63106 Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices

1The numbers in brackets denote the number of

portfolios which are currently available under the

Contracts.

2ASAP II, the Alliance Navigator and the

Stagecoach Contracts will not be subject to the

proposed substitutions.

authorized to view under the Rules of

Operation and Procedure.

[FR Doc. 95–29950 Filed 12–7–95; 8:45 am]

BILLING CODE 8010–01–P

[Rel. No. IC–21561; File No. 812–9588]

American Skandia Life Assurance

Corporation, et al.

December 1, 1995.

AGENCY: U.S. Securities and Exchange

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

ACTION: Notice of Application for

Exemption Under the Investment

Company Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: American Skandia Life

Assurance Corporation (‘‘ASLAC’’),

American Skandia Life Assurance

Corporation Variable Account B (Class

1) (‘‘Account B—Class 1’’), American

Skandia Life Assurance Corporation

Variable Account B (Class 2) (‘‘Account

B—Class 2’’), and American Skandia

Marketing, Inc. (‘‘ASM’’).

RELEVANT 1940 ACT SECTIONS: Sections

6(c), 17(a), 17(b), 17(d) and 26(b) of the

1940 Act and Rule 17d–1 thereunder.

SUMMARY OF APPLICATION: Applicants

seek an order of approval under Section

26(b) of the 1940 Act and exemptions

from Sections 6(c), 17(a), 17(b), 17(d) of

the 1940 Act and Rule 17d–1

thereunder. The requested order would

exempt Applicants from those Sections

of the 1940 Act and the Rule set out

above to the extent necessary to permit

certain underlying mutual funds of the

separate account to be substituted for

certain other underlying mutual funds.

FILING DATE: The application was filed

on May 2, 1995 and amended on

November 17, 1995.

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 Secretary of

the SEC and serving Applicants with a

copy of the request, personally or by

mail. Hearing requests should be

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

December 26, 1995, 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 SEC.

ADDRESSES: SEC, Secretary, 450 Fifth

Street, NW., Washington, DC 20549.

Applicants: John T. Buckley, Esq.,

Werner & Kennedy 1633 Broadway,

New York, New York 10019 and

American Skandia Life Assurance

Corporation, c/o Jeffrey M. Ulness, Esq.,

One Corporate Drive, Shelton, CT

06484.

FOR FURTHER INFORMATION CONTACT:

Edward P. Macdonald, Staff Attorney, or

Brenda D. Sneed, 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

may be obtained for a fee from the

Public Reference Branch of the SEC.

Applicants’ Representations

1. ASLAC, the depositor of both

Account B—Class 1 and Account B—

Class 2 (collectively, the ‘‘Separate

Account’’), is a stock life insurance

company organized under the laws of

the State of Connecticut and whollyowned by American Skandia Investment

Holding Corporation (‘‘ASIHC’’), which

is an indirect wholly-owned subsidiary

of Skandia Insurance Company Ltd., a

corporation organized under the laws of

the Kingdom of Sweden.

2. ASM, the underwriter of variable

annuity contracts issued through the

Separate Account and offered by

ASLAC, is registered with the SEC and

is a member of the NASD. ASM is 100%

owned by ASIHC.

3. The Separate Account is a separate

account of ASLAC, and is registered

under the 1940 Act as a unit investment

trust. ASLAC established the Separate

Account to the purpose of funding

certain flexible purchase payment

deferred variable annuity contracts (the

‘‘Contracts’’). Account B—Class 1

subaccounts each invest exclusively in

one of the corresponding portfolios of

six open-end management investment

companies. The following five Contracts

are funded, through the sub-accounts of

Account B—Class 1: American Skandia

Advisors Plan (‘‘ASAP’’) [32]; 1 ASAP II

[21]; 2 the LifeVest Personal Security

Annuity (‘‘PSA’’) [32]; the Alliance

Capital Navigator Annuity (‘‘Alliance

Navigator’’) [15]; and the StageCoach

Variable Annuity (‘‘StageCoach’’) [8]

(collectively, the ‘‘Class 1 Contracts’’).

