[Federal Register Volume 63, Number 145 (Wednesday, July 29, 1998)]
[Notices]
[Pages 40568-40573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20246]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23329; 813-168]
The Goldman Sachs Group, L.P.; Notice of Application
July 22, 1998.
AGENCY: Securities and Exchange Commission (``Commission'' or ``SEC'').
ACTION: Notice of application for an order under sections 6(b) and 6(e)
of the Investment Company Act of 1940 (the ``Act'') exempting certain
employees' securities companies from all provisions of the Act, except
sections 9 and 36 through 53 and applicable rules and regulations; and
certain other employees' securities companies from all provisions of
the Act, except section 9, sections 17 and 30, sections 36 through 53,
and applicable rules and regulations.
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APPLICANT: The Goldman Sachs Group, L.P. (``GS Group'').
FILING DATES: The application was filed on July 21, 1997. Applicant has
agreed to file an amendment, the substance of which is incorporated in
this notice, during the notice period.
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 13, 1998,
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.
Applicant, 85 Broad Street, New York, New York 1004.
FOR FURTHER INFORMATION CONTACT:
Brian T. Hourihan, Senior Counsel, at (202) 942-0526, or Mary Kay
Frech, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC
20549 (tel. (202) 942-8090).
Applicant's Representations
1. GS Group, a Delaware limited partnership, together with its
corporate and partnership subsidiaries, is a leading international
investment banking organization. The GS Group, and entities that are
controlling, controlled by, or under common control with, the GS Group
(collectively, ``Goldman Sachs'' and individually a ``Goldman Sachs
Entity'') propose to establish certain investment vehicles (``Funds'')
as a means of rewarding and retaining Goldman Sachs' limited partners,
officers, employees, and consultants. The principal purposes of the
Funds are to enhance the investment opportunities available to these
persons, strengthen the relationship between employment and wealth
creation, attract talented professionals to Goldman Sachs, and provide
additional investment opportunities to retired partners.
2. The Funds will be organized as partnerships, limited liability
companies or other entities. Each Fund will enable its investors (i) to
co-invest with Goldman Sachs in investment opportunities and (ii) to
invest in opportunities identified by Goldman Sachs or in collective
investment programs with investment strategies developed, monitored or
overseen by Goldman Sachs. Interests in the Funds (``Interests'') will
be sold without a sales load. The Funds will be divided into three
categories--Bridge Street Funds, Battery Place Funds, and Stone Street
Funds.
3. The Bridge Street Funds include the Bridge Street Diversified
Funds, Bridge Street Real Estate Funds and Bridge Street Separate
Investment Funds. These Funds will be offered and sold to (i)
individual limited partners \1\ who are active in Goldman Sachs
business and share in the profits and losses of the business
(``Participating Limited Partners''), (ii) individual limited partners
who are no longer active in Goldman Sachs' business and who earn a
fixed return on their capital invested in the GS Group, members of
their families, trusts, and family investment vehicles (``Other
Individual Limited Partners'' and, together with Participating Limited
Partners, ``GS Limited Partners''), and (iii) Qualified Participants
(as defined below) of the GS Limited Partners (collectively, the
``Bridge Street Investors'').
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\1\ Interests also could be sold to entities resident outside
the U.S. that are wholly-owned and controlled by the individual
limited partners and formed for tax purposes.
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4. The Battery Place Funds include the Battery Place Diversified
Funds,
[[Page 40569]]
Battery Place Real Estate Funds, and Battery Place Separate Investment
Funds. These Funds will be offered and sold to managing directors of
Goldman Sachs (``Managing Directors'') who are not GS Limited Partners
and their Qualified Participants as defined below (collectively, the
``Battery Place Investors''). Battery Place Funds also may be offered
and sold to Bridge Street Investors and Stone Street Investors
described below.
5. The Stone Street Funds include Stone Street Diversified Funds,
Stone Street Real Estate Funds, and Stone Street Separate Investment
Funds. These Funds will be offered and sold to certain officers and
employees of Goldman Sachs (``Eligible Employees'') \2\ and certain
consultants of Goldman Sachs (``Consultants''),\3\ and Qualified
Participants, defined below, of Eligible Employees and Consultants
(collectively, the ``Stone Street Investors''). Stone Street Funds also
may be offered and sold to Bridge Street Investors and Battery Place
Investors. No Battery Place or Stone Street Fund will invest in a
Bridge Street Fund.
