[Federal Register Volume 61, Number 137 (Tuesday, July 16, 1996)]
[Notices]
[Pages 37097-37102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18050]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22062; 813-142]
FMR Corp. and Fidelity Waterway Limited Partnership; Notice of
Application
July 10, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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Applications: FMR Corp. (``FMR'') and Fidelity Waterway Limited
Partnership (the ``Initial Partnership'').
Relevant Act Sections: Order under sections 6(b) and 6(e) of the Act
for an exemption from all provisions of the Act except section 9,
certain provisions of sections 17 and 30, sections 36 through 53, and
the rules and regulations thereunder.
Summary of Application: Applicants request an order to permit the
Initial Partnership, and future partnerships or investment vehicles
that may be offered to the same class of investors (the ``Subsequent
Partnerships'') (together with the Initial Partnership, the
``Partnerships''), to engage in certain affiliated and joint
transactions. Each 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 May 12, 1995 and amended on
December 21, 1995 and June 19, 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
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 5, 1996,
and should be accompanied by proof of service on the 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 may request
notification of a hearing by writing to the SEC's Secretary.
addresses: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: 82 Devonshire Street, F5H, Boston, Massachusetts
02109.
FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Robert A.
Robertson, 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 from
the SEC's Public Reference Branch.
Applicants' Representations
1. FMR and its subsidiaries provide investment advisory,
management, and shareholder services for the ``FMR Funds,'' \1\ for
individual and institutional investors, as well as for pension trusts.
FMR and its subsidiaries also offer discount brokerage services to
[[Page 37098]]
retail and institutional clients, manage and develop real estate
properties, operate a credit card business, offer variable annuity and
life insurance products, and operate and invest in emerging businesses.
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\1\ ``FMR Funds'' means an investment fund or account organized
for the benefit of investors who are not affiliated with the FMR
Group (as defined below) and over which an entity within the FMR
Group exercises investment discretion. An entity which is either
within the FMR Group or an FMR Fund is referred to as an ``FMR
Affiliate.''
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2. The Partnerships will be organized by FMR and its affiliates (as
defined in rule 12b-2 promulgated under the Securities Exchange Act of
1934 (the ``Exchange Act''), excluding the FMR Funds (FMR, together
with such included affiliates, the ``FMR Group''). The Partnerships are
intended to benefit certain current employees, officers, directors, and
persons on retainer of the FMR Group (the ``Eligible Employees'') who,
except as described below, are also ``accredited investors'' meeting
the income requirements set forth in rule 501(a)(6) of regulation D
under the Securities Act of 1933 (the ``Securities Act''),\2\ and to be
a means of rewarding and retaining those individuals. An entity with
the FMR Group will, as a general partner or other manager of each
Partnership (a ``General Partner''), participate in each Partnership.
The Partnerships will enable such personnel to participate in a wide
variety of investment opportunities that would not be offered to them
as individual investors.
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\2\ An Eligible Employee may be determined to be an ``accredited
investor'' under rule 501(a)(6) of regulation D under the Securities
Act by reference to income from sources other than from the FMR
Group.
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3. The Partnerships will operate as non-diversified, closed-end
management investment companies. The Partnerships generally will seek
to achieve a high rate of return through long-term capital appreciation
by providing expansion capital to a variety of emerging growth
companies and by making investments in real estate assets through a
venture capital portfolio (the ``FMR Investments'').
4. Participation in the Partnerships will be limited to Eligible
Employees, individuals, and entities that fall within the following
categories: (a) Trusts of which the trustees, grantors and/or
beneficiaries are Eligible Employees; (b) partnerships, corporations,
or other entities all of the voting power of which is controlled by
Eligible Employees; and (c) spouses, parents, children, spouses of
children, brothers, sisters, and grandchildren (``Eligible Family
Members'') of Eligible Employees, and trusts established for the
benefit of Eligible Family Members ((a), (b), and (c), collectively,
``Qualified Participants''). Eligible Employees and their Qualified
Participants are referred to as ``Eligible Participants.''
5. The purpose of the Initial Partnership is to enable Eligible
Employees and persons or entities related to Eligible Employees to
receive the benefit of certain FMR Investments. In order to achieve
this result, the Eligible Participants have acquired their limited
partnership interests in the Initial Partnership without payment
therefor by way of a dividend on their stock interests in FMR.
