(a) Investments may be made in the bonds of any corporation that at the time of the investment is incorporated under the laws of the United States or any state of the United States, or the District of Columbia, and is authorized to engage and is engaging in the business of furnishing telephone service in the United States, and provided the corporation is subject to regulation by the interstate commerce commission or a regulatory authority, or public utility commission or other similar federal or state regulatory body duly established by the laws of the United States or the states in which the corporation operates, subject to the following conditions:

(1) The corporation has been in existence for a period of not less than eight (8) fiscal years and at no time within that period of eight (8) fiscal years next preceding the date of the investment has the corporation failed to pay promptly and regularly the matured principal and interest of all its indebtedness direct, assumed or guaranteed, but the period of life of the corporation, together with the period of life of any predecessor corporation or corporations from which a major portion of its property was acquired by consolidation, merger or purchase, shall be considered together in determining the required period;

(2) The outstanding full paid capital stock of the corporation is at the time of the investment equal to at least two thirds (⅔) of the total debt secured by all mortgage liens on any part or all of its property;

(3) For a period of five (5) fiscal years next preceding the investment, the net earnings of the corporation have averaged per year not less than twice the average annual interest charges on its total funded debt applicable to that period, and for the last fiscal year preceding the investment, the net earnings have been not less than twice the interest charges for a full year on its total funded debt outstanding at the time of the investment, and for that period, the gross operating revenues of the corporation have averaged per year not less than five million dollars ($5,000,000), and the corporation has for each of those years either earned an amount available for dividends or paid in dividends an amount equal to four percent (4%) upon all of its outstanding capital stock; and

(4) The bonds must be part of an issue of not less than five million dollars ($5,000,000) and must be secured by a first or refunding mortgage, and the aggregate principal amount of bonds secured by the first or refunding mortgage, plus the principal amount of all underlying outstanding bonds, shall not exceed sixty percent (60%) of the value of the property, real and personal, owned absolutely and subject to the lien of the mortgage; provided, that, if a refunding mortgage, it must provide for the retirement of all bonds secured by prior liens on the property. Not more than thirty-three and one third percent (33⅓%) of the property constituting the specific security for the bonds may consist of stock or unsecured obligations of affiliated or other telephone companies, or both.

(b) In determining the qualification of any bond under this section, where a corporation has acquired its property or any substantial part of its property within five (5) years immediately preceding the date of the investment by consolidation or merger or by the purchase of all or a substantial portion of the property of any other corporation or corporations, the gross operating revenues, net earnings and interest charges of the several predecessor or constituent corporations shall be consolidated and adjusted so as to ascertain whether there has been compliance with the requirements of subdivision (a)(3);

(c) The gross operating revenues and expenses of a corporation, for the purpose of this section, shall be respectively the total amount earned from the operation of, and the total expense of maintaining and operating, all property owned and operated by or leased and operated by the corporation, as determined by the system of accounts prescribed by the interstate commerce commission or the Tennessee public utility commission, or public utility commission, or other similar federal or state regulatory body having jurisdiction in the matter;

(d) The net earnings of any corporation, for the purpose of this section, shall be the balance obtained by deducting from its gross operating revenues its operating and maintenance expenses, provision for depreciation of the physical assets of the corporation, taxes other than federal and state income taxes, rentals and miscellaneous charges, and by adding to the balance its income from securities and miscellaneous sources, but not, however, to exceed fifteen percent (15%) of the balance. “Funded debt” means all interest bearing debts maturing more than one (1) year from date of issue; and

(e) Not more than twenty-five percent (25%) of the assets of any trust shall be loaned on or invested in bonds of telephone corporations, and not more than ten percent (10%) of the assets of any trust shall be invested in the bonds of any one (1) telephone corporation, as authorized by this section.