81 FR 28910 - Triloma EIG Global Energy Fund, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 90 (May 10, 2016)

[Federal Register Volume 81, Number 90 (Tuesday, May 10, 2016)]
[Notices]
[Pages 28910-28915]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-10960]



[[Page 28910]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32106; File No. 812-14429]


Triloma EIG Global Energy Fund, et al.; Notice of Application

May 5, 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 (``BDC'') and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds.

Applicants: Triloma EIG Global Energy Fund (the ``Perpetual Fund''), 
Triloma EIG Global Energy Term Fund I (the ``Term Fund'' and, together 
with the Perpetual Fund, the ``Existing Regulated Entities''); Triloma 
Energy Advisors, LLC (``Triloma''); EIG Credit Management Company, LLC 
(``EIG''); EIG Asset Management, LLC, EIG Funds Management, LLC, EIG 
Management Company, LLC, EIG Global Energy (Asia) Limited, EIG Harbour 
Energy Advisor, L.P. (collectively, together with EIG, the ``Existing 
EIG Advisors''); EIG-Gateway Direct Investments, L.P., EIG Energy Fund 
XVI, L.P., EIG Energy Fund XVI-B, L.P., EIG Energy Fund XVI-E, L.P., 
EIG Energy Fund XVI (Cayman), L.P., EIG Energy Fund XVI (Scotland), 
L.P., EIG-Keats Energy Partners, L.P., EIG Global Private Debt Fund-A, 
L.P., EIG Global Private Debt Fund-A (UL), L.P., EIG Global Private 
Debt Sub Fund-B, L.P., EIG Global Private Debt Sub B (UL), L.P., EIG 
Global Private Debt Finco-B, LLC, EIG Global Private Debt Finco-B (UL), 
LLC, and Harbour Energy Ltd. (collectively, the ``Existing Affiliated 
Investors'').

Filing Dates: The application was filed on March 6, 2015, and amended 
on November 12, 2015, February 24, 2016, and April 29, 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 May 27, 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: Triloma and the 
Existing Regulated Entities: 201 N. New York Avenue, Suite 250, Winter 
Park, FL 32789; the Existing EIG Advisors and the Existing Affiliated 
Investors: 1700 Pennsylvania Ave. NW., Suite 800, Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT: Robert Shapiro, Senior Counsel, at 
(202) 551-7758 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Chief Counsel's Office, Division of Investment Management).

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

Applicants' Representations

    1. Term Fund was organized under the Delaware Statutory Trust Act 
for the purpose of operating as an externally-managed, non-diversified, 
closed-end management investment company. Term Fund is a registered 
investment company under the Act. Term Fund's Objectives and Strategies 
\1\ are to provide shareholders with current income, capital 
preservation and, to a lesser extent, long-term capital appreciation by 
investing primarily in a global portfolio of privately originated 
energy company and project debt. Term Fund has a five member Board,\2\ 
of which three members are Independent Trustees,\3\ one member is 
considered an ``interested person'' of Triloma, within the meaning of 
section 2(a)(19) of the Act, and one member is considered an 
``interested person'' of EIG.
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    \1\ ``Objectives and Strategies'' means a Regulated Entity's (as 
defined below) investment objectives and strategies, as described in 
the Regulated Entity's registration statement on Form N-2, other 
filings the Regulated Entity has made with the Commission under the 
Securities Act of 1933 (the ``Securities Act''), or under the 
Securities Exchange Act of 1934, and the Regulated Entity's reports 
to shareholders.
    \2\ The term ``Board'' refers to the board of directors or 
trustees of any Regulated Entity.
    \3\ The term ``Independent Trustees'' refers to the trustees or 
directors of any Regulated Entity that are not ``interested 
persons'' of the Regulated Entity within the meaning of section 
2(a)(19) of the Act.
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    2. Perpetual Fund was organized under the Delaware Statutory Trust 
Act for the purpose of operating as an externally-managed, non-
diversified, closed-end management investment company. Perpetual Fund 
is a registered investment company under the Act. Perpetual Fund has 
the same Objectives and Strategies as Term Fund. Perpetual Fund will be 
governed by a Board comprised of the same trustees (including 
Independent Trustees) that serve as the Board of Term Fund.
    3. Triloma is a Florida limited liability company and is registered 
as an investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act''). Triloma serves as the investment adviser to the 
Existing Regulated Entities. Triloma also provides administrative 
services to the Existing Regulated Entities under an administrative 
services agreement.
    4. EIG is a Delaware limited liability company and is registered as 
an investment adviser under the Advisers Act. EIG serves as the sub-
adviser to the Existing Regulated Entities. EIG is an indirectly owned 
subsidiary of EIG Global Energy Partners, LLC (``EIG Partners'').
    5. Each Existing Affiliated Investors is a privately-offered fund 
that would be an investment company but for section 3(c)(1) or 3(c)(7) 
of the Act. An Existing EIG Advisor serves as the investment adviser to 
each Existing Affiliated Investor. Each Existing EIG Advisor is either, 
directly or indirectly, controlled by EIG Partners or under common 
control with EIG and is registered as an investment adviser under the 
Advisers Act.
    6. Applicants seek an order (``Order'') to permit one or more 
Regulated Entities \4\ and/or one or more Affiliated

