30646 Federal Register / Vol. 65, No. 93 / Friday, May 12, 2000 / Notices

rejection, identification of the guarantor,

and whether the guarantor failed to

meet the transfer agent’s guarantee

standard. These recordkeeping

requirements assist the Commission and

other regulatory agencies with

monitoring transfer agents and ensuring

compliance with the rule.

There are approximately 1,093

registered transfer agents. Of the 1,093

registered transfer agents, proximately

120 will receive fewer than 100 items

for transfer. The staff expects that most

small transfer agents will have few, if

any, rejections. The staff estimates that

every transfer agent will spend about 40

hours annually to comply with Rule

17Ad–15. The total annual burden for

all transfer agents is 43,720 hours. The

average cost per hour is approximately

$30. Therefore, the total cost of

compliance for all transfer agents is

$1,311,600.

Please note that an agency may not

conduct or sponsor, and a person is not

required to respond to, a collection of

information unless it displays a

currently valid control number.

Written comments are invited on: (a)

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information will have practical utility;

(b) the accuracy of the agency’s estimate

of the burden of the collection of

information; (c) ways to enhance the

quality, utility, and clarity of the

information collected; and (d) ways to

minimize the burden of the collection of

information on respondents, including

through the use of automated collection

techniques or other forms of information

technology. Consideration will be given

to comments and suggestions submitted

in writing within 60 days of this

publication.

Please direct your written comments

to Michael E. Bartell, Associate

Executive Director, Office of

Information Technology, Securities and

Exchange Commission, 450 5th Street,

NW, Washington, DC 20549.

Dated: May 1, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11918 Filed 5–11–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24447: File No. 812–12006]

Allianz Life Insurance Company of

North America, et al.; Notice of

Application

May 8, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of application for an

order under Section 6(c) of the

Investment Company Act of 1940, as

amended (the ‘‘1940 Act’’ or ‘‘Act’’)

granting exemptions from the provisions

of Sections 2(a)(32), 22(c), and

27(i)(2)(A) of the 1940 Act and Rule

22c–1 thereunder to permit the

recapture of bonus amounts applied to

purchase payments made under certain

deferred variable annuity contracts.

Summary of Application. Applicants

seek an order under Section 6(c) of the

Act to the extent necessary to permit the

issuance and, under specified

circumstances, the subsequent recapture

of unvested bonuses applied to

purchase payment made under (i)

certain deferred variable annuity

contracts that Allianz Life Insurance

Company of North America (‘‘Allianz

Life’’) will issue through Allianz Life

Variable Account B (‘‘Variable Account

B’’) (the contracts, including certain

contract data pages, endorsements and

riders, are collectively referred to herein

as the ‘‘Contracts’’), and (ii) contracts

that Allianz Life may issue in the future

through Variable Account B or any

Future Accounts that are substantially

similar in all material respects to the

Contracts (the ‘‘Future Contracts’’).

Applicants also request that the order

being sought extend to any other

National Association of Securities

Dealers, Inc. (‘‘NASD’’) member brokerdealer controlling or controlled by, or

under common control with, Allianz

Life, whether existing or created in the

future, that serves as a distributor or

principal underwriter for the Contracts

or Future Contracts (collectively

‘‘Allianz Life Broker-Dealers’’).

Applicants: Allianz Life Insurance

Company of North America, Allianz Life

Variable Account B, any other separate

account established by Allianz Life in

the future to support certain deferred

variable annuity contracts issued by

Allianz Life (‘‘Future Accounts’’) and

USAllianz Investor Services, LLC

(‘‘USAIS’’) (collectively, ‘‘Applicants’’).

Filing Date: The application was filed

on February 29, 2000.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving Applicants with a

copy of the request, in person or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

June 2, 2000, and should be

accompanied by proof of service on the

Applicants, in the form of an affidavit

or, for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the Secretary of the SEC.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW, Washington, DC 20549–0609.

Applicants, c/o Lynn Stone, Esq.,

Blazzard, Grodd & Hasenauer, P.C., 943

Post Road East, Westport, CT 06880.

