58694 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices 

1A ‘‘carried interest’’ is an allocation to the 

Manager based on net gains in addition to the 

amount allocable to such entity in proportion to its 

capital contributions. A Manager that is registered 

as an investment adviser under the Advisers Act 

may charge a carried interest only if permitted by 

rule 205–3 under the Advisers Act. Any carried 

interest paid to a Manager that is not registered 

under the Advisers Act will comply with section 

easily accessible place, minutes 

specifically describing the deliberations 

by the Board and the information and 

documents supporting those 

deliberations, the factors considered by 

the Board in connection with such 

determination, and the basis of such 

determination. 

2. Upon expiration of the Exemption 

Period, each Fund will have asset 

coverage of at least 300% for each class 

of senior security representing 

indebtedness. 

3. The Board of any Fund that has 

borrowed in reliance on the order shall 

receive and review, no less frequently 

than quarterly during the Exemption 

Period, detailed progress reports 

prepared by management (or other 

parties selected by the Independent 

Trustees) regarding and assessing the 

efforts that the applicant has 

undertaken, and the progress that the 

applicant has made, towards achieving 

compliance with the appropriate asset 

coverage requirements under section 18 

by the expiration of the Exemption 

Period. The Board, including a majority 

of the Independent Trustees, will make 

such adjustments as it deems necessary 

or appropriate to ensure that the 

applicant comes into compliance with 

section 18 of the Act within a 

reasonable period of time, not to exceed 

the expiration of the Exemption Period. 

Each Fund will make and preserve 

minutes describing these reports and the 

Board’s review, including copies of such 

reports and all other information 

provided to or relied upon by the Board, 

for a period of not less than six years 

from the date of such determination, the 

first two years in an easily accessible 

place. 

By the Commission. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23672 Filed 10–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28428; 813–00355] 

HLHZ Investments II, LLC and 

Houlihan, Lokey, Howard & Zukin, Inc.; 

Notice of Application 

September 30, 2008. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an 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, except section 9 

and sections 36 through 53, and the 

rules and regulations under the Act. 

With respect to sections 17 and 30 of the 

Act, and the rules and regulations 

thereunder, and rule 38a-1 under the 

Act, the exemption is limited as set 

forth in the application. 

Summary of Application: Applicants 

request an order to exempt certain 

limited liability companies and other 

investment vehicles established 

primarily for the benefit of eligible 

employees of Houlihan, Lokey, Howard 

& Zukin, Inc. (‘‘HLHZ’’) and its affiliates 

from certain provisions of the Act. Each 

limited liability company or other 

investment vehicle will be an 

‘‘employees’ securities company’’ 

within the meaning of section 2(a)(13) of 

the Act. 

Applicants: HLHZ Investments II, LLC 

(the ‘‘Initial Fund’’) and HLHZ. 

Filing Dates: The application was 

filed on August 26, 2004 and amended 

on November 17, 2004, March 14, 2008, 

and June 20, 2008. 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 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 October 27, 2008, 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, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants, 1930 Century Park West, 

Los Angeles, CA 90067–6802. 

FOR FURTHER INFORMATION CONTACT: 

Laura J. Riegel, Senior Counsel, at (202) 

551–6873 or Julia Kim Gilmer, Branch 

Chief, at (202) 551–6821 (Division of 

Investment Management, Office of 

Investment Company Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington, DC 

20549–1520 (telephone (202) 551–5850). 

Applicants’ Representations 

1. HLHZ is an investment banking 

firm organized under the laws of the 

State of California. HLHZ provides a 

range of investment banking services, 

including mergers and acquisitions, 

financing, financial opinions and 

advisory services and financial 

restructuring. HLHZ and its ‘‘affiliates,’’ 

as defined in rule 12b–2 under the 

Securities Exchange Act of 1934 (the 

‘‘1934 Act’’), are referred to collectively 

as ‘‘HLHZ Group’’ and each entity 

within HLHZ Group is referred to 

individually as a ‘‘HLHZ Group entity.’’ 

2. The Initial Fund is a California 

limited liability company. HLHZ Group 

may offer in the future other investment 

vehicles identical in all material 

respects to the Initial Fund (other than 

investment objectives and strategies and 

form of organization) (together with the 

Initial Fund, the ‘‘Funds’’). Each Fund 

will be a limited liability company or 

other investment vehicle formed as an 

‘‘employees’ security company’’ within 

the meaning of section 2(a)(13) of the 

Act. Each Fund will operate as a nondiversified, closed-end management 

company. The Funds have been or will 

be established primarily for key 

employees of the HLHZ Group as part 

of a program designed to create capital 

building opportunities that are 

competitive with those at other 

investment banking firms and to 

facilitate its recruitment of high caliber 

professionals. 

