[Federal Register Volume 63, Number 229 (Monday, November 30, 1998)]
[Notices]
[Pages 65823-65827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31716]


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

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23543; 813-188]


Sixty Wall Street Fund, L.P. et al.; Notice of Application

November 20, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under sections 6(b) and 6(e) 
of the Investment Company Act of 1940 (``Act'') exempting the 
applicants from all provisions of the Act, except section 9, sections 
17 (other than certain provisions of paragraphs (a), (d), (e), (f), 
(g), and (j)) and 30 (other than certain provisions of paragraphs (a), 
(b), (e) and (h)), sections 36 through 53, and the rules and 
regulations under the Act.

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

SUMMARY OF APPLICATION: Applicants request an order superseding a prior 
order \1\ to exempt certain limited partnerships formed for the benefit 
of key employees of J.P. Morgan & Co. Incorporated (``JP Morgan'') and 
its affiliates from certain provisions of the Act. Each partnership 
will be an employees' securities company within the meaning of section 
2(a)(13) of the Act.

    \1\ Sixty Wall Street Fund 1995, L.P., et al., Investment 
Company Act Release Nos. 21451 (Oct. 25, 1995) (notice) and 21536 
(Nov. 21, 1995) (order).
---------------------------------------------------------------------------

APPLICANTS: Sixty Wall Street Fund, L.P. (``Master Partnership''), 
Sixty Wall Street SBIC Fund, L.P. (``SBIC Partnership''), and JP Jorgan 
on behalf of other partnerships or other investment vehicles that may 
be formed in the future (together, with the Master Partnership and the 
SBIC Partnership, the ``Partnerships'').

FILING DATES: The application was filed on October 30, 1997. Applicants 
have agreed to file a amendment to the application, the substance of 
which is reflected in this notice during the notice period.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on December 15, 
1998, 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 Fifth Street, NW, Washington, DC 20549. 
Applicants, c/o J. Edmund Colloton, J.P. Morgan Capital Corporation, 60 
Wall Street, New York, New York 10260.

FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney Advisor, at 
(202) 942-0569, or Mary Kay Frech, 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, 450 Fifth Street, NW, Washington, DC 
20549 (tel. 202-942-8090).

Applicants' Representations

    1. JP Morgan Group, as defined below, is a global financial firm. 
J.P. Morgan Securities Inc., a wholly-owned subsidiary of JP Morgan, is 
the principal broker-dealer affiliate of JP Morgan and is registered 
under the Securities Exchange Act of 1934 (``Exchange Act''). JP Morgan 
and its affiliates, as defined in rule 12b-2 of the Exchange Act, are 
referred to in this notice collectively as ``JP Morgan Group'' and 
individually as a ``JP Morgan Group entity.''
    2. Applicants propose to offer various investment programs for the 
benefit of certain key employees of JP Morgan Group. The programs may 
be structured as different Partnerships or as separate plans within the 
same Partnership. Each Partnership will be a limited partnership or 
limited liability company formed as an ``employees' securities 
company'' within the meaning of section 2(a)(13) of the Act, and will 
operate as a closed-end, non-diversified, management investment 
company. The Partnerships will be established primarily for the benefit 
of highly compensated employees of JP Morgan Group as part of a program 
designed to create capital building opportunities that are competitive 
with those at other investment banking firms and to facilitate the 
recruitment of high caliber professionals. Participation in a 
Partnership will be voluntary.
    3. Sixty Wall Street Corporation, a Delaware corporation, will act 
as the general partner of the Master Partnership and Sixty Wall Street 
SBIC Corporation, a Delaware corporation, will act as general partner 
of SBIC Partnership (together with any affiliate that controls, is 
controlled by or is under common control with JP Morgan and that acts 
as a Partnership's general partner, the ``General Partner''). The 
General Partner will manage and operate each of the Partnerships. The 
General Partner will be authorized to delegate management 
responsibility to JP Morgan Group or to a committee of JP Morgan Group 
employees. A JP Morgan Group entity will act as the investment adviser 
to a Partnership and will be registered as an investment adviser under 
the Investment Advisers Act of 1940.
    4. Interests in the Partnerships (``Interests'') will be offered 
without registration in reliance on section 4(2) of the Securities Act 
of 1933 (the ``Securities Act''), or Regulation D under the Securities 
Act, and will be sold without a sales load only to ``Eligible 
Employees'' and ``Qualified Participants,'' in each case as defined 
below, or to JP Morgan Group (collectively, ``Participants''). Prior to 
offering Interests to an Eligible Employee, the General Partner must 
reasonably believe that the Eligible Employee will be a sophisticated 
investor capable of understanding and evaluating the risks of 
participating in the Partnership without the benefit of regulatory 
safeguards. An Eligible Employee is (i) an individual who is a current 
or former employee, officer, director, or ``Consultant'' of JP Morgan 
Group and, except for certain individuals who manage the day-to-day 
affairs of the Partnership in question (``Managing Employees''), meets 
the standards of an accredited investor under rule 501(a)(6) of 
Regulation D under the Securities Act, or (ii) an entity