FOR FURTHER INFORMATION CONTACT:

Keith A. O’Connell, Senior Counsel, or

Keith E. Carpenter, Branch Chief, Office

of Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application is

available for a fee from the SEC’s Public

Reference Branch, 450 Fifth St., NW,

Washington, DC 20549–0102 (tel. (202)

942–8090).

Applicant’s Representations

1. Allianz Life was organized under

the laws of the state of Minnesota in

1896. Allianz Life offers fixed and

variable life insurance and annuities

and group life, accident and health

insurance. Allianz Life is licensed to do

business in 49 states and the District of

Columbia. Allianz Life is a whollyowned subsidiary of Allianz

Verischerungs-AG Holding. Allianz Life

serves as depositor for Variable Account

B. Allianz Life may in the future

establish one or more Future Accounts

for which it will serve as depositor.

Variable Account B is a segregated

asset account of Allianz Life. Variable

Account B is registered with the

Commission as a unit investment trust

under the Act. Variable Account B filed

a Form N–8A Notification of

Registration under the 1940 Act on July

13, 1988. Variable Account B will fund

the variable benefits available under the

Contracts funded through it. Units of

interest in Variable Account B will be

registered under the Securities Act of

1933 (the ‘‘1933 Act’’). In that regard,

Variable Account B filed a Form N–4

Registration Statement on January 31,

2000 under the 1933 Act relating to the

Contracts. Allianz Life may in the future

Federal Register / Vol. 65, No. 93 / Friday, May 12, 2000 / Notices 30647

issue Future Contracts through Variable

Account B or through Future Accounts.

That portion of the assets of Variable

Account B that is equal to the reserves

and other Contract liabilities with

respect to Variable Account B is not

chargeable with liabilities arising out of

any other business of Allianz Life. Any

income, gains or losses, realized or

unrealized, from assets allocated to

Variable Account B are, in accordance

with Variable Account B’s Contracts,

credited to or charged against Variable

Account B, without regard to other

income, gains or losses of Allianz Life.

3. USAIS (formerly NALAC Financial

Plans, LLC) is a wholly-owned

subsidiary of Allianz Life and will act

as the distributor of the Contracts

funded through Variable Account B.

USAIS is registered with the

Commission as a broker-dealer under

the Securities Exchange Act of 1934 (the

‘‘1934 Act’’) and is a member of the

NASD. The Contracts will be offered

through unaffiliated broker-dealers who

have entered into agreements with

USAIS. All such unaffiliated brokerdealers will be registered broker-dealers

under the 1934 Act and NASD

members. USAIS, or any successor

entity, may act as principal underwriter

for any Future Accounts and distributor

for any Future Contracts issued by

Allianz Life.

4. The Contract is a flexible purchase

payment variable deferred annuity

contract with a fixed account option.

The Contract may be issued under a

qualified plan, or as a non-qualified

contract. The Contract is designed to

provide for the accumulation of assets

during the accumulation phase through

investment in various investment

choices, and income during the payout

phase. Contract Owners may make

purchase payments at any time during

the accumulation phase. The minimum

initial purchase payment is $15,000.

The maximum amount of purchase

payments that Allianz Life will accept

from a Contract Owner without prior

approval is $1,000,000. Additional

purchase payments of at least $250 can

be made ($100 under the automatic

investment plan).

5. The Contract provides that a

Contract Owner may cancel the Contract

within 10 days after receipt (or for a

longer period in states where required).

This is referred to as the ‘‘Free Look

Period.’’ Allianz Life will refund the

Contract Owner’s Contract value (less

any Bonus payments) as of the date it

receives the request for cancellation. In

certain states, or if the Contract is

purchased as an Individual Retirement

Annuity, Allianz Life will refund

purchase payments made by the

Contract Owner.

6. Contract owners can allocate

purchase payments to sub-accounts of

Variable Account B and to a fixed

account (‘‘Fix Account’’), where

available, offered by Allianz Life.

