
[Federal Register Volume 77, Number 119 (Wednesday, June 20, 2012)]
[Notices]
[Pages 37079-37082]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15059]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30103; File No. 812-14008]


Versus Capital Multi-Manager Real Estate Income Fund LLC and 
Versus Capital Advisors; Notice of Application

June 14, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c) 
and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act for 
an exemption from rule 23c-3 under the Act, and for an order pursuant 
to section 17(d) of the Act and rule 17d-1 under the Act.

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Summary of Application: Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares and to impose asset-based distribution fees and early 
withdrawal charges (``EWCs'').

Applicants: Versus Capital Multi-Manager Real Estate Income Fund LLC 
(``Initial Fund'') and Versus Capital Advisors LLC (``Adviser'').

Filing Dates: The application was filed on February 23, 2012, and 
amended on April 30, 2012 and June 8, 2012.

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 July 9, 2012 and should be accompanied by proof of service 
on the applicants, in the form of an affidavit, or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be

[[Page 37080]]

notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants, c/o Mark D. Quam, 
Versus Capital Advisors LLC, 7100 E. Belleview Avenue, Suite 306, 
Greenwood Village, CO 80111-1632.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel, 
at (202) 551-6812 or David P. Bartels, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. The Initial Fund is a recently-formed Delaware limited liability 
company that is registered under the Act as a non-diversified, closed-
end management investment company. The Initial Fund attempts to achieve 
its objectives by investing in funds that invest indirectly in real 
estate and by retaining institutional asset managers to sub-advise 
assets invested in real estate securities.
    2. The Adviser is a Delaware limited liability company and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940. The Adviser serves as investment adviser to the Initial Fund.
    3. The Applicants seek an order to permit the Initial Fund to issue 
multiple classes of shares, each having its own fee and expense 
structure, and to impose asset-based distribution fees and EWCs.
    4. Applicants request that the order also apply to any 
continuously-offered registered closed-end management investment 
company that has been previously organized or that may be organized in 
the future for which the Adviser or any entity controlling, controlled 
by, or under common control with the Adviser, or any successor in 
interest to any such entity,\1\ acts as investment adviser and which 
operates as an interval fund pursuant to rule 23c-3 under the Act or 
provides periodic liquidity with respect to its shares pursuant to rule 
13e-4 under the Securities Exchange Act of 1934 (``Exchange Act'') 
(together with the Initial Fund, the ``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that each entity presently 
intending to rely on the requested relief is listed as an applicant.
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    5. The Initial Fund is currently making an initial public offering 
of its common shares following the effectiveness of its registration 
statement. The Initial Fund anticipates that it will commence a 
continuous public offering of its common shares within one year 
following the completion of its initial registration under the 
Securities Act of 1933 (``Securities Act''). Applicants state that 
additional offerings by any Fund relying on the order may be on a 
private placement or public offering basis. Shares of the Funds will 
not be listed on any securities exchange, nor quoted on any quotation 
medium. The Funds do not expect there to be a secondary trading market 
for their shares.
    6. If the requested relief is granted, the Initial Fund intends to 
redesignate its common shares as ``Class F Shares'' and to continuously 
offer two additional classes of shares (``Class I Shares'' and ``Class 
Y Shares''). Because of the different distribution fees, services and 
any other class expenses that may be attributable to the Class F 
Shares, Class I and Class Y Shares, the net income attributable to, and 
the dividends payable on, each class of shares may differ from each 
other.
    7. Applicants state that, from time to time, the Initial Fund may 
create additional classes of shares, the terms of which may differ from 
the Class F, Class I and Class Y Shares in the following respects: (i) 
The amount of fees permitted by different distribution plans or 
different service fee arrangements; (ii) voting rights with respect to 
a distribution plan of a class; (iii) different class designations; 
(iv) the impact of any class expenses directly attributable to a 
particular class of shares allocated on a class basis as described in 
this application; (v) any differences in dividends and net asset value 
resulting from differences in fees under a distribution plan or in 
class expenses; (vi) any EWC or other sales load structure; and (vii) 
exchange or conversion privileges of the classes as permitted under the 
Act.
    8. Applicants state that the Initial Fund has adopted a fundamental 
policy to repurchase a specified percentage of its shares (no less than 
5%) at net asset value on a quarterly basis. Such repurchase offers 
will be conducted pursuant to rule 23c-3 under the Act. Each of the 
other Funds will likewise adopt fundamental investment policies in 
compliance with rule 23c-3 and make quarterly repurchase offers to its 
shareholders or provide periodic liquidity with respect to its shares 
pursuant to rule 13e-4 under the Exchange Act.\3\ Any repurchase offers 
made by the Funds will be made to all holders of shares of each such 
Fund.
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    \3\ Applicants submit that rule 23c-3 and Regulation M under the 
Exchange Act permit an interval fund to make repurchase offers to 
repurchase its shares while engaging in a continuous offering of its 
shares pursuant to Rule 415 under the Securities Act.
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    9. Applicants represent that any asset-based service and 
distribution fees for each class of shares will comply with the 
provisions of NASD Rule 2830(d) (``NASD Sales Charge Rule'').\4\ 
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 N-1A. As is required for open-end 
funds, each Fund will disclose its expenses in shareholder reports, and 
disclose any arrangements that result in breakpoints in or elimination 
of sales loads in its prospectus.\5\ In addition, applicants will 
comply with applicable enhanced fee disclosure requirements for fund of 
funds, including registered funds of hedge funds.\6\
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    \4\ Any reference to the NASD Sales Charge Rule includes any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority (``FINRA'').
    \5\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \6\ 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 12d1-1, et seq. of the Act.
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    10. Each of the Funds will comply with any requirements that the 
Commission or FINRA may adopt 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. In 
addition, each Fund will contractually require that any

