[Federal Register Volume 61, Number 133 (Wednesday, July 10, 1996)]
[Notices]
[Pages 36399-36410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17502]


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[[Page 36400]]

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22051; International Series Release No. 1000/812-9898]


The T. Rowe Price International Funds, Inc., et al.; Notice of 
Application

July 2, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: T. Rowe Price International Funds, Inc., T. Rowe Price 
International Series, Inc., Institutional International Fund, Inc., and 
Rowe Price-Fleming International, Inc. (``Price-Fleming'').

RELEVANT ACT SECTIONS: Order requested under section 10(f) granting an 
exemption from that section.

SUMMARY OF APPLICATION: Applicants request an order to permit T. Rowe 
Price International Funds, Inc., T. Rowe Price International Series, 
Inc., and Institutional International Fund, Inc. to purchase securities 
that are not registered under the Securities Act of 1933 (the 
``Securities Act'') from an underwriting syndicate when the funds' 
investment adviser is an affiliated person of a principal underwriter 
in the syndicate.

FILING DATE: The application was filed on December 15, 1995 and amended 
on May 3, 1996. Applicants have agreed to file an amendment, the 
substance of which is incorporated herein, during the notice period.

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 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 July 29, 1996, 
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. Applicants, 100 East Pratt Street, Baltimore, Maryland 21202.

FOR FURTHER INFORMATION CONTACT: David W. Grim, Staff Attorney, at 
(202) 942-0571, or Robert A. Robertson, Branch Chief, 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 at the 
SEC's Public Reference Branch.

Applicants' Representations

I. Background

    1. T. Rowe Price International Funds, Inc., T. Rowe Price 
International Series, Inc., and Institutional International Fund, Inc. 
are open-end management investment companies registered under the Act. 
Each fund was organized as a Maryland corporation, and each fund 
invests primarily in foreign equity and fixed income securities.
    2. Applicants request that any exemptive order issued pursuant to 
the application also apply to any other registered investment company, 
or separate investment series thereof, which in the future is advised 
or managed by Price-Fleming, or an entity controlling, controlled by or 
under common control with Price-Fleming, and which is a member of the 
T. Rowe Price ``group of investment companies,'' as defined in rule 
11a-3(a)(5) under the Act (each, a ``Future International Fund''). In 
addition, applicants request that any exemptive order issued pursuant 
to the application also apply to any other registered investment 
company, or separate investment series thereof, to which Price-Fleming 
currently or in the future acts as sub-adviser (each, a ``Sub-Advised 
Fund'') (together, with T. Rowe Price International Funds, Inc., T. 
Rowe Price International Series, Inc., Institutional International 
Fund, Inc., and the Future International Funds, the ``International 
Funds'').
    3. Price-Fleming is a registered investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act''). Price-Fleming 
is adviser or sub-adviser, as the case may be, to each of the 
International Funds. Price-Fleming is one of America's largest 
international mutual fund managers with approximately $20 billion under 
management in its offices in Baltimore, London, Tokyo and Hong Kong. 
Price-Fleming was incorporated in Maryland in 1979 as a joint venture 
between T. Rowe Price and Robert Fleming Holdings Limited (``Fleming 
Holdings''). The common stock of Price-Fleming is 50% owned by a 
wholly-owned subsidiary of T. Rowe Price Associates, Inc. (``T. Rowe 
Price''), 25% owned by a subsidiary of Fleming Holdings and 25% owned 
by Jardine Fleming Group Limited (``Jardine Fleming''). Half of Jardine 
Fleming is owned by Fleming Holdings and half is owned by Jardine 
Matheson Holdings Limited. T. Rowe Price has the right to elect a 
majority of the board of directors of Price-Fleming, and Fleming 
Holdings has the right to elect the remaining directors, one of whom 
will be nominated by Jardine Fleming.
    4. Fleming Holdings is a diversified investment organization which 
participates in a global network of regional investment offices. 
Currently, the following direct or indirect subsidiaries of Fleming 
Holdings may participate as principal underwriters in international 
securities offerings in which the International Funds may invest (the 
location of each such underwriter's principal office(s) is set forth in 
parenthesis following its name): Robert Fleming Securities Limited 
(London), Jardine Fleming Securities Limited (Hong Kong, Tokyo, Seoul), 
Jardine Fleming Taiwan Limited (Taipei), PT Jardine Fleming Nusantara 
(Jakarta), Jardine Fleming Thanakom Securities Limited (Thailand), Ord 
Minnett Securities Ltd. (Melbourne, Wellington), Fleming Martin Ltd. 
(London), Jardine Fleming Australia Securities Ltd. (Sydney), Jardine 
Fleming Australia Management Ltd. (Melbourne), Jardine Fleming New 
Zealand Limited (Wellington), Jardine Fleming India Limited (Bombay) 
and Pesaka Jardine Fleming SDN, BHD (Kuala Lumpur) (together with any 
additional entities existing or created in the future which are direct 
or indirect subsidiaries of Flemings Holdings and which may participate 
as principal underwriters in international underwritings in which the 
International Funds participate, the ``Affiliated Syndicate''). The 
entities in the Affiliated Syndicate and Price-Fleming are or may be 
deemed to be ``affiliated persons'' of each other within the meaning of 
section 2(a)(3) of the Act.
    5. To the extent any of the entities in the Affiliated Syndicate 
participates as principal underwriter in an international securities 
offering, the International Funds would be prohibited from purchasing 
securities in such offering, absent the relief requested herein. 
Applicants request that the International Funds be permitted to 
purchase, through the Affiliated Syndicate, foreign securities which 
are not registered under the Securities Act. Foreign securities 
purchased pursuant to the exemptive relief being sought will be issued 
in public offerings conducted in accordance with the applicable laws of 
Australia, Brazil, France, India,

[[Page 36401]]

Indonesia, Ireland, Japan, Mexico, the Philippines, South Africa, 
Sweden, Taiwan, and Thailand (the ``Countries''), and the applicable 
rules and regulations of the stock exchanges and regulated unlisted 
market(s), if any, in such Countries.

II. Information About the Countries

A. Australia

    1. Securities regulation throughout Australia derives its authority 
from the Corporations Law 1991 (the ``Australia Corporations Law''). 
The legislation covers a wide range of issues, including raising 
capital, preparation of prospectuses, and personal liability for false 
or misleading statements and omissions. The Australian Stock Exchange 
Limited (the ``ASX'') operates in the capital cities of each of the six 
states in Australia. The Australia Corporations Law is administered by 
the Australian Securities Commission (the ``ASC''), which is 
accountable and responsible to the Commonwealth Attorney General and 
the Commonwealth Parliament. All securities purchased in offerings in 
Australia by the International Funds pursuant to the requested relief 
will be listed or approved for listing on the ASX.
    2. The Listing Rules of the ASX impose various reporting and other 
obligations on listed companies, in addition to the obligations imposed 
by the Australia Corporations Law. Companies wishing to list their 
securities with the ASX must be of a sufficient size and their 
prospectuses, articles of association, share certificates, annual 
accounts, and other published documents must conform to the 
requirements of the Australia Corporations Law and the ASX. Among other 
things, the ASX Listing Rules require listed companies to promptly 
announce the declaration of dividends and new issues of capital, to 
provide semi-annual financial reports and to disclose other information 
which may have an important bearing on market value. The ASX Listing 
Rules also require disclosure of all material information on an ongoing 
basis. The other requirements of the ASX to obtain a listing relate to 
minimum capitalization, shareholder distributions, and size of 
operation or net tangible assets. In order to list, a company must have 
an initial minimum capitalization of $AUD 1,000,000 (approximately US 
$787,402 at current exchange rates). Further, the company must have at 
least 500 shareholders, each of whom holds shares with a market value 
of at least $AUD 2,000 (approximately US $1,575 at current exchange 
rates).
    3. Under the Australia Corporations Law, issuers that intend to 
make public offerings of securities are required to file with the ASC a 
prospectus or a sale notice which complies with statutory requirements 
intended to ensure full and fair disclosure. In almost all cases where 
an initial public offering is involved, the practical effect of the 
provisions will be that similar information and disclosure will be 
required to be made, irrespective of the form of document legally 
required.
    4. The Australia Corporations Law provides only in general terms 
the kind of information required to appear in a prospectus; it does not 
provide a statutory checklist of information required. A prospectus is 
required to contain ``all such information as investors and their 
professional advisers would reasonably require, and reasonably expect 
to find in a prospectus, for the purpose of making an informed 
assessment of: (i) the assets and liabilities, financial position, 
profits and losses, and prospects of the corporation; and (ii) the 
rights attaching to the securities.'' There is no legal requirement 
that financial statements be included in the prospectus. However, as a 
matter of practice, where a company which issues a prospectus has a 
track record, it is usual for a summary of historical financial 
information to be included. In many cases, this period extends to the 
last three financial years. In other prospectuses, however, only a 
summary of financial information for the most recent year is included 
together with a summary of pro forma financial information assuming the 
securities offered under the prospectus are actually issued. It is 
unusual for the actual financial statements themselves to be included 
in the prospectus. In addition, a prospectus usually includes 
directors' forecasts of future profits for the forthcoming year or two, 
and an independent accountant's report reviewing both historical and 
forecast financial information.
    5. An underwriting commitment in Australia typically proceeds by 
way of bookbuilding with soft underwriting. The underwriter only takes 
up that portion of the public offering which is not subscribed for 
within a specified time (public offerings generally stay open for one 
month). This process has partly arisen due to market practice, and also 
because of tax (stamp duty) savings. Generally, no stamp duty is 
payable on the issue of shares. Stamp duty is usually payable on the 
transfer of shares listed on the ASX at the rate of 3% of the value of 
the shares and the rate of 6% of the value of the shares where the 
shares are not listed on the ASX. An underwriter will often engage sub-
underwriters, or seek to place shares with institutional investors.

