826 Federal Register / Vol. 77, No. 4 / Friday, January 6, 2012 / Notices 

1For the purposes of the requested order, 

‘‘successor’’ is limited to an entity or entities that 

result from a reorganization into another 

jurisdiction or a change in the type of business 

organization. 

2Section 2(a)(48) of the 1940 Act defines a 

business development company to be any closedend investment company that operates for the 

purposes of making investment in securities 

described in sections 55(a)(1) through 55(a)(3) of the 

Act, makes available significant managerial 

assistance with respect to the issuers of such 

securities and has elected to be subject to the 

provisions of section 55 through 65 of the 1940 Act. 

3Subparagraph (d)(1) of rule 12d3–1 defines 

‘‘securities related activities’’ to mean a person’s 

activities as a broker, dealer, underwriter, registered 

investment adviser or investment adviser to a 

registered investment company. 

Investment Management, Inc., 

applicant’s former investment adviser. 

Filing Date: The application was filed 

on November 30, 2011. 

Applicant’s Address: 375 Park Ave., 

32nd floor, New York, NY 10152. 

Arden Sage Multi-Strategy TEI Master 

Fund, LLC 

[File No. 811–22222] 

Summary: Applicant, a closed-end 

investment company, seeks an order 

declaring that it has ceased to be an 

investment company. On September 30, 

2011, applicant transferred its assets to 

Arden Sage Multi-Strategy Master Fund, 

LLC (f/k/a Robeco-Sage Multi-Strategy 

Master Fund, LLC), based on net asset 

value. Expenses of $38,000 incurred in 

connection with the reorganization were 

paid by Robeco Investment 

Management, Inc., applicant’s former 

investment adviser. 

Filing Date: The application was filed 

on November 30, 2011. 

Applicant’s Address: 375 Park Ave., 

32nd floor, New York, NY 10152. 

Keystone High Yield Priority Value 

Fund 

[File No. 811–6149] 

Summary: Applicant seeks an order 

declaring that it has ceased to be an 

investment company. Applicant has 

never made a public offering of its 

securities and does not propose to make 

a public offering or engage in business 

of any kind. 

Filing Date: The application was filed 

on December 7, 2011. 

Applicant’s Address: 200 Berkeley St., 

Boston, MA 02116. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–46 Filed 1–5–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29896; 812–13781] 

Cantilever Capital, LLC and Cantilever 

Group, LLC; Notice of Application 

December 29, 2011. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTIONS: Notice of application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) granting an exemption from 

section 12(d)(3) of the Act. 

APPLICANTS: Cantilever Capital, LLC 

(‘‘Cantilever’’ or the ‘‘Company’’) and 

Cantilever Group, LLC (the ‘‘Adviser’’). 

SUMMARY OF APPLICATION: Cantilever, or 

any successor to Cantilever, and the 

Adviser, or any successor to the Adviser 

(each, an ‘‘Applicant’’ and collectively, 

the ‘‘Applicants’’) seek an order under 

section 6(c) of the Act to permit 

Cantilever to acquire the securities of 

various investment managers that each 

derives more than 15% of its gross 

revenues from securities related 

activities as defined in rule 12d3–1(d)(1) 

under the Act, in excess of the 

limitations in rule 12d3–1(b).1

DATES: Filing Dates: The application was 

filed on June 8, 2010, and amended on 

October 18, 2010, and December 5, 

2011. Applicants have agreed to file an 

amendment during the notice period, 

the substance of which is reflected in 

this notice. 

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 

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 January 23, 2012, and 

should be accompanied by proof of 

service on the 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, Securities and 

Exchange Commission, 100 F Street NE. 

Washington, DC 20549–1090. 

Applicants, c/o Mr. David Ballard, 

Cantilever Capital, LLC, 137 Rowayton 

Ave., Third Floor, Rowayton, CT 06853. 

FOR FURTHER INFORMATION CONTACT: Jean 

E. Minarick, Senior Counsel, at (202) 

551–6811, or Janet M. Grossnickle, 

Assistant Director, 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 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 Company, a Delaware limited 

liability company, intends to operate as 

a non-diversified, closed-end 

management investment company 

under the Act. The Company intends to 

elect to be treated as a business 

development company under section 54 

of the Act on or before June 30, 2014.2

The Adviser is a Delaware limited 

liability company organized to manage 

the Company, which will be the sole 

client of the Adviser, and will not 

engage in any other business. Cantilever 

will invest more than 70% of the total 

value of its assets in securities of private 

companies engaged exclusively in the 

investment management business (each, 

an ‘‘Investment Manager’’), with the 

exception that certain Investment 

Managers may, through affiliates (as 

defined below) or subsidiaries, also 

provide limited broker-dealer services 

in connection with distribution of their 

investment products or as part of a 

wealth management business. 

