[Federal Register Volume 81, Number 110 (Wednesday, June 8, 2016)]
[Notices]
[Pages 36967-36973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13514]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32138; File No. 812-14426]


Carey Credit Income Fund, et al.; Notice of Application

June 2, 2016.
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.

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    Summary of Application: Applicants request an order to permit 
certain business development companies (``BDC'') and closed-end 
management investment companies to co-invest in portfolio companies 
with each other and with affiliated investment funds.
    Applicants: Carey Credit Income Fund (the ``Fund''); Carey Credit 
Advisors, LLC (``W.P. Carey''); Guggenheim Partners Investment 
Management, LLC (``Guggenheim''); Guggenheim Funds Distributors, LLC, 
Guggenheim Funds Investment Advisors, LLC, Security Investors, LLC 
(collectively, together with Guggenheim, the ``Existing Guggenheim 
Advisers''); Guggenheim European Credit Fund, Guggenheim Private Debt 
Fund Note Issuer, LLC, Guggenheim Private Debt Fund, LLC, Guggenheim 
Private Debt Fund, Ltd., Guggenheim Private Debt Master Fund, LLC, 
Guggenheim Private Debt Fund Note Issuer 2.0, LLC, Guggenheim Private 
Debt Fund 2.0, LLC, Guggenheim Private Debt Fund 2.0, Ltd., Guggenheim 
Private Debt Master Fund 2.0, LLC, NZC Guggenheim Fund LLC, NZC 
Guggenheim Fund Limited, NZC Guggenheim Master Fund Limited, NZCG 
Funding Ltd., NZCG Funding 2 Limited, South Dock Funding Limited, NZCG 
Feeder I, L.P., NZCG Funding 2, LLC, NZCG Funding LLC, Guggenheim U.S. 
Loan Fund, Guggenheim U.S. Loan Fund II, Guggenheim U.S. Loan Fund III, 
Guggenheim Opportunistic U.S. Loan and Bond Fund IV, Guggenheim Loan 
and Bond Fund V, Guggenheim Loan and Bond Fund VI, GFI Fund, and GHY 
Fund (collectively, the ``Existing Affiliated Investors'').
    Filing Dates: The application was filed on February 23, 2015, and 
amended on June 12, 2015, October 20, 2015, February 25, 2016 and April 
29, 2016.
    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 June 27, 2016, 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

[[Page 36968]]

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: W.P. Carey and the 
Fund: 50 Rockefeller Plaza, New York, NY 10020; the Existing Guggenheim 
Advisers and the Existing Affiliated Investors: 100 Wilshire Boulevard, 
5th Floor, Santa Monica, CA 90401.

