[Federal Register Volume 62, Number 140 (Tuesday, July 22, 1997)]
[Notices]
[Pages 39287-39292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19197]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22757; 813-148]
PW Masters Fund, L.P.; Notice of Application
July 16, 1997.
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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APPLICANT: PW Masters Fund, L.P. (the ``Initial Partnership'').
RELEVANT ACT SECTION: Applicant seeks an order under section 6(b) and
6(e) granting an exemption from all provisions of the Act except
sections 9, 17, (except for certain provisions of sections 17(a), (d),
(f), (g), and (j) as described in the application), 30 (except for
certain provisions of sections 30(a), (b), (e), and (h) as described in
the application), and 36 through 53, and the rules and regulations
thereunder.
SUMMARY of APPLICATION: Applicant seeks an order on behalf of itself
and subsequent partnerships to be formed by PaineWebber Inc.
(``PaineWebber'') that will be identical in all material respects to
the Initial Partnership (the ``Subsequent Partnerships'' and together,
the ``Partnerships'') that would grant an exemption from most
provisions of the Act and would permit certain affiliated and joint
transactions. Each Partnership will be an employees' securities company
within the meaning of section 2(a)(13) of the Act.
FILING DATES: The application was filed on March 29, 1996, and amended
on September 27, 1996, May 8, 1997, and July 2, 1997.
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
applicant 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 11, 1997,
and should be accompanied by proof of service on applicant 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. Applicant, c/o PaineWebber Incorporated, 1285 Avenue of the
Americas, 14th Floor, New York, N.Y. 10019
FOR FURTHER INFORMATION CONTACT: Suzanne Krudys, Senior Counsel, at
(202) 942-0641, or Mercer E. Bullard, Branch Chief, (202) 942-0564
(Office of Investment Company Regulation, Division of Investment
Management).
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.
Applicant's Representations
1. The Initial Partnership is a limited partnership organized under
Delaware law. Subsequent Partnerships will be general or limited
partnerships organized under state law and established from time to
time by PaineWebber. The general partner of the Initial Partnership is
PaineWebber Futures Management Corp. (the ``General Partner''), a
Delaware corporation and a subsidiary of PaineWebber Group, Inc.
(``PaineWebber Group''), which is a financial services holding company
whose shares are publicly traded on the New York Stock Exchange. The
general partner of Subsequent Partnerships may
[[Page 39288]]
be an entity directly or indirectly controlled by PaineWebber Group or
any of its divisions or subsidiaries. PaineWebber, a registered
investment adviser under the Investment Advisers Act of 1940, will
serve as investment manager to the Initial Partnership. PaineWebber is
a Delaware corporation and a subsidiary of PaineWebber Group.
2. The Initial Partnership is an investment partnership established
to enable employees of PaineWebber to pool their investment resources
and to receive the benefit of certain investment opportunities that,
because of substantial minimum purchase requirements, limited
availability or otherwise, may not be available to an individual
investor. The pooling of resources would permit diversification by,
among other things, overcoming high minimum investment requirements,
and participation in investment private partnerships that usually would
not be offered to them as individual investors. The purpose of the
Partnership is to reward and retain key personnel of PaineWebber Group
or its divisions or subsidiaries.
3. No Partnership will acquire any security issued by a registered
investment company if immediately after such acquisition (i) the
Partnership would own more than 3% of the outstanding voting stock of
the registered investment company or (ii) more than 15% of the
Partnership's assets would be invested in securities issued by
registered investment companies, with the exception of temporary
investments in money market funds. None of the Partnerships will make
loans to its general partner, PaineWebber or any officer, director,
employee or other affiliate of the General Partner or PaineWebber.
4. The partnership agreement will provide that the Initial
Partnership may be dissolved at any time by the General Partner in its
sole discretion. In addition, the retirement, bankruptcy or dissolution
of the General Partner shall dissolve the Initial Partnership. The
limited partners of the Initial Partnership have no right to remove the
General Partner.
