[Federal Register Volume 67, Number 235 (Friday, December 6, 2002)]
[Notices]
[Pages 72709-72711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30914]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25839; 812-12874]


Stratigos Fund, L.L.C., et al.; Notice of Application

December 2, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 17(a) 
of the Act.

-----------------------------------------------------------------------

    Summary of Application: Applicants request an order to permit a 
limited liability company to transfer its assets to a registered 
closed-end investment company in exchange for interests in the closed-
end investment company.
    Applicants: Stratigos Fund, L.L.C. (``Stratigos''), Balius Fund, 
L.L.C. (``Balius'') and CIBC Oppenheimer Advisers, L.L.C. 
(``Adviser'').
    Filing Dates: The application was filed on August 27, 2002. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is reflected in this notice.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on December 27, 2002, and should be accompanied by proof of 
service on the 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, c/o CIBC World Market Corp., 622 Third Avenue, 
8th Floor, New York, NY 10017.

FOR FURTHER INFORMATION CONTACT: John L. Sullivan, Senior Counsel, at 
(202) 942-0681, or Annette Capretta, 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. Stratigos, a Delaware limited liability company, is registered 
under the Act as a closed-end management investment company. Balius, a 
Delaware limited liability company, is not registered under the Act in 
reliance on section 3(c)(7) of the Act. Limited liability company 
interests (``Interests'') in Stratigos and Balius are not registered 
under the Securities Act of 1933, as amended (the ``1933 Act''), and 
are sold to investors (``Members'') in a private placement in reliance 
upon section 4(2) of the 1933 Act and Regulation D under the 1933 Act.
    2. The Adviser, a Delaware corporation, serves as (a) Stratigos' 
investment adviser and (b) the managing member of Balius and, in that 
capacity, has overall responsibility for the management, operation and 
administration of Balius, including Balius' investment activities. The 
Adviser is registered as an investment adviser under the Investment 
Advisers Act of 1940. As of July 31, 2002, the Adviser owned an 
Interest in Stratigos with a net asset value of $52,452.31 (which 
represented 0.74% of the value of the outstanding Interests in 
Stratigos as of such date). As of July 31, 2002, Canadian Imperial 
Holdings, Inc. (``CIHI''), an affiliated person of the Adviser, owned 
an Interest in Balius with a net asset value of $67,459.64 (which 
represented 0.81% of the value of the outstanding Interests in Balius 
as of such date).
    3. Applicants propose that, pursuant to an agreement and plan of 
acquisition (``Acquisition Agreement''), Balius will transfer to 
Stratigos substantially all of its assets, which will consist of cash 
and the portfolio securities of Balius that (a) are permissible 
investments under the investment policies and restrictions of 
Stratigos, as set forth in its offering memorandum (``Offering 
Memorandum'') and its limited liability company agreement (``Company 
Agreement''), and (b) have readily available market quotations (the 
``Assets''), in exchange for Interests of Stratigos (the ``Exchange''). 
All of

[[Page 72710]]

Balius' known liabilities (excluding short positions in securities and 
options) will be paid by Balius prior to the Exchange, and no 
liabilities of Balius (excluding short positions and options) will be 
transferred to Stratigos. Under the Acquisition Agreement, Interests of 
Stratigos delivered to Balius will have an aggregate net asset value 
equal to the net asset value of the Assets transferred by Balius to 
Stratigos. The Assets will be valued in accordance with the valuation 
policies of Stratigos as set forth in its Offering Memorandum and 
Company Agreement (``Valuation Procedures''). Interests in Stratigos 
received by Balius in the Exchange will be distributed to the Members 
of Balius and will be allocated to each Member of Balius in proportion 
to that Member's closing capital account in Balius, as determined 
immediately before the Exchange, in complete liquidation of Balius. The 
Exchange is scheduled to occur on or about December 31, 2002. No 
brokerage commissions, fees (except for customary transfer fees, if 
any) or other remuneration will be paid by Stratigos or Balius in 
connection with the Exchange. Stratigos and Balius each will pay its 
pro rata share, based on their relative net assets on the date of the 
Exchange, of the expenses incurred in connection with the Exchange. 
Applicants agree not to make any material changes to the Acquisition 
Agreement without prior approval of the Commission or its staff.
    4. On August 1, 2002, the board of managers of Stratigos (the 
``Board''), including a majority of the members who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Managers''), approved the Acquisition Agreement. In 
approving the Acquisition Agreement, the Board concluded that: (a) The 
Exchange is consistent with the policies of Stratigos, as recited in 
its registration statement, (b) the terms of the Exchange, including 
the consideration to be received by Stratigos, are reasonable and fair 
and do not involve overreaching on the part of any concerned, (c) 
participation by Stratigos in the Exchange is in the best interests of 
Stratigos and its Members and the Interests of existing Members of 
Stratigos will not be diluted as a result of the Exchange, and (d) the 
Exchange is consistent with the general purposes of the Act. These 
findings, and the basis upon which they were made, are recorded in the 
minute books of Stratigos.
    5. With respect to Balius, the Adviser (as Balius' managing member) 
believes that the Exchange is in the best interests of Balius and the 
Members of Balius. The Exchange is required to be approved by Members 
of Balius that represent more than 50% of the aggregate value of the 
outstanding Interests of Balius.
    6. The Exchange will not be effected until: (a) The Commission has 
issued the requested order; and (b) Stratigos and Balius have received 
an opinion of counsel substantially to the effect that the Exchange 
will not result in taxable income to Balius, Stratigos or their 
respective Members.

