An investment in any of our funds is suitable only for sophisticated investors of adequate financial means who have no need for liquidity with respect to their investment. Investments in our funds are not intended as a complete investment program, but should be viewed as one component in the development of a balanced distribution of investment capital. An investment in our funds will have limited liquidity, insofar as there will not be a public market for the Interests, and the sale or transfer of such Interests is not permitted except under very limited circumstances. Members are not permitted to withdraw capital from our funds.
Our funds requires that investors be “accredited investors” (as defined in Regulation D of Securities Act of 1933 (the “1933 Act”). In addition to the financial requirements of an accredited investor, investors (either alone or with the assistance of a “purchaser representative”) must have sufficient knowledge and experience in financial and business matters generally and in securities investment in particular to allow him or her to evaluate the merits and risks of investing in the Fund. Other suitability requirements or restrictions on investment may be applicable under the laws of certain states in which the Interests may be offered. Prospective Limited Partners must also make certain representations in the Subscription Agreement relating to securities law compliance.
The satisfaction of the above standards does not necessarily mean that our funds are a suitable investment for a prospective investor. Investors should have sufficient funds beyond those they intend to invest in our funds, to meet personal needs and contingencies. Investors will not have access to the funds invested in our funds for extended periods and should be capable of absorbing a loss in the value of their investments. Accordingly, prospective investors should carefully evaluate whether an investment in our funds is suitable for their particular circumstances and investment needs. In doing so, they should consult with such legal, tax, and financial advisors as they consider appropriate, and should avail themselves of the opportunity to ask questions of the Managing Member.
An organization exempt from tax under §501(a) of the Code (a “Tax-Exempt Investor”) that is considering an investment in our funds should consult with its legal advisors concerning the impact of the Code and the consequences of the investment in light of the Tax-Exempt Investor’s particular circumstances. Our investment programs may result in unrelated business taxable income (“UBTI”) to Tax-Exempt Investors (or Benefit Plan Investors defined below). Because a charitable remainder trust that has UBTI for any taxable year would be subject to an excise tax equal to the entire amount of the UBTI, trustees or administrators of such entities should consult their own legal and tax advisers.
Prospective investors who are private foundations under federal tax law should consult their legal or tax advisors regarding the risk that some of our funds' investment practices, including the purchase of the common stock of smaller companies, may be deemed by the Internal Revenue Service (“IRS”) to jeopardize the carrying out of the purposes for which the foundation was granted its federal tax exemption. IRS regulations define jeopardizing investments generally as ones that show lack of reasonable business care and prudence in providing for the long- and short-term financial needs of the private foundation to carry out its exempt function.
Benefit plan fiduciaries are cautioned that our funds operate in a manner that may make an investment unsuitable for a benefit plan. The operation of our funds may generate UBTI allocable to benefit plans that invest in Interests. Generally, the term “benefit plan” includes any employee benefit plan that is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) (“ERISA Plan Investors”), governmental plans, foreign plans and church plans that are exempt from ERISA, as well as non-ERISA plans that are subject to the prohibited transaction rules of the Code, such as individual retirement accounts (“IRAs”), health savings accounts and educational savings accounts (the preceding benefit plans are referred to collectively as “Benefit Plan Investors”). The following limited discussion is for informational purposes only and is not intended to substitute for careful planning and review and the advice of qualified, independent legal counsel.
A fiduciary of an ERISA Plan Investor should consult with its legal advisors concerning the application of ERISA’s fiduciary standards, which set high standards for benefit plan fiduciaries. Accordingly, fiduciaries of ERISA Plan Investors should take into account the particular facts and circumstances of the plan and consider, among other things, (i) whether the benefit plan documents permit an investment in Interests, (ii) whether the fiduciary has the authority to make the investment, (iii) whether the investment would constitute a direct or indirect prohibited transaction with a party-in-interest or disqualified person, (iv) whether an investment in the Interests satisfies the prudence and diversification requirements of ERISA, taking into account the benefit plan’s investment policy and the composition of the benefit plan’s investment portfolio, including but not limited to the nature of the investments in our funds, the manner in which the Managing Member intends to operate our funds, the compensation and fees payable to our funds, the limitations on the liability of the Managing Member to the ERISA Plan Investors, and the illiquidity of our funds, (v) whether the expected volatility of our funds is consistent with the ERISA Plan Investor’s funding and operational requirements, and (vi) any other factors the fiduciary determines to be relevant to its consideration.
A fiduciary of a benefit plan that is not subject to ERISA, such as a governmental plan or a church plan, should be aware that there may be state law fiduciary requirements that apply to such plans as well as, in the case of governmental plans, state law prohibitions on an investment in Interests. Such benefit plan fiduciaries should take into account the matters discussed in the preceding paragraph in their consideration of an investment in our funds, as well as any additional requirements of state or other applicable law.
Under the Pension Protection Act of 2006, which modifies certain provisions of the Plan Asset Regulations issued by the United States Department of Labor, our funds' assets would be treated as the assets of an ERISA Plan Investor if, at any time, certain ERISA and non-ERISA Benefit Plan Investors hold 25% or more of the value of any class of the Fund’s Interests (the “25% threshold”). Benefit Plan Investors whose Interests are included in determining the 25% threshold include: (a) ERISA Plan Investors (therefore excluding government plans, foreign plans and most church plans), (b) IRAs and other non-ERISA plans that are subject to the prohibited transaction rules of the Code, and (c) any entity Member whose own Benefit Plan Investors exceed the 25% threshold (limited to the portion of such entity’s Interest that is attributable to its own benefit plan assets). The Managing Member does not intend to accept subscriptions from a Benefit Plan Investor, or consent to the admission of, or transfer of Interests to, a Benefit Plan Investor, and will require the withdrawal of a Benefit Plan Investor, if such subscription or transfer or any other transaction affecting Interests (including withdrawals of capital by non-Benefit Plan Investors) would cause the Fund’s assets to become benefit plan assets under ERISA (that is, 25% or more of the value of any class of Interests outstanding are held by Benefit Plan Investors whose assets are included in computing the 25% threshold).
Despite the above, if for any reason our funds' assets become benefit plan assets, an investment in our funds by an ERISA Plan Investor will be treated as a direct investment in each of the assets held by the fund. If this occurs, the Managing Member will be a fiduciary with respect to each investing ERISA Plan Investor and its management of the Fund will be subject to ERISA’s fiduciary standards. Moreover, the fiduciaries of the ERISA Plan Investors could be subject to co-fiduciary liability under ERISA with respect to the Managing Member’s management of the Fund. If the assets of our funds were deemed to be assets of the ERISA Plan Investors, some or all of the transactions effected by the Managing Member in connection with the operation of the fund may be prohibited transactions under ERISA and the Code, which would result in excise taxes, fiduciary liability and penalties for the Managing Member and, under certain circumstances other fiduciaries of the ERISA Plan Investors.
Our funds will require detailed verification of a proposed investor’s identity and source of payment. Our funds reserves the right to request such information they deem necessary with regard to the applicable anti-money laundering legislation of the United States in order to verify the identity of a subscriber. In the event of delay or failure by a subscriber to produce any information required for verification purposes, our funds may refuse to accept the subscription and the subscription funds relating thereto. The subscriber shall have no claim whatsoever against our funds, the Managing Member for any form of losses or other damages incurred as a result of such refusal to accept the subscription.
The Managing Members of our funds have the discretion at any time to apply additional standards for admission to our funds.