[Federal Register Volume 69, Number 170 (Thursday, September 2, 2004)]
[Notices]
[Pages 53740-53746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2018]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26582; 812-12970]


ASA Limited, et al.; Notice of Application

August 27, 2004.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 7(d) of the Investment 
Company Act of 1940 (the ``Act'').

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    Summary of Application: Applicants ASA Limited (``ASA''), a South 
African closed-end management investment company registered under 
section 7(d) of the Act, and ASA (Bermuda) Limited (``ASAB''), a 
Bermuda limited liability company, request an order that would permit 
ASA to change its country of incorporation from South Africa to Bermuda 
by reorganizing into ASAB and permit ASAB to register under the Act. 
Applicants also seek approval of certain changes to the custodian 
agreement and the conditions governing their custodial arrangements.
    Filing Dates: The application was filed on May 1, 2003, and amended 
on August 13, 2004.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on September 17, 2004, and should be accompanied by proof of 
service on applicants, 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 Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants, c/o R. Darrell 
Mounts, Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, NW., 
Washington, DC 20036.

FOR FURTHER INFORMATION CONTACT: Marc R. Ponchione, Senior Counsel, at 
(202) 942-7927, or Janet M. Grossnickle, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone 202-942-8090).

Applicants' Representations

    1. ASA is a closed-end management investment company organized in 
1958 in South Africa. ASA is registered under the Act.\1\ ASA's 
investment objective is to invest primarily in equity securities of 
South African issuers conducting, as the major portion of their 
business, gold mining and related activities in South Africa. As of 
April 30, 2004, approximately 74% of ASA's portfolio securities consist 
of equity securities issued by such companies. As of April 30, 2004, 
ASA has approximately $372 million in assets and is internally managed 
by its director and chief executive officer who is a U.S. citizen 
residing in Buffalo, New York. Shares of ASA 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) (the ``Original Order''). 
Since 1958, the Original Order has been amended on a number of 
occasions. See Investment Company Act Release Nos. 24321 (Feb. 29, 
2000) (notice) and 24367 (Mar. 27, 2000) (order) (the ``CSD 
Order''); Investment Company Act Release Nos. 21161 (June 23, 1995) 
(notice) and 21220 (July 20, 1995) (order); Investment Company Act 
Release Nos. 17904 (Dec. 17, 1990) (notice) and 17945 (Jan. 15, 
1991) (order); Investment Company Act Release Nos. 14826 (Dec. 4, 
1985) (notice) and 14878 (Dec. 31, 1985) (order); Investment Company 
Act Release Nos. 11669 (Mar. 6, 1981) (notice) and 11722 (Apr. 7, 
1981) (order) (collectively with the CSD Order, the ``Custody 
Orders''); 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) (collectively with the 
Custody Orders, the ``Subsequent Orders'' and together with the 
Original Order, the ``Prior Orders'').
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    2. ASA recently became subject to, or will soon become subject to, 
certain taxes in South Africa. ASA is presently subject to South 
African tax on its income from interest and foreign dividends. Interest 
received from funds held on deposit in South Africa is taxed at a rate 
of 30%. Beginning with the fiscal year ended November 30, 2002, 
interest received from funds held outside South Africa also became 
subject to a 30% tax. In addition, certain dividends received from 
investments outside South Africa are subject to a 30% tax. South Africa 
also imposes a capital gains tax (``CGT'') on investment gains and a 
secondary tax on corporations (``STC'') on dividends and

