81_FR_70406 81 FR 70210 - Terra Income Fund 6, Inc., et al.; Notice of Application

81 FR 70210 - Terra Income Fund 6, Inc., et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 196 (October 11, 2016)

Page Range70210-70214
FR Document2016-24428

Federal Register, Volume 81 Issue 196 (Tuesday, October 11, 2016) 
[Federal Register Volume 81, Number 196 (Tuesday, October 11, 2016)]
[Notices]
[Pages 70210-70214]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-24428]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32303; File No. 812-14452]


Terra Income Fund 6, Inc., et al.; Notice of Application

October 4, 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 permitting 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 a 
business development company (``BDC'') and certain closed-end 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds.

APPLICANTS: Terra Income Fund 6, Inc. (``Terra 6''), Terra Secured 
Income Fund, LLC (``TSIF''), Terra Secured Income Fund 2, LLC (``TSIF 
2''), Terra Secured Income Fund 3, LLC (``TSIF 3''), Terra Secured 
Income Fund 4, LLC (``TSIF 4''), Terra Secured Income Fund 5, LLC 
(``TSIF 5''), Terra Property Trust, Inc. (``Terra REIT''), Terra 
Secured Income Fund 5 International (``Terra International''), and 
Terra Income Advisors, LLC (``Terra Income Advisors''), on behalf of 
itself and its successors.\1\
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    \1\ The term ``successor'' means an entity that results from a 
reorganization into another jurisdiction or change in the type of 
business organization.

FILING DATES: The application was filed on April 29, 2015 and amended 
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on November 3, 2015, May 11, 2016 and September 14, 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 October 31, 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: Brent J. Fields, Secretary, U.S. Securities and Exchange 
Commission, 100 F St. NE., Washington, DC 20549-1090. Applicants: Bruce 
D. Batkin, 805 Third Avenue, 8th Floor, New York, NY 10022.

FOR FURTHER INFORMATION CONTACT: Kay-Mario Vobis, Senior Counsel, at 
(202) 551-6728, 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. Terra 6 is a Maryland corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
within the meaning of section 2(a)(48) of the Act.\2\ Terra 6 is a 
specialty finance company formed to invest primarily in commercial real 
estate loans to, and preferred equity investments in, U.S. companies 
qualifying as ``eligible portfolio companies'' under the Act. Terra 6 
may also purchase other select commercial real estate-related debt 
securities of private companies. Terra 6's Objectives and Strategies 
\3\ are to pay attractive and stable cash distributions and to 
preserve, protect and return capital contributions to stockholders. The 
board of directors (``Board'') of Terra 6 is comprised of five 
directors, three of whom are not ``interested persons,'' within the 
meaning of section 2(a)(19) of the Act (the ``Non-Interested 
Directors''), of Terra 6.
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    \2\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in section 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \3\ ``Objectives and Strategies'' means, with respect to a 
Regulated Fund (defined below), the investment objectives and 
strategies, as described in the Regulated Fund's registration 
statement on Form N-2, other filings the Regulated Fund has made 
with the Commission under the Securities Act of 1933 (the 
``Securities Act''), or under the Securities Exchange Act of 1934, 
and the Regulated Fund's reports to shareholders.
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    2. Each of TSIF, TSIF 2, TSIF 3, TSIF 4 and TSIF 5 is organized as 
a Delaware limited liability company and would be an investment company 
but for section 3(c)(5)(C) of the Act. Each of TSIF, TSIF 2, TSIF 3, 
TSIF 4 and TSIF 5 was formed to originate, fund, acquire and structure 
real estate-related loans, including mezzanine loans, first and second 
mortgage loans, subordinated mortgage loans, bridge loans, preferred 
equity investments and other loans related to high quality commercial 
real estate in the United States. TSIF, TSIF 2, TSIF 3 and TSIF 4 
currently exist as wholly-owned subsidiaries of TSIF 5.
    3. Terra REIT is a Maryland corporation that intends to qualify to 
be taxed as a REIT and would be an investment company but for section 
3(c)(5)(C) of the Act. Terra REIT exists as a wholly-owned subsidiary 
of TSIF 5 and holds the portfolio assets of each of TSIF, TSIF 2, TSIF 
3, TSIF 4 and TSIF 5.
    4. Terra International is a Cayman Islands exempted company and 
would be an investment company but for section 3(c)(1) of the Act. 
Terra International was formed to acquire real estate-related loans, 
including mezzanine loans, first and second mortgage loans, 
subordinated mortgage loans, bridge loans and other loans

[[Page 70211]]