[[Page 28911]]

Investors \5\ to participate in the same investment opportunities 
through a proposed co-investment program (the ``Co-Investment 
Program'') where such participation would otherwise be prohibited under 
sections 17(d) and 57(a)(4) and the rules under the Act. For purposes 
of the application, ``Co-Investment Transaction'' means any transaction 
in which a Regulated Entity (or its Wholly-Owned Investment Subsidiary, 
as defined below) participated together with one or more other 
Regulated Entities and/or one or more Affiliated Investors in reliance 
on the requested Order. ``Potential Co-Investment Transaction'' means 
any investment opportunity in which a Regulated Entity (or its Wholly-
Owned Investment Subsidiary) could not participate together with one or 
more Affiliated Investors and/or one or more other Regulated Entities 
without obtaining and relying on the Order.\6\ The term ``Advisor'' 
means any Triloma Advisor or any EIG Advisor.
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    \4\ ``Regulated Entity'' means any of the Existing Regulated 
Entities and any Future Regulated Entity. ``Future Regulated 
Entity'' means a closed-end management investment company (a) that 
is registered under the Act or has elected to be regulated as a BDC 
under the Act, (b) whose investment adviser is a Triloma Advisor and 
(c) whose investment sub-adviser is an EIG Advisor. ``Triloma 
Advisor'' means Triloma or any future investment adviser that (i) 
controls, is controlled by or is under common control with Triloma, 
(ii) is registered as an investment adviser under the Advisers Act 
and (iii) is not a Regulated Entity or a subsidiary of a Regulated 
Entity. ``EIG Advisor'' means any Existing EIG Advisor or any future 
investment adviser that (i) controls, is controlled by or is under 
common control with EIG, (ii) is registered as an investment adviser 
under the Advisers Act, and (iii) is not a Regulated Entity or a 
subsidiary of a Regulated Entity.
    \5\ ``Affiliated Investors'' means the Existing Affiliated 
Investors and any Future Affiliated Investor. ``Future Affiliated 
Investor'' means an entity (a) whose investment adviser is an EIG 
Advisor and (b) that would be an investment company but for section 
3(c)(1) or 3(c)(7) of the Act.
    \6\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    7. Applicants state that a Regulated Entity may, from time to time, 
form a Wholly-Owned Investment Subsidiary.\7\ Such a subsidiary would 
be prohibited from investing in a Co-Investment Transaction with any 
Affiliated Investor 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 Subsidiary be 
permitted to participate in Co-Investment Transactions in lieu of its 
parent Regulated Entity and that the Wholly-Owned Investment 
Subsidiary's participation in any such transaction be treated, for 
purposes of the requested Order, as though the parent Regulated Entity 
were participating directly. Applicants represent that this treatment 
is justified because a Wholly-Owned Investment Subsidiary would have no 
purpose other than serving as a holding vehicle for the Regulated 
Entity's investments and, therefore, no conflicts of interest could 
arise between the Regulated Entity and the Wholly-Owned Investment 
Subsidiary. The Regulated Entity's Board would make all relevant 
determinations under the conditions with regard to a Wholly-Owned 
Investment Subsidiary's participation in a Co-Investment Transaction, 
and the Regulated Entity's Board would be informed of, and take into 
consideration, any proposed use of a Wholly-Owned Investment Subsidiary 
in the Regulated Entity's place. If the Regulated Entity proposes to 
participate in the same Co-Investment Transaction with any of its 
Wholly-Owned Investment Subsidiaries, the Board will also be informed 
of, and take into consideration, the relative participation of the 
Regulated Entity and the Wholly-Owned Investment Subsidiary.
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    \7\ The term ``Wholly-Owned Investment Subsidiary'' means an 
entity (i) that is wholly-owned by a Regulated Entity (with such 
Regulated Entity at all times holding, beneficially and of record, 
100% of the voting and economic interests); (ii) whose sole business 
purpose is to hold one or more investments on behalf of the 
Regulated Entity (and, in the case of an entity that is licensed by 
the Small Business Administration to operate under the Small 
Business Investment Act of 1958, as amended (the ``SBA Act''), as a 
small business investment company (an ``SBIC''), to maintain a 
