
[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Notices]
[Pages 76395-76400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26401]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32340; File No. 812-14472]


NF Investment Corp., et al.; Notice of Application

October 27, 2016.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice of application for an order to amend a prior 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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Summary of Application:  Applicants request an order (``Order'') to 
amend a prior order to permit certain business development companies 
(``BDCs'') and closed-end investment companies to co-invest in 
portfolio companies with each other and with certain other affiliated 
investment funds and broker-dealers. The Order would supersede the 
prior order.\1\
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    \1\ NF Investment Corp., et al., Investment Company Act Rel. 
Nos. 30900 (Jan. 31, 2014) (notice) and 30968 (Feb. 26, 2014) 
(order).

Applicants: NF Investment Corp. (``NFIC''); Carlyle GMS Finance, Inc. 
(``CGMSF,'' and together with NFIC, the ``Existing Regulated Funds''); 
NFIC SPV LLC (``NFIC Sub''); Carlyle GMS Finance SPV LLC (``CGMSF 
Sub'''); Carlyle GMS Finance MM CLO 2015-1 LLC (``2015-1 Issuer,'' and 
together with CFMSF Sub and NFIC Sub, the ``Existing SPV Subs'') 
(collectively, the ``Existing Co-Investment Affiliates''); Carlyle GMS 
Investment Management L.L.C. (``CGMSIM'') on behalf of itself and its 
successors; \2\ and TCG Securities, L.L.C. (``TCG'').
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    \2\ The term ``successor'' as applied to CGMSIM means an entity 
that results from a reorganization into another jurisdiction or 
change in the type of business organization.

Filing Dates: The application was filed on May 22, 2015, and amended on 
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October 8, 2015, March 30, 2016, and August 4, 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 November 21, 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, any facts 
bearing upon the desirability of a hearing on the matter, 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: The Commission: Brent J. Fields, Secretary, U.S. Securities 
and Exchange Commission, 100 F St. NE., Washington, DC 20549-1090. 
Applicants: Carlyle GMS Finance, Inc., 520 Madison Avenue, 38th Floor, 
New York, NY 10022.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811 or Daniele Marchesani, 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. CGMSF and NFIC are both Maryland corporations organized as non-
diversified, closed-end management investment companies that have 
elected to be regulated as BDCs under Section 54(a) of the Act.\3\ The 
Objectives and Strategies \4\ of both

[[Page 76396]]

