was in various investments includ
ing Boston & Maine preferred and common, Atlantic Coast Line common. Southern Railway common
and Castle Shannon Coal common stock and notes.
The company has been involved in various litigations, of which the most important is a deri
vative action which a U. S. District Court has heard and decided in favor of the corporation and
against the Pennsylvania R.R. in the amount of $22,104,515 equal to $3.23 a share for Pennroad, less
expenses. Later this year, the appeal on this suit will be heard by the Circuit Court of Appeals. Since
14,000 pages of testimony are involved, final judgment will be very slow.
SECURITIES
Only capitalization of Pennroad consists of its Common stock, which is active on the New
York Curb. The net asset value at the year-end was $6.59 using values set forth in the Corporation's
report for 1942. This of course does not give consideration to any amount which might be added by
successful culmination of the above mentioned litigation and does not take into consideration the
legal expenses, which may be considerable in a case like this.
The last dividend on the common of 25tf was paid on Dec. 15, 1942 affording a 7% yield at
year-end prices. The company has been buying in the stock and in 1942 acquired 198,700 shares at
an average of $3.38 and in 1941 acquired 507,300 shares at an average of $2.69.
Interim reports were not published by Pennroad until 1942 and the asset values are obviously
difficult to determine except as given in the ledger figures. The management expenses of $184,789 last
year seem in line with the character of the investments and it is quite possible that the stock is still
under-priced. However, the nature of the holdings is so apart from those of the usual investment com
pany that we cannot pretend to give an opinion on this security.
Portfolio,Securities of Subsidiaries
as oi Dec. 31. I942iBook Value
Shares Stocks Dec. 31, '42
21,975 Canton Co. ol Bait $7,918,609245,329 Detroit, Tol. & Ir. $60.56 scrip 19,941,791
223,230 Pitts. S W. Va. Ry 3,487,9695,100 Springfield Subur 200,500
31,549,069
Par Value1 000 omit. ) Bonds and Notes$8,126 Detroit, Tol. & Ir. 1st 4s, 1967. . . .3,000 Pitts. & W. Va. Ry. 4% sec. nts.
7,634,907
'45 3,000,000
1,913 Pittsburgh Term. R.R. & Coal 1st
5s, 1942 1,266,585
11,901,492
250,000U. S. Giov't Bonds
Other Investments—Stocks
(Common shares unless otherwise stated)
Shares1,000 Amour (111.) $6 prior preferred.. 46,000
8,000 Atlantic Coast L 239,000
Boston & Me. R.R.44,304 Prior pref. 7% 304,590
Value
Dec. 31, '42i$7,9l8,B09
{19,941,7911,646,321
t 200,500
29,707,421
1 7,634,907
t 3,000,000
| 1,266,585
11,901,492
251,213
45,500218,000
371,046
50,547 1st pfd. A 5% 83,75624,979 1st pfd. B 8% 46,573
24,337 1st pfd. C 7% 47,676
14,668 1st pfd. D 10% 29,95719 1st pf. E 4i/2% 21
14,968 Pfd. (old) (6% non-cum.) 7,59227,565 Common 59,761
1,000 Chesapeake & Ohio 38,125
1,600 Lehigh Valley R.R 8,400
500 Louisv. & Nash 28,7504,500 M-K-T 7% pfd. A 42,188
124,700 N.Y., N.H. & H 124,7001,000 Pennsylvania R.R 24,125
1 ,000 Republic Steel pr. pref. 6% .... 67,0001,500 Southern Pac. Co 31,500
10,000 Southern Ry 230,0001,000 Tide Water Assoc. $4.50 pfd 94,0001,000 Youngstown Sheet S>/2% pfd. A. . 80,000
Miscellaneous
Total Portfolio
1,633,714
936,371
93,600
48,37146,041
28,33324
13,09748,23934,000
4,20030,00015,188
50.659
23,50072,500
23,625156,250
95,75081,000
1 ,498,922
936,371
$46,270,645 $44,295,418
i Securities not listed on any stock exchange and for which nosuch quotations are available, "Book Value" is given as a fair
value in opinion of directors for purposes of this report.
[134]
PENNROAD CORPORATION
Simplified Balance Sheet
As of Dec. 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc. $ 676,715 2%
Securities of subsidiaries *
Stocks of sub. companies $29,707,421 71%
Bonds and Notes 11,901,492 29
100%
41,608,913 92
Other Investments *
Marketable investments 1,498,922 62
Miscellaneous investments 936,371 38
100%
2,435,293 5
Other Assets 315,123 1
Total $45,036,044 100%
* Book price $43,450,560 for securities of subsidiaries and $2,820,084 for other
investments (at cost or prices of December 31st, 1938, if acquired prior to this
date).
tBoolc Surplus $38,484,385.
SUMMARY OF CAPITALIZATION
Asset Value
Assets Applicable Per Share
Common $44,809,158 $6.59
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income .25 .39 .28 .17 .07 .27 .28 .19 .12 .08
Dividends .25 .25 .20 .10 Nil .25 .25 .20 Nil Nil
Asset Value at
year-end 6.59 6.53 6.21 6.13 5.95 6.26 7.21 — Not Available —
Price Range
High Low
Low-
Last
AVb
2Vb
3V2
3Vb
2Vb
2Vb
3 3Vb
1%
2
2% 53/b
2Vb
2V2
5s/s
3V2
AVb
AVb
IV*
3Vb
AVa 63/s
IVb IVb
IVb 2V2
1%
2V2
W2
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
1%
511 576 453 464 360 784 1,582 924 576 1,043
LIABILITIES
Payables $ 226,886
Common Stockf
$1 par value
(6,798,500 shs.) 44,809,158 (a)
Total $45,036,044
(a) Applicable to Common at 12/31/42.
[135]
PETROLEUM CORPORATION OF AMERICA
BACKGROUND
Formed in January, 1929, with a public offering underwritten by a group of prominent banking
firms. The early history of the company was dominated by Harry F. Sinclair and his attempt to gain
control of a large part of the oil industry. In 1932 various oil companies in which Sinclair Consolidated
Oil Corp. was interested were consolidated into the Consolidated Oil Company, which until recently
was the largest single investment of Petroleum Corporation and which, at the present time, owns
783,776 shares, or 42.2% of Petroleum Corporation's common stock. Beginning in 1938, the company
started to dispose of its Consolidated Oil holdings by distributing stock dividends to its own stock
holders, in order to comply with legal restrictions against "circular ownership." This policy by the end
of 1942, had resulted in a reduction of Consolidated Oil holdings to only about 4% of Petroleum's total
holdings. Consolidated Oil, however, has effective control of Petroleum Corp., through its 42.2% owner
ship of the common stock, and the 7.3% owned by the friendly Adams Express Co. The president of
Petroleum Corp. is also director, vice-president and treasurer of Consolidated Oil, and the president of
Consolidated Oil, Mr. H. F. Sinclair, is a director of Petroleum Corp. The directorate includes partners
of Kuhn, Loeb & Co. and E. F. Hutton & Co., and an officer of Adams Express Co.
While the company is not limited by charter to owning only oil securities, the portfolio consists
entirely of such investments. With the exception of a small amount of Cities Service debentures, all the
holdings are common shares of oil companies. At the year-end, large items included Standard Oil of
California (10'/2% of all securities owned), Socony-Vacuum (9%), Standard Oil of N. J. (10*/2%), and
Texas Co. (10%). About 5.3% gross earned income was shown last year.
The company's operating results compare unfavorably with the Dow-Jones Composite Stock
Average, bettering it in only five of the last 13 years. Taking the entire period since 1929, however,
the performance comparison of Petroleum Corp. with the Composite Average is not especially unfavor
able. Poor performance in the earlier years, moreover, can probably be fairly attributed, at least in
part, to the heavy concentration of holdings in a few companies, investment in which was dictated by
other than strictly investment considerations. Furthermore, the market action of oil shares during a
large part of this period was poor in relation to the industrial share averages.
Management expenses are below average, having been reduced considerably in recent years.
They amounted to .53% of average assets in 1942 compared with .57% in 1941 and are understood
to be running currently at a very much lower rate. Little trading activity was shown last year in the
portfolio, only about $1,500,000 of combined purchases and sales being made, equal to 11% of year-
end assets. This compares with a similar turnover in 1941 and 21% in 1940.
Capitalization consists only of Common stock. These shares belong to the few "closed-end"
investment company equities — outside of the extreme leverage group — now selling at just about
break-up value. They must be regarded as a straight oil commitment and are in the non-leverage
category. The fact that total dividends paid in 1942 have tentatively been held non-taxable by the
Bureau of Internal Revenue may help to account for the recent disappearance of the market discount.
The large amount of unrealized depreciation suggests the likely continuance of this feature. Except for
interruption during 1932 and 1933, cash dividends have been paid in each year since formation, and
the company has followed a policy of paying all net cash income as dividends. Thirty-five cents a
share was paid last year, which amounted to a yield of 5.8% at the year-end price. In past years, an
additional special dividend feature were annual distributions of 1/5 share of Consolidated Oil Corp.
common, but this program of liquidation is completed. Such payments were made in 1938, 1940, 1941
and 1942.
Repurchases of its own stock at discounts in the open market have been made by the company
each year and during 1942, 21,100 shares were repurchased at an average cost of $5.11 a share.
The shares are listed on the New York Stock Exchange and have a fairly active market.
POLICY
SECURITIES
Shares Stocks11,500 Atlantic Refining
75,000 Consolidated Oil20 000 Continental Oil55,300 Creole Petroleum18,600 Gulf Oil Corp17 400 International Petroleum .47 200 Mid-Continent Petroleum83^000 Ohio Oil
15,000 Pure Oil55,000 Richfield Oil98,719 Richfield Oil purch warr.
8,000 Shell Union Oil112 500 Socony-Vacuum Oil ...25,000 Southland Royalty45,100 Standard Oil (Cal.) ...
Portfolio Owned, as of Dec. 31. 1942:Curr. Val.
$215,625515,625547,500898,625706,800245,775
902,700975,250168,750412,500• 12,339
11,300 Standard Oil (Ind.)29,000 Standard Oil (N. J.)30,300 Texas Company48,600 Tide Water Assoc. Oil . .100,000 Venezuelan Petroleum11,235 Wirt Franklin Pet. pfd. ..
5,583 Wirt Franklin Petrol
PrincipalAmount Bonds$23,000 Cities Service deb. 5s, '50
65,000 Cities Service deb. 5s, '5812,000 Cities Service deb. 5s, '69
250,000 U. S. %% treas. ctfs. 1943
}
322,0501,337,6251,257,450486,000475,000
19,75154,92510,155
250,000
Aggregate value* Based on New York-over-the-counter bid quotation,t No quotations are available for these securities.
$12,593,122
[136]
PETROLEUM CORPORATION OF AMERICA
Simplified Balance Sheet
As of December 31, 1942
ASSETS LIABILITIES
-,./ Payables $ 54.936Cash, U. S. Gov't Bds., etc. $ 874,326 7%
, , Capitalization: fInvestments at market Common Stock,
Bonds J* $5 par value 13,216,114(0
Oil Com. Stk. 12,258,291 99 „Ar7nnn.^-\
100% 12,343,122 93
Mineral Rights 53,602
(1,856,000 shs.)
Total $13,271,050 100% Total $13,271,050
* Book value (at cost or prices at Dec. 31, 1930, if acquired (a) Applicable to Common at 12/31/42.
prior to this date) $14,051,813.
t Book Surplus 35,644,505.
SUMMARY OF CAPITALIZATION
Asset Value
Assets Applicable Per Share
Common Stock $13,216,114 $7.12
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Petroleum Corp.
of America +22 +11 -16 -8 +8 -36 + 48 +39 -9 + 96 +10 -58 -55
Dow-Jones Com
posite Stocks (b) + 15 - 10 -10 + 3 +29 -34 + 32 +41 -1 + 49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Petroleum Corp.
of America +35 + 13 + 4 +11 -29 + 5 + 267 -79 -45
Dow-Jones (b) +3 -7 -5 +22 -20 +6 + 176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income ,^ ^ .31 .46 .68 .69 .82 1.28 .91 .35 .50 .08
Dividends j J (c) .35 (c).45 (c) .70 .70 (c).81 1.27 .90 .33 .50 Nil
Asset Value at
year-end 7^6 7.12 7.11 8.05 11.42 13.08 14.56 23.95 17.12 12.55 14.14
Price Range /
High jO\ 6Ve 7% 8% IOVa \3Vb 21% 18'/4 14 14'/4 15
Low (//, 4 53/b 5% 6% 7% 9% 12% 7% 8»/4 4%
Last 6 5% GVa 8 9% ll>/8 17% 14 9% 9V2
Annual Volume of '
Trading N.Y.S.E.
(000 omitted) 95 116 105 103 156 339 387 249 276 636
(c) Plus % share of Consolidated Oil Corporation common stock.
[137]
PHOENIX SECURITIES CORPORATION
BACKGROUND
Only a few weeks before the bull market of 1929 came to its abrupt end. Prince & Whitely
formed this company as Prince & Whitely Trading Corp. Subsequently it fell into financial difficul
ties following the collapse of its sponsor. In 1931, its control passed to Wallace Groves, who directed
its affairs until 1941 when he resigned as chairman and a director and entire management was
transferred to Walter S. Mack, Jr., closely associated in the management since 1931 with Mr. Groves
who continues as the largest stockholder of the company. Besides his position as president of Phoenix,
Mr. Mack is also president of Pepsi-Cola Company. Directorate of five include W. W. Colpitts of the
engineering firm of Coverdale & Colpitts, Samuel J. Reckford of American Lead Pencil Co. and Albert
E. Winger of Crowell Publishing Co.
POLICY
Phoenix, since Mr. Groves entered and changed the name, has concentrated its holdings in a
small group of companies of which the currently most important is Pepsi-Cola. This investment dates
back to the old Loft candy concern, which, it will be recalled recouped control of Pepsi-Cola through
an unusually successful litigation. On August 31, 1938, Phoenix's investment in this situation had a
market value of $57,375. Exercise of options and market appreciation increased this holding to $6,997,-
650 the following year, and on last August 31st, the Pepsi-Cola investment had a market value of
$9,839,087. On February 28, 1943 this holding, which represents 25% of Pepsi-Cola, had a market
value of over $18,200,000 against a book value of $3,380,000.
The second largest Phoenix holding was in United Cigar-Whelan Stores Corp. where 36.6%
of the preferred and 41.4% of the common are held. On February 28, 1943 this commitment showed
a market value of $3,500,000. A block of 1,000,000 shares of the United Cigar Common was reported
sold in April 1943, and it is generally anticipated that the balance of this holding as well as the pre
ferred shares will be liquidated later in the year. The remainder of the portfolio was in a few mis
cellaneous special situations with a market value of around $580,000.
PORTFOLIO
Pepsi-Cola is so important a part of Phoenix that its stock must be favored to justify an invest
ment in the Phoenix securities. In 1942, Pepsi-Cola earned $6,274,776, or $3.30 a share against $4.93
in 1941. In its favor are the expanding world markets for cola drinks, the relatively untouched fountain
market in the U. S. and a very able merchandising organization. The share seems to be quite favorably
situated and should show a satisfactory rate of earnings throughout the war with large peace-time
potentials. High excess profit taxes also provide a cushion of reserve earning capacity. The negative
factors include the sugar and crown shortages now existent and the fact that Coca-Cola, a concern
of tremendous resources and aggressive management, may change its traditional price policy. The
United Cigar investment has shown promise of working out advantageously as the earnings are in
an uptrend. (Earnings per common share were 13.3^ in 1942 against only 1$ in 1941.) Dividends on the
United Cigar Preferred shares seem likely during the second half of 1943.
SECURITIES
Phoenix $3 Preferred, callable at $55 and entitled to $50 in liquidation, appears to present a
good opportunity for high yield at little risk. In the fiscal year ended August 31, 1942 net income from
interest and dividends was $13.98 a share against the $3 dividend rate and coverage was $150.57 a
share. On February 28, 1943 coverage had soared to $290.03 and was the highest in the history of the
company. This would seem to compensate for the small appreciation possibilities. This stock is con
vertible into 2Vi shares of common, a factor that might be of interest in the event of liquidation, pro
vided the break-up value of the common stock is above 20 at that time. On April 14, 1943 the company
sought tenders at not over 50 (plus 40^ accrued dividends) on $1,000,000 value of this stock.
The Common stock sold at a 40% discount from asset value at the year-end, in the meantime
the discount has narrowed, but is still large enough to make the stock an interesting value to inves
tors contemplating a commitment in Pepsi-Cola as these shares must really be viewed in terms of
the price of Pepsi-Cola. A simple formula by which the approximate asset value of Phoenix common
may be calculated quickly is to figure it as equal in value to 6/10 of a share of Pepsi-Cola. At current
price levels this allows for the preferred obligations to be offset by the values of other investments,
and the existing values of subsidiary investments. No cash dividend has been paid on the common
stock since 1937. However, in the 1942 fiscal year, a dividend of l/5th a share of Celotex per share
of common was distributed.
In recent months there have been various rumors that this company would be liquidated, sup
ported by the fact that the company is gradually selling out the smaller investments. As an eventual
possibility liquidation seems likely but owing to tax and other considerations this must remain a
decision of the controlling interests.
[138]
PHOENIX SECURITIES CORPORATION
Simplified Balance Sheet
As of February 28, 1943
ASSETS
Cash, U. S. Gov't Bds., etc.
Miscellaneous
Investments at market *
482,900 Pepsi Cola shs.
23,319 United-Cigar Pfd.
2,366,209 United-Cigar Com.
93,100 Southcoast Corp.
193,650 South Shore Oil
Other Investments
(25.4%) $18,229,475
(36.6%)
(41.4%)
(28.6%)
(28.3%)
Total
1,230,077
2,218,320
232,750
226,931
128,545
332,388
13,892
22,266,098
$22,612,378
* Book value at cost or "other value" 36,720,696. Percentages shown indicate
extent of ownership in total outstanding stock of various companies,
t Book Surplus 35,268,789.
LIABILITIES
Miscellaneous $ 191,358
Capitalization: f
Preferred Stock
$10 p.v. ent.
in liq. to $50
and to $55
if called
(77,306 shs.) 3,865,300
Common Stock
$1 p.v.
(833,769 shs.) 18,555,720 (a)
Total $22,612,378
(a) Applicable to Common at 2/28/43.
Preferred Stock
Common Stock
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$3,865,300
Balance
Assets
Applicable
$22,421,020
18,555,720
Coverage
$290.03
22.25
August 31st
Net Income
Preferred
Common
Dividends
Preferred
Common
Net Asset Value
August 31st
Preferred
Common
Price Range
(Calendar Year)
Phoenix Pfd.
STOCK DATA
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
13.98
1.02
12.75
(0
7.62
.43
.75
Nil
d
d
150.57 208.05
9.32 14.65
.84
.36
Nil
Nil
145.56
8.86
d 3.33
d .59
Nil
Nil
142.50
8.58
d 3.78
d .63
.75
Nil
81.20
2.89
d 2.71 d .55 .11 .06
d .53 d .33 d .28 d .26
3.00 3.00
.25(e) Nil
140.52 130.75
8.39 7.49
2.00(b) Nil
Nil .75
91.03
3.71
59.88
.21
(b) In addition 1/8 Phoenix Preferred Shares to liquidate arrears of 310.00.
(c) 1/5 Celotex Corp. Common Share.
(e) In addition 1/70 Certain-teed Preference Share.
.08
d .27
Nil
Nil
51.20
d .38
High 45 55 47% 36% 31 40 40 48 36 Vb 25
Low 3iy2 31 20 Vz 16 10% 17% 34 27% 16
Last 44% 34 36% 35% 24 V* 18 37% 39 Yi 33 19
Phoenix Com.
High 9Yi 9'/2 15% 91/8 6% 11% 7% 4% 2% 3!/4
Low 3% 4% 5 2% 1% 2% 4% 1% %
Last 9 5% 6% 6 5% 2% 6»/4 4% 1% 1
Pepsi-Cola
High 30 30 Vt 39%
Low 15% 14 15% Shares not traded —
Last 29 V* 19V217l/2
Annual Volume of
Trading N.Y.C.E.
(Calendar year)
(000 omitted)
Preferred 17 71 70 40 17 14 20 32 8 4
Common 95 116 105 103 156 339 387 249 276 636
[139]
QUARTERLY INCOME SHARES, INC.
