[Federal Register Volume 85, Number 77 (Tuesday, April 21, 2020)]
[Notices]
[Pages 22217-22222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08350]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33839; File No. 812-15019]


Great Elm Capital Corp., et al.

April 15, 2020.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice.

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    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.

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

Applicants:  Great Elm Capital Corp. (``GECC''), Great Elm Capital 
Management, Inc. (``Great Elm Adviser''), each on behalf of itself and 
its successors,\1\ and Great Elm Opportunities Fund I, LP (``Existing 
Affiliated Fund'').
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    \1\ For the purposes of the requested order, a ``successor'' 
includes an entity or entities that result from a reorganization 
into another jurisdiction or a change in the type of business 
organization.

Filing Dates:  The application was filed on April 11, 2019, and amended 
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on October 2, 2019 and January 16, 2020.

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 emailing the Commission's 
Secretary at Secretarys-Office@sec.gov and serving applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on May 11, 2020 and should be accompanied 
by proof of service on the 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 emailing the 
Commission's Secretary at Secretarys-Office@sec.gov.

ADDRESSES: ADDRESSES: The Commission: Secretarys-Office@sec.gov. 
Applicants: Great Elm Capital Corp. geccoperations@greatelmcap.com.

FOR FURTHER INFORMATION CONTACT:  Jill Ehrlich, Senior Counsel, at 
(202) 551-6819, or Andrea Ottomanelli Magovern, Branch Chief, at (202) 
551-6821 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website 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. GECC is a Maryland corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under section 54(a) of the Act.\2\ GECC's Objectives and Strategies \3\ 
are to seek to generate both current income and capital appreciation, 
while seeking to protect against risk of capital loss, by investing 
predominantly in the debt securities of middle market companies, which 
GECC defines as companies with enterprise values between $100.0 million 
and $2.0 billion. The business and affairs of GECC are managed under 
the direction of a Board,\4\ a majority of whose

[[Page 22218]]

