Securities and Exchange Commission — Jennison070600

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RULE

RESPONSE OF THE OFFICE OF CHIEF COUNSEL

DIVISION OF INVESTMENT MANAGEMENT

July 6, 2000

Our Ref. No. 20006261544

Jennison Associates LLC

. File No. 801-5608

Your letter of June 22, 2000 requests assurance that the staffwould not

recoinmend enforcement action to the Commission against Jennison Associates LLC

("Jennison") 1illder Section 204 ofthe Investment Advisers Act of 1940 ("Advisers Act")

and Rule 1Q4.:2(a)(l6) thereunder ifJennison retains only those records described in your

letter to supp6it its performance from 1969 to 1981, even though some ofthe underlying

records that Jennison previously maintained to form the basis for, or demonstrate the

calculation of, that performance under Rule 204-2(a)(16) were destroyed in a series of

fIres in 1997. As a matter of policy, we will not provide no-action assurances regarding

whether an investment adviser's particular records are sufficient to form the basis for, or

demonstrate the calculation of, the adviser's investment performance under Rule 2042(a)(16). As .discussed below, however, advisers who advertise their performance can

facilitate examinations by the staff by maintaining the following records: (i) records

prepared by a third party ~, custodial or brokerage statements) that confIrm the

accuracy of client account statements and other performance-related records maintained

by the adviser; and (ii) reports prepared by an independent auditor that verify the

advisers' advertised performance.

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Facts

You state that Jennison, an investment adviser that is registered under the

Advisers Act, \vas incorporated in 1969 and reorganized in 1998 as a limited liability

company. Jerihison provides investment advice primarily to institutional investors, such

as endowme~, foundations, public and corporate employee benefIt plans, pension plans,

and investment companies registered under the Investment Company Act of 1940. You

state that Jennison provides advice as to both equity and fIxed-income securities.

You state that Jennison includes composite performance in its institutional

marketing materials for each of its investment strategies for periods dating back to the

inception of each such strategy, the fIrst of which was introduced in 1969. Jennison does

not separately include the performance of any individual account in these materials.

You state that, for many years, Jennison maintained certain of the records relating

to its investment advisory business at a document storage facility operated by Iron

Mountain Incorporated ("Iron Mountain"), a full-service provider of records management

and related services. In March 1997, Iron Mountain experienced three fIres that resulted

in extensive damage to two of its records management facilities, including the one used

by Jennison. You state that all of Jennison's records that were stored with Iron Mountain

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at this facility· were destroyed in the fires. You state that the fires are believed to have.

been caused by arson and are under investigation by local, state, and federal authorities.

'.. Upon comple!ii,g its review ofthe records that remained after the fire, Jennison

became concemedthatit no longer had sufficient records to form the basis for, or

demonstrate ,the calculation of, its investment performance from 1969 to 1981 (the

"RelevantPeriod"Yfor purposes of Rule 204-2(a)(16).1 You state that Jennison Wishes to

continue to include in its marketing materials its performance for the Relevant Period.

Further, Jennison believes that omitting the performance for the Relevant Period from its

marketing materials ~ould be materially misleading, because Jennison's performance

since January 1982 is superior to its performance for the Relevant Period, both in

absolute terms and in cDmparison with relevant benchmarks.

You state that Jennison maintains other records that it believes can be used to

substantiate its composite performance achieved during the Relevant Period. In

.particular,. Jennison has internally produced information for all managed accounts dating

back to 1969 showing the market value of each account at the end of each month, along

with any client contributions to, or withdrawals from, the account in each month, and the

market value adjusted for the cash flows ("AccoUl}t Information"). You state that the

AccountInfoI'IDa1ion was entered into Jennison's computerized recordkeeping system

based on paper statements that were produced by Jennison contemporaneously with the

management of the relevant accounts, although these paper statements were subsequently

lost in the fires. You note that the Account Information does not identify specific

securities transactions or holdings in the accounts. 2

'.. In addition, you state that Jennison maintains reports ("Reports") that were

prepared by an independent auditor, Ernst & Young (or one of its predecessors, Ernst &

Ernst), annually since 1970. The Reports are based on Ernst & Young's examination of,

among other things, performance evaluation summaries ("Summaries") that were

prepared by Jennison contemporaneously with the management of the relevant accounts.

