81 FR 12165 - Apollo Investment Corporation, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 45 (March 8, 2016)

Page Range		12165-12174
FR Document		2016-05043
Federal Register, Volume 81 Issue 45 (Tuesday, March 8, 2016)
[Federal Register Volume 81, Number 45 (Tuesday, March 8, 2016)]
[Notices]
[Pages 12165-12174]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-05043]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32019; File No. 812-13754]


Apollo Investment Corporation, et al.; Notice of Application

March 2, 2016.
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 
certain business development companies and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds.
    Applicants: Apollo Investment Corporation (``AIC''), Apollo 
Tactical Income Fund Inc. (``AIF''), Apollo Investment Management, L.P. 
(``AIM''), Apollo Management VII, L.P., Apollo Management VIII, L.P., 
Apollo Global Real Estate Management, L.P., Apollo Capital Management, 
L.P., Apollo SVF Management, L.P., Apollo Value Management, L.P., 
Apollo Europe Management, L.P., Apollo EPF Management, L.P., Apollo 
Credit Opportunity Management III LLC, Apollo Credit Management II, 
L.P., Apollo Credit Management (CLO), LLC, Apollo Credit Management II 
GP, LLC, Athene Asset Management, L.P., Apollo Credit Management, LLC 
(``ACM''), Apollo Palmetto Strategic Partnership, L.P., Apollo Special 
Opportunities Managed Account, L.P., Apollo Investment Europe II, L.P., 
Apollo Credit Opportunity Fund III LP, Apollo Investment Fund VII, 
L.P., Apollo Investment Fund VIII, L.P., Apollo

[[Page 12166]]

Commercial Real Estate Finance, Inc., ACREFI Management, LLC, Apollo 
Credit Senior Loan Fund, L.P., Apollo Senior Floating Rate Fund Inc. 
(``ASFRF''), ALM IV, Ltd., AGRE U.S. Real Estate Fund, L.P., ALM V, 
Ltd., Apollo Longevity, LLC, A-A European Senior Debt Fund, L.P., 
Apollo Management Singapore Pte. Ltd., Apollo European Strategic 
Management, L.P., Apollo European Strategic Investments (Holdings), 
L.P., Apollo Residential Mortgage, Inc., ARM Manager, LLC, AGRE Debt 
Fund I, L.P., AGRE-CRE Debt Manager, LLC, Apollo Natural Resources 
Partners, L.P., Apollo Commodities Management, L.P., Financial Credit 
Investment I, L.P., Financial Credit Investment I Manager, LLC, Apollo 
European Senior Debt Management, LLC, Apollo/Palmetto Short-Maturity 
Loan Portfolio, L.P., Apollo Credit Management (Senior Loans), LLC, 
2011 Stone Tower HY Cayman Fund Trust, AGRE NA Management, LLC, ALM X, 
Ltd., ALM VI, Ltd., ALM VII, Ltd., ALM VII (R), LTD., ALM VII (R)-2, 
LTD., ALM VIII, Ltd., ALM IX, Ltd., ALM XI, Ltd., ALM XII, Ltd., ALM 
XIV, Ltd., Apollo AF Loan Trust 2012, Apollo Asia Private Credit Master 
Fund Pte., Ltd., Apollo Centre Street Management, LLC, Apollo Centre 
Street Partnership, L.P., Apollo Credit Management (Senior Loans) II, 
LLC, Apollo Credit Master Fund Ltd., Apollo Credit Strategies Master 
Fund Ltd., Apollo EPF II Partnership, Apollo EPF Management II, L.P., 
Apollo European Credit Management, L.P., Apollo European Credit Master 
Fund, L.P., Apollo SK Strategic Investments, L.P., Apollo SK Strategic 
Management, LLC, Apollo ST Debt Advisors LLC, Apollo ST Fund Management 
LLC, Apollo Structured Credit Recovery Master Fund II Ltd., Cornerstone 
CLO Ltd., Rampart CLO 2006-I Ltd., Rampart CLO 2007 Ltd., Stone Tower 
CLO V Ltd., Stone Tower CLO VI Ltd., Stone Tower CLO VII Ltd., Stone 
Tower Loan Trust 2010, Stone Tower Loan Trust 2011, Merx Aviation 
Finance, LLC (``Merx''), Athene Holding Ltd. (``Athene''), MidCap FinCo 
Holdings Limited (``MidCap''), ALME Loan Funding 2013-1 Limited, ALME 
Loan Funding II Limited, ALME Loan Funding IV B.V., ALME Loan Funding 
III Limited, Apollo Capital Spectrum Fund, L.P., Apollo Capital 
Spectrum Management, LLC, Apollo Credit Short Opportunities Master 
Fund, L.P., Apollo Credit Short Opportunities Management, LLC, Apollo 
Franklin Management, LLC, Apollo Franklin Partnership, L.P., Apollo 
Structured Credit Recovery Management III LLC, Apollo Structured Credit 
Recovery Master Fund III L.P., Apollo Total Return Management LLC, 
Apollo Total Return Master Fund L.P., Apollo Zeus Strategic Management, 
LLC, Apollo Zeus Strategic Investments, L.P., AP Investment Europe III, 
L.P., AESI II, L.P., Apollo Lincoln Fixed Income Fund, L.P., Apollo 
Lincoln Private Credit Fund, L.P., Apollo Emerging Markets Debt Master 
Fund LP, Apollo Emerging Markets Fixed Income Strategies Fund, L.P. 
Financial Credit Investment II, L.P., Financial Credit Investment II 
Manager, LLC, Apollo U.S. Real Estate Fund II, L.P., ALM XIX, Ltd., ALM 
XVI, Ltd., ALM XVII, Ltd., ALM XVIII, Ltd., Apollo A-N Credit Fund, 
L.P., Apollo A-N Credit Management, LLC, Apollo Hercules Management, 
LLC, Apollo Hercules Partners, L.P., Apollo Management International 
LLP, Apollo Moultrie Credit Fund Management, LLC, Apollo Moultrie 
Credit Fund, L.P., Apollo NA Management II, LLC, Apollo Tactical Value 
SPN Investments, L.P., Apollo Tactical Value SPN Management, LLC, 
Apollo Thunder Management, LLC, Apollo Thunder Partners, L.P., Apollo 
Total Return Enhanced Management, LLC, Apollo Total Return Master Fund 
Enhanced, L.P., Apollo Union Street Management, LLC, Apollo Union 
Street Partners, L.P., Financial Credit Investment III Manager, LLC, 
and Financial Credit Investment III, L.P.
    Filing Dates: The application was filed on February 16, 2010, and 
amended on November 17, 2010, November 23, 2011, July 26, 2012, 
February 12, 2013, March 21, 2014, November 26, 2014 and March 1, 2016.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on March 28, 2016, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
St. NE., Washington, DC 20549-1090. Applicants: 9 West 57th Street, New 
York, NY 10019.

FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, or 
Dalia Blass, Assistant Chief Counsel, at (202) 551-6821 (Chief 
Counsel's Office, Division of Investment Management).

