Federal Register / Vol. 65, No. 73 / Friday, April 14, 2000 / Notices 20219

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–24387; File No. 812–11910]

The Penn Mutual Life Insurance

Company, et al.; Notice of Application

April 11, 2000.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for an

order pursuant to Section 26(b) of the

Investment Company Act of 1940, as

amended (the ‘‘1940 Act’’) approving

certain substitutions of securities, and

pursuant to Section 17(b) of the 1940

Act exempting related transactions from

Section 17(a) of the 1940 Act.

Summary of Application: Applicants

request an order approving the

substitutions of shares of four new

investment portfolios (‘‘New Funds’’) of

Penn Series Funds, Inc. (‘‘Penn Series’’)

for shares of certain unaffiliated

registered management investment

companies (‘‘Replaced Funds’’)

currently serving as investment options

for certain variable annuity contracts

and variable life insurance policies, and

to permit certain in-kind redemptions of

portfolio securities in connection with

the substitutes (‘‘Substitutions’’).

Applicants: The Penn Mutual Life

Insurance Company (‘‘Penn Mutual

Life’’), The Penn Annuity and Insurance

Company (‘‘PIA’’), Penn Mutual

Variable Annuity Account III (‘‘Variable

Annuity Account III’’), Penn Mutual

Variable Life Account I (‘‘Variable Life

Account I’’), PIA Variable Annuity

Account I (‘‘Variable Annuity Account

I,’’ and together with Variable Annuity

Account III and Variable Life Account I,

‘‘the Separate Accounts’’), and

Independence Capital Management, Inc.

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

Filing Date: The application was filed

on December 23, 1999, and amended

and restated on April 10, 2000.

Hearing or Notification Of Hearing:

An order granting the application will

be issued unless the Commission orders

a hearing. Interested persons may

request a hearing by writing to the

Secretary of the Commission and

serving Applicants with a copy of the

request, personally or by mail. Hearing

requests should be received by the

Commission by 5:30 p.m. on May 1,

2000, and should be accompanied by

proof of service on 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 Commission.

ADDRESSES: Secretary, Commission, 450

Fifth Street, N.W., Washington, D.C.

20549–0609. Applicants: Franklin L.

Best, Esq., Managing Corporate Director,

The Penn Mutual Life Insurance

Company, 600 Dresher Road, Horsham,

PA 19044. Copies to C. Ronald Rubley,

Esq., 1701 Market Street, Philadelphia,

PA 19103 and Edward J. Meehan, Jr.,

Esq., 1701 Market Street, Philadelphia,

PA 19103.

FOR FURTHER INFORMATION CONTACT: Paul

G. Cellupica, 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 Street,

N.W., Washington, D.C. 20549–0102

(202–942–8090).

Applicants’ Representations

1. Penn Mutual Life is a mutual life

insurance company organized under the

laws of Pennsylvania in 1847. It

provides life insurance, annuity, and

investment products. PIA, a wholly

owned subsidiary of Penn Mutual Life,

is a Delaware stock insurance company

established in 1994.

2. Variable Annuity Account I,

sponsored by PIA, is registered under

the 1940 Act as a unit investment trust.

Variable Annuity Account I serves as a

funding vehicle for variable annuity

contracts issued by PIA. Variable

Annuity Account III, sponsored by Penn

Mutual Life, is a unit investment trust

registered under the 1940 Act. Variable

Annuity Account III serves as a funding

vehicle for variable annuity contracts

issued by Penn Mutual Life. Variable

Life Account I, sponsored by Penn

Mutual Life, is a unit investment trust

registered under the 1940 Act. Variable

Life Account III serves as a funding

vehicle for variable life insurance

contracts issued by Penn Mutual Life.