BACKGROUND
This fund was formed in late 1932 by Administrative and Research Corporation, Maryland,
(name later changed to Maryland Sponsors, Inc.) and operated as an "open-end" investment com
pany until 1940, when the right of stockholders to require the company to repurchase their shares at
asset value, less a small discount (the distinguishing feature of an "open-end" fund), was terminated
by a vote of the stockholders at a special meeting called for the purpose. It operates now as a general
portfolio investment company with a small amount of leverage provided by a bank loan of about
$1,800,000 which was made to refund debentures issued in 1937 as a dividend. The fund may issue
securities representing indebtedness, provided the aggregate amount does not exceed 50% of net
assets. To date, the only borrowing has been the small bank loan referred to above. Investment super
vision is furnished by Administrative and Research Corporation (New York) which has a contract to
manage this fund as well as The Maryland Fund, Inc., formed under the same sponsorship. Three of
the five directors are the three officers of the fund, the other two being investment bankers of Salt
Lake City, Utah. Officers and directors are identical with those of The Maryland Fund, Inc.
POLICY
Investments are almost entirely confined to common stocks, holdings as of January 15, 1943
comprised 84% common stocks, 8% speculative preferred shares, about 4% second grade or specu
lative bonds, and 4% cash. Investments are limited to a list of "eligible companies", but since the
list can be amended from time to time, this is a restriction of little importance. The management
record of the past three years, was slightly better than the Dow-Jones Composite averages and showed
a considerable improvement over a previously unimpressive record.
From inception to the middle of 1941, it was the policy to maintain a minimum distribution rate
and to this end distributions of paid-in surplus were utilized when net investment income and/or
profits on sales of securities were insufficient. As a result a substantial portion of distributions
made represented a return of capital and therefore past dividends should not be considered in evalu
ating this security. However, since August 1, 1941 distributions have been limited to net investment
income.
A gross yield of 6.9% was obtained on investments in the fiscal year ended October 15, 1942.
Expenses have been about average amounting in the latest fiscal year to 0.88% of average assets,
compared with 1.01% in the preceding fiscal year. Portfolio turnover declined in the last fiscal year,
the total of purchases and sales in the year ended last October 15th, being less than 15% of assets,
compared with 28% in the previous year.
SECURITIES
The Common stock at the year-end bid price of $4.20 was selling at a discount of 31% from its
then asset value of $6.10. As previously stated, a small amount of leverage is provided by the bank
loan, which was incurred during 1941 in order to retire the 5% debentures the company had paid as
a dividend to common stockholders in 1937. The interest rate on the bank loan is 2V*%. Additional
leverage is provided for a rising market so long as the shares sell at a discount, since this discount
usually tends to narrow in a rising market and conversely widens in a "down" market. The stock
may be regarded as a moderate speculation.
Dividends have been paid every year since 1933. During the calendar year 1942 payments,
which exactly equalled the net income, totalled 37^ a share, compared with 51^ in 1941. However, as
previously indicated the distributions in 1941 were paid in part from paid-in surplus, actual net invest
ment income amounting to 35 a share. Yield based on 1942 dividends and year-end bid price was
8.8%. Of the 1942 payments 30f has been ruled non-taxable to the extent of 36%. The remaining 7^ is
tentatively held 100% taxable, subject to adjustment after the close of the 1943 fiscal year. The com
pany has sufficient unrealized depreciation to warrant the expectation that dividends may continue
to be non-taxable for a while longer, barring a very sharp advance in security prices or a radical
change in existing corporate tax law. This is a distinct feature for investors in higher income brackets
who are seeking a current high rate of income. As these dividends are treated as a return of capital
eventual sale of these shares will determine a final capital gain tax. The amount of unrealized
depreciation at the year-end was $7,255,559 equal to $3.09 per share.
The stock is dealt in over-the-counter and is also listed on the Chicago Board of Trade. Prior
to the termination of the repurchase agreement in 1940 the stock sold at or close to its liquidating
value, a factor to keep in mind in examining the price range of this issue prior to 1940. No repurchases
have been made by the company since 1940.
Quarterly Income Shares, Inc. recently notified its stockholders that beginning May 10, 1943,
common shares may be tendered at 80% of the net asset value and will be accepted by the company
as long as a surplus for such repurchases will be available; this provides a floor which will limit the
discount for the shares to 20%.
[140]
QUARTERLY INCOME SHARES, INC.
Simplified Balance Sheet
As of Jan. 15, 1943
Cash & Receivables
Investments, at market *
Bonds
Preferreds
Common
Ind. $12,209,681 87%
P.U. 670,992 5
R.R. 1,208,513 8
100%
ASSETS
$ 630,563
1,375,238
$ 708,620 4%
* Cost price $22,755,242.
t Book Surplus $21,051,662.
4%
9
14,089,186 87
100%
Total
16,094,987 96
$16,803,607 100%
LIABILITIES
Payables &
Accruals $ 377,509
Capitalization: f
2Vi% Secured
Bank Loan
(due 5/1/46) 1,799,650
Common Stock,
10^ p.v. 14,626,448 (a)
(2,350,412.8 shs.)
Total $16,803,607
(a) Applicable to Common at 12/31/42.
Bank Loan
Common Stock
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$1,799,650
Balance
Assets
Applicable
$16,426,098
14,626,448
Coverage
913%
$6.22
OPERATING RESULTS
Close of the fiscal year on October 15 and lack of some comparative data for earlier years is
the reason for leaving out the usual calculation of operating performance in calendar years.
October 15
Net Income
Dividends (Cal
endar Year)
Net Asset Value
on Oct. 15
Price Range (e)
High
Low
Last
STOCK DATA (b)
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
.37
4.45
3.60
4.20
.35
5.90
3.50
3.55
.26 .18 .35 .69 .52 .46 .38
8.45
5.20
5.45
11.87
7.00
8.20
11.85
7.88
11.85
19.80
9.40
10.18
19.04
14.50
19.01
15.20
11.30
15.10
.16
.37 .51 .80 1.00 1.20 1.50(c) 1.20 1.20 1.20 .95
5.84 5.98 6.83 9.23 10.56 11.36 17.79 14.24 11.67 13.21
14.60 15.90
11.20 9.70
12.50 13.50
(b) Net Income, Dividends, Net Asset Value and Prices
have been adjusted for consolidation of 10 capital
shares into 1 common share on October 29, 1936.
(c) In addition $1 distributed in Debenture 5s of 1942.
(e) Bid prices for calendar year.
[141]
QUARTERLY INCOME SHARES, INC
Statement of Holdings as at January 15, 1943
Number of
Shares or
PrincipalDescription Amount
Stocks: of Bonds
Air Reduction Company, Incorporated 2,800
Allis-Chalmers Manufacturing Company 12,000
American Car and Foundry Company 5,600
American Gas and Electric Company 5,500
American Locomotive Company:
Common 3 ooo
Preferred 5)100
American Radiator & Standard Sanitary Corporation 35,000
American Smelting and Refining Company 6)000
American Water Works and Electric Company, Incorporated 13)500
Anaconda Copper Mining Company 12,500
The Atchison, Topeka and Santa Fe Railway Company 2,500
Bethlehem Steel Corporation 9)500
Borg-Warner Corporation 3)000
Caterpillar Tractor Co 6,000
The Chesapeake and Ohio Railway Company 4,000
Chrysler Corporation 7,400
Consolidated Oil Corporation 25,000
Continental Oil Company o)000
Crane Co • 9,000
Crucible Steel Company of America, 5% convertible preferred 2,000
Cutler-Hammer, Inc 8,500
Deere & Company 8,000
The Detroit Edison Company 11,320
General American Transportation Corporation 4,500
General Cable Corporation, 7% cumulative preferred 6,000
General Motors Corporation .' A'nnn
Great Northern Railway Company, preferred 4,000
Gulf Oil Corporation
Harbison-Walker Refractories Company 'j'SS
Illinois Central Rail Road Company -. 3,000
Ingersoll-Rand Company 3,500
International Harvester Company .S'sSS
The International Nickel Company of Canada, Limited ,'222
International Paper Company, cumulative convertible 5% preferred 3,000
Tohns-Manville Corporation 5,000
Jones & Laughlin Steel Corporation:
Common 3,750
5% cumulative preferred, Series A 2,200
5% cumulative preferred, Series B, convertible 800
Kennecott Copper Corporation 11,500
Libbey-Owens-Ford Glass Company 5,500
Loew s , Incorporated 15,000
Montgomery Ward & Co., Incorporated 10,000
National Dairy Products Corporation 2,000
National Steel Corporation 6,000
The New York Central Railroad Company 13,400
Niagara Hudson Power Corporation 10,000
The North American Company 22,000
Oliver Farm Equipment Company 6,000
Otis Elevator Company 14,500
The Pennsylvania Railroad Company 11,400
Phelps Dodge Corporation 11,000
Phillips Petroleum Company 5,500
Pittsburgh Plate Glass Company 3,000
Pullman Incorporated 7,500
The Pure Oil Company • 25,000
Republic Steel Corporation 18,000
Sears, Roebuck and Co 4,500
Southern Railway Company 8,000
Standard Brands Incorporated 5,000
Twentieth Century-Fox Film Corporation 11,500
Union Pacific Railroad Company 3,100
United States Gypsum Company 2,600
United States Rubber Company 5,000
United States Steel Corporation 11,000
The Western Union Telegraph Company 1,500
Westinghouse Electric & Manufacturing Company 3,000
The Youngstown Sheet and Tube Company 10,500
Total stocks
Bonds:
The Baltimore and Ohio Railroad Company:
Refunding and General Mortgage Bonds, Series D, 5's 2000 $ 50,000
Refunding and General Mortgage Bonds, Series F, 5's 1996 50,000
Illinois Central Railroad Company, Forty Year Gold Bonds, 4Ji's 1966 150,000
Missouri Pacific Railroad Company, First and Refunding Mortgage Gold
Bonds, Series F, 5*s 1977 100,000
The New York Central and Hudson River Railroad Company, Refunding
and Improvement Mortgage Bonds, Series A, 4$4's 2013 200,000
Northern Pacific Railway Company:
Refunding and Improvement Mortgage Bonds, Series B, 6's 2047 250,000
Refunding and Improvement Mortgage Bonds, Series A, 4J4's 2047 150,000
Southern Pacific Company:
Gold Bonds Central Pacific Stock Collateral, 4's 1949 50,000
Forty-Year Gold Bonds, 4'/S's 1969 100,000
Fifty-Year Gold Bonds, 4 54 's 1981 100,000
Total bonds
Total stocks and bondsIn v r. st able Cash (Including receivables)
Total
Value
Based on
Closing
Market
Quotations
$ 113,400.00
334,500.00
148,400.00
125,812.50
25,500.00
420,750.00
240,625.00
234,750.00
47,250.00
318,750.00
119,062.50
562,875.00
84,000.00
247,500.00
143,500.00
517,075.00
187,500.00
237,375.00
137,250.00
150,000.00
153,000.00
216,000.00
200,930.00
176,062.50
471,000.00
675,000.00
94,000.00
273,000.00
148,750.00
25,500.00
323,750.00
319,000.00
297,500.00
153,000.00
360,000.00
78,281.25
126,087.50
54,400.00
346,437.50
181,500.00
673,125.00
341,250.00
31,750.00
324,000.00
150,750.00
27,500.00
228,250.00
202,500.00
253,750.00
279,300.00
273,625.00
250,250.00
261,000.00
209,062.50
293,750.00
276,750.00
271,125.00
136,000.00
25,000.00
156,687.50
260,400.00
159,900.00
133,125.00
555,500.00
41,250.00
246,375.00
333,375.00
$15.464,423.75
$ 16,875.00
16,750.00
65,250.00
38,750.00
98,250.00
169,375.00
78,375.00
39,437.50
54,250.00
53,250.00
$ 630,562.50
$16,094,986.25
331,110.08
$16,426,096.33
Percentage
of Market Value
of Net Assets
(Excluding
Bank Loan from
Liabilities)
.69%
2.04
.90
.77
.16
2.56
1.46
1.43
.29
1.94
.72
3.43
.51
1.51
.87
3.15
1.14
1.44
.84
.91
.93
1.32
1.22
1.07
2.87
4.11
.57
1.66
.91
.16
1.97
1.94
1.81
.93
2.19
.48
.77
.33
2.11
1.10
4.10
2.08
.19
1.97
.92
.17
1.39
1.23
1.54
1.70
1.67
1.52
1.59
1.27
1.79
1.69
1.65
.83
.15
.95
1.59
.97
.81
3.38
.25
1.50
2.03
94.14%
.10%
.10
.40
.24
.60
1.03
.48
.24
.33
■32
3.84%
97.98%
2.02
100.00%
[142]
NOTES
[143]
RAILWAY AND LIGHT SECURITIES COMPAA/r
BACKGROUND
This is the oldest leverage investment company in the United States, the original company
having been created in 1904. The present company was incorporated in 1928, when certain changes
were made in the charter governing the type of securities which could be held. Stone & Webster and
Estabrook & Co. participated in the original financing and are still represented on the Board of
Directors. The fund's corporate title does not properly convey its investment policy nor its excellent
performance record especially during the past years when railroads and utilities proved rather poor
investments. In addition this company has the outstanding achievement of reporting earnings and
paying uninterrupted dividends on its preferred shares since 1905 and on its common shares for
each year since 1910 except 1933-1935. Railway and Light Securities Company owns the majority of
Investment Service Corp. which also handles outside accounts, such as The Bond Investment Trust
of America, a closed-end fund organized in 1926.
POLICY
Better grade utility and rail bonds and preferred shares have comprised the major part of this
fund's portfolio and as of January 31, 1943, 42% of assets were represented by bonds, 12% by pre
ferred shares, and 37% was in common stocks with about 9% in cash and governments.
The common stocks are mostly well-diversified industrials. It is the announced policy of the
company "to seek income and capital appreciation and/or preservation rather than to seek trading
profits, and to avoid concentration of investments in any one field as much as practicable." The gross
income return on the assets was about 6% last year. Management results were better than the Dow-
Jones Composite Stock Average in eight of the last 13 years with an excellent record over the longer
term. It has done better, in comparison with the stock average, in declining than in rising markets.
The portfolio position has been fairly constant, although turnover was 22% last year and 27% in
1941. Expenses have been about average, the ratio to average assets last year being .85%.
The fiscal year of the Company was changed in 1941 to terminate on October 31 in order to
provide a more evenly distributed income and resultant more regular dividends for the common stock.
SECURITIES
The Collateral Trust 3V4% Bonds due 1955 were sold in December, 1940 to refund a 4V*%
series, and were traded over-the-counter at the year-end around 100. On January 31, 1943, their cover
age was 218%. They are secured by collateral securities which, according to the indenture, must be
at least 120% of aggregate principal amount of bonds outstanding, at least half of which must be
bonds, notes or cash.
The $6 Cumulative Preferred has paid dividends regularly and ranks as a conservative
senior investment company stock. It is traded over-the-counter in Boston and New York but is ex
tremely inactive.
The Common stock was selling at the year-end at a high discount of more than 46% from
asset value. While it appears to have high leverage, only 37% of the assets are invested in common
stocks and the rest, almost equaling in amount the company's senior capital, is in bonds and preferred
stocks, so that the actual leverage is small unless the investment policy is drastically changed. The
stock could, however, show better than general market appreciation in any substantial market rise
owing to the large discount from asset value. As stated above, dividends have been paid, with
exception of 1933-1935, for over 33 years. The payments in 1942 equalled 75^ per share against earn
ings of 92^ for the year ended October 31. An interim dividend of 15^ was paid in this year's first
quarter. Yield, based on year-end price and 1942 dividends was 10.0%. Practically no repurchases of
its own stock have occurred during the past two decades.
The common is divided between 134,980 voting shares, traded on the New York Curb Exchange,
and 28,160 non-voting shares convertible into voting stock if such conversion would not make the
company a "subsidiary" or "affiliate" under the terms of the Public Utility Act. These shares are
believed to be held by Stone & Webster, Inc.
Last year's common dividends are tentatively reported 30.32% non-taxable for Federal income
tax. Massachusetts' residents, however, are liable to State tax on these payments but this ruling is
now subject to contest.
:
[144]
RAILWAY AND LIGHT SECURITIES COMPANY
Simplified Balance Sheet
As of January 31. 1943
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments, at market *
Bonds
Preferreds
Common
Ind. $2,550,938 79%
$ 852,932 10%
$3,652,256
1,049,533
46%
13
P.U.
R.R.
Fin.
448,416
181,938
38,130
14
6
1
100%
3,219,422 41
100%
7,921,211 90
Total $8,774,143 100%
* Book value (at cost or prices at Feb. 10, 1932, if acquired prior to this date)
$8,302,067.
f Capital Surplus $515,047, Earned Surplus $231,805, Special Surplus $445,946.
LIABILITIES
Payables $ 41,211
Capitalization: f
3lA% Coll.
Trust Bonds 4,000,000
(due 12/1/55)
6% Cum. Pref.
Stk., $100 p.v.
ent. in liq. to
$100 a sh.
(21,136 shs.) 2,113,600
Common Stock,
$10 p.v. 2,619,332 (a)
(163,140 shs.)
Total $8,774,143
(a) Applicable to Common at 1/31/43.
SUMMARY OF CAPITALIZATION
Bonds
Preferred
Common
Entitled to
in Liquidation
$4,000,000
2,113,600
Balance
Assets
Applicable
$8,732,932
4,732,932
2,619,331
Coverage
218%
$223.93
16.06
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 :1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Railway & Light +7 —1 -1 +7 + 16 -26 + 20 +37 +21 -7 -6 -31 -17
Dow-Jones Com
posite Stocks (b) +15 -10 -10 + 3 + 29 -34 +32 +41 -1 + 49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
BullMkt. BearMkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Railway & Light +5 + 4 + 11 + 29 -5 + 14 + 85 -46 -5
Dow-Jones (b) +3 -7 -5 +22 -20 +6 + 176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferred 13.13(c) 12.33(c) 10.05 9.69 7.52 14.33 16.79 8.21 8.73 9.03
Common .92(c) .82(c) .52 .48 .20 1.08 1.40 .29 .36 .39
Dividends
Preferred 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
Common .75 .50 .40 .30 .15 .50 1.55 Nil Nil Nil
Net Asset Value
at year-end
Preferred 205.83 199.80 221.24 256.29 243.26 199.96 354.59 288.33 187.90 136.99
Common 13.71 12.93 15.71 20.25 18.56 12.95 32.98 24.40 11.39 4.79
Price Range
Preferred
High 101 104 103 100 94 109 Vi1091/2
105 76 68
Low 89 100 90 90 77 82 102 73 45 40
Last 91 100 101 94 92 82 107 »/2 102 72 y2 46 V2
Common
High 8% 7'/2 10»/4 12 Va 14 28% 24% 19 11 14
Low 4 4% 5Va 7V2 7% 9 16% 6'/25i/4
3Vt
Last 7Y2 5»/2 7Va 8V2 10% 9 22% 18 6'/4 6
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
Common 3 7 9 6 4 9 14 12 5 —
(c) Years ended Oct. 31.
[145]
RAILWAY AND LIGHT SECURITIES COMPANY
Investments Oct 31, 1942:
Short-Term Notes
Face Amt. Market Val.
