[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