3. Variable Annuity Account I and

Variable Annuity Account III serves as

the funding vehicle for variable annuity

contracts (‘‘VA Contracts’’) issued by

Penn Mutual Life and PIA. Variable Life

Account I serves as the funding vehicle

for variable universal life contracts

(‘‘VUL Contracts’’) issued by Penn

Mutual Life. Each of the VA Contracts

and VUL Contracts funded by the

Separate Accounts (collectively,

‘‘Variable Products’’) is registered with

the Commission under the Securities

Act of 1933, as amended, and is offered

exclusively by means of a prospectus

which describes the applicable terms

and conditions of each such contract.

The Separate Accounts are each divided

into subaccounts (each a ‘‘Subaccount’’)

and each Subaccount invests

exclusively in shares of funds of

registered management investment

companies (‘‘Existing Funds’’) currently

available to the holders of the contracts

(‘‘Contractholders’’.

4. The Existing funds consists of 18

separate investment options, which

contain certain investment portfolios

issued by Penn Series, Neuberger

Berman Advisers Management Trust

(‘‘Neuberger & Berman Portfolios’’),

Variable Insurance Products Fund and

Variable Insurance Products Fund II

(‘‘Fidelity Portfolios’’), American

Century Variable Portfolios Inc.

(‘‘American Century Portfolio’’) and

Morgan Stanley Dean Witter Universal

Funds, Inc. (‘‘Morgan Stanley

Portfolio’’). Each of the Existing Funds

is registered as a management

investment company under the 1940

Act. Not all of the Existing Funds are

involved in the Substitutions. The

application contemplates that the

American Century Portfolio, two of the

three Neuberger & Berman Portfolios

and one of the four Fidelity Portfolios

will be replaced by substantially similar

funds.

5. Penn Series is registered under the

1940 Act as an open-end investment

management series. Currently, Penn

Series has nine investment portfolios

(‘‘Current Penn Funds’’). Shares of the

Current Penn Funds are offered only to

Penn Mutual Life and PIA (Penn Mutual

Life and PIA hereinafter referred to

collectively as ‘‘Penn Mutual’’) for the

Variable Products.

6. ICMI, a wholly owned subsidiary of

Penn Mutual Life, is a registered

investment adviser under the

Investment Advisers Act of 1940. ICMI

provides investment management

services to each of the Current Penn

Funds.

7. Penn Series is organizing four New

Funds. Each of the New Funds will have

the same or substantially the same

investment objectives and policies of

one of the Replaced Funds involved in

the Substitutions. Overall investment

management services will be provided

to each of the newly organized New

Funds by ICMI pursuant to an

investment advisory agreement between

ICMI and Penn Series (‘‘ICMI Advisory

Agreement’’). Under the ICMI Advisory

Agreement, ICMI will be responsible for

the management of the business and

affairs of each of the New Funds, subject

to the supervision of the Board of

Directors of Penn Series. ICMI will also

20220 Federal Register / Vol. 65, No. 73 / Friday, April 14, 2000 / Notices

be authorized to exercise full

investment discretion and make all

determinations with respect to the

investment of the assets of the

respective New Funds, but may, at its

own cost and expense, retain subadvisers (‘‘Sub-Advisers’’) to provide

day-to-day portfolio management to

each of the New Funds. For its services

under the ICMI Advisory Agreement,

ICMI will receive a fee from each of the

New Funds. ICMI, in turn, will pay the

fees and expenses of any Sub-Adivser

retained by ICMI or any of the New

Funds. It is currently anticipated that

ICMI will employ Sub-Advisers for

three of the New Funds and directly

manage the assets of the fourth New

Fund.