[[Page 65824]]

that is a current or former ``Consultant'' of JP Morgan Group and meets 
the standards of an accredited investor under rule 501(a) of Regulation 
D.\2\ Eligible Employees will be experienced professionals in the 
banking and financial services businesses, or in related administrative 
financial, accounting, legal, or operational activities.
---------------------------------------------------------------------------

    \2\ A ``Consultant'' is a person or entity whom JP Morgan Group 
has engaged on retainer to provide services and professional 
expertise on an ongoing basis as a regular consultant or as a 
business or legal adviser and who shares a community of interest 
with JP Morgan Group and JP Morgan Group employees.
---------------------------------------------------------------------------

    5. Managing Employees, who also will qualify as Eligible Employees, 
will have primary responsibility for operating the Partnership. These 
responsibilities will include, among other things, identifying, 
investigating, structuring, negotiating, and monitoring investments for 
the Partnership, communicating with the Participants in the 
Partnership, maintaining the books and records of the Partnership, and 
making recommendations with respect to investment decisions by the 
General Partner. Each Managing Employee will (a) be closely involved 
with and knowledgeable with respect to the Partnership's affairs, (b) 
be an officer or employee of JP Morgan Group, and (c) have reportable 
income from all sources (including any profit sharing and bonuses) in 
the calendar year immediately preceding the Employee's participation in 
the Partnership in excess of $120,000 and have a reasonable expectation 
of reportable income of at least $150,000 in the years in which the 
Employee invests in a Partnership.
    6. A Qualified Participant (a) is an eligible Family Member or 
Qualified entity (in each case as defined below) of an Eligible 
Employee, and (b) if the individual or entity is purchasing an Interest 
from a Partner or directly from the Partnership, comes within one of 
the categories of an ``accredited investor'' under rule 501(a) of 
Regulation D.\3\ An ``Eligible Family Member'' is a spouse, parent, 
child, spouse of child, brother, sister, or grandchild of an Eligible 
Employee. A ``Qualified Entity'' is: (a) a trust of which the trustee, 
grantor, and/or beneficiary is an Eligible Employee; (b) a partnership, 
corporation, or other entity controlled by an Eligible Employee,\4\ of 
(c) a trust or other entity established for the benefit of Eligible 
Family Members of an Eligible Employee.
---------------------------------------------------------------------------

    \3\ ``Partner'' means any partner of a Partnership, including 
the General Partner.
    \4\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
`'qualified Entities'' is intended to enable Eligible Employees to 
make investments in the Partnerships through personal investment 
vehicles for the purpose of personal and family investment and 
estate planning objectives. Eligible Employees will exercise 
investment discretion or control over these investment vehicles, 
thereby creating a close nexus between JP Morgan Group and these 
investment vehicles. In the case of a partnership, corporation, or 
other entity controlled by a Consultant entity, individual 
participants will be limited to senior level employees, members, or 
partners of the Consultant who will be required to qualify as an 
``accredited investor'' under rule 501(a)(6) of Regulation D and who 
will have access to the General Partner or JP Morgan Group.
---------------------------------------------------------------------------

