[Federal Register Volume 61, Number 153 (Wednesday, August 7, 1996)]
[Notices]
[Pages 41189-41194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20083]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-22114; 813-144]
Great Pond Investors, L.P., et al.; Notice of Application
August 1, 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: Great Pond Investors, L.P. (``Great Pond''), GPCI, L.P.
(the ``Co-Investment Partnership'') and Bain & Company, Inc.
(``Bain'').
RELEVANT 1940 ACT SECTIONS: Applicants request an order 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, sections 36
through 53, and the rules and regulations thereunder.
SUMMARY OF APPLICATION: Applicants request an order exempting Great
Pond and the Co-Investment Partnership (collectively, the ``Initial
Partnerships'') and subsequent partnerships or other investment
vehicles organized by Bain or one of its subsidiaries (the ``Subsequent
Partnerships'') from all provisions of the Act with certain specified
exceptions. The Initial and Subsequent Partnerships (collectively, the
``Partnerships''), each of which will be an ``employees' securities
company'' within the meaning of the Act, will be offered to key
employees of Bain and its subsidiaries (the ``Company Group'') who meet
certain minimum financial criteria.
FILING DATES: The application was filed on October 20, 1995, and
amended on March 28 and July 30, 1996.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a
[[Page 41190]]
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 August 26, 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, D.C.
20549. Applicants: Two Copley Place, Boston, Massachusetts 02117.
FOR FURTHER INFORMATION CONTACT:
H.R. Hallock, Jr., Special Counsel at (202) 942-0564 or Robert A.
Robertson, 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 at the
SEC's Public Reference Branch.
Applicants' Representations
1. The Company Group, an international consulting firm with more
than 1,200 employees worldwide, specializes in developing and
implementing business strategy for numerous corporate clients in a
variety of industries. The two Initial Partnerships are newly-formed
Delaware limited partnerships. Subsequent Partnerships may be organized
as limited partnerships, limited liability companies or other types of
entities.
2. Each Partnership will have at least one general partner or
manager (collectively, ``General Partners'') who will be a member of
the Company Group. The Partnerships will be established from time to
time to enable key employees of the Company Group to participate in
certain investment opportunities of which the Company Group becomes
aware that generally would not be available to them as individual
investors. The ultimate purpose of the Partnerships is to reward and
retain key employees and to aid the Company Group's recruitment
efforts.
3. The Partnerships will operate as non-diversified, closed-end
management investment companies. Except for short-term investments,
Great Pond will invest solely in private equity investment funds (the
``Initial Investment Funds'') which are managed by Bain Capital, Inc.
(``BCI''), a private investment firm established by former employees of
the Company Group and other persons. The Initial Investment Funds,
which are exempt from registration under the Act in reliance on section
3(c)(1) of the Act, will make private equity investments primarily in
acquisitions and restructurings where the general partners of the
Initial Investment Funds and BCI believe they can create value and
improve operating profits substantially.
4. The Co-Investment Partnership may co-invest with the Initial
Investment Funds in certain transactions referred to BCI by the Company
Group or an employee of the Company Group. BCI may also offer the Co-
Investment Partnership the opportunity to co-invest in other
transactions in which the Initial Investment Funds invest. It is
expected that the Subsequent Partnerships will make private equity and
other investments, both directly and through investments in limited
partnerships and other pooled investment vehicles managed by BCI and
others, including investments in public companies and investments in
registered investment companies.
5. Limited partnership interests in the Partnerships (or other
similar interests in a Partnership not organized as a limited
partnership) (``Interests'') will be offered without registration in a
transaction exempt from registration under section 4(2) of the
Securities Act of 1933 (the ``Securities Act'') or pursuant to
Regulation D under the Securities Act.\1\ Interests will be offered and
sold to (a) ``Eligible Employees,'' as defined in the following
paragraph, and (b) trusts or other investment vehicles for the benefit
of such Eligible Employees and/or members of their immediate families,
including self-directed 401(k) plans (``Eligible Trusts,'' collectively
with Eligible Employees, ``Eligible Participants''). Members of the
Company Group (temporarily and for the convenience of future Eligible
Participants) may also hold Interests in a Partnership. A member of the
Company Group may sell all or a portion of its Interest in a
Partnership to Eligible Participants.