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\2\ Eligible Employees will be experienced professionals in the
investment banking, asset management, securities or commodities
businesses, or in administrative, financial, accounting, legal or
related operational fields.
\3\ Consultants will have levels of expertise and sophistication
at least comparable to, and in most cases exceeding, those of
Eligible Employees.
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6. All GS Limited Partners, Managing Directors, Eligible Employees,
and Consultants will be accredited investors under Rule 501(a)(6) of
Regulation D (``Regulation D'') under the Securities Act of 1933. GS
Limited Partners that invest in the Bridge Street Funds may also be
accredited investors under Rule 501(a)(5) of Regulation D.
7. Goldman Sachs has a number of officers and employees located
outside the United States. Approximately 70 of these persons would
qualify as Bridge Street Investors, 50 would qualify as Battery Place
Investors, and 850 would qualify as Stone Street Investors. These
persons are not citizens of the United States and are not subject to
U.S. federal income taxes. To maintain their tax status, these persons
desire to make investments in the Funds through a separate investment
vehicle organized in a non-U.S. jurisdiction (``Nonresident Investment
Vehicle''). Applicants expect that the Nonresident Investment Vehicles
will be owned by the relevant Eligible Investors in proportion to the
ownership interests that each investor would have had in the relevant
Fund itself, and that the indirect ownership interest of each Eligible
Investor in the relevant Fund will therefore be the same as if all such
Eligible Investors had invested directly in the Fund.
8. Bridge Street Investors, Battery Place Investors, Stone Street
Investors, Goldman Sachs, and investors in the Nonresident Investment
Vehicles are collectively referred to as ``Eligible Investors.'' A
``Qualified Participant'' eligible to invest in the Funds is a spouse,
parent, child, spouse of child, brother, sister or grandchild of a GS
Limited Partner, a Managing Director who is not a GS Limited Partner,
an Eligible Employee or Consultant (each an ``Eligible Family
Member''), or a family investment vehicle, foundation, charitable
organization or trust established by, or for the benefit of, a GS
Limited Partner, a Managing Director, an Eligible Employee or
Consultant, or their Eligible Family Members. A Qualified Participant
must qualify as an accredited investor under Rule 501(a) of Regulation
D.
9. The manager of each Fund (``Manager'') will be an entity that is
directly or indirectly wholly-owned by a Goldman Sachs Entity or the
Participating Limited Partners. The Manager will register as an
investment adviser under the Investment Advisers Act of 1940 if
required under applicable law. The Manager will be responsible for
administering the Fund's investment program and business affairs except
for certain administrative responsibilities that may be delegated to
other Goldman Sachs Entities or third parties.
10. Interests in a Fund will not be transferable, except with the
express consent of the Manager and then only to another Eligible
Investor, the Manager, or Goldman Sachs. Interests will not be
redeemable at the option of the investor, except upon the death of the
investor. Goldman Sachs will have the option to purchase an investor's
Interest at a price determined by a formula described in the offering
documents for the Fund if an Other Individual Limited Partner retires
as a limited partner or a Participating Limited Partner retires and
does not become an Other Individual Limited Partner, or, if for any
reason, the employment of a Battery Place or Stone Street Investor
terminates. The terms of any repurchase option will be disclosed to
Eligible Investors in the offering documents for each Fund. The failure
of an investor in a Fund to make a required capital contribution to the
Fund may result in the forfeiture of the portion of the investor's
Interest attributable to the defaulted amount and to any remaining
capital commitment. The terms of any forfeiture provision will be
disclosed in the offering documents for each Fund. Upon repurchase, a
Battery Place or a Stone Street Investor will receive at least the
lower of (i) the amount invested by the investor, plus interest (at an
interest rate disclosed in the offering document for the applicable
Battery Place or the Stone Street Fund), and with appropriate deduction
for any distributions made by the Fund to the investor, and (ii) the
fair market value of the investor's Interest in the Battery Place or
Stone Street Fund as determined at the time of repurchase, less the
portion, if any, of the fair market value attributable to the Fund's
use of leverage, if any.