B. Brazil

    1. All securities purchased by the International Funds in offerings 
in Brazil pursaunt to the requested relief will be admitted for trading 
or listed or approved for listing on one or more of the following 
exchanges or markets: Bolsa de Valores de Sao Paulo, Bolsa de Valores 
do Rio de Janeiro, Bolsa de Valores do Parana, Bolsa de Valores de 
Santos, Bolsa de Valores de Pernambuco e Paraiba, Bolsa de Valores do 
Extremo Sul, Bolsa de Valores de Minas Gerais, Brasilia e Espirito 
Santo, Bolsa de Valores da Bahia, Sergipe e Alagoas, and Bolsa de 
Valores Regional.
    2. Companies wishing to become public companies must register as 
such with the Brazilian securities commission, the Commissoa de Valores 
Mobiliarios (the ``CVM''), and must apply with the CVM for registration 
of particular securities before issuing and selling them to the public. 
Among other items, the application for registering an issue of 
securities must contain information concerning the company, a copy of 
the agreement concerning the distribution of the securities, a draft of 
the subscription documents and the prospectus, and, in some cases, a 
study of the economic and financial feasibility of the issue. The CVM 
reviews the foregoing materials and has authority to deny the 
registration on the grounds that the proposed issuance is unfeasible or 
otherwise not advisable. The CVM may also suspend a registration and 
the public offering after the registration has been granted if it 
uncovers fraud or determines that the offering is not being conducted 
in compliance with the materials approved or the Brazilian securities 
laws and regulations.
    3. The public offering may commence only after the registration has 
been granted, the lead distributor has made the public announcement 
required by the CVM regulations, and the final prospectus has been made 
available to the public. The public offering of equity securities 
requires the prior approval of the company shareholders, or, if the 
company has authorized capital and the amount of securities to be 
offered are within its limit, of the company's board of directors. The 
issue price to the public and a justification therefor must be set in 
accordance with the applicable law by the company's shareholders at a 
shareholders' meeting even if the company has adequate authorized 
capital, although the shareholders may

[[Page 36402]]

delegate this authority to the company's board of directors.
    4. Under Brazilian law, shareholders have preemptive rights to 
subscribe for equity securities to be issued in connection with any 
capital increase of the company in proportion to their current equity 
participation. Such preemptive rights may be eliminated only if the 
company has authorized capital, the securities will be issued though a 
public offering, and the company's by-laws expressly waive the 
preemptive rights. If there are no preemptive rights, a company may 
first offer the securities to existing shareholders, giving them a 
priority to subscribe for them rather than a preemptive right. In such 
a case, the period to exercise the priority is usually two to five 
days. At the end of the period for the exercise of the preemptive 
rights or priority, if any, the unsubscribed securities are offered to 
the public for subscription.
    5. The offering and distribution of the securities must be made 
through the intermediation of distributors, which may be investment 
banks, brokerage firms, and securities dealers, all of whom must be 
registered with the CVM. The distributor may either work as an 
intermediary, or agent, between the issuing company and the purchasers 
on a best efforts basis, or acquire, partially or wholly, the 
securities issued for resale through a firm commitment, or standby firm 
commitment, underwriting. The CVM has prescribed certain terms and 
provisions that all distribution and underwriting contracts must 
contain as a minimum. In a firm commitment underwriting, any securities 
that are not subscribed for by the public or existing shareholders by 
the end of the subscription period will be subscribed for by members of 
the underwriting consortium in the proportion established by the 
consortium agreement. Applicants are seeking relief with respect to 
participation in underwritings in Brazil only to the extent necessary 
to purchase securities that are the subject of firm commitment 
underwritings.

C. France

    1. The seven securities exchanges in France--Paris, Lyon, Nancy, 
Marseille, Lille, Nantes, and Bordeaux (together, the ``French Stock 
Exchanges'')--are all governed by the same stock exchange authorities 
and are subject to uniform rules and regulations. All securities 
purchased by the International Funds in offerings in France pursuant to 
the requested relief will be admitted for trading or listed, or 
approved for listing, on one or more of the French Stock Exchanges. 
Three regulatory agencies supervise the operations of the French Stock 
Exchanges: (i) the Counseil des Bourses de Valeurs, or Stock Exchange 
Council, which has general regulatory and supervisory authority over 
the French Stock Exchanges; (ii) the Societe des Bourses Francaises, or 
French Securities Exchange Company (``SBF''), which implements the 
rules, regulations and policies established by the Stock Exchange 
Council; and (iii) the Commission des Operations de Bourse, or 
Commission on Securities Exchange Operations (``COB''), an autonomous 
administrative body that performs market regulator functions. Each of 
the French Stock Exchanges is comprised of three markets--the Cote 
Officielle or ``Official Market,'' the Second Marche or ``Second 
Market,'' and the Marche Hors-Cote or over-the-counter market.
    2. French law requires any company making a public offering of 
securities, prior to such offering, to ``publish a public information 
document describing the structure, financial condition and development 
of the activities of such company.'' Varying levels of detail are 
required for the information contained in such a prospectus, depending 
on whether the issuer is seeking to list its securities on the Official 
or Second Market and on the extent of information about the issuer that 
is already available to the investing public. In general, COB 
regulations require that the prospectus must contain information 
necessary to inform investors as to the assets, financial condition, 
results of operations, and prospects of the issuer, as well as the 
terms of the securities being offered.
    3. In addition to SBF and Stock Exchange Council oversight, an 
issuer seeking to list its securities on the Official Market must 
obtain the advance written approval for its prospectus from the COB. A 
Second Market prospectus does not require such COB approval, but must 
be filed with the COB at least three months prior to the expected 
admission date. The regulatory authorities' review of the listing file 
and prospectus typically involves a comment procedure pursuant to which 
the authorities seek to ensure that appropriate disclosure is being 
made by the issuer. The prospectus in final form must be delivered or 
addressed to all offerees.
    4. Initial public offerings in France are made in conjunction with 
an initial listing of the issuer's shares on the French Stock 
Exchanges. In both initial and subsequent public offerings, all shares 
of the same class included in the offering are offered to all potential 
investors at a single offering price and, except for the preferential 
or priority subscription rights granted to existing shareholders, on 
the same other terms and conditions.
    5. Initial public offerings and subsequent public offerings of 
equity securities, equity-related debt securities, and straight debt 
securities in France are generally underwritten by banks and certain 
other financial institutions authorized to underwrite securities and 
regulated by the Bank of France. Underwriting practices are identical 
for initial and subsequent public offerings. Generally, stock offerings 
are underwritten pursuant to a practice known as the garantie de bonne 
fin (literally, ``guarantee of successful result'') and equity-related 
debt securities and straight debt securities are underwritten ``prise 
ferme'' (literally, ``firm taking'').
    6. All public offerings in France involving the issuance of shares 
that result in a capital increase are underwritten pursuant to an 
agreement between the issuer and an underwriting syndicate providing 
for a garantie de bonne fin. The agreement allots to each underwriter a 
specified number of the shares being offered, and each underwriter 
severally commits to subscribe to, of procure subscribers for, its pro 
rata portion (based on such respective underwriting allotments) of the 
number of offered shares that are not subscribed for by existing 
shareholders or the public pursuant to subscription rights or otherwise 
during a stated subscription period. The garantie de bonne fin 
constitutes a binding contractual obligation by the underwriters to 
purchase all shares in the offering that are not otherwise sold to the 
public and, therefore, constitutes bookbuilding with soft underwriting 
or standby firm commitment underwriting. The price payable by the 
underwriters pursuant to their standby firm commitment under the 
garantie de bonne fin is the same as the subscription price at which 
the shares are offered to the public.
    7. French public offerings of equity-related debt securities, such 
as convertible bonds or debentures with warrants, as well as straight 
debt securities, are underwritten pursuant to the prise ferme method. 
Pursuant to the agreement between the underwriters and the issuer, each 
underwriter severally commits to purchase from the issuer a specific 
number of the newly issued securities before they are listed for 
trading on an exchange. In practice, the prise ferme method operates 
similarly to the garantie de bonne fin. Securities that have not been 
placed with the public or with existing security holders are purchased 
by the