Similarly, in the case of any Subsequent Partnership in which the
investors will acquire their limited partnership interests without
payment therefor by way of a dividend or compensation award from an
entity within the FMR Group, the interests will be granted only to
those persons and entities that are Eligible Participants. The amount
and timing of distribution of limited partnership interests in a
Partnership to Eligible Participants will be determined solely by FMR.
Because the recipients of a distribution of limited partnership
interests will not have discretion over whether or not they receive
such distribution of interests, it is possible that certain Eligible
Employees who receive such interests may not meet the income
requirements set forth in rule 501(a)(6) under regulation D under the
Securities Act and, similarly, certain Qualified Participants may not
qualify as ``accredited investors'' under regulation D.\3\ FMR Group
will endeavor to ensure that no more than 35 Eligible Participants who
are not ``accredited investors'' will receive partnership interests in
the Initial Partnership which is distributed by way of a dividend on
FMR stock.\4\
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\3\ Each such employee who is not an ``accredited investor''
will have received minimum total compensation, (including any profit
shares, whether paid as dividend or other investment income, and
bonus) of at least $150,000 in the year prior to the year in which
the interest in the Initial Partnership is distributed to such
employee and will have a reasonable expectation of at least the same
level of minimum total compensation in each of the two immediately
succeeding years. All such employees will have received
undergraduate degrees, will have been employed with the FMR Group
for at least two years, and will occupy middle to senior level
positions. In addition, each such employee will have such knowledge
and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of the prospective
investment or FMR will have a reasonable belief immediately prior to
such employee becoming a limited partner of a Partnership that such
employee falls within the foregoing description.
\4\ In the event the number of non-accredited investors would
exceed 35 if all stockholders received the partnership interests as
a dividend, an appropriate number of non-accredited investors will
receive cash instead of partnership interests.
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6. To date, FMR has acquired limited partnership interests in the
Initial Partnership in exchange for capital contributions of real
estate interests and securities representing all or a portion of FMR's
interest in certain FMR Investments. FMR has transferred, by way of a
dividend on its capital stock, substantially all of its limited
partnership interests in the Initial Partnership to Eligible
Participants. Those Eligible Participants who acquire limited
partnership interests in a Partnership are referred to as ``Limited
Partners.'' FMR stockholders who were not Eligible Participants (i.e.,
charitable organizations) and certain individual stockholders who do
not participate for tax reasons (collectively with the charitable
organizations, ``Excluded Stockholders'') received cash in lieu of
limited partnership interests in the Initial Partnership. If interests
in Subsequent Partnerships are acquired by means of a dividend,
Excluded Stockholders will receive cash and all other shareholders will
receive partnership interests.\5\
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\5\ Until receipt of the requested exemptive order, FMR Corp.
may effect transactions similar to that described above with respect
to FMR Corp.'s interest in certain FMR Investments, provided that at
all times the Initial Partnership will continue to qualify for the
exclusion provided in section 3(c)(50(C) of the Act.
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7. Currently, the Initial Partnership is not structured to enable
Participants to invest their own funds but may be amended to permit
such transactions. Subsequent Partnerships will be identical to the
Initial Partnership except that they may provide for participants to
invest their own funds.
8. The management and control of each Partnership, including all
investment decisions, will be vested exclusively in the General
Partner. The General Partner will be under the common control of FMR.
Thus, the business and affairs of each Partnership will be managed by
or under the direction of the board of directors or other committee
serving similar functions (the ``Board'') of an entity that is under
common control with FMR. Each Board will be comprised exclusively of
directors and/or officers of the FMR Group, each of whom is expected to
qualify as an Eligible Employee.
9. In the case of a Partnership that makes investments with funds
provided by the Limited Partners, the General Partner will be
responsible primarily for identifying, investigating, and structuring
the investments. The General Partner initially will not receive any
fees or other compensation for serving as the General Partner of the
Initial Partnership. However, Subsequent Partnerships may provide, and
the Initial Partnership may be amended to provide, for the General
[[Page 37099]]
Partner to receive a management or performance-based fee, or ``carried
interest'' based on the gains and losses arising from a Partnership's
investments.\6\ Any such fee would not exceed those customarily charged
for such investment advisory services.
