Bmrdoi   Zmuxnce   Coml44ioner4
Auetln, Toxw

oeatlsmen:                                 Attentionr   Mr. D. B. B4rroir

                                           open   210.O-3015
                                             : CWWmactionof Articlrr 4725
                                                wd 4706, concrraing rli&iblo
                                                InYertmefltr for life in4~cr
                                                companies and Sira or caogalty
                                                inrumnce companies in Texap,
                                                rmpectively,      iuvolving putici-
                                                Fatting ce*l?lcatcr      or mutIJa1
                                                invertwnt cowern..

          Wo 4ckaowledg4 rmdlpt of your letter of J4nu4ry 2, 1941, repuert-
iag 4n opl&n    from t&l4 &partment upon quertionr propounded, your’lattbr
belng 4, follows:

          “I am enclosing for your conelderation,   in connectIon with
     the question.4 asked in thin letter, the following paperr:

          “‘Proapectm of the HamIlton Inve4tment Plan, Cowolida-
     tion of Trust Indenture ~,i the Hamilton Deposltore~Corporation
     audThe International Truet Companyas to EamlltonTrust Sham4
     and %m.llton Trurt Shares Certificate.!

           “I am also enclosing 4 Prorpectus of the Ma4sachuaetts In-
     vestors Trust and 4 Proepectua of the Boeton Fund, Inc. The
     legality of investment of inlrurance companiesf funds in the
     Hamilton Trust, the Maseachueetta.Inve4tors Tru4t and the Bo4ton
     Fund, ha4 been queati-d    and we, therefore reepec~iWJy reque4t
     an opinion from you cihout the matter.

           “In connection with the Hamilton Trust, your attentlon’is
     directed to the statement made on Page 4 of the Proapectum uh4re-
     in there Is stated ‘Thle is not an lnveetment in the stock of the
     Eam11ton.corporst ion, ’ and to the statements nmde on Pags 6 under
     the heading ‘Brief Sumwaryof the Hamilton Plan.’ In a letter
     received bythia Departwnt and signed by the President of the
     Hamilton Corporation, there is itated:    ‘There la no essential
     difference,  48 far as vc can eee, between investing in our iuna
     and investing ip the individual stocks.’
Board of Ine-ce    Cwncismiwerr,   Page 2 (o-3015)



          “Your attention is alro directed to the fact that & the
     Maseachusetto InveBtorr Trust and the Boston Fund, Incorporztod,
     the imeeting company or individual doer 10 by purchsoa     oharer
     of the trwt.   Your opl!Um ir respectfully requested in connec-
     tion with this matter ae to the following quertionr:

           “1. May the fun& of a TezaB Life Inrurance Companybe in-
     vested with fho Hamilton Depositora Corporot.1~ for Eamlltm&
     Trust Sharer Certificatea and if no, mart the variour rtoc&r pur-
     chased by the Hamilton Doporltorr Corporation be rtockr of corn-
     pnniem which me eligible iammtmntr for the iundr of a Texw
     Life Iwuranc e Companyin rccordence with the provi#ionn  of Set-
     tioq 3 of Artlcle 4725 of our insurance ntatuten?

           “2. May the fuuda of a Texan Fire or Cmuzlty Inmuroncs
     Companybe inveated with the Eemi~ton Deporitorr Corporation for
     Hamilton Tnmt Shares Certlficatee   md if 10, mumtthe various
     stocka purchased by the Hamilton Depoaitorr Corporation be rtocko
     of companies eligible  for investmontm by Texan Fire and Carualty
     Inmamnce Compeniea in accordance with the pr&rlonn     of Article
     4706, Section D of oux ino-ce     etatutes?  In thir counection,
     it should be noted that the above referred to Article provide8
     in effect that the tide of a Texas Fire sqd Casualty Innurence
     Company may be @vented in the etock of a solvent dividend pky-
     ing corporation Incorporated under the lawn of a state in which
     the lnaursnce compzny 1~ duly authprized to conduct an inouremce
     bu8Meso.

