12258 Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Notices

are members of a national securities

exchange. The time needed for

investment companies to comply with

the requirements of the form is

approximately nine minutes annually.

Form N–17f–2 is the coversheet for

accountant examination certificates

filed pursuant to rule 17f–2 under the

1940 Act by management investment

companies maintaining custody of

securities or other investments. The

time needed for investment companies

to comply with the requirements of the

form is approximately nine minutes

annually.

Form ADV–E is the coversheet for

accountant examination certificates

filed pursuant to rule 206(4)–2 under

the Investment Advisers Act by

investment advisers retaining custody of

client securities or funds. Registrants

each spend approximately three

minutes annually to comply with the

requirements of the form.

Rule 30b2–1 requires the filing of four

copies of every periodic or interim

report transmitted by or on behalf of any

registered investment company to its

shareholders. The annual burden of

filing the reports is estimated to be

negligible.

The estimate of average burden hours

is made solely for the purposes of the

Paperwork Reduction Act, and is not

derived from a comprehensive or even

a representative survey or study of the

cost of SEC rules and forms.

Written comments are requested on:

(a) Whether the collections of

information are necessary for the proper

performance of the functions of the

Commission, including whether the

information has practical utility; (b) the

accuracy of the Commission’s estimate

of the burdens of the collection of

information; (c) ways to enhance the

quality, utility, and clarity of the

information collected; and (d) ways to

minimize the burden of the collection of

information on respondents, including

through the use of automated collection

techniques or other forms of information

technology. Consideration will be given

to comments and suggestions submitted

in writing within 60 days of this

publication.

Direct your written comments to

Michael E. Bartell, Associate Executive

Director, Office of Information

Technology, Securities and Exchange

Commission, 450 5th Street, NW.,

Washington, DC 20549.

Dated: March 6, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–6421 Filed 3–13–97; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IA–1617; 803–104]

Brac Associates Limited Liability

Company, et al.; Notice of Application

March 7, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Advisers Act of 1940 (the ‘‘Advisers

Act’’).

Applicants: Brac Associates Limited

Liability Company (‘‘Brac’’) and

Lexington Capital Partners, L.P.

(‘‘Lexington’’).

Relevant Act Sections: Order

requested under section 205(e) of the

Advisers Act for an exemption from

section 205(a)(1) of the Advisers Act.

Summary of Application: Applicants

are a limited liability company and a

limited partnership that a family formed

to facilitate and simplify the investment

of its assets and multiple trusts

established by family members.

Applicants request an order to permit

registered investment advisers to charge

them performance-based advisory fees.

Filing Dates: The application was

filed on August 29, 1996, and amended

on February 12, 1997.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

April 2, 1997, 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 SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549.

Applicants, c/o Antaeus Enterprises,

Inc., Suite 3020, 420 Lexington Avenue,

New York, New York 10170.

FOR FURTHER INFORMATION CONTACT:

Brian T. Hourihan, Senior Counsel, at

(202) 942–0526, or Mary Kay Frech,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch.

Applicants’ Representations

1. Applicants were formed by the

Beinecke family to facilitate and

simplify the investment of Beinecke

family assets and trusts established by

Beinecke family members. Applicants

are excepted from registration under the

Investment Company Act of 1940 under

section 3(c)(1). Applicants request an

order under section 205(e) of the

Advisers Act granting an exemption

from section 205(a)(1) of the Advisers

Act to permit registered investment

advisers to charge them a performancebased advisory fee.

2. Brac and Lexington are essentially

Beinecke family investment vehicles.

Brac is a Delaware limited liability

company that is owned by Antaeus

Enterprises, Inc. (‘‘Antaeus’’), one

individual Beinecke family member,

and four irrevocable trusts (the trustees

and beneficiaries of which are all

Beinecke family members). Lexington is

a Delaware limited partnership that is

owned by Antaeus, four individual

Beinecke family members, fifteen

irrevocable trusts and one revocable

grantor trust (the trustees and

beneficiaries of which are all Beinecke

family members), and two investment

vehicles established by Mr. Robert L.

Bael, a long-term family employee and

an executive officer of Antaeus

(together, the ‘‘Bael Partners’’).

3. Brac’s managing member and

Lexington’s general partner, Antaeus, is

responsible for making investment

decisions for applicants. Antaeus is an

investment management company

owned by four trusts established by

William Sperry Beinecke for the benefit

of his four children. Antaeus acts as

coordinator and administrator of the

Beinecke family assets, including

certain trusts. Antaeus invests in

publicly traded and privately held fixed

income and equity securities and

investment partnerships, with a portion

of its assets invested in applicants. No

management, performance, or other fee

is charged to the members of Brac or the

limited partners of Lexington.

4. Applicants state that they want to

participate in investment opportunities

managed by registered investment

advisers that seek to charge applicants

a performance-based advisory fee

pursuant to rule 205–3 of the Advisers

Act. Applicants represent that neither

themselves, Antaeus, any other

Beinecke family member who acts as

trustee of any Beinecke trust, any other

Beinecke family member who is a

beneficiary of any of the Beinecke trusts,

nor any partner, trustee or beneficiary of

the Bael Partners has any relationship

with, or is an affiliate or an interested
Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Notices 12259

1 It is unlikely that the alternative requirement of

having at least $500,000 under the management of

the investment adviser will be satisfied, because

applicants invest their assets in multiple private

investment companies.

person of, any such registered

investment adviser.

