form40app_072314.htm

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In the Matter of:	)
	)	APPLICATION FOR AN ORDER PURSUANT TO SECTIONS
	)	1940 AND17(d)AND 57(i) OF THE INVESTMENT COMPANY
MCM ADVISERS, LP	)	ACT OF RULE 17d-1 UNDER THE 1940 ACT TO PERMIT JOINT
MACKENZIE CAPITAL,	)	CERTAIN TRANSACTIONS OTHERWISE PROHIBITED BY
MANAGEMENT, LP	)	SECTION 17(d) OR57(a)(4) OF THE ACT
MACKENZIE REALTY CAPITAL,	)
INC.	)
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1640 School Street	)
Moraga, California 94556	)
(925) 631-9100	)
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File No.	)
Investment Company Act of 1940	)

MCM Advisers, LP (the “Adviser”), MacKenzie Capital Management, LP (the “Manager”) and MacKenzie Capital Realty, Inc. (“MRC,” together with the Adviser and the Manager, the “Applicants”) hereby apply for an order (the “Order”) of the U.S. Securities and Exchange Commission (the “Commission”) pursuant to Sections 17(d) and 57(i) of the Investment Company Act of 1940, as amended (the “1940 Act”), and Rule 17d-1 thereunder, authorizing certain co-investment transactions that otherwise may be prohibited by Section 17(d) or 57(a)(4) of the 1940 Act.

In particular, the relief requested in this application (the “Application”) would allow the Adviser, the Manager, MRC and one or more Co-Investment Affiliates1 to participate in the same tender offers where such participation would otherwise be prohibited under Section 17(d) or Section 57(a)(4) and the rules under the 1940 Act (the “Co-Investment Program”).

MCM Advisers, LP is organized as a limited partnership under the California Uniform Limited Partnership Act of 2008 and controlled by its general partner, MCM-GP, Inc. (“GP”), which is controlled by its board members: C.E. Patterson, Berniece Patterson, Glen Fuller, Chip Patterson, and Robert Dixon. The Adviser is registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

The Adviser manages the investment activities of the Co-Investment Affiliates under investment advisory agreements (collectively, the “Advisory Agreements”). The Adviser is responsible for providing investment advisory services for the Co-Investment Affiliates. The Adviser’s investment committee of the Adviser consists of the following individuals: C.E. Patterson, Glen Fuller, Chip Patterson, Robert Dixon, Paul Koslosky, and Christine Simpson.

MacKenzie Capital Management, LP is organized as a limited partnership under the California Uniform Limited Partnership Act of 2008 and controlled by GP. The Manager does not provide advice about securities, but rather manages all other day-to-day operations of the Co-Investment Affiliates. Any Co-Investment Affiliate is or will be similarly managed by the Manager.

MRC is a Maryland corporation that is an externally managed, non-diversified investment company that has elected to be treated as a business development company (“BDC”) under the 1940 Act. MRC currently expects to elect to be treated for federal income tax purposes as a real estate investment trust (or “REIT”) under the Internal Revenue Code of 1986, as amended. On August 1, 2013, MRC commenced its initial public offering and plans to continually offer its common stock until early 2016 (although the offering period may be extended). MRC’s common stock is not expected to be listed on an exchange in the foreseeable future. MRC’s principal place of business is 1640 School Street, Moraga, California 94556.

MRC intends to continue to invest primarily in debt and equity real estate-related securities, generally ranging in size from $10,000 to $3,000,000, similar to the investments acquired by Co-Investment Affiliates. MRC will purchase most of its securities (i) directly from existing security holders via tender offers, (ii) through established securities markets, and (iii) in the case of unregistered, privately offered securities, directly from issuers. MRC will invest primarily in debt and equity securities issued by U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange. MRC generally considers purchasing securities issued by entities that have (i) completed the initial offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering, and (iii) fully invested their capital in real properties or other real estate-related investments.

