As filed with the U.S. Securities and Exchange Commission on April 12, 2013
Securities Act File No. 333-184361
Investment Company Act File No. 811-22759
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
x | REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |
x | Pre-effective Amendment No. 1 |
¨ | Post-effective Amendment No. |
x | REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |
x | Amendment No. 1 |
SHARESPOST 100 FUND
(Exact name of Registrant as specified in Charter)
1150 Bayhill Drive
San Bruno, California 94066
(Address of Principal Executive Offices)
Registrant’s Telephone Number, including Area Code:
(800) 279-7754
Sven Weber
c/o SP Investments Management, LLC
1150 Bayhill Drive
San Bruno, California 94066
(Name and Address of Agent for Service)
Copies to:
Daniel I. DeWolf, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
The Chrysler Center
666 Third Avenue
New York, New York 10017
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), other than securities offered in connection with a dividend reinvestment plan, check the following box. x
It is proposed that this filing will become effective: |
¨ when declared effective pursuant to Section 8(c) |
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
TITLE OF SECURITIES BEING REGISTERED | AMOUNT BEING REGISTERED | PROPOSED MAXIMUM OFFERING PRICE PER SHARE | PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT* | AMOUNT OF REGISTRATION FEE | ||||||||||||
Shares of Beneficial Interests | 25,000,000 Shares | $20.00 | $500,000,000.00 | $68,200.00** |
* Estimated solely for the purpose of calculating the registration fee, in accordance with Rule 457(o) under the Securities Act.
**The Registrant previously paid $68,200.00 of the total registration fee in connection with prior filings of this Registration Statement.
The Registrant hereby amends this Registration Statement under the Securities Act on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT USE THIS PROSPECTUS TO SELL SECURITIES UNTIL THE REGISTRATION STATEMENT CONTAINING THIS PROSPECTUS, WHICH HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SharesPost 100 Fund
25,000,000 Shares of Beneficial Interest
$2,500 minimum purchase
SharesPost 100 Fund (the “Fund”, “we”, or “us”) is a recently formed Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, closed-end, management investment company that is operated as an interval fund. The shares of beneficial interest of the Fund (the “Shares”) will be continuously offered under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). The Fund intends to qualify and will elect to be treated as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”). The Fund is designed primarily for long-term investors and not as a trading vehicle.
This Prospectus applies to the offering of Shares of the Fund. The Fund has registered 25,000,000 Shares for sale under the registration statement to which this Prospectus relates. The Shares will be offered on a continuous basis at the Fund’s net asset value (“NAV”) per Share next calculated after receipt of the purchase in good order, plus any applicable sales load. The Fund has an interval fund structure pursuant to which the Fund, subject to applicable law, will conduct quarterly repurchase offers for no less than 5% of the Fund’s outstanding Shares at NAV. Even though the Fund will make quarterly repurchase offers, investors should consider the Fund’s Shares to be illiquid.
The Fund seeks capital appreciation. The Fund seeks to achieve its investment objective by investing in the equity securities of certain private, late-stage, growth companies (“Portfolio Companies”) primarily comprising the SharesPost 100, a list of companies (the “SharesPost 100”) selected and maintained by SP Investments Management, LLC, a Delaware limited liability company and the Fund’s investment adviser (the “Investment Adviser”). The SharesPost 100 includes companies traded on the “SharesPost Trading Platform”, a private capital markets trading platform on which institutional and high net worth investors purchase and sell the securities of private growth companies. In connection with a joint venture between SharesPost, Inc. (“SharesPost”) and The NASDAQ OMX Group, Inc. announced in March 2013, the SharesPost Trading Platform is expected to become the NASDAQ Private Market sometime in 2013.
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The SharesPost 100 is a list of 100 private, late-stage, growth companies, primarily in the technology sector, selected by the Investment Adviser according to several criteria, including revenue growth, market potential, product stage, management team, investor composition and level of trading activity. The SharesPost 100 should not be viewed as an index, but a selection of issuers in which the Fund will seek to make investments. The Fund’s performance will therefore not necessarily replicate the performance of any particular composite measurement of the stock performance of some or all issuers included in the SharesPost 100. There may be reasons why a particular SharesPost 100 issuer is not included in the Fund’s portfolio, including, without limitation: limited availability of shares for purchase, and the analysis of the Investment Adviser of the appropriateness of particular securities of SharesPost 100 issuers as investments for the Fund. While the Fund’s Investment Adviser may use the SharesPost 100 as a guideline for investing in the Fund’s Portfolio Companies, the Fund may invest in the securities of issuers other than those included in the SharesPost 100. The Investment Adviser expects that at least 85% of the Fund’s equity investments will be among the companies included in the SharesPost 100, and the Fund has adopted a non-fundamental policy to invest, under normal market conditions, at least 80% of the value of its assets in companies in the SharesPost 100 (measured at the time of investment). The Fund will notify investors of any proposed change in such policy at least 60 days in advance of such change in accordance with the 1940 Act. The inclusion of the number “100” in the Fund’s name is intended only to reflect the Fund’s primary investment program (i.e., to invest in securities of companies listed on the SharesPost 100). The Fund’s ability to implement this investment strategy is subject to the ability of the Fund’s Investment Adviser to identify and acquire the securities of Portfolio Companies on acceptable terms. The Fund is a “non-diversified” investment company, and, as such, the Fund may invest a greater percentage of its assets in the securities of a single issuer than investment companies that are “diversified.” See “Risk Factors.”
The Fund has a fundamental concentration policy not to invest 25% or more of its total assets in companies in a particular “industry”, as that term is used in the 1940 Act, and as interpreted, modified or otherwise permitted by a regulatory authority having jurisdiction, from time to time (the “Fundamental Concentration Policy”). The Fund’s Fundamental Concentration Policy does not preclude it from focusing investments in issuers in a group of related industrial sectors, and the Fund expects that most of the Portfolio Companies may (i) be in either internet-, mobile-, social media-, or technology-related fields, or (ii) utilize developing technology in providing their products and services. The Fund may also have significant holdings in cash and cash equivalents, generally at least 5%. There is no assurance that the Fund will achieve its investment objective.
The Fund is operated as an interval fund and, as such, has established a limited repurchase policy under Rule 23c-3 of the 1940 Act. Although the Fund will offer to repurchase Shares on a quarterly basis in accordance with the Fund’s repurchase policy, which repurchase policy provides that each quarter the Fund will offer to repurchase no less than 5% of its outstanding Shares, the Fund will not otherwise be required to repurchase or redeem Shares at the option of a shareholder of the Fund (each, a “Shareholder”, and collectively, the “Shareholders”) nor will Shares be exchangeable for units, interests or shares of any other fund. It is also possible that a repurchase offer may be oversubscribed, with the result that Shareholders may be able to have only a portion of their Shares repurchased.
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In addition, it is expected that the Fund’s Board of Trustees (the “Board of Trustees”) may determine in certain circumstances that it is in the best interests of the Fund and its Shareholders to suspend quarterly repurchase offers, which would further reduce the ability of Shareholders to redeem their Shares. The Fund does not currently intend to list its Shares for trading on any national securities exchange, and there is not expected to be any secondary trading market in the Shares. The Shares are therefore not readily marketable. Even though the Fund will endeavor to make quarterly repurchase offers to repurchase a portion of the Shares to provide some liquidity to Shareholders, you should consider the Shares to be illiquid. This risk may be even greater for Shareholders expecting to sell their Shares in a relatively short period after completion of the Fund’s initial public offering. If, and to the extent that, a public trading market ever develops, shares of closed-end investment companies frequently trade at a discount from their NAV per share and initial offering prices. The Fund is not suitable for investors who cannot bear the risk of loss of all or part of their investment, or who need a reasonable expectation of being able to liquidate all or a portion of their investment in a particular time frame. The Shares are appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. See “Risk Factors.”
The Fund’s Shares have no history of public trading, and you should not expect to be able to sell your Shares other than through the Fund’s repurchase policy, regardless of how the Fund performs. The Fund does not intend to list its Shares on any securities exchange during the continuous offering, and the Fund does not expect a secondary market in the Shares to develop. As a result of the foregoing, an investment in the Fund’s Shares is not suitable for investors that require liquidity, other than liquidity provided through the Fund’s repurchase policy. The Investment Adviser will publish the daily NAV of its Shares on its website at http://www.spinvestments.com. Investing in the Fund’s Shares involves substantial risks. Prospective investors should refer to the risk factors under the section entitled “Risk Factors” prior to making an investment in the Fund.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.
The Fund intends to offer the Shares in a continuous offering. The offering price for the Shares will be equal to the NAV per Share, plus any applicable sales load. The Fund’s Shares will be offered through Foreside Fund Services, LLC (the “Distributor”). In addition, certain institutions (including banks, trust companies, brokers and investment advisers) may be authorized to accept, on behalf of the Fund, purchase and exchange orders and repurchase requests placed by or on behalf of their customers, and if approved by the Fund, may designate other financial intermediaries to accept such orders.
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(Initial) Price to Public | Sales Load(2) | Proceeds to Registrant | ||||||||||
Per Share | $ | 20.00 | $ | 1.15 | $ | 18.85 | ||||||
Total Minimum | $ | 2,500.00 | $ | 143.75 | $ | 2,356.25 | ||||||
Total Maximum(1) | $ | 500,000,000.00 | $ | 28,750,000.00 | $ | 471,250,000.00 |
(1) | Assumes sale of all Shares currently registered at the initial NAV. The Shares are initially offered at an NAV per Share as of the date that the Fund’s registration statement on Form N-2 is declared by the SEC to be effective (plus any applicable sales load) and, thereafter, at the NAV per Share next calculated after the request to purchase Shares is received and accepted by or on behalf of the Fund (plus any applicable sales load). |
(2) | Investments are subject to a
sales load assessed at a rate of between 5.75% and 0.00% depending
upon the amount invested. The following sales charges apply to
your purchases of Shares of the Fund: |
Amount Invested | Sales Charge as a % of Offering Price | Sales Charge as a % of Amount Invested | Dealer Reallowance | |||||||||
Under $50,000 | 5.75% | 6.10% | 5.00% | |||||||||
$50,000 to $99,999 | 4.75% | 4.99% | 4.00% | |||||||||
$100,000 to $249,999 | 3.75% | 3.83% | 3.25% | |||||||||
$250,000 to $499,999 | 2.50% | 2.56% | 2.00% | |||||||||
$500,000 to $999,999 | 2.00% | 2.04% | 1.75% | |||||||||
$1,000,000 and above | 0.00% | 0.00% | 0.00% |
This Prospectus sets forth concisely the information about the Fund that a prospective investor ought to know before investing. You should read it carefully before you invest, and keep it for future reference. The Fund has filed with the Securities and Exchange Commission (“SEC”) an SAI dated, 2013, as may be amended, containing additional information about the Fund. The SAI is hereby incorporated by reference into this Prospectus (is legally considered part of this Prospectus). The Table of Contents of the SAI appears on page 63 of this Prospectus. The Fund also produces both annual and semi-annual reports that contain important information about the Fund. The Fund’s SAI and annual and semi-annual reports are available free of charge upon request by calling the Investment Adviser at (800) 279-7754. You can also access and download the annual and semi-annual reports and the SAI at the following website: http://www.spinvestments.com, or by mail at 1150 Bayhill Drive, San Bruno, CA 94066. The SEC also maintains a website at http://www.sec.gov that contains such information. Information contained on our website is not incorporated by reference into this Prospectus, and you should not consider that information to be part of this Prospectus.
Prospective investors should not construe the contents of this Prospectus as legal, tax, financial, or other advice. Each prospective investor should consult with his, her or its own professional advisers as to the legal, tax, financial or other matters relevant to the suitability of an investment in the Fund.
The date of this Prospectus is , 2013.
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TABLE OF CONTENTS
Page | |
PROSPECTUS SUMMARY | 1 |
SUMMARY OF FUND EXPENSES | 18 |
FINANCIAL HIGHLIGHTS | 19 |
USE OF PROCEEDS | 19 |
THE FUND | 20 |
INVESTMENT OBJECTIVE, STRATEGIES, METHODOLOGY AND POLICIES | 20 |
RISK FACTORS | 23 |
MANAGEMENT OF THE FUND | 40 |
FEES AND EXPENSES | 45 |
INVESTOR SUITABILITY | 48 |
SUBSCRIPTION FOR SHARES | 48 |
PLAN OF DISTRIBUTION | 49 |
QUARTERLY REPURCHASES OF SHARES | 55 |
BORROWING | 59 |
DISTRIBUTIONS | 59 |
DIVIDEND REINVESTMENT POLICY | 59 |
DETERMINATION OF NET ASSET VALUE | 60 |
U.S. FEDERAL INCOME TAX MATTERS | 61 |
ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST | 62 |
RESERVES | 63 |
LEGAL PROCEEDINGS | 63 |
LIQUIDITY REQUIREMENTS | 63 |
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION | 63 |
ADDITIONAL INFORMATION | 63 |
PRIVACY STATEMENT | 64 |
No broker-dealer, salesperson or other person is authorized to give an investor any information or to represent anything not contained in this Prospectus. As a prospective investor, you must not rely on any unauthorized information or representations that anyone provides to you. This Prospectus is an offer to sell or a solicitation of an offer to buy the securities it describes, but only under the circumstances and in jurisdictions where and to persons to which it is lawful to do so. The information contained in this Prospectus is current only as of the date of this Prospectus.
PROSPECTUS SUMMARY
This is only a summary and does not contain all of the information that a prospective investor should consider before investing in SharesPost 100 Fund (the “Fund”, “we”, or “us”). Before investing, a prospective investor in the Fund should carefully read the more detailed information appearing elsewhere in this Prospectus and the statement of additional information (the “SAI”), which should be retained by any prospective investor.
The Fund | The Fund is a recently formed Delaware statutory trust that is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, closed-end management investment company that operates as an “interval fund”. Shares of beneficial interest of the Fund (the “Shares”) will be continuously offered under the Securities Act of 1933, as amended (the “Securities Act”). |
The Offering; Initial Price per Share; Maximum Offering; Minimum Investment | The Fund intends to offer to sell up to 25,000,000 Shares on a continuous basis at an initial net asset value (“NAV”) of $20.00 per Share, plus any applicable sales load. Any sales load will be deducted from the proceeds to the Fund. The initial offering date for subscriptions for Shares is currently anticipated to be on or about the date that the Fund’s registration statement on Form N-2 is declared by the Securities and Exchange Commission (“SEC”) to be effective. Thereafter, Shares will be offered on a continuous basis at the Fund’s NAV per Share next calculated after receipt of a purchase in good order, plus any applicable sales load.
The minimum investment of each investor is Shares with a value of at least $2,500, plus any applicable sales load. There is no minimum investment for subsequent investments. The Fund’s board of trustees (the “Board of Trustees” and each member of the Board of Trustees, a “Trustee”), in its sole discretion, may vary the investment minimums from time to time.
The Fund’s Shares are offered through the Fund’s distributor, Foreside Fund Services, LLC (the “Distributor”). In addition, certain institutions (including banks, trust companies, brokers and investment advisers) may be authorized to accept, on behalf of the Fund, purchase and exchange orders and repurchase requests placed by or on behalf of their customers, and if approved by the Fund, may designate other financial intermediaries to accept such orders. |
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This is not a “firm commitment” offering in which an underwriter has committed to sell a pre-determined number of Shares to investors. Therefore, early investors in the Fund may bear a significant portion of the Fund’s organizational expenses (subject to the Expense Limitation Agreement, as discussed below) if the Fund does not raise a substantial amount of capital during its first year of operations.
See “Subscription for Shares” and “Plan of Distribution – How to Purchase Fund Shares.” | |
The Investment Adviser | Under the supervision of the Board of Trustees and pursuant to an investment advisory agreement (the “Investment Advisory Agreement”), SP Investments Management, LLC (the “Investment Adviser”), a wholly owned subsidiary of SharesPost, Inc. (“SharesPost”) and an investment adviser registered with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), serves as investment adviser to the Fund.
The Investment Adviser was formed in November 2010 as a Delaware limited liability company and registered with the SEC under the Advisers Act in June 2012. The Investment Adviser manages multiple investment vehicles, and as of the end of the most recent fiscal quarter (March 31, 2013) held in the aggregate approximately $2.0 million under management.
Pursuant to the Investment Advisory Agreement, the Investment Adviser is responsible for developing, implementing and supervising the Fund’s investment program and providing day-to-day management services to the Fund.
The Investment Adviser also provides office space, telephone services and utilities, and administrative, secretarial, clerical and other personnel as necessary to provide the services required to be provided under the Investment Advisory Agreement. |
Investment Objective and Strategies | Investment Objective. The Fund seeks capital appreciation. The Fund seeks to achieve its investment objective by investing in the equity securities of certain private, late-stage, growth companies (“Portfolio Companies”). The Investment Adviser’s primary strategy will be to invest in companies selected by the Investment Adviser for the SharesPost 100. |
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SharesPost 100. The SharesPost 100 is a list of 100 private, late-stage, growth companies, primarily in the technology sector, selected and maintained by the Investment Adviser according to several criteria, including revenue growth, market potential, product stage, management team, investor composition and level of trading activity. The Investment Adviser reviews the composition of the SharesPost 100 on a regular basis. The SharesPost 100 includes companies traded on the “SharesPost Trading Platform”, a private capital markets trading platform on which institutional and high net worth investors purchase and sell the securities of private growth companies. Each investment of the Fund will be subject to the Investment Adviser’s review. In some cases, the Investment Adviser may determine that investing in one or more of the companies on the SharesPost 100 would not be in the best interest of the Fund. It is also possible that the Fund, for a variety of reasons, may not be able to purchase shares of targeted issuers.
Investment Strategies. The Fund initially intends to invest in Portfolio Companies through secondary purchases and exchanges from selling shareholders of such companies, but under certain circumstances may, in the discretion of the Investment Adviser, purchase securities of such Portfolio Companies directly from such companies.
In reviewing potential investments for the Fund, the Investment Adviser will utilize, among other sources, the information and research available on the SharesPost Trading Platform. The Investment Adviser will also, wherever possible, interface with the management of companies targeted for investment and review their past and expected financial performance. Lastly, the Investment Adviser will consult with the SharesPost Financial (as defined below) sales and trading groups in an effort to gather market intelligence and understand trends in the market for an issuer’s shares.
Given the Fund will seek to invest primarily in companies on the SharesPost 100, the Investment Adviser expects that it should generally be able to connect through SharesPost Financial with sellers of shares. The Investment Adviser also expects to bring shares of targeted companies into the Fund on attractive terms through the Fund’s exchange mechanism, whereby holders of such shares can exchange them for Shares in the Fund at the end of each fiscal quarter. |
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SharesPost Trading Platform. Founded in 2009, SharesPost established a financial marketplace to facilitate investments and liquidity for investors and shareholders. The SharesPost Trading Platform was registered as an alternative trading system under Regulation ATS of the Securities Exchange Act of 1934, amended (the “Exchange Act”) by SharesPost Financial Corporation, a wholly owned subsidiary of SharesPost, a registered broker-dealer and a member of FINRA and SIPC (“SharesPost Financial”). In March 2013, SharesPost and The NASDAQ OMX Group, Inc. (“NASDAQ OMX”) entered into a joint venture to launch a successor platform to the SharesPost Trading Platform later in 2013 called the NASDAQ Private Market. It is anticipated that the NASDAQ Private Market will continue to provide substantially the same information and transactional capabilities to the Fund as the SharesPost Trading Platform. | |
SharesPost 100 is not an index; SharesPost 100 80% investment policy. The SharesPost 100 should not be viewed as an index, but a selection of issuers in which the Fund will seek to make investments. The Fund’s performance will therefore not necessarily replicate the performance of any particular composite measurement of the stock performance of some or all issuers included in the SharesPost 100. There may be reasons why a particular SharesPost 100 issuer is not included in the Fund’s portfolio, including, without limitation: limited availability of shares for purchase, and the Investment Adviser’s analysis of the appropriateness of particular securities of SharesPost 100 issuers as investments for the Fund. While the Investment Adviser may use the SharesPost 100 as a guideline for investing in the Fund’s Portfolio Companies, the Fund may invest in the securities of issuers other than those included in the SharesPost 100. The Investment Adviser, however, expects that at least 85% of the Fund’s equity investments will be among the companies included in the SharesPost 100, and the Fund has adopted a non-fundamental policy to invest, under normal market conditions, at least 80% of the value of its assets in companies in the SharesPost 100 (measured at the time of investment). The Fund will notify investors of any proposed change in such policy at least 60 days in advance of such change in accordance with the 1940 Act. The SAI contains a list of the fundamental and non-fundamental investment policies of the Fund under the heading “Investment Objective and Policies.” |
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The inclusion of the number “100” in the Fund’s name is intended only to reflect the Fund’s primary investment program (i.e., to invest in securities of companies listed on the SharesPost 100). The Fund’s ability to implement this investment strategy is subject to the ability of the Fund’s Investment Adviser to identify and acquire the securities of Portfolio Companies on acceptable terms. The Fund is a “non-diversified” investment company, and, as such, the Fund may invest a greater percentage of its assets in the securities of a single issuer than investment companies that are “diversified.” See “Risk Factors.”
Fundamental concentration policy. The Fund has a fundamental concentration policy not to invest 25% or more of its total assets in companies in a particular “industry”, as that term is used in the 1940 Act, and as interpreted, modified or otherwise permitted by a regulatory authority having jurisdiction, from time to time (the “Fundamental Concentration Policy”). The Fund’s Fundamental Concentration Policy does not preclude it from focusing investments in issuers in a group of related industrial sectors, and the Fund expects that most of the Portfolio Companies may (i) be in either internet-, mobile-, social media-, or technology-related fields, or (ii) utilize developing technology in providing their products and services. The Fund may also have significant holdings in cash and cash equivalents, generally at least 5%.
No assurance. There can be no assurance that the Fund will achieve its investment objective or avoid substantial losses. Subject to the provisions of the 1940 Act, the Fund’s investment strategies may be changed by the Board of Trustees without the vote of a majority of the Fund’s outstanding voting securities. Notice will be provided to shareholders of the Fund (“Shareholders”) prior to any such change in accordance with the 1940 Act. |
Use of Proceeds | The Fund expects that the net proceeds of the continuous offering, after payment of any sales loads, will be invested in accordance with its investment objective and principal strategies, subject to the Investment Adviser’s ability to identify and acquire the securities of Portfolio Companies. |
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Certain Risk Factors | The following is a discussion of the principal risks of investing in the Fund. Please refer to the section of the Prospectus titled “Risk Factors” for a more detailed discussion of the principal risk factors related to the Fund and the continuous offering of Shares.
Illiquidity of Fund Shares—Shares in the Fund are highly illiquid, and you may not be able to sell your Shares when, or in the amount that, you desire. The Fund’s Shares have no history of public trading, nor is it intended that they will be listed on a public exchange at this time. There is no secondary market for the Fund’s Shares, and the Fund does not expect that a secondary market will develop.
As a closed-end “interval fund,” the Fund will make quarterly repurchase offers for no less than 5% of the Fund’s outstanding Shares at NAV. Even though the Fund will make quarterly repurchase offers, investors should consider the Fund’s Shares to be illiquid. There is no guarantee that you will be able to sell the amount of Shares that you wish to tender in connection with a given repurchase offer. Shareholders may tender more Shares than the Fund has offered to repurchase. If so, the Fund will repurchase the Shares tendered on a pro rata basis, and Shareholders will have to wait until the next repurchase offer to make another repurchase request. As a result, it is possible that not all Shares that are tendered in a repurchase offer will be repurchased. There is also a risk that some Shareholders, in anticipation of proration, may tender more Shares than they wish to have repurchased in a given quarter, thereby increasing the likelihood that a proration will occur. Finally, the Board of Trustees may suspend quarterly redemptions if it determines that doing so is in the best interests of the Fund and its Shareholders. Each of these factors may further limit the liquidity of the Fund’s Shares. |
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Potential Illiquidity of the Fund’s Investments—The Fund intends to invest primarily in private company securities that are thinly traded and less liquid than other investments, or whose liquidity decreases in response to market developments or adverse investor perceptions. These securities may also be subject to “lock-up agreements” restricting their sale. As a result, the Fund may not be able to sell an investment, or a portion of an investment, when the Investment Adviser believes that doing so would maximize returns. For example, the Fund may not be able to sell securities of a Portfolio Company that is performing poorly. In addition, because private company securities are thinly traded, such securities may display especially volatile or erratic price movements, sometimes in response to relatively small changes in investor supply or demand or other market conditions. As a result, even if the Investment Adviser is able to sell such securities on behalf of the Fund when it desires to do so, the Fund may have to accept a lower price.
The inability to sell one or more portfolio positions can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities. If the Fund is forced to sell securities at an unfavorable time and/or under unfavorable conditions, such sales may also adversely affect the Fund’s NAV.
Alternatively, because shares of private companies are generally limited in number, the Fund may pay a higher price for shares of companies the Investment Adviser believes to be promising. Paying such a premium may adversely affect the Fund’s returns.
Valuation—The Fund’s NAV will be based on the value of its securities. Where reliable market prices are available for those securities, the Investment Adviser will rely on those prices. However, because the securities in which the Fund will invest will often be illiquid, market prices may not be readily available or, where available, may be unreliable. At any point in time, there may be few recent purchase or sale transactions or offers on which to base the value of a given private share. In addition, the prices reflected in recent transactions or offers may be extremely sensitive to changes in supply or demand, including changes fueled by investor perceptions or other conditions. See “Determination of Net Asset Value.”
In these cases, the Fund’s investments will valued by the Investment Adviser pursuant to fair valuation procedures and methodologies adopted by the Board of Trustees. While the Fund and the Investment Adviser will use good faith efforts to determine the fair value of the Fund’s securities, value will be dependent on the judgment of the Investment Adviser. The Investment Adviser may also rely to some extent on information provided by the underlying companies, which may not be timely or comprehensive. From time to time, the Fund may determine that it should modify its estimates or assumptions, as new information becomes available. As a consequence, the value of the securities and therefore the Fund’s NAV may vary. This may adversely affect Shareholders. |
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Because valuation of the private shares will be difficult, the Fund may also not be able to sell these securities at the prices at which they are carried on the Fund’s books, or may have to delay their sale in order to do so. This may in turn adversely affect the Fund’s NAV.
Valuation issues also raise regulatory risk. Regulatory guidance on the valuation of securities that must be “fair valued” (i.e., securities for which a current market price is not readily available) by registered investment companies has been sparse. To the extent guidance is forthcoming, the Fund—and other registered investment companies—may be required to adjust their fair valuation methods, which could negatively affect the Fund’s NAV.
Expenses—The Fund’s Shareholders will incur the costs of the Fund’s organization (subject to the Expense Limitation Agreement, as discussed below), and therefore early investors in the Fund will bear a greater proportion of the Fund’s organizational expenses. It is also possible that the Fund may not raise significant assets, either initially or on a longer-term basis, further increasing the proportion of costs borne by early investors.