11. The Manager of a Fund may be paid an annual management fee by
the Fund, and in the case of a Bridge Street Fund may also be paid a
special allocation.\4\ The Manager also may receive a performance-based
fee (a ``carried interest'') based on the net gains of the Fund's
investments in addition to any amount allocable to the Manager's
capital contribution. Any Goldman Sachs Entity or a Manager may be
compensated for providing services to entities in which a Fund makes an
investment, and may engage in market-making activities in the
securities of entities in which a Fund makes an investment. Employees
of Goldman Sachs may be compensated for serving as officers or
directors of entities in which the Funds make an investment.
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\4\ In order to ensure that GS Limited Partners who do not
participate in a Bridge Street Fund do not, in effect, bear the
direct and indirect costs of establishing and administering that
Fund, GS Group or an affiliated person of GS Group within the
meaning of section 2(a)(3)(C) of the Act may become an interest
holder of each Bridge Street Fund and receive a special allocation.
Special allocations will have priority over all other Fund
allocations.
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12. Goldman Sachs or a third party may lend to the Funds or become
a senior or preferred limited partner or other senior equity holder of
a Fund. Any such loans made by Goldman Sachs or a third party will be
on commercially reasonable arm's length terms. To the extent that a
senior interest may be a security within the meaning of the Act, the
senior interest holder will be required to be an Eligible Investor.
13. The Funds may co-invest with a Goldman Sachs Entity. The Funds
also may co-invest with an investment vehicle for investors
unaffiliated with Goldman Sachs and over which a Goldman Sachs Entity
exercises investment discretion (``Third Party Funds''). Co-investments
with a Third Party Fund will not be subject to condition 3 below. No
Fund will purchase or otherwise acquire any security issued by a
registered investment company if the Fund immediately after the
purchase or
[[Page 40570]]
acquisition will own in the aggregate more than 3% of the total
outstanding voting stock of the registered investment company.
14. The Manager will have discretion as to the distribution of any
cash flow or any proceeds derived from a Fund's investments, which will
depend on the investment objective of the Fund and will be described in
the Fund's offering documents. The offering documents for each Fund
also will describe the following types of information to the extent
material to an Eligible Investor's investment decision: investment
objectives and policies (including a discussion of leveraging
strategies, if any, that will be utilized by the Fund); the
organizational structure of the Manager and the Fund; risk factors; any
conflicts of interest; procedures relevant to the offering of Interests
in the Fund; use of proceeds from the offering; relationship between
the Fund and any other Fund; the management of the Fund, including any
fees to be paid to the manager; taxation of Interests; procedures of
allocations and distributions; limits on the transferability of
Interests in the Funds; special provisions applicable to the Funds,
including any relating to disposition of an Interest in the Fund in the
event of termination of the investor's relationship with Goldman Sachs;
and such other matters as Goldman Sachs considers material to the
investment decision of Eligible Investors. The offering documents will
be made available to all Eligible Investors.
15. The Manager will send investors in each Fund annual reports
regarding the operations and assets of the Fund. Each Fund's annual
report will contain audited financial statements with disclosure of
outstanding borrowings of the Fund. Each investor in a Fund also will
receive a report of his or her distributive share of income, gains,
losses, credits and other items for U.S. federal income tax purposes
resulting from the operation of the Fund during the tax year.
Applicant's Legal Analysis
1. Section 6(b) of the Act provides that the Commission shall
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 Commission shall consider, in
determining from which provisions of the Act 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 ``employees' securities company'' to include any investment
company all of whose outstanding securities are beneficially owned by
(a) current or former employees, or persons on retainer, of one or more
affiliated employers, (b) immediate family members of such persons, or
(c) 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 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 provisions of
section 7, certain specified provisions of the Act will be applicable
to the company, and to other persons in their transactions and
relations with the company, as though the company were registered under
the Act, if the Commission deems it necessary or appropriate in the
public interest or for the protection of investors.
