
[Federal Register Volume 81, Number 45 (Tuesday, March 8, 2016)]
[Notices]
[Pages 12155-12159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05106]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32018; File No. 812-14454]


Crescent Capital BDC Inc., et al.; Notice of Application

March 2, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d) 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) and 57(a)(4) of the Act and rule 17d-1 
under the Act.

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SUMMARY: Summary of Application: Applicants request an order to permit 
a business development company (``BDC'') and certain closed-end 
management investment companies to co-invest in portfolio companies 
with each other and with affiliated investment funds.
    Applicants: Crescent Capital BDC, Inc. (``Crescent''); CBDC 
Advisors, LLC (``CBDC Advisors''); Crescent Mezzanine Partners VI, LP, 
Crescent Mezzanine Partners VIB, LP, Crescent Mezzanine Partners VIC, 
LP, Crescent Long/Short Credit Opportunity Fund, LP, Crescent Capital 
High Income Fund, LP, Crescent Capital High Income Fund B, L.P., 
Crescent Capital High Yield Fund, LP, Crescent Senior Secured Floating 
Rate Loan Fund, LLC, Crescent Senior Secured Floating Rate Loan Fund 
(Cayman), LP, Crescent/Kamehameha Schools Partnership, LP, NPS/Crescent 
Strategic Partnership, LP, Crescent (TX) Direct Lending Fund, L.P., 
Crescent Direct Lending Fund, L.P., CDL Unit Trust (Ireland), Crescent 
Direct Lending SBIC Fund, L.P., Crescent Special Situations Fund 
(Investor Group), L.P., Crescent European Specialty Lending Fund, L.P., 
Crescent European Specialty Loan Fund SCS, SICAV-FIS, Crescent European 
Specialty Lending Fund (Levered) LP, Crescent European Specialty 
Lending Fund (Cayman-Levered) LP, Crescent European Specialty Lending 
Fund (Cayman) LP, Crescent European Specialty Lending Fund for ERISA 
Plans LP, Crescent Mezzanine Partners VII (Ltl), L.P., Crescent 
Mezzanine Partners VII, L.P., Crescent Mezzanine Partners VIIB, L.P., 
Crescent Mezzanine Partners VIIC (LTL), L.P., Crescent Mezzanine 
Partners VIIC, L.P., and Crescent/AEGIS Partnership, L.P. 
(collectively, the ``Existing Affiliated Funds''); Crescent Capital 
Group LP (``Crescent Capital''); and Crescent Direct Lending 
Management, LLC, Crescent SBIC Management, LLC, and Crescent Credit 
Europe LLP (collectively with Crescent Capital, the ``Existing Crescent 
Advisers'').

DATES: Filing Dates: The application was filed on April 15, 2015, and 
amended on June 25, 2015, August 18, 2015, November 18, 2015, February 
26, 2016, and March 1, 2016.
    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 March 28, 2016, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to Rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, 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: 11100 Santa Monica 
Blvd., Suite 2000, Los Angeles, CA 90025.

FOR FURTHER INFORMATION CONTACT: Mark N. 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. Crescent is a Delaware corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under section

[[Page 12156]]

