[Federal Register Volume 63, Number 84 (Friday, May 1, 1998)]
[Notices]
[Pages 24198-24200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11565]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23127; 812-10988]
TCW/BQA Enhanced 500 Limited Partnership, et al.; Notice of
Application
April 24, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 17(b) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
section 17(a) of the Act.
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SUMMARY OF THE APPLICATION: Applicants seek an order to permit certain
limited partnerships to transfer their assets to corresponding series
of a registered open-end management investment company in exchange for
the series' shares.
APPLICANTS: TCW/BQA Enhanced 500 Limited Partnership, TCW Emerging
Markets Fixed Income Total Return II Limited Partnership, TCW Large Cap
Growth Limited Partnership, TCW Large
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Cap Value Limited Partnership (collectively, ``Partnerships''), TCW
Galileo Funds, Inc. (``Company''), TCW Asset Management Company
(``TAMCO''), and TCW Funds Management, Inc. (``Adviser'').
FILING DATE: The application was filed on February 4, 1998. Applicants
have agreed to file an additional amendment, the substance of which is
incorporated in this notice, during the notice period.
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 the
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 May 19, 1998 and
should be accompanied by proof of service on the 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 may request
notification by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 865 South Figueroa Street, Suite 1800, Los Angeles,
CA 90017.
FOR FURTHER INFORMATION CONTACT:
Annmarie J. Zell, Staff Attorney, at (202) 942-0532, or Mary Kay Frech,
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 from
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington,
D.C. 20549 (telephone (202) 942-8090).
Applicants' Representations
1. TWC/BQA Enhanced 500 Limited Partnership, TCW Emerging Markets
Fixed Income Total Return II Limited Partnership, TCW Large Cap Growth
Limited Partnership, and TCW Large Cap Value Limited Partnership were
organized as California limited partnerships on May 31, 1996, August
23, 1996, June 22, 1993, and October 13, 1997, respectively. The
Partnerships are not registered under the Act in reliance on section
3(c)(1) of the Act.
2. TAMCO, a wholly owned subsidiary of The TCW Group, Inc., serves
as the sole general partner of the Partnerships and has exclusive
responsibility for their overall management, control, and
administration. TAMCO is an investment adviser registered under the
Investment Advisers Act of 1940 (``Advisers Act'') and serves as an
investment adviser with respect to the Partnerships' assets.
3. The Company, a Maryland corporation, is an open-end management
investment company registered under Act. Currently, the Company offers
seventeen series (``Existing Funds'') and proposes to offer four
additional series (``New Funds''), each of which will correspond to a
Partnership in terms of investment objective and policies.
4. The Company has entered into an investment advisory agreement
with the Adviser, an investment adviser registered under the Advisers
Act, pursuant to which the Adviser will provide advisory services to
the Existing Funds and New Funds. 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 corresponding New
Funds.
5. Applicants propose that, pursuant to an Agreement and Plan of
Exchange (``Plan''), each of the New Funds will acquire assets from its
corresponding Partnership in exchange for New Fund shares
(``Exchanges''). New Fund shares delivered to the Partnerships in the
Exchanges will have an aggregate net asset value (``NAV'') equal to the
NAV of the assets transferred by the Partnerships to the Company
(except for any reduction due to the New Funds' payment of
organizational expenses). Upon consummation of the Exchanges, each
Partnership will distribute the New Fund shares to its respective
limited partners, with each limited partner receiving shares having an
aggregate NAV equivalent to the NAV of the units of the Partnership
held by the limited partner prior to the Exchange (except for the
effect of the payment of certain organizational expenses by the New
Funds and the retention of assets by the Partnership to pay accrued
expenses). After payment of any accrued expenses from retained assets,
each Partnership will be liquidated and dissolved. No liabilities of a
Partnership will be transferred to its corresponding New Fund; all
known liabilities, other than accrued expenses discussed above, will be
paid by each Partnership prior to the transfer of its assets to the
corresponding New Fund. The General Partner, TAMCO, will be responsible
for any unknown liabilities of each Partnership.
