Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Notices 32271

portfolio securities to the extent

necessary to meet redemptions. The

Target Account, however, is a managed

investment company issuing variable

annuities and, as such, will continually

accept new premiums which it must

continue to invest; it is not a unit

investment trust with a fixed number of

units outstanding. The Adviser is

obligated to follow the investment

formula described in the application

and summarized in this notice as nearly

as practicable, and therefore, for new

investments during a year the 10% ratio

for the DJIA Target 10 Subaccount and

any Portfolios thereunder and the 20%

ratio for the DJIA Target 5 Subaccount

and any Portfolios thereunder will be

based on the ratios of the number of

shares established at the beginning of

each year rather than the value of the

stocks. Securities for each Subaccount

and any Portfolio thereunder will be

chosen with respect to specified

formulas for each Subaccount or

Portfolio and not in the Adviser’s

discretion.

9. The Adviser is permitted to deviate

from the respective formula for a

Subaccount or Portfolio where

circumstances are such that the

investment of a particular Subaccount

or Portfolio would fail to meet the

817(h) diversification requirements and

would thus cause the annuity contracts

to fail to qualify as an annuity contract

under the Code. Applicants maintain

that, in such a situation, the Adviser

must be permitted to deviate from a

Subaccount’s or Portfolio’s investment

strategy, but only in order to meet the

817(h) diversification requirements and

then only to the extent necessary to do

so. Applicants state that this limited

discretion does not raise the concerns

that Section 12(d)(3) is designed to

prevent.

10. Applicants represent that the

liquidity of a Subaccount’s portfolio is

not a concern here since the shares of

common stock selected are each

included in the DJIA, listed on the New

York Stock Exchange and are among the

most actively traded securities in the

United States.

11. Applicants also represent that the

effect of a Subaccount’s purchase on the

stock of parents of broker-dealers would

be de minimis. The common stocks of

securities related issuers represented in

the DJIA are widely held and have

active markets, and potential purchases

by a Subaccount would represent an

insignificant amount of the outstanding

common stock and the trading volume

of any of those issuers.

12. Applicants state that a potential

conflict of interest could occur if brokerdealers are influenced to recommend

certain investment company funds

which invest in the stock of the brokerdealer or any of its affiliates. Because of

the large market capitalization of the

DJIA issuers and the small portion of

these issuers’ common stock and trading

volume that would be purchased by a

Subaccount, however, Applicants find

that it is extremely unlikely that any

advice offered by a broker-dealer to a

customer as to which investment

company to invest in would be

influenced by the possibility that the

Target Account would be invested in

the broker-dealer or parent thereof.

13. Finally, Applicants state that

another potential conflict of interest

could occur if an investment company

directed brokerage to an affiliated

broker-dealer in which the company has

invested to enhance the broker-dealer’s

profitability or to assist it during

financial difficulty, even though that

broker-dealer may not offer the best

price and execution. To preclude this

type of conflict, Applicants and each

Subaccount agree, as a condition of the

application, that no company held in a

Subaccount portfolio, nor any affiliate of

such company, will act as broker for any

Subaccount in the purchase or sale of

any security for its portfolio.

14. Applicants seek relief not only

with respect to the Target Account and

the Subaccounts described in the

application, but also with respect to

other separate accounts of PFL or its

affiliated insurance companies

hereinafter created that support

materially similar subaccounts (‘‘Future

Accounts’’). Applicants represent that

the terms of relief requested with

respect to Future Accounts are

consistent with the standards set forth

in Section 6(c) of the 1940 Act.