5. All current members of Brac and

the majority of limited partners of

Lexington, as well as the general

partner, have a net worth exceeding

$1,000,000 and thereby satisfy the client

eligibility requirements of paragraph (b)

of rule 205–3. However, nine trusts

which are limited partners of Lexington

fail individually to satisfy the net worth

requirements of rule 205–3(b) (the

‘‘Non-qualifying Trusts’’).1 Six of the

Non-qualifying Trusts have been

established on behalf of six of the

grandchildren of William Sperry

Beinecke, whose ages range form 7 to

17. The seventh Non-qualifying Trust is

a grantor trust which was established by

a seventh grandchild of William Sperry

Beinecke upon reaching the age of

majority. Such grandchildren are the

ultimate beneficiaries of (a) the four

trusts which own Antaeus, a

corporation having assets with an

estimated market value in excess of $50

million, and (b) the trusts which are

qualifying limited partners of Lexington.

The eighth Non-qualifying Trust is a

testamentary trust beneficially owned

by the four adult children of William

Sperry Beinecke, each of whom has

assets in excess of $1,000,000. The ninth

Non-qualifying Trust is beneficially

owned by the three adult children of

Mr. Bael. Each of the Bael children is

expected to be an eventual beneficiary

of the estate of his or her parents to the

extent of more than $1,000,000. As a

result of the limited partnership

interests held by the Non-qualifying

Trusts, Lexington may not be treated as

satisfying the client eligibility

requirements in paragraph (b) of rule

205–3.

6. Applicants request that any relief

be applicable not only with respect to

the Non-qualifying Trusts that are

currently limited partners of Lexington,

but also with respect to future Beinecke

family trusts and custodianships under

the Uniform Gift to Minors Act

(‘‘UGMA’’) having Beinecke family

members as trustee or custodian, as

applicable, that may become limited

partners or members, as the case may

be, of applicants in the future. Such

future trusts and custodianships will

comply with the representations set

forth in the application.

Applicants’ Legal Analysis.

1. Section 205(a)(1) of the Advisers

Act generally prohibits a registered

investment adviser from receiving

compensation on the basis of a share of

capital gains in or capital appreciation

of a client’s account, or any portion

thereof. Section 205(e) of the Advisers

Act provides that the SEC may exempt

any person or transaction, or any class

or classes of persons or transactions

from section 205(a)(1) of the Advisers

Act if and to the extent that the

exemption relates to an investment

advisory agreement with any person

that the SEC determines does not need

the protection of section 205(a)(1), on

the basis of such factors as financial

sophistication, net worth, knowledge of

and experience in financial matters,

amount of assets under management,

relationship with a registered

investment adviser, and such other

factors as the SEC determines are

consistent with section 205.

2. Rule 205–3 provides an exemption

from the prohibition against

performance-based compensation in

section 205(a)(1) provided the

conditions of the rule are satisfied.

Paragraph (b)(1) of rule 205–3 requires

each client entering into an investment

advisory contract that provides for such

compensation to be: (a) A natural person

or a company who immediately after

entering into the contract has at least

$500,000 under management of the

investment adviser; or (b) a person who

the registered investment adviser

reasonably believes, prior to entering

into the contract, is a natural person or

a company whose net worth at the time

the contract is entered into exceeds

$1,000,000. Paragraph (b)(2) of the rule

provides that the term ‘‘company’’ does

not include private investment

companies such as applicants unless

each of the equity owners is a natural

person or a company, as defined

therein, that meets the eligibility

requirements of paragraph (b)(1) of the

rule. A trust is expressly included in the

definition of a ‘‘company.’’ Applicants

believe that a custodianship should be

viewed as a type of trust for this

purpose because, under UGMA, a

custodian is a fiduciary whose duties

and powers are similar to those of a

trustee.

3. The client eligibility requirements

of rule 205–3 reflect the SEC’s

recognition that certain high net worth

clients have the capacity to bear the

additional risks of performance fees, as

well as the ability to protect themselves

against the potential abuses of

performance fees. Applicants are unable

to rely on the rule because the Nonqualifying Trusts do not satisfy the

$500,000 under management or the

$1,000,000 net worth requirement.

However, applicants believe that

exemptive relief is appropriate under

and consistent with the purposes of

section 205(a)(1) and complies with the

factors specified in section 205(e) of the

Advisers Act because: (a) Antaeus, the

entity which makes the investment

decisions for applicants, satisfies the net

worth requirement, is financially

sophisticated with very substantial

knowledge of and experience in

financial matters, and is fully able to

assess the potential risks of performance

fees; (b) each trustee of the Nonqualifying Trusts is a family member of

the beneficiaries thereof who, in

addition to possessing a high level of

financial sophistication and very

substantial knowledge of and

experience in financial matters, have

substantial personal wealth,

entitlements or expectancies invested in

applicants, and may reasonably be

presumed to be acting in the best

interests of the beneficiaries who are

their close family members; and (c) the

beneficiaries of the Non-qualifying

Trusts have the financial means to bear

the potential risks of performance fees,

because each satisfies the net worth

requirement if his or her entitlements

and expectancies are aggregated for this

purpose, and do not have a relationship

with prospective registered investment

advisers.

4. Because those executing investment

authority for the Non-qualifying Trusts

have such strong and intimate familial

relationships to the beneficiaries,

applicants believe that it is not

unreasonable to presume that the

commonality of such interest will result

in the decision-maker behaving in the

best interests of the beneficiaries. Except

for the requested exemption for the

Non-qualifying Trusts and

custodianships, the requirements of rule

205–3 are satisfied in all respects. Thus,

applicants believe that granting the

requested exemption is appropriate

under and consistent with the purposes

of section 205(a)(1) and the factors

specified in section 205(e).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–6420 Filed 3–13–97; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–22549; 812–10328]

Great-West Life & Annuity Insurance

Company, et al.

March 10, 1997.

AGENCY: The Securities and Exchange

Commission (‘‘Commission’’).