Fundrise Real Estate Interval Fund, LLC, et al., 538-545 [2019-28491]
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Federal Register / Vol. 85, No. 3 / Monday, January 6, 2020 / Notices
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[FR Doc. 2019–28448 Filed 1–3–20; 8:45 am]
BILLING CODE 8011–01–P
[Investment Company Act Release No.
33739; 812–15040]
Fundrise Real Estate Interval Fund,
LLC, et al.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
(‘‘Order’’) under section 17(d) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act to
permit certain joint transactions
otherwise prohibited by section 17(d) of
the Act and rule 17d–1 under the Act.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE, Washington, DC 20549–
1090. Applicants: 11 Dupont Circle NW,
9th Floor, Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at
202–551–6817, or Kaitlin C. Bottock,
Branch Chief, at (202) 551–6825
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION:
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
closed-end management investment
companies to co-invest in portfolio
companies with each other and with
affiliated investment funds and
accounts.
APPLICANTS: Fundrise Real Estate
Interval Fund, LLC (the ‘‘Company’’),
Fundrise Real Estate Investment Trust,
LLC, Fundrise Equity REIT, LLC,
Fundrise Income eREIT II, LLC,
37 17
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Fundrise Income eREIT III, LLC,
Fundrise Income eREIT 2019, LLC,
Fundrise Growth eREIT II, LLC,
Fundrise Growth eREIT III, LLC,
Fundrise Growth eREIT 2019, LLC,
Fundrise Midland Opportunistic REIT,
LLC, Fundrise West Coast Opportunistic
REIT, LLC, Fundrise East Coast
Opportunistic REIT, LLC, Fundrise ForSale Housing eFUND—Los Angeles CA,
LLC, Fundrise For-Sale Housing
eFUND—Washington DC, LLC, Fundrise
National For-Sale Housing eFund, LLC,
Fundrise Opportunity Fund, LP, (the
‘‘Existing Affiliated Funds’’), Fundrise
Advisors, LLC (‘‘FA’’) and Fundrise
Lending LLC.
FILING DATES: The application was filed
on June 11, 2019, and amended on
September 4, 2019, and November 26,
2019.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on January 24, 2020, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
The following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Introduction
1. The applicants request an order of
the Commission under section 17(d) of
the Act and rule 17d–1 under the Act to
permit, subject to the terms and
conditions set forth in the application
(the ‘‘Conditions’’), one or more
Regulated Funds 1 and/or one or more
1 ‘‘Regulated Funds’’ means the Company and the
Future Regulated Funds. ‘‘Future Regulated Fund’’
means a closed-end management investment
company (a) that is registered under the Act, (b)
whose investment adviser is an Adviser, and (c)
that intends to participate in the proposed coinvestment program (the ‘‘Co-Investment
Program’’).
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Affiliated Funds 2 to enter into CoInvestment Transactions with each
other. ‘‘Co-Investment Transaction’’
means any transaction in which one or
more Regulated Funds (or its WhollyOwned Investment Sub (defined below)
participated together with one or more
Affiliated Funds and/or one or more
other Regulated Funds in reliance on
the Order. ‘‘Potential Co-Investment
Transaction’’ means any investment
opportunity in which a Regulated Fund
(or its Wholly-Owned Investment Sub)
could not participate together with one
or more Affiliated Funds and/or one or
more other Regulated Funds without
obtaining and relying on the Order.3
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Applicants
2. The Company is a Delaware limited
liability company organized as a nondiversified closed-end management
investment company that operates as an
interval fund pursuant to rule 23c3
under the Act. The Company has
elected to be treated as a REIT under
Sub-Chapter M of the Code, and intends
to continue to maintain its qualification
as a REIT in the future. The Company
is managed by a Board 4 currently
comprised of four persons, three of
whom are Independent Directors.5
3. FA, a Delaware limited liability
company that is registered under the
Advisers Act, serves as the investment
‘‘Adviser’’ means FA together with any future
investment adviser that (i) controls, is controlled by
or is under common control with FA, (ii) is
registered as an investment adviser under the
Investment Advisers Act of 1940 (the ‘‘Advisers
Act’’) and (iii) is not a Regulated Fund or a
subsidiary of a Regulated Fund.
2 ‘‘Affiliated Fund’’ means any Existing Affiliated
Fund, any Future Affiliated Fund or any Fundrise
Proprietary Account. ‘‘Future Affiliated Fund’’
means any entity (a) whose investment adviser is
an Adviser, (b) (i) that would be an investment
company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7)
of the Act or (ii) that does not meet the definition
of investment company under the Act and qualifies
as a real estate investment company (‘‘REIT’’)
within the meaning of Section 856 of the Internal
Revenue Code (‘‘Code’’) because substantially all of
its assets would consist of real properties, and (c)
that intends to participate in the Co-Investment
Program. ‘‘Fundrise Proprietary Account’’ means
Fundrise Lending LLC, and any direct or indirect,
wholly- or majority-owned subsidiary of FA that is
formed in the future that, from time to time, may
hold various financial assets in a principal capacity.
3 All existing entities that currently intend to rely
on the Order have been named as applicants and
any existing or future entities that may rely on the
Order in the future will comply with the terms and
Conditions set forth in the application.
4 ‘‘Board’’ means the board of directors (or the
equivalent) of the applicable Regulated Fund.
5 ‘‘Independent Director’’ means a member of the
Board of any relevant entity who is not an
‘‘interested person’’ as defined in section 2(a)(19) of
the Act. No Independent Director of a Regulated
Fund will have a financial interest in any CoInvestment Transaction, other than indirectly
through share ownership in one of the Regulated
Funds.
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adviser to the Company pursuant to an
investment advisory agreement. FA also
serves as investment adviser to each
Existing Affiliated Fund.
4. Fundrise Lending LLC, an affiliate
under common control with FA, holds
various financial assets in a principal
capacity. Fundrise Lending, LLC also
originates real estate loans.
5. Applicants represent that each
Existing Affiliated Fund is a separate
and distinct legal entity and each of
which (i) would be an investment
company but for Section 3(c)(1),
3(c)(5)(C) or 3(c)(7) of the Act, or (ii)
does not meet the definition of
investment company under the Act and
qualifies as a REIT within the meaning
of Section 856 of the Code because
substantially all of its assets would
consist of real properties.
6. Applicants state that a Regulated
Fund may, from time to time, form one
or more Wholly-Owned Investment
Subs.6 Such a subsidiary may be
prohibited from investing in a CoInvestment Transaction with a
Regulated Fund (other than its parent)
or any Affiliated Fund because it would
be a company controlled by its parent
Regulated Fund for purposes of rule
17d–1. Applicants request that each
Wholly-Owned Investment Sub be
permitted to participate in CoInvestment Transactions in lieu of the
Regulated Fund that owns it and that
the Wholly-Owned Investment Sub’s
participation in any such transaction be
treated, for purposes of the Order, as
though the parent Regulated Fund were
participating directly.
Applicants’ Representations
A. Allocation Process
7. Applicants represent that FA has
established processes for allocating
initial investment opportunities,
opportunities for subsequent
investments in an issuer and
dispositions of securities holdings
reasonably designed to treat all clients
fairly and equitably. Further, applicants
represent that these processes will be
extended and modified in a manner
6 ‘‘Wholly-Owned Investment Sub’’ means an
entity (i) that is a wholly-owned subsidiary of a
Regulated Fund (with such Regulated Fund at all
times holding, beneficially and of record, 100% of
the voting and economic interests); (ii) whose sole
business purpose is to hold one or more
investments on behalf of such Regulated Fund; (iii)
with respect to which such Regulated Fund’s Board
has the sole authority to make all determinations
with respect to the entity’s participation under the
Conditions to the application; and (iv) (A) would
be an investment company but for Section 3(c)(1),
3(c)(5)(C), or 3(c)(7) of the Act, or (B) qualifies as
a REIT within the meaning of Section 856 of the
Code because substantially all of its assets would
consist of real properties.
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539
reasonably designed to ensure that the
additional transactions permitted under
the Order will both (i) be fair and
equitable to the Regulated Funds and
the Affiliated Funds and (ii) comply
with the Conditions.
8. If the requested Order is granted,
the Adviser will establish, maintain and
implement policies and procedures
reasonably designed to ensure that
when such opportunities arise, the
Adviser to the relevant Regulated Funds
is promptly notified and receives the
same information about the opportunity
as any other Adviser considering the
opportunity for its clients. In particular,
consistent with Condition 1, if a
Potential Co-Investment Transaction
falls within the then-current Objectives
and Strategies 7 and any BoardEstablished Criteria 8 of a Regulated
Fund, the policies and procedures will
require that the Adviser to such
Regulated Fund receive sufficient
information to allow such Adviser’s
investment committee to make its
independent determination and
recommendations under the Conditions.
9. The Adviser to each applicable
Regulated Fund will then make an
independent determination of the
appropriateness of the investment for
the Regulated Fund in light of the
Regulated Fund’s then-current
circumstances. If the Adviser to a
Regulated Fund deems the Regulated
Fund’s participation in any Potential
7 ‘‘Objectives and Strategies’’ means a Regulated
Fund’s investment objectives and strategies, as
described in its most current registration statement
on Form N–2, other current filings with the
Commission under the Securities Act of 1933 (the
‘‘Securities Act’’) or under the Securities Exchange
Act of 1934, as amended, and its most current
report to stockholders.
8 ‘‘Board-Established Criteria’’ means criteria that
the Board of a Regulated Fund may establish from
time to time to describe the characteristics of
Potential Co-Investment Transactions regarding
which the Adviser to such Regulated Fund should
be notified under Condition 1. The BoardEstablished Criteria will be consistent with the
Regulated Fund’s Objectives and Strategies. If no
Board-Established Criteria are in effect, then the
Regulated Fund’s Adviser will be notified of all
Potential Co-Investment Transactions that fall
within the Regulated Fund’s then-current
Objectives and Strategies. Board-Established
Criteria will be objective and testable, meaning that
they will be based on observable information, such
as industry/sector of the issuer, minimum EBITDA
of the issuer, asset class of the investment
opportunity or required commitment size, and not
on characteristics that involve a discretionary
assessment. The Adviser to the Regulated Fund may
from time to time recommend criteria for the
Board’s consideration, but Board-Established
Criteria will only become effective if approved by
a majority of the Independent Directors. The
Independent Directors of a Regulated Fund may at
any time rescind, suspend or qualify its approval
of any Board-Established Criteria, though
Applicants anticipate that, under normal
circumstances, the Board would not modify these
criteria more often than quarterly.
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Co-Investment Transaction to be
appropriate, then it will formulate a
recommendation regarding the proposed
order amount for the Regulated Fund.
10. Applicants state that, for each
Regulated Fund and Affiliated Fund
whose Adviser recommends
participating in a Potential CoInvestment Transaction, such Adviser’s
investment committee will approve an
investment amount to be allocated to
each Regulated Fund and/or Affiliated
Fund participating in the Potential CoInvestment Transaction. Applicants
state further that, each proposed order
amount may be reviewed and adjusted,
in accordance with the Adviser’s
written allocation policies and
procedures, by the Adviser’s investment
committee.9 The order of a Regulated
Fund or Affiliated Fund resulting from
this process is referred to as its ‘‘Internal
Order.’’ The Internal Order will be
submitted for approval by the Required
Majority of any participating Regulated
Funds in accordance with the
Conditions.10
11. If the aggregate Internal Orders for
a Potential Co-Investment Transaction
do not exceed the size of the investment
opportunity immediately prior to the
submission of the orders to the
underwriter, broker, dealer or issuer, as
applicable (the ‘‘External Submission’’),
then each Internal Order will be
fulfilled as placed. If, on the other hand,
the aggregate Internal Orders for a
Potential Co-Investment Transaction
exceed the size of the investment
opportunity immediately prior to the
External Submission, then the allocation
of the opportunity will be made pro rata
on the basis of the size of the Internal
Orders.11 If, subsequent to such External
Submission, the size of the opportunity
is increased or decreased, or if the terms
9 The reason for any such adjustment to a
proposed order amount will be documented in
writing and preserved in the records of each
Adviser.
10 ‘‘Required Majority’’ means a required
majority, as defined in section 57(o) of the Act.
