File No. [   ]

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

APPLICATION FOR AN ORDER

UNDER SECTIONS 6(b) AND 6(e)

OF THE INVESTMENT COMPANY ACT OF 1940

of

CITADEL INVESTMENT GROUP, L.L.C.

(Exact name of applicant as specified in charter)

131 South Dearborn Street

Chicago, IL 60603

(Address of principal executive offices)

Copies of all Communications and Orders to:

Citadel Investment Group, L.L.C.	Sidley Austin LLP
Adam C. Cooper	David R. Sawyier
131 South Dearborn Street	One South Dearborn
Chicago, IL 60603	Chicago, IL 60603

Application pursuant to Sections 6(b) and 6(e) of the Investment Company Act of 1940.

This Application (including Exhibits) consists of 47 pages.

TABLE OF CONTENTS

SECTION		PAGE
GLOSSARY		1
APPLICATION		4
PART I.	STATEMENT OF FACTS	5
	Organization of the ESC Funds	5
	Purposes	5
	Eligible Employees	6
	The ESC Funds	8
	Registration of an Investment Adviser Pursuant to the Advisers Act	15
	Investments and Operations	15
	Reports and Accounting	19
PART II.	REQUEST FOR ORDER	20
PART III.	APPLICANT’S CONDITIONS	38
PART IV.	CONCLUSION	42

Exhibit – Authorizing Resolution

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GLOSSARY

Terms defined throughout the text of this Application have been collected in this Glossary for convenience of reference.

“1940 Act” means the Investment Company Act of 1940, as amended.

 “1934 Act” means the Securities Exchange Act of 1934, as amended.

“1933 Act” means the Securities Act of 1933, as amended.

 “Advisers Act” means the Investment Advisers Act of 1940, as amended.

“Affiliate” has the meaning found in Rule 12b-2 under the 1934 Act.

“Applicant” means the Company.

“Application” means this application for the Order.

“Citadel” means the Company, together with any Affiliate of the Company.

 “Citadel Third Party Fund” means an investment fund or separate account, organized in part for the benefit of investors who are not affiliated with Citadel, over which a Citadel Affiliate exercises investment discretion.

 “Classes” means the classes of Interests that may be issued by an ESC Fund.

“Co-Investor” means with respect to any ESC Fund, any person who is: (i) an “affiliated person” (as such term is defined in the 1940 Act) of such ESC Fund (other than a Citadel Third Party Fund); (ii) a Citadel entity; (iii) an officer, director or partner of a Citadel entity; or (iv) an entity (other than a Citadel Third Party Fund) in which the Managing Member or an Affiliate acts as a managing member or has a similar capacity to control the sale or other disposition of the entity’s securities.

“Commission” means the Securities and Exchange Commission.

“Compliance Period” means the period during which an Eligible Employee must comply with the Obligations in order for his/her Unvested Membership Interest to become vested in whole or in part.

“Company” means Citadel Investment Group, L.L.C., a Delaware limited liability company.

“Determination Date” means (i) the forty-second month-end following the end of the Service Year with respect to which an Eligible Employee was issued the relevant Long-Term Points or (ii) such other date as agreed upon by Citadel and the relevant Eligible Employee.

“Eligible Employee” means an individual who (i) is a current or former employee, officer or partner of Citadel or a director of Citadel that is an interested person (as defined in the 1940

Act) and (ii) meets the standards of an “accredited investor” under Rule 501(a)(5) or (6) of Regulation D.

“ESC Funds” means the limited liability companies, limited partnerships, companies or other investment vehicles, including the Participation Points ESC Funds, sponsored by Citadel the Interests in which may be issued in reliance on the Order.

“Interests” mean the limited liability company, limited partnership or similar ownership interests (including shares) in an ESC Fund held by Members other than the Managing Member, the Company or its Affiliates.

“Long-Term Points” means the long-term points issued to an Eligible Employee.

“Long-Term Points Program” means the long-term incentive program pursuant to which Long-Term Points are issued to Eligible Employees.

“Managing Member” means an Affiliate of the Company that acts as a managing member or manager of an ESC Fund or in a similar capacity.

 “Member” means any member or partner of, or other investor in, an ESC Fund.

“Members’ Representative Committee” means a committee comprised of one or more Members or third parties, each of which is not a “related party” (as defined in Accounting Standards Codification) of Citadel, which committee acts as the representative and agent of the Members of an ESC Fund.

 “Obligations” means the employment and post-employment obligations to which an Eligible Employee may be subject for various Compliance Periods.

“Offering Documents” means the offering memorandum and/or other documents (including subscription documents and management agreements) describing the issuance of Interests in an ESC Fund.

“Operating Agreement” means the operating agreement or other organizational document of an ESC Fund.

 “Order” means the order requested hereby.

“Parent” means any company of which an entity is a direct or indirect wholly-owned subsidiary.

“Participation Points” means participation points issued to an Eligible Employee on the basis of, among other things, personal performance and/or firm-wide or relevant team performance results.  For the avoidance of doubt, Participation Points include Long-Term Points.

“Participation Points ESC Fund” means an ESC Fund the Interests in which may be acquired through the Long-Term Points Program.

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“Portfolio Committee” means the committee comprised of certain Citadel senior personnel (including any investment, screening, allocation or similar committee of Citadel).

“Portfolio Investments” mean investments (which may be made directly or through a Citadel Third Party Fund) of an ESC Fund.

“Qualified Investment Vehicle” means (i) a trust of which the trustee, grantor and/or beneficiary is an Eligible Employee or (ii) a partnership, corporation or other entity controlled by an Eligible Employee.

 “Qualified Participant” means an entity that (i) is a Qualified Investment Vehicle and (ii) if such entity is purchasing an Interest directly from an ESC Fund, comes within one of the categories of an “accredited investor” under Rule 501(a) of Regulation D.

“Regulation D” means Regulation D under the 1933 Act.

“Regulation S” means Regulation S under the 1933 Act.

 “Section 17 Transaction” means a transaction to which an ESC Fund is a party that is otherwise prohibited by Section 17(a), Section 17(d) and/or Rule 17d-1 of the 1940 Act.

“Series” means the different series of Interests that an ESC Fund may issue to Members.

“Service Year” means any calendar year beginning on or after January 1, 2009.

“Short-Term Points” means the short-term points issued to an Eligible Employee.

“Unvested Membership Interest” means an unvested membership interest in a Participation Points ESC Fund granted to an Eligible Employee in respect of the Long-Term Points issued to such employee.

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

APPLICATION

FOR AN ORDER

of

CITADEL INVESTMENT GROUP, L.L.C.

Application pursuant to Sections 6(b) and 6(e) of the Investment Company Act of 1940.

The Applicant hereby applies to the Commission pursuant to Sections 6(b) and 6(e) of the 1940 Act for an Order exempting the Applicant and the ESC Funds from all provisions of the 1940 Act, except Section 9 and Sections 36 through 53, and the rules and regulations under the 1940 Act, as described herein.  With respect to Sections 17 and 30 of the 1940 Act, and the rules and regulations thereunder, and Rule 38a-1 under the 1940 Act, the requested exemption is limited as set forth in this Application.

No form having been prescribed by the rules and regulations of the Commission, the Applicant proceeds under Rule 0-2 of the 1940 Act.

The ESC Funds will be established for the benefit of Eligible Employees as part of a program designed to create capital building opportunities that are competitive with those at other financial services firms and to facilitate the recruitment and retention of high caliber professionals.  Each ESC Fund will comply with the terms and conditions of the Application.

Applicant believes that, in view of the facts described below and the conditions contained in this Application, concerns of abuse of investors and overreaching, which the 1940 Act was designed to prevent, will not be present in the case of the ESC Funds.

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PART I.                      STATEMENT OF FACTS

A statement of the facts relied upon as the basis for the action of the Commission herein requested is as follows:

Organization of the ESC Funds

Citadel began operations in November 1990 with its founder, a limited staff and $4,600,000 under management.  Since 1990, Citadel has grown to be one of the largest alternative asset management and services institutions with investment capital under management of approximately $13.8 billion, as of November 1, 2009.  The alternative asset management businesses currently operated by Citadel include asset management, market-making and fund administration businesses.  As of the date hereof, Citadel has offices in Chicago, New York, San Francisco, London and Hong Kong.