5. It is contemplated that, at least initially, a large proportion
if not all of the Initial Partnership's assets will be invested in
Masters Fund, L.P. (``Masters Fund''), a Delaware limited partnership
whose general partner is PaineWebber Futures Management Corp. and whose
investment manager is PaineWebber. Masters Fund is a private investment
partnership that seeks capital appreciation over the long term in a
wide range of market conditions principally through a program of
investment in investment partnerships, managed funds, separate accounts
and other investment vehicles that invest or trade in a wide range of
equity securities and other instruments. Masters Fund and other private
investment partnerships in which the Partnership may invest
(collectively ``Private Funds'') generally rely on section 3(c)(1) of
the Act for an exception from the definition of investment company.
6. Equity interests in the partnership will be offered without
registration under a claim of exemption under Section 4(2) of the
Securities Act of 1933 (the ``Securities Act''). Such interests will be
offered and sold only to (i) current employees of PaineWebber or any of
its divisions or subsidiaries who are directors or officers at or above
the level of Vice President (``Eligible Employees'') or (ii) trusts or
other investment vehicles for the benefit of such Eligible Employees
and/or the benefit of their immediate families. At the time of making
an initial contribution and making any additional contribution to the
Partnership, each Eligible Employee will be required to be (i) an
accredited investor within the meaning of rule 501(a)(6) under the
Securities Act or (ii) a non-accredited investor who (a) manages the
``day to day'' affairs of the Partnership, including an employee
identifying, investigating, structuring, negotiating and monitoring
investments of the Partnership, communicating with limited partners,
maintaining the books and records of the Partnership and/or making
recommendations with respect to investment decisions and/or who is
substantially involved in the sales and marketing of the Partnership
and (b) whose income exceed $120,000 from all sources in the preceding
calendar year and who has a reasonable expectation of reportable income
of at least $150,000 during such individual's participation in the
Partnership and (c) who 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 the Partnership.
7. Only a small portion of PaineWebber employees will qualify as
Eligible Employees. The Eligible Employees are experienced
professionals in the financial services business, or in administrative,
financial, accounting or operational activities related thereto. No
Eligible Employee will be required to invest in any Partnership.
8. Interests in the Initial Partnership will be nontransferable
except with the prior written consent of the general partner of the
Partnership, which consent may be withheld in its sole discretion. In
any event, no person will be admitted to a Partnership as a partner
unless such person or entity is (a) another Eligible Employee; (b)
trusts or other investment vehicles for the benefit of such limited
partner and/or such limited partner's immediate family; or (c) an
entity affiliated with PaineWebber.
9. The management of each of the Partnerships will be vested in its
general partner and, in certain cases, in an investment manager. If a
Partnership will be considered a commodity pool for purposes of the
Commodity Exchange Act (the ``Commodity Act'') and the regulations
thereunder, the general partner of the Partnership will be registered
as a commodity pool operator to the extent such registration is
required. The Initial Partnership is a commodity pool and the General
Partner is registered as a commodity pool operator and will be
responsible for selecting and allocating the Initial Partnership's
assets among the investment vehicles that engage in future
transactions. All other investment decisions with respect to the
Initial Partnership will be made by PaineWebber. PaineWebber, the
General Partner and the general partner of any Subsequent Partnerships
may make investments of their own in the Partnership, as a partner or
otherwise, and in any case the General Partner will invest to the
minimum extent required to satisfy Federal income tax requirements in
the case of limited partnerships, which investment will be pro rata
with all investors as to income and capital.