You state that the Summaries show, on an individual, account-by-account basis, the

performance achieved during the preceding year, on both a time-weighted and internal

You state that, in response to a request by the Commission's Office of Compliance

Inspections and Examination~ ("OCIE") soon after the fires, Jennison sent a letter to

OCIE detailing which records were destroyed by the fires.

You note that the Account Information also does not identify the amounts of all of

the applicable fees and expenses for each account, nor does it identify which accounts are

part of which composites. You state that Jennison maintains other records that include

this information, which is necessary to calculate composite performance.

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rate of retUrn basi~ in accordance with certain industry standards used at that time. You

also state that the Reports were prepared by Ernst & Young in accordance with Generally

Accepted Auditing Standards ("GAAS"). The Reports conclude that the Summaries

present fairly the infOrmatiOD.~t forth therein on the bases described in the Summaries,

and that the methodology forannputing the rates of return in the Summaries is derived

from then-applicable industry.standards.

You believe that Ernst & Young's examination of the Summaries in accordance

with GAAS provides a high level of assurance as to the accuracy of the Summaries. You

state that in accordance with GAAS, Ernst & Young reviewed sufficient competent

fmancialmatter throughinspeqions, observations, inquiries, and confIrmations to afford

a reasonable basis.for its conclusion. In particular, you state that Ernst & Young selected

samples of Jennison's acco~and tested the calculation of account returns by comparing

Jennison's monthly transaction journals and other records, including cash and asset

conciliations, with, among other things, custodian statements, transaction confIrmations,

and pricing information from third-party sources.

You state that Jennison also maintains worksheets that were created after the fIres

that demonstrate the calculation of the advertised s;:omposite performance based on the

combinationofJennison's remaining records described above ("Worksheets"). In

addition, you represent that Jennison has confIrmed, and a Commission examiner would

be able to verify, that for the Relevant Period, the account-by-account performance as

derived from the Account Information is consistent in all material respects with the

account-by-accountperfonnance in the Summaries as examined in the Reports, and that

Jennison's advertised composite performance is consistent with that account-by-account

performance.

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Analysis

Section 204 of the Advisers Act and Rule 204-2(a)(l6) thereunder generally

require registered investment advisers to maintain "all accounts, books, internal working

papers, and any other records or documents that are necessary to form the basis for or

demonstrate the calculation of$e performance or rate of return of any or all managed

accounts or securities recommendations" in any advertisement or other communication

distributed to ten or more persons. 3 The purpose of Rule 204-2(a)(l6) was to deter the

Paragraph (a)(ll) of Rule 204-2 generally requires advisers also to maintain all of

their advertisements. Rule 204-2(e)(3} under the Advisers Act requires that the records

described in Rule 204-2(a)(ll) and (a)(l6) be maintained and preserved in an easily

.accessible place for a period ofnot less than fIve years, the fIrst two years in an

appropriate office of the adviser, from the end of the fIscal year during which the adviser

last published or disseminated the communication. For example, if an adviser's current '

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use offalse or.nllsleading.performance advertisements by advisers by requiring advisers

to make and keep for insp.ection by the Commi~sion's examination staff all records

necessary to substant:4d:e.the performance information in their advertisements. The rule

also was designed to allow the staffto evaluate more effectively an investment adviser's

,compliance WithRuIe 206(4)-1 under the Advisers Act, which, among other things,

prohibits false or misleading advertisements by investment advisers.4

In 1987, at the time the rule was proposed, several commenters were concerned that

advisers would be required to maintain all documents of original entry supporting their

performance ,claims, ~h would have required advisers to maintain a considerable

amount ofpaper,-,the storage of which would have been very expensive. 'In response to

these concerns, the rule as'adopted in 1988 provides that an investment adviser shall be

deemed to satisfy the requirements of the rule if, with respect to the performance of its

managed accounts, the investment adviser retains all account statements, provided that

they reflect all debits, credits, and other transactions in a client's account for the period of

the statement, and all worksheets necessary to demonstrate the calculation of the

performance or rate ofretUrn of all managed accounts. S The staff notes that technology