Account B—Class 2 sub-accounts

each invest exclusively in one of the

corresponding portfolios of six openend management investment

companies. ASLAC currently offers two

Contracts that invest in Account B—

Class 2: the Wrap Fee Contracts (‘‘Wrap

Fee’’) [42].

4. Under the Contracts affected by the

proposed substitutions, six open-end

management investment companies

currently offer shares of several of their

portfolios to the Separate Account: The

Alger American Fund (‘‘Alger Fund’’);

Alliance Variable Products Series Fund,

Inc. (‘‘AVP’’); Neuberger & Berman

Advisers Management Trust (‘‘AMT’’);

American Skandia Trust (‘‘AST’’); and

Scudder Variable Life Investment Fund

(‘‘Scudder’’). In addition, six portfolios

of the Janus Aspen Series (‘‘Janus’’) are

offered to Account B—Class 2 but not

Account B—Class 1. All such

investment companies in which the

Separate Account invest are collectively

referred to as ‘‘Underlying Funds.’’

5. The proposed substitutions would

result in a reduction in variable

investment options and corresponding

portfolios available as follows. ASAP

and PSA would be reduced to 21 (a

reduction of 11 each) and Wrap Fee

would be reduced to 21 (a reduction of

21). Applicants state that funding such

varied products through a consolidated

fund structure will aid in the growth of

the Underlying Funds resulting in lower

operating costs through economies of

scale. Applicants further state that

regardless of whether one Contract

achieves more popularity or appeal, or

is no longer marketed by ASLAC, the

interests of Contract owners will be

protected by like underlying portfolios

of all ASLAC nonproprietary variable

annuities.

6. Of the Underlying Funds, only AST

is affiliated with ASLAC or the Separate

Account. None of the Underlying

Funds, their investment managers, or

underwriters are affiliated with ASLAC,

the Separate Account or AST through

any corporate ownership.

7. Applicants state that in the

registration statements filed by the

Separate Account, ASLAC expressly

reserved the right both on its own behalf

and on behalf of the Separate Account

to eliminate sub-accounts, combine two

or more sub-accounts, or substitute one

or more Underlying Funds for others in

which its sub-accounts are invested.

8. ASLAC, on its own behalf and on

behalf of the Separate Account,

proposes to effect the following

substitutions of shares of the following

portfolios (the ‘‘Transferee Portfolios’’)

for shares of other portfolios (the

‘‘Transferor Portfolios’’) (collectively,

the ‘‘Substitution(s)’’): (i) the AST

Phoenix Balanced Asset Portfolio will

be substituted for the Alger Balanced,

Alliance Total Return, AMT Balanced,

Scudder Balanced, and Janus Aspen
Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices 63107

Balanced Portfolios; (ii) The Lord Abbett

Growth & Income Portfolio (AST) will

be substituted for the Alger Income &

Growth and Alliance Growth & Income

Portfolios; (iii) the Seligman Henderson

International Equity Portfolio (AST) will

be substituted for the Alliance

International, Scudder International,

and Janus Aspen Worldwide Growth

Portfolios; (iv) the Alger Growth

Portfolio will be substituted for the

Alliance Premier Growth, AST Phoenix

Capital Growth, AST Eagle Growth

Equity, Scudder Capital Growth, and the

Janus Aspen Aggressive Growth

Portfolios; (v) the PIMCO Limited

Maturity Bond Portfolio (AST) will be

substituted for the Alliance Short-Term

Multi-Market, Alliance U.S.

