Morgan Stanley Dean Witter Institutional Fund, Inc., et al.; Notice of Application

[Federal Register Volume 64, Number 96 (Wednesday, May 19, 1999)]
[Notices]
[Pages 27339-27341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12538]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Rel. No. IC-23834; 812-9600]


Morgan Stanley Dean Witter Institutional Fund, Inc., et al.; 
Notice of Application

May 12, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to section 17(d) of 
the Investment Company Act of 1940 (``Act'') and rule 17d-1 under the 
Act.

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SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered management investment companies to deposit their uninvested 
cash balances into one or more joint accounts for the purpose of 
investing in short-term repurchase agreements.

    Applicants: Morgan Stanley Dean Witter Institutional Fund, Inc. 
(``MSDWIF''), Morgan Stanley Dean Witter Universal Funds, Inc. 
(``MSDWUF''), and Van Kampen Series Fund, Inc. (``VKSF'') (each an 
``Open-End Fund'' and, collectively, the ``Open-End Funds''); The Latin 
American Discovery Fund, Inc., The Malaysia Fund, Inc., Morgan Stanley 
Africa Investment Fund, Inc., Morgan Stanley Asia-Pacific Fund, Inc., 
Morgan Stanley Emerging Markets Debt Fund, Inc., Morgan Stanley 
Emerging Markets Fund, Inc., Morgan Stanley Global Opportunity Bond 
Fund, Inc., The Morgan Stanley High Yield Fund, Inc., Morgan Stanley 
India Investment Fund, Inc., The Pakistan Investment Fund, Inc., The 
Thai Fund, Inc., The Turkish Investment Fund, Inc., and Morgan Stanley 
Russia & New Europe Fund, Inc. (each a ``Closed-End Fund'' and, 
collectively, the ``Closed-End Funds''); Morgan Stanley Dean Witter 
Investment Management, Inc. (``MSDW Investment Management''); and 
Miller Anderson & Sherrerd, LLP (``Miller Anderson'').

    Filing Dates: The application was filed on May 10, 1995 and was 
amended on March 27, 1997, June 11, 1998, and December 4, 1998. 
Applicants have agreed to file an amendment, the substance of which is 
included in this notice, during the notice period.

    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 June 7, 1999 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 of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549-0609. Applicants, c/o Richard W. 
Grant, Esq., Morgan, Lewis & Bockius LLP, 1701 Market Street, 
Philadelphia, PA 19103.

FOR FURTHER INFORMATION CONTACT: Rachel H. Graham, Senior Counsel, at 
(202) 942-0583, 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 Commission's Public Reference Branch, 450 Fifth Street, NW, 
Washington, DC 20549-0102 (tel. (202) 942-8090).

Applicant's Representations

    1. The Open-End Funds are open-end management investment companies 
registered under the Act. Each Open-End Fund currently offers multiple 
portfolios (``Portfolios''). The Closed-End Funds are closed-end 
management investment companies registered under the Act. The 
Portfolios of the Open-End Funds and the Closed-End Funds are referred 
to collectively as the ``Funds'' and, individually, as a ``Fund.''

    2. MSDW Investment Management is registered under the Investment 
Advisers Act of 1940 (``Advisers Act'') and serves as investment 
adviser to each Portfolio of MSDWIF, certain Portfolios of MSDWUF, and 
each Closed-End Fund. Miller Anderson is registered under the Advisers 
Act and serves as investment adviser to the remaining MSDWUF 
Portfolios. In addition, MSDW Investment Management serves as 
investment subadviser to twenty VKSF Portfolios, and Miller Anderson 
serves as investment subadviser to the remaining two VKSF Portfolios. 
MSDW Investment Management and Miller Anderson are subsidiaries of 
Morgan Stanley Dean Witter & Co. MSDW Investment Management, Miller 
Anderson, and all registered investment advisers now or in the future 
controlling, controlled by, or under common control and MSDW Investment 
Management or Miller Anderson are referred to as the ``Advisers'' or, 
individually, as an ``Adviser.''