Many BDCs that have obtained orders such as the Order in the past have pursued traditional venture-type co-investments whereby the BDC and its affiliates invest together to increase the portion of the portfolio company that can be acquired, which can result in the BDC, its adviser or affiliate collectively obtaining greater control over the portfolio company and opening up a greater number of opportunities to the BDC. The Co-Investment Affiliates do not operate in the traditional venture capital model—instead, they seek to identify issuers whose stockholders need liquidity and so who might sell their stock at prices that are lower than actual value, and then make tender offers to such issuers’ current stockholders. Those stockholders may be looking for liquidity or perhaps the issuer’s ability to pay dividends has been limited. Regardless of the reason, the Adviser seeks out such opportunities as a key part of its strategies for the Co-Investment Affiliates.

The Adviser’s experience has been that often one that makes a tender offer (an “Offeror”) can attain certain benefits under the Securities Exchange Act of 1934 (“1934 Act”) and its rules if the tender offer is for at least 5% of the target’s outstanding securities (for example, the Offeror’s ability to cause a target issuer to either provide a list of security holders to the Offeror or to mail the tender offer materials to the issuer’s security holders under Rule 14d-5). However, there may be cases where it is not appropriate—because of either capital limitations or concentration concerns—for a given Co-Investment Affiliate to offer to purchase 5% or more of a target’s outstanding stock. Section 14(d)(2) of the 1934 Act provides that when two or more persons act together in a tender offer, those persons are deemed to be a “person” for purposes of the other 1934 Act requirements respecting tender offers. Accordingly, where the Adviser identifies a target meeting the investment objectives of MRC and one or more other Co-Investment Affiliates, and where MRC would achieve benefits under the 1934 Act by virtue of combining its offer with that of one or more other Co-Investment Affiliates (a “Co-Tender”), the Adviser may propose that MRC and such Co-Investment Affiliate(s) proceed as co-Offerors. Such transactions may violate Section 17(d) or 57(a)(4) of the 1940 Act.

It is expected that Co-Tenders by the Co-Investment Affiliates will increase favorable investment opportunities for the Co-Investment Affiliates. As discussed below, a Co-Tender will be effected only if it is approved by the Required Majority on the basis that it would be advantageous for MRC and one or more other Co-Investment Affiliates to act as co-Offerors and attain equal benefits under the 1934 Act. MRC may limit its participation in any one transaction to a specific dollar amount, which may be determined by legal or internally imposed prudential limits on exposure in a single investment.

MRC could lose some investment opportunities if it is unable to act as a co-Offeror with other Co-Investment Affiliates. If any Co-Investment Affiliate is unable to make an offer for at least 5% of a target’s securities on its own in a timely manner (i.e., without the delay that typically would be associated with obtaining single-transaction exemptive relief from the Commission where MRC is a Co-Investment Affiliate), it would not be able to avail itself of certain benefits under the 1934 Act. By reducing the number of occasions on which MRC and another Co-Investment Affiliate’s individual or aggregate investment limits require the Adviser to arrange a syndication with unaffiliated entities, the Co-Investment Affiliates will likely be able to find more suitable investment opportunities. With the assets of the other Co-Investment Affiliates available for co-investment, there should be an increase in the number of opportunities accessible to the Co-Investment Affiliates.

The Adviser believes that it would be advantageous for MRC and the Co-Investment Affiliates to participate in Co-Tenders and that such investments would be consistent with the investment objectives, investment policies, investment positions, investment strategies, investment restrictions, regulatory requirements, and other pertinent factors applicable to MRC and each Co-Investment Affiliate.

As described above, the Adviser provides the Co-Investment Affiliates with advice about investments pursuant to their respective Advisory Agreements, and the Manager provides the Co-Investment Affiliates with non-investment advisory management services. The Adviser anticipates that, from time to time, it will determine that certain investments for MRC would also be appropriate investments for another Co-Investment Affiliate and by utilizing a Co-Tender, such parties can together attain benefits under the 1934 Act. Such a determination may result in MRC and one or more other Co-Investment Affiliates co-investing in certain investments. A “Co-Investment Transaction” means any transaction in which MRC participates together with another Co-Investment Affiliate in reliance on the Order. A “Potential Co-Investment Transaction” means any investment opportunity in which MRC could not participate together with one or more Co-Investment Affiliates without obtaining and relying on the Order.

