[Federal Register Volume 65, Number 57 (Thursday, March 23, 2000)]
[Notices]
[Pages 15667-15671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7199]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24340; 813-246]


Morgan Stanley Capital Investors, L.P. and Morgan Stanley Dean 
Witter & Co.; Notice of Application

March 17, 2000.
AGENCY: Securities and Exchange Commission (``Commisson'')

ACTION: Notice of an application for an order under sections 6(b) and 
6(e) of the Investment Company Act of 1940 (the ``Act``) granting an 
exemption from all provisions of the Act, except section 9, section 17 
(other than certain provisions of paragraphs (a), (d), (e), (f), (g), 
and (j)), section 30 (other than certain provisions of paragraphs (a), 
(b), (e), and (h)), sections 36 through 53, and the rules and 
regulations thereunder.

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Summary of Application: Applicants request an order to exempt certain 
limited partnerships and limited liability companies (``Partnerships``) 
formed for the benefit of key employees of Morgan Stanley Dean Witter & 
Co. (``MSDW & Co.'') and certain of its affiliates from certain 
provisions of the Act. Each Partnership will be an ``employees' 
securities company'' as defined in section 2(a)(13) of the Act. The 
requested order would supersede an existing order.\1\
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    \1\ Morgan Stanley Capital Investors, L.P. and Morgan Stanley, 
Dean Witter, Discover & Co., Investment Company Act Release No. 
23111 (April 14, 1998).

Applicants: Morgan Stanley Capital Investors, L.P. (the ``Initial 
Partnership'') and MSDW & Co., on behalf of other Partnerships that 
have been or may in the future be formed under the terms and conditions 
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of the application.

Filing Date: The application was filed on March 10, 2000.

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 April 11, 2000, 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609; Applicants, 1221 Avenue of the Americas, New York, NY 
10020.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574 or George J. Zornada, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. MSDW & Co. is a diversified financial services company engaged 
in three primary business--securities, asset management, and credit 
cards. Morgan Stanley & Co. Incorporated, a wholly-owned subsidiary of 
MSDW & Co., is a broker-dealer registered under the Securities Exchange 
Act of 1934 (the ``Exchange Act``) and an investment adviser registered 
under the Investment Advisers Act of 1940 (the ``Advisers Act``). MSDW 
& Co. and any entity controlling, controlled by, or under common 
control with MSDW & Co. are referred to herein collectively as ``MSDW`` 
and individually as an ``MSDW entity.``
    2. MSDW offers various investment programs for the benefit of 
certain key employees. These programs may be structured as different 
Partnerships, or as separate plans within a Partnership. Each 
Partnership will be a limited partnership or limited liability company 
formed as an ``employees' securities company`` within the meaning of 
section 2(a)(13) of the Act, and will operate a closed-end, non-
diversified, management investment company. \2\ The Partnerships will 
be established primarily for the benefit of highly compensated 
employees of MSDW as part of a program designed to create capital 
building opportunities that are competitive with those at other 
investment banking firms and to facilitate the recruitment of high 
caliber professionals. Participation in a Partnership will be 
voluntary.
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    \2\ Applicants also may implement a pretax plan arrangement 
(``Pretax Plan``). In this case, no investment vehicle will be 
formed with respect to such Pretax Plan. Pursuant to a Pretax Plan, 
MSDW will enter into arrangements with certain Eligible Employees, 
as later defined, of MSDW, which will generally provide that (a) an 
Eligible Employee will defer a portion of his or her compensation 
payable by MSDW; (b) such deferred compensation will be treated as 
having been notionally invested in investments designated for these 
purposes pursuant to the specific compensation plan; and (c) an 
Eligible Employee will be entitled to receive cash, securities, or 
other property at the times and in the amounts set forth in the 
specific compensation plan, where the aggregate amount received by 
such Eligible Employee would be based upon the investment 
performance of the investments designated for these purposes 
pursuant to such compensation plan. The Pretax Plan will not 
actually purchase or sell any securities. MSDW expects to offer, 
through Pretax Plans, economic benefits comparable to what would 
have been offered in an arrangement where an investment vehicle is 
formed. For purposes of the application, a Partnership will be 
deemed to be formed with respect to each Pretax Plan and each 
reference to ``Partnership,'' ``capital contribution,'' ``General 
Partner,'' ``Limited Partner,'' ``loans,'' and ``Interest'' in the 
application will be deemed to refer to the Pretax Plan, the notional 
capital contribution to the Pretax Plan, MSDW, a participant of the 
Pretax Plan, national loans and participation rights in the Pretax 
Plan, respectively.
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    3. MSCP III, L.P., a Delaware limited partnership, will act as the 
general partner of the Initial Partnership (together with any other 
MSDW entity that acts as a Partnership's general partner, the ``General 
Partner''). Any MSDW entity that acts as the investment adviser to a 
Partnership will be registered as an investment adviser under the 
Advisers Act. The General Partner will manage, operate, and control 
each of the Partnerships. However, the General Partner will be 
authorized to delegate management responsibility to MSDW or to a 
committee of MSDW employees.
    4. Limited partner interests in the Partnerships (``Interests'') 
will be offered without registration in reliance on section 4(2) of the 
Securities Act of 1933 (the ``Securities Act'') or similar exemption 
and will be sold only to ``Eligible Employees'' and ``Qualified 
Participants'' (collectively,