related to high quality commercial real estate in the United States.
    5. Terra Income Advisors, a Delaware limited liability company, is 
registered with the Commission as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act'') and serves as 
investment adviser to Terra 6 and Terra International, as well as TSIF 
5 and its wholly-owned subsidiaries TSIF, TSIF 2, TSIF 3, TSIF 4, and 
Terra REIT.
    6. Applicants seek an order (``Order'') to permit one or more 
Regulated Funds \4\ and/or one or more Affiliated Funds \5\ to 
participate in the same investment opportunities through a proposed co-
investment program (the ``Co-Investment Program'') where such 
participation would otherwise be prohibited under section 57(a)(4) and 
rule 17d-1 by (a) co-investing with each other in securities issued by 
issuers in private placement transactions in which an Adviser 
negotiates terms in addition to price; \6\ and (b) making additional 
investments in securities of such issuers, including through the 
exercise of warrants, conversion privileges, and other rights to 
purchase securities of the issuers (``Follow-On Investments''). ``Co-
Investment Transaction'' means any transaction in which a Regulated 
Fund (or its Wholly-Owned Investment Sub) participated together with 
one or more other Regulated Funds and/or one or more Affiliated Funds 
in reliance on the requested Order. ``Potential Co-Investment 
Transaction'' means any investment opportunity in which a Regulated 
Fund (or its Wholly-Owned Investment Sub, as defined below) could not 
participate together with one or more Affiliated Funds and/or one or 
more other Regulated Funds without obtaining and relying on the 
Order.\7\
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    \4\ ``Regulated Fund'' means Terra 6 and any Future Regulated 
Fund. ``Future Regulated Fund'' means any closed-end management 
investment company (a) that is registered under the Act or has 
elected to be regulated as a BDC, (b) whose investment adviser is an 
Adviser, and (c) that intends to participate in the Co-Investment 
Program. The term ``Adviser'' means Terra Income Advisors and/or any 
future investment adviser that controls, is controlled by or is 
under common control with Terra Income Advisors and is registered as 
an investment adviser under the Advisers Act.
    \5\ Terra International together with TSIF, TSIF 2, TSIF 3, TSIF 
4, TSIF 5, Terra REIT and any Future Affiliated Funds are the 
``Affiliated Funds.'' ``Future Affiliated Fund'' means any entity 
(a) whose investment adviser is an Adviser, (b) that would be an 
investment company but for sections 3(c)(1), 3(c)(5)(C), or 3(c)(7) 
of the Act, and (c) that intends to participate in the Co-Investment 
Program.
    \6\ The term ``private placement transactions'' means 
transactions in which the offer and sale of securities by the issuer 
are exempt from registration under the Securities Act.
    \7\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    7. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary 
would be prohibited from investing in a Co-Investment Transaction with 
any Affiliated Fund or Regulated Fund because it would be a company 
controlled by its parent Regulated Fund for purposes of section 
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned 
Investment Sub be permitted to participate in Co-Investment 
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be 
treated, for purposes of the requested Order, as though the parent 
Regulated Fund were participating directly. Applicants represent that 
this treatment is justified because a Wholly-Owned Investment Sub would 
have no purpose other than serving as a holding vehicle for the 
Regulated Fund's investments and, therefore, no conflicts of interest 
could arise between the Regulated Fund and the Wholly-Owned Investment 
Sub. The Regulated Fund's Board would make all relevant determinations 
under the conditions with regard to a Wholly-Owned Investment Sub's 
participation in a Co-Investment Transaction, and the Regulated Fund's 
Board would be informed of, and take into consideration, any proposed 
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If 
the Regulated Fund proposes to participate in the same Co-Investment 
Transaction with any of its Wholly-Owned Investment Subs, the Board 
will also be informed of, and take into consideration, the relative 
participation of the Regulated Fund and the Wholly-Owned Investment 
Sub.
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    \8\ The term ``Wholly-Owned Investment Sub'' means an entity (i) 
that is wholly-owned by a Regulated Fund (with the Regulated Fund at 
all times holding, beneficially and of record, 100% of the voting 
and economic interests); (ii) whose sole business purpose is to hold 
one or more investments on behalf of the Regulated Fund; (iii) with 
respect to which the Regulated Fund's Board has the sole authority 
to make all determinations with respect to the entity's 
participation under the conditions of the application; and (iv) that 
would be an investment company but for sections 3(c)(1), 3(c)(5)(C), 
or 3(c)(7) of the Act.
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    8. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the applicable Adviser will consider only the 
Objectives and Strategies, investment policies, investment positions, 
capital available for investment, and other pertinent factors 
applicable to that Regulated Fund. The Regulated Funds' Advisers expect 
that any portfolio company that is an appropriate investment for a 
Regulated Fund should also be an appropriate investment for one or more 
other Regulated Funds and/or one or more Affiliated Funds, with certain 
exceptions based on available capital or diversification.\9\
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    \9\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
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    9. Other than pro rata dispositions and Follow-On Investments as 
provided in conditions 7 and 8, and after making the determinations 
required in conditions 1 and 2(a), the Adviser will present each 
Potential Co-Investment Transaction and the proposed allocation to the 
directors of the Board eligible to vote under section 57(o) of the Act 
(``Eligible Directors''), and the ``required majority,'' as defined in 
section 57(o) of the Act (``Required Majority'') \10\ will approve each 
Co-Investment Transaction prior to any investment by the participating 
Regulated Fund.
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    \10\ In the case of a Regulated Fund that is a registered 
closed-end fund, the Board members that make up the Required 
Majority will be determined as if the Regulated Fund were a BDC 
subject to section 57(o).
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    10. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and 
Affiliated Fund 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) the Board of the 
Regulated Fund has approved that Regulated Fund's participation in pro 
rata dispositions and Follow-On Investments as being in the best 
interests of the Regulated Fund. If the Board does not so approve, any 
such disposition or Follow-On Investment will be submitted to the 
Regulated Fund's Eligible Directors. The Board of any Regulated Fund 
may at any time rescind, suspend or qualify its approval of pro rata 
dispositions and Follow-On Investments with the result that all 
dispositions and/or Follow-On Investments must be submitted to the 
Eligible Directors.
    11. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than through 
share

[[Page 70212]]

ownership in one of the Regulated Funds.
    12. Applicants also represent that if an Adviser or its principals, 
or any person controlling, controlled by, or under common control with 
an Adviser or its principals, and the Affiliated Funds (collectively, 
the ``Holders'') own in the aggregate more than 25% of the outstanding 
voting shares of a Regulated Fund (the ``Shares''), then the Holders 
will vote such Shares as required under condition 14. Applicants 
believe this condition will ensure that the Non-Interested Directors 
will act independently in evaluating the Co-Investment Program, because 
the ability of the Advisers or the Principals to influence the Non-
Interested Directors by a suggestion, explicit or implied, that the 
Non-Interested Directors can be removed will be limited significantly. 
Applicants represent that the Non-Interested Directors will evaluate 
and approve any such 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 57(a)(4) of the Act prohibits certain affiliated persons 
of a BDC from participating in joint transactions with the BDC or a 
company controlled by a BDC in contravention of rules as prescribed by 
the Commission. Under section 57(b)(2) of the Act, any person who is 
directly or indirectly controlling, controlled by, or under common 
control with a BDC is subject to section 57(a)(4). Applicants submit 
that each of the Regulated Funds and Affiliated Funds could be deemed 
to be a person related to each Regulated Fund in a manner described by 
section 57(b) by virtue of being under common control. Section 57(i) of 
the Act provides that, until the Commission prescribes rules under 
section 57(a)(4), the Commission's rules under section 17(d) of the Act 
applicable to registered closed-end investment companies will be deemed 
to apply to transactions subject to section 57(a)(4). Because the 
Commission has not adopted any rules under section 57(a)(4), rule 17d-1 
also applies to joint transactions with Regulated Funds that are BDCs. 
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to 
Regulated Funds that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
affiliated persons of a registered investment company from 
participating in joint transactions with the company unless the 
Commission has granted an order permitting such transactions. In 
passing upon applications under rule 17d-1, the Commission considers 
whether the company's participation in the joint transaction is 
consistent with the provisions, policies, and purposes of the Act and 
the extent to which such participation is on a basis different from or 
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief, 
the Regulated Funds would be, in some circumstances, limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants believe that the proposed terms and 
conditions will ensure that the Co-Investment Transactions are 
consistent with the protection of each Regulated Fund's shareholders 
and with the purposes intended by the policies and provisions of the 
Act. Applicants state that the Regulated Funds' participation in the 
Co-Investment Transactions will be consistent with the provisions, 
policies, and purposes of the Act and on a basis that is not different 
from or less advantageous than that of other participants.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time an Adviser considers a Potential Co-Investment 
Transaction for an Affiliated Fund or another Regulated Fund that falls 
within a Regulated Fund's then-current Objectives and Strategies, the 
Regulated Fund's Adviser will make an independent determination of the 
appropriateness of the investment for such Regulated Fund in light of 
the Regulated Fund's then-current circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, it will then determine an appropriate level of investment for the 
Regulated Fund.
    (b) If the aggregate amount recommended by the applicable Adviser 
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be 
invested by the other participating Regulated Funds and Affiliated 
Funds, collectively, in the same transaction, exceeds the amount of the 
investment opportunity, the investment opportunity will be allocated 
among them pro rata based on each participating party's capital 
available for investment in the asset class being allocated, up to the 
amount proposed to be invested by each. The applicable Adviser will 
provide the Eligible Directors of each participating Regulated Fund 
with information concerning each participating party's available 
capital to assist the Eligible Directors with their review of the 
Regulated Fund's investments for compliance with these allocation 
procedures.
    (c) After making the determinations required in conditions 1 and 
2(a), the applicable Adviser will distribute written information 
concerning the Potential Co-Investment Transaction (including the 
amount proposed to be invested by each participating Regulated Fund and 
Affiliated Fund) to the Eligible Directors of each participating 
Regulated Fund for their consideration. A Regulated Fund will co-invest 
with one or more other Regulated Funds and/or one or more Affiliated 
Funds only if, prior to the Regulated Fund's participation in the 
Potential Co-Investment Transaction, a Required Majority concludes 
that:
    (i) The terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Fund and its shareholders and do not involve overreaching in respect of 
the Regulated Fund or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Affiliated 
Funds would not disadvantage the Regulated Fund, and participation by 
the Regulated Fund would not be on a basis different from or less 
advantageous than that of other Regulated Funds or Affiliated Funds; 
provided that, if 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 or the right to 
have a board observer or any similar right to participate in the 
governance or management of the portfolio company, such event shall not 
be interpreted to prohibit the Required Majority from reaching the 
conclusions required by this condition (2)(c)(iii), if:
    (A) the Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any;
    (B) the applicable Adviser agrees to, and does, provide periodic 
reports to the Regulated Fund's Board with respect to the actions of 
such director or the information received by such board observer or 
obtained through the exercise of any similar right to