[[Page 36403]]

underwriters pro rata on the basis of their respective commitments, and 
then are resold on the markets by the underwriters for their own 
accounts.

D. India

    1. India's stock exchanges, while mainly self-regulating, are 
subject to the supervision of the Securities Exchange Board of India 
(``SEBI'') under the Securities Contract (Regulation) Act of 1956 (the 
``SCRA'') and Rules, 1957 (the ``SCRA'') and Rules, 1957 (the ``SCRA 
Rules''). Currently, 24 stock exchanges in India are recognized under 
the SCRA Rules. All securities purchased by the International Funds in 
offerings in India pursuant to the requested relief will be admitted 
for trading or listed, or approved for listing, on one or more of the 
following exchanges or markets: The Stock Exchange, The Bombay Stock 
Exchange, The Calcutta Stock Exchange Association Ltd., Madras Stock 
Exchange Ltd., The Delhi Stock Exchange Association Ltd., The Hyderabad 
Stock Exchange Ltd., Madhya Pradesh Stock Exchange Ltd., Bangalore 
Stock Exchange Ltd., Cochin Stock Exchange Ltd., The Uttar Pradesh 
Stock Exchange Association Ltd., Pune Stock Exchange Ltd., The Ludhiana 
Stock Exchange Association Ltd., The Guahati Stock Exchange Ltd., 
Mangalore Stock Exchange Ltd., The Magadh Stock Exchange Ltd., Jaipur 
Stock Exchange Ltd., Bhubaneshwar Stock Exchange Association Ltd., 
Saurashtra Kutch Stock Exchange Ltd., The Vadodara Stock Exchange Ltd., 
The Coimbatore Stock Exchange Ltd., OTC Exchange of India (the 
``OTCEI''), and National Stock Exchange of India Ltd.
    2. SCRA Rules provide that only companies whose issued share 
capital par value is more than Rs 50 million (approximately US 
$1,464,987 at current exchange rates) and whose shares are widely held 
may list their shares on existing recognized stock exchanges. OTCEI was 
incorporated in 1990 to enable trading in securities of companies which 
do not meet such minimum capital requirements. Recently, OTCEI 
announced that certain ``main board'' securities will be eligible to 
trade on OTCEI. Although listing of a company's shares is generally 
optional, the Government may compel public companies to list their 
securities on the stock exchanges if such a listing is deemed to be in 
the public interest or in the interest of the securities market. A 
minimum of 25% of the ordinary shares of a company seeking a listing 
are required to be offered to the public.
    3. A public offering of securities is generally required to be made 
by means of a prospectus, which must contain the information specified 
in the Companies Act, 1956 (the ``India Companies Act'') including, but 
not limited to, a description of the entire history of the company, its 
main objectives, the number and classes of its shares, information 
regarding the directors and their remuneration, and statements 
regarding the purpose of the raising of funds. The International Funds 
will not purchase securities in public offerings in India unless a 
prospectus relating to such securities is available.
    4. The prospectus must be accompanied by an auditors report for the 
previous five years of the company and its subsidiaries and an expert 
consent. A company's directors and promoter are subject to civil and 
criminal liability for misstatements in a prospectus and SEBI has been 
delegated with the power and the authority for this purpose.
    5. A public offering also requires that the company enter into a 
listing agreement with the relevant stock exchange. The listing 
agreement is statutorily prescribed and requires disclosure of 
information about the company prior to listing as well as, among other 
things, reporting of unaudited results at six month intervals with 
explanations of differences with audited results, providing information 
about material changes, changes in management and auditors once trading 
has commenced.
    6. Underwriting is no longer mandatory. It is left to the issuer 
whether to have the issue partially or totally underwritten. In an 
underwritten offering, an underwriter enters into an underwriting 
agreement with the issuer and is required to commit to purchase a 
certain number of shares. Applications for shares received directly by 
the underwriter from its clients, as well as applications received by 
the issuer from the public independently, may serve to reduce an 
underwriter's obligation under the underwriting agreement based on the 
allocation methodology set forth in the agreement. To the extent such 
applications are insufficient to meet the underwriter's full obligation 
under the underwriting agreement, the underwriter is required to 
purchase the remainder of the shares. There are only two circumstances 
in which an underwriter may be relieved of its obligations under the 
underwriting agreement: (i) the issue fails to keep the subscription 
list for public issuer open for the maximum 10 day period (unless the 
issue is oversubscribed, in which case the subscription list may be 
kept open for less than 10 days), and (ii) the issuer fails to receive 
subscriptions for 90% of the issue (in which case all amounts paid in 
satisfaction of underwriting obligations are refunded).
    7. If there is no underwriting, since all issues are conditional 
upon a minimum subscription requirement of 90% of the securities being 
issued, any deficit will result in the entire amount raised being 
refunded. Promoters are required to retain specified minimum holdings 
of equity capital, and, as a consequence, promoters can be required to 
purchase a portion of public issues. Shares purchased by promoters to 
maintain their minimum required holdings are subject to a lockup of 
five years, and the full subscription amount must be paid in advance 
before the public issue is made. Bonus issues to security holders are 
prohibited for 12 months following any public offering or rights issue.

E. Indonesia

    1. There are currently two stock exchanges in Indonesia, the Bursa 
Efek Indonesia, comprised of the Jakarta Stock Exchange (``JSE'') and 
the Surabaya Stock Exchange (``SSE'') (together, the ``Bursa Efek''). 
All securities purchased by the International Funds in offerings in 
Indonesia pursuant to the requested relief will be admitted for trading 
or listed, or approved for listing, on the JSE and/or the SSE.
    2. In 1976, the government established Badan Pelaksana Pasar Modal 
(``BAPEPAM''), the Capital Market Executive Agency. Initially, BAPEPAM 
was created to, among other things, establish and regulate the stock 
market, and evaluate and approve listings of new companies. In 1990, 
however, BAPEPAM's responsibilities were modified to include monitoring 
and regulating a market in which securities can be issued and traded 
regularly, fairly, and efficiently, and protecting the interests of 
investors and the public. Consistent with its new responsibilities, the 
BAPEPAM's official name was changed to the ``Capital Market Supervisory 
Agency.''
    3. Listing requirements differ for the JSE and the SSE. Companies 
desiring to list shares on any exchange must be organized with limited 
liability. The JSE requires as conditions to listing that issuers have 
paid-up capital of at least Rp 2 billion (approximately US $856,714 at 
current exchange rates), have an operating profit and positive net 
income for the prior two fiscal years, and have audited financial 
statements for the prior year accompanied by an unqualified auditor's 
report. The SSE requires issuers desiring a listing to have at least Rp 
1 billion (approximately US $428,357 at current exchange rates) in 
paid-up capital, a par value of at least