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\1\ Section 4(2) exempts transactions by an issuer not involving
a public offering from the registration requirements of the
Securities Act.
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6. The term ``Eligible Employees'' is defined to include the
following three groups of individuals who are ``accredited investors''
meeting the income requirements set forth in rule 501(a)(6) of
Regulation D of the Securities Act: (i) members of the professional
staff of the Company Group, which consists of (in order of seniority)
directors, vice presidents, managers, consultants and assistant
consultants, (ii) former vice presidents of the Company Group who
provide to the Company Group thirty hours per week, on average, of
services as subcontractors, and (iii) members of the administrative
staff of the Company Group. Such an Eligible Employee may be determined
to meet such income requirements of Regulation D by reference to income
from sources other than from the Company Group. The term ``Eligible
Employees'' is further defined to include the following two groups of
individuals who are not ``accredited investors'' meeting the income
requirements of rule 501(a)(6) of Regulation D: (i) a limited number of
professionals consisting of managers who meet the sophistication and
salary requirements described in paragraph 7 below and (ii) a small
number of other employees of the Company Group who will be involved in
managing the day-to-day affairs of the Partnerships as described in
paragraph 8 below.
7. A manager who does not satisfy the income requirements of rule
501(a)(6) of Regulation D at the time of investment in a Partnership,
and his related Eligible Participants, will only be permitted to invest
in such Partnership if he (a) has a graduate degree in business, law or
accounting, (b) has a minimum of five years of consulting, investment
banking or similar business experience, and (c) has had reportable
income from all sources of at least $100,000 in each of the two most
recent years and a reasonable expectation of income from all sources of
at least $140,000 in each year in which such person will be committed
to make investments in a Partnership. In addition, such a manager will
not be permitted to invest in any year more than 10 percent of his
income from all sources for the immediately preceding year in the
aggregate in such Partnership and in all other Partnerships in which he
has previously invested. Thus, managers who will be allowed to
participate in the Partnership will have sufficient knowledge,
sophistication and experience in business and financial matters to be
capable of evaluating the risks of an investment in a Partnership and
will be able to bear the economic risk of a complete loss of such
investments.
8. The other employees of the Company Group included in the
definition of ``Eligible Employees'' who will not satisfy the income
requirements set forth in rule 501(a)(6) of Regulation D will be
primarily responsible for the operation of the Partnerships not managed
by an Unaffiliated Manager (as defined below). Such responsibility will
[[Page 41191]]
include, among other things, monitoring investments for such
Partnerships, communicating with the limited partners of such
Partnerships, day-to-day tax issues involving such Partnerships,
maintaining the books and records of such Partnerships and, in the case
of Subsequent Partnerships, evaluating investments for such
Partnerships. Accordingly, they will be closely involved with and
knowledgeable about the affairs and investments of such Partnerships.
These employees may be permitted to invest if they had a reportable
income from all sources in the calendar year immediately preceding
their participation of at least $100,000 and have a reasonable
expectation of income in the years in which such person will be
required to invest in a Partnership of at least $100,000 per year.
Furthermore, each of these employees has such knowledge and experience
in financial and business matters that he or she is capable of
evaluating the merits and risks of an investment in a Partnership, or
the relevant Partnership shall reasonably believe immediately prior to
making any sale that such employee comes within this description. These
employees will not be permitted to invest in a Partnership managed by
an Unaffiliated Manager.
9. The management and control of each Partnership, including all
investment decisions, will be vested exclusively in the General Partner
or General Partners of the Partnership. Each Partnership will have at
least one General Partner which is a member of the Company Group and
whose board of directors is exclusively comprised of Eligible Employees
(a ``Company Controlled General Partner''). In the case of a
Partnership having more than one General Partner, certain aspects of
the management and control of the Partnership may be delegated to a
managing general partner (``Managing General Partner'') which shall be
a Company Controlled General Partner. If required under applicable law,
a General Partner will be registered under the Investment Advisers Act
of 1940. All investment and valuation decisions of each Partnership
will be subject to the approval of the board of directors of its
Company Controlled General Partner. The board of directors of the
Company Controlled General Partner will also be required by Condition 1
below to make certain fairness and other determinations in connection
with the section 17 relief requested.
