Alvarez & Marsal, Inc., et al.; Notice of Application, 53936-53941 [2012-21636]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53936-53941]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21636]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30183; 813-379]


Alvarez & Marsal, Inc., et al.; Notice of Application

August 28, 2012.
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 (``Act'') granting an exemption 
from all provisions of the Act, except sections 9, 17, 30, and 36 
through 53, and the rules and regulations under the Act (the ``Rules 
and Regulations''). With respect to sections 17(a), (d), (f), (g), and 
(j) of the Act, sections 30(a), (b), (e), and (h) of the Act and the 
Rules and Regulations, and rule 38a-1 under the Act, applicants request 
a limited exemption 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 formed for the benefit 
of eligible employees of Alvarez & Marsal, Inc. 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: Alvarez & Marsal, Inc. (``A&M Inc.''), Alvarez & Marsal 
Capital, LLC (``A&M Capital''), A&M Capital-GP, LP (``A&M Capital-
GP''), Alvarez & Marsal Partners Fund, LP, and Alvarez & Marsal 
Partners Buyout Fund, LP.
    Filing Dates: The application was filed on August 13, 2010, and 
amended on February 11, 2011, and May 4, 2012.
    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

[[Page 53937]]

should be received by the Commission by 5:30 p.m. on September 24, 
2012, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: 
Alvarez & Marsal, Inc., 600 Lexington Avenue, 6th Floor, New York, NY 
10022.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, or Mary Kay Frech, 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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. A&M Inc. is a New York corporation that is privately held and 
controlled by Antonio C. Alvarez II and Bryan P. Marsal. A&M Inc. and 
its ``affiliates,'' as defined in rule 12b-2 under the Securities 
Exchange Act of 1934 (the ``Exchange Act''), other than Third Party 
Funds (as defined below), are referred to collectively as the ``A&M 
Group'' and individually as an ``A&M Group entity.'' The A&M Group is 
one of the world's leading global professional services firms, 
providing, as its principal business, comprehensive performance 
improvement, turnaround management, and business advisory services to 
clients ranging from global enterprises to middle market companies that 
are publicly held or privately owned.
    2. Alvarez & Marsal Partners Fund, LP and Alvarez & Marsal Partners 
Buyout Fund, LP are each a Delaware limited partnership (together, the 
``Initial Funds''). A&M Capital and A&M Capital-GP, each a Delaware 
limited liability company, and A&M Inc. organized the Initial Funds, 
and may in the future organize limited partnerships, limited liability 
companies, business trusts or other entities (each an ``Other Fund,'' 
and together with the Initial Funds, the ``Funds'').
    3. The Funds will be established primarily for the benefit of key 
Professionals (as defined below) of the A&M Group, as part of a program 
designed to create capital building opportunities that are competitive 
with those at other global professional services firms and to 
facilitate the A&M Group's recruitment and retention of high caliber 
Professionals. These programs may be structured as different Funds, or 
as separate series within the same Fund. Each Fund will be an 
``employees' securities company'' within the meaning of section 
2(a)(13) of the Act. Each of the Funds will operate as a non-
diversified, closed-end management company within the meaning of the 
Act. The A&M Group will control the Funds within the meaning of section 
2(a)(9) of the Act.
    4. Each Fund will have a manager that is an A&M Group entity 
(``Manager''). A&M Capital and A&M Capital-GP will serve as the 
Managers of the Initial Funds. The Manager will manage, operate and 
control each of the Funds. The Manager will be authorized to delegate 
to an A&M Group entity or to a committee of A&M Group employees such 
management responsibility provided that the ultimate responsibility for 
and control of each Fund remain with the Manager. The Manager will 
delegate management responsibility only to entities that control, are 
controlled by, or are under common control with A&M Inc. The Manager or 
the A&M Group entity acting as the investment adviser to a Fund will 
register as an investment adviser under the Investment Advisers Act of 
1940 (the ``Advisers Act'') if required under applicable law. 