    3. Applicants request that any relief granted pursuant to the 
application also apply to (i) future Portfolios of the Open-End Funds 
and (ii) all other registered management investment companies for which 
an Adviser may now or in the future act as investment adviser 
(collectively, the ``Future Funds'').\1\
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    \1\ Each Fund that currently intends to rely on the requested 
order is named as an applicant. Any Future Fund that relies on the 
requested relief will do so only in compliance with the terms and 
conditions of the application.

    4. The U.S. assets of each Fund are held by the Chase Manhattan 
Bank (``Chase'') as custodian. At the end of each trading day, each 
Fund has, or may have, uninvested cash balances resulting primarily 
from share purchases that occurred late in the day and cash held in 
order to assure prompt payment of redemption proceeds (``Cash 
Balances''). The Cash Balance of each Fund generally is invested by the 
Fund's Adviser in short-term investments authorized by the Fund's 
investment policies. Currently, the advisers must make such investments 
separately on behalf of each Fund. Applicants asserts that these 
separate purchases result in certain inefficiencies that limit a Fund's 
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return on investment of its Cash Balance.

    5. Applicants propose that the Funds establish joint trading 
accounts or subaccounts (``Joint Accounts'') with Chase or other 
custodians (collectively, ``Custodians,'' and each a ``Custodian'') 
into which the Funds may deposit some

[[Page 27340]]

or all of their Cash Balances. The balances in the Joint Accounts will 
be invested in repurchase agreements with an overnight, over-the 
weekend, or over-a-holiday maturity and a term of no more than seven 
days (``Overnight Investments''). The investment policies of each Fund 
permit investments in Overnight Investments. Currently, applicants 
expect to establish two Joint Accounts with Chase as custodian: one 
Joint Account for the Funds advised or sub-advised by MSDW Investment 
Management, and the other for the Funds advised or sub-advised by 
Miller Anderson.

    6. All investments in Overnight Investments through the Joint 
Accounts will be effected only in compliance with (i) standards and 
procedures established by the board of trustees or directors 
(``Board'') of each Fund with respect to Overnight Investments, and 
(ii) guidelines set forth in Investment Company Act Release No. 13005 
(Feb. 2, 1983) and any other existing and future positions taken by the 
SEC or its staff by rule, release, letter, or order relating to joint 
Overnight Investment transactions.

    7. The Funds will enter into ``hold-in-custody'' repurchase 
agreements (i.e., repurchase agreements where the counterparty or one 
of its affiliated persons may have possession of, or control over, the 
collateral subject to the agreement) only where cash is received very 
late in the business day and otherwise would be unavailable for 
investment.

    8. Each list of approved repurchase agreement counterparties 
(``Approved Counterparties'') for a Fund is monitored by the Fund's 
Adviser on an ongoing basis and reviewed by the Fund's Board on a 
quarterly basis. Approved Counterparties may include the Custodian and 
certain affiliated persons of the Advisers to the extent permitted by 
the Act or by relief from the Act obtained by the Funds.

    9. Before investing the assets of any Fund in Overnight Investments 
through a Joint Account, the Adviser will determine that all Overnight 
Investments in which that Fund will participate are permissible 
investments for that Fund. The Joint Accounts will only be used to 
aggregate what otherwise would be one or more daily transactions by 
each participating Fund to manage its daily Cash Balance.

    10. The Advisers will be responsible for investing the balances of 
the Joint Accounts, establishing accounting and control procedures, and 
ensuring equal treatment of each participating Fund. The Advisers will 
not charge any additional or separate fees for administering or 
advising the Joint Accounts and will have no monetary participation in 
the Joint Accounts.

