
[Federal Register Volume 82, Number 172 (Thursday, September 7, 2017)]
[Notices]
[Pages 42390-42396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18930]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32804; 813-00387]


Hudson Advisors L.P., et al.

August 31, 2017.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice.

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    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 and the rules and regulations 
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act, 
and the rules and regulations thereunder (the ``Rules and 
Regulations''). With respect to sections 17(a), (d), (e), (f), (g) and 
(j) and 30(a), (b), (e), and (h) of the Act, and the Rules and 
Regulations, and rule 38a-1 under the Act, the exemption is limited as 
set forth in the application.

SUMMARY OF APPLICATION: Applicants request an order to exempt certain 
limited partnerships and other entities (``Partnerships'') formed for 
the benefit of eligible employees of Hudson Advisors L.P. (``Hudson'') 
and Lone Star Global Acquisitions, Ltd. (``LSGA'') and their affiliates 
(Hudson and LSGA, along with their affiliated companies and affiliated 
persons, collectively the ``Advisers'') 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: Hudson, LSGA, LSREF V Investments, L.P., HudCo Real Estate 
V, L.P., HudCo Real Estate V (Bermuda), L.P., HudCo Real Estate V 
(Europe I), L.P., HudCo Real Estate V (Europe II), L.P., HudCo GenPar 
RE V, LLC, HudCo GenPar RE V (Europe I), LLC, and HH GenPar RE V 
(Europe II), LLC.

Filing Dates: The application was filed on November 18, 2016 and was 
amended on April 13, 2017, June 23, 2017 and August 25, 2017.

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 September 25, 2017, 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: c/o William D. 
Young, 2711 N. Haskell Avenue, Suite 1800, Dallas, TX 75204; c/o 
William D. Young, 2711 N. Haskell Avenue, Suite 1700, Dallas, TX 75204.

FOR FURTHER INFORMATION CONTACT:  Elizabeth G. Miller, Senior Counsel, 
at (202) 551-8707, or Holly Hunter-Ceci, Assistant Chief Counsel, at 
(202) 551-6825 (Division of Investment Management, Chief Counsel's 
Office).

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.

Applicants' Representations

    1. The Advisers have organized, and may in the future organize, 
limited partnerships, limited liability companies, business trusts or 
other entities as ``employees' securities companies,'' as defined in 
section 2(a)(13) of the Act (each a ``Partnership'' and, collectively, 
the ``Partnerships'').
    2. A Partnership may be organized under the laws of the state of 
Delaware, another state, or a jurisdiction outside the United States. A 
Partnership may serve as the master fund of one or more other 
Partnerships (such entities, ``Master Partnerships''). A Partnership 
may be organized under the laws of a non-U.S. jurisdiction to address 
any tax, legal, accounting and regulatory considerations applicable to 
certain Eligible Employees (as defined below) in other jurisdictions or 
the nature of the program. 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 a closed-
end management investment company, and a particular Partnership may 
operate as a ``diversified'' or ``non-diversified'' vehicle within the 
meaning of the Act. The Partnerships are intended to provide investment 
opportunities for Eligible Employees that are competitive with those at 
other investment management and financial services firms and to 
facilitate the recruitment and retention of high caliber professionals. 
The Advisers will control each Partnership within the meaning of 
section 2(a)(9) of the Act.
    3. The initial Master Partnership, LSREF V Investments, L.P., is a 
Bermuda exempted limited partnership established on February 17, 2016. 
HudCO GenPar RE V, LLC is its general partner and Hudson serves as its 
investment adviser. HudCO Real Estate V, L.P., a Delaware limited 
partnership, was established on February 23, 2016. HudCo GenPar RE V, 
LLC is its general partner and Hudson serves as its investment adviser. 
HudCo Real Estate V (Bermuda), L.P., a Bermuda exempted limited 
partnership, was established on February 17, 2016. HudCo GenPar RE V, 
LLC is its general partner and Hudson serves as its investment adviser. 
HudCo Real Estate V (Europe I), L.P., a Bermuda exempted limited 
partnership, was established on February 17, 2016. HudCo GenPar RE V 
(Europe I), LLC is its general partner and Hudson serves as its 
investment adviser. HudCo Real Estate V (Europe II), L.P., a Delaware 
limited partnership, was established on September 8, 2016. HH GenPar RE 
V (Europe II), LLC is its general partner and Hudson serves as its 
investment adviser. The Advisers provide certain advisory and related 
services to a family of closed-end, privately offered funds (the 
``Funds''), which invest globally in

