[Federal Register Volume 80, Number 221 (Tuesday, November 17, 2015)]
[Notices]
[Pages 71895-71900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29204]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31899; File No. 812-14256]


THL Credit, Inc., et al.; Notice of Application

November 10, 2015.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  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 a 
business development company and certain other closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds.
    Applicants: THL Credit, Inc. (``TCRD''), THL Credit Holdings, Inc. 
(``TCRD Subsidiary''), THL Credit Direct Lending Fund III LLC (``THL 
Credit Fund III''), THL Credit Advisors LLC (``BDC Adviser'') on behalf 
of itself and its successors,\1\ and THL Credit Senior Loan Strategies 
LLC (``Subsidiary Adviser'') on behalf of itself and its successors.
---------------------------------------------------------------------------

    \1\ The term ``successor,'' as applied to an Adviser, means 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 December 23, 2013, 
and amended on February 10, 2015, May 20, 2015, September 11, 2015, and 
November 6, 2015.
    Hearing or Notification of Hearing: An order granting the requested 
relief will

[[Page 71896]]

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 
December 7, 2015, and should be accompanied by proof of service on 
applicants, in the form of an affidavit or, for lawyers, a certificate 
of service. Pursuant to rule 0-5 under the Act, hearing requests should 
state the nature of the writer's interest, any facts bearing upon the 
desirability of a hearing on the matter, the reason for the request, 
and the issues contested. Persons who wish to be notified of a hearing 
may request notification by writing to the Commission's Secretary.

ADDRESSES:  Brent J. Fields, Secretary, U.S. Securities and Exchange 
Commission, 100 F St. NE., Washington, DC 20549-1090. Applicants: 100 
Federal St., 31st Floor, Boston, MA 02110.

FOR FURTHER INFORMATION CONTACT:  Courtney S. Thornton, Senior Counsel, 
at (202) 551-6812 or David P. Bartels, 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. TCRD is an externally managed, non-diversified closed-end 
management investment company incorporated in Delaware that has elected 
to be regulated as a business development company (``BDC'') under 
Section 54(a) of the Act.\2\ TCRD's Objectives and Strategies \3\ are 
to generate both current income and capital appreciation, primarily 
through investments in privately negotiated debt and equity securities 
of middle market companies. The board of directors (``Board'') of TCRD 
is comprised of seven directors, six of whom are Non-Interested 
Directors. A majority of the directors of each of the Regulated Funds 
will be persons who are not ``interested persons'' as defined in 
section 2(a)(19) of the Act (``Non-Interested Directors'').
---------------------------------------------------------------------------

    \2\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \3\ ``Objectives and Strategies'' means the investment 
objectives and strategies of a Regulated Fund (as defined below), as 
described in the Regulated Fund's registration statement 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.
---------------------------------------------------------------------------

    2. THL Credit Fund III is a private fund organized in Delaware that 
has not yet formally commenced principal operations. THL Credit Fund 
III's investment objective is to generate current income consistent 
with capital preservation by investing primarily in first lien and 
second lien secured loans. THL Credit Fund III is not registered under 
the Act in reliance on the exclusion from the definition of 
``investment company'' in section 3(c)(7) of the Act.
    3. The BDC Adviser is a Delaware limited liability company and is 
registered as an investment adviser under the Advisers Act. The BDC 
Adviser serves as the investment adviser to TCRD and will serve as 
investment adviser to THL Credit Fund III. The Subsidiary Adviser is a 
Delaware limited liability company that is registered under the 
Advisers Act.
    4. Applicants seek an order (``Order'') to permit one or more 
Regulated Funds \4\ and/or one or more Affiliated Funds \5\ to 
participate in the same investment opportunities through a proposed co-
investment program (the ``Co-Investment Program'') where such 
participation would otherwise be prohibited under section 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 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 Funds 
and/or one or more other Regulated Funds without obtaining and relying 
on the Order.\7\
---------------------------------------------------------------------------