CGMSF and NFIC are to generate current income and capital appreciation 
primarily through debt investments in U.S. middle market companies. The 
board of directors of NFIC and CGMSF (each a ``Board'') will be 
comprised of directors, a majority of whom will not be ``interested 
persons,'' within the meaning of section 2(a)(19) of the Act (the 
``Non-Interested Directors'') of NFIC or CGMSF. The Existing SPV Subs 
are each an SPV Sub (defined below) of either NFIC or CGMSF.
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    \3\ 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.
    \4\ ``Objectives and Strategies'' means the investment 
objectives and strategies of a Regulated Fund (as defined below), as 
described in the filings made with the Commission by the Regulated 
Fund under the Exchange Act or under the Securities Act of 1933 (the 
``Securities Act'') and the Act, and the Regulated Fund's reports to 
shareholders.
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    2. CGMSIM is registered as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act'') and serves as 
the investment adviser to the Existing Regulated Funds. CGMSIM is a 
Delaware corporation and a wholly owned subsidiary of The Carlyle Group 
L.P. (``Carlyle'').
    3. TCG, a wholly owned subsidiary of Carlyle, is registered as a 
limited purpose broker-dealer under the Securities Exchange Act of 1934 
(``Exchange Act'') and is a Delaware limited liability company that, 
from time to time, may hold various assets in a principal capacity. 
When acting in this capacity, TCG, and any other future wholly or 
majority owned broker-dealer subsidiaries of Carlyle and any future 
wholly owned subsidiaries of such broker-dealer subsidiaries who intend 
to participate in the Co-Investment Program are collectively referred 
to as the ``Capital Markets Affiliates.''
    4. Applicants seek an Order to permit a Regulated Fund \5\ (or any 
SPV Sub, as defined below), on the one hand, and one or more Co-
Investment Affiliates,\6\ on the other hand, to participate in the same 
investment opportunities through a co-investment program (the ``Co-
Investment Program'') where such participation would otherwise be 
prohibited under sections 17(d) and 57(a)(4) of the Act and rule 17d-1 
under the Act by (a) co-investing with each other in securities issued 
by issuers in private placement transactions in which an Investment 
Adviser negotiates terms in addition to price; \7\ 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 any of the 
Regulated Funds (or any SPV Sub) participated together with one or more 
Co-Investment Affiliates in reliance on the Order. ``Potential Co-
Investment Transaction'' means any investment opportunity in which any 
of the Regulated Funds (or any SPV Sub) could not participate together 
with one or more Co-Investment Affiliates without obtaining and relying 
on the Order.\8\
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    \5\ ``Regulated Fund'' means any of the Existing Regulated Funds 
and any Future Regulated Fund. ``Future Regulated Fund'' means any 
future closed-end management investment company that (a) has elected 
to be regulated as a BDC or is registered under the Act; (b) will be 
advised by an Investment Adviser and (c) that intends to participate 
in the Co-Investment Program (as defined below). The term 
``Investment Adviser'' means (a) CGMSIM and (b) any future 
investment adviser controlling, controlled by, or under common 
control with CGMSIM and is registered as an investment adviser under 
the Advisers Act.
    \6\ ``Co-Investment Affiliates'' means (a) the Existing Co-
Investment Affiliates, (b) any Capital Markets Affiliate, or (c) any 
Regulated Fund, SPV Sub, or Private Fund. ``Private Fund'' means any 
entity (a) whose investment adviser is an Investment 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 the Co-
Investment Program.
    \7\ 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.
    \8\ All existing entities that currently intend to rely upon the 
Order have been named as applicants. Any other existing or future 
entity that relies on the Order in the future will comply with the 
terms and conditions of the application.
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    5. Applicants state that a Regulated Fund may, from time to time, 
form one or more SPV Subs.\9\ Such a subsidiary would be prohibited 
from investing in a Co-Investment Transaction with any Co-Investment 
Affiliate because it would be a company controlled by its parent 
Regulated Fund for purposes of sections 17(d) and 57(a)(4) and rule 
17d-1. Applicants request that each SPV Sub be permitted to participate 
in Co-Investment Transactions in lieu of its parent Regulated Fund and 
that the SPV Sub's participation in any such transaction be treated, 
for purposes of the Order, as though the parent Regulated Fund were 
participating directly. Applicants represent that this treatment is 
justified because a SPV 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 
SPV Sub. The Board would make all relevant determinations under the 
conditions with regard to a SPV Sub's participation in a Co-Investment 
Transaction, and the Board would be informed of, and take into 
consideration, any proposed use of a SPV Sub in the Regulated Fund's 
place. If the Regulated Fund proposes to participate in the same Co-
Investment Transaction with any of its SPV Subs, the Board will also be 
informed of, and take into consideration, the relative participation of 
the Regulated Fund and the SPV Sub.
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    \9\ ``SPV Sub'' means an entity that (a) is wholly-owned by a 
Regulated Fund (with such Regulated Fund 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 the Regulated Fund (and, in the case of an 
SBIC Subsidiary (as defined below), maintain a license under the SBA 
Act (as defined below) and issue debentures guaranteed by the SBA 
(as defined below)); (c) with respect to which the Regulated Fund's 
Board has the sole authority to make all determinations with respect 
to the SPV Sub'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. ``SBIC Subsidiary'' means an 
SPV Sub that is licensed by the Small Business Administration to 
operate under the Small Business Investment Act of 1958 (the ``SBA 
Act'') as a small business investment company.
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    6. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the applicable Investment Adviser will consider only 
the Objectives and Strategies, investment policies, investment 
positions, capital available for investment (``Available 
Capital''),\10\ and other factors relevant to such Regulated Fund. Upon 
issuance of the Order, the Investment Adviser to a Co-Investment 
Affiliate or the Co-Investment Affiliates (in the case of Capital 
Market Affiliates) will refer to the Investment Advisers of the 
Regulated Funds all Potential Co-Investment Transactions within a 
Regulated Fund's Objectives and Strategies that are considered for or 
by a Co-Investment Affiliate, and such investment opportunities may 
result in a Co-Investment Transaction. A Capital Markets Affiliate 
would have the opportunity to participate in a Co-Investment 
Transaction only if the demand for a Potential Co-Investment 
Transaction from the Regulated Funds and the other Co-Investment 
Affiliates is less than the total investment opportunity presented by 
such Potential Co-Investment Transaction.
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    \10\ 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 by 
the settlement date of the Co-Investment Transaction.
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    7. 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 Investment Adviser 
will present each Potential Co-Investment Transaction and the proposed 
allocation to the directors of the Board that are eligible to vote 
under section 57(o) of the Act (``Eligible Directors''). The ``required

