[Federal Register Volume 86, Number 123 (Wednesday, June 30, 2021)]
[Notices]
[Pages 34822-34830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13911]



[[Page 34822]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34318; File No. 812-15176]


Investcorp Credit Management BDC, Inc., et al.

June 24, 2021.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice.

-----------------------------------------------------------------------

    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 certain affiliated investment funds and accounts.

APPLICANTS:  InvestCorp Credit Management BDC, Inc. (the ``Existing 
Regulated Fund''), CM Finance SPV Ltd. (``CMSPV1), CM Finance SPV LLC 
(``CMSPV2''), CM Investment Partners LLC (``CMIP''), Investcorp Credit 
Management US LLC (``ICMUS''), Investcorp Credit Management EU 
(``ICMEU'', and together with ICMUS, the ``Existing Advisers''), and 
each of the Existing Affiliated Funds set forth on Exhibit B on the 
application.

FILING DATES: The application was filed on October 30, 2020, and 
amended on February 16, 2021, and June 7, 2021.

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 July 19, 2021, 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:  The Commission: Secretarys-Office@sec.gov. Applicants: 
PMaloney@Investcorp.com.

FOR FURTHER INFORMATION CONTACT:  Asen Parachkevov, Senior Counsel, at 
(202) 551-6908 or Lisa Reid Ragen, Branch Chief, at (202) 551-6825 
(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.

Introduction

    1. The applicants request an order of the Commission under sections 
17(d) and 57(i) and rule 17d-1 thereunder (the ``Order'') to permit, 
subject to the terms and conditions set forth in the application (the 
``Conditions''), a Regulated Fund \1\ and one or more other Regulated 
Funds and/or one or more Affiliated Funds \2\ to enter into Co-
Investment Transactions with each other. ``Co-Investment Transaction'' 
means any transaction in which a Regulated Fund (or its Wholly-Owned 
Investment Sub (as defined below)) participated together with one or 
more Affiliated Funds and/or one or more other Regulated Funds in 
reliance on the Order. ``Potential Co-Investment Transaction'' means 
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub) could not participate together with one or more 
Affiliated Funds and/or one or more other Regulated Funds without 
obtaining and relying on the Order.\3\
---------------------------------------------------------------------------

    \1\ ``Regulated Funds'' means the Existing Regulated Fund, the 
Future Regulated Funds and the BDC Downstream Funds (defined below). 
``Future Regulated Fund'' means a closed-end management investment 
company (a) that is registered under the Act or has elected to be 
regulated as a BDC, (b) whose investment adviser (and sub-
adviser(s), if any) are an Adviser, and (c) that intends to 
participate in the co-investment program (``Co-Investment 
Program'').
    ``Adviser'' means the Existing Advisers and any future 
investment adviser that (i) controls, is controlled by, or is under 
common control with Investcorp Holdings B.S.C (``Investcorp 
Holdings''), (ii) (a) is registered as an investment adviser under 
the Investment Advisers Act of 1940 (``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 Investcorp Holdings, or (c) is an exempt 
reporting adviser pursuant to rule 203(m) of the Advisers Act 
(``Exempt Reporting Adviser''), and (iii) is not a Regulated Fund or 
a subsidiary of a Regulated Fund.
    \2\ ``Affiliated Fund'' means any Existing Affiliated Fund, any 
Investcorp Proprietary Account (as defined below) and any entity (a) 
whose investment adviser (and sub-adviser(s), if any) are Advisers, 
(b) that either (i) would be an investment company but for section 
3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act or (ii) relies on rule 3a-
7 under the Act, (c) that is not a BDC Downstream Fund, and (d) that 
intends to participate in the Co-Investment Program.
    ``BDC Downstream Fund'' means, with respect to any Regulated 
Fund that is a business development company (``BDC''), an entity (i) 
that the BDC directly or indirectly controls, (ii) that is not 
controlled by any person other than the BDC (except a person that 
indirectly controls the entity solely because it controls the BDC), 
(iii) that would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act, (iv) whose investment adviser (and sub-
adviser(s), if any) are an Adviser, (v) that is not a Wholly-Owned 
Investment Sub and (vi) that intends to participate in the Co-
Investment Program (defined below).
    Affiliated Funds may include funds that are ultimately 
structured as collateralized loan obligation funds (``CLOs''). Such 
CLOs would be investment companies but for the exception provided in 
section 3(c)(7) of the Act or their ability to rely on rule 3a-7 of 
the Act. During the investment period of a CLO, the CLO may engage 
in certain transactions customary in CLO formations with another 
Affiliated Fund on a secondary basis at fair market value. For 
purposes of the Order, any securities that were acquired by an 
Affiliated Fund in a particular Co-Investment Transaction that are 
then transferred in such customary transactions to an Affiliated 
Fund that is or will become a CLO (an ``Affiliated Fund CLO'') will 
be treated as if the Affiliated Fund CLO acquired such securities in 
the Co-Investment Transaction. For the avoidance of doubt, any such 
transfer from an Affiliated Fund to an Affiliated Fund CLO will be 
treated as a Disposition and completed pursuant to terms and 
conditions of the application, though Applicants note that the 
Regulated Funds would be prohibited from participating in such 
Disposition by section 17(a)(2) or section 57(a)(2) of the Act, as 
applicable. The participation by any Affiliated Fund CLO in any such 
Co-Investment Transaction will remain subject to the Order.
    \3\ All existing entities that currently intend to rely on the 
Order have been named as applicants and any existing or future 
entities that may rely on the Order in the future will comply with 
its terms and Conditions set forth in the application.
---------------------------------------------------------------------------