Applicants expect that more than 15% 

of the revenues of each Investment 

Manager will be from ‘‘securities related 

activities’’ as defined in rule 12d3– 

1(d)(1) under the Act.3

2. Applicants will offer to make 

available to the Investment Managers, 

and if desired by the Investment 

Managers provide, managerial services 

including distribution and marketing 

advice; guidance on industry best 

practices; advice on planning, strategy 

and product development; geographic 

expansion and mergers and 

acquisitions, joint ventures, and liftouts; 

advice on operations, accounting, legal, 

capital structure, human resources and 

compensation, general management and 

industry networking. Neither the 

Applicants nor their affiliates will 

provide any managerial assistance that 

includes any activity involving any 

Investment Manager’s investment 

process or investment decisions. 

3. The Company will provide debt 

capital to Investment Managers, 


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Federal Register / Vol. 77, No. 4 / Friday, January 6, 2012 / Notices 827 

4 In order to comply with the Internal Revenue 

Code’s diversification requirements for regulated 

investment companies, it is contemplated that, with 

respect to at least 50% of the Company’s total 

assets, each of the investments in an Investment 

Manager will not constitute more 5% of the 

Company’s total assets at the time of investment. 

However, with respect to the remaining 50% of the 

Company’s total assets, the Company intends to 

make investments that each constitute more than 

5% but less than 25% of the value of the Company’s 

total assets, as measured at the time of the 

acquisition. 

including Investment Managers that are 

or may become registered under the 

Investment Advisers Act of 1940. In 

exchange for a non-voting, noncontrolling loan from the Company or 

its affiliates (as defined below), the 

Investment Manager will issue a 

participating convertible debt security 

to the Company (each, a ‘‘Note’’ and 

such loan, a ‘‘Loan’’). Each Note will 

have a coupon and will provide for 

repayment of principal at the Note’s 

maturity (such maturity is contemplated 

to be 20 years after the issue date) in the 

event that it is not converted into equity 

of the underlying Investment Manager at 

such time. If converted into equity, it is 

expected that in most cases the equity 

security received from the conversion of 

the Notes would consist of non-voting 

securities and in any case would not 

represent more than 25% of outstanding 

voting securities, or otherwise constitute 

control, of the underlying Investment 

Manager. The Notes will not be actively 

or publicly traded; they will be 

purchased by the Company in private 

transactions and, generally, held to 

maturity. 

4. Applicants represent that most of 

the Investment Managers issuing the 

Notes will be registered investment 

advisers and the vast majority of each 

Investment Manager’s revenue will be 

earned by charging a fee on assets under 

management or possibly also through a 

performance fee. The amount of the 

Company’s investments in each of the 

Notes, which Applicants believe will be 

treated as equity securities for purposes 

of rule 12d3–1, will likely constitute 

more than 5% of the outstanding equity 

securities of each Investment Manager at 

the time of the investment. In the event 

the Company invests in Notes of an 

Investment Manager that are treated as 

debt securities for purposes of rule 

12d3–1, the principal amount of that 

debt will likely exceed 10% of the 

outstanding principal amount of the 

Investment Manager’s debt securities. In 

addition, Applicants believe that there 

will be instances whereby more than 

5% of the value of Applicant’s total 

assets will be invested in each of several 

of the Investment Managers.4

5. Applicants believe that permitting 

the Company to invest in the equity and 

debt securities of various Investment 

Managers, each of which the Applicants 

believe will be an issuer that derives 

more than 15% of its gross revenues 

from ‘‘securities related activities,’’ in 

excess of the quantitative limitations set 

forth in rule 12d3–1(b) would be in the 

best interests of the Company’s 

shareholders. Applicants will comply 

with all other requirements of rule 

12d3–1. Applicants will require each of 

the Investment Managers to 

contractually agree to be bound by the 

terms of the conditions of the 

application. 

Applicants’ Legal Analysis 

1. Section 12(d)(3) of the Act, with 

limited exceptions, prohibits a 

registered investment company from 

purchasing or otherwise acquiring any 

securities issued by any person who is 

a broker, a dealer, is engaged in the 

business of underwriting, or is either an 

investment adviser of a registered 

investment company or a registered 

investment adviser. Rule 12d3–1 under 

the Act exempts the acquisition of 

securities of an issuer that derived more 

than 15% of its gross revenues in its 

most recent fiscal year from ‘‘securities 

related activities,’’ provided that, among 

other things, immediately after the 

acquisition of such issuer’s equity or 

debt securities, (i) the acquiring 

company has invested not more than 

5% of the value of its total assets in 

securities of the issuer and (ii) the 

acquiring company owns (a) with 

respect to that class of the issuer’s 

equity securities, not more than 5% of 

the outstanding securities of that class 

or (b) with respect to the issuer’s debt 

securities, not more than 10% of the 

outstanding principal amount of the 

issuer’s debt securities. Section 6(c) of 

the Act provides that the Commission 

may conditionally or unconditionally 

exempt any person, security or 

transaction from any provision of the 

Act or any rule thereunder, 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. 