3. Applicant requests an order under sections 6(b) and 6(e) of Act
exempting the Bridge Street Funds from all provisions of the Act,
except sections 9 and 36 through 53 and applicable rules and
regulations. Applicant also requests an order under sections 6(b) and
6(e) of the Act exempting the Battery Place and the Stone Street Funds
from all provisions of the Act, except section 9, certain provisions of
sections 17 and 30, and sections 36 through 53, and applicable rules
and regulations.\5\
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\5\ The requested order would supersede an existing order. Stone
Street Fund 1984, Investment Company Act Release Nos. 19905 (Nov.
24, 1993) (notice) and 19978 (Dec. 21, 1993) (order).
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A. Bridge Street Funds
4. Applicant asserts that the requested exemption for the Bridge
Street Funds is consistent with the protection of investors because the
Bridge Street Investors who are Participating Limited Partners
participate in the profits and losses of Goldman Sachs directly and
those who are Other Individual Limited partners hold substantial
partnership capital of GS Group. Applicant states that the capital of
Goldman Sachs is held by over 300 Participating and Other Individual
Limited Partners, their family members or trusts, and institutional
limited partners. These same persons (or their Qualified Participants),
other than institutional limited partners, comprise the class of Bridge
Street Investors. Accordingly, given the unique community of interests
among the Bridge Street Investors and Goldman Sachs, applicant asserts
that the expectation that Goldman Sachs will act in the ordinary course
of its business to maximize the profits of GS Limited Partners provides
ample protection to the Bridge Street Investors. Applicant states that,
given the relationship of trust and confidence between the Bridge
Street Investors and Goldman Sachs, and their knowledge of the
operations of Goldman Sachs, the proposed exemption would be
appropriate. Applicant acknowledges that new Bridge Street Funds may be
created and existing Bridge Street Funds may raise capital from new
investors in reliance upon the requested order only so long as Goldman
Sachs continues its current form of organization as a limited
partnership.
B. Battery Place and Stone Street Funds
5. Section 17(a) of the Act makes it unlawful for any affiliated
person of a registered investment company, or an affiliated person of
such a person, acting as principal, to sell any security or other
property to the company or to purchase any security or other property
from the company. Applicant requests an exemption to the extent
necessary to (i) permit any Goldman Sachs Entity, acting as principal,
to engage in any transaction directly or indirectly with any Battery
Place or Stone Street Fund or any entity controlled by a Battery Place
or Stone Street Fund: (ii) permit any Battery Place or Stone Street
Fund to invest in or engage in any transaction with any entity, acting
as principal, (a) in which the Battery Place or Stone Street Fund, any
entity controlled by the Fund or any Goldman Sachs Entity has invested
or will invest, or (b) with which the Battery Place or Stone Street
Fund, any entity controlled by either a Battery Place or Stone Street
Fund or any Goldman Sachs Entity is or will become otherwise
affiliated; and (iii) permit any partner or other investor in a Third
Party Fund (a ``Third Party Investor''), acting as principal, to engage
in any transaction directly or indirectly with a Battery Place or Stone
Street Fund or any entity controlled by a Battery Place or Stone Street
Fund.
6. Applicant asserts that the requested exemption is necessary,
among other purposes, to enable the Funds to make investments in
companies, properties, or securities which are offered by a Goldman
Sachs Entity (or any GS Partners' Investment Vehicle or Third party
Fund) to investors, or in which a Goldman Sachs Entity (any GS
Partners' Investment Vehicle or Third Party Fund) is investing or may
have made an
[[Page 40571]]
investment. Applicant states that the Battery Place or Stone Street
Investors will be fully informed of the possible extent of each Fund's
dealings with Goldman Sachs, GS Partners' Investment Vehicles, and
Third party Funds, and as professionals employed in the securities, or
a related, industry will be able to evaluate the attendant risks.
Moreover, applicant asserts that the community of interest among the
Battery Place or Stone Street Investors and the GS Limited Partners
will reduce the risk of abuse in these transactions.
