[Federal Register Volume 79, Number 186 (Thursday, September 25, 2014)]
[Notices]
[Pages 57596-57601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22792]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31253; File No. 812-14028]
Monroe Capital Corporation, et al.; Notice of Application
September 19, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 17(d),
57(a)(4), and 57(i) of the Investment Company Act of 1940 (the ``Act'')
and rule 17d-1 under the Act to permit certain joint transactions
otherwise prohibited by sections 17(d), 57(a)(4), and 57(i) of the Act
and rule 17d-1 under the Act.
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[[Page 57597]]
Summary of Application: Applicants request an order to permit
certain business development companies (``BDCs'') and registered
closed-end management investment companies to co-invest in portfolio
companies with each other and with affiliated investment funds.
Applicants: Monroe Capital Corporation (the ``Company''), MC
Funding Ltd. (``MC Funding''), MC Funding, Ltd. 2013-1 (``2013-1''),
Monroe Capital Partners Fund, L.P. (``Monroe SBIC''), Monroe Capital
Partners Fund II, L.P. (``Monroe SBIC II''), Monroe Capital Corporation
SBIC, LP (``MCC SBIC''), Monroe Capital Senior Secured Direct Loan Fund
LP (``MCSSDL Fund''), Monroe Capital Senior Secured Direct Loan Fund
(Unleveraged) LP (``MCSSDL-U Fund''), Monroe FCM Direct Loan Fund LP
(``MFDL Fund'' and collectively with MC Funding, 2013-1, Monroe SBIC,
Monroe SBIC II, MCSSDL Fund and MCSSDL-U Fund, the ``Existing
Affiliated Private Funds''), Monroe Capital Management Advisors, LLC
(``MCMA''), Monroe Capital Management LLC (``Monroe Collateral
Manager''), Monroe Capital Partners Fund Advisors, Inc. (``Monroe SBIC
Adviser''), Monroe Capital Partners Fund II Advisors, Inc. (``Monroe
SBIC II Adviser'' and, collectively with MCMA, Monroe Collateral
Manager, and Monroe SBIC Adviser, the ``Affiliated Advisers''), Monroe
Capital Partners Fund, LLC (``Monroe SBIC General Partner''), Monroe
Capital Partners Fund II, LLC (``Monroe SBIC II General Partner''), MCC
SBIC GP, LLC (``MCC SBIC General Partner''), Monroe Capital Senior
Secured Direct Loan Fund LLC (``MCSSDL Funds General Partner,''), and
Monroe FCM Direct Loan Fund LLC (``MFDL Fund General Partner''), and
Monroe Capital BDC Advisors, LLC (``BDC Adviser'').\1\
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\1\ All references to the term ``BDC Adviser'' include
successors-in-interest to the BDC Adviser. A successor-in-interest
is limited to an entity that results from a reorganization into
another jurisdiction or change in the type of business organization.
DATES: Filing Dates: The application was filed on April 18, 2012, and
amended on February 27, 2013, June 5, 2013, November 27, 2013, July 16,
2014, and September 5, 2014.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on October 14, 2014, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St. NE., Washington, DC 20549-1090. Applicants: 311 South Wacker Drive,
Suite 6400, Chicago, IL 60606.
FOR FURTHER INFORMATION CONTACT: Mark Zaruba, Senior Counsel, at (202)
551-6878 or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Chief
Counsel's Office, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. The Company 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. The Company's Objectives and Strategies
\2\ are to maximize the total return to stockholders in the form of
current income and capital appreciation through investment in primarily
senior, unitranche and junior secured debt of middle-market companies
and, to a lesser extent, unsecured subordinated debt and equity
investments. A majority of the directors of the Company are persons who
are not ``interested persons'' as defined in section 2(a)(19) of the
Act (``Non-Interested Directors'').
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\2\ ``Objectives and Strategies'' means a Regulated Fund's (as
defined below) investment objectives and strategies, as described in
the Regulated Fund's registration statement on Form N-2, 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.
