[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23398-23404]
[FR Doc No: 2020-08824]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33843; 812-14866]

Principal Funds, Inc. et al.

April 21, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application for an order under sections 6(c) and 17(b)
of the Investment Company Act of 1940 (``Act'') for exemptions from
section 17(a) of the Act, and under section 17(d) of the Act and rule
17d-1 thereunder to permit certain joint transactions.
    Summary of Application: Applicants request an order that would
permit certain registered management investment companies or series
thereof that are advised by Principal Global Investors, LLC (``PGI'')
\1\ to invest in a private investment vehicle established by PGI to
invest directly in real estate.
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    \1\ PGI includes any successor entity to PGI or an entity
controlling, controlled by, or under common control with PGI. For
purposes of the application, the term ``successor'' is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization.
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    Applicants: Principal Funds, Inc. (``PFI''), Principal Variable
Contracts Funds, Inc. (``PVC''), PGI, Principal Direct Property Fund,
LP (``PDPF''), Principal Direct Property Fund GP, LLC (``PDPGP'') and
Principal Commercial Property Fund REIT, LLC (``PCP REIT'').
    Filing Dates: The application was filed on January 16, 2018 and
amended on June 27, 2018, July 11, 2019, September 6, 2019, February 5,
2020, and March 17, 2020.
    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 emailing the Commission's
Secretary at<EMAIL_ADDRESS>and serving applicants with a
copy of the request by email. Hearing requests should be received by
the Commission by 5:30 p.m. on May 18, 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 emailing the
Commission's Secretary at<EMAIL_ADDRESS>
ADDRESSES: The Commission<EMAIL_ADDRESS>Applicants: PGI,
Attn: Adam U. Shaikh, Assistant General Counsel,
<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-3038, or Trace W. Rakestraw, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: 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 http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. Each of PFI and PVC is organized as a Maryland corporation and
is an open-end management investment company registered under the Act.
PFI and PVC each consist of multiple Funds (as defined below).
    2. PDPF is organized as a limited partnership, and applicants state
that it will rely on an exception from the definition of ``investment
company'' such as section 3(c)(1) or section 3(c)(7) of the Act (or any
other applicable exclusion). PDPGP, the general partner of PDPF, is
organized as a limited liability company and will be a direct or
indirect wholly owned subsidiary of Principal Financial Group, Inc.
(``PFG''). As general partner of PDPF, PDPGP will