[[Page 15668]]

``Participants'').\3\ Prior to offering Interests to an Eligible 
Employee, the General Partner must reasonably believe that an Eligible 
Employee will be a sophisticated investor capable of understanding and 
evaluating the risks of participating in the Partnership without the 
benefit of regulatory safeguards. An Eligible Employee is (a) an 
individual who is a current or former employee, officer, director, or 
``Consultant'' of MSDW and, except for certain individuals who manage 
the day-to-day affairs of the Partnership in question (``Managing 
Employees''), meets the standards of an accredited investor under rule 
501(a)(6) of Regulation D (``Regulation D'') under the Securities Act, 
or (b) an entity that is a current or former ``Consultant'' of MSDW and 
meets the standards of an accredited investor under rule 501(a) of 
Regulation D.\4\ Eligible Employees will be experienced professionals 
in the investment banking and securities, investment management or 
credit card businesses, or in the related administrative, financial, 
accounting, legal, or operational activities.
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    \3\ If applicants implement a Pretax Plan, participation rights 
in the Pretax Plan will only be offered to Eligible Employees who 
are current employees or Consultants, as later defined, of MSDW.
    \4\ A ``Consultant'' is a person or entity whom MSDW has engaged 
on retainer to provide services and professional expertise on an 
ongoing basis as a regular consultant or as a business or legal 
adviser and who shares a community of interest with MSDW and MSDW 
employees.
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    5. Managing Employees will have primary responsibility for 
operating the Partnership. These responsibilities will include, among 
other things, identifying, investigating, structuring, negotiating, and 
monitoring investments for the Partnership, communicating with the 
limited partners of the Partnership, maintaining the books and records 
of the Partnership, and making recommendations with respect to 
investment decisions by the General Partner. Each Managing Employee 
will (a) be closely involved with, and knowledgeable with respect to, 
the Partnership's affairs and the status of the Partnership's 
investments, (b) be an officer or employee of MSDW, and (c) have 
reportable income from all sources (including any profit shares and 
bonuses) in the calendar year immediately preceding the employee's 
participation in the Partnership in excess of $120,000 and have a 
reasonable expectation of reportable income of at least $150,000 in the 
years in which the employee invests in a Partnership.
    6. A Qualified Participant (a) is an Eligible Family Member or 
Qualified Entity (in each case as defined below) of an Eligible 
Employee, and (b) if the individual or entity is purchasing an Interest 
from a Partner or directly from the Partnership, comes within one of 
the categories of an ``accredited investor'' under rule 501(a) of 
Regulation D. An ``Eligible Family Member'' is a spouse, parent, child, 
spouse of child, brother, sister, or grandchild of an Eligible 
Employee. A ``Qualified Entity'' is (a) a trust of which the trustee, 
grantor, and/or beneficiary is an Eligible Employee; (b) a partnership, 
corporation, or other entity controlled by an Eligible Employee,\5\ or 
(c) a trust or other entity established for the benefit of Eligible 
Family Members of an Eligible Employee.
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    \5\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
``Qualified Entities'' is intended to enable Eligible Employees to 
make investments in the Partnerships through personal investment 
vehicles for the purpose of personal and family investment and 
estate planning objectives. Eligible Employees will exercise 
investment discretion or control over these investment vehicles, 
thereby creating a close nexus between MSDW and these investment 
vehicles. In the case of a partnership, corporation, or other entity 
controlled by a Consultant entity, individual participants will be 
limited to senior level employees, members, or partners of the 
Consultant who will be required to qualify as an ``accredited 
investor'' under rule 501(a)(6) of Regulation D and who will have 
access to the General Partner or MSDW.
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    7. The terms of a Partnership will be fully disclosed to each 