    \4\ ``Regulated Fund'' means TCRD and any Future Regulated Fund. 
``Future Regulated Fund'' means any closed-end management investment 
company (a) that is registered under the Act or has elected to be 
regulated as BDC, (b) whose investment adviser is an Adviser, and 
(c) that intends to participate in the Co-Investment Program. The 
term ``Adviser'' means (a) the BDC Adviser and the Subsidiary 
Adviser and (b) any future 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 Fund'' means THL Credit Fund III and any Future 
Affiliated Funds. ``Future Affiliated Funds'' means 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 the 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. TCRD manages two 
limited term investment funds, THL Credit Greenway Fund LLC and THL 
Credit Greenway Fund II LLC (together, the ``Greenway Entities''). 
TCRD and the Greenway Entities previously agreed to conditions that 
would apply to any co-investment transactions between them, but the 
Greenway Entities are not applicants to the Order. Accordingly, the 
Greenway Entities would not be able to rely on the requested Order 
to participate in Co-Investment Transactions pursuant to the Order. 
Moreover, the Greenway Entities will not be making any new or 
follow-on co-investments with TCRD because the Greenway Entities are 
fully invested and do not, and will not at any point, have any 
capital to invest. No Greenway Entity will have an interest in any 
issuer that is the subject of a Co-Investment Transaction completed 
pursuant to the Order, and TCRD will not form or manage another 
entity structured in the same manner as the Greenway Entities. 
Additionally, THL Credit Logan JV LLC (``Logan JV''), a joint 
venture with TCRD, would not be able to rely on the requested Order 
and, accordingly, would not participate in Co-Investment 
Transactions pursuant to the Order. No entity that holds an interest 
in Logan JV is or would be an affiliated person, or an affiliated 
person of an affiliated person, of TCRD within the meaning of 
section 2(a)(3) of the Act, other than by virtue of its ownership 
interest in Logan JV.
---------------------------------------------------------------------------

    5. 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 Affiliated Fund or other Regulated Fund because it would be a 
company controlled by its parent Regulated Fund for purposes of section 
57(a)(4) of the Act and rule 17d-1. Applicants request that each 
Wholly-Owned Investment Sub be permitted to participate in Co-

[[Page 71897]]

Investment Transactions in lieu of its parent Regulated Fund and that 
the Wholly-Owned Investment Sub's participation in any such transaction 
be treated, for purposes of the requested order, as though the parent 
Regulated Fund were participating directly. Applicants represent that 
this treatment is justified because a Wholly-Owned Investment Sub would 
have no purpose other than serving as a holding vehicle for the 
Regulated Fund's investments and, therefore, no conflicts of interest 
could arise between the Regulated Fund and the Wholly-Owned Investment 
Sub. The Regulated Fund's Board would make all relevant determinations 
under the conditions with regard to a Wholly-Owned Investment Sub's 
participation in a Co-Investment Transaction, and the Regulated Fund's 
Board would be informed of, and take into consideration, any proposed 
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If 
the Regulated Fund proposes to participate in the same Co-Investment 
Transaction with any of its Wholly-Owned Investment Subs, the Board 
will also be informed of, and take into consideration, the relative 
participation of the Regulated Fund and the Wholly-Owned Investment 
Sub. TCRD Subsidiary is a Wholly-Owned Investment Sub of TCRD, which is 
structured as a Delaware corporation. In reliance on the exclusion from 
the definition of ``investment company'' provided by section 3(c)(7) of 
the Act, TCRD Subsidiary is not registered under the Act.
---------------------------------------------------------------------------

    \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, beneficially and of record, 100% of the voting 
and economic interests); (ii) whose sole business purpose is to hold 
one or more investments on behalf of the Regulated Fund; (iii) with 
respect to which the Regulated Fund's Board has the sole authority 
to make all determinations with respect to the entity's 
participation under the conditions of the application; and (iv) that 
would be an investment company but for Section 3(c)(1) or 3(c)(7) of 
the Act.
---------------------------------------------------------------------------

    6. When considering Potential Co-Investment Transactions for a 
Regulated Fund, the applicable Adviser will consider only the 
Objectives and Strategies, investment policies, investment positions, 
Available Capital (defined below),\9\ and other pertinent factors 
applicable to that Regulated Fund. The Board of each Regulated Fund, 
including the Non-Interested Directors, has (or will have prior to 
relying on the requested Order) determined that it is in the best 
interests of the Regulated Fund to participate in Co-Investment 
Transactions. The Regulated Fund Advisers expect 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 Affiliated Funds, with certain exceptions based on Available 
Capital or diversification.\10\
---------------------------------------------------------------------------