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advertisement contains data based on the adviser's performance over the last ten years,

the documents forming the basis for the adviser's performance for each of the ten years

would be required to be kq>t for five years, the first two years in the adviser's office, after

the end of the fiscal year which the advertisement was last published. See Investment

Advisers Act Release No.~093 (Nov. 5, 1987) (proposing the addition of paragraph

(a)(16) to Rule 204-2) (the "proposing release"). You have not asked, and we express no

view regarding, whether Jennison has been in compliance with Rule 204-2(e)(3).

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See the proposing r~lease, and Investment Advisers Act Release No. 1135 (Aug.

17, 1988) (adopting the ad~tion of paragraph (a)(16) to Rule 204-2) (the "adopting

release").

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See the adopting release. The rule provides a safe harbor for certain account

statements and workshee~ but contemplates that the retention of other records also could

satisfy the requirements ofthe rule. See,~, Salomon Brothers Asset Management Inc

and Salomon Brothers Asset Management Asia Pacific Limited (pub. avail. July 23,

1999) ("Salomon"): In Salomon, the staff confmned that published materials listing the

net asset values of a managed account ("NAVs"), together with worksheets that

demonstrate the calculation of performance based on those NAVs, could form the basis

for, or demonstrate the calculation of, advertised performance under Section 204 and

Rule 204-2(a)(16). The staffbased its position, in part, on the fact that the published

NAVs were accumulated contemporaneously withthe management of the relevant

account.

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now allowsJildvlsemto receive electronic confirmations and statements from brokerde3IeISJimi-custodians, and/or to store this information in an electronic format.

~Moreom;: Commission rules allow advisers to maintain these and other documents

electr~,.~

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Asamatter of policy, the staff,will not provide no-action assurances under Rule

204-2(a)(16) regarding whether an investment adviser's particular records are sufficient to

fOIDltbe basis for, or demonstrate the calculation of; the investment performance ofthe

adviser's managed accounts or securities recommendations.' In other words, while the

staffwillprovide general 'guidance to ,~sist advisers in complying with the rule, we will

n01'review.(m1he context of 1:1 no-actiQ~ request) the contents of an adviser's particular

records to determine whether :the records satisfy the rule. Consistent with this policy, we

decline to state whether Jennison's particular records are sufficient under Rule 2042(aX16).

We are taking this opportunity, however, to provide investment advisers who

advertise their performance with information that may facilitate staff examinations of the

accuracy of such peIformance and facilitate the examination process for investment

advisers. In light of the importance of accurate p~rformance advertising, and in

recognition of reCCD1 instances of fraud by investment advisers who advertised inflated

performance, we strongly urge advisers to maintain reliable supporting documentation for

their performance claims. We rec'ognize that the rule provides a safe harbor to advisers

who maintain certain account statements and worksheets. In recent instances, however,

the staff found thaUhe advisers' own account statements were not reliable, because the

advisers were inflating their performance in their advertisements and in their account

statements. Thus, the inspection staffwa$ unable to confirm the veracity ofthe advisers'

performance based solely on examination of the advisers' account statements and other

internally generat:ed documents. Based on this experience, and on the availability of

electronic storage technology that allows advisers to maintain third-party account

statements and oonfirmationsin electronic format, we take this opportunity to stress that

advisers will facilitate the staff's examinations of their performance claims if advisers

maintain custodial or brokerage statements that conftrm the accuracy of the account

statements and other internally generated documents that the advisers maintain.8

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See Rule 204-2(g).

See, ~, Salomon, supra n.s.

The staff notes that maintaining third-party records also will assist the

Commission's examination staff in confirming client assets and reviewing for

misappropriation and misuse of client funds and securities.