Each of the ESC Funds will be a limited liability company, limited partnership, corporation, business trust or other entity organized under the laws of the State of Delaware or another U.S. jurisdiction.  In each case, Eligible Employees will invest in ESC Funds with limited liability.  The Managing Member of each ESC Fund will be an Affiliate of the Company.

Purposes

The Company intends to form the ESC Funds in order to provide long-term financial incentives for Eligible Employees and, in certain circumstances, their Qualified Participants, to preserve Citadel’s competitive advantage and to align the financial interests of Eligible Employees with those of Citadel and investors in the Citadel Third Party Funds.1  In addition, the ESC Funds will be designed to enable Eligible Employees to pool their investment resources.  Pooling of resources should allow the Members diversification of investments and participation

1 Citadel has in the past and may in the future sponsor and manage other investment vehicles for the benefit of certain current and former employees and other affiliated persons that rely on other exemptions from the 1940 Act (e.g., Sections 3(c)(1) or 3(c)(7)). Such vehicles will not rely on, or be subject to the terms of, the Order.

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in investments which usually would not be available to them as individual investors due to the minimum investment level and eligibility requirements of the Citadel Third Party Funds in which the ESC Funds will invest.  Each ESC Fund will be an “employees’ securities company” as defined in Section 2(a)(l3) of the 1940 Act.

Eligible Employees

Interests will be issued without registration in transactions under a claim of exemption pursuant to Section 4(2) of the 1933 Act, Regulation D and/or Regulation S2 and may be acquired only by (i) Eligible Employees or (ii) at the request of Eligible Employees and in the discretion of the Managing Member of an ESC Fund, by Qualified Participants of such Eligible Employees.  As a result, prior to issuing Interests to an Eligible Employee, the Managing Member must reasonably believe that (i) each Eligible Employee that is required to make an decision with respect to whether or not to participate, or to request that a related Qualified Participant be permitted to participate, in an ESC Fund and (ii) each Eligible Employee that is issued Interests in a Participation Points ESC Fund as a condition of receiving any consideration for such Eligible Employee’s Long-Term Points will be a sophisticated investor capable of understanding and evaluating the risks of participating in such ESC Fund without the benefit of regulatory safeguards.  The Managing Member may impose more restrictive suitability standards in its sole discretion.

In order to qualify as an “Eligible Employee,” an individual must (i) be a current or former employee, officer or partner of Citadel or a director of Citadel that is an interested person (as defined in the 1940 Act) and (ii) meet the standards of an “accredited investor” under Rule 501(a)(5) or (6) of Regulation D.

2 An offer may be made pursuant to Regulation S to Eligible Employees who are not U.S. residents.

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In the discretion of the Managing Member of an ESC Fund and at the request of an Eligible Employee, Interests may be assigned by such Eligible Employee, or issued directly by such ESC Fund, to a Qualified Participant of an Eligible Employee.  The inclusion of partnerships, corporations or other entities that are controlled by Eligible Employees in the definition of Qualified Investment Vehicle is intended to enable such Eligible Employees to participate in the ESC Funds through personal investment vehicles over which they exercise investment discretion or other investment vehicles the management or affairs of which they otherwise control.  Individuals often form these types of investment vehicles for the purpose of implementing their personal and family investment and estate planning objectives.

The Interests in each ESC Fund will be held only by persons, directly or indirectly through Qualified Participants, with a close nexus to Citadel through current or past employment.

The Managing Member will have the absolute right to purchase any Interest for its fair value if the Managing Member determines in good faith that any Member’s continued ownership of such Interest in an ESC Fund jeopardizes such ESC Fund’s status as an “employees’ securities company” under the 1940 Act; provided that the foregoing is without prejudice to any other rights the Managing Member may have as a result of a breach of a representation or other agreement by a Member.

Interests in each ESC Fund will be non-transferable except (i) to the extent cancelled or (ii) with the prior written consent of the Managing Member, and, in any event, no person or entity will be admitted into an ESC Fund as a Member unless such person is (i) an Eligible Employee, (ii) a Qualified Participant of an Eligible Employee or (iii) a Citadel entity, including

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the Company.  The limitations on the transferability of Interests in an ESC Fund ensure that the community of interest among the Members will continue through the life of such ESC Fund.

Only those persons who qualify as Eligible Employees will be able to participate in the ESC Funds.  Eligible Employees will be professionals with experience in investing, financial planning, securities brokerage, investment banking, asset management, business operations, banking, cash management or trust services or other similar areas, or in administrative, financial, tax, legal, accounting or operational activities related thereto.  All Eligible Employees will have undergraduate degrees and many will have graduate degrees.

The ESC Funds

Citadel will operate various structures for the benefit of its Eligible Employees pursuant to the Order, including, without limitation, different ESC Funds, or separate investment baskets within the same ESC Fund, and the terms of these structures are likely to differ from one another.  Interests in these ESC Funds will be issued without a sales load.  An ESC Fund may have a set term or may have an indefinite life.

An ESC Fund may invest directly in securities and similar investments (including, without limitation, exchange-traded funds, mutual funds and index funds) and/or may invest all or substantially all of its assets in Citadel Third Party Funds.  See also “Investments and Operations” below.

An Eligible Employee may acquire an Interest in an ESC Fund voluntarily, in which case the amount of such Eligible Employee’s permitted capital contribution to, and terms of redemptions from, such ESC Fund will be described in such ESC Fund’s Operating Agreement and Offering Documents.

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Participation Points ESC Funds

In order to receive any consideration for Long-Term Points issued pursuant to the Long-Term Points Program, an Eligible Employee may be mandatorily required to acquire an Interest in an ESC Fund, specifically a Participation Points ESC Fund.  Pursuant to the Long-Term Points Program, Eligible Employees may be issued Participation Points on the basis of, among other things, personal performance and/or firm-wide or relevant team performance results.  Participation Points may be issued in the form of Short-Term Points or Long-Term Points and may be issued in respect of any Service Year.  An Eligible Employee who is issued Short-Term Points will receive a cash payment equal to $1 per Short-Term Point no later than March 15th of the year following the Service Year to which such Short-Term Points relate.  An Eligible Employee who is issued Long-Term Points will receive an Unvested Membership Interest in a Participation Points ESC Fund, which Interest will equal the amount of the Unvested Membership Interest issued to such Eligible Employee reduced by the amount of taxes withheld in respect of such Long-Term Points.  Since the Eligible Employee will be required to make an election under Section 83(b) of the Code of 1986, such Unvested Membership Interest will be treated as taxable upon issuance rather than vesting.

A Member will become vested in his/her Unvested Membership Interest if (a) he/she remains employed by Citadel through the relevant Determination Date and he/she has satisfied, among other things, all of the Obligations (including non-competition, non-solicitation, non-disclosure and notice Obligations) imposed on him/her throughout his/her employment up to the Determination Date or (b) in the case of certain specified Eligible Employees, he/she ceases to be employed by Citadel prior to the Determination Date but he/she has satisfied, among other things, all of the Obligations, if any, imposed on him/her during his/her employment with Citadel

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and through any applicable post-employment Compliance Period.  The Obligations to which an Eligible Employee may be subject for various Compliance Periods include, generally, refraining from:

(a) engaging in competitive activity, including (i) working on the development of competitive analytical models and/or trading strategies, (ii) soliciting or contacting any Citadel client with respect to the provision of investment management, asset management or advisory services to such client, and/or (iii) obtaining investment capital from such client;

(b) soliciting, facilitating or inducing a Citadel employee to cease employment with Citadel, including employing a current or former Citadel employee in a competitive enterprise;

(c) using or disclosing any confidential information of Citadel;

(d) violating any applicable notice requirements;

(e) failing to provide information to Citadel that Citadel deems necessary or advisable to conduct its business activities; and/or

(f) failing to cooperate with Citadel in any negotiation, transaction, investigation or other action in which such Eligible Employee was involved or of which he/she had knowledge during his/her employment with Citadel.

If an Eligible Employee does not fulfill such Eligible Employee’s Obligations for any reason, such Eligible Employee’s Unvested Membership Interest will become the property of Citadel.

Unless otherwise determined by Citadel, a Member’s Unvested Membership Interest will be mandatorily redeemed as soon as reasonably practicable following the relevant Determination

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Date, and, subject to the liquidity terms (including suspensions on withdrawals) of the Citadel Third Party Funds in which the relevant Participation Points ESC Fund is invested, the balance of such Member’s capital account in such Participation Points ESC Fund relating to such redeemed Unvested Membership Interest, as adjusted through the date of such redemption, will be distributed to such Member.