Although each Regulated Fund will be a registered
closed-end fund, the Board members that make up
the Required Majority will be determined as if the
Regulated Fund were a business development
company subject to section 57(o) (‘‘BDC’’).
11 The Advisers will maintain records of all
proposed order amounts, Internal Orders and
External Submissions in conjunction with Potential
Co-Investment Transactions. Each applicable
Adviser will provide the Eligible Directors with
information concerning the Affiliated Funds’ and
Regulated Funds’ order sizes to assist the Eligible
Directors with their review of the applicable
Regulated Fund’s investments for compliance with
the Conditions. ‘‘Eligible Directors’’ means, with
respect to a Regulated Fund and a Potential CoInvestment Transaction, the members of the
Regulated Fund’s Board eligible to vote on that
Potential Co-Investment Transaction as if the
Regulated Fund were a BDC subject to section 57(o)
of the Act.
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of such opportunity, or the facts and
circumstances applicable to the
Regulated Funds’ or the Affiliated
Funds’ consideration of the opportunity,
change, the participants will be
permitted to submit revised Internal
Orders in accordance with written
allocation policies and procedures that
the Advisers will establish, implement
and maintain.12
B. Follow-On Investments
12. Applicants state that from time to
time the Regulated Funds and Affiliated
Funds may have opportunities to make
Follow-On Investments 13 in an issuer in
which a Regulated Fund and one or
more other Regulated Funds and/or
Affiliated Funds previously have
invested.
13. Applicants propose that FollowOn Investments would be divided into
two categories depending on whether
the prior investment was a CoInvestment Transaction or a PreBoarding Investment.14 If the Regulated
Funds and Affiliated Funds have
previously participated in a CoInvestment Transaction with respect to
the issuer, then the terms and approval
of the Follow-On Investment would be
subject to the Standard Review FollowOns described in Condition 8. If the
Regulated Funds and Affiliated Funds
have not previously participated in a
Co-Investment Transaction with respect
to the issuer but hold a Pre-Boarding
Investment, then the terms and approval
of the Follow-On Investment would be
subject to the Enhanced-Review FollowOns described in Condition 9. All
Enhanced Review Follow-Ons require
the approval of the Required Majority.
For a given issuer, the participating
Regulated Funds and Affiliated Funds
need to comply with the requirements
of Enhanced-Review Follow-Ons only
for the first Co-Investment Transaction.
Subsequent Co-Investment Transactions
with respect to the issuer would be
12 The Board of the Regulated Fund will then
either approve or disapprove of the investment
opportunity in accordance with Condition 2, 6, 7,
8 or 9, as applicable.
13 ‘‘Follow-On Investment’’ means an additional
investment in the same issuer, including, but not
limited to, through the exercise of warrants,
conversion privileges or other rights to purchase
securities of the issuer.
14 ‘‘Pre-Boarding Investments’’ are investments in
an issuer held by a Regulated Fund as well as one
or more Affiliated Funds and/or one or more other
Regulated Funds that were acquired prior to
participating in any Co-Investment Transaction: (i)
In transactions in which the only term negotiated
by or on behalf of such funds was price in reliance
on one of the JT No-Action Letters (defined below);
or (ii) in transactions occurring at least 90 days
apart and without coordination between the
Regulated Fund and any Affiliated Fund or other
Regulated Fund.
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governed by the requirements of
Standard Review Follow-Ons.
14. A Regulated Fund would be
permitted to invest in Standard Review
Follow-Ons either with the approval of
the Required Majority under Condition
8(c) or without Board approval under
Condition 8(b) if it is (i) a Pro Rata
Follow-On Investment 15 or (ii) a NonNegotiated Follow-On Investment.16
Applicants believe that these Pro Rata
and Non-Negotiated Follow-On
Investments do not present a significant
opportunity for overreaching on the part
of any Adviser and thus do not warrant
the time or the attention of the Board.
Pro Rata Follow-On Investments and
Non-Negotiated Follow-On Investments
remain subject to the Board’s periodic
review in accordance with Condition
10.
C. Dispositions
15. Applicants propose that
Dispositions 17 would be divided into
two categories. If the Regulated Funds
and Affiliated Funds holding
investments in the issuer have
previously participated in a CoInvestment Transaction with respect to
the issuer, then the terms and approval
of the Disposition would be subject to
the Standard Review Dispositions
described in Condition 6. If the
Regulated Funds and Affiliated Funds
have not previously participated in a
Co-Investment Transaction with respect
to the issuer but hold a Pre-Boarding
Investment, then the terms and approval
of the Disposition would be subject to
the Enhanced Review Dispositions
described in Condition 7. Subsequent
15 A ‘‘Pro Rata Follow-On Investment’’ is a
Follow-On Investment (i) in which the participation
of each Affiliated Fund and each Regulated Fund
is proportionate to its outstanding investments in
the issuer or security, as appropriate, immediately
preceding the Follow-On Investment, and (ii) in the
case of a Regulated Fund, a majority of the Board
has approved the Regulated Fund’s participation in
the pro rata Follow-On Investments as being in the
best interests of the Regulated Fund. The Regulated
Fund’s Board may refuse to approve, or at any time
rescind, suspend or qualify, its approval of Pro Rata
Follow-On Investments, in which case all
subsequent Follow-On Investments will be
submitted to the Regulated Fund’s Eligible Directors
in accordance with Condition 8(c).
16 A ‘‘Non-Negotiated Follow-On Investment’’ is a
Follow-On Investment in which a Regulated Fund
participates together with one or more Affiliated
Funds and/or one or more other Regulated Funds
(i) in which the only term negotiated by or on behalf
of the funds is price and (ii) with respect to which,
if the transaction were considered on its own, the
funds would be entitled to rely on one of the JT NoAction Letters.
‘‘JT No-Action Letters’’ means SMC Capital, Inc.,
SEC No-Action Letter (pub. avail. Sept. 5, 1995) and
Massachusetts Mutual Life Insurance Company,
SEC No-Action Letter (pub. avail. June 7, 2000).
17 ‘‘Disposition’’ means the sale, exchange or
other disposition of an interest in a security of an
issuer.
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Dispositions with respect to the same
issuer would be governed by Condition
6 under the Standard Review
Dispositions.18
16. A Regulated Fund may participate
in a Standard Review Disposition either
with the approval of the Required
Majority under Condition 6(d) or
without Board approval under
Condition 6(c) if (i) the Disposition is a
Pro Rata Disposition 19 or (ii) the
securities are Tradable Securities 20 and
the Disposition meets the other
requirements of Condition 6(c)(ii). Pro
Rata Dispositions and Dispositions of a
Tradable Security remain subject to the
Board’s periodic review in accordance
with Condition 10.
registration rights and any other rights,
so that none of them receives terms
more favorable than any other.
However, the settlement date for an
Affiliated Fund in a Co-Investment
Transaction may occur up to ten
business days after the settlement date
for the Regulated Fund, and vice versa.
Nevertheless, in all cases, (i) the date on
which the commitment of the Affiliated
Funds and Regulated Funds is made
will be the same even where the
settlement date is not and (ii) the
earliest settlement date and the latest
settlement date of any Affiliated Fund
or Regulated Fund participating in the
transaction will occur within ten
business days of each other.
D. Delayed Settlement
17. Applicants represent that under
the terms and Conditions of the
application, all Regulated Funds and
Affiliated Funds participating in a CoInvestment Transaction will invest at
the same time, for the same price and
with the same terms, conditions, class,
E. Holders
18. Under Condition 15, if an Adviser,
its principals, or any person controlling,
controlled by, or under common control
with the Adviser or its principals, and
the Affiliated Funds (collectively, the
‘‘Holders’’) own in the aggregate more
than 25 percent of the outstanding
voting shares of a Regulated Fund (the
‘‘Shares’’), then the Holders will vote
such Shares as directed by an
independent third party when voting on
matters specified in the Condition.
Applicants believe that this Condition
will ensure that the Independent
Directors will act independently in
evaluating Co-Investment Transactions,
because the ability of the Adviser or its
principals to influence the Independent
Directors by a suggestion, explicit or
implied, that the Independent Directors
can be removed will be limited
significantly. The Independent Directors
shall evaluate and approve any
independent party, taking into account
its qualifications, reputation for
independence, cost to the shareholders,
and other factors that they deem
relevant.
18 However, with respect to an issuer, if a
Regulated Fund’s first Co-Investment Transaction is
an Enhanced Review Disposition, and the Regulated
Fund does not dispose of its entire position in the
Enhanced Review Disposition, then before such
Regulated Fund may complete its first Standard
Review Follow-On in such issuer, the Eligible
Directors must review the proposed Follow-On
Investment not only on a stand-alone basis but also
in relation to the total economic exposure in such
issuer (i.e., in combination with the portion of the
Pre-Boarding Investment not disposed of in the
Enhanced Review Disposition), and the other terms
of the investments. This additional review is
required because such findings were not required
in connection with the prior Enhanced Review
Disposition, but they would have been required had
the first Co-Investment Transaction been an
Enhanced Review Follow-On.
19 A ‘‘Pro Rata Disposition’’ is a Disposition (i) in
which the participation of each Affiliated Fund and
each Regulated Fund is proportionate to its
outstanding investment in the security subject to
Disposition immediately preceding the Disposition;
and (ii) in the case of a Regulated Fund, a majority
of the Board has approved the Regulated Fund’s
participation in pro rata Dispositions as being in the
best interests of the Regulated Fund. The Regulated
Fund’s Board may refuse to approve, or at any time
rescind, suspend or qualify, its approval of Pro Rata
Dispositions, in which case all subsequent
Dispositions will be submitted to the Regulated
Fund’s Eligible Directors.
20 ‘‘Tradable Security’’ means a security that
meets the following criteria at the time of
Disposition: (i) It trades on a national securities
exchange or designated offshore securities market
as defined in rule 902(b) under the Securities Act;
(ii) it is not subject to restrictive agreements with
the issuer or other security holders; and (iii) it
trades with sufficient volume and liquidity
(findings as to which are documented by the
Advisers to any Regulated Funds holding
investments in the issuer and retained for the life
of the Regulated Fund) to allow each Regulated
Fund to dispose of its entire position remaining
after the proposed Disposition within a short period
of time not exceeding 30 days at approximately the
value (as defined by section 2(a)(41) of the Act) at
which the Regulated Fund has valued the
investment.
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Applicants’ Legal Analysis
1. Section 17(d) of the Act and rule
17d–1 under the Act prohibit
participation by a registered investment
company and an affiliated person in any
‘‘joint enterprise or other joint
arrangement or profit-sharing plan,’’ as
defined in the rule, without prior
approval by the Commission by order
upon application.
2. Co-Investment Transactions are
prohibited by rule 17d–1 without a prior
exemptive order of the Commission to
the extent that the Affiliated Funds and
the Regulated Funds participating in
such transactions fall within the
category of persons described by rule
17d–1, vis-a`-vis each participating
Regulated Fund. Each of the
participating Regulated Funds and
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541
Affiliated Funds may be deemed to be
affiliated persons vis-a`-vis a Regulated
Fund within the meaning of section
2(a)(3) by reason of common control
because (i) the Adviser manages each of
the Affiliated Funds and may be
deemed to control any Future Regulated
Fund and any Future Affiliated Fund,
and (ii) the Adviser manages the
Company pursuant its investment
advisory agreement. Thus, each of the
Affiliated Funds could be deemed to be
a person related to the Company and the
Future Regulated Funds in a manner
described by rule 17d–1; and therefore
the prohibitions of rule 17d–1 would
apply respectively to prohibit the
Affiliated Funds from participating in
Co-Investment Transactions with the
Regulated Funds. Each Regulated Fund
would also be related to each other
Regulated Fund in a manner described
by rule 17d–1, and thus prohibited from
participating in Co-Investment
Transactions with each other. In
addition, because the Fundrise
Proprietary Accounts are controlled by,
or under common control with, FA and,
therefore, may be under common
control with the Company, any future
Advisers, and any Future Regulated
Funds, the Fundrise Proprietary
Accounts could be prohibited from
participating in the Co-Investment
Program.
3. In passing upon applications under
rule 17d–1, the Commission considers
whether the company’s participation in
the joint transaction is consistent with
the provisions, policies, and purposes of
the Act and the extent to which such
participation is on a basis different from
or less advantageous than that of other
participants.
