[Federal Register Volume 59, Number 12 (Wednesday, January 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1224]


[[Page Unknown]]

[Federal Register: January 19, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20015; 812-8698]

 

TCW Asia Pacific Equity Limited Partnership, et al.

January 12, 1994.
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: TCW Asia Pacific Equity Limited Partnership, TCW Emerging 
Markets Limited Partnership, TCW Small Capitalization Growth Stocks 
Limited Partnership (collectively, the ``Partnerships''), TCW Funds, 
Inc. (the ``Company''), TCW Asset Management Company (``TAMCO''), and 
TCW Funds Management, Inc. (the ``Adviser'').

RELEVANT ACT SECTIONS: Order requested under section 17(b) of the Act 
for an exemption from the provisions of section 17(a) of the Act.

SUMMARY OF APPLICATION: Applicants seek an order that would permit the 
Partnerships to transfer substantially all of their assets and 
liabilities to certain series of the Company in exchange for the 
series' shares, which then will be distributed to partners of the 
Partnerships.

FILING DATE: The application was filed on November 26, 1993, and 
amended on January 6, 1994.

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 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on February 7, 
1994, 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 who wish to 
be notified of a hearing may request notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, 865 South Figueroa Street, Suite 1800, Los Angeles, 
California 90017.

FOR FURTHER INFORMATION CONTACT:
James J. Dwyer, Staff Attorney, at (202) 504-2920, or Elizabeth G. 
Osterman, Branch Chief, at (202) 272-3016 (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

