CHAPTER 230 - INVESTMENTS BY TRUSTEES, GUARDIANS AND OTHER FIDUCIARIES

AN ACT IN RELATION TO INVESTMENTS BY TRUSTEES, GUARDIANS, AND OTHER FIDUCIARIES AND TO PROPERTY TAKEN OVER BY THEM, BEING AN AMENDMENT TO CHAPTER 117 OF THE REVISED CODE OF THE STATE OF DELAWARE AS AMENDED BY CHAPTER 259, VOLUME 37, LAWS OF DELAWARE.

Be It Enacted by the Senate and House of Representatives of the State of Delaware in General Assembly Met:

Section 1. That Chapter 117 of the Revised Code of Delaware (1915) as amended by Chapter 259, Volume 37, Laws of Delaware, be and the same is hereby amended by striking out and repealing 3875. Sec. 32, of the said Revised Code as amended by Chapter 259, Volume 37, Laws of Delaware, and by substituting in lieu thereof the following:

3875. Sec. 32. Trust Securities Designated:--Trustees, Guardians and other fiduciaries may invest the funds of their trusts as follows:

(A)--In accordance with the provisions pertaining to investments contained in instruments under which they are acting;

(B)--In the absence of any such provisions, then in securities of the following classes:

(1)--Bonds and other interest-bearing obligations of the United States for the payment of interest and principal of which the faith and credit of the United States are pledged and interest-bearing obligations of any debtor or promissor for the payment of interest and principal of which the faith and credit of the United States Government are pledged.

(2)--Bonds and other interest-bearing obligations of the State of Delaware and of any other State of the United States and of the District of Columbia for which the faith and credit of any such State or District are pledged to provide for the payment of the interest and principal thereof; provided the State or the District, as the case may be, shall not have been in default of interest or principal payments on any of its obligations for more than six months during any time within five years prior to the date of purchase.

(3)--Bonds and other interest-bearing obligations of any county of the State of Delaware, for which the faith and credit of any such county are pledged to provide for the payment of the interest and principal thereof.

(4)--Bonds and other interest-bearing obligations of any county of any state in the United States, outside of Delaware, for which the faith and credit of such county are pledged to provide for payment of interest and principal thereof, provided that the county shall have a population of fifty thousand (50,000) or more and that at the time of purchase the net debt shall not exceed three per cent (3%) of the taxable valuation and that the direct and local net debt shall not exceed twelve per cent (12%) of the taxable valuation and provided the county has not defaulted for more than six (6) months on its funded debt within five (5) years prior to the date of purchase. The phrase "direct and local net debt" shall be construed to mean the combined bonded debt of the county and of all political sub-divisions within the county, less sinking funds and self-supporting water and other utility debt.

(5)--Bonds and other interest-bearing obligations of any school district of the State of Delaware issued pursuant to the authority of the law relating thereto and for which the faith and credit of any such district are pledged to provide for the payment of the interest and principal thereof.

(6)--Bonds and other interest-bearing obligations of any incorporated city or town of the State of Delaware for which the faith and credit of any such city or town are pledged to provide for the payment of the interest and principal thereof.

(7)--Bonds and other interest-bearing obligations of any incorporated city of any state of the United States (other than the State of Delaware) for which the faith and credit of the city issuing the same are pledged to provide for the payment of the interest and principal thereof; provided that at the date of purchase of such obligation the city issuing the same shall have a population of not less than one hundred thousand (100,000) persons, according to the most recent Federal census, and shall have a total net debt (determined in accordance with the law applicable to such city defining its total net debt) of not more than ten per cent (10%) of the most recent assessed valuation of the taxable property in such city; provided the city shall not have been in default of interest or principal payments on any of its obligations for more than six (6) months during any time within five (5) years prior to the date of purchase.

(8)--Bonds and other interest-bearing obligations of the Dominion of Canada for the payment of interest and principal of which the faith and credit of the Dominion of Canada are pledged and interest-bearing obligations of any debtor or promissor for the payment of interest and principal of which the faith and credit of the Dominion of Canada are pledged.

(9)--Bonds of natural persons or corporations secured by first mortgage on improved and productive real estate, located in Delaware (including buildings occupied by owner) provided that the amount of said mortgage does not exceed sixty per cent (605) of the value of the property covered thereby as determined at the date of investment.

