As filed with the U.S. Securities and Exchange Commission on
February 17, 1999
Investment Company Act File No. 811-09181
-----------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
|X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|X| Amendment No. 1
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PW TECHNOLOGY PARTNERS, L.P.
(Exact name of Registrant as specified in Charter)
1285 Avenue of the Americas
New York, New York 10019-6028
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code:
(212) 713-2000
-------------------------
MARK D. GOLDSTEIN, ESQ.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019-6028
(Name and address of agent for service)
Copy to:
STUART H. COLEMAN, ESQ.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
-------------------------
<PAGE>
This Registration Statement has been filed by Registrant pursuant to Section
8(b) of the Investment Company Act of 1940, as amended. However, partnership
interests in the Registrant are not being registered under the Securities Act of
1933, as amended (the "1933 Act"), since such interests will be issued solely in
private placement transactions which do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may
be made only by individuals or entities which are "accredited investors" within
the meaning of Regulation D under the 1933 Act. This Registration Statement does
not constitute an offer to sell, or the solicitation of an offer to buy, any
partnership interests in the Registrant.
<PAGE>
MEMORANDUM NO:
PW TECHNOLOGY PARTNERS, L.P.
PAINEWEBBER
FEBRUARY 1999
<PAGE>
The interests in PW Technology Partners, L.P. (The "Fund") which are described
in this Confidential Memorandum ("Memorandum") have not been and will not be
registered under the Securities Act of 1933, as amended ("1933 Act"), or the
Securities Laws of any of the States of the United States. The offering
contemplated by this Memorandum will be made in reliance upon an exemption from
the registration requirements of the 1933 act for offers and sales of securities
which do not involve any public offering, and analogous exemptions under state
securities laws.
This Memorandum shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of interests in the Fund in any
jurisdiction in which such offer, solicitation or sale is not authorized or to
any person to whom it is unlawful to make such offer, solicitation or sale. No
person has been authorized to make any representations concerning the Fund that
are inconsistent with those contained in this Memorandum. Prospective investors
should not rely on any information not contained in this Memorandum or the
exhibits hereto.
This Memorandum is intended solely for the use of the person to whom it has been
delivered for the purpose of evaluating a possible investment by the recipient
in the interests in the Fund described herein, and is not to be reproduced or
distributed to any other persons (other than professional advisers of the
prospective investor receiving this document).
Prospective investors should not construe the contents of this Memorandum as
legal, tax or financial advice. Each prospective investor should consult his or
her own professional advisers as to the legal, tax, financial or other matters
relevant to the suitability of an investment in the Fund for such investor.
These securities are subject to substantial restrictions on transferability and
resale and may not be transferred or resold except as permitted under the
Limited Partnership Agreement of the Fund, the 1933 Act and applicable state
securities laws, pursuant to registration or exemption therefrom. Investors
should be aware that they may be required to bear the financial risks of this
investment for up to two years from the date that a repurchase request has been
made by an investor.
In making an investment decision, investors must rely upon their own examination
of the fund and the terms of the offering, including the merits and risks
involved. Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the Fund's interests or
passed upon the accuracy or adequacy of the disclosure in this Memorandum. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY OF TERMS...............................................1
THE FUND......................................................12
STRUCTURE.....................................................12
INVESTMENT PROGRAM............................................12
TYPES OF INVESTMENTS AND RELATED RISK FACTORS.................15
ADDITIONAL RISK FACTORS.......................................27
PERFORMANCE INFORMATION.......................................29
THE DIRECTORS.................................................29
THE MANAGER...................................................32
VOTING........................................................33
CONFLICTS OF INTEREST.........................................33
BROKERAGE.....................................................36
FEES AND EXPENSES.............................................37
CAPITAL ACCOUNTS AND ALLOCATIONS..............................39
ALLOCATION OF SPECIAL ITEMS--CERTAIN WITHHOLDING TAXES AND
OTHER EXPENDITURES..........................................41
SUBSCRIPTION FOR INTERESTS....................................43
REDEMPTIONS, REPURCHASES OF INTERESTS AND TRANSFERS...........44
TAX ASPECTS...................................................48
ERISA CONSIDERATIONS..........................................62
ADDITIONAL INFORMATION AND SUMMARY OF LIMITED PARTNERSHIP
AGREEMENT...................................................64
APPENDIX A--AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT..................................................A-1
APPENDIX B--DESCRIPTION OF THE INVESTMENT FUNDS AND
CERTAIN PERFORMANCE INFORMATION............................B-1
<PAGE>
SUMMARY OF TERMS
The following summary is qualified entirely by the detailed information
appearing elsewhere in this Memorandum and by the terms and conditions of the
Fund's Amended and Restated Limited Partnership Agreement (the "Partnership
Agreement"), each of which should be read carefully and retained for future
reference.
THE FUND: PW Technology Partners, L.P. (the "Fund") is
a newly formed Delaware limited partnership,
registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a
closed-end, non-diversified, management
investment company.
The Fund is a specialized investment vehicle
that may be referred to as a registered
private investment partnership. The Fund is
similar to an unregistered private investment
partnership in that (i) the Fund's portfolio
may be more aggressively managed than other
investment companies, (ii) interests in the
Fund will be sold in large minimum
denominations in private placements solely to
high net worth individual and institutional
investors, and will be restricted as to
transfer, and (iii) the capital accounts in
the Fund of persons who purchase the
partnership interests offered hereby (the
"Limited Partners") will be subject to both
asset-based fees and performance bonuses or
allocations.
INVESTMENT The Fund's investment objective is to
PROGRAM: maximize capital appreciation over the
long-term.
The Fund is a multi-manager fund that seeks
to achieve its objective by deploying its
assets primarily among a select group of
specialized portfolio managers (the
"Investment Managers") who invest primarily
in, or who have particular knowledge within,
the technology sector, including computer
software and service companies, semiconductor
manufacturers, computer hardware and
peripherals companies, communications and
telecommunications companies, networking
equipment and service companies, internet-
related companies, consumer electronics
companies, electronic components and
instruments manufacturers, biomedical,
pharmaceutical, medical device and healthcare
service companies, and other companies that
may use technology for strategic purposes.
PW Fund Advisor, L.L.C. (the "Manager") will
select Investment Managers on the basis of
various criteria, generally including, among
other things, an analysis of: the Investment
Manager's performance during various time
periods and market cycles; the Investment
Manager's reputation, experience and
training; its articulation of, and adherence
to, its investment philosophy; the presence
of risk management discipline; on-site
interviews of the management team; the
quality and stability of the Investment
Manager's organization, including internal
and external professional staff; and whether
the Investment Manager has a substantial
personal investment in the investment
program.
Investment Managers generally conduct their
investment programs through unregistered
investment partnerships, which have investors
other than the Fund, and in other registered
investment companies (collectively, the
"Investment Funds"). The Fund currently
intends to invest its assets primarily in the
Investment Funds. The Fund also may invest
its assets directly pursuant to investment
advisory agreements, granting the Investment
Managers discretionary investment authority
on a managed account basis. In addition, to
facilitate the efficient investment of the
Fund's assets, a separate investment vehicle
may be created for an Investment Manager in
which the Investment Manager serves as
general partner and the Fund is the sole
limited partner. (Investment Managers for
which such an investment vehicle is formed
and Investment Managers who manage assets
directly on a managed account basis are
collectively referred to as "Subadvisers".)
The Manager will allocate no more than 40% of
the Fund's assets to any Investment Fund that
is advised by a Subadviser and will limit its
investment in any Investment Fund that is not
advised by a Subadviser to less than 5% of
the Investment Fund's voting securities.
However, to permit it to invest more of its
assets in desirable Investment Funds, the
Fund may purchase without limitation
non-voting securities of Investment Funds
that are not advised by a Subadviser or, as
to these Investment Funds, contractually
forego its right to vote on any matter that
requires the approval of the limited
partners. The Fund may invest a majority of
its assets in non-voting securities of the
Investment Funds. See "ADDITIONAL RISK
FACTORS--Special Risks of Multi-Manager
Structure."
The Manager anticipates that it initially
will invest at least 80% of the Fund's assets
in the Investment Funds set forth and
described in Appendix B. However, no
assurance can be given that the Manager will
allocate the Fund's assets to all of these
Investment Funds.
The Manager will evaluate regularly each
Investment Manager to determine whether its
investment program is consistent with the
Fund's investment objective and whether its
investment performance is satisfactory. The
Manager may reallocate the Fund's assets
among the Investment Managers, terminate
existing Investment Managers and select
additional Investment Managers, subject to
the condition that selection of a new
Subadviser requires approval of a majority
(as defined in the 1940 Act) of the Fund's
outstanding voting securities, unless the
Fund receives an exemption from certain
provisions of the 1940 Act. See "SUMMARY OF
TERMS--Management."
Unregistered investment funds typically
provide greater flexibility than traditional
investment funds (e.g., registered investment
companies) over the types of securities that
may be owned, the types of trading strategies
employed, and in some cases, the amount of
leverage that can be used. The Investment
Managers selected by the Manager may invest
and trade in a wide range of instruments and
markets, including, but not limited to,
domestic and foreign equities and
equity-related instruments, and fixed income
and other debt-related instruments. Each
Investment Manager may sell securities short.
Investment Managers will not be limited in
the markets (either by location or type, such
as large capitalization, small capitalization
or non-U.S. markets) in which they invest or
the investment discipline that they may
employ (such as value or growth or bottom-up
or top-down analysis).
Each Investment Manager may use various
investment techniques for hedging and
non-hedging purposes. For example, each
Investment Manager may sell securities short
and purchase and sell options and futures
contracts and engage in other derivative
transactions, subject to certain limitations
described elsewhere in this Memorandum. The
use of these techniques will be an integral
part of their investment programs, and
involves certain risks to the Fund. Each
Investment Manager may use leverage, which
also entails risk. See "TYPES OF INVESTMENTS
AND RELATED RISK FACTORS." For purposes of
the Fund's investment restrictions and
certain investment limitations under the 1940
Act, the Fund will look through the
Investment Funds managed by the Subadvisers,
if any, to their underlying securities.
POTENTIAL BENEFITS OF An investment in the Fund enables
INVESTING IN THE FUND: investors to invest with Investment Managers
whose services generally are not available to
the investing public, whose investment funds
may be closed from time to time to new
investors or who otherwise may place
stringent restrictions on the number and type
of persons whose money they will manage. An
investment in the Fund also enables investors
to invest with a cross-section of Investment
Managers without incurring the high minimum
investment requirements that Investment
Managers typically would impose on investors.
In addition to benefiting from the Investment
Managers' individual investment strategies,
the Fund as a whole should achieve the
benefits of diversification by allocating its
assets among a carefully selected group of
Investment Managers. The Manager expects that
by investing through multiple Investment
Managers, the Fund may reduce the volatility
inherent in a direct investment with a single
Investment Manager.
RISK FACTORS: The Fund's investment program is speculative
and entails substantial risks. No assurance
can be given that the Fund's investment
objective will be achieved.
The Fund's performance depends upon the
performance of the Investment Managers and
the Manager's ability to select Investment
Managers and effectively allocate and
reallocate the Fund's assets among them.
The Fund's emphasis on Investment Managers
that invest primarily in securities of
technology-related companies present certain
risks that may not exist to the same degree
as in other types of investments. Technology
stocks, in general, tend to be highly
volatile as compared to other types of
investments. In addition, since the
portfolios of the Investment Managers are
concentrated in securities of
technology-related companies, the investment
risk is greater than if the portfolios were
invested in a more diversified manner among
various sectors. See "TYPES OF INVESTMENTS
AND RELATED RISK FACTORS."
Each Investment Manager's use of leverage,
short sales and derivative transactions, in
certain circumstances, can result in
significant losses. See "TYPES OF INVESTMENTS
AND RELATED RISK FACTORS."
As a non-diversified investment company,
there are no percentage limitations on the
portion of the Fund's assets that may be
invested in the securities of any one issuer.
As a result, the Fund's investment portfolio
may be subject to greater risk and volatility
than if investments had been made in the
securities of a broader range of issuers.
Each Investment Manager generally will charge
the Fund an asset-based fee and some or all
of the Investment Managers will receive
performance-based allocations. The
asset-based fees of the Investment Managers
are expected to range from 1% to 2% and the
performance-based allocations of the
Investment Managers are expected to range
from 15% to 20% of net profits.
The performance-based allocation received by
an Investment Manager may create an incentive
for the Investment Manager to make
investments that are riskier or more
speculative than those that might have been
made in the absence of the performance-based
allocation. In addition, because the
performance-based allocation is calculated on
a basis that includes unrealized appreciation
of an Investment Fund's assets, the
performance-based allocation may be greater
than if it were based solely on realized
gains.
In addition, the Manager will charge the Fund
an asset-based fee and will receive a
performance-based bonus, which gives rise to
similar risks. See "SUMMARY OF TERMS--Fees
and Expenses" and"--Performance Bonus."
An investment in the Fund entails special tax
risks. See "SUMMARY OF TERMS--Summary of
Taxation."
Interests in the Fund will not be traded on
any securities exchange or other market and
are subject to substantial restrictions on
transfer. Although the Fund may offer to
repurchase interests from time to time, a
Limited Partner may not be able to liquidate
its interest in the Fund for up to two years.
The Manager expects that generally, beginning
in 2001, it will recommend to the Directors
(as hereinafter defined) that the Fund offer
to repurchase interests from Partners twice
in each year, in June and December, and also
intends to recommend the making of offers to
repurchase interests effective as of April
2000 and December 2000. See "SUMMARY OF
TERMS--Transfer Restrictions"
and"--Repurchases of Interests by the Fund."
INVESTING IN A MULTI-MANAGER FUND, SUCH AS
THE FUND, INVOLVES ADDITIONAL SPECIAL RISKS,
INCLUDING THE FOLLOWING:
The Investment Funds will not be registered
as investment companies under the 1940 Act
and, therefore, the Fund will not be able to
avail itself of the protections of the 1940
Act with respect to the Investment Funds.
Although the Manager will receive detailed
information from each Investment Manager
regarding its historical performance and
investment strategy, in most cases the
Manager has little or no means of
independently verifying this information. An
Investment Manager may use proprietary
investment strategies that are not fully
disclosed to the Manager, which may involve
risks under some market conditions that are
not anticipated by the Manager.
An investor who met the conditions imposed by
the Investment Managers, including investment
minimums that may be considerably higher than
$250,000, could invest directly with the
Investment Managers. By investing in the
Investment Funds indirectly through the Fund,
the investor bears asset-based fees and
performance-based allocations at the Fund
level and the Investment Fund level. In
addition, the investor bears a proportionate
share of the fees and expenses of the Fund
(including operating costs, distribution
expenses and administrative fees) and,
indirectly, similar expenses of the
Investment Funds.
Each Investment Manager will receive any
performance-based allocations to which it is
entitled irrespective of the performance of
the other Investment Managers and the Fund
generally. Accordingly, an Investment Manager
with positive performance may receive
compensation from the Fund, and thus
indirectly from investors, even if the Fund's
overall returns are negative.
Investment decisions of the Investment Funds
are made by the Investment Managers
independently of each other. As a result, at
any particular time, one Investment Fund may
be purchasing shares of an issuer whose
shares are being sold by another Investment
Fund. Consequently, the Fund could incur
indirectly certain transaction costs without
accomplishing any net investment result.
Since the Fund may make additional
investments in the Investment Funds only at
certain times pursuant to limitations set
forth in the partnership agreements of the
Investment Funds, the Fund from time to time
may have to invest some of its assets
temporarily in money market securities.
To the extent the Fund purchases non-voting
securities of, or contractually foregoes the
right to vote in respect of, an Investment
Fund, it will not be able to vote on matters
that require the approval of the limited
partners of the Investment Fund, including a
matter that could adversely affect the Fund's
investment in it.
Each Investment Fund is permitted to redeem
its limited partnership interests in-kind.
Thus, upon the Fund's withdrawal of all or a
portion of its interest in an Investment
Fund, the Fund may receive securities that
are illiquid or difficult to value. In such
circumstances, the Manager would seek to
dispose of these securities in a manner that
is in the best interests of the Fund.
MANAGEMENT: Investment advice regarding the selection of
Investment Managers will be provided to the
Fund by the Manager, which also is
responsible for the Fund's day-to-day
management. The Manager also is the Fund's
General Partner.
The Manager is an indirect, wholly-owned
subsidiary of Paine Webber Group Inc. ("PW
Group"), and is registered as an investment
adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). The
Manager and its affiliates provide investment
advisory services to registered investment
companies, private investment funds and
individual accounts, and have approximately
$352 billion of assets under control and $58
billion of assets under management.
The Fund's General Partner, to the fullest
extent permitted by applicable law, has
irrevocably delegated to a group of
individuals (the "Directors") its rights and
powers to manage and control the business
affairs of the Fund, including the exclusive
authority to oversee and to establish
policies regarding the management, conduct
and operation of the Fund's business. See
"THE DIRECTORS."
PLACEMENT PaineWebber Incorporated acts as placement
AGENT: agent for the Fund, without special
compensation from the Fund, and will bear its
own costs associated with its activities as
placement agent. The Manager and PaineWebber
Incorporated intend to compensate PaineWebber
Incorporated's or its affiliates' financial
advisors and others for their ongoing
servicing of clients with whom they have
placed interests in the Fund. See "CONFLICTS
OF INTEREST--The Manager."
CONFLICTS OF The investment activities of the Manager,
INTEREST: the Investment Managers and their affiliates
for their own accounts and the other accounts
they manage may give rise to conflicts of
interest which may disadvantage the Fund. The
Fund's operations may give rise to other
conflicts of interest. See "CONFLICTS OF
INTEREST."
FEES AND The Manager provides certain
EXPENSES: management and administrative services to the
Fund, including, among other things,
providing office space and other support
services to the Fund. In consideration for
such services, the Fund will pay the Manager
a monthly management fee at the annual rate
of 1% of the Fund's net assets, excluding
assets attributable to the Manager's capital
account (the "Fee"). The Fee will be paid to
the Manager out of the Fund's assets, and
debited against the Limited Partners' capital
accounts.
PFPC Inc. (the "Administrator") performs
certain administration, accounting and
investor services for the Fund and the
Investment Funds managed by the Subadvisers.
In consideration for these services, the Fund
will pay the Administrator an annual fee
calculated based upon the average net assets
of the Fund and each Investment Fund managed
by a Subadviser, if any, subject to a minimum
monthly fee, and will reimburse the
Administrator for certain of the
Administrator's expenses.
The Fund will bear all expenses incurred in
the business of the Fund, including, but not
limited to, the following: all costs and
expenses related to portfolio transactions
and positions for the Fund's account;
establishment of any Investment Funds managed
by the Subadvisers; legal fees; accounting
fees; costs of insurance; organizational and
registration expenses; certain offering
costs; and expenses of meetings of Directors
and Limited Partners.
The Investment Funds will bear all expenses
incurred in the business of the Investment
Funds, which are similar to those expenses
incurred by the Fund in the business of the
Fund. See "FEES AND EXPENSES."
ALLOCATION OF The net profits or net losses of the Fund
PROFIT AND LOSS: (including, without limitation, net realized
gain or loss and the net change in unrealized
appreciation or depreciation of securities
positions) will be credited to or debited
against the capital accounts of the Manager
in its capacity as General Partner and
Limited Partners (collectively, the
"Partners") at the end of each fiscal period
in accordance with their respective Fund
percentages for such period. Each Partner's
Fund percentage will be determined by
dividing as of the start of a fiscal period
the balance of the Partner's capital account
by the sum of the balances of the capital
accounts of all Partners of the Fund. See
"CAPITAL ACCOUNTS AND ALLOCATIONS--Allocation
of Net Profits and Net Losses."
PERFORMANCE The Manager will be entitled to a performance
bonus (the "Performance Bonus"), charged to
the capital account of each Limited Partner
as of the last day of a Measurement Period,
provided the Fund meets certain performance
criteria for such Measurement Period. The
Performance Bonus is an amount equal to 1% of
the balance of the Limited Partner's capital
account at the end of the Measurement Period.
The Performance Bonus will be calculated
separately with respect to each Limited
Partner and will be made only if, at the end
of Measurement Period, the net profits
allocated to the Limited Partner for the
Measurement Period equal or exceed the
Threshold Return. The "Threshold Return" is
the amount that a Limited Partner would have
earned for a Measurement Period if it had
received an annualized rate of return of 20%
on its opening capital account balance
(appropriately adjusted for contributions,
distributions and withdrawals) for such
period. The Threshold Return is not
cumulative from year to year or Measurement
Period to Measurement Period. If the Manager
is entitled to a Performance Bonus with
respect to a Limited Partner for a
Measurement Period of less than 12 months,
the Performance Bonus for that Measurement
Period will be that portion of 1% of the
Limited Partner's Capital Account at the end
of the period which the actual rate of return
(non-annualized) earned by the Limited
Partner for such period bears to 20%. The
Performance Bonus for a Measurement Period
will be reduced by an amount necessary so
that the amount of a Limited Partner's actual
return for the Measurement Period (after
being reduced by the applicable Performance
Bonus) is at least equal to the amount of the
Limited Partner's Threshold Return for such
period. In no event will the Performance
Bonus for a Measurement Period exceed 1% of
the balance of the Limited Partner's capital
account at the end of such period.
A "Measurement Period" as to each Limited
Partner is a period commencing on the
admission of the Limited Partner to the
Fund, and thereafter each period commencing
on the day immediately following the last day
of the preceding Measurement Period and
ending as of the close of business on the
first to occur of (1) the last day of the
fiscal year, (2) the day as of which the Fund
repurchases all or a portion of the Limited
Partner's Interest, and (3) certain other
enumerated dates. See "CAPITAL ACCOUNTS AND
ALLOCATIONS--Performance Bonus."
SUBSCRIPTION FOR Both initial and additional subscriptions
INTERESTS: for interests by eligible investors may be
accepted at such times as the Manager may
determine, subject to the receipt of cleared
funds on or before the acceptance date set by
the Manager. After the initial closing,
initial subscriptions and additional capital
contributions will generally be accepted
monthly. The Fund reserves the right to
reject any subscription for interests in the
Fund. Generally, the minimum initial
investment in the Fund is $250,000. For
employees or directors of the Manager and its
affiliates, and members of their immediate
families, and, in the sole discretion of the
Manager, attorneys or other professional
advisors engaged on behalf of the Fund, and
members of their immediate families, the
minimum initial investment is $25,000. The
Fund may vary the investment minimums from
time to time. The Fund, in its discretion,
may suspend subscriptions for interests at
any time.
INITIAL CLOSING The initial closing date for subscriptions
DATE: of interests in the Fund is March 29, 1999.
The Manager, in its sole discretion, may
accelerate the closing date or may postpone
it for up to 60 days.
TRANSFER Limited Partner interests in the Fund may be
RESTRICTIONS: transferred only by (i) operation of law
pursuant to the death, bankruptcy, insolvency
or dissolution of a Limited Partner or (ii)
with the written consent of the Manager,
which may be withheld in its sole and
absolute discretion and is expected to be
granted, if at all, only under extenuating
circumstances, in connection with a transfer
to an entity that does not result in a change
of beneficial ownership. The foregoing
permitted transferees will not be allowed to
become substituted Limited Partners without
the consent of the Manager, which may be
withheld in its sole and absolute discretion.
See "REDEMPTIONS, REPURCHASES OF INTERESTS
AND TRANSFERS--Transfers of Interests."
REPURCHASES OF No Limited Partner will have the right to
INTERESTS BY THE require the Fund to redeem the Limited
FUND: Partner's interest in the Fund. The Fund from
time to time may offer to repurchase
interests pursuant to written tenders by
Partners. These repurchases will be made at
such times and on such terms as may be
determined by the Directors, in their
complete and exclusive discretion. In
determining whether the Fund should
repurchase interests or portions thereof from
Partners pursuant to written tenders, the
Directors will consider the recommendation of
the Manager. The Manager expects that
generally, beginning in 2001, it will
recommend to the Directors that the Fund
offer to repurchase interests from Partners
twice each year, in June and December, and
intends to recommend the making of an offer
to repurchase interests effective as of April
2000 and December 2000. The Directors also
will consider the following factors, among
others, in making such determination: (i)
whether any Limited Partners have requested
to tender interests or portions thereof to
the Fund; (ii) the liquidity of the Fund's
assets; (iii) the investment plans and
working capital requirements of the Fund;
(iv) the relative economies of scale with
respect to the size of the Fund; (v) the
history of the Fund in repurchasing interests
or portions thereof; (vi) the condition of
the securities markets; and (vii) the
anticipated tax consequences of any proposed
repurchases of interests or portions thereof.
In addition, the Fund may repurchase an
interest in the Fund or portion thereof of a
Partner or any person acquiring an interest
or portion thereof from or through a Partner
if, among other reasons, the Manager
determines that it would be in the best
interests of the Fund for the Fund to
repurchase such an interest or portion
thereof. See "REDEMPTIONS, REPURCHASES OF
INTERESTS AND TRANSFERS--No Right of
Redemption" and "--Repurchases of Interests."
The Partnership Agreement provides that the
Fund shall be dissolved if the interest of
any Limited Partner that has submitted a
written request, in accordance with the terms
of the Partnership Agreement, to tender its
entire interest for repurchase by the Fund
has not been repurchased within a period of
two years of such request.
SUMMARY OF Counsel to the Fund has rendered an opinion
TAXATION: that the Fund will be treated as a
partnership and not as an association taxable
as a corporation for Federal income tax
purposes. Counsel to the Fund has rendered
its opinion that, under a "facts and
circumstances" test set forth in regulations
adopted by the U.S. Treasury Department, the
Fund will not be treated as a "publicly
traded partnership" taxable as a corporation.
Accordingly, the Fund should not be subject
to Federal income tax, and each Limited
Partner will be required to report on its own
annual tax return its distributive share of
the Fund's taxable income or loss.
If it were determined that the Fund should be
treated as an association or a publicly
traded partnership taxable as a corporation,
as a result of a successful challenge to the
opinions rendered by counsel to the Fund or
otherwise, the taxable income of the Fund
would be subject to corporate income tax and
any distributions of profits from the Fund
would be treated as dividends.
For the Fund to complete its tax reporting
requirements, it must receive information on
a timely basis from the Investment Managers.
An Investment Manager's delay in providing
this information will delay the Fund's
preparation of tax information to investors,
which is likely to cause investors to seek
extensions on the time to file their tax
returns.
ERISA PLANS AND Investors subject to the Employee Retirement
OTHER TAX-EXEMPT Income Security Act of 1974, as amended
ENTITIES: ("ERISA"), and other tax-exempt entities
(each a "tax-exempt" entity) may purchase
interests in the Fund. The Fund's assets
should not be considered to be "plan assets"
for purposes of ERISA's fiduciary
responsibility and prohibited transaction
rules or similar provisions of the Internal
Revenue Code of 1986, as amended (the
"Code"). The Investment Managers may use
leverage in connection with their trading
activities. Therefore, a tax-exempt Limited
Partner may incur income tax liability with
respect to its share of the net profits from
such leveraged transactions to the extent
they are treated as giving rise to "unrelated
business taxable income" ("UBTI"). The Fund
will provide to tax-exempt Limited Partners
such accounting information as such Partners
require to report their UBTI for income tax
purposes.
Investment in the Fund by tax-exempt entities
requires special consideration. Trustees or
administrators of such entities are urged to
review carefully the matters discussed in
this Memorandum.
TERM: The Fund's term is perpetual unless it is
otherwise dissolved under the terms of the
Partnership Agreement. See "ADDITIONAL
INFORMATION AND SUMMARY OF LIMITED
PARTNERSHIP AGREEMENT--Term, Dissolution and
Liquidation."
REPORTS TO The Fund will furnish to Partners as soon as
PARTNERS: practicable after the end of each taxable
year such information as is necessary for
Partners to complete Federal and state income
tax or information returns, along with, any
other tax information required by law. See
"ADDITIONAL RISK FACTORS--Special Risks of
Multi-Manager Structure." The Fund also will
send to Partners a semi-annual and an
audited annual report generally within 60
days after the close of the period for which
the report is being made, or as otherwise
required by the 1940 Act. Quarterly reports
from the Manager regarding the Fund's
operations during each quarter also will be
sent to Partners.
<PAGE>
THE FUND
The Fund is registered under the 1940 Act as a closed-end, non-diversified,
management investment company. The Fund was formed as a limited partnership
under the laws of Delaware on December 28, 1998, and has no operating history.
The Fund's principal office is located at 1285 Avenue of the Americas, New York,
New York 10019, and its telephone number is (800) 486-2608. Investment advisory
services are provided to the Fund by the Manager, which also is the Fund's
General Partner.
STRUCTURE
The Fund is a specialized investment vehicle that combines many of the features
of a private investment partnership with those of a closed-end investment
company. Private investment partnerships are unregistered, commingled asset
pools that may be leveraged, managed aggressively and offered in large minimum
denominations, often over $1 million, through private placements to a limited
number of high net worth individual and institutional investors. The general
partners of these partnerships typically are compensated through asset-based
fees and performance-based bonuses or allocations. Closed-end investment
companies are 1940 Act registered pools typically organized as corporations or
business trusts that usually are managed more conservatively than most private
investment partnerships, subject to relatively modest minimum investment
requirements (often less than $2,000), and publicly offered to a broad range of
investors. The advisers to these companies typically are compensated through
asset-based, but not performance-based, fees.
The Fund is similar to private investment partnerships in that its investment
portfolio may be actively managed and Fund interests will be sold in
comparatively large minimum denominations in private placements solely to high
net worth individual and institutional investors, whose capital accounts will be
subject to both asset-based fees and performance-based bonuses.
INVESTMENT PROGRAM
The Fund's investment objective is to maximize capital appreciation over the
long term.
The Fund is a multi-manager fund that seeks to achieve its objective by
deploying its assets primarily among a select group of specialized portfolio
managers who invest primarily in, or who have particular knowledge within, the
technology sector, including computer software and service companies,
semiconductor manufacturers, computer hardware and peripherals companies,
communications and telecommunications companies, networking equipment and
service companies, internet-related companies, consumer electronics companies,
electronic components and instruments manufacturers, biomedical, pharmaceutical,
medical device and healthcare service companies, and other companies that may
use technology for strategic purposes.
The Manager's research staff assists in the selection of Investment Managers
using its database of asset managers to narrow the universe of potential
candidates.
The Manager will select Investment Managers on the basis of various criteria,
generally including, among other things, an analysis of: the Investment
Manager's performance during various time periods and market cycles; the
Investment Manager's reputation, experience and training; its articulation of,
and adherence to, its investment philosophy; the presence of risk management
discipline; on-site interviews of the management team; the quality and stability
of the Investment Manager's organization, including internal and external
professional staff; and whether the Investment Manager has a substantial
personal investment in the investment program.
As part of its diligence process, the Manager conducts a comprehensive review of
the Investment Manager, its investment process and organization, and conducts
interviews with references and industry sources to complete its determination.
Once an asset manager is selected as an Investment Manager, the Manager will
continue its oversight of the Investment Manager. See "APPENDIX B--Description
of the Investment Funds and Certain Performance Information."
Investment Managers generally conduct their investment programs through the
Investment Funds. The Fund currently intends to invest its assets primarily in
the Investment Funds. The Fund also may invest its assets directly pursuant to
investment advisory agreements, granting the Investment Managers discretionary
investment authority on a managed account basis. In addition, to facilitate the
efficient investment of the Fund's assets, a separate investment vehicle may be
created for an Investment Manager in which the Investment Manager serves as
general partner and the Fund is the sole limited partner. The Manager will
allocate no more than 40% of the Fund's assets to any Investment Fund that is
advised by a Subadviser and will limit its investment in any Investment Fund
that is not advised by a Subadviser to less than 5% of the Investment Fund's
voting securities. However, to permit it to invest more of its assets in
desirable Investment Funds, the Fund may purchase without limitation non-voting
securities of Investment Funds that are not advised by a Subadviser or, as to
these Investment Funds, contractually forego its right to vote on any matter
that requires the approval of the limited partners. The Fund may invest a
majority of its assets in non-voting securities of the Investment Funds. See
"ADDITIONAL RISK FACTORS--Special Risks of Multi-Manager Structure."
The Manager anticipates that it initially will invest approximately 80% of the
Fund's assets in the Investment Funds set forth in Appendix B. A brief
description of the investment strategies of these Investment Funds, and their
performance, is set forth in Appendix B. However, no assurance can be given that
the Manager will allocate the Fund's assets to all of these Investment Funds.
The Manager will evaluate regularly each Investment Manager to determine whether
its investment program is consistent with the Fund's investment objective and
whether its investment performance is satisfactory. The Manager may reallocate
the Fund's assets among the Investment Managers, terminate existing Investment
Managers and select additional Investment Managers, subject to the condition
that selection of a new Subadviser requires approval of a majority (as defined
in the 1940 Act) of the Fund's outstanding voting securities, unless the Fund
receives an exemption from certain provisions of the 1940 Act.
Unregistered investment funds typically provide greater flexibility than
traditional investment funds (e.g., registered investment companies) over the
types of securities that may be owned, the types of trading strategies employed,
and in some cases, the amount of leverage that can be used. The Investment
Managers selected by the Manager may invest and trade in a wide range of
instruments and markets, including, but not limited to, domestic and foreign
equities and equity-related instruments, and fixed income and other
debt-related instruments. Each Investment Manager may sell securities short.
Investment Managers will not be limited in the markets (either by location or
type, such as large capitalization, small capitalization or non-U.S. markets) in
which they invest or the investment discipline that they may employ (such as
value or growth or bottom-up or top-down analysis).
Each Investment Manager may use various investment techniques for hedging and
non-hedging purposes. For example, each Investment Manager may sell securities
short and purchase and sell options and futures contracts and engage in other
derivative transactions, subject to certain limitations. The use of these
techniques will be an integral part of their investment programs, and involves
certain risks to the Fund. Each Investment Manager may use leverage, which also
entails risk. See "TYPES OF INVESTMENTS AND RELATED RISK FACTORS--Leverage,"
"--Short Sales" and"--Special Investment Instruments and Techniques."
Each Investment Manager may invest, for defensive purposes or otherwise, some or
all of its assets in high quality fixed income securities and money market
instruments, or may hold cash or cash equivalents in such amounts as the
Investment Manager deems appropriate under the circumstances. Pending allocation
of the offering proceeds, and thereafter, from time to time, the Fund also may
invest in these instruments. See "TYPES OF INVESTMENTS AND RELATED RISK
FACTORS--Money Market Instruments."
Additional information about the types of investments that are expected to be
made by the Investment Managers, their investment practices and related risk
factors is provided below. Except as otherwise indicated, the Fund's investment
policies and restrictions are not fundamental and may be changed without a vote
of the Limited Partners. See "TYPES OF INVESTMENTS AND RELATED RISK
FACTORS--Investment Restrictions."
THE FUND'S INVESTMENT PROGRAM IS SPECULATIVE AND ENTAILS SUBSTANTIAL RISKS.
THERE CAN BE NO ASSURANCE THAT THE FUND'S OR THE INVESTMENT FUNDS' INVESTMENT
OBJECTIVES WILL BE ACHIEVED OR THAT THEIR INVESTMENT PROGRAMS WILL BE
SUCCESSFUL. IN PARTICULAR, EACH INVESTMENT MANAGER'S CONCENTRATION IN THE
TECHNOLOGY SECTOR, AS WELL AS ITS USE OF LEVERAGE, SHORT SALES AND DERIVATIVE
TRANSACTIONS, AND LIMITED DIVERSIFICATION CAN, IN CERTAIN CIRCUMSTANCES, RESULT
IN SIGNIFICANT LOSSES TO THE FUND. INVESTORS SHOULD CONSIDER THE FUND AS A
SUPPLEMENT TO AN OVERALL INVESTMENT PROGRAM AND SHOULD INVEST ONLY IF THEY ARE
WILLING TO UNDERTAKE THE RISKS INVOLVED. INVESTORS COULD LOSE SOME OR ALL OF
THEIR INVESTMENT.
TYPES OF INVESTMENTS AND RELATED RISK FACTORS
GENERAL
All securities investments risk the loss of capital. The value of the Fund's
total net assets should be expected to fluctuate and, as described below, given
the Fund's emphasis on the technology sector, may be especially volatile. To the
extent that the Fund's portfolio (which, for this purpose, means the aggregate
securities positions held by the Investment Managers) is concentrated in
securities of a single issuer or issuers in a single industry, the risk of any
investment decision is increased. An Investment Manager's use of leverage is
likely to cause the Fund's net assets to appreciate or depreciate at a greater
rate than if leverage were not used.
For purposes of the Fund's investment restrictions and certain investment
limitations under the 1940 Act, the Fund will look through the Investment Funds
managed by the Subadvisers, if any, to their underlying securities.
TECHNOLOGY SECTOR
The Fund's emphasis on Investment Managers that invest primarily in securities
of technology-related companies presents certain risks that may not exist to
the same degree as in other types of investments. Technology stocks, in general,
tend to be highly volatile as compared to other types of investments. Since the
portfolios of the Investment Managers are concentrated in securities of
technology-related companies, the investment risk is greater than if the
portfolios were invested in a more diversified manner among various sectors.
While each Investment Manager will invest in the securities of entities in
several different industries considered to be technology related, many of those
entities share common characteristics which may affect the Investment Manager's
investment. For example, industries throughout the technology field include many
smaller and less seasoned companies. These types of companies may present
greater opportunities for capital appreciation, but also may involve greater
risks. Such companies may have limited product lines, markets, or financial
resources, or may depend on a limited management group. In addition, the
securities of smaller companies may be subject to more volatile market movements
than the securities of larger, more established companies. The companies in
which each Investment Manager invests also are strongly affected by worldwide
scientific or technological developments, and their products and services may
not be economically successful or may quickly become outdated. Certain of such
companies also offer products or services that are subject to governmental
regulation and may, therefore, be affected adversely by governmental policies.
Each Investment Manager may purchase securities of companies which have no
earnings or have experienced losses. The Investment Manager generally will make
these investments based on a belief that actual or anticipated products or
services will produce future earnings. If the anticipated event is delayed or
does not occur, or if investor perceptions about the company change, the
company's stock price may decline sharply and its securities may become less
liquid.
EQUITY SECURITIES
Each Investment Manager's investment portfolio may include long and short
positions in common stocks, preferred stocks and convertible securities of U.S.
and foreign issuers. Each Investment Manager also may invest in depositary
receipts relating to foreign securities. See "Foreign Securities" below. Equity
securities fluctuate in value, often based on factors unrelated to the value of
the issuer of the securities, and such fluctuations can be pronounced.
Each Investment Manager may invest in equity securities without restriction as
to market capitalization, such as those issued by smaller capitalization
companies, including micro cap companies. The prices of the securities of
smaller companies may be subject to more abrupt or erratic market movements than
larger, more established companies, because these securities typically are
traded in lower volume and the issuers typically are more subject to changes in
earnings and prospects. Each Investment Manager may purchase securities in all
available securities trading markets.
FIXED-INCOME SECURITIES
Each Investment Manager may invest in fixed-income securities. The Investment
Managers will invest in these securities when their yield and potential for
capital appreciation are considered sufficiently attractive and also may invest
in these securities for defensive purposes and to maintain liquidity. These
securities may pay fixed, variable or floating rates of interest, and may
include zero coupon obligations. Fixed-income securities are subject to the risk
of the issuer's inability to meet principal and interest payments on its
obligations (i.e., credit risk) and are subject to the risk of price volatility
due to such factors as interest rate sensitivity, market perception of the
creditworthiness or financial condition of the issuer and general market
liquidity (i.e., market risk).
Each Investment Manager may invest in both investment grade and non-investment
grade debt securities. Investment grade debt securities are securities that have
received a rating from at least one nationally recognized statistical rating
organization ("NRSRO") in one of the four highest rating categories or, if not
rated by any NRSRO, have been determined by the Investment Manager to be of
comparable quality. Non-investment grade debt securities are considered by the
NRSRO to be predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal. Non-investment grade debt securities in the
lowest rating categories may involve a substantial risk of default or may be in
default. Adverse changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuers of non-investment grade debt securities to make
principal and interest payments than is the case for higher grade debt
securities. In addition, the market for lower grade debt securities may be
thinner and less liquid than for higher grade debt securities.
FOREIGN SECURITIES
Although each Investment Manager is expected to invest principally in equity
securities of publicly traded U.S. companies, the Investment Manager may invest
in equity and fixed-income securities of foreign issuers and in depositary
receipts, such as American Depositary Receipts ("ADRs"), that represent indirect
interests in securities of foreign issuers. Foreign securities in which the
Investment Manager may invest may be listed on foreign securities exchanges or
traded in foreign over-the-counter markets.
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Similarly, volume and
liquidity in most foreign securities markets are less than in the United States
and, at times, volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held outside the
United States, the Fund will be subject to additional risks which include
possible adverse political and economic developments, seizure or nationalization
of foreign deposits or adoption of governmental restrictions which might
adversely affect or restrict the payment of principal and interest on the
foreign securities to investors located outside the country of the issuer,
whether from currency blockage or otherwise.
Since foreign securities often are purchased with and payable in currencies of
foreign countries, the value of these assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations.
FOREIGN CURRENCY TRANSACTIONS
Each Investment Manager may engage in foreign currency transactions for a
variety of purposes, including to fix in U.S. dollars, between trade and
settlement date, the value of a security the Investment Manager has agreed to
buy or sell, or to hedge the U.S. dollar value of securities the Investment
Manager already owns, particularly if it expects a decrease in the value of the
currency in which the foreign security is denominated.
Foreign currency transactions may involve, for example, the Investment Manager's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Investment Manager
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Investment Manager contracted to
receive in the exchange. The Investment Manager's success in these transactions
will depend principally on its ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
MONEY MARKET INSTRUMENTS
Each Investment Manager may invest, for defensive purposes or otherwise, some or
all of its assets in high quality fixed-income securities, money market
instruments, and money market mutual funds, or hold cash or cash equivalents in
such amounts as the Investment Manager deems appropriate under the
circumstances. Pending allocation of the offering proceeds and thereafter, from
time to time, the Fund also may invest in these instruments. Money market
instruments are high quality, short-term fixed-income obligations, which
generally have remaining maturities of one year or less, and may include U.S.
Government securities, commercial paper, certificates of deposit and bankers'
acceptances issued by domestic branches of United States banks that are members
of the Federal Deposit Insurance Corporation, and repurchase agreements.