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\6\ A ``carried interest'' is an allocation to the General
Partner of net gains in addition to the amount allocable to the
General Partner that is in proportion to its capital contributions.
If a ``carried interest'' is payable to the General Partner, it will
be structured to comply with the requirements of rule 205-3 under
the Advisers Act.
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10. Applicants anticipate that a Partnership may own an investment
in an entity in which an FMR Affiliate is also invested and the
Partnership's investment may be in the same or different securities as
the entity's investment. A Partnership's investment may be acquired by
the Partnership as a capital contribution from an entity within the FMR
Group while the entity continues to hold an investment in the same or
different securities of the portfolio company. In the case of a
Partnership that makes investments with funds provided by the Limited
Partners, an investment in a portfolio company may be purchased by a
Partnership: (a) From an entity within the FMR Group while the entity
continues to hold an investment in the same or different securities of
the portfolio company; (b) concurrently with an investment made in the
same or different securities by an entity within the FMR Group; or (c)
at a different point in time from an investment held by an entity
within the FMR Group in the same or different securities of the
portfolio company. All such purchases will meet the requirements of
condition 1 below.
11. If a Partnership makes its investment concurrently with an
investment in the same securities by an entity within the FMR Group,
the economic terms applicable to the Partnership's investment generally
will be substantially the same as those applicable to the corresponding
investment by the FMR Group entity. It is possible, however, that the
FMR Group entity's investment may have more favorable non-economic
terms (e.g., the right to representation on the board of directors of
the portfolio company) in light of differences in legal structure or
regulatory, tax, or other considerations.
12. In addition, a Partnership may co-invest in a portfolio company
alongside an FMR Fund.\7\ Although the terms applicable to the
investment by the FMR Fund may differ from the terms of the relevant
investment held by the Partnership, and the limitations and conditions
contained in the application that are applicable to entities within the
FMR Group will not apply to the FMR Fund, the entities within the FMR
Group will continue to be subject to all of the limitations and
conditions contained in the application with respect to the making and
disposition of investments by the Partnership.
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\7\ With respect to any FMR Fund that is an investment company
registered under the Act, applicant acknowledges and agrees that,
for purposes of the application, no exemption from any provision of
the Act that may apply to any Partnership's dealings with such
investment company is being sought, and each Partnership will
continue to be subject to, and to comply with, all of the provisions
of the Act that may apply to any such dealings with any such
investment company.
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13. The Partnership will, except as permitted under condition 3
below, be required to be given the opportunity to sell or otherwise
dispose of its investments prior to or concurrently with, and on the
same terms as, sales or other dispositions of the side-by-side
investment of an entity within the FMR Group in the same investment
securities.\8\
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\8\ ``Non-lockstep'' dispositions generally would be confined to
instances where tax or other regulatory concerns made different
disposition strategies advisable. For example, FMR may donate
appreciated securities to charity to minimize capital gains
taxation. Holders of partnership interests, on the other hand, would
pay tax on dispositions by the Partnership. Thus, holders of
Partnership interests might prefer to sell the securities in a later
negotiated sale or that the securities be distributed in order to
choose the timing of recognition of capital gains.
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14. The General Partner and the Limited Partners (collectively, the
``Partners'') of the Initial Partnership will share in the profits and
losses arising from the Initial Partnership's investment activities in
proportion to the size of their respective interests in the Initial
Partnership. When distributing cash and securities to the Partners, the
General Partner will be required to distribute the cash and securities
to all Partners in the same proportion, however, the General Partner
will have the right to make non-ratable distributions.\9\
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\9\ The General Partner's right to make such non-ratable
distributions would be confined to the instances in which it is
desirable for an individual partner to receive certain types of
distributions due to regulatory, tax, or other legal considerations.
No non-ratable distribution will be made to any Partner to the
extent that such distribution, while beneficial to such Partner, is
substantially likely to have a material adverse effect on another
Partner.