See “Risk Factors” for more detail and additional risks that should be considered, including risks related to the competition for portfolio investments, the likelihood of minimal distributions of current income, potential conflicts of interest related to our Fund and our affiliates, and the relative inexperience of the Fund’s management with registered funds. | |
Potential Benefits of Investing in the Fund | There are several material benefits an investment in the Fund is expected to confer on its Shareholders. These include:
Access to Attractive Asset Class. The Fund will be investing in private, late-stage, growth companies, primarily in the technology sector. The Investment Adviser believes that the asset class represented by these companies should be an element in many investors’ diversified portfolio for two primary reasons. First, these companies have a lower technology, product and market risk profile than early-stage private companies. As a consequence failure rates are lower and time to exit is faster. These companies may, however, have a higher technology, product and market risk profile than publicly traded companies. Second, there appears to be a general trend for companies to stay private longer, which results in a greater and greater portion of companies’ value appreciation occurring in this asset class rather than the public equities markets (although this is not always the case). This, the Investment Adviser believes, is a large part of the reason public equity market returns have been disappointing for roughly a decade. These private, late-stage, growth companies are typically hard to access, especially for smaller and mid-size investors. The SharesPost Trading Platform provides access to these companies to investors. The Investment Adviser will seek to use the advantages of the SharesPost Trading Platform’s access to build a balanced portfolio of private, late-stage, growth companies, primarily in the technology sector. Prospective investors can learn more about the SharesPost 100 by reviewing information on SharesPost’s website at http://www.sharespost.com. |
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Efficient, Transparent Investment. The Fund offers investors an opportunity to invest efficiently in a portfolio of private, late-stage, growth companies, primarily in the technology sector. With active portfolio management, the Fund expects to achieve a balanced portfolio to avoid an overconcentration in a small number of companies. Unlike traditional venture and secondary funds, the Investment Adviser will publish on its website (1) a complete list of the Fund’s current investments, and (2) the daily NAV of the Fund’s Shares, giving investors valuable insight into the market for venture-backed private companies. | |
Closed-End Fund Structure | The Fund is a closed-end management investment company. Closed-end funds differ from open-end management investment companies (commonly referred to as mutual funds) in that closed-end funds do not typically redeem their shares at the option of a shareholder. Rather, closed-end fund shares typically trade in the secondary market via a stock exchange. Unlike many closed-end funds, however, the Fund’s Shares will not be listed on a stock exchange. Instead, the Fund will provide very limited liquidity to its Shareholders by offering to repurchase a limited amount of Shares quarterly (no less than 5% of outstanding Shares), which is discussed in more detail below. The Fund, similar to a mutual fund, is subject to continuous asset in-flows (purchases), although not subject to continuous out-flows (redemptions). An investment in the Fund is suitable only for long-term investors who can bear the risks associated with the limited liquidity of the Shares. |
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Board of Trustees | The Board of Trustees of the Fund has overall responsibility for monitoring the Fund’s investment program and its management and operations. Any vacancy on the Board of Trustees may be filled by the remaining Trustees, except to the extent the 1940 Act requires the election of Trustees by Shareholders. A majority of the Trustees are “Independent Trustees” who are not “interested persons” (as defined in the 1940 Act) of the Fund or the Investment Adviser. See “Management”. |
Fees | Advisory Fee. The Fund will pay a fee (the “Advisory Fee”) to the Investment Adviser as compensation for its investment advisory services. The Advisory Fee shall accrue quarterly at a rate equal to 0.475% (a 1.90% annual rate) of the average daily NAV of the Fund, and shall be paid quarterly in arrears. The NAV of the Fund is determined by subtracting the Fund’s liabilities from the fair market value of its assets, to be determined as set forth under “Determination of Net Asset Value” below.
Redemption Fee. Shareholders who choose to participate in the Fund’s repurchase offers will incur a redemption fee equal to 2.00% of the value of the Shares the Fund repurchases from them for Shares held less than 365 days. Shares held longest will be treated as being repurchased first and Shares held shortest will be treated as being repurchased last. The redemption fee does not apply to Shares that were acquired through reinvestment of distributions. Shares held for 365 days or more are not subject to the 2.00% fee. Redemption fees are paid to the Fund directly and are designed to offset costs charged by the Transfer Agent (as defined below) for redeeming Shares and for costs associated with fluctuations in Fund asset levels and cash flow caused by such redemptions.
Shareholder Services Fee. The Fund has adopted a “Shareholder Services Plan” under which the Fund may compensate financial industry professionals for providing ongoing services in respect of clients to whom they have distributed Shares of the Fund. Such services may include electronic processing of client orders, electronic fund transfers between clients and the Fund, account reconciliations with the Fund’s Transfer Agent, facilitation of electronic delivery to clients of Fund documentation, monitoring client accounts for back-up withholding and any other special tax reporting obligations, maintenance of books and records with respect to the foregoing, and such other information and liaison services as the Fund or the Investment Adviser may reasonably request. The Fund may incur such foregoing expenses on an annual basis equal to 0.25% of its average NAV. |
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Expense Limitation Agreement. The Investment Adviser has entered into a written expense limitation agreement (the “Expense Limitation Agreement”) under which it has agreed to limit the total expenses of the Fund, including organizational expenses but excluding interest, taxes, other expenditures which are capitalized in accordance with generally accepted accounting principles, brokerage commissions and extraordinary expenses) to an annual rate of 2.50% of the average NAV of the Fund (the “Expense Limitation”) until , 2015, and from year to year thereafter; provided that each such continuance is specifically approved by the Board of Trustees. The Investment Adviser may recoup from the Fund fees previously waived or expenses previously reimbursed by the Investment Adviser with respect to the Fund pursuant to the Expense Limitation Agreement if such reimbursement does not cause the Fund to exceed the Expense Limitation and the reimbursement is made within three years after the year in which the Investment Adviser waived the fee or incurred the expense. | |
Borrowing | The Fund will not borrow or issue preferred shares or debt during its first 12 months of operations, and thereafter the Fund intends to have the option to borrow, which such borrowing, if any, the Fund anticipates would be used to satisfy repurchase requests from Fund Shareholders and otherwise to provide the Fund with temporary liquidity. In each case, the amount that the Fund may borrow will be limited by the provisions of Section 18 of the 1940 Act, which, among other limitations contained therein relating to the declaration of dividends or distributions, limits the issuance of a “senior security” (as defined in the 1940 Act) to those instances where immediately after giving effect to such issuance, the Fund will have “net asset coverage” (as defined in the 1940 Act) of at least 300%. The interest on borrowing by the Fund will be at prevailing market rates, to the extent the Fund borrows. Notwithstanding the foregoing, the Fund intends to limit its borrowing, if any, and the overall leverage of its portfolio to an amount that does not exceed 33⅓% of the Fund's gross asset value. |
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Determination of Net Asset Value | The NAV of the Fund’s Shares is determined daily, as of the close of regular trading on the NASDAQ Stock Market Exchange (“NASDAQ”) (normally, 4:00 p.m., Eastern time). Each Share will be offered at NAV next calculated after receipt of the purchase in good order, plus any applicable sales load. During the continuous offering, the price of the Shares will increase or decrease on a daily basis according to the NAV of the Shares. In computing NAV, portfolio securities of the Fund are valued at their current fair market values determined on the basis of market quotations, if available. Because market quotations are not typically readily available for the majority of the Fund’s securities, they are valued at fair value as determined by the Board of Trustees. The Board of Trustees has delegated the day-to-day responsibility for determining these fair values to the Investment Adviser. The Investment Adviser, subject to the oversight of the Board of Trustees, shall develop the Fund’s valuation methodologies, and make valuation determinations. The Investment Adviser will act in accordance with the Fund’s written valuation policies and procedures as approved by the Board of Trustees, and in accordance with the 1940 Act. Valuation determinations are reviewed periodically by the Board of Trustees, including in connection with any quarterly repurchase offer.
See “Determination of Net Asset Value” below for additional information. |
Expenses | The Fund pays all of its organizational and investment expenses, including, but not limited to, brokerage commissions (if any) and all other costs of executing transactions, interest expense, insurance expense, custodial expense, and all ongoing ordinary administrative and operational costs of the Fund, including (but not limited to) legal costs, accounting costs, taxes and any fees paid to the Fund Administrator (as defined below) or the Custodian and all expenses incurred in connection with the continuous offering and sale of its Shares and communications with Shareholders. The Fund also directly pays any extraordinary operating expenses.
The Investment Adviser bears all ongoing ordinary administrative and operational costs of the Investment Adviser, including employees’ salaries, facilities, travel costs, technology costs, office supplies, research and data costs, and its own legal, accounting and filing fees. |
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Purchase of Shares | Each investor must initially purchase a minimum of $2,500 of Shares in the Fund, plus any applicable sales load. The Fund may accept both initial and additional applications by investors to purchase Shares at such times as the Fund may determine, subject, in the case of investors purchasing Shares with cash, to the receipt of cleared funds on or prior to the third business day prior to the relevant subscription date (or such other acceptance date set by the Fund and notified to prospective Shareholders prior to a subscription date). Investors may also purchase Shares by exchanging securities of Portfolio Companies for Shares, as discussed below. Such exchanges will be permitted only once per fiscal quarter, at the end of each fiscal quarter.
Each investor must submit a completed application to the selling agent before the applicable purchase date. The Fund has the sole right to accept applications for Shares and reserves the right to reject in its complete and absolute discretion any application for Shares in whole or in part. The Fund also reserves the right to suspend sales and purchases of Shares at any time.
The Fund has entered into a distribution agreement (the “Distribution Agreement”) with Foreside Fund Services, LLC (the “Distributor”) to act as the distributor for the sale of Shares. The Distributor serves in such capacity on a best efforts basis. The Distributor may enter into related selling group agreements with various broker-dealers to assist in the distribution of Shares. Shares are available to investors investing through broker-dealers or other financial intermediaries (collectively, “Financial Intermediaries”) where such Financial Intermediary has agreed to provide certain administrative services to assist in the distribution of Shares. |
Exchange Feature | The Fund provides the opportunity for holders of securities in SharesPost 100 private companies to acquire Shares of the Fund in exchange for such securities at the end of each fiscal quarter. This exchange mechanism provides entrepreneurs the ability to diversify their personal portfolios, and provides the Fund an additional way to source shares in Portfolio Companies.
Each exchange of private company shares for Fund Shares is subject to approval by the Board of Trustees, upon recommendation by the Investment Adviser, and may only be consummated at the end of the fiscal quarter in which Board of Trustees approval is received. The terms of each exchange must be approved by the Board of Trustees, including a majority of Independent Trustees. |
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The Investment Adviser shall determine the valuation of such securities and the number of Shares for which such securities may be exchanged. The value of shares of Portfolio Companies to be exchanged by prospective investors for Shares will be determined by negotiation between the parties, taking factors into account such as the recent trading prices of such shares on the SharesPost Trading Platform and other alternative trading systems, financial results of such Portfolio Company (when available), research reports and other diligence materials, and the valuation of such security to the extent it is already a part of the Fund’s portfolio.
Such exchanges would generally result in a taxable event for the exchanging shareholder with a taxable capital gain in the amount of the difference between such shareholder’s basis in the exchanged shares and the fair market value of the Shares received in the exchange. The Investment Adviser will not receive any fee, payment, commission, or other financial incentive of any type (“Payments”) in connection with the exchange by an investor of Portfolio Company shares for Fund Shares, and to the extent any affiliate of the Investment Adviser receives Payments in connection with exchanges, such Payments will be subject to policies and procedures adopted by the Board of Trustees pursuant to Section 17(e) and Rule 17e-1 of the 1940 Act. These policies and procedures include quarterly review by the Board of Trustees of any such payments. | |
Quarterly Repurchases of Shares | The Fund is an interval fund and, as such, has adopted a fundamental policy that it will make quarterly repurchase offers pursuant to Rule 23c-3 of the 1940 Act. Each quarterly repurchase offer will be for no less than 5% of the Shares outstanding at NAV, unless such offer is suspended or postponed in accordance with regulatory requirements or otherwise by the Board of Trustees, as described herein. There is no guarantee, and it is unlikely, that Shareholders will be able to sell all of the Shares they desire in a quarterly repurchase offer, although each Shareholder will have the right to require the Fund to purchase up to and including 5% of such Shareholder’s Shares in each quarterly repurchase. Limited liquidity will be provided to Shareholders only through the Fund’s quarterly repurchases. The Fund maintains liquid securities, cash or access to a bank line of credit in amounts sufficient to meet quarterly redemption requirements. See “Quarterly Repurchases of Shares.” |
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Investor Suitability | An investment in the Fund involves a considerable amount of risk. It is possible that you will lose money. An investment in the Fund is suitable only for investors who can bear the risks associated with the limited liquidity of the Shares and should be viewed as a long-term investment. Before making your investment decision, you should (i) consider the suitability of this investment with respect to your investment objectives and personal financial situation and (ii) consider factors such as your personal net worth, income, age, risk tolerance and liquidity needs. An investor should invest in the Fund only money that it can afford to lose, and it should not invest in the Fund money to which it will need access in the short-term or on a frequent basis. In addition, all investors should be aware of how the Fund’s investment strategies fit into their overall investment portfolios because the Fund is not designed to be, by itself, a well-balanced investment for a particular investor.
An investment in the Fund is suitable only for investors who can bear the risks associated with the illiquidity of the Fund’s Shares and should be viewed as a long-term investment. The Fund should be considered to be an illiquid investment. Investors will not be able to redeem Shares on a daily basis because the Fund is a closed-end fund operating as an interval fund. The Fund’s Shares are not traded on an active market and there is currently no secondary market for the Shares, nor does the Fund expect a secondary market in the Shares to develop. However, limited liquidity may be available through the quarterly repurchase offers described in this Prospectus. |
Dividends | Following the disposition by the Fund of securities of Portfolio Companies, the Fund will make cash dividends of the net profits, if any, to Shareholders (subject to the dividend reinvestment policy, as described below) at such times as the Board of Trustees determines in its sole discretion, but in no event less than annually. The Fund will establish reasonable cash reserves to meet Fund obligations prior to making distributions. See “Distributions” and “U.S. Federal Income Tax Considerations.” |
Dividend Reinvestment Policy | The Fund provides distribution options for its Shareholders. Under these options, if the Fund declares a distribution, then a Shareholder’s distribution will be automatically reinvested in additional Shares unless the Shareholder has specifically elected in its application (or otherwise) to receive cash. Pursuant to the dividend reinvestment policy, a Shareholder will receive additional Shares, including fractions of Shares, at a price equal to the NAV per Share on the date of distribution. The automatic reinvestment of distributions does not relieve participants of any U.S. federal income tax that may be payable (or required to be withheld) on such distributions. See “U.S. Federal Income Tax Considerations.” |
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ERISA Plans and Other Tax-Exempt Entities | Investors subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and other tax-exempt entities, including employee benefit plans, individual retirement accounts, 401(k) and Keogh Plans (“Plans”) may purchase Shares. Because the Fund will be registered as an investment company under the 1940 Act, the underlying assets of the Fund will not be considered to be “plan assets” of the Plans investing in the Fund for purposes of ERISA’s fiduciary responsibility and prohibited transaction rules. Thus, the Investment Adviser will not be a fiduciary within the meaning of ERISA with respect to the assets of any Plan that becomes a Shareholder, solely as a result of the Plan’s investment in the Fund. See “Investment by Employee Benefit Plans.” |
Taxes | The Fund will elect to be classified as an association taxable as a corporation for U.S. federal tax purposes. The Fund also (i) will elect to be treated as, and (ii) intends to operate in a manner to qualify as, a “regulated investment company” (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended. As a RIC, the Fund generally will pay no U.S. federal income tax on the earnings or capital gains it timely distributes to Shareholders. This avoids a “double tax” on distributed earnings normally incurred by taxable investors in regular “C corporations.” Holders of Shares normally will be taxed on their Fund distributions (unless their Shares are held in a retirement account that permits tax deferral or the holder is otherwise exempt from U.S. federal income tax). Tax-exempt U.S. investors generally will not incur unrelated business taxable income with respect to an investment in Shares if they do not borrow to make the investment. The Fund’s tax reporting to Shareholders are made on IRS Forms 1099. See “U.S. Federal Income Tax Considerations.” |
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Reports to Shareholders | In addition to the annual and semi-annual reports required by the 1940 Act, the Fund anticipates making available to Shareholders unaudited quarterly financial information that will include the number of Shares held by the Shareholder, the NAV per Share and the aggregate NAV of a Shareholder’s Shares, certified audited annual financial statements and certain U.S. federal income tax information within 60 calendar days after the close of the period for which the report is being made, or as required by the 1940 Act. |
The Fund Administrator | UMB Fund Services, Inc. (“UMB Fund Services”) serves as the administrator of the Fund (the “Fund Administrator”). The Fund compensates the Fund Administrator for providing administrative services to the Fund. The Fund Administrator is responsible for matters pertaining to the administration of the Fund, including, but not limited to, the following: (i) preparing and maintaining the financial and accounting records and statements of the Fund; (ii) arranging for the provision of accounting, clerical and administrative services; (iii) coordinating communications of the Board of Trustees; (iv) monitoring the Fund’s compliance with regulations to which it is subject; (v) maintaining records of the Fund; and (vi) providing the coordination and processing of all repurchase offers. See “Management of the Fund.” |
The Custodian | UMB Bank National Association (“UMB Bank”) serves as the custodian of the Fund (the “Custodian”). The Fund compensates the Custodian for providing custody services to the Fund. See “Management of the Fund.” |
The Transfer Agent | UMB Fund Services serves as the transfer agent of the Fund (the “Transfer Agent”). Any successor Transfer Agent shall be appointed by the Fund. The Fund compensates the Transfer Agent for providing transfer agent services to the Fund. See “Management of the Fund.” |
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SUMMARY OF FUND EXPENSES
The table below summarizes the expenses of the Fund and is intended to assist Shareholders and potential investors in understanding the various costs and expenses that they will bear, directly or indirectly, by investing in the Fund. Each figure below relates to a percentage of the Fund’s average NAV at month-end over the course of a year.
Shareholder Transaction Expenses | ||||
Maximum Sales Charge (Load) (as a percentage of the offering price)(1) | 5.75 | % | ||
Maximum Sales Charge on Reinvested Dividends | None | |||
Redemption Fee on Shares Repurchased Within 365 Days of Purchase (as a percentage of proceeds) (2) | 2.00 | % | ||
Annual Expenses (as a percentage of net assets attributable to Shares) | ||||
Advisory Fee(3) | 1.90 | % | ||
Shareholder Services Fee | 0.25 | % | ||
Other Expenses(4) | 0.35 | % | ||
Total Annual Expenses(5) | 2.50 | % |
(1) | Investments are subject to a sales load assessed at a rate of between 5.75% and 0.00% depending upon the amount invested. The following sales charges apply to your purchases of Shares of the Fund: |
Amount Invested | Sales Charge as a % of Offering Price | Sales Charge as a % of Amount Invested | Dealer Reallowance | |||||||||
Under $50,000 | 5.75% | 6.10% | 5.00% | |||||||||
$50,000 to $99,999 | 4.75% | 4.99% | 4.00% | |||||||||
$100,000 to $249,999 | 3.75% | 3.83% | 3.25% | |||||||||
$250,000 to $499,999 | 2.50% | 2.56% | 2.00% | |||||||||
$500,000 to $999,999 | 2.00% | 2.04% | 1.75% | |||||||||
$1,000,000 and above | 0.00% | 0.00% | 0.00% |
(2) | Shareholders who choose to participate in the Fund’s repurchase offers will incur a redemption fee equal to 2.00% of the value of the Shares the Fund repurchases from them for Shares held less than 365 days. |
(3) | The Fund will pay to the Investment Adviser a quarterly Advisory Fee. The Advisory Fee accrues quarterly at a rate equal to 0.475% (a 1.90% annual rate) of the average daily NAV of the Fund. |
(4) | Reflects the gross amount of all expected ordinary operating expenses of the Fund other than brokerage commissions, any extraordinary expenses of the Fund, and the Advisory Fee. The organizational and initial offering expenses of the Fund will be paid by the Fund. |
(5) | The Investment Adviser has entered into a written Expense Limitation Agreement under which it has agreed to limit the total expenses of the Fund, including organizational expenses but excluding interest, taxes, other expenditures which are capitalized in accordance with generally accepted accounting principles, brokerage commissions and extraordinary expenses) to an annual rate of 2.50% of the average NAV of the Fund until , 2015, and from year to year thereafter; provided that each such continuance is specifically approved by the Board of Trustees. The Investment Adviser may recoup from the Fund fees previously waived or expenses previously reimbursed by the Investment Adviser with respect to the Fund pursuant to the Expense Limitation Agreement if such reimbursement does not cause the Fund to exceed the Expense Limitation and the reimbursement is made within three years after the year in which the Investment Adviser waived the fee or incurred the expense. |
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The following hypothetical examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. The examples demonstrate the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in the Fund. These examples also assume that all distributions are reinvested at NAV and that the percentage amounts listed under Total Annual Expenses remain the same in the years shown. The tables and the assumption in the hypothetical examples of a 5% annual return are required by regulations of the SEC applicable to all investment companies; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Shares. See “Fees and Expenses” for a more complete description of the Fund’s costs and expenses.
The following example should not be considered a representation of past or future expenses because actual expenses may be greater or less than those shown.
Example
1 YEAR | 3 YEARS | 5 YEARS | 10 YEARS | |||||||||||||
You would pay the following net expenses based on a $1,000 investment, assuming a 5% annual return | $25 | $78 | $134 | $285 |
This Example assumes the application of the 2.50% expense ratio, with all fees and expenses assumed to have been accrued on a quarterly basis as of the last calendar day of each quarter, reducing the NAV per Share.
FINANCIAL HIGHLIGHTS
Because the Fund is recently formed and has no performance history as of the date of this Prospectus, a financial highlights table for the Fund has not been included in this Prospectus.
USE OF PROCEEDS
The Fund expects that the net proceeds of the continuous offering, after payment of any sales loads, will be invested in accordance with its investment objective and principal strategies, subject to the Investment Adviser’s ability to identify and acquire the securities of Portfolio Companies. Pending the investment of the proceeds of the continuous offering pursuant to the Fund’s investment policies, a portion of such proceeds not invested in accordance with the Fund’s investment objective may be invested by the Fund in short-term, high-quality debt securities, money market funds or other cash equivalents, and any cash balance will be held by the Fund’s Custodian. Any cash balance in such account, including any interest earned, will be held by the Custodian to be invested pursuant to the Fund’s investment policies. Such custodial accounts shall be the property of the Fund and held for the benefit of all Shareholders of the Fund, and any interest accrued in such custodial account will be for the benefit of all Shareholders and not any particular Shareholder. In addition, the Fund may maintain a portion of the proceeds of the continuous offering in cash with the Custodian to meet operational needs (including liquidity reserves necessary to comply with the 1940 Act provisions regarding interval funds and periodic repurchase offers) or during any period in which the Investment Adviser determines, in its sole discretion, that investment of the Fund’s assets in Portfolio Companies is not in the best interests of the Fund.
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THE FUND
The Fund is a recently formed Delaware statutory trust that is registered under the 1940 Act as a non-diversified, closed-end management investment company that operates as an “interval fund”, and which invests substantially all of its investable assets in Portfolio Companies. The Fund was established as a limited liability company under the laws of the State of Delaware on August 20, 2012 and converted into a Delaware statutory trust on March 22, 2013, and has no operating history. The Fund’s office is located at 1150 Bayhill Drive, San Bruno, California 94066. The Fund’s Prospectus is available upon request and without charge on the Fund’s website (http://www.spinvestments.com) or by writing to the Investment Adviser at 1150 Bayhill Drive, San Bruno, California 94066. The telephone number of the Fund is (800) 279-7754.
INVESTMENT OBJECTIVE, STRATEGIES, METHODOLOGY AND POLICIES
The Fund seeks capital appreciation. The Fund seeks to achieve its investment objective by investing in the equity securities of certain private, late-stage, growth companies. The Investment Adviser’s primary strategy will be to invest in companies selected by the Investment Adviser for the SharesPost 100. The SharesPost 100 is a list of 100 private, late-stage, growth companies, primarily in the technology sector, selected and maintained by the Investment Adviser according to several criteria, including revenue growth, market potential, product stage, management team, investor composition and level of trading activity. The Investment Adviser reviews the composition of the SharesPost 100 on a regular basis. The SharesPost 100 includes companies traded on the SharesPost Trading Platform, a private capital markets trading platform on which institutional and high net worth investors purchase and sell the securities of private growth companies. Each investment of the Fund will be subject to the Investment Adviser’s review. In some cases, the Investment Adviser may determine that investing in one or more of the companies on the SharesPost 100 would not be in the best interest of the Fund. It is also possible that the Fund, for a variety of reasons, may not be able to purchase shares of targeted issuers.
The Fund initially intends to invest in Portfolio Companies through secondary purchases and exchanges from selling shareholders of such companies, but under certain circumstances may, in the discretion of the Investment Adviser, purchase securities of such Portfolio Companies directly from such companies. The Fund will not accept any securities of Portfolio Companies through either secondary purchases or exchanges during any “restricted period” under the SEC’s Regulation M if either (1) the Fund or any affiliate thereof is a “selling security holder” in a “distribution” of such securities or (2) the Fund or any affiliate thereof is a “distribution participant” in a “distribution” of such securities (as such terms are defined under Regulation M).
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In reviewing potential investments for the Fund, the Investment Adviser will utilize, among other sources, the information and research available on the SharesPost Trading Platform. The Investment Adviser will also, wherever possible, interface with the management of companies targeted for investment and review their past and expected financial performance. Lastly, the Investment Adviser will consult with the SharesPost Financial sales and trading groups in an effort to gather market intelligence and understand trends in the market for an issuer’s shares.
Given the Fund will seek to invest primarily in companies on the SharesPost 100, the Investment Adviser expects that it should generally be able to connect through SharesPost Financial with sellers of shares. The Investment Adviser also expects to bring shares of targeted companies into the Fund on attractive terms through the Fund’s exchange mechanism, whereby holders of such shares can exchange them for Shares in the Fund at the end of each fiscal quarter. The Investment Adviser will not receive any fee, payment, commission, or other financial incentive of any type in connection with the exchange by an investor of Portfolio Company shares for Fund Shares, and to the extent any affiliate of the Investment Adviser or the Fund (“Affiliated Broker”) receives any fee, payment, commission, or other financial incentive of any type (“Broker Fees”) in connection with exchanges, such Broker Fees will be subject to policies and procedures adopted by the Board of Trustees pursuant to Section 17(e) and Rule 17e-1 of the 1940 Act. These policies and procedures include quarterly review by the Board of Trustees of any such payments. Among other things, Section 17(e) and those procedures provide that, when acting as broker for the Fund in connection with the purchase or sale of securities to or by the Fund, an affiliated broker may not receive any compensation exceeding the following limits: (1) if the transaction is effected on a securities exchange, the compensation may not exceed the “usual and customary broker's commission” (as defined in Rule 17e-1 under the 1940 Act); (2) in the case of the purchase of securities by the Fund in connection with a secondary distribution, the compensation cannot exceed 2% of the sale price; and (iii) the compensation for transactions otherwise effected cannot exceed 1% of the purchase or sale price. Rule 17e-1 defines a “usual and customary broker's commission” as one that is fair compared to the commission received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on an exchange during a comparable period of time.
Founded in 2009, SharesPost established a financial marketplace to facilitate investments and liquidity for investors and shareholders. The SharesPost Trading Platform was registered as an alternative trading system under Regulation ATS of the Exchange Act by SharesPost Financial. In March 2013, SharesPost and NASDAQ OMX entered into a joint venture to launch a successor platform to the SharesPost Trading Platform later in 2013 called the NASDAQ Private Market. It is anticipated that the NASDAQ Private Market will continue to provide substantially the same information and transactional capabilities to the Fund as the SharesPost Trading Platform.
