[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Notices]
[Pages 31984-31989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15907]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22021; 813-146]
George K. Baum Employee Equity Fund, L.P.; Notice of Application
June 17, 1996.
agency: Securities and Exchange Commission (``SEC'').
[[Page 31985]]
action: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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applicant: George K. Baum Employee Equity Fund, L.P. (the
``Partnership'').
Relevant Act sections: Order requested under sections 6(b) and 6(e)
granting an exemption from all provisions of the Act and the rules and
regulations thereunder except section 9, certain provisions of sections
17 and 30, and sections 36 through 53.
summary of application: The Partnership requests an order that would
grant an exemption from most provisions of the Act and would permit
certain affiliated and joint transactions. The Partnership will be an
employees' securities company within the meaning of section 2(a)(13) of
the Act.
filing dates: The application was filed on December 4, 1995, and
amended on June 17, 1996.
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 July 12, 1996,
and should be accompanied by proof of service on the 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, N.W., Washington, D.C.
20549. Applicant, 120 West 12th Street, Kansas City, MO 64105.
for further information contact: Elaine M. Boggs, Staff Attorney, at
(202) 942-0572, or Robert A. Robertson, Branch Chief, at (202) 942-0564
(Dvision 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 from
the SEC's Public Reference Branch.
Applicant's Representations
1. The Partnership was formed for the benefit of certain officers
who are experienced professionals in the investment banking, merchant
banking or securities business, or in administrative, financial,
accounting, or operations activities related thereto (``Eligible
Officers'') of George K. Baum Holdings Inc. (``GKB Holdings''), a
Delaware corporation, and its affiliates (as defined in rule 12b-2
promulgated under the Securities Exchange Act of 1934 (the ``Exchange
Act'') (GKB Holdings and its affiliates are referred to herein as the
``Baum Entities''). The Partnership is intended to be a means of
rewarding and retaining key professionals of the Baum Entities by
enabling them to pool their investment resources to invest in
opportunities which come to the attention of the Partnership. The
pooling of resources permits diversification and participation in
investments that usually would not be offered to individual investors.
The preeminent purpose of the Partnership is to reward and retain key
officers of the Baum Entities and to attract other qualified
professionals to the Baum Entities.
2. George K. Baum & Company (``Baum''), a Missouri corporation and
a wholly-owned subsidiary of GKB Holdings, is a full-line investment
banking firm with headquarters in Kansas City, Missouri. Baum is the
broker-dealer affiliate of the Baum Entities and is registered as a
broker-dealer under the Exchange Act and is a registered investment
adviser under the Investment Advisers Act of 1940 (the ``Advisers
Act'').
3. The Partnership will operate as a closed-end management
investment company. The sole investment option of the Partnership will
be to co-invest with George K. Baum Capital Partners, L.P. (the
``Investor Fund''), a limited partnership to be formed under the laws
of Delaware. The Investor Fund will seek to achieve long-term capital
growth through investments in leveraged buyout and recapitalization
transactions primarily involving manufacturing companies with revenues
of between $25 and $100 million. Oversight required by the Investor
Fund partnership agreement in connection with the Investor Fund's
investments, potential conflicts of interest, and other matters will be
provided by an advisory board consisting of at least three independent
representatives of limited partners of the Investor Fund (``Investor
Fund Advisory Board''). The Investor Fund will be exempt from
registration under the Act by reason of the exemption afforded by
section 3(c)(1) of the Act. The Investor Fund and the Partnership will
be separate legal entities and will be administered separately. No
person will be permitted to invest as a limited partner in both the
Investor Fund and the Partnership.
4. The general partner of the Partnership is GKB Equity, Inc., a
Missouri corporation (the ``General Partner''), and a wholly-owned
subsidiary of GKB Holdings. George K. Baum Merchant Banc, L.L.C., a
Missouri limited liability company and an affiliate of GKB Holdings,
will be the investment adviser (the ``Adviser'') to both the Investor
Fund and the Partnership. The Adviser has filed an application to
become registered as an investment adviser under the Advisers Act.