[[Page 70213]]

participate in the governance or management of the portfolio company; 
and
    (C) any fees or other compensation that any Affiliated Fund or any 
Regulated Fund or any affiliated person of any Affiliated Fund or any 
Regulated Fund receives in connection with the right of an Affiliated 
Fund or a Regulated Fund to nominate a director or appoint a board 
observer or otherwise to participate in the governance or management of 
the portfolio company will be shared proportionately among the 
participating Affiliated Funds (who each may, in turn, share its 
portion with its affiliated persons) and the participating Regulated 
Funds in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
the Advisers, the Affiliated Funds or the other Regulated Funds or any 
affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by 
condition 13, (B) to the extent permitted by sections 17(e) or 57(k) of 
the Act, as applicable, (C) indirectly, as a result of an interest in 
the securities issued by one of the parties to the Co-Investment 
Transaction, or (D) in the case of fees or other compensation described 
in condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in 
any Potential Co-Investment Transaction or to invest less than the 
amount proposed.
    4. The applicable Adviser will present to the Board of each 
Regulated Fund, on a quarterly basis, a record of all investments in 
Potential Co-Investment Transactions made by any of the other Regulated 
Funds or Affiliated Funds during the preceding quarter that fell within 
the Regulated Fund's then-current Objectives and Strategies that were 
not made available to the Regulated Fund, and an explanation of why the 
investment opportunities were not offered to the Regulated Fund. All 
information presented to the Board pursuant to this condition will be 
kept for the life of the Regulated Fund and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\11\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Affiliated Fund, 
or any affiliated person of another Regulated Fund or Affiliated Fund 
is an existing investor.
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    \11\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Fund and Affiliated 
Fund. The grant to an Affiliated Fund or another Regulated Fund, but 
not the Regulated Fund, of the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
an observer on the board of directors or similar rights to participate 
in the governance or management of the portfolio company will not be 
interpreted so as to violate this condition 6, if conditions 
2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Fund or any Regulated Fund elects to sell, 
exchange or otherwise dispose of an interest in a security that was 
acquired in a Co-Investment Transaction, the applicable Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by each 
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such 
disposition on a proportionate basis, at the same price and on the same 
terms and conditions as those applicable to the participating 
Affiliated Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Fund and each Affiliated Fund in such 
disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in such dispositions on a pro 
rata basis (as described in greater detail in the application); and 
(iii) the Board of the Regulated Fund is provided on a quarterly basis 
with a list of all dispositions made in accordance with this condition. 
In all other cases, the Adviser will provide its written recommendation 
as to the Regulated Fund's participation to the Eligible Directors, and 
the Regulated Fund will participate in such disposition solely to the 
extent that a Required Majority determines that it is in the Regulated 
Fund's best interests.
    (d) Each Affiliated Fund and each Regulated Fund will bear its own 
expenses in connection with any such disposition.
    8. (a) If any Affiliated Fund or any Regulated Fund desires to make 
a Follow-On Investment in a portfolio company whose securities were 
acquired in a Co-Investment Transaction, the applicable Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest 
practical time; and
    (ii) formulate a recommendation as to the proposed participation, 
including the amount of the proposed Follow-On Investment, by each 
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Fund and each Affiliated Fund 
in such investment is proportionate to its outstanding investments in 
the issuer immediately preceding the Follow-On Investment; and (ii) the 
Board of the Regulated Fund has approved as being in the best interests 
of the Regulated Fund the ability to participate in Follow-On 
Investments on a pro rata basis (as described in greater detail in the 
application). In all other cases, the Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Follow-On 
Investment solely to the extent that a Required Majority determines 
that it is in the Regulated Fund's best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Regulated 
Funds' and the Affiliated Funds' outstanding investments immediately 
preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the applicable Adviser to 
be invested by each Regulated Fund in the Follow-On Investment, 
together with the amount proposed to be invested by the participating 
Affiliated Funds in the same transaction, exceeds the amount of the 
opportunity; then the amount invested by each such party will be 
allocated among them pro rata based on each participant's capital 
available for investment in the asset class being allocated, up to the 
amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-

[[Page 70214]]

Investment Transaction for all purposes and subject to the other 
conditions set forth in the application.
    9. The Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Funds or Affiliated Funds that the 
Regulated Fund considered but declined to participate in, so that the 
Non-Interested Directors may determine whether all investments made 
during the preceding quarter, including those investments that the 
Regulated Fund considered but declined to participate in, comply with 
the conditions of the Order. In addition, the Non-Interested Directors 
will consider at least annually the continued appropriateness for the 
Regulated Fund of participating in new and existing Co-Investment 
Transactions.
    10. Each Regulated Fund will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Funds were a 
BDC and each of the investments permitted under these conditions were 
approved by the Required Majority under section 57(f) of the Act.
    11. No Non-Interested Director of a Regulated Fund will also be a 
director, general partner, managing member or principal, or otherwise 
an ``affiliated person'' (as defined in the Act) of an Affiliated Fund.
    12. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the Securities Act) will, to 
the extent not payable by the Advisers under their respective 
investment advisory agreements with Affiliated Funds and the Regulated 
Funds, be shared by the Regulated Funds and the Affiliated Funds in 
proportion to the relative amounts of the securities held or to be 
acquired or disposed of, as the case may be.
    13. Any transaction fee \12\ (including break-up or commitment fees 
but excluding broker's fees contemplated by section 17(e) or 57(k) of 
the Act, as applicable), received in connection with a Co-Investment 
Transaction will be distributed to the participating Regulated Funds 
and Affiliated Funds on a pro rata basis based on the amounts they 
invested or committed, as the case may be, in such Co-Investment 
Transaction. If any transaction fee is to be held by an Adviser pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by such Adviser at a bank or banks having the 
qualifications prescribed in section 26(a)(1) of the Act, and the 
account will earn a competitive rate of interest that will also be 
divided pro rata among the participating Regulated Funds and Affiliated 
Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Affiliated Funds, the Advisers, the other 
Regulated Funds or any affiliated person of the Regulated Funds or 
Affiliated Funds will receive additional compensation or remuneration 
of any kind as a result of or in connection with a Co-Investment 
Transaction (other than (a) in the case of the Regulated Funds and the 
Affiliated Funds, the pro rata transaction fees described above and 
fees or other compensation described in condition 2(c)(iii)(C); and (b) 
in the case of an Adviser, investment advisory fees paid in accordance 
with the agreement between the Adviser and the Regulated Fund or 
Affiliated Fund).
---------------------------------------------------------------------------

