[Federal Register Volume 66, Number 49 (Tuesday, March 13, 2001)]
[Notices]
[Pages 14607-14611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6189]


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

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC--24887; 813-290]


BMO Nesbitt Burns Corp.; Notice of Application

March 7, 2001.

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 1949 (the ``Act'') exempting applicant 
from all provisions of the Act, except section 9, section 17 (other 
than certain provisions of paragraphs (a), (d), (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 and regulations 
under the Act.

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

SUMMARY OF APPLICATION: Applicant requests an order to exempt certain 
limited partnerships or limited liability companies (each a 
``Partnership'') formed for the benefit of key employees of BMO Nesbitt 
Burns Corp. (``BMO NB'') 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.
    Applicant: BMO NB.

FILING DATES: The application was filed on August 18, 2000, and amended 
on February 12, 2001. Applicant has agreed to file an amendment during 
the notice period, the substance of which is reflected in this notice.
    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 applicant with a copy of the request, personally or by mail. 
Hearing requests should be received by the SEC by 5:30 p.m. on April 2, 
2001, and should be accompanied by proof of service on applicant, 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, D.C. 
20549-0609. Applicant, Michael G. Zeiss, BMO Nesbitt Burns Corp., 430 
Park Avenue, New York, NY 10022.

FOR FURTHER INFORMATION CONTACT: Maura S. McNulty, Senior Counsel, at 
(202) 942-0621, or May 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).

Applicant's Representations

    1. BMO NB, a Delaware corporation, is a full-service investment 
bank serving the financial needs of individual, institutional, 
corporate and government clients. BMO NB is an indirect subsidiary of 
the Bank of Montreal, Canada's oldest bank with over Cdn. $200 billion 
in assets. BMO NB 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 ``BMO NB Group.''
    2. Applicant proposes to establish Partnerships for the benefit of 
eligible current and former key employees, officers, directors, and 
persons on retainer of the BMO NB Group. The Partnerships would be part 
of a program designed to create investment opportunities that are 
competitive with those at other financial institutions and brokerage 
and investment banking firms for employees and to facilitate the 
recruitment of high caliber employees. Participation in a Partnership 
will be voluntary.
    3. Each Partnership will be a limited partnership, or, 
alternatively, a limited liability company, business trust or other 
entity organized under the laws of Delaware or another state. The BMO 
NB Group also may form a parallel Partnership organized under the laws 
of Canada to create the same investment opportunities for its Canadian 
employees as would be available to its U.S. employees. The Partnerships 
will be operated in accordance with their respective limited 
partnership agreements or other organizational documents (each, a 
``Partnership Agreement''). Each Partnership will be formed as an 
``employees' securities company'' within the meaning of section 
2(a)(13) of the Act, and will operate as a closed-end, management 
investment company which may be diversified or non-diversified.
    4. Each Partnership will be managed, operated and controlled by its 
general partner, managing member of similar entity (``General 
Partner''). Each General Partner will be an entity within the BMO NB 
Group. The General Partner or another entity in the BMO NB Group will 
serve as investment adviser (``Investment Adviser'') to the initial 
Partnership. The Investment Adviser will be (a) registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''), (b) exempt from Advisers Act registration 
requirements 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 (as defined in the 
Bank Holding Company Act of 1956). Any Investment Adviser of any future 
Partnership also will be an entity within the BMO NB Group.
    5. With respect to some or all Partnerships, the Investment Adviser 
will be permitted to delegate certain of its responsibilities relating 
to the acquisition, management and disposition of Partnership 
investments to one or more sub-investment advisers, each of which will 
be an entity within the BMO NB Group (``Affiliated Subadviser'') and 
registered under the Advisers Act if required under applicable law. If 
the Investment Adviser elects to enter into any side-by-side investment 
with an unaffiliated entity, the Investment Adviser will be permitted 
to engage as sub-investment adviser the unaffiliated entity 
(``Unaffiliated Subadviser'' and, together with the Affiliated 
Subadviser, a ``Subadviser'') responsible for the management of such 
side-by-side investment.
    6. 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 (a) current and former key employees, 
officers, directors, and persons on retainer of the BMO NB Group 
(``Eligible Employees''), (b) qualified family members who are spouses, 
parents, children, spouses of children, brothers, sisters, and 
grandchildren of Eligible Employees (``Qualified Family