    1. The Partnerships were organized as California limited 
partnerships. They are open-end investment partnerships, allowing 
investors to purchase and redeem Partnership interests (the ``Units'') 
at net asset value on a monthly basis. The Partnerships are not 
registered under the Act in reliance on section 3(c)(1) of the Act. The 
offerings of the Units were structured as private placements under 
section 4(2) of the Securities Act of 1933, and Regulation D 
promulgated thereunder. Units are sold to institutional investors and 
high net worth individuals.
    2. TAMCO, a registered investment adviser and an indirect wholly-
owned subsidiary of The TCW Group, Inc., serves as the sole general 
partner of each of the Partnerships, and has exclusive responsibility 
for the overall administration of the Partnerships. TAMCO also has 
exclusive power and authority to manage and control the investments of 
each Partnership.
    3. The Company, a Maryland corporation, is a registered open-end 
investment company formed as a series company. Currently, the Company 
offers six portfolios. The Company proposes to offer three new 
investment portfolios (the ``Funds''), each of which will correspond to 
a Partnership in terms of investment objectives and policies.
    4. The Company has entered into an advisory agreement with the 
Adviser, a wholly-owned subsidiary of The TCW Group, Inc., pursuant to 
which the Adviser will render investment management services to the 
Funds that are substantially the same as the services that TAMCO 
currently renders to the Partnerships. The officers of TAMCO serving as 
portfolio managers of the Partnerships also serve as officers of the 
Adviser and will serve as portfolio managers of the Funds.
    5. Applicants propose that, pursuant to an agreement and plan of 
exchange, each of the Funds acquire substantially all of the assets and 
assume substantially all of the liabilities of the corresponding 
Partnership in exchange for Fund shares (the ``Exchange''). Fund shares 
received by the Partnership will have an aggregate net asset value 
equivalent to the net asset value of the assets transferred by the 
Partnership (except for the effect of organizational expenses paid by 
the Fund). Upon consummation of an Exchange, the Partnership will 
distribute the Fund shares to its partners, with each partner receiving 
shares having an aggregate net asset value equivalent to the net asset 
value of the Units held by such partner prior to the Exchange (except 
for the effect of organizational expenses paid by the Fund). Each 
Partnership may retain assets needed to pay any accrued expenses. Each 
Partnership may also retain assets which the applicable Fund is not 
permitted to purchase, or which would be unsuitable for the Fund. Any 
assets retained in excess of amounts needed to pay the accrued expenses 
not transferred to the Fund would be distributed pro rata to partners 
of the Partnership. Each Partnership will be liquidated and dissolved 
following the distribution.
    6. Each Partnership agreement of the Partnerships provides that the 
Partnership may be converted into a registered investment company if 
the general partner determines that a conversion is in the best 
interest of the Partnership. Each agreement expressly provides that no 
further approval or consent of the limited partners is required for 
such conversion, so long as at least 60 days' advance written notice is 
provided to the limited partners. Limited partners who do not wish to 
participate in the conversion of their Partnership will have adequate 
opportunity to redeem their Partnership interests before the conversion 
occurs. As a result, no limited partner will receive shares in exchange 
for his or her Units unless such limited partner determines to retain 
his or her investment.
    7. Prior to an Exchange, certain limited partners may withdraw from 
the Partnerships and receive a pro rata in-kind distribution for the 
purpose of investing in new limited partnerships that have similar 
investment strategies and are expected to have a minimum investment of 
$1.5 million. Such limited partners include limited partners who have 
made investments of a magnitude sufficient to qualify for advisory fees 
lower than those to be charged by the Funds, limited partners with more 
than $1.5 million invested in any Partnership, and certain limited 
partners who would encounter regulatory or other difficulties if they 
invested in a registered investment company. The new limited 
partnerships will not be registered under the Act in reliance on 
section 3(c)(1) thereof, and the new partnership interests will not be 
registered under the Securities Act of 1933 in reliance on section 4(2) 
thereof.
    8. The expenses of each Exchange will be borne by TAMCO. No 
brokerage commission, fee, or other remuneration will be paid in 
connection with an Exchange. Fund organizational expenses, up to a 
maximum of $50,000 per Fund, will be paid by the Funds and amortized 
over five years. Fund organizational expenses in excess of $50,000 per 
Fund will be paid by the Adviser. Any unamortized organizational 
expenses associated with the organization of a Fund at the time the 
Adviser withdraws its initial investment in the Company will be borne 
by the Adviser and not the Fund.
    9. The management fees for the Funds will not exceed the maximum 
fees currently paid by the limited partners in each corresponding 
Partnership. It is expected that other Fund expenses generally will be 
higher as a percentage of net asset value than the expenses of a 
corresponding Partnership. This is primarily because of the increased 
operating costs of a registered investment company and compliance with 
additional regulatory requirements. Through the end of calendar 1994, 
however, the Adviser will limit annual Fund expenses with the intention 
of capping Fund expense ratios at levels which would have been incurred 
during 1994 by the Partnerships.
    10. The Funds' board of directors and TAMCO have considered the 
desirability of the Exchange from the respective points of view of the 
Company and the Partnerships. All of the members of the board, 
including all of the independent directors, and TAMCO have approved the 
Exchanges and concluded that: (a) The Exchanges are desirable as a 
business matter from the respective points of view of the Company and 
the Partnerships; (b) the Exchanges are in the best interests of the 
Company and the Partnerships; (c) the Exchanges are reasonable and 
fair, do not involve overreaching, and are consistent with the policies 
of the Act; (d) the Exchanges are consistent with the policies of the 
Company and the Partnerships; and (e) the interests of existing 
shareholders in the Company and existing partners will not be diluted 
as a result of the Exchanges.
    11. The Exchanges will not be effected until each of the following 
conditions is satisfied: the Company's registration statement has been 
declared effective; the SEC has issued an order relating to the 
application; and the Company has received a favorable opinion of 
counsel with respect to the tax consequences of the Exchanges.
    12. The Exchanges will establish the Funds as the successor 
investment vehicles to the Partnerships. The Exchanges will permit 
partners to pursue the same investment objectives and policies they 
were expecting from the Partnerships as shareholders of the Funds 
without sacrificing the pass-through tax features of the Partnerships. 
In addition, shareholders of the Funds will be able to purchase and 
redeem shares on each business day, as opposed to only once per month 
as in currently provided under the partnership agreements. The Funds 
expect that operating as registered investment companies will help 
encourage net asset growth.

Applicants' Legal Analysis

    1. Section 17(a) prohibits affiliated persons of a registered 
investment company, or affiliated persons of such persons, from selling 
to or purchasing from such company any security or other property. Each 
Partnership may be an affiliated person of the Company because TAMCO, 
the general partner of the Partnerships, and the Adviser, the 
investment adviser of the Company, are under common control. Thus, the 
proposed Exchanges may be prohibited by section 17(a) if they are 
viewed as principal transactions between the Company and the partners 
of the Partnerships, or between the Company and the Partnerships.
    2. Section 17(b) provides for SEC approval of a proposed affiliated 
transaction that would be otherwise prohibited by section 17(a) if the 
terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned, the transaction is consistent with 
the policy of each registered investment company concerned, and the 
transaction is consistent with the general purposes of the Act.
    3. Applicants believe that the proposed Exchanges meet the terms of 
section 17(b). They represent, among other things, that the investment 
objectives and policies of each Fund are substantially similar to the 
corresponding Partnerships. In addition, after the Exchanges, limited 
partners will hold substantially the same assets as Fund shareholders 
as they previously had held as limited partners. In this sense, the 
Exchanges can be viewed as a change in the form in which the assets are 
held, rather than a disposition giving rise to section 17(a) concerns.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-1224 Filed 1-18-94; 8:45 am]
BILLING CODE 8010-01-M