[Federal Register Volume 59, Number 239 (Wednesday, December 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30710]


[[Page Unknown]]

[Federal Register: December 14, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-20759; 813-134]

 

Employee Incentive Partnership, L.P. et al.; Notice of 
Application

December 8, 1994.
agency: Securities and Exchange Commission (the ``SEC'' or the 
``Commission'').

action: Notice of application for an order under the Investment Company 
Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

applicants: Employee Incentive Partnership, L.P. (the ``Incentive 
Partnership''), a New York limited partnership, and Tiger Management 
Corporation, the general partner of the Incentive Partnership (the 
``General Partner'').

Relevant Act Sections: Order requested under sections 6(b) and 6(e) 
granting an exemption from all provisions of the Act except section 9, 
certain provisions of sections 17 and 30, and sections 36 through 53, 
and the rules and regulations thereunder.

summary of application: Applicants request an order that would exempt 
the Incentive Partnership from most provisions of the Act and would 
permit certain affiliated and joint transactions. Applicants also 
request that the order apply to (1) other partnerships that will be 
identical in all material respects to the Incentive Partnership and 
that may be formed from time to time (the ``Subsequent Incentive 
Partnerships'') on the terms and conditions applicable to the Incentive 
Partnership, and (2) other entities directly or indirectly controlled 
by the General Partner that may serve as general partner of the 
Subsequent Incentive Partnerships. The Incentive Partnership and the 
Subsequent Incentive Partnerships are collectively referred to as the 
``Partnerships.'' Each Partnership will be an employees' securities 
company within the meaning of section 2(a)(13) of the Act.

filing date: The application was filed on September 8, 1994 and amended 
on December 5, 1994. By supplemental letter dated December 7, 1994, 
counsel, on behalf of applicants, agreed to file an amendment during 
the notice period to make certain technical changes to the application. 
This notice reflects the changes that will be made in the amendment.

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 29, 
1994, 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 
reasons for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request such notification by writing to 
the SEC's Secretary.

addresses: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, c/o Robert E. Fink, 101 Park Avenue, 47th Floor, New 
York, New York 10178.

For Further Information Contact: Marilyn Mann, Special Counsel, at 
(202) 942-0582, or Barry D. Miller, Senior Special Counsel, 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 
SEC's Public Reference Branch.

Applicants' Representations

    1. The Incentive Partnership is a limited partnership newly formed 
under the laws of the State of New York. The General Partner believes 
that the best way to motivate its staff is to provide them with a means 
to share in some of the gains that they reap for the General Partner's 
clients. The General Partner will provide this financial incentive to 
key personnel through the Incentive Partnership and any Subsequent 
Incentive Partnerships established in the future. Each Partnership will 
be formed for the benefit of present and former employees, officers, 
and directors of the General Partner and any entity that is directly or 
indirectly controlled by it who meet certain income and sophistication 
standards described below (``Eligible employees''). Eligible Employees 
and any trusts established by such Eligible Employees for the benefit 
of their immediate family that will be admitted to any or all of the 
Partnerships as limited partners are referred to as the ``Limited 
Partners.''
    2. The General Partner currently is expected to serve as general 
partner for the Subsequent Incentive Partnerships. In the future, 
however, one or more separate entities directly or indirectly 
controlled by the General Partner may serve as general partner of one 
or more of the Subsequent incentive Partnerships. The general partner 
of each Partnership, including the Incentive Partnership, will make the 
investment decisions for that Partnership.
    3. The General Partner is a corporation that is registered as an 
investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act'').\1\ It is a global asset manager providing advisory 
services to large institutional clients and wealthy individuals. The 
business and affairs of the General Partner are managed by or under the 
direction of its management committee (the ``Committee''), members of 
which qualify as Eligible Employees.
---------------------------------------------------------------------------

    \1\To the extent that any subsequent Incentive Partnership is 
managed by any person neither listed on the General Partner's Form 
ADV nor registered as an investment adviser under the Advisers act, 
applicants will consider, at the time of formation of such 
Subsequent Incentive Partnership, whether that person will be 
required to register as an investment adviser under the Advisers 
Act.
---------------------------------------------------------------------------

    4. In recent years the General Partner has organized certain 
private investment funds with institutional and individual investors 
(the ``Private Funds'') that are excluded from the definition of 
investment company under the Act by virtue of section 3(c)(1). In its 
capacity as a general partner of the Private Funds, the General Partner 
receives a performance allocation equal to a percentage of the Private 
Funds' net profits. Such allocation is not paid to the General Partner 
directly in cash. Instead, a portion of the Private Fund's income, 
gain, and unrealized appreciation is credited to the General Partner's 
capital accounts in an amount equal to the performance allocation.
    5. Upon receipt of the order (or such earlier date, if any, as 
applicants determine to rely on rule 6b-1 under the Act), the General 
Partner will cause the Incentive Partnership to be admitted as a 
partner of one of the Private Funds and, pursuant to its authority as a 
general partner of the Private Fund, the General Partner expects to 
cause part of the performance allocation to which it otherwise would be 
entitled in a given year to be allocated to the capital accounts of the 
Incentive Partnership. The performance allocation will be sub-allocated 
by the General Partner among the capital accounts of the individual 
Limited Partners of the Incentive Partnership.\2\ At the discretion of 
the General Partner, eligible Employees also may be permitted to make 
capital contributions to the Incentive Partnership.
---------------------------------------------------------------------------

