[Federal Register Volume 59, Number 121 (Friday, June 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15431]


[[Page Unknown]]

[Federal Register: June 24, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20364; 812-8922]

 

Malaysia Fund, Inc., et al.; Notice of Application

June 20, 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: The Malaysia Fund, Inc,; The Thai Fund, Inc.; The Turkish 
Investment Fund, Inc.; The Brazilian Investment Fund, Inc.; Morgan 
Stanley Emerging Markets Fund, Inc.; The Latin American Discovery Fund, 
Inc.; Morgan Stanley Emerging Markets Debt Fund, Inc.; The Morgan 
Stanley High Yield Fund, Inc.; The Pakistan Investment Fund, Inc.; 
Morgan Stanley Africa Investment Fund, Inc.; Morgan Stanley India 
Investment Fund, Inc.; and all subsequently registered closed-end 
investment companies that in the future are advised by Morgan Stanley 
Asset management Inc. (``MSAM'') or any entity controlling, controlled 
by, or under common control (within the meaning of section 2(a)(9) of 
the Act) with MSAM (the ``Funds'').

Relevant Act Sections: Order requested under section 6(c) for an 
exemption from sections 13(a)(2), 18(a), 18(c), and 23(a) and under 
section 17(d) and rule 17d-1 thereunder.

Summary of Application: Applicants seek an order to permit them to 
enter into deferred fee arrangements with certain of their directors.

Filing Date: The application was filed on April 5, 1994 and amended on 
May 19, 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 July 18, 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 such notification by writing to the 
SEC's Secretary.

Addresses: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, 1221 Avenue of the Americas, New York, New York 10020.

For Further Information Contact: Marc Duffy, Staff Attorney, (202) 942-
0565, or Robert A. Robertson, Branch Chief, (202) 942-0564 (Division of 
Investment Management, Office of Investment Company Regulation).

Supplementary Information: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. Each of the Funds is a closed-end management investment company 
organized as a Maryland corporation.\1\ MSAM is a wholly-owned 
subsidiary of Morgan Stanley Group Inc. and currently serves as the 
investment adviser for each of the Funds. MSAM is registered under the 
Investment Advisers Act of 1940.
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    \1\Although certain closed-end investment companies currently 
advised by MSAM do not presently intend to rely on the requested 
order, any such company would be covered by the order if it later 
proposed to enter into deferred fee arrangements with its directors 
who are not ``affiliated persons'' (as such term is defined under 
section 2(a)(3) of the Act) of MSAM (or any other investment adviser 
or sub-adviser, of one or more of the applicants), as described in 
the application.
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    2. The majority of the members of the board of directors (the 
``Board'') of each fund are not ``interested persons'' of such Fund 
within the meaning of section 2(a)(19) of the Act. Each of the 
directors who is not an ``affiliated person'' (within the meaning of 
section 2(a)(3) of the Act) of MSAM (or any other investment adviser or 
sub-adviser of one or more of the Funds) receives annual fees that 
collectively are, and are expected to continue to be, insignificant in 
comparison to the total net assets of the Funds. No director who is an 
affiliated person of MSAM (or any other investment adviser or sub-
adviser of any of the Funds) receives any remuneration from the Funds.
    3. Under the deferred fee arrangements (the ``Deferred Fee 
Arrangements''), the directors who receive directors fees from one or 
more of the Funds (the ``Eligible Directors'') will be entitled to 
deter to a later date the receipt of all or part of such fees. The 
Deferred Fee Arrangements will be implemented by means of a form of 
deferred fee Agreement (the ``Agreement'') entered into between an 
Eligible Director and the appropriate Fund. The purpose of the 
Agreement will be to permit an Eligible Director to elect to defer 
receipt of his or her director's fees, to defer payment of income taxes 
on such fees, or for other reasons. The Funds believes the availability 
of the proposed Deferred Fee Arrangements will enhance the Funds' 
ability to attract and retain directors of the same high caliber as 
those who now serve on their Boards.
    4. Under each Agreement, deferred director's fees payable by a Fund 
will be credited to a book reserve account established by such Fund 
(the ``Deferred Fee Account''). Each Eligible Director may elect to 
have his or her deferred fees valued as if such fees (and all income 
earned thereon) had been invested and reinvested either: (i) In shares 
of the Fund from which such director is receiving the fees, or (ii) at 
a rate equal to the prevailing rate applicable to 90-day United States 
Treasury Bills, at the beginning of each calendar quarter for which 
this rate is in effect. The election made by execution of an Agreement 
will continue in effect for each subsequent calendar year unless, prior 
to January 1 of any such year, the Eligible Director delivers to the 
president of the appropriate Fund a written revocation or modification 
of such election.
    5. Each Agreement provides that the obligation of each Fund to make 
payments from the Deferred Fee Account will be general obligations of 
each such Fund and payments made under the Agreement will be made from 
such Fund's general assets and property. With respect to the 
obligations created under the Agreements, the relationship of the 
Eligible Directors to the applicable Funds will be only that of general 
unsecured creditors. The Funds will be under no obligation to purchase, 
hold, or dispose of any investments under the Agreements, but, if one 
or more of the Funds choose to purchase investments to cover their 
obligations under the Agreements, then any and all such investments 
will continue to be part of the general assets and property of the 
Funds.
    6. Under each Agreement, deferred director's fees (including the 
return accrued thereon) will become payable in cash upon such Eligible 
Director's resignation from the Board of the participating Fund in 
generally equal annual installments over a period of five years (unless 
the participating Fund has agreed to a longer payment period) beginning 
on the first day of the year following the year in which such Eligible 
Director's resignation occurred. In the event of an Eligible Director's 
death, remaining amounts payable to him or her under an Agreement will 
thereafter be payable to his or her designated beneficiary; in all 
other events, the Eligible Director's right to receive payments will be 
non-transferable. Each Agreement provides that the Funds in their sole 
discretion have reserved the right to accelerate payment of amounts in 
the Deferred Fee Account at any time after the termination of an 
Eligible Director's service as a director. In the event of the 
liquidation, dissolution, or winding up of the appropriate Fund or the 
distribution of all or substantially all of a Fund's assets and 
property to its shareholders (other than in connection with a 
reorganization or merger into another Fund), all unpaid amounts in the 
Deferred Fee Account maintained by such Fund shall be paid in a lump 
sum to the Eligible Directors.
    7. The amounts paid to the Eligible Directors are expected to be 
insignificant in comparison to the total net assets of each Fund. 
Accordingly, deferral of director's fees in accordance with the 
Agreements is expected to have a negligible effect on any Fund's 
assets, liabilities, net assets, and net income.