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

Introduction

    1. The Applicants request an order of the Commission under Sections 
17(d) and 57(i) and Rule 17d-1 thereunder (the ``Order'') to permit, 
subject to the terms and conditions set forth in the application (the 
``Conditions''), a Regulated Fund \1\ and one or more other Regulated 
Funds 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) participated together with one or more Affiliated Funds 
and/or one or more other Regulated Funds 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 AIC, ASFRF, AIF, the Future 
Regulated Funds and the BDC Downstream Funds (defined below). 
``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 and (b) whose investment adviser is an Adviser.
    ``Adviser'' means AIM, ACM and the Existing Advisers to 
Affiliated Funds (identified in Appendix A to the application) 
together with any future investment adviser that (i) controls, is 
controlled by or is under common control with AGM, (ii) is 
registered as an investment adviser under the Advisers Act, and 
(iii) is not a Regulated Fund or a subsidiary of a Regulated Fund.
    \2\ ``Affiliated Fund'' means any Existing Affiliated Fund 
(identified in Appendix A to the application) or any entity (a) 
whose investment adviser is an Adviser, (b) that would be an 
investment company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of 
the Act and (c) that is not a BDC Downstream Fund. 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 
its terms and Conditions set forth in the application.

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[[Page 12167]]

Applicants

    2. AIC is a closed-end management investment company incorporated 
in Maryland that has elected to be regulated as a business development 
company (``BDC'') under the Act.\4\ AIC's Board \5\ currently consists 
of eight members, six of whom are Independent Directors.\6\ ASFRF and 
AIF are Maryland corporations that are registered as closed-end 
management investment companies. Each of ASFRF's and AIF's Board 
currently consists of six members, four of whom are Independent 
Directors.
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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. AIM, a Delaware limited partnership that is registered under the 
Investment Advisers Act of 1940 (the ``Advisers Act''), serves as the 
investment adviser to AIC. ACM, a Delaware limited liability company 
that is registered as an investment adviser under the Advisers Act, 
serves as investment adviser to ASFRF and AIF.
    4. Merx, a Delaware limited liability company, is a special purpose 
vehicle owned by AIC. AIM serves as Merx's investment adviser. 
Applicants state that Merx engages primarily in aircraft leasing and 
related businesses and is thus excluded from investment company status 
under Section 3(a). Merx is a BDC Downstream Fund.\7\ If Applicants 
receive the requested Order, Merx may on occasion engage in Co-
Investment Transactions with other Regulated Funds and with Affiliated 
Funds.\8\
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    \7\ ``BDC Downstream Fund'' means either (a) with respect to 
AIC, Merx or (b) 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 
is an Adviser and (v) that is not a Wholly-Owned Investment Sub.
    \8\ Applicants believe that allowing the other Regulated Funds 
and the Affiliated Funds to co-invest with Merx does not raise any 
legal or policy concerns that are not otherwise raised by allowing a 
Regulated Fund to co-invest with another Regulated Fund and/or one 
or more Affiliated Funds because, in terms of its operation and 
purpose, Merx differs from a private fund only in that it invests in 
and operates aircraft subject to leases instead of in investment 
securities.
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    5. The Existing Affiliated Funds are the investment funds 
identified in Appendix A to the application. Applicants represent that 
each Existing Affiliated Fund is a separate and distinct legal entity 
and each, other than Athene and MidCap, would be an investment company 
but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act. Applicants 
state that Athene Holding does not come within the definition of 
investment company in Section 3(a)(1). As described in the application, 
Applicants state that Athene engages in the insurance business through 
wholly-owned subsidiary insurance companies which are excluded from 
investment company status by either Rule 3a-6 or Section 3(c)(3). 
Applicants state that Athene also invests through its controlled 
affiliate MidCap, which currently is excluded from investment company 
status by Section 3(b)(1), 3(c)(5) or 3(c)(6).\9\ As with the other 
Affiliated Funds, each of Athene and MidCap is advised by an Adviser 
pursuant to a separate investment management agreement.
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    \9\ Applicants state that, although Athene and MidCap may not 
rely on section 3(c)(1), 3(c)(5)(c) or 3(c)(7) of the Act, as do the 
other Existing Affiliated Funds, Applicants do not believe that 
allowing Athene and MidCap to participate in Co-investment 
Transactions as Affiliated Funds raises any additional legal or 
policy concerns not otherwise raised by allowing a Regulated Fund to 
co-invest with one or more Affiliated Funds. Specifically, 
Applicants argue that Athene and MidCap are clients of Advisers the 
same way that an Affiliated Fund relying on Section 3(c)(1) or 
3(c)(7) is a client of an Adviser. Although a relatively small 
portion of Athene's assets are managed by an investment adviser that 
is not an Adviser, only the portion of Athene's assets for which an 
Adviser has investment discretion will participate in Co-investment 
Transactions. Athene and MidCap may continue to be an Affiliated 
Fund in the future if it instead relies solely on Section 3(c)(1), 
3(c)(5)(C) or 3(c)(7) and otherwise satisfies the criteria for an 
``Affiliated Fund'' set out in the definition thereof.
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    6. The Existing Advisers to Affiliated Funds, identified in 
Appendix A to the application, are the investment advisers to the 
Existing Affiliated Funds. Each of the Existing Advisers to Affiliated 
Funds is registered as an investment adviser under the Advisers Act.
    7. Each of the Applicants may be deemed to be controlled by Apollo 
Global Management, LLC (``AGM''), a publicly traded company. AGM owns 
controlling interests in the Advisers and, thus, may be deemed to 
control the Regulated Funds and the Affiliated Funds. Applicants state 
that AGM is a holding company and does not currently offer investment 
advisory services to any person and is not expected to do so in the 
future. Applicants state that as a result, AGM has not been included as 
an Applicant.
    8. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\10\ 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 Entity 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 Entity 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. 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 parent Regulated Fund and the Wholly-Owned 
Investment Sub. The Board of the parent Regulated Fund 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 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 parent Regulated Fund proposes to participate in the same 
Co-Investment Transaction with any of its Wholly-Owned Investment Subs, 
the Board of the parent Regulated Fund will also be informed of, and 
take into consideration, the relative participation

[[Page 12168]]

of the Regulated Fund and the Wholly-Owned Investment Sub.
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    \10\ ``Wholly-Owned Investment Sub'' means an entity (i) that is 
wholly-owned by one of AIC, ASFRF, AIF or a Future Regulated Fund 
(with such 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 
such Regulated Fund; (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) or 
3(c)(7) of the Act.
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Applicants' Representations

A. Allocation Process

    9. Applicants state that the Advisers are presented with thousands 
of investment opportunities each year on behalf of their clients and 
must determine how to allocate those opportunities in a manner that, 
over time, is fair and equitable to all of their clients. Such 
investment opportunities may be Potential Co-Investment Transactions.
    10. Applicants represent that they 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.
    11. 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, analysts 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 requested 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 \11\ and any Board-Established 
Criteria \12\ of a Regulated Fund, the policies and procedures will 
require that the relevant portfolio managers, Investment Teams and 
Investment Committees responsible for that Regulated Fund receive 
sufficient information to allow the Regulated Fund's Adviser to make 
its independent determination and recommendations under the Conditions.
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    \11\ ``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).
    \12\ ``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 its 
approval of any Board-Established Criteria, though Applicants 
anticipate that, under normal circumstances, the Board would not 
modify these criteria more often than quarterly.
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    12. 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 such Potential Co-Investment Transaction to be 
appropriate, then it will formulate a recommendation regarding the 
proposed order amount for the Regulated Fund.
    13. Applicants state that, for each Regulated Fund and Affiliated 
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, the Adviser will submit a proposed order amount 
to the internal trading function, which is comprised of a group of 
individual traders who collect and execute trades. Applicants state 
further that 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, private equity, real estate) on which senior management, legal 
and compliance personnel from that area participate or, in the case of 
issues involving multiple areas or AGM as a whole, an AGM-wide 
allocation committee on which senior management, legal and compliance 
personnel for AGM participate.\13\ 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.\14\
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    \13\ The reason for any such adjustment to a proposed order 
amount will be documented in writing and preserved in the records of 
the Advisers.
    \14\ ``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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    14. 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.\15\ 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