10. During the existence of each Partnership, books and accounts of
the Partnership will be kept, in which the general partner of the
Partnership will enter, or cause to be entered, all business transacted
by the Partnership and all moneys and other consideration received,
advanced and paid out or delivered on behalf of the Partnership, the
results of the Partnership's operations, and each Partner's capital
account. Such books at all times will be fully accessible to all
Partners of the Partnership, subject to certain reasonable limitations
to address concerns with respect to, among other things the
confidentiality of certain information. In addition, the General
Partner, or in the case of any Subsequent Partnership its general
partner, or PaineWebber or the investment manager of any Subsequent
Partnership will cause an audit of the financial statements for each
fiscal year of the Partnership to be made by a nationally recognized
firm of
[[Page 39289]]
independent certified public accountants. A copy of the accountant's
report with respect to each fiscal year will be mailed or otherwise
furnished to each partner of the Partnership within a specified period
after the end of such fiscal year. Each Partnership will also supply
all information reasonably necessary to enable the partners of the
Partnership to prepare their Federal and state income tax returns. The
General Partner or in the case of any Subsequent Partnership its
general partner, or PaineWebber or the investment manager of any
Subsequent Partnership also will generally furnish information
regarding each Partnership to the Partners on a quarterly basis. It is
expected that the scope and nature of the information furnished to the
limited partners of any Partnership will be the same furnished to the
third party investors of any investment vehicle in which the
Partnership invests.
11. A limited partner may withdraw all or a portion of his or her
capital account at the end of a quarter on 60 days prior written
notice, provided that a limited partner may not withdraw any amounts
during the first twelve months following his or her initial capital
contribution to the Initial Partnership. Withdrawals may be limited to
the extent that the Initial Partnership is limited or restricted from
effecting a withdrawal from any investment vehicle in which it has
invested. Distributions upon withdrawal may be made in cash or in the
sole discretion of the General Partner, in kind, or partly in cash and
partly in kind, and in kind distributions may be made on a non pro-rata
basis.
12. The partnership agreement will provide that valuation of the
assets of the Initial Partnership for all purposes, including valuation
for purposes of determining the value of the interests of withdrawing
limited partners (including, without limitation, limited partners who
are required to withdraw by the General Partner, in its sole
discretion, pursuant to the Partnership Agreement), will be as follows.
Assets of the Initial Partnership for which market quotations are
readily available will be valued at market value. Other assets of the
Initial Partnership representing investments in investment partnerships
or other investment vehicles, or with investment managers, will be
valued based on the latest unaudited or audited financial statement or
performance report unless the General Partner determines that some
other valuation is more appropriate. All other assets of the Initial
Partnership will be valued in the manner determined by the General
Partner.
13. A limited partner retiring in accordance with the partnership
agreement (including, without limitation, a limited partner who is
required to retire by the General Partner, in its sole discretion,
pursuant to the Partnership Agreement) will be entitled to receive an
amount equal to the value of his capital account as of the date of his
retirement, and the legal representative of any deceased or
incapacitated limited partner may, in the discretion of the general
partner, be paid the value of such limited partner's capital account,
as of the end of the then current fiscal year. Redemptions of a
retiring limited partner's interest may be paid in cash or, in the sole
discretion of the general partner of the Partnership, in kind or partly
in cash and partly in kind, and in kind distributions may be made on a
non pro-rata basis.
14. Except to the extent that a Partnership is limited or
restricted from effecting a withdrawal from any investment vehicle in
which it has invested, retiring partners will be paid 90% of the
estimate of the value of their capital account within 30 days after the
date of such partner's retirement or the end of the fiscal year.
Promptly after the General Partner of the Partnership has determined
the capital accounts of the partners as of the retirement date or, if
the retirement date is the last day of the fiscal year, the
Partnership's independent public accountants have completed their audit
of the Partnership's financial statements, the Partnership will pay to
the retired limited partner or his representative the amount, if any,
by which the amount to which such limited partner is entitled exceeds
the amount previously paid, or the retired limited partner or
representative will be obligated to pay to the Partnership the amount,
if any, by which the amount previously paid exceeds the amount to which
the retired limited partner is entitled, in each case together with
interest thereon, to the extent permitted by applicable law, from the
date of retirement or the last day of the fiscal year, as the case may
be, to the date of payment at an annual rate equal to the 90-day
Treasury Bill rate on such applicable date. A Partnership may retain as
a reserve for Partnership liabilities or for other contingencies, so
much of the amount to which a retiring limited partner is entitled as
the General Partner, in its sole discretion, determines.