4. Applicants state that in the absence
of the requested relief, in many
circumstances the Regulated Funds
would be limited in their ability to
participate in attractive and appropriate
investment opportunities. Applicants
state that, as required by rule 17d–1(b),
the Conditions ensure that the terms on
which Co-Investment Transactions may
be made will be consistent with the
participation of the Regulated Funds
being on a basis that it is neither
different from nor less advantageous
than other participants, thus protecting
the equity holders of any participant
from being disadvantaged. Applicants
further state that the Conditions ensure
that all Co-Investment Transactions are
reasonable and fair to the Regulated
Funds and their shareholders and do
not involve overreaching by any person
concerned, including the Advisers.
Applicants state that the Regulated
Funds’ participation in the CoInvestment Transactions in accordance
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with the Conditions will be consistent
with the provisions, policies, and
purposes of the Act and would be done
in a manner that is not different from,
or less advantageous than, that of other
participants.
Applicants’ Conditions
Applicants agree that the Order will
be subject to the following Conditions:
1. Identification and Referral of
Potential Co-Investment Transactions.
(a). The Advisers will establish,
maintain and implement policies and
procedures reasonably designed to
ensure that each Adviser is promptly
notified of all Potential Co-Investment
Transactions that fall within the thencurrent Objectives and Strategies and
Board-Established Criteria of any
Regulated Fund the Adviser manages.
(b). When an Adviser to a Regulated
Fund is notified of a Potential CoInvestment Transaction under
Condition 1(a), the Adviser will make
an independent determination of the
appropriateness of the investment for
the Regulated Fund in light of the
Regulated Fund’s then-current
circumstances.
2. Board Approvals of Co-Investment
Transactions.
(a). If the Adviser deems a Regulated
Fund’s participation in any Potential
Co-Investment Transaction to be
appropriate for the Regulated Fund, it
will then determine an appropriate level
of investment for the Regulated Fund.
(b). If the aggregate amount
recommended by the Advisers to be
invested in the Potential Co-Investment
Transaction by the participating
Regulated Funds and any participating
Affiliated Funds, collectively, exceeds
the amount of the investment
opportunity, the investment opportunity
will be allocated among them pro rata
based on the size of the Internal Orders,
as described in section III.A.1.b. of the
application. Each Adviser to a
participating Regulated Fund will
promptly notify and provide the Eligible
Directors with information concerning
the Affiliated Funds’ and Regulated
Funds’ order sizes to assist the Eligible
Directors with their review of the
applicable Regulated Fund’s
investments for compliance with these
Conditions.
(c). After making the determinations
required in Condition 1(b) above, each
Adviser to a participating Regulated
Fund will distribute written information
concerning the Potential Co-Investment
Transaction (including the amount
proposed to be invested by each
participating Regulated Fund and each
participating Affiliated Fund) to the
Eligible Directors of its participating
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Regulated Fund(s) for their
consideration. A Regulated Fund will
enter into a Co-Investment Transaction
with one or more other Regulated Funds
or Affiliated Funds only if, prior to the
Regulated Fund’s participation in the
Potential Co-Investment Transaction, a
Required Majority concludes that:
(i). The terms of the transaction,
including the consideration to be paid,
are reasonable and fair to the Regulated
Fund and its equity holders and do not
involve overreaching in respect of the
Regulated Fund or its equity holders on
the part of any person concerned;
(ii). the transaction is consistent with:
(A). The interests of the Regulated
Fund’s equity holders; and
(B). the Regulated Fund’s then-current
Objectives and Strategies;
(iii). the investment by any other
Regulated Fund(s) or Affiliated Fund(s)
would not disadvantage the Regulated
Fund, and participation by the
Regulated Fund would not be on a basis
different from, or less advantageous
than, that of any other Regulated
Fund(s) or Affiliated Fund(s)
participating in the transaction;
provided that the Required Majority
shall not be prohibited from reaching
the conclusions required by this
Condition 2(c)(iii) if:
(A). The settlement date for another
Regulated Fund or an Affiliated Fund in
a Co-Investment Transaction is later
than the settlement date for the
Regulated Fund by no more than ten
business days or earlier than the
settlement date for the Regulated Fund
by no more than ten business days, in
either case, so long as: (x) The date on
which the commitment of the Affiliated
Funds and Regulated Funds is made is
the same; and (y) the earliest settlement
date and the latest settlement date of
any Affiliated Fund or Regulated Fund
participating in the transaction will
occur within ten business days of each
other; or
(B). any other Regulated Fund or
Affiliated Fund, but not the Regulated
Fund itself, gains the right to nominate
a director for election to a portfolio
company’s board of directors, the right
to have a board observer or any similar
right to participate in the governance or
management of the portfolio company
so long as: (x) The Eligible Directors will
have the right to ratify the selection of
such director or board observer, if any;
(y) the Adviser agrees to, and does,
provide periodic reports to the
Regulated Fund’s Board with respect to
the actions of such director or the
information received by such board
observer or obtained through the
exercise of any similar right to
participate in the governance or
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management of the portfolio company;
and (z) any fees or other compensation
that any other Regulated Fund or
Affiliated Fund or any affiliated person
of any other Regulated Fund or
Affiliated Fund receives in connection
with the right of one or more Regulated
Funds or Affiliated Funds to nominate
a director or appoint a board observer or
otherwise to participate in the
governance or management of the
portfolio company will be shared
proportionately among any participating
Affiliated Funds (who may, in turn,
share their portion with their affiliated
persons) and any participating
Regulated Fund(s) in accordance with
the amount of each such party’s
investment; and
(iv). the proposed investment by the
Regulated Fund will not involve
compensation, remuneration or a direct
or indirect 21 financial benefit to the
Advisers, any other Regulated Fund, the
Affiliated Funds or any affiliated person
of any of them (other than the parties to
the Co-Investment Transaction), except
(A) to the extent permitted by Condition
14, (B) to the extent permitted by
Section 17 (e), (C) indirectly, as a result
of an interest in the securities issued by
one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or
other compensation described in
Condition 2(c)(iii)(B)(z).
3. Right to Decline. Each Regulated
Fund has the right to decline to
participate in any Potential CoInvestment Transaction or to invest less
than the amount proposed.
4. General Limitation. Except for
Follow-On Investments made in
accordance with Conditions 8 and 9
below,22 a Regulated Fund will not
invest in reliance on the Order in any
issuer in which a Related Party has an
investment.23
21 For example, procuring the Regulated Fund’s
investment in a Potential Co-Investment
Transaction to permit an affiliate to complete or
obtain better terms in a separate transaction would
constitute an indirect financial benefit.
22 This exception applies only to Follow-On
Investments by a Regulated Fund in issuers in
which that Regulated Fund already holds
investments.
23 ‘‘Related Party’’ means (i) any Close Affiliate
and (ii) in respect of matters as to which any
Adviser has knowledge, any Remote Affiliate.
‘‘Close Affiliate’’ means the Advisers, the
Regulated Funds, the Affiliated Funds and any
other person described in section 57(b) (after giving
effect to rule 57b–1) in respect of any Regulated
Fund (treating any registered investment company
or series thereof as a BDC for this purpose) except
for limited partners included solely by reason of the
reference in section 57(b) to section 2(a)(3)(D).
‘‘Remote Affiliate’’ means any person described
in section 57(e) in respect of any Regulated Fund
(treating any registered investment company or
series thereof as a BDC for this purpose) and any
limited partner holding 5% or more of the relevant
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5. Same Terms and Conditions. A
Regulated Fund will not participate in
any Potential Co-Investment
Transaction unless (i) the terms,
conditions, price, class of securities to
be purchased, date on which the
commitment is entered into and
registration rights (if any) will be the
same for each participating Regulated
Fund and Affiliated Fund and (ii) the
earliest settlement date and the latest
settlement date of any participating
Regulated Fund or Affiliated Fund will
occur as close in time as practicable and
in no event more than ten business days
apart. The grant to one or more
Regulated Funds or Affiliated Funds,
but not the respective Regulated Fund,
of the right to nominate a director for
election to a portfolio company’s board
of directors, the right to have an
observer on the board of directors or
similar rights to participate in the
governance or management of the
portfolio company will not be
interpreted so as to violate this
Condition 5, if Condition 2(c)(iii)(B) is
met.
6. Standard Review Dispositions.
(a). General. If any Regulated Fund or
Affiliated Fund elects to sell, exchange
or otherwise dispose of an interest in a
security and one or more Regulated
Funds and Affiliated Funds have
previously participated in a CoInvestment Transaction with respect to
the issuer, then:
(i). The Adviser to such Regulated
Fund or Affiliated Fund 24 will notify
each Regulated Fund that holds an
investment in the issuer of the proposed
Disposition at the earliest practical time;
and
(ii). the Adviser to each Regulated
Fund that holds an investment in the
issuer will formulate a recommendation
as to participation by such Regulated
Fund in the Disposition.
(b). Same Terms and Conditions. Each
Regulated Fund will have the right to
participate in such Disposition on a
proportionate basis, at the same price
and on the same terms and conditions
as those applicable to the Affiliated
Funds and any other Regulated Fund.
(c). No Board Approval Required. A
Regulated Fund may participate in such
a Disposition without obtaining prior
approval of the Required Majority if:
(i). (A) The participation of each
Regulated Fund and Affiliated Fund in
such Disposition is proportionate to its
then-current holding of the security (or
limited partner interests that would be a Close
Affiliate but for the exclusion in that definition.
24 Any Fundrise Proprietary Account that is not
advised by an Adviser is itself deemed to be an
Adviser for purposes of Conditions 6(a)(i), 7(a)(i),
8(a)(i) and 9(a)(i).
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securities) of the issuer that is (or are)
the subject of the Disposition; 25 (B) the
Board of the Regulated Fund has
approved as being in the best interests
of the Regulated Fund the ability to
participate in such Dispositions on a pro
rata basis (as described in greater detail
in the application); and (C) the Board of
the Regulated Fund is provided on a
quarterly basis with a list of all
Dispositions made in accordance with
this Condition; or
(ii). each security is a Tradable
Security and (A) the Disposition is not
to the issuer or any affiliated person of
the issuer; and (B) the security is sold
for cash in a transaction in which the
only term negotiated by or on behalf of
the participating Regulated Funds and
Affiliated Funds is price.
(d). Standard Board Approval. In all
other cases, the Adviser will provide its
written recommendation as to the
Regulated Fund’s participation to the
Eligible Directors and the Regulated
Fund will participate in such
Disposition solely to the extent that a
Required Majority determines that it is
in the Regulated Fund’s best interests.
7. Enhanced Review Dispositions.
(a). General. If any Regulated Fund or
Affiliated Fund elects to sell, exchange
or otherwise dispose of a Pre-Boarding
Investment in a Potential Co-Investment
Transaction and the Regulated Funds
and Affiliated Funds have not
previously participated in a CoInvestment Transaction with respect to
the issuer:
(i). The Adviser to such Regulated
Fund or Affiliated Fund will notify each
Regulated Fund that holds an
investment in the issuer of the proposed
Disposition at the earliest practical time;
(ii). the Adviser to each Regulated
Fund that holds an investment in the
issuer will formulate a recommendation
as to participation by such Regulated
Fund in the Disposition; and
(iii). the Advisers will provide to the
Board of each Regulated Fund that
holds an investment in the issuer all
information relating to the existing
investments in the issuer of the
Regulated Funds and Affiliated Funds,
including the terms of such investments
and how they were made, that is
necessary for the Required Majority to
make the findings required by this
Condition.
(b). Enhanced Board Approval. The
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
25 In the case of any Disposition, proportionality
will be measured by each participating Regulated
Fund’s and Affiliated Fund’s outstanding
investment in the security in question immediately
preceding the Disposition.
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543
Directors, and the Regulated Fund will
participate in such Disposition solely to
the extent that a Required Majority
determines that:
(i). The Disposition complies with
Condition 2(c)(i), (ii), (iii)(A), and (iv);
and
(ii). the making and holding of the
Pre-Boarding Investments were not
prohibited by Rule 17d–1 and records
the basis for the finding in the Board
minutes.
