
[Federal Register Volume 82, Number 23 (Monday, February 6, 2017)]
[Notices]
[Pages 9426-9430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02361]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32461; File No. 812-13764]


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

January 31, 2017.
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) and 57(a)(4) of the Act and rule 
17d-1 under the Act.

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SUMMARY OF APPLICATION:  Applicants request an order to permit certain 
business development companies (``BDCs'') and certain closed-end 
management investment companies to co-invest in portfolio companies 
with each other and with affiliated investment funds.

APPLICANTS:  Golub Capital BDC, Inc. (``GBDC''), Golub Capital 
Investment Corporation (``GCIC''); GC Advisors LLC (``GC Advisors''); 
GC Synexus Advisors, LLC, and GC Investment Management LLC (each a 
``Controlled Adviser''); Golub Capital Partners V, L.P., Golub Capital 
Partners VI, L.P., Golub Capital Partners VII, L.P., Golub Capital 
Partners VIII, L.P., Golub Capital Partners 9, L.P., Golub Capital 
Partners 10, L.P., Golub Capital Partners International VII, L.P., 
Golub Capital Partners International VIII, L.P., Golub Capital Partners 
International 9, L.P., Golub Capital Partners International 10, L.P., 
Golub Capital International Ltd., GC 2009 Mezzanine Partners, L.P., 
GEMS Fund, L.P., GEMS Fund 4, L.P., Golub Capital Pearls Direct Lending 
Program, L.P., Golub Capital Coinvestment, L.P., Golub Capital Finance, 
LLC, GC Finance Operations LLC, Golub Capital Finance Funding LLC, 
Golub Capital Partners Ltd., Golub Capital Partners CLO 11 Ltd., Golub 
Capital Partners CLO 14 Ltd., Golub Capital Partners CLO 15 Ltd., Golub 
Capital Partners CLO 16 Ltd., Golub Capital Partners CLO 17 Ltd., Golub 
Capital Partners CLO 18(M) Ltd., Golub Capital Partners CLO 19(B) Ltd., 
Pearls X, L.P., SG-E2 LLC, Golub Capital Partners CLO 21(M), Ltd., 
Golub Capital Partners Warehouse CLO 22(B), Ltd., Golub Capital 
Partners CLO 23 (B), Ltd., Golub Capital Partners CLO 24(M), Ltd., 
Golub Capital Partners CLO 25 (M), Ltd., Golub Capital Partners CLO 
26(B), Ltd., Golub Capital Partners CLO 28(M), Ltd., Golub Capital 
Partners CLO 29(B), Ltd., Golub Capital Partners CLO 30(M), Ltd., Golub 
Capital Partners CLO 31(M), Ltd., Golub Capital Partners CLO 32(M), 
Ltd., GCP Finance 2 Ltd., GCP Finance Ltd., GCP Finance 4, Ltd., GC 
International Ladder Ltd., GCP Finance 3 Ltd., GCP Finance 5 Ltd., GCP 
Finance 6 Ltd., Golub Capital Partners CLO 33(M), Ltd., Golub Capital 
Partners 11, L.P., Golub Capital Partners International 11, L.P., and 
Golub Capital Partners 11 Rollover Fund, L.P. (collectively, ``Existing 
Affiliated Funds''); Golub GP V, LLC, Golub GP VI, LLC, Golub Onshore 
GP, LLC, Golub Offshore GP, Ltd., Golub Capital Coinvestment, LLC, 
Golub Onshore GP 2, LLC and Golub Onshore GP NC, LLC; and Golub Capital 
LLC.

FILING DATES:  The application was filed on April 1, 2010, and amended 
on September 30, 2010, December 10, 2012, June 6, 2013, December 2, 
2013, December 5, 2013, August 11, 2014, January 28, 2015, October 29, 
2015, June 2, 2016, September 23, 2016 and January 26, 2017.