If an Eligible Employee that has been issued an Unvested Membership Interest dies, the Eligible Employee’s estate will receive payments in redemption of such Unvested Membership Interest so long as such Eligible Employee satisfied all of the relevant Obligations through the date of death.  The value of such Eligible Employee’s Unvested Membership Interest (and the corresponding capital account balance in the relevant Participation Points ESC Fund) will be determined, and all redemption payments for such Unvested Membership Interest will be made, as soon as reasonably practicable following the date of death and, if applicable, the appointment of the estate administrator.  If the deceased Eligible Employee did not satisfy all of the relevant Obligations through the date of death, the estate will not receive any payments for any Unvested Membership Interest held by such Eligible Employee.

An Eligible Employee will bear, indirectly as an investor in an ESC Fund, his/her pro rata portion of any expense reimbursement, management fees and performance fees/allocations imposed on such ESC Fund by the Citadel Third Party Funds in which it is invested.3

Terms of the ESC Funds

While the terms of an ESC Fund will be determined by Citadel in its discretion, these terms will be fully disclosed to each Eligible Employee and, if applicable, a Qualified Participant, prior to the time such person or entity is admitted to the ESC Fund. Among other

3 A Managing Member, Member or Citadel entity that is registered as an investment adviser under the Advisers Act may be paid a performance fee or allocated a performance allocation only if permitted by Rule 205-3 under the Advisers Act.

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things, each Eligible Employee and Qualified Participant will be furnished with access to the Offering Documents, including a copy of the Operating Agreement, for the relevant ESC Fund, which will set forth at a minimum the following information, if applicable:4

(i)whether Citadel will make a co-investment in the same portfolio securities as such ESC Fund, and the terms generally applicable to such ESC Fund’s investment as compared to those of Citadel’s investment;

(ii)whether Interests in such ESC Fund may only be acquired through the Long-Term Points Program or whether Interests may also be acquired on a voluntary basis;

(iii)whether an Interest in such ESC Fund may be acquired on a voluntary basis, the maximum amount of capital that an Eligible Employee will be permitted to invest in such ESC Fund, or the manner in which such amount will be determined, and the manner in which the capital contribution will be applied towards investments made, and expenses incurred, by such ESC Fund;

(iv)whether the Managing Member or a Citadel entity will offer to make any loans to an Eligible Employee to purchase an Interest in such ESC Fund and, if so, the terms of such loans;5

(v)whether the Managing Member, Citadel or any employees of the Managing Member or Citadel will be eligible to receive any compensation, or any

4 The Offering Documents will also disclose such items as risk, leverage and the manner of allocating profits and losses and distributions. Events that would trigger the dissolution of an ESC Fund and what would happen to an ESC Fund’s assets upon dissolution will also be disclosed.

5 An Eligible Employee will not borrow from any person if such borrowing would cause any person not named in Section 2(a)(13) of the 1940 Act to own outstanding securities of an ESC Fund (other than short term paper).

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performance-based fee or profits allocation (such as a “carried interest”),6 from such ESC Fund and, if so, the terms of such compensation or performance-based profit allocation;

(vi)whether the Managing Member or a Citadel entity will make any capital contributions or loans to such ESC Fund and, if so, the terms applicable to the Managing Member’s or the Citadel entity’s investment in such ESC Fund or its extension of credit to such ESC Fund, provided that the interest rate applicable to any such loan made to an ESC Fund will be no less favorable to such ESC Fund than the rate obtainable in an arm’s-length transaction, provided, further, that any indebtedness of such ESC Fund, other than indebtedness incurred specifically on behalf of a Member where the Member has agreed to guarantee the loan or to act as co-obligor on the loan, will be the debt of such ESC Fund and without recourse to the Members; and whether such ESC Fund may borrow from an unaffiliated third party;7

(vii)whether vesting and cancellation provisions will apply to a Member’s Interest in such ESC Fund and, if so, the terms of such vesting and cancellation provisions.

In an investment program that includes vesting and cancellation provisions, some or all of an Eligible Employee’s Interest at the commencement of the program will be treated as being “unvested,” and “vesting” will occur only as certain conditions are satisfied under the terms of the investment program.

6 A “carried interest” is a fee paid or allocation made to the Managing Member, a Member or the Citadel entity acting as the investment adviser to an ESC Fund based on net gains in addition to the amount allocable to the Managing Member, such Member or such Citadel entity in proportion to its invested capital. A Managing Member, Member or Citadel entity that is registered as an investment adviser under the Advisers Act may be paid or allocated carried interest only if permitted by Rule 205-3 under the Advisers Act. See also footnote 3.

7 An ESC Fund will not lend funds to any Citadel entity. No ESC Fund will borrow from any person if the borrowing would cause any person not named in Section 2(a)(13) of the 1940 Act to own outstanding securities of the ESC Fund.

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To the extent that an Eligible Employee’s Interest is or becomes “vested,” the termination of such Eligible Employee’s employment by Citadel will not affect the Eligible Employee’s rights with respect to the vested portion of the Interest.  The portion of an Eligible Employee’s Interest that is “unvested” at the time of termination of such Eligible Employee’s employment by Citadel may be subject to: (a) repurchase; (b) in the case of Unvested Membership Interests, cancellation if such Eligible Employee has failed to comply with any relevant Obligations at or prior to the time of such termination or during the relevant post-employment Compliance Period;  and/or (c) the imposition of different terms and conditions, as described in the Operating Agreement or Offering Documents of the relevant ESC Fund.  In any event, the consequences of the vesting and cancellation provisions of the ESC Funds will not be more onerous than those set forth below:

Unless (x) an Eligible Employee fails to satisfy the relevant Obligations or (y) as otherwise described in the Operating Agreement and/or Offering Document of the relevant ESC Fund, an Eligible Employee’s Unvested Membership Interest in an ESC Fund will continue to be treated in a manner similar to those of other Eligible Employees.  However, if any of the events described in clauses (x) or (y) above occur, the Managing Member may deem the Eligible Employee’s Unvested Membership Interest to be subject to repurchase or cancellation, as described below, or to the imposition of different terms and conditions, as described in the Operating Agreement and/or Offering Documents related to the relevant ESC Fund.

In an investment program that does not provide for vesting provisions, an Eligible Employee’s entire Interest may be subject to repurchase or cancellation by the Managing Member, as described below, and/or the imposition of different terms and conditions upon

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termination of such Eligible Employee’s employment by Citadel, as described in the Operating Agreement and/or Offering Documents related to the relevant ESC Fund.

Upon any repurchase of an Eligible Employee’s Interest, the Managing Member will at a minimum pay to the Eligible Employee the fair market value of such Interest, determined at the time of repurchase in good faith by the Managing Member.  Citadel shall be entitled to offset against the payment for a repurchased Interest (i) any outstanding principal amount of, and unpaid interest on, any loans, advances or payments subject to clawbacks made by Citadel to such Eligible Employee and (ii) the costs of repurchasing such Interest, such as legal fees and administrative expenses.  In addition, if the Eligible Employee has pledged such Interest to secure any such loan, Citadel may foreclose upon such Interest upon any failure to repay such loan when due.

An ESC Fund (except for a Participation Points ESC Fund) may permit a Member to purchase or redeem Interests at any time and from time to time, at the discretion of the Managing Member, as described in such ESC Fund’s Operating Agreement and/or Offering Documents.

Registration of an Investment Adviser Pursuant to the Advisers Act

The Citadel entity acting as the managing member to an ESC Fund will be registered as an investment adviser under the Advisers Act if required under applicable law.  The determination as to whether a Citadel entity is required to register under the Advisers Act will be made by Citadel; no relief in respect of such determination is requested herein.