NON-DIVERSIFIED STATUS
The classification of the Fund as a "non-diversified" investment company means
that the percentage of the Fund's assets that may be invested in the securities
of a single issuer is not limited by the 1940 Act. A "diversified" investment
company is required by the 1940 Act generally, with respect to 75% of its total
assets, to invest not more than 5% of such assets in the securities of a single
issuer. Since a relatively high percentage of the Fund's assets may be invested
in the securities of a limited number of issuers, some of which will be within
the same industry, the Fund's portfolio securities may be more sensitive to
changes in the market value of a single issuer and to events affecting a
particular industry or market segment.
LEVERAGE
Some or all of the Investment Managers may borrow money from brokers and banks
for investment purposes. Borrowing for investment purposes, which is known as
"leverage," is a speculative investment technique and involves certain risks.
Although leverage will increase investment return if the Fund earns a greater
return on the investments purchased with borrowed funds than it pays for the use
of such funds, using leverage will decrease investment return if the Fund fails
to earn as much on such investments as it pays for the use of such funds. Using
leverage, therefore, will magnify the volatility of the value of the Fund's
investment portfolio. If the Investment Manager's equity or debt instruments
decline in value, the Investment Manager could be required to deposit additional
collateral with the lender or suffer mandatory liquidation of the pledged
securities to compensate for the decline in value. In the event of a sudden,
precipitous drop in an Investment Fund's assets, whether resulting from changes
in market value or from redemptions, the Investment Manager might not be able to
liquidate assets quickly enough to pay off its borrowing. Money borrowed for
leveraging will be subject to interest costs that may or may not be recovered by
return on the securities purchased. The Investment Manager also may be required
to maintain minimum average balances in connection with its borrowings or to pay
a commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
The 1940 Act limits the amount an investment company can borrow by imposing an
asset coverage requirement of 300% of its indebtedness, including amounts
borrowed, measured at the time the investment company incurs the indebtedness
(the "Asset Coverage Requirement"). This means that the value of an investment
company's total indebtedness may not exceed one-third the value of its total
assets, including such indebtedness, measured at the time the investment company
incurs the indebtedness. These limits do not apply to the Investment Funds that
are not managed by Subadvisers and, therefore, the Fund's portfolio may be
highly leveraged and the volatility of the price of its Interests may be great.
To obtain "leveraged" market exposure in certain investments and to increase
overall return, an Investment Manager may purchase options and other instruments
that do not constitute "indebtedness" for purposes of the Asset Coverage
Requirement. These instruments nevertheless may involve significant economic
leverage and therefore, in some cases, may involve significant risks of loss.
PURCHASING INITIAL PUBLIC OFFERINGS
Each Investment Manager may purchase securities of companies in initial public
offerings or shortly thereafter. Special risks associated with these securities
may include a limited number of shares available for trading, unseasoned
trading, lack of investor knowledge of the company, and limited operating
history. These factors may contribute to substantial price volatility for the
shares of these companies and, thus, for the Fund's interests. The limited
number of shares available for trading in some initial public offerings may make
it more difficult for an Investment Fund to buy or sell significant amounts of
shares without an unfavorable impact on prevailing market prices. In addition,
some companies in initial public offerings are involved in relatively new
industries or lines of business, which may not be widely understood by
investors. Some of these companies may be undercapitalized or regarded as
developmental stage companies, without revenues or operating income, or the
near-term prospects of achieving them.
SHORT SALES
Some or all of the Investment Managers may attempt to limit exposure to a
possible market decline in the value of its portfolio securities through short
sales of securities that the Investment Manager believes possess volatility
characteristics similar to those being hedged. In addition, Investment Managers
may use short sales for non-hedging purposes to profit from anticipated declines
in prices of securities which in the view of the Investment Managers are
overvalued or are likely to be adversely affected by particular trends or events
relating to the issuer of those securities, the sector in which the issuer is
engaged or the general markets or economy. Technological advances often create
winners and losers, which presents Investment Managers with the opportunity to
profit on both the long and short side of the technology sector. To effect a
short sale, an Investment Manager will borrow a security from a brokerage firm,
or other permissible financial intermediary, to make delivery to the buyer. The
Investment Manager then is obligated to replace the borrowed security by
purchasing it at the market price at the time of replacement. The price at such
time may be more or less than the price at which the security was sold by the
Investment Manager, which would result in a loss or gain, respectively. These
techniques are speculative and, in certain circumstances, can substantially
increase the impact of adverse price movements on the Fund's portfolio. A short
sale of a security involves the risk of an unlimited increase in the market
price of the security which could result in an inability to cover the short
position and thus a theoretically unlimited loss. There can be no assurance that
securities necessary to cover the short position will be available for purchase.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve a sale of a security to a bank or
securities dealer and the Investment Manager's simultaneous agreement to
repurchase the security for a fixed price, reflecting a market rate of interest,
on a specific date. These transactions involve a risk that the other party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Fund. Reverse
repurchase agreements are a form of leverage which also may increase the
volatility of the Fund's investment portfolio.
SPECIAL INVESTMENT TECHNIQUES
Each Investment Manager may use a variety of special investment techniques to
hedge its investment portfolio against various risks or other factors that
generally affect the values of securities and for non-hedging purposes. These
techniques may involve the use of derivative transactions. The techniques the
Investment Managers may employ may change over time as new instruments and
techniques are introduced or as a result of regulatory developments. Certain of
the special investment techniques that the Investment Managers may use are
speculative and involve a high degree of risk, particularly when used for
non-hedging purposes.
DERIVATIVES. Some or all of the Investment Managers may invest in, or enter
into, derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. Derivatives can be volatile and involve various
types and degrees of risk, depending upon the characteristics of the particular
Derivative and the portfolio as a whole. Derivatives permit an Investment
Manager to increase or decrease the level of risk, or change the character of
the risk, to which its investment portfolio is exposed in much the same way as
the Investment Manager can increase or decrease the level of risk, or change the
character of the risk, of its investment portfolio by making investments in
specific securities.
Derivatives may entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in Derivatives could have a large
potential impact on the Fund's performance.
If an Investment Manager invests in Derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if the Investment
Manager's Derivatives were poorly correlated with its other investments, or if
the Investment Manager were unable to liquidate its position because of an
illiquid secondary market. The market for many Derivatives is, or suddenly can
become, illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
OPTIONS AND FUTURES. The Investment Managers may invest in options and futures
contracts. The Investment Managers also may invest in so-called "synthetic"
options or other derivative instruments written by broker-dealers or other
permissible financial intermediaries. Options transactions may be effected on
securities exchanges or in the over-the-counter market. When options are
purchased over-the-counter, the Fund bears the risk that the counterparty that
wrote the option will be unable or unwilling to perform its obligations under
the option contract. Such options may also be illiquid and, in such cases, an
Investment Manager may have difficulty closing out its position.
Over-the-counter options purchased and sold by the Investment Manager also may
include options on baskets of specific securities.
The Investment Managers may purchase and sell call and put options in respect of
specific securities, and may write and sell covered or uncovered call and put
options. A covered call option, which is a call option with respect to which an
Investment Manager owns the underlying security, that is sold by the Investment
Manager exposes the Investment Manager during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or to possible continued holding of a security that might
otherwise have been sold to protect against depreciation in the market price of
the security. A covered put option, which is a put option with respect to which
an Investment Manager has segregated cash or liquid securities to fulfill the
obligation undertaken, that is sold by the Investment Manager exposes the
Investment Manager during the term of the option to a decline in price of the
underlying security while depriving the Investment Manager of the opportunity to
invest the segregated assets.
An Investment Manager may close out a position when writing options by
purchasing an option on the same security with the same exercise price and
expiration date as the option that it has previously written on such security.
The Investment Manager will realize a profit or loss if the amount paid to
purchase an option is less or more, as the case may be, than the amount received
from the sale thereof. To close out a position as a purchaser of an option, the
Investment Manager would ordinarily make a similar "closing sale transaction,"
which involves liquidating the Investment Manager's position by selling the
option previously purchased, although the Investment Manager would be entitled
to exercise the option should it deem it advantageous to do so.
Although the Fund will not be a commodity pool, Derivatives subject the Fund to
the rules of the Commodity Futures Trading Commission ("CFTC") which limit
investment in certain Derivatives. Some or all of the Investment Managers may
invest in futures contracts and currency futures contracts, and options with
respect thereto for hedging purposes without limit. However, to comply with CFTC
rules, the Subadvisers may not invest in such contracts and options for other
purposes if the sum of the amount of initial margin deposits and premiums paid
for unexpired options with respect to such contracts, other than for bona fide
hedging purposes, exceed 5% of the liquidation value of the Fund's assets, after
taking into account unrealized profits and unrealized losses on such contracts
and options; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. If applicable CFTC rules change, these
percentages may change or different conditions may be applied to the Fund's use
of certain Derivatives.
The Investment Managers may enter into futures contracts in U.S. domestic
markets or on exchanges located outside the United States. Foreign markets may
offer advantages such as trading opportunities or arbitrage possibilities not
available in the United States. Foreign markets, however, may have greater risk
potential than domestic markets. For example, some foreign exchanges are
principal markets so that no common clearing facility exists and an investor may
look only to the broker for performance of the contract. In addition, any
profits an Investment Manager might realize in trading could be eliminated by
adverse changes in the exchange rate, or the Fund could incur losses as a result
of those changes. Transactions on foreign exchanges may include both commodities
which are traded on domestic exchanges and those which are not. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC.
Engaging in these transactions involves risk of loss to the Fund which could
adversely affect the value of the Fund's net assets. No assurance can be given
that a liquid market will exist for any particular futures contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses.
Successful use of futures by an Investment Manager also is subject to the
Investment Manager's ability to predict correctly movements in the direction of
the relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract.
Pursuant to regulations and/or published positions of the SEC, a Subadviser may
be required to segregate permissible liquid assets in connection with its
commodities transactions in an amount generally equal to the value of the
underlying commodity. The segregation of such assets will have the effect of
limiting the Subadviser's ability otherwise to invest those assets.
Some or all of the Investment Managers may purchase and sell stock index futures
contracts. A stock index future obligates an Investment Manager to pay or
receive an amount of cash equal to a fixed dollar amount specified in the
futures contract multiplied by the difference between the settlement price of
the contract on the contract's last trading day and the value of the index based
on the stock prices of the securities that comprise it at the opening of trading
in such securities on the next business day.
Some or all of the Investment Managers may purchase and sell interest rate
futures contracts. An interest rate future obligates an Investment Manager to
purchase or sell an amount of a specific debt security at a future date at a
specific price.
Some or all of the Investment Managers may purchase and sell currency futures. A
currency future obligates an Investment Manager to purchase or sell an amount of
a specific currency at a future date at a specific price.
CALL AND PUT OPTIONS ON SECURITIES INDEXES. Some or all of the Investment
Managers may purchase and sell call and put options on stock indexes, such as
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Standard
& Poor's 100 Index, Nasdaq High Technology Index, Pacific Stock Exchange High
Technology Index, Morgan Stanley High Tech Index, Philadelphia Semiconductor
Index or AMEX Internet Stock Index, listed on national securities exchanges or
traded in the over-the-counter market for hedging purposes and to pursue its
investment objective. A stock index fluctuates with changes in the market values
of the stocks that comprise the index. Accordingly, successful use by the
Investment Manager of options on stock indexes will be subject to the Investment
Manager's ability to predict correctly movements in the direction of the stock
market generally or segments thereof. This requires different skills and
techniques than forecasting changes in the price of individual stocks.
WARRANTS. Warrants are derivative instruments that permit, but do not obligate,
the holder to subscribe for other securities. Warrants do not carry with them
the right to dividends or voting rights with respect to the securities that they
entitle the holder to purchase, and they do not represent any rights in the
assets of the issuer. As a result, warrants may be considered more speculative
than certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying securities or
commodities, and a warrant ceases to have value if it is not exercised prior to
its expiration date.
SWAP AGREEMENTS. Some or all of the Investment Managers may enter into equity,
interest rate, index and currency rate swap agreements on behalf of the
Investment Funds. These transactions are entered into in an attempt to obtain a
particular return when it is considered desirable to do so, possibly at a lower
cost than if the Investment Manager had invested directly in the asset that
yielded the desired return. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from a few weeks to
more than a year. In a standard swap transaction, two parties agree to exchange
the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments, which may be adjusted for
an interest factor. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional amount," i.e., the
return on or increase in value of a particular dollar amount invested at a
particular interest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. Forms of swap agreements include
interest rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent interest rates exceed a specified rate
or "cap"; interest rate floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent interest rates fall below a
specified level or "floor"; and interest rate collars, under which a party sells
a cap and purchases a floor or vice versa in an attempt to protect itself
against interest rate movements exceeding given minimum or maximum levels.
Most swap agreements entered into by an Investment Manager would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, the
Investment Fund's current obligations (or rights) under a swap agreement
generally will be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The risk of loss with respect to swaps is
limited to the net amount of interest payments that the Investment Fund is
contractually obligated to make. If the other party to a swap defaults, the
Investment Fund's risk of loss consists of the net amount of payments that the
Investment Fund contractually is entitled to receive.
To achieve investment returns equivalent to those achieved by an investment
adviser in whose investment vehicles the Fund could not invest directly, perhaps
because of its investment minimum or its unavailability for direct investment,
the Fund may enter into swap agreements under which the Fund may agree, on a net
basis, to pay a return based on a floating interest rate, such as LIBOR, and to
receive the total return of the reference investment vehicle over a stated time
period. The Fund may seek to achieve the same investment result through the use
of other derivatives in similar circumstances. The Federal income tax treatment
of swap agreements and other derivatives used in the above manner is unclear.
Until the Federal income tax treatment of derivatives on hedge funds is
clarified, the Fund will not invest in such derivatives.
LENDING PORTFOLIO SECURITIES
Some or all of the Investment Managers may lend securities from their portfolios
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Investment Manager continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities which affords the Investment
Manager an opportunity to earn interest on the amount of the loan and on the
loaned securities' collateral. Loans of portfolio securities by a Subadviser may
not exceed 33-1/3% of the value of the Fund's total assets, and, in respect of
such transactions, the Fund will receive collateral consisting of cash, U.S.
Government Securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. The Fund might experience risk of loss if the institution
with which the Investment Manager has engaged in a portfolio loan transaction
breaches its agreement with the Investment Manager.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES
To reduce the risk of changes in interest rates and securities prices, some or
all of the Investment Managers may purchase securities on a forward commitment
or when-issued or delayed delivery basis, which means delivery and payment take
place a number of days after the date of the commitment to purchase. The payment
obligation and the interest rate receivable with respect to such purchase are
fixed when an Investment Manager enters into the commitment, but the Investment
Manager does not make payment until it receives delivery from the counterparty.
The Investment Manager will commit to purchase such securities only with the
intention of actually acquiring the securities, but the Investment Manager may
sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a forward commitment or when-issued or delayed delivery
basis are subject to changes in value, generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise, based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities so
purchased may expose the Fund to risks because they may experience such
fluctuations prior to their actual delivery. Purchasing securities on a
when-issued or delayed delivery basis can involve the additional risk that the
yield available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. Purchasing securities on a
forward commitment or when-issued or delayed delivery basis when an Investment
Manager is fully or almost fully invested may result in greater potential
fluctuation in the value of the Fund's net assets. In addition, there is a risk
that securities purchased on a when-issued or delayed delivery basis may not be
delivered and that the purchaser of securities sold by the Investment Manager on
a forward basis will not honor its purchase obligation. In such cases, the Fund
may incur a loss.
RESTRICTED AND ILLIQUID INVESTMENTS
Although each Investment Manager will invest primarily in publicly traded
securities, the Fund and each Investment Manager may invest without limitation
in restricted securities and other investments which are illiquid. Restricted
securities are securities that may not be sold to the public without an
effective registration statement under the 1933 Act, or, if they are
unregistered, may be sold only in a privately negotiated transaction or pursuant
to an exemption from registration under the 1933 Act.
Where registration is required to sell a security, an Investment Manager may be
obligated to pay all or part of the registration expenses, and a considerable
period may elapse between the decision to sell and the time the Investment
Manager may be permitted to sell a security under an effective registration
statement. If during such a period adverse market conditions were to develop,
the Investment Manager might obtain a less favorable price than the prevailing
price when it decided to sell. Restricted securities for which no market exists
and other illiquid investments are valued at fair value as determined in
accordance with procedures approved and periodically reviewed by the Directors.
Investment Managers may be unable to sell restricted and other illiquid
securities at the most opportune times or at prices approximating the value at
which they purchased such securities.
In addition, the Fund's interests in unregistered Investment Funds are
themselves illiquid and subject to substantial restrictions on transfer. The
Fund may liquidate an interest and withdraw from an unregistered Investment Fund
pursuant to limited withdrawal rights. The illiquidity of these interests may
adversely affect the Fund were it to have to sell interests at an inopportune
time.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions as fundamental
policies, which cannot be changed without approval by holders of a majority (as
defined in the 1940 Act) of the Fund's outstanding voting securities. The Fund
may not:
o Issue senior securities, except that, to the extent permitted by the
1940 Act, (a) the Subadvisers, if any are engaged, may borrow money to
finance portfolio transactions and engage in other transactions
involving the issuance by the Fund of "senior securities" representing
indebtedness, and (b) the Fund may borrow money from banks for
temporary or emergency purposes or in connection with repurchases of,
or tenders for, the Fund's interests.
o Underwrite securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the 1933 Act in connection with the
disposition of its portfolio securities.
o Make loans, except through purchasing fixed-income securities, lending
portfolio securities or entering into repurchase agreements in a
manner consistent with the Fund's investment policies or as otherwise
permitted under the 1940 Act.
o Purchase, hold or deal in real estate, except that the Subadvisers may
invest in real estate and securities that are secured by real estate,
or securities issued by companies that invest or deal in real estate
or real estate investment trusts.
o Invest in commodities or commodity contracts, except that the
Subadvisers may purchase and sell foreign currency, options, futures
and forward contracts, including those related to indexes, and options
on indexes.
o Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, except that U.S.
Government Securities may be purchased without limitation. For
purposes of this Investment Restriction, the Investment Funds are not
considered part of an industry.
Under the 1940 Act, the vote of a majority of the outstanding voting securities
of an investment company, such as the Fund, means the vote, at the annual or a
special meeting of the security holders of such company duly called, (A) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the outstanding voting securities of such company are present or
represented by proxy; or (B) of more than 50% of the outstanding voting
securities of such company, whichever is less.
With respect to these investment restrictions, and other policies described in
this Memorandum, the Fund will not look through the Investment Funds not managed
by Subadvisers to their underlying securities. If a percentage restriction is
adhered to at the time of an investment or transaction, a later change in
percentage resulting from a change in the values of investments or the value of
the Fund's total assets, unless otherwise stated, will not constitute a
violation of such restriction or policy.
The Fund's investment objective is fundamental and may not be changed without
the vote of a majority (as defined by the 1940 Act) of the Fund's outstanding
voting securities.
ADDITIONAL RISK FACTORS
ASSET-BASED FEES AND PERFORMANCE-BASED ALLOCATIONS
Each Investment Manager generally will charge the Fund an asset-based fee and
some or all of the Investment Managers will receive performance-based
allocations. The asset-based fees of the Investment Managers are expected to
range from 1% to 2% and the performance-based allocations of the Investment
Managers are expected to range from 15% to 20% of net profits.
The performance-based allocation that will be received by an Investment Manager
may create an incentive for the Investment Manager to make investments that are
riskier or more speculative than those that might have been made in the absence
of the performance-based allocation. In addition, because the performance-based
allocation is calculated on a basis that includes realized and unrealized
appreciation of an Investment Fund's assets, the allocation may be greater than
if it were based solely on realized gains.
In addition, the Manager will charge the Fund an asset-based fee and will
receive a performance-based bonus, which gives rise to similar risks. See "FEES
AND EXPENSES" and "CAPITAL ACCOUNTS AND ALLOCATIONS--Performance Bonus."
TAX RISKS
Counsel to the Fund has rendered an opinion that the Fund will be treated as a
partnership and not as an association taxable as a corporation for Federal
income tax purposes. Counsel to the Fund has rendered its opinion that, under a
"facts and circumstances" test set forth in regulations adopted by the U.S.
Treasury Department, the Fund will not be treated as a "publicly traded
partnership" taxable as corporation. If it were determined that the Fund should
be treated as an association or publicly traded partnership taxable as a
corporation, as a result of a successful challenge to the opinions rendered by
counsel to the Fund or otherwise, the taxable income of the Fund would be
subject to corporate income tax and distributions of profits from the Fund would
be treated as dividends. See "TAX ASPECTS--Tax Treatment of Fund Operations--
Classification of the Fund."
LIQUIDITY RISKS
Fund interests will not be traded on any securities exchange or other market and
are subject to substantial restrictions on transfer. Although the Fund may offer
to repurchase Limited Partner interests from time to time, a Limited Partner may
not be able to liquidate its interest in the Fund for up to two years. The
Manager expects that generally, beginning in 2001, it will recommend to the
Directors that the Fund offer to repurchase interests from Partners twice each
year, in June and December, and also intends to recommend the making of offers
to repurchase interests effective as of April 2000 and December 2000. See
"REDEMPTIONS, REPURCHASES OF INTERESTS AND TRANSFERS."
DISTRIBUTIONS TO LIMITED PARTNERS AND PAYMENT OF TAX LIABILITY
The Fund does not intend to make periodic distributions of its net income or
gains, if any, to Limited Partners. Whether or not distributions are made,
Limited Partners will be required each year to pay applicable Federal and state
income taxes on their respective shares of the Fund's taxable income, and will
have to pay such applicable taxes from sources other than Fund distributions.
The amount and times of any distributions will be determined in the sole
discretion of the Directors.
SPECIAL RISKS OF MULTI-MANAGER STRUCTURE
The Investment Funds will not be registered as investment companies under the
1940 Act and, therefore, the Fund will not be able to avail itself of the
protections of the 1940 Act with respect to the Investment Funds. Although the
Manager will receive detailed information from each Investment Manager regarding
its historical performance and investment strategy, in most cases the Manager
has little or no means of independently verifying this information. An
Investment Manager may use proprietary investment strategies that are not fully
disclosed to the Manager, which may involve risks under some market conditions
that are not anticipated by the Manager.
An investor who met the conditions imposed by the Investment Managers could
invest directly with the Investment Managers. These conditions include
investment minimums that may be considerably higher than $250,000. By investing
in investment vehicles indirectly through the Fund, the investor bears
asset-based fees and performance-based allocations at the Fund level and the
Investment Fund level. In addition, the investor bears a proportionate share of
the fees and expenses of the Fund (including operating costs, distribution
expenses and administrative fees) and, indirectly, similar expenses of the
Investment Funds.
Each Investment Manager will receive any performance-based allocations to which
it is entitled irrespective of the performance of the other Investment Managers
and the Fund generally. Accordingly, an Investment Manager with positive
performance may receive compensation from the Fund, and thus indirectly from
investors, even if the Fund's returns are negative. Investment decisions of the
Investment Funds are made by the Investment Managers entirely independently of
each other. As a result, at any particular time, one Investment Fund may be
purchasing shares of an issuer whose shares are being sold by another Investment
Fund. Consequently, the Fund could incur indirectly certain transaction costs
without accomplishing any net investment result.
To the extent the Fund holds non-voting securities of, or contractually foregoes
the right to vote in respect of, an Investment Fund, it will not be able to vote
on matters that require the approval of the limited partners of the Investment
Fund, including a matter that could adversely affect the Fund's investment in
it.
Since the Fund may make additional investments in the Investment Funds only at
certain times pursuant to limitations set forth in the partnership agreements of
the Investment Funds, the Fund from time to time may have to invest some of its
assets temporarily in money market securities.
Each Investment Fund is permitted to redeem its limited partnership interests
in-kind. Thus, upon the Fund's withdrawal of all or a portion of its interest in
an Investment Fund, the Fund may receive securities that are illiquid or
difficult to value. In such circumstances, the Manager would seek to dispose of
these securities in a manner that is in the best interests of the Fund.
For the Fund to complete its tax reporting requirements, it must receive
information on a timely basis from the Investment Managers. An Investment
Manager's delay in providing this information will delay the Fund's preparation
of tax information to investors, which is likely to cause investors to seek
extensions on the time to file their tax returns.
A noncorporate investor's share of the Fund's investment expenses (including the
asset-based fees and performance-based bonuses or allocations at the Fund and
Investment Fund levels) may be subject to certain limitations on deductibility
for regular Federal income tax purposes and may be completely disallowed for
purposes of determining the noncorporate investor's alternative minimum tax
liability.
The Fund has agreed to indemnify certain of the Investment Funds and their
Investment Managers from any liability, damage, cost or expense arising out of,
among other things, certain acts or omissions relating to the offer or sale of
the Fund's interests.
PERFORMANCE INFORMATION
Appendix B contains performance information for the Investment Funds.
THE DIRECTORS
The business affairs of the Fund are managed under the general supervision of
the Directors. The Fund's General Partner, to the fullest extent permitted by
applicable law, has irrevocably delegated to the Directors its rights and powers
to manage and control the business affairs of the Fund, including the complete
and exclusive authority to oversee and to establish policies regarding the
management, conduct and operation of the Fund's business. The Directors exercise
the same powers, authority and responsibilities on behalf of the Fund as are
customarily exercised by the directors of a registered investment company
organized as a corporation. The General Partner retains only those rights,
powers and duties that may not be delegated under Delaware law. The General
Partner will remain as the general partner of the Fund and will continue to be
liable as such.
The Directors are not general partners or limited partners of the Fund and,
accordingly, have no liability as such. The Directors will not contribute to the
capital of the Fund and will not hold partnership interests in the Fund. A
majority of the Directors are not "interested persons" (as defined in the 1940
Act) of the Fund (collectively, the "Independent Directors") and perform the
same functions for the Fund as are customarily exercised by the non-interested
directors of a registered investment company organized as a corporation.
The identity of the Directors and brief biographical information regarding each
Director is set forth below. Each Director who is deemed to be an "interested
person" of the Fund, as defined in the 1940 Act, is indicated by an asterisk.
Name, Address and Age Principal Occupation(s) During
Past Five Years
*E. Garrett Bewkes, Jr. Mr. Bewkes is a director of, and
c/o PaineWebber Incorporated prior to December 1995 was a
1285 Avenue of the Americas consultant to, PW Group. Prior
New York, New York 10019 to 1988, he was Chairman of the
Age 72 Board, President and Chief
Executive Officer of American
Bakeries Company. Mr. Bewkes is
a director of Interstate
Bakeries Corporation. Mr. Bewkes also
is a director or trustee of 35 other
investment companies for which
PaineWebber Incorporated or its
affiliates serves as investment
adviser.
Meyer Feldberg Mr. Feldberg is Dean and
c/o Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, New York 10027 Columbia University. Prior to
Age 56 1989, he was President of the
Illinois Institute of
Technology. Dean Feldberg is a
director of Primedia Inc.,
Federated Department Stores Inc.
and Revlon, Inc. Dean Feldberg
also is a director or trustee of
34 other investment companies for
which PaineWebber Incorporated or its
affiliates serves as investment
adviser.
George W. Gowen Mr Gowen is a partner in the law firm
666 Third Avenue of Dunnington, Bartholow & Miller.
New York, New York 10017 Prior to May 1994, he was a partner
Age 68 in the law firm of Fryer, Ross &
Gowen. Mr. Gowen is a director of
Columbia Real Estate Investments,
Inc. Mr. Gowen also is a director
or trustee of 33 other investment
companies for which PaineWebber
Incorporated or its affiliates serves
as investment adviser.
Each of the Directors was appointed to serve in such position by the General
Partner and, on January 20, 1999, such appointment was approved and ratified by
the General Partner and Norman E. Sienko, Jr., in his capacity as the Fund's
organizational limited partner, who were the sole holders of partnership
interests in the Fund on such date.
A Director's position in that capacity will terminate if such Director is
removed, resigns or is subject to various disabling events such as death or
incapacity. A Director may resign upon 90 days' prior written notice to the
other Directors, and may be removed either by vote of two-thirds of the
Directors not subject to the removal vote or vote of the Partners holding not
less than two-thirds of the total number of votes eligible to be cast by all
Partners. In the event of any vacancy in the position of a Director, the
remaining Directors may appoint an individual to serve as a Director, so long as
immediately after such appointment at least two-thirds of the Directors then
serving would have been elected by the Partners. The Directors may call a
meeting of Partners to fill any vacancy in the position of a Director, and must
do so within 60 days after any date on which Directors who were elected by the
Partners cease to constitute a majority of the Directors then serving. If no
Director remains to manage the business of the Fund, the General Partner may
manage and control the Fund, but must convene a meeting of Partners within 60
days for the purpose of either electing new Directors or dissolving the Fund.
The Independent Directors are each paid an annual retainer of $5,000 and per
meeting fees of $500, or $250 in the case of telephonic meetings, by the Fund.
The other Directors receive no annual or other fees from the Fund. All Directors
are reimbursed by the Fund for their reasonable out-of-pocket expenses. It is
estimated that the aggregate annual compensation paid by the Fund to each
Independent Director will be $7,000 during the coming year, and that, together
with compensation paid to them by other registered investment companies advised
by affiliates of the Manager, Messrs. Feldberg and Gowen will receive aggregate
annual compensation from all such companies of approximately $140,000 and
$124,000, respectively, for such year. The Directors do not receive any pension
or retirement benefits from the Fund.
THE MANAGER
The Manager is the Fund's General Partner. The Manager will initially allocate
the Fund's assets and, thereafter, will evaluate regularly each Investment
Manager to determine whether its investment program is consistent with the
Fund's investment objective and whether its investment performance is
satisfactory. The Manager may reallocate the Fund's assets among the Investment
Managers, terminate existing Investment Managers and select additional
Investment Managers, subject to the condition that selection of a new Subadviser
requires approval of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting securities, unless the Fund receives an exemption from
certain provisions of the 1940 Act. The Manager will perform its duties subject
to any policies established by the Directors. The Manager, which was formed as a
Delaware limited liability company on June 25, 1996, is an indirect,
wholly-owned subsidiary of PW Group and is registered as an investment adviser
under the Advisers Act. The Manager and its affiliates provide investment
advisory services to registered investment companies, private investment funds
and individual accounts, and have approximately $352 billion of assets under
control and $58 billion of assets under management. PaineWebber Incorporated, a
wholly-owned subsidiary of PW Group, is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, and is a member of the New York
Stock Exchange, Inc. and other principal securities exchanges.
The offices of the Manager are located at 1285 Avenue of the Americas, New York,
New York 10019, and its telephone number is (800) 486-2608. As of January 20,
1999, the Manager owned 99% of the outstanding interests in the Fund (thereby
controlling the Fund) and was the only person known by the Fund to own of record
or beneficially 5% or more of the outstanding interests in the Fund. The Manager
or its designee maintains the Fund's accounts, books and other documents
required to be maintained under the 1940 Act at 1285 Avenue of the Americas, New
York, New York 10019 or such other location as may be designated by the Fund.
Investment decisions for the Fund are made by a team of the Manager's portfolio
managers, and no person is primarily responsible for making recommendations to
the team.
The authority of the Manager to serve or act as investment adviser, and be
responsible for the day-to-day management, of the Fund (collectively, "Advice
and Management"), and the performance bonus arrangement between the Fund and the
Manager, as the foregoing are set forth in the Partnership Agreement, was
initially approved by the Directors, including each Independent Director, and by
vote of Partners holding interests in the Fund on January 20, 1999. The
authority of the Manager to provide Advice and Management will terminate under
the following circumstances:
(1) if revoked by (A) vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Fund or (B)
the Directors, in either case with 60 days' prior written
notice to the Manager;
(2) at the election of the Manager, with 60 days' prior written
notice to the Directors;
(3) if, after January 20, 2000, any period of 12 consecutive
months shall conclude without the approval of the continuation
of such authority by (A) the vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Fund
or (B) the Directors and, in either case, approved by a
majority of the Independent Directors by vote cast at a
meeting called for such purpose;
(4) to the extent required by the 1940 Act, upon the occurrence of
any event in connection with the Manager, its provision of
Advice and Management, the Partnership Agreement or otherwise
constituting an "assignment" within the meaning of the 1940
Act; or
(5) if the Manager is no longer a General Partner of the Fund.
The Manager also may withdraw, or be removed by the Fund, as a General Partner.
If the Manager gives notice to the Fund of its intention to withdraw, it will be
required to remain as a General Partner for one year, or until such earlier date
as a successor Manager is approved by the Fund, if, in the opinion of counsel to
the Fund, earlier withdrawal is likely to cause the Fund to lose its partnership
tax classification or as otherwise required by the 1940 Act. At the request of
the Fund, the Manager will remain as a General Partner of the Fund for a period
of six months if the Fund has terminated the authority of the Manager to provide
Advice and Management, unless a successor General Partner to the Manager is
earlier approved by the Fund.
VOTING
Each Partner will have the right to cast a number of votes based on the value of
such Partner's respective capital account at any meeting of Partners called by
the Directors or Partners holding at least a majority of the total number of
votes eligible to be cast by all Partners. Limited Partners will be entitled to
vote on any matter on which shareholders of a registered investment company
organized as a corporation would be entitled to vote, including selection of
Directors, approval of the authority of the Manager to provide Advice and
Management to the Fund and approval of the Fund's auditors. Except for the
exercise of their voting privileges, Limited Partners will not be entitled to
participate in the management or control of the Fund's business, and may not act
for or bind the Fund.
CONFLICTS OF INTEREST
THE MANAGER
The Manager and its affiliates manage the assets of registered investment
companies, private investment funds and individual accounts (collectively, "PWFA
Clients"). The Fund has no interest in these activities. In addition, the
Manager, its affiliates, and any of their respective officers, directors,
partners, members or employees, may invest for their own accounts in various
investment opportunities, including in investment partnerships, private
investment companies or other investment vehicles in which the Fund will have no
interest.
The Manager or its affiliates may determine that an investment opportunity in a
particular investment vehicle is appropriate for a particular PWFA Client or for
itself or its officers, directors, partners, members or employees, but not for
the Fund. Situations may arise in which the Manager, its affiliates or PWFA
Clients have made investments which would have been suitable for investment by
the Fund but, for various reasons, were not pursued by, or available to, the
Fund. The investment activities of the Manager, its affiliates and any of their
respective officers, directors, partners, members or employees may disadvantage
the Fund in certain situations, if among other reasons, the investment
activities limit the Fund's ability to invest in an investment vehicle.
The officers or employees of the Manager will be engaged in substantial
activities other than on behalf of the Manager and may have conflicts of
interest in allocating their time and activity between the Manager and PWFA
Clients. The Manager and its officers and employees will devote so much of their
time to the affairs of the Manager as in their judgment is necessary and
appropriate.
PaineWebber Incorporated acts as the placement agent for the Fund, without
special compensation from the Fund, and will bear its own costs associated with
its activities as placement agent. The Manager and PaineWebber Incorporated
intend to compensate PaineWebber Incorporated's or its affiliates' account
executives, as well as third-party securities dealers and other industry
professionals, for their ongoing servicing of clients with whom they have placed
interests in the Fund and such compensation will be based upon a formula that
takes into account the amount of client assets being serviced as well as the
investment results attributable to the clients' assets in the Fund. See "FEES
AND EXPENSES" and "CAPITAL ACCOUNTS AND ALLOCATIONS--Performance Bonus."
PaineWebber Incorporated or its affiliates may provide brokerage and other
services from time to time to one or more accounts or entities managed by the
Investment Managers or their affiliates, including the Investment Funds. (All
Investment Funds and other accounts managed by the Investment Managers or their
affiliates, excluding the Fund, are referred to collectively as the "Investment
Manager Accounts.")
The Manager, its affiliates or PWFA Clients may have an interest in an account
managed by, or enter into relationships with, an Investment Manager or its
affiliates on terms different than an interest in the Fund. In addition, the
Investment Managers may receive research products and services in connection
with the brokerage services that the Manager and its affiliates may provide from
time to time to one or more Investment Manager Accounts or to the Fund.
PERTAINING TO SUBADVISERS
To the extent Subadvisers are engaged to manage the Fund's assets, the following
potential conflicts of interest may be relevant:
PARTICIPATION IN INVESTMENT OPPORTUNITIES. Each Subadviser expects to employ an
investment program for its Investment Fund that is substantially similar to the
investment program employed by the Subadviser for its Investment Manager
Accounts. Accordingly, as a general matter, the Subadviser will consider
participation by the Fund in all appropriate investment opportunities that are
under consideration for investment by the Subadviser for its Investment Manager
Accounts. There may be, however, circumstances under which a Subadviser will
cause its Investment Manager Accounts to commit a larger percentage of their
respective assets to an investment opportunity than to which the Subadviser will
commit the Fund's assets. There also may be circumstances under which a
Subadviser will consider participation by its Investment Manager Accounts in
investment opportunities in which the Subadviser does not intend to invest on
behalf of the Fund, or vice versa.
Each Subadviser will evaluate a variety of factors that may be relevant in
determining whether a particular investment opportunity or strategy is
appropriate and feasible for its respective Investment Fund or Investment
Manager Account at a particular time, including, but not limited to, the
following: (1) the nature of the investment opportunity taken in the context of
the other investments at the time; (2) the liquidity of the investment relative
to the needs of the particular entity or account; (3) the availability of the
opportunity (i.e., size of obtainable position); (4) the transaction costs
involved; and (5) the investment or regulatory limitations applicable to the
particular entity or account. Because these considerations may differ for the
Investment Fund and relevant Investment Manager Accounts in the context of any
particular investment opportunity, the investment activities of the Investment
Fund and Investment Manager Accounts may differ considerably from time to time.
In addition, the fees and expenses of the Investment Fund will differ from those
of the Investment Manager Accounts and the Fund. Accordingly, prospective
Limited Partners should note that the future performance of the Subadviser and
the Investment Manager Accounts will vary.
When a Subadviser determines that it would be appropriate for its respective
Investment Fund and one or more of its Investment Manager Accounts to
participate in an investment opportunity at the same time, they will attempt to
aggregate, place and allocate orders on a basis that the Subadviser believes to
be fair and equitable, consistent with its responsibilities under applicable
law. Decisions in this regard are necessarily subjective and there is no
requirement that each Investment Fund participate, or participate to the same
extent as the Investment Manager Accounts, in all trades. However, no
participating entity or account will receive preferential treatment over any
other and the Subadviser will take steps to ensure that no participating entity
or account will be systematically disadvantaged by the aggregation, placement
and allocation of orders.
Situations may occur, however, where the Fund could be disadvantaged because of
the investment activities conducted by the Subadvisers for the Investment
Manager Accounts. Such situations may be based on, among other things, the
following: (1) legal restrictions on the combined size of positions that may be
taken for the Investment Funds and the Investment Manager Accounts, thereby
limiting the size of the Fund's position; (2) the difficulty of liquidating an
investment for the Investment Funds and the Investment Manager Accounts where
the market cannot absorb the sale of the combined positions; and (3) the
determination that a particular investment is warranted only if hedged with an
option or other instrument and there is a limited availability of such options
or other instruments. In particular, each Subadviser may be legally restricted
from entering into a "joint transaction" (as defined in the 1940 Act) with its
Investment Fund or Investment Manager Accounts with respect to the securities of
an issuer without first obtaining exemptive relief from the SEC. See "CONFLICTS
OF INTEREST--Other Matters."
Each Investment Manager and its principals, officers, employees and affiliates,
may buy and sell securities or other investments for their own accounts and may
have actual or potential conflicts of interest with respect to investments made
on behalf of the Fund. As a result of differing trading and investment
strategies or constraints, positions may be taken by principals, officers,
employees and affiliates of the Investment Manager that are the same, different
or made at a different time than positions taken for the Fund.
OTHER MATTERS. Except in accordance with applicable law, no Subadviser is
permitted to buy securities or other property from, or sell securities or other
property to, its respective Investment Fund. However, the Investment Fund may
effect certain principal transactions in securities with one or more Investment
Manager Accounts, except for accounts in which the Subadviser or any affiliate
thereof serves as a general partner or in which it has a financial interest,
other than an interest that results solely from the Subadviser's appointment as
an investment adviser to the account. Such transactions would be made in
circumstances where the Subadviser has determined it would be appropriate for
the Investment Fund to purchase and an Investment Manager Account to sell, or
the Investment Fund to sell and an Investment Manager Account to purchase, the
same security or instrument on the same day. Future investment activities of the
Investment Managers, or their affiliates, and the principals, partners,
directors, officers or employees of the foregoing may give rise to additional
conflicts of interest.
BROKERAGE
Each Investment Manager is directly responsible for the execution of its
portfolio investment transactions and the allocation of brokerage. Transactions
on U.S. stock exchanges and on some foreign stock exchanges involve the payment
of negotiated brokerage commissions. On the great majority of foreign stock
exchanges, commissions are fixed. No stated commission is generally applicable
to securities traded in over-the-counter markets, but the prices of those
securities include undisclosed commissions or mark-ups.
To the extent Subadvisers are engaged to manage the Fund's assets, the following
paragraphs will be relevant:
In executing transactions on behalf of its Investment Fund, each Subadviser will
seek to obtain the best price and execution for the transactions, taking into
account factors such as price, size of order, difficulty of execution and
operational facilities of a brokerage firm, and in the case of transactions
effected by the Subadviser with unaffiliated brokers, the firm's risk in
positioning a block of securities. Although each Subadviser generally will seek
reasonably competitive commission rates, a Subadviser will not necessarily pay
the lowest commission available on each transaction. The Subadvisers will have
no obligation to deal with any broker or group or brokers in executing
transactions in portfolio securities.
Following the principle of seeking best price and execution, a Subadviser may
place brokerage business with brokers that provide the Subadviser and its
affiliates with supplemental research, market and statistical information,
including advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities, and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. The expenses of the
Subadviser are not necessarily reduced as a result of the receipt of this
supplemental information, which may be useful to the Subadviser or its
affiliates in providing services to clients other than the Fund. In addition,
not all of the supplemental information is used by the Subadviser in connection
with the Fund. Conversely, the information provided to the Subadviser by brokers
and dealers through which other clients of the Subadviser and its affiliates
effect securities transactions may be useful to the Subadviser in providing
services to the Fund.
Each Investment Manager may execute portfolio brokerage transactions through its
affiliates and affiliates of the Manager, in each case subject to compliance
with the 1940 Act.