8. Penn Series and ICMI have applied

for exemptive relief from Section 15(a)

of the 1940 Act (‘‘Manager of Managers

Order’’). The Manager of Managers

Order would permit ICMI, as the

investment adviser for the existing

series of Penn Series to replace any SubAdviser or to employ a new SubAdviser, without submitting such

actions for the approval of shareholders

of the affected series. Following the

Substitutions, Applicants anticipate that

each of the New Funds will be entitled

to rely on the Manager of Managers

Order. As a condition to the application,

however, Applicants state that they will

take no action in reliance on the

Manager of Managers Order with respect

to any one of the New Funds unless and

until the operation of that Fund in the

manner contemplated by the Manager of

Managers Order is approved, following

the Substitutions, by the holders of a

majority of the outstanding shares of

that Fund within the meaning of the

1940 Act.

9. The purpose of the Substitutions is

to provide Contractholders with

improved investment options through

enhanced investment performance and

reduced expense ratios of investment

options available under the Variable

Products. The Substitutions are the first

step in establishing a manager of

managers structure that will provide

Applicants with increased ability to

affect the administration and

management of the investment options

offered through Variable Products. As

the investment manager of each of the

New Funds, ICMI will be in a position

to oversee the operations of the New

Funds, including the performance and

portfolio management. Applicants

represent that the manager of managers

structure will give Applicants the means

to more directly monitor the overall

manner in which investment options

available through the Variable Products

are managed and administered.

10. Applicants seek relief for four

Substitutions. The following table

summarizes the proposed Substitutions.

The investment objectives of

Contractholders with interests in any

Subaccount of the Separate Account

(‘‘Affected Contractholder’’) will not be

materially affected by the Substitutions.

BILLING CODE 8010–01–M

Federal Register / Vol. 65, No. 73 / Friday, April 14, 2000 / Notices 20221

11. Applicants represent that the

investment objectives of each New Fund

will be the same as, or substantially

similar to, the investment objectives of

the corresponding fund that the New

Fund will replace. The investment

strategies and policies of the Penn

Series Limited Maturity Bond Fund and

the Penn Series Index 500 Fund will be

substantially the same or substantially

similar to the investment strategies and

policies of the Neuberger Berman

Limited Maturity Bond Portfolio and the

Fidelity Investments’ Index 500

Portfolio. The investment strategies and

policies of the Penn Series Mid Cap

Value Fund and the Penn Series Mid

Cap Growth Fund may differ from the

investment strategies and policies of

Neuberger Berman Partners Fund and

the American Century Capital

Appreciation Portfolio respectively.

However, the investment strategies and

policies of these New Funds will be

sufficiently similar to their

corresponding Replaced Funds so that

the Affected Contractholders may

continue to seek to achieve their

investment objectives in the substituted

funds.

12. In Substitution No. 1, ICMI will

serve as investment adviser and

Neuberger Berman Investment

Management Inc. (‘‘Neuberger Berman’’)

will continue day-to-day portfolio

management as Sub-Adviser to the New

Fund. In Substitutions Nos. 2, 3, and 4,

the New Fund will, following the

substitutions, be advised by investment

advisory organizations different from

the organizations that currently manage

the Replaced Funds. In Substitution No.

2, ICMI will serve as the investment

adviser and investment manager of the

New Fund. Applicants believe that

given the below average investment

performance for the Neuberger Berman

Limited Maturity Bond Portfolio, ICMI

will achieve improved investment

results for Contractholders. In

Substitution No. 3, ICMI will serve as

the investment adviser and Wells

Capital Management Inc. will serve as

Sub-Adviser to the Penn Series Index

500 Fund. As in the case of the Fidelity

Investment’s Index 500 Portfolio,

investments of Penn Series Index 500

Fund are expected to approximate the

relative composition of the securities in

the S&P 500. In Substitution No. 4, the

day-to-day decisions for Penn Series

Mid Cap Growth Fund will be the

responsibility of Turner Investment

Partners, Inc. (‘‘TIP’’) as Sub-Adviser.

Applicants believe that TIP is in a

position to achieve improved

investment results for Contractholders

who currently have contract values

allocated to the corresponding Replaced

Fund.