    \2\The General Partner will not receive any performance 
allocation from the capital accounts of the Incentive partnership.
---------------------------------------------------------------------------

    6. The General Partner will have all powers necessary, proper, 
suitable, or advisable to carry out the purposes and business of the 
Incentive Partnership. No compensation will be paid to the General 
Partner by the Incentive Partnership for its services.\3\ The General 
Partner will bear all normal operating expenses incurred, including but 
not limited to office rent, supplies, secretarial services, travel and 
entertainment, telephone (local and long distance), printing, and 
stationery. Certain expenses designated as ``investment expenses,'' 
including commissions, the accounting and legal fees and disbursements 
related to any actual or threatened legal action or proceeding in 
connection with purchasing, selling, or holding any investment, 
borrowing charges on any securities sold short, custodial fees, bank 
service fees, organizational expenses of the Incentive Partnership, and 
any other reasonable expenses related to the purchase, sale, or 
transmittal of the Incentive Partnership assets, will be taken into 
account in determining net increases or net decreases in net worth of 
the Incentive Partnership.
---------------------------------------------------------------------------

    \3\The General Partner receives from each Private Fund a 
management fee, currently at an annual rate equal to one percent 
(1.0%) per annum of the Private Fund's net worth. The Incentive 
Partnership or any Subsequent Incentive Partnership that will invest 
in any of the Private Funds will incur a proportionate share of such 
management fee on the same economic terms as those applicable to 
third party investors.
---------------------------------------------------------------------------

    7. Limited partner interests in the Partnerships (the 
``Interests'') will be offered without registration under a claim of 
exemption under section 4(2) of the Securities Act of 1933, as amended 
(the ``1933 Act'') and will be offered only to Eligible Employees and 
any trusts established by such Eligible Employees for the benefit of 
their immediate family. To be an Eligible Employee, an individual must 
be a present or former employee or officer of the General Partner or a 
person directly or indirectly controlled by the General Partner and an 
``accredited investor'' meeting the income requirements set forth in 
rule 501(a)(6) of Regulation D under the 1933 Act. The limitations on 
the class of person who may hold the Interests, in conjunction with 
other characteristics of the Partnerships, will qualify each 
Partnership as an ``employees' securities company'' under section 
2(a)(13) of the Act.
    8. The General Partner and the Limited Partners each have or will 
have a basic capital account (``Basic Capital Account'') established on 
the books of the Incentive Partnership reflecting their initial capital 
contributions.\4\ The Incentive Partnership may cause a portion of each 
partner's capital to be carried in one or more special capital accounts 
(hereinafter referred to as ``Special Situation Account'') consisting 
of such partner's indirect participation, in the same proportion as his 
or her Basic Capital Account, in each special situation investment made 
by one of the Private Funds that the Incentive Partnership intends to 
invest in.\5\ If a ``follow-up investment''\6\ to any such special 
situation investment is made, each partner will share proportionately 
in the resulting increase in his or her Special Situation Account that 
such follow-up investment relates to. Notwithstanding the foregoing, if 
any partner shall have given notice of his or her complete withdrawal, 
received notice or required retirement, or shall be deemed to retire 
from the Incentive Partnership by reason of death, such partner will 
not participate in any subsequent special situation investment that 
would establish new Special Situation Account or any subsequent follow-
up investment that would increase an existing Special Situation 
Account.
---------------------------------------------------------------------------

    \4\The Partnerships will be similar structurally and 
operationally in all material respects (other than investment 
objective and/or strategy) to the Incentive Partnership. The 
management and control of each Partnership, including all investment 
decisions, will be vested, directly or indirectly, in the General 
Partner. The Limited Partners, in their capacity as such, will have 
no part in the management and control of any Partnership.
    \5\These special situation investment activities generally 
involve interests that are illiquid or otherwise subject in the 
hands of the Private Fund to restrictions on disposition. The cost 
of, and any contractual commitment with respect to, all such special 
situation investment activities is currently restricted to 15% of 
the Private Fund's net assets.
    \6\The term ``follow-up investment'' refers to the subsequent 
acquisition by the Private Fund of additional interests relating to 
the original special situation investment, where such acquisition is 
undertaken on a voluntary basis, not pursuant to any preexisting 
capital commitment.
---------------------------------------------------------------------------

    9. The General Partner will periodically increase Basic Capital 
Accounts of the partners of the Incentive Partnership by amounts which, 
in aggregate, are equal to the Incentive Partnership's share of any 
performance allocation. Because an Eligible Employee's interest in a 
performance allocation-based increase in the assets of the Incentive 
Partnership essentially will be non-contributory, the performance 
allocation indirectly credited to each Eligible Employee will be 
determined by the General Partner in its sole discretion.\7\
---------------------------------------------------------------------------