[[Page 36404]]

Rp 1,000 (approximately US $0.43 at current exchange rates) per share, 
positive net income in its most recent fiscal year, and audited 
financial statements accompanied by an unqualified auditor's report, 
provided, however, that a qualification in the auditor's report 
respecting financial statements for the most recent year will be 
acceptable.
    4. Public offerings of securities in Indonesia are subject to 
BAPEPAM regulation and supervision. In order to conduct a public 
offering in Indonesia, BAPEPAM requires that issuers have been in 
existence for three years and have three years of profitable 
operations. An offering must be made by a prospectus which includes 
information regarding the company's history, business, operations, 
management, share ownership, and financial condition. The prospectus 
must include three years of audited financial statements, including 
three years of income statements, balance sheets, statements of cash 
flow (or equivalent), and statements of changes in stockholders' 
equity. Companies may have only one class of capital stock unless 
special permission is received from the BAPEPAM. Shareholders have 
preemptive rights.
    5. The offering prospectus forms part of a registration statement 
which, together with related documents (e.g., an underwriting agreement 
and articles of association), must be submitted to the Chairman of the 
BAPEPAM for possible review. Prior to effectiveness of the registration 
statement, the underwriters meet with the issuer to fix the public 
offering price, the underwriters' compensation, and the size of the 
offering. Once agreed, a firm commitment underwriting agreement is 
entered into, and thereafter the offering period which must last at 
least three days begins. During this period, the prospectus must be 
publicly distributed. Given the possibility of a short offering period 
and in order to ensure knowledge of the impending offering, a 
prospectus summary must be published in an Indonesian newspaper at 
least three business days before the beginning of the offering period. 
Pursuant to the terms of the underwriting agreement, the underwriters 
are required to purchase all of the securities in the offering, 
notwithstanding the fact that they may not have been able to resell all 
of them.

F. Ireland

    1. Irish securities laws, comprised principally of the Companies 
Acts 1963-1990 (together, the ``Irish Companies Act''), generally 
provide for self-regulation, and there is no central agency other than 
the Irish Stock Exchange having authority over listed companies. The 
Irish Stock Exchange supervises listed companies in accordance with its 
rules. In particular, a provision of the Irish Companies Act allows a 
listed company to issue an invitation to the public to subscribe for 
shares without following many of the provisions of the Irish Companies 
Act provided that the invitation is accompanied by a document which has 
been approved by the Irish Stock Exchange. Typically such a document 
issued by a listed company will have been scrutinized several times by 
the Irish Stock Exchange before it is publicly disseminated.
    2. If a company is not seeking any form of stock exchange listing 
or trading facility, the securities laws are entirely self-regulating. 
However, all issuers also are subject to civil claims and criminal 
prosecutions, including criminal prosecutions by the Director of Public 
Prosecutions (akin to the U.S. Attorney General). In addition, issuers 
whose securities are officially listed on the Irish Stock Exchange are 
subject to regulation by the exchange and may be the subject of 
sanctions, such as suspension of trading or de-listing.
    3. All securities purchased in Ireland by the International Funds 
pursuant to the requested order will be purchased in public offerings 
which are (i) subject to Irish law and listed (or seeking listing) on 
the Official List of the Irish Stock Exchange,\1\ and/or (ii) listed 
approved for listing on the London Stock Exchange Limited. Securities 
of Irish issuers listed on the London Stock Exchange Limited are 
subject to the regulations of such Exchange, which may be in addition 
to and more stringent than those of the Irish Stock Exchange and the 
Irish Companies Act.
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    \1\ The Irish Stock Exchange is comprised of four markets--the 
main market or the ``First Market'' or, more commonly, the 
``Official List,'' the Unlisted Securities Market, the Exploration 
Securities Market, and the Small Companies Market.
---------------------------------------------------------------------------

    4. To be listed on the Official List on the Irish Stock Exchange, a 
company must have capitalization of 700,000 Irish Pounds (approximately 
US $1,092,555 based on current exchange rates), must have published 
three years of financial results, and must have at least 25 percent of 
its shares in public hands, i.e., held by others who are not affiliates 
of such company. In addition to the above requirements, companies 
seeking to list on the Irish Stock Exchange must provide the exchange 
with a formal statement (known as ``listing particulars'') describing 
the company's business, management, and financial condition.
    5. Irish law also requires, with certain exceptions, any invitation 
to subscribe or purchase shares in a public offering be accompanied by 
a prospectus meeting the disclosure requirements set forth in the Third 
Schedule to the Irish Companies Act. Among other things, the Irish 
Companies Act requires any company conducting a public offering to 
disclose its dividend record, profits, and losses for the preceding 
three years. Under the Irish Companies Act, the listing particulars for 
companies on the Official List are deemed to be a ``prospectus'' and, 
therefore, the requirement to make a separate Third Schedule disclosure 
does not apply. The disclosure required under the Irish Stock Exchange 
rules for a company on the Official List, however, is generally more 
onerous than that required under the Irish Companies Act.
    6. The public offering price is fixed at the time of initial 
issuance and published in the offering prospectus, and the securities 
offered to and purchased by affiliates of underwriters as part of a 
public offering are offered and sold under the same terms as to the 
general public. With respect to a rights issue, the subscription price 
is generally fixed and is at a discount to the prevailing market price 
or at the market price. Applicants are aware of at least one instance 
when the price was fixed at a premium to the market price. The 
International Funds, however, will not purchase securities in 
underwritten offerings at a public offering price that is set at a 
premium to the current market price.
    7. A public offering in Ireland is often underwritten pursuant to 
an underwriting agreement in which the primary underwriters (as opposed 
to the sub-underwriters) commit to purchase any of the offered 
securities that are not taken up by existing shareholders (after a 
stated subscription period) or by the market generally. Typically, sub-
underwriters irrevocably contract with the underwriter to subscribe for 
a minimum portion of the issue at a fixed price.
    8. The number of subscribers participating in a public offering 
will vary depending on the nature of the existing trading market for an 
issuer's securities and other circumstances, either related to the 
status of the issuer or to general economic conditions. The 
International Funds will only participate in underwritten offerings in 
which it is likely that the securities will be widely disseminated.

[[Page 36405]]