5. Interests in the Partnership will be offered without
registration under a claim of exemption pursuant to section 4(2) of the
Securities Act of 1933 (the ``Securities Act'').\1\ Interests will be
offered and sold only to Eligible Officers of the Baum Entities or
trusts established by such Eligible Officers for their benefit or the
benefit of their immediate families.
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\1\ Section 4(2) exempts certain transactions by an issuer not
involving any public offering from the Securities Act's registration
requirement.
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6. To be an Eligible Officer an individual must be (at the time of
his or her subscription for and admission to the Partnership) an
officer at the level of vice president or above of one or more of the
Baum Entities and must satisfy the requirements to be either an
``Accredited Officer'' or a ``Non-Accredited Officer.'' To be an
Accredited Officer, an individual must be (at the time of his or
subscription for and admission to the Partnership) an ``accredited
investor'' meeting the standards set forth in rule 501(a)(6) of
Regulation D under the Securities Act. To be a Non-Accredited Officer,
an individual must have had an individual income in excess of $100,000
in each of the two most recent years, or joint income with that
person's spouse in excess of $150,000 in each of those years, and in
both cases must have a reasonable expectation of reaching the same
income level in the current year. In addition, Non-Accredited Officers
will be limited to officers who meet one of the following criteria: (a)
he or she is in charge of a principal business function of one of the
Baum Entities and directly reports to either the CEO of Baum or the
executive directors of the Adviser, or (b) he or she is an experienced
vice president in Baum's corporate finance group who regularly works
with clients in mergers and acquisitions and financings in the public
and private equity markets and who has direct access to the managers of
the Adviser on a regular basis.
7. The Eligible Officers are experienced professionals in the
investment banking, merchant banking or securities business, or in the
[[Page 31986]]
administrative, financial accounting, or operational activities related
thereto. Each Non-Accredited Officer will have such knowledge and
experience in financial and business matters that he or she is capable
of evaluating the merits and risks of an investment in the Partnership,
or the Partnership reasonably believes immediately prior to making any
sale that such person comes within this description. The limitations on
the class of persons who may acquire interests (``Limited Partners''),
in conjunction with the other characteristics of the Partnership, will
result in the Partnership meeting the definition of an ``employees'
securities company'' under section 2(a)(13) of the Act. No Eligible
Officer will be required to invest in the Partnership.
8. Each Limited Partner will make a commitment to invest in the
Partnership (a ``Commitment''). An Accredited Officer's Commitment will
expire on the sixth anniversary of the initial closing of the Investor
Fund (the ``Commitment Period''). During the 30 day period at the
beginning of each fiscal year (the ``Adjustment Period''), Accredited
Officers may increase, but not decrease, the amount of their
Commitment. Non-Accredited Officers may only make Commitments for up to
10% of his or her W-2 income derived from the Baum Entities in the
prior fiscal year. On each anniversary date, Non-Accredited Officers
may increase (subject to the 10% income maximum) or decrease the amount
of their Commitment. If a Non-Accredited Officer qualifies as an
Accredited Officer at any time during the Commitment Period, he or she
must make a Commitment during the next Adjustment Period for the
balance of the Commitment Period in accordance with the terms
applicable to Accredited Officers or may choose not to make any further
investment in the Partnership.
9. The General Partner will determine in its sole discretion the
amount and timing of capital contributions to be made by the Limited
and General Partners to the Partnership. Capital contributions will
fund Partnership investments and the payment of Partnership expenses.
The maximum amount of capital contributions that a Limited Partner may
be required to make during the life of the Partnership will be limited
to the Limited Partner's Commitment. The minimum Commitment of each
Accredited Officer will be $10,000, subject to waiver by the General
Partner in its sole discretion. There will be no assurance of the
precise timing or amount of capital calls but the General Partner
expects that investments by the Partnership will be made over a four to
six-year period and the Partners' Commitments will be called over this
period.
