[Federal Register Volume 83, Number 204 (Monday, October 22, 2018)]
[Notices]
[Pages 53329-53334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22894]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33271; 812-14931]


Blackstone Real Estate Income Fund, et al.

October 16, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order under sections 17(d) and 57(i) 
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1 
under the Act to permit certain joint transactions otherwise prohibited 
by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
    Summary of Application: Applicants request an order to permit 
business development companies (``BDCs'') and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with certain affiliated investment funds and accounts.
    Applicants: Blackstone Real Estate Income Fund (``BREIF''); 
Blackstone Real Estate Income Fund (``BREIF II''); Blackstone Real 
Estate Income Master Fund (``BREI Master Fund,'' and, together with 
BREIF and BREIF II, the ``BREI Regulated Funds''); Blackstone Real 
Estate Income Advisors L.L.C. (``BREIA''), the investment adviser to 
the BREI Regulated Funds; the investment advisers set forth in Schedule 
A to the application (together with BREIA, the ``Blackstone RE 
Advisers''); and the Existing Affiliated Funds set forth on Schedule A 
to the application.\1\
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    \1\ The Existing Affiliated Funds, together with their direct 
and indirect wholly-owned subsidiaries, are entities (i) whose 
primary investment adviser is a Blackstone RE Adviser and (ii) that 
either (A) would be an investment company but for section 3(c)(1), 
3(c)(5)(C) or 3(c)(7) of the Act or (B) rely on the rule 3a-7 
exemption thereunder from investment company status.
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    Filing Dates: The application was filed on July 20, 2018.
    Applicants have agreed to file an amendment during the notice 
period, the substance of which is reflected in this notice.
    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 November 12, 2018, 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: Leon Volchyok, Esq., 345 
Park Avenue, New York, New York 10154.

FOR FURTHER INFORMATION CONTACT: Asen Parachkevov, Senior Counsel, or 
David J. Marcinkus, 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 website 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. Each BREI Regulated Fund is a Delaware statutory trust and is 
structured as an externally managed, non-diversified, closed-end 
management investment company. Each BREI Regulated Fund's investment 
objective is to seek long-term total return, with an emphasis on 
current income, by primarily investing in a broad range of real estate-
related deb investments. BREIF and BREIF II are ``feeder'' funds in a 
``master-feeder'' structure and pursues their respective investment 
objective by investing substantially all of their assets in the BREI 
Master Fund. Each BREI Regulated Fund has a five-member Board, of which 
four members are Non-Interested Trustees.\2\
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    \2\ ``Board'' means the board of trustees (or equivalent) of the 
BREI Regulated Funds and any other Regulated Fund (as defined 
below).
    ``Non-Interested Trustees'' means the Non-Interested Trustees of 
the BREI Regulated Funds and any other Regulated Fund who are not 
``interested persons'' within the meaning of section 2(a)(19) of the 
Act.
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    2. Each Adviser \3\ is a subsidiary of The Blackstone Group, L.P. 
(``Blackstone''). Blackstone is a leading global alternative asset 
manager, whose alternative asset management businesses include 
investment vehicles focused on private equity, real estate, hedge fund 
solutions, non-investment grade credit, secondary private equity funds 
of funds and multi-asset class strategies. Blackstone's four business 
segments are (1) private equity, (2) real estate, (3) hedge fund 
solutions and (4) credit.
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    \3\ The term ``Adviser'' means (i) the Blackstone RE Advisers 
and (ii) any future investment adviser that controls, is controlled 
by or is under common control with a Blackstone RE Adviser and is 
registered as an investment adviser under the Investment Advisers 
Act of 1940 (the ``Advisers Act'') that intends to participate in 
the Co-Investment Program (as defined below).
    The term ``Primary Adviser'' means any future investment adviser 
that (i) controls, is controlled by or is under common control with 
an Adviser, (ii) is registered as an investment adviser under the 
Advisers Act, and (iii) is not an Adviser. For the avoidance of 
doubt, a Primary Adviser will not be treated as an Adviser under the 
requested Order, but will be subject to conditions 2(c)(iv) and 13 
of the requested Order. A Primary Adviser will not rely on the 
requested Order with respect to any investment vehicles it manages 
other than to the extent those vehicles are sub-advised by an 
Adviser.
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    3. The Blackstone RE Advisers operate as a self-contained advisory 
business within Blackstone's real estate.