Investments and Operations

Each of the ESC Funds will operate as a diversified or non-diversified, closed-end or open-end investment company of the management type within the meaning of the 1940 Act.  The investment objective of each ESC Fund and whether it will operate as a diversified or non-diversified and open-end or closed-end investment vehicle may vary from ESC Fund to ESC

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Fund, and will be set forth in the Offering Documents relating to the specific ESC Fund.  ESC Funds (directly or indirectly through their investments in Citadel Third Party Funds) may be expected to engage in relative value, event-driven and/or directional investment strategies implemented by Citadel in markets around the world.  Investment strategies employed could include, among others, capital structure arbitrage, convertible bond arbitrage, credit arbitrage, fixed-income arbitrage, merger arbitrage, and mortgage-backed securities arbitrage, as well as fundamental long and short equity trading strategies.  Citadel anticipates that it will continue to develop and implement new analytical methodologies, quantitative models and investment strategies on behalf of the ESC Funds through the Citadel Third Party Funds as Citadel seeks profit and investment opportunities on a global basis.  Potential investments for the ESC Funds (directly or indirectly through their investments in Citadel Third Party Funds) include a wide variety of U.S. and non-U.S. assets, including but not limited to public and private debt and equity securities, real estate, commodity futures, derivatives and other financial instruments and assets.  Investments may be made either directly or indirectly through one or more Citadel Third Party Funds.  In addition, an ESC Fund also may invest in another ESC Fund.  Pending investment of capital contributions and reinvestment of proceeds of investments, an ESC Fund’s assets may be invested in short-term investments.  An ESC Fund may utilize leverage as part of its investment operations, as may the Citadel Third Party Funds.

An ESC Fund may issue its Interests in Series, with new Series of Interests being issued from time to time.  The Operating Agreement for such ESC Fund may provide that portions of a Member’s Interest may be directed to particular Portfolio Investments of such ESC Fund and, in turn, to the Series corresponding to such Portfolio Investments.

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Interests in an ESC Fund may be issued in separate Classes.  A Class of an ESC Fund may also be issued in separate Series.

The Managing Member of each ESC Fund will manage, operate and control such ESC Fund.  However, the Managing Member will be authorized to delegate investment management responsibility with respect to the acquisition, management and disposition of Portfolio Investments to a Citadel entity.  As described above, any Citadel entity that is delegated the responsibility of making investment decisions for an ESC Fund will be registered as an investment adviser under the Advisers Act if required under applicable law.  In addition, the Managing Member of an ESC Fund may contribute substantial funds to such ESC Fund or to entities (including Citadel Third Party Funds) in which such ESC Fund will invest.

The Managing Member will provide Members of the ESC Funds access to information concerning their ESC Fund’s operations and results as described below under “Reports and Accounting.”  An ESC Fund may directly engage, or the Managing Member may delegate to and pay Affiliates or unaffiliated third parties to provide administrative, bookkeeping, financial statement and tax accounting and other services to such ESC Fund.

An ESC Fund will not acquire any security issued by a registered investment company, except for entities that rely on exemptions from the 1940 Act under Section 6 thereof, if immediately after such acquisition such ESC Fund will own more than 3% of the outstanding voting stock of the registered investment company.

An ESC Fund may co-invest with a Citadel Affiliate in a Citadel Third Party Fund.

Subject to the terms of the applicable Operating Agreement and/or Offering Document, an ESC Fund will be permitted to enter into transactions involving (i) a Citadel entity, (ii) any Member or person or entity affiliated with a Member or (iii) a Citadel Third Party Fund.  Such

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transactions may include, without limitation, such ESC Fund purchasing from, or selling to, a Citadel entity a Portfolio Investment, or purchasing an interest in a Citadel Third Party Fund, in each case with the Citadel entity acting as principal.  As described in fuller detail below in “Part III - Applicant’s Conditions”, with regard to such transactions, the Members’ Representative Committee shall have authority, as representative and agent of the Members of such ESC Fund, to give consent to any such transaction submitted to the Members’ Representative Committee by Citadel if the Members’ Representative Committee determines that the terms of the transaction are consistent with the terms that would reasonably be expected in a comparable transaction between unrelated parties.

In addition, a Citadel entity (including the Managing Member) may provide a full range of financial, asset management or other services, and may also provide financing in the form of debt, equity or other financial instruments, and receive fees or other compensation and expense reimbursement in connection therewith, from entities in which an ESC Fund (directly or indirectly) makes an investment, from competitors of such entities or from other unaffiliated persons or entities.  Such fees or other compensation may include, without limitation, commitment fees, advisory fees, underwriting fees, placement fees, organization or success fees, financing fees, management fees, performance-based fees, fees for brokerage and clearing services, expense reimbursements and compensation in the form of carried interests entitling the Citadel entity to share disproportionately in income or capital gains or similar compensation.  A Citadel entity may also engage in market-making activities with respect to the securities of entities in which an ESC Fund makes an investment or competitors of such entities, clear trades on behalf of such ESC Fund and provide administrative services to such ESC Fund.  Citadel Third Party Funds may make loans to or accept loans from, and may guarantee the loans of,

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other Citadel Third Party Funds or the ESC Funds.  Employees of Citadel may serve as officers or directors of such entities pursuant to rights held by an ESC Fund or Citadel to designate such officers or directors, and receive officers’ and directors’ fees, other compensation and expense reimbursement in connection with such services.  Any such fees, other compensation or expense reimbursement received by such Citadel employee will generally not be shared with any ESC Fund.

Reports and Accounting

Each ESC Fund will send its Members annual financial statements within 180 days after the end of the fiscal year of such ESC Fund or as soon as practicable thereafter.  The annual financial statements of each ESC Fund will be audited by independent certified public accountants.  In addition, to enable Members to determine the U.S. federal and state income tax consequences of their investments, as soon as practicable after the end of each tax year of an ESC Fund, a report will be transmitted to each Member showing such Member’s share of income, gains, losses, credits, deductions, and other tax items for U.S. federal income tax purposes, resulting from such ESC Fund’s operations during that year.

In addition, each ESC Fund will provide a non-U.S. Member with such information as may be reasonably necessary to enable him/her to prepare his/her non-U.S. income tax returns, provided that each such Member has notified the Managing Member of the specific information required by the jurisdiction or jurisdictions for which such Member will be preparing income tax returns reasonably in advance of the time that such information will be required, and provided, further that complying with such information request does not impose an undue or disproportionate burden on the Managing Member of the applicable ESC Fund.

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PART II.REQUEST FOR ORDER

Applicable 1940 Act Provisions

Section 2(a)(13) of the 1940 Act defines “employees’ securities company” as:

Any investment company or similar issuer all of the outstanding securities of which (other than short-term paper) are beneficially owned (A) by the employees or persons on retainer of a single employer or of two or more employers each of which is an affiliated company of the other, (B) by former employees of such employer or employers, (C) by members of the immediate family of such employees, persons on retainer or former employees, (D) by any two or more of the foregoing classes of persons, or (E) by such employer or employers together with any one or more of the foregoing classes of persons.

Section 6(b) of the 1940 Act provides, in part, that the Commission may, by order upon application, conditionally or unconditionally exempt any “employees’ securities company” from the provisions of the 1940 Act and the rules and regulations thereunder, if and to the extent that such exemption is consistent with the protection of investors.  Section 6(b) provides that the Commission will consider, in determining the provisions of the 1940 Act from which an employees’ securities company should be exempt, the company’s form of organization and capital structure, the persons owning and controlling its securities, the price of the company’s securities and the amount of any sales load, how the company’s funds are invested, and the relationship between the company and the issuers of the securities in which it invests.

Section 7 of the 1940 Act generally prohibits investment companies that are not registered under Section 8 of the 1940 Act from selling or redeeming their securities.  Section 6(e) of the 1940 Act provides that the Commission may determine as necessary or appropriate in the public interest or for the protection of investors that, in connection with any order exempting an investment company from Section 7 of the 1940 Act, certain provisions of the 1940 Act shall be applicable to such investment company and to other persons in their

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transactions and relations with such investment company, as though such investment company were a registered investment company.

Section 9 of the 1940 Act limits persons who can act as employees, officers, directors, members of the advisory board, investment advisers and depositors of registered investment companies and provides the Commission with certain administrative powers to enforce the 1940 Act.

Section 17 of the 1940 Act generally limits certain affiliated and joint transactions between an investment company and certain affiliated persons of the investment company, its principal underwriter or affiliated persons of such persons or underwriter.  Section 17 also sets forth standards for custody arrangements for an investment company’s securities as well as requirements for fidelity bonding, liability limitations for directors, officers and investment advisers and a code of ethics for such investment company.

Section 17(a) of the 1940 Act, among other things, generally prohibits certain persons affiliated with an investment company, acting as principal, from knowingly selling any security or other property to the investment company or knowingly purchasing a security or other property from the investment company.  Among the persons precluded from dealing as principal with an investment company under Section 17(a) are: (a) any affiliated person of the investment company; and (b) any affiliated person of an affiliated person of the investment company.