7. Contract owners can currently

allocate money to 37 sub-accounts of

Variable Account B. Each sub-account

will invest in shares of a corresponding

fund or portfolio of various underlying

investment companies (‘‘Funds’’). The

sub-accounts and the Fixed Account

will comprise the initial investment

options under the Contract.

8. The Variable Account B subaccounts currently invest in shares of

the following Funds: AIM Variable

Insurance Funds, Inc., advised by A I M

Advisors, Inc.; The Alger American

Fund, advised by Fred Alger

Management, Inc.; Davis Variable

Account Fund, Inc., advised by Davis

Selected Advisers, LP; Franklin

Templeton Variable Insurance Products

Trust, advised by Franklin Advisers

Inc., Franklin Mutual Advisers, LLC,

Franklin Advisory Services, LLC,

Templeton Asset Management Ltd., and

Templeton Global Advisors Limited

(depending upon the portfolio); JP

Morgan Series Trust II, advised by J.P.

Morgan Investment Management Inc.;

Oppenheimer Variable Account Funds,

advised by Oppenheimer Funds, Inc.;

PIMCO Variable Insurance Trust,

advised by Pacific Investment

Management Company; Seligman

Portfolios, Inc., advised by J & W

Seligman & Co. Incorporated; USAllianz

Variable Insurance Products Trust,

advised by Allianz of America, Inc.; and

Van Kampen Life Investment Trust,

advised by Van Kampen Asset

Management Inc. The Funds are

registered under the 1940 Act and the

shares are registered under the 1933

Act. The Fixed Account is not registered

with the Commission.

9. Allianz Life, at a later date, may

determine to create additional subaccounts of Variable Account B to invest

in any additional underlying portfolios

or other investments as may now or in

the future be available. Similarly, subaccounts of Variable Account B may be

discontinued, combined or eliminated

from time to time.

10. The Contract provides for transfer

privileges among investment options,

dollar cost averaging, flexible

rebalancing, asset allocation and other

features. The following charges are

assessed under the Contract: (i) Annual

asset-based charges as follows: 1.50%

for mortality and expense risks if the

Owner selects the traditional death

benefit and 1.70% if the Owner selects

the enhanced death benefit, plus .15%

for administration expenses; (ii) a

contingent deferred sales charge with

starts at 8.5% in the first year, and

declines thereafter to 0% after 10 years

with a 10% of purchase payments free

surrender option; (iii) a $40 contract

maintenance charge; (iv) a transfer fee of

$25 for each transfer in excess of 12 in

a Contract year; and (v) a commutation

fee assessed against liquidations when

certain annuity options are selected

which starts at 7% in the first year

following the income date and declines

to 1% after 6 years following the income

date. The Funds also impose

management fees and operating

expenses that vary depending upon

which portfolio is selected.

11. The Contract offers a selection of

death benefits—a Contract Owner can

select the traditional death benefit or the

enhanced death benefit. The traditional

death benefit is equal to the greater of:

(1) The Contract value determined as of

the end of the business day on which

due proof of death and an election of

payment method is received by Allianz

Life; or (2) the guaranteed minimum

death benefit which is equal to the total

of all purchase payments made reduced

proportionately by the percentage of

Contract value surrendered, including

any contingent deferred sales charge. If

selected, the enhanced death benefit is

equal to the greater of: (1) The Contract

value determined as of the end of the

business day on which due proof of

death and an election of payment

method is received by Allianz Life; or

(2) the guaranteed minimum death

benefit which is equal to the greater of:

(a) The total of all purchase payments

made reduced proportionately by the

percentage of the Contract value

surrendered, including any contingent

deferred sales charge assessed; or (b) the

greatest anniversary value which is

equal to the Contract value on a

Contract anniversary, increased by

additional purchase payments and

reduced proportionately by the

percentage of the Contract value

surrendered, including any contingent

deferred sales charge assessed, since

that Contract anniversary. Contract

anniversaries occurring on or after the

Contract Owner’s 81st birthday of date

of death will not be taken into

consideration in determining the

enhanced death benefit.

