SEC Division of Investment Management staff letter: Shee Atika Investments, LLC

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Shee Atika Investments, LLC

January 20, 2004

RESPONSE OF THE OFFICE OF CHIEF COUNSEL

Our Ref. No. 20037281118 Shee Atika Investments, LLC

DIVISION OF INVESTMENT MANAGEMENT

File No. 132-3

Your letter dated January 14, 2004 requests that we concur with your view that compliance with the Investment Company Act of 1940 (the "1940 Act") is not required in connection with the establishment of Shee Atika Investments, LLC ("SAIL") or investments therein, provided that the only persons or entities which may invest through SAIL are Member Entities, as defined below.

BACKGROUND

You represent that Shee Atika Fund Endowment ("SAFE") and Shee Atika Benefits Trust ("SABT," and together with SAFE, the "Settlement Trusts") are settlement trusts established in accordance with the provisions of the Alaska Native Claims Settlement Act ("ANCSA") and meet the definition of settlement trust under ANCSA. 1 Shee Atika, Incorporated ("SAI") is a corporation formed pursuant to the provisions of ANCSA for Alaska Natives historically residing in and around Sitka, Alaska. SAI has established SAIL, an Alaska limited liability company, to provide diversified investment opportunities for itself, the Settlement Trusts and any other entity that SAI or the Settlement Trusts may establish from time to time.

You state that SAIL intends to rely on the exception from the definition of "investment company" in section 3(c)(1) of the 1940 Act. You state that SAI and/or SAFE will likely own initially at least ten percent of the outstanding voting securities of SAIL. SABT may own at least ten percent of SAIL's outstanding voting securities in the future.

You state that SAI, the Settlement Trusts and any entity wholly owned by any of them (collectively, the "Member Entities") are beneficially owned directly or indirectly by the more than 2,600 Alaska Natives who own SAI's stock. The beneficial interests in the Settlement Trusts are stapled to the shares of SAI; one share of SAI is stapled to one trust unit of SAFE and one trust unit of SABT. SAI and the Settlement Trusts have identical beneficial owners.

You also represent that (1) investing in the securities of SAIL by, and issuance of SAIL's securities to, the Member Entities are permissible under ANCSA, and (2) the establishment of SAIL to provide diversified investment opportunities for the Member Entities is permissible under ANCSA. 2

In your letter, you ask that we concur with your view that compliance with the 1940 Act is not required in connection with the establishment of SAIL as a result of investments in SAIL by the Member Entities. Your request, however, fails to identify the specific sections of the 1940 Act that could apply to SAIL and the Member Entities. 3 It appears from your letter that you believe that SAIL meets the definition of investment company set forth in section 3(a)(1)(A) or (C) of the 1940 Act. You represent that SAIL will rely on the exception from the definition set forth in section 3(c)(1) of the 1940 Act to avoid registration with the Commission and regulation as an investment company. In this letter, we only address how SAIL should apply the "look-through" provision of section 3(c)(1)(A), as defined below, to SAI and the Settlement Trusts. 4

ANALYSIS

Section 3(a) of the 1940 Act defines investment company. 5 Section 3(c)(1) excepts from the definition any issuer whose outstanding securities are beneficially owned by not more than one hundred persons ("100 Shareholder Limitation") and that is not making and does not presently propose to make a public offering of its securities. Section 3(c)(1)(A) of the 1940 Act provides that beneficial ownership by a company shall be deemed to be beneficial ownership by one person except that, if the company owns ten percent or more of the outstanding voting securities of the issuer, and is or, but for sections 3(c)(1) or 3(c)(7) of the 1940 Act, would be an investment company, the beneficial ownership shall be deemed to be that of the holders of such company's outstanding securities (the "look-through provision"). 6