be responsible for the operational and administrative maintenance of
PDPF, but it will not exercise any responsibilities for the management
of PDPF's assets.
    3. PCP REIT is organized as a limited liability company, and
applicants anticipate that it will be excluded from the definition of
``investment company'' under section 3(a)(1) of the Act by reason of
its real estate investments. Applicants state that PCP REIT will elect
to be taxed as a real estate investment trust (``REIT'') under the
Internal Revenue Code of 1986, as amended (the ``Code'') and will not
incur separate, entity level tax under the current provisions of the
Code.
    4. PGI, a Delaware limited liability company, is an investment
adviser that is registered with the Commission under the Investment
Advisers Act of 1940, as amended (the ``Advisers Act''). PGI is an
indirect, wholly owned subsidiary of PFG. PGI will be the investment
adviser to each of the Funds (as defined below), PDPF and PCP REIT.\2\
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    \2\ Only PGI will serve as investment adviser to PDPF or PCP
REIT, and any other investment adviser to PDPF or PCP REIT will
serve only as investment sub-adviser.
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    5. PGI believes that exposure to direct real estate investments is
an important element of diversified retirement investing. Applicants
argue that direct exposure to real estate offers advantages over
investment in conventional real estate mutual funds that invest
primarily in publicly traded REITs. In addition, applicants note that,
while the Act does not preclude a registered management investment
company from investing directly in real estate (provided that the fund
is not subject to a fundamental policy precluding such investment and,
in the case of an open-end fund, has sufficient liquidity to comply
with applicable Commission and staff positions), direct investment in
real estate would be impractical due to the typical size of such
investments and for tax reasons. Accordingly, applicants propose to
allow each Fund (solely to the extent consistent with its investment
policies, objectives, strategies and restrictions) to obtain exposure
to real estate through PDPF, which will be dedicated to investing
indirectly in real estate through PCP REIT.
    6. For this reason, applicants request an order under sections 6(c)
and 17(b) of the Act for exemptions from section 17(a) of the Act, and
under section 17(d) of the Act and rule 17d-1 thereunder, to permit:
(i) One or more Funds (as defined below) to purchase, hold and redeem
units of limited partnership interests of PDPF (``Units''); (ii) PDPF
to sell Units to one or more Funds and redeem such Units following
demand of such Funds; (iii) to the extent it could be deemed an element
of a ``joint transaction,'' as defined below, PDPF to purchase, hold
and redeem interests in PCP REIT; and (iv) the Funds and Other Accounts
(as defined below) to engage in certain purchase or sale cross
transactions in securities, all as described and subject to the
conditions set forth in the application.\3\
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    \3\ Applicants acknowledge that they are not seeking, and the
Commission is not granting, relief from any disclosure requirements
that are applicable to applicants.
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    7. Applicants request that the relief extend to each existing or
future registered management investment company or series thereof that
is advised by PGI or any successor entity or any entity controlling,
controlled by, or under common control with PGI (each, a ``Fund'').\4\
Applicants further request that the relief extend to any future limited
partnership (``Future LP''), general partner thereof (``Future GP''),
and underlying real estate investment vehicle (``Future Real Estate
Fund'') in which such Future LP invests that has elected to be taxed as
a REIT pursuant to the Code that operate in a manner that is identical
to PDPF, PDPGP and PCP REIT except for the types of real estate
investments held by a Future Real Estate Fund.\5\
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    \4\ Each entity that currently intends to rely on the requested
relief has been named as an applicant. For purposes of the requested
order, ``successor'' is limited to an entity that results from
reorganization into another jurisdiction or a change in the type of
business organization.
    \5\ Any entity that relies in the future on the requested relief
will comply with the terms and conditions of the application as they
apply to the corresponding current party.
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    8. Applicants state that PCP REIT will invest in direct real estate
holdings and, to maintain some liquidity, may invest a portion of its
assets in liquid investments. To finance its investments in real estate
holdings, PCP REIT plans to borrow from banks, as well as from
insurance companies, pension/retirement systems, state and federal
government related entities (e.g., Freddie Mac), investment banks, and
other commercial lenders (e.g., GE Capital Corporation (or its
successor), Ally Financial) (lenders other than banks are referred to
as ``Non-bank Commercial Lenders''). Applicants represent that PCP REIT
plans to incur loans from Non-bank Commercial Lenders because such
lenders have been longstanding capital resources to the commercial real
estate market and often are able to offer more favorable lending terms
to borrowers.\6\ PCP REIT will not incur any loans that are callable at
the option of the lender.
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    \6\ Applicants submit that, in light of the presence of a bona
fide business purpose for PDPF and PCP REIT and the difficulty a
Fund would have in directly investing in real estate, the structure
proposed by the application can be distinguished from a structure
intended primarily to evade leverage restrictions applicable to
open-end funds.
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    9. Applicants state that PDPF will invest a substantial portion of
its assets in PCP REIT and, if deemed appropriate by PGI, for short-
term cash management purposes and/or for purposes of maintaining some
liquidity, invest a portion of its assets in liquid securities. PDPF
will incur expenses relating to the management of any liquid
investments held by PDPF, as well as for the general operation and
administration of the entity.\7\
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    \7\ Applicants anticipate that PDPF will be able to efficiently
deploy assets invested by the Funds in light of the ability of PDPF
to invest in liquid investments in addition to interests in PCP
REIT, so that any Fund assets invested in PDPF that are not
currently invested in real estate will be effectively deployed
pending completion of real estate investments. The performance of
PDPF, the costs of investing in PDPF and the related expenses, will
be considered by the Funds' Board during the course of its oversight
of the Funds' investments in PDPF, including its annual
determinations as required by condition 1 below.
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    10. PDPF will conduct a non-public offering of its Units, and will
not be publicly traded. Applicants state that PDPF is currently
expected to be made available solely to the Funds, although it is
possible that it will be made available in the future to: (i)
Unaffiliated registered investment companies, pension plans, other
institutional investors or high-net-worth individuals (``Outside
Investors''); as well as to (ii) pension plans, insurance separate
accounts, collective investment trusts, or other institutional
investors or high-net-worth individuals for which PGI or an affiliate
of PGI serves as investment adviser (``Other Accounts'').\8\
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    \8\ No applicant, or an affiliated person thereof, will have a
proprietary interest in any Outside Investor or Other Account,
except that an applicant or an affiliated person thereof may be a
shareholder of an Outside Investor that is a registered investment
company so long as the applicant or affiliated person of such
applicant is not an affiliated person of such registered investment
company.
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    11. Applicants state that the Funds (as well as any Other Accounts
or Outside Investors) that invest in PDPF will be able to purchase and
redeem Units on a daily basis at the next determined net asset value
(``NAV'') per Unit. In the event that PDPF is unable to accommodate
investment demand from the Funds, Other Accounts and/or Outside
Investors, opportunities for investment will be allocated in accordance
with allocation policies and procedures drafted and maintained by