10. CIGP, Inc., a Delaware corporation wholly-owned by an Eligible
Employee, is a general partner of each Initial Partnership (the
``Equity General Partner''). GPI, Inc., a Massachusetts corporation
which is a Company Controlled General Partner (``GPI''), is the
Managing General Partner of each Initial Partnership. General Partners
of Subsequent Partnerships may be (a) GPI or another Company Controlled
General Partner, (b) one or more Eligible Participants or an entity
controlled by one or more Eligible Participants or (c) one or more
third party investment managers or advisers not affiliated with the
Company Group (an ``Unaffiliated Manager''). Engagement of any
Unaffiliated Manager by a Partnership will be subject to the approval
of the board of directors of its Company Controlled General Partner.
11. Members of the Company Group and Eligible Employees who have an
interest in a General Partner and their affiliates may also make direct
investments in the Partnerships. Eligible Employees serving as
directors of a Company Controlled General Partner and individuals
managing the day-to-day affairs of the Partnerships may also invest as
limited partners of such Partnership. Generally, no individual who
serves on the board of directors of the Company Controlled General
Partner or manages or is otherwise employed to perform the day-to-day
affairs of the Partnership will be permitted to invest his or her own
funds in connection with any Partnership investment, except as a
limited partner or through the General Partner or other investment
funds in which such individual is an investor, or through the exercise
of stock options or warrants granted, on the same terms and amounts, to
all outside directors of the entities in which such Partnership
invests.
12. Instead of charging for office space or administrative services
provided to the Partnerships by a member of the Company Group or by
employees of the Company Group, the Company Group will not require
reimbursement of administrative expenses from a partnership with
respect to any partner who (or whose related Eligible Employee in the
case of a partner which is an Eligible Trust) continues to be employed
by the Company Group or who otherwise continues to add value to the
Company Group and its operations. The Company Group has agreed that the
amount of administrative expenses charged each year to any partner who
(or whose related Eligible Employee) is no longer employed by the
Company Group will not exceed 1 percent of such partner's total capital
commitment to such Partnership. To the extent any expenses are not
borne by the Company Group or an Unaffiliated Manager, the Partnerships
will be required to pay such expenses.
13. Neither General Partner of the Initial Partnerships will charge
a management fee. A General Partner of a Subsequent Partnership may be
paid a management fee, generally determined as a percentage of assets
under management or aggregate commitments. The General Partners of the
Initial Partnerships will not be entitled to any performance-based fee
or ``carried interest'' of a specified percentage based on the gains
and losses of such Partnership. General Partners of Subsequent
Partnerships may be entitled to a performance-based fee or ``carried
interest''.\2\ All or a portion of the ``carried interest'' may be paid
to the individuals who are officers, employees or stockholders of a
General Partner.
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\2\ Any ``carried interest'' charged by a General Partner that
is registered under the Investment Advisers Act of 1940 will be
structured to comply with section 205 of that Act.
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14. The general partner of the Initial Investment Funds, an
affiliate of BCI, will be entitled to a ``carried interest'' on the
gains of the Initial Investment Funds, and BCI, as the manager of the
Initial Investment Funds, will be entitled to a management fee. A
portion of the ``carried interest'' will be waived with respect to
participants in Great Pond in exchange for agreements with the Company
and Eligible Employees who participate in Great Pond to provide BCI
with access to potential investment transactions that come to their
attention. The Co-Investment Partnership, which will be available as an
investment only for Eligible Participants who have invested in Great
Pond, will be charged a management fee by BCI or be subject to a
``carried interest.''