    7. The terms of a Partnership will be fully disclosed to each 
Eligible Employee and, if applicable, to a Qualified Participant of the 
Eligible Employee, in a limited partnership agreement (the ``Limited 
Partnership Agreement''), which will be furnished at the time of 
Eligible Employee is invited to participate in the Partnership. Each 
Partnership will send audited financial statements to each Participant 
within 120 days or as soon as practicable after the end of its fiscal 
year. In addition, each Participant will receive a copy of Schedule K-1 
showing the Participant's share of income, credits, deductions, and 
other tax items.
    8. Interests in a Partnership will be non-transferable except with 
the prior written consent of the General partner. No person will be 
admitted into a Partnership as a Partner unless the person is an 
Eligible Employee, a Qualified Participant of an Eligible Employee, or 
a JP Morgan Group entity.
    9. An Eligible Employee's interest in a Partnership may be subject 
to repurchase or cancellation if: (a) the Eligible Employee's 
relationship with JP Morgan Group is terminated for cause; (b) the 
Eligible Employee becomes a consultant to or joins any firm that the 
General Partner determines, in its reasonable discretion, is 
competitive with any business of JP Morgan Group, or (c) the Eligible 
Employee voluntarily resigns from employment with JP Morgan Group. Upon 
repurchase or cancellation, the General Partner will pay to the 
Eligible Employee at least the lesser of (a) the amount actually paid 
by the Eligible Employee to acquire the Interest (plus interest, as 
determined by the General Partner), and (b) the fair market value of 
the Interest as determined at the time of repurchase in good faith by 
the General Partner. The terms of any repurchase or cancellation will 
apply equally to any Qualified Participant of an Eligible Employee.
    10. Subject to the terms of the applicable Limited Partnership 
Agreement, a Partnership will be permitted to enter into transactions 
involving (a) a JP Morgan Group entity, (b) a portfolio company, (c) 
any Partner or any person or entity affiliated with a Partner, (d) an 
investment fund or separate account that is organized for the benefit 
of investors who are not affiliated with JP Morgan Group and over which 
a JP Morgan Group entity will exercise investment discretion (``Third 
Party Fund''), or (e) any partner or other investor of a Third Party 
Fund that is not affiliated with JP Morgan Group (a ``Third Party 
Investor''). These transactions may include a Partnership's purchase or 
sale of an investment or an interest from or to any JP Morgan Group 
entity or Third Party Fund, acting as principal. Prior to entering into 
these transactions, the General Partner must determine that the terms 
are fair to the Partners.
    11. A Partnership will not invest more than 15% of its assets in 
securities issued by registered investment companies (with the 
exception of temporary investments in money market funds). A 
Partnership will not acquire any security issued by a registered 
investment company if immediately after the acquisition, the 
Partnership will own more than 3% of the outstanding voting stock of 
the registered investment company.
    12. A JP Morgan Group entity (including the General partner) acting 
as agent or broker may receive placement fees, advisory fees, or other 
compensation from a Partnership in connection with a Partnership's 
purchase or sale of securities, provided the placement fees, advisory 
fees, or other compensation are ``usual and customary.'' Fees or other 
compensation will be deemed ``usual and customary'' only if (a) the 
Partnership is purchasing or selling securities with other unaffiliated 
third parties, including Third Party Funds, (b) the fees or 
compensation being charged to the partnership are also being charged to 
the unaffiliated third parties, including Third Party Funds, and (c) 
the amount of securities being purchased or sold by the Partnership 
does not exceed 50% of the total amount of securities being purchased 
or sold by the Partnership and the unaffiliated third parties, 
including Third Party Funds. JP Morgan Group entities, including the 
General Partner, also may be compensated for services to entities in 
which the Partnerships invest and to entities that are competitors of 
these entities, and may otherwise engage in normal business activities.