PGI.\9\ Applicants represent that, while such allocation policies and
procedures may be subject to revision over time, the allocation
policies and procedures generally will allocate opportunities on a pro
rata basis based on orders received, with normal exceptions for
rounding and de minimis amounts, although applicants state that other
allocation methodologies may be employed as appropriate. Any such
methodology will be applied in a manner that is objective and
verifiable and will be consistent with PGI's fiduciary obligation to
treat client accounts in a manner that is fair and provides for
equality of opportunity over time. However, PDPF will reserve the right
to give the Funds preferential access to opportunities to invest in
PDPF as compared to Outside Investors and (to the extent permitted
under the allocation policies and procedures) Other Accounts, and the
Funds will always have opportunities to invest in PDPF that are at
least as favorable as the opportunities to invest in PDPF made
available to Other Accounts or Outside Investors. The policies and
procedures will require the documentation of the basis of allocation,
as well as the basis for any exception to the general principles set
forth in the policies and procedures, which exception will be subject
to review by legal or compliance personnel.
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    \9\ Applicants are not seeking any comfort and acknowledge that
the Commission is providing no opinion on whether these allocation
policies and procedures meet the standards applicable either under
the Act or the Advisers Act.
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    12. Applicants anticipate that PDPF will be managed to maintain
sufficient liquidity to satisfy the daily liquidity needs of its
limited partners under ordinary market conditions. However, any
investment in PDPF will be subject to terms permitting PDPF, under
circumstances described in the application, to (a) cease offering new
Units; (b) limit or postpone redemptions in the event that PCP REIT has
insufficient liquidity to satisfy redemption requests; or (c) utilize a
``gate'' pursuant to which the amount of redemptions from PDPF by any
limited partner on any business day may be limited to a percentage of
the limited partner's entire investment in PDPF.\10\ Accordingly, each
Fund that is an open-end investment company will treat its entire
investments in PDPF and any Future LPs as investments that are not
liquid for purposes of any applicable rules or guidance of the
Commission or its staff regarding the management of liquidity.
Similarly, each Fund, including any open-end or closed-end investment
company will, at all times, limit its holdings in PDPF (together with
any Future LPs) to no more than 15% of its net assets.\11\
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    \10\ PDPF expects that the ability to limit or postpone
redemption will help to minimize transaction costs, investment
losses and any dilutive effects on non-redeeming limited partners.
PDPF's ability to limit or postpone redemption and the circumstances
under which PDPF may waive an established redemption gate, in whole
or in part, are discussed in greater detail in the application.
    \11\ Applicants submit that, although closed-end Funds do not
present the same concerns with respect to liquidity as open-end
Funds, it is nonetheless appropriate to limit the investments of
these Funds in PDPF (and Future LPs) to address concerns that may
arise regarding complex structures and the use of leverage, among
other things.
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    13. Redemption requests will be considered on a first in basis
based upon the business day of receipt, unless a limited partner (other
than a registered investment company or Other Account) has agreed to a
lower priority of redemption. Except as a limited partner (other than a
registered investment company or Other Account) has otherwise agreed,
redemption requests of all investors will be treated equally, and PDPF
will allocate redemption proceeds on a pro rata basis in the event that
there are insufficient liquid assets to satisfy fully all redemption
requests. The rules on redemption and PDPF's policy regarding the
allocation of redemption proceeds, and any changes to either of these,
will be disclosed to all prospective investors in PDPF. PDPF will have
a written policy regarding the allocation of redemption proceeds that
will be applied in a manner that is objective and verifiable and will
be consistent with PGI's fiduciary obligation to treat client accounts
in a manner that is fair.
    14. Each Fund and Other Account limited partner of PDPF will have
identical rights, duties and obligations under the limited partnership
agreement as each other Fund and Other Account limited partner. If
Outside Investors are permitted to invest in PDPF, PDPF may distinguish
between Fund and Other Account limited partners, on the one hand, and
Outside Investors, on the other, by entitling the Funds and Other
Accounts to purchase, hold and redeem Units with more favorable rights,
duties and obligations pursuant to the terms of the limited partnership
agreement with respect to the following issues: (a) Utilization of
redemption gates; (b) limitation of rights of redemption; and/or (c)
the level of expenses charged in connection with an investment in
PDPF.\12\
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    \12\ In making a determination as to whether the rights, duties,
and obligations of the Funds and Other Accounts under the terms of
the limited partnership agreement are more favorable than those of
Outside Investors, applicants will consider each right, duty, and
obligation individually and in the aggregate.
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    15. PDPF will be able to purchase and redeem limited liability
company interests in PCP REIT on a daily basis at the next determined
NAV. Applicants represent that PDPF will be the sole investor in PCP
REIT, other than the ninety-nine or more additional investors necessary
or appropriate to allow PCP REIT to qualify as a REIT under section
856(a)(5) of the Code (the ``Tax Holders''). The Tax Holders' interests
in PCP REIT will be preferred to PDPF's interests in PCP REIT. However,
(a) the Tax Holders will have only limited voting rights, (b) the Tax
Holders' aggregate interests in PCP REIT will be de minimis in relation
to that of PDPF,\13\ and (c) PCP REIT will not issue additional
interests to the Tax Holders after the initial organization of PCP REIT
(clause (a), (b), and (c), collectively, the ``Tax Holder
Limitations'').\14\ Accordingly, it is anticipated that PDPF will own
substantially all of the total outstanding securities of PCP REIT at
all times during the operation of PCP REIT.
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    \13\ Applicants anticipate that the Tax Holders will invest, in
aggregate, approximately $125,000 and will represent much less than
1% of the expected aggregate net assets of PCP REIT.
    \14\ The Tax Holders' interests in PCP REIT and the Tax Holder
Limitations are discussed in greater detail in the application.
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    16. Applicants represent that PCP REIT will not participate in any
joint enterprise or other joint arrangement, within the meaning of rule
17d-1 under the Act, with the Future Real Estate Funds or other PGI
related accounts, and applicants are not asking for an order pursuant
to rule 17d-1 with respect to any such transaction. Further, applicants
state that PGI has adopted policies and procedures applicable to any
purchasing conflicts between PCP REIT and any other PGI related
accounts, which are designed to allocate opportunities consistent with
PGI's fiduciary obligations to its clients and will be applied in a
manner that is objective and verifiable.