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 February 24, 2017, 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: Secretary, U.S. Securities and Exchange Commission, 100 F 
St. NE., Washington, DC 20549-1090. Applicants: 666 Fifth Avenue, 18th 
Floor, New York, New York 10103.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990 or Daniele Marchesani, Assistant Director, 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. GBDC and GCIC, a Delaware corporation and a Maryland 
corporation, respectively, are organized as non-diversified, closed-end 
management investment companies that have elected to be regulated as 
BDCs under section 54(a) of the Act.\1\ GBDC and GCIC (the ``Regulated 
Funds'') \2\ seek to maximize the total return to their stockholders 
through both current income and capital appreciation through debt and 
minority equity investments. The boards of directors (each a ``Board'') 
\3\ of GBDC and GCIC consist of the same six members, four of whom are 
not ``interested persons'' as defined in section 2(a)(19) of the Act 
(``Non-Interested Directors'').\4\
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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 ``Regulated Funds'' means GBDC, GCIC, and any 
future closed-end management investment company that has elected to 
be regulated as a BDC or is registered under the Act, whose 
investment adviser is an Adviser (as defined below) and who intends 
to participate in the Co-Investment Program (as defined below).
    \3\ The term ``Board'' means the board of directors of a 
Regulated Fund.
    \4\ Currently, Lawrence E. Golub serves as a Director and 
Chairman of the Board of each of GBDC and GCIC and David B. Golub 
serves as a Director and Chief Executive Officer of GBDC and as a 
Director, President and Chief Executive Officer of GCIC 
(``Principals'').
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    2. Each of the Existing Affiliated Funds would be an investment 
company but for section 3(c)(1) or 3(c)(7) of the Act.
    3. GC Advisors, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act'') and serves as the investment adviser to each of GBDC 
and GCIC pursuant to the applicable Investment Advisory Agreement. GC 
Advisors or a Controlled Adviser currently serves as investment adviser 
to each of the Existing Affiliated Funds. Golub Capital LLC, a wholly-
owned subsidiary of GC Advisors, makes experienced investment 
professionals

[[Page 9427]]