Section 17(d) of the 1940 Act and Rule 17d-1 promulgated thereunder, in the absence of an order granted by the Commission, preclude any affiliated person of an investment company, or any affiliated persons of such an affiliated person, acting as principal, from effecting any transaction in connection with any joint enterprise or other joint arrangement in which the investment company is a participant.

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Section 17(f) of the 1940 Act requires each investment company to place and maintain its securities only in the custody of certain qualified custodians.  Rule 17f-1 promulgated under Section 17(f) specifies the requirements that must be satisfied for an investment company to maintain custody of its securities and similar investments with a company that is a member of a national securities exchange.  Rule 17f-2 promulgated under Section 17(f) allows an investment company to act as self-custodian, subject to certain requirements.

Section 17(g) of the 1940 Act requires that certain officers or employees of an investment company who have access to such company’s securities or funds be bonded by a reputable fidelity insurance company against larceny and embezzlement in amounts as prescribed in Rule 17g-1 promulgated thereunder.  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.  Paragraph (g) of Rule 17g-1 sets forth certain materials relating to the fidelity bond that must be filed with the Commission and certain notices relating to the fidelity bond that must be given to each member of the investment company’s board of directors.  Paragraph (h) of Rule 17g- l provides that an investment company must designate one of its officers to make the filings and give the notices required by paragraph (g).  Paragraph (j) of Rule 17g-1 exempts a joint insured bond provided and maintained by an investment company and one or more other parties from the prohibitions on joint transactions contained in Section 17(d) of the 1940 Act.  Paragraph (j)(3) of Rule 17g-1 provides that the board of directors of an investment company must satisfy the fund governance standards of Rule 0-1(a)(7).

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

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that every registered investment company adopt a written code of ethics and that every “access person” (as defined in the 1940 Act) of a registered company report personal securities transactions.

Section 30 of the 1940 Act sets forth the periodic financial reporting requirements for an investment company to its shareholders and the Commission.  Section 30(h) sets forth certain reporting requirements applicable to key shareholders, directors, officers, the investment adviser and affiliated persons of the investment adviser of a closed-end investment company pursuant to Section 16 of the 1934 Act.

Sections 36 through 53 of the 1940 Act deal generally with the Commission’s rule-making, investigation and enforcement powers under the 1940 Act and the rules and regulations thereunder.

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 and to appoint a chief compliance officer.

Discussion

Section 6(b) provides that the Commission shall exempt employees’ securities companies from the provisions of the 1940 Act to the extent that such exemption is consistent with the protection of investors.  Section 6(e) provides that in connection with any order exempting an investment company from any provision of Section 7, certain specified provisions of the 1940 Act shall be applicable to such company, and to other persons in their transactions and relations with such company, as though such company were registered under the 1940 Act, if the Commission deems it necessary.  On the basis of the foregoing statement of facts, the Applicant submits that the action of the Commission herein requested is appropriate in the public interest

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and consistent with the protection of investors and the purposes fairly intended by the policies and provisions of the 1940 Act for the following reasons:

1.each ESC Fund will be an “employees’ securities company” as such term is defined in Section 2(a)(13) of the 1940 Act; all persons who will be officers and directors of the Managing Member of such ESC Fund will be directors, officers or other employees of Citadel and all Members of such ESC Fund will be Eligible Employees and/or their Qualified Participants; each Eligible Employee and/or their Qualified Participants will, at the time of each issuance of Interests to such Eligible Employee, be an “accredited investor” pursuant to the requirements set forth in Rule 501(a)(5) or (6) of Regulation D as of the date of the Order; and no sales load or compensation (other than the management fee, the carried interest and/or other compensation provided for in the applicable Operating Agreement, if any) is payable directly or indirectly to the Managing Member by such Fund;

2.the substantial community of economic and other interests among Citadel, the Managing Member of an ESC Fund and the Members of such ESC Fund, taking into consideration the concern of Citadel with the morale of its personnel, the importance to Citadel of attracting and retaining its personnel and the absence of any public group of investors;

3.the fact that the investment portfolio for each ESC Fund will be conceived and organized by persons who may be hold, directly or indirectly, or who may be eligible to hold, Interests in such ESC Fund and will not be promoted to Eligible Employees by persons outside of Citadel seeking to profit from fees for investment advice or from the distribution of securities;

4.the potentially burdensome aspects of compliance, including the requirement that an application be filed each and every time each ESC Fund considers a (i) co-

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investment with Citadel, or (ii) purchase from or sale to Citadel; and the imposition of a burden of unnecessary expenditures both of money and time on the part of the Managing Member of such ESC Fund and on the part of such ESC Fund itself, and to some extent on the part of the staff of the Commission, in light of the substantial protections afforded to the Members of such ESC Fund with respect to such matters as independent accountants, the furnishing of reports to Members of such ESC Fund, and in the conditions and other restrictions on such ESC Fund’s operations proposed in this Application;

5.the fact that Eligible Employees will, at the time of each issuance of Interests to them, be professionals with experience in investing, financial planning, securities brokerage, investment banking, asset management, business operations, banking, cash management or trust services or other similar areas, or in administrative, financial, tax, legal, accounting or operational activities related thereto, who meet the current standard of “accredited investor” under the requirements set forth in Rule 501(a)(5) or (6) of Regulation D and, in the reasonable belief of the Managing Member, are each equipped by experience and education to understand and evaluate the structure, management and plan of each ESC Fund as compared to other opportunities, to understand and evaluate the merits and risks of holding Interests in such ESC Fund and to understand that Interests in such ESC Fund are being issued without registration under the 1940 Act and the 1933 Act and the protections afforded thereby; and

6.the relief sought is similar to the relief granted by the Commission to employees’ securities companies in Hambrecht & Quist Employee Venture Fund, L.P., Docket No. 813-176, Release Nos. IC-23396 (Aug. 21, 1998) [notice] and 1C-23438 (Sept. 16, 1998) [order]; Greenwich Street Employees Fund, L.P., et al., Docket No. 813-202, Release Nos. 1C-25324 (Dec. 21, 2001) [notice] and IC-25367 (Jan. 16, 2002) [order]; GC&H Investments, LLC,

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 Docket No. 813-272, Release Nos. IC-25799 (Nov. 8, 2002) [notice] and IC-25843 (Dec. 4, 2002) [order]; Stephens Inc., Docket No. 813-306, Release Nos. IC-27843 (May 29, 2007) [notice] and IC-27875 (June 26, 2007) [order]; Raymond James Employee Investment Fund I, L. P., Docket No. 813-326, Release Nos. IC-28012 (Oct. 11, 2007) [notice] and IC-28043 (Nov. 6, 2007) [order]; The Bessemer Group, Incorporated, Docket No. 813-362, Release Nos. IC-28258 (April 29, 2008) [notice] and IC-28289 (May 28, 2008) [order]; American International Group, Inc., Docket No. 813-369, Release Nos. IC-28286 (May 23, 2008) [notice] and IC-28301 (June 18, 2008) [order].

WHEREFORE, the Applicant respectfully requests that the Commission enter an Order pursuant to Sections 6(b) and 6(e) of the 1940 Act exempting the Applicant and any ESC Funds from all provisions of the 1940 Act, except Section 9 and Sections 36 through 53, and the rules and regulations under the 1940 Act.  With respect to Sections 17 and 30 of the 1940 Act, and the rules and regulations thereunder, and Rule 38a-1 under the 1940 Act, the exemption is limited as set forth in this Application.

Section 17(a)

The Applicant requests an exemption from Section 17(a) of the 1940 Act to the extent necessary to:

(a) permit a Citadel entity or a Citadel Third Party Fund (or any affiliated person of such Citadel Third Party Fund), acting as principal, to engage in any transaction directly or indirectly with any ESC Fund or any company controlled by such ESC Fund; and

(b) permit any ESC Fund to invest in or engage in any transaction with any Citadel entity or Citadel Third Party Fund, acting as principal:

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(i) in which such ESC Fund, any company controlled by such ESC Fund or any Citadel entity or Citadel Third Party Fund has invested or will invest; or

(ii) with which such ESC Fund, any company controlled by such ESC Fund or any Citadel entity or Citadel Third Party Fund is or will become otherwise affiliated.

The transactions to which any ESC Fund is a party will be effected only after a determination by the Members’ Representative Committee and the Portfolio Committee that the requirements of Condition 1 in “Applicant’s Conditions” below have been satisfied.  In addition, these transactions will be effected only to the extent not prohibited by the applicable Operating Agreement.

