[Federal Register Volume 65, Number 251 (Friday, December 29, 2000)]
[Notices]
[Pages 83106-83110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-33261]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24795; 813-214]


BCP III Affiliates Fund Limited Partnership and Baird Financial 
Corporation; Notice of Application

December 21, 2000.
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'') exempting the 
applications 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 (except for certain provisions of paragraphs 
(a), (b), (e), and (h)), and sections 36 through 53, and the rules of 
regulations under the Act.

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    Summary of Application: Applicants request an order to exempt 
certain limited partnerships or other investment vehicles formed for 
the benefit of key employees of Baird Financial Corporation (``BFC'') 
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.
    Applicants: BCP III Affiliates Fund Limited Partnership (``Initial 
Partnership'') and BFC, on behalf of other partnerships or other 
investment vehicles that may be formed in the future (together, with 
the Initial Partnership, the ``Partnerships'').
    Filing Dates: The application was filed on September 30, 1999, and 
amended on June 12, 2000 and December 14, 2000.
    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 January 
16, 2001, 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-
0609. Applicants, 777 East Wisconsin Avenue, Milwaukee, Wisconsin, 
53202.

FOR FURTHER INFORMATION CONTACT: Paula L. Kashtan, Senior Counsel, at 
(202) 942-0615, 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 
20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. BFC, a Wisconsin corporation, is a diversified financial 
services company which, directly or through its affiliates, engages in 
investment banking, securities and asset management. BFC and its 
affiliates as defined in rule 12b-2 of the Securities Exchange Act of 
1934 (the ``Exchange Act'') are referred to in this notice collectively 
as the ``BFC Group'' and individually as a ``BFC entity.''
    2. Applicants propose to offer various investment programs for the 
benefit of certain key employees of BFC Group. The programs may be 
structured as different Partnerships or as separate plans within the 
same Partnership. Each Partnership will be a limited partnership, 
limited liability company, or other entity 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 BFC 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 is voluntary.
    3. Baird Capital Partners Management Company III, L.L.C., a 
Delaware limited liability company, will act as the general partner of 
the Initial Partnership (together with any affiliate that controls, is 
controlled by or is under common control with BFC and acts as a 
Partnership's general partner, the ``General Partner''). The General 
Partner will be registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act''). The General Partner 
will manage, operate and control each of the Parnerships. The General 
Partner will not charge the Initial Partnership a management fee, but 
it will receive a carried interest.\1\ The General Partner may charge 
subsequent Partnerships a management fee and/or receive a carried 
interest.
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    \1\ Any carried interest will be charged only to the extent 
permitted by section 205(a) of the Advisers Act and rule 205-3 under 
the Advisers Act.
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    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 (``Securities Act''), or Regulation D under the 
Securities Act, and will be sold only to ``Eligible Employees'' and 
other ``Qualified Participants,'' in each case as defined below 
(collectively, ``Participants''). Prior to offering Interests to an 
Eligible Employee, the General Partner must reasonably believe that 
such individual will be a sophisticated investor capable of 
understanding and evaluating the risks

[[Page 83107]]

of participating in the Partnership without the benefit of regulatory 
safeguards. An Eligible Employee is an individual who is a current or 
former employee, officer, or director of BFC Group and, except for a 
maximum of 35 individuals who meet the definition of Knowledgeable 
Employee in rule 3c-5(a)(4) under the Act with respect to a Partnership 
as if it were a Covered Company within the meaning of the rule or 
certain professionals who meet the sophistication and salary 
requirements described below (``BFC Investors''), meets the standards 
of an accredited investor under rule 501(a)(6) of Regulation D under 
the Securities Act. Eligible Employees will be experienced 
professionals in the investment banking, securities, and investment 
management businesses, or in related administrative, financial, 
accounting, legal, or operational activities.
    5. Each BFC Investor, who also will qualify as an Eligible 
Employee, will: (a) Have a graduate degree in business, law or 
accounting; (b) have a minimum of five years of consulting, investment 
banking or similar business experience; and (c) have had reportable 
income from all sources (including all profit shares or bonuses) in the 
calendar year immediately preceding the individual's commitment in 
excess of $120,000 and have a reasonable expectation of income from all 
sources of at least $150,000 in each year in which the person invests 
in a Partnership. In addition, an Eligible Employee in this category 
will not be permitted to invest in any year more than 10% of his or her 
aggregate income from all sources for the immediately preceding year in 
the Partnership and in all other Partnerships in which he or she has 
previously invested.
    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 \2\ 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: (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; \3\ or 
(c) a trust or other entity established solely for the benefit of 
eligible Family Members of an Eligible Employee.
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    \2\ ``Partner'' means any partner of a Partnership, including 
the General Partner.
    \3\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
``Qualified Entity'' 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 BFC Group and these 
investment vehicles.
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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 BFC entity. No 
sales load will be charged in connection with the sale of Interests.
    9. An Eligible Employee's Interest may be subject to repurchase 
upon termination of such employee from BFC Group. Upon repurchase, 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 (less prior distributions, plus interest and dividends), and 
(b) the fair market value of the Interest as determined at the time of 
termination by the General Partner. The terms of any repurchase 
provisions 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 BFC 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 and over which a BFC entity will exercise 
investment discretion (a ``Third Party Fund''); or (e) any partner or 
other investor of a Third Party Fund that is not affiliated with BFC 
Group (a ``Third Party Investor''). These transaction may include a 
Partnership's purchase or sale of an investment or an interest from or 
to any BFC 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 Participants.
    11. No Partnership will acquire any security issued by a registered 
investment company if, immediately after such acquisition, the 
Partnership would own more than 3% of the outstanding voting stock of 
the registered investment company.
    12. A BFC 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,'' subject to the 
requirements described below. A BFC 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.

