[Federal Register Volume 82, Number 108 (Wednesday, June 7, 2017)]
[Notices]
[Pages 26554-26559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11728]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Release Act No. 32667; 812-14193-01]
Partners Group (USA) Inc., et al.
DATE: June 1, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of application for an order under section 17(d) of the
Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the
Act to permit certain joint transactions otherwise prohibited by
section 17(d) of the Act and rule 17d-1 under the Act.
SUMMARY OF APPLICATION: Applicants request an order to permit certain
closed-end management investment companies to co-invest in portfolio
companies with each other and with affiliated investment funds.
APPLICANTS: Partners Group Private Equity (Master Fund), LLC (the
``Fund''); Partners Group Private Income Opportunities, LLC (``Partners
Group Private Income Opportunities''); Partners Group (USA) Inc.
(``Partners Group''); Partners Group AG (``Partners Group AG'');
Partners Group (UK) Limited (``Partners Group UK''); Partners Group
(Luxembourg) S.A. (``Partners Group Lux''); Partners Group (Guernsey)
Limited (``Partners Group Guernsey''); Partners Group Cayman Management
I Limited (``PGCM I''); Partners Group Cayman Management III Limited
(``PGCM III''); Partners Group Management Limited (``PGML''); Partners
Group Management I S.[agrave] r.l. (``PGMS I''); Partners Group
Management II Limited (``PGML II''); Partners Group Management III
S.[agrave] r.l. (``PGMS III''); Partners Group Management IX Limited
(``PGML IX''); Partners Group Management V Limited (``PGML V'');
Partners Group Management VII Limited (``PGML VII''); Partners Group
Management VIII Limited (``PGML VIII''); Partners Group Management XI
Limited (``PGML XI''); Partners Group Management XIII Limited (``PGML
XIII''); Princess Management Limited (``Princess'' and collectively
with Partners Group Guernsey, Partners Group UK, PGCM I, PGCM III,
PGML, PGMS I, PGML II, PGMS III, PGML IX, PGML V, PGML VII, PGML VIII,
PGML XI and PGML XIII, the ``General Partner Advisers''); and Partners
Group (Italy) Global Value 2014; Partners Group Direct Equity 2016
(EUR) G, L.P. Inc.; Partners Group Direct Equity 2016 (EUR) S.C.A.,
SICAV-SIF; Partners Group Direct Equity 2016 (EUR), L.P. Inc.; Partners
Group Direct Equity 2016 (USD) A, L.P.; Partners Group Direct Equity
2016 (USD) C, L.P.; Partners Group Direct Equity 2016 (USD) C-G, L.P.;
Partners Group Direct Equity 2016 (USD) C-I, L.P.; Partners Group
Direct Infrastructure 2015 (EUR) S.C.A., SICAV-SIF; Partners Group
Direct Infrastructure 2015 (USD), L.P. Inc.; Partners Group Direct
Infrastructure 2016 (USD) A, L.P.; Partners Group Emerging Markets
2015, L.P. Inc.; Partners Group Generations Fund I; Partners Group
Global Growth 2014, L.P. Inc.; Partners Group Global Infrastructure
2012, L.P. Inc.; Partners Group Global Infrastructure 2015 (EUR)
S.C.A., SICAV-SIF; Partners Group Global Infrastructure 2015 (EUR),
L.P. Inc.; Partners Group Global Infrastructure SICAV; Partners Group
Global Multi-Asset Fund; Partners
[[Page 26555]]
Group Global Value 2014 (EUR) S.C.A., SICAR; Partners Group Global
Value 2014, L.P. Inc.; Partners Group Global Value SICAV; Partners
Group Growth Strategies 2016 S.C.A., SICAV-RAIF; Partners Group Private
Equity Performance Holding Limited; Partners Group Secondary 2015 (EUR)
S.C.A., SICAV-SIF; Partners Group Secondary 2015 (EUR), L.P. Inc.;
Partners Group Secondary 2015 (USD) A, L.P.; Partners Group Secondary
2015 (USD) C, L.P.; Partners Group U.S. Private Equity 2015 L.P.
S.C.S., SICAV-SIF; Princess Private Equity Holding Limited; The
Partners Fund SICAV and The Partners Fund (the ``Existing Affiliated
Funds'').
FILING DATES: The application was filed on August 2, 2013, and amended
on August 11, 2014, January 13, 2016, May 4, 2017, and June 1, 2017.
