[Federal Register Volume 85, Number 100 (Friday, May 22, 2020)]
[Notices]
[Pages 31257-31265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11035]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33867; 812-15059]


Varagon Capital Corporation, et al.

May 18, 2020.
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 
certain 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: Varagon Capital Corporation (``Varagon BDC''), VCC 
Advisors, LLC (``Varagon BDC Adviser''), Varagon Capital Partners, L.P. 
(``Varagon'', and together with Varagon BDC Adviser, the ``Existing 
Advisers''), Varagaon Fund I, L.P. (``Existing Affiliated Fund'').
    Filing Dates: The application was filed on August 12, 2019, and 
amended on November 27, 2019, February 20, 2020 and April 29, 2020.
    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 emailing the Commission's 
Secretary at [email protected] and serving applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on June 12, 2020, 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 emailing the 
Commission's Secretary at [email protected].

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 
[email protected] Applicants: c/o Afsar Farman-Farmaian, 
[email protected].

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at 202-551-6990, or Trace W. Rakestraw, Branch Chief, at (202) 551-6825 
(Division of Investment Management, Chief Counsel's Office).

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.

Introduction

    1. The applicants request an order of the Commission under sections 
17(d) and 57(i) of the Act and rule 17d-1 under the Act (``Order'') to 
permit, subject to the terms and conditions set forth in the 
application (the ``Conditions''), one or more Regulated Funds \1\ and/
or one or more Affiliated Funds \2\ to enter into Co-Investment 
Transactions with each other. ``Co-Investment Transaction'' means any 
transaction in which a Regulated Fund (or its Wholly-Owned Investment 
Sub (defined below)) participated together with one or more Affiliated 
Funds and/or one or more other Regulated Funds

[[Page 31258]]

in reliance on the Order. ``Potential Co-Investment Transaction'' means 
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub) could not participate together with one or more 
Affiliated Funds and/or one or more other Regulated Funds without 
obtaining and relying on the Order.\3\
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    \1\ ``Regulated Funds'' means Varagon BDC, the Future Regulated 
Funds and the BDC Downstream Funds. ``Future Regulated Fund'' means 
a closed-end management investment company (a) that is registered 
under the Act or has elected to be regulated as a BDC, (b) whose 
investment adviser (and sub-adviser(s), if any) are an Adviser, and 
(c) that intends to participate in the proposed co-investment 
program (the ``Co-Investment Program'').
    ``BDC Downstream Fund'' means, with respect to any Regulated 
Fund that is a BDC, an entity (i) that the BDC directly or 
indirectly controls, (ii) that is not controlled by any person other 
than the BDC (except a person that indirectly controls the entity 
solely because it controls the BDC), (iii) that would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act, 
(iv) whose investment adviser (and sub-adviser(s), if any) are an 
Adviser, (v) that is not a Wholly-Owned Investment Sub, and (vi) 
that intends to participate in the Co-Investment Program.
    ``Adviser'' means the Existing Advisers and any Future Adviser. 
``Future Adviser'' means any investment adviser that in the future 
(i) is controlled by Varagon, (ii)(a) is registered as an investment 
adviser under the Investment Advisers Act of 1940 (the ``Advisers 
Act'') or (b) is a relying adviser of an investment adviser that is 
registered under the Advisers Act and that is controlled by Varagon, 
and (iii) is not a Regulated Fund or a subsidiary of a Regulated 
Fund.
    \2\ ``Affiliated Fund'' means the Existing Affiliated Fund, the 
Varagon Proprietary Accounts (as defined below), and any entity (a) 
whose investment adviser (and sub-adviser(s), if any) are an 
Adviser, (b) that either (x) would be an investment company but for 
section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act, or (y) relies on 
rule 3a-7 under the Act, (c) that is not a BDC Downstream Fund, and 
(d) that intends to participate in the Co-Investment Program. 
Applicants represent that no Existing Affiliated Fund is a BDC 
Downstream Fund.
    \3\ All existing entities that currently intend to rely on the 
Order have been named as applicants and any existing or future 
entities that may rely on the Order in the future will comply with 
the terms and Conditions set forth in the application.
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Applicants