FOR FURTHER INFORMATION CONTACT:  Robert Shapiro, Senior Counsel, at 
(202) 551-7758 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 Fund is a Delaware statutory trust organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under the Act.\1\ The Fund serves as the master fund in a master-feeder 
structure with two feeder funds and makes investments with the proceeds 
it receives from the sale of shares of the feeder funds.\2\ The Fund's 
Objectives and Strategies \3\ are to provide shareholders with current 
income, capital preservation and, to a lesser extent, long-term capital 
appreciation. The Fund invests primarily in large, privately-negotiated 
loans to private middle market U.S. companies and in opportunities that 
are originated by various intermediaries where the Fund is able to play 
a differentiated role gaining outsized allocation, influencing 
structure, pricing, and fees compared to the broader market (this could 
include more broadly syndicated assets such as bank loans and corporate 
bonds). The Fund has a five member Board,\4\ of which three members are 
Independent Trustees.\5\
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    \1\ Section 2(a)(48) of the Act defines a ``BDC'' to be any 
closed-end investment company that operates for the purpose of 
making investments in securities described in sections 55(a)(1) 
through 55(a)(3) of the Act and makes available significant 
managerial assistance with respect to the issuers of such securities
    \2\ The existing feeder funds are Carey Credit Income Fund--I 
and Carey Credit Income Fund 2016 T. Any future feeder fund will be 
created by W.P. Carey.
    \3\ ``Objectives and Strategies'' means a Regulated Entity's (as 
defined below) investment objectives and strategies, as described in 
the Regulated Entity's registration statement on Form N-2, other 
filings the Regulated Entity 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 Entity's reports 
to shareholders.
    \4\ The term ``Board'' refers to the board of directors or 
trustees of any Regulated Entity.
    \5\ The term ``Independent Trustees'' refers to the trustees or 
directors of any Regulated Entity that are not ``interested 
persons'' of the Regulated Entity within the meaning of section 
2(a)(19) of the Act.
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    2. W.P. Carey is a Delaware limited liability company and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (the ``Advisers Act''). W.P. Carey serves as the investment 
adviser to the Fund. W.P. Carey also provides administrative services 
to the Fund under an administrative services agreement.
    3. Guggenheim is a Delaware limited liability company and is 
registered as an investment adviser under the Advisers Act. Guggenheim 
serves as the sub-adviser to the Fund. Guggenheim is part of the 
investment management business of Guggenheim Partners LLC, a privately 
held, global financial services firm.
    4. Each Existing Affiliated Investor is a privately-offered fund 
that would be an investment company but for section 3(c)(1) or 3(c)(7) 
of the Act. An Existing Guggenheim Adviser serves as the investment 
adviser to each Existing Affiliated Investor. Each Existing Guggenheim 