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The SharesPost 100 should not be viewed as an index, but a selection of issuers in which the Fund will seek to make investments. The Fund’s performance will therefore not necessarily replicate the performance of any particular composite measurement of the stock performance of some or all issuers included in the SharesPost 100. There may be reasons why a particular SharesPost 100 issuer is not included in the Fund’s portfolio, including, without limitation: limited availability of shares for purchase, and the Investment Adviser’s analysis of the appropriateness of particular securities of SharesPost 100 issuers as investments for the Fund. While the Investment Adviser may use the SharesPost 100 as a guideline for investing in the Fund’s Portfolio Companies, the Fund may invest in the securities of issuers other than those included in the SharesPost 100. The Investment Adviser, however, expects that at least 85% of the Fund’s equity investments will be among the companies included in the SharesPost 100, and the Fund has adopted a non-fundamental policy to invest, under normal market conditions, at least 80% of the value of its assets in companies in the SharesPost 100 (measured at the time of investment). The Fund will notify investors of any proposed change in such policy at least 60 days in advance of such change in accordance with the 1940 Act. The SAI contains a list of the fundamental and non-fundamental investment policies of the Fund under the heading “Investment Objective and Policies.”
The inclusion of the number “100” in the Fund’s name is intended only to reflect the Fund’s primary investment program (i.e., to invest in securities of companies listed on the SharesPost 100). The Fund’s ability to implement this investment strategy is subject to the ability of the Fund’s Investment Adviser to identify and acquire the securities of Portfolio Companies on acceptable terms. The Fund is a “non-diversified” investment company, and, as such, the Fund may invest a greater percentage of its assets in the securities of a single issuer than investment companies that are “diversified.” See “Risk Factors.”
The Fund has a Fundamental Concentration Policy not to invest 25% or more of its total assets in companies in a particular “industry”, as that term is used in the 1940 Act, and as interpreted, modified or otherwise permitted by a regulatory authority having jurisdiction, from time to time. The Fund’s Fundamental Concentration Policy does not preclude it from focusing investments in issuers in a group of related industrial sectors, and the Fund expects that most of the Portfolio Companies may (i) be in either internet-, mobile-, social media-, or technology-related fields, or (ii) utilize developing technology in providing their products and services. The Fund may also have significant holdings in cash and cash equivalents, generally at least 5%.
There can be no assurance that the Fund will achieve its investment objective or avoid substantial losses. Subject to the provisions of the 1940 Act, the Fund’s investment strategies may be changed by the Board of Trustees without the vote of a majority of the Fund’s outstanding voting securities. Notice will be provided to Shareholders of the Fund prior to any such change in accordance with the 1940 Act.
The Fund May Change Its Investment Strategies, Policies, Restrictions, and Techniques
Except as otherwise indicated and subject to the provisions of the 1940 Act, the Fund may change any of its policies, restrictions, strategies, and techniques if the Board of Trustees believes doing so is in the best interest of the Fund and the Shareholders; provided that the investment objective of achieving capital appreciation may not be changed without a Shareholder vote as described above with respect to other fundamental policies.
Illiquid Securities. The Fund will invest in illiquid securities, including restricted securities (i.e., securities not readily marketable without registration under the Securities Act) and other securities that are not readily marketable. These may include restricted securities that can be offered and sold only to “qualified institutional buyers” under Rule 144A of the Securities Act. There is no limit to the percentage of the Fund’s net assets that may be invested in illiquid securities. The Board of Trustees or its delegate may determine that securities issued pursuant to Rule 144A under the Securities Act are marketable under procedures approved by the Board of Trustees.
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RISK FACTORS
Prospective investors should consider the following factors in determining whether an investment in the Fund is suitable for them. However, the following section does not set forth all risks applicable to the Fund and prospective investors should read this entire Prospectus prior to investing in the Fund. The following discussion of risk factors does not purport to be an exhaustive list or a complete explanation of all of the risks involved in an investment in the Fund. An investment in the Fund should only be made after consultation with independent qualified sources of investment and tax advice.
THE PAST RESULTS OF PORTFOLIO COMPANIES SELECTED FOR INVESTMENT BY THE FUND ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. NO ASSURANCE CAN BE MADE THAT PROFITS WILL BE ACHIEVED OR THAT SUBSTANTIAL LOSSES WILL NOT BE INCURRED. THE FUND IS NOT A COMPLETE INVESTMENT PROGRAM AND SHOULD REPRESENT ONLY A PORTION OF AN INVESTOR’S PORTFOLIO MANAGEMENT STRATEGY.
Risks Related To Our Investments
Our investments in Portfolio Companies may be extremely risky and we could lose all or part of our investments.
Investment in Portfolio Companies that we are targeting involves a number of significant risks, including:
• | these Portfolio Companies may have limited financial resources and may be unable to meet their obligations under their existing debt, which may lead to equity financings, possibly at discounted valuations, in which we could be substantially diluted if we do not or cannot participate, bankruptcy or liquidation and the reduction or loss of our equity investment; |
• | these Portfolio Companies typically have limited operating histories, narrower, less established product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions, market conditions and consumer sentiment in respect of their products or services, as well as general economic downturns; |
• | because Portfolio Companies are privately owned, there is generally little publicly available information about these businesses; therefore, although the Investment Adviser and its agents will perform due diligence investigations on these Portfolio Companies, their operations and their prospects, including diligence review of independent research reports and market valuations of securities of such companies on the SharesPost Trading Platform and other alternative trading systems, we may not be able to obtain all of the material information we need regarding these businesses, including financial or other information regarding the Portfolio Companies in which we invest. Furthermore, there can be no assurance that the information that we do obtain with respect to any investment is reliable. The Fund will invest in Portfolio Companies for which financial information is not available if the Investment Adviser determines, based on the results of its due diligence review, that such investment is in the best interest of the Fund and its Shareholders; |
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• | Portfolio Companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on a Portfolio Company and, in turn, on us; and |
• | Portfolio Companies generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. |
Because our investments are generally not in publicly traded securities, there will be uncertainty regarding the fair market value of our investments, which could adversely affect the determination of our NAV.
Our portfolio investments will generally not be in publicly traded securities. As a result, although we expect to determine the fair market value based on the implied valuation of the asset as reflected by stock purchase contracts as reported on the SharesPost Trading Platform or other alternative trading systems, the fair market value of our direct investments in Portfolio Companies will often not be readily determinable. Under the 1940 Act, for our investments for which there are no readily available market quotations, including securities posted on the SharesPost Trading Platform and other alternative trading systems that have not actively traded, we will value such securities at fair value quarterly as determined in good faith by our Investment Adviser under consistently applied policies and procedures approved by the Board of Trustees in accordance with generally accepted accounting principles (“GAAP”). In connection with that determination, members of our Investment Adviser’s portfolio management team will prepare Portfolio Company valuations using the most recent Portfolio Company financial statements and forecasts. The Investment Adviser may utilize the services of an independent valuation firm, which, if engaged, will prepare valuations for each of our portfolio investments that are not publicly traded or for which we do not have readily available market quotations, including securities posted on the SharesPost Trading Platform (or other alternative trading systems) that have not actively traded. However, the Board of Trustees will retain ultimate authority as to the appropriate valuation of each such investment. The types of factors that the Investment Adviser will take into account in providing its fair value recommendation to the Board of Trustees with respect to such non-traded investments will include, as relevant and, to the extent available, the Portfolio Company’s earnings, the markets in which the Portfolio Company does business, comparison to valuations of publicly traded companies in the Portfolio Company’s industry, comparisons to recent sales of comparable companies, the discounted value of the cash flows of the Portfolio Company and other relevant factors. This information may not be available because it is difficult to obtain financial and other information with respect to private companies, and even where we are able to obtain such information, there can be no assurance that it is complete or accurate. Because such valuations are inherently uncertain and may be based on estimates, our determinations of fair market value may differ materially from the values that would be assessed if a readily available market for these securities existed. Due to this uncertainty, our fair market value determinations with respect to any non-traded investments we hold may cause our NAV on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments. As a result, investors purchasing our Shares based on an overstated NAV would pay a higher price than the value of our investments might warrant. Conversely, investors redeeming Shares during a period in which the NAV understates the value of our investments will receive a lower price for their Shares than the value of our investments might warrant.
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We may not realize gains from our equity investments and, because certain of our Portfolio Companies may incur substantial debt to finance their operations, we may experience a complete loss on our equity investment in the event of a bankruptcy or liquidation of any of our Portfolio Companies.
We invest principally in the equity securities of private growth companies primarily comprising the SharesPost 100. However, the equity interests we acquire may not appreciate in value and, in fact, may decline in value. In addition, the private company securities we acquire are often subject to drag-along rights. Drag-along rights are rights granted to a majority stockholder in a particular company that enables such shareholder to force minority stockholders to join in the sale of a company on the same price, terms, and conditions as any other seller in the sale. Such drag-along rights could permit other stockholders, under certain circumstances, to force us to liquidate our position in a Portfolio Company at a specified price, which could be, in our opinion, inadequate or undesirable or even below our cost basis. In this event, we could realize a loss or fail to realize gain in an amount that we deem appropriate on our investment. Further, capital market volatility and the overall market environment may preclude our Portfolio Companies from realizing liquidity events and impede our exit from these investments. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We will generally have little, if any, control over the timing of any gains we may realize from our equity investments. In addition, the Portfolio Companies in which we invest may have substantial debt loads. In such cases, we would typically be last in line behind any creditors in a bankruptcy or liquidation, and would likely experience a complete loss on our investment.
The lack of liquidity in, and potentially extended holding period of, many of our investments may adversely affect our business, and will delay any distributions of any gains.
Our investments will generally not be in publicly traded securities. Although we expect that most of our equity investments will trade on private secondary marketplaces, including the SharesPost Trading Platform, certain of the securities we hold will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. In addition, while some Portfolio Companies may trade on private secondary marketplaces, we can provide no assurance that such a trading market will continue or remain active, or that we will be able to sell our position in any Portfolio Company at the time we desire to do so and at the price we anticipate. The illiquidity of our investments, including those that are traded on private secondary marketplaces, may make it difficult for us to sell such investments if the need arises. Also, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. We will have no limitation on the portion of our portfolio that may be invested in illiquid securities, and a substantial portion or all of our portfolio may be invested in such illiquid securities from time to time.
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In addition, because we will generally invest in equity securities, with respect to the majority of our Portfolio Companies we do not expect realization events, if any, to occur in the near term. We expect that our holdings of equity securities may require several years to appreciate in value, and we can offer no assurance that such appreciation will occur. Even if such appreciation does occur, it is likely that purchasers of our Shares could wait for an extended period of time before any appreciation or sale of our investments, and any attendant distributions of gains, may be realized.
Our portfolio may be concentrated in a limited number of Portfolio Companies, subject to our Fundamental Concentration Policy, which will subject us to a risk of significant loss if the business or market position of these companies deteriorates or market sectors experiences a market downturn.
To the extent we limit our number of investments, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Beyond our income tax asset diversification requirements and our Fundamental Concentration Policy (which prohibits the Fund from investing 25% or more of its total assets in a particular industry), we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few issuers. As a result, a downturn in any particular industry, or in any other market sector in which we invest, in which a significant number of our Portfolio Companies operate could materially adversely affect us.
The Fund is classified as a “non-diversified” investment company under the 1940 Act, which means we are not limited by the 1940 Act in the proportion of our assets that may be invested in the securities of a single Portfolio Company. However, we intend to conduct our operations so as to qualify as a RIC for purposes of the Code (including by meeting the applicable diversification requirements under the Code), which generally will relieve the Fund of any liability for U.S. federal income tax to the extent our earnings are distributed to stockholders. See “Material U.S. Federal Income Tax Considerations.” Because we, as a non-diversified investment company, may invest in a smaller number of individual Portfolio Companies than a diversified investment company, an investment in the Fund presents greater risk to you than an investment in a diversified investment company.
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Technology-related sectors in which we invest are subject to many risks, including volatility, intense competition, decreasing life cycles, product obsolescence, changing consumer preferences and periodic downturns.
Given the experience of our Investment Adviser’s senior investment professionals within the technology space and considering the type of companies the securities of which trade on the SharesPost Trading Platform, we expect that a number of the Portfolio Companies in which we invest will operate in technology-related sectors. The revenues, income (or losses) and valuations of technology-related companies can and often do fluctuate suddenly and dramatically. In addition, because of rapid technological change, the average selling prices of products and some services provided by technology-related sectors have historically decreased over their productive lives. As a result, the average selling prices of products and services offered by our Portfolio Companies that operate in technology-related sectors may decrease over time, which could adversely affect their operating results and, correspondingly, the value of any equity securities that we may hold. This could, in turn, materially adversely affect our business, financial condition and results of operations.
We may be limited in our ability to make follow-on investments, and our failure to make follow-on investments in our Portfolio Companies could impair the value of our portfolio.
Following an initial investment in a Portfolio Company, we may make additional investments in that Portfolio Company as “follow-on” investments, in order to: (1) increase or maintain in whole or in part our equity ownership percentage; (2) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or (3) attempt to preserve or enhance the value of our investment.
We may elect not to make follow-on investments, or may otherwise lack sufficient funds to make those investments or lack access to desired follow-on investment opportunities. We have the discretion to make any follow-on investments, subject to the availability of capital resources and of the investment opportunity. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a Portfolio Company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities or the desire to maintain our tax status or because we lack access to the desired follow-on investment opportunity.
Because we will generally not hold controlling equity interests in our Portfolio Companies, we will likely not be in a position to exercise control over our Portfolio Companies or to prevent decisions by substantial shareholders or management of our Portfolio Companies that could decrease the value of our investments.
Generally, we will not take controlling equity positions in our Portfolio Companies. As a result, we will be subject to the risk that a Portfolio Company may make business decisions with which we disagree, and the stockholders and management of a Portfolio Company may take risks or otherwise act in ways that are adverse to our interests. In addition, other shareholders, such as venture capital and private equity sponsors, that have substantial investments in our Portfolio Companies may have interests that differ from that of the Portfolio Company or its minority shareholders, which may lead them to take actions that could materially and adversely affect the value of our investment in the Portfolio Company. Due to the lack of liquidity for the equity investments that we will typically hold in our Portfolio Companies, we may not be able to dispose of our investments in the event we disagree with the actions of a Portfolio Company or its substantial shareholders, and may therefore suffer a decrease in the value of our investments.
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Investments in foreign companies may involve significant risks in addition to the risks inherent in U.S. investments.
While we intend to invest primarily in U.S. companies, we may invest on an opportunistic basis in certain non-U.S. companies, including those located in emerging markets, that otherwise meet our investment criteria. Investing in foreign companies, and particularly those in emerging markets, may expose us to additional risks not typically associated with investing in U.S. issues. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes (including withholding taxes) at potentially confiscatory levels, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Further, we may have difficulty enforcing our rights as equity holders in foreign jurisdictions. In addition, to the extent we invest in non-U.S. companies, we may face greater exposure to foreign economic developments.
Although we expect that most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments.
Exchanges of shares in Portfolio Companies for Shares of the Fund may create investment and economic challenges for the Fund.
When an owner of shares of a Portfolio Company exchanges their shares for Shares of the Fund, it is possible that such owner, if they are actively involved in the Portfolio Company, will have more information about that company than the Investment Adviser. In valuing such shares for purposes of the exchange, the Investment Adviser will analyze all information available about the company, including data concerning any secondary trading activity in shares of the company, on the SharesPost Trading Platform or otherwise, but there can be no assurance that the Investment Adviser will have access to all information that might have a bearing on the appropriate value of the shares for purposes of the exchange.
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Risks Relating to Our Business and Structure
We are a recently formed company with no operating history, and our Investment Adviser has only a limited history of investing experience.
We were formed in August 2012 and have no operating history. As a result, we have limited financial information on which you can evaluate an investment in the Fund. In addition, our Investment Adviser, SP Investments Management, LLC, was formed in November 2010, has only a limited history of investing experience managing a pool of assets substantially smaller in size than is expected for this offering, and has no previous experience managing a closed-end, registered investment company. We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially or fall to zero.
Our financial condition and results of operations will depend on our ability to achieve our investment objective.
Our ability to achieve our investment objective will depend on our Investment Adviser’s ability to identify, analyze and invest in Portfolio Companies that meet our investment criteria. Accomplishing this result on a cost-effective basis is largely a function of our Investment Adviser’s structuring of the investment process and its ability to provide competent, attentive and efficient services to us. We seek a specified number of investments in private growth companies traded on the SharesPost Trading Platform, which may be extremely risky. There can be no assurance that the Investment Adviser will be successful in investing in Portfolio Companies that meet our investment criteria, or that we will achieve our investment objective. In addition, if the Fund fails to achieve its estimated size and the Expense Limitation Agreement is not renewed, expenses will be higher than expected. It may be difficult to implement the Fund’s strategy unless we raise a meaningful amount of assets.
Our Investment Adviser also currently manages several pooled investment vehicles in which we have no economic interest. These investment vehicles are typically Delaware series limited liability companies, which hold the securities of one or more issuers of private company stock. Managing these pooled investment vehicles requires the time of the Investment Adviser’s professionals, and may distract them or slow the rate of investment in the Fund. Even if we are able to grow and build upon our investment operations, any failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial markets, and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies as described herein, it could negatively impact our ability to make distributions.
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We will likely experience fluctuations in our quarterly results and we may be unable to replicate past investment opportunities or make the types of investments we have made to date in future periods.
We will likely experience fluctuations in our quarterly operating results due to a number of factors, including the rate at which we make new investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. These fluctuations may in certain cases be exaggerated as a result of our focus on realizing capital gains rather than current income from our investments. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
There are significant potential risks relating to investing in securities traded on private secondary marketplaces.
We intend to utilize the SharesPost Trading Platform and other alternative trading systems to acquire investments in our portfolio. We generally have little or no direct access to financial or other information from the Portfolio Companies in which we invest through such private secondary marketplaces. As a result, we are dependent upon the relationships and contacts of our Investment Adviser’s senior investment professionals and our Board of Trustees to obtain the information for our Investment Adviser to perform research and due diligence, and to monitor our investments after they are made. There can be no assurance that our Investment Adviser will be able to acquire adequate information on which to make its investment decision with respect to any private secondary marketplace purchases, or that the information it is able to obtain is accurate or complete. Any failure to obtain full and complete information regarding the Portfolio Companies in which we invest could cause us to lose part or all of our investment in such companies, which would have a material and adverse effect on our NAV and results of operations.
In addition, while we believe the ability to trade on private secondary marketplaces provides valuable opportunities for liquidity, there can be no assurance that Portfolio Companies in which we invest through private secondary marketplaces will have or maintain active trading markets, and the prices of those securities may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods, which may cause an inability for us to realize full value on our investment. In addition, wide swings in market prices, which are typical of irregularly traded securities, could cause significant and unexpected declines in the value of our portfolio investments. Further, prices on the SharesPost Trading Platform or other alternative trading systems, where limited information is available, may not accurately reflect the true value of a Portfolio Company, and may in certain cases overstate a Portfolio Company’s actual value, which may cause us to realize future capital losses on our investment in that Portfolio Company. If any of the foregoing were to occur, it would likely have a material and adverse effect on our NAV and results of operations.
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Investments in private companies, including through private secondary marketplaces, also entail additional legal and regulatory risks which expose participants to the risk of liability due to the imbalance of information among participants and participant qualification and other transactional requirements applicable to private securities transactions. Failure to comply with such requirements could result in rescission rights and monetary and other sanctions. The application of these laws within the context of private secondary marketplaces and related market practices are still evolving, and, despite our efforts to comply with applicable laws, we could be exposed to liability. The regulation of private secondary marketplaces is also evolving. Additional state or federal regulation of these markets could result in limits on the operation of or activity on those markets. Conversely, deregulation of these markets could make it easier for investors to invest directly in private companies and affect the attractiveness of our Fund as an access vehicle for investment in private shares. Private companies may also increasingly seek to limit secondary trading in their stock, through such methods as contractual transfer restrictions and employment policies. To the extent that these or other developments result in reduced trading activity and/or availability of private company shares, our ability to find investment opportunities and to liquidate our investments could be adversely affected.
Due to transfer restrictions and the illiquid nature of our investments, we may not be able to purchase or sell our investments when we wish to do so.
Most of our investments are or will be in equity securities of privately held companies. Such securities are typically subject to contractual transfer limitations, which may include prohibitions on transfer without the company’s consent. In order to complete a purchase of shares we may need to, among other things, give the issuer or its stockholders a particular period of time, often 30 days, in which to exercise a veto right, or a right of first refusal over, the sale of such securities. We may be unable to complete a purchase transaction if the subject company or its stockholders chooses to exercise a veto right or right of first refusal. When we complete an investment, we generally become bound to the contractual transfer limitations imposed on the subject company's stockholders as well as other contractual obligations, such as tag-along rights (i.e., rights of a company’s minority stockholders to participate in a sale of such company’s shares on the same terms and conditions as a company’s majority shareholder, if the majority stockholder sell its shares of the company). These obligations generally expire only upon an IPO by the subject company. As a result, prior to an IPO, our ability to liquidate such securities may be constrained. Transfer restrictions could limit our ability to liquidate our positions in these securities if we are unable to find buyers acceptable to our Portfolio Companies, or where applicable, their stockholders. Such buyers may not be willing to purchase our investments at adequate prices or in volumes sufficient to liquidate our position, and even where they are willing, other stockholders could exercise their tag-along rights to participate in the sale, thereby reducing the number of shares sellable by us. Furthermore, prospective buyers may be deterred from entering into purchase transactions with us due to the delay and uncertainty that these transfer and other limitations create.
Although we believe the SharesPost Trading Platform or other alternative trading systems may offer an opportunity to liquidate our private company investments, there can be no assurance that a trading market will develop for the securities that we wish to liquidate or that the subject companies will permit their shares to be sold through such platforms.
Due to the illiquid nature of most of our investments, we may not be able to sell these securities at times when we deem it advantageous to do so, or at all. Due to the difficulty of assessing our NAV, the NAV for our Shares may not fully reflect the illiquidity of our portfolio, which may change on a daily basis, depending on many factors, including the status of the SharesPost Trading Platform or other alternative trading systems on which our portfolio securities may trade, and our particular portfolio at any given time.
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We may be subject to lock-up provisions or agreements that could prohibit us from selling our investments for a specified period of time.
Even if some of our Portfolio Companies complete IPOs, we will often be subject to lock-up provisions that prohibit us from selling our investments into the public market for specified periods of time after IPOs. As a result, the market price of securities that we hold may decline substantially before we are able to sell these securities following an IPO.
There are significant potential risks associated with investing in venture capital and private equity-backed companies with complex capital structures.
A primary feature of our investment objective is to invest in private growth companies comprising the SharesPost 100, either through private secondary transactions or direct investments in such companies. Such private companies frequently have much more complex capital structures than traditional publicly-traded companies, and may have multiple classes of equity securities with differing rights, including with respect to voting and distributions. In addition, it is often difficult to obtain financial and other information with respect to private companies, and even where we are able to obtain such information, there can be no assurance that it is complete or accurate. In certain cases, such private companies may also have preferred stock or senior debt outstanding, which may heighten the risk of investing in the underlying equity of such private companies, particularly in circumstances when we have limited information with respect to such capital structures. Although we believe that our Investment Adviser’s senior investment professionals and our Board of Trustees have extensive experience evaluating and investing in private companies with such complex capital structures, there can be no assurance that we will be able to adequately evaluate the relative risks and benefits of investing in a particular class of a Portfolio Company’s equity securities. Any failure on our part to properly evaluate the relative rights and value of a class of securities in which we invest could cause us to lose part or all of our investment, which in turn could have a material and adverse effect on our NAV and results of operations.
We operate in a highly competitive market for direct equity investment opportunities.
A large number of entities compete with us to make the types of direct equity investments that we target as part of our business strategy. We compete for such investments with a large number of private equity and venture capital funds, secondary market funds, other equity and non-equity based investment funds, investment banks and other sources of financing, including traditional financial services companies such as commercial banks and specialty finance companies. Many of our competitors are substantially larger than us and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a RIC. There can be no assurance that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make direct equity investments that are consistent with our investment objective.
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There are significant potential conflicts of interest, which could impact our investment returns and limit the flexibility of our investment policies.
We have entered into an Investment Advisory Agreement with the Investment Adviser. The Investment Adviser is controlled by Greg Brogger, Sven Weber, our President and one of our Trustees, and Ryan Stroub, our Chief Financial Officer and Chief Compliance Officer. Messrs. Weber and Stroub, as principals of the Investment Adviser, collectively manage the business and internal affairs of the Investment Adviser. Mr. Brogger is Chairman and a controlling shareholder of SharesPost, which in turns own 100% of the equity of the Investment Adviser and SharesPost Financial. He is expected to serve as CEO of the NASDAQ Private Market, reporting to a Board to which he has the right to designate one member but that will be controlled by designees of NASDAQ OMX. Through his ownership of equity in SharesPost, Mr. Brogger will have an indirect minority interest in the NASDAQ Private Market.
In addition, our executive officers and Trustees, and the principals of our Investment Adviser serve or may serve as officers and directors of entities that operate in a line of business similar to our own, including new entities that may be formed in the future. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our Shareholders.
While the investment focus of each of these entities may be different from our investment objective, it is likely that new investment opportunities that meet our investment objective will come to the attention of one of these entities, or new entities that will likely be formed in the future in connection with another investment advisory client or program, and, if so, such opportunity might not be offered, or otherwise made available, to us. However, our executive officers, Trustees and Investment Adviser intend to treat us in a fair and equitable manner consistent with their applicable duties under law so that we will not be disadvantaged in relation to any other particular client. In addition, while the Investment Adviser anticipates that it will from time to time identify investment opportunities that are appropriate for both the Fund and the other funds that are currently or in the future may be managed by the Investment Adviser, to the extent it does identify such opportunities, the Investment Adviser has established a written allocation policy to ensure that the Fund is not disadvantaged with respect to the allocation of investment opportunities among the Fund and such other funds. Our Board of Trustees will monitor on a quarterly basis any such allocation of investment opportunities between the Fund and any such other funds.
SharesPost is the owner of the “SharesPost” name and marks, which we are permitted to use pursuant to a non-exclusive license agreement between us and SharesPost. SharesPost and its principals also use and may permit other entities to use the “SharesPost” name and marks in connection with businesses and activities unrelated to our operations. The use of the “SharesPost” name and marks in connection with businesses and activities unrelated to our operations may not be in the best interest of us or our Shareholders, and may result in actual or perceived conflicts of interest.
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We do not intend to enter into transactions with portfolio companies that may be considered related parties (including transactions for the purchase of securities of SharesPost). In order to ensure that we do not engage in any transactions with any persons affiliated with us that are prohibited, we have implemented certain written policies and procedures whereby (1) our Board of Trustees screens each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our executive officers and Trustees; (2) we do not enter into any agreements unless and until the Board of Trustees is satisfied that doing so will not raise concerns under the 1940 Act, and (3) if such concerns exist, we take appropriate actions to seek Board of Trustees review and approval or exemptive relief for such transaction. Our Board of Trustees will review these procedures on an annual basis. If the Fund files an application for exemptive relief with the SEC for any reason, there is no guarantee that such relief will be granted. In any interim period pending response to an application for exemptive relief from the SEC, the Fund will comply with the requirements of the 1940 Act concerning affiliate transactions.