    \7\Although an Eligible Employee may be required to make a 
nominal capital contribution for the purpose of becoming a limited 
partner under state law, the Eligible Employee otherwise will not be 
required to contribute capital in order to receive a performance 
allocation.
---------------------------------------------------------------------------

    10. At the beginning of each accounting period, the General Partner 
will determine the percentage (the ``Capital Account Percentage'') of 
each partner with respect to Basic Capital Accounts and each category 
of Special Situation Accounts by dividing the amount of his or her 
opening capital in each such account by the sum of all capital carried 
by the partners in the same set of capital accounts.
    11. All partners will share any increase or decrease in the net 
worth of the Incentive Partnership, not attributable to the current 
fiscal year's performance allocation or any addition or withdrawal of 
capital, in proportion to their pro rata interest in each such account 
at the beginning of each accounting period.\8\ Because the Incentive 
Partnership will be entitled to an increased partnership interest in 
the Private Fund as performance allocation only at the end of a fiscal 
year (which also will be the last day of an accounting period), the 
current performance allocation will not influence a partner's share of 
that period's increase or decrease in the Incentive Partnership's net 
worth from other sources.
---------------------------------------------------------------------------

    \8\As noted previously, each partner's share of any special 
Situation Account initially will equal such partner's interest in 
his or her Basic Capital Account. Only persons who are partners at 
the time a Special Situation Account is created will participate in 
the account. In addition, future participation in, and additions of 
capital to or withdrawals from, a Special Situation Account will be 
limited as further described in the application. Accordingly, each 
partner's percentage interest (if any) in Special Situation Accounts 
may vary from such partner's percentage interest in Basic Capital 
Accounts.
---------------------------------------------------------------------------

    12. The respective portion of the performance allocation that a 
partner of the Incentive Partnership may receive at the end of a given 
fiscal year that is not immediately withdrawn will be reflected in his 
or her Basic Capital Account on the first day of the following 
accounting period, leading to an appropriate adjustment in that 
partner's Capital Account Percentage with respect to Basic Capital 
Accounts. Similarly, because a withdrawal of capital from a Basic 
Capital Account by any partner of the Incentive Partnership may occur 
only on the last day of an accounting period, any withdrawal will 
decrease the relevant partner's Capital Account Percentage starting 
with the following, but not the current, accounting period. In this 
manner, each partner will share in the incentive Partnership's holdings 
on a pro rata basis.\9\
---------------------------------------------------------------------------

    \9\Each Subsequent Incentive Partnership, irrespective of 
whether it will receive any performance compensation allocation from 
the Private Funds, will be subject to all applicable representations 
and conditions made herein, including but not limited to the pro 
rata allocation of any increase or decrease in the net worth of such 
Partnership.
---------------------------------------------------------------------------

