Document ID: SEC-2010-1228-0001
Agency: sec
Document Type: Notice
Title: Applications: Blackstone Group, L.P.
Posted Date: 2010-08-12T04:00Z

[Federal Register: August 12, 2010 (Volume 75, Number 155)]
[Notices]               
[Page 48999-49005]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12au10-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29378; File No. 813-00375]

 
The Blackstone Group, LP; Notice of Application

August 5, 2010.
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 (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.

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SUMMARY: Summary of Application: Applicant requests an order to exempt 
certain future partnerships, limited liability companies and other 
investment vehicles that it and/or its affiliates sponsor 
(``Partnerships'') formed for the benefit of eligible employees of The 
Blackstone Group, LP 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.

Applicant: The Blackstone Group LP (``Company'').

DATES: Filing Dates: The application was filed on October 16, 2008 and 
amended on May 14, 2009 and May 27, 2010. Applicant has 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 applicant with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on August 30, 2010 and should be accompanied by proof of service 
on applicant, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicant, The Blackstone Group 
LP, 345 Park Avenue, New York, NY 10154.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at 
(202) 551-6915, 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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicant's Representations

    1. The Company is a Delaware limited partnership. The Company and 
its ``Affiliates,'' as defined in rule 12b-2 under the Securities 
Exchange Act of 1934 (the ``Exchange Act''), are referred to 
collectively as ``Blackstone.'' Blackstone is a global alternative 
asset manager and provider of financial advisory services. The 
alternative asset management businesses include the management of 
corporate private equity funds, real estate funds, funds of hedge

[[Page 49000]]

