80 FR 28027 - Business Development Corporation of America, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 94 (May 15, 2015)

[Federal Register Volume 80, Number 94 (Friday, May 15, 2015)]
[Notices]
[Pages 28027-28031]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-11731]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31598; File No. 812-14368]


Business Development Corporation of America, et al.; Notice of 
Application

May 11, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d) and 
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act to permit certain joint transactions otherwise 
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 
under the Act.

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Summary of Application: Applicants request an order to permit business 
development companies (``BDCs'') to co-invest in portfolio companies 
with each other and with affiliated investment funds.

Applicants: Business Development Corporation of America (``BDCA''); 
Business Development Corporation of America II (``BDCA II''); BDCA 
Venture, Inc. (``BDCA Venture,'' and BDCA Venture together with BDCA 
and BDCA II, the ``BDCA Funds''), BDCA Adviser, LLC (``BDCA Adviser''), 
on behalf of itself and its successors; \1\ BDCA Adviser II, LLC 
(``BDCA Adviser II''), on behalf of itself and its successors; BDCA 
Venture Adviser, LLC, on behalf of itself and its successors (``BDCA 
Venture Adviser''); and BDCA Funding I, LLC; BDCA 2L Funding I, LLC; 
BDCA-CB Funding, LLC; and 54th Street Equity Holdings, Inc. 
(collectively, the ``Existing BDCA Subs'').
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    \1\ The term ``successor,'' as applied to each Adviser, means an 
entity that results from a reorganization into another jurisdiction 
or change in the type of business organization.

DATES: Filing Dates: The application was filed on October 2, 2014 and 
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amended on March 13, 2015.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on June 8, 2015, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, 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: James A. Tanaka, 
General Counsel, RCS Capital, 405 Park Avenue, 14th Floor, New York, 
NY, 10022.

FOR FURTHER INFORMATION CONTACT: Michael S. Didiuk, Senior Counsel, at 
(202) 551-6839 or Holly Hunter-Ceci, Branch Chief, at (202) 551-6869 
(Chief Counsel's Office, Division of Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. BDCA, BDCA II and BDCA Venture are Maryland corporations 
organized as closed-end management investment companies that have 
elected to be regulated as BDCs under Section 54(a) of the Act.\2\ 
BDCA's Objectives and Strategies \3\ are to generate both current 
income and to a lesser extent long-term capital appreciation through 
debt and equity investments. BDCA invests primarily in first and second 
lien senior loans and mezzanine debt issued by middle market companies. 
BDCA II's Objectives and Strategies are to generate both current income 
and, to a lesser extent, capital appreciation through its investments. 
BDCA II intends to achieve this objective by investing in a portfolio 
composed primarily of leveraged loans. BDCA Venture's Objectives and 
Strategies are to maximize total return by generating current income 
from debt investments and, to a lesser extent, capital appreciation 
from equity and equity-related investments. BDCA Venture seeks to 
accomplish its total return objective by primarily lending with 
warrants to emerging growth

[[Page 28028]]

