Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67575

that attributable to other E.ON

subsidiaries; and

(7) A statement of revenues and net

income of each of E.ON’s EWGs and

FUCOs for the twelve months ended as

of the end of that semiannual period,

with an indication of which EWGs and

FUCOs were acquired during the

reporting period.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32074 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

25324; 813–202]

Greenwich Street Employees Fund,

L.P., et al.; Notice of Application

December 21, 2001.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of application for an

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

Investment Company Act of 1940

(‘‘Act’’) exempting applicants from all

provisions of the Act and the rules and

regulations under the Act, except

section 9, section 17 (other than certain

provisions of paragraphs (a), (d), (e), (f),

(g), and (j)), section 30 (except for

certain provisions of paragraphs (a), (b),

(e), and (h)), and section 36 through 53,

and the rules and regulations under

those sections.

SUMMARY OF APPLICATION: Applicants

request an order to exempt certain

limited partnerships and other entities

(each a ‘‘Partnership’’) formed for the

benefit of key employees of Citigroup

Inc. and its affiliates 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: Greenwich Street

Employees Fund, LP (‘‘Initial

Partnership’’); Citigroup Inc.; Citigroup

Employee Fund of Funds I, LP;

Citigroup Employee Fund of Funds

(US–UK) I, LP; Citigroup Employee

Fund of Funds (Cayman) I, LP;

Citigroup Employee Fund of Funds

(DE–UK) I, LP; SSB Capital Partners I,

LP; SSB Capital Partners (US–UK) I, LP;

SSB Capital Partners (Cayman) I, LP;

and SSB Capital Partners (DE–UK) I, LP.

FILING DATES: The application was filed

on February 10, 1999 and amended on

August 18, 1999, October 31, 2000,

April 16, 2001 and December 20, 2001.

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 January 15, 2002, 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, Commission, 450

Fifth Street, NW., Washington, DC

20549–0609. Applicants, 399 Park

Avenue, New York, New York 10043.

FOR FURTHER INFORMATION CONTACT: John

L. Sullivan, Senior Counsel, at (202)

942–0681, or Nadya B. Roytblat,

Assistant Director, 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 at the

Commission’s Public Reference Branch,

450 Fifth Street, NW, Washington, DC

20549–0102 (tel. 202–942–8090).

Applicants’ Representations

1. Citigroup Inc. is a financial holding

company whose businesses provide a

broad range of financial services.

Citigroup Inc. and its affiliates (as

defined under rule 12b–2 under the

Securities Exchange Act of 1934

(‘‘Exchange Act’’)) (‘‘Citigroup’’) have

organized and will organize

Partnerships primarily for the benefit of

eligible current and former employees,

officers, directors, and persons on

retainer of Citigroup (an ‘‘Eligible

Employee’’). The Partnerships are part

of a program designed to create capital

building opportunities that are

competitive with those at other financial

services firms and to facilitate the

recruitment of high caliber

professionals. Participation in a

Partnership is voluntary.

2. A Partnership will be a limited

partnership, a limited liability company,

business trust or other entity organized

under the laws of Delaware or another

state. Citigroup also will form

Partnerships organized under the laws

of jurisdictions outside the United

States to create the same investment

opportunities for Eligible Employees

who are not U.S. residents. The

Partnerships will be operated in

accordance with their respective limited

partnership agreements or other

organizational documents (each, a

‘‘Partnership Agreement’’). Each

Partnership will be formed as an

‘‘employees’ securities company’’

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

the Act and will operate as a closed-end

management investment company,

which may be diversified or nondiversified.

3. Each Partnership will be managed,

operated and controlled by its general

partner, managing member or other

similar entity (‘‘General Partner’’). Each

General Partner, with the exception of

the Initial General Partner (as defined

below), will be a Citigroup entity. The

General Partner or another entity will

serve as investment adviser

(‘‘Investment Adviser’’) to a Partnership.