10. The management and control of the Partnership, including all
investment decisions, will be vested in the General Partner. The
management and control of the General Partner will, in turn, be vested
in the board of directors of the General Partner, all of whom are
Eligible Officers. The General Partner will enter into a management
agreement (the ``Management Agreement'') with the Adviser. The Adviser
will make all investment decisions on behalf of the Investor Fund and
the Partnership, as well as provide personnel, office space and
business facilities to the Investor Fund and the Partnership.
11. Until the end of the Commitment Period, the Partnership will
pay the Adviser a management fee, payable quarterly in advance, equal
to 3% per year of the aggregate amount of the Commitments, and
thereafter the management fee will be equal to 3% per year of the
aggregate amount of the cost basis of securities owned by the
Partnership. The management fee will comply with all provisions of the
Investment Adviser's Act of 1940. To the extent not otherwise
reimbursed, the Adviser will have the right to be reimbursed by the
Investor Fund and the Partnership for its out-of-pocket expenses
incurred in connection with the transactions proposed on behalf of the
Investor Fund and the Partnership. These expenses will be shared
between the Investor Fund and the Partnership pro rata according to the
aggregated capital commitments of each.
12. Prior to selling interests to Eligible Officers, the
Partnership will distribute to Eligible Officers a copy of offering
memorandum for the Investor Fund, memorandum containing a summary
description of the terms of the Partnership, and a copy of the
Partnership Agreement. In addition, each Eligible Officer will be
provided a copy of the application for the requested exemptive relief
and will be given the opportunity to ask questions of the Partnership
and the Adviser.
13. Except for short-term cash investments, the Partnership will
co-invest its capital in investments in which the Investor Fund
invests. The amount of the Partnership co-investment will bear the same
proportion to the aggregate investments of the Investor Fund and the
Partnership as the aggregate capital commitments of the Partnership
bear to the aggregate capital commitments of the Investor Fund and the
Partnership. (Any entity in which the Partnership and the Investor Fund
invests is a ``Portfolio Company''.) It is expected that the economic
terms applicable to the Partnership's investments will be identical to
the corresponding investments by the Investor Fund; however,
investments of the Investor Fund may have more favorable non-economic
terms (e.g., the right to representation on the board of directors of a
Portfolio Company) if required for the Investor Fund to qualify as a
venture capital operating company under the Employees' Retirement
Income Securities Act or for other regulatory reasons.
14. The Partnership and the Investor Funds will not be permitted,
except with the consent of the Investor Fund Advisory Board, to make an
investment in any company in which a member of the Baum Entities
previously has made an investment, or in which a member is a director
or officer. The Partnership and the Investor Fund also will not be
permitted, except with the consent of the Investor Fund Advisory Board,
to make a follow-on investment in a Portfolio Company previously
participated in by a member of the Baum Entities if, in such round, the
member of the Baum Entities is acquiring more or less than its pro rata
position from the previous round.
15. Subject to the limitations described above, the Partnership
will be permitted to enter into transactions involving (a) a member of
the Baum Entities (including without limitation the Investor Fund), (b)
a Portfolio Company, (c) any partner of the Investor Fund that is not a
member of the Baum Entities (together with the affiliates of such
partner, a ``Non-Baum Investor Fund Partner''), or (d) the General
Partner or any Limited Partner (collectively the ``Partners'') or
person or entity related to any Partner. Any such transaction, however,
must be on terms no less favorable to the Partnership than are
generally afforded to unrelated third parties in comparable
transactions. Such transactions include, without limitation, the
purchase or sale by the Partnership of an investment, or an interest
therein, from or to any member of the Baum Entities acting as
principal. With respect to any investment purchased by the Partnership
from a member of the Baum Entities acting as principal, the Partnership
will acquire the investment for no more than the fair value at the time
of purchase, plus customary fees and expenses. The fair value at the
time of such purchase may be more or less than the price paid by the
member of the Baum Entities, depending on the
[[Page 31987]]
appreciation or depreciation in the particular investment.
