[Federal Register Volume 65, Number 44 (Monday, March 6, 2000)]
[Notices]
[Pages 11811-11815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5385]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24321; International Series Release 
No. 1216; 812-10724]


ASA Limited; Notice of Application

February 29, 2000.

AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application under the Investment Company Act of 1940 
(the ``Act'').

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Summary of Application: The order would permit applicant, ASA Limited 
(``ASA''), a South African closed-end management investment company 
registered under section 7(d) of the Act, to maintain its assets with a 
central securities depository in South Africa. The requested order 
would amend a prior order.

Filing Dates: The application was filed on July 18, 1997, and amended 
on December 21, 1999.

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 March 24, 2000, 
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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549-0609. Applicant, 36 Wierda Road West, Sandton 2196, South Africa.

FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Senior Attorney, at 
(202) 942-0572 or Christine Y. Greenless, 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 is available for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 
20549-0102 (telephone (202) 942-8090).

Applicant's Representations

    1. ASA is a closed-end management investment company organized in 
1958

[[Page 11812]]

in South Africa. ASA registered under the Act in 1958 pursuant to a 
Commission order issued under section 7(d) of the Act (the ``Original 
Order'').\1\ ASA's investment objective is to invest primarily in South 
African gold mining companies. As of August 31, 1999, 90.2% of ASA's 
net assets consisted of equity securities issued by South African 
companies that trade primarily on the Johannesburg Stock Exchange 
(``JSE''). ASA is internally managed, and its shares trade on the New 
York Stock Exchange (``NYSE'').
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    \1\ Investment Company Act Release Nos. 2739 (July 3, 1958) 
(notice) and 2756 (Aug. 13, 1958 (order).
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    2. ASA has received several Commission orders that address, among 
other things, ASA's custodial arrangements (collectively, and together 
with the Original Order, the ``Prior Orders'').\2\ Under the Prior 
Orders, ASA, with certain exceptions, is required to keep its assets in 
the U.S. in the custody of a bank. Thus, ASA currently maintains in the 
custody of Chase Manhattan Bank (``Chase'') all of the share 
certificates issued by ASA's South African portfolio companies.
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    \2\ Investment Company Act Release Nos. 21161 (June 23, 1995) 
(notice) and 21220 (July 20, 1995) (order) (permits ASA to appoint 
Chase Manhattan Bank, N.A. as its custodian and to authorize Chase 
Manhattan Bank to appoint Standard Bank of South Africa Limited as 
ASA's sub-custodian); Investment Company Act Release Nos. 17904 
(Dec. 17, 1990) (notice) and 17945 (Jan. 15, 1991) (order) (``1991 
Order''); Investment Company Act Release Nos. 14826 (Dec. 4, 1985) 
(notice) and 14878 (Dec. 31, 1985) (order) (``1985 Order''); 
Investment Company Act Release Nos. 11669 (Mar. 6, 1981) (notice) 
and 11722 (Apr. 7. 1981) (order); Investment Company Act Release 
Nos. 8278 (Mar. 20, 1974) (notice) and 8312 (Apr. 17, 1974) (order); 
Investment Company Act Release Nos. 7860 (June 12, 1973) (notice) 
and 7894 (July 10, 1973) (order); Investment Company Act Release 
Nos. 2944 (Dec. 14, 1959) (notice) and 2957 (Dec. 29, 1959) (order); 
Investment Company Act Release Nos. 2883 (May 22, 1959) (notice) and 
2886 (June 9, 1959 (order); and Investment Company Act Release Nos. 
2817 (Jan. 5, 1959) (notice) and 2821 (Jan. 20, 1959) (order).
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    3. The Prior Orders permit ASA to keep up to 33% of its assets 
abroad--up to 5% of its assets in each of Great Britain, Japan, Canada, 
Australia, and Switzerland, under certain circumstances, up to 5% of 
its assets in rand-denominated interest bearing accounts in South 
Africa, and up to 3% of its assets in South Africa in short term rand-
denominated investments issued or guaranteed by the Republic of South 
Africa.\3\ In addition, ASA may maintain $200,000 in cash to cover 
administrative expenses in a checking account with a South African 
bank.\4\ At present, all of ASA's assets in South Africa are maintained 
with its subcustodian, Standard Bank of South Africa Limited 
(``Standard Bank''), except for $200,000 which is kept in a checking 
account with another South African bank.
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    \3\ 1985 and 1991 Orders.
    \4\ 1991 Order.
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    4. Until recently, South African equity securities existed and 
traded only in paper form. In a transition that has begun and will 
continue through next year, paper certificates will be replaced with an 
electronic book-entry securities will be maintained electronically with 
a central securities depository (``CSD System''). Under the CSD System, 
ownership records of equity securities will be maintained 
electronically with a central securities depository (``CSD''). Security 
holders will not directly interact with the CSD but with a ``CSD 
Participant.'' Once the process of converting to the CSD System is 
complete, paper certificates will no longer be an acceptable form of 
ownership to clear and settle securities transactions on the JSE.
    5. Currently, JSE owns 50% of the CSD and the CSD Participants, 
including Standard Bank, own the remaining 50%. CSD Participants are 
not required to own shares of the CSD and parties other than the CSD 
Participants may own shares of the CSD in the future. The CSD is 
regulated by the Financial Services Board (``FSB''), which is an agency 
of the South African government that supervises the activities of South 
African financial services institutions.
    6. To become a CSD Participant, an entity must meet the CSD's 
criteria, which include the maintenance of a minimum level of 
capitalization, the ability to provide certain specialized services to 
shareholders, and other requirements relating to technology, human 
resources, internal controls, corporate governance, and risk 
management. CSD Participants are regulated by either the FSB or the 
Register of Banks in South Africa. ASA plans to retain Standard Bank, 
which meets the CSD's criteria for CSD Participants and is a CSD 
Participant, to be its CSD Participant.
    7. Once the CSD System becomes fully operational, in order for JSE 
listed shares owned by ASA to be tradable on the JSE, the share 
certificates must be voided and ASA's ownership interests must be 
recorded electronically in book entry form in the CSD system. This 
would be prohibited under the terms of the Prior Orders because ASA's 
assets would not be physically maintained in the U.S. but in the South 
African CSD System. The requested order would permit ASA to maintain 
its portfolio securities that trade on the JSE and are eligible for the 
CSD System (``CSD-Eligible Securities'') in electronic book-entry form 
with the CSD System in South Africa, rather than in the U.S. in paper 
share certificates.

