
[Federal Register Volume 79, Number 186 (Thursday, September 25, 2014)]
[Notices]
[Pages 57596-57601]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22792]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31253; File No. 812-14028]


Monroe Capital Corporation, et al.; Notice of Application

September 19, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d), 
57(a)(4), and 57(i) of the Investment Company Act of 1940 (the ``Act'') 
and rule 17d-1 under the Act to permit certain joint transactions 
otherwise prohibited by sections 17(d), 57(a)(4), and 57(i) of the Act 
and rule 17d-1 under the Act.

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[[Page 57597]]

    Summary of Application: Applicants request an order to permit 
certain business development companies (``BDCs'') and registered 
closed-end management investment companies to co-invest in portfolio 
companies with each other and with affiliated investment funds.
    Applicants: Monroe Capital Corporation (the ``Company''), MC 
Funding Ltd. (``MC Funding''), MC Funding, Ltd. 2013-1 (``2013-1''), 
Monroe Capital Partners Fund, L.P. (``Monroe SBIC''), Monroe Capital 
Partners Fund II, L.P. (``Monroe SBIC II''), Monroe Capital Corporation 
SBIC, LP (``MCC SBIC''), Monroe Capital Senior Secured Direct Loan Fund 
LP (``MCSSDL Fund''), Monroe Capital Senior Secured Direct Loan Fund 
(Unleveraged) LP (``MCSSDL-U Fund''), Monroe FCM Direct Loan Fund LP 
(``MFDL Fund'' and collectively with MC Funding, 2013-1, Monroe SBIC, 
Monroe SBIC II, MCSSDL Fund and MCSSDL-U Fund, the ``Existing 
Affiliated Private Funds''), Monroe Capital Management Advisors, LLC 
(``MCMA''), Monroe Capital Management LLC (``Monroe Collateral 
Manager''), Monroe Capital Partners Fund Advisors, Inc. (``Monroe SBIC 
Adviser''), Monroe Capital Partners Fund II Advisors, Inc. (``Monroe 
SBIC II Adviser'' and, collectively with MCMA, Monroe Collateral 
Manager, and Monroe SBIC Adviser, the ``Affiliated Advisers''), Monroe 
Capital Partners Fund, LLC (``Monroe SBIC General Partner''), Monroe 
Capital Partners Fund II, LLC (``Monroe SBIC II General Partner''), MCC 
SBIC GP, LLC (``MCC SBIC General Partner''), Monroe Capital Senior 
Secured Direct Loan Fund LLC (``MCSSDL Funds General Partner,''), and 
Monroe FCM Direct Loan Fund LLC (``MFDL Fund General Partner''), and 
Monroe Capital BDC Advisors, LLC (``BDC Adviser'').\1\
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    \1\ All references to the term ``BDC Adviser'' include 
successors-in-interest to the BDC Adviser. A successor-in-interest 
is limited to an entity that results from a reorganization into 
another jurisdiction or change in the type of business organization.

DATES: Filing Dates: The application was filed on April 18, 2012, and 
amended on February 27, 2013, June 5, 2013, November 27, 2013, July 16, 
2014, and September 5, 2014.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on October 14, 2014, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
St. NE., Washington, DC 20549-1090. Applicants: 311 South Wacker Drive, 
Suite 6400, Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT: Mark Zaruba, Senior Counsel, at (202) 
551-6878 or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Chief 
Counsel's Office, Division of Investment Management).