16. Distributions of cash and securities will be made at the
discretion of the General Partner. All distributions will be made to
the Partners in proportion to their respective capital contributions.
When distributing cash or securities or both to the Partners, the
General Partner will be required to distribute the cash and securities
to all Partners in the same proportions. 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 and a copy of the
valuation will be delivered to each of the Partners.
17. The Partnership will not be permitted to incur indebtedness for
borrowed money in an amount in excess of 10% of the sum of the cost
basis of the Partnership's investments plus the sum of the remaining
Commitments. The Partnership will not make loans to the Investor Fund
or any other member of the Baum Entities, or any employee, officer,
director, or advisory director of one of the Baum Entities.
18. A Limited Partner may not withdraw from the Partnership prior
to the dissolution of the Partnership, except under certain limited
circumstances. The General Partner may require a Limited Partner to
withdraw if (a) the Limited Partner is a Defaulting Partner (as defined
below), (b) the Limited Partner violates the restrictions on transfer
described below, or (c) if the General Partner determines in its
reasonable discretion that continued membership of the Limited Partner
in the Partnership would subject the Partnership to material onerous
legal or other regulatory requirements that cannot reasonably be
avoided. In addition, a Limited Partner will cease to be a Limited
Partner upon termination of employment with any of the Baum Entities,
other than due to death, retirement, or permanent disability. If a
Limited Partner terminates his or her employment with any of the Baum
Entities for any reason, no further capital contributions will be made
pursuant to the remaining uncalled Commitment and the holder of such
interest will not participate in subsequent Partnership investments or
pay subsequent management fees.
19. If a Limited Partner dies, retires after age 60, or becomes
permanently disabled, the Partnership Agreement will provide that the
Limited Partner (or his or her estate in the case of death) will
continue to hold his or her interest. Upon termination of a Limited
Partner's interest resulting from a termination of employment with the
Baum Entities for any reason other than death, retirement, or permanent
disability, the Partnership Agreement will provide that the Partnership
may redeem, in its discretion, that Limited the Partner's interest for
cash and/or a promissory note. The amount payable to terminated Limited
Partner will be the lower of (a) such Limited Partner's capital account
balance on the date of termination or (b) the then fair value (as
determined by the General Partner) of the interest.
20. Interests in the Partnership will be non-transferable except
with the prior written consent of the General Partner, which consent
may be withheld in its sole discretion, and in any event, will not be
transferable to persons other than (a) other Partners or Eligible
Officers, (b) trusts established by the transferor Limited Partner
primarily for the benefit of such Limited Partner or such Limited
Partner's immediate family, or (c) by succession or testamentary
disposition upon the death of the transferor Limited Partners.
21. During the existence of the Partnership, books of account
will be kept, in which the General Partner will enter, or cause to
be entered, all business transacted by the Partnership and all
moneys and other things received, advanced, paid out, or delivered
on behalf of the Partnership, the results of the Partnership's
operations, and each partner's capital. Such books will at all times
be accessible to all Partners at the Partnership's principal place
of business during normal working hours.
Applicant's Legal Analysis
1. The Partnership requests an exemption under section 6(b) and
6(e) of the Act from all provisions of the Act and the rules and
regulations thereunder except section 9, certain provisions of section
17 and 30, and sections 36 through 53.
2. Section 6(b) of the Act provides that the SEC shall exempt
employees' securities companies from the provisions of the Act to the
extent that such exemption is consistent with the protection of
investors. Section 2(a)(13) of the Act defines an employee's security
company, among other things, as any investment company all of the
outstanding securities of which are beneficially owned by the employees
or persons on retainer of a single employer or affiliated employers or
by former employees of such employers; or by members of the immediate
family of such employers, persons on retainer, or former employees.