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15. The Initial Partnership may, in the future, either through the
Initial Partnership or a subsidiary partnership established by the
Initial Partnership (a ``Subpartnership''), acquire additional FMR
Investments through: (a) The proceeds of a loan from an entity within
the FMR Group made to the Initial Partnership or such Subpartnership;
(b) cash generated by Partnership investments or; (c) capital
contributions provided by an entity within the FMR Group. A
Subpartnership might be utilized to allow an FMR Group entity and the
Initial Partnership to invest together. In the event that the Initial
Partnership incurs indebtedness from an entity within the FMR Group to
finance such investments, such indebtedness will bear interest on terms
no less favorable to the Partnership than would be obtained on an
arm's-length basis from an unaffiliated third party.
16. The Partnerships also may, in the future, make loans to FMR.
The loans will be on terms no more favorable than would be obtainable
by FMR from an unaffiliated third party on an arm's length basis. Such
unsecured loans will be fully disclosed to an Eligible Employee prior
to the acquisition of limited partnership interests.
17. In addition, the Initial Partnership or a Subpartnership may,
in the future, enter into a joint venture or other arrangement with an
FMR Group entity (a ``Joint Venture''). Such Joint Ventures will be
fully disclosed to an Eligible Employee prior to the acquisition of
limited partnership interests. Such Joint Ventures will acquire
additional FMR Investments or capital contributions provided by such
FMR entity and/or the Initial Partnership or Subpartnership. Any entity
with the FMR Group that participates with the Initial Partnership in a
Joint Venture will be subject to the requirements applicable to a ``Co-
Investor'' under condition 3.
18. During the existence of the Initial Partnership, full and
faithful books and accounts will be kept, in which the General Partner
will enter, or cause to be entered, all business transacted by the
Initial Partnership and all monies received, advanced, paid out, or
delivered on behalf of the Initial Partnership, the results of the
Initial Partnership's operations, and each Partner's capital. Such
books will at all times be accessible to all Partners. In addition, the
General Partner will supply to the Limited Partners all information it
deems necessary to enable the Limited Partners to prepare their Federal
income tax returns.
19. The General Partner will cause a firm of independent certified
public accountants to make a determination of the net asset value of
the Initial Partnership as of the end of each fiscal year of the
Initial Partnership and at any time such value will affect or determine
the price at which a specified percentage of interests in the Initial
Partnership will be redeemed, sold, or otherwise transferred by any
Partner,
[[Page 37100]]
unless such requirement is waived by the parties to the applicable
transaction.
20. Subsequent Partnerships may be structured in a manner
substantially identical to that of the Initial Partnership described
above. However, it is possible that a Subsequent Partnership may have
different terms for the purpose of enabling Eligible Participants to
invest their own funds through the Partnership in investments that come
to the attention of the FMR Group from time to time.
Applicants' Legal Analysis
1. Applicants request an exemption under sections 6(b) and 6(e) of
the Act from all provisions of the Act, except section 9, sections 17
and 30 (except as described below), sections 36 through 53, and the
rules and regulations thereunder that would permit the Partnerships to
engage in certain affiliated and joint transactions. Each Partnership
will be an employees' securities company within the meaning of section
2(a)(13) of the Act.
2. Section 2(a)(13) defines an employees' 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 by members of the immediate family
of such employees, persons on retainer, or former employees. Section
6(b) 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 6(e) provides that
in connection with any order exempting an investment company from
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.
3. Section 17(a) provides, in relevant part, that it is unlawful
for any affiliated person of a registered investment company, acting as
principal, to sell any security or other property to such registered
investment company or to purchase from such registered investment
company any security or other such property. Section 17(b) provides
that the SEC shall exempt a proposed transaction from section 17(a) if
evidence establishes that: (a) The terms of the proposed transaction
are reasonable and fair and do not involve overreaching; (b) the
proposed transaction is consistent with the policies of the registered
investment company involved; and (c) the proposed transaction is
consistent with the general provisions of the Act.
4. Applicants request an exemption from section 17(a) of the Act to
the extent necessary to: (a) Permit an entity within the FMR Group,
acting as principal, to engage in any transaction directly or
indirectly with any Partnership or any company controlled by such
Partnership; and (b) permit any Partnership to invest in or engage in
any transaction with any entity, acting as principal, (i) in which such
Partnership, any company controlled by such Partnership or any FMR
Affiliate has invested in or will invest, or (ii) with which such
partnership, any company controlled by such Partnership or any FMR
Affiliate is or will become otherwise affiliated. The transactions to
which any Partnership is a party will be effected only after a
determination by the Board that the requirements of condition 1 below
have been satisfied.