The Investment Adviser will be (a)

registered as an investment adviser

under the Investment Advisers Act of

1940 (‘‘Advisers Act’’), (b) exempt from

Advisers Act registration requirements

by virtue of section 203(b)(3) of the

Advisers Act, or (c) excluded from the

definition of investment adviser under

the Advisers Act because it is a bank or

a bank holding company (as defined in

the Bank Holding Company Act of

1956). Any entity serving as Investment

Adviser to any Partnership (other than

the Initial Partnership as described

below) will be a Citigroup entity.

4. The Initial Partnership is a limited

partnership that first offered Interests

(as defined below) in Feburary 1999.

The Initial Partnership invests

concurrently with Greenwich Street

Capital Partners II, LP (‘‘Fund II’’) and

other investors organized or managed by

Citigroup or its designees that generally

co-invest with Fund II (‘‘Fund II CoInvestors’’). Pursuant to their respective

limited partnership agreements, the

Initial Partnership, Fund II and Fund II

Co-Investors must each, to the extent

possible, make investments in securities

of portfolio companies on a pari passu

basis with each other on the same terms

and at the same times and dispose of

such securities at the same time, on the

terms and conditions no more favorable

than the terms and conditions of any

other such disposition by any other

such party. Both the Initial Partnership

and Fund II are advised by GSCP (NJ),

LP (‘‘Initial Investment Adviser’’). The

Initial Investment Adviser is wholly

owned by individuals who are

managing members of Greenwich Street

Investments II, L.L.C., which is the

general partner of the Initial Partnership

(‘‘Initial General Partner’’) and the

67576 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

1A limited number of Eligible Employees who

were Accredited Investors invested in the Initial

Partnership through estate planning vehicles that

may or may not have been Accredited Investors.

There were significantly fewer than 35 such

vehicles investing in the Initial Partnership, all of

which were established for the exclusive benefit of

Eligible Individuals.

2A ‘‘carried interest’’ is an allocation to the

General Partner based on the net gains in addition

to the amount allocable to the General Partner that

is in proportion to its capital contributions. 3The management fee and carried interest

payable to the Initial Investment Adviser and Initial

General Partner, respectively, by the Limited

Partners in the Initial Partnership are on the same

terms in all material respects as the management fee

and carried interest payable to the investment

adviser and general partner, respectively, of Fund

II, as negotiated by Citigroup for its own account

and by other institutional investors. In calculating

the carried interest payable to the Initial General

Partner, unrealized capital depreciation is taken

into account as periodically determined by the

Initial General Partner in its discretion. The

Partnership Agreement for the Initial Partnership

Agreement contains a ‘‘clawback’’ provision that

requires the Initial General Partner to return to a

Limited Partner any amount retained by the Initial

General Partner and attributable to the Limited

Partner that is in excess of 20% of distributions

payable to that Limited Partner.

general partner of Fund II. At the time

the Initial Partnership was formed, the

Initial General Partner was a Citigroup

entity. In June 1999, Citigroup

restructured its interest in the Initial

General Partner as a condition to an

order of the Federal Reserve Board

prompted by the merger of Citicorp and

Travelers Group Inc. The restructuring

involved (a) a reduction in the voting

interest of The Travelers Insurance

Company (‘‘Travelers Insurance’’) and

certain of its affiliates in the Initial

General Partner to 24.9%, (b) Travelers

Insurance ceasing to be a managing

member of the Initial General Partner,

and (c) the management and employees

of the Initial Investment Adviser ceasing

to be employed by Citigroup. When the

restructuring occurred, 42.5% of the

Initial Partnership’s capital had been

invested or committed for investment.

Citigroup continues to own a 50%

economic interest in the equity of the

Initial General Partner.

5. Interests in the Partnerships

(‘‘Interests’’) will be offered without

registration in reliance on section 4(2) of

the Securities Act of 1933 (the

‘‘Securities Act’’), Regulation D or

Regulation S under the Securities Act,

and will be sold only to Eligible

Employees, and other ‘‘Qualified

Participants,’’ each as defined below,

(collectively, the ‘‘Limited Partners’’).