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a broad range of real estate, equity, credit and other financial 
assets.
    4. Each Partnership will have a general partner, managing member or 
other such similar entity (a ``General Partner''). All investors in a 
Partnership will be ``Limited Partners.'' The General Partner will be 
responsible for the overall management of each Partnership and will 
have the authority to make all decisions regarding the management 
control, and direction of the Partnership and its operations, business, 
and affairs. An Adviser entity may be a General Partner of each 
Partnership. 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 (as 
defined below), provided that the ultimate responsibility for, and 
control of, each Partnership, remain with the applicable General 
Partner.
    5. The General Partner or another Adviser entity will serve as 
investment adviser to a Partnership (the ``Investment Adviser''). The 
Investment Adviser will be registered as an investment adviser under 
the Investment Advisers Act of 1940 (the ``Advisers Act''), if required 
under applicable law. Each Investment Adviser shall comply with the 
standards prescribed in sections 9, 36 and 37 of the Act. The 
Applicants represent and concede that each General Partner and 
Investment Adviser managing a Partnership is an ``investment adviser'' 
within the meaning of sections 9 and 36 of the Act and is subject to 
those sections. An Investment Adviser may be paid a management fee, 
which will generally be determined as a percentage of the capital 
commitments or assets under management (appreciated 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 such Partnership treated as 
though it were a business development company solely for the purpose 
of that section).
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    6. If the General Partner determines that a Partnership enter into 
any side-by-side investment with an unaffiliated entity, the General 
Partner will be permitted to engage as sub-investment adviser the 
unaffiliated entity (an ``Unaffiliated Subadviser''), which will be 
responsible for the management of such side-by-side investment.
    7. Interests in a Partnership will be offered without registration 
in reliance on section 4(a)(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: (i) Eligible Employees; (ii) 
at the request of Eligible Employees and the discretion of the General 
Partner, to Qualified Participants (as defined below) of such Eligible 
Employees; or (iii) to Adviser entities. Prior to offering Interests to 
an Eligible Employee or an Eligible Family Member (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 participating 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 investments in a Partnership. 
Investing in the Partnerships will be voluntary on the part of Eligible 
Employees and Qualified Participants.
    8. To qualify as an ``Eligible Employee,'' (a) an individual must 
(i) be a current or former employee, officer or director or current 
Consultant \2\ of the Advisers and (ii) except for certain individuals 
who meet the definition of ``knowledgeable employee'' in Rule 3c-
5(a)(4) under the Act as if the Partnerships were ``Covered Companies'' 
within the meaning of the rule and a limited number of other employees 
of the Advisers \3\ (collectively, ``Non-Accredited Investors''), meet 
the standards of an ``accredited investor'' under Rule 501(a)(5) or 
(a)(6) of Regulation D, or (b) an entity must (i) be a current 
Consultant of the Advisers and (ii) meet the standards of an 
``accredited investor'' under Rule 501(a) of Regulation D. A 
Partnership may not have more than 35 Non-Accredited Investors. At the 
request of an Eligible Employee and the discretion of the General 
Partner, Interests may be assigned by such Eligible Employee, or sold 
directly by the Partnership, to a Qualified Participant of an Eligible 
Employee. In order to qualify as a ``Qualified Participant,'' an 
individual or entity must (i) be an Eligible Family Member or Eligible 
Investment Vehicle (in each case as defined below), respectively, of an 
Eligible Employee and (ii) if purchasing an Interest from a 
Partnership, except as discussed below, come within one of the 
categories of an ``accredited investor'' under Rule 501(a) of 
Regulation D. An ``Eligible Family Member'' is a spouse, parent, child, 
spouse of child, brother, sister or grandchild of an Eligible Employee, 
including step and adoptive relationships. An ``Eligible Investment 
Vehicle'' is (a) a trust of which the trustee, grantor and/or 
beneficiary is an Eligible Employee, (b) a partnership, corporation or 
other entity controlled by an Eligible Employee,\4\ or (c) a trust or 
other entity established solely for the benefit of an Eligible Employee 
and/or