Applicants represent and concede that the Manager in managing a Fund is 
an ``investment adviser'' within the meaning of sections 9 and 36 of 
the Act and is subject to those sections.
    5. A Fund may pay a management or an administrative fee to its 
Manager or an A&M Group entity. The Manager, the A&M Group, or any 
employees of the Manager or the A&M Group may be entitled to receive 
compensation or a performance-based fee (a ``carried interest'') \1\ 
based on the gains and losses of the investment program or of the 
Fund's investment portfolio.
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    \1\ A ``carried interest'' is an allocation to the Manager based 
on the net gains of an investment program. A Manager that is 
registered as an investment adviser under the Advisers Act may 
charge a carried interest only if permitted by rule 205-3 under the 
Advisers Act. Any carried interest paid to a Manager that is not 
registered under the Advisers Act will be structured to comply with 
section 205(b)(3) of the Advisers Act as if a Fund were a business 
development company as defined in the Advisers Act.
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    6. Interests in the Funds (``Interests'') will be offered without 
registration in reliance on section 4(2) of the Securities Act of 1933 
(the ``Securities Act'') or Regulation D or Regulation S under the 
Securities Act, and will be sold only to the A&M Group, Eligible 
Employees and Eligible Consultants, and certain related persons of 
Eligible Employees and Eligible Consultants, each as defined below. 
Prior to offering an Interest to a natural person, the Manager must 
reasonably believe that the natural person is a sophisticated investor 
capable of understanding and evaluating the risks of participating in 
the Fund without the benefit of regulatory safeguards. Investment in 
the Funds will be voluntary.
    7. Only those Professionals of the A&M Group who qualify as 
``Eligible Employees'' will be able to participate in the Funds. In 
order to qualify as an ``Eligible Employee,'' an individual must (a) be 
a principal, partner (or equivalent), officer, director \2\ or current 
or former employee (provided that such former employee was a current 
employee at the time of investment) of an A&M Group entity (each, a 
``Professional'') and (b) meet the standards of an ``accredited 
investor'' as defined in rule 501(a)(5) or 501(a)(6) of Regulation D or 
be one of a maximum of 35 individuals who are either (i) 
``knowledgeable employees,'' as defined in rule 3c-5(a)(4) under the 
Act of the Fund (with the Fund treated as though it were a ``covered 
company'' for purposes of the rule) or (ii) individuals who (1) have a 
graduate degree in business, law or accounting, (2) have a minimum of 
three years of consulting, investment management, investment banking, 
financial services, legal or similar business experience, and (3) will 
have had reportable income from all sources (including any profit 
shares or bonus) of $100,000 in each of the two most recent years 
immediately preceding such individual's admission as a partner or 
member of a Fund (``Member'') and will have a reasonable expectation of 
income from all sources of at least $140,000 in each year in which such 
individual invests in a Fund

[[Page 53938]]

(such individuals, ``Non-Accredited Investors''). Any Fund offering 
will be limited to no more than 35 Non-Accredited Investors. In 
addition, an Eligible Employee in category (ii) above must meet the 
requirements set forth in rule 506(b) of Regulation D and 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 the 
Fund and in all other Funds in which that Eligible Employee has 
previously invested. It is anticipated that, in the discretion of the 
Manager, Eligible Consultants (as defined below) of the A&M Group may 
be offered the opportunity to participate in the Funds.\3\
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    \2\ Certain entities of the A&M Group are structured as 
partnerships or LLCs. The principals and partners (or equivalent) of 
these entities are owners of the entities rather than employees. 
However, such principals and partners perform identical functions to 
those of an employee and therefore are treated as employees for 
purposes of section 2(a)(13) of the Act. In order to qualify as an 
Eligible Employee, any current or former officer or director must be 
an employee or former employee (or person on retainer) within the 
meaning of section 2(a)(13) of the Act.