We have also adopted a Code of Ethics which applies to, among others, our officers, including our chief executive officer and chief financial officer, as well as our Trustees and employees. Our officers and Trustees also remain subject to the fiduciary obligations imposed by both the 1940 Act and applicable state corporate law. Our Code of Ethics requires that all employees and Trustees avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and affiliated Trustee must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our chief compliance officer, as well as provide periodic reports concerning their personal securities transactions and obtain prior clearance of certain personal trades. Any pre-clearance approval that is granted will be effective for only two business days (the day on which approval is given and one additional business day) and no clearance will be given to any officer or Trustee to purchase or sell any security (i) on a day when the Fund has a pending “buy” or “sell” order in that same security until that order is executed or withdrawn or (2) when the chief compliance officer has been advised by the Investment Adviser that the same security is being considered for purchase or sale by the Fund. The Board of Trustees shall consider reports made to it under the Code of Ethics and shall determine whether the policies established in the Code of Ethics have been violated, and what sanctions, if any, should be imposed on the violator, including, but not limited to, a letter of censure, suspension or termination of the employment of the violator, or the unwinding of the transaction and disgorgement of any profits to the Company. The Board of Trustees shall review the Code of Ethics at least once a year.
The lack of experience of our Investment Adviser and its management in operating under the constraints imposed on us as a registered investment company may hinder the achievement of our investment objective.
We will be subject to numerous constraints on our operations under both the 1940 Act and the Code. For example, qualification for U.S. federal income taxation as a RIC requires satisfaction of source-of-income, diversification and distribution requirements. The Investment Adviser does not have experience investing under these constraints. These constraints, among others, may hinder the Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.
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We may be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC.
We will elect to be treated as a RIC and intend operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on our income and gain that we distribute to our Shareholders as distributions on a timely basis. To qualify as a RIC, we must meet certain income source, asset diversification and annual distribution requirements (and will pay corporate-level U.S, federal income tax on any undistributed income). We may also be subject to certain U.S. federal excise taxes, as well as state, local and foreign taxes (including withholding taxes).
We will satisfy the annual distribution requirement for a RIC if we distribute to our Shareholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income for each year. Under certain circumstances, we may be restricted from making distributions necessary to qualify as a RIC. If we are unable to obtain cash from other sources, we may fail to qualify as a RIC and, thus, may be subject to corporate-level income tax. Because we must make distributions to our Shareholders as described above, such amounts, to the extent a Shareholder is not participating in our dividend reinvestment option, will not be available to us to make investments. We will be subject to corporate-level U.S. federal income tax on any undistributed income and/or gain.
To qualify as a RIC, in general, we must also meet certain annual income source requirements at the end of each taxable year and asset diversification requirements at the end of each calendar quarter. Failure to meet these tests may result in our having to (a) dispose of certain investments quickly or (b) raise additional capital to prevent the loss of RIC status. Because most of our investments are in private companies and are generally illiquid, any such dispositions may be at disadvantageous prices and may result in losses. Also, the rules applicable to our qualification as a RIC are complex with many areas of uncertainty. Accordingly, no assurance can be given that we will continue to qualify as a RIC. If we fail to qualify as a RIC for any reason and become subject to regular “C” corporation income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our Shareholders. The Regulated Investment Company Modernization Act of 2010, which is effective for 2011 and later tax years, provides some relief from RIC disqualification due to failures of the income source and asset diversification requirements, although there may be additional taxes due in such cases. We cannot assure you that we would qualify for any such relief should we fail the income source or asset diversification requirements.
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If we do not have at least 500 Shareholders for an entire taxable year, we may be treated as a “non-publicly offered RIC” and you may be deemed to receive a pro rata share of certain of our expenses as a taxable distribution and we will be subject to additional tax requirements.
If we do not have at least 500 Shareholders for an entire taxable year, we may be treated as a “non-publicly offered RIC.” As a non-publicly offered RIC, we could not deduct our “affected RIC expenses” which instead are allocated to our Shareholders. Our Shareholders who or that are “affected investors” must treat such allocations as a taxable dividend and can deduct such expenses subject to the limitations imposed on “miscellaneous itemized deductions.” We believe that substantially all of our expenses would be treated as “affected RIC expenses.” “Affected investors” include individuals, trusts and estates. Moreover, as a non-publicly offered RIC, we generally would be required to ensure that, for U.S. federal income tax purposes, all of our distributions to Shareholders are pro rata, with no preference as to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another except to the extent that the former is entitled to such preference. If we violated this “no preference” requirement, we could be subject to U.S. corporate income tax and/or be disqualified as a RIC.
We may be treated as a non-publicly offered RIC in any taxable year and cannot provide assurance that we will not violate the “no preference” requirement.
Even in the event the value of your investment declines, the Advisory Fee will still be payable.
The Advisory Fee shall accrue quarterly at a rate equal to 0.475% (a 1.90% annual rate) of the average daily NAV of the Fund. The Advisory Fee is payable regardless of whether the NAV of the Fund or your investment declines. As a result, we will owe the Investment Adviser a quarterly Advisory Fee regardless of whether we incurred significant realized capital losses and unrealized capital depreciation (losses) during the fiscal quarter for which the Advisory Fee is paid.
Our Board of Trustees may change our non-fundamental investment policies and our investment strategies without prior notice or Shareholder approval, the effects of which may be adverse.
Our Board of Trustees has the authority to modify or waive our non-fundamental investment policies, and our investment criteria and strategies without prior notice and without Shareholder approval. We cannot predict the effect any changes to our current non-fundamental operating policies, investment criteria and strategies would have on our business, NAV of the Fund and operating results. However, the effects might be adverse, which could negatively impact our ability to make distributions to Shareholders and cause you to lose all or part of your investment.
Changes in laws or regulations governing our operations may adversely affect our business.
We and our Portfolio Companies are subject to regulation by laws at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Any change in these laws or regulations could have a material adverse effect on our business and the value of your investment.
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The transparency of our performance reporting may indirectly increase the difficulty of investing in certain Portfolio Companies.
Although the Investment Adviser will not report on the performance of individual Portfolio Companies, the Investment Adviser will report on the SharesPost Trading Platform and on the Investment Adviser’s website the valuation of securities owned by the Fund and the aggregate Fund-level performance. As a result, some Portfolio Companies might be concerned that their performance could be derived from such figures. Such concern might be heightened in reverse proportion to the number of Portfolio Companies existing in the Fund’s portfolio. These concerns might lead Portfolio Companies to oppose sale of their securities to the Fund, and might make it more difficult for the Fund to execute its investment strategy.
Risks Related to the Offering Made Pursuant to this Prospectus and Our Shares
Shareholders will have only limited liquidity.
The Fund is a closed-end investment company, provides limited liquidity through a quarterly repurchase policy under Rule 23c-3 of the 1940 Act, and is designed for long-term investors. Unlike many closed-end investment companies, the Fund’s Shares are not listed on any securities exchange and are not publicly traded. There is currently no secondary market for the Shares and the Fund expects that no secondary market will develop. Shares are subject to substantial restrictions on transferability and may only be transferred or resold in accordance with the Fund’s repurchase policy.
Limited liquidity is provided to Shareholders only through the Fund’s quarterly repurchase offers for no less than 5% of the Shares outstanding on the repurchase request deadline. There is no guarantee, and it is unlikely, that Shareholders will be able to sell all of the Shares they desire to sell in a quarterly repurchase offer. Additionally, in certain instances such repurchase offers may be suspended or postponed by a vote of a majority of the Board of Trustees, including a vote by a majority of the Independent Trustees, as permitted by the 1940 Act and other laws. See “Quarterly Repurchases of Shares.”
The Fund’s quarterly repurchase policy may require the Fund to liquidate portfolio holdings earlier than the Investment Adviser would otherwise do so, and may also result in an increase in the Fund’s expense ratio.
Quarterly repurchases by the Fund of its Shares typically will be funded from available cash. However, payment for repurchased Shares may require the Fund to liquidate securities of Portfolio Companies, and earlier than the Investment Adviser would otherwise liquidate such holdings. Such liquidation could potentially result in losses, and may increase the Fund’s portfolio turnover. The Investment Adviser intends to take measures to attempt to avoid or minimize such potential losses and turnover, and instead of liquidating portfolio holdings, may borrow money to finance repurchases of Shares. If the Fund borrows to finance repurchases, interest on any such borrowing will negatively affect Shareholders who do not tender their Shares in a repurchase offer by increasing the Fund’s expenses (subject to the Expense Limitation Agreement) and reducing any net investment income. To the extent the Fund finances repurchase proceeds by selling Portfolio Company securities, the Fund may hold a larger proportion of its net assets in less liquid securities. Also, the sale of Portfolio Company securities to fund repurchases could reduce the market price of those securities, which in turn would reduce the Fund’s NAV.
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Repurchases of Shares will tend to reduce the amount of outstanding Shares and, depending upon the Fund’s investment performance, its net assets. A reduction in the Fund’s net assets may increase the Fund’s expense ratio (subject to the Expense Limitation Agreement), to the extent that additional Shares are not sold. In addition, the repurchase of Shares by the Fund may be a taxable event to Shareholders.
There is a risk that you may not receive distributions or that our distributions may not grow over time, particularly since we invest primarily in securities that do not produce current income.
We cannot assure you that we will achieve investment results or maintain a tax status that will allow or require any specified level of cash distributions or year-to-year increases in cash distributions. As we intend to focus on making primarily capital gains-based investments in equity securities, which generally will not be income producing, we do not anticipate that we will make distributions on a quarterly basis or become a predictable issuer of distributions, and we expect that our distributions, if any, will be less consistent than other investment companies that primarily make debt investments. If the Fund declares a cash distribution, then Shareholders’ distribution will be automatically reinvested in additional Shares, unless they specifically “opt out” of the dividend reinvestment option by written request to the Investment Adviser so as to receive cash.
We will have broad discretion over the use of proceeds from this continuous offering and will use proceeds in part to satisfy operating expenses.
We will have significant flexibility in applying the proceeds of this continuous offering and may use the net proceeds in ways with which you may not agree, or for purposes other than those contemplated at the time of this offering. We cannot assure you that we will be able to successfully utilize the proceeds within the timeframe contemplated. We will also pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from the net proceeds of this offering. Our ability to achieve our investment objective may be limited to the extent that the net proceeds of this offering, pending full investment, are used to pay operating expenses. In addition, we can provide you no assurance that any future offering will be successful, or that by increasing the size of our available equity capital our aggregate expenses, and correspondingly, our expense ratio, will be lowered.
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Investors in any future offering pursuant to this Prospectus and any accompanying prospectus supplement may incur immediate and substantial dilution.
Our organization expense and other expenses of any future offering will reduce the net proceeds of any such offering available for us to invest. Depending upon the public offering price, and after deducting the related offering expenses payable by us, in connection with any offering pursuant to this Prospectus, investors in any such offering may be subject to an immediate and substantial dilution.
Early investors in the Fund may bear a greater proportion of the Fund’s organizational expenses.
The Fund’s Shareholders will incur the costs of the Fund’s organization (subject to the Expense Limitation Agreement), and therefore early investors in the Fund will bear a greater proportion of the Fund’s organizational expenses. It is also possible that the Fund may not raise significant assets, either initially or on a longer-term basis, further increasing the proportion of costs borne by early investors.
THE FOREGOING LIST OF “RISK FACTORS” IS NOT A COMPLETE ENUMERATION OR EXPLANATION OF THE RISKS INVOLVED IN AN INVESTMENT IN THE FUND. PROSPECTIVE INVESTORS SHOULD READ THIS ENTIRE PROSPECTUS AND CONSULT WITH THEIR OWN LEGAL, TAX AND FINANCIAL ADVISORS BEFORE DECIDING TO INVEST IN THE FUND.
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MANAGEMENT OF THE FUND
The Board of Trustees
The Board of Trustees of the Fund has overall responsibility for monitoring the Fund’s investment program and its management and operations. At least a majority of the Board of Trustees are and will be persons who are not “interested persons” of the Fund or the Investment Adviser (as such term is defined in Section 2(a)(19) of the 1940 Act, each, an “Independent Trustee” and, collectively, the “Independent Trustees”). Any vacancy on the Board of Trustees may be filled by the remaining Trustees, except to the extent the 1940 Act requires the election of Trustees by Shareholders. Subject to the provisions of Delaware law, the Trustees will have all powers necessary and convenient to carry out this responsibility. The name and business address of the Trustees and officers of the Fund and their principal occupations and other affiliations during the past five years, as well as a description of committees of the Board of Trustees, are set forth under “Management” in the SAI.
Portfolio Managers
The portfolio managers of the Investment Adviser primarily responsible for the investment management of the Fund are the officers of the Fund. See below for biographies of each portfolio manager.
Name, Address(1), and Age | Position(s) Held with Fund |
Term of Office and Length of Time Served(2) |
Principal Occupation(s) During the Past Five Years | |||
Sven Weber DOB: 1/22/1970 |
President | Since inception | Managing Director of SP Investments Management LLC, President of SVB Capital with SVB Financial Group, Principal of Cipio Partners LLC | |||
Ryan Stroub DOB: 7/7/1968 |
Chief Financial Officer and Chief Compliance Officer | Since inception | Chief Financial and Administrative Officer of SharesPost, Inc., Chief Financial Officer and Chief Accounting Officer of Thomas Weisel Partners |
(1) | All addresses c/o SharesPost 100 Fund, 1150 Bayhill Drive, San Bruno, California 94066. |
(2) | The Fund has not yet commenced operations. |
Sven Weber has been the President and a member of the Board of Trustees of the Fund since inception, and is the Managing Director of SharesPost’s wholly owned registered investment adviser, SP Investments Management LLC, and in such role is responsible for the management of SharesPost’s private investment vehicles. Prior to his position with the Investment Adviser, Sven served as President of SVB Capital, an affiliate of Silicon Valley Bank. During his tenure at SVB Capital, Sven managed the company’s venture capital investing business, which included fund of funds, and direct and secondary investment funds exceeding $1.5 billion under management. Prior to SVB Capital, Sven was a principal of Cipio Partners, where he focused on secondary investments, and prior to that he worked as Vice President on direct investments for Siemens, and had operational responsibilities with Vodafone Germany and O2 Germany. Sven holds a Master’s degree in physics from the University of Heidelberg, where he specialized in information technology and environmental physics.
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Ryan Stroub has served as the Chief Financial Officer and Chief Compliance Officer of the Fund since inception. Ryan also currently serves Chief Financial and Administrative Officer of SharesPost, Inc., in which position he is responsible for financial strategy, reporting and compliance. Prior to joining SharesPost, Ryan served as Chief Financial Officer and Chief Accounting Officer of Thomas Weisel Partners (a subsidiary of Stifel Nicolaus (NYSE: SF)), an investment bank focused principally on growth companies and growth investors. Prior to that position, Ryan spent eight years at E*TRADE Financial Corporation (NASDAQ: ETFC) as the Global and Corporate Controller, overseeing accounting operations, systems and financial reporting throughout its transformation from a new online investing company to a global financial services company. Ryan holds a Bachelor of Arts degree from University of California, Santa Barbara, and is a member of the California Society of Certified Public Accountants.
Compensation of Portfolio Managers
Each of the portfolio managers receives a fixed annual salary and a discretionary bonus, which is dependent upon the overall performance of the Investment Adviser. The portfolio managers do not receive any additional compensation from the Fund for serving as a portfolio manager of the Fund. The SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers, and the portfolio managers’ ownership of securities of the Fund.
The Investment Adviser
Under the supervision of the Board of Trustees and pursuant to the Investment Advisory Agreement, SP Investments Management, LLC, a wholly owned subsidiary of SharesPost and an investment adviser registered with the SEC under the Advisers Act, serves as Investment Adviser to the Fund. The Investment Adviser is located at 1150 Bayhill Drive, San Bruno, California 94066.
The Investment Adviser was formed in November 2010 as a Delaware limited liability company, and registered with the SEC under the Advisers Act in June 2012. The Investment Adviser manages multiple investment vehicles, and as of the end of the most recent fiscal quarter (March 31, 2013), held in the aggregate approximately $2.0 million under management.
Pursuant to the Investment Advisory Agreement, the Investment Adviser is responsible for developing, implementing and supervising the Fund’s investment program and providing day-to-day management services to the Fund. The Investment Advisory Agreement authorizes the Investment Adviser to implement the Fund’s investment program.
The Investment Adviser also provides office space, telephone services and utilities, and administrative, secretarial, clerical and other personnel as necessary to provide the services required to be provided under the Investment Advisory Agreement.
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For a discussion of the Investment Adviser’s compensation, see “Fees and Expenses – Advisory Fee” below.
The Fund Administrator
The Fund will enter into an Administration and Fund Accounting Agreement (the “Fund Administration Agreement”) with UMB Fund Services to perform certain financial, accounting, corporate, administrative, registrar and other services on behalf of the Fund. The Fund Administrator will be paid a monthly fee (the “Fund Administration Fee”) by the Fund.
Between the Investment Adviser and the Fund Administrator, the Fund Administrator is responsible, pursuant to the Fund Administration Agreement and under the ultimate supervision of the Investment Adviser, for matters pertaining to the administration of the Fund, including, but not limited to, the following: (i) preparing and maintaining the financial and accounting records and statements of the Fund; (ii) arranging for the provision of accounting, clerical and administrative services; (iii) coordinating communications of the Board of Trustees; (iv) monitoring the Fund’s compliance with regulations to which it is subject; (v) maintaining records of the Fund; and (vi) providing the coordination and processing of all repurchase offers.
The Fund Administration Fee is based on the Fund Administrator’s standard schedule of fees charged by it for similar services. These fees are detailed in the Fund Administration Agreement, a copy of which is available from the Investment Adviser upon request and filed herewith. The Fund may retain other service providers affiliated with the Fund Administrator to perform the administrative services that would otherwise be performed by the Fund Administrator and such service providers may be located outside of the United States.
The initial term of the Fund Administration Agreement is one year. Thereafter, if not terminated as provided in the Fund Administration Agreement, the Fund Administration Agreement shall continue automatically in effect for successive annual periods. The Fund Administration Agreement is subject to termination by the Fund Administrator or by the Fund upon not less than 90 calendar days’ written notice prior to the end of the respective term. The Fund Administration Agreement is also terminable upon the material breach of the other party of any term of the Fund Administration Agreement if such breach is not cured within 30 days of notice of such breach to the breaching party, or if the Fund Administrator enters receivership or other similar event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
Under the Fund Administration Agreement:
· | the Fund has agreed to indemnify and hold harmless the Fund Administrator, its employees, agents, officers, directors, shareholders, affiliates and nominees (together the “Fund Administrator Indemnified Parties”) from and against any and all claims, demands, actions and suits, and from and against any and all judgments, liabilities, losses, damages, costs, charges, fees, penalties, reasonable counsel fees and other expenses of every nature and character which may be asserted against or incurred by any Fund Administrator Indemnified Parties or for which any Fund Administrator Indemnified Parties may be held liable as a result of the services provided to the Fund (other than by reason of bad faith, gross negligence, fraud, reckless disregard in the performance of its duties and obligations thereunder, uncured material breach of the Fund Administration Agreement or willful misconduct on the part of the Fund Administrator in connection with the provision of the services to the Fund under the Fund Administration Agreement); and |
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· | the Fund has agreed that, in the absence of an uncured material breach of the Fund Administration Agreement by the Fund Administrator or the bad faith, gross negligence, fraud, reckless disregard in the performance of its duties and obligations under the Fund Administration Agreement or willful misconduct by the Fund Administrator in the provision of the services thereunder, the Fund Administrator shall not be liable to the Fund for: (i) any action taken or omitted to be taken in accordance with or in reliance upon instructions, communications, data, documents or information (without investigation or verification) received by the Fund Administrator from an officer or representative of the Fund, or from any authorized person as defined thereto; (ii) any action taken or omission by the Fund, Investment Adviser, any authorized person or any past or current service provider; or (iii) its reliance on the security valuations without investigation or verification provided by pricing service(s), the Investment Adviser or representatives of the Fund. |
IN PROVIDING SERVICES AS AN ADMINISTRATOR, THE FUND ADMINISTRATOR DOES NOT ACT AS A GUARANTOR OF THE FUND’S SHARES. MOREOVER, THE FUND ADMINISTRATOR IS NOT RESPONSIBLE FOR ANY INVESTMENT DECISIONS OF THE FUND (ALL OF WHICH WILL BE MADE BY THE INVESTMENT ADVISER) OR THE EFFECT OF SUCH INVESTMENT DECISIONS ON THE PERFORMANCE OF THE FUND.
The Fund may engage a different administrator or perform such administrative services itself in its discretion upon notice to Shareholders.
The Custodian
The Fund will enter into a custody agreement (the “Custody Agreement”) with UMB Bank to act as the Fund’s custodian of all securities and cash at any time delivered to the Custodian, in each case in accordance with the provisions of Section 17 of the 1940 Act and any associated rules and regulations. The Custodian may place certain of the Fund’s assets with sub-custodians and/or depositories.
The fees payable to the Custodian are based on its standard schedule of fees charged by the Custodian for similar services. These fees are detailed in the Custody Agreement, a copy of which is available from the Investment Adviser upon request and filed herewith. The Fund may retain other custodians from time to time without notice to, or approval of, any Shareholder.
The Custody Agreement is subject to termination by the Custodian or by the Fund upon not less than 90 calendar days’ written notice. The Custody Agreement is also subject to termination by the Custodian or by the Fund upon the breach of the other party of any material term of the Custody Agreement if such breach is not cured within 30 days of notice of such breach to the breaching party. Further, the Custody Agreement may be terminated by the Fund in the event that the Custodian enter receivership or a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
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UMB Bank’s principal business address is 1010 Grand Boulevard, Kansas City, MO 64106.
The Transfer Agent
The Fund will enter into a Transfer Agency Agreement with UMB Fund Services to provide transfer agent services to the Fund in connection with the sale and repurchase of Shares. The Transfer Agency Agreement provides for fees payable to the Transfer Agent based on the Transfer Agent’s standard schedule of fees charged by it for similar services. These fees are detailed in the Transfer Agency Agreement, a copy of which is available from the Investment Adviser upon request and filed herewith.
The Transfer Agency Agreement has a term of one year. Thereafter, if not terminated as provided in the Transfer Agency Agreement, the Transfer Agency Agreement shall continue automatically in effect for successive annual periods. The Transfer Agency Agreement is subject to termination by the Transfer Agent or by the Fund upon 90 calendar days’ written notice prior to the end of the respective term. The Transfer Agency Agreement is also terminable upon the material breach of the other party of any term of the Transfer Agency Agreement if such breach is not cured within 30 days of notice of such breach to the breaching party, or if the Transfer Agent enters receivership or other similar event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
UMB Fund Services’ principal business address is 803 West Michigan Street, Milwaukee, WI 53233.
The Distributor
The Fund will enter into a Distribution Agreement with Foreside Fund Services, LLC to act as the Fund’s distributor for the Shares. The Distributor bears all of its expenses of providing distribution services as described under that agreement. The Fund assumes and pays all charges not specifically assumed or otherwise to be provided by the Distributor under the Distribution Agreement. In addition, the Investment Adviser will enter into a Distribution Services Agreement with the Distributor. The Investment Adviser will pay the Distributor certain fees for providing marketing and sales support services to the Fund and reimburse certain out-of-pocket expenses incurred by the Distributor in connection therewith. See “Fees and Expenses – Distributor Expenses” below.
The Distribution Agreement and the Distribution Services Agreement each has an initial term of two years. Thereafter, if not terminated as provided in the Distribution Agreement, the Distribution Agreement shall continue automatically in effect for successive annual periods. The Distribution Services Agreement is terminable upon termination of the Distribution Agreement. The Distribution Agreement and the Distribution Services Agreement is each subject to termination by the Distributor or by the Fund upon 60 calendar days’ written notice.
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Liquidating Trust
The Board of Trustees may, at its discretion if determined to be in the best interests of Shareholders, distribute the assets of the Fund into and through a liquidating trust to effect the liquidation of, all or a portion of, the Fund. The use of a liquidating trust would be subject to the regulatory requirements of the 1940 Act and applicable Delaware law, and could result in expenses that the Shareholders would bear indirectly. There are no current plans to liquidate the Fund.
Independent Registered Public Accounting Firm and Legal Counsel
KPMG LLP serves as the independent registered public accounting firm of the Fund. KPMG LLP’s principal business address is located at 355 South Grand Avenue, Los Angeles, California 90071.
The law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., 666 Third Avenue, New York, New York 10017, serves as legal counsel to the Fund. The firm may also act as legal counsel to the Investment Adviser and its affiliates with respect to various matters. The firm does not represent potential investors with respect to their investment in the Fund.
FEES AND EXPENSES
Advisory Fee
The Fund will pay the Advisory Fee to the Investment Adviser as compensation for its investment advisory services. The Advisory Fee shall accrue quarterly at a rate equal to 0.475% (a 1.90% annual rate) of the average daily NAV of the Fund, and shall be paid quarterly in arrears. The NAV of the Fund is determined by subtracting the Fund’s liabilities from the fair market value of its assets, to be determined as set forth under “Determination of Net Asset Value” below. A discussion regarding the basis for the Board of Trustees approval of the Investment Advisory Agreement, or any future amendments, will be available in the Fund’s annual and semi-annual report to Shareholders.
Fund Administrative Fee
The Fund will pay the Fund Administrator the following fees: for administrative services 0.07% on the first $300 million of net assets, 0.06% on the next $300 million of net assets, and 0.05% on net assets greater than $600 million, paid monthly at the preceding annual rates; and for accounting services a $35,000 base fee plus 0.03% of net assets up to $300 million, 0.02% on the next $300 million of net assets, and 0.01% on net assets greater than $600 million, paid monthly at the preceding annual rates, plus out-of-pocket expenses for each of the preceding services.
Redemption Fee
Shareholders who choose to participate in the Fund’s repurchase offers will incur a redemption fee equal to 2.00% of the value of the Shares the Fund repurchases from them for Shares held less than 365 days. Shares held longest will be treated as being repurchased first and Shares held shortest will be treated as being repurchased last. The redemption fee does not apply to Shares that were acquired through reinvestment of distributions. Shares held for 365 days or more are not subject to the 2.00% fee. Redemption fees are paid to the Fund directly and are designed to offset costs charged by the Transfer Agent for redeeming Shares and for costs associated with fluctuations in Fund asset levels and cash flow caused by such redemptions. In addition, if Shareholders request repurchase proceeds be paid by wire transfer, such Shareholders will be assessed an outgoing wire transfer fee at prevailing rates charged by UMB Fund Services, currently $16.
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Shareholder Services Fee
The Fund has adopted a “Shareholder Services Plan” under which the Fund may compensate financial industry professionals for providing ongoing services in respect of clients to whom they have distributed Shares of the Fund. Such services may include electronic processing of client orders, electronic fund transfers between clients and the Fund, account reconciliations with the Fund’s Transfer Agent, facilitation of electronic delivery to clients of Fund documentation, monitoring client accounts for back-up withholding and any other special tax reporting obligations, maintenance of books and records with respect to the foregoing, and such other information and liaison services as the Fund or the Investment Adviser may reasonably request. The Fund may incur such foregoing expenses on an annual basis equal to 0.25% of its average NAV.