[[Page 12169]]

allocation policies and procedures that the Advisers will establish, 
implement and maintain.\16\
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    \15\ 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.
    \16\ However, if the size of the opportunity is decreased such 
that the aggregate of the original Internal Orders would exceed the 
amount of the remaining investment opportunity, then upon submitting 
any revised order amount to the Board of a Regulated Fund for 
approval, the Adviser to the Regulated Fund will also notify the 
Board promptly of the amount that the Regulated Fund would receive 
if the remaining investment opportunity were allocated pro rata on 
the basis of the size of the original Internal Orders. 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

    15. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\17\ 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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    \17\ ``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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    16. 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.\18\ If the 
Regulated Funds and Affiliated Funds had previously participated in a 
Co-Investment Transaction with respect to the issuer, 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, 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 would 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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    \18\ ``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: (i) were acquired 
prior to participating in any Co-Investment Transaction; (ii) were 
acquired in transactions in which the only term negotiated by or on 
behalf of such funds was price; and (iii) were acquired either: (A) 
in reliance on one of the JT No-Action Letters (defined below); or 
(B) 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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    17. 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 \19\ or (ii) a Non-Negotiated 
Follow-On Investment.\20\ Applicants believe that these Pro Rata and 
Non-Negotiated Follow-On Investments do not present a significant 
opportunity for overreaching on the part of any Adviser and thus do not 
warrant the time or the attention of the Board. Pro Rata Follow-One 
Investments and Non-Negotiated Follow-On Investments remain subject to 
the Board's periodic review in accordance with Condition 10.
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    \19\ 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).
    \20\ 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).
---------------------------------------------------------------------------

C. Dispositions

    18. Applicants propose that Dispositions \21\ would be divided into 
two categories. If the Regulated Funds and Affiliated Funds holding 
investments in the issuer had 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.\22\
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    \21\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \22\ 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 would be required because such 
findings would not have been 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.
---------------------------------------------------------------------------

    19. 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 \23\ or (ii) the securities 
are Tradable Securities \24\ 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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    \23\ 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.
    \24\ ``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

    20. Applicants represent that under the terms and Conditions of the 
Application, all Regulated Funds and Affiliated Funds participating in 
a Co-

[[Page 12170]]

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.\25\ 
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.
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    \25\ Applicants state this may occur for two reasons. First, 
when the Affiliated Fund or Regulated Fund is not yet fully funded 
because, when the Affiliated Fund or Regulated Fund desires to make 
an investment, it must call capital from its investors to obtain the 
financing to make the investment, and in these instances, the notice 
requirement to call capital could be as much as ten business days. 
Second, where, for tax or regulatory reasons, an Affiliated Fund or 
Regulated Fund does not purchase new issuances immediately upon 
issuance but only after a short seasoning period of up to ten 
business days.
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E. Holders

    21. 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 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) controlled 
affiliates of AGM manage each of the Affiliated Funds and ASFRF and AIF 
and may be deemed to control any future Regulated Fund, (ii) AGM 
controls AIM, which manages AIC, and (iii) AIC Downstream Funds, are, 
and, in the future will be, deemed to be controlled by AIM, AIC or 
certain of AIC's subsidiaries. Thus, each of the Affiliated Funds could 
be deemed to be a person related to the AIC 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.
    4. 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.
    5. 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 will 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

[[Page 12171]]

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 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 \26\ 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).
---------------------------------------------------------------------------

    \26\ 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,\27\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\28\
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    \27\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \28\ ``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-

[[Page 12172]]

Investment Transaction with respect to the issuer, then:
    (i) The Adviser to such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition 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 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; \29\ (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
---------------------------------------------------------------------------

    \29\ 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 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 Conditions 2(c)(i), (ii), 
(iii)(A), and (iv);
    (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 \30\ 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
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    \30\ 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,\31\ 
immediately

[[Page 12173]]

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
---------------------------------------------------------------------------

    \31\ 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 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

[[Page 12174]]

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 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.\32\ 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.
---------------------------------------------------------------------------

    \32\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
---------------------------------------------------------------------------

    15. 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 (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 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.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05043 Filed 3-7-16; 8:45 am]
BILLING CODE 8011-01-P
12168 Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Notices

of the Regulated Fund and the Wholly- and any Board-Established Criteria 12 of issues involving multiple areas or AGM
Owned Investment Sub. a Regulated Fund, the policies and as a whole, an AGM-wide allocation
procedures will require that the relevant committee on which senior
Applicants’ Representations
portfolio managers, Investment Teams management, legal and compliance
A. Allocation Process and Investment Committees responsible personnel for AGM participate.13 The
for that Regulated Fund receive order of a Regulated Fund or Affiliated
9. Applicants state that the Advisers sufficient information to allow the Fund resulting from this process is
are presented with thousands of Regulated Fund’s Adviser to make its referred to as its ‘‘Internal Order’’. The
investment opportunities each year on independent determination and Internal Order will be submitted for
behalf of their clients and must recommendations under the Conditions. approval by the Required Majority of
determine how to allocate those 12. The Adviser to each applicable any participating Regulated Funds in
opportunities in a manner that, over Regulated Fund will then make an accordance with the Conditions.14
time, is fair and equitable to all of their independent determination of the 14. If the aggregate Internal Orders for
clients. Such investment opportunities appropriateness of the investment for a Potential Co-Investment Transaction
may be Potential Co-Investment the Regulated Fund in light of the do not exceed the size of the investment
Transactions. Regulated Fund’s then-current opportunity immediately prior to the
10. Applicants represent that they circumstances. If the Adviser to a submission of the orders to the
have established processes for allocating Regulated Fund deems the Regulated underwriter, broker, dealer or issuer, as
initial investment opportunities, Fund’s participation in such Potential applicable (the ‘‘External Submission’’),
opportunities for subsequent Co-Investment Transaction to be then each Internal Order will be
investments in an issuer and appropriate, then it will formulate a fulfilled as placed. If, on the other hand,
dispositions of securities holdings recommendation regarding the proposed the aggregate Internal Orders for a
reasonably designed to treat all clients order amount for the Regulated Fund. Potential Co-Investment Transaction
fairly and equitably. Further, Applicants 13. Applicants state that, for each exceed the size of the investment
represent that these processes will be Regulated Fund and Affiliated Fund opportunity immediately prior to the
extended and modified in a manner whose Adviser recommends External Submission, then the allocation
reasonably designed to ensure that the participating in a Potential Co- of the opportunity will be made pro rata
additional transactions permitted under Investment Transaction, the Adviser on the basis of the size of the Internal
the Order will both (i) be fair and will submit a proposed order amount to Orders.15 If, subsequent to such External
equitable to the Regulated Funds and the internal trading function, which is Submission, the size of the opportunity
the Affiliated Funds and (ii) comply comprised of a group of individual is increased or decreased, or if the terms
with the Conditions. traders who collect and execute trades. of such opportunity, or the facts and
11. Specifically, applicants state that Applicants state further that each circumstances applicable to the
the Advisers are organized and managed proposed order amount may be Regulated Funds’ or the Affiliated
such that the individual portfolio reviewed and adjusted, in accordance Funds’ consideration of the opportunity,
managers, as well as the teams and with the Advisers’ written allocation change, the participants will be
committees of portfolio managers, policies and procedures, by an permitted to submit revised Internal
analysts and senior management allocation committee for the area in Orders in accordance with written
(‘‘Investment Teams’’ and ‘‘Investment question (e.g., credit, private equity, real
Committees’’), responsible for estate) on which senior management, 13 The reason for any such adjustment to a

