Silas Partners I, LLC et al.; Notice of Application, 15919-15923 [E7-6081]
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Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices
[Investment Company Act Release No.
27770; 813–264]
Silas Partners I, LLC et al.; Notice of
Application
March 27, 2007.
Securities and Exchange
Commission (SEC).
ACTION: Notice of an application for an
order under sections 6(b) and 6(e) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting an exemption from all
provisions of the Act, except section 9
and sections 36 and 53, and the rules
and regulations under the Act. With
respect to sections 17 and 30 of the Act,
and the rules and regulations
thereunder, and rule 38a–1 under the
Act, the exemption is limited as set
forth in the application.
AGENCY:
Applicants
request an order to exempt certain
investment funds formed for the benefit
of eligible current and former employees
of Winston & Strawn LLP and its
affiliates from certain provisions of the
Act. Each fund will be an ‘‘employees’’
securities company’’ as defined in
section 2(a)(13) of the Act.
APPLICANTS: Silas Partners I, LLC (the
‘‘Investment Fund’’) and Winston &
Strawn LLP (together with any business
organization that results from a
reorganization of Winston & Strawn LLP
into a different type of business
organization or into an entity organized
under the laws of another jurisdiction,
the ‘‘Firm’’).
FILING DATES: The application was filed
on April 24, 2000 and amended on
March 16, 2007. Applicants have agreed
to file an amendment during the notice
period, the substance of which is
reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on April 23, 2007 and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
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SUMMARY OF APPLICATION:
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Secretary, Securities and
Exchange Commission, 100 F St., NE.,
Washington, DC 20549–1090.
Applicants, 35 West Wacker Drive,
Chicago, IL 60601.
FOR FURTHER INFORMATION CONTACT: Jean
Minarick, Senior Counsel, at (202) 551–
6811, or Nadya Roytblat, Assistant
Director, at (202) 551–6821, (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Branch,
100 F St., NE., Washington, DC 20549–
0102 (tel. 202–551–5850).
ADDRESSES:
SECURITIES AND EXCHANGE
COMMISSION
Applicants’ Representations
1. The Firm is a law firm organized
as an Illinois limited liability
partnership. The Firm and its
‘‘affiliates,’’ as defined in rule 12b–2
under the Securities Exchange Act of
1934 (the ‘‘Exchange Act’’), are referred
to collectively as the ‘‘Winston Group’’
and individually as a ‘‘Winston Entity.’’
The shareholders of the Firm are
referred to as ‘‘Partners.’’
2. The Investment Fund is a Delaware
limited liability company. The
applicants may in the future offer
additional pooled investment vehicles
identical in all material respects to the
Investment Fund (other than investment
objectives and strategies) (the
‘‘Subsequent Funds’’) (together, the
Investment Fund and the Subsequent
Funds are referred to as the ‘‘Funds’’).
The applicants anticipate that each
Subsequent Fund will also be structured
as a limited liability company, although
a Subsequent Fund could be structured
as a limited partnership, corporation,
trust or other business organization
formed as an ‘‘employees’’ securities
company’’ within the meaning of the
section 2(a)(13) of the Act. The Funds
will operate as non-diversified, closedend management investment
companies. The Funds will be
established to enable the Partners and
certain employees of Winston Group to
participate in certain investment
opportunities that come to the attention
of Winston Group. Participation as
investors in the Funds will allow the
Eligible Investors, as defined below, to
diversify their investments and to have
the opportunity to participate in
investments that might not otherwise be
available to them or that might be
beyond their individual means.
3. A group of Eligible Investors, as
defined below, appointed by the Firm,
who are current or retired Partners of
the Firm (the ‘‘Managers’’) will manage
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the Funds. The Funds will have one or
more investment committees
(‘‘Investment Committees’’), each
member of which shall be a current
Partner. The Managers shall appoint the
members of each Investment Committee.
The Managers or any person involved in
the operation of the Funds will register
as investment advisers if required under
the Investment Advisers Act of 1940, or
the rules under that Act.
4. Interests in the Funds (‘‘Interests’’)
will be offered without registration in
reliance on section 4(2) of the Securities
Act of 1933 (the ‘‘Securities Act’’) or
Regulation D under the Securities Act,
or any successor rule, and will be sold
solely to Eligible Investors. Eligible
Investors consist of ‘‘Eligible
Employees,’’ ‘‘Qualified Investment
Vehicles,’’ ‘‘Immediate Family
Members,’’ each as defined below, and
Winston Entities. The term ‘‘Fund
Investors’’ refers to Eligible Investors
who invest in the Funds. Prior to
offering Interests in a Fund to an
individual, the Managers must
reasonably believe that the individual is
a sophisticated investor capable of
understanding and evaluating the risks
of participating in the Fund without the
benefit of regulatory safeguards. An
‘‘Eligible Employee’’ is a person who is,
at the time of investment, a current or
former Partner of the Firm or an
employee of the Winston Group who (a)
meets the standards of an ‘‘accredited
investor’’ set forth in rule 501(a)(5) or
rule 501(a)(6) of Regulation D under the
Securities Act, or (b) is one of 35 or
fewer Partners or employees of the
Winston Group who meets certain
requirements (‘‘Category 2 investors’’).
5. Each Category 2 investor will be a
Partner or an employee of the Winston
Group, who meets the sophistication
requirements set forth in rule
506(b)(2)(ii) of Regulation D under the
Securities Act and who (a) has a
graduate degree, has a minimum of 3
years of business and/or professional
experience, has had compensation of at
least $150,000 in the preceding 12
month period, and has a reasonable
expectation of compensation of at least
$150,000 in each of the 2 immediately
succeeding 12 month periods, or (b) is
a ‘‘knowledgeable employee,’’ as
defined in rule 3c–5 under the Act, of
the Fund (with the Fund treated as
though it were a ‘‘Covered Company’’
for purposes of the rule). In addition, a
Category 2 investor qualifying under (a)
above will not be permitted to invest in
any calendar or fiscal year (as
determined by the Firm) more than 10%
of his or her income from all sources for
the immediately preceding calendar or
fiscal year in one or more Funds.
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6. A Qualified Investment Vehicle is
a trust or other entity the sole
beneficiaries of which are Eligible
Employees or their Immediate Family
Members or the settlors and trustees of
which consist of Eligible Employees or
Eligible Employees together with
Immediate Family Members. Immediate
Family Members include any parent,
child, spouse of a child, spouse, brother
or sister, and includes any step and
adoptive relationships. A Qualified
Investment Vehicle must be either (a) an
accredited investor as defined in rule
501(a) of Regulation D or (b) an entity
for which an Eligible Employee is a
settlor and principal investment
decision-maker and counted toward the
35 non-accredited Fund Investors.1
7. Each Fund may issue its Interests
in series (each, a ‘‘Series’’ and
collectively, the ‘‘Series’’) with new
Series of Interests being offered from
time to time. Each Series will represent
an interest in some or all of those Fund
investments made by the Fund during a
specified period of time (the
‘‘Investment Period’’).