funds, credit-oriented funds, collateralized loan obligation vehicles, 
and publicly-traded closed-end mutual funds. Blackstone also provides 
various financial advisory services, including corporate and mergers 
and acquisitions advisory, restructuring and reorganization advisory 
and fund placement services.
    2. Each of the Partnerships will be a limited partnership, limited 
liability company, corporation, business trust or other entity 
organized under the laws of the state of Delaware or any other U.S. or 
non-U.S. jurisdiction. Each Partnership will be identical in all 
material respects (other than investment objectives and strategies, 
form of organization and related structural and operative provisions 
contained in the constitutive documents of such Partnerships). The 
Partnerships will be formed as an ``employees' securities company'' 
within the meaning of section 2(a)(13) of the Act and will operate as a 
diversified or non-diversified, closed-end management investment 
company, provided that the governing documents of a Partnership may 
provide for periodic subscriptions and redemptions.\1\ The Partnerships 
will be established primarily for the benefit of Eligible Employees 
(defined below) of the Company or of any Affiliate of the Company as 
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.
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    \1\ Applicant also may implement a pretax plan arrangement 
(``Pretax Plan''). In this case, no investment vehicle will be 
formed with respect to such Pretax Plan. Pursuant to a Pretax Plan, 
Blackstone will enter into arrangements with certain Eligible 
Employees, as defined below, of Blackstone, which will generally 
provide that (a) an Eligible Employee will defer a portion of his or 
her compensation payable by Blackstone, (b) such deferred 
compensation will be treated as having been notionally invested in 
investments designated for these purposes pursuant to the specific 
compensation plan, and (c) an Eligible Employee will be entitled to 
receive cash, securities or other property at the times and in the 
amounts set forth in the specific compensation plan, where the 
aggregate amount received by such Eligible Employee would be based 
upon the investment performance of the investments designated for 
these purposes pursuant to such compensation plan. The Pretax Plan 
will not actually purchase or sell any securities. Blackstone 
expects to offer, through Pretax Plans, economic benefits comparable 
to what would have been offered in an arrangement where an 
investment vehicle is formed. For purposes of the application, a 
Partnership will be deemed to be formed with respect to each Pretax 
Plan and each reference in the application to ``Partnership,'' 
``capital contribution,'' ``General Partner,'' ``Limited Partner,'' 
``loans,'' and ``Interest'' will be deemed to refer to the Pretax 
Plan, the notional capital contribution to the Pretax Plan, 
Blackstone, a participant of the Pretax Plan, notional loans, and 
participation rights in the Pretax Plan, respectively.
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    3. The general partner of each Partnership will be an Affiliate of 
the Company (``General Partner''). Any partner, member of, or other 
investor in a Partnership (collectively, the ``Partners'') other than a 
General Partner is a ``Limited Partner'' or ``Participant.'' The 
General Partner of each Partnership will manage, operate, and control 
that Partnership. The General Partner will be authorized to delegate 
investment management responsibility to a Blackstone entity or a group 
of Blackstone employees (the ``Investment Manager''). The ultimate 
responsibility for the Partnerships' investments delegated to an 
Investment Manager will remain with the General Partner. Any Blackstone 
entity that is delegated the responsibility of making investment 
decisions for a Partnership will be registered as an investment adviser 
under the Investment Advisers Act of 1940 (the ``Advisers Act'') (or, 
in the case of a group of Blackstone employees, be reflected in the 
Form ADV of the applicable Blackstone entity) if required under 
applicable law.
    4. The General Partner, Blackstone or any employee of the General 
Partner or Blackstone may be entitled to receive a performance-based 
fee (such as a ``carried interest'') based on the gains and losses of 
the investment program or of the Partnership's investment portfolio.\2\ 
All Partnership investments are referred to herein collectively as 
``Portfolio Investments.''