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides, in part, that the SEC will 
exempt

[[Page 65825]]

employees' securities companies from the provisions of the Act to the 
extent that the exemption is consistent with the protection of 
investors. Section 6(b) provides that the SEC will consider, in 
determining the provisions of the Act from which the company should be 
exempt, the company's form of organization and capital structure, the 
persons owning and controlling its securities, the price of the 
company's securities and the amount of any sales load, how the 
company's funds are invested, and the relationship between the company 
and the issuers of the securities in which it invests. Section 2(a)(13) 
defines an employees' security company, in relevant part, as any 
investment company all of whose securities are beneficially owned (a) 
by current or former employees, or persons on retainer, of one or more 
affiliated employers, (b) by immediate family members of such persons, 
or (c) by such employer or employers together with any of the persons 
in (a) or (b).
    2. Section 7 of the Act generally prohibits investment companies 
that are not registered under section 8 from selling or redeeming their 
securities. Section 6(e) provides that, in connection with any order 
exempting an investment company from any provision of section 7, 
certain provisions of the Act, as specified by the SEC, will be 
applicable to the company and other persons dealing with the company as 
though the company were registered under the Act. Applicants request an 
order under section 6(b) and 6(e) of the Act exempting the Partnerships 
from all provisions of the Act, except section 9, section 17 (other 
than certain provisions of paragraphs (a), (d), (e), (f), (g), and 
(j)), section 30 (other than certain provisions of paragraphs (a), (b), 
(e), and (h)), sections 36 through 53 of the Act, and the rules and 
regulations under the Act.
    3. Section 17(a) generally prohibits any affiliated person of a 
registered investment company, or any affiliated person of an 
affiliated person, acting as principal, from knowingly selling or 
purchasing any security or other property to or from the company. 
Applicants request an exemption from section 17(a) to permit: (a) a JP 
Morgan Group entity or a Third Party Fund, acting as principal, to 
engage in any transaction directly or indirectly with any Partnership 
or any company controlled by the Partnership; (b) any Partnership to 
invest in or engage in any transaction with any JP Morgan Group entity, 
acting as principal, (i) in which the Partnership, any company 
controlled by the Partnership, or any JP Morgan Group entity or Third 
Party Fund has invested or will invest, or (ii) with which the 
Partnership, any company controlled by the Partnership, or any JP 
Morgan Group entity or Third Party Fund is or will become otherwise 
affiliated; and (c) any Third Party Investor, acting as principal, to 
engage in any transaction directly or indirectly with a Partnership or 
any company controlled by the Partnership.
    4. Applicants state that an exemption from section 17(a) is 
consistent with the protection of investors and is necessary to promote 
the purpose of the Partnerships. Applicants state that the Participants 
in each Partnership will be fully informed of the extent of the 
Partnership's dealings with JP Morgan Group. Applicants also state 
that, as professionals employed in the banking and financial services 
businesses, Participants will be able to understand and evaluate the 
attendant risks. Applicants assert that the community of interest among 
the Participants and JP Morgan Group will provide the best protection 
against any risk of abuse.
    5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
any affiliated person or principal underwriter of a registered 
investment company, or any affiliated person of an affiliated person or 
principal underwriter, acting as principal, from participating in any 