[[Page 14608]]

Members''), or (c) trusts or other investment vehicles established 
solely for the benefit of Eligible Employees or Qualified Family 
Members ``Qualified Investment Vehicles'' and, collectively with 
Qualified Family Members, ``Qualified Participants'').
    7. Qualified Investment Vehicles must meet the standards for an 
``accredited investor'' under rule 501(a) of Regulation D. Eligible 
Employees and their Qualified Family Members will be individuals who 
satisfy certain financial sophistication standards, will be capable of 
understanding and evaluating the merits and risks of participation in a 
Partnership and able to bear the economic risk of such participation, 
including a complete loss of his or her investment. Eligible Employees 
and Qualified Family Members will meet the standards for an 
``accredited investor'' under rule 501(a)(6) of Regulation D, except 
that a maximum of 35 Eligible Employees who are sophisticated investors 
but who do not meet the definition of an accredited investor may become 
limited partners (``Limited Partners'') if each of them falls into one 
of the following categories: (a) Eligible Employees who (i) have a 
graduate degree in business, law or accounting, (ii) have a minimum of 
five years of consulting, investment banking or similar business 
experience, and (iii) will have had reportable income from all sources 
(including any profit shares or bonus) in the calendar year immediately 
preceding the Eligible Employee's admission as a Limited Partner in 
excess of $120,000 and will have a reasonable expectation of reportable 
income of at least $150,000 in the years in which the Eligible Employee 
invests in a Partnership \1\, or (b) Eligible Employees who are 
``knowledgeable employees'' as defined in rule 3c-5 under the Act of 
the Partnership (with the Partnership treated as though it were a 
``covered company'' for purposes of the rule).
    8. The specific investment objectives and strategies for a 
particular Partnership will be set forth in the private placement 
memorandum relating to the Interests offered by the Partnership, and 
each Eligible Employee and Qualified Participant will receive a copy of 
the private placement memorandum in connection with their investment in 
a Partnership. The terms of a Partnership will be fully disclosed to 
each Eligible Employee at the time the Eligible Employee is invited to 
participate in the Partnership. Each Partnership will send audited 
financial statements to the Limited Partners as soon as practicable 
after the end of its fiscal year. In addition, a report will be sent to 
each Limited Partner setting forth the information with respect to his 
or her share of income, gains, losses, credits and other items for 
federal and state income tax purposes, resulting from the operation of 
the Partnership during that year.
---------------------------------------------------------------------------

    \1\ In addition, such Eligible Employees in this category will 
not be permitted to invest in any year more than 10% of his or her 
income from all sources for the immediately precedng year in the 
aggregate in a Partnership and in all other Partnerships in which 
that Eligible Employee has previously invested.
---------------------------------------------------------------------------

    9. Interests in a Partnership will be non-transferable except with 
the express consent of the General Partner and then only to Eligible 
Employees or Qualified Participants. No fee of any kind will be charged 
in connection with the sale of Interests.
    10. BMO NB or an entity within the BMO NB Group, or any Eligible 
Employee or Qualified Participant designated thereby, may have the 
right, but not the obligation, to acquire the Interest of a Limited 
Partner upon the termination of the Limited Partner's employment with 
an entity within the BMO NB Group with or without cause, including as a 
result of the death, disability, or voluntary resignation of the 
Limited Partner, or upon the Limited Partner's bankruptcy. Each private 
placement memorandum will describe whether the BMO NB Group will be 
required or have the option to acquire the Interest of a Limited 
Partner upon the termination of the Limited Partner's employment. In 
this regard, the purchase price for the Interest will be at least equal 
to the Interest's fair market value (as determined by the BMO NB Group 
in good faith and in accordance with its customary valuation 
procedures).
    11. An entity within the BMO NB Group may purchase Interests, which 
it may offer to new Eligible Employees joining the BMO NB Group after 
the closing of a Partnership or which it may award to Eligible 
Employees as bonus or similar compensation. These Interests will be 
acquired from the Partnership in the same manner of payment, at the 
same time and at the same price as Interest purchased by Limited 
Partners. An entity within the BMO NB Group may sell the Interests it 
has so acquired to any Eligible Employee or Qualified Participant at 
any time during the life of the Partnership at a price no greater than 
the net asset value of the Interests on the previous appraisal date as 
set forth in the Partnership Agreement.
    12. The purchase price for Interests may be payable in full upon 
subscription or in installments as determined by the General Partner. 
Eligible Employees may be offered the opportunity to acquire Interests 
pursuant to the arranging of recourse and nonrecourse loans.
    13. In an investment program that provides for vesting provisions, 
such as vesting of interests purchased with the proceeds of loans, an 
Eligible Employee's Interest at the commencement of the program will be 
treated as being entirely ``unvested'' and ``vesting'' will occur 
either through the passage of a specified period of time or upon the 
occurrence of a specified event. The portion of an Interest that is 
unvested at the time of an Eligible Employee's employment termination, 
and the portion that is vested in the event of certain specified 
events, may be subject to repurchase by a BMO NB Group entity or 
reallocated to other Limited Partners in the Partnership.
    14. 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.
    15. The Investment Adviser may be paid an advisory fee for its 
services to a particular Partnership, which may be determined as a 
percentage of assets under management or aggregate commitments. In 
addition, an Investment Adviser and/or Subadviser may be entitled to a 
performance-based fee or ``carried interest.'' \2\ The General Partner 
or the Investment Adviser may charge the Partnership any expenses 
charged by a Subadviser, legal and accounting fees, administrative 
expenses and other operating expenses.
---------------------------------------------------------------------------