    \3\ In order to participate in the Funds, consultants will be 
required to be natural persons or entities who (a) an A&M Group 
entity has engaged on retainer at the time of investment to provide 
services and professional expertise on an ongoing basis as regular 
consultants or business or legal advisors to such A&M Group entity 
and (b) are sophisticated investors who qualify as an ``accredited 
investor'' under rule 501(a)(5) or 501(a)(6), if the consultants are 
natural persons, or if entities, meet the standards of an 
``accredited investor'' under rule 501(a) of Regulation D 
(``Eligible Consultants'').
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    8. In the discretion of the Manager of a Fund and at the request of 
an Eligible Employee or Eligible Consultant, Interests may be assigned 
by such Eligible Employee or Eligible Consultant, or sold directly by 
the Fund, to a Qualified Entity or Eligible Family Member (each as 
defined below and, collectively, ``Qualified Participants'') of such 
Eligible Employee or Eligible Consultant. A ``Qualified Entity'' is (a) 
a trust of which the trustee, grantor and/or beneficiary is an Eligible 
Employee or Eligible Consultant, (b) a partnership, limited liability 
company, corporation or other entity controlled by an Eligible Employee 
or Eligible Consultant, or (c) an individual retirement account, trust, 
or other entity established solely for the benefit of an Eligible 
Employee, Eligible Consultant, or Eligible Family Members. An 
``Eligible Family Member'' is a parent, sibling, spouse, child, spouse 
of a child, or grandchild of an Eligible Employee or Eligible 
Consultant (including step and adoptive relationships). If an Eligible 
Family Member is purchasing an Interest, such Eligible Family Member 
must come within one of the categories of an ``accredited investor'' 
under rule 501(a) of Regulation D. An Eligible Employee, Eligible 
Consultant or Eligible Family Member may purchase an Interest through a 
Qualified Entity only if either (a) the investment vehicle is an 
``accredited investor'' as defined in rule 501(a) of Regulation D or 
(b) the Eligible Employee, Eligible Consultant, or Eligible Family 
Member is the settlor \4\ and principal investment decision-maker with 
respect to the investment vehicle.\5\ Qualified Entities that are not 
accredited investors will be included toward the limit of 35 Non-
Accredited Investors discussed above.
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    \4\ If such investment vehicle is an entity other than a trust, 
the term ``settlor'' means a person who created such vehicle, alone 
or together with others, and contributed funds to such vehicle.
    \5\ If an Eligible Consultant is an entity (such as a law firm 
or consulting firm), and the Eligible Consultant proposes to invest 
in the Fund through a Qualified Entity, the individual participants 
in such partnership, corporation or other entity will be limited to 
senior level employees, members or partners of the Eligible 
Consultant who are responsible for the activities of the Eligible 
Consultant and will be required to qualify as ``accredited 
investors'' under rule 501(a) of Regulation D.
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    9. The terms of a Fund will be fully disclosed to each Eligible 
Employee and Eligible Consultant, and, if applicable, to a Qualified 
Participant, at the time they are invited to participate in the Fund. 
Each Eligible Employee and Eligible Consultant and their Qualified 
Participants will be furnished with a private placement memorandum or 
other offering document, including a copy of the operating agreement or 
other organizational documents (the ``Operating Agreement'') for the 
relevant Fund. The Funds will send the Members annual financial 
statements audited by independent public accountants as soon as 
practicable after the end of the fiscal year of each of the Funds.\6\ 
The Manager of each Fund, within 120 days after the end of the fiscal 
year of such Fund, or as soon as practicable thereafter, will send a 
report to each person who was a Member of such Fund at any time during 
the fiscal year then ended, setting forth such tax information as shall 
be necessary for the preparation by the Member of his, her or its 
federal and state income tax returns and a report of the investment 
activities of such Fund during that year.
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    \6\ ``Audit'' will have the meaning defined in rule 1-02(d) of 
Regulation S-X.