(000 omitted) Issue Oct. 81/42
$200 Comm. Credit *4> 1-6-43 $199-I2i
225 Gen. Motors Accept *4s 1-12-43— 224,658
Bonds and Other Notes
Public Utilities
$100 Amer. Pr. ft Lt. 6s, 2016 $98,500
50 Amer. Wtr. Wks. A 6s, 1975 47,500
50 Ark. Pr. ft Lt. 5s, 1956 53,563
80 Bellows Falls Hydro-Elec. 5s, 1958. 82.400
100 Broad River Pr. A 5s, 1954 104,000
100 Canada Nor. Pr. A 5s, 1953 80.250
50 Columbia Gas ft Elec. 5s, 1952 45,375
50 Columbia Gas ft Elee. 5s, 1961 44,000
29 Connecticut Lt. ft Pr. A 7s, 1951— 34.838
100 Cont. Gas ft Elec. A 5s. 1958 83,750
200 Eieetrie Pr. ft Lt. 6s, 2030 175,750
75 Empire District Elec. 6s, 1952 78,750
75 Fed. Water Ser. 5%s, 1954 76,938
75 Federated Utilities 5%t. 1957 70,031
120 Florida Pr. ft Lt 5s, 1954 123,750
8 Gt. Nor. Pr. 5s, 1950 8,710
187 Houston Gas Sec. 5s, 1952 188,403
75 Illinois Pr. ft Light A 6s, 1953 77.250
75 Indiana Service A 5s, 1950 58.875
50 Laclede Gas Lt. C 5Vi«. 1953 43,812
59 Lehigh Valley Tran. B 5s, 1945 67.910
90 Lehigh Valley Tran. A 6s, 1945 86,850
55 Louisiana Pr. ft Lt. 5s, 1957 60,225
40 Montreal Isl. Pr. A 5Vis, 1957 39,200
100 New England Pr. Assoc. 5Vis, 1954. 82,750
25 Niagara, Lockport ft Ont. A 5s, 1955. 27,625
60 North American 3%s. 1954 61,650
100 P.uget Pr. ft Lt. A 5Vi» 1949 103,000
55 Savannah El. ft Pr. F 6s, 1955 58,300
50 Texas Pr. ft Lt. 6s, 1956 53,625
50 United Lt. ft Rys. (Me.) A 6s, 1952. 68,600
80 United Lt. ft Rys. (Del.) 5Vi«. 1952. 77,200
50 Utah Power ft Light 5s, 1944 49,000
50 Virginia Public 8er. 5s, 1957 50,375
100 West Penn Elec. 6s, 2030 101,500
50 York Rys. 5s, 1987 39,760
50 York Rys. (ext.) 5s, 1947 39,000
Railroads
$65 Atlantic Coast Line 6s, 1946 $66,564
25 Boston ft Maine A 4 Vis, 1970 9,750
165 Chicago, Mil., St. P. ft P. A 5s, 1975 28,256
25 Chicago, T. H. ft So. 5s, 1960 16,093
75 Chicago. T. H. ft So. c/d 5s, I960.. 32,250
100 Great Northern G 4s 1946., 98.000
50 Louisiana ft Ark A 5s, 1969 40,000
75 Nash., Chatt. ft St. L. A 4s. 1978 51,750
100 Northern Pacific B 6s, 2047 70,000
50 St. L.. Iron Mt. (stpd.) 4s, 1933.. 38,125
60 Southern PaelQe R.R. 4s, 1955 85,500
50 Southern Ry. A 4s. 1956 85,760
Industrials and Others
$150 American I. G. Chemical 5%*. 1949. $155,625
76 Baldwin Locomotive 6s. I960 82,969
100 Eastern Gas ft Fuel A 4s, 1956 80.500
48 National Distillers 3 Vis, 1949 49,320
100 Republic Steel 5Vis, 1954 105.600
18 Warren (8. D.) 4V4», 1952 14.040
Stock!
Public Utilities
Shares Preferred
500 American Power ft Lt. $6 $10,760
1,000 American Power ft Lt. $5 19375
500 Buffalo, Niagara ft East. Pr. $5 1st— 84,125
1,000 Commonwealth ft Sou. $6 85,500
1,000 Electric Bond ft Share $6 47,000
1,000 Electric Bond ft Share $5 44,000
1,200 Electric Power ft Light $7 39,450
1,200 Engineers Public Service $6 78,200
2,900 Engineers Public Service $5.50 166,750
560 Iowa Power ft Light 7% 66.000
1,400 Oklahoma Natural Gas $5.50 prior.. 148,400
2,000 United Corp. $8 80.000
1,500 United Gas $7 177.000
Public Utilities
Common
2,072 American Gas ft Electric $89,886
1,000 American TeL ft TeL 126,876
2,800 Commonwealth Edison 69.500
2,950 Eastern Utilities Associates _ 50.519
20,000 Eastern Utilities Associates, eonv— 20,000
5,000 National Power ft Llgfcl 13.760
1,500 North American 15.760
2,000 North Texas 19,000
8,456 Tampa Electric 67.046
Railroads
1,500 Chesapeake ft Ohio $51,000
1.000 Louisville ft Nashville 61.250
2,500 Pennsylvania R.R. 63,750
Industrials and Others
Aircraft
2.000 Bell Aircraft $34,600
1.500 Bendix Aviation 62,688
2.000 Curtiss-Wright el A 45.500
2,000 Curtiss-Wright 17,250
500 Douglas Aircraft 34.876
1,000 Lockheed Aircraft 22.500
2,500 Martin (Glenn L.) 58,438
600 Sperry Corp. 15,600
400 United Aircraft 6% pfd. 39.850
1.000 United Aircraft 28475
Automotive
500 Chrysler Corp. $32,375
1.000 Electric Auto-Ltte 28.876
2.000 tVnwaJ Motors 61.TM
3,000 Otis Elevator $49,126
3,400 Ruberold Co. 61,200
Food
3,000 Borden Co. $61,876
1,000 Central Agulrre Associates 17450
4,000 National Dairy Products 58,500
Machinery and Steel
2,000 Allis-Chalmers $53,500
1,500 American Steel Foundries 32,063
3,000 Deere & Co. 70,500
1,600 General Electric 47,000
1.000 Inland Steel 65,000
1,000 International Harvester 62,000
1,000 Westlnghouse Electric ft Mfg 76,250
Merchandising
2,000 Montgomery Ward $63,000
1,200 8ears, Roebuck 66,300
500 F. W. Woolworth 14.126
Mining
1,000 American Metal $18,750
500 Climax Molybdenum 21,563
1.500 International Nickel 44,625
3,500 Kennecott Copper 109,818
2,000 Phelps Dodge 53,760
Office Equipment
5,000 Burroughs Adding Machine $43,750
10,000 Pltney-Bowes Postage Meter 67.000
Oil
5,000 Continental OH (Del.) $134475
1,000 Humble Oil ft Refining 61,000
8,000 Standard Oil of California 83,250
3,000 Standard Oil (Ind.) 79,500
3,000 Texas Co. 116,875
Railroad Equipment
1,000 American Brake Shoe ft Foundry— $27,500
1,215 Canadian Car ft Fdry., 7% part. pref. 26,515
Others
500 American Tobaceo B $21,750
100 Associates Investment 5% pfd. 9,750
3,000 Investment Service (non-voting) 86,120
1,000 Llbbey-Owens-Ford Glass 27,625
1,000 Loew's Inc. 44,125
1,500 National Oil Products 47,250
2,000 Phileo Corp. 21,000
600 Sherwin-Williams 87.600
Summary of Assets, Oct. 11 (at market):
1942 % 1941 %
Net curr. assets.. $346,181 4.18 $419,685 4.86
Sbt. term dlsct.
notes 424,379 5.13 699,431 8.09
Bonds and Notes:
PubUc Utilities . 2.621,909 31.69 2,587,685 29.96
Railroads 522.039 6.31 300.115 8.48
Industrials, etc 487,954 6.90 484.405 6 61
Total bonds ft
notes 3,631.902 43.90 3.372.116 89.04
Stocks:
Public Utilities
Preferred $881,550 10.66 $1,142,410 18.22
Common 411,826 4.98 461474 6.84
Total P. U $1,298,376 15.64 $1,603,784 18.66
Railroads 176,000 2.18 181.813 2.11
Industrials, etc. - 2.401.148 29.02 2462.258 8744
Total stocks. $3,870,524 46.79 $4,147,854 48.01
Total assets (net) $8472.985 100.00 $8,638,986 100.00
[146]
NOTES
[147]
SELECTED INDUSTRIES, INC.
BACKGROUND
Formed in 1928, this company has been affiliated since 1931 with Tri-Continental Corp., which
owns large blocks of its common and convertible preferred stocks. The directorate of thirteen includes
three members of J. & W. Seligman & Co.; a partner of Kidder Peabody & Co.; Eugene W. Stetson,
President of the Guaranty Trust Co.; Bayard W. Pope, chairman of the Board of Marine Midland Corp.;
Curtis E. Calder, President of American & Foreign Power Co., Inc.; former Under-Secretary of the Treasury
John W. Hanes and a partner of the law firm of Sullivan & Cromwell.
POLICY
About 55% of the assets at the year-end were in diversified common stocks, some 39% in a wide
variety of bonds and preferred shares and the balance of 6% in cash, government bonds, and receiv
ables. The company shares ownership with Tri-Continental of Union Securities Corp., an underwriting
and distributing firm. The portfolio showed a gross yield of about 6.7% last year, gross income being
about 13% lower than in 1941. The management record has been good, bettering the Dow-Jones Com
posite Stock Average in eight of the past 13 years, and equalling it in another, although the record
of recent years has been less impressive than that of the earlier years. Turnover of investments of this
fund, as with others of the Tri-Continental group, is heavier than with most other companies included
in this analysis. Purchases and sales of securities totaled $13,527,974, or 53% of average assets, com
pared with 63% in 1941 and 83% in 1940. Operating expenses were a little below average amounting
to 0.75% of average net assets and were about 20% lower than in 1941.
SECURITIES
The $5.50 Cumulative Prior Preferred is quite speculative in quality due to a bank loan of
$7,900,000. It should be noted, however, that investments in bonds and preferred stocks plus cash on
hand at the year-end amounted to considerably more than this loan, which at its 2% fixed interest rate
provided a nice margin of additional income. This obligation was reduced by $1,000,000 last year. Asset
coverage of the preferred fluctuates sharply with any general market movement due to the speculative
portfolio, as evidenced by the 1942 increase in its asset value to $74.38 from $66.12 on Dec. 31, 1941 or by
12.5% while the Dow Jones industrial average gained 7.6%. This speculative quality is also reflected in
the high yield, 10.8% at the year-end, and in the 31% discount from asset value at which it was then
selling. Net income of $5.61 just barely covered the dividend compared with $6.32 earned in 1941. Of
the dividends paid last year, only 2% were stated to be non-taxable compared with 22% in 1941. This
company has chosen to be taxed as a "regulated investment company," so that future dividend pay
ments will be fully taxable under the present tax laws.
The 243,800 Prior Preferred shares outstanding include shares underlying the 108,229 Allotment
Certificates which are traded on the Curb at approximately the same prices as the Prior Preferred shares.
Each Allotment Certificate represents 1 share of Prior Preferred stock plus 1 share of common stock and
1 warrant entitling the holder to purchase one share of common stock at $15.00 a share. These units can
now be broken into their constituent parts.
The Prior Preferred stock has been repurchased from time to time,—3,450 shares were repurchased
last year at an average cost of $41.94 per share.
The | J.50 Converfi'b/e Preferred is completely in the common stock category since it has no asset
value and, as shown in the accompanying table, it would require about 45% rise in common stock
holdings or about a 25% rise in total assets from year-end prices to make these shares "see daylight."
Their leverage and volatility is, however, very great and they can be expected to fluctuate sharply with
any rise or fall of the general market. Evidence of this is the extreme price range in the past six years
when the shares sold as high as 28 Vi and as low as 1. Dividend arrears totalled $14.50 as of the year-
end. The stock is convertible into three shares of common, a privilege which would be of value only
under extreme conditions. No dividends may be paid which would reduce the asset value of the Prior
Preferred below $92.86 a share ($22,639,268), except that they may be paid out of net profits for a
particular year and/or the previous year if they do not reduce the assets to below $46.43 per Prior
Preferred and $10.75 per Convertible Preferred. There are 184,000 shares of the Convertible Preferred
(43%) held by Tri-Continental Corp.
The Common sfoek is far "under water" and an extreme speculation. It is in the so called "option
category" for the portfolio would have to reach a value of $51,000,000 before this stock would show
an asset value. However, these shares must always be regarded as a participation in a large portfolio
which could conceivably have important asset value in a big Bull market; and therefore in a rising
market trend these shares have commanded premium prices. At the point where these shares would
be "in the black" — possibly about 240 on the Dow-Jones Industrial Average, each 10% rise in the
value of the portfolio would add about $2 per share to the asset value of this stock. At such a level
of stock prices these shares could conceivably sell at $10 to $15 per share so obviously they repre
sented an alluring long range speculation at the year-end price of 15 cents. There are 444,500 shares
(22%) held by Tri-Continental Corp.
Perpetual Warrants to buy 271,250 shares of common at $15 per share are outstanding.
All classes of securities (except the warrants) are traded on the New York Curb.
[148]
SELECTED INDUSTRIES, INC.
Simplified Balance Sheet
As of Dec. 31, 1942
Cash, U. S. Gov't Bds., etc.
Investments, at market*
Bonds
Preferreds
Common
Ind.
P.U.
R.R.
Fin.
Inv.
ASSETS
3,987,294
6,209,136
$10,641,578
745,725
1,682,114
1,280,080
Co. 352,313
72%
5
11
9
3
100%
$ 1,642,876 6%
16%
25
14,701,810 59
100%
24,898,240 94%
Total $26,541,116 100%
* Book Value (at cost or prices at March 31, 1931, if
acquired prior to this date) $28,645,544.
t Capital Surplus $12,016,357; Earned Surplus Deficit $408,094.
LIABILITIES
Payables incL
Reserves $ 508,284
Capitalization:t
2% Bank Loans
(due 3/1/45) 7,900,000
$5.50 Prior Pfd. 18,132,832 (a)
$25 p.v. ent. in liq.
to $100 a sh. plus
cum. div.
(243,800 shs.)
$1.50 Conv. Pfd. 0
$5 p.v. ent. in liq.
to $30 a sh. plus
$14.50 accr. div.
(424,317 shs.)
Common 0
$1 p.v. (2,056.940 shs.)
Total $26,541,116
(a) Applicable to Prior Preferred
at 12/31/42.
Bank Loans
$5.50 Prior Pfd.
$1.50 Conv. Pfd.
Common
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$ 7,900,000
24,380,000
18,882.107
Balance
Assets
Applicable
$26,032,832
18,132,832
d 6,247,168
d 25,129,275
Coverage
330%
$74.38
d 14.72
d 12.22
OPERATING RESULTS
(See Page 10)
STOCK DATA
Net Income
$5.50 prior pfd. ft?
$1.50 conv. pfd.
Common ^
Dividend
$5.50 prior pfd. 5~.S 6
$1.50 conv. pfd.
Common
Net Asset Value
at year-end j
$5.50 prior pfd.0/.*
Common ^
Price Range
$5.50 prior pfd.
High
Low
Last .£7
$1.50 conv. pfdX
I-
10
:
7
$
High
Low
Last
Common
High
Low
Last
Annual Turnover
of Trading N.Y.C.E.
(000 omitted) -
$5.50 prior pfd. »'
$1.50 conv. pfd. 77
Common
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
5.61
.06
6.32
.43
5.69
.10
4.22 3.09 5.87
(d) (d)
None
5.56
.05
3.80
(d)
3.72
(d)
3.20
(d)(d)
5.50
Nil
5.50
Nil
5.50
Nil
5.50 5.50 5.50 7.50
Nil Nil 1.50 2.00
No Dividends Paid —
3.50
Nil
5.50
Nil
5.50
Nil
74.38,
14.72
12.22
66.12
d 19.74
d 12.94
76.55
d 13.96
d 11.44
90.72
d5.56
d9.40
100.60
.36
d7.87
85.69
d8.83
d9.45
144.18
35.58
d.29
113.92
11.09
d5.28
82.07
d 17.44
d 10.79
77.83
d 20.98
d 11.21
52*4 50
38
59% 69 Va
48 *4
SIVa
75*4
48*4
64
101*4
52
50
98*4
81
86
48
80
61 *4
40*4
49V*
65
33
40
38 35
51. 39% 44 97%
5
1
3 6*4
2
9*4 12
5 T'j
3s/s
1*4
1*4 2*4
4%
5% 9*4 7*4 \
> Not listed before 1937
*4 % Va 1% 1%
Va
4*44s/a
2s/s
3*4
2% 3 4*4
%*4e *4e
Vu
Va
Va
*4
%
%3/4
V*
1*4%2 1*4 1 2*4 3
13
41
21
29
140
11
19
91
8
13
104
12
18
118
50
10
236
19
309
29
Not
163
11 18
30265
listed
111
[149]
SELECTED INDUSTRIES INC.
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st, 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below wo show the same facts in further detail.
LEVERAGE FACTOR OF SELECTED INDUSTRIES COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the December
31st, 1942 portfolio position. Leverage figures have been adjusted for estimated increase or decrease in asset values ol
investment companies leverage shares owned by Selected Industries.
Applied to Com. Applied to all
In event of Shares owned Assets
Rise of 10% d $11.58 d $11.03
25% d 10.52 d 9.09
50% d 8.59 d 5.70
100% d 4.70 1.09
Fall of 10% d 12.99 d 13.54
25% d 14.06 d 15.43
50% d 15.83 d 18.58
[150]
SELECTED INDUSTRIES INC
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st, 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show tho same facts in further detail.
LEVERAGE FACTOR OF SELECTED INDUSTRIES $1.50 CONV. PFD.
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the December
31st, 1942 portfolio position. Leverage figures have been adjusted for estimated increase or decrease in asset values of
investment companies leverage shares owned by Selected Industries.
Applied to Com. Applied to all
In event of Shares owned Assets
Rise of 10% d $11.62 d $ 8.95
25% d 6.47 0.42
50% 2.85 16.87
100% 21.72 49.76(a)
Fall of 10% d 18.48 d 21.15
25% d 23.63 d 30.31
50% d 32.21 d 45.56
(a) Entitled to $30 and $14.50 dividends in arrears.
[151]
SELECTED INDUSTRIES, INC
Ssrcuritlaa OwMi at «tf Dm. SI. 1Mb
Principal U. 8. Government Securities
Amount GQMarket
(000 omitted) Value
$100 Treas. 2s. 1951-49 $100,438
300 Ctri. of Indebt. E. %%.
1843 Q1S00.093
50 U. 8. war Ms.. 0. 3Vis. '53 (848.450
50 U. 8. war bds.. 0. SVis. "54 QJ49.400
%of Cross
Total
Roods
Industrials
T American I. C. SVis. 1949
100 Canadian Intl. Paper 6s.
1949 .
14T Consol. 0~ifdtb~3Vis.' 1951
110 Goodrich Co. (B. T. ) *%t.
1956
50 Intl. Paper Si. 1947
75 McKesson * Robblns SVis.
1956
100 Natl. Dairy Prod. 3 Vis. '60
100 National Dlst. 3 Vis. 1949.
50 Otis Steel A 4 Vis. 1962..
200 Paramount Pictures 4s. '56
100 Schenley Distillers 4a, '52
100 Simmons Co. deb. 4s. '52.
H3 Studehaker Corp. 6s. '45.
50 United Drue 8s. 1953
65 Warner Bros. Plct 6s, '48
200 Vnistn. Sh. 4s, '48
lnreetment Companies
240 Alleghany Corp. 5s. '49
( modified )
Public Utilities
500
125
10
35
50
2.10
35
30
15
IT
28
20
20
MO
20
SOIT
5
S
t<
39
30
IS
19
IS
6
1910
60
SO
TS
•5
150
8
89
11
t
18
65
9428
15
62
S5
SO
159
59
135
TS
115
SI
90
Am. k Fgn. Pr. 5s. 2030,
Am. P. k L. Co. 6s. 2016
Appal. E. P. 6s. 2024
Commons. Edls. 3 Vis. '58
Cont. G. k El. 5s. 1958..
Elee. Pr. k Lt. 5s. 2030..
FU. Pr. k Lt 5s. 1954..
Illinois Pr. * Lt. 6s. '53.
Kansas G. t EL 6s. 2022.
Motion. W. Penn P. 8. 4 Vis.
1900
N. Orl. P. 8. A 6s, 1949..
S. Orl. P. 8. B 5s. 1955..
Obio Kdlson 4s. 1965
Pacific Gas k El. 4s, 1964
Pacific G. * El. 3%s, 1961
Par.. P. 4 L. pr. In. Ss. '53
Potomac Edison 5s, 1956
Potomac Edison 4 Vis. 1961
Pub. Sen. of Colo. 4s. '49
Pug. Sod. P. * L. SVis. '49
Pug. Snd. P. k L. 5s, '50.
Put Snd. P. * L. 4 Vis, '50
Stand. C.tE. nts., 6% '48
Stand. G. * I. t». nta..
6%. 1948
Btand. G. k E. 6s, 1957..
Stand, a. k E. 6s, 1966..
Texas P. k L. 5s. 1956
Texas P. k L. 6s. 2022—
1.13
.18
.11
498.381 1.88
7.306 .03
B96.5O0 M
152,145 .fit
117,563 .44
31.375 .IS
79,969 .SO
106,250 .40
103.500 .3949.938 .19
202.000 .76
103.750 .39
102.750 .89
84.453 .32
49.813 .19
67.113 .25
203.500 .TT
1.577.925 794
167.400 4S
398.7S0 1.59
118.750 .45
12.613 .05
38.194 .14
41.063 .10
120.835 JS
36,488 .14
31,500 .12
18,525 .or
18.913 .Of
29,330 .11
21,400 .OS
21,250 .OS
89.600 .14
11.225 .00
30.788 .It18.891 .Of
5.575 .OS
5.200 .09
18.715 .10
89.878 .15
30.638 .18
9.619 .04
6.325 .OS
11,475 .04
3.825 .01
10.750 04
11.250 .04
1.330.155 5.01
Ballroads
Chic, k North West. 4s. '87
(unstamped) 20,100
Chic, k North West. 5s, '87
(sUmped) 10,200
Chic. i n. Station 8*s. '63 81.000
Erie R.K B 4s. 1993 60.613
Erie K B. 4 Vis, 2015 82,875
Mo. Pac. A 5s. 1965 1.788
Mo. Pie. F 5s, 1977 82.040
Mo. Pac. G 5s. 1978 3.988
Mo. Pac. II 5s. 1980 8,160
Mo. Pac. 1 5s, 1981 17,040
New England I K. 4s, 1945 44,606
New Orleans, Texas k Mexico:
A 5Vi«. 1954 30.560
B 5s, 1954 14.000
C 5s. 1956 7.275
D 4 Vis. 1956 31.465
Ore. -Wash. B R. k Nat. 4s,
1961 68,506
Per* Marquette 5s, 1956.. 14.550
St. L.-Saa Fran. pr. In. 4s,
1950 29,250
St. L -Han Fran. pr. In. 5s,
1950 11,096
St. L San Fran 4 Vis. '78 16.643
Virginian Ry. 1st 8%s. '94 82.081
Wabash R.R. 4s. 1971 .. 95.881
Wabasb R.R. 4s. 1981 ... 9,240
Western Pac. 1st 6s, 1946
(assented) 81.513When Issued contracts with
respect to 8150.000
principal amount Chi
cago k North Western Ry.
