[Federal Register Volume 81, Number 239 (Tuesday, December 13, 2016)]
[Notices]
[Pages 90021-90025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29796]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32382; File No. 812-14219]


Goldman Sachs BDC, Inc., et al.; Notice of Application

December 7, 2016.

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 (``BDCs'') and certain closed-end 
management investment companies to co-invest in portfolio companies 
with each other and with affiliated investment funds.

APPLICANTS:  Goldman Sachs BDC, Inc. (``BDC I''), Goldman Sachs Private 
Middle Market Credit LLC (``BDC II''), Goldman Sachs Middle Market 
Lending LLC (``BDC III,'' and together with BDC I and BDC II, the 
``Companies''), and Goldman Sachs Asset Management, L.P. (the 
``Adviser''), each on behalf of itself and its successors.\1\
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    \1\ For the purposes of the requested order, a ``successor'' 
includes an entity or entities that result from a reorganization 
into another jurisdiction or a change in the type of business 
organization.

FILING DATES:  The application was filed on September 27, 2013, and 
amended on January 9, 2014, October 9, 2015, January 8, 2016, August 
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26, 2016, and December 5, 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 January 3, 2017, 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: Secretary, U.S. Securities and Exchange Commission, 100 F 
St. NE., Washington, DC 20549-1090. Applicants: David Plutzer, Esq., 
Goldman Sachs Asset Management L.P., 200 West Street, 15th Floor, New 
York, NY 10282.

FOR FURTHER INFORMATION CONTACT:  Mark N. 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. BDC I is a Delaware corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under section 54(a) of the Act.\2\ BDC II is a Delaware limited 
liability company organized as a closed-end management investment 
company that has elected to be regulated as a BDC under section 54(a) 
of the Act. BDC III is a Delaware limited liability company \3\ 
organized as a closed-end management investment company that intends to 
elect to be regulated as a BDC under section 54(a) of the Act. Each 
Company's Objectives and Strategies \4\ are to generate current income 
and, to a lesser extent, capital appreciation through debt and equity 
investments. The business and affairs of each Company is managed under 
the direction of a Board,\5\ a majority of whose members are persons 
who are Non-Interested Directors.\6\
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    \2\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \3\ Applicants represent that BDC III intends to convert to a 
Delaware corporation.
    \4\ ``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.
    \5\ The term ``Board'' means, with respect to any Regulated Fund 
(as defined below), the board of directors of that Regulated Fund.
    \6\ The term ``Non-Interested Directors'' means, with respect to 
any Board, the directors who are not ``interested persons'' within 
the meaning of section 2(a)(19) of the Act.
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    2. The Adviser, a Delaware limited partnership, is registered with 
the

[[Page 90022]]

