SEC Division of Investment Management staff letter: Jennison Associates LLC

-- ••• 'oM, ._ ~.••• .~ __ • r... - ...' .,,-.,'•.••• .• __.-. . . __ . ". ..•. ..__. ••........ _~ •.a. ... • • __ . 0'.. __ . ••. .~:. ... AC'I JAA _ . oS s~ ~1~DVl.-:----;- RULE BOi.( j. l4J1tb.1---- PUBLIC . 71L/IJO A\fAlLABILITY +r.::!.-~--- 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 ofJune 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 ofpolicy, 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 204- 2(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 ofclient 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. . 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 ofits investment strategies for periods dating back to the inception ofeach such strategy, the fIrst ofwhich 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 ofthe records relating to its investment advisory business at a document storage facility operated by Iron Mountain Incorporated ("Iron Mountain"), a full-service provider ofrecords management and related services. In March 1997, Iron Mountain experienced three fIres that resulted in extensive damage to two ofits records management facilities, including the
one used by Jennison. You state that all ofJennison's records that were stored with Iron Mountain

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 ofRule 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 issuperior 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 hasinternally produced informationfor 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 ofthe 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 ofits 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 ofthe 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 ofCompliance Inspections and Examination~ ("OCIE") soon after the fires, Jennison sent a letter to OCIE detailing which records were destroyed by the fires. 2 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 ofwhich composites. You state that Jennison maintains other records that include
this information, which is necessary to calculate composite performance.

_ - --- ~-- ~, - ----- -- ._- . -. - .. - ..- .•.. . . rate ofretUrn 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 ofreturn in the Summaries is derived from then-applicable industry.standards. You believe that Ernst & Young's examination ofthe Summaries in accordance with GAAS provides a high level of assurance as to the accuracy ofthe 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 ofJennison'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 ofthe advertised s;:omposite performance based on the combinationofJennison'sremaining records described above ("Worksheets"). In addition, you representthatJennison 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. . Analysis
Section 204 ofthe 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 calculationof$e performance or rate ofreturn of any or all managed accounts or securities recommendations" in any advertisement or other communication distributed to ten or more persons.3 The purpose ofRule 204-2(a)(l6) was to deter the 3 Paragraph (a)(ll) ofRule 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 ofthe adviser, from the end ofthe fIscal year during which the adviser last published or disseminated the communication. For example, if an adviser's current ' (footnote continued)

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 ormisleading 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 oforiginal entry supporting their performance ,claims, ~h would have required advisers to maintain a considerable amount ofpaper,-,the storage ofwhich 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 ofthe rule if, with respect to the performance ofits 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 ofthe performance or rate ofretUrn of all managed accounts.S The staff notes that technology ;" 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 ofthe ten years would be required to be kq>t for five years, the first two years in the adviser's office, after the end ofthe fiscal year in 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, whetherJennison has been in compliance with Rule 204-2(e)(3). 4 See the proposing r~lease, and Investment Advisers Act Release No. 1135 (Aug. 17, 1988) (adopting the ad~tion ofparagraph (a)(16) to Rule 204-2) (the "adopting release"). - '!. .. S See the adopting release. The rule provides a safe harbor for certain account statements and workshee~ but contemplates that the retention ofother 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 ofperformance 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 ofthe relevant account.

• . ,- - .~ .. - ... .... .... ..- .... . ••••.• -. ,•• . - .- .-- •• __ •• _ •• _ - • . - - •.• -0 _ ••• •. _ . ••. • __ • __ •• ' •• _ ••••• _.
  now allowsJildvlsemto receive electronic confirmations and statements from broker￾de3IeISJimi-custodians, and/or to store this information in an electronic format. ~Moreom;:Commission rules allow advisers to maintain these and other documents electr~,.~ ., .,; " Asamatterofpolicy, 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 204- 2(aX16). We are taking this opportunity, however, to provide investment advisers who advertise their performance with information that may facilitate staff examinations ofthe accuracy ofsuch peIformance and facilitate the examination process for investment advisers. In lightofthe importance ofaccurate p~rformance advertising, and in recognition ofreCCD1 instances offraud by investment advisers who advertised inflated performance, we strongly urge advisersto 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 stafffound 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 examinationofthe 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 oftheir performance claims if advisers maintain custodial or brokerage statements that conftrm the accuracy ofthe account statements and other internally generated documents that the advisers maintain.8 , See Rule 204-2(g). See, ~, Salomon, supra n.s. 8 The staffnotes that maintaining third-party records also will assist the Commission's examination staffin confirming client assets and reviewing for misappropriation and misuse of client funds and securities.