available to GC Advisors pursuant to a staffing agreement.
    4. Applicants seek an order (``Order'') to permit one or more 
Regulated Funds and Affiliated Funds \5\ to participate in the same 
investment opportunities through a proposed co-investment program where 
such participation would otherwise be prohibited under sections 17(d) 
and 57(a)(4) and the rules under the Act (the ``Co-Investment 
Program'').\6\ A ``Co-Investment Transaction'' means any transaction in 
which one or more Regulated Funds (or a Wholly-Owned Investment 
Subsidiary, as defined below) participated together with one or more 
Regulated Funds and Affiliated Funds in reliance on the Order. A 
``Potential Co-Investment Transaction'' means any investment 
opportunity in which the Regulated Funds (or its Wholly-Owned 
Investment Subsidiary, as defined below) could not participate together 
with one or more Regulated Funds and Affiliated Funds without obtaining 
and relying on the Order.
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    \5\ The term ``Affiliated Fund'' means (a) the Existing 
Affiliated Funds and (b) any Future Affiliated Fund. ``Future 
Affiliated Fund'' means an entity (a) whose investment adviser is an 
Adviser and (b) that would be an investment company but for section 
3(c)(1) or 3(c)(7) of the Act, and (iii) that intends to participate 
in the Co-Investment Program. The term ``Adviser'' means (a) GC 
Advisors, (b) the Controlled Advisers, and (c) any future investment 
adviser that controls, is controlled by or is under common control 
with GC Advisors and is registered as an investment adviser under 
the Advisers Act.
    \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 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 Wholly-Owned Investment Subsidiaries.\7\ A Wholly-
Owned Investment Subsidiary would be prohibited from investing in a Co-
Investment Transaction with another Regulated Fund or any Affiliated 
Fund because it would be a company controlled by the applicable 
Regulated Fund for purposes of sections 17(d) and 57(a)(4) and rule 
17d-1. Applicants request that a Wholly-Owned Investment Subsidiary be 
permitted to participate in Co-Investment Transactions in lieu of the 
applicable Regulated Fund, and that such Wholly-Owned Investment 
Subsidiary'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 Subsidiary 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 such Regulated Fund and its respective Wholly-Owned Investment 
Subsidiaries. The Board of the Regulated Fund 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 Board would be informed of, and take into consideration, any 
proposed use of a Wholly-Owned Investment Subsidiary in place of the 
Regulated Fund. If a Regulated Fund proposes to participate in the same 
Co-Investment Transaction with any of its Wholly-Owned Investment 
Subsidiaries, its Board will also be informed of, and take into 
consideration, the relative participation of the Regulated Fund and the 
Wholly-Owned Investment Subsidiary.
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    \7\ The term ``Wholly-Owned Investment Subsidiary'' means an 
entity (a) whose sole business purpose is to hold one or more 
investments on behalf of a 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)); (b) that 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); (c) with respect 
to which the Board of the Regulated Fund has the sole authority to 
make all determinations with respect to the Wholly-Owned Investment 
Subsidiary's participation under the conditions of the application; 
and (d) that is and entity that would be an investment company but 
for section 3(c)(1) or 3(c)(7) of the Act. The term ``SBIC 
Subsidiary'' means a Wholly-Owned Investment Subsidiary that is 
licensed by the Small Business Administration (the ``SBA'') to 
operate under the Small Business Investment Act of 1958, as amended, 
(the ``SBA Act'') as a small business investment company.
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    6. When considering Potential Co-Investment Transactions for any 
Regulated Fund, an Adviser will consider only the Objectives and 
Strategies,\8\ Board-Established Criteria,\9\ investment policies, 
investment positions, capital available for investment (``Available 
Capital''),\10\ and other pertinent factors applicable to that 
Regulated Fund. The participation of a Regulated Fund in a Potential 
Co-Investment Transaction may only be approved by a Required Majority, 
as defined in section 57(o) (a ``Required Majority''), of the directors 
of the Board eligible to vote on that Co-Investment Transaction under 
section 57(o) (the ``Eligible Directors'').\11\ When selecting 
investments for the Affiliated Funds, an Adviser will select 
investments separately for each Affiliated Fund, considering in each 
case, only the investment objective, investment policies, investment 
position, capital available for investment, and other pertinent factors 
applicable to that particular Affiliated Fund. Applicants' state that 
the Objectives and Strategies of each Regulated Fund and the investment 
objectives and strategies of the Affiliated Funds are substantially 
similar, and GC Advisors anticipates that a portfolio company that is 
an appropriate investment for one or more Regulated Funds will normally 
be an appropriate investment for one or more Affiliated Funds. To the 
extent a Potential Co-Investment Transaction falls within any Board-
Established Criteria of a Regulated Fund and the objectives and 
strategies of one or more Regulated Funds and Affiliated Funds, each 
Regulated Fund intends to co-invest with the Affiliated Funds, with 
certain exceptions based on factors such as available capital, 
investment size or diversification.\12\
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    \8\ The term ``Objectives and Strategies'' means a Regulated 
Fund's investment objectives and strategies as described in the 
Regulated Fund's registration statement, other filings the Regulated 
Fund has made with the Commission under the Securities Act of 1933 
or the Securities Exchange Act of 1934, and the Regulated Fund's 
reports to shareholders.
    \9\ The term ``Board-Established Criteria'' means criteria that 
the Board of the applicable Regulated Fund may establish from time 
to time to describe the characteristics of Potential Co-Investment 
Transactions regarding which an Adviser to the Regulated Fund should 
be notified under Condition 1. The Board-Established Criteria will 
be consistent with the Regulated Fund's then-current Objectives and 
Strategies. If no Board-Established Criteria are in effect, then the 
Regulated Fund's Adviser will be notified of all Potential Co-
Investment Transactions that fall within the Regulated Fund's then 
current Objectives and Strategies. Board-Established Criteria will 
be objective and testable, meaning that they will be based on 
observable information, such as industry/sector of the issuer, 
minimum earnings before interest, taxes, depreciation, and 
amortization of the issuer, asset class of the investment 
opportunity or required commitment size, and not on characteristics 
that involve discretionary assessment. The Adviser to the Regulated 
Fund may from time to time recommend criteria for the applicable 
Board's consideration, but Board-Established Criteria will only 
become effective if approved by a majority of the Non-Interested 
Directors. The Non-Interested Directors of a Regulated Fund may at 
any time rescind, suspend or qualify its approval of any Board-
Established Criteria, though Applicants anticipate that, under 
normal circumstances, the Board would not modify these criteria more 
often than quarterly.
    \10\ Available Capital will be determined based on the amount of 
cash on hand, existing commitments and reserves, if any, the 
targeted leverage level, targeted asset mix and other investment 
policies and restrictions set from time to time by the Board of the 
applicable Regulated Fund or imposed by applicable laws, rules, or 
regulations or interpretations.
    \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.
    \12\ A Regulated Fund, however, will not be obligated to invest, 
or co-invest, when investment opportunities are referred to them.
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    7. With respect to participation in a Potential Co-Investment 
Transaction by