15. The partnership agreements for Great Pond and the Co-Investment
Partnership each require a limited partner to pay capital contributions
in installments, with an initial installment of 10% and 1%,
respectively, of his total capital subscription upon admission as a
limited partner to such Partnership. Those agreements also each provide
that if a limited partner fails to pay an installment when due after
not less than 5 days prior written notice, the Managing General Partner
may in its sole discretion, and in addition to exercising any other
rights afforded by law or at equity, take any of a number of possible
actions. For example, the Managing General Partner may require the
defaulting limited partner to sell his Interest to another Eligible
Participant who agrees to cure the default and assume the defaulting
limited partner's
[[Page 41192]]
other obligations to the Partnership for a price determined pursuant to
the partnership agreement. The partnership agreement or other
instruments governing Subsequent Partnerships may provide that capital
contributions are payable in full upon admission as a limited partner
or in installments as determined by the General Partner or Managing
General Partner and may provide for the same or similar remedies as
those exercisable by the Managing General Partner with respect to the
Initial Partnerships for defaults in payments of installment
contributions.
16. The partnership agreements of the Initial Partnerships provide
that a partner's Interest is nontransferable, except that a limited
partner may, with the consent of the Equity General Partner, transfer
all or a portion of his Interest in such Partnership to another
Eligible Participant. Under the partnership agreements for the Initial
Partnerships, limited partners may not withdraw from such Partnership.
The Managing General Partner believes that the prohibition on
withdrawal is necessary for the protection of the Initial Partnerships
and their Limited Partners. Subsequent Partnerships are expected to
have substantially similar provisions.
17. The partnership agreements of the Initial Partnerships further
provide that a departed employee (or his related Eligible Trust) will
not be allowed to redeem his Interests or withdraw as a limited
partner. Such a limited partner will continue as a limited partner of
the Initial Partnerships and will be required to fund his (or its)
capital subscriptions. Each Partnership will make investment
commitments based on the commitments to such Partnership of its limited
partners. If a limited partner were permitted to withdraw or redeem his
Interest in the Partnership and cease making capital contributions, the
Partnership still would be required to meet its obligations.
18. The governing instruments of a Subsequent Partnership may
provide that the General Partner or Managing General Partner, or its
designee, may acquire the Interest of a limited partner in such
Partnerships once such limited partner (or related Eligible Employee in
the case of a limited partner which is an Eligible Trust) leaves the
employ of the Company Group. A partner who remains as a partner in a
Subsequent Partnership after such termination may lose certain benefits
in connection with investments by such Partnership that are provided
for the benefit of employees of the Company Group, such as the waiver
or reduction of administrative expenses or ``carried interest'' for
such employees.
19. No Partnership will invest more than 15% of its assets in
securities of registered investment companies (except for temporary
money market fund investments). In addition, no Partnership will
acquire securities of a registered investment company if immediately
thereafter the Partnership will own more than 3% of that company's
outstanding voting stock. There are no other limitations on the types
or amounts of securities or other instruments in which the Partnerships
may invest.
20. Each Partnership will keep books and accounts concerning all
its business transactions and all moneys and other consideration
received, advanced, paid out, or delivered on behalf of the
Partnership, the Partnership's operating results, and each partner's
capital. Each Partnership's books will be accessible to all its
partners at all times, subject to certain reasonable limitations as to
confidential information and other concerns. The General Partner or
Managing General Partner will value or have a valuation made of all of
the Partnership's assets as of the end of each fiscal year. Within a
specified period after the end of each fiscal year, Partnership annual
financial statements audited by a certified public accountant will be
sent to each partner. In addition, within 90 days after the end of each
fiscal year of the Partnership or as soon as practicable thereafter, a
report will be sent to each person who was a partner providing
information necessary to prepare federal and state income tax returns
and a report of the Partnership's investment activities during such
year.
Applicants' Legal Analysis
1. Section 6(b) of the Act provides that the SEC shall exempt
employees' securities companies from the provisions of the Act to the
extent that such exemption is consistent with the protection of
investors. Section 2(a)(13) defines an employees' securities company,
in relevant part, as any investment company all of whose outstanding
securities are beneficially owned by the employees of a single employer
or affiliated employers; by former employees of such employers; by
members of the immediate family of such employees or former employees;
or by such employer or employers together with members of any of the
foregoing classes of persons.
2. Section 6(e) provides that in connection with any SEC order
exempting an investment company from any provision of section 7,
certain specified provisions of the Act shall be applicable to such
company, and to other persons in their transactions and relations with
such company, as though such company were registered under the Act, if
the SEC deems it necessary or appropriate in the public interest or for
the protection of investors.