As there is overlap between the Co-Investment Affiliates’ investment objectives and investment policies, the Adviser anticipates that opportunities for Potential Co-Investment Transactions may arise when the Adviser becomes aware of investment opportunities in which it may be appropriate for one or more other Co-Investment Affiliates to co-invest with MRC. A portfolio company that is an appropriate investment for MRC may be an

In such cases, following issuance of the requested Order, the Adviser will refer all Potential Co-Investment Transactions that the Adviser considers appropriate for MRC and other Co-Investment Affiliates, and that are within the Co-Investment Affiliates’ “Objectives and Strategies,”2 to MRC and such Co-Investment Affiliates, and such investment opportunities may result in a Co-Investment Transaction. For each such referral, when selecting investments for a Co-Investment Affiliate, the Adviser will consider only the investment objective, investment policies, investment position, capital available for investment, and other pertinent factors applicable to the respective Co-Investment Affiliate.

Other than pro rata dispositions and Follow-On Investments provided in conditions 7 and 8 below, if the Adviser determines that an opportunity is appropriate for MRC and other Co-Investment Affiliates (and the Adviser, exercising its fiduciary duties to the other Co-Investment Affiliates, approves the investment for the Co-Investment Affiliates), the Adviser will present the investment opportunity and the proposed allocation of each investment opportunity to the directors of MRC’s board that are eligible to vote under Section 57(o) (the “Eligible Directors”). The “required majority,” as defined in Section 57(o) (“Required Majority”) of MRC will approve each Co-Investment Transaction prior to any investment with a Co-Investment Affiliate.

Co-investment opportunities are to be allocated to a Co-Investment Affiliate either (a) based on the size recommended by the Adviser based on such Co-Investment Affiliate’s available capital and the investment’s attributes consistent with the Adviser’s allocation policy or (b) if the size of the investment available is smaller than the sum of the recommended amounts for such Co-Investment Affiliate, pro rata based on the relative capital of each entity available for investment (“Available Capital”). Available Capital consists solely of liquid assets not held for permanent investment, including cash, amounts that can currently be drawn down from lines of credit, and marketable securities held for short-term purposes. In addition, Available Capital would include bona fide uncalled capital commitments that can be called from a Co-Investment Affiliate’s investors by the settlement date of the Co-Investment Transaction. The Adviser’s allocation procedures are designed to allocate investment opportunities among the accounts sponsored or managed by the Adviser in a manner that is fair and equitable over time and consistent with its obligations under the Advisers Act and its allocation procedures, which procedures will be reviewed by MRC and any other Co-Investment Affiliate.

A Co-Investment Affiliate may, subject to the terms and conditions of the Order, make additional investments in securities of issuers, including through the exercise of warrants, conversion privileges, and other rights to purchase securities of the issuers (“Follow-On Investments”). Co-Investment Transactions will require that the terms, conditions, price, class of securities, settlement date and registration rights applicable to the one Co-Investment Affiliate’s purchase or sale be the same as those applicable to another Co-Investment Affiliate’s purchase or sale.

Other than pro rata dispositions and Follow-On Investments as provided in conditions 7 and 8 below, and after making the determinations required in conditions 1 and 2(a) below, the Adviser will present each Potential Co-Investment Transaction and the proposed allocation to the Eligible Directors, and the Required Majority will approve each Co-Investment Transaction prior to any Co-Tenders. With respect to the pro rata dispositions and Follow-On Investments provided in conditions 7 and 8, MRC and other Co-Investment Affiliates may participate in a pro rata disposition or Follow-On Investment without obtaining prior approval of the Required Majority if, among other things: (i) the proposed participation of MRC and each Co-Investment Affiliate in such disposition or Follow-On Investment is proportionate to its outstanding investments in the issuer immediately preceding the disposition or Follow-On Investment, as the case may be; (ii) the board of directors of MRC has approved MRC’s participation in pro rata dispositions and Follow-On Investments as being in the best interests of MRC. If MRC’s board does not so approve, any such disposition or Follow-On Investment will be submitted to the Eligible Directors. MRC’s board

2 “Objectives and Strategies” means MRC’s investment objectives and strategies as described in its registration statement on Form N-2, other filings MRC has made with the Commission under the Securities Act of 1933 (the “Securities Act”), or under the 1934 Act, and MRC’s reports to stockholders. With respect to other Co-Investment Affiliates, “Objectives and Strategies” means such Co-Investment Affiliate’s investment objectives and strategies as described in its offering documents.