Applicant's Legal Analysis

    1. Section 7(d) of the Act prohibits a foreign investment company 
from making a public offering of its securities in the U.S. but 
authorizes the Commission to permit a foreign investment company to 
register under the Act and make a public offering of its securities if 
the Commission finds that ``by reasons of special circumstances or 
arrangements, it is both legally and practically feasible to enforce 
the provisions of [the Act] against such company and that the issuance 
of such order is otherwise consistent with the public interest and 
protection of investors.'' Rule 7d-1 under the Act sets forth the 
conditions that a Canadian investment company must satisfy in order to 
receive an order under section 7(d) Under the Original Order, ASA met 
the requirements of rule 7d-1.
    2. ASA requests an order under section 7(d) to amend the Prior 
Orders to permit it to maintain its CSD-Eligible Securities in the CSD. 
ASA states that it s custodian arrangement with the CSD meets the 
requirements of rule 17f-5 under the Act, which governs foreign custody 
arrangements of U.S. investment companies, and that the requested 
relief is consistent with the standards of section 7(d).
    3. Rule 17f-5 under the Act permits a U.S. investment company 
(``fund'') to maintain its assets overseas with an ``Eligible Foreign 
Custodian.'' Under the rule, an Eligible Foreign Custodian includes ``a 
securities depository that acts as a system for the central handling of 
securities or equivalent book-entries in the country that is regulated 
by a foreign financial regulatory authority, as defined under section 
2(a)(50) of the Act.`` ASA states that the CSD meets this definition of 
an Eligible Foreign Custodian.
    4. Under the 17f-5, a fund's board of directors, its investment 
adviser, or custodian bank (``Foreign Custody Manager'') must determine 
that the fund's assets in the custody of an Eligible Foreign Custody 
will be subject to reasonable care, based upon the standards applicable 
to custodians in the relevant market after considering certain factors. 
Under rule 17f-5, the custody arrangement also must be governed by a 
written contract and/or rules, practices and procedures of the 
securities depository (``governing documents'') that the Foreign 
Custody Manager determines will provide reasonable care for fund 
assets. Finally, the Foreign Custody Manager must

