[Federal Register Volume 61, Number 58 (Monday, March 25, 1996)]
[Notices]
[Pages 12121-12122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7190]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21833; 812-10018]


TCW Mid-Cap Growth Stocks Limited Partnership, et al.; Notice of 
Application

March 20, 1996
AGENCY: Security 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 Mid-Cap Growth Stocks Limited Partnership (the 
``Partnership''), TCW Galileo 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 section 17(a) of the Act.

summary of application: Applicants request an order that would permit 
the Partnership to transfer substantially all of its assets and 
liabilities to a series of the Company in exchange for the series' 
shares, which then would be distributed pro rata to partners of the 
Partnership.

filing date: The application was filed on February 28, 1996.

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 April 15, 1996, 
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:
Elaine M. Boggs, Staff Attorney, at (202) 942-0572, or Alison E. Baur, 
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 may be obtained for a fee at the 
SEC's Public Reference Branch.

Applicants' Representations

    1. The Partnership is a California limited partnership with an 
investment objective of seeking long-term growth of capital through 
investment in publicly-traded equity securities of medium 
capitalization companies. Investors may purchase and redeem Partnership 
interests (the ``Units'') at net asset value on a monthly basis. The 
Partnership is not registered under the Act in reliance on section 
3(c)(1) of the Act. The Units are offered as private placements under 
section 4(2) of the Securities Act of 1933 and Regulation D promulgated 
thereunder, and are sold to institutional investors and high net worth 
individuals.
    2. TAMCO and the Adviser are wholly-owned subsidiaries of The TCW 
Group, Inc. TAMCO serves as the sole general partner and administrator 
of the Partnership. TAMCO also manages the Partnership's investments.
    3. The Company, a Maryland corporation, is a registered open-end 
investment company formed as a series company. Currently, the Company 
offers eleven portfolios. The Company proposes to offer a new 
investment portfolio (the ``Fund''), whose investment objectives and 
policies will be substantially similar to those of the partnership. The 
Company has entered into an advisory agreement with the Adviser, which 
will provide investment management services to the Fund that are 
substantially the same as the services that TAMCO currently provides to 
the Partnership.
    4. Applicants propose that, pursuant to an agreement and plan of 
exchange, the fund will acquire substantially all of the assets and 
assume substantially all of the liabilities of the Partnership in 
exchange for Fund shares (the ``Exchange''). Prior to the Exchange, 
information concerning the Exchange will be delivered to the 
Partnership's limited partners.
    5. 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 the 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). The Partnership may retain assets needed to pay any accrued 
expenses. The Partnership also may retain assets that the Fund is not 
permitted to purchase, or that would be unsuitable for the Fund. Assets 
retained by the Partnership that are not needed to pay accrued expenses 
will be distribute pro rata to the partners of the Partnership. The 
Partnership will be liquidated and dissolved following the 
distribution.
    6. The agreement governing the Partnership 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. The 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 the Partnership will have adequate 
opportunity to redeem their Partnership interests before the conversion 
occurs.
    7. The expenses of the Exchange will be borne by TAMCO. No 
brokerage commission, fee, or other remuneration will be paid in 
connection with the Exchange. Fund organizational expenses, up to a 
maximum of $50,000, will be paid by the Fund and amortized over five 
years. Fund organizational expenses in excess of $50,000 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.
    8. The management fees for the Fund will not exceed the maximum 
fees currently paid by the Partnership. As of December 31, 1995, there 
were three limited partners in the Partnership who had an investment of 
a sufficient

[[Page 12122]]
magnitude to qualify for lower advisory fees than those to be charged 
by the Fund. These limited partners will be given the opportunity to 
withdraw from the Partnership prior to the Exchange. Applicants expect 
that other Fund expenses will be relatively higher than Partnership 
expenses. 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 1996, however, the 
Adviser will limit annual Fund expenses with the intention of capping 
Fund expense ratios at levels which would have been incurred during 
1996 by the Partnership.
    9. Prior to the Exchange, certain limited partners may withdraw 
from the Partnership and participate in a new limited partnership with 
similar investment objectives. The new limited partnership 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.
    10. The Fund's board of directors and TAMCO have considered whether 
the Exchange will be in the best interests of the Company and the 
Partnership, respectively. All of the members of the Fund's board and 
TAMCO have approved the Exchange and have concluded that: (a) The 
Exchange is desirable as a business matter for both the Company and the 
Partnership; (b) the Exchange is in the best interests of the Company 
and the Partnership; (c) the Exchange is reasonable and fair, does not 
involve overreaching, and is consistent with the policies of the Act; 
(d) the Exchange is consistent with the policies of the Company and the 
Partnership; and (e) the interests of existing shareholders in the 
company and existing partners will not be diluted as a result of the 
Exchange. The Exchange will not effected until the Company has received 
a favorable opinion of counsel with respect to the tax consequences of 
the Exchange and the SEC has issued the requested order.

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. 
Section 2(a)(3) of the Act defines an ``affiliated person'' as, among 
other things, any person directly or indirectly controlling, controlled 
by, or under common control with another. The Partnership may be an 
affiliated person of an affiliated person of the Company because TAMCO 
is the general partner of the Partnership and because TAMCO and the 
Adviser are under common control. Thus, the proposed Exchange may be 
prohibited by section 17(a).
    2. Section 17(b) of the Act permits the SEC to exempt a proposed 
transaction from section 17(a) if evidence establishes that (a) 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; (b) the proposed transaction is 
consistent with the policy of the registered investment company 
concerned; and (c) the proposed transaction is consistent with the 
general purposes of the Act.
    3. The Exchange will permit partners to pursue the same investment 
objectives and policies as shareholders of the Fund without sacrificing 
the pass-through tax features of the Partnership. In addition, 
shareholders of the Partnership. In addition, shareholders of the Fund 
will be able to purchase and redeem shares on each business day, as 
opposed to only once per month as is currently provided under the 
Partnership agreement. Shareholders of the Fund also will be able to 
shift investments among the eleven existing series of the Company at no 
charge. The Fund expects that operating as a registered investment 
company will help encourage net asset growth. For these reasons, among 
others, applicants believe that the proposed Exchange meets the section 
17(b) standards.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-7190 Filed 3-22-96; 8:45 am]
BILLING CODE 8010-01-M