552 Forestry Quarterly 



Under the serial form, a given amount of bonds matures yearly, 

 regardless of the output of the mills. 



Another objection to the sinking fund plan is that the amount 

 of money turned into the Trustee is dependent upon the honesty 

 of the ofhcials, unless a plan for a periodical audit of the accounts 

 has been provided. Then, again, a not over discriminating man- 

 agement may select and cut the more choice tracts first, with re- 

 sults naturally undesirable. 



It may be said here, that in timber bonds, more than in most 

 security issues, the good intentions of those managing the prop- 

 erty is an element to be reckoned with, and, perhaps, therefore, 

 it is all essential that the mortgage itself should provide also for 

 a periodical inspection of the property. This is in order to as- 

 certain that the provisions of the mortgage, which, in themselves, 

 should properly safeguard the investor, are being complied with. 



Where timber companies are using their machinery for the 

 manufacture of lumber or pulp for other concerns, a certain pro- 

 tection should be given the investor so that he shall benefit by the 

 earnings received from such outside sources as an offset against 

 the natural wear and tear of the mortgaged property. 



In some instances, a form of sinking fund is provided for buy- 

 ing additional stumpage each year to offset that cut. This pro- 

 vision may be fully as safe as an actual cash sinking fund or a 

 serial form of redemption, but it is a provision, nevertheless, that 

 places so much confidence in the hands of the officials of the com- 

 pany, that many experienced financiers are not favorably inclined 

 towards its adoption. The character of the timber thus purchased 

 may be far inferior to that which has been cut. Thus all the 

 conditions as regards the purchasing of such stumpage should 

 be as carefully passed upon by an expert employed in the interests 

 of the investor, as in the case of the whole property at the time of 

 the issue. It is just as necessary that timber land replacing that 

 cut should come up to the requirements of the careful investor as 

 that originally covered by his mortgage. 



Under the serial form of issue, it is natural that the first 

 maturities should be the safer. This fact appeals to banks which 

 are legally permitted and do invest in timber issues, thus the 

 earlier maturities are naturally selected by those more experienced 

 investors. Upon the other hand, the ordinary investor more 