Co. 1st * gen. A 2Vis-4s,1989 EDI 11,375
.90
.04
■SO
.st
si
.01
.IS
.01
.01
.Of
.IT
.11
.05
.03
.IS
M
.09
.11
.00
.10
Jl
.84
.OS
.11
.41
Shares
8.300
200
250
500
700
300
1.500
1.000
1.000
800
3.100
1.500
4.800
100
850
200
1,000
487
300
1,000
2.000
1,015
1.000
1.021
8.900
6.100
2.180
6.000
6.000
200
470
4.100
1.000
1.300
Preferred 8tocks
Industrials
Allied Stores, 5% 171.350 .65
American Metal. 6% 23,350 .09
American Tobaeeo, 6% 32,250 .IS
Associated Dry Goods, 7% 30.500 .11
Coca-Cola Co., A. S3 43.400 .18
Commercial Credit. 4 V4 % 31.030 .IS
General Motors. 85 319.375 1.30
Goodrich Co. (B. P.). $5 83.375 .31
Goodyear Tire k Rubber. $5 90,125 .34
Great Western Sugar. 7%. 111.000 .42
lotl. Mln. k Chem., 4%.. 170.500 .44
Intl. Nickel. 7% 101.500 .70
Intl. Paper. 5% 117.800 .81
Urlllard (P.), 7% - 15.050 .06
Maytag Company, $8 86,275 .33
Maytag Company. $3 4.375 .03
McKesson k Rob., 5Vi%- 110,375 .41
Parkersburg Rig k Reel,
35.50 .- _ BJ39.OO0 .IS
Philip Morris. 4Vi% 32.700 .12
Radio Corp.. $3.50 58.750 .22
Revere Copper. 7% 172,500 .66
8t. Regis Paper. 7% 119.541 .45
Tide Wat. Assoc. Oil. $4.50 95.750 .36
Tubtae ChatUlon. 7% ... (E106.695 .40
2,367.586 8.91
1409
8.100
400
400
200
110
220
900
600
360
200
1400
too
600
8.300
10.000
1.600
500
500
200
soo
Public CUUtlss
American k Fgn. Pr., $6
American k Fgn. Pr., ST..
American Gas k El. 4*4%
American P. k U, $5
American P. * L.. $6
Appalaeh. EL Pr., 4V4%-
Colum. * Sou. 0. EL, 6%
Commonw. k Sou.. $6
Consol. Edison. $5
Electric B<L * 8h.. $5
Electric Bd. * 8b.. $6
Pr. k Lt. $0 —
Electric Pr. k Lt. $7 -
Engineers Pub. Sen., $5.
Engineers P. 8err , $5.50
Gulf 8tat es (JUL. $6
Idaho Power. 7% —__
Kara. City P. k L. B, SO.
Kansas Oas k Elee., T%~
Mississippi Riser Pr., 6%.
Mew Engl. Pr.. 6%
N. T. 8tete E. k 0.. 5.10%
North Amer. Co.. 6% ($50
•iSTItttanfOmftio K-Pacific Lighting. $5 .
Pug. Snd. PAL. $5—
United Gas. $7
United Lt k Pr., $8 1st—
Virginia EL k Pr.. $6 -._
Washington Water Pr.. $8.
Pr. «Lt, 6%~
Pr. k Lt. T%.
282.900 LOT
295.850 1.11
203.285 .Tf
99.750 M112.500 .4119,500 .Of
(D53.698 M151,700 Jf91.000 44
53,300 Jt
141.488 4S
40.138 .IS
303416 40
21,200 .08
22,700 .09
22.000 .08
[TJ13408 .05
26,730 .10
22,900 .00
60.115 JS
1144,730 .If
20.450 .08
89,400 41
33,150 .13
61400 .13
331488 1.35
1,137.500 4.19
36.000 .14
68,500 4SrTJ52.500 40
ffil9,70O .Of
30475 .11
8.831400 14.40
8,000 Mo.-Kans.-Tei. I.R., 7%. 10,250 .08
Total pfd. stocks 6.209.186 S8.40
Common Stocks
Agricultural Equipment
3400 Deere* Co 89.513 .34
Amusements
18,100 Paramount Pictures 808.1T6 1.14
91.800 .888,700 CloeU. Peabody —
Automobiles am
4,000 Borg-Warner
8400 Chrysler Corp.
18,400 General Motors
Aftatlon
400 American Airlines
3.500 Eastern Air Lines
1,000 Pan American Airways .
1.700 Penna.-Central Airlines
8400 United Air Lines
116.400
563.363
550.250
.4T
2.12
1.08
1.239.013 4.67
22.200
80,934
25,625
18.275
42.350
1.000 American Be-Insuranee —
10.700 Globe k Rutgers Fire
400 Guaranty Trust, N. T.
8,000 Marine Midland Carp
900 National City Ik. of N. T_
911.814 S.4S
Building Equipment a
'4,000 Holland Furnace
10,800 Minneapolis-Honeywell
3,700 Otis Bletator
1.300 Sherwin-WUItam
189488
[1195.000
m66,875
UJ94.2009,875
rjJ26.438
291,888
Beooratioo
116,000
642.600
59.663
106,300
.08
40.10
.07
.16
.71
40
JS
48
.04
.10
1.10
.44
S.42.22
.40
Total bonds 3.987.294 16.01988.663 8.48
[152]
SELECTED INDUSTRIES, INC
soo
Chemicals
31.800 .13
400 Allied Chemical .18.000 .22
5.400 American Cyanamld B 215.32S .81
6.100 Union Carbide 494.100 .86
Drap
T89.225 To!
2.200 Merek * Co (E64.625 .24
Electrical Equipment
8,850 Chicago Flexible Shaft 250.250 .94
1,700 General Electric 51.850 .20
802.100 7l4
2, TOO
7,700
6.400
11.900
6,000
500
1.000
Finance Companies
Commercial Credit T6.275
Commercial Invest. Trust. 246,400
10,000 Dome Mines
9,200 Homestake Mining
3,000 Mclntyre Porcupine
15,000 So. Amer. Gold ft Pitt. ..
100 Christiana Securities 13218,000
297,200 General Shareholdings 189.813
Machinery
10,800 Parkersburg Big ft Keel
Miscellaneous
1,500 Doehler Die Casting
1.800 Oenl. Time Instruments
T.000 Outboard, Marine ft Mfg
4.000 Simmons Co.
14.900
10,600
18,900
3.400
17.600
7.600
6.700
19.000
9.100
4,600
3.800
6.000
4,800
13.T0O
4.100
94400
80,000
1.024
11,500
5.500
25.600
1,000
80.800
5,000
2.800
20.600
13.800
2458.963
Paper and Pulp
Rayonler Inc. 57,600
Public Utilities
Amer. Gas ft Elec 263.725
Commonwealth Edison 86,613
Commonwealth ft Southern 26,522
Commonw. ft Southern wis. 1.250
Detroit Edison 17.664Electric Bond ft Share 24.438
Engineers Public Service.. 15,813
North American Co 256.000
Peoples Gas Lt. ft Coke.. 46.000
United Lt. ft Pr. "A" 7.700
.29
.93
322,675 1.22
Foods and Beverages
Canada Dry 91.200
National Distillers 306.425
Pepsl-CoU 175.500
Snider Packing 8.250
Walker ( Hiram )-G. ft Worts 39.500
.34
1.15
.66
.03
.16
620,875 1.33
155.000
262,100
117.000
33,750
.59
1.10
.44
.12
597.850 2.25
.80
.52
352,313 1.32
110.700 .43
38.250
19,500
194.250
65.000
.14
.07
.74
.34
817,000 1.19
1,750 Aluminium Limited 153.563
6.600 International Nickel 191,400
5,900 Kennecott Copper 171.100
8,000 Noranda Mines (D260.000
776.063
Office and Business Equipment
400 Intl. Bus. Mach. 59.800
3.400 National Cash Register 65,875
.58
.73
.64
.98
2.92
.23
.35
135.675 .48
Oils
Consolidated Oil 102.438 .38
Continental Oil 290.175 1.09
Ohio Oil 822,075 .84
Phillips Petroleum 153.000 .58
Pore Oil 801.375 .76
Shell Union Oil 139.650 .53
Skelly Oil 303,675 .76
Socony-Vacuum OU 164,750 .73
Standard Oil ( Indiana) 259,350 .98
Standard Oil (N. J.) 212.175 .80
Standard Oil (Ohio) 132.300 .50
Texas Co. 249,000 .94
8.89
.99
.33
.10
.07
.09
.06
.97
.17
.03
3.81745,725
Radio and Electronics
Pbllco Corp 71460 ST
Railroad Equipment
Natl. MalL ft 8teel Cast... 39,900 .15
Railroads and Other Transportation
Chesapeake ft Ohio 700.400
Greyhound Corp. 196.338
3.64
.74
18.400 Kansas City Southern
700 Louisville ft Nashrllle ...
35.000 Missouri-Kansas-Texas ..
1,500 Norfolk ft Western
16.000 Pennsylvania R.R.
Retail Trade
1.000 Best ft Co.
8.700 Green (HL.)
2,000 Sears. Roebuck ft Co.
1,600 Western Auto Supply
1.800 Woohrorth Co. (P. W.) ...
9<i,600
42.088
28.438
242.250
376.000
.36
.16
.11
.91
1.42
1.682.114 6.34
22.875
278.400
123.750
31.400
55.575
.68
1.05
.47
.12
.21
Shipbuilding
35,800 Newport News Shlpbldg...
Textiles
5.000 Burlington Mills
613.000 1.93
617 550 8.33
101.87.1 .3M
3.000
3.000
22.500
500
Philip Morris 236.250
Underwriting Companies
Union Securities Corp. ... 3)660.517
Miscellaneous
Lehigh Coal ft Navigation. 95.625
Union Service Corp. (25.000
.89
2.4V
.36
.02
100.626 .38
Total stoeks.$14,701.810 55.40
QOver the Counter Market In New York,
[Taken at fair value In the opinion of the Corporation.
jDTaken at fair value In the opinion of the Corporation,
representing one-balf of the consolidated net sssets of Union
Securities Corporation as of December 31, 1942 (see Note
2 to balanee sheet).
[SUnless otherwise Indicated, these securities are traded
in on the New York Stock Exchang or New York Curb Ex
change, and- market values art based on last recorded sales
on December 31, 1942, or lu the absence of recorded sales,
the mean between the closing bid and asked prices.
ClMitfcatten erf JUaeta, Dec 11 (at market
or appraised value:
1942—
U. K.
Bonds:Railroad
Utilities
Industrial, etc..
Total bds.
Pfd. stocks.
Railroad
Utilities
Industrial
Amount
$498481
911.814
1.330,156
1,745,325
% of
ToUl
1.88
3.43
5.01
6.57
1941-
Amount
$557477
523,837 2.03
871.345 3.38
590.223 3.29
3,987.284 15.01 1.984,305 7.71
30.250 0.08
3.821.300 14.40
2.867,586 8.92
7.500 0.03
4.167.524 16.20
1.770.741 6.89
Tot. pfd. stk. 6.209,136 23.40 5.945.765 23.12
Com. stocks:
Railroads 1,682.114 6.84 1,530.407 5.94Utilities 745,725 3.81 812,140 8.16Banks, Insur... 291.m 1.10 345,488 1.84
322.675 1.33 337,835 0.89Inv. cos. 352413 1.33 440,381 1.T1Agric. equip. 89.513 0.34 412.250 1.60Amusements 303.175 1.14 363.450 1.01Apparel 81,800 0.36 106.500 0.41Autos .. 1486,013 4.67 449.438 1.75Aviation 188.388 0.71 382.300 1.49Foods ft bev... 620.875 3.33 334.900 1.80Bldg. equip... 823,563 3.48 590,013 3.26Chemicals 788.226 3.01 1.564,650 6.08Containers _ 164.988 0.64Drugs 64.625 0.24 911.888 0.82Elec. equip. .. 302.100 1.14 251,876 0.98Gold min. 587.850 3.25 604,450 1.96Machinery 110.700 0.42 48.600 0.16Misc. mfg. ... 317.000 1.19 183,000 0.62
Metals 776.063 2.92 1.077.29T
1.723*714
4.19Office equip. .. 125.675 0.48
ioliOils - 3458.863 8.89
Piper 57,600 0.22
Radio 71,250
39,900
0.27
0'08R.R. equip. .. 0.15 18,500
Retail 512,000 1.93 630.761 2.41Shipbuilding .. 617,550 2.33 886.275 3.45
Steels __ _ _ __ 526.138 2.06
101,875 0.88 96,000 0.37Tobaccos 236.250 0.89 187,125 0.73
Mlsc 100.625 0.38 98.750 O.S«Underwriting 660417 2.49 630.938 1.45
ToUl com. 14.701,810 55.40 1.1.638.804 60.80
Cash ft rec. .. 1,144.494 4.31 1.585.920 6.10
Grand total 826.541.116 100.00 $2.1.722,171 100.00
[153]
SHAWMUT ASSOCIATION
BACKGROUND
This investment company was organized in 1928 as a voluntary trust under Massachusetts law
and the indenture does not provide for regular stockholder meetings. It operates as a non-leverage
type of management investment company, and its four trustees, whose appointment is subject to
approval by the executive committee of the National Shawmut Bank of Boston, are all officers or
directors of the Bank, with broad investment discretion.
Management is provided by the trustees, but the fund also has a contract to receive advice on
its equity holdings from State Street Research & Management Co., which manages State Street Invest
ment Corp., one of the oldest and most successful of the open-end investment companies. Paul Cabot,
president of State Street until his resignation in September 1941 to take up war work in Washington,
was an officer and director of Shawmut.
The Trust agreement provides for participation payments to the Bank, depending on earnings,
equal to one-eighth of annual net earnings available for the common shares. For the present the Bank
has agreed to deduct from this all expenses except taxes and legal costs. It also provides that the Bank
is to receive one-half of all dividend payments over $2.50 a year; however, the most paid on the
common stock in any year so far has been 82$ a share in 1936 and 1937. Compensations were paid to
the Bank in 1928, 1929, 1936, 1937, 1940 and 1941. In liquidation, the Bank is to receive one-third of the
assets remaining after common shares receive the original paid-in amount ($20.00 to $22.50) plus 5%
per annum, less dividends paid.
POLICY
Approximately 54% of year-end assets were invested in a moderately diversified list of common
stocks, principally industrials; 5% was in utility holding company preferred stocks; and about 12%
was in cash and Treasury notes. The remaining 27% (based on underlying asset values) was invested
in majority holdings of the common stocks of seven suburban Boston banks, plus a majority of the
preferred 'B' shares of one of these banks. These seven banks showed total consolidated assets of
$22,766,000 and deposits of $19,872,000 at the year-end. The Association showed a gross yield on all
holdings of 5.4% last year.
The management record has been outstanding, investments showing a better result than the
Dow-Jones Composite Stock Average in eight of the last 13 years and equalling it in one. Over-all
results for the entire period are among the best.
Expenses last year were well below average, amounting to only .65% of average assets, a
decline of $6,181 from the previous year.
SECURITIES
The Common sfock is of about the same calibre as the other high grade non-leverage issues
reviewed in this analysis and because of the excellent management record deserves consideration in
this group. It should be noted however that the portfolio is not fully liquid as $4.50 of the year-end
asset value of $16.55 a common share is more or less frozen in non-volatile bank stocks. At the year-
end, the stock sold at SVa or some 40% below its asset value, so that its market price in a rising market
could advance more rapidly than its asset value. Dividends have been paid regularly since 1929, last
year's payment amounted to 65^ compared with 67 Vz$ in 1941. It is apparently the management's
policy to pay out practically all net income. On the basis of last year's dividend, the stock yielded
6l/2% at the close of the year. Dividends paid during 1942 were reported to be fully taxable.
The stock is listed on the Boston Stock Exchange, where it has a fairly good market.
[154]
SHAWMUT ASSOCIATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS LIABILITIES
Cash, U. S. Gov't Bds., etc. $ 853,323 13% Payables
& Reserves $ 20,328
General Investments at Market *
Preferreds $ 343,432 9% Capitalization^
Common Common Stock
Ind. $3,195,835 91% no p.v. 6,455,792 (a)
P. U. 323,446 9 (390,000 shs.)
100%
3,519,281 91
100%
3,862,713 60
Special Investments (b)
Bank Shares 1,760,084 27
Total $6,476,120 100% Total $6,476,120
* Cost price $4,661,956.
tBook Surplus $2,231,087.
(b) Represents net asset value of majority holding of common stocks of seven (a) Applicable to Common at 12/31/42.
suburban banks plus a majority of the preferred 3' shares of one of these banks.
SUMMARY OF CAPITALIZATION
Asset Value
Assets Applicable Per Share
Common $6,455,792 $16.55
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Shawmut
Association + 16 —7 -6 + 3 +20 -26 +23 +27 + 7 +3 0 -24 -13
Dow-Jones Com
posite Stocks (d) + 15 -10 -10 + 3 +29 -34 +32 +41 -1 + 49 - 16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Shawmut Association +9 + 2 +5 +27 -7 + 15 +73 -34 +6
Dow-Jones (d) +3 -7 -5 +22 -20 + 6 + 176 -73 -40
(d) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income .70 .80 .69 .61 .45 .87 .82 .51 .51 .51
Dividends .65 .675 .60 .60 .40 .82 .82 .40 .40 .55
Net Asset Value
at year-end 16.55 14.80 16.53 18.30 18.26 15.56 21.84 18.56 14.99 14.33
Price Range
High
Low
Last
10% 11
8
12 11%
8V4
11
12%
8
10
165/8
8'/8
15% 12
8
9% 10%
63/47V2
10%
11
14
5%
8%
6%
Annual Volume of Trad
ing Boston S. E.
(000 omitted)
9% 8V2 9% 11% 63/4
12 19 26 30 30 36 64 42 25 52
[155]
SHAWMUT ASSOCIATION
Lift Of Holding M of DM. 31, 1942:
Par Val. Bonds Mkt. Vtl.
$200,000 U. S. %% Treas. ctfs Ser. E-'42_ $200,062
Shares Preferred Stocks
r>00 Amer. Power * Light $6— 9,375
3,000 Commonwealth A Southern $6 111,000
1,000 Electric Bond * Share $5 41,000
800 Electric Bond fc Sture {6 34,300
500 Illinois Iowa Power 5% 12.625
3.500 United Corp. $3 62,663
600 United Gas Corp. $7 1st 68,250
183 Wabash R.R. 4%%
4.400
950
3.340
6.000
500
200
3.400
3,300
3.500
5.000
1,600
4.100
5.000
15,900
1.000
6,000
6.900
3,300
500
2.000
3.700
6.200
1.400
1.000
3.000
2,000
700
4.600
600
Public Utility Common Slocks
Amer. Gas k Electric
Amer. Tel. A Tel.
Detroit Edison
North American Co.
I'nlted Light It Power A
343,432
84.700
121.006
57,615
60,000
125
323,446
Industrial Common Stocks
Aluminum Co. of America 20,600
American Metal 68,000
American Radiator 19,800
Armstrong Cork 106,750
Borden Co. 113,750
Burroughs Adding Mach. 15,200
Chrysler Corp. 278,288
Colgate-Palmolive 84,375
Commercial Credit 81,925
Commercial Investment Tr. 32,000
Continental Oil 164.250
Deere & Co. — 187.163
Distillers Corp.—Seagrams 71.775
First National Btores 15.375
General Electric 61,000
General Motors 164,188
Greyhound Corp. 8I ?!5
International Harvester 83,475
International Nickel 29.000
Kennecott Copper 2! -992
Kroger Grocery * Baking M.000
Lone Star Cement 26.600
Montgomery Ward — 15H95
Mueller Brass 13.050
6,800 National Dairy oo akq
3.000 National Distillers 77 2%0
3,288 Pullman, Inc. " 86 721
1,500 Safeway Stores 52 500
1.400 Sears. Roebuck ReVl
5.000 Servel, Inc. 55 000
18,000 Socony-Vacuum Oil 184 500
3.000 Standard Oil of Cal. " 87 750
2.000 Standard Oil (Ind.) 57 000
4.200 Texas Co. 174^300
2,000 U. S. Smelting 92 noo
4.000 Woolworth (F\ W.) 123 500
3,195,835
7.694
4.424
7.999
4,800
2.668
813
835
$4,062,775Bank Stocks
(Shawmut Association holds a majority of outstanding
common shares of following banks, and a majority of pre
ferred B shares of Merchants National Bank of Salem. )
19,889 County Bank & Trust Co , Cambridge, Mass.
