Document ID: SEC-2014-0666-0001
Agency: sec
Document Type: Notice
Title: Applications: UBS AG, et al.
Posted Date: 2014-04-23T04:00Z

[Federal Register Volume 79, Number 78 (Wednesday, April 23, 2014)]
[Notices]
[Pages 22728-22734]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09212]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31019; File No.813-336]

UBS AG, et al.; Notice of Application

April 17, 2014.
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'') exempting the 
applicants 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 
would be limited as set forth in the application.

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    Summary of Application: Applicants request an order to exempt 
certain investment vehicles (``Funds'') formed for the benefit of key 
employees of UBS AG (``UBS'') and its affiliates from certain 
provisions of the Act. Each Fund will be an ``employees' securities 
company'' within the meaning of section 2(a)(13) of the Act.
    Applicants: UBS, UBS IB Co-Investment 2001 Limited Partnership 
(``CLP1'') and UBS IB Co-Investment 2001 (No. 1) Feeder L.P. (``Feeder 
L.P.'').

DATES:  Filing Dates: The application was filed on July 6, 2001, and 
amended on January 9, 2004, May 8, 2008, November 20, 2012 and January 
22, 2014.
    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 May 12, 2014, and should be accompanied by proof of 
service on applicants, in the form of an

[[Page 22729]]

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. Applicants, 677 Washington 
Boulevard, Stamford, CT 06901.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 
551-6870, or David P. Bartels, at (202) 551-6821 (Division of 
Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling 202-551-8090.

Applicants' Representations

    1. UBS is a bank established under the laws of Switzerland that 
offers a range of financial services including private banking, asset 
management and investment banking services.
    2. UBS has organized CLP1, a Cayman Island limited partnership, and 
Feeder L.P., a Delaware limited partnership, as the Initial Funds. UBS 
intends to organize additional Funds from time to time for the benefit 
of highly compensated current and former employees, officers and 
directors of UBS and its affiliates (as defined in rule 12b-2 under the 
Securities Exchange Act of 1934 (the ``Exchange Act'')) (collectively, 
the ``UBS Group'') who have been approved to purchase interests by UBS 
(``Eligible Employees''). Each Fund will be 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. Applicants state that the Funds are 
designed primarily to create capital appreciation opportunities that 
are competitive with those at other financial services firms and to 
facilitate the recruitment and retention of high caliber professionals. 
Applicants assert that participation by Eligible Employees in the Funds 
may allow them to diversify their investments or to participate in 
investments that might not otherwise be available to them or that might 
be beyond their individual means. The investment objectives and 
policies for each Fund may vary from Fund to Fund, and participation in 
a Fund will be voluntary.
    3. Applicants state that each Fund will be organized as a limited 
partnership, a limited liability company, a corporation, or another 
appropriate entity, in each case organized under the laws of a state of 
the United States or of a jurisdiction outside the United States. 
Applicants state that, because a large portion of Eligible Employees 
reside outside of the United States, applicants expect that most, if 
not all, of the Funds will be organized under the laws of jurisdictions 
outside of the United States for various tax, regulatory, and other 
reasons.\1\
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    \1\ Applicants state that, for tax, regulatory or other reasons, 
a Fund organized for employees residing in a particular country may 
have different terms than other Funds organized for employees 
residing in other countries, and Funds that are organized at 
different times are likely to have different terms. However, no 
organizational document for, or any other contractual arrangement 
regarding, a Fund will contain any provision that protects or 
purports to protect UBS AG, the General Partner or their delegates 
against any liability with respect to the Fund or its security 
holders to which such person would otherwise be subject by reason of 
