American International Group, Inc., et al.; Notice of Application, 31157-31162 [E8-12014]
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Federal Register / Vol. 73, No. 105 / Friday, May 30, 2008 / Notices
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of 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 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.
Employee Alternative Investment GP II,
LLC, AIG Non-U.S. Employee Feeder GP
II, LLC, and AIG Global Investment
Corp.
FILING DATES: The application was filed
on September 25, 2007 and amended on
December 26, 2007, and May 8, 2008.
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 June 17, 2008, 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, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090; Applicants, 70 Pine Street, New
York, NY 10270.
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6879, or Julia Kim Gilmer,
Branch Chief, 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 Street, NE., Washington, DC
20549–1520 (telephone (202) 551–5850).
Applicants
request an order to exempt certain
limited partnerships and other entities
(‘‘Partnerships’’) formed for the benefit
of eligible employees of American
International Group, Inc. (‘‘AIG’’) and its
affiliates from certain provisions of the
Act. Each Partnership will be an
‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act.
APPLICANTS: AIG Employee Hedge
Fund, L.P. (the ‘‘Employee Hedge
Fund’’), AIG Employee PE/RE Fund
2007, L.P. (together with the Employee
Hedge Fund, the ‘‘Initial Partnerships’’),
AIG Non-U.S. Employee PE/RE Feeder
Fund 2007, L.P. (the ‘‘PE/RE Feeder’’),
AIG Non-U.S. Employee Hedge Feeder,
L.P. (together with the PE/RE Feeder,
the ‘‘Cayman Partnerships’’), AIG, AIG
Applicants’ Representations
1. AIG, a Delaware corporation, is a
holding company which, through its
subsidiaries, is engaged in a broad range
of insurance and insurance-related
activities worldwide. AIG’s primary
activities include both general insurance
and life insurance and retirement
services operations. Other significant
activities include financial services and
asset management. AIG and its
‘‘affiliates,’’ as defined in rule 12b–2
under the Securities Exchange Act of
1934 (the ‘‘1934 Act’’), are referred to
collectively as ‘‘AIG entities.’’
2. Each Initial Partnership is a limited
partnership organized under the laws of
the state of Delaware and each Cayman
Partnership is an exempted limited
partnership organized under the laws of
the Cayman Islands. AIG Employee
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to R. Corey Booth, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Shirley
Martinson, 6432 General Green Way,
Alexandria, Virginia 22312 or send an email to: PRA_Mailbox@sec.gov.
Comments must be submitted within 60
days of this notice.
Dated: May 21, 2008.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8–12015 Filed 5–29–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28286; 813–00369]
American International Group, Inc., et
al.; Notice of Application
May 23, 2008.
AGENCY:
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SUMMARY OF APPLICATION:
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Alternative Investment GP II, LLC will
serve as the general partner of each
Initial Partnership and AIG Non-U.S.
Employee Feeder GP II, LLC will serve
as the general partner of each Cayman
Partnership. AIG Global Investment
Corp., which is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’), will be the investment
adviser to the Initial Partnerships and
the Cayman Partnerships. A General
Partner (as defined below) or another
AIG entity will serve as investment
adviser to a Partnership (the
‘‘Investment Adviser’’). The Investment
Adviser will be registered as an
investment adviser under the Advisers
Act if required under applicable law.
AIG entities may form additional
Partnerships from time to time to enable
Eligible Employees (as defined below) to
pool their investment resources to
achieve diversification of investments
and participation in investments that
usually would not be available to them
as individual investors.
3. A Partnership will be structured as
a limited partnership, limited liability
company, business trust or other entity.
Interests in a Partnership (‘‘Interests’’)
may be issued in one or more series,
each of which corresponds to particular
Partnership investments (each, a
‘‘Series’’). Each Series will be an
‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act. Each Partnership will operate
as either a closed-end or open-end
management investment company, and
may operate as a diversified or nondiversified vehicle.
4. Each Partnership will have a
general partner, managing member or
other similar entity that is an AIG entity
(a ‘‘General Partner’’). All potential
investors in a Partnership will be
‘‘Limited Partners.’’ The General Partner
will manage, operate, and control each
Partnership and will have the authority
to make all decisions regarding the
acquisition, management and
disposition of Partnership investments.
The General Partner may be permitted
to delegate certain of its responsibilities
regarding the acquisition, management
and disposition of Partnership
investments to an Investment Adviser.
5. If the Investment Adviser elects to
recommend that a Partnership enter into
any side-by-side investment with an
unaffiliated entity, the Investment
Adviser will be permitted to engage as
sub-investment adviser an unaffiliated
entity (an ‘‘Unaffiliated Subadviser’’),
which will be responsible for the
management of such side-by-side
investment. An Investment Adviser may
be paid a management fee, which will
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generally be determined as a percentage
of the capital commitments of the
Limited Partners. A General Partner or
Investment Adviser may receive a
performance-based fee (a ‘‘Carried
Interest’’) based on the net gains of the
Partnership’s investments in addition to
any amount allocable to the General
Partner’s or Investment Adviser’s capital
contribution.1
6. Interests in a Partnership will be
offered without registration in reliance
on section 4(2) of the Securities Act of
1933 (the ‘‘Securities Act’’), or
Regulation D or Regulation S under the
Securities Act, and will be sold only to
‘‘Qualified Participants’’ (as defined
below). Prior to offering Interests to an
Eligible Employee or Eligible Family
Member (in each case as defined below),
a General Partner must reasonably
believe that the Eligible Employee or
Eligible Family Member will be capable
of understanding and evaluating the
merits and risks of participation in a
Partnership and that each such
individual is able to bear the economic
risk of such participation and afford a
complete loss of his or her investment.
7. ‘‘Qualified Participants’’ are (a)
current or former employees, including
employee officers and directors (except
directors of AIG) and current persons on
retainer, including, but not limited to,
Consultants 2 (collectively, ‘‘Eligible
Employees’’), (b) spouses, parents,
children, spouses of children, brothers,
sisters and grandchildren of Eligible
Employees (‘‘Eligible Family Members’’
and, together with Eligible Employees
who are natural persons, ‘‘Eligible
Individuals’’), (c) trusts or other
investment vehicles established solely
for the benefit of Eligible Employees or
Eligible Family Members (‘‘Eligible
Investment Vehicles’’), and (d) AIG
entities. Each Eligible Individual will be
an ‘‘accredited investor’’ under rule
501(a)(5) or rule 501(a)(6) of Regulation
D (‘‘Accredited Investor’’), except that a
maximum of 35 Eligible Employees who
are sophisticated investors but who are
not Accredited Investors may become
Limited Partners if each of them falls
1 If a General Partner or Investment Adviser is
registered under the Advisers Act, the Carried
Interest payable to it by a Partnership will be
pursuant to an arrangement that complies with rule
205–3 under the Advisers Act. If the General
Partner or Investment Adviser is not required to
register under the Advisers Act, the Carried Interest
payable to it will comply with section 205(b)(3) of
the Advisers Act, with the Partnership treated as a
business development company solely for the
purpose of that section.