2. The Applicants request an order 

pursuant to section 6(c) of the Act 

exempting the Applicants from the 

provisions of section 12(d)(3) of the Act 

to the extent necessary to permit the 

Applicants to invest in the equity and 

debt securities of various Investment 

Managers, each an issuer that derives 

more than 15% of its gross revenues 

from ‘‘securities related activities,’’ in 

excess of the quantitative limitations set 

forth in rule 12d3–1(b). 

3. The Applicants state that section 

12(d)(3) was intended (a) to prevent 

investment companies from exposing 

their assets to the entrepreneurial risks 

of securities related businesses, (b) to 

prevent potential conflicts of interest 

and to eliminate certain reciprocal 

practices between investment 

companies and securities related 

businesses, and (c) to ensure that 

investment companies maintain 

adequate liquidity in their portfolios. 

4. The Applicants believe that the 

Company’s investment in various 

Investment Managers does not raise the 

same type of entrepreneurial risks that 

may have concerned Congress in 

enacting section 12(d)(3). The 

Applicants state that the ownership 

structure of most securities related 

businesses has changed since the time 

of enactment from partnership to a 

corporate form resulting in the limited 

liability status of these entities. In this 

case, the Company states that it will 

invest only in Investment Managers 

organized as corporations or other 

limited liability entities. The Applicants 

argue that shareholders choosing to 

invest in the Company will have sought 

exposure to a vehicle that that provides 

a non-diversified investment in one or 

more Investment Managers, and the 

Company’s shareholders will be 

informed of the risks, including 

entrepreneurial risk, of investing in the 

Company by disclosure in the 

Company’s prospectus in connection 

with its initial public offering and its 

ongoing disclosure as a public company 

following the offering. 

5. The Applicants also believe that the 

proposed investments in various 

Investment Managers will not create 

potential conflicts of interest for the 

Applicants or their respective 

shareholders. One potential conflict 

could occur if an investment company 

purchased securities or other interests 

in a broker-dealer to reward that brokerdealer for selling fund shares, rather 

than solely on investment merit. The 

Applicants note that, as a condition to 

the granting of exemptive relief, the 

Investment Managers and their affiliated 

persons within the meaning of section 

2(a)(3) of the Act and affiliated persons 

of such affiliated persons (collectively, 

‘‘Affiliates’’) and the clients of the 

Investment Manager will not buy, sell or 

otherwise trade any securities issued by 

the Applicants or any of its Affiliates. 

6. Applicant states that another 

potential conflict of interest is that 

investment advisers could be influenced 

to recommend to their clients certain 

investment companies that invest in 


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828 Federal Register / Vol. 77, No. 4 / Friday, January 6, 2012 / Notices 

5For the purposes of this paragraph, the terms 

‘‘equity security’’ and ‘‘debt securities’’ have the 

meanings given them in Rule 12d3–1. 

such investment adviser or its affiliates, 

thereby using the assets of the 

investment companies to boost the price 

of the investment adviser’s securities. 

Applicant notes that, as a condition to 

the requested order, the Investment 

Managers and their Affiliates will not 

sell any securities issued by the 

Applicants as an underwriter, will not 

make a market in any securities issued 

by the Applicants, will not act as agent 

or a broker in connection with the sale 

of any shares of the Applicants and will 

not recommend investing in securities 

of the Applicants. 

7. The Applicants state that another 

purpose of section 12(d)(3) is to prevent 

investment companies from directing 

brokerage to a broker-dealer in which 

the investment company has invested to 

enhance the broker-dealer’s profitability 

or to assist it during financial difficulty, 

even though that broker-dealer may not 

offer the best price and execution. The 

Company represents that its business is 

to provide specialized debt capital to 

Investment Managers. The Applicants 

also represent that Investment Managers 

today typically do not serve as 

underwriters and broker-dealers (except 

as noted above) and thus it is highly 

unlikely that there would be any 

opportunity to engage in any transaction 

with an Investment Manager or its 

Affiliates, other than the Company’s 

investment (and any follow-on 

investment) in such Investment 

Manager. Further, as a condition to the 

requested order, the Applicants will not 

use any Investment Manager or any 

Affiliate thereof as a broker-dealer for 

the purchase or sale of any portfolio 

securities. 