Government/High Grade Securities,

AMT Limited Maturity Bond, and Janus

Short-Term Bond Portfolios; (vi) the

AMT Partners Portfolio will be

substituted for the AMT Growth

Portfolio; (vii) the PIMCO Total Return

Bond Portfolio (AST) will be substituted

for the Scudder Bond and Janus Aspen

Flexible Income Portfolios; and, (viii)

the JanCap Growth Portfolio (AST) will

be substituted for the Janus Aspen

Growth Portfolio. Applicants note that

allocations to the Alliance Fund

Transferor Portfolios available under

Separate Account Contracts will be

substituted, except for those amounts

allocated under the Alliance Navigator

Contract (Account B—Class 1).

Allocations under the Alliance

Navigator Contract will remain

unaffected by the Substitutions.

9. The Substitution process will

include two periods during which

Contract owners may make cost free

transfers to the remaining portfolios of

their choice. The first free transfer

period will start prior to the ‘‘Automatic

Selection Date.’’ The Automatic

Selection Date is the date ASLAC will

schedule the Substitutions to occur.

Such date will be as soon as practicable

following the issuance of an order by

the SEC. Moreover, any transfers of

account value from any of the

Transferor Portfolios from May 1, 1995

(the date the relevant Contract

prospectuses reflected the proposed

Substitutions), will not be counted

toward the twelve free transfers

permitted under relevant Contracts.

10. For several months prior to the

Automatic Selection Date, and in all

cases since May 1, 1995, relevant

Contract prospectuses reflected the

Substitutions. Such registration

statements as in effect as of May 1, 1995

for ASAP, PSA and Wrap Fee also

contain information of the investment

policies of the Transferee Portfolios.

11. The first free transfer period will

start before the Automatic Selection

Date. Within approximately five days

after the Applicant’s notice of

application appearing in the Federal

Register, ASLAC will mail a written

notice to all Contract owners who, as of

the date the notice of application

appears in the Federal Register, have

allocations in any Transferor Portfolio.

The notice will contain information as

to the Substitutions and will provide

instructions regarding the ability of

Contract owners to make transfers of

account value out of any Transferor

Portfolio without transfer fees or similar

charges, and without such transfer being

counted as a free transfer. After notice

is mailed and up until the Automatic

Selection Date, any Contract owner

making an allocation or transfer (i.e.,

new money) to any Transferor Portfolio

during the first free transfer period will

be sent a similar notice with their

confirmation statement (the ‘‘Affected

Contract owners’’).

12. As of the Automatic Selection

Date, allocations or transfers to a

Transferor Portfolio will automatically

be allocated to the corresponding

Transferee Portfolio. No Transferor

portfolio will accept additional

premium payments (i.e., new money) on

or after the Automatic Selection Date.

3. On the Automatic Selection Date,

all account values allocated to each

Transferor Portfolio, if any, will be

transferred to the corresponding

Transferee Portfolio (‘‘Automatic

Selection Option’’). Applicants state

that the Automatic Selection Options

(which may only occur if Contract

owners do not give timely instructions

during the first free transfer period) are

temporary in character because Contract

owners can always exercise their own

judgment as to the most appropriate

alternative investment. Applicants also

state that Affected Contract owners will

have an additional free transfer period

after the Automatic Selection Date. No

sales load deductions will be made in

connection with any transfers among

the portfolios because of the

Substitutions or otherwise. Contract

owners who have not annuitized may at

any time, before or after the

Substitutions, transfer their account

value to any of the other portfolios

offered under their respective Contracts.

14. The second free transfer period

will start after the Automatic Selection

Date. For thirty (30) calendar days, or if

the thirtieth day is not a business day

then the following business day after the

Automatic Selection Date, Affected

Contract owners may transfer account

values out of the Transferee Portfolios to

any other available portfolios without

transfer fees or similar charges and

without transfer being counted as a free

transfer. Within five (5) days of the

Automatic Selection Date, ASLAC will

send Affected Contract owners written

notice of the Substitution identifying

units of the Transferee Portfolios.

ASLAC will include in this notice

information regarding the second free

transfer period. Applicants state that if

Affected Contract owners have

telephone transfer privileges, telephone

instructions will be accepted during

both free transfer periods.