    2. The Order sought by the applicants would supersede a prior order 
\4\ (``Prior Order'') with the result that no person will continue to 
rely on the Prior Order if the Order is granted.
---------------------------------------------------------------------------

    \4\ CM Finance Inc., et al. (File No. 812-14850) Investment 
Company Act Rel. Nos. 33377 (February 19, 2019) (notice) and 33401 
(March 19, 2019) (order).
---------------------------------------------------------------------------

Applicants

    3. The Existing Regulated Fund is an externally-managed, non-
diversified, closed-end management investment company incorporated in 
Maryland that has elected to be regulated as a BDC under the Act.\5\ 
The Board \6\ of the

[[Page 34823]]

Existing Regulated Fund currently consist of four directors, three of 
whom are Independent Directors.\7\
---------------------------------------------------------------------------

    \5\ 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 section 55(a)(1) through 
55(a)(3) and makes available significant managerial assistance with 
respect to the issuers of such securities.
    \6\ ``Board'' means (i) with respect to a Regulated Fund other 
than a BDC Downstream Fund, the board of directors (or the 
equivalent) of the Regulated Fund and (ii) with respect to a BDC 
Downstream Fund, the Independent Party of the BDC Downstream Fund.
    ``Independent Party'' means, with respect to a BDC Downstream 
Fund, (i) if the BDC Downstream Fund has a board of directors (or 
the equivalent), the board or (ii) if the BDC Downstream Fund does 
not have a board of directors (or the equivalent), a transaction 
committee or advisory committee of the BDC Downstream Fund.
    \7\ ``Independent Director'' means a member of the Board of any 
relevant entity who is not an ``interested person'' as defined in 
section 2(a)(19) of the Act. No Independent Director of a Regulated 
Fund (including any non-interested member of an Independent Party) 
will have a financial interest in any Co-Investment Transaction, 
other than indirectly through share ownership in one of the 
Regulated Funds.
---------------------------------------------------------------------------

    4. CMIP is organized as a limited liability company under the laws 
of the state of Delaware. CMIP is controlled by ICMUS. CMIP has 
registered as an investment adviser with the Commission pursuant to 
section 203 of the Advisers Act. ICMUS is organized as a limited 
liability company under the laws of the state of Delaware. ICMUS is 
controlled by Investcorp International Holdings Inc. ICMUS has 
registered with the Commission pursuant to section 203 of the Advisers 
Act. ICMEU is organized as an English private limited company under the 
laws of the United Kingdom and is an Exempt Reporting Adviser. ICMEU is 
controlled by Investcorp S.A.
    5. Applicants represent that each Existing Affiliated Fund is a 
separate and distinct legal entity and each would be an investment 
company but for section 3(c)(7) of the Act.
    6. Any Adviser, in a principal capacity, and any direct or 
indirect, wholly- or majority-owned subsidiary of Investcorp Holdings 
or any Adviser, may hold various financial assets in a principal 
capacity (the ``Investcorp Proprietary Accounts'').
    7. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary may 
be prohibited from investing in a Co-Investment Transaction with a 
Regulated Fund (other than its parent) or any 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 the Regulated Fund that owns it 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 state that each 
of CMSPV1 and CMSPV2 is a Wholly-Owned Investment Sub of the Existing 
Regulated Fund, whose sole business purpose is to hold one or more 
investments on behalf of the Existing Regulated Fund. Applicants 
further state that CMSPV1 and CMSPV2 are each a separate and distinct 
legal entity. Applicants state that CMSPV1 and CMSPV2 are each exempt 
from registration under section 3(c)(7) of the Act.
---------------------------------------------------------------------------

    \8\ ``Wholly-Owned Investment Sub'' means an entity (i) that is 
wholly-owned by a Regulated Fund (with such Regulated Fund at all 
times holding, beneficially and of record, 95% or more of the voting 
and economic interests); (ii) whose sole business purpose is to hold 
one or more investments on behalf of such Regulated Fund (and in the 
case of an SBIC Subsidiary, maintain a license under the Small 
Business Investment Act of 1958 (``SBA Act'') and issue debentures 
guaranteed by the Small Business Administration (``SBA'')); (iii) 
with respect to which such Regulated Fund's Board has the sole 
authority to make all determinations with respect to the entity's 
participation under the Conditions; and (iv) that (A) would be an 
investment company but for section 3(c)(1), 3(c)(5)(C), or 3(c)(7) 
of the Act, or (B) that qualifies as a real estate investment trust 
within the meaning of section 856 of the Internal Revenue Code 
because substantially all of its assets would consist of real 
properties. ``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.
---------------------------------------------------------------------------