[[Page 76397]]

majority,'' as defined in section 57(o) of the Act (``Required 
Majority''),\11\ of a Regulated Fund will approve each Co-Investment 
Transaction prior to any investment by the Regulated Fund.
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    \11\ With respect to Regulated Funds that are not BDCs, the 
defined terms Eligible Directors and Required Majority apply as if 
each Regulated Fund were a BDC subject to section 57(o) of the Act.
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    8. With respect to the pro rata dispositions and Follow-On 
Investments as 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 Co-Investment Affiliate 
and Regulated Fund 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; 
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 
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.
    9. 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.
    10. If an Investment Adviser, the principal owners of the 
Investment Adviser (``Principals''), or any person controlling, 
controlled by, or under common control with the Investment Adviser or 
the Principals, and the Co-Investment Affiliates (collectively, the 
``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Fund (the ``Shares''), then 
the Holders will vote such Shares as required under condition 16. 
Applicants believe that this condition will ensure that the Non-
Interested Directors will act independently in evaluating the Co-
Investment Program, because the ability of an Investment Adviser or the 
Principals to influence the Non-Interested Directors by a suggestion, 
explicit or implied, that the Non-Interested Directors can be removed 
will be limited significantly. Applicants represent that the Non-
Interested Directors will evaluate and approve any such voting trust or 
proxy adviser, taking into accounts its qualifications, reputation for 
independence, cost to the shareholders, and other factors that they 
deem relevant.

Applicants' Legal Analysis

    1. 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 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.
    2. Applicants submit that the Investment Advisers and the entities 
that they advise would be deemed to be a person related to, or 
affiliated with, a Regulated Fund in a manner described by sections 
17(d) or 57(b) and therefore prohibited by sections 17(d) or 57(a)(4) 
and rule 17d-1 from participating in the Co-Investment Transactions. 
Further, because the SPV Subs are controlled by the Regulated Funds, 
the SPV Subs are subject to sections 17(d) or 57(a)(4) and would be 
prohibited by rule 17d-1 from participating in the Co-Investment 
Transactions without the Order. Finally, because each Capital Markets 
Affiliate is under common control with CGMSIM and, therefore, is an 
``affiliated person'' of CGMSIM, each Capital Markets Affiliate could 
be deemed to be a person related to a Regulated Fund (or an SPV Sub) in 
a manner described by section 17(d) or section 57(b) and also 
prohibited from participating in the Co-Investment Program.
    3. Rule 17d-1 under the Act generally prohibits participation by a 
registered investment company, or a company controlled by such 
registered investment company, and an affiliated person (as defined in 
section 2(a)(3) of the 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, absent an 
order by the Commission. Similarly, rule 17d-1, as made applicable to 
BDCs by section 57(i), prohibits any person who is related to a BDC in 
a manner described in section 57(b), acting as principal, from 
participating in, or effecting any transaction in connection with, any 
joint enterprise or other joint arrangement or profit-sharing plan in 
which the BDC (or a company controlled by such BDC) is a participant, 
absent an order from the Commission. 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.
    4. 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 believe that the proposed terms and 
conditions will ensure that the Co-Investment Transactions are 
consistent with the protection of each Regulated Fund's shareholders 
and with the purposes intended by the policies and provisions of the 
Act. Applicants state that the Regulated Funds' 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 any order granting the requested relief will 
be subject to the following conditions:
    1. Each time an investment adviser to any Co-Investment Affiliate 
or a Co-Investment Affiliate considers a Potential Co-Investment 
Transaction for a Co-Investment Affiliate that falls within a Regulated 
Fund's then-current Objectives and Strategies, the Regulated Fund's 
Investment Adviser will make an independent determination of the 
appropriateness of the investment for the Regulated Fund in light of 
such Regulated Fund's then-current circumstances.
    2. (a) If the Investment Adviser deems the Regulated Fund's 
participation in any such Potential Co-Investment Transaction is 
appropriate for the Regulated Fund, it will then determine

[[Page 76398]]

an appropriate level of investment for the Regulated Fund.
    (b) If the aggregate amount recommended by an Investment 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 Co-Investment Affiliates, 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 available for investment in the asset 
class being allocated, up to the amount proposed to be invested by 
each. The Investment Advisers will provide the Eligible Directors of 
each participating Regulated Fund with information concerning each 
participating Co-Investment Affiliate'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 Investment 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 of each participating Regulated Fund for their 
consideration. A Regulated Fund will co-invest with Co-Investment 
Affiliates only if, prior to such Regulated Fund's and any Co-
Investment Affiliates' participation in the Potential Co-Investment 
Transaction, a Required Majority of such Regulated Fund 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 of such 
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 such Regulated Fund; and
    (B) such Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by the Co-Investment Affiliates would not 
disadvantage such Regulated Fund, and participation by such Regulated 
Fund is not on a basis different from or less advantageous than that of 
any Co-Investment Affiliate; provided, that if a Co-Investment 
Affiliate, other than such Regulated Fund, 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;
    (B) the Investment Advisers agree to, and do, provide, periodic 
reports to such 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 any Co-Investment Affiliate 
or any affiliated person of a Co-Investment Affiliate receives in 
connection with the right of the Co-Investment Affiliate 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 Co-Investment Affiliates (the 
Co-Investment Affiliates (other than the Regulated Funds) may, in turn, 
share their portion with their affiliated persons)) and the applicable 
Regulated Fund in accordance with the amount of each party's 
investment; and
    (iv) the proposed investment by such Regulated Fund will not 
benefit the Investment Advisers or the Co-Investment Affiliates or any 
affiliated person of either 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 sections 17(e) and 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 Investment Adviser will present to the Board of 
the Regulated Fund, on a quarterly basis, a record of all investments 
made by the Co-Investment Affiliates in Potential Co-Investment 
Transactions during the preceding quarter that fell within such 
Regulated Fund's then-current Objectives and Strategies that were not 
made available 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 of such Regulated Fund pursuant to 
this condition will be kept for the life of such 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 any Co-Investment Affiliate or any 
affiliated person of a Co-Investment Affiliate 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 such Regulated Fund as for the Co-Investment 
Affiliates. The grant to a Co-Investment Affiliate, but not such 
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 Co-Investment Affiliate elects to sell, exchange or 
otherwise dispose of an interest in a security that was acquired in a 
Co-Investment Transaction, the applicable Investment Adviser or Co-
Investment Affiliate (only as to clause (i)) 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 other Co-Investment 
Affiliates.
    (c) A Regulated Fund 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 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