3. Applicants request an order under sections 6(b) and 6(e) of the
Act exempting the Partnerships from all provisions of the Act and the
rules and regulations thereunder the Act, except section 9, sections 17
and 30 (except as described below), and sections 36 through 53 and the
rules and regulations thereunder.
4. Section 17(a) provides, in relevant part, that it is unlawful
for any affiliated person of a register investment company, acting as
principal, knowingly to sell any security or other property to such
company or to purchase from such company any security or other
property. Applicants request an exemption from section 17(a) to permit:
(a) a Partnership to purchase and dispose of interests in a company or
other investment vehicle (other than in a member of the Company Group)
which is an ``affiliated person'' of that Partnership or an
``affiliated person'' of such ``affiliated person'' (as such term is
defined in the Act); (b) a member of the Company Group or entity under
common control with the Company, acting as principal, to engage in any
transaction directly or indirectly with any Partnership or any entity
controlled by, or under common control with, such Partnership; (c) a
Partnership to invest in or engage in any transaction with any entity,
acting as principal (i) in which such Partnership, any company
controlled by such Partnership or any entity within the Company Group
or entity under common control with the Company has invested or will
invest or (ii) with which such Partnership, any company controlled by
such Partnership or any entity within the Company Group or under common
control with the Company is or will otherwise become affiliated; and
(d) a partner in any entity in which a Partnership invests, acting as a
principal, to engage in transactions directly or indirectly with the
related Partnership or any company controlled by such Partnership. The
requested exemption from section 17(a) would permit, among other
specific examples, the investment by Great Pond in the Initial
Investment Funds and investment by a member of the Company Group
temporarily on behalf of a Partnership under the various circumstances
described previously.
5. The partners of the Partnerships will have been fully informed
of the possible extent of the Partnerships' dealings with the Company
Group and
[[Page 41193]]
its affiliates and will be able to evaluate any attendant risks. The
community of interest among the partners and the Company Group is the
best insurance against any risk of abuse in this regard. Accordingly,
applicants believe that an exemption from section 17(a) is consistent
with the policy and purpose of the Partnerships and the protection of
investors. Applicants acknowledge that transactions otherwise subject
to section 17(a) for which exemptive relief has not been requested
would require specific approval by the SEC.
6. Section 17(d) makes it unlawful for any affiliated person of a
registered investment company, acting as principal, to effect any
transaction in which the company is a joint or joint and several
participant with the affiliated person in contravention of such rules
and regulations as the SEC may prescribe. Rule 17d-1 under section
17(d) prohibits most joint transactions unless approved by order of the
SEC. Applicants request an exemption from section 17(d) and rule 17d-1
to permit affiliated persons of each Partnership or affiliated persons
of any such persons to participate in, or effect any transaction in
connection with, any joint enterprise or other joint arrangement or
profit-sharing plan in which such Partnership or a company controlled
by such Partnership is a participant. The exemption requested would
permit, among other things, investment by Great Pond in the Initial
Investment Funds in which affiliated persons of Great Pond or its
affiliates may invest, co-investments by the Co-Investment Partnership
and Initial Investment Funds, and co-investments by a Partnership and
individual partners or other investors, members of the Company Group or
employees, officers, directors, or an entity within the Company Group
or under common control with the Company.
7. Compliance with section 17(d) would prevent the Initial
Partnerships from achieving their respective principal purposes, which
are to invest in the Initial Investment Funds and to provide a vehicle
for Eligible Employees to co-invest with the Initial Investment Funds.
Because of the number and sophistication of the potential partners and
other investors in the Partnerships and the persons affiliated with
such partners or investors, strict compliance with section 17(d) may
cause the Partnerships to forego investment opportunities simply
because a partner of, or investor in, such Partnership or other
affiliated person of such Partnership (or any affiliated person of such
a person) also had, or contemplated making, a similar investment. The
requested exemption is also sought to ensure that a partner in a
partnership or other investment vehicles in which a Partnership invests
will not directly or indirectly become subject to a burden,
restriction, or other adverse effect by virtue of the related
Partnership's participation in an investment opportunity.