[[Page 53330]]

Each Blackstone RE Adviser is under common control with BREIA, the 
Adviser to each of the BREI Regulated Funds, and collectively they 
conduct a single advisory business for purposes of the requested Order. 
The Blackstone RE Advisers are each either separately registered as 
investment advisers with the Commission, or are relying advisers that 
rely on the registration of another Blackstone RE Adviser. No 
Blackstone RE Adviser is a relying adviser of any Blackstone-affiliated 
investment adviser from outside of the self-contained group.
    4. Applicants seek an order to permit one or more Regulated Funds 
\4\ to be able to participate with one or more other Regulated Funds 
and/or one or more Affiliated Investors \5\ in the same investment 
opportunities through a proposed co-investment program where such 
participation would otherwise be prohibited under sections 17(d) and 
57(a)(4) of the Act and rule 17d-1 thereunder (the ``Co-Investment 
Program'').
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    \4\ ``Regulated Fund'' means any of the BREI Regulated Funds and 
any future closed-end management investment company (i) that has 
elected to be regulated as a business development company (``BDC'') 
or is registered under the Act, (ii) whose investment adviser is an 
Adviser and (iii) who intends to participate in the Co-Investment 
Program.
     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.
    \5\ ``Affiliated Investor'' means (i) the Existing Affiliated 
Funds, (ii) any Affiliated Proprietary Account and (iii) any Future 
Affiliated Fund.
    ``Future Affiliated Fund'' means an entity (i)(A) whose 
investment adviser is an Adviser or (B) whose investment adviser is 
a Primary Adviser and whose sub-adviser is an Adviser (a ``Sub-
Advised Affiliated Fund''), and (ii) that either (A) would be an 
investment company but for an exemption in section 3(c)(1), 
3(c)(5)(C) or 3(c)(7) of the Act or (B) relies on the rule 3a-7 
exemption thereunder from investment company status, and (iii) that 
intends to participate in the Co-Investment Program.
    ``Affiliated Proprietary Account'' means any account of an 
Adviser or its affiliates or any company that is an indirect, 
wholly- or majority-owned subsidiary of an Adviser or its 
affiliates, which, from time to time, may hold various financial 
assets in a principal capacity. For the avoidance of doubt, neither 
the Regulated Funds, the Existing Affiliated Funds nor any Future 
Affiliated Funds shall be deemed to be Affiliated Proprietary 
Accounts for purposes of the requested Order.
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    5. For purposes of the requested Order, ``Co-Investment 
Transaction'' means any transaction in which one or more Regulated 
Funds (or one or more Wholly-Owned Investment Subsidiaries, as defined 
below) participates together with one or more other Regulated Funds (or 
one or more Wholly-Owned Investment Subsidiaries, as defined below) 
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 Fund (or its Wholly-Owned Investment 
Subsidiary, as defined below) could not participate together with one 
or more Affiliated Investors and/or one or more other Regulated Funds 
without obtaining and relying on the requested Order.\6\ Funds that are 
advised or sub-advised by affiliates of Blackstone other than an 
Adviser or Primary Adviser will not participate in the Co-Investment 
Program. No Primary Adviser will be the source of any Potential Co-
Investment Transactions under the requested Order. Potential Co-
Investment Transactions will not be shared outside of the Co-Investment 
Program.
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    \6\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    6. Applicants state that a Regulated Fund may, from time to time, 
form a special purpose subsidiary (a ``Wholly-Owned Investment 
Subsidiary'').\7\ A Wholly-Owned Investment Subsidiary would be 
prohibited from investing in a Co-Investment Transaction with another 
Regulated Fund or any Affiliated Investor because it would be a company 
controlled by its parent Regulated Fund for purposes of sections 17(d) 
and 57(a)(4) of the Act and rule 17d-1 thereunder. 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 the Wholly-Owned Investment Subsidiary's participation in any 
such transaction be treated, for purposes of the requested Order, as 
though the parent Regulated Fund were participating directly.
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    \7\ ``Wholly-Owned Investment Subsidiary'' means an (i) 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)); (ii) 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); (iii) 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 requested 
Order; and (iv) that is an entity that would be an investment 
company but for an exemption in section 3(c)(1) or 3(c)(7) of the 
Act.
    The term ``SBIC Subsidiary'' means a Wholly-Owned Investment 
Subsidiary 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 (a ``SBIC'').
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    7. When considering Potential Co-Investment Transactions for any 
Regulated Fund, an Adviser will consider only the Objectives and 
Strategies,\8\ Board-Established Criteria,\9\ investment policies, 
investment positions, capital available for investment, and other 
pertinent factors applicable to that Regulated Fund. 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 trustees of the Board eligible to 
vote on that Co-Investment Transaction under section 57(o) of the Act 
(the ``Eligible Trustees'').\10\ When selecting investments for the 
Affiliated Investors, an Adviser will select investments separately for 
each Affiliated Investor, considering, in each case, only the 
investment objective, investment policies, investment position, capital 
available for investment, and other pertinent factors applicable to 
that particular Affiliated Investor.
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    \8\ The term ``Objectives and Strategies'' means a Regulated 
Fund's investment objectives and strategies, as described in the 
filings made with the Commission by the Regulated Fund under the 
Securities Exchange Act of 1934, as amended, the Securities Act of 
1933, as amended (the ``1933 Act'') and the Act, and the Regulated 
Fund's reports to shareholders.
    \9\ 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 regarding which an Adviser to the Regulated Fund should 
be notified under condition 1 of the requested Order. The Board-
Established Criteria will be consistent with the Regulated Fund's 
then-current Objectives and Strategies. If no Board-Established 
Criteria are in effect, then the Regulated Fund's Adviser will be 
notified of all Potential Co-Investment Transactions that fall 
within the Regulated Fund's then current Objectives and Strategies. 
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 earnings before interest, taxes, 
depreciation, and amortization of the issuer, asset class of the 
investment opportunity or required commitment size, and not on 
characteristics that involve discretionary assessment. The Adviser 
to the Regulated Fund 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 Trustees. The Non-Interested Trustees of a Regulated Fund 
may at any time rescind, suspend or qualify its approval of any 
Board-Established Criteria, though Applicants anticipate that, under 
normal circumstances, the Board would not modify these criteria more 
often than quarterly.
    \10\ The defined terms Eligible Trustees and Required Majority 
apply as if each Regulated Fund were a BDC subject to section 57(o) 
of the Act.
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    8. With respect to participation in a Potential Co-Investment 
Transaction by a Regulated Fund, the application Adviser will present 
each Potential Co-

