INVESTMENT COMPANIES HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURRENCY UNITED STATES SENATE SEVENTY-SIXTH CONGRESS THIRD SESSION ON S. 3580 A BILL TO PROVIDE FOR THE REGISTRATION AND PART 3 EXHIBITS Printed for the use of the Committee on Banking and Currency CONTENTS EXHIBITS Page Letter addressed to committee by Frank F. Russell, president, National 1061 Letter addressed to committee by Paul T. Babson, president, Poor's 1063 Letter addressed to Hon. Robert F. Wagner by Louis W. Jenkins, Jr., secretary, North America Investment Corporation. 1064 Letter submitted to committee by Hon. David I. Walsh from Augustus 1065 Letter addressed to committee by James H. Orr, president, Railway & 1066 Letter addressed to Hon. Robert F. Wagner by W. Elliott Pratt, Jr., treasurer, Eaton & Howard, and Maynard Hutchinson, treasurer, Loomis, Sayles & Co., Inc-- Letter addressed to Hon. Robert F. Wagner by Prof. E. Merrick Dodd, Letters addressed to Hon. Robert F. Wagner by F. Eberstadt of F. Letter addressed to Hon. Robert F. Wagner by Francis T. Greene, Securities and Exchange Commission. Letter addressed to Hon. Robert F. Wagner by Hugh Bullock, president, Calvin Bullock. 1068 1069 1070, 1071, 1073 Letter addressed to Hon. Robert F. Wagner and signed by C. M. O'Hearn, Letter and statement submitted by Paul C. Cabot, president, State Street Supplementary statement of Arthur H. Bunker, president, The Lehman Supplementary statement of Mahlon E. Traylor, president, Massachu- 1072 1073 1075 1076 1082 1085 Letter addressed to Hon. Robert F. Wagner by Francis I. Amory, vice president, and E. R. Kittredge, treasurer, General Capital Corporation 1096 Article from financial section, New York Times, submitted by Securities and Exchange Commission____ 1097 Letter addressed to Hon. Robert F. Wagner by Walter L. Morgan, president, Wellington Fund, Inc. 1098 Charts submitted by Raymond W. Goldsmith, Trading and Exchange Di- 1099 1101 EXHIBITS COMMITTEE ON BANKING AND CURRENCY, NATIONAL AVIATION CORPORATION, United States Senate, Washington, D. C. GENTLEMEN : National Aviation Corporation is an investment company specializing in the aviation industry, including the furnishing of new capital from its own resources for new ventures in that field. Senate bill No. 3580, if enacted in anything like its present form and content, might so adversely affect the interests of our 3,400 stockholders, that we feel obliged, in their interests, to go on record in opposition to certain features of the bill. We have not asked to testify at your hearings because the point of view of our branch ("closed-end management") of the investment industry on the wider aspects of the bill-such as the very broad control (without prescribed standards) given the Securities and Exchange Commission to regulate not only the general functioning of the industry but the business policies and detailed operations of the individual companies have been adequately presented by others. The sphere of activities of our company, however, is so much more specialized and limited, and its field of investment so distinctive, that we feel justified in detailing these special features and in commenting upon provisions in the bill which are especially damaging in our situation. Also, we respectfully ask that this letter be incorporated into the record of the hearings. FACTS ABOUT NATIONAL AVIATION CORPORATION Our company is a New York corporation, organized in 1928 by a group who desired to foster and participate in the growth of the American aviation industry through investment. The only securities ever authorized by the company have been stock, all of the same class and with identical attributes. Stock was offered to the public in 1928 and 1929, but none since. The company is not in debt; its policy is not to borrow; it has never bought or sold on margin, and since 1931 has kept its portfolio in safekeeping with Guaranty Trust Co., New York City, under a strict custody agreement. On the basis of present market values, our portfolio (consisting of securities in 22 aviation companies) and cash are worth about $8,700,000 out of a net worth in excess of $10,000,000. Except for a wholly owned subsidiary operating Washington Airport, a small aviation research subsidiary, and a small subsidiary owning undeveloped real estate, our company does not directly or indirectly control any of the companies whose securities it owns. These securities are almost all common stocks, and the highest percentage of stock of any company (except the subsidiaries) which we own is 6.8 percent. The highest percentage of our assets invested in the stock of any one company (except the Washington Airport subsidiary) is 8.5 percent. The stock of National Aviation Corporation is listed on the New York Stock Exchange. A stock dividend was paid in 1929 and cash dividends in 1936, 1938, and 1939. The company is managed by a board of 10 directors, all of whom have had many years of experience with the aviation industry, its financing, dealings in aviation securities, or in investment generally. As stated, we have more than 3,400 stockholders. The aviation industry, in which our company invests and reinvests its funds, is, as the committee doubtless appreciates, still adolescent and relatively small. It is highly competitive, changes rapidly, is subject to wide fluctuations, and is speculative. CLASSIFICATION PROBLEM National Aviation Corporation is a "closed-end management investment company" and a "securities finance company," within the definitions of the bill. We submit, however, that from the functional standpoint, our company is |