8. The terms of a Fund will be fully
disclosed in the private placement
memorandum of the Fund, and each
Eligible Investor will receive a private
placement memorandum and the Fund’s
limited liability company agreement (or
other organizational documents) prior to
his or her investment in the Fund. Each
Fund will send its Fund Investors
annual reports, which will contain
audited financial statements with
respect to those Series in which the
Fund Investor has Interests, as soon as
practicable after the end of each fiscal
year. In addition, as soon as practicable
after the end of each fiscal year, the
Funds will send a report to each Fund
Investor setting forth such tax
information as shall be necessary for the
preparation by the Fund Investor of his
or her federal and state tax returns.
9. Fund Investors will be permitted to
transfer their Interests only with the
express consent of the Managers. The
Managers do not anticipate giving such
consent. Any such transfer must be to
another Eligible Investor. No fee of any
kind will be charged in connection with
the sale of Interests.
10. The Managers may require a Fund
Investor to withdraw from a Fund if: (a)
A Fund Investor ceases to be an Eligible
Investor; (b) a Fund Investor is no longer
1 If a Qualified Investment Vehicle is an entity
other than a trust, (a) the reference to ‘‘settlor’’ shall
be construed to mean a person who created the
vehicle, alone or together with others, and who
contributed funds or other assets to the vehicle, and
(b) the reference to ‘‘trustee’’ shall be construed to
mean a person who performs functions similar to
those of a trustee.
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deemed to be able to bear the economic
risk of investment in a Fund; (c) adverse
tax consequences were to inure to the
Fund were a particular Fund Investor to
remain; or (d) the continued
membership of the Fund Investor would
violate applicable law or regulations. In
addition, the Firm reserves the right to
impose vesting provisions on a Fund
Investor’s investments in a Fund. In an
investment program that provides for
vesting provisions, all or a portion of a
Fund Investor’s Interests will be treated
as unvested, and vesting will occur
through the passage of a specified
period of time. After the end of a Series’
Investment Period, to the extent a Fund
Investor’s Interests become ‘‘vested,’’
the termination of such Fund Investor’s
association or employment with the
Firm will not affect the Fund Investor’s
rights with respect to the vested
Interests. Following the Investment
Period, any portion of a Fund Investor’s
Interests that are unvested at the time of
the termination of a Fund Investor’s
association or employment with the
Firm may be subject to repurchase or
cancellation by the Fund. Upon any
repurchase or cancellation of all or a
portion of a Fund Investor’s Interests, a
Fund will at a minimum pay to the
Fund Investor the lesser of (a) the
amount actually paid by the Fund
Investor to acquire the Interests less the
amount of any distributions received by
that Fund Investor from the Fund (plus
interest at or above the prime rate, as
determined by the Managers) and (b) the
fair market value of the Interests
determined at the time of repurchase or
cancellation, as determined in good
faith by the Managers. Any interest
owed to a Fund Investor pursuant to (a)
above will begin to accrue at the end of
the Investment Period.
11. The Firm may be reimbursed by
a Fund for reasonable and necessary
out-of-pocket costs directly associated
with the organization and operation of
the Funds, including administrative and
overhead expenses. There will be no
allocation of any of the Firm’s operating
expenses to a Fund. In addition, the
Firm may allocate to a Series any outof-pocket expenses specifically
attributable to the organization and
operation of that Series. No separate
management fee will be charged to a
Fund by the Managers for their services.
12. The Funds may borrow from
Winston Group, a Partner, or a bank or
other financial institution, provided that
a Fund will not borrow from any person
if the borrowing would cause any
person not named in section 2(a)(13) of
the Act to own outstanding securities of
the Fund (other than short-term paper).
Any borrowings by a Fund will be non-
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recourse other than to the Winston
Group. If a Winston Entity or a Partner
makes a loan to the Funds, the interest
rate on the loan will be no less favorable
to the Funds than the rate that could be
obtained on an arm’s length basis.
13. No Fund will acquire any security
issued by a registered investment
company if immediately after the
acquisition the Fund would own more
than 3% of the outstanding voting stock
of the registered investment company.
Applicants’ Legal Analysis
1. Section 6(b) of the Act provides, in
part, that the Commission will exempt
employees’ securities companies from
the provisions of the Act to the extent
that the exemption is consistent with
the protection of investors. Section 6(b)
provides that the Commission will
consider, in determining the provisions
of the Act from which the company
should be exempt, the company’s form
of organization and capital structure, the
persons owning and controlling its
securities, the price of the company’s
securities and the amount of any sales
load, how the company’s funds are
invested, and the relationship between
the company and the issuers of the
securities in which it invests. Section
2(a)(13) defines an employees’ securities
company as any investment company
all of whose securities (other than shortterm paper) are beneficially owned (a)
by current or former employees, or
persons on retainer, of one or more
affiliated employers, (b) by immediate
family members of such persons, or (c)
by such employer or employers together
with any of the persons in (a) or (b).
2. Section 7 of the Act generally
prohibits investment companies that are
not registered under section 8 of the Act
from selling or redeeming their
securities. Section 6(e) provides that, in
connection with any order exempting an
investment company from any provision
of section 7, certain provisions of the
Act, as specified by the Commission,
will be applicable to the company and
other persons dealing with the company
as though the company were registered
under the Act. Applicants request an
order under sections 6(b) and 6(e) of the
Act exempting the Funds from all
provisions of the Act, except section 9
and sections 36 through 53, and the
rules and regulations under the Act.
With respect to sections 17 and 30 of the
Act, and the rules and regulations
thereunder, and rule 38a–1 under the
Act, the exemption is limited as set
forth in the application.
3. Section 17(a) generally prohibits
any affiliated person of a registered
investment company, or any affiliated
person of an affiliated person, acting as
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principal, from knowingly selling or
purchasing any security or other
property to or from the company.
Applicants request an exemption from
section 17(a) to permit a Fund to: (a)
Purchase, from the Firm or any affiliated
person thereof, securities or interests in
properties previously acquired for the
account of the Firm or any affiliated
person thereof; (b) sell, to the Firm or
any affiliated person thereof, securities
or interests in properties previously
acquired by the Funds; (c) invest in
companies, partnerships or other
investment vehicles offered, sponsored
or managed by the Firm or any affiliated
person thereof; and (d) purchase
interests in any company or other
investment vehicle (i) in which the Firm
owns 5% or more of the voting
securities, or (ii) that otherwise is an
affiliated person of the Fund (or an
affiliated person of such a person) or an
affiliated person of the Firm.
4. Applicants state that an exemption
from section 17(a) is consistent with the
protection of investors and the purposes
of the Act. Applicants state that the
Fund Investors will be informed in the
Fund’s private placement memorandum
of the possible extent of the Fund’s
dealings with the Firm or any affiliated
person thereof. Applicants also state
that, as financially sophisticated
professionals, Fund Investors will be
able to evaluate the attendant risks.