    \12\ Applicants are not requesting and the staff is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
---------------------------------------------------------------------------

    14. If the Holders own in the aggregate more than 25% of the Shares 
of a Regulated Fund, then the Holders will vote such Shares as directed 
by an independent third party when voting on (1) the election of 
directors; (2) the removal of one or more directors; or (3) any other 
matter under either the Act or applicable State law affecting the 
Board's composition, size or manner of election.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24428 Filed 10-7-16; 8:45 am]
 BILLING CODE 8011-01-P

70210 Federal Register / Vol. 81, No. 196 / Tuesday, October 11, 2016 / Notices change that are filed with the Secured Income Fund 3, LLC (‘‘TSIF meaning of section 2(a)(48) of the Act.2 Commission, and all written 3’’), Terra Secured Income Fund 4, LLC Terra 6 is a specialty finance company communications relating to the (‘‘TSIF 4’’), Terra Secured Income Fund formed to invest primarily in proposed rule change between the 5, LLC (‘‘TSIF 5’’), Terra Property Trust, commercial real estate loans to, and Commission and any person, other than Inc. (‘‘Terra REIT’’), Terra Secured preferred equity investments in, U.S. those that may be withheld from the Income Fund 5 International (‘‘Terra companies qualifying as ‘‘eligible public in accordance with the International’’), and Terra Income portfolio companies’’ under the Act. provisions of 5 U.S.C. 552, will be Advisors, LLC (‘‘Terra Income Terra 6 may also purchase other select available for Web site viewing and Advisors’’), on behalf of itself and its commercial real estate-related debt printing in the Commission’s Public successors.1 securities of private companies. Terra Reference Room, 100 F Street NE., FILING DATES: The application was filed 6’s Objectives and Strategies 3 are to pay Washington, DC 20549 on official on April 29, 2015 and amended on attractive and stable cash distributions business days between the hours of November 3, 2015, May 11, 2016 and and to preserve, protect and return 10:00 a.m. and 3:00 p.m. Copies of such September 14, 2016. capital contributions to stockholders. filing also will be available for HEARING OR NOTIFICATION OF HEARING: An The board of directors (‘‘Board’’) of inspection and copying at the principal order granting the requested relief will Terra 6 is comprised of five directors, office of the Exchange. All comments be issued unless the Commission orders three of whom are not ‘‘interested received will be posted without change; a hearing. Interested persons may persons,’’ within the meaning of section the Commission does not edit personal request a hearing by writing to the 2(a)(19) of the Act (the ‘‘Non-Interested identifying information from Commission’s Secretary and serving Directors’’), of Terra 6. submissions. You should submit only applicants with a copy of the request, 2. Each of TSIF, TSIF 2, TSIF 3, TSIF information that you wish to make personally or by mail. Hearing requests 4 and TSIF 5 is organized as a Delaware available publicly. All submissions should be received by the Commission limited liability company and would be should refer to File Number SR– by 5:30 p.m. on October 31, 2016, and an investment company but for section NASDAQ–2016–124, and should be should be accompanied by proof of 3(c)(5)(C) of the Act. Each of TSIF, TSIF submitted on or before November 1, service on applicants, in the form of an 2, TSIF 3, TSIF 4 and TSIF 5 was 2016. affidavit or, for lawyers, a certificate of formed to originate, fund, acquire and For the Commission, by the Division of service. Pursuant to rule 0–5 under the structure real estate-related loans, Trading and Markets, pursuant to delegated Act, hearing requests should state the including mezzanine loans, first and authority.12 nature of the writer’s interest, any facts second mortgage loans, subordinated Robert W. Errett, bearing upon the desirability of a mortgage loans, bridge loans, preferred Deputy Secretary. hearing on the matter, the reason for the equity investments and other loans [FR Doc. 2016–24420 Filed 10–7–16; 8:45 am] request, and the issues contested. related to high quality commercial real Persons who wish to be notified of a estate in the United States. TSIF, TSIF BILLING CODE 8011–01–P hearing may request notification by 2, TSIF 3 and TSIF 4 currently exist as writing to the Commission’s Secretary. wholly-owned subsidiaries of TSIF 5. SECURITIES AND EXCHANGE 3. Terra REIT is a Maryland ADDRESSES: Brent J. Fields, Secretary, COMMISSION corporation that intends to qualify to be U.S. Securities and Exchange taxed as a REIT and would be an [Release No. IC–32303; File No. 812–14452] Commission, 100 F St. NE., Washington, investment company but for section DC 20549–1090. Applicants: Bruce D. 3(c)(5)(C) of the Act. Terra REIT exists Terra Income Fund 6, Inc., et al.; Notice Batkin, 805 Third Avenue, 8th Floor, as a wholly-owned subsidiary of TSIF 5 of Application New York, NY 10022. and holds the portfolio assets of each of October 4, 2016. FOR FURTHER INFORMATION CONTACT: Kay- TSIF, TSIF 2, TSIF 3, TSIF 4 and TSIF AGENCY: Securities and Exchange Mario Vobis, Senior Counsel, at (202) 5. Commission (‘‘Commission’’). 551–6728, or Mary Kay Frech, Branch 4. Terra International is a Cayman Chief, at (202) 551–6821 (Chief Islands exempted company and would ACTION: Notice of application for an Counsel’s Office, Division of Investment be an investment company but for order under sections 17(d) and 57(i) of Management). section 3(c)(1) of the Act. Terra the Investment Company Act of 1940 (the ‘‘Act’’) and rule 17d–1 under the SUPPLEMENTARY INFORMATION: The International was formed to acquire real Act permitting certain joint transactions following is a summary of the estate-related loans, including otherwise prohibited by sections 17(d) application. The complete application mezzanine loans, first and second and 57(a)(4) of the Act and rule 17d–1 may be obtained via the Commission’s mortgage loans, subordinated mortgage under the Act. Web site by searching for the file loans, bridge loans and other loans number, or for an applicant using the SUMMARY OF APPLICATION: Applicants Company name box, at http:// 2 Section 2(a)(48) defines a BDC to be any closed- request an order to permit a business www.sec.gov/search/search.htm or by end investment company that operates for the calling (202) 551–8090. purpose of making investments in securities development company (‘‘BDC’’) and described in section 55(a)(1) through 55(a)(3) of the certain closed-end investment Applicants’ Representations Act and makes available significant managerial companies to co-invest in portfolio assistance with respect to the issuers of such asabaliauskas on DSK3SPTVN1PROD with NOTICES companies with each other and with 1. Terra 6 is a Maryland corporation securities. affiliated investment funds. organized as a closed-end management 3 ‘‘Objectives and Strategies’’ means, with respect investment company that has elected to to a Regulated Fund (defined below), the APPLICANTS: Terra Income Fund 6, Inc. investment objectives and strategies, as described in (‘‘Terra 6’’), Terra Secured Income be regulated as a BDC within the the Regulated Fund’s registration statement on Fund, LLC (‘‘TSIF’’), Terra Secured Form N–2, other filings the Regulated Fund has 1 The term ‘‘successor’’ means an entity that made with the Commission under the Securities Income Fund 2, LLC (‘‘TSIF 2’’), Terra results from a reorganization into another Act of 1933 (the ‘‘Securities Act’’), or under the jurisdiction or change in the type of business Securities Exchange Act of 1934, and the Regulated 12 17 CFR 200.30–3(a)(12). organization. Fund’s reports to shareholders. VerDate Sep<11>2014 20:12 Oct 07, 2016 Jkt 241001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 E:\FR\FM\11OCN1.SGM 11OCN1