Applicants' Legal Conclusions

    1. In connection with the adoption and implementation of the 
Deferred Fee Arrangements, applicants seek an order under section 6(c) 
of the Act exempting the Funds from sections 13(a)(2), 18(a), 18(c), 
and 23(a) and under section 17(d) and rule 17d-1 thereunder. The order 
would permit the Funds to enter into deferred fee arrangements with 
certain of their directors, and to effect transactions incident to 
those arrangements. Section 6(c) authorizes the SEC to exempt any 
person, security, or transaction from any provision of the Act 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. Applicants believe 
that their proposal meets the section 6(c) standards.
    2. Section 18(a) prohibits a registered closed-end investment 
company from issuing any class of senior security or selling any 
seniority security of which it is the issuer unless certain 
requirements are satisfied. In addition, section 18(c), in pertinent 
part, prohibits a registered closed-end investment company from issuing 
any senior security representing indebtedness if immediately thereafter 
such company will have outstanding more than one class of senior 
security representing indebtedness. Section 13(a)(2) requires each 
registered investment company to obtain authorization by a vote of a 
majority of its outstanding voting securities before issuing any senior 
securities not contemplated by the recitals of policy contained in its 
registration statement.
    3. Applicants contend that the Deferred Fee Arrangements possess 
none of the characteristics of senior securities that led Congress to 
enact sections 18(a), 18(c), and 13(a)(2). The Funds will not be 
borrowing from the Eligible Directors in the sense that concerned 
Congress. All liabilities created by credits to the Deferred Fee 
Account under the Deferred Fee Arrangements are expected to be offset 
by essentially equal amounts of assets of each Fund that would not 
otherwise exist if the fees were paid on a current basis. The Deferred 
Fee Arrangements will not induce speculative investments by any Fund or 
provide opportunity for manipulative allocation of the expenses and 
profits of any Fund; control of each Fund will not be affected; and the 
Deferred Fee Arrangements will not confuse investors or convey a false 
impression of safety.
    4. Section 23(a) prohibits closed-end investment companies from 
issuing any of their securities for services or for property other than 
cash or securities. Section 23(a) is concerned primarily with the 
dilutive effect on the equity and voting power that can result when 
securities are issued for consideration that is not readily valued. The 
Deferred Fee Arrangements merely provide for the deferral of directors 
fees and thus should be viewed as being ``issued'' not in return for 
services, but in return for the Funds not being required to pay such 
fees on a current basis.
    5. Section 17(d) and rule 17d-1 thereunder prohibit an affiliated 
person of a registered investment company, acting as principal, from 
participating in, or effecting any transaction in connection with, any 
joint enterprise or other joint arrangement or profit-sharing plan in 
which such registered company is a participant, without prior receipt 
of an order of the SEC. Deferral of Eligible Directors' fees in 
accordance with the Deferred Fee Arrangements will essentially maintain 
the parties in the same position as if the fees were paid on a current 
basis. When all payments under the Deferred Fee Arrangements have been 
made to an Eligible Director, the Eligible Director will be in a 
position relative to the Fund no better than if any deferred fees had 
been paid to such Eligible Director on a current basis and invested in 
shares of the relevant Fund.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15431 Filed 6-23-94; 8:45 am]
BILLING CODE 8010-01-M