    2. Varagon BDC is a Maryland corporation organized as a non-
diversified closed-end management investment company that intends to 
elect to be regulated as a BDC under the Act.\4\ Varagon BDC will be 
managed by a Board \5\ which will consist of five directors, three of 
whom will be Independent Directors.\6\ Prior to relying on the 
requested Order, Varagon BDC will have filed an election to be 
regulated as a BDC under the Act.
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    \4\ 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 section 55(a)(1) through 
55(a)(3) and makes available significant managerial assistance with 
respect to the issuers of such securities.
    \5\ ``Board'' means (i) with respect to a Regulated Fund other 
than a BDC Downstream Fund, the board of directors (or the 
equivalent) of the Regulated Fund and (ii) with respect to a BDC 
Downstream Fund, the Independent Party of the BDC Downstream Fund.
    ``Independent Party'' means, with respect to a BDC Downstream 
Fund, (i) if the BDC Downstream Fund has a board of directors (or 
the equivalent), the board or (ii) if the BDC Downstream Fund does 
not have a board of directors (or the equivalent), a transaction 
committee or advisory committee of the BDC Downstream Fund.
    \6\ ``Independent Director'' means a member of the Board of any 
relevant entity who is not an ``interested person'' as defined in 
section 2(a)(19) of the Act. No Independent Director of a Regulated 
Fund (including any non-interested member of an Independent Party) 
will have a financial interest in any Co-Investment Transaction, 
other than indirectly through share ownership in one of the 
Regulated Funds.
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    3. Varagon BDC Adviser, a Delaware limited liability company that 
is registered under the Advisers Act, serves as the investment adviser 
to Varagon BDC pursuant to an investment advisory agreement.
    4. Varagon, a Delaware limited partnership, is registered as an 
investment adviser under the Advisers Act. Varagon serves as the 
investment adviser to the Existing Affiliated Fund pursuant to an 
investment advisory agreement. Varagon also may serve as the investment 
adviser to Future Regulated Funds and Future Affiliated Funds.
    5. The Existing Affiliated Fund, a Delaware limited partnership, 
would be an investment company but for section 3(c)(7) of the Act.
    6. Varagon Proprietary Accounts \7\ may hold various financial 
assets in a principal capacity.
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    \7\ ``Varagon Proprietary Accounts'' means any direct or 
indirect, wholly- or majority-owned subsidiary of Varagon, including 
Varagon BDC Adviser, or any other Adviser that from time to time, 
may hold various financial assets in a principal capacity, and 
intends to participate in the Co-Investment Program.
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    7. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary may 
be prohibited from investing in a Co-Investment Transaction with a 
Regulated Fund (other than its parent) or any 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 the Regulated Fund that owns it 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.
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    \8\ ``Wholly-Owned Investment Sub'' means an entity (i) that is 
wholly-owned by a Regulated Fund (with such Regulated Fund at all 
times holding, beneficially and of record, directly or indirectly, 
100% of the voting and economic interests); (ii) whose sole business 
purpose is to hold one or more investments on behalf of such 
Regulated Fund (and in the case of an SBIC Subsidiary, maintain a 
license under the Small Business Investment Act of 1958 (``SBA 
Act'') and issue debentures guaranteed by the Small Business 
Administration (``SBA'')); (iii) with respect to which such 
Regulated Fund's Board has the sole authority to make all 
determinations with respect to the entity's participation under the 
Conditions; and (iv) that would be an investment company but for 
section 3(c)(1), 3(c)(5)(C), or 3(c)(7) of the Act. ``SBIC 
Subsidiary'' means a Wholly-Owned Investment Sub that is licensed by 
the SBA to operate under the SBA Act as a small business investment 
company.
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Applicants' Representations

A. Allocation Process

    8. Applicants represent that the Advisers have established 
processes for allocating initial investment opportunities, 
opportunities for subsequent investments in an issuer and dispositions 
of securities holdings reasonably designed to treat all clients fairly 
and equitably. Further, applicants represent that these processes will 
be extended and modified in a manner reasonably designed to ensure that 
the additional transactions permitted under the Order will both (i) be 
fair and equitable to the Regulated Funds and the Affiliated Funds and 
(ii) comply with the Conditions.
    9. Specifically, applicants state that the Advisers are organized 
and managed such that the individual portfolio managers, as well as the 
teams and committees of portfolio managers and senior management 
(``Investment Teams'' and Investment Committees''), responsible for 
evaluating investment opportunities and making investment decisions on 
behalf of clients are promptly notified of the opportunities. If the 
Order is granted, the Advisers will establish, maintain and implement 
policies and procedures reasonably designed to ensure that, when such 
opportunities arise, the Advisers to the relevant Regulated Funds are 
promptly notified and receive the same information about the 
opportunity as any other Advisers considering the opportunity for their 
clients. In particular, consistent with Condition 1, if a Potential Co-
Investment Transaction falls within the then-current Objectives and 
Strategies \9\ and any Board-Established Criteria \10\ of a Regulated 
Fund, the policies and procedures will require that the relevant 
portfolio managers, Investment Teams and/or Investment Committees 
responsible for that Regulated Fund receive sufficient

[[Page 31259]]