Commission as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act''). The Adviser serves as the investment 
adviser to each Company and will serve as the investment adviser to 
each Future Regulated Fund (as defined below).
    3. Applicants seek an order (``Order'') to permit a Regulated Fund 
\7\ and one or more other Regulated Funds and/or one or more Affiliated 
Funds \8\ to (a) co-invest with each other in investment opportunities 
in which the Adviser negotiates terms in addition to price; and (b) 
make additional investments in such issuers, including through the 
exercise of warrants, conversion privileges, and other rights to 
purchase securities of the issuers (``Follow-On Investments'') through 
a proposed co-investment program (the ``Co-Investment Program'') where 
such participation would otherwise be prohibited under section 17(d) or 
section 57(a)(4) and the rules under the Act. ``Co-Investment 
Transaction'' means any transaction in which a Regulated Fund (or its 
``Wholly-Owned Investment Sub,'' as defined below) participates 
together with one or more other Regulated Funds and/or one or more 
Affiliated Funds in reliance on the requested Order. ``Potential Co-
Investment Transaction'' means any investment opportunity in which a 
Regulated Fund (or its Wholly-Owned Investment Sub) could not 
participate together with one or more other Regulated Funds and/or one 
or more Affiliated Funds without obtaining and relying on the Order.\9\
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    \7\ ``Regulated Fund'' refers to BDC I, BDC II, BDC III, once it 
has elected to be regulated as a BDC under the Act, 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 the Adviser, and (c) that intends to participate in the Co-
Investment Program (as defined below).
    \8\ An ``Affiliated Fund'' means an entity (a) whose investment 
adviser is the 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. No Affiliated Funds exist 
at this time.
    \9\ 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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    4. Applicants state that a Regulated Fund may, from time to time, 
form a Wholly-Owned Investment Sub.\10\ Such a subsidiary would be 
prohibited from investing in a Co-Investment Transaction with any other 
Regulated Fund or Affiliated Fund because it would be a company 
controlled by its parent Regulated Fund for purposes of section 
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned 
Investment Sub be permitted to participate in Co-Investment 
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be 
treated, for purposes of the Order, as though the parent Regulated Fund 
were participating directly. Applicants represent that this treatment 
is justified because a Wholly-Owned Investment Sub would have no 
purpose other than serving as a holding vehicle for the Regulated 
Fund's investments and, therefore, no conflicts of interest could arise 
between the Regulated Fund and the Wholly-Owned Investment Sub. The 
Regulated Fund's Board would make all relevant determinations under the 
conditions with regard to a Wholly-Owned Investment Sub's participation 
in a Co-Investment Transaction, and the Regulated Fund's Board would be 
informed of, and take into consideration, any proposed use of a Wholly-
Owned Investment Sub in the Regulated Fund's place. If the Regulated 
Fund proposes to participate in the same Co-Investment Transaction with 
any of its Wholly-Owned Investment Subs, the Board will also be 
informed of, and take into consideration, the relative participation of 
the Regulated Fund and the Wholly-Owned Investment Sub.
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    \10\ The term ``Wholly-Owned Investment Sub'' means an entity 
(a) whose sole business purpose is to hold one or more investments 
on behalf of a Regulated Fund (and, in the case of an SBIC 
Subsidiary (as defined below), maintain a license under the SBA Act 
(as defined below) and issue debentures guaranteed by the SBA (as 
defined below)); (b) that is wholly-owned by the Regulated Fund 
(with the Regulated Fund at all times holding, beneficially and of 
record, 100% of the voting and economic interests); (c) with respect 
to which the Regulated Fund's Board has the sole authority to make 
all determinations with respect to the entity's participation under 
the conditions of the application; and (d) that would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act. 
All subsidiaries of the Regulated Fund participating in the Co-
Investment Transactions will be Wholly-Owned Investment Subs. The 
term ``SBIC Subsidiary'' means a Wholly-Owned Investment Sub that is 
licensed by the Small Business Administration (the ``SBA'') to 
operate under the Small Business Investment Act of 1958, as amended 
(the ``SBA Act'') as a small business investment company (an 
``SBIC'').
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    5. The Adviser expects that any portfolio company that is an 
appropriate investment for a Regulated Fund should also be an 
appropriate investment for one or more other Regulated Funds and/or one 
or more Affiliated Funds, with certain exceptions based on available 
capital or diversification.\11\ When considering Potential Co-
Investment Transactions for any Regulated Fund, the Adviser will 
consider only the Objectives and Strategies, Board-Established 
Criteria,\12\ investment policies, investment positions, capital 
available for investment, and other pertinent factors applicable to 
that Regulated Fund. Applicants believe that the use of Board-
Established Criteria for each of the Regulated Funds is appropriate 
based on the size and scope of the Adviser's advisory business. 
Applicants argue that in addition to the other protections offered by 
the conditions, using Board-Established Criteria in the allocation of 
Potential Co-Investment Transactions will further reduce the risk of 
subjectivity in the Adviser's determination of whether an investment 
opportunity is appropriate for a Regulated Fund. In connection with the 
Board's annual review of the continued appropriateness of any Board-
Established Criteria under condition 9, the Regulated Fund's Adviser 
will provide information regarding any Co-Investment Transaction 
(including, but not limited to, Follow-On Investments) effected by the 
Regulated Fund that did not fit within the then-current Board-
Established Criteria.
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    \11\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
    \12\ The term ``Board-Established Criteria'' means criteria that 
the Board of the applicable Regulated Fund may establish from time 
to time to describe the characteristics of Potential Co-Investment 
Transactions which would be within the Regulated Fund's then-current 
Objectives and Strategies that the Adviser should consider as 
appropriate for the Regulated Fund. If no Board-Established Criteria 
are in effect for a Regulated Fund, then the Adviser will consider 
all Potential Co-Investment Transactions that fall within the then-
current Objectives and Strategies for that Regulated Fund. Board-
Established Criteria will be objective and testable, meaning that 
they will be based on observable information, such as industry/
sector of the issuer, minimum EBITDA of the issuer, asset class of 
the investment opportunity or required commitment size, and not on 
characteristics that involve discretionary assessment. The Adviser 
may from time to time recommend criteria for the applicable Board's 
consideration, but Board-Established Criteria will only become 
effective if approved by a majority of the Non-Interested Directors. 
The Non-Interested Directors of a Regulated Fund may at any time 
rescind, suspend or qualify its approval of any Board-Established 
Criterion, though applicants anticipate that, under normal 
circumstances, the Board would not modify these criteria more often 
than quarterly.
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    6. 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