Applicants' Legal Analysis

    1. Section 17(a)(1) of the Act prohibits any affiliated person of a 
registered investment company, or any affiliated person of that person, 
acting as principal, from selling to the registered investment company 
any security or other property. Section 2(a)(3) of the Act defines an 
``affiliated person'' as, among other things, any person controlling, 
controlled by, or under common control with, the other person; and, if 
the other person is an investment company, its investment adviser. 
Section 2(a)(9) of the Act, in relevant part, defines ``control'' as 
``the power to exercise a controlling influence over the management or 
policies of a company, unless such power is solely the result of an 
official positions with such company.''
    2. Applicants state that Balius could be deemed to be an affiliated 
person of Stratigos because Balius and Stratigos might be deemed to be 
under the common control of the Adviser. Thus, applicants state that 
the proposed Exchange may be prohibited under section 17(a) of the Act.
    3. Rule 17a-7 exempts certain purchase and sale transactions 
otherwise prohibited by section 17(a) of the Act if an affiliation 
exists solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided, among other requirements, 
that the transaction is for no consideration other than cash. 
Applicants state that the relief provided by rule 17a-7 may not be 
available for the Exchange because the Exchange will involve 
consideration other than cash (i.e., Interests of Stratigos) and 
certain of the assets transferred will be valued in accordance with the 
Valuation Procedures, rather than the methodology set forth in 
paragraph (b) of rule 17a-7.\1\ Applicants also state that Balius may 
be deemed to be affiliated with Stratigos for reasons other than those 
set forth in the rule 17a-7. There is a possibility that, as a result 
of withdrawals of capital by Members of Balius and Stratigos prior to 
the Exchange, the Adviser or CIHI may, at the time of the Exchange, own 
five percent or more of the outstanding Interests in Stratigos or 
Balius, or both.
---------------------------------------------------------------------------

    \1\ Under the Valuation Procedures, domestic exchange traded or 
NASDAQ listed equity securities are valued at their last composite 
sales price as reported on the exchanges where those securities are 
traded. If no sales of such securities are reported on a particular 
day, the securities are valued based upon their composite bid prices 
for securities held long, or their composite ask prices for 
securities held short, as reported by such exchanges. The rationale 
for this approach is that in the absence of an actual sale price, 
the bid would best reflect the price at which Stratigos could expect 
to sell securities held long and the ask would best reflect the 
price at which Stratigos could expect to purchase the securities 
held short if it were required to do so.
---------------------------------------------------------------------------

    4. Rule 17a-8 exempts certain transactions (including mergers, 
consolidations or purchases or sales of substantially all of the assets 
of a company (collectively, ``Asset Acquisitions'')) otherwise 
prohibited by section 17(a) of the Act, provided, among other 
requirements, that the Asset Acquisition is between registered 
investment companies or between a registered investment company and an 
eligible investment fund (as defined in the rule) (``Eligible 
Unregistered Fund''). Applicants state that the relief provided by rule 
17a-8 may not be available for the Exchange because the Exchange will 
involve Balius, which is not a registered investment company nor an 
Eligible Unregistered Fund.
    5. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from the provisions of section 17(a) of the Act if the 
terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned and the proposed transaction is 
consistent with the policy of each registered investment company 
concerned and the general purposes of the Act.
    6. Applicants submit that the terms of the Exchange meet the 
criteria contained in section 17(b) of the Act. Applicants state that 
the Interests issued by Stratigos will have an aggregate net asset 
value equal to the aggregate net asset value of the assets acquired 
from Balius. Because the Valuation Procedures will be those used by 
Stratigos to value its portfolio securities, the Interests of existing 
Members of Stratigos will not be diluted as a result of the Exchange. 
Applicants also state that the investment objective and policies of 
Balius are substantially similar to those of Stratigos. Applicants 
further state that the Board, including a majority of the Independent 
Managers, has approved the Acquisition

[[Page 72711]]

Agreement and that the Exchange will comply with the terms of paragraph 
(b) of rule 17a-7, except as described in the application, paragraphs 
(c), (d), (e), (f) and (g) of rule 17a-7 and the provisions of rule 
17a-8 (as those provisions apply to a merger of an Eligible 
Unregistered Fund with a registered investment company).

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition: The Exchange will comply with 
the terms of paragraph (b) of Rule 17a-7, except as described in the 
application, paragraphs (c), (d), (e), (f) and (g) of Rule 17a-7 and 
the provisions of Rule 17a-8 (as these provisions apply to a merger of 
an Eligible Unregistered Fund with a registered investment company).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30914 Filed 12-5-02; 8:45 am]
BILLING CODE 8010-01-P