legal and compliance personnel from proposed order amount will be documented in
evaluating investment opportunities and writing and preserved in the records of the
making investment decisions on behalf that area participate or, in the case of Advisers.
of clients are promptly notified of the 14 ‘‘Required Majority’’ means a required

opportunities. If the requested Order is organizational documents (including operating majority, as defined in Section 57(o) of the Act. In
agreements). the case of a Regulated Fund that is a registered
granted, the Advisers will establish, 12 ‘‘Board-Established Criteria’’ means criteria closed-end fund, the Board members that make up
maintain and implement policies and that the Board of a Regulated Fund may establish the Required Majority will be determined as if the
procedures reasonably designed to from time to time to describe the characteristics of Regulated Fund were a BDC subject to Section
ensure that, when such opportunities Potential Co-Investment Transactions regarding 57(o). In the case of a BDC Downstream Fund with
which the Adviser to the Regulated Fund should be a board of directors (or the equivalent), the
arise, the Advisers to the relevant notified under Condition 1. The Board-Established members that make up the Required Majority will
Regulated Funds are promptly notified Criteria will be consistent with the Regulated be determined as if the BDC Downstream Fund
and receive the same information about Fund’s Objectives and Strategies. If no Board- were a BDC subject to Section 57(o). In the case of
the opportunity as any other Advisers Established Criteria are in effect, then the Regulated a BDC Downstream Fund with a transaction
Fund’s Adviser will be notified of all Potential Co- committee or advisory committee, the committee
considering the opportunity for their Investment Transactions that fall within the members that make up the Required Majority will
clients. In particular, consistent with Regulated Fund’s then-current Objectives and be determined as if the BDC Downstream Fund
Condition 1, if a Potential Co- Strategies. Board-Established Criteria will be were a BDC subject to Section 57(o) and as if the
Investment Transaction falls within the objective and testable, meaning that they will be committee members were directors of the fund.
based on observable information, such as industry/ 15 The Advisers will maintain records of all
then-current Objectives and Strategies 11 sector of the issuer, minimum EBITDA of the issuer, proposed order amounts, Internal Orders and
asset class of the investment opportunity or External Submissions in conjunction with Potential
11 ‘‘Objectives and Strategies’’ means (i) with required commitment size, and not on Co-Investment Transactions. Each applicable
respect to any Regulated Fund other than a BDC characteristics that involve a discretionary Adviser will provide the Eligible Directors with
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Downstream Fund, its investment objectives and assessment. The Adviser to the Regulated Fund may information concerning the Affiliated Funds’ and
strategies, as described in its most current from time to time recommend criteria for the Regulated Funds’ order sizes to assist the Eligible
registration statement on Form N–2, other current Board’s consideration, but Board-Established Directors with their review of the applicable
filings with the Commission under the Securities Criteria will only become effective if approved by Regulated Fund’s investments for compliance with
Act of 1933 (the ‘‘Securities Act’’) or under the a majority of the Independent Directors. The the Conditions.
Securities Exchange Act of 1934, as amended, and Independent Directors of a Regulated Fund may at ‘‘Eligible Directors’’ means, with respect to a
its most current report to stockholders, and (ii) with any time rescind, suspend or qualify its approval Regulated Fund and a Potential Co-Investment
respect to any BDC Downstream Fund, those of any Board-Established Criteria, though Transaction, the members of the Regulated Fund’s
investment objectives and strategies described in its Applicants anticipate that, under normal Board eligible to vote on that Potential Co-
disclosure documents (including private placement circumstances, the Board would not modify these Investment Transaction under Section 57(o) of the
memoranda and reports to equity holders) and criteria more often than quarterly. Act.

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allocation policies and procedures that Investment Transaction. Subsequent Co- of the Disposition would be subject to
the Advisers will establish, implement Investment Transactions with respect to the Enhanced Review Dispositions
and maintain.16 the issuer would be governed by the described in Condition 7. Subsequent
requirements of Standard Review Dispositions with respect to the same
B. Follow-On Investments
Follow-Ons. issuer would be governed by Condition
15. Applicants state that from time to 17. A Regulated Fund would be 6 under the Standard Review
time the Regulated Funds and Affiliated permitted to invest in Standard Review Dispositions.22
Funds may have opportunities to make Follow-Ons either with the approval of 19. A Regulated Fund may participate
Follow-On Investments 17 in an issuer in the Required Majority under Condition in a Standard Review Disposition either
which a Regulated Fund and one or 8(c) or without Board approval under with the approval of the Required
more other Regulated Funds and/or Condition 8(b) if it is (i) a Pro Rata Majority under Condition 6(d) or
Affiliated Funds previously have Follow-On Investment 19 or (ii) a Non- without Board approval under
invested. Negotiated Follow-On Investment.20 Condition 6(c) if (i) the Disposition is a
16. Applicants propose that Follow- Applicants believe that these Pro Rata Pro Rata Disposition 23 or (ii) the
On Investments would be divided into and Non-Negotiated Follow-On securities are Tradable Securities 24 and
two categories depending on whether Investments do not present a significant the Disposition meets the other
the prior investment was a Co- opportunity for overreaching on the part requirements of Condition 6(c)(ii). Pro
Investment Transaction or a Pre- of any Adviser and thus do not warrant Rata Dispositions and Dispositions of a
Boarding Investment.18 If the Regulated the time or the attention of the Board. Tradable Security remain subject to the
Funds and Affiliated Funds had Pro Rata Follow-One Investments and Board’s periodic review in accordance
previously participated in a Co- Non-Negotiated Follow-On Investments with Condition 10.
Investment Transaction with respect to remain subject to the Board’s periodic
the issuer, then the terms and approval D. Delayed Settlement
review in accordance with Condition
of the Follow-On Investment would be 10. 20. Applicants represent that under
subject to the Standard Review Follow- the terms and Conditions of the
Ons described in Condition 8. If the C. Dispositions Application, all Regulated Funds and
Regulated Funds and Affiliated Funds 18. Applicants propose that Affiliated Funds participating in a Co-
have not previously participated in a Dispositions 21 would be divided into
Co-Investment Transaction with respect two categories. If the Regulated Funds 22 However, with respect to an issuer, if a