(c). Additional Requirements: The
Disposition may only be completed in
reliance on the Order if:
(i). Same Terms and Conditions. Each
Regulated Fund has the right to
participate in such Disposition on a
proportionate basis, at the same price
and on the same terms and Conditions
as those applicable to the Affiliated
Funds and any other Regulated Fund;
(ii). Original Investments. All of the
Affiliated Funds’ and Regulated Funds’
investments in the issuer are PreBoarding Investments;
(iii). Advice of counsel. Independent
counsel to the Board advises that the
making and holding of the investments
in the Pre-Boarding Investments were
not prohibited by Rule 17d–1.
(iv). Multiple Classes of Securities. All
Regulated Funds and Affiliated Funds
that hold Pre-Boarding Investments in
the issuer immediately before the time
of completion of the Co-Investment
Transaction hold the same security or
securities of the issuer. For the purpose
of determining whether the Regulated
Funds and Affiliated Funds hold the
same security or securities, they may
disregard any security held by some but
not all of them if, prior to relying on the
Order, the Required Majority is
presented with all information
necessary to make a finding, and finds,
that: (x) Any Regulated Fund’s or
Affiliated Fund’s holding of a different
class of securities (including for this
purpose a security with a different
maturity date) is immaterial 26 in
amount, including immaterial relative to
the size of the issuer; and (y) the Board
records the basis for any such finding in
its minutes. In addition, securities that
differ only in respect of issuance date,
currency, or denominations may be
treated as the same security; and
(v). No control. The Affiliated Funds,
the other Regulated Funds and their
26 In determining whether a holding is
‘‘immaterial’’ for purposes of the Order, the
Required Majority will consider whether the nature
and extent of the interest in the transaction or
arrangement is sufficiently small that a reasonable
person would not believe that the interest affected
the determination of whether to enter into the
transaction or arrangement or the terms of the
transaction or arrangement.
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affiliated persons (within the meaning
of Section 2(a)(3)(C) of the Act),
individually or in the aggregate, do not
control the issuer of the securities
(within the meaning of Section 2(a)(9) of
the Act).
8. Standard Review Follow-Ons.
(a). General. If any Regulated Fund or
Affiliated Fund desires to make a
Follow-On Investment in an issuer and
the Regulated Funds and Affiliated
Funds holding investments in the issuer
previously participated in a CoInvestment Transaction with respect to
the issuer:
(i). The Adviser to each such
Regulated Fund or Affiliated Fund will
notify each Regulated Fund that holds
securities of the portfolio company of
the proposed transaction at the earliest
practical time; and
(ii). the Adviser to each Regulated
Fund that holds an investment in the
issuer will formulate a recommendation
as to the proposed participation,
including the amount of the proposed
investment, by such Regulated Fund.
(b). No Board Approval Required. A
Regulated Fund may participate in the
Follow-On Investment without
obtaining prior approval of the Required
Majority if:
(i). (A) The proposed participation of
each Regulated Fund and each
Affiliated Fund in such investment is
proportionate to its outstanding
investments in the issuer or the security
at issue, as appropriate,27 immediately
preceding the Follow-On Investment;
and (B) the Board of the Regulated Fund
has approved as being in the best
interests of the Regulated Fund the
ability to participate in Follow-On
Investments on a pro rata basis (as
described in greater detail in the
application); or
(ii). it is a Non-Negotiated Follow-On
Investment.
(c). Standard Board Approval. In all
other cases, the Adviser will provide its
written recommendation as to the
Regulated Fund’s participation to the
Eligible Directors and the Regulated
27 To the extent that a Follow-On Investment
opportunity is in a security or arises in respect of
a security held by the participating Regulated
Funds and Affiliated Funds, proportionality will be
measured by each participating Regulated Fund’s
and Affiliated Fund’s outstanding investment in the
security in question immediately preceding the
Follow-On Investment using the most recent
available valuation thereof. To the extent that a
Follow-On Investment opportunity relates to an
opportunity to invest in a security that is not in
respect of any security held by any of the
participating Regulated Funds or Affiliated Funds,
proportionality will be measured by each
participating Regulated Fund’s and Affiliated
Fund’s outstanding investment in the issuer
immediately preceding the Follow-On Investment
using the most recent available valuation thereof.
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Fund will participate in such Follow-On
Investment solely to the extent that a
Required Majority makes the
determinations set forth in Condition
2(c). If the only previous Co-Investment
Transaction with respect to the issuer
was an Enhanced Review Disposition
the Eligible Directors must complete
this review of the proposed Follow-On
Investment both on a stand-alone basis
and together with the Pre-Boarding
Investments in relation to the total
economic exposure and other terms of
the investment.
(d). Allocation. If, with respect to any
such Follow-On Investment:
(i). The amount of the opportunity
proposed to be made available to any
Regulated Fund is not based on the
Regulated Funds’ and the Affiliated
Funds’ outstanding investments in the
issuer or the security at issue, as
appropriate, immediately preceding the
Follow-On Investment; and
(ii). the aggregate amount
recommended by the Advisers to be
invested in the Follow-On Investment
by the participating Regulated Funds
and any participating Affiliated Funds,
collectively, exceeds the amount of the
investment opportunity, then the
Follow-On Investment opportunity will
be allocated among them pro rata based
on the size of the Internal Orders, as
described in section III.A.1.b. of the
application.
(e). Other Conditions. The acquisition
of Follow-On Investments as permitted
by this Condition will be considered a
Co-Investment Transaction for all
purposes and subject to the other
Conditions set forth in the application.
9. Enhanced Review Follow-Ons.
(a). General. If any Regulated Fund or
Affiliated Fund desires to make a
Follow-On Investment in an issuer that
is a Potential Co-Investment Transaction
and the Regulated Funds and Affiliated
Funds holding investments in the issuer
have not previously participated in a
Co-Investment Transaction with respect
to the issuer:
(i). The Adviser to each such
Regulated Fund or Affiliated Fund will
notify each Regulated Fund that holds
securities of the portfolio company of
the proposed transaction at the earliest
practical time;
(ii). the Adviser to each Regulated
Fund that holds an investment in the
issuer will formulate a recommendation
as to the proposed participation,
including the amount of the proposed
investment, by such Regulated Fund;
and
(iii). the Advisers will provide to the
Board of each Regulated Fund that
holds an investment in the issuer all
information relating to the existing
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investments in the issuer of the
Regulated Funds and Affiliated Funds,
including the terms of such investments
and how they were made, that is
necessary for the Required Majority to
make the findings required by this
Condition.
(b). Enhanced Board Approval. The
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such Follow-On
Investment solely to the extent that a
Required Majority reviews the proposed
Follow-On Investment both on a standalone basis and together with the PreBoarding Investments in relation to the
total economic exposure and other
terms and makes the determinations set
forth in Condition 2(c). In addition, the
Follow-On Investment may only be
completed in reliance on the Order if
the Required Majority of each
participating Regulated Fund
determines that the making and holding
of the Pre-Boarding Investments were
not prohibited by Rule 17d–1. The basis
for the Board’s findings will be recorded
in its minutes.
(c). Additional Requirements. The
Follow-On Investment may only be
completed in reliance on the Order if:
(i). Original Investments. All of the
Affiliated Funds’ and Regulated Funds’
investments in the issuer are PreBoarding Investments;
(ii). Advice of counsel. Independent
counsel to the Board advises that the
making and holding of the investments
in the Pre-Boarding Investments were
not prohibited by Rule 17d–1;
(iii). Multiple Classes of Securities.
All Regulated Funds and Affiliated
Funds that hold Pre-Boarding
Investments in the issuer immediately
before the time of completion of the CoInvestment Transaction hold the same
security or securities of the issuer. For
the purpose of determining whether the
Regulated Funds and Affiliated Funds
hold the same security or securities,
they may disregard any security held by
some but not all of them if, prior to
relying on the Order, the Required
Majority is presented with all
information necessary to make a
finding, and finds, that: (x) Any
Regulated Fund’s or Affiliated Fund’s
holding of a different class of securities
(including for this purpose a security
with a different maturity date) is
immaterial in amount, including
immaterial relative to the size of the
issuer; and (y) the Board records the
basis for any such finding in its
minutes. In addition, securities that
differ only in respect of issuance date,
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currency, or denominations may be
treated as the same security; and
(iv). No control. The Affiliated Funds,
the other Regulated Funds and their
affiliated persons (within the meaning
of Section 2(a)(3)(C) of the Act),
individually or in the aggregate, do not
control the issuer of the securities
(within the meaning of Section 2(a)(9) of
the Act).
(d). Allocation. If, with respect to any
such Follow-On Investment:
(i). The amount of the opportunity
proposed to be made available to any
Regulated Fund is not based on the
Regulated Funds’ and the Affiliated
Funds’ outstanding investments in the
issuer or the security at issue, as
appropriate, immediately preceding the
Follow-On Investment; and
(ii). the aggregate amount
recommended by the Advisers to be
invested in the Follow-On Investment
by the participating Regulated Funds
and any participating Affiliated Funds,
collectively, exceeds the amount of the
investment opportunity, then the
Follow-On Investment opportunity will
be allocated among them pro rata based
on the size of the Internal Orders, as
described in section III.A.1.b. of the
application.
(e). Other Conditions. The acquisition
of Follow-On Investments as permitted
by this Condition will be considered a
Co-Investment Transaction for all
purposes and subject to the other
Conditions set forth in the application.
10. Board Reporting, Compliance and
Annual Re-Approval.
(a). Each Adviser to a Regulated Fund
will present to the Board of each
Regulated Fund, on a quarterly basis,
and at such other times as the Board
may request, (i) a record of all
investments in Potential Co-Investment
Transactions made by any of the other
Regulated Funds or any of the Affiliated
Funds during the preceding quarter that
fell within the Regulated Fund’s thencurrent Objectives and Strategies and
Board-Established Criteria that were not
made available to the Regulated Fund,
and an explanation of why such
investment opportunities were not made
available to the Regulated Fund; (ii) a
record of all Follow-On Investments in
and Dispositions of investments in any
issuer in which the Regulated Fund
holds any investments by any Affiliated
Fund or other Regulated Fund during
the prior quarter; and (iii) all
information concerning Potential CoInvestment Transactions and CoInvestment Transactions, including
investments made by other Regulated
Funds or Affiliated Funds that the
Regulated Fund considered but declined
to participate in, so that the
VerDate Sep<11>2014
17:53 Jan 03, 2020
Jkt 250001
Independent Directors, may determine
whether all Potential Co-Investment
Transactions and Co-Investment
Transactions during the preceding
quarter, including those investments
that the Regulated Fund considered but
declined to participate in, comply with
the Conditions.
(b). All information presented to the
Regulated Fund’s Board pursuant to this
Condition will be kept for the life of the
Regulated Fund and at least two years
thereafter, and will be subject to
examination by the Commission and its
staff.
(c). Each Regulated Fund’s chief
compliance officer, as defined in rule
38a–1(a)(4), will prepare an annual
report for its Board each year that
evaluates (and documents the basis of
that evaluation) the Regulated Fund’s
compliance with the terms and
Conditions of the application and the
procedures established to achieve such
compliance.
(d). The Independent Directors will
consider at least annually whether
continued participation in new and
existing Co-Investment Transactions is
in the Regulated Fund’s best interests.
11. Record Keeping. Each Regulated
Fund will maintain the records required
by Section 57(f)(3) of the Act as if each
of the Regulated Funds were a BDC and
each of the investments permitted under
these Conditions were approved by the
Required Majority under Section 57(f).
12. Director Independence. No
Independent Director of a Regulated
Fund will also be a director, general
partner, managing member or principal,
or otherwise be an ‘‘affiliated person’’
(as defined in the Act) of any Affiliated
Fund.
13. Expenses. The expenses, if any,
associated with acquiring, holding or
disposing of any securities acquired in
a Co-Investment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the Securities
Act) will, to the extent not payable by
the Advisers under their respective
advisory agreements with the Regulated
Funds and the Affiliated Funds, be
shared by the Regulated Funds and the
participating Affiliated Funds in
proportion to the relative amounts of the
securities held or being acquired or
disposed of, as the case may be.
14. Transaction Fees.28 Any
transaction fee (including break-up,
structuring, monitoring or commitment
fees but excluding brokerage or
28 Applicants are not requesting and the
Commission is not providing any relief for
transaction fees received in connection with any
Co-Investment Transaction.