FEES AND EXPENSES
The Manager provides certain management and administrative services to the Fund,
including, among other things, providing office space and other support services
to the Fund. In consideration for such services, the Fund will pay the Manager a
monthly management fee at the annual rate of 1% of the Fund's net assets,
excluding assets attributable to the Manager's capital account (the "Fee"). Net
assets means the total value of all assets of the Fund, less an amount equal to
all accrued debts, liabilities and obligations of the Fund, calculated before
giving effect to any repurchases of interests. The Fee will be computed based on
the net assets of the Fund as of the start of business on the first business day
of each month, after adjustment for any subscriptions effective on such date,
and will be due and payable in arrears within five business days after the end
of such month. The Fee will be charged in each fiscal period to the capital
accounts of all Limited Partners in proportion to their capital accounts at the
beginning of such fiscal period.
The Administrator performs certain administration, accounting and investor
services for the Fund and the Investment Funds managed by the Subadvisers, if
any. In consideration for these services, the Fund will pay the Administrator an
annual fee based on: (i) the average net assets of the Fund, subject to a
minimum monthly fee, and (ii) the average net assets of each Investment Fund
managed by a Subadviser, if any, subject to a minimum monthly fee, and will
reimburse the Administrator for out-of-pocket expenses.
In addition, the capital accounts of Limited Partners may be subject to the
Performance Bonus depending upon the investment performance of the Fund. See
"CAPITAL ACCOUNTS AND ALLOCATIONS--Performance Bonus."
The Fund will bear all expenses incurred in the business of the Fund other than
those specifically required to be borne by the Manager. Expenses to be borne by
the Fund include, but are not limited to, the following:
o all costs and expenses directly related to portfolio transactions and
positions for the Fund's account, including, but not limited to,
brokerage commissions, research fees, interest and commitment fees on
loans and debit balances, borrowing charges on securities sold short,
dividends on securities sold short but not yet purchased, custodial
fees, margin fees, transfer taxes and premiums, taxes withheld on
foreign dividends and indirect expenses from investments in investment
funds;
o all costs and expenses associated with the organization and
registration of the Fund, certain offering costs and the costs of
compliance with any applicable Federal or state laws;
o all costs and expenses associated with the organization of Investment
Funds managed by Subadvisers, if any, and with the selection of
Investment Managers, including due diligence and travel-related
expenses;
o the costs and expenses of holding any meetings of any Partners that
are regularly scheduled, permitted or required to be held under the
terms of the Partnership Agreement, the 1940 Act or other applicable
law;
o fees and disbursements of any attorneys, accountants, auditors and
other consultants and professionals engaged on behalf of the Fund;
o the fees of custodians and other persons providing administrative
services to the Fund;
o the costs of a fidelity bond and any liability insurance obtained on
behalf of the Fund, the General Partner or the Directors;
o all costs and expenses of preparing, setting in type, printing and
distributing reports and other communications to Limited Partners;
o all expenses of computing the Fund's net asset value, including any
equipment or services obtained for the purpose of valuing the Fund's
investment portfolio;
o all charges for equipment or services used for communications between
the Fund and any custodian, or other agent engaged by the Fund; and
o such other types of expenses as may be approved from time to time by
the Directors other than those required to be borne by the Manager.
The Manager will be reimbursed by the Fund for any of the above expenses that it
pays on behalf of the Fund.
The Fund's organizational and offering expenses are estimated at $250,000. The
Fund also will bear certain on-going offering costs associated with any periodic
offers of Fund interests. Offering costs cannot be deducted by the Fund or the
Partners.
The Investment Funds will bear all expenses incurred in the business of the
Investment Funds, which are similar to those expenses incurred by the Fund in
the business of the Fund. The Investment Managers generally will charge an
asset-based fee to and receive performance-based allocations from the Investment
Funds, which effectively will reduce total distributions from the Investment
Funds to the Fund.
CAPITAL ACCOUNTS AND ALLOCATIONS
CAPITAL ACCOUNTS
The Fund will maintain a separate capital account for each Partner, which will
have an opening balance equal to such Partner's initial contribution to the
capital of the Fund. Each Partner's capital account will be increased by the sum
of the amount of cash and the value of any securities constituting additional
contributions by such Partner to the capital of the Fund, plus any amounts
credited to such Partner's capital account as described below. Similarly, each
Partner's capital account will be reduced by the sum of the amount of any
repurchase by the Fund of the interest, or portion thereof, of such Partner,
plus the amount of any distributions to such Partner which are not reinvested,
plus any amounts debited against such Partner's capital account as described
below. To the extent that any debit would reduce the balance of the capital
account of any Limited Partner below zero, that portion of any such debit will
instead be allocated to the capital account of the Manager; any subsequent
credits that would otherwise be allocable to the capital account of any such
Limited Partner will instead be allocated to the capital account of the Manager
in such amounts as are necessary to offset all previous debits attributable to
such Limited Partner.
Capital accounts of Partners are adjusted as of the close of business on the
last day of each fiscal period. Fiscal periods begin on the day after the last
day of the preceding fiscal period and end at the close of business on (1) the
last day of the fiscal year of the Fund, (2) the day preceding the date as of
which a contribution to the capital of the Fund is made, (3) the last day of a
Measurement Period for any Partner, or (4) the day as of which any amount is
credited to or debited from the capital account of any Partner other than an
amount to be credited to or debited from the capital accounts of all Partners in
accordance with their respective Fund percentages. A Fund percentage will be
determined for each Partner as of the start of each fiscal period by dividing
the balance of such Partner's capital account as of the commencement of such
period by the sum of the balances of all capital accounts of all Partners as of
such date.
ALLOCATION OF NET PROFITS AND NET LOSSES
Net profits or net losses of the Fund for each fiscal period will be allocated
among and credited to or debited against the capital accounts of all Partners as
of the last day of each fiscal period in accordance with Partners' respective
partnership percentages for such fiscal period. Net profits or net losses will
be measured as the net change in the value of the net assets of the Fund,
including any net change in unrealized appreciation or depreciation of
investments and realized income and gains or losses and expenses during a fiscal
period, before giving effect to any repurchases by the Fund of interests or
portions thereof, and adjusted to exclude the amount of any "key man" insurance
premiums or proceeds to be allocated among the capital accounts of the Partners
and any items to be allocated among the capital accounts of the Partners other
than in accordance with the Partners' respective partnership percentages.
Allocations for Federal income tax purposes generally will be made among the
Partners so as to reflect equitably amounts credited or debited to each
Partner's capital account for the current and prior fiscal years.
PERFORMANCE BONUS
The Manager will be entitled to a performance bonus (the "Performance Bonus"),
charged to the capital account of each Limited Partner as of the last day of a
Measurement Period, as long as the Manager provided Advice and Management to the
Fund on the first day of the Measurement Period. The Performance Bonus is an
amount equal to 1% of the balance of the Limited Partner's capital account at
the end of the Measurement Period. The Performance Bonus will be calculated
separately with respect to each Limited Partner and will be made only if, at the
end of a Measurement Period, the net profits allocated to the Limited Partner
for the Measurement Period exceed the Threshold Return. The "Threshold Return"
is the amount that a Limited Partner would have earned for a Measurement Period
if it had received an annualized rate of return of 20% on its opening capital
account balance (appropriately adjusted for contributions, distributions and
withdrawals) for such period. The Threshold Return is not cumulative from year
to year or Measurement Period to Measurement Period. If the Manager is entitled
to a Performance Bonus with respect to a Limited Partner for a Measurement
Period of less than 12 months, the Performance Bonus for that Measurement Period
will be that portion of 1% of the Limited Partner's Capital Account at the end
of the period which the actual rate of return (non-annualized) earned by the
Limited Partner for such period bears to 20%. In addition, the Performance Bonus
for a Measurement Period will be reduced by an amount necessary so that the
amount of a Limited Partner's actual return for the Measurement Period (after
being reduced by the applicable Performance Bonus) is at least equal to the
amount of the Limited Partner's Threshold Return for the Measurement Period. In
no event will the Performance Bonus for a Measurement Period exceed 1% of the
balance of the Limited Partner's capital account at the end of the Measurement
Period.
A "Measurement Period" as to each Limited Partner is a period commencing on the
admission of the Limited Partner to the Fund, and thereafter each period
commencing on the day immediately following the last day of the preceding
Measurement Period and ending as of the close of business on the first to occur
of (1) the last day of the relevant fiscal year, (2) the day preceding any day
as of which the Limited Partner becomes a Special Limited Partner (as defined
below), (3) the day on which the Limited Partner ceases to be a Special Limited
Partner, (4) the day on which the Fund repurchases the interest or portion
thereof of the Limited Partner, (5) the day preceding the day on which there is
a transfer of the Limited Partner's interest or portion thereof, or (6) the day
on which the authority of the Manager to provide Advice and Management is
terminated or the Manager ceases to be a general partner of the Fund.
Within 30 days of each Measurement Period with respect to each Limited Partner,
and subject to certain limitations, the Manager may withdraw up to 98% of the
Performance Bonus, computed on the basis of unaudited data, that was credited to
the Manager's capital account and debited from the Limited Partner's capital
account with respect to such Measurement Period. The Fund will pay the balance,
subject to audit adjustments, within 30 days after the completion of the audit
of the Fund's books.
The Performance Bonus will be waived for Limited Partners whose Invested Capital
(as defined in the Partnership Agreement) equals or exceeds $10,000,000
("Special Limited Partners") as of the first day of the relevant Measurement
Period and such other Limited Partners as the Manager may determine from time to
time, including, without limitation, Limited Partners who are employees or
directors of the Manager and its affiliates, and members of their immediate
families, and, in the sole discretion of the Manager, attorneys or other
professional advisors engaged on behalf of the Fund, and members of their
immediate families.
ALLOCATION OF SPECIAL ITEMS--CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES
Withholding taxes or other tax obligations incurred by the Fund which are
attributable to any Partner will be debited against the capital account of such
Partner as of the close of the fiscal period during which the Fund paid such
obligation, and any amounts then or thereafter distributable to such Partner
will be reduced by the amount of such taxes. If the amount of such taxes is
greater than any such distributable amounts, then the Partner and any successor
to the Partner's interest is required to pay to the Fund as a contribution to
the capital of the Fund, upon demand of the Fund, the amount of such excess.
RESERVES
Appropriate reserves may be created, accrued and charged against net assets for
contingent liabilities as of the date any such contingent liabilities become
known to the Fund. Reserves will be in such amounts, subject to increase or
reduction, which the Fund may deem necessary or appropriate. The amount of any
reserve, or any increase or decrease therein, will be proportionately charged or
credited, as appropriate, to the capital accounts of those investors who are
Partners at the time when such reserve is created, increased or decreased, as
the case may be; provided, however, that if any such reserve, or any increase or
decrease therein, exceeds the lesser of $500,000 or 1% of the aggregate value of
the capital accounts of all such Partners, the amount of such reserve, increase,
or decrease shall instead be charged or credited to those investors who, as
determined by the Fund, were Partners at the time of the act or omission giving
rise to the contingent liability for which the reserve was established,
increased or decreased in proportion to their capital accounts at that time.
NET ASSET VALUATION
Net asset value of the Fund will be determined by or at the direction of the
Manager as of the close of business at the end of any fiscal period in
accordance with the valuation principles set forth below or as may be determined
from time to time pursuant to policies established by the Directors.
The Fund will value interests in Investment Funds not managed by the Subadvisers
at fair value, which ordinarily will be the value determined by their Investment
Managers in accordance with the policies established by the relevant Investment
Fund.
To the extent Subadvisers are engaged to manage the Fund's assets, the Fund will
value the portfolio securities of the Investments Funds managed by the
Subadvisers as described below:
Domestic exchange traded securities and securities included in the Nasdaq
National Market System will be valued at their last composite sale prices as
reported on the exchanges where such securities are traded. If no sales of such
securities are reported on a particular day, the securities will be valued based
upon their composite bid prices for securities held long, or their composite ask
prices for securities held short, as reported by such exchanges. Securities
traded on a foreign securities exchange will be valued at their last sale prices
on the exchange where such securities are primarily traded, or in the absence of
a reported sale on a particular day, at their bid prices, in the case of
securities held long, or ask prices, in the case of securities held short, as
reported by such exchange. Listed options or futures contracts will be valued
using last sales prices as reported by the exchange with the highest reported
daily volume for such options or futures contracts or, in the absence of any
sales on a particular day, at their bid prices as reported by the exchange with
the highest volume on the last day a trade was reported. Other securities for
which market quotations are readily available will be valued at their bid
prices, or ask prices in the case of securities held short, as obtained from one
or more dealers making markets for such securities. If market quotations are not
readily available, securities and other assets will be valued at fair value as
determined in good faith by, or under the supervision of, the Directors.
Debt securities will be valued in accordance with the procedures described
above, which with respect to such securities may include the use of valuations
furnished by a pricing service which employs a matrix to determine valuations
for normal institutional size trading units. The Directors will monitor
periodically the reasonableness of valuations provided by any such pricing
service. Debt securities with remaining maturities of 60 days or less, absent
unusual circumstances, will be valued at amortized cost, so long as such
valuation is determined by the Directors to represent fair value.
All assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars using foreign exchange rates provided by a pricing
service compiled as of 4:00 p.m. London time. Trading in foreign securities
generally is completed, and the values of such securities are determined, prior
to the close of securities markets in the U.S. Foreign exchange rates are also
determined prior to such close. On occasion, the values of securities and
exchange rates may be affected by events occurring between the time as of which
determination of such values or exchange rates are made and the time as of which
the net asset value of the Fund is determined. When such events materially
affect the values of securities held by the Fund or its liabilities, such
securities and liabilities may be valued at fair value as determined in good
faith by, or under the supervision of, the Directors.
Prospective investors should be aware that situations involving uncertainties as
to the valuation of portfolio positions could have an adverse effect on the
Fund's net assets if the Directors' judgments regarding appropriate valuations
should prove incorrect.
SUBSCRIPTION FOR INTERESTS
SUBSCRIPTION TERMS
Both initial and additional subscriptions for interests in the Fund may be
accepted from eligible investors (as described below) at such times as the
Manager may determine on the terms set forth below. The Fund may, in its
discretion, suspend the offering of interests at any time or permit
subscriptions on a more frequent basis. The Fund reserves the right to reject
any subscription for interests in the Fund. After the initial closing, initial
subscriptions and additional capital contributions will generally be accepted
monthly. Generally, the minimum required initial contribution to the capital of
the Fund from each investor is $250,000. For employees or directors of the
Manager and its affiliates, and members of their immediate families, and, in the
sole discretion of the Manager, attorneys or other professional advisors engaged
on behalf of the Fund, and members of their immediate families, the minimum
required initial contribution to the capital of the Fund is $25,000. The Fund
may vary the investment minimums from time to time. The initial closing date for
subscriptions of interests in the Fund is March 29, 1999. The Manager, in its
sole discretion, may accelerate the closing date or may postpone it for up to 60
days. In addition, because the Fund may generate UBTI, charitable remainder
trusts may not want to purchase interests in the Fund because a charitable
remainder trust will not be exempt from Federal income tax under Section 664(c)
of the Code for any year in which it has UBTI. See "TAX ASPECTS--Unrelated
Business Taxable Income."
Except as otherwise permitted by the Fund, initial and any additional
contributions to the capital of the Fund by any Partner will be payable in cash,
and all contributions must be transmitted by such time and in such manner as is
specified in the subscription documents of the Fund. Initial and any additional
contributions to the capital of the Fund will be payable in one installment and
will be due prior to the proposed acceptance of the contribution, although the
Fund may accept, in its discretion, a subscription prior to its receipt of
cleared funds.
Each new Limited Partner will be obligated to agree to be bound by all of the
terms of the Partnership Agreement. Each potential investor also will be
obligated to represent and warrant in a subscription agreement, among other
things, that such investor is purchasing an interest for its own account, and
not with a view to the distribution, assignment, transfer or other disposition
of such interest.
If and when the Fund determines to accept securities as a contribution to the
capital of the Fund, the Fund will charge each Partner making such contribution
an amount determined by the Directors and not exceeding 2% of the value of such
contribution in order to reimburse the Fund for any costs it incurs in
liquidating and accepting such securities. Any such charge will be due and
payable by the contributing Partner in full at the time the contribution to the
capital of the Fund to which such charge relates is due.
ELIGIBLE INVESTORS
Each prospective investor will be required to certify that the interest
subscribed for is being acquired directly or indirectly for the account of an
"accredited investor" as defined in Regulation D under the 1933 Act, and
generally that such investor, as well as each of the investor's equity owners
under certain circumstances, (i) immediately after the time of subscription, has
at least $750,000 under the discretionary investment management of PW Group and
its affiliates or subsidiaries, (ii) at the time of subscription, has a net
worth of more than $1.5 million, or (iii) at the time of subscription, is a
"qualified purchaser" as defined in Section 2(a)(51)(A) of the 1940 Act (a
"Qualified Purchaser"). Existing Limited Partners who subscribe for additional
interests in the Fund and transferees of interests in the Fund may be required
to represent that they meet the foregoing eligibility criteria at the time of
the additional subscription. The relevant investor qualifications will be set
forth in a subscription agreement to be provided to prospective investors, which
must be completed by each prospective investor.
MANAGER'S INVESTMENT IN THE FUND
The Manager, in its capacity as General Partner, is required by the Partnership
Agreement to contribute amounts to the Fund sufficient to maintain its capital
account balance at a level, if any, necessary to ensure that the Fund will be
treated as a partnership for Federal income tax purposes.
REDEMPTIONS, REPURCHASES OF INTERESTS AND TRANSFERS
NO RIGHT OF REDEMPTION
No Partner or other person holding an interest or a portion of an interest will
have the right to require the Fund to redeem the interest or portion thereof. No
public market exists for interests in the Fund, and none is expected to develop.
Consequently, investors may not be able to liquidate their investment other than
as a result of repurchases of interests by the Fund, as described below.
REPURCHASES OF INTERESTS
The Directors, from time to time and in their complete and exclusive discretion,
may determine to direct the Manager to cause the Fund to repurchase interests or
portions thereof from Partners, including the Manager, pursuant to written
tenders by Partners on such terms and conditions as the Directors may determine.
In determining whether the Fund should repurchase interests or portions thereof
from Partners pursuant to written tenders, the Directors will consider the
recommendation of the Manager. The Manager expects that generally, beginning in
2001, it will recommend to the Directors that the Fund offer to repurchase
interests from Partners twice in each year, in June and December, and also
intends to recommend the making of offers to repurchase interests effective as
of April 2000 and December 2000. The Directors also will consider the following
factors, among others, in making such determination:
o whether any Partners have requested to tender interests or portions
thereof to the Fund;
o the liquidity of the Fund's assets;
o the investment plans and working capital requirements of the Fund;
o the relative economies of scale with respect to the size of the Fund;
o the history of the Fund in repurchasing interests or portions thereof;
o the condition of the securities markets; and
o the anticipated tax consequences of any proposed repurchases of
interests or portions thereof.
The Directors will determine that the Fund repurchase interests or portions
thereof from Partners pursuant to written tenders only on terms they determine
to be fair to the Fund and to all Partners or persons holding interests acquired
from Partners as applicable. When the Directors determine that the Fund will
repurchase interests in the Fund or portions thereof, notice will be provided to
each Partner describing the terms thereof, and containing information Partners
should consider in deciding whether and how to participate in such repurchase
opportunity. Partners who are deciding whether to tender their interests or
portions thereof during the period that a repurchase offer is open may ascertain
the net asset value of their interest in the Fund from the Manager during such
period.
The Partnership Agreement provides that the Fund shall be dissolved if the
interest of any Limited Partner that has submitted a written request to tender
its entire interest for repurchase by the Fund has not been repurchased within a
period of two years of such request.
Repurchases of interests or portions thereof from Partners by the Fund may be
made, in the discretion of the Manager, in part or in whole for cash or for
securities of equivalent value and will be effective after receipt by the Fund
of all eligible written tenders of interests or portions thereof from Partners.
The amount due to any Partner whose interest or portion thereof is repurchased
will be equal to the value of the Partner's capital account or portion thereof
based on the net asset value of the Fund's assets as of the effective date of
repurchase, after giving effect to all allocations to be made to the Partner's
capital account as of such date. Payment of the purchase price pursuant to a
tender of interests will consist of, first, cash and/or securities traded on an
established securities exchange, valued at net asset value in accordance with
the Partnership Agreement and distributed to tendering Partners on a pari passu
basis, in an aggregate amount equal to at least 95% of the estimated unaudited
net asset value of the interests tendered, determined as of the expiration date
of the tender offer (the "expiration date"). Payment of such amount will be made
promptly after the expiration date (the "cash payment"). Generally, payment
pursuant to such a tender also will consist of a promissory note that bears no
interest and is not transferable (the "note") entitling the holder thereof to a
contingent payment equal to the excess, if any, of (a) the net asset value of
the interests tendered as of the expiration date, determined based on the
audited financial statements of the Fund, over (b) the cash payment. The note
would be delivered to the tendering Partner promptly after the expiration date
and would be payable in cash promptly after completion of the audit of the
financial statements of the Fund. The audit of the Fund's financial statements
is expected to be completed within 60 days after the end of each year. The Fund
does not impose any charges on a repurchase of interests or portion of interests
in the Fund, although it may allocate to tendering Partners withdrawal or
similar charges imposed by Investment Funds that are not advised by a Subadviser
if the Manager determined to withdraw from the Investment Fund as a result of a
tender and such a charge was imposed on the Fund.
The Fund intends to maintain daily a segregated account containing permissible
liquid assets in an amount equal to the aggregate amount of the notes. Payment
for repurchased interests may require the Fund to liquidate portfolio holdings
earlier than the Manager otherwise would liquidate such holdings, potentially
resulting in losses, and may increase the Fund's portfolio turnover. The Manager
intends to take measures to attempt to avoid or minimize such potential losses
and turnover.
The Fund may repurchase an interest in the Fund or portion thereof of a Partner
or any person acquiring an interest or portion thereof from or through a Partner
if:
o such an interest or portion thereof has been transferred or such an
interest or portion thereof has vested in any person by operation of
law as the result of the death, dissolution, bankruptcy or
incompetency of a Partner;
o ownership of such an interest by a Partner or other person will cause
the Fund to be in violation of, or require registration of any
interest or portion thereof under, or subject the Fund to additional
registration or regulation under, the securities, commodities or other
laws of the United States or any other relevant jurisdiction;
o continued ownership of such an interest may be harmful or injurious to
the business or reputation of the Fund or the Manager, or may subject
the Fund or any Partners to an undue risk of adverse tax or other
fiscal consequences;
o any of the representations and warranties made by a Partner in
connection with the acquisition of an interest in the Fund or portion
thereof was not true when made or has ceased to be true; or
o it would be in the best interests of the Fund for the Fund to
repurchase such an interest or portion thereof.
The Manager is entitled to tender for repurchase all or a portion of its
interest in the Fund only if the Manager maintains the requisite minimum capital
account balance described previously, or if, in the opinion of legal counsel to
the Fund, such repurchase would not jeopardize the classification of the Fund as
a partnership for U.S. Federal income tax purposes. The Manager also is entitled
to tender its interest to the Fund in certain circumstances described in the
Partnership Agreement where the status of the Manager is terminated or the
authority of the Manager to provide Advice and Management is terminated.
TRANSFERS OF INTERESTS
No person may become a substituted Limited Partner without the written consent
of the Manager, which consent may be withheld for any reason in the Manager's
sole and absolute discretion. Limited Partner interests may be transferred only
(i) by operation of law pursuant to the death, bankruptcy, insolvency or
dissolution of a Limited Partner or (ii) with the written consent of the
Manager, which may be withheld in its sole and absolute discretion and is
expected to be granted, if at all, only under extenuating circumstances, in
connection with a transfer to a family trust or other entity that does not
result in a change of beneficial ownership. Notice to the Manager of any
proposed transfer must include evidence satisfactory to the Manager that the
proposed transfer is exempt from registration under the 1933 Act, that the
proposed transferee meets any requirements imposed by the Fund with respect to
investor eligibility and suitability, including the requirement that any
investor, or investor's equity owners in certain circumstances, (i) immediately
after the time of subscription, has at least $750,000 under the discretionary
investment management of PW Group and its affiliates or subsidiaries, (ii) at
the time of subscription, has a net worth of more than $1.5 million, or (iii) at
the time of subscription, is a Qualified Purchaser, and must be accompanied by a
properly completed subscription agreement. In addition to the foregoing, no
Limited Partner will be permitted to transfer an interest or portion thereof
unless after such transfer the balance of the capital account of the transferee,
and any Limited Partner transferring less than its entire interest, is at least
equal to the amount of the Limited Partner's initial capital contribution.
Any transferee meeting the eligibility requirements that acquires an interest or
portion thereof in the Fund by operation of law as the result of the death,
dissolution, bankruptcy or incompetency of a Limited Partner or otherwise, will
be entitled to the allocations and distributions allocable to the interest so
acquired and to transfer such interest in accordance with the terms of the
Partnership Agreement, but will not be entitled to the other rights of a Limited
Partner unless and until such transferee becomes a substituted Limited Partner
as provided in the Partnership Agreement. If a Limited Partner transfers an
interest or portion thereof with the approval of the Manager, under the policies
established by the Directors, the Manager will promptly take all necessary
actions to admit such transferee or successor to the Fund as a Limited Partner.
Each Limited Partner and transferee is required to pay all expenses, including
attorneys' and accountants' fees, incurred by the Fund in connection with such
transfer. If such a transferee does not meet the investor eligibility
requirements, the Fund reserves the right to redeem its partnership interest.
By subscribing for an interest in the Fund, each Limited Partner has agreed to
indemnify and hold harmless the Fund, the Directors, the Manager, each other
Limited Partner and any affiliate of the foregoing against all losses, claims,
damages, liabilities, costs and expenses, including legal or other expenses
incurred in investigating or defending against any such losses, claims, damages,
liabilities, costs and expenses or any judgments, fines and amounts paid in
settlement, joint or several, to which such persons may become subject by reason
of or arising from any transfer made by such Limited Partner in violation of
these provisions or any misrepresentation made by such Limited Partner in
connection with any such transfer.
The Manager may not transfer its interest as a General Partner, except to a
person who has agreed to be bound by all of the terms of the Partnership
Agreement and pursuant to applicable law.
TAX ASPECTS
The following is a summary of certain aspects of the income taxation of the Fund
and its Partners which should be considered by a prospective Limited Partner.
The Fund has not sought a ruling from the Internal Revenue Service (the
"Service") or any other Federal, state or local agency with respect to any of
the tax issues affecting the Fund, nor has it obtained an opinion of counsel
with respect to any tax issues other than the characterization of the Fund as a
partnership for Federal income tax purposes.
This summary of certain aspects of the Federal income tax treatment of the Fund
is based upon the Code, judicial decisions, Treasury Regulations (the
"Regulations") and rulings in existence on the date hereof, all of which are
subject to change. This summary does not discuss the impact of various proposals
to amend the Code which could change certain of the tax consequences of an
investment in the Fund. This summary also does not discuss all of the tax
consequences that may be relevant to a particular investor, to investors that
acquire interests in the Fund other than for cash or to certain investors
subject to special treatment under the Federal income tax laws, such as
insurance companies.
EACH PROSPECTIVE LIMITED PARTNER SHOULD CONSULT WITH ITS OWN TAX ADVISER IN
ORDER FULLY TO UNDERSTAND THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE FUND.
In addition to the particular matters set forth in this section, tax-exempt
organizations should review carefully those sections of this Memorandum
regarding liquidity and other financial matters to ascertain whether the
investment objective of the Fund is consistent with their overall investment
plans. Each prospective tax-exempt Limited Partner is urged to consult its own
counsel regarding the acquisition of Fund interests.
TAX TREATMENT OF FUND OPERATIONS
CLASSIFICATION OF THE FUND. The Fund has received an opinion of Stroock &
Stroock & Lavan LLP, counsel to the Fund, that under the provisions of the Code
and the Regulations, as in effect on the date of the opinion, the Fund will be
treated as a partnership for Federal income tax purposes and not as an
association taxable as a corporation.
Under Section 7704 of the Code, "publicly traded partnerships" are generally
treated as corporations for Federal income tax purposes. A publicly traded
partnership is any partnership the interests in which are traded on an
established securities market or which are readily tradable on a secondary
market, or the substantial equivalent thereof. Interests in the Fund will not be
traded on an established securities market. Regulations concerning the
classification of partnerships as publicly traded partnerships provide certain
safe harbors under which interests in a partnership will not be considered
readily tradable on a secondary market, or the substantial equivalent thereof.
The Fund will not be eligible for any of those safe harbors. In particular, it
will not qualify under the private placement safe harbor set forth in the
Regulations if, as is anticipated, the Fund has more than 100 Partners.
The Regulations specifically provide that the fact that a partnership does not
qualify for the safe harbors is disregarded for purposes of determining whether
interests in a partnership are readily tradable on a secondary market, or the
substantial equivalent thereof. Rather, in this event the partnership's status
is examined under a general facts and circumstances test set forth in the
Regulations. Counsel to the Fund has rendered its opinion that, under this
"facts and circumstances" test, and based upon the anticipated operations of the
Fund as well as the legislative history to Section 7704 and the text of the
Regulations, interests in the Fund will not be readily tradable on a secondary
market, or the substantial equivalent thereof, and, therefore, the Fund will not
be treated as a publicly traded partnership taxable as a corporation.
Neither of the opinions of counsel described above, however, is binding on the
Service or the courts. If it were determined that the Fund should be treated as
an association or a publicly traded partnership taxable as a corporation for
Federal income tax purposes, as a result of a successful challenge to such
opinions by the Service, changes in the Code, the Regulations or judicial
interpretations thereof, a material adverse change in facts, or otherwise, the
taxable income of the Fund would be subject to corporate income tax when
recognized by the Fund; distributions of such income, other than in certain
redemptions of Fund interests, would be treated as dividend income when received
by the Partners to the extent of the Fund's current or accumulated earnings and
profits; and Partners would not be entitled to report profits or losses realized
by the Fund.
Unless otherwise indicated, references in the following discussion to the tax
consequences of Fund investments, activities, income, gain and loss, include the
direct investments, activities, income, gain and loss of the Fund, and those
indirectly attributable to the Fund as a result of it being a member of an
Investment Fund.
As a partnership, the Fund is not itself subject to Federal income tax. Each
Limited Partner will be taxed upon its distributive share of each item of the
Fund's income, gain, loss and deductions allocated to the Fund (including from
investments in other partnerships) for each taxable year of the Fund ending with
or within the Limited Partner's taxable year. Each item will have the same
character to a Limited Partner, and will generally have the same source (either
United States or foreign), as though the Limited Partner realized the item
directly. Limited Partners must report these items regardless of the extent to
which, or whether, the Fund or Limited Partners receive cash distributions for
such taxable year, and thus may incur income tax liabilities unrelated to any
distributions to or from the Fund.
ALLOCATION OF PROFITS AND LOSSES. Under the Partnership Agreement, the Fund's
net capital appreciation or net capital depreciation for each accounting period
is allocated among the Partners and to their capital accounts without regard to
the amount of income or loss actually recognized by the Fund for Federal income
tax purposes. The Partnership Agreement provides that items of income,
deduction, gain, loss or credit actually recognized by the Fund for each fiscal
year generally are to be allocated for income tax purposes among the Partners
pursuant to Regulations issued under Sections 704(b) and 704(c) of the Code,
based upon amounts of the Fund's net capital appreciation or net capital
depreciation allocated to each Partner's capital account for the current and
prior fiscal years.
Under the Partnership Agreement, the Manager has the discretion to allocate
specially an amount of the Fund's net capital gains, including short-term
capital gain, for Federal income tax purposes to a withdrawing Limited Partner
to the extent that the Partner's capital account exceeds its Federal income tax
basis in its partnership interest. There can be no assurance that, if the
Manager makes such a special allocation, the Service will accept such
allocation. If such allocation is successfully challenged by the Service, the
Fund's gains allocable to the remaining Partners would be increased.
TAX ELECTIONS; RETURNS; TAX AUDITS. The Code provides for optional adjustments
to the basis of partnership property upon distributions of partnership property
to a partner and transfers of partnership interests, including by reason of
death, provided that a partnership election has been made pursuant to Section
754. Under the Partnership Agreement, at the request of a Partner, the Manager,
in its sole discretion, may cause the Fund to make such an election. Any such
election, once made, cannot be revoked without the Service's consent. As a
result of the complexity and added expense of the tax accounting required to
implement such an election, the Manager does not presently intend to make such
election.
The Manager decides how to report the partnership items on the Fund's tax
returns, and all Partners are required under the Code to treat the items
consistently on their own returns, unless they file a statement with the Service
disclosing the inconsistency. In the event the income tax returns of the Fund
are audited by the Service, the tax treatment of the Fund's income and
deductions generally is determined at the partnership level in a single
proceeding rather than by individual audits of the Partners. The Manager,
designated as the "Tax Matters Partner," has considerable authority to make
decisions affecting the tax treatment and procedural rights of all Partners. In
addition, the Tax Matters Partner has the authority to bind certain Partners to
settlement agreements and the right on behalf of all Partners to extend the
statute of limitations relating to the Partners' tax liabilities with respect to
Fund items.
TAX CONSEQUENCES TO A WITHDRAWING LIMITED PARTNER
A Limited Partner receiving a cash liquidating distribution from the Fund, in
connection with a complete withdrawal from the Fund generally will recognize
capital gain or loss to the extent of the difference between the proceeds
received by such Limited Partner and such Limited Partner's adjusted tax basis
in its partnership interest. Such capital gain or loss will be short-term or
long-term depending upon the Limited Partner's holding period for its interest
in the Fund. However, a withdrawing Limited Partner will recognize ordinary
income to the extent such Limited Partner's allocable share of the Fund's
"unrealized receivables" exceeds the Limited Partner's basis in such unrealized
receivables, as determined pursuant to the Regulations. For these purposes,
accrued but untaxed market discount, if any, on securities held by the Fund will
be treated as an unrealized receivable with respect to the withdrawing Limited
Partner. A Limited Partner receiving a cash nonliquidating distribution will
recognize income in a similar manner only to the extent that the amount of the
distribution exceeds such Limited Partner's adjusted tax basis in its
partnership interest.
As discussed above, the Partnership Agreement provides that the Manager may
specially allocate items of Fund capital gain, including short-term capital
gain, to a withdrawing Limited Partner to the extent its liquidating
distribution would otherwise exceed its adjusted tax basis in its Fund interest.
Such a special allocation may result in the withdrawing Partner recognizing
capital gain, which may include short-term gain, in the Partner's last taxable
year in the Fund, thereby reducing the amount of long-term capital gain
recognized during the tax year in which it receives its liquidating distribution
upon withdrawal.
Distributions of property other than cash, whether in complete or partial
liquidation of a Limited Partner's interest in the Fund, generally will not
result in the recognition of taxable income or loss to the Limited Partner,
except to the extent such distribution is treated as made in exchange for such
Limited Partner's share of the Fund's unrealized receivables.1
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1 It should be noted however, that gain generally must be
recognized where the distribution consists of marketable
securities unless the distributing partnership is an "investment
partnership" and the recipient is an "eligible partner" as
defined in Section 731(c) of the Code. While there can be no
assurance, the General Partner anticipates that the Partnership
will qualify as an "investment partnership." Thus, if a Limited
Partner is an "eligible partner," which term should include a
Limited Partner whose sole contributions to the Partnership
consisted of cash, the nonrecognition rule described above should apply
<PAGE>
TAX TREATMENT OF FUND INVESTMENTS
IN GENERAL. The Fund through the Investment Funds expects to act as a trader or
investor, and not as a dealer, with respect to its securities transactions. A
trader and an investor are persons who buy and sell securities for their own
accounts. A dealer, on the other hand, is a person who pruchases securites for
resale to customers rather than for investment or speculation.
Generally, the gains and losses realized by a trader or investor on the sale of
securities are capital gains and losses. Thus, subject to the treatment of
certain currency exchange gains as ordinary income and certain other
transactions described below, the Fund expects that its gains and losses from
its securities transactions typically will be capital gains and capital losses.
See "Currency Fluctuations--'Section 988' Gains or Losses" below and certain
other transactions described below. These capital gains and losses may be
long-term or short-term depending, in general, upon the length of time a
particular investment position is maintained and, in some cases, upon the nature
of the transaction. Property held for more than one year generally will be
eligible for long-term capital gain or loss treatment. The application of
certain rules relating to short sales, to so-called "straddle" and "wash sale"
transactions and to "Section 1256 contracts" may serve to alter the manner in
which the holding period for a security is determined or may otherwise affect
the characterization as long-term or short-term, and also the timing of the
realization, of certain gains or losses. Moreover, the straddle rules and short
sale rules may require the capitalization of certain related expenses.
The maximum ordinary income tax rate for individuals is 39.6%, and the maximum
individual income tax rate for long-term capital gains is 20%, unless the
taxpayer elects to be taxed at ordinary rates, although in any case the actual
rate may be higher due to the phase out of certain tax deductions and
exemptions. See "Limitation on Deductibility of Interest" below. The excess of
capital losses over capital gains may be offset against the ordinary income of
an individual taxpayer, subject to an annual deduction limitation of $3,000. For
corporate taxpayers, the maximum income tax rate is 35%. Capital losses of a
corporate taxpayer may be offset only against capital gains, but unused capital
losses may be carried back three years, subject to certain limitations, and
carried forward five years.
The Fund may realize ordinary income from accruals of interest and dividends on
securities. The Fund through the Investment Funds may hold debt obligations with
"original issue discount." In such case, the Fund would be required to include
amounts in taxable income on a current basis even though receipt of such amounts
may occur in a subsequent year. The Fund through the Investment Funds also may
acquire debt obligations with "market discount." Upon disposition of such an
obligation, the Fund generally would be required to treat gain realized as
interest income to the extent of the market discount which accrued during the
period the debt obligation was held. The Fund may realize ordinary income or
loss with respect to its investments in partnerships engaged in a trade or
business. Income or loss from transactions involving derivative instruments,
such as swap transactions, also may constitute ordinary income or loss. In
addition, periodic amounts payable by the Investment Funds in connection with
equity swaps, interest rate swaps, caps, floors and collars likely would be
considered "miscellaneous itemized deductions" which, for a noncorporate Limited
Partner, may be subject to restrictions on their deductibility. See
"Deductibility of Fund Investment Expenditures by Noncorporate Limited Partners"
below. Moreover, gain recognized from certain "conversion transactions" will be
treated as ordinary income.2
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2 Generally, a conversion transaction is one of several
enumerated transactions where substantially all of the
taxpayer's return is attributable to the time value of the
net investment in the transaction. The enumerated
transactions are (i) the holding of any property, whether
or not actively traded, and entering into a contract to
sell such property, or substantially identical property, at
a price determined in accordance with such contract, but
only if such property was acquired and such contract was
entered into on a substantially contemporaneous basis,
(ii) certain straddles, (iii) generally any other
transaction that is marketed or sold on the basis that it
would have the economic characteristics of a loan but the
interest-like return would be taxed as capital gain or
(iv) any other transaction specified in Regulations.
<PAGE>
CURRENCY FLUCTUATIONS--"SECTION 988" GAINS OR LOSSES. The amount of gain or loss
on securities denominated in a foreign currency frequently will be affected by
the fluctuation in the value of such foreign currencies relative to the value of
the dollar. Generally, gains or losses with respect to investments in common
stock of foreign issuers will be taxed as capital gains or losses at the time of
the disposition of such stock. However, under Section 988 of the Code, gains and
losses on the acquisition and disposition of foreign currency (e.g., the
purchase of foreign currency and subsequent use of the currency to acquire
stock) will be treated as ordinary income or loss. Moreover, under Section 988,
gains or losses on disposition of debt securities denominated in a foreign
currency to the extent attributable to fluctuation in the value of the foreign
currency between the date of acquisition of the debt security and the date of
disposition will be treated as ordinary income or loss. Similarly, gains or
losses attributable to fluctuations in exchange rates that occur between the
time the taxpayer accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the taxpayer
actually collects such receivables or pays such liabilities may be treated as
ordinary income or ordinary loss.
The Fund through the Investment Funds may acquire foreign currency forward
contracts. See "TYPES OF INVESTMENTS AND RELATED RISK FACTORS--Foreign Currency
Transactions." Generally, any gain or loss with respect to any forward currency
contracts will be ordinary, unless (i) the contract is a capital asset in the
hands of the holder and is not a part of a straddle transaction and (ii) the
holder makes an election, by the close of the day the transaction is entered
into, to treat the gain or loss attributable to such contract as capital gain or
loss.
SECTION 1256 CONTRACTS. In the case of "Section 1256 Contracts," the Code
generally applies a "mark to market" system of taxing unrealized gains and
losses on such contracts and otherwise provides for special rules of taxation.
Under these rules, Section 1256 Contracts, which include certain regulated
futures contracts, certain foreign currency forward contracts and certain
options contracts, held at the end of each taxable year are treated for Federal
income tax purposes as if they were sold by the holder for their fair market
value on the last business day of such taxable year. The net gain or loss, if
any, resulting from such deemed sales, known as "marking to market," together
with any gain or loss resulting from actual sales of Section 1256 Contracts,
must be taken into account by the holder in computing its taxable income for
such year. If a Section 1256 Contract held at the end of a taxable year is sold
in the following year, the amount of any gain or loss realized on such sale will
be adjusted to reflect the gain or loss previously taken into account under the
"mark to market" rules.
Capital gains and losses from such Section 1256 contracts generally are
characterized as short-term capital gains or losses to the extent of 40%
thereof and as long-term capital gains or losses to the extent of 60% thereof.
Such gains and losses will be taxed under the general rules described above.
Gains and losses from certain foreign currency transactions will be treated as
ordinary income and losses. See 'Currency Fluctuations--'Section 988' Gains or
Losses." If an individual taxpayer incurs a net capital loss for a year, the
portion thereof, if any, which consists of a net loss on "Section 1256
Contracts" may, at the election of the taxpayer, be carried back three years.
Losses so carried back may be deducted only against net capital gain to the
extent that such gain includes gains on "Section 1256 Contracts."
MIXED STRADDLE ELECTION. The Code allows a taxpayer to elect to offset gains and
losses from positions which are part of a "mixed straddle." A "mixed straddle"
is any straddle in which one or more but not all positions are Section 1256
Contracts.
