[Federal Register Volume 71, Number 55 (Wednesday, March 22, 2006)]
[Notices]
[Pages 14560-14562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27263; 812-13065]


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

March 16, 2006.
AGENCY: Securities and Exchange Commission (``Commission'')

ACTION:  Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'' for an exemption from sections 18(c) 
and 18(i) of the Act and an order pursuant to section 17(d) of the Act 
and rule 17d-1 under the Act.

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    Summary of Application: Applicants request an order to permit 
certain registered closed-end management companies to issue multiple 
classes of shares and to impose asset-based distribution fees.
    Applicants: Man-Glenwood Lexington, LLC (``Lexington''), Man-
Glenwood Lexington TEI, LLC (``TEI''), Glenwood Capital Investments, 
L.L.C. (``Adviser''), and Man Investments Inc. (``Distributor'').
    Filing Dates: The application was filed on February 11, 2004, and 
amended on February 24, 2006, and March 15, 2006.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 April 10, 2006, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, c/o Steven Zoric 
Esq., Man Investments Inc., 123 N. Wacker Drive, 28th Floor, Chicago, 
IL 60606.

FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at 
(202) 551-6871, or Janet M. Grossnickle, 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 for a fee at the 
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC 
20549-0102 (tel. 202-551-5850).

Applicants' Representations

    1. Lexington, TEI, and Man-Glenwood Lexington Associates Portfolio, 
LLC (the ``Portfolio Company'') are continuously offered closed-end 
management investment companies registered under the Act and organized 
as Delaware limited liability companies. Lexington and TEI 
(collectively, the ``Feeder Funds'') operate as feeder funds in a 
master-feeder structure and invest all or substantially all of their 
investable assets in the Portfolio Company. The Portfolio Company, 
which acts as the master fund to the Feeder Funds, is a fund of hedge 
funds.
    2. The Adviser is registered as an investment adviser under the 
Investment Advisers Act of 1940 and serves as investment adviser to the 
Portfolio Company. The Distributor, a broker-dealer registered under 
the Securities Exchange Act of 1934 (``1934 Act''), acts as the 
principal underwriter to the Feeder Funds. The Distributor is under 
common control with the Adviser and is an affiliated person, as defined 
in section 2(a)(3) of the Act, of the Adviser.
    Applicants request that the order also apply to any other 
continuously offered registered closed-end management investment 
company existing now or in the future for which the Adviser, the 
Distributor, or any entity controlling, controlled by, or under common 
control with the Adviser, the Distributor, or any entity controlling, 
controlled by, or under common control with the Adviser or the 
Distributor acts as investment adviser or principal underwriter, and 
which provides periodic liquidity with respect to its proportionate 
ownership interests (``Units'') pursuant to rule 13e-4 under the 1934 
Act (collectively, with the Feeder Funds, the ``Funds'').\1\
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    \1\ Any Fund relying on the requested relief will do so in a 
manner consistent with the terms and conditions of the application. 
Applicants represent that each investment company presently 
intending to rely on the requested relief is listed as an applicant.
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    3. The Feeder Funds continuously offer their Units to the public 
pursuant to rule 415 under the Securities Act of 1933 at net asset 
value and each currently offers a single class of Units subject to a 
front-end sales load as a percentage of the public offering price and 
an investor servicing fee. Units of the Feeder Funds are not listed on 
any securities exchange and do not trade on an over-the-counter system 
such as the National Association of Securities Dealers Automated 
Quotation System. Applicants do not expect that any secondary market 
will for the Units. To provide a limited degree of liquidity to 
investors, the Feeder Funds ordinarily will offer to repurchase Units 
quarterly at their then current net asset value pursuant to rule 13e-4 
under the 1934 Act. The amount, timing and terms of any repurchase 
offer would remain within the discretion of each Feeder Fund's Board.