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 26, 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: 1114 Avenue of the
Americas, 37th Floor, New York, NY 10036.
FOR FURTHER INFORMATION CONTACT: Robert Shapiro, 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 \1\ is a Delaware limited liability company that is
registered as a closed-end management investment company under the Act.
The Fund's investment objective is to seek attractive long-term capital
appreciation by investing in a globally diversified portfolio of
private equity investments. The board of directors of the Fund (the
``Fund Board'') is currently comprised of three managers, two of whom
are not ``interested persons,'' within the meaning of Section 2(a)(19)
of the Act (the ``Non-Interested Directors''), of the Fund.
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\1\ The Fund, Partners Group Private Income Opportunities, and
any Future Regulated Fund are referred to individually as a
``Regulated Fund,'' and collectively as the ``Regulated Funds.''
``Future Regulated Fund'' means any closed-end management investment
company (a) that is registered under the Act, (b) whose investment
adviser is an Adviser (defined below) that is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act''), and (c) that intends to participate
in the Co-Investment Program. The term ``Adviser'' means (a)
Partners Group, Partners Group AG, Partners Group UK, Partners Group
Lux and each General Partner Adviser, and (b) any future investment
adviser that controls, is controlled by or is under common control
with Partners Group, Partners Group AG, Partners Group UK, Partners
Group Lux or any General Partner Adviser and is either registered as
an investment adviser under the Advisers Act or is an exempt
reporting adviser or a foreign private adviser.
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2. Partners Group Private Income Opportunities is a Delaware
limited liability company that is registered as a closed-end management
investment company under the Act. Partners Group Private Income
Opportunities' investment objective will be to generate attractive
risk-adjusted returns and current income by investing in a diversified
portfolio of predominantly credit-related opportunities. The board of
managers of Partners Group Private Income Opportunities (the ``PGPIO
Board'') \2\ is currently comprised of five managers, four of whom are
Non-Interested Directors of Partners Group Private Income
Opportunities.
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\2\ The Fund Board, the PGPIO Board and any board of managers,
board of directors or board of trustees of a Future Regulated Fund
are each referred to herein as a ``Board'' and collectively the
``Boards,'' as applicable.
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3. Each of the Existing Affiliated Funds would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act.
4. Partners Group is a Delaware corporation and an investment
adviser registered with the Commission under the Investment Advisers
Act of 1940, as amended (the ``Advisers Act''). Partners Group serves
as investment adviser to the Fund and Partners Group Private Income
Opportunities. Partners Group is a wholly-owned subsidiary of Partners
Group Holding AG, a corporation organized in Switzerland.
5. Partners Group AG is a corporation organized in Switzerland and
is an exempt reporting adviser under the Advisers Act. Partners Group
AG is registered with the Swiss Financial Markets Authority (FINMA) and
provides investment recommendations to Partners Group with respect to
its clients' portfolios. While Partners Group AG may provide investment
recommendations to Partners Group, Partners Group maintains ultimate
investment discretion as to whether such recommendations will translate
into investments made by its clients.
6. Partners Group Guernsey is a company limited by shares organized
in Guernsey and is an exempt reporting adviser under the Advisers Act.
Partners Group Guernsey is registered with the Guernsey Financial
Services Commission (GFSC) and provides administrative and in
particular investment execution services to Partners Group with respect
to its clients. Partners Group Guernsey also serves as General Partner
Adviser to Affiliated Funds.
7. Partners Group UK is a foreign private adviser under the
Advisers Act, formed as a private limited company in the United
Kingdom. Partners Group UK is registered with the UK Financial Conduct
Authority (FCA) and provides investment management or advisory services
to certain Affiliated Funds.
8. Partners Group Lux is an exempt reporting adviser under the
Advisers Act, formed as a soci[eacute]t[eacute] anonyme in Luxembourg.
Partners Group Lux is registered with the Luxembourg Commission de
Surveillance du Secteur Financier (CSSF) and provides administrative,
domiciliary, depositary and/or investment management or advisory
services to certain Affiliated Funds.
9. As described more fully in the application, each General Partner
Adviser serves as the general partner or fund manager of one or more
Affiliated Funds. Investment decisions are made by affiliated
investment committees and the respective General Partner signs-off or
otherwise ratifies such decisions. Other than Partners Group UK, each
General Partner Adviser is an exempt reporting adviser.