license under the SBA Act and issue debentures guaranteed by the 
Small Business Administration); (iii) with respect to which the 
Regulated Entity's Board has the sole authority to make all 
determinations with respect to the entity's participation under the 
conditions of the application; and (iv) that would be an investment 
company but for section 3(c)(1) or 3(c)(7) of the Act. All 
subsidiaries participating in the Co-Investment Program will be 
Wholly-Owned Investment Subsidiaries and will have Objectives and 
Strategies that are either substantially the same as, or a subset 
of, their parent Regulated Entity's Objectives and Strategies. A 
subsidiary that is an SBIC may be a Wholly-Owned Investment 
Subsidiary if it satisfies the conditions in this definition.
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    8. It is anticipated that an EIG Advisor will periodically 
determine that certain investments the EIG Advisor recommends for a 
Regulated Entity would also be appropriate investments for one or more 
other Regulated Entities and/or one or more Affiliated Investors. Such 
a determination may result in the Regulated Entity, one or more other 
Regulated Entities and/or one or more Affiliated Investors co-investing 
in certain investment opportunities. For each such investment 
opportunity, the Advisors to each Regulated Entity will independently 
analyze and evaluate the investment opportunity as to its 
appropriateness for such Regulated Entity taking into consideration the 
Regulated Entity's Objectives and Strategies.
    9. Applicants state that Triloma serves as the Existing Regulated 
Entities' investment adviser and administrator and either it or another 
Triloma Advisor will serve in the same capacity to any Future Regulated 
Entity, and that EIG serves as the Existing Regulated Entities' sub-
adviser and either it or another EIG Advisor will serve in the same 
capacity to any Future Regulated Entity. Applicants represent that 
although an EIG Advisor will identify and recommend investments \8\ for 
each Regulated Entity, prior to any investment by the Regulated Entity, 
the EIG Advisor will present each proposed investment to the Triloma 
Advisor which has the authority to approve or reject all investments 
proposed for the Regulated Entity by the EIG Advisor.
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    \8\ Applicants represent that the Triloma Advisors will not 
source any Potential Co-Investment Transactions under the requested 
Order.
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    10. Applicants state that each EIG Advisor has (or will have, in 
the case of future advisers) an investment committee through which it 
will carry out its obligation under condition 1 to make a determination 
as to the appropriateness of a Potential Co-Investment Transaction for 
each Regulated Entity. Applicants represent that each EIG Advisor, as a 
registered investment adviser, has (or will have, in the case of future 
advisers) developed a robust allocation process that is designed to 
allocate investment opportunities fairly and equitably among its 
clients over time. Applicants state that, in the case of a Potential 
Co-Investment Transaction, the applicable EIG Advisor would apply its 
allocation policies and procedures in determining the proposed 
allocation for the Regulated Entity consistent with the requirements of 
condition 2(a).
    11. Applicants state that, once the applicable EIG Advisor 
determined a proposed allocation for a Regulated Entity, such EIG 
Advisor would notify the applicable Triloma Advisor of the Potential 
Co-Investment Transaction and the EIG Advisor's recommended allocation 
for such Regulated Entity. Applicants further state that the applicable 
Triloma Advisor would then present the Potential Co-Investment 
Transaction and the EIG Advisor's proposed allocation to the Triloma 
Advisor's investment committee for its approval. Applicants represent 
that the Triloma Advisor's investment committee would review the EIG 
Advisor's recommendation for the Regulated Entity and would have the 
ability to ask questions of the EIG Advisor and request additional 
information from the EIG Advisor. Applicants further submit that if the 
Triloma Advisor's investment committee approved the investment for the 
Regulated Entity, the investment and all relevant allocation 
information would then be presented to the Regulated Entity's Board for 
its approval in accordance with the conditions to the application. 
Applicants state that they believe the investment process between the 
EIG Advisors and the Triloma Advisors, prior to seeking approval from