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    10. Interests in each Fund will be non-transferable except with the 
prior written consent of the Manager, and, in any event, no person or 
entity will be admitted into a Fund as a Member unless such person or 
entity is an Eligible Employee, Eligible Consultant, a Qualified 
Participant or an A&M Group entity. The Interests in the Funds will be 
sold without a sales load.
    11. If an Eligible Employee's or Eligible Consultant's relationship 
with the A&M Group terminates for any reason, including death, 
disability, termination, retirement, or withdrawal, his/her Interest 
may be subject to repurchase, reallocation, redemption, mandatory 
transfer, or cancellation. In the case of Interests held by an Eligible 
Consultant or its Qualified Participants, if any, whose retainer has 
been terminated or has expired, such Interests will be subject to 
mandatory redemption or repurchases by an A&M Group entity, or the A&M 
Group entity may require the former Eligible Consultant, or its 
Qualified Participants, to sell such Interests to an Eligible Employee 
or Eligible Consultant. Pursuant to a formula set forth in a Fund's 
Operating Agreement, the Member will, at a minimum, receive an amount 
equal to or greater than the lesser of (a) the amount actually paid by 
the Member to acquire the Interest plus interest less prior 
distributions and (b) the fair market value of the Interest as 
determined in good faith at the time of repurchase or cancellation by 
the Manager. The terms of any such redemption or resale will apply 
equally to any Qualified Participant of an Eligible Employee or 
Eligible Consultant.
    12. It is possible that an investment program may be structured in 
which a Fund will co-invest in a portfolio investment with an A&M Group 
entity or an investment fund or separate account, organized primarily 
for the benefit of investors who are not affiliated with the A&M Group, 
over which an A&M Group entity exercises investment discretion (a 
``Third Party Fund''). Subject to the terms of the applicable Operating 
Agreement and the requested order, a Fund will be permitted to enter 
into transactions involving (a) an A&M Group entity, (b) a Fund 
investment, (c) any Member or person or entity affiliated with a 
Member, (d) a Third Party Fund, or (e) any partner or other investor of 
a Third Party Fund that is not affiliated with the A&M Group (``Third 
Party Investor'').
    13. A Fund may borrow from an A&M Group entity. In such case, the 
Manager or another A&M Group entity may make loans to a Fund, which 
would bear interest at a rate no less favorable than the rate of 
interest that could be obtained on an arm's length basis from third 
party lenders. Any borrowing by a Fund will be non-recourse to the 
Members other than the Manager. A Fund will not borrow from any person 
if the borrowing would cause any person not named in section 2(a)(13) 
of the Act to own securities of the Fund (other than short-term paper).
    14. A Fund will not acquire any security issued by a registered 
investment company if, immediately after such acquisition, the Fund 
will own more than 3% of the outstanding

[[Page 53939]]

voting stock of the registered investment company.

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides, in part, that the Commission 
will exempt employees' securities companies from the provisions of the 
Act to the extent that the exemption is consistent with the protection 
of investors. Section 6(b) provides that the Commission will consider, 
in determining the provisions of the Act from which the company should 
be exempt, the company's form of organization and capital structure, 
the persons owning and controlling its securities, the price of the 
company's securities and the amount of any sales load, how the 
company's funds are invested, and the relationship between the company 
and the issuers of the securities in which it invests. Section 2(a)(13) 
defines an employees' securities company, 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 Funds from all the provisions of the Act, except 
sections 9, 17, 30, 36 through 53, and the Rules and Regulations. With 
respect to sections 17(a), (d), (f), (g), and (j) and 30(a), (b), (e), 
and (h) 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) of the Act to permit 
an A&M Group entity or a Third Party Fund (or any ``affiliated 
person,'' as defined in the Act, of any such entity or Third Party 
Fund), acting as principal, to purchase or sell securities or other 
property to or from any Fund or any company controlled by such Fund. 