Applicants assert that the community of
interest among the Fund Investors and
the Firm will provide the best
protection against any risk of abuse.
5. Section 17(d) of the Act and rule
17d–1 under the Act prohibit any
affiliated person or principal
underwriter of a registered investment
company, or any affiliated person of an
affiliated person or principal
underwriter, acting as principal, from
participating in any joint arrangement
with the company unless authorized by
the Commission. Applicants request
relief to permit affiliated persons of each
Fund, or affiliated persons of any of
these persons, to participate in any joint
arrangement in which the Fund is a
participant. Joint transactions in which
a Fund may participate could include
the following: (a) An investment by one
or more Funds in a security in which
the Firm or its affiliated person, or
another Fund, is a participant, or with
respect to which the Firm or an
affiliated person is entitled to receive
fees (including, but not limited to, legal
fees, placement fees, investment
banking fees, brokerage commissions, or
other economic benefits or interests); (b)
an investment by one or more Funds in
an investment vehicle sponsored,
offered or managed by the Firm; and (c)
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an investment by one or more Funds in
a security in which an affiliate is or may
become a participant.
6. Applicants state that compliance
with section 17(d) would cause the
Funds to forego investment
opportunities simply because a Fund
Investor, the Firm or other affiliates of
the Fund also had made or
contemplated making a similar
investment. In addition, because
investment opportunities of the types
considered by the Funds often require
that each participant make available
funds in an amount that may be
substantially greater than that available
to the investor alone, there may be
certain attractive opportunities of which
a Fund may be unable to take advantage
except as a co-participant with other
persons, including affiliates. Applicants
note that, in light of the Firm’s purpose
of establishing the Funds so as to
reward Eligible Investors and to attract
highly qualified personnel to the Firm,
the possibility is minimal that an
affiliated party investor will enter into
a transaction with a Fund with the
intent of disadvantaging the Fund.
Finally, applicants contend that the
possibility that a Fund may be
disadvantaged by the participation of an
affiliate in a transaction will be
minimized by compliance with the
lockstep procedures described in
condition 4 below. Applicants assert
that the flexibility to structure coinvestments and joint investments will
not involve abuses of the type section
17(d) and rule 17d–1 were designed to
prevent.
7. Section 17(f) of the Act designates
the entities that may act as investment
company custodians, and rule 17f–2
allows an investment company to act as
self-custodian, subject to certain
requirements. Applicants request an
exemption from section 17(f) and rule
17f–2 to permit the following exceptions
from the requirements of rule 17f–2: (a)
A Fund’s investments may be kept in
the locked files of the Firm or of a
Partner; (b) for purposes of paragraph
(d) of the rule, (i) employees of the Firm
will be deemed employees of the Funds,
(ii) the Managers of a Fund will be
deemed to be officers of the Fund; and
(iii) the Managers of a Fund will be
deemed to be the board of directors of
the Fund; and (c) in place of the
verification procedures under paragraph
(f) of the rule, verification will be
effected quarterly by two employees of
the Firm. Applicants assert that the
securities held by the Funds are most
suitably kept in the Firm’s files, where
they can be referred to as necessary.
8. Section 17(g) and rule 17g–1
generally require the bonding of officers
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and employees of a registered
investment company who have access to
its securities or funds. Rule 17g–1
requires that a majority of directors who
are not interested persons
(‘‘disinterested directors’’) take certain
actions and give certain approvals
relating to fidelity bonding. Paragraph
(g) of rule 17g–1 sets forth certain
materials relating to the fidelity bond
that must be filed with the Commission
and certain notices relating to the
fidelity bond that must be given to each
member of the investment company’s
board of directors. Paragraph (h) of rule
17g–1 provides that an investment
company must designate one of its
officers to make the filings and give the
notices required by paragraph (g).
Paragraph (j) of rule 17g–1 exempts a
joint insured bond provided and
maintained by an investment company
and one or more other parties from
section 17(d) of the Act and the rules
thereunder. Rule 17g–1(j)(3) requires
that the board of directors of an
investment company satisfy the fund
governance standards defined in rule 0–
1(a)(7).
9. Applicants request an exemption
from section 17(g) and rule 17g–1 to the
extent necessary to permit each Fund to
comply with rule 17g–1 without the
necessity of having a majority of the
disinterested directors take such action
and make such approvals as are set forth
in the rule. Specifically, each Fund will
comply by having the Managers take
such actions and make such approvals
as are set forth in rule 17g–1. Applicants
state that, because the Managers will be
interested persons of the Fund, a Fund
could not comply with rule 17g–1
without the requested relief. Applicants
also request an exemption from the
requirements of rule 17g–1(g) and (h)
relating to the filing of copies of fidelity
bonds and related information with the
Commission and the provision of
notices to the board of directors and
from the requirements of rule 17g–
1(j)(3). Applicants believe the filing
requirements are burdensome and
unnecessary as applied to the Funds.
The Managers will maintain the
materials otherwise required to be filed
with the Commission by rule 17g–1(g)
and agree that all such material will be
subject to examination by the
Commission and its staff. The Managers
will designate a person to maintain the
records otherwise required to be filed
with the Commission under paragraph
(g) of the rule. Applicants also state that
the notices otherwise required to be
given to the board of directors would be
unnecessary as the Funds will not have
boards of directors. The Funds will
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comply with all other requirements of
rule 17g–1.
10. Section 17(j) and paragraph (b) of
rule 17j–1 make it unlawful for certain
enumerated persons to engage in
fraudulent or deceptive practices in
connection with the purchase or sale of
a security held or to be acquired by a
registered investment company. Rule
17j–1 also requires that every registered
investment company adopt a written
code of ethics and that every access
person of a registered investment
company report personal securities
transactions. Applicants request an
exemption from the requirements of rule
17j–1, except for the anti-fraud
provisions of paragraph (b), because
they are unnecessarily burdensome as
applied to the Funds.
11. Applicants request an exemption
from the requirements in sections 30(a),
30(b) and 30(e), and the rules under
those sections, that registered
investment companies prepare and file
with the Commission and mail to their
shareholders certain periodic reports
and financial statements. Applicants
contend that the forms prescribed by the
Commission for periodic reports have
little relevance to the Funds and would
entail administrative and legal costs that
outweigh any benefit to the Fund
Investors. Applicants request exemptive
relief to the extent necessary to permit
each Fund to report annually to its Fund
Investors. Applicants also request an
exemption from section 30(h) to the
extent necessary to exempt the
Managers of each Fund and any other
persons who may be deemed members
of an advisory board of a Fund from
filing Forms 3, 4 and 5 under section 16
of the Exchange Act with respect to
their ownership of Interests in the Fund.
Applicants assert that, because there
will be no trading market and the
transfers of Interests will be severely
restricted, these filings are unnecessary
for the protection of investors and
burdensome to those required to make
them.
