[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Notices]
[Pages 6706-6711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1651]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24826; 813-212]


BankBoston Co-Investment Partners (1999) L.P. and FleetBoston 
Financial Corporation; Notice of Application

January 11, 2001.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an order under sections 6(b) and 6(e) 
of the Investment Company Act of 1940 (``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 
under the Act.

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SUMMARY OF APPLICATION: Applicants request an order to exempt certain 
partnerships and other entities formed for the benefit of key employees 
of FleetBoston Financial Corporation and its affiliates from certain 
provisions of the Act. Each partnership or other entity will be an 
employees' securities company within the meaning of section 2(a)(13) of 
the Act.

APPLICANTS: BankBoston Co-Investment Partners (1999) L.P. (``Initial 
Partnership'') and FleetBoston Financial Corporation, on behalf of 
other partnerships or other investment vehicles which have been or may 
in the future be formed or through which a Partnership (as defined 
below) may invest (``Other Partnerships,'' and together with the 
Initial Partnership, ``Partnerships'').

FILING DATES: The application was filed on August 18, 1999, and amended 
on January 11, 2001.

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 5, 
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: BankBoston Co-Investment Partners (1999) L.P., 175 
Federal Street, Boston, MA 02110; FleetBoston Financial Corporation, 
100 Federal Street, Boston, MA 02110.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, 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. FleetBoston Financial Corporation is a diversified financial 
services company organized under the laws of the State of Rhode Island. 
FleetBoston Financial Corporation and its affiliates (as defined in 
rule 12b-2 under the Securities Exchange Act of 1934 (the ``Exchange 
Act''), other than Third Party Funds (as defined below), are referred 
to in this notice collectively as ``FleetBoston.''
    2. The Initial Partnership is a limited partnership organized under 
the laws of the State of Delaware. FleetBoston formed the Initial 
Partnership to provide investment opportunities to certain of its key 
employees.
    3. FleetBoston may organize Other Partnerships in the future. 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,

[[Page 6707]]

management investment company.\1\ The Partnerships will be established 
primarily for the benefit of highly compensated employees of 
FleetBoston 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.
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    \1\ A Partnership may implement its investment program by 
investing through another Partnership.
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    4. Each Partnership will have a general partner (``General 
Partner'') that is an affiliate that controls, is controlled by or is 
under common control with FleetBoston Financial Corporation. The 
General Partner or another FleetBoston entity will act as the 
investment adviser to a Partnership and will be: (a) Registered as an 
investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act''), (b) exempt from the registration requirements of the 
Advisers Act by virtue of section 203(b)(3) of the Advisers Act, or (c) 
excluded from the definition of investment adviser under the Advisers 
Act because it is a bank or a bank holding company. BBI Management Co. 
LLC, a Delaware limited liability company, the members of which will be 
affiliates that control, are controlled by or are under common control 
with FleetBoston Financial Corporation, will act as the General Partner 
of the Initial Partnership. BBI Management Co. LLC is exempt from 
registration under the Advisers Act.
    5. The General Partner will manage, operate, and control each of 
the Partnerships. However, the General Partner may exercise its 
authority through its board of managers or directors, including a 
committee of FleetBoston employees.\2\ The General Partner will 
delegate management responsibility only to entities that control, are 
controlled by, or are under common control with FleetBoston.
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    \2\ References in this notice to the ``directors of the General 
Partner'' shall include such board of managers or directors, 
including a committee of FleetBoston employees.
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    6. 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 only to ``Eligible Employees,'' as defined below. 
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 an individual who is a 
current or former employee, officer, director, or ``Consultant'' \3\ of 
FleetBoston and: (a) Meets the standards of an ``accredited investor,'' 
as defined in rule 501(a)(5) or (6) of Regulation D under the 
Securities Act (an ``Accredited Investor''), or (b) is one of a maximum 
of 35 individuals who is not an Accredited Investor but who meets 
certain salary and other requirements (``Other Investors'').
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    \3\ A ``Consultant'' is a person or entity who FleetBoston 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 to FleetBoston and who shares a community of interest 
with FleetBoston and FleetBoston's employees.
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    7. Each Other Investor will be an Eligible Employee who: (a) Is a 
``knowledgeable employee,'' as defined in rule 3c-5 under the Act, of 
such Partnership (with the Partnership treated as though it were a 
``Covered Company'' for purposes of the rule), or (b) has a graduate 
degree in business, law, or accounting, has a minimum of five years of 
consulting, investment banking, or similar business experience, and has 
had reportable income from all sources of at least $125,000 in each of 
the two most recent years, and has a reasonable expectation of income 
from all sources of at least $150,000 in each year in which the Other 
Investor will be committed to make investments in a Partnership. In 
addition, an Other Investor qualifying under (b) above will not be 
permitted to invest in any year more than 10% of his or her income from 
all sources for the immediately preceding year in the aggregate in the 
Partnership and in all other Partnerships in which he or she has 
previously invested.
    8. In the discretion of FleetBoston and at the request of an 
Eligible Employee, an Eligible Employee may assign Interests to an 
Eligible Family Member or a Qualified Entity, both as defined below 
(each a ``Qualified Participant'' ). a Qualified Participant that 
purchases an Interest from a Partner \4\ must be an accredited investor 
under rule 501(a) of Regulation D. An ``Eligible Family Member'' is a 
parent, sibling, spouse, child, 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,\5\ or 
(c) a trust or other entity established solely for the benefit of 
Eligible Family Members of an Eligible Employee.
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    \4\ ``Partner'' means any partner of a Partnership, including 
the General Partner unless otherwise specified.
    \5\ 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 FleetBoston 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 501(a)(6) of Regulation D and who will 
have access to the General Partner and/or FleetBoston.
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    9. The terms of a Partnership will be fully disclosed to each 
Eligible Employee in a partnership agreement (the ``Limited Partnership 
Agreement'' ), which will be furnished at the time the Eligible 
Employee is invited to participate in the Partnership. Each Partnership 
will send audited financial statements to each Partner as soon as 
practicable after the end of its fiscal year. In addition, each person 
who was a Limited Partner \6\ of such Partnership at any time during 
the fiscal year then ended will receive a report setting forth such tax 
information as will be necessary for the preparation by the Limited 
Partner of his, her or its federal and state income tax returns.
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    \6\ ``Limited Partner'' means any limited partner of a 
Partnership within the meaning of the Delaware Limited Partnership 
Act.
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    10. Interests in a Partnership will be non-transferable except with 
the prior written consent of the General Partner. No person or entity 
will be admitted into a Partnership as a Partner unless the person or 
entity is an Eligible Employee, a Qualified Participant, or a 
FleetBoston entity. Interests in the Partnerships will be sold without 
a sales load.
    11. An Eligible Employee's Interest in a Partnership may be subject 
to repurchase or cancellation if: (a) The Eligible Employee's 
relationship with FleetBoston is terminated for cause, or (b) the 
Eligible Employee's employment with FleetBoston ends for any reason. 
Upon repurchase or cancellation, the General Partner will pay to the 
Eligible Employee at least the lesser of: (a) The amount paid by the 
Eligible Employee to acquire the Interest (less prior distributions, 
plus a specified rate of return, as determined by the General Partner), 
or (b) the fair market value of the Interest as determined in good 
faith at the time of repurchase or cancellation by the General Partner. 
The terms of any repurchase or cancellation will apply equally to any 
Qualified Participant of an Eligible Employee.