PO 00000
Frm 00053
Fmt 4703
Sfmt 4703
545
underwriting compensation permitted
by Section 17(e) received in connection
with any Co-Investment Transaction
will be distributed to the participants on
a pro rata basis based on the amounts
they invested or committed, as the case
may be, in such Co-Investment
Transaction. If any transaction fee is to
be held by an Adviser pending
consummation of the transaction, the
fee will be deposited into an account
maintained by an Adviser at a bank or
banks having the qualifications
prescribed in Section 26(a)(1), and the
account will earn a competitive rate of
interest that will also be divided pro
rata among the participants. None of the
Adviser, the Affiliated Funds, the other
Regulated Funds or any affiliated person
of the Affiliated Funds or the Regulated
Funds will receive any additional
compensation or remuneration of any
kind as a result of or in connection with
a Co-Investment Transaction other than
(i) in the case of the Regulated Funds
and the Affiliated Funds, the pro rata
transaction fees described above and
fees or other compensation described in
Condition 2(c)(iii)(B)(z), (ii) brokerage or
underwriting compensation permitted
by Section 17(e) or (iii) in the case of the
Adviser, investment advisory
compensation paid in accordance with
investment advisory agreements
between the applicable Regulated
Fund(s) or Affiliated Fund(s) and its
Adviser.
15. Independence. If the Holders own
in the aggregate more than 25 percent of
the Shares of a Regulated Fund, then the
Holders will vote such Shares as
directed by an independent third party
when voting on (1) the election of
directors; (2) the removal of one or more
directors; or (3) any other matter under
either the Act or applicable State law
affecting the Board’s composition, size
or manner of election.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–28491 Filed 1–3–20; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16240 and #16241;
TEXAS Disaster Number TX–00537]
Administrative Declaration of a
Disaster for the State of Texas
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
E:\FR\FM\06JAN1.SGM
06JAN1
]]>Agencies
[Federal Register Volume 85, Number 3 (Monday, January 6, 2020)]
[Notices]
[Pages 538-545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28491]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33739; 812-15040]
Fundrise Real Estate Interval Fund, LLC, et al.
December 31, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of application for an order (``Order'') under section 17(d)
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1
under the Act to permit certain joint transactions otherwise prohibited
by section 17(d) of the Act and rule 17d-1 under the Act.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE, Washington, DC 20549-1090. Applicants: 11 Dupont Circle NW,
9th Floor, Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
202-551-6817, or Kaitlin C. Bottock, Branch Chief, at (202) 551-6825
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION:
Summary of Application: Applicants request an order to permit certain
closed-end management investment companies to co-invest in portfolio
companies with each other and with affiliated investment funds and
accounts.
Applicants: Fundrise Real Estate Interval Fund, LLC (the ``Company''),
Fundrise Real Estate Investment Trust, LLC, Fundrise Equity REIT, LLC,
Fundrise Income eREIT II, LLC, Fundrise Income eREIT III, LLC, Fundrise
Income eREIT 2019, LLC, Fundrise Growth eREIT II, LLC, Fundrise Growth
eREIT III, LLC, Fundrise Growth eREIT 2019, LLC, Fundrise Midland
Opportunistic REIT, LLC, Fundrise West Coast Opportunistic REIT, LLC,
Fundrise East Coast Opportunistic REIT, LLC, Fundrise For-Sale Housing
eFUND--Los Angeles CA, LLC, Fundrise For-Sale Housing eFUND--Washington
DC, LLC, Fundrise National For-Sale Housing eFund, LLC, Fundrise
Opportunity Fund, LP, (the ``Existing Affiliated Funds''), Fundrise
Advisors, LLC (``FA'') and Fundrise Lending LLC.
Filing Dates: The application was filed on June 11, 2019, and amended
on September 4, 2019, and November 26, 2019.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on January 24, 2020, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.
The following is a summary of the application. The complete
application may be obtained via the Commission's website by searching
for the file number, or for an applicant using the Company name box, at
https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Introduction
1. The applicants request an order of the Commission under section
17(d) of the Act and rule 17d-1 under the Act to permit, subject to the
terms and conditions set forth in the application (the ``Conditions''),
one or more Regulated Funds \1\ and/or one or more
[[Page 539]]
Affiliated Funds \2\ to enter into Co-Investment Transactions with each
other. ``Co-Investment Transaction'' means any transaction in which one
or more Regulated Funds (or its Wholly-Owned Investment Sub (defined
below) participated together with one or more Affiliated Funds and/or
one or more other Regulated Funds in reliance on the Order. ``Potential
Co-Investment Transaction'' means any investment opportunity in which a
Regulated Fund (or its Wholly-Owned Investment Sub) could not
participate together with one or more Affiliated Funds and/or one or
more other Regulated Funds without obtaining and relying on the
Order.\3\
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\1\ ``Regulated Funds'' means the Company and the Future
Regulated Funds. ``Future Regulated Fund'' means a closed-end
management investment company (a) that is registered under the Act,
(b) whose investment adviser is an Adviser, and (c) that intends to
participate in the proposed co-investment program (the ``Co-
Investment Program'').
``Adviser'' means FA together with any future investment
adviser that (i) controls, is controlled by or is under common
control with FA, (ii) is registered as an investment adviser under
the Investment Advisers Act of 1940 (the ``Advisers Act'') and (iii)
is not a Regulated Fund or a subsidiary of a Regulated Fund.
\2\ ``Affiliated Fund'' means any Existing Affiliated Fund, any
Future Affiliated Fund or any Fundrise Proprietary Account. ``Future
Affiliated Fund'' means any entity (a) whose investment adviser is
an Adviser, (b) (i) that would be an investment company but for
Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act or (ii) that does
not meet the definition of investment company under the Act and
qualifies as a real estate investment company (``REIT'') within the
meaning of Section 856 of the Internal Revenue Code (``Code'')
because substantially all of its assets would consist of real
properties, and (c) that intends to participate in the Co-Investment
Program. ``Fundrise Proprietary Account'' means Fundrise Lending
LLC, and any direct or indirect, wholly- or majority-owned
subsidiary of FA that is formed in the future that, from time to
time, may hold various financial assets in a principal capacity.
\3\ All existing entities that currently intend to rely on the
Order have been named as applicants and any existing or future
entities that may rely on the Order in the future will comply with
the terms and Conditions set forth in the application.
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Applicants
2. The Company is a Delaware limited liability company organized as
a non-diversified closed-end management investment company that
operates as an interval fund pursuant to rule 23c3 under the Act. The
Company has elected to be treated as a REIT under Sub-Chapter M of the
Code, and intends to continue to maintain its qualification as a REIT
in the future. The Company is managed by a Board \4\ currently
comprised of four persons, three of whom are Independent Directors.\5\
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\4\ ``Board'' means the board of directors (or the equivalent)
of the applicable Regulated Fund.
\5\ ``Independent Director'' means a member of the Board of any
relevant entity who is not an ``interested person'' as defined in
section 2(a)(19) of the Act. No Independent Director of a Regulated
Fund will have a financial interest in any Co-Investment
Transaction, other than indirectly through share ownership in one of
the Regulated Funds.
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3. FA, a Delaware limited liability company that is registered
under the Advisers Act, serves as the investment adviser to the Company
pursuant to an investment advisory agreement. FA also serves as
investment adviser to each Existing Affiliated Fund.
4. Fundrise Lending LLC, an affiliate under common control with FA,
holds various financial assets in a principal capacity. Fundrise
Lending, LLC also originates real estate loans.
5. Applicants represent that each Existing Affiliated Fund is a
separate and distinct legal entity and each of which (i) would be an
investment company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of
the Act, or (ii) does not meet the definition of investment company
under the Act and qualifies as a REIT within the meaning of Section 856
of the Code because substantially all of its assets would consist of
real properties.
6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\6\ Such a subsidiary may
be prohibited from investing in a Co-Investment Transaction with a
Regulated Fund (other than its parent) or any Affiliated Fund because
it would be a company controlled by its parent Regulated Fund for
purposes of rule 17d-1. Applicants request that each Wholly-Owned
Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of the Regulated Fund that owns it and that the
Wholly-Owned Investment Sub's participation in any such transaction be
treated, for purposes of the Order, as though the parent Regulated Fund
were participating directly.
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\6\ ``Wholly-Owned Investment Sub'' means an entity (i) that is
a wholly-owned subsidiary of a Regulated Fund (with such Regulated
Fund at all times holding, beneficially and of record, 100% of the
voting and economic interests); (ii) whose sole business purpose is
to hold one or more investments on behalf of such Regulated Fund;
(iii) with respect to which such Regulated Fund's Board has the sole
authority to make all determinations with respect to the entity's
participation under the Conditions to the application; and (iv) (A)
would be an investment company but for Section 3(c)(1), 3(c)(5)(C),
or 3(c)(7) of the Act, or (B) qualifies as a REIT within the meaning
of Section 856 of the Code because substantially all of its assets
would consist of real properties.
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Applicants' Representations
A. Allocation Process
7. Applicants represent that FA has established processes for
allocating initial investment opportunities, opportunities for
subsequent investments in an issuer and dispositions of securities
holdings reasonably designed to treat all clients fairly and equitably.
Further, applicants represent that these processes will be extended and
modified in a manner reasonably designed to ensure that the additional
transactions permitted under the Order will both (i) be fair and
equitable to the Regulated Funds and the Affiliated Funds and (ii)
comply with the Conditions.
8. If the requested Order is granted, the Adviser will establish,
maintain and implement policies and procedures reasonably designed to
ensure that when such opportunities arise, the Adviser to the relevant
Regulated Funds is promptly notified and receives the same information
about the opportunity as any other Adviser considering the opportunity
for its clients. In particular, consistent with Condition 1, if a
Potential Co-Investment Transaction falls within the then-current
Objectives and Strategies \7\ and any Board-Established Criteria \8\ of
a Regulated Fund, the policies and procedures will require that the
Adviser to such Regulated Fund receive sufficient information to allow
such Adviser's investment committee to make its independent
determination and recommendations under the Conditions.
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\7\ ``Objectives and Strategies'' means a Regulated Fund's
investment objectives and strategies, as described in its most
current registration statement on Form N-2, other current filings
with the Commission under the Securities Act of 1933 (the
``Securities Act'') or under the Securities Exchange Act of 1934, as
amended, and its most current report to stockholders.
\8\ ``Board-Established Criteria'' means criteria that the Board
of a Regulated Fund may establish from time to time to describe the
characteristics of Potential Co-Investment Transactions regarding
which the Adviser to such Regulated Fund should be notified under
Condition 1. The Board-Established Criteria will be consistent with
the Regulated Fund's Objectives and Strategies. If no Board-
Established Criteria are in effect, then the Regulated Fund's
Adviser will be notified of all Potential Co-Investment Transactions
that fall within the Regulated Fund's then-current Objectives and
Strategies. Board-Established Criteria will be objective and
testable, meaning that they will be based on observable information,
such as industry/sector of the issuer, minimum EBITDA of the issuer,
asset class of the investment opportunity or required commitment
size, and not on characteristics that involve a discretionary
assessment. The Adviser to the Regulated Fund may from time to time
recommend criteria for the Board's consideration, but Board-
Established Criteria will only become effective if approved by a
majority of the Independent Directors. The Independent Directors of
a Regulated Fund may at any time rescind, suspend or qualify its
approval of any Board-Established Criteria, though Applicants
anticipate that, under normal circumstances, the Board would not
modify these criteria more often than quarterly.
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9. The Adviser to each applicable Regulated Fund will then make an
independent determination of the appropriateness of the investment for
the Regulated Fund in light of the Regulated Fund's then-current
circumstances. If the Adviser to a Regulated Fund deems the Regulated
Fund's participation in any Potential
[[Page 540]]
Co-Investment Transaction to be appropriate, then it will formulate a
recommendation regarding the proposed order amount for the Regulated
Fund.
10. Applicants state that, for each Regulated Fund and Affiliated
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, such Adviser's investment committee will
approve an investment amount to be allocated to each Regulated Fund
and/or Affiliated Fund participating in the Potential Co-Investment
Transaction. Applicants state further that, each proposed order amount
may be reviewed and adjusted, in accordance with the Adviser's written
allocation policies and procedures, by the Adviser's investment
committee.\9\ The order of a Regulated Fund or Affiliated Fund
resulting from this process is referred to as its ``Internal Order.''