3. Each Fund will have a managing 

member or general partner (‘‘Manager’’) 

that is an HLHZ Group entity and that 

will manage, operate, and control such 

Fund. The Manager will be registered as 

an investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’) if required by 

applicable law. HLHZ, the Manager of 

the Initial Fund, is exempt from 

registration as an investment adviser 

under the Advisers Act. The Manager 

will be authorized to delegate 

investment management responsibility 

to a HLHZ Group entity or a committee 

of HLHZ Group employees. The 

ultimate responsibility for the Funds’ 

investments will remain with the 

Manager. The Manager may be entitled 

to receive compensation or a 

performance-based fee (a ‘‘carried 

interest’’).1

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205(b)(3) of the Advisers Act, with the Fund treated 

as a business development company solely for 

purposes of that section. 

2Applicants are not requesting any exemption 

from any provision of the Act or any rule 

thereunder that may govern the eligibility of a Fund 

to invest in an entity relying on section 3(c)(1) or 

section 3(c)(7) of the Act or any such entity’s status 

under the Act. 

4. Interests in the Funds (‘‘Interests’’) 

will be offered without registration in 

reliance on section 4(2) of the Securities 

Act of 1933 (the ‘‘1933 Act’’) or 

Regulation D under the 1933 Act 

(‘‘Regulation D’’). Interests will be sold 

only to ‘‘Eligible Employees,’’ ‘‘Eligible 

Consultants’’ or ‘‘Qualified Entities,’’ in 

each case as defined below, or to HLHZ 

Group entities. Prior to offering Interests 

in a Fund to an Eligible Employee or 

Eligible Consultant (either, an ‘‘Eligible 

Participant’’) or a Qualified Entity, the 

Manager must reasonably believe that 

each Eligible Participant that is required 

to make an investment decision with 

respect to whether or not to participate 

in a Fund, on behalf of itself or its 

related Qualified Entity, will be a 

sophisticated investor capable of 

understanding and evaluating the risks 

of participating in such Fund without 

the benefit of regulatory safeguards. All 

investors in a Fund will be ‘‘Members’’ 

and all Members in a Fund other than 

the Manager will be ‘‘Participants.’’ 

5. An ‘‘Eligible Employee’’ is an 

individual who is a current or former 

employee, officer, or director of HLHZ 

Group and (a) meets the standards of an 

‘‘accredited investor’’ under rule 

501(a)(5) or 501(a)(6) of Regulation D or 

(b) is one of 35 individuals who are 

‘‘knowledgeable employees,’’ as defined 

in rule 3c–5(a)(4) under the Act (with 

the Fund treated as though it were a 

‘‘covered company’’ for purposes of the 

rule) (such individuals, ‘‘NonAccredited Investors’’). A Fund may not 

have more than 35 Non-Accredited 

Investors. 

6. An ‘‘Eligible Consultant’’ is a 

natural person or entity that a HLHZ 

Group entity has engaged on retainer to 

provide services and professional 

expertise on an ongoing basis as regular 

consultants or business or legal advisors 

and shares a community of interest with 

the HLHZ Group and HLHZ Group 

employees and (a) meets the standards 

of an ‘‘accredited investor’’ under rule 

501(a)(5) or 501(a)(6) of Regulation D, if 

a natural person or (b) meets the 

standards of an ‘‘accredited investor’’ 

under rule 501(a), if an entity. 

7. In the discretion of a Manager and 

at the request of an Eligible Employee, 

Interests may be assigned to a Qualified 

Entity of an Eligible Employee or 

purchased by the Qualified Entity. A 

‘‘Qualified Entity’’ is (a) a trust of which 

the trustee, grantor and/or beneficiary is 

an Eligible Employee, or (b) a 

partnership, limited liability company, 

corporation or other entity controlled by 

an Eligible Employee or Eligible 

Consultant, which trust or other entity 

meets the standards of an ‘‘accredited 

investor’’ under rule 501(a) of 

Regulation D. 