15. No remuneration will be paid by the Partnership to either the
General Partner or PaineWebber. The General Partner and PaineWebber do
not intend to seek reimbursement from a Partnership except in the case
of funds advanced to a Partnership, or to third parties on behalf of
the Partnership, to pay Partnership expenses, but each reserves the
right to do so at a future date. PaineWebber, the General Partner and
the general partner of any Subsequent Partnerships will not charge a
fee to, or receive any compensation from the Partnerships for its
management services, although PaineWebber and the General Partner do
receive fees from Masters Fund which will be borne by the Partnership
pro rata along with other partners of Masters Fund.
16. The Initial Partnership will be designated as a ``Special
Limited Partner'' as an investor in the Masters Fund and will be
charged by PaineWebber, the investment manager of Masters Fund, a
reduced rate of 0.40% of the Initial Partnership's capital account in
Masters Fund. An amount equal to 6.0% of the Initial Partnership's
share of net profits of Masters Fund in excess of an annual 15% return
will be reallocated to the general partner of Masters Fund. Any
incentive allocation made to the general partner of Masters Fund will
comply with rule 205-3 under the Advisers Act. The Initial Partnership
will bear its allocable share of all other fees and expenses of Masters
Fund including a quarterly administrative fee paid to the Masters
Fund's administrator in an amount equal to 0.20% of the Initial
Partnership's capital account in Masters Fund.
17. A minimum initial capital contribution of $50,000, subject to
reduction in the sole discretion of the General Partner, will be
required of an Eligible Employee to become a limited partner of the
Partnership. Additional contributions must be in an amount equal to at
least $50,000, subject to reduction in the sole discretion of the
General Partner. On the basis of the total capital contribution, each
partner of the Partnership will have an aggregate contribution recorded
in his capital account.
Applicant's Legal Analysis
1. Applicant requests an exemption under section 6(b) and 6(e) of
the Act from all provisions of the Act and the rules and regulations
thereunder except sections 9, 17 (except for certain provisions of
sections 17 (a), (d), (f), (g), and (j) as described in the
application), 30 (except for certain provisions of sections 30 (a),
(b), (e) and (h) as described in the application), and 36 through 53,
and the rules and regulations thereunder.
2. Section 17(a) provides, in relevant part, that it is unlawful
for any affiliated
[[Page 39290]]
person of a registered investment company or any affiliated person of
such person, 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. Applicant believes that section 17(a) would
prohibit certain purchases of assets from a sales of assets to any of
the Partnerships and borrowings from any of the Partnerships
(collectively, ``Section 17(a) Transactions'') by affiliated persons of
that Partnership and affiliated persons of such persons (collectively,
``Section 17 Persons'').
3. Applicant requests an exemption from the provisions of section
17(a) to the extent necessary to permit any of the partnerships (a) to
purchase and dispose of interests in a company of other investment
vehicle which is a Section 17 Person with respect to that Partnership,
whether by virtue of ownership by affiliated persons of one of the
Partnerships of 5% or more of the voting securities of the company or
vehicle, or otherwise, (b) to acquire investments from PaineWebber or
any affiliate of PaineWebber that PaineWebber or any of its affiliates
has, temporarily and as accommodation to one of the Partnerships,
acquired on the Partnership's behalf, provided that the foregoing would
not exempt transactions between one of the Partnerships and any
director, officer or employee of the General Partner or PaineWebber and
(c) to accept investment in any Partnership by a Section 17 Person.