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    \2\ A ``carried interest'' is an allocation to the General 
Partner, a Limited Partner, or an Investment Manager based on net 
gains in addition to the amount allocable to such entity in 
proportion to its invested capital. A General Partner, Limited 
Partner or Investment 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 General Partner, Limited Partner or Investment Manager 
that is not registered under the Advisers Act may be paid only if 
permitted by rule 205-3 as if such General Partner, Limited Partner 
or Investment Manager were registered under the Advisers Act.
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    5. Ownership 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''), or Regulation D under 
the Securities Act, and will be sold only to ``Eligible Employees'' and 
``Qualified Participants,'' in each case as defined below, or to 
Blackstone entities.\3\ Prior to offering Interests to an Eligible 
Employee, the General Partner must reasonably believe that the Eligible 
Employee will be a sophisticated investor capable of understanding and 
evaluating the risks of participating in the Partnership without the 
benefit of regulatory safeguards.
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    \3\ If applicant implements a Pretax Plan, participation rights 
in such Pretax Plan will only be offered to Eligible Employees who 
are current employees or Consultants, as defined below, of 
Blackstone.
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    6. An ``Eligible Employee'' is (a) an individual who is a current 
or former employee, officer, director, or current ``Consultant'' of 
Blackstone and, except for certain individuals who manage the day-to-
day affairs of the Partnership in question (``Managing Employees'') \4\ 
and a limited number of other employees of Blackstone \5\ 
(collectively, ``Non-Accredited Investors''), meets the standards of an 
accredited investor under rule 501(a)(5) or 501(a)(6) of Regulation D 
under the Securities Act, or (b) an entity that is a current 
``Consultant'' of Blackstone and meets the standards of an accredited 
investor under rule 501(a) of Regulation D.\6\ A Partnership may not 
have more than 35 Non-Accredited Investors.
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    \4\ A Managing Employee may invest in a Partnership if he or she 
meets the definition of ``knowledgeable employee'' in rule 3c-
5(a)(4) under the Act with the Partnership treated as though it were 
a ``Covered Company'' for purposes of the rule.
    \5\ Such employees must meet the sophistication requirements set 
forth in rule 506(b)(2)(ii) of Regulation D under the Securities Act 
and may be permitted to invest his or her own funds in the 
Partnership if, at the time of the employee's investment in a 
Partnership, he or she (a) has a graduate degree in business, law or 
accounting, (b) has a minimum of five years of consulting, 
investment banking or similar business experience, and (c) has had 
reportable income from all sources of at least $100,000 in each of 
the two most recent years and a reasonable expectation of income 
from all sources of at least $140,000 in each year in which such 
person will be committed to make investments in a Partnership. In 
addition, such an employee will not be permitted to invest in any 
year more than 10% of his or her income from all sources for the 
immediately preceding year in the aggregate in such Partnership and 
in all other Partnerships in which he or she has previously 
invested.
    \6\ A ``Consultant'' is a person or entity whom Blackstone has 
engaged on retainer to provide services and professional expertise 
on an ongoing basis as a regular consultant or as a business or 
legal adviser and who shares a community of interest with Blackstone 
and Blackstone employees.
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    7. A ``Qualified Participant,'' is an individual or entity (a) that 
is an Eligible Family Member or Qualified Investment Vehicle (in each 
case as defined below) of an Eligible Employee, and (b) purchasing an 
Interest from a Partnership (except as discussed below) and comes 
within one of the categories of an ``accredited investor'' under rule 
501(a) of Regulation D. An ``Eligible Family Member'' is a spouse, 
parent, child, spouse of child, brother, sister, or grandchild of an 
Eligible Employee, including step and adoptive relationships. A 
``Qualified Investment Vehicle'' is (a) a trust of which the trustee, 
grantor and/or beneficiary is an