12. Prior to the Contract Owner’s/joint

owner’s 81st birthday, Allianz Life will

credit each purchase payment made

with a bonus (‘‘Bonus’’). The amount of

the Bonus rate is based on the total

amount of purchase payments made at

the time of the contribution, less any

surrenders and applicable contingent

30648 Federal Register / Vol. 65, No. 93 / Friday, May 12, 2000 / Notices

deferred sales charges. The Bonus rates

are: 4% of the purchase payment with

total purchase payments (less

surrenders and related contingent

deferred sales charges) of less than

$25,000; 5% of the purchase payment

with total purchase payments (less

surrenders and related contingent

deferred sales charges) of $25,000–

$99,9999; 6% of the purchase payment

with total purchase payments (less

surrenders and related contingent

deferred sales charges) of $100,000–

$999,999; 7% of the purchase payment

with total purchase payments (less

surrenders and related contingent

deferred sales charges) of $1,000,000–

$4,999,999; 8% of the purchase

payment with total purchase payments

(less surrenders and related contingent

deferred sales charges ) of $5,000,000 or

greater. Allianz Life will fund the Bonus

from its general account assets and will

allocate the Bonus to the Fixed Account

and/or the sub-accounts of Variable

Account B in the same proportion as the

purchase payment. Allianz Life reserves

the right to increase the Bonus rights, up

to 10% of the purchase payment. In

addition, Allianz Life reserves the right

to vary the break points amounts

relating to the Bonus rates.

13. A Contract Owner has access to

funds by making either a partial or

complete surrender, or by electing to

receive annuity payments. A beneficiary

will have access to the money in the

Contract when a death benefit is paid.

Any partial surrender must be for at

least $500 (except under the Minimum

Distribution Program). A Contract

Owner may elect to receive annuity

payments under the six available

annuity options. An Owner may not

annuitize until three years after the

issue date.

14. Bonus amounts are available for

surrender, annuitization, payment of

death benefits (which will never be less

than the minimum guaranteed death

benefit) only when such amounts

become vested. Allianz Life will

recapture any unvested Bonus upon

surrender, annuitization or payment of

a death benefit (if Contract value is the

greater of the values). Bonuses vest as

follows: 0%—up through 12 completed

months from the date of purchase

payment; 35%—at least 12 and through

24 completed months from date of

purchase payment; 70%—at least 24

months and through 36 completed

months from date of purchase payment;

100%—at least 36 completed months

from date of purchase payment.

Regardless of whether the Bonus is

vested, all gains or losses attributable to

such Bonus are part of the Owner’s

Contract value and are always 100%

vested. All Bonuses, and any gains or

losses attributable to a Bonus are treated

as earnings under the Contract for tax

purposes.

15. Applicants seek exemption

pursuant to Section 6(c) from Sections

2(a)(32), 22(c) and 27(i)(2)(A) of the Act

and Rule 22c–1 thereunder to the extent

necessary to permit Allianz Life to issue

Contracts and Future Contracts that

provide for the recapture of any

unvested Bonus in the following

instances: (i) When the Contract that

provide for the recapture of any

unvested Bonus in the following

instances: (i) when the Contract Owner

makes either a partial or full surrender

(including during the Free-Lock Period)

within 36 complete months after a

purchase payment is made, Allianz Life

will recapture the unvested Bonus

(according to the vesting schedule set

forth above); (ii) if an Owner annutizes

within 36 complete months after a

purchase payment is made, Allianz Life

will recapture the unvested Bonus

(according to the vesting schedule set

forth above) before the Contract value is

applied to an annuity option; and (iii)

when a death benefit becomes payable

within 36 complete months of a

purchase payment, Allianz Life will

recapture the unvested Bonus

(according to the vesting schedule set

forth above) from the Contract value

used in the death benefit calculation (in

no event will the death benefit be less

than the guaranteed minimum death

benefit).