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2. The BDC Adviser is a Delaware corporation and is wholly owned
and controlled by Theodore L. Koenig. The BDC Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940
(``Advisers Act'') and serves as investment adviser to the Company. Mr.
Koenig also directly or indirectly owns a controlling interest in, and
serves as the principal executive officer of, each of the Affiliated
Advisers.
3. MCC SBIC is a Delaware limited partnership and is licensed to
operate as a small business investment company (``SBIC'') by the United
States Small Business Administration (``SBA''). MCC SBIC General
Partner is a Delaware limited liability company and serves as general
partner of MCC SBIC. The Company owns 100 percent of the MCC SBIC
General Partner's equity interests and the MCC SBIC General Partner
owns 1 percent of MCC SBIC in the form of a general partnership
interest. The Company directly owns 99 percent of MCC SBIC in the form
of limited partnership interests. As a result, the Company directly or
indirectly wholly owns MCC SBIC. MCC SBIC General Partner has appointed
the BDC Adviser as the sole investment adviser for MCC SBIC.
4. MC Funding and 2013-1 are exempted companies incorporated under
the laws of the Cayman Islands with limited liability. Monroe
Collateral Manager is a Delaware limited liability company and is the
investment adviser for MC Funding and 2013-1. Monroe SBIC and Monroe
SBIC II Delaware limited partnerships and are each licensed as SBIC by
the SBA. Monroe SBIC General Partner and Monroe SBIC II General
Partner, each a Delaware limited liability company, are the general
partners of Monroe SBIC and Monroe SBIC II, respectively, and have
entered into agreements with Monroe SBIC Adviser and Monroe SBIC II
Adviser, each a Delaware corporation, to serve as investment adviser
for Monroe SBIC and Monroe SBIC II, respectively. MCSSDL Fund, MCSSDL-U
Fund, and MFDL Fund are Delaware limited partnerships. MCSSDL Funds
General Partner, a Delaware limited liability company, is the general
partner of MCSSDL Fund and MCSSDL-U Fund and MFDL Fund General Partner,
a Delaware limited liability company, is the general partner of MFDL
Fund. MCMA, a Delaware limited liability company, serves as investment
adviser for MCSSDL Fund, MCSSDL-U Fund, and MFDL Fund under agreements
with MCSSDL Funds General Partner and MFDL Fund General Partner,
respectively. Each of the Existing Affiliated Private Funds is excluded
from the definition of investment company by section 3(c)(1) of the
Act. Each of the Affiliated Advisers is
[[Page 57598]]
registered as an investment adviser under the Advisers Act.\3\
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\3\ MCMA has filed a Form ADV with the Commission. Monroe
Collateral Manager, Monroe SBIC Adviser and Monroe SBIC II Adviser
are each investment advisers registered under the Advisers Act
because they are relying advisers of MCMA.
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5. Applicants seek an order (``Order'') to permit each Regulated
Fund,\4\ together with one or more Regulated Funds and/or Affiliated
Private Funds \5\ to participate in the same investment opportunities
through a co-investment program where such participation would
otherwise be prohibited under sections 17(d) or 57(a)(4) and rule 17d-1
by (a) co-investing with each other in securities issued by issuers in
private placement transactions in which an Adviser negotiates terms in
addition to price; \6\ and (b) making additional investments in
securities of such issuers, including through the exercise of warrants,
conversion privileges, and other rights to purchase securities of the
issuers (``Follow-On Investments''). ``Co-Investment Transaction''
means any transaction in which a Regulated Fund (or its Wholly-Owned
Investment Sub, as defined below) participated together with one or
more other Regulated Funds and/or one or more Affiliated Private 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 Affiliated Private Funds and/or one or more
other Regulated Funds without obtaining and relying on the Order.\7\
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\4\ ``Regulated Funds'' means the Company and the Future
Regulated Funds. ``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 is an Adviser, and (c) that intends to participate in the
Co-Investment Program (as defined below). ``Adviser'' means (a) the
BDC Adviser, (b) an Affiliated Adviser, or (c) any investment
adviser that controls, is controlled by or is under common control
with the BDC Adviser and is registered as an investment adviser
under the Advisers Act.