Applicants' Legal Analysis

Section 17(a)--purchase and sale of Units

    1. Section 17(a) of the Act generally prohibits an ``affiliated
person'' as defined by section 2(a)(3) of the Act, or an affiliated
person of an affiliated person, of a registered investment company,
acting as principal, from purchasing securities or other property from
the registered investment company or selling securities or other
property to the registered investment company.

Section 2(a)(3) of the Act defines an ``affiliated person'' of another
person to include, among others, (a) any person directly or indirectly
owning, controlling, or holding with power to vote, 5% or more of the
outstanding voting securities of the other person; (b) any person 5% or
more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with the power to vote by the other person;
and (c) any person directly or indirectly controlling, controlled by,
or under common control with the other person. Section 2(a)(9) defines
``control'' to mean ``the power to exercise a controlling influence
over the management or policies of a company, unless such power is
solely the result of an official position with such company.''
    2. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
the terms of the proposed transaction, including the consideration to
be paid or received, are fair and reasonable and do not involve
overreaching on the part of any person concerned, and the proposed
transaction is consistent with the policies of each registered
investment company involved and with the general purposes of the Act.
Section 6(c) of the Act permits the Commission to exempt any person or
transactions from any provisions of the Act if 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.
    3. Applicants state that the sale by PDPF of its Units to a Fund or
the repurchase by PDPF of its Units from a Fund may be deemed to be
prohibited by section 17(a) of the Act, as PDPF and each Fund may be
deemed to be affiliated persons, or affiliated persons of affiliated
persons, of each other under multiple theories. For example, the Fund
may be deemed to be an affiliated person of PDPF in the event that it
owns 5% or more of the Units in PDPF. In addition, PDPF could be deemed
to be an affiliated person of an affiliated person of the Fund, if it
is deemed to be under the control of or under common control with PGI.
    4. Applicants believe that the proposed transactions among the
Funds and PDPF satisfy the requirements for relief from section 17(a)
of the Act under both sections 17(b) and 6(c) of the Act.
    5. Applicants submit that the proposed transactions are reasonable
and fair and would not involve overreaching on the part of any person
concerned. Before investment by a Fund in PDPF, the Fund's Board,
including a majority of the Independent Directors, would have made the
determinations required under condition 1 below.\15\ The Board,
including the Independent Directors, will review these determinations
on at least an annual basis. Applicants represent that, currently, the
Board is made up of twelve directors, nine of whom are Independent
Directors. Further, applicants notes that PGI's ability to allocate a
Fund's assets to investments in PDPF would be limited to address any
potential for overreaching because (a) the allocation would be
determined either by the Fund's glide path or would be within a range
of permissible allocations approved in advance by the Board and (b) the
Fund's investment would be limited under condition 3 below.
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    \15\ The ``Independent Directors'' are the directors who are not
interested persons of the relevant Fund within the meaning of
section 2(a)(19) of the Act.
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    6. In addition, applicants state that each Fund would purchase and
sell Units on the same terms as each other Fund and any Other Account,
and on terms that are at least as favorable as the terms on which
Outside Investors would purchase and sell Units. PDPF also would sell
its shares to or purchase its shares from a Fund at the next-calculated
NAV per Unit. This value, which would be provided to the Funds on a
daily basis, would be determined based on the valuations of the assets
of PCP REIT, which would be determined by using valuation methodologies
that are consistent with section 2(a)(41) of the Act except that the
PDPF Committee will, in reliance on independent appraisals obtained at
least quarterly, make determinations that would otherwise be made by a
board of directors.\16\
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    \16\ Applicants note that, in accordance with condition 9, PDPF
will consolidate PCP REIT for reporting purposes and the
consolidated financial statements of PDPF will be prepared in
accordance with Regulation S-X, will be audited by an independent
auditor, and, if practicable, will be prepared as of the same date
and for the same periods as the investing Funds. Applicants state
that the Public Company Accounting Oversight Board auditing
standards applicable to the audit of PDPF would be the same
standards as those applicable to a registered investment company.
Further, applicants state that the U.S. Generally Accepted
Accounting Principles and Regulation S-X would apply to the
financial statements of both PDPF and a registered investment
company. Thus, applicants assert that critical accounting policies
governing security valuation, accounting for investment
transactions, recognition of investment income and of expenses, and
accrual of expenses, which are often the critical policies
applicable to investment companies, would apply in substantially the
same manner for the financial statements of PDPF. Valuation of the
assets of PDPF and PCP REIT for which market quotations are not
readily available will be overseen by a committee consisting of the
employees and agents of PDPF, PGI and/or its subsidiaries (the
``PDPF Committee'').
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    7. Applicants further submit that the proposed transactions would
be consistent with the policies of each Fund. Applicants represent that
the investment by a Fund in PDPF would be effected in accordance with
the investment policies, objective, strategies and restrictions
contained in the registration statement of the Fund.
    8. Finally, applicants submit that, for these reasons, as well as
the benefits shareholders in the Funds would experience by reason of
the Funds' investments in PDPF, the proposed transactions are
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.