Applicants state that the relief is requested to permit each Fund the 
flexibility to deal with its investments in the manner the Manager 
deems most advantageous to all Members other than the Manager 
(``Participants''), including borrowing funds from an A&M Group entity, 
pledging its assets, restructuring its investments, having its 
investments redeemed, tendering such Fund's securities or negotiating 
options or implementing exit strategies with respect to its 
investments. Applicants state the requested exemption is sought to 
ensure that a Third Party Fund or Third Party Investor will not 
directly or indirectly become subject to a burden, restriction, or 
other adverse effect by virtue of a Fund's participation in an 
investment opportunity.
    4. Applicants believe an exemption from section 17(a) is consistent 
with the policy of each Fund and the protection of investors and 
necessary to promote the basic purpose of such Fund. Applicants state 
that the Participants in each Fund will have been fully informed of the 
possible extent of such Fund's dealings with the A&M Group, and, as 
experienced professionals in the restructuring, advisory, consulting or 
investment management businesses, will be able to understand and 
evaluate the attendant risks. Applicants assert that the community of 
interest among the Members in each Fund, on the one hand, and the A&M 
Group, on the other hand, is the best insurance against any risk of 
abuse. Applicants, on behalf of the Funds, represent that any 
transactions otherwise subject to section 17(a) of the Act, for which 
exemptive relief has not been requested, would require approval of the 
Commission.
    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 Fund, or affiliated persons of any of these 
persons, to participate in, or effect any transaction in connection 
with, any joint enterprise or other joint arrangement or profit-sharing 
plan in which the Fund or a company controlled by the Fund is a 
participant. The exemption requested would permit, among other things, 
co-investments by each Fund and individual Members or other investors 
or Professionals of the A&M Group making their own individual 
investment decisions apart from the A&M Group.
    6. Applicants assert that compliance with section 17(d) would cause 
a Fund to forego investment opportunities simply because a Participant 
in such Fund or other affiliated person of such Fund (or any affiliate 
of such a person) also had, or contemplated making, a similar 
investment. Applicants further assert that attractive investment 
opportunities of the types considered by a Fund often require each 
participant in the transaction to make funds available in an amount 
that may be substantially greater than may be available to such Fund 
alone. Applicants contend that, as a result, the only way in which a 
Fund may be able to participate in such 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. Applicants state that side-by-side investments held by a Third 
Party Fund, or by an A&M Group entity in a transaction in which the A&M 
Group investment was made pursuant to a contractual obligation to a 
Third Party Fund, will not be subject to condition 3 below. Applicants 
assert that in structuring a Third Party Fund, it is likely that the 
unaffiliated investors of such fund will require that an A&M Group 
entity invest its own capital in Third Party Fund investments, either 
through the Third Party Fund or on a side-by-side basis, and that A&M 
Group investments be subject to substantially the same terms as those 
applicable to the Third Party Fund's investments. Applicants state that 
it is important that the interests of the Third Party Fund take 
priority over the interests of the Funds, and that the activities of 
the Third Party Fund not be burdened or otherwise affected by 
activities of the Funds. Applicants also state that the relationship of 
a Fund to a Third Party Fund is fundamentally different from a Fund's 
relationship to the A&M Group. Applicants contend that the focus of, 
and the rationale for, the protections contained in the application are 
to protect the Funds from any overreaching by the A&M Group in the 
employer/employee context, whereas the same concerns are not present 
with respect to the Funds vis-[agrave]-vis the investors of a Third 
Party Fund.