willful malfeasance, bad faith, or gross negligence in the 
performance of such person's duties, or by reason of such person's 
reckless disregard of such person's obligations and duties under 
such contract or organizational documents. Moreover, all Funds will 
be subject to, and comply with, the terms and conditions of the 
application.
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    4. Each Fund will be managed, operated and controlled by a general 
partner that is controlled, directly or indirectly, by UBS (a ``General 
Partner'').\2\ Applicants state that the General Partner will be 
responsible for the overall management of each Fund and will have the 
authority to make all decisions regarding the acquisition, management 
and disposition of Fund investments. The executive officers and 
directors of the General Partner or of any entity controlling the 
General Partner will be employees of UBS Group, a majority of whom will 
be eligible to invest in the Fund. Applicants state that the General 
Partner may delegate all management responsibilities, including 
responsibility for investment decisions in respect of the Fund, to UBS 
or another entity that is part of the UBS Group as investment manager 
(the ``Investment Manager''). The General Partner or Investment Manager 
will register as an investment adviser under the Investment Advisers 
Act of 1940 (``Advisers Act''), if required under applicable law.\3\ 
Whenever UBS, the General Partner or any other person acting for or on 
behalf of a Fund is required or permitted to make a decision, take or 
approve an action, or omit to do any of the foregoing in such person's 
discretion, such person will act in the best interest of the Fund and 
its security holders and will exercise such discretion in accordance 
with reasonableness and good faith and any fiduciary duties owed to the 
Fund and its security holders.
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    \2\ If a form of organization other than a limited partnership 
is used, the functions of the General Partner will be performed by a 
corresponding entity or governing body.
    \3\ Applicants acknowledge that no relief in respect of such 
determination is requested.
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    5. The Investment Manager may, from time to time, be presented with 
investment opportunities by one or more investment advisers 
(``Investment Advisers'') that are engaged by the Investment Manager 
that may be affiliated or not affiliated with UBS (any such non-
affiliated Investment Adviser being referred to as an ``Outside 
Investment Adviser''). If the Investment Manager elects to enter into 
any side-by-side investment with a party that is not a member of the 
UBS Group, the Investment Manager will be permitted to engage as an 
Investment Adviser the Outside Investment Adviser responsible for the 
management of such side-by-side investment. In each of the foregoing 
cases, however, all decisions with respect to the purchase, holding or 
disposition of investments by each Fund will be made by either the 
General Partner or the Investment Manager alone, and not by any 
Investment Adviser.
    6. Interests in the Funds (``Interests'') will be offered without 
registration in reliance on section 4(a)(2) of the Securities Act of 
1933 (the ``Securities Act''), or Regulation D under the Securities 
Act, and will be sold only to Qualified Participants, as defined below, 
and members of the UBS Group.\4\ The term ``Qualified Participant'' 
means: (a) Eligible Employees, (b) spouses, parents, children, spouses 
of children, brothers, sisters and grandchildren of Eligible Employees 
(``Qualified Family Members'') and (c) trusts or other investment 
vehicles established solely for the benefit of Eligible Employees or 
Qualified Family Members (``Qualified Investment Vehicles'').
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    \4\ Any member of the UBS Group that acquires Interests will be 
an ``accredited investor,'' as defined in rule 501(a) of Regulation 
D under the 1933 Act.
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    7. An Eligible Employee must be either (a) an ``accredited 
investor'' as defined in rule 501(a)(6) or 501(a)(5) of Regulation D 
under the Securities Act (an ``Accredited Investor'') or (b) one of not 
more than 35 employees of the UBS Group who meets the salary and other 
requirements as described below (``Other Investors''). Each Other 
Investor