Applicants’ Conditions

The Applicants agree to the following

conditions:

1. The Common Shares are included

in the DJIA as of the applicable

specified Stock Selection Date;

2. The Common Shares represent one

of the ten companies in the DJIA that

have the highest dividend yield as of the

applicable specified Stock Selection

Date;

3. With respect to the DJIA Target 5

Subaccount, the Common Shares

represent one of the five companies

with the lowest dollar per share stock

price of the ten companies in the DJIA

that have the highest dividend yield as

of the applicable specified Stock

Selection Date;

4. With respect to the DJIA Target 10

Subaccount and any Portfolios

thereunder, at the beginning of each

year, the value of the Common Shares

of each securities related issuer

represents approximately 10% of the

value of the DJIA Target 10

Subaccount’s (or, if there is more than

one Portfolio thereunder, of the

applicable Portfolio’s) total assets, but in

no event more than 10.5% of the value

of the DJIA Target 10 Subaccount’s (or,

if there is more than one Portfolio

thereunder, of the applicable Portfolio’s)

total assets on the first business day

after each Stock Selection Date;

5. With respect to the DJIA Target 5

Subaccount and any Portfolios

thereunder, at the beginning of each

year, the value of the Common Shares

of each securities related issuer

represents approximately 20% of the

value of the DJIA Target 5 Subaccount’s

(or, of there is more than one Portfolio

thereunder, of the applicable Portfolio’s)

total assets, but in no event more than

20.5% of the value of the DJIA Target 5

Subaccount’s (or, if there is more than

one Portfolio thereunder, of the

applicable Portfolio’s) total assets on the

first business day after each Stock

Selection Date; and

6. No company whose stock is held in

any Subaccount or Portfolio, nor any

affiliate thereof, will act as broker for

any Subaccount or Portfolio in the

purchase or sale of any security for the

Subaccount or Portfolio.

Conclusion

For the reasons summarized above,

Applicants assert 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 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15632 Filed 6–11–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35—26882]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

June 5, 1998.

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
32272 Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Notices

1Each of the entities invested in by PP&L Global,

Inc. is either an exempt wholesale generator or a

foreign utility company under the Act.

complete statements of the proposed

transaction(s) summarized below. The

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

any amendments is/are available for

public inspection through the

Commission’s Office 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

June 29, 1998, to the Secretary,

Securities and Exchange Commission,

Washington, D.C. 20549, 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 case of an attorney at law, by

certificate) should be filed with the

request. Any request for hearing should

identify specifically the issues of fact 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 June 29, 1998, the application(s)

and /or declaration(s), as filed or as

amended, may be granted and/or

permitted to become effective.

PP&L Resources, Inc. (70–9165)

PP&L Resources, Inc. (‘‘Resources’’),

Two North Ninth Street, Allentown,

Pennsylvania 18101, a holding company

exempt by order under section 3(a)(1) of

the Act, has filed an application under

sections 9(a)(2) and 10 of the Act for an

order authorizing it to acquire all of the

issued and outstanding common stock

of Penn Fuel Gas, Inc. (‘‘PFG’’), a

holding company exempt by order

under section 3(a)(1) of the Act

(‘‘Transaction’’). Resources also requests

an order under section 3(a)(1)

exempting it and all of its subsidiary

companies from all provisions of the

Act, except section 9(a)(2), after the

Transaction is completed.

Resources is the parent holding

company of PP&L, Inc. (‘‘PP&L’’). PP&L

provides electric service to

approximately 1.2 million customers in

its retail service territory in

Pennsylvania at retail rates.

Additionally, PP&L sells electricity at

retail throughout Pennsylvania under

the state’s retail access pilot programs.

Finally, PP&L markets wholesale

electric power throughout the eastern

United States. PP&L operates its

generation and transmission facilities as

part of the Pennsylvania-New JerseyMaryland Interconnection Association.

PP&L is subject to regulation by the

Pennsylvania Public Utility Commission

(‘‘PaPUC’’) with respect to retail electric

rates and other matters.

PP&L also is a holding company

exempt from regulation under the Act

under section 3(a)(2). PP&L owns 33.3%

of the capital stock and 50% of the

voting stock of Safe Harbor Water Power

Corporation (‘‘Safe Harbor’’), which

owns and operates a hydroelectric plant

on the Susquehanna River in south

central Pennsylvania. The entire output

of the plant is sold to PP&L and

Baltimore Gas & Electric, which owns

the balance of the Safe Harbor capital

and voting stock.