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

Applicants' Representations

    1. The Company is a Maryland corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under section 54(a) of the Act. The Company's Objectives and Strategies 
\2\ are to maximize the total return to stockholders in the form of 
current income and capital appreciation through investment in primarily 
senior, unitranche and junior secured debt of middle-market companies 
and, to a lesser extent, unsecured subordinated debt and equity 
investments. A majority of the directors of the Company are persons who 
are not ``interested persons'' as defined in section 2(a)(19) of the 
Act (``Non-Interested Directors'').
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    \2\ ``Objectives and Strategies'' means a Regulated Fund's (as 
defined below) investment objectives and strategies, as described in 
the Regulated Fund's registration statement on Form N-2, other 
filings the Regulated Fund has made with the Commission under the 
Securities Act of 1933 (the ``Securities Act''), or under the 
Securities Exchange Act of 1934, and the Regulated Fund's reports to 
shareholders.
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    2. The BDC Adviser is a Delaware corporation and is wholly owned 
and controlled by Theodore L. Koenig. The BDC Adviser is registered as 
an investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act'') and serves as investment adviser to the Company. Mr. 
Koenig also directly or indirectly owns a controlling interest in, and 
serves as the principal executive officer of, each of the Affiliated 
Advisers.
    3. MCC SBIC is a Delaware limited partnership and is licensed to 
operate as a small business investment company (``SBIC'') by the United 
States Small Business Administration (``SBA''). MCC SBIC General 
Partner is a Delaware limited liability company and serves as general 
partner of MCC SBIC. The Company owns 100 percent of the MCC SBIC 
General Partner's equity interests and the MCC SBIC General Partner 
owns 1 percent of MCC SBIC in the form of a general partnership 
interest. The Company directly owns 99 percent of MCC SBIC in the form 
of limited partnership interests. As a result, the Company directly or 
indirectly wholly owns MCC SBIC. MCC SBIC General Partner has appointed 
the BDC Adviser as the sole investment adviser for MCC SBIC.
    4. MC Funding and 2013-1 are exempted companies incorporated under 
the laws of the Cayman Islands with limited liability. Monroe 
Collateral Manager is a Delaware limited liability company and is the 
investment adviser for MC Funding and 2013-1. Monroe SBIC and Monroe 
SBIC II Delaware limited partnerships and are each licensed as SBIC by 
the SBA. Monroe SBIC General Partner and Monroe SBIC II General 
Partner, each a Delaware limited liability company, are the general 
partners of Monroe SBIC and Monroe SBIC II, respectively, and have 
entered into agreements with Monroe SBIC Adviser and Monroe SBIC II 
Adviser, each a Delaware corporation, to serve as investment adviser 
for Monroe SBIC and Monroe SBIC II, respectively. MCSSDL Fund, MCSSDL-U 
Fund, and MFDL Fund are Delaware limited partnerships. MCSSDL Funds 
General Partner, a Delaware limited liability company, is the general 
partner of MCSSDL Fund and MCSSDL-U Fund and MFDL Fund General Partner, 
a Delaware limited liability company, is the general partner of MFDL 
Fund. MCMA, a Delaware limited liability company, serves as investment 
adviser for MCSSDL Fund, MCSSDL-U Fund, and MFDL Fund under agreements 
with MCSSDL Funds General Partner and MFDL Fund General Partner, 
respectively. Each of the Existing Affiliated Private Funds is excluded 
from the definition of investment company by section 3(c)(1) of the 
Act. Each of the Affiliated Advisers is

[[Page 57598]]

