35624 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 / Notices

securities represent more than 3% of the

acquired company’s outstanding voting

stock, more than 5% of the acquiring

company’s total assets, or if such

securities, together with the securities of

other investment companies, represent

more than 10% of the acquiring

company’s total assets. Section

12(d)(1)(B) provides that no registered

open-end investment company may sell

its securities to another investment

company if the sale will cause the

acquiring company to own more than

3% of the acquired company’s voting

stock to be owned by investment

companies.

2. Section 12(d)(1)(G) of the Act

provides that section 12(d)(1) will not

apply to securities of an acquired

company purchased by an acquiring

company if: (a) the acquiring company

and the acquired company are part of

the same group of investment

companies; (b) the acquiring company

holds only securities of acquired

companies that are part of the same

group of investment companies,

government securities, and short-term

paper; (c) the aggregate sales loads and

distribution-related fees of the acquiring

company and the acquired company are

limited; and (d) the acquired company

has a policy that prohibits it from

acquiring securities of registered openend investment companies or registered

unit investment trusts in reliance on

section 12(d)(1) (F) or (G).

3. Applicants state that the

investment by the Mixed Funds in the

Core Funds will comply with section

12(d)(1)(G) of the Act, with the

exception of the requirement in section

12(d)(1)(G)(i)(II) that the Mixed Funds

limit their other investments to

Government securities and short-term

paper.

4. Section 12(d)(1)(J) provides that the

SEC may exempt persons or transactions

from any provision of section 12(d)(1) if

and to the extent that the exemption is

consistent with the public interest and

the protection of investors. Applicants

request relief under section 12(d)(1)(J)

from section 12(d)(1)(G)(i)(II) to permit

the Mixed Funds to invest in Additional

Portfolio Investments as described in

the application. Applicants believe that

the Mixed Funds’ proposed investments

in Additional Portfolio Investments do

not raise any of the concerns that the

requirements of section 12(d)(1)(G) were

designed to address.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief will be

subject to the following conditions:

1. Applicants will comply with all

provisions of section 12(d)(1)(G), except

for section 12(d)(1)(G)(i)(II) to the extent

that it restricts the Mixed Funds from

investing in the Additional Portfolio

Investments as described in the

application.

2. Before approving any investment

advisory contract for a Mixed Fund, the

directors of the Mixed Fund, including

a majority of the directors who are not

‘‘interested persons’’ as defined in

section 2(a)(19) of the Act, will find that

the advisory fee, if any, charged under

the contract is based on services

provided that are in addition to, rather

than duplicative of, services provided

under the contracts of any Core Fund in

which the Mixed Fund may

invest.These findings and their basis

will be recorded fully in the minute

books of the Mixed Fund.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17295 Filed 6–29–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

23268; 812–11064]

The Emerging Germany Fund Inc.;

Notice of Application

June 24, 1998.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of an application for an

order under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) for an exemption from section

19(b) of the Act and rule 19b–1 under

the Act.

Summary of Application: Applicant,

The Emerging Germany Fund, Inc., a

registered closed-end management

investment company, requests an order

to permit it to make up to four

distributions of net long-term capital

gains in any one taxable year, so long as

it maintains in effect a distribution

policy with respect to its common stock

calling for quarterly distributions of a

fixed percentage of its net asset value.

Filing Date: The application was filed

on March 13, 1998 and amended on

May 28, 1998. Applicant has agreed to

file an amendment during the notice

period, the substance of which is

reflected in this notice.

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

applicant with a copy of the request,

personally or by mail. Hearing requests

should be received by the Commission

by 5:30 p.m. on July 20, 1998 and

should be accompanied by proof of

service on applicant, in the form of an

affidavit or, for lawyers, a certificate of

service. Hearing requests should state

the nature of the writer’s interest, the

reason for the request, and the issues

contested. Persons may request

notification of a hearing by writing to

the Commission’s Secretary.

ADDRESSES: Secretary, Commission, 450

5th Street, NW., Washington, DC 20549.

Applicant, Four Embarcadero Center,

San Francisco, CA 94111–4189,

Attention: Robert J. Goldstein.

FOR FURTHER INFORMATION CONTACT:

Lawrence W. Pisto, Senior Counsel, at

(202) 942–0527, or George J. Zornada,

Branch Chief at (202) 942–0564, Office

of Investment Company Regulation,

Division of Investment Management.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the

Commission’s Public Reference Branch,

450 5th Street NW., Washington, DC

20549 (tel. 202–942–8090).

Applicant’s Representations

1. Applicant is registered under the

Act as a closed-end management

investment company and is organized as

a Maryland Corporation. Applicant’s

investment objective is long-term capital

appreciation, which applicant seeks to

obtain by investing primarily in equity

and equity-linked securities of German

companies. Applicant’s investment

adviser is Dresdner RCM Global

Investors LLC, an investment adviser

registered under the Investment

Advisers Act of 1940.

2. On February 12, 1998, applicant’s

board of directors adopted a distribution

policy with respect to applicant’s

common stock that calls for quarterly

distributions of approximately 2.5% of

applicant’s average weekly net asset

value, for an annual total of at least 10%

of its average weekly net asset value (the

‘‘Distribution Policy’’).

3. Applicant states that the

Distribution Policy will provide a steady

cash flow to its shareholders, and,

during periods when its per share net

asset value is increasing, a means for

shareholders to receive on a regular

basis some of the appreciation in value

of their shares. Applicant also believes

that the Distribution Policy plays a role

in reducing the discount from net asset

value at which applicant’s shares

typically trade.
Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 / Notices 35625

4. Applicant requests relief to permit

it to make up to four distributions of net

long-term capital gains in any one

taxable year, so long as it maintains in

effect the Distribution Policy.