Applicants' Representations

A. Allocation Process

    8. Applicants represent that the Advisers have established 
processes for ensuring compliance with the Prior Order and for 
allocating initial investment opportunities, opportunities for 
subsequent investments in an issuer and dispositions of securities 
holdings reasonably designed to treat all clients fairly and equitably. 
Further, applicants represent that these processes will be extended and 
modified in a manner reasonably designed to ensure that the additional 
transactions permitted under the Order will both (i) be fair and 
equitable to the Regulated Funds and the Affiliated Funds and (ii) 
comply with the Conditions.
    9. Opportunities for Potential Co-Investment Transactions may arise 
when investment advisory personnel of an Adviser becomes aware of 
investment opportunities that may be appropriate for a Regulated Fund 
and one or more other Regulated Funds and/or one or more Affiliated 
Funds. If the requested Order is granted, the Advisers will establish, 
maintain and implement policies and procedures reasonably designed to 
ensure that, when such opportunities arise, the Advisers to the 
relevant Regulated Funds are promptly notified and receive the same 
information about the opportunity as any other Advisers considering the 
opportunity for their clients. In particular, consistent with Condition 
1, if a Potential Co-Investment Transaction falls within the then-
current Objectives and Strategies \9\ and any Board-Established 
Criteria \10\ of a Regulated Fund, the policies and procedures will 
require that the Adviser to such Regulated Fund receive sufficient 
information to allow such Adviser's investment committee to make its 
independent determination and recommendations under the Conditions. The 
Adviser to each applicable Regulated Fund will then make an independent 
determination of the appropriateness of the investment for the 
Regulated Fund in light of the Regulated Fund's then-current 
circumstances. If the Adviser to a Regulated Fund deems the Regulated 
Fund's participation in such Potential Co-Investment Transaction to be 
appropriate, then it will formulate a recommendation regarding the 
proposed order amount for the Regulated Fund.
---------------------------------------------------------------------------

    \9\ ``Objectives and Strategies'' means (i) with respect to any 
Regulated Fund other than a BDC Downstream Fund, its investment 
objectives and strategies, as described in its most current 
registration statement on Form N-2, other current filings with the 
Commission under the Securities Act of 1933 (``Securities Act'') or 
under the Securities Exchange Act of 1934, as amended, and its most 
current report to stockholders, and (ii) with respect to any BDC 
Downstream Fund, those investment objectives and strategies 
described in its disclosure documents (including private placement 
memoranda and reports to equity holders) and organizational 
documents (including operating agreements).
    \10\ ``Board-Established Criteria'' means criteria that the 
Board of a Regulated Fund may establish from time to time to 
describe the characteristics of Potential Co-Investment Transactions 
regarding which the Adviser to the Regulated Fund should be notified 
under Condition 1. The Board-Established Criteria will be consistent 
with the Regulated Fund's 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 EBITDA of the issuer, 
asset class of the investment opportunity or required commitment 
size, and not on characteristics that involve a discretionary 
assessment. The Adviser to the Regulated Fund may from time to time 
recommend criteria for the Board's consideration, but Board-
Established Criteria will only become effective if approved by a 
majority of the Independent Directors. The Independent Directors of 
a Regulated Fund may at any time rescind, suspend or qualify their 
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. Applicants state that, for each Regulated Fund and Affiliated 
Fund whose Adviser recommends participating in a Potential Co-

[[Page 34824]]

Investment Transaction, the Adviser's investment committee will approve 
an investment amount. Prior to the External Submission (as defined 
below), each proposed order amount may be reviewed and adjusted, in 
accordance with the applicable Advisers' written allocation policies 
and procedures, by the applicable Adviser's investment committee.\11\ 
The order of a Regulated Fund or Affiliated Fund resulting from this 
process is referred to as its ``Internal Order.'' The Internal Order 
will be submitted for approval by the Required Majority of any 
participating Regulated Funds in accordance with the Conditions.\12\
---------------------------------------------------------------------------

    \11\ The reason for any such adjustment to a proposed order 
amount will be documented in writing and preserved in the records of 
each Adviser.
    \12\ ``Required Majority'' means a required majority, as defined 
in section 57(o) of the Act. In the case of a Regulated Fund that is 
a registered closed-end 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). In the case of a BDC Downstream Fund 
with a board of directors (or the equivalent), the members that make 
up the Required Majority will be determined as if the BDC Downstream 
Fund were a BDC subject to section 57(o). In the case of a BDC 
Downstream Fund with a transaction committee or advisory committee, 
the committee members that make up the Required Majority will be 
determined as if the BDC Downstream Fund were a BDC subject to 
section 57(o) and as if the committee members were directors of the 
fund.
---------------------------------------------------------------------------

    11. If the aggregate Internal Orders for a Potential Co-Investment 
Transaction do not exceed the size of the investment opportunity 
immediately prior to the submission of the orders to the underwriter, 
broker, dealer or issuer, as applicable (the ``External Submission''), 
then each Internal Order will be fulfilled as placed. If, on the other 
hand, the aggregate Internal Orders for a Potential Co-Investment 
Transaction exceed the size of the investment opportunity immediately 
prior to the External Submission, then the allocation of the 
opportunity will be made pro rata on the basis of the size of the 
Internal Orders.\13\ If, subsequent to such External Submission, the 
size of the opportunity is increased or decreased, or if the terms of 
such opportunity, or the facts and circumstances applicable to the 
Regulated Funds' or the Affiliated Funds' consideration of the 
opportunity, change, the participants will be permitted to submit 
revised Internal Orders in accordance with written allocation policies 
and procedures that the Advisers will establish, implement and 
maintain.\14\
---------------------------------------------------------------------------

    \13\ The Advisers will maintain records of all proposed order 
amounts, Internal Orders and External Submissions in conjunction 
with Potential Co-Investment Transactions. Each applicable Adviser 
will provide the Eligible Directors with information concerning the 
Affiliated Funds' and Regulated Funds' order sizes to assist the 
Eligible Directors with their review of the applicable Regulated 
Fund's investments for compliance with the Conditions.
    ``Eligible Directors'' means, with respect to a Regulated Fund 
and a Potential Co-Investment Transaction, the members of the 
Regulated Fund's Board eligible to vote on that Potential Co-
Investment Transaction under section 57(o) of the Act (treating any 
registered investment company or series thereof as a BDC for this 
purpose).
    \14\ The Board of the Regulated Fund will then either approve or 
disapprove of the investment opportunity in accordance with 
Condition 2, 6, 7, 8 or 9, as applicable.
---------------------------------------------------------------------------