Eligible Employee and, if applicable, to a Qualified Participant of the 
Eligible Employee, at the time the Eligible Employee is invited to 
participate in the Partnership. Each Partnership will send audited 
financial statements to each Participant within 120 days or as soon as 
practicable after the end of its fiscal year.\6\ In addition, each 
Participant will receive a copy of Schedule K-1 showing the 
Participant's share of income, credits, reductions, and other tax 
items.
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    \6\ If applicants implement a Pretax Plan, Eligible Employees 
participating in such Pretax Plan will be furnished with a copy of 
the Pretax Plan, which will set forth at a minimum the same terms of 
the proposed investment program as those that would have been set 
forth in a limited partnership agreement for a Partnership. MSDW 
will prepare an audited informational statement with respect to the 
investments deemed to be made by such Pretax Plan, including, with 
respect to each investment, the name of the portfolio company and 
the amount deemed invested by such Pretax Plan in the portfolio 
company. MSDW will send each participant of such Pretax Plan a 
statement prepared based on the audited informational statement 
within 120 days after the end of the fiscal year of MSDW.
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    8. Interests in a Partnership will be non-transferable except with 
the prior written consent of the General Partner. \7\ No person will be 
admitted into a Partnership unless the person is an Eligible Employee, 
a Qualified Participant of an Eligible Employee, or an MSDW entity. No 
sales load will be charged in connection with the sale of a limited 
partnership interest.
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    \7\ If applicants implement a Pretax Plan, an Eligible 
Employee's participation rights in such plan may not be transferred, 
other than to a Qualified Participant in the event of the Eligible 
Employee's death.
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    9. An Eligible Employee's interest in a Partnership may be subject 
to repurchase or cancellation if (a) the Eligible Employee's 
relationship with MSDW is terminated for cause; (b) the Eligible 
Employee becomes a consultant to or joins any firm that the General 
Partner determines, in its reasonable discretion, is competitive with 
any business of MSDW; or (c) the Eligible Employee voluntarily resigns 
from employment with MSDW. Upon repurchase or cancellation, the General 
Partner will pay to the Eligible Employee at least the lesser of (a) 
the amount actually paid by the Eligible Employee to acquire the 
Interest (plus interest, as determined by the General Partner), or (b) 
the fair market value of the Interest as determined at the time of 
repurchase by the General partner. The terms of any repurchase or 
cancellation will apply equally to any Qualified Participant of an 
Eligible Employee.
    10. Subject to the terms of the applicable limited partnership 
agreement, a Partnership will be permitted to enter into transactions 
involving (a) an MSDW entity; (b) a portfolio company, (c) any Partner 
or person or entity affiliated with a Partner, (d) an investment fund 
or separate account that is organized for the benefit of investors who 
are not affiliated with MSDW and over which an MSDW entity will 
exercise investment discretion (a ``Third Party Fund''), or (e) any 
partner or other investor of a Third Party Fund that is not affiliated 
with MSDW (a ``Third Party Investor''). These transactions may include 
a Partnership's purchase or sale of an investment or an interest from 
or to any MSDW entity or Third Party Fund, acting as principal. Prior 
to entering into these transactions, the General Partner must determine 
that the terms are fair to the Partners.
    11. A Partnership will not invest more than 15% of its assets in 
securities issued by registered investment companies (with the 
exception of temporary investments in money market funds). A 
Partnership will not acquire any security issued by a registered 
investment company if immediately after the acquisition, the 
Partnership will own more than 3% of the outstanding voting stock of 
the registered investment company.
    12. An MSDW entity (including the General Partner) acting as agent 
or