[[Page 90023]]

the Act (``Required Majority'') \13\ will approve each Co-Investment 
Transaction prior to any investment by the participating Regulated 
Fund.
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    \13\ 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).
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    7. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and each 
Affiliated Fund in such disposition is proportionate to its outstanding 
investments in the issuer immediately preceding the disposition or 
Follow-On Investment, as the case may be; and (ii) the Board of the 
Regulated Fund has approved that Regulated Fund's participation in pro 
rata dispositions and Follow-On Investments as being in the best 
interests of the Regulated Fund. If the Board does not so approve, any 
such disposition or Follow-On Investment will be submitted to the 
Regulated Fund's Eligible Directors. The Board of any Regulated Fund 
may at any time rescind, suspend or qualify its approval of pro rata 
dispositions and Follow-On Investments with the result that all 
dispositions and/or Follow-On Investments must be submitted to the 
Eligible Directors.
    8. No Non-Interested Director of a Regulated Fund will have a 
direct or indirect financial interest in any Co-Investment Transaction 
(other than indirectly through share ownership in one of the Regulated 
Funds), including any interest in any company whose securities would be 
acquired in a Co-Investment Transaction.
    9. Applicants also represent that if the Adviser or its principals, 
or any person controlling, controlled by, or under common control with 
the Adviser or its principals, and the Affiliated Funds (collectively, 
the ``Holders'') own in the aggregate more than 25% of the outstanding 
voting shares of a Regulated Fund (the ``Shares''), then the Holders 
will vote such Shares as required under condition 14. Applicants 
believe this condition will ensure that the Non-Interested Directors 
will act independently in evaluating the Co-Investment Program, because 
the ability of the 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. 
Applicants represent that the Non-Interested Directors will evaluate 
and approve any such independent third party, taking into account its 
qualifications, reputation for independence, cost to the shareholders, 
and other factors that they deem relevant.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons 
of a BDC from participating in joint transactions with the BDC or a 
company controlled by a BDC in contravention of rules as prescribed by 
the Commission. Under section 57(b)(2) of the Act, any person who is 
directly or indirectly controlling, controlled by, or under common 
control with a BDC is subject to section 57(a)(4). Applicants submit 
that each of the Regulated Funds and Affiliated Funds could be deemed 
to be a person related to each Regulated Fund in a manner described by 
section 57(b) by virtue of being under common control. Section 57(i) of 
the Act provides that, until the Commission prescribes rules under 
section 57(a)(4), the Commission's rules under section 17(d) of the Act 
applicable to registered closed-end investment companies will be deemed 
to apply to transactions subject to section 57(a)(4). Because the 
Commission has not adopted any rules under section 57(a)(4), rule 17d-1 
also applies to joint transactions with Regulated Funds that are BDCs. 
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to 
Regulated Funds that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
affiliated persons of a registered investment company from 
participating in joint transactions with the company unless the 
Commission has granted an order permitting such transactions. In 
passing upon applications under rule 17d-1, the Commission considers 
whether the company's participation in the joint transaction is 
consistent with the provisions, policies, and purposes of the Act and 
the extent to which such participation is on a basis different from or 
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief, 
the Regulated Funds would be, in 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. (a) The Adviser will establish, maintain and implement policies 
and procedures reasonably designed to ensure that the Adviser 
identifies for each Regulated Fund all Potential Co-Investment 
Transactions that (i) the Adviser considers for any other Regulated 
Fund or Affiliated Fund and (ii) fall within the Regulated Fund's then-
current Objectives and Strategies and Board-Established Criteria.
    (b) When the Adviser identifies a Potential Co-Investment 
Transaction for a Regulated Fund under condition 1(a), the Adviser will 
make an independent determination of the appropriateness of the 
investment for the Regulated Fund in light of the Regulated Fund's 
then-current circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, the Adviser will then determine an appropriate level of 
investment for the Regulated Fund.
    (b) If the aggregate amount recommended by the Adviser to be 
invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction together with the amount proposed to be invested 
by the other participating Regulated Funds and Affiliated Funds, 
collectively, in the same transaction, exceeds the amount of the 
investment opportunity, the investment opportunity will be allocated 
among them pro rata based on each participant's capital available for 
investment in the asset class being allocated, up to the amount 
proposed to be invested by each. The 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(b) and 
2(a), the Adviser will distribute written information concerning the 
Potential Co-Investment Transaction (including the amount proposed to 
be invested by