[[Page 37081]]

distributor of the Fund's shares comply with such requirements in 
connection with the distribution of such Fund's shares.
    11. Each Fund will allocate all expenses incurred by it among the 
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 distribution fees, service fees, 
and any other incremental expenses of that class. Expenses of the Fund 
allocated to a particular class of 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 18f-3 under the Act 
as if it were an open-end investment company.
    12. Each Fund may impose an EWC on shares submitted for repurchase 
that have been held less than a specified period and may waive the EWC 
for certain categories of shareholders or transactions to be 
established from time to time. Each of the Funds will apply the EWC 
(and any waivers or scheduled variations of the EWC) uniformly to all 
shareholders in a given class and consistently with the requirements of 
rule 22d-1 under the Act as if the Funds were open-end investment 
companies.
    13. Each Fund operating as an interval fund pursuant to rule 23c-3 
under the Act may offer its shareholders an exchange feature under 
which the shareholders of the Fund may, in connection with the Fund's 
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 23c-3 under the Act and continuously offer their 
shares at net asset value, that are in the Fund's group of investment 
companies (collectively, ``Other Funds''). Shares of a Fund operating 
pursuant to rule 23c-3 that are exchanged for shares of Other Funds 
will be included as part of the amount of the repurchase offer amount 
for such Fund as specified in rule 23c-3 under the Act. Any exchange 
option will comply with rule 11a-3 under the Act, as if the Fund were 
an open-end investment company subject to rule 11a-3. In complying with 
rule 11a-3, each Fund will treat an EWC as if it were a contingent 
deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of shares of the Funds may be prohibited by section 
18(c), as a class may have priority over another class as to payment of 
dividends because shareholders of different classes would pay different 
fees and expenses.
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of shares of the Funds 
may violate section 18(i) of the Act because each class would be 
entitled to exclusive voting rights with respect to matters solely 
related to that class.
    3. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction or any class or classes of persons, 
securities or transactions from any provision of the Act, or from any 
rule thereunder, if and to the extent such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Applicants request an exemption under section 
6(c) from sections 18(c) and 18(i) to permit the Funds to issue 
multiple classes of shares.
    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of shareholders. Applicants 
submit that the proposed arrangements would permit a Fund to facilitate 
the distribution of its shares and provide investors with a broader 
choice of shareholder services. Applicants assert that the proposed 
closed-end investment company multiple class structure does not raise 
the concerns underlying section 18 of the Act to any greater degree 
than open-end investment companies' multiple class structures that are 
permitted by rule 18f-3 under the Act. Applicants state that each Fund 
will comply with the provisions of rule 18f-3 as if it were an open-end 
investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company will purchase securities of 
which it is the issuer, except: (a) On a securities exchange or other 
open market; (b) pursuant to tenders, after reasonable opportunity to 
submit tenders given to all holders of securities of the class to be 