15. Applicants anticipate that some or

all Substitutions may be effected partly

for cash and partly for securities as a

partial redemption ‘‘in-kind’’ at the net

asset values of the portfolios (such

transfer will be in conformity with

Sections 22(c) and 22(g) of the 1940 Act

and Rule 22c–1 thereunder). The

transfers will be effected by selling the

securities of the applicable Transferor

Portfolios and applying the proceeds to

the purchase price of securities issued

by the Transferee Portfolios selected by

Contract owners. At all times all

contract values will remain unchanged,

no fees or charges will be incurred, all

Contract owner rights will be

unaffected, and ASLAC’s obligations

under any Contract will not be altered

in any way because of the Substitutions.

16. To the extent ‘‘in-kind’’

redemptions are not utilized, Applicants

anticipate that Transferor Portfolios will

incur brokerage fees and expenses to the

extent not assumed by Applicants, or

the adviser or sub-adviser of the

Transferee Portfolios in connection with

the redemption of shares of the affected

Transferor Portfolios.

Applicants state that they will effect

the redemptions ‘‘in-kind’’ to the extent

consistent with investment objectives

and applicable diversification

requirements. ASLAC states that it will

establish procedures to ensure that ‘‘inkind’’ redemptions will be effected in a

fair and equitable manner from the

perspective of the Separate Account, the

Transferor Portfolios, and other separate

accounts which currently invest in the

Transferor Portfolios, and other separate

accounts which currently invest in the

Transferor Portfolios. These procedures

will provide that: (i) the Transferor

Portfolio investment adviser identify

prior to the effective date of the

Substitutions the securities to be

included in the ‘‘in-kind’’ transfer; and

(ii) the investment adviser to the

Transferee Portfolio reviews and agrees

to accept the securities so identified as

payment for the purchase of Transferee

Portfolio shares. The valuation of ‘‘inkind’’ transfers will be on a basis

consistent with the valuation
63108 Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices

procedures of the applicable Transferor

and Transferee Portfolios.

17. ASLAC or the investment adviser

of the Transferee Portfolio will assume

the transfer and custodial expenses and

legal and accounting fees of the

Substitutions, and Contract owners will

not incur any fees or charges as a result

of the transfer of account value from any

portfolio. The Substitutions will not

increase Contract and Separate Account

fees and charges after the Substitutions.

In addition, Applicants state that the

Substitutions have been designed to

avoid any adverse federal income tax

impact on Contract owners.

18. Following the Substitutions, the

sub-accounts which invest in the

Transferor Portfolios will be terminated.

Applicants’ Legal Analysis

Request for an Order Pursuant to

Section 26(b) of the 1940 Act

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 shall have approved

such substitution; and the Commission

shall issue an order approving such

substitution if the evidence establishes

that it is consistent with the protection

of investors and the purpose fairly

intended by the policy and provisions of

the 1940 Act.

2. Section 26(b) protects the

expectation of investors in a UIT that

the UIT will accumulate shares of a

particular issuer. The Section also

prevents unscrutinized security to

redeem their shares, thereby incurring

either a loss of the sales load deducted

from initial proceeds, an additional

sales load upon reinvestment of the

redemption proceeds, or both. Section

26(b) affords protection to investors by

preventing a depositor or trustee of a

unit investment trust (holding the

shares of one issuer) from substituting

the shares of another issuer for those

shares, unless the Commission approves

the Substitutions.