Section 3(c)(1)(A) would look through to the shareholders of SAI and a Settlement Trust, respectively, and such shareholders would be deemed to be beneficial owners of SAIL, if SAI or the Settlement Trust (1) owns ten percent or more of the outstanding voting securities of SAIL, and (2) is an investment company or would be one but for sections 3(c)(1) or 3(c)(7) of the 1940 Act. You state that SAI and/or SAFE will likely initially own at least 10% of the outstanding voting securities of SAIL. If SAI or SAFE were deemed to be an investment company, SAIL would fail the 100 Shareholder Limitation of section 3(c)(1) because there are more than 2,600 shareholders of SAI and each Settlement Trust. Consequently, SAIL would meet the definition of investment company in section 3(a)(1)(A) and (C) of the 1940 Act. 7

You contend, however, that SAIL should not look through SAI or the Settlement Trusts pursuant to the look through provision. You represent that SAI does not meet the definition of investment company in section 3(a). 8 You also contend that the Settlement Trusts are not investment companies under the 1940 Act, including for purposes of section 3(c)(1)(A), because ANCSA makes the 1940 Act inapplicable to the Settlement Trusts. You cite to section 28(d)(2) of ANCSA, which states that the 1940 Act shall not apply to any settlement trust (as defined in ANSCA). 9 You represent that each Settlement Trust was established in accordance with the provisions of ANCSA and meets the definition of settlement trust under ANCSA. 10 Consequently, based on the facts and representations set forth in your letter, we believe that SAIL would not be required to look through SAI or a Settlement Trust pursuant to section 3(c)(1)(A) of the 1940 Act. 11 Any different facts or representations may require a different conclusion.

John L. Sullivan Senior Counsel

Endnotes

1 For the definition of settlement trust under ANCSA, see infra note 10.

2 You do not ask, and we express no view regarding, whether (1) investing in the securities of SAIL by, and issuance of SAIL's securities to, the Member Entities are permissible under ANCSA, or (2) the establishment of SAIL to provide diversified investment opportunities for the Member Entities is permissible under ANCSA.

3 See Securities Act Release No. 5127 (January 25, 1971).

4 Your letter also requests that we concur with your view that, under section 3(c)(1)(A) of the 1940 Act, ownership by a Member Entity (other than SAI or a Settlement Trust) of ten percent or more of the outstanding voting securities of SAIL would be deemed to be beneficial ownership by one person, the Member Entity, and not beneficial ownership by the respective holders of the Member Entity's outstanding securities (or the respective holders of SAI, SAFE or SABT's outstanding securities). We decline to respond to that request because the incoming letter does not contain adequate facts and legal analysis to enable us to consider it. See, e.g., Glenwood Investment Corp. (pub. avail. Aug. 10, 1994).

5 Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities. Section 3(a)(1)(B) of the 1940 Act defines an investment company as any issuer that is engaged or proposes to engage in the business of issuing face amount certificates of the installment type, or has been engaged in such business and has any such certificate outstanding. Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 percent of the value of such issuer's total assets (exclusive of government securities and cash items) on an unconsolidated basis.

6 Section 3(c)(7) of the 1940 Act excepts from the definition of investment company any issuer whose outstanding securities are owned exclusively by persons who, at the time of acquisition of such securities, are qualified purchasers (as defined in section 2(a)(51) of the 1940 Act) and that is not making, and does not propose to make, a public offering of its securities.

7 Pursuant to section 7 of the 1940 Act, SAIL would be required to register with the Commission as an investment company prior to conducting any business in interstate commerce, including the offer and sale of its shares.

8 We take no position, however, regarding whether SAI meets the definition of investment company. The determination of whether SAI is an investment company would entail an inherently factual inquiry that is not appropriate for the staff to undertake in the context of providing no action or interpretive relief. We assume, however, that SAI is not an investment company solely for purposes of explaining how the look-through provision would apply to SAI.

9 43 U.S.C. � 1625(d)(2).