The Internal Order will be submitted for approval by the Required
Majority of any participating Regulated Funds in accordance with the
Conditions.\10\
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\9\ The reason for any such adjustment to a proposed order
amount will be documented in writing and preserved in the records of
each Adviser.
\10\ ``Required Majority'' means a required majority, as defined
in section 57(o) of the Act. Although each Regulated Fund will be a
registered closed-end fund, the Board members that make up the
Required Majority will be determined as if the Regulated Fund were a
business development company subject to section 57(o) (``BDC'').
---------------------------------------------------------------------------
11. If the aggregate Internal Orders for a Potential Co-Investment
Transaction do not exceed the size of the investment opportunity
immediately prior to the submission of the orders to the underwriter,
broker, dealer or issuer, as applicable (the ``External Submission''),
then each Internal Order will be fulfilled as placed. If, on the other
hand, the aggregate Internal Orders for a Potential Co-Investment
Transaction exceed the size of the investment opportunity immediately
prior to the External Submission, then the allocation of the
opportunity will be made pro rata on the basis of the size of the
Internal Orders.\11\ If, subsequent to such External Submission, the
size of the opportunity is increased or decreased, or if the terms of
such opportunity, or the facts and circumstances applicable to the
Regulated Funds' or the Affiliated Funds' consideration of the
opportunity, change, the participants will be permitted to submit
revised Internal Orders in accordance with written allocation policies
and procedures that the Advisers will establish, implement and
maintain.\12\
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\11\ The Advisers will maintain records of all proposed order
amounts, Internal Orders and External Submissions in conjunction
with Potential Co-Investment Transactions. Each applicable Adviser
will provide the Eligible Directors with information concerning the
Affiliated Funds' and Regulated Funds' order sizes to assist the
Eligible Directors with their review of the applicable Regulated
Fund's investments for compliance with the Conditions. ``Eligible
Directors'' means, with respect to a Regulated Fund and a Potential
Co-Investment Transaction, the members of the Regulated Fund's Board
eligible to vote on that Potential Co-Investment Transaction as if
the Regulated Fund were a BDC subject to section 57(o) of the Act.
\12\ The Board of the Regulated Fund will then either approve or
disapprove of the investment opportunity in accordance with
Condition 2, 6, 7, 8 or 9, as applicable.
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B. Follow-On Investments
12. Applicants state that from time to time the Regulated Funds and
Affiliated Funds may have opportunities to make Follow-On Investments
\13\ in an issuer in which a Regulated Fund and one or more other
Regulated Funds and/or Affiliated Funds previously have invested.
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\13\ ``Follow-On Investment'' means an additional investment in
the same issuer, including, but not limited to, through the exercise
of warrants, conversion privileges or other rights to purchase
securities of the issuer.
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13. Applicants propose that Follow-On Investments would be divided
into two categories depending on whether the prior investment was a Co-
Investment Transaction or a Pre-Boarding Investment.\14\ If the
Regulated Funds and Affiliated Funds have previously participated in a
Co-Investment Transaction with respect to the issuer, then the terms
and approval of the Follow-On Investment would be subject to the
Standard Review Follow-Ons described in Condition 8. If the Regulated
Funds and Affiliated Funds have not previously participated in a Co-
Investment Transaction with respect to the issuer but hold a Pre-
Boarding Investment, then the terms and approval of the Follow-On
Investment would be subject to the Enhanced-Review Follow-Ons described
in Condition 9. All Enhanced Review Follow-Ons require the approval of
the Required Majority. For a given issuer, the participating Regulated
Funds and Affiliated Funds need to comply with the requirements of
Enhanced-Review Follow-Ons only for the first Co-Investment
Transaction. Subsequent Co-Investment Transactions with respect to the
issuer would be governed by the requirements of Standard Review Follow-
Ons.
---------------------------------------------------------------------------
\14\ ``Pre-Boarding Investments'' are investments in an issuer
held by a Regulated Fund as well as one or more Affiliated Funds
and/or one or more other Regulated Funds that were acquired prior to
participating in any Co-Investment Transaction: (i) In transactions
in which the only term negotiated by or on behalf of such funds was
price in reliance on one of the JT No-Action Letters (defined
below); or (ii) in transactions occurring at least 90 days apart and
without coordination between the Regulated Fund and any Affiliated
Fund or other Regulated Fund.
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14. A Regulated Fund would be permitted to invest in Standard
Review Follow-Ons either with the approval of the Required Majority
under Condition 8(c) or without Board approval under Condition 8(b) if
it is (i) a Pro Rata Follow-On Investment \15\ or (ii) a Non-Negotiated
Follow-On Investment.\16\ Applicants believe that these Pro Rata and
Non-Negotiated Follow-On Investments do not present a significant
opportunity for overreaching on the part of any Adviser and thus do not
warrant the time or the attention of the Board. Pro Rata Follow-On
Investments and Non-Negotiated Follow-On Investments remain subject to
the Board's periodic review in accordance with Condition 10.
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\15\ A ``Pro Rata Follow-On Investment'' is a Follow-On
Investment (i) in which the participation of each Affiliated Fund
and each Regulated Fund is proportionate to its outstanding
investments in the issuer or security, as appropriate, immediately
preceding the Follow-On Investment, and (ii) in the case of a
Regulated Fund, a majority of the Board has approved the Regulated
Fund's participation in the pro rata Follow-On Investments as being
in the best interests of the Regulated Fund. The Regulated Fund's
Board may refuse to approve, or at any time rescind, suspend or
qualify, its approval of Pro Rata Follow-On Investments, in which
case all subsequent Follow-On Investments will be submitted to the
Regulated Fund's Eligible Directors in accordance with Condition
8(c).
\16\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On
Investment in which a Regulated Fund participates together with one
or more Affiliated Funds and/or one or more other Regulated Funds
(i) in which the only term negotiated by or on behalf of the funds
is price and (ii) with respect to which, if the transaction were
considered on its own, the funds would be entitled to rely on one of
the JT No-Action Letters.
``JT No-Action Letters'' means SMC Capital, Inc., SEC No-Action
Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life
Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000).
---------------------------------------------------------------------------
C. Dispositions
15. Applicants propose that Dispositions \17\ would be divided into
two categories. If the Regulated Funds and Affiliated Funds holding
investments in the issuer have previously participated in a Co-
Investment Transaction with respect to the issuer, then the terms and
approval of the Disposition would be subject to the Standard Review
Dispositions described in Condition 6. If the Regulated Funds and
Affiliated Funds have not previously participated in a Co-Investment
Transaction with respect to the issuer but hold a Pre-Boarding
Investment, then the terms and approval of the Disposition would be
subject to the Enhanced Review Dispositions described in Condition 7.
Subsequent
[[Page 541]]
Dispositions with respect to the same issuer would be governed by
Condition 6 under the Standard Review Dispositions.\18\
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\17\ ``Disposition'' means the sale, exchange or other
disposition of an interest in a security of an issuer.
\18\ However, with respect to an issuer, if a Regulated Fund's
first Co-Investment Transaction is an Enhanced Review Disposition,
and the Regulated Fund does not dispose of its entire position in
the Enhanced Review Disposition, then before such Regulated Fund may
complete its first Standard Review Follow-On in such issuer, the
Eligible Directors must review the proposed Follow-On Investment not
only on a stand-alone basis but also in relation to the total
economic exposure in such issuer (i.e., in combination with the
portion of the Pre-Boarding Investment not disposed of in the
Enhanced Review Disposition), and the other terms of the
investments. This additional review is required because such
findings were not required in connection with the prior Enhanced
Review Disposition, but they would have been required had the first
Co-Investment Transaction been an Enhanced Review Follow-On.
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16. A Regulated Fund may participate in a Standard Review
Disposition either with the approval of the Required Majority under
Condition 6(d) or without Board approval under Condition 6(c) if (i)
the Disposition is a Pro Rata Disposition \19\ or (ii) the securities
are Tradable Securities \20\ and the Disposition meets the other
requirements of Condition 6(c)(ii). Pro Rata Dispositions and
Dispositions of a Tradable Security remain subject to the Board's
periodic review in accordance with Condition 10.
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\19\ A ``Pro Rata Disposition'' is a Disposition (i) in which
the participation of each Affiliated Fund and each Regulated Fund is
proportionate to its outstanding investment in the security subject
to Disposition immediately preceding the Disposition; and (ii) in
the case of a Regulated Fund, a majority of the Board has approved
the Regulated Fund's participation in pro rata Dispositions as being
in the best interests of the Regulated Fund. The Regulated Fund's
Board may refuse to approve, or at any time rescind, suspend or
qualify, its approval of Pro Rata Dispositions, in which case all
subsequent Dispositions will be submitted to the Regulated Fund's
Eligible Directors.
\20\ ``Tradable Security'' means a security that meets the
following criteria at the time of Disposition: (i) It trades on a
national securities exchange or designated offshore securities
market as defined in rule 902(b) under the Securities Act; (ii) it
is not subject to restrictive agreements with the issuer or other
security holders; and (iii) it trades with sufficient volume and
liquidity (findings as to which are documented by the Advisers to
any Regulated Funds holding investments in the issuer and retained
for the life of the Regulated Fund) to allow each Regulated Fund to
dispose of its entire position remaining after the proposed
Disposition within a short period of time not exceeding 30 days at
approximately the value (as defined by section 2(a)(41) of the Act)
at which the Regulated Fund has valued the investment.
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D. Delayed Settlement
17. Applicants represent that under the terms and Conditions of the
application, all Regulated Funds and Affiliated Funds participating in
a Co-Investment Transaction will invest at the same time, for the same
price and with the same terms, conditions, class, registration rights
and any other rights, so that none of them receives terms more
favorable than any other. However, the settlement date for an
Affiliated Fund in a Co-Investment Transaction may occur up to ten
business days after the settlement date for the Regulated Fund, and
vice versa. Nevertheless, in all cases, (i) the date on which the
commitment of the Affiliated Funds and Regulated Funds is made will be
the same even where the settlement date is not and (ii) the earliest
settlement date and the latest settlement date of any Affiliated Fund
or Regulated Fund participating in the transaction will occur within
ten business days of each other.
E. Holders
18. Under Condition 15, if an Adviser, its principals, or any
person controlling, controlled by, or under common control with the
Adviser or its principals, and the Affiliated Funds (collectively, the
``Holders'') own in the aggregate more than 25 percent of the
outstanding voting shares of a Regulated Fund (the ``Shares''), then
the Holders will vote such Shares as directed by an independent third
party when voting on matters specified in the Condition. Applicants
believe that this Condition will ensure that the Independent Directors
will act independently in evaluating Co-Investment Transactions,
because the ability of the Adviser or its principals to influence the
Independent Directors by a suggestion, explicit or implied, that the
Independent Directors can be removed will be limited significantly. The
Independent Directors shall evaluate and approve any independent party,
taking into account its qualifications, reputation for independence,
cost to the shareholders, and other factors that they deem relevant.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
participation by a registered investment company and an affiliated
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the
Commission by order upon application.
2. Co-Investment Transactions are prohibited by rule 17d-1 without
a prior exemptive order of the Commission to the extent that the
Affiliated Funds and the Regulated Funds participating in such
transactions fall within the category of persons described by rule 17d-
1, vis-[agrave]-vis each participating Regulated Fund. Each of the
participating Regulated Funds and Affiliated Funds may be deemed to be
affiliated persons vis-[agrave]-vis a Regulated Fund within the meaning
of section 2(a)(3) by reason of common control because (i) the Adviser
manages each of the Affiliated Funds and may be deemed to control any
Future Regulated Fund and any Future Affiliated Fund, and (ii) the
Adviser manages the Company pursuant its investment advisory agreement.
Thus, each of the Affiliated Funds could be deemed to be a person
related to the Company and the Future Regulated Funds in a manner
described by rule 17d-1; and therefore the prohibitions of rule 17d-1
would apply respectively to prohibit the Affiliated Funds from
participating in Co-Investment Transactions with the Regulated Funds.
