7.24.2007

The SEC issued a no-action letter under Section 3(c)(7) of the Investment Company Act of 1940, allowing the trustee (the "Trustee") of several large family trusts (the "Trusts"), who is a qualified purchaser under Section 2(a)(51)(A)(iv) of the 1940 Act, and the spouse of the Trustee (the "Spouse"), who is not a qualified purchaser, to invest jointly in Section 3(c)(7) Funds.

Section 3(c)(7) of the 1940 Act excludes an issuer from the definition of investment company provided, in pertinent part, that the outstanding securities of the issuer are owned exclusively by persons who, at the time of acquisition of the securities, were "qualified purchasers." As relevant here, Section 2(a)(51)(A)(iv) of the 1940 Act defines qualified purchaser to include: "any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments."

The incoming letter successfully argued that the Trustee is a qualified purchaser because the Trustee invests on a discretionary basis not less than $25 million in qualifying investments held in the Trusts. The Trustee has management authority over all of the Trusts. The Trustee is the sole, mandatory income beneficiary of the Trusts and a discretionary principal beneficiary of certain of the Trusts. The Trusts collectively have investments substantially in excess of $100 million. In conjunction with investments in the Trusts and otherwise, the Trustee and the Spouse periodically are offered the opportunity to invest in Section 3(c)(7) Funds.

The SEC stated as with Section 2(a)(51)(A)(i) and Rule 3c-5, Section 2(a)(51)(A)(iv) pertains to persons who have the financial sophistication to understand and evaluate the risks associated with purchasing securities of an investment pool that is not regulated under the 1940 Act. The SEC stated that it believes that it is consistent with the intent of Congress to apply the spousal joint interest position in Section 2(a)(51)(A)(i) to Section 2(a)(51)(A)(iv).

Please click http://www.sec.gov/divisions/investment/noaction/2007/mcdermott072607-3c7.htm for a copy of the no-action letter.