83 FR 43715 - Tortoise Capital Advisors, L.L.C., et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 166 (August 27, 2018)

[Federal Register Volume 83, Number 166 (Monday, August 27, 2018)]
[Notices]
[Pages 43715-43720]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-18427]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33205; File No. 812-14839]


Tortoise Capital Advisors, L.L.C., et al.

August 21, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
business development companies (``BDC'') and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds.

APPLICANTS: Tortoise Energy Infrastructure Corporation (``Energy 
Infrastructure Corp.''), Tortoise MLP Fund, Inc. (``MLP Fund''), 
Tortoise Pipeline & Energy Fund, Inc. (``Pipeline Fund''), Tortoise 
Energy Independence Fund, Inc. (``Independence Fund''), Tortoise Power 
and Energy Infrastructure Fund, Inc. (``Power Fund''), Tortoise 
Essential Assets Income 2024 Term Fund, Inc. (``Income Fund''), 
Tortoise Tax-Advantaged Social Infrastructure Fund, Inc. (``Social 
Infrastructure Fund'' and together with Energy Infrastructure Corp., 
MLP Fund, Pipeline Fund, Independence Fund, Power Fund, and Income 
Fund, the ``Existing Regulated Funds''), Tortoise Capital Advisors, 
L.L.C. (``Tortoise Advisors''), on behalf of itself and its successors, 
Tortoise Direct Opportunities Fund, LP (``DO Fund''), Tortoise Direct 
Opportunities Fund II, LP (``DO Fund II''), Tortoise Direct Municipal 
Opportunities Fund, LP (``Municipal Fund'' and, together with DO Fund 
and DO Fund II, the ``Existing Affiliated Funds''), and Tortoise Credit 
Strategies, LLC (the ``Existing Affiliated Adviser'').

FILING DATES: The application was filed on November 7, 2017, and 
amended on March 29, 2018, and August 1, 2018.

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 September 17, 2018, 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, 11550 Ash Street, Suite 
300, Leawood, KS 66211.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879 or Andrea Ottomanelli Magovern, 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 website by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
    Applicants' Representations:
    1. Energy Infrastructure Corp. was organized as a Maryland 
corporation for the purpose of operating as an externally-managed, non-
diversified, closed-end management investment company. Energy 
Infrastructure Corp. is a registered investment company under the Act. 
Energy Infrastructure Corp.'s Objectives and Strategies \1\ are to seek 
a high level of total return with an emphasis on current distributions 
primarily through investments in publicly traded master limited 
partnerships (``MLPs'') and their affiliates in the energy 
infrastructure sector. Energy Infrastructure Corp. has a six member 
Board,\2\ of which four members are Non-Interested Directors.\3\
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    \1\ ``Objectives and Strategies'' means a Regulated Fund's 
investment objectives and strategies, as described in the Regulated 
Fund's registration statement on Form N-2, other filings the 
Regulated Fund has made with the Commission under the Securities Act 
of 1933 (the ``Securities Act''), or under the Securities Exchange 
Act of 1934, and the Regulated Fund's reports to shareholders.
    \2\ The term ``Board'' refers to the board of directors of any 
Regulated Fund.
    \3\ The term ``Non-Interested Directors'' refers to the 
directors of any Regulated Fund that are not ``interested persons'' 
of the Regulated Fund within the meaning of section 2(a)(19) of the 
Act.
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    2. MLP Fund was organized as a Maryland corporation for the purpose 
of operating as an externally-managed, non-diversified, closed-end 
management investment company. MLP Fund is a registered investment 
company under the Act. MLP Fund's Objectives and Strategies are to seek 
a high level of total return with an emphasis on current distributions 
primarily through investments in energy MLPs and their affiliates, with 
an emphasis on natural gas infrastructure MLPs. MLP Fund has a six 
member Board, of which four members are Non-Interested Directors.
    3. Pipeline Fund was organized as a Maryland corporation for the 
purpose of operating as an externally-managed, non-diversified, closed-
end management investment company. Pipeline Fund is a registered 
investment company under the Act. Pipeline Fund has elected to be 
treated, and intends to comply with the requirements to continue to 
qualify annually, as a regulated investment company (``RIC'') under the 
Internal Revenue Code of 1986, as amended (the ``Code''), and intends 
to continue to make such election in the future. Pipeline Fund's 
Objectives and Strategies are to seek a high level of total return with 
an emphasis on current distributions primarily through investments in 
equity securities of North American pipeline companies that transport 
natural gas,