10. Applicants seek an order (``Order'') to permit one or more
Regulated Funds and/or one or more Affiliated Funds \3\ to participate
in the
[[Page 26556]]
same investment opportunities through a proposed co-investment program
where such participation would otherwise be prohibited under section
17(d) and the rules under the Act (the ``Co-Investment Program'').\4\ A
``Co-Investment Transaction'' means any transaction in which a
Regulated Fund (or its Wholly-Owned Investment Subsidiary, as defined
below) participated together with one or more other Regulated Funds
and/or one or more Affiliated Funds in reliance on the Order. A
``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Fund (or its Wholly-Owned Investment
Subsidiary, as defined below) could not participate together with one
or more Regulated Funds and/or one or more Affiliated Funds without
obtaining and relying on the Order.
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\3\ The term ``Affiliated Fund'' means any of the Existing
Affiliated Funds and any Future Affiliated Fund. ``Future Affiliated
Fund'' means an entity (a) whose investment adviser is an Adviser
and (b) that would be an investment company but for section 3(c)(1)
or 3(c)(7) of the Act, and (iii) that intends to participate in the
Co-Investment Program.
\4\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that relies on the Order in the future will comply
with the terms and conditions of the application.
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11. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subsidiaries.\5\ A Wholly-
Owned Investment Subsidiary would be prohibited from investing in a Co-
Investment Transaction with another Regulated Fund or any Affiliated
Fund because it would be a company controlled by the applicable
Regulated Fund for purposes of sections 17(d) and rule 17d-1.
Applicants request that a Wholly-Owned Investment Subsidiary be
permitted to participate in Co-Investment Transactions in lieu of the
applicable Regulated Fund, and that such Wholly-Owned Investment
Subsidiary's participation in any such transaction be treated, for
purposes of the requested Order, as though the Regulated Fund were
participating directly. Applicants represent that this treatment is
justified because a Wholly-Owned Investment Subsidiary 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 such Regulated Fund and its respective Wholly-Owned Investment
Subsidiaries. The Board of the Regulated Fund 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 Board would be informed of, and take into consideration, any
proposed use of a Wholly-Owned Investment Subsidiary in place of the
Regulated Fund. If a Regulated Fund proposes to participate in the same
Co-Investment Transaction with any of its Wholly-Owned Investment
Subsidiaries, its Board will also be informed of, and take into
consideration, the relative participation of the Regulated Fund and the
Wholly-Owned Investment Subsidiary.
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\5\ The term ``Wholly-Owned Investment Subsidiary'' means an
entity (a) whose sole business purpose is to hold one or more
investments on behalf of a Regulated Fund; (b) that is wholly-owned
by a Regulated Fund (with such Regulated Fund at all times holding,
beneficially and of record, 100% of the voting and economic
interests); (c) with respect to which the Board of the Regulated
Fund has the sole authority to make all determinations with respect
to the Wholly-Owned Investment Subsidiary's participation under the
conditions of the application; and (d) that is and entity that would
be an investment company but for section 3(c)(1) or 3(c)(7) of the
Act.
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12. When considering Potential Co-Investment Transactions for any
Regulated Fund, an Adviser will consider only the Objectives and
Strategies,\6\ investment policies, investment positions, capital
available for investment,\7\ and other pertinent factors applicable to
that Regulated Fund. Each Adviser, as applicable, undertakes to perform
these duties consistently for each Regulated Fund, as applicable,
regardless of which of them serves as investment adviser to these
entities. The participation of a Regulated Fund in a Potential Co-
Investment Transaction may only be approved by a Required Majority, as
defined in section 57(o) of the Act (a ``Required Majority''), of the
directors of the Board eligible to vote on that Co-Investment
Transaction under section 57(o) (the ``Eligible Directors'').\8\ Due to
the similarity in Objectives and Strategies of certain Regulated Funds
with the investment objectives, policies and strategies of certain
Affiliated Funds, the Adviser expects that investments for a Regulated
Fund should also generally be appropriate investments for one or more
other Regulated Funds and/or one or more Affiliated Funds, with certain
exceptions based on available capital, diversification, investment
objectives, policies and strategies.\9\
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\6\ The term ``Objectives and Strategies'' means a Regulated
Fund's investment objectives and strategies as described in the
Regulated Fund's registration statement, other filings the Regulated
Fund has made with the Commission under the Securities Act of 1933
(the ``1933 Act'') or the Securities Exchange Act of 1934, and the
Regulated Fund's reports to shareholders.
\7\ Capital available for investment 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, or regulations or interpretations.