8. The terms of a Fund will be fully 

disclosed to each Eligible Participant 

and, if applicable, to each Qualified 

Entity at the time they are invited to 

participate in a Fund. Each Eligible 

Participant and applicable Qualified 

Entity will receive a copy of the Fund’s 

organizational documents prior to 

investment in the Fund. The Manager of 

each Fund will send Participants 

audited financial statements of the Fund 

as soon as practicable after the end of 

the Fund’s fiscal year. In addition, the 

Manager will send a report to each 

Participant of the Fund setting forth the 

tax information necessary for the 

preparation of the Participant’s federal 

and state income tax returns. 

9. Interests in a Fund will be nontransferable except with the prior 

written consent of the Manager. No 

person will be admitted into a Fund 

unless the person is an Eligible 

Participant, a Qualified Entity, or an 

HLHZ Group entity. No sales load will 

be charged in connection with the sale 

of Interests. 

10. The Initial Fund has the right, but 

not the obligation, to purchase all or any 

portion of the Interests of a Member 

who ceases to be a current employee, 

officer or director of HLHZ Group for 

any reason. The repurchase price for all 

or any portion of an Interest will be 

based on a preset book-value based 

formula set forth in the operating 

documents. The Manager of any Fund 

will have the absolute right to purchase 

any Interest from any Member, for a 

value determined by a formula set forth 

in the Fund’s partnership or operating 

agreements, subscription agreements or 

similar documents, if the Manager 

determines in good faith that the 

Member’s continued ownership of the 

Interest jeopardizes the Fund’s status as 

an ‘‘employees’ securities company’’ 

under the Act. 

11. A Fund may invest its portfolio 

investments directly or indirectly 

through other pooled investment 

vehicles (including a limited 

partnership or limited liability 

company).2 Subject to the terms of the 

applicable operating agreement, a Fund 

will be permitted to enter into 

transactions involving (a) a HLHZ 

Group entity, (b) a Fund investment, or 

(c) any Member or person or entity 

affiliated with a Member. Prior to 

entering into any of these transactions, 

the Manager must determine that the 

terms are fair to the Members. 

12. A Fund will not borrow from any 

person if such borrowing would cause 

any person not named in section 

2(a)(13) of the Act to own outstanding 

securities of the Fund (other than shortterm paper). A Fund will not lend funds 

to any HLHZ Group entity. 

13. A Fund will not acquire any 

security issued by a registered 

investment company if immediately 

after the acquisition, the Fund will own 

more than 3% of the outstanding voting 

stock of the registered investment 

company. 

Applicants’ Legal Analysis 

1. Section 6(b) of the Act provides, in 

part, that the Commission will exempt 

employees’ securities companies from 

the provisions of the Act to the extent 

that the exemption is consistent with 

the protection of investors. Section 6(b) 

provides that the Commission will 

consider, in determining the provisions 

of the Act from which the company 

should be exempt, the company’s form 

of organization and capital structure, the 

persons owning and controlling its 

securities, the price of the company’s 

securities and the amount of any sales 

load, how the company’s funds are 

invested, and the relationship between 

the company and the issuers of the 

securities in which it invests. Section 

2(a)(13) defines an employees’ securities 

company as any investment company 

all of whose securities (other than shortterm 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 an investment company that is 

not registered under section 8 of the Act 

from selling or redeeming its securities. 

Section 6(e) provides that, in connection 

with any order exempting an investment 

company from any provision of section 

7, certain provisions of the Act, as 

specified by the Commission, will be 

applicable to the company and other 

persons dealing with the company as 

though the company were registered 

under the Act. Applicants request an 

order under sections 6(b) and 6(e) of the 

Act exempting the Funds from all 

provisions of the Act, except section 9 

and sections 36 through 53 of the Act, 

and the rules and regulations under the 

Act. With respect to sections 17 and 30 

of the Act, and the rules and regulations 

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58696 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices 

thereunder, and rule 38a–1 under the 

Act, the exemption is limited as set 

forth in the application. 

3. Section 17(a) generally prohibits 

any affiliated person of a registered 

investment company, or any affiliated 

person of an affiliated person, acting as 

principal, from knowingly selling or 

purchasing any security or other 

property to or from the company. 