3. Section 6(e) of the Act provides that in connection with any
order exempting an investment company from any provision of section 7,
certain specified provisions of the Act shall be applicable to such
company, and to other persons in their transactions and relations with
such company, as though such company were registered under the Act, if
the SEC deems it necessary or appropriate in the public interest or for
the protection of investors.
4. Section 17(a) of the Act provides, in relevant part, that it is
unlawful for any affiliated person of a registered investment company
acting as principal, knowingly to sell any security or other property
to such registered investment company or to purchase from such
registered investment company any security or other property. The
Partnership requests an exemption from section 17(a) to the extent
necessary to: (a) permit a member of the Baum Entities, acting as
principal, to engage in any transaction with the Partnership or any
company controlled by the Partnership; (b) permit the Partnership to
invest in or engage in any transaction with any entity, acting as
principal, (i) in which the Partnership, any company controlled by the
Partnership or any member of the Baum Entities has invested or will
invest or (ii) with which the Partnership, any company controlled by
the Partnership or any member of the Baum Entitles is or will become
otherwise affiliated; and (c) permit a Non-Baum Investor Fund Partner,
acting as principal, to engage in any transaction with the Partnership
or any company controlled by the Partnership. The transaction in which
the Partnership is a party will be effected only after a determination
by the Adviser and the General Partner that the requirements of
condition 1 below have been satisfied.
5. The principal reason for the requested exemption is to ensure
that the Partnership will be able to invest in companies, properties,
or vehicles in which a member of the Baum Entities or the Baum
Entities' individual employees, officers, directors or advisory
directors, or the partners of the Investor Fund may make or have
already made an investment. In addition, relief is requested to permit
the Partnership the flexibility to deal with the Portfolio Companies in
the manner the General Partner deems most advantageous to all Partners
or as required by the Investor Fund or the Partnership's other co-
investors.
6. The Partners will have been fully informed of the possible
extent of the Partnership's dealings with the Investor Fund, another
member of the Baum Entities, or with a Non-Baum Investor Fund Partner
and, as successful professionals employed in the securities business,
will be able to understand and evaluate the attendant risks. The
[[Page 31988]]
Partnership believes that the community of interest among the Partners,
on the one hand, and the Investor Fund or another member of the Baum
Entities or the Non-Baum Investor Fund Partners, on the other hand, is
the best insurance against any risk of abuse in this regard.
7. Section 17(d) of the Act makes it unlawful for any affiliated
person of a registered investment company, acting as principal, to
effect any transaction in which the company is a joint or joint and
several participant with the affiliated person in contravention of such
rules and regulations as the SEC may prescribe for the purpose of
limiting or preventing participation by such companies. Rule 17d-1
under section 17(d) prohibits most joint transactions unless approved
by order of the SEC.
8. The Partnership requests an exemption from section 17(d) and
rule 17d-1 to the extent necessary to permit affiliated persons of the
Partnership (including without limitation the General Partner, the
Investor Fund, and other members of the Baum Entities) or affiliated
persons of any of these persons (including without limitation of the
Non-Investor Fund Partners) 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. The exemption
requested would permit, among other things, co-investments by
individual partners or employees, officers, directors, or advisory
directors of the Baum Entities with the Partnership.
9. Compliance with section 17(d) would prevent the Partnership from
achieving its only investment purpose. Because of the number and
sophistication of the potential Partners and persons affiliated with
such Partners, compliance with section 17(d) would cause the
partnership to forego investment opportunities simply because a Partner
or other affiliated person of the Partnership (or any affiliate of such
a person) also had, or contemplated making, a similar investment. In
addition, the Partnership asserts that it is the existence of the
Investor Fund and the Baum Entities' experience in structuring
transactions which will result in the Partnership having the
opportunity to make attractive investments. As a result, the only way
in which the Partnership will be able to participate in such
opportunities will be to co-invest with its affiliates.