    13. The Interest reflected in any Limited Partner's capital 
accounts not attributable to a performance allocation will vest 
immediately. The portion attributable to a performance allocation may 
be subject to a vesting schedule agreed to between the General Partner 
(or a person directly or indirectly controlled by it) and such Limited 
Partner. The vesting schedule, which will be no longer than five years, 
will be governed by the terms of the Limited Partner's written 
agreement executed prior to his or her admission to the Incentive 
Partnership. The schedule may be modified only with respect to any 
performance allocation effected subsequent to the modification. Any 
amount attributable to a performance allocation previously credited 
will continue to be subject to the vesting schedule in effect at the 
time such allocation was done.
    14. No Limited Partner, including one who, subsequent to admission 
to the Incentive Partnership, ceases to be an employee of the Genereal 
Partner or a person directly or indirectly controlled by the General 
Partner, will forfeit any vested interest. The unvested share of a 
performance allocation may be forfeited only if the Limited Partner 
(or, in the case of any Limited Partner that is a trust, the Eligible 
Employee who established such trust) is terminated for cause or 
voluntarily resigns from his or her employment prior to the relevant 
vesting dates. If the Limited Partner dies, becomes incapacitated, or 
is terminated by the General Partner other than for cause, such Limited 
Partner will not forfeit any unvested share of a performance 
allocation. If such Limited Partner (or his or her estate) is deemed to 
withdraw or required to retire from the Partnership as a result of such 
an event, the remaining performance allocation will be treated as 
vested and accordingly will be distributed in the manner described 
below.
    15. The Limited Partners may make withdrawals from their vested 
capital accounts on a quarterly basis, provided that they deliver sixty 
days written notice. In addition, immediately after the last day of any 
fiscal quarter, the Limited Partners may withdraw, after notifying the 
General Partner only five days in advance, all or any part of their 
capital accounts attributable to a performance allocation that has been 
credited to them and has vested but has not yet been withdrawn, 
provided that the amounts so credited must have been also realized for 
income tax purposes. No Limited Partner may make a capital account 
withdrawal based on a performance allocation that has not yet vested, 
except as may be permitted by the General Partner in its sole 
discretion.
    16. Notwithstanding the foregoing, the General Partner may limit 
withdrawals on any particular day if and to the extent that the 
Incentive Partnership is not permitted to effect (or is otherwise 
restricted regarding) a withdrawal from the Private Funds. At such 
time, the limitation shall be applicable pro rata to all partners 
withdrawing on such date in proportion to the amounts requested to be 
withdrawn.
    17. In the event of a withdrawal of capital from any Limited 
Partner's capital accounts, such withdrawal will be deemed to be made 
first from such Limited Partner's Basic Capital Account, and only after 
such Basic Capital Account has been exhausted will such withdrawal be 
deemed made from any Special Situation Account. If any such withdrawal 
is deemed to be made from any special Situation Account payment may be 
postponed until no later than the last day of the fiscal quarter in 
which the investment in such Special Situation Account is liquidated, 
prior to which liquidation, the withheld amount will continue to be 
held for the benefit of such Limited Partner. In addition, if any 
Limited Partner withdraws an amount which is deemed to be from a 
Special Situation Account, or otherwise withdraws a substantial portion 
of his or her capital accounts as described above, the General Partner 
may withhold from the proceeds an amount equal to such Limited 
Partner's pro rata share of the Incentive Partnership's obligation to 
fund the Private Fund's outstanding capital commitment with respect to 
such special Situation Accounts and retain such amount in the Incentive 
Partnership as a liability to the Limited Partner. Such amount withheld 
will be invested in money market instruments (with interest earned 
thereon to be distributed to the Limited Partner annually) until the 
capital commitment is called, and will be returned to the Limited 
Partner if the investment in the Special Situation Account is 
liquidated without funding the outstanding capital commitment.
    18. The Limited Partners who withdraw all of their capital accounts 
will be deemed to have retired from the Incentive Partnership and will 
receive the net worth of their capital accounts, subject to the 
provisions relating to vesting and the withdrawal from any Special 
Situation Account described above. In the event that the beneficial 
interest of any Limited Partner passes to his or her estate or another 
person by reason of such Limited Partner's death, the deceased Limited 
Partner will be deemed to have elected to withdraw all of his or her 
capital accounts immediately after the last day of the year in which 
such Limited Partner has died and will receive the net worth of his or 
her capital accounts, subject to the provisions relating to the 
withdrawal from any Special Situation Account described above. No 
person may become a transferee or substitute Limited Partner of the 
Incentive Partnership unless the person is a member of one of the 
classes of persons listed in section 2(a)(13) of the Act, except that a 
legal representative or executor may hold the Interest in order to 
settle an estate of a decedent or bankrupt or for similar purposes.
    19. Distributions pursuant to any withdrawal from capital accounts 
will be made in cash, in kind, or partly in cash and partly in kind, 
and the determination as to the manner in which such distribution will 
be made will be in the sole discretion of the General Partner. 
Distributions in kind ordinarily will consist of securities for which 