16. Partial surrenders in excess of the

10% of purchase payments free

surrender option (‘‘Partial Surrender

Privilege’’) will reduce unvested

Bonuses by such excess amount’s

percentage of the Contract value at the

time of the surrender. This percentage is

determined by dividing the amount of

the partial surrender (including any

contingent deferred sales charge) in

excess of the Partial Surrender Privilege

amount by the Contract value. If there

are multiple bonuses applied to a

Contract, Allianz Life will reduce the

oldest unvested bonus first.

Applicants’ Legal Analysis

1. Section 6(c) of the Act authorizes

the Commission to exempt any person,

security or transaction, or any class or

classes of persons, securities or

transactions from the provisions of the

Act and rules promulgated thereunder if

and to the extent that such exemption

is necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. Applicants

request that the Commission, pursuant

to Section 6(c) of the Act grant the

exemptions requested below with

respect to the Contract, and any Future

Contracts funded by Variable Account B

that are issued by Allianz Life and

underwritten or distributed by USAIS or

Allianz Life Broker-Dealers. Applicants

undertake the Future Contracts funded

by Variable Account B or any Future

Account will be substantially similar in

all material respects to the Contract.

Applicants believe that the requested

exemptions are appropriate in the

public interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act.

2. Applicants represent that it is not

administratively feasible to track the

Bonus in Variable Account B after the

Bonus is applied. Accordingly, the

asset-based charges applicable to

Variable Account B will be assessed

against the entire amount held in

Variable Account B, including the

Bonus during the 36-month period

following a purchase payment

preceding certain events (i.e., surrender,

annuitization and payment of a death

benefit). As a result, the aggregate assetbased charges assessed will be higher

than those that would be charged if the

Contract Owner’s Contract value did not

include the Bonus.

3. Subsection (i) of Section 27

provides that Section 27 does not apply

to any registered separate account

funding variable insurance contracts, or

to the sponsoring insurance company

and principal underwriter of such

account, except as provided in

paragraph (2) of the subsection.

Paragraph (2) provides that it shall be

unlawful for such a separate account or

sponsoring insurance company to sell a

contract funded by the registered

separate account unless ‘‘(A) such

contract is a redemable security.’’

Section 2(a)(32) defines ’’ ‘‘redeemable

security’’ as any security, other than

short-term paper, under the terms of

which the holder, upon presentation to

the issuer, is entitled to receive

approximately his proportionate share

of the issuer’s current net assets, or the

cash equivalent thereof.

4. Applicants submit that the Bonus

recapture provisions described in this

application would not deprive a

Contract Owner of his or her

proportionate share of the issuer’s

current net assets. A Contract Owner’s

interest in the Bonus allocated to his or

her Contract value upon receipt of a

purchase payment is not 100% vested

until the completion of 36 months

following a purchase payment. Until or

unless the Bonus is vested, Allianz Life

retains the right and interest in the

Federal Register / Vol. 65, No. 93 / Friday, May 12, 2000 / Notices 30649

Bonus, although not in the earnings

attributable to that amount. Thus, when

Allianz Life recaptures any unvested

Bonus it is simply retrieving its own

assets, and because a Contract Owner’s

interest in the Bonus is not 100% vested

until the completion of 36 months, the

Contract Owner has not been deprived

of a proportionate share of Variable

Account B assets, i.e., a share of

Variable Account B’s assets

proportionate to the Contract Owner’s

Contract value (including the Bonus).

5. With respect to the recapture of the

Bonus upon the exercise of the FreeLook privilege, it would be patently

unfair to allow a Contract Owner

exercising that privilege to retain the

Bonus under a Contract that has been

returned for a refund after a period of

only a few days. If Allianz Life could

not recapture the Bonus, individuals

could purchase a Contract with no

intention of retaining it, and simply

return it for a quick profit. Furthermore,

the recapture of the unvested Bonus

relating to a surrender, annuitization or

payment of a death benefit is designed

to protect Allianz Life against Contract

Owners making large purchase

payments within 36 months of certain

events. It would provide Allianz Life

with insufficient time to recover the cost

of the Bonus, to its financial detriment.