Distributor Expenses
Pursuant to the Distribution Agreement between the Fund and the Distributor, the Distributor bears all of its expenses of providing distribution services as described under that agreement. The Fund assumes and pays all charges not specifically assumed or otherwise to be provided by the Distributor under the Distribution Agreement. The Fund pays, among other things: (i) all fees and expenses in connection with the registration of the Fund and the Shares under the United States securities laws and the registration and qualification of Shares for sale in the various jurisdictions in which the Fund will determine it is advisable to qualify such Shares for sale; and (ii) the cost of preparing and printing of sufficient copies of the Fund’s Prospectus and any other sales material (and any supplements or amendments thereto). The Distributor serves in such capacity on a best efforts basis, subject to various conditions, and may enter into related selling group agreements with various Financial Intermediaries to assist in the distribution of Shares. Shares are available to investors investing through Financial Intermediaries where such Financial Intermediary has agreed to provide certain administrative services.
Pursuant to a Distribution Services Agreement between the Investment Adviser and the Distributor, the Investment Adviser will pay the Distributor certain fees for providing marketing and sales support services to the Fund and reimburse certain out-of-pocket expenses incurred by the Distributor in connection therewith. The maximum amount of items of compensation payable to the Distributor under the Distribution Services Agreement (excluding reimbursement of expenses) will not exceed 0.01% of total net assets of the Fund, calculated and paid monthly, subject to a minimum monthly fee of $1,500.
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Other Expenses
The Fund pays all of its organizational and investment expenses, including, but not limited to, brokerage commissions (if any) and all other costs of executing transactions, interest expense, insurance expense, custodial expense, and all ongoing ordinary administrative and operational costs of the Fund, including (but not limited to) legal costs, accounting costs, taxes and any fees paid to the Fund Administrator or the Custodian and all expenses incurred in connection with the continuous offering and sale of its Shares and communications with Shareholders. The Fund also directly pays any extraordinary operating expenses.
The Investment Adviser bears all ongoing ordinary administrative and operational costs of the Investment Adviser, including employees’ salaries, facilities, travel costs, technology costs, office supplies, research and data costs, and its own legal, accounting and filing fees.
The Board of Trustees, including a majority of the Independent Trustees, has adopted a procedure that the Board of Trustees has determined is reasonably designed to provide that Broker Fees received by affiliated persons of the Fund or the Investment Adviser for effecting transactions as broker (“Affiliated Broker”) in connection with the purchase and sale of securities by the Fund are (i) reasonable and fair compared to the Broker Fees received by other brokers in connection with comparable transactions involving similar instruments being purchased or sold on a securities exchange (including the SharesPost Trading Platform) during a comparable period of time, or (ii) otherwise subject to the limits prescribed by Section 17(e) of the 1940 Act. Such procedure permits the Fund to effect transactions through an Affiliated Broker, provided that the Broker Fees received by the Affiliated Broker in connection with the sale of securities to or by the Fund are subject to the following limits contained in Section 17(e)(2) of the 1940 Act: (1) if the transaction is effected on a securities exchange, the compensation may not exceed the “usual and customary broker's commission” (as defined in Rule 17e-1 under the 1940 Act); (2) in the case of the purchase of securities by the Fund in connection with a secondary distribution, the compensation cannot exceed 2% of the sale price; and (iii) the compensation for transactions otherwise effected cannot exceed 1% of the purchase or sale price. Rule 17e-1 defines a “usual and customary broker's commission” as one that is fair compared to the commission received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on an exchange during a comparable period of time. The Board of Trustees, including a majority of Independent Trustees, shall determine no less frequently than quarterly that all transactions effected pursuant to the aforementioned procedures during the preceding quarter were effected in compliance with such procedures.
Expense Limitation Agreement
The Investment Adviser has entered into a written Expense Limitation Agreement under which it has agreed to limit the total expenses of the Fund, including organizational expenses but excluding interest, taxes, other expenditures which are capitalized in accordance with GAAP, brokerage commissions and extraordinary expenses) to an annual rate of 2.50% of the average NAV of the Fund until , 2015, and from year to year thereafter; provided that each such continuance is specifically approved by the Board of Trustees. The Investment Adviser may recoup from the Fund fees previously waived or expenses previously reimbursed by the Investment Adviser with respect to the Fund pursuant to the Expense Limitation Agreement if such reimbursement does not cause the Fund to exceed the Expense Limitation and the reimbursement is made within three years after the year in which the Investment Adviser waived the fee or incurred the expense.
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INVESTOR SUITABILITY
An investment in the Fund involves a considerable amount of risk. It is possible that you will lose money. An investment in the Fund is suitable only for investors who can bear the risks associated with the limited liquidity of the Shares and should be viewed as a long-term investment. Before making your investment decision, you should (i) consider the suitability of this investment with respect to your investment objectives and personal financial situation and (ii) consider factors such as your personal net worth, income, age, risk tolerance and liquidity needs. An investor should invest in the Fund only money that it can afford to lose, and it should not invest in the Fund money to which it will need access in the short-term or on a frequent basis. In addition, all investors should be aware of how the Fund’s investment strategies fit into their overall investment portfolios because the Fund is not designed to be, by itself, a well-balanced investment for a particular investor.
The Fund should be considered to be an illiquid investment. Investors will not be able to redeem Shares on a daily basis because the Fund is a closed-end fund operating as an interval fund. The Fund’s Shares are not traded on an active market and there is currently no secondary market for the Shares, nor does the Fund expect a secondary market in the Shares to develop. However, limited liquidity may be available through the quarterly repurchase offers described in this Prospectus.
SUBSCRIPTION FOR SHARES
Each investor must initially purchase a minimum of $2,500 of Shares in the Fund, plus any applicable sales load. The Fund may accept both initial and additional applications by investors to purchase Shares at such times as the Fund may determine, subject, in the case of investors purchasing Shares with cash, to the receipt of cleared funds on or prior to the third business day prior to the relevant subscription date (or such other acceptance date set by the Fund and notified to prospective Shareholders prior to a subscription date).
Investors may also purchase Shares by exchanging securities of Portfolio Companies for Fund Shares. Each exchange of private company shares for Fund Shares is subject to approval by the Board of Trustees, upon recommendation by the Investment Adviser, and may only be consummated at the end of the fiscal quarter in which Board of Trustees approval is received. The terms of each exchange must be approved by the Board of Trustees, including a majority of Independent Trustees. The Investment Adviser shall determine the valuation of such securities and the number of Shares for which such securities may be exchanged. The value of shares of Portfolio Companies to be exchanged by prospective investors for Shares will be determined by negotiation between the parties, taking factors into account such as the recent trading prices of such shares on the SharesPost Trading Platform and other alternative trading systems, financial results of such Portfolio Company (when available), research reports and other diligence materials, and the valuation of such security to the extent it is already a part of the Fund’s portfolio. Such exchanges would generally result in a taxable event for the exchanging shareholder with a taxable capital gain in the amount of the difference between such shareholder’s basis in the exchanged shares and the fair market value of the Shares received in the exchange. The Investment Adviser will not receive any Payment in connection with the exchange by an investor of Portfolio Company shares for Fund Shares, and to the extent any affiliate of the Investment Adviser receives Payments in connection with exchanges, such Payments will be subject to policies and procedures adopted by the Board of Trustees pursuant to Section 17(e) and Rule 17e-1 of the 1940 Act. These policies and procedures include quarterly review by the Board of Trustees of any such Payments.
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Each investor must submit a completed application to a Financial Intermediary before the applicable purchase date. The Fund has the sole right to accept applications for Shares and reserves the right to reject in its complete and absolute discretion any application for Shares in whole or in part. The Fund also reserves the right to suspend sales and purchases of Shares at any time.
PLAN OF DISTRIBUTION
Foreside Fund Services, LLC (the “Distributor”), located at Three Canal Plaza, Suite 100, Portland, ME 04101, acts as the Fund’s distributor in connection with the offering of Fund Shares. The Distributor serves on a best efforts basis, subject to various conditions. It is not required to buy any Shares and does not intend to make a market in the Shares. The Fund’s Shares are offered for sale at NAV next calculated after receipt of the purchase in good order, plus any applicable sales load. The Distributor may enter into related selling group agreements with various broker-dealers to assist in the distribution of Shares. No arrangement has been made by the Fund to place funds received in an escrow, trust or similar account. Shares of the Fund will not be listed on any national securities exchange. The Distributor does not receive compensation from the Fund for its distribution services. The Investment Adviser pays the Distributor a fee for providing certain distribution-related services to the Fund.
The Investment Adviser or its affiliates, in the Investment Adviser’s or such affiliates’ discretion and from their own resources, including out of the Investment Adviser’s own legitimate profits from advising the Fund, may pay additional compensation to brokers or dealers in connection with the sale and distribution of Fund Shares (the “Additional Compensation”). In return for the Additional Compensation, the Fund may receive certain marketing advantages including access to a broker’s or dealer’s registered representatives, placement on a list of investment options offered by a broker or dealer, or the ability to assist in training and educating the broker’s or dealer’s registered representatives. The Additional Compensation may differ among brokers or dealers in amount or in the manner of calculation: payments of Additional Compensation may be fixed dollar amounts, or based on the aggregate value of outstanding Shares held by Shareholders introduced by the broker or dealer, or determined in some other manner. The receipt of Additional Compensation by a selling broker or dealer may create potential conflicts of interest between an investor and its broker or dealer who is recommending the Fund over other potential investments.
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The Fund and the Investment Adviser have agreed to indemnify the Distributor against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Distributor may be required to make because of any of those liabilities. Such agreement does not include indemnification of the Distributor against liability resulting from willful misfeasance, bad faith or gross negligence on the part of the Distributor in the performance of its duties or from reckless disregard by the Distributor of its obligations and duties under the Distribution Agreement.
Prior to the initial public offering of Shares, the Investment Adviser purchased Shares from the Fund in an amount satisfying the net worth requirements of Section 14(a) of the 1940 Act.
How to Purchase Fund Shares
Investors may purchase Shares directly from the Fund in accordance with the instructions below. Investors will be assessed fees for returned checks and stop payment orders at prevailing rates charged by the Fund Administrator. The returned check and stop payment fee is currently $25.00. Investors may buy and sell Shares of the Fund through Financial Intermediaries and their agents that have made arrangements with the Fund and are authorized to buy and sell Shares of the Fund. Orders will be priced at the appropriate price next computed after it is received by a Financial Intermediary and accepted by the Fund. A Financial Intermediary may hold Shares in an omnibus account in the Financial Intermediary’s name or the Financial Intermediary may maintain individual ownership records. The Fund may pay the Financial Intermediary for maintaining individual ownership records as well as providing other Shareholder services. Financial Intermediaries may charge fees for the services they provide in connection with processing an investor’s transaction order or maintaining an investor’s account with them. Investors should check with their Financial Intermediary to determine if it is subject to these arrangements. Financial Intermediaries are responsible for placing orders correctly and promptly with the Fund, forwarding payment promptly. Orders transmitted with a Financial Intermediary before the close of regular trading (generally 4:00 p.m., Eastern Time) on a day that the NASDAQ is open for business, will be priced based on the Fund’s NAV next computed after it is received by the Financial Intermediary.
By Mail
To make an initial purchase by mail, complete an account application and mail the application, together with a check made payable to SharesPost 100 Fund to:
SharesPost 100
Fund
c/o UMB Fund Services, Inc.
803 West Michigan Street
Milwaukee, Wisconsin 53233
All checks must be in U.S. dollars drawn on a domestic bank. The Fund will not accept payment in cash or money orders. To prevent check fraud, the Fund will neither accept cashier’s checks, third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of Shares, nor post dated checks, post dated on-line bill pay checks, or any conditional purchase order or payment.
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The Transfer Agent will charge a $25.00 fee against an investor’s account, in addition to any loss sustained by the Fund, for any payment that is returned. It is the policy of the Fund not to accept applications under certain circumstances or in amounts considered disadvantageous to Shareholders. The Fund reserves the right to reject any application.
By Wire — Initial Investment
To make an initial investment in the Fund, the Transfer Agent must receive a completed account application before an investor wires funds. Investors may mail or overnight deliver an account application to the Transfer Agent. Upon receipt of the completed account application, the Transfer Agent will establish an account. The account number assigned will be required as part of the instruction that should be provided to an investor’s bank to send the wire. An investor’s bank must include both the name of the Fund, the account number, and the investor’s name so that monies can be correctly applied. If investors wish to wire money to make an investment in the Fund, please call the Fund Administrator at for wiring instructions and to notify the Fund that a wire transfer is coming. Any commercial bank can transfer same-day funds via wire. The Fund will normally accept wired funds for investment on the day received if they are received by the Fund’s designated bank before the close of regular trading on the NASDAQ. An investor’s bank may charge such investor a fee for wiring same-day funds. The bank should transmit funds by wire to:
ABA #: 101000695
Credit: UMB Bank, n.a.
Account #: TBD
Further Credit: SharesPost 100 Fund
Investor name(s):
Investor account number:
By Wire — Subsequent Investments
Before sending a wire, investors must contact the Fund Administrator to advise it of the intent to wire funds. This will ensure prompt and accurate credit upon receipt of the wire. Wired funds must be received prior to 4:00 p.m. Eastern time to be eligible for same day pricing. The Fund, and its agents, including the Transfer Agent and the Custodian, are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions.
Automatic Investment Plan — Subsequent Investments
Investors may participate in the Fund’s Automatic Investment Plan, an investment plan that automatically moves money from an investor’s bank account and invests it in the Fund through the use of electronic funds transfers or automatic bank drafts. Investors may elect to make subsequent investments by transfers of a minimum of $100 on the 5th and 20th day of each month into such investor’s established Fund account. Please contact the Fund Administrator at for more information about the Fund’s Automatic Investment Plan.
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By Telephone
Investors may purchase additional Shares of the Fund by calling the Fund Administrator at . If an investor elected this option on the account application, and the account has been open for at least 15 days, telephone orders will be accepted via electronic funds transfer from your bank account through the Automated Clearing House (ACH) network. Banking information must be established on the account prior to making a purchase. Orders for Shares received prior to 4 p.m. Eastern time will be purchased at the appropriate price calculated on that day.
Telephone trades must be received by or prior to market close. During periods of high market activity, Shareholders may encounter higher than usual call wait times. Please allow sufficient time to place your telephone transaction.
By Exchange of Shares of Portfolio Companies
Investors may also purchase Shares by contributing securities of Portfolio Companies to the Fund at the end of each fiscal quarter. Please contact the Fund Administrator at for more information about the Fund’s exchange mechanism. The Investment Adviser shall determine the valuation of securities offered for exchange and the number of Shares for which such securities may be exchanged. The value of shares of Portfolio Companies to be exchanged by prospective investors for Shares will be determined by negotiation between the parties, taking factors into account such as the recent trading prices of such shares on the SharesPost Trading Platform and other alternative trading systems, financial results of such Portfolio Company (when available), research reports and other diligence materials, and the valuation of such security to the extent it is already a part of the Fund’s portfolio.
As requested on the application, investors must supply a full name, date of birth, social security number and permanent street address. Mailing addresses containing only a P.O. Box will not be accepted. Investors may call the Fund Administrator at for additional assistance when completing an application.
If the Fund Administrator does not have a reasonable belief of the identity of a customer, the account will be rejected or the customer will not be allowed to perform a transaction on the account until such information is received. The Fund also may reserve the right to close the account within five business days if clarifying information/documentation is not received.
Purchase Terms
The minimum initial purchase by an investor is $2,500, plus any applicable sales load. The Fund’s Shares are offered for sale at NAV plus any applicable sales load, subject to member services fees of up to 0.25% of the average daily NAV. The price of the Shares during the Fund’s continuous offering will fluctuate over time with the NAV of the Shares. Investors in the Fund will pay a sales load based on the amount of their investment in the Fund. The sales load payable by each investor depends upon the amount invested by such investor in the Fund, but may range from 5.75% to 0.00%, as set forth in the table below. A reallowance will be made by the Distributor from the sales load paid by each investor. The sales charge varies, depending on how much an investor invests in the Fund. There are no sales charges on reinvested distributions. Each of the Fund and the Investment Adviser reserves the right to waive sales charges at its discretion. The following sales charges apply to your purchases of Shares of the Fund:
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Amount Invested | Sales Charge as a % of Offering Price | Sales Charge as a % of Amount Invested | Dealer Reallowance | |||||||||
Under $50,000 | 5.75% | 6.10% | 5.00% | |||||||||
$50,000 to $99,999 | 4.75% | 4.99% | 4.00% | |||||||||
$100,000 to $249,999 | 3.75% | 3.83% | 3.25% | |||||||||
$250,000 to $499,999 | 2.50% | 2.56% | 2.00% | |||||||||
$500,000 to $999,999 | 2.00% | 2.04% | 1.75% | |||||||||
$1,000,000 and above | 0.00% | 0.00% | 0.00% |
The Investment Adviser shall reimburse the Fund in connection with commissions retained by authorized broker-dealers on purchases of Shares over $1 million calculated as follows: 1.00% on purchases between $1 million and $3 million, 0.50% on amounts over $3 million but less than $5 million, 0.25% on amounts over $5 million. The commission rate is determined based on the purchase amount combined with the current market value of existing investments in Shares.
As shown, investors that purchase $1,000,000 or more of the Fund’s Shares will not pay any initial sales charge on the purchase. However, purchases of $1,000,000 or more may be subject to a contingent deferred sales charge (“CDSC”) on Shares repurchased by the Fund during the first 18 months after their purchase in the amount of the commissions paid on those Shares repurchased. Shares held longest will be treated as being repurchased first and Shares held shortest as being repurchased last. Shares held for 18 months or more are not subject to the CDSC.
You may be able to buy Shares without a sales charge (i.e. “load-waived”) if you fall in one of the following categories:
· | current and retired Trustees and officers of the Fund, their families (e.g., spouse, domestic partner, children, parent) and any purchases referred through the Investment Adviser. |
· | Employees of the Investment Adviser and their families, or any full-time employee or registered representative of the Distributor or of broker-dealers having dealer agreements with the Investment Adviser (a “Selling Broker”) and their immediate families (or any trust, pension, profit sharing or other benefit plan for the benefit of such persons). |
· | Any full-time employee of a bank, savings and loan, credit union or other financial institution that utilizes a Selling Broker to clear purchases of the Fund’s Shares and their immediate families. |
· | Participants in certain “wrap-fee” or asset allocation programs or other fee-based arrangements sponsored by broker-dealers and other financial institutions that have entered into agreements with the Distributor. |
· | Clients of registered investment advisers that have entered into arrangements with the Distributor providing for the Shares to be used in particular investment products made available to such clients and for which such registered investment advisers may charge a separate fee, including third party administrators. |
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· | Institutional investors (which may include bank trust departments and registered investment advisers). |
· | Any accounts established on behalf of registered investment advisers or their clients by broker-dealers that charge a transaction fee and that have entered into agreements with the Distributor. |
· | Separate accounts used to fund certain unregistered variable annuity contracts or Section 403(b) or 401(a) or (k) accounts. |
· | Employer-sponsored retirement or benefit plans with total plan assets in excess of $5 million where the plan’s investments in the Fund are part of an omnibus account. A minimum initial investment of $1 million in the Fund is required. The Fund, in its sole discretion, may waive these minimum dollar requirements. |
In addition, concurrent purchases by related accounts may be combined to determine the application of the sales load. The Fund will combine purchases made by an investor, the investor’s spouse or domestic partner, and dependent children when it calculates the sales load.
It is the investor’s responsibility to determine whether a reduced sales load would apply. The Fund is not responsible for making such determination. To receive a reduced sales load, notification must be provided at the time of the purchase order. If you purchase Shares directly from the Fund, you must notify the Fund in writing. Otherwise, notice should be provided to the Financial Intermediary through whom the purchase is made so they can notify the Fund.
Right of Accumulation
For the purposes of determining the applicable reduced sales charge, the right of accumulation allows you to include prior purchases of Shares of the Fund as part of your current investment as well as reinvested distributions. To qualify for this option, you must be either:
· | an individual; |
· | an individual and spouse purchasing Shares for your own account or trust or custodial accounts for your minor children; or |
· | a fiduciary purchasing for any one trust, estate or fiduciary account, including employee benefit plans created under Sections 401, 403 or 457 of the Code, including related plans of the same employer. |
If you plan to rely on this right of accumulation, you must notify the Fund’s Transfer Agent at the time of your purchase. You will need to give the Transfer Agent your account numbers. Existing holdings of family members or other related accounts of a Shareholder may be combined for purposes of determining eligibility. If applicable, you will need to provide the account numbers of your spouse and your minor children as well as the ages of your minor children.
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Letter of Intent
The letter of intent allows you to count all investments within a 13-month period in Shares of the Fund as if you were making them all at once for the purposes of calculating the applicable reduced sales charges. The minimum initial investment under a letter of intent is 5% of the total letter of intent amount. The letter of intent does not preclude the Fund from discontinuing sales of its Shares. You may include a purchase not originally made pursuant to a letter of intent under a letter of intent entered into within 90 days of the original purchase. To determine the applicable sales charge reduction, you also may include the cost of Shares of the Fund which were previously purchased at a price including a front end sales charge during the 90-day period prior to the Transfer Agent receiving the letter of intent. You may combine purchases and exchanges by family members (limited to spouse and children, under the age of 21, living in the same household). You should retain any records necessary to substantiate historical costs because the Fund, the Transfer Agent and any financial intermediaries may not maintain this information. Shares acquired through reinvestment of distributions are not aggregated to achieve the stated investment goal.
Shareholder Services Fee
The Fund has adopted a “Shareholder Services Plan” under which the Fund may compensate financial industry professionals for providing ongoing services in respect of clients with whom they have distributed Shares of the Fund. Such services may include electronic processing of client orders, electronic fund transfers between clients and the Fund, account reconciliations with the Fund’s Transfer Agent, facilitation of electronic delivery to clients of Fund documentation, monitoring client accounts for back-up withholding and any other special tax reporting obligations, maintenance of books and records with respect to the foregoing, and such other information and liaison services as the Fund or the Investment Adviser may reasonably request. The Fund may incur such foregoing expenses on an annual basis equal to 0.25% of its average NAV.
QUARTERLY REPURCHASES OF SHARES
The Fund has adopted a fundamental policy that it will make quarterly repurchase offers for no less than 5% of its Shares outstanding at NAV, unless such offer is suspended or postponed in accordance with regulatory requirements (as discussed below), and that each quarterly repurchase pricing shall occur no later than the 14th day after the Repurchase Request Deadline (defined below), or the next business day if the 14th day is not a business day (each, a “Repurchase Pricing Date”). Because this policy is “fundamental,” it may not be changed without the vote of the holders of a majority of the Fund’s outstanding voting securities. Shares will be repurchased at the NAV per Share determined as of the close of regular trading on the NASDAQ on the Repurchase Pricing Date. The Fund expects its first Repurchase Request Deadline will be during the fourth calendar quarter of 2013.
Shareholders will be notified in writing about each quarterly repurchase offer, how they may request that the Fund repurchase their Shares and the date the repurchase offer ends (the “Repurchase Request Deadline”). The Repurchase Request Deadline will be determined by the Fund’s Board of Trustees and will be based on factors such as market conditions, liquidity of the Fund’s assets and Shareholder servicing conditions. The time between the notification to Shareholders and the Repurchase Request Deadline may vary from no more than 42 days to no less than 21 days, and is expected to be approximately 30 days. The repurchase price of the Shares will be the NAV as of the close of regular trading on the NASDAQ on the Repurchase Pricing Date. Payment pursuant to the repurchase will be made by checks to the Shareholder’s address of record, or credited directly to a predetermined bank account within seven days of the Repurchase Pricing Date (the “Repurchase Payment Deadline”). The Board of Trustees may establish other policies for repurchases of Shares that are consistent with the 1940 Act, the regulations promulgated thereunder, and other pertinent laws. Shares tendered for repurchase by Shareholders prior to any Repurchase Request Deadline will be repurchased subject to the aggregate repurchase amounts established for that Repurchase Request Deadline. Repurchase proceeds, net of any redemption fee, will be paid to Shareholders prior to the Repurchase Payment Deadline.
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Repurchase Amounts
The Board of Trustees, or a committee thereof, in its sole discretion, will determine the number of Shares that the Fund will offer to repurchase (the “Repurchase Offer Amount”) for a given Repurchase Request Deadline. Rule 23c-3 of the 1940 Act permits repurchases between 5% and 25% of the Fund’s outstanding Shares at NAV. In connection with any given repurchase offer, it is expected that the Fund will offer to repurchase only the minimum amount of 5% of its outstanding Shares. The Repurchase Offer Amount, however, will be no less than 5% of the total number of Shares outstanding on the Repurchase Request Deadline.
If Shareholders tender more than the Repurchase Offer Amount, the Fund may, but is not required to, repurchase an additional amount of Shares not to exceed 2% of the outstanding Shares of the Fund on the Repurchase Request Deadline. If Shareholders tender for repurchase more than the Repurchase Offer Amount for a given repurchase offer, the Fund will repurchase the Shares on a pro rata basis. In the event there is an oversubscription of a repurchase offer, Shareholders may be unable to liquidate all or a given percentage of their investment in the Fund during the repurchase offer. However, the Fund may accept all Shares tendered for repurchase by Shareholders who own less than 100 Shares and who tender all of their Shares, before prorating other amounts tendered. In addition, the Fund will accept the total number of Shares tendered in connection with required minimum distributions from an IRA or other qualified retirement plan. It is the Shareholder’s obligation to both notify and provide the Fund supporting documentation of a required minimum distribution from an IRA or other qualified retirement plan. If Shareholders tender less than the Repurchase Offer Amount, the Fund will repurchase only those Shares offered for repurchase and shall not redeem any other Shares.
Redemption Fee
For Shares held less than 365 days, the Fund will deduct a 2.00% redemption fee on your redemption amount. Shares held longest will be treated as being repurchased first and Shares held shortest will be treated as being repurchased last. The redemption fee does not apply to Shares that were acquired through reinvestment of distributions. Shares held for 365 days or more are not subject to the 2.00% fee. Redemption fees are paid to the Fund directly and are designed to offset costs charged by the Transfer Agent for redeeming Shares and for costs associated with fluctuations in Fund asset levels and cash flow caused by such redemptions.
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Notice to Shareholders
Notice of each repurchase offer will be given to each beneficial owner of Shares approximately 30 days (but no less than 21 and no more than 42 days) before each Repurchase Request Deadline. The notice will:
· | contain information Shareholders should consider in deciding whether to tender their Shares for repurchase; |
· | include detailed instructions on how to tender Shares for repurchase; |
· | state the Repurchase Offer Amount; |
· | identify the dates of the Repurchase Request Deadline, scheduled Repurchase Pricing Date, and scheduled Repurchase Payment Deadline; |
· | describe the risk of fluctuation in the NAV between the Repurchase Request Deadline and the Repurchase Pricing Date, if such dates do not coincide, and the possibility that the Fund may use an earlier Repurchase Pricing Date than the scheduled Repurchase Pricing Date (if the scheduled Repurchase Pricing Date is not the Repurchase Request Deadline); |
· | describe (i) the procedures for Shareholders to tender their Shares for repurchase, (ii) the procedures for the Fund to repurchase Shares on a pro rata basis, (iii) the circumstances in which the Fund may suspend or postpone a repurchase offer, and (iv) the procedures that will enable Shareholders to withdraw or modify their tenders of Shares for repurchase until the Repurchase Request Deadline; and |
· | will set forth the NAV that has been computed no more than seven days before the date of notification, and how Shareholders may ascertain the NAV after the notification date. |
Repurchase Price
The repurchase price of the Shares will be the NAV as of the close of regular trading on the NASDAQ on the Repurchase Pricing Date. You may visit the Fund’s website (http://www.spinvestments.com) to learn the NAV. The notice of the repurchase offer will also provide information concerning the NAV, such as the NAV as of a recent date or a sampling of recent NAVs, and a toll-free number for information regarding the repurchase offer.