13. Immediately following the

Substitutions, the expense ratios of the

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New Funds will not exceed the expense

ratios of the Replaced Funds. The

following table shows the total assets in

each of the Replaced Funds at December

31, 1999 that are attributable to the

Variable Products, as well as other nonregistered insurance products, and

compares the advisory fees and the

expense ratios of the Replaced Funds for

the six months ended December 31,

1999, with the pro forma advisory fees

and expense ratios of the New Funds for

the same periods. (Pro forma expense

ratios of the New Funds are based on

assets in the Replaced Funds

attributable to the Variable Products and

other non-registered insurance products,

and estimates of expenses associated

with those assets had they been invested

in the New Funds during the periods).

14. Applicants expect to effect the

Substitutions on or about May 1, 2000

in coordination with the distribution of

annual prospectuses to Contractholders.

As of the effective date of the

Substitutions (‘‘Effective Date’’), shares

of the Replaced Funds held by each of

the Subaccounts of Applicant Separate

Accounts will be presented to the

Replaced Funds for redemption. The

proceeds of such redemptions, which

may be effected through cash or ‘‘inkind’’ transactions, will then be used to

purchase the appropriate number of

shares of the corresponding New Funds.

The Substitutions will take place at

relative net asset values, with no change

in the contract value of any Affected

Contractholder, and all redemptions of

shares of the Replaced Funds and

purchases of shares of the

corresponding New Funds will be

effected in accordance with Rule 22c–1

under the 1940 Act.

15. Penn Mutual will bear the costs of

the Substitutions, including any legal

and/or accounting fees relating to them.

Affected Contractholders will not incur

any additional fees or charges as a result

of the Substitutions; no current fees or

charges applicable under any of the

Variable Products will be increased as a

result of the Substitutions; the rights of

Federal Register / Vol. 65, No. 73 / Friday, April 14, 2000 / Notices 20223

Affected Contractholder under any of

the Variable Products, and the

obligations of Penn Mutual under the

Variable Products will not diminish in

any way.

16. Applicants state that as soon as

practicable after filing the Application,

a supplement to each of the

prospectuses relating to the Variable

Products will be filed with the

Commission. These supplements

(‘‘Product Supplements’’) will reflect all

material information relating to the

Substitutions and the New Funds,

including the identity of the Replaced

Funds, a description of the New Funds

and their respective investment

objectives and policies, the Sub-Adviser

for each of the New Funds, fees and

expenses associated with the New

Funds, and the impact that the

Substitution will have on fees and

expenses.

17. Following the date on which the

notice of the Application is published in

the Federal Register, but before the

Effective Date, Penn Mutual will send to

Affected Contractholders a notice (‘‘PreSubstitution Notice’’), which will

include the Product Supplements. The

Pre-Substitution Notice will inform

Affected Contractholders of: (a) The

Effective Date of the Substitutions; (b)

the right of each Affected

Contractholder, under the VUL and VA

Contracts, to transfer contract values

among the various Subaccounts; and (c)

the fact that any such transfer that

involves a transfer from any of the

Replaced Funds will not be subject to

any administrative charge and will not

count as one of the ‘‘free transfers’’ to

which Affected Contractholders may

otherwise be entitled.

18. Within five days after the Effective

Date, Affected Contractholders will be

sent written confirmation

(‘‘Confirmation Notice’’) of the

substitution transactions. The

Confirmation Notice will: (a) Confirm

that the Substitutions were carried out;

(b) reiterate that each Affected

Contractholder may make one transfer

of all of the contract value or cash value

under their Variable Products that is

invested in any one of the Subaccounts

that were affected by the Substitutions

to any other Subaccount available under

their Variable Products without such

transfer being subject to any

administrative charge, or being counted

as one of the ‘‘free transfers’’ (or one of

the limited number of transfers) to

which Affected Contractholders may be

entitled under their Variable Products;

and (c) state that Penn Mutual will not

exercise any rights reserved by it under

the Variable Products to impose

additional restrictions on transfers until

at least 30 days after the Effective Date.

The Confirmation Notice will be

accompanied by a then-current

prospectus for the relevant Variable

Product, reflecting the inclusion of the

New Funds, as well as an amended

prospectus for the New Funds.