to the issuer but hold a Pre-Boarding and Affiliated Funds holding Regulated Fund’s first Co-Investment Transaction is
an Enhanced Review Disposition, and the Regulated
Investment, then the terms and approval investments in the issuer had previously Fund does not dispose of its entire position in the
of the Follow-On Investment would be participated in a Co-Investment Enhanced Review Disposition, then before such
subject to the Enhanced-Review Follow- Transaction with respect to the issuer, Regulated Fund may complete its first Standard
Ons described in Condition 9. All then the terms and approval of the Review Follow-On in such issuer, the Eligible
Directors must review the proposed Follow-On
Enhanced Review Follow-Ons require Disposition would be subject to the Investment not only on a stand-alone basis but also
the approval of the Required Majority. Standard Review Dispositions described in relation to the total economic exposure in such
For a given issuer, the participating in Condition 6. If the Regulated Funds issuer (i.e., in combination with the portion of the
Regulated Funds and Affiliated Funds and Affiliated Funds have not Pre-Boarding Investment not disposed of in the
Enhanced Review Disposition), and the other terms
would need to comply with the previously participated in a Co- of the investments. This additional review would be
requirements of Enhanced-Review Investment Transaction with respect to required because such findings would not have
Follow-Ons only for the first Co- the issuer but hold a Pre-Boarding been required in connection with the prior
Investment, then the terms and approval Enhanced Review Disposition, but they would have
16 However, if the size of the opportunity is
been required had the first Co-Investment
Transaction been an Enhanced Review Follow-On.
decreased such that the aggregate of the original 19 A ‘‘Pro Rata Follow-On Investment’’ is a
23 A ‘‘Pro Rata Disposition’’ is a Disposition (i) in
Internal Orders would exceed the amount of the Follow-On Investment (i) in which the participation which the participation of each Affiliated Fund and
remaining investment opportunity, then upon of each Affiliated Fund and each Regulated Fund each Regulated Fund is proportionate to its
submitting any revised order amount to the Board is proportionate to its outstanding investments in outstanding investment in the security subject to
of a Regulated Fund for approval, the Adviser to the the issuer or security, as appropriate, immediately Disposition immediately preceding the Disposition;
Regulated Fund will also notify the Board promptly preceding the Follow-On Investment, and (ii) in the and (ii) in the case of a Regulated Fund, a majority
of the amount that the Regulated Fund would case of a Regulated Fund, a majority of the Board of the Board has approved the Regulated Fund’s
receive if the remaining investment opportunity has approved the Regulated Fund’s participation in participation in pro rata Dispositions as being in the
were allocated pro rata on the basis of the size of the pro rata Follow-On Investments as being in the best interests of the Regulated Fund. The Regulated
the original Internal Orders. The Board of the best interests of the Regulated Fund. The Regulated Fund’s Board may refuse to approve, or at any time
Regulated Fund will then either approve or Fund’s Board may refuse to approve, or at any time rescind, suspend or qualify, its approval of Pro Rata
disapprove of the investment opportunity in rescind, suspend or qualify, its approval of Pro Rata Dispositions, in which case all subsequent
accordance with condition 2, 6, 7, 8 or 9, as Follow-On Investments, in which case all Dispositions will be submitted to the Regulated
applicable. subsequent Follow-On Investments will be Fund’s Eligible Directors.
17 ‘‘Follow-On Investment’’ means an additional submitted to the Regulated Fund’s Eligible Directors 24 ‘‘Tradable Security’’ means a security that
investment in the same issuer, including, but not in accordance with Condition 8(c).
20 A ‘‘Non-Negotiated Follow-On Investment’’ is a
meets the following criteria at the time of
limited to, through the exercise of warrants, Disposition: (i) It trades on a national securities
conversion privileges or other rights to purchase Follow-On Investment in which a Regulated Fund exchange or designated offshore securities market
securities of the issuer. participates together with one or more Affiliated as defined in rule 902(b) under the Securities Act;
18 ‘‘Pre-Boarding Investments’’ are investments in Funds and/or one or more other Regulated Funds (ii) it is not subject to restrictive agreements with
an issuer held by a Regulated Fund as well as one (i) in which the only term negotiated by or on behalf the issuer or other security holders; and (iii) it
of the funds is price and (ii) with respect to which,
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or more Affiliated Funds and/or one or more other trades with sufficient volume and liquidity
Regulated Funds that: (i) were acquired prior to if the transaction were considered on its own, the (findings as to which are documented by the
participating in any Co-Investment Transaction; (ii) funds would be entitled to rely on one of the JT No- Advisers to any Regulated Funds holding
were acquired in transactions in which the only Action Letters. investments in the issuer and retained for the life
term negotiated by or on behalf of such funds was ‘‘JT No-Action Letters’’ means SMC Capital, Inc., of the Regulated Fund) to allow each Regulated
price; and (iii) were acquired either: (A) in reliance SEC No-Action Letter (pub. avail. Sept. 5, 1995) and Fund to dispose of its entire position remaining
on one of the JT No-Action Letters (defined below); Massachusetts Mutual Life Insurance Company, after the proposed Disposition within a short period
or (B) in transactions occurring at least 90 days SEC No-Action Letter (pub. avail. June 7, 2000). of time not exceeding 30 days at approximately the
apart and without coordination between the 21 ‘‘Disposition’’ means the sale, exchange or value (as defined by section 2(a)(41) of the Act) at
Regulated Fund and any Affiliated Fund or other other disposition of an interest in a security of an which the Regulated Fund has valued the
Regulated Fund. issuer. investment.

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Investment Transaction will invest at ‘‘joint enterprise or other joint the Act and the extent to which such
the same time, for the same price and arrangement or profit-sharing plan,’’ as participation is on a basis different from
with the same terms, conditions, class, defined in the rule, without prior or less advantageous than that of other
registration rights and any other rights, approval by the Commission by order participants.
so that none of them receives terms upon application. Section 17(d) of the 5. Applicants state that in the absence
more favorable than any other. Act and rule 17d–1 under the Act are of the requested relief, in many
However, the settlement date for an applicable to Regulated Funds that are circumstances the Regulated Funds
Affiliated Fund in a Co-Investment registered closed-end investment would be limited in their ability to
Transaction may occur up to ten companies. participate in attractive and appropriate
business days after the settlement date 2. Similarly, with regard to BDCs, investment opportunities. Applicants
for the Regulated Fund, and vice section 57(a)(4) of the Act generally state that, as required by Rule 17d–1(b),
versa.25 Nevertheless, in all cases, (i) the prohibits certain persons specified in the Conditions ensure that the terms on
date on which the commitment of the section 57(b) from participating in joint which Co-Investment Transactions may
Affiliated Funds and Regulated Funds is transactions with the BDC or a company be made will be consistent with the
made will be the same even where the controlled by the BDC in contravention participation of the Regulated Funds
settlement date is not and (ii) the of rules as prescribed by the being on a basis that it is neither
earliest settlement date and the latest Commission. Section 57(i) of the Act different from nor less advantageous
settlement date of any Affiliated Fund provides that, until the Commission than other participants, thus protecting
or Regulated Fund participating in the prescribes rules under section 57(a)(4), the equity holders of any participant
transaction will occur within ten the Commission’s rules under section from being disadvantaged. Applicants
business days of each other. 17(d) of the Act applicable to registered further state that the Conditions ensure
closed-end investment companies will that all Co-Investment Transactions are
E. Holders be deemed to apply to transactions reasonable and fair to the Regulated
21. Under Condition 15, if an Adviser, subject to section 57(a)(4). Because the Funds and their shareholders and do
its principals, or any person controlling, Commission has not adopted any rules not involve overreaching by any person
controlled by, or under common control under section 57(a)(4), rule 17d–1 also concerned, including the Advisers.
with the Adviser or its principals, and applies to joint transactions with Applicants state that the Regulated
the Affiliated Funds (collectively, the Regulated Funds that are BDCs. Funds’ participation in the Co-
‘‘Holders’’) own in the aggregate more 3. Co-Investment Transactions are Investment Transactions in accordance
than 25 percent of the outstanding prohibited by either or both of Rule with the Conditions will be consistent
voting shares of a Regulated Fund (the 17d–1 and Section 57(a)(4) without a with the provisions, policies, and
‘‘Shares’’), then the Holders will vote prior exemptive order of the purposes of the Act and would be done
such Shares as directed by an Commission to the extent that the in a manner that is not different from,
independent third party when voting on Affiliated Funds and the Regulated or less advantageous than, that of other
matters specified in the Condition. Funds participating in such transactions participants.
Applicants believe that this Condition fall within the category of persons
described by Rule 17d–1 and/or Section Applicants’ Conditions
will ensure that the Independent
Directors will act independently in 57(b), as applicable, vis-à-vis each Applicants agree that the Order will
evaluating Co-Investment Transactions, participating Regulated Fund. Each of be subject to the following Conditions:
because the ability of the Adviser or its the participating Regulated Funds and 1. Identification and Referral of
principals to influence the Independent Affiliated Funds may be deemed to be Potential Co-Investment Transactions.
Directors by a suggestion, explicit or affiliated persons vis-à-vis a Regulated (a) The Advisers will establish,
implied, that the Independent Directors Fund within the meaning of section maintain and implement policies and
can be removed will be limited 2(a)(3) by reason of common control procedures reasonably designed to
significantly. The Independent Directors because (i) controlled affiliates of AGM ensure that each Adviser is promptly
shall evaluate and approve any manage each of the Affiliated Funds and notified of all Potential Co-Investment
independent party, taking into account ASFRF and AIF and may be deemed to Transactions that fall within the then-
its qualifications, reputation for control any future Regulated Fund, (ii) current Objectives and Strategies and
independence, cost to the shareholders, AGM controls AIM, which manages Board-Established Criteria of any
and other factors that they deem AIC, and (iii) AIC Downstream Funds, Regulated Fund the Adviser manages.
are, and, in the future will be, deemed (b) When an Adviser to a Regulated
relevant.
to be controlled by AIM, AIC or certain Fund is notified of a Potential Co-
Applicants’ Legal Analysis of AIC’s subsidiaries. Thus, each of the Investment Transaction under
1. Section 17(d) of the Act and rule Affiliated Funds could be deemed to be Condition 1(a), the Adviser will make
17d–1 under the Act prohibit a person related to the AIC Funds in a an independent determination of the
participation by a registered investment manner described by Section 57(b) and appropriateness of the investment for
company and an affiliated person in any related to the other Regulated Funds in the Regulated Fund in light of the
a manner described by Rule 17d–1; and Regulated Fund’s then-current
25 Applicants state this may occur for two therefore the prohibitions of Rule 17d– circumstances.
reasons. First, when the Affiliated Fund or 1 and Section 57(a)(4) would apply 2. Board Approvals of Co-Investment
respectively to prohibit the Affiliated
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Regulated Fund is not yet fully funded because, Transactions.
when the Affiliated Fund or Regulated Fund desires Funds from participating in Co- (a) If the Adviser deems a Regulated
to make an investment, it must call capital from its
investors to obtain the financing to make the Investment Transactions with the Fund’s participation in any Potential
investment, and in these instances, the notice Regulated Funds. Co-Investment Transaction to be
requirement to call capital could be as much as ten 4. In passing upon applications under appropriate for the Regulated Fund, it
business days. Second, where, for tax or regulatory rule 17d–1, the Commission considers will then determine an appropriate level
reasons, an Affiliated Fund or Regulated Fund does
not purchase new issuances immediately upon
whether the company’s participation in of investment for the Regulated Fund.
issuance but only after a short seasoning period of the joint transaction is consistent with (b) If the aggregate amount
up to ten business days. the provisions, policies, and purposes of recommended by the Advisers to be