4. Applicant requests the exemption to allow the Partnerships to
buy and sell as principals (a) the interests of other investment
vehicles sponsored by PaineWebber and (b) the interests of private
investment partnerships or other investment vehicles in which a Section
17 Person including PaineWebber and any of its employees, officers and
directors are investors. Applicant requests the relief to permit the
Partnerships to have the flexibility to deal with their investments in
the manner their general partner and/or PaineWebber deems most
advantageous to the Partnerships. Applicant states that the exception
in clause (b) of the previous paragraph is requested to permit
PaineWebber to acquire an investment temporarily on behalf of a
Partnership prior to or during its formation or prior to receipt by a
Partnership of the necessary funds from its partners to make such
acquisition itself. Applicant believes it is in the interests of the
limited partners for the Partnerships to be able to take advantage of
investment opportunities that are identified as attractive by the
general partner or investment manager but may not remain available
during the months required to organize the Initial or Subsequent
Partnerships and solicit Eligible Employees, or to seek additional
voluntary funds for one of the existing Partnerships. In such cases,
applicant states that PaineWebber's motivation would be solely to
accommodate the Initial or Subsequent Partnerships.
5. Applicant contends that section 17(a) relief is appropriate
because the partners of the Partnership will have been fully informed
of the possible extent of the Partnerships' dealings with PaineWebber
and its affiliates and, as successful professionals employed in the
financial services industry, will be able to evaluate any attendant
risks.
6. Section 17(d) and rule 17d-1 thereunder, among other things,
prohibit a Section 17 Person, acting as principal, from participating
in, or effecting any transaction in connection with, any joint
enterprise or other joint arrangement or profit-sharing plan in which
the Partnerships are a participant.
7. Applicant requests an exemption under rule 17d-1 to the extent
necessary to permit the Partnerships to engage in transactions in which
a Section 17 Person with respect to the Partnerships may participate as
a co-investor with any such Partnerships and to allow Section 17
Persons to invest in the Partnerships.
8. Because of the number and sophistication of the potential
partners in the Partnerships and the persons affiliated with such
partners, applicant believes that strict compliance with section 17(d)
of the Act may cause the Partnerships to forego many otherwise
attractive investment opportunities simply because an affiliated person
of PaineWebber or the Partnerships also had, or contemplated making, a
similar investment. Applicant believes that the concern that permitting
joint investments by PaineWebber or affiliates of PaineWebber might
lead to disadvantageous treatment of the Partnerships should be
mitigated by the fact that PaineWebber will be acutely concerned with
its relationship with its employees who are partners in the
Partnerships.
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. Applicant
requests an exemption from section 17(f) and rule 17f-1 thereunder to
the extent necessary to permit PaineWebber to act as custodian without
a written contract. Because there is a close association between the
Partnerships and PaineWebber, applicant contends that requiring a
detailed contract would cause each Partnership to unnecessary burden
and expense. Furthermore, applicant notes that any securities of a
Partnership held by PaineWebber will have the protection of fidelity
bonds. Applicant also requests an exemption from the terms of rule 17f-
1(b)(4), as it does not believe that the expense of retaining an
independent account to conduct periodic verifications (as required by
the rule) is warranted given the community of interest of all the
parties involved and the existing requirement for an independent annual
audit.
10. Section 17(g) and rule 17g-1 thereunder generally require the
bonding of officers and employees of a registered investment company
who have access to securities or funds of the company. Applicant
requests an exemption from section 17(g) and rule 17g-1 to the extent
necessary to permit the Partnerships to comply with rule 17g-1 without
having a majority of the directors of the general partner who are not
``interested persons'' (as defined in section 2(a)(19) of the Act) take
such action and make such approvals as set forth in the rule and to
permit the general partner to treat all Partnerships together as a
single partnership for purposes of making a determination under section
17(g) and rule 17g-1. Because all of the directors will be affiliated
persons, applicant believes that, without the requested relief, the
Partnerships could not comply with rule 17g-1. The Partnerships will,
except for the requirements of such approvals by ``non-interested''
directors, otherwise comply with rule 17g-1.