Temporary Regulations provide for the establishment of mixed straddle accounts
for certain of its mixed straddle trading positions. The mixed straddle account
rules require a daily "marking to market" of all open positions in the account
and a daily netting of gains and losses from positions in the account. At the
end of a taxable year, the annual net gains or losses from the mixed straddle
account are recognized for tax purposes. The application of the Temporary
Regulations' mixed straddle account rules is not entirely clear, and therefore,
there can be no assurance that a mixed straddle account election in the
circumstances here will be accepted by the Service.
SHORT SALES. Gain or loss from a short sale of property is generally considered
as capital gain or loss to the extent the property used to close the short sale
constitutes a capital asset in the taxpayer's hands. Except with respect to
certain situations where the property used to close a short sale has a long-term
holding period on the date of the short sale, special rules would generally
treat the gains on short sales as short-term capital gains. These rules may also
terminate the running of the holding period of "substantially identical
property" held by the taxpayer. Moreover, a loss on a short sale will be treated
as a long-term capital loss if, on the date of the short sale, "substantially
identical property" has been held by the taxpayer for more than one year.
The Taxpayer Relief Act of 1997 included constructive sale provisions that
generally will apply if the taxpayer either holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests and then enters into a short sale respecting the same or substantially
identical property or holds an appreciated financial position that is a short
sale and then acquires property that is the same as or substantially identical
to the underlying property. In each instance, with certain exceptions, the
taxpayer generally will recognize gain as if the appreciated financial position
were sold at its fair market value on the date it enters into the short sale or
acquires the property, respectively. The holding period for any appreciated
financial position that is subject to the constructive sale rules will be
determined as if such position were acquired on the date of the constructive
sale.
EFFECT OF STRADDLE RULES ON PARTNERS' SECURITIES POSITIONS. The Service may
treat certain positions in securities held, directly or indirectly, by a Limited
Partner and its indirect interest in similar securities held by the Fund as
"straddles" for Federal income tax purposes. The application of the "straddle"
rules in such a case could affect a Limited Partner's holding period for the
securities involved and may defer the recognition of losses with respect to such
securities.
LIMITATION ON DEDUCTIBILITY OF INTEREST. For noncorporate taxpayers, Section
163(d) of the Code limits the deduction for "investment interest" (i.e.,
interest or short sale expenses for "indebtedness incurred or continued to
purchase or carry property held for investment"). Investment interest is not
deductible in the current year to the extent that it exceeds the taxpayer's
"investment income," consisting of net gain and ordinary income derived from
investments in the current year. For this purpose, any long-term capital gain is
excluded from investment income unless the taxpayer elects to pay tax on such
amount at ordinary income tax rates.
For purposes of this provision, the Fund's activities will be treated as giving
rise to investment income for a Limited Partner, and the investment interest
limitation would apply to a noncorporate Limited Partner's share of the interest
and short sale expenses attributable to the Fund's operation. In such case, a
noncorporate Limited Partner would be denied a deduction for all or part of that
portion of its distributive share of the Fund's ordinary losses attributable to
interest and short sale expenses unless it had sufficient investment income from
all sources including the Fund. A Limited Partner that could not deduct losses
currently as a result of the application of Section 163(d) would be entitled to
carry forward such losses to future years, subject to the same limitation. The
investment interest limitation would also apply to interest paid by a
noncorporate Limited Partner on money borrowed to finance its investment in the
Fund. Potential investors are advised to consult with their own tax advisers
with respect to the application of the investment interest limitation in their
particular tax situations.
DEDUCTIBILITY OF FUND INVESTMENT EXPENDITURES BY NONCORPORATE PARTNERS.
Investment expenses (e.g., investment advisory fees) of an individual, trust and
estate are deductible only to the extent that such expenses exceed 2% of
adjusted gross income.3 In addition, the Code further restricts the ability of
an individual with an adjusted gross income in excess of a specified amount, for
1999, $126,600 or $63,300 for a married person filing a separate return, to
deduct such investment expenses. Under such provision, investment expenses in
excess of 2% of adjusted gross income may only be deducted to the extent such
excess expenses, along with certain other itemized deductions, exceed the lesser
of (i) 3% of the excess of the individual's adjusted gross income over the
specified amount or (ii) 80% of the amount of certain itemized deductions
otherwise allowable for the taxable year. Moreover, such investment expenses are
miscellaneous itemized deductions which are not deductible by a noncorporate
taxpayer in calculating its alternative minimum tax liability.
- --------------
3 However, Section 67(e) of the Code provides that, in the
case of a trust or an estate, such limitation does not
apply to deductions or costs which are paid or incurred in
connection with the administration of the estate or trust
and would not have been incurred if the property were not
held in such trust or estate. The Federal Court of Appeals
for the Sixth Circuit, reversing a Tax Court decision, has
held that the investment advisory fees incurred by a trust
were exempt (under Section 67(e)) from 2% of adjusted gross
income floor on deductibility. The Service, however, has
stated that it will not follow this decision outside of the
Sixth Circuit. Limited Partners that are trusts or estates
should consult their tax advisers as to the applicability
of this case to the investment expenses that are allocated
to them.
<PAGE>
Pursuant to Temporary Regulations issued by the Treasury Department, these
limitations on deductibility should not apply to a noncorporate Limited
Partner's share of the expenses of the Fund to the extent that such expenses are
allocable to an Investment Fund that is considered to be in a trade or business
within the meaning of the Code. These limitations will apply, however, to a
noncorporate Limited Partner's share of the expenses of the Fund to the extent
that such expenses are allocable to an Investment Fund that is not considered to
be in a trade or business within the meaning of the Code. Although the Fund
intends to treat the trade or business related expenses and any
performance-based allocations as not being subject to the foregoing limitations
on deductibility, there can be no assurance that the Service may not treat such
items as investment expenses which are subject to the limitations. The
consequences of these limitations will vary depending upon the particular tax
situation of each taxpayer. Accordingly, noncorporate Limited Partners should
consult their tax advisers with respect to the application of these limitations.
APPLICATION OF RULES FOR INCOME AND LOSSES FROM PASSIVE ACTIVITIES. The Code
restricts the deductibility of losses from a "passive activity" against certain
income which is not derived from a passive activity. This restriction applies to
individuals, personal service corporations and certain closely held
corporations. Pursuant to Temporary Regulations issued by the Treasury
Department, income or loss from the Fund's securities trading activity generally
will not constitute income or loss from a passive activity. Therefore, passive
losses from other sources generally could not be deducted against a Limited
Partner's share of income and gain from the Fund. Income or loss attributable to
investments in partnerships engaged in a trade or business may constitute
passive activity income or loss.
"PHANTOM INCOME" FROM FUND INVESTMENTS. Pursuant to various "anti-deferral"
provisions of the Code (the "Subpart F," "passive foreign investment company"
and "foreign personal holding company" provisions), investments, if any, by the
Fund through the Investment Funds in certain foreign corporations may cause a
Limited Partner to (i) recognize taxable income prior to the Fund's receipt of
distributable proceeds, (ii) pay an interest charge on receipts that are deemed
as having been deferred or (iii) recognize ordinary income that, but for the
"anti-deferral" provisions, would have been treated as long-term capital gain.
FOREIGN TAXES
It is possible that certain dividends and interest received from sources within
foreign countries will be subject to withholding taxes imposed by such
countries. In addition, some foreign countries may impose capital gains taxes on
certain securities transactions involving foreign issuers. Tax treaties between
certain countries and the United States may reduce or eliminate such taxes.
The Fund will inform Partners of their proportionate share of the foreign taxes
paid or incurred by the Fund that Partners will be required to include in their
income. The Partners generally will be entitled to claim either a credit,
subject to the limitations discussed below, and provided that, in the case of
dividends, the foreign stock is held for the requisite holding period, or, if
they itemize their deductions, a deduction, subject to the limitations generally
applicable to deductions, for their share of such foreign taxes in computing
their Federal income taxes. A Partner that is tax exempt will not ordinarily
benefit from such credit or deduction.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the Partner's Federal tax, before the credit, attributable to its
total foreign source taxable income. A Partner's share of dividends and interest
from non-U.S. securities generally will qualify as foreign source income.
Generally, the source of income realized upon the sale of personal property,
such as securities, will be based on the residence of the seller. In the case of
a partnership, the determining factor is the residence of the partner. Thus,
absent a tax treaty to the contrary, the gains from the sale of securities
allocable to a Partner that is a U.S. resident will be treated as derived from
U.S. sources, even though the securities are sold in foreign countries. However,
proposed regulations would generally provide that certain securities losses
realized by U.S. residents would be recharacterized as foreign source to the
extent of certain dividends and other deemed inclusions of income taken into
account by that U.S. resident in respect of the shares during the two-year
period ending on the date of the sale. Certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables, will also be treated as ordinary income derived from
U.S. sources.
The limitation on the foreign tax credit is applied separately to foreign source
passive income, such as dividends and interest. In addition, the foreign tax
credit is allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals.
Furthermore, for foreign tax credit limitation purposes, the amount of a
Partner's foreign source income is reduced by various deductions that are
allocated and/or apportioned to such foreign source income. One such deduction
is interest expense, a portion of which generally will reduce the foreign source
income of any Partner who owns (directly or indirectly) foreign assets. For
these purposes, foreign assets owned by the Fund will be treated as owned by the
investors in the Fund and indebtedness incurred by the Fund will be treated as
incurred by investors in the Fund. Because of these limitations, Partners may be
unable to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. The foregoing is only a general description of
the foreign tax credit under current law. Moreover, since the availability of a
credit or deduction depends on the particular circumstances of each Partner,
Partners are advised to consult their own tax advisers.
UNRELATED BUSINESS TAXABLE INCOME
Generally, an exempt organization is exempt from Federal income tax on its
passive investment income, such as dividends, interest and capital gains,
whether realized by the organization directly or indirectly through a
partnership in which it is a partner.4
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4 With certain exceptions, tax-exempt organizations which are
private foundations are subject to a 2% Federal excise tax
on their "net investment income." The rate of the excise
tax for any taxable year may be reduced to 1% if the
private foundation meets certain distribution requirements
for the taxable year. A private foundation will be
required to make payments of estimated tax with respect to
this excise tax.
<PAGE>
This general exemption from tax does not apply to the UBTI of an exempt
organization. Generally, except as noted above with respect to certain
categories of exempt trading activity, UBTI includes income or gain derived,
either directly or through partnerships, from a trade or business, the conduct
of which is substantially unrelated to the exercise or performance of the
organization's exempt purpose or function. UBTI also includes "unrelated
debt-financed income," which generally consists of (i) income derived by an
exempt organization, directly or through a partnership, from income-producing
property with respect to which there is "acquisition indebtedness" at any time
during the taxable year, and (ii) gains derived by an exempt organization,
directly or through a partnership, from the disposition of property with respect
to which there is "acquisition indebtedness" at any time during the 12-month
period ending with the date of such disposition. With respect to its investments
in partnerships engaged in a trade or business, the Fund's income, or loss, from
these investments may constitute UBTI.
The Fund through the Investment Funds may incur "acquisition indebtedness" with
respect to certain transactions, such as the purchase of securities on margin.
Based upon a published ruling issued by the Service which generally holds that
income and gain with respect to short sales of publicly traded stock does not
constitute income from debt financed property for purposes of computing UBTI,
short sales of securities will be treated as not involving "acquisition
indebtedness" and therefore not generating UBTI.5 The percentage of income
(i.e., dividends and interest) from securities with respect to which there is
"acquisition indebtedness" during a taxable year which will be treated as UBTI
generally will be based on the percentage which the "average acquisition
indebtedness" incurred with respect to such securities is of the "average amount
of the adjusted basis" of such securities during the taxable year.
The percentage of capital gain from securities with respect to which there is
"acquisition indebtedness" at any time during the twelve-month period ending
with the date of their disposition which will be treated as UBTI will be based
on the percentage which the highest amount of such "acquisition indebtedness" is
of the "average amount of the adjusted basis" of such securities during the
taxable year. In determining the unrelated debt-financed income of the Fund, an
allocable portion of deductions directly connected with the debt-financed
property is taken into account. Thus, for instance, a percentage of capital
losses from debt-financed securities, based on the debt/basis percentage
calculation described above, would offset gains treated as UBTI.
Since the calculation of the Fund's "unrelated debt-financed income" is complex
and will depend in large part on the amount of leverage, if any, used by the
Investment Funds from time to time,6 it is impossible to predict what percentage
of the Fund's income and gains will be treated as UBTI for a Limited Partner
which is an exempt organization. An exempt organization's share of the income or
gains of the Fund which is treated as UBTI may not be offset by losses of the
exempt organization either from the Fund or otherwise, unless such losses are
treated as attributable to an unrelated trade or business (e.g., losses from
securities for which there is acquisition indebtedness).
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5 Moreover, income realized from option writing and futures contract
transactions generally would not constitute UBTI.
6 The calculation of a particular exempt organization's UBTI would also
be affected if it incurs indebtedness to finance its investment in the
Fund. An exempt organization is required to make estimated tax payments
with respect to UBTI.
<PAGE>
To the extent that the Fund generates UBTI, the applicable Federal tax rate for
such a Limited Partner generally would be either the corporate or trust tax rate
depending upon the nature of the particular exempt organization. An exempt
organization may be required to support, to the satisfaction of the Service, the
method used to calculate its UBTI. The Fund will be required to report to a
Partner which is an exempt organization information as to the portion, if any,
of its income and gains from the Fund for each year which will be treated as
UBTI. The calculation of such amount with respect to transactions entered into
by the Fund is highly complex, and there is no assurance that the Fund's
calculation of UBTI will be accepted by the Service.
In general, if UBTI is allocated to an exempt organization such as a qualified
retirement plan or a private foundation, the portion of the Fund's income and
gains which is not treated as UBTI will continue to be exempt from tax, as will
the organization's income and gains from other investments which are not treated
as UBTI. Therefore, the possibility of realizing UBTI from its investment in the
Fund generally should not affect the tax-exempt status of such an exempt
organization.7 However, a charitable remainder trust will not be exempt from
Federal income tax under Section 664(c) of the Code for any year in which it has
UBTI. A title-holding company will not be exempt from tax if it has certain
types of UBTI. Moreover, the charitable contribution deduction for a trust under
Section 642(c) of the Code may be limited for any year in which the trust has
UBTI. A prospective investor should consult its tax adviser with respect to the
tax consequences of receiving UBTI from the Fund. See "ERISA CONSIDERATIONS."
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7 Certain exempt organizations which realize UBTI in a
taxable year will not constitute "qualified organizations"
for purposes of Section 514(c)(9)(B)(iv)(I) of the Code,
pursuant to which, in limited circumstances, income from
certain real estate partnerships in which such
organizations invest might be treated as exempt from UBTI.
A prospective tax-exempt Limited Partner should consult its
tax adviser in this regard.
<PAGE>
CERTAIN ISSUES PERTAINING TO SPECIFIC EXEMPT ORGANIZATIONS
PRIVATE FOUNDATIONS. Private foundations and their managers are subject to
excise taxes if they invest "any amount in such a manner as to jeopardize the
carrying out of any of the foundation's exempt purposes." This rule requires a
foundation manager, in making an investment, to exercise "ordinary business care
and prudence" under the facts and circumstances prevailing at the time of making
the investment, in providing for the short-term and long-term needs of the
foundation to carry out its exempt purposes. The factors which a foundation
manager may take into account in assessing an investment include the expected
rate of return, both income and capital appreciation, the risks of rising and
falling price levels, and the needs for diversification within the foundation's
portfolio.
In order to avoid the imposition of an excise tax, a private foundation may be
required to distribute on an annual basis its "distributable amount," which
includes, among other things, the private foundation's "minimum investment
return," defined as 5% of the excess of the fair market value of its
nonfunctionally related assets, assets not used or held for use in carrying out
the foundation's exempt purposes, over certain indebtedness incurred by the
foundation in connection with such assets. It appears that a foundation's
investment in the Fund would most probably be classified as a nonfunctionally
related asset. A determination that an interest in the Fund is a nonfunctionally
related asset could conceivably cause cash flow problems for a prospective
Limited Partner which is a private foundation. Such an organization could be
required to make distributions in an amount determined by reference to
unrealized appreciation in the value of its interest in the Fund. Of course,
this factor would create less of a problem to the extent that the value of the
investment in the Fund is not significant in relation to the value of other
assets held by a foundation.
In some instances, an investment in the Fund by a private foundation may be
prohibited by the "excess business holdings" provisions of the Code. For
example, if a private foundation, either directly or together with a
"disqualified person," acquires more than 20% of the capital interest or profits
interest of the Fund, the private foundation may be considered to have "excess
business holdings."
If this occurs, such foundation may be required to divest itself of its interest
in the Fund in order to avoid the imposition of an excise tax. However, the
excise tax will not apply if at least 95% of the gross income from the Fund is
"passive" within the applicable provisions of the Code and Regulations. Although
there can be no assurance, the Manager believes that the Fund will meet this 95%
gross income test.
A substantial percentage of investments of certain "private operating
foundations" may be restricted to assets directly devoted to their tax-exempt
purposes. Otherwise, generally, rules similar to those discussed above govern
their operations.
QUALIFIED RETIREMENT PLANS. Employee benefit plans subject to the provisions of
ERISA, Individual Retirement Accounts ("IRAs") and Keogh Plans should consult
their counsel as to the implications of such an investment under ERISA. See
"ERISA CONSIDERATIONS."
ENDOWMENT FUNDS. Investment managers of endowment funds should consider whether
the acquisition of an Interest is legally permissible. This is not a matter of
Federal law, but is determined under state statutes. It should be noted,
however, that under the Uniform Management of Institutional Funds Act, which has
been adopted, in various forms, by a large number of states, participation in
investment partnerships or similar organizations in which funds are commingled
and investment determinations are made by persons other than the governing board
of the endowment fund is allowed.
STATE AND LOCAL TAXATION
In addition to the Federal income tax consequences described above, prospective
investors should consider potential state and local tax consequences of an
investment in the Fund. State and local laws often differ from Federal income
tax laws with respect to the treatment of specific items of income, gain, loss,
deduction and credit. A Partner's distributive share of the taxable income or
loss of the Fund generally will be required to be included in determining its
reportable income for state and local tax purposes in the jurisdiction in which
it is a resident.
A partnership in which the Fund acquires an interest may conduct business in a
jurisdiction which will subject to tax a Limited Partner's share of the Fund's
income from that business. Prospective investors should consult their tax
advisers with respect to the availability of a credit for such tax in the
jurisdiction in which that Limited Partner is a resident.
The Fund should not be subject to the New York City unincorporated business tax,
which is not imposed on a partnership which purchases and sells securities for
its "own account." (This exemption may not be applicable if a partnership in
which the Fund invests conducts a business in New York City.) By reason of a
similar "own account" exemption, it is also expected that a nonresident
individual Partner should not be subject to New York State personal income tax
with respect to his share of income or gain realized directly by the Fund. A
nonresident individual Partner will not be subject to New York City earnings tax
on nonresidents with respect to his or her investment in the Fund. Individual
Limited Partners who are residents in New York State and New York City should be
aware that the New York State and New York City personal income tax laws limit
the deductibility of itemized deductions for individual taxpayers at certain
income levels. This limitation would likely apply to a Limited Partner's share
of some or all of the Fund's expenses. Prospective investors are urged to
consult their tax advisers with respect to the impact of these provisions and
the Federal limitations on the deductibility of certain itemized deductions and
investment expenses on their New York State and New York City tax liability.
For purposes of the New York State corporate franchise tax and the New York City
general corporation tax, a corporation generally is treated as doing business in
New York State and New York City, respectively, and is subject to such corporate
taxes as a result of the ownership of a limited partnership interest in a
partnership which does business in New York State and New York City,
respectively.8 Each of the New York State and New York City corporate taxes are
imposed, in part, on the corporation's taxable income or capital allocable to
the relevant jurisdiction by application of the appropriate allocation
percentages. Moreover, a non-New York corporation which does business in New
York State may be subject to a New York State license fee. A corporation which
is subject to New York State corporate franchise tax solely as a result of being
a limited partner in a New York partnership may, under certain circumstances,
elect to compute its New York State corporate franchise tax by taking into
account only its distributive share of such partnership's income and loss. There
is currently no similar provision in effect for purposes of the New York City
general corporation tax.
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8 New York State (but not New York City) generally exempts from corporate
franchise tax a non-New York corporation which (i) does not actually or
constructively own a 1% or greater limited partnership interest in a
partnership doing business in New York and (ii) has a tax basis in such
limited partnership interest not greater than $1 million.
<PAGE>
Regulations under both the New York State corporate franchise tax and the New
York City general corporation tax, however, provide an exception to this general
rule in the case of a "portfolio investment partnership," which is defined,
generally, as a partnership which meets the gross income requirements of Section
851(b)(2) of the Code. New York State (but not New York City) has adopted
regulations that also include income and gains from commodity transactions
described in Section 864(b)(2)(B)(iii) as qualifying gross income for this
purpose. The Fund's qualification as such a portfolio investment partnership
must be determined on an annual basis and with respect to a taxable year, the
Fund may not qualify as a portfolio investment partnership.
A trust or other unincorporated organization which by reason of its purposes or
activities is exempt from Federal income tax is also exempt from New York State
and New York City personal income tax. A nonstock corporation which is exempt
from Federal income tax is generally presumed to be exempt from New York State
corporate franchise tax and New York City general corporation tax. New York
State imposes a tax with respect to such exempt entities on UBTI, including
unrelated debt-financed income, at a rate which is currently equal to the New
York State corporate franchise tax rate, plus the corporate surtax. There is no
New York City tax on the UBTI of an otherwise exempt entity.
ERISA CONSIDERATIONS
Persons who are fiduciaries with respect to an employee benefit plan or other
arrangement subject to the Employee Retirement Income Security Act of 1974, as
amended (an "ERISA Plan" and "ERISA," respectively), and persons who are
fiduciaries with respect to an IRA or Keogh plan, which is not subject to ERISA
but is subject to the prohibited transaction rules of Section 4975 of the Code
(together with ERISA Plans, "Benefit Plans") should consider, among other
things, the matters described below before determining whether to invest in the
Fund.
ERISA imposes certain general and specific responsibilities on persons who are
fiduciaries with respect to an ERISA Plan, including prudence, diversification,
an obligation not to engage in a prohibited transaction and other standards. In
determining whether a particular investment is appropriate for an ERISA Plan,
Department of Labor ("DOL") regulations provide that a fiduciary of an ERISA
Plan must give appropriate consideration to, among other things, the role that
the investment plays in the ERISA Plan's portfolio, taking into consideration
whether the investment is designed reasonably to further the ERISA Plan's
purposes, an examination of the risk and return factors, the portfolio's
composition with regard to diversification, the liquidity and current return of
the total portfolio relative to the anticipated cash flow needs of the ERISA
Plan, the income tax consequences of the investment (see "TAX ASPECTS--Unrelated
Business Taxable Income" and"--Certain Issues Pertaining to Specific Exempt
Organizations") and the projected return of the total portfolio relative to the
ERISA Plan's funding objectives. Before investing the assets of an ERISA Plan in
the Fund, a fiduciary should determine whether such an investment is consistent
with its fiduciary responsibilities and the foregoing regulations. For example,
a fiduciary should consider whether an investment in the Fund may be too
illiquid or too speculative for a particular ERISA Plan, and whether the assets
of the ERISA Plan would be sufficiently diversified. If a fiduciary with respect
to any such ERISA Plan breaches its or his responsibilities with regard to
selecting an investment or an investment course of action for such ERISA Plan,
the fiduciary itself or himself may be held liable for losses incurred by the
ERISA Plan as a result of such breach.
Because the Fund will register as an investment company under the 1940 Act, the
underlying assets of the Fund should not be considered to be "plan assets" of
the ERISA Plans investing in the Fund for purposes of ERISA's (or the Code's)
fiduciary responsibility and prohibited transaction rules. Thus, the Manager
will not be a fiduciary within the meaning of ERISA by reason of its authority
with respect to the Fund.
The Manager will require a Benefit Plan which proposes to invest in the Fund to
represent that it, and any fiduciaries responsible for such Plan's investments,
are aware of and understand the Fund's investment objective, policies and
strategies, that the decision to invest plan assets in the Fund was made with
appropriate consideration of relevant investment factors with regard to the
Benefit Plan and is consistent with the duties and responsibilities imposed upon
fiduciaries with regard to their investment decisions under ERISA and/or the
Code.
Certain prospective Benefit Plan investors may currently maintain relationships
with the Manager or other entities which are affiliated with the Manager. Each
of such persons may be deemed to be a party in interest to and/or a fiduciary of
any Benefit Plan to which it provides investment management, investment advisory
or other services. ERISA prohibits (and the Code penalizes) the use of ERISA and
Benefit Plan assets for the benefit of a party in interest and also prohibits
(or penalizes) an ERISA or Benefit Plan fiduciary from using its position to
cause such Plan to make an investment from which it or certain third parties in
which such fiduciary has an interest would receive a fee or other consideration.
ERISA and Benefit Plan investors should consult with counsel to determine if
participation in the Fund is a transaction which is prohibited by ERISA or the
Code. Fiduciaries of ERISA or Benefit Plan investors will be required to
represent that the decision to invest in the Fund was made by them as
fiduciaries that are independent of such affiliated persons, that such
fiduciaries are duly authorized to make such investment decision and that they
have not relied on any individualized advice or recommendation of such
affiliated persons, as a primary basis for the decision to invest in the Fund.
The provisions of ERISA and the Code are subject to extensive and continuing
administrative and judicial interpretation and review. The discussion of ERISA
and the Code contained in this Memorandum is general and may be affected by
future publication of regulations and rulings. Potential Benefit Plan investors
should consult their legal advisers regarding the consequences under ERISA and
the Code of the acquisition and ownership of interests.
ADDITIONAL INFORMATION AND SUMMARY OF LIMITED PARTNERSHIP AGREEMENT
The following is a summary description of additional items and of select
provisions of the Partnership Agreement which are not described elsewhere in
this Memorandum. The description of such items and provisions is not definitive
and reference should be made to the complete text of the Partnership Agreement
contained in Appendix A.
LIABILITY OF LIMITED PARTNERS
Pursuant to applicable Delaware law, Limited Partners generally are not
personally liable for obligations of the Fund unless, in addition to the
exercise of their rights and powers as Limited Partners, they participate in the
control of the business of the Fund. Any such Limited Partner would be liable
only to persons who transact business with the Fund reasonably believing, based
on such Limited Partner's conduct, that the Limited Partner is a General
Partner. Under the terms of the Partnership Agreement, the Limited Partners do
not have the right to take part in the control of the Fund, but they may
exercise the right to vote on matters requiring approval under the 1940 Act and
on certain other matters. Although such right to vote should not constitute
taking part in the control of the Fund's business under applicable Delaware law,
there is no specific statutory or other authority for the existence or exercise
of some or all of these powers in some other jurisdictions. To the extent that
the Fund is subject to the jurisdiction of courts in jurisdictions other than
the State of Delaware, it is possible that these courts may not apply Delaware
law to the question of the limited liability of the Limited Partners.
Under Delaware law and the Partnership Agreement, each Limited Partner may be
liable up to the amount of any contributions to the capital of the Fund (plus
any accretions in value thereto prior to withdrawal) and a Limited Partner may
be obligated to make certain other payments provided for in the Partnership
Agreement and to return to the Fund amounts wrongfully distributed to him.
DUTY OF CARE OF THE GENERAL PARTNER
The Partnership Agreement provides that the General Partner shall not be liable
to the Fund or any of the Limited Partners for any loss or damage occasioned by
any act or omission in the performance of the General Partner's services as
General Partner in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
General Partner's office. The Partnership Agreement also contains provisions for
the indemnification, to the extent permitted by law, of the General Partner by
the Fund, but not by the Limited Partners individually, against any liability
and expense to which the General Partner may be liable as General Partner which
arise in connection with the performance of its activities on behalf of the
Fund. The General Partner will not be personally liable to any Limited Partner
for the repayment of any positive balance in such Limited Partner's capital
account or for contributions by such Limited Partner to the capital of the Fund
or by reason of any change in the Federal or state income tax laws applicable to
the Fund or its investors. The rights of indemnification and exculpation
provided under the Partnership Agreement do not provide for indemnification of
the General Partner for any liability, including liability under Federal
securities laws which, under certain circumstances, impose liability even on
persons that act in good faith, to the extent, but only to the extent, that such
indemnification would be in violation of applicable law.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
The Partnership Agreement may be amended with the approval of (i) the Directors,
including a majority of the Independent Directors, if required by the 1940 Act,
(ii) the Manager or (iii) a majority, as defined in the 1940 Act, of the
outstanding voting securities of the Fund. Certain amendments involving capital
accounts and allocations thereto may not be made without the consent of any
Partners adversely affected thereby or unless each Limited Partner has received
notice of such amendment and any Limited Partner objecting to such amendment has
been allowed a reasonable opportunity to tender its entire interest for
repurchase by the Fund. However, the Manager may at any time without the consent
of the other Partners of the Fund amend the Partnership Agreement to (i) restate
the Partnership Agreement, (ii) effect compliance with any applicable law or
regulation, or (iii) make such changes as may be necessary to assure the Fund's
continuing eligibility to be classified for U.S. Federal income tax purposes as
a partnership which is not treated as a corporation under Section 7704(a) of the
Code, subject to the requirement that any amendment of the Partnership Agreement
made pursuant to items (ii) or (iii) above must be approved by the Directors.
POWER OF ATTORNEY
By subscribing for an interest in the Fund, each Partner will appoint the
Manager and each of the Directors his or her attorney-in-fact for purposes of
filing required certificates and documents relating to the formation and
continuance of the Fund as a limited partnership under Delaware law or signing
all instruments effecting authorized changes in the Fund or the Partnership
Agreement and conveyances and other instruments deemed necessary to effect the
dissolution or termination of the Fund.
The power-of-attorney granted in the Partnership Agreement is a special
power-of-attorney coupled with an interest in favor of the Manager and each of
the Directors and as such is irrevocable and continues in effect until all of
such Partner's interest in the Fund has been withdrawn pursuant to a periodic
tender or transferred to one or more transferees that have been approved by the
Manager for admission to the Fund as substitute Partners.
TERM, DISSOLUTION AND LIQUIDATION
The Fund will be dissolved:
o upon the affirmative vote to dissolve the Fund by both (1) the
Directors and (2) Partners holding at least two-thirds of the total
number of votes eligible to be cast by all Partners;
o upon either of (1) an election by the Manager to dissolve the Fund or
(2) the termination of the Manager's status as a general partner of
the Fund (other than as a result of a transfer as provided in the
Partnership Agreement), unless (A) as to clause (2) above, there is at
least one other general partner of the Fund who is authorized to and
does carry on the business of the Fund, and (B) as to either event
both the Directors and Partners holding not less than two-thirds of
the total number of votes eligible to be cast by all Partners shall
elect within 60 days after such event to continue the business of the
Fund and a person to be admitted to the Fund, effective as of the date
of such event, as an additional General Partner has agreed to make
such contributions to the capital of the Fund as are required to be
made in the Partnership Agreement;
o upon the expiration of any two-year period which commences on the date
on which any Limited Partner has submitted to the Fund a written
request in accordance with the Partnership Agreement to tender its
entire interest for repurchase by the Fund if such Limited Partner's
interest has not been repurchased during such period;
o upon the failure of Partners to elect successor Directors at a meeting
called by the Manager when no Director remains; or
o as required by operation of law.
Upon the occurrence of any event of dissolution, the General Partner, or a
liquidator, if the General Partner is unable to perform this function, is
charged with winding up the affairs of the Fund and liquidating its assets. Net
profits or net loss during the fiscal period including the period of liquidation
will be allocated as described in the section titled "CAPITAL ACCOUNTS AND
ALLOCATIONS--Allocation of Net Profits and Net Losses."
Upon the dissolution of the Fund, its assets are to be distributed (1) first to
satisfy the debts, liabilities and obligations of the Fund, other than debts to
Partners, including actual or anticipated liquidation expenses, (2) next to
satisfy debts owing to the Partners, and (3) finally to the Partners
proportionately in accordance with the balances in their respective capital
accounts. Assets may be distributed in-kind on a pro rata basis if the General
Partner or liquidator determines that such a distribution would be in the
interests of the Partners in facilitating an orderly liquidation.
REPORTS TO PARTNERS
The Fund will furnish to Partners as soon as practicable after the end of each
taxable year such information as is necessary for such Partners to complete
Federal and state income tax or information returns, along with any other tax
information required by law. The Fund will send to Partners a semi-annual and an
audited annual report within 60 days after the close of the period for which it
is being made, or as otherwise required by the 1940 Act. Quarterly reports from
the Manager regarding the Fund's operations during such period also will be sent
to Partners.
FISCAL YEAR
The Fund's fiscal year ends on December 31st.
ACCOUNTANTS AND LEGAL COUNSEL
Ernst & Young LLP serves as the independent public accountants of the Fund. Its
principal business address is at 787 Seventh Avenue, New York, New York 10019.
Stroock & Stroock & Lavan LLP, New York, New York, acts as legal counsel to the
Fund.
Schulte Roth & Zabel LLP, acts as legal counsel to the Manager and its
affiliates. Each of such counsel from time to time may serve as counsel to one
or more Investment Managers.
CUSTODIAN
PFPC Trust Company (the "Custodian") serves as the primary custodian of the
assets of the Fund and the Investment Funds managed by the Subadvisers, and may
maintain custody of such assets with domestic and foreign subcustodians (which
may be banks, trust companies, securities depositories and clearing agencies)
approved by the Directors. Assets of the Fund and Investment Funds are not held
by the Manager or Subadvisers, respectively, or commingled with the assets of
other accounts other than to the extent that securities are held in the name of
a custodian in a securities depository, clearing agency or omnibus customer
account of such custodian. The Custodian's principal business address is Airport
Business Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania
19113.
INQUIRIES
Inquiries concerning the Fund and interests in the Fund, including information
concerning subscription and withdrawal procedures, should be directed to:
PW Fund Advisor, L.L.C.
c/o PaineWebber Incorporated
Alternative Investment Group
1285 Avenue of the Americas
New York, New York 10019
Telephone: (800) 486-2608
Telecopier: (212) 713-1498
For additional information contact:
Robert Discolo, Vice President
* * * * *
All potential investors in the Fund are encouraged to consult
appropriate legal and tax counsel.
<PAGE>
APPENDIX A
PW TECHNOLOGY PARTNERS, L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT of PW Technology
Partners, L.P. (the "Fund") is dated as of February __, 1999 by and among PW
Fund Advisor, L.L.C., a Delaware limited liability company ("PWFA"), as the
General Partner and Norman E. Sienko, Jr. as the Organizational Limited Partner
and each person hereinafter admitted to the Fund and reflected on the books of
the Fund as a General Partner or as a Limited Partner.
WITNESSETH:
WHEREAS, the Fund has heretofore been formed as a limited partnership under the
Delaware Revised Uniform Limited Fund Act, 6 Del. C. ss.ss. 17-101 ET seq.,
pursuant to an initial Certificate of Limited Fund (the "Certificate") dated as
of December 28, 1998 and filed with the Secretary of State of the State of
Delaware on December 28, 1998 and pursuant to an agreement of limited
partnership of the Fund, dated as of December 28, 1998 (the "Original
Partnership Agreement"), between the General Partner and the Organizational
Limited Partner;
WHEREAS, the parties hereto hereby agree to continue the Fund as a limited
partnership under and pursuant to the provision of the Delaware Act and agree
that the rights, duties and liabilities of the Partners shall be as provided in
the Delaware Act, except as otherwise provided herein; and
WHEREAS, the Original Partnership Agreement hereby is being amended and restated
by the Partners to set forth in its entirety the terms and conditions of the
agreement of the Partners with respect to the operation of the Fund;
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
Definitions
For purposes of this Agreement:
ADVICE AND MANAGEMENT means those services provided to the Fund by the Manager
pursuant to Section 3.4(b) hereof.
ADVISERS ACT means the Investment Advisers Act of 1940 and the rules,
regulations and orders thereunder, as amended from time to time, or any
successor law.
AFFILIATE means affiliated person as such term is defined in the 1940 Act.
AGREEMENT means this Amended and Restated Limited Partnership Agreement, as
amended and/or restated from time to time.
ALLOCATION CHANGE means, with respect to each Limited Partner for each
Measurement Period, the difference between:
(1) the sum of (a) the balance of such Limited Partner's Capital
Account as of the close of the Measurement Period (after giving effect
to all allocations to be made to such Limited Partner's Capital
Account as of such date other than any Performance Allocation to be
debited against such Limited Partner's Capital Account), plus (b) any
debits to such Limited Partner's Capital Account during the
Measurement Period to reflect any actual or deemed distributions or
repurchases with respect to such Limited Partner's Interest, plus (c)
any debits to such Limited Partner's Capital Account during the
Measurement Period to reflect any Insurance premiums allocable to such
Limited Partner; and
(2) the sum of (a) the balance of such Limited Partner's Capital
Account as of the commencement of the Measurement Period, plus (b) any
credits (not already included in the balance described in clause (a))
to such Limited Partner's Capital Account during the Measurement
Period to reflect any contributions by such Limited Partner to the
capital of the Fund, plus (c) any credits to such Limited Partner's
Capital Account during the Period to reflect any Insurance proceeds
allocable to such Limited Partner.
If the amount specified in clause (1) exceeds the amount specified in
clause (2), such difference shall be a Positive Allocation Change, and
if the amount specified in clause (2) exceeds the amount specified in
clause (1), such difference shall be a Negative Allocation Change.
CAPITAL ACCOUNT means, with respect to each Partner, the capital account
established and maintained on behalf of each Partner pursuant to Section 5.3
hereof.
CAPITAL CONTRIBUTION means the contribution, if any, made, or to be made, as the
context requires, to the capital of the Fund by a Partner.
CERTIFICATE means the Certificate of Limited Fund of the Fund and any amendments
thereto and/or restatements thereof as filed with the office of the Secretary of
State of the State of Delaware.
CLOSING DATE means the first date on or as of which a Limited Partner other than
the Organizational Limited Partner is admitted to the Fund.
CODE means the United States Internal Revenue Code of 1986, as amended and as
hereafter amended from time to time, or any successor law.
DELAWARE ACT means the Delaware Revised Uniform Limited Fund Act as in effect on
the date hereof and as amended from time to time, or any successor law.
DIRECTORS means those natural persons listed on Schedule I hereto as Directors
and such other natural persons who, from time to time, pursuant hereto shall
become Directors.
FISCAL PERIOD means the period commencing on the Closing Date, and thereafter
each period commencing on the day immediately following the last day of the
preceding Fiscal Period and ending at the close of business on the first to
occur of the following dates:
(1) the last day of a Fiscal Year;
(2) the day preceding any day as of which a contribution to the
capital of the Fund is made pursuant to Section 5.1;
(3) the last day of a Measurement Period for any Partner; or
(4) any other day as of which this Agreement provides for any amount
to be credited to or debited against the Capital Account of any Partner, other
than an amount to be credited to or debited against the Capital Accounts of all
Partners in accordance with their respective Fund Percentages.
FISCAL YEAR means the period commencing on the Closing Date and ending on
December 31, 1999, and thereafter each period commencing on January 1 of each
year and ending on December 31 of each year (or on the date of a final
distribution pursuant to Section 6.2 hereof), unless the Directors shall
designate another fiscal year for the Fund that is a permissible taxable year
under the Code.
FORM N-2 means the Fund's Registration Statement on Form N-2 filed with the
Securities and Exchange Commission, as amended from time to time.
FUND means the limited partnership governed hereby, as such limited partnership
may from time to time be constituted.
FUND PERCENTAGE means a percentage established for each Partner on the Fund's
books as of the first day of each Fiscal Period. The Fund Percentage of a
Partner for a Fiscal Period shall be determined by dividing the balance of the
Partner's Capital Account as of the commencement of such Fiscal Period by the
sum of the Capital Accounts of all of the Partners as of the commencement of
such Fiscal Period. The sum of the Fund Percentages of all Partners for each
Fiscal Period shall equal 100%.
GENERAL PARTNERS means PWFA and any other person or persons admitted to the Fund
as a general partner of the Fund, collectively, in their capacities as general
partners of the Fund, and General Partner means any of the General Partners.
Where the term General Partners is used and there is only one General Partner,
such term shall refer to the sole General Partner. If at any time there is more
than one general partner of the Fund, unless otherwise provided herein, any
action allowed to be taken, or required to be taken, by the General Partners may
be taken only with the unanimous approval of all of the General Partners.
INDEPENDENT DIRECTORS means those Directors who are not "interested persons" of
the Fund as such term is defined in the 1940 Act.
INSURANCE means one or more "key man" insurance policies on the life of any
principal of a member of the Manager, the benefits of which are payable to the
Fund.
INTEREST means the entire ownership interest in the Fund at any particular time
of a Partner or other person to whom an Interest or portion thereof has been
transferred pursuant to Section 4.3 or 4.4 hereof, including the rights and
obligations of such Partner or other person under this Agreement and the
Delaware Act.
INVESTED CAPITAL means, with respect to any Limited Partner, the amount equal to
(a) the amount of cash and the value of any Securities (determined at the time
of contribution) constituting such Partner's initial and additional
contributions to the capital of the Fund pursuant to Section 5.1 hereof minus
(b) the amount of any repurchase of such Partner's Interest or portion thereof
or distribution to such Partner pursuant to Sections 4.5, 5.12 or 6.2 hereof
(whether or not any such repurchase or distribution constitutes a return of
capital).
INVESTMENT FUNDS means unregistered general or limited partnerships or other
pooled investment vehicles and registered investment companies which are advised
by an Investment Manager or Subadviser.
INVESTMENT MANAGERS means portfolio managers among which the Fund deploys some
or all of its assets.
LIMITED PARTNER means any person who shall have been admitted to the Fund as a
limited partner (including any person who is a General Partner when acting in
such person's capacity as a limited partner of the Fund and any person who is a
Special Limited Partner) until the Fund repurchases the entire Interest of such
person as a limited partner pursuant to Section 4.5 hereof or a substitute
Limited Partner or Partners are admitted with respect to any such person's
entire Interest as a limited partner pursuant to Section 4.4 hereof, in such
person's capacity as a limited partner of the Fund.
MANAGEMENT FEE means the fee paid to PWFA out of the Fund's assets, and debited
against Limited Partners' Capital Accounts, for PWFA Services.
MANAGER means PWFA, or any other person selected by the Directors as the
Manager, in its capacity as an agent of the Directors and a subagent of the
General Partners.