Adviser is either controlled by Guggenheim or under common control with 
Guggenheim and is registered as an investment adviser under the 
Advisers Act.
    5. Applicants seek an order (``Order'') to permit one or more 
Regulated Entities \6\ and/or one or more Affiliated Investors \7\ 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 sections 17(d) and 
57(a)(4) and the rules under the Act. For purposes of the application, 
``Co-Investment Transaction'' means any transaction in which a 
Regulated Entity (or its Wholly-Owned Investment Subsidiary, as defined 
below) participated together with one or more other Regulated Entities 
and/or one or more Affiliated Investors in reliance on the requested 
Order. ``Potential Co-Investment Transaction'' means any investment 
opportunity in which a Regulated Entity (or its Wholly-Owned Investment 
Subsidiary) could not participate together with one or more Affiliated 
Investors and/or one or more other Regulated Entities without obtaining 
and relying on the Order.\8\ The term ``Adviser'' means any W.P. Carey 
Adviser or any Guggenheim Adviser.
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    \6\ ``Regulated Entity'' means the Fund and any Future Regulated 
Entity. ``Future Regulated Entity'' means a closed-end management 
investment company (a) that is registered under the Act or has 
elected to be regulated as a BDC under the Act, (b) whose investment 
adviser is a W.P. Carey Adviser and (c) whose investment sub-adviser 
is a Guggenheim Adviser. ``W.P. Carey Adviser'' means W.P. Carey or 
any future investment adviser that (i) controls, is controlled by or 
is under common control with W.P. Carey, (ii) is registered as an 
investment adviser under the Advisers Act and (iii) is not a 
Regulated Entity or a subsidiary of a Regulated Entity. ``Guggenheim 
Adviser'' means any Existing Guggenheim Adviser or any future 
investment adviser that (i) controls, is controlled by or is under 
common control with Guggenheim, (ii) is registered as an investment 
adviser under the Advisers Act, and (iii) is not a Regulated Entity 
or a subsidiary of a Regulated Entity.
    \7\ ``Affiliated Investors'' means the Existing Affiliated 
Investors and any Future Affiliated Investor. ``Future Affiliated 
Investor'' means an entity (a) whose investment adviser is a 
Guggenheim Adviser and (b) that would be an investment company but 
for section 3(c)(1) or 3(c)(7) of the Act.
    \8\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    6. Applicants state that a Regulated Entity may, from time to time, 
form a Wholly-Owned Investment Subsidiary.\9\ Such a subsidiary would 
be prohibited from investing in a Co-Investment Transaction with any 
Affiliated Investor because it would be a company controlled by its 
parent Regulated Entity for purposes of section 57(a)(4) and rule 17d-
1. Applicants request that each Wholly-Owned Investment Subsidiary be 
permitted to participate in Co-Investment Transactions in lieu of its 
parent Regulated Entity and that the Wholly-Owned Investment 
Subsidiary's participation in any such transaction be treated, for 
purposes of the requested Order, as though the parent Regulated