7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons, and affiliated persons of such persons, from
participating in joint transactions with a registered investment
company unless authorized by the Commission. In passing on applications
for such orders under rule 17d-1, the Commission will consider whether
the participation of the investment company is consistent with the
provisions, policies, and purposes of the Act and the extent to which
the participation is on a basis different from or less advantageous
than that of other participants. Applicant requests an exemption from
section 17(d) and rule d-1 to permit the Battery Place or Stone Street
Funds to engage in transactions in which affiliated persons of the
Funds or affiliated persons of those persons (including Third Party
Investors) may be participants.
8. Applicant asserts that section 17(d) and rule 17d-1 might
prevent the Battery Place and the Stone Street Funds from engaging in
transactions in which a Battery Place or a Stone Street Investor, a
Goldman Sachs Entity, or a Third Party Fund, are participants.
Applicant submits that restricting these types of investments by a Fund
would undermine a principal rationale of the Battery Place and the
Stone Street Funds, i.e., to provide a vehicle for the Battery Place
and the Stone Street Investors to invest alongside Goldman Sachs
(acting through a Goldman Sachs Entity, GS Partners' Investment
Vehicles or Third Party Funds). Applicant further asserts that
attractive investment opportunities of the types considered by the
Battery Place and the Stone Street Funds often require each participant
to make available funds in amounts greater than those available to a
Fund alone and, in certain instances, a Fund may only invest in these
opportunities as a participant with a Goldman Sachs Entity, a GS
Partners' Investment Vehicle or a Third Party Fund. Applicant submits
that permitting joint investments by a Goldman Sachs Entity, a GS
Partners' Investment Vehicle, a Third Party Fund and a Battery Place
and/or Stone Street Fund will not lead to the disadvantageous treatment
of either Fund because Goldman Sachs will be acutely concerned with its
relationship with the Battery Place and the Stone Street Investors.
9. Section 17(e) of the Act and rule 17e-1 under the Act limit the
compensation an affiliated person of a registered investment company,
or an affiliated person of such a person, may receive when acting as
agent or broker for the company. Applicant requests an exemption from
section 17(e) to permit a Goldman Sachs Entity (including the Manager),
acting as an agent or broker, to receive compensation from a Battery
Place or Stone Street Fund in connection with the purchase or sale by
either Fund of securities, provided the fees or other compensation are
``usual and customary.'' Applicant states that fees or other
compensation will be deemed ``usual and customary'' only if (i) the
Battery Place or Stone Street Fund is purchasing or selling securities
alongside other unaffiliated third parties or Third Party Funds who are
also similarly purchasing or selling securities, (ii) the fees or other
compensation that are charged to the Battery Place or Stone Street Fund
are also charged to the unaffiliated third parties and Third Party
Funds, and (iii) the amount of securities being purchased or sold by
the Battery Place or Stone Street Fund does not exceed 50% of the total
amount of securities being purchased or sold by the Battery Place or
Stone Street Fund and the unaffiliated third parties or Third Party
Funds. Applicant also requests an exemption from paragraph (b) of rule
17e-1 to permit each Battery Place and Stone Street Fund to comply with
rule 17e-1 without having a majority of the board of directors (or
comparable body) of the Manager who are not ``interested persons,'' as
defined in section 2(a)(19) of the Act, take the actions and give the
approvals that are required under the rule. Applicant states that
because the officers and directors of the Manager will be affiliated
persons, without the relief requested, a Battery Place or a Stone
Street Fund could not comply with rule 17e-1(b).
10. 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 Commission rules.
Section 17(f) also prohibits a company which is a member of a national
securities exchange and which trades in securities for its own account
from acting as a custodian except in accordance with rules prescribed
by the Commission. Rule 17f-1 under the Act specifies the requirements
that must be satisfied for a registered management investment company
to use a broker-dealer as a custodian.