[[Page 11813]]

establish a system to monitor the appropriateness of maintaining the 
fund's assets with the Eligible Foreign Custodian. ASA states that its 
board of directors (``Board''), as the Foreign Custody Manager, has 
approved the maintenance of ASA's assets with the CSD System in 
accordance with rule 17f-5. The Board concluded that ASA's assets will 
be subject to reasonable care if maintained with the CSD System in 
accordance with the governing documents. The Board also concluded that 
ASA will receive periodic reports concerning material developments 
affecting the CSD System, which will provide an adequate system for the 
Board to monitor the appropriateness of maintaining ASA's assets with 
the CSD under the standards of rule 17f-5.
    5. ASA notes that the Commission recently proposed rule 17f-7 under 
the Act that would govern the custody of fund assets with foreign 
securities depositories. \5\ ASA states that, if proposed rule 17f-7 is 
adopted, ASA's custodial arrangements with the CSD will be brought into 
compliance with rule 17f-7 in the same time frame as the Commission 
would afford U.S. funds.
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    \5\ Investment Company Act Release No. 23815 (April 29, 1999) 
(proposing amendments to rule 17f-5 and proposing new rule 17f-7).
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    6. ASA further states that the conditions of the Prior Orders will 
contine to apply to ASA. ASA states that these conditions are designed, 
among other things, to address any jurisdictional concerns and 
otherwise assure the protection of investors. ASA also states that, as 
a condition to the requested order, it will keep at least 5% of its 
assets in the U.S. in the custody of a U.S. bank.