    \2\ A ``carried interest'' is an allocation to the Investment 
Adviser or Subadviser based on net gains in addition to the amount 
allocable to the Investment Adviser or Subadviser that is in 
proportion to its capital contributions, provided, however, that no 
Unaffiliated Subadviser will beneficially own any outstanding 
securities of any Partnership. Depending on whether the Investment 
Adviser or Subadviser is registered as an investment adviser under 
the Advisers Act any carried interest will be charged only if 
permitted by rule 205-3 under the Advisers Act (in the case of an 
Investment Adviser or Subadviser registered under the Advisers Act) 
or will comply with section 205(b)(3) of the Advisers Act (with the 
Partnership treated as though it were a ``business development 
company'' solely for the purpose of that section) in the case of an 
Investment Adviser or Subadviser not registered under the Advisers 
Act.
---------------------------------------------------------------------------

    16. A Partnership will not borrow from any person if the borrowing 
would cause any person not named in section 2(a)(13) of the Act to own 
securities of the Partnership (other than short-term paper). If an 
entity within the BMO NB Group makes loans to any Partnership or 
Limited Partner, the lender will be entitled to receive interest at a 
rate

[[Page 14609]]

which is permissible under applicable banking or tax regulations, 
provided that the rate will be no less favorable to the borrowers than 
the rate obtainable on an arm's length basis. Any indebtedness of the 
Partnership will be the debt of the Partnership and without recourse to 
the Limited Partners.