registered as an investment adviser under the Advisers Act.\3\
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    \3\ MCMA has filed a Form ADV with the Commission. Monroe 
Collateral Manager, Monroe SBIC Adviser and Monroe SBIC II Adviser 
are each investment advisers registered under the Advisers Act 
because they are relying advisers of MCMA.
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    5. Applicants seek an order (``Order'') to permit each Regulated 
Fund,\4\ together with one or more Regulated Funds and/or Affiliated 
Private Funds \5\ to participate in the same investment opportunities 
through a co-investment program where such participation would 
otherwise be prohibited under sections 17(d) or 57(a)(4) and rule 17d-1 
by (a) co-investing with each other in securities issued by issuers in 
private placement transactions in which an Adviser negotiates terms in 
addition to price; \6\ and (b) making additional investments in 
securities of such issuers, including through the exercise of warrants, 
conversion privileges, and other rights to purchase securities of the 
issuers (``Follow-On Investments''). ``Co-Investment Transaction'' 
means any transaction in which a Regulated Fund (or its Wholly-Owned 
Investment Sub, as defined below) participated together with one or 
more other Regulated Funds and/or one or more Affiliated Private Funds 
in reliance on the requested Order. ``Potential Co-Investment 
Transaction'' means any investment opportunity in which a Regulated 
Fund (or its Wholly-Owned Investment Sub) could not participate 
together with one or more Affiliated Private Funds and/or one or more 
other Regulated Funds without obtaining and relying on the Order.\7\
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    \4\ ``Regulated Funds'' means the Company and the Future 
Regulated Funds. ``Future Regulated Fund'' means a closed-end 
management investment company (a) that is registered under the Act 
or has elected to be regulated as a BDC, (b) whose investment 
adviser is an Adviser, and (c) that intends to participate in the 
Co-Investment Program (as defined below). ``Adviser'' means (a) the 
BDC Adviser, (b) an Affiliated Adviser, or (c) any investment 
adviser that controls, is controlled by or is under common control 
with the BDC Adviser and is registered as an investment adviser 
under the Advisers Act.
    \5\ ``Affiliated Private Fund'' means any Existing Affiliated 
Private Fund or any entity (a) whose investment adviser is an 
Adviser, (b) that would be an investment company but for section 
3(c)(1) or 3(c)(7) of the Act, and (c) that intends to participate 
in Co-Investment Program.
    \6\ The term ``private placement transactions'' means 
transactions in which the offer and sale of securities by the issuer 
are exempt from registration under the Securities Act.
    \7\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    6. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary 
would be prohibited from investing in a Co-Investment Transaction with 
any other Regulated Fund or Affiliated Private Fund because it would be 
a company controlled by a Regulated Fund for purposes of sections 17(d) 
or 57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned 
Investment Sub be permitted to participate in Co-Investment 
Transactions in lieu of the Regulated Fund and that the Wholly-Owned 
Investment Sub's participation in any such transaction be treated, for 
purposes of the requested Order, as though the Regulated Fund were 
participating directly. Applicants represent that this treatment is 
justified because a Wholly-Owned Investment Sub would have no purpose 
other than serving as a holding vehicle for the Regulated Fund's 
investments and, therefore, no conflicts of interest could arise 
between the Regulated Fund and the Wholly-Owned Investment Sub. The 
Regulated Fund's board of directors (for any Regulated Fund, the 
``Board'') would make all relevant determinations under the conditions 
with regard to a Wholly-Owned Investment Sub's participation in a Co-
Investment Transaction, and the Regulated Fund's Board would be 
informed of, and take into consideration, any proposed use of a Wholly-