B. Follow-On Investments

    12. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\15\ in an issuer in which a Regulated Fund and one or more other 
Regulated Funds and/or Affiliated Funds previously have invested.
---------------------------------------------------------------------------

    \15\ ``Follow-On Investment'' means an additional investment in 
the same issuer, including, but not limited to, through the exercise 
of warrants, conversion privileges or other rights to purchase 
securities of the issuer.
---------------------------------------------------------------------------

    13. Applicants propose that Follow-On Investments would be divided 
into two categories depending on whether the prior investment was a Co-
Investment Transaction or a Pre-Boarding Investment.\16\ If the 
Regulated Funds and Affiliated Funds had previously participated in a 
Co-Investment Transaction with respect to the issuer, then the terms 
and approval of the Follow-On Investment would be subject to the 
Standard Review Follow-Ons described in Condition 8. If the Regulated 
Funds and Affiliated Funds have not previously participated in a Co-
Investment Transaction with respect to the issuer but hold a Pre-
Boarding Investment, then the terms and approval of the Follow-On 
Investment would be subject to the Enhanced-Review Follow-Ons described 
in Condition 9. All Enhanced Review Follow-Ons require the approval of 
the Required Majority. For a given issuer, the participating Regulated 
Funds and Affiliated Funds would need to comply with the requirements 
of Enhanced-Review Follow-Ons only for the first Co-Investment 
Transaction. Subsequent Co-Investment Transactions with respect to the 
issuer would be governed by the requirements of Standard Review Follow-
Ons.
---------------------------------------------------------------------------

    \16\ ``Pre-Boarding Investments'' are investments in an issuer 
held by a Regulated Fund as well as one or more Affiliated Funds 
and/or one or more other Regulated Funds that were acquired prior to 
participating in any Co-Investment Transaction: (i) In transactions 
in which the only term negotiated by or on behalf of such funds was 
price in reliance on one of the JT No-Action Letters (defined 
below); or (ii) in transactions occurring at least 90 days apart and 
without coordination between the Regulated Fund and any Affiliated 
Fund or other Regulated Fund.
---------------------------------------------------------------------------

    14. A Regulated Fund would be permitted to invest in Standard 
Review Follow-Ons either with the approval of the Required Majority 
under Condition 8(c) or without Board approval under Condition 8(b) if 
it is (i) a Pro Rata Follow-On Investment \17\ or (ii) a Non-Negotiated 
Follow-On Investment.\18\ Applicants believe that these Pro Rata and 
Non-Negotiated Follow-On Investments do not present a significant 
opportunity for overreaching on the part of any Adviser and thus do not 
warrant the time or the attention of the Board. Pro Rata Follow-On 
Investments and Non-Negotiated Follow-On Investments remain subject to 
the Board's periodic review in accordance with Condition 10.
---------------------------------------------------------------------------

    \17\ A ``Pro Rata Follow-On Investment'' is a Follow-On 
Investment (i) in which the participation of each Affiliated Fund 
and each Regulated Fund is proportionate to its outstanding 
investments in the issuer or security, as appropriate, immediately 
preceding the Follow-On Investment, and (ii) in the case of a 
Regulated Fund, a majority of the Board has approved the Regulated 
Fund's participation in the pro rata Follow-On Investments as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Follow-On Investments, in which 
case all subsequent Follow-On Investments will be submitted to the 
Regulated Fund's Eligible Directors in accordance with Condition 
8(c).
    \18\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On 
Investment in which a Regulated Fund participates together with one 
or more Affiliated Funds and/or one or more other Regulated Funds 
(i) in which the only term negotiated by or on behalf of the funds 
is price and (ii) with respect to which, if the transaction were 
considered on its own, the funds would be entitled to rely on one of 
the JT No-Action Letters.
    ``JT No-Action Letters'' means SMC Capital, Inc., SEC No-Action 
Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life 
Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000).
---------------------------------------------------------------------------

C. Dispositions

    15. Applicants propose that Dispositions \19\ would be divided into 
two categories. If the Regulated Funds and Affiliated Funds holding 
investments in the issuer had previously participated in a Co-
Investment Transaction with respect to the issuer, then the terms and 
approval of the Disposition would be subject to the Standard Review 
Dispositions described in Condition 6. If the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer but hold a Pre-Boarding 
Investment, then the terms and approval of the Disposition would be 
subject to the Enhanced Review Dispositions described in Condition 7. 
Subsequent

[[Page 34825]]

Dispositions with respect to the same issuer would be governed by 
Condition 6 under the Standard Review Dispositions.\20\
---------------------------------------------------------------------------

    \19\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \20\ However, with respect to an issuer, if a Regulated Fund's 
first Co-Investment Transaction is an Enhanced Review Disposition, 
and the Regulated Fund does not dispose of its entire position in 
the Enhanced Review Disposition, then before such Regulated Fund may 
complete its first Standard Review Follow-On in such issuer, the 
Eligible Directors must review the proposed Follow-On Investment not 
only on a stand-alone basis but also in relation to the total 
economic exposure in such issuer (i.e., in combination with the 
portion of the Pre-Boarding Investment not disposed of in the 
Enhanced Review Disposition), and the other terms of the 
investments. This additional review would be required because such 
findings would not have been required in connection with the prior 
Enhanced Review Disposition, but they would have been required had 
the first Co-Investment Transaction been an Enhanced Review Follow-
On.
---------------------------------------------------------------------------