The Applicants believe that participation by the Co-Investment Affiliates in pro rata dispositions and Follow-On Investments, as provided in conditions 7 and 8, is consistent with the provisions, policies and purposes of the 1940 Act and will not be made on a basis different from or less advantageous than that of other participants. A formulaic approach, such as the pro rata dispositions and Follow-On Investments, eliminates the discretionary ability to make allocation determinations, and in turn eliminates the possibility for overreaching and promotes fairness. Applicants note that the Commission has adopted a similar pro rata approach in the context of Rule 23c-2, which relates to the redemption by a closed-end investment company of less than all of a class of its securities, indicating the general fairness and lack of overreaching that such approach provides.

Section 17(d) of the 1940 Act generally prohibits an affiliated person (as defined in Section 2(a)(3) of the 1940 Act), or an affiliated person of such affiliated person, of a registered closed-end investment company acting as principal, from effecting any transaction in which the registered closed-end investment company is a joint or a joint and several participant, in contravention of such rules as the Commission may prescribe for the purpose of limiting or preventing participation by the registered closed-end investment company on a basis different from or less advantageous than that of such other participant. Rule 17d-1 under the 1940 Act generally prohibits participation by a registered closed-end investment company and an affiliated person (as defined in Section 2(a)(3) of the 1940 Act) or principal underwriter for that investment company, or an affiliated person of such affiliated person or principal underwriter, in any “joint enterprise or other joint arrangement or profit-sharing plan,” as defined in the rule, without prior approval by the Commission by order upon application.

Similarly, Section 57(a)(4) of the 1940 Act makes it unlawful for any person who is related to a BDC in a manner described in Section 57(b) of the 1940 Act, acting as principal, knowingly to effect any transaction in which the BDC (or a company controlled by such BDC) is a joint or a joint and several participant with that person in contravention of rules and regulations as the Commission may prescribe for the purpose of limiting or preventing participation by the BDC (or a controlled company) on a basis less advantageous than that of the other participant. Although the Commission has not adopted any rules specifically under Section 57(a)(4) of the 1940 Act, Section 57(i) of the 1940 Act provides that the rules under Section 17(d) of the 1940 Act applicable to registered closed-end investment companies (e.g., Rule 17d-1 under the 1940 Act) are, in the interim, deemed to apply to transactions subject to Section 57(a) of the 1940 Act. Rule 17d-1 under the 1940 Act is made applicable to BDCs by Section 57(i) of the 1940 Act.

In passing upon applications under Rule 17d-1 under the 1940 Act, the Commission considers whether the participation by one or more registered closed-end investment companies or BDCs (or controlled companies) in such a joint transaction is consistent with the provisions, policies and purposes of the 1940 Act and the extent to which such participation is on a basis different from or less advantageous than that of other participants.

Section 57(b) of the 1940 Act, as modified by Rule 57b-1, specifies the persons to whom the prohibitions of Section 57(a)(4) of the 1940 Act apply, including: (1) any director, officer, employee or member of an advisory board of a BDC or any person (other than the BDC itself) who is, within the meaning of Section 2(a)(3)(C) of the 1940 Act, an affiliated person3 of any such person; or (2) any investment adviser or promoter of, general partner in, principal underwriter for, or person directly or indirectly either controlling, controlled by, or under common control with4 a BDC (except the BDC itself and any person who, if it were not directly or indirectly controlled by the BDC,

would not be directly or indirectly under the control of a person who controls the BDC), or any person who is, within the meaning of Section 2(a)(3)(C) of the 1940 Act an affiliated person of such person. Rule 57b-1 under the 1940 Act exempts certain persons otherwise related to a BDC in a manner described in Section 57(b)(2) of the 1940 Act from being subject to the prohibitions of Section 57(a). Specifically, this rule states that the provisions of Section 57(a) shall not apply to any person: (a) solely because that person is directly or indirectly controlled by a BDC, or (b) solely because that person is directly or indirectly controlling, controlled by, or under common control with a person described in (a) of the rule or is an officer, director, partner, co-partner or employee of a person described in (a) of the rule.