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We also note that advisers who advertise their perfonnance can further facilitate

"1he staff's examination of their perfonnance if they also maintain reports prepared by an

independent auditor that veQfy that perfonnance. When reviewing auditor reports part

':ofan assessment of whe1:hci~im adviser mamtains sufficient records under Rule 204~::. 2(~)(16), the staffwill consider all facts and circumstances relating to the quality ofthe "

audit, including the following factors: .,

as

(i)

whether the auditor is appropriately independent from the adviser;

(ii)

.whether"tbe auditor~ports are based on the auditor's review of data that were

...accumulated contemporaneously with the management ofthe relevant accounts;

(iii)

whether the auditor reviews sufficient infonnation to afford a reasonable basis for

the auditor's conclusions (such as, for example, by reviewing custodian and

brokerage statements, and by confinning data directly with custodians and

brokers), and prepares the auditor reports, in accordance with appropriate auditing

.standards;"

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(iv)

whether the adviser or the auditor maintains the records underlying the auditor

reports (i.e., audit work papers), and the staffis provided with access to such

records;

(v)

whether the performance verified by the auditor reports is consistent with the

perfonnance derived from the other records maintained by the adviser; and

(vi)

whether the auditor reports include a clear and specific description of the standard

." used by the adviser to calculate perfonnance.

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Special Counsel

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DEBEVOISE & PLIMPTON

555·13TH STREET. N.W.

.WASHINGTON, DC 20004

(202) 383-8000

. . 875.THIRD AVENUE

NEW YORK, NY 10022

TELEPHONE (212) 909·6000

TELECOPIER (212)909·6836

21 AVENUE GEORGE V

75008 PARIS

TELEPHONE 133-1) 40 73 12 12

TELECOPIER (33.1) 47 20 50 82

INTERNATIONAL ANANOAL CENtRE

25 OLD BROAD STREET .. .

LONDON EC2N 1HQ

TELEPHONE (44-171)7869000

TELECOPIER (44·171) 588 4160

TELECOPIER: (202) 383-8118 .

131F ENTERTAINMENT BUILDING

30 QUEEN'S ROAD CENTRAL

HONG KONG

TELEPHONE (852) 2810 7918

TELECOPIER (852) 28109828

BOLSHOI PALASHEVSKY PIER. 1312

MOSCOW 103104

TELEPHONE (7-503) 956 3858

TELECOPIER (7-503) 956 3868

Investment Advisers Act of 1940

Section 204

Rule 204-2(a)(16)

June 22, 2000

Douglas Scheidt, Esq.

Associate Director (Chief Counsel)

Division of Investment Management

Mail Stop 5-1

Securities and Exchange Commission

450 Fifth Street, N.W..

Washington, D.C. 20549

Jennison Associates LLC

Dear Mr. Scheidt:

We are writing on behalf of our client, Jennison Associates LLC

("Jennison"), an investment adviser registered under the Investment Advisers Act of

i940, as amended (the "Advisers Act"). We request confirmation that, based upon the

facts and circumstances discussed below, the staff of the Division ofInvestment

Management will not recommend. any enforcement action to the Securities and Exchange

Commission (the "SEC") against Jennison under Section 204 of the Advisers Act or Rule

204-2(a)(16) thereunder if Jennisonretains those records described below to support its

performance record from 1969 through 1981, even though some of the underlyi~g

records that Jennison previously maintained to form the basis for, or demonstrate the

calculation of, that performance under Rule 204-2(a)(16) were destroyed in a series of

fires in 1997.

Background

Jennison is a United States-based investment advisory firm, incorporated

in 1969 and reorganized in 1998 as a limited liability company. Jennison was employee-

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""owued until 1985, when it was acquired by the Prudential Insurance Company of

America:' Jennison is managed independently from Prudential; Jennison's management·

.makes its strategic and day-to-day business and operational decisions. '

Jennison provides investment advice primarily to institutional investors,

such as endowments, foundations, public and corporate employee benefit plans, pension

plans and investment companies registered under the Investment Company Act. Jennison

pmvides.advice .as.to both ~quity securities and fixed income securities.