[[Page 28912]]

the Regulated Entity's Board (which is in addition to, rather than in 
lieu of, the procedures required under the conditions of the 
application), is significant and provides for additional procedures and 
processes to ensure that the Regulated Entity is being treated fairly 
in respect of Potential Co-Investment Transactions.
    12. If the Advisors to a Regulated Entity determine that a 
Potential Co-Investment Opportunity is appropriate for the Regulated 
Entity (and the applicable Triloma Advisor approves the investment for 
such Regulated Entity), and one or more other Regulated Entities and/or 
one or more Affiliated Investors may also participate, the Advisors 
will present the investment opportunity to the Eligible Trustees \9\ of 
the Regulated Entity prior to the actual investment by the Regulated 
Entity. As to any Regulated Entity, a Co-Investment Transaction will be 
consummated only upon approval by a required majority of the Eligible 
Trustees of such Regulated Entity within the meaning of section 57(o) 
of the Act (``Required Majority'').\10\
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    \9\ ``Eligible Trustees'' means the trustees or directors of a 
Regulated Entity that are eligible to vote under section 57(o) of 
the Act.
    \10\ In the case of a Regulated Entity that is a registered 
closed-end fund, the trustees or directors that make up the Required 
Majority will be determined as if the Regulated Entity were a BDC 
subject to section 57(o). As defined in section 57(o), ``required 
majority'' means ``both a majority of a business development 
company's directors or general partners who have no financial 
interest in such transaction, plan, or arrangement and a majority of 
such directors or general partners who are not interested persons of 
such company.''
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    13. With respect to the pro rata dispositions and follow-on 
Investments provided in conditions 7 and 8, a Regulated Entity may 
participate in a pro rata disposition or follow-on Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Entity and 
Affiliated Investor in such disposition is proportionate to its 
outstanding investments in the issuer immediately preceding the 
disposition or follow-on investment, as the case may be; and (ii) each 
Regulated Entity's Board has approved that Regulated Entity's 
participation in pro rata dispositions and follow-on investments as 
being in the best interests of the Regulated Entity. If the Board does 
not so approve, any such disposition or follow-on investment will be 
submitted to the Regulated Entity's Eligible Trustees. The Board of any 
Regulated Entity may at any time rescind, suspend or qualify its 
approval of pro rata dispositions and follow-on investments with the 
result that all dispositions and/or follow-on investments must be 
submitted to the Eligible Trustees.
    14. No Independent Trustee of a Regulated Entity will have a 
financial interest in any Co-Investment Transaction.
    15. Under condition 15, if an Advisor or its principals, or any 
person controlling, controlled by, or under common control with the 
Advisor or its the principals, and any Affiliated Investors 
(collectively, the ``Holders'') own in the aggregate more than 25% of 
the outstanding voting securities of a Regulated Entity (``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 
Trustees will act independently in evaluating the Co-Investment 
Program, because the ability of the Advisor or its principals to 
influence the Independent Trustees by a suggestion, explicit or 
implied, that the Independent Trustees can be removed will be limited 
significantly. Applicants represent that the Independent Trustees shall 
evaluate and approve any such independent third 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 Entities that are 
registered closed-end investment companies. Similarly, with regard to 
BDCs, section 57(a)(4) of the Act makes it unlawful for any person who 
is related to a BDC in a manner described in section 57(b), acting as 
principal, knowingly to effect any transaction in which the BDC (or a 
company controlled by such BDC) is a joint or a joint and several 
participant with that person in contravention of rules as prescribed by 
the Commission. Because the Commission has not adopted any rules 
expressly under section 57(a)(4), section 57(i) provides that the rules 
under section 17(d) applicable to registered closed-end investment 
companies (e.g., rule 17d-1) are, in the interim, deemed to apply to 
transactions subject to section 57(a). Rule 17d-1, as made applicable 
to BDCs by section 57(i), prohibits any person who is related to a BDC 
in a manner described in section 57(b), as modified by rule 57b-1, from 
acting as principal, from participating in, or effecting any 
transaction in connection with, any joint enterprise or other joint 
arrangement or profit-sharing plan in which the BDC (or a company 
controlled by such BDC) is a participant, unless an application 
regarding the joint enterprise, arrangement, or profit-sharing plan has 
been filed with the Commission and has been granted by an order entered 
prior to the submission of the plan or any modification thereof, to 
security holders for approval, or prior to its adoption or modification 
if not so submitted.
    2. In passing upon applications under rule 17d-1, the Commission 
considers whether the company's participation in the joint transaction 
is consistent with the provisions, policies, and purposes of the Act 
and the extent to which such participation is on a basis different from 
or less advantageous than that of other participants.
    3. Applicants submit that Each Regulated Entity may be deemed to be 
an ``affiliated person'' of each other Regulated Entity within the 
meaning of section 2(a)(3) of the Act. Applicants state that the 
Regulated Entities, by virtue of each having a Triloma Advisor, may be 
deemed to be under common control, and thus affiliated persons of each 
other under section 2(a)(3)(C) of the Act. Section 17(d) and section 
57(b) apply to any investment adviser to a closed-end fund or a BDC, 
respectively, including the sub-adviser. Thus, an EIG Advisor and any 
Affiliated Investors that it advises could be deemed to be persons 
related to Regulated Entities in a manner described by sections 17(d) 
and 57(b) and therefore prohibited by sections 17(d) and 57(a)(4) and 
rule 17d-1 from participating in the Co-Investment Program. Applicants 
further submit that, because the EIG Advisors are ``affiliated 
persons'' of other EIG Advisors, Affiliated Investors advised by any of 
them could be deemed to be persons related to Regulated Entities (or a 
company controlled by a Regulated Entity) in a manner described by 
sections 17(d) and 57(b) and also prohibited from participating in the 
Co-Investment Program.
    4. Applicants state that they expect that that co-investment in 
portfolio companies by a Regulated Entity, one or more other Regulated 
Entities and/or one or more Affiliated Investors will increase 
favorable investment opportunities for each Regulated Entity.