Each Regulated Fund would also be related to each other Regulated Fund
in a manner described by rule 17d-1, and thus prohibited from
participating in Co-Investment Transactions with each other. In
addition, because the Fundrise Proprietary Accounts are controlled by,
or under common control with, FA and, therefore, may be under common
control with the Company, any future Advisers, and any Future Regulated
Funds, the Fundrise Proprietary Accounts could be prohibited from
participating in the Co-Investment Program.
3. In passing upon applications under rule 17d-1, the Commission
considers whether the company's participation in the joint transaction
is consistent with the provisions, policies, and purposes of the Act
and the extent to which such participation is on a basis different from
or less advantageous than that of other participants.
4. Applicants state that in the absence of the requested relief, in
many circumstances the Regulated Funds would be limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants state that, as required by rule 17d-1(b), the
Conditions ensure that the terms on which Co-Investment Transactions
may be made will be consistent with the participation of the Regulated
Funds being on a basis that it is neither different from nor less
advantageous than other participants, thus protecting the equity
holders of any participant from being disadvantaged. Applicants further
state that the Conditions ensure that all Co-Investment Transactions
are reasonable and fair to the Regulated Funds and their shareholders
and do not involve overreaching by any person concerned, including the
Advisers. Applicants state that the Regulated Funds' participation in
the Co-Investment Transactions in accordance
[[Page 542]]
with the Conditions will be consistent with the provisions, policies,
and purposes of the Act and would be done in a manner that is not
different from, or less advantageous than, that of other participants.
Applicants' Conditions
Applicants agree that the Order will be subject to the following
Conditions:
1. Identification and Referral of Potential Co-Investment
Transactions.
(a). The Advisers will establish, maintain and implement policies
and procedures reasonably designed to ensure that each Adviser is
promptly notified of all Potential Co-Investment Transactions that fall
within the then-current Objectives and Strategies and Board-Established
Criteria of any Regulated Fund the Adviser manages.
(b). When an Adviser to a Regulated Fund is notified of a Potential
Co-Investment Transaction under Condition 1(a), the Adviser will make
an independent determination of the appropriateness of the investment
for the Regulated Fund in light of the Regulated Fund's then-current
circumstances.
2. Board Approvals of Co-Investment Transactions.
(a). If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
(b). If the aggregate amount recommended by the Advisers to be
invested in the Potential Co-Investment Transaction by the
participating Regulated Funds and any participating Affiliated Funds,
collectively, exceeds the amount of the investment opportunity, the
investment opportunity will be allocated among them pro rata based on
the size of the Internal Orders, as described in section III.A.1.b. of
the application. Each Adviser to a participating Regulated Fund will
promptly notify and provide the Eligible Directors with information
concerning the Affiliated Funds' and Regulated Funds' order sizes to
assist the Eligible Directors with their review of the applicable
Regulated Fund's investments for compliance with these Conditions.
(c). After making the determinations required in Condition 1(b)
above, each Adviser to a participating Regulated Fund will distribute
written information concerning the Potential Co-Investment Transaction
(including the amount proposed to be invested by each participating
Regulated Fund and each participating Affiliated Fund) to the Eligible
Directors of its participating Regulated Fund(s) for their
consideration. A Regulated Fund will enter into a Co-Investment
Transaction with one or more other Regulated Funds or Affiliated Funds
only if, prior to the Regulated Fund's participation in the Potential
Co-Investment Transaction, a Required Majority concludes that:
(i). The terms of the transaction, including the consideration to
be paid, are reasonable and fair to the Regulated Fund and its equity
holders and do not involve overreaching in respect of the Regulated
Fund or its equity holders on the part of any person concerned;
(ii). the transaction is consistent with:
(A). The interests of the Regulated Fund's equity holders; and
(B). the Regulated Fund's then-current Objectives and Strategies;
(iii). the investment by any other Regulated Fund(s) or Affiliated
Fund(s) would not disadvantage the Regulated Fund, and participation by
the Regulated Fund would not be on a basis different from, or less
advantageous than, that of any other Regulated Fund(s) or Affiliated
Fund(s) participating in the transaction; provided that the Required
Majority shall not be prohibited from reaching the conclusions required
by this Condition 2(c)(iii) if:
(A). The settlement date for another Regulated Fund or an
Affiliated Fund in a Co-Investment Transaction is later than the
settlement date for the Regulated Fund by no more than ten business
days or earlier than the settlement date for the Regulated Fund by no
more than ten business days, in either case, so long as: (x) The date
on which the commitment of the Affiliated Funds and Regulated Funds is
made is the same; and (y) the earliest settlement date and the latest
settlement date of any Affiliated Fund or Regulated Fund participating
in the transaction will occur within ten business days of each other;
or
(B). any other Regulated Fund or Affiliated Fund, but not the
Regulated Fund itself, gains the right to nominate a director for
election to a portfolio company's board of directors, the right to have
a board observer or any similar right to participate in the governance
or management of the portfolio company so long as: (x) The Eligible
Directors will have the right to ratify the selection of such director
or board observer, if any; (y) the Adviser agrees to, and does, provide
periodic reports to the Regulated Fund's Board with respect to the
actions of such director or the information received by such board
observer or obtained through the exercise of any similar right to
participate in the governance or management of the portfolio company;
and (z) any fees or other compensation that any other Regulated Fund or
Affiliated Fund or any affiliated person of any other Regulated Fund or
Affiliated Fund receives in connection with the right of one or more
Regulated Funds or Affiliated Funds to nominate a director or appoint a
board observer or otherwise to participate in the governance or
management of the portfolio company will be shared proportionately
among any participating Affiliated Funds (who may, in turn, share their
portion with their affiliated persons) and any participating Regulated
Fund(s) in accordance with the amount of each such party's investment;
and
(iv). the proposed investment by the Regulated Fund will not
involve compensation, remuneration or a direct or indirect \21\
financial benefit to the Advisers, any other Regulated Fund, the
Affiliated Funds or any affiliated person of any of them (other than
the parties to the Co-Investment Transaction), except (A) to the extent
permitted by Condition 14, (B) to the extent permitted by Section 17
(e), (C) indirectly, as a result of an interest in the securities
issued by one of the parties to the Co-Investment Transaction, or (D)
in the case of fees or other compensation described in Condition
2(c)(iii)(B)(z).
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\21\ For example, procuring the Regulated Fund's investment in a
Potential Co-Investment Transaction to permit an affiliate to
complete or obtain better terms in a separate transaction would
constitute an indirect financial benefit.
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3. Right to Decline. Each Regulated Fund has the right to decline
to participate in any Potential Co-Investment Transaction or to invest
less than the amount proposed.
4. General Limitation. Except for Follow-On Investments made in
accordance with Conditions 8 and 9 below,\22\ a Regulated Fund will not
invest in reliance on the Order in any issuer in which a Related Party
has an investment.\23\
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\22\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
\23\ ``Related Party'' means (i) any Close Affiliate and (ii) in
respect of matters as to which any Adviser has knowledge, any Remote
Affiliate.
``Close Affiliate'' means the Advisers, the Regulated Funds,
the Affiliated Funds and any other person described in section 57(b)
(after giving effect to rule 57b-1) in respect of any Regulated Fund
(treating any registered investment company or series thereof as a
BDC for this purpose) except for limited partners included solely by
reason of the reference in section 57(b) to section 2(a)(3)(D).
``Remote Affiliate'' means any person described in section
57(e) in respect of any Regulated Fund (treating any registered
investment company or series thereof as a BDC for this purpose) and
any limited partner holding 5% or more of the relevant limited
partner interests that would be a Close Affiliate but for the
exclusion in that definition.
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[[Page 543]]
5. Same Terms and Conditions. A Regulated Fund will not participate
in any Potential Co-Investment Transaction unless (i) the terms,
conditions, price, class of securities to be purchased, date on which
the commitment is entered into and registration rights (if any) will be
the same for each participating Regulated Fund and Affiliated Fund and
(ii) the earliest settlement date and the latest settlement date of any
participating Regulated Fund or Affiliated Fund will occur as close in
time as practicable and in no event more than ten business days apart.
The grant to one or more Regulated Funds or Affiliated Funds, but not
the respective Regulated Fund, of the right to nominate a director for
election to a portfolio company's board of directors, the right to have
an observer on the board of directors or similar rights to participate
in the governance or management of the portfolio company will not be
interpreted so as to violate this Condition 5, if Condition
2(c)(iii)(B) is met.
6. Standard Review Dispositions.
(a). General. If any Regulated Fund or Affiliated Fund elects to
sell, exchange or otherwise dispose of an interest in a security and
one or more Regulated Funds and Affiliated Funds have previously
participated in a Co-Investment Transaction with respect to the issuer,
then:
(i). The Adviser to such Regulated Fund or Affiliated Fund \24\
will notify each Regulated Fund that holds an investment in the issuer
of the proposed Disposition at the earliest practical time; and
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\24\ Any Fundrise Proprietary Account that is not advised by an
Adviser is itself deemed to be an Adviser for purposes of Conditions
6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i).
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(ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to participation by
such Regulated Fund in the Disposition.
(b). Same Terms and Conditions. Each Regulated Fund will have the
right to participate in such Disposition on a proportionate basis, at
the same price and on the same terms and conditions as those applicable
to the Affiliated Funds and any other Regulated Fund.
(c). No Board Approval Required. A Regulated Fund may participate
in such a Disposition without obtaining prior approval of the Required
Majority if:
(i). (A) The participation of each Regulated Fund and Affiliated
Fund in such Disposition is proportionate to its then-current holding
of the security (or securities) of the issuer that is (or are) the
subject of the Disposition; \25\ (B) the Board of the Regulated Fund
has approved as being in the best interests of the Regulated Fund the
ability to participate in such Dispositions on a pro rata basis (as
described in greater detail in the application); and (C) the Board of
the Regulated Fund is provided on a quarterly basis with a list of all
Dispositions made in accordance with this Condition; or
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\25\ In the case of any Disposition, proportionality will be
measured by each participating Regulated Fund's and Affiliated
Fund's outstanding investment in the security in question
immediately preceding the Disposition.
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(ii). each security is a Tradable Security and (A) the Disposition
is not to the issuer or any affiliated person of the issuer; and (B)
the security is sold for cash in a transaction in which the only term
negotiated by or on behalf of the participating Regulated Funds and
Affiliated Funds is price.
(d). Standard Board Approval. In all other cases, the Adviser will
provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors and the Regulated Fund will
participate in such Disposition solely to the extent that a Required
Majority determines that it is in the Regulated Fund's best interests.
7. Enhanced Review Dispositions.
(a). General. If any Regulated Fund or Affiliated Fund elects to
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a
Potential Co-Investment Transaction and the Regulated Funds and
Affiliated Funds have not previously participated in a Co-Investment
Transaction with respect to the issuer:
(i). The Adviser to such Regulated Fund or Affiliated Fund will
notify each Regulated Fund that holds an investment in the issuer of
the proposed Disposition at the earliest practical time;
(ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to participation by
such Regulated Fund in the Disposition; and
(iii). the Advisers will provide to the Board of each Regulated
Fund that holds an investment in the issuer all information relating to
the existing investments in the issuer of the Regulated Funds and
Affiliated Funds, including the terms of such investments and how they
were made, that is necessary for the Required Majority to make the
findings required by this Condition.
(b). Enhanced Board Approval. The Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Disposition
solely to the extent that a Required Majority determines that:
(i). The Disposition complies with Condition 2(c)(i), (ii),
(iii)(A), and (iv); and
(ii). the making and holding of the Pre-Boarding Investments were
not prohibited by Rule 17d-1 and records the basis for the finding in
the Board minutes.
(c). Additional Requirements: The Disposition may only be completed
in reliance on the Order if:
(i). Same Terms and Conditions. Each Regulated Fund has the right
to participate in such Disposition on a proportionate basis, at the
same price and on the same terms and Conditions as those applicable to
the Affiliated Funds and any other Regulated Fund;
(ii). Original Investments. All of the Affiliated Funds' and
Regulated Funds' investments in the issuer are Pre-Boarding
Investments;
(iii). Advice of counsel. Independent counsel to the Board advises
that the making and holding of the investments in the Pre-Boarding
Investments were not prohibited by Rule 17d-1.