Applicants request an exemption from 

section 17(a) to permit: (a) An HLHZ 

Group entity, acting as principal, to 

engage in any transaction directly or 

indirectly with any Fund or any 

company controlled by such Fund; and 

(b) any Fund to invest in or engage in 

any transaction with any HLHZ Group 

entity, acting as principal, (i) in which 

the Fund, any company controlled by 

the Fund, or any HLHZ Group entity has 

invested or will invest, or (ii) with 

which the Fund, any company 

controlled by the Fund, or any HLHZ 

Group entity is or will become 

otherwise affiliated. 

4. Applicants state that an exemption 

from section 17(a) is consistent with the 

policy of each Fund and the protection 

of investors. Applicants state that the 

Members in each Fund will be fully 

informed of the possible extent of the 

Fund’s dealings with the HLHZ Group. 

Applicants also state that, as 

experienced professionals employed in 

investment banking, securities, or 

investment management businesses, 

Members in each Fund will be able to 

understand and evaluate the attendant 

risks. Applicants assert that the 

community of interest among Members 

and HLHZ Group is the best insurance 

against any risk of abuse. 

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. 

Applicants request relief under rule 

17d–1 to permit affiliated persons of 

each Fund, or affiliated persons of such 

persons, to participate in any joint 

arrangement in which the Fund or a 

company controlled by the Fund is a 

participant. 

6. Applicants state that compliance 

with section 17(d) would cause a Fund 

to forego investment opportunities 

simply because a Participant in such 

Fund or other affiliated person of the 

Fund (or any affiliated person of the 

affiliated person) also had, or 

contemplated making, a similar 

investment. Applicants also submit that 

the types of investment opportunities 

considered by a Fund often require each 

participant to make available funds in 

an amount that may be substantially 

greater than that available to the Fund 

alone. Applicants contend that, as a 

result, the only way in which a Fund 

may be able to participate in such 

opportunities may be to co-invest with 

other persons, including its affiliates. 

Applicants assert that the flexibility to 

structure co-investments and joint 

transactions in the context of 

employees’ securities companies will 

not involve abuses of the type section 

17(d) and rule 17d–1 were designed to 

prevent. 

7. Section 17(f) of the Act designates 

the entities that may act as investment 

company custodians, and rule 17f–2 

under the Act allows an investment 

company to act as self-custodian, 

subject to certain requirements. 

Applicants request an exemption from 

section 17(f) and rule 17f–2 to permit 

the following exceptions from the 

requirements of rule 17f–2: (a) A Fund’s 

investments may be kept in the locked 

files of the Manager for purposes of 

paragraph (b) of the rule; (b) for 

purposes of paragraph (d) of the rule, (i) 

employees of the Manager will be 

deemed to be employees of the Funds, 

(ii) officers of the Manager and the 

Manager of a Fund will be deemed to be 

officers of the Fund, and (iii) the 

members of the board of managers or 

directors of the Manager will be deemed 

to be the board of directors of the Fund; 

and (c) in place of the verification 

procedures under paragraph (f) of the 

rule, verification will be effected 

quarterly by two employees of the 

Manager. With respect to certain Funds, 

applicants expect that many of their 

investments will be evidenced only by 

partnership or operating agreements, 

subscription agreements or similar 

documents, rather than by negotiable 

certificates that could be 

misappropriated. Applicants believe 

that these instruments are most suitably 

kept in the Manager’s files, where they 

can be referred to as necessary. 

8. Section 17(g) and rule 17g–1 

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 

(‘‘independent directors’’) take certain 

actions and give certain approvals 

relating to fidelity bonding. Applicants 

request relief to permit the Manager’s 

board of managers or directors, who 

may be deemed interested persons, to 

take actions and make determinations as 

set forth in the rule. Applicants state 

that, because all the members of a board 

of managers or directors of a Manager 

will be interested persons, a Fund could 

not comply with rule 17g–1 without the 

requested relief. Specifically, each Fund 

will comply with rule 17g–1 by having 

a majority of the members of the board 

of managers or directors of the Manager 

take such actions and make such 

approvals as are set forth in rule 17g– 

1. Applicants also request an exemption 

from the requirements of paragraph (g) 

of rule 17g–1 relating to the filing of 

copies of fidelity bonds and related 

information with the Commission and 

the provision of notices to the board of 

directors, paragraph (h) of rule 17g–1 

relating to the appointment of a person 

to make the filings and provide notices 

required by paragraph (g), and an 

exemption from the requirements of 

paragraph (j)(3) that the Funds comply 

with the fund governance standards 

defined in rule 0–1(a)(7). Applicants 

state that each Fund will comply with 

all other requirements of rule 17g–1. 