companies that are typically backed by venture capital firms.
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    \2\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \3\ ``Objectives and Strategies'' means a Regulated Fund's 
investment objectives and strategies, as described in the Regulated 
Fund's registration statement on Form N-2, other filings the 
Regulated Fund has made with the Commission under the Securities Act 
of 1933 (the ``Securities Act''), or under the Securities Exchange 
Act of 1934 and the Regulated Fund's reports to shareholders.
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    2. The board of directors of BDCA (the ``BDCA Board'') is comprised 
of five directors, three of whom are not ``interested persons,'' within 
the meaning of Section 2(a)(19) of the 1940 Act (the ``Non-Interested 
Directors''), of BDCA. The board of directors of BDCA II (the ``BDCA II 
Board'') is comprised of five directors, three of whom are Non-
Interested Directors of BDCA II. The board of directors of BDCA Venture 
(the ``BDCA Venture Board,'' and collectively with the BDCA Board and 
the BDCA II Board, and any board of directors of a Future Regulated 
Fund, the ``Boards'' and each a ``Board,'' as applicable) consists of 
five directors, four of whom are Non-Interested Directors of BDCA 
Venture.
    3. BDCA Adviser is a Delaware limited liability company that is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (the ``Advisers Act''). BDCA Adviser serves as investment 
adviser to BDCA. BDCA Adviser II is a Delaware limited liability 
company that is registered as an investment adviser under the Advisers 
Act. BDCA Adviser II serves as investment adviser to BDCA II. BDCA 
Venture Adviser is a Delaware limited liability company that is 
registered as an investment adviser under the Advisers Act. BDCA 
Venture Adviser serves as investment adviser to BDCA Venture.
    4. Applicants seek an order (``Order'') to permit a Regulated Fund 
\4\ and one or more Regulated Funds and/or one or more Future 
Affiliated Funds \5\ to participate in the same investment 
opportunities through a proposed co-investment program (the ``Co-
Investment Program'') where such participation would otherwise be 
prohibited under section 57(a)(4) and rule 17d-1 by (a) co-investing 
with each other in securities issued by issuers in private placement 
transactions in which an Adviser negotiates terms in addition to price; 
\6\ and (b) making additional investments in securities of such 
issuers, including through the exercise of warrants, conversion 
privileges, and other rights to purchase securities of the issuers 
(``Follow-On Investments''). ``Co-Investment Transaction'' means any 
transaction in which a Regulated Fund (or its Wholly-Owned Investment 
Sub, as defined below) participated together with one or more other 
Regulated Funds and/or one or more Future Affiliated Funds in reliance 
on the requested Order. ``Potential Co-Investment Transaction'' means 
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub, as defined below) could not participate together 
with one or more Future Affiliated Funds and/or one or more other 
Regulated Funds without obtaining and relying on the Order.\7\
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    \4\ ``Regulated Fund'' means any of the BDCA Funds and any 
Future Regulated Fund. ``Future Regulated Fund'' means any closed-
end management investment company (a) that is registered under the 
Act or has elected to be regulated as a BDC, (b) whose investment 
adviser is an Adviser, and (c) that intends to participate in the 
Co-Investment Program. The term ``Adviser'' means (a) BDCA Adviser, 
BDCA Adviser II, and BDCA Venture Adviser and (b) any future 
investment adviser that controls, is controlled by or is under 
common control with AR Capital, LLC and is registered as an 
investment adviser under the Advisers Act.
    \5\ ``Future Affiliated Fund'' means any entity (a) whose 
investment adviser is an Adviser, (b) that would be an investment 
company but for section 3(c)(1) or 3(c)(7) of the Act, and (c) that 
intends to participate in the Co-Investment Program.
    \6\ The term ``private placement transactions'' means 
transactions in which the offer and sale of securities by the issuer 
are exempt from registration under the Securities Act.
    \7\ 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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    5. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary 
would be prohibited from investing in a Co-Investment Transaction with 
any Future Affiliated Fund or Regulated Fund because it would be a 
company controlled by its parent Regulated Fund for purposes of section 
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned 
Investment Sub be permitted to participate in Co-Investment 
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be 
treated, for purposes of the requested Order, as though the parent 
Regulated Fund were participating directly. Applicants represent that 
this treatment is justified because a Wholly-Owned Investment Sub would 
have no purpose other than serving as a holding vehicle for the 
Regulated Fund's investments and, therefore, no conflicts of interest 
could arise between the Regulated Fund and the Wholly-Owned Investment 
Sub. The Regulated Fund's Board would make all relevant determinations 
under the conditions with regard to a Wholly-Owned Investment Sub's 
participation in a Co-Investment Transaction, and the Regulated Fund's 
Board would be informed of, and take into consideration, any proposed 
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If 
the Regulated Fund proposes to participate in the same Co-Investment 
Transaction with any of its Wholly-Owned Investment Subs, the Board 
will also be informed of, and take into consideration, the relative 
participation of the Regulated Fund and the Wholly-Owned Investment 
Sub.
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    \8\ The term ``Wholly-Owned Investment Sub'' means an entity (i) 
that is wholly-owned by a Regulated Fund (with the Regulated Fund at 
all times holding, beneficially and of record, 100% of the voting 
and economic interests); (ii) whose sole business purpose is to hold 
one or more investments on behalf of the Regulated Fund; (iii) with 
respect to which the Regulated Fund's Board has the sole authority 
to make all determinations with respect to the entity's 
participation under the conditions of the Application; and (iv) that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act.
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    6. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the applicable Adviser will consider only the 
Objectives and Strategies, investment policies, investment positions, 
capital available for investment, and other pertinent factors 
applicable to that Regulated Fund. The Regulated Funds' Advisers expect 
that any portfolio company that is an appropriate investment for a 
Regulated Fund should also be an appropriate investment for one or more 
other Regulated Funds and/or one or more Future Affiliated Funds, with 
certain exceptions based on available capital or diversification.\9\
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    \9\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
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    7. Other than pro rata dispositions and Follow-On Investments as 
provided in conditions 7 and 8, and after making the determinations 
required in conditions 1 and 2(a), the Adviser will present each 
Potential Co-Investment Transaction and the proposed allocation to the 
directors of the Board eligible to vote under section 57(o) of the Act 
(``Eligible Directors''), and the ``required majority,'' as defined in 
section 57(o) of the Act (``Required Majority'') \10\ will approve each 
Co-Investment Transaction prior to any investment by the participating 
Regulated Fund.
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    \10\ In the case of a Regulated Fund that is a registered 
closed-end fund, the Board members that make up the Required 
Majority will be determined as if the Regulated Fund were a BDC 
subject to Section 57(o).
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    8. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and 
Future Affiliated Fund in such disposition is proportionate to its