12. Rule 38a–1 requires investment
companies to adopt, implement and
periodically review written policies and
procedures reasonably designed to
prevent violation of the federal
securities laws and to appoint a chief
compliance officer. The Funds will
comply with rule 38a–1(a), (c) and (d),
except that (a) since the Funds do not
have boards of directors, the Managers
will fulfill the responsibilities assigned
to a Fund’s board of directors under the
rule, and (b) since the Managers are not
disinterested persons of the Funds,
approval by a majority of the
disinterested board members required
by rule 38a–1 will not be obtained.
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Applicants’ Conditions
The applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each proposed transaction to which
a Fund is a party otherwise prohibited
by section 17(a) or section 17(d) and
rule 17d–1 (each, a ‘‘Section 17
Transaction’’) will be effected only if the
Managers determine that: (a) The terms
of the Section 17 Transaction, including
the consideration to be paid or received,
are fair and reasonable to the Fund
Investors of the participating Fund and
do not involve overreaching of the Fund
or its Fund Investors on the part of any
person concerned; and (b) the Section
17 Transaction is consistent with the
interests of the Fund Investors of the
participating Fund, the Fund’s
organizational documents and the
Fund’s reports to its Fund Investors.
In addition, the Managers will record
and preserve a description of such
Section 17 Transactions, their findings,
the information or materials upon
which their findings are based and the
basis therefor. All such records will be
maintained for the life of a Fund and at
least six years thereafter, and will be
subject to examination by the
Commission and its staff. All such
records will be maintained in an easily
accessible place for at least the first two
years.
2. If purchases or sales are made by
a Fund from or to an entity affiliated
with the Fund by reason of a Partner or
employee of the Winston Group (a)
serving as an officer, director, general
partner or investment adviser of the
entity, or (b) having a 5% or more
investment in the entity, such
individual will not participate in the
Fund’s determination of whether or not
to effect the purchase or sale.
3. The Managers will adopt, and
periodically review and update,
procedures designed to ensure that
reasonable inquiry is made, prior to the
consummation of any Section 17
Transaction, with respect to the possible
involvement in the transaction of any
affiliated person or promoter of or
principal underwriter for the Funds, or
any affiliated person of such a person,
promoter, or principal underwriter.
4. The Managers will not make on
behalf of a Fund any investment in
which a Co-Investor, as defined below,
has or proposes to acquire the same
class of securities of the same issuer,
where the investment involves a joint
enterprise or other joint arrangement
within the meaning of rule 17d–1 in
which the Fund and the Co-Investor are
participants, unless any such CoInvestor, prior to disposing all or part of
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its investment, (a) gives the Managers
sufficient, but not less than one day’s,
notice of its intent to dispose of its
investment, and (b) refrains from
disposing of its investment unless the
participating Fund holding such
investment has the opportunity to
dispose of its investment prior to or
concurrently with, on the same terms as,
and on a pro rata basis with the CoInvestor. The term ‘‘Co-Investor’’ with
respect to any Fund means any person
who is (a) an ‘‘affiliated person’’ (as
defined in section 2(a)(3) of the Act) of
the Fund; (b) the Winston Group; (c) a
Partner, lawyer, or employee of the
Winston Group; (d) an investment
vehicle offered, sponsored, or managed
by the Firm or an affiliated person of the
Firm; or (e) an entity in which a
Winston Entity acts as a general partner
or has a similar capacity to control the
sale or other disposition of the entity’s
securities.
The restrictions contained in this
condition, however, shall not be
deemed to limit or prevent the
disposition of an investment by a CoInvestor: (a) To its direct or indirect
wholly-owned subsidiary, to any
company (a ‘‘parent’’) of which the CoInvestor is a direct or indirect whollyowned subsidiary, or to a direct or
indirect wholly-owned subsidiary of its
parent; (b) to Immediate Family
Members of the Co-Investor or a trust
established for any such Immediate
Family Member; (c) when the
investment is comprised of securities
that are listed on a national securities
exchange registered under section 6 of
the Exchange Act; or (d) when the
investment is comprised of securities
that are national market system
securities pursuant to section 11A(a)(2)
of the Exchange Act and rule 11Aa2–1
thereunder.
5. The Managers of each Fund will
send to each person who was a Fund
Investor in such Fund at any time
during the fiscal year then ended
audited financial statements of the Fund
and with respect to those Series in
which the Fund Investor held Interests.
At the end of each fiscal year, the
Managers will make a valuation or have
a valuation made of all of the assets of
the Series as of the fiscal year end in a
manner consistent with customary
practice with respect to the valuation of
assets of the kind held by the Fund. In
addition, as soon as practicable after the
end of each fiscal year of each Fund, the
Managers of the Fund shall send a
report to each person who was a Fund
Investor at any time during the fiscal
year then ended, setting forth such tax
information as shall be necessary for the
preparation by the Fund Investor of his
E:\FR\FM\03APN1.SGM
03APN1
Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices
or her federal and state income tax
returns and a report of the investment
activities of such Fund during such
year.
6. Each Fund and the Managers of
each Fund will maintain and preserve,
for the life of each Series of that Fund
and at least six years thereafter, such
accounts, books and other documents as
constitute the record forming the basis
for the audited financial statements and
annual reports of such Series to be
provided to its Fund Investors, and
agree that all such records will be
subject to examination by the
Commission and its staff. All such
records will be maintained in an easily
accessible place for at least the first two
years.
Dated: March 29, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–6124 Filed 4–2–07; 8:45 am]
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–6081 Filed 4–2–07; 8:45 am]
March 27, 2007.
SECURITIES AND EXCHANGE
COMMISSION
ycherry on PROD1PC64 with NOTICES
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold the following
meeting during the week of April 2,
2007:
An Open Meeting will be held on
Wednesday, April 4, 2007 at 10 a.m. in
the Auditorium, Room L–002.
The subject matter of the Open
Meeting scheduled for Wednesday,
April 4, 2007 will be:
The Commission will consider its
staff’s approach to (1) the Public
Company Accounting Oversight Board’s
(‘‘PCAOB’’) Proposed Auditing
Standard—An Audit of Internal Control
Over Financial Reporting That Is
Integrated with An Audit of Financial
Statements; and (2) the PCAOB’s
Proposed Auditing Standard—
Considering and Using the Work of
Others in an Audit.
Commissioner Casey, as duty officer,
determined that no earlier notice thereof
was possible.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
18:30 Apr 02, 2007
Jkt 211001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55544; File No. SR–Amex–
2007–07]
Self-Regulatory Organizations;
American Stock Exchange LLC; Order
Approving a Proposed Rule Change
Revising Existing Rules for Portfolio
Depositary Receipts and Index Fund
Shares
I. Introduction
BILLING CODE 8010–01–P
VerDate Aug<31>2005
BILLING CODE 8010–01–P
On January 11, 2007, the American
Stock Exchange LLC (‘‘Amex’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposal to revise its
existing rules for portfolio depositary
receipts (Amex Rule 1000–AEMI) and
index fund shares (Amex Rule 1000A–
AEMI) to eliminate the methodology
standards for eligible indexes. On
January 25, 2007, the Amex submitted
Amendment No. 1 to the proposed rule
change. The proposed rule change, as
modified by Amendment No. 1, was
published for comment in the Federal
Register on February 12, 2007 for a 15day comment period.3 The Commission
received no comments regarding the
proposal. On March 14, 2007, Amex
filed Amendment No. 2 to the proposed
rule change.4 This order approves the
proposed rule change, as amended.