[[Page 22730]]

will, at the time of investment in a Fund, (x) be a ``knowledgeable 
employee,'' as defined in rule 3c-5 under the Act, of such Fund (with 
the Fund treated as though it were a ``Covered Company'' for purposes 
of such rule) or (y) have (i) a graduate degree in business, law or 
accounting, (ii) a minimum of five years of consulting, investment 
banking, legal or similar business experience and (iii) a reportable 
income from all sources in the two calendar years immediately preceding 
their participation of at least $100,000 and a reasonable expectation 
of income from all sources of at least $140,000 per year in each year 
in which the person invests in a Fund. An Other Investor qualifying 
under (y) 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 Fund and in all other Funds in 
which that Other Investor has previously invested. A Qualified Family 
Member who purchases an Interest must be an Accredited Investor.
    8. An Eligible Employee or a Qualified Family Member may purchase 
an Interest through a Qualified Investment Vehicle only if either (a) 
such investment vehicle is an ``accredited investor,'' as defined in 
rule 501(a) of Regulation D under the Securities Act or (b) such 
Eligible Employee or Qualified Family Member is a settlor and principal 
investment decision-maker with respect to such investment vehicle. 
Prior to offering Interests to an Eligible Employee or Qualified Family 
Member, UBS 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 Fund, is able to bear the economic risk of such 
investment and is able to afford a complete loss of such investment.
    9. Applicants represent that the material terms of investment in a 
Fund, including without limitation, the terms and conditions of any and 
all transfers of Interests in any Fund, will be fully disclosed to each 
Qualified Participant and member of the UBS Group when Interests are 
offered to that person. The specific investment objectives and 
strategies for a particular Fund will be set forth in a private 
placement memorandum relating to the Interests offered by a Fund. In 
connection with an investment in a Fund, each Qualified Participant and 
member of the UBS Group will receive the private placement memorandum, 
form of application and the limited partnership agreement (or other 
constitutive document) of the Fund. Each Fund will send its investors 
(``Investors'') annual reports, which will contain audited financial 
statements, as soon as practicable after the end of each fiscal 
year.\5\ In addition, as soon as practicable after the end of each tax 
year of a Fund, a report will be transmitted to each Investor setting 
forth such tax information as shall be necessary for the preparation by 
the Investor of his or her federal tax returns.
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    \5\ For the purposes of the application, ``audit'' has the 
meaning provided in rule 1-02(d) of Regulation S-X.
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    10. Interests in a Fund will not be transferable by an Investor 
except with the prior written consent of UBS or a Fund's General 
Partner and then only to Qualified Participants or to members of the 
UBS Group. Applicants expect that interests in the Funds will generally 
not be redeemable at the option of an Investor (except on liquidation 
of a Fund) but state that it is possible that one or more Funds may 
offer Interests with certain redemption rights. With respect to certain 
Funds, UBS 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 or director of any member of the UBS Group for any 
reason. Upon repurchase or cancellation, such Investor's Interest will 
be purchased by the General Partner for cash in an amount at least 
equal to the lesser of (a) the amount of such Investor's capital 
contributions less prior distributions from the Fund (plus interest, as 
determined by UBS) or (b) the value of the Interest, as determined by 
UBS in good faith as of the date of termination. For other Funds, UBS 
AG may be permitted to exercise this right only under particular 
circumstances, such as if an employee resigns to join a competitor of 
the UBS Group, or not at all.
    11. UBS may establish one or more deferred compensation plans in 
connection with the Funds. Applicants state that Eligible Employees may 
be able to defer compensation and receive a return on such deferred 
compensation determined by reference to the performance of a Fund. 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; \6\ (b) will only be offered to Eligible Employees 
who are current employees, officers or directors of the UBS Group; (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 Fund, including, without 
limitation, disclosure documents and audited financial information.
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    \6\ For purposes of this application, a Fund will be deemed to 
be formed with respect to each deferred compensation plan and each 
reference to ``Fund,'' ``capital contribution,'' ``General 
Partners,'' ``Investor,'' ``loans'' or ``leverage'' and ``Interest'' 
in this application will be deemed to refer to the deferred 
compensation plan, the notional capital contribution to the deferred 
compensation plan, the UBS Group, a participant of the deferred 
compensation plan, notional loans or leverage and participation 
rights in the deferred compensation plan, respectively.
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    12. The General Partner or Investment Manager of a Fund may charge 
the Fund an annual management fee, a flat administrative charge or an 
expense reimbursement, but will not charge a carried interest. Any 
expense reimbursement may cover out-of-pocket expenses of the General 
Partner or Investment Manager, including allocable portions of the 
salaries of UBS Group employees who work on the Funds' affairs. 
Directors or officers of the General Partner or Investment Manager, or 
of any entity controlling the General Partner or Investment Manager, 
may also be compensated for their services to the General Partner or 
Investment Manager, including reimbursement for out-of-pocket expenses. 
A Fund will not pay both a fee to the General Partner of the Fund and a 
fee to the Investment Manager of the Fund for providing the same 
services or bearing the same expenses. An Investment Adviser to the 
Investment Manager may charge the Fund an advisory fee; however, such 
advisory fee will not be duplicative of any fees paid to the General 
Partner. No fee of any kind will be charged in connection with the sale 
of Interests.
    13. If a Fund becomes a limited partner or otherwise holds an 
interest in an investment fund organized or managed by the UBS Group in 
which affiliated third parties also are limited partners or otherwise 
hold interests (a ``Client Fund''), the Fund may be obligated to pay a 
pro rata share of any fees (including carried interest) charged to the 
unaffiliated limited partners or interest holders of such Client Fund. 
A Fund may also invest in funds managed or advised by an Outside 
Investment Adviser, which may be entitled to fees (including carried 
interest) from the Fund. In all such cases, the Fund will enter into 
commercially reasonable arm's length arrangements with respect to the 
payment of the fees, and the potential for payment of any such