[[Page 15669]]

broker may receive placement fees, advisory fees, or other compensation 
from a Partnership or portfolio company in connection with a 
Partnership's purchases or sale of securities, provided the placement 
fees, advisory fees, or other compensation are ``usual or customary.'' 
Fees or other compensation will be deemed ``usual and customary'' only 
if (a) the Partnership is purchasing or selling securities with other 
unaffiliated third parties, including Third Party Funds; (b) the fees 
or other compensation being charged to the Partnership are also being 
charged to the unaffiliated third parties, including third Party Funds; 
and (c) the amount of securities being purchased or sold by the 
Partnership does not exceed 50% of the total amount of securities being 
purchased or sold by the Partnership and the unaffiliated third 
parties, including Third Party Funds. MSDW entities (including the 
General Partner) also may be compensated for services to entities in 
which the Partnerships invest and to entities that are competitors of 
these entities, and may otherwise engage in normal business activities 
that conflict with the interests of the Partnerships.

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides, in part, that the Commission 
will exempt employees' securities companies from the provisions of the 
Act to the extent that the exemption is consistent with the protection 
of investors. Section 6(b) provides that the Commission will consider, 
in determining the provisions of the Act from which the company should 
be exempt, the company's form of organization and capital structure, 
the persons owning and controlling its securities, the price of the 
company's securities and the amount of any sales load, how the 
company's funds are invested, and the relationship between the company 
and the issuers of the securities in which it invests. Section 2(a)(13) 
defines an employees' securities company, in relevant part, as any 
investment company all of whose securities are beneficially owned (a) 
by current or former employees, or persons on retainer, of one or more 
affiliated employers, (b) by immediate family members of such persons, 
or (c) by such employer or employers together with any of the persons 
in (a) or (b).
    2. Section 7 of the Act generally prohibits an investment company 
that is not registered under section 8 of the Act from selling or 
redeeming its securities. Section 6(e) provides that, in connection 
with any order exempting an investment company from any provision of 
section 7, certain provisions of the Act, as specified by the 
Commission, will be applicable to the company and other persons dealing 
with the company as though the company were registered under the Act. 
Applicants request an order under sections 6(b) and 6(e) of the Act for 
an exemption from all provisions of the Act except section 9, section 
17 (other than certain provisions of paragraphs (a), (d), (e), (f), 
(g), and (j)), section 30 (other than certain provisions of paragraphs 
(a), (b), (e), and (h)), sections 36 through 53, and the rules and 
regulations thereunder.
    3. Section 17(a) generally prohibits any affiliated person of a 
registered investment company, or any affiliated person of an 
affiliated person, acting as principal, from knowingly selling or 
purchasing any security or other property to or from the company. 
Applicants request an exemption from section 17(a) to permit 9(a) an 
MSDW entity or a Third Party Fund, acting as principal, to engage in 
any transaction directly or indirectly with any Partnership or any 
company controlled by the Partnership; (b) any Partnership to invest in 
or engage in any transaction with any MSDW entity, acting as principal, 
(i) in which the Partnership, any company controlled by the 
Partnership, or any MSDW entity or Third Party Fund has invested or 