[[Page 36969]]

Entity were participating directly. Applicants represent that this 
treatment is justified because a Wholly-Owned Investment Subsidiary 
would have no purpose other than serving as a holding vehicle for the 
Regulated Entity's investments and, therefore, no conflicts of interest 
could arise between the Regulated Entity and the Wholly-Owned 
Investment Subsidiary. The Regulated Entity's Board would make all 
relevant determinations under the conditions with regard to a Wholly-
Owned Investment Subsidiary's participation in a Co-Investment 
Transaction, and the Regulated Entity's Board would be informed of, and 
take into consideration, any proposed use of a Wholly-Owned Investment 
Subsidiary in the Regulated Entity's place. If the Regulated Entity 
proposes to participate in the same Co-Investment Transaction with any 
of its Wholly-Owned Investment Subsidiaries, the Board will also be 
informed of, and take into consideration, the relative participation of 
the Regulated Entity and the Wholly-Owned Investment Subsidiary.
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    \9\ The term ``Wholly-Owned Investment Subsidiary'' means an 
entity (i) that is wholly-owned by a Regulated Entity (with such 
Regulated Entity 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 Entity (and, in the case of an entity that is licensed by 
the Small Business Administration to operate under the Small 
Business Investment Act of 1958, as amended (the ``SBA Act''), as a 
small business investment company (an ``SBIC''), to maintain a 
license under the SBA Act and issue debentures guaranteed by the 
Small Business Administration); (iii) with respect to which the 
Regulated Entity'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. All 
subsidiaries participating in the Co-Investment Program will be 
Wholly-Owned Investment Subsidiaries and will have Objectives and 
Strategies that are either substantially the same as, or a subset 
of, their parent Regulated Entity's Objectives and Strategies. A 
subsidiary that is an SBIC may be a Wholly-Owned Investment 
Subsidiary if it satisfies the conditions in this definition.
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    7. It is anticipated that a Guggenheim Adviser will periodically 
determine that certain investments the Guggenheim Adviser recommends 
for a Regulated Entity would also be appropriate investments for one or 
more other Regulated Entities and/or one or more Affiliated Investors. 
Such a determination may result in the Regulated Entity, one or more 
other Regulated Entities and/or one or more Affiliated Investors co-
investing in certain investment opportunities. For each such investment 
opportunity, the Advisers to each Regulated Entity will independently 
analyze and evaluate the investment opportunity as to its 
appropriateness for such Regulated Entity taking into consideration the 
Regulated Entity's Objectives and Strategies.
    8. Applicants state that W.P. Carey serves as the Fund's investment 
adviser and administrator and either it or another W.P. Carey Adviser 
will serve in the same capacity to any Future Regulated Entity, and 
that Guggenheim serves as the Fund's sub-adviser and either it or 
another Guggenheim Adviser will serve in the same capacity to any 
Future Regulated Entity. Applicants represent that although a 
Guggenheim Adviser will identify and recommend investments \10\ for 
each Regulated Entity, prior to any investment by the Regulated Entity, 
the Guggenheim Adviser will present each proposed investment to the 
W.P. Carey Adviser which has the authority to approve or reject all 
investments proposed for the Regulated Entity by the Guggenheim 
Adviser.
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    \10\ Applicants represent that the W.P. Carey Advisers will not 
source any Potential Co-Investment Transactions under the requested 
Order.
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    9. Applicants state that each Guggenheim Adviser has (or will have, 
in the case of future advisers) an investment committee through which 
it will carry out its obligation under condition 1 to make a 
determination as to the appropriateness of a Potential Co-Investment 
Transaction for each Regulated Entity. Applicants represent that each 
Guggenheim Adviser, as a registered investment adviser, has (or will 