Federal Register / Vol. 81, No. 196 / Tuesday, October 11, 2016 / Notices 70211 related to high quality commercial real more other Regulated Funds without investment positions, capital available estate in the United States. obtaining and relying on the Order.7 for investment, and other pertinent 7. Applicants state that a Regulated factors applicable to that Regulated 5. Terra Income Advisors, a Delaware Fund may, from time to time, form one Fund. The Regulated Funds’ Advisers limited liability company, is registered or more Wholly-Owned Investment expect that any portfolio company that with the Commission as an investment Subs.8 Such a subsidiary would be is an appropriate investment for a adviser under the Investment Advisers prohibited from investing in a Co- Regulated Fund should also be an Act of 1940 (the ‘‘Advisers Act’’) and Investment Transaction with any appropriate investment for one or more serves as investment adviser to Terra 6 Affiliated Fund or Regulated Fund other Regulated Funds and/or one or and Terra International, as well as TSIF because it would be a company more Affiliated Funds, with certain 5 and its wholly-owned subsidiaries controlled by its parent Regulated Fund exceptions based on available capital or TSIF, TSIF 2, TSIF 3, TSIF 4, and Terra for purposes of section 57(a)(4) and rule diversification.9 REIT. 17d–1. Applicants request that each 9. Other than pro rata dispositions 6. Applicants seek an order (‘‘Order’’) Wholly-Owned Investment Sub be and Follow-On Investments as provided to permit one or more Regulated Funds 4 permitted to participate in Co- in conditions 7 and 8, and after making and/or one or more Affiliated Funds 5 to Investment Transactions in lieu of its the determinations required in participate in the same investment parent Regulated Fund and that the conditions 1 and 2(a), the Adviser will opportunities through a proposed co- Wholly-Owned Investment Sub’s present each Potential Co-Investment investment program (the ‘‘Co- participation in any such transaction be Transaction and the proposed allocation Investment Program’’) where such treated, for purposes of the requested to the directors of the Board eligible to participation would otherwise be Order, as though the parent Regulated vote under section 57(o) of the Act Fund were participating directly. (‘‘Eligible Directors’’), and the ‘‘required prohibited under section 57(a)(4) and Applicants represent that this treatment majority,’’ as defined in section 57(o) of rule 17d–1 by (a) co-investing with each is justified because a Wholly-Owned the Act (‘‘Required Majority’’) 10 will other in securities issued by issuers in Investment Sub would have no purpose approve each Co-Investment private placement transactions in which other than serving as a holding vehicle Transaction prior to any investment by an Adviser negotiates terms in addition for the Regulated Fund’s investments the participating Regulated Fund. to price; 6 and (b) making additional and, therefore, no conflicts of interest 10. With respect to the pro rata investments in securities of such could arise between the Regulated Fund dispositions and Follow-On Investments issuers, including through the exercise and the Wholly-Owned Investment Sub. provided in conditions 7 and 8, a of warrants, conversion privileges, and The Regulated Fund’s Board would Regulated Fund may participate in a pro other rights to purchase securities of the make all relevant determinations under rata disposition or Follow-On issuers (‘‘Follow-On Investments’’). ‘‘Co- the conditions with regard to a Wholly- Investment without obtaining prior Investment Transaction’’ means any Owned Investment Sub’s participation approval of the Required Majority if, transaction in which a Regulated Fund in a Co-Investment Transaction, and the among other things: (i) The proposed (or its Wholly-Owned Investment Sub) Regulated Fund’s Board would be participation of each Regulated Fund participated together with one or more informed of, and take into and Affiliated Fund in such disposition other Regulated Funds and/or one or consideration, any proposed use of a is proportionate to its outstanding more Affiliated Funds in reliance on the Wholly-Owned Investment Sub in the investments in the issuer immediately requested Order. ‘‘Potential Co- Regulated Fund’s place. If the Regulated preceding the disposition or Follow-On Investment Transaction’’ means any Fund proposes to participate in the Investment, as the case may be; and (ii) investment opportunity in which a same Co-Investment Transaction with the Board of the Regulated Fund has Regulated Fund (or its Wholly-Owned any of its Wholly-Owned Investment approved that Regulated Fund’s Investment Sub, as defined below) Subs, the Board will also be informed participation in pro rata dispositions could not participate together with one of, and take into consideration, the and Follow-On Investments as being in or more Affiliated Funds and/or one or relative participation of the Regulated the best interests of the Regulated Fund. Fund and the Wholly-Owned If the Board does not so approve, any 4 ‘‘Regulated Fund’’ means Terra 6 and any Investment Sub. such disposition or Follow-On Future Regulated Fund. ‘‘Future Regulated Fund’’ 8. When considering Potential Co- Investment will be submitted to the means any closed-end management investment Investment Transactions for any Regulated Fund’s Eligible Directors. The company (a) that is registered under the Act or has Regulated Fund, the applicable Adviser Board of any Regulated Fund may at any elected to be regulated as a BDC, (b) whose investment adviser is an Adviser, and (c) that will consider only the Objectives and time rescind, suspend or qualify its intends to participate in the Co-Investment Strategies, investment policies, approval of pro rata dispositions and Program. The term ‘‘Adviser’’ means Terra Income Follow-On Investments with the result Advisors and/or any future investment adviser that 7 All existing entities that currently intend to rely that all dispositions and/or Follow-On controls, is controlled by or is under common upon the requested Order have been named as control with Terra Income Advisors and is Investments must be submitted to the applicants. Any other existing or future entity that registered as an investment adviser under the subsequently relies on the Order will comply with Eligible Directors. Advisers Act. the terms and conditions of the application. 11. No Non-Interested Director of a 5 Terra International together with TSIF, TSIF 2, 8 The term ‘‘Wholly-Owned Investment Sub’’ Regulated Fund will have a financial TSIF 3, TSIF 4, TSIF 5, Terra REIT and any Future means an entity (i) that is wholly-owned by a interest in any Co-Investment Affiliated Funds are the ‘‘Affiliated Funds.’’ asabaliauskas on DSK3SPTVN1PROD with NOTICES Regulated Fund (with the Regulated Fund at all ‘‘Future Affiliated Fund’’ means any entity (a) times holding, beneficially and of record, 100% of Transaction, other than through share whose investment adviser is an Adviser, (b) that the voting and economic interests); (ii) whose sole would be an investment company but for sections business purpose is to hold one or more 9 The Regulated Funds, however, will not be 3(c)(1), 3(c)(5)(C), or 3(c)(7) of the Act, and (c) that investments on behalf of the Regulated Fund; (iii) obligated to invest, or co-invest, when investment intends to participate in the Co-Investment with respect to which the Regulated Fund’s Board opportunities are referred to them. Program. has the sole authority to make all determinations 10 In the case of a Regulated Fund that is a 6 The term ‘‘private placement transactions’’ with respect to the entity’s participation under the registered closed-end fund, the Board members that means transactions in which the offer and sale of conditions of the application; and (iv) that would make up the Required Majority will be determined securities by the issuer are exempt from registration be an investment company but for sections 3(c)(1), as if the Regulated Fund were a BDC subject to under the Securities Act. 3(c)(5)(C), or 3(c)(7) of the Act. section 57(o). VerDate Sep<11>2014 20:12 Oct 07, 2016 Jkt 241001 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 E:\FR\FM\11OCN1.SGM 11OCN1

