a point where gold shipments were likely to occur, will be suddenly changed by the creditor nation lending its balances at the prevailing rate in preference to calling its funds home. This will reduce the rate of exchange. Just as soon as the rates for money decline exchange will go up.

A shipment of gold has a natural tendency to strengthen money rates, and is, therefore, always dreaded by Wall and State Streets. The reverse brings lower rates and ease of mind.

Unless there is some such influence at work as the above, it is obvious that the rate of exchange may advance until the shipment of bullion is more advantageous and gold exports follow.

Then there is the complex system of one country paying its debts to another through the medium of a third. Gold was shipped from Australia to pay for food stuffs purchased in Argentina for the English soldiers in the Boer war. The Sydney Mint now sends much gold to San Francisco in payment for American products shipped to Europe.

Great efforts are at times made to attract imports. It is not uncommon for Germany, for example, to mark up discounts as a bid for gold, or the Bank of England to pursue the same tactics to prevent its export.

The Bank of France, however, has another method, namely, that of purchasing gold on its own account and charging exporters a premium for the same. This plan necessitates less frequent changing of the discount rate.

It is usual to expect Europe to ship us gold in the autumn when payments are due for our cotton and grain, and for us to reciprocate in the spring when we are more likely to be in its debt.

Gold is almost the last article exported. We exchange all other products for it. It must be borne in mind, however, that we produce it, as well as corn, cotton, etc., and in the natural course are bound to export it from time to time. (See "Balance of Trade," "Bank of England," "Gold Import Point," and "Gold Export Point.")

International Postal Money-Orders. See "Postal MoneyOrders."

International Securities. Securities dealt in upon both the London and New York stock exchanges.

Inter-Relation of Interests. At times, the control by a certain group of men of the stock of one or more railway companies, and control on the part of these railways or other companies is so far-reaching, and the operating of such roads so largely dominated or influenced by the group of men mentioned, that competition, which otherwise might exist between

such roads, disappears, on account of the "inter-relation of interests" existing. Or two railway companies may either by direct ownership, or through the control of their own large stockholders, own together the controlling interest in a third railway, which, on account of this common ownership, may be operated to the common benefit of the two owning roads. There exists here an "inter-relation of interests."

Intersecting Street Improvement Bonds. If the reader will first read the subject " Street Improvement Bonds" and then read what is given under " Intercepting Sewer Bonds," it will be understood that "intersecting street improvement bonds" are bonds issued by the municipality itself to defray its proportion of the street improvement expense not properly chargeable against the abutting property.

Intestate. Dying without leaving a will.

In the Red. See "Profit and Loss."

In the Street. See "Street.'

Into Sight. First read "Visible Supply." "Into Sight" refers to the quantity which has been added to the "visible supply."

Inventory. A schedule of property owned, with the market value of each article or parcel. An inventory of a dry goods business would be a schedule giving goods on hand not sold, store and office fixtures and furniture of all kinds, real estate, if any, delivery wagons, etc.: in fact everything except cash on hand or due. Often applied, as in a balance sheet, to raw materials, stock in process, and finished goods.

Inverted Pyramid. Condition of insecurity. (See "Pyramiding.")

Investment. The purchase of real property, stocks, or some evidence of indebtedness, with the purpose of obtaining an interest return upon the money; any increase in value of the principal being but a secondary consideration, but the safety of the principal a first consideration. Refer to "Speculation," from which investment differs. As one writer expresses it, Planting good seed in fertile soil, is investment; betting on how many potatoes the seed will produce to a hill, is speculation."

1

In its exact sense "investment" is concisely defined by Sprague: "Investment implies divesting one's self of the possession and control of one's assets and granting such possession and control to another." Also: The essence of strict investment is . a share of the gain not dependent on the fortunes of the handler."

Investment Banker (or Broker). A dealer in investment securities. He buys for his own account in large amounts, "The Accountancy of Investment," Charles E. Sprague.

and then resells (retails) to his customers, the difference between the buying and selling prices being his principal profit. He also gains or loses on the interest which the investments pay him while under his ownership in accordance with the prevailing rates for money, for he customarily is a large borrower, using his securities as "collateral."

Investment Board. See "Savings Bank."

Investment Trusts. The Investment Trust, in general terms, may be described as a corporation or association whose capital is raised by the sale of its securities (stocks and, or bonds or debentures) to individual investors, which capital is invested in securities by a board of management for the benefit of the shareholders of the Investment Trust. It was first adopted as a standard form of investment in England and Scotland more than a half century ago. It was the outgrowth of a group of individual investors voluntarily pooling their funds. and employing experts to manage the details of investing.