8. The concern that permitting joint investments by a Partnership,
on the one hand, and affiliated persons of the Partnership (and
affiliated persons of such persons), on the other hand, might lead to
disadvantageous treatment of the Partnership should be mitigated by the
fact that: (a) the Company will be acutely concerned with its
relationship with the key employees who invest in the Partnerships; and
(b) senior officers of the Company Group will be investing in such
Partnerships. In addition, the transactions subject to either sections
17(a) or 17(d) to which any Partnership is a party will be effected
only after the board of directors of the Company Controlled General
Partner determines that the requirements of Condition 1 below have been
satisfied.
9. Section 17(f) provides that the securities and similar
investments of a registered management investment company must be
placed in the custody of a bank, a member of a national securities
exchange, or the company itself in accordance with SEC rules. The
Partnerships will comply with rule 17f-2 in all respects except for the
following requirements, as to which an exemption is requested: (i)
compliance with paragraph (b) will be achieved through safekeeping in
the locked files of a member of the Company Group or by a registered
broker-dealer; (ii) for purposes of paragraph (d) of the rule, (A)
employees of the Company Group are deemed employees of the
Partnerships, (B) employees of the General Partner are deemed to be
officers of the Partnerships, and (C) the General Partner, or Managing
General Partner in the case of Partnership having more than one General
Partner, is deemed to be the board of directors of a Partnership; and
(iii) instead of the verification procedure under paragraph (f),
verification will be effected quarterly by two employees of the
Company. Many of the Partnerships' investments will be evidenced only
by partnership agreements or similar documents, rather than by
negotiable certificates which could be misappropriated. Such
instruments are most suitably kept in the Company Group's files, where
they can be referred to as necessary.
10. Section 17(g) and rule 17g-1 generally require the bonding of
officers and employees of a registered investment company who have
access to securities or funds of the company. Applicants request an
exemption from section 17(g) to permit the Partnerships to comply with
rule 17g-1 without the necessity of having a majority of the directors
of a General Partner who are not ``interested persons'' take such
action and make such approvals as required by the rule.
11. Section 17(j) and rule 17j-1 make it unlawful for certain
enumerated persons to engage in fraudulent, deceitful, or manipulative
practices in connection with the purchase or sale of a security held or
to be acquired by an investment company. Rule 17j-1 also requires every
registered investment company, its adviser, and its principal
underwriter to adopt a written code of ethics with provisions
reasonably designed to prevent fraudulent activities, and to institute
procedures to prevent violations of the code. Applicants request an
exemption from section 17(j) and rule 17j-1 (other than the antifraud
provisions of paragraph (a) of rue 17j-1) because they are burdensome
and unnecessary and because an exemption is consistent with the policy
of the Act. Applicants believe that the community of interest among the
partners of the Partnerships and the conditions set forth below in
connection with the exemptions requested should provide adequate
safeguards.
12. Sections 30(a), 30(b) and 30(d) of the Act, and the rules
thereunder, generally require that registered investment companies
prepare and file with the SEC and mail to their shareholders certain
periodic reports and financial statements. The forms prescribed by the
SEC for periodic reports have little relevance to a Partnership and
would entail administrative and legal costs that outweigh any benefit
to partners of the Partnerships. Applicants request an exemption from
these provisions to the extent necessary to permit each Partnership to
report annually to its partners in the manner described above. Because
it is intended that the Partnerships will hold relatively few
investments over long periods of time, which might require
sophisticated and complex valuation, and because of the lack of trading
or public market for Interests in the Partnerships, applicants believe
the provision of annual, rather than semi-annual reports would be
consistent with the policy and purpose of the Partnerships and the
protection of investors.
13. Section 30(f) extends, in substance, the duties and liabilities
imposed by section 16 of the Securities Exchange Act of 1934 (the
``Exchange
[[Page 41194]]
Act'') to any 10% shareholder, director, officer, member of an
investment advisory board, investment adviser or affiliated person of
any investment adviser of a registered closed-end investment company.