    \9\ The amount of each Regulated Fund's capital available for 
investment (``Available Capital'') will be determined based on the 
amount of cash on hand, existing commitments and reserves, if any, 
the targeted leverage level, targeted asset mix, and other 
investment policies and restrictions set from time to time by the 
Board of the applicable Regulated Fund or imposed by applicable 
laws, rules, regulations, or interpretations. Likewise, an 
Affiliated Fund's Available Capital will be determined based on the 
amount of cash on hand, existing commitments and reserves, if any, 
the targeted leverage level, targeted asset mix and other investment 
policies and restrictions set by the Affiliated Fund's directors, 
general partners or adviser or imposed by applicable laws, rules, 
regulations or interpretations.
    \10\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
---------------------------------------------------------------------------

    7. Other than pro rata dispositions and Follow-On Investments as 
provided in conditions 7 and 8, and after making the determinations 
required in conditions 1 and 2(a), the 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'') \11\ will approve each 
Co-Investment Transaction prior to any investment by the participating 
Regulated Fund.
---------------------------------------------------------------------------

    \11\ 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).
---------------------------------------------------------------------------

    8. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and 
Affiliated Fund in such disposition is proportionate to its outstanding 
investments in the issuer immediately preceding the disposition or 
Follow-On Investment, as the case may be; and (ii) the Board of the 
Regulated Fund has approved that Regulated Fund's participation in pro 
rata dispositions and Follow-On Investments as being in the best 
interests of the Regulated Fund. If the Board does not so approve, any 
such disposition or Follow-On Investment will be submitted to the 
Regulated Fund's Eligible Directors. The Board of any Regulated Fund 
may at any time rescind, suspend or qualify its approval of pro rata 
dispositions and Follow-On Investments with the result that all 
dispositions and/or Follow-On Investments must be submitted to the 
Eligible Directors.
    9. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than 
indirectly through share ownership in one of the Regulated Funds.
    10. If an Adviser or its principals, or any person controlling, 
controlled by, or under common control with the Adviser or its 
principals, and any Affiliated Fund (collectively, the ``Holders'') own 
in the aggregate more than 25 per cent of the outstanding voting shares 
of a Regulated Fund, then the Holders will vote such shares as directed 
by an independent third party (such as the trustee of a voting trust or 
a proxy adviser) when voting on (1) the election of directors; (2) the 
removal of one or more directors; or (3) the vote of a majority of the 
outstanding voting securities, as defined in section 2(a)(42) of the 
Act. Applicants believe that this condition will ensure that the Non-
Interested Directors will act independently in evaluating the Co-
Investment Program, because the ability of the Adviser or its 
principals to influence the Non-Interested Directors by a suggestion, 
explicit or implied, that the Non-Interested Directors can be removed 
will be limited significantly. The Non-Interested Directors shall 
evaluate and approve any such voting trust or proxy adviser, taking 
into account its qualifications, reputation for independence, cost to 
the shareholders, and other factors that they deem relevant.
    Applicants' Legal Analysis:
    1. Section 57(a)(4) of the Act prohibits certain affiliated persons 
of a BDC from participating in joint transactions with the BDC or a 
company controlled by a BDC in contravention of rules as prescribed by 
the Commission. Under section 57(b)(2) of the Act, any person who is 
directly or indirectly controlling, controlled by, or under common 
control with a BDC is subject to section 57(a)(4). Applicants submit 
that each of the Regulated Funds and Affiliated Funds could be deemed 
to be a person related to each Regulated Fund in a manner described by 
section 57(b) by virtue of being under common control. Section 57(i) of 
the Act provides that, until the Commission prescribes rules under 
section 57(a)(4), the Commission's rules under section 17(d) of the Act 
applicable to registered closed-end investment companies will be deemed 
to apply to transactions subject to section 57(a)(4). Because the 
Commission has not adopted any rules under section 57(a)(4), rule 17d-1 
also applies to joint transactions with Regulated Funds that are BDCs. 
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to 
Regulated Funds that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
affiliated persons of a registered investment