10 See 43 U.S.C. � 1602(t), which defines a settlement trust under ANCSA as a trust (1) established and registered by a Native Corporation (as defined in ANCSA) under the laws of the state of Alaska pursuant to a resolution of its shareholders, and (2) operated for the benefit of shareholders, Natives (as defined in ANCSA), and descendants of Natives, in accordance with the provisions of ANCSA and the laws of the state of Alaska.

11 You represent that SAI and the Settlement Trusts are each counted as a single person for purposes of the 100 Shareholder Limitation. Also, you represent that SAI and the Settlement Trusts have the same beneficial owners. We note that ownership by SAI and the Settlement Trusts of the outstanding voting securities of SAIL would be deemed to be beneficial ownership by one person, SAI and the Trusts collectively, rather than each of SAI, SAFE and SABT. Generally, if two or more entities have identical beneficial owners, they would be counted as one person for purposes of the 100 Shareholder Limitation. See, e.g., OSIRIS Management, Inc. (pub. avail. Feb. 17, 1984).

Incoming Letter:

January 14, 2004

John L. Sullivan, Esq. Senior Counsel Office of Chief Counsel, Division of Investment Management United States Securities and Exchange Commission 450 Fifth Street Northwest, M/S 0504 Washington, D.C. 20549

Re: No-Action Request As To Alaska Native Entity Our File 54386

Dear Mr. Sullivan:

We are writing to request that the staff of the Securities and Exchange Commission ("SEC") concur in our view as to the manner in which certain federal securities laws will apply to the formation and operation of an Alaska limited liability company known as "Shee Atika Investments, SAIL" (herein "SAIL"). SAIL has been established by Shee Atika, Incorporated ("SAI") 1a to provide diversified investment opportunities for itself, the two settlement trusts 2a SAI has established in accordance with ANCSA to benefit SAI's shareholders, and any other entities that SAI or these settlement trusts (SABT and SAFE) may establish from time to time. 3a Investing in the securities of SAIL by, and the issuance of SAIL's securities to, the members of the Shee Atika Group are permissible under ANCSA, and the establishment of SAIL to provide diversified investment opportunities for the members of the Shee Atika Group is permissible under ANCSA.

In 1992, the staff of the SEC issued a no-action letter confirming that SAFE's formation and operation was exempt under the Securities Act of 1933 (the "'33 Act"), the Securities Exchange Act of 1934 (the "'34 Act") and the Investment Company Act of 1940 ("'40 Act"). 4a A similar no-action letter was requested in 1997 as to SAI's other settlement trust, SABT, but the SEC staff declined to issue the requested no-action letter on the grounds that "unique or unusual issues" concerning settlement trusts were not presented by SABT's request.

SAI believes that the present no-action request involving SAIL should be ruled on for two reasons. First, SAIL will be formed as an Alaska limited liability company rather than as an ANCSA settlement trust. SAIL is therefore presumably not within the SEC staff's announced position 5a that no-action letters generally will not be issued concerning ANCSA settlement trusts. Second, SAI is seeking guidance as to the application of the '40 Act to SAIL. The prior no-action letters concerning settlement trusts did not focus on the application of the '40 Act because ANCSA expressly exempts ANCSA settlement trusts from the '40 Act. No such express exemption within ANCSA is applicable to SAIL, and thus, a unique or unusual issue relative to SAIL as an investment entity for settlement trusts is being presented.

I.

NO ACTION REQUEST

We hereby request that the staff of the SEC concur that no form of compliance is necessary relative to the establishment of SAIL or investments therein with regard to the '40 Act, provided that the only persons or entities which may invest through SAIL are members of the Shee Atika Group.

II.

DESCRIPTION OF SAIL

A. Organization. SAIL has been organized under the laws of Alaska as a limited liability company to avoid entity level taxes. SAIL is governed by an Operating Agreement (the "Operating Agreement") that is attached hereto as Exhibit C. Once investment occurs, the Operating Agreement cannot be changed except upon the affirmative vote of the entities ("Unitholders") holding two-thirds of the units representing proportional ownership of SAIL ("Units"). Each Unit is voting and has a par value of $1.00/Unit. One hundred million (100,000,000) Units have been authorized. Each Unitholder will have the same number of Units as they have dollars in their capital account that is maintained for tax purposes.