[[Page 53741]]

liquidation distributions to shareholders. At the time of its 
organization in 1958, ASA received from the South African government an 
exemption from the CGT and the STC. Recently, South African authorities 
indicated that ASA's exemption from these taxes will be repealed 
effective November 30, 2004.
    3. Applicants request an order to permit ASA to change its country 
of incorporation from South Africa to Bermuda by reorganizing into ASAB 
(``Reorganization''), and to permit ASAB to register under the Act.\2\ 
ASAB is a limited liability company organized in Bermuda on April 29, 
2003 for the purpose of the Reorganization. ASAB's investment policies 
and limitations will be the same in all material respects as ASA's. 
ASAB will be internally managed and the current directors and 
substantially all of the officers of ASA, including the chief 
compliance officer, will serve as the directors and officers of ASAB. 
Aside from the Reorganization, ASAB has no current plans to make any 
additional public offerings of its securities. Prior to issuing its 
shares in the Reorganization, ASAB intends to take the actions 
necessary for its shares to be listed and traded on the NYSE. Following 
the Reorganization, ASA will be wound up in South Africa and will 
deregister under the Act.
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    \2\ The Reorganization is subject to approval by ASA's 
shareholders. Applicants plan to mail the proxy statement/prospectus 
early in October 2004, with a shareholder meeting to be held in 
early to mid-November 2004.
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    4. JP Morgan Chase Bank (``Chase'') has served as ASA's custodian 
since 1995.\3\ ASA requests an order to permit ASA to amend its 
custodian agreement with Chase and modify certain conditions of the 
Prior Orders to the extent they involve the custodian to more closely 
reflect current global custody standards for registered investment 
companies organized in the United States (``U.S. funds'').
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    \3\ The Standard Bank of South Africa Limited (``Standard 
Bank'') has served as ASA's South African subcustodian since August 
1995 and will serve as ASAB's South African subcustodian.
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Applicants' Legal Analysis

    1. Section 7(d) of the Act prohibits an investment company 
organized outside the U.S. (``foreign fund'') from making a public 
offering of its securities in the U.S., but authorizes the Commission 
by order to permit a foreign fund to register under the Act and make a 
public offering of its securities in the U.S. if the Commission finds 
that ``by reason of special circumstances or arrangements, it is both 
legally and practically feasible effectively 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 an 
investment company organized in Canada must satisfy in order to receive 
an order under section 7(d) of the Act. Applicants seek an order under 
section 7(d) to permit the Reorganization and allow ASAB to register 
under the Act, subject to conditions that, among other things, would 
require ASAB to comply with substantially all of rule 7d-1 under the 
Act.
    2. Applicants state that ASA's board of directors (the ``Board'') 
considered reincorporating ASA in the U.S. This alternative was 
rejected due principally to two significant adverse tax effects. First, 
ASA's shareholders would incur significant federal income tax 
consequences on an exchange of their ASA shares for shares of a 
domestic corporation. Because ASA is incorporated outside the U.S., it 
cannot take advantage of the tax-free reorganization provisions in the 
Internal Revenue Code of 1986 (``Code''). In addition, under Subchapter 
M of the Code, a regulated investment company (``RIC'') that satisfies 
certain requirements may pass through all its income and gain to its 
shareholders and thus avoid the payment of federal taxes at the RIC 
level. One of the requirements under Subchapter M, however, is that a 
RIC may not have any accumulated undistributed income and gains that 
arose in a taxable year during which it was not subject to Subchapter 
M. Because any U.S. corporate successor to ASA would inherit all of 
ASA's undistributed income and gains accumulated while it was a South 
African company, it would have to distribute approximately $127 million 
before the end of its first taxable year to qualify for RIC pass-
through treatment. That distribution would amount to 34% of ASA's total 
assets.
    3. Applicants state that the Board also considered reincorporating 
ASA in Canada. Although this alternative did not present the same 
adverse tax consequences as moving to the U.S., the Board concluded 
that it presented significant structural difficulties. In order to 
benefit from favorable tax treatment in Canada, ASA would have to 
qualify as either a mutual fund trust or a mutual fund corporation. To 
qualify as a mutual fund trust, ASA would have to meet certain asset 
diversification requirements that are incompatible with ASA's current 
portfolio holdings. To qualify as a mutual fund corporation, ASA would 
have to issue redeemable securities, a requirement ASA cannot meet 
because it is a closed-end investment company. In addition, ASA is 
internally managed, an arrangement that applicants state does not 
appear to exist under Canadian regulations.
    4. Applicants state that the requested order allowing the 
Reorganization and ASAB's registration under the Act meets the 
standards of section 7(d) due to ASA's unique circumstances, the fact 
that ASA has been complying with the Act since 1958 and ASAB will 
continue to comply with substantially all of the requirements of rule 
7d-1 under the Act, and the sophistication and stability of the legal 
system in Bermuda. Applicants also state that, under the requested 
order, ASAB will not be exempt from any provisions of the Act.
    5. Applicants state that certain of the conditions and arrangements 
of rule 7d-1 are incorporated as conditions of the requested order, 
which are designed to ensure that it is both legally and practically 
feasible effectively to enforce the provisions of the Act against ASAB. 
Applicants also note that, since 1958, ASA has received the Custody 
Orders that address, among other things, the arrangements governing the 
custody of its assets. The Custody Orders exempted ASA from the 
requirement under rule 7d-1 that a foreign fund's assets be maintained 
in the U.S. in the custody of a U.S. bank. Under the Custody Orders, 
ASA is required to maintain at least 5% of its total assets in the U.S. 
in the custody of a U.S. bank, and may, subject to the 5% requirement, 
maintain up to 100% of its eligible securities in a central securities 
depository in South Africa (``CSD'').\4\ ASA currently does not 
maintain assets in any foreign country except South Africa.\5\ 
Applicants state that, under the requested order, ASAB will maintain at 
least 20% of its assets in the U.S. Otherwise, applicants state that 
ASAB's custody arrangements would be the same as those the Commission 
previously had approved for ASA with