Jennison includes' composite performance figures iIi institutional

.marketing materials for each of its'investment strategies for periods dating back to the

..inception of each such strategy (the first ofwhich was introduced in 1969). It does not

.. include the performance of any individual account in these materials.

For many years, Jennison has maintained certain of the records relating to

its investment advisory business at a South Brunswick, New Jersey document storage

.' facility run by Iron Mountain Incorporated ("Iron Mountain"). According to its filings

with the SEC, Iron Mountain is America's largest records management company, as

measured by its revenues in the United States, and is a full-service provider of records

management and related services whose customers include more than. half of the Fortune

500 companies and numerous legal, banking, healthcare, accounting, insurance,

entertainment and government organizations. .

In March 1997, Iron Mountain experienced three fires that resulted in

extensive damage to two of its record management facilities in South Brunswick, New

.1er-sey,.including the one used by Jennison. According to Iron Mountain, approximately

'''1:0 milliOn ofthe 1.2 million cartons stored at these facilities were destroyed, including

all Jennison records stored there. The fires are believed to have been caused by arson and

Me under investigation by local, state and federal authorities. Thus, the destruction of

Jennison's records was due entirely to events beyond Jennison's control.

Following the fires, Jennison developed and implemented a plan to restore

the records that it was required to maintain as a registered investment adviser and as an

investment adviser to registered iuvestment companies. In addition, in response to a

request of the SEC, it sent a letter to the SEC's Office of Compliance Inspections and

Examinations detailing which records were destroyed by the fires. As a result of

Jennison's efforts to restore its records, Jennison has become concerned that it may not

literally have all of the records necessary to form the basis for the calculation ofits

.composite performance information for its investment strategies from 1969 through 1981.

Nevertheless, Jennison does have much ofthe records underlying that composite

performance information, including annual attestations by independent auditors.

Accordingly, Jennison believes it is appropriate to continue including in its composite

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performance informationJennison~s composite.performance results from 1969 through

1981.

Analysis

Section 204 under the Advisers Act requires that every investment adviser

make and keep for prescribed periods such records as the SEC may prescribe by rule.

Rule 204-2 under the Advisers Act generally requires investment advisers to maintain

and preserve their records iri an easily accessible place for five years after the fiscal year

in which the record was created. The rule also pennits advisers to store most records that

are more than two years old outside ofthe adviser's offices. Paragraph (e)(3) of Rule 204

-2 however, requires that advisers preserve certain records, including those required to be

created under paragraph (a)(16), for longer periods. Paragraph (a)(16) requires that

advisers make and keep accurate "[a]ll accounts, books, internal working papers, and any

other records or documents that are necessary to form the basis for or demonstrate the

calculation ofthe performance or rate ofreturn ofany or all managed accounts" in

communications to ten or more people. Paragraph (e)(3) requires that such records be

preserved for five years after the fiscal year in which the communications are made, the

first two years in an office of the adviser.

It has been Jennison's long-standing practice to store off-site only those

records that it believed were permitted to be stored outside ofits offices under Rule 2042. Upon completing its review of the records that were destroyed by the fires, however,

Jennison concluded that it may no longer have certain records that may be necessary to

form the basis for the calculation ofiis'investment performance from 1969 through 1981 .

. Specifically, Jennison rio longer has records that' show all ofthe securities

transactions in its clients' accounts from 1969 through 1981 that form the basis for the

calculation ofits investment performance for that period. In particular, it does not have

worksheets or client account statements. Jennison has attempted to re-create these

records by obtaining duplicate account statements from its clients' custodians, but they

did not have copies of such statements for those years..

Jennison, however, continues to have many records relevant to the

calculation of its investment performance.· In particular, Jennison has reports prepared by

an independent auditor, Ernst & Young (or one ofits predecessors), annually since 1970,

examining Performance Evaluation Summaries of Jennison (in accordance with generally

accepted auditing standards). Those Performance Evaluation Summaries show on an

individual, account by account basis, the performance figures that were generated the

preceding year, on both a time-weighted and internal rate of return basis, in accordance

with certain industry standards used at that time. The Ernst & Young reports conclude

that the Performance Evaluation Summaries present fairly the informatio~ set forth

therein on the bases described in the summaries.