    8. Section 17(f) of the Act designates the entities that may act as 
investment company custodians, and rule 17f-2 under the Act specifies 
requirements that must be satisfied for a registered

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management investment company to act as custodian of its own 
investments. Applicants request an exemption from section 17(f) of the 
Act and rule 17f-2 to permit the following exceptions from the 
requirements of rule 17f-2: (a) A Fund's investments may be kept in the 
locked files of an A&M Group entity for purposes of paragraph (b) of 
the rule; (b) for purposes of paragraph (d) of the rule, (i) employees 
of the A&M Group will be deemed to be employees of the Funds, (ii) 
partners, officers or managers of the Manager of a Fund will be deemed 
to be officers of the Fund, and (iii) the Manager of a Fund, its board 
of directors or managers, or a committee of A&M Group Professionals to 
whom the Manager may delegate its functions will be deemed to be the 
board of directors of such Fund; and (c) in place of the verification 
procedure under paragraph (f) of the rule, verification will be 
effected quarterly by two employees of the A&M Group, each of whom 
shall have sufficient knowledge, sophistication and experience in 
business matters to perform such examination. Applicants expect that 
many of the Funds' investments will be evidenced only by partnership 
agreements, participation agreements or similar documents, rather than 
by negotiable certificates that could be misappropriated. Applicants 
believe that these instruments are most suitably kept in the files of 
an A&M Group entity, where they can be referred to as necessary. 
Applicants will comply with all other provisions of rule 17f-2.
    9. 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 
an investment company relying on the rule satisfy the fund governance 
standards, as defined in rule 0-1(a)(7). Applicants request relief to 
permit the Manager's board of managers or directors, who may be deemed 
interested persons, to take actions and determinations as set forth in 
the rule. Applicants state that, because all the members of the board 
of directors or managers of the Manager of each Fund will be interested 
persons of the Fund, the Fund could not comply with rule 17g-1 without 
the requested relief. Applicants state that each Fund will comply with 
rule 17g-1 by having a majority of the members of the board of managers 
or directors of the Manager take such actions and make approvals as are 
set forth in rule 17g-1. Applicants also request an exemption from the 
requirements of rule 17g-l(g) and (h) relating to the filing of copies 
of fidelity bonds and related information with the Commission and the 
provision of notices to the board of directors and an exemption from 
the requirements of rule 17g-1(j)(3) relating to compliance with the 
fund governance standards. Applicants state that the fidelity bond of 
the Funds will cover employees of the A&M Group who have access to the 
securities or funds of the Funds and that the Funds will comply with 
all other requirements of rule 17g-1.
    10. 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 burdensome and unnecessary as applied to the Funds.
    11. 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 a Fund 
and would entail administrative and legal costs that outweigh any 
benefit to the Participants in such Fund. Applicants request relief to 
the extent necessary to permit each Fund to report annually to its 
Participants. Applicants also request relief from the requirements of 
section 30(h), to the extent necessary to exempt the Manager of each 
Fund, members of the Manager, or any board of managers or directors or 
committee of A&M Group Professionals to whom the Manager may delegate 
its functions, and any other persons who may be subject to section 
30(h), from filing Forms 3, 4 and 5 under Section 16 of the Exchange 
Act with respect to their ownership of Interests in such Fund. 
Applicants believe that, because there will be no trading market and 
the transfers of Interests will be severely restricted, these filings 
are unnecessary for the protection of investors and burdensome to those 
required to make them.
    12. Rule 38a-1 requires investment companies to adopt, implement 
and periodically review written policies reasonably designed to prevent 
violation of the federal securities laws and to appoint a chief 
compliance officer. Applicants state that each Fund will comply with 
rule 38a-1(a), (c) and (d), except that (a) since the Fund does not 
have a board of directors, the governing body of the Manager with 
respect to the Fund will fulfill the responsibilities assigned to the 
Fund's board of directors under the rule, (b) since the governing body 
of the Manager with respect to the Fund 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) since the 
governing body of the Manager does not have any disinterested members, 
the Funds 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 governing body of the 
Manager as constituted.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transaction otherwise prohibited by section 17(a) 
or section 17(d) and rule 17d-1 to which a Fund is a party (the 
``Section 17 Transactions'') will be effected only if the Manager 
determines that:
    (a) The terms of the Section 17 Transaction, including the 
consideration to be paid or received, are fair and reasonable to the 
Members of such Fund and do not involve overreaching of such Fund or 
its Members on the part of any person concerned, and
    (b) The Section 17 Transaction is consistent with the interests of 
the Members of such Fund, such Fund's organizational documents and such 
Fund's reports to its Members.