B. Limited Ownership. At all times, only members of the Shee Atika Group may be Unitholders. No Units may be issued by SAIL until such time as the staff of the SEC issues a no-action letter or other similar guidance acceptable to SAIL's directors as to whether SAIL must register under the Investment Company Act of 1940.

C. Tax and Financial Reporting Of SAIL. SAIL will be treated as a partnership for federal and Alaska state income tax purposes. The books of SAIL will be maintained on the cash method of income, and SAIL's taxable year will be the calendar taxable year. An annual audited financial statement must be issued with regard to SAIL, which will be provided to all Unitholders as soon as practical following the conclusion of the calendar year to which the audited financial report relates. As described more fully below, SAI will be responsible for overseeing all tax and financial reporting of SAIL, as well as providing bookkeeping and accounting services, and will charge a fee for such services.

D. Treatment of Unitholders for Tax Purposes. Because SAIL will be treated as a partnership for income tax purposes, the Unitholders will be taxed in accordance with the provisions of Subchapter K of the Internal Revenue Code of 1986 ("Code"). A capital account will be maintained for each Unitholder in accordance with section 704. As discussed below, each Unitholder will be required to take into account in computing its federal income tax liability its distributive share of SAIL's partnership tax items for a given calendar year, without regard to whether the Unitholder has received a distribution of cash or other property from SAIL. Each Unitholder will be responsible for determining the tax basis in the Units it owns.

1. Allocation Periods. There will be one or more "allocation periods" within each year that will be the basis upon which various items are allocated among the Unitholders. Each time a Unitholder makes a capital contribution to or receives a distribution from SAIL, the current allocation period ends on such day, and a new allocation period begins on the next. This may occur at any time throughout the calendar year. In addition, a new allocation period begins each January 1, and the then current allocation period ends on each December 31.

2. Capital Accounts. The initial capital account of each Unitholder will consist of such Unitholder's investment in SAIL (including the value of any assets contributed at fair market value). Thereafter, at the end of each allocation period, the capital account will be adjusted for such Unitholder's share during such allocation period of (i) the amount of any recognized ordinary income or expense; (ii) the amount of any recognized capital gain or loss (other than that subject to section 704(c) of the Code); and (iii) the change in the aggregate of unrealized capital gains and losses of SAIL (other than those that would be subject to section 704(c) of the Code if recognized). Such adjustments shall be made based upon the proportion each Unitholder's capital account at the beginning of such allocation period bears to the aggregate capital accounts of all Unitholders. Following the allocations described in the preceding portions of this paragraph, each Unitholder's capital account shall be credited with any contribution or charged with any distribution made on the last day of the allocation period, as the case may be. The capital account as so computed on the last day of a given allocation period shall be the starting capital account for the next allocation period. The allocations of recognized ordinary income and expense and recognized capital gain and loss made with regard to each allocation period falling within a given calendar year shall control for tax purposes as well.

3. Section 704(c) Gains and Losses. The gains and losses that are subject to section 704(c) will already be reflected within the investment accounts of each Unitholders, since any assets contributed in kind are included within the investment accounts at their fair market value at the time of contribution. This in turn means that any allocations of gain or loss required by section 704(c) are necessarily for tax purposes only and do not affect the investment accounts when such gain or loss is realized by SAIL.

4. Unrealized Capital Gains and Losses. Unrealized capital gains and losses will be maintained in an aggregate account on a net basis, and each investor's capital account will be adjusted by their respective share of the net change in this account within a given period at the conclusion of that period. When capital gains or losses are recognized, the amount of the recognized gain or loss will reduce the aggregate unrealized capital gain and loss account, but only to the extent of the unrealized gain or loss previously reflected within such account. As noted above, the net change in the unrealized capital gain or loss account (whether positive or negative) within a given period will operate to adjust each investor's capital account, as will the aggregate of recognized gains or losses in such period. In both cases, the percentage reflected in each investor's account will be based on the percentage attributable to that respective investor at the start of the respective allocation period.