Again, the amounts recaptured equal the

unvested Bonus provided by Allianz

Life from its own general account assets

and any gain would remain part of the

Contract value.

6. Applicants represent that the Bonus

will be attractive to and in the interest

of investors because it will permit

Contract Owners to put between 104–

108% of their purchase payments to

work for them in the selected subaccounts and the Fixed Account. Also,

any earnings attributable to the Bonus

will be retained by Contract Owners and

the principal amount of the Bonus will

be retained if the contingencies set forth

in the application are satisfied.

7. Applicants state that Allianz Life’s

right to recapture unvested Bonus

amounts applied to purchase payments

made within 36 months of the payment

of a surrender, annuitization or death

benefit protects it against the risk that

owners will contribute larger amounts

as they approach certain events (if

forseeable) to obtain the Bonus, while

avoiding Contract charges over the long

terms. With respect to refunds paid

upon the return of Contract within the

Free-Look Period, the amount payable

by Allianz Life must be reduced by the

allocated Bonus payment. Otherwise,

Applicants state that purchasers could

apply for contracts for the sole purpose

of exercising the free-look provision and

making a quick profit.

8. Applicants submit that the

provisions for recapture of any

applicable unvested Bonus under the

Contracts do not, and any such Future

Contract provisions will not, violate

Section 2(a)(32) and 27(i)(2)(A) of the

Act. Nevertheless, to avoid any

uncertainties, Applicants request an

exemption from those Sections, to the

extent deemed necessary, to permit the

recapture of any unvested Bonus under

the circumstances summarized herein

with respect to the Contracts and any

Future Contracts, without the loss of the

relief from Section 27 provided by

Section 27(i).

9. Section 22(c) of the 1940 Act

authorizes the Commission to make

rules and regulations applicable to

registered investment companies and to

principal underwriters of, and dealers

in, the redeemable securities of any

registered investment company,

whether or not members of any

securities association, to the same

extent, covering the same subject matter,

and for the accomplishment of the same

ends as prescribed in Section 22(a) in

respect of the rules which may be made

by a registered securities association

governing its members. Rule 22c–1

thereunder prohibits a registered

investment company issuing any

redeemable security, a person

designated in such issuer’s prospectus

as authorized to consummate

transactions in any such security, and a

principal underwriter of, or dealer in,

such security, from selling, redeeming,

or repurchasing any such security

except at a price based on the current

net asset value of such security which

is next computed after receipt of a

tender of such security for redemption

or of an order to purchase or sell such

security.

10. Arguably, Allianz Life’s recapture

of the unvested Bonus might be viewed

as resulting in the redemption of

redeemable securities for a price other

than one based on the current net asset

value of Variable Account B. Applicants

contend, however, that recapture of the

unvested Bonus is not violative of

Section 22(c) and Rule 22c–1.

Applicants argue that the recapture does

not involve either of the evils that Rule

22c–1 was intended to eliminate or

reduce, namely: (i) The dilution of the

value of outstanding redeemable

securities of registered investment

companies through their sale at a price

below net asset value or their

redemption or repurchase at a price

above it, and (ii) other unfair results

including speculative trading practices.

See Adoption of Rule 22c–1 under the

1940 Act, Investment Company Release

No. 5519 (Oct. 16, 1968). To effect a

recapture of an unvested Bonus, Allianz

Life will redeem interests in an Owner’s

Contract value at a price determined on

the basis of current net asset value of

Variable Account.

B. The amount captured will equal

the amount of the unvested Bonus that

Allianz Life paid out of its general

account assets. Although Owners will

be entitled to retain any investment gain

attributable to the Bonus, the amount of

such gain will be determined on the

basis of the current net asset value of

Variable Account B. Thus, no dilution

will occur upon the recapture of the

unvested Bonus. Applicants also submit

that the second harm that Rule 22c–1

was designed to address, namely,

speculative trading practices calculated

to take advantage of backward pricing,

will not occur as a result of the

recapture of the unvested Bonus.