MEASUREMENT PERIOD means, with respect to a Limited Partner, the period
commencing as of the date of admission of such Limited Partner to the Fund, and
thereafter each period commencing on the day immediately following the last day
of the preceding Measurement Period and ending at the close of business on the
first to occur of the following dates:
(1) the last day of the relevant Fiscal Year;
(2) the day preceding any day as of which such Limited Partner becomes
a Special Limited Partner;
(3) the day on which such Limited Partner ceases to be a Special
Limited Partner;
(4) the day on which the Fund repurchases the Interest or portion
thereof of such Limited Partner;
(5) the day preceding the day on which there is a Transfer of such
Limited Partner's Interest or portion thereof; and
(6) the day on which the authority of the Manager to provide Advice
and Management is terminated pursuant to Section 3.4(a) hereof.
MEMORANDUM means the Fund's confidential memorandum.
NEGATIVE ALLOCATION CHANGE has the meaning given such term in the definition of
Allocation Change.
NET ASSETS means the total value of all assets of the Fund, less an amount equal
to all accrued debts, liabilities and obligations of the Fund, calculated before
giving effect to any repurchases of Interests.
NET PROFIT OR NET LOSS means the amount by which the Net Assets as of the close
of business on the last day of a Fiscal Period exceed (in the case of Net
Profit) or are less than (in the case of Net Loss) the Net Assets as of the
commencement of the same Fiscal Period (or, with respect to the initial Fiscal
Period of the Fund, at the close of business on the Closing Date), such amount
to be adjusted to exclude:
(1) the amount of any Insurance premiums or proceeds to be allocated
among the Capital Accounts of the Partners pursuant to Section 5.5
hereof; and
(2) any items to be allocated among the Capital Accounts of the
Partners on a basis which is not in accordance with the respective
Fund Percentages of all Partners as of the commencement of such Fiscal
Period pursuant to Sections 5.6 and 5.7 hereof.
1940 ACT means the Investment Company Act of 1940 and the rules, regulations and
orders thereunder, as amended from time to time, or any successor law.
1934 ACT means the Securities Exchange Act of 1934 and the rules, regulations
and orders thereunder, as amended from time to time, or any successor law.
ORGANIZATIONAL LIMITED PARTNER means Norman E. Sienko, Jr.
PARTNERS means the General Partners and the Limited Partners, collectively.
PERFORMANCE ALLOCATION means, with respect to a Limited Partner for any
Measurement Period, an amount equal to the product of (1) a fraction (but not
greater than one), the numerator of which is the actual rate of return
(non-annualized) (expressed as a percentage) that the Limited Partner earned for
such Measurement Period on its opening Capital Account balance (appropriately
adjusted for contributions, distributions and withdrawals) for such Measurement
Period, and the denominator of which is 20%, and (2) an amount equal to 1% (or
such other percentage as the General Partners and the Limited Partner may agree)
of such Limited Partner's Capital Account balance at the close of such
Measurement Period (after giving effect to all allocations to be made to such
Limited Partner's Capital Account as of such date other than any Performance
Allocation to be debited against such Limited Partner's Capital Account, and
adding back to such Limited Partner's Capital Acccount any debits thereto during
such Measurement Period to reflect any actual or deemed distributions or
repurchases with respect to such Limited Partner's Interest).
PERSON means any individual, entity, corporation, partnership, association,
limited liability company, joint-stock company, trust, estate, joint venture,
organization or unincorporated organization.
POSITIVE ALLOCATION CHANGE has the meaning given such term in the definition of
Allocation Change.
PWFA means PW Fund Advisor, L.L.C., or any successor thereto.
PWFA SERVICES means such management and administrative services as PWFA or its
affiliates shall provide to the Fund pursuant to a separate written agreement
with the Fund as contemplated by Section 3.10(a) hereof.
RELATED PERSON means, with respect to any person, (i) a relative, spouse or
relative of a spouse who has the same principal residence as such person, (ii)
any trust or estate in which such person and any persons who are related to such
person collectively have more than 50% of the beneficial interests (excluding
contingent interests) and (iii) any corporation or other organization of which
such person and any persons who are related to such person collectively are
beneficial owners of more than 50% of the equity securities (excluding
directors' qualifying shares) or equity interests.
SECURITIES means securities (including, without limitation, equities, debt
obligations, options, and other "securities" as that term is defined in Section
2(a)(36) of the 1940 Act) and any contracts for forward or future delivery of
any security, debt obligation, currency or commodity, all manner of derivative
instruments and any contracts based on any index or group of securities, debt
obligations, currencies or commodities, and any options thereon.
SPECIAL LIMITED PARTNER means a Limited Partner whose Invested Capital equals or
exceeds $10,000,000, or such other amount as respects such Limited Partner as
may be determined, from time to time, by the Manager, and such other Limited
Partner as the Manager shall determine from time to time to be a Special Limited
Partner, including, without limitation, employees or directors of the Manager
and its affiliates, and members of their immediate families, and, in the sole
discretion of the Manager, attorneys or other professional advisors engaged on
behalf of the Fund, and members of their immediate families.
SUBADVISERS means those Investment Managers for which a separate investment
vehicle has been created in which the Investment Manager serves as general
partner and the Fund is the sole limited partner and those Investment Managers
who manage the Fund's assets directly through a separate managed account.
THRESHOLD RETURN means the amount that a Limited Partner would have earned for a
Measurement Period if it had received an annualized rate of return of 20% on its
opening Capital Account balance (appropriately adjusted for contributions,
distributions and withdrawals) for such Measurement Period. The Threshold Return
is not cumulative from year to year or Measurement Period to Measurement Period.
TRANSFER means the assignment, transfer, sale or other disposition of all or any
portion of an Interest, including any right to receive any allocations and
distributions attributable to an Interest.
ARTICLE II
Organization; Admission of Partners; Directors
2.1. CONTINUATION OF LIMITED PARTNERSHIP. The parties hereto hereby continue the
Fund as a limited partnership under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the Partners
shall be as provided in the Delaware Act, except as otherwise provided herein.
The General Partners shall execute and file in accordance with the Delaware Act
any amendment to the Certificate and shall execute and file with applicable
governmental authorities any other instruments, documents and certificates
which, in the opinion of the Fund's legal counsel, may from time to time be
required by the laws of the United States of America, the State of Delaware or
any other jurisdiction in which the Fund shall determine to do business, or any
political subdivision or agency thereof, or which such legal counsel may deem
necessary or appropriate to effectuate, implement and continue the valid
existence and business of the Fund. Each person listed on the date hereof as a
Limited Partner on the books of the Fund shall be admitted to the Fund as a
limited partner of the Fund upon the execution and delivery by or on behalf of
such person and the General Partner of a counterpart of this Agreement. The
person listed on the date hereof as the General Partner on the books of the Fund
shall continue as a general partner of the Fund upon the execution and delivery
by or on behalf of such person of a counterpart of this Agreement.
2.2. NAME. The name of the Fund shall be "PW Technology Partners, L.P." or such
other name as the General Partners hereafter may adopt upon (i) causing an
appropriate amendment to the Certificate to be filed in accordance with the
Delaware Act and (ii) sending notice thereof to each Partner.
2.3. PRINCIPAL AND REGISTERED OFFICE. The Fund shall have its principal office
at the principal office of the General Partner, or at such other place
designated from time to time by the General Partners.
The Fund shall have its registered office in the State of Delaware at 1013
Center Road, Wilmington, New Castle County, Delaware 19805-1297, and shall have
Corporation Service Company as its registered agent for service of process in
the State of Delaware, unless a different registered office or agent is
designated from time to time by the General Partners in accordance with the
Delaware Act.
2.4. DURATION. The term of the Fund commenced on the filing of the Certificate
with the Secretary of State of the State of Delaware and shall continue until
the Fund is dissolved pursuant to Section 6.1 hereof.
2.5. BUSINESS OF THE FUND.
(a) The business of the Fund is to purchase, sell (including short sales),
invest and trade in Securities and engage in any financial or derivative
transactions relating thereto or otherwise. Discrete portions of the Fund's
assets (which may constitute, in the aggregate, all of the Fund's assets) may be
invested in general or limited partnerships and other pooled investment vehicles
which invest and trade in Securities or in separate managed accounts through
which the Fund may invest and trade in Securities, some or all of which may be
advised by one or more Subadvisers. The Fund may execute, deliver and perform
all contracts, agreements and other undertakings and engage in all activities
and transactions as the General Partners may deem necessary or advisable to
carry out its objective or business.
(b) The Fund shall operate as a closed-end, management investment company in
accordance with the 1940 Act and subject to any fundamental policies and
investment restrictions set forth in the Form N-2.
2.6. GENERAL PARTNERS.
(a) The General Partners may admit to the Fund any person, who shall agree to be
bound by all of the terms of this Agreement as a General Partner, as an
additional General Partner. The General Partners may admit to the Fund as a
substitute General Partner any person to which it has Transferred its Interest
as the General Partner pursuant to Section 4.3 hereof. Such person shall be
admitted immediately prior to the Transfer and shall continue the business of
the Fund without dissolution. The names and mailing addresses of the General
Partners and the Capital Contribution of the General Partners shall be reflected
on the books and records of the Fund.
(b) Each General Partner shall serve for the duration of the term of the Fund,
unless it ceases to be a general partner of the Fund pursuant to Section 4.1
hereof.
2.7. LIMITED PARTNERS. The General Partners may at any time and without advance
notice to or consent from any other Partner admit any person who shall agree to
be bound by all of the terms of this Agreement as an additional Limited Partner.
The General Partners may in their absolute discretion reject subscriptions for
Interests in the Fund. The admission of any person as an additional Limited
Partner shall be effective upon the execution and delivery by, or on behalf of,
such additional Limited Partner of this Agreement or a counterpart hereof. The
General Partners shall cause the books and records of the Fund to reflect the
name and the required contribution to the capital of the Fund of such additional
Limited Partner. For all purposes of the Delaware Act, the Limited Partners
shall constitute a single class or group of limited partners of the Fund.
2.8. ORGANIZATIONAL LIMITED PARTNER. Upon the admission to the Fund of any
Limited Partner, the Organizational Limited Partner shall withdraw from the Fund
as the Organizational Limited Partner and shall be entitled to the return of his
Capital Contribution, if any, without interest or deduction, and shall cease to
be a limited partner of the Fund.
2.9. BOTH GENERAL AND LIMITED PARTNER. A Partner may be simultaneously a General
Partner and a Limited Partner, in which event such Partner's rights and
obligations in each capacity shall be determined separately in accordance with
the terms and provisions hereof and as provided in the Delaware Act.
2.10. LIMITED LIABILITY. Except as provided under applicable law, a Limited
Partner shall not be liable for the Fund's obligations in any amount in excess
of the Capital Account balance of such Partner, plus such Partner's share of
undistributed profits and assets. In addition, subject to applicable law, a
Limited Partner shall be obligated to return to the Fund amounts distributed to
the Limited Partner in accordance with this Agreement if, after giving effect to
such distribution, the Fund's liabilities exceed the fair value of the Fund's
assets.
2.11. DIRECTORS.
(a) The number of Directors shall be fixed from time to time by the Directors
then in office, but, at the Closing Date, shall not be fewer than three. The
Organizational Limited Partner hereby approves the delegation by the General
Partners to the Directors, pursuant to Section 3.1 hereof, of the General
Partners' rights and powers.
(b) Each Director shall serve for the duration of the term of the Fund, unless
his or her status as a Director shall be sooner terminated pursuant to Section
2.11(d) hereof. If any vacancy in the position of a Director occurs, the
remaining Directors may appoint an individual to serve in such capacity, so long
as immediately after such appointment at least two-thirds of the Directors then
serving would have been approved of by the Partners. The Directors may call a
meeting of Partners to fill any vacancy in the position of a Director, and shall
do so within 60 days after any date on which Directors who were approved of by
the Partners cease to constitute a majority of the Directors then serving.
(c) If no Director remains, the General Partners shall promptly call a meeting
of the Partners, to be held within 60 days after the date on which the last
Director ceased to act in that capacity, for the purpose of determining whether
to continue the business of the Fund and, if the business shall be continued,
approving the required number of Directors. If the Partners shall determine at
such meeting not to continue the business of the Fund or, if the required number
of Directors is not approved of within 60 days after the date on which the last
Director ceased to act in that capacity, then the Fund shall be dissolved
pursuant to Section 6.1 hereof and the assets of the Fund shall be liquidated
and distributed pursuant to Section 6.2 hereof.
(d) The status of a Director shall terminate if the Director (i) shall die; (ii)
shall be adjudicated incompetent; (iii) shall resign as a Director (upon not
less than 90 days' prior written notice to the other Directors); (iv) shall be
removed; (v) shall be certified by a physician to be mentally or physically
unable to perform his or her duties hereunder; or (vi) shall be determined to be
ineligible to serve as a director of a registered investment company pursuant to
the 1940 Act.
(e) Any Director may be removed either by (a) the vote or written consent of at
least two-thirds of the Directors not subject to the removal vote or (b) the
vote or written consent of Partners holding not less than two-thirds of the
total number of votes eligible to be cast by all Partners.
ARTICLE III
Management; Advice and Management
3.1. MANAGEMENT AND CONTROL.
(a) The General Partners hereby irrevocably delegate to the Directors, except
for the right to execute documents on behalf of the Fund and to bind the Fund
and except to the extent any such delegation is not permitted under the Delaware
Act and so long as the Fund shall have Directors, their rights and powers to
manage and control the business affairs of the Fund, including the complete
authority to oversee and to establish policies regarding the management, conduct
and operation of the Fund's business, and to do all things necessary and proper
to carry out the objective and business of the Fund, including, without
limitation, the power to engage the Manager to provide Advice and Management and
such other rights and powers expressly given to the Directors under this
Agreement. The parties hereto intend that, to the fullest extent permitted by
law and except to the extent otherwise expressly provided herein, (i) each
Director shall be vested with the same powers and authority on behalf of the
Fund as are customarily vested in each director of a Delaware corporation and
(ii) each Independent Director shall be vested with the same powers and
authority on behalf of the Fund as are customarily vested in each director of a
closed-end management investment company registered under the 1940 Act that is
organized as a Delaware corporation who is not an "interested person" of such
company as such term is defined in the 1940 Act. During any period in which the
Fund shall have no Directors, the General Partners shall manage and control the
Fund. Each Director shall be the agent of the General Partners but shall not,
for any purpose, be a Partner. The General Partners retain only those rights,
powers and duties that have not been delegated hereunder. Notwithstanding the
foregoing delegation, the General Partners will not cease to be the general
partners of the Fund and will continue to be liable as such. Notwithstanding
anything to the contrary contained herein, in no event shall a Director be
considered a general partner of the Fund by agreement, estoppel or otherwise as
a result of the performance of his or her duties hereunder or otherwise. The
Directors will not contribute to the capital of the Fund and will not have
partnership interests in the Fund.
(b) PWFA shall be the designated tax matters partner for purposes of Section
6231(a)(7) of the Code. Each Partner agrees not to treat, on his personal return
or in any claim for a refund, any item of income, gain, loss, deduction or
credit in a manner inconsistent with the treatment of such item by the Fund. The
tax matters partner shall have the exclusive authority and discretion to make
any elections required or permitted to be made by the Fund under any provisions
of the Code or any other revenue laws.
(c) Limited Partners shall have no right to participate in and shall take no
part in the management or control of the Fund's business and shall have no
right, power or authority to act for or bind the Fund. Limited Partners shall
have the right to vote on any matters only as provided in this Agreement or on
any matters that require the approval of the holders of voting securities under
the 1940 Act.
3.2. ACTIONS BY DIRECTORS.
(a) Unless provided otherwise in this Agreement, the Directors shall act only:
(i) by the affirmative vote of a majority of the Directors (which majority shall
include any requisite number of Independent Directors required by the 1940 Act)
present at a meeting duly called at which a quorum of the Directors shall be
present (in person or, if in person attendance is not required by the 1940 Act,
by telephone) or (ii) by unanimous written consent of all of the Directors
without a meeting, if permissible under the 1940 Act.
(b) The Directors may designate from time to time a principal Director (the
"Principal Director"), who shall preside at all meetings. Meetings of the
Directors may be called by the General Partners, the Principal Director or any
two Directors, and may be held on such date and at such time and place as the
Directors shall determine. Each Director shall be entitled to receive written
notice of the date, time and place of such meeting within a reasonable time in
advance of the meeting. Notice need not be given to any Director who shall
attend a meeting without objecting to the lack of notice or who shall execute a
written waiver of notice with respect to the meeting. Directors may attend and
participate in any meeting by telephone, except where in person attendance at a
meeting is required by the 1940 Act. A majority of the Directors shall
constitute a quorum at any meeting.
(c) The Directors may designate from time to time agents and employees of the
Fund who shall have the same powers and duties on behalf of the Fund as are
customarily vested in officers of a Delaware corporation, and designate them as
officers of the Fund.
3.3. MEETINGS OF PARTNERS.
(a) Actions requiring the vote of the Partners may be taken at any duly
constituted meeting of the Partners at which a quorum is present. Meetings of
the Partners may be called by the General Partners or by Partners holding at
least a majority of the total number of votes eligible to be cast by all
Partners, and may be held at such time, date and place as the General Partners
shall determine. The General Partners shall arrange to provide written notice of
the meeting, stating the date, time and place of the meeting and the record date
therefor, to each Partner entitled to vote at the meeting within a reasonable
time prior thereto. Failure to receive notice of a meeting on the part of any
Partner shall not affect the validity of any act or proceeding of the meeting,
so long as a quorum shall be present at the meeting. Except as otherwise
required by applicable law, only matters set forth in the notice of a meeting
may be voted on by the Partners at a meeting. The presence in person or by proxy
of Partners holding a majority of the total number of votes eligible to be cast
by all Partners as of the record date shall constitute a quorum at any meeting.
In the absence of a quorum, the General Partners may adjourn a meeting to the
time or times as determined by the General Partners without additional notice to
the Partners. Except as otherwise required by any provision of this Agreement or
of the 1940 Act, (i) those candidates receiving a plurality of the votes cast at
any meeting of Partners shall be elected as Directors and (ii) all other actions
of the Partners taken at a meeting shall require the affirmative vote of
Partners holding a majority of the total number of votes eligible to be cast by
those Partners who are present in person or by proxy at such meeting.
(b) Each Partner shall be entitled to cast at any meeting of Partners a number
of votes equivalent to such Partner's Fund Percentage as of the record date for
such meeting. The General Partners shall establish a record date not less than
10 nor more than 60 days prior to the date of any meeting of Partners to
determine eligibility to vote at such meeting and the number of votes which each
Partner will be entitled to cast thereat, and shall maintain for each such
record date a list setting forth the name of each Partner and the number of
votes that each Partner will be entitled to cast at the meeting.
(c) A Partner may vote at any meeting of Partners by a proxy properly executed
in writing by the Partner and filed with the Fund before or at the time of the
meeting. A proxy may be suspended or revoked, as the case may be, by the Partner
executing the proxy by a later writing delivered to the Fund at any time prior
to exercise of the proxy or if the Partner executing the proxy shall be present
at the meeting and decides to vote in person. Any action of the Partners that is
permitted to be taken at a meeting of the Partners may be taken without a
meeting if consents in writing, setting forth the action to be taken, are signed
by Partners holding a majority of the total number of votes eligible to be cast
or such greater percentage as may be required under this Agreement to approve
such action.
3.4. ADVICE AND MANAGEMENT.
(a) Among their powers, the Directors shall have the power to engage the Manager
to provide Advice and Management to the Fund under their general supervision,
subject to the initial approval thereof prior to the Closing Date by the
Directors (including the vote of a majority of the Independent Directors at a
meeting called for such purpose) and by the Organizational Limited Partner. The
Directors also delegate to the Manager the rights and powers expressly given to
the Manager under this Agreement. The authority of the Manager granted under
this Section 3.4 shall become effective upon such initial approvals and shall
terminate: (i) if any period of 12 consecutive months following the first 12
consecutive months of the effectiveness of such authority shall conclude without
the approval of the continuation of such authority by (A) the vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund or
(B) the Directors, and in either case, approval by a majority of the Independent
Directors by vote cast in person at a meeting called for such purpose; (ii) if
revoked by the Directors or by vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of the Fund, in either case with 60 days'
prior written notice to the Manager; or (iii) at the election of the Manager
with 60 days' prior written notice to the Directors. The authority of the
Manager to provide Advice and Management pursuant to this Section 3.4 shall
automatically terminate upon the occurrence of any event in connection with the
Manager, its provision of Advice and Management, this Agreement or otherwise
constituting an "assignment" within the meaning of the 1940 Act. If the
authority of the Manager under this Section 3.4 is terminated as provided
herein, the Directors may appoint, subject to the approval thereof by a majority
of the Independent Directors and by vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Fund, a person or persons to
provide Advice and Management to the Fund, and shall cause the terms and
conditions of such appointment to be stated in an agreement executed on behalf
of the Fund and such person or persons. Notwithstanding anything in this
Agreement to the contrary, upon receiving the requisite approval set forth in
the preceding sentence, the Fund, and the General Partners on behalf of the
Fund, shall have the power and authority to enter into such agreement without
any further act, vote or approval of any Partner.
(b) So long as the Manager has been and continues to be authorized to provide
Advice and Management, it shall have, subject to any policies and restrictions
set forth in any current offering memorandum issued by the Fund, this Agreement,
the Form N-2 or the 1940 Act, or adopted from time to time by the Directors and
communicated in writing to the Manager, full discretion and authority (i) to
manage the assets and liabilities of the Fund and (ii) to manage the day-to-day
business and affairs of the Fund. In furtherance of and subject to the
foregoing, the Manager, except as otherwise provided in this Agreement, shall
have full power and authority on behalf of the Fund:
(1) to purchase, sell, exchange, trade and otherwise deal in and with
Securities and other property of the Fund and to loan Securities of
the Fund;
(2) to do any and all acts and exercise all rights with respect to the
Fund's interest in any person, firm, corporation, partnership or other
entity, including, without limitation, the voting of limited
partnership interests or shares of the Investment Funds;
(3) to enter into agreements with the Investment Funds irrevocably to
forego the Fund's right to vote its interests or shares of the
Investment Funds;
(4) to enter into agreements with the Investment Funds that provide
for, among other things, the indemnification by the Fund of the
Investment Funds and the Investment Managers to the same or different
extent as provided for in respect of the Manager, and to terminate
such agreements;
(5) to open, maintain and close accounts with brokers and dealers, to
make all decisions relating to the manner, method and timing of
Securities and other investment transactions, to select and place
orders with brokers, dealers or other financial intermediaries for the
execution, clearance or settlement of any transactions on behalf of
the Fund on such terms as the Manager considers appropriate, and to
grant limited discretionary authorization to such persons with respect
to price, time and other terms of investment and trading transactions;
(6) to borrow from banks or other financial institutions and to pledge
Fund assets as collateral therefor, to trade on margin, to exercise or
refrain from exercising all rights regarding the Fund's investments,
and to instruct custodians regarding the settlement of transactions,
the disbursement of payments to Partners with respect to repurchases
of Interests and the payment of Fund expenses, including those
relating to the organization and registration of the Fund;
(7) to issue to any Partner an instrument certifying that such Partner
is the owner of an Interest;
(8) to call and conduct meetings of Partners at the Fund's principal
office or elsewhere as it may determine and to assist the Directors in
calling and conducting meetings of the Directors;
(9) to engage and terminate such attorneys, accountants and other
professional advisers and consultants as the Manager may deem
necessary or advisable in connection with the affairs of the Fund or
as may be directed by the Directors;
(10) to engage the services of persons other than the Subadvisers (the
engagement of which shall be subject to Section 3.4(b)(15)) to assist
the Manager in providing, or to provide under the Manager's control
and supervision, Advice and Management to the Fund at the expense of
the Manager and to terminate such services;
(11) to assist in the preparation and filing of any required tax or
information returns to be made by the Fund;
(12) as directed by the Directors, to commence, defend and conclude
any action, suit, investigation or other proceeding that pertains to
the Fund or any assets of the Fund;
(13) if directed by the Directors, to arrange for the purchase of (A)
Insurance, or (B) any insurance covering the potential liabilities of
the Fund or relating to the performance of the Directors or the
Manager, or any of their principals, directors, officers, members,
employees and agents;
(14) to execute, deliver and perform such contracts, agreements and
other undertakings, and to engage in such activities and transactions
as are necessary and appropriate for the conduct of the business of
the Fund; and
(15) (A) to direct the formulation of investment policies and
strategies for the Fund using a multi-asset and multiple manager
strategy whereby some or all of the Fund's assets may be committed
from time to time by the Manager to the discretionary management of
one or more Subadvisers, the selection of which shall be subject to
the approval of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting securities, unless the Fund receives an exemption
from the provisions of the 1940 Act requiring such approval, (B) to
enter into agreements with the Subadvisers that provide for, among
other things, the indemnification by the Fund of the Subadvisers to
the same or different extent as provided for in respect of the
Manager, and to terminate such agreements, (C) to authorize the
payment of fees and allocations of profits to Subadvisers pursuant to
their respective governing documents and any rebates or reductions of
such fees or allocations which shall be for the benefit of the Fund
and (D) to identify appropriate Subadvisers, assess the most
appropriate investment vehicles (general or limited partnerships,
separate managed accounts or other investment vehicles (pooled or
otherwise) that invest or trade in Securities, and determine the
assets to be committed to each Subadviser and invested through the
Subadviser, which investments shall be subject in each case to the
terms and conditions of the respective governing documents used by the
Subadviser.
3.5. CUSTODY OF ASSETS OF THE FUND. Notwithstanding anything to the contrary
contained herein, the Manager shall not have any authority to hold or have
possession or custody of any funds, Securities or other property of the Fund.
The physical possession of all funds, Securities or other property of the Fund
shall at all times, be held, controlled and administered by one or more
custodians retained by the Fund. The Manager shall have no responsibility with
respect to the collection of income, physical acquisition or the safekeeping of
the funds, Securities or other assets of the Fund, and all such duties of
collection, physical acquisition or safekeeping shall be the sole obligation of
such custodians.
3.6. BROKERAGE. In the course of selecting brokers, dealers and other financial
intermediaries for the execution, clearance and settlement of transactions for
the Fund pursuant to Sections 3.4(b)(5) and (6) hereof, the Manager may, subject
to such policies as are adopted by the Fund and to the provisions of applicable
law, agree to such commissions, fees and other charges on behalf of the Fund as
it shall deem reasonable in the circumstances taking into account all such
factors as it deems relevant (including the quality of research and other
services made available to it even if such services are not for the exclusive
benefit of the Fund and the cost of such services does not represent the lowest
cost available) and shall be under no obligation to combine or arrange orders so
as to obtain reduced charges unless otherwise required under the Federal
securities laws. The Manager, subject to such procedures as may be adopted by
the Directors, may use Affiliates of the Manager as brokers to effect the Fund's
Securities transactions and the Fund may pay such commissions to such brokers in
such amounts as are permissible under applicable law.
3.7. OTHER ACTIVITIES.
(a) The General Partners shall not be required to devote full time to the
affairs of the Fund, but shall devote such time as may reasonably be required to
perform their obligations under this Agreement.
(b) Any Partner, and any Affiliate of any Partner, may engage in or possess an
interest in other business ventures or commercial dealings of every kind and
description, independently or with others, including, but not limited to,
acquisition and disposition of Securities, provision of investment advisory or
brokerage services, serving as directors, officers, employees, advisors or
agents of other companies, partners of any partnership, members of any limited
liability company, or trustees of any trust, or entering into any other
commercial arrangements. No Partner shall have any rights in or to such
activities of any other Partner, or any profits derived therefrom.
(c) The Manager and its members, directors, officers, employees and beneficial
owners, from time to time may acquire, possess, manage, hypothecate and dispose
of Securities or other investment assets, and engage in any other investment
transaction, for any account over which it or they exercise discretionary
authority, including their own accounts, the accounts of their families, the
account of any entity in which it or they have a beneficial interest or the
accounts of others for whom they may provide investment advisory or other
services, notwithstanding the fact that the Fund may have or may take a position
of any kind or otherwise; PROVIDED, HOWEVER, that the Manager shall not cause
the Fund to purchase any asset from or sell any asset to any such discretionary
account without the consent of the Directors and in accordance with the 1940
Act.
(d) To the extent that at law or in equity the General Partners, the Directors
or the Manager have duties (including fiduciary duties) and liabilities relating
thereto to the Fund or to any other Partner, any such person acting under this
Agreement shall not be liable to the Fund or to any other Partner for its good
faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of the
General Partners, the Directors or the Manager otherwise existing at law or in
equity, are agreed by the Partners to replace such other duties and liabilities
of such person.
3.8. DUTY OF CARE.
(a) The Directors, the General Partners and the Manager, including any officer,
director, partner, member, principal, employee or agent of the foregoing, shall
not be liable to the Fund or to any of its Partners for any loss or damage
occasioned by any act or omission in the performance of such person's services
under this Agreement, unless it shall be determined by final judicial decision
on the merits from which there is no further right to appeal that such loss is
due to an act or omission of such person constituting willful misfeasance, bad
faith, gross negligence or reckless disregard of such person's duties hereunder.
(b) Limited Partners not in breach of any obligation hereunder or under any
agreement pursuant to which the Limited Partner subscribed for an Interest shall
be liable to the Fund, any Partner or third parties only as required by the
Delaware Act.
3.9. INDEMNIFICATION.
(a) To the fullest extent permitted by law, the Fund shall, subject to Section
3.9(b) hereof, indemnify each General Partner (including for this purpose each
officer, director, member, partner, principal, employee or agent of, or any
person who controls, a General Partner or a member thereof, and their executors,
heirs, assigns, successors or other legal representatives), the Manager
(including for this purpose each officer, director, member, partner, principal,
employee or agent of, or any person who controls, the Manager or a member
thereof, and their executors, heirs, assigns, successors or other legal
representatives) and each Director (and their executors, heirs, assigns,
successors or other legal representatives) (each such person being referred to
as an "indemnitee"), against all losses, claims, damages, liabilities, costs and
expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and reasonable counsel fees,
incurred in connection with the defense or disposition of any action, suit,
investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which such indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter, by
reason of being or having been a General Partner, Manager or Director,
respectively, of the Fund or the past or present performance of services to the
Fund by such indemnitee, except to the extent such loss, claim, damage,
liability, cost or expense shall have been finally determined in a decision on
the merits in any such action, suit, investigation or other proceeding to have
been incurred or suffered by such indemnitee by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such indemnitee's office. The rights of indemnification provided
under this Section 3.9 shall not be construed so as to provide for
indemnification of an indemnitee for any liability (including liability under
federal securities laws which, under certain circumstances, impose liability
even on persons that act in good faith) to the extent (but only to the extent)
that such indemnification would be in violation of applicable law, but shall be
construed so as to effectuate the applicable provisions of this Section 3.9 to
the fullest extent permitted by law.
(b) Expenses, including reasonable counsel fees, so incurred by any such
indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties), may be paid from time to time by the Fund
in advance of the final disposition of any such action, suit, investigation or
proceeding upon receipt of an undertaking by or on behalf of such indemnitee to
repay to the Fund amounts so paid if it shall ultimately be determined that
indemnification of such expenses is not authorized under Section 3.9(a) hereof;
PROVIDED, HOWEVER, that (i) such indemnitee shall provide security for such
undertaking, (ii) the Fund shall be insured by or on behalf of such indemnitee
against losses arising by reason of such indemnitee's failure to fulfill his or
its undertaking, or (iii) a majority of the Independent Directors (excluding any
Director who is either seeking advancement of expenses hereunder or is or has
been a party to any other action, suit, investigation or proceeding involving
claims similar to those involved in the action, suit, investigation or
proceeding giving rise to a claim for advancement of expenses hereunder) or
independent legal counsel in a written opinion shall determine based on a review
of readily available facts (as opposed to a full trial-type inquiry) that there
is reason to believe such indemnitee ultimately will be entitled to
indemnification.
(c) As to the disposition of any action, suit, investigation or proceeding
(whether by a compromise payment, pursuant to a consent decree or otherwise)
without an adjudication or a decision on the merits by a court, or by any other
body before which the proceeding shall have been brought, that an indemnitee is
liable to the Fund or its Partners by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
such indemnitee's office, indemnification shall be provided pursuant to Section
3.9(a) hereof if (i) approved as in the best interests of the Fund by a majority
of the Independent Directors (excluding any Director who is either seeking
indemnification hereunder or is or has been a party to any other action, suit,
investigation or proceeding involving claims similar to those involved in the
action, suit, investigation or proceeding giving rise to a claim for
indemnification hereunder) upon a determination based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that such indemnitee
acted in good faith and in the reasonable belief that such actions were in the
best interests of the Fund and that such indemnitee is not liable to the Fund or
its Partners by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of such indemnitee's
office, or (ii) the Directors secure a written opinion of independent legal
counsel based upon a review of readily available facts (as opposed to a full
trial-type inquiry) to the effect that such indemnification would not protect
such indemnitee against any liability to the Fund or its Partners to which such
indemnitee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such indemnitee's office.
(d) Any indemnification or advancement of expenses made pursuant to this Section
3.9 shall not prevent the recovery from any indemnitee of any such amount if
such indemnitee subsequently shall be determined in a decision on the merits in
any action, suit, investigation or proceeding involving the liability or expense
that gave rise to such indemnification or advancement of expenses to be liable
to the Fund or its Partners by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of such
indemnitee's office. In any suit brought by an indemnitee to enforce a right to
indemnification under this Section 3.9 it shall be a defense that, and in any
suit in the name of the Fund to recover any indemnification or advancement of
expenses made pursuant to this Section 3.9 the Fund shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in this Section 3.9. In any such suit
brought to enforce a right to indemnification or to recover any indemnification
or advancement of expenses made pursuant to this Section 3.9, the burden of
proving that the indemnitee is not entitled to be indemnified, or to any
indemnification or advancement of expenses, under this Section 3.9 shall be on
the Fund (or any Partner acting derivatively or otherwise on behalf of the Fund
or its Partners).
(e) An indemnitee may not satisfy any right of indemnification or advancement of
expenses granted in this Section 3.9 or to which he or it may otherwise be
entitled except out of the assets of the Fund, and no Partner shall be
personally liable with respect to any such claim for indemnification or
advancement of expenses.
(f) The rights of indemnification provided hereunder shall not be exclusive of
or affect any other rights to which any person may be entitled by contract or
otherwise under law. Nothing contained in this Section 3.9 shall affect the
power of the Fund to purchase and maintain liability insurance on behalf of any
General Partner, Manager, Director or other person.
3.10. FEES, EXPENSES AND REIMBURSEMENT.
(a) So long as PWFA (or its affiliates) provides PWFA Services to the Fund, it
shall be entitled to receive such fees as may be agreed to by PWFA and the Fund
pursuant to a separate written agreement, which, notwithstanding anything in
this Agreement to the contrary, may be entered into by the Fund, and the Manager
on behalf of the Fund, without any further act, vote or approval of any Partner.
(b) The Fund shall compensate each Director for his or her services hereunder as
may be agreed to by the Directors and the General Partners. In addition, the
Fund shall reimburse the Directors for reasonable out-of-pocket expenses
incurred by them in performing their duties under this Agreement.
(c) The Fund shall bear all expenses incurred in the business of the Fund other
than those specifically required to be borne by the Manager pursuant hereto.
Expenses to be borne by the Fund include, but are not limited to, the following:
(1) all costs and expenses related to portfolio transactions and
positions for the Fund's account, including, but not limited to,
brokerage commissions, research fees, interest and commitment fees on
loans and debit balances, borrowing charges on Securities sold short,
dividends on Securities sold short but not yet purchased, custodial
fees, margin fees, transfer taxes and premiums, taxes withheld on
foreign dividends and indirect expenses from investments in Investment
Funds;
(2) all costs and expenses associated with the organization and
registration of the Fund, certain offering costs and the costs of
compliance with any applicable Federal or state laws;
(3) the costs and expenses of holding any meetings of any Partners
that are regularly scheduled, permitted or are required to be held by
this Agreement, the 1940 Act or other applicable law;
(4) fees and disbursements of any attorneys, accountants, auditors and
other consultants and professionals engaged on behalf of the Fund;
(5) the costs of a fidelity bond and any liability insurance obtained
on behalf of the Fund, the General Partners or the Directors;
(6) any fees payable to PWFA or its affiliates for PWFA Services;
(7) all costs and expenses associated with the organization of
Investment Funds managed by Subadvisers and with the selection of
Investment Managers, including due diligence and travel-related
expenses;
(8) all costs and expenses of preparing, setting in type, printing and
distributing reports and other communications to Limited Partners;
(9) all expenses of computing the Fund's net asset value, including
any equipment or services obtained for the purpose of valuing the
Fund's investment portfolio;
(10) all charges for equipment or services used for communications
between the Fund and any custodian, or other agent engaged by the
Fund;
(11) fees payable to custodians and other persons providing
administrative services to the Fund; and
(12) such other types of expenses as may be approved from time to time
by the Directors, other than those required to be borne by the
Manager.
The Manager shall be entitled to reimbursement from the Fund for any of the
above expenses that it pays on behalf of the Fund.
(d) Subject to procuring any required regulatory approvals, the Fund from time
to time, alone or in conjunction with other accounts for which the Manager, or
any Affiliate of the Manager, acts as general partner or investment adviser, may
purchase Insurance in such amounts, from such insurers and on such terms as the
General Partners shall determine.
ARTICLE IV
Termination of Status of General Partners, Removal of General Partners,
Transfers and Repurchases
4.1. TERMINATION OF STATUS OF A GENERAL PARTNER.
(a) A General Partner shall cease to be a general partner of the Fund if the
General Partner (i) shall be dissolved or otherwise shall terminate its
existence; (ii) shall voluntarily withdraw as General Partner; (iii) shall be
removed; (iv) shall transfer its entire Interest as General Partner as permitted
under Section 4.3 hereof and such person to which such Interest is transferred
is admitted as a substitute General Partner pursuant to Section 2.6(a) hereof;
or (v) shall otherwise cease to be a general partner of the Fund under Section
17-402(a) of the Delaware Act.
(b) A General Partner may not withdraw voluntarily as a General Partner until
the earliest of (i) one year from the date on which the General Partner shall
have given the Directors written notice of its intention to effect such
withdrawal (or upon lesser notice if in the opinion of counsel to the Fund, such
withdrawal is not likely to cause the Fund to lose its partnership tax
classification or as otherwise permitted by the 1940 Act); (ii) the date on
which the authority of the Manager to provide Advice and Management is
terminated (other than at the election of the Manager) pursuant to Section
3.4(a) hereof, unless within 30 days after such termination, the Directors
request the General Partner not to withdraw, in which case 180 days after the
date of such termination, unless a successor general partner is earlier approved
by the Fund; and (iii) the date on which one or more persons shall have agreed
to assume the obligations of the Manager hereunder with the approval of the
Directors and such other approvals as may be required by the 1940 Act.
4.2. REMOVAL OF GENERAL PARTNERS. Any General Partner may be removed by the vote
or written consent of Partners holding not less than two-thirds of the total
number of votes eligible to be cast by all Partners.
4.3. TRANSFER OF INTERESTS OF GENERAL PARTNERS. A General Partner may not
Transfer its Interest as the General Partner except to persons who have agreed
to be bound by all of the terms of this Agreement and pursuant to applicable
law. By executing this Agreement, each other Partner shall be deemed to have
consented to any such Transfer permitted by the preceding sentence.
4.4. TRANSFER OF INTERESTS OF LIMITED PARTNERS.
(a) An Interest or portion thereof of a Limited Partner may be Transferred only
(i) by operation of law pursuant to the death, bankruptcy, insolvency or
dissolution of such Limited Partner or (ii) with the written consent of the
General Partners (which may be withheld in their sole and absolute discretion).
In addition, the General Partners may not consent to a Transfer of an Interest
or a portion thereof of a Limited Partner unless the person to whom such
Interest is transferred (or each of such person's equity owners if such a person
is a "private investment company" as defined in Rule 205-3(d)(3) under the
Advisers Act, an investment company registered under the 1940 Act, or a business
development company as defined under the Advisers Act) is a person whom the
General Partners believe meets the requirements of paragraph (d)(1) of Rule
205-3 under the Advisers Act or successor rule thereto, or is otherwise exempt
from such requirements. If any transferee does not meet such investor
eligibility requirements, the Fund reserves the right to redeem its Interest. In
addition to the foregoing, no Limited Partner shall be permitted to Transfer its
Interest or portion thereof unless after such Transfer the balance of the
Capital Account of the transferee, and of the Limited Partner Transferring less
than its entire Interest, is at least equal to the amount of the Limited
Partner's initial Capital Contribution. Any permitted transferee shall be
entitled to the allocations and distributions allocable to the Interest so
acquired and to Transfer such Interest in accordance with the terms of this
Agreement, but shall not be entitled to the other rights of a Limited Partner
unless and until such transferee becomes a substituted Limited Partner. If a
Limited Partner Transfers an Interest or portion thereof with the approval of
the General Partners, the General Partners shall promptly take all necessary
actions so that each transferee or successor to whom such Interest or portion
thereof is transferred is admitted to the Fund as a Limited Partner. The
admission of any transferee as a substituted Limited Partner shall be effective
upon the execution and delivery by, or on behalf of, such substituted Limited
Partner of this Agreement or a counterpart hereof. Each Limited Partner and
transferee agrees to pay all expenses, including attorneys' and accountants'
fees, incurred by the Fund in connection with such Transfer.
(b) Each Limited Partner shall indemnify and hold harmless the Fund, the General
Partners, the Directors, the Manager, each other Limited Partner and any
Affiliate of the foregoing against all losses, claims, damages, liabilities,
costs and expenses (including legal or other expenses incurred in investigating
or defending against any such losses, claims, damages, liabilities, costs and
expenses or any judgments, fines and amounts paid in settlement), joint or
several, to which such persons may become subject by reason of or arising from
(i) any Transfer made by such Limited Partner in violation of this Section 4.4
and (ii) any misrepresentation by such Limited Partner in connection with any
such Transfer.