2 A ‘‘Consultant’’ is a person or entity whom AIG
has engaged on retainer to provide services and
professional expertise on an ongoing basis as a
regular consultant or as a business or legal adviser
and who shares a community of interest with AIG
and its employees.
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into one of the following two categories:
(A) Eligible Employees who (i) have a
graduate degree in business, law or
accounting, (ii) have a minimum of five
years of consulting, investment
management, investment banking, legal
or similar business experience, and (iii)
had reportable income from all sources
(including any profit shares or bonus) of
$100,000 in each of the two years
immediately preceding the Eligible
Employee’s admission as a Limited
Partner and have a reasonable
expectation of income from all sources
of at least $140,000 in each year in
which the Eligible Employee will be
committed to make investments in a
Partnership; or (B) Eligible Employees
who are ‘‘knowledgeable employees,’’ as
defined in rule 3c–5 of the Act, of the
Partnership (with the Partnership
treated as though it were a ‘‘covered
company’’ for purposes of the rule). An
Eligible Employee who is described in
category (A) above will not be permitted
to invest in any year more than 10% of
his or her income from all sources for
the immediately preceding year in the
aggregate in a Partnership and in all
other Partnerships in which that
investor has previously invested.
8. An Eligible Individual may
purchase an Interest through an Eligible
Investment Vehicle only if either (i) the
investment vehicle is an ‘‘accredited
investor,’’ as defined in rule 501(a) of
Regulation D under the 1933 Act, or (ii)
the Eligible Individual or Consultant
entity is the settlor 3 and principal
investment decision-maker with respect
to the investment vehicle. Eligible
Investment Vehicles that are not
accredited investors will be included in
the 35 non-accredited investor limit
discussed above. An AIG entity or a
Consultant entity will be an ‘‘accredited
investor’’ as defined in rule 501(a) of
Regulation D under the 1933 Act.
9. The terms of a Partnership will be
disclosed to the Eligible Employees at
the time they are offered the right to
subscribe for Interests, and they will be
furnished with a copy of the partnership
agreement. A Partnership will send its
Limited Partners an audited financial
statement as soon as practicable after
the end of its fiscal year. In addition, as
soon as practicable after the end of each
fiscal year of a Partnership, a report will
be sent to each Limited Partner setting
forth the information with respect to his
or her share of income, gains, losses,
credits, and other items for federal and
state income tax purposes.
3 If such investment vehicle is an entity other
than a trust, the term ‘‘settlor’’ will be read to mean
a person who created such vehicle, alone or
together with others, and contributed funds to such
vehicle.
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10. Interests in the Partnerships will
not be transferable except with the
express consent of the General Partner.
All of the Partnerships will have only
Qualified Participants as Limited
Partners. No sales load will be charged
in connection with the sale of Interests.
11. The General Partner (or an AIG
entity) will have the right to purchase or
redeem the Interest of an Eligible
Employee who is terminated for cause
or solicits employees or clients of AIG
during that Eligible Employee’s
relationship with AIG or within six
months after such relationship
terminates, at a price equaling the lesser
of (a) cost plus interest less
distributions, or (b) fair market value or
net asset value, as applicable.
12. A Partnership may make
investments side-by-side with AIG
entities and through investment pools
sponsored by or managed by an AIG
entity or an unaffiliated entity. A
Partnership may also co-invest directly
in a company with an AIG entity or an
investment fund or separate account
organized for the benefit of investors
who are not affiliated with an AIG entity
over which an AIG entity exercises
investment discretion (‘‘Third Party
Funds’’).
13. If any AIG entity makes loans to
any Partnership, it will be entitled to
receive interest at a rate no less
favorable to the Partnership than the
rate that could be obtained on an arm’s
length basis. A Partnership 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 securities of the Partnership (other
than short-term paper). Any
indebtedness of a Partnership will be
non-recourse to the Limited Partners of
the Partnership.
14. A Partnership will not acquire any
security issued by a registered
investment company if, immediately
after the acquisition, the Partnership
will own, in the aggregate, 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
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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, in relevant part, 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) of the Act
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 Partnerships from all
provisions of the Act, except section 9
and sections 36 through 53 of the Act,
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
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) An AIG
entity or a Third Party Fund (or any
affiliated person of a Third Party Fund),
acting as principal, to engage in any
transaction directly or indirectly with
any Partnership or any company
controlled by the Partnership; (b) a
Partnership to invest in or engage in any
transaction with any entity, acting as
principal, (i) in which the Partnership,
any company controlled by the
Partnership, or any AIG entity or Third
Party Fund has invested or will invest,
or (ii) with which the Partnership, any
company controlled by the Partnership,
or any AIG entity or Third Party Fund
is or will otherwise become affiliated;
and (c) a Third Party Investor, acting as
principal, to engage in any transaction
directly or indirectly with any
Partnership or any company controlled
by the Partnership. The term ‘‘Third
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Party Investor’’ refers to any person or
entity that is not an AIG entity or
affiliated with AIG and is a partner or
other investor in a Third Party Fund.
4. Applicants submit that an
exemption from section 17(a) is
consistent with the purposes of the
Partnerships and the protection of
investors. Applicants state that the
Limited Partners will be informed of the
possible extent of the Partnership’s
dealings with AIG entities and of the
potential conflicts of interest that may
exist. Applicants also state that, as
professionals engaged in insurance and/
or financial services businesses, the
Limited Partners will be able to evaluate
the risks of such dealings. Applicants
assert that the community of interest
among the Limited Partners and AIG
entities will serve to reduce the risk of
abuse. Applicants represent that the
requested relief will not extend to any
transactions between a Partnership and
an Unaffiliated Subadviser or an
affiliated person of an Unaffiliated
Subadviser, or between a Partnership
and any person who is not an employee,
officer or director of an AIG entity or is
not an AIG entity and is an affiliated
person of the Partnership as defined in
section 2(a)(3)(E) of the Act (‘‘Advisory
Person’’) or any affiliated person of such
a person.
5. Section 17(d) of the Act and rule
17d–1 under the Act prohibit any
affiliated person of a registered
investment company, or any affiliated
person of such person, 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 Partnership, or
affiliated persons of any of these
persons, to participate in, or effect any
transaction in connection with, any
joint arrangement in which the
Partnership or a company controlled by
the Partnership is a participant.
Applicants acknowledge that the
requested relief will not extend to any
transaction in which an Unaffiliated
Subadviser or an Advisory Person, or an
affiliated person of either such person,
has an interest.