11. One of Goldman Sachs' principal operating businesses in the
United States is Goldman, Sachs & Co. (``GS&Co.''), a New York limited
partnership that is a broker-dealer registered under the Securities
Exchange Act of 1934 (the ``Exchange Act''), and a member of the
National Association of Securities Dealers and the New York Stock
Exchange. Applicant requests an exemption from section 17(f) of the Act
and rule 17f-1 under the Act to the extent necessary to permit GS&Co.
or another Goldman Sachs Entity to act as custodian of Fund assets
without a written contract. Applicant states that any securities of the
Battery Place and the Stone Street Funds held by GS&Co. will have the
protection of a fidelity bond. Applicant also requests an exemption to
the extent necessary to establish one or more brokerage accounts at
GS&Co. in which the Battery Place and the Stone Street Funds will
participate without the necessity of separately segregating the
securities and investments of each Fund. Applicant states that this
relief is needed to facilitate the investment by the Battery Place and
the Stone Street Funds in a joint account established by GS&Co. for
investment by Goldman Sachs Entities in certain types of investments.
Applicant believes that the financial position of GS&Co., the
regulation to which it is subject under the Exchange Act and the
relationship of the Battery Place and Stone Street Investors, as
Eligible Employees of and Consultants to GS&Co., should adequately
protect the Funds' assets.
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 the securities or funds of the
company. Rule 17g-1 requires that a majority of the investment
company's directors who are not ``interested persons,'' as defined in
section 2(a)(19) of the Act, take certain actions and give certain
approvals. Applicant requests relief from the disinterested director
approval requirement because all directors of the Manager will be
affiliated persons of the Funds, and the Battery Place and the Stone
Street Funds therefore could not comply with the requirement.
13. Section 17(j) of the Act and rule 17j-1 under the Act require a
registered investment company to adopt a written
[[Page 40572]]
code of ethics that requires every access person of the company to
report to the company concerning transactions in any security in which
the access person has, or by reason of the transactions acquires, any
direct or indirect beneficial ownership in the security. Applicant
requests an exemption from section 17(j) and rule 17j-1 (except for the
antifraud provisions of paragraph (a)) because the requirements are
burdensome and unnecessary as applied to the Funds. Applicant asserts
that compliance with these requirements would be unnecessary in light
of the community of interest between investors in the Funds and Goldman
Sachs and the proposed conditions to the requested order.
14. Applicant also requests an exemption from paragraphs (a), (b),
(c), (d), and (h) of section 30 of the Act to exempt the Battery Place
and the Stone Street Funds from filing annual and quarterly reports
with the Commission. Applicant states that the pertinent information in
the filings must, under the terms of the organizational documents of
the Funds, be sent to their investors. Exemptive relief is also
requested under section 30(e) of the Act to permit the Battery Place
and the Stone Street Funds to report annually to their investors in the
manner prescribed by the organizational documents of the Funds. Lastly,
applicant requests an exemption from the requirements of section 30(h)
of the Act so that the Manager of each Battery Place and each Stone
Street Fund and all persons who are directors or officers of a Manager
and each member of the board of directors, if any, of a Battery Place
or a Stone Street Fund and any other persons who may be deemed members
of an advisory board of a Battery Place or a Stone Street Fund will not
be required to file Forms 3, 4, or 5 under section 16 of the Exchange
Act with respect to their ownership of Interests in a Battery Place or
a Stone Street Fund.
Applicant's Conditions
The Battery Place and the Stone Street Funds agree that any order
granting the requested relief will be subject to the following
conditions:
1. Each proposed transaction otherwise prohibited by Section 17(a)
or section 17(d) and rule 17d-1 (the ``Section 17 Transactions'') will
be effected only if the Manager determines that: (i) the terms of the
transaction, including the consideration to be paid or received, are
fair and reasonable to the investors in the Fund and do not involve
overreaching of the Fund or its investors on the part of any person
concerned; and (ii) the transaction is consistent with the interests of
the investors in the Fund, the organizational documents of the Fund and
the Fund's report to its investors. In addition, each Manager will
record and preserve a description of each Section 17 Transaction, its
findings, the information or materials upon which its findings are
based and the basis for the findings. All required records will be
maintained for the life of each Fund and at least two years thereafter,
and will be subject to examination by the Commission and its staff. All
required records will be maintained in an easily accessible place for
at least the first two years.
2. Each Manager will adopt, and periodically review and update,
procedures designed to ensure that reasonable inquiry is made, prior to
the consummation of any Section 17 Transaction, with respect to the
possible involvement in the transaction of any affiliated person or
promoter of or principal underwriter for the Funds, or any affiliated
person of an affiliated person, promoter, or principal underwriter.