Applicant’s Legal Analysis

1. Section 19(b) of the Act provides

that a registered investment company

may not, in contravention of such rules,

regulations, or orders as the

Commission may prescribe, distribute

long-term capital gains more often than

once every twelve months. Rule 19b–

1(a) under the Act permits a registered

investment company, with respect to

any one taxable year, to make one

capital gains distribution, as defined in

section 852(b)(3)(C) of the Internal

Revenue Code of 1986, as amended (the

‘‘Code’’). Rule 19b–1(a) also permits a

supplemental distribution to be made

pursuant to section 855 of the Code not

exceeding 10% of the total amount

distributed for the year. Rule 19b–1(f)

permits one additional long-term capital

gains distribution to be made to avoid

the excise tax under section 4982 of the

Code.

2. Applicant asserts that rule 19b–1,

by limiting the number of net long-term

capital gains distributions that applicant

may make with respect to any one year,

would prevent the normal operation of

its Distribution Policy whenever

applicant’s realized net long-term gains

in any year exceed the total of the fixed

quarterly distributions that under rule

19b–1 may include such capital gains.

As a result, applicant states that it must

fund these quarterly distributions with

returns on capital (to the extent net

investment income and realized shortterm capital gains are insufficient to

cover a quarterly distribution).

Applicant further asserts that the longterm capital gains in excess of the fixed

quarterly distributions permitted by rule

19b–1 then must either be added as an

‘‘extra’’ to one of the permitted capital

gains distributions, thus exceeding the

total annual amount called for by the

Distribution Policy, or retained by

applicant (with applicant paying taxes

on the retained amounts). Applicant

asserts that the application of rule 19b–

1 to its Distribution Policy may cause

anomalous results and create pressure to

limit the realization of long-term capital

gains to the total amount of the fixed

quarterly distributions that under the

rule may include such gains.

3. Applicant believes that the

concerns underlying section 19(b) and

rule 19b–1 are not present in applicant’s

situation. One of these concerns is that

shareholders might not be able to

distinguish frequent distributions of

capital gains and dividends from

investment income. Applicant states

that the Distribution Policy has been

disclosed in a special letter to its

shareholders, and applicant will

disclose the Policy in future quarterly

and annual reports to shareholders.

Applicant further states that, in

accordance with rule 19a–1 under the

Act, a separate statement showing the

source of the distribution (net

investment income, net realized capital

gain or return of capital) will

accompany each distribution (or the

conformation of the reinvestment under

applicant’s dividend reinvestment

plan). In addition, a statement showing

the amount and source of each quarterly

distribution received during the year

will be disclosed to each shareholder of

applicant who received distributions

during the year (including shareholders

who shares during the year). Applicant

expects to include disclosure describing

the amount and source of distributions

under the Distribution Policy on a

cumulative basis for the full fiscal year

either in (i) the statement showing the

amount and source of the quarterly

distribution paid in the last quarter of

each fiscal year, or (ii) in a separate

statement mailed to shareholders

shortly after year-end.

4. Another concern underlying

section 19(b) and rule 19b–1 is that

frequent capital gains distributions

could facilitate improper fund

distribution practices, including, in

particular, the practice of urging an

investor to purchase fund shares on the

basis of an upcoming distribution

(‘‘selling the dividend’’) where the

distribution would result in an

immediate corresponding reduction in

net asset value and would be, in effect,

a return of the investor’s capital.

Applicant submits that this concern

does not apply to closed-end investment

companies, such as applicant, which do

not continuously distribute shares.

5. Applicant states that increased

administrative costs also are a concern

underlying section 19(b) and rule 19b–

1. Applicant asserts, however, that it

will continue to make quarterly

distributions regardless of whether

capital gains are included in any

particular distribution.

6. Section 6(c) provides that the

Commission may exempt any person,

security, or transaction or any class or

classes of persons, securities, or

transactions from any provision of the

Act, or from any rule thereunder, if such

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the Act. For the

reasons stated above, applicant believes

that the requested relief satisfies this

standard.

Applicant’s Condition

Applicant agrees that any

Commission order granted the requested

relief will terminate upon the effective

date of a registration statement under

the Securities Act of 1933 for any future

public offering by applicant of its shares

other than: (i) a non-transferable rights

offering to shareholders of applicant,

provided that such offering does not

include solicitation by brokers or the

payment of any commissions or

underwriting fee; and (ii) an offering in

connection with a merger,

consolidation, acquisition, or

reorganization.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17385 Filed 6–29–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23269; File No. 812–11092]

Variable Insurance Products Fund, et

al.

June 24, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for an

amended order under Section 6(c) of the

Investment Company Act of 1940 (the

‘‘1940 Act’’) for exemptions from

Sections 9(a), 13(a), 15(a) and 15(d) of

the 1940 Act, and Rules 6e–2(b)(15) and

6e–3(T)(b)(15) thereunder.

SUMMARY OF APPLICATION: Applicants

seek an amended order to permit shares

of the Variable Insurance Products

Fund, Variable Insurance Products Fund

II, and Variable Insurance Products

Fund III (together, the ‘‘Funds’’), as well

as shares of any future funds for which

Fidelity Management & Research

Company (‘‘FMR’’) or any affiliate of

FMR serves as the investment manager,

advisor, principal underwriter, or

sponsor (‘‘Future Funds’’) to be issued

to and held by qualified pension and

retirement plans outside the Separate

account context (‘‘Qualified Plans’’).

APPLICANTS: Variable Insurance Products

Fund (‘‘VIPF’’), Variable Insurance

Products Fund II (‘‘VIPF II’’), and

Variable Insurance Products Fund III

(‘‘VIPF III’’).