findings of fact by counsel for the Commission, the filing of briefs and oral argument, prior to the entry of the Commission's findings and order herein. The Braddock Light & Power Company, Incorporated, is organized in the State of Virginia and is an operating public utility company doing business in the State of Virginia in a small area contiguous to the District of Columbia. The above-mentioned 5,000 shares of capital stock are to be sold at a private sale to The Washington and Rockville Railway Company of Montgomery County, the immediate parent of the applicant, at a price of $10 per share; there is to be no underwriting thereof. The applicant has now outstanding 14,250 shares of capital stock without nominal or par value (stated value of $10 per share), all of which is owned by The Washington and Rockville Railway Company of Montgomery County. The net proceeds of such issue and sale are to be expended for the purpose of reimbursing the treasury of Braddock Light & Power Company, Incorporated, for a portion of the expenditures heretofore incurred in connection with the construction, completion, extension, or improvement of the applicant's facilities during the period from February 1, 1937, to April 30, 1939, in the aggregate amount of $72,013.42. Of such amount, $45,000 is represented by demand note and $27,013.42 by open account, both payable at 5% interest to Potomac Electric Power Company, an associate of applicant. $45,000 of the proceeds of such issue and sale will be applied to discharge the demand note and the balance of approximately $4,879 (after deduction of $121 expense) will be applied to partial reduction of the hereinabove-mentioned open account indebtedness.2 The balance sheet of the applicant, as of April 30, 1939, shows property and plant in the amount of $250,691. The property and plant is stated at cost, including an amount of $31,500, representing discount on the sale on January 28, 1918, of capital stock (then $100 The capital structure, including surplus, of the applicant, as of April 30, 1939, both before and after the proposed issuance of the capital stock, is as follows: par value) of the company, which was prior to the acquisition thereof by the present parent of the company.3 The balance in the reserve for depreciation and retirement account amounted to $34,226 as of April 30, 1939, which amount was 13.65 percent of the gross property and plant account as of the same date, and 15.61 percent of the gross property and plant account after deducting discount on the sale of capital stock in the amount of $31,500. Depreciation has been provided on the balance in the property and plant account at the rate of 3 percent per annum for the years 1936 and 1937, and at the rate of 4 percent per annum for the year 1938 and 12 months ended April 30, 1939. The issuance and sale of the additional shares of capital stock with the proceeds applied to discharge outstanding indebtedness with an annual interest rate of 5 percent, will result in an annual saving of approximately $2,494. Net income for the 12 months ending April 30, 1939, amounted to 5.3 percent of the stated value of the outstanding capital stock, and after adjustment for the above-mentioned saving would be 5.2 percent of the stated value of the capital stock outstanding after the proposed issuance.* The construction, completion, extension, or improvement of the applicant's facilities during the above-mentioned period was performed by the Potomac Electric Power Company, an associate of applicant, pursuant to a service contract dated January 1, 1934, under which the construction, completion, extension, or improvement was performed at cost to the Potomac Electric Power Company. The State Corporation Commission of Virginia has expressly authorized the issuance and sale of the above securities. On January 28, 1918, applicant sold 350 shares of capital stock, then $100 par value, to Washington Utilities Co. at $10 per share. The discount on the sale in the amount of $31,500 was charged to "cost of property" account. Thereafter, The Washington and Rockville Ry. Co. of Montgomery County acquired this stock from Washington Utilities Company at a cost of $35,000. The discount is still carried on the plant and property account of the applicant. The condensed income statement of the applicant for the 12 months ended December 31, 1936, 1937, and 1938, and April 30, 1939, follows: In view of the foregoing, the Commission finds that the issue and sale of such capital stock of the applicant are solely for the purpose of financing the business of the applicant and has been expressly authorized by the state commission of the state in which the applicant is organized and doing business and is therefore entitled to an order exempting the transaction from the provisions of Section 6 (a) of the Act, subject to the conditions that— (1) The issue and sale of the capital stock shall be in compliance with the terms and conditions of, and for the purposes represented by, said application; and (2) Such exemption shall immediately terminate without further notice or order of this Commission if, at any time, the State Corporation Commission of Virginia shall revoke, rescind, amend, or otherwise alter the effectiveness of its order approving the securities; and (3) Within 10 days after the issue and sale of the capital stock, the applicant shall file with this Commission a certificate of notification showing that such issue and sale have been effected in accordance with the terms and conditions and for the purposes represented by said application. An appropriate order will issue. By the Commission: Commissioner Healy and Commissioner Eicher were absent at the time of the Commission's consideration of this case and did not participate therein. 