6. Applicants assert that compliance
with section 17(d) would cause the
Partnership to forego attractive
investment opportunities simply
because a Limited Partner, the General
Partner or any other affiliated person of
the Partnership (or any affiliate of the
affiliated person) made a similar
investment. Applicants also submit that
the types of investment opportunities
considered by a Partnership often
require each investor to make funds
available in an amount that may be
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substantially greater than what a
Partnership may be able to make
available on its own. Applicants
contend that, as a result, the only way
in which a Partnership may be able to
participate in these opportunities may
be to co-invest with other persons,
including its affiliates. 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. Co-investments with Third Party
Funds, or by an AIG entity pursuant to
a contractual obligation to a Third Party
Fund, will not be subject to condition 3
below. Applicants note that it is
common for a Third Party Fund to
require that an AIG entity invest its own
capital in Third Party Fund
investments, and that investments by an
AIG entity be subject to substantially the
same terms as those applicable to the
Third Party Fund. Applicants believe it
is important that the interests of the
Third Party Fund take priority over the
interests of the Partnerships, and that
the Third Party Fund not be burdened
or otherwise affected by activities of the
Partnerships. In addition, applicants
assert that the relationship of a
Partnership to a Third Party Fund is
fundamentally different from a
Partnership’s relationship to AIG
entities. Applicants contend that the
focus of, and the rationale for, the
protections contained in the requested
relief are to protect the Partnerships
from any overreaching by any AIG
entity in the employer/employee
context, whereas the same concerns are
not present with respect to the
Partnerships and a Third Party Fund.
8. Section 17(e) of the Act and rule
17e–1 under the Act limit the
compensation an affiliated person may
receive when acting as agent or broker
for a registered investment company.
Applicants request an exemption from
section 17(e) to permit an AIG entity
(including the General Partner) that acts
as an agent or broker to receive
placement fees, advisory fees, or other
compensation from a Partnership in
connection with the purchase or sale by
the Partnership of securities, provided
that the fees or other compensation are
deemed ‘‘usual and customary.’’
Applicants state that for purposes of the
application, fees or other compensation
that are charged or received by an AIG
entity will be deemed ‘‘usual and
customary’’ only if (a) the Partnership is
purchasing or selling securities with
other unaffiliated third parties,
including Third Party Funds, (b) the
fees or compensation being charged to
the Partnership are also being charged to
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the unaffiliated third parties, including
Third Party Funds, and (c) the amount
of securities being purchased or sold by
the Partnership does not exceed 50% of
the total amount of securities being
purchased or sold by the Partnership
and the unaffiliated third parties,
including Third Party Funds.
Applicants assert that, because AIG does
not wish to appear to be favoring the
Partnerships, compliance with section
17(e) would prevent a Partnership from
participating in transactions where the
Partnership is being charged lower fees
than unaffiliated third parties.
Applicants assert that the fees or other
compensation paid by a Partnership to
an AIG entity will be the same as those
negotiated at arm’s length with
unaffiliated third parties.
9. Rule 17e–1(b) under the Act
requires that a majority of directors who
are not ‘‘interested persons’’ (as defined
in section 2(a)(19) of the Act) take
actions and make approvals regarding
commissions, fees, or other
remuneration. Rule 17e–1(c) under the
Act requires each Partnership to comply
with the fund governance standards
defined in rule 0–1(a)(7) under the Act
(the ‘‘Fund Governance Standards’’).
Applicants request an exemption from
rule 17e–1 to the extent necessary to
permit each Partnership to comply with
the rule without having a majority of the
directors of the General Partner who are
not interested persons take actions and
make determinations as set forth in
paragraph (b) of the rule, and without
having to satisfy the Fund Governance
Standards as required by paragraph (c)
of the rule. Applicants state that because
all the directors of the General Partner
will be affiliated persons, without the
relief requested, a Partnership could not
comply with rule 17e–1. Applicants
state that each Partnership will comply
with rule 17e–1 by having a majority of
the directors of the General Partner take
actions and make approvals as set forth
in the rule. Applicants state that each
Partnership will otherwise comply with
rule 17e–1.
10. Section 17(f) of the Act designates
the entities that may act as investment
company custodians, and rule 17f–1
under the Act imposes certain
requirements when the custodian is a
member of a national securities
exchange. Applicants request an
exemption from section 17(f) and rule
17f–1 to permit an AIG entity to act as
custodian of Partnership assets without
a written contract. Applicants also
request an exemption from the rule 17f–
1(b)(4) requirement that an independent
accountant periodically verify the assets
held by the custodian. Applicants state
that, because of the community of
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interest between AIG and the
Partnerships and the existing
requirement for an independent audit,
compliance with this requirement
would be unnecessary. Applicants will
comply with all other requirements of
rule 17f–1.
11. Applicants also request an
exemption from rule 17f–2 to permit the
following exceptions from the
requirements of rule 17f–2: (a) A
Partnership’s investments may be kept
in the locked files of the General
Partner; (b) for purposes of paragraph
(d) of the rule, (i) employees of the
General Partner (or an AIG entity) will
be deemed to be employees of the
Partnerships, (ii) officers or managers of
the General Partner of a Partnership (or
an AIG entity) will be deemed to be
officers of the Partnership and (iii) the
General Partner of a Partnership or its
board of directors will be deemed to be
the board of directors of a Partnership
and (c) in place of the verification
procedure under paragraph (f) of the
rule, verification will be effected
quarterly by two employees of the
General Partner (or an AIG entity).
Applicants expect that with respect to
certain Partnerships, some of their
investments may be evidenced only by
partnership agreements, participation
agreements or similar documents, rather
than by negotiable certificates that could
be misappropriated. Applicants assert
that for such a Partnership, these
instruments are most suitably kept in
the files of the General Partner (or an
AIG entity), where they can be referred
to as necessary.
12. Section 17(g) of the Act and rule
17g–1 under the Act 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
take certain actions and give certain
approvals relating to fidelity bonding.
The rule also requires that the board of
directors of any investment company
relying on the rule satisfy the Fund
Governance Standards. Applicants
request relief to permit the General
Partner’s board of directors, who may be
deemed interested persons, to take
actions and make determinations as set
forth in the rule. Applicants state that,
because all directors of the General
Partner will be affiliated persons, a
Partnership could not comply with rule
17g–1 without the requested relief.
Specifically, each Partnership will
comply with rule 17g–1 by having a
majority of the General Partner’s
directors take actions and make
determinations as set forth in rule 17g–
1. Applicants also request an exemption
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from the requirements of paragraph (g)
of rule 17g–1 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, paragraph (h) of rule 17g–1
relating to the appointment of a person
to make the filings and provide the
notices required by paragraph (g), and
paragraph (j)(3) of rule 17g–1 relating to
compliance with the Fund Governance
Standards. Applicants state that the
Partnerships will comply with all other
requirements of rule 17g–1.
13. Section 17(j) of the Act and
paragraph (b) of rule 17j–1 under the
Act 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 provisions of rule
17j–1, except for the anti-fraud
provisions of paragraph (b), because
they are unnecessarily burdensome as
applied to the Partnerships. The relief
requested will only extend to AIG
entities and is not requested with
respect to any Unaffiliated Subadviser
or Advisory Person.
14. Applicants request an exemption
from the requirements in sections 30(a),
30(b), and 30(e) of the Act, 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 Partnerships and
would entail administrative and legal
costs that outweigh any benefit to the
Limited Partners. Applicants request
exemptive relief to the extent necessary
to permit each Partnership to report
annually to its Limited Partners.