G. Japan

    1. There are eight securities exchanges in Japan and one over-the-
counter market. The securities exchanges and the over-the-counter 
market are regulated by the Minister of Finance (the ``MOF''), and 
there is strong emphasis on self-regulation. All securities purchased 
by the International Funds in offerings in Japan pursuant to the 
requested relief will be admitted for trading or listed, or approved 
for listing, on one or more of the eight Japanese securities exchanges: 
the Tokyo Stock Exchange, the Osaka Securities Exchange, the Nagoya 
Stock Exchange, the Sapporo Stock Exchange, the Ni'igata Stock 
Exchange, the Kyoto Stock Exchange, the Hiroshima Stock Exchange, and 
the Fukuoka Stock Exchange.
    2. The basic listing requirements are governed by the Securities 
and Exchange Law of 1948 (the ``Japan Securities and Exchange Law''), 
while detailed matters such as listing eligibility criteria and 
reporting procedures are dealt with in the listing regulations of each 
exchange. A company wishing to list its equity securities on the Tokyo 
Stock Exchange (the ``TSE'') is required to file an application for 
listing with the TSE, which is examined by the exchange, placing 
emphasis on the public interest and investor protection. If the TSE 
considers a listing of the relevant instrument to be appropriate, it 
may authorizing listing subject to approval of the MOF. Assuming 
approval of the MOF is then obtained, the company is required to enter 
into a listing agreement with the TSE whereby the company agrees that 
it will abide by the Japan Securities and Exchange Law and the TSE's 
rules and regulations, including Business Regulations, Listing 
Regulations, and Regulations for Supervision of Listed Securities.
    3. Issuers that intend to make public offerings of securities are 
required to file with the MOF a registration statement for the 
securities accompanied by supplemental materials that adequately 
disclose pertinent information concerning the offering and the issuer. 
Issuers are required to include financial statements for their last 
five business periods (ten business periods if the business period is 
half a year) in their registration statements.
    4. A preliminary prospectus corresponding to a ``red herring'' in 
the United States can be circulated for the purpose of soliciting 
offers during the period between the initial filing and effective dates 
so that the public can learn the essential facts relating to a proposed 
issue. The use of prospectuses that do not meet the statutory 
requirements is prohibited and a prospectus must be delivered at the 
time of sale.
    5. The nature of the underwriting commitment is determined by 
contract and may differ from transaction to transaction. In general, 
however, one of two types of commitments is made, roughly equivalent to 
firm commitment underwriting and bookbuilding with soft underwriting. 
Under the first method, the underwriting syndicate buys as principal 
all of the securities of the issuer and assigns them to its members. If 
any underwriter or any assignee is unable to place any of the 
securities which it has purchased, those securities remain in that 
underwriter's or assignee's inventory. Under the second method, an 
underwriting syndicate seeks to market the securities, and members of 
the syndicate must purchase for their own accounts any securities of 
the issuer which they are unable to place. In either of the two 
methods, the syndicate is responsible for placing all the securities of 
the issuer, but it is rare that any securities are not placed because 
the conditions of issuance are determined in accordance with market 
conditions.
    6. Only licensed securities companies may act as underwriters. A 
company that intends to issue securities generally enters into an 
underwriting agreement with a primary managing underwriter which will 
form a syndicate for the floatation of the securities. The terms and 
conditions on which the primary managing underwriter is required to 
purchase any shortfall are a matter for contract between the issuer of 
the securities and the primary managing underwriter. The relationship 
between an underwriter and its parent or its subsidiary is regulated by 
rules known as ``fire-walls.'' In the sphere of underwriting, an 
underwriter must not (within 6 months of becoming an underwriter) sell 
underwritten securities to a customer which the underwriter knows has 
received financing for the purchase from the parent or a subsidiary of 
the underwriter. In addition, an underwriter is prohibited from selling 
underwritten securities to its parent or subsidiary within 6 months of 
becoming an underwriter for such securities.

H. Mexico

    1. Securities legislation, Ley del Mercado de Valores (``Securities 
Market Law''), passed in 1975, contains the regulatory framework for 
the Mexican securities industry and strengthened the regulatory powers 
of the Mexican Banking and Securities Commission, or Comision Nacional 
Bancaria y de Valores (``CNBV''). The CNBV is responsible in general 
for monitoring the Mexican securities market and, among other things, 
regulates the registration and subsequent trading of all new issues of 
shares, bonds and commercial paper, and other securities, and regulates 
the activities of brokers and of securities depositories and Mexico's 
only stock exchange, the Bolsa Mexicana de Valores, S.A. de C.V. (the 
``Mexican Stock Exchange''), a private corporation, the shares of which 
are owned solely by authorized brokers. All securities purchased by the 
International Funds in offerings in Mexico pursuant to the requested 
relief will be admitted for trading or listed, or approved for listing, 
on the Mexican Stock Exchange.
    2. In order to offer securities to the public in Mexico, an issuer 
must meet certain requirements set forth in the Securities Market Law 
and by the CNBV as to assets, operating history, management, and other 
matters, and only securities approved by the CNBV may be listed on the 
Mexican Stock Exchange. In order to obtain and maintain registration to 
offer securities in the Mexican Stock Exchange, an issuer must file an 
application for registration with the securities section of the 
Registro Nacional de Valores e Intermediarios, the National Registry of 
Securities and Securities Brokers, which is part of the CNBV. The 
issuer seeking approval must comply, to the satisfaction of the CNBV, 
among others, with the following requirements: (i) The characteristics 
of the securities and the terms of the offering are such that the 
securities will have significant circulation and will cause no 
dislocation of the market, (ii) the securities possess, or have the 
potential for, broad circulation in relation to the size of the market 
or the issuer; and (iii) the issuer is solvent and has liquidity. 
Although the Securities Market Law does not set any specific 
quantitative standards regarding the size of the offering, it does 
require that every public offering be large enough, in the opinion of 
the CNBV, to assure investors of secondary market liquidity. As a 
result, securities must be issued in sufficient quantity to be 
available to a wide group of offerees.
    3. Once the offering price for a security is set, it is disclosed 
in the prospectus and CNBV circulars require the underwriters to offer 
the securities to the public at that set price. As a result, publicly 
offered securities are offered to and purchased by the public investors 
on the same terms. Although

[[Page 36406]]

Mexican law does permit, under certain circumstances, securities to be 
publicly offered at a premium to market price, the situation rarely 
occurs. The International Funds will not purchase securities in 
underwritten offerings at a public offering price that is set at a 
premium to the current market price.
    4. In firm commitment public offerings in Mexico, the obligations 
of the various underwriters are in practice several and not joint, and 
each underwriter is obligated to purchase shares from the issuer at a 
fixed price regardless of the marketing results of the underwriting 
group. The CNBV, however, can object to the price set by the issuer and 
underwriters.

I. The Philippines

    1. Public offerings of securities in the Philippines are conducted 
in accordance with regulations promulgated by the Securities and 
Exchange Commission of the Philippines (the ``Philippine SEC'') and 
rules promulgated by the Philippine Stock Exchange. These rules and 
regulations are intended to ensure that a wide group of offerees will 
take part in each offering, that the price offered to each of the 
offerees is the same, and that the securities will be offered to and 
purchased by unaffiliated persons on the same terms as the other 
participants in the offering. In particular, the Philippine Stock 
Exchange requires an issuer to have at least 500 shareholders (subject 
to certain modifications), have 400 million pesos (about US $15.3 
million at current exchange rates) in authorized capital stock, and 100 
million pesos (about US $3.8 million at current exchange rates) in 
subscribed capital stock, all of which subscribed capital stock must be 
fully paid-up, before its securities may be listed on the Philippine 
Stock Exchange. No single stockholder should own or control more than 
75% of the subscribed capital stock of the issuer. All securities 
purchased by the International Funds in offerings in the Philippines 
pursuant to the requested relief will be admitted for trading or 
listed, or approved for listing, on the Philippine Stock Exchange--
Ayala and/or the Philippine Stock Exchange--Pektite.
    2. A company wishing to issue securities to the public is required 
to file a registration statement with the Philippine SEC setting forth 
information about the company, its business, and its management. 
Registration statements must be prepared in accordance with principles 
of full and fair disclosure. The registration statement (which includes 
the offering prospectus) is required to contain a provision stating the 
price at which the security is to be sold. A registration statement 
becomes effective upon the issuance by the Philippine SEC of an order 
to that effect. Once such an order is issued, the issuer and the 
underwriter cannot modify the offering price set forth in the 
registration statement and prospectus and the securities may only be 
offered pursuant to the stated terms of the prospectus. Accordingly, 
any securities issued in connection with a public offering in the 
Philippines will be offered to unaffiliated persons on the same terms 
as any other participant in the offering.
    3. Public offerings are underwritten by investment houses and 
commercial banks with expanded commercial banking authority. If the 
securities to be publicly offered are to be listed on the Philippine 
Stock Exchange, approximately 50% of the company's subscribed shares 
(or shares offered to be subscribed through an underwriter) are offered 
to the public through the Philippine Stock Exchange for distribution to 
the public. This ensures that each Philippine offering to be listed on 
the Philippine Stock Exchange is made available publicly to a wide 
group of offerees.
    4. Although underwriting commitments differ from issue to issue in 
the Philippines, generally all of Philippine public offerings are 
conducted on a bookbuilding with soft underwriting basis. Under this 
type of commitment, the issuer is responsible for selling the shares 
(through the underwriting syndicate), but the lead underwriter or 
underwriters commit to purchase any unsold shares at the completion of 
the initial offering period. The Philippine Stock Exchange requires 
such a commitment by the underwriter as a condition to listing on the 
Philippine Stock Exchange.