[[Page 28913]]

    5. Applicants submit that the fact that the Required Majority will 
approve each Co-Investment Transaction before investment (except for 
certain dispositions or follow-on investments, as described in the 
conditions), and other protective conditions set forth in the 
application, will ensure that each Regulated Entity will be treated 
fairly. Applicants state that each Regulated Entity's participation in 
the Co-Investment Transactions will be consistent with the provisions, 
policies and purposes of the Act and on a basis that is not different 
from or less advantageous than that of other participants. Applicants 
further state that the terms and conditions proposed herein will ensure 
that all such transactions are reasonable and fair to each Regulated 
Entity and the Affiliated Investors and do not involve overreaching by 
any person concerned, including Triloma or EIG.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time an EIG Advisor considers a Potential Co-Investment 
Transaction for an Affiliated Investor or another Regulated Entity that 
falls within a Regulated Entity's then-current Objectives and 
Strategies, the Advisors to the Regulated Entity will make an 
independent determination of the appropriateness of the investment for 
the Regulated Entity in light of the Regulated Entity's then-current 
circumstances.
    2. a. If the Advisors to a Regulated Entity deem participation in 
any Potential Co-Investment Transaction to be appropriate for the 
Regulated Entity, the Advisors will then determine an appropriate level 
of investment for such Regulated Entity.
    b. If the aggregate amount recommended by the Advisors to a 
Regulated Entity to be invested by the Regulated Entity in the 
Potential Co-Investment Transaction, together with the amount proposed 
to be invested by the other participating Regulated Entities and 
Affiliated Investors, collectively, in the same transaction, exceeds 
the amount of the investment opportunity, the amount of the investment 
opportunity will be allocated among the Regulated Entities and such 
Affiliated Investors, pro rata based on each participant's Available 
Capital \11\ for investment in the asset class being allocated, up to 
the amount proposed to be invested by each. The Advisors to each 
participating Regulated Entity will provide the Eligible Trustees of 
each participating Regulated Entity with information concerning each 
participating party's Available Capital to assist the Eligible Trustees 
with their review of the Regulated Entity's investments for compliance 
with these allocation procedures.
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    \11\ ``Available Capital'' means (a) for each Regulated Entity, 
the amount of capital available for investment determined based on 
the amount of cash on hand, existing commitments and reserves, if 
any, the targeted leverage level, targeted asset mix and other 
investment policies and restrictions set from time to time by the 
Board of the applicable Regulated Entity or imposed by applicable 
laws, rules, regulations or interpretations and (b) for each 
Affiliated Investor, the amount of capital available for investment 
determined based on the amount of cash on hand, existing commitments 
and reserves, if any, the targeted leverage level, targeted asset 
mix and other investment policies and restrictions set by the 
Affiliated Investor's directors, general partners or adviser or 
imposed by applicable laws, rules, regulations or interpretations.
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    c. After making the determinations required in conditions 1 and 
2(a) above, the Advisors to the Regulated Entity will distribute 
written information concerning the Potential Co-Investment Transaction, 
including the amount proposed to be invested by each Regulated Entity 