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12172 Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Notices

Investment Transaction with respect to previously participated in a Co- same security or securities, they may
the issuer, then: Investment Transaction with respect to disregard any security held by some but
(i) The Adviser to such Regulated the issuer: not all of them if, prior to relying on the
Fund or Affiliated Fund will notify each (i) The Adviser to such Regulated Order, the Required Majority is
Regulated Fund that holds an Fund or Affiliated Fund will notify each presented with all information
investment in the issuer of the proposed Regulated Fund that holds an necessary to make a finding, and finds,
Disposition at the earliest practical time; investment in the issuer of the proposed that: (x) Any Regulated Fund’s or
and Disposition at the earliest practical time; Affiliated Fund’s holding of a different
(ii) the Adviser to each Regulated (ii) the Adviser to each Regulated class of securities (including for this
Fund that holds an investment in the Fund that holds an investment in the purpose a security with a different
issuer will formulate a recommendation issuer will formulate a recommendation maturity date) is immaterial 30 in
as to participation by such Regulated as to participation by such Regulated amount, including immaterial relative to
Fund in the Disposition. Fund in the Disposition; and the size of the issuer; and (y) the Board
(b) Same Terms and Conditions. Each (iii) the Advisers will provide to the records the basis for any such finding in
Regulated Fund will have the right to Board of each Regulated Fund that its minutes. In addition, securities that
participate in such Disposition on a holds an investment in the issuer all differ only in respect of issuance date,
proportionate basis, at the same price information relating to the existing currency, or denominations may be
and on the same terms and conditions investments in the issuer of the treated as the same security; and
as those applicable to the Affiliated Regulated Funds and Affiliated Funds, (v) No control. The Affiliated Funds,
Funds and any other Regulated Fund. including the terms of such investments the other Regulated Funds and their
(c) No Board Approval Required. A and how they were made, that is affiliated persons (within the meaning
Regulated Fund may participate in such necessary for the Required Majority to of Section 2(a)(3)(C) of the Act),
a Disposition without obtaining prior make the findings required by this individually or in the aggregate, do not
approval of the Required Majority if: Condition. control the issuer of the securities
(i)(A) The participation of each (b) Enhanced Board Approval. The (within the meaning of Section 2(a)(9) of
Regulated Fund and Affiliated Fund in Adviser will provide its written the Act).
such Disposition is proportionate to its recommendation as to the Regulated 8. Standard Review Follow-Ons.
then-current holding of the security (or Fund’s participation to the Eligible (a) General. If any Regulated Fund or
securities) of the issuer that is (or are) Directors, and the Regulated Fund will Affiliated Fund desires to make a
the subject of the Disposition; 29 (B) the participate in such Disposition solely to Follow-On Investment in an issuer and
Board of the Regulated Fund has the extent that a Required Majority the Regulated Funds and Affiliated
approved as being in the best interests determines that: Funds holding investments in the issuer
of the Regulated Fund the ability to (i) The Disposition complies with previously participated in a Co-
participate in such Dispositions on a pro Conditions 2(c)(i), (ii), (iii)(A), and (iv); Investment Transaction with respect to
rata basis (as described in greater detail (ii) the making and holding of the Pre- the issuer:
in the application); and (C) the Board of Boarding Investments were not (i) The Adviser to each such
the Regulated Fund is provided on a prohibited by Section 57 or Rule 17d– Regulated Fund or Affiliated Fund will
quarterly basis with a list of all 1, as applicable, and records the basis notify each Regulated Fund that holds
Dispositions made in accordance with for the finding in the Board minutes. securities of the portfolio company of
this Condition; or (c) Additional Requirements. The the proposed transaction at the earliest
(ii) each security is a Tradable Disposition may only be completed in practical time; and
Security and (A) the Disposition is not reliance on the Order if: (ii) the Adviser to each Regulated
to the issuer or any affiliated person of (i) Same Terms and Conditions. Each Fund that holds an investment in the
the issuer; and (B) the security is sold Regulated Fund has the right to issuer will formulate a recommendation
for cash in a transaction in which the participate in such Disposition on a as to the proposed participation,
only term negotiated by or on behalf of proportionate basis, at the same price including the amount of the proposed
the participating Regulated Funds and and on the same terms and conditions investment, by such Regulated Fund.
Affiliated Funds is price. as those applicable to the Affiliated (b) No Board Approval Required. A
(d) Standard Board Approval. In all Funds and any other Regulated Fund; Regulated Fund may participate in the
other cases, the Adviser will provide its (ii) Original Investments. All of the Follow-On Investment without
written recommendation as to the Affiliated Funds’ and Regulated Funds’ obtaining prior approval of the Required
Regulated Fund’s participation to the investments in the issuer are Pre- Majority if:
Eligible Directors and the Regulated Boarding Investments; (i)(A) The proposed participation of
Fund will participate in such (iii) Advice of counsel. Independent each Regulated Fund and each
Disposition solely to the extent that a counsel to the Board advises that the Affiliated Fund in such investment is
Required Majority determines that it is making and holding of the investments proportionate to its outstanding
in the Regulated Fund’s best interests. in the Pre-Boarding Investments were investments in the issuer or the security
7. Enhanced Review Dispositions. not prohibited by Section 57 (as at issue, as appropriate,31 immediately
(a) General. If any Regulated Fund or modified by Rule 57b–1) or Rule 17d–
Affiliated Fund elects to sell, exchange 1, as applicable; 30 In determining whether a holding is