E. Investments In Cash or Kind. Investments may be made in cash or in kind. In kind investments will be accepted at their fair market value on the day of investment as determined in the reasonable judgment of SAIL. Any gain or loss inherent in such fair market value will be subject to section 704(c), but only for tax purposes as discussed above.

F. Certificates And Transactions in Units. Certificates may, but need not, be issued relative to the Units. SAIL will maintain a register of the Unitholders on a daily basis. Ownership of the Units can be acquired only from SAIL. Further, a Unitholder may only sell Units back to SAIL (i.e., in a redemption). All transactions involving Units will be based upon the Unitholder's capital account as of the close of business on the day on which the particular transaction occurs. Redemptions are required to occur in cash only. Any certificates that are issued by SAIL will bear a restrictive legend indicating that ownership is limited at all times to members of the Shee Atika Group.

G. Certain Automatic Redemptions. SAI shall be required to redeem all of its Units in the event that it ceases to be a Native Corporation within the meaning of ANCSA. Such redemption shall automatically occur as of the close of business on the first day that SAI ceases to be a Native Corporation. SAFE and SABT, respectively, shall be required to redeem all of its Units in the event that it ceases to be a Settlement Trust within the meaning of ANCSA. Such redemption shall automatically occur as of the close of business on the first day that SAFE or SABT, as the case may be, ceases to be an ANCSA settlement trust.

H. SAIL Directors and Officers. The Directors and Officers of SAIL shall be the same as the Directors and Officers of SAI, regardless of whether SAI is a Unitholder. SAIL directors and officers will not receive compensation so long as they are directors, officers, and employees of SAI. SAIL may employ other persons from time to time and compensate them as appropriate.

I. Bonding And Insurance. The directors and officers of SAIL are not required to be bonded. The Board of Directors of SAIL has the power to maintain appropriate directors and officers insurance, including through inclusion as an additional insured entity within SAI's own directors and officers policy, which presently also insures the trustees and officers of SAFE and SABT.

J. Investment Policies. The investment policy and allocation of SAIL assets will be established by SAIL's directors.

K. Employees and Professional Advisors. The Board of Directors of SAIL will have the discretion to hire such administrators, employees, investment consultants, financial advisors, or money managers to advise SAIL directors and/or to act in such capacities as the Board of Directors of SAIL shall designate. The Board of Directors of SAIL also will have the broad power to engage such financial institutions as they deem necessary to perform their duties, including to act as custodians for funds, as brokers, etc. The Operating Agreement allows SAIL directors to rely without liability upon the advice of these professionals.

L. Indemnification, etc. Neither the Manager (including each individual who is a director of SAIL) nor any officer shall be liable to SAIL or to the Unitholders for any act or omission in connection with the business or affairs of SAIL so long as the act or omission is not in bad faith. Likewise, SAIL shall indemnify and hold the Manager (including each individual who is a director of SAIL) and officers harmless from any claim or action against them as well as any fees, costs and expenses incurred in connection with the claim or action so long as the act or omission is not in bad faith. The provisions of this section are in addition to any other indemnification that may be available, whether through contract, or by law, or otherwise. In general, the Manager (including each individual who is a director of SAIL) and officers will have liability if they do not discharge their respective duties to the Company with the respective standard of care set forth above. The Manager (including each individual who is a director of SAIL) and SAIL's officers will be conclusively presumed to have satisfied this standard in certain circumstances, including (a) relying in good faith on outside advisors (such as attorneys, accountants, financial advisors, and money managers); (b) making good faith estimates of the fair market value of property contributed in kind; and (c) relying in good faith on the genuineness of a document. These listed circumstances are not the only circumstances in which the Manager (including each individual who is a director of SAIL) and each officer of SAIL will have met the standard of care. Such indemnification is in addition to any other indemnification available to the Manager (including each individual who is a director of SAIL) and SAIL's officers that meet the respective standard of care described above, including without limitation, indemnification by SAI, SAFE and/or SABT.