[[Page 71898]]

company from participating in joint transactions with the company 
unless the Commission has granted an order permitting such 
transactions. In passing upon applications under rule 17d-1, the 
Commission considers whether the company's participation in the joint 
transaction is consistent with the provisions, policies, and purposes 
of the Act and the extent to which such participation is on a basis 
different from or less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief, 
the Regulated Funds would be, in some circumstances, limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants believe that the proposed terms and 
conditions will ensure that the Co-Investment Transactions are 
consistent with the protection of each Regulated Fund's shareholders 
and with the purposes intended by the policies and provisions of the 
Act. Applicants state that the Regulated Funds' participation in the 
Co-Investment Transactions will be consistent with the provisions, 
policies, and purposes of the Act and on a basis that is not different 
from or less advantageous than that of other participants.
    Applicants' Conditions:
    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time an Adviser considers a Potential Co-Investment 
Transaction for an Affiliated 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 applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be 
invested by the other participating Regulated Funds and Affiliated 
Funds, collectively, in the same transaction, exceeds the amount of the 
investment opportunity, the investment opportunity will be allocated 
among them pro rata based on each participant's 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 Fund) to the Eligible Directors of each participating 
Regulated Fund for their consideration. A Regulated Fund will co-invest 
with one or more other Regulated Funds and/or one or more Affiliated 
Funds only if, prior to the Regulated Fund's participation in the 
Potential Co-Investment Transaction, a Required Majority concludes 
that:
    (i) The terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Fund and its shareholders and do not involve overreaching in respect of 
the Regulated Fund or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Affiliated 
Funds would not disadvantage the Regulated Fund, and participation by 
the Regulated Fund would not be on a basis different from or less 
advantageous than that of other Regulated Funds or Affiliated Funds; 
provided that, if any other Regulated Fund or Affiliated Fund, but not 
the Regulated Fund itself, gains the right to nominate a director for 
election to a portfolio company's board of directors or the right to 
have a board observer or any similar right to participate in the 
governance or management of the portfolio company, such event shall not 
be interpreted to prohibit the Required Majority from reaching the 
conclusions required by this condition (2)(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any;
    (B) the applicable Adviser agrees to, and does, provide periodic 
reports to the Regulated Fund's Board with respect to the actions of 
such director or the information received by such board observer or 
obtained through the exercise of any similar right to participate in 
the governance or management of the portfolio company; and
    (C) any fees or other compensation that any Affiliated Fund or any 
Regulated Fund or any affiliated person of any Affiliated Fund or any 
Regulated Fund receives in connection with the right of an Affiliated 
Fund or a Regulated Fund to nominate a director or appoint a board 
observer or otherwise to participate in the governance or management of 
the portfolio company will be shared proportionately among the 
participating Affiliated Funds (who each may, in turn, share its 
portion with its affiliated persons) and the participating Regulated 
Funds in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
the Advisers, the Affiliated Funds or the other Regulated Funds or any 
affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by 
condition 13, (B) to the extent permitted by Section 17(e) or 57(k) of 
the Act, as applicable, (C) indirectly, as a result of an interest in 
the securities issued by one of the parties to the Co-Investment 
Transaction, or (D) in the case of fees or other compensation described 
in condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in 
any Potential Co-Investment Transaction or to invest less than the 
amount proposed.
    4. The applicable Adviser will present to the Board of each 
Regulated Fund, on a quarterly basis, a record of all investments in 
Potential Co-Investment Transactions made by any of the other Regulated 
Funds or Affiliated Funds during the preceding quarter that fell within 
the Regulated Fund's then-current Objectives and Strategies that were 
not made available to the Regulated Fund, and an explanation of why the 
investment opportunities were not offered to the Regulated Fund. All 
information presented to the Board pursuant to this condition will be 
kept for the life of the Regulated Fund and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\12\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Affiliated Fund, 
or any affiliated person