8. The Applicants also believe that 

section 12(d)(3) reflects a concern with 

respect to the liquidity of an investment 

company’s portfolio. Because the 

shareholders that will invest in the 

Company prior to its initial public 

offering (each of which will be 

intimately familiar with the business of 

the Company) will have done so for the 

specific purpose of buying and holding 

a vehicle that would provide for an 

investment in Investment Managers, 

liquidity of the Company’s portfolio is 

not a concern for the Company’s 

shareholders. Furthermore, shareholders 

that invest in the Company during or 

following the initial public offering will 

receive disclosure (i) in the Company’s 

prospectus in connection with its initial 

public offering and (ii) pursuant to its 

ongoing reporting requirements as a 

public company following its initial 

public offering. Such disclosure will 

describe the fact that the Company’s 

business (like that of business 

development companies generally) is 

investing in illiquid investments of 

small, developing companies, and more 

specifically, purchasing Notes in 

Investment Managers. Moreover, the 

Company is a closed-end investment 

company that does not offer redeemable 

securities; therefore, there are no 

minimum liquidity standards applicable 

to the Company under the Act. 

9. Applicant believes that its 

proposed acquisitions of the securities 

of various Investment Managers do not 

present the potential for the risks and 

abuses section 12(d)(3) is intended to 

eliminate, including the risk of 

reciprocal practices. The Applicants 

believe that the standards set forth in 

section 6(c) have been met. 

Applicants’ Conditions 

The Applicants agree that the order 

granting the requested relief will be 

subject to the following conditions: 

1. Neither of the Applicants and none 

of their respective Affiliates will engage 

in any transaction with an Investment 

Manager other than (i) the Company’s 

investment in the Investment Manager 

(and any follow-on investment) and (ii) 

the Company’s providing managerial 

assistance to an Investment Manager. 

The managerial assistance provided by 

the Company or any of its Affiliates will 

not include any activity involving any 

Investment Manager’s investment 

process or investment decisions. 

2. No Investment Manager or its 

Affiliates or client of an Investment 

Manager or its Affiliates will (i) buy, sell 

or otherwise trade securities issued by 

the Applicants or any of their respective 

Affiliates, or (ii) buy, sell or otherwise 

trade securities owned by the 

Applicants or any of their respective 

Affiliates in transactions involving the 

Applicants or any of their respective 

Affiliates. Nor will any Investment 

Manager or its Affiliates sell any 

securities issued or owned by the 

Applicants or any of their respective 

Affiliates as an underwriter, make a 

market in any securities issued or 

owned by the Applicants or act as agent 

or as a broker in connection with the 

sale of any securities issued or owned 

by the Applicants or any of their 

respective Affiliates or recommend to 

their clients the purchase of any such 

securities. 

3. Neither of the Applicants nor any 

of their respective Affiliates will use any 

Investment Manager or any Affiliate 

thereof as a broker-dealer for the 

purchase or sale of any portfolio 

securities. 

4. No Investment Manager or its 

Affiliates will provide any services to 

the Applicants or any of their respective 

Affiliates. 

5. No officer of the Applicants or 

member of the Applicants’ board of 

managers (‘‘Board’’) will be affiliated 

with an Investment Manager or its 

Affiliates. The Applicants, their 

respective Affiliates or their officers or 

directors will not (i) serve on the board 

of directors of an Investment Manager, 

(ii) participate in the management of an 

Investment Manager (except for 

providing managerial assistance) or (iii) 

have other indicia of control as defined 

in the Act (other than typical rights of 

debt holders, including, but not limited 

to, access to certain information). The 

only affiliation the Applicants (or any of 

their respective officers or members) 

will have will be as a provider of debt 

capital. 

6. The Applicants’ respective Chief 

Compliance Officers will monitor and 

report to the applicable Applicant’s 

Board no less than annually on 

compliance with these conditions. 

7. The Applicants will comply with 

the provisions of rule 12d3–1 under the 

Act, except for paragraph (b) solely to 

the extent necessary to permit the 

Company to invest (i) more than 5% of 

the value of its total assets in equity 

securities issued by a registered 

investment adviser, (ii) in more than 5% 

of the outstanding equity securities of a 

registered investment adviser, and (iii) 

in more than 10% of the outstanding 

principal amount of a registered 

investment adviser’s debt securities, 

provided that, (aa) immediately after the 

Company makes an investment 

permitted by (i) and/or (ii), not more 

than 50% of the value of the Company’s 

total assets will consist of investments 

permitted by (i) and/or (ii), (bb) in no 

event will the Company acquire more 

than 25% of the outstanding voting 

securities of a registered investment 

adviser or otherwise control a registered 

investment adviser, and (cc) 

immediately after the Company makes 

an investment permitted by (iii), not 

more than 10% of the value of the 

Company’s total assets will consist of 

investments permitted by (iii).5

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2011–33859 Filed 1–5–12; 8:45 am] 

BILLING CODE 8011–01–P 


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