[[Page 53742]]

respect to the location of ASAB's assets.\6\
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    \4\ The CSD Order, supra note 1. The Custody Orders have 
permitted ASA to keep 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. The Custody Orders have 
also permitted ASA to maintain $200,000 in cash in a checking 
account with a South African bank to cover administrative expenses. 
ASA currently maintains this account with Nedbank Limited.
    \5\ The Custody Orders have permitted ASA to maintain up to 5% 
of its assets in each of Great Britain, Japan, Canada, Australia, 
and Switzerland, if removal of these securities to the U.S. becomes 
either prohibited by law or financially impracticable.
    \6\ Applicants state that ASAB will maintain the cash account in 
South Africa with Nedbank Limited until ASA's affairs have been 
wound up, which could take up to a year. Any cash remaining in the 
account following ASA's termination will be placed by ASAB in the 
custody of Chase in the U.S. ASAB does not intend to maintain a cash 
account in either South Africa or Bermuda for its own administrative 
expenses.
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    6. Applicants further state that the Bermuda legal system is 
founded upon the English common law, the doctrines of equity, and 
Bermuda statute law. Many of the provisions of the Bermuda Companies 
Act 1981 are derived from the English Companies Act 1948. Bermuda's 
judicial system also is similar to that of the United Kingdom. 
Applicants state that the duties of directors and the rights of 
shareholders under Bermudian law generally are comparable to those 
contained in state law in the U.S. The extradition treaty between the 
U.S. and the United Kingdom also is applicable to Bermuda. Applicants 
represent that, as is the case in South Africa, Bermuda law permits 
ASAB to subject itself to the provisions of the Act and that it will be 
legally and practically feasible effectively to enforce the provisions 
of the Act against ASAB after the reorganization. Moreover, Bermuda law 
will permit ASAB to be subject to the same investor protections found 
in the Act as South African law permitted ASA.
    7. Applicants state that ASAB's charter and bylaws taken together 
will contain, in effect, the substantive provisions of the Act 
applicable to closed-end investment companies, which provisions ASAB 
has agreed may be enforced as a matter of contract right in the U.S. 
and Bermuda by ASAB's shareholders. ASAB submits that the undertakings 
and agreements contained in the application constitute a contract among 
ASAB, the Commission, and ASAB's shareholders under which ASAB and its 
present and future officers, directors, investment advisers, and 
principal underwriters are required to comply with the Act. Other 
undertakings and agreements contained in the application are designed 
to facilitate the enforcement of the Act by the Commission or ASAB's 
shareholders in appropriate courts of the U.S. or Bermuda, including, 
among other things, an agreement that ASAB's present and future 
directors, officers, or investment advisers who are not residents of 
the U.S. will designate ASAB's custodian as an agent in the U.S. for 
service of process.
    8. ASA and ASAB seek to amend certain conditions of the Prior 
Orders with respect to certain responsibilities of the custodian. 
Specifically, they seek to (a) delete the condition requiring the 
custodian to comply with the charter and bylaws of ASA or ASAB; (b) 
modify a condition so that the shareholders of ASA and ASAB will not 
have the status of third party beneficiaries to any agreement between 
the custodian and ASA or ASAB; (c) modify another condition so that 
only the Commission will have the right to initiate a proceeding, based 
on the custodian's violation of the Act or the requested order, for the 
revocation of the requested order or for the liquidation of ASA or ASAB 
and a distribution of assets; and (d) modify another condition so that 
the custodian will no longer be required to monitor applicants' 
portfolio transactions itself, but will agree not to transfer ASA or 
ASAB's assets unless the instructions contain the written approval of 
the Chief Compliance Officer (as defined below).\7\
