[Federal Register Volume 67, Number 145 (Monday, July 29, 2002)]
[Notices]
[Pages 49050-49055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19121]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25670; 813-198]


Credit Suisse First Boston, Inc.; Notice of Application

July 23, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of an application under sections 6(b) and 6(e) of the 
Investment Company Act of 1940 (``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)), sections 
30(c), (d), (f), (g), (i) and (j), and sections 36 through 53, and the 
rules and regulations thereunder.

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Summary of Application: Credit Suisse First Boston, Inc. (``CSFB'') 
requests an order to supersede an existing order (``Prior Order'') \1\ 
exempting CSFB and certain partnerships (``Partnerships'') formed for 
the benefit of key employees of CSFB 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.
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    \1\ Credit Suisse First Boston, Inc., Investment Company Act 
Release Nos. 22808 (Sept. 3, 1997) (notice) and 22836 (Sept. 29, 
1997) (order).
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Filing Dates: The application was filed on November 3, 1998, and 
amended on July 10, 2002.
    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 August 
19, 2002, 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, DC 20549-
0609. Applicant, Eleven Madison Avenue, New York, NY 10010.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, or Nadya B. Roytblat, Assistant Director, 
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. CSFB, a Delaware corporation, is a subsidiary of Credit Suisse 
First Boston, a Swiss bank, which is, in turn, a subsidiary of Credit 
Suisse Group, a Swiss corporation. CSFB and its affiliates as defined 
in rule 12b-2 under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') (``Affiliates'' and, together with CSFB, the ``Credit Suisse 
Group'') provide a range of financial, banking, insurance, advisory, 
and investment services to corporations, governments, and other clients 
throughout the world. Credit Suisse First Boston Corporation (``CSFB 
Corporation''), a broker-dealer registered under the Exchange Act, is a 
wholly-owned subsidiary of CSFB.
    2. Under the Prior Order, CSFB has offered and proposes to continue 
to offer various investment programs for the benefit of certain key 
employees. These programs may be structured as different Partnerships, 
or as separate plans within the same Partnership. Each Partnership will 
be a limited partnership or other investment vehicle 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.\2\ The Partnerships

[[Page 49051]]