II. Description of the Proposal
The purpose of this proposed rule
change is to amend Amex’s existing
generic listing standards pursuant to
Rule 19b–4(e) under the Act 5 for
portfolio depositary receipts (‘‘PDRs’’)
and index fund shares 6 to eliminate the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 55240
(February 5, 2007), 72 FR 6624.
4 Amendment No. 2 is a technical amendment,
which revises the proposal to reflect the
implementation of Amex’s Auction and Electronic
Market Integration (‘‘AEMI’’) platform and
corresponding adoption of Rules 1000–AEMI and
1000A–AEMI, which replace former Amex rules
1000 and 1000A. As such, it is not subject to notice
and comment.
5 17 CFR 240.19b–4(e).
6 PDRs and index fund shares are registered
investment companies under the Investment
2 17
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
15923
requirement that an eligible index be
calculated and weighted following a
specified methodology.
The Exchange currently has generic
listing standards (within the meaning of
Rule 19b–4(e) under the Act 7), which
permit the listing and trading of various
qualifying ETFs subject to the
procedures contained in Rule 19b–4(e).
The existence of generic listing
standards allows qualifying ETFs to list
or trade without the need to file a rule
change for each security. The generic
listing standards for ETFs presently
provide that eligible indexes be
calculated based on the market
capitalization, modified market
capitalization, price, equal-dollar, or
modified equal-dollar weighting
methodology.8 The proposed rule
change would eliminate this standard,
and, as a result, the Exchange would no
longer consider index methodology in
its review of an ETF’s eligibility for
listing and trading pursuant to Rule
19b–4(e) under the Act.9
III. Discussion
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange 10 and, in
particular, the requirements of Section 6
of the Act.11 Specifically, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,12 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
As the market for ETFs has grown, the
variety of weighting and calculation
methodologies for underlying indexes
has also expanded, limiting the
applicability of Amex’s current generic
ETF listing standards. The Commission
believes that the proposed elimination
of index methodology from its generic
Company Act of 1940 and are referred to in this
filing as exchange traded funds (‘‘ETFs’’).
7 17 CFR 240.19b–4(e).
8 See Commentary .03(b)(i) to Amex Rule 1000–
AEMI and Commentary .02(b)(i) to Amex Rule
1000A–AEMI.
9 17 CFR 240.19b–4(e).
10 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
11 15 U.S.C. 78f.
12 15 U.S.C. 78f(b)(5).
E:\FR\FM\03APN1.SGM
03APN1
]]>Agencies
[Federal Register Volume 72, Number 63 (Tuesday, April 3, 2007)]
[Notices]
[Pages 15919-15923]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-6081]
[[Page 15919]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27770; 813-264]
Silas Partners I, LLC et al.; Notice of Application
March 27, 2007.
AGENCY: Securities and Exchange Commission (SEC).
ACTION: Notice of an application for an order under sections 6(b) and
6(e) of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except section 9 and sections
36 and 53, and the rules and regulations under the Act. With respect to
sections 17 and 30 of the Act, and the rules and regulations
thereunder, and rule 38a-1 under the Act, the exemption is limited as
set forth in the application.
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicants request an order to exempt certain
investment funds formed for the benefit of eligible current and former
employees of Winston & Strawn LLP and its affiliates from certain
provisions of the Act. Each fund will be an ``employees'' securities
company'' as defined in section 2(a)(13) of the Act.
APPLICANTS: Silas Partners I, LLC (the ``Investment Fund'') and Winston
& Strawn LLP (together with any business organization that results from
a reorganization of Winston & Strawn LLP into a different type of
business organization or into an entity organized under the laws of
another jurisdiction, the ``Firm'').
FILING DATES: The application was filed on April 24, 2000 and amended
on March 16, 2007. Applicants have agreed to file an amendment during
the notice period, the substance of which is reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on April 23, 2007 and should be accompanied by proof of service on
applicants, in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F St.,
NE., Washington, DC 20549-1090. Applicants, 35 West Wacker Drive,
Chicago, IL 60601.
FOR FURTHER INFORMATION CONTACT: Jean Minarick, Senior Counsel, at
(202) 551-6811, or Nadya Roytblat, Assistant Director, at (202) 551-
6821, (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 100 F St., NE., Washington, DC
20549-0102 (tel. 202-551-5850).
Applicants' Representations
1. The Firm is a law firm organized as an Illinois limited
liability partnership. The Firm and its ``affiliates,'' as defined in
rule 12b-2 under the Securities Exchange Act of 1934 (the ``Exchange
Act''), are referred to collectively as the ``Winston Group'' and
individually as a ``Winston Entity.'' The shareholders of the Firm are
referred to as ``Partners.''
2. The Investment Fund is a Delaware limited liability company. The
applicants may in the future offer additional pooled investment
vehicles identical in all material respects to the Investment Fund
(other than investment objectives and strategies) (the ``Subsequent
Funds'') (together, the Investment Fund and the Subsequent Funds are
referred to as the ``Funds''). The applicants anticipate that each
Subsequent Fund will also be structured as a limited liability company,
although a Subsequent Fund could be structured as a limited
partnership, corporation, trust or other business organization formed
as an ``employees'' securities company'' within the meaning of the
section 2(a)(13) of the Act. The Funds will operate as non-diversified,
closed-end management investment companies. The Funds will be
established to enable the Partners and certain employees of Winston
Group to participate in certain investment opportunities that come to
the attention of Winston Group. Participation as investors in the Funds
will allow the Eligible Investors, as defined below, to diversify their
investments and to have the opportunity to participate in investments
that might not otherwise be available to them or that might be beyond
their individual means.
3. A group of Eligible Investors, as defined below, appointed by
the Firm, who are current or retired Partners of the Firm (the
``Managers'') will manage the Funds. The Funds will have one or more
investment committees (``Investment Committees''), each member of which
shall be a current Partner. The Managers shall appoint the members of
each Investment Committee. The Managers or any person involved in the
operation of the Funds will register as investment advisers if required
under the Investment Advisers Act of 1940, or the rules under that Act.
4. Interests in the Funds (``Interests'') will be offered without
registration in reliance on section 4(2) of the Securities Act of 1933
(the ``Securities Act'') or Regulation D under the Securities Act, or
any successor rule, and will be sold solely to Eligible Investors.