    16. A Regulated Fund may participate in a Standard Review 
Disposition either with the approval of the Required Majority under 
Condition 6(d) or without Board approval under Condition 6(c) if (i) 
the Disposition is a Pro Rata Disposition \21\ or (ii) the securities 
are Tradable Securities \22\ and the Disposition meets the other 
requirements of Condition 6(c)(ii). Pro Rata Dispositions and 
Dispositions of a Tradable Security remain subject to the Board's 
periodic review in accordance with Condition 10.
---------------------------------------------------------------------------

    \21\ A ``Pro Rata Disposition'' is a Disposition (i) in which 
the participation of each Affiliated Fund and each Regulated Fund is 
proportionate to its outstanding investment in the security subject 
to Disposition immediately preceding the Disposition; and (ii) in 
the case of a Regulated Fund, a majority of the Board has approved 
the Regulated Fund's participation in pro rata Dispositions as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Dispositions, in which case all 
subsequent Dispositions will be submitted to the Regulated Fund's 
Eligible Directors.
    \22\ ``Tradable Security'' means a security that meets the 
following criteria at the time of Disposition: (i) It trades on a 
national securities exchange or designated offshore securities 
market as defined in rule 902(b) under the Securities Act; (ii) it 
is not subject to restrictive agreements with the issuer or other 
security holders; and (iii) it trades with sufficient volume and 
liquidity (findings as to which are documented by the Advisers to 
any Regulated Funds holding investments in the issuer and retained 
for the life of the Regulated Fund) to allow each Regulated Fund to 
dispose of its entire position remaining after the proposed 
Disposition within a short period of time not exceeding 30 days at 
approximately the value (as defined by section 2(a)(41) of the Act) 
at which the Regulated Fund has valued the investment.
---------------------------------------------------------------------------

D. Delayed Settlement

    17. Applicants represent that under the terms and Conditions of the 
application, all Regulated Funds and Affiliated Funds participating in 
a Co-Investment Transaction will invest at the same time, for the same 
price and with the same terms, conditions, class, registration rights 
and any other rights, so that none of them receives terms more 
favorable than any other. However, the settlement date for an 
Affiliated Fund in a Co-Investment Transaction may occur up to ten 
business days after the settlement date for the Regulated Fund, and 
vice versa. Nevertheless, in all cases, (i) the date on which the 
commitment of the Affiliated Funds and Regulated Funds is made will be 
the same even where the settlement date is not and (ii) the earliest 
settlement date and the latest settlement date of any Affiliated Fund 
or Regulated Fund participating in the transaction will occur within 
ten business days of each other.

E. Holders

    18. Under Condition 15, if an Adviser, its principals, or any 
person controlling, controlled by, or under common control with the 
Adviser or its principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Fund (the ``Shares''), then 
the Holders will vote such Shares as required under the Condition.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. 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. Similarly, with regard to BDCs, section 57(a)(4) of the Act 
generally prohibits certain persons specified in section 57(b) from 
participating in joint transactions with the BDC or a company 
controlled by the 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 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.
    3. Co-Investment Transactions are prohibited by either or both of 
rule 17d-1 and section 57(a)(4) without a prior exemptive order of the 
Commission to the extent that the Affiliated Funds and the Regulated 
Funds participating in such transactions fall within the category of 
persons described by rule 17d-1 and/or section 57(b), as modified by 
rule 57b-1 thereunder, as applicable, vis-[agrave]-vis each 
participating Regulated Fund. Each of the participating Regulated Funds 
and Affiliated Funds may be deemed to be affiliated persons vis-
[agrave]-vis a Regulated Fund within the meaning of section 2(a)(3) by 
reason of common control because (i) an Adviser or Advisers manage each 
of the Existing Affiliated Funds and may be deemed to control the 
Existing Affiliated Funds, and an Adviser will advise (and sub-advise, 
if applicable) and will control any future Affiliated Fund, (ii) an 
Adviser serves or will serve as investment adviser (and sub-adviser, if 
applicable) to each of the Regulated Funds and may be deemed to control 
the Regulated Funds, (iii) each BDC Downstream Fund will be deemed to 
be controlled by its BDC parent and/or its BDC parent's Adviser; and 
(iv) the Advisers are under common control. Thus, each Regulated Fund 
and each Affiliated Fund could be deemed to be a person related to a 
Regulated Fund, or BDC Downstream Fund, in a manner described by 
section 57(b) and related to the other Regulated Funds in a manner 
described by rule 17d-1; and therefore the prohibitions of rule 17d-1 
and section 57(a)(4) would apply respectively to prohibit the 
Affiliated Funds from participating in Co-Investment Transactions with 
the Regulated Funds. Further, because the BDC Downstream Funds and 
Wholly-Owned Investment Subs are controlled by the Regulated Funds, the 
BDC Downstream Funds and Wholly-Owned Investment Subs are subject to 
section 57(a)(4) (or section 17(d) in the case of Wholly-Owned 
Investment Subs controlled by Regulated Funds that are registered under 
the Act) and thus also subject to the provisions of rule 17d-1. In 
addition, because the Investcorp Proprietary Accounts will be 
controlled by Investcorp Holdings, which is the parent company of the 
Existing Advisers and, therefore, may be under common control with the 
Existing Regulated Fund, the Advisers, and any Future Regulated Funds, 
the Investcorp Proprietary Accounts could be deemed to be persons 
related to the Regulated Funds (or a company controlled by the 
Regulated Funds) in a manner described by section 17(d) or section 
57(b) and also prohibited from participating in the Co-Investment 
Program.
    4. In passing upon applications under rule 17d-1, the Commission 
considers