[[Page 42392]]

one or more Eligible Family Members of an Eligible Employee.
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    \2\ A ``Consultant'' is a person or entity whom the Advisers 
have 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 the Advisers and the Advisers' employees. In order to 
participate in a Partnership, Consultants must be currently engaged 
with the Advisers and will be required to be sophisticated investors 
who qualify as accredited investors (``Accredited Investors'') under 
Rule 501(a) of Regulation D under the Securities Act. If a 
Consultant is an entity (such as, for example, a law firm or 
consulting firm), and the Consultant proposes to invest in the 
Partnership through a partnership, corporation or other entity that 
is controlled by the Consultant, the individual participants in such 
partnership, corporation or other entity will be limited to senior 
level employees, members or partners of the Consultant who are 
responsible for the activities of the Consultant and will be 
required to qualify as Accredited Investors. In addition, such 
entities will be limited to businesses controlled by individuals who 
have levels of expertise and sophistication in the area of 
investments in securities that are comparable to other Eligible 
Employees who are employees, officers or directors of the Advisers 
and who have an interest in maintaining an ongoing relationship with 
the Advisers. The individuals participating through such entities 
will belong to that class of persons who will have access to the 
directors and officers of the General Partner and/or the officers of 
the Advisers responsible for making investments for the Partnerships 
similar to the access afforded other Eligible Employees who are 
employees, officers or directors of the Advisers.
    \3\ Such employees must meet the sophistication requirements set 
forth in Rule 506(b)(2)(ii) of Regulation D under the Securities Act 
and may be permitted to invest his or her own funds in the 
Partnership if, at the time of the employee's investment in a 
Partnership, he or she (a) has a graduate degree in business, law or 
accounting, (b) has a minimum of five years of consulting, 
investment banking or similar business experience, and (c) has had 
reportable income from all sources of at least $100,000 in each of 
the two most recent years and a reasonable expectation of income 
from all sources of at least $140,000 in each year in which such 
person will be committed to make investments in a Partnership. In 
addition, such an employee 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 such Partnership and 
in all other Partnerships in which he or she has previously 
invested.
    \4\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
``Eligible Investment Vehicle'' is intended to enable Eligible 
Employees to make investments in the Partnerships through personal 
investment vehicles for the purpose of personal and family 
investment and estate planning objectives.
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    9. An Eligible Employee or Eligible Family Member 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 Securities Act or (ii) the applicable 
Eligible Employee or Eligible Family Member is a settlor \5\ and 
principal investment decision-maker with respect to the investment 
vehicle. Eligible Investment Vehicles that are not accredited investors 
will be included in accordance with Regulation D toward the 35 Non-
Accredited Investor limit discussed above.
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    \5\ 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 other Eligible Employees and/or 
Eligible Family Members, and contributed funds to such vehicle.
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    10. While the terms of a Partnership will be determined by the 
Advisers in their discretion, these terms will be fully disclosed to 
each Eligible Employee and, if a Qualified Participant of such Eligible 
Employee is required to make an investment decision with respect to 
whether or not to participate in a Partnership, to such Qualified 
Participant, at the time such Eligible Employee or Qualified 
Participant is invited to participate in the Partnership. A Partnership 
will send its Limited Partners an annual financial statement within 120 
days, or as soon as practicable, after the end of the Partnership's 
fiscal year. The financial statement will be audited \6\ by independent 
certified public accountants. 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 such 
Limited Partner's share of income, gains, losses, credits, and other 
items for federal and state income tax purposes.
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    \6\ ``Audit'' will have the meaning defined in rule 1-02(d) of 
Regulation S-X.
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    11. Interests in each Partnership will be non-transferable except 
with the prior written consent of the General Partner, and, in any 
event, no person or entity will be admitted into the Partnership as a 
Limited Partner unless such person is (i) an Eligible Employee, (ii) a 
Qualified Participant or (iii) an Adviser entity. No sales load or 
similar fee of any kind will be charged in connection with the sale of 
Interests.
    12. The Applicant states that a General Partner may have the right 
to repurchase or cancel the Interest of (i) an Eligible Employee who 