[[Page 49001]]

Eligible Employee, (b) a partnership, corporation or other entity 
controlled by an Eligible Employee, or (c) a trust or other entity 
established solely for the benefit of Eligible Family Members of an 
Eligible Employee.\7\ A Qualified Investment Vehicle that is not an 
accredited investor will be counted in accordance with Regulation D 
toward the 35 person limit for Non-Accredited Investors.
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    \7\ The inclusion of partnerships, corporations, or other 
entities controlled by an Eligible Employee in the definition of 
``Qualified Investment Vehicle'' is intended to enable Eligible 
Employees to make investments in the Partnerships through personal 
investment vehicles over which they exercise investment discretion 
or other investment vehicles the management or affairs of which they 
otherwise control. In the case of a partnership, corporation, or 
other entity controlled by a Consultant entity, individual 
participants will be limited to senior level employees, members, or 
partners of the Consultant who will be required to qualify as an 
``accredited investor'' under rule 501(a)(5) or 501(a)(6) of 
Regulation D and who will have access to the directors and officers 
of the General Partner.
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    8. The terms of a Partnership will be fully disclosed to each 
Eligible Employee and, if applicable, to a Qualified Participant of the 
Eligible Employee, in the offering materials, including a copy of the 
partnership agreement or other organizational document (the 
``Partnership Agreement''), which will be furnished prior to the time 
such person or entity is admitted to the Partnership. The General 
Partner of each Partnership will send its Partners audited financial 
statements within 120 days after the end of its fiscal year of the 
Partnership or as soon as practicable thereafter, except for any 
Partnership that was formed to make a single portfolio investment (in 
which case audited financial statements will be prepared for either the 
Partnership or the entity that is the single portfolio investment).\8\ 
In addition, as soon as practicable after the end of each tax year of a 
Partnership, each Partner will receive a report showing the Partner's 
share of income, credits, deductions, and other tax items.
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    \8\ If applicant implements a Pretax Plan, Eligible Employees 
participating in such Pretax Plan will be furnished with a copy of 
the Pretax Plan, which will set forth at a minimum the same terms of 
the proposed investment program as those that would have been set 
forth in a Partnership Agreement for a Partnership. Blackstone will 
prepare an audited informational statement with respect to the 
investments deemed to be made by such Pretax Plan, including, with 
respect to each investment, the name of the portfolio company and 
the amount deemed invested by such Pretax Plan in the portfolio 
company. Blackstone will send each participant of such Pretax Plan a 
separate statement based on the audited informational statement 
within 120 days after the end of the fiscal year of Blackstone or as 
soon as practicable thereafter.
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    9. Interests in a Partnership will be non-transferable except with 
the prior written consent of the General Partner.\9\ No person or 
entity will be admitted into a Partnership unless such person or entity 
is an Eligible Employee, a Qualified Participant of an Eligible 
Employee, or a Blackstone entity. No sales load will be charged in 
connection with the sale of Interests.
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    \9\ If applicant implements a Pretax Plan, an Eligible 
Employee's participation rights in such Pretax Plan may not be 
transferred, other than to a Qualified Participant in the event of 
the Eligible Employee's death.
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    10. An Eligible Employee's interest in a Partnership may be subject 
to repurchase or cancellation in certain circumstances as described in 
the offering documents related to the relevant Partnership. Upon 
repurchase or cancellation, the General Partner will at a minimum pay 
to the Eligible Employee the lesser of (a) the amount actually paid by 
the Eligible Employee to acquire the Interest plus interest less prior 
distributions, and (b) the fair market value of the Interest as 
determined at the time of repurchase or cancellation by the General 
Partner. The terms of any repurchase or cancellation will apply equally 
to any Qualified Participant of an Eligible Employee.
    11. Subject to the terms of the applicable Partnership Agreement, a 
Partnership will be permitted to enter into transactions involving (a) 
a Blackstone entity, (b) a portfolio company, (c) any Partner or person 
or entity affiliated with a Partner, (d) an investment fund or separate 
account that is organized for the benefit of investors who are not 
affiliated with Blackstone and over which a Blackstone entity will 
exercise investment discretion or which is sponsored by a Blackstone 
entity (``Blackstone Third Party Fund''), or (e) any person or entity 
who is not affiliated with Blackstone and is a partner or other 
investor in a Blackstone Third Party Fund or a ``Third Party Sponsored 
Fund'' \10\ (each a ``Third Party Investor''). Prior to entering into 
any of these transactions, the General Partner or board of directors 
(or similar body) of the General Partner or any committee serving 
similar functions of the General Partner (``Board'') must determine 
that the terms are fair to the Partners.
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    \10\ ``Third Party Sponsored Fund'' is an investment fund or 
pooled investment vehicle for which entities or persons unaffiliated 
with Blackstone are the sponsors or investment advisers.
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    12. A Blackstone entity (including the General Partner) acting as 
agent or broker may receive placement fees, advisory fees, or other 
compensation from a Partnership or a portfolio company in connection 
with a Partnership's purchase or sale of securities, provided that such 
placement fees, advisory fees, or other compensation can be deemed to 
be ``usual and customary.'' Such fees or other compensation will be 
deemed ``usual and customary'' only if (a) the Partnership is 
purchasing or selling securities (directly or indirectly) alongside 
other unaffiliated third parties, including Blackstone Third Party 
Funds or Third Party Investors, who are similarly purchasing or selling 
securities, (b) the fees or other compensation being charged to the 
Partnership (directly or indirectly) are also being charged to the 
unaffiliated third parties, including Blackstone Third Party Funds or 
Third Party Investors (directly or indirectly), 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 the unaffiliated third parties, including Blackstone 
Third Party Funds and Third Party Investors. A Blackstone entity, 
including the General Partner, also may be compensated for services to 
entities in which the Partnerships invest and to entities that are 
competitors of these entities, or from other unaffiliated persons or 
entities.
    13. The investment objective of each Partnership will be set forth 
in the offering documents relating to the specific Partnership. A 
Partnership may invest directly or through investment pools (including 
private funds relying on sections 3(c)(1) and 3(c)(7) of the Act) \11\ 
and registered investment companies sponsored or managed by Blackstone 
or by third parties. 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.
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    \11\ Applicant is not requesting any exemption from any 
provision of the Act or any rule thereunder that may govern a 
Partnership's eligibility to invest in a Portfolio Investment 
relying on section 3(c)(1) or 3(c)(7) of the Act or the Portfolio 
Investment's status under the Act.
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    14. The Partnerships may borrow from a General Partner or a 
Blackstone entity. The interest rate on such loans will be no less 
favorable to the Partnerships than the rate that could be obtained on 
an arm's length basis. A Partnership will not borrow from any person if 
the borrowing would cause any person not named in section 2(a)(13) of 
the Act to own outstanding securities of the Partnership (other than 
short-term paper). Any indebtedness of a Partnership will be non-
recourse to