joint arrangement with the company unless authorized by the SEC. 
Applicants request exemptive relief to permit affiliated persons of 
each Partnership, or affiliated persons of any of these persons, to 
participate in any joint arrangement in which the Partnership or a 
company controlled by the Partnership is a participant.
    6. Applicants submit that it is likely that suitable investments 
will be brought to the attention of a Partnership because of its 
affiliation with JP Morgan Group, JP Morgan Group's large capital 
resources, and its experience in structuring complex transactions. 
Applicants also submit that the types of investment opportunities 
considered by a Partnership often require each investor to make funds 
available in an amount that may be substantially greater than what a 
Partnership may make available on its own. Applicants contend that, as 
a result, the only way in which a Partnership may be able to 
participate in these opportunities may be to co-invest with other 
persons, including its affiliates. Applicants note that each 
Partnership will be organized for the benefit of Eligible Employees as 
an incentive for them to remain with JP Morgan Group and for the 
generation and maintenance of goodwill. Applicants believe that, if co-
investments with JP Morgan Group are prohibited, the appeal of the 
Partnerships would be significantly diminished. Applicants assert that 
Eligible Employees wish to participate in co-investment opportunities 
because they believe that (a) the resources of JP Morgan Group enable 
it to analyze investment opportunities to an extent that individual 
employees would not be able to duplicate, (b) investments made by JP 
Morgan Group will not be generally available to investors even of the 
financial status of the Eligible Employees, and (c) Eligible Employees 
will be able to pool their investment resources, thus achieving greater 
diversification of their individual investment portfolios.
    7. Applicants assert that the flexibility to structure co-
investments and joint investments will not involve abuses of the type 
section 17(d) and rule 17d-1 were designed to prevent. Applicants state 
that the concern that premitting co-investment by JP Morgan Group and a 
Partnership might lead to less advantageous treatment of the 
Partnership should be mitigated by the fact that JP Morgan Group will 
be acutely concerned with its relationship with the investors in the 
Partnership, and fact that senior officers and directors of JP Morgan 
Group entities will be investing in the Partnership. In addition, 
applicants assert that strict compliance with section 17(d) would cause 
the Partnership to forego investment opportunities simply because a 
Participant or other affiliated person of the Partnership (or any 
affiliate of the affiliated person) made a similar investment.
    8. Co-investments with Third Party Funds, or by a JP Morgan Group 
entity pursuant to a contractual obligiation to a Third Party Fund, 
will not be subject to condition 3 below. Applicants note that it is 
common for a Third Party Fund to require that JP Morgan Group invest 
its own capital in Third Party Fund investments, and that the JP Morgan 
Group investments be subject to substantially the same terms as those 
applicable to the Third Party Fund. Applicants state that it is 
important that the interests of the Third Party Fund take priority over 
the interests of the Partnerships, and that the Third Party Fund not be 
burdened or othewise affected by activities of the Partnerships. In 
addition, applicants assert that the relationship of a Partnership to a 
Third Party Fund is fundamentally different from a Partnership's 
relationship to JP Morgan Group. Applicants contend that the focus of, 
and the rationale for, the protections contained in the requested 
relief are to protect the Partnerships from any overreaching by JP 
Morgan Group in the employer/employee