market quotations are readily available within the meaning of rule 17a-
7 of the Act. The General Partner will use its best efforts to 
distribute other forms of property pro rata and will not effect any in-
kind distribution on a non-pro-rata basis unless it determines that the 
terms of the distribution are fair and reasonable to all the Limited 
Partners in light of tax and other considerations.
    20. If the General Partner requires any Limited Partner to retire 
from the Incentive Partnership, subject to provisions relating to 
forfeiture to the extent that such provisions are applicable, at least 
ninety percent of such Limited Partner's capital accounts shall be paid 
within ten days after the effective day of his or her retirement, and 
the balance shall be paid within ninety days after such date; provided 
that payment from any Special Situation Account will be subject to the 
provisions relating to the withdrawal from any Special Situation 
Account described above, and provided, further, that in lieu of such 
continuing interest, the General Partner may, in its sole discretion, 
determine that such Limited Partner will receive the fair value of the 
Special Situation Account (after taking into account such Limited 
Partner's pro rata share of any unfunded capital commitment relating 
thereto) as of the effective date of retirement. If the General Partner 
pays such Limited Partner the fair value of a Special Situation 
Account, the General Partner either will purchase the retiring Limited 
Partner's interest in the Special Situation Account out of its own 
funds or reduce its Basic Capital Account and concurrently increase its 
interest in the applicable Special Situation Account by a like amount. 
In this way, the pro rata participation in the Special Situation 
Accounts by the remaining Limited Partners will not be altered.
    21. The Incentive Partnership's books of account will be open to 
inspection by any Limited Partner or his or her duly authorized 
representative at any reasonable time. At the end of each fiscal year, 
the General Partner will cause an audit of the books and records of the 
Incentive Partnership by a certified public accountant. A copy of the 
accountant's report with respect to the fiscal year will be mailed to 
each Limited Partner within ninety days after the end of such fiscal 
year, which report will include a statement of (1) the Incentive 
Partnership's assets and liabilities, (ii) the Incentive Partnership's 
net profit or loss, and (iii) the capital account balances of such 
Limited Partner.
    22. For purposes of determining the net worth of the Incentive 
Partnership at any time, the partnership assets will be valued as 
follows: (i) securities that are listed on a national securities 
exchange and that are freely marketable will be valued at their last 
sale price on the date of determination, or if no sales occurred on 
such day, at the mean between the bid and asked prices on such day; 
(ii) other publicly traded and freely marketable securities will be 
valued at their last closing bid prices if held long and their last 
closing asked prices if sold short as supplied by the National 
Association of Securities Dealers, Inc. (or, if necessary, other 
sources); and (iii) any securities and assets other than those 
described above will be assigned a fair value as determined by the 
General Partner in its sole discretion in accordance with generally 
accepted accounting principles; provided that an interest in any 
Private Fund that values its own assets as otherwise provided in this 
paragraph will be carried at the value assigned by such Private Fund.
    23. The Interests in the Incentive Partnership will be non-
transferable except with the prior written consent of the General 
Partner, which consent may be withheld in its sole discretion, and in 
any event, will not be transferable to persons other than Eligible 
Employees, any trusts established by such Eligible Employees for the 
benefit of their immediate family, or the General Partner.
    24. Each Partnership will operate as a nondiversified, closed-end 
investment company of the management type within the meaning of the 
Act. The Partnerships will not be limited in the percentage of assets 
that may be invested in a particular investment. No Partnership, 
however, will invest more than fifteen percent of its assets in 
securities issued by registered investment companies (with the 
exception of temporary investments in money market funds), and no 
Partnership will acquire any security issued by a registered investment 
company if immediately after such acquisition, the Partnership owns 
more than three percent of the outstanding voting stock of the 
registered investment company.
    25. The investment objectives and capital structures of the Private 
Funds vary from one Private Fund to another. Accordingly, the 
Partnerships that will invest in the different Private Funds will have 
different investment policies. The particular investment objectives of 
each Private Fund will be set forth in an information memorandum 
relating to the interests offered by that Private Fund. Prior to being 
admitted to any Partnership, Eligible Employees will received a copy of 
such memorandum about any Private Fund in which the Partnership will 
invest.
    26. The Partnerships may engage in certain business dealings 
incidental to their operation, including but not limited to the payment 
of brokerage commissions, research fees and other expenses, with any 
company or persons that the General Partner (or any officer or employee 
thereof) or one or more of the Limited Partners may be directly or 
indirectly interested in. Any such transactions will comply with 
section 17(e) of the Act when applicable, and must be on terms no less 
favorable to the Partnerships than are generally afforded to unrelated 
third parties in comparable transactions. With respect to any 
securities purchased or sold by the Partnerships from or to the General 
Partner (or any officer or employee thereof) or any Limited Partner, 
acting as principal, the purchase or disposition of such securities 
will be made at their fair value.