Prior to offering Interests to an Eligible

Employee or Eligible Family Member (as

defined below), the General Partner

must reasonably believe that such

individual has such knowledge,

sophistication and experience in

business and financial matters to be

capable of evaluating the merits and

risks of participating in the Partnership,

is able to bear the economic risk of such

investment, and is able to afford a

complete loss of such investment. Each

Eligible Employee will meet the

standards of an ‘‘accredited investor’’ as

defined in rule 501(a)(5) or 501(a)(6) of

Regulation D under the Securities Act

(an ‘‘Accredited Investor’’) or be one of

35 or fewer employees of Citigroup who

meets certain other requirements

(‘‘Other Investors’’).

6. Each Other Investor will be an

Eligible Employee who (a) is a

‘‘knowledgeable employee,’’ as defined

in rule 3c–5 under the Act, of the

Partnership (with the Partnership

treated as though it were a ‘‘Covered

Company’’ for purposes of the rule), or

(b) has a graduate degree in business,

law or accounting, has a minimum of

five years of consulting, investment

banking, legal or similar business

experience, and has a reportable income

from all sources in each of the two

calendar years immediately preceding

the Other Investor’s participation in the

Partnership of at least $100,000 and has

a reasonable expectation of reportable

income of at least $140,000 per year in

each year in which the Other Investor

will be committed to make investments

in a Partnership. An Other Investor

qualifying under (b) above will not be

permitted to invest in any year more

than 10% of such person’s income from

all sources for the immediately

preceding year in the aggregate in a

Partnership and in all other

Partnerships in which that Other

Investor has previously invested.

7. A Qualified Participant is an

Eligible Employee, Eligible Family

Member, Eligible Investment Vehicle, or

Citigroup. An ‘‘Eligible Family

Member’’ is a spouse, parent, child,

spouse of child, brother, sister, or

grandchild of an Eligible Employee, and

must be an Accredited Investor. An

‘‘Eligible Investment Vehicle’’ is a trust

or other investment vehicle established

solely for the benefit of an Eligible

Employee or Eligible Family Members.

An Eligible Investment Vehicle must be

either (a) an Accredited Investor or (b)

an entity for which an Eligible

Employee or Eligible Family Member

(each, an ‘‘Eligible Individual’’) is a

settlor and principal investment

decision-maker.1 Any member of

Citigroup that acquires an Interest will

be an Accredited Investor.

8. The specific investment objectives

and strategies for a particular

Partnership will be set forth in a private

placement memorandum relating to the

Interests offered by the Partnership, and

each Qualified Participant will receive a

copy of the private placement

memorandum before making an

investment in the Partnership. The

terms of a Partnership will be disclosed

to each Eligible Employee at the time

the Eligible Employee is invited to

participate in the Partnership. Each

Partnership will send audited financial

statements to the Limited Partners as

soon as practicable after the end of its

fiscal year. In addition, a report will be

sent to each Limited Partner setting

forth the information with respect to his

or her share of income, gains, losses,

credits and other items for federal

income tax purposes, resulting from the

operation of the Partnership during that

year.

9. Interests in a Partnership will be

non-transferable except with the express

consent of the General Partner. No

person will be admitted into a

Partnership unless the person is a

Qualified Participant. No fee of any kind

will be charged in connection with the

sale of Interests.

10. The General Partner may have the

right, but not the obligation, to

repurchase or cancel the Interest of an

Eligible Employee who ceases to be an

employee, officer, director or current

consultant of any member of Citigroup

for any reason.

11. A Partnership will not acquire any

security issued by a registered

investment company if immediately

after the acquisition, the Partnership

will own more than 3% of the

outstanding voting stock of the

registered investment company.

12. An Investment Adviser may be

paid a management fee for its services

to a particular Partnership, which may

be determined as a percentage of

aggregate commitments. In addition, a

General Partner may be entitled to a

performance-based fee or ‘‘carried

interest.’’ 2 If the General Partner is

registered as an investment adviser

under the Advisers Act, any carried

interest will be charged only if

permitted by rule 205–3 under the

Advisers Act. Except for the Initial

Partnership, if the General Partner is not

registered under the Advisers Act, the

carried interest will comply with

section 205(b)(3) of the Advisers Act

(with the Partnership treated as though

it were a business development

company solely for the purpose of that

section).3 Certain of the Partnerships

may not pay a management fee or a

carried interest but will pay a fee for

administrative services to a Citigroup

entity.