Applicant's Conditions

    ASA agrees that the Original Order, as amended by any subsequent 
order, including any order of the SEC granting the requested relief 
(collectively, the ``ASA Orders''), will be subject to the following 
conditions:
    1. Chase will serve as ASA's custodian and will continue to meet 
the qualifications of a custodian under section 17(f) of the Act and 
Standard Bank will serve as Chase's subcustodian in South Africa. As 
long as Standard Bank holds ASA's assets, Standard Bank will designate 
Chase as its agent for service of process in the U.S. ASA will comply 
with rule 17f-5 under the Act, as it may be amended, as if it were a 
registered management investment company organized or incorporated in 
the United States with respect to any of its assets held by eligible 
foreign custodians (including Standard Bank and the CSD) or overseas 
branches of qualified U.S. banks (including Chase) outside the United 
States.
    2. The Board will serve as foreign custody manager and will not 
delegate such functions to its custodian or any other person.
    3. ASA will seek an order of the Commission prior to any amendment 
of its custodian agreement with its custodian.
    4. ASA will cause each present and future officer, director, 
investment adviser, principal underwriter, and custodian of ASA to 
enter into an agreement (``Agreement'') (to be filed by ASA with the 
Commission when that person assumes office), which will provide that 
each person agrees: (a) to comply with ASA's Memorandum of Association 
(``Charter'') and Articles of Association (``Bylaws''), the Act and the 
rules of the Commission under the Act, and the terms and conditions of 
the ASA Orders as applicable to each person and as each may be amended 
from time to time, as applicable to each person; (b) to do nothing 
inconsistent with the terms and conditions of the ASA Orders, the 
provisions of the Act, or the rules under the Act; (c) that the 
undertakings described in (a) and (b) above constitute representations 
and inducements to the Commission to issue the ASA Orders, and (d) each 
Agreement constitutes a contract between the person and ASA and the 
shareholders of ASA with the intent that ASA's shareholders will be 
beneficiaries of and will have the status of parties to the Agreement 
so as to enable them to maintain actions at law or in equity within the 
United States or South Africa. In addition, each Agreement of each 
officer and director of ASA will contain provisions similar to those 
contained in condition 21 below. \6\
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    \6\ ASA acknowledges that: (a) Every agreement and undertaking 
of ASA, its officers, directors, investment adviser, principal 
underwriters, and custodian which are required by the conditions 
contained in the ASA Orders constitute (i) inducements to the 
Commission for the issuance and continuance in effect of the ASA 
Orders, and (ii) a contract among ASA, the Commission, and ASA's 
shareholders with the same intent as set forth in condition 4 above; 
and (b) the failure by ASA or any of the persons listed above to 
comply with any of the agreements or undertakings, unless permitted 
by the Commission, will constitute a violation of the ASA Orders.
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    5. So long as ASA is registered under the Act, ASA's Charter and 
Bylaws, together, will contain in substance the provisions required by 
rule 7d-1(b)(8), and neither the Charter nor the Bylaws will be changed 
or amended in any manner inconsistent with rule 7d-1(b)(8) of the Act 
and the rules and regulations under the Act, unless authorized by the 
Commission.
    6. No person will qualify to serve as a director or officer of ASA 
until he or she has transmitted to ASA a list of his or her affiliated 
persons, as that term is defined in section 2(a)(3) of the Act. ASA 
will: (a) Require each of its directors, officers, and investment 
advisers to transmit to ASA quarterly a list of affiliated persons or a 
statement that there has been no change since the last list so 
transmitted to ASA; (b) transmit each list to its custodian promptly 
after receipt by ASA; and (c) transmit to its custodian quarterly a 
list of its affiliated persons or a statement that there has been no 
change since the last list was transmitted. The contract between ASA 
and its custodian will provide that the custodian will not consummate 
any transaction on behalf of ASA with any person who, on the basis of 
the lists transmitted to the custodian, is an affiliated person of ASA 
or an affiliated person of any director, officer, or investment adviser 
of ASA, unless the transaction is of a type permitted by the Act or any 
regulation under the Act or specifically permitted by order of 
exemption issued under the Act.
    7. ASA will furnish to the Commission, concurrently with the filing 
of periodic reports required to be filed under the Act, any changes to 
its list previously submitted to the Commission of persons affiliated 
with ASA and with ASA's investment adviser and principal underwriter.
    8. The chief executive officer of ASA, a majority of the directors 
of ASA, and a majority of the officers of ASA will be both citizens and 
residents of the U.S.
    9. ASA will hold all of its shareholder meetings in the U.S.
    10. ASA will maintain in the U.S. a transfer agent for transfer of 
its shares, and a registrar for the registration of its shares.
    11. ASA will file, and will cause each of its present or future 
directors, officers, or investment advisers who is not a resident of 
the U.S. to file with the Commission irrevocable designation of ASA's 
custodian as an agent in the U.S. to accept service of process in any 
suit, action, or proceeding before the Commission or any appropriate 
court to enforce the provisions of the laws administrated by the 
Commission, or to enforce any right or liability based upon ASA's 
Charter or Bylaws, contracts, or the respective undertakings and 
agreements of any of these persons required by the terms and conditions 
of the ASA Orders, or which alleges a liability on the part of any of 
these persons arising out of their services, acts, or transactions 
relating to ASA.