J. South Africa

    1. There are three exchanges in South Africa, namely, the Bond 
Market Exchanges (``BME''), the South African Futures Exchange 
(``Safex'') and the Johannesburg Stock Exchange (``JSE''). Each is 
self-regulating within the parameters of the relevant acts. Securities 
purchased by the International Funds in securities offerings in South 
Africa pursuant to the requested relief will be admitted for trading or 
listed, or approved for listing, on the BME or the JSE.
    2. There are three possible listings on the JSE: the Main Board, 
the Development Capital Market (``DCM'') or the Venture Capital Market 
(``VCM''). The DCM was created in 1984 and designed to encourage the 
growth of small businesses. Companies listed on the DCM, and 
particularly the VCM, are subject to less stringent requirements for 
listing, and accordingly, a higher degree of risk is normally 
associated with such companies. Once DCM and VCM companies achieve the 
requirements for a Main Board listing, they may apply for a transfer. 
Both the DCM and the VCM require a shorter or no profit history, a 
smaller and narrower distribution of shares to the public, and a lower 
minimum initial price of shares. The requirements for listing equity 
securities on the Main Board of the JSE include (i) a minimum 
subscribed capital, excluding revaluations of assets, of at least R2 
million (approximately US $459,242 at current exchange rates) in the 
form of not less than one million shares in issue; (ii) a satisfactory 
profit history for the preceding three years, with a current audited 
level of earnings of at least R1 million (approximately US $229,621 at 
current exchange rates), before taxation; (iii) 30% of the first 
million shares (and an agreed percentage of the balance) to be held by 
the public; (iv) the number of public shareholders to be at least 300; 
and (v) the minimum initial price of shares to be no less than 100 
cents per share. Despite the requirement for a three-year history of 
trading for a Main Board listing, mining ventures generally go directly 
to the Main Board upon delivery to the JSE of a satisfactory geological 
report, evidence of proven reserves, and appropriate undertakings 
relating to minimum capital structure.
    3. The JSE introduced a new rule in July 1995 to promote broader 
public ownership of shares. It is now a continuing obligation that at 
least 10% of a company's shares be held by the public (other than 
institutions) at the time of listing.
    4. New equity shares are generally underwritten in South Africa by 
insurance companies, large pension funds, or merchant banks. Typically, 
underwriters in public offerings of securities will commit to subscribe 
for any shares not purchased in the offering. When a public issue is 
underwritten, the structure and mechanics thereof usually take the 
following form. The potential issuer will first approach a financial 
institution such as a merchant bank which will act as agent on behalf 
of the issuer (the ``Agent''). The Agent itself may arrange for the 
underwriting of the issue in total or in part. Pursuant to an 
underwriting agreement, the primary underwriters will be obligated to 
purchase at a fixed price all of the securities being offered and which 
are not taken up by others under the offering. A broker is usually 
engaged to arrange for the sub-

[[Page 36407]]

underwriting of the primary underwriting. Typically, the sub-
underwriters will irrevocably subscribe for a minimum portion of the 
issue at a fixed price. The primary underwriters and sub-underwriters 
commitments will be subject to certain conditions precedent typically 
related to the delivery by the issuer of appropriate offering 
documents, the admission of the securities to listing on the JSE (if 
the issuer is a listed company), and the compliance by the issuer with 
The South Africa Companies Act, 1973 provisions relating to offering 
prospectuses. The primary underwriters fully assume risk of the Agent 
of finding sufficient sub-underwriters for the securities underwritten. 
As compensation, the primary underwriters and sub-underwriters receive 
a fee which is defined as a percentage of the offering price to the 
public of the securities purchased thereby. The Agent will also receive 
a fee directly from the issuer. Such ``firm commitment'' underwriting 
is the most common structure used by companies listed on the JSE.

K. Sweden

    1. To qualify for a listing on the Swedish Stock Exchange's 
(``SSE's'') ``A'' list (comprising the officially listed companies), a 
company must (i) have at least 3 years of audited financial statements; 
(ii) meet the SSE's requirements concerning financial stability, 
organization and dissemination of information; (iii) must publish an 
SSE listing prospectus; and (iv) at least 25% of the share capital and 
no less than 10% of the voting power must be distributed in the market 
among no fewer than 1,000 investors, each with a holding the market 
value of which is half a base amount (equivalent to approximately SEK 
17,850 or US $2,644 at current exchange rates).
    2. The SSE also provides an over-the-counter quotation facility for 
unlisted securities known as the ``OTC'' or ``O'' list. To qualify for 
quotation on O lists, a company must (i) publish a listing prospectus; 
(ii) have a share capital of at least SEK 2 million (approximately US 
$296,222 at current exchange rates) and total equity of at least SEK 4 
million (approximately US $592,443 at current exchange rates); and 
(iii) at least 10% of the share capital must be distributed to the 
market among no less than 300 investors, each with a holding of at 
least one quarter of a base amount in market value but not exceeding 
10% of the total equity.
    3. The Swedish Companies Act (1975:1385) (the ``Swedish Companies 
Act'') requires that companies which publicly offer or otherwise invite 
a substantial number of persons to acquire shares of subscription 
rights in the company must prepare a prospectus, if the sum total of 
the amounts payable under the offer amounts to SEK 300,000 
(approximately US $44,443 at current exchange rates) or more. In 
addition, the contents of prospectuses are subject to recommendations 
of the Swedish Industry and Commerce Stock Exchange Committee and to 
detailed regulations issued by the Financial Supervisory Authority.
    4. Under the Swedish Companies Act, a prospectus must contain, 
among other things, the balance sheets, the income statements, and a 
summary of the management reports for the last three financial years 
for which annual reports and auditor's reports have been rendered; a 
description of the company's and any group's operations, supply or raw 
materials, products, and places of business as well as its position in 
the industry; and a description of the distribution of ownership of 
shares and voting power in the company.
    5. In general, securities of Swedish companies have historically 
traded immediately after their public offering at substantial premiums 
over the initial offering price. One consequence of this pattern is 
that offerings for such securities are typically oversubscribed during 
a ``red herring'' offering phase. As a result, the practice in Sweden 
is that underwriting commitments are not firm since all of the 
securities offered will have been already placed. Applicants have no 
reason to believe that securities of companies in Sweden will not in 
the future trade at a premium over the initial offering price. In 
addition, offerings in Sweden that are not oversubscribed are rare, and 
applicants have no reason to believe that oversubscribed securities 
offerings will not continue in the future.

L. Taiwan

    1. All securities purchased by the International Funds in offerings 
in Taiwan pursuant to the requested relief will be admitted for trading 
or listed, or approved for listing, on the Taiwan Stock Exchange (the 
``TSE'') and/or the Republic of China OTC Securities Exchange.
    2. Securities traded on the TSE are divided into three categories: 
``A'', ``B'' and ``C'', depending on years of establishment of the 
issuer, capital, profitability and the extent of share distribution. To 
meet Category A listing criteria, a company must, among other things, 
have minimum paid-up share capital of at least TWD 600 million 
(approximately US $22,081,555 at current exchange rates) for the two 
most recent fiscal years, and have at least 2,000 registered 
shareholders of which more than 1,000 hold 1,000 to 50,000 shares and 
the total holdings of such shareholders is more than 20% of the total 
issued and outstanding shares of 10,000,000 shares. To meet Category B 
listing criteria, a company must, among other things, have minimum 
paid-up share capital of at least TWD 300 million (approximately US 
$11,040,777 at current exchange rates) for the two most recent fiscal 
years, and have at least 1,000 registered shareholders of which more 
than 500 hold 1,000 to 50,000 shares and the total holdings of such 
shareholders is more than 20% of the total issued and outstanding 
shares or 10,000,000 shares. To meet Category C listing criteria, a 
company must, among other things, obtain classification from the 
relevant central competent authority as a ``qualified science 
technology company,'' and have paid-up share capital of at least TWD 
200 million (approximately US $7,360,518 at current exchange rates).
    3. The Taiwan Securities and Exchange Commission (the ``Taiwan 
SEC'') supervises and controls all aspects of securities market 
operations. In general, listed companies are required to submit to the 
Taiwan SEC a prospectus in a standard format prescribed by the Taiwan 
SEC on commencement of an initial public offering and upon an increase 
of capital stock. The International Funds will not purchase securities 
in public offerings in Taiwan unless a prospectus relating to such 
securities is available. A prospectus must include, among other 
information, company history, organization, business scope and 
facilities available, capital structure and share-distribution, records 
of corporate bond issues, plans and business prospects, and audited 
financial statements for the five most recent years.
    4. All listed companies on the TSE must enter into a listing 
agreement with the TSE, which is a standard form agreement adopted by 
the TSE and approved by the Taiwan SEC. Listed companies are required 
to report promptly any material events which may affect the business or 
affairs of the company, such as a corporate reorganization. In 
addition,the Taiwan SEC may require issuers to make financial and 
business reports at any time after the public issuance of securities, 
and the Taiwan SEC may, if deemed necessary, conduct direct 
investigations on the issuers' financial or business conditions.

