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33464

Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES

the Initial Fund isstructured as an interval fund and makes semi-annual offers to repurchase between 5% and 25% of its outstanding Shares at net assetvalue NAV, pursuant to Rule 23c3 under the Act, unless such offer is suspended or postponed in accordance with regulatory requirements. Any other closed-end investment company that intends to rely on this relief will provide periodic liquidity to shareholders in accordance with either Rule 23c3 under the Act or Rule 13e4 under the 1934 Act.
9. Applicants represent that any assetbased service and/or distribution fees of a Fund will comply with the provisions of Rule 2341 of the Rules of the Financial Industry Regulatory Authority FINRA Rule 2341 as if that rule applied to the Fund.3 Applicants also represent that each Fund will disclose in its prospectus the fees, expenses and other characteristics of each class of Shares offered for sale by the prospectus, as is required for open-end, multiple class funds under Form N1A.
As is required for open-end funds, each Fund will disclose its expenses in shareholder reports, and describe any arrangements that result in breakpoints in, or elimination of, sales loads in its prospectus.4 In addition, applicants will comply with applicable enhanced fee disclosure requirements for fund of funds, including registered funds of hedge funds.5
10. Each Fund and its distributor the Distributor will also comply with any requirements that may be adopted by the Commission or FINRA regarding disclosure at the point of sale and in transaction confirmations about the costs and conflicts of interest arising out of the distribution of open-end investment company shares, and regarding prospectus disclosure of sales loads and revenue sharing arrangements as if those requirements applied to the Fund and the Distributor. Each Fund or the Distributor will contractually require that any other distributor of the Funds Shares comply with such requirements in connection with the distribution of Shares of the Fund.
3 Any references to FINRA Rule 2341 include any successor or replacement rule that may be adopted by the Financial Industry Regulatory Authority FINRA.
4 See Shareholder Reports and Quarterly Portfolio Disclosure of Registered Management Investment Companies, Investment Company Act Release No.
26372 Feb. 27, 2004 adopting release; and Disclosure of Breakpoint Discounts by Mutual Funds, Investment Company Act Release No. 26464
June 7, 2004 adopting release.
5 Fund of Funds Investments, Investment Company Act Rel. Nos. 26198 Oct. 1, 2003
proposing release and 27399 Jun. 20, 2006
adopting release. See also rules 12d11, et seq. of the Act.

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11. Each Fund will allocate all expenses incurred by it among its various classes of Shares based on the net assets of the Fund attributable to each class, except that the net asset value and expenses of each class will reflect the expenses associated with the Distribution and Shareholder Services Plan of that class if any, shareholder services fees attributable to a particular class including transfer agency fees, if any, and any other incremental expenses of that class. Expenses of a Fund allocated to a particular class of the Funds Shares will be borne on a pro rata basis by each outstanding Share of that class. Applicants state that each Fund will comply with the provisions of rule 18f3 under the Act as if it were an open-end investment company.
12. Applicants state that the Initial Fund does not intend to offer any exchange privilege or conversion feature, but any such privilege or feature introduced in the future by a Fund will comply with rule 11a1, rule 11a3, and rule 18f3 as if the Fund were an openend investment company.
13. Applicants state that the Initial Fund does not currently intend to impose an early withdrawal charge.
However, in the future a Fund may impose an early withdrawal charge on shares submitted for repurchase that have been held less than a specified period. The Fund may waive the early withdrawal charge for certain categories of shareholders or transactions to be established from time to time.
Applicants state that each Fund will apply the early withdrawal charge and any waivers or scheduled variations of the early withdrawal charge uniformly to all shareholders in a given class and consistently with the requirements of rule 22d1 under the Act as if the Fund was an open-end investment company.
14. Each Fund operating as an interval fund pursuant to rule 23c3 under the Act may offer its shareholders an exchange feature under which the shareholders of the Fund may, in connection with such Funds periodic repurchase offers, exchange their Shares of the Fund for shares of the same class of i registered open-end investment companies or ii other registered closed-end investment companies that comply with rule 23c3 under the Act and continuously offer their shares at net asset value, that are in the Funds group of investment companies collectively, the Other Funds.
Shares of a Fund operating pursuant to rule 23c3 that are exchanged for shares of Other Funds will be included as part of the repurchase offer amount for such Fund as specified in rule 23c3 under the Act. Any exchange option will
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comply with rule 11a3 under the Act, as if the Fund were an open-end investment company subject to rule 11a3. In complying with rule 11a3
under the Act, each Fund will treat an early withdrawal charge as if it were a contingent deferred sales load.
15. Applicants state that the Initial Fund does not currently intend to impose a repurchase fee, but may do so in the future.6 If a Fund charges a repurchase fee, Shares of the Fund will be subject to a repurchase fee at a rate of no greater than 2% of the shareholders repurchase proceeds if the interval between the date of purchase of the Shares and the valuation date with respect to the repurchase of those Shares is less than one year. Repurchase fees, if charged, will equally apply to all classes of Shares of the Fund, consistent with section 18 of the Act and rule 18f 3 thereunder. To the extent a Fund determines to waive, impose scheduled variations of, or eliminate a repurchase fee, it will do so consistently with the requirements of rule 22d1 under the Act as if the repurchase fee were a contingent deferred sales load and as if the Fund were a registered open-end investment company and the Funds waiver of, scheduled variation in, or elimination of, the repurchase fee will apply uniformly to all shareholders of the Fund regardless of class.
Applicants Legal Analysis Multiple Classes of Shares 1. Section 18a2A and B makes it unlawful for a registered closed-end investment company to issue a senior security that is a stock unless a immediately after such issuance it will have an asset coverage of at least 200%
and b provision is made to prohibit the declaration of any distribution, upon its common stock, or the purchase of any such common stock, unless in every such case such senior security has at the time of the declaration of any such distribution, or at the time of any such purchase, an asset coverage of at least 200% after deducting the amount of such distribution or purchase price, as the case may be. Applicants state that the creation of multiple classes of shares of the Funds may violate section 18a2 because the Funds may not meet such requirements with respect to a class of shares that may be a senior security.
6 Unlike a distribution-related charge, the repurchase fee is payable to the Fund to compensate long-term shareholders for the expenses related to shorter-term investors, in light of the Funds generally longer-term investment horizons and investment operations.

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