3. Applicants represent that the

purposes, terms, and conditions of the

Substitutions will not entail any of the

abuses that Section 26(b) is designed to

prevent for the following reasons:

a. The proposed Substitutions are for

shares of the Transferee Portfolios with

investment objectives of the

corresponding Transferor Portfolios so

as to provide a means for Contract

owners to continue their current

investment goals and risk expectations.

b. The proposed Automatic Selection

Options will be only temporary because

Contract owners may always exercise

their own judgment as to the most

appropriate alternative investment

vehicles. No sales load deductions will

be made in connection with any

transfers among the portfolios by reason

of the Substitutions. After the

Substitutions, the Affected Contracts

would still offer a broad array of

variable investment options and

Contract owners who have not

annuitized may at any time transfer

their account value to any of the other

portfolios offered under their respective

Contracts.

c. the transactions effecting the

proposed Substitutions including the

redemption of Transferor Portfolio

shares and the purchase of Transferee

Portfolio shares will be effected at net

asset value in conformity with Section

22(c) of the 1940 Act and Rule 22c–1

thereunder.

d. The anticipated utilization of ‘‘inkind’’ redemptions by the Transferor

Portfolios for the purchase by the

Separate Account of Transferee Portfolio

shares, in conformity with Section 22(g)

of the 1940 Act, may reduce transaction

costs of the Substitutions.

e. ASLAC or the Transferee Portfolio

investment adviser will assume various

expenses and transaction costs relating

to the Substitutions, including custodial

and transfer fees incurred by use of any

‘‘in kind’’ redemptions, and legal and

accounting fees.

f. The Substitutions will not alter or

affect the insurance benefits provided

by ASLAC to Contract owners or the

terms or obligations under the terms of

the Contracts.

g. The Substitutions are designed to

avoid any adverse effects upon the tax

benefits available to Contract owners;

the Substitutions are designed not to

give rise to any current federal income

tax to Contract owners.

h. The Substitutions are expected to

confer economic benefits by virtue of

the enhanced asset size of the

Transferee Portfolios.

4. Applicants state that under the

circumstances it is in the best interest of

Contract owners to proceed with the

Substitutions. The Substitutions are

appropriate because the overall

investment objectives of the Transferee

Portfolios are similar and their

investment objectives are compatible to

the Transferor Portfolios.

5. Applicants also represent that total

fees and expenses as a percentage of net

assets for the Transferee Portfolios are

expected to decrease through economies

of scale caused by the anticipated

increase in asset size and the increased

similarity of available portfolios in

applicable Contracts as a result of the

Substitutions.

Request for Order Pursuant to Section

6(c) and 17(b) of the 1940 Act

6. Applicants seek an exemption from

Section 17(a) through both Sections

17(b) and 6(c) of the 1940 Act because

Section 17(b) permits the Commission

to exempt a single ‘‘proposed

transaction’’ whereas Section 6(c)

enables the Commission to exempt a

series of transactions.

7. Under certain circumstances,

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

prohibits any affiliated person of a

registered investment company, or an

affiliated person of an 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 of the

persons described above from

purchasing any security or other

property from such registered

investment company.

8. Applicants state that since the

Substitutions may be deemed to involve

one or more purchases or sales of

securities between and among affiliated

persons, the Substitutions may involve

transactions prohibited by Section 17(a)

of the 1940 Act. Applicants also state

that the Substitutions may not be

exempt from Section 17 of the 1940 Act

pursuant to Rule 17a–7 thereunder,

since the affiliations among some of the

parties do not arise solely through

having common investment advisers,

common directors and/or common

officers.

9. Section 17(b) authorizes the SEC to

issue an order exempting a proposed

transaction from Section 17(a) if

evidence establishes that: (1) the

proposed transaction is fair and

reasonable and does not involve

overreaching on the part of any person

concerned; (2) the proposed transaction

is consistent with the policy of each

registered investment company

concerned; and (3) the proposed

transaction is consistent with the

general purposes of the 1940 Act.

Applicant represent that the terms of the

Substitutions are consistent with the

standard for relief described in Section

17(b) of the 1940 Act.

10. The Substitutions will be effected

at the net asset value of the securities

involved. ASLAC or the adviser of the

Transferee Portfolios will bear those

expenses associated with the transfers.