will invest, or (ii) with which the Partnership, any company controlled 
by the Partnership, or any MSDW entity or third Party Fund will become 
affiliated; and (c) a third Party Investor, acting as principal, to 
engage in any transaction directly or indirectly with any Partnership 
or any company controlled by the Partnership.
    4. Applicants state that an exemption from section 17(a) is 
consistent with the protection of investors and is necessary to promote 
the purpose of the Partnerships. Applicants state that the Participants 
in each Partnership will be fully informed of the extent of the 
Partnership's dealings with MSDW. Applicants also state that, as 
professionals employed in the investment banking and financial services 
businesses, Participants will be able to understand and evaluate the 
attendant risks. Applicants assert that the community of interest among 
the Participants and MSDW will provide the best protection against any 
risk of abuse.
    5. Section 17(d) and rule 17d-1 prohibit any affiliated person or 
principal underwriter of a registered investment company, or any 
affiliated person of such person or principal underwriter, acting as 
principal, from participating in any joint arrangement with the company 
unless authorized by the Commission. Applicants request exemptive 
relief to permit affiliated persons of each Partnership, or affiliated 
persons of any of these persons, to participate in any joint 
arrangement in which the Partnership or a company controlled by the 
Partnership is a participant.
    6. Applicants submit that it is likely that suitable investments 
will be brought to the attention of a Partnership because of its 
affiliation with MSDW or MSDW's large capital resources, and its 
experience in structuring complex transactions. Applicants also submit 
that the types of investment opportunities considered by a Partnership 
often require each investor to make funds available in an amount that 
may be substantially greater than what a Partnership may make available 
on its own. Applicants contend that, as a result, the only way in which 
a Partnership may be able to participant in these opportunities may be 
to co-invest with other persons, including its affiliates. Applicants 
note that each Partnership will be primarily organized for the benefit 
of Eligible Employees as an incentive for them to remain with MSDW and 
for the generation and a maintenance of goodwill. Applicants believe 
that, if co-investments with MSDW are prohibited, the appeal of the 
Partnerships would be significantly diminished. Applicants assert that 
Eligible Employees wish to participate in co-investment opportunities 
because they believe that (a) the resources of MSDW enable it to 
analyze investment opportunities to an extent that individual employees 
would not be able to duplicate; (b) investments made by MSDW will not 
be generally available to investors even of the financial status of the 
Eligible Employees; and (c) Eligible Employees will be able to pool 
their investment resources, thus achieving greater diversification of 
their individual investment portfolios.
    7. Applicants assert that the flexibility to structure co-
investments and joint investments will not involve abuses of the type 
section 17(d) and rule 17d-1 were designed to prevent. Applicants state 
that the concern that permitting co-investments by MSDW and a 
Partnership might lead to less advantageous treatment of the 
Partnership will be mitigated by the community of interest among MSDW 
and the Participants, and the fact that senior officers and directors 
of MSDW entities will be investing in the Partnership. In addition, 
applicants assert that strict compliance with section 17(d) would cause 
the Partnership to forego investment opportunities simply because a

[[Page 15670]]