purchased; or (c) under other circumstances as the Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    2. Rule 23c-3 under the Act permits a registered closed-end 
investment company (an ``interval fund'') to make repurchase offers of 
between five and twenty-five percent of its outstanding shares at net 
asset value at periodic intervals pursuant to a fundamental policy of 
the interval fund. Rule 23c-3(b)(1) under the Act provides that an 
interval fund may deduct from repurchase proceeds only a repurchase 
fee, not to exceed two percent of the proceeds, that is paid to the 
interval fund and is reasonably intended to compensate the fund for 
expenses directly related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased.
    4. Applicants request relief under sections 6(c), discussed above, 
and 23(c)(3) from rule 23c-3 to the extent necessary for the Funds to 
impose EWCs on shares of the Funds submitted for repurchase that have 
been held for less than a specified period.
    5. Applicants state that the EWCs they intend to impose are 
functionally similar to CDSLs imposed by open-end investment companies 
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment 
companies to impose CDSLs, subject to certain conditions. Applicants 
note that rule 6c-10 is grounded in policy considerations supporting 
the employment of CDSLs where there are adequate safeguards for the 
investor and state that the same policy considerations support 
imposition of EWCs in the interval fund context. In addition, 
applicants state that EWCs may be necessary for the distributor to 
recover distribution costs. Applicants represent that any EWC imposed 
by the Funds will comply with rule 6c-10 under the Act as if the rule 
were applicable to closed-end investment companies. The Funds will 
disclose EWCs in accordance with the requirements of Form N-1A 
concerning CDSLs. Applicants further state that the Funds will apply 
the EWC (and any waivers or scheduled variations of the EWC) uniformly 
to all shareholders in a given class and consistently with the 
requirements of rule 22d-1 under the Act.

[[Page 37082]]

Asset-based Distribution Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to the extent necessary to permit the Fund to impose asset-
based distribution fees. Applicants have agreed to comply with rules 
12b-1 and 17d-3 as if those rules applied to closed-end investment 
companies, which they believe will resolve any concerns that might 
arise in connection with a Fund financing the distribution of its 
shares through asset-based distribution fees.
    For the reasons stated above, applicants submit that the exemptions 
requested under section 6(c) are necessary and appropriate in the 
public interest and are consistent with the protection of investors and 
the purposes fairly intended by the policy and provisions of the Act. 
Applicants further submit that the relief requested pursuant to section 
23(c)(3) will be consistent with the protection of investors and will 
insure that applicants do not unfairly discriminate against any holders 
of the class of securities to be purchased. Finally, applicants state 
that the Funds' institution of asset-based distribution fees is 
consistent with the provisions, policies and purposes of the Act and 
does not involve participation on a basis different from or less 
advantageous than that of other participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of 
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3 
under the Act, as amended from time to time, as if those rules applied 
to closed-end management investment companies, and will comply with the 
NASD Sales Charge Rule, as amended from time to time, as if that rule 
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15059 Filed 6-19-12; 8:45 am]
BILLING CODE 8011-01-P