Hlngham Trust Co., Hlngham, Mass.
Lexington Trust Co., Lexington, Mass.
Melrose Trust Co., Melrose, Mass.
Merchants National Bank. Salem, Mass. pfd. "B"
Merchants National Bank, Salem, Mass.
Needham National Bank, Needhasa, Mass.
Winchester National Bank. Winchester. Mass.
Classification of Invostmonts, SI, 19*2:
Bands
Preferred stocks
Utility cannon stks..
Ind. common stks.
Bank stocks
Demand loans
Acer. Int.
Cash
Book
Value
1200.000
423.484
549.484
3,688.989
Mkt.
Value
$200,062
348,482
S2S.446
3.195,835
BJ1.T60.084 rj]1.760.084
33,273 33.273
248 348
505,853 696,853
Asset
Value
Par Sb.
$.51
.87
.83
8.17
[D4.60
.09
1.52
Totals $7,251,415 $6,452,233 $16.49
BStock In seren suburban banks at aggregate amount
of pet assets applicable thereto as shown by statements
of condition of the banks at Dec. 31, 1942.
[156]
NOTES
[157]
TOBACCO AND ALLIED STOCKS, INC.
BACKGROUND
Formed in January, 1929, this company operates as a non-leverage type management invest
ment company specializing in the securities of the tobacco and related industries. It is managed by
a Board of Directors of ten, including at last report officers of Lee Higginson Corporation, Bank of
the Manhattan Company, Clark, Dodge & Co., as well as of the companies in the tobacco industry:
Webster, Eisenlohr, Inc., Universal Leaf Tobacco Co., Inc. and Cullman Bros., Inc. The latter firm
which are highly regarded dealers in leaf tobacco, were one of the originators of this fund and are
the largest stockholders with 39% of the shares in this ownership. Cullman Brothers, are also mem
bers of the New York Stock Exchange.
POLICY
While not limited by charter to a particular investment policy, the company has restricted its
investments to companies engaged in the tobacco and allied industries. The company's policy has
never been to operate as a trading company, but rather to take and retain substantial positions in
companies regarded as well-managed and having favorable trade positions and long-term prospects.
About two-thirds of its assets at the end of 1942 were invested in well-known companies in the
tobacco field, with a heavy preference shown for Philip Morris, holdings of which amounted to about
20% of total assets at market. Other relatively large investments included American Tobacco, R. J.
Reynolds Tobacco B, United States Tobacco, Imperial Tobacco Co. of Canada and George W. Helme.
Late in 1941 Tobacco and Allied Stocks acquired voting control (55%) of Benson and Hedges,
an independent manufacturer and seller of cigarettes and other tobacco products, including "Virginia
Rounds" and "Parliaments." Market value of the 5,387 preferred and 27,741 common shares of this
company held by Tobacco and Allied amounted at the year-end to nearly a quarter of the latter
company's assets at market. Four of its directors are also on the board of Benson and Hedges.
Remaining 11% of holdings consists of companies considered as "affiliated" under the Invest
ment Company Act of 1940, the most important of them being American Sumatra Tobacco Corporation.
Management record of Tobacco and Allied, when compared with the Composite Average, has
been outstanding, bettering it in eight years, equalling it in one of the past 13 years, and far sur
passing it for the entire period since the end of 1929. Primarily this record is indicative of the invest
ment qualities of tobacco securities, particularly in declining markets.
Gross income from dividends last year amounted to 6.0% of assets. Expenses were below aver
age, totalling .58% of average assets, a decline of $9,643 from 1941. Portfolio turnover was light last
year, amounting to only 9% of average net assets, compared with 22% in the previous year.
SECURITIES
At the year-end, the capital stock was available at a discount of 33% from its liquidating
value. At that time a small amount of leverage was provided by a $450,000 bank loan, due April 1,
1943. This loan has since been reduced to $400,000 and renewed to mature October 1, 1943.
The stock represents a straight investment in the tobacco industry and may be considered
attractive by anyone desiring to invest in this industry because of the discount and the management
and diversification provided. It can be expected to fluctuate about in line with the leading tobacco
stocks, with its movements somewhat accentuated so long as leverage is provided by bank loans.
The company follows the policy of paying out all income, including security profits, as divi
dends, and paid $3.70 last year, compared with $3.85 in 1941. Dividends have been paid in every year
since 1933. The 1942 dividend is fully taxable. The stock yielded 9% at its year-end price on the
basis of last year's dividends. It is traded inactively, on the New York Curb Exchange.
Repurchases of its own stock have been made by the company in minor amounts in the last
three years, 100 shares having been bought during the past year at a cost of $40.22 per share.
Portfolio, as of Dec. 31, 1942:
(Common shares unless otherwise indicated)Affiliated companies: Shares Mkt. Val.
American Sumatra Tobacco 16,500 $358,875Tobacco Products Export 35,900 89,750
Julep Tobacco 170 35*Julep Tobacco pfd 83'/3 8,333*
456,993Other securities:
American Tobacco 7,000 2'5,750American Tobacco B 300 2,900Axton-Fisher Tobacco 6% pfd 174 13,137)Bayuk Cigars .300 29,575
British-Amer. Tobacco ord ,500 6,749
M» :::::::::::::::::::::::: |S 2 :|
&Wcanadaord7::::::::::::::: ^ SffiInternational Cigar Mach 5,900 70,800
Liggett & Myers Tobacco 3,000 184,500P. Lorillard 1.000 16,500MacAndrews & Forbes 1,800 36,000Philip Morris 11,850 933,187
R. J. Reynolds B 11,400 283,575Seal-O-Sac (Canada) 500 251
U. S. Tobacco 11,400 245,100Universal Leaf Tobacco 1,100 64,900Waitt & Bond $2 A pfd 9,900 74,250
2,713,609Majority-owned subsidiary:
Benson & Hedges $2 conv. pref 5,387 199,319
Benson & Hedges 27,741 832,230
1,031,549
Total $4,202,151
* Cost and fair value as determined by Board of Directors.fBased upon bid prices.
[158]
TOBACCO AND ALLIED STOCKS INC.
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc. $ - 119,751 3%
General Market Investments*
Preferred
Common
$ 87,387 3%
2,626,222 97
100%
Securities of Subsid. and affil.
Preferred $ 207,652 14
Common 1,280,890 86
100%
Total
* Book Value at cost $3,037,103
t Book Surplus $1,626,489.
2,713,609 63
1,448,542 34
$ 4,321,902 100%
LIABILITIES
Payable &
Rerserves
Capitalization^
Unsec. Notes
Payable to
banks
(due 4/1/43)
Capital Stock,
no p.v.
(66,913 shs.)
Total
$ 50,906
450,000
3,820,996 (a)
$4,321,902
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
Bank Loans
Capital Stock
Entitled to
in Liquidation
$450,000
Balance
Assets
Applicable
$4,270,996
3,820,996
Coverage
949%
$57.10
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Tobacco & Allied +15 -8 -6 0 +27 -12 + 10 + 11 + 44 +57 +5 -26 -3
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 + 32 + 41 -1 + 49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
Bull Mkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Tobacco & Allied +6 -1 -1 +26 + 11 + 22 + 89 -24 + 59
Dow-Jones (b) +3 -7 -5 +22 -20 +6 + 176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Per Common Share 1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Net Income 3.14 3.48 3.14 3.33 3.09 3.54 3.23 2.88 3.50 3.56
Dividends 3.70 3.85 3.25 3.40 4.00 4.00 3.25 5.50 4.50 .50
Net Asset Value
at year-end 57.10 52.53 62.08 73.47 73.38 63.16 78.33 78.37 77.40 55.13
Price Range
High
Low
Last
49
38
38
53
43
50
59
48%
54%
63
54
58
63
50
60
66
55
64%
69
65
67
73% 65
45
65
40%
60 22
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
73% 38%
1 2 2 1 1 2 2 3 2 5
[159]
TRI-CONTINENTAL CORPORATION
BACKGROUND
Tri-Continental was formed at the end of 1929 by merger of two predecessor companies under
the sponsorship of J. & W. Seligman & Co., who continue as the recognized sponsors of this fund and
have three members on the Board of Directors. Other board members are partners of Clark Dodge &
Co. and Homblower & Weeks; John R. Simpson, chairman of the Executive Committee of the Fiduciary
Trust Co.; Eugene W. Stetson, President of Guaranty Trust Co.; Arthur F. White, President of Dominion
Securities Corp., Ltd.; a partner of the law firm of Cravath, de Gersdorff, Swaine & Wood and former
Under-Secretary of the Treasury, John W. Hanes.
POLICY
Tri-Continental in the early 1930's acquired controlling interests in a number of other invest
ment companies, partially at least for the purpose of helping to support a large research organization.
It now holds more than a majority (about 60%) of the common stock of General Shareholdings Corp.
and about 69% of the Class 'B' stock of Capital Administration Co., Ltd. It holds less than a majority
interest in Selected Industries, Inc., and Globe & Rutgers Fire Insurance Co. These investments
accelerate the leverage of its outstanding securities. It also owns, with Selected Industries, the Union
Securities Co., active in securities' underwriting and distribution. Approximately 9% of total assets
are invested in these situations.
The general portfolio contains a long list of securities, with some attention to "special situations."
Common stocks comprised 59% of the fund at the year-end, 22% was in preferreds, 10% in bonds,
and 9% was in cash and equivalent. The portfolio showed a gross yield of about 5.8% last year —
about $223,000 less than in 1941. The company's management record on the whole has been good,
bettering the Dow-Jones Composite Stock Average in eight out of 13 years. With the exception of
the last two years, however, all of the years of relatively good performance occurred prior to 1937.
Turnover of investments continues more frequent than in most other similar funds, as is typical of
the other companies in the Tri-Continental group. Last year's purchases and sales totalled $11,599,695,
or 47% of average assets, compared with a turnover rate of 58% in 1941 and 54% in 1940. Operating
expenses are about average, amounting in 1942 to .78% of average assets. Expenses were about
$29,000 less than in 1941.
SECURITIES
The $2,460,000 of 5% Convertible Debentures due January 1, 1953 are extremely well pro
tected and show a yield of about 4.7% based on the year-end price of 105%. They were callable at
105 up to January 1, 1943, and, thereofter the premium is reduced Vz of 1% for each year or part
thereof. They are convertible into 80 shares of common, per $1,000 face value. Listed on the New
York Stock Exchange, they have consistently sold at a premium since issuance in 1933.
The $6 Cumulative Preferred stock is speculative and may be characterized as a "business
man's" risk. It was available at a 32% discount from its liquidating value at the year-end and showed
a yield of about 8.8% at that time. It should be noted that net earnings were $6.72 per share last
year compared with $8.14 earned in 1941. While year-end asset coverage was about 1.8 times the
market price, a large degree of leverage is created by the substantial senior obligations. The stock
is relatively inactive, being traded in 10-share units on the New York Stock Exchange. The com
pany has repurchased approximately two-thirds of this issue and continues to buy additional quan
tities from time to time. Last year's purchases amounted to 1,360 shares at an average cost of $64.90
per share. Dividends have been paid regularly and without interruption. The dividends in 1942 were
stated to be 100% non-taxable.
The Common sfock usually sells at a premium over asset value. At the end of 1942 this premium
amounted to 55%. This is explained by the large leverage the stock possesses, both in its own direct
portfolio appreciation and in the additional leverage obtained through the investments in other
companies of the leverage type. Because it is relatively more active than most other leverage trust
shares on the New York Stock Exchange, it has special attraction for the investor wanting to make
a substantial commitment in a situation of this type. Common dividends cannot be paid unless the
net assets available for the preferred stock equal twice the amount the preferred is entitled to in
liquidation ($28,276,000). Dividends of 25^ and 50^ a share were paid in 1937 and 1936 respectively.
Also outstanding are 1,008,642 Perpetual Warrants to purchase 1.22 common shares at $18.46.
These were issued under the consolidation plan in 1929 to holders of preferred stock in the prede
cessor companies, which had been issued with warrants, and to holders of warrants issued separately
by the predecessor companies ta the sponsors and their associates. These warrants are listed on the
New York Curb and the fact that they have any market value at all is indicative of the premiums
always payable for even the most extreme options. It should be noted that these warrants sold at
5V8 in 1936 when the common sold at 12 and as low as 1/ 128th in 1941 when the common sold at 5/e.
[160]
TRI-CONTINENTAL CORPORATION
Simplified Balance Sheet
As of Dec. 31, 1942
Cash, U. S. Gov't Bds., etc
Investments, at market*
Bonds 3
Preferreds
Common
Ind. $10,823,480 71%
P.U. 603,764 4
R.R. 1,376,888 9
Fin. 1,612,705 11
Inv. Co. 139,350 1
Subsid. 752,400 4
ASSETS
100%
$ 2,399,799 9%
2,721,229
5,737,191
11%
24
15,308,587 65
100%
23,767,007 91
Total
* Book value at cost $37,108,671.
t Capital Surplus $23,025,058; Earned Surplus $1,609,019.
$26,166,806 100%
LIABILITIES
Payables incl.
Reserves $ 547,743
Capitalization: f
2% Bank Loans
(due 9/30/44) 5,900,000
5% Conv. Deb.
(due 1/1/53) 2,460,000
$6 Cum. Pref.
Stk., no p.v.
stated val. $25
ent. in liq.
to $100 a sh.
(141,380 shs.) 14,138,000
Common Stock,
$1 p.v.
(2,429,318 shs) 3,121,063 fa)
Total $26,166,806
(a) Applicable to Common at 12/31/42.
Bank Loans
Debentures
$6 Preferred
Common
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable
$ 5,900,000 $25,619,063
2,460,000 19,719,063
14,138,000 17,259,063
Balance 3,121,063
Coverage
434%
802%
$122.08
1.29
OPERATING RESULTS
(See Page 10)
STOCK DATA
Net Income
/<7Y3 1942 - 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferred a* 6.72 8.13 7.11 5.55 3.76 11.68 15.19 5.52 5.00 4.24
Common jr .04 .12 .06 d.03 d.14 .35 .39 d.05 d. 11 d. 19
Dividends
Preferred 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
Common Nil Nil NU Nil NU .25 .50 Nil Nil Nil
Net Asset Value
at year-end
Preferrednut
122.08 101.22 118.64 150.69 179.83 152.85 305.64 171.50 116.26 111.71
Common 1.29 .07 1.11 3.04 4.85 3.27 12.89 7.68 1.75 1.26
Price Range
5% deb. 1953
High 106% 107% 108% 109 110 123 130 118% . _
Low 105 103 104 104% 103 104 115 112%
Last 105% 103 107 106% 108% 107% 121% 117% — _
Preferred
High90
71 75 82% 88 91 109% 110 97% 78 75
Low LI, 56% 60 64 74 77 82 93 69 60% 41
Last 68 60% 74% 73% 86 81% 108 93 70 60
Common
High
li
2% 2 2% 4% 4% 11% 12 8% 6% 8%
Low % % 1% 2 2% 3% 7% 1% 3 2%
Last 2 % 1% 2% 3% 3% 9% 7% 3% 4%
Warrants
High 9*6 % %6 1% 3 5% 2% 2% 4%
Low 9ia % 1% % % %
Last 9is %> % % % % 2% 2 1 1%
Annual Volume
of Trading (c)
(000 omitted)
5% deb. 1953 83 113 120 92 288 275 224 89
Preferred 5 9 5 6 10 9 35 16 17 22
Common 219 379 235 312 403 574 796 706 404 948
Warrants 58 118 51 61 47 115 142 71 47 78
(c) 5% Debentures, Preferred and Common Shares traded on New York Slock Exchange. Warrants on New York Curb Exchange.
[161]
TRI-CONTINENTAL CORPORATION
ASSET VALUE
PER SHARECOMMON STOCK
100
10
-10
-100
$16.43
$ 9.96"
/•ftit
itit1 11 1i >
/ •/ *
/ t/ *
//
/ */ »
/
d $2. it
I—
d $4. 24
-
)
-50% -25% DE^4231 +25% +50%/ +75% +100%
This chart shows the potential rise or tail in asset values of the above stock which should take place with any
change in market conditions from December 31st. 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks of the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF TRI-CONTINENTAL COMMON STOCK
The fluctuations in the asset value of this stock should be approximately as follows with any variation from the December
31st, 1942 portfolio position. Leverage figures were adjusted for estimated increase or decrease in asset values of investment
company leverage shares owned by Tri-Continental Corp.; figures further adjusted for dilution through warrants and conversion
rights.
Applied to Common Applied to
In Event of Shares owned all Assets
Rise of 10% $1.38 $1.78
25% 2.29 3.44
50% 4.43 7.90
100% 9.96 16.43
Fall of 10% .17 d .23
25% d .74 d 1.74
50% d 2.26 d 4.24
[162]
i
UNITED CORPORATION
BACKGROUND
United Corporation was formed in January, 1929, and was generally identified with the Mor-
gan-Bonbright interests as a utility holding or investment company. A part of its growth was accom
plished by exchange of its own securities for those of Public Service Corp. of N. J., United Gas Im
provement Co., Columbia Gas & Electric Corp., and Niagara Hudson Power Corp. A seven-man direc
torate includes Attorney John J. Burns (formerly with the S.E.C.); George L. Burr, formerly partner
of Lazard Freres; Bruce D. Smith, former Vice President of Northern Trust Co. of Chicago; O. Kelly
Anderson, President of Consolidated Investment Trust and of Boston Fund, Inc.; and Frederic C.
Dumaine, Jr., a trustee of Amoskeag Co. Originally, company spokesman said that the aim of United
was to further mutual cooperation between the utilities involved, with no attempt to gain operating
control. St. Regis Paper owns 1,341,666 common shares and voted in favor of the management last
March when an attempt was made to elect new directors.
POLICY
In 1938, the company registered under the Public Utility Holding Company Act and filed notice
of its intention to remove itself from a holding company classification and to retain its investment
company status. This was to be accomplished by scaling down, as rapidly as possible, stock owner
ship in any single utility company to 10% or less, and to devote a part of its large capital to under
writing new capital issues and to general investments.
Since 1938, the major activities of the corporation appear to have been centered in a series of
uncompleted hearings, negotiations, etc. with the S.E.C. and the results to date have been inconclu
sive. Principal holdings of utilities have been only nominally reduced—the huge U.G.I, investment
(6,066,223 shs) has been untouched, but plans for dissolution of U.G.I, are well advanced, and United
will receive stock of Philadelphia Electric. Although in 1939 the investment of $8,000,000 in non-utility
securities was approved, only $4,474,845 was so invested, and there have been no subsequent
changes in the original uninspiring list of 25 standard issues. The portfolio showed no change last
year. Technically, it is still a Public Utility Holding Company, rather than an Investment Company.
The entire portfolio showed a gross return of 6.1% last year, compared with 7.6% in 1941, and
expenses were among the lowest of any investment company equaling only .43% of average net
assets last year. Cash and equivalent at the year-end equalled 12% of the total fund.
SECURITIES
The $3 Cumulative Preference stock is of speculative calibre, and with no senior capital ahead
of it, might be considered an interesting long-term holding if it were not for the past and until recently
unfavorable position of its major investments. Fairly active on the New York Stock Exchange, it was
available at a discount of 40% from asset value on December 31, 1942. Dividends in the past have
been fairly regular, with small arrears being cleared up from time to time. Cash earnings exceeded
preferred dividend requirements for many years, and covered them about 1.25 times in 1940, but earn
ings for 1941 amounted to only $2.74 per preferred share and for 1942, only $1.43 per share was
shown. Last year, the stated value per preferred share was reduced to $5, as a consequence of which
arrears of $3 per share were paid up on June 15, and on February 9, 1943 a $1.00 dividend was paid,
leaving $2 per share accruals at that date. The 1942 dividend was 93.4% taxable. The UGI holdings
amount to 2Vz shares for every share of United Preferred.
On November 10, 1941, the Company filed with the S.E.C, for its approval, a plan to expend
not more than $2,500,000 over a 12-months' period to purchase its preferred stock. A hearing was held
before the S.E.C. on December 2, 1941, but no announcement of the result has yet been made.