           “3.  May the fund4 of a Texas Life Inourance Companybe in-
     veoted in the Worachuoettr Invemtorr Tnmt Sharer or Booton
     Fund, Inc., and if 10, ie it neces&wy that all of the mtocl&n
     owned by the Trurt be hocka eligible for inrertint   .by a Teur
     Life Insurance Companyin accdrdssce with Article 4725 of our
     insurance rtatuter?

          “4. May the fur&U of 6 Texar Fire or Canulty Inoursnce
     Companybe l+vorted ln Marrachurettr Involtorr Truot Sbareo or
     Booton !Und, Inc. Truot Sharer and if 10, munt the rtocka owned
     by the Truot be eligible inventtmantr for the i~umace compnny
     in accordance with the provisiona of Article 4706 of oy ins.w-
     ~4   atrtuttss, and eat the Texan Fire or Camaalty Ineuranc&
     Companybe authorized to tranoact buoinern Fn the State .of    _
     Maaeachueettsl”                                                .
           gone of the certificates or &ares mentioned by you arc e.jiglble
for lnveetzkent by the respective insuranc e compauiee mention&    ..,
          Life inmrance compaqies incorpore,ted under the lavs Ff,t-i$q State
are authorized to invest their surplus, or zny part thereof, over.apd sboVe
Board of Inaurauce Comimioners,     Page 3 (o-3015)



the aaount of their reaervel and capital stock, in the “capital stock, bonda,
debenturea, b1U.r of exchange, or other comercial notes or bill,  and mecurl-
tiem of any aolveat dividend-paying corporation which han not defaulted in
the paynmnt of any of itr obligationr for a period of five (5) year,, + * it".
(Vernon’8  Civ. Stat. Anno. Art. k725(3).                               . .

           Corporationa other than life, health and accident lnauraace compaaier
organized under the law.wrof Texar are authorized to invert their fundn over
and above their paid-up capital ntock in: “* * * (d) the ntockr or boadm or
other rvidencer of iadabteduass  of any aolvrnt dividend-payiq   corporation,
incorporated under the lawa of thin State, or of the United Statea, or of my
atate, country, or province lh which ruch compaay may be duly licenned to con-
duct an iaaurancs bunlaeaa.”

          It w1l.l thur be reea a security to be eligible for either clam of
theas Texam corporatlone muot be the direct obligation of the isruing corpora-
tion.  The statutory definition of eligible   rccurltier excludem, therefore,
etock or rharee evldenclng merely participating   lntcrente by the holdem in
the net profit0 if any of the imrulug concern.    Such a plea 11 in the nature
of a mutual invectaent compaay.

           Au examlaation of the Ilterature of the renpective illruing cwpaniem
in the present .case dlsclorea that their share8 or certificatetv ‘do not repre-
sent direct pecuniary obligations of the lsmlng companies, an contemplated
by the statutes, but on the contrary, represent aerely psrticlpatiag    interest6
in the net eamlnga (if any) of the issuing concera.     For thin reason, such
stock, shares, or cerbiflcates,  by whatsoever name called, do not constitute
ell.gible iuveatmeute for our inmrao ce companies.

           Moreover, with respect to the Massachuretta Investors’ Truot shares
or Boston Fund, Inc., lt la not clear that such concern is a corporation, with-
in the meaning of that word, a8 it la ueed in our etatutee, or understood gen-
erally.   On the contrary, there la evidence in the literature of that company
lxdlcating it la a mere voluntary aseociation of ludividualn governed by true-
teee and not by the board of directors contelnplated by the laws governing corpo-
ratione generally.   If thin be true, its securitier are not eligible, because
It is not a corporation, e.8 required by the statutea above quoted. However
that question may be, its certificatea   or &ares fall within the condemoation
first above diecussed.

          We tmat   thin will be a sufficient   aumer to your lnquiriea.

AFTROVED JAIi 22, I.941                                    Very truly yours
/s/ Grover Sellera                                    Al7!ORNEfG-      OF TEihS
FIRSI ASSISTART                                       By /s/ Ocie Speer
ATl!oRi4RYoERERAG                                             Ocie Spser
                                                               Aaalatant
OS-m-w                    APPROVRR
                                 OPIRIORCm
                               RY /s/ B.W.B.
                                 CRAIRMAN