Owned Investment Sub in the Regulated Fund's place. If the Regulated 
Fund proposes to participate in the same Co-Investment Transaction with 
any of its Wholly-Owned Investment Subs, the Board will also be 
informed of, and take into consideration, the relative participation of 
the Regulated Fund and the Wholly-Owned Investment Sub. MCC SBIC is a 
Wholly-Owned Investment Sub and SBIC Subsidiary of the Company.
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    \8\ The term ``Wholly-Owned Investment Sub'' means an entity (i) 
that is wholly-owned by a Regulated Fund (with the Regulated Fund at 
all times holding, directly or indirectly, 100% of the voting and 
economic interests); (ii) whose sole business purpose is to hold one 
or more investments on behalf of such Regulated Fund (and, in the 
case of an SBIC Subsidiary, maintain a license under the SBA Act and 
issue debentures guaranteed by the SBA); (iii) with respect to which 
the Regulated Fund's board of directors (``Board'') has the sole 
authority to make all determinations with respect to the entity's 
participation under the conditions of the application; and (iv) that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act. ``SBIC Subsidiary'' means an entity that is licensed by the 
SBA to operate under the Small Business Investment Act of 1958 (the 
``SBA Act'') as a small business investment company. An SBIC 
Subsidiary may be a Wholly-Owned Investment Sub if it satisfies the 
conditions in this definition.
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    7. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the BDC Adviser will consider only the Objectives and 
Strategies, investment policies, investment positions, capital 
available for investment (``Available Capital''),\9\ and other 
pertinent factors applicable to that Regulated Fund. The BDC Adviser 
expects that any portfolio company that is an appropriate investment 
for a Regulated Fund should also be an appropriate investment for one 
or more other Regulated Funds and/or one or more Affiliated Private 
Funds, with certain exceptions based on Available Capital or 
diversification.\10\
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    \9\ ``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, for the 
Affiliated Private Funds, Available Capital would include bona fide 
uncalled capital commitments that can be called by the settlement 
date of the Co-Investment Transaction.
    \10\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
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    8. Other than pro rata dispositions and Follow-On Investments as 
provided in conditions 7 and 8, and after making the determinations 
required in conditions 1 and 2(a), the Adviser will present each 
Potential Co-Investment Transaction and the proposed allocation to the 
directors of the Board eligible to vote under section 57(o) of the Act 
(``Eligible Directors''), and the ``required majority,'' as defined in 
section 57(o) of the Act (``Required Majority'') will approve each Co-
Investment Transaction prior to any investment by the participating 
Regulated Fund.\11\
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    \11\ In the case of a Regulated Fund that is a registered 
closed-end fund, the Board members that make up the Eligible 
Directors and the Required Majority will be determined as if the 
Regulated Fund were a BDC subject to section 57(o).
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    9. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund 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 each Regulated Fund and 
Affiliated Private Fund in such disposition is proportionate to its 
outstanding investments in the issuer immediately preceding the 
disposition or Follow-On Investment, as the case may be; and (ii) the 
Board of the Regulated Fund has approved that Regulated Fund's 
participation in pro rata dispositions and Follow-On Investments as 
being in the best interests of the Regulated Fund. If the Board does 
not so approve, any such disposition or Follow-On Investment will be 
submitted to the Regulated Fund's Eligible Directors. The Board of any 
Regulated Fund may at any time rescind, suspend or qualify its approval