Suspension or Postponement of Repurchase Offer
The Fund may suspend or postpone a repurchase offer only: (a) if making or effecting the repurchase offer would cause the Fund to lose its status as a RIC under the Code; (b) for any period during which any market on which securities owned by the Fund are principally traded is closed, other than customary weekend and holiday closings, or during which trading in such market is restricted; (c) for any period during which an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable, or during which it is not reasonably practicable for the Fund fairly to determine the value of its net assets; or (d) for such other periods as the SEC may by order permit for the protection of Shareholders of the Fund.
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Liquidity Requirements
The Fund must maintain liquid assets equal to the Repurchase Offer Amount from the time that the notice is sent to Shareholders until the Repurchase Pricing Date. The Fund will ensure that a percentage of its net assets equal to at least 100% of the Repurchase Offer Amount consists of assets that can be sold or disposed of in the ordinary course of business at approximately the price at which the Fund has valued the investment within the time period between the Repurchase Request Deadline and the Repurchase Payment Deadline.
The Board of Trustees will adopt procedures that are reasonably designed to ensure that the Fund’s assets are sufficiently liquid so that the Fund can comply with the repurchase offer and the liquidity requirements described in the previous paragraph. If, at any time, the Fund does not comply with these liquidity requirements, the Board of Trustees will take whatever action it deems appropriate to ensure compliance.
Consequences of Repurchase Offers
Repurchase offers will typically be funded from available cash. Payment for repurchased Shares, however, may require the Fund to liquidate securities of Portfolio Companies, and earlier than the Investment Adviser otherwise would, thus increasing the Fund’s portfolio turnover and potentially causing the Fund to realize losses. The Investment Adviser intends to take measures to attempt to avoid or minimize such potential losses and turnover, and instead of liquidating portfolio holdings, may borrow money to finance repurchases of Shares. If the Fund borrows to finance repurchases, interest on that borrowing will negatively affect Shareholders who do not tender their Shares in a repurchase offer by increasing the Fund’s expenses and reducing any net investment income. To the extent the Fund finances repurchase amounts by selling Fund investments, the Fund may hold a larger proportion of its assets in less liquid securities. Also, the sale of securities of Portfolio Companies to fund repurchases could reduce the market price of those underlying securities, which in turn would reduce the Fund’s NAV.
Repurchase of the Fund’s Shares will reduce the amount of outstanding Shares and, depending upon the Fund’s investment performance, its net assets. A reduction in the Fund’s net assets would increase the Fund’s expense ratio, to the extent that additional Shares are not sold and expenses otherwise remain the same (or increase). In addition, the repurchase of Shares by the Fund may be a taxable event to Shareholders.
The Fund is intended as a long-term investment. The Fund’s quarterly repurchase offers are a Shareholder’s only means of liquidity with respect to their Shares. Shareholders have no rights to redeem or transfer their Shares, other than limited rights of a Shareholder’s descendants to redeem Shares in the event of such Shareholder’s death pursuant to certain conditions and restrictions. The Shares are not traded on a national securities exchange and no secondary market exists for the Shares, nor does the Fund expect a secondary market for its Shares to exist in the future.
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BORROWING
The Fund will not borrow or issue preferred shares or debt during its first 12 months of operations, and thereafter the Fund intends to have the option to borrow, which such borrowing, if any, the Fund anticipates would be used to satisfy requests from Shareholders pursuant to the quarterly repurchase offers and otherwise to provide the Fund with temporary liquidity. In each case, the amount that the Fund may borrow will be limited by the provisions of Section 18 of the 1940 Act, which, among other limitations contained therein relating to the declaration of dividends or distributions, limits the issuance of a “senior security” (as defined in the 1940 Act) to those instances where immediately after giving effect to such issuance, the Fund will have “net asset coverage” (as defined in the 1940 Act) of at least 300%. The interest on borrowing by the Fund will be at prevailing market rates, to the extent the Fund borrows. Notwithstanding the foregoing, the Fund intends to limit its borrowing, if any, and the overall leverage of its portfolio to an amount that does not exceed 33⅓% of the Fund's gross asset value.
DISTRIBUTIONS
Following the disposition by the Fund of securities of Portfolio Companies, the Fund will make cash distributions of the net profits, if any, to Shareholders (subject to the dividend reinvestment policy, as described below) at such times as the Board of Trustees determines in its sole discretion, but in no event less than annually. The Fund will establish reasonable reserves to meet Fund obligations prior to making distributions.
DIVIDEND REINVESTMENT POLICY
The Fund will operate under a dividend reinvestment policy administered by UMB Fund Services (the “Agent”). Pursuant to the policy, any distributions by the Fund to its Shareholders, net of any applicable U.S. withholding tax, are reinvested in Shares of the Fund.
Shareholders automatically participate in the dividend reinvestment policy, unless and until an election is made to withdraw from the policy on behalf of such participating Shareholder. Shareholders who do not wish to have distributions automatically reinvested should so notify the Agent in writing at SharesPost 100 Fund, c/o UMB Fund Services, Inc., PO Box 2175, Milwaukee Wisconsin 53201-2175. Such written notice must be received by the Agent 30 days prior to the record date of the distribution or the Shareholder will receive such distribution in Shares through the dividend reinvestment policy. Under the dividend reinvestment policy, the Fund’s distributions to Shareholders are reinvested in full and fractional Shares as described below.
When the Fund declares a distribution, the Agent, on the Shareholder’s behalf, will receive additional authorized Shares from the Fund. The number of Shares to be received when distributions are reinvested will be determined by dividing the amount of the distribution by the Fund’s NAV per Share as of the date of such distribution.
The Agent will maintain all Shareholder accounts and furnish written confirmations of all transactions in the accounts, including information needed by Shareholders for personal and tax records. The Agent will hold Shares in the account of the Shareholders in non-certificated form in the name of the participant, and each Shareholder’s proxy, if any, will include those Shares purchased pursuant to the dividend reinvestment policy. The Agent will distribute all proxy solicitation materials, if any, to participating Shareholders.
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In the case of Shareholders, such as banks, brokers or nominees, that hold Shares for others who are beneficial owners participating under the dividend reinvestment policy, the Agent will administer the dividend reinvestment policy on the basis of the number of Shares certified from time to time by the record Shareholder as representing the total amount of Shares registered in the Shareholder’s name and held for the account of beneficial owners participating under the dividend reinvestment policy.
Neither the Agent nor the Fund shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the dividend reinvestment policy, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither shall they be liable hereunder for any act done in good faith or for any good faith omissions to act, including, without limitation, failure to terminate a participant’s account prior to receipt of written notice of his or her death or with respect to prices at which Shares are purchased or sold for the participant’s account and the terms on which such purchases and sales are made, subject to applicable provisions of the federal securities laws.
The automatic reinvestment of distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such distributions. See “Material U.S. Federal Income Tax Considerations.”
The Fund reserves the right to amend or terminate the dividend reinvestment policy. There is no direct service charge to participants with regard to purchases under the dividend reinvestment policy; however, the Fund reserves the right to amend the dividend reinvestment policy to include a service charge payable by the participants.
All correspondence concerning the dividend reinvestment policy should be directed to the Agent at SharesPost 100 Fund, c/o UMB Fund Services, Inc., P.O. Box 2175, Milwaukee, Wisconsin 53201-2175 or overnight express mail to SharesPost 100 Fund c/o UMB Fund Services, 803 W. Michigan Street Milwaukee, Wisconsin 53233. Certain transactions can be performed by calling the toll free number .
DETERMINATION OF NET ASSET VALUE
The NAV of the Fund’s Shares is determined daily, as of the close of regular trading on the NASDAQ (normally, 4:00 p.m., Eastern time). Each Share will be offered at NAV next calculated after receipt of the purchase in good order, plus any applicable sales load. During the continuous offering, the price of the Shares will increase or decrease on a daily basis according to the NAV of the Shares. In computing NAV, portfolio securities of the Fund are valued at their current fair market values determined on the basis of market quotations, if available. Because market quotations are not typically readily available for the majority of the Fund’s securities, they are valued at fair value as determined by the Board of Trustees. The Board of Trustees has delegated the day-to-day responsibility for determining these fair values to the Investment Adviser. The Investment Adviser, subject to the oversight of the Board of Trustees, shall develop the Fund’s valuation methodologies, and make valuation determinations. The Investment Adviser will act in accordance with the Fund’s written valuation policies and procedures as approved by the Board of Trustees, and in accordance with the 1940 Act. Valuation determinations are reviewed periodically by the Board of Trustees, including in connection with any quarterly repurchase offer.
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Fair valuation involves subjective judgments, and it is possible that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security. There is no single standard for determining fair value of a security. Rather, in determining the fair value of a security for which there are no readily available market quotations, the Investment Adviser may consider several factors, including the implied valuation of the asset as reflected by stock purchase contracts reported on the SharesPost Trading Platform and other alternative trading systems, fundamental analytical data relating to the investment in the security, the nature and duration of any restriction on the disposition of the security, the cost of the security at the date of purchase, the liquidity of the market for the security, the price of such security in a meaningful private or public investment or merger or acquisition of the issuer subsequent to the Fund’s investment therein, the per share price of the security to be valued in recent verifiable transactions, including private secondary transactions (including exchanges for Fund Shares), and the recommendation of the Fund’s portfolio managers. Where such information is not available or reliable, the Investment Adviser will determine fair market value of Fund assets in accordance with consistently applied written procedures established by the Board of Trustees and in accordance with GAAP.
The Investment Adviser will provide the Board of Trustees with periodic reports that discuss the functioning of the valuation process, if applicable to that period, and that identify issues and valuations problems that have arisen, if any. To the extent deemed necessary by the Investment Adviser, the Board of Trustees will review any securities valued by the Investment Adviser in accordance with the Fund’s valuation policies.
Fair value prices are necessarily estimates, and there is no assurance that such a price will be at or close to the price at which the security is next quoted or next trades.
U.S. FEDERAL INCOME TAX MATTERS
The following briefly summarizes some of the important federal income tax consequences to Shareholders of investing in the Fund’s Shares, reflects the federal tax law as of the date of this Prospectus only, and does not address special tax rules applicable to certain types of investors, such as corporate, tax-exempt and foreign investors. The following discussion is only a summary of some of the important tax considerations generally applicable to investments in the Fund and the discussion set forth herein does not constitute tax advice. Investors should consult their tax advisers regarding other federal, state or local tax considerations that may be applicable in their particular circumstances, as well as any proposed tax law changes.
The Fund intends to elect to be treated and to qualify each year for taxation as a regulated investment company (a “RIC”) under Subchapter M of the Code. In order for the Fund to qualify as a RIC, it must meet an income and asset diversification test each year. If the Fund so qualifies and satisfies certain distribution requirements, the Fund will not be subject to federal income tax to the extent it distributes its investment company taxable income and net capital gains (the excess of net long-term capital gains over net short-term capital loss) in a timely manner to its Shareholders in the form of dividends or capital gain distributions. The Code imposes a 4% nondeductible excise tax on regulated investment companies, such as the Fund, to the extent they do not meet certain distribution requirements by the end of each calendar year.
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The Fund intends to make distributions of investment company taxable income after payment of the Fund’s operating expenses no less frequently than annually. Unless a Shareholder is ineligible to participate or elects otherwise, all distributions will be automatically reinvested in additional Shares of the Fund pursuant to the dividend reinvestment policy. For U.S. federal income tax purposes, all distributions are generally taxable whether a Shareholder takes them in cash or they are reinvested pursuant to the policy in additional shares of the Fund. Distributions of the Fund’s investment company taxable income (including short-term capital gains) will generally be treated as ordinary income to the extent of the Fund’s current and accumulated earnings and profits. Distributions of the Fund’s net capital gains (“capital gain distributions”), if any, are taxable to Shareholders as capital gains, regardless of the length of time Shares have been held by Shareholders. Distributions, if any, in excess of the Fund’s earnings and profits will first reduce the adjusted tax basis of a holder’s Shares and, after that basis has been reduced to zero, will constitute capital gains to the Shareholder (assuming the Shares are held as a capital asset). The determination of the character for U.S. federal income tax purposes of any distribution from the Fund will be made as of the end of the Fund’s taxable year. Generally, no later than 60 days after the close of its taxable year, the Fund will provide Shareholders with a written notice designating the amount of any capital gain distributions and any other distributions.
For more detailed information regarding tax considerations, see the section entitled “Tax Status” in the SAI.
ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST
The Fund’s Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of the Board of Trustees, and could have the effect of depriving the Fund’s Shareholders of an opportunity to sell their Shares at a premium over prevailing market prices, if any, by discouraging a third party from seeking to obtain control of the Fund. These provisions may have the effect of discouraging attempts to acquire control of the Fund, which attempts could have the effect of increasing the expenses of the Fund and interfering with the normal operation of the Fund. The Trustees are elected for indefinite terms and do not stand for reelection. A Trustee may be removed from office without cause only by a written instrument signed or adopted by a majority of the remaining Trustees or by a vote of the holders of at least 75% of the class of Shares of the Fund that are entitled to elect a Trustee and that are entitled to vote on the matter. The Declaration of Trust does not contain any other specific inhibiting provisions that would operate only with respect to an extraordinary transaction such as a merger, reorganization, tender offer, sale or transfer of substantially all of the Fund’s assets, or liquidation. Reference should be made to the Declaration of Trust on file with the SEC for the full text of these provisions.
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RESERVES
Liabilities and accruals shall be determined in accordance with GAAP.
LEGAL PROCEEDINGS
As of April 11, 2013, the Fund is not currently a party to in any legal proceeding that we believe would have a material adverse effect upon the Fund or the ability of the Investment Adviser to perform its contract with the Fund.
LIQUIDITY REQUIREMENTS
The Fund’s portfolio is not subject to any minimum liquidity requirement. The Fund will, however, be required to maintain sufficient liquidity to repurchase Fund Shares under the quarterly repurchase procedures described above under “Quarterly Repurchases of Shares”.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
GENERAL INFORMATION AND HISTORY | 2 | |
INVESTMENT OBJECTIVE AND POLICIES | 2 | |
MANAGEMENT OF THE FUND | 4 | |
CODE OF ETHICS | 10 | |
TAX STATUS | 12 | |
DETERMINATION OF NET ASSET VALUE | 20 | |
INVESTMENT BY EMPLOYEE BENEFIT PLANS | 21 | |
PERFORMANCE INFORMATION | 23 | |
CALCULATION OF FEES | 23 | |
PROXY VOTING POLICIES AND PROCEDURES | 24 | |
VOTING | 25 | |
CONFLICTS OF INTEREST | 25 | |
FINANCIAL STATEMENTS | 26 |
ADDITIONAL INFORMATION
The Prospectus and the SAI do not contain all of the information set forth in the Registration Statement that the Fund has filed with the SEC. The complete Registration Statement may be obtained from the SEC at www.sec.gov. See the cover page of this Prospectus for information about how to obtain a paper copy of the Registration Statement or the SAI without charge.
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PRIVACY STATEMENT
The Investment Adviser believes that protecting the privacy of investors’ nonpublic personal information (“personal information”) is of the utmost importance. Personal information is nonpublic information about Shareholders that is personally identifiable and that the Investment Adviser obtains in connection with providing a financial product or service to investors. For example, personal information includes information regarding each Shareholder’s account balance and investment activity. This notice describes the personal information that the Investment Adviser collects about investors, and the Investment Adviser’s treatment of that information.
The Investment Adviser collects personal information about investors from the following sources:
(i) | Information it receives from investors in the investor certification; and |
(ii) | Information about investors’ transactions with the Investment Adviser, the Fund, their affiliates or others (for example, account activity and balances). |
The Investment Adviser does not disclose any personal information it collects, as described above, about its customers or former customers to anyone other than in connection with the administration, processing and servicing of customer accounts or to its accountants, attorneys and auditors, or otherwise as permitted by law.
The Investment Adviser restricts access to personal information it collects about investors to its personnel who need to know that information in order to provide products or services to investors. The Investment Adviser maintains physical, electronic and procedural controls in keeping with U.S. federal standards to safeguard Shareholders’ nonpublic personal information.
The Investment Adviser reserves the right to change this privacy notice, and to apply changes to information previously collected, as permitted by law. The Investment Adviser will inform investors of any changes as required by law.
Shareholders with questions on this policy may contact the Investment Adviser at (650) 492-6878.
All dealers that buy, sell or trade the Fund’s Shares, whether or not participating in this offering, may be required to deliver a Prospectus when acting on behalf of the Fund’s Distributor.
You should rely only on the information contained in or incorporated by reference into this Prospectus. The Fund has not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Fund is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
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The information in this Statement of Additional Information is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated April 12, 2013
STATEMENT OF ADDITIONAL INFORMATION
SHARESPOST 100 FUND
Shares of Beneficial Interest
1150 Bayhill Drive
San Bruno, California 94066
(Address of Principal Executive Offices)
Registrant’s Telephone Number, including Area Code: (800) 279-7754
, 2013
This Statement of Additional Information (“SAI”) is not a prospectus. This SAI relates to and should be read in conjunction with the Prospectus of SharesPost 100 Fund (the “Fund”, “we”, or “us”), dated , 2013 (the “Prospectus”). The Prospectus is hereby incorporated by reference into this SAI (legally made a part of this SAI). Defined terms used herein, and not otherwise defined herein, have the same meanings as in the Prospectus. This SAI does not include all information that a prospective investor should consider before purchasing the Fund’s securities.
You should obtain and read the Prospectus and any related Prospectus supplement prior to purchasing any of the Fund’s securities. A copy of the Prospectus may be obtained without charge by calling the Fund toll-free at (800) 279-7754. Information on the Fund’s website is not incorporated herein by reference. The registration statement of which the Prospectus is a part can be reviewed and copied at the Public Reference Room of the Securities and Exchange Commission (“SEC”) at 100 F Street NE, Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. The Fund’s filings with the SEC also are available to the public on the SEC’s Internet website at www.sec.gov. Copies of these filings may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street NE, Washington, D.C. 20549.
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TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY | 2 | |
INVESTMENT OBJECTIVE AND POLICIES | 2 | |
MANAGEMENT OF THE FUND | 4 | |
CODE OF ETHICS | 10 | |
TAX STATUS | 12 | |
DETERMINATION OF NET ASSET VALUE | 20 | |
INVESTMENT BY EMPLOYEE BENEFIT PLANS | 21 | |
PERFORMANCE INFORMATION | 23 | |
CALCULATION OF FEES | 23 | |
PROXY VOTING POLICIES AND PROCEDURES | 24 | |
VOTING | 25 | |
CONFLICTS OF INTEREST | 25 | |
FINANCIAL STATEMENTS | 26 |
GENERAL INFORMATION AND HISTORY
The Fund was established as a limited liability company under the laws of the State of Delaware on August 20, 2012 and converted into a Delaware statutory trust on March 22, 2013, and has no operating history. The Fund’s office is located at 1150 Bayhill Drive, San Bruno, California 94066. The investment objective and principal investment strategies of the Fund, as well as the principal risks associated with the Fund’s investment strategies, are set forth in the Prospectus. Certain additional investment information is set forth below.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective
The Fund’s principal investment objective is capital appreciation.
Fundamental Policies
The Fund’s stated fundamental policies, listed below, may not be changed without a majority vote of the shareholders of the Fund (each, a “Shareholder”, and collectively, the “Shareholders”), which means the lesser of: (i) 67% of the shares of beneficial interest of the Fund (“Shares”) present at a meeting at which holders of more than 50% of the outstanding Shares are present in person or by proxy; or (ii) more than 50% of the outstanding Shares. No other policy is a fundamental policy of the Fund, except as expressly stated. Within the limits of the Fund’s fundamental policies, the Fund’s management has reserved freedom of action.
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As fundamental policies, the Fund:
(1) | will not borrow money or issue any senior security except in compliance with Section 18 of the Investment Company Act of 1940, as amended (the “1940 Act”), as it may be modified by SEC order, rule or regulation. Section 18 currently requires that the Fund have an asset coverage of 300% upon the issuance of senior securities representing indebtedness and an asset coverage of 200% upon the issuance senior equity securities; |
(2) | will not engage in short sales, purchases on margin and the writing of put and call options; |
(3) | will not act as underwriter of securities of other issuers, except to the extent that in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under the U.S. federal securities laws; |
(4) | will not engage in the purchase or sale of real estate and real estate mortgage loans; |
(5) | will not engage in the purchase or sale of commodities or commodity contracts, including futures contracts; |
(6) | will not make loans, except as permitted by the 1940 Act, which prohibits loans to any person who controls or is under common control with the Fund, excluding a company that owns all of the Shares of the Fund; |
(7) | will not invest 25% or more of its total assets in companies in a particular “industry”, as that term is used in the 1940 Act, and as interpreted, modified or otherwise permitted by a regulatory authority having jurisdiction, from time to time (the “Fundamental Concentration Policy”). The Fund’s Fundamental Concentration Policy does not preclude it from focusing investments in issuers in a group of related industrial sectors; and |
(8) | will make quarterly repurchase offers for no less than 5% of the Shares outstanding at their net asset value (“NAV”) less any redemption fee, unless suspended or postponed in accordance with regulatory requirements, and each repurchase pricing shall occur no later than the 14th day after the Repurchase Request Deadline (as defined below), or the next business day if the 14th day is not a business day. |
The Fund’s investment policies and restrictions do not apply to the activities and transactions of the Portfolio Companies in which the Fund invests (other than indirectly by the Fundamental Concentration Policy), but do apply to investments made by the Fund directly.
The Fund’s investment strategies are non-fundamental and may be changed by the Fund’s Board of Trustees (the “Board of Trustees”). The Fund has adopted a non-fundamental policy to invest, under normal market conditions, at least 80% of the value of its assets in companies in the SharesPost 100 (measured at the time of investment). The Fund will notify investors of any proposed change in such policy at least 60 days in advance of such change in accordance with the 1940 Act.
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MANAGEMENT OF THE FUND
The Board of Trustees
The Board of Trustees of the Fund has overall responsibility for monitoring the Fund’s investment program and its management and operations. At least a majority of the Board of Trustees are and will be persons who are not “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act, each, an “Independent Trustee” and, collectively, the “Independent Trustees”) of the Fund and SP Investments Management, LLC, the Fund’s Investment Adviser (the “Investment Adviser”). Any vacancy on the Board of Trustees may be filled by the remaining Trustees, except to the extent the 1940 Act requires the election of Trustees by Shareholders. Subject to the provisions of Delaware law, the Trustees will have all powers necessary and convenient to carry out this responsibility.
Name, Address(1), and Age | Position(s) Held with Fund |
Term
of Office(2) and Length of Time Served(3) |
Principal Occupation(s) During the Past Five Years |
Number
of Portfolios in Fund Complex Overseen by Trustee |
Other
Public Company Directorships | |||||
Independent Trustees | ||||||||||
Robert Boulware DOB: 5/11/1956 |
Independent Trustee | Since inception | Professional board director and trustee. Managing Director, Pilgrim Funds, LLC | Not applicable. | Gainsco, Inc. (PINK: GANS), Met Investor Series Trust (trustee) | |||||
Mark Radcliffe DOB: 5/11/1952 |
Independent Trustee | Since inception | Partner, DLA Piper | Not applicable. | Innovaro, Inc. (NYSE MKT: INV) | |||||
Interested Trustees | ||||||||||
Sven Weber DOB: 1/22/1970 |
Interested Trustee | Since inception | Managing Director of SP Investments Management LLC, President SVB Capital with SVB Financial Group, Principal of Cipio Partners LLC | Not applicable. | 0 |
(1) | All addresses c/o SharesPost 100 Fund, 1150 Bayhill Drive, San Bruno, California 94066. |
(2) | Each Trustee will serve for the duration of the Fund, or until his death, resignation, termination, removal or retirement. |
(3) | The Fund has not yet commenced operations. |
Additional information about each Trustee follows (supplementing the information provided in the table above) that describes some of the specific experiences, qualifications, attributes or skills that each Trustee possesses which the Board of Trustees believes has prepared them to be effective Trustees.
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Robert J. Boulware has served as a member of the Board of Trustees since the Fund’s inception. In addition to his services for the Fund, Mr. Boulware has been an executive in the financial services industry for 35 years. Since March 2008, Mr. Boulware has served as a trustee for Met Investors Series Trust, a $140 billion fund complex. He has also served as a trustee of Vertical Capital Income Fund, a startup mutual fund, since 2012. Mr. Boulware serves a director of Gainsco Inc. (PINK: GANS), a public traded auto insurance company, and as Managing Director of Pilgrim Funds, LLC, a private equity fund. From 1992 to 2006, Mr. Boulware was the President and Chief Executive Officer of ING Funds Distributor, LLC. Mr. Boulware holds a BSBA from Northern Arizona University, College of Business Administration.
Mark Radcliffe has served as a member of the Board of Trustees since the Fund’s inception. Mr. Radcliffe has been a partner of DLA Piper USA, LLP (or its predecessor law firms) since 1989, where he represents startup technology corporations in their intellectual property and finance matters. He also represents Fortune 100 companies in complex intellectual property transactions. His experience covers a wide variety of industries from internet to software to cloud to semiconductors. In 2011, Mr. Radcliffe was appointed by the Department of State to be one of ten private members of the U.S.-Japan Innovation and Entrepreneurship Council. Since February 2010, Mr. Radcliffe has been a director at Innovaro, Inc. (NYSE MKT: INV), a company focused on management software and consulting. Mr. Radcliffe earned a B.S. in Chemistry magna cum laude from University of Michigan and a J.D. from Harvard Law School.
Sven Weber has been the President and a member of the Board of Trustees of the Fund since inception, and is the Managing Director of SharesPost’s wholly owned registered investment adviser, SP Investments Management LLC, and in such role is responsible for the management of SharesPost’s private investment vehicles. Prior to his position with the Investment Adviser, Sven served as President of SVB Capital, an affiliate of Silicon Valley Bank. During his tenure at SVB Capital, Sven managed the company’s venture capital investing business, which included fund of funds, and direct and secondary investment funds exceeding $1.5 billion under management. Prior to SVB Capital, Sven was a principal of Cipio Partners, where he focused on secondary investments, and prior to that he worked as Vice President on direct investments for Siemens, and had operational responsibilities with Vodafone Germany and O2 Germany. Sven holds a Master’s degree in physics from the University of Heidelberg, where he specialized in information technology and environmental physics.
The Board of Trustees believes that the significance of each Trustee’s experience, qualifications, attributes or skills is an individual matter (meaning that experience that is important for one Trustee may not have the same value for another) and that these factors are best evaluated at the board level, with no single Trustee, or particular factor, being indicative of board effectiveness. However, the Board of Trustees believes that Trustees need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties. The Board of Trustees believes that its members satisfy this standard. Experience relevant to having this ability may be achieved through a Trustee’s educational background; business, professional training or practice (e.g., accountancy or law), public service or academic positions; experience from service as a board member (including the Board of Trustees of the Fund) or as an executive of investment funds, public companies or significant private or not-for-profit entities or other organizations; and/or other life experiences. The charter for the Board of Trustees’ Nominating and Governance Committee contains certain other specific requirements and factors considered by the Nominating and Governance Committee in identifying and selecting the Trustee candidates (please see below).