[[Page 9428]]

a Regulated Fund, the applicable Adviser will present each Potential 
Co-Investment Transaction and the proposed allocation of each 
investment opportunity to the Eligible Directors. The Required Majority 
of a Regulated Fund will approve each Co-Investment Transaction prior 
to any investment by the Regulated Fund.
    8. With respect to the pro rata dispositions and Follow-On 
Investments \13\ provided in conditions 7 and 8, a participating 
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 
Affiliated Fund 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 applicable Board has approved such 
Regulated Fund's participation in pro rata dispositions and Follow-On 
Investments as being in the best interests of such Regulated Fund. If 
the Board of a Regulated Fund does not so approve, any such disposition 
or Follow-On Investment will be submitted to the Eligible Directors. 
The Board of a Regulated Fund may at any time rescind, suspend or 
qualify their respective 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.
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    \13\ ``Follow-On Investment'' means any additional investment in 
an existing portfolio company whose securities were acquired in a 
Co-Investment Transaction, including the exercise of warrants, 
conversion privileges or other similar rights to acquire additional 
securities of the portfolio company.
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    9. No Director will be considered a Non-Interested Director with 
respect to a particular Co-Investment Transaction unless the Director 
has no direct or indirect financial interest in that Co-Investment 
Transaction or any interest in any portfolio company, other than 
through an interest in the securities of a Regulated Fund.
    10. Applicants represent that if an Adviser, the Principals, any 
person controlling, controlled by, or under common control with an 
Adviser or the Principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25% of the outstanding 
voting securities of a Regulated Fund (``Shares''), then the Holders 
will vote such Shares as required under condition 14. 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 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. The Non-Interested Directors shall evaluate and 
approve any such independent third party, taking into account its 
qualifications, reputation for independence, cost to the shareholders, 
and other factors they deem relevant.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits any person who is related 
to a BDC in the manner described in section 57(b) from participating in 
joint transactions with the BDC in contravention of rules as prescribed 
by the Commission. Under section 57(b)(2) of the Act, any person who is 
directly or indirectly controlling, controlled by our under common 
control with a BDC is subject to section 57(a)(4). Applicants submit 
that each of the Regulated Funds and Affiliated Funds could be deemed 
to be a person related to a Regulated Fund in a manner described in 
section 57(b) of the Act. Section 57(i) of the Act provides that, until 
the Commission prescribes rules under section 57(a)(4), the rules under 
section 17(d) of the Act applicable to registered closed-end investment 
companies, are 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 applies to joint transaction involving a 
BDC.
    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 will 
consider whether the participation by the Regulated Fund in such 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 the Co-Investment Program will increase 
favorable investment opportunities for the Regulated Funds and allow 
the Regulated Funds to participate in attractive opportunities at 
levels that are appropriate. The conditions are designed to ensure that 
GC Advisors would not be able to favor any Regulated Fund or Affiliated 
Funds over other Regulated Funds through the allocation of investment 
opportunities among them. Applicants state that the Regulated Fund's 
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. (a) The Advisers will establish, maintain and implement policies 
and procedures reasonably designed to ensure that each Adviser is 
promptly notified, for each Regulated Fund the Adviser manages, of all 
Potential Co-Investment Transactions that (i) an Adviser considers for 
any other Regulated Fund or Affiliated Fund and (ii) fall within the 
Regulated Fund's then-current Objectives and Strategies and Board-
Established Criteria.
    (b) When an Adviser to a Regulated Fund is notified of a Potential 
Co-Investment Transaction under condition 1(a), such Adviser will make 
an independent determination of the appropriateness of the investment 
for the 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 applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be 
invested by the other participating Regulated Funds and Affiliated 
Funds, collectively, in the same transaction, exceeds the amount of the 
investment opportunity, then 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