(10)--Bonds of railroad, public utility, transportation and industrial corporations incorporated in one or more states of the United States, secured by mortgage upon the whole or a part of the property, plants and systems of such corporations, the earnings of which, after depreciation, for a period of five fiscal years immediately preceding the date of the purchase, have averaged, in the case of railroad corporations, one and one-half (11/2) times; in the case of public utility (other than railroad) corporations, two (2) times; and in the case of transportation and industrial (other than railroad and public utility) corporations, three (3) times the total fixed charges (including therein interest on funded debt, on bank loans and other forms of floating debt, amortization charges, and discounts on securities sold); provided, however, that if said period of five fiscal years shall comprise a fiscal year ending in 1934 or 1935 and in such fiscal year (ending in 1934 or 1935) the earnings, after depreciation, shall be, in the case of railroad corporations, one time and, in the case of public utility corporations (other than railroad corporations) one and one-half (11/2) times the total fixed charges (as above defined), then the averaged earnings, after depreciation, for said period of five years shall be required to be only in the case of railroad corporations one and two-tenths (1.2) times and in the case of public utility (other than railroad) corporations one and eight-tenths (1.8) times fixed charges (as above defined.)

(11)--Mortgage bonds, the principal and interest of which have been assumed or guaranteed by railroad, public utility, transportation or industrial corporations whose own mortgage bonds qualify under clause numbered (10) hereof; provided, however, that no default has occurred in the payment of interest of such bonds for a period of five years next preceding date of purchase thereof.

(12)--Equipment trust obligations, issued in connection with the purchase of new standard gauge equipment for use on railroads incorporated in one or more states of the United States, secured by an instrument vesting title to such equipment in a trustee free of any prior encumbrance; provided, however, that the maximum amount of such obligations so issued shall not exceed eighty per cent (80%) of the cost of such equipment, and that such obligations shall mature within fifteen (15) years from the date of issue in approximately equal annual or semi-annual installments, beginning not later than three (3) years after the date of issue.

(13)--A bank or trust company authorized to act in a fiduciary capacity and acting in such a capacity, other than merely as agent, may invest funds held by it in such a fiduciary capacity in fractional undivided interests in a common commingled fund composed exclusively of securities of the classes described in paragraphs (1) to (12), both inclusive, of this sub-division (B) of this Section 32; provided that such common fund shall have been created and is managed exclusively by such bank or trust company under a written plan of which an original executed by such bank or trust company has been filed and recorded in the Office of the Register in Chancery of the County in which such bank or trust company is located; and also provided that under such plan it shall not be permitted that any such fractional interests shall at any time be owned by any other than such bank or trust company acting in a fiduciary capacity, as aforesaid, and such bank or trust company temporarily for the purpose of making settlement of a fiduciary estate that has been terminated; and also provided that, upon the termination of a fiduciary estate in which such a fractional interest is owned, the value of such fractional interest, computed on the basis of the market values as of the date of such termination of all the securities composing the common fund of which such fractional interest is a part, shall be payable in cash by such bank or trust company to the person or persons entitled thereto.

(14)--Such stocks, bonds and securities as may be approved by the Court having jurisdiction.

(C)--The foregoing specification of the classes of securities in which Trustees, Guardians and other fiduciaries may invest funds shall not be construed to relieve such Trustees, Guardians and other fiduciaries from the duty of exercising reasonable care in selecting securities within such classes.

(D)--Nothing contained in this section shall be interpreted as prohibiting a Trustee, Guardian or other fiduciary from taking over (other than by purchase) from any source whatsoever (including property taken in exchange in connection with reorganizations and other financial readjustments of corporations) property of any kind, including securities not within any of the classes specified in sub-division (B) hereof; but a Trustee, Guardian or other fiduciary may take over such property and may without liability for any loss or depreciation therein continue to hold the same so long as such retention is in the exercise of reasonable care on the part of said Trustee, Guardian or other fiduciary; provided, however, that in case a Trustee, Guardian or other fiduciary is acting under authority of an instrument, the terms and provisions of such instrument shall be controlling as to the power and duty of such Trustee, Guardian or other fiduciary.

(E)--Securities and/or other property which at the time they were acquired or invested in by a Trustee, Guardian or other fiduciary were in conformity with the law of the State of Delaware and which later cease to be in conformity with the law of the State of Delaware may, nevertheless, be retained by such Trustee, Guardian or other fiduciary without liability for any loss or depreciation therein so long as such retention is in the exercise of reasonable care on the part of such trustee, guardian or other fiduciary.

(F)--The proceeds of the sale or other disposition of any securities and/or other property held in accordance with sub-division (D) or (E) of this section shall be invested in accordance with the provisions of sub-division (A) or (B) of this section, as the case may be.

Sec. 2. That Chapter 117 of the Revised Code of Delaware (1915) be and the same is hereby amended by striking out and repealing 3876. Sec, 33, and 3877, Sec. 34 thereof.

Sec. 3. That Chapter 37, Volume 39, Laws of Delaware, be and the same is hereby repealed.

Approved March 20, 1935.