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    \7\ ASAB's proposed conditions reflect these changes. ASA would 
reflect these changes by replacing conditions 4, 6, 8 and 20 of the 
Prior Orders with proposed conditions 4, 6, 8 and 20 below and 
adding proposed conditions 28, 29, 30 and 31.
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    9. Applicants note that custodians are not usually required to 
monitor compliance with a U.S. fund's organizational documents and 
assert that U.S. fund shareholders generally are not considered third-
party beneficiaries of the custody contracts of their U.S. funds. 
Applicants state that the Commission will retain the ability to 
initiate proceedings based on a custodian's violation of the Act or the 
requested order, and the custodian will continue to perform certain 
duties designed to ensure U.S. jurisdiction, e.g., act as agent for 
service of process on non-residents and settle certain portfolio 
transactions in the U.S. Applicants further state that the compliance-
related duties historically performed by the custodian will be 
performed instead by a chief compliance officer appointed by the Board 
in accordance with rule 38a-1 under the Act (``Chief Compliance 
Officer'') or a registered public accountant.\8\ Applicants thus assert 
that the proposed conditions will continue to ensure that it is both 
legally and practically feasible effectively to enforce the provisions 
of the Act against ASA and ASAB.
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    \8\ Under the proposed conditions, the responsibility for 
monitoring for affiliated transactions is placed on the Chief 
Compliance Officer. The registered public accountants of ASA and 
ASAB also will review procedures for ensuring that they are in 
compliance with the conditions governing the location of their 
assets.
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    10. Applicants submit that the undertakings and agreements 
contained in the application (including those required under rule 7d-1) 
and the Bermuda legal system, are special arrangements supporting the 
issuance of the requested order to ASAB under section 7(d) of the Act. 
Applicants further submit that the requested order is consistent with 
the public interest and the protection of investors due to the special 
nature of ASAB's circumstances, including the fact that ASA has been 
registered under section 7(d) of the Act since 1958, the recently 
imposed significant adverse tax consequences for ASA in South Africa, 
and the uniquely adverse tax consequences for ASA if it were to 
reincorporate in the U.S.

ASAB's Conditions

    ASAB agrees that any order granting the requested relief will be 
subject to the following conditions: \9\
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    \9\ The terms ``eligible foreign custodian,'' ``U.S. bank'' and 
``foreign custody manager'' used in the conditions have the same 
meaning as defined in rule 17f-5 under the Act.
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    1. Chase will serve as ASAB'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 ASAB's assets, Standard Bank will designate 
Chase as its agent for service of process in the U.S. ASAB will comply 
with rule 17f-5 under the Act as if it were a registered management 
investment company organized or incorporated in the U.S. with respect 
to any of its assets held by eligible foreign custodians (including 
Standard Bank and the CSD) or overseas branches of U.S. banks 
(including Chase) outside the U.S.
    2. The Board will serve as foreign custody manager and will not 
delegate such functions to its custodian or any other person.
    3. ASAB will seek an order of the Commission prior to any amendment 
of its custodian agreement with its custodian.
    4. ASAB will cause each present and future officer, director, 
investment adviser, and principal underwriter of ASAB to enter into an 
agreement (``Agreement'') (to be filed by ASAB with the Commission when 
that person assumes office), which will provide that each person 
agrees: (a) To comply with ASAB's charter and bylaws, the Act and the 
rules of the Commission under the Act, and the undertakings and 
agreements contained in the application as applicable to each person 
and as each