information to allow the Regulated Fund's Adviser to make its 
independent determination and recommendations under the Conditions.
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    \9\ ``Objectives and Strategies'' means (i) with respect to any 
Regulated Fund other than a BDC Downstream Fund, its investment 
objectives and strategies, as described in its most current 
registration statement on Form N-2, other current filings with the 
Commission under the Securities Act of 1933 (the ``Securities Act'') 
or under the Securities Exchange Act of 1934, as amended, and its 
most current report to stockholders, and (ii) with respect to any 
BDC Downstream Fund, those investment objectives and strategies 
described in its disclosure documents (including private placement 
memoranda and reports to equity holders) and organizational 
documents (including operating agreements).
    \10\ ``Board-Established Criteria'' means criteria that the 
Board of a Regulated Fund may establish from time to time to 
describe the characteristics of Potential Co-Investment Transactions 
regarding which the Adviser to the Regulated Fund should be notified 
under Condition 1. The Board-Established Criteria will be consistent 
with the Regulated Fund's 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 EBITDA of the issuer, 
asset class of the investment opportunity or required commitment 
size, and not on characteristics that involve a discretionary 
assessment. The Adviser to the Regulated Fund may from time to time 
recommend criteria for the Board's consideration, but Board-
Established Criteria will only become effective if approved by a 
majority of the Independent Directors. The Independent Directors of 
a Regulated Fund may at any time rescind, suspend or qualify their 
approval of any Board-Established Criteria, though applicants 
anticipate that, under normal circumstances, the Board would not 
modify these criteria more often than quarterly.
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    10. The Adviser to each applicable Regulated Fund will then make an 
independent determination of the appropriateness of the investment for 
the Regulated Fund in light of the Regulated Fund's then-current 
circumstances. If the Adviser to a Regulated Fund deems the Regulated 
Fund's participation in any Potential Co-Investment Transaction to be 
appropriate, then it will formulate a recommendation regarding the 
proposed order amount for the Regulated Fund.
    11. Applicants state that, for each Regulated Fund and Affiliated 
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, the Adviser will formulate a proposed order 
amount. Prior to the External Submission (as defined below), each 
proposed order amount may be reviewed and adjusted, in accordance with 
the Advisers' written allocation policies and procedures, by an 
allocation committee for the area in question (e.g., credit) on which 
senior management, legal and compliance personnel from that area 
participate or, in the case of issues involving multiple areas, an 
Adviser-wide allocation committee on which senior management, legal and 
compliance personnel for the Advisers participate.\11\ The order of a 
Regulated Fund or Affiliated Fund resulting from this process is 
referred to as its ``Internal Order.'' The Internal Order will be 
submitted for approval by the Required Majority of any participating 
Regulated Funds in accordance with the Conditions.\12\
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    \11\ The reason for any such adjustment to a proposed order 
amount will be documented in writing and preserved in the records of 
each Adviser.
    \12\ ``Required Majority'' means a required majority, as defined 
in section 57(o) of the Act. 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). In the case of a BDC Downstream Fund 
with a board of directors (or the equivalent), the members that make 
up the Required Majority will be determined as if the BDC Downstream 
Fund were a BDC subject to section 57(o). In the case of a BDC 
Downstream Fund with a transaction committee or advisory committee, 
the committee members that make up the Required Majority will be 
determined as if the BDC Downstream Fund were a BDC subject to 
section 57(o) and as if the committee members were directors of the 
fund.
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    12. If the aggregate Internal Orders for a Potential Co-Investment 
Transaction do not exceed the size of the investment opportunity 
immediately prior to the submission of the orders to the underwriter, 
broker, dealer or issuer, as applicable (the ``External Submission''), 
then each Internal Order will be fulfilled as placed. If, on the other 
hand, the aggregate Internal Orders for a Potential Co-Investment 
Transaction exceed the size of the investment opportunity immediately 
prior to the External Submission, then the allocation of the 
opportunity will be made pro rata on the basis of the size of the 
Internal Orders.\13\ If, subsequent to such External Submission, the 
size of the opportunity is increased or decreased, or if the terms of 
such opportunity, or the facts and circumstances applicable to the 
Regulated Funds' or the Affiliated Funds' consideration of the 
opportunity, change, the participants will be permitted to submit 
revised Internal Orders in accordance with written allocation policies 
and procedures that the Advisers will establish, implement and 
maintain.\14\
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    \13\ The Advisers will maintain records of all proposed order 
amounts, Internal Orders and External Submissions in conjunction 
with Potential Co-Investment Transactions. Each applicable Adviser 
will provide the Eligible Directors with information concerning the 
Affiliated Funds' and Regulated Funds' order sizes to assist the 
Eligible Directors with their review of the applicable Regulated 
Fund's investments for compliance with the Conditions. ``Eligible 
Directors'' means, with respect to a Regulated Fund and a Potential 
Co-Investment Transaction, the members of the Regulated Fund's Board 
eligible to vote on that Potential Co-Investment Transaction under 
section 57(o) of the Act (treating any registered investment company 
or series thereof as a BDC for this purpose).
    \14\ The Board of the Regulated Fund will then either approve or 
disapprove of the investment opportunity in accordance with 
Condition 2, 6, 7, 8 or 9, as applicable.
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B. Follow-On Investments

    13. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\15\ in an issuer in which a Regulated Fund and one or more other 
Regulated Funds and/or Affiliated Funds previously have invested.
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    \15\ ``Follow-On Investment'' means an additional investment in 
the same issuer, including, but not limited to, through the exercise 
of warrants, conversion privileges or other rights to purchase 
securities of the issuer.
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    14. Applicants propose that Follow-On Investments would be divided 
into two categories depending on whether the prior investment was a Co-
Investment Transaction or a Pre-Boarding Investment.\16\ If the 
Regulated Funds and Affiliated Funds have previously participated in a 
Co-Investment Transaction with respect to the issuer and only such 
funds are participating in the Follow-On Investment, then the terms and 
approval of the Follow-On Investment would be subject to the Standard 
Review Follow-Ons described in Condition 8. If the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer but hold a Pre-Boarding 
Investment and only such funds are participating in the Follow-On 
Investment, then the terms and approval of the Follow-On Investment 
would be subject to the Enhanced-Review Follow-Ons described in 
Condition 9. All Enhanced Review Follow-Ons require the approval of the 
Required Majority. For a given issuer, the participating Regulated 
Funds and Affiliated Funds need to comply with the requirements of 
Enhanced-Review Follow-Ons only for the first Co-Investment 
Transaction. Subsequent Co-Investment Transactions with respect to the 
issuer would be governed by the requirements of Standard Review Follow-
Ons.
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    \16\ ``Pre-Boarding Investments'' are investments in an issuer 
held by a Regulated Fund as well as one or more Affiliated Funds 
and/or one or more other Regulated Funds that were acquired prior to 
participating in any Co-Investment Transaction: (i) In transactions 
in which the only term negotiated by or on behalf of such funds was 
price in reliance on one of the JT No-Action Letters (defined 
below); or (ii) in transactions occurring at least 90 days apart and 
without coordination between the Regulated Fund and any Affiliated 
Fund or other Regulated Fund.
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    15. A Regulated Fund would be permitted to invest in Standard 
Review Follow-Ons either with the approval of the Required Majority 
under Condition 8(c) or without Board approval under Condition 8(b) if 
it is (i) a Pro Rata Follow-On Investment \17\ or (ii) a Non-Negotiated 
Follow-On Investment.\18\ Applicants believe that these Pro Rata and 
Non-Negotiated Follow-On Investments do not present a significant 
opportunity for overreaching on the part