Applicants request relief from section 30(f) to exempt each General
Partner, members of the board of directors of any such General Partner,
and any other persons who may be deemed members of an advisory board of
a Partnership from filing reports under section 16 of the Exchange Act
with respect to their ownership of Interests in such Partnership. There
is no trading market for the Interests in the Partnerships and
transferability of the Interests will be severely restricted. In view
of the foregoing, the purpose intended to be served by section 16 is
not readily apparent and applicants believe the filings are therefore
unnecessary for the protection of investors and burdensome to those who
would be required to file them.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Each proposed transaction otherwise prohibited by section 17(a)
or section 17(d) of the Act and rule 17d-1 thereunder (the ``Section 17
Transaction'') will be effected only if the board of directors of the
Company Controlled General Partner determines that: (a) the terms of
the transaction, including the consideration to be paid or received,
are fair and reasonable to the partners and do not involve overreaching
of the Partnership or its partners on the part of any person concerned;
and (b) the transaction is consistent with the interests of the
partners and the Partnership's organizational documents, and the
Partnership's reports to its partners. In addition, the board of
directors of the Company Controlled General Partner 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 Partnerships and at least two years thereafter, and will be subject
to examination by the SEC and its staff. Each Partnership will preserve
the accounts, books and other documents required to be maintained by
the order in an easily accessible place for the first two years.
2. In connection with the Section 17 Transactions, the board of
directors of the Company Controlled General Partner 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 Partnerships, or any affiliated person of such a
person, promoter, or principal underwriter.
3. A General Partner will not invest the funds of any Partnership
in any investment in which an ``Affiliated Co-Investor,'' as defined
below, 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 an Affiliated Co-Investor are participants, unless any
such Affiliated Co-Investor, prior to disposing of all or part of its
investment, (a) gives such General partner sufficient, but not less
than one day's, notice of its intent to dispose of its investment, and
(b) refrains from disposing of its investment unless the Partnership
has the opportunity to dispose of the Partnership's investment prior to
or concurrently with, on generally the same terms as, and pro rata with
the Affiliated Co-Investor. The term ``Affiliated Co-Investor'' means
the Company, and any person who is (1) an ``affiliated person'' (as
such term is defined in the Act) of the Partnership, or controlled by a
member of the Company Group (which persons shall not include any
parties who may be ``affiliated persons'' of the Partnership solely
because they have co-invested in an investment vehicle or joint
enterprise, where neither the Partnership nor any member of the Company
Group exercises control over such persons); (2) a member of the Company
Group, or other entity controlled by a member of the Company Group; (3)
an officer or director of a member of the Company Group; or (4) any
entity with respect to which a General Partner of such Partnership or
another member of the Company Group acts as a general partner or in a
similar capacity or has a similar capacity to control the sale or other
disposition of such entity's securities. The restrictions contained in
this condition, however, shall not be deemed to limit or prevent the
disposition of an investment by an Affiliated Co-Investor: (a) to its
direct or indirect wholly-owned subsidiary, to any company (a
``parent'') of which the Affiliated Co-Investor is a direct or indirect
wholly-owned subsidiary, or to direct or indirect wholly-owned
subsidiary of its parent; (b) to immediate family members of the
Affiliated Co-Investor or a trust established for any Affiliated Co-
Investor or 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 Exchange Act; or
(d) when the investment is comprised of securities that are national
market system securities pursuant to section 11A(a)(2) of the Exchange
Act and rule 11a2-2(T) thereunder.
4. Each Partnership and its General Partner will maintain and
preserve, for the life of each such Partnership and at least two years
thereafter, such accounts, books, and other documents as constitute the
record forming the basis for the financial statements that are to be
provided to the partners, and each annual report of such Partnership
required by the terms of the applicable partnership agreement to be
sent to the partners, and agree that all such records will be subject
to examination by the SEC and its staff.
5. In any case where purchases or sales are made from or to an
entity affiliated with a Partnership by reason of a 5% or more
investment in such entity by a director, officer, or employee of a
member of the Company Group or any of its affiliates, such individual
will not participate in the applicable General Partner's determination
of whether or not to effect such purchase or sale.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-20083 Filed 8-6-96; 8:45 am]
BILLING CODE 8010-01-M