[[Page 22731]]

management fees or carried interest will be fully described in the 
applicable offering documents.
    14. Subject to the terms of the applicable limited partnership 
agreement (or other constitutive documents), a Fund will be permitted 
to enter into transactions involving (a) a UBS Group entity, (b) a 
Client Fund or other portfolio company, (c) any Investor or any person 
or entity affiliated with an Investor, or (d) any partner or other 
investor in any entity in which a Fund invests. These transactions may 
include a Fund's purchase or sale of an investment or an interest from 
or to any UBS Group entity or Client Fund, acting as principal. Prior 
to entering into these transactions, the General Partner (or the 
Investment Manager, to whom the General Partner may delegate this 
responsibility) must determine that the terms are fair to Investors.
    15. A Fund will not invest more than 15% of its assets in 
securities issued by registered investment companies except for 
temporary investments in money market funds. A Fund will not acquire 
any security issued by a registered investment company if, immediately 
after the acquisition, the Fund will own more than 3% of the 
outstanding voting stock of the registered investment company. 
Applicants state that a Fund may also invest in Client Funds that are 
not registered under the Act by virtue of section 3(c)(1) or section 
3(c)(7) of the Act.\7\
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    \7\ Applicants are not requesting any exemption from any 
provision of the Act or any rule thereunder that may govern a Fund's 
eligibility to invest in a Client Fund relying on section 3(c)(1) or 
3(c)(7) of the Act or a Client Fund's status under the Act.
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    16. Members of the UBS Group and/or unaffiliated third parties may 
make loans to Funds and/or to Investors in connection with their 
purchase of Interests, provided that a Fund 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 Fund (other 
than short-term paper). Members of the UBS Group may also make 
preferred capital contributions to the Funds. In connection with any 
leverage of the Fund or preferred capital contributions, Eligible 
Employees will not have any personal liability in excess of the amounts 
payable under their respective subscription agreements for the 
repayment of the loan or preferred capital contribution, including in 
the event that, upon liquidation of the Fund, the assets of the Fund 
are insufficient to permit the Fund to repay such loan preferred 
capital contribution in full. Any leverage or preferred capital 
contributions will bear interest at a rate no less favorable to a Fund 
or its Investors than that could be obtained on an arm's length basis. 
The terms of any leverage or preferred capital contribution provided by 
any member of the UBS Group (or third party lender) will be described 
in the applicable private placement memorandum and partnership 
agreement (or other constitutive documents) as appropriate.

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 who will own and control the company's voting securities, 
evidences of indebtedness and other securities, the prices at which 
securities issued by the company will be sold and any applicable sales 
load, the disposition of the proceeds of the securities issued by the 
company, the character of securities in which those proceeds will be 
invested, and any relationship between the company and the issuers of 
the securities. 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 sections 6(b) and 6(e) of the Act 
exempting the Funds from all provisions of the Act, except section 9 
and sections 36 through 53 of the Act, and the rules and regulations 
thereunder. With respect to sections 17 and 30 of the Act, and the 
rules and regulations thereunder, and rule 38a-1 under the Act, the 
exception 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 that 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 member of the UBS Group 
or a Client Fund, acting as principal, to engage in any transaction 
directly or indirectly with any Fund or entity controlled by such Fund; 
(b) a Fund to invest in or engage in any transaction with any entity, 
acting as principal (i) in which such Fund, any company controlled by 
such Fund, or any entity within the UBS Group or a Client Fund has 
invested or will invest or (ii) with which such Fund, any company 
controlled by such Fund or any entity within the UBS Group or a Client 
Fund is or will otherwise become affiliated; and (c) a partner or other 
investor in any entity in which a Fund invests, acting as principal, to 
engage in transactions directly or indirectly with the related Fund or 
any company controlled by such Fund.
    4. Applicants state that an exemption from section 17(a) is 
consistent with the protection of investors and the purposes of the 
Funds. Applicants state that the Investors in each Fund will be 
informed of the possible extent of the Fund's dealings with the UBS 
Group and of the potential conflicts of interest that may exist. 
Applicants also assert that the community of interest among the 
Investors and UBS Group will serve to reduce any risk of abuse in 
transactions involving a Fund and the UBS Group. Applicants represent 
that the requested relief will not extend to any transaction between a 
Fund and an Outside Investment Adviser or an affiliated person of the 
Outside Investment Adviser, or between a Fund and who is not a member 
of the UBS Group or an employee, officer or director of a member of the 
UBS Group and is an affiliated person of the Fund as defined in section 
2(a)(3)(E) of the Act (``Advisory Person'') or any affiliated person of 
such person.
    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, 
unless approved by the Commission. Applicants request relief to permit 
affiliated persons of each Fund, or affiliated persons of such persons, 
to