The principal reason for the requested exemption is to ensure that each ESC Fund will be able to invest in companies, properties, or vehicles in which Citadel, or its employees, officers or directors, may make or have already made an investment.

The relief is also requested to permit each ESC Fund the flexibility to deal with its Portfolio Investments in the manner the Managing Member deems most advantageous to all Members in the ESC Fund, or as required by Citadel or the ESC Fund’s other co-investors, including without limitation borrowing funds from a Citadel entity, restructuring its investments, having its investments redeemed, tendering such ESC Fund’s securities or negotiating options or implementing exit strategies with respect to its investments.  Without an exemption, Section 17(a) may restrict an ESC Fund in its ability to negotiate such advantageous terms.  Indeed, without the requested relief the Managing Member may be limited in its ability to take

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those steps which it believes would be in the best interests of such ESC Fund or to effectuate the investment program contemplated by Citadel, such ESC Fund and its Members.

In addition to seeking the relief described above, the Applicant requests a specific exemption from Section 17(a) so that ESC Funds are permitted (a) to purchase short-term instruments from, or sell such instruments to, a Citadel entity and/or (b) to enter into repurchase agreements and reverse repurchase agreements with a Citadel entity.  An ESC Fund will pay no fee (other than any customary transaction charges also applicable to unaffiliated parties in similar transactions) in connection with the purchase of short-term instruments from, or entering into repurchase agreements or reverse repurchase agreements with, a Citadel entity.

An exemption from Section 17(a) would be consistent with the purpose of each ESC Fund and the protection of investors and is necessary to promote the basic purpose of such ESC Fund, as more fully discussed with respect to Section 17(d) below.  The Members of each ESC Fund will be fully informed of the possible extent of such ESC Fund’s dealings with Citadel, and, as professionals with experience in investing, financial planning, securities brokerage, investment banking, asset management, business operations, banking, cash management or trust services or other similar areas, or in administrative, financial, tax, legal, accounting or operational activities related thereto, will be able to understand and evaluate the attendant risks.  The community of interest among the Members in each ESC Fund, on the one hand, and Citadel, on the other hand, is the best insurance against any risk of abuse.

The considerations described above will protect each ESC Fund and will limit the possibilities of conflict of interest and abuse of the type that Section 17(a) was designed to prevent.  Consistent with the foregoing, the Applicant agrees to abide by the conditions to the relief requested from Section 17(a) set forth below.  In addition, the Applicant, on behalf of the

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ESC Funds, acknowledges that any transactions otherwise subject to Section 17(a) of the 1940 Act, for which exemptive relief has not been requested, would require a Commission order.

Section 17(d) and Rule 17d-1

The Applicant requests an order pursuant to Section 17(d) of the 1940 Act and Rule 17d-1 thereunder to the extent necessary to permit affiliated persons of each ESC Fund (including without limitation the Managing Member, Citadel and/or a Citadel Third Party Fund), or affiliated persons of any of these persons to participate in, or effect any transaction in connection with, any joint enterprise or other joint arrangement or profit-sharing plan in which an ESC Fund or a company controlled by such ESC Fund is a participant.  The exemption requested would permit, among other things, co-investments by each ESC Fund and by individual members or employees, officers or directors of Citadel making their own individual investment decisions apart from Citadel.

Compliance with Section 17(d) would prevent each ESC Fund from providing a vehicle for Eligible Employees to co-invest with Citadel or, to the extent permitted by the terms of the applicable Operating Agreement, with other employees, officers or directors or Citadel entities, including, or with, a Citadel Third Party Fund.  Because of the number and sophistication of the potential Members in an ESC Fund and affiliated persons of such Members, compliance with Section 17(d) would cause such ESC Fund to forego investment opportunities simply because a Member in such ESC Fund or other affiliated person of such ESC Fund (or any affiliate of such a person) also had, or contemplated making, a similar investment.

In this regard, it should be noted that each ESC Fund will primarily be organized for the benefit of Eligible Employees, as an incentive for them to remain with Citadel and for the generation and maintenance of goodwill.  The Applicant believes that, if co-investments with

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Citadel are prohibited, the appeal of an ESC Fund as a vehicle for Eligible Employees would be significantly diminished.  Co-investment opportunities with Citadel are advantageous to Eligible Employees because (a) the resources of Citadel enable it to analyze investment opportunities to an extent that Eligible Employees would have neither the time nor resources to duplicate, (b) investments made by Citadel will not be generally available to investors even if the financial status of the Eligible Employees would enable them to otherwise participate in such opportunities and (c) Eligible Employees will be able to pool their resources, thus achieving greater diversification of their individual portfolios.

The flexibility to structure co-investments and joint investments in the manner described above will not involve abuses of the type Section 17(d) and Rule 17d-1 were designed to prevent.  The concern that permitting co-investments by Citadel, on the one hand, and an ESC Fund, on the other, might lead to less advantageous treatment of such ESC Fund, is mitigated by the fact that (a) Citadel, in addition to its stake through the Managing Member and its co-investment, if any, will be acutely concerned with its relationship with the personnel who invest in such ESC Fund, and (b) certain officers, directors and key employees of Citadel entities will be investing in such ESC Fund.

In summary, the requested relief under Section 17(d) of the 1940 Act is necessary in light of the purpose of each ESC Fund.  Given the criteria for Eligible Employees and the conditions with which the ESC Funds have agreed to comply, the requested relief is appropriate in light of the purposes of the 1940 Act.

The Applicant specifically acknowledges that the Managing Member in managing an ESC Fund is subject to Sections 9 (Ineligibility of Certain Affiliated Persons and Underwriters), 36 (Breach of Fiduciary Duty) and 37 (Larceny and Embezzlement) of the 1940 Act, and the

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Managing Member will, at all times, comply with the requirements of such Sections of the 1940 Act.  The requirements of such Sections are specifically incorporated by reference in this Application.

The considerations described above will protect each ESC Fund and will limit the possibilities of the conflicts of interest and abuses of the type which Section 17(d) was designed to prevent.  Consistent with the foregoing, the ESC Funds agree to abide by the conditions set forth below in “Part III – Applicant’s Conditions” to the relief requested from Section 17(d) and Rule 17d-1.  In addition, the Applicant, on behalf of the ESC Funds, acknowledges that any transactions otherwise subject to Section 17(d) of the 1940 Act and Rule 17d-1 thereunder, which are not subject to the exemptive order herein requested, would require a Commission order.

Section 17(f)

The Applicant requests an exemption from Section 17(f) and Rule 17f-1 to the extent necessary to permit a Citadel entity to act as custodian without a written contract.  Because there will be such a close association between each ESC Fund and Citadel, requiring a detailed written contract would expose such ESC Fund to unnecessary burden and expense.  Furthermore, any securities owned by an ESC Fund over which a Citadel entity has custody will have the protection of fidelity bonds if such Citadel entity is required to have a broker’s blanket bond.  Thus, it does not appear that any written contract is necessary.  In addition, an exemption is requested from the terms of Rule 17f-1(b)(4), as the Applicant does not believe the expense of retaining an independent accountant to conduct periodic verifications is warranted given the community of interest of all the parties involved and the existing requirement for an independent

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annual audit.  Except as set forth above, each ESC Fund will otherwise comply with the provisions of Rule 17f-1.

Rule 17f-2 under the 1940 Act specifies the requirements that must be satisfied for a registered management investment company to act as a custodian of its own investments.  Applicant requests relief from Section 17(f) of the 1940 Act and Rule 17f-2 to permit the following exceptions from the requirements of Rule 17f-2:

(a) an ESC Fund’s investments, or evidence thereof, may be kept in the locked files of the Managing Member (or a Citadel entity);

(b) for purposes of paragraph (d) of the rule, (i) employees of the Managing Member (or a Citadel entity) will be deemed to be employees of the ESC Funds, (ii) officers or managers of the Managing Member of an ESC Fund (or a Citadel entity) will be deemed to be officers of the ESC Fund and (iii) the Portfolio Committee will be deemed to be the board of directors of the ESC Fund; and

(c) in place of the verification procedure under paragraph (f) of the rule, verification will be effected quarterly by two employees of the Managing Member (or a Citadel entity).

With respect to certain ESC Funds, most of their investments may be evidenced only by partnership agreements, participation agreements or similar documents, rather than by negotiable certificates that could be misappropriated.  The Applicant asserts that, for such an ESC Fund, these instruments are most suitably kept in the locked files of the Managing Member (or a Citadel entity), where they can be referred to as necessary.