[[Page 57599]]

of pro rata dispositions and Follow-On Investments with the result that 
all dispositions and/or Follow-On Investments must be submitted to the 
Eligible Directors.
    10. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than 
indirectly through share ownership in one of the Regulated Funds.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act generally 
prohibit affiliated persons of a registered investment company from 
participating in joint transactions with the company or a company 
controlled by such registered investment company unless the Commission 
has granted an order permitting such transactions. Section 57(a)(4) of 
the Act prohibits certain affiliated persons of a BDC from 
participating in joint transactions with the BDC (or a company 
controlled by such BDC) in contravention of rules as prescribed by the 
Commission. Section 57(i) of the Act provides that, until the 
Commission prescribes rules under section 57(a)(4), the Commission's 
rules under section 17(d) of the Act applicable to registered closed-
end investment companies will be deemed to apply to BDCs. Because the 
Commission has not adopted any rules under section 57(a)(4), rule 17d-1 
applies to joint transactions involving a BDC. In passing upon 
applications under rule 17d-1, the Commission considers whether the 
company's participation in the joint transaction is consistent with the 
provisions, policies, and purposes of the Act and the extent to which 
such participation is on a basis different from or less advantageous 
than that of other participants.
    2. The Regulated Funds and the Affiliated Private Funds (a) may be 
deemed to be under common control, and thus affiliated persons of each 
other under section 2(a)(3)(C) of the Act and (b) will be persons 
related to a Regulated Fund that is a BDC in a manner described in 
section 57(b) of the Act. As a result, these relationships will cause 
each Regulated Fund (or its Wholly-Owned Investment Sub) and Affiliated 
Private Fund participating in a Co-Investment Transaction with a 
Regulated Fund (or its Wholly-Owned Investment Sub) to be subject to 
section 17(d) or section 57(a)(4) and rule 17d-1.
    3. Applicants state that in the absence of the requested relief, 
the Regulated Funds would be, in some circumstances, limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants state that the participation of the Regulated 
Funds in Co-Investment Transactions in accordance with the conditions 
to the requested relief would be consistent with the provisions, 
policies and purposes of the Act and on a basis that is not different 
from, or less advantageous than, of other participants.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time an Adviser considers a Potential Co-Investment 
Transaction for an Affiliated Private Fund or another Regulated Fund 
that falls within a Regulated Fund's then-current Objectives and 
Strategies, the Regulated Fund's Adviser will make an independent 
determination of the appropriateness of the investment for such 
Regulated Fund in light of the Regulated Fund's then-current 
circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, it will then determine an appropriate level of investment for the 
Regulated Fund.
    (b) If the aggregate amount recommended by the applicable Adviser 
to be invested by the Regulated Fund in the Potential Co-Investment 
Transaction, together with the amount proposed to be invested by the 
other participating Regulated Funds and Affiliated Private Funds, 
collectively, in the same transaction, exceeds the amount of the 
investment opportunity, the investment opportunity will be allocated 
among them pro rata based on each participant's Available Capital, up 
to the amount proposed to be invested by each. The applicable Adviser 
will provide the Eligible Directors of each participating Regulated 
Fund with information concerning each participating party's Available 
Capital to assist the Eligible Directors with their review of the 
Regulated Fund's investments for compliance with these allocation 
procedures.
    (c) After making the determinations required in conditions 1 and 
2(a), the applicable Adviser will distribute written information 
concerning the Potential Co-Investment Transaction (including the 
amount proposed to be invested by each participating Regulated Fund and 
Affiliated Private Fund) to the Eligible Directors of each 
participating Regulated Fund for their consideration. A Regulated Fund 
will co-invest with one or more other Regulated Funds and/or one or 
more Affiliated Private Funds only if, prior to the Regulated Fund's 
participation in the Potential Co-Investment Transaction, a Required 
Majority concludes that:
    (i) The terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Fund and its shareholders and do not involve overreaching in respect of 
the Regulated Fund or its shareholders on the part of any person 
concerned;
    (ii) The Potential Co-Investment Transaction is consistent with:
    (A) the interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) The investment by any other Regulated Funds or Affiliated 
Private Funds would not disadvantage the Regulated Fund, and 
participation by the Regulated Fund would not be on a basis different 
from or less advantageous than that of other Regulated Funds or 
Affiliated Private Funds; provided that, if any other Regulated Fund or 
Affiliated Private Fund, but not the Regulated Fund itself, gains the 
right to nominate a director for election to a portfolio company's 
board of directors or the right to have a board observer or any similar 
right to participate in the governance or management of the portfolio 
company, such event will not be interpreted to prohibit the Required 
Majority from reaching the conclusions required by this condition 
(2)(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any;
    (B) the applicable Adviser agrees to, and does, provide periodic 
reports to the Regulated Fund's Board with respect to the actions of 
such director or the information received by such board observer or 
obtained through the exercise of any similar right to participate in 
the governance or management of the portfolio company; and
    (C) any fees or other compensation that an Affiliated Private Fund 
or a Regulated Fund or any affiliated person of any Affiliated Private 
Fund or any Regulated Fund receives in connection with the right of an 
Affiliated Private Fund or a Regulated Fund to nominate a director or 
appoint a board observer or otherwise to participate in the governance 
or management of the portfolio company will be shared proportionately 
among the participating Affiliated Private Funds (who each may, in 
turn, share its portion with its affiliated persons) and the 
participating Regulated Funds in accordance with the amount of each 
party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
the