Co-Investment Transactions may be prohibited by Sections 17(d) and 57(a)(4) and Rule 17d-1 without a prior order of the Commission to the extent that the Co-Investment Affiliates fall within the category of persons described by Section 17(d) and Section 57(b), as modified by Rule 57b-1 thereunder, vis-à-vis each Co-Investment Affiliate. MRC and the other Co-Investment Affiliates may be deemed to be affiliated persons within the meaning of Section 2(a)(3) by reason of common control because the Adviser provides them with investment advice and its affiliate (the Manager) provides day-to-day management, and thus the Adviser and Manager may be deemed to control MRC and the other Co-Investment Affiliates. Thus, MRC and the other Co-Investment Affiliates could be deemed to be controlled by or under common control with the Adviser and the Manager in a manner described by Sections 17(d) and 57(b) and therefore prohibited by Sections 17(d) and 57(a)(4) and Rule 17d-1 from participating in the Co-Investment Program.

The Commission has granted co-investment relief on numerous occasions in the past several years, though not where the applicants sought to merely participate in Co-Tenders as the Applicants propose to do.5 Although various precedents involve somewhat different allocation formulae, approval procedures and presumptions for co-investment transactions to protect the interests of public investors in the affiliates, other than those described in this Application, the Applicants submit that the formulae and procedures set forth as conditions for the relief requested herein are consistent with the range of investor protection found in the cited orders. We note, in particular, that the co-investment protocol to be followed by the Applicants here is substantially similar to the protocol followed by PennantPark Investment Corp, Gladstone Capital Corporation and its affiliates, for which an order was granted on July 26, 2012, Medley Capital Corporation and its affiliates, for which an order was granted on March 26, 2012, NGP Capital Resources Company and its affiliates, for which an order was granted on November 10, 2011, and Ridgewood Capital Management LLC and its affiliates, for which an order was granted on October 21, 2009.

“control” clarifies that any person who owns beneficially, either directly or through one or more controlled companies, more than 25 percent of the voting securities of a company shall be presumed to control such company; any person who does not so own more than 25 percent of the voting securities of a company shall be presumed not to control such company; and a natural person shall be presumed not to be a controlled person.

5 PennantPark Investment Corp, et al., Release No. IC-30985 (March 19, 2014), HMS Income Fund, Inc. et al., Release No. 30984 (March 18, 2014), NF Investment Corp., et al., Release No. IC-30900 (Jan. 31, 2014) (notice) (order pending); Prospect Capital Corporation, et al., Release No. IC-30909 (Feb. 10, 2014) (order), Release No. IC-30855 (Jan. 13, 2014) (notice); Medley Capital Corporation, et al., Release No. IC-30807 (Nov. 25, 2013) (order), Release No. IC-30769 (Oct. 28, 2013) (notice); Stellus Capital Investment Corporation, et al., Release No. IC-30754 (Oct. 23, 2013) (order), Release No. IC-30739 (Sep. 30, 2013) (notice).

prohibited person, acting as principal, to participate in, or effect a transaction in connection with, a joint enterprise or other joint arrangement or profit-sharing plan in which a registered investment company or a BDC, or an entity controlled by such registered investment company or BDC is a participant if an application regarding the joint enterprise, arrangement or profit-sharing plan has been filed with the Commission and has been granted by an order issued prior to the submission of such plan or any modification thereof to security holders for approval, or prior to its adoption or modification if not so submitted. Rule 17d-1(b) under the 1940 Act states that in passing upon applications under such rule, the Commission shall consider whether the participation by the investment company in such joint enterprise, joint arrangement or profit-sharing plan on the basis proposed is consistent with the provisions, policies and purposes of the 1940 Act and the extent to which such participation is on a basis different from or less advantageous than that of other participants.