9. Section 17(j) of the Act and 

paragraph (b) of rule 17j–1 under the 

Act make it unlawful for certain 

enumerated persons to engage in 

fraudulent or deceptive practices in 

connection with the purchase or sale of 

a security held or to be acquired by a 

registered investment company. Rule 

17j–1 also requires that every registered 

investment company adopt a written 

code of ethics and that every access 

person of a registered investment 

company report personal securities 

transactions. Applicants request an 

exemption from the provisions of rule 

17j–1, except for the anti-fraud 

provisions of paragraph (b), because 

they are unnecessarily burdensome as 

applied to the Funds. 

10. Applicants request an exemption 

from the requirements in sections 30(a), 

30(b), and 30(e) of the Act, and the rules 

under those sections, that registered 

investment companies prepare and file 

with the Commission and mail to their 

shareholders certain periodic reports 

and financial statements. Applicants 

contend that the forms prescribed by the 

Commission for periodic reports have 

little relevance to a Fund and would 

entail administrative and legal costs that 

outweigh any benefit to the Members. 

Applicants request exemptive relief to 

the extent necessary to permit each 

Fund to report annually to its Members. 

Applicants also request an exemption 

from section 30(h) of the Act to the 

extent necessary to exempt the Manager 

of each Fund and any other persons 

who may be deemed to be members of 

an advisory board of a Fund from filing 

Forms 3, 4, and 5 under section 16(a) of 

the 1934 Act with respect to their 

ownership of Interests in the Fund. 

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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. 

11. Rule 38a–1 requires investment 

companies to adopt, implement and 

periodically review written policies 

reasonably designed to prevent violation 

of the federal securities law and to 

appoint a chief compliance officer. Each 

Fund will comply will rule 38a–1(a), (c) 

and (d), except that (a) because the Fund 

does not have a board of directors, the 

board of managers or directors of the 

Manager will fulfill the responsibilities 

assigned to the Fund’s board of directors 

under the rule, (b) because the board of 

managers or directors of the Manager 

does not have any independent 

directors, approval by a majority of the 

independent directors required by rule 

38a–1 will not be obtained; and (c) 

because the board of managers or 

directors of the Manager does not have 

any independent directors, the Fund 

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 managers or directors of the 

Manager as constituted. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Each proposed transaction 

otherwise prohibited by section 17(a) or 

section 17(d) and rule 17d–1 to which 

a Fund is a party (the ‘‘Section 17 

Transaction’’) will be effected only if the 

Manager determines that: 

(a) The terms of the Section 17 

Transaction, including the 

consideration to be paid or received, are 

fair and reasonable to the Members of 

such Fund and do not involve 

overreaching of such Fund or its 

Members on the part of any person 

concerned; and 

(b) The Section 17 Transaction is 

consistent with the interests of the 

Members of such Fund, such Fund’s 

organizational documents and such 

Fund’s reports to its Members. 

In addition, the Manager of each Fund 

will record and preserve a description of 

Section 17 Transactions, the Manager’s 

findings, the information or materials 

upon which the Manager’s findings are 

based, and the basis for the findings. All 

such records will be maintained for the 

life of the Fund and at least six years 

thereafter, and will be subject to 

examination by the Commission and its 

staff. Each Fund will preserve the 

accounts, books, and other documents 

required to be maintained in an easily 

accessible place for the first two years. 

2. In connection with the Section 17 

Transactions, the Manager of each Fund 

will adopt, and periodically review and 

update, procedures designed to ensure 

that reasonable inquiry is made, prior to 

the consummation of any Section 17 

Transaction, with respect to the possible 

involvement in the transaction of any 

affiliated person or promoter of or 

principal underwriter for such Fund, or 

any affiliated person of an affiliated 

person, promoter, or principal 

underwriter. 