[[Page 53331]]

Investment Transaction and the proposed allocation of each investment 
opportunity to the Eligible Trustees. The Required Majority of a 
Regulated Fund will approve each Co-Investment Transaction prior to any 
investment by the Regulated Fund.
    9. Applicants state that the majority of the Blackstone RE 
Advisers' employees work on matters for Close Affiliates \11\ and 
information about potential investment opportunities is routinely 
disseminated among such Adviser's employees. Other than to satisfy 
compliance obligations, information regarding Potential Co-Investment 
Transactions will not be shared with Remote Affiliates,\12\ which would 
include other investment advisers that operate in other Blackstone 
business groups, except in unusual circumstances, as the Blackstone 
business groups each generally target different investment strategies 
or asset classes and there are information barrier policies in place 
between the Blackstone business groups. Applicants further note within 
the Blackstone RE Advisers, the personnel overlap and coordination 
among portfolio management teams ensures that all relevant investment 
opportunities will be brought to the attention of each Regulated Fund 
(as defined below) managed by the respective Adviser. Applicants submit 
that the Blackstone RE Advisers will receive all information regarding 
all investment opportunities that fall within the then-current 
Objectives and Strategies and Board-Established Criteria of each 
Regulated Fund managed by the respective Adviser.
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    \11\ The term ``Close Affiliate'' means the Advisers, the 
Regulated Funds, the Affiliated Investors and any other person 
described in section 57(b) of the Act (after giving effect to rule 
57b-1 thereunder) in respect of any Regulated Fund (treating any 
registered investment company or series thereof as a BDC for this 
purpose) except for limited partners included solely by reason of 
the reference in section 57(b) to section 2(a)(3)(D) of the Act.
    \12\ The term ``Remote Affiliate'' means any person described in 
section 57(e) of the Act in respect of any Regulated Fund (treating 
any registered investment company or series thereof as a BDC for 
this purpose) and any limited partner holding 5% or more of the 
relevant limited partner interests that would be a Close Affiliate 
but for the exclusion in that definition.
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    10. Applicants submit that, in the event that a Potential Co-
Investment Transaction would be within the investment objectives and 
strategies of the Sub-Advised Affiliated Fund, the respective Adviser 
shall have the primary responsibility for the investment, including 
making the initial investment recommendation, and day-to-day monitoring 
of the investment. Applicants further note that the Adviser will be 
responsible for complying with the conditions of the requested Order. 
Applicants state that if the Adviser and Primary Adviser agree that the 
Sub-Advised Affiliated Fund should invest in the Potential Co-
Investment Transaction and at what size of investment, then the Adviser 
would, consistent with the conditions of the requested Order, determine 
an allocation for the Regulated Funds and Affiliated Investors, 
including such Sub-Advised Affiliated Fund.
    11. Applicants acknowledge that some of the Affiliated Investors 
may not be funds advised by an Adviser because they are Affiliated 
Proprietary Accounts. Applicants do not believe the participation of 
these Affiliated Proprietary Accounts in Co-Investment Transactions 
should raise issues under the conditions of the requested Order because 
allocation policies and procedures of the account owners provide that 
investment opportunities are offered to client accounts before they are 
offered to Affiliated Proprietary Accounts.
    12. Under condition 14, if an Adviser or its principals, or any 
person controlling, controlled by, or under common control with the 
Adviser or its principals, and any Affiliated Investor (collectively, 
the ``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Fund (``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.
    13. No Non-Interested Trustee of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than 
indirectly through share ownership in one of the Regulated Funds.
    Applicants' Legal Analysis:
    1. Section 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) of the Act. Section 
57(i) of the Act provides that, until the Commission prescribes rules 
under section 57(a)(4) of the Act, 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) of the Act. Because the Commission has not adopted any rules 
under section 57(a)(4) of the Act, rule 17d-1 thereunder applies.
    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 certain transactions effected as part of 
the Co-Investment Program may be prohibited by sections 17(d) and 
57(a)(4) of the Act and rule 17d-1 thereunder without a prior exemptive 
order of the Commission to the extent that the Affiliated Investors 
fall within the category of persons described by section 17(d) or 
section 57(b) of the Act, as modified by rule 57b-1 thereunder with 
respect to a Regulated Fund. Applicants believe that the proposed terms 
and conditions will ensure would ensure that the conflicts of interest 
that section 17(d) and section 57(a)(4) of the Act were designed to 
prevent would be addressed and the standards for an order under rule 
17d-1 under the Act are met.
    Applicants' Conditions:
    Applicants agree that any Order granting the requested relief shall 
be subject to the following conditions:
    1. (a) Each Adviser will establish, maintain and implement policies 
and procedures reasonably designed to ensure that each Adviser is 
promptly notified, for each Regulated Fund the Adviser manages, of all 
Potential Co-Investment Transactions \13\ that (i) an Adviser considers 
for any other Regulated Fund or Affiliated Investor and (ii) fall 
within the Regulated Fund's then-current Objectives and Strategies and 
Board-Established Criteria.
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    \13\ No Primary Adviser will be the source of any Potential Co-
Investment Transactions under the requested Order.
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    (b) When an Adviser to a Regulated Fund is notified of a Potential 
Co-Investment Transaction under condition 1(a), such 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.