members are persons who are Non-Interested Directors.\5\
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    \2\ 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.
    \3\ ``Objectives and Strategies'' means the investment 
objectives and strategies of a Regulated Fund (as defined below), 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 (the ``Securities Act''), or under the 
Securities Exchange Act of 1934, and the Regulated Fund's reports to 
shareholders.
    \4\ The term ``Board'' means, with respect to any Regulated 
Fund, the board of directors of that Regulated Fund.
    \5\ The term ``Non-Interested Directors'' means, with respect to 
any Board, the directors who are not ``interested persons'' within 
the meaning of section 2(a)(19) of the Act.
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    2. The Existing Affiliated Fund was formed as a Delaware limited 
partnership and would be an investment company but for section 3(c)(7) 
of the Act. The Existing Affiliated Fund's investment objective is to 
seek total returns by investing throughout the capital structures of 
leveraged issuers. From time to time, certain positions that are 
suitable for the Existing Affiliated Fund may also fit the investment 
objectives of GECC.
    3. Great Elm Adviser, a Delaware corporation, is registered with 
the Commission as an investment adviser under the Investment Advisers 
Act of 1940 (``Advisers Act''). Great Elm Adviser serves as the 
investment adviser to GECC and the Existing Affiliated Fund.
    4. Applicants seek an order (``Order'') to permit a Regulated Fund 
\6\ and one or more other Regulated Funds and/or one or more Affiliated 
Funds \7\ to (a) co-invest with each other in investment opportunities 
in which an Adviser (as defined below) negotiates terms in addition to 
price and (b) make additional investments in such issuers, including 
through the exercise of warrants, conversion privileges, and other 
rights to purchase securities of the issuers (``Follow-On 
Investments'') through a proposed co-investment program (the ``Co-
Investment Program'') where such participation would otherwise be 
prohibited under section 17(d) or section 57(a)(4) and the rules under 
the Act. ``Co-Investment Transaction'' means any transaction in which a 
Regulated Fund (or its ``Wholly-Owned Investment Sub,'' as defined 
below) participates together with one or more other Regulated Funds 
and/or one or more Affiliated Funds in reliance on the requested Order. 
``Potential Co-Investment Transaction'' means any investment 
opportunity in which a Regulated Fund (or its Wholly-Owned Investment 
Sub) could not participate together with one or more other Regulated 
Funds and/or one or more Affiliated Funds without obtaining and relying 
on the Order.\8\
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    \6\ ``Regulated Fund'' refers to GECC and any Future Regulated 
Fund. ``Future Regulated Fund'' means any closed-end management 
investment company (a) that is registered under the Act or has 
elected to be regulated as a BDC under the Act, (b) whose investment 
adviser is an Adviser, and (c) that intends to participate in the 
Co-Investment Program. The term ``Adviser'' means (a) Great Elm 
Adviser and (b) any future investment adviser that (i) controls, is 
controlled by or is under common control with Great Elm Adviser, 
(ii) (A) is registered as an investment adviser under the Advisers 
Act or (B) is a relying adviser of an investment adviser that is 
registered under the Advisers Act and that controls, is controlled 
by, or is under common control with, Great Elm Adviser, and (iii) is 
not a Regulated Fund or a subsidiary of a Regulated Fund.
    \7\ An ``Affiliated Fund'' means (a) the Existing Affiliated 
Fund and (b) any Future Affiliated Fund. ``Future Affiliated Fund'' 
means any entity (a) whose investment adviser is an Adviser, (b) 
that would be an investment company but for section 3(c)(1), 
3(c)(5)(C) or 3(c)(7) of the Act, and (c) that intends to 
participate in the Co-Investment Program.
    \8\ 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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    5. Applicants state that any of the Regulated Funds may, from time 
to time, form one or more Wholly-Owned Investment Subs.\9\ Such a 
subsidiary would be prohibited from investing in a Co-Investment 
Transaction with any other Regulated Fund or Affiliated Fund because it 
would be a company controlled by its parent Regulated Fund for purposes 
of section 57(a)(4) and rule 17d-1. Applicants request that each 
Wholly-Owned Investment Sub be permitted to participate in Co-
Investment Transactions in lieu of its parent Regulated Fund and that 
the Wholly-Owned Investment 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 Wholly-Owned Investment Sub would have 
no purpose other than serving as a holding vehicle for the Regulated 
Fund's investments and, therefore, no conflicts of interest could arise 
between the Regulated Fund and the Wholly-Owned Investment Sub. The 
Regulated Fund's Board would make all relevant determinations under the 
conditions with regard to a Wholly-Owned Investment Sub's participation 
in a Co-Investment Transaction, and the Regulated Fund's Board would be 
informed of, and take into consideration, any proposed use of a Wholly-
Owned Investment Sub in the Regulated Fund's place. If the Regulated 
Fund proposes to participate in the same Co-Investment Transaction with 
any of its Wholly-Owned Investment Subs, the Board will also be 
informed of, and take into consideration, the relative participation of 
the Regulated Fund and the Wholly-Owned Investment Sub.
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    \9\ The term ``Wholly-Owned Investment Sub'' 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 Small Business 
Investment Act of 1958, as amended (the ``SBA Act'') and issue 
debentures guaranteed by the Small Business Administration (the 
``SBA''); (b) that is wholly-owned by the Regulated Fund (with the 
Regulated Fund at all times holding, beneficially and of record, 
100% of the voting and economic interests); (c) with respect to 
which the Regulated Fund's Board 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 of the Regulated Fund participating in the Co-
Investment Transactions will be Wholly-Owned Investment Subs. The 
term ``SBIC Subsidiary'' means a Wholly-Owned Investment Sub that is 
licensed by the SBA to operate under the SBA Act as a small business 
investment company (an ``SBIC'').
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    6. Great Elm Adviser expects that any portfolio company that is an 
appropriate investment for a Regulated Fund should also be an 
appropriate investment for one or more other Regulated Funds and/or one 
or more Affiliated Funds, with certain exceptions based on available 
capital or diversification.\10\ When considering Potential Co-
Investment Transactions for any Regulated Fund, the applicable Adviser 
will consider only the Objectives and Strategies, Board-Established 
Criteria,\11\ investment policies, investment positions, capital 
available for investment, and other pertinent factors applicable to 
that Regulated Fund. Applicants believe that the use of Board-
Established Criteria for each of the Regulated Funds is appropriate 
based on the potential size and scope of Great Elm Adviser's advisory 
business. Applicants argue that in addition to the other protections 
offered by the conditions, using Board-Established Criteria in the 
allocation of Potential Co-Investment Transactions

[[Page 22219]]