Applicants also request an exemption
from section 30(h) of the Act to the
extent necessary to exempt the General
Partner of each Partnership, members of
the General Partner or any board of
managers or directors or committee of
employees of AIG entities to whom the
General Partner may delegate its
functions, and any other persons who
may be deemed to be members of an
advisory board of a Partnership, from
filing Forms 3, 4, and 5 under section
16(a) of the 1934 Act with respect to
their ownership of Interests in the
Partnership. Applicants assert that,
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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.
15. Rule 38a–1 requires investment
companies to adopt, implement and
periodically review written policies
reasonably designed to prevent violation
of the federal securities law and to
appoint a chief compliance officer. Each
Partnership will comply with rule 38a–
1(a), (c) and (d), except that (a) because
the Partnership does not have a board of
directors, the board of directors of the
General Partner will fulfill the
responsibilities assigned to the
Partnership’s board of directors under
the rule, (b) since the board of directors
of the General Partner does not have any
disinterested members, approval by a
majority of the disinterested board
members required by rule 38a–1 will
not be obtained, and (c) because the
board of directors of the General Partner
does not have any disinterested
members, the Partnerships will comply
with the requirement in rule 38a–
1(a)(4)(iv) that the chief compliance
officer meet with the independent
directors by having the chief
compliance officer meet with the board
of directors of the General Partner as
constituted.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each proposed transaction
involving a Partnership otherwise
prohibited by section 17(a) or section
17(d) of the Act and rule 17d–1 under
the Act to which a Partnership is a party
(the ‘‘Section 17 Transactions’’) will be
effected only if the General Partner
determines that:
(a) The terms of the Section 17
Transaction, including the
consideration to be paid or received, are
fair and reasonable to the Limited
Partners of the Partnership and do not
involve overreaching of the Partnership
or its Limited Partners on the part of any
person concerned; and
(b) The Section 17 Transaction is
consistent with the interests of the
Limited Partners, the Partnership’s
organizational documents and the
Partnership’s reports to its Limited
Partners.
In addition, the General Partner of the
Partnership will record and preserve a
description of all Section 17
Transactions, the General Partner’s
findings, the information or materials
upon which the findings are based and
the basis for the findings. All such
VerDate Aug<31>2005
16:52 May 29, 2008
Jkt 214001
31161
records will be maintained for the life
of the Partnership and at least six years
thereafter and will be subject to
examination by the Commission and its
staff.4
2. The General Partner of each
Partnership 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 Partnership or any affiliated person
of such person, promoter or principal
underwriter.
3. The General Partner of each
Partnership will not invest the funds of
the Partnership in any investment in
which an ‘‘Affiliated Co-Investor’’ (as
defined below) has acquired or proposes
to acquire the same class of securities of
the same issuer and where the
investment transaction involves a joint
enterprise or other joint arrangement
within the meaning of rule 17d–1 in
which the Partnership and an Affiliated
Co-Investor are participants, unless any
such Affiliated Co-Investor, prior to
disposing of all or part of its investment,
(a) gives the General Partner 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 Partnership has
the opportunity to dispose of the
Partnership’s investment prior to or
concurrently with, on the same terms as,
and pro rata with the Affiliated CoInvestor. The term ‘‘Affiliated CoInvestor’’ with respect to any
Partnership means any person who is:
(a) An ‘‘affiliated person’’ (as such term
is defined in section 2(a)(3) of the Act)
of the Partnership (other than a Third
Party Fund); (b) an AIG entity; (c) an
officer or director of an AIG entity; or
(d) an entity (other than a Third Party
Fund) in which an AIG 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 an Affiliated Co-Investor:
(a) To its direct or indirect whollyowned subsidiary, to any company (a
‘‘Parent’’) of which the Affiliated 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 Affiliated Co-Investor or
a trust or other investment vehicle
established for any Affiliated CoInvestor or any such immediate family
member; or (c) when the investment is
comprised of securities that are (i) listed
on a national securities exchange
registered under section 6 of the 1934
Act, (ii) NMS stocks pursuant to section
11A(a)(2) of the 1934 Act and rule
600(a) of Regulation NMS thereunder,
(iii) government securities as defined in
section 2(a)(16) of the Act or other
securities that meet the definition of
‘‘Eligible Security’’ in rule 2a–7 under
the Act, or (iv) listed or traded on any
foreign securities exchange or board of
trade that satisfies regulatory
requirements under the law of the
jurisdiction in which such foreign
securities exchange or board of trade is
organized similar to those that apply to
a national securities exchange or a
national market system for securities.
4. Each Partnership and its General
Partner will maintain and preserve, for
the life of each Series of the Partnership
and at least six years thereafter, such
accounts, books and other documents
constituting the record forming the basis
for the audited financial statements that
are to be provided to the Limited
Partners in the Partnership, and each
annual report of the Partnership
required to be sent to the Limited
Partners, and agree that all such records
will be subject to examination by the
Commission and its staff.5
5. The General Partner of each
Partnership will send to each Limited
Partner having an interest in the
Partnership at any time during the fiscal
year then ended, Partnership financial
statements audited by the Partnership’s
independent accountants with respect
to those Series in which the Limited
Partner had an Interest. At the end of
each fiscal year, the General Partner will
make or cause to be made a valuation
of all of the assets of the Partnership as
of such fiscal year end in a manner
consistent with customary practice with
respect to the valuation of assets of the
kind held by the Partnership. In
addition, as soon as practicable after the
end of each fiscal year of the
Partnership, the General Partner will
send a report to each person who was
a Limited Partner at any time during the
fiscal year then ended, setting forth such
tax information as shall be necessary for
the preparation by the Limited Partner
of that partner’s federal and state
income tax returns and a report of the
4 Each Partnership will preserve the accounts,
books and other documents required to be
maintained in an easily accessible place for the first
two years.
5 Each Partnership will preserve the accounts,
books and other documents required to be
maintained in an easily accessible place for the first
two years.
PO 00000
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Federal Register / Vol. 73, No. 105 / Friday, May 30, 2008 / Notices
investment activities of the Partnership
during that fiscal year.
6. If a Partnership makes purchases or
sales from or to an entity affiliated with
the Partnership by reason of an officer,
director or employee of an AIG entity (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
Partnership’s determination of whether
or not to effect the purchase or sale.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Nancy M. Morris,
Secretary.
[FR Doc. E8–12014 Filed 5–29–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
sroberts on PROD1PC70 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 a Closed Meeting
on June 3, 2008 at 2 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3) (5), (6), (7), (9)(B), and
(10) and 17 CFR 200.402(a)(3), (5), (6),
(7), 9(ii) and (10), permit consideration
of the scheduled matters at the Closed
Meeting.
Commissioner Atkins, as duty officer,
voted to consider the items listed for the
Closed Meeting in closed session.
The subject matter of the Closed
Meeting scheduled for June 3, 2008 will
be:
Formal orders of investigation;
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings of an
enforcement nature;
Resolution of litigation claims;
Collection matters; and other matters
related to enforcement proceedings.