[[Page 31260]]

of any Adviser and thus do not warrant the time or the attention of the 
Board. Pro Rata Follow-On Investments and Non-Negotiated Follow-On 
Investments remain subject to the Board's periodic review in accordance 
with Condition 10.
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    \17\ A ``Pro Rata Follow-On Investment'' is a Follow-On 
Investment (i) in which the participation of each Affiliated Fund 
and each Regulated Fund is proportionate to its outstanding 
investments in the issuer or security, as appropriate, immediately 
preceding the Follow-On Investment, and (ii) in the case of a 
Regulated Fund, a majority of the Board has approved the Regulated 
Fund's participation in the pro rata Follow-On Investments as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Follow-On Investments, in which 
case all subsequent Follow-On Investments will be submitted to the 
Regulated Fund's Eligible Directors in accordance with Condition 
8(c).
    \18\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On 
Investment in which a Regulated Fund participates together with one 
or more Affiliated Funds and/or one or more other Regulated Funds 
(i) in which the only term negotiated by or on behalf of the funds 
is price and (ii) with respect to which, if the transaction were 
considered on its own, the funds would be entitled to rely on one of 
the JT No-Action Letters.
    ``JT No-Action Letters'' means SMC Capital, Inc., SEC No-Action 
Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life 
Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000).
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C. Dispositions

    16. Applicants propose that Dispositions \19\ would be divided into 
two categories. If the Regulated Funds and Affiliated Funds holding 
investments in the issuer have previously participated in a Co-
Investment Transaction with respect to the issuer, then the terms and 
approval of the Disposition would be subject to the Standard Review 
Dispositions described in Condition 6. If the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer but hold a Pre-Boarding 
Investment, then the terms and approval of the Disposition would be 
subject to the Enhanced Review Dispositions described in Condition 7. 
Subsequent Dispositions with respect to the same issuer would be 
governed by Condition 6 under the Standard Review Dispositions.\20\
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    \19\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \20\ However, with respect to an issuer, if a Regulated Fund's 
first Co-Investment Transaction is an Enhanced Review Disposition, 
and the Regulated Fund does not dispose of its entire position in 
the Enhanced Review Disposition, then before such Regulated Fund may 
complete its first Standard Review Follow-On in such issuer, the 
Eligible Directors must review the proposed Follow-On Investment not 
only on a stand-alone basis but also in relation to the total 
economic exposure in such issuer (i.e., in combination with the 
portion of the Pre-Boarding Investment not disposed of in the 
Enhanced Review Disposition), and the other terms of the 
investments. This additional review is required because such 
findings were not required in connection with the prior Enhanced 
Review Disposition, but they would have been required had the first 
Co-Investment Transaction been an Enhanced Review Follow-On.
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    17. A Regulated Fund may participate in a Standard Review 
Disposition either with the approval of the Required Majority under 
Condition 6(d) or without Board approval under Condition 6(c) if (i) 
the Disposition is a Pro Rata Disposition \21\ or (ii) the securities 
are Tradable Securities \22\ and the Disposition meets the other 
requirements of Condition 6(c)(ii). Pro Rata Dispositions and 
Dispositions of a Tradable Security remain subject to the Board's 
periodic review in accordance with Condition 10.
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    \21\ A ``Pro Rata Disposition'' is a Disposition (i) in which 
the participation of each Affiliated Fund and each Regulated Fund is 
proportionate to its outstanding investment in the security subject 
to Disposition immediately preceding the Disposition; and (ii) in 
the case of a Regulated Fund, a majority of the Board has approved 
the Regulated Fund's participation in pro rata Dispositions as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Dispositions, in which case all 
subsequent Dispositions will be submitted to the Regulated Fund's 
Eligible Directors.
    \22\ ``Tradable Security'' means a security that meets the 
following criteria at the time of Disposition: (i) It trades on a 
national securities exchange or designated offshore securities 
market as defined in rule 902(b) under the Securities Act; (ii) it 
is not subject to restrictive agreements with the issuer or other 
security holders; and (iii) it trades with sufficient volume and 
liquidity (findings as to which are documented by the Advisers to 
any Regulated Funds holding investments in the issuer and retained 
for the life of the Regulated Fund) to allow each Regulated Fund to 
dispose of its entire position remaining after the proposed 
Disposition within a short period of time not exceeding 30 days at 
approximately the value (as defined by section 2(a)(41) of the Act) 
at which the Regulated Fund has valued the investment.
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D. Delayed Settlement

    18. Applicants represent that under the terms and Conditions of the 
application, all Regulated Funds and Affiliated Funds participating in 
a Co-Investment Transaction will invest at the same time, for the same 
price and with the same terms, conditions, class, registration rights 
and any other rights, so that none of them receives terms more 
favorable than any other. However, the settlement date for an 
Affiliated Fund in a Co-Investment Transaction may occur up to ten 
business days after the settlement date for the Regulated Fund, and 
vice versa. Nevertheless, in all cases, (i) the date on which the 
commitment of the Affiliated Funds and Regulated Funds is made will be 
the same even where the settlement date is not and (ii) the earliest 
settlement date and the latest settlement date of any Affiliated Fund 
or Regulated Fund participating in the transaction will occur within 
ten business days of each other.