Section 17(g) and Rule 17g-1

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The Applicant requests exemption from the requirement, contained in Rule 17g-1 promulgated under Section 17(g), that a majority of the “directors” of the ESC Funds who are not “interested persons” of the respective ESC Fund (as defined in the 1940 Act) take certain actions and make certain approvals concerning bonding and requests instead that such actions and approvals be taken by the Portfolio Committee, regardless of whether it is (or each of its members are) deemed to be an interested person of the ESC Funds.  Because the Managing Member or an Affiliate will be the investment adviser to each ESC Fund, the Managing Member will be an “interested person” of the ESC Funds.  The Applicant submits that relieving it and the ESC Funds from the requirement under Rule 17g-1 that certain matters be acted upon by “directors” who are not “interested persons” is entirely consistent with relieving them of their obligation under Section 10(a) to have a Managing Member who is not an “interested person.”  The ESC Funds will comply with all other requirements of Rule 17g-1, except that the Applicant requests an exemption from the requirements of paragraphs (g) and (h) of Rule 17g-1 relating to the filing of copies of fidelity bonds and related information with the Commission and relating to the provision of notices to the board of directors, and an exemption from the requirements of paragraph (j)(3) of Rule 17g-1 that the ESC Funds comply with the fund governance standards defined in Rule 0-1(a)(7).

The Applicant believes that the filing requirements are burdensome and unnecessary as applied to the ESC Funds.  The Managing Member will maintain the materials otherwise required to be filed with the Commission by paragraph (g) of Rule 17g-1 and agrees that all such materials will be subject to examination by the Commission and its staff.  The Managing Member will designate a person to maintain the records otherwise required to be filed with the Commission under paragraph (g) of the Rule.  The Applicant submits that no purpose would be

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served in complying with the requirements of the Rule related to filing information with the Commission.  While filing information related to fidelity bonds may serve to protect public investors, as an employees’ securities company an ESC Fund will not have public investors.  Exempting the ESC Funds from these provisions does not diminish investor protections, as Eligible Employees will still receive the protections offered by the ESC Funds’ compliance with the other provisions of Rule 17g-1.  Moreover, the ESC Funds will not be making other filings with the Commission, such as those related to a registration statement, and no purpose would be served by establishing filing requirements solely for Rule 17g-1.

In addition, the Applicant maintains that the notices otherwise required to be provided to each member of the board of directors of an investment company by paragraph (g) of Rule 17g-1 would be unnecessary as the ESC Funds will not have boards of directors.  The Portfolio Committee is the functional equivalent of the board of directors of an investment company.  As stated above, the Managing Member appoints the person responsible for maintaining, and has access to, all the information that would otherwise be filed with the Commission under paragraph (g) of the Rule.  The information that would otherwise be filed with the Commission under paragraph (g) of the Rule includes the full scope of the information for which notices would otherwise be given to the board of directors under the Rule.  It therefore would be unnecessary to give notices to the Portfolio Committee regarding this information.

For the same reasons, the Applicant believes that the requirements relating to disinterested directors and their counsel in paragraph (j)(3) of Rule 17g-1 are burdensome and unnecessary as applied to the ESC Funds.  As discussed above, the ESC Funds will have no boards of directors, and it therefore is not feasible to require approval of joint fidelity bonds by disinterested directors of the ESC Funds.  Moreover, in light of the purpose of the ESC Funds

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and the community of interest among the ESC Funds and between the ESC Funds and the Managing Member, the Applicant believes that little purpose would be served by this requirement even if it were feasible to comply.

Section 17(j) and Rule 17j-1

Section 17(j) and Rule 17j-1 require that every registered investment company and the investment adviser of and principal underwriter for the investment company adopt a written code of ethics approved by the board of directors of the investment company that contains provisions reasonably necessary to prevent “access persons” from violating the anti-fraud provisions of the Rule.  Under Rule 17j-1, the investment company’s access persons must report to the investment company with respect to transactions in any security in which the access person has, or by reason of the transaction acquires, any direct or indirect beneficial ownership in such security, which reports the investment company must retain in its records.  In addition, the investment company’s “investment personnel” must obtain pre-transaction clearance for certain securities transactions and the investment company’s board must consider and review an annual report certifying compliance with the Code.

The Applicant requests an exemption from Section 17(j) and Rule 17j-1 (except Rule 17j-1(b)) because the requirements contained therein are burdensome and unnecessary.  Requiring each ESC Fund to adopt a written code of ethics and requiring access persons to report each of their securities transactions (including the attendant record review and retention procedures) would be time consuming and expensive, and would serve little purpose in light of, among other things, the community of interest among the Members in such ESC Fund by virtue of their common association with Citadel; the substantial and largely overlapping protections afforded by the conditions with which such ESC Fund has agreed to comply; the concern of

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Citadel that personnel who participate in such ESC Fund actually receive the benefits they expect to receive when investing in such ESC Fund; and the fact that the investments of such ESC Fund will be investments that usually would not be available to the Members of such ESC Fund, including those Members who would be deemed access persons, as individual investors.  Accordingly, the requested exemption is consistent with the purposes of the 1940 Act, because the dangers against which Section 17(j) and Rule 17j-1 are intended to guard are not present in the case of any ESC Fund.  Moreover, no exemption is requested from the general anti-fraud provisions of Rule 17j-1(b).

Sections 30(a), (b) and (e)

Sections 30(a), 30(b) and 30(e), and the rules under those sections, generally require that registered investment companies prepare and file with the Commission and mail to their shareholders certain periodic reports and financial statements.  The forms prescribed by the Commission for periodic reports have little relevance to an ESC Fund and would entail administrative and legal costs that outweigh any benefit to the Members of such ESC Fund.  Also, due to the size, public presence and reputation of Citadel, the public availability of such reports may lead investors to draw unwarranted inferences from the information contained in such reports.  The pertinent information contained in these reports will be furnished to the Members of an ESC Fund, the only class of people with an economic interest in such material.  In view of the community of interest among all parties affiliated with an ESC Fund and the fact that Interests in such ESC Funds are not available to the public, but rather to a specific group of people only, it would seem that the protection afforded by Sections 30(a) and (b) (i.e., public dissemination of information to ensure orderly markets and equality of information among the public) is not relevant to such ESC Funds or their operations.  Consequently, the Applicant

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requests that the exemptive relief be granted.  Each ESC Fund would report annually to its Members in the manner described herein.

Exemptive relief is also requested under Section 30(e) to the extent necessary to permit each ESC Fund to report annually to the Members of such ESC Fund in the manner referenced above.  An ESC Fund may actively trade portfolio securities.  Such investments require sophisticated and complex valuations.  In view of the foregoing, and in light of the lack of trading or public market for the Interests, it is respectfully submitted that to allow annual, rather than semi-annual, reports would be consistent with the protection of investors and the policies fairly intended by the 1940 Act.

Section 30(h)

Section 30(h) of the 1940 Act requires that every officer, director, member of an advisory board, investment adviser or affiliated person of an investment adviser of a closed-end investment company be subject to the same duties and liabilities as those imposed upon similar classes of persons under Section 16(a) of the 1934 Act.  As a result, the Managing Member of each ESC Fund and others who may be deemed members of an advisory board or an investment adviser (and affiliated persons thereof) of such ESC Fund may be required to file Forms 3, 4 and 5 with respect to such ESC Fund, even though no trading market for the Interests would exist and transferability of such Interests would be severely restricted.  These filings are unnecessary for the protection of investors and burdensome to those required to make them.  Because there would be no trading market, and the transfers of Interests are severely restricted, the purpose intended to be served by Section 16(a) is not applicable.  Accordingly, exemption is requested from the requirements of Section 30(h) to the extent necessary to exempt the Managing Member of each ESC Fund, directors and officers of the Managing Member and any other persons who

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may be deemed members of an advisory board or investment adviser (and affiliated persons thereof) of such ESC Fund from filing Forms 3, 4 and 5 under Section 16 of the 1934 Act with respect to such ESC Fund.

Rule 38a-1

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 and to appoint a chief compliance officer.  Each ESC Fund will comply with Rule 38a-1(a), (c) and (d), except that since the ESC Fund does not have a board of directors and the Portfolio Committee will fulfill the responsibilities assigned to the ESC Fund’s board of directors under the Rule.