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:
VerDate Aug<31>2005
16:52 May 29, 2008
Jkt 214001
The Office of the Secretary at (202)
551–5400.
Dated: May 27, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–12068 Filed 5–29–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
In the Matter of: Affinity Networks, Inc.;
Order of Suspension of Trading
May 28, 2008.
It appears to the Securities and
Exchange Commission that the public
interest and the protection of investors
require a suspension of trading in the
securities of Affinity Networks, Inc.
(‘‘Affinity’’) because there is a lack of
current and accurate information
concerning its securities. Affinity is
quoted on the Pink Sheets under the
ticker symbol AFFN.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company.
Therefore, it is ordered, pursuant to
section 12(k) of the Securities Exchange
Act of 1934, that trading in the abovelisted company is suspended for the
period from 9:30 a.m. EDT May 28, 2008
through 11:59 p.m. EDT, on June 10,
2008.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. 08–1312 Filed 5–28–08; 11:35 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57852; File No. SR–Amex–
2008–41]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Regarding
Position and Exercise Limits for
Options on the DIAMONDS Trust
May 22, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 16,
2008, the American Stock Exchange LLC
(‘‘Exchange’’ or ‘‘Amex’’) filed with the
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00111
Fmt 4703
Sfmt 4703
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been
substantially prepared by the Exchange.
The Exchange has designated this
proposal as non-controversial under
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules to increase the position and
exercise limits applicable to options on
the DIAMONDS Trust, Series 1 (‘‘DIA’’).
The text of the proposed rule change is
available on the Exchange’s Web site
(https://www.amex.com), at the offices of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
its rules pertaining to position and
exercise limits for options on DIA. The
Exchange proposes to increase position
and exercise limits for options on DIA
to 300,000 contracts on the same side of
the market. The Commission previously
approved a similar proposal by the
Chicago Board Options Exchange, Inc.
(‘‘CBOE’’).5
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 See Securities Exchange Act Release No. 47346
(February 11, 2003), 68 FR 8316 (February 20, 2003)
(SR–CBOE–2002–26) (approving an increase in the
position limits and exercise limits to 300,000 for
DIA options). The Commission stated that ‘‘given
the surveillance capabilities of the [CBOE] and the
4 17
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]]>Agencies
[Federal Register Volume 73, Number 105 (Friday, May 30, 2008)]
[Notices]
[Pages 31157-31162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-12014]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28286; 813-00369]
American International Group, Inc., et al.; Notice of Application
May 23, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of 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 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.
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Summary of Application: Applicants request an order to exempt certain
limited partnerships and other entities (``Partnerships'') formed for
the benefit of eligible employees of American International Group, Inc.
(``AIG'') and its affiliates from certain provisions of the Act. Each
Partnership will be an ``employees' securities company'' within the
meaning of section 2(a)(13) of the Act.
Applicants: AIG Employee Hedge Fund, L.P. (the ``Employee Hedge
Fund''), AIG Employee PE/RE Fund 2007, L.P. (together with the Employee
Hedge Fund, the ``Initial Partnerships''), AIG Non-U.S. Employee PE/RE
Feeder Fund 2007, L.P. (the ``PE/RE Feeder''), AIG Non-U.S. Employee
Hedge Feeder, L.P. (together with the PE/RE Feeder, the ``Cayman
Partnerships''), AIG, AIG Employee Alternative Investment GP II, LLC,
AIG Non-U.S. Employee Feeder GP II, LLC, and AIG Global Investment
Corp.
Filing Dates: The application was filed on September 25, 2007 and
amended on December 26, 2007, and May 8, 2008.
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 June 17, 2008, 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, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants, 70 Pine Street, New
York, NY 10270.
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6879, or Julia Kim Gilmer, Branch Chief, 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 Street, NE., Washington, DC
20549-1520 (telephone (202) 551-5850).
Applicants' Representations
1. AIG, a Delaware corporation, is a holding company which, through
its subsidiaries, is engaged in a broad range of insurance and
insurance-related activities worldwide. AIG's primary activities
include both general insurance and life insurance and retirement
services operations. Other significant activities include financial
services and asset management. AIG and its ``affiliates,'' as defined
in rule 12b-2 under the Securities Exchange Act of 1934 (the ``1934
Act''), are referred to collectively as ``AIG entities.''
2. Each Initial Partnership is a limited partnership organized
under the laws of the state of Delaware and each Cayman Partnership is
an exempted limited partnership organized under the laws of the Cayman
Islands. AIG Employee Alternative Investment GP II, LLC will serve as
the general partner of each Initial Partnership and AIG Non-U.S.
Employee Feeder GP II, LLC will serve as the general partner of each
Cayman Partnership. AIG Global Investment Corp., which is registered as
an investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act''), will be the investment adviser to the Initial
Partnerships and the Cayman Partnerships. A General Partner (as defined
below) or another AIG entity will serve as investment adviser to a
Partnership (the ``Investment Adviser''). The Investment Adviser will
be registered as an investment adviser under the Advisers Act if
required under applicable law. AIG entities may form additional
Partnerships from time to time to enable Eligible Employees (as defined
below) to pool their investment resources to achieve diversification of
investments and participation in investments that usually would not be
available to them as individual investors.
3. A Partnership will be structured as a limited partnership,
limited liability company, business trust or other entity. Interests in
a Partnership (``Interests'') may be issued in one or more series, each
of which corresponds to particular Partnership investments (each, a
``Series''). Each Series will be an ``employees' securities company''
within the meaning of section 2(a)(13) of the Act. Each Partnership
will operate as either a closed-end or open-end management investment
company, and may operate as a diversified or non-diversified vehicle.
4. Each Partnership will have a general partner, managing member or
other similar entity that is an AIG entity (a ``General Partner''). All
potential investors in a Partnership will be ``Limited Partners.'' The
General Partner will manage, operate, and control each Partnership and
will have the authority to make all decisions regarding the
acquisition, management and disposition of Partnership investments. The
General Partner may be permitted to delegate certain of its
responsibilities regarding the acquisition, management and disposition
of Partnership investments to an Investment Adviser.
5. If the Investment Adviser elects to recommend that a Partnership
enter into any side-by-side investment with an unaffiliated entity, the
Investment Adviser will be permitted to engage as sub-investment
adviser an unaffiliated entity (an ``Unaffiliated Subadviser''), which
will be responsible for the management of such side-by-side investment.
An Investment Adviser may be paid a management fee, which will
[[Page 31158]]
generally be determined as a percentage of the capital commitments of
the Limited Partners. A General Partner or Investment Adviser may
receive a performance-based fee (a ``Carried Interest'') based on the
net gains of the Partnership's investments in addition to any amount
allocable to the General Partner's or Investment Adviser's capital
contribution.\1\
---------------------------------------------------------------------------
\1\ If a General Partner or Investment Adviser is registered
under the Advisers Act, the Carried Interest payable to it by a
Partnership will be pursuant to an arrangement that complies with
rule 205-3 under the Advisers Act. If the General Partner or
Investment Adviser is not required to register under the Advisers
Act, the Carried Interest payable to it will comply with section
205(b)(3) of the Advisers Act, with the Partnership treated as a
business development company solely for the purpose of that section.