[[Page 14561]]

    4. The Feeder Funds seek the flexibility to be structured as 
multiple class funds and propose to offer two additional classes of 
Units.\2\ Class A Units would be offered at net asset value, plus a 
front-end sales charge and an annual asset-based service and/or 
distribution fee of up to 0.25% and 0.75%, respectively, of average 
monthly net assets. Class 1 Units would be offered at net asset value 
with no front-end sales load or asset-based service and/or distribution 
fees and would be offered only to institutions and investors who 
compensate their financial intermediary directly. The Funds may in the 
future adopt these classes or another sales charge structure.
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    \2\ The Feeder Funds may designate their existing Units as 
Initial Class Units. The Initial Class would be closed to new 
investors and would only be available to those Unit holders who 
currently hold Initial Class Units.
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    5. Applicants represent that any asset-based service and 
distribution fees will comply with the provisions of rule 2830(d) of 
the Conduct Rules of the National Association of Securities Dealers, 
Inc. (``NASD Sales Charge Rule'') as if that rule applied to the Feeder 
Funds. Applicants also represent that each Fund will disclose in its 
prospectus, the fees, expenses and other characteristics of each class 
of Units offered for sale by the prospectus as is required for open-end 
multiple class funds under Form N-1A. As is required for open-end 
funds, each Fund will disclose its expenses in shareholder reports, and 
disclose any arrangements that result in breakpoints in or elimination 
of sales loads in its prospectus.\3\ Each Fund and the Distributor will 
also comply with any requirements that may be adopted by the Commission 
regarding disclosure at the point of sale and in transaction 
confirmations about the costs and conflicts of interest arising out of 
the distribution of open-end investment company shares, and regarding 
prospectus disclosure of sales loads and revenue sharing arrangements 
as if those requirements applied to the Funds and the Distributor.\4\
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    \3\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (February 27, 2004) (adopting release) 
(requiring open-end investment companies to disclose fund expenses 
in shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information)
    \4\ Confirmation Requirements and Point of Sale Disclosure 
Requirements for Transactions and Certain Manual Funds and Other 
Securities, and Other Confirmation Requirement Amendments, and 
Amendments to the Registration Form for Mutual Funds, Investment 
Company Act Release No. 26341 (January 29, 2004) (proposing 
release).
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    6. Each Feeder Fund will allocate all expenses incurred by it among 
the various classes of Units based on the net assets of the Feeder Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect distribution fees, service fees, 
and any other incremental expenses of that class. Expenses of a Feeder 
Fund allocated to a particular class of Units will be borne on a pro 
rata basis by each outstanding Unit of that class. The Funds will not 
offer exchange privileges. Units will not be subject to an early 
withdrawal charge.

Applicants' Legal Analysis

Multiple Classes of Units

    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of Units of the Funds may be prohibited by section 
18(c).
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that permitting multiple classes of Units of 
the Funds may violate section 18(i) of the Act because each class would 
be entitled to exclusive voting rights with respect to matters solely 
related to that class.
    3. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction or any class or classes of persons, 
securities or transactions from any provision of the Act, or from any 
rule under the Act, if and to the extent such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Applicants request an exemption under section 
6(c) from sections 18(c) and 18(i) to permit the Funds to issue 
multiple classes of Units.
    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of Unit holders. Applicants 
submit that the proposed arrangements would permit the Funds to 
facilitate the distribution of their Units and provide investors with a 
broader choice of Unit holder options. Applicants assert that the 
proposed closed-end investment company multiple class structure does 
not raise the concerns underlying section 18 of the Act to any greater 
degree than open-end investment companies' multiple class structures 
that are permitted by rule 18f-3 under the Act. A Fund may create 
additional classes of Units or vary the characteristics of the proposed 
Class A and Class I Units, but each Fund will comply with the 
provisions of rule 18f-3 as if it were an open-end investment company.

Asset-Based Distribution Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to permit the Funds to impose asset-based distribution fees. 
Applicants have agreed to comply with rules 12b-1 and 17d-3 as if those 
rules applied to closed-end investment companies.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Applicants will comply with the provisions of rules 12b-1, 17d-3, 
and 18f-3 under the Act, as amended from time to time, as if those 
rules applied to closed-end management investment companies, and will 
comply with the NASD Sales Charge Rule, as amended from time to time, 
as if that rule applied to all closed-end management investment 
companies.


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    For the Commission, by the Division of Investment Management, 
under delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. 06-2764 Filed 3-21-06; 8:45 am]
BILLING CODE 8010-01-M