will further reduce the risk of subjectivity in the Adviser's 
determination of whether an investment opportunity is appropriate for a 
Regulated Fund. In connection with the Board's annual review of the 
continued appropriateness of any Board-Established Criteria under 
condition 9, the Regulated Fund's Adviser will provide information 
regarding any Co-Investment Transaction (including, but not limited to, 
Follow-On Investments) effected by the Regulated Fund that did not fit 
within the then-current Board-Established Criteria.
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    \10\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
    \11\ 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 which would be within the Regulated Fund's then-current 
Objectives and Strategies that the applicable Adviser should 
consider as appropriate for the Regulated Fund. If no Board-
Established Criteria are in effect for a Regulated Fund, then such 
Adviser will consider all Potential Co-Investment Transactions that 
fall within the then-current Objectives and Strategies for that 
Regulated Fund. 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 EBITDA of the issuer, 
asset class of the investment opportunity or required commitment 
size, and not on characteristics that involve discretionary 
assessment. The Adviser to a 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.
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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), for each Regulated Fund, 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'') \12\ will approve each Co-
Investment Transaction prior to any investment by the participating 
Regulated Fund.
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    \12\ In the case of a Regulated Fund that is a registered fund, 
the Board members that make up the Required Majority will be 
determined as if the Regulated Fund were a BDC subject to section 
57(o).
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    8. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and 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 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 
direct or indirect financial interest in any Co-Investment Transaction 
(other than indirectly through share ownership in one of the Regulated 
Funds), including any interest in any company whose securities would be 
acquired in a Co-Investment Transaction.
    10. Applicants also represent that if the Advisers, the principal 
owners of any of the Advisers (the ``Principals''), or any person 
controlling, controlled by, or under common control with the Advisers 
or the Principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25% of the outstanding 
voting shares of a Regulated Fund (the ``Shares''), then the Holders 
will vote such Shares as required under condition 14. Applicants 
believe this condition will ensure that the Non-Interested Directors 
will act independently in evaluating the Co-Investment Program, because 
the ability of the Advisers 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 independent third party, taking into account its 
qualifications, reputation for independence, cost to the 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. Under section 57(b)(2) of the Act, 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 Funds and Affiliated Funds could be deemed 
to be a person related to each Regulated Fund 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 Funds that are BDCs. 
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to 
Regulated Funds 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 Funds would be, in many 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 the Order will be subject to the following 
conditions:
    1. (a) Each Adviser will establish, maintain and implement policies 
and procedures reasonably designed to ensure that it identifies for 
each Regulated Fund all Potential Co-Investment Transactions that (i) 
the 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 identifies a Potential Co-Investment 
Transaction for a Regulated Fund under condition 1(a), the 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 an Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, the Adviser will then determine an appropriate level of 
investment for the Regulated Fund.

[[Page 22220]]

    (b) If the aggregate amount recommended by an 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, 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. Each 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 applicable Regulated Fund's 
investments for compliance with these allocation procedures.
    (c) After making the determinations required in conditions 1(b) and 
2(a), the applicable Adviser will distribute written information 
concerning the Potential Co-Investment Transaction (including the 
amount proposed to be invested by each participating Regulated Fund and 
each participating Affiliated Fund) to the Eligible Directors of its 
participating Regulated Fund(s) for their consideration. A Regulated 
Fund will enter into a Co-Investment Transaction with one or more other 
Regulated Funds or 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 equity holders and do not involve overreaching in respect 
of the Regulated Fund or its equity holders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the Regulated Fund's equity holders; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Fund(s) or any 
Affiliated Fund(s) 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 any other Regulated Funds or any 
Affiliated Funds; provided that, if any other Regulated Fund or any 
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; and
    (B) the Adviser agrees to, and does, provide periodic reports to 
the Board of the Regulated Fund 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 Fund or any 
Affiliated Fund or any affiliated person of any Regulated Fund or any 
Affiliated Fund receives in connection with the right of a Regulated 
Fund 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 
Funds in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
any Adviser, the other Regulated Funds, 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 sections 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 other Regulated Fund 
or Affiliated Fund 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,\13\ 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 applicable Adviser will maintain books and 
records that demonstrate compliance with this condition for such 
Regulated Fund.
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    \13\ 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 another Regulated Fund or an Affiliated 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 Regulated Fund or 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 Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by each 
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such 
disposition on a proportionate basis, at the same price and on the same 
terms and conditions as those applicable to the participating Regulated 
Funds and Affiliated 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

[[Page 22221]]

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 such Regulated Fund's participation to 
such Regulated Fund's Eligible Directors, and such Regulated Fund will 
participate in such disposition solely to the extent that a Required 
Majority determines that it is in such Regulated Fund's best interests.
    (d) Each Regulated Fund and each Affiliated Fund will bear its own 
expenses in connection with any such disposition.
    8. (a) If a Regulated Fund 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 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 a Follow-On Investment 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 Advisers to 
be invested by each Regulated Fund 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 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 and 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).
    11. No Non-Interested Director of a Regulated Fund will also be a 
director, general partner, managing member or principal, or otherwise 
be an ``affiliated person'' (as defined in the Act), of any 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 the Advisers under their respective 
investment advisory agreements with the Regulated Funds and the 
Affiliated Funds, be shared by the Affiliated Funds and the Regulated 
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 \14\ (including break-up or commitment fees 
but excluding brokerage or underwriting compensation permitted by 
section 17(e) or 57(k) of the Act, as applicable) received in 
connection with a Co-Investment Transaction will be distributed to the 
participating Regulated Funds and Affiliated 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 amounts they invest in such Co-Investment 
Transaction. None of the Advisers, the Affiliated Funds, the other 
Regulated Funds or 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 
Affiliated Funds, the pro rata transaction fees described above and 
fees or other compensation described in condition 2(c)(iii)(C), (b) 
brokerage or underwriting compensation permitted by section 17(e) or 
57(k) of the Act or (c) in the case of an Adviser, investment advisory 
fees paid in accordance with the investment advisory agreement between 
the Adviser and the Regulated Fund or Affiliated Fund).
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    \14\ Applicants are not requesting and the staff of the 
Commission 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 Fund, then the Holders will

[[Page 22222]]

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.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08350 Filed 4-20-20; 8:45 am]
BILLING CODE 8011-01-P


