[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