[[Page 43716]]

natural gas liquids, crude oil and refined products, and other energy 
infrastructure companies. Pipeline Fund has a six member Board, of 
which four members are Non-Interested Directors.
    4. Independence Fund was organized as a Maryland corporation for 
the purpose of operating as an externally-managed, non-diversified, 
closed-end management investment company. Independence Fund is a 
registered investment company under the Act. Independence Fund has 
elected to be treated, and intends to comply with the requirements to 
continue to qualify annually, as a RIC under the Code, and intends to 
continue to make such election in the future. Independence Fund's 
Objectives and Strategies are to seek a high level of total return with 
an emphasis on current distributions primarily through investments in 
North American energy companies that engage in the exploration and 
production of crude oil, condensate, natural gas and natural gas 
liquids that generally have a strong presence in North American oil and 
gas reservoirs, including shale, and, to a lesser extent, on companies 
that provide associated transportation, processing, storage, servicing 
and equipment. Independence Fund has a six member Board, of which four 
members are Non-Interested Directors.
    5. Power Fund was organized as a Maryland corporation for the 
purpose of operating as an externally-managed, non-diversified, closed-
end management investment company. Power Fund is a registered 
investment company under the Act. Power Fund has elected to be treated, 
and intends to comply with the requirements to continue to qualify 
annually, as a RIC under the Code, and intends to continue to make such 
election in the future. Power Fund's Objectives and Strategies are to 
seek a high level of current income, with a secondary objective of 
capital appreciation primarily through investments in income-producing 
fixed income and equity securities issued by power and energy 
infrastructure companies. Power Fund has a six member Board, of which 
four members are Non-Interested Directors.
    6. Income Fund was organized as a Maryland corporation for the 
purpose of operating as an externally-managed, non-diversified, closed-
end management investment company. Income Fund is a registered 
investment company under the Act. Income Fund has elected to be 
treated, and intends to comply with the requirements to continue to 
qualify annually, as a RIC under the Code, and intends to continue to 
make such election in the future. Income Fund's Objectives and 
Strategies are to seek a high level of current income, with a secondary 
objective of capital appreciation primarily through investments in 
corporate debt securities, and private investments. Income Fund has a 
six member Board, of which four members are Non-Interested Directors.
    7. Social Infrastructure Fund was organized as a Maryland 
corporation for the purpose of operating as an externally-managed, non-
diversified, closed-end management investment company. Social 
Infrastructure Fund is a registered investment company under the Act. 
Social Infrastructure Fund has elected to be treated, and intends to 
comply with the requirements to continue to qualify annually, as a RIC 
under the Code, and intends to continue to make such election in the 
future. Social Infrastructure Fund's Objectives and Strategies are to 
seek a high level of total return with an emphasis on tax-advantaged 
income primarily through investments in the social infrastructure 
sector. Social Infrastructure Fund has a four member Board, of which 
three members are Non-Interested Directors.
    8. Each of the Existing Affiliated Funds was organized as a 
Delaware limited partnership and would be an investment company but for 
section 3(c)(7) of the Act. Each Existing Affiliated Fund has 
investment objectives and policies that are similar to those of the 
Existing Regulated Funds.
    9. Tortoise Advisors is a Delaware limited liability company and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (the ``Advisers Act''). Tortoise Advisors is wholly-owned by 
Tortoise Investments, LLC. Lovell Minnick Partners LLC (``Lovell 
Minnick'') owns a majority interest in Tortoise Investments, LLC 
(``Tortoise''). An entity formed by Lovell Minnick owned by certain 
private funds sponsored by Lovell Minnick and a group of institutional 
co-investors owns a controlling interest in Tortoise. Certain employees 
in the Tortoise complex also own interests in Tortoise. Tortoise 
Advisors serves as investment adviser to Energy Infrastructure Corp., 
MLP Fund, Pipeline Fund, Independence Fund, Power Fund, DO Fund, and DO 
Fund II.
    10. The Existing Affiliated Adviser is a Delaware limited liability 
company and is registered as an investment adviser under the Advisers 
Act. The Existing Affiliated Adviser is privately held and is an 
affiliate of, and under common control with, Tortoise Advisors. The 
Existing Affiliated Adviser serves as investment adviser to Income 
Fund, Social Infrastructure Fund, and Municipal Fund.
    11. 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 sections 17(d) and 
57(a)(4) and rule 17d-1 by (a) co-investing with each other in 
securities issued by issuers in private placement transactions in which 
an Adviser negotiates terms in addition to price; \6\ and (b) making 
additional investments in securities of such issuers, including through 
the exercise of warrants, conversion privileges, and other rights to 
purchase securities of the issuers (``Follow-On Investments''). ``Co-
Investment Transaction'' means any transaction in which a Regulated 
Fund (or its Wholly-Owned Investment Sub, as defined below) 
participated together with one or more other Regulated Funds and/or one 
or more 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) 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 the Existing Regulated Funds and 
any Future Regulated Fund. ``Future Regulated Fund'' means any 
closed-end management investment company (a) that is registered 
under the Act or has elected to be regulated as a BDC, (b) whose 
investment adviser is an Adviser, and (c) that intends to 
participate in the Co-Investment Program. The term ``Adviser'' means 
(a) Tortoise Advisors, (b) the Existing Affiliated Adviser, and (c) 
any future investment adviser that is controlled by Tortoise 
Advisors and is registered under the Advisers Act.
    \5\ ``Affiliated Fund'' means (a) the Existing Affiliated Funds 
and (b) any Future Affiliated Fund. ``Future Affiliated Fund'' means 
any entity (a) whose investment adviser is an Adviser, (b) that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act, and (c) that intends to participate in the Co-Investment 
Program.
    \6\ The term ``private placement transactions'' means 
transactions in which the offer and sale of securities by the issuer 
are exempt from registration under the Securities Act.
    \7\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    12. Applicants state that a Regulated Fund may, from time to time, 
form a Wholly-Owned Investment Sub.\8\ Such a