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may be amended from time to time, as applicable to each person; (b) to 
do nothing inconsistent with the undertakings and agreements contained 
in the application, 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 requested order, and (d) each Agreement constitutes a contract 
between the person and ASAB and the shareholders of ASAB with the 
intent that ASAB'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 U.S. or Bermuda. In addition, 
each Agreement of each officer and director of ASAB will contain 
provisions similar to those contained in condition 20 below.\10\
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    \10\ ASAB acknowledges that: (a) every agreement and undertaking 
of ASAB, its officers, directors, investment adviser, and principal 
underwriters contained in the application constitute (i) inducements 
to the Commission for the issuance and continuance in effect of the 
requested order, and (ii) a contract among ASAB, the Commission, and 
ASAB's shareholders with the same intent as set forth in condition 4 
above; and (b) the failure by ASAB 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 
requested order.
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    5. So long as ASAB is registered under the Act, ASAB's charter and 
bylaws, together, will contain in substance the provisions required by 
rule 7d-1(b)(8) under the Act, and neither the charter nor the bylaws 
will be changed or amended in any manner inconsistent with rule 7d-
1(b)(8) under the Act or the Act and the rules and regulations under 
the Act, unless authorized by the Commission.
    6. ASAB's custodian will not transfer any assets of ASAB unless the 
instructions it receives from ASAB include the written approval of 
ASAB's Chief Compliance Officer. ASAB will submit instructions relating 
to any transfer of assets to its Chief Compliance Officer, who will 
review them prior to the submission of any approved instructions to 
ASAB's custodian. ASAB's Chief Compliance Officer will not approve a 
transfer of assets if an agent, broker-dealer, or counterparty is an 
affiliated person of ASAB or an affiliated person of any director, 
officer, or investment adviser of ASAB, 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. In 
addition to providing any other information relevant to the Chief 
Compliance Officer's review, ASAB will require each of its officers, 
directors, and investment advisers to transmit quarterly a list of 
affiliated persons or a statement that there has been no change since 
the last list so transmitted to ASAB's Chief Compliance Officer. No 
person will qualify to serve as a director or officer of ASAB until he 
or she has transmitted to ASAB a list of his or her affiliated persons, 
as that term is defined in section 2(a)(3) of the Act.
    7. Prior to acquiring the assets of ASA, ASAB will furnish to the 
Commission a list of persons affiliated with ASAB and will furnish 
revisions of such list, if any, concurrently with the filing of 
periodic reports required to be filed under the Act. Such revised lists 
will include persons affiliated with any future investment adviser or 
principal underwriter of ASAB.
    8. The chief executive officer of ASAB, a majority of the directors 
of ASAB, a majority of the officers, and the Chief Compliance Officer 
of ASAB will be both citizens and residents of the U.S.
    9. ASAB will hold all of its shareholder meetings in the U.S.
    10. ASAB will maintain in the U.S. a transfer agent for transfer of 
its shares, and a registrar for the registration of its shares.
    11. ASAB 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 ASAB'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 administered by the 
Commission, or to enforce any right or liability based upon ASAB's 
charter or bylaws, contracts, or the respective undertakings and 
agreements of any of these persons required by the terms and conditions 
of the requested order, or which alleges a liability on the part of any 
of these persons arising out of their services, acts, or transactions 
relating to ASAB.
    12. After receipt of the requested order, ASAB will file with the 
Commission a copy of the subcustodian agreement that irrevocably 
designates ASAB'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 with Standard Bank 
(``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 
ASAB's assets. This designation will automatically terminate upon 
Standard Bank ceasing to hold ASAB'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 ASAB's assets.
    13. ASAB 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 will 
have so directed by final order.\11\ ASAB also will perform every 
action and thing necessary to cause and assist its shareholders or the 
Commission to collect (a) any monetary amount specified in a Commission 
order or (b) a final judgment entered by a court of competent 
jurisdiction.
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    \11\ A court of competent jurisdiction means any U.S. federal 
court that has jurisdiction to issue such an order.
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    14. ASAB will take all steps necessary to insure that it will 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 ASAB 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 requested order or the 
Act and may determine whether distribution of ASAB's assets is 
necessary or appropriate in the interests of investors and may so 
direct.
    16. ASAB waives any counsel fees to which it may be entitled and 
waives security for costs in any action brought against it in Bermuda 
by any shareholder based on its charter or bylaws or any of the 
undertakings and agreements contained in the application. ASAB will 
cause each of its present or future directors who is a non-resident of 
the U.S. to make similar waivers.
    17. ASAB will promptly notify the Commission in the event that 
there is any change in Bermudian law that will be contrary to any 
provision of the Act or detrimental to or inconsistent with the 
protection afforded by the undertakings and agreements contained in the 
application.
    18. ASAB's use of the CSD will comply with rule 17f-7 under the Act 
as if ASAB were a registered