Section 17(d)

    9. Section 17(d) of the Act and rule 17d-1 under the Act generally
prohibit joint transactions involving registered investment companies
and their affiliates unless the Commission has approved the
transaction. In considering whether to approve a joint transaction
under rule 17d-1, the Commission considers whether the proposed
transaction is consistent with the provisions, policies, and purposes
of the Act, and the extent to which the participation of the investment
companies is on a basis different from or less advantageous than that
of the other participants.
    10. Applicants state that the sale of Units to a Fund, the Fund's
holding of Units, the redemption of Units held by the Fund, an Other
Account's purchase, holding and redemption of Units alongside a Fund,
PDPF's purchase, holding and redemptions of interest in the PCP REIT,
and PGI's management of the Funds, Other Accounts, PDPF and PCP REIT at
the same time that the Funds are investing in PDPF (directly) and PCP
REIT (indirectly) could be deemed to constitute a joint enterprise or
joint arrangement among the Funds, Other Accounts, PDPF, PDPGP, PCP
REIT, and PGI because the Funds may be presumed to be affiliated
persons, or affiliated persons of affiliated persons, of PGI, Other
Accounts, PDPF or PCP REIT.
    11. For the reasons discussed above, applicants submit that the
proposed transactions are consistent with the provisions, policies and
purposes of the Act. Applicants further believe that, based on the
terms of the proposed transactions and the conditions set forth

below, the participation by the Funds in the proposed transactions
would be on a basis no different from that of other Funds or Other
Accounts or less advantageous than that of other Funds, Outside
Investors or Other Accounts. A Fund will hold Units of PDPF only if it
will at all times have identical rights, duties and obligations under
the limited partnership agreement as each other Fund limited partner
and Other Account limited partner. If Outside Investors or Other
Accounts are permitted to invest in PDPF, the Funds will be entitled to
purchase, hold and redeem Units on terms that are at least as
favorable, including (without limitation) the expenses associated with
an investment in PDPF, as the terms on which any Outside Investor
purchases, holds or redeem Units and on terms that are the same as the
terms on which any Other Account purchases, holds or redeems Units.\17\
PDPF and the Tax Holders will be the only investors in PCP REIT, and
the Tax Holders' interests will be subject to the Tax Holder
Limitations. All transactions in Units would be priced in the same
manner and would be redeemable under the terms discussed herein and
disclosed to investors. In addition, any investment by a Fund in PDPF
would be subject to oversight by the Fund's Board.
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    \17\ In making a determination as to whether the rights, duties,
and obligations of the Funds and Other Accounts under the terms of
the limited partnership agreement are at least as favorable as those
of Outside Investors, applicants will consider each right, duty and
obligation individually and in the aggregate.
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Section 17(a)--Cross Transactions