3. The Manager of each Fund will not 

invest the funds of such Fund in any 

investment in which a ‘‘Co-Investor’’ (as 

defined below) has acquired or proposes 

to acquire the same class of securities of 

the same issuer, where the investment 

involves a joint enterprise or other joint 

arrangement within the meaning of rule 

17d-1 in which such Fund and the CoInvestor are participants, unless any 

such Co-Investor, prior to disposing of 

all or part of its investment, (a) gives 

such Manager sufficient, but not less 

than one day’s, notice of its intent to 

dispose of its investment; and (b) 

refrains from disposing of its investment 

unless such Fund has the opportunity to 

dispose of such Fund’s investment prior 

to or concurrently with, and on the 

same terms as, and pro rata with the CoInvestor. The term ‘‘Co-Investor’’ means, 

with respect to any Fund: (a) An 

‘‘affiliated person’’ (as defined in 

section 2(a)(3) of the Act) of such Fund; 

(b) any HLHZ Group entity; (c) an 

officer or director of HLHZ Group; (d) 

an entity in which the Manager acts as 

a managing member or 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 shall not be deemed to 

limit or prevent the disposition of an 

investment by a Co-Investor: (a) To its 

direct or indirect wholly-owned 

subsidiary, to any company (a ‘‘parent’’) 

of which such Co-Investor is a direct or 

indirect wholly-owned subsidiary, or to 

a direct or indirect wholly-owned 

subsidiary of its parent; (b) to immediate 

family members of such Co-Investor or 

a trust or other investment vehicle 

established for any immediate family 

member; (c) when the investment is 

comprised of securities that are listed on 

any exchange registered as a national 

securities exchange under section 6 of 

the 1934 Act; (d) when the investment 

is comprised of NMS stocks pursuant to 

section 11A(a)(2) of the 1934 Act and 

rule 600(a) of Regulation NMS 

thereunder; (e) when the investment is 

comprised of government securities as 

defined in section 2(a)(16) of the Act; or 

(f) when the investment is comprised of 

securities that are 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. 

4. Each Fund and the Manager will 

maintain and preserve, for the life of 

such Fund and at least six years 

thereafter, such accounts, books, and 

other documents as constitute the 

record forming the basis for the 

financial statements that are to be 

provided to the Participants in such 

Fund, and each annual report of such 

Fund required to be sent to such 

Participants, and agree that all such 

records will be subject to examination 

by the Commission and its staff. Each 

Fund shall preserve the accounts, books 

and other documents required to be 

maintained in an easily accessible place 

for the first two years after the inception 

of the Fund. 

5. The Manager will send to each 

Participant who had an Interest in a 

Fund, at any time during the fiscal year 

then ended, Fund financial statements 

that have been audited by the Fund’s 

independent accountants. At the end of 

each fiscal year, the Manager will make 

a valuation or have a valuation made of 

all of the assets of a Fund as of such 

fiscal year end in a manner consistent 

with customary practice with respect to 

the valuation of assets of the kind held 

by the Fund. In addition, within 120 

days after the end of each fiscal year of 

the Fund or as soon as practicable after 

the end of each fiscal year, the Manager 

shall send a report to each person who 

was a Participant at any time during the 

fiscal year then ended setting forth tax 

information necessary for the 

preparation by the Participant of his or 

her federal and state income tax returns 

and a report of the investment activities 

of the Fund during that year. 

6. If a Fund makes purchases or sales 

from or to an entity affiliated with the 

Fund by reason of an officer, director or 

employee of the HLHZ Group (a) serving 

as an officer, director, manager or 

investment adviser of the entity, or (b) 

having a 5% or more investment in the 

entity, such individual will not 

participate in the Fund’s determination 

of whether or not to effect the purchase 

or sale. 

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58698 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Notices 

1Exchange Act Release No. 58588 (Sept. 18, 

2008). 

1 15 U.S.C. 78l(k)(2). 

2See Securities Exchange Act Release No. 58572 

(Sept. 17, 2008). 

3See http://www.sec.gov/divisions/marketreg/

204tfaq.htm and http://www.sec.gov/divisions/

marketreg/loanedsecuritiesfaq.htm. 

1 15 U.S.C. 78s(b)(1). 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23689 Filed 10–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 58703] 

Order Extending Emergency Order 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

Taking Temporary Action To Respond 

to Market Developments 

October 1, 2008. 

On September 18, 2008, the 

Commission issued an Emergency Order 

pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) (the ‘‘Order’’) 

temporarily broadening Exchange Act 

Rule 10b–18’s safe harbor from liability 

for issuer repurchases in order to 

facilitate orderly markets.1 That Order 

became effective at 12:01 a.m. E.D.T. on 

September 19, 2008, and is currently set 

to terminate at 11:59 p.m. E.D.T. on 

October 2, 2008. 