Participant or other affiliated person of the Partnership (or any 
affiliate of such person) made a similar investment. Finally, 
applicants contend that the possibility that a Partnership may be 
disadvantaged by the participation of an affiliate in a transaction 
will be minimized by compliance with the lockstep procedures described 
in condition 3 below. Applicants believe that this condition will 
ensure that a Partnership will co-invest side-by-side and pro rata 
with, and on at least as favorable terms as, an MSDW entity.
    8. Co-investments with Third Party Funds, or by an MSDW entity 
pursuant to a contractual obligation to a Third Party Fund, will not be 
subject to condition 3. Applicants note that it is common for a Third 
Party Fund to require that MSDW invest its own capital in Third Party 
Fund investments, and that the MSDW investments be subject to 
substantially the same terms as those applicable to the Third Party 
Fund. Applicants believe it is important that the interests of the 
Third Party Fund take priority over the interests of the Partnerships, 
and that the Third Party Fund not be burdened or otherwise affected by 
activities of the Partnerships. In addition, applicants assert that the 
relationship of a Partnership to a Third Party Fund is fundamentally 
different from a Partnerships's relationship to MSDW. Applicants 
contend that the focus of, and the rationale for, the protections 
contained in the requested relief are to protect the Partnerships from 
any overreaching by MSDW in the employer/employee context, whereas the 
same concerns are not present with respect to the Partnerships vis-a-
vis a Third Party Fund.
    9. Section 17(e) and rule 17e-1 limit the compensation an 
affiliated person may receive when acting as agent or broker for a 
registered investment company. Applicants request an exemption from 
section 17(e) to permit an MSDW entity (including the General Partner), 
that acts as an agent or broker, to receive placement fees, advisory 
fees, or other compensation from a Partnership in connection with the 
purchase or sale by the Partnership of securities, provided that the 
fees or other compensation is deemed ``usual and customary. Applicants 
state that for the purposes of the application, fees or other 
compensation that is charge or received by an MSDW entity will be 
deemed ``usual and customary'' only if (a) the Partnership is 
purchasing or selling securities with other unaffiliated third parties, 
including Third Party Funds; (b) the fees or compensation being charged 
to the Partnership are also being charged to the unaffiliated third 
parties, including Third Party Funds; and (c) the amount of securities 
being purchased or sold by the Partnership does not exceed 50% of the 
total amount of securities being purchased or sold by the Partnership 
and the unaffiliated third parties, including Third Party Funds. 
Applicants assert that, because MSDW does not wish it to appear as if 
it is favoring the Partnerships, compliance with section 17(e) would 
prevent a Partnership from participating in transactions where the 
Partnership is being charged lower fees than unaffiliated third 
parties. Applicants assert that the fees or other compensation paid by 
a Partnership to an MSDW entity will be the same as those negotiated at 
arm's length with unaffiliated third parties.
    10. Rule 17e-1(b) requires that a majority of directors who are not 
``interested persons'' (as defined in section 2(a)(19) of the Act) take 
actions and make approvals regarding commissions, fees, or other 
remuneration. Applicants request an exemption from rule 17e-1(b) to the 
extent necessary to permit each Partnership to comply with the rule 
without having a majority of the directors of the General Partner who 
are not interested persons take actions and make determinations as set 
