[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