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Under Generally Accepted Auditing Standards ("GAAS") in effect during

the relevant periods,·the reports by the auditor on Jennison's Performance Evaluation

Summaries were subject to requirements that provide a high level of assurance as to the

accuracy of the Summaries. In particular; the reports were subject to general.standards,

standards of field work, and certain standards of reporting. See Statement on Auditing

Standards No.1, "Codification ofAuditing Standards and Procedures, Committee on

Auditing Procedure, American Institute of Certified Public Accountants (1972).

II

. The general standards addressed the qualifications ofthe auditor and the

quality of its work. They required that the "examination [was] to be performed by a

person or persons having adequate technical training and proficiency as an auditor." In

addition, they required that "in all matters relating to the assignment, and independence

in mental attitude is to be maintained by the auditor or auditors." Finally, they required

that "[d] ue professional care is to be exercised in the performance of the examination in

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the preparation of a report."

The standards of field work required that the work be adequately planned

and assistants, if any, be properly supervised. They also required that there be a proper

study and evaluation of Jennison's internal control to determine the nature, extent, and

timing of audit tests to be applied in the auditor' s examination. Finally, they required

that sufficient competent financial matter be reviewed through inspection, observations,

inquiries, and confirmations to afford a reasonable basis for the auditor's opinion. Thus,

in conducting their work on the Performance Evaluation Summaries, the auditor selected

samples ofJennison' S .accounts and tested the calculation of account returns by

comparing Jennison's monthly transaction journals and other records, including cash and

asset conciliations, to , among other things, custodian statements, transaction

confirmations, and pricing information trom third-party sources.

The standards of reporting required that the reports express a clear-cut

indication of the character of the· auditor's examination and the responsibility it'is taking.

(As noted abQve, in each report the auditor opined that the Performance Evaluation

Summaries presented fairly the information therein, subject to the methodologies

employed to measure and compute rates of return.) Because the Performance Evaluation

Summaries, like the performance disclosures of all investment advisers, do not take the

form of balance sheets, results of operations, and changes in financial position, the

reports were not subject to certain GAAS reporting standards. In particular, the

Summaries were not subject to Generally Accepted Accounting Principles ("GAAP"),

because GAAP does not address investment performance. Thus, the reports of the

auditor do not address whether the Performance Evaluation Summaries are consistent

with GAAP .. Instead, they disclose that the methodology for computing the rates of

return presented in the Performance Evaluation Summaries is derived from thenapplicable industry standards. (For example, the Summaries for 1969 and 1970 were

40020301v8

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. computed maccordance with the methods recommended by the Bank. Administration

..Jnstitute-for evalUating investment management performance.)

Thus~ 'We believe that the reports provide the SEC and potential investor:s a

degree of assurance as to the accuracy ofJetmison's disclosures concerning its past

investment performance essentially equivalent or superior to that which would be

achieved through an SEC inspection under the Investment Advisers Act.

In-'additiow Jennison has other information supporting its performance

figures;~specificaUy month.,.end market value~iind principal flow information for all

managed accounts dating back to 1969, showing the market value of each account at the

end of each mont:h; along with any client contributions to, or withdrawals from, the

account in eachmonth, and the market value adjusted for the cash flows. The cash flows

do not identifywhether a withdrawal was dlle to investment advisory or other applicable

fees or-expenses. However, Jennison does maintain separate records reflecting actual

advisory feeschatged to each account. 1 All of this information _had been entered into

Jennison's computerized recordkeeping system based on paper statements that were

produced contemporaneously with the management of the relevant accounts, although

these paper statements were subsequently lost in the fire. This information does not

identifY specific ~es transactions or holdings, or which accounts were included in a

specific composite, however. Jennison does maintain separate records that identifY the

accounts included in its composites. Jennison also maintains worksheets that were

created after themes and that demonstrate the calculation ofthe advertised composite

performance based on the combination ofJennison's remaining records described above.