[[Page 65826]]

context, whereas the same concerns are not present with respect to the 
Partnerships and a Third Party Fund.
    9. Section 17(e) and rule 17e-1 limit the compensation an 
affiliated person may receive when acting as agent or broker for a 
registered investment company. Applicants request an exemption from 
section 17(e) to permit a JP Morgan Group entity (including the General 
Partner) that acts as an agent or broker to receive placement fees, 
advisory fees, or other compensation from a Partnership in connection 
with the purchase or sale by the Partnership of securities, provided 
that the fees or other compensation is deemed ``usual and customary.'' 
Applicants state that for the purposes of the application, fees or 
other compensation that is charged or received by a JP Morgan Group 
entity will be deemed ``usual and customary'' only if (a) the 
Partnership is purchasing or selling securities with other unaffiliated 
third parties, including Third Party Funds, (b) the fees or 
compensation being charged to the Partnership are also being charged to 
the unaffiliated third parties, including Third Party Funds, and (c) 
the amount of securities being purchased or sold by the Partnership 
does not exceed 50% of the total amount of securities being purchased 
or sold by the Partnership and the unaffiliated third parties, 
including Third Party Funds. Applicants assert that, because JP Morgan 
Group does not wish to appear as if it is favoring the Partnerships, 
compliance with section 17(e) would prevent a Partnership from 
participating in transactions where the Partnership is being charged 
lower fees than unaffiliated third parties. Applicants assert that the 
fees or other compensation paid by a Partnership to a JP Morgan Group 
entity will be the same as those negotiated at arm's length with 
unaffiliated third parties.
    10. Rule 17e-1(b) requires that a majority of directors who are not 
``interested persons'' (as defined in section 2(a)(19) of the Act) take 
actions and make approvals regarding commissions, fees, or other 
remuneration. Applicants request an exemption from rule 17e-1(b) to the 
extent necessary to permit each Partnership to comply with the rule 
without having a majority of the directors of the General Partner who 
are not interested persons take actions and make determinations as set 
forth in the rule. Applicants state that because all of the directors 
of the General Partner will be affiliated persons, without the relief 
requested, a Partnership could not comply with rule 17e-1(b). 
Applicants state that each Partnership will comply with rule 17e-1(b) 
by having a majority of the directors of the General Partner take 
actions and make approvals as are set forth in rule 17e-1. Applicants 
state that each Partnership will comply with all other requirements of 
rule 17e-1 for the transactions described above in the discussion of 
section 17(e).
    11. Section 17(f) designates the entities that may act as 
investment company custodians, and rule 17f-1 imposes certain 
requirements when the custodian is a member of a national securities 
exchange. Applicants request an exemption from section 17(f) and rule 
17f-1 to permit a JP Morgan Group entity to act as custodian of 
Partnership assets without a written contract, as would be required by 
rule 17f-1(a). Applicants also request an exemption from the rule 17f-
1(b)(4) requirement that an independent accountant periodically verify 
the assets held by the custodian. Applicants state that, because of the 
community of interest between JP Morgan Group and the Partnerships and 
the existing requirement for an independent audit, compliance with 
these requirements would be unnecessarily burdensome and expensive. 
Applicants will comply with all other requirements of rule 17f-1.
    12. Section 17(g) and rule 17g-1 generally require the bonding of 
officers and employees of a registered investment company who have 
access to its securities or funds. Rule 17g-1 requires that a majority 
of directors who are not interested persons take certain actions and 
given certain approvals relating to fidelity bonding. Applicants 
request exemptive relief to permit the General Partner's officers and 
directors, who may be deemed interested persons, to take actions and 
make determinations set forth in the rule. Applicants state that, 
because all the directors of the General Partner will be affiliated 
persons, a Partnership could not comply with rule 17g-1 without the 
requested relief. Specifically, each Partnership will comply with rule 
17g-1 by having a majority of the General Partner's directors take 
actions and make determinations as are set forth in rule 17g-1. 
Applicants also state that each Partnership will comply with all other 
requirements of rule 17g-1.
    13. Section 17(j) and paragraph (a) of rule 17j-1 make it unlawful 
for certain enumerated persons to engage in fraudulent or deceptive 
practices in connection with the purchase or sale of a security held or 
to be acquired by a registered investment company. Rule 17j-1 also 
requires that every registered investment company adopt a written code 
of ethics and that every access person of a registered investment 
company report personal securities transactions. Applicants request an 
exemption from the provisions of rule 17j-1, except for the anti-fraud 
provisions of paragraph (a), because they are unnecessarily burdensome 
as applied to the Partnerships.
    14. Applicants request an exemption from the requirements in 
sections 30(a), 30(b), and 30(e), and the rules under those sections, 
that registered investment companies prepare and file with the SEC and 
mail to their shareholders certain periodic reports and financial 
statements. Applicants contend 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 
Participants. Applicants request exemptive relief to the extent 
necessary to permit each Partnership to report annually to its 
Participants. Applicants also request an exemption from section 30(h) 
to the extent necessary to exempt the General Partner of each 
Partnership and any other persons who may be deemed to be members of an 
advisory board of a Partnership from filing Forms 3, 4, and 5 under 
section 16(a) of the Exchange Act with respect to their ownership of 
Interests in Partnership. Applicants assert that, because there will be 
no trading market and the transfers of Interests will be severely 
restricted, these filings are unnecessary for the protection of 
investors and burdensome to those required to make them.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transactions otherwise prohibited by section 17(a) 
or section 17(d) of the Act and rule 17d-1 under the Act to which a 
Partnership is a party (the ``Section 17 Transactions'') will be 
effected only if the 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, the Partnership's organizational documents, and the 
Partnership's reports to its Partners. In addition, the General Partner 
will record and preserve a description of all Section 17 Transactions, 
the General Partner's findings, the information or materials upon which 
the General Partner's findings are based, and the basis for the