will be established primarily for the benefit of highly compensated 
employees of Credit Suisse Group as part of a program designed to 
create capital building opportunities that are competitive with those 
at other investment banking firms and to facilitate the recruitment of 
high caliber professionals. Participation in a Partnership will be 
voluntary.
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    \2\ Applicant also may implement a pretax plan arrangement 
(``Pretax Plan''). In this case, no investment vehicle will be 
formed with respect to such Pretax Plan. Pursuant to a Pretax Plan, 
Credit Suisse Group will enter into arrangements with certain 
Eligible Employees, as defined below, of Credit Suisse Group, which 
will generally provide that (a) an Eligible Employee will defer a 
portion of his or her compensation payable by Credit Suisse Group, 
(b) such deferred compensation will be treated as having been 
notionally invested in investments designated for these purposes 
pursuant to the specific compensation plan, and (c) an Eligible 
Employee will be entitled to receive cash, securities or other 
property at the times and in the amounts set forth in the specific 
compensation plan, where the aggregate amount received by such 
Eligible Employee would be based upon the investment performance of 
the investments designated for these purposes pursuant to such 
compensation plan. The Pretax Plan will not actually purchase or 
sell any securities. Credit Suisse Group expects to offer, through 
Pretax Plans, economic benefits comparable to what would have been 
offered in an arrangement where an investment vehicle is formed. For 
purposes of the application, a Partnership will be deemed to be 
formed with respect to each Pretax Plan and each reference in the 
application to ``Partnership,'' ``capital contribution,'' ``General 
Partner,'' ``Limited Partner,'' ``loans,'' and ``Interest'' will be 
deemed to refer to the Pretax Plan, the notional capital 
contribution to the Pretax Plan, Credit Suisse Group, a participant 
of the Pretax Plan, notional loans, and participation rights in the 
Pretax Plan, respectively.
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    3. The general partner of each Partnership will be an Affiliate of 
CSFB (``General Partner''). The General Partner will manage, operate, 
and control each of the Partnerships. The General Partner will be 
authorized to delegate investment management responsibility to a Credit 
Suisse Group entity, a committee of Credit Suisse Group employees, or 
certain unaffiliated third-party investment managers in connection with 
a ``third party sponsored program.'' \3\ The ultimate responsibility 
for the Partnerships' investments will remain with the General Partner. 
Any Credit Suisse Group entity that is delegated the responsibility of 
making investment decisions for a Partnership will register as an 
investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act'') if required under applicable law. The General 
Partner, Credit Suisse Group or any employees of the General Partner or 
Credit Suisse Group may be entitled to receive a performance-based fee 
(such as a ``carried interest'') based on the gains and losses of the 
investment program or of the Partnership's investment portfolio.\4\
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    \3\ In a ``third party sponsored program,'' a Partnership will 
co-invest with an investment fund, pooled investment vehicle or 
separate account for which entities or persons unaffiliated with the 
Credit Suisse Group are the sponsors or over which such entities or 
persons exercise investment discretion. Under a third party 
sponsored program, a Partnership will only be permitted to invest if 
a Credit Suisse Group entity will co-invest with the Partnership in 
the portfolio investments making up the third party sponsored 
program.
    \4\ A carried interest is an allocation to the General Partner, 
Limited Partner or the Credit Suisse Group entity acting as the 
investment adviser to a Partnership based on net gains in addition 
to the amount allocable to such entity in proportion to its capital 
contributions. A General Partner, Limited Partner or Credit Suisse 
Group entity 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, Limited Partner or Credit Suisse Group entity that is not 
registered under the Advisers Act also will comply with rule 205-3 
as if such General Partner, Limited Partner or Credit Suisse Group 
entity were so registered.
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    4. Interests in the Partnerships (``Interests'') will be offered 
without registration in reliance on section 4(2) of the Securities Act 
of 1933 (the ``Securities Act''), or Regulation D under the Securities 
Act, and will be sold only to ``Eligible Employees'' and ``Qualified 
Participants,'' in each case as defined below, or to Credit Suisse 
Group entities (collectively, ``Participants'').\5\ 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.
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    \5\ If applicant implements a Pretax Plan, participation rights 
in such Pretax Plan will only be offered to Eligible Employees who 
are current employees or Consultants, as defined below, of Credit 
Suisse Group.
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    5. An ``Eligible Employee'' is (a) an individual who is a current 
or former employee, officer, director, or ``Consultant'' of Credit 
Suisse Group and, except for certain individuals who manage the day-to-
day affairs of the Partnership in question (``Managing Employees'') \6\ 
and a limited number of other employees of Credit Suisse Group,\7\ 
meets the standards of an accredited investor under rule 501(a)(6) of 
Regulation D under the Securities Act, or (b) an entity that is a 
current or former ``Consultant'' of Credit Suisse Group and meets the 
standards of an accredited investor under rule 501(a) of Regulation 
D.\8\ Eligible Employees will be experienced professionals in the 
investment banking and securities businesses, or in related 
administrative, financial, accounting, legal, or operational 
activities.
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    \6\ A Managing Employee may invest in a Partnership if he or she 
meets the definition of ``knowledgeable employee'' in rule 3c-
5(a)(4) under the Act as if the Partnership were a ``covered 
company'' within the meaning of the rule.
    \7\ With respect to any Partnership, up to 35 employees 
(including Managing Employees, except to the extent that a Managing 
Employee meets the requirements of rule 501(a)(4) under the 
Securities Act), may be permitted to invest his or her own funds in 
the Partnership if, at the time of the employee's investment, he or 
she (a) has a graduate degree in business, law, or accounting, (b) 
has a minimum of five years of consulting, investment banking or 
similar business experience, and (c) has had reportable income from 
all sources of at least $100,000 in each of the two most recent 
years and a reasonable expectation of income from all sources of at 
least $140,000 in each year in which such person will be committed 
to make investments in a Partnership. In addition, such an employee 
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 such Partnership and in all other partnerships in 
which he or she has previously invested.
    \8\ A ``Consultant'' is a person or entity whom Credit Suisse 
Group has engaged on retainer to provide services and professional 
expertise on an ongoing basis as a regular consultant or as a 
business or legal adviser and who shares a community of interest 
with Credit Suisse Group and Credit Suisse Group employees.
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    6. A ``Qualified Participant'' (a) is an Eligible Family Member or 
Qualified Investment Vehicle (in each case as defined below) of an 
Eligible Employee, and (b) if the individual or entity is purchasing an 
Interest from a 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, including step 
and adoptive relationships. A ``Qualified Investment Vehicle'' 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,\9\ or (c) a trust or other entity established 
solely for the benefit of Eligible Family Members of an Eligible 
Employee.
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    \9\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
``Qualified Investment Vehicle'' is intended to enable Eligible 
Employees to make investments in the Partnerships through personal 
investment vehicles over which they exercise investment discretion 
or vehicles the management or affairs of which they otherwise 
control. In the case of a partnership, corporation, or other entity 
controlled by a Consultant entity, individual participants will be 
limited to senior level employees, members, or partners of the 
Consultant who will be required to qualify as an ``accredited 
investor'' under rule 501(a)(6) of Regulation D and who will have 
access to the directors and officers of the General Partner.
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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, in a partnership agreement (the ``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 Participant within 120 days 
or as soon as practicable after the end of its fiscal year, except for 
any Partnership that was formed to make a single portfolio investment 
(in which case audited financial statements will be prepared for either 
the Partnership or the entity that is the single portfolio 
investment).\10\ In