[[Page 22732]]

participate in any joint arrangement in which the Fund or an entity 
controlled by the Fund is a participant. Applicants acknowledge that 
the requested relief will not extend to any transaction in which an 
Outside Investment Adviser or an Advisory Person, or an affiliated 
person of either, has an interest.
    6. Applicants assert that compliance with section 17(d) could cause 
a Fund to forego investment simply because an affiliate of the Fund has 
made, or is contemplating making, the same investment. Applicants also 
submit that the types of investment opportunities considered by a Fund 
often require each investor to make funds available in an amount that 
may be substantially greater than what a Fund may make available on its 
own. Applicants state that the possibility that permitting co-
investments by an affiliated person or an affiliated person of an 
affiliated person might lead to less advantageous treatment of the Fund 
is minimal in light of (a) the UBS Group's intention in establishing a 
Fund so as to reward Eligible Employees and to attract and retain 
highly qualified personnel, (b) the UBS Group's capital contributions 
to the Funds, and (c) the fact that a majority of the directors of the 
General Partner or Investment Manager or of the entity controlling the 
General Partner or Investment Manager may themselves invest in the 
Fund.
    7. Applicants believe that the interests of the Eligible Employees 
participating in a Fund will be adequately protected in situations 
where condition 3 in the application does not apply. Applicants state 
that a Fund may co-invest with an investment fund or separate account, 
organized for the benefit of investors who are not affiliated with the 
UBS Group, over which a member of the UBS Group exercises investment 
discretion (a ``Third-Party Fund''). Applicants assert that, in 
structuring a Third-Party Fund, it is common for unaffiliated investors 
of such fund to require that the UBS Group invest its own capital in 
fund investments, either through the fund or on a side-by-side basis, 
and that such UBS Group investment be subject to substantially the same 
terms as those applicable to the fund's investment. Applicants state 
that it is important to the UBS Group that the interests of the Third-
Party Fund take priority over the interests of the Funds, and that the 
activities of the Third-Party Fund not be burdened or otherwise 
affected by the activities of the Funds. In addition, applicants 
contend that the relationship of a Fund to a Third-Party Fund, in the 
context of this application, is fundamentally different from such 
Fund's relationship to the UBS Group. Applicants assert that the focus 
of, and the rationale for, the protections contained in condition 3 are 
to protect the Funds from any overreaching by the UBS Group in the 
employer/employee context, whereas the same concerns are not present 
with respect to the Funds vis-[agrave]-vis the investors of a 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. Applicants request an 
exemption from section 17(e) to permit a UBS Group member (including 
the General Partner) acting as agent or broker, to receive placement 
fees, financial advisory fees or other compensation in connection with 
the purchase or sale by a Fund of securities, subject to the 
requirement that placement fees, financial advisory fees or other 
compensation is deemed ``usual and customary.'' Applicants state that 
for the purposes of the application, fees and other compensation that 
is being charged or received by the UBS Group entity will be deemed 
``usual and customary'' only if (a) the Fund is purchasing or selling 
securities with other unaffiliated third parties, (b) the fees or 
compensation being charged to the Fund are also being charged to the 
unaffiliated third parties, and (c) the amount of securities being 
purchased or sold by the Fund does not exceed 50% of the total amount 
of securities being purchased or sold by the Fund and unaffiliated 
third parties.
    9. Applicants assert that compliance with section 17(e) would 
prevent a Fund from participating in a transaction in which a member of 
the UBS Group does not, for other business reasons, wish a Fund to be 
treated in a more favorable manner (in terms of lower fees) than 
unaffiliated third parties also participating in the transaction. 
Applicants assert that the concerns of overreaching and abuse that 
section 17(e) and rule 17e-1 were designed to prevent are alleviated by 
the conditions that ensure that fees or other compensation paid to 
members of the UBS Group are the same as those negotiated at arm's 
length with unaffiliated third parties, and the unaffiliated third 
parties have as great or greater interest as the Fund in the 
transaction as a whole.
    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. Applicants request an exemption from rule 17e-1 to the 
extent necessary to permit each Fund 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. Applicants state that because all of the 
directors of a General Partner will be affiliated persons, without the 
relief requested, a Fund could not comply with rule 17e-1. Applicants 
state that each Fund will comply with rule 17e-1(b) by having a 
majority of the directors of the General Partner take actions and make 
approvals as set forth in rule 17e-1. Applicants state that each Fund 
will otherwise comply with the requirements of rule 17e-1.
    11. Section 17(f) designates the entities that may act as 
investment company custodians, and rule 17f-1 imposes certain 
requirements when the custodian is a member of a national securities 
exchange. Applicants request an exemption from section 17(f) and rule 
17f-1(a) to the extent necessary to permit a member of the UBS Group to 
act as custodian for a Fund without a written contract. Applicants also 
request an exemption from the rule 17f-1(b)(4) requirement that an 
independent accountant periodically verify the assets held by the 
custodian . Applicants further request an exemption from rule 17f-
1(c)'s requirement of transmitting to the Commission a copy of any 
contract executed pursuant to rule 17f-1. Applicants believe that, 
because of the community of interest of all of the parties involved and 
the requirement to provide annual audited financial reports, compliance 
with these requirements would be unnecessary. Applicants state that 
they will comply with rule 17f-1(d), provided that ratification by the 
General Partner of any Fund will be deemed to be ratification by a 
majority of a board of directors. Applicants state that they will 
comply with all other requirements of rule 17f-1.
    12. Section 17(g) and rule 17g-1 generally require the bonding of 
officers and employees of a registered investment company who have 
access to its securities or funds. Rule 17g-1 requires that a majority 
of directors who are not interested persons take certain actions and 
give certain approvals relating to fidelity bonding. Applicants request 
relief to the extent necessary to permit the General Partner's officers 
and directors, who may be deemed to be interested persons, to take the 
actions and make the determinations set forth in the rule. Applicants 
also request an exemption from the requirements of paragraph (g) of 
rule 17g-1 relating to the filing of copies of fidelity bonds and