70212 Federal Register / Vol. 81, No. 196 / Tuesday, October 11, 2016 / Notices ownership in one of the Regulated the Commission has granted an order Eligible Directors of each participating Funds. permitting such transactions. In passing Regulated Fund with information 12. Applicants also represent that if upon applications under rule 17d–1, the concerning each participating party’s an Adviser or its principals, or any Commission considers whether the available capital to assist the Eligible person controlling, controlled by, or company’s participation in the joint Directors with their review of the under common control with an Adviser transaction is consistent with the Regulated Fund’s investments for or its principals, and the Affiliated provisions, policies, and purposes of the compliance with these allocation Funds (collectively, the ‘‘Holders’’) own Act and the extent to which such procedures. in the aggregate more than 25% of the participation is on a basis different from (c) After making the determinations outstanding voting shares of a Regulated or less advantageous than that of other required in conditions 1 and 2(a), the Fund (the ‘‘Shares’’), then the Holders participants. applicable Adviser will distribute will vote such Shares as required under 3. Applicants state that in the absence written information concerning the condition 14. Applicants believe this of the requested relief, the Regulated Potential Co-Investment Transaction condition will ensure that the Non- Funds would be, in some (including the amount proposed to be Interested Directors will act circumstances, limited in their ability to invested by each participating Regulated independently in evaluating the Co- participate in attractive and appropriate Fund and Affiliated Fund) to the Investment Program, because the ability investment opportunities. Applicants Eligible Directors of each participating of the Advisers or the Principals to believe that the proposed terms and Regulated Fund for their consideration. influence the Non-Interested Directors conditions will ensure that the Co- A Regulated Fund will co-invest with by a suggestion, explicit or implied, that Investment Transactions are consistent one or more other Regulated Funds and/ the Non-Interested Directors can be with the protection of each Regulated or one or more Affiliated Funds only if, removed will be limited significantly. Fund’s shareholders and with the prior to the Regulated Fund’s Applicants represent that the Non- purposes intended by the policies and participation in the Potential Co- Interested Directors will evaluate and provisions of the Act. Applicants state Investment Transaction, a Required approve any such independent third that the Regulated Funds’ participation Majority concludes that: party, taking into account its in the Co-Investment Transactions will (i) The terms of the Potential Co- qualifications, reputation for be consistent with the provisions, Investment Transaction, including the independence, cost to the shareholders, policies, and purposes of the Act and on consideration to be paid, are reasonable and other factors that they deem a basis that is not different from or less and fair to the Regulated Fund and its relevant. advantageous than that of other shareholders and do not involve participants. overreaching in respect of the Regulated Applicants’ Legal Analysis Applicants’ Conditions Fund or its shareholders on the part of 1. Section 57(a)(4) of the Act prohibits any person concerned; certain affiliated persons of a BDC from Applicants agree that the Order will (ii) the Potential Co-Investment participating in joint transactions with be subject to the following conditions: Transaction is consistent with: the BDC or a company controlled by a 1. Each time an Adviser considers a (A) The interests of the shareholders BDC in contravention of rules as Potential Co-Investment Transaction for of the Regulated Fund; and prescribed by the Commission. Under an Affiliated Fund or another Regulated (B) the Regulated Fund’s then-current section 57(b)(2) of the Act, any person Fund that falls within a Regulated Objectives and Strategies; who is directly or indirectly controlling, Fund’s then-current Objectives and (iii) the investment by any other controlled by, or under common control Strategies, the Regulated Fund’s Adviser Regulated Funds or Affiliated Funds with a BDC is subject to section 57(a)(4). will make an independent would not disadvantage the Regulated Applicants submit that each of the determination of the appropriateness of Fund, and participation by the Regulated Funds and Affiliated Funds the investment for such Regulated Fund Regulated Fund would not be on a basis could be deemed to be a person related in light of the Regulated Fund’s then- different from or less advantageous than to each Regulated Fund in a manner current circumstances. that of other Regulated Funds or described by section 57(b) by virtue of 2. (a) If the Adviser deems a Regulated Affiliated Funds; provided that, if any being under common control. Section Fund’s participation in any Potential other Regulated Fund or Affiliated 57(i) of the Act provides that, until the Co-Investment Transaction to be Fund, but not the Regulated Fund itself, Commission prescribes rules under appropriate for the Regulated Fund, it gains the right to nominate a director for section 57(a)(4), the Commission’s rules will then determine an appropriate level election to a portfolio company’s board under section 17(d) of the Act of investment for the Regulated Fund. of directors or the right to have a board applicable to registered closed-end (b) If the aggregate amount observer or any similar right to investment companies will be deemed recommended by the applicable Adviser participate in the governance or to apply to transactions subject to to be invested by the applicable management of the portfolio company, section 57(a)(4). Because the Regulated Fund in the Potential Co- such event shall not be interpreted to Commission has not adopted any rules Investment Transaction, together with prohibit the Required Majority from under section 57(a)(4), rule 17d–1 also the amount proposed to be invested by reaching the conclusions required by applies to joint transactions with the other participating Regulated Funds this condition (2)(c)(iii), if: Regulated Funds that are BDCs. Section and Affiliated Funds, collectively, in the (A) the Eligible Directors will have the 17(d) of the Act and rule 17d–1 under same transaction, exceeds the amount of right to ratify the selection of such asabaliauskas on DSK3SPTVN1PROD with NOTICES the Act are applicable to Regulated the investment opportunity, the director or board observer, if any; Funds that are registered closed-end investment opportunity will be (B) the applicable Adviser agrees to, investment companies. allocated among them pro rata based on and does, provide periodic reports to 2. Section 17(d) of the Act and rule each participating party’s capital the Regulated Fund’s Board with respect 17d–1 under the Act prohibit affiliated available for investment in the asset to the actions of such director or the persons of a registered investment class being allocated, up to the amount information received by such board company from participating in joint proposed to be invested by each. The observer or obtained through the transactions with the company unless applicable Adviser will provide the exercise of any similar right to VerDate Sep<11>2014 20:12 Oct 07, 2016 Jkt 241001 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 E:\FR\FM\11OCN1.SGM 11OCN1