[[Page 28029]]

outstanding investments in the issuer immediately preceding the 
disposition or Follow-On Investment, as the case may be; and (ii) the 
Board of the Regulated Fund has approved that Regulated Fund's 
participation in pro rata dispositions and Follow-On Investments as 
being in the best interests of the Regulated Fund. If the Board does 
not so approve, any such disposition or Follow-On Investment will be 
submitted to the Regulated Fund's Eligible Directors. The Board of any 
Regulated Fund may at any time rescind, suspend or qualify its approval 
of pro rata dispositions and Follow-On Investments with the result that 
all dispositions and/or Follow-On Investments must be submitted to the 
Eligible Directors.
    9. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than 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). Applicants submit 
that each of the Regulated Funds and Future Affiliated Funds be deemed 
to be a person related to each Regulated Fund in a manner described by 
section 57(b) by virtue of being under common control. Section 57(i) of 
the Act provides that, until the Commission prescribes rules under 
section 57(a)(4), the Commission's rules under section 17(d) of the Act 
applicable to registered closed-end investment companies will be deemed 
to apply to transactions subject to section 57(a)(4). Because the 
Commission has not adopted any rules under section 57(a)(4), rule 17d-1 
also applies to joint transactions with Regulated Funds that are BDCs. 
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to 
Regulated Funds that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
affiliated persons of a registered investment company from 
participating in joint transactions with the company unless the 
Commission has granted an order permitting such transactions. In 
passing upon applications under rule 17d-1, the Commission considers 
whether the company's participation in the joint transaction is 
consistent with the provisions, policies, and purposes of the Act and 
the extent to which such participation is on a basis different from or 
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief, 
the Regulated Funds would be, in some circumstances, limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants believe that the proposed terms and 
conditions will ensure that the Co-Investment Transactions are 
consistent with the protection of each Regulated Fund's shareholders 
and with the purposes intended by the policies and provisions of the 
Act. Applicants state that the Regulated Funds' participation in the 
Co-Investment Transactions will be consistent with the provisions, 
policies, and purposes of the Act and on a basis that is not different 
from or less advantageous than that of other participants.
    4. Under condition 14, if the Advisers, the Principals, any person 
controlling, controlled by, or under common control with the Advisers 
or the Principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25% of the outstanding 
voting securities of a Regulated Fund (``Shares''), then the Holders 
will vote such Shares as directed by an independent third party when 
voting on matters specified in the condition. Applicants believe that 
this condition will ensure that the Non-Interested Directors will act 
independently in evaluating the Co-Investment Program, because the 
ability of the Advisers or the Principals to influence the Non-
Interested Directors by a suggestion, explicit or implied, that the 
Non-Interested Directors can be removed will be limited significantly. 
Applicants represent that the Non-Interested Directors will evaluate 
and approve any such voting trust or proxy adviser, taking into 
accounts its qualifications, reputation for independence, cost to the 
shareholders, and other factors that they deem relevant.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time an Adviser considers a Potential Co-Investment 
Transaction for a Future Affiliated Fund or another Regulated Fund that 
falls within a Regulated Fund's then-current Objectives and Strategies, 
the Regulated Fund's Adviser will make an independent determination of 
the appropriateness of the investment for such Regulated Fund in light 
of the Regulated Fund's then-current circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, it will then determine an appropriate level of investment for the 
Regulated Fund.
    (b) If the aggregate amount recommended by the applicable Adviser 
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be 
invested by the other participating Regulated Funds and Future 
Affiliated Funds, collectively, in the same transaction, exceeds the 
amount of the investment opportunity, the investment opportunity will 
be allocated among them pro rata based on each participating party's 
capital available for investment in the asset class being allocated, up 
to the amount proposed to be invested by each. The applicable Adviser 
will provide the Eligible Directors of each participating Regulated 
Fund with information concerning each participating party's available 
capital to assist the Eligible Directors with their review of the 
Regulated Fund's investments for compliance with these allocation 
procedures.
    (c) After making the determinations required in conditions 1 and 
2(a), the applicable Adviser will distribute written information 
concerning the Potential Co-Investment Transaction (including the 
amount proposed to be invested by each participating Regulated Fund and 
Future Affiliated Fund) to the Eligible Directors of each participating 
Regulated Fund for their consideration. A Regulated Fund will co-invest 
with one or more other Regulated Funds and/or one or more Future 
Affiliated Funds only if, prior to the Regulated Fund's participation 
in the Potential Co-Investment Transaction, a Required Majority 
concludes that:
    (i) The terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Fund and its shareholders and do not involve overreaching in respect of 
the Regulated Fund or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Future 
Affiliated Funds would not disadvantage the Regulated Fund, and 
participation by