Eligible Investors consist of ``Eligible Employees,'' ``Qualified
Investment Vehicles,'' ``Immediate Family Members,'' each as defined
below, and Winston Entities. The term ``Fund Investors'' refers to
Eligible Investors who invest in the Funds. Prior to offering Interests
in a Fund to an individual, the Managers must reasonably believe that
the individual is a sophisticated investor capable of understanding and
evaluating the risks of participating in the Fund without the benefit
of regulatory safeguards. An ``Eligible Employee'' is a person who is,
at the time of investment, a current or former Partner of the Firm or
an employee of the Winston Group who (a) meets the standards of an
``accredited investor'' set forth in rule 501(a)(5) or rule 501(a)(6)
of Regulation D under the Securities Act, or (b) is one of 35 or fewer
Partners or employees of the Winston Group who meets certain
requirements (``Category 2 investors'').
5. Each Category 2 investor will be a Partner or an employee of the
Winston Group, who meets the sophistication requirements set forth in
rule 506(b)(2)(ii) of Regulation D under the Securities Act and who (a)
has a graduate degree, has a minimum of 3 years of business and/or
professional experience, has had compensation of at least $150,000 in
the preceding 12 month period, and has a reasonable expectation of
compensation of at least $150,000 in each of the 2 immediately
succeeding 12 month periods, or (b) is a ``knowledgeable employee,'' as
defined in rule 3c-5 under the Act, of the Fund (with the Fund treated
as though it were a ``Covered Company'' for purposes of the rule). In
addition, a Category 2 investor qualifying under (a) above will not be
permitted to invest in any calendar or fiscal year (as determined by
the Firm) more than 10% of his or her income from all sources for the
immediately preceding calendar or fiscal year in one or more Funds.
[[Page 15920]]
6. A Qualified Investment Vehicle is a trust or other entity the
sole beneficiaries of which are Eligible Employees or their Immediate
Family Members or the settlors and trustees of which consist of
Eligible Employees or Eligible Employees together with Immediate Family
Members. Immediate Family Members include any parent, child, spouse of
a child, spouse, brother or sister, and includes any step and adoptive
relationships. A Qualified Investment Vehicle must be either (a) an
accredited investor as defined in rule 501(a) of Regulation D or (b) an
entity for which an Eligible Employee is a settlor and principal
investment decision-maker and counted toward the 35 non-accredited Fund
Investors.\1\
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\1\ If a Qualified Investment Vehicle is an entity other than a
trust, (a) the reference to ``settlor'' shall be construed to mean a
person who created the vehicle, alone or together with others, and
who contributed funds or other assets to the vehicle, and (b) the
reference to ``trustee'' shall be construed to mean a person who
performs functions similar to those of a trustee.
---------------------------------------------------------------------------
7. Each Fund may issue its Interests in series (each, a ``Series''
and collectively, the ``Series'') with new Series of Interests being
offered from time to time. Each Series will represent an interest in
some or all of those Fund investments made by the Fund during a
specified period of time (the ``Investment Period'').
8. The terms of a Fund will be fully disclosed in the private
placement memorandum of the Fund, and each Eligible Investor will
receive a private placement memorandum and the Fund's limited liability
company agreement (or other organizational documents) prior to his or
her investment in the Fund. Each Fund will send its Fund Investors
annual reports, which will contain audited financial statements with
respect to those Series in which the Fund Investor has Interests, as
soon as practicable after the end of each fiscal year. In addition, as
soon as practicable after the end of each fiscal year, the Funds will
send a report to each Fund Investor setting forth such tax information
as shall be necessary for the preparation by the Fund Investor of his
or her federal and state tax returns.
9. Fund Investors will be permitted to transfer their Interests
only with the express consent of the Managers. The Managers do not
anticipate giving such consent. Any such transfer must be to another
Eligible Investor. No fee of any kind will be charged in connection
with the sale of Interests.
10. The Managers may require a Fund Investor to withdraw from a
Fund if: (a) A Fund Investor ceases to be an Eligible Investor; (b) a
Fund Investor is no longer deemed to be able to bear the economic risk
of investment in a Fund; (c) adverse tax consequences were to inure to
the Fund were a particular Fund Investor to remain; or (d) the
continued membership of the Fund Investor would violate applicable law
or regulations. In addition, the Firm reserves the right to impose
vesting provisions on a Fund Investor's investments in a Fund. In an
investment program that provides for vesting provisions, all or a
portion of a Fund Investor's Interests will be treated as unvested, and
vesting will occur through the passage of a specified period of time.
After the end of a Series' Investment Period, to the extent a Fund
Investor's Interests become ``vested,'' the termination of such Fund
Investor's association or employment with the Firm will not affect the
Fund Investor's rights with respect to the vested Interests. Following
the Investment Period, any portion of a Fund Investor's Interests that
are unvested at the time of the termination of a Fund Investor's
association or employment with the Firm may be subject to repurchase or
cancellation by the Fund. Upon any repurchase or cancellation of all or
a portion of a Fund Investor's Interests, a Fund will at a minimum pay
to the Fund Investor the lesser of (a) the amount actually paid by the
Fund Investor to acquire the Interests less the amount of any
distributions received by that Fund Investor from the Fund (plus
interest at or above the prime rate, as determined by the Managers) and
(b) the fair market value of the Interests determined at the time of
repurchase or cancellation, as determined in good faith by the
Managers. Any interest owed to a Fund Investor pursuant to (a) above
will begin to accrue at the end of the Investment Period.
11. The Firm may be reimbursed by a Fund for reasonable and
necessary out-of-pocket costs directly associated with the organization
and operation of the Funds, including administrative and overhead
expenses. There will be no allocation of any of the Firm's operating
expenses to a Fund. In addition, the Firm may allocate to a Series any
out-of-pocket expenses specifically attributable to the organization
and operation of that Series. No separate management fee will be
charged to a Fund by the Managers for their services.
12. The Funds may borrow from Winston Group, a Partner, or a bank
or other financial institution, provided that a Fund will not borrow
from any person if the borrowing would cause any person not named in
section 2(a)(13) of the Act to own outstanding securities of the Fund
(other than short-term paper). Any borrowings by a Fund will be non-
recourse other than to the Winston Group. If a Winston Entity or a
Partner makes a loan to the Funds, the interest rate on the loan will
be no less favorable to the Funds than the rate that could be obtained
on an arm's length basis.
13. No Fund will acquire any security issued by a registered
investment company if immediately after the acquisition the Fund would
own more than 3% of the outstanding voting stock of the registered
investment company.
Applicants' Legal Analysis
1. Section 6(b) of the Act provides, in part, that the Commission
will exempt employees' securities companies from the provisions of the
Act to the extent that the exemption is consistent with the protection
of investors. Section 6(b) provides that the Commission will consider,
in determining the provisions of the Act from which the company should
be exempt, the company's form of organization and capital structure,
the persons owning and controlling its securities, the price of the
company's securities and the amount of any sales load, how the
company's funds are invested, and the relationship between the company
and the issuers of the securities in which it invests. Section 2(a)(13)
defines an employees' securities company as any investment company all
of whose securities (other than short-term paper) are beneficially
owned (a) by current or former employees, or persons on retainer, of
one or more affiliated employers, (b) by immediate family members of
such persons, or (c) by such employer or employers together with any of
the persons in (a) or (b).