The Substitutions and transfers of

securities are consistent with the

policies of each investment company

involved and of the 1940 Act.

11. As a condition to the granting of

an order of exemption under Section
Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices 63109

17(b), Applicants represent that they

will company with the conditions set

forth in Rule 17a–7 except for subparagraph (a), which requires that the

transaction be ‘‘for no consideration

other than cash payment.’’ Although the

consideration in some cases will be

‘‘securities’’ and not cash, Applicants

state that these transactions are in

substance the type of transactions

currently exempted by Rule 17a–7.

12. Applicants further state that the

terms of the Substitutions and the

transfer of the securities meet all the

requirements of Section 17(b) and

represent that for the terms of the

Substitutions and transfers of securities

are reasonable and fair and do not

involve overreaching on the part of any

person concerned.

13. Applicants also represent that

with respect to the ‘‘in-kind’’ portion of

the Substitutions established procedures

will guard against inappropriate or

unfair exchanges.

14. Since Applicants may be deemed

to be affiliated persons of each other or

affiliated persons of an affiliated person

under Section 2(a)(3) of the 1940 Act the

Substitutions may be deemed to entail

one or more purchases or sales of

securities or property between

Applicants. Accordingly, Applicants

believe that the Substitutions may

require an order exempting the

transactions prohibited under Sections

17(a)(1) and 17(a)(2) of the 1940 Act,

pursuant to Section 17(b) of the 1940

Act.

15. Rule 17a–7 under the 1940 Act

exempts from the prohibitions of

Section 17(a) a purchase or sale

transaction between registered

investment companies or separate series

of registered investment companies

which may be affiliated persons, or

affiliated persons of affiliated persons,

solely by reason of having a common

investment adviser or investment

advisers which are affiliated persons of

each other, common directors and/or

common officers, subject to certain

specified conditions. As the affiliation

among the Applicants, however, does

not arise solely by reason of having

common investment advisors, directors,

and/or officers, and redemption by the

Transferor Portfolios may involve

redemptions of securities ‘‘in-kind’’

rather than for cash, the Substitutions

likely would not satisfy the technical

requirements of Rule 17a–7.

Nonetheless, Applicants represent that

the Substitutions will comply with the

underlying intent of Rule 17a–7 in all

respects for the following reasons. First,

although the Substitutions would

involve partial redemption of securities

‘‘in-kind’’ rather than the ‘‘all-cash,’’ as

required under subsection (a) of Rule

17a–7, such transactions likely would

be less amenable to self-dealing than

corresponding ‘‘all-cash’’ transactions.

Moreover, redemptions in kind would

reduce brokerage commissions or other

remuneration ordinarily paid in

connection with securities transactions.

Second, because the Substitutions will

be effected at the independent current

market price and are consistent with the

policies of each of the Transferor and

the Transferee Portfolios, the

Substitutions would comply with both

the technical requirements and

underlying intent of subsections (b) and

(c) of the Rule. Third, to the extent

consistent with investment objectives

and applicable diversification

requirements, Applicants will effect

redemption ‘‘in-kind’’ to reduce any

brokerage commissions or other

remuneration usually paid in

connection with securities transactions,

as contemplated by subsection (d) of the

Rule. Finally, because the Substitutions

would occur only once, the formal

written compliance procedure required

under subsections (e) and (f) of the Rule

would prove inapplicable.

Request for Order Pursuant to Section

6(c) and Rule 17d–1 of the 1940 Act

16. Section 17(d) of the 1940 Act

prohibits any affiliated person of a

registered investment company, or any

affiliated person of such affiliated

person, acting as principal, from

effecting any transaction in which such

registered investment company, or a

company controlled by such registered

investment company, is a joint

participant with such person, in

contravention of Commission rules

designed to limit or prevent

participation by the registered

investment company ‘‘on a basis

different from or less advantageous

than’’ that of the affiliated person. Rule

17d–1(a) prohibits any of the persons

described above, acting as principal,

from participating in, or effecting ‘‘any

transaction in connection with, any

joint enterprise or other joint

arrangement or profit-sharing plan in

which any such registered investment

company, or a company controlled by

such registered company, is a

participant’’ unless the Commission has

approved the joint enterprise,

arrangement or plan.