10. The flexibility to structure co-investments and joint
investments in the manner described above will not involve abuses of
the type section 17(d) and rule 17d-1 were designed to prevent. The
concern that permitting co-investments or joint investments by the
Investor Fund or another member of the Baum Entities or by the Non-Baum
Investor Fund Partners on the other, might lead to less advantageous
treatment of the Partnership should be mitigated by the fact that: (a)
the Baum Entities, in addition to their interest through the General
Partner, the Investor Fund's general partner, the Investor Fund, and
the Partnership, will be acutely concerned with their relationship with
the personnel who invest in the Partnership; and (b) senior officers
and directors of the Baum Entities will be investing in the
Partnership.
11. Section 17(f) of the Act 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. The
Partnership requests an exemption from section 17(f) and rule 17f-1 to
the extent necessary to permit a member of the Baum Entities to act as
custodian without a written contract. Because there is such a close
association between the Partnership and the Baum Entities, requiring a
detailed, written contract would expose the Partnership to unnecessary
burden and expense. Further, any securities of the Partnership which
will be held by the Baum Entities will have the protection of fidelity
bonds. An exemption is requested from the terms of rule 17f-1(b) (4),
as the partnership does not believe that the expense of retaining an
independent accountant to conduct periodic verifications is warranted
given the community of interest of all the parties involved and the
existing requirement for an independent annual audit.
12. Section 17(g) of the Act and rule 17g-1 generally require the
bonding of officers and employees of a registered investment company
who have access to securities or funds of the company. The Partnership
requests an exemption from section 17(g) and rule 17g-1 to the extent
necessary to permit the Partnership to comply with rule 17g-1 without
the necessity of having a majority of the managers of the General
Partner who are not ``interested persons'' take such actions and make
such approvals as are set forth in rule 17g-1. Because all of the
managers of the General Partner will be affiliated persons, without the
requested relief, the Partnership could not comply with rule 17g-1. The
Partnership will except for the requirements of such approvals by ``not
interested'' persons, otherwise comply with rule 17g-1.
13. Section 17(j) of the Act and rule 17j-1 make it unlawful for
certain enumerated persons to engage in fraudulent, deceitful, or
manipulative practices in connection with the purchase or sale of a
security held or to be acquired by an investment company. Rule 17j-1
also requires every registered investment company, its adviser, and its
principal underwriter to adopt a written code of ethics with provisions
reasonably designed to prevent fraudulent activities, and to institute
procedures to prevent violations of the code. The Partnership requests
an exemption from section 17(j) and rule 17j-1 (except rule 17j-1(a))
because the requirements contained therein are burdensome and
unnecessary. Requiring the Partnership to adopt a written code of
ethics and requiring access persons to report each of their securities
transactions would be time consuming and expensive, and would serve
little purpose in light of, among other things, the community of
interest among the Partners by virtue of their common association in
the Baum Entities and the substantial and largely overlapping
protections afforded by the conditions with which the Partnership has
agreed to comply. Accordingly, the Partnership believes that the
requested exemption is consistent with the purposes of the Act because
the dangers against which section 17(j) and rule 17j-1 are intended to
guard will not be present.
14. Sections 30(a), (b), and (d), and the rules under these
sections, generally require that registered investment companies
prepare and file with the SEC and mail to their shareholders certain
periodic reports and financial statements. The Partnership asserts that
the forms prescribed by the SEC for periodic reports have little
relevance to the Partnership and would entail administrative and legal
costs that outweigh any benefit to the Limited Partners. Exemptive
relief is requested to the extent necessary to permit the Partnership
to report quarterly and annually in the manner referred to above. An
exemption also is requested from section 30(f) to exempt the General
Partner, Adviser, employees and managers of the General Partner and the
Adviser, and any other persons who may be deemed members of an advisory
board of the Partnership from filing forms 3, 4, and 5 under section 16
of the Exchange Act with respect to their ownership of interests in the
Partnership.