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 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 person 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.

[[Page 83108]]

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: (a) Permit a BFC 
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) permit any Partnership to invest in 
or engage in any transaction with any entity, acting as principal, (i) 
in which the Partnership, any company controlled by the Partnership, or 
any BFC entity or Third Party Fund has invested or will invest, or (ii) 
with which the Partnership, any company controlled by the Partnership, 
or any BFC entity or Third Party Fund is or will become otherwise 
affiliated; and (c) 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 BFC 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 BFC Group will provide the best protection against 
any risk of abuse.
    5. Section 17(d) of the Act 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 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 BFC Group, or BFC 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 BFC Group and for the generation and maintenance of 
goodwill. Applicants believe that, if co-investments with BFC 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 BFC Group enable it to analyze investment 
opportunities to an extent that individual employees would not be able 
to duplicate; (b) investments made by BFC 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 BFC Group and a 
Partnership might lead to less advantageous treatment of the 
Partnership will be mitigated by the fact that BFC 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 
BFC Group entities will be investing in such Partnership. 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 BFC entity.
    8. Co-investments with Third Party Funds, or by a BFC 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 BFC Group invest its own capital in Third 
Party Fund investments, and that the BFC 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 BFC 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 BFC 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 BFC 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 BFC entity will be 
deemed ``usual and customary'' only if: (a) The Partnership is 
purchasing or selling securities with other unaffiliated third parties, 
including a Third Party Fund; (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.

[[Page 83109]]

Applicants assert that, because BFC 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 of other compensation paid by 
a Partnership to a BFC 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 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 to the extent necessary to permit each 
Partnership to comply with the rule without having a majority of the 
managers 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 managers of the General Partner will be 
affiliated persons, without the relief requested, a Partnership could 
not comply with rule 17e-1. Applicants state that each Partnership will 
comply with rule 17e-1 by having a majority of the managers 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 BFC 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 BFC 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 comply 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 (b) 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 (b), 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: (a) The terms of the transaction, including 
the consideration to be paid or received, are fair and reasonable to 
the Partners of such Partnership and do not involve overreaching of 
such Partnership or its Participants on the part of any person 
concerned; and (b) the transaction is consistent with the interests of 
the Partners of such Partnership, and the Partnership's organizational 
documents, and such Partnership's reports to its Partners. 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.\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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    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 such 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 such 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 such Partnership and the Co-Investor are participants, unless 
the Co-Investor, prior to disposing of all

[[Page 83110]]

or part of its investment: (a) Gives the General Partner sufficient, 
but not less than one day's, notice of its intent to dispose of its 
investment; and (b) refrains from disposing of its investment unless 
the Partnership has the opportunity to dispose of the Partnership's 
investment prior to or concurrently with, on 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) BFC Group; (c) an officer or director of BFC 
Group; or (d) 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: 
(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 immediate family members of the Co-Investor or a 
trust or other investment vehicle established for any immediate family 
member; (c) when the investment comprises securities that are listed on 
any exchange registered as a national securities exchange under section 
6 of the Exchange Act; (d) when the investment comprises 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; 
(e) when the investment comprises government securities as defined in 
section 2(a)(16) of the Act or other money market instruments; or (f) 
when the investment comprises 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 such 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 such Partnership required to be sent to such 
Participants, and agree that these records will be subject to 
examination by the SEC and its Staff.\5\
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    \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.
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    5. The General Partner of each Partnership will send to each 
Participant in such Partnership who had an interest in any capital 
account of such Partnership, at any time during the fiscal year then 
ended, Partnership financial statements audited by the Partnership's 
independent accountants. At the end of each fiscal year, the General 
Partner 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 such 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 BFC director, officer, or employee, such 
individual will not participate in the Partnership's determination of 
whether or not to effect the purchase or sale.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-33261 Filed 12-28-00; 8:45 am]
BILLING CODE 8010-01-M