E. Holders

    19. Under Condition 15, if an Adviser, 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 percent of the 
outstanding voting shares of a Regulated Fund (the ``Shares''), then 
the Holders will vote such Shares as directed by an independent third 
party when voting on matters specified in the Condition. Applicants 
believe that this Condition will ensure that the Independent Directors 
will act independently in evaluating Co-Investment Transactions, 
because the ability of the Adviser or its principals to influence the 
Independent Directors by a suggestion, explicit or implied, that the 
Independent Directors can be removed will be limited significantly. The 
Independent Directors shall evaluate and approve any independent party, 
taking into account its qualifications, reputation for independence, 
cost to the shareholders, and other factors that they deem relevant.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Funds that are 
registered closed-end investment companies.
    2. Similarly, with regard to BDCs, section 57(a)(4) of the Act 
generally prohibits certain persons specified in section 57(b) from 
participating in joint transactions with the BDC or a company 
controlled by the BDC in contravention of rules as prescribed by the 
Commission. 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.
    3. Co-Investment Transactions are prohibited by either or both of 
rule 17d-1 and section 57(a)(4) without a prior exemptive order of the 
Commission to the extent that the Affiliated Funds and the Regulated 
Funds participating in such transactions fall within the category of 
persons described by rule 17d-1 and/or section 57(b), as modified by 
rule 57b-1 thereunder, as applicable, vis-[agrave]-vis each 
participating Regulated Fund. Each of the participating Regulated Funds 
and Affiliated Funds may be deemed to be affiliated persons vis-
[agrave]-vis a Regulated Fund within the meaning of section 2(a)(3) by 
reason of common control because (i) Varagon manages the Existing 
Affiliated Fund and may be deemed to control the Existing Affiliated 
Fund, and an Adviser will advise (and sub-advise, if applicable) and 
will control any future Affiliated Fund, (ii) Varagon BDC Adviser or 
another Adviser is or will be

[[Page 31261]]

an investment adviser (and sub-adviser, if any) to each of the 
Regulated Funds, including Varagon BDC and may be deemed to control the 
Regulated Funds, and (iii) each BDC Downstream Fund will be deemed to 
be controlled by an Adviser, its parent BDC or certain of its parent 
BDC's subsidiaries. Thus, each of the Affiliated Funds could be deemed 
to be a person related to the BDC Regulated Funds, or the BDC 
Downstream Funds in a manner described by section 57(b) and related to 
the other Regulated Funds in a manner described by rule 17d-1; and 
therefore the prohibitions of rule 17d-1 and section 57(a)(4) would 
apply respectively to prohibit the Affiliated Funds from participating 
in Co-Investment Transactions with the Regulated Funds. Each Regulated 
Fund would also be related to each other Regulated Fund in a manner 
described by 57(b) or rule 17d-1, as applicable, and thus prohibited 
from participating in Co-Investment Transactions with each other. 
Further, because the BDC Downstream Funds and Wholly-Owned Investment 
Subs are controlled by the Regulated Funds, the BDC Downstream Funds 
and Wholly-Owned Investment Subs are subject to section 57(a)(4) (or 
section 17(d) in the case of Wholly-Owned Investment Subs controlled by 
Regulated Funds that are registered under the Act) and thus also 
subject to the provisions of rule 17d-1 and therefore would be 
prohibited from participating in Co-Investment Transactions.
    4. In addition, because the Varagon Proprietary Accounts are 
controlled by Varagon, which is the parent company of Varagon BDC 
Adviser and, therefore, are under common control with the Regulated 
Funds, the Varagon Proprietary Accounts could be deemed to be persons 
related to the Regulated Funds (or a company controlled by the 
Regulated Funds) in a manner described by section 57(b) (or section 
17(d) in the case of Regulated Funds that are registered under the Act) 
and also prohibited from participating in the Co-Investment Program.
    5. 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.
    6. Applicants state that in the absence of the requested relief, in 
many circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants state that, as required by rule 17d-1(b), the 
Conditions ensure that the terms on which Co-Investment Transactions 
may be made will be consistent with the participation of the Regulated 
Funds being on a basis that it is neither different from nor less 
advantageous than other participants, thus protecting the equity 
holders of any participant from being disadvantaged. Applicants further 
state that the Conditions ensure that all Co-Investment Transactions 
are reasonable and fair to the Regulated Funds and their shareholders 
and do not involve overreaching by any person concerned, including the 
Advisers. Applicants state that the Regulated Funds' participation in 
the Co-Investment Transactions in accordance with the Conditions will 
be consistent with the provisions, policies, and purposes of the Act 
and would be done in a manner that is not different from, or less 
advantageous than, that of other participants.