---------------------------------------------------------------------------
6. Interests in a Partnership will be offered without registration
in reliance on section 4(2) of the Securities Act of 1933 (the
``Securities Act''), or Regulation D or Regulation S under the
Securities Act, and will be sold only to ``Qualified Participants'' (as
defined below). Prior to offering Interests to an Eligible Employee or
Eligible Family Member (in each case as defined below), a General
Partner must reasonably believe that the Eligible Employee or Eligible
Family Member will be capable of understanding and evaluating the
merits and risks of participation in a Partnership and that each such
individual is able to bear the economic risk of such participation and
afford a complete loss of his or her investment.
7. ``Qualified Participants'' are (a) current or former employees,
including employee officers and directors (except directors of AIG) and
current persons on retainer, including, but not limited to, Consultants
\2\ (collectively, ``Eligible Employees''), (b) spouses, parents,
children, spouses of children, brothers, sisters and grandchildren of
Eligible Employees (``Eligible Family Members'' and, together with
Eligible Employees who are natural persons, ``Eligible Individuals''),
(c) trusts or other investment vehicles established solely for the
benefit of Eligible Employees or Eligible Family Members (``Eligible
Investment Vehicles''), and (d) AIG entities. Each Eligible Individual
will be an ``accredited investor'' under rule 501(a)(5) or rule
501(a)(6) of Regulation D (``Accredited Investor''), except that a
maximum of 35 Eligible Employees who are sophisticated investors but
who are not Accredited Investors may become Limited Partners if each of
them falls into one of the following two categories: (A) Eligible
Employees who (i) have a graduate degree in business, law or
accounting, (ii) have a minimum of five years of consulting, investment
management, investment banking, legal or similar business experience,
and (iii) had reportable income from all sources (including any profit
shares or bonus) of $100,000 in each of the two years immediately
preceding the Eligible Employee's admission as a Limited Partner and
have a reasonable expectation of income from all sources of at least
$140,000 in each year in which the Eligible Employee will be committed
to make investments in a Partnership; or (B) Eligible Employees who are
``knowledgeable employees,'' as defined in rule 3c-5 of the Act, of the
Partnership (with the Partnership treated as though it were a ``covered
company'' for purposes of the rule). An Eligible Employee who is
described in category (A) above will not be permitted to invest in any
year more than 10% of his or her income from all sources for the
immediately preceding year in the aggregate in a Partnership and in all
other Partnerships in which that investor has previously invested.
---------------------------------------------------------------------------
\2\ A ``Consultant'' is a person or entity whom AIG has engaged
on retainer to provide services and professional expertise on an
ongoing basis as a regular consultant or as a business or legal
adviser and who shares a community of interest with AIG and its
employees.
---------------------------------------------------------------------------
8. An Eligible Individual may purchase an Interest through an
Eligible Investment Vehicle only if either (i) the investment vehicle
is an ``accredited investor,'' as defined in rule 501(a) of Regulation
D under the 1933 Act, or (ii) the Eligible Individual or Consultant
entity is the settlor \3\ and principal investment decision-maker with
respect to the investment vehicle. Eligible Investment Vehicles that
are not accredited investors will be included in the 35 non-accredited
investor limit discussed above. An AIG entity or a Consultant entity
will be an ``accredited investor'' as defined in rule 501(a) of
Regulation D under the 1933 Act.
---------------------------------------------------------------------------
\3\ If such investment vehicle is an entity other than a trust,
the term ``settlor'' will be read to mean a person who created such
vehicle, alone or together with others, and contributed funds to
such vehicle.
---------------------------------------------------------------------------
9. The terms of a Partnership will be disclosed to the Eligible
Employees at the time they are offered the right to subscribe for
Interests, and they will be furnished with a copy of the partnership
agreement. A Partnership will send its Limited Partners an audited
financial statement as soon as practicable after the end of its fiscal
year. In addition, as soon as practicable after the end of each fiscal
year of a Partnership, a report will be sent to each Limited Partner
setting forth the information with respect to his or her share of
income, gains, losses, credits, and other items for federal and state
income tax purposes.
10. Interests in the Partnerships will not be transferable except
with the express consent of the General Partner. All of the
Partnerships will have only Qualified Participants as Limited Partners.
No sales load will be charged in connection with the sale of Interests.
11. The General Partner (or an AIG entity) will have the right to
purchase or redeem the Interest of an Eligible Employee who is
terminated for cause or solicits employees or clients of AIG during
that Eligible Employee's relationship with AIG or within six months
after such relationship terminates, at a price equaling the lesser of
(a) cost plus interest less distributions, or (b) fair market value or
net asset value, as applicable.
12. A Partnership may make investments side-by-side with AIG
entities and through investment pools sponsored by or managed by an AIG
entity or an unaffiliated entity. A Partnership may also co-invest
directly in a company with an AIG entity or an investment fund or
separate account organized for the benefit of investors who are not
affiliated with an AIG entity over which an AIG entity exercises
investment discretion (``Third Party Funds'').
13. If any AIG entity makes loans to any Partnership, it will be
entitled to receive interest at a rate no less favorable to the
Partnership than the rate that could be obtained on an arm's length
basis. A Partnership 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
securities of the Partnership (other than short-term paper). Any
indebtedness of a Partnership will be non-recourse to the Limited
Partners of the Partnership.
14. A Partnership will not acquire any security issued by a
registered investment company if, immediately after the acquisition,
the Partnership will own, in the aggregate, 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
[[Page 31159]]
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, in
relevant part, 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) of the Act 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 Partnerships from all provisions of the Act,
except section 9 and sections 36 through 53 of the Act, 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 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) An
AIG entity or a Third Party Fund (or any affiliated person of a Third
Party Fund), acting as principal, to engage in any transaction directly
or indirectly with any Partnership or any company controlled by the
Partnership; (b) a Partnership to invest in or engage in any
transaction with any entity, acting as principal, (i) in which the
Partnership, any company controlled by the Partnership, or any AIG
entity or Third Party Fund has invested or will invest, or (ii) with
which the Partnership, any company controlled by the Partnership, or
any AIG entity or Third Party Fund is or will otherwise become
affiliated; and (c) a Third Party Investor, acting as principal, to
engage in any transaction directly or indirectly with any Partnership
or any company controlled by the Partnership. The term ``Third Party
Investor'' refers to any person or entity that is not an AIG entity or
affiliated with AIG and is a partner or other investor in a Third Party
Fund.