[[Page 49002]]

the Limited Partners of the Partnership, except indebtedness incurred 
specifically on behalf of a Limited Partner where such Limited Partner 
has agreed to guarantee the loan or act as co-obligor on the loan.

Applicant's 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 (other than short-term 
paper) are beneficially owned (a) by current or former employees, or 
persons on retainer, of one or more affiliated employers, (b) by 
immediate family members of such persons, or (c) by such employer or 
employers together with any of the persons in (a) or (b).
    2. Section 7 of the Act generally prohibits investment companies 
that are not registered under section 8 of the Act from selling or 
redeeming their securities. Section 6(e) of the Act provides that, in 
connection with any order exempting an investment company from any 
provision of section 7, certain provisions of the Act, as specified by 
the Commission, will be applicable to the company and other persons 
dealing with the company as though the company were registered under 
the Act. Applicant requests an order under sections 6(b) and 6(e) of 
the Act exempting applicant and any Partnerships 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 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. 
Applicant requests an exemption from section 17(a) to permit: (a) a 
Blackstone entity or a Blackstone Third Party Fund (or any affiliated 
person of the Blackstone Third Party Fund), acting as principal, to 
engage in any transaction directly or indirectly with any Partnership 
or any company controlled by the Partnership; (b) any Partnership to 
invest in or engage in any transaction with any Blackstone entity or 
Blackstone Third Party Fund, acting as principal, (i) in which the 
Partnership, any company controlled by the Partnership, or any 
Blackstone entity or Blackstone Third Party Fund has invested or will 
invest, or (ii) with which the Partnership, any company controlled by 
the Partnership, or any Blackstone entity or Blackstone Third Party 
Fund is or will become affiliated; and (c) any Third Party Investor, 
acting as principal, to engage in any transaction directly or 
indirectly with a Partnership or any company controlled by the 
Partnership.
    4. Applicant states that an exemption from section 17(a) is 
consistent with the protection of investors and is necessary to promote 
the purpose of each Partnership. Applicant states that the Participants 
in each Partnership will be fully informed of the possible extent of 
the Partnership's dealings with Blackstone. Applicant also states that, 
as professionals with experience in financial services businesses, 
Participants in each Partnership will be able to understand and 
evaluate the attendant risks. Applicant asserts that the community of 
interest among the Participants in each Partnership and Blackstone will 
provide 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 of a registered investment company, or any 
affiliated person of such person, acting as principal, from 
participating in any joint arrangement with the company unless 
authorized by the Commission. Applicant requests relief to permit 
affiliated persons of each Partnership, or affiliated persons of any of 
these 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 a company controlled by 
the Partnership is a participant.
    6. Applicant asserts that compliance with section 17(d) would cause 
the Partnerships to forego investment opportunities simply because a 
Participant or other affiliated person of the Partnerships (or any 
affiliate of the affiliated person) made or is concurrently making a 
similar investment. Applicant also states that because certain 
attractive investment opportunities often require that each participant 
make available funds in an amount substantially greater than that 
available to one Partnership alone, there may be attractive 
opportunities that a Partnership may be unable to take advantage of 
except by co-investing with other persons, including affiliated 
persons. Applicant notes that each Partnership will primarily be 
organized for the benefit of the employee Participants, as an incentive 
for them to remain with Blackstone and for the generation and 
maintenance of goodwill. Applicant asserts 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.
    7. Co-investments with a Blackstone Third Party Fund, or by a 
Blackstone entity pursuant to a contractual obligation to a Blackstone 
Third Party Fund, will not be subject to condition 3 below. Applicant 
notes that it is common for a Blackstone Third Party Fund to require 
that Blackstone invest its own capital in Blackstone Third Party Fund 
investments, and that Blackstone investments be subject to 
substantially the same terms as those applicable to the Blackstone 
Third Party Fund. Applicant believes it is important that the interests 
of the Blackstone Third Party Fund take priority over the interests of 
the Partnerships, and that the Blackstone Third Party Fund not be 
burdened or otherwise affected by activities of the Partnerships. In 
addition, applicant asserts that the relationship of a Partnership to a 
Blackstone Third Party Fund is fundamentally different from a 
Partnership's relationship to Blackstone. Applicant contends that the 
focus of, and the rationale for, the protections contained in the 
requested relief are to protect the Partnerships from any overreaching 
by Blackstone in the employer/employee context, whereas the same 
concerns are not present with respect to the Partnerships and a 
Blackstone Third Party Fund.
    8. Section 17(e) of the Act and rule 17e-1 under the Act limit the 
compensation an affiliated person may receive when acting as agent or 
broker for a registered investment company. Applicant requests an 
exemption from section 17(e) to permit a Blackstone entity (including 
the General Partner) that acts as an agent or broker to receive 
placement fees, advisory fees, or other compensation from a Partnership 
in connection with the purchase or sale by the Partnership of 
securities, provided that the fees or other compensation can

[[Page 49003]]