3. Each Manager will not invest the funds of any 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, if the investment involves a joint enterprise or other joint
arrangement within the meaning of rule 17d-1 in which the Fund and the
Co-Investor are participants, unless any such Co-Investor, prior to
disposing of all or part of its investment, (i) gives the Manager
sufficient, but not less than one day's, notice of its intent to
dispose of its investment, and (ii) refrains from disposing of its
investment unless the Fund has the opportunity to dispose of the Fund's
investment prior to or concurrently with, on the same terms as, and pro
rata with the Co-Investor. The term ``Co-Investor'' means any person
who is: (i) an ``affiliated person'' (as defined in section 2(a)(3) of
the Act) of the Fund (other than a Third Party Fund); (ii) Goldman
Sachs; (iii) an employee, officer, or director of Goldman Sachs; (iv) a
GS Partners' Investment Vehicle; (v) any entity (other than a Third
Party Fund) with respect to which Goldman Sachs provides management,
investment management or similar services as manager, investment
manager, or Manager or in a similar capacity, and for which it may
receive compensation, including without limitation, management or
performance fees, carried interests entitling it to share
disproportionately in income and capital gains, or similar
compensation; or (vi) a company (other than a Third Party Fund) in
which an officer or director of the Manager acts as an officer,
director, or Manager, 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: (i) to its
direct or indirect wholly-owned subsidiary, to any company (``Parent'')
of which the Co-Investment is a direct or indirect wholly-owned
subsidiary, or to a direct or indirect wholly-owned subsidiary of its
Parent; (ii) to immediate family members of the Co-Investor or a trust
or other investment vehicle established for any such family member;
(iii) when the investment is comprised of securities that are (a)
listed on a national securities exchange registered under section 6 of
the Exchange Act; (b) national market system securities pursuant to
section 11A(a)(2) of the Exchange Act and rule 11Aa2-1 under the
Exchange Act; or (c) listed on or traded on any foreign securities
exchange or board of trade that satisfies regulatory requirements under
the law of the jurisdiction in which such foreign securities exchange
or board of trade is organized similar to those that apply to a
national securities exchange or a national market system for
securities.
4. In any case where purchases or sales are made by a Fund from or
to an entity affiliated with the Fund by reason of a 5% or more
investment in such entity by a director, officer, or employee of the
Manager, such individual will not participate in the Manager's
determination of whether or not to effect the purchase or sale.
The Bridge Street, Battery Place, and Stone Street Funds agree that
any order granting the requested relief will be subject to the
following conditions:
5. Each Manager will send to each investor who had an Interest in
its Fund, at any time during the fiscal year then ended, financial
statements of the Fund audited by the Fund's independent accountants.
At the end of each fiscal year, each Manager will make a valuation or
have a valuation made of all of the assets of the Fund as of such
fiscal year end. The valuation of the Fund assets may be by independent
third parties appointed by the applicable Manager and deemed qualified
by such Manager to render an opinion as to the value of Fund assets,
using such methods and considering such information relating to the
investments, assets and liabilities of the Fund as such persons may
deem appropriate, but in the case of an event subsequent to the end of
the fiscal year
[[Page 40573]]
materially affecting the value of any Fund asset or investment, the
Manager may revise the valuation as it, in its sole discretion, deems
appropriate. In addition, each Manager shall send a report to each
person who was an investor in its Fund at any time during the fiscal
year then ended, setting forth such tax information as shall be
necessary for the preparation by the investor of his or its federal and
state income tax returns and a report of the investment activities of
the Fund during such year by such date as may be required to permit
investors to comply with income tax filing requirements (including
extensions).
6. Each Fund and its Manager will maintain and preserve, for the
life of the Fund and at least two years thereafter, all accounts,
books, and other documents as constitute the record forming the basis
for the audited financial statements and annual reports of such Fund to
be provided to the investors, and agree that all such records will be
subject to examination by the Commission and its staff. All required
records will be maintained in an easily accessible place for at least
the first two years.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20246 Filed 7-28-98; 8:45 am]
BILLING CODE 8010-01-M