11. Section 17(j) and rule 17j-1 thereunder make it unlawful for
certain enumerated persons to engage in fraudulent, deceitful, or
manipulative practices in connections with the purchase or sale of
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. Applicant requests an
exemption from the provisions of section 17(j) and rule 17j-1 because
it believes they are burdensome and unnecessary and the exception is
consistent with the policy of the Act. Applicant believes that the
community of interests among the
[[Page 39291]]
partners of the Partnerships and the conditions set forth below in
connection with the exemptions requested from sections 17 (a) and (d)
should provide adequate safeguards. Applicant does not seek an
exemption from, and applicant will comply with, the anti-fraud
provisions of paragraph (a) of rule 17j-1.
12. Applicant requests an exemption from the requirement in
sections 30 (a), (b) and (e), and the rules thereunder, that registered
investment companies prepare a file with the Commission and mail to
their shareholders certain periodic reports and financial statements.
Applicant believes that the forms prescribed by the SEC for periodic
reports have little relevance to the Partnerships and would entail
administrative and legal costs that outweigh any benefit to the limited
partners. Applicant also requests an exemption from section 30(e) to
the extent necessary to permit a Partnership to report annually to
limited partners in the manner described in the application.
13. Section 30(h) requires that every officer, director and member
of an advisory board, investment advisor or affiliated person of an
investment advisor 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 Securities Exchange Act of 1934 (the
``1934 Act''). Applicant requests an exemption from the requirements of
section 30(h) to the extent necessary to exempt the General Partner,
the general partner of any Subsequent Partnership, PaineWebber, any
investment manager of a subsequent Partnership, any affiliated person
of PaineWebber or such other investment manager, and any of their
respective officers or directors and any other persons who may be
deemed members of an advisory board of any of the Partnerships from
filing Forms 3, 4 and 5 under section 16 of the Exchange Act with
respect to their ownership interests in the Partnerships. Applicant
submits that its request is appropriate and consistent with the
protection of investors because of the lack of trading market in and
the restriction on transferability of Partnership interests.
Applicant's Conditions
Applicant will comply with the following as conditions to any order
granted by the SEC:
1. As a condition of the relief requested for the Partnerships from
sections 17 (a) and (d), applicant agrees that the proposed
transactions otherwise prohibited by sections 17(a) and/or 17(d) to
which any Partnership is a party will be affected only in accordance
with the following: (a) the Partnerships will not acquire any interest
in PaineWebber or the PaineWebber Group; (b) any acquisition by any of
the Partnerships of an investment covered by the section 17(a) relief
will be affected at value (as defined in section 2(a)(41) of the Act),
as determined in good faith by the General Partner, or in the case of
any Subsequent Partnership, its general partner, or PaineWebber, except
that transfers from the General Partner, or in the case of any
Subsequent Partnership, its general partner, or PaineWebber will be
effected at cost as described in paragraph c below; (c) transfer of an
investment from the General Partner, the general partner of any
Subsequent Partnership or PaineWebber to any of the Partnerships will
be effected as soon as reasonably practicable after the acquisition by
the General Partner, the general partner of any Subsequent Partnership
or PaineWebber, but in any event within one year and will be effected
at the General Partner's, general partner's or PaineWebber's cost,
which includes any actual interest charges, not to exceed the
prevailing prime rate, incurred to purchase and hold the property in
question; and (d) the General Partner and any general partner of any
Subsequent Partnership will adopt, and periodically reivew 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 of the
Partnership, or any affiliated person of such a person.