ceases to be an employee, officer, director or current Consultant of 
any Adviser entity for any reason or (ii) any Qualified Participant of 
any person described in clause (i). Once a Consultant's ongoing 
relationship with an Adviser entity is terminated: (i) such Consultant 
and its Qualified Participants, if any, will not be permitted to 
contribute any additional capital to a Partnership; and (ii) the 
existing Interests of such Consultant and its Qualified Participants, 
if any, as of the date of such termination will (A) to the extent the 
governing documents of a Partnership provide for periodic redemptions 
in the ordinary course, be redeemed as of the next regularly scheduled 
redemption date and (B) to the extent the governing documents of a 
Partnership do not provide for such periodic redemptions (e.g., as a 
result of the vehicle primarily investing in illiquid investments), be 
retained. The Partnership Agreement or private placement memorandum for 
each Partnership will describe, if applicable, the amount that a 
Limited Partner would receive upon repurchase, cancellation or 
forfeiture of its Interest. A Limited Partner would receive upon 
repurchase, cancellation or forfeiture of its Interest, at a minimum, 
the lesser of (i) the amount actually paid by or (subject to any 
vesting requirements) on behalf of the Limited Partner to acquire the 
Interest, plus interest, less any distributions, and (ii) the fair 
market value of the Interest determined at the time of the repurchase 
or cancellation as determined in good faith by the General Partner. The 
amount to be received by the Limited Partner will be subject to any 
applicable vesting schedule or forfeiture provisions and to the extent 
there is an oversubscription for a regularly scheduled redemption, 
existing Interests of the Limited Partner will be redeemed on a pro 
rata basis with all other Limited Partners who have made a request, in 
accordance with the governing documents, to be redeemed as of that 
redemption date and any subsequent regularly scheduled redemption date 
until all of such Limited Partner's existing Interests are redeemed.
    13. The Applicant states that the Partnerships may invest either 
directly or through investments in limited partnerships and other 
investment pools (including pools that are exempt from registration in 
reliance on section 3(c)(1) or 3(c)(7) of the Act) and investments in 
registered investment companies.\7\ Investments may be made side by 
side with Adviser entities and through investment pools (including 
``Aggregation Vehicles'') \8\ sponsored or managed by an Adviser entity 
or an unaffiliated entity.
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    \7\ The Applicant is not requesting any exemption from any 
provision of the Act or any rule thereunder that may govern the 
eligibility of a Partnership to invest in an entity relying on 
section 3(c)(1) or 3(c)(7) of the Act or any such entity's status 
under the Act.
    \8\ An ``Aggregation Vehicle'' is an investment pool sponsored 
or managed by an Adviser entity that is formed solely for the 
purpose of permitting a Partnership and other Adviser entities or 
Third Party Funds to collectively invest in other entities. The 
Applicant states that it may be more efficient for a Partnership and 
other Adviser entities and Third Party Funds to invest in an entity 
together through an Aggregation Vehicle rather than having each 
investor separately acquire a direct interest in such entity. An 
Aggregation Vehicle will not be used to issue interests that 
discriminate against a Partnership or provide preferential treatment 
to an Adviser entity or other Adviser-related investors with respect 
to a portfolio company investment. The Applicant submits that 
because no investment decisions are made at the Aggregation Vehicle 
level, the fact that a person who participates in the Partnership's 
decision to acquire an interest in an Aggregation Vehicle also 
serves as an officer, director, general partner or investment 
adviser of the Aggregation Vehicle would not create a conflict of 
interest on the part of such person.
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    14. The Applicant states that a Partnership may also co-invest in a 
portfolio company with the Advisers or an investment fund or separate 
account organized primarily for the benefit of investors who are not 
affiliated with the Advisers over which an Adviser entity or an 
Unaffiliated Subadviser exercises investment discretion (``Third Party 
Funds''). The General Partner will not delegate management and 
investment discretion for the Partnership to an Unaffiliated Subadviser 
or a sponsor of a Third Party Fund. Side-by-side investments held by a 
Third Party Fund, or by an Adviser entity in a transaction in which the 
Adviser investment was made pursuant to a contractual obligation to a 
Third Party Fund, will not be subject to the restrictions contained in 
Condition 3 below. All other side-by-side investments held by Adviser 
entities will be subject to the restrictions contained in Condition 3.
    15. 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). A 
Partnership will not make any loans to the Advisers, their subsidiaries 
or any entity that controls the Advisers.\9\ A Partnership will not 
borrow from any person if the borrowing would cause the Partnership not 
to be an ``employees' securities company'' as defined in Section 
2(a)(13) of the Act. Any