Pursuant to our authority under 

Section 12(k)(2)(C) of the Exchange Act, 

we are extending the Order. Section 

12(k)(2)(C) authorizes the Commission 

to extend an emergency order issued 

pursuant to Section 12(k)(2)(A) of the 

Exchange Act for a total effective period 

of up to 30 calendar days, if the 

Commission finds that the emergency 

still exists and determines that an 

extension is necessary in the public 

interest and for the protection of 

investors to maintain fair and orderly 

securities markets. 

We have carefully reevaluated the 

current state of the markets and we 

remain concerned about the potential of 

sudden and excessive fluctuations of 

securities prices generally and 

disruption in the functioning of the 

securities markets that could threaten 

fair and orderly markets. Issuer 

repurchases can represent an important 

source of liquidity during these times of 

market volatility. Thus, we have 

determined in this environment that the 

standards under Section 12(k)(2) for 

extending the Order have been met. 

Accordingly, the Commission has 

determined that extending the Order is 

in the public interest and necessary to 

maintain fair and orderly securities 

markets and for the protection of 

investors. 

Therefore, it is ordered, pursuant to 

Section 12(k)(2)(C) of the Exchange Act, 

that the Order is extended such that it 

will terminate at 11:59 p.m. E.D.T. on 

Friday, October 17, 2008. 

By the Commission. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23613 Filed 10–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 58711] 

Order Extending Emergency Order 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

Taking Temporary Action To Respond 

to Market Developments 

October 1, 2008. 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’),1 on September 17, 

2008, the Securities and Exchange 

Commission (‘‘Commission’’) issued an 

Emergency Order (the ‘‘Order’’) aimed at 

further reducing fails to deliver and 

addressing potentially abusive ‘‘naked’’ 

short selling in all equity securities.2

The Order became effective at 12:01 

a.m. E.D.T. on September 18, 2008 and 

is currently set to terminate at 11:59 

p.m. E.D.T. on October 1, 2008. 

Pursuant to our authority under 

Section 12(k)(2)(C) of the Exchange Act, 

we are extending the Order. Section 

12(k)(2)(C) authorizes the Commission 

to extend an emergency order issued 

pursuant to Section 12(k)(2)(A) of the 

Exchange Act for a total effective period 

of up to 30 calendar days, if the 

Commission finds that the emergency 

still exists and determines that an 

extension is necessary in the public 

interest and for the protection of 

investors to maintain fair and orderly 

securities markets. 

We have carefully reevaluated the 

current state of the markets and we 

remain concerned about the potential of 

sudden and excessive fluctuations of 

securities prices generally and 

disruption in the functioning of the 

securities markets that could threaten 

fair and orderly markets. We intend the 

enhanced delivery requirements 

(temporary Rule 204T and elimination 

of the options market maker exception) 

imposed by the Order and the ‘‘naked’’ 

short selling antifraud rule to provide 

powerful disincentives to those who 

might otherwise exacerbate artificial 

price movements through ‘‘naked’’ short 

selling. Thus, we have determined in 

this environment that the standards 

under Section 12(k)(2) for extending the 

Order have been met. Accordingly, we 

have determined that extending the 

Order is in the public interest and 

necessary to maintain fair and orderly 

securities markets and for the protection 

of investors. 

In addition, we note that Staff of the 

Division of Trading and Markets has 

issued guidance regarding the Order to 

address current and anticipated 

technical and operational concerns 

resulting from the requirements of the 

Order.3 The guidance will continue to 

apply for the duration of the Order and 

the Commission hereby incorporates 

and adopts the guidance. 

It is therefore ordered that, pursuant 

to Section 12(k)(2)(C) of the Exchange 

Act, the Commission hereby 

incorporates and adopts the Division of 

Trading and Markets: Guidance 

Regarding the Commission’s Emergency 

Order Concerning Rules to Protect 

Investors Against ‘‘Naked’’ Short Selling 

Abuses and the Division of Trading and 

Markets Guidance Regarding Sale of 

Loaned but Recalled Securities. 

It is further ordered that, pursuant to 

Section 12(k)(2)(C) of the Exchange Act, 

the Order is extended such that it will 

terminate at 11:59 p.m. E.D.T. on 

Friday, October 17, 2008. 

By the Commission. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23614 Filed 10–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58696; File No. SR–FICC– 

2008–04] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Rules of the Government Securities 

Division To Expand the Types of 

Securities Eligible for the GCF Repo 

Service 

September 30, 2008. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

mstockstill on PROD1PC66 with NOTICES