[[Page 76399]]

participate in such dispositions on a pro rata basis (as described in 
greater detail in the application); and (iii) the Board of each 
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 applicable Investment 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 Co-Investment Affiliate will bear its own expenses in 
connection with any such disposition.
    8. (a) If any Co-Investment Affiliate desires to make a Follow-On 
Investment in a portfolio company whose securities were acquired in a 
Co-Investment Transaction, the Investment Adviser or Co-Investment 
Affiliate (only as to clause (i)) 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 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 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 applicable Investment 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 Co-Investment 
Affiliate's outstanding investments immediately preceding the Follow-On 
Investment; and
    (ii) the aggregate amount recommended by the applicable Investment 
Adviser to be invested by such Regulated Fund in the Follow-On 
Investment, together with the amount proposed to be invested by the 
other Co-Investment Affiliates 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 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 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 any Co-Investment Affiliate that the applicable 
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 which such 
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 the continued appropriateness for the 
applicable Regulated Fund of participating in new and existing Co-
Investment Transactions. All information presented to such Regulated 
Fund's Board pursuant to this condition will be kept for the life of 
such Regulated Fund and at least two years thereafter, and will be 
subject to examination by the Commission and its staff.
    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).
    11. No Non-Interested Director of a Regulated Fund also will be a 
director, general partner, managing member or principal, or otherwise 
an ``affiliated person'' (as defined in the 1940 Act) of any Co-
Investment Affiliate (other than any other Regulated 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 applicable Investment Adviser under its 
respective investment advisory agreement with the applicable Regulated 
Fund or other Co-Investment Affiliate, be shared by such Regulated Fund 
and each Co-Investment Affiliate 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 applicable 
Regulated Fund and the 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 Investment Advisers of Co-Investment Affiliates pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by the Investment Advisers of the Co-Investment 
Affiliates 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 between such Fund 
and the Co-Investment Affiliates based on the amounts they invest in 
such Co-Investment Transaction. None of the Co-Investment Affiliates, 
their investment advisers, nor any affiliated person (as defined in the 
Act) of the Regulated Funds or 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 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 Investment Advisers, investment 
advisory fees paid in accordance with the agreements between such 
Investment Advisers and the Co-Investment Affiliates).
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    \13\ Applicants are not requesting any relief for transaction 
fees received in connection with any Co-Investment Transaction.
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    14. The Capital Markets Affiliates will not be permitted to invest 
in a Potential Co-Investment Transaction except to the extent the 
demand from the Regulated Funds and the other Co-Investment Affiliates 
is less than the total investment opportunity.
    15. The Investment Advisers will maintain written policies and 
procedures reasonably designed to ensure compliance with the foregoing 
Conditions. These policies and procedures will require, among other 
things, that each of the applicable Investment Advisers will be 
notified of

[[Page 76400]]

all Potential Co-Investment Transactions that fall within each 
Regulated Fund's then-current Objectives and Strategies and will be 
given sufficient information to make its independent determination and 
recommendations under conditions 1, 2(a), 7 and 8.
    16. If the Holders own in the aggregate more than 25 percent of the 
Shares of a Regulated Fund, then the Holders will vote such Shares as 
directed by an independent third party (such as the trustee of a voting 
trust or a proxy adviser) when voting on (1) the election of directors; 
(2) the removal of one or more directors; or (3) any matters requiring 
approval by the vote of a majority of the outstanding voting 
securities, as defined in section 2(a)(42) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-26401 Filed 11-1-16; 8:45 am]
 BILLING CODE 8011-01-P