Applicants' Legal Analysis

    1. On behalf of the Partnerships, Applicants request exemptions 
from all the provisions of the Act, and the rules and regulations 
thereunder, except section 9, certain provisions of sections 17 and 30, 
and sections 36 through 53, and the rules and regulations thereunder.
    2. The principal reason for the requested exemption is to ensure 
that the Partnerships will be able to share in a performance allocation 
that the General Partner is entitled to in a manner described above and 
to invest in attractive companies, properties or vehicles in which the 
General Partner or its individual employees, officers, or directors, or 
the limited partners of any of the Private Funds may make or have 
already made an investment. In addition, relief is requested to permit 
the Partnerships the flexibility to deal with their investments in the 
manner the General Partner deems most advantageous to each Partnership 
or as required by the terms of the limited partnership agreements of 
the Private Funds, including without limitation restructuring the 
Partnership investments, having such investments redeemed, tendering 
the Partnership securities or negotiating options or implementing exist 
strategies with respect to the Partnership investments.
    3. An exemption is requested from section 17(a) of the Act to the 
extent necessary to (a) permit the General Partner, acting as 
principal, to engage in any transaction directly or indirectly with any 
Partnership; (b) permit any Partnership to invest in an entity that is 
directly or indirectly controlled by the General Partner or in which 
the General Partner or any other Partnership has invested or will 
invest, or with which the General Partner or any other Partnership is 
or will become otherwise affiliated; and (c) permit a third party 
investor in the Private Funds, acting as principal, to engage in any 
transaction directly or indirectly with any Partnership. The 
transactions to which any Partnership is a party will be effected only 
after a determination by the General Partner that the requirements of 
condition 1 set forth below have been satisfied. To the extent any of 
the transactions described under the request for exemption from section 
17(d) (and rule 17d-1) would come within the purview of section 17(a), 
such transactions are incorporated hereunder and an exemption from such 
section also is requested.
    4. An exemption from section 17(a) is consistent with the policy of 
each Partnership and the protection of investors and necessary to 
promote the basic purpose of the Partnership, as more fully discussed 
with respect to section 17(d) below. The Limited Partners will have 
been fully informed of the possible extent of the Partnership's 
dealings with the Private Funds or with a third party investor in the 
Private Funds and, as successful professionals employed in the 
securities business, will be able to understand and evaluate the 
attendant risks. The community of interest among the Limited Partners, 
the General Partner and the Private Funds is the best insurance against 
any risk of abuse in this regard.
    5. The foregoing exemption is requested on the undertaking that the 
Partnerships will not make any loans to the Private Funds, the General 
Partner, any general partner of any Subsequent Incentive Partnership, 
or any employee, officer or director of the General Partner or any 
person controlled directly or indirectly by the General Partner. In 
addition, the Partnerships will not sell or lease any property to any 
Private Fund or any other person controlled directly or indirectly by 
the General Partner except on terms at least as favorable as those 
obtainable from unaffiliated third parties. The considerations 
described above will protect the Partnership and limit the 
possibilities of conflict of interest and abuse of the type that 
section 17(a) was designed to prevent.
    6. An exemption is requested from section 17(d) of the Act and rule 
17d-1 thereunder to the extent necessary to permit the Partnerships to 
engage in any transactions in which affiliated persons of the 
Partnerships (including without limitation the General Partner and the 
Private Funds) or affiliated persons of such affiliated persons, 
(including without limitation the third party investors in the Private 
Funds) are participants. The exemption requested would permit, among 
other things, co-investments by the Partnerships, the General Partner, 
and the individual employees, officers, or directors thereof making 
their own individual investment decisions apart from the Partnerships. 
To the extent any of the transactions described under the request for 
exemption from section 17(a) would come within the purview of section 
17(d) (and rule 17d-1) such transactions are incorporated hereunder and 
an exemption for such section and rule is also requested.
    7. The flexibility to structure co-investments and joint 
investments in the manner described above will not involve abuses of 
the type section 17(d) and rule 17d-1 were designed to prevent. The 
Concern that permitting co-investments or joint investments by the 
General Partner or by third party investors in the Private Funds might 
lead to less advantageous treatment of the Partnerships should be 
mitigated by the fact that (a) the General Partner, in addition to its 
substantial economic interest as general partner of the Private Funds 
and the Partnerships, will be acutely concerned with its relationship 
with the key personnel who invest in the Partnerships; and (b) senior 
officers and directors of the General Partner will be investing in the 
Partnerships.
    8.The Partnerships will maintain their assets with either a bank 
qualified to serve as a custodian under section 17(f) of the Act or a 
registered broker-dealer. To the extent that the Partnerships maintain 
custody of their assets with a registered broker-dealer, applicants 
will comply with rule 17f-1 as described below.
    9. Pursuant to paragraph (a) of rule 17f-1, each Partnership will 
enter into a written contract with an independent registered broker-
dealer, provided that approval by the General Partner or any general 
partner of any Subsequent Incentive Partnership will be deemed to be 
approved by a majority of the board of directors of that Partnership.
    10. Pursuant to paragraph (b)(1) of rule 17f-1, to the extent that 
any investment in the Private Funds will be evidenced only by 
partnership agreements and similar documents, the Partnership's copies 
of such documents will be kept in the registered broker-dealer's locked 
files. To the extent that the Partnerships invest in any securities 
that are either uncertificated or held in book-entry form, such 
investments will be maintained by the broker-dealer in the same manner 
as similar investments for other third parties are maintained.
    11. Applicants will comply with paragraphs (b)(2) and (b)(3) of 
rule 17f-1.
    12. Applicants request relief from paragraph (b)(4) of rule 17f-1 
to permit the Partnerships to enter into the arrangement discussed 
below without periodic verifications. Given the community of interest 
of all the parties involved, the existing requirement for an annual 
audit, and the protections and procedures described below, applicants 
submit that the burden of complying with such a requirement is 
unwarranted.
    13. Applicants will comply with paragraphs (b)(5) and (b)(6) of 
rule 17f-1.
    14. Applicants request relief from paragraph (c) of rule 17f-1. 
Applicants believe that the transmission to the Commission of a copy of 
any contract executed thereunder is unnecessary because of the 
community of interest of all the parties involved. Instead, such 