However, to avoid any uncertainty as to

full compliance with the Act,

Applicants request an exemption from

the provisions of Section 22(c) and Rule

22c–1 to the extent deemed necessary to

permit them to recapture the unvested

Bonus under the Contracts and Future

Contracts.

Conclusion

Applicants submit that their request

for an order is appropriate in the public

interest. Applicants state that such an

order would promote competitiveness

in the variable annuity market

eliminating the need to file redundant

exemptive applications, thereby

reducing administrative expenses and

maximizing the efficient use of

Applicants’ resources. Applicants argue

that investors would not receive any

benefit or additional protection by

requiring Applicants to repeatedly seek

exemptive relief that would present no

issue under the Act that has not already

been addressed in their application

described herein. Applicants submit

that having them file additional

applications would impair their ability

effectively to take advantage of business

opportunities as they arise. Further,

Applicants state that if they were

required repeatedly to seek exemptive

relief with respect to the same issues

addressed in the application described

herein, investors would not receive any

benefit or additional protection thereby.

Applicants submit, based on the

grounds summarized above, that their

exemptive request meets the standards

set out in Section 6(c) of the Act,

namely, that the exemptions requested

are necessary or appropriate in the

public interest and consistent with the

protection of investors and the purposes

30650 Federal Register / Vol. 65, No. 93 / Friday, May 12, 2000 / Notices

1These assets include approximately 127 MW of

net generating capacity (with book value of $26

million net of deferred taxes) to be transferred by

Delmarva to CDG that may be transferred to a

nonassociate exempt wholesale generator (‘‘EWG’’)

in exchange for like-kind assets under a like-kind

exchange agreement. In addition, ACE and

Delmarva intend to transfer certain other generating

assets to EWGs and propose in another filing, S.E.C.

File NO. 70–9607, to transfer certain generating

assets to nonassociate non-EWGs.

2Applicants propose to use ACE–REIT as an

intermediate holding company over the ACE

Generation Assets in order to minimize the tax

consequences of the transfer.

3Applicants note that the capital dividend by

Delmarva of the CDG common stock will cause its

common equity to total capitalization ratio to fall

below 30% until the sale of other generation assets

to third parties is completed. The closing of this

sale is scheduled for September 1, 2000 subject to

the prior receipt of certain state regulatory

approvals. The capital dividend by ACE will also

cause the common equity to total capitalization

ratio for ACE to fall below 30%.

4CEH will not be an operating company, will

have no employees and will function as an

intermediary holding company that will be a utility

holding company until such time as CDG and CAG

are qualified as EWGs. Applicants state that

following authorization by the Commission, CEH

will issue a nominal number of shares of equity to

Conectiv in exchange for a nominal amount of cash

not to exceed $1000.

5Conectiv intends for CEH to invest in one or

more EWGs and to consolidate or dispose of

ownership interests in any such EWG so long as the

aggregate limitation on such investments, imposed

by rule 53 or other applicable order, is not

exceeded. Separately, Conectiv intends to

contribute to CEH the equity securities of a rule 58

company engaged in energy marketing, Conectiv

Energy Supply, Inc.

fairly intended by the policy and

provisions of the Act, and that,

therefore, the Commission should grant

the requested order.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11959 Filed 5–11–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27174]

Filings Under the Public Utility Holding

Company Act of 1935, As Amended

(‘‘Act’’)

May 5, 2000.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated under the Act. All

interested persons are referred to the

application(s) and/or declaration(s) for

complete statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendment(s) is/are available for

public inspection through the

Commission’s Branch of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

May 30, 2000, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549–0609, and serve

a copy on the relevant applicant(s) and/

or declarant(s) at the address(es)

specified below. Proof of service (by

affidavit or, in the case of an attorney at

law, by certificate) should be filed with

the request. Any request for hearing

should identify specifically the issues of

facts or law that are disputed. A person

who so requests will be notified of any

hearing, if ordered, and will receive a

copy of any notice or order issued in the

matter. After May 30, 2000, the

application(s) and/declaration(s), as

filed or as amended, may be granted

and/or permitted to become effective.