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each Regulated Fund and each Affiliated Fund) to the Eligible Directors 
of each participating Regulated Fund for their consideration. A 
Regulated Fund will co-invest with another Regulated Fund or an 
Affiliated Fund 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 Regulated Fund's shareholders; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or any 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 any other Regulated Funds or any Affiliated 
Funds; provided that, if any other Regulated Fund or any Affiliated 
Fund, but not the Regulated Fund itself, gains the right to nominate a 
director for election to a portfolio company's board of directors or 
the right to have a board observer or any similar right to participate 
in the governance or management of the portfolio company, such event 
shall not be interpreted to prohibit the Required Majority from 
reaching the conclusions required by this condition (2)(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any; and
    (B) the Adviser agrees to, and does, provide periodic reports to 
the Board of the Regulated Fund with respect to the actions of such 
director or the information received by such board observer or obtained 
through the exercise of any similar right to participate in the 
governance or management of the portfolio company; and
    (C) any fees or other compensation that any Regulated Fund or any 
Affiliated Fund or any affiliated person of any Regulated Fund or any 
Affiliated Fund receives in connection with the right of a Regulated 
Fund or an Affiliated Fund to nominate a director or appoint a board 
observer or otherwise to participate in the governance or management of 
the portfolio company will be shared proportionately among the 
participating Affiliated Funds (who may each, in turn, share its 
portion with its affiliated persons) and the participating Regulated 
Funds in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
the Adviser, the other Regulated Funds, the Affiliated Funds or any 
affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by 
condition 13, (B) to the extent permitted by 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 Adviser will present to the Board of each Regulated Fund, on 
a quarterly basis, a record of all investments in Potential Co-
Investment Transactions made by any other Regulated Fund or Affiliated 
Fund during the preceding quarter that fell within the Regulated Fund's 
then-current Objectives and Strategies and Board-Established Criteria 
that were not made available to the Regulated Fund, and an explanation 
of why the investment opportunities were not offered to the Regulated 
Fund. All information presented to the Board pursuant to this condition 
will be kept for the life of the Regulated Fund and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\14\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Affiliated Fund, 
or any affiliated person of another Regulated Fund or Affiliated Fund 
is an existing investor. The Adviser will maintain books and records 
that demonstrate compliance with this condition for each Regulated 
Fund.
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    \14\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Fund and Affiliated 
Fund. The grant to another Regulated Fund or an Affiliated Fund, but 
not the Regulated Fund, of the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
an observer on the board of directors or similar rights to participate 
in the governance or management of the portfolio company will not be 
interpreted so as to violate this condition 6, if conditions 
2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Regulated Fund or an Affiliated Fund elects to sell, 
exchange or otherwise dispose of an interest in a security that was 
acquired in a Co-Investment Transaction, the Adviser will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by each 
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such 
disposition on a proportionate basis, at the same price and on the same 
terms and conditions as those applicable to the participating Regulated 
Funds and Affiliated Funds.
    (c) A Regulated Fund may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Fund and each Affiliated 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 Regulated Fund's 
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 Regulated Fund and each Affiliated Fund will bear its own 
expenses in connection with any such disposition.
    8. (a) If a Regulated Fund or an Affiliated Fund desires to make a 
Follow-On Investment in a portfolio company whose securities were 
acquired in a Co-Investment Transaction, the Adviser will:

[[Page 90025]]

    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest 
practical time; and
    (ii) formulate a recommendation as to the proposed participation, 
including the amount of the proposed Follow-On Investment, by each 
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Fund and each Affiliated Fund 
in such investment is proportionate to its outstanding investments in 
the issuer immediately preceding the Follow-On Investment; and (ii) the 
Board of the Regulated Fund has approved as being in the best interests 
of the Regulated Fund the ability to participate in Follow-On 
Investments on a pro rata basis (as described in greater detail in the 
application). In all other cases, the Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Follow-On 
Investment solely to the extent that a Required Majority determines 
that it is in the Regulated Fund's best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of a Follow-On Investment is not based on the 
Regulated Funds' and the Affiliated Funds' outstanding investments 
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the 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 Funds in 
the same transaction, exceeds the amount of the opportunity; then the 
amount invested by each such party will be allocated among them pro 
rata based on each party's capital available for investment in the 
asset class being allocated, up to the amount proposed to be invested 
by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions that fell within the Regulated Fund's then-
current Objectives and Strategies and Board-Established Criteria, 
including investments in Potential Co-Investment Transactions made by 
other Regulated Funds and Affiliated Funds, that the Regulated Fund 
considered but declined to participate in, and concerning Co-Investment 
Transactions in which the Regulated Fund participated, so that the Non-
Interested Directors may determine whether all Potential Co-Investment 
Transactions and Co-Investment Transactions during the preceding 
quarter, including those Potential Co-Investment Transactions which the 
Regulated Fund considered but declined to participate in, comply with 
the conditions of the Order. In addition, the Non-Interested Directors 
will consider at least annually: (a) The continued appropriateness for 
the Regulated Fund of participating in new and existing Co-Investment 
Transactions and (b) the continued appropriateness of any Board-
Established Criteria.
    10. Each Regulated Fund will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Funds were a 
business development company and each of the investments permitted 
under these conditions were approved by the Required Majority under 
section 57(f).
    11. No Non-Interested Director of a Regulated Fund will also be a 
director, general partner, managing member or principal, or otherwise 
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 Adviser under the investment advisory 
agreements with the Regulated Funds and the Affiliated Funds, be shared 
by the Affiliated Funds and the Regulated Funds in proportion to the 
relative amounts of the securities held or to be acquired or disposed 
of, as the case may be.
    13. Any transaction fee \15\ (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 the Adviser 
pending consummation of the transaction, the fee will be deposited into 
an account maintained by the Adviser at a bank or banks having the 
qualifications prescribed in section 26(a)(1) of the Act, and the 
account will earn a competitive rate of interest that will also be 
divided pro rata among the participating Regulated Funds and Affiliated 
Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Affiliated Funds, the Adviser, 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 the Adviser, investment advisory fees paid in accordance 
with the agreements between the Adviser and the Regulated Funds or the 
Affiliated Funds).
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    \15\ Applicants are not requesting and the staff of the 
Commission is not providing any relief for transaction fees received 
in connection with any Co-Investment Transaction.
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    14. If the Holders own in the aggregate more than 25 percent of the 
Shares of a Regulated Fund, then the Holders will vote such Shares as 
directed by an independent third party when voting on (1) the election 
of directors; (2) the removal of one or more directors; or (3) all 
other matters under either the Act or applicable State law affecting 
the Board's composition, size or manner of election.
    15. Each Regulated Fund's chief compliance officer, as defined in 
rule 38a-1(a)(4), will prepare an annual report for its Board each year 
that evaluates (and documents the basis of that evaluation) the 
Regulated Fund's compliance with the terms and conditions of the 
application and the procedures established to achieve such compliance.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29796 Filed 12-12-16; 8:45 am]
 BILLING CODE 8011-01-P