\5\ ``Affiliated Private Fund'' means any Existing Affiliated
Private Fund or any entity (a) whose investment adviser is an
Adviser, (b) that would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act, and (c) that intends to participate
in Co-Investment Program.
\6\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
\7\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application.
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6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any other Regulated Fund or Affiliated Private Fund because it would be
a company controlled by a Regulated Fund for purposes of sections 17(d)
or 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 and that the Wholly-Owned
Investment Sub's participation in any such transaction be treated, for
purposes of the requested Order, as though the Regulated Fund were
participating directly. Applicants represent that this treatment is
justified because a Wholly-Owned Investment 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 of directors (for any Regulated Fund, the
``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. MCC SBIC is a
Wholly-Owned Investment Sub and SBIC Subsidiary of the Company.
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\8\ The term ``Wholly-Owned Investment Sub'' means an entity (i)
that is wholly-owned by a Regulated Fund (with the Regulated Fund at
all times holding, directly or indirectly, 100% 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 SBA Act and
issue debentures guaranteed by the SBA); (iii) with respect to which
the Regulated Fund's board of directors (``Board'') has the sole
authority to make all determinations with respect to the entity's
participation under the conditions of the application; and (iv) that
would be an investment company but for section 3(c)(1) or 3(c)(7) of
the Act. ``SBIC Subsidiary'' means an entity that is licensed by the
SBA to operate under the Small Business Investment Act of 1958 (the
``SBA Act'') as a small business investment company. An SBIC
Subsidiary may be a Wholly-Owned Investment Sub if it satisfies the
conditions in this definition.
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7. When considering Potential Co-Investment Transactions for any
Regulated Fund, the BDC Adviser will consider only the Objectives and
Strategies, investment policies, investment positions, capital
available for investment (``Available Capital''),\9\ and other
pertinent factors applicable to that Regulated Fund. The BDC 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 Private
Funds, with certain exceptions based on Available Capital or
diversification.\10\
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\9\ ``Available Capital'' consists solely of liquid assets not
held for permanent investment, including cash, amounts that can
currently be drawn down from lines of credit, and marketable
securities held for short-term purposes. In addition, for the
Affiliated Private Funds, Available Capital would include bona fide
uncalled capital commitments that can be called by the settlement
date of the Co-Investment Transaction.
\10\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
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8. Other than pro rata dispositions and Follow-On Investments as
provided in conditions 7 and 8, and after making the determinations
required in conditions 1 and 2(a), the 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'') will approve each Co-
Investment Transaction prior to any investment by the participating
Regulated Fund.\11\
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\11\ In the case of a Regulated Fund that is a registered
closed-end fund, the Board members that make up the Eligible
Directors and the Required Majority will be determined as if the
Regulated Fund were a BDC subject to section 57(o).
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9. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, a Regulated 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
Affiliated Private 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
[[Page 57599]]
of pro rata dispositions and Follow-On Investments with the result that
all dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
10. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than
indirectly through share ownership in one of the Regulated Funds.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act generally
prohibit affiliated persons of a registered investment company from
participating in joint transactions with the company or a company
controlled by such registered investment company unless the Commission
has granted an order permitting such transactions. Section 57(a)(4) of
the Act prohibits certain affiliated persons of a BDC from
participating in joint transactions with the BDC (or a company
controlled by such BDC) in contravention of rules as prescribed by the
Commission. Section 57(i) of the Act provides that, until the
Commission prescribes rules under section 57(a)(4), the Commission's
rules under section 17(d) of the Act applicable to registered closed-
end investment companies will be deemed to apply to BDCs. Because the
Commission has not adopted any rules under section 57(a)(4), rule 17d-1
applies to joint transactions involving a BDC. 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.