4. Applicants submit that an exemption from section 17(a) is
consistent with the purposes of the Partnerships and the protection of
investors. Applicants state that the Limited Partners will be informed
of the possible extent of the Partnership's dealings with AIG entities
and of the potential conflicts of interest that may exist. Applicants
also state that, as professionals engaged in insurance and/or financial
services businesses, the Limited Partners will be able to evaluate the
risks of such dealings. Applicants assert that the community of
interest among the Limited Partners and AIG entities will serve to
reduce the risk of abuse. Applicants represent that the requested
relief will not extend to any transactions between a Partnership and an
Unaffiliated Subadviser or an affiliated person of an Unaffiliated
Subadviser, or between a Partnership and any person who is not an
employee, officer or director of an AIG entity or is not an AIG entity
and is an affiliated person of the Partnership as defined in section
2(a)(3)(E) of the Act (``Advisory Person'') or any affiliated person of
such a person.
5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person of a registered investment company, or any
affiliated person of such person, 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 Partnership, or affiliated persons of any of
these persons, to participate in, or effect any transaction in
connection with, any joint arrangement in which the Partnership or a
company controlled by the Partnership is a participant. Applicants
acknowledge that the requested relief will not extend to any
transaction in which an Unaffiliated Subadviser or an Advisory Person,
or an affiliated person of either such person, has an interest.
6. Applicants assert that compliance with section 17(d) would cause
the Partnership to forego attractive investment opportunities simply
because a Limited Partner, the General Partner or any other affiliated
person of the Partnership (or any affiliate of the affiliated person)
made a similar investment. Applicants also submit that the types of
investment opportunities considered by a Partnership often require each
investor to make funds available in an amount that may be substantially
greater than what a Partnership may be able to make available on its
own. Applicants contend that, as a result, the only way in which a
Partnership may be able to participate in these opportunities may be to
co-invest with other persons, including its affiliates. 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. Co-investments with Third Party Funds, or by an AIG entity
pursuant to a contractual obligation to a Third Party Fund, will not be
subject to condition 3 below. Applicants note that it is common for a
Third Party Fund to require that an AIG entity invest its own capital
in Third Party Fund investments, and that investments by an AIG entity
be subject to substantially the same terms as those applicable to the
Third Party Fund. Applicants believe it is important that the interests
of the Third Party Fund take priority over the interests of the
Partnerships, and that the Third Party Fund not be burdened or
otherwise affected by activities of the Partnerships. In addition,
applicants assert that the relationship of a Partnership to a Third
Party Fund is fundamentally different from a Partnership's relationship
to AIG entities. Applicants contend that the focus of, and the
rationale for, the protections contained in the requested relief are to
protect the Partnerships from any overreaching by any AIG entity in the
employer/employee context, whereas the same concerns are not present
with respect to the Partnerships and a Third Party Fund.
8. Section 17(e) of the Act and rule 17e-1 under the Act limit the
compensation an affiliated person may receive when acting as agent or
broker for a registered investment company. Applicants request an
exemption from section 17(e) to permit an AIG entity (including the
General Partner) that acts as an agent or broker to receive placement
fees, advisory fees, or other compensation from a Partnership in
connection with the purchase or sale by the Partnership of securities,
provided that the fees or other compensation are deemed ``usual and
customary.'' Applicants state that for purposes of the application,
fees or other compensation that are charged or received by an AIG
entity will be deemed ``usual and customary'' only if (a) the
Partnership is purchasing or selling securities with other unaffiliated
third parties, including Third Party Funds, (b) the fees or
compensation being charged to the Partnership are also being charged to
[[Page 31160]]
the unaffiliated third parties, including Third Party Funds, and (c)
the amount of securities being purchased or sold by the Partnership
does not exceed 50% of the total amount of securities being purchased
or sold by the Partnership and the unaffiliated third parties,
including Third Party Funds. Applicants assert that, because AIG does
not wish to appear to be favoring the Partnerships, compliance with
section 17(e) would prevent a Partnership from participating in
transactions where the Partnership is being charged lower fees than
unaffiliated third parties. Applicants assert that the fees or other
compensation paid by a Partnership to an AIG entity will be the same as
those negotiated at arm's length with unaffiliated third parties.
9. Rule 17e-1(b) under the Act requires that a majority of
directors who are not ``interested persons'' (as defined in section
2(a)(19) of the Act) take actions and make approvals regarding
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act
requires each Partnership to comply with the fund governance standards
defined in rule 0-1(a)(7) under the Act (the ``Fund Governance
Standards''). Applicants request an exemption from rule 17e-1 to the
extent necessary to permit each Partnership to comply with the rule
without having a majority of the directors of the General Partner who
are not interested persons take actions and make determinations as set
forth in paragraph (b) of the rule, and without having to satisfy the
Fund Governance Standards as required by paragraph (c) of the rule.
Applicants state that because all the directors of the General Partner
will be affiliated persons, without the relief requested, a Partnership
could not comply with rule 17e-1. Applicants state that each
Partnership will comply with rule 17e-1 by having a majority of the
directors of the General Partner take actions and make approvals as set
forth in the rule. Applicants state that each Partnership will
otherwise comply with rule 17e-1.
10. Section 17(f) of the Act designates the entities that may act
as investment company custodians, and rule 17f-1 under the Act imposes
certain requirements when the custodian is a member of a national
securities exchange. Applicants request an exemption from section 17(f)
and rule 17f-1 to permit an AIG entity to act as custodian of
Partnership assets without a written contract. Applicants also request
an exemption from the rule 17f-1(b)(4) requirement that an independent
accountant periodically verify the assets held by the custodian.
Applicants state that, because of the community of interest between AIG
and the Partnerships and the existing requirement for an independent
audit, compliance with this requirement would be unnecessary.
Applicants will comply with all other requirements of rule 17f-1.
11. Applicants also request an exemption from rule 17f-2 to permit
the following exceptions from the requirements of rule 17f-2: (a) A
Partnership's investments may be kept in the locked files of the
General Partner; (b) for purposes of paragraph (d) of the rule, (i)
employees of the General Partner (or an AIG entity) will be deemed to
be employees of the Partnerships, (ii) officers or managers of the
General Partner of a Partnership (or an AIG entity) will be deemed to
be officers of the Partnership and (iii) the General Partner of a
Partnership or its board of directors will be deemed to be the board of
directors of a Partnership and (c) in place of the verification
procedure under paragraph (f) of the rule, verification will be
effected quarterly by two employees of the General Partner (or an AIG
entity). Applicants expect that with respect to certain Partnerships,
some of their investments may be evidenced only by partnership
agreements, participation agreements or similar documents, rather than
by negotiable certificates that could be misappropriated. Applicants
assert that for such a Partnership, these instruments are most suitably
kept in the files of the General Partner (or an AIG entity), where they
can be referred to as necessary.
12. Section 17(g) of the Act and rule 17g-1 under the Act 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 take certain actions and give certain approvals relating to
fidelity bonding. The rule also requires that the board of directors of
any investment company relying on the rule satisfy the Fund Governance
Standards. Applicants request relief to permit the General Partner's
board of directors, who may be deemed interested persons, to take
actions and make determinations as set forth in the rule. Applicants
state that, because all directors of the General Partner will be
affiliated persons, a Partnership could not comply with rule 17g-1
without the requested relief. Specifically, each Partnership will
comply with rule 17g-1 by having a majority of the General Partner's
directors take actions and make determinations as set forth in rule
17g-1. Applicants also request an exemption from the requirements of
paragraph (g) of rule 17g-1 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, paragraph (h) of rule
17g-1 relating to the appointment of a person to make the filings and
provide the notices required by paragraph (g), and paragraph (j)(3) of
rule 17g-1 relating to compliance with the Fund Governance Standards.