54(a) of the Act.\1\ Crescent's investment objective is to maximize the 
total return to its stockholders in the form of current income and 
capital appreciation. Crescent's primary focus is originating and 
investing primarily in secured debt (including senior secured, 
unitranche and second lien debt) and unsecured debt (including senior 
unsecured and subordinated debt), as well as related equity securities 
of private U.S. middle-market companies. The board of directors 
(``Board'') of Crescent has five members, three of which members are 
not ``interested persons'' as defined in section 2(a)(19) of the Act 
(``Independent Directors'').\2\
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    \1\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \2\ The term ``Independent Directors'' refers to the independent 
directors or trustees of any Regulated Entity (defined below).
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    2. CBDC Advisors is a Delaware limited liability company and is an 
investment adviser registered with the Commission under the Investment 
Advisers Act of 1940 (``Advisers Act''). CBDC Advisors serves as the 
investment adviser to Crescent, which is currently CBDC Advisors' sole 
client.
    3. Crescent Capital is a limited partnership organized under the 
Delaware Revised Uniform Limited Partnership Act, Crescent Direct 
Lending Management, LLC and Crescent SBIC Management, LLC are each 
Delaware limited liability companies, and Crescent Credit Europe LLP is 
a limited liability partnership organized in England and Wales. Each 
Existing Crescent Adviser is registered as an investment adviser under 
the Advisers Act.
    4. The Existing Affiliated Funds pursue strategies focused on 
originating and investing primarily in secured debt (including senior 
secured, unitranche and second lien debt) and unsecured debt (including 
senior unsecured and subordinated debt), as well as related equity 
securities of private U.S. middle-market companies. Each Existing 
Affiliated Fund is advised by a Crescent Adviser \3\ and would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act.
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    \3\ ``Crescent Adviser'' means any Existing Crescent Adviser or 
any future investment adviser that controls, is controlled by, or is 
under common control with Crescent Capital and is registered as an 
investment adviser under the Advisers Act.
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    5. Applicants seek an order (``Order'') to permit a Regulated 
Entity \4\ and one or more other Regulated Entities and one or more 
Affiliated Funds \5\ to (a) participate in the same investment 
opportunities through a proposed co-investment program where such 
participation would otherwise be prohibited under sections 17 and 57 of 
the Act; and (b) make additional investments in securities of such 
issuers (``Follow-On Investments''), including through the exercise of 
warrants, conversion privileges, and other rights to purchase 
securities of the issuers. ``Co-Investment Transaction'' means any 
transaction in which a Regulated Entity (or its Wholly-Owned Investment 
Subsidiary, as defined below) participated together with one or more 
other Regulated Entities and/or Affiliated Funds in reliance on the 
requested Order. ``Potential Co-Investment Transaction'' means any 
investment opportunity in which a Regulated Entity (or its Wholly-Owned 
Investment Subsidiary) seeks to participate together with one or more 
other Regulated Entities and/or Affiliated Funds in reliance on the 
Order.\6\
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    \4\ ``Regulated Entity'' refers to Crescent and the Future 
Regulated Entities. ``Future Regulated Entity'' means any closed-end 
management investment company whose investment adviser is the CBDC 
Advisors or any future investment adviser that controls, is 
controlled by, or is under common control with CBDC Advisors and is 
registered as an investment adviser under the Advisers Act (each 
such investment adviser, a ``Regulated Entity Adviser'').
    \5\ ``Affiliated Fund'' means any Existing Affiliated Fund or 
any Future Affiliated Fund. ``Future Affiliated Fund'' means any 
investment fund that would be an ``investment company'' but for 
section 3(c)(1) or 3(c)(7) of the Act, is formed in the future, and 
is advised by a Crescent Adviser. No Affiliated Fund is or will be a 
subsidiary of a Regulated Entity.
    \6\ 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 Entity may, from time to time, 
form a Wholly-Owned Investment Subsidiary.\7\ Such a subsidiary would 
be prohibited from investing in a Co-Investment Transaction with any 
other Regulated Entity or Affiliated Fund because it would be a company 
controlled by its parent Regulated Entity for purposes of section 
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned 
Investment Subsidiary be permitted to participate in Co-Investment 
Transactions in lieu of its parent Regulated Entity and that the 
Wholly-Owned Investment Subsidiary's participation in any such 
transaction be treated, for purposes of the Order, as though the parent 
Regulated Entity were participating directly. Applicants represent that 
this treatment is justified because a Wholly-Owned Investment 
Subsidiary would have no purpose other than serving as a holding 
vehicle for the Regulated Entity's investments and, therefore, no 
conflicts of interest could arise between the Regulated Entity and the 
Wholly-Owned Investment Subsidiary. The Regulated Entity's Board would 
make all relevant determinations under the conditions with regard to a 
Wholly-Owned Investment Subsidiary's participation in a Co-Investment 
Transaction, and the Regulated Entity's Board would be informed of, and 
take into consideration, any proposed use of a Wholly-Owned Investment 
Subsidiary in the Regulated Entity's place. If the Regulated Entity 
proposes to participate in the same Co-Investment Transaction with any 
of its Wholly-Owned Investment Subsidiaries, the Board will also be 
informed of, and take into consideration, the relative participation of 
the Regulated Entity and the Wholly-Owned Investment Subsidiary.
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    \7\ The term ``Wholly-Owned Investment Subsidiary'' means an 
entity: (a) That is wholly-owned by a Regulated Entity (with such 
Regulated Entity at all times holding, beneficially and of record, 
100% of the voting and economic interests); (b) whose sole business 
purpose is to hold one or more investments on behalf of such 
Regulated Entity (and, in the case of an entity that is licensed by 
the Small Business Administration to operate under the Small 
Business Investment Act of 1958, as amended (the ``SBA Act''), as a 
small business investment company, to maintain a license under the 
SBA Act and issue debentures guaranteed by the Small Business 
Administration); (c) with respect to which the board of directors of 
such Regulated Entity has the sole authority to make all 
determinations with respect to the entity's participation under the 
conditions of the application; and (d) that would be an investment 
company but for section 3(c)(1) or 3(c)(7) of the Act. All 
subsidiaries participating in Co-Investment Transactions will be 
Wholly-Owned Investment Subsidiaries and will have Objectives and 
Strategies (as defined below) that are either the same as, or a 
subset of, their parent Regulated Entity's Objectives and 
Strategies.
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    7. When considering Potential Co-Investment Transactions for any 
Regulated Entity, the relevant Adviser \8\ will consider only the 
Objectives and Strategies,\9\ investment policies, investment 
positions, capital available for investment, and other pertinent 
factors applicable to that Regulated Entity. CBDC Advisors expects that 
any portfolio company that is an appropriate investment for a Regulated 
Entity should also be an appropriate investment for one or more other 
Regulated Entities and/or one or more