records will be maintained for the life of the Partnership and at least 
two years thereafter, and will be subject to examination by the 
Commission and its staff. Each Partnership will maintain all such 
records in an easily accessible place for at least the first two years.
    15. Applicants will comply with paragraph (d) of rule 17f-1, 
provided that ratification by the General Partner or any general 
partner of any Subsequent Incentive Partnership will be deemed to be 
ratification by a majority of the Board of directors of that 
Partnership.
    16. In addition to compliance with rule 17f-1 in the manner and to 
the extent described above, applicants will adopt the following 
procedures. Each Partnership will engage an attorney or certified 
public accountant to act as an independent representative to review and 
authorize the transfer of Partnership funds or securities to its 
partners. The custodian will transfer funds or securities to the 
General Partner or any Limited Partner only in connection with the 
withdrawal of all or part of such person's partnership interest. Before 
the Partnership makes any distribution of Partnership funds or 
securities to either the General Partner or any Limited Partner, the 
General Partner will submit a written request to the independent 
representative showing (i) the amount of the withdrawal in dollars, 
(ii) the Capital Account Percentages of the partner in all Basic 
Capital Accounts and Special Situation Accounts before the withdrawal, 
and (iii) the Capital Account Percentages of the Partner in all Basic 
Capital Accounts and Special Situation Accounts after the withdrawal. 
The General Partner will give the independent representative 
information sufficient to permit him or her to determine whether the 
withdrawal is being effected in accordance with the provisions of the 
Partnership Agreement. The General Partner will send copies of all 
written requests for capital withdrawals of the custodian. The 
agreement with the custodian will require that the custodian transfer 
funds or securities to the General Partner or any Limited Partner only 
after receiving written authorization from the independent 
representative. The custodian will provide the independent 
representative and the Partnership with statements listing all amounts 
disbursed from the Partnership account at least quarterly. Applicants 
believe that these conditions and procedures will provide substantial 
protection against any risk of abuse and overreaching of investors.
    17. An exemption is requested from section 17(g) and rule 17g-1 to 
the extent necessary to permit the Partnerships to comply with rule 
17g/1 without the necessity of having a majority of the General 
Partner's Committee who are not ``interested persons'' take such action 
and make such approvals as are set forth in such rule 17g-1. Since all 
the members of the Committee will be affiliated persons, without the 
relief requested the Partnerships could not comply with rule 17g-1. The 
Partnerships will, except for the requirements of such approvals by 
``not interested'' persons, otherwise comply with rule 17g-1.
    18. Section 17(j) and rule 17j-1 require that every registered 
investment company adopt a written code of ethics requiring that every 
access person of the investment company report to the investment 
company with respect to transactions in any security in which the 
access person has, or by reason of the transaction acquires, any direct 
or indirect beneficial ownership in the security. Applicants request an 
exemption from rule 17j-1 (except rule 17j-1(a)). Requiring the 
Partnerships to adopt a written code of ethics and requiring access 
persons to report each of their securities transactions would be time 
consuming and expensive, and would serve little purpose in light of, 
among other things, the community of interest among the participants of 
the Partnerships; the concern of the General Partner that personnel who 
participant in the Partnerships actually receive the benefits they 
expect to receive when investing in the Partnerships; and the fact that 
the investments of the Partnerships will be investments that ordinarily 
would not be offered to the Limited Partners, including those Partners 
who would be deemed access persons, as individual investors.
    19. Sections 30(a), 30(b) and 30(d), and the rules under those 
sections, generally require that registered investment companies 
prepare and file with the Commission and mail to their shareholders 
certain periodic reports and financial statements. 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 Limited Partner. The pertinent information 
contained in such filings will be furnished to the Limited Partners, 
the only class of people truly interested in such material. In view of 
the community of interest among all parties concerned with the 
Partnerships and the fact that the Interests are not available to the 
public, but rather a specific group of people, it would seem that the 
protection afforded by sections 30(a) and (b) (i.e., public 
dissemination of information to ensure orderly markets and equality of 
information among the public) is not relevant to the Partnerships or 
their operations. Consequently, applicants respectfully request that 
the exemptive relief be granted. Exemptive relief is also requested 
under section 30(d) to the extent necessary to permit each Partnership 
to report annually in the manner described herein. In light of the lack 
of trading or public market for the Interests held by the Limited 
Partners, it is respectfully submitted that to allow annual reports, 
rather than semi-annual reports, would be consistent with the 
protection of investors and the policy fairly intended by the Act.
    20. Section 30(f) of the Act requires that every officer, director 
and member of an advisory board of a closed-end investment company be 
subject to the same duties and liabilities as those imposed upon 
similar classes of persons under section 16(a) of the 1934 Act. As a 
result, the General Partner and others who may be deemed members of an 
advisory board of any Partnership may be required to file Forms 3, 4 
and 5 with respect to their interests in the Partnerships, even though 
no trading market for such interests would exist and transferability of 
such interests would be severely restricted. These filings are 
unnecessary for the protection of investors and burdensome to those 
required to make them. Because there would be no trading market and the 
transfers of any Interests are severely restricted, the purpose 
intended to be served by section 16(a) is not apparent. Accordingly, 
exemption from the requirements of section 30(f), to the extent 
necessary to exempt the General Partner and the members of the 
Committee and any other persons who may be deemed members of an 
advisory board of any Partnership from filing Forms 3, 4 and 5 under 
section 16 of the 1934 Act with respect to their ownership interests in 
the Partnerships, is appropriate and consistent with the protection of 
investors.
    21. Applicants submit that the exemptions requested are consistent 
with the protection of investors in view of the fact that each 
Partnership will be an ``employees' securities company'' as that term 
is defined in section 2(a)(13) of the Act, organized to provide 
incentive compensation and investment opportunities to Eligible 
Employees. Applicants further submit that there is a substantial 
community of economic and other interests among the General Partner, 
the members of the Committee, and the individual Limited Partners of 
the Partnerships, and there is no public group of investors.