[[Page 31989]]
15. The Partnership believes that the exemptions requested are
consistent with the protection of investors in view of the substantial
community of interest among all the parties and the fact that the
Partnership will be an ``employees' securities company'' as that term
is defined in section 2(a)(13).
16. The Partnership states that each Eligible Officer will be
equipped by experience and education to understand and evaluate the
structure, management, and plan of the Partnership as compared to other
investment opportunities, to understand and evaluate the risks of
investing in the Partnership, and to understand that the Partnership is
being offered without registration under the Act and the Securities Act
and the protections afforded thereby.
Applicant's Conditions
The Partnership agrees to comply with the following as conditions
if the requested order is granted:
1. Each proposed transaction otherwise prohibited by section 17(a)
or section 17(d) and rule 17d-1 to which the 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 the Partnership or its
Partners on the part of any person concerned; and (b) the transaction
is consistent with the interests of the Partners, the Partnership's
organizational documents, and the Partnership's reports to its
Partners. In addition, the General Partner will record and preserve a
description of such affiliated transactions, their findings, the
information or materials upon which their findings are based and the
basis therefor. All such records will be maintained for the life of the
Partnership, and at least two years thereafter, and will be subject to
examination by the SEC and its staff.\2\
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\2\ The 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 such transaction, with respect to the possible
involvement in the transaction of any affiliated person or promoter of
or principal underwriter for the Partnership, or any affiliated person
of such a person, promoter or principal underwriter.
3. The General Partner will not invest the funds of the Partnership
in any investment in which a ``Co-Investor'' has 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 the 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, and on the same terms as, and
pro rata with the Co-Investor. The term ``Co-Investor'' means any
person who is: (a) an ``affiliated person'' (as such term is defined in
the Act) of the Partnership; (b) a member of the Baum Entities; (c) a
officer or director of one or more of the Baum Entities; or (d) a
company in the General Partner or Adviser acts as a general partner or
has a similar capacity to control the sale or other disposition of the
company's securities (including without limitation other Investor
Fund). The restrictions contained in this condition 3, however, shall
not be deemed to limit to prevent the disposition of an investment by a
Co-Investor: (a) to its direct or indirect wholly-owned subsidiary, to
any company (a ``parent'') of which the Co-Investor in a direct or
indirect wholly-owned subsidiary, or to a direct or indirect wholly-
owned subsidiary of its parent; (b) to immediate family members of the
Co-Investor or a trust established for any such family member; (c) when
the investment is comprised of securities that are listed of any
exchange registered as a national securities exchange under section 6
of the Exchange Act; or (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 11As2-1 thereunder.
4. The Partnership and the General Partner will maintain and
preserve, for the life of the Partnership and at least two years
thereafter, such accounts, books and other document as constitute
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 Partner and each annual report of the Partnership
required to be sent to the Partners, and agree that all such records
will be subject examination by the SEC and its staff.\3\
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\3\ The 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 will send to each Partner who had a capital
account 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 a valuation or have a valuation made of
all of the assets of the Partnership as of such fiscal year in a manner
consistent with customary practice with respect to the valuation of
assets of the Kind held by the Partnership. In addition, within 90 days
after the end of each fiscal year of the Partnership or as soon as
practicable thereafter, the General Partner shall send a report to each
person who was a Partner at any time during the fiscal year then ended,
setting forth such tax information as shall be necessary for the
preparation by the Partner of his, her, or its 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 were made by the
Partnership from or to an entity affiliated with the Partnership by
reason of a 5% or more investment in such entity by an advisory
director, director, officer, or employee, of any one or more of the
Baum Entities, such individual will not participate in the
Partnership's determination of whether or not to effect such purchase
or sale.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-15907 Filed 6-20-96; 8:45 am]
BILLING CODE 8010-01-M