[[Page 43717]]

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 section 3(c)(1) or 3(c)(7) of 
the Act. Any future subsidiaries of the Regulated Funds that 
participate in Co-Investment Transactions will be Wholly-Owned 
Investment Subs.
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    13. 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 (``Available Capital''), and other 
pertinent factors applicable to that Regulated Fund. The 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. The 
Regulated Funds, however, will not be obligated to invest, or co-
invest, when investment opportunities are referred to them.
    14. 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'') \9\ will approve each 
Co-Investment Transaction prior to any investment by the participating 
Regulated Fund.
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    \9\ 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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    15. 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.
    16. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than 
indirectly through share ownership in one of the Regulated Funds.
    17. Under condition 14, if an Adviser or its principal owners (the 
``Principals''), or any person controlling, controlled by, or under 
common control with an Adviser or the 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 directed by an 
independent third party when voting on matters specified in the 
condition. Applicants believe that this condition will ensure that the 
Non-Interested Directors will act independently in evaluating the Co-
Investment Program, because the ability of an Adviser 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 party, taking 
into account its qualifications, reputation for independence, cost to 
the shareholders, and other factors that they deem relevant.
    Applicants' Legal Analysis:
    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Funds that are 
registered closed-end investment companies. Similarly, with regard to 
BDCs, section 57(a)(4) of the Act generally prohibits certain persons 
specified in section 57(b) from participating in joint transactions 
with the BDC or a company controlled by the BDC in contravention of 
rules as prescribed by the Commission. Section 57(i) of the Act 
provides that, until the Commission prescribes rules under section 
57(a)(4), the Commission's rules under section 17(d) of the Act 
applicable to registered closed-end investment companies will be deemed 
to apply to transactions subject to section 57(a)(4). Because the 
Commission has not adopted any rules under section 57(a)(4), rule 17d-1 
also applies to joint transactions with Regulated Funds that are BDCs.
    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 Tortoise Advisors and the Existing 
Affiliated Adviser may be deemed to control the Existing Regulated 
Funds and the Existing Affiliated Funds, respectively, and any other 
Adviser will be controlling, controlled by, or under common control 
with Tortoise Advisors.

[[Page 43718]]

As a result, the Regulated Funds may be deemed to be under common 
control, and thus affiliated persons of each other under section 
2(a)(3)(C) of the Act. In addition, the Affiliated Funds may be deemed 
to be under common control with the Regulated Funds, and thus 
affiliated persons of each Regulated Fund under section 2(a)(3)(C) of 
the Act. As a result, these relationships might cause a Regulated Fund 
and one or more other Regulated Funds and/or one or more Affiliated 
Funds participating in Co-Investment Transactions to be subject to 
section 17(d) or 57(a)(4) of the Act, and thus subject to the 
provisions of rule 17d-1 of the Act.
    4. Applicants state that in the absence of the requested relief, in 
some circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants believe that the proposed terms and 
conditions of the application 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 would be done in 
a manner that is not different from, or less advantageous than, that of 
other participants.
Applicants' Conditions:
    Applicants agree that the Order will be subject to the following 
conditions:
    1. 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 participant's Available Capital, 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 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 the 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 Section 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,\10\

[[Page 43719]]

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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    \10\ 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 the applicable Regulated Fund in the Follow-On 
Investment, 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, then the investment opportunity will be allocated among 
them pro rata based on each participant's Available Capital, up to the 
maximum amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Funds or 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 \11\ (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

[[Page 43720]]

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.
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    \11\ Applicants are not requesting and the staff of the 
Commission is not providing any relief for transaction fees received 
in connection with any Co-Investment Transaction.
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    14. If the Holders own in the aggregate more than 25% of the 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.
    15. Each Regulated Fund's chief compliance officer, as defined in 
rule 38a-1(a)(4), will prepare an annual report for its Board that 
evaluates (and documents the basis of that evaluation) the Regulated 
Fund's compliance with the terms and conditions of the application and 
the procedures established to achieve such compliance.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18427 Filed 8-24-18; 8:45 am]
 BILLING CODE 8011-01-P