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indebtedness of a Partnership, other than indebtedness incurred 
specifically on behalf of a Limited Partner where the Limited Partner 
has agreed to guarantee the loan or to act as co-obligor of the loan, 
will be the debt of the Partnership and without recourse to the Limited 
Partners.
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    \9\ A Partnership may, subject to the terms and conditions set 
out herein, make investments in issuers that are portfolio companies 
of funds managed by the Advisers, and such investments may take the 
form of loans.
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    16. In compliance with section 12(d)(1)(A)(i) of the Act, a 
Partnership will not purchase or otherwise 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.

Applicant's Legal Analysis

    1. Section 6(b) of the Act provides that, upon application, 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. The Applicants request an order under sections 6(b) and 6(e) 
of the Act exempting the Partnerships from all provisions of the Act, 
except sections 9, 17, 30, and 36 through 53 of the Act, and the Rules 
and Regulations. With respect to sections 17(a), (d), (e), (f), (g), 
and (j) and 30(a), (b), (e), and (h) of the Act, and the Rules and 
Regulations, 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. The 
Applicants request an exemption from section 17(a) to the extent 
necessary to permit an Adviser entity or a Third Party Fund (or any 
affiliated person of any such Adviser entity or Third Party Fund), 
acting as principal, to purchase or sell securities or other property 
to or from any Partnership or any company controlled by such 
Partnership. Any such transaction to which any Partnership is a party 
will be effected only after a determination by the General Partner that 
the requirements of condition 1 below have been satisfied. In addition, 
the Applicants, on behalf of the Partnerships, represents 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.
    4. The Applicants submit that an exemption from section 17(a) is 
consistent with the purposes of the Partnerships and the protection of 
investors. The Applicants state that the Limited Partners will be 
informed of the possible extent of the Partnership's dealings with the 
Advisers and of the potential conflicts of interest that may exist. The 
Applicants also state that, as professionals engaged in financial 
services businesses, the Limited Partners will be able to evaluate the 
risks associated with those dealings. The Applicants assert that the 
community of interest among the Limited Partners and the Advisers and 
the Funds will serve to reduce the risk of abuse. The Applicants 
acknowledge 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 the Advisers or is an entity outside of the Advisers 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 or principal underwriter of a registered 
investment company, or any affiliated person of such person or 
principal underwriter, acting as principal, from participating in any 
joint arrangement with the company unless authorized by the Commission. 
The Applicants request relief to permit affiliated persons of the 
Partnerships (such as the Funds), or affiliated persons of any of such 
persons, to participate in, or effect any transaction in connection 
with, any joint enterprise or other joint arrangement or profit-sharing 
plan in which a Partnership or a company controlled by the Partnerships 
participate. The 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, except in connection with a Third Party Fund sponsored by an 
Unaffiliated Subadviser.
    6. The Applicants assert that compliance with section 17(d) would 
cause the Partnership to forego investment opportunities simply because 
the Funds, 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. The Applicants submit 
that the types of investment opportunities in which the Partnerships 
will co-invest with the Funds require each investor to make funds 
available in an amount that may be substantially greater than what a 
Partnership (including its Eligible Employees and Qualified 
Participants) may be able to make available on its own. The Applicants 
contend that, as a result, the only way in which a Partnership (and 
thus its Eligible Employees and Qualified Participants) may be able to 
participate in these opportunities is to co-invest with the Funds, 
which would be affiliated persons, as defined in section 2(a)(3) of the 
Act. The 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. In addition, the 
Applicants represent that any transactions otherwise subject to section 
17(d) of the Act and rule 17d-1 thereunder, for which exemptive relief 
has not been requested, would require approval by the Commission.
    7. Co-investments with Third Party Funds, or by an Adviser entity 
pursuant to a contractual obligation to a Third Party Fund, will not be 
subject to condition 3 below. The Applicants note that it is common for 
a Third Party Fund to require that the Advisers invest their own 
capital in Third Party Fund investments, and that the Advisers' 
investments be subject to substantially the same terms as those 
applicable to

