[Federal Register Volume 69, Number 236 (Thursday, December 9, 2004)]
[Notices]
[Pages 71438-71440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3570]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26686 ; 812-13062]


Man-Glenwood Lexington, LLC, et al., Notice of Application

December 2, 2004.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

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

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Applicants: Man-Glenwood Lexington, LLC (``Lexington''), Man-Glenwood 
Lexington TEI, LLC (``TEI,'' together with Lexington, the ``Funds''), 
Man-Glenwood Lexington Associates Portfolio, LLC (``Portfolio 
Company''), Glenwood Capital Investments, L.L.C. (the ``Adviser''), and 
Man Investments Inc. (the ``Distributor'').

Summary of Application: Applicants request an order to permit a 
purchase and sale transaction as part of an exchange tender offer by a 
registered closed-end investment company.

Filing Dates: The application was filed on January 23, 2004, and 
amended on November 30, 2004.

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, 2004, 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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, 123 N. Wacker Drive, 28th Floor, Chicago, IL 
60606.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, 
(202) 942-0634 or Todd Kuehl, Branch Chief, (202) 942-0564 (Office of 
Investment Company Regulation, Division of Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. Lexington, TEI and the Portfolio Company, each a Delaware 
limited liability company, are non-diversified closed-end management 
investment companies registered under the Act. Lexington and TEI are 
each ``feeder'' funds in a master-feeder structure in which they invest 
all or substantially all of their assets in interests of the Portfolio 
Company (``Interests''), which

[[Page 71439]]

serves as the ``master'' fund.\1\ The Portfolio Company is a ``fund of 
hedge funds.'' Lexington, TEI and the Portfolio Company have the same 
investment objectives and policies. TEI is designed for investment 
solely by tax-exempt and tax-deferred investors (``Tax-Exempt 
Investors''). Lexington was organized on August 5, 2002, and began 
offering its limited liability company interests (``Units'') to the 
public in February, 2003. TEI was organized on October 22, 2003, and 
began offering its Units to the public in April, 2004. Lexington's and 
TEI's Units are registered under the Securities Act of 1933.
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    \1\ TEI invests indirectly in the Portfolio Company. See Man-
Glenwood Lexington TEI, LLC and Man-Glenwood Lexington TEI, LDC 
(pub. avail. April 30, 2004).
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    2. The Adviser is an Illinois limited liability company and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940. The Adviser serves as the Portfolio Company's investment 
adviser and also provides certain administrative services to Lexington 
and TEI. The Distributor, a New York corporation, is a broker-dealer 
registered under the Securities Exchange Act of 1934 (``Exchange Act'') 
and serves as distributor for Units of Lexington and TEI.
    3. Lexington and TEI continuously offer their Units at net asset 
value (``NAV''). Investors who purchase Units and are admitted to 
Lexington or TEI by their respective board of managers (the ``Board'') 
\2\ become members of the respective Fund (``Members''). Members may 
not redeem Units and Units are not listed on any securities exchange. 
In order to provide a limited degree of liquidity to Members, Lexington 
and TEI may from time to time offer to repurchase Units at their NAV. 
Lexington's and TEI's repurchase offers for Units (and the Portfolio 
Company's repurchase offers for Interests) are conducted pursuant to 
section 23(c)(2) of the Act and rule 13e-4 under the Exchange Act.
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    \2\ Lexington, TEI and the Portfolio Company have a common 
Board.
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    4. Since the creation of TEI, Tax-Exempt Investors have principally 
invested in TEI rather than Lexington. Both taxable investors and Tax-
Exempt Investors currently hold Units of Lexington. Applicants believe 
that Lexington's tax-exempt Unit holders (``Tax-Exempt Unit Holders'') 
may determine that they would be in a better position investing in the 
Portfolio Company through TEI. Applicants propose to conduct a tender 
offer in which all Unit holders of Lexington may choose to tender Units 
to Lexington in exchange for a cash payment of a dollar amount equal to 
the NAV of the Units on the tender offer valuation date (``Valuation 
Date''), and those Tax-Exempt Unit Holders eligible to invest in TEI 
may choose to tender instead any or all of their Lexington Units for an 
amount of full and fractional Units of TEI based on their respective 
NAV on the Valuation Date (the ``Transaction''). Applicants state that 
the intent of the Transaction is to enable Tax-Exempt Unit Holders of 
Lexington to move their investment to TEI without creating potential 
adverse consequences to themselves, the Portfolio Company, or the 
remaining taxable Unit holders of Lexington. The Transaction will 
involve a tender offer by Lexington and the Portfolio Company.\3\
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    \3\ TEI simultaneously will conduct a cash tender offer.
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    5. On July 20, 2004, the Board, including a majority of managers 
who are not ``interested persons,'' as defined in section 2(a)(19) of 
the Act (``Independent Managers''), approved the Transaction on behalf 
of each Fund and the Portfolio Company subject to the Commission 
issuing an order pursuant to the application. In approving the 
Transaction, the Board concluded that: (a) The Transaction is 
consistent with the policies of each Fund and the Portfolio Company, as 
recited in their respective registration statements, (b) the terms of 
the Transaction, including the consideration to be received by each 
Fund and the Portfolio Company, are reasonable and fair and do not 
involve overreaching on the part of any person concerned, and (c) 
participation in the Transaction is in the best interests of each Fund 
and its respective Members and the Portfolio Company and its Interest 
holders and interests of existing Members of Lexington and TEI and the 
Portfolio Company's Interest holders will not be diluted as a result of 
the Transaction. The tender offer in connection with the Transaction is 
expected to begin on January 31, 2005, and expire on March 1, 2005 
(``Expiration Date''). Each Fund's Units and the Portfolio Company's 
Interests will be valued as of the Valuation Date, anticipated to be 
March 31, 2005.
    6. The Transaction will not be effected until the Commission has 
issued an order relating to the application. Applicants have agreed not 
to make any material changes to the Transaction without prior approval 
of the Commission or its staff. No repurchase fee, brokerage 
commissions, fees (except for customary transfer fees, if any) or other 
remuneration will be paid by Lexington, TEI, the Portfolio Company or 
any Unit holder or Interest holder in connection with the Transaction. 
Each of the Funds and the Portfolio Company will bear its own expenses 
of filing tender offer materials with the Commission.