5. The principal reason for the requested exemption is to ensure
that each Partnership will be able to hold investments in companies:
(a) In which an FMR Affiliate or its individual employees, officers, or
directors may make or have already made an investment, or (b) with
which an FMR Affiliate or its individual employees, officers, or
directors may engage in transactions.
6. The Partners of each Partnership will have been fully informed
of the possible extent of such Partnership's dealings with an FMR
Affiliate and, as professionals employed in the securities business,
will be able to understand and evaluate the attendant risks. Applicants
believe that the community of interest among the Partners of each
Partnership, on the one hand, and the FMR Group, on the other hand, is
the best safeguard against any risk of abuse.
7. Section 17(d) makes it unlawful for any affiliated person of a
registered investment company, acting as principal, to effect any
transaction in which such company, or a company controlled by such
company, is a joint or joint and several participant in contravention
of SEC rules. Rule 17d-1 provides that the SEC may approve a
transaction subject to section 17(d) after considering whether the
participation of such registered company is consistent with the
provisions, policies, and purposes of the Act and the extent to which
such participation is on a basis different from or less advantageous
than that of other participants.
8. Applicants request an order in accordance with section 17(d) and
rule 17d-1 to the extent necessary to permit affiliated persons of each
Partnership (including without limitation on the General Partner and
the investment adviser of such Partnership and other FMR Affiliates),
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 such
Partnership or a company controlled by such Partnership is a
participant.
9. Applicants assert that the flexibility to structure co-
investments and joint investments will not involve abuses of the type
section 17(d) and rule 17d-1 were designed to prevent. The concern that
permitting co-investments or joint investments by an FMR Affiliate on
the one hand, and a Partnership on the other, might lead to less
advantageous treatment of such Partnership should be mitigated by the
fact that: (a) The FMR Group will be acutely concerned with its
relationship with the personnel who invest in such Partnership; and (b)
senior officers and directors of the FMR Group will be investing in
such Partnership.
10. Section 17(f) provides that the securities and similar
investments of a registered management investment company must be
placed in the custody of a bank, a member of a national securities
exchange, or the company itself in accordance with SEC rules.
Applicants request an exemption from section 17(f) and rule 17f-1 to
the extent necessary to permit an entity within the FMR Group to act as
custodian without a written contract. Applicants believe that because
there is such a close association between each Partnership and the FMR
Group, requiring a detailed written contract would expose such
Partnership to unnecessary burden and expense. An exemption also is
requested from the terms of rule 17f-1(b)(4), as applicants do not
believe 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.
11. Section 17(g) 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. Applicants request an
exemption from section 17(g) and rule 17g-1 to the extent necessary to
permit each Partnership to comply with rule 17g-1 without the necessity
of having a majority of the members of the related Board who are not
``interested persons'' take such actions and make such approvals as are
set forth in rule 17g-
[[Page 37101]]
1. Applicants state that since all the members of the related Board
will be affiliated persons, without the requested relief, a Partnership
could not comply with rule 17g-1.
12. Section 17(j) and rule 17j-1 make it unlawful for certain
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. Applicants request an
exemption from section 17(j) and rule 17j-1 (except rule 17j-1(a)).
Applicants believe that requiring such 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 of such Partnership by virtue
of their common association in the FMR Group, and the substantial and
largely overlapping protection afforded by the conditions with which
such Partnerships have agreed to comply.
13. Sections 30(a), 30(b), and 30(d), and the rules under those
sections, generally require that registered investment companies
prepare and file with the SEC and mail to their shareholders certain
periodic reports and financial statements. Applicants believe that the
forms prescribed by the SEC for periodic reports have little relevance
to a Partnership and would entail administrative and legal costs that
outweigh any benefit to the Limited Partners of such Partnership. An
exemption is requested to the extent necessary to permit a Partnership
to report annually to its Partners in the manner described above.