[[Page 12157]]

Affiliated Funds, with certain exceptions based on available capital or 
diversification.\10\
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    \8\ The term ``Adviser'' means any Crescent Adviser or any 
Regulated Entity Adviser.
    \9\ The term ``Objectives and Strategies'' means a Regulated 
Entity's investment objectives and strategies as described in the 
Regulated Entity's registration statement on Form 10, other filings 
the Regulated Entity has made with the Commission under the 
Securities Act of 1933 (the ``Securities Act'') or the Securities 
Exchange Act of 1934, and the Regulated Entity's reports to 
shareholders.
    \10\ The Regulated Entities, 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 applicable 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'') \11\ will approve 
each Co-Investment Transaction prior to any investment by the 
participating Regulated Entity.
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    \11\ In the case of a Regulated Entity that is a registered 
closed-end fund, the Board members that make up the Required 
Majority will be determined as if the Regulated Entity 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 Entity 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 Entity and 
each Affiliated 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 Entity has approved that Regulated Entity's 
participation in pro rata dispositions and Follow-On Investments as 
being in the best interests of the Regulated Entity. If the Board does 
not so approve, any such disposition or Follow-On Investment will be 
submitted to the Regulated Entity's Eligible Directors. The Board of 
any Regulated Entity may at any time rescind, suspend or qualify its 
approval 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 Independent Director of a Regulated Entity will have a 
direct or indirect financial interest in any Co-Investment Transaction 
(other than indirectly through share ownership in one of the Regulated 
Entities), including any interest in any company whose securities would 
be acquired in a Co-Investment Transaction.
    11. Under condition 14, if an Adviser, its principals, or any 
person controlling, controlled by, or under common control with the 
Adviser or its principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Entity (the ``Shares''), then 
the Holders will vote such Shares as directed by an independent third 
party when voting on matters specified in the condition. Applicants 
believe that this condition will ensure that the Independent Directors 
will act independently in evaluating the co-investment program, because 
the ability of an Adviser or its principals to influence the 
Independent Directors by a suggestion, explicit or implied, that the 
Independent Directors can be removed will be limited significantly. 
Applicants represent that the Independent Directors will evaluate and 
approve any such independent third party, taking into account its 
qualifications, reputation for independence, cost to the Regulated 
Entity's shareholders, and other factors that they deem relevant.