and any Affiliated Investor, to the Eligible Trustees of each 
participating Regulated Entity for their consideration. A Regulated 
Entity will co-invest with one or more other Regulated Entities and/or 
an Affiliated Investor only if, prior to the Regulated Entities' and 
the Affiliated Investors' participation in the Potential Co-Investment 
Transaction, a Required Majority concludes that:
    (i) The terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Entity and its shareholders and do not involve overreaching in respect 
of the Regulated Entity or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (a) The interests of the Regulated Entity's shareholders; and
    (b) the Regulated Entity's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Entity or an Affiliated 
Investor would not disadvantage the Regulated Entity, and participation 
by the Regulated Entity would not be on a basis different from or less 
advantageous than that of any other Regulated Entity or Affiliated 
Investor; provided, that if another Regulated Entity or Affiliated 
Investor, but not the Regulated Entity itself, gains the right to 
nominate a director for election to a portfolio company's board of 
directors or the right to have a board observer, or any similar right 
to participate in the governance or management of the portfolio 
company, such event shall not be interpreted to prohibit a Required 
Majority from reaching the conclusions required by this condition 
2(c)(iii), if:
    (a) The Eligible Trustees will have the right to ratify the 
selection of such director or board observer, if any; and
    (b) the Advisors to the Regulated Entity agree to, and do, provide 
periodic reports to the Regulated Entity's Board with respect to the 
actions of such director or the information received by such board 
observer or obtained through the exercise of any similar right to 
participate in the governance or management of the portfolio company; 
and
    (c) any fees or other compensation that any other Regulated Entity 
or any Affiliated Investor or any affiliated person of any other 
Regulated Entity or an Affiliated Investor receives in connection with 
the right of one or more Regulated Entities or Affiliated Investors to 
nominate a director or appoint a board observer or otherwise to 
participate in the governance or management of the portfolio company 
will be shared proportionately among the participating Affiliated 
Investors (who may, in turn, share their portion with their affiliated 
persons) and any participating Regulated Entity in accordance with the 
amount of each party's investment; and
    (iv) the proposed investment by the Regulated Entity will not 
benefit the Advisors, any other Regulated Entity or the Affiliated 
Investors or any affiliated person of any of them (other than the 
parties to the Co-Investment Transaction), except (A) to the extent 
permitted by condition 13, (B) to the extent permitted under sections 
17(e) and 57(k) of the Act, as applicable, (C) in the case of fees or 
other compensation described in condition 2(c)(iii)(c), or (D) 
indirectly, as a result of an interest in the securities issued by one 
of the parties to the Co-Investment Transaction.
    3. Each Regulated Entity will have the right to decline to 
participate in any Potential Co-Investment Transaction or to invest 
less than the amount proposed.
    4. The Advisors will present to the Board of each Regulated Entity, 
on a quarterly basis, a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Entities or 
any of the Affiliated Investors during the preceding quarter that fell 
within the Regulated Entity's then-current Objectives and Strategies 
that were not made available to the Regulated Entity, and an 
explanation of why the investment opportunities were not offered to the 
Regulated Entity. All