[[Page 28030]]

the Regulated Fund would not be on a basis different from or less 
advantageous than that of other Regulated Funds or Future Affiliated 
Funds; provided that, if any other Regulated Fund or Future Affiliated 
Fund, but not the Regulated Fund itself, gains the right to nominate a 
director for election to a portfolio company's board of directors or 
the right to have a board observer or any similar right to participate 
in the governance or management of the portfolio company, such event 
shall not be interpreted to prohibit the Required Majority from 
reaching the conclusions required by this condition 2(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any;
    (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 Future Affiliated Fund 
or any Regulated Fund or any affiliated person of any Future Affiliated 
Fund or any Regulated Fund receives in connection with the right of an 
Future Affiliated Fund 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 Future Affiliated Funds (who each may, in turn, 
share its portion with its affiliated persons) and the participating 
Regulated Funds in accordance with the amount of each party's 
investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
the Advisers, the Future Affiliated Funds or the other Regulated Funds 
or any affiliated person of any of them (other than the parties to the 
Co-Investment Transaction), except (A) to the extent permitted by 
condition 13, (B) to the extent permitted by sections 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 Future Affiliated Funds during the preceding quarter that fell 
within the Regulated Fund's then-current Objectives and Strategies that 
were not made available to the Regulated Fund, and an explanation of 
why the investment opportunities were not offered to the Regulated 
Fund. All information presented to the Board pursuant to this condition 
will be kept for the life of the Regulated Fund and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\11\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Future Affiliated 
Fund, or any affiliated person of another Regulated Fund or Future 
Affiliated Fund is an existing investor.
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    \11\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Fund and Future 
Affiliated Fund. The grant to a Future Affiliated Fund or another 
Regulated Fund, but not the Regulated Fund, of the right to nominate a 
director for election to a portfolio company's board of directors, the 
right to have an observer on the board of directors or similar rights 
to participate in the governance or management of the portfolio company 
will not be interpreted so as to violate this condition 6, if 
conditions 2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Future Affiliated Fund or any Regulated Fund elects 
to sell, exchange or otherwise dispose of an interest in a security 
that was acquired in a Co-Investment Transaction, the applicable 
Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by each 
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such 
disposition on a proportionate basis, at the same price and on the same 
terms and conditions as those applicable to the participating Future 
Affiliated Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Fund and each Future Affiliated Fund in 
such disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in such dispositions on a pro 
rata basis (as described in greater detail in the application); and 
(iii) the Board of the Regulated Fund is provided on a quarterly basis 
with a list of all dispositions made in accordance with this condition. 
In all other cases, the Adviser will provide its written recommendation 
as to the Regulated Fund's participation to the Eligible Directors, and 
the Regulated Fund will participate in such disposition solely to the 
extent that a Required Majority determines that it is in the Regulated 
Fund's best interests.
    (d) Each Future Affiliated Fund and each Regulated Fund will bear 
its own expenses in connection with any such disposition.
    8. (a) If any Future Affiliated Fund or any Regulated Fund desires 
to make a Follow-On Investment in a portfolio company whose securities 
were acquired in a Co-Investment Transaction, the applicable Advisers 
will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest 
practical time; and
    (ii) formulate a recommendation as to the proposed participation, 
including the amount of the proposed Follow-On Investment, by each 
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Fund and each Future 
Affiliated Fund in such investment is proportionate to its outstanding 
investments in the issuer immediately preceding the Follow-On 
Investment; and (ii) the Board of the Regulated Fund has approved as 
being in the best interests of the Regulated Fund the ability to 
participate in Follow-On Investments on a pro rata basis (as described 
in greater detail in the application). In all other cases, the Adviser 
will provide its written recommendation as to the Regulated Fund's 
participation to the Eligible Directors, and the Regulated Fund will 
participate in such Follow-On Investment solely to the extent that a