2. As a condition of the relief requested for the Partnerships
under sectin 17(d) and rule 17d-1, applicant agrees that proposed
transactions otherwise prohibited by section 17(d) to which any
Partnership is a party will be effected in accordance with the
following: The General Partner and any general partner of any
Subsequent Partnership will not invest funds of the Partnership in any
investment in which a Section 17 Person 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 Section 17
Person are participants, unless any such Section 17 Person agrees that,
prior to disposing of all or part of its investment, it will (i) give
the General Partner or, in the case of any Subsequent Partnership, its
general partner, sufficient, but not less than one day's notice of its
intent to dispose of its investment, and (ii) refrain from disposing of
its ivestment unless the Partnership has the opportunity to dispose of
the Partnership's investment prior to or concurrently with, and on the
same term as, and pro rata with the Section 17 Person. The restrictions
contained in this condition, however, shall not be deemed to limit or
prevent the disposition of an investment by a Section 17 Person: (i) to
its direct or indirect wholly-owned subsidiary, to any company (a
``parent'') of which the Section 17 Person is a direct or indirect
wholly-owned subsidiary, or to a direct or indirect wholly-owned
subsidiary of its parent; (ii) to immediate family members of the
Section 17 Person or a trust established for any such family members;
(ii) 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 (iv) when the investment is comprised or
securities that are national market system securities pursuant to
section 11A(a)(2) of the 1934 Act and rule 11Aa2-1 thereunder.
3. As a further condition to a Partnership's participation in
Section 17(a) Transactions or Section 17(d) Transactions for which
relief is requested herein, applicant agrees that such Transaction will
be affected in compliance with section 57(f) of the Act as if the
applicant were a business development company to the extent that the
General Partner, or in the case of any subsequent Partnership its
general partner, or PaineWebber (instead of the ``required majority''
as defined in section 57) approves that transactions on the basis
hereinafter set forth. The General Partner or, with respect to a
Subsequent Partnership, its general partner, must approve the
Transaction on the basis that as follows: (1) The terms of such
Transaction, including the consideration to be paid or received, are
fair and reasonable to the partners of the Initial or Subsequent
Partnership and do not involve overreaching of the Initial or
Subsequent Partnership or its partners on the part of any person
concerned; (2) the proposed Transaction in consistent with the
interests of the partners and consistent with the partnership agreement
or the partnership agreement of any Subsequent Partnership and its
report to partners; and (3) the general partner or PaineWebber will
preserve in its records a description of such Transaction, its
findings, the information or materials upon which its findings were
based, and the basis therefore. All such records will be maintained for
the life of the Initial and
[[Page 39292]]
Subsequent Partnership and for a period of at least six years after the
termination of the Initial or Subsequent Partnership, and will be
subject to examination by the SEC and its staff.\1\
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\1\ Consistent with rule 31a-2 under the Act, each of the
Partnerships will preseve the accounts, books and other documents
required to be maintained in an easily accessible place for the
first two years.
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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 SEC and its
staff.
5. The General Partner and any general partner of any Subsequent
Partnership will send to each limited partner of such Partnership who
had an interest in any capital account of such Partnership, at any time
during the fiscal year then ended, Partnership financial statements
audited by the Partnership's independent accountants. At the end of
each fiscal year, the General Partner and the general partner of each
Subsequent Partnership will make a valuation or have a valuation made
of all of the assets of such partnership as of such fiscal year end in
a manner consistent with customary practice with respect to the
valuation of assets of the kind held by the Partnership. In addition,
within 90 days after the end of each fiscal year of each Partnership or
as soon as practicable thereafter, the general partner of such
Partnership will send a report to each person who was a partner at any
time during the fiscal year then ended, setting forth such tax
information as shall be necessary for the preparation by the partner of
his Federal and state income tax returns and a report of investment
activities during the year.
6. If purchases or sales are made by a Partnership from or to an
entity affiliated with the Partnership by reason of a 5% or more
investment in such entity by any director, officer or employee of
PaineWebber or by any director, officer of the general partner of that
Partnership, such individual will not participate in that 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.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-19197 Filed 7-21-97; 8:45 am]
BILLING CODE 8010-01-M