
[Federal Register Volume 81, Number 14 (Friday, January 22, 2016)]
[Notices]
[Pages 3853-3855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01201]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31959; File No. 812-14473]


Leaning Pine II, L.L.C.; Notice of Application

January 15, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from all 
provisions of the Act and all rules and regulations thereunder.

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SUMMARY OF APPLICATION:  Applicant requests an order for an exemption 
from all provisions of the Act and all rules and regulations 
thereunder, as Applicant is essentially a closely-held private 
investment company formed for a limited purpose.

APPLICANT:  Leaning Pine II, L.L.C. (``Applicant'').

FILING DATES:  The application was filed on May 26, 2015 and amended on 
October 22, 2015 and January 13, 2016.

HEARING OR NOTIFICATION OF HEARING:  An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on February 9, 2016, and should be accompanied by proof of 
service on applicant, 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 
St. NE., Washington, DC 20549-1090. Applicant: Leaning Pine II, L.L.C., 
315 E. Commerce Street, Suite 300, San Antonio, TX 78205.

FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Senior Counsel, or 
Melissa R. Harke, Branch Chief, at (202) 551-6825 (Chief Counsel's 
Office, Division of Investment Management).

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 for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicant's Representations

    1. Applicant is a newly-formed Texas limited liability company. 
Applicant will be capitalized with assets of individual members of the 
Hixon family (the ``Family'') and other Family Members (as defined 
below) so that it may serve as a non-charitable endowment for Hobo Lake 
Club Incorporated (``Hobo Lake Club''), a non-profit corporation 
organized by the Family, which owns a lakeside property and lodge in 
Plum Lake, Vilas County, Wisconsin and operates as a recreation club 
for its members. The land held by Hobo Lake Club was first acquired by 
members of the Family approximately 100 years ago. As a non-profit 
corporation, Hobo Lake Club does not have ``owners'' in the common 
sense, but instead has ``members.'' Under Hobo Lake Club's bylaws, 
members are limited to lineal descendants of Joseph M. Hixon and Irene 
C. Hixon.
    2. As used herein, ``Family Members'' refers to (i) the descendants 
(including adopted descendants) of Joseph M. Hixon (deceased) and Irene 
C. Hixon (deceased); (ii) spouses and former-spouses of any individuals 
described in clause (i) above; (iii) one descendant of a former spouse 
who will be admitted as a member of Applicant upon the effectiveness of 
the Shareholder Agreement (as defined below) and his descendants 
(including adopted descendants); and (iv) trusts, partnerships and 
other entities established for the exclusive benefit of, or exclusively 
owned by, any individuals described in clause (i), (ii) or (iii) above.
    3. Applicant anticipates that upon its capitalization Applicant 
will have approximately 120 members, all of whom will be Family 
Members. These approximately 120 members will include several trusts 
for the benefit of individuals who are also members individually. 
Applicant will be capitalized exclusively by the contribution of a 
portion of dividend proceeds payable to various Family Members by Hixon 
Properties Incorporated (``Hixon Properties''), a private company that 
owns and invests primarily in real estate and related ventures that is 
controlled by Family Members, such dividend proceeds to be contributed 
to Applicant pursuant to an agreement (the ``Shareholder Agreement'') 
among Applicant, Hixon Properties and Applicant's members.
    4. Membership interests in Applicant (``Interests'') have not been 
and will not be offered or sold to the public. Applicant's operating 
agreement (the ``LLC Agreement'') includes a restriction on transfers 
that prohibits members from transferring Interests to anyone other than 
Family Members. As a result of this restriction on transfers, no 
trading market will exist for the Interests. Additionally, any new 
member (i.e. other than by transfer) is also required to be a 
shareholder of Hixon Properties, whose shares are subject to transfer 
restrictions similar to those in the LLC Agreement (and applicant will 
further prohibit admittance of non-Family Members other than upon a 
transfer of shares of Hixon Properties subject to the Shareholder 
Agreement by a Member of Applicant to a non-Family Member).
    5. Under the LLC Agreement, Applicant's purpose is to serve as a 
source of funding for Hobo Lake Club, and Applicant is expressly 
authorized to make distributions to Hobo Lake Club for the operations, 
maintenance and improvement of Hobo Lake Club's properties. Applicant 
is not intended to

[[Page 3854]]