[[Page 53744]]

management investment company organized or incorporated in the U.S.
    19. Any shareholder of ASAB or the Commission, on its own motion or 
on request of any of ASAB's shareholders, will have the right to 
initiate a proceeding: (a) Before the Commission for the revocation of 
the order permitting registration of ASAB; or (b) before a court of 
competent jurisdiction for the liquidation of ASAB 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 ASAB, its officers, directors, investment adviser, or 
principal underwriter has violated any provision of the Act or the 
requested order.
    20. Any shareholder of ASAB will have the right to bring suit at 
law or equity, in any court of the U.S. or Bermuda having jurisdiction 
over ASAB, its assets, or any of its officers or directors to enforce 
compliance by ASAB, its officers and directors with any provision of 
ASAB's charter or bylaws, the Act, the rules under the Act, or the 
undertakings and agreements required by the conditions of the requested 
order, in so far as applicable to these persons. The court may appoint 
a trustee or receiver of ASAB with all powers necessary to implement 
the purposes of the suit, including the administration of the estate, 
the collection of corporate property including choses-in action, and 
distribution of ASAB's assets to its creditors and shareholders. ASAB 
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 ASAB 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. ASAB and 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 Bermuda and consent that 
the Bermudian court may enter judgment or decree on ASAB at the request 
of any shareholder, receiver, or trustee of ASAB.
    21. ASAB 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 Securities Exchange 
South Africa, the London Stock Exchange, the Tokyo Stock Exchange, the 
Toronto Stock Exchange, the Australian Stock Exchange Limited, and the 
Effektenborsenverein Zurich Exchange (collectively the ``Established 
Exchanges'')) and (b) purchases and sales, through its custodian or its 
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 ASAB's 
custodian, unless prohibited by law or regulation or financially 
impracticable as provided in condition 24 below.
    22. Contracts of ASAB, 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, each 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.
    23. ASAB will keep at least 20% of its assets in the U.S. in the 
custody of a U.S. bank (``20% Requirement''). ASAB'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 such a U.S. 
custodian, except:
    a. Subject to the 20% 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 
and expenses related to the winding up of ASA's affairs in South 
Africa, 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 U.S. banks.
    24. If removal of securities purchased on the Established Exchanges 
becomes either prohibited by law or regulation or financially 
impracticable, up to 5% of ASAB's assets may be held by an eligible 
foreign custodian or overseas branch of ASAB's custodian in each of 
London, Japan, Australia, Switzerland, and Canada.
    25. If an eligible foreign custodian or an overseas branch of the 
custodian is to be appointed as subcustodian, ASAB will comply with the 
requirements of rule 17f-5 under the Act prior to the purchase of 
securities on an Established Exchange.
    26. ASAB 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 
under the Act 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 ASAB and its shareholders.
    27. ASAB will cause each custodian of ASAB to enter into an 
Agreement (to be filed by ASAB with the Commission when that person 
assumes office), which will provide that each custodian agrees: (a) To 
comply with the Act and the rules of the Commission under the Act and 
the undertakings and agreements contained in the application as 
applicable to the custodian and as each may be amended from time to 
time, as applicable to the custodian; (b) to do nothing inconsistent 
with the undertakings and agreements contained in the application, the 
provisions of the Act, or the rules under the Act; and (c) that the 
undertakings described in (a) and (b) above constitute representations 
and inducements to the Commission to issue the requested order.\12\
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    \12\ ASAB acknowledges that: (a) Every agreement and undertaking 
of ASAB and its custodian contained in the application constitute 
(i) inducements to the Commission for the issuance and continuance 
in effect of the requested order, and (ii) a contract among ASAB and 
the Commission; and (b) the failure by ASAB or the custodian to 
comply with any of the agreements or undertakings, unless permitted 
by the Commission, will constitute a violation of the requested 
order.
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    28. So long as ASAB is registered under the Act, ASAB's custody 
contract with its custodian will provide that the custodian will: (a) 
Consummate all purchases and sales of securities by ASAB through the 
delivery of securities and receipt of cash, or vice versa as the case 
may be, within the United States, except for (i) purchases and sales on 
the Established Exchanges, and (ii) purchases and sales, through ASAB'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; and (b) distribute 
ASAB's assets, or the proceeds thereof, to ASAB's creditors