Conectiv, et al. (70–9655)

Conectiv, a registered public utility

holding company; Atlantic City Electric

Company (‘‘ACE’’), and Delmarva Power

& Light Company (‘‘Delmarva’’), each a

public utility subsidiary of Conectiv;

ACE–REIT, Inc. (‘‘ACE–REIT’’),

Conectiv Atlantic Generation, LLC

(‘‘CAG’’), nonutility subsidiaries of ACE;

and Conectiv Delmarva Generation, Inc.

(‘‘CDG’’), a nonutility subsidiary of

Delmarva (collectively, ‘‘Applicants’’),

all located at 800 King Street,

Wilmington, Delaware 19899, have filed

an application-declaration under

sections 6(a), 7, 9(a), 10, 12(c), 12(d) and

32 of the Act and rules 43, 45, 46 and

54 under the Act.

Applicants state that Conectiv intends

to convert Delmarva and ACE into

subsidiaries that provide only regulated

electric transmission and distribution

services and, in the case of Delmarva,

regulated gas distribution services. As

part of this plan, Convectiv is

implementing a strategy of divesting

baseload generating facilities and

retaining ‘‘mid-merit’’ facilities, e.g.,

those facilities that can quickly increase

or decrease their KW per hour output

level on an economic basis. In

connection with this strategy, Delmarva

and ACE intend to transfer ownership of

certain generating facilities to a special

purpose holding company, Conectiv

Energy Holding Company (‘‘CEH’’), that

Conectiv proposes to establish and own,

to hold these facilities. The Delmarva

facilities have approximately 1,364 MW

of net generating capacity, with an

approximate value of $301.4 million net

of deferred taxes (‘‘Delmarva Generation

Assets’’).1 The ACE facilities have

approximately 502 MW of net

generating capacity valued at

approximately $77.2 million net of

deferred taxes (‘‘ACE Generation

Assets’’). Applicants request several

authorizations to accomplish this

transfer and for other related matters.

Transfer of ACE and Delmarva

Generation Assets

ACE proposes to acquire additional

ownership interests in its subsidiary,

CAG, which is currently inactive, and to

transfer the ACE Generation Assets to

CAG, in exchange for those interests.

ACE also requests authority to acquire

additional common stock of its

subsidiary, ACE–REIT, which is also

inactive, and to transfer to ACE–REIT its

ownership interest in CAG in exchange

for that common stock.2 ACE proposes

to issue a dividend to Conectiv of ACE–

REIT’s common stock.

Similarly, Delmarva proposes to

acquire additional common stock of its

subsidiary, CDG, which is currently

inactive, and to transfer the Delmarva

Generation Assets to CDG in exchange

for that common stock. Delmarva

proposes to issue a dividend to Conectiv

of CDG’s common stock. In accordance

with generally accepted accounting

principles: The dividends by ACE of

ACE–REIT common stock and by

Delamarva of CDG common stock will

be treated as dividends out of capital

surplus.3

In addition, Conectiv requests

authority to establish and acquire all of

the common shares of CEH 4 as an

intermediate holding company that

would hold the equity securities of

CDG, ACE–REIT and indirectly, CAG.5

Accordingly, Applicants request

authority for Conectiv to contribute the

equity securities of CDG and ACE–REIT

and, indirectly, CAG to CEH. These

transactions would make CDG and

ACE–REIT direct subsidiaries and CAG

and indirect subsidiary of CEH.

Applicants also request that the

Commission deem ACE–REIT not to be

a utility holding company solely for

purposes of section 11(b)(2) of the Act.

Financings

Applicants request authority for CEH,

ACE–REIT, CAG and CDG to engage in

certain financings until such time as

CAG and CDG qualify as EWGs and the

financing of the companies can be

accomplished through rule 52 or until

March 31, 2000, whichever first occurs

(‘‘Authorized Period’’). Specifically,

CEH requests authority to issue equity

or long- or short-term debt securities to