[[Page 34826]]

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.
    5. Applicants state that in the absence of the requested relief, in 
many circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants state that, as required by rule 17d-1(b), the 
Conditions ensure that the terms on which Co-Investment Transactions 
may be made will be consistent with the participation of the Regulated 
Funds being on a basis that it is neither different from nor less 
advantageous than other participants, thus protecting the equity 
holders of any participant from being disadvantaged. Applicants further 
state that the Conditions ensure that all Co-Investment Transactions 
are reasonable and fair to the Regulated Funds and their shareholders 
and do not involve overreaching by any person concerned, including the 
Advisers. Applicants state that the Regulated Funds' participation in 
the Co-Investment Transactions in accordance with the Conditions will 
be consistent with the provisions, policies, and purposes of the Act 
and would be done in a manner 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. Identification and Referral of Potential Co-Investment 
Transactions.
    (a) The Advisers will establish, maintain and implement policies 
and procedures reasonably designed to ensure that each Adviser is 
promptly notified of all Potential Co-Investment Transactions that fall 
within the then-current Objectives and Strategies and Board-Established 
Criteria of any Regulated Fund the Adviser manages.
    (b) When an Adviser to a Regulated Fund is notified of a Potential 
Co-Investment Transaction 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. Board Approvals of Co-Investment Transactions.
    (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 Advisers to be 
invested in the Potential Co-Investment Transaction by the 
participating Regulated Funds and any participating Affiliated Funds, 
collectively, exceeds the amount of the investment opportunity, the 
investment opportunity will be allocated among them pro rata based on 
the size of the Internal Orders, as described in section III.A.1.b. of 
the application. Each Adviser to a participating Regulated Fund will 
promptly notify and provide the Eligible Directors with information 
concerning the Affiliated Funds' and Regulated Funds' order sizes to 
assist the Eligible Directors with their review of the applicable 
Regulated Fund's investments for compliance with these Conditions.
    (c) After making the determinations required in Condition 1(b) 
above, each Adviser to a participating Regulated Fund 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 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 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 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 Fund(s) or Affiliated 
Fund(s) participating in the transaction; provided that the Required 
Majority shall not be prohibited from reaching the conclusions required 
by this Condition 2(c)(iii) if:
    (A) The settlement date for another Regulated Fund or an Affiliated 
Fund in a Co-Investment Transaction is later than the settlement date 
for the Regulated Fund by no more than ten business days or earlier 
than the settlement date for the Regulated Fund by no more than ten 
business days, in either case, so long as: (x) The date on which the 
commitment of the Affiliated Funds and Regulated Funds is made is the 
same; and (y) the earliest settlement date and the latest settlement 
date of any Affiliated Fund or Regulated Fund participating in the 
transaction will occur within ten business days of each other; or
    (B) 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, the right to have 
a board observer or any similar right to participate in the governance 
or management of the portfolio company so long as: (x) The Eligible 
Directors will have the right to ratify the selection of such director 
or board observer, if any; (y) the 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 (z) any fees or other compensation that any other Regulated Fund or 
Affiliated Fund or any affiliated person of any other Regulated Fund or 
Affiliated Fund receives in connection with the right of one or more 
Regulated Funds or Affiliated Funds 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 any participating Affiliated Funds (who may, in turn, share their 
portion with their affiliated persons) and any participating Regulated 
Fund(s) in accordance with the amount of each such party's investment; 
and
    (iv) the proposed investment by the Regulated Fund will not involve 
compensation, remuneration or a direct or indirect \23\ financial 
benefit to the Advisers, any other Regulated Fund, 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 14, (B) to the extent permitted by section 17(e) or 57(k), as 
applicable, (C) indirectly, as a result of an interest in

[[Page 34827]]

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)(B)(z).
---------------------------------------------------------------------------

    \23\ For example, procuring the Regulated Fund's investment in a 
Potential Co-Investment Transaction to permit an affiliate to 
complete or obtain better terms in a separate transaction would 
constitute an indirect financial benefit.
---------------------------------------------------------------------------

    3. Right to Decline. 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. General Limitation. Except for Follow-On Investments made in 
accordance with Conditions 8 and 9 below,\24\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\25\
---------------------------------------------------------------------------

    \24\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \25\ ``Related Party'' means (i) any Close Affiliate and (ii) in 
respect of matters as to which any Adviser has knowledge, any Remote 
Affiliate.
    ``Close Affiliate'' means the Advisers, the Regulated Funds, the 
Affiliated Funds and any other person described in section 57(b) 
(after giving effect to rule 57b-1) in respect of any Regulated Fund 
(treating any registered investment company or series thereof as a 
BDC for this purpose) except for limited partners included solely by 
reason of the reference in section 57(b) to section 2(a)(3)(D).
    ``Remote Affiliate'' means any person described in section 57(e) 
in respect of any Regulated Fund (treating any registered investment 
company or series thereof as a BDC for this purpose) and any limited 
partner holding 5% or more of the relevant limited partner interests 
that would be a Close Affiliate but for the exclusion in that 
definition.
---------------------------------------------------------------------------