4.5. REPURCHASE OF INTERESTS.
(a) Except as otherwise provided in this Agreement, no Partner or other person
holding an Interest or portion thereof shall have the right to withdraw or
tender to the Fund for repurchase an Interest or portion thereof. The General
Partners may from time to time, in their complete and exclusive discretion and
on such terms and conditions as they may determine, cause the Fund to repurchase
Interests or portions thereof pursuant to written tenders. In determining
whether to cause the Fund to repurchase Interests or portions thereof pursuant
to written tenders, the General Partners shall consider the following factors,
among others:
(1) whether any Partners have requested to tender Interests or
portions thereof to the Fund;
(2) the liquidity of the Fund's assets;
(3) the investment plans and working capital requirements of the Fund;
(4) the relative economies of scale with respect to the size of the
Fund;
(5) the history of the Fund in repurchasing Interests or portions
thereof;
(6) the condition of the securities markets; and
(7) the anticipated tax consequences of any proposed repurchases of
Interests or portions thereof.
The General Partners shall cause the Fund to repurchase Interests or portions
thereof pursuant to written tenders only on terms fair to the Fund and to all
Partners and persons holding Interests acquired from Partners, as applicable.
(b) Except as set forth in Sections 4.5(c) and (d) hereof, a General Partner may
tender its Interest or a portion thereof under Section 4.5(a) hereof only if and
to the extent that (1) such repurchase would not cause the value of the Capital
Account of the General Partner to be less than the value thereof required to be
maintained pursuant to Section 5.1(c) hereof, or (2) in the opinion of legal
counsel to the Fund, such repurchase would not jeopardize the classification of
the Fund as a partnership for U.S. Federal income tax purposes.
(c) More than 180 days after termination of the authority to provide Advice and
Management, the Manager, if it is a General Partner, may, by written notice to
the Directors, tender to the Fund all or any portion of its Capital Account,
established and maintained by it as a general partner of the Fund, which it is
not required to maintain pursuant to Section 5.1(c) hereof until it ceases to be
a general partner of the Fund pursuant to Section 4.1(a) hereof. Within 30 days
after the receipt of such notice, the Directors shall cause the tendered portion
of such Capital Account to be repurchased by the Fund for cash, subject to any
adjustment pursuant to Section 5.7 hereof.
(d) If a General Partner ceases to be a general partner of the Fund pursuant to
Section 4.1 hereof and the business of the Fund is continued pursuant to Section
6.1(a)(2) hereof, the former General Partner (or its trustee or other legal
representative) may, by written notice to the Directors within 60 days of the
action resulting in the continuation of the Fund pursuant to Section 6.1(a)(2)
hereof, tender to the Fund all or any portion of its Interest. Within 30 days
after the receipt of such notice, the Directors shall cause such Interest to be
repurchased by the Fund for cash in an amount equal to the balance of the former
General Partner's Capital Account or applicable portion thereof, subject to any
adjustment pursuant to Section 5.7 hereof. If the former General Partner does
not tender to the Fund all of its Interest as permitted by this Section 4.5(d)
such Interest shall be thereafter deemed to be and shall be treated in all
respects as the Interest of a Limited Partner.
(e) The General Partners may cause the Fund to repurchase an Interest or portion
thereof of a Limited Partner or any person acquiring an Interest or portion
thereof from or through a Limited Partner in the event that the General Partners
determine or have reason to believe that:
(1) such an Interest or portion thereof has been transferred in
violation of Section 4.4 hereof, or such an Interest or portion
thereof has vested in any person by operation of law as the result of
the death, dissolution, bankruptcy or incompetency of a Partner;
(2) ownership of such an Interest by a Partner or other person will
cause the Fund to be in violation of, or require registration of any
Interest or portion thereof under, or subject the Fund to additional
registration or regulation under, the securities or commodities laws
of the United States or any other relevant jurisdiction;
(3) continued ownership of such an Interest may be harmful or
injurious to the business or reputation of the Fund, the Directors or
the General Partners, or may subject the Fund or any of the Partners
to an undue risk of adverse tax or other fiscal consequences;
(4) any of the representations and warranties made by a Partner in
connection with the acquisition of an Interest or portion thereof was
not true when made or has ceased to be true; or
(5) it would be in the best interests of the Fund, as determined by
the General Partners, for the Fund to repurchase such an Interest or
portion thereof.
(f) Repurchases of Interests or portions thereof by the Fund shall be payable in
cash, without interest, or, in the discretion of the General Partners, in
Securities (or any combination of Securities and cash) of equivalent value. All
such repurchases shall be subject to any and all conditions as the General
Partners may impose and shall be effective as of a date set by the General
Partners after receipt by the Fund of all eligible written tenders of Interests
or portion thereof. The amount due to any Partner whose Interest or portion
thereof is repurchased shall be equal to the value of such Partner's Capital
Account or portion thereof as applicable as of the effective date of repurchase,
after giving effect to all allocations to be made to such Partner's Capital
Account as of such date. Notwithstanding anything to the contrary in this
Agreement, a Partner may be compelled to accept a distribution of any asset in
kind from the Fund despite the fact that the percentage of the asset distributed
to him exceeds the percentage of that asset which is equal to the percentage in
which he shares in distributions from the Fund.
ARTICLE V
CAPITAL
5.1. CONTRIBUTIONS TO CAPITAL.
(a) The minimum initial contribution of each Partner to the capital of the Fund
shall be $250,000 ($25,000 for employees or directors of the Manager and its
affiliates, and members of their immediate families, and, in the sole discretion
of the Manager, attorneys or other professional advisors engaged on behalf of
the Fund, and members of their immediate families) or such other amount as the
General Partners may determine from time to time. The amount of the initial
contribution of each Partner shall be recorded by the General Partners upon
acceptance as a contribution to the capital of the Fund.
(b) The Limited Partners may make additional contributions to the capital of the
Fund effective as of such times and in such amounts as the General Partners may
permit, but no Limited Partner shall be obligated to make any additional
contribution to the capital of the Fund except to the extent provided in Section
5.7 hereof.
(c) A General Partner may make additional contributions to the capital of the
Fund effective as of such times and in such amounts as it may determine, and
shall be required to make additional contributions to the capital of the Fund
from time to time to the extent necessary to maintain the balance of its Capital
Account at an amount, if any, necessary to ensure that the Fund will be treated
as a partnership for Federal income tax purposes. Except as provided above or in
the Delaware Act, no General Partner shall be required or obligated to make any
additional contributions to the capital of the Fund.
(d) Except as otherwise permitted by the General Partners, (i) initial and any
additional contributions to the capital of the Fund by any Partner shall be
payable in cash or in such Securities that the General Partners, in their
absolute discretion, may agree to accept on behalf of the Fund, and (ii) initial
and any additional contributions in cash shall be payable in readily available
funds at the date of the proposed acceptance of the contribution. The Fund shall
charge each Partner making a contribution in Securities to the capital of the
Fund such amount as may be determined by the General Partners not exceeding 2%
of the value of such contribution in order to reimburse the Fund for any costs
incurred by the Fund by reason of accepting such Securities, and any such charge
shall be due and payable by the contributing Partner in full at the time the
contribution to the capital of the Fund to which such charges relate is due. The
value of contributed Securities shall be determined in accordance with Section
7.3 hereof as of the date of contribution.
(e) The minimum initial and additional contributions set forth in (a) and (b) of
this Section 5.1 may be reduced by the General Partners.
5.2. RIGHTS OF PARTNERS TO CAPITAL. No Partner shall be entitled to interest on
his or its contribution to the capital of the Fund, nor shall any Partner be
entitled to the return of any capital of the Fund except (i) upon the repurchase
by the Fund of a part or all of such Partner's Interest pursuant to Section 4.5
hereof, (ii) pursuant to the provisions of Section 5.7(b) hereof or (iii) upon
the liquidation of the Fund's assets pursuant to Section 6.2 hereof. No Partner
shall be liable for the return of any such amounts. To the fullest extent
permitted by applicable law, no Partner shall have the right to require
partition of the Fund's property or to compel any sale or appraisal of the
Fund's assets.
5.3. CAPITAL ACCOUNTS.
(a) The Fund shall maintain a separate Capital Account for each Partner.
(b) Each Partner's Capital Account shall have an initial balance equal to the
amount of cash and the value of any Securities (determined in accordance with
Section 7.3 hereof) constituting such Partner's initial contribution to the
capital of the Fund.
(c) Each Partner's Capital Account shall be increased by the sum of (i) the
amount of cash and the value of any Securities (determined in accordance with
Section 7.3 hereof) constituting additional contributions by such Partner to the
capital of the Fund permitted pursuant to Section 5.1 hereof, plus (ii) any
amount credited to such Partner's Capital Account pursuant to Sections 5.4
through 5.7 hereof.
(d) Each Partner's Capital Account shall be reduced by the sum of (i) the amount
of any repurchase of the Interest, or portion thereof, of such Partner or
distributions to such Partner pursuant to Sections 4.5, 5.12 or 6.2 hereof which
are not reinvested, plus (ii) any amounts debited against such Partner's Capital
Account pursuant to Sections 5.4 through 5.8 hereof.
(e) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest.
5.4. ALLOCATION OF NET PROFIT AND LOSS. Subject to Section 5.9 hereof, as of the
last day of each Fiscal Period, any Net Profit or Net Loss for the Fiscal Period
shall be allocated among and credited to or debited against the Capital Accounts
of the Partners in accordance with their respective Fund Percentages for such
Fiscal Period.
5.5. ALLOCATION OF INSURANCE PREMIUMS AND PROCEEDS.
(a) Any premiums payable by the Fund for Insurance purchased pursuant to Section
3.10(d) hereof shall be apportioned evenly over each Fiscal Period or portion
thereof falling within the period to which such premiums relate under the terms
of such Insurance, and the portion of the premiums so apportioned to any Fiscal
Period shall be allocated among and debited against the Capital Accounts of each
Partner who is a partner of the Fund during such Fiscal Period in accordance
with such Partner's Fund Percentage for such Fiscal Period.
(b) Proceeds, if any, to which the Fund may become entitled pursuant to such
Insurance shall be allocated among and credited to the Capital Accounts of each
Partner who is a partner of the Fund during the Fiscal Period in which the event
which gives rise to recovery of proceeds occurs in accordance with such
Partner's Fund Percentage for such Fiscal Period.
5.6. ALLOCATION OF CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES.
(a) If the Fund incurs a withholding tax or other tax obligation with respect to
the share of Fund income allocable to any Partner, then the General Partners,
without limitation of any other rights of the Fund or the General Partners,
shall cause the amount of such obligation to be debited against the Capital
Account of such Partner when the Fund pays such obligation, and any amounts then
or thereafter distributable to such Partner shall be reduced by the amount of
such taxes. If the amount of such taxes is greater than any such distributable
amounts, then such Partner and any successor to such Partner's Interest shall
pay to the Fund as a contribution to the capital of the Fund, upon demand of the
General Partners, the amount of such excess. A General Partner shall not be
obligated to apply for or obtain a reduction of or exemption from withholding
tax on behalf of any Partner that may be eligible for such reduction or
exemption; provided, that in the event that the General Partners determine that
a Partner is eligible for a refund of any withholding tax, the General Partners
may, at the request and expense of such Partner, assist such Partner in applying
for such refund.
(b) Except as otherwise provided for in this Agreement and unless prohibited by
the 1940 Act, any expenditures payable by the Fund, to the extent determined by
the General Partners to have been paid or withheld on behalf of, or by reason of
particular circumstances applicable to, one or more but fewer than all of the
Partners, shall be charged to only those Partners on whose behalf such payments
are made or whose particular circumstances gave rise to such payments. Such
charges shall be debited from the Capital Accounts of such Partners as of the
close of the Fiscal Period during which any such items were paid or accrued by
the Fund.
5.7. RESERVES.
(a) Appropriate reserves may be created, accrued and charged against Net Assets
and proportionately against the Capital Accounts of the Partners for contingent
liabilities, if any, as of the date any such contingent liability becomes known
to the General Partners, such reserves to be in the amounts which the General
Partners in their sole discretion deem necessary or appropriate. The General
Partners may increase or reduce any such reserves from time to time by such
amounts as they in their sole discretion deem necessary or appropriate. The
amount of any such reserve, or any increase or decrease therein, shall be
proportionately charged or credited, as appropriate, to the Capital Accounts of
those parties who are Partners at the time when such reserve is created,
increased or decreased, as the case may be; PROVIDED, HOWEVER, that if any such
individual reserve item, adjusted by any increase therein, exceeds the lesser of
$500,000 or 1% of the aggregate value of the Capital Accounts of all such
Partners, the amount of such reserve, increase, or decrease instead shall be
charged or credited to those parties who were Partners at the time, as
determined by the General Partners in their sole discretion, of the act or
omission giving rise to the contingent liability for which the reserve was
established, increased or decreased in proportion to their Capital Accounts.
(b) If any amount is required by paragraph (a) of this Section 5.7 to be charged
or credited to a party who is no longer a Partner, such amount shall be paid by
or to such party, as the case may be, in cash, with interest from the date on
which the General Partners determine that such charge or credit is required. In
the case of a charge, the former Partner shall be obligated to pay the amount of
the charge, plus interest as provided above, to the Fund on demand; PROVIDED,
HOWEVER, that (i) in no event shall a former Partner be obligated to make a
payment exceeding the amount of such Partner's Capital Account at the time to
which the charge relates; and (ii) no such demand shall be made after the
expiration of three years from the date on which such party ceased to be a
Partner. To the extent that a former Partner fails to pay to the Fund, in full,
any amount required to be charged to such former Partner pursuant to paragraph
(a), the deficiency shall be charged proportionately to the Capital Accounts of
the Partners at the time of the act or omission giving rise to the charge to the
extent feasible, and otherwise proportionately to the Capital Accounts of the
current Partners.
5.8. PERFORMANCE ALLOCATION.
(a) The Manager shall be entitled to the Performance Allocation with respect to
each Limited Partner for a Measurement Period as long as the authority to
provide Advice and Management under Section 3.4 hereof was effective, and the
Manager was a general partner of the Fund, on the first day of the Measurement
Period. The Performance Allocation, if applicable, shall be debited against the
Capital Account of each Limited Partner as of the last day of each Measurement
Period with respect to such Limited Partner and the amount so debited shall be
credited simultaneously to the Capital Account of such General Partner, or,
subject to compliance with the 1940 Act and the Advisers Act, to the Capital
Accounts of such Partners as have been designated in any written notice
delivered by such General Partner to the Fund within 90 days after the close of
such Measurement Period. The Performance Allocation will be calculated
separately with respect to each Limited Partner for each Measurement Period and
will be made only if such Limited Partner's Positive Allocation Change for such
Measurement Period, if any, exceeds such Limited Partner's Threshold Return for
such Measurement Period; provided, however, that any Performance Allocation to
be made with respect to a Limited Partner for a Measurement Period will be
reduced by an amount necessary so that such Limited Partner's Positive
Allocation Change for such Measurement Period after reduction by any applicable
Performance Allocation is at least equal to the amount of such Limited Partner's
Threshold Return for such Measurement Period; and, further provided that no
Performance Allocation will be made with respect to a Limited Partner for a
Measurement Period if such Limited Partner was a Special Limited Partner as of
the first day of such Measurement Period.
(b) Within 30 days of each Measurement Period with respect to each Limited
Partner, the Manager may withdraw up to 98% of the Performance Allocation
(computed on the basis of unaudited data) that was credited to the Capital
Account of such General Partner, and debited from such Limited Partner's Capital
Account with respect to such Measurement Period only if and to the extent that
such withdrawal would not cause the value of the Capital Account of such General
Partner to be less than the value thereof required to be maintained pursuant to
Section 5.1(c) hereof. Subject to such criteria, the Fund shall pay the Manager
the undrawn balance of such Performance Allocation (subject to audit
adjustments) within 30 days after the completion of the audit of the Fund's
books. Any amount of such Performance Allocation not withdrawn by the Manager
pursuant to the first sentence of this Section 5.8(b) shall be deemed reinvested
in the Fund by such General Partner.
5.9. ALLOCATION TO AVOID CAPITAL ACCOUNT DEFICITS. To the extent that any debits
pursuant to Sections 5.4 through 5.7 hereof would reduce the balance of the
Capital Account of any Limited Partner below zero and as long as the Manager is
a general partner of the Fund, that portion of any such debits instead shall be
allocated to the Capital Account of such General Partner. Any credits in any
subsequent Fiscal Period which otherwise would be allocable pursuant to Sections
5.4 through 5.7 hereof to the Capital Account of any Limited Partner previously
affected by the application of this Section 5.9 instead shall be allocated to
the Capital Account of such General Partner in such amounts as are necessary to
offset all previous debits attributable to such Limited Partner, pursuant to
this Section 5.9, that have not been recovered.
5.10. ALLOCATIONS PRIOR TO CLOSING DATE. As long as the Manager is a general
partner of the Fund, any net cash profits or any net cash losses realized by the
Fund from the purchase or sale of Securities during the period ending on the day
prior to the Closing Date shall be allocated to the Capital Account of such
General Partner. (No unrealized item of profit or loss shall be allocated
pursuant to this Section 5.10 to the Capital Account of any Partner.)
5.11. TAX ALLOCATIONS. For each Fiscal Year, items of income, deduction, gain,
loss or credit shall be allocated for income tax purposes among the Partners in
such a manner as to reflect equitably amounts credited or debited to each
Partner's Capital Account for the current and prior Fiscal Years (or relevant
portions thereof). Allocations under this Section 5.11 shall be made pursuant to
the principles of Sections 704(b) and 704(c) of the Code, and in conformity with
Treasury Regulations Sections 1.704-1(b)(2)(iv)(f), 1.704-1(b)(4)(i) and
1.704-3(e) promulgated thereunder, as applicable, or the successor provisions to
such Section and Regulations. Notwithstanding anything to the contrary in this
Agreement, there shall be allocated to the Partners such gains or income as
shall be necessary to satisfy the "qualified income offset" requirement of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
If the Fund realizes net capital gains for Federal income tax purposes for any
Fiscal Year during or as of the end of which one or more Positive Basis Partners
(as hereinafter defined) withdraw from the Fund pursuant to Articles IV or VI
hereof, the General Partners may elect to allocate such net gains as follows:
(i) to allocate such net gains among such Positive Basis Partners, PRO RATA in
proportion to the respective Positive Basis (as hereinafter defined) of each
such Positive Basis Partner, until either the full amount of such net gains
shall have been so allocated or the Positive Basis of each such Positive Basis
Partner shall have been eliminated and (ii) to allocate any net gains not so
allocated to Positive Basis Partners to the other Partners in such manner as
shall reflect equitably the amounts credited to such Partners' Capital Accounts.
As used herein, (i) the term "Positive Basis" shall mean, with respect to any
Partner and as of any time of calculation, the amount by which the total of such
Partner's Capital Account as of such time exceeds its "adjusted tax basis," for
Federal income tax purposes, in its interest in the Fund as of such time
(determined without regard to any adjustments made to such "adjusted tax basis"
by reason of any transfer or assignment of such interest, including by reason of
death), and (ii) the term "Positive Basis Partner" shall mean any Partner who
withdraws from the Fund and who has a Positive Basis as of the effective date of
its withdrawal.
5.12. DISTRIBUTIONS.
(a) The General Partners may authorize the Fund to make distributions in cash or
in kind at any time to all of the Partners on a PRO RATA basis in accordance
with the Partners' Fund Percentages.
(b) The General Partners may withhold taxes from any distribution to any Partner
to the extent required by the Code or any other applicable law. For purposes of
this Agreement, any taxes so withheld by the Fund with respect to any amount
distributed by the Fund to any Partner shall be deemed to be a distribution or
payment to such Partner, reducing the amount otherwise distributable to such
Partner pursuant to this Agreement and reducing the Capital Account of such
Partner.
(c) Notwithstanding any provision to the contrary contained in this Agreement,
the Fund and the General Partners on behalf of the Fund shall not make a
distribution to any Partner on account of its interest in the Fund if such
distribution would violate Section 17-607 of the Delaware Act or other
applicable law.
ARTICLE VI
DISSOLUTION AND LIQUIDATION
6.1. DISSOLUTION.
(a) The Fund shall be dissolved at any time there are no Limited Partners or
upon the occurrence of any of the following events:
(1) upon the affirmative vote to dissolve the Fund by both (i) the
Directors and (ii) Partners holding at least two-thirds of the total
number of votes eligible to be cast by all Partners;
(2) upon either of (i) an election by the General Partners to dissolve
the Fund or (ii) a General Partner ceasing to be a general partner of
the Fund pursuant to Section 4.1 hereof (other than in conjunction
with a Transfer of the Interest of a General Partner permitted by
Section 4.3 hereof to a person who is admitted as a substitute General
Partner pursuant to Section 2.6(a) hereof), unless (a) as to the event
set forth in clause (ii) above, there is at least one other general
partner of the Fund who is hereby authorized to and does carry on the
business of the Fund, and (b) as to either event both the Directors
and the Partners holding not less than two-thirds of the total number
of votes eligible to be cast by all Partners shall elect within 60
days after such event to continue the business of the Fund and a
person to be admitted to the Fund, effective as of the date of such
event, as an additional General Partner has agreed to make such
contributions to the capital of the Fund as are required to be made
pursuant to Section 5.1(c) hereof;
(3) upon the failure of Partners to approve of successor Directors at
a meeting called by the General Partners in accordance with Section
2.11(c) hereof when no Director remains to continue the business of
the Fund;
(4) upon the expiration of any two-year period which commences on the
date on which any Limited Partner has submitted a written notice to
the Fund requesting to tender such Partner's entire Interest for
repurchase by the Fund if such Limited Partner has not been permitted
to do so at any time during such period; or
(5) as required by operation of law.
Dissolution of the Fund shall be effective on the later of the day on which the
event giving rise to the dissolution shall occur or, to the extent permitted by
the Delaware Act, the conclusion of any applicable 60-day period during which
the Directors and Partners may elect to continue the business of the Fund as
provided above, but the Fund shall not terminate until the assets of the Fund
have been liquidated in accordance with Section 6.2 hereof and the Certificate
has been canceled.
(b) Except as provided in Section 6.1(a) hereof or in the Delaware Act, the
death, mental illness, dissolution, termination, liquidation, bankruptcy,
reorganization, merger, sale of substantially all of the stock or assets of or
other change in the ownership or nature of a Partner, the admission to the Fund
of a new Partner, the withdrawal of a Partner from the Fund, or the transfer by
a Partner of his Interest to a third party shall not cause the Fund to dissolve.
6.2. LIQUIDATION OF ASSETS.
(a) Upon the dissolution of the Fund as provided in Section 6.1 hereof, the
General Partners shall promptly liquidate the business and administrative
affairs of the Fund, except that if the General Partners are unable to perform
this function, a liquidator elected by Partners holding a majority of the total
number of votes eligible to be cast by all Partners shall promptly liquidate the
business and administrative affairs of the Fund. Net Profit and Net Loss during
the period of liquidation shall be allocated pursuant to Article V hereof.
Subject to the Delaware Act, the proceeds from liquidation (after establishment
of appropriate reserves for all claims and obligations, including all
contingent, conditional or unmatured claims and obligations in such amount as
the General Partners or liquidator shall deem appropriate in their or its sole
discretion as applicable) shall be distributed in the following manner:
(1) the debts of the Fund, other than debts, liabilities or
obligations to Partners, and the expenses of liquidation (including
legal and accounting expenses incurred in connection therewith), up to
and including the date that distribution of the Fund's assets to the
Partners has been completed, shall first be paid on a PRO RATA basis;
(2) such debts, liabilities or obligations as are owing to the
Partners shall be paid next in their order of seniority and on a PRO
RATA basis; and
(3) the Partners shall be paid next on a PRO RATA basis the positive
balances of their respective Capital Accounts after giving effect to
all allocations to be made to such Partners' Capital Accounts for the
Fiscal Period ending on the date of the distributions under this
Section 6.2(a)(3).
(b) Anything in this Section 6.2 to the contrary notwithstanding, upon
dissolution of the Fund, subject to the Delaware Act and the priorities set
forth in Section 6.2(a), the General Partners or other liquidator may distribute
ratably in-kind any assets of the Fund; PROVIDED, HOWEVER, that if any in-kind
distribution is to be made (i) the assets distributed in kind shall be valued
pursuant to Section 7.3 hereof as of the actual date of their distribution and
charged as so valued and distributed against amounts to be paid under Section
6.2(a) above, and (ii) any profit or loss attributable to property distributed
in-kind shall be included in the Net Profit or Net Loss for the Fiscal Period
ending on the date of such distribution. Notwithstanding anything to the
contrary in this Agreement, the General Partner may compel a Partner to accept a
distribution of any asset in-kind from the Fund notwithstanding that the
percentage of the asset distributed to the Partner exceeds a percentage of that
asset that is equal to the percentage in which such Partner shares in
distributions from the Fund.
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
7.1. ACCOUNTING AND REPORTS.
(a) The Fund shall adopt for tax accounting purposes any accounting method which
the General Partners shall decide in their sole discretion is in the best
interests of the Fund. The Fund's accounts shall be maintained in U.S. currency.
(b) After the end of each taxable year, the Fund shall furnish to each Partner
such information regarding the operation of the Fund and such Partner's Interest
as is necessary for Partners to complete Federal and state income tax or
information returns and any other tax information required by federal or state
law.
(c) Except as otherwise required by the 1940 Act, or as may otherwise be
permitted by rule, regulation or order, within 60 days after the close of the
period for which a report required under this Section 7.1(c) is being made, the
Fund shall furnish to each Limited Partner a semi-annual report and an annual
report containing the information required by the 1940 Act. The Fund shall cause
financial statements contained in each annual report furnished hereunder to be
accompanied by a certificate of independent public accountants based upon an
audit performed in accordance with generally accepted accounting principles. The
Fund may furnish to each Partner such other periodic reports as it deems
necessary or appropriate in its discretion.
(d) The General Partners shall provide the Directors with the identity of the
members of the General Partners and thereafter shall notify the Directors of any
change in the membership of the General Partners within a reasonable time after
such change.
7.2. DETERMINATIONS BY GENERAL PARTNERS.
(a) All matters concerning the determination and allocation among the Partners
of the amounts to be determined and allocated pursuant to Article V hereof,
including any taxes thereon and accounting procedures applicable thereto, shall
be determined by the General Partners unless specifically and expressly
otherwise provided for by the provisions of this Agreement or as required by
law, and such determinations and allocations shall be final and binding on all
the Partners.
(b) The General Partners may make such adjustments to the computation of Net
Profit or Net Loss, the Allocation Change with respect to any Limited Partner,
or any components (withholding any items of income, gain, loss or deduction)
comprising any of the foregoing as they consider appropriate to reflect fairly
and accurately the financial results of the Fund and the intended allocation
thereof among the Partners.
7.3. VALUATION OF ASSETS.
(a) Except as may be required by the 1940 Act, the General Partners shall value
or have valued any Securities or other assets and liabilities of the Fund (other
than assets invested in Investment Funds) as of the close of business on the
last day of each Fiscal Period in accordance with such valuation procedures as
shall be established from time to time by the General Partners and which conform
to the requirements of the 1940 Act. Assets of the Fund that are invested in
Investment Funds managed by the Subadvisers shall be valued in accordance with
the terms and conditions of the respective agreements of the Investment Funds.
Assets of the Fund invested in Investment Funds not managed by the Subadvisers
shall be valued at fair value, which ordinarily will be the value determined by
their investment managers in accordance with the policies established by the
relevant Investment Fund. In determining the value of the assets of the Fund, no
value shall be placed on the goodwill or name of the Fund, or the office
records, files, statistical data or any similar intangible assets of the Fund
not normally reflected in the Fund's accounting records, but there shall be
taken into consideration any items of income earned but not received, expenses
incurred but not yet paid, liabilities fixed or contingent, the unamortized
portion of any organizational expenses and any other prepaid expenses to the
extent not otherwise reflected in the books of account, and the value of options
or commitments to purchase or sell Securities or commodities pursuant to
agreements entered into prior to such valuation date.
(b) The value of Securities and other assets of the Fund and the net worth of
the Fund as a whole determined pursuant to this Section 7.3 shall be conclusive
and binding on all of the Partners and all parties claiming through or under
them.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1. AMENDMENT OF PARTNERSHIP AGREEMENT.
(a) Except as otherwise provided in this Section 8.1, this Agreement may be
amended, in whole or in part, with the approval of (i) the Directors (including
the vote of a majority of the Independent Directors, if required by the 1940
Act), (ii) the General Partners or (iii) a majority (as defined in the 1940 Act)
of the outstanding voting securities of the Fund.
(b) Any amendment that would:
(1) increase the obligation of a Partner to make any contribution to
the capital of the Fund;
(2) reduce the Capital Account of a Partner other than in accordance
with Article V; or
(3) modify the events causing the dissolution of the Fund;
may be made only if (i) the written consent of each Partner adversely affected
thereby is obtained prior to the effectiveness thereof or (ii) such amendment
does not become effective until (A) each Limited Partner has received written
notice of such amendment and (B) any Limited Partner objecting to such amendment
has been afforded a reasonable opportunity (pursuant to such procedures as may
be prescribed by the General Partners) to tender his entire Interest for
repurchase by the Fund.
(c) The General Partners at any time without the consent of the other Partners
may:
(1) restate this Agreement together with any amendments hereto which
have been duly adopted in accordance herewith to incorporate such
amendments in a single, integrated document;
(2) amend this Agreement (other than with respect to the matters set
forth in Section 8.1(b) hereof) to effect compliance with any
applicable law or regulation or to cure any ambiguity or to correct or
supplement any provision hereof which may be inconsistent with any
other provision hereof, provided that such action does not adversely
affect the rights of any Partner in any material respect; and
(3) amend this Agreement to make such changes as may be necessary or
desirable, based on advice of legal counsel to the Fund, to assure the
Fund's continuing eligibility to be classified for U.S. Federal income
tax purposes as a partnership which is not treated as a corporation
under Section 7704(a) of the Code,
subject, however, to the limitation that any amendment to this Agreement
pursuant to Sections 8.1(c)(2) or (3) hereof shall be valid only if approved by
the Directors (including the vote of a majority of the Independent Directors, if
required by the 1940 Act).
(d) The General Partners shall give prior written notice of any proposed
amendment to this Agreement (other than any amendment of the type contemplated
by clause (1) of Section 8.1(c) hereof) to each Partner, which notice shall set
forth (i) the text of the proposed amendment or (ii) a summary thereof and a
statement that the text thereof will be furnished to any Partner upon request.
8.2. SPECIAL POWER OF ATTORNEY.
(a) Each Partner hereby irrevocably makes, constitutes and appoints each of the
General Partners and each of the Directors, acting severally, and any liquidator
of the Fund's assets appointed pursuant to Section 6.2 hereof with full power of
substitution, the true and lawful representatives and attorneys-in-fact of, and
in the name, place and stead of, such Partner, with the power from time to time
to make, execute, sign, acknowledge, swear to, verify, deliver, record, file
and/or publish:
(1) any amendment to this Agreement which complies with the provisions
of this Agreement (including the provisions of Section 8.1 hereof);
(2) any amendment to the Certificate required because this Agreement
is amended, including, without limitation, an amendment to effectuate
any change in the membership of the Fund; and
(3) all other such instruments, documents and certificates which, in
the opinion of legal counsel to the Fund, from time to time may be
required by the laws of the United States of America, the State of
Delaware or any other jurisdiction in which the Fund shall determine
to do business, or any political subdivision or agency thereof, or
which such legal counsel may deem necessary or appropriate to
effectuate, implement and continue the valid existence and business of
the Fund as a limited partnership under the Delaware Act.
(b) Each Partner is aware that the terms of this Agreement permit certain
amendments to this Agreement to be effected and certain other actions to be
taken or omitted by or with respect to the Fund without such Partner's consent.
If an amendment to the Certificate or this Agreement or any action by or with
respect to the Fund is taken in the manner contemplated by this Agreement, each
Partner agrees that, notwithstanding any objection which such Partner may assert
with respect to such action, the attorneys-in-fact appointed hereby are
authorized and empowered, with full power of substitution, to exercise the
authority granted above in any manner which may be necessary or appropriate to
permit such amendment to be made or action lawfully taken or omitted. Each
Partner is fully aware that each Partner will rely on the effectiveness of this
special power-of-attorney with a view to the orderly administration of the
affairs of the Fund.
(c) This power-of-attorney is a special power-of-attorney and is coupled with an
interest in favor of each of the General Partners and each of the Directors,
acting severally, and any liquidator of the Fund's assets, appointed pursuant to
Section 6.2 hereof, and as such:
(1) shall be irrevocable and continue in full force and effect
notwithstanding the subsequent death or incapacity of any party
granting this power-of-attorney, regardless of whether the Fund, the
General Partners, the Directors or any liquidator shall have had
notice thereof; and
(2) shall survive the delivery of a Transfer by a Partner of the whole
or any portion of such Partner's Interest, except that where the
transferee thereof has been approved by the General Partners for
admission to the Fund as a substituted Partner, this power-of-
attorney given by the transferor shall survive the delivery of such
assignment for the sole purpose of enabling the General Partners, the
Directors or any liquidator to execute, acknowledge and file any
instrument necessary to effect such substitution.
8.3. NOTICES. Notices which may or are required to be provided under this
Agreement shall be made, if to a Limited Partner, by regular mail, or, if to a
General Partner, by hand delivery, registered or certified mail return receipt
requested, commercial courier service, telex or telecopier, and shall be
addressed to the respective parties hereto at their addresses as set forth on
the books and records of the Fund (or to such other addresses as may be
designated by any party hereto by notice addressed to the General Partners in
the case of notice given to any Partner, and to each of the Partners in the case
of notice given to the General Partners). Notices shall be deemed to have been
provided when delivered by hand, on the date indicated as the date of receipt on
a return receipt or when received if sent by regular mail, commercial courier
service, telex or telecopier. A document that is not a notice and that is
required to be provided under this Agreement by any party to another party may
be delivered by any reasonable means.
8.4. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, assigns, executors, trustees or other legal representatives,
but the rights and obligations of the parties hereunder may not be Transferred
or delegated except as provided in this Agreement and any attempted Transfer or
delegation thereof which is not made pursuant to the terms of this Agreement
shall be void.
8.5. APPLICABILITY OF 1940 ACT AND FORM N-2. The parties hereto acknowledge that
this Agreement is not intended to, and does not set forth the substantive
provisions contained in the 1940 Act and the Form N-2 which affect numerous
aspects of the conduct of the Fund's business and of the rights, privileges and
obligations of the Partners. Each provision of this Agreement shall be subject
to and interpreted in a manner consistent with the applicable provisions of the
1940 Act and the Form N-2.
8.6. CHOICE OF LAW; ARBITRATION.
(a) Notwithstanding the place where this Agreement may be executed by any of the
parties hereto, the parties expressly agree that all the terms and provisions
hereof shall be construed under the laws of the State of Delaware, including the
Delaware Act, without regard to the conflict of law principles of such State.
(B) EACH PARTNER AGREES TO SUBMIT ALL CONTROVERSIES ARISING BETWEEN OR AMONG
PARTNERS OR ONE OR MORE PARTNERS AND THE FUND IN CONNECTION WITH THE FUND OR ITS
BUSINESSES OR CONCERNING ANY TRANSACTION, DISPUTE OR THE CONSTRUCTION,
PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT, WHETHER ENTERED INTO PRIOR
TO, ON OR SUBSEQUENT TO THE DATE HEREOF, TO ARBITRATION IN ACCORDANCE WITH THE
PROVISIONS SET FORTH BELOW. EACH PARTNER UNDERSTANDS THAT:
(1) ARBITRATION IS FINAL AND BINDING ON THE PARTIES;
(2) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL;
(3) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS;
(4) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING AND A PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY ARBITRATORS IS STRICTLY LIMITED; AND
(5) A PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
(C) CONTROVERSIES SHALL BE DETERMINED BY ARBITRATION BEFORE, AND ONLY BEFORE, AN
ARBITRATION PANEL CONVENED BY THE NEW YORK STOCK EXCHANGE, INC. ("NYSE") OR THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (THE "NASD"), TO THE FULLEST
EXTENT PERMITTED BY LAW. THE PARTIES MAY ALSO SELECT ANY OTHER NATIONAL
SECURITIES EXCHANGE'S ARBITRATION FORUM UPON WHICH A PARTY IS LEGALLY REQUIRED
TO ARBITRATE THE CONTROVERSY, TO THE FULLEST EXTENT PERMITTED BY LAW. SUCH
ARBITRATION SHALL BE GOVERNED BY THE RULES OF THE ORGANIZATION CONVENING THE
PANEL. JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN THE
SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT HAVING JURISDICTION
OVER THE PARTY OR PARTIES AGAINST WHOM SUCH AWARD IS RENDERED. EACH PARTNER
AGREES THAT THE DETERMINATION OF THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE
UPON THEM.
(D) NO PARTNER SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO
HAS INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE
CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED
BY THE PUTATIVE CLASS ACTION UNLESS AND UNTIL: (I) THE CLASS CERTIFICATION IS
DENIED; OR (II) THE CLASS IS DECERTIFIED; OR (III) THE PARTNER IS EXCLUDED FROM
THE CLASS BY THE COURT. THE FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE
SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE
EXTENT STATED HEREIN.
8.7. NOT FOR BENEFIT OF CREDITORS. The provisions of this Agreement are intended
only for the regulation of relations among past, present and future Partners and
the Fund. This Agreement is not intended for the benefit of non-Partner
creditors and no rights are granted to non-Partner creditors under this
Agreement.
8.8. CONSENTS. Any and all consents, agreements or approvals provided for or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Fund.
8.9. MERGER AND CONSOLIDATION.
(a) The Fund may merge or consolidate with or into one or more limited
partnerships formed under the Delaware Act or other business entities pursuant
to an agreement of merger or consolidation which has been approved in the manner
contemplated by Section 17-211(b) of the Delaware Act.
(b) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, an agreement of merger or consolidation approved in accordance with
Section 17-211(b) of the Delaware Act may, to the extent permitted by Section
17-211(g) of the Delaware Act, (i) effect any amendment to this Agreement, (ii)
effect the adoption of a new partnership agreement for the Fund if it is the
surviving or resulting limited partnership in the merger or consolidation, or
(iii) provide that the partnership agreement of any other constituent
partnership to the merger or consolidation (including a limited partnership
formed for the purpose of consummating the merger or consolidation) shall be the
partnership agreement of the surviving or resulting limited partnership.
8.10. PRONOUNS. All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the person or persons,
firm or corporation may require in the context thereof.
8.11. CONFIDENTIALITY.
(a) A Limited Partner may obtain from the General Partners, for any purpose
reasonably related to the Limited Partner's Interest in the Fund, such
information regarding the affairs of the Fund as is just and reasonable under
the Delaware Act, subject to reasonable standards (including standards governing
what information and documents are to be furnished, at what time and location
and at whose expense) established by the General Partners.
(b) Each Limited Partner covenants that, except as required by applicable law or
any regulatory body, it will not divulge, furnish or make accessible to any
other person the name or address (whether business, residence or mailing) of any
Limited Partner (collectively, "Confidential Information") without the prior
written consent of the General Partners, which consent may be withheld in their
sole discretion.
(c) Each Partner recognizes that in the event that this Section 8.11 is breached
by any Partner or any of its principals, partners, members, directors, officers,
employees or agents or any of its affiliates, including any of such affiliates'
principals, partners, members, directors, officers, employees or agents,
irreparable injury may result to the non-breaching Partners and the Fund.
Accordingly, in addition to any and all other remedies at law or in equity to
which the non-breaching Partners and the Fund may be entitled, such Partners
also shall have the right to obtain equitable relief, including, without
limitation, injunctive relief, to prevent any disclosure of Confidential
Information, plus reasonable attorneys' fees and other litigation expenses
incurred in connection therewith. If any non-breaching Partner or the Fund
determines that any of the other Partners or any of its principals, partners,
members, directors, officers, employees or agents or any of its affiliates,
including any of such affiliates' principals, partners, members, directors,
officers, employees or agents should be enjoined from or required to take any
action to prevent the disclosure of Confidential Information, each of the other
non-breaching Partners agrees to pursue in a court of appropriate jurisdiction
such injunctive relief.
(d) The General Partners shall have the right to keep confidential from the
Limited Partners for such period of time as the General Partners deem
reasonable, any information which the General Partners reasonably believe to be
in the nature of trade secrets or other information the disclosure of which the
General Partners in good faith believe is not in the best interest of the Fund
or could damage the Fund or its business or which the Fund is required by law or
by agreement with a third party to keep confidential.
8.12. CERTIFICATION OF NON-FOREIGN STATUS. Each Limited Partner or transferee of
an Interest from a Limited Partner that is admitted to the Fund in accordance
with this Agreement shall certify, upon admission to the Fund and at such other
time thereafter as the General Partners may request, whether he is a "United
States Person" within the meaning of Section 7701(a)(30) of the Code on forms to
be provided by the Fund, and shall notify the Fund within 30 days of any change
in such Partner's status. Any Limited Partner who shall fail to provide such
certification when requested to do so by the General Partners may be treated as
a non-United States Person for purposes of U.S. Federal tax withholding.
8.13. SEVERABILITY. If any provision of this Agreement is determined by a court
of competent jurisdiction not to be enforceable in the manner set forth in this
Agreement, each Partner agrees that it is the intention of the Partners that
such provision should be enforceable to the maximum extent possible under
applicable law. If any provisions of this Agreement are held to be invalid or
unenforceable, such invalidation or unenforceability shall not affect the
validity or enforceability of any other provision of this Agreement (or portion
thereof).
8.14. ENTIRE AGREEMENT. This Agreement (including the Schedules attached hereto
which are incorporated herein) constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
It is hereby acknowledged and agreed that the General Partners, without the
approval of any Limited Partner may enter into written agreements ("Other
Agreements") with Limited Partners, executed contemporaneously with the
admission of such Limited Partners to the Fund, effecting the terms hereof in
order to meet certain requirements of such Limited Partners. The parties hereto
agree that any terms contained in an Other Agreement with a Limited Partner
shall govern with respect to such Limited Partner notwithstanding the provisions
of this Agreement.
8.15. DISCRETION. To the fullest extent permitted by law, whenever in this
Agreement, a person is permitted or required to make a decision (i) in its "sole
discretion" or "discretion" or under a grant of similar authority or latitude,
such person shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Fund or the
Limited Partners, or (ii) in its "good faith" or under another express standard,
then such person shall act under such express standard and shall not be subject
to any other or different standards imposed by this Agreement or any other
agreement contemplated herein or by relevant provisions of law or in equity or
otherwise.
8.16. COUNTERPARTS. This Agreement may be executed in several counterparts, all
of which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
<PAGE>
THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS ENTIRETY BEFORE
SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION CLAUSES SET FORTH IN SECTION 8.6
ON PAGES 37-38 AND THE CONFIDENTIALITY CLAUSES SET FORTH IN SECTION 8.11 ON
PAGES 38-39.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
GENERAL PARTNER:
PW Fund Advisor, L.L.C.