13. A Partnership will not borrow

from any person if the borrowing would

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67577

4For purposes of the application, a Partnership

will be deemed to be formed with respect to each

deferred compensation plan and each reference to

‘‘Partnership,’’ ‘‘capital contribution,’’ ‘‘General

Partner,’’ ‘‘Limited Partner,’’ and ‘‘Interest’’ in the

application will be deemed to refer to the deferred

compensation plan, the notional capital

contribution to the deferred compensation plan,

Citigroup, a participant of the deferred

compensation plan, and participation rights in the

deferred compensation plan, respectively.

cause any person not named in section

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

the Partnership (other than short-term

paper). If Citigroup makes loans to any

Partnership, the lender will be entitled

to receive interest at a rate that is

permissible under applicable banking or

tax regulations, provided that the rate

will be no less favorable to the borrower

than the rate obtainable on an arm’s

length basis. Any indebtedness of the

Partnership will be the debt of the

Partnership and without recourse to the

Limited Partners.

14. Eligible Employees may be able to

defer compensation under a deferred

compensation plan established in

connection with the Partnerships and

receive a return on such deferred

compensation determined by reference

to the performance of a Partnership. The

deferred compensation plans and/or an

Eligible Employee’s interest in such

plans: (a) Will be subject to the

applicable terms and conditions of the

application; 4 (b) will only be offered to

Eligible Employees who are current

employees, officers, directors, or

persons on retainer of Citigroup; (c) will

have restrictions on transferability,

including prohibitions on assignment or

transfer except in the event of the

Eligible Employee’s death or as

otherwise required by law; and (d) will

provide information to participants

equivalent to that provided to investors

and prospective investors in the

corresponding Partnership, including,

without limitation, disclosure

documents and audited financial

information.

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, in relevant part, as any

investment company all of whose

securities 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) 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 section 6(b) and 6(e) of the

Act exempting the Partnerships from all

provisions of the Act and the rules and

regulations under the Act, except

section 9, section 17 (other than certain

provisions of paragraphs (a), (d), (e), (f),

(g), and (j)), section 30 (other than

certain provisions of paragraphs (a), (b),

(e), and (h)), sections 36 through 53 of

the Act, and the rules and regulations

under those sections.

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) A Citigroup

entity or a Third Party Fund (as defined

below), or any affiliated person of such

entity or Third Party Fund, acting as

principal, to engage in any transaction

directly or indirectly with any

Partnership or any company controlled

by such Partnership; (b) a Partnership to

invest in or engage in any transaction

with any entity, acting as principal (i) in

which the Partnership, any company

controlled by the Partnership, or any

Citigroup entity or Third Party Fund has

invested or will invest or (ii) with which

the Partnership, any company

controlled by the Partnership, or any

Citigroup entity or Third Party Fund is

or will otherwise become affiliated; and

(c) a Third Party Investor (as defined

below), acting as principal, to engage in

any transaction directly or indirectly

with any Partnership or any company

controlled by such Partnership. The

term ‘‘Third Party Fund’’ refers to an

investment fund or separate account

that is organized for the benefit of

investors who are not affiliated with

Citigroup over which a Citigroup entity

will exercise investment discretion. The

term ‘‘Third Party Investor’’ refers to

any person or entity that is not a

Citigroup entity or affiliated with

Citigroup and is a partner or other

investor in a Third Party Fund.