2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 of the Act from selling or
redeeming their securities. Section 6(e) provides that, in connection
with any order exempting an investment company from any provision of
section 7, certain provisions of the Act, as specified by the
Commission, will be applicable to the company and other persons dealing
with the company as though the company were registered under the Act.
Applicants request an order under sections 6(b) and 6(e) of the Act
exempting the Funds from all provisions of the Act, except section 9
and sections 36 through 53, and the rules and regulations under the
Act. With respect to sections 17 and 30 of the Act, and the rules and
regulations thereunder, and rule 38a-1 under the Act, the exemption is
limited as set forth in the application.
3. Section 17(a) generally prohibits any affiliated person of a
registered investment company, or any affiliated person of an
affiliated person, acting as
[[Page 15921]]
principal, from knowingly selling or purchasing any security or other
property to or from the company. Applicants request an exemption from
section 17(a) to permit a Fund to: (a) Purchase, from the Firm or any
affiliated person thereof, securities or interests in properties
previously acquired for the account of the Firm or any affiliated
person thereof; (b) sell, to the Firm or any affiliated person thereof,
securities or interests in properties previously acquired by the Funds;
(c) invest in companies, partnerships or other investment vehicles
offered, sponsored or managed by the Firm or any affiliated person
thereof; and (d) purchase interests in any company or other investment
vehicle (i) in which the Firm owns 5% or more of the voting securities,
or (ii) that otherwise is an affiliated person of the Fund (or an
affiliated person of such a person) or an affiliated person of the
Firm.
4. Applicants state that an exemption from section 17(a) is
consistent with the protection of investors and the purposes of the
Act. Applicants state that the Fund Investors will be informed in the
Fund's private placement memorandum of the possible extent of the
Fund's dealings with the Firm or any affiliated person thereof.
Applicants also state that, as financially sophisticated professionals,
Fund Investors will be able to evaluate the attendant risks. Applicants
assert that the community of interest among the Fund Investors and the
Firm will provide the best protection against any risk of abuse.
5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person or principal underwriter of a registered
investment company, or any affiliated person of an affiliated person or
principal underwriter, acting as principal, from participating in any
joint arrangement with the company unless authorized by the Commission.
Applicants request relief to permit affiliated persons of each Fund, or
affiliated persons of any of these persons, to participate in any joint
arrangement in which the Fund is a participant. Joint transactions in
which a Fund may participate could include the following: (a) An
investment by one or more Funds in a security in which the Firm or its
affiliated person, or another Fund, is a participant, or with respect
to which the Firm or an affiliated person is entitled to receive fees
(including, but not limited to, legal fees, placement fees, investment
banking fees, brokerage commissions, or other economic benefits or
interests); (b) an investment by one or more Funds in an investment
vehicle sponsored, offered or managed by the Firm; and (c) an
investment by one or more Funds in a security in which an affiliate is
or may become a participant.
6. Applicants state that compliance with section 17(d) would cause
the Funds to forego investment opportunities simply because a Fund
Investor, the Firm or other affiliates of the Fund also had made or
contemplated making a similar investment. In addition, because
investment opportunities of the types considered by the Funds often
require that each participant make available funds in an amount that
may be substantially greater than that available to the investor alone,
there may be certain attractive opportunities of which a Fund may be
unable to take advantage except as a co-participant with other persons,
including affiliates. Applicants note that, in light of the Firm's
purpose of establishing the Funds so as to reward Eligible Investors
and to attract highly qualified personnel to the Firm, the possibility
is minimal that an affiliated party investor will enter into a
transaction with a Fund with the intent of disadvantaging the Fund.
Finally, applicants contend that the possibility that a Fund may be
disadvantaged by the participation of an affiliate in a transaction
will be minimized by compliance with the lockstep procedures described
in condition 4 below. Applicants assert that the flexibility to
structure co-investments and joint investments will not involve abuses
of the type section 17(d) and rule 17d-1 were designed to prevent.
7. Section 17(f) of the Act designates the entities that may act as
investment company custodians, and rule 17f-2 allows an investment
company to act as self-custodian, subject to certain requirements.
Applicants request an exemption from section 17(f) and rule 17f-2 to
permit the following exceptions from the requirements of rule 17f-2:
(a) A Fund's investments may be kept in the locked files of the Firm or
of a Partner; (b) for purposes of paragraph (d) of the rule, (i)
employees of the Firm will be deemed employees of the Funds, (ii) the
Managers of a Fund will be deemed to be officers of the Fund; and (iii)
the Managers of a Fund will be deemed to be the board of directors of
the Fund; and (c) in place of the verification procedures under
paragraph (f) of the rule, verification will be effected quarterly by
two employees of the Firm. Applicants assert that the securities held
by the Funds are most suitably kept in the Firm's files, where they can
be referred to as necessary.
8. Section 17(g) and rule 17g-1 generally require the bonding of
officers and employees of a registered investment company who have
access to its securities or funds. Rule 17g-1 requires that a majority
of directors who are not interested persons (``disinterested
directors'') take certain actions and give certain approvals relating
to fidelity bonding. Paragraph (g) of rule 17g-1 sets forth certain
materials relating to the fidelity bond that must be filed with the
Commission and certain notices relating to the fidelity bond that must
be given to each member of the investment company's board of directors.
Paragraph (h) of rule 17g-1 provides that an investment company must
designate one of its officers to make the filings and give the notices
required by paragraph (g). Paragraph (j) of rule 17g-1 exempts a joint
insured bond provided and maintained by an investment company and one
or more other parties from section 17(d) of the Act and the rules
thereunder. Rule 17g-1(j)(3) requires that the board of directors of an
investment company satisfy the fund governance standards defined in
rule 0-1(a)(7).
9. Applicants request an exemption from section 17(g) and rule 17g-
1 to the extent necessary to permit each Fund to comply with rule 17g-1
without the necessity of having a majority of the disinterested
directors take such action and make such approvals as are set forth in
the rule. Specifically, each Fund will comply by having the Managers
take such actions and make such approvals as are set forth in rule 17g-
1. Applicants state that, because the Managers will be interested
persons of the Fund, a Fund could not comply with rule 17g-1 without
the requested relief. Applicants also request an exemption from the
requirements of rule 17g-1(g) and (h) relating to the filing of copies
of fidelity bonds and related information with the Commission and the
provision of notices to the board of directors and from the
requirements of rule 17g-1(j)(3). Applicants believe the filing
requirements are burdensome and unnecessary as applied to the Funds.
