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Policies, partnership assets were revalued and unrealized income,
gains, and losses were allocated among the partners. For this
purpose, a value of $13,974,304 was assigned to the BOT LIBOR
Notes, reflecting their current market value increased by the
$781,250 origination cost attributable to them. The liquidating
distribution that Kannex received was equal to the resulting
balance in its capital account.
At the twelfth partnership meeting, held on December 5,
1991, it was observed that
as Colgate and a subsidiary, Southampton, owned 99.4%
of the Partnership, the principal Partners' net
economic exposure to the risk of interest rate
fluctuations in the value of the Colgate debt was
effectively minimal, and the Partnership need not
maintain its position in the instruments purchased to
hedge against such exposure.
Moreover, the LIBOR Notes "were a highly volatile investment and
* * * without the need to hedge interest rate risk, it was unwise
for the Partnership to hold them." "[Short-term interest rates
had declined steadily in recent months, thereby reducing the
value of the instruments." It was resolved that the partnership
would sell the LIBOR Notes. The final substantive comment of the
meeting was delivered by Belasco, representing Colgate, who noted
that "the Partnership had achieved substantially all of its
objectives in connection with the acquisition of Colgate bonds
and related debt management."
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