[[Page 49052]]

addition, as soon as practicable after the end of each tax year of a 
Partnership, each Participant will receive a report showing the 
Participant's share of income, credits, deductions, and other tax 
items.
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    \10\ If applicant implements a Pretax Plan, Eligible Employees 
participating in such Pretax Plan will be furnished with a copy of 
the Pretax Plan, which will set forth at a minimum the same terms of 
the proposed investment program as those that would have been set 
forth in a Partnership Agreement for a Partnership. The Credit 
Suisse Group will prepare an audited informational statement with 
respect to the investments deemed to be made by such Pretax Plan, 
including, with respect to each investment, the name of the 
portfolio company and the amount deemed invested by such Pretax Plan 
in the portfolio company. The Credit Suisse Group will send each 
participant of such Pretax Plan a separate statement prepared based 
on the audited informational statement within 120 days after the end 
of the fiscal year of the Credit Suisse Group or as soon as 
practicable thereafter.
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    8. Interests in a Partnership will be non-transferable except with 
the prior written consent of the General Partner.\11\ No person will be 
admitted into a Partnership unless the person is an Eligible Employee, 
a Qualified Participant of an Eligible Employee, or a Credit Suisse 
Group entity. No sales load will be charged in connection with the sale 
of Interests.
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    \11\ If applicant implements a Pretax Plan, an Eligible 
Employee's participation rights in such plan may not be transferred, 
other than to a Qualified Participant in the event of the Eligible 
Employee's death.
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    9. An Eligible Employee's interest in a Partnership may be subject 
to repurchase or cancellation if: (a) The Eligible Employee's 
relationship with Credit Suisse Group is terminated for cause; (b) the 
Eligible Employee becomes a consultant to or joins any firm that the 
General Partner determines, in its reasonable discretion, is 
competitive with any business of Credit Suisse Group; or (c) the 
Eligible Employee voluntarily resigns from employment with Credit 
Suisse Group. Upon repurchase or cancellation, the General Partner will 
pay to the Eligible Employee at least the lesser of (a) the amount 
actually paid by the Eligible Employee to acquire the Interest (less 
prior distributions, plus interest), and (b) the fair market value of 
the Interest as determined 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.
    10. Subject to the terms of the applicable Partnership Agreement, a 
Partnership will be permitted to enter into transactions involving (a) 
a Credit Suisse Group 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 Credit Suisse Group and over which a Credit 
Suisse Group entity will exercise investment discretion (``Third Party 
Fund''), or (e) any person or entity who is not affiliated with Credit 
Suisse Group and is a partner or other investor in a Third Party Fund 
or a third party sponsored program that is not affiliated with Credit 
Suisse Group (a ``Third Party Investor''). Prior to entering into any 
of these transactions, the General Partner must determine that the 
terms are fair to the Partners.
    11. A Partnership will not invest more than 15% of its assets in 
securities issued by registered investment companies (with the 
exception of temporary investments in money market funds). A 
Partnership will not acquire any security issued by a registered 
investment company if immediately after the acquisition, the 
Partnership will own more than 3% of the outstanding voting stock of 
the registered investment company.
    12. A Credit Suisse Group entity (including the General Partner) 
acting as agent or broker may receive placement fees, advisory fees, or 
other compensation from a Partnership or a portfolio company in 
connection with a Partnership's purchase or sale of securities, 
provided that such placement fees, advisory fees, or other compensation 
can be deemed to be ``usual and customary.'' Such 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 or Third Party Investors who 
are similarly purchasing or selling securities, (b) the fees or other 
compensation being charged to the Partnership are also being charged to 
the unaffiliated third parties, including Third Party Funds or Third 
Party Investors, 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 and Third Party 
Investors. Credit Suisse Group entities, including the General Partner, 
also may be compensated for services to entities in which the 
Partnerships invest and to entities that are competitors of these 
entities, and may otherwise engage in normal business activities.