5 S. E. C. [No. 799] IN THE MATTER OF INTERNATIONAL UTILITIES CORPORATION and RALPH ELSMAN, as Liquidating Trustee File No. 56-28. Promulgated July 12, 1939 SALE OF PUBLIC UTILITY SECURITIES BY REGISTERED HOLDING COMPANY. A registered holding company having filed an application, pursuant to Sections 12 (d) and 12 (f) of the Public Utility Holding Company Act of 1935, for approval of the sale of notes and common stock of its subsidiaries, the proceeds to be used for the purchase and retirement by tender of a maximum of 24,000 shares of its 52% cumulative preferred stock, approval granted, subject to certain conditions, the Commission finding that in view of all the circumstances of the case it cannot be said that the terms and conditions of the proposed sale are detrimental to the public interest or the interest of investors and consumers, or will tend to circumvent the provisions of the Act or any rules, regulations, or orders of the Commission thereunder. ACQUISITION OF SECURITIES BY THE ISSUER-RETIREMENTS AND REDEMPTIONS. A registered holding company having filed an application, pursuant to Section 12 (c) of the Act for approval of the application of the proceeds received by it from the sale of notes and stocks of its subsidiaries to the purchase and retirement by tender of a maximum of 24,000 shares of its 5%% cumulative preferred stock, approval granted, subject to certain conditions. Solicitation of Tenders. Where registered holding company was permitted to purchase and retire by tender shares of its cumulative preferred stock, the Commission did not find that the tender and sale arrangements are detrimental to the interest of the security holders, in view of the fact that disclosures caused to be made prior or simultaneously with solicitation of tenders would aid stockholders in determining whether or not to tender, that the tender arrangements would afford those stockholders who wished to liquidate their investment an opportunity to obtain approximately market price for their holdings. In view of circumstances of the case, the Commission reserved jurisdiction as to the reasonableness of the tender price by registered holding company and subsidiaries. ACQUISITION OF SECURITIES BY REGISTERED HOLDING COMPANY OR SUBSIDIARY. A subsidiary of a registered holding company having filed an application pursuant to Section 10 of the Act, for approval of the acquisition of notes and common stock of an associate company, approval granted, the Commission observing no basis for making adverse findings under Section 10 of the Act. A registered holding company having filed an application pursuant to Section 10 of the Act for approval of the acquisition of notes and stock of an associate company, approval granted, subject to certain conditions, where, although in view of other holdings of applicant, the standards of Section 10 (c) could not be met by a permanent acquisition, the Commission was satisfied that the circumstances of the case did not require it to make adverse findings under Section 10 (c), the sale and other transactions being designed to carry out the Section 11 (b) program of applicant, and stipulations afforded assurance of the liquidation within a reasonable period of time of applicant's interest in the associate. SALE OF PUBLIC UTILITY SECURITIES TO ASSOCIATE COMPANIES OR AFFILIATES. Registered holding company and subsidiaries having filed applications, pursuant to Section 12 (f) of the Act, for approval of the tender and sale to the issuer at not more than $15 a share of not less than a total of 23,000 shares of issuer's preferred stock, approval granted, the Commission reserving jurisdiction as to the reasonableness of the tender price and conditioning its approval of the tender and sale upon applicants notifying the Commission of their tender price 5 days prior to the closing dates for tenders during which period the Commission reserves the right to issue an order to show cause why the tender prices are not unreasonable. SALE OF PUBLIC UTILITY SECURITIES BY REGISTERED HOLDING COMPANY. Rule U-12D-1 Not Applicable To Sale To Underwriters. Registered holding company and subsidiaries having filed application, pursuant to Section 12 (d) and Rule U-12D-1 for approval of the sale to underwriters for sale to the public of a maximum number of 39,060 shares of preferred stock of an associate company, held that Rule U-12D-1 is not applicable to the sale in question, the Commission assuming without presently deciding that it would have jurisdiction over the transfer of a registered holding company's controlling interest in a subholding company which in turn controls a public utility company to a single or a readily cohesive group of purchasers as involving an indirect sale of utility securities or utility assets under Rule U-12D-1, nevertheless, in this case, no transfer of control is present. FINDINGS AND OPINION OF THE COMMISSION American States Utilities Corporation (hereinafter called "American States"), a registered holding company and a statutory subsidiary of International Utilities Corporation (hereinafter called "International"), proposes to sell the notes and common stock of its subsidiary, Kellogg Power & Water Company (hereinafter called "Kellogg") to General Water, Gas & Electric Company (hereinafter called "General Water"), a subsidiary of International, and a note and the common stock of Hermiston Light & Power Company (hereinafter called "Hermiston"), to International and Ralph Elsman, liquidating |