14. Section 30(f) requires that every officer, director, and member
of an advisory board of a closed-end investment company be subject to
the same duties and liabilities as those imposed upon similar classes
of persons under section 16(a) of the Exchange Act. An exemption also
is requested from section 30(f) to the extent necessary to exempt the
General Partner of each Partnership and any other persons who may be
deemed members of an advisory board of such Partnership, such as
members of the related Board, from filing Forms 3, 4, and 5 under
section 16 of the Exchange Act with respect to their ownership of
interests in such Partnership. Applicants argue that the purpose
intended to be served by section 30(f) is not apparent because there
would be no trading market and the transfers of interests are severely
restricted.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. Each proposed transaction otherwise prohibited by section 17(a)
or section 17(d) and rule 17d-1 to which a Partnership is a party (the
``Section 17 Transactions'') will be effected only if the Board,
through the General Partner of such Partnership, determines that: (a)
The terms of the transaction, including the consideration to be paid or
received, are fair and reasonable to the Partners of such Partnership
and do not involve overreaching of such Partnership or its Partners on
the part of any person concerned; and (b) the transaction is consistent
with the interests of the Partners of such Partnership, such
Partnership's organizational documents and such Partnership's reports
to its Partners. In addition, the General Partners of each Partnership
will record and preserve a description of such affiliated transactions,
the Board's findings, the information or materials upon which the
Board's findings are based. All such records will be maintained for the
life of such Partnership and at least two years thereafter and will be
subject to examination by the SEC and its staff.\10\
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\10\ Each Partnership will preserve the accounts, books and
other documents required to be maintained in an easily accessible
place for the first two years.
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2. In connection with Section 17 Transactions, the Board, through
the General Partner of each Partnership, will adopt, and periodically
review and update, procedures designed to ensure that reasonable
inquiry is made, prior to the consummation of any such 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 of each Partnership will not invest funds 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 such
Partnership and the Co-Investor are participants, unless any such Co-
Investor, prior to disposing of all or part of its investment, (a)
gives such General Partner sufficient, but not less than one day's
notice of its intent to dispose of its investment; and (b) refrains
from disposing of its investment unless such Partnership has the
opportunity to dispose of such Partnership's investment prior to or
concurrently with, and on the same terms as, and pro rata with the Co-
Investor. The term ``Co-Investor,'' with respect to any Partnership, is
defined as any person who is: (a) An ``affiliated person'' (as such
term is defined in the Act) of such Partnership (other than an FMR
Fund); (b) an entity within the FMR Group; (c) an officer or director
of an entity within the FMR Group; or (d) a company in which the
General Partner of such Partnership acts as a 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, shall not be deemed to limit or prevent the disposition of an
investment by a Co-Investor: (a) To its direct or indirect wholly-owned
subsidiary, to any company (a ``Parent'') of which such Co-Investor is
a direct or indirect wholly-owned subsidiary of its Parent; (b) to
immediate family members of the Co-Investor or a trust or other
investment vehicle established for any such family member; (c) when the
investment is comprised of securities that are listed on any exchange
registered as a national securities exchange under section 6 of the
Exchange Act; (d) when the investment is comprised of securities that
are national market system securities pursuant to section 11A(a)(2) of
the Exchange Act and rule 11Aa2-1 thereunder; or (e) when the
investment is comprised of securities that are listed on or traded on
any foreign securities exchange or board of trade that satisfies
regulatory requirements under the law of the jurisdiction in which such
foreign securities exchange or board of trade is organized similar to
those that apply to a United States national securities exchange or a
United States national market system for securities.
4. Each Partnership and the General Partner of such Partnership
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 Partners of such Partnership,
and each annual report of such Partnership required to be sent to such
Partners, and agree that all such
[[Page 37102]]
records will be subject to examination by the SEC and its staff.\11\
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\11\ 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
Partner of such Partnership who had an interest in any capital account
of such Partnership, at any time during the fiscal year then ended,
Partnership financial statements audited by such partnership's
independent accountants. At the end of each fiscal year, the General
Partner of such Partnership will make a valuation or have a valuation
made of all of the assets of such 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,
within 90 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 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 or its federal and state income tax returns and a report of the
investment activities of such Partnership during such 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 an FMR 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 SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-18050 Filed 7-15-96; 8:45 am]
BILLING CODE 8010-01-M