Applicant's Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such a person, acting as principal, from 
participating in any joint enterprise or arrangement in which that 
investment company is a participant, unless the Commission has issued 
an order authorizing the arrangement. In determining whether to grant 
such an order, the Commission considers whether the participation of 
the registered investment company in the proposed joint arrangement is 
consistent with the provisions, policies, and purposes of the Act and 
the extent to which such participation is on a basis different from or 
less advantageous than that of other participants in the arrangement.

    2. Under section 2(a)(3) of the Act, each Fund might be deemed to 
be an ``affiliated person'' of each other Fund, or an affiliated person 
of such a person, if each Adviser was deemed to control each Fund that 
it advises or subadvises. Applicants state that each Fund participating 
in a Joint Account and the Adviser managing that Joint Account may be 
deemed to be ``joint participants'' in a transaction within the meaning 
of section 17(d) of the Act. In addition, applicants state that each 
Joint Account may be deemed to be a ``joint enterprise or other 
arrangement'' within the meaning of rule 17d-1.

    3. Applicants assert that no participating Fund will receive fewer 
relative benefits from effecting its transactions through the proposed 
Joint Accounts than any other participating Fund. Applicants also 
believe that the proposed method of operating the Joint Accounts will 
not result in any conflicts of interest among any of the Funds or 
between any Fund and its Adviser. Each Fund's liability on any 
Overnight Investment invested in through the Joint Accounts will be 
limited to its own interest in such Overnight Investment.

    4. Applicants believe that the Joint Accounts could result in 
certain benefits to the Funds. The Funds may earn a higher return on 
investments effected through the Joint Accounts relative to the returns 
they could earn individually. Under normal market conditions, 
applicants assert, it is possible to negotiate a higher rate of return 
on larger Overnight Investments than that available on smaller 
Overnight Investments. Applicants further assert that Funds precluded 
from investing individually in Overnight Investments because of their 
relatively small Cash Balances would be able to invest in such 
instruments through the Joint Accounts. Finally, applicants assert that 
the Funds would reduce significantly their transaction fees and 
expenses by aggregating through the Joint Accounts what would otherwise 
be separate investments by each Fund to manage its daily Cash Balance.

    5. Applicants submit that the proposed Joint Accounts meet the 
criteria of rule 17d-1 for issuance of an order. Applicants state that, 
although the Advisers may realize some benefit through administrative 
convenience and reduced clerical costs, the Funds would be the primary 
beneficiaries of the Joint Accounts.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:

    1. The Joint Accounts will be established at a Custodian as one or 
more separate cash accounts on behalf of the Funds that are advised or 
subadvised by a particular Adviser. Each Fund may deposit daily all or 
a portion of its Cash Balances into the Joint Accounts that are advised 
or subadvised by its Adviser. If a Fund wishes to participate in a 
Joint Account that will be maintained by a Custodian other than its 
regular Custodian, the Fund would appoint that Custodian as its sub-
custodian for the limited purpose of: (1) Receiving and disbursing 
cash; (ii) holding any Overnight Investment purchased by the Joint 
Account; and (iii) holding any collateral received from a transaction 
effected through the Joint Account. Any Fund that appoints a sub-
custodian will take all necessary actions to authorize that entity as 
its legal custodian, including all actions required under the Act.

    2. Cash in the Joint Accounts will be invested solely in Overnight 
Investments with a maximum maturity of seven days that are 
``collateralized fully,'' as defined in a rule 2a-7 under the Act, and 
that will comply with the investment policies of each Fund 
participating in that Overnight Investment.

    3. All Overnight Investments invested in through the Joint Accounts 
will be valued on an amortized cost basis to the extent permitted by 
applicable Commission or staff releases, rules, letters, or orders. 
Each Fund that relies upon rule 2a-7 under the Act will use the dollar-
weighted average maturity of a Joint Account's Overnight Investments

[[Page 27341]]

for the purpose of computing that Fund's average portfolio maturity on 
that day with respect to the portion of its assets held in that Joint 
Account.