The Common stock is in the "under water" class and has been entirely influenced by the sharp
decline in utility holding company common share prices and the aforementioned attitude of the S.E.C.
on any capital reorganization plan. It has considerable leverage through the large amount of pre
ferred stock outstanding, which has been an adverse influence in a period of declining utility share
prices but which could give it great momentum in any sharp upturn of utility common stocks. Divi
dends were paid in all but two of the years 1930-37, but none since, although earnings were shown
on the common stock annually until 1941. No common dividends can be paid, unless full refund has
been made for all dividend payments on the preference stock charged to capital surplus. The stock
has a broad market on the New York Stock Exchange.
Warrants entitling holders to purchase at any time 3,732,059 shares of common stock at $27.50
per share are outstanding, quoted at end of 1942 at 1/64 bid on the New York Curb, which is a posi
tive proof that options have a value regardless of how remote they seem, for the common was
11/32 bid on the same date.
[164]
UNITED CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds.. etc. $ 9,061,800 12%
Investments, at market *
Common
P.U. $61,396,046 95%
Ind. 3,743,577 5
100%
65,139,623 88
Total $74,201,423 100%
* Original cost price about S587.000.000, present book value
(as restated on 6/30/38) $148,181,823.
f Book surplus $130,001,797.
LIABILITIES
Accrued Taxes $ 268,773
73,932,650 (a)
Capitalization: f
$3 Cum. Pref. Stk., no p.v.
ent. in liq. to $50 plus $3
accr. div. stated value
$5 (2,488,712 shs.)
Common Stock, no p.v.
stated value $1
(14,529,491 shs.) 0» 0
Total $74,201,423
(a) Applicable to Preferred at 12/31/42.
(b) There are outstanding 3,732,059 Option Warrants
entitling holders to purchase at any time without
restriction one common share at $27.50.
SUMMARY OF CAPITALIZATION
Entitled to Assets
in Liquidation Applicable Coverage
Preference Stock $131,901,744 $73,932,650 $29.71
Common Stock Balance d 57,969,094 d 3.99
STOCK DATA
Net Income
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preference 1.43 2.74 3.84 3.41 3.42 4.30 4.12 3.63 4.01 4.40
Common d .29 d .05 .14 .07 .07 .22 .19 .11 .17 .24
Dividends
Preference 3.00 .75 3.00 4.50 1.50 3.00 3.00 3.00 3.00 3.00
Common Nil Nil Nil Nil Nil .20 .20 Nil Nil .30
Net Asset Value
at year-end
Preference 29.71 27.39 51.06 71.33 65.74 60.23 99.95 92.44 56.68 73.92
Common d 3.99 d 4.52 .05 3.65 2.44 1.75 8.55 7.27 1.14 4.10
Price Range
Pr6f©rgnc6
High 18 303/4 42 39% 38 46% 48% 45% 37% 40%
Low 11 13% 26 30% 22% 25% 40% 20% 21% 22%
Last 17% 14% 28% 39% 34 29% 44% 44 24% 25%
Common
High 7Ao 1% 2% 3% 4% 8% 9% 7% 8% 14%
Low %2 %e 1% 2 2 2 5% 1% 2% 4
Last % %2 1% 2% 3% 3% 6% 7% 2% 4%
Warrants
High %2 %s % %e % 2 2% 1% 2% 6%
Low Y«4 %se % % % 1% % % 1%
Last %* Yt* %2 %s % % 1% 1% % 2
%6 1% 2% 3% 4% 8% 9% 7% 8%
%a 1% 2 2 2 5% 1% 2%
% 1% 2% 3% 3% 6% 7% 2%
Me % %6 % 2 2% 1% 2%
%4 % % % 1% % %
%4 %4 %a % % 1% 1% %
468 551 278 390 369 284 429 1,160 321
857 1,876 1,381 1,461 1,963 2,959 5,047 4,107 2,777
22 181 94 49 89 122 207 135 109
Annual Volume of
Trading (c)
(000 omitted)
Preference 468 551 278 390 369 284 429 1,160 321 406
Common 857 1.876 1,381 1,461 1,963 2,959 5,047 4,107 2,777 8,056
Warrants 22 181 94 49 89 122 207 135 109 145
(c) Preference and Common Stock traded on New York Stock Exchange. Warrants on New York Curb Exchange
[165]
UNITED CORPORATION
Statement of Investments in Stocks of Corporations
AT DECEMBER 31, 194a
Investments in Stocks or Corporations, Restated as at June 30, 1938,
Pursuant to a Resolution or Stockholders Adopted at a Special
Meeting Held on Auoust ii, 1938:-
Statutory subsidiaries (as defined in the Public Utility Holding Com
pany Act of 1935)—
Columbia Gas & Electric Corporation Common Stock
Niagara Hudson Power Corporation Common Stock
Niagara Hudson Power Corporation "B" Option Warrants en
titling holders to purchase at any time without limit 145,530
shares of Common Stock at an aggregate price of $50 per each
1-1/6 shares.
Public Service Corporation of New Jersey Common Stock
The United Gas Improvement Company Common Stock
Other Companies—
American Water Works and Electric Company, Incorporated
Shares Held
2,410,856
2.333,»07
988,271
6,066,223
% of Total
Voting Stock
19.6
23.2
Amount
Common Stock. 63,002
(a) 84,769
1,798,270
Columbia Oil & Gasoline Corporation Common Stock.— .„...
The Commonwealth & Southern Corporation Common Stock.
The Commonwealth & Southern Corporation Option Warrants
entitling holders to purchase at any time without limit 1,005,000
shares of Common Stock at $30 per share.
Consolidated Edison Company of New York, Inc., Common Stock 203,900
Consolidated Gas Electric Light and Power Company of Baltimore
Common Stock. — 33,' 7S
The Lehigh Coal and Navigation Company Common Stock. 48,705
Investments in Stocks or Corporations, Acquired Subsequent to
June 30, 1938, at Cost:
American Can Company Common Stock. _ 1,600
Chrysler Corporation Common Stock. „ 3»2oo
E. L du Pont de Nemours & Company Common Stock 2,300
Eastman Kodak Company Common Stock — 900
General Electric Company Common Stock. 7,oco
General Foods Corporation Common Stock 2,000
General Mills, Inc. Common Stock... 2,200
General Motors Corporation Common Stock.. 3,000
Gulf Oil Corporation Capital Stock.. 2,500
International Harvester Company Common Stock.. 2*300
The International Nickel Company of Canada, Limited Common
Stock. _ 3,ooo
Kennecott Copper Corporation Capital Stock. 2,500
Montgomery Ward & Co., Incorporated Common Stock. 1,900
National Dairy Products Corporation Common Stock... 5>oo°
J. C. Penney Company Common Stock 1,000
Phelps Dodge Corporation Capital Stock. 3>8oo
The Procter & Gamble Company Common Stock 4,100
Pullman Incorporated Capital Stock 2,300
Sears, Roebuck and Co. Capital Stock 3i°°°
Socony-Vacuum Oil Company, Incorporated Capital Stock 13,400
Standard Oil Company (New Jersey) Capital Stock.— 4,800
Union Carbide and Carbon Corporation Capital Stock 4,000
United Fruit Company Capital Stock 2,500
Westinghouse Electric & Manufacturing Company Common Stock 2,600
F. W. Wooiworth Co. Capital Stock 5,000
•3-9
26.1
»-73-1
5-i
1-5
2.8
$ 18,985,491.00
16,915,025.75
145,530.00
32,118,807.50
04^4S3,6'9-38
716,647.75
84,769.00
3,37i,756-25
188,437.50
4,460,312.50
2,090,025.00
i76,555-63
$143,706,977.26
$ 141,891.00
145,921.00
340.oiA.50
150,236.50
275,401.50
93,902.50
182,109.00
141,210.00
105,098.00
138,224.00
146,163.00
89,900.00
99,325 50
87,462.50
91,215.00
143,508.00
239,664-20
84,480.50
224,314-50
187*63.50
226,771.34
323,916.50
190,556.00
287,034.94
239,062.50
$ 4,474,845.98
(b)$i48,i 81,823.24
(a) The investment in Columbia CHI & Gasoline Corporation is stated at $84,769.00, this being the amount receivable in return for such
investment under a plan of liquidation of Columbia Oil & Gasoline Corporation approved by its stockholders on December 30, 1942.
The loss representing the difference between this amount and the book amount has been charged against income for the year 1942.
(b) Under the provisions of the charter the holders of the $3 Cumulative Preference Stock, having a stated value of $5 per share,
upon any dissolution, are entitled to receive $50 per share plus accrued dividends before any distribution of the assets to be
distributed shall be made to the holders of the Common Stock, or in case of call for redemption are entitled to receive $55
per share plus accrued dividends.
The preference per share, on any dissolution, amounted, at December 31, 1942, to $50 plus accrued and unpaid dividends of
$3, or an aggregate of $131,901,744.34.
[166]
O T E
[167]
U. S. & FOREIGN SECURITIES CORPORATION
BACKGROUND
This company is credited with being the first American diversified investment company organ
ized on a large scale and sold to the public as such. It was created in 1924 by Dillon, Read & Co. and
Clarence Dillon of that firm is a member of the directorate which also includes a partner of the New
York Exchange firm of Winthrop, Whitehouse & Co.; Princeton University's famous Prof. E. W. Kem-
merer; President C. E. Colder of American & Foreign Power Co.; and Charles C. Parlin of the law
firm of Wright, Gordon, Zachry, Parlin & Cahill.
POLICY
While the corporate name of this company suggests foreign holdings, the portfolio has no foreign
investments at present but is comprised of a broad list of common stocks, the heaviest investments
being in the oil and chemical industries, and a limited amount of speculative bonds, with an over-all
yield last year of about 6.2% gross. The dollar income was $173,000 less than in 1941. The company's
management record has been good, bettering the Dow-Jones Composite Stock Average in seven of
the last 13 years and showing a decidedly better result from 1930 to date. Expenses were consider
ably reduced last year, equaling 0.70% of average assets for the year, approximately $145,000 less
than in 1941. In the last annual report, President Tracy repeated his comment of previous years, "Your
company has always been administered by its Board of Directors and has never had a management
or profit-sharing contract."
The company controls U. S. & International Securities Corp. through ownership of about 80%
of the common stock and also owns 95% of that company's second preferred. This entire investment
in U. S. & International Securities Corp., which was "under water" at the year-end, is carried at $1.
In a rising market this asset could show substantial value and must be carefully appraised.
Small turnover of investments has characterized this fund for a number of years. Purchases and
sales last year totaled $2,589,537, equal to 10% of year-end assets. In 1941 the turnover was only
Vi of 1%, although in 1940 the turnover was 35%.
At the end of last year, the Company declared and paid $63 per share on the Second Preferred
which cleared up the arrears on this stock. No explanation of this unusual payment was issued by the
Company but it probably was partly the result of the Company's election to be taxed as a "regulated
investment company" which requires as a condition of the tax benefits, distribution of at least 90%
of current income. The large undistributed operating surplus was undoubtedly also a contributing
influence to this decision; after this payment of arrears the operating surplus was $4,183,914.
SECURITIES
The $6 Cumulative First Preferred is of conservative calibre. Net asset coverage is satisfac
tory as there are no senior obligations or bank loans, and earnings have adequately covered the
dividend, which has been paid regularly with an exception in 1932 when three quarterly payments
were deferred but paid up in the following year. The stock sold at a 15% discount from value in liqui
dation at the year-end to yield 7% and at that time the asset coverage was 172% of market price; net
earnings were $7.73 last year, compared with $8.74 in 1941. Disbursement of $3,150,000 on the Second
Preferred arrears may cause a dimunition of earning power in 1943. The shares are listed on the New
York Stock Exchange but are relatively inactive. The company asked for tenders and retired 15,483
shares of this issue in 1940, and in March of 1941 an additional 22,198 shares were bought from
agents of the British Treasury at $84 a share and retired. No shares were bought last year.
The $6 Cumulative Second Preferred together with 75% of the common stock was purchased
by Dillon, Read & Co. and associates for $5,100,000 when U. S. & Foreign was formed and until re
cently was not traded. Dividends were unpaid from November, 1931, until late 1940, when $3 dividend
was paid in arrears. As already mentioned, all accumulations, totaling $63 a share were paid off in
December 1942. These shares showed income from dividends and interest of $5.95 per share last year,
compared with $9.46 per share in 1941. Asset value at the year-end was $160.41 per share. A limited
number of shares changed hands at the year-end, with the stock quoted 30-40 at that time.
The Common stock, while selling at a 55% premium over asset value at the year-end, possesses
a high degree of leverage. The leverage potentialities are accentuated by the holdings of U. S.
& International Securities which amount to nearly one-tenth of a share of Second Preferred and
slightly over two common shares for every U. S. & Foreign common share. Although there was no
asset value to this equity at the year-end, and U. S. & Foreign carried the holdings at $1, we would
estimate, based on the market values of similar securities at the time, that they were worth about
$1,500,000 or $1.50 a share on U. S. & Foreign common at that time. It is important to understand that
in a rising market U. S. & Foreign common has a direct interest in the appreciation of 90% of a port
folio worth about $26,000,000 (that of U. S. & International) in addition to its own portfolio of $25,000,000.
We thus calculate that U. S. & Foreign common has a participation in the price fluctuation of about
$50,000,000 fund, equivalent to $50 a share of "working assets" at the year end.
This issue is listed on the New York Stock Exchange where it enjoys a good market.
Stock holdings of the management are relatively large,—Clarence Dillon and "associates"
were reported as owners of 24,933 shares of first preferred (14.7%), 36,131 shares of second pre
ferred (72%) and 418,543 shares (42%) of common.
[168]
U. S. & FOREIGN SECURITIES CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, U. S. Gov't Bds., etc.
Investments at market*
Bonds
Preferreds
Common
Ind. $20,625,037 97%
P.U. 408,700 2
Fin. 202,710 1
100%
U. S. & Int'l Sec. Holdings
$ 849,496 3%
$2,161,095
1.139,751
9%
5
21,236,447
1
100%
24,537,294 97
LIABILITIES
Payables &
Reserves $ 134,500
Capitalization^
$6 Cum. 1st Pref.
Stk., no p.v. ent.
in liq. to
$100 a sh.
to $100 a sh.
(172,319 shs.) 17,231,900
$6 Cum. 2nd Pref.
Stk., no p.v. ent.
in liq. to $100 a sh.
(50,000 shs.) 5,000,000
Common Stock,
no p.v.
(985,000 shs.) 3,020,390 (a)
Total $25,386,790 100% Total $25,386,790
• Book Value at cost $26,647,250.
t Book Surplus $5,031,849 plus General Reserve oi $4,950,000.
(a) Applicable to Common at 12/31/42.
SUMMARY OF CAPITALIZATION
$6 First Pfd.
$6 Second Pfd.
Common
Entitled to
in Liquidation
$17,231,900
5,000,000
Balance
Assets
Applicable
$25,252,290
8,020,390
3,020,390
Coverage
$146.54
160.41
3.07
OPERATING RESULTS
% Net Change in Market Value of Assets
U. S. & Fgn.
Securities
Dow-Jones Com-
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
+ 12 -5 -7 -2 +30 -44 + 65 +37 + 10 +25 --1 -32 -31
+ 15 -10 -10 + 3 +29 -34 + 32 +41 -1 +49 - 16 -54 -30
Net Change in Market Value of Assets for Various Periods Inclusive
BullMkt. Bear Mkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
+ 7 -1 -3 +26 -30 + 16 +210 -53 + 1
+ 3 -7 -5 + 22 -20 + 6 + 176 -73 -40
U. S. & Fgn.
Dow-Jones (b)
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income
1st pfd.
2nd pfd.
Common
Dividends
1st pfd.
2nd pfd.
Common
Net Asset Value
at year-end
1st pfd.
2nd pfd.
Common
Price Range
1st pfd.—High
Low
Last
Comm.—High
Low
Last
Annual Volume of
Trading N.Y.S.E.
(000 omitted)
1st pfd.
Common
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
7.73 8.74 7.82 6.58 5.39 9.36 7.98 5.21 4.84 4.77
5.95 9.46 7.08 2.44 d 2.57 14.11 8.32 d 3.32 d 4.87 d 5.18
Nil .17 .05 d .18 d .43 .41 .12 d .47 d .54 d .56
6.00 6.00 6.00 7.00 6.00 6.00 6.00 6.00 6.00 10.50
63.00 Nil 3.00 Nil Nil Nil Nil Nil Nil Nil
— — — No Dividends Paid — — —
146.54 155.54 159.20 172.56 182.92 146.91 269.69 169.39 129.76 123.94
160.41 191.47 230.30 304.75 344.07 192.81 708.52 282.25 120.81 96.26
3.07 1.67 3.92 7.79 10.05 2.79 28.88 8.11 .09 d .83
87 93% 97 87 V2 87% 100 Vi 100 96 78 84
77 Vz 83 80 75 62 70 91 65*4 63 Vi 36 Vi
85 84 86»/8 80 84 70 98 91»/2 75% 66
55/84 7Va 11 13 24% 20 15 i5y4 17%
2% 2% 3%53/4
4% 5% 13 4% 6 3%
4% 2% 3V4 6%103/4
6 18V4133/4
6% 7%
4 5 11 9 6 8 15 11 6 17
73 70 72 99 144 152 166 140 78 178
[169]
U S. AND FOREIGN SECURITIES CORPORATION
ASSET VALUE
PER SHARECOMMON STOCK
This chart shows the potential rise or fall in asset values of the above stock which should take place with any
change in market conditions from December 31st 1942 when the Dow-Jones Industrial Average stood at 119.40.
The black line shows the fluctuations in the asset value that would result from the indicated losses or gains in
the common stocks oi the company's portfolio. The dotted line shows the fluctuations that would result from similar
losses or gains in the entire portfolio. The red line portrays these same fluctuations for the general market.
A logarithmic scale has been used. Below we show the same facts in further detail.
LEVERAGE FACTOR OF U. S. & FOREIGN SECURITIES CORPORATION COMMON
The fluctuation in the asset value of this stock should be approximately as follows with any variation from the Decem
ber 31st, 1942 portfolio position. Leverage figures have been adjusted for estimated increase or decrease in asset values of
Investment companies leverage shares owned by U. S. & Foreign Sec. Corp.
Applied to Common Applied to
In event of Shares owned all Assets
Rise of 10% $ 5.24 $ 5.63
25% 9.12 11.41
50% 19.44 24.01
100% 40.08 48.76
Fall of 10% 0.90 0.50
25% d 2.36 d 3.34
50% d 7.78 d 9.75
[170]
U. S. & FOREIGN SECURITIES CORPORATION
ImriBw Owned, at «ff Dec 31* 1M3:
D. B. Government Obligations
Face Valae Indicated
( 000 omitted ) Value
$600 Ctti. of bidebt. %,%%. 1943 [JJ$600,188
Bonds
500 Amtr. ft Fgn. Pr. 5i, 2030 897,500
200 Cities 8en1ee deb. 5s, 1950 1T1.000
125 Cities Serrlee deb. 5s, 1958 105,625
150 Cities Service Pr. ft Lt. 5%s, 1949. 127,500
800 Cities 8errlce Pr. ft Lt. 5%s, 1952. 256,500
500 Electric Power ft Light deb. 5s, 2030 440,000
150 Poll-New England Theatres 5s, 1983. (TJ37.500
200 Standard Gas ft Elec. 6s, A, 1951 — 128,000
200 Standard Gas ft Elec. 6s, B, 1966 .. 127.000
200 Standard Power ft Light deb. 6s, '57 127,000
251 United Light ft Ry». 5Hl, 1952 243,470
Stocks
(Common unlets otherwise stated)
Share* Amusement Value
37,000 Loew's Inc. $1,242,000
Aviation
5.000 Eastern Air Lines 160,000
4.000 Lockheed Aircraft 66,000
4,000 United Aircraft 102,000
Bank
4.660 Empire Trust Co. HJ202.710
Chemical
4,500 Dow Chemical 598,600
7,500 Du Pont (E. I.) 1.008,750
6,500 Hercules Powder 481,000
10,000 Intercbcmlcal Corp. 225,000
2.500 Monsanto Chemical 216,250
4.000 Union Carbide ft Carbon 364,500
Drug and Household Supply
5,000 Abbott Laboratories 255,000
10.000 American Home Products 555,000
5,000 Bristol-Myers 190,000
14.000 Colgate-Palmolive-Peet 231.000
3.000 Procter ft Gamble 147.000
1.000 Squibb (E. R.) — 49.000
5.000 Sterling Drug. Inc. 310.000
1,500 Vlck Chemical 61.600
Pood and Beverage
6.500 American Chicle 653,250
3.000 Coca-Cola Co. _ 262.500
4,500 United Fruit _ 299,250
5.000 Wrlgley (Win.) Jr 285,000
Manufacturing
3.000 Addressograph-Multlgraph 43,500
2.400 Allegheny Ludlum Steel 43,200
5.000 Armstrong Cork 152.500
3.000 Bethlehem Steel 168.000
3,900 Cutler-Hammer, Inc. 60,450
9.0<>0 General Electric 274,500
7.000 International Harvester 416.500
2.000 Johns-Manvllle 144,000
5.600 Ma<onlte Corp. 1X7,600
3.000 Mueller Brass Co. 64,500
8.000 National Gypsum 48.000
9.500 Irwens-llllnols Glass 546.250
1.000 Slier* In-Wllllaras 86.500
1.000 Square D Co. 35.500
4.50" Tlmken Roller Hearing 186,750
4.500 Westlniihouse Elec. ft Mfg. _ 366.750
Merchandising
9.000 Glmbel Brothers 40.500
5,000 Green (H. L.) 160.000
5.000 Marshall Field 47.500
13.500 May Dept. Stores 499.500
9.500 Montgomery Ward _ 318.250
4.500 Penney (J. C.) 364,500
14.500 Scars. Roebuck 891, "T.O
10.000 Walgreen Co. 200.000
4.000
9,000
4,000
5.000
10.000
9,500
3,000
3.200
3,000
4.500
9,500
10,000
10,000
4,000
10.000
50.000
6,350
5.500
17.000
14,500
10,000
5.000
3,000
2,500
2,500
11.800
2,000
7,000
10,000
5,000
2.500
1,000
500
Metal and Mining
Aluminium, Ltd. .