M. Administrative Services and Fee. The Board of Directors of SAIL will have the discretion to obtain administrative services for SAIL and to hire such employees or independent contractors as may be necessary, and to pay for such services from SAIL assets. Without limiting the generality of the foregoing, SAIL is permitted to contract with SAI to obtain some or all of such services, including its services as Manager of SAIL.

N. Borrowings and Loans. SAIL will be prohibited from making any loans to Unitholders or other persons and entities (except through publicly traded bonds). SAIL may borrow such amounts as its directors deem prudent, including through the guarantee of any debt, with or without the provision of collateral. If deemed necessary by the directors, the assets of SAIL may be pledged or subjected to an encumbrance to provide security for the performance of any obligation of SAIL, including without limitation the repayment of amounts borrowed or guaranteed.

O. Duration/Termination. SAIL's Operating Agreement will continue forever unless termination action is taken. Termination may occur at any time upon the affirmative vote of Unitholders holding two-thirds of Units. Upon termination of SAIL, SAIL's assets would be sold and the proceeds distributed in proportion to the relative capital accounts of the Unitholders as of the date of such termination.

P. Manager. The Board of Directors of SAIL shall be its Manager.

III.

ANALYSIS - SAIL IS NOT AN INVESTMENT COMPANY WITHIN THE MEANING OF THE '40 ACT.

Under section 3(c)(1) of the '40 Act, 15 U.S.C. section 80a-3(c)(1), any issuer that has no more than 100 beneficial owners of its outstanding securities ("100 owner rule") and that does not presently propose to make a public offering of its securities is not an investment company. Such an issuer is thus not subject to registration under the Investment Company Act.

SAIL intends to rely on the exception from the definition of "investment company" in section 3(c)(1) to avoid registration as an investment entity with the SEC and regulation as an investment company.

SAIL has no present plans to make a public offering of its securities and in fact will be unable to do so under its organic documents. Therefore, SAIL will not be an investment company within the meaning of the '40 Act if it meets the 100 owner test.

Under section 3(c)(1)(A), beneficial ownership of a company shall be deemed to be ownership by one person, except for a company that owns 10 per cent or more (a "10 per cent owner") of the outstanding voting securities of the issuer. If such a 10 per cent owner is themselves either an investment company or excepted from the definition of an investment company by section 3(c)(1) or section 3(c)(7) of the '40 Act (the "(c)(1)/(c)(7) test"), then the beneficial ownership of the issuer is deemed to be that of the holders of the company's outstanding securities. In essence, the company's ownership is looked through.

Since SAI has 2600+ shareholders, and these shareholders of SAI also own (through the stapling concept) all of the beneficial interests in SABT and SAFE, SAIL will be an investment company if SAI's, SABT's or SAFE's intervening ownership is ignored under section 3(c)(1)(A). It is expected that either or both of SAI and SAFE will likely initially own at least 10% of the outstanding voting securities of SAIL 6a , and so the (c)(1)/(c)(7) test must be examined.

No member of the Shee Atika Group (including SAI, SAFE and SABT) will fail the (c)(1)/(c)(7) test because no member relies on paragraph 3(c)(1) or paragraph 3(c)(7) of the '40 Act to avoid investment company status.