6. The expenses of the Exchanges will be borne by TAMCO.
Organizational expenses, up to a maximum of $50,000 per New Fund, will
be paid by the New Funds and amortized over five years. Organizational
expenses in excess of $50,000 per New Fund will be paid by the Adviser.
Any unamortized organization expenses associated with the organization
of the New Funds at the time the Adviser withdraws its initial
investment in the Company will be borne by the Adviser, not the New
Funds. Through October 31, 1998, the Adviser will place a limit on the
annual expenses of each New Fund. This limit is generally intended to
cap New Fund expense ratios at levels projected to be incurred during
1998 by the Partnerships.
7. The board of directors of the Company (``Board'') and TAMCO have
considered the desirability of the Exchanges from the points of view of
the company and the Partnerships, and all of the members of the Board
(including all of the independent directors within the meaning of
section 2(a)(19) of the Act) and TAMCO have approved the Exchanges and
concluded that: (i) the terms of the Exchanges have been designated to
meet the criteria in section 17(b) of the Act; (ii) the Exchanges are
desirable as a business matter from the respective points of view of
the Company and the Partnerships; (iii) the Exchanges are in the best
interests of the Company and the Partnerships; (iv) the Exchanges are
reasonable and fair, do not involve overreaching, and are consistent
with the policies of the Act; (v) the Exchanges are consistent with the
policies of the Company and the Partnerships; and (vi) the interests of
existing shareholders in the Company and existing partners in the
Partnerships will not be diluted as a result of the Exchanges. These
findings, and the basis upon which the findings are made, have been
fully recorded in the respective minute books of the Company and TAMCO.
8. The Exchanges will not be effected until (i) the Company's Form
N-1A registration statement has been filed; (ii) the Company and the
Partnerships have received a favorable opinion of counsel regarding the
tax consequences of the Exchanges; and (iii) the SEC has issued the
requested order.
Applicants' Legal Analysis
1. Section 17(a) of the Act prohibits any affiliated person of a
registered investment company, or any affiliated person of such a
person, acting as principal from selling to or purchasing from the
registered investment 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
[[Page 24200]]
with, such other person; and officer, director, partner, copartner or
employee of such other person; or, if such other person is an
investment company, any investment adviser of the investment company.
Each Partnership is an affiliated person of an affiliated person of the
Company because TAMCO, the general partner of the Partnerships, and the
Adviser are under common control. Thus, the proposed Exchanges may be
deemed to be prohibited under section 17(a) of the Act.
2. Rule 17a-7 exempts certain purchase and sale transactions
otherwise prohibited by section 17(a) if an affiliation exists solely
by reason of having a common investment adviser, common directors, and/
or common officers, provided, among other requirements, that the
transaction involves a cash payment against prompt delivery of the
security. The relief provided by rule 17a-7 may not be available to
applicants because the transaction is effected on a basis other than
cash. Applicants also note that TAMCO is not only the investment
adviser but also has a one percent economic interest in each
Partnership. As a result, applicants believe that the relief afforded
by rule 17a-7 is not available.
3. Section 17(b) of the Act authorized the SEC to exempt any person
from the provisions of 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 and the proposed transaction is consistent with the policy of
each registered investment company concerned and the general purposes
of the Act.
4. Applicants believe that the proposed Exchanges satisfy the
requirements of section 17(b). Applicants state that because New Fund
shares will be issued to the limited partners at net asset value and
only nominal shares will be outstanding after the completion of the
Exchanges, their interests will not be diluted. Applicants also state
that the investment objectives and policies of each New Fund are
substantially similar to its corresponding Partnership and that after
the Exchanges, limited partners will hold substantially the same assets
as Company shareholders as they held as limited partners. Applicants
also note that the partners will become investors in an entity that
offers greater liquidity, without incurring immediate tax consequences
or transaction and brokerage charges. In this sense, applicants submit
that the Exchanges can be viewed as a change in the form in which
assets are held, rather than a disposition giving rise to section 17(a)
concerns.
Applicants' Condition
Applicants agree that the order granting the requested relief will
be subject to the following condition:
The Exchanges will comply with the terms of rule 17a-7(b) through
(f).
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-11565 Filed 4-30-98; 8:45 am]
BILLING CODE 8010-01-M