Resources has several nonutility

subsidiaries. One subsidiary, PP&L

Global invests in electric generation,

transmission and distribution facilities

both overseas and domestically.1

Another subsidiary, PP&L Spectrum,

Inc., provides energy-related products

and services both inside and outside of

PP&L’s service territory. A third

subsidiary, Interstate Energy Company,

operates oil and gas pipeline facilities

that supply fuel to a PP&L generating

station. Two subsidiaries, Realty

Company of Pennsylvania and BDW

Corporation, own real estate and other

interests related to the operation of

PP&L’s generating stations. One

subsidiary, PP&L Capital Funding, Inc.,

engages in debt financing activities on

behalf of Resources. Another subsidiary,

CEPT Group, Inc., holds passive

investments in securities for investment

purposes.

For the year ended December 31,

1997, Resource’s operating revenues on

a consolidated basis were approximately

$3.049 billion, of which approximately

$90 million was attributable to

nonutility activities. Resources’

consolidated assets at December 31,

1997 were approximately $10.0 billion,

of which approximately $6.8 billion

consisted of net electric plant and

equipment.

PFG owns two utility subsidiaries,

PFG Gas, Inc. (‘‘PFG Gas’’) and North

Penn Gas Company (‘‘NPG’’). PFG Gas

provides natural gas distribution service

to approximately 35,000 customers in

Pennsylvania and to approximately 200

customers in Maryland. NPG provides

natural gas distribution service to

approximately 34,500 customers in

Pennsylvania. PFG Gas and NPG also

each provide natural gas transportation

and storage services in Pennsylvania.

PFG Gas and North Penn are each

subject to regulation by the PaPUC with

respect to rates and other matters. In

addition, PFG Gas is subject to the

jurisdiction of the Maryland Public

Service Commission with respect to

rates and other matters for its utility

business conducted in that state.

For the year ended December 31,

1997, PFG’s operating revenues on a

consolidated basis were approximately

$119 million, of which approximately

$106 million were attributable to its gas

utility operations. Consolidated assets

PFG and its subsidiaries as of December

31, 1997, were approximately $150

million. PFG has no nonutility

subsidiaries.

The Transaction will be governed by

the terms of a June 26, 1997 Agreement

and Plan of Merger (‘‘Agreement’’) by

and among Resources, Keystone Merger

Corp. (‘‘Keystone’’), a wholly owned

subsidiary of Resources, and PFG.

Keystone was organized solely for the

purpose of the Transaction and is not

engaged in any business operations.

Under the terms of the Agreement,

Keystone will be merged into PFG and

PFG will survive as a wholly owned

subsidiary of Resources. Each share of

PFG common stock outstanding prior to

the Transaction will be converted into

the right to receive between 6.968 and

8.516 shares of Resources common

stock, depending on the market price of

Resources common stock at the time of

closing. PFG common stock

shareholders will become Resources

common stock shareholders, and

Resources will become the sole holder

of all outstanding PFG common stock.

In addition to its common stock, PFG

has issued $1.40 cumulative preferred

stock (‘‘PFG Preferred’’). PFG has

undertaken to redeem shares of the PFG

Preferred in accordance with its terms.

PFG Preferred shareholders will receive

either the redemption price or the right

to receive between 0.682 and 0.833

shares of Resources common stock,

depending on the market price of

Resources common stock at the time of

closing.

Following the Transaction, Resources

and each of its public utility

subsidiaries will be organized in

Pennsylvania. Resources contends that

it will quality for a section 3(a)(1)

exemption upon consummation of the

Transaction. In addition, Resources

states that, following the Transaction,

PP&L will continue to meet the

requirements for exemption under

section 3(a)(2), and PFG will continue to

meet the requirements for an exemption

under section 3(a)(1).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15633 Filed 6–11–98; 8:45 am]

BILLING CODE 8010–01–M