19. The in-kind redemption proceeds

will consist of the same securities that

are currently held by the Replaced

Funds. Redemptions in-kind will be

done in a manner consistent with the

investment objectives, policies and

diversification requirements of the

respective New Funds. Further,

Applicants represent that the in-kind

redemptions for each of the New Funds

will be reviewed by the Sub-Adviser

responsible for making day-to-day

investment decisions for that Portfolio

to assure that the investment objective,

investment policies and diversification

requirements set forth in the registration

statement relating to the relevant New

Fund are satisfied. In addition, the inkind asset transfers will be valued in the

manner that is consistent with the

valuation procedures of both the

Replaced Fund and the relevant New

Fund. Applications state that any

inconsistencies in valuation procedures

between the Replaced Fund and the

relevant New Fund will be reconciled so

that the redeeming and purchasing

values are the same. In addition, and

consistent with Rule 17a–7 under the

1940 Act, no brokerage commissions,

fees or other remuneration will be paid

in connection with the in-kind

transactions.

20. The Variable Products expressly

reserve to Penn Mutual the right, subject

to compliance with applicable law, to

substitute shares of one open-end

investment company for shares of

another open-end investment company

held by a Separate Account.

Applicant’s Legal Analysis

1. Section 26(b) of the 1940 Act

provides that it shall be unlawful for

any depositor or trustee of a registered

unit investment trust holding the

security of a single issuer to substitute

another security for such security unless

the Commission approves such

substitution. Section 26(b) further

provides that the Commission shall

issue an order approving such

substitution if the evidence establishes

that it is consistent with the protection

of investors and the purposes fairly

intended by the policies and provisions

of the 1940 Act.

2. Applicants request an order

pursuant to Section 26(b) of the 1940

Act approving the substitutions and

related transactions. Applicants assert

that the purposes, terms, and conditions

of the Substitutions are consistent with

the protection of investors and the

purposes fairly intended by the 1940

Act. Applicants further assert that the

Substitutions will not result in the type

of forced redemption that Section 26(b)

was designed to guard against.

3. Applicants maintain that the

substitutions do not represent the type

of transaction that Section 26(b) was

designed to prevent for the following

reasons: (a) the Substitutions are

designed to give Penn Mutual more

control over investment products it

offers to the investing and insurance

purchasing public; (b) Contractholders

involved in Substitution Nos. 1, 3 and

4 will have the benefit of ICMI’s

oversight of the Sub-Advisers; and (c)

the procedures that Applicants will

follow in the Substitutions will give

Affected Contractholders ample notice

of the Substitutions and any potential

impact. Affected Contractholders will

have the opportunity to transfer their

investments from one of the Replaced

Funds in anticipation of the

Substitutions, or from the New Funds

following the Substitution. In either

case, Applicants represent that no

administrative fee or transfer charge will

be assessed. In light of the fact that only

four of the 18 investment options

currently available to Affected

Contractholders will be involved in the

Substitutions, Applicants believe that

this ability to ‘‘opt out’’ of any

Substitution affords each Affected

Contractholder an effective choice of

investments.

4. Section 17(a)(1) of the 1940 Act

prohibits any affiliated person of a

registered investment company, or any

affiliate of such affiliated person, from

selling any security or other property to

such registered investment company.

Section 17(a)(2) of the 1940 Act

prohibits any affiliated person from

purchasing any security or other

property from such registered

investment company.

5. Applicants request an order

pursuant to Section 17(b) of the 1940

Act exempting the in-kind redemptions

and purchases from the provisions of

Section 17(a). Section 17(b) of the 1940

Act provides that the Commission may

grant an order exempting a proposed

transaction from Section 17(a) if

evidence establishes that: (a) The terms

of the proposed transaction, including

the consideration to be paid or received,

are fair and reasonable and do not

involve overreaching on the part of any

person concerned; (b) the proposed

transaction is consistent with the policy

of each registered investment company

concerned; and (c) the proposed

20224 Federal Register / Vol. 65, No. 73 / Friday, April 14, 2000 / Notices

transaction is consistent with the

general purposes of the 1940 Act.