[[Page 71899]]

of another Regulated Fund or Affiliated Fund is an existing investor.
---------------------------------------------------------------------------

    \12\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
---------------------------------------------------------------------------

    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Fund and Affiliated 
Fund. The grant to an Affiliated Fund or another Regulated Fund, but 
not the Regulated Fund, of the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
an observer on the board of directors or similar rights to participate 
in the governance or management of the portfolio company will not be 
interpreted so as to violate this condition 6, if conditions 
2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Fund or any Regulated Fund elects to sell, 
exchange or otherwise dispose of an interest in a security that was 
acquired in a Co-Investment Transaction, the applicable 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 Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Fund and each Affiliated Fund in such 
disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in such dispositions on a pro 
rata basis (as described in greater detail in the application); and 
(iii) the Board of the Regulated Fund is provided on a quarterly basis 
with a list of all dispositions made in accordance with this condition. 
In all other cases, the Adviser will provide its written recommendation 
as to the Regulated Fund's participation to the Eligible Directors, and 
the Regulated Fund will participate in such disposition solely to the 
extent that a Required Majority determines that it is in the Regulated 
Fund's best interests.
    (d) Each Affiliated Fund and each Regulated Fund will bear its own 
expenses in connection with any such disposition.
    8. (a) If any Affiliated Fund or any Regulated Fund desires to make 
a Follow-On Investment in a portfolio company whose securities were 
acquired in a Co-Investment Transaction, the applicable Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest 
practical time; and
    (ii) formulate a recommendation as to the proposed participation, 
including the amount of the proposed Follow-On Investment, by each 
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Fund and each Affiliated Fund 
in such investment is proportionate to its outstanding investments in 
the issuer immediately preceding the Follow-On Investment; and (ii) the 
Board of the Regulated Fund has approved as being in the best interests 
of the Regulated Fund the ability to participate in Follow-On 
Investments on a pro rata basis (as described in greater detail in the 
application). In all other cases, the Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Follow-On 
Investment solely to the extent that a Required Majority determines 
that it is in the Regulated Fund's best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Regulated 
Funds' and the Affiliated Funds' outstanding investments immediately 
preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the applicable Adviser to 
be invested by the applicable Regulated Fund in the Follow-On 
Investment, together with the amount proposed to be invested by the 
other participating Regulated Funds and Affiliated Funds, collectively, 
in the same transaction, exceeds the amount of the opportunity, then 
the investment opportunity will be allocated among them pro rata based 
on each participant's Available Capital, up to the maximum 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 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 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 an Affiliated Fund.
    12. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the Securities Act) will, to 
the extent not payable by the Advisers under their respective 
investment advisory agreements with Affiliated Funds and the Regulated 
Funds, be shared by the Regulated Funds and the Affiliated Funds in 
proportion to the relative amounts of the securities held or to be 
acquired or disposed of, as the case may be.
    13. Any transaction fee (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 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

[[Page 71900]]

banks having the qualifications prescribed in Section 26(a)(1) of the 
Act, and the account will earn a competitive rate of interest that will 
also be divided pro rata among the participating Regulated Funds and 
Affiliated Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Affiliated Funds, the Advisers, the other 
Regulated Funds or any affiliated person of the Regulated Funds or 
Affiliated Funds will receive additional compensation or remuneration 
of any kind as a result of or in connection with a Co-Investment 
Transaction (other than (a) in the case of the Regulated Funds and the 
Affiliated Funds, the pro rata transaction fees described above and 
fees or other compensation described in condition 2(c)(iii)(C); and (b) 
in the case of an Adviser, investment advisory fees paid in accordance 
with the agreement between the Adviser and the Regulated Fund or 
Affiliated Fund.
    14. If the Holders own in the aggregate more than 25 percent of the 
shares of a Regulated Fund, then the Holders will vote such shares as 
directed by an independent third party (such as the trustee of a voting 
trust or a proxy adviser) when voting on (1) the election of directors; 
(2) the removal of one or more directors; or (3) any matters requiring 
approval by the vote of a majority of the outstanding voting 
securities, as defined in section 2(a)(42) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29204 Filed 11-16-15; 8:45 am]
 BILLING CODE 8011-01-P