4. Applicants state that an exemption

from section 17(a) is consistent with the

protection of investors and the purposes

of the Partnerships. Applicants state

that the Limited Partners in each

Partnership will be informed of the

possible extent of the Partnership’s

dealings with Citigroup and of the

potential conflicts of interest that may

exist. Applicants also assert that the

community of interest among the

Limited Partners and Citigroup will

serve to reduce any risk of abuse in

transactions involving a Partnership and

Citigroup or the respective affiliates of

Citigroup. With respect to the Initial

Partnership, applicants state that a

sufficient community of interest exists

between the Limited Partners of that

Partnership and Citigroup, despite the

fact that the Initial General Partner and

Initial Investment Adviser are no longer

Citigroup entities. The Initial

Partnership operates according to terms

that Citigroup negotiated with the Initial

General Partner when the Initial General

Partner was still a Citigroup entity. A

significant amount of the Initial

Partnership’s committed capital was

invested by the Initial General Partner

while it was still a Citigroup entity, and

all of the Partnership’s investments are

made in lockstep with Fund II, in which

Citigroup is the largest investor.

5. Section 17(d) of the Act and rule

17d–1 under the Act prohibit any

affiliated person of a registered

investment company, or any affiliated

person of an affiliated person, acting as

principal, from participating in any joint

enterprise, or other joint arrangement,

with the company, unless approved by

the Commission. Applicants request

relief to permit affiliated persons of each

Partnership, or affiliated persons 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 the Partnership or an company

controlled by the Partnership is a

participant.

6. Applicants submit that it is likely

that suitable investments will be

brought to the attention of a Partnership

because of its affiliation with Citigroup

or Citigroup’s large capital resources

and its experience in structuring

complex transactions. Applicants also

submit that the types of investment

67578 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

opportunities considered by a

Partnership often require each investor

to make funds available in an amount

that may be substantially greater than

what a Partnership may make available

on its own. Applicants contend that, as

a result, the only way in which a

Partnership may be able to participate in

these opportunities may be to co-invest

with other persons, including its

affiliates. Applicants note that each

Partnership will be primarily organized

for the benefit of Eligible Employees as

an incentive for them to remain with

Citigroup and for the generation and

maintenance of goodwill. Applicants

believe that, if co-investments with

Citigroup are prohibited, the appeal of

the Partnerships would be significantly

diminished. Applicants assert that

Eligible Employees wish to participate

in co-investment opportunities because

they believe that (a) the resources of

Citigroup enable it to analyze

investment opportunities to an extent

that individual employees would not be

able to duplicate, (b) investments made

by Citigroup will not be generally

available to investors even of the

financial status of the Eligible

Employees, and (c) Eligible Employees

will be able to pool their investment

resources, thus achieving greater

diversification of their individual

investment portfolios.

7. 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. Applicants

state that the concern that permitting coinvestments by Citigroup and a

Partnership might lead to less

advantageous treatment of the

Partnership should be mitigated by the

fact that Citigroup will be acutely

concerned with its relationship with the

investors in the Partnership and the fact

that senior officers and directors of

Citigroup entities will be investing in

the Partnership. In addition, applicants

assert that strict compliance with

section 17(d) would cause the

Partnership to forego investment

opportunities simply because 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.

8. Co-investments with Third Party

Funds, or by a Citigroup entity pursuant

to a contractual obligation to a Third

Party Fund, will not be subject to

condition 3 below. Applicants note that

it is common for a Third Party Fund to

require that Citigroup invest its own

capital in Third Party Fund investments

and that Citigroup investments be

subject to substantially the same terms

as those applicable to the Third Party

Fund. 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

Partnership. In addition, applicants

assert that the relationship of a

Partnership to a Third Party Fund is

fundamentally different from a

Partnership’s relationship to Citigroup.

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 Citigroup in the

employer/employee context, whereas

the same concerns are not present with

respect to the Partnerships vis-a`-vis a

Third Party Fund.

9. 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.

Applicants request an exemption from

section 17(e) to permit a Citigroup entity

(including the General Partner) acting as

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.’’

Applicants state that for the purposes of

the application, fees or other

compensation that are charged or

received by a Citigroup 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 compensation

being charged to the Partnership 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

does not exceed 50% of the total

amount of securities being purchased or

sold by the Partnership and unaffiliated

third parties, including Third Party

Funds. Applicants assert that, because

Citigroup does 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. Applicants

assert that the fees or other

compensation paid by a Partnership to

a Citigroup entity will be the same as

those negotiated at arm’s length with

unaffiliated third parties.