Federal Register / Vol. 81, No. 196 / Tuesday, October 11, 2016 / Notices 70213 participate in the governance or Affiliated Fund, or any affiliated person determines that it is in the Regulated management of the portfolio company; of another Regulated Fund or Affiliated Fund’s best interests. and Fund is an existing investor. (d) Each Affiliated Fund and each (C) any fees or other compensation 6. A Regulated Fund will not Regulated Fund will bear its own that any Affiliated Fund or any participate in any Potential Co- expenses in connection with any such Regulated Fund or any affiliated person Investment Transaction unless the disposition. of any Affiliated Fund or any Regulated terms, conditions, price, class of 8. (a) If any Affiliated Fund or any Fund receives in connection with the securities to be purchased, settlement Regulated Fund desires to make a right of an Affiliated Fund or a date, and registration rights will be the Follow-On Investment in a portfolio Regulated Fund to nominate a director same for each participating Regulated company whose securities were or appoint a board observer or otherwise Fund and Affiliated Fund. The grant to acquired in a Co-Investment to participate in the governance or an Affiliated Fund or another Regulated Transaction, the applicable Advisers management of the portfolio company Fund, but not the Regulated Fund, of will: will be shared proportionately among the right to nominate a director for (i) Notify each Regulated Fund that the participating Affiliated Funds (who election to a portfolio company’s board participated in the Co-Investment each may, in turn, share its portion with of directors, the right to have an Transaction of the proposed transaction its affiliated persons) and the observer on the board of directors or at the earliest practical time; and participating Regulated Funds in similar rights to participate in the (ii) formulate a recommendation as to accordance with the amount of each governance or management of the the proposed participation, including party’s investment; and portfolio company will not be the amount of the proposed Follow-On (iv) the proposed investment by the interpreted so as to violate this Investment, by each Regulated Fund. Regulated Fund will not benefit the (b) A Regulated Fund may participate condition 6, if conditions 2(c)(iii)(A), (B) Advisers, the Affiliated Funds or the in such Follow-On Investment without and (C) are met. other Regulated Funds or any affiliated obtaining prior approval of the Required 7. (a) If any Affiliated Fund or any Majority if: (i) The proposed person of any of them (other than the Regulated Fund elects to sell, exchange parties to the Co-Investment participation of each Regulated Fund or otherwise dispose of an interest in a and each Affiliated Fund in such Transaction), except (A) to the extent security that was acquired in a Co- permitted by condition 13, (B) to the investment is proportionate to its Investment Transaction, the applicable outstanding investments in the issuer extent permitted by sections 17(e) or Advisers will: 57(k) of the Act, as applicable, (C) immediately preceding the Follow-On (i) Notify each Regulated Fund that Investment; and (ii) the Board of the indirectly, as a result of an interest in participated in the Co-Investment the securities issued by one of the Regulated Fund has approved as being Transaction of the proposed disposition in the best interests of the Regulated parties to the Co-Investment at the earliest practical time; and Transaction, or (D) in the case of fees or Fund the ability to participate in (ii) formulate a recommendation as to Follow-On Investments on a pro rata other compensation described in participation by each Regulated Fund in condition 2(c)(iii)(C). basis (as described in greater detail in the disposition. the application). In all other cases, the 3. Each Regulated Fund has the right (b) Each Regulated Fund will have the to decline to participate in any Potential Adviser will provide its written right to participate in such disposition recommendation as to the Regulated Co-Investment Transaction or to invest on a proportionate basis, at the same less than the amount proposed. Fund’s participation to the Eligible price and on the same terms and Directors, and the Regulated Fund will 4. The applicable Adviser will present conditions as those applicable to the to the Board of each Regulated Fund, on participate in such Follow-On participating Affiliated Funds and Investment solely to the extent that a a quarterly basis, a record of all Regulated Funds. investments in Potential Co-Investment Required Majority determines that it is (c) A Regulated Fund may participate in the Regulated Fund’s best interests. Transactions made by any of the other in such disposition without obtaining Regulated Funds or Affiliated Funds (c) If, with respect to any Follow-On prior approval of the Required Majority Investment: during the preceding quarter that fell if: (i) The proposed participation of each (i) The amount of the opportunity is within the Regulated Fund’s then- Regulated Fund and each Affiliated not based on the Regulated Funds’ and current Objectives and Strategies that Fund in such disposition is the Affiliated Funds’ outstanding were not made available to the proportionate to its outstanding investments immediately preceding the Regulated Fund, and an explanation of investments in the issuer immediately Follow-On Investment; and why the investment opportunities were preceding the disposition; (ii) the Board (ii) the aggregate amount not offered to the Regulated Fund. All of the Regulated Fund has approved as recommended by the applicable Adviser information presented to the Board being in the best interests of the to be invested by each Regulated Fund pursuant to this condition will be kept Regulated Fund the ability to participate in the Follow-On Investment, together for the life of the Regulated Fund and in such dispositions on a pro rata basis with the amount proposed to be at least two years thereafter, and will be (as described in greater detail in the invested by the participating Affiliated subject to examination by the application); and (iii) the Board of the Funds in the same transaction, exceeds Commission and its staff. Regulated Fund is provided on a the amount of the opportunity; then the 5. Except for Follow-On Investments quarterly basis with a list of all amount invested by each such party will asabaliauskas on DSK3SPTVN1PROD with NOTICES made in accordance with condition 8,11 dispositions made in accordance with be allocated among them pro rata based a Regulated Fund will not invest in this condition. In all other cases, the on each participant’s capital available reliance on the Order in any issuer in Adviser will provide its written for investment in the asset class being which another Regulated Fund, recommendation as to the Regulated allocated, up to the amount proposed to 11 This exception applies only to Follow-On Fund’s participation to the Eligible be invested by each. Investments by a Regulated Fund in issuers in Directors, and the Regulated Fund will (d) The acquisition of Follow-On which that Regulated Fund already holds participate in such disposition solely to Investments as permitted by this investments. the extent that a Required Majority condition will be considered a Co- VerDate Sep<11>2014 20:12 Oct 07, 2016 Jkt 241001 PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 E:\FR\FM\11OCN1.SGM 11OCN1