SAFE AND SABT

SAFE and SABT are both settlement trusts organized under ANCSA, and thus, do not have investment company status by virtue of ANCSA section 28(d)(2), 43 U.S.C. Section 1625(d)(2). 7a

SAI

For periods prior to December 31, 2001, SAI is not an investment company because of the express language of ANCSA section 28, which provides that Native Corporations such as SAI are not investment companies for purposes of the '40 Act. For the periods after December 31, 2001, SAI has no exemption from the '40 Act under ANCSA, but is still not an investment company within the meaning of section 3(a)(1) of the '40 Act.

SAI (as shown by its 2002 audited financial report attached hereto as Exhibit D (the "Financial Statements")) is not primarily engaged and does not propose to primarily engage in the business of securities within the meaning of section 3(a)(1)(A). SAI also does not issue face-amount certificates of the installment type, as described in section 3(a)(1)(B) of the '40 Act. Further, the investment securities SAI owns do not exceed 40% of the value of its assets within the meaning of section 3(a)(1)(C).

Simply put, SAI has substantial non investment activities, including real estate development and ownership, that are its primary focus. The Financial Statements indicate that during 2002 SAI had significant investments in a hotel, commercial real estate in various cities, and cutover timberlands.

As to the 40% test of section 3(a)(1)(C), SAI is not an investment company. At the end of 2002, land, buildings and equipment represented over twenty-one times 8a the value of long term investments (primarily debt and bond mutual fund securities). Ignoring cash, the long term investments of $1,017,429 represented just 4.3% of total assets (not counting cash and similar assets) of $23,708,693. At the end of 2001, long term investments were just under $7.7 million in value compared to approximately $20.3 million of total assets (not counting cash and similar assets), i.e., about 37.8 %. Thus, the requirement of section 3(a)(1)(C) that 40% or less of the value of SAI's assets be represented by investment securities has been met.

With regard to the question posed by 3(a)(1)(A), it is apparent that SAI is not "primarily" engaged in the business of securities. From a revenue stand point, SAI's hotel operations alone contributed gross revenues of $4.6 million (about 70%) of SAI's gross total revenue of $6.6 million in 2002, and about 50% of the total revenue in 2001. In 2002, rentals from commercial properties generated further total revenue of $440,000 or about another 7% of total revenue, while the sale of residential homes produced gross revenue of over $1 million (about 15% of gross revenues). By contrast, in 2002 investment income consisted of only $443,000 (6.7% of total revenue), and about 9 % of the total revenue of $8.7 million in 2001. 9a Through the end of 2002, SAI was primarily engaged in the hospitality and commercial real estate business.

In Arizona Property Investors, Ltd. (available August 9, 1979), the staff of the SEC confirmed the view that a company that invests in fee ownership of real estate 10a is not an investment company. Although most of the Shee Atika Group's commercial real estate is owned for convenience and liability reasons in the form of limited liability companies, the "securities" representing control of these wholly owned limited liability companies is excluded in determining whether the 40% or less test of present-day section 3(a)(1)(C) has been exceeded. See In re Broadway and 58th Street SAI, 12 S.E.C. 1128, 1132-1133 (1943).

It follows from the foregoing that SAI is not an investment company "but for the exceptions provided for in [paragraph (c)(1)] or paragraph (7)", and it further follows that the exemption test has not been met. SAI, SABT and SAFE are each counted as a single person in determining whether more than 100 persons have invested in SAIL. See Torchmark SAI (available November 24, 1986).

Other Members of the Shee Atika Group

Any other member of the Shee Atika Group other than SAI, SAFE or SABT that might subsequently acquire securities of SAIL will be owned directly or indirectly by one of SAI, SAFE or SABT, and likewise, should be treated only as a single company rather than being "looked through" to the 2600+ Native owners of SAI, SAFE and SABT.

Conclusion As To the '40 Act

Therefore, at its inception, SAIL is not an investment company under section 3(c)(1) of the '40 Act, and SAIL will continue to not be an investment company under the foregoing analysis so long as it has fewer than 100 persons that own its investment securities. Therefore, the staff of the SEC should express its view that it will not recommend action to require any form of compliance with the '40 Act relative to the establishment of SAIL or investments therein, provided that the only persons or entities which may invest through SAIL are members of the Shee Atika Group.