be deemed ``usual and customary.'' Applicant states that for the 
purposes of the application, fees or other compensation will be deemed 
``usual and customary'' only if (a) the Partnership is purchasing or 
selling securities alongside other unaffiliated third parties, 
including Blackstone Third Party Funds or Third Party Investors, who 
are similarly purchasing or selling securities, (b) the fees or other 
compensation being charged to the Partnership are also being charged to 
the unaffiliated third parties, including Blackstone Third Party Funds 
and Third Party Investors, 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 the 
unaffiliated third parties, including Blackstone Third Party Funds or 
Third Party Investors. Applicant asserts that, because Blackstone does 
not wish it to appear as if it is 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. Applicant asserts that the fees or other 
compensation paid by a Partnership to a Blackstone entity will be the 
same as those negotiated at arm's length with unaffiliated third 
parties.
    9. Rule 17e-1(b) under the Act requires that a majority of 
directors who are not ``interested persons'' (as defined in section 
2(a)(19) of the Act) take actions and make approvals regarding 
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act 
requires each Partnership to comply with the fund governance standards 
defined in rule 0-1(a)(7) under the Act. Applicant requests 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 
Board 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. 
Applicant states that because all the Board members will be affiliated 
persons, without the relief requested, a Partnership could not comply 
with rule 17e-1. Applicant states that each Partnership will comply 
with rule 17e-1 by having a majority of the Board members take actions 
and make approvals as are set forth in rule 17e-1. Applicant states 
that each Partnership will comply with all other requirements of rule 
17e-1.
    10. Section 17(f) of the Act designates the entities that may act 
as investment company custodians, and rule 17f-1 under the Act imposes 
certain requirements when the custodian is a member of a national 
securities exchange. Applicant requests an exemption from section 17(f) 
and rule 17f-1 to permit a Blackstone entity to act as custodian of 
Partnership assets without a written contract. Applicant also requests 
an exemption from the rule 17f-1(b)(4) requirement that an independent 
accountant periodically verify the assets held by the custodian. 
Applicant states that, because of the community of interest of all the 
parties involved and the existing requirement for an independent audit, 
compliance with these requirements would be unnecessary. Each 
Partnership will otherwise comply with all the provisions of rule 17f-
1.
    11. Applicant also requests 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 (or a Blackstone entity) for purposes of paragraph (b) 
of the rule; (b) for purposes of paragraph (d) of the rule, (i) 
employees of the General Partner (or a Blackstone entity) will be 
deemed to be employees of the Partnerships, (ii) officers or managers 
of the General Partner of a Partnership (or a Blackstone entity) will 
be deemed to be officers of the Partnership, and (iii) the Board 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 (or a Blackstone entity). Applicant expects that some 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. Applicant 
asserts that these instruments are most suitably kept in the files of 
the General Partner (or a Blackstone entity), 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. Applicant requests exemptive relief to permit the 
Board, regardless of whether it is (or each of its members are) deemed 
interested persons, to take actions and make determinations set forth 
in the rule. Applicant states that, because the General Partner will be 
affiliated with the Partnership, a Partnership could not comply with 
rule 17g-1 without the requested relief. Applicant also states that 
each Partnership will comply with all other requirements of rule 17g-1, 
except that the Partnerships request an exemption from the requirements 
of paragraphs (g) and (h) or rule 17g-1 relating to the filing of 
copies of fidelity bonds and related information with the Commission 
and relating to this provision of notices to the board of directors, 
and an exemption from the requirements of paragraph (j)(3) of rule 17g-
1 that the Partnerships comply with the fund governance standards 
defined in rule 0-1(a)(7).
    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 anti-fraud provisions of paragraph (b), 
because they are unnecessarily burdensome as applied to the 
Partnerships.
    14. Applicant requests 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. Applicant contends that the forms prescribed 
by the Commission for periodic reports have little relevance to a 
Partnership and would entail administrative and legal costs that 
outweigh any benefit to the Participants. Applicant requests exemptive 
relief to the extent necessary to permit each Partnership to report 
annually to its Participants. Applicant also requests an exemption from 
section 30(h) of the Act to the extent necessary to exempt the General 
Partner of each Partnership, directors and officers of the General 
Partner 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. Applicant asserts 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

[[Page 49004]]

investors and burdensome to those required to make them.
    15. 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 Partnership will comply with rule 38a-1(a), 
(c) and (d), except that (a) because the Partnership does not have a 
board of directors, the board of directors or other governing body of 
the General Partner will fulfill the responsibilities assigned to the 
Partnership's board of directors under the rule, (b) since the board of 
directors or other governing body of the General Partner does not have 
any disinterested members, approval by a majority of the disinterested 
board members required by rule 38a-1 will not be obtained, and (c) 
since the board of directors or other governing body of the General 
Partner does not have any independent directors, the Partnerships will 
comply with the requirement in rule 38a-1(a)(4)(iv) that the chief 
compliance officer meet with the independent directors by having the 
chief compliance officer meet with the board of directors or other 
governing body of the General Partner as constituted.