70214 Federal Register / Vol. 81, No. 196 / Tuesday, October 11, 2016 / Notices Investment Transaction for all purposes may be, in such Co-Investment ‘‘Act’’),1 and Rule 19b–4 thereunder,2 and subject to the other conditions set Transaction. If any transaction fee is to notice is hereby given that on forth in the application. be held by an Adviser pending September 28, 2016, BOX Options 9. The Non-Interested Directors of consummation of the transaction, the Exchange LLC (the ‘‘Exchange’’) filed each Regulated Fund will be provided fee will be deposited into an account with the Securities and Exchange quarterly for review all information maintained by such Adviser at a bank or Commission (‘‘Commission’’) the concerning Potential Co-Investment banks having the qualifications proposed rule change as described in Transactions and Co-Investment prescribed in section 26(a)(1) of the Act, Items I, II, and III below, which Items Transactions, including investments and the account will earn a competitive have been prepared by the Exchange. made by other Regulated Funds or rate of interest that will also be divided The Exchange filed the proposed rule Affiliated Funds that the Regulated pro rata among the participating change pursuant to Section Fund considered but declined to Regulated Funds and Affiliated Funds 19(b)(3)(A)(ii) of the Act,3 and Rule participate in, so that the Non-Interested based on the amounts they invest in 19b–4(f)(2) thereunder,4 which renders Directors may determine whether all such Co-Investment Transaction. None the proposal effective upon filing with investments made during the preceding of the Affiliated Funds, the Advisers, the Commission. The Commission is quarter, including those investments the other Regulated Funds or any publishing this notice to solicit that the Regulated Fund considered but affiliated person of the Regulated Funds comments on the proposed rule change declined to participate in, comply with or Affiliated Funds will receive from interested persons. the conditions of the Order. In addition, additional compensation or I. Self-Regulatory Organization’s the Non-Interested Directors will remuneration of any kind as a result of Statement of the Terms of the Substance consider at least annually the continued or in connection with a Co-Investment of the Proposed Rule Change appropriateness for the Regulated Fund Transaction (other than (a) in the case of participating in new and existing Co- of the Regulated Funds and the The Exchange is filing with the Investment Transactions. Affiliated Funds, the pro rata Securities and Exchange Commission 10. Each Regulated Fund will transaction fees described above and (‘‘Commission’’) a proposed rule change maintain the records required by section fees or other compensation described in to amend the Fee Schedule to adopt 57(f)(3) of the Act as if each of the condition 2(c)(iii)(C); and (b) in the case Participant Fees on the BOX Market LLC Regulated Funds were a BDC and each of an Adviser, investment advisory fees (‘‘BOX’’) options facility. While changes of the investments permitted under paid in accordance with the agreement to the fee schedule pursuant to this these conditions were approved by the proposal will be effective upon filing, between the Adviser and the Regulated Required Majority under section 57(f) of the changes will become operative on Fund or Affiliated Fund). the Act. October 1, 2016. The text of the 14. If the Holders own in the aggregate 11. No Non-Interested Director of a proposed rule change is available from more than 25% of the Shares of a Regulated Fund will also be a director, the principal office of the Exchange, at Regulated Fund, then the Holders will general partner, managing member or the Commission’s Public Reference vote such Shares as directed by an principal, or otherwise an ‘‘affiliated Room and also on the Exchange’s independent third party when voting on person’’ (as defined in the Act) of an Internet Web site at http:// (1) the election of directors; (2) the Affiliated Fund. boxexchange.com. removal of one or more directors; or (3) 12. The expenses, if any, associated any other matter under either the Act or II. Self-Regulatory Organization’s with acquiring, holding or disposing of applicable State law affecting the Statement of the Purpose of, and any securities acquired in a Co- Board’s composition, size or manner of Statutory Basis for, the Proposed Rule Investment Transaction (including, election. Change without limitation, the expenses of the For the Commission, by the Division of In its filing with the Commission, the distribution of any such securities Investment Management, under delegated Exchange included statements registered for sale under the Securities authority. concerning the purpose of and basis for Act) will, to the extent not payable by Robert W. Errett, the proposed rule change and discussed the Advisers under their respective Deputy Secretary. any comments it received on the investment advisory agreements with proposed rule change. The text of these [FR Doc. 2016–24428 Filed 10–7–16; 8:45 am] Affiliated Funds and the Regulated statements may be examined at the BILLING CODE 8011–01–P Funds, be shared by the Regulated places specified in Item IV below. The Funds and the Affiliated Funds in Exchange has prepared summaries, set proportion to the relative amounts of the forth in Sections A, B, and C below, of SECURITIES AND EXCHANGE securities held or to be acquired or the most significant aspects of such COMMISSION disposed of, as the case may be. statements. 13. Any transaction fee 12 (including break-up or commitment fees but [Release No. 34–79038; File No. SR–BOX– A. Self-Regulatory Organization’s excluding broker’s fees contemplated by 2016–47] Statement of the Purpose of, and section 17(e) or 57(k) of the Act, as Statutory Basis for, the Proposed Rule Self-Regulatory Organizations; BOX applicable), received in connection with Change Options Exchange LLC; Notice of a Co-Investment Transaction will be 1. Purpose asabaliauskas on DSK3SPTVN1PROD with NOTICES Filing and Immediate Effectiveness of distributed to the participating a Proposed Rule Change To Amend Regulated Funds and Affiliated Funds The Exchange proposes to amend the the Fee Schedule To Adopt Participant Fee Schedule for trading on BOX to on a pro rata basis based on the amounts Fees on the BOX Market LLC (‘‘BOX’’) they invested or committed, as the case establish two Participant Fees; a Options Facility 1 15 U.S.C. 78s(b)(1). 12 Applicants are not requesting and the staff is October 4, 2016. 2 17 not providing any relief for transaction fees CFR 240.19b–4. received in connection with any Co-Investment Pursuant to Section 19(b)(1) of the 3 15 U.S.C. 78s(b)(3)(A)(ii). Transaction. Securities Exchange Act of 1934 (the 4 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 20:12 Oct 07, 2016 Jkt 241001 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 E:\FR\FM\11OCN1.SGM 11OCN1


Document Created: 2018-02-13 16:33:53
Document Modified: 2018-02-13 16:33:53
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice 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 permitting certain joint transactions otherwise prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
DatesThe application was filed on April 29, 2015 and amended
ContactKay-Mario Vobis, Senior Counsel, at (202) 551-6728, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Chief Counsel's Office, Division of Investment Management).
FR Citation81 FR 70210 
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