Applicants' Conditions

    Applicants agree that the Order shall be subject to the following 
Conditions:
    1. Identification and Referral of Potential Co-Investment 
Transactions.
    (a). The Advisers will establish, maintain and implement policies 
and procedures reasonably designed to ensure that each Adviser is 
promptly notified of all Potential Co-Investment Transactions that fall 
within the then-current Objectives and Strategies and Board-Established 
Criteria of any Regulated Fund the Adviser manages.
    (b). When an Adviser to a Regulated Fund is notified of a Potential 
Co-Investment Transaction 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. Board Approvals of Co-Investment Transactions.
    (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 Advisers to be 
invested in the Potential Co-Investment Transaction by the 
participating Regulated Funds and any participating Affiliated Funds, 
collectively, exceeds the amount of the investment opportunity, the 
investment opportunity will be allocated among them pro rata based on 
the size of the Internal Orders, as described in section III.A.1.b. of 
the application. Each Adviser to a participating Regulated Fund will 
promptly notify and provide the Eligible Directors with information 
concerning the Affiliated Funds' and Regulated Funds' order sizes to 
assist the Eligible Directors with their review of the applicable 
Regulated Fund's investments for compliance with these Conditions.
    (c). After making the determinations required in Condition 1(b) 
above, each Adviser to a participating Regulated Fund will distribute 
written information concerning the Potential Co-Investment Transaction 
(including the amount proposed to be invested by each participating 
Regulated Fund and each participating Affiliated Fund) to the Eligible 
Directors of its participating Regulated Fund(s) for their 
consideration. A Regulated Fund will enter into a Co-Investment 
Transaction with one or more other Regulated Funds or 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 transaction, including the consideration to 
be paid, are reasonable and fair to the Regulated Fund and its equity 
holders and do not involve overreaching in respect of the Regulated 
Fund or its equity holders on the part of any person concerned;
    (ii). the transaction is consistent with:
    (A). The interests of the Regulated Fund's equity holders; and
    (B). the Regulated Fund's then-current Objectives and Strategies;
    (iii). the investment by any other Regulated Fund(s) or Affiliated 
Fund(s) 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 Fund(s) or Affiliated 
Fund(s) participating in the transaction; provided that the Required 
Majority shall not be prohibited from reaching the conclusions required 
by this Condition 2(c)(iii) if:
    (A). The settlement date for another Regulated Fund or an 
Affiliated Fund in a Co-Investment Transaction is later than the 
settlement date for the Regulated Fund by no more than ten business 
days or earlier than the settlement date for the Regulated Fund by no 
more than ten business days, in either case, so long as: (x) The date 
on which the commitment of the Affiliated Funds and Regulated Funds is 
made is the same; and (y) the earliest settlement date and the latest 
settlement date of any Affiliated Fund or Regulated Fund participating 
in the transaction will

[[Page 31262]]

occur within ten business days of each other; or
    (B). any other Regulated Fund or Affiliated Fund, but not the 
Regulated Fund itself, gains the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
a board observer or any similar right to participate in the governance 
or management of the portfolio company so long as: (x) The Eligible 
Directors will have the right to ratify the selection of such director 
or board observer, if any; (y) the 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 (z) any fees or other compensation that any other Regulated Fund or 
Affiliated Fund or any affiliated person of any other Regulated Fund or 
Affiliated Fund receives in connection with the right of one or more 
Regulated Funds or Affiliated Funds 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 any participating Affiliated Funds (who may, in turn, share their 
portion with their affiliated persons) and any participating Regulated 
Fund(s) in accordance with the amount of each such party's investment; 
and
    (iv). the proposed investment by the Regulated Fund will not 
involve compensation, remuneration or a direct or indirect \23\ 
financial benefit to the Advisers, any other Regulated Fund, 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 14, (B) to the extent permitted by section 17(e) 
or 57(k), 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)(B)(z).
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    \23\ For example, procuring the Regulated Fund's investment in a 
Potential Co-Investment Transaction to permit an affiliate to 
complete or obtain better terms in a separate transaction would 
constitute an indirect financial benefit.
---------------------------------------------------------------------------

    3. Right to Decline. 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. General Limitation. Except for Follow-On Investments made in 
accordance with Conditions 8 and 9 below,\24\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\25\
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    \24\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \25\ ``Related Party'' means (i) any Close Affiliate and (ii) in 
respect of matters as to which any Adviser has knowledge, any Remote 
Affiliate.
    ``Close Affiliate'' means the Advisers, the Regulated Funds, the 
Affiliated Funds and any other person described in section 57(b) 
(after giving effect to rule 57b-1) 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).
    ``Remote Affiliate'' means any person described in section 57(e) 
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.
---------------------------------------------------------------------------