Jamison has confirmed, and an SEC examiner would be able to verifY,

.that for the years 1969 through 1981, account-by-account performance figures as derived

from cash flows.and the market values of the accounts are consistent in all material

respects with account-by-account performance figures in the Performance Evaluation

Summaries as examined by the auditor in its reports, and that Jennison's published

composite performance figures are therefore consistent with such previously ex~ned

account-by-account performance figures. In addition, an SEC examiner could review

Jennison's calculation of investment performance, based on those market values and cash

flows. The examiner, however, would not be able to review specific securities holdings

in an account and verifY that their market prices at a particular point were consistent with

the account market values in Jennison's records.

Of course, details regarding portfolio transactions and montWy holdings'

.summaries supporting the valuation information are available for all accounts from

While the cash flow and market value information does not identifY the amounts of all applicable

fees and expenses for each account, this information and the calculation of account performance is

available separately on Jennison's recordkeeping system.

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Jauuary 1982 to present. In addition, as with the years 1969 through 1981, Jennison has

.-reports for those years prepared by the auditor examining, on an individual account by

account basis, perfonnance figures that were generated the preceding year.

Consequently, while certain records destroyed in the fires were used by

Jennison to demonstrate compliance with paragraph (a)(16) of Rule 204-2, Jennison has

sufficient documentation in the market value and cash flow information, Performance

Evaluation Summaries and auditor reports relating to each composite to support the

performance figures that it iticludes in marketing materials becau.se, among other things,

such data were generated subsequently but accumulated contemporaneously with the

management ofthe accounts. In addition, the worksheets that were created by Jennison

after the fires and which were based on the market value and cash flow information,

auditor reports and Performance Evaluation Summaries are sufficient to demonstrate the

calculation ofthe advertised composite performance for purposes ofRule 204-2(a)(l6).

Such documentation is also sufficient to establish that such performance figures are not

false and misleading. Thus, Jennison's records are consistent with the policy behind the

SEC's adoption of paragraph (a)(16). See Investment Advisers Act Release No. 1093

(November 5, 1987) (purpose is to allow SEC exaniiners "to more effectively review

advertisements to determine compliance with the advertising rule"). In this regard, SEC

examiners will continue to be able to review reports on theyear-by-year performance

figures for each account managed by Jennison and to review the cash flow and portfolio

market value data for those accounts, from 1969 to the present. In addition, SEC

examiners will be able to review details regarding portfolio transactions and monthly

,:holdings' summaries supporting the valuation information from January 1982 to present.

. .Accordingly, Jennison believes it is appropriate to continue to provide

.' investors with. its performance record since 1969, rather than since January 1982. In this

regard, Jennison notes that its performance record since January 1982 for its activelymarketed strategies is superior to its performance record from 1969through 1981, both in

absolute terms and in comparison to 'relevant benchmarks. Thus, Jennison is concerned

that omitting its performance from 1969 through 1981 from investor materials would be

misleading.

We understand that in the past the Commission staffhas been reluctant to

. take a "no-action" position on whether or not particular records are adequate under Rule

204-2. We nonetheless request that, based on the facts and circumstances described

above, the Division agree that it will not recommend any enforcement action under

Section 204 of the Advisers Act or Rule 204-2(a)(16) thereunder if Jennison retains only

those described above to support its performance record from 1969 through 1981, even

though some of the underlying records that Jennison previously maintained to form the

basis for, or demonstrate the calculation of, that performance under Rule 204-2(a)(16)

were destroyed in a series offires in 1997. It is important to note that: Jennison's

records were destroyed by warehouse fires that were beyond its control; Jennison has

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7

made a good:faitheffort1oTestoreits'records after the fires at substantial cost to

Jennison; JennisOn bas records for1he'l'eriods besides the period from 1969 through

1981; and JennisOn bas cash-flow iIdbrmation, third-party audit reports containing

Performance Evaluation SuJnInaries..and other data described above for the period from

1969 through 19tH.

.

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Sincerely yours,

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