[[Page 65827]]

findings. All records relating to an investment program will be 
maintained until the termination of the investment program and at least 
two years thereafter, and will be subject to examination by the SEC and 
its staff.\5\
---------------------------------------------------------------------------

    \5\ Each Partnership will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
---------------------------------------------------------------------------

    2. In connection with the Section 17 Transactions, the General 
Partner will adopt, and periodically review and update, procedures 
designed to ensure that reasonable inquiry is made, prior to the 
consummation of any Section 17 Transaction, with respect to the 
possible involvement in the transaction of any affiliated person or 
promoter of or principal underwriter for the Partnership, or any 
affiliated person of such person, promoter, or principal underwriter.
    3. The General Partner will not invest the funds of any Partnership 
in any investment in which a ``Co-Investor'' (as defined below) has 
acquired 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 a Co-Investor are participants, unless any such Co-
Investor, prior to disposing of all or part of its investment, (a) 
gives the General Partner sufficient, but not less than one days, 
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 or 
concurrently with, on the same terms as, and pro rata with the Co-
Investor. The term ``Co-Investor'' with respect to any Partnership 
means any person who is: (a) an ``affiliated person'' (as defined in 
section 2(a)(3) of the Act) of the Partnership (other than a Third 
Party Fund); (b) JP Morgan Group; (c) an officer or director of JP 
Morgan Group; or (d) an entity (other than a Third party Fund) in which 
the General Partner acts as general partner or has a similar capacity 
to control the sale or other disposition of the entity's securities. 
The restrictions contained in this condition, however, shall not be 
deemed to limit or prevent the disposition of an investment by a Co-
Investor: (a) to its direct or indirect wholly-owned subsidiary, to any 
company (a ``parent'') of which the Co-Investor is a direct or indirect 
wholly-owned subsidiary, or to a direct or indirect wholly-owned 
subsidiary of its parent; (b) to a spouse, parent, child, spouse of 
child, brother, sister, or grandchild of the Co-Investor or a trust or 
other investment vehicle established for any 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; 9d) 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 11Aa2-1 thereunder; or (e) when 
the investment is comprised of securities that are listed on or traded 
on any foreign securities exchange or board of trade that satisfies 
regulatory requirements under the law of the jurisdiction in which such 
foreign securities exchange or board of trade is organized similar to 
those that apply to a national securities exchange or a national market 
system for securities.
    4. Each Partnership and the 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 audited financial statements that are 
to be provided to the Participants in the Partnership, and each annual 
report of the Partnership required to be sent to the Participants, and 
agree that all such records will be subject to examination by the SEC 
and its staff.\6\
---------------------------------------------------------------------------

    \6\ Each Partnership will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
---------------------------------------------------------------------------

    5. The General Partner of each Partnership will send to each 
Participant in the Partnership who had an interest in any capital 
account of the 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 or at other 
times as necessary in accordance with customary practice, the General 
Partner will make a valuation or have a valuation made of all of the 
assets of the Partnership as of the 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 120 
days after the end of each fiscal year of each Partnership or as soon 
as practicable thereafter, the General Partner of the Partnership will 
send a report to each person who was a Participant in the Partnership 
at any time during the fiscal year then ended, setting forth such tax 
information as shall be necessary for the preparation by the 
Participant of his or its federal and state income tax returns, and a 
report of the investment activities of the Partnership during that 
year.
    6. In any case where 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 the entity by a JP Morgan Group director, 
officer, or employee, the individual will not participate in the 
Partnership's determination of whether or not to effect the purchase or 
sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-31716 Filed 11-27-98; 8:45 am]
BILLING CODE 8010-01-M