Applicants' Conditions

    Applicants will comply with the following conditions if the 
requested order is granted:
    1. Proposed transactions otherwise prohibited by section 17(a) or 
section 17(d) and rule 17d-1 to which any Partnership is a party (the 
``Section 17 Transactions'') will be effected only if the General 
Partner or, in the case of any Subsequent Incentive Partnership, its 
general partner, determines that:
    a. the terms of the transactions, including the consideration to be 
paid or received, are fair and reasonable to the Limited Partners and 
do not involve overreaching or the Partnership or its Limited Partners 
on the part of any person concerned; and
    b. the transactions are consistent with the interests of the 
Limited Partners, the Partnership's organizational documents and the 
Partnership's reports to its partners.
    In addition, the General Partner and any general partner of any 
Subsequent Incentive Partnership will record and preserve a description 
of such affiliated transactions, their findings, the information or 
materials upon which their findings are based and the basis therefor. 
All such records will be maintained for the life of the Partnership and 
at least two years thereafter, and will be subject to examination by 
the Commission and its staff. Each partnership will maintain all such 
records in an easily accessible place for at least the first two years.
    2. In connection with the Section 17 Transactions, the General 
Partner and any general partner of any Subsequent Incentive Partnership 
will adopt, and periodically review and update, procedures designed to 
ensure that reasonable inquiry is made, prior to the consummation of 
any such 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 such a 
person, promoter, or principal underwriter.
    3. As a condition to the relief requested from section 17(d) and 
rule 17d-1, the General Partner and any general partner of any 
Subsequent Incentive Partnership will not invest the funds of the 
Partnership in any investment in which a ``Co-Investor'' has or 
proposes to acquire the same class of securities of the same issuer, 
where the investment involves a joint enterprise or other joint 
arrangement within the meaning of rule 17d-1 in which the Partnership 
and the Co-Investor are participants, unless any such Co-Investor 
agrees that, prior to disposing of all or part of its investment, it 
will (a) give the General Partner or, in the case of any Subsequent 
Incentive Partnership, its general partner, sufficient, but not less 
than one day's, notice of its intent to dispose of its investment, and 
(b) refrain from disposing of its investment unless the Partnership has 
the opportunity to dispose of the Parthership's investment prior to or 
concurrently with, and on the same terms as, and pro rata with the Co-
Investor. The term ``Co-Investor'' means any person who is: (a) an 
``affiliated person'' (as such term is defined in the Act) of the 
Partnership; (b) an officer or director of the General Partner or any 
entity directly or indirectly controlled by the General Partner; or (c) 
a company in which the General Partner acts as a general partner or has 
a similar capacity to control the sale or other disposition of the 
company's securities (including without limitation each Private Fund). 
The restrictions contained in this condition 3, however, shall 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 established for any such 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 1934 Act; or (d) when the investment is comprised of securities 
that are national market system securities pursuant to section 
11A(a)(2) of the 1934 Act and rule 11Aa2-1 thereunder.
    4. Each Partnership and its general partner will maintain and 
preserve, for the life of the Partnership and at least two years 
thereafter, such accounts, books, and other documents as constitute the 
record forming the basis for the audited financial statements that are 
to be provided to the Limited Partners, and each annual report of the 
Partnership required to be sent to the Limited Partners, and agree that 
all such records will be subject to examination by the Commission and 
its staff.\10\
---------------------------------------------------------------------------

    \10\The Partnership will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
---------------------------------------------------------------------------

    5. The General Partner and any general partner of any Subsequent 
Incentive Partnership will send to each Limited Partner who had an 
interest in the Partnership, at any time during the fiscal year then 
ended, Partnership financial statements audited by a certified public 
accountant. At the end of each fiscal year, the General Partner and any 
general partner of any Subsequent Incentive Partnership will make a 
valuation or have a valuation made of all of the assets of the 
Partnership as of such fiscal year end. In addition, within ninety (90) 
days after the end of each fiscal year of the Partnership or as soon as 
practicable thereafter, the General Partner or the general partner of 
any Subsequent Incentive Partnership shall send a report to each person 
who was a limited partner at any time during the fiscal year then 
ended, setting forth such tax information as shall be necessary for the 
preparation by that partner of his or her federal and state income tax 
returns and a report of the investment activities of the Partnership 
during such year.
    6. If purchases or sales are made by any Partnership from or to an 
entity affiliated with the Partnership by reason of a five percent (5%) 
or more investment in such entity by any director, officer, or employee 
of the general partner of that Partnership, such individual will not 
participate in that general partner's determination, under the terms 
set forth above in condition 1, concerning whether or not to effect 
such purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-30710 Filed 12-13-94; 8:45 am]
BILLING CODE 8010-01-M