[Federal Register Volume 64, Number 22 (Wednesday, February 3, 1999)]
[Notices]
[Pages 5322-5327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2481]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23669; 813-196]


NationsBanc Coinvest Fund 1999, L.P. and BankAmerica Corporation; 
Notice of Application

January 27, 1999.
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 (the ``Act'') granting an 
exemption 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, and the rules and 
regulations thereunder.

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    Summary of Application: Applicants request an order to exempt 
certain limited partnerships and limited liability companies 
(``Partnerships'') formed for the benefit of key employees of 
BankAmerica Corporation (``BankAmerica'') and certain of its affiliates 
from certain provisions of the Act. Each Partnership will be an 
``employees' securities company'' as defined in section 2(a)(13) of the 
Act.
    Applicants: NationsBanc Coinvest Fund 1999, L.P. (the ``Initial 
Partnership''), and BankAmerica, on behalf of other Partnerships which 
have been or may in the future be formed.

[[Page 5323]]

    Filing Dates: The application was filed on August 12, 1998, and 
amended on October 14, 1998.
    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 February 
22, 1999, 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, Securities and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549. Applicants, 100 North Tyson Street, 
Charlotte, NC 28255.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Staff Attorney, at 
(202) 942-0634, or Edward P. Macdonald, 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. BankAmerica, the largest bank in the United States, was created 
by the merger of NationsBank Corporation and BankAmerica Corporation on 
September 30, 1998. BankAmerica and its affiliates, as defined in rule 
12b-2 under the Securities Exchange Act of 1934 (the ``Exchange Act''), 
(``Affiliates'') are referred to in this notice collectively as 
``BankAmerica Group'' and individually as a ``BankAmerica entity.''
    2. BankAmerica Group offers various investment programs for the 
benefit of certain key employees. These programs may be structured as 
different Partnerships or as separate plans within a 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 BankAmerica 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. The Initial Partnership will invest exclusively in one or 
more limited partnerships formed by BankAmerica to make private entity 
investments (the ``BankAmerica Funds'').
    3. NB Coinvest GP, Inc., a North Carolina corporation, will act as 
the general partner of the Initial Partnership (together with any 
Affiliate of BankAmerica that acts as a Partnership's general partner, 
the ``General Partner''). The General Partner of the Initial 
Partnership will not be registered under the Investment Advisers Act of 
1940 (``Advisers Act'') pursuant to section 203(b)(3) of the Advisers 
Act and rule 203(b)(3)-1 thereunder. The General Partner will manage, 
operate, and control each of the Partnerships. However, the General 
Partner will be authorized to delegate to another BankAmerica Group 
affiliate or to a committee of BankAmerica Group employees such 
management responsibility (including, without limitation, the managers 
of the other Partnerships which have been or may in the future be 
formed).
    4. Limited partner 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 similar exemption 
and will be sold only to ``Eligible Employees'' and ``Qualified 
Participants'' (collectively, ``Participants''). Prior to offering 
Interests to an Eligible Employee, the General Partner must reasonably 
believe that an 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 BankAmerica 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 that is a current or 
former ``Consultant'' of BankAmerica Group and meets the standards of 
an accredited investor under rule 501(a) of Regulation D.\1\ Eligible 
Employees will be experienced professionals in the banking, investment 
banking and securities, investment management or financial services 
businesses, or in the related administrative, financial, accounting, 
legal, or operational activities.
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    \1\ A Consultant is a person or entity whom BankAmerica Group 
has engaged in 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 BankAmerica Group and BankAmerica Group employees.
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    5. Managing 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 
limited partners, maintaining the books and records of the Partnership, 
and making recommendations with respect to investment decisions. Each 
Managing Employee will: (a) be closely involved with, and knowledgeable 
with respect to, the affairs and the status of the Partnership, (b) be 
an officer or employee of BankAmerica Group and (c) have reportable 
income from all sources (including any profit shares 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 (i) is an Eligible Family Member or 
Qualified Entity (in each case as defined below) of an Eligible 
Employee, and, (ii) if the individual or entity is purchasing on 
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. An ``Eligible Family Member'' is a spouse, parent, 
child, spouse of child, brother, sister, or grandchild of an Eligible 
Employee. A ``Qualified Entity'' is (i) a trust of which the trustee, 
grantor, and/or beneficiary is an Eligible Employee; (ii) a 
partnership, corporation, or other entity controlled by an Eligible 
Employee; \2\ or (iii) a trust or other entity