or otherwise dispose of a Pre-Boarding (iv) Multiple Classes of Securities. All ‘‘immaterial’’ for purposes of the Order, the
asabaliauskas on DSK3SPTVN1PROD with NOTICES

Investment in a Potential Co-Investment Regulated Funds and Affiliated Funds Required Majority will consider whether the nature
and extent of the interest in the transaction or
Transaction and the Regulated Funds that hold Pre-Boarding Investments in arrangement is sufficiently small that a reasonable
and Affiliated Funds have not the issuer immediately before the time person would not believe that the interest affected
of completion of the Co-Investment the determination of whether to enter into the
29 In the case of any Disposition, proportionality
Transaction hold the same security or transaction or arrangement or the terms of the
will be measured by each participating Regulated transaction or arrangement.
Fund’s and Affiliated Fund’s outstanding
securities of the issuer. For the purpose 31 To the extent that a Follow-On Investment

investment in the security in question immediately of determining whether the Regulated opportunity is in a security or arises in respect of
preceding the Disposition. Funds and Affiliated Funds hold the a security held by the participating Regulated

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Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Notices 12173

preceding the Follow-On Investment; purposes and subject to the other (ii) Advice of counsel. Independent
and (B) the Board of the Regulated Fund Conditions set forth in the application. counsel to the Board advises that the
has approved as being in the best 9. Enhanced Review Follow-Ons. making and holding of the investments
interests of the Regulated Fund the (a) General. If any Regulated Fund or in the Pre-Boarding Investments were
ability to participate in Follow-On Affiliated Fund desires to make a not prohibited by Section 57 (as
Investments on a pro rata basis (as Follow-On Investment in an issuer that modified by Rule 57b–1) or Rule 17d–
described in greater detail in the is a Potential Co-Investment Transaction 1, as applicable;
Application); or and the Regulated Funds and Affiliated (iii) Multiple Classes of Securities. All
(ii) it is a Non-Negotiated Follow-On Funds holding investments in the issuer Regulated Funds and Affiliated Funds
Investment. have not previously participated in a that hold Pre-Boarding Investments in
(c) Standard Board Approval. In all Co-Investment Transaction with respect the issuer immediately before the time
other cases, the Adviser will provide its to the issuer: of completion of the Co-Investment
written recommendation as to the (i) The Adviser to each such Transaction hold the same security or
Regulated Fund’s participation to the Regulated Fund or Affiliated Fund will securities of the issuer. For the purpose
Eligible Directors and the Regulated notify each Regulated Fund that holds of determining whether the Regulated
Fund will participate in such Follow-On securities of the portfolio company of Funds and Affiliated Funds hold the
Investment solely to the extent that a the proposed transaction at the earliest same security or securities, they may
Required Majority makes the practical time; disregard any security held by some but
determinations set forth in Condition (ii) the Adviser to each Regulated not all of them if, prior to relying on the
2(c). If the only previous Co-Investment Fund that holds an investment in the Order, the Required Majority is
Transaction with respect to the issuer issuer will formulate a recommendation presented with all information
was an Enhanced Review Disposition as to the proposed participation, necessary to make a finding, and finds,
the Eligible Directors must complete including the amount of the proposed that: (x) Any Regulated Fund’s or
this review of the proposed Follow-On investment, by such Regulated Fund; Affiliated Fund’s holding of a different
Investment both on a stand-alone basis and class of securities (including for this
and together with the Pre-Boarding (iii) the Advisers will provide to the purpose a security with a different
Investments in relation to the total Board of each Regulated Fund that maturity date) is immaterial in amount,
economic exposure and other terms of holds an investment in the issuer all including immaterial relative to the size
the investment. information relating to the existing of the issuer; and (y) the Board records
(d) Allocation. If, with respect to any investments in the issuer of the the basis for any such finding in its
such Follow-On Investment: Regulated Funds and Affiliated Funds, minutes. In addition, securities that
(i) The amount of the opportunity including the terms of such investments differ only in respect of issuance date,
proposed to be made available to any and how they were made, that is currency, or denominations may be
Regulated Fund is not based on the necessary for the Required Majority to treated as the same security; and
Regulated Funds’ and the Affiliated make the findings required by this (iv) No control. The Affiliated Funds,
Funds’ outstanding investments in the Condition. the other Regulated Funds and their
issuer or the security at issue, as (b) Enhanced Board Approval. The affiliated persons (within the meaning
appropriate, immediately preceding the Adviser will provide its written of Section 2(a)(3)(C) of the Act),
Follow-On Investment; and recommendation as to the Regulated individually or in the aggregate, do not
(ii) the aggregate amount Fund’s participation to the Eligible control the issuer of the securities
recommended by the Advisers to be Directors, and the Regulated Fund will (within the meaning of Section 2(a)(9) of
invested in the Follow-On Investment participate in such Follow-On the Act).
by the participating Regulated Funds Investment solely to the extent that a (d) Allocation. If, with respect to any
and any participating Affiliated Funds, Required Majority reviews the proposed such Follow-On Investment:
collectively, exceeds the amount of the Follow-On Investment both on a stand- (i) The amount of the opportunity
investment opportunity, then the alone basis and together with the Pre- proposed to be made available to any
Follow-On Investment opportunity will Boarding Investments in relation to the Regulated Fund is not based on the
be allocated among them pro rata based total economic exposure and other Regulated Funds’ and the Affiliated
on the size of the Internal Orders, as terms and makes the determinations set Funds’ outstanding investments in the
described in section III.A.1.b. of the forth in Condition 2(c). In addition, the issuer or the security at issue, as
application. Follow-On Investment may only be appropriate, immediately preceding the
(e) Other Conditions. The acquisition completed in reliance on the Order if Follow-On Investment; and
of Follow-On Investments as permitted the Required Majority of each (ii) the aggregate amount
by this Condition will be considered a participating Regulated Fund recommended by the Advisers to be
Co-Investment Transaction for all determines that the making and holding invested in the Follow-On Investment
of the Pre-Boarding Investments were by the participating Regulated Funds
Funds and Affiliated Funds, proportionality will be not prohibited by Section 57 (as and any participating Affiliated Funds,
measured by each participating Regulated Fund’s
and Affiliated Fund’s outstanding investment in the
modified by Rule 57b–1) or Rule 17d– collectively, exceeds the amount of the
security in question immediately preceding the 1, as applicable. The basis for the investment opportunity, then the
Board’s findings will be recorded in its Follow-On Investment opportunity will
asabaliauskas on DSK3SPTVN1PROD with NOTICES