17. Applicants state that they may be

deemed to be affiliated persons of each

other under Section 2(a)(3) of the 1940

Act, and that the Substitutions will

involve transactions that may be

deemed to implicate Section 17(d) of the

1940 Act and Rule 17d–1 thereunder.

18. The simultaneous purchase and

sale transactions involve a number of

registered investment companies, and

each such purchase and sale transaction

is dependent on the other. Each

transaction therefore may be deemed to

be in connection with a joint

arrangement within the contemplation

of Section 17(d) of the 1940 Act and

Rule 17d–1 thereunder. Applicants

request an order pursuant to Section

6(c) and Rule 17d–1 to eliminate any

question of compliance with Section

17(d) and Rule 17d–1.

19. Rule 17d–1 provides for the

Commission to grant an order upon

request. In passing upon such request,

the Commission is to consider whether

the participation of the management

investment companies is consistent

with the provisions, policies and

purposes of the 1940 Act and the extent

to which such participation is on a basis

different from or less advantageous than

that of other participants.

20. Section 6(c) of the 1940 Act

provides that the Commission may grant

an order exempting persons and

transactions from any provision or

provisions of the 1940 Act as may be

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 1940 Act. For all the

reasons stated herein, Applicants

submit that the Substitutions are

consistent with the provisions, policies

and purposes of the 1940 Act and that

the participation of each of the parties

to the Substitutions will be on an equal

basis and consistent with their

respective participation in the

Substitutions, and is consistent with the

provisions, policies and purposes of the

1940 Act.

21. Based on the foregoing,

Applicants represent that the

Substitutions and the related

transactions meet all the requirements

of Section 6(c) of the 1940 Act and Rule

17d–1 thereunder, and are consistent

with applicable precedent, and request

that an order of exemption from Section

17(d) and approval pursuant to Section

6(c) and Rule 17d–1 be granted.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested are necessary and

appropriate in the public interest and

consistent with the protection of

investors and purposes fairly intended

by the policy and provisions of the 1940

Act.
63110 Federal Register / Vol. 60, No. 236 / Friday, December 8, 1995 / Notices

1Cogenex announced on September 28, 1995, that

it was discontinuing one of its principal business

segments involving small self-generation projects.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29920 Filed 12–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 35–26423]

Filing Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

December 1, 1995.

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 thereunder. 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 amendments thereto 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

December 26, 1995, 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 shall

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 said date, the application(s) and/

or declaration(s), as filed or as amended,

may be granted and/or permitted to

become effective.

Eastern Utilities Associates, et al. (70–

7287)

Eastern Utilities Associates (‘‘EUA’’),

a registered holding, and its wholly

owned nonutility subsidiary company,

EUA Cogenex, Corp. (‘‘Cogenex’’), both

at P.O. 2333, Boston, Massachusetts

02107, have filed a post-effective

amendment under sections 9(a) and 10

of the Act to their applicationdeclaration previously filed under

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

13(b) of the Act and rules 42, 45, 87, 90,

and 91 thereunder.

By prior order in this proceeding

dated December 19, 1986, the

Commission authorized EUA to acquire

Cogenex (HCAR Release No. 24273).

Subsequent orders of the Commission

authorized Cogenex to engage in

additional activities and removed

restrictions on the amount of revenues

Cogenex could receive from customers

outside New England (see, e.g., HCAR

Release Nos. 26232 (Feb. 15, 1995),

26135 (Sept. 30, 1994), 25982 (Jan. 28,

1994), and 25636 (Sept. 17, 1992)).1

Cogenex designs, finances, installs

and maintains energy conservation

systems. Cogenex provides energy

management services (‘‘EMS’’) directly

to institutional commercial, industrial

and governmental customers to reduce

their energy costs and consumption.