[[Page 11814]]

    12. As an exhibit to the application, ASA will file with the 
Commission an amendment to the subcustodian agreement that irrevocably 
designates ASA's custodian as an agent in the U.S. to accept service of 
process in any suit, action, or proceeding (collectively, 
``Proceeding'') before the Commission or any appropriate court to 
enforce the provisions of the laws administered by the Commission in 
connection with the subcustodian agreement, or to enforce any right or 
liability (``Liability'') based on the subcustodian agreement or which 
alleges a liability on the part of Standard Bank arising out of its 
services, acts, or transactions under the subcustodian agreement 
relating to ASA's assets. This designation will automatically terminate 
upon Standard Bank ceasing to hold ASA's assets, except as to a 
Proceeding or a Liability based on an action or inaction of Standard 
Bank prior to Standard Bank having ceased holding ASA's assets.
    13. ASA will perform every action and thing necessary to cause and 
assist the custodian of its assets to distribute the same, or the 
proceeds, if the Commission or a court of competent jurisdiction,\7\ 
will have so directed by final order.
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    \7\ A court of competent jurisdiction means any U.S. federal 
court that has jurisdiction to issue such an order.
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    14. ASA will take all steps necessary to insure that it will 
continue to be listed on the NYSE, including the publishing of 
financial statements and other information required by the NYSE for the 
benefit of holders of the shares listed on the NYSE and the performance 
of all the covenants contained in its listing agreement.
    15. The Commission, in its discretion, may revoke its order 
permitting registration of ASA and the public offering of its 
securities if the Commission finds, after notice and opportunity for 
hearing, that there has been a violation of the ASA Orders or the Act 
and may determine whether distribution of ASA's assets is necessary or 
appropriate in the interests of investors and may so direct.
    16. Neither ASA's Charter nor Bylaws will be changed in any manner 
inconsistent with the Act, nor will the terms and conditions of the 
application be changed without approval by the Commission or its staff.
    17. ASA waives any counsel fees to which it may be entitled and 
waives security for costs in any action brought against it in South 
Africa by any shareholder based on its Charter or Bylaws or any of the 
terms and conditions of the ASA Orders. ASA will cause each of its 
present or future directors who is a non-resident of the U.S. to make 
similar waivers.
    18. ASA will promptly notify the Commission in the event that there 
is any change in South African law that will be contrary to any 
provision of the Act or detrimental to or inconsistent with the 
protection afforded by the conditions of the ASA Orders.
    19. If proposed rule 17f-7 under the Act is adopted by the 
Commission, ASA's use of the CSD will comply with the rule and any 
amendments to the rule as if ASA were a registered management 
investment company organized or incorporated in the U.S.
    20. Any shareholder of ASA or the Commission on its own motion or 
on request of any ASA's shareholders will have the right to initiate a 
proceeding: (a) before the Commission for the revocation of the order 
permitting registration of ASA; or (b) before a court of competent 
jurisdiction for the liquidation of ASA and a distribution of its 
assets to its shareholders and creditors. The court may enter the order 
in the event that it finds, after notice and opportunity for hearing, 
that ASA, its officers, directors, investment adviser, principal 
underwriter, or custodian has violated any provision of the Act or the 
ASA Orders.
    21. Any shareholder of ASA will have the right to bring suit at law 
or equity, in any court of the U.S. or South Africa having jurisdiction 
over ASA, its assets or any of its officers or directors to enforce 
compliance by ASA, its officers and directors with any provision of 
ASA's Charter or Bylaws, the Act, the rules under the Act, or the terms 
and conditions of the ASA Orders, in so far as applicable to these 
persons. The court may appoint a trustee or receiver of ASA with all 
powers necessary to implement the purposes of the suit, including the 
administration of the estate, the collection of corporate property 