10. Rule 17e–1(b) requires that a

majority of directors who are not

‘‘interested persons’’ (as defined by

section 2(a)(19) of the Act) take actions

and make approvals regarding

commissions, fees, or other

remuneration. Rule 17e–1(c) requires

that a majority of the directors not be

interested persons, that those directors

select and nominate other disinterested

directors and that any person who acts

as legal counsel for the disinterested

directors be an independent legal

counsel. 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.

Applicants state that because all of the

directors of a General Partner will be

affiliated persons, without the relief

requested, a Partnership could not

comply with rule 17e–1. Applicants

state that each Partnership will comply

with rule 17e–1(b) by having a majority

of the board of directors of the General

Partner take actions and make approvals

as set forth in rule 17e–1. Applicants

state that each Partnership will

otherwise comply with rule 17e–1.

11. Section 17(f) of the Act provides

that the securities and similar

investments of a registered management

investment company must be placed in

the custody of a bank, a member of a

national securities exchange, or the

company itself in accordance with

Commission rules. Rule 17f–1 under the

Act specifies the requirements that must

be satisfied when the custodian is a

member of a national securities

exchange. Rule 17f–2 under the Act

specifies the requirements that must be

satisfied for a registered management

investment company to act as a

custodian of its own investments.

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 the extent necessary to

permit a Citigroup entity to act as

custodian for a Partnership without a

written contract. Additionally,

applicants request an exemption from

the rule 17f–1(b)(4) requirement that an

independent accountant periodically

verify the assets held by the custodian.

Applicants believe that, because of the

community of interest between a

Partnership and Citigroup, compliance

with these requirements would be

unnecessarily burdensome and

expensive. Applicants will otherwise

comply with the provisions of rule 17f–

1.

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67579

5Each Partnership will preserve the accounts,

books and other documents required to be

maintained in an easily accessible place for the first

two years.

Applicants also request an exemption

from 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 General Partner; (b) for

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

employees of the General Partner will be

deemed to be employees of the

Partnerships, (ii) officers or managers of

the General Partner of a Partnership 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 the Partnership and (c) in

place of the verification procedure

under paragraph (f) of the rule,

verification will be effected quarterly by

two employees of the General Partner.

Applicants expect that many of the

Partnerships’ investments will be

evidenced only by partnership

agreements, participation agreements or

similar documents, rather than by

negotiable certificates that could be

misappropriated. Applicants assert that

these instruments are most suitably kept

in the files of the General Partner, where

they can be referred to as necessary.

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

take certain actions and give certain

approvals relating to fidelity bonding.

The rule also requires that a majority of

the directors not be interested persons,

that those directors select and nominate

other disinterested directors and that

any person who acts as legal counsel for

the disinterested directors be an

independent legal counsel. Applicants

request exemptive 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. Applicants state

that, because all directors 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 General Partner’s

directors take actions and make

determinations as are set forth in rule

17g–1. Applicants also state that each

Partnership will otherwise comply with

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. Applicant requests an

exemption from the provisions of rule

17j–1, except for the antifraud

provisions of paragraph (b), because

they are unnecessarily burdensome as

applied to the Partnerships.

14. 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 the Partnerships and

would entail administrative and legal

costs that outweigh any benefit to the

Limited Partners. Applicants request

exemptive relief to the extent necessary

to permit each Partnership to report

annually to its Limited Partners.

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

Citigroup 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. 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.

Applicants’ 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 General Partner

determines that (a) the terms of the

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 (b) the

transaction is consistent with the

interests of the Limited Partners, the

Partnership’s organizational documents

and the Partnership’s reports to its

Limited Partners. In addition, the

General Partner of the 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 therefore. All such

records will be maintained for the life

of the Partnership and at least two years

thereafter and will be subject to

examination by the Commission and its

staff.5 With respect to the Initial

Partnership, the findings required by

this condition will be made by Citigroup

or a designated senior officer(s) of

Citigroup. The records relating to these

findings will be prepared and preserved

by Citigroup in accordance with this

condition and will be subject to

examination by the Commission and its

staff.