American Smelting ft Refining .
Anaconda Copper .
Bunker Hill ft Sullivan Mining .
Freeport Sulphur Co. .. .
International Nickel
International Salt ..
Kennecott Copper ...
Noranda Mines, Ltd
Phelps Dodge Corp.
St. Joseph Lead
Texas Gulf Sulphur
OU and Gas
Amerada Petroleum
Gulf Oil Corp
Humble Oil ft Refining
Louisiana Land & Explor
Mission Oil Co
Standard Oil (Ind.)
Standard Oil (N. J.)
Texas Company .
Transwestern Oil Co.
United Carbon Co.
United Gas, $7 pfd.
Publle Utility
Amer. ft Pgn. Pr., $7 1st pfd. .
Amer. ft Fgn. Pr., $6 1st pfd. .
Amer. Gas and Elec.
Commonwealth Edison
Detroit Edison
Electric Bond ft Sh., $6 pfd
Electric Bond ft Share
Elec. Pr. ft Lt., $7 pfd
Mississippi Pr. ft Lt., $6 pfd. .
Western Union
1,500
10,000
4.500
1.000
1.000
12.500
3.900
2.000
Tobacco
Liggett ft Myers, B —
Lorillard (P.) - •
Philip Morris ft Co.
Miscellaneous
Belco Royalties, Inc. —
Cobel Royalties, Inc
Credit ft Investment Corp. $6
preferred
Seattle Times, A
Southeastern Greyhound Lines. ..
350,000
333.000
98.000
45,000
355,000
275,500
118,500
92,800
ID96.00O
110.250
270,750
370.000
690.000
152,000
600.000
250,000
fB73.020
156,750
782,000
601.750
65.000
280,000
340,600
121.250
102,500
224.200
42.000
119.000
425,000
10,000
82,500
3]68.000
13,500
94,500
165.000
353.250
2nd!
22,183
25,327
311
5)659,452
31.000
Investment In United States ft International
Securities Corporation
94.900 Second preferred stock .--1 31
1.9S7.653 Common stock J
[QValue on basis of over-the-counter quotation.
SjCost: estimated fair value, although actual value
may prove to be less.
3C Nominal value.
Summary off Assets* a* of Doc. 31 (based on
market values):
-1942
Amount
1249,307
600,188
Cash, rec., etc.
U. 8. Govt, oblig.
Bonds 2.161,095
Stocks:
Amusement 1.242,000
Aviation 32S.000
Bank 202.710
Chemical 2,894.000
Drug. etc. 1,798,500
r'ood ft bever. 1,500.000
Manufacturing . 2.824,500
Merchandising . 2.522.000
Metal ft mining 2.514.800
Oil & ga.> 3,991.025
Public utility . 1,207,950
Tobacco 612,750
Miscellaneous .. 737,963
I s ft Int. See. 1
Assets
0.98
2.36
8.51
4.89
1.29
0.80
11.40
7.09
5.91
11.13
9.93
9.91
15.72
4.76
2.41
2.91
-1941-
Amnunt
$1,146,565
Assets
4.25
2.372.235 8.80
985,500
365,500
188,730
2,858,500
1.597,500
1.426.000
2,645.000
2.380.750
3,193.750
4,263,700
2,158.950
581,750
782.267
1
3.66
1.36
0.70
10.61
5.93
5.29
9.82
8.84
11.85
15.82
8.01
2.16
2.90
Total $25,386,789 100 00 $26,946,698 100.00
[171]
U. S. & INTERNATIONAL SECURITIES CORPORATION
BACKGROUND
Formed in 1928 by U. S. & Foreign Securities Corp., with a public distribution of securities by
a syndicate headed by Dillon Read & Co., this investment company has a background similar to
that of U. S. & Foreign which controls it through ownership of 80% of the common stock. Directorate
is practically identical for both companies and includes Clarence Dillon; Henry R. Winthrop, a member
of the New York Stock Exchange; Princeton University's famous Professor E. W. Kemmerer; President
C. E. Colder of American & Foreign Power Co.; and Charles C. Parlin of the law firm of Wright,
Gordon, Zachry, Parlin & Cahill.
POLICY
Composition of the portfolio is quite similar, though not identical, to that of U. S. & Foreign
and general investment policy seems to be the same for both companies. While the corporate names
suggests foreign holdings, the portfolio has no foreign investments at present but is comprised of a
broad list of common stocks, about 18% of year-end assets being invested in the oil and gas industry
and over 10% in chemical stocks. There was a limited holding of speculative bonds and preferreds.
The total fund showed a gross income last year of approximately 5%%. The management record
has been fair, bettering the Dow-Jones Combined Stock Average in six of the last 13 years and
equalling it in one, with a decidedly better result from 1930 to date.
Portfolio changes have been infrequent in the last two years — total purchases and sales in
1942 amounting to $1,470,645 or about 6% of year-end assets compared with less than Vz of 1% in
1941. However, the fund has not always been so dormant, for in 1940 the turnover was 52%. Oper
ating expenses were lower than average amounting to .63% of average assets last year and showed
a very substantial decline from that incurred in 1941 and previous years.
In the last annual report President Tracy repeated his statement of previous years, "Your com
pany has always been administered by its Board of Directors and has never had a management or
profit-sharing contract."
SECURITIES
The $5 Cumulative First Preferred showed the high return of 8.3% on the basis of last year's
dividend of $5.00 and the year-end market price of 60. While earnings in the last few years were
sufficient to pay the full dividend, it appears to be the policy of the company not to pay full divi
dends when the asset value of this preferred drops below $100 a share. This has resulted in irregular
payments and large dividend arrears of $26.08 a share. This preferred represents one of the best
values currently in its class, as year-end asset coverage of $107.57 a share was about 1.79 times the
market price with no senior capital or bank loans preceding it. Net income from interest and dividends
was reported at $4.90 per share, on the First Preferred compared with $5.49 per share in 1941.
Increased federal income taxes accounted for part of this decline. Last year's payment has been
ruled 57.66% taxable and 42.34% non-taxable. Payments in 1941 were fully taxable. A $1.00 dividend
was paid on this stock March 31, 1943.
This stock was a popular medium of investment in Great Britain before the war, and 30,000
shares requisitioned from former British holders are now deposited with the R.F.C. under the Lend
Lease Loan to Great Britain.
Each share of this preferred, which is listed on the New York Curb and is fairly active as this
type of security goes, carries a warrant entitling the holder to subscribe at $25 a share for one share
of common, which warrant obviously has no value at present.
Of the 100,000 shares of $5 Cumulative Second Preferred, U. S. & Foreign Securities Corp. owns
94,900 shares. Arrears amounted to $63.33 a share as of the year-end, a total of $6,333,333.
The Common sfocfc is without asset value, and despite the considerable leverage, a rise of
almost 100% in year-end assets would be required to carry it into the "black." Dividend arrears of
some $12,500,000 on the preferred issues put the common in a poorer position than appears from
normal balance sheet data. It is listed on the New York Curb where it trades infrequently. U. S. &
Foreign Securities Corp. owns almost 2,000,000 (80%) of the outstanding common shares.
[172]
U. S. & INTERNATIONAL SECURITIES CORPORATION
Cash, U. S. Gov't Bda., etc.
Investments at market*
Bonds
Preferreds
Common
Ind. $18,775,925
ASSETS
$ 1.531,320
1,777,290
Simplified Balance Sheet
As of December 31, 1942
$ 2,537,402 9%
6%
8
P.U.
R.R.
Fin.
Inv. Co.
327,400
36,134
1,153,641
22,500
92%
2
100%
$20,315,600 86
100%
23,624,210 91
Total $26,161,612 100%
' Book value at cost $40,874,762.
<r Book Surplus S9.060.917.
Spec. Reserve $9,475,000.
First Pfd.
Second Pfd.
Common
LIABILITIES
Payables &
Reserves $ 431,240
Capitalization: f
$5 Cum. 1st
Pref. Stk., 25,730,372(0)
no p.v. ent. in liq.
to $100 a sh. Plus
$26.08 accr. div.
(239.200 shs.)
$5 Cum. 2nd
Pref. Stk., 0
no p.v. ent. in liq. to
$100 a sh. plus $63.33
accr. div. (100,000 shs.)
Common Stock, 0
no p.v. (2,485,543 shs.)
Total $26,161,612
(a) Applicable to First Preferred at
12/31/42.
SUMMARY OF CAPITALIZATION
Entitled to
in Liquidation
$30,159,133
16,333,333
Balance
Assets
Applicable
$25,730,372
d 4,428,761
d20,762,094
Coverage
$107.57
d 44.29
d 8.35
OPERATING RESULTS
% Net Change in Market Value of Assets
TT R A Tnn 1942 19411940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Securities +14 —4 -10 -1 +26 -37 +38 +39 +8 + 43 --7 -42 -22
Dow-Jones Com
posite Stocks (b) + 15 -10
% Net Change in Market Value of Assets for Various Periods Inclusive
-10 + 3 +29 -34 +32 +41 -1 +49 - 16 -54 -30
BullMkt. BearMkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1952 1942 1942 1936 1932 1942
U. S. & International + 9 -2 -3 +22 -22 +7 + 195 -59 -5
Dow-Jones (b) + 3 -7 -5 +22 -20 +6 + 176 -73 -40
(b) Above percentages adjusted ior actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income per Share1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
1st pfd. 4.90 5.49 5.28 5.04 4.35 6.62 6.01 3.57 3.05 2.81
2nd pfd. d.23 1.17 .66 d.09 d.1.55 3.97 2.41 (d) (d) (d)
Common — _ — No Net Income Available
Dividends Paid
1st pfd. 5.00 3.75 5.00 5.00 4.25 5.00 5.75 1.00 Nil Nil
2nd pfd. — — No Dividends Paid — — —. —.
Common — — — No Dividends Paid — — —
Net Asset Value
at year-end
1st pfd. 107.57 99.56 107.40 124.99 131.25 108.27 175.62 132.74 96.63 88.93
2nd pfd. d 44.29 d 63.45 d 41.69 .39 15.35 d 37.82 123.82 18.92 d 58.04 d 66.94
Common d8.35 d8.92 d7.85 d5.95 d5.15 d7.09 d.40 d4.40 d7.30 d7.45
Price Range
1st pfd.
High 61% 61 Ya 71 68 70% 93% 96 80% 60% 65
Low 43 47% 47 50 42 47 70 41'/4 39% 17%
Last 60 49 Ya 55% 59% 65 51 90 78% 47% 54%
Common
High %6 Ya % IYa IYs 3 3Ya 2 2 3%
Low %« Ya Y2 % Wa % Va 15<ia
Last % Via 94e% % 1S46
2 Ye 2 Ve 1%
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
1st pfd. 14 16 19 14 14 27 26 32 29 65
Common 20 19 30 30 26 67 72 56 42 73
[173]
U. S. & INTERNATIONAL SECURITIES CORPORATION
Securities
1'. 8.
M •# Dec. 31,
Govt. ObligationsFace Value
(000 omitted)
11.750 Ctfs. of Indent.. K. %%. due '43
Bonds
500 Amer. ft Kgn. Power 5k, 2030
I IX Central of Georgia Ry 5s, C, 1959
:tlfi Chicago. Mllw., St. P. & Pacific
5s. A. 2000
:M Chicago. R. I. 4 Pac. 4%s. 19«0
70 Choctaw. Okla. ft (iulf St, '58. o/.l
2!W Demer & Rio Gra. 5s. '55 (stpri )
300 Electric Pr. ft Li. 6s. 2030
500 Park-Lexington Co. 1st 3s, 1964
ISO Poll-New England Theatres 1st 5s,
1958
150 Poll-New England Theatres 5s. '83
599 St. Louis San Fran. 6s. B, 1936..
T5 Standard Gas A EL 6s. A, 1951..
50 Standard Gas ft EL 6s. B, 1966..
116 Standard Pr. ft Lit. 6s. 195T
156 United Lt. ft Rys. 5fts, 1952—
1442:
Indicated
Value
S$l,750.547
397.500
Shares
15.000
5.000
4,000
4.000
29.000
5.000
3.500
3.500
7,000
6,500
:<,utio
2,500
4,500
5.000
1.400
5.000
9.000
1.500
3.000
1.000
5.000
2.000
9.300
8.500
200
3.000
2.000
5.000
1.100
5.000
5.000
4.240
4.000
36.700
2".000
4.800
2.000
2.500
1.000
5.600
2.000
3.000
8,000
6.500
1.000
4.500
2,000
7,080
14.220
13.440
18.550
7.080
264.000
152.500
0)147.000
3137.500
E167.720
48.000
31.750
73,660
151.320
$1,531,320
Stocks
(Common unless otherwise stated) Indicated
Amusement Value
Loew's, incorporated $690,000
Aviation
Eastern Air Lines. Ine 160,000
Lockheed Aireraft - 66.000
United Aircraft — . 102.000
Bank and Finance
Commercial Investment Trust 928,000
Empire Trust Company 00217,500
Chemical
American Cyanamid, B 138,250
Dow Chemical Co. 465,500
Du Pont (E. I.) 941.500
Hercules Powder 481,000
lnterchemieal Corp. 67,500
Monsanto Chemical 216,250
Union Carbide ft Carbon 364,500
Drug and Household Supply
Abbott Laboratories 355,000
American Home Products 77,700
Bristol-Myers 190,000
Colgate-Palmolive-Peet ___-„-—_ 148,500
Mead Johnson 184,500
Procter ft Gamble 147,000
Squibb (E. R.) 49,000
Sterling Drug. Ine. 310,000
Food and Beverage
American Chicle 201.000
Childs Company 9,300
United Fruit 565.250
Wrigley (Km.) Jr._ 11,400
Manufacturing
Addressograph-Multigraph 43,500
Armstrong Cork Co. 61,000
Bethlehem Steel r 280,000
Caterpillar Tractor 45.100
Chrysler Corp. 337.500
Cutler-Hammer, Ine. JJAQ
Doehler Die Casting 106,000
General Electric — 122.000
General Printing Ink 165.150
Gliilden Company 28,029
International Harvester 285.600
International Paper 5% pfd 90.000
International Paper 20,000
Johns-Manrtlle .12-929
Masonite Corporation 18I*5S9
Melville Shoe Corp. — 59'?99
Mueller Brass Co. 'I'SSS
National Gypsum .*5'999
Owens Illinois Glass 373.750
Shenrln-Wllllams 86.500
Timken Roller Bearing }85'I55
Westlnghouse Electric ft Mfg—t 163.000
9.000
5.000
14.000
9,500
4,500
14.500
4.900
4.000
1.000
5,500
5.000
7.000
4,500
14.500
2.000
9.500
12.000
29.700
4.000
4.500
100.000
6,350
14.000
3.500
7.000
4.500
2.500
5.000
2.500
2.500
13,800
6.000
10.000
3.000
2.000
46.800
500
44.900
36.900
129.900
Merchandising
Glmhcl Brothers 40.500
Green (H. L. ) 160,000
May Dept. Stores 518,000
Montgomery Ward 318,250
Penney (J. C.) 364.500
Sears. Roebuck _. 891.750
Walgreen Co. 98,000
MeUl and Mining
Aluminium. Ltd. 350,000
American Smelting 148,000
Anaconda Copper 134.750
Bunker Hill ft Sullivan 45.000
Freeporl Sulphur 248.500
International Nickel 130,500
Kennecolt Copper 420,500
Noramil Mines, Ltd. — 1264,000
St. Joseph Lead 270,750
Texas Gulf Sulphur 444.000
Oil and Gas
Amerada Petroleum 2,049.300
Gulf Oil Corp. 152,000
Humble Oil L Reiinlng.. 270.000
Louisiana Land ft Explor. 500.000
Mission Oil Co. .- 0373,025
Standard Oil (Calif.) 406,000
Standard Oil (Ind.) 99,750
Standard Oil (N. J.) S22.000
Texas Company 186,750
l nlted Carbon Co. 140.000
United Gas $7 pfd 567.500
Public Utility
Amer. ft Kgn. Pr. $7 1st pfd 121.250
Amer. ft Kgn. Pr $6 1st pfd. - 102.500
Amer. Gas* Electric - 202.200
Electric Bond ft Share $6 pfd 25^59?
Electric Bond ft Share 20.000
Electric Power ft Lt. $7 pfd 99,000
North American Co 20.000
United Lt. ft Pr. Co.. B-. U..00
Western Union 13.500
Railroad
Chicago. Rock Island ft Pa*. 11.336
St. Louis-San Francisco *'5i!
Seaboard Air Line 20,297
6.500 Liggett ft Myers, B i22'S9°,
14.500 Lorlllard (P.) ?2?-:S2
5.500 Philip Morris 481,760
8.000 Reynolds (R. J.) B 196.000
Miscellaneous
S6.1S6 Credit ft Inv. 1st pfd. stock allot.
etfs. (25% paid) 3)342.040
10.000 Equitable Office Building 1.250
13.500 General Realty ft Utilities
1,500 Park-Lexington Co. v.t.c tD2,250
5.000 U. S. ft Fgn. Sec 22,500
QQOver-tbe-eouoter quotation.
Summary of Assets, aw of Dec St (based on
market quoUttoiu): 1N1
% of % of
Assets- Amount Assets Amount Assets
Cash rec.. etc $786,855 3.01 $3,596,050 10.87
Bonds ----- 1.531.330 5.85 1.409.330 5.90
V. S. Govt, obllg. 1,750,647 6.69
Stocks'
Amusement 690,000 2.64 547,500 3.29
Aviation 328,000 1.35 865,500 1.58
Bank ft finance 1,145,500 4.38 797.000 8.34
Chemical 3.674.500 10.22 2.439.500 10.21
Drag ft househ. 1.361.T00 5.20 1.195,000 5.00
Food ft beverage 786,950 3.01 808.650 8.38
Manufae --- 3.908.450 11.10 3.250.740 9.42
Merehandls. 2.391.000 9.14 3.303,250 9.23
Metal ft mining 2.256.000 8.62 2.308.250 9.66
MUeellan -- 572.681 2.19 598.176 3.50
Ollftgas 4.766.325 18.22 3.883.050 16.25
Public utility— 905,150 3.46 1,210.175 5.06
Railroad —- 36.134 0.14 80.319 0.08
Tobacco 1.276.500 4.88 1.263.250 5.29
Total $26,161,612 100.00 $23,895,530 100.00
[174]
NOTES
[175]
UTILITY EQUITIES CORPORATION
BACKGROUND
Formed in 1928 by Stone & Webster, this company became part of the Equity Corp. group in
July, 1939. American General Corp. held 48.72% of Utility Equities' voting power at the year-end,
but this was subsequently increased to 50.03%. American General owns now 19.28% of the preferred
and 54.02% of the common stcok. (See The Equity Corp. and American General Corp.) In addition
to the Equity Corp. directors, the senior partner of the Stock Exchange firm of Gude, Winmill & Co.
is on the Board, as is James Bruce, Vice President of National Dairy Products Corp.
POLICY
Although the corporate title suggests utility holdings, this class of securities comprised only
about one-fifth of the year-end portfolio. About 70% of the investments were in a broad list of common
stocks. A gross yield of about 5.6% was obtained on assets last year.