By:__________________________
ORGANIZATIONAL LIMITED PARTNER
- -----------------------------
Norman E. Sienko, Jr.
MANAGER:
PW Fund Advisor, L.L.C.
By:___________________________
DIRECTORS:
- ------------------------------
E. Garrett Bewkes, Jr.
- ------------------------------
Meyer Feldberg
- ------------------------------
George W. Gowen
LIMITED PARTNERS:
Each person who has signed or has had signed on its behalf a Limited Partner
Signature Page, which shall constitute a counterpart hereof.
<PAGE>
SCHEDULE I
DIRECTORS
NAME AND ADDRESS
E. Garrett Bewkes, Jr.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Meyer Feldberg
c/o Columbia University
101 Uris Hall
New York, New York 10027
George W. Gowen
666 Third Avenue
New York, New York 10017
<PAGE>
APPENDIX B
DESCRIPTION OF THE INVESTMENT FUNDS
AND CERTAIN PERFORMANCE INFORMATION
The Manager initially intends to invest approximately 80% of the
Fund's assets in the Investment Funds described in this Appendix. However, no
assurance can be given that the Manager will allocate the Fund's assets to all
of these Investment Funds.
A brief description of the investment strategies and historical
performance of these Investment Funds is presented below. This information has
been obtained from and reviewed by the relevant Investment Manager. The
historical performance is based upon the results a full period investor would
have achieved on an investment made in each Investment Fund for the period
specified. The performance shown is net of fees and expenses and
performance-based allocations, if applicable. The performance information has
not been audited and does not comply with the standards established by the
Association of Investment Management and Research (AIMR).
The following pages describe the investment philosophy and methodology
the Investment Manager of each Investment Fund has used to date, except as
noted, and expects to use to manage the Investment Fund. The performance shown
has been generated by applying this investment philosophy and methodology.
Future investments, however, will be made under different economic conditions
and may include different portfolio securities. The performance record of each
Investment Fund is limited and may not reflect performance in different economic
cycles. Investors should not assume that they will experience returns in the
future, if any, comparable to those discussed herein. In comparing each
Investment Fund's performance to market indices, potential investors should note
that the indices are highly diversified and represent only unmanaged results of
long investment, while each Investment Fund is not as diversified and an
Investment Fund's portfolio may contain debt and equity investments, foreign
securities, options and other derivatives and each Investment Manager may sell
securities short and some Investment Managers may utilize leverage. Because of
the differences among the Investment Funds' investment strategies and the
performance of the equity market indices shown, no such index is directly
comparable to the investment strategy of an Investment Fund.
The Investment Manager's performance information for periods before
those shown, if applicable, and for other accounts is available upon request by
contacting the Manager. The performance tables should be read in conjunction
with the notes thereto.
INVESTORS IN THE FUND WILL BEAR AN ADDITIONAL ASSET-BASED FEE AND
PERFORMANCE-BASED BONUS AND ADDITIONAL EXPENSES AT THE FUND LEVEL WHICH WILL
REDUCE PERFORMANCE. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
<PAGE>
PEQUOT TECHNOLOGY PERENNIAL FUND, L.P.
- --------------------------------------------------------------------------------
1997(a) 1998
Pequot Technology Perennial Fund, L.P. (b) 8.4% 99.8%
S&P 500 Index (c) 2.9% 28.6%
Morgan Stanley High Tech Index(d) (14.0%) 95.4%
Lipper Science & Technology Fund Index(e) (15.5%) 46.9%
- --------------------------------------------------------------------------------
Pequot Technology Perennial Fund, L.P. ("Pequot Perennial") is an
unregistered investment limited partnership whose investment objective is to
achieve superior long-term capital appreciation through the purchase and sale of
securities of companies in the information technology industry and its major
subsectors, including communications hardware and services, semiconductors and
semiconductor capital equipment, software, hardware and peripherals. Pequot
Perennial engages in the short selling of stocks which are believed to be
overvalued both as a potential source of profits and as a portfolio hedge.
Pequot Perennial also may engage in options transactions and may utilize
leverage. Pequot Perennial intends to invest primarily in U.S. equity
securities; however, it may invest up to 20% of its assets in foreign securities
and may trade in foreign currencies to hedge the currency risk of these
securities.
The investment manager of Pequot Perennial is Pequot Capital
Management, Inc. ("Pequot Capital"). Pequot Capital was recently spun off from
Dawson-Samberg Capital Management, Inc. ("Dawson Samberg"), which began managing
hedge funds in 1986. Pequot Capital currently provides investment advisory
services to private investment partnerships and offshore funds ("Pequot Family
of Funds") as well as separately managed accounts. Pequot Capital's assets under
management currently exceed $4.5 billion. The senior investment professionals of
Pequot Capital have been the primary portfolio managers for the Pequot Family of
Funds since the inception of each fund.
Daniel C. Benton is the President of Pequot Capital and is the primary
portfolio manager of the Pequot Technology Fund, L.P. and the Pequot Technology
Offshore Fund, Inc. Mr. Benton joined Dawson Samberg in 1993 from Goldman, Sachs
& Company in New York where he was a Vice President and securities analyst. From
1988 to 1992, Mr. Benton was selected for the Institutional Investor
All-American Research Team in PC/peripherals and mainframes. He is also a
five-time First Team position holder in PC/peripherals. Mr. Benton graduated
magna cum laude and Phi Beta Kappa from Colgate University with a B.A. in 1980
and earned his M.B.A. from Harvard University in 1984.
- --------
Notes:
(a) Pequot Perennial commenced operations on October 1, 1997. Returns for
Pequot Perennial and the indices for 1997 are for the period October 1,
1997 through December 31, 1997.
(b) Pequot Capital is entitled to an annual management fee, paid quarterly, of
2% of Pequot Perennial's net assets and an annual performance allocation
of 20% of net profits. The performance for Pequot Perennial is net of all
fees and expenses, including performance allocations. At all times under
consideration, the assets of Pequot Perennial were between $23 million and
$240 million.
(c) The S&P 500 Index is an unmanaged index considered to be generally
representative of the U.S. large cap stock market as a whole. The
performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses. Pequot Perennial does
not restrict its investments to securities included in the S&P 500 Index.
(d) The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35
stocks from nine technology subsectors: computer services, design software,
server software, PC software and new media, networking and
telecommunications equipment, server hardware, PC hardware and peripherals,
specialized systems, and semiconductors. The performance data for the
Morgan Stanley High Tech Index does not reflect dividends and does not
deduct any fees or expenses. Pequot Perennial does not restrict its
investments to securities in the Morgan Stanley High Tech Index.
(e) The Lipper Science & Technology Fund Index reflects the performance of 10
actively managed large mutual funds that have a technology focus. The
performance data for the Lipper Science & Technology Fund Index includes
the reinvestment of all dividends declared by such mutual funds and deducts
any fees or expenses of such mutual funds.
The performance data is set forth solely for the information of prospective
investors in the Fund. The statistical data for the S&P 500 Index, the Morgan
Stanley High Tech Index and the Lipper Science & Technology Fund Index have been
obtained from sources believed to be reliable but which are not warranted as to
accuracy or completeness.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
SPINNAKER TECHNOLOGY FUND, L.P.
- --------------------------------------------------------------------------------
1995(a) 1996 1997 1998
Spinnaker Technology Fund, L.P. (b) 94.2% 72.0% 11.9% 41.7%
S&P 500 Index (c) 30.5% 23.0% 33.4% 28.6%
Morgan Stanley High Tech Index(d) 42.2% 21.3% 16.8% 95.4%
Lipper Science & Technology Fund Index(e) 34.0% 16.9% 7.8% 46.9%
- --------------------------------------------------------------------------------
Spinnaker Technology Fund, L.P. ("Spinnaker") is an unregistered
investment limited partnership whose investment objective is significant capital
appreciation. Spinnaker invests a majority of its assets in companies in the
technology industry, which includes electronics technology companies,
telecommunications companies, information processing providers, software and
distribution companies, medical technology companies, and other companies that
may use technology for strategic purposes. Spinnaker focuses on high quality
growth companies, experiencing earnings growth in excess of 20% per year.
Investments are made on the basis of fundamental analysis relative to
valuations. Spinnaker also engages in short sales, may engage in options
transactions and may utilize leverage.
The investment manager of Spinnaker is Bowman Capital Management,
L.L.C. ("Bowman Capital"). Bowman Capital currently provides investment advisory
services to private investment partnerships and offshore funds with aggregate
assets in excess of $ 1.4 billion. Prior to March 1997, the investment manager
of Spinnaker was SoundView Asset Management, Inc. ("SoundView"); however,
Lawrence A. Bowman has been the primary portfolio manager of Spinnaker since
February 1995.
Lawrence A. Bowman is the President and founder of Bowman Capital and
is the primary portfolio manager of three other private investment vehicles that
invest primarily in the technology industry. Mr. Bowman was President of
SoundView from November 1994 until March 1997, where he managed Spinnaker and
other accounts. From November 1993 through November 1994, Mr. Bowman was a
Managing Director of Tiger Management Corporation ("Tiger") and was responsible
for technology investments. Before Tiger, Mr. Bowman was a high technology
analyst at Fidelity Investments, where he managed the Fidelity Select Computer
Fund, Fidelity Select Technology Fund and Fidelity Emerging Growth Fund. He
began his career at Texas Instruments and later spent four years at Apple
Computer. Mr. Bowman graduated from Lehigh University with a B.A. in 1980. He
earned his M.B.A. from Stanford Graduate School of Business in 1987.
- --------
NOTES:
(a) Spinnaker began trading with client capital on February 15, 1995. Returns
for Spinnaker and the indices for 1995 are for the period February 15, 1995
through December 31, 1995.
(b) Bowman Capital is entitled to an annual management fee, paid quarterly, of
1% of Spinnaker's net assets and an annual performance allocation of 20% of
net profits. The performance for Spinnaker is net of all fees and expenses,
including performance allocations, and reflects the reinvestment of
dividends and earnings. At all times under consideration, the assets of
Spinnaker were between $16 million and $567 million.
(c) The S&P 500 Index is an unmanaged index and is considered to be generally
representative of the U.S. large cap stock market as a whole. The
performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses. Spinnaker does not
restrict its investments to securities included in the S&P 500 Index.
(d) The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35
stocks from nine technology subsectors: computer services, design software,
server software, PC software and new media, networking and
telecommunications equipment, server hardware, PC hardware and peripherals,
specialized systems, and semiconductors. The performance data for the
Morgan Stanley High Tech Index does not reflect dividends and does not
deduct any fees or expenses. Spinnaker does not restrict its investments to
securities in the Morgan Stanley High Tech Index.
(e) The Lipper Science & Technology Fund Index reflects the performance of 10
actively managed large mutual funds that have a technology focus. The
performance data for the Lipper Science & Technology Fund Index includes
the reinvestment of all dividends declared by such mutual funds and deducts
any fees or expenses of such mutual funds.
The performance data is set forth solely for the information of prospective
investors in the Fund. The statistical data for the S&P 500 Index, the Morgan
Stanley High Tech Index and the Lipper Science & Technology Fund Index have been
obtained from sources believed to be reliable but which are not warranted as to
accuracy or completeness.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
GALLEON PARTNERS II, L.P.
- --------------------------------------------------------------------------------
1997(a) 1998
Galleon Partners II, L.P. (b) (6.8)% 31.3%
S&P 500 Index (c) 10.6% 28.6%
Morgan Stanley High Tech Index(d) 5.0% 95.4%
Lipper Science & Technology Fund Index (e) 1.1% 46.9%
- --------------------------------------------------------------------------------
Galleon Partners II, L.P. ("Galleon II") is an unregistered investment
limited partnership whose investment objective is to achieve above average
long-term capital appreciation primarily through investments in equity
securities and other equity related instruments of high quality emerging growth
companies. Galleon II focuses on investment opportunities in the information
technology industry (software, computers, consumer electronics, semiconductors
and communications). Galleon II takes long positions in undervalued companies
that it believes will experience rapid growth in sales and earnings, offer high
profitability, have high quality management, and a strong competitive position.
Galleon II will consider reducing a position in a portfolio company or taking a
short position in a company when it observes adverse changes in the company's
fundamentals, a negative change in sector outlook, overly optimistic Wall Street
expectations, significant insider selling and/or an adverse trading environment,
or when it believes the company is overvalued relative to comparable companies.
Galleon II also may engage in options transactions and may utilize leverage.
The investment manager of Galleon II is Galleon Advisors, L.L.C.
("Galleon Advisors"). Galleon Advisors and its affiliates began managing money
in January 1997 and currently provide investment advisory services to private
investment partnerships, offshore funds and separate accounts with aggregate
assets in excess of $700 million.
Raj Rajaratnam is the founder and Managing Member of Galleon Advisors
and is the primary portfolio manager of Galleon II. Mr. Rajaratnam also is the
primary portfolio manager of three other private investment vehicles. Prior to
forming Galleon Advisors, Mr. Rajaratnam was the President and Chief Operating
Officer of Needham & Company, Inc. ("Needham") where he was responsible
primarily for managing the assets of three investment funds. Mr. Rajaratnam
joined Needham in August 1985 as an analyst covering the electronics sector. He
served as the Managing Director of Investment Analysis with overall
responsibility for the firm's technology, healthcare and specialty retailing
investment analysis. In 1989, he was appointed Needham's Chief Operating Officer
and, in 1991, he was appointed its President. Mr. Rajaratnam received an M.B.A.
in Finance from the Wharton School of Business, University of Pennsylvania in
May 1983.
- --------
Notes:
(a) Galleon II commenced operations on July 1, 1997. Returns for Galleon II and
the indices for 1997 are for the period July 1, 1997 through December 31,
1997.
(b) Galleon Advisors is entitled to an annual management fee, paid quarterly,
of 1% of Galleon II's net assets and an annual performance allocation of
20% of net profits. The performance for Galleon II is net of all fees and
expenses, including performance allocations. At all times under
consideration, the assets of Galleon II were between $60 million and $100
million.
(c) The S&P 500 Index is an unmanaged index and is considered to be generally
representative of the U.S. large cap stock market as a whole. The
performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses. Galleon II does not
restrict its investments to securities included in the S&P 500 Index.
(d) The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35
stocks from nine technology subsectors: computer services, design software,
server software, PC software and new media, networking and
telecommunications equipment, server hardware, PC hardware and peripherals,
specialized systems, and semiconductors. The performance data for the
Morgan Stanley High Tech Index does not reflect dividends and does not
deduct any fees or expenses. Galleon II does not restrict its investments
to securities in the Morgan Stanley High Tech Index.
(e) The Lipper Science & Technology Fund Index reflects the performance of 10
actively managed large mutual funds that have a technology focus. The
performance data for the Lipper Science & Technology Fund Index includes
the reinvestment of all dividends declared by such mutual funds and deducts
any fees or expenses of such mutual funds.
The performance data is set forth solely for the information of prospective
investors in the Fund. The statistical data for the S&P 500 Index, the Morgan
Stanley High Tech Index and the Lipper Science & Technology Fund Index have been
obtained from sources believed to be reliable but which are not warranted as to
accuracy or completeness.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
P.A.W. PARTNERS, L.P.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1990(a) 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
P.A.W. Partners, L.P. (b) 1.0% 48.0% 33.8% 24.0% 7.1% 25.7% 22.7% 19.2% 8.9%
S&P 500 Index (c) 2.8% 30.5% 7.6% 10.1% 1.3% 37.6% 23.0% 33.4% 28.6%
Morgan Stanley High Tech
Index(d) N/A 80.5% 55.6% 52.1% 34.7% 50.9% 21.3% 16.8% 95.4%
Lipper Science & Technology
Fund Index (e) 4.5% 45.0% 9.8% 21.9% 9.4% 38.6% 16.9% 7.8% 46.9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
P.A.W. Partners, L.P. ("PAW Partners") is an unregistered investment
limited partnership whose investment objective is capital appreciation. PAW
Partners invests primarily in publicly-traded securities of companies with
market capitalizations under $500 million. PAW Partners focuses on smaller cap
companies because it believes their potential may not be reflected in their
stock prices due to limited research coverage and institutional ownership. PAW
Partners analyzes the industry dynamics and fundamentals of companies and buys
stocks with inexpensive valuations when it believes a company's expectations are
higher than average; it sells short stocks with expensive valuations when it
believes a company's expectations are lower than average. PAW Partners may
invest in growth stocks, value stocks and turnaround situations. PAW Partners
also may engage in options and futures transactions and may utilize leverage.
The investment manager of PAW Partners is P.A.W. Capital Partners,
L.P. ("PAW Capital"). PAW Capital, which is the successor to Peter A. Wright
Asset Management, began managing money in December 1990 and currently provides
investment advisory services to private investment partnerships, an offshore
fund and separate accounts with aggregate assets in excess of $550 million.
Peter A. Wright is the President and founder of PAW Capital and is the
primary portfolio manager of PAW Partners. Mr. Wright also is the primary
portfolio manager of two other private investment vehicles. From 1985 through
1990, Mr. Wright served as President and Chief Executive Officer of SoundView
Financial Group, Inc. ("SoundView"), a registered broker-dealer and registered
investment adviser. Prior to SoundView, Mr. Wright worked at the Gartner Group,
Inc., where he served as Executive Vice President and analyst, covering many
companies and sectors in technology and managing the firm's consulting and
general products division. Mr. Wright began his career at I.B.M. Corporation in
1976 as a financial analyst. Mr. Wright obtained a B.S. in Chemical Engineering
in 1975 and an M.B.A. in 1976 from Cornell University.
- --------
NOTES:
(a) PAW Partners commenced operations on December 3, 1990. Returns for PAW
Partners and the indices for 1990 are for the period December 3, 1990
through December 31, 1990.
(b) PAW Capital is entitled to an annual management fee, paid quarterly, of 1%
of PAW Partners' net assets and an annual performance allocation of 20% of
net profits. The performance for PAW Partners is net of all fees and
expenses, including performance allocations. At all times under
consideration, the assets of PAW Partners were between $2 million and $250
million.
(c) The S&P 500 Index is an unmanaged index and is considered to be generally
representative of the US large cap stock market as a whole. The performance
data for the S&P 500 Index assumes the reinvestment of all dividends, but
does not deduct any fees or expenses. PAW Partners does not restrict its
investments to securities included in the S&P 500 Index.
(d) The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35
stocks from nine technology subsectors: computer services, design software,
server software, PC software and new media, networking and
telecommunications equipment, server hardware, PC hardware and peripherals,
specialized systems, and semiconductors. The performance data for the
Morgan Stanley High Tech Index does not reflect dividends and does not
deduct any fees or expenses. PAW Partners does not restrict its investments
to securities in the Morgan Stanley High Tech Index. Information for the
Morgan Stanley High Tech Index is not available for 1990.
(e) The Lipper Science & Technology Fund Index reflects the performance of 10
actively managed large mutual funds that have a technology focus. The
performance data for the Lipper Science & Technology Fund Index includes
the reinvestment of all dividends declared by such mutual funds and deducts
any fees or expenses of such mutual funds.
The performance data is set forth solely for the information of prospective
investors in the Fund. The statistical data for the S&P 500 Index, the Morgan
Stanley High Tech Index and the Lipper Science & Technology Fund Index have been
obtained from sources believed to be reliable but which are not warranted as to
accuracy or completeness.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
OWENOKE ASSOCIATES, L.P.
- -------------------------------------------------------------------------------
1998(a)
Owenoke Associates, L.P. (b) 20.9%
S&P 500 Index (c) 25.3%
Morgan Stanley High Tech Index(d) 71.5%
Lipper Science & Technology Fund Index (e) 58.8%
- -------------------------------------------------------------------------------
Owenoke Associates, L.P. ("Owenoke Associates") is an unregistered
investment limited partnership whose investment objective is to maximize
risk-adjusted total return. Owenoke Associates seeks to invest primarily in
equity and debt securities of U.S. and non-U.S. companies. The basis of Owenoke
Associates' investment approach is proprietary bottom-up stock selection that is
designed to systematically identify and exploit the earnings surprise anomaly
and its appropriate biases. Because this approach is designed specifically to
identify candidate companies and sectors undergoing significant positive or
negative change, it is believed that this approach can provide a distinct
advantage to investment approaches whose stock selection focuses primarily on
earnings momentum, relative price momentum and valuation. It is believed that
long or short positions in companies or sectors demonstrating significant
earnings surprise caused by sustainable changes in profitability can produce
portfolios that exhibit returns superior to those that simply buy or sell short
all companies reporting earnings surprise. Owenoke Associates also uses short
selling as a hedge to reduce both stock market and industry risk. Owenoke
Associates also may engage in options transactions and may utilize leverage.
Owenoke Associates may engage in short-term trading, including day trading, in
response to earnings surprises, dramatic short-term price changes or other
factors.
The investment manager of Owenoke Associates is Owenoke Capital
Management, LLC ("Owenoke Capital"). Owenoke Capital began managing money in
October 1998 and currently provides investment advisory services to private
investment partnerships and an offshore fund with aggregate assets in excess of
$170 million.
David Korus is the Managing Member of Owenoke Capital and is the
primary portfolio manager of Owenoke Associates. Mr. Korus also is the primary
portfolio manager of two other private investment vehicles. From July 1996 to
October 1998, Mr. Korus was a Managing Member of and a portfolio manager for
Westcliff Capital Management, LLC and its affiliates. From October 1994 to July
1996, Mr. Korus was a portfolio manager at Kingdon Capital Management, where he
managed technology equities. From February 1984 through October 1994, Mr. Korus
was an analyst at Kidder, Peabody & Co., Incorporated ("Kidder Peabody"),
specializing in technology equities. In 1991, Mr. Korus became Director of
Technology Research at Kidder Peabody. In 1993 and 1994, Mr. Korus earned a #1
ranking from Institutional Investor magazine for securities analysts covering
the personal computer industry. Mr. Korus received an A.B. in Economics from the
University of Michigan in 1983.
- --------
Notes:
(a) Owenoke Associates commenced operations on October 12, 1998. Returns for
Owenoke Associates and the indices for 1998 are for the period October 12,
1998 through December 31, 1998.
(b) Owenoke Capital is entitled to an annual management fee, paid quarterly, of
1% of Owenoke Associates' net assets and an annual performance allocation
of 20% of net profits. The performance for Owenoke Associates is net of all
fees and expenses, including performance allocations, and reflects the
reinvestment of dividends and earnings. At all times under consideration,
the assets of Owenoke Associates were between $51 million and $96 million.
(c) The S&P 500 Index is an unmanaged index and is considered to be generally
representative of the US stock market as a whole. The performance data for
the S&P 500 Index assumes the reinvestment of all dividends, but does not
deduct any fees or expenses. Owenoke Associates does not restrict its
investments to securities included in the S&P 500 Index.
(d) The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35
stocks from nine technology subsectors: computer services, design software,
server software, PC software and new media, networking and
telecommunications equipment, server hardware, PC hardware and peripherals,
specialized systems, and semiconductors. The performance data for the
Morgan Stanley High Tech Index does not reflect dividends and does not
deduct any fees or expenses. Owenoke Associates does not restrict its
investments to securities in the Morgan Stanley High Tech Index.
(e) The Lipper Science & Technology Fund Index reflects the performance of 10
actively managed large mutual funds that have a technology focus. The
performance data for the Lipper Science & Technology Fund Index includes
the reinvestment of all dividends declared by such mutual funds and deducts
any fees or expenses of such mutual funds.
The performance data is set forth solely for the information of prospective
investors in the Fund. The statistical data for the S&P 500 Index, the Morgan
Stanley High Tech Index and the Lipper Science & Technology Fund Index have been
obtained from sources believed to be reliable but which are not warranted as to
accuracy or completeness.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FORM N-2
PW TECHNOLOGY PARTNERS, L.P.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements:
Because the Registrant has no assets, financial statements are
omitted.
(2) Exhibits:
(a) (1) Certificate of Limited Partnership.*
(2) Agreement of Limited Partnership.*
(3) Amended and Restated Limited Partnership
Agreement.**
(b) Not Applicable.
(c) Not Applicable.
(d) See Item 24(2)(a)(3).
(e) Not Applicable.
(f) Not Applicable.
(g) See Item 24(2)(a)(3).
(h) Not Applicable.
(i) Not Applicable.
(j) Custodian Services Agreement.
(k) (1) Management and Administration Agreement.
(2) Administration, Accounting and Investor
Services Agreement.
(3) Escrow Agreement.
(l) Not Applicable.
(m) Not Applicable.
(n) Not Applicable.
(o) Not Applicable.
(p) Not Applicable.
(q) Not Applicable.
(r) Not Applicable.
--------------
* Previously filed on December 29, 1998.
** See Appendix A of Confidential Offering Memorandum.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Blue Sky fees and expenses (including fees of counsel) $ 5,000
Legal and accounting fees and expenses 125,000
Printing engraving and offering expenses 115,000
Miscellaneous 5,000
--------
$250,000
========
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
After completion of the private offering of interests, the Registrant
expects that no person will be directly or indirectly under common control with
the Registrant, except that the Registrant may be deemed to be controlled by PW
Fund Advisor, L.L.C. (the "Manager"), the general partner of the Registrant.
Information regarding the ownership of PW Fund Advisor, L.L.C. is set forth in
its Form ADV, as filed with the Commission (File No. 801-55537).
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
Title of Class Number of Record Holders
- -------------- -------------------------
Limited Partnership 1 (The Registrant anticipates Interests
that as a result of the private
offering of interests there will
be more than 100 record holders
of such interests in the future.)
ITEM 29. INDEMNIFICATION
Reference is made to Section 3.9 of the Registrant's Amended and
Restated Limited Partnership Agreement (the "Partnership Agreement") filed as
Exhibit 2(a)(3) hereto. The Registrant hereby undertakes that it will apply the
indemnification provision of the Partnership Agreement in a manner consistent
with Release 40-11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"), so long as the
interpretation therein of Sections 17(h) and 17(i) of the 1940 Act remains in
effect.
The Registrant, in conjunction with the Manager, the Registrant's
directors and other registered investment management companies managed by the
Manager or its affiliates, maintains insurance on behalf of any person who is or
was an independent director, officer, employee, or agent of the Registrant, or
who is or was serving at the request of the Registrant as an, individual general
partner, director, officer, employee or agent of another managed investment
company, against certain liability asserted against and incurred by, or arising
out of, his or her position. However, in no event will the Registrant pay that
portion of the premium, if any, for insurance to indemnify any such person or
any act for which the Registrant itself is not permitted to indemnify.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
A description of any other business, profession, vocation, or
employment of a substantial nature in which the investment adviser of the
Registrant, and each member, director, executive officer, or partner of any such
investment adviser, is or has been, at any time during the past two fiscal
years, engaged in for his or her own account or in the capacity of member,
director, officer, employee, partner or trustee, is set forth in the
Registrant's Confidential Memorandum in the section entitled "THE MANAGER."
Information as to the members and officers of PW Fund Advisor, L.L.C. is
included in its Form ADV as filed with the Commission (File No. 801-55537), and
is incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Administrator maintains certain required accounting related and
financial books and records of the Registrant at PFPC Inc., 103 Bellevue
Parkway, 4th Floor, Wilmington, DE 19809. The other required books and records
are maintained by the Manager c/o PW Fund Advisor, L.L.C., 1285 Avenue of the
Americas, New York, New York 10019.
ITEM 32. MANAGEMENT SERVICES
Not Applicable.
ITEM 33. UNDERTAKINGS
Not Applicable.
- --------
<PAGE>
FORM N-2
PW TECHNOLOGY PARTNERS, L.P.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 17th day of February, 1999.
PW TECHNOLOGY PARTNERS, L.P.
By: PW FUND ADVISOR, L.L.C.
GENERAL PARTNER
By: /S/ ROBERT DISCOLO
----------------------
Name: Robert Discolo
Title: Authorized Representative
<PAGE>
FORM N-2
PW TECHNOLOGY PARTNERS, L.P.
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION
(j) Custodian Services Agreement.
(k) (1) Management and Administration Agreement.
(2) Administration, Accounting and Investor Services Agreement.
(3) Escrow Agreement.
EXHIBIT (J)
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of _____________, 1999 by and between PFPC
TRUST COMPANY, a limited purpose trust company organized under the laws of
Delaware ("PFPC Trust"), and PW Technology Partners, L.P., a Delaware limited
partnership (the "Partnership").
W I T N E S S E T H:
WHEREAS, the Partnership is registered as a closed-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Partnership wishes to retain PFPC Trust to provide
custodian services, and PFPC Trust wishes to furnish custodian services, either
directly or through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(c) "AUTHORIZED PERSON" means any person duly authorized by the
Partnership's General Partner or Directors to give Oral
Instructions and Written Instructions on behalf of the
Partnership and listed on the Authorized Persons Appendix
attached hereto and made a part hereof, or any amendment
thereto as may be received by PFPC Trust. An Authorized
Person's scope of authority may be limited by the
Partnership by setting forth such limitation in the
Authorized Persons Appendix.
(d) "BOOK-ENTRY SYSTEM" means Federal Reserve Treasury
book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or
nominees and any book-entry system maintained by an exchange
registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
(g) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC
Trust from an Authorized Person or from a person reasonably
believed by PFPC Trust to be an Authorized Person
(h) "PROPERTY" means:
(i) any and all securities and other investment items which
the Partnership may from time to time deposit, or cause
to be deposited, with PFPC Trust or which PFPC Trust
may from time to time hold for the Partnership;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the
Partnership, which are received by PFPC Trust from time
to time, from or on behalf of the Partnership.
(i) "SEC" means the Securities and Exchange Commission.
(j) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(k) "SHARES" mean the limited partnership interests of the
Partnership.
(l) "SHAREHOLDERS" mean the holders of limited partnership
interests of the partnership.
(m) "WRITTEN INSTRUCTIONS" mean written instructions signed by
two Authorized Persons and received by PFPC Trust. The
instructions may be delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Partnership hereby appoints PFPC Trust to provide
custodian services to the Partnership, on behalf of each of its
investment portfolios (each, a "Portfolio"), and PFPC Trust accepts
such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Partnership has provided or, where
applicable, will provide PFPC Trust with the following:
(a) certified or authenticated copies of the resolutions of the
Partnership's General Partner or Directors, approving the
appointment of PFPC Trust or its affiliates to provide
services;
(b) a copy of the Partnership's most recent effective
registration statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the placement agency agreement with respect to the
of Shares;
(e) a copy of each Portfolio's administration agreement if PFPC
Trust is not providing the Portfolio with such services;
(f) copies of any shareholder servicing agreements made in
respect of the Partnership or a Portfolio; and
(g) certified or authenticated copies of any and all amendments
or supplements to the foregoing.
4. COMPLIANCE WITH LAWS. PFPC Trust undertakes to comply with all
applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with
respect to the duties to be performed by PFPC Trust hereunder. Except
as specifically set forth herein, PFPC Trust assumes no responsibility
for such compliance by the Partnership or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC Trust
shall act only upon Oral Instructions and Written
Instructions.
(b) PFPC Trust shall be entitled to rely upon any Oral
Instructions and Written Instructions it receives from an
Authorized Person (or from a person reasonably believed by
PFPC Trust to be an Authorized Person) pursuant to this
Agreement. PFPC Trust may assume that any Oral Instructions
or Written Instructions received hereunder are not in any
way inconsistent with the provisions of organizational
documents of the Partnership or of any vote, resolution or
proceeding of the Partnership's General Partner, Directors
or Shareholders unless and until PFPC Trust receives Written
Instructions to the contrary.
(c) The Partnership agrees to forward to PFPC Trust Written
Instructions confirming Oral Instructions (except where such
Oral Instructions are given by PFPC Trust or its affiliates)
so that PFPC Trust receives the Written Instructions by the
close of business on the same day that such Oral
Instructions are received. The fact that such confirming
Written Instructions are not received by PFPC Trust in no
way shall invalidate the transactions or enforceability of
the transactions authorized by the Oral Instructions. Where
Oral Instructions or Written Instructions reasonably appear
to have been received from an Authorized Person, PFPC Trust
shall incur no liability to the Partnership in acting upon
such Oral Instructions or Written Instructions provided that
PFPC Trust's actions comply with the other provisions of
this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE PARTNERSHIP. If PFPC Trust is in doubt as to
any action it should or should not take, PFPC Trust may
request directions or advice, including Oral Instructions or
Written Instructions, from the Partnership.
(b) ADVICE OF COUNSEL. If PFPC Trust shall be in doubt as to any
question of law pertaining to any action it should or should
not take, PFPC Trust may request advice at its own cost from
such counsel of its own choosing (who may be counsel for the
Partnership, the Partnership's investment adviser or PFPC
Trust, at the option of PFPC Trust).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written
Instructions PFPC Trust receives from the Partnership, and
the advice it receives from counsel, PFPC Trust shall be
entitled to rely upon and follow the advice of counsel
provided that such counsel is selected with reasonable care.
In the event PFPC Trust so relies on the advice of counsel,
PFPC Trust remains liable for any action or omission on the
part of PFPC Trust which constitutes willful misfeasance,
bad faith, negligence or reckless disregard by PFPC Trust of
any duties, obligations or responsibilities set forth in
this Agreement.
(d) PROTECTION OF PFPC TRUST. PFPC Trust shall be protected in
any action it takes or does not take in reliance upon
directions, advice or Oral Instructions or Written
Instructions it receives from the Partnership or from
counsel and which PFPC Trust believes, in good faith, to be
consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this
section shall be construed so as to impose an obligation
upon PFPC Trust (i) to seek such directions, advice or Oral
Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral Instructions
or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of
PFPC Trust's properly taking or not taking such action.
Nothing in this subsection shall excuse PFPC Trust when an
action or omission on the part of PFPC Trust constitutes
willful misfeasance, bad faith, negligence or reckless
disregard by PFPC Trust of any duties, obligations or
responsibilities set forth in this Agree ment.
7. RECORDS; VISITS. The books and records pertaining to the
Partnership and any Portfolio, which are in the possession or under
the control of PFPC Trust, shall be the property of the Partnership.
Such books and records shall be prepared, preserved and maintained as
required by the 1940 Act and other applicable securities laws, rules
and regulations. The Partnership and Authorized Persons shall have
access to such books and records at all times during PFPC Trust's
normal business hours. Upon the reasonable request of the Partnership,
copies of any such books and records shall be provided by PFPC Trust
to the Partnership or to an authorized representative of the
Partnership, at the Partnership's expense.
8. CONFIDENTIALITY. PFPC Trust agrees to keep confidential all records of
the Partnership and information relating to the Partnership, the
Partnership's General Partner and the Shareholders, unless the release
of such records or information is otherwise consented to, in writing,
by the Partnership. The Partnership agrees that such consent shall not
be unreasonably withheld and may not be withheld where PFPC Trust may
be exposed to civil or criminal contempt proceedings or when required
to divulge such information or records to duly constituted
authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC Trust shall cooperate with the
Partnership's independent public accountants and shall take all
reasonable action in the performance of its obligations under this
Agreement to ensure that the necessary information is made available
to such accountants for the expression of their opinion, as required
by the Partnership.
10. DISASTER RECOVERY. PFPC Trust shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing
equipment to the extent appropriate equipment is available. In the
event of equipment failures, PFPC Trust at no additional expense to
the Partnership, shall take reasonable steps to minimize service
interruptions. PFPC Trust shall have no liability with respect to the
loss of data or service interruptions caused by equipment failure
provided such loss or interruption is not caused by PFPC Trust's own
willful misfeasance, bad faith, negligence or reckless disregard of
its duties or obligations under this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC Trust (a) has reviewed its
business and operations as they relate to the services provided
hereunder, (b) has developed or is developing a program to remediate
or replace computer applications and systems, and (c) has developed a
testing plan to test the remediation or replacement of computer
applications/systems, in each case, to address on a timely basis the
risk that certain computer applications/systems used by PFPC Trust may
be unable to recognize and perform properly date sensitive functions
involving dates prior to, including and after December 31, 1999,
including dates such as February 29, 2000 (the "Year 2000 Challenge").
To the best of PFPC Trust's knowledge and belief, the reasonably
foreseeable consequences of the Year 2000 Challenge will not adversely
effect PFPC Trust's ability to perform its duties and obligations
under this Agreement.
12. COMPENSATION. As compensation for custody services rendered by PFPC
Trust during the term of this Agreement, the Partnership, on behalf of
each of the Portfolios, will pay to PFPC Trust a fee or fees as may be
agreed to in writing from time to time by the Partnership and PFPC
Trust.
13. INDEMNIFICATION. (a) The Partnership, on behalf of each Portfolio,
agrees to indemnify and hold harmless PFPC Trust and its affiliates
from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky
laws, and amendments thereto) and expenses, including (without
limitation) reasonable attorneys' fees and disbursements,
(collectively, "Losses") arising directly or indirectly from any
action or omission to act which PFPC Trust takes (i) at the request or
on the direction of or in reliance on the advice of the Partnership or
(ii) upon Oral Instructions or Written Instructions. Neither PFPC
Trust, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of
PFPC Trust's or its affiliates' own willful misfeasance, bad faith,
negligence or reckless disregard of its duties under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary,
neither the Partnership nor any Portfolio shall be liable to PFPC
Trust or its affiliates for any consequential, special or indirect
losses or damages which PFPC Trust or its affiliates may incur or
suffer, whether or not the likelihood of such losses or damages was
known by the Partnership.
14. RESPONSIBILITY OF PFPC TRUST.
(a) PFPC Trust shall be under no duty to take any action on
behalf of the Partnership or any Portfolio except as
specifically set forth herein or as may be specifically
agreed to by PFPC Trust in writing. PFPC Trust shall be
obligated to exercise care and diligence in the performance
of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing
services provided for under this Agreement. PFPC Trust
agrees to indemnify and hold harmless the Partnership from
Losses arising out of PFPC Trust's failure to perform its
duties under this Agreement to the extent such damages arise
out of PFPC Trust's willful misfeasance, bad faith,
negligence or reckless disregard of its duties under this
Agreement.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC Trust shall not
be under any duty or obligation to inquire into and shall
not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, and which
PFPC Trust reasonably believes to be genuine; or (B) subject
to Sections 10 and 11 of this Agreement, delays or errors or
loss of data occurring by reason of circumstances beyond
PFPC Trust's control, including acts of civil or military
authority, national emergencies, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC Trust nor its affiliates shall be liable to the
Partnership or to any Portfolio for any consequential,
special or indirect losses or damages which the Partnership
may incur or suffer by or as a consequence of PFPC Trust's
or its affiliates' performance of the services provided
hereunder, whether or not the likelihood of such losses or
damages was known by PFPC Trust or its affiliates.
15. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. The Partnership will deliver or
arrange for delivery to PFPC Trust, all of the Property
owned by the Portfolios, including cash received as a result
of the distribution of Shares, during the period that is set
forth in this Agreement. PFPC Trust will not be responsible
for such Property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. PFPC Trust, acting upon
Written Instructions, shall open and maintain separate
accounts in the Partnership's name using all cash received
from or for the account of the Partnership, subject to the
terms of this Agreement. In addition, upon Written
Instructions, PFPC Trust shall open separate custodial
accounts for each separate Portfolio of the Partnership
(collectively, the "Accounts") and shall hold in the
Accounts all cash received from or for the Accounts of the
Partnership specifically designated to each separate
Portfolio. PFPC Trust shall make cash payments from or for
the Accounts of a Portfolio only for:
(i) purchases of securities in the name of a Portfolio or
PFPC Trust or PFPC Trust's nominee as provided in
sub-section (j) of this Section and for which PFPC
Trust has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares delivered to PFPC
Trust;
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or similar
expenses which are to be borne by a Portfolio;
(iv) payment to, subject to Written Instructions, the
Shareholders of an amount equal to the amount of
dividends and distributions stated in the Written
Instructions to be distributed in cash.
(v) payments, upon Written Instructions, in connection
with the conversion, exchange or surrender of
securities owned or subscribed to by the Partnership
and held by or delivered to PFPC Trust;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-section (c) of this Section;
and
(viii) payments, upon Written Instructions, made for other
proper Partnership purposes.
PFPC Trust hereby is authorized to endorse and collect all
checks, drafts or other orders for the payment of money
received as custodian for the Accounts.
(c) RECEIPT OF SECURITIES; SUBCUSTODIANS.
(i) PFPC Trust shall hold all securities received by
it for the Accounts in a separate account that
physically segregates such securities from those
of any other persons, firms or corporations,
except for securities held in a Book-Entry
System. All such securities shall be held or
disposed of only upon Written Instructions of
the Partnership pursuant to the terms of this
Agreement. PFPC Trust shall have no power or
authority to assign, hypothecate, pledge or
otherwise dispose of any such securities or
investment, except upon the express terms of this
Agreement and upon Written Instructions,
accompanied by a certified resolution of the
Partnership's General Partner or Directors,
authorizing the transaction. In no case may any
member of the Partnership's General Partner, or
any officer, employee or agent of the
Partnership withdraw any securities.
At PFPC Trust's own expense and for its own
convenience, PFPC Trust may enter into sub-custodian
agreements with other United States banks or trust
companies to perform duties described in this
sub-section (c). Such bank or trust company shall
have an aggregate capital, surplus and undivided
profits, according to its last published report, of
at least one million dollars ($1,000,000), if it is a
subsidiary or affiliate of PFPC Trust, or at least
twenty million dollars ($20,000,000) if such bank or
trust company is not a subsidiary or affiliate of
PFPC Trust. In addition, such bank or trust company
must be qualified to act as custodian and agree to
comply with the relevant provisions of the 1940 Act
and other applicable rules and regulations. Any such
arrangement will not be entered into without prior
written notice to the Partnership.
PFPC Trust shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold
the Partnership and each Portfolio harmless from its own acts
or omissions, under the standards of care provided for herein,
or the acts and omissions of any sub-custodian chosen by PFPC
Trust under the terms of this sub-section (c).