have, in the case of future advisers) developed a robust allocation 
process that is designed to allocate investment opportunities fairly 
and equitably among its clients over time. Applicants state that, in 
the case of a Potential Co-Investment Transaction, the applicable 
Guggenheim Adviser would apply its allocation policies and procedures 
in determining the proposed allocation for the Regulated Entity 
consistent with the requirements of condition 2(a).
    10. Applicants state that, once the applicable Guggenheim Adviser 
determined a proposed allocation for a Regulated Entity, such 
Guggenheim Adviser would notify the applicable W.P. Carey Adviser of 
the Potential Co-Investment Transaction and the Guggenheim Adviser's 
recommended allocation for such Regulated Entity. Applicants further 
state that the applicable W.P. Carey Adviser would then present the 
Potential Co-Investment Transaction and the Guggenheim Adviser's 
proposed allocation to the W.P. Carey Adviser's investment committee 
for its approval. Applicants represent that the W.P. Carey Adviser's 
investment committee would review the Guggenheim Adviser's 
recommendation for the Regulated Entity and would have the ability to 
ask questions of the Guggenheim Adviser and request additional 
information from the Guggenheim Adviser. Applicants further submit that 
if the W.P. Carey Adviser's investment committee approved the 
investment for the Regulated Entity, the investment and all relevant 
allocation information would then be presented to the Regulated 
Entity's Board for its approval in accordance with the conditions to 
the application. Applicants state that they believe the investment 
process between the Guggenheim Advisers and the W.P. Carey Advisers, 
prior to seeking approval from the Regulated Entity's Board (which is 
in addition to, rather than in lieu of, the procedures required under 
the conditions of the application), is significant and provides for 
additional procedures and processes to ensure that the Regulated Entity 
is being treated fairly in respect of Potential Co-Investment 
Transactions.
    11. If the Advisers to a Regulated Entity determine that a 
Potential Co-Investment Transaction is appropriate for the Regulated 
Entity (and the applicable W.P. Carey Adviser approves the investment 
for such Regulated Entity), and one or more other Regulated Entities 
and/or one or more Affiliated Investors may also participate, the 
Advisers will present the investment opportunity to the Eligible 
Trustees \11\ of the Regulated Entity prior to the actual investment by 
the Regulated Entity. As to any Regulated Entity, a Co-Investment 
Transaction will be consummated only upon approval by a required 
majority of the Eligible Trustees of such Regulated Entity within the 
meaning of section 57(o) of the Act (``Required Majority'').\12\
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    \11\ ``Eligible Trustees'' means the trustees or directors of a 
Regulated Entity that are eligible to vote under section 57(o) of 
the Act.
    \12\ In the case of a Regulated Entity that is a registered 
closed-end fund, the trustees or directors that make up the Required 
Majority will be determined as if the Regulated Entity were a BDC 
subject to section 57(o). As defined in section 57(o), ``required 
majority'' means ``both a majority of a business development 
company's directors or general partners who have no financial 
interest in such transaction, plan, or arrangement and a majority of 
such directors or general partners who are not interested persons of 
such company.''
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    12. With respect to the pro rata dispositions and follow-on 
Investments provided in conditions 7 and 8, a Regulated Entity 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 Entity and 
Affiliated Investor 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) each 
Regulated Entity's Board has approved that Regulated Entity's 
participation in pro rata dispositions and follow-on investments as 
being in the best interests of the Regulated Entity. If the Board does 
not so approve, any such disposition or follow-on investment will be 
submitted to the Regulated Entity's Eligible Trustees. The Board of any 
Regulated Entity 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 Trustees.