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the Third Party Fund. The 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, the 
Applicants assert that the relationship of a Partnership to a Third 
Party Fund is fundamentally different from a Partnership's relationship 
to the Advisers. The 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 the Advisers in the 
employer/employee context, whereas the same concerns are not present 
with respect to the Partnerships vis-[agrave]-vis 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. The Applicant requests an 
exemption from section 17(e) to permit an Adviser 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.'' The Applicants state that for purposes of the application, 
fees or other compensation that are charged or received by an Adviser 
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 other 
compensation being charged to the Partnership (directly or indirectly) 
are also being charged to the unaffiliated third parties, including 
Third Party Funds, and (c) the amount of securities being purchased or 
sold by the Partnership (directly or indirectly) does not exceed 50% of 
the total amount of securities being purchased or sold by the 
Partnership (directly or indirectly) and the unaffiliated third 
parties, including Third Party Funds. The Applicants assert that, 
because the Advisers do 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. The Applicants 
assert that the fees or other compensation paid by a Partnership to an 
Adviser 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 investment company relying on the rule to satisfy the 
fund governance standards defined in rule 0-1(a)(7) under the Act (the 
``Fund Governance Standards''). The 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 standards set forth in paragraph (c) of the rule. 
The 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. The 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. The 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. The Applicants request an exemption from section 
17(f) and subsections (a), (b) (to the extent such subsection refers to 
contractual requirements), (c), and (d) of rule 17f-1 to permit an 
Adviser entity to act as custodian of Partnership assets without a 
written contract. The 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. The Applicants 
state that, because of the community of interest between the Advisers 
and the Partnerships and the existing requirement for an independent 
audit, compliance with this requirement would be unnecessary. The 
Applicants will comply with all other requirements of rule 17f-1.
    11. The Applicants also request an exemption from section 17 and 
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 Advisers, the General Partner or the Investment Adviser; 
(b) for purposes of paragraph (d) of the rule, (i) employees of the 
General Partner (or the Advisers) will be deemed to be employees of the 
Partnerships, (ii) officers or managers of the General Partner of a 
Partnership (or the Advisers) 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, each of whom will have sufficient knowledge, 
sophistication and experience in business matters to perform such 
examination. The 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. 
The Applicants assert that for such a Partnership, these instruments 
are most suitably kept in the files of the Advisers, the General 
Partner, or the Adviser entity that serves as investment adviser to the 
Partnership, where they can be referred to as necessary. The Applicants 
will comply with all other provisions of rule 17f-2.
    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 of a registered investment company 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. The 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. The Applicants state that, 
because all directors or other governing body 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 applicable General 
Partner's directors (or members of a comparable body) take actions and 
make determinations as set forth in rule 17g-1. The Applicants also 
request an exemption from the requirements of: (i) Paragraph (g) of the 
rule relating to the filing of copies of fidelity bonds and related 
information with the

[[Page 42395]]