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Composition of Board of Trustees and Leadership Structure. To rely on certain exemptive rules under the 1940 Act, a majority of the Fund’s Trustees must be Independent Trustees, and for certain important matters, such as the approval of investment advisory agreements or transactions with affiliates, the 1940 Act or the rules thereunder require the approval of a majority of the Independent Trustees. Currently, 66.6% of the Fund’s Trustees are Independent Trustees. Sven Weber is an interested person of the Fund, and the Independent Trustees have designated Robert Boulware as the lead Independent Trustee who will chair meetings or executive sessions of the Independent Trustees, review and comment on Board of Trustee’s meeting agendas, represent the views of the Independent Trustees to management and facilitate communication among the Independent Trustees. The Board of Trustees has determined that its leadership structure, in which the Independent Trustees have designated a lead Independent Trustee to function as described above, is appropriate in light of the Fund’s investment objective and policies, the Fund’s status as a new company with no performance history, the small size of the Board of Trustees and the Fund’s relatively small initial capitalization, as well as the services that the Investment Adviser and its affiliates provide to the Fund and potential conflicts of interest that could arise from these relationships. This determination was made after careful consideration by the Independent Trustees and reflects the unanimous determination of the Independent Trustees. The Board of Trustees expects to play an active role in the risk oversight of the Fund and to receive risk oversight reports from the Investment Adviser no less frequently than quarterly, although this has not materially impacted the Board of Trustees’s leadership structure.
Officers
Name, Address(1), and Age | Position(s)
Held with Fund |
Term
of Office and Length of Time Served(2) |
Principal
Occupation(s) During the Past Five Years | |||
Sven Weber DOB: 1/22/1970 |
President | Since inception | Managing Director of SP Investments Management LLC, President of SVB Capital with SVB Financial Group, Principal of Cipio Partners LLC | |||
Ryan Stroub DOB: 7/7/1968 |
Chief Financial Officer and Chief Compliance Officer | Since inception | Chief Financial and Administrative Officer of SharesPost, Inc., Chief Financial Officer and Chief Accounting Officer of Thomas Weisel Partners |
(1) | All addresses c/o SharesPost 100 Fund, 1150 Bayhill Drive, San Bruno, California 94066. |
(2) | The Fund has not yet commenced operations. |
Ryan Stroub has served as the Chief Financial Officer and Chief Compliance Officer of the Fund since inception. Ryan also currently serves Chief Financial and Administrative Officer of SharesPost, Inc., in which position he is responsible for financial strategy, reporting and compliance. Prior to joining SharesPost, Ryan served as Chief Financial Officer and Chief Accounting Officer of Thomas Weisel Partners (a subsidiary of Stifel Nicolaus (NYSE: SF)), an investment bank focused principally on growth companies and growth investors. Prior to that position, Ryan spent eight years at E*TRADE Financial Corporation (NASDAQ: ETFC) as the Global and Corporate Controller, overseeing accounting operations, systems and financial reporting throughout its transformation from a new online investing company to a global financial services company. Ryan holds a Bachelor of Arts degree from University of California, Santa Barbara, and is a member of the California Society of Certified Public Accountants.
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Committees of the Board of Trustees
The Board of Trustees has formed an Audit Committee that has the responsibility and power to: (i) oversee the Fund’s accounting and financial reporting policies and practices, its internal controls, and, as appropriate, the internal controls of key service providers; (ii) approve, and recommend to the full Board of Trustees for its ratification and approval in accord with applicable law, the selection and appointment of an independent auditor for the Fund prior to the engagement of such independent auditor; (iii) pre-approve all audit and non-audit services provided to the Fund by its independent auditor, directly or by the established pre-approval policies and procedures pursuant to which (A) the policies and procedures are detailed as to the particular service, (B) the Audit Committee is informed of each service, and (C) the Audit Committee’s responsibilities under the Securities Exchange Act of 1934, as amended, may not be delegated to management (which, for purposes of this paragraph, includes the appropriate officers of the Fund, the Investment Adviser, the Fund Administrator, and other key service providers (other than the independent auditors)); (iv) pre-approve all non-audit services provided by the Fund’s independent auditor to the Investment Adviser and any entity controlling, controlled by, or under common control with the Investment Adviser that provides ongoing services to the Fund, if the engagement relates directly to the operations and financial reporting of the Fund; (v) attempt to identify, through reports from the auditor and discussions with management: (A) conflicts of interest between management and the independent auditor as a result of employment relationships; (B) the provision of prohibited non-audit services to the Fund by the independent auditor and violations of audit partner rotation requirements; and (C) prohibited independent auditor compensation arrangements whereby individual auditors are compensated based on selling non-audit services to the Fund; (vi) (A) ensure that the independent auditors submit on a periodic basis to the Audit Committee a formal written statement delineating all relationships between the independent auditors and the Fund; (B) actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors; and (C) recommend that the Board of Trustees take appropriate action in response to such formal written statement to satisfy themselves of the independent auditors’ independence; (vii) meet with the Fund’s independent auditors and management, including private meetings, as appropriate, to: (A) review the form and substance of the Fund’s financial statements and reports and to report the result of such meetings to the full Board of Trustees; (B) review the arrangements for and the scope of the annual audit and any special audits or other special services; (C) discuss any matters of concern arising in connection with audits of the Fund’s financial statements, including any adjustments to such statements recommended by the independent auditors, or other results of the audits; (D) review the quality and adequacy of the internal accounting staff (which, for purposes of this paragraph, includes the appropriate officers and employees of the Fund, the Investment Adviser, the Fund Administrator, and other key service providers (other than independent auditors); (E) consider the independent auditors’ comments with respect to the appropriateness and adequacy of the Fund’s financial policies, procedures and internal accounting controls (including computer system controls and controls over the daily net asset valuation process and the adequacy of the computer systems and technology used in the Fund’s operations) and review management’s responses thereto; (F) review the matters about which Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU § 380) requires discussion; and (G) review with the independent auditors their opinions as to the fairness of the financial statements; (viii) consider the effect on the Fund of: (A) any changes in accounting principles or practices proposed by management or the independent auditors; (B) any changes in service providers, such as accountants or administrators for the Fund, that could impact the Fund’s internal controls; or (C) any changes in schedules (such as fiscal or tax year-end changes) or structures or transactions that require special accounting activities or resources; (ix) review the fees charged by the independent auditors for audit and non-audit services; and (x) report its activities to the full Board of Trustees on a regular basis and to make such recommendations with respect to the matters described above and other matters as the Audit Committee may deem necessary or appropriate.
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The Audit Committee currently consists of each of the Fund’s Independent Trustees and shall always be composed entirely of Independent Trustees. Robert Boulware has been designated as the lead member of the Audit Committee for purposes of interacting with the Fund’s independent auditor.
At such times as one of the Independent Trustees notifies the Board of Trustees of his intent to step down from the Board of Trustees, the Board of Trustees will form a Nominating and Governance Committee. The Nominating and Governance Committee will have the power to nominate directors of the Fund who are not “interested persons” of the Fund as that term is defined in the 1940 Act, and to nominate officers of the Fund and appoint officers of the Fund to serve until the next meeting of the Board of Trustees succeeding such action. The Nominating and Governance Committee will initially consist of each of the Fund’s Independent Trustees. The Nominating and Governance Committee does not currently have a policy regarding whether it will consider nominees recommended by Shareholders.
All actions taken by a committee of the Board of Trustees will be recorded and reported to the full Board of Trustees at its next meeting following such actions.
Trustee Ownership of Securities
The dollar range of equity securities owned by each Trustee is set forth below.
Name of Trustee | Dollar
Range of Equity Securities in the Fund(1) | Aggregate
Dollar Range of Equity Securities in all Registered Investment Companies Overseen by Trustee in Family of Investment Companies(1) | ||||||
Independent Trustees | ||||||||
Robert Boulware | $0 | $0 | ||||||
Mark Radcliffe | $0 | $0 | ||||||
Interested Trustees | ||||||||
Sven Weber | $0 | $0 |
(1) | The Fund is recently formed and has not issued Shares to any person. |
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Independent Trustee Ownership of Securities
As of the date of this SAI, none of the Independent Trustees (or their immediate family members) owned securities of the Investment Adviser, or of an entity (other than a RIC (as defined below)) controlling, controlled by or under common control with the Investment Adviser.
Trustee Compensation
The Fund will pay each Independent Trustee a fee of $25,000 per annum. In addition, the Fund will reimburse each of the Independent Trustees for travel and other expenses incurred in connection with attendance at such meetings. Each of the Independent Trustees is a member of the Audit Committee and/or Nominating and Governance Committee, and receives a fee for each meeting attended. Other officers and Trustees of the Fund receive no compensation.
The following table summarizes the compensation paid to the Trustees of the Fund, including the Audit Committee and/or Nominating and Governance Committee fees, for the period from the Fund’s inception through the date of this SAI.
Name of Trustee | Aggregate Compensation from the Fund | Pension or Retirement Benefits Accrued as Part of Fund Expenses | Estimated Annual Benefits Upon Retirement | Total Compensation From Fund Paid to Trustee | ||||||||||||
Robert Boulware | $0(1) | N/A | N/A | $0(1) | ||||||||||||
Mark Radcliffe | $0(1) | N/A | N/A | $0(1) | ||||||||||||
Sven Weber | N/A | N/A | N/A | N/A |
(1) | Each Independent Trustee will be paid an aggregate of $25,000 per annum to act as a manager of the Fund. |
Portfolio Managers
The portfolio managers of the Investment Adviser primarily responsible for the investment management of the Fund are the officers of the Fund. See above for biographies of each portfolio manager.
Compensation of Portfolio Managers
Each of the portfolio managers receives a fixed annual salary and a discretionary bonus, which is dependent upon the overall performance of the Investment Adviser. The portfolio managers do not receive any additional compensation from the Fund for serving as a portfolio manager of the Fund.
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Portfolio Manager Conflicts of Interest
In addition to managing the assets of the Fund, the Fund’s portfolio managers may have responsibility for managing other client accounts of the Investment Adviser. The tables below show, for each portfolio manager, the number and asset size of (i) SEC-registered investment companies (or series thereof) other than the Fund, (ii) pooled investment vehicles that are not registered investment companies, and (iii) other accounts (e.g., accounts managed for individuals or organizations) managed by each portfolio manager. The tables also show the number of performance-based fee accounts, as well as the total assets of the accounts for which the advisory fee is based on the performance of the account. This information is provided as of the date of this SAI.
See page 25 below for details of certain conflicts of interest between the Fund and the Investment Adviser and its principals.
Other SEC-Registered Investment Companies Managed
Name of Portfolio Manager | Number of Registered Investment Companies | Total Assets of Registered Investment Companies | Number of Investment Company Accounts with Performance- Based Fees | Total Assets of Performance- Based Fee Accounts | ||||||||||||
Sven Weber | 0 | $0 | 0 | $0 | ||||||||||||
Ryan Stroub | 0 | $0 | 0 | $0 | ||||||||||||
Other Pooled Investment Vehicles Managed
Name of Portfolio Manager | Number of Pooled Investment Vehicles | Total Assets of Pooled Investment Vehicles | Number of Pooled Investment Vehicles with Performance- Based Fees | Total Assets of Performance- Based Fee Accounts | ||||||||||||
Sven Weber | 6 | $2,000,000 | 0 | $0 | ||||||||||||
Ryan Stroub | 6 | $2,000,000 | 0 | $0 | ||||||||||||
Other Accounts Managed
Name of Portfolio Manager | Number of Other Accounts | Total Assets of Other Accounts | Number of Other Accounts with Performance- Based Fees | Total Assets of Performance- Based Fee Accounts | ||||||||||||
Sven Weber | 0 | $0 | 0 | $0 | ||||||||||||
Ryan Stroub | 0 | $0 | 0 | $0 | ||||||||||||
CODE OF ETHICS
The Fund and the Investment Adviser each has adopted a code of ethics as required by applicable law, which is designed to prevent affiliated persons of the Fund and the Investment Adviser from engaging in deceptive, manipulative, or fraudulent activities in connection with securities held or to be acquired by the Fund (which may also be held by persons subject to a code of ethics). There can be no assurance that the codes of ethics will be effective in preventing such activities. Each code of ethics may be examined on the Internet from the SEC’s website (http://www.sec.gov) and the Fund’s website (http://www.spinvestments.com). A copy of each code of ethics may be obtained by request to the Investment Adviser.
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The Fund’s code of ethics allows personnel to invest in securities for their own account, but requires compliance with the code’s pre-clearance requirements and other restrictions. The code of ethics requires Fund personnel to obtain pre-clearance for the purchase of any security if they knew or, in the ordinary course of fulfilling their official duties, should have known, that during the 15-day period before the transaction in such security, other than an Exempt Security (as defined below), or at the time of the transaction the security purchased or sold by them, other than an Exempt Security, was also purchased or sold by the Fund or considered for the purchase or sale by the Fund. An “Exempt Security” is a (i) direct obligation of the U.S. government; (ii) bankers’ acceptance, bank certificate of deposit, commercial paper and high quality short-term debt instrument (defined as any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a Nationally Recognized Statistical Rating Organization), including repurchase agreements; (iii) share issued by open-end funds registered under the 1940 Act, other than exchange traded funds; (iv) security purchased or sold in any account over which the individual has no direct or indirect influence or control; (v) security purchased or sold in a transaction that is non-volitional on the part of either the individual or the Fund, including mergers, recapitalizations or similar transactions; (vi) security acquired as a part of an automatic investment plan; (vii) security acquired upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; (viii) security which the Fund is not permitted to purchase pursuant to its investment objectives and the policies set forth in the Fund’s then current prospectus(es) under the Securities Act or the Fund’s registration statement on Form N-2.
The Investment Adviser’s code of ethics allows its personnel to invest in securities for their own account, but requires compliance with the code’s pre-clearance requirements and other restrictions. The Investment Adviser’s code of ethics requires its personnel to obtain pre-clearance for the purchase or sale of any security on a restricted list maintained by the Investment Adviser’s chief compliance officer comprised of securities issuers for which transactions in securities issued by or other financial products referencing such issuers require prior approval by the Investment Adviser’s chief compliance officer. The term security for purposes of the Investment Adviser’s code of ethics pre-clearance restrictions excludes (i) direct obligations of the U.S. government; (ii) bankers’ acceptances; bank certificates of deposit; commercial paper; high quality short-term debt instruments, including repurchase agreements; shares issued by affiliated or unaffiliated money market funds; and (iii) shares issued by open-end investment companies, other than affiliated funds.
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TAX STATUS
The following discussion is a general summary of certain U.S. federal income tax considerations applicable to the Fund and to an investment in Shares. This summary does not purport to be a complete description of the income tax considerations applicable to such an investment. For example, the following does not describe tax consequences that are assumed to be generally known by investors or certain considerations that may be relevant to certain types of Shareholders subject to special treatment under U.S. federal income tax laws, including Shareholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, pension plans and trusts, financial institutions and Non-U.S. Shareholders, defined below. This summary assumes that Shareholders hold Shares as capital assets (generally, property held for investment). The discussion is based upon the Code, Treasury Regulations and administrative and judicial interpretations, each as of the date of this Prospectus and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. The Fund has neither sought nor will seek any ruling from the Internal Revenue Service, or “IRS,” regarding this offering. This summary does not discuss any aspects of foreign, state or local tax, or any U.S. federal taxes other than income taxes. It does not discuss the special treatment under U.S. federal income tax laws that could result if the Fund invested in tax-exempt securities or certain other investment assets.
A “U.S. Shareholder” is a beneficial owner of Shares that is for U.S. federal income tax purposes:
· | a citizen or individual resident of the United States; |
· | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; |
· | a trust, if a court within the United States has primary supervision over its administration and one of more U.S. persons have the authority to control all of its substantial decisions, or the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person; or |
· | an estate, the income of which is subject to U.S. federal income taxation regardless of its source. |
A “Non-U.S. Shareholder” is a beneficial owner of Shares that is not a U.S. Shareholder.
If an entity treated as a partnership for U.S. federal income tax purposes holds Shares, the U.S. federal income tax treatment of a shareholder of the entity would generally depend upon the status of the shareholder and the activities of the entity. A prospective Shareholder that is such an entity or a shareholder of such an entity should consult its own tax advisors with respect to the purchase, ownership and disposition of Shares.
Tax matters are very complicated and the tax consequences to an investor of an investment in Shares will depend on the facts of its particular situation. Shareholders are encouraged to consult their own tax advisors regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty and the effect of any possible changes in the tax laws.
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Election to be Taxed as a RIC
The Fund will elect to be treated as a “regulated investment company” (“RIC”) under Subchapter M of the Code. As a qualifying RIC, the Fund generally would not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes to Shareholders as dividends. To qualify as a RIC, the Fund must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, the Fund must distribute to Shareholders, for each taxable year, an amount equal to at least 90% of the Fund’s “investment company taxable income,” which is generally its ordinary income plus the excess of recognized net short-term capital gain over recognized net long-term capital loss, reduced by deductible expenses. Such required amount is referred to as the “Annual Distribution Requirement.”
Taxation as a RIC
If the Fund:
· | qualifies as a RIC; and |
· | satisfies the Annual Distribution Requirement; |
then the Fund will not be subject to U.S. federal income tax on the portion of its investment company taxable income and net capital gain (generally, recognized net long-term capital gain in excess of recognized net short-term capital loss) distributed to Shareholders. The Fund will be subject to U.S. federal income tax at regular corporate rates on any income or capital gain not distributed (or treated as distributed for tax purposes) to Shareholders. However, as a RIC, the Fund cannot deduct its net operating loss carryovers against its taxable income. We may realize substantial net operating losses.
The Fund will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless the Fund distributes in a timely manner an amount at least equal to the sum of (1) 98% of the Fund’s ordinary income for each calendar year, (2) 98.2% of the Fund’s capital gain net income for the one-year period generally ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years. Collectively, such amount is referred to as the “Excise Tax Avoidance Requirement.” The Fund currently intends to make sufficient distributions each taxable year to satisfy the Excise Tax Avoidance Requirements.
To qualify as a RIC for U.S. federal income tax purposes, the Fund generally must, among other things:
· | derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to the Fund’s business of investing in such stock or securities. The Fund refers to this test as the “90% Gross Income Test;” and |
· | diversify the Fund’s holdings so that at the end of each quarter of the taxable year: |
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· | at least 50% of the value of the Fund’s assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of the Fund’s total assets or more than 10% of the outstanding voting securities of such issuer; and |
· | no more than 25% of the value of the Fund’s assets is invested in the securities, other than U.S. Government securities or securities of other RICs, of one issuer, the securities of two or more issuers that are controlled, as determined under applicable tax rules, by the Fund and that are engaged in the same or similar or related trades or businesses, or the securities of one or more qualified publicly traded partnerships. Collectively, the Fund refers to these tests as the “Diversification Tests.” |
In addition, if we qualify as a non-publicly offered RIC, discussed below, we generally would be required to ensure that, for U.S. federal income tax purposes, all of our distributions to Shareholders are pro rata, with no preference as to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another except to the extent that the former is entitled to such preference. If we violated this “no preference” requirement, we could be subject to U.S. corporate income tax and/or be disqualified as a RIC. We cannot provide assurance that we will not violate this requirement.
Furthermore, certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (a) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (b) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income, (c) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (d) adversely affect the time when a purchase or sale of stock or securities is deemed to occur or (e) adversely alter the characterization of certain complex financial transactions. We will monitor our transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurance can be given that we will be eligible for any such tax elections or that any elections we make will fully mitigate the effects of these provisions. Gain or loss recognized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.
Our investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, our yield on those securities would be decreased. Shareholders will generally not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by us.
Our functional currency is the U.S. dollar for U.S. federal income tax purposes. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time we accrue income, expenses or other liabilities denominated in a foreign currency and the time we actually collect such income or pay such expenses or liabilities may be treated as ordinary income or loss.
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Although the Fund is not prohibited from making foreign investments, currently the Fund does not anticipate making any significant foreign investments. However, if the Fund acquires any equity interest in an entity treated as a “passive foreign investment company” for U.S. federal income tax purposes, we could be subject to significant adverse tax consequences.
In general, the Fund may sell assets in order to satisfy distribution requirements. However, the Fund’s ability to dispose of assets to meet the distribution requirements may be limited by (1) the illiquid nature of its portfolio and (2) other requirements relating to the Fund’s status as a RIC, including the Diversification Tests. If the Fund disposes of assets to meet the Annual Distribution Requirement, the Diversification Test, or the Excise Tax Avoidance Requirement, the Fund may make such dispositions at times that, from an investment standpoint, are not advantageous.
If the Fund fails to satisfy the Annual Distribution Requirement or otherwise fails to qualify as a RIC in any taxable year, the Fund will be subject to tax in that year on all of its taxable income, regardless of whether the Fund makes any distributions to Shareholders. In that case, all of the Fund’s income will be subject to corporate-level U.S. federal income tax, reducing the amount available to be distributed to Shareholders. In contrast, assuming the Fund qualifies as a RIC, its corporate-level U.S. federal income tax should be substantially reduced or eliminated.
The remainder of this discussion assumes that the Fund qualifies as a RIC and has satisfied the Annual Distribution Requirement.
Taxation of U.S. Shareholders
Whether an investment in our Shares is appropriate for a U.S. Shareholder will depend upon that person’s particular circumstances. An investment in our Shares by a U.S. Shareholder may have adverse tax consequences. The following summary generally describes certain U.S. federal income tax consequences of an investment in our Shares by taxable U.S. Shareholders and not by U.S. Shareholders that are generally exempt from U.S. federal income taxation. U.S. Shareholders should consult their own tax advisors before investing in our Shares.
Exchanges
While an investment in the Fund with cash generally would not be taxable, the Fund provides the opportunity for holders of securities in Portfolio Companies to acquire Shares of the Fund in exchange for such securities at the end of each fiscal quarter. Such exchanges would generally result in a taxable event for the exchanging shareholder with a taxable capital gain in the amount of the difference between such shareholders basis in the exchanged shares and the fair market value of the Fund shares received in the exchange.
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Dividends on our Shares
Dividends by us generally are taxable to U.S. Shareholders as ordinary income or long-term capital gain. Dividends of our investment company taxable income (which is, generally, our net income excluding net capital gain) will be taxable as ordinary income to U.S. Shareholders to the extent of our current and accumulated earnings and profits, whether paid in cash or reinvested in additional Shares. Dividends of our net capital gain (which is generally the excess of our net long-term capital gain over our net short-term capital loss) properly reported by us as “capital gain dividends” will be taxable to a U.S. Shareholder as long-term capital gain in the case of individuals, trusts or estates. This is true regardless of the U.S. Shareholder’s holding period for his, her or its Shares and regardless of whether the dividend is paid in cash or reinvested in additional Shares. Dividends in excess of our earnings and profits first will reduce a U.S. Shareholder’s adjusted tax basis in such U.S. Shareholder’s Shares and, after the adjusted basis is reduced to zero, will constitute capital gain to such U.S. Shareholder. We may make dividends in excess of our earnings and profits. As a result, a U.S. Shareholder will need to consider the effect of our dividends on such U.S. Shareholder’s adjusted tax basis in our Shares in their individual circumstances.
A portion of our dividends, but not those reported as capital gain dividends, paid to corporate U.S. Shareholders may, if certain conditions are met, qualify for the 70% dividends-received deduction to the extent that we have received dividends from certain corporations during the taxable year, but only to the extent such dividends are treated as paid out of our earnings and profits. We expect only a small portion of our dividends to qualify for this deduction.
In general, “qualified dividend income” recognized by non-corporate U.S. Shareholders is taxable at the same rate as net capital gain. Generally, qualified dividend income is dividend income attributable to certain U.S. and foreign corporations, as long as certain holding period requirements as met. As long as certain requirements are met, our dividends paid to non-corporate U.S. Shareholders attributable to qualified dividend income may be treated by such U.S. Shareholders as qualified dividend income, but only to the extent such dividends are treated as paid out of our earnings and profits. We expect only a small portion of our dividends to qualify as qualified dividend income.
Although we currently intend to distribute any of our net capital gain at least annually (which would be automatically reinvested unless a Shareholder opts out of the dividend reinvestment option), we may in the future decide to retain some or all of our net capital gain, but treat the retained amount as a distribution for tax purposes. In that case, among other consequences, we will pay tax on the retained amount, each U.S. Shareholder will be required to include his, her or its share of the retained amount in income as if it had been actually distributed to the U.S. Shareholder, and the U.S. Shareholder will be entitled to claim a credit equal to his, her or its allocable share of the tax paid thereon by us. The amount of the retained amount net of such tax will be added to the U.S. Shareholder’s tax basis for his, her or its Shares. The Fund will report, within 60 days of the end of its tax year, on Form 2349, Notice to Shareholder of Undistributed Long-Term Capital Gains, to each U.S. Shareholder such Shareholder’s allocable share of our undistributed long-term capital gains, the Shareholder’s allocable share of the taxes paid by the Fund on such gains, and the effect on such Shareholder’s adjusted tax basis in his, her, or its Shares.
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Because we expect to pay tax on any retained net capital gain at our regular corporate tax rate, and because that rate currently is in excess of the maximum rate currently payable by individuals on net capital gain, the amount of tax that individual U.S. Shareholders will be treated as having paid and for which they will receive a credit would exceed the tax they owe on the retained net capital gain. Such excess generally may be claimed as a credit against the U.S. Shareholder’s other U.S. federal income tax obligations or may be refunded to the extent it exceeds the U.S. Shareholder’s liability for U.S. federal income tax. A U.S. Shareholder that is not subject to U.S. federal income tax or otherwise is not required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. In order to treat amounts as distributed for tax purposes, we must provide a written statement to our U.S. Shareholders reporting the retained amount after the close of the relevant taxable year. We cannot treat any of our investment company taxable income in this manner.
We will be subject to the alternative minimum tax, also referred to as the “AMT,” but any items that are treated differently for AMT purposes must be apportioned between us and our U.S. Shareholders and this may affect U.S. Shareholders’ AMT liabilities. We expect such items will generally be apportioned in the same proportion that distributions paid to each U.S. Shareholder bear to our taxable income (determined without regard to the dividends paid deduction), unless a different method for a particular item is warranted under the circumstances.
For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of distributions paid for that year, we may, under certain circumstances, elect to treat a distribution that is paid during the following taxable year as if it had been paid during the taxable year in question. If we make such an election, the U.S. Shareholder will still be treated as receiving the distribution in the taxable year in which the distribution is made. However, any distribution declared by us in October, November or December of any calendar year, payable to U.S. Shareholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by our U.S. Shareholders on December 31 of the year in which the distribution was declared.
If a U.S. Shareholder purchases Shares shortly before the record date of a distribution, the price of the Shares will include the value of the distribution and the U.S. Shareholder will be subject to tax on the distribution even though it represents a return of his, her or its investment. We have built-up or have the potential to build up large amounts of unrealized gain which, when realized and distributed, could have the effect of a taxable return of capital to U.S. Shareholders.
If we do not have at least 500 Shareholders for an entire taxable year, we may be treated as a “non-publicly offered RIC.” As a non-publicly offered RIC, we cannot deduct our “affected RIC expenses” which instead are allocated to our Shareholders. Our U.S. Shareholders who or that are “affected investors” must treat such allocations as a taxable dividend and can deduct such expenses subject to the limitations imposed on “miscellaneous itemized deductions.” We believe that substantially all of our expenses would be treated as “affected RIC expenses.” “Affected investors” include individuals, trusts and estates. We may be treated as a non-publicly offered RIC in any taxable year.