The Applicants submit that the fact that the Required Majority will approve each Co-Investment Transaction before investment, in addition to the other protective conditions set forth in this Application, will ensure that the Co-Investment Affiliates will be treated fairly. The conditions to which the requested relief will be subject are designed to ensure that the principals of the Adviser would not be able to favor one Co-Investment Affiliate over a Co-Investment Affiliate through the allocation of investment opportunities amongst them. Because many attractive investment opportunities for one Co-Investment Affiliate will also be attractive investment opportunities for another Co-Investment Affiliate, the Applicants submit that the Co-Investment Program presents an attractive alternative to instituting an equitable protocol for the allocation of 100% of individual investment opportunities to a particular Co-Investment Affiliate as opportunities arise. The Applicants submit that the Co-Investment Affiliates’ participation in the Co-Investment Transactions will be consistent with the provisions, policies and purposes of the 1940 Act and on a basis that is not different from, or less advantageous than, that of other Co-Investment Affiliates.

Each time the Adviser considers a Potential Co-Investment Transaction for MRC that falls within another Co-Investment Affiliate’s Objectives and Strategies, the Adviser will make an independent determination of the appropriateness of such investment for the other Co-Investment Affiliate in light of such Co-Investment Affiliate’s then-current circumstances.

(b) After making the determinations required in conditions 1 and 2(a), the Adviser will distribute written information concerning the Potential Co-Investment Transaction (including the amount proposed to be invested by each Co-Investment Affiliate), to the Eligible Directors for their consideration. MRC will co-invest with one or more Co-Investment Affiliates only if, prior to participating in the Potential Co-Investment Transaction, a Required Majority concludes that:

(iv) the proposed investment by a Co-Investment Affiliate will not benefit the Adviser or any Co-Investment Affiliates or any affiliated person of any of them (other than the parties to the Co-Investment Transaction) except (a) to the extent permitted by condition 13, (b) to the extent permitted by Section 17(e) or 57(k) of the 1940 Act, as applicable, (c) indirectly, as a result of an

The Adviser will present to MRC’s board of directors, on a quarterly basis, a record of all investments in Potential Co-Investment Transactions made by the Co-Investment Affiliates during the preceding quarter that fell within MRC’s then-current Objectives and Strategies that were not made available to MRC, and an explanation of why such investment opportunities were not offered to MRC. All information presented to the board of directors pursuant to this condition will be kept for the life of MRC and at least two years thereafter, and will be subject to examination by the Commission and its staff.

(c)

MRC may participate in such disposition without obtaining prior approval of the Required Majority if: (i) the proposed participation of each Co-Investment Affiliate in such disposition is proportionate to its outstanding investment in the issuer immediately preceding the disposition; (ii) the board of directors of MRC has approved as being in the best interests of MRC the ability to participate in such dispositions on a pro rata basis (as described in greater detail in the Application); and (iii) the board of directors of MRC is provided on a quarterly basis with a list of all dispositions made in accordance with this condition. In all other cases, the Adviser will provide its written recommendation as to MRC’s participation to the Eligible Directors, and MRC will participate in such disposition solely to the extent that a Required Majority determines that it is in MRC’s best interests.

(b)

MRC may participate in such Follow-On Investment without obtaining prior approval of the Required Majority if: (i) the proposed participation of each Co-Investment Affiliate in such investment is proportionate to its outstanding investments in the issuer immediately preceding the Follow-On Investment; and (ii) the board of directors of MRC has approved as being in the best interests of MRC

the ability to participate in Follow-On Investments on a pro rata basis (as described in greater detail in this Application). In all other cases, the Adviser will provide its written recommendation as to MRC’s participation to the Eligible Directors, and MRC will participate in such Follow-On Investment solely to the extent that a Required Majority determines that it is in MRC’s best interests.