[[Page 28914]]

information presented to the Board pursuant to this condition will be 
kept for the life of the Regulated Entity and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for follow-on investments made in accordance with 
condition 8,\12\ a Regulated Entity will not invest in reliance on the 
Order in any issuer in which another Regulated Entity or an Affiliated 
Investor or any affiliated person of another Regulated Entity or an 
Affiliated Investor is an existing investor.
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    \12\ This exception applies only to follow-on investments by a 
Regulated Entity in issuers in which that Regulated Entity already 
holds investments.
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    6. A Regulated Entity will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Entity and Affiliated 
Investor. The grant to one or more Regulated Entities or Affiliated 
Investors, but not the Regulated Entity itself, of the right to 
nominate a director for election to a portfolio company's board of 
directors, the right to have an observer on the board of directors or 
similar rights to participate in the governance or management of the 
portfolio company will not be interpreted so as to violate this 
condition 6, if conditions 2(c)(iii)(a), (b) and (c) are met.
    7.a. If any Regulated Entity or Affiliated Investor elects to sell, 
exchange or otherwise dispose of an interest in a security that was 
acquired by one or more Regulated Entities and/or Affiliated Investors 
in a Co-Investment Transaction, the Advisors will:
    (i) Notify each Regulated Entity that participated in the Co-
Investment Transaction of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by each 
Regulated Entity in the disposition.
    b. Each Regulated Entity 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 Investors 
and any other Regulated Entity.
    c. A Regulated Entity may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Entity and each Affiliated Investor in 
such disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Regulated 
Entity's Board has approved as being in the best interests of the 
Regulated Entity the ability to participate in such dispositions on a 
pro rata basis (as described in greater detail in the application); and 
(iii) the Regulated Entity's Board is provided on a quarterly basis 
with a list of all dispositions made in accordance with this condition. 
In all other cases, the Advisors will provide their written 
recommendation as to the Regulated Entity's participation to the 
Eligible Trustees, and the Regulated Entity will participate in such 
disposition solely to the extent that a Required Majority determines 
that it is in the Regulated Entity's best interests.
    d. Each Regulated Entity and each Affiliated Investor will bear its 
own expenses in connection with the disposition.
    8. a. If any Regulated Entity or Affiliated Investor desires to 
make a ``follow-on investment'' (i.e., an additional investment in the 
same entity, including through the exercise of warrants or other rights 
to purchase securities of the issuer) in a portfolio company whose 
securities were acquired by the Regulated Entity and the Affiliated 
Investor in a Co-Investment Transaction, the Advisors will:
    (i) Notify each Regulated Entity of the proposed transaction at the 
earliest practical time; and
    (ii) formulate a recommendation as to the proposed participation, 
including the amount of the proposed follow-on investment, by each 
Regulated Entity.
    b. A Regulated Entity may participate in such follow-on investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Entity and each Affiliated 
Investor in such investment is proportionate to its outstanding 
investments in the issuer immediately preceding the follow-on 
investment; and (ii) the Regulated Entity's Board has approved as being 
in the best interests of such Regulated Entity the ability to 
participate in follow-on investments on a pro rata basis (as described 
in greater detail in the application). In all other cases, the Advisors 
will provide their written recommendation as to such Regulated Entity's 
participation to the Eligible Trustees, and the Regulated Entity will 
participate in such follow-on investment solely to the extent that the 
Required Majority determines that it is in such Regulated Entity's best 
interests.
    c. If, with respect to any follow-on investment:
    (i) The amount of a follow-on investment is not based on the 
Regulated Entities' and the Affiliated Investors' outstanding 
investments immediately preceding the follow-on investment; and
    (ii) the aggregate amount recommended by the Advisors to be 
invested by the Regulated Entity in the follow-on investment, together 
with the amount proposed to be invested by the other participating 
Regulated Entities and the Affiliated Investors in the same 
transaction, exceeds the amount of the opportunity; then the amount 
invested by each such party will be allocated among them pro rata based 
on each participant's Available Capital for investment in the asset 
class being allocated, up to the amount proposed to be invested by 
each.
    d. The acquisition of follow-on investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and be subject to the other conditions set forth in the 
application.
    9. The Independent Trustees of each Regulated Entity will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Entities or Affiliated Investors 
that a Regulated Entity considered but declined to participate in, so 
that the Independent Trustees may determine whether all investments 
made during the preceding quarter, including those investments which 
the Regulated Entity considered but declined to participate in, comply 
with the conditions of the Order. In addition, the Independent Trustees 
will consider at least annually the continued appropriateness for such 
Regulated Entity of participating in new and existing Co-Investment 
Transactions.
    10. Each Regulated Entity will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Entities were a 
BDC and each of the investments permitted under these conditions were 
approved by a Required Majority under section 57(f).
    11. No Independent Trustee of a Regulated Entity will also be a 
trustee, director, general partner, managing member or principal, or 
otherwise an ``affiliated person'' (as defined in the Act) of any 
Affiliated Investor.
    12. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the 1933 Act) shall, to the 
extent not payable by the