Commission and the provision of notices to the board of directors; (ii) 
paragraph (h) of the rule relating to the appointment of a person to 
make the filings and provide the notices required by paragraph (g); and 
(iii) paragraph (j)(3) of the rule relating to compliance with the Fund 
Governance Standards. The Applicants state that the fidelity bond of 
each Partnership will cover the Advisers' employees who have access to 
the securities and funds of the Partnership. The 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. The Applicants request an exemption from section 17(j) 
and the provisions of rule 17j-1, except for the anti-fraud provisions 
of paragraph (b), because they assert that these requirements are 
unnecessarily burdensome as applied to the Partnerships. The relief 
requested will only extend to Adviser entities and is not requested 
with respect to any Unaffiliated Subadviser or Advisory Person.
    14. The 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. The Applicant contends 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. The Applicant 
requests exemptive relief to the extent necessary to permit each 
Partnership to report annually to its Limited Partners, as described in 
the application. The 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 the Advisers' employees 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 Exchange Act 
with respect to their ownership of Interests in the Partnership. The 
Applicants assert that, because there will be no trading market and the 
transfers of Interests will be severely restricted, these filings are 
unnecessary for the protection of investors and burdensome to those 
required to make them.
    15. Rule 38a-1 requires registered 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. Each Partnership will comply will rule 38a-
1(a), (c) and (d), except that (i) since the Partnership does not have 
a board of directors, the board of directors or other governing body of 
the General Partner will fulfill the responsibilities assigned to the 
Partnership's board of directors under the rule, and (ii) since the 
board of directors or other governing body of the General Partner does 
not have any disinterested members, (a) approval by a majority of the 
disinterested board members required by rule 38a-1 will not be 
obtained, and (b) 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

    The 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 applicable General Partner 
determines that (i) 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 (ii) 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.\10\
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    \10\ If a Partnership invests through an Aggregation Vehicle and 
such investment is a Section 17 Transaction, this condition will 
apply with respect to both the investment in the Aggregation Vehicle 
and any investment by the Aggregation Vehicle of Partnership funds.
---------------------------------------------------------------------------

    In addition, the applicable General Partner of a 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.\11\
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    \11\ 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 (each such investment, a ``Rule 
17d-1 Investment''), unless any such Affiliated Co-Investor, prior to 
disposing of all or part of its investment, (i) gives the General 
Partner sufficient, but not less than one day's, notice of its intent 
to dispose of its investment; and (ii) 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.\12\ The term 
``Affiliated Co-Investor'' with respect to any Partnership means any 
person who is: (i) An ``affiliated person'' (as such term is defined in 
section 2(a)(3) of the Act) of the Partnership (other than a Third

[[Page 42396]]

Party Fund); (ii) the Advisers; (iii) an officer or director of the 
Advisers; (iv) an Eligible Employee; or (v) an entity (other than a 
Third Party Fund) in which an Adviser 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 (i) 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, (ii) 
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 (iii) when the investment is 
comprised of securities that are (a) listed on a national securities 
exchange registered under section 6 of the Exchange Act, (b) NMS stocks 
pursuant to section 11A(a)(2) of the Exchange Act and rule 600(a) of 
Regulation NMS thereunder, (c) 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 (d) 
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.
---------------------------------------------------------------------------

    \12\ If a Partnership invests in a Rule 17d-1 Investment through 
an Aggregation Vehicle, the requirements of clauses (i) and (ii) of 
this sentence shall apply to both the Affiliated Co-Investor's 
disposition of such Rule 17d-1 Investment and, if the Affiliated Co-
Investor also holds a Rule 17d-1 Investment through such Aggregation 
Vehicle, its disposition of all or part of its investment in the 
Aggregation Vehicle.
---------------------------------------------------------------------------

    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.\13\
---------------------------------------------------------------------------

    \13\ 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. Within 120 days after the end of each fiscal year of each 
Partnership, or as soon as practicable thereafter, 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. 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, within 120 days after the 
end of each fiscal year of each Partnership (or as soon as practicable 
thereafter), 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 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 Adviser entity (i) serving as an officer, director, 
general partner, manager or investment adviser of the entity (other 
than an entity that is an Aggregation Vehicle), or (ii) 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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18930 Filed 9-6-17; 8:45 am]
 BILLING CODE P