    In addition, the Manager of each Fund will record and preserve a 
description of all Section 17 Transactions, the Manager's findings, the 
information or materials upon which the findings are based and the 
basis for the findings. All records will be maintained for the life of 
such Fund and for at least six years thereafter, and will be subject to 
examination by the Commission and its staff. Each Fund will preserve 
the accounts, books and other documents required to be maintained in an 
easily accessible place for the first two years.

[[Page 53941]]

    2. The Manager of each Fund 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 such Fund, or any 
affiliated person of such a person, promoter or principal underwriter.
    3. The Manager of each Fund will not invest the funds of such Fund 
in any investment in which a ``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 such Fund and the Co-Investor are participants, unless any 
such Co-Investor, prior to disposing of all or part of its investment, 
(a) gives such Manager 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 such Fund has the opportunity to 
dispose of such Fund's investment prior to or concurrently with, on the 
same terms as, and pro rata with, the Co-Investor. The term ``Co-
Investor'' with respect to any Fund means any person, other than a 
Third Party Fund or an A&M Group entity in a transaction in which the 
A&M Group investment was made pursuant to a contractual obligation to a 
Third Party Fund, who is: (a) An ``affiliated person'' (as such term is 
defined in section 2(a)(3) of the Act) of such Fund; (b) an A&M Group 
entity; (c) an Eligible Employee; or (d) an entity in which an A&M 
Group entity acts as a manager or has a similar capacity to control the 
sale or disposition of the entity's securities. The restrictions 
contained in this condition shall not be deemed to limit or prevent the 
disposition of an investment by a Co-Investor: (a) To its direct or 
indirect wholly-owned subsidiary, to any company (a ``parent'') of 
which such 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 such Co-Investor or a trust or other 
investment vehicle established for any such immediate family member; or 
(c) when the investment is comprised of securities that are (i) listed 
on any exchange registered under section 6 of the Exchange Act; (ii) 
NMS stocks pursuant to section 11A(a)(2) of the Exchange Act and rule 
600(b) 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 on 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 Fund will maintain and preserve, for the life of the Fund 
and for at least six years thereafter, the accounts, books, and other 
documents as constitute the record forming the basis for the audited 
financial statements and annual reports to be provided to the 
Participants in such Fund, and agree that all such records will be 
subject to examination by the Commission and its staff. Each Fund will 
preserve the accounts, books and other documents required to be 
maintained in an easily accessible place for the first two years.
    5. The Manager of each Fund will send to each Participant in such 
Fund who had an interest in such Fund, at any time during the fiscal 
year then ended, Fund financial statements audited by such Fund's 
independent accountants. At the end of each fiscal year, the Manager 
will make a valuation or have a valuation made of all of the assets of 
the Fund 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 Fund. In addition, within 120 days after the end of each 
fiscal year of each Fund, or as soon as practicable after the end of 
each fiscal year of each Fund, the Manager of such Fund will send a 
report to each person who was a Participant in such Fund at any time 
during the fiscal year then ended, setting forth such tax information 
as shall be necessary for the preparation by the Participant of that 
Participant's federal and state income tax returns, and a report of the 
investment activities of the Fund during that fiscal year.
    6. If a Fund makes purchases or sales from or to an entity 
affiliated with the Fund by reason of a Professional of the A&M Group 
(a) serving as an officer, director, general partner, manager or 
investment adviser of the entity, or (b) having a 5% or more investment 
in the entity, such individual will not participate in the Fund's 
determination of whether or not to effect the purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21636 Filed 8-31-12; 8:45 am]
BILLING CODE 8011-01-P