[[Page 5324]]

established for the benefit of Eligible Family Members of an Eligible 
Employee.
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    \2\ 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 BankAmerica 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 BankAmerica Group.
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    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, at the time the 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, reductions, 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 unless the person is an Eligible Employee, 
a Qualified Participant of an Eligible Employee, or a BankAmerica 
entity. No sales load will be charged in connection with the sale of a 
limited partnership interest.
    9. An Eligible Employee's interest in a Partnership may be subject 
to repurchase or cancellation if: (i) the Eligible Employee's 
relationship with BankAmerica Group is terminated for cause; (ii) 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 BankAmerica Group; or (iii) the 
Eligible Employee voluntarily resigns from employment with BankAmerica 
Group. Upon repurchase or cancellation, the General Partner will pay to 
the Eligible Employee at least the lesser of (i) the amount actually 
paid by the Eligible Employee to acquire the Interest (plus interest, 
as determined by the General Partner), and (ii) the fair market value 
of the Interest as determined at the time of repurchase 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 (i) a BankAmerica entity, (ii) a portfolio company, (iii) any 
Partner or any person or entity affiliated with a Partner, (iv) an 
investment fund or separate account that is organized for the benefit 
of investors who are not affiliated with and over which a BankAmerica 
entity will exercise investment discretion (a ``Third Party Fund''), or 
(v) any partner or other investor of a Third Party Fund that is not 
affiliated with BankAmerica 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 BankAmerica 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 BankAmerica 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 ``reasonable and customary.'' Fees or 
other compensation will be deemed ``reasonable and customary'' only if 
(i) the Partnership is purchasing or selling securities with other 
unaffiliated third parties, including Third Party Funds, (ii) the fees 
or compensation being charged to the Partnership are also being charged 
to the unaffiliated third parties, including Third Party Funds, and 
(iii) 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. A BankAmerica entity (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 that conflict with the interests of the Partnerships.

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides, in part, that the SEC will 
exempt 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 Commission 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 an investment company 
that is not registered under section 8 of the Act from selling or 
redeeming its 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 sections 6(b) and 6(e) of the Act for an exemption 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, and the rules and regulations 
thereunder.
    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 (i) permit a 
BankAmerica entity (including, without limitation, a BankAmerica Fund) 
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; (ii) permit any Partnership to invest in 
or engage in any transaction with any BankAmerica entity (including 
without limitation, acting as principal), (a) in which the Partnership, 
any company controlled by the Partnership, or any BankAmerica entity 
(including, without limitation, a BankAmerica Fund) or Third Party Fund 
has invested or will invest, or (b) with which the Partnership, any 
company controlled by

[[Page 5325]]