[[Page 36970]]

    13. No Independent Trustee of a Regulated Entity will have a 
financial interest in any Co-Investment Transaction.
    14. Under condition 15, if an Adviser or its principals, or any 
person controlling, controlled by, or under common control with the 
Adviser or its the principals, and any Affiliated Investors 
(collectively, the ``Holders'') own in the aggregate more than 25% of 
the outstanding voting securities of a Regulated Entity (``Shares''), 
then the Holders will vote such Shares as directed by an independent 
third party when voting on matters specified in the condition. 
Applicants believe that this condition will ensure that the Independent 
Trustees will act independently in evaluating the Co-Investment 
Program, because the ability of the Adviser or its principals to 
influence the Independent Trustees by a suggestion, explicit or 
implied, that the Independent Trustees can be removed will be limited 
significantly. Applicants represent that the Independent Trustees shall 
evaluate and approve any such independent third party, taking into 
account its qualifications, reputation for independence, cost to the 
shareholders, and other factors that they deem relevant.

Applicants' Legal Analysis

    1. Section 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 Entities that are 
registered closed-end investment companies. Similarly, with regard to 
BDCs, section 57(a)(4) of the Act makes it unlawful for any person who 
is related to a BDC in a manner described in section 57(b), acting as 
principal, knowingly to effect any transaction in which the BDC (or a 
company controlled by such BDC) is a joint or a joint and several 
participant with that person in contravention of rules as prescribed by 
the Commission. Because the Commission has not adopted any rules 
expressly under section 57(a)(4), section 57(i) provides that the rules 
under section 17(d) applicable to registered closed-end investment 
companies (e.g., rule 17d-1) are, in the interim, deemed to apply to 
transactions subject to section 57(a). Rule 17d-1, as made applicable 
to BDCs by section 57(i), prohibits any person who is related to a BDC 
in a manner described in section 57(b), as modified by rule 57b-1, from 
acting as principal, from participating in, or effecting any 
transaction in connection with, any joint enterprise or other joint 
arrangement or profit-sharing plan in which the BDC (or a company 
controlled by such BDC) is a participant, unless an application 
regarding the joint enterprise, arrangement, or profit-sharing plan has 
been filed with the Commission and has been granted by an order entered 
prior to the submission of the plan or any modification thereof, to 
security holders for approval, or prior to its adoption or modification 
if not so submitted.
    2. 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 submit that each Regulated Entity may be deemed to be 
an ``affiliated person'' of each other Regulated Entity within the 
meaning of section 2(a)(3) of the Act. Applicants state that the 
Regulated Entities, by virtue of each having a W.P. Carey Adviser, may 
be deemed to be under common control, and thus affiliated persons of 
each other under section 2(a)(3)(C) of the Act. Section 17(d) and 
section 57(b) apply to any investment adviser to a closed-end fund or a 
BDC, respectively, including the sub-adviser. Thus, a Guggenheim 
Adviser and any Affiliated Investors that it advises could be deemed to 
be persons related to Regulated Entities in a manner described by 
sections 17(d) and 57(b) and therefore prohibited by sections 17(d) and 
57(a)(4) and rule 17d-1 from participating in the Co-Investment 
Program. Applicants further submit that, because the Guggenheim 
Advisers are ``affiliated persons'' of other Guggenheim Advisers, 
Affiliated Investors advised by any of them could be deemed to be 
persons related to Regulated Entities (or a company controlled by a 
Regulated Entity) in a manner described by sections 17(d) and 57(b) and 
also prohibited from participating in the Co-Investment Program.
    4. Applicants state that they expect that that co-investment in 
portfolio companies by a Regulated Entity, one or more other Regulated 
Entities and/or one or more Affiliated Investors will increase 
favorable investment opportunities for each Regulated Entity.
    5. Applicants submit that the fact that the Required Majority will 
approve each Co-Investment Transaction before investment (except for 
certain dispositions or follow-on investments, as described in the 
conditions), and other protective conditions set forth in the 
application, will ensure that each Regulated Entity will be treated 
fairly. Applicants state that each Regulated Entity's participation in 
the Co-Investment Transactions will be consistent with the provisions, 
policies and purposes of the Act and on a basis that is not different 
from or less advantageous than that of other participants. Applicants 
further state that the terms and conditions proposed herein will ensure 
that all such transactions are reasonable and fair to each Regulated 
Entity and the Affiliated Investors and do not involve overreaching by 
any person concerned, including W.P. Carey or Guggenheim.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time a Guggenheim Adviser considers a Potential Co-
Investment Transaction for an Affiliated Investor or another Regulated 
Entity that falls within a Regulated Entity's then-current Objectives 
and Strategies, the Advisers to the Regulated Entity will make an 
independent determination of the appropriateness of the investment for 
the Regulated Entity in light of the Regulated Entity's then-current 
circumstances.
    2. a. If the Advisers to a Regulated Entity deem participation in 
any Potential Co-Investment Transaction to be appropriate for the 
Regulated Entity, the Advisers will then determine an appropriate level 
of investment for such Regulated Entity.
    b. If the aggregate amount recommended by the Advisers to a 
Regulated Entity to be invested by the Regulated Entity in the 
Potential Co-Investment Transaction, together with the amount proposed 
to be invested by the other participating Regulated Entities and 
Affiliated Investors, collectively, in the same transaction, exceeds 
the amount of the investment opportunity, the amount of the investment 
opportunity will be allocated among the Regulated Entities and such 
Affiliated Investors, pro rata based on each participant's Available 
Capital \13\ for investment in the asset