6. Applicants represent that, if

effected in accordance with the

procedures described in the Application

and summarized herein, the

Substitutions are consistent with the

general purposes of the 1940 Act and do

not present any of the conditions or

abuses that the 1940 Act was designed

to prevent. Applicants state that the

consideration to be paid by each New

Fund, and received by each of the

Replaced Funds, will be fair and

reasonable and will not involve

overreaching because the Substitutions

will not result in the dilution of the

interests of any Affected

Contractholders and will not effect any

change in economic interest, contract

value or the dollar value of any Variable

Products held by an Affected

Contractholder. The in-kind

redemptions and purchases will be done

at values consistent with the policies of

both the Replaced Funds and the New

Funds and will satisfy the procedural

safeguards of Rule 17a–7. Both ICMI and

the Sub-Adviser of a New Fund will

review all the asset transfers to assure

that the assets meet the objectives of a

New Fund and that they are valued

under the appropriate valuation

procedures of the Replaced Fund and

such New Fund. The in-kind

redemption proceeds will consist of the

same securities that are currently held

by the Replaced Funds. Applicants

represent that the transactions are

consistent with the policies of each

investment company involved and the

general purposes of the 1940 Act, and

comply with the requirements of

Section 17(b).

7. Applicants state that the facts and

circumstances in the application are

sufficient to assure that the

Substitutions will be carried out in a

manner that is consistent with Sections

17(b) and 26(b) of the 1940 Act and that

the terms and conditions to which

Applicants will be subject hereby are

consistent with orders the Commission

has issued in the past under similar

circumstances.

Applicants’ Terms

The significant terms of the

substitutions described in the

application include:

1. The New Funds have objectives

and policies that are substantially the

same or substantially similar to the

objectives and policies of the Replaced

Funds so that the objectives of the

Affected Contractholders can continue

to be met.

2. The expense ratios of the New

Funds will, immediately following the

Substitution, not exceed the expense

ratios of the Replaced Funds. In the

event that the expense ratio of a New

Fund exceeds that of its corresponding

Replaced Fund, Penn Mutual will waive

its fees and/or reimburse expenses such

that its expense ratio does not exceed

that of its corresponding Replaced

Fund’s expense ratio. Penn Mutual will

continue any such fee waivers and/or

reimbursements, as necessary, until

April 30, 2001, except that in the case

of Substitution No. 2 (of the Penn Series

Limited Maturity Bond Fund for the

Neuberger Berman Limited Maturity

Bond Portfolio), Penn Mutual will

continue any such fee waiver and/or

expense reimbursements, as necessary,

until April 30, 2003.

3. Affected Contractholders may,

under the terms of the Variable

Products, transfer assets from any

Subaccount of Applicant Separate

Accounts to any other Subaccount

available under the Variable Product.

Any such transfer that involves a

transfer from any of the Replaced

Funds, from the date of the notice that

the Replaced Funds will be substituted

through a date at least 30 days following

the Effective Date, will not be subject to

any administrative charge, and will not

count as one of any ‘‘free transfers’’ to

which Affected Contractholder may

otherwise be entitled. Affected

Contractholders may also withdraw

amounts under any contract held, or

terminate their interest in any such

contract, in accordance with the terms

and conditions of any such contract,

including but not limited to payment of

any applicable surrender charge.

4. The Substitutions will be effected

at the net asset value of the respective

shares in conformity with Section 22(c)

of the 1940 Act and Rule 22c–1

thereunder, without the imposition of

any transfer or similar charge by

Applicants.

5. The Substitutions will take place at

relative net asset value without change

in the amount or value of any Variable

Products held by Affected

Contractholders. Affected

Contractholders will not incur any fees

or charges as a result of the

Substitutions, nor will their rights or the

obligations of Penn Mutual under such

Variable Products be altered in any way.