    12. Applicants also propose that the Funds and Other Accounts be
permitted to engage in certain purchase and sale cross transactions in
securities (``Cross Transactions''). Applicants expect that these
transactions will be between a Fund seeking to implement a portfolio
strategy and an Other Account seeking to raise or invest cash, or vice
versa. Applicants represent that the Funds currently are able rely on
rule 17a-7 to engage in such Cross Transactions. However, if a Fund and
an Other Account were deemed to be affiliated persons of an affiliated
person of each other by virtue of their ownership or control
affiliations with PDPF, the Funds may not be entitled to rely on rule
17a-7 because they would no longer be affiliated solely for the reasons
permitted by the rule. Applicants represent that Funds and Other
Accounts will not engage in Cross Transactions involving Units, and to
the extent any Future LPs are created, PDPF and the Future LPs (and
their respective subsidiaries) will not engage in cross-trades with
each other.
    13. Applicants represent that, when engaging in Cross Transactions,
the Funds and Other Accounts will comply with the requirements set
forth in rule 17a-(7)(a) through (g), as interpreted by the Commission
staff. Applicants assert that the potential affiliations created by the
PDPF structure do not affect the other protections provided by the
rule, including the integrity of the pricing mechanism employed and
oversight by each Fund's Board. Applicants also note that no brokerage
commission, fee or other remuneration will be paid in connection with
the transactions. Applicants, therefore, believe that Cross
Transactions will be reasonable and fair, will not involve
overreaching, and will be consistent with the purposes of the Act and
the investment policy of each Fund.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
    1. PGI will not implement an initial decision to invest the assets
of a Fund in PDPF unless prior to the Fund's initial investment in
PDPF, the Board, including a majority of the Independent Directors, has
determined that: (i) Investment in PDPF (and indirectly in PCP REIT) is
an appropriate means to implement an investment decision made by PGI
for the Fund to seek real estate exposure; (ii) investment in PDPF (and
indirectly in PCP REIT) is in the best interests of the Fund and its
shareholders, taking into account, among other things, the management
and administration fees of PDPF and PCP REIT; (iii) the management and
administration fees to be charged by PDPF and PCP REIT are for services
in addition to, rather than duplicative of, services rendered to the
Fund directly; and (iv) the management and administration fees to be
charged by PDPF and PCP REIT are fair and reasonable in light of the
usual and customary fees charged by others for services of the same
nature and quality. The Board, including the Independent Directors,
will review these determinations on at least an annual basis. The basis
for each of the Board's determinations required by this condition will
be recorded in its minutes. If the Board does not make the
determinations in clauses (iii) and (iv) in a review subsequent to the
initial investment, PGI will reimburse the Fund the amount of any
management and administrative fee borne by the Fund as a direct
investor in PDPF and an indirect investor in PCP REIT charged since the
most recent date on which the Board did make these determinations.
    2. Prior to any initial or additional investments in Units, PGI
will determine that each Fund's investment in PDPF will be consistent
with the Fund's investment policies, objective, strategies and
restrictions, and purchases of Units will be determined either by the
Fund's glide path or be limited such that total holdings remain within
a range of permissible allocations approved in advance by the Board.
For purposes of determining consistency with a Fund's investment
policies, objective, strategies and restrictions, a Fund will look
through its investment in PDPF (and indirectly in PCP REIT) and apply
its investment policies, objective, strategies and restrictions (except
for any restriction relevant to the direct ownership of real estate
assets) in such a manner that the Fund will not do indirectly through
PDPF and PCP REIT that which it cannot do directly. For purposes of
applying its investment policies, objective, strategies and
restrictions, a Fund will be considered as owning its pro rata portion
of the portfolio holdings of PDPF and PCP REIT.
    3. Each Fund that is an open-end investment company will treat its
entire investments in PDPF and any Future LPs as investments that are
not liquid for purposes of any applicable rules or guidance of the
Commission or its staff regarding the management of liquidity. In
addition, each Fund, including any open- or closed-end investment
company, will, at all times, limit its holdings in PDPF (together with
any Future LPs) to no more than 15% of its net assets.\18\
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    \18\ Although closed-end Funds do not present the same concerns
with respect to liquidity as open-end Funds, Applicants believe that
it is nonetheless appropriate to limit the investments of these
Funds in PDPF (and Future LPs) to address concerns that may arise
regarding complex structures and the use of leverage, among other
things.
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    4. At all times that any Fund or other registered investment
company holds an interest in PDPF, each of PDPF and PCP REIT: (a) Will
determine its respective net asset value per Unit or membership
interest, as applicable, each Business Day; and (b) will maintain and
comply with policies and procedures for valuing its assets that are
consistent with section 2(a)(41) of the Act except that PDPF Committee
will, in reliance on independent appraisals obtained at least
quarterly, make determinations that would otherwise be made by a board
of directors (as if PDPF and PCP REIT were subject to section 2(a)(41))
and with