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' 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) of the Act 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 
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)), sections 30(c), (d), (f), (g), (i) and 
(j), and sections 36 through 53, and the rules and regulations under 
those sections.
    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: (a) A 
Credit Suisse Group entity or a Third Party Fund, acting as principal, 
to engage in any transaction directly or indirectly with any 
Partnership or any company controlled by the Partnership; (b) any 
Partnership to invest in or engage in any transaction with any Credit 
Suisse Group entity, acting as principal, (i) in which the Partnership, 
any company controlled by the Partnership, or any Credit Suisse Group 
entity or Third Party Fund has invested or will invest, or (ii) with 
which the Partnership, any company controlled by the Partnership, or 
any Credit Suisse Group entity or Third Party Fund is or will become 
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. 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

[[Page 49053]]

Partnerships. Applicant states that the Participants in each 
Partnership will be fully informed of the extent of the Partnership's 
dealings with Credit Suisse Group. Applicant also states that, as 
professionals employed in the investment banking and securities 
businesses, Participants will be able to understand and evaluate the 
attendant risks. Applicant asserts that the community of interest among 
the Participants and Credit Suisse Group will provide the best 
protection against any risk of abuse.
    5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
any affiliated person or principal underwriter of a registered 
investment company, or any affiliated person of an affiliated person or 
principal underwriter, acting as principal, from participating in any 
joint arrangement with the company unless authorized by the SEC. 
Applicant requests relief to permit affiliated persons of each 
Partnership, or affiliated persons of any of these persons, to 
participate in any joint arrangement in which the Partnership or a 
company controlled by the Partnership is a participant.
    6. Applicant submits that it is likely that suitable investments 
will be brought to the attention of a Partnership because of its 
affiliation with Credit Suisse Group's large capital resources, and its 
experience in structuring complex transactions. Applicant also submits 
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. Applicant contends 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. Applicant 
notes that each Partnership will be organized for the benefit of 
Eligible Employees as an incentive for them to remain with Credit 
Suisse Group and for the generation and maintenance of goodwill. 
Applicant believes that, if co-investments with Credit Suisse Group are 
prohibited, the appeal of the Partnerships would be significantly 
diminished. Applicant asserts that Eligible Employees wish to 
participate in co-investment opportunities because they believe that 
(a) the resources of Credit Suisse Group enable it to analyze 
investment opportunities to an extent that individual employees would 
not be able to duplicate, (b) investments made by Credit Suisse 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. Applicant asserts 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. Applicant states 
that the concern that permitting co-investments by Credit Suisse Group 
and a Partnership might lead to less advantageous treatment of the 
Partnership should be mitigated by the fact that Credit Suisse Group 
will be acutely concerned with its relationship with the investors in 
the Partnership, and the fact that senior officers and directors of 
Credit Suisse Group entities will be investing in the Partnership. In 
addition, applicant asserts 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 Credit Suisse 
Group entity pursuant to a contractual obligation to a Third Party 
Fund, will not be subject to condition 3 below. Applicant notes that it 
is common for a Third Party Fund to require that Credit Suisse Group 
invest its own capital in Third Party Fund investments, and that Credit 
Suisse Group investments be subject to substantially the same terms as 
those applicable to the Third Party Fund. Applicant believes 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, applicant asserts that the relationship of a Partnership to a 
Third Party Fund is fundamentally different from a Partnership's 
relationship to Credit Suisse Group. Applicant contends that the focus 
of, and the rationale for, the protections contained in the requested 
relief are to protect the Partnerships from any overreaching by Credit 
Suisse Group in the employer/employee context, whereas the same 
concerns are not present with respect to the Partnerships and 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. Applicant requests an 
exemption from section 17(e) to permit a Credit Suisse Group entity 
(including the General Partner) that acts as an agent or broker to 
receive placement fees, advisory fees, or other compensation from a 
Partnership in connection with the purchase or sale by the Partnership 
of securities, provided that the fees or other compensation can be 
deemed ``usual and customary.'' Applicant states that for the purposes 
of the application, fees or other compensation will be deemed ``usual 
and customary'' only if (a) the Partnership is purchasing or selling 
securities alongside other unaffiliated third parties, including Third 
Party Funds or Third Party Investors, who are similarly purchasing or 
selling securities, (b) the fees or other compensation being charged to 
the Partnership are also being charged to the unaffiliated third 
parties, including Third Party Funds and Third Party Investors, 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 or Third Party Investors. Applicant asserts 
that, because Credit Suisse 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. Applicant asserts that the fees or other compensation paid by 
a Partnership to a Credit Suisse Group entity will be the same as those 
negotiated at arm's length with unaffiliated third parties.
    10. Rule 17e-1(b) under the Act 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. Rule 17e-1(c) under the Act 
requires that a majority of the directors not be interested persons, 
that those directors select and nominate other disinterested directors 
and that any person who acts as legal counsel for the disinterested 
directors be an independent legal counsel. Applicant requests 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 
directors of the General Partner who are not interested persons take 
actions and make determinations as set forth in paragraph (b) of the 
rule and without having to satisfy the standards set forth in paragraph 
(c) of the rule. Applicant states that because all the directors of the 
General Partner will be affiliated persons, without the relief 
requested, a