[[Page 22733]]

related information with the Commission and the provision of notices to 
the board of directors, and paragraph (h) of rule 17g-1 relating to the 
appointment of a person to make the filings and provide the notices 
required by paragraph (g). Applicants state that, because all the 
directors of the General Partner will be affiliated persons, a Fund 
could not comply with rule 17g-1 without the requested relief. Each 
Fund will comply with rule 17g-1 by having a majority of the General 
Partner's directors take actions and make determinations as set forth 
in rule 17g-1. Applicants also state that the Funds will comply with 
all other requirements of rule 17g-1.
    13. Section 17(j) and paragraph (b) of rule 17j-1 make it unlawful 
for certain enumerated persons to engage in fraudulent or deceptive 
practices in connection with the purchase or sale of a security held or 
to be acquired by a registered investment company. Rule 17j-1 also 
requires that every registered investment company adopt a written code 
of ethics and that every access person of a registered investment 
company report personal securities transactions. Applicants request an 
exemption from the provisions of rule 17j-1, except for the antifraud 
provisions of paragraph (b), asserting that these provisions are 
unnecessarily burdensome because of the community of interest among the 
Investors. The relief requested will only extend to members of the UBS 
Group and is not requested with respect to any Outside Investment 
Adviser or Advisory Person.
    14. Applicants request an exemption from the requirements in 
sections 30(a), 30(b) and 30(e), 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 Funds 
and would entail administrative and legal costs that outweigh any 
benefit to the Investors. Applicants request exemptive relief to the 
extent necessary to permit each Fund to report annually to its 
Investors. Applicants also request an exemption from section 30(h) to 
the extent necessary to exempt the General Partner of each Fund and any 
other person who may be deemed to be a member of an advisory board of a 
Fund from filing Forms 3, 4, and 5 under section 16(a) of the Exchange 
Act with respect to their ownership of Interests in a Fund. 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.
    15. Rule 38a-1 requires investment companies to adopt, implement 
and periodically review written policies and procedures reasonably 
designed to prevent violation of the federal securities laws, appoint a 
chief compliance officer and maintain certain records. Applicants state 
that the Funds will comply with rule 38a-1(a), (c) and (d), except that 
(a) the board of directors of the General Partner of each Fund will 
fulfill the responsibilities assigned to the Fund's board of directors 
under the rule, (b) because all members of the board of directors of 
the General Partner would be considered interested persons of the 
Funds, approval by a majority of the disinterested directors required 
by rule 38a-1 would not be obtained, and (c) because the board of 
directors of the General Partner do not have any disinterested members, 
the Funds 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 of 
the General Partner as constituted. Applicants assert that, in view of 
the community of interest between the Funds and the General Partners 
and Investment Managers, there is no significant benefits to be gained 
from imposing the costs of compliance with the other aspects of the 
rule on the Funds.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transaction to which a Fund is a party otherwise 
prohibited by section 17(a) or section 17(d) of the Act and rule 17d-1 
thereunder (the ``Section 17 Transactions'') will be effected only if 
the General Partner determines that: (a) The terms of the Section 17 
Transaction, including the consideration to be paid or received, are 
fair and reasonable to the Investors and do not involve overreaching of 
the Fund or its Investors on the part of any person concerned; and (b) 
the Section 17 Transaction is consistent with the interests of the 
Investors, the Fund's organizational documents, and the Fund's reports 
to its Investors. In addition, the General Partner will record and 