(iv). Multiple Classes of Securities. All Regulated Funds and
Affiliated Funds that hold Pre-Boarding Investments in the issuer
immediately before the time of completion of the Co-Investment
Transaction hold the same security or securities of the issuer. For the
purpose of determining whether the Regulated Funds and Affiliated Funds
hold the same security or securities, they may disregard any security
held by some but not all of them if, prior to relying on the Order, the
Required Majority is presented with all information necessary to make a
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's
holding of a different class of securities (including for this purpose
a security with a different maturity date) is immaterial \26\ in
amount, including immaterial relative to the size of the issuer; and
(y) the Board records the basis for any such finding in its minutes. In
addition, securities that differ only in respect of issuance date,
currency, or denominations may be treated as the same security; and
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\26\ In determining whether a holding is ``immaterial'' for
purposes of the Order, the Required Majority will consider whether
the nature and extent of the interest in the transaction or
arrangement is sufficiently small that a reasonable person would not
believe that the interest affected the determination of whether to
enter into the transaction or arrangement or the terms of the
transaction or arrangement.
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(v). No control. The Affiliated Funds, the other Regulated Funds
and their
[[Page 544]]
affiliated persons (within the meaning of Section 2(a)(3)(C) of the
Act), individually or in the aggregate, do not control the issuer of
the securities (within the meaning of Section 2(a)(9) of the Act).
8. Standard Review Follow-Ons.
(a). General. If any Regulated Fund or Affiliated Fund desires to
make a Follow-On Investment in an issuer and the Regulated Funds and
Affiliated Funds holding investments in the issuer previously
participated in a Co-Investment Transaction with respect to the issuer:
(i). The Adviser to each such Regulated Fund or Affiliated Fund
will notify each Regulated Fund that holds securities of the portfolio
company of the proposed transaction at the earliest practical time; and
(ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to the proposed
participation, including the amount of the proposed investment, by such
Regulated Fund.
(b). No Board Approval Required. A Regulated Fund may participate
in the Follow-On Investment without obtaining prior approval of the
Required Majority if:
(i). (A) The proposed participation of each Regulated Fund and each
Affiliated Fund in such investment is proportionate to its outstanding
investments in the issuer or the security at issue, as appropriate,\27\
immediately preceding the Follow-On Investment; and (B) the Board of
the Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in Follow-On Investments on a
pro rata basis (as described in greater detail in the application); or
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\27\ To the extent that a Follow-On Investment opportunity is in
a security or arises in respect of a security held by the
participating Regulated Funds and Affiliated Funds, proportionality
will be measured by each participating Regulated Fund's and
Affiliated Fund's outstanding investment in the security in question
immediately preceding the Follow-On Investment using the most recent
available valuation thereof. To the extent that a Follow-On
Investment opportunity relates to an opportunity to invest in a
security that is not in respect of any security held by any of the
participating Regulated Funds or Affiliated Funds, proportionality
will be measured by each participating Regulated Fund's and
Affiliated Fund's outstanding investment in the issuer immediately
preceding the Follow-On Investment using the most recent available
valuation thereof.
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(ii). it is a Non-Negotiated Follow-On Investment.
(c). Standard Board Approval. In all other cases, the Adviser will
provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors and the Regulated Fund will
participate in such Follow-On Investment solely to the extent that a
Required Majority makes the determinations set forth in Condition 2(c).
If the only previous Co-Investment Transaction with respect to the
issuer was an Enhanced Review Disposition the Eligible Directors must
complete this review of the proposed Follow-On Investment both on a
stand-alone basis and together with the Pre-Boarding Investments in
relation to the total economic exposure and other terms of the
investment.
(d). Allocation. If, with respect to any such Follow-On Investment:
(i). The amount of the opportunity proposed to be made available to
any Regulated Fund is not based on the Regulated Funds' and the
Affiliated Funds' outstanding investments in the issuer or the security
at issue, as appropriate, immediately preceding the Follow-On
Investment; and
(ii). the aggregate amount recommended by the Advisers to be
invested in the Follow-On Investment by the participating Regulated
Funds and any participating Affiliated Funds, collectively, exceeds the
amount of the investment opportunity, then the Follow-On Investment
opportunity will be allocated among them pro rata based on the size of
the Internal Orders, as described in section III.A.1.b. of the
application.
(e). Other Conditions. The acquisition of Follow-On Investments as
permitted by this Condition will be considered a Co-Investment
Transaction for all purposes and subject to the other Conditions set
forth in the application.
9. Enhanced Review Follow-Ons.
(a). General. If any Regulated Fund or Affiliated Fund desires to
make a Follow-On Investment in an issuer that is a Potential Co-
Investment Transaction and the Regulated Funds and Affiliated Funds
holding investments in the issuer have not previously participated in a
Co-Investment Transaction with respect to the issuer:
(i). The Adviser to each such Regulated Fund or Affiliated Fund
will notify each Regulated Fund that holds securities of the portfolio
company of the proposed transaction at the earliest practical time;
(ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to the proposed
participation, including the amount of the proposed investment, by such
Regulated Fund; and
(iii). the Advisers will provide to the Board of each Regulated
Fund that holds an investment in the issuer all information relating to
the existing investments in the issuer of the Regulated Funds and
Affiliated Funds, including the terms of such investments and how they
were made, that is necessary for the Required Majority to make the
findings required by this Condition.
(b). Enhanced Board Approval. The Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority reviews the
proposed Follow-On Investment both on a stand-alone basis and together
with the Pre-Boarding Investments in relation to the total economic
exposure and other terms and makes the determinations set forth in
Condition 2(c). In addition, the Follow-On Investment may only be
completed in reliance on the Order if the Required Majority of each
participating Regulated Fund determines that the making and holding of
the Pre-Boarding Investments were not prohibited by Rule 17d-1. The
basis for the Board's findings will be recorded in its minutes.
(c). Additional Requirements. The Follow-On Investment may only be
completed in reliance on the Order if:
(i). Original Investments. All of the Affiliated Funds' and
Regulated Funds' investments in the issuer are Pre-Boarding
Investments;
(ii). Advice of counsel. Independent counsel to the Board advises
that the making and holding of the investments in the Pre-Boarding
Investments were not prohibited by Rule 17d-1;
(iii). Multiple Classes of Securities. All Regulated Funds and
Affiliated Funds that hold Pre-Boarding Investments in the issuer
immediately before the time of completion of the Co-Investment
Transaction hold the same security or securities of the issuer. For the
purpose of determining whether the Regulated Funds and Affiliated Funds
hold the same security or securities, they may disregard any security
held by some but not all of them if, prior to relying on the Order, the
Required Majority is presented with all information necessary to make a
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's
holding of a different class of securities (including for this purpose
a security with a different maturity date) is immaterial in amount,
including immaterial relative to the size of the issuer; and (y) the
Board records the basis for any such finding in its minutes. In
addition, securities that differ only in respect of issuance date,
[[Page 545]]
currency, or denominations may be treated as the same security; and
(iv). No control. The Affiliated Funds, the other Regulated Funds
and their affiliated persons (within the meaning of Section 2(a)(3)(C)
of the Act), individually or in the aggregate, do not control the
issuer of the securities (within the meaning of Section 2(a)(9) of the
Act).
(d). Allocation. If, with respect to any such Follow-On Investment:
(i). The amount of the opportunity proposed to be made available to
any Regulated Fund is not based on the Regulated Funds' and the
Affiliated Funds' outstanding investments in the issuer or the security
at issue, as appropriate, immediately preceding the Follow-On
Investment; and
(ii). the aggregate amount recommended by the Advisers to be
invested in the Follow-On Investment by the participating Regulated
Funds and any participating Affiliated Funds, collectively, exceeds the
amount of the investment opportunity, then the Follow-On Investment
opportunity will be allocated among them pro rata based on the size of
the Internal Orders, as described in section III.A.1.b. of the
application.
(e). Other Conditions. The acquisition of Follow-On Investments as
permitted by this Condition will be considered a Co-Investment
Transaction for all purposes and subject to the other Conditions set
forth in the application.
10. Board Reporting, Compliance and Annual Re-Approval.
(a). Each Adviser to a Regulated Fund will present to the Board of
each Regulated Fund, on a quarterly basis, and at such other times as
the Board may request, (i) a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Funds or any
of the Affiliated Funds during the preceding quarter that fell within
the Regulated Fund's then-current Objectives and Strategies and Board-
Established Criteria that were not made available to the Regulated
Fund, and an explanation of why such investment opportunities were not
made available to the Regulated Fund; (ii) a record of all Follow-On
Investments in and Dispositions of investments in any issuer in which
the Regulated Fund holds any investments by any Affiliated Fund or
other Regulated Fund during the prior quarter; and (iii) all
information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by other Regulated
Funds or Affiliated Funds that the Regulated Fund considered but
declined to participate in, so that the Independent Directors, may
determine whether all Potential Co-Investment Transactions and Co-
Investment Transactions during the preceding quarter, including those
investments that the Regulated Fund considered but declined to
participate in, comply with the Conditions.
(b). All information presented to the Regulated Fund's Board
pursuant to this Condition will be kept for the life of the Regulated
Fund and at least two years thereafter, and will be subject to
examination by the Commission and its staff.
(c). Each Regulated Fund's chief compliance officer, as defined in
rule 38a-1(a)(4), will prepare an annual report for its Board each year
that evaluates (and documents the basis of that evaluation) the
Regulated Fund's compliance with the terms and Conditions of the
application and the procedures established to achieve such compliance.
(d). The Independent Directors will consider at least annually
whether continued participation in new and existing Co-Investment
Transactions is in the Regulated Fund's best interests.
11. Record Keeping. Each Regulated Fund will maintain the records
required by Section 57(f)(3) of the Act as if each of the Regulated
Funds were a BDC and each of the investments permitted under these
Conditions were approved by the Required Majority under Section 57(f).
12. Director Independence. No Independent Director of a Regulated
Fund will also be a director, general partner, managing member or
principal, or otherwise be an ``affiliated person'' (as defined in the
Act) of any Affiliated Fund.
13. Expenses. The expenses, if any, associated with acquiring,
holding or disposing of any securities acquired in a Co-Investment
Transaction (including, without limitation, the expenses of the
distribution of any such securities registered for sale under the
Securities Act) will, to the extent not payable by the Advisers under
their respective advisory agreements with the Regulated Funds and the
Affiliated Funds, be shared by the Regulated Funds and the
participating Affiliated Funds in proportion to the relative amounts of
the securities held or being acquired or disposed of, as the case may
be.
14. Transaction Fees.\28\ Any transaction fee (including break-up,
structuring, monitoring or commitment fees but excluding brokerage or
underwriting compensation permitted by Section 17(e) received in
connection with any Co-Investment Transaction will be distributed to
the participants on a pro rata basis based on the amounts they invested
or committed, as the case may be, in such Co-Investment Transaction. If
any transaction fee is to be held by an Adviser pending consummation of
the transaction, the fee will be deposited into an account maintained
by an Adviser at a bank or banks having the qualifications prescribed
in Section 26(a)(1), and the account will earn a competitive rate of
interest that will also be divided pro rata among the participants.
None of the Adviser, the Affiliated Funds, the other Regulated Funds or
any affiliated person of the Affiliated Funds or the Regulated Funds
will receive any additional compensation or remuneration of any kind as
a result of or in connection with a Co-Investment Transaction other
than (i) in the case of the Regulated Funds and the Affiliated Funds,
the pro rata transaction fees described above and fees or other
compensation described in Condition 2(c)(iii)(B)(z), (ii) brokerage or
underwriting compensation permitted by Section 17(e) or (iii) in the
case of the Adviser, investment advisory compensation paid in
accordance with investment advisory agreements between the applicable
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
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\28\ Applicants are not requesting and the Commission is not
providing any relief for transaction fees received in connection
with any Co-Investment Transaction.
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15. Independence. If the Holders own in the aggregate more than 25
percent of the Shares of a Regulated Fund, then the Holders will vote
such Shares as directed by an independent third party when voting on
(1) the election of directors; (2) the removal of one or more
directors; or (3) any other matter under either the Act or applicable
State law affecting the Board's composition, size or manner of
election.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28491 Filed 1-3-20; 8:45 am]
BILLING CODE 8011-01-P