\8\ Although each Regulated Fund will be 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) of the Act.
\9\ A Regulated Fund, however, will not be obligated to invest,
or co-invest, when investment opportunities are referred to them.
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13. With respect to participation in a Potential Co-Investment
Transaction by a Regulated Fund, the applicable Adviser will present
each Potential Co-Investment Transaction and the proposed allocation of
each investment opportunity to the Eligible Directors. The Required
Majority of a Regulated Fund will approve each Co-Investment
Transaction prior to any investment by the Regulated Fund.
14. With respect to the pro rata dispositions and Follow-On
Investments \10\ 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 Affiliated Fund and
Regulated Fund in such disposition or Follow-On Investment 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 applicable Board has approved such Regulated Fund's
participation in pro rata dispositions and Follow-On Investments as
being in the best interests of such Regulated Fund. If the Board of the
applicable Regulated Fund does not so approve, any such disposition or
Follow-On Investment will be submitted to the Eligible Directors. The
Board of any Regulated Fund may at any time rescind, suspend or qualify
their respective 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.
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\10\ ``Follow-On Investment'' means any additional investment in
an existing portfolio company whose securities were acquired in a
Co-Investment Transaction, including the exercise of warrants,
conversion privileges or other similar rights to acquire additional
securities of the portfolio company.
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15. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than through
an interest in the securities of a Regulated Fund.
16. Applicants represent that if an Adviser or its principal owners
(the ``Principals''), or any person controlling, controlled by, or
under common control
[[Page 26557]]
with an Adviser or the Principals, and the Affiliated Funds
(collectively, the ``Holders'') own in the aggregate more than 25% of
the outstanding voting securities of a Regulated Fund (``Shares''),
then the Holders will vote such Shares as required under condition 14.
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 an Adviser or the 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 independent third party, taking into account its
qualifications, reputation for independence, cost to the shareholders,
and other factors they deem relevant.
17. As discussed in more detail in the application, all of
Applicants' investment activities are conducted within a global,
centralized investment committee and allocation process and overseen by
a unified, global compliance program. Applicants represent that the
global processes and compliance program would ensure that (a) the
Commission and its staff have complete transparency into the Co-
Investment Program and the Advisers involved with the Co-Investment
Program through its access to Partners Group and (b) the Co-Investment
Program would be subject to Commission and staff oversight. Applicants
acknowledge that this global compliance program will be a key element
in ensuring that the proposed 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' Legal Analysis
1. 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 will
consider whether the participation by the Regulated Fund in such joint
transaction is consistent with the provisions, policies, and purposes
of the Act and the extent to which such participation is on a basis
different from or less advantageous than that of other participants.
2. Applicants state that the Co-Investment Program will increase
favorable investment opportunities for the Regulated Funds and allow
the Regulated Funds to participate in attractive opportunities at
levels that are appropriate. The conditions are designed to ensure that
the Advisors would not be able to favor any Regulated Fund or
Affiliated Funds over other Regulated Funds through the allocation of
investment opportunities among them. Applicants state that the
Regulated Fund'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' Conditions
Applicants agree that any Order granting the requested relief 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 ``capital available for
investment'' in the asset class being allocated, 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 Funds 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, Affiliated Fund or Adviser,
but not the Regulated Fund itself, gains the right to nominate a
director for election to a portfolio company's board of directors, the
right to have a board observer or any similar right to participate in
the governance or management of the portfolio company, 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, board observer or participant, 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
[[Page 26558]]
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) of the Act;
(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,\11\ 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.
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\11\ 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 identical 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 a 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 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
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 this 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 Adviser 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 this
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 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 participant'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. Each Regulated Fund will maintain the records required by
Section 57(f)(3) of the Act as if each of the Regulated Funds was a
business development company and each of the investments permitted
under these conditions was approved by the Required Majority under
Section 57(f).
[[Page 26559]]
10. 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.
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 any of the
Affiliated Funds.
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 1933 Act) will, to the
extent not payable by the Adviser under its 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, without limitation, break-up or
commitment fees but excluding broker's fees contemplated by Section
17(e) of the Act) received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Funds
and Affiliated Funds (who may, in turn, share their portion with
affiliated persons) 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 agreement between the Adviser and the Regulated Fund or
Affiliated Fund).
14. If the Holders own in the aggregate more than 25% of the
Shares, 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) of the Act, 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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11728 Filed 6-6-17; 8:45 am]
BILLING CODE 8011-01-P