including chooses-in action, and distribution of ASA's assets to its 
creditors and shareholders. ASA and its officers and directors waive 
any objection they may be entitled to raise and any right they may have 
to object to the power and right of any shareholder of ASA to bring 
such suit, reserving, however, their right to maintain that they have 
complied with these provisions, undertakings, and agreements, and 
otherwise to dispute the suit on its merits. ASA, its officers, and 
directors also agree that any final judgment or decree of any U.S. 
court may be granted full faith and credit by a court of competent 
jurisdiction of South Africa and consent that the South African court 
may enter judgment or decree on ASA at the request of any shareholder, 
receiver, or trustee of ASA.
    22. ASA will settle its purchases and sales of portfolio securities 
in the U.S. by use of the mails or means of interstate commerce, except 
for: (a) Purchases and sales on an ``established securities exchange'' 
(defined as a national securities exchange as defined in section 
2(a)(26) of the Act, the JSE, the London Stock Exchange, the Tokyo 
Stock Exchange, the Toronto Stock Exchange, the Stock Exchange of 
Melbourne, Ltd., and the Effektenborsenverein Zurich Exchange 
(collectively the ``Established Exchanges'')) and (b) purchases and 
sales, through ASA's custodian or custodian's agent, in South Africa of 
South African Treasury Bills from or to the South African Treasury, 
South African Reserve Bank securities, or CSD-Eligible Securities. 
Assets purchased on an Established Exchange will be maintained in the 
U.S. with Chase, unless prohibited by law or regulation or financially 
impracticable as provided in condition 25 below.
    23. Contracts of ASA, other than those executed on an Established 
Exchange which do not involve affiliated persons, will provide that: 
(a) the contracts, irrespective of the place of their execution or 
performance, will be performed in accordance with the requirements of 
the Act, the Securities Act of 1933, and the Securities Exchange Act of 
1934, as amended, if the subject matter of the contracts is within the 
purview of these acts; and (b) in effecting the purchase or sale of 
assets, the parties to the contracts will utilize the U.S. mails or 
means of interstate commerce.
    24. ASA will keep at least 5% of its assets in the U.S. in the 
custody of a U.S. bank (``5% Requirement''). ASA's remaining assets 
(which may include U.S. dollars invested in time deposits and bank 
certificates of deposit) will be kept in the custody of a U.S. 
custodian, except:
    (a) Subject to the 5% Requirement, up to 100% of its CSD-Eligible 
Securities may be kept in the CSD through its custodian and 
subcustodian;
    (b) $200,000 may be kept in cash to cover administrative expenses, 
to be kept in a checking account with a South African bank;
    (c) Up to 3% of its assets may be kept in South Africa in short-
term rand-denominated investments issued or guaranteed by the Republic 
of South Africa; and
    (d) Up to 5% of its assets may be kept in rand-denominated interest 
bearing bank accounts with ``eligible foreign custodians'' or 
``overseas branches of

[[Page 11815]]

qualified United States banks,'' as those terms are defined in rule 
17f-5 under the Act (as it may be amended).
    25. If removal of securities purchased on the Established Exchanges 
becomes either prohibited by law or regulation or financially 
impracticable, up to 5% of ASA's assets may be held by an eligible 
foreign custodian or overseas branch of Chase in each of London, Japan, 
Australia, Switzerland, and Canada.
    26. If an ``eligible foreign custodian'' or an overseas branch of 
the custodian is to be appointed as subcustodian, ASA will comply with 
the requirements of rule 17f-5, as it may be amended, prior to the 
purchase of securities on an Established Exchange.
    27. ASA will withdraw its assets from the care of a subcustodian as 
soon as practicable, and in any event within 180 days of the date when 
a majority of the Board makes the determination that a particular 
subcustodian may no longer be considered eligible under rule 17f-5 of 
the Act, as it may be amended, or may no longer be considered an 
overseas branch of the custodian, or that continuance of the 
subcustodian arrangement would not be consistent with the best 
interests of ASA asnd its shareholders.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-5385 Filed 3-3-00; 8:45 am]
BILLING CODE 8010-01-M