PART III.APPLICANT’S CONDITIONS

Applicant agrees that any order granting the requested relief will be subject to the following conditions:

1.Each Section 17 Transaction will be effected only if the Members’ Representative Committee determines that the terms of the Section 17 Transaction, including the consideration to be paid or received, are consistent with the terms that would reasonably be expected in a comparable transaction between unrelated parties; and the Portfolio Committee determines that the Section 17 Transaction is consistent with the interests of the Members of the participating ESC Fund.  An ESC Fund’s investments will be kept in the locked files of the Managing Member (or a Citadel entity).

In addition, the Managing Member will record and will preserve a description of all Section 17 Transactions, the findings of the Members’ Representative Committee and the Portfolio Committee and the information or materials upon which such findings are based and the basis for the findings.  All such records will be maintained for the life of the ESC Fund and at

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least six years thereafter, and will be subject to examination by the Commission and its staff.  Each ESC 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 Managing Member will adopt, and periodically review and update, procedures relating to the Members’ Representative Committee designed to ensure that reasonable inquiry is made, prior to the consummation of any Section 17 Transaction, with respect to the possible involvement in the transaction of any affiliated person or promoter of or principal underwriter for such Fund, or any affiliated person of such a person, promoter or principal underwriter.

3.The Managing Member will not make on behalf of an ESC Fund any investment in which a Co-Investor with respect to any ESC Fund has acquired or proposes to acquire the same class of securities of the same issuer, where the investment in which such ESC Fund and the Co-Investor are participants involves a joint enterprise or other joint arrangement within the meaning of Rule 17d-1, unless any such Co-Investor, prior to disposing of all or part of its investment: (a) gives such Managing Member 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 participating ESC Fund holding such investment has the opportunity to dispose of its investment prior to or concurrently with, on the same terms as, and on a pro rata basis with, the Co-Investor.

The restrictions contained in this condition, however, shall not be deemed to limit or prevent the disposition of an investment by a Co-Investor:

(a) to its direct or indirect wholly-owned subsidiary, to a Parent, or to a direct or indirect wholly-owned subsidiary of one or more of its Parents;

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(b) to immediate family members of such Co-Investor, including step and adoptive relationships, or to a trust or other investment vehicle established for any such immediate family member;

(c) when the investment is comprised of securities that are listed on any exchange registered as a national securities exchange under Section 6 of the 1934 Act;

(d) when the investment is comprised of securities that are NMS securities pursuant to Section 11A(a)(2) of the 1934 Act and Rule 600(a) of Regulation NMS thereunder;

(e) 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 for securities; or

(f) when the investment is comprised of securities that are government securities as defined in Section 2(a)(16) of the 1940 Act.

All side-by-side investments held by Citadel entities will be subject to the restrictions contained in this Condition 3, except for side-by-side investments held by a Citadel Third Party Fund, or by a Citadel entity in a transaction in which the Citadel investment was made pursuant to a contractual obligation to a Citadel Third Party Fund.

The Applicant believes that the interests of the Eligible Employees participating in an ESC Fund will be adequately protected even in situations where this Condition 3 is not satisfied.  Citadel is likely to invest its own capital in Citadel Third Party Fund investments, either through such Citadel Third Party Fund or on a side-by-side basis (which Citadel investments will be subject to substantially the same terms as those applicable to such Citadel Third Party Fund).  If

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Condition 3 were to apply to Citadel’s investment in these situations, the effect of such a requirement would be to indirectly burden the Citadel Third Party Fund with the requirements of Condition 3.  In addition, the relationship of an ESC Fund to a Citadel Third Party Fund, in the context of this Application, is fundamentally different from such ESC Fund’s relationship to Citadel.  The focus of, and the rationale for, the protections contained in this Application are to protect the ESC Funds from any overreaching by Citadel in the employer/employee context, whereas the same concerns are not present with respect to the ESC Funds vis-à-vis the investors of a Citadel Third Party Fund.

4.Each ESC Fund and its Managing Member will maintain and preserve, for the life of such ESC 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 Members of such ESC Fund, and each annual report of such ESC Fund required to be sent to such Members, and agree that all such records will be subject to examination by the Commission and its staff.  Each ESC Fund will preserve the accounts, books and other documents required to be maintained in an easily accessible place for the first two years after the life of such ESC Fund.

5.The Managing Member of each ESC Fund will send to each person who was a Member of such Fund at any time during the fiscal year then ended, such ESC Fund’s financial statements audited by such ESC Fund’s independent accountants.  At the end of each fiscal year, the Managing Member will make a valuation or have a valuation made of all of the assets of the ESC 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 ESC Fund.  In addition, within 180 days after the end of each fiscal year of each ESC Fund or as soon as practicable thereafter,

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the Managing Member will send a report to each person who was a Member at any time during the fiscal year then ended, setting forth such tax information as shall be necessary for the preparation by the Member of his, her or its U.S. federal and state income tax returns and a report of the investment activities of the ESC Fund during that fiscal year.

6.If an ESC Fund makes purchases from, or sales to, an entity affiliated with the ESC Fund by reason of an officer, director or employee of Citadel (a) serving as an officer, director, managing member, general partner or investment adviser of the entity, or (b) having a 5% or more investment in the entity, such individual will not participate in the ESC Fund’s determination of whether or not to effect the purchase or sale.

PART IV.                      CONCLUSION

For the foregoing reasons and subject to the foregoing conditions, Applicant requests an order under Sections 6(b) and 6(e) of the 1940 Act exempting Applicant and any ESC Funds from all provisions of the 1940 Act, except Section 9 and Sections 36 through 53, and the rules and regulations under the 1940 Act.  With respect to Sections 17 and 30 of the 1940 Act, and the rules and regulations thereunder, and Rule 38a-1 under the 1940 Act, the exemption is limited as set forth in this Application.  It is respectfully submitted that the protections provided in the sections of the 1940 Act from which exemptions have been requested are not necessary, appropriate or consistent with the protection of investors provided by the 1940 Act in view of the substantial community of interest among all the parties and the fact that each ESC Fund is an “employees’ securities company” as defined in Section 2(a)(13) of the 1940 Act.

The resolution required by Rule 0-2(c)(1) under the 1940 Act for the Applicant is attached as the Exhibit hereto.

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On the basis of the foregoing, the Applicant submits that all the requirements contained in Rule 0-2 under the 1940 Act relating to the signing and filing of this Application have been complied with and that the undersigned, who has signed and filed this Application on behalf of the Applicant, is fully authorized to do so.

Dated:  December 3, 2009

CITADEL INVESTMENT GROUP, L.L.C.
By:	/s/ Shawn F. Fagan
Name:	Shawn F. Fagan
Title:	Deputy General Counsel and Managing Director

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STATE OF ILLINOIS		)
	ss:	)
COUNTY OF COOK		)

The undersigned, Shawn F. Fagan, being duly sworn, deposes and says that he has duly executed the attached Application for an order pursuant to Sections 6(b) and 6(e) of the Investment Company Act of 1940 for and on behalf of Citadel Investment Group, L.L.C., that he is the Senior Managing Director and General Counsel of Citadel Investment Group, L.L.C., and that all action necessary to authorize deponent to execute and file such instrument has been taken.  Deponent further says that he is familiar with such instrument, and the contents thereof, and that the facts therein set forth are true to the best of his knowledge, information and belief.

By:	/s/ Shawn F. Fagan
Name:	Shawn F. Fagan
Title:	Deputy General Counsel and Managing Director

Subscribed and sworn to before

me a Notary Public this 3rd

day of December, 2009

(Notarial Seal) /s/ Lauren C. Whitney

Commission Expires:  January 15, 2012

(Notarial Stamp)

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EXHIBIT

Authorizing Resolution

The following resolution was adopted on December 3, 2009 by the unanimous written consent of the Members of Citadel Investment Group, L.L.C. (the “Company”):

RESOLVED, that any Authorized Representative be and hereby is authorized and empowered to negotiate, enter into and execute, for and in the name of the Company, any and all agreements, assignments, contracts, and other instruments relating to the business of the Company that the Managing Member is authorized to negotiate, enter into and execute for and on behalf of the Company; provided, however, that such authorization shall not apply in connection with any transaction, activity or instrument that requires, under the Limited Liability Company Agreement of the Company, any standing resolutions of the Members or any specific resolution of the Members, the approval of the Members or of any specifically designated officer or officers.

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