2. In connection with the Section 17

Transactions, 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, unless any

such Affiliated Co-Investor, prior to

disposing of all or part of its investment,

(a) gives the General Partner 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 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 CoInvestor. The term ‘‘Affiliated CoInvestor’’ with respect to any

Partnership means any person who is (a)

67580 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

6Each Partnership will preserve the accounts,

books, and other documents required to be

maintained in an easily accessible place for the first

two years.

1Applicants also request relief with respect to all

registered open-end investment companies and

an ‘‘affiliated person’’ (as such term is

defined in the Act) of the Partnership

(other than a Third Party Fund), (b)

Citigroup, (c) an officer or director of

Citigroup or (d) an entity (other than a

Third Party Fund) in which the General

Partner 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 (a) 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, (b) to immediate

family members of the Affiliated CoInvestor or a trust or other investment

vehicle established for any Affiliated

Co-Investor or any such family member

or (c) when the investment comprises

securities that are (i) listed on a national

securities exchange registered under

section 6 of the Exchange Act, (ii)

national market system securities

pursuant to section 11A(a)(2) of the

Exchange Act and rule 11Aa2–1

thereunder, (iii) government securities

as defined in section 2(a)(16) of the Act

or other money market instruments or

(iv) 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 Partnership and its General

Partner will maintain and preserve, for

the life of the Partnership and at least

two 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.6

5. The General Partner of each

Partnership will send to each Limited

Partner having an interest in any capital

account of 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, as soon

as practicable after the end of each fiscal

year of the Partnership, 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 his, her or its

federal and state income tax returns and

a report of the investment activities of

the Partnership during that fiscal year.

6. Whenever a Partnership makes a

purchase from or sale to an entity

affiliated with the Partnership by reason

of a 5% or more investment in the entity

by a Citigroup director, officer or

employee, such individual will not

participate in the General Partner’s

determination of whether or not to effect

such purchase or sale.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32075 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

25325; 812–12288]

One Fund, Inc., Ohio National Fund,

Inc., Dow Target Variable Fund LLC,

and Ohio National Investments, Inc.;

Notice of Application

December 21, 2001.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of an application for an

order under section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) for an exemption from section

15(a) of the Act and rule 18f–2 under

the Act.

SUMMARY OF APPLICATION: Applicants,

ONE Fund, Inc. (‘‘ONE Fund’’) (each a

‘‘Fund’’ and, collectively, the ‘‘Funds’’),

and Ohio National Investments, Inc. (the

‘‘Adviser’’), request an order that would

permit applicants to enter into and

materially amend subadvisory

agreements without shareholder

approval.

FILING DATES: The application was filed

on September 29, 2000, and amended

on December 14, 2001.

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 January 15, 2002, 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, Commission, 450

Fifth Street, NW., Washington, DC

20549–0609; Applicants, One Financial

Way, Montgomery, Ohio 45242.

FOR FURTHER INFORMATION CONTACT:

Deepak T. Pai, Senior Counsel, at (202)

942–0574 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 at the

Commission’s Public Reference Branch,

450 Fifth Street, NW., Washington, DC

20549–0102 (telephone (202) 942–8090).

Applicants’ Representations

1. ONE Fund and ON Fund are

Maryland corporations registered under

the Act as open-end management

investment companies. ON Fund offers

its shares only to separate accounts of

The Ohio National Life Insurance

Company (‘‘ONLI’’) and Ohio National

Life Assurance Corporation (‘‘ONLAC’’),

as the underlying investments for

variable annuities issued by ONLI and

variable life insurance contracts issued

by ONLAC. Dow Fund is an Ohio

limited liability company registered

under the act as an open-end

management investment company. Dow

Fund presently sells its interests only to

separate accounts of ONLI as a funding

option to support certain benefits under

variable annuity contracts issued by

ONLI. Each Fund is comprised of

multiple series (‘‘Portfolios’’), each with

its own investment objectives and

policies.1