APPLICATIONS AND DECLARATIONS INCIDENT TO THE CONSUMMATION OF THE PLAN

The application before us includes separate applications and declarations, pursuant to several sections of the Act, for the various steps which are or may be necessary for the consummation of the plan. It should, however, be noted that an application under Section 11 (e) is to be regarded as embracing all proceedings included in the plan. The supplemental applications and declarations are, therefore, unnecessary.

It appears that the new common stock will have a par value of $10 per share and each share will be entitled to one vote. Accordingly, the proposed new common stock meets the requirements of clause (A) of paragraph (1) of Section 7 (c), as "a common stock having a par value and being without preference as to dividends or distribution over, and having at least equal voting rights with, any outstanding security" of the company.

With respect to the assignments and agreements, as modified, it appears that these obligations are to be issued in exchange for the present outstanding ones and are, therefore, within the provisions of Section 7 (c) (2) (A) of the Act. Similar considerations are applicable to the assumption by the new corporation, if one is organized to consummate the proposed plan, of the $14,000,000 face amount of first mortgage collateral gold bonds and the secured note payable to the Reconstruction Finance Corporation in the face amount of $1,350,000. We see no reason for making any adverse findings with respect to the various standards of Section 7 (d) with respect to any of the proposed securities. Since no state commission or state securities commission has informed the Commission with respect to the applicability of state laws, we find that the provisions of Section 7 (g) are inapplicable.

In the event that a new corporation is organized, it is necessary to consider the applicability of Sections 10 and 12 (d) and Rule U-12D-1. Under the terms of the plan compliance will be made with all provisions of state laws, except insofar as such compliance would be detrimental to the carrying out of the provisions of Section 11, and we therefore find that any acquisition under the plan meets the standards of Section 10 (f). We see no reason for making any adverse findings under Section 10 (b). With particular reference to the provisions of Section 10 (c) (1), we find that the proposed transaction is not

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is fair and equitable to the persons affected thereby and our approval of the plan have reference only to Community as an individual company. They are not determinative as to the status of the corporate structure of the Community system or as to that of any other company within the system. We therefore express no opinion at this time as to the extent to which other action may be necessary under Sections 11 (b) (1) or 11 (b) (2).

detrimental to the carrying out of the provisions of Section 11 but on the contrary is a step toward carrying out all of the provisions of that section. With respect to the provisions of paragraph (2) of Section 10 (c), we are of the opinion that the carrying out of the plan will facilitate compliance in the future with the provisions of paragraph (1) of Section 11 (b), and that any acquisition under the plan will thereby serve the public interest and is in accord with Section 10 (c) (2).

In the event that a new corporation is formed to carry out the plan, the Commission finds, with reference to Section 12 (d) and Rule U-12D-1, that the terms and conditions of any sale to the new corporation under the plan, with respect to the consideration to be received for such sale, maintenance of competitive conditions, fees and commissions, accounts, disclosure of interest, and similar matters, are not detrimental to the public interest or the interest of investors or consumers, and will not tend to circumvent the provisions of the Act or any rules, regulations, or orders of the Commission thereunder.

CONCLUSION

On the basis of the findings hereinbefore contained an appropriate order will issue approving the plan, subject, however, to the condition, as required by the terms of said plan, that said plan be approved, and the action of the board of directors of the company, in causing it to be submitted to this Commission, be ratified, by the holders of at least two-thirds in amount of the outstanding first preferred stock and a majority in amount of the outstanding common stock of said company. Compliance with this condition may be evidenced by the filing, as part of the record in this proceeding, of a statement executed by the proper corporate officers of Community Power and Light Company, setting forth that such approval has been given as required by the terms of said plan, and summarizing the results of the action of the preferred and common stockholders at a special stockholders' meeting or otherwise at which such approval may be given.

The Commission reserves jurisdiction to entertain such further proceedings, to make such other findings, and to enter such other orders as may be appropriate in the premises in connection with such plan and in connection with the various steps required to carry out said plan.

By the Commission: Commissioner Healy concurs only in the result.

