96-29516. TCW Convertible Limited Partnership, et al.; Notice of Application  

  • [Federal Register Volume 61, Number 224 (Tuesday, November 19, 1996)]
    [Notices]
    [Pages 58917-58919]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 96-29516]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    [Rel. No. IC-22327; 812-10330]
    
    
    TCW Convertible Limited Partnership, et al.; Notice of 
    Application
    
    November 12, 1996.
    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 Convertible Limited Partnership (``Partnership''), TCW 
    Galileo Funds, Inc. (``Company''), TCW Asset Management Company 
    (``TAMCO''), and TCW Funds Management, Inc. (``Adviser'').
    
    RELEVANT ACT SECTION: 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 request an order to permit the 
    exchange of shares of the Company's common stock for portfolio 
    securities and other assets of the Partnership.
    
    FILING DATES: The application was filed on September 5, 1996. 
    Applicants have agreed to file an amendment during the notice period, 
    the substance of which is included in this notice.
    
    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 December 2, 
    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 5th Street, N.W., Washington, DC 20549. 
    Applicants, 865 South Figueroa Street, Suite 1800, Los Angeles, 
    California 90017.
    
    FOR FURTHER INFORMATION CONTACT: Harry Eisenstein, Staff Attorney, at 
    (202) 942-0552, or Mercer E. Bullard, Branch Chief, (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 
    SEC's Public Reference Branch.
    
    Applicants' Representations
    
        1. The Partnership was organized as a California limited 
    partnership on November 17, 1988. Its investment objective is to 
    generate returns competitive with those of the S&P 500 with lower 
    volatility and greater capital protection by investing in a diversified 
    portfolio of convertible securities. The Partnership allows investors 
    to purchase and redeem Partnership interests (``Units'') at net asset 
    value on a monthly basis. The offering of the Units was structured as a 
    private placement under section 4(2) of the Securities Act of 1933, and 
    Regulation D promulgated thereunder. The Partnership is not registered 
    under the Act in reliance on section 3(c)(1) of the Act. Units are sold 
    to institutional investors and high net worth individuals. The 
    Partnership has a minimum initial purchase requirement of $250,000, 
    subject to reduction by TAMCO (but not below $50,000). On June 30, 
    1996, the net asset value of the Partnership was $29,614,782 and there 
    were 31 limited partners.
        2. TAMCO serves as the sole general partner of the Partnership and 
    has exclusive responsibility for its overall management, control and 
    administration. TAMCO, a registered investment adviser under the 
    Investment Advisers Act of 1940, also serves as investment manager with 
    respect to the Partnership assets. TAMCO and the Adviser are wholly 
    owned subsidiaries of The TCW Group, Inc. As compensation for its 
    services, TAMCO is paid a monthly management fee with respect to each 
    limited partner's pro rata share of the Partnership's net asset value 
    (``Attributable Value'').\1\
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        \1\ The annual management fees payable to TAMCO by the 
    Partnership are 1.00% on the first $2 million or less of 
    Attributable Value, .75% on Attributable Value exceeding $2 million 
    and less than $5 million, and .50% on Attributable Value exceeding 
    $5 million.
    
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    [[Page 58918]]
    