    5. Same Terms and Conditions. A Regulated Fund will not participate 
in any Potential Co-Investment Transaction unless (i) the terms, 
conditions, price, class of securities to be purchased, date on which 
the commitment is entered into and registration rights (if any) will be 
the same for each participating Regulated Fund and Affiliated Fund and 
(ii) the earliest settlement date and the latest settlement date of any 
participating Regulated Fund or Affiliated Fund will occur as close in 
time as practicable and in no event more than ten business days apart. 
The grant to one or more Regulated Funds or Affiliated Funds, but not 
the respective 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 5, if Condition 
2(c)(iii)(B) is met.
    6. Standard Review Dispositions.
    (a) General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of an interest in a security and 
one or more Regulated Funds and Affiliated Funds have previously 
participated in a Co-Investment Transaction with respect to the issuer, 
then:
    (i) The Adviser to such Regulated Fund or Affiliated Fund \26\ will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition at the earliest practical time; and
---------------------------------------------------------------------------

    \26\ Any Investcorp Proprietary Account that is not advised by 
an Adviser is itself deemed to be an Adviser for purposes of 
Conditions 6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i).
---------------------------------------------------------------------------

    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to participation by such 
Regulated Fund in the Disposition.
    (b) Same Terms and Conditions. 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 Affiliated Funds and any other Regulated Fund.
    (c) No Board Approval Required. A Regulated Fund may participate in 
such a Disposition without obtaining prior approval of the Required 
Majority if:
    (i) (A) The participation of each Regulated Fund and Affiliated 
Fund in such Disposition is proportionate to its then-current holding 
of the security (or securities) of the issuer that is (or are) the 
subject of the Disposition; \27\ (B) 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 (C) the Board of 
the Regulated Fund is provided on a quarterly basis with a list of all 
Dispositions made in accordance with this Condition; or
---------------------------------------------------------------------------

    \27\ In the case of any Disposition, proportionality will be 
measured by each participating Regulated Fund's and Affiliated 
Fund's outstanding investment in the security in question 
immediately preceding the Disposition.
---------------------------------------------------------------------------

    (ii) each security is a Tradable Security and (A) the Disposition 
is not to the issuer or any affiliated person of the issuer; and (B) 
the security is sold for cash in a transaction in which the only term 
negotiated by or on behalf of the participating Regulated Funds and 
Affiliated Funds is price.
    (d) Standard Board Approval. 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.
    7. Enhanced Review Dispositions.
    (a) General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a 
Potential Co-Investment Transaction and the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer:
    (i) The Adviser to such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to participation by such 
Regulated Fund in the Disposition; and
    (iii) the Advisers will provide to the Board of each Regulated Fund 
that holds an investment in the issuer all information relating to the 
existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition.
    (b) Enhanced Board Approval. 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:
    (i) The Disposition complies with Condition 2(c)(i), (ii), 
(iii)(A), and (iv); and
    (ii) the making and holding of the Pre-Boarding Investments were 
not prohibited by section 57 or rule 17d-1, as applicable, and records 
the basis for the finding in the Board minutes.
    (c) Additional Requirements: The Disposition may only be completed 
in reliance on the Order if:
    (i) Same Terms and Conditions. Each Regulated Fund has 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 
Affiliated Funds and any other Regulated Fund;
    (ii) Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (iii) Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iv) Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds

[[Page 34828]]

that hold Pre-Boarding Investments in the issuer immediately before the 
time of completion of the Co-Investment Transaction hold the same 
security or securities of the issuer. For the purpose of determining 
whether the Regulated Funds and Affiliated Funds hold the same security 
or securities, they may disregard any security held by some but not all 
of them if, prior to relying on the Order, the Required Majority is 
presented with all information necessary to make a finding, and finds, 
that: (x) Any Regulated Fund's or Affiliated Fund's holding of a 
different class of securities (including for this purpose a security 
with a different maturity date) is immaterial \28\ in amount, including 
immaterial relative to the size of the issuer; and (y) the Board 
records the basis for any such finding in its minutes. In addition, 
securities that differ only in respect of issuance date, currency, or 
denominations may be treated as the same security; and
---------------------------------------------------------------------------

    \28\ In determining whether a holding is ``immaterial'' for 
purposes of the Order, the Required Majority will consider whether 
the nature and extent of the interest in the transaction or 
arrangement is sufficiently small that a reasonable person would not 
believe that the interest affected the determination of whether to 
enter into the transaction or arrangement or the terms of the 
transaction or arrangement.
---------------------------------------------------------------------------

    (v) No control. The Affiliated Funds, the other Regulated Funds and 
their affiliated persons (within the meaning of section 2(a)(3)(C) of 
the Act), individually or in the aggregate, do not control the issuer 
of the securities (within the meaning of section 2(a)(9) of the Act).
    8. Standard Review Follow-Ons.
    (a) General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer and the Regulated Funds and 
Affiliated Funds holding investments in the issuer previously 
participated in a Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time; and
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund.
    (b) No Board Approval Required. A Regulated Fund may participate in 
the Follow-On Investment without obtaining prior approval of the 
Required Majority if:
    (i) (A) The proposed participation of each Regulated Fund and each 
Affiliated Fund in such investment is proportionate to its outstanding 
investments in the issuer or the security at issue, as appropriate,\29\ 
immediately preceding the Follow-On Investment; and (B) 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); or
---------------------------------------------------------------------------

    \29\ To the extent that a Follow-On Investment opportunity is in 
a security or arises in respect of a security held by the 
participating Regulated Funds and Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the security in question 
immediately preceding the Follow-On Investment using the most recent 
available valuation thereof. To the extent that a Follow-On 
Investment opportunity relates to an opportunity to invest in a 
security that is not in respect of any security held by any of the 
participating Regulated Funds or Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the issuer immediately 
preceding the Follow-On Investment using the most recent available 
valuation thereof.
---------------------------------------------------------------------------