Applicants state that the Partnerships will comply with all other
requirements of rule 17g-1.
13. Section 17(j) of the Act and paragraph (b) of rule 17j-1 under
the Act 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 provisions of
rule 17j-1, except for the anti-fraud provisions of paragraph (b),
because they are unnecessarily burdensome as applied to the
Partnerships. The relief requested will only extend to AIG entities and
is not requested with respect to any Unaffiliated Subadviser or
Advisory Person.
14. Applicants request an exemption from the requirements in
sections 30(a), 30(b), and 30(e) of the Act, 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
Partnerships and would entail administrative and legal costs that
outweigh any benefit to the Limited Partners. Applicants request
exemptive relief to the extent necessary to permit each Partnership to
report annually to its Limited Partners. Applicants also request an
exemption from section 30(h) of the Act to the extent necessary to
exempt the General Partner of each Partnership, members of the General
Partner or any board of managers or directors or committee of employees
of AIG entities to whom the General Partner may delegate its functions,
and any other persons who may be deemed to be members of an advisory
board of a Partnership, from filing Forms 3, 4, and 5 under section
16(a) of the 1934 Act with respect to their ownership of Interests in
the Partnership. Applicants assert that,
[[Page 31161]]
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.
15. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies reasonably designed to prevent
violation of the federal securities law and to appoint a chief
compliance officer. Each Partnership will comply with rule 38a-1(a),
(c) and (d), except that (a) because the Partnership does not have a
board of directors, the board of directors of the General Partner will
fulfill the responsibilities assigned to the Partnership's board of
directors under the rule, (b) since the board of directors of the
General Partner does not have any disinterested members, approval by a
majority of the disinterested board members required by rule 38a-1 will
not be obtained, and (c) because the board of directors of the General
Partner does not have any disinterested members, the Partnerships will
comply with the requirement in rule 38a-1(a)(4)(iv) that the chief
compliance officer meet with the independent directors by having the
chief compliance officer meet with the board of directors of the
General Partner as constituted.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Each proposed transaction involving a Partnership otherwise
prohibited by section 17(a) or section 17(d) of the Act and rule 17d-1
under the Act to which a Partnership is a party (the ``Section 17
Transactions'') will be effected only if the General Partner determines
that:
(a) The terms of the Section 17 Transaction, including the
consideration to be paid or received, are fair and reasonable to the
Limited Partners of the Partnership and do not involve overreaching of
the Partnership or its Limited Partners on the part of any person
concerned; and
(b) The Section 17 Transaction is consistent with the interests of
the Limited Partners, the Partnership's organizational documents and
the Partnership's reports to its Limited Partners.
In addition, the General Partner of the Partnership will record and
preserve a description of all Section 17 Transactions, the General
Partner's findings, the information or materials upon which the
findings are based and the basis for the findings. All such records
will be maintained for the life of the Partnership and at least six
years thereafter and will be subject to examination by the Commission
and its staff.\4\
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\4\ Each Partnership will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
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2. The General Partner of each Partnership 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 Partnership or any affiliated person of such
person, promoter or principal underwriter.
3. The General Partner of each Partnership will not invest the
funds of the Partnership in any investment in which an ``Affiliated Co-
Investor'' (as defined below) has acquired or proposes to acquire the
same class of securities of the same issuer and where the investment
transaction involves a joint enterprise or other joint arrangement
within the meaning of rule 17d-1 in which the Partnership and an
Affiliated Co-Investor are participants, unless any such Affiliated Co-
Investor, prior to disposing of all or part of its investment, (a)
gives the General Partner 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 Partnership has the
opportunity to dispose of the Partnership's investment prior to or
concurrently with, on the same terms as, and pro rata with the
Affiliated Co-Investor. The term ``Affiliated Co-Investor'' with
respect to any Partnership means any person who is: (a) An ``affiliated
person'' (as such term is defined in section 2(a)(3) of the Act) of the
Partnership (other than a Third Party Fund); (b) an AIG entity; (c) an
officer or director of an AIG entity; or (d) an entity (other than a
Third Party Fund) in which an AIG 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 an Affiliated Co-Investor: (a) To its direct or indirect
wholly-owned subsidiary, to any company (a ``Parent'') of which the
Affiliated 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 Affiliated Co-Investor or a trust or
other investment vehicle established for any Affiliated Co-Investor or
any such immediate family member; or (c) when the investment is
comprised of securities that are (i) listed on a national securities
exchange registered under section 6 of the 1934 Act, (ii) NMS stocks
pursuant to section 11A(a)(2) of the 1934 Act and rule 600(a) of
Regulation NMS thereunder, (iii) government securities as defined in
section 2(a)(16) of the Act or other securities that meet the
definition of ``Eligible Security'' in rule 2a-7 under the Act, or (iv)
listed or traded on any foreign securities exchange or board of trade
that satisfies regulatory requirements under the law of the
jurisdiction in which such foreign securities exchange or board of
trade is organized similar to those that apply to a national securities
exchange or a national market system for securities.
4. Each Partnership and its General Partner will maintain and
preserve, for the life of each Series of the Partnership and at least
six years thereafter, such accounts, books and other documents
constituting the record forming the basis for the audited financial
statements that are to be provided to the Limited Partners in the
Partnership, and each annual report of the Partnership required to be
sent to the Limited Partners, and agree that all such records will be
subject to examination by the Commission and its staff.\5\
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\5\ Each Partnership will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
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5. The General Partner of each Partnership will send to each
Limited Partner having an interest in the Partnership at any time
during the fiscal year then ended, Partnership financial statements
audited by the Partnership's independent accountants with respect to
those Series in which the Limited Partner had an Interest. At the end
of each fiscal year, the General Partner will make or cause to be made
a valuation of all of the assets of the Partnership as of such fiscal
year end in a manner consistent with customary practice with respect to
the valuation of assets of the kind held by the Partnership. In
addition, as soon as practicable after the end of each fiscal year of
the Partnership, the General Partner will send a report to each person
who was a Limited Partner at any time during the fiscal year then
ended, setting forth such tax information as shall be necessary for the
preparation by the Limited Partner of that partner's federal and state
income tax returns and a report of the
[[Page 31162]]
investment activities of the Partnership during that fiscal year.
6. If a Partnership makes purchases or sales from or to an entity
affiliated with the Partnership by reason of an officer, director or
employee of an AIG entity (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
Partnership's determination of whether or not to effect the purchase or
sale.
For the Commission, by the Division of Investment Management,
under delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E8-12014 Filed 5-29-08; 8:45 am]
BILLING CODE 8010-01-P