applicable U.S. generally accepted accounting principles (``U.S.
GAAP'') (or successor accounting standards). For these purposes,
``Business Day'' means each day on which the Funds or other registered
investment company determine net asset value per share, as disclosed in
the Funds' or other registered investment company's registration
statement.
    5. A Fund will hold Units of PDPF only if it will at all times have
identical rights, duties and obligations under the limited partnership
agreement as each other Fund limited partner and Other Account limited
partner. If Other Accounts or Outside Investors are permitted to invest
in PDPF, the Funds will be entitled to purchase, hold and redeem Units
on terms that are at least as favorable, including (without limitation)
the expenses associated with an investment in PDPF, as the terms on
which any Outside Investor purchases, holds or redeems Units and on
terms that are the same as the terms on which any Other Account
purchases, holds or redeems Units.\19\ Other than the Tax Holders'
interests, which will be subject to the Tax Holder Limitations, PDPF
will own at all times 100% of the voting and economic interests in PCP
REIT.
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    \19\ See supra footnote 17.
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    6. PCP REIT and PDPF will be managed by an investment adviser that
is registered as an investment adviser with the Commission. Any
investment sub-adviser to PCP REIT or PDPF will be registered as an
investment adviser with the Commission or, if not registered, will
consent to examination by the Commission staff with respect to the
services it would provide to PCP REIT or PDPF as if it were registered
as an investment adviser.
    7. The Funds' proposed investments in PDPF, and PDPF's investment
in PCP REIT, will not be subject to any sales load, redemption fee,
distribution fee analogous to a 12b-1 fee, or service fee analogous to
a FINRA Rule 2830 service fee imposed by PDPF or PCP REIT.
    8. PGI shall cause PDPGP, PDPF and PCP REIT to maintain books and
records as is consistent with Internal Revenue Service guidance and
U.S. GAAP, shall cause the books and records of PDPGP, PDPF and PCP
REIT to be made available for inspection by the Commission staff as
would be required by the Act if each of PDPGP, PDPF and PCP REIT was a
registered investment company, and, if requested, shall furnish copies
of the books and records to the Commission staff.
    9. PDPF will prepare consolidated annual and semi-annual financial
reports and, for each quarter for which a semi-annual or annual report
is not required to be prepared, a consolidated schedule of investments
for PDPF. The financial statements of PDPF will be prepared in
accordance with Regulation S-X and U.S. GAAP, will be audited by an
independent auditor (for annual financial statements), and, if
practicable, will be prepared as of the same date and for the same
periods as the investing Funds. PDPF will consolidate PCP REIT for
financial reporting purposes. Any consolidated schedule of investments
of PDPF will disclose each position that PDPF and PCP REIT hold. PFI
and PVC on behalf of each Fund that has invested 5% or more of its net
assets in PDPF \20\ as of the end of a reporting period, will attach,
as an exhibit to each of PFI's and PVC's shareholder reports with
respect to such a Fund filed on Form N-CSR and each of PFI's and PVC's
quarterly reports with respect to such a Fund filed on Form N-PORT,
PDPF's audited or unaudited financial statements (which will consist of
financial statements, footnotes thereto and a schedule of investments)
or schedule of investments for the period most recently ended. PDPF
will deliver such annual and semi-annual financial statements and
schedules of investments to PFI and PVC in time to allow PFI and PVC to
make such filings. The relevant Fund's shareholder reports and
quarterly reports will cross-reference the PDPF financial statements
(for annual and semi-annual reports) or schedule of investments (for
other quarters) filed as an exhibit to the form. If a Fund is required
to attach and cross-reference the financial statements of PDPF solely
for purpose of complying with this condition 9, (a) the Fund may
disclaim that (i) PDPF financial statements or schedule of investments
constitute part of the Fund's financial statements, shareholder report
or quarterly report, and (ii) PDPF financial statements or schedule of
investments are incorporated therein by reference, and (b) the
certifications for each principal executive and principal financial
officer required by rule 30a-2(a) under the Act that accompany Form N-
CSR or Form N-PORT filings with respect to such a Fund may make clear
that PDPF financial statements or schedule of investments that
accompany the Form N-CSR or Form N-PORT filings do not constitute part
of the report to which the certificate relates.\21\
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    \20\ Investments in any Future LPs will be aggregated with
investments in PDPF to determine whether a Fund has invested 5% or
more of its net assets. If the aggregate investments are 5% or more,
then the disclosure requirements under this condition will apply
(for that Fund) with respect to information about PDPF and each
Future LP in which that Fund is invested.
    \21\ As noted above, the requested order does not include relief
from any existing disclosure requirements. Accordingly, the
disclaimer and clarification contemplated in clauses (a) and (b)
could not be included if the Fund is required to disclose
information regarding the financial statements of PDPF for any
purpose other than complying with this condition 9.
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    10. Neither PDPF nor PCP REIT will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained in section 12(d)(1)(A) of the
Act, except to the extent that PDPF or PCP REIT: (a) Receives
securities of another investment company as a dividend or as a result
of a plan of reorganization of a company (other than a plan devised for
the purpose of evading section 12(d)(1) of the Act); or (b) acquires
(or is deemed to have acquired) securities of another investment
company pursuant to exemptive relief from the Commission permitting
PDPF or PCP REIT to (i) acquire securities of one or more investment
companies for short-term cash management purposes, or (ii) engage in
interfund borrowing and lending transactions.
    11. A Fund will treat any leverage that PDPF or PCP REIT incurs as
though such leverage were incurred by the Fund for purposes of
determining compliance with applicable restrictions under the Act
relevant to the Fund's use of leverage. Under no circumstances will a
Fund guarantee, or otherwise be responsible for the satisfaction of,
any loan or obligation incurred by PDPF or PCP REIT.
    12. PDPF and PCP REIT will comply with the following sections of
the Act as if PDPF and PCP REIT each were an open-end management
investment company registered under the Act, except as noted: Section
9; section 12 (except that, to the extent necessary to implement the
arrangements described herein, (i) the Funds may invest in Units issued
by PDPF in accordance with condition 3, (ii) PDPF may issue Units to
the investing Funds subject to the limits in condition 3, and (iii)
PDPF may invest in PCP REIT beyond the limits of sections 12(d)(1)(A)
and (B)); section 13 (provided that section 13(a)(4) will apply as
though it read only ``change the nature of its business''; the
interests issued by PDPF and PCP REIT will be regarded as voting
securities under section 2(a)(42) of the Act for purposes of applying
this condition; and the offering memoranda utilized by PDPF and PCP
REIT to offer and sell their interests will be regarded as registration
statements for purposes