    5. Same Terms and Conditions. A Regulated Fund will not participate 
in any Potential Co-Investment Transaction unless (i) the terms, 
conditions, price, class of securities to be purchased, date on which 
the commitment is entered into and registration rights (if any) will be 
the same for each participating Regulated Fund and Affiliated Fund and 
(ii) the earliest settlement date and the latest settlement date of any 
participating Regulated Fund or Affiliated Fund will occur as close in 
time as practicable and in no event more than ten business days apart. 
The grant to one or more Regulated Funds or Affiliated Funds, but not 
the respective 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 5, if Condition 
2(c)(iii)(B) is met.
    6. Standard Review Dispositions.
    (a). General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of an interest in a security and 
one or more Regulated Funds and Affiliated Funds have previously 
participated in a Co-Investment Transaction with respect to the issuer, 
then:
    (i). The Adviser to such Regulated Fund or Affiliated Fund \26\ 
will notify each Regulated Fund that holds an investment in the issuer 
of the proposed Disposition at the earliest practical time; and
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    \26\ Any Varagon Proprietary Account that is not advised by an 
Adviser is itself deemed to be an Adviser for purposes of Conditions 
6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i).
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    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to participation by 
such Regulated Fund in the Disposition.
    (b). Same Terms and Conditions. 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 Affiliated Funds and any other Regulated Fund.
    (c). No Board Approval Required. A Regulated Fund may participate 
in such a Disposition without obtaining prior approval of the Required 
Majority if:
    (i). (A) The participation of each Regulated Fund and Affiliated 
Fund in such Disposition is proportionate to its then-current holding 
of the security (or securities) of the issuer that is (or are) the 
subject of the Disposition; \27\ (B) 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 (C) the Board of 
the Regulated Fund is provided on a quarterly basis with a list of all 
Dispositions made in accordance with this Condition; or
---------------------------------------------------------------------------

    \27\ In the case of any Disposition, proportionality will be 
measured by each participating Regulated Fund's and Affiliated 
Fund's outstanding investment in the security in question 
immediately preceding the Disposition.
---------------------------------------------------------------------------

    (ii). each security is a Tradable Security and (A) the Disposition 
is not to the issuer or any affiliated person of the issuer; and (B) 
the security is sold for cash in a transaction in which the only term 
negotiated by or on behalf of the participating Regulated Funds and 
Affiliated Funds is price.
    (d). Standard Board Approval. 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.
    7. Enhanced Review Dispositions.
    (a). General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a 
Potential Co-Investment Transaction and the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer:
    (i). The Adviser to such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds an

[[Page 31263]]

investment in the issuer of the proposed Disposition at the earliest 
practical time;
    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to participation by 
such Regulated Fund in the Disposition; and
    (iii). the Advisers will provide to the Board of each Regulated 
Fund that holds an investment in the issuer all information relating to 
the existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition.
    (b). Enhanced Board Approval. 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:
    (i). The Disposition complies with Condition 2(c)(i), (ii), 
(iii)(A), and (iv); and
    (ii). the making and holding of the Pre-Boarding Investments were 
not prohibited by section 57 or rule 17d-1, as applicable, and records 
the basis for the finding in the Board minutes.
    (c). Additional Requirements: The Disposition may only be completed 
in reliance on the Order if:
    (i). Same Terms and Conditions. Each Regulated Fund has the right 
to participate in such Disposition on a proportionate basis, at the 
same price and on the same terms and Conditions as those applicable to 
the Affiliated Funds and any other Regulated Fund;
    (ii). Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (iii). Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iv). Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial \28\ in 
amount, including immaterial relative to the size of the issuer; and 
(y) the Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency, or denominations may be treated as the same security; and
---------------------------------------------------------------------------

    \28\ In determining whether a holding is ``immaterial'' for 
purposes of the Order, the Required Majority will consider whether 
the nature and extent of the interest in the transaction or 
arrangement is sufficiently small that a reasonable person would not 
believe that the interest affected the determination of whether to 
enter into the transaction or arrangement or the terms of the 
transaction or arrangement.
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    (v). No control. The Affiliated Funds, the other Regulated Funds 
and their affiliated persons (within the meaning of section 2(a)(3)(C) 
of the Act), individually or in the aggregate, do not control the 
issuer of the securities (within the meaning of section 2(a)(9) of the 
Act).
    8. Standard Review Follow-Ons.
    (a). General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer and the Regulated Funds and 
Affiliated Funds holding investments in the issuer previously 
participated in a Co-Investment Transaction with respect to the issuer:
    (i). The Adviser to each such Regulated Fund or Affiliated Fund 
will notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time; and
    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund.
    (b). No Board Approval Required. A Regulated Fund may participate 
in the Follow-On Investment without obtaining prior approval of the 
Required Majority if:
    (i). (A) The proposed participation of each Regulated Fund and each 
Affiliated Fund in such investment is proportionate to its outstanding 
investments in the issuer or the security at issue, as appropriate,\29\ 
immediately preceding the Follow-On Investment; and (B) 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); or
---------------------------------------------------------------------------

    \29\ To the extent that a Follow-On Investment opportunity is in 
a security or arises in respect of a security held by the 
participating Regulated Funds and Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the security in question 
immediately preceding the Follow-On Investment using the most recent 
available valuation thereof. To the extent that a Follow-On 
Investment opportunity relates to an opportunity to invest in a 
security that is not in respect of any security held by any of the 
participating Regulated Funds or Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the issuer immediately 
preceding the Follow-On Investment using the most recent available 
valuation thereof.
---------------------------------------------------------------------------

    (ii). it is a Non-Negotiated Follow-On Investment.
    (c). Standard Board Approval. 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 makes the determinations set forth in Condition 2(c). 
If the only previous Co-Investment Transaction with respect to the 
issuer was an Enhanced Review Disposition the Eligible Directors must 
complete this review of the proposed Follow-On Investment both on a 
stand-alone basis and together with the Pre-Boarding Investments in 
relation to the total economic exposure and other terms of the 
investment.
    (d). Allocation. If, with respect to any such Follow-On Investment:
    (i). The amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii). the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.A.1.b. of the 
application.
    (e). Other Conditions. 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. Enhanced Review Follow-Ons.
    (a). General. If any Regulated Fund or Affiliated Fund desires to 
make a