        3. The Company, a Maryland corporation, is a no-load, open-end 
    investment company registered under the Act. The Company currently 
    offers twelve series (``Existing Funds''), ten of which were formed in 
    connection with the transfer of interests in certain limited 
    partnerships in exchange for shares of those series. TAMCO served as 
    general partner for each of such limited partnerships. One of the 
    Existing Funds was formed in connection with an exchange of shares 
    between the Company and TCW Investment Funds, Inc., another registered 
    investment company. The Company is managed by a board of directors 
    (``Board''), currently consisting of five members. Three members of the 
    Board are persons who are not ``interested persons'' (as defined in the 
    Act) of the Company (``Independent Directors'').
        4. The Company proposes to offer an additional series (``Fund''), 
    which will correspond to the Partnership in terms of its investment 
    objective and policies. The Fund will acquire assets from the 
    Partnership in exchange for Fund shares (``Exchange''), pursuant to an 
    Agreement and Plan of Exchange (``Plan''). The Plan permits the 
    Partnership to retain sufficient assets to pay any Partnership-accrued 
    expenses and retain any assets that the Company is not permitted to 
    purchase or that are reasonably determined to be unsuitable for it. No 
    liabilities of the Partnership will be transferred to the Fund; all 
    known liabilities, other than accrued expenses discussed immediately 
    above, will be paid by the Partnership prior to the transfer of its 
    assets to the Fund. The general partner, TAMCO, will be responsible for 
    any unknown liabilities of the Partnership. Prior to effecting the 
    Exchange, a private placement memorandum will be distributed to each 
    limited partner in the Partnership. The memorandum will describe the 
    nature and reasons for the Exchange, the tax and other consequences to 
    the limited partners, and other relevant matters, including a 
    comparison of the Fund and the Partnership in terms of their investment 
    objectives and policies, fee structures, management structures, and 
    other aspects of their operations.
        5. Fund shares delivered to the Partnership in the Exchange will 
    have an aggregate net asset value equivalent to the net asset value of 
    the assets transferred by the Partnership to the Company (except for 
    the effect of certain organizational expenses paid by the Company, as 
    discussed below). Upon consummation of the Exchange, Fund shares 
    received by the Partnership will be distributed by the Partnership 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 certain 
    organizational expenses paid by the Company and the effect of any 
    assets retained by the Partnership to pay accrued expenses). After 
    payment of any accrued expenses from retained assets, the Partnership 
    will be liquidated and dissolved. Assets retained by the Partnership 
    that are not needed to pay expenses will be distributed pro rata to the 
    partners of the Partnership.
        6. The expenses of the Exchange will be borne by TAMCO. 
    Organizational expenses of up to a maximum of $50,000 will be paid by 
    the Fund and amortized over five years. Organizational expenses in 
    excess of $50,000 will be paid by the Adviser. To the extent there are 
    unamortized organizational expenses associated with the organization of 
    the Fund or the Existing Funds at the time the Adviser withdraws its 
    initial investment in the Company, those expenses will be borne by the 
    Adviser and not the Fund or the Existing Funds.
        7. The partnership agreement governing the operations of the 
    Partnership (``Partnership Agreement'') provides that the Partnership 
    may be converted into a registered investment company, if TAMCO, as 
    sole general partner of the Partnership, determines such conversion to 
    be in the best interest of the Partnership. 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 and, at their request, receive either cash or a pro 
    rata in-kind distribution.
        8. The Company has entered into an advisory agreement with the 
    Adviser (``Advisory Agreement''), pursuant to which the Adviser renders 
    advisory services to the Existing Funds. Under the Advisory Agreement, 
    the Adviser will render to the Fund services substantially the same as 
    those TAMCO currently renders to the Partnership. The Adviser is a 
    registered investment adviser under the Investment Advisers Act of 
    1940.
        9. In return for the Adviser's services, the Fund will pay a 
    management fee to the Adviser on a monthly basis. Applicants expect 
    that other Fund expenses will generally be higher as a percentage of 
    net asset value than the expenses of the Partnership, primarily because 
    of the increased costs of operating a registered investment company and 
    complying with various additional regulatory requirements and industry 
    practices. The Adviser will, however, place a limit on the annual 
    expenses of the Fund through the end of 1997. This limit is generally 
    intended to cap Fund expense ratios at levels projected to be incurred 
    during 1996 by the Partnership.
        10. The Board and TAMCO have considered the desirability of the 
    Exchange from the respective points of view of the Company and the 
    Partnership, and all members of the Board (including all of the 
    Independent Directors) and TAMCO have approved the Exchange and 
    concluded that: (i) the terms of the Exchange are designed to meet the 
    criteria contained in section 17(b) of the Act; (ii) the Exchange is 
    desirable as a business matter from the respective points of view of 
    the Company and the Partnership; (iii) the Exchange is in the best 
    interests of the Company and the Partnership; (iv) the Exchange is 
    reasonable and fair, does not involve overreaching, and is consistent 
    with the policies of the Act; (v) the Exchange is consistent with the 
    policies of the Company and the Partnership; and (vi) the interests of 
    existing shareholders in the Company and existing partners in the 
    Partnership will not be diluted as a result of the Exchange. The 
    Exchange will not be effected until (a) the Company's amended 
    registration statement has been filed; (b) the Company and the 
    Partnership have received an opinion of counsel with respect to the tax 
    consequences of the Exchange; and (c) 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, (1) any person directly or indirectly controlling, 
    controlled by, or under common control with, such other person, (2) any 
    officer, director, partner, copartner or employee of such other person, 
    or, (3) if such other person is an investment company, any investment 
    company or adviser of such investment company. The Partnership is an 
    affiliated person of an affiliated person of the Company because TAMCO, 
    general partner of the Partnership, and the Adviser are under common 
    control. Thus, the proposed Exchange may be deemed to be prohibited 
    under section 17(a) of the Act, unless relief is granted.
    
    [[Page 58919]]
    
        2. Section 17(b) of the Act authorizes the Commission to exempt any 
    person from one or more of the provisions of Section 17(a) if evidence 
    establishes that (1) 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; (2) the 
    proposed transaction is consistent with the policy of each registered 
    investment company concerned; and (3) the proposed transaction is 
    consistent with the general purposes of the Act.
        3. Applicants contend that the Exchange will permit partners to 
    pursue, as shareholders of the Fund, substantially the same investment 
    objective and policies they were expecting from the partnership without 
    sacrificing the pass-through tax features 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.
        4. Applicants assert that the terms of the Exchange should be 
    considered reasonable and fair to the Partnership, to the Company, and 
    to the limited partners who, with TAMCO, will be the initial 
    shareholders of the Fund, and should not be considered to involve 
    overreaching on the part of any applicant, for the following reasons:
        (a) The investment objectives and policies of the Fund are 
    substantially similar to that of the partnership.
        (b) No brokerage commission, fee or other remuneration will be paid 
    in connection with the Exchange.
        (c) If effected in the manner described in the application, the 
    Exchange will result in no gain or loss being recognized by partners of 
    the Partnership. The partners of the Partnership will become investors 
    in an entity that offers greater liquidity and other advantages, 
    without immediate tax consequences and without having incurred 
    transaction and brokerage charges in order to do so.
        (d) A majority of the members of the Board, including a majority of 
    the Independent Directors, and the general partner of the Partnership 
    have approved the Exchange.
        (e) Fund shares will be issued at their net asset value.
        5. Applicants believe that the terms of the proposed Exchange are 
    consistent with the provisions, policies and purposes of the Act in 
    that they are reasonable and fair to all parties, do not involve 
    overreaching, and are consistent with the investment policies of each 
    of the applicants.
    
        For the SEC, by the Division of Investment Management, under 
    delegated authority.
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 96-29516 Filed 11-18-96; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
11/19/1996
Department:
Securities and Exchange Commission
Entry Type:
Notice
Action:
Notice of Application for Exemption Under the Investment Company Act of 1940 (the ``Act'').
Document Number:
96-29516
Dates:
The application was filed on September 5, 1996. Applicants have agreed to file an amendment during the notice period, the substance of which is included in this notice.
Pages:
58917-58919 (3 pages)
Docket Numbers:
Rel. No. IC-22327, 812-10330
PDF File:
96-29516.pdf