of applying this condition); section 17(a) (except insofar as relief is
provided by the order requested herein); section 17(d) (except insofar
as relief is provided by the order requested herein); section 17(e);
section 17(f); section 17(h); section 18 (although (a) the interests
issued by PDPF and PCP REIT will be regarded as voting securities under
section 2(a)(42) of the Act for purposes of applying this condition,
(b) PCP REIT will be permitted to incur loans from Non-bank Commercial
Lenders, subject to the asset coverage limit, (c) PCP REIT will not be
required to restore 300% asset coverage within three days, as required
under section 18(f), if such asset coverage falls below 300% solely as
a result of a decline in the value of PCP REIT's real estate holdings,
and (d) each Fund and Other Account limited partner of PDPF will have
identical rights, duties, and obligations under the limited partnership
agreement as each other Fund and Other Account limited partner, and if
Outside Investors are permitted to invest in PDPF, PDPF may distinguish
between Fund and Other Account limited partners, on the one hand, and
Outside Investors, on the other, by entitling the Funds and Other
Accounts to purchase, hold, and redeem Units with more favorable
rights, duties and obligations pursuant to the terms of the limited
partnership agreement with respect to the following issues: (1)
Utilization of redemption gates; (2) limitation of rights of
redemption; and/or (3) the level of expenses charged in connection with
an investment in PDPF); \22\ section 21; section 36; and sections 37-
53. In addition, PDPF and PCP REIT will comply with the rules under
section 17(f) and section 17(g) of the Act, as well as rule 22c-1 under
the Act as if each of PDPF and PCP REIT were an open-end management
investment company registered under the Act.
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    \22\ See supra, footnote 12.
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    PGI will cause PDPGP, PDPF and PCP REIT to, and PDPGP, PDPF and PCP
REIT will, adopt policies and procedures designed to ensure that each
of PDPF and PCP REIT complies with the aforementioned sections of the
Act and rules under the Act. PGI will cause PDPGP, PDPF and PCP REIT
to, and PDPGP, PDPF and PCP REIT will, periodically review and
periodically update as appropriate such policies and procedures,
maintain books and records describing such policies and procedures, and
maintain the records required by rules 31a-1(b)(1), 31a-1(b)(2)(ii) and
31a-1(b)(9) under the Act. All books and records required to be made
pursuant to this condition will be maintained and preserved for a
period of not less than six years from the end of the fiscal year in
which any transaction occurs, the first two years in an easily
accessible place, and will be subject to examination by the Commission
and its staff.
    For purposes of implementing condition 12, any action that the
above-referenced statutory and regulatory provisions require to be
taken or made by the directors, officers and/or employees of a
registered investment company will be performed by PDPGP with respect
to PDPF, and by PGI, as managing member with respect to PCP REIT. As
noted in this Application, the PDPF Committee will oversee the
valuation of the assets of PDPF and PCP REIT for which market
quotations are not readily available, which also will be relevant to
the implementation of condition 12.
    13. To engage in Cross Transactions, the Funds will comply with
rule 17a-7 under the Act in all respects other than the requirement
that the parties to the transaction be affiliated persons (or
affiliated persons of affiliated persons) of each other solely by
reason of having a common investment adviser or investment advisers
which are affiliated persons of each other, common officers, and/or
common directors, solely because a Fund and Other Account might become
affiliated persons within the meaning of section 2(a)(3)(A), (B) or (C)
of the Act due to their investments in PDPF.

    For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08824 Filed 4-24-20; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 219 (Wednesday, November 15, 2017)]
[Notices]
[Pages 52958-52959]
[FR Doc No: 2017-24659]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82040; File No. SR-NYSEArca-2017-111]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of
Designation of a Longer Period for Commission Action on a Proposed Rule
Change, as Modified by Amendment No. 1, To List and Trade Shares of the
GraniteShares Silver Trust Under NYSE Arca Rule 8.201-E

November 8, 2017.
    On September 12, 2017, NYSE Arca, Inc. (``Exchange'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to list and trade
shares of the GraniteShares Silver Trust under NYSE Arca Rule 8.201-E.
The proposed rule change was published for comment in the Federal
Register on September 29, 2017.\3\ On October 24, 2017, the Exchange
filed Amendment No. 1 to the proposed rule change.\4\ The Commission

has received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81699 (Sept. 25,
2017), 82 FR 45634.
    \4\ Amendment No. 1, which amended and replaced the proposed
rule change in its entirety, is available on the Commission's Web
site at: https://www.sec.gov/comments/sr-nysearca-2017-111/nysearca2017111-2653768-161362.pdf.
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    Section 19(b)(2) of the Act \5\ provides that, within 45 days of
the publication of notice of the filing of a proposed rule change, or
within such longer period up to 90 days as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding, or as to which the self-regulatory organization
consents, the Commission shall either approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether the proposed rule change should be disapproved. The
45th day after publication of the notice for this proposed rule change
is November 13, 2017. The Commission is extending this 45-day time
period.
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    \5\ 15 U.S.C. 78s(b)(2).
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    The Commission finds that it is appropriate to designate a longer
period within which to take action on the proposed rule change so that
it has sufficient time to consider the proposed rule change, as
modified by Amendment No. 1. Accordingly, the Commission, pursuant to
Section 19(b)(2) of the Act,\6\ designates December 28, 2017, as the
date by which the Commission shall either approve or disapprove, or
institute proceedings to determine whether to disapprove, the proposed
rule change (File No. SR-NYSEArca-2017-111), as modified by Amendment
No. 1.
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    \6\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(31).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24659 Filed 11-14-17; 8:45 am]
 BILLING CODE 8011-01-P