[[Page 53745]]

and shareholders, upon service upon the custodian of an order of the 
Commission or court directing such distribution as provided in 
conditions 15, 19, and 29.
    29. With respect to an alleged violation of the Act or the 
requested order by ASAB's custodian, the Commission, on its own motion, 
will have the right to initiate a proceeding: (a) Before the Commission 
for the revocation of the order permitting registration of ASAB; or (b) 
before a court of competent jurisdiction for the liquidation of ASAB 
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 ASAB's custodian has violated any 
provision of the Act or the requested order.
    30. ASAB will adopt procedures reasonably designed to ensure that 
ASAB complies with conditions 21, 23, and 24 regarding the location of 
ASAB's assets. For two years following the issuance of an order 
granting the requested relief, the registered public accountant for 
ASAB shall prepare an annual report that evaluates ASAB's assertion 
that it has established procedures reasonably designed to achieve 
compliance with conditions 21, 23, and 24 regarding the location of 
ASAB's assets. The report shall be prepared in accordance with the 
Statements on Standards for Attestation Engagements No. 10 and it shall 
be filed pursuant to Item 77Q3 of Form N-SAR, as such Statements or 
Form may be revised, amended, or superseded from time to time. After 
the final report is filed, ASAB's registered public accountant, in 
connection with its annual audit of ASAB's financial statements, will 
continue to review ASAB's compliance with conditions 21, 23, and 24 
regarding the location of ASAB's assets and its review will form the 
basis, in part, of the registered public accountant's report on 
internal controls in Form N-SAR.