-. -.., - _ - --.,-- •..., -.- -- -.--- ---- ..-- ._ .. - --._.. . - - .. .~:. We also note that advisers who advertise their perfonnance can further facilitate "1he staff's examination oftheir perfonnance ifthey also maintain reports prepared by an independent auditor that veQfy that perfonnance. When reviewing auditor reports as part ':ofan assessment ofwhe1:hci~imadviser 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: ., (i) whether the auditor is appropriately independent from the adviser; (ii) .whether"tbe auditor~ports are based on the auditor's review ofdata that were ...accumulated contemporaneously with the management ofthe relevant accounts; (iii) whether the auditor reviews sufficientinfonnation 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;".~. (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 auditorreports include a clear and specific description ofthe standard ." used by the adviser to calculate perfonnance. m~Special Counsel

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DEBEVOISE & PLIMPTON
555·13TH STREET. N.W.
.WASHINGTON, DC 20004
(202) 383-8000
TELECOPIER: (202) 383-8118 .
..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
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 (ChiefCounsel)
Division ofInvestment 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 ofthe Division ofInvestment Management will not recommend. any enforcement action to the Securities and Exchange Commission (the "SEC") against Jennison under Section 204 ofthe Advisers Act or Rule 204-2(a)(16) thereunder ifJennisonretains those records described below to support its performance record from 1969 through 1981, even though some ofthe 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￾40020301v8

""owued until 1985, when it was acquired by the Prudential Insurance Company of America:' Jennison is managed independently from Prudential; Jennison's management· .makesits strategic and day-to-day business and operational decisions. ' Jennison providesinvestment 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 ofits'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 ofthe 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 ofrecords management and related services whose customers include more than. half ofthe 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 ofits 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 allJennison 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. . - ._- --- - ... - ··- 0 __ 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 ofthe SEC, it sent a letter to the SEC's Office ofCompliance 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 ofthe 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 40020301 vB

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) ofRule 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 communicationsto 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 ofthe 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 204-
2. Upon completing its review ofthe 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 ofsuch statementsfor those years.. Jennison, however, continues to have many records relevant to the calculation ofits 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 ofJennison (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 ofreturn 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. 40020301v8

Under Generally AcceptedAuditing Standards ("GAAS") in effect during the relevant periods,·the reports by the auditor on Jennison's Performance Evaluation Summaries were subject to requirementsthat provide a high level of assurance as to the accuracy ofthe Summaries. In particular; the reports were subject to general.standards, standards offield work, and certain standards ofreporting. See Statement on Auditing Standards No.1, "Codification ofAuditing Standards andProcedures, II Committee on Auditing Procedure, American Institute ofCertified Public Accountants (1972). . The general standards addressed the qualifications ofthe auditor and the quality ofits 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 ofthe examination in the preparation ofa report." , .' The standards offield work required that the work be adequately planned and assistants, ifany, be properly supervised. They also required that there be a proper study and evaluation ofJennison'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 ofreporting required that the reports express a clear-cut indication ofthe character ofthe· 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 ofreturn.) Because the Performance Evaluation Summaries, like the performance disclosures ofall investment advisers, do not take the form ofbalance 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 ofthe 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 then￾applicable industry standards. (For example, the Summaries for 1969 and 1970 were 40020301v8

.. computedmaccordance with the methodsrecommended 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 ofassurance 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 underthe Investment Advisers Act. In-'additiowJennison 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 ofeach account at the end ofeach 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 ofthis information _had been entered into Jennison's computerized recordkeeping system based on paper statements that were produced contemporaneously with the management ofthe 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 onthe combination ofJennison's remaining records described above. Jamison has confirmed, and an SEC examiner would be able to verifY, .that for the years1969 through 1981, account-by-account performance figures as derived from cash flows.and the market values ofthe 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 ofinvestment 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. Ofcourse, 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. 40020301v8 .-

," ". .... - .. . - -
:' ~.~ -.- •. -~ , - ,.~ .. J' '!"<':~ .. ·'., ~-.lo' --: ,- , #' •••• ' .. ,< : ,.' ," ,,. ".•..•",.., .__ .. :.~...", .. Jauuary 1982to present. In addition, as with the years 1969 through 1981, Jennison has .-reportsfor 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) ofRule 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'srecords 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 detailsregarding portfolio transactions and monthly ,:holdings' summariessupporting 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 actively￾marketed 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 ofthe Advisers Act or Rule 204-2(a)(16) thereunder ifJennison retains only
those described above to support its performance record from 1969 through 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 offires in 1997. It is important to note that: Jennison's records were destroyed by warehouse fires that were beyond its control; Jennison has

.,,~ ,,·-,,:·.-t·~·"':"··'·'.·-!'<"":·'·"Jr.~ .~:.,.: •.. ,•. ... I ,,, ,.,._ " ••' ." ,,_, _..... ""~ . :.~...., '~':. 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,