All expenses incurred in connection

with the Substitutions, including legal,

accounting and other fees and expenses,

will be borne by Applicants, other than

Separate Accounts.

6. Redemptions in kind will be

handled in a manner consistent with the

investment objectives, policies and

diversification requirements of the New

Fund. Consistent with Rule 17a–7(d)

under the 1940 Act, no brokerage

commissions, fees (except customary

transfer fees) or other remuneration will

be paid by the Replaced Funds or New

Funds or Affected Contractholders in

connection with the in-kind

transactions. In addition, the in-kind

asset transfers will be valued in the

manner that is consistent with the

valuation procedures of both the

Replaced Fund and the relevant New

Funds.

7. The Substitutions will not be

counted as transfers in determining any

limit on the total number of transfers

that Affected Contractholders are

permitted to make under the Variable

Products.

8. The Substitutions will not alter in

any way the annuity, life insurance, or

other benefits afforded under the

Variable Products held by any Affected

Contractholders.

9. Each of the New Funds may rely

upon a Commission order expected to

be issued to certain affiliates of Penn

Series. Applicants will take no action in

reliance on the Manager of Managers

Order with respect to any one of the

New Funds unless and until the

operation of that portfolio in the manner

contemplated by the Manager of

Managers Order is approved by the

holders of a majority of the outstanding

shares of that portfolio within the

meaning of the 1940 Act by vote

obtained following the Substitution.

Applicants’ Conditions

Applicants state that they will not

complete the Substitutions and related

transactions described in this

Application (other than the mailing of

the Pre-Substitution Notices) unless all

of the following conditions are met:

1. The Commission shall have issued

an order (a) approving the Substitutions

under Section 26(b) of the 1940 Act, and

(b) exempting the in-kind redemptions

from the provisions of Section 17(a) of

the 1940 Act as necessary to carry out

the transactions described in this

Application.

2. Each Affected Contractholder will

have been sent a Pre-Substitution

Notice, which will include the

Prospectus Supplements and will

inform Affected Contractholders of: (a)

The Effective Date of the Substitutions;

(b) the right of each Affected

Contractholder, under the Variable

Products, to transfer contract values

among the various Subaccounts; and (c)

the fact that any such transfer that

involves a transfer from any of the

Replaced Funds will not be subject to

any administrative charge and will not

count as one of any ‘‘free transfers’’ to

Federal Register / Vol. 65, No. 73 / Friday, April 14, 2000 / Notices 20225

1The number of Authorized Shares was adjusted

to reflect a two-for-one stock split that occurred on

December 11, 1992.

2Applicants claim that borrowings by the

Subsidiaries other than Fitchburg are exempt from

Commission review under rule 52 under the Act.

3As of February 17, 2000, Unitil had three

unsecured lines of credit totaling $23 million.

which Affected Contractholders may

otherwise be entitled.

3. Each Affected Contractholder will

receive, within five days following the

Effective Date of Substitutions, written

notice (‘‘Confirmation Notice’’). The

Confirmation Notice will: (a) Confirm

that the Substitutions were carried out;

(b) reiterate that each Affected

Contractholder may make one transfer

to all of the contract value or cash value

under their Variable Product that is

invested in any one of the Subaccounts

that were affected by the Substitutions

to any other Subaccount available under

their Variable Product without such

transfer being subject to any

administrative charge, or being counted

as one of any ‘‘free transfers’’ (or one of

the limited number of transfers) to

which Affected Contractholders may be

entitled under their Variable Product;

and (c) state that Penn Mutual will not

exercise any rights reserved by it under

the Variable Products to impose

additional restrictions on transfers until

at least 30 days after the Effective Date.

The Confirmation Notice will be

accompanied by a then-current

prospectus for the relevant Variable

Product, reflecting the inclusion of the

New Funds, as well as an amended

prospectus for the New Funds.