Applicants' Legal Analysis

    1. 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 a BDC in contravention of rules as prescribed by 
the Commission. In particular, section 57(a)(4) applies to any person 
who is directly or indirectly controlling, controlled by, or under 
common control with a BDC is subject to section 57(a)(4). Applicants 
submit that each of the Regulated Entities and Affiliated Funds could 
be deemed to be a person related to each Regulated Entity in a manner 
described by section 57(b) by virtue of being under common control. 
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 transactions subject to section 
57(a)(4). Because the Commission has not adopted any rules under 
section 57(a)(4), rule 17d-1 also applies to joint transactions with 
Regulated Entities that are BDCs. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Entities that are 
registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
affiliated persons of a registered investment company from 
participating in joint transactions with the company unless the 
Commission has granted an order permitting such transactions. 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.
    3. Applicants state that in the absence of the requested relief, 
the Regulated Entities would be, in some circumstances, limited in 
their ability to participate in attractive and appropriate investment 
opportunities. Applicants believe that the proposed terms and 
conditions will ensure that the Co-Investment Transactions are 
consistent with the protection of each Regulated Entity's shareholders 
and with the purposes intended by the policies and provisions of the 
Act. Applicants state that the Regulated Entities' participation in the 
Co-Investment Transactions will be consistent with the provisions, 
policies, and purposes of the Act and on a basis that is not different 
from or less advantageous than that 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 another Regulated Entity or an Affiliated Fund that 
falls within a Regulated Entity's then-current Objectives and 
Strategies, the Regulated Entity's Adviser will make an independent 
determination of the appropriateness of the investment for the 
Regulated Entity in light of the Regulated Entity's then-current 
circumstances.
    2. (a) If the Adviser deems a Regulated Entity's participation in 
any Potential Co-Investment Transaction to be appropriate for the 
Regulated Entity, the Adviser will then determine an appropriate level 
of investment for the Regulated Entity.
    (b) If the aggregate amount recommended by the applicable Adviser 
to be invested by the applicable Regulated Entity in the Potential Co-
Investment Transaction together with the amount proposed to be invested 
by the other participating Regulated Entities and Affiliated 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 capital available for 
investment in the asset class being allocated, up to the amount 
proposed to be invested by each. The applicable Adviser will provide 
the Eligible Directors of each participating Regulated Entity with 
information

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concerning each participating party's available capital to assist the 
Eligible Directors with their review of the Regulated Entity'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 Regulated Entity and each 
Affiliated Fund) to the Eligible Directors of each participating 
Regulated Entity for their consideration. A Regulated Entity will co-
invest with another Regulated Entity or an Affiliated Fund only if, 
prior to the Regulated Entity'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 
Entity and its shareholders and do not involve overreaching in respect 
of the Regulated Entity or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) the interests of the Regulated Entity's shareholders; and
    (B) the Regulated Entity's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Entities or any 
Affiliated Funds would not disadvantage the Regulated Entity, and 
participation by the Regulated Entity would not be on a basis different 
from or less advantageous than that of any other Regulated Entities or 
any Affiliated Funds; provided that, if any other Regulated Entity or 
any Affiliated Fund, but not the Regulated Entity 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 shall 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; and
    (B) the applicable Adviser agrees to, and does, provide periodic 
reports to the Board of the Regulated Entity 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 any Regulated Entity or any 
Affiliated Fund or any affiliated person of any Regulated Entity or any 
Affiliated Fund receives in connection with the right of a Regulated 
Entity or an Affiliated 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 Funds (who may each, in turn, share its 
portion with its affiliated persons) and the participating Regulated 
Entities in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Entity will not 
benefit any Adviser, the other Regulated Entities, the Affiliated 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 Entity 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 Entity, on a quarterly basis, a record of all investments in 
Potential Co-Investment Transactions made by any of the other Regulated 
Entities or Affiliated Funds during the preceding quarter that fell 
within the Regulated Entity's then-current Objectives and Strategies 
that were not made available to the Regulated Entity, and an 
explanation of why the investment opportunities were not offered to the 
Regulated Entity. All information presented to the Board pursuant to 
this condition will be kept for the life of the Regulated Entity 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 Entity will not invest in reliance on the 
Order in any issuer in which another Regulated Entity, Affiliated Fund, 
or any affiliated person of another Regulated Entity or Affiliated Fund 
is an existing investor.
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    \12\ This exception applies only to Follow-On Investments by a 
Regulated Entity in issuers in which that Regulated Entity already 
holds investments.
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    6. A Regulated Entity 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 Entity and Affiliated 
Fund. The grant to another Regulated Entity or an Affiliated Fund, but 
not the Regulated Entity, 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 Regulated Entity or an Affiliated Fund elects to 
sell, exchange or otherwise dispose of an interest in a security that 
was acquired in a Co-Investment Transaction, the applicable Adviser 
will:
    (i) notify each Regulated Entity 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 Entity in the disposition.
    (b) Each Regulated Entity 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 
Regulated Entities and Affiliated Funds.
    (c) A Regulated Entity may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Entity and each Affiliated Fund in such 
disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Entity has approved as being in the best interests of the 
Regulated Entity 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 Entity 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 Entity's participation to the 
Regulated Entity's Eligible Directors, and the Regulated Entity will 
participate in such disposition solely to the extent that a Required 
Majority determines that it is in the Regulated Entity's best 
interests.