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Redemption or other Disposition of our Shares
A U.S. Shareholder generally would recognize taxable gain or loss if the U.S. Shareholder redeems or otherwise disposes of his, her or its Shares. The amount of gain or loss will be measured by the difference between such U.S. Shareholder’s adjusted tax basis in the Shares sold and the amount of the proceeds received in exchange. Any gain arising from such redemption or disposition generally will be treated as long-term capital gain or loss if the U.S. Shareholder has held his, her or its Shares for more than one year. Otherwise, it will be classified as short-term capital gain or loss. However, any capital loss arising from the redemption or disposition of Shares held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such Shares. In addition, all or a portion of any loss recognized upon a disposition of Shares may be disallowed if substantially identical Shares are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition.
U.S. Federal Income Tax Rates
In general, U.S. Shareholders who or that are individuals, trusts or estates are subject to a maximum U.S. federal income tax rate of 20% on their net capital gain (generally, the excess of net long-term capital gain over net short-term capital loss for a taxable year, including long-term capital gain derived from an investment in our Shares). Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. Shareholders currently are subject to U.S. federal income tax on net capital gain at the maximum 35% rate that also applies to ordinary income. Non-corporate U.S. Shareholders with net capital losses for a year (i.e., capital loss in excess of capital gain) generally may deduct up to $3,000 of such losses against their ordinary income each year; any net capital losses of a non-corporate U.S. Shareholder in excess of $3,000 generally may be carried forward and used in subsequent years as provided in the Code. Corporate U.S. Shareholders generally may not deduct any net capital losses for a year, but may carry back such losses for three years or carry forward such losses for five years.
Non-corporate U.S. Shareholders generally will be subject to a 3.8% Medicare tax on their “net investment income,” which ordinarily includes taxable distributions or retained amounts treated as distributions on Shares, as well as taxable gain on the disposition of Shares. It is also very likely that “net investment income” would include, for this purpose any taxable income or gain on any other securities we may offer.
Information Reporting and Backup Withholding
We will send to each of our U.S. Shareholders, after the end of each calendar year, a notice providing, on a per Share and per distribution basis, the amounts includible in such U.S. Shareholder’s taxable income for such year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each year’s distributions generally will be reported to the IRS. Distributions may also be subject to additional state, local and foreign taxes depending on a U.S. Shareholder’s particular situation.
We may be required to withhold U.S. federal income tax (“backup withholding”), currently at a rate of 31%, from all taxable distributions to any non-corporate U.S. Shareholder (1) who fails to furnish us with a correct taxpayer identification number or a certificate that such U.S. Shareholder is exempt from backup withholding or (2) with respect to whom the IRS notifies us that such U.S. Shareholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual’s taxpayer identification number is his or her social security number. Backup withholding is not an additional tax. Any amount withheld under backup withholding is allowed as a credit against the U.S. Shareholder’s U.S. federal income tax liability and may entitle such U.S. Shareholder to a refund, provided that proper information is timely provided to the IRS.
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Foreign Account Tax Compliance Act
The recently enacted Foreign Account Tax Compliance Act (“FATCA”) will impose a 30% withholding tax on any “withholdable payment” from a U.S. payer (including the Fund) to (i) a “foreign financial institution,” unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which would include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States owners) or (ii) a foreign entity that is not a financial institution, unless such entity provides the U.S. payer with a certification identifying the substantial U.S. owners of the entity, which generally includes any U.S. person who directly or indirectly owns more than 10% of the entity. Under certain circumstances, the payee might be eligible for refunds or credits of such taxes.
Therefore, U.S. Shareholders who own their Shares through foreign accounts or foreign intermediaries may have distributions from the Fund reduced by the withholding tax unless the foreign payee qualifies for an exception.
“Withholdable payments” subject to FATCA will include U.S.-source payments otherwise subject to nonresident withholding tax, and also include the entire gross proceeds from the sale of any equity or debt instruments of U.S. issuers (in either case to exclude payments made on “obligations” that were outstanding on March 18, 2012). The withholding tax will apply regardless of whether the payment would otherwise be exempt from U.S. nonresident withholding tax (e.g., under the portfolio interest exemption or as capital gain). The IRS is authorized to provide rules for implementing the FATCA withholding regime with the existing nonresident withholding tax rules.
Under the applicable Treasury Regulations, this withholding will apply to U.S.-source payments otherwise subject to nonresident withholding tax made on or after January 1, 2014 and to the payment of gross proceeds from the sale of any equity or debt instruments of U.S. issuers made on or after January 1, 2015.
Investors are urged to consult with their tax advisors regarding the effect, if any, of FATCA to them based on their particular circumstances.
Information Reporting of Substantial Losses
Under U.S. Treasury regulations, if a U.S. Shareholder recognizes a loss with respect to Shares of $2 million or more for a non-corporate U.S. Shareholder or $10 million or more for a corporate U.S. Shareholder in any single taxable year (or a greater loss over a combination of years), the U.S, Shareholder must file with the IRS a disclosure statement on Form 8886. Direct U.S. holders of portfolio securities in many cases are excepted from this reporting requirement, but under current guidance, stockholders or members of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to stockholders or members of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have a similar reporting requirement. U.S. Shareholders should consult their own tax advisors to determine the applicability of these regulations in light of their individual circumstances.
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Failure to Qualify as a RIC
If the Fund were unable to qualify for treatment as a RIC, the Fund would be subject to U.S. federal income tax on all of its net taxable income at regular corporate rates. The Fund would not be able to deduct distributions to Shareholders, nor would they be required to be made. Distributions would generally be taxable to non-corporate Shareholders as ordinary distribution income eligible for the reduced rates of U.S. federal income tax to the extent of the Fund’s current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate U.S. Shareholders eligible for the dividends would receive deductions. Distributions in excess of the Fund’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the Shareholder’s tax basis, and any remaining distributions would be treated as a capital gain. If the Fund were to fail to meet the RIC requirements in its first taxable year or, with respect to later years, for more than two consecutive years, and then to seek to requalify as a RIC, the Fund would be required to recognize gain to the extent of any unrealized appreciation in its assets unless the Fund made a special election to pay corporate-level tax on any such unrealized appreciation recognized during the succeeding 10-year period.
DETERMINATION OF NET ASSET VALUE
The NAV of the Fund’s Shares is determined daily, as of the close of regular trading on the NASDAQ (normally, 4:00 p.m., Eastern time). Each Share will be offered at NAV next calculated after receipt of the purchase in good order, plus any applicable sales load. During the continuous offering, the price of the Shares will increase or decrease on a daily basis according to the NAV of the Shares. In computing NAV, portfolio securities of the Fund are valued at their current fair market values determined on the basis of market quotations, if available. Because market quotations are not typically readily available for the majority of the Fund’s securities, they are valued at fair value as determined by the Board of Trustees. The Board of Trustees has delegated the day-to-day responsibility for determining these fair values to the Investment Adviser. The Investment Adviser, subject to the oversight of the Board of Trustees, shall develop the Fund’s valuation methodologies, and make valuation determinations. The Investment Adviser will act in accordance with the Fund’s written valuation policies and procedures as approved by the Board of Trustees, and in accordance with the 1940 Act. Valuation determinations are reviewed periodically by the Board of Trustees, including in connection with any quarterly repurchase offer.
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Fair valuation involves subjective judgments, and it is possible that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security. There is no single standard for determining fair value of a security. Rather, in determining the fair value of a security for which there are no readily available market quotations, the Investment Adviser may consider several factors, including the implied valuation of the asset as reflected by stock purchase contracts reported on the SharesPost Trading Platform and other alternative trading systems, fundamental analytical data relating to the investment in the security, the nature and duration of any restriction on the disposition of the security, the cost of the security at the date of purchase, the liquidity of the market for the security, the price of such security in a meaningful private or public investment or merger or acquisition of the issuer subsequent to the Fund’s investment therein, the per share price of the security to be valued in recent verifiable transactions, including private secondary transactions (including exchanges for Fund Shares), and the recommendation of the Fund’s portfolio managers. Where such information is not available or reliable, the Investment Adviser will determine fair market value of Fund assets in accordance with consistently applied written procedures established by the Board of Trustees and in accordance with GAAP.
The Investment Adviser will provide the Board of Trustees with periodic reports, that discuss the functioning of the valuation process, if applicable to that period, and that identify issues and valuations problems that have arisen, if any. To the extent deemed necessary by the Investment Adviser, the Board of Trustees will review any securities valued by the Investment Adviser in accordance with the Fund’s valuation policies. The Investment Adviser will provide the Board of Trustees with periodic reports, no less frequently than quarterly, that discuss the functioning of the valuation process, if applicable to that period, and that identify issues and valuations problems that have arisen, if any.
Fair value prices are necessarily estimates, and there is no assurance that such a price will be at or close to the price at which the security is next quoted or next trades.
INVESTMENT BY EMPLOYEE BENEFIT PLANS
General
The following section sets forth certain consequences which should be considered by a fiduciary before acquiring Shares on behalf of (i) an “employee benefit plan” as defined in and subject to the fiduciary responsibility provisions of ERISA, (ii) a “plan” as defined in and subject to Section 4975 of the Code, or (iii) an entity deemed to hold “plan assets” as a result of investments in the entity by such Plans (each such fiduciary is referred to herein as a “Plan Fiduciary” and such plans or entities “plans”). The following summary is not intended to be complete, but only to address certain questions under ERISA and the Code which are likely to be raised by the Plan Fiduciary’s own counsel.
In general, the terms “employee benefit plan” as defined in ERISA and “plan” as defined in Section 4975 of the Code together refer to any plan or account of various types which provides retirement benefits or welfare benefits to an individual or to an employer’s employees and their beneficiaries. Such plans and accounts include, but are not limited to, corporate pension and profit-sharing plans, “simplified employee pension plans,” Keogh plans for self-employed individuals (including partners), individual retirement accounts described in Section 408 of the Code and medical benefit plans.
Because the Fund will be registered as an investment company under the 1940 Act, the underlying assets of the Fund will not be considered to be “plan assets” of the Plans investing in the Fund for the purposes of ERISA’s fiduciary responsibility and prohibited transaction rules. Thus, the Investment Adviser will not be a fiduciary within the meaning of ERISA with respect to the assets of any Plan that becomes a Shareholder of the Fund, solely as a result of the Plan’s investment in the Fund.
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ERISA imposes certain general and specific responsibilities on persons who are fiduciaries with respect to a Plan, including prudence, diversification, prohibited transaction, and other standards. In determining whether to invest assets of a Plan in the Fund, a Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Fund, including the role an investment in the Fund plays in the Plan’s investment portfolio. Each Plan Fiduciary, before deciding to invest in the Fund, must be satisfied that investment in the Fund is a prudent investment for the Plan, that the investments of the Plan, including the investment in the Fund, are diversified so as to minimize the risks of large losses and that an investment in the Fund complies with the documents of the Plan and any related trust.
EACH PLAN FIDUCIARY CONSIDERING ACQUIRING SHARES MUST CONSULT ITS OWN LEGAL AND TAX ADVISORS BEFORE DOING SO.
Prohibited Transactions
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of a Plan and certain persons (referred to as “parties in interest” under ERISA or “disqualified persons” under the Code) having certain relationships to such Plans, unless an exemption is available. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, a Plan Fiduciary who permits a Plan to engage in a transaction that the Plan Fiduciary knows or should know is a prohibited transaction may be liable to the Plan for any loss the Plan incurs as a result of the transaction or for any profits earned by the fiduciary in the transaction.
In general, Shares may not be purchased with the assets of a Plan if the Investment Adviser, any member of the Board of Trustees, the Distributor, any Financial Intermediary, any of their respective affiliates, or any of their respective agents or employees (collectively, the “Fund Affiliates”) either: (a) has investment discretion with respect to the investment of such plan assets; (b) has authority or responsibility to give or regularly gives investment advice with respect to such plan assets, for a fee, and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to such plan assets and that such advice will be based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to such Plan. A party that is described in clause (a) or (b) of the preceding sentence is a fiduciary under ERISA and the Code with respect to the Plan, and any such purchase might result in a prohibited transaction under ERISA and the Code, as described above. There are certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be applicable, depending in part on the type of Plan Fiduciary making the decision to acquire Shares and the circumstances under which that decision is made.
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A Plan and Plan Fiduciary considering investing in the Fund should consult with its legal counsel to determine if participation in the Fund is a transaction that is prohibited by ERISA or the Code or whether the investment is entitled to an exemption. A Plan Fiduciary will be required to represent that the decision to invest in the Fund was made by them as a fiduciary duly authorized to make such investment decisions, that the decision was made independent of all of the Fund Affiliates, and that the Plan Fiduciary has not relied on any individualized advice or recommendation of a Fund Affiliate as a primary basis for the decision to invest in the Fund.
Except as otherwise set forth, the foregoing statements regarding the consequences under ERISA and the Code of an investment in the Fund are based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations thereunder. No assurance can be given that administrative, judicial or legislative changes will not occur that may make the foregoing statements incorrect or incomplete.
OFFERING OF SHARES TO PLANS IS IN NO RESPECT A REPRESENTATION BY THE INVESTMENT ADVISER OR ANY OTHER PARTY RELATED TO THE FUND THAT THIS INVESTMENT MEETS THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN THE FUND IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN.
PERFORMANCE INFORMATION
Advertisements and sales literature relating to the Fund as well as reports to Shareholders may include quotations of investment performance. In these materials, the Fund’s performance will normally be portrayed as the net return to an investor in the Fund during each month or quarter of the period for which the investment performance is being shown. Cumulative performance and year-to-date performance computed by aggregating quarterly or monthly return data may also be used. Investment returns will be reported on a net basis, after all fees and expenses. Other methods also may be used to portray the Fund’s investment performance.
The Fund’s performance results will vary from time to time, and past results are not necessarily indicative of future investment results.
Comparative performance information, as well as any published ratings, rankings and analyses, reports and articles discussing the Fund, may also be used to advertise or market the Fund, including data and materials prepared by recognized sources of such information. Such information may include comparisons of the Fund’s investment performance to the performance of recognized market indices and indices, including but not limited to the Standard & Poor’s 500, the Russell 2000, or other lesser known indices. Comparisons also may be made to economic and financial trends and data that may be relevant for investors to consider in determining whether to invest in the Fund.
CALCULATION OF FEES
If, consistent with the Fund’s then-current registration statement, the determination of NAV is suspended or NAV is otherwise not calculated on a particular day, then for purposes of calculating and accruing any fee payable by the Fund that is based on the Fund’s NAV, such fee will be computed on the basis of the value of the Fund’s net assets as last calculated.
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PROXY VOTING POLICIES AND PROCEDURES
The Fund intends to invest in securities issued by Portfolio Companies. As such, it is expected that proxies and consent requests received by the Fund will deal with matters related to the operative terms and business details of such Portfolio Companies.
To the extent that the Fund receives notices or proxies from Portfolio Companies (or to the extent the Fund receives proxy statements or similar notices in connection with any other portfolio securities), the Fund has delegated proxy voting responsibilities to the Investment Adviser. The Investment Adviser will vote proxies and respond to investor consent requests in the best interests of the Fund, as applicable, in accordance with the Investment Adviser’s Proxy Voting Policies and Procedures (the “Policies”).
The Policies provide the following general guidelines for determining the best interests of the Fund:
(i) | The Investment Adviser will generally vote in favor of normal corporate housekeeping proposals including, but not limited to, the following: |
(A) | election of directors (where there are no related corporate governance issues); |
(B) | selection or reappointment of auditors; or |
(C) | increasing or reclassification of common stock. |
(ii) | The Investment Adviser will generally vote against proposals that: |
(A) | make it more difficult to replace members of the issuer’s board of directors or board of managers; and |
(B) | introduce unequal voting rights (although there may be regulatory reasons that would make such a proposal favorable to certain clients of the Investment Adviser). |
For proxies or consent requests addressing any other issues (which may include proposals related to fees paid to investment managers of underlying investment funds, redemption rights provided by underlying investment funds, investment objective modifications, etc.), the Investment Adviser shall determine (which may be based upon the advice of external lawyers or accountants) whether a proposal is in the best interest of the Fund. In doing so, the Investment Adviser will evaluate a number of factors which may include (but are not limited to): (i) the performance or financial condition of the Portfolio Company in question; and (ii) a comparison of the proposed changes in terms to customary terms in the industry.
Information regarding how the Fund voted proxies relating to portfolio securities held by the Fund during the most recent 12-month period ending June 30 will be available (1) without charge, upon request, by calling the Fund toll-free at (800) 279-7754; and (2) on the SEC’s website at http://www.sec.gov or the Fund’s website (http://www.spinvestments.com). In addition, copies of the Fund’s proxy voting policies and procedures are also available by calling toll-free at (800) 279-7754 and will be sent within three business days of receipt of a request.
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VOTING
Each Shareholder will have the right to cast a number of votes based on the number of Shares held by such Shareholder at any meeting of Shareholders called by (i) the Board of Trustees or (ii) Shareholders holding at least a majority of the total number of votes eligible to be cast by all Shareholders. Shareholders will be entitled to vote on any matter on which shareholders of a RIC organized as a corporation would be entitled to vote, including selection of Trustees. Except for the exercise of their voting privileges, Shareholders will not be entitled to participate in the management or control of the Fund’s business, and may not act for or bind the Fund.
CONFLICTS OF INTEREST
The following actual and potential conflicts of interest exist in respect of the Fund:
(1) Role of the Investment Adviser. The Investment Adviser has an inherent conflict of interest in recommending itself to the Board of Trustees as the Fund’s Investment Adviser and acting in the Shareholders’ best interests. Further, the compensation payable to the Investment Adviser by the Fund has not been negotiated at arm’s-length.
(2) Other Activities. The principals of the Investment Adviser will devote substantially all of their working time to the management and operation of the Investment Adviser, including the investment process, monitoring and management of the Fund and other investment funds. However, the principals of the Investment Adviser may be involved in other business ventures. The Fund will not share in the risks or rewards of the Investment Adviser or its principals with respect to such other ventures. However, such other ventures will compete for their time and attention and might create other conflicts of interest. The Investment Advisory Agreement does not require the Investment Adviser to devote its full time or any specified portion of its time to the Fund, although the Investment Adviser intends to dedicate a reasonable amount of time to the Fund and its activities.
(3) Other Products Offered by the Investment Adviser. The Fund may utilize an investment program similar to the investment program utilized by the Investment Adviser for other funds it advises. Such other products may make continuous offerings of securities contemporaneously with the offerings of the Fund, and the Investment Adviser has discretion as to whether investors are offered Shares of the Fund or units, interests or otherwise in such other funds. Even if such other funds are generally closed to new investment, such funds may accept subscriptions at the time to replace amounts withdrawn.
(4) Preferential Terms. Affiliates of the Investment Adviser, other than the Fund, may invest in Portfolio Companies on terms more favorable than those available to the Fund.
(5) Financial Intermediaries. Financial Intermediaries may receive ongoing compensation in respect of selling Shares, and they may have a conflict of interest in consulting with investors as to the purchase and repurchase of Shares. Further, Financial Intermediaries may receive different amounts of compensation with respect to sales of the Shares than from other products advised by the Investment Adviser and/or its affiliates, and therefore may have incentives to favor one or more products over others.
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(6) Greg Brogger is Chairman and a controlling minority shareholder of SharesPost, which in turns own 100% of the equity of the Investment Adviser and SharesPost Financial. He is expected to serve as CEO of the NASDAQ Private Market, reporting to a Board to which he has the right to designate one member but that will be controlled by designees of NASDAQ OMX. Through his ownership of equity in SharesPost, Mr. Brogger will have an indirect minority interest in the NASDAQ Private Market. To the extent (a) the Fund incurs brokerage fees for sales of Portfolio Company securities on the SharesPost Trading Platform or the NASDAQ Private Market accruing to such entities, or (b) SharesPost Financial acts as a broker for sale of Fund Shares (which would entitle SharesPost Financial to Broker Fees, subject to the policies and procedures adopted by the Board of Trustees pursuant to Section 17(e) and Rule 17e-1 of the 1940 Act), Mr. Brogger may have a pecuniary interest with respect to those transactions.
FINANCIAL STATEMENTS*
*To be added by amendment.
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PART C
OTHER INFORMATION
Item 25. Financial Statements and Exhibits
25(1) | Financial Statements: |
The Financial Statements of the Registrant, dated as of , 2013, are included in the Prospectus.*
*To be completed by amendment.
25(2) | Exhibits | |
(a)(1) | Certificate of Formation of SharesPost 100 Fund LLC.† | |
(a)(2) | Certificate of Conversion of SharesPost 100 Fund LLC to SharesPost 100 Fund.* | |
(a)(3) | Certificate of Trust of SharesPost 100 Fund .* | |
(a)(4) | Agreement and Declaration of Trust.* | |
(b) | By-Laws.* | |
(c) | Not Applicable. | |
(d) | Incorporated by reference to Exhibits (a)(4) and (b) above. | |
(e) | Not Applicable. | |
(f) | Not Applicable. | |
(g) | Form of Investment Advisory Agreement between the Registrant and SP Investments Management, LLC.* | |
(h)(i) | Form of Distribution Agreement between the Registrant and Foreside Fund Services, LLC.* | |
(h)(ii) | Form of Distribution Services Agreement between SP Investments Management, LLC and Foreside Fund Services, LLC.* | |
(i) | Not Applicable. | |
(j) | Form of Custody Agreement between the Registrant and UMB Bank National Association* | |
(k)(1) | Form of Administration and Fund Accounting Agreement between the Registrant and UMB Fund Services, Inc.* |
(k)(2) | Form of Transfer Agency Agreement between the Registrant and UMB Fund Services, Inc.* | |
(k)(3) | Form of Expense Limitation Agreement between the Registrant and SP Investments Management, LLC.* | |
(k)(4) | Shareholder Services Plan.* | |
(l) | Opinion and Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.** | |
(m) | Not Applicable. | |
(n) | Consent of KPMG LLP, independent registered public accounting firm for the Registrant.** | |
(o) | Not Applicable. | |
(p) | Initial Capital Agreement.** | |
(q) | Not applicable. | |
(r)(1) | Code of Ethics of the Fund.* | |
(r)(2) | Code of Ethics of the Investment Adviser.** |
† Previously filed.
* Filed herewith.
** To be filed by amendment.
Item 26. Marketing Arrangements
Not applicable.
Item 27. Other Expenses of Issuance and Distribution
All figures are estimates | ||||
Registration Fees | $ | 68,200 | ||
Legal Fees and Expenses | $ | 400,000 | ||
Blue Sky Fees | $ | 44,206 | ||
Printing Fees | $ | 2,000 | ||
Miscellaneous Fees | $ | 3,594 | ||
Total | $ | 515,000 |
Item 28. Persons Controlled By or Under Common Control
Not Applicable.
Item 29. Number of Holders of Securities
The following table sets forth the approximate number of record holders of the Registrant's securities as of April 11, 2013.
Title of Class | Number of Record Holders | |||
Shares of Beneficial Interests | 1 |
Item 30. Indemnification
Reference is made to Article VIII Section 2 of the Registrant’s Agreement and Declaration of Trust (the “Declaration of Trust”), filed as Exhibit (a)(4) hereto, and to Section 7 of the Registrant’s Distribution Agreement, to be filed as Exhibit (h)(1) hereto. The Registrant hereby undertakes that it will apply the indemnification provisions of the Declaration of Trust and Distribution Agreement in a manner consistent with Release 40-11330 of the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), so long as the interpretation therein of Sections 17(h) and 17(i) of the 1940 Act remains in effect. The Registrant maintains insurance on behalf of any person who is or was an independent trustee, officer, employee, or agent of the Registrant against certain liability asserted against and incurred by, or arising out of, his or her position. However, in no event will the Registrant pay that portion of the premium, if any, for insurance to indemnify any such person for any act for which the Registrant itself is not permitted to indemnify.
Insofar as indemnification for liability arising under the Securities Act of 1933 (the “1933 Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.
Item 31. Business and Other Connections of Investment Adviser
Information as to the directors and officers of the Registrant’s investment adviser, SP Investments Management, LLC (the “Investment Adviser”), together with information as to any other business, profession, vocation, or employment of a substantial nature in which the Investment Adviser, and each director, executive officer, managing member or partner of the Investment Adviser, is or has been, at any time during the past two fiscal years, engaged in for his or her own account or in the capacity of director, officer, employee, managing member, partner or trustee, is included in its Form ADV as filed with the Securities and Exchange Commission (File No. 801-76627), and is incorporated herein by reference.
Item 32. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules thereunder are maintained at the offices of:
(1) | the Registrant, SharesPost 100 Fund, 1150 Bayhill Drive, San Bruno, California 94066; |
(2) | the Transfer Agent, UMB Fund Services, Inc., 803 West Michigan Street, Milwaukee, WI 53233; |
(3) | the Custodian, UMB Bank National Association, 1010 Grand Boulevard, Kansas City, MO 64106; and |
(4) | the Investment Adviser, SP Investments Management, LLC, 1150 Bayhill Drive, San Bruno, California 94066. |
Item 33. Management Services
Except as described under “The Investment Adviser” and “The Fund Administrator” in this Registration Statement, the Fund is not party to any management service related contract.
Item 34. Undertakings
(1) | The Registrant undertakes to suspend the offering of Shares until the prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the registration statement or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus. |
(2) | Not applicable. |
(3) | Not applicable. |
(4) | The Registrant undertakes |
(a) to file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement:
(1) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 Act (the “1933 Act”);
(2) to reflect in the prospectus any facts or events after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
(3) to include any material information with respect to any plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(b) that, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof;
(c) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(d) that, for the purpose of determining liability under the 1933 Act to any purchaser, if the Registrant is subject to Rule 430C: Each prospectus filed pursuant to Rule 497(b), (c), (d) or (e) under the 1933 Act as part of a registration statement relating to an offering, other than prospectuses filed in reliance on Rule 430A under the 1933 Act, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(e) that for the purpose of determining liability of the Registrant under the 1933 Act to any purchaser in the initial distribution of securities:
The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
(1) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 497 under the 1933 Act;
(2) the portion of any advertisement pursuant to Rule 482 under the 1933 Act relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
(3) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
(5) | Not applicable. |
(6) | The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days receipt of a written or oral request, any Statement of Additional Information. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Bruno, and State of California, on the 12th day of April, 2013.
SHARESPOST 100 FUND | ||
By: | /s/ Sven Weber | |
Name: Sven Weber | ||
Title: President and Trustee |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacity and on the date indicated.
/s/ Sven Weber | President and Trustee | April 12, 2013 | ||
Name: Sven Weber | ||||
/s/ Ryan Stroub | Chief Financial Officer and | April 12, 2013 | ||
Name: Ryan Stroub | Chief Compliance Officer | |||
* | Independent Trustee | April 12, 2013 | ||
Name: Mark Radcliffe |
* | /s/ Sven Weber | |
By: Attorney-in-fact |
The undersigned manager SharesPost 100 Fund hereby constitutes and appoints Sven Weber and Ryan Stroub and each of them with full power to act without the other and with full power of substitution and resubstitution, my true and lawful attorneys-in-fact with full power to execute in my name and behalf in the capacities indicated below this Registration Statement on Form N-2 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and thereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue hereof.
/s/ Robert J. Boulware | Independent Trustee | April 12, 2013 | ||
Name: Robert J. Boulware |