[[Page 28031]]

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 Future Affiliated Funds' outstanding investments 
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser to be invested 
by each Regulated Fund in the Follow-On Investment, together with the 
amount proposed to be invested by the participating Future Affiliated 
Funds in the same transaction, exceeds the amount of the opportunity; 
then the amount invested by each such party will be allocated among 
them pro rata based on each participating party's capital available for 
investment in the asset class being allocated, up to the amount 
proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Funds or Future Affiliated Funds 
that the Regulated Fund considered but declined to participate in, so 
that the Non-Interested Directors may determine whether all investments 
made during the preceding quarter, including those investments that the 
Regulated Fund considered but declined to participate in, comply with 
the conditions of the Order. In addition, the Non-Interested Directors 
will consider at least annually the continued appropriateness for the 
Regulated Fund of participating in new and existing Co-Investment 
Transactions.
    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 Director of a Regulated Fund will also be a 
director, general partner, managing member or principal, or otherwise 
an ``affiliated person'' (as defined in the Act), of a Future 
Affiliated Fund.
    12. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the Securities Act) will, to 
the extent not payable by the Advisers under their respective 
investment advisory agreements with Future Affiliated Funds and the 
Regulated Funds, be shared by the Regulated Funds and the Future 
Affiliated Funds in proportion to the relative amounts of the 
securities held or to be acquired or disposed of, as the case may be.
    13. Any transaction fee \12\ (including break-up or commitment fees 
but excluding broker's fees contemplated by section 17(e) or 57(k) of 
the Act, as applicable) received in connection with a Co-Investment 
Transaction will be distributed to the participating Regulated Funds 
and Future Affiliated Funds on a pro rata basis based on the amounts 
they invested or committed, as the case may be, in such Co-Investment 
Transaction. If any transaction fee is to be held by an Adviser pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by such 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 Future 
Affiliated Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Future Affiliated Funds, the Advisers, the 
other Regulated Funds or any affiliated person of the Regulated Funds 
or Future Affiliated Funds will receive additional compensation or 
remuneration of any kind as a result of or in connection with a Co-
Investment Transaction (other than (a) in the case of the Regulated 
Funds and the Future Affiliated Funds, the pro rata transaction fees 
described above and fees or other compensation described in condition 
2(c)(iii)(C); and (b) in the case of an Adviser, investment advisory 
fees paid in accordance with the agreement between the Adviser and the 
Regulated Fund or Future Affiliated Fund.
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    \12\ 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 
outstanding Shares, then the Holders will vote such Shares as directed 
by an independent third party (such as the trustee of a voting trust or 
a proxy adviser) when voting on (1) the election of directors; (2) the 
removal of one or more directors; or (3) any matters requiring approval 
by the vote of a majority of the outstanding voting securities, as 
defined in Section 2(a)(42) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-11731 Filed 5-14-15; 8:45 am]
 BILLING CODE 8011-01-P