ASA's Conditions

    ASA agrees that the Prior Orders and any order granting the relief 
it requests will be subject to the conditions of the Prior Orders 
(other than conditions 4, 6, 8 and 20) and the following conditions:
    4. ASA will cause each present and future officer, director, 
investment adviser, and principal underwriter 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 charter and bylaws, the Act and the 
rules of the Commission under the Act, and the undertakings and 
agreements contained in the application 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 undertakings and 
agreements contained in the application, 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 requested order, 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 U.S. or South Africa. 
In addition, each Agreement of each officer and director of ASA will 
contain provisions similar to those contained in condition 20 
below.\13\
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    \13\ ASA acknowledges that: (a) Every agreement and undertaking 
of ASA, its officers, directors, investment adviser, and principal 
underwriters contained in the application constitute (i) inducements 
to the Commission for the issuance and continuance in effect of the 
requested order, 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 
requested order.
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    6. ASA's custodian will not transfer any assets of ASA unless the 
instructions it receives from ASA include the written approval of ASA's 
Chief Compliance Officer. ASA will submit instructions relating to any 
transfer of assets to its Chief Compliance Officer, who will review 
them prior to the submission of any approved instructions to ASA's 
custodian. ASA's Chief Compliance Officer will not approve a transfer 
of assets if an agent, broker-dealer, or counterparty 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. In addition to 
providing any other information relevant to the Chief Compliance 
Officer's review, ASA will require each of its officers, directors, and 
investment advisers to transmit quarterly a list of affiliated persons 
or a statement that there has been no change since the last list so 
transmitted to ASA's Chief Compliance Officer. 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.
    8. The chief executive officer of ASA, a majority of the directors 
of ASA, a majority of the officers, and the Chief Compliance Officer of 
ASA will be both citizens and residents of the U.S.
    20. Any shareholder of ASA or the Commission, on its own motion or 
on request of any of 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, or 
principal underwriter has violated any provision of the Act or the 
requested order.
    28. ASA will cause each custodian of ASA to enter into an Agreement 
(to be filed by ASA with the Commission when that person assumes 
office), which will provide that each custodian agrees: (a) To comply 
with the Act and the rules of the Commission under the Act and the 
undertakings and agreements contained in the application as applicable 
to the custodian and as each may be amended from time to time, as 
applicable to the custodian; (b) to do nothing inconsistent with the 
undertakings and agreements contained in the application, the 
provisions of the Act, or the rules under the Act; and (c) that the 
undertakings described in (a) and (b) above constitute representations 
and inducements to the Commission to issue the requested order.\14\
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    \14\ ASA acknowledges that: (a) Every agreement and undertaking 
of ASA and its custodian contained in the application constitute (i) 
inducements to the Commission for the issuance and continuance in 
effect of the requested order, and (ii) a contract among ASA and the 
Commission; and (b) the failure by ASA or the custodian to comply 
with any of the agreements or undertakings, unless permitted by the 
Commission, will constitute a violation of the requested order.
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    29. So long as ASA is registered under the Act, ASA's custody 
contract with its custodian will provide that the custodian will: (a) 
Consummate all purchases and sales of securities by ASA through the 
delivery of securities and receipt of cash, or vice versa as the case 
may be, within the United States, except for (i) purchases and sales on 
the Established Exchanges, and (ii) purchases and sales, through ASAB'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,

[[Page 53746]]

or CSD-eligible securities; and (b) distribute ASA's assets, or the 
proceeds thereof, to ASA's creditors and shareholders, upon service 
upon the custodian of an order of the Commission or court directing 
such distribution as provided in conditions 15, 20, and 30.
    30. With respect to an alleged violation of the Act or the 
requested order by ASA's custodian, the Commission, on its own motion, 
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's custodian has violated any 
provision of the Act or the requested order.
    31. ASA will adopt procedures reasonably designed to ensure that 
ASA complies with conditions 22, 24, and 25 regarding the location of 
ASA's assets. For two years following the issuance of an order granting 
the requested relief, the registered public accountant for ASA shall 
prepare an annual report that evaluates ASA's assertion that it has 
established procedures reasonably designed to achieve compliance with 
conditions 22, 24, and 25 regarding the location of ASA's assets. The 
report shall be prepared in accordance with the Statements on Standards 
for Attestation Engagements No. 10 and it shall be filed pursuant to 
Item 77Q3 of Form N-SAR, as such Statements or Form may be revised, 
amended, or superseded from time to time. After the final report is 
filed, ASA's registered public accountant, in connection with its 
annual audit of ASA's financial statements, will continue to review 
ASA's compliance with conditions 22, 24, and 25 regarding the location 
of ASA's assets and its review will form the basis, in part, of the 
registered public accountant's report on internal controls in Form N-
SAR.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2018 Filed 9-1-04; 8:45 am]
BILLING CODE 8010-01-P