preserve a description of the Section 17 Transactions, the General 
Partner's findings, the information or materials upon which the General 
Partner's findings are based, and the basis therefore. All such records 
will be maintained for the life of the Fund and at least six years 
thereafter, and will be subject to examination by the Commission and 
its staff. Each Fund will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place for 
the first two years.
    2. In connection with the Section 17 Transactions, the General 
Partner of each Fund will adopt, and periodically review and update, 
procedures designed to ensure that reasonable inquiry is made, before 
the consummation of any such transaction, with respect to the possible 
involvement in the transaction of any affiliated person or promoter of 
or principal underwriter for the Funds, or any affiliated person of 
such a person, promoter, or principal underwriter.
    3. The General Partner of each Fund will not invest the funds of 
the Funds 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, where the investment involves a joint 
enterprise or other joint arrangement within the meaning of rule 17d-1 
in which the Fund 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 Fund has the opportunity to dispose of the Fund's investment prior 
to or concurrently with, on the same terms as, and pro rata with the 
Affiliated Co-Investor. The term ``Affiliated Co-Investor'' with 
respect to a Fund means (a) an ``affiliated person,'' as such term is 
defined in section 2(a)(3) of the Act, of the Fund (other than a Third-
Party Fund or a person that is an affiliated person of the Fund solely 
because of section 2(a)(3)(B) of the Act); (b) the UBS Group; (c) an 
officer or director of a member of the UBS Group; or (d) an entity 
(other than a Third-Party Fund) in which a member of the UBS Group acts 
as a general partner or has a similar capacity to control the sale or 
other disposition of an 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

[[Page 22734]]

members of the Affiliated Co-Investor or a trust established for any 
Affiliated Co-Investor or any such family member; or (c) when the 
investment is comprised of securities that are (i) listed on any 
exchange registered as a national securities exchange 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 (iv) 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.
    4. Each Fund and its General Partner will maintain and preserve, 
for the life of each such Fund 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 Investors, and each annual report of the Fund required to be 
sent to the Investors, and agree that all such records will be subject 
to examination by the Commission and its staff. Each Fund will preserve 
the accounts, books and other documents required to be maintained in an 
easily accessible place for the first two years.
    5. The General Partner of each Fund will send to each Investor who 
had an Interest in the Fund, at any time during the fiscal year then 
ended, Fund financial statements that have been audited by 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 
Fund as of such fiscal year end in a manner consistent with customary 
practice with respect to the valuation of assets of the kind held by 
the Fund. In addition, within 90 days after the end of each fiscal year 
of each of the Funds or as soon as practicable thereafter, the General 
Partner of each Fund shall send a report to each person who was a 
Investor at any time during the fiscal year then ended, setting forth 
such tax information as shall be necessary for the preparation by the 
Investor of his or her federal and state income tax returns and a 
report of the investment activities of the Fund during that year.
    6. If purchases or sales are made by a Fund from or to an entity 
affiliated with the Fund solely by reason of a partner or employee of 
the UBS Group (a) serving as officer, director, general partner or 
investment adviser of the entity, or (b) having a 5% or more investment 
in such entity, such individual will not participate in the Fund's 
determination of whether or not to effect the purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09212 Filed 4-22-14; 8:45 am]
BILLING CODE 8011-01-P