forth in the rule. Applicants state that because all the directors of 
the General Partner will be affiliated persons, without the relief 
requested, a Partnership could not comply with rule 17e-1(b). 
Applicants state that each Partnership will comply with rule 17e-1(b) 
by having a majority of the directors of the Partnership take actions 
and make approvals as are set forth in rule 17e-1. Applicants state 
that each Partnership will comply with all other requirements of rule 
17e-1 for transactions described above in the discussion of section 
17(e).
    11. Section 17(f) designates the entities that may act as 
investment company custodians, and rule 17f-1 imposes certain 
requirements when the custodian is a member of a national securities 
exchange. Applicants request an exemption from section 17(f) and rule 
17f-1 to permit MSDW to act as custodian of Partnership assets without 
a written contract, as would be required by rule 17f-1(a). Applicants 
also request an exemption from the rule 17f-1(b)(4) requirement that an 
independent accountant periodically verify the assets held by the 
custodian. Applicants believe that, because of the community of 
interest between MSDW and the Partnerships and the existing requirement 
for an independent audit, compliance with these requirements would be 
unnecessarily burdensome and expensive. Applicants will comply with all 
other requirements of rule 17f-1.
    12. Section 17(g) and rule 17g-1 generally require the bonding of 
officers and employees of a registered investment company who have 
access to its securities or funds. Rule 17g-1 requiries that a majority 
of directors who are not interested persons take certain actions and 
give certain approvals relating to fidelity bonding. Applicants request 
exemptive relief to permit the General Partner's officers and 
directors, who may be deemed interested persons, to take actions and 
make determinations set forth in the rule. Applicants state that, 
because all the directors of the General Partner will be affiliated 
persons, a Partnership could not comply with rule 17g-1 without the 
requested relief. Specifically, each Partnership will comply with rule 
17g-1 by having a majority of the Partnerships' directors take actions 
and make determinations as are set forth in rule 17g-1. Applicants also 
state that each Partnership will comply with all other requirements of 
rule 17g-1.
    13. Section 17(j) and paragraph (a) of rule 17j-1 make it unlawful 
or certain enumerated persons to engage in fraudulent or deceptive 
practices in connection with the purchase or sale of a security held or 
to be acquired by a registered investment company. Rule 17j-1 also 
requires that every registered investment company adopt a written code 
of ethics and that every access person of a registered investment 
company report personal securities transactions. Applicants request an 
exemption from the provisions of rule 17j-1, except for the anti-fraud 
provisions of paragraph (a), because they are unnecessarily burdensome 
as applied to the Partnerships.
    14. Applicants request an exemption from the requirements in 
sections 30(a), 30(b), and 30(e), and the rules under those sections, 
that registered investment companies prepare and file with the 
Commission and mail to their shareholders certain periodic reports and 
financial statements. Applicants contend that the forms prescribed by 
the Commission for periodic reports have little relevance to the 
Partnerships and would entail administrative and legal costs that 
outweigh any benefit to the Participants. Applicants request exemptive 
relief to the extent necessary to permit each Partnership to report 
annually to its Participants. Applicants also request an exemption from 
section 30(h) to the extent necessary to exempt the General Partner of 
each Partnership