The original experiments were so strikingly successful that the plan was elaborated and offered to the public by financial houses specializing in Investment Trusts. Certain other continental European countries also adopted the idea, but it is best known to have been eminently successful in England and Scotland.

Following the world war there was started considerable agitation for transplanting the British Investment Trust to the United States. Already considerable progress has been made in developing such organizations in this country. It was found, however, that an investment trust set up with the simple capital structure, with the conservative investment policy, with sound accounting practices and the plain, business-like fiscal relationships with the managers that are found in the successful British Trusts would not yield the quick, handsome profits demanded by most of our American promoters and exploiters. Instead of being content with a slow but healthy growth, many promoters resorted to artificial means of stimulating sales to the public and adopted unsound accounting practices in order that large dividends might be paid immediately. Some of these practices bid fair to bring future grief to both the investors and the promoters. Of more recent date, however, greater care by promoters and more caution on the part of the investors is correcting many of the earlier abuses.

Let us consider the outstanding characteristics of a few of the better known so-called American Investment Trusts. They are herein designated by the letters A, B, C, D, E, and F.

1 Mr. Adelbert W. Smith, of Smith, Scott & Hobson, Inc., Springfield, Mass.

A

"A" is a corporation and invests its money in hundreds of securities originating in many countries of the world. The management is hedged about by a great number of restrictions as to the qualifications of a security before it may be eligible for purchase and as to the percentage of capital that may be invested in certain types of securities and the amount that may be invested in the various countries of the world. Only little more than two-thirds may ever be invested in the United States. This concern earns income in two ways, by interest and dividends on securities and by profits made in a process of attempting to buy in depressions and sell on high markets. Its capital structure is rather complex, having different kinds of bonds, three types of preferred stock and two kinds of common stock. Its relationships with the fiscal agency are not easily understood by the layman. The fiscal agent pays all selling and organizing expenses and has received as compensation therefor the right to buy all of one class of the common stock at a price equivalent to a very small fraction of the price paid by the public for the other class of common stock. Both classes of common ultimately share equally in dividend disbursements. As compensation for management, the organizing company receives a fee based on the gross income of the Investment Trust.

B

"B" is a voluntary association and as a matter of policy invests its money in more than a hundred American common stocks representing many lines of business. The announced policy of the management is to buy for the long pull. Market profits, stock dividends and other capital gains are added to principal, only cash dividends and interest on investments being considered income for dividend purposes. The capital structure is very simple, there being only capital stock with no bonds or preferred stock. Authority is given to the trustees to borrow up to 50% of the total assets. The management receives as compensation 6% of the annual income from the investments. The selling and promoting cost is easily understood being confined to the difference between the book value (at current market) and the offering price, a spread of about 5%. The management is charged with constant supervision of the investments to eliminate weak ones and substitute stronger ones.

C

"C" is very much like B, except that it is a corporation and does not spread its investment over so many common stocks.

The announced policy of the management is to endeavor to pick a few companies constituting the leaders in their respective lines of business, the belief being that such investments on the long pull will be more stable and profitable than a larger number of relatively smaller companies. In capital structure, promotion and management costs, "C" is very similar to "B," the main difference being that the management fee is 1% of the principal per year and that at present the holdings are inventoried every day and the price adjusted accordingly, while "B" sometimes goes several weeks without adjusting the quotations to the market value.

D

"D" raises its capital by selling" collateral trust certificates" against a block of securities (all common stocks) pledged with a trustee. The stocks in each block represent some 80 American companies. The trustee prorates to the certificate holders semi-annually money received from cash dividends and the proceeds from the sale of certain stock dividends and rights, and, in some cases, market profits may be so distributed. No deduction is made for paying the management, which item is paid by the organizers from selling commissions. This trust is what is commonly known as a fixed or rigid Investment Trust. The securities are purchased and pledged with the trustee as definite collateral back of the certificates sold to the public. Substitutions can be made only under the most rigid restrictions. Its promoters claim for it an advantage to the investor in knowing in advance just where his money is going to be placed and that no board of management will ever have authority to change the investment list as originally set up.

E

"E" is a corporation and raises its capital by selling preferred and common stock to the public in blocks of one share each. The money is invested as a matter of policy in the common stocks of banks and insurance companies. It is the announced policy to buy for the long pull and to pay out only cash dividends to the shareholders, retaining all capital gains in the principal. Apparently the organizers and managers retain one-half the common stock since there are twice as many shares of common as of preferred and the public is receiving only share for share. Since all appreciation goes to the common this should be a very liberal compensation in addition to a selling commission of ten to twenty per cent.