[[Page 53332]]

    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 
Investors, collectively, in the same transaction, exceeds the amount of 
the investment opportunity, then the investment opportunity will be 
allocated among them pro rata based on each participant's Available 
Capital up \14\ to the amount proposed to be invested by each. The 
applicable Adviser will provide the Eligible Trustees of each 
participating Regulated Fund with information concerning each 
participating party's Available Capital to assist the Eligible Trustees 
with their review of the Regulated Fund's investments for compliance 
with these allocation procedures.
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    \14\ ``Available Capital'' means (a) for each Regulated Entity, 
the amount of capital available for investment determined based on 
the amount of cash on hand, liquidity considerations, existing 
commitments and reserves, if any, the targeted leverage level, 
targeted asset mix, risk return and target-return profile, tax 
implications, regulatory or contractual restrictions or consequences 
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, liquidity 
considerations, existing commitments and reserves, if any, the 
targeted leverage level, targeted asset mix, risk return and target-
return profile, tax implications, regulatory or contractual 
restrictions or consequences and other investment policies and 
restrictions set from time to time by the Affiliated Investors' 
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), 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 Investor) to the Eligible Trustees 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 
Investors only if, prior to the Regulated Fund's participation in the 
Potential Co-Investment Transaction, a Required Majority concludes 
that:
    (i) the terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Fund and its shareholders and do not involve overreaching in respect of 
the Regulated Fund or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) the interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Affiliated 
Investors 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 
Investors; provided that, if any other Regulated Fund or Affiliated 
Investor, 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 Trustees will have the right to ratify the 
selection of such director or board observer, if any;
    (B) the applicable Adviser agrees to, and does, provide periodic 
reports to the Regulated Fund's Board with respect to the actions of 
such director or the information received by such board observer or 
obtained through the exercise of any similar right to participate in 
the governance or management of the portfolio company; and
    (C) any fees or other compensation that any Affiliated Investor or 
any Regulated Fund or any affiliated person of any Affiliated Investor 
or any Regulated Fund receives in connection with the right of an 
Affiliated Investor or a Regulated Fund to nominate a director or 
appoint a board observer or otherwise to participate in the governance 
or management of the portfolio company will be shared proportionately 
among the participating Affiliated Investors (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 Investors, the other Regulated Funds or 
any Primary Adviser or any affiliated person of any of them (other than 
the parties to the Co-Investment Transaction), except
    (A) to the extent permitted by condition 13;
    (B) to the extent permitted by section 17(e) or 57(k) of the Act, 
as applicable;
    (C) indirectly, as a result of an interest in the securities issued 
by one of the parties to the Co-Investment Transaction; or
    (D) in the case of fees or other compensation described in 
condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in 
any Potential Co-Investment Transaction or to invest less than the 
amount proposed.
    4. The applicable Adviser will present to the Board of each 
Regulated Fund, on a quarterly basis, a record of all investments in 
Potential Co-Investment Transactions made by any of the other Regulated 
Funds or Affiliated Investors 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,\15\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which a Related Party \16\ has an investment. 
The Adviser will maintain books and records that demonstrate compliance 
with this condition for each Regulated Fund.
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    \15\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \16\ The term ``Related Party'' means (i) any Close Affiliate 
and (ii) in respect of matters as to which any Adviser has 
knowledge, any Remote Affiliate.
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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 
Investor. The grant to an Affiliated Investor or another Regulated 
Fund, but not the Regulated Fund, of the right to nominate a director 
for election to a portfolio company's board of directors, the right to 
have an observer on the board of directors or similar rights to 
participate in the governance or management of the portfolio company 
will not be interpreted so as to violate this