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PFPC
Trust, directly or through the use of the Book-Entry System,
shall:
(i) deliver any securities held for a Portfolio against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral Instructions or Written
Instructions, proxies, consents, authorizations, and
any other instruments whereby the authority of a
Portfolio as owner of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed,
retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be
delivered to PFPC Trust;
(iv) deliver any securities held for a Portfolio against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of
any conversion privilege;
(v) deliver any securities held for a Portfolio to any
protective committee, reorganization committee or other
person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold
under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery; (vi) make such transfer or exchanges of the
assets of the Portfolios and take such other steps as
shall be stated in said Oral Instructions or Written
Instructions to be for the purpose of effectuating a
duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the
Partnership;
(vii) release securities belonging to a Portfolio to any
bank or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the
Partnership on behalf of that Portfolio; provided,
however, that securities shall be released only upon
payment to PFPC Trust of the monies borrowed, except
that in cases where additional collateral is required
to secure a borrowing already made subject to proper
prior authorization, further securities may be released
for that purpose; and repay such loan upon redelivery
to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes
evidencing the loan;
(viii) release and deliver securities owned by a Portfolio
in connection with any repurchase agreement entered
into on behalf of the Partnership, but only on receipt
of payment therefor; and pay out moneys of the
Partnership in connection with such repurchase
agreements, but only upon the delivery of the
securities;
(ix) release and deliver or exchange securities owned by the
Partnership in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
(x) release and deliver securities owned by the Partnership
for the purpose of redeeming in kind shares of the
Partnership upon delivery thereof to PFPC Trust; and
(xi) release and deliver or exchange securities owned by the
Partnership for other corporate purposes.
PFPC Trust must also receive a certified resolution
describing the nature of the corporate purpose and the
name and address of the person(s) to whom delivery
shall be made when such action is pursuant to this sub-
section d.
(e) USE OF BOOK-ENTRY SYSTEM. The Partnership shall deliver to PFPC
Trust certified resolutions of the Partnership's General Partner
or Directors approving, authorizing and instructing PFPC Trust on
a continuous basis, to deposit in the Book-Entry System all
securities belonging to the Portfolios eligible for deposit
therein and to utilize the Book-Entry System to the extent
possible in connection with settlements of purchases and sales of
securities by the Portfolios, and deliveries and returns of
securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. PFPC Trust shall
continue to perform such duties until it receives Written
Instructions or Oral Instructions authorizing contrary actions.
PFPC Trust shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of
PFPC Trust shall identify by book-entry or otherwise
those securities belonging to each Portfolio. PFPC
Trust shall furnish to the Partnership a detailed
statement of the Property held for each Portfolio under
this Agreement at least monthly and from time to time
and upon written request.
(ii) Securities and any cash of each Portfolio deposited in
the Book-Entry System will at all times be segregated
from any assets and cash controlled by PFPC Trust in
other than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities.
PFPC Trust and its sub-custodian, if any, will pay out
money only upon receipt of securities and will deliver
securities only upon the receipt of money.
(iii) All books and records maintained by PFPC Trust which
relate to the Partnership's participation in the
Book-Entry System will be open to the inspection of
Authorized Persons at all times during PFPC Trust's
regular business hours, and PFPC Trust will furnish to
the Partnership all information in respect of the
services rendered as it may require.
PFPC Trust will also provide the Partnership with such
reports on its own system of internal control as the
Partnership may reasonably request from time to time.
(f) REGISTRATION OF SECURITIES. All Securities held for a Portfolio
which are issued or issuable only in bearer form, except such
securities held in the Book-Entry System, shall be held by PFPC
Trust in bearer form; all other securities held for a Portfolio
may be registered in the name of the Partnership on behalf of
that Portfolio, PFPC Trust, the Book-Entry System, a
sub-custodian, or any duly appointed nominees of the Partnership,
PFPC Trust, Book-Entry System or sub-custodian. The Partnership
reserves the right to instruct PFPC Trust as to the method of
registration and safekeeping of the securities of the
Partnership. The Partnership agrees to furnish to PFPC Trust
appropriate instruments to enable PFPC Trust to hold or deliver
in proper form for transfer, or to register in the name of its
nominee or in the name of the Book-Entry System, any securities
which it may hold for the Accounts and which may be registered
from time to time in the name of the Partnership on behalf of a
Portfolio.
(g) VOTING AND OTHER ACTION. Neither PFPC Trust nor its nominee shall
vote any of the securities held pursuant to this Agreement by or
for the account of a Portfolio, except in accordance with Written
Instructions. PFPC Trust, directly or through the use of the
Book-Entry System, shall execute in blank and promptly deliver
all notices, proxies and proxy soliciting materials to the
registered holder of such securities. If the registered holder is
not the Partnership on behalf of a Portfolio, then Written
Instructions or Oral Instructions must designate the person who
owns such securities.
(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of
contrary Written Instructions, PFPC Trust is authorized to take
the following actions:
(i) COLLECTION OF INCOME AND OTHER PAYMENTS.
(A) collect and receive for the account of each
Portfolio, all income, dividends, distributions,
coupons, option premiums, other payments and
similar items, included or to be included in the
Property, and promptly advise each Portfolio of
such receipt and credit such income, as collected,
to each Portfolio's custodian account;
(B) endorse and deposit for collection, in the name of
the Partnership, checks, drafts, or other orders
for the payment of money;
(C) receive and hold for the account of each Portfolio
all securities received as a distribution on the
Portfolio's securities as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other
rearrangement or distribution of rights or similar
securities issued with respect to any securities
belonging to a Portfolio and held by PFPC Trust
hereunder;
(D) present for payment and collect the amount payable
upon all securities which may mature or be called,
redeemed, or retired, or otherwise become payable
on the date such securities become payable; and
(E) take any action which may be necessary and proper
in connection with the collection and receipt of
such income and other payments and the endorsement
for collection of checks, drafts, and other
negotiable instruments.
(ii) MISCELLANEOUS TRANSACTIONS.
(A) deliver or cause to be delivered Property against
payment or other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer
selling for the account of a Portfolio
in accordance with street delivery custom;
(2) for the exchange of interim receipts or
temporary securities for definitive
securities; and
(3) for transfer of securities into the
name of the Partnership on behalf of
a Portfolio or PFPC Trust or nominee
of either, or for exchange of
securities for a different number of
bonds, certificates, or other
evidence, representing the same
aggregate face amount or number of
units bearing the same interest
rate, maturity date and call
provisions, if any; provided that,
in any such case, the new securities
are to be delivered to PFPC Trust.
(B) Unless and until PFPC Trust receives Oral
Instructions or Written Instructions to the
contrary, PFPC Trust shall:
(1) pay all income items held by it
which call for payment upon
presentation and hold the cash
received by it upon such payment for
the account of each Portfolio;
(2) collect interest and cash dividends
received, with notice to the
Partnership, to the account of each
Portfolio;
(3) hold for the account of each
Portfolio all stock dividends,
rights and similar securities issued
with respect to any securities held
by PFPC Trust; and
(4) execute as agent on behalf of the
Partnership all necessary ownership
certificates required by the Code or
the Income Tax Regulations of the
United States Treasury Department or
under the laws of any state now or
hereafter in effect, inserting the
Partnership's name, on behalf of a
Portfolio, on such certificate as
the owner of the securities covered
thereby, to the extent it may
lawfully do so.
(b) SEGREGATED ACCOUNTS.
(i) PFPC Trust upon receipt of Written Instructions or Oral
Instructions, shall establish and maintain segregated
accounts on its records for and on behalf of each Portfolio.
Such accounts may be used to transfer cash and securities,
including securities in the Book-Entry System:
(A) for the purposes of compliance by the Partnership with
the procedures required by a securities or option
exchange, providing such procedures comply with the
1940 Act and any releases of the SEC relating to the
maintenance of segregated accounts by registered
investment companies; and
(B) Upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PFPC Trust shall arrange for the establishment of IRA
custodian accounts for such shareholders holding Shares
through IRA accounts, in accordance with the Partnership's
confidential memorandum, the Code and such other procedures
as are mutually agreed upon from time to time by and between
the Partnership and PFPC Trust.
(j) PURCHASES OF SECURITIES. PFPC Trust shall settle purchased
securities upon receipt of Oral Instructions or Written
Instructions from the Partnership or its investment advisers that
specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker through whom
the purchase was made. PFPC Trust, upon receipt of
securities purchased by or for a Portfolio, shall pay out of
the moneys held for the account of the Portfolio the total
amount payable to the person from whom or the broker through
whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Oral
Instructions or Written Instructions.
(k) SALES OF SECURITIES. PFPC Trust shall settle sold securities upon
receipt of Oral Instructions or Written Instructions from the
Partnership that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Partnership upon such sale;
(vi) the name of the broker through whom or the person to whom
the sale was made;
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii) the Portfolio involved. PFPC Trust shall deliver the
securities upon receipt of the total amount payable to the
Portfolio upon such sale, provided that the total amount
payable is the same as was set forth in the Oral
Instructions or Written Instructions. Subject to the
foregoing, PFPC Trust may accept payment in such form as
shall be satisfactory to it, and may deliver securities and
arrange for payment in accordance with the customs
prevailing among dealers in securities.
(l) REPORTS; PROXY MATERIALS.
(i) PFPC Trust shall furnish to the Partnership the following
reports:
(A) such periodic and special reports as the Partnership
may reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of each Portfolio, listing each
Portfolio securities belonging to each Portfolio with
the adjusted average cost of each issue and the market
value at the end of such month and stating the cash
account of each Portfolio including disbursements;
(C) the reports required to be furnished to the Partnership
pursuant to Rule 17f-4 under the 1940 Act; and
(D) such other information as may be agreed upon from time
to time between the Partnership and PFPC Trust.
(ii) PFPC Trust shall transmit promptly to the Partnership any
proxy statement, proxy material, notice of a call or
conversion or similar communication received by it as
custodian of the Property. PFPC Trust shall be under no
other obligation to inform the Partnership as to such
actions or events.
(m) COLLECTIONS. All collections of monies or other property in
respect, or which are to become part, of the Property (but not
the safekeeping thereof upon receipt by PFPC Trust) shall be at
the sole risk of the Partnership. If payment is not received by
PFPC Trust within a reasonable time after proper demands have
been made, PFPC Trust shall notify the Partnership in writing,
including copies of all demand letters, any written responses,
memoranda of all oral responses and shall await instructions from
the Partnership. PFPC Trust shall not be obliged to take legal
action for collection unless and until reasonably indemnified to
its satisfaction. PFPC Trust also shall notify the Partnership as
soon as reasonably practicable whenever income due on securities
is not collected in due course and shall provide the Partnership
with periodic status reports of such income collected after a
reasonable time.
16. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Partnership or by PFPC Trust on ninety (90) days=
prior written notice to the other party. In the event this Agreement
is terminated (pending appointment of a successor to PFPC Trust or
vote of the shareholders of the Partnership to dissolve or to function
without a custodian of its cash, securities or other property), PFPC
Trust shall not deliver cash, securities or other property of the
Portfolios to the Partnership. It may deliver them to a bank or trust
company of PFPC Trust's choice, having an aggregate capital, surplus
and undivided profits, as shown by its last published report, of not
less than twenty million dollars ($20,000,000), as a custodian for the
Partnership to be held under terms similar to those of this Agreement.
PFPC Trust shall not be required to make any such delivery or payment
until full payment shall have been made to PFPC Trust of all of its
fees, compensation, costs and expenses attributable to the relevant
Portfolio(s). PFPC Trust shall have a security interest in and shall
have a right of setoff against the Property of such Portfolio(s) as
security for the payment of such fees, compensation, costs and
expenses.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notice shall be addressed (a) if to
PFPC Trust at 400 Bellevue Parkway, Wilmington, Delaware, marked for
the attention of Custodian Services, (b) if to the Partnership, at
1285 Avenue of the Americas, New York, New York 10019, ATTN: or (c) if
to neither of the foregoing, at such other address as shall have been
given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed
to have been given immediately. If notice is sent by first-class mail,
it shall be deemed to have been given five days after it has been
mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered.
18. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC Trust may assign its rights and delegate
its duties hereunder to any affiliate (as defined in the 1940 Act) of
or any majority-owned direct or indirect subsidiary of PFPC Inc., PFPC
Trust Corp., or PNC Bank Corp. provided that (i) PFPC Trust gives the
Partnership thirty (30) days' prior written; (ii) the delegate (or
assignee) agrees with PFPC Trust and the Partnership to comply with
all relevant provi sions of the Securities Laws; and (iii) PFPC Trust
and such delegate (or assignee) promptly provide such information as
the Partnership may request, and respond to such questions as the
Partnership may ask, relative to the delegation (or assignment),
including (without limitation) the capabilities of the delegate (or
assignee).
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter
hereof, provided that the parties may embody in one or more
separate documents their agreement, if any, with respect to
delegated duties and Oral Instructions.
(b) CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
or effect.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution
hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PFPC TRUST COMPANY
BY:
TITLE:
PW TECHNOLOGY PARTNERS, L.P.
BY:
TITLE:
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
EXHIBIT (K)(1)
MANAGEMENT AND ADMINISTRATION AGREEMENT
BY AND BETWEEN
PW FUND ADVISOR, L.L.C.
AND
PW TECHNOLOGY PARTNERS, L.P.
THIS MANAGEMENT AND ADMINISTRATION AGREEMENT (the "Agreement") is made
as of this 20th day of January, 1999, by and between PW Fund Advisor, L.L.C.
("PWFA") and PW Technology Partners, L.P. (the "Fund").
WHEREAS, PWFA is in the business of providing, and the Fund wishes
PWFA to provide, certain management and administrative services;
NOW THEREFORE, in consideration of the terms and conditions herein
contained, the parties agree as follows:
1. APPOINTMENT OF PWFA.
(a) The Fund hereby appoints, and PWFA hereby accepts
appointment, to serve as the Fund's management company. In such capacity, PWFA
agrees to provide certain management (but not investment management) and
administrative services to the Fund. These services shall include:
(i) the provision of office space, telephone and utilities;
(ii) the provision of administrative and secretarial, clerical
and other personnel as necessary to provide the services
required to be provided under this Agreement;
(iii) the general supervision of the entities which are
retained by the Fund to provide administrative services
and custody services to the Fund;
(iv) the handling of investor inquiries regarding the Fund and
providing investors with information concerning their
investment in the Fund and capital account balances;
(v) monitoring relations and communications between investors
and the Fund;
(vi) overseeing the drafting and updating of disclosure
documents relating to the Fund and assisting in the
distribution of all offering materials to investors;
(vii) maintaining and updating investor information, such as
change of address and employment;
(viii) overseeing the distribution and acceptance of investor
subscription documents and confirming the receipt of such
documents and funds;
(ix) overseeing the provision of investment advice to the Fund
by any Subadviser (as such term is defined in the Fund's
Confidential Memorandum), and monitoring compliance by
the Subadvisers with applicable investment policies and
restrictions of the Fund;
(x) coordinating and organizing meetings of the Fund's
directors (the "Directors");
(xi) preparing materials and reports for use in connection
with meetings of the Directors; and
(xii) reviewing and approving all regulatory filings required
under applicable law.
(b) All other services to be performed, and expenses related
thereto, in the operation of the Fund shall be borne by the Fund.
(c) Notwithstanding the appointment of PWFA to provide services
hereunder, the Directors shall remain responsible for supervising and
controlling the management, business and affairs of the Fund.
2. PWFA FEE; REIMBURSEMENT OF EXPENSES.
(a) In consideration for the provision by PWFA of its services
hereunder, the Fund will pay PWFA a monthly management fee at the annual rate of
1% of the Fund's "net assets," excluding assets attributable to PWFA's capital
account (the "Fee"). "Net assets" shall equal the total value of all assets of
the Fund, less an amount equal to all accrued debts, liabilities and obligations
of the Fund, calculated before giving effect to any repurchases of interests.
(b) The Fee will be computed based on the net assets of the Fund
as of the start of business on the first business day of each month, after
adjustment for any subscriptions effective on such date, and will be due and
payable in arrears within five business days after the end of such month. The
Fee will be charged in each fiscal period to the capital accounts of the Fund's
limited partners in proportion to their capital accounts at the beginning of
such fiscal period. In the event that the Fee is payable in respect of a partial
month, such fee will be appropriately pro-rated.
(c) PWFA is responsible for all costs and expenses associated
with the provision of its services hereunder. The Fund shall pay all other
expenses associated with the conduct of its business, including the costs and
expenses of holding any meetings of the Directors that are regularly scheduled,
permitted or required to be held under the terms of the Fund's amended and
restated limited partnership agreement, the Investment Company Act of 1940, as
amended (the "1940 Act"), or other applicable law, and the fees and
disbursements of any attorneys engaged on behalf of the Fund.
3. LIABILITY. PWFA will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or its partners in
connection with the performance of its duties under this Agreement, except a
loss resulting from willful misfeasance, bad faith or gross negligence on PWFA's
part (or on the part of an officer or employee of PWFA) in the performance of
its duties hereunder or reckless disregard by it of its duties under this
Agreement.
4. EFFECTIVE DATE AND TERMINATION. This Agreement shall become
effective as of the date first noted above, and shall remain in effect for an
initial term of two years from the date of its effectiveness. This Agreement may
be continued in effect from year to year thereafter provided that each such
continuance is approved by the Directors, including the vote of a majority of
the Directors who are not "interested persons" of the Fund, as defined by the
1940 Act. This Agreement may be terminated by PWFA, by the Directors or by vote
of a majority of the outstanding voting securities of the Fund at any time, in
each case upon not less than 60 days' prior written notice. This Agreement shall
also terminate automatically in the event of its "assignment," as such term is
defined by the 1940 Act.
5. ENTIRE AGREEMENT. This Agreement embodies the entire understanding
of the parties. This Agreement cannot be altered, amended, supplemented, or
abridged, or any provisions waived, except by written agreement of the parties.
6. CHOICE OF LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of New York and the 1940 Act. In the event
the laws of New York conflict with the 1940 Act, the applicable provisions of
the 1940 Act shall control.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PW FUND ADVISOR, L.L.C.
By:_________________________
Name:
Title:
PW TECHNOLOGY PARTNERS, L.P.
By: PW FUND ADVISOR, L.L.C.
GENERAL PARTNER
By:____________________________
Name:
Title:
EXHIBIT (K)(2)
ADMINISTRATION , ACCOUNTING AND INVESTOR SERVICES AGREEMENT
THIS AGREEMENT is made as of ___________, 1999 by and between PW TECHNOLOGY
PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), and PFPC
INC., a Delaware corporation ("PFPC"), which is an indirect subsidiary of PNC
Bank Corp.
W I T N E S S E T H :
WHEREAS, the Partnership is registered as a closed-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Partnership wishes to retain PFPC to provide certain
administration, accounting and investor services provided for herein, and PFPC
wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED PERSON" means any person duly authorized by the
Partnership's directors to give Oral Instructions and Written
Instructions on behalf of the Partnership and listed on the Authorized
Persons Appendix attached hereto or any amendment thereto as may be
received by PFPC from time to time. An Authorized Person's scope of
authority may be limited to the extent set forth in the Authorized
Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "GENERAL PARTNERS" AND "LIMITED PARTNERS" shall have the same meanings
as set forth in the Partnership's amended and restated limited
partnership agreement (the "Limited Partnership Agreement").
(f) "MANAGER" means PW Fund Advisor, L.L.C.
(g) "MEMORANDUM" means the Partnership's confidential memorandum.
(h) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(i) "SEC" means the Securities and Exchange Commission.
(j) "SECURITIES LAWS" means the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(k) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person or a person reasonably believed by PFPC to be an
Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. APPOINTMENT. The Partnership hereby appoints PFPC to provide
administration, accounting and investor services to the Partnership, in
accordance with the terms set forth in this Agreement. PFPC accepts such
appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Partnership has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Partnership's directors, approving the appointment of PFPC or its
affiliates to provide services and approving this Agreement;
(b) a copy of the Partnership's most recent effective registration
statement on Form N- 2 under the 1940 Act, as filed with the SEC;
(c) a copy of the Limited Partnership Agreement and Memorandum;
(d) a copy of any distribution agreement with respect to the Partnership;
(e) a copy of any additional administration agreement with respect to the
Partnership;
(f) a copy of any investor servicing agreement made with respect to the
Partnership; and
(g) copies (certified or authenticated, where applicable) of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with all
applicable requirements of the Securities Laws, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to
the duties to be performed by PFPC hereunder. Except as specifically set
forth herein, PFPC assumes no responsibility for such compliance by the
Partnership or any other party.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions or Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to
this Agreement. PFPC may assume that any Oral Instruction or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of organizational documents or this Agreement or of any
vote, resolution or proceeding of the Partnership's directors or of
the Partnership's Limited Partners, unless and until PFPC receives
Written Instructions to the contrary.
(c) The Partnership agrees to forward to PFPC Written Instructions
confirming Oral Instructions and shall endeavor to ensure that PFPC
receives the Written Instructions by the close of business on the same
day that such Oral Instructions are received. The fact that such
confirming Written Instructions are not received by PFPC shall in no
way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an
Authorized Person, PFPC shall incur no liability to the Partnership in
acting upon such Oral Instructions or Written Instructions provided
that PFPC's actions comply with the other provisions of this
Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE PARTNERSHIP. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice,
including Oral Instructions or Written Instructions, from the
Partnership.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of law
pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may, without limitation, be counsel for the Partnership, or PFPC,
at the option of PFPC), provided that such counsel is selected with
reasonable care.
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC receives from
the Partnership, and the advice PFPC receives from counsel selected
with reasonable care, PFPC may rely upon and follow the advice of such
counsel. PFPC shall promptly inform the Partnership of such conflict.
If PFPC relies on the advice of counsel, PFPC will remain liable for
any action or omission on the part of PFPC which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this
Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Partnership or from
counsel selected with reasonable care and which PFPC believes, in good
faith, to be consistent with those directions, advice and Oral
Instructions or Written Instructions. Nothing in this section shall be
construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral
Instructions or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of PFPC's
properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC
constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Partnership, which are in the
possession or under the control of PFPC, shall be the property of the
Partnership. Such books and records shall be prepared and maintained
as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Partnership and Authorized Persons shall
have access to such books and records at all times during PFPC's
normal business hours. Upon the reasonable request of the Partnership,
copies of any such books and records shall be provided by PFPC to the
Partnership or to an Authorized Person, at the Partnership's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to the Partnership's books of
account;
(ii) records of the Partnership's securities transactions; and
(iii) all other books and records as the Partnership is required to
maintain pursuant to Rule 31a-1 of the 1940 Act in connection
with the services of PFPC provided hereunder.
(c) Upon termination of this Agreement, PFPC in accordance with the
Partnership's reasonable request, shall, in accordance with Written
Instructions, deliver a copy of the books and records pertaining to
the Partnership, which are in the possession or under control of PFPC,
to the Partnership or any other person designated by the Partnership.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Partnership and information relating to the Partnership, the General
Partners and the Limited Partners, unless the release of such records or
information is otherwise consented to, in writing, by the Partnership. The
Partnership agrees that such consent shall not be unreasonably withheld.
The Partnership further agrees that, should PFPC be required to provide
such information or records to duly constituted authorities (who may
institute civil or criminal contempt proceedings for failure to comply),
PFPC shall not be required to seek the Partnership's consent prior to
disclosing such information.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Partnership's
independent public accountants and shall provide account analyses, fiscal
year summaries, and other audit-related schedules as the Partnership or
such accountants may reasonably request. PFPC shall take all reasonable
action in the performance of its duties under this Agreement to ensure that
the necessary information is made available to such accountants for the
expression of their opinion, as required by the Partnership.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Partnership, take reasonable
steps to minimize service interruptions. PFPC shall have no liability with
respect to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by PFPC's own
willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties or obligations under this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC (a) has reviewed its business and
operations as they relate to the services provided hereunder, (b) has
developed or is developing a program to remediate or replace computer
applications and systems, and (c) has developed a testing plan to test the
remediation or replacement of computer applications/systems, in each case,
to address on a timely basis the risk that certain computer
applications/systems used by PFPC may be unable to recognize and perform
properly date sensitive functions involving dates prior to, including and
after December 31, 1999, including dates such as February 29, 2000 (the
"Year 2000 Challenge"). To the best of PFPC's knowledge and belief, the
reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely effect PFPC's ability to perform its duties and obligations under
this Agreement.
12. COMPENSATION. As compensation for services rendered by PFPC during the term
of this Agreement, the Partnership will pay to PFPC a fee or fees as may be
agreed to in writing by the Partnership and PFPC.
13. INDEMNIFICATION.
(a) The Partnership agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under
the Securities Laws and any state or foreign securities and Blue Sky
laws, and amendments thereto), and expenses, including, without,
limitation reasonable attorneys' fees and disbursements (collectively,
"Losses") arising directly or indirectly from any action which PFPC
takes or does not take (i) at the request or on the direction of or in
reliance on the advice of the Partnership or (ii) upon Oral
Instructions or Written Instructions. Neither PFPC, nor any of its
affiliates, shall be indemnified against any liability (or any
expenses incident to such liability) arising out of PFPC's or its
affiliates own willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, the
Partnership shall not be liable to PFPC or its affiliates for any
consequential, special or indirect losses or damages which PFPC or its
affiliates may incur or suffer, whether or not the likelihood of such
losses or damages was known by the Partnership.
14. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Partnership except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this
Agreement. PFPC agrees to indemnify and hold harmless the Partnership
from Losses arising out of PFPC's failure to perform its duties under
this Agreement to the extent such damages arise out of PFPC's willful
misfeasance, bad faith, gross negligence or reckless disregard of such
duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with
the standard of care set forth above; and (ii) PFPC shall not be
liable for (A) the validity or invalidity or authority or lack thereof
of any Oral Instruction or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B)
subject to Sections 10 and 11 of this Agreement, delays or errors or
loss of data occurring by reason of circumstances beyond PFPC's
control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood, catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Partnership for any
consequential, special or indirect losses or damages which the
Partnership may incur or suffer by or as a consequence of PFPC's or
any affiliates' performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by
PFPC or its affiliates.
15. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services:
(i) Journalize investment, capital and income and expense activities;
(ii) Verify investment buy/sell trade tickets when received from the
Manager in accordance with PFPC's written procedures;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Record and reconcile corporate action activity and all other
capital changes with the Manager;
(vi) Reconcilecash and investment balances of the Partnership with the
Custodian, and provide the Manager with the beginning cash
balance available for investment purposes.
(vii) Update the cash availability throughout the day as required by
the Manager, including details of cash movements related to
securities and payment of Partnership expenses;
(viii) Calculate contractual expenses (e.g. advisory and custody fees)
in accordance with the Memorandum;
(ix) Maintain expense budget for the Partnership and notify an officer
of the Partnership of any proposed adjustments;
(x) Control all disbursements and authorize such disbursements from
the Partnership's account with the custodian upon Written
Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Determine applicable foreign exchange gains and losses on
payables and receivables;
(xiv) Interface with global custodian to monitor collection of tax
reclaims;
(xv) Obtain daily security market quotes from independent pricing
services approved by the Manager, or if such quotes are
unavailable, then obtain such prices from the Manager, and in
either case calculate the market value and the
appreciation/depreciation on the Partnership's investments;
(xvi) Transmit or otherwise send a copy of the daily portfolio
valuation to the Manager;
(xvii) Compute net asset values monthly;
(xviii) Research and recommend portfolio accounting tax treatment for
unique security types; and
(xix) As appropriate, compute yields, total return, expense ratios,
portfolio turnover rate, and, if required, portfolio average
DRAFT 1/8/99 dollar-weighted maturity in accordance with
applicable regulations.
16. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services:
(i) Prepare quarterly broker security transactions summaries
including principal and agency transactions and related
commissions;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Partnership statistical data
as requested on an ongoing basis;
(iv) Provide to the extent contained in accounting records materials
required for board reporting as may be requested from time to
time;
(v) Prepare for execution and file the Partnership's Federal Form
1065 and state tax returns;
(vi) Prepare and file the Partnership's Annual and Semi-Annual Reports
with the SEC on Form N-SAR via EDGAR;
(vii) Prepare and coordinate the services of the Partnership's printer
for the printing of and filing with the SEC via EDGAR the
Partnership's annual and semi-annual shareholder reports;
(viii) Assist in the preparation of registration statements;
(ix) Transmit or otherwise send, to the extent practicable and
feasible, requested detailed information related to the Limited
Partners, including admission details, income, capital gains and
losses, and performance detail;
(x) Mail Partnership offering materials to prospective investors; and
(xi) Mail quarterly reports of the Manager and Semi-Annual Financial
Statements to investors as well as any other necessary
correspondence.
17. DESCRIPTION OF INVESTOR SERVICES ON A CONTINUOUS BASIS. PFPC will
perform the following functions:
(i) Maintain the register of Limited Partners and enter on such
register all issues, transfers and repurchases of interests in
the Partnership;
(ii) Arrange for the calculation of the issue and repurchase prices of
interests in the Partnership in accordance with the Limited
Partnership Agreement and the Memorandum;
(iii) Allocate income, expenses, gains and losses to individual
Limited Partners= capital accounts in accordance with applicable
tax laws and with the Memorandum;
(iv) Calculate the Incentive Allocation in accordance with the
Memorandum and reallocate corresponding amounts from the
applicable Limited Partners' accounts to the Manager's account;
(v) Prepare and mail annually to each Partner a Form K-1 in
accordance with applicable tax regulations; and
(vi) Mail tender offers to Partners for purposes of executing
repurchases.
18. DURATION AND TERMINATION. This Agreement shall be effective on the date
first above written and shall continue in effect for an initial period of
two years. Thereafter, this Agreement, unless terminated, shall continue
automatically for successive terms of one (1) year. This Agreement may be
terminated by either party upon 60 days' prior written notice to the other
party.
19. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex
or facsimile sending device. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been
given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered. Notices shall be addressed (a) if to PFPC, at 400 Bellevue
Parkway, Wilmington, Delaware 19809, Attn: Neal J. Andrews; (b) if to the
Partnership, at c/o PaineWebber Incorporated, 1285 Avenue of the Americas,
New York, New York 10019, Attn:____________; or (c) if to neither of the
foregoing, at such other address as shall have been provided by like notice
to the sender of any such notice or other communication by the other party.
20. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived
only by written amendment, signed by the party against whom enforcement of
such change or waiver is sought.
21. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its duties
hereunder to any affiliate (as defined in the 1940 Act) of or any
majority-owned direct or indirect subsidiary of PFPC or PNC Bank Corp.,
provided that (i) PFPC gives the Partnership (60) days' prior written
notice; (ii) the delegate (or assignee) agrees with PFPC and the
Partnership to comply with all relevant provisions of the Securities Laws,
and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by the delegate (or
assignee) hereunder; and (iii) PFPC and such delegate (or assignee)
promptly provide such information as the Partnership may request, and
respond to such questions as the Partnership may ask, relative to the
delegation (or assignment), including, without limitation, the capabilities
of the delegate (or assignee).
22. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
23. FURTHER ACTIONS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
24. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating
to the subject matter hereof.
(b) CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: ______________________
Title:____________________
PW TECHNOLOGY PARTNERS, L.P.
By:______________________
Title: ______________________
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
EXHIBIT (K)(3)
ESCROW AGREEMENT
THIS AGREEMENT is made as of______________, 1999, by and PW TECHNOLOGY
PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), PW FUND
ADVISOR, L.L.C., a ________________ company (the "Manager"), and PFPC INC., a
Delaware corporation which is an indirect subsidiary of PNC Bank Corp. ("Escrow
Agent").
WITNESSETH
WHEREAS, the Partnership is registered as a closed-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Partnership has retained PFPC Inc. to provide certain
administration, accounting and investor services pursuant to an Administration,
Accounting and Investor Services Agreement dated as of ________________, 1999;
and
WHEREAS, the Partnership desires that PFPC Inc. also provide services as
escrow agent for the purpose of receiving payments from potential subscribing
limited partners in the Partnership (the "Potential Investors") and PFPC Inc.
wishes to provide such services.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. ACCEPTANCE BY ESCROW AGENT. The Escrow Agent hereby accepts the appointment
as escrow agent hereunder and agrees to act on the terms and conditions
hereinafter set forth.
2. RIGHTS AND RESPONSIBILITIES OF ESCROW AGENT. The acceptance by the Escrow
Agent of its duties hereunder is subject to the following terms and
conditions, which the parties to this Agreement hereby agree shall govern
and control the Escrow Agent's rights, duties, liabilities and immunities.
(a) The Escrow Agent shall act hereunder as a depositary only, and in its
capacity as such, it shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of
any document furnished to the Escrow Agent or any asset deposited with
it.
(b) "Written Instructions" mean written instructions received by the
Escrow Agent and signed by the Manager or any other person duly
authorized by the Manager, or by the directors of the Partnership, to
give such instructions on behalf of the Partnership. The instructions
may be delivered by hand, mail, facsimile, cable, telex or telegram;
except that any instruction terminating this Agreement may be given
only by hand or mail. The Partnership shall file from time to time
with the Escrow Agent a certified copy certified by the Manager of
each resolution of the Manager or directors authorizing the person or
persons to give Written Instructions. Such resolution shall include
certified signatures of such persons authorized to give Written
Instructions. This shall constitute conclusive evidence of the
authority of the signatories designated therein to act. Such
resolution shall be considered in full force and effect with the
Escrow Agent fully protected in acting in reliance thereon unless and
until it receives written notice from the Manager to the contrary. The
Escrow Agent may rely upon and shall be protected for any action or
omission it takes pursuant to Written Instructions if it, in good
faith, believes such Written Instructions to be genuine. Unless
otherwise provided in this Agreement, the Escrow Agent shall act only
upon Written Instructions. The Escrow Agent shall be entitled to
assume that any Written Instruction received hereunder is not in any
way inconsistent with the provisions of the Partnership's amended and
restated limited partnership agreement (the "Limited Partnership
Agreement") or this Agreement or of any vote, resolution or proceeding
of the Partnership's general partner or directors, or of the
Partnership's limited partners, unless and until the Escrow Agent
receives Written Instructions to the contrary.
(c) The Escrow Agent shall be obligated to exercise care and diligence in
the performance of its duties hereunder, to act in good faith and to
use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. The Escrow Agent shall be liable
for any damages arising out if its failure to perform its duties under
this Agreement to the extent such damages arise out of its willful
misfeasance, bad faith, gross negligence or reckless disregard of such
duties.
(d) Notwithstanding anything in this Agreement to the contrary, neither
the Escrow Agent nor its affiliates shall be liable to the Partnership
or the Manager for any consequential, special or indirect losses or
damages which the Partnership may incur or suffer by or as a
consequence of the Escrow Agent's or its affiliates' performance of
the services provided hereunder, whether or not the likelihood of such
losses or damages was known by the Escrow Agent or its affiliates.
(e) Without limiting the generality of the foregoing or of any other
provision of this Agreement, the Escrow Agent shall not be liable for
losses beyond its control, provided it has acted in accordance with
the standard of care set forth above; and the Escrow Agent shall not
be liable for delays or errors or loss of data occurring by reason of
circumstances beyond its control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood,
catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(f) The Partnership agrees to indemnify the Escrow Agent and hold it
harmless from and against any tax, charge, loss, liability, expense
(including reasonable attorneys fees and expenses), claim or demand
arising directly or indirectly from any action or omission to act
which the Escrow Agent takes (i) at the request or on the direction of
or in reliance on the advice of the Partnership or (ii) upon Written
Instructions; provided, however, that neither the Escrow Agent, nor
any of its affiliates, shall be indemnified against any liability (or
any expenses incident to such liability) arising out of the Escrow
Agent's or its affiliates own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under
this Agreement. The Partnership shall indemnify and hold harmless the
Escrow Agent against and in respect of any liability for taxes and for
any penalties or interest in respect of taxes attributable to the
investment of funds held in escrow by the Escrow Agent pursuant to
this Agreement. Notwithstanding anything in this Agreement to the
contrary, the Partnership shall not be liable to the Escrow Agent for
any consequential, special or indirect losses or damages which the
Escrow Agent may incur or suffer, whether or not the likelihood of
such losses or damages was known by the Partnership. These indemnities
shall survive the resignation of the Escrow Agent or the termination
of this Agreement.
(g) The Escrow Agent shall have no duties except those specifically set
forth in this Agreement.
(h) The Escrow Agent shall have the right at any time it deems appropriate
to seek an adjudication in a court of competent jurisdiction as to the
respective rights of the parties hereto and shall not be held liable
by any party hereto for any delay or the consequences of any delay
occasioned by such resort to court.
(i) The Escrow Agent shall notify promptly the Manager of any discrepancy
between the amounts set forth on any remittance advice received by
Escrow Agent and the sums delivered to it therewith.
3. DEFINITIONS. Except as specifically set forth herein, the terms used in
this Agreement shall have the same meaning as set forth in the
Administration, Accounting and Investor Services Agreement among the
parties.
4. DEPOSIT OF ESCROW FUND. The Escrow Agent shall establish an account in the
name of PW Technology Partners, L.P., Escrow Account for the Benefit of
Investors (the "Subscription Account") and an account in the name of PW
Technology Partners, L.P. Repurchase Account (the "Repurchase Account")
and, together with the Subscription Account, the "Accounts"). The Escrow
Agent shall promptly deposit in the Subscription Account checks remitted by
Potential Investors and made payable to PW Technology Partners, L.P.
Potential Investors also may deposit monies in the Subscription Account by
wire transfer pursuant to instructions provided to them by the Partnership
or by amounts wire transferred from brokerage accounts at PaineWebber
Incorporated. Balances on deposit in the Subscription Account will earn
interest at prevailing market rates pursuant to arrangements approved by
the Partnership.
5. STATEMENTS. During the term of this Agreement, the Escrow Agent shall
provide the Partnership with (a) monthly statements containing the
beginning balance in each Account as well as all principal and income
transactions for the statement period and (b) a daily summary of amounts
deposited and the status of available funds. The Partnership shall be
responsible for reconciling such statements. The Escrow Agent shall be
forever released and discharged from all liability with respect to the
accuracy of such statements, except with respect to any such act or
transaction as to which the Partnership shall, within 90 days after the
furnishing of the statement, file written objections with the Escrow Agent.
6. DISTRIBUTIONS AND CLOSINGS. Upon Written Instructions, at each closing of
each offering of interests in the Partnership, the Escrow Agent will wire
principal balances on deposit in the Subscription Account to the account
designated by the Partnership. Such Written Instructions shall be sent to
the Escrow Agent by 2:00 p.m. on the closing date with respect to each
closing. In the event that a Potential Investor who has escrow funds in the
Subscription Account is not admitted into the Partnership, upon Written
Instructions, the Escrow Agent shall promptly issue refunds to the
Potential Investor in the amount of the principal balance with accrued
interest. Such refunds shall be made in check form or by wire transfer to
the brokerage account of the Potential Investor at PaineWebber
Incorporated.
7. INTEREST. All interest earned on the escrow funds deposited in the Accounts
hereunder shall be added to and held in the Accounts. With respect to each
closing, pursuant to Written Instructions, within 5 business days the
Escrow Agent shall issue interest payments in check form to each Potential
Investor based on his or her individual balance in the Subscription Account
along with a cover letter and to the Manager based upon its balance in the
Subscription Account along with a cover letter. The Escrow Agent will
prepare and send notifications on Form 1099 for each calendar year.
8. REPURCHASES. The Partnership from time to time may wire balances to the
Repurchase Account in connection with periodic repurchases of interests by
the Partnership from its partners. Upon Written Instructions, the Escrow
Agent shall issue promptly repurchase payments from the Repurchase Account
in check form to the repurchasing limited partner or to the Manager, as the
case may be. Upon Written Instructions, the Escrow Agent will withhold
specified amounts from repurchasing partners. Any interest earned thereon
will be credited to the accounts of the Partnership.
9. TAX IDENTIFICATION NUMBER. All deposits to the Accounts shall be subject to
the Escrow Agent's receipt of a valid tax identification number for the
Partnership, Manager or Potential Investor, as applicable.
10. COMPENSATION. The fee of the Escrow Agent for its services hereunder shall
be paid by the Partnership as may be mutually agreed to in writing by the
Partnership and Escrow Agent. Notwithstanding the foregoing, standard
account transaction charges will be billed to the Partnership as an
out-of-pocket expense.
11. AMENDMENT. This Agreement may not be amended or supplemented, and no
provision hereof may be modified or waived, except by an instrument in
writing, signed by all of the parties hereto.
12. TERMINATION. This Agreement shall continue until terminated by either party
on 60 days prior written notice. Upon the termination of this Agreement and
upon the delivery of the balance of the Accounts to a successor escrow
agent or such other person as may be designated by Written Instructions,
the Escrow Agent shall be released and discharged of any and all further
obligations hereunder. If no successor Escrow Agent has been designated
pursuant to Written Instructions to receive the balance of the Accounts at
the expiration of the 60-day period, the Escrow Agent shall have no further
obligation hereunder except to hold the escrow funds as a depositary. Upon
written notification by the Partnership of the appointment of the
successor, the Escrow Agent shall promptly deliver the balance of the
Accounts to such successor, and the duties of the resigning Escrow Agent
shall thereupon in all respects terminate, and it shall be released and
discharged of any and all further obligations hereunder.
13. EXECUTION. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but such counterparts together shall
constitute one and the same instrument.
14. MISCELLANEOUS. All covenants and agreements contained in this Agreement by
or on behalf of the parties hereto shall bind and inure to the benefit of
such parties and their respective heirs, administrators, legal
representatives, successors and assigns, as the case may be. The headings
in this Agreement are for convenience of reference only and shall neither
be considered as part of this Agreement, nor limit or otherwise affect the
meaning thereof. This Agreement shall be construed and enforced in
accordance with the laws of Delaware without regard to principles of
conflicts of law.
15. NOTICES. All instructions, notices and other communications hereunder must
be in writing and shall be deemed to have been duly given if delivered by
hand or facsimile or mailed by first class, registered mail, return receipt
requested, postage prepaid, and addressed as follows:
(a) If to the Partnership
PW Technology Partners, L.P.
c/o PaineWebber Incorporated
Attn: _______________
1285 Avenue of the Americas
New York, New York 10019
(b) If to the Escrow Agent
PFPC Inc.
Attn: Neal Andrews
400 Bellevue Parkway
Wilmington, DE 19809
16. PARTIAL INVALIDITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. 17. ENTIRE AGREEMENT. This
Agreement embodies the entire agreement and understanding among the parties
and supersedes all prior agreements and understandings relating to the
subject matter hereof; provided that, the parties may embody in one or more
separate documents their agreement, if any, with respect to delegated
duties and instructions.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PW TECHNOLOGY PARTNERS, L.P.
By: ________________________________
Name: _____________________________
Title: ______________________________
PFPC INC.
By: _______________________________
Name: _____________________________
Title: ______________________________