[[Page 49054]]

Partnership could not comply with rule 17e-1. Applicant states that 
each Partnership will comply with rule 17e-1(b) by having a majority of 
the directors of the Partnership take actions and make approvals as are 
set forth in rule 17e-1. Applicant states that each Partnership will 
comply with all other requirements of rule 17e-1.
    11. Section 17(f) of the Act designates the entities that may act 
as investment company custodians, and rule 17f-1 under the Act 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 a Credit Suisse Group entity 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 states 
that, because of the community of interest between Credit Suisse Group 
and the Partnerships and the existing requirement 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.
    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. Applicant requests exemptive relief to permit the 
General Partner's directors, who may be deemed interested persons, to 
take actions and make determinations set forth in the rule. Applicant 
states 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. Applicant also states 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. Applicant requests 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. 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 Commission and mail to their shareholders certain periodic reports 
and financial statements. Applicant contends that the forms prescribed 
by the Commission for periodic reports have little relevance to the 
Partnerships and would entail administrative and legal costs that 
outweigh any benefit to the Participants. Applicant requests exemptive 
relief to the extent necessary to permit each Partnership to report 
annually to its Participants. Applicant also requests an exemption from 
section 30(h) of the Act 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 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 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, such Partnership's organizational documents, and such 
Partnership's reports to its Partners. In addition, the General Partner 
will record and preserve a description of all Section 17 Transactions, 
the General Partner's findings, the information or materials upon which 
the General Partner's findings are based, and the basis therefor. All 
records relating to an investment program will be maintained until the 
termination of such investment program and at least two years 
thereafter, and will be subject to examination by the SEC and its 
staff.\12\
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    \12\ 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 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 principal underwriter.
    3. The General Partner will not invest the funds of any Partnership 
in any investment in which a ``Co-Investor'' (as defined below) has 
acquired or proposes to acquire the same class of securities of the 
same issuer, where the investment involves a joint enterprise or other 
joint arrangement within the meaning of rule 17d-1 in which the 
Partnership and a Co-Investor are participants, unless any such Co-
Investor, prior to disposing of all or part of its investment, (a) 
gives the General Partner sufficient, but not less than one 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) a Credit Suisse Group entity; (c) an officer or 
director of a Credit Suisse Group entity; 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, 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

[[Page 49055]]

indirect wholly-owned subsidiary, or to a direct or indirect wholly-
owned subsidiary of its parent; (b) to immediate family members of such 
Co-Investor, including step and adoptive relationships, 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; (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; or (f) when the investment is comprised of 
securities that are government securities as defined in section 
2(a)(16) of the Act.
    4. Each Partnership and the General Partner will maintain and 
preserve, for the life of such Partnership and at least two years 
thereafter, such accounts, books, and other documents as constitute the 
record forming the basis for the audited financial statements that are 
to be provided to the Participants in such Partnership, and each annual 
report of such Partnership required to be sent to such Participants, 
and agree that all such records will be subject to examination by the 
SEC and its staff.\13\
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    \13\ 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 the Partnership, at any time during the fiscal year then 
ended, Partnership financial statements audited by the Partnership's 
independent accountants, except in the case of a Partnership formed to 
make a single portfolio investment. In such cases, financial statements 
will be unaudited, but each Participant will receive financial 
statements of the single portfolio investment audited by such entity's 
independent accountants. At the end of each fiscal year and at other 
times as necessary in accordance with customary practice, the General 
Partner will make a valuation or have a valuation made of all of the 
assets of the Partnership as of the fiscal year end in a manner 
consistent with customary practice with respect to the valuation of 
assets of the kind held by the Partnership. In addition, within 120 
days after the end of each fiscal year of each Partnership or as soon 
as practicable thereafter, the General Partner of 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 U.S. 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 such entity by a Credit Suisse Group director, 
officer, or employee, 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.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-19121 Filed 7-26-02; 8:45 am]
BILLING CODE 8010-01-P