The Independent Directors of MRC will be provided quarterly for review all information concerning Potential Co-Investment Transactions and Co-Investment Transactions, including investments made by other Co-Investment Affiliates that MRC considered but declined to participate in, so that the Independent Directors may determine whether all investments made during the preceding quarter, including those investments that MRC considered but declined to participate in, comply with the conditions of the Order. In addition, the Independent Directors will consider at least annually the continued appropriateness for MRC of participating in new and existing Co-Investment Transactions.

10.

Each Co-Investment Affiliate will maintain the records required by Section 57(f)(3) of the 1940 Act as if each of the Co-Investment Affiliates were a BDC and each of the investments permitted under these conditions were approved by the Required Majority under Section 57(f). What are we agreeing to do here?

12.

The expenses, if any, associated with acquiring, holding or disposing of any securities acquired in a Co-Investment Transaction (including the expenses of the distribution of any such securities registered for sale under the 1933 Act) will, to the extent not payable by the Adviser under its respective Advisory Agreements with the Co-Investment Affiliates, be shared by the Co-Investment Affiliates in proportion to the relative amounts of the securities held or being acquired or disposed of, as the case may be.

13.

Any transaction fee (including break-up or commitment fees but excluding broker’s fees contemplated by Section 17(e) or 57(k), as applicable) received in connection with a Co-Investment Transaction will be distributed to the participating Co-Investment Affiliates on a pro rata basis based on the amounts they invested or committed, as the case may be, in such Co-Investment Transaction. If any transaction fee is to be held by the Adviser pending consummation of the transaction, the fee will be deposited into an account maintained by the Adviser at a bank or banks having the qualifications prescribed in Section 26(a)(1), and the account will earn a competitive rate of interest that will also be divided pro rata among the participating Co-Investment Affiliates based on the amounts they invest in such Co-Investment Transaction. None of the Adviser, the Co-Investment Affiliates nor any affiliated person of the Co-Investment Affiliates will receive additional compensation or remuneration of any kind as a result of or in connection with a Co-Investment Transaction (other than (a) in the case of the participating Co-Investment Affiliates, the pro rata transaction fees described above and fees or other compensation described in condition 2(c)(iii)(C), and (b) in the case of the Adviser, investment advisory fees paid in accordance with the respective agreements between the Adviser and the Co-Investment Affiliates).

14.

To the extent any of the above conditions limit the Adviser or obligate the Adviser to take an action, the Manager will be similarly limited and assist the Adviser in taking such actions or take such actions itself, consistent with the manner in which the Adviser’s and the Manager’s duties to the Co-Investment Affiliates are separated.

Pursuant to Rule 0-2(c) under the 1940 Act, the Applicants hereby state that the GP and the board of directors of MRC have authorized the Adviser, the Manager and MRC, respectively, to cause to be prepared and to execute and file with the Commission this Application for the Order sought hereby.

MCM ADVISERS, LP	MACKENZIE CAPITAL MANAGEMENT, LP

By: MCM-GP, Inc.	By: MCM-GP, Inc.

By: /s/ Chip Patterson	By: /s/ Chip Patterson
Name: Chip Patterson	Name: Chip Patterson
Title: Managing Director	Title: Managing Director

MACKENZIE REALTY CAPITAL, INC.

By: /s/ Chip Patterson
Name: Chip Patterson
Title: Secretary

Each of the undersigned states that he has duly executed the foregoing Application, dated July 23, 2014, for and on behalf of the Applicants, as the case may be, that he holds the office with such entity as indicated below and that all action by the directors, general partners or members of each entity, as applicable, necessary to authorize the undersigned to execute and file such instrument has been taken. Each of the undersigned further states that he is familiar with such instrument and the contents thereof and that the facts set forth therein are true to the best of his knowledge, information and belief.

MCM ADVISERS, LP	MACKENZIE CAPITAL MANAGEMENT, LP

By: MCM-GP, Inc.	By: MCM-GP, Inc.

By: /s/ Chip Patterson	By: /s/ Chip Patterson
Name: Chip Patterson	Name: Chip Patterson
Title: Managing Director	Title: Managing Director

MACKENZIE REALTY CAPITAL, INC.

By: /s/ Chip Patterson
Name: Chip Patterson
Title: Secretary