[[Page 53333]]

condition 6, if conditions 2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Investor 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 \17\:
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    \17\ Any Affiliated Proprietary Account that is not advised by 
an Adviser is itself deemed to be an Adviser for purposes of 
Conditions 7(a)(i) and 8(a)(i).
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    (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 Investors 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 Investor in 
such disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in such dispositions on a pro 
rata basis (as described in greater detail in the application); and 
(iii) the Board of the Regulated Fund is provided on a quarterly basis 
with a list of all dispositions made in accordance with this condition. 
In all other cases, the Adviser will provide its written recommendation 
as to the Regulated Fund's participation to the Eligible Trustees, 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 Investor and each Regulated Fund will bear its 
own expenses in connection with any such disposition.
    8. (a) If any Affiliated Investor or any Regulated Fund desires to 
make a Follow-On Investment in a portfolio company whose securities 
were acquired in a Co-Investment Transaction, the applicable Advisers 
will:
    (i) notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest 
practicable 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 
Investor 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 Trustees, 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 Investors' outstanding investments 
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the applicable Adviser to 
be invested by the applicable Regulated Fund in the Follow-On 
Investment, together with the amount proposed to be invested by the 
other participating Regulated Funds and Affiliated Investors, 
collectively, in the same transaction, exceeds the amount of the 
investment opportunity; then the amount invested by each such party 
will be allocated among them pro rata based on each party's Available 
Capital, up to the amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Non-Interested Trustees 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 or Affiliated Investors 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 Trustees 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 Trustees 
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 
BDC and each of the investments permitted under these conditions were 
approved by the Required Majority under section 57(f) of the Act.
    11. No Non-Interested Trustee 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 Investors.
    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 Advisers under their respective investment 
advisory agreements with Affiliated Investors and the Regulated Funds, 
be shared by the Regulated Funds 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 \18\ (including break-up, structuring, 
monitoring 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 Investors on a pro rata 
basis based on the amounts they invested or committed, as the case may 
be, in such Co-Investment Transaction. If any transaction fee is to be 
held by an Adviser pending consummation of the transaction, the fee 
will be deposited into an account maintained by the

[[Page 53334]]

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 Investors based on the 
amount they invest in such Co-Investment Transaction. None of the 
Advisers, the Primary Advisers, the Affiliated Investors, the other 
Regulated Funds nor any affiliated person of the Regulated Funds or 
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 
Funds 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 an Adviser or Primary Adviser, 
investment advisory fees paid in accordance with their respective 
agreements between the Advisers and the Regulated Fund or Affiliated 
Investor).
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    \18\ Applicants are not requesting and the staff 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% of the 
Shares, then the Holders will vote such Shares as directed by an 
independent third party when voting on (1) the election of trustees; 
(2) the removal of one or more trustees; 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) under 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.
    16. The Affiliated Proprietary Accounts will not be permitted to 
invest in a Potential Co-Investment Transaction except to the extent 
the aggregate demand from the Regulated Funds and the other Affiliated 
Investors is less than the total investment opportunity.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22894 Filed 10-19-18; 8:45 am]
 BILLING CODE 8011-01-P