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    (d) Each Regulated Entity and each Affiliated Fund will bear its 
own expenses in connection with any such disposition.
    8. (a) If a Regulated Entity or an Affiliated Fund desires to make 
a Follow-On Investment in a portfolio company whose securities were 
acquired in a Co-Investment Transaction, the applicable Adviser will:
    (i) notify each Regulated Entity 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 Entity.
    (b) A Regulated Entity may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Entity and each Affiliated 
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 Entity has approved as being in the best 
interests of the Regulated Entity 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 Entity's participation to 
the Eligible Directors, and the Regulated Entity will participate in 
such Follow-On Investment solely to the extent that a Required Majority 
determines that it is in the Regulated Entity's best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) the amount of a Follow-On Investment is not based on the 
Regulated Entities' and the Affiliated Funds' outstanding investments 
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser to be invested 
by each Regulated Entity in the Follow-On Investment, together with the 
amount proposed to be invested by the participating Affiliated 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 party's capital available for investment in the 
asset class being allocated, 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 Independent Directors of each Regulated Entity will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Entities and the Affiliated Funds 
that the Regulated Entity considered but declined to participate in, so 
that the Independent Directors may determine whether all investments 
made during the preceding quarter, including those investments which 
the Regulated Entity 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 the Regulated Entity of participating in new and existing Co-
Investment Transactions.
    10. Each Regulated Entity will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Entities were a 
business development company and each of the investments permitted 
under these conditions were approved by the Required Majority under 
section 57(f) of the Act.
    11. No Independent Director of a Regulated Entity will also be a 
director, general partner, managing member or principal, or otherwise 
an ``affiliated person'' (as defined in the Act) of an Affiliated 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 an Adviser under the investment advisory 
agreements with the Regulated Entities and the Affiliated Funds, be 
shared by the Affiliated Funds and the Regulated Entities 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 \13\ (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 Entities 
and Affiliated 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 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) of the Act, and the 
account will earn a competitive rate of interest that will also be 
divided pro rata among the participating Regulated Entities and 
Affiliated Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Affiliated Funds, the Advisers, the other 
Regulated Entities or any affiliated person of the Regulated Entities 
or Affiliated 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 
Entities and the Affiliated 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 the Advisers, investment advisory 
fees paid in accordance with the agreements between the Advisers and 
the Regulated Entities or the Affiliated Funds).
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    \13\ Applicants are not requesting and the staff is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    14. If the Holders own in the aggregate more than 25 percent of the 
Shares of a Regulated Entity, then the Holders will vote such Shares as 
directed by an independent third party when voting on (a) the election 
of directors; (b) the removal of one or more directors; or (c) all 
other matters under either the Act or applicable State law affecting 
the Board's composition, size or manner of election.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05106 Filed 3-7-16; 8:45 am]
 BILLING CODE 8011-01-P