The company's long-term investment record has been good, bettering the Dow-Jones Composite
Stock Average in eight of the last 13 years, but the record of recent years is less impressive than
that of the earlier years. Like the other companies in the Equity group. Utility Equities last year
entered into a contract with the Empire Trust Company, whereby the latter provides investment
advisory service at a fixed annual fee.
Portfolio turnover has been relatively low, total purchases and sales in 1942 amounting to
33% of the year-end assets, compared with 24% in 1941. Expenses have run about average, last year's
amounting to .92% of average assets.
SECURITIES
The $5.50 Preferred stock available at the year-end at a discount of 43% from asset value,
has paid dividends at various rates since issuance, and as of the year-end, arrears of $19.71 had
accumulated. Dividends of $2.50 were paid in 1942 and 1941. The 1942 payment has been tentatively
held as 100% non-taxable. Net income from interest and dividends indicates that more satisfactory
payments might be made. Net income last year amounted to $3.55 per preferred share compared
with $4.29 in 1941.
With an asset coverage at the year-end equal to one and three-quarters times the market
price, no senior debt, and a yield of 5. 1 % on the basis of last year's dividend, this preferred represents
an attractive value in its group and might be considered as an intelligent replacement for some non-
leverage investment company common stocks.
The company has from time to time repurchased its preferred shares and they have also been
bought by the American General Corp., which owns a total of 14,159 shares (19% of outstanding),
11,052 shares were bought by public tender in 1939 at $55.00. The Board of Directors has announced
its intention to purchase additional shares from time to time for retirement. A total of 1,685 shares
were purchased in the open market last year at an average cost of $38.07 per share.
These shares are traded on the New York Curb in 25-share units but are rather inactive. The
conversion privilege (into three common shares) is of negligible interest and only serves as a re
minder of past optimistic days.
The Common stock is without asset value, but the large leverage gives it long-term speculative
attraction in a period of rising prices. It is listed on the New York Curb, where it trades only infre
quently due to the large quantity (54%) held by American General Corp. Occasional purchases
have been reported by American General Corp.
There are outstanding 330,000 Perpetual Warrants to buy that many shares of common at $20
a share. The warrants were originally acquired by the organizers of the company who bought 330,000
common shares to which the warrants were attached.
[176]
UTILITY EQUITIES CORPORATION
Simplified Balance Sheet
As of December 31, 1942
ASSETS
Cash, Receivables, etc.
Investments, at market
Bonds
Preferreds
Common
$ 507,897
750,625
9%
13
Ind.
P.U.
R.R.
Fin.
$3,710,575
316,042
146,376
167,216
86%
7
3
_4
100%
4,340,209 78
100%
Total
$ 727,872 11%
5,598,731 89
* Book price (at cost or quotations at Dec. 31, 1931 if acquired prior
to this date) $6,892,773.
+ Book Surplus $7,468,520.
$6,326,603 100%
LIABILITIES
Payables $ 21,955
Capitalization: t
$5.50 Div. Priority
Cv. Stk. 6,304,648 (a)
$1 p.v., ent. in
liq. to $100 plus
$19.71 acc. div.
(73,414 shs.)
Common Stock,
10«f p.v. 0
(567,549 shs.)
Total $6,326,603
(a) Applicable to Preferred at 12/31/42.
SUMMARY OF CAPITALIZATION
$5.50 Pfd.
Common
Entitled to
in Liquidation
$8,788,390
Balance
Assets
Applicable
$6,304,648
d 2,483,742
Coverage
$85.88
d 4.38
OPERATING RESULTS
% Net Change in Market Value of Assets
1942 1941 1940 1939 1938 1937 1936 1935 1934 1933 1932 1931 1930
Utility Equities +17 -7 -9 -2 +23 -35 +26 +59 +5 0 -4 -36 -20
Dow-Jones Com
posite Stocks (b) + 15 -10 -10 +3 +29 -34 +32 +41 -1 +49 -16 -54 -30
% Net Change in Market Value of Assets for Various Periods Inclusive
BullMkt. BearMkt.
1941 1940 1939 1938 1937 1936 1933 1930 1930
to to to to to to to to to
1942 1942 1942 1942 1942 1942 1936 1932 1942
Utility Equities +9 -1 -3 +20 -21 -1 +112 -51 -18
Dow-Jones (b) +3 -7 -5 +22 -20 +6 +176 -73 -40
(b) Above percentages adjusted for actual dividends paid each year. All figures are approximate.
STOCK DATA
Net Income1942 1941 1940 1939 1938 1937 1936 1935 1934 1933
Preferred 3.55 4.29 3.76 2.65 2.26 6.13 6.13 3.90 4.17 4.82
Common d .23 d .16 d .24 d .41 d .50 .10 .10 d .27 d .22 d .09
Dividends
Preferred 2.50 2.50 2.00 2.00 2.00 7.25 7.00 3.50 3.50 3.50
Common — — — No Dividends Paid — — —
Net Asset Value
at year-end
Preferred 85.88 75.25 82.56 90.14 90.54 74.86 129.07 108.60 71.79 71.07
Common d 4.38 d 5.49 d 4.23 d 2.89 d 2.51 d 4.50 3.91 .36 d 5.43 d 5.38
Price Range
Preferred
High 49 49 55Ve 58 54% 89% 96 79% 53 495/s
Low 33>/4 30% 38 42 31% 40 Va 73 Vi 43»/4 36 26
Last 49 33 Yi 48% 53 5242lA
87 77 44 36
Common
High Yi Ya l>/8 2'/4 3Vb 6 5V2 5% 4 4»/2
Low %2lA
% 1 1% 2 3Va % 1% %
Last %e % 1 2 2Y2 4% 4 Wa 1%
Annual Volume of
Trading N.Y.C.E.
(000 omitted)
Preferred 6 6 6 11 9 7 14 18 7 9
Common 13 33 10 24 22 84 114 97 50 75
[177]
UTILITY EQUITIES CORPORATION
General Market Securities Owned, as <
31, 1942:
Bonds
Government (Canadian)
Principal Market
Amount Value
S25.000 Dom. of Canada. 3s, 1952 $21,563
20,000 Dom. of Canada. 3s, 1955 17,200
15 000 Dom. of Canada, 3s. 1958 12,900
10.000 Dom. of Canada, 41fci, 1958.. 9 400
40.000 Dom. of Canada, 5s, 1943 35,600
Public Authority
2.000 Tribor. Br. 23,is 1952 1,735
24.000 Tribor. Br. 3s, '59 to '69 19 84425.000 Tribor. Br. s. f. 3l/4S, 1980... 22,125
Public Utilities
50.000 Aaner. Tel. & Tel. 3s. 1956— 53,500
62.000 Cities Serv. deb. 5s, 1950 53,242
18.000 Cities Serv. deb. 5s. 1958 15.2105.000 Gatineau Pr. 1st 3s,is. B, *69- 3,975
30.000 Interstate Pr. 1st 5s, '57 22,463
10.000 New Eng. G. & E. 5s, 1947... 4.988
14.000 New Eng. G. & E. 5s. 1948... 7,000
20.000 New Eng. G. & E. 5s, 1950... 9,900
58.000 Util. Empl. Sec. 6s, 1981 44,805
Railroads
30.000 B. & O. notes, 4s. '44 (ext.). 21,450
40,000 B. & O. 58, F, "96 (stpd.j 13.050
30.000 B. & O. 5s. D. 2000 (stpd.) 9.825
56.000 Del. & Hud. Co. 1st 4s, 1943. 32,200
5.625 Erie R.R. 4s, B. 1995 5.245
11.250 Erie R.R. inc. 4>,fcs. A. 2015.. 6.216
14,000 N. Y., Chicago & St. L. 4fts,
C. 1978 9,030
75.000 N. Y . N. H. & H. s. f. 6s, '40 36.750
8.000 Southern Ry. 4s, 1956 5,520
15,000* Southern Ry. 6s. 1956 13,163
Preferred Stocks
Shares Industrials
120 Amer. Cyanamid 5% 1,365
1,000 Amer. woolen 7% 53,500
900 Armour (111.) $6 pr. 40,950
900 Intl. Miner. & Chem. 4% 49,500
1.000 Wilson & Co. $6 57,500
200 Worthington Pump 4>,i% pr. 9,200
Public Utilities
2,500 Commonw. & Southern $6.. 92,500
400 Electric Bond & Share $5.. 16,400
1.600 Electric Bond & Share $6— 68,600
1.700 Electric Pr. & Lt. 86 52,488
1,800 Electric Pr. & Lt. $7 - 59.850
3,000 Engineers Pub. Serv. $5 159,000
1,000 Engineers Pub. Serv. $5.50— 56,750
550 North Amer. Lt. & Pr. $6.. 28,875
Railroads
105 Erie R.R. ser. A — 4,148
Common Stocks
Industrials
500 Addressograph-Multigraph . 7,312
300 Air Reduction 11,925
300 Allied Chemical & Dye 43.500
500 Aluminium Ltd. 43,875
200 American Airlines, Inc. 11,100
1,600 American Cyanamid "B" .. 63,800
4,700 Amer. Rad. & Stand. San 28,200
900 Amer. Steel Foundries 18,000
2,500 Armstrong Cork Co. 76,250
2.90U Chrysler Corp 196,837
1,000 Cclgate-Palmolive-Peet 16,875
3,000 Consolidated Oil Corp. 20,625
900 Continental Can 24,300
2,000 Continental Oil 54,750
2.400 Crane Co 34,500
2,900 Creole Petroleum 47,125
4.000 Deere & Co. 108,500
800 Dow Chemical 106,400
200 Eastern Air Lines 6,475
700 Electric Auto-Lite 21,000
800 Flintkote Co 12.600
700 General Amer. Transport.. 26.250
2,000 General Cable 4,500
2.400 General Electric 73,200
2,200 General Motors 97,625
2,300 Goodrich (B. F.) 60,375
1,600 Goodyear Tire & Rubber...
1.000 Gull Oil Corp
1.900 Hudson Bay Mining
1.000 Humble Oil & Refining
1.250 Indiana Gas & Chem
100 Intel chemical
4.000 Intl. Minerals & Chem
11,100 International Nickel
1.600 Johns-Manville
400 Mclntyre Porcupine
2,350 Merck & Co -
3.700 Montgomery Ward
1,400 National Gypsum
400 New York Air Brake
1.100 Noranda Mines
2.000 Otis Elevator -
1,100 Pacific Amer. Fisheries —
900 Phillips Petroleum
900 Pittsburgh Plate Glass
9,300 Pure Oil Co.
800 Republic Sleel
1.700 Sears. Roebuck —
8.300 Socony-Vacuum Oil
3.600 Standard Oil (N. J.)
3,100 Texas Co
500 Union Cnrbide
400 United Air Lines -
1.600 U. S. Gypsum Co
4.300 U. S. Industrial Alcohol
4,000 U. S. Rubber
1.500 U. S. Steel
2.800 Vanadium Corp
1.000 Walker (Hiram)-G. Sc W...-
700 Western Auto Supply -
2.400 Westinghouse Elec.
2,000 Youngstown Sheet
Public Utilities
17.000 Col. Gas 8t Electric
5,800 Col. Oil & Gasoline
4.500 Consol. Edison Co. of N. Y..
114 Detroit Edison
1,800 Eng. Public Service
5,700 North American —
4,400 Pacific Lighting
Railroads
300 Chesapeake & Ohio Ry
1,500 Erie R.R. ben. ctfs.
8 Erie R.R
16/40 Erie R.R. scrip
1,500 Great Northern Ry
1,500 New York Central
1,400 Pennsylvania R.R.
1,100 Southern Railway -
300 Union Pacific R.R.
Banks and Finance Companies
2,000 Chase Natl. Bank (N. Y.)—
700 Commercial Credit
1,200 Comm. Invest. Trust
340 Empire Trust Co.
1.000 First Natl. Bank, Boston ...
2,500 N. Y. Title & Mtge. Co
Summary of GeneralI Marks*
Cash). DM. 31 (at marketyalues) mJ
Amount % Amount
$152,449 2.4 $187,115
215.083 3.4 217,443
96,663 1.5 13,040
43,704 0.7
41.400
38.000
43,700
60.250
2.031
2.250
47.500
321.900
115.600
1 5.600
67.856
123.950
8.750
10.400
34.925
32.250
8.387
40.500
77.175
104.625
11,200
105.187
85,075
166.050
128,650
40,500
7.700
97.600
129.000
103.500
70,875
42.350
39.500
13.738
196.200
60,500
31.875
5.075
69.750
1.967
5.175
57.000
145,200
10.200
12.563
61
3
33.750
15,563
32,900
17,188
24,150
56.000
19.775
38,400
14,790
38.250
1
(and
Bond* :
Railroad
Public utility —
Govt. (Can.) —
Public author. —
Total bonds.
Preferred Stocks:
Public utility —
Industrial
Railroad
Total pfd. __
Common Stocks:
Industrial
Railroad
Public utility —
Banks, etc.
Tot. com. stk.
%
8.3
8.9
0.1
507,897 8.1 417,698 7.4
534,463
212,015
4,148
636,850 11.3
404,500 7.2
61,250 1.1
750,625 11.9 1,102,600 19.6
8.5
3.3
0.1
3,710,575
146,377
316,042
167,216
58.9
2.3
5.0
2.7
Cash
4,340,209 68.9
700,569 11.1
3,026,675 53.7
325,775 5.8
289,683 5.2
120,121 2.1
3,762.259 66.8
350,173 6.2
Grand total . $6,299,300 100.0 $5,632,630 100.0
[178]
NOTES
[179]
ADDRESSES OF INVESTMENT COMPANIES
NAME
The Adams Express Company
American Capital Corporation
American Cities Power and Light Corporation
American European Securities Company
American General Corporation
American International Corporation
The American Superpower Corporation
(oi Delaware)
Amoskeag Company
Atlas Corporation
Blue Ridge Corporation
Capital Administration Company, Ltd.
Carriers & General Corporation
Central States Electric Corporation
(in Reorganization)
The Chicago Corporation
Consolidated Investment Trust
The Equity Corporation
General American Investors Company .Inc.
General Public Service Corporation
General Shareholdings Corporation
Insuranshares Certificates Incorporated
The Lehman Corporation
The Maryland Fund, Inc.
National Aviation Corporation
National Bond and Share Corporation
Newmont Mining Corporation
Niagara Share Corporation of Maryland
Pacific Southern Investors Inc.
The Pennroad Corporation
Petroleum Corporation of America
Phoenix Securities Corporation
Quarterly Income Shares, Inc.
Railway and Light Securities Company
Selected Industries, Incorporated
Shawmut Association
Tobacco & Allied Stocks
Tri-Continental Corporation
The United Corporation
United States & Foreign Securities Corporation
United States & International Securities
Corporation
Utility Equities Corporation
EXECUTIVE OFFICE
40 Wall Street, New York, N. Y.
650 So. Spring Street,
Los Angeles, Calif.
60 Broadway, New York, N. Y.
15 Exchange Place,
Jersey City, N. J.
120 Wall Street, New York, N. Y.
25 Broad St., New York N. Y.
100 West 10th Street,
Wilmington, Del.
199 Washington Street,
Boston, Mass.
1 Exchange Place, Jersey City, N. J.
60 Broadway, New York, N. Y.
65 Broadway, New York, N. Y.
1 Wall Street, New York, N. Y.
Richmond Trust Building,
Richmond, Va.
135 So. LaSalle Street.
Chicago, 111.
Ill Devonshire Street,
Boston, Mass.
120 Wall Street, New York, N. Y.
44 Wall Street, New York, N. Y.
90 Broad Street, New York, N. Y.
65 Broadway, New York. N. Y.
100 West 10th Street,
Wilmington. Del.
1-3 South William Street,
New York, N. Y.
15 Exchange Place,
Jersey City, N. J.
Ill Broadway, New York, N. Y.
14 Wall Street, New York. N. Y.
14 Wall Street, New York, N. Y.
Canadian Niagara Power Bldg.
Fort Erie, Ontario (Canada) and
70 Niagara Street, Buffalo, N. Y.
650 So. Spring Street.
Los Angeles, Cal.
Delaware Trust Bldg.,
Wilmington, Del.
15 Exchange Place,
Jersey City, N. J.
44 Wall Street,
New York, N. Y.
15 Exchange Place,
Jersey City, N. J.
49 Federal Street,
Boston, Mass.
65 Broadway,
New York, N. Y.
40 Water Street.
Boston, Mass.
161 Front Street,
New York, N. Y.
65 Broadway. New York, N. Y.
100 West 10th Street,
Wilmington, Del.
921 Bergen Avenue,
Jersey City, N. J.
921 Bergen Street,
Jersey City, N. J.
120 Wall Street,
New York, N. Y.
CORPORATE OFFICE
40 Wall Street, New York, N. Y.
100 West 10th Street,
Wilmington, Del.
700 East Franklin Street,
Richmond, Va.
100 West 10th Street,
Wilmington, Del.
317-325 South State Street,
Dover, Del.
25 Broad Street. New York, N. Y.
100 West 10th Street.
Wilmington, Del.
Voluntary Association
900 Market St., Wilmington, Del.
100 West 10th St., Wilmington. Del.
10 Light Street, Baltimore, Md.
7 East Redwood Street,
Baltimore, Md.
Richmond Trust Building,
Richmond, Va.
100 West 10th Street,
Wilmington, Del.
Ill Devonshire Street,
Boston, Mass.
317-325 South State Street,
Dover, Del.
44 Wall Street, New York, N. Y.
7 West 10th Street,
Wilmington, Del.
100 West 10th Street,
Wilmington, Del.
7 East Redwood Street,
Baltimore, Md.
100 West 10th Street,
Wilmington, Del.
10 Light Street.
Baltimore, Md.
Ill Broadway, New York. N. Y.
19-21 Dover Green.
Dover, Del.
100 West 10th Street,
Wilmington, Del.
10 Light Street, Baltimore, Md.
100 West 10th Street,
Wilmington, Del.
Delaware Trust Bldg.,
Wilmington, Del.
c/o Corporation Trust Co.
Wilmington, Del.
100 West 10th Street,
Wilmington, Del.
10 Light Street,
Baltimore, Md.
900 Market Street,
Wilmington, Del.
100 West 10th Street,
Wilmington, Del.
40 Water Street,
Boston, Mass.
100 West 10th Street,
Wilmington, Del.
10 Light Street. Baltimore, Md.
901 Market Street,
Wilmington, Del.
10 Light Street,
Baltimore, Md.
10 Light Street,
Baltimore, Md.
317-325 South State Street,
Dover, Del.
[180]
Layout, Production and Charts by PICK-S
Printed and Produced by Carman-Gould, Inc.
ARTHUR WIESENBERGER & COM PA NY
MEMBERS NEW YORK STOCK EXCHANGE
56 BEAVER STREET • NEW YORK
TELEPHONE
WHITEHALL 3-7623
CABLE ADDRESS
ARTWIES-NEW YORK
INVESTMENT COMPANY SHARES
PRICE RANGE AND TRADING VOLUME
FOR THE MONTH OF MARCH. 1Q^
ABset Trading
COMMON STOCKS Value Low last Volume
Adams Express $15.80 12 1/4 9 12 1/4 85,400
American Capital 'A' d 1 1/2 1 1 1/8 2,000
d 3/8 1/4 1/4 6,100
American Cities Pwr. 4 Lt. ,fll 0.60(e) 1 3/4 1 1/4 1 3/4 31,400
American European Securities 9.95(e) 8 7 1/4 8 2,400
American General Corp. 8.30(e) 5 3/4 4 3A 5 5/8 6,200
American International 11.04(e) 9 6 1/8 9 47,600
Amoskeag Co. 37.95(f) - 24 - o/c
Atlas Corp. 17.54(e) 11 3/4 9 11 5/8 44,000
Blue Ridge Corp. 1.60(e) 2 1/4 1 5/8 2 23,800
Capital Administration 'A' 12.04(e) 9 1/4 6 5/8 9 1/4 5,300
Carriers & General 6.93 5 4 5 8,200
Chicago Corp. 1.15(e) 4 1/4 3 1/8 4 1/8 96,700
Consolidated Investment Tr. 45.70(e) 34 1/2 33 1/2 34 1/2 o/c
The Equity Corp. 0.68(e) 1 1/8 13/16 1 1/8 75,600
General Amer. Investors 12.85 9 7/8 8 3/8 9 3/4 23*000
General Public Service d 1 3/8 15/16 1 3/8 23,650
General Shareholdings Corp. 0.05(e) 1 5/8 1 1/4 1 1/2 19,100
Insuranshare Certificates 9.74(#) 7 3/8 6 7/8 7 3/8 3,000
Lehman Corp. 34.54 30 1/4 26 7/8 29 3/4?2,QQ0