Applicant's Conditions

    Applicant agrees 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 Partnership is a party (the 
``Section 17 Transactions'') will be effected only if the Board 
determines that:
    (a) The terms of the Section 17 Transaction, including the 
consideration to be paid or received, are fair and reasonable to the 
Partners of the participating Partnership and do not involve 
overreaching of such Partnership or its Partners on the part of any 
person concerned; and
    (b) The Section 17 Transaction is consistent with the interests of 
the Partners of the participating Partnership, such Partnership's 
organizational documents and such Partnership's reports to its 
Partners.
    In addition, the Board will record and will preserve a description 
of all Section 17 Transactions, the Board's findings and the 
information or materials upon which the Board's findings are based and 
the basis for the findings. All such records will be maintained for the 
life of the Partnership and at least six years thereafter, and will be 
subject to examination by the Commission and its staff. Each 
Partnership will preserve the accounts, books and other documents 
required to be maintained in an easily accessible place for the first 
two years.
    2. The Board 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 Partnership, or any 
affiliated person of such a person, promoter or principal underwriter.
    3. The General Partner will not make on behalf of a Partnership any 
investment in which a ``Co-Investor'' with respect to any Partnership 
(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 Partnership and the Co-Investor are participants, unless 
any such Co-Investor, prior to disposing of all or part of its 
investment, (a) gives such 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 participating 
Partnership holding such investment has the opportunity to dispose of 
its investment prior to or concurrently with, on the same terms as, and 
on a pro rata basis with the Co-Investor. The term ``Co-Investor'' with 
respect to any Partnership means any person who is: (a) An ``affiliated 
person'' (as defined in section 2(a)(3) of the Act) of such Partnership 
(other than a Blackstone Third Party Fund); (b) a Blackstone entity; 
(c) an officer, director or partner of a Blackstone entity; or (d) an 
entity (other than a Blackstone Third Party Fund) in which the Company 
or an Affiliate 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 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, including step and adoptive relationships, or to a trust or 
other investment vehicle established for any such 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 Exchange Act; (d) when the investment is 
comprised of securities that are NMS securities pursuant to section 
11A(a)(2) of the Exchange Act and rule 600(a) of Regulation NMS 
thereunder; (e) when the investment is comprised of securities that are 
listed on 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; or (f) when the 
investment is comprised of securities that are government securities as 
defined in section 2(a)(16) of the Act.
    4. Each Partnership and its General Partner will maintain and 
preserve, for the life of such Partnership and at least six years 
thereafter, such accounts, books, and other documents as constitute the 
record forming the basis for the audited financial statements that are 
to be provided to the Participants in such Partnership, and each annual 
report of such Partnership 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 Partnership will preserve the accounts, 
books and other documents required to be maintained in an easily 
accessible place for the first two years.
    5. The General Partner of each Partnership will send to each 
Participant in that Partnership, at any time during the fiscal year 
then ended, Partnership financial statements audited by such 
Partnership's independent accountants, except under certain 
circumstances in the case of a Partnership formed to make a single 
Portfolio Investment. In such cases, the Partnership may send unaudited 
financial statements, but each Participant will receive financial 
statements of the single Portfolio Investment audited by such entity's 
independent accountants. At the end of each fiscal year, the General 
Partner will make a valuation or have a valuation made of all of the 
assets of the Partnership as of such fiscal year end in a manner 
consistent with customary practice with respect to the valuation of 
assets of the kind held by the Partnership. In addition, within 120 
days after the end of each fiscal year of each Partnership or as soon 
as practicable thereafter, the General Partner will send a report to 
each person who was a Participant at any time during the fiscal year 
then ended, setting forth such tax information as shall be necessary 
for the preparation by the Participant of his, her or its U.S.

[[Page 49005]]

Federal and State income tax returns and a report of the investment 
activities of the Partnership during that fiscal year.
    6. If a Partnership makes purchases or sales from or to an entity 
affiliated with the Partnership by reason of an officer, director or 
employee of Blackstone (a) serving as an officer, director, general 
partner or investment adviser of the entity, or (b) having a 5% or more 
investment in the entity, such individual will not participate in the 
Partnership's determination of whether or not to effect the purchase or 
sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19854 Filed 8-11-10; 8:45 am]
BILLING CODE 8010-01-P