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits any affiliated person of a 
registered investment company, or any affiliated person of that person 
(``second-tier affiliate''), acting as principal, from selling to or 
purchasing from the registered investment company, or any company 
controlled by the registered company, any security or other property. 
Section 2(a)(3) of the Act defines an ``affiliated person'' as, among 
other things, any person directly or indirectly owning, controlling, or 
holding with power to vote 5% or more of the outstanding voting 
securities of the other person; any person controlling, controlled by 
or under common control with, the other person; any officer, director, 
partner, copartner or employee of the other person; and, if the other 
person is an investment company, its investment adviser.
    2. Applicants state that Lexington and TEI may be deemed to be 
affiliated persons, or second-tier affiliates, of each other. Although 
Lexington and TEI, as feeder funds, do not have an investment adviser, 
they may be deemed to be under the common control of their managers and 
executive officers, which are the same for each Fund. Lexington and TEI 
may each be deemed to be an affiliated person of the Portfolio Company 
and, therefore, each may also be deemed to be a second-tier affiliate 
of the other. In addition, to the extent that an eligible Lexington 
Unit holder requesting an exchange to TEI (an ``Exchanging Holder'') 
holds 5% or more of the outstanding voting securities of Lexington, the 
Exchanging Holder could be an affiliated person of Lexington and if 
Lexington and TEI are deemed to be affiliated persons of each other, 
the Exchanging Holder may be deemed to be a second-tier affiliate of 
TEI. Thus applicants state that the Transaction may be prohibited under 
section 17(a).
    3. Rule 17a-7 provides in pertinent part that a purchase or sale 
transaction between registered investment companies which are 
affiliated persons, or affiliated persons of affiliated persons, of 
each other, is exempt from section 17(a) provided that certain 
conditions are met. Applicants state that they can not rely on rule 
17a-7, however, because the Transaction would not meet the terms of 
rule 17a-7 (a) and (b) because it would involve

[[Page 71440]]

a purchase and sale for consideration other than cash (Lexington would 
purchase Units of TEI with its Portfolio Company Interests rather than 
with cash; and TEI would sell its Units for Portfolio Company Interests 
rather than for cash) and the Transaction would be effected at the NAV 
of the Portfolio Company's Interests rather than at an independent 
current market price.
    4. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from the provisions of section 17(a) 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.
    5. Applicants submit that the Transaction meets the requirements of 
section 17(b) of the Act. Applicants state that the Transaction will be 
effected at the Funds' and the Portfolio Company's NAVs, calculated in 
accordance with their respective policies and procedures as set forth 
in their registration statements under the Act. Applicants state that 
the valuation policies and procedures are identical for the Funds and 
the Portfolio Company. Applicants further state that the Transaction is 
consistent with the policies of the Funds and the Portfolio Company and 
does not involve overreaching on the part of any person concerned.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Transaction will be effected at the NAV of the Portfolio 
Company's Interests determined in accordance with the Portfolio 
Company's registration statement under the Act. The NAV of the Units of 
each Fund for purposes of the Transaction will be determined in 
accordance with each Fund's registration statement under the Act.
    2. The Transaction will comply with the terms of rule 17a-7(c), (d) 
and (f) under the Act.
    3. At its next regular meeting following the Transaction, the Board 
of each Fund and the Portfolio Company, including a majority of the 
Independent Managers, will determine: (a) Whether the Units and 
Interests were valued in accordance with condition 1 and (b) whether 
the Transaction was consistent with the policies of each Fund and the 
Portfolio Company as reflected in its registration statement and 
reports filed under the Act.
    4. The Funds and the Portfolio Company will maintain and preserve 
for a period of not less than six years from the end of the fiscal year 
in which the Transaction occurs, the first two years in an easily 
accessible place, a written record of the Transaction setting forth a 
description of each security transferred, the terms of the Transaction, 
and the information or materials upon which the determinations required 
by condition 3 were made.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-3570 Filed 12-8-04; 8:45 am]
BILLING CODE 8010-01-P