[[Page 36408]]

    5. Underwriting can be done by securities companies, banks, and 
trust and investment companies that have obtained an underwriter 
license from the Taiwan SEC. Because of the recently implemented rules, 
underwriting can be conducted only on firm commitment basis.\2\ The 
underwriter and issuer must enter into an underwriting agreement which 
sets forth, among other things, the underwriting period, the number of 
securities to be underwritten and their price, and the underwriting 
fees and disbursements. The underwriter must ensure that the prospectus 
prepared in accordance with the regulations of the Taiwan SEC be 
delivered to each subscriber. The subscription price may not be changed 
during the underwriting period, and the subscription price must be paid 
in full in one lump sum payment. Upon expiration of the underwriting 
period, the underwriter must report to the Taiwan SEC the status of the 
underwriting, including the number of securities which have been sold 
in the underwriting period and the number of securities which have been 
acquired by the underwriter, if any.
---------------------------------------------------------------------------

    \2\ Article 76 of the Securities and Exchange Law of Taiwan (the 
``SEL'') provides that underwriters may choose to conduct 
underwritings on either a firm commitment or best efforts basis. 
Pursuant to its rulemaking authority, the Taiwan SEC has promulgated 
a rule which provides that underwriters can only offer securities to 
the public through firm commitment underwritings. The inconsistency 
between the SEL and the recently adopted rules will be resolved when 
the Taiwan legislature amends the SEL to limit public underwritings 
to firm commitment underwritings. The amendment is expected to be 
passed in the near future. In practice, the result has already been 
obtained since underwritings are conducted only on a firm commitment 
basis.
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M. Thailand

    1. The Stock Exchange of Thailand (``SET'') is the only official 
stock exchange in Thailand. Shares which are not listed on the SET are 
sometimes traded on the informal over-the-counter (``OTC'') market (the 
``Bangkok Stock Dealing Centre''). Currently, the Bangkok Stock Dealing 
Center is principally used for the trading of unlisted shares which are 
expected to be quoted on the SET in the near future. All securities 
purchased by the International Funds in offerings in Thailand pursuant 
to the requested relief will be admitted for trading or listed, or 
approved for listing, on the SET and/or the Bangkok Stock Dealing 
Center.
    2. The Thailand SEC is charged with formulating policies to promote 
and develop, as well as to supervise, matters concerning securities, 
securities businesses, the securities exchange, OTC centers and related 
businesses, organizations related to the securities business, the issue 
or offer of securities for sale to the public, acquisition of 
securities for business takeovers, and prevention of unfair securities 
trading practices. Under The Securities and Exchange Act B.E. 2535 
(A.D. 1992) (the ``SEC Act''), a public offering of newly issued 
securities is permitted only when the issuer has received approval from 
the Thailand SEC to make the offering and a registration statement in 
the prescribed form, together with a draft prospectus, has become 
effective. Upon effectiveness, sales activities and distribution of the 
prospectus may begin. Sales activities must be completed within six 
months. In addition, the issuer must meet qualitative standards under 
Thailand SEC regulations.
    3. While primary responsibility for the regulation of new 
securities issues has shifted to the Thailand SEC, the SET continues to 
operate the stock exchange as an exchange authorized under the SEC Act 
and is responsible for listing approvals, once the SEC public offering 
approval, prospectus, and related requirements have been met and the 
paid-up capital reflecting the shares offered in the relevant offering 
has been registered with the Ministry of Commerce. The SET is 
responsible, among other things, for processing all listing 
applications, for ensuring that disclosure requirements for listed 
companies are met and for monitoring all trading activities in respect 
of listed securities.
    4. The SEC Act provides for only one category of securities to be 
listed and traded on the SET (``listed securities''). Under the 
regulations promulgated by the SET, existing publicly traded securities 
must be converted into listed securities and listed companies must 
comply with the listing requirements within three to five years, 
depending on the nature and locality of such company. Under the current 
SET listing regulations, the applicant must have a main business which 
is economically and socially beneficial to the country. Approval for 
listing of shares is granted after the public offering thereof is 
approved by the Thailand SEC and the shares are distributed to a 
specified number of small shareholders. The applicant must also be able 
to show that its business operations are sound and consistent with the 
nature and type of business, and that it is in a stable and healthy 
financial condition with sufficient working capital. The business of 
the applicant must have operated continuously under substantially the 
same management for not less than three years prior to the submission 
of the listing application. The applicant must also have the net profit 
after tax of Baht 50,000,000 (approximately US $1,981,493 at current 
exchange rates) is aggregate for the last three years prior to the 
submission of the listing application.
    5. Underwriting of securities may be conducted either on a firm 
commitment or best efforts basis. In practice, however, substantially 
all underwritings are done on a firm commitment basis. Under the 
Thailand SEC notification, issuers of shares shall arrange for the 
securities underwriter to underwrite all shares of the issue. 
Generally, one or more securities underwriters will enter into an 
underwriting agreement with an issuer to underwrite the securities 
issue on a several basis. In rare cases, securities may be underwritten 
on a non-several (or joint) basis. Applicants submit that a firm 
commitment underwriting conducted on such a basis is still a firm 
commitment underwriting for purposes of rule 10f-3(a)(3), the only 
difference being that an underwriter may be liable for the entire 
amount of the offering, not just its own share.

Applicants' Legal Analysis

    1. Section 10(f) of the Act prohibits a registered investment 
company from purchasing securities from an underwriting syndicate if, 
as relevant here, the investment company's investment adviser is an 
affiliated person of a principal underwriter in the syndicate.
    2. Section 2(a)(3) of the Act defines the term ``affiliated 
person'' to include, among other things, any entity directly or 
indirectly controlling, controlled by, or under common control with 
another entity. Section 2(a)(9) of the Act generally defines the term 
``control'' to mean the power to exercise a controlling influence over 
the management or policies of a company. Section 2(a)(9) further 
provides that any person who owns beneficially, either directly or 
through one or more controlled companies, more than 25 percent of the 
voting securities of a company shall be presumed to control the 
company. Based on the complex ownership structure of the various direct 
and indirect subsidiaries of Fleming Holdings which may participate as 
principal underwriters in international underwritings, each such 
subsidiary is or may be deemed to be controlled by or under common 
control with Fleming Holdings for purposes of section 2(a)(3). Price-
Fleming also may be deemed to be controlled by Fleming Holdings for 
purposes of section 2(a)(3) of the Act. As a result, the entities that 
make up the Affiliated Syndicate and Price-Fleming

[[Page 36409]]

may be deemed to be under the common control of Fleming Holdings, 
making the Affiliated Syndicate entities and Price-Fleming affiliated 
persons of each other. Thus, the International Funds, which are advised 
or sub-advised by Price-Fleming, are prohibited from purchasing 
securities from any underwriting syndicate in which one or more of the 
entities in the Affiliated Syndicate participates as principal 
underwriter.\3\
---------------------------------------------------------------------------

    \3\ T. Rowe Price, rather than by Price-Fleming, advises certain 
funds in the T. Rowe Price group of funds (the ``Domestic Funds''). 
T. Rowe Price is an affiliated person of Price-Fleming and, in turn, 
is or may be deemed to be an affiliated person of an affiliated 
person of each of the Affiliated Syndicate entities (a ``second-tier 
affiliate''). Accordingly, purchases of securities by the Domestic 
Funds during the existence of an underwriting syndicate in which one 
or more of the Affiliated Syndicate entities serves as principal 
underwriter are not prohibited by section 10(f), and, therefore, 
relief is not requested herein in connection with such transactions.
---------------------------------------------------------------------------