[[Page 9429]]

(including the amount proposed to be invested by each participating 
Regulated Fund and Affiliated 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 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 Funds then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Affiliated 
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 Funds; 
provided that, if any other Regulated Fund or Affiliated 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 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 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 any Affiliated Fund or any 
Regulated Fund or any affiliated person of any Affiliated Fund or any 
Regulated Fund receives in connection with the right of an Affiliated 
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 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 Advisers, the Affiliated 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 Funds during the preceding quarter that fell within 
the Regulated Fund's then-current Objectives and Strategies and Board 
Established Criteria 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 
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,\14\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Affiliated Fund or 
any affiliated person of another Regulated Fund or Affiliated Fund is 
an existing investor. The Adviser will maintain books and records that 
demonstrate compliance with this condition for each Regulated Fund.
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    \14\ 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 
Fund. The grant to an Affiliated 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 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 Adviser 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 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 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 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 Fund and each Regulated Fund will bear its own 
expenses in connection with any such disposition.

[[Page 9430]]

    8. (a) If any Affiliated 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 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 Funds' outstanding investments immediately 
preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the applicable Adviser to 
be invested by the applicable Regulated Fund in the Follow-On 
Investment, together with the amount proposed to be invested by the 
other participating Regulated Funds and Affiliated Funds, collectively, 
in the same transaction, exceeds the amount of the investment 
opportunity; then the will be allocated among them pro rata based on 
each party'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 that fell within the Regulated Fund's then-
current Objectives and Strategies and Board-Established Criteria, 
including investments in Potential Co-Investment Transactions made by 
other Regulated Funds or Affiliated Funds that the Regulated Fund 
considered but declined to participate in, and concerning Co-Investment 
Transactions in which the Regulated Fund participated, so that the Non-
Interested Directors may determine whether all Potential Co-Investment 
Transactions and Co-Investment Transactions during the preceding 
quarter, including those Potential Co-Investment Transactions which 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: (a) The continued appropriateness for 
the Regulated Fund of participating in new and existing Co-Investment 
Transactions, and (b) the continued appropriateness of any Board-
Established Criteria.
    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 any of the 
Affiliated Funds.
    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 Affiliated Funds and the Regulated 
Funds, be shared by the Regulated Funds and the Affiliated 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 \15\ (including break-up or commitment fees 
but excluding broker's fees contemplated 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 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 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 Funds and Affiliated 
Funds based on the amount they invest in such Co-Investment 
Transaction. None of the Advisers, the Affiliated Funds, the other 
Regulated Funds nor any affiliated person of the Regulated Funds 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 Funds 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 an Adviser, investment advisory fees paid in accordance 
with their respective agreements between the Advisers and the Regulated 
Fund or Affiliated Fund).
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    \15\ 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% of the 
Shares, then the Holders will vote such Shares as directed by an 
independent third party when voting on (1) the election of directors; 
(2) the removal of one or more directors; or (3) all other matters 
under either the Act or applicable state law affecting the Board's 
composition, size or manner of election.
    15. Each Regulated Fund's chief compliance officer, as defined in 
rule 38a-1(a)(4), will prepare an annual report for its Board each year 
that evaluates (and documents the basis of that evaluation) the 
Regulated Fund's compliance with the terms and conditions of the 
application and the procedures established to achieve such compliance.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02361 Filed 2-3-17; 8:45 am]
 BILLING CODE 8011-01-P