[[Page 15671]]

and any other persons who may be deemed to be members of an advisory 
board of a Partnership from filing Forms 3, 4 and 5 under section 16(a) 
of the Exchange Act with respect to their ownership of Interests in the 
Partnership. Applicants assert that, because there will be no trading 
market and the transfers of Interests will be severely restricted, 
these filings are unnecessary for the protection of investors and 
burdensome to those required to make them.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transaction otherwise prohibited by section 17(a) 
or section 17(d) and rule 17d-1 to which a Partnership is a party (the 
``Section 17 Transaction'') will be effected only if the General 
Partner determines that: (a) The terms of the transaction, including 
the consideration to be paid or received, are fair and reasonable to 
the Partners of the Partnership and do not involve overreaching of the 
Partnership or its Participants on the part of any person concerned: 
and (b) the transaction is consistent with the interests of the 
Participants in the Partnership, and the Partnership's organizational 
documents and reports to its Participants. In addition, the General 
Partner of each Partnership will record and preserve a description of 
the Section 17 Transactions, the General Partner's findings, the 
information or materials upon which the General Partner's findings are 
based, and the basis for the findings. All records relating to an 
investment program will be maintained until the termination of the 
investment program and at least two years thereafter, and will be 
subject to examination by the Commission and its staff.\8\
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    \8\ Each Partnership will preserve the accounts, books, and 
other documents required to be maintained in an easily accessible 
place for the first two years.
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    2. In connection with the Section 17 Transactions, the General 
Partner of each partnership will adopt, and periodically review and 
update, procedures designed to ensure that reasonable inquiry is made, 
prior to the consummation of any Section 17 Transaction, with respect 
to the possible involvement in the Transaction of any affiliated person 
or promoter of or principal underwriter for the Partnership, or any 
affiliated person of an affiliated person, promoter, or principal 
underwriter.
    3. The General Partner of each Partnership will not invest the 
funds of the Partnership in any investment in which a ``Co-Investor'' 
(as defined below) has acquired or proposes to acquire the same class 
of securities of the same issuer, if the investment involves a joint 
enterprise or other arrangement within the meaning of rule 17d-1 in 
which the Partnership and the Co-Investor are participants, unless the 
Co-Investor, prior to disposing of all or part of its investment, (a) 
gives the General Partner sufficient, but not less than one day's 
notice of its intent to dispose of its investment; and (b) refrains 
from disposing of its investment unless the Partnership has the 
opportunity to dispose of the Partnership's investment prior to or 
concurrently with, on the same terms as, and pro rata with the Co-
Investor. The term ``Co-Investor'' with respect to any Partnership 
means any person who is (a) an ``affiliated person'' (as defined in 
section 2(a)(3) of the Act) of the Partnership (other than a Third 
Party Fund); (b) MSDW; (c) an officer or director of MSDW; or (d) an 
entity (other than a Third Party Fund) in which the General Partner 
acts as a general partner or has a similar capacity to control the sale 
or other disposition of the entity's securities. The restrictions 
contained in this condition; however, will not be deemed to limit or 
prevent the disposition of an investment by a Co-Investor: (a) to its 
direct or indirect wholly-owned subsidiary, to any company (a 
``Parent'') of which the Co-Investor is a direct or indirect wholly-
owned subsidiary, or to a direct or indirect wholly-owned subsidiary of 
its Parent; (b) to immediate family members of the Co-Investor or a 
trust or other investment vehicle established for any immediate family 
member; (c) when the investment is comprised of securities that are 
listed on any exchange registered as a national securities exchange 
under section 6 of the Exchange Act; (d) when the investment is 
comprised of securities that are national market system securities 
pursuant to section 11A(a)(2) of the Exchange Act and rule 11Aa2-1 
under the Exchange Act; or (e) when the investment is comprised of 
securities that are listed or traded on any foreign securities exchange 
or board of trade that satisfies regulatory requirements under the law 
of jurisdiction in which the foreign securities exchange or board of 
trade is organized similar to those that apply to a national securities 
exchange or a national market system for securities.
    4. Each Partnership and the General Partner will maintain and 
preserve, at for the life of the Partnership and a least two years 
thereafter, the accounts, books, and other documents that constitute 
the record forming the basis for the audited financial statements that 
are to be provided to the Participants in the Partnership, and each 
annual report of the Partnership required to be sent to Participants, 
and agree that these records will be subject to examination by the 
Commission and its staff.\9\
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    \9\ Each Partnership will preserve the accounts, books, and 
other documents required to be maintained in an easily accessible 
place for the first two years.
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    5. The General Partner of each Partnership will send to each 
Participant in the Partnership who had an interest in any capital 
account of the Partnership, at any time during the fiscal year then 
ended. Partnership financial statements audited by the Partnership's 
independent accountants. At the end of each fiscal year, the General 
Partner will make a valuation or have a valuation made of all of the 
assets of the Partnership as of the fiscal year end in a manner 
consistent with customary practice with respect to the valuation of 
assets of the kind held by the Partnership. In addition, within 120 
days after the end of each fiscal year of each Partnership or as soon 
as practicable thereafter, the General Partner of the Partnership will 
send a report to each person who was a participant in the Partnership 
at any time during the fiscal year then ended, setting forth the tax 
information necessary for the preparation by the Participant of federal 
and state income tax returns.
    6. If purchases or sales are made by a Partnership from or to an 
entity affiliated with the Partnership by reason of a 5% or more 
investment in the entity by an MSDW director, officer, or employee, the 
individual will not participate in the Partnership's determination of 
whether or not to effect the purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7199 Filed 3-22-00; 8:45 am]
BILLING CODE 8010-01-M