American International Group, Inc., et al.; Notice of Application, 31157-31162 [E8-12014]

Download as PDF 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: sroberts on PROD1PC70 with NOTICES SUMMARY OF APPLICATION: VerDate Aug<31>2005 16:52 May 29, 2008 Jkt 214001 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 31157 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 E:\FR\FM\30MYN1.SGM 30MYN1 31158 Federal Register / Vol. 73, No. 105 / Friday, May 30, 2008 / Notices sroberts on PROD1PC70 with NOTICES 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. VerDate Aug<31>2005 16:52 May 29, 2008 Jkt 214001 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. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 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 E:\FR\FM\30MYN1.SGM 30MYN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 105 / Friday, May 30, 2008 / Notices 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 VerDate Aug<31>2005 16:52 May 29, 2008 Jkt 214001 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 PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 31159 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 E:\FR\FM\30MYN1.SGM 30MYN1 sroberts on PROD1PC70 with NOTICES 31160 Federal Register / Vol. 73, No. 105 / Friday, May 30, 2008 / Notices 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 VerDate Aug<31>2005 16:52 May 29, 2008 Jkt 214001 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 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 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, E:\FR\FM\30MYN1.SGM 30MYN1 Federal Register / Vol. 73, No. 105 / Friday, May 30, 2008 / Notices sroberts on PROD1PC70 with NOTICES 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 Frm 00110 Fmt 4703 Sfmt 4703 E:\FR\FM\30MYN1.SGM 30MYN1 31162 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 (http://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 E:\FR\FM\30MYN1.SGM 30MYN1

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\
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    \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.
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    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.
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    \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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    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.
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    \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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    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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