Cogenex employs energy efficiency

technology and equipment in its EMS

program through building automation,

lighting modifications, boiler

replacement, and other heat recovery

methods to reduce electrical energy and

fuel consumption and related energy

costs of its customers. Cogenex earns

fees for these services primarily through

shared savings agreements under which

Cogenex is paid a portion of the

customers’ energy savings.

Cogenex also participates in demand

side management (‘‘DSM’’) programs

sponsored by electric utilities as a

means to decrease base load and peak

demand on the utilities’ systems. In

DSM programs, Cogenex provides EMS

services to the utility’s customers to

reduce their energy demands. The

utility pays Cogenex based on the

reduction in demand, and Cogenex may

also receive a portion of the customer’s

savings.

Cogenex now proposes to provide

services relating to the furnishing and

conservation of water to the types of

customers to whom it furnishes EMS

services. Cogenex proposes to provide

such water services packaged with its

EMS services or on a stand alone basis.

American Electric Power Company,

Inc., et al. (70–8307)

American Electric Power Company,

Inc. (‘‘AEP’’), a registered holding

company, and its nonutility subsidiary

company, AEP Energy Services, Inc.

(‘‘AEPES’’) (collectively, ‘‘Applicants’’),

both at 1 Riverside Plaza, Columbus,

Ohio 43215, have filed a post-effective

amendment to their applicationdeclaration filed under sections 6(a), 7,

9(a), 10, 12(b), and 13(b) of the Act and

rules 45, 54, 87, 90, and 91 thereunder.

AEPES is engaged in the business of

selling management, technical and

training expertise both to certain AEP

affiliates and to non-affiliates. AEPES

requests authorization to make financial

and/or technical contributions to assist

research and development efforts of

non-affiliated entities. As a result of

such contributions, AEPES may receive

a license to use and/or a right to

sublicense intellectual property

developed by those entities (‘‘NonAffiliate Intellectual Property’’). If

AEPES became entitled to receive an

equity interest in a non-affiliated entity

to which such contributions were made,

AEPES would sell the interest to an

affiliate, AEP Investments, Inc., at its

fair market value, subject to the receipt

of any required regulatory approvals.

AEPES is also engaged in, among

other things, the business of selling or

otherwise providing access to

intellectual property developed by AEP

affiliates for their own use. Currently,

AEPES pays to any such affiliate in

perpetuity a certain portion of the

revenues realized from any disposition

of such intellectual property.

Specifically, AEPES pays the affiliate (a)

70% of the revenues from the

intellectual property until the affiliate

recovers its direct costs of making the

property available and (b) 20% of such

revenues thereafter. Additionally,

AEPES makes intellectual property it

develops available to AEP affiliates

without charge, except for actual

expenses incurred by AEPES in

connection with making such

intellectual property so available.

AEP and AEPES propose that, if

AEPES disposes of intellectual property

developed by an affiliate for its own use

and which such affiliate retains a right

to use, AEPES would pay that affiliate

an amount equal to the costs the affiliate

directly incurred in making the property

available to AEPES. For dispositions by

AEPES of intellectual property

developed by an AEP affiliate for its

own use, but which that affiliate no

longer would be able to use, AEPES

would continue to reimburse that

affiliate an amount equal to the

affiliate’s development costs. If an AEP

affiliate developed intellectual property

not for its own use but for use by

AEPES, AEPES would also pay that

affiliate an amount equal to the

affiliate’s development costs. AEPES

additionally proposes that any

disposition on Non-Affiliate Intellectual

Property to an AEP affiliate would be at

cost. Any intellectual property

developed by AEPES would be made

available to AEP affiliates at the direct

cost of making such property available.

Also, AEPES requests authority to

provide or broker financing to

customers in connection with and to

support the sale of goods or provision of