2. The Regulated Funds and the Affiliated Private Funds (a) may be
deemed to be under common control, and thus affiliated persons of each
other under section 2(a)(3)(C) of the Act and (b) will be persons
related to a Regulated Fund that is a BDC in a manner described in
section 57(b) of the Act. As a result, these relationships will cause
each Regulated Fund (or its Wholly-Owned Investment Sub) and Affiliated
Private Fund participating in a Co-Investment Transaction with a
Regulated Fund (or its Wholly-Owned Investment Sub) to be subject to
section 17(d) or section 57(a)(4) and rule 17d-1.
3. Applicants state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants state that the participation of the Regulated
Funds in Co-Investment Transactions in accordance with the conditions
to the requested relief would be consistent with the provisions,
policies and purposes of the Act and on a basis that is not different
from, or less advantageous than, of other participants.
Applicants' Conditions
Applicants agree that the Order will be subject to the following
conditions:
1. Each time an Adviser considers a Potential Co-Investment
Transaction for an Affiliated Private Fund or another Regulated Fund
that falls within a Regulated Fund's then-current Objectives and
Strategies, the Regulated Fund's Adviser will make an independent
determination of the appropriateness of the investment for such
Regulated Fund in light of the Regulated Fund's then-current
circumstances.
2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
(b) If the aggregate amount recommended by the applicable Adviser
to be invested by the Regulated Fund in the Potential Co-Investment
Transaction, together with the amount proposed to be invested by the
other participating Regulated Funds and Affiliated Private 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 Available Capital, up
to the amount proposed to be invested by each. The applicable Adviser
will provide the Eligible Directors of each participating Regulated
Fund with information concerning each participating party's Available
Capital to assist the Eligible Directors with their review of the
Regulated Fund's investments for compliance with these allocation
procedures.
(c) After making the determinations required in conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
Affiliated Private Fund) to the Eligible Directors of each
participating Regulated Fund for their consideration. A Regulated Fund
will co-invest with one or more other Regulated Funds and/or one or
more Affiliated Private Funds only if, prior to the Regulated Fund's
participation in the Potential Co-Investment Transaction, a Required
Majority concludes that:
(i) The terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
(ii) The Potential Co-Investment Transaction is consistent with:
(A) the interests of the shareholders of the Regulated Fund; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) The investment by any other Regulated Funds or Affiliated
Private Funds would not disadvantage the Regulated Fund, and
participation by the Regulated Fund would not be on a basis different
from or less advantageous than that of other Regulated Funds or
Affiliated Private Funds; provided that, if any other Regulated Fund or
Affiliated Private 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 will not be interpreted to prohibit the Required
Majority from reaching the conclusions required by this condition
(2)(c)(iii), if:
(A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
(B) the applicable Adviser agrees to, and does, provide periodic
reports to the Regulated Fund's Board with respect to the actions of
such director or the information received by such board observer or
obtained through the exercise of any similar right to participate in
the governance or management of the portfolio company; and
(C) any fees or other compensation that an Affiliated Private Fund
or a Regulated Fund or any affiliated person of any Affiliated Private
Fund or any Regulated Fund receives in connection with the right of an
Affiliated Private Fund or a Regulated Fund to nominate a director or
appoint a board observer or otherwise to participate in the governance
or management of the portfolio company will be shared proportionately
among the participating Affiliated Private Funds (who each may, in
turn, share its portion with its affiliated persons) and the
participating Regulated Funds in accordance with the amount of each
party's investment; and
(iv) the proposed investment by the Regulated Fund will not benefit
the
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Advisers, the Affiliated Private Funds or the other Regulated Funds or
any affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by
condition 13, (B) to the extent permitted by section 17(e) or 57(k) of
the Act, as applicable, (C) indirectly, as a result of an interest in
the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in condition 2(c)(iii)(C).