[[Page 6708]]

    12. Subject to the terms of the applicable Partnership Agreement, a 
Partnership will be permitted to enter into transactions involving: (a) 
A FleetBoston entity, (b) a portfolio company, (c) any Partner or 
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 FleetBoston and over which a FleetBoston 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 FleetBoston (a ``Third Party Investor'' ). These 
transactions may include a Partnership's purchase or sale of an 
investment or an interest from or to any FleetBoston 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.
    13. 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.
    14. A FleetBoston entity (including the General Partner) acting as 
agency 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. A FleetBoston 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.
    15. A Partnership may pay the General Partner an annual management 
fee, a flat administrative fee or a ``carried interest.'' \7\ The 
administrative fee will serve to reimburse the General Partner for its 
costs of managing the Partnership, and will include expenses incurred 
by a FleetBoston entity for services actually rendered to the 
Partnership without any additional markup.
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    \7\ A ``carried interest'' is an allocation to the General 
Partner based on the net gains of an investment program. A General 
Partner that is registered as an investment adviser under the 
Advisers Act may charge a carried interest only if permitted by rule 
205-3 under the Advisers Act. Any carried interest paid to a General 
Partner that is not registered under the Advisers Act will be 
structured to comply with section 205(b)(3) of the Advisers Act as 
if a Partnership were a business development company as defined in 
the Advisers Act.
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    16. The General Partner or another FleetBoston entity may make 
loans to a Partnership. Any such loans will bear interest at a rate no 
less favorable to a Partnership than the rate that could be obtained on 
an arm's length basis. Any such indebtedness of a Partnership will be 
non-recourse to the Partners other than the General Partner.

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' securities 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 of the Act 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 sections 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 though 53, 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 
FleetBoston entity or a Third Party Fund (or any affiliated person, as 
defined in the Act, of any FleetBoston entity or 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 FleetBoston entity (or any affiliated person, as 
defined in the Act, of the FleetBoston entity), acting as principal, 
(i) in which the Partnership, any company controlled by the 
Partnership, or any FleetBoston entity or Third Party Fund has invested 
or will invest, or (ii) with which the Partnership, any company 
controlled by the Partnership, or any FleetBoston 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 
\8\ in each Partnership will be fully informed of the extent of the 
Partnership's dealings with FleetBoston. 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 FleetBoston will provide the best protection 
against any risk of abuse.
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    \8\ ``Participant'' means any Partner other than the General 
Partner.