[[Page 31264]]

Follow-On Investment in an issuer that is a Potential Co-Investment 
Transaction and the Regulated Funds and Affiliated Funds holding 
investments in the issuer have not previously participated in a Co-
Investment Transaction with respect to the issuer:
    (i). The Adviser to each such Regulated Fund or Affiliated Fund 
will notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time;
    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund; and
    (iii). the Advisers will provide to the Board of each Regulated 
Fund that holds an investment in the issuer all information relating to 
the existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition.
    (b). Enhanced Board Approval. 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 reviews the 
proposed Follow-On Investment both on a stand-alone basis and together 
with the Pre-Boarding Investments in relation to the total economic 
exposure and other terms and makes the determinations set forth in 
Condition 2(c). In addition, the Follow-On Investment may only be 
completed in reliance on the Order if the Required Majority of each 
participating Regulated Fund determines that the making and holding of 
the Pre-Boarding Investments were not prohibited by section 57 (as 
modified by rule 57b-1) or rule 17d-1, as applicable. The basis for the 
Board's findings will be recorded in its minutes.
    (c). Additional Requirements. The Follow-On Investment may only be 
completed in reliance on the Order if:
    (i). Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (ii). Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iii). Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial in amount, 
including immaterial relative to the size of the issuer; and (y) the 
Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency, or denominations may be treated as the same security; and
    (iv). No control. The Affiliated Funds, the other Regulated Funds 
and their affiliated persons (within the meaning of section 2(a)(3)(C) 
of the Act), individually or in the aggregate, do not control the 
issuer of the securities (within the meaning of section 2(a)(9) of the 
Act).
    (d). Allocation. If, with respect to any such Follow-On Investment:
    (i). The amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii). the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.A.1.b. of the 
application.
    (e). Other Conditions. 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.
    10. Board Reporting, Compliance and Annual Re-Approval.
    (a). Each Adviser to a Regulated Fund will present to the Board of 
each Regulated Fund, on a quarterly basis, and at such other times as 
the Board may request, (i) a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Funds or any 
of the Affiliated Funds 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 such investment opportunities were not 
made available to the Regulated Fund; (ii) a record of all Follow-On 
Investments in and Dispositions of investments in any issuer in which 
the Regulated Fund holds any investments by any Affiliated Fund or 
other Regulated Fund during the prior quarter; and (iii) 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 Independent Directors, may 
determine whether all Potential Co-Investment Transactions and Co-
Investment Transactions during the preceding quarter, including those 
investments that the Regulated Fund considered but declined to 
participate in, comply with the Conditions.
    (b). All information presented to the Regulated Fund's 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.
    (c). 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. 
In the case of a BDC Downstream Fund that does not have a chief 
compliance officer, the chief compliance officer of the BDC that 
controls the BDC Downstream Fund will prepare the report for the 
relevant Independent Party.
    (d). The Independent Directors (including the non-interested 
members of each Independent Party) will consider at least annually 
whether continued participation in new and existing Co-Investment 
Transactions is in the Regulated Fund's best interests.
    11. Record Keeping. 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

[[Page 31265]]

these Conditions were approved by the Required Majority under section 
57(f).
    12. Director Independence. No Independent Director (including the 
non-interested members of any Independent Party) of a Regulated Fund 
will also be a director, general partner, managing member or principal, 
or otherwise be an ``affiliated person'' (as defined in the Act) of any 
Affiliated Fund.
    13. Expenses. The expenses, if any, associated with acquiring, 
holding or disposing of any securities acquired in a Co-Investment 
Transaction (including, without limitation, the expenses of the 
distribution of any such securities registered for sale under the 
Securities Act) will, to the extent not payable by the Advisers under 
their respective advisory agreements with the Regulated Funds and the 
Affiliated Funds, be shared by the Regulated Funds and the 
participating Affiliated Funds in proportion to the relative amounts of 
the securities held or being acquired or disposed of, as the case may 
be.
    14. Transaction Fees.\30\ Any transaction fee (including break-up, 
structuring, monitoring or commitment fees but excluding brokerage or 
underwriting compensation permitted by section 17(e) or 57(k)) received 
in connection with any Co-Investment Transaction will be distributed to 
the participants 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 Adviser at a bank or banks having the qualifications prescribed 
in section 26(a)(1), and the account will earn a competitive rate of 
interest that will also be divided pro rata among the participants. 
None of the Advisers, the Affiliated Funds, the other Regulated Funds 
or any affiliated person of the Affiliated Funds or the Regulated Funds 
will receive any additional compensation or remuneration of any kind as 
a result of or in connection with a Co-Investment Transaction other 
than (i) 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)(B)(z), (ii) brokerage or 
underwriting compensation permitted by section 17(e) or 57(k) or (iii) 
in the case of the Advisers, investment advisory compensation paid in 
accordance with investment advisory agreements between the applicable 
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
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    \30\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    15. Independence. 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) any other matter under either the Act or applicable 
State law affecting the Board's composition, size or manner of 
election.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11035 Filed 5-21-20; 8:45 am]
 BILLING CODE 8011-01-P