3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
4. The applicable Adviser will present to the Board of each
Regulated Fund, on a quarterly basis, a record of all investments in
Potential Co-Investment Transactions made by any of the other Regulated
Funds or Affiliated Private Funds during the preceding quarter that
fell within the Regulated Fund's then-current Objectives and Strategies
that were not offered 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,\12\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, Affiliated Private
Fund, or any affiliated person of another Regulated Fund or Affiliated
Private Fund is an existing investor.
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\12\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
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6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of
securities to be purchased, settlement date, and registration rights
will be the same for each participating Regulated Fund and Affiliated
Private Fund. The grant to an Affiliated Private Fund or another
Regulated Fund, but not the Regulated Fund, of the right to nominate a
director for election to a portfolio company's board of directors, the
right to have an observer on the board of directors or similar rights
to participate in the governance or management of the portfolio company
will not be interpreted so as to violate this condition 6, if
conditions 2(c)(iii)(A), (B) and (C) are met.
7. (a) If any Affiliated Private Fund or any Regulated Fund elects
to sell, exchange or otherwise dispose of an interest in a security
that was acquired in a Co-Investment Transaction, the applicable
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
Affiliated Private Funds and Regulated Funds.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and Affiliated Private Fund in
such disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
(d) Each Affiliated Private Fund and each Regulated Fund will bear
its own expenses in connection with any such disposition.
8. (a) If any Affiliated Private Fund or any Regulated Fund desires
to make a Follow-On Investment in a portfolio company whose securities
were acquired in a Co-Investment Transaction, the applicable Advisers
will:
(i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest
practical time; and
(ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Regulated Fund.
(b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Affiliated
Private Fund in such investment is proportionate to its outstanding
investments in the issuer immediately preceding the Follow-On
Investment; and (ii) the Board of the Regulated Fund has approved as
being in the best interests of the Regulated Fund the ability to
participate in Follow-On Investments on a pro rata basis (as described
in greater detail in the application). In all other cases, the Adviser
will provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors, and the Regulated Fund will
participate in such Follow-On Investment solely to the extent that a
Required Majority determines that it is in the Regulated Fund's best
interests.
(c) If, with respect to any Follow-On Investment:
(i) The amount of the opportunity is not based on the Regulated
Funds' and the Affiliated Private Funds' outstanding investments
immediately preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the Adviser to be invested
by each Regulated Fund in the Follow-On Investment, together with the
amount proposed to be invested by the participating Affiliated Private
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 participant's Available Capital, up to the
amount proposed to be invested by each.
(d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in the
application.
9. The Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or Affiliated Private Funds
that the Regulated Fund considered but declined to participate in, so
that the Non-Interested Directors may determine whether all investments
made during the preceding quarter, including those investments that 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
[[Page 57601]]
the continued appropriateness for the Regulated Fund of participating
in new and existing Co-Investment Transactions.
10. Each Regulated Fund will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under section 57(f) of the Act.
11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act) of a Affiliated
Private 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 Affiliated Private Funds and
the Regulated Funds, be shared by the Regulated Funds and Affiliated
Private 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 (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable) received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Funds
and Affiliated Private 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 such 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
Private Funds based on the amounts they invest in such Co-Investment
Transaction. None of the Affiliated Private Funds, the Advisers, the
other Regulated Funds or any affiliated person of the Regulated Funds
or Affiliated Private Funds will receive additional compensation or
remuneration of any kind as a result of or in connection with a Co-
Investment Transaction (other than (a) in the case of the Regulated
Funds and the Affiliated Private Funds, the pro rata transaction fees
described above and fees or other compensation described in condition
2(c)(iii)(C); and (b) in the case of an Adviser, investment advisory
fees paid in accordance with the agreement between the Adviser and the
Regulated Fund or Affiliated Private Fund).
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22792 Filed 9-24-14; 8:45 am]
BILLING CODE 8011-01-P