[[Page 28915]]

Advisors under their respective advisory agreements with the Regulated 
Entities and the Affiliated Investors, be shared by the Regulated 
Entities and the Affiliated Investors in proportion to the relative 
amounts of the securities held or to be acquired or disposed of, as the 
case may be.
    13. Any transaction fee (including break-up or commitment fees but 
excluding brokers' fees contemplated by section 17(e) or 57(k) of the 
Act, as applicable) \13\ received in connection with a Co-Investment 
Transaction will be distributed to the participating Regulated Entities 
and Affiliated Investors on a pro rata basis based on the amount they 
invested or committed, as the case may be, in such Co-Investment 
Transaction. If any transaction fee is to be held by an Advisor pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by the Advisor at a bank or banks having the 
qualifications prescribed in section 26(a)(1) of the Act, and the 
account will earn a competitive rate of interest that will also be 
divided pro rata among the participating Regulated Entities and 
Affiliated Investors based on the amount they invest in the Co-
Investment Transaction. None of the other Regulated Entities, 
Affiliated Investors, the Advisors nor any affiliated person of the 
Regulated Entities or the Affiliated Investors will receive additional 
compensation or remuneration of any kind as a result of or in 
connection with a Co-Investment Transaction (other than (a) in the case 
of the Regulated Entities and the Affiliated Investors, the pro rata 
transaction fees described above and fees or other compensation 
described in condition 2(c)(iii)(c) and (b) in the case of the 
Advisors, investment advisory fees paid in accordance with the 
Regulated Entities' and the Affiliated Investors' investment advisory 
agreements).
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    \13\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    14. The Advisors to the Regulated Entities and Affiliated Investors 
will maintain written policies and procedures reasonably designed to 
ensure compliance with the foregoing conditions. These policies and 
procedures will require, among other things, that each of the Advisors 
to each Regulated Entity will be notified of all Potential Co-
Investment Transactions that fall within a Regulated Entity's then-
current Objectives and Strategies and will be given sufficient 
information to make its independent determination and recommendations 
under conditions 1, 2(a), 7 and 8.
    15. If the Holders own in the aggregate more than 25 percent of the 
shares of a Regulated Entity, then the Holders will vote such shares as 
directed by an independent third party when voting on (1) the election 
of directors or trustees; (2) the removal of one or more directors or 
trustees; or (3) any matters requiring approval by the vote of a 
majority of the outstanding voting securities, as defined in section 
2(a)(42) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10960 Filed 5-9-16; 8:45 am]
BILLING CODE 8011-01-P