4. Penn Mutual shall have satisfied

itself, that: (a) The Variable Products

allow the substitution of investments in

the manner contemplated by the

Substitutions and related transactions

described herein; (b) the transactions

can be consummated as described in

this Application under the applicable

insurance laws; and (c) that any

regulatory requirements in each

jurisdiction where the Variable Products

are qualified for sale, have been

complied with to the extent necessary to

complete the transactions.

Conclusion

Applicants assert that, for the reasons

summarized above, the requested order

approving the substitutions and related

transactions involving in-kind

transactions should be granted.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–9398 Filed 4–12–00; 10:11 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27162]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

April 7, 2000.

Notice is hereby given that the

following filings(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 2, 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 2, 2000, the

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

filed or as amended, may be granted

and/or permitted to become effective.

Unitil Corporation (70–8050)

Unitil Corporation (‘‘Unitil’’), 6

Liberty Lane West, Hampton, New

Hampshire 03842–1720, a registered

holding company, has filed a posteffective amendment under sections 6(a)

and 7 of the Act to a declaration

previously filed under the Act.

By orders dated November 16, 1992

and February 7, 1997 (NCAR Nos. 25677

and 26663) (‘‘Orders’’), Unitil has

authorized, among other things, to issue

and sell up to 253,654 shares (‘‘DRIP

Shares’’) of its no par value common

stock (‘‘Common Stock) under its

dividend reinvestment and stock

purchase plan (‘‘DRIP Plan’’). As of

February 1, 2000, 15,030 of the

authorized DRIP Shares remained

unsold. The Orders also authorized

Unitil to issue and sell up to 229,636

shares (‘‘401(k) Shares’’ and, together

with DRIP Shares, ‘‘Authorized

Shares’’) 1 of Common Stock under its

tax-deferred savings and investment

plan (‘‘401(k) Plan’’). As of February 1,

2000, 44,393 of the authorized 401(k)

Shares were unsold.

In addition to the Authorized Shares,

Unitil now proposes to issue and sell up

to 200,000 shares of its Common Stock

under its DRIP Plan and up to 150,000

shares under its 401(k) Plan. Shares

available for issuance under each of

these plans may come from authorized

but unissued Common Stock or from

Common Stock purchased by Unitil on

the open market.

Unitil Corporation (70–9633)

Unitil Corporation (‘‘Unitil’’), a

registered holding company under the

Act, and its subsidiary companies,

Concord Electric Company, Exeter &

Hampton Electric Company, Fitchburg

Gas and Electric Light Company

(‘‘Fitchburg’’), Unitil Power Corp.,

Unitil Realty Corp., Unitil Resources,

Inc. and Unitil Service Corp. (‘‘Unitil

Service’’) (collectively, ‘‘Subsidiaries’’

and, together with Unitil,

‘‘Applicants’’), all at 6 Liberty Lane

West, Hampton, New Hampshire 03842,

have filed an application-declaration

under sections 6(b), 9(a), 10 and 12(b) of

the Act and rules 43 and 45 under the

Act.

By order dated June 30, 1997 (HCAR

No. 26737), Applicants were authorized

to make unsecured short-term

borrowings and to operate a system

money pool (‘‘Money Pool’’) through

June 30, 2000. The Applicants now

request authority to make additional

short-term borrowings and extend the

operation of the Money Pool through

June 30, 2003 (‘‘Authorization Period’’).

Specifically, Unitil requests authority

to incur short-term borrowings from

banks in an aggregate amount that will

not exceed $25 million outstanding. In

addition, Fitchburg requests authority to

incur short-term borrowings from third

parties and the other Applicants, and

Unitil and the other Subsidiaries request

authority to lend funds to Fitchburg

under the Money Pool. 2 Borrowings by

Fitchburg under the Money Pool and its

short-term borrowings from banks

would not exceed $20 million at any

one time outstanding.

Unitil’s existing 3 and proposed

borrowing arrangements will provide for

borrowings at (1) ‘‘base’’ or ‘‘prime’’