[[Page 36971]]

class being allocated, up to the amount proposed to be invested by 
each. The Advisers to each participating Regulated Entity will provide 
the Eligible Trustees of each participating Regulated Entity with 
information concerning each participating party's Available Capital to 
assist the Eligible Trustees with their review of the Regulated 
Entity's investments for compliance with these allocation procedures.
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    \13\ ``Available Capital'' means (a) for each Regulated Entity, 
the amount of capital available for investment 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 Entity or imposed by applicable 
laws, rules, regulations or interpretations and (b) for each 
Affiliated Investor, the amount of capital available for investment 
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 Investor's directors, general partners or adviser or 
imposed by applicable laws, rules, regulations or interpretations.
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    c. After making the determinations required in conditions 1 and 
2(a) above, the Advisers to the Regulated Entity will distribute 
written information concerning the Potential Co-Investment Transaction, 
including the amount proposed to be invested by each Regulated Entity 
and any Affiliated Investor, to the Eligible Trustees of each 
participating Regulated Entity for their consideration. A Regulated 
Entity will co-invest with one or more other Regulated Entities and/or 
an Affiliated Investor only if, prior to the Regulated Entities' and 
the Affiliated Investors' 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 
Entity and its shareholders and do not involve overreaching in respect 
of the Regulated Entity or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (a) The interests of the Regulated Entity's shareholders; and
    (b) the Regulated Entity's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Entity or an Affiliated 
Investor would not disadvantage the Regulated Entity, and participation 
by the Regulated Entity would not be on a basis different from or less 
advantageous than that of any other Regulated Entity or Affiliated 
Investor; provided, that if another Regulated Entity or Affiliated 
Investor, but not the Regulated Entity 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 a Required 
Majority from reaching the conclusions required by this condition 
2(c)(iii), if:
    (a) The Eligible Trustees will have the right to ratify the 
selection of such director or board observer, if any; and
    (b) the Advisers to the Regulated Entity agree to, and do, provide 
periodic reports to the Regulated Entity'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 other Regulated Entity 
or any Affiliated Investor or any affiliated person of any other 
Regulated Entity or an Affiliated Investor receives in connection with 
the right of one or more Regulated Entities or Affiliated Investors 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 
Investors (who may, in turn, share their portion with their affiliated 
persons) and any participating Regulated Entity in accordance with the 
amount of each party's investment; and
    (iv) the proposed investment by the Regulated Entity will not 
benefit the Advisers, any other Regulated Entity or the Affiliated 
Investors 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 under sections 
17(e) and 57(k) of the Act, as applicable, (C) in the case of fees or 
other compensation described in condition 2(c)(iii)(c), or (D) 
indirectly, as a result of an interest in the securities issued by one 
of the parties to the Co-Investment Transaction.
    3. Each Regulated Entity will have the right to decline to 
participate in any Potential Co-Investment Transaction or to invest 
less than the amount proposed.
    4. The Advisers will present to the Board of each Regulated Entity, 
on a quarterly basis, a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Entities or 
any of the Affiliated Investors during the preceding quarter that fell 
within the Regulated Entity's then-current Objectives and Strategies 
that were not made available to the Regulated Entity, and an 
explanation of why the investment opportunities were not offered to the 
Regulated Entity. All information presented to the Board pursuant to 
this condition will be kept for the life of the Regulated Entity and at 
least two years thereafter, and will be subject to examination by the 
Commission and its staff.
    5. Except for follow-on investments made in accordance with 
condition 8,\14\ a Regulated Entity will not invest in reliance on the 
Order in any issuer in which another Regulated Entity or an Affiliated 
Investor or any affiliated person of another Regulated Entity or an 
Affiliated Investor is an existing investor.
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    \14\ This exception applies only to follow-on investments by a 
Regulated Entity in issuers in which that Regulated Entity already 
holds investments.
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    6. A Regulated Entity 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 Entity and Affiliated 
Investor. The grant to one or more Regulated Entities or Affiliated 
Investors, but not the Regulated Entity itself, of the right to 
nominate a director for election to a portfolio company's board of 
directors, the right to have an observer on the board of directors or 
similar rights to participate in the governance or management of the 
portfolio company will not be interpreted so as to violate this 
condition 6, if conditions 2(c)(iii)(a), (b) and (c) are met.
    7. a. If any Regulated Entity or Affiliated Investor elects to 
sell, exchange or otherwise dispose of an interest in a security that 
was acquired by one or more Regulated Entities and/or Affiliated 
Investors in a Co-Investment Transaction, the Advisers will:
    (i) Notify each Regulated Entity 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 Entity in the disposition.
    b. Each Regulated Entity 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 Investors 
and any other Regulated Entity.
    c. A Regulated Entity may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Entity and each Affiliated Investor in 
such disposition is proportionate to its outstanding investments in the 
issuer immediately

[[Page 36972]]