The Managers will maintain the materials otherwise required to be filed
with the Commission by rule 17g-1(g) and agree that all such material
will be subject to examination by the Commission and its staff. The
Managers will designate a person to maintain the records otherwise
required to be filed with the Commission under paragraph (g) of the
rule. Applicants also state that the notices otherwise required to be
given to the board of directors would be unnecessary as the Funds will
not have boards of directors. The Funds will
[[Page 15922]]
comply with all other requirements of rule 17g-1.
10. Section 17(j) and paragraph (b) of rule 17j-1 make it unlawful
for certain enumerated persons to engage in fraudulent or deceptive
practices in connection with the purchase or sale of a security held or
to be acquired by a registered investment company. Rule 17j-1 also
requires that every registered investment company adopt a written code
of ethics and that every access person of a registered investment
company report personal securities transactions. Applicants request an
exemption from the requirements of rule 17j-1, except for the anti-
fraud provisions of paragraph (b), because they are unnecessarily
burdensome as applied to the Funds.
11. Applicants request an exemption from the requirements in
sections 30(a), 30(b) and 30(e), and the rules under those sections,
that registered investment companies prepare and file with the
Commission and mail to their shareholders certain periodic reports and
financial statements. Applicants contend that the forms prescribed by
the Commission for periodic reports have little relevance to the Funds
and would entail administrative and legal costs that outweigh any
benefit to the Fund Investors. Applicants request exemptive relief to
the extent necessary to permit each Fund to report annually to its Fund
Investors. Applicants also request an exemption from section 30(h) to
the extent necessary to exempt the Managers of each Fund and any other
persons who may be deemed members of an advisory board of a Fund from
filing Forms 3, 4 and 5 under section 16 of the Exchange Act with
respect to their ownership of Interests in the Fund. Applicants assert
that, because there will be no trading market and the transfers of
Interests will be severely restricted, these filings are unnecessary
for the protection of investors and burdensome to those required to
make them.
12. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies and procedures reasonably
designed to prevent violation of the federal securities laws and to
appoint a chief compliance officer. The Funds will comply with rule
38a-1(a), (c) and (d), except that (a) since the Funds do not have
boards of directors, the Managers will fulfill the responsibilities
assigned to a Fund's board of directors under the rule, and (b) since
the Managers are not disinterested persons of the Funds, approval by a
majority of the disinterested board members required by rule 38a-1 will
not be obtained.
Applicants' Conditions
The applicants agree that any order granting the requested relief
will be subject to the following conditions:
1. Each proposed transaction to which a Fund is a party otherwise
prohibited by section 17(a) or section 17(d) and rule 17d-1 (each, a
``Section 17 Transaction'') will be effected only if the Managers
determine that: (a) The terms of the Section 17 Transaction, including
the consideration to be paid or received, are fair and reasonable to
the Fund Investors of the participating Fund and do not involve
overreaching of the Fund or its Fund Investors on the part of any
person concerned; and (b) the Section 17 Transaction is consistent with
the interests of the Fund Investors of the participating Fund, the
Fund's organizational documents and the Fund's reports to its Fund
Investors.
In addition, the Managers will record and preserve a description of
such Section 17 Transactions, their findings, the information or
materials upon which their findings are based and the basis therefor.
All such records will be maintained for the life of a Fund and at least
six years thereafter, and will be subject to examination by the
Commission and its staff. All such records will be maintained in an
easily accessible place for at least the first two years.
2. If purchases or sales are made by a Fund from or to an entity
affiliated with the Fund by reason of a Partner or employee of the
Winston Group (a) serving as an officer, director, general partner or
investment adviser of the entity, or (b) having a 5% or more investment
in the entity, such individual will not participate in the Fund's
determination of whether or not to effect the purchase or sale.
3. The Managers will adopt, and periodically review and update,
procedures designed to ensure that reasonable inquiry is made, prior to
the consummation of any Section 17 Transaction, with respect to the
possible involvement in the transaction of any affiliated person or
promoter of or principal underwriter for the Funds, or any affiliated
person of such a person, promoter, or principal underwriter.
4. The Managers will not make on behalf of a Fund any investment in
which a Co-Investor, as defined below, has or proposes to acquire the
same class of securities of the same issuer, where the investment
involves a joint enterprise or other joint arrangement within the
meaning of rule 17d-1 in which the Fund and the Co-Investor are
participants, unless any such Co-Investor, prior to disposing all or
part of its investment, (a) gives the Managers sufficient, but not less
than one day's, notice of its intent to dispose of its investment, and
(b) refrains from disposing of its investment unless the participating
Fund holding such investment has the opportunity to dispose of its
investment prior to or concurrently with, on the same terms as, and on
a pro rata basis with the Co-Investor. The term ``Co-Investor'' with
respect to any Fund means any person who is (a) an ``affiliated
person'' (as defined in section 2(a)(3) of the Act) of the Fund; (b)
the Winston Group; (c) a Partner, lawyer, or employee of the Winston
Group; (d) an investment vehicle offered, sponsored, or managed by the
Firm or an affiliated person of the Firm; or (e) an entity in which a
Winston Entity acts as a general partner or has a similar capacity to
control the sale or other disposition of the entity's securities.
The restrictions contained in this condition, however, shall not be
deemed to limit or prevent the disposition of an investment by a Co-
Investor: (a) To its direct or indirect wholly-owned subsidiary, to any
company (a ``parent'') of which the Co-Investor is a direct or indirect
wholly-owned subsidiary, or to a direct or indirect wholly-owned
subsidiary of its parent; (b) to Immediate Family Members of the Co-
Investor or a trust established for any such Immediate Family Member;
(c) when the investment is comprised of securities that are listed on a
national securities exchange registered under section 6 of the Exchange
Act; or (d) when the investment is comprised of securities that are
national market system securities pursuant to section 11A(a)(2) of the
Exchange Act and rule 11Aa2-1 thereunder.
5. The Managers of each Fund will send to each person who was a
Fund Investor in such Fund at any time during the fiscal year then
ended audited financial statements of the Fund and with respect to
those Series in which the Fund Investor held Interests. At the end of
each fiscal year, the Managers will make a valuation or have a
valuation made of all of the assets of the Series as of the fiscal year
end in a manner consistent with customary practice with respect to the
valuation of assets of the kind held by the Fund. In addition, as soon
as practicable after the end of each fiscal year of each Fund, the
Managers of the Fund shall send a report to each person who was a Fund
Investor at any time during the fiscal year then ended, setting forth
such tax information as shall be necessary for the preparation by the
Fund Investor of his
[[Page 15923]]
or her federal and state income tax returns and a report of the
investment activities of such Fund during such year.
6. Each Fund and the Managers of each Fund will maintain and
preserve, for the life of each Series of that Fund and at least six
years thereafter, such accounts, books and other documents as
constitute the record forming the basis for the audited financial
statements and annual reports of such Series to be provided to its Fund
Investors, and agree that all such records will be subject to
examination by the Commission and its staff. All such records will be
maintained in an easily accessible place for at least the first two
years.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6081 Filed 4-2-07; 8:45 am]
BILLING CODE 8010-01-P
