diff --git a/msvc.jam b/msvc.jam
index 31f9e4b1f..05a67d062 100755
--- a/msvc.jam
+++ b/msvc.jam
@@ -28,9 +28,6 @@ feature.subfeature toolset msvc : vendor
     # link-incompatible  
     ;
   
-.version-configured =  ;
-.versionless-configured =  ;
-
 # Initialize the toolset
 rule init ( version ? : path ? : vendor ? : setup ? compiler ? linker ? )
 {
@@ -47,33 +44,18 @@ rule init ( version ? : path ? : vendor ? : setup ? compiler ? linker ? )
     local condition  = -$(vendor)$(version) ;
     condition ?= "" ;
     condition = <toolset>msvc$(condition) ;
-    
+     
     # setup will be used iff a path has been specified.  If setup is
     # not specified, vcvars32.bat will be used instead.
     setup ?= vcvars32.bat ;
     
     if ! $(path) && ! $(vendor)
     {
-        local v = [ MATCH ^(6|[^6].*) : $(version) ] ;
-        local version-6-path = "c:\\Program Files\\Microsoft Visual Studio\\VC98" ;
-        local version-7-path = "c:\\Program Files\\Microsoft Visual Studio .NET\\VC7" ;
-        local version-7.0-path = $(version-7-path) ;
-        local version-7.1-path = "c:\\Program Files\\Microsoft Visual Studio .NET 2003\\VC7" ;
-        local default-path = $(version-$(v)-path) ;
-        
-        # look for the setup program in both the system PATH and in
-        # its default installation location based on version
-        local env-PATH = [ modules.peek : PATH Path path ] ;
-        local PATH-setup =  [ GLOB $(env-PATH) : $(setup) ] ;
-        local default-setup =  [ GLOB $(default-path)\\bin : $(setup) ] ;
-        
-        if $(default-setup) && $(PATH-setup) != $(default-setup)
-        {
-            path = $(default-path) ;
-        }
+        path = [ locate $(version) ] ;
         
         compiler = $(compiler) ;
 
+        local env-PATH = [ modules.peek : PATH Path path ] ;
         if ! [ GLOB [ path.native [ path.join $(path) "bin" ] ] $(env-PATH) : $(compiler:E=CL).EXE ]
         {
             error toolset msvc $(vendor) $(version) initialization: :
@@ -82,7 +64,9 @@ rule init ( version ? : path ? : vendor ? : setup ? compiler ? linker ? )
                   : PATH= \"$(env-PATH)\" ;
         }
     }
-    
+
+    # FIXME? The 'path' can be empty here, which will give us
+    # empty 'setup'. See comment in 'locate' below.
     setup = "call \""$(path)\\bin\\$(setup)"\" > nul" ;
     
     if [ os.name ] = NT
@@ -94,8 +78,6 @@ rule init ( version ? : path ? : vendor ? : setup ? compiler ? linker ? )
     {
         setup = "cmd /S /C "$(setup)" \"&&\" " ;
     }
-    
-    flags msvc SETUP $(condition) : $(setup:E="") ;
 
     # prefix with setup, or quoted path if any
     local prefix = $(setup) ;
@@ -103,7 +85,7 @@ rule init ( version ? : path ? : vendor ? : setup ? compiler ? linker ? )
     prefix ?= "" ;
     compiler ?= cl ;
     linker ?= link ;
-    
+
     flags msvc.compile .CC $(condition) : $(prefix)$(compiler) ;
     flags msvc.link .LD $(condition) : $(prefix)$(linker) ;
     flags msvc.archive .LD $(condition) : $(prefix)$(linker) ;
@@ -111,6 +93,38 @@ rule init ( version ? : path ? : vendor ? : setup ? compiler ? linker ? )
 
 .CC = cl ;
 .LD = LINK ;
+  
+
+# Attempts to find the directory where the compiler is located, and returns it.
+# If there are several possibilities, returns arbitrary one, after issuing a
+# warning message.
+local rule locate ( version )
+{
+    local v = [ MATCH ^(6|[^6].*) : $(version) ] ;
+    local version-6-path = "c:\\Program Files\\Microsoft Visual Studio\\VC98" ;
+    local version-7-path = "c:\\Program Files\\Microsoft Visual Studio .NET\\VC7" ;
+    local version-7.0-path = $(version-7-path) ;
+    local version-7.1-path = "c:\\Program Files\\Microsoft Visual Studio .NET 2003\\VC7" ;
+    local default-path = $(version-$(v)-path) ;
+        
+    # look for the setup program in both the system PATH and in
+    # its default installation location based on version
+    local env-PATH = [ modules.peek : PATH Path path ] ;
+    local PATH-setup =  [ GLOB $(env-PATH) : $(setup) ] ;
+    local default-setup =  [ GLOB $(default-path)\\bin : $(setup) ] ;
+
+    # CONSIDER: what's the intentions here? Probably, it's meant that if
+    # setup script found in path is the same as setup script found
+    # in default location, we can invoke this script without full path.
+    # This probably does not work --- if we return empty path, the setup
+    # script won't be called at all.
+    if $(default-setup) && $(PATH-setup) != $(default-setup)
+    {
+        return $(default-path) ;
+    }                
+}
+
+
 
 # Declare generators