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[[Page 6709]]

    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, 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 FleetBoston or FleetBoston'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 FleetBoston and for the generation and maintenance 
of goodwill. Applicnts believe that, if co-investments with FleetBoston 
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 FleetBoston enable it to analyze investment 
opportunities to an extent that individual employees would not be able 
to duplicate, (b) investments made by FleetBoston 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 FleetBoston and a 
Partnership might lead to less advantageous treatment of the 
Partnership should be mitigated by the fact that FleetBoston will be 
acutely concerned with its relationship with the investors in the 
Partnership, and the fact that senior officers and directors of 
FleetBoston 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 FleetBoston 
entity pursuant to a contractual obligation 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 FleetBoston invest its own 
capital in Third Party Fund investments, and that FleetBoston 
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 FleetBoston. 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 FleetBoston 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) of the Act and rule 17e-1 under the Act 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 FleetBoston 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 are deemed 
``usual and customary.'' Applicants state that for the purposes of the 
application, fees or other compensation that are charged or received by 
a FleetBoston 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 
FleetBoston 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 transaction 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 
FleetBoston 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 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 board of 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) provides that the securities and similar 
investments of a registered management investment company must be 
placed in the custody of a bank, a member of a national securities 
exchange, or the company itself in accordance with SEC rules. Rule 17f-
2 under the Act specifies the requirements that must be satisfied for a 
registered management investment company to act as a custodian of its 
own investments. Applicants request an exemption from section 17(f) of 
the Act and rule 17f-2 under the Act to permit the following exceptions 
from the requirements of rule 17f-2: (a) A

[[Page 6710]]

Partnership's investments may be kept in the locked files of a 
FleetBoston entity; (b) for purposes of paragraph (d) of the rule, (i) 
employees of FleetBoston will be deemed to be employees of the 
Partnerships, (ii) officers or managers of the General Partner of a 
Partnership will be deemed to be officers of the Partnership, and (iii) 
the General Partner of a Partnership or its board of directors will be 
deemed to be the board of directors of the Partnership; and (c) in 
place of the verification procedure under paragraph (f) of the rule, 
verification will be effected quarterly by two employees of 
FleetBoston. Applicants expect that many of the Partnerships' 
investments will be evidenced only by partnership agreements, 
participation agreements, or similar documents, rather than by 
negotiable certificates that could be misappropriated. Applicants 
assert that these instruments are most suitably kept in the files of a 
FleetBoston entity, where they can be referred to as necessary.
    12. Section 17(g) of the Act and rule 17g-1 under the Act 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 board of directors, who may be deemed interested 
persons, to take actions and make determinations as set forth in the 
rule. Applicants state that, because all 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) of the Act and paragraph (b) of rule 17j-1 under 
the Act 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 
Partners. 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, members of 
the General Partner, or any board of managers or directors or committee 
of FleetBoston employees to whom the General Partner may delegate its 
functions, 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 any 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) 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 of such Partnership and do not 
involve overreaching of such Partnership or its Partners on the part of 
any person concerned; and (b) the transaction is consistent with the 
interests of the Partners of such Partnership, such 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 
findings are based, and the basis therefor. All records relating to an 
investment program will be maintained until the termination of the 
investment program and for at least two years thereafter, and will be 
subject to examination by the Commission and its staff.\9\
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    \9\ 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 such a person, promoter, or principle 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, and where the investment transaction 
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 any such Co-Investor, prior to disposing of all or 
part of its investment: (a) Gives such 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 
such Partnership has the opportunity to dispose of such 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 such term is defined in the act) of such Partnership (other than a 
Third Party Fund); (b) FleetBoston; (c) an officer or director of 
FleetBoston; 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 disposition of the entity's securities. The 
restrictions contained in this condition 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 such Co-Investor is a direct or indirect wholly-
owned subsidiary, or to a direct or indirect wholly-owned

[[Page 6711]]

subsidiary of its parent; (b) to immediate family members of such Co-
Investor or a trust or other investment vehicle established for any 
such 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; (d) 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 such Partnership and for 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 such Partnership, and each annual 
report of such Partnership required to be sent to such Partnerships, 
and agree that all such records will be subject to examination by the 
Commission and its staff.\10\
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    \10\ 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 such 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 such fiscal year end in a manner 
consistent with customary practice with respect to the valuation of 
assets of the kind held by the Partnership. In addition, as soon as 
practicable after the end of each fiscal year of each Partnership, the 
General Partner of such Partnership will send a report to each person 
who was a Participant in such 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, her, or its 
federal and state income tax returns, and a report of the investment 
activities of the Partnership during that fiscal year.
    6. In any case where purchases or sales are made by a Partnership 
from or to an entity affiliated with such Partnership by reason of a 5% 
or more investment in the entity by a FleetBoston employee, officer, or 
director, such individual will not participate in such Partnership's 
determination of whether or not to effect such purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-1651 Filed 1-19-01; 8:45am]
BILLING CODE 8010-01-M