68. E. C.

COMMUNITY POWER AND LIGHT COMPANY

Comparative balance sheet as of June 30, 1939, giving effect to proposed plan of corporate simplification of parent company and application of proceeds from proposed loan by Reconstruction Finance Corporation

NOTE: Community recently concluded a loan with the Reconstruction Finance Corporation in the maximum amount of $1,350,000. The main purpose of the loan is the addition of equipment, machinery, etc., to the facilities of subsidiaries. The money will be advanced as construction work progresses. The above figures show the effect of this loan after the full amount of $1,350,000 has been paid to Community. 6 S. E. C.

APPENDIX B

PROPOSED BALANCE SHEET ADJUSTMENTS

The company in connection with the plan of corporate simplification proposes to make the following adjustments in its accounts in order that the accounts of the company may, in the opinion of the management, more accurately reflect its true financial position:

1. An item entitled "organization expense" which is presently carried as an asset in the amount of $12,147.54 is proposed to be written off against the earned surplus account. This item represents expenses incurred in connection with the organization of the company which were not amortized but were capitalized and have since been carried

as an asset.

2. An item entitled "unamortized debt discount and expenses" which is presently carried as an asset in the amount of $917,978.02 is proposed to be written off against the earned surplus account. This item represents the balance of the discount and expenses incurred in connection with the sale of the presently outstanding first mortgage collateral gold bonds, 30-year 5% series of 1957, the remainder having been amortized by charges against income. The effect of writing this item off will be to increase the company's income annually by $51.960.96, which is the amount of the yearly amortization charge. 3. An item entitled "commission and expenses on capital stock," which is presently carried as an asset in the amount of $977,237.98, is proposed to be written off (1) against earned surplus to the extent of $661,244.86, the balance remaining after the two above described write-offs against that account have been made, and (2) the balance thereof amounting to $315,993.12 against capital surplus. This item represents discount and expenses in connection with the sale of the first preferred stock which were capitalized and have been carried as an asset rather than amortized.

4. An item entitled "investments in subsidiary companies-common stock" presently carried as an asset in the amount of $5,457,390.13 is proposed to be reduced to and carried at $2,435,000. This reduction in the carrying value of the common stock of subsidiary companies is proposed to be accomplished in the following manner:

(a) There will be a write-off of $2,258,390.13, which represents an upward revaluation on the books of the parent company of the common stock of subsidiaries resulting primarily from two sources. A portion of this "write-up" occurred when

the surplus existing on the books of the subsidiary companies was capitalized and added to the investment account as shown on the books of the company. The remainder of such upward revaluation took place in connection with the recordation in the investment account of the company of the value of the common stock of subsidiaries as determined upon the basis of an appraisal. The write-off of the entire amount will be charged against the capital surplus account.

(b) There will be a write-off of $164,000 representing an amount contributed by the company to the capital account of one of its subsidiaries, Texas-New Mexico Utilities Company, in accordance with an order of the Federal Power Commission. This write-off will be charged against the capital surplus

account.

(c) There will be a further reduction of or credit to this account in the amount of $600,000 which will be charged against the reserve account entitled "reserve for revaluation of investments in subsidiaries." This reserve was created out of "capital surplus" prior to the date of the present plan and represents the reduction which had been made in 1935 in the stated value of the common stock and the cancelation of 1,058 shares of 7% preferred stock of Texas Utilities Company (now Texas-New Mexico Utilities Company) in the consummation of the recapitalization plan of that subsidiary.

It is also proposed to create, in connection with the plan, other reserves in the amount of $3,084,674.53. These reserves are to be merely an allocation of the capital surplus created by the elimination of the present first preferred and common stocks. Such reserves will be used to take care of expenses incident to the consummation of the plan, which are estimated as approximately $83,000, and to absorb any losses which in the future might be shown to have been inherent in the company's investments as at the effective date of the plan of corporate simplification. The unused portion of such reserve is to be returned to capital surplus 3 years after the effective date of the proposed plan.

6 S. E. C.