[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Notices]
[Pages 17242-17244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9125]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23097; International Series Release No. 1128; File No.
812-11072]
B.A.T. Industries p.l.c.; Notice of Application
April 2, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') granting relief from all
provisions of the Act.
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SUMMARY OF APPLICATION: Applicant, B.A.T. Industries p.l.c., requests
an order under section 6(c) of the Act exempting Allied Zurich p.l.c.
from all provisions of the Act.
FILING DATES: The application was filed on March 17, 1998 and amended
on March 30, 1998.
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 SEC's
[[Page 17243]]
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the SEC by 5:30 p.m.
on April 24, 1998, and should be accompanied by proof of service on
applicant, 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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicant, B.A.T. Industries p.l.c., Windsor House, 50 Victoria
Street, London SW1H ONL, England.
FOR FURTHER INFORMATION CONTACT: Mary T. Geffroy, Senior Counsel, at
(202) 942-0553, or Nadya B. Roytblat, Assistant Director, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington,
D.C. 20549 (tel. (202) 942-8090).
Applicant's Representations
1. Applicant is a public limited company organized under the laws
of England. On December 22, 1997, Zurich Insurance Company (``ZIC''), a
Swiss corporation, and applicant entered into a merger agreement
pursuant to which the financial services businesses of applicant will
be combined with ZIC's financial services businesses, through a series
of transactions. (collectively, the ``Transaction'').
2. Allied Zurich p.l.c. (``AZ'') will be organized as a public
limited company under the laws of England in order to effect the
Transaction. AZ will become a holding company for substantially all of
applicant's financial services subsidiaries. AZ will exchange the
ordinary shares of applicant's former financial services subsidiaries
for 43% of the equity of Zurich Financial Services (``ZFS''), a newly
created Swiss subsidiary of Zurich Allied AG (``Zurich''), a Swiss
corporation.
3. Applicant will distribute to its current shareholders shares of
AZ. Applicant intends that AZ will be listed and publicly traded on the
London Stock Exchange. In addition, it is currently under consideration
whether or not an American Depositary Receipt facility will be created
in the United States for AZ's ordinary shares.
4. Concurrently with applicant's restructuring, ZIC will reorganize
its existing corporate structure by establishing a new holding company,
Zurich, which will be owned by the former shareholders of ZIC.
5. As a result of these transactions and reorganizations, ZFS will
own the financial services businesses of applicant and ZIC. AZ will own
43% and Zurich will own 57% of the voting stock of ZFS. AZ also will
hold one series of non-equity shares of ZFS that will not be entitled
to vote and will receive dividends declared on the series. In addition,
to facilitate tax efficient dividend payments, AZ will directly hold
non-equity shares in Allied Zurich Holdings Limited (``AZH''), which
will be a wholly-owned subsidiary of AFS. AZH will be a holding company
for several of applicant's former financial services subsidiaries.
Neither AZH nor ZFS will be an investment company under section 3(a) of
the Act, and neither will rely on an exemption from the definition of
``investment company'' under sections 3(c)(1) or 3(c)(7) of the Act.
6. AZ and Zurich (collectively, the ``Topcos'') will be holding
companies for ZFS, a corporate structure sometimes referred to as
``dual listed holding companies.'' The dual listed holding company
structure will be employed to achieve a unified governance structure
that will enable ZFS and its subsidiaries (collectively, the ``ZFS
Group'') to be operated as a fully merged enterprise. Under the dual
listed holding company structure, the Transaction can be accounted for
as a ``pooling of interests'' under International Accounting Standards.
The dual listed holding company structure also will allow dividends to
be upstreamed from ZFS's operating subsidiaries in a tax efficient
manner. Through the use of non-equity shares, ZFS can make dividends
from its United States operating subsidiaries directly to AZ (rather
than through ZFS, which would subject the dividends to Swiss
withholding tax).
7. The sole assets of each Topco will be the equity securities of
ZFS and other related assets, such as cash received from the ZFS Group
as dividends prior to distribution to the Topco's shareholders. Neither
Topco may, without the consent of the other, engage in any activities
unrelated to its investment in ZFS or transfer or otherwise encumber
the ZFS shares owned by it.
Applicant's Legal Analysis
1. Section 3(a)(1)(C) of the Act defines ``investment company'' to
include any issuer which is engaged or proposes to engage in the
business of investing, reinvesting, owning, holding, or trading in
securities, and owns or proposes to acquire investment securities
having a value exceeding 40% of the value of that issuer's total assets
(exclusive of Government securities and cash items) on an
unconsolidated basis. Under section 3(a)(2), ``investment securities''
includes all securities except (i) Government securities and (ii)
securities issued by (a) employee's securities companies or (b) certain
majority-owned subsidiaries.
2. Applicant states that because ZFS is not a majority-owned
subsidiary of AZ, the ZFS shares owned by AZ could be deemed to be
``investment securities'' within the meaning of section 3(a)(2).
Applicant also submits that because virtually all of AZ's assets will
consist of ordinary and non-equity shares of ZFS and non-equity shares
of AZH, AZ may be deemed to be an investment company under section
3(a)(1)(C) of the Act.
3. Section 6(c) of the Act provides, in part, that the Commission
may exempt any persons from any provision of the Act or any rule under
the Act if and to the extent the exemption is necessary or appropriate
in the pubic interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act. Applicants requests an order under section 6(c) exempting AZ from
all provisions of the Act.
4. Applicant contends that because AZ will be solely a holding
company of ZFS, AZ does not raise the concerns underlying the Act and
is not the type of entity intended to be covered by the Act. Applicant
also states that the dual listed holding company structure is an
accepted form of organizing an international enterprise. Applicant
submits that the corporate form employed by these types of companies
does not implicate the concerns underlying the Act. Applicants also
states that such companies function as fully merged business
enterprises with diverse international public ownership.
5. Applicant states that AZ, Zurich and ZFS will be operated as a
fully merged enterprise in a manner similar to that employed by other
dual listed holding companies. Applicant submits that, from the
perspective of an investor, AZ will be no different than a traditional
holding company. Applicant believes that exempting AZ from the
provisions of the Act would be consistent with the protection of
investors and the legislative purpose of the Act.
[[Page 17244]]
6. Applicant contends that AZ's assets are not of the sort that
Congress was concerned about in creating the Act. Applicant submits
that, rather than being liquid, mobile and readily negotiable or large
pools of funds, AZ's sole assets will be the ordinary shares and a
series of non-equity shares of ZFS, together with certain related
assets (such as non-equity shares in AZH and dividends received from
ZFS and AZH prior to distribution to AZ's shareholders). Applicant
states that AZ is prohibited from engaging in any activities unrelated
to its investment in ZFS or transferring or otherwise encumbering the
ZFS securities without the consent of Zurich. Applicant submits that
AZ's business does not entail the types of risk to public investors
that the Act was designed to eliminate or mitigate.
Applicant's Conditions
Applicant agrees that the order granting the requested relief will
be subject to the following conditions:
1. AZ will not hold itself out as being engaged in the business of
investing, reinvesting, or trading in securities.
2. AZ will not acquire any investment securities as that term is
defined in section 3(a)(2) of the Act, except securities of ZFS and its
majority-owned subsidiaries that are neither investment companies nor
relying on section 3(c)(1) or 3(c)(7) of the Act and for cash
management purposes, certificates of deposit, banker's acceptances, and
time deposits maturing within 180 days from the date of acquisition
thereof, securities issued or guaranteed by a foreign government with a
maturity not exceeding one year, and shares of money market mutual
funds.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-9125 Filed 4-7-98; 8:45 am]
BILLING CODE 8010-01-M