the Partnership, or any BankAmerica entity (including, without 
limitation, a BankAmerica Fund) or Third Party Fund is or will become 
otherwise affiliated; and (iii) permit any Third Party Investor, acting 
as principal, to engage in any transaction directly or indirectly with 
any 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 BankAmerica Group. Applicants also state 
that, as professionals employed in the investment 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 BankAmerica Group will provide the 
best protection against any risk of abuse.
    5. Section 17(d) and rule 17d-1 prohibit any affiliated person or 
principal underwriter of a registered investment company, or any 
affiliated person of such 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, or effect any transaction in 
connection with, any joint enterprise or other joint arrangement or 
profit-sharing plan 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 BankAmerica Group, BankAmerica 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 primarily organized for the benefit of employee 
participants as an incentive for them to remain with BankAmerica Group 
and for the generation and maintenance of goodwill. Applicants believe 
that, if co-investments with BankAmerica 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 
BankAmerica Group enable it to analyze investment opportunities to an 
extent that individual employees would not be able to duplicate, (b) 
investments made by BankAmerica 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 permitting co-investments by BankAmerica Group 
and a Partnership might lead to less advantageous treatment of the 
Partnership will be mitigated by the fact that BankAmerica Group will 
be acutely concerned with its relationship with the personnel who 
invest in such partnership and the fact that senior officers and 
directors of BankAmerica Group entities will be investing in such 
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 such person) made a similar 
investment. Finally, applicants contend that the possibility that a 
Partnership may be disadvantaged by the participation of an affiliate 
in a transaction will be minimized by compliance with the lockstep 
procedures described in condition 3 below. Applicants believe that this 
condition will ensure that a Partnership will co-invest side-by-side 
and pro rata with, and on at least as favorable terms as, a BankAmerica 
entity.
    8. Co-investments with Third Party Funds, or by a BankAmerica 
entity pursuant to a contractual obligation to a Third Party Fund, will 
not be subject to condition 3. Applicants note that it is common for a 
Third Party Fund to require that BankAmerica Group invest its own 
capital in Third Party Fund investments, and that the BankAmerica Group 
investments be subject to substantially the same terms as those 
applicable to the Third Party Fund. Applicants believe 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 otherwise 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 BankAmerica 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 
BankAmerica Group in the employer/employee context, whereas the same 
concerns are not present with respect to the Partnerships vis-a-vis 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 BankAmerica 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 BankAmerica entity 
will be deemed ``usual and customary'' only if (i) the Partnership is 
purchasing or selling securities with other unaffiliated third parties, 
including Third Party Funds, (ii) the fees or compensation being 
charged to the Partnership are also being charged to the unaffiliated 
third parties, including Third Party Funds, and (iii) 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 BankAmerica Group does not wish 
it 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 BankAmerica 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 of the 
General Partner who are not ``interested

[[Page 5326]]

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 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 BankAmerica 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 believe that, because of the 
community of interest between BankAmerica 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 
give 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 company with rule 
17g-1 by having a majority of the Partnership'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 the 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 the order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transaction otherwise prohibited by section 17(a) 
or section 17(d) and rule 17d-1 to which a Partnership is a party (the 
``Section 17 Transaction'') will be effected only if the General 
Partner determines that: (i) the terms of the transaction, including 
the consideration to be paid or received, are fair and reasonable to 
the Partners of the Partnership and do not involve overreaching of the 
Partnership or its Participants on the part of any person concerned; 
and (ii) the transaction is consistent with the interests of the 
Participants in the Partnership, and the Partnership's organizational 
documents and reports to its Participants. In addition, the General 
Partner of each Partnership will record and preserve a description of 
the 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 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.\3\
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    \3\ Each Partnership will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
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    2. In connection with the Section 17 Transactions, the General 
Partner of each Partnership 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 the affiliated person, promoter, or principal 
underwriter.
    3. The General Partner of each Partnership will not invest the 
funds of the 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, if the investment involves a joint 
enterprise or other joint arrangement within the meaning of rule 17d-1 
in which the Partnership and the Co-Investor are participants, unless 
the Co-Investor, prior to disposing of all or part of its investment, 
(i) gives the General Partner sufficient, but not less than one day's 
notice of its intent to dispose of its investment; and (ii) refrains 
from disposing of its investment unless the Partnership has the 
opportunity to dispose of the Partnership's investment prior to or 
concurrently with, on 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: (i) an ``affiliated person'' (as defined in 
section 2(a)(3) of the Act) of the Partnership (other than a Third 
Party

[[Page 5327]]

Fund); (ii) BankAmerica Group; (iii) an officer or director of 
BankAmerica Group; or (iv) an entity (other than a Third Party Fund) in 
which the General Partner acts as a 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, will 
not be deemed to limit or prevent the disposition of an investment by a 
Co-Investor: (i) 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; (ii) to immediate family members of the 
Co-Investor or a trust or other investment vehicle established for any 
immediate family member; (iii) 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; (iv) when the 
investment if comprised of securities that are national market system 
securities pursuant to section 11A(a)(2) of the Exchange Act and rule 
11Aa2-1 under the Exchange Act; or (v) 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 the 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 the Partnership and at least two years 
thereafter, the accounts, books, and other documents that 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 Participants, 
and agree that these records will be subject to examination by the SEC 
and its staff.\4\
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    \4\ Each Partnership will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
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    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, 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 the tax 
information necessary for the preparation by the Participant of federal 
and state income tax returns.
    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 the entity by a BankAmerica 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, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2481 Filed 2-2-99; 8:45 am]
BILLING CODE 8010-01-M