Applicant's 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 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. Applicant requests 
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), (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. 
Applicant requests an exemption from section 17(a) to permit each 
Partnership to: (a) Purchase portfolio investments from or sell 
portfolio securities to BMO NB, or any other affiliated person of a 
Partnership, or an affiliated person thereof (an ``Affiliated 
Entity''), on a principal basis; (b) purchase interests or property in 
a company or other investment vehicle in which BMO NB, or an Affiliated 
Entity, already owns securities, or, where such company or other 
investment vehicle is otherwise affiliated with BMO NB or a 
Partnership; (c) sell, put or tender, or grant options in securities or 
interest in a company or other investment vehicle back to such entity, 
where that entity is affiliated with BMO NB or an Affiliated Entity; 
(d) participate as a selling security holder in a public offering that 
is underwritten by BMO NB or an Affiliated Entity or in which BMO NB or 
an Affiliated Entity acts as a member of the underwriting or selling 
group; (e) invest in companies, partnerships or other investment 
vehicles offered, sponsored or managed by BMO NB or an Affiliated 
Entity (referred to collectively as ``BMO NB Sponsored Vehicles''), or 
to purchase securities from BMO NB Sponsored Vehicles; (f) invest in 
securities of, or lend money to entities for which BMO NB or an 
Affiliated Entity has performed investment banking or other services 
and from which they may have received fees; and (g) purchase securities 
that are underwritten by BMO NB or an Affiliated Entity (including a 
member of a selling group) on terms at least as favorable to the 
Partnership as those offered to investors other than affiliated persons 
of BMO NB.
    4. Applicant states that an exemption from section 17(a) is 
consistent with the protection of investors and is necessary to promote 
the purpose of the Partnerships. Applicant states that the Limited 
Partners in each Partnership will be fully informed of the extent of 
the Partnership's dealings with affiliated persons and, as 
professionals employed in the investment banking and financial services 
businesses, will be able to understand and evaluate the attendant 
risks. Applicant asserts that the community of interest among the 
Limited Partners and BMO NB Group will provide the best protection 
against any risk of abuse. Applicant acknowledges that the requested 
relief will not extend to any transactions between a Partnership and an 
Unaffiliated Subadviser or an affiliated person of he Unaffiliated 
Subadviser, or between a Partnership and any person who is not an 
employee, officer or director of BMO NB or is an entity outside of the 
BMO NB Group and is an affiliated person of the Partnership as defined 
in section 2(a)(3)(E) of the Act (``Advisory Person'') or any 
affiliated person of such person.
    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. Applicant requests 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. Applicant acknowledges that the 
requested relief will not extend to any transaction in which an 
Unaffiliated Subadviser or an Advisory Person or an affiliated person 
of either has an interest.
    6. Applicant believes that the participation by the Partnerships in 
transactions in which affiliated co-investors specified in condition 3 
below (``Affiliated Co-Investors'') are also participants is consistent 
with the provisions, policies and purposes of the Act and is otherwise 
consistent with the rule 17d-1 standards.
    7. Applicant argues that the concern that permitting joint 
investments with BMO NB or another BMO NB affiliated person, on the one 
hand, and a Partnership, on the other, might lead to disadvantageous 
treatment of the Partnership will be mitigated by the fact that BMO NB 
is acutely concerned with its relationships with the key employees who 
invest in the Partnerships. Applicant notes that each Partnership will 
be established to attract and retain highly qualified employees. 
Applicant states that the Partnerships were conceived and will be 
organized by the persons who will be investing, directly or indirectly, 
or are eligible to invest, in the Partnerships, and the Partnerships 
will not be promoted by persons outside the BMO NB Group, nor will the 
General Partner seek to profit from fees for investment advice or from 
the distribution of securities. Finally, applicant contends 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. 
Thus, Applicant believes it is unlikely that an Affiliated Co-Invester 
will enter into a transaction with a Partnership with the intention of 
disadvantaging the Partnership.

[[Page 14610]]

    8. 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. Applicant 
requests an exemption from section 17(f) and rule 17f-1 to permit an 
entity within the BMO NB Group to act as custodian of Partnership 
assets without a written contract, as would be required by rule 17f-
1(a). Applicant also requests an exemption from the rule 17f-1(b)(4) 
requirement that an independent accountant periodically verify the 
assets held by the custodian. Applicant believes that, because of the 
community of interest between the Partnerships and the BMO NB Group and 
the existing requirements for an independent audit, compliance with 
these requirements would be unnecessarily burdensome and expensive. 
Applicant will comply with all other requirements of rule 17f-1.
    9. 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. Applicant requests 
exemptive relief in the case of any Partnership for which an entity 
within the BMO NB Group is the General Partner to permit a majority of 
the board of directors or similar body of the General Partner or the 
entity controlling the General Partner to take actions and make certain 
determinations set forth in the rule. Applicant states that, because 
all the directors of the General Partner will be interested persons, a 
Partnership could not comply with rule 17g-1 without the requested 
relief. Each Partnership will comply with all other requirements of 
rule 17g-1.
    10. 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. Applicant requests an 
exemption from the provisions of rule 17j-1, except for anti-fraud 
provisions of paragraph (b), because they are unnecessarily burdensome 
as applied to the Partnerships. The relief requested will extend only 
to entities within the BMO NB Group and is not requested with respect 
to any Unaffiliated Subadviser or Advisory Person.
    11. Applicant requests an exemption from the requirements in 
sections 30(a), 30(b) and 30(e) of the Act, 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. Applicant contends 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 Limited Partners. Applicants requests exemptive relief 
to the extent necessary to permit each Partnership to report annually 
to its Limited Partners. Applicant also requests 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. Applicant asserts 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.