    4. In order to assure that there will be no opportunity for one 
Fund to use any part of a balance of any Joint Account credited to 
another Fund, no Fund will be allowed to create a negative balance in 
any Joint Account for any reason, although each Fund will be permitted 
to draw down its pro rata share of the entire balance at any time. Each 
Fund's decision to invest through the Joint Accounts will be solely at 
the option of that Fund and its Adviser, and no Fund will in any way be 
obligated to invest through, or maintain any minimum balance in, the 
Joint Accounts. In addition, each Fund will retain the sole rights of 
ownership of any of its assets, including interest payable on such 
assets, invested through the Joint Accounts. Each Fund's investments 
effected through the Joint Accounts will be documented daily on the 
books of that Fund as well as on the books of the Custodian. Each Fund, 
through its Adviser and/or Custodian, will maintain records (in 
conformity with section 31 of the Act and the rules thereunder) 
documenting, for any given day, the Fund's aggregate investment in a 
Joint Account and its pro rata share of each Overnight Investment made 
through such Joint Account.

    5. Each Fund will participate in and own its proportionate share of 
an Overnight Investment, and receive the income earned on or accrued in 
such Overnight Investment, based upon the percentage of such investment 
purchased with amounts contributed by such Fund, and each Fund will 
participate in a Joint Account on the same basis as every other Fund in 
conformity with its respective fundamental investment objectives, 
policies, and restrictions. Any Future Funds that participate in a 
Joint Account would do so on the same terms and conditions as the 
existing Funds.

    6. Each Adviser will administer the Joint Accounts in accordance 
with standards and procedures established by the Board of each Fund 
that it advises as a part of its duties under its existing or future 
investment advisory contracts with the Funds, and will not collect any 
additional or separate fee for the administration of the Joint 
Accounts.

    7. The administration of the Joint Accounts will be within the 
fidelity bond coverage required by section 17(g) of the Act and rule 
17g-1 under the Act.

    8. The Board of each Fund investing in Overnight Investments 
through the Joint Account will adopt procedures pursuant to which the 
Joint Accounts will operate, which procedures will be reasonably 
designed to provide that the requirements of this application will be 
met. The Board will make and approve such changes as it deems necessary 
to ensure that such procedures are followed. In addition, not less 
frequently than annually, the Board will evaluate the Joint Account 
arrangements, will determine whether the Joint Accounts have been 
operated in accordance with the adopted procedures, and will authorize 
a Fund's continued participation in the Joint Accounts only if the 
Board determines that there is a reasonable likelihood that such 
continued participation would benefit that Fund and its shareholders.

    9. The Joint Accounts will not be distinguishable from any other 
accounts maintained by a Fund with a Custodian, except that moneys from 
various Funds will be deposited in the Joint Accounts on a commingled 
basis. The Joint Accounts will not have a separate existence with 
indicia of a separate legal entity. The sole function of the Joint 
Accounts will be to provide a convenient way of aggregating individual 
transaction that would otherwise require daily management and 
investment of Cash Balances by each Fund.

    10. Overnight Investments held in a Joint Account generally will 
not be sold prior to maturity unless: (i) The Adviser believes that the 
investment no longer presents minimal credit risk; (ii) as a result of 
credit downgrading or otherwise, the investment no longer satisfies the 
investment criteria of all Funds participating in the investment; or 
(iii) the counterparty defaults. A Fund may, however, sell its 
fractional portion of an investment in a Joint Account prior to the 
maturity of the investment if the cost of the transaction will be borne 
solely by the selling Fund and the transaction would not adversely 
affect the other Funds participating in that Joint Account. In no case 
would an early termination by less than all participating Funds be 
permitted if it would reduce the principal amount or yield received by 
other Funds participating in a particular Joint Account or otherwise 
adversely affect the other participating Funds. Each Fund participating 
in such Joint Account will be deemed to have consented to such sale and 
partition of the investment in such Joint Account.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-12538 Filed 5-18-99; 8:45 am]
BILLING CODE 8010-01-M