Follow-On Investment using the most recent
available valuation thereof. To the extent that a minutes. be allocated among them pro rata based
Follow-On Investment opportunity relates to an
opportunity to invest in a security that is not in
(c) Additional Requirements. The on the size of the Internal Orders, as
respect of any security held by any of the Follow-On Investment may only be described in section III.A.1.b. of the
participating Regulated Funds or Affiliated Funds, completed in reliance on the Order if: application.
proportionality will be measured by each (i) Original Investments. All of the (e) Other Conditions. The acquisition
participating Regulated Fund’s and Affiliated
Fund’s outstanding investment in the issuer
Affiliated Funds’ and Regulated Funds’ of Follow-On Investments as permitted
immediately preceding the Follow-On Investment investments in the issuer are Pre- by this Condition will be considered a
using the most recent available valuation thereof. Boarding Investments; Co-Investment Transaction for all

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12174 Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Notices

purposes and subject to the other existing Co-Investment Transactions is and the Affiliated Funds, the pro rata
Conditions set forth in the application. in the Regulated Fund’s best interests. transaction fees described above and
10. Board Reporting, Compliance and 11. Record Keeping. Each Regulated fees or other compensation described in
Annual Re-Approval. Fund will maintain the records required Condition 2(c)(iii)(B)(z), (ii) brokerage or
(a) Each Adviser to a Regulated Fund by Section 57(f)(3) of the Act as if each underwriting compensation permitted
will present to the Board of each of the Regulated Funds were a BDC and by Section 17(e) or 57(k) or (iii) in the
Regulated Fund, on a quarterly basis, each of the investments permitted under case of the Advisers, investment
and at such other times as the Board these Conditions were approved by the advisory compensation paid in
may request, (i) a record of all Required Majority under Section 57(f). accordance with investment advisory
investments in Potential Co-Investment 12. Director Independence. No agreements between the applicable
Transactions made by any of the other Independent Director (including the Regulated Fund(s) or Affiliated Fund(s)
Regulated Funds or any of the Affiliated non-interested members of any and its Adviser.
Funds during the preceding quarter that Independent Party) of a Regulated Fund 15. If the Holders own in the aggregate
fell within the Regulated Fund’s then- will also be a director, general partner, more than 25 percent of the Shares of
current Objectives and Strategies and managing member or principal, or a Regulated Fund, then the Holders will
Board-Established Criteria that were not otherwise be an ‘‘affiliated person’’ (as vote such Shares as directed by an
made available to the Regulated Fund, defined in the Act) of any Affiliated independent third party (such as the
and an explanation of why such Fund. trustee of a voting trust or a proxy
investment opportunities were not made 13. Expenses. The expenses, if any, adviser) when voting on (1) the election
available to the Regulated Fund; (ii) a associated with acquiring, holding or of directors; (2) the removal of one or
record of all Follow-On Investments in disposing of any securities acquired in more directors; or (3) any other matter
and Dispositions of investments in any a Co-Investment Transaction (including, under either the Act or applicable State
issuer in which the Regulated Fund without limitation, the expenses of the law affecting the Board’s composition,
holds any investments by any Affiliated distribution of any such securities size or manner of election.
Fund or other Regulated Fund during registered for sale under the Securities
the prior quarter; and (iii) all For the Commission, by the Division of
Act) will, to the extent not payable by Investment Management, under delegated
information concerning Potential Co- the Advisers under their respective authority.
Investment Transactions and Co- advisory agreements with the Regulated
Investment Transactions, including Robert W. Errett,
Funds and the Affiliated Funds, be Deputy Secretary.
investments made by other Regulated shared by the Regulated Funds and the
Funds or Affiliated Funds that the [FR Doc. 2016–05043 Filed 3–7–16; 8:45 am]
participating Affiliated Funds in
Regulated Fund considered but declined proportion to the relative amounts of the BILLING CODE 8011–01–P
to participate in, so that the securities held or being acquired or
Independent Directors, may determine disposed of, as the case may be.
whether all Potential Co-Investment SECURITIES AND EXCHANGE
14. Transaction Fees.32 Any
Transactions and Co-Investment COMMISSION
transaction fee (including break-up,
Transactions during the preceding structuring, monitoring or commitment [Release No. 34–76955A; File No. SR–
quarter, including those investments fees but excluding brokerage or NYSEArca–2015–93]
that the Regulated Fund considered but underwriting compensation permitted
declined to participate in, comply with by Section 17(e) or 57(k)) received in Self-Regulatory Organizations; NYSE
the Conditions. connection with any Co-Investment Arca, Inc.; Notice of Designation of a
(b) All information presented to the Longer Period for Commission Action
Transaction will be distributed to the
Regulated Fund’s Board pursuant to this on Proposed Rule Change, as Modified
participants on a pro rata basis based on
Condition will be kept for the life of the by Amendment No. 1, Relating to
the amounts they invested or
Regulated Fund and at least two years Listing and Trading of Shares of the
committed, as the case may be, in such
thereafter, and will be subject to Cumberland Municipal Bond ETF
Co-Investment Transaction. If any
examination by the Commission and its Under NYSE Arca Equities Rule 8.600;
transaction fee is to be held by an
staff. Correction
(c) Each Regulated Fund’s chief Adviser pending consummation of the
compliance officer, as defined in rule transaction, the fee will be deposited March 2, 2016.
38a–1(a)(4), will prepare an annual into an account maintained by the AGENCY: Securities and Exchange
report for its Board each year that Adviser at a bank or banks having the Commission.
evaluates (and documents the basis of qualifications prescribed in Section
ACTION: Correction.
that evaluation) the Regulated Fund’s 26(a)(1), and the account will earn a
compliance with the terms and competitive rate of interest that will also SUMMARY: The Securities and Exchange
Conditions of the application and the be divided pro rata among the Commission published a document in
procedures established to achieve such participants. None of the Advisers, the the Federal Register on January 27,
compliance. In the case of a BDC Affiliated Funds, the other Regulated 2016 (81 FR 4724), concerning a Notice
Downstream Fund that does not have a Funds or any affiliated person of the of Designation of a Longer Period for
chief compliance officer, the chief Affiliated Funds or the Regulated Funds Commission Action on Proposed Rule
compliance officer of the BDC that will receive any additional Change, as Modified by Amendment No.
asabaliauskas on DSK3SPTVN1PROD with NOTICES

controls the BDC Downstream Fund will compensation or remuneration of any 1, Relating to Listing and Trading of
prepare the report for the relevant kind as a result of or in connection with Shares of the Cumberland Municipal
Independent Party. a Co-Investment Transaction other than Bond ETF under NYSE Arca Equities
(d) The Independent Directors (i) in the case of the Regulated Funds Rule 8.600. The document contained a
(including the non-interested members typographical error.
32 Applicants are not requesting and the
of each Independent Party) will Commission is not providing any relief for
FOR FURTHER INFORMATION CONTACT:
consider at least annually whether transaction fees received in connection with any Kristie Diemer, Division of Trading and
continued participation in new and Co-Investment Transaction. Markets, Securities and Exchange

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Document Created: 2018-02-02 15:10:21
Document Modified: 2018-02-02 15:10:21
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
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.
Dates		The application was filed on February 16, 2010, and amended on November 17, 2010, November 23, 2011, July 26, 2012, February 12, 2013, March 21, 2014, November 26, 2014 and March 1, 2016.
Contact		David J. Marcinkus, Senior Counsel, or Dalia Blass, Assistant Chief Counsel, at (202) 551-6821 (Chief Counsel's Office, Division of Investment Management).
FR Citation		81 FR 12165