    (ii) it is a Non-Negotiated Follow-On Investment.
    (c) Standard Board Approval. 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 makes the determinations set forth in Condition 2(c). 
If the only previous Co-Investment Transaction with respect to the 
issuer was an Enhanced Review Disposition the Eligible Directors must 
complete this review of the proposed Follow-On Investment both on a 
stand-alone basis and together with the Pre-Boarding Investments in 
relation to the total economic exposure and other terms of the 
investment.
    (d) Allocation. If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii) the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.A.1.b. of the 
application.
    (e) Other Conditions. 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. Enhanced Review Follow-Ons.
    (a) General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer that is a Potential Co-
Investment Transaction and the Regulated Funds and Affiliated Funds 
holding investments in the issuer have not previously participated in a 
Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund; and
    (iii) the Advisers will provide to the Board of each Regulated Fund 
that holds an investment in the issuer all information relating to the 
existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition.
    (b) Enhanced Board Approval. 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 reviews the 
proposed Follow-On Investment both on a stand-alone basis and together 
with the Pre-Boarding Investments in relation to the total economic 
exposure and other terms and makes the determinations set forth in 
Condition 2(c). In addition, the Follow-On Investment may only be 
completed in reliance on the Order if the Required Majority of each 
participating Regulated Fund determines that the making and holding of 
the Pre-Boarding Investments were not prohibited by section 57 (as 
modified by rule 57b-1) or rule 17d-1, as applicable. The basis for the 
Board's findings will be recorded in its minutes.
    (c) Additional Requirements. The Follow-On Investment may only be 
completed in reliance on the Order if:

[[Page 34829]]

    (i) Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (ii) Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iii) Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial in amount, 
including immaterial relative to the size of the issuer; and (y) the 
Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency, or denominations may be treated as the same security; and
    (iv) No control. The Affiliated Funds, the other Regulated Funds 
and their affiliated persons (within the meaning of section 2(a)(3)(C) 
of the Act), individually or in the aggregate, do not control the 
issuer of the securities (within the meaning of section 2(a)(9) of the 
Act).
    (d) Allocation. If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii) the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.A.1.b. of the 
application.
    (e) Other Conditions. 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.
    10. Board Reporting, Compliance and Annual Re-Approval
    (a) Each Adviser to a Regulated Fund will present to the Board of 
each Regulated Fund, on a quarterly basis, and at such other times as 
the Board may request, (i) a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Funds or any 
of the 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 such investment opportunities were not 
made available to the Regulated Fund; (ii) a record of all Follow-On 
Investments in and Dispositions of investments in any issuer in which 
the Regulated Fund holds any investments by any Affiliated Fund or 
other Regulated Fund during the prior quarter; and (iii) all 
information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by other Regulated 
Funds or Affiliated Funds that the Regulated Fund considered but 
declined to participate in, so that the Independent Directors, may 
determine whether all Potential Co-Investment Transactions and Co-
Investment Transactions during the preceding quarter, including those 
investments that the Regulated Fund considered but declined to 
participate in, comply with the Conditions.
    (b) All information presented to the Regulated Fund's 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.
    (c) 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. 
In the case of a BDC Downstream Fund that does not have a chief 
compliance officer, the chief compliance officer of the BDC that 
controls the BDC Downstream Fund will prepare the report for the 
relevant Independent Party.
    (d) The Independent Directors (including the non-interested members 
of each Independent Party) will consider at least annually whether 
continued participation in new and existing Co-Investment Transactions 
is in the Regulated Fund's best interests.
    11. Record Keeping. 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).
    12. Director Independence. No Independent Director (including the 
non-interested members of any Independent Party) 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.
    13. Expenses. 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 advisory agreements with the Regulated Funds and the 
Affiliated Funds, be shared by the Regulated Funds and the 
participating Affiliated Funds in proportion to the relative amounts of 
the securities held or being acquired or disposed of, as the case may 
be.
    14. Transaction Fees.\30\ Any transaction fee (including break-up, 
structuring, monitoring or commitment fees but excluding brokerage or 
underwriting compensation permitted by section 17(e) or 57(k)) received 
in connection with any Co-Investment Transaction will be distributed to 
the participants 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), and the account will earn a competitive rate of 
interest that will also be divided pro rata among the participants. 
None of the Advisers, the Affiliated Funds, the other Regulated Funds 
or any affiliated person of the Affiliated Funds or the Regulated Funds

[[Page 34830]]

will receive any additional compensation or remuneration of any kind as 
a result of or in connection with a Co-Investment Transaction other 
than (i) 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)(B)(z), (ii) brokerage or 
underwriting compensation permitted by section 17(e) or 57(k) or (iii) 
in the case of the Advisers, investment advisory compensation paid in 
accordance with investment advisory agreements between the applicable 
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
---------------------------------------------------------------------------

    \30\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
---------------------------------------------------------------------------

    15. Independence. 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 in the same percentages as the Regulated Fund's other 
shareholders (not including the Holders) when voting on (1) the 
election of directors; (2) the removal of one or more directors; or (3) 
any other matter under either the Act or applicable State law affecting 
the Board's composition, size or manner of election.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DesLesDernier,
Assistant Secretary.
[FR Doc. 2021-13911 Filed 6-29-21; 8:45 am]
BILLING CODE 8011-01-P