IV.

PROCEDURAL MATTERS

In the event the SEC staff is inclined to issue any unfavorable ruling, SAI requests a conference before the issuance of the ruling. The establishment of SAIL is a part of an actual transaction, and is not a hypothetical nor alternative transaction. Nevertheless, SAIL has not been fully consummated and is subject to such modifications as may be suggested by various government regulators. We hereby request an advance copy of the ruling to be issued to the undersigned as SAI's authorized representative via facsimile transmission. The telecopier number of SAI's authorized representative is: (206) 224-8250.

V.

CONCLUSION

Based on the foregoing, we hereby request the staff of the SEC to provide no-action rulings as indicated above. Please contact us if you have any questions.

SORENSEN & EDWARDS, P. S.

Michael R. Sorensen

Bruce N. Edwards

Attachments

EXHIBIT A No Action Letter to Shee Atika, Inc. (available December 28, 1992)

EXHIBIT B No Action Letter to Shaan-Seet, Inc. (available September 15, 1994)

EXHIBIT C Copy of the Operating Agreement establishing SAIL

EXHIBIT D Copy of the 2002 Annual Report for SAI, SAFE and SABT

Endnotes

1 SAI is the SAI formed pursuant to the provisions of the Alaska Native Claims Settlement Act, 43 U.S.C. section 1601 et seq. ("ANCSA") for the Alaska Natives historically residing in and around Sitka, Alaska.

2 These two ANCSA settlement trusts are the Shee Atika Fund Endowment ("SAFE") and the Shee Atika Benefits Trust ("SABT"). SAFE and SABT both meet the definition of "settlement trust" contained in ANCSA. 43 U.S.C. section 1602(t).

3 Collectively, we refer in this letter to SAI, SAFE, and SABT, as well as any entity wholly owned by any of them, as the "Shee Atika Group". The key feature of the Shee Atika Group is that all member entities are beneficially owned directly or indirectly by the 2600+ Alaska Natives that own SAI's stock. In the case of SAFE and SABT this is accomplished by the stapling of the beneficial interests in such trusts to the shares of SAI. One share of SAI is stapled to one trust unit in SAFE and one trust unit in SABT, and vice versa. SAI, SAFE, and SABT have identical beneficial owners.

4 Shee Atika, Inc. (available December 28, 1992). A copy of the staff's response is attached as Exhibit A.

5 Shaan-Seet, Incorporated (September 15, 1994). A copy of the staff's response is attached as Exhibit B.

6 While it is not presently expected that SABT will initially own at least 10% of SAIL's outstanding voting securities, it is possible that at some point in the future that SABT may own at least 10% of SAIL's outstanding voting securities.

7 Although there are nine trustees of each of SABT and SAFE, the position of the staff of the SEC has been that normally a trust is counted as a single beneficial owner, subject to the "look through" rule of section 3(a)(1)(C). Torchmark Corp. (available November 24, 1986); OSIRIS Management, Inc. (available February 17, 1984); Rosenberg Capital Management (available February 18, 1979).

8 Land, buildings and equipment represented almost $22 million of value on the 2002 balance sheet, while long term investments represented just over $1 million. The other significant asset on the 2002 balance sheet was almost $900,000 of residential homes and land held for sale. The text assumes that all other items are cash or cash equivalent items.

9 This includes income of $685,771 of investment income plus $92,000 attributable to Atikon Forest Products, Inc., an operating company in which SAI owns 49% and thus, not a majority of the equity securities. It does not include the ($890,776) extraordinary write down of the value of the Atikon securities.

10 SAI transferred ownership of the hotel to SAFE as of December 31, 2002. As of the date of this no-action request, SAI principal assets are developed and undeveloped real estate.

http://www.sec.gov/divisions/investment/noaction/shee012004.htm

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Modified: 01/22/2004