be utilized as a wealth-creation vehicle for its members. Rather, 
pursuant to the Shareholder Agreement and consistent with Applicant's 
limited purpose of serving as a source of funding for Hobo Lake Club, 
contributions of dividend proceeds from Hixon Properties will cease 
once Applicant's assets reach $4,500,000 (as adjusted for changes in 
the consumer price index) (the ``Funding Threshold''), which is a level 
of funding that is intended, along with other funding resources, to be 
sufficient to support Hobo Lake Club.
    6. Applicant will be managed by a body of at least three managers 
(the ``Managers''), each of whom must be a Family Member. Election or 
removal of a Manager requires the action of Applicant's members holding 
a majority of the Interests. The Managers may be reimbursed for 
expenses incurred on behalf of Applicant, but may only receive 
compensation for their service as Managers in excess of such 
reimbursements with the consent of the members holding at least 60% of 
the Interests, which compensation shall not include performance fees or 
other performance-based compensation.
    7. Applicant's assets will be comprised of investments in 
individual securities and investment funds. The Managers will engage 
investment advisers registered with the Commission to carry out 
Applicant's investment policy (the ``Policy'').
    8. The highest priority of the Policy is to ensure funding for Hobo 
Lake Club. The registered investment advisers engaged by Applicant will 
be required to operate within the guidelines established by the Policy 
and assume a moderate risk posture. Management fees charged must be 
reasonable and customary, and no performance fees will be permitted.
    9. The Managers will supervise all advisers engaged by Applicant 
and will review Applicant's investment portfolio quarterly to ensure 
compliance with the Policy. All advisers will be required to provide 
reports to the Managers at least quarterly. Applicant will provide 
reports to its members at least annually. On a portfolio-wide basis, 
the registered investment advisers engaged by Applicant will be subject 
to quantitative asset allocation, portfolio quality and diversification 
standards, which will be established by the Managers.

Applicant's Legal Analysis

    1. Applicant is seeking an order pursuant to section 6(c) of the 
Act for an exemption from all of the provisions of the Act and all 
rules and regulations thereunder. Applicant submits that section 
3(c)(1) of the Act evidences the intention of Congress to exclude 
``private'' investment companies from the scope of the Act. Under 
section 6(c) of the Act, the Commission may exempt any person, 
security, or transaction from any provision of the Act, if and to the 
extent that such exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. 
Applicant submits that the requested exemption from all provisions of 
the Act and all rules and regulations thereunder meets these standards, 
as Applicant is essentially a closely-held private investment company 
formed for a limited purpose.
    2. Applicant states that similarly situated companies can typically 
rely on section 3(c)(1) of the Act for an exclusion from registration 
under the Act. Section 3(c)(1) excepts from the definition of 
``investment company'' any issuer whose outstanding securities are 
beneficially owned by not more than 100 persons and which is not making 
and does not presently propose to make a public offering of its 
securities. Applicant submits that, as contemplated, there will be over 
100 initial investors in Applicant, and the number of members is likely 
to increase in the future as Interests are passed down to younger 
generations, meaning it would not qualify for the exception under 
section 3(c)(1).
    3. Applicant submits that the exemption requested is necessary and 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Applicant further submits that the exemption 
requested is consistent with relief granted by the Commission to other 
private investment companies that have more than 100 beneficial owners 
and that are substantially owned and controlled by a single family or 
that were formed for the limited purpose of aggregating and holding 
funds pending utilization of those funds by a related private 
enterprise.
    4. Applicant submits that one of the key purposes of the Act is the 
mitigation of the conflicts of interest between fund investors and the 
management of the fund. Applicant submits that, in its case, sufficient 
safeguards exist to protect its investors and such safeguards are 
consistent with those implemented by similarly situated entities for 
which relief has previously been granted.

Applicant's Conditions

    Applicant agrees that the order of the Commission granting the 
requested relief shall be subject to the following conditions, which 
conditions shall continue for so long as Applicant seeks to rely on 
such relief:
    1. Interests have not been and will not be offered or sold to the 
public. The LLC Agreement includes a restriction on transfers that 
prohibits members from transferring Interests to anyone other than 
Family Members. Additionally, any new member (i.e., other than by 
transfer) is also required to be a shareholder of Hixon Properties, 
whose shares are subject to transfer restrictions similar to those in 
the LLC Agreement. Applicant will further prohibit admittance of non-
Family Members other than upon a transfer of shares of Hixon Properties 
subject to the Shareholder Agreement by a Member of Applicant to a non-
Family Member.
    2. Applicant will be managed by Managers, each of whom will be a 
Family Member.
    3. Applicant's Managers will engage only Commission-registered 
investment advisers and will meet no less frequently than quarterly to 
review Applicant's investment portfolio to ensure compliance with the 
Policy.
    4. Applicant will not modify its purpose as set forth in the LLC 
Agreement.
    5. Applicant will not knowingly make available to any broker or 
dealer registered under the Securities Exchange Act of 1934, as 
amended, any financial information concerning Applicant for the purpose 
of knowingly enabling such broker or dealer to initiate any regular 
trading market in the Interests.
    6. Applicant will provide each member of Applicant annual financial 
statements audited by an independent public accountant registered with, 
and subject to regular inspection by, the Public Company Accounting 
Oversight Board at such times as Applicant's assets, as reflected on 
Applicant's year-end balance sheet prepared in accordance with 
generally accepted accounting principles, equal or exceed $1,000,000. 
With respect to any year for which audited annual financial statements 
are not provided in accordance with the foregoing limitation, Applicant 
will provide unaudited annual financial statements to each member of 
Applicant.
    7. Applicant will comply with the provisions set forth in 
subparagraphs (A)(i) and (B)(i) of section 12(d)(1) of the Act, as if 
Applicant were an investment company relying on the exemption set forth 
in section 3(c)(1) of the Act.


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    For the Commission, by the Division of Investment Management, 
under delegated authority.

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01201 Filed 1-21-16; 8:45 am]
 BILLING CODE 8011-01-P