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Advisers, the Affiliated Private Funds or the other Regulated Funds 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 Act, as applicable, (C) indirectly, as a result of an interest in 
the securities issued by one of the parties to the Co-Investment 
Transaction, or (D) in the case of fees or other compensation described 
in condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in 
any Potential Co-Investment Transaction or to invest less than the 
amount proposed.
    4. The applicable Adviser will present to the Board of each 
Regulated Fund, on a quarterly basis, a record of all investments in 
Potential Co-Investment Transactions made by any of the other Regulated 
Funds or Affiliated Private Funds during the preceding quarter that 
fell within the Regulated Fund's then-current Objectives and Strategies 
that were not offered to the Regulated Fund, and an explanation of why 
the investment opportunities were not offered to the Regulated Fund. 
All information presented to the Board pursuant to this condition will 
be kept for the life of the Regulated Fund and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\12\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Affiliated Private 
Fund, or any affiliated person of another Regulated Fund or Affiliated 
Private Fund is an existing investor.
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    \12\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Fund and Affiliated 
Private Fund. The grant to an Affiliated Private Fund or another 
Regulated Fund, but not the Regulated Fund, of the right to nominate a 
director for election to a portfolio company's board of directors, the 
right to have an observer on the board of directors or similar rights 
to participate in the governance or management of the portfolio company 
will not be interpreted so as to violate this condition 6, if 
conditions 2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Private Fund or any Regulated Fund elects 
to sell, exchange or otherwise dispose of an interest in a security 
that was acquired in a Co-Investment Transaction, the applicable 
Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by each 
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such 
disposition on a proportionate basis, at the same price and on the same 
terms and conditions as those applicable to the participating 
Affiliated Private Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Fund and Affiliated Private Fund in 
such disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Fund has approved as being in the best interests of the 
Regulated Fund 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 the Regulated Fund 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 the Regulated Fund's participation to the Eligible Directors, and 
the Regulated Fund will participate in such disposition solely to the 
extent that a Required Majority determines that it is in the Regulated 
Fund's best interests.
    (d) Each Affiliated Private Fund and each Regulated Fund will bear 
its own expenses in connection with any such disposition.
    8. (a) If any Affiliated Private Fund or any Regulated Fund desires 
to make a Follow-On Investment in a portfolio company whose securities 
were acquired in a Co-Investment Transaction, the applicable Advisers 
will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest 
practical time; and
    (ii) formulate a recommendation as to the proposed participation, 
including the amount of the proposed Follow-On Investment, by each 
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Fund and each Affiliated 
Private Fund in such investment is proportionate to its outstanding 
investments in the issuer immediately preceding the Follow-On 
Investment; and (ii) the Board of the Regulated Fund has approved as 
being in the best interests of the Regulated Fund the ability to 
participate in Follow-On Investments on a pro rata basis (as described 
in greater detail in the application). In all other cases, the Adviser 
will provide its written recommendation as to the Regulated Fund's 
participation to the Eligible Directors, and the Regulated Fund will 
participate in such Follow-On Investment solely to the extent that a 
Required Majority determines that it is in the Regulated Fund's best 
interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Regulated 
Funds' and the Affiliated Private Funds' outstanding investments 
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser to be invested 
by each Regulated Fund in the Follow-On Investment, together with the 
amount proposed to be invested by the participating Affiliated Private 
Funds in the same transaction, exceeds the amount of the opportunity; 
then the amount invested by each such party will be allocated among 
them pro rata based on each participant's Available Capital, up to the 
amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Funds or Affiliated Private Funds 
that the Regulated Fund considered but declined to participate in, so 
that the Non-Interested Directors may determine whether all investments 
made during the preceding quarter, including those investments that the 
Regulated Fund considered but declined to participate in, comply with 
the conditions of the Order. In addition, the Non-Interested Directors 
will consider at least annually

[[Page 57601]]

the continued appropriateness for the Regulated Fund of participating 
in new and existing Co-Investment Transactions.
    10. Each Regulated Fund will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Funds were a 
BDC and each of the investments permitted under these conditions were 
approved by the Required Majority under section 57(f) of the Act.
    11. No Non-Interested Director of a Regulated Fund will also be a 
director, general partner, managing member or principal, or otherwise 
an ``affiliated person'' (as defined in the Act) of a Affiliated 
Private Fund.
    12. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the Securities Act) will, to 
the extent not payable by the Advisers under their respective 
investment advisory agreements with the Affiliated Private Funds and 
the Regulated Funds, be shared by the Regulated Funds and Affiliated 
Private Funds in proportion to the relative amounts of the securities 
held or to be 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) of the 
Act, as applicable) received in connection with a Co-Investment 
Transaction will be distributed to the participating Regulated Funds 
and Affiliated Private Funds 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 an Adviser pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by such Adviser at a bank or banks having the 
qualifications prescribed in section 26(a)(1) of the Act, and the 
account will earn a competitive rate of interest that will also be 
divided pro rata among the participating Regulated Funds and Affiliated 
Private Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Affiliated Private Funds, the Advisers, the 
other Regulated Funds or any affiliated person of the Regulated Funds 
or Affiliated Private Funds 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 Regulated 
Funds and the Affiliated Private Funds, 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 an Adviser, investment advisory 
fees paid in accordance with the agreement between the Adviser and the 
Regulated Fund or Affiliated Private Fund).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22792 Filed 9-24-14; 8:45 am]
BILLING CODE 8011-01-P