Applicant's Conditions

    Applicant agrees 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) of the Act and rule 17d-1 thereunder (the ``Section 17 
Transactions'') will be effected only if the Investment Adviser 
determines that: (a) The terms of the transaction, including the 
consideration to be paid or received, are fair and reasonable to the 
Limited Partners and do not involve overreaching of the Partnership or 
its Limited Partners on the part of any person concerned; and (b) the 
transaction is consistent with the interests of the Limited Partners, 
the Partnership's organizational documents, and the Partnership's 
reports to its Limited Partners. In addition, the Investment Adviser 
will record and preserve a description of the Section 17 Transactions, 
the Investment Adviser's findings, the information or materials upon 
which the Investment Adviser's findings are based, and the basis for 
those finding. All such records will be maintained for the life the 
Partnership and at least two years thereafter, and will be subject to 
examination by the SEC and its staff.\3\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    2. In connection with section 17 Transactions, the Investment 
Adviser 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 Partnerships, or any 
affiliated person of such a person, promoter, or principal underwriter.
    3. The Investment Adviser will not invest the funds of any 
Partnership in any investment in which an Affiliated Co-Investor has 
acquired or proposes to acquire the same class of securities of the 
same issuer, where the investment involves a joint enterprise or other 
joint arrangement within the meaning of rule 17d-1 in which the 
Partnership and Affiliated Co-Investor are participants, unless any 
such Affiliated Co-Investor, prior to disposing of all or part of its 
investment: (a) Gives the Investment Adviser 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 
Affiliated Co-Investor. The term ``Affiliated Co-Investor'' means any 
person who is: (a) An affiliated person of the Partnership; (b) BMO NB 
or an entity within the BMO NB Group; (c) an officer or director of BMO 
NB or any other entity within the BMO NB Group; (d) a company, 
partnership, or other investment vehicle offered, sponsored, or managed 
by BMO NB or by any other entity within the BMO NB Group; (e) any 
entity with respect to which BMO NB or another entity within the BMO NB 
Group provides management, investment management or similar services as 
manager, investment manager, or general partner or in a similar 
capacity; or (f) a company in which an officer, director or member of 
the General Partner acts as an officer, director, or general partner, 
or has a similar capacity to control the sale or other disposition of 
the company's securities. The restrictions contained in this condition, 
however, will not be deemed to limit or prevent the disposition of an 
investment by an Affiliated Co-Investor: (a) To its direct

[[Page 14611]]

or indirect wholly-owned subsidiary, to any company (a ``Parent'') of 
which the Affiliated Co-Investor is a direct or indirect wholly-owned 
subsidiary, or to a direct or indirect wholly-owned subsidiary of its 
Parent; (b) to Qualified Family Members of the Affiliated Co-Investor 
or a trust established for any Affiliated Co-Investor or 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 
under the Exchange Act; (e) when the securities are government 
securities as defined in section 2(a)(16) of the Act; (f) 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; or (g) when the Affiliated Co-Investor is an 
entity with respect to which BMO NB or any other entity within the BMO 
NB Group provides management, investment management or similar services 
as manager, investment manager, or general partner or in a similar 
capacity, if BMO NB or such entity does not have the actual investment 
discretion over the sale or disposition of the entity's securities.
    4. Each Partnership and its General Partner and Investment Adviser 
will maintain and preserve, for the life of each such Partnership and 
at least two years thereafter, the accounts, books, and other documents 
as constitute the record forming the basis for the audited financial 
statements that are to be provided to the Limited Partners, and each 
annual report of such Partnership required to be sent to the Limited 
Partners, and agree that all such records will be subject to 
examination by the SEC and its staff.\4\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    5. The General Partner will send or cause to be sent to each 
Limited Partner who had an interest in 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 or cause to be made a 
valuation 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 or 
cause to be sent a report to each person who was a Limited Partner at 
any time during the fiscal year then ended, setting forth the tax 
information necessary for the preparation by the Limited Partners of 
federal and state income tax returns and a report of the investment 
activities of the Partnership during such year.
    6. In any case where purchases or sales are made by a Partnership 
from or to an entity affiliated with a Partnership by reason of a 5% or 
more investment in such entity by a BMO NB Group director, officer, or 
employee, such individual will not participate in the Investment 
Adviser'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. 01-6189 Filed 3-12-01; 8:45 am]
BILLING CODE 8010-01-M