preceding the disposition; (ii) the Regulated Entity's Board has 
approved as being in the best interests of the Regulated Entity the 
ability to participate in such dispositions on a pro rata basis (as 
described in greater detail in the application); and (iii) the 
Regulated Entity's Board is provided on a quarterly basis with a list 
of all dispositions made in accordance with this condition. In all 
other cases, the Advisers will provide their written recommendation as 
to the Regulated Entity's participation to the Eligible Trustees, and 
the Regulated Entity will participate in such disposition solely to the 
extent that a Required Majority determines that it is in the Regulated 
Entity's best interests.
    d. Each Regulated Entity and each Affiliated Investor will bear its 
own expenses in connection with the disposition.
    8. a. If any Regulated Entity or Affiliated Investor desires to 
make a ``follow-on investment'' (i.e., an additional investment in the 
same entity, including through the exercise of warrants or other rights 
to purchase securities of the issuer) in a portfolio company whose 
securities were acquired by the Regulated Entity and the Affiliated 
Investor in a Co-Investment Transaction, the Advisers will:
    (i) Notify each Regulated Entity 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 Entity.
    b. A Regulated Entity may participate in such follow-on investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Entity and each Affiliated 
Investor in such investment is proportionate to its outstanding 
investments in the issuer immediately preceding the follow-on 
investment; and (ii) the Regulated Entity's Board has approved as being 
in the best interests of such Regulated Entity 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 Advisers 
will provide their written recommendation as to such Regulated Entity's 
participation to the Eligible Trustees, and the Regulated Entity will 
participate in such follow-on investment solely to the extent that the 
Required Majority determines that it is in such Regulated Entity's best 
interests.
    c. If, with respect to any follow-on investment:
    (i) The amount of a follow-on investment is not based on the 
Regulated Entities' and the Affiliated Investors' outstanding 
investments immediately preceding the follow-on investment; and
    (ii) the aggregate amount recommended by the Advisers to be 
invested by the Regulated Entity in the follow-on investment, together 
with the amount proposed to be invested by the other participating 
Regulated Entities and the Affiliated Investors 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 for investment in the asset 
class being allocated, up to the amount proposed to be invested by 
each.
    d. The acquisition of follow-on investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and be subject to the other conditions set forth in the 
application.
    9. The Independent Trustees of each Regulated Entity will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Entities or Affiliated Investors 
that a Regulated Entity considered but declined to participate in, so 
that the Independent Trustees may determine whether all investments 
made during the preceding quarter, including those investments which 
the Regulated Entity considered but declined to participate in, comply 
with the conditions of the Order. In addition, the Independent Trustees 
will consider at least annually the continued appropriateness for such 
Regulated Entity of participating in new and existing Co-Investment 
Transactions.
    10. Each Regulated Entity will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Entities were a 
BDC and each of the investments permitted under these conditions were 
approved by a Required Majority under section 57(f).
    11. No Independent Trustee of a Regulated Entity will also be a 
trustee, director, general partner, managing member or principal, or 
otherwise an ``affiliated person'' (as defined in the Act) of any 
Affiliated Investor.
    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) shall, to 
the extent not payable by the Advisers under their respective advisory 
agreements with the Regulated Entities and the Affiliated Investors, be 
shared by the Regulated Entities and the Affiliated Investors 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 brokers' fees contemplated by section 17(e) or 57(k) of the 
Act, as applicable) \15\ received in connection with a Co-Investment 
Transaction will be distributed to the participating Regulated Entities 
and Affiliated Investors on a pro rata basis based on the amount they 
invested or committed, as the case may be, in such Co-Investment 
Transaction. If any transaction fee is to be held by an Adviser pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by the Adviser at a bank or banks having the 
qualifications prescribed in section 26(a)(1) of the Act, and the 
account will earn a competitive rate of interest that will also be 
divided pro rata among the participating Regulated Entities and 
Affiliated Investors based on the amount they invest in the Co-
Investment Transaction. None of the other Regulated Entities, 
Affiliated Investors, the Advisers nor any affiliated person of the 
Regulated Entities or the Affiliated Investors 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 Entities and the Affiliated Investors, 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 the 
Advisers, investment advisory fees paid in accordance with the 
Regulated Entities' and the Affiliated Investors' investment advisory 
agreements).
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    \15\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    14. The Advisers to the Regulated Entities and Affiliated Investors 
will maintain written policies and procedures reasonably designed to 
ensure compliance with the foregoing conditions. These policies and 
procedures will require, among other things, that each of the Advisers 
to each Regulated Entity will be notified of all Potential Co-
Investment Transactions that fall within a Regulated Entity's then-
current Objectives and Strategies and will be given sufficient 
information to make its independent determination

[[Page 36973]]

and recommendations under conditions 1, 2(a), 7 and 8.
    15. If the Holders own in the aggregate more than 25 percent of the 
shares of a Regulated Entity, then the Holders will vote such shares as 
directed by an independent third party when voting on (1) the election 
of directors or trustees; (2) the removal of one or more directors or 
trustees; 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.
Brent J. Fields,
Secretary.
[FR Doc. 2016-13514 Filed 6-7-16; 8:45 am]
 BILLING CODE 8011-01-P