    3. Notwithstanding the section 10(f) prohibition, the section 
provides that the SEC may exempt conditionally or unconditionally any 
transaction or classes of transactions from any of the provisions of 
section 10(f) if and to the extent that the exemption is consistent 
with the protection of investors. Applicants believe that the granting 
of the requested exemption is consistent with the protection of 
investors.
    4. Rule 10f-3 under the Act provides that purchases of securities 
by a registered investment company otherwise prohibited by section 
10(f) are exempt from such section if certain specified conditions are 
met. Applicants represent that purchases of foreign securities which 
would not be permitted but for the requested relief will be made in 
accordance with all the terms of rule 10f-3, except paragraph (a)(1) of 
the rule.
    5. Applicants state that the Securities Act registration 
requirement set forth in rule 10f-3 was imposed to ensure that 
investment companies purchased marketable securities, at the public 
offering price (which ordinarily would not exist absent registration), 
that the securities were issued more or less in the ordinary course of 
business, and that adequate disclosure is made with respect to the 
securities to be purchased. Applicants believe that the effect of the 
exemption sought is to substitute for the Securities Act registration 
requirement (i) a condition requiring that the securities at issue be 
purchased in public offerings conducted in accordance with the laws of 
the Countries, (ii) a condition requiring that the securities at issue 
will be either (a) admitted for trading on one or more of the official 
stock exchange(s) or regulated unlisted market(s) in the relevant 
Country, or (b) approved for admission to one or more of the relevant 
Country's official exchange(s) or regulated unlisted market(s), but not 
yet admitted or listed, and (iii) a condition requiring that an 
issuer's audited financial statements for two years prior to the 
offering will be available to prospective purchasers. Applicants 
believe that the availability of such financial statements, as well as 
other disclosure provided by issuers in accordance with the various 
securities laws of each Country (including listing or admission 
requirements), would provide Price-Fleming with sufficient information 
to make informed decisions on behalf of the International Funds. The 
audited financial statements, together with the public offering and 
listing (or admission) requirements, also would provide some assurance 
that the securities being purchased are issued more or less in the 
``ordinary course'' of business. Similarly, the financial statements 
and public offering and listing (or admission) requirements assure 
investors that the securities being purchased are issued in compliance 
with regulatory requirements substantially similar to those imposed by 
United States securities laws.
    6. Applicants represent that the International Funds will only 
participate in underwritings in Countries in which (i) it is likely 
that a wide group of offerees will participate; (ii) the price offered 
to such offerees will consist of a single price (except for any 
discounted price offered to certain specified groups within a 
particular locality or jurisdiction (i.e., employees of the issuer or 
the government, citizens of the issuer's home country)); and (iii) the 
securities will be offered to and purchased by unaffiliated persons on 
the same terms as other participants in the offerings. Moreover, 
applicants represent that the International Funds will not purchase 
securities in underwritten offerings in which the public offering price 
is set at a premium to the current market price.\4\ Applicants believe 
that the foregoing limitations will further address the SEC's concern 
that securities purchased by the International Funds will be purchased 
at the public offering price and more or less in the ordinary course of 
business.
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    \4\ As noted above, securities in foreign underwritings may be 
offered at a discount to certain specified groups within a 
particular locality or jurisdiction. The International Funds 
typically would not be eligible to purchase securities at the 
discounted price. As a result, the Funds would purchase securities 
in the offering at a separate fixed public offering price which is 
higher than the discounted price but which does not constitute a 
premium.
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    7. Applicants represent that they will comply with the firm 
commitment underwriting requirement of paragraph (a)(3) of rule 10f-3. 
Accordingly, the types of underwritings in which the International 
Funds will be permitted to invest will be firm commitment underwritings 
and certain other types of underwriting arrangements specific to a 
particular Country, the practical realities of which effectively 
satisfy the firm commitment underwriting requirement.
    8. The typical underwriting arrangements involved in securities 
underwritings in India, Indonesia, Mexico, South Africa, and Taiwan, as 
well as all underwriting commitments in Japan other than bookbuilding 
with soft underwriting, are firm commitment. Underwriting arrangements 
in Brazil and Thailand may be either firm commitment or a variation of 
best efforts underwritings; however, applicants are seeking relief with 
respect to participation in underwritings in Brazil and Thailand only 
to the extent necessary to purchase securities that are the subject of 
firm commitment underwritings.
    9. The public offerings in Australia, France, Ireland and the 
Philippines, as well as certain public offerings in Japan, are 
underwritten using ``bookbuilding with soft underwriting'' or ``standby 
firm commitment underwriting,'' which is a form of underwriting in 
which the underwriter makes a firm commitment to purchase or procure 
purchasers for any portion of the offered securities that remains 
unsold to the public after a stated subscription period. Applicants 
believe that the practical realities of bookbuilding with soft 
underwriting as conducted in the securities markets of Australia, 
France, Ireland, the Philippines, and Japan effectively satisfy the 
firm commitment underwriting requirement of paragraph (a)(3) of rule 
10f-3 since the primary underwriters are contractually committed, on a 
firm basis, to purchase all the securities being offered, and this 
obligation is reduced only to the extent that the securities which the 
primary underwriters are required to purchase pursuant to the 
underwriting agreement are actually sold to others.
    10. In Sweden, there is no mechanism by which underwriters bind 
themselves to purchase all of the securities offered as in a firm 
commitment underwriting in the United States. In practice, however, 
underwritings in Sweden are not undertaken unless all of the offered 
securities are placed. Typically, offerings of securities of companies

[[Page 36410]]

based in Sweden are oversubscribed. Applicants state that with respect 
to oversold offerings, a reasonable inference may be drawn that the 
underwriter is unlikely to have any improper incentive to cause an 
affiliated company to purchase the securities that are the subject of 
such offerings.\5\ Applicants submit that the practical realities of 
oversold offerings in Sweden effectively satisfy the firm commitment 
requirement of paragraph (a)(3) of rule 10f-3.
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    \5\ See Investment Company Acquisition of Securities 
Underwritten by an Affiliate of that Company, Investment Company Act 
Release No. 14924 (Jan. 29, 1986).
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    11. Applicants represent that the board of each International Fund 
will adopt internal procedures which are reasonably designed to provide 
that the conditions of the requested order are complied with with 
respect to the purchase of securities subject to section 10(f). In 
addition, the boards will determine, at least quarterly, that all 
purchases made during the preceding quarter were made in compliance 
with such procedures and will approve such changes to the procedures as 
such boards deem necessary.
    12. Applicants believe that the representations and conditions of 
the requested order are at least as protective of the interests of 
investors in the International Funds as are the provisions of paragraph 
(a)(1) of Rule 10f-3 which require Securities Act registration. 
Furthermore, applicants believe that the representations and conditions 
will act to ensure that purchases of foreign securities by the 
International Funds through the Affiliated Syndicate are made in a 
manner consistent with the underlying policies of section 10(f) and 
rule 10f-3.

Applicants' Conditions

    Applicants agree that any order granting the requested exemptive 
relief will be subject to the following conditions:
    1. Applicants will comply with rule 10f-3, except for paragraph 
(a)(1).
    2. All foreign securities purchased under circumstances otherwise 
subject to section 10(f) will be purchased in public offerings 
conducted in accordance with the applicable laws of the relevant 
Country and with the rules and regulations of the stock exchanges and 
regulated unlisted market(s), if any, in such Country, as applicable.
    3. All foreign securities purchased under circumstances otherwise 
subject to section 10(f) will be either (i) admitted for trading on one 
or more of the official stock exchange(s) or regulated unlisted 
market(s) in the relevant Country, or (ii) approved for admission to 
one or more of the relevant Country's official exchange(s) or regulated 
unlisted market(s) but not yet admitted or listed.
    4. All subject foreign issuers will make available to prospective 
purchasers financial statements, audited in accordance with the 
accounting standards of the relevant Country, for at least the two 
years prior to purchase.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-17502 Filed 7-9-96; 8:45 am]
BILLING CODE 8010-01-M