[Federal Register Volume 86, Number 38 (Monday, March 1, 2021)]
[Notices]
[Pages 12040-12045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04075]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34202; 812-15120]


Star Mountain Credit Opportunities Fund, LP, et al.

February 23, 2021.
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 (``BDCs'') and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with certain affiliated investment funds.

Applicants:  Star Mountain Credit Opportunities Fund, LP (the 
``Fund''); Star Mountain Fund Management, LLC (the ``BDC Adviser), on 
behalf of itself and its successors; \1\ Star Mountain Diversified 
Small Business Access Fund II, LP, Star Mountain Diversified Small 
Business Access Fund II-A, LP, Star Mountain Diversified Credit Income 
Fund III, LP, Star Mountain--PA Small Business Co-Investment Platform, 
LP, Star Mountain--PA Small Business Co-Investment Platform II, LP, 
Star Mountain--PA Holdings I, LTD, Star Mount U.S. Lower Middle-Market 
Secondary Fund II, LP and Star Mountain SBIC Fund, LP (collectively, 
the ``Existing Affiliated Funds'').
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    \1\ The term ``successor'', as applied to each Adviser (as 
defined below), 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 3, 2020 and amended 
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on July 29, 2020 and November 25, 2020.

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 emailing the Commission's 
Secretary at <a href="/cdn-cgi/l/email-protection#2c7f494f5e49584d5e555f01634a4a454f496c5f494f024b435a"><span class="__cf_email__" data-cfemail="fba89e98899e8f9a898288d6b49d9d92989ebb889e98d59c948d">[email protected]</span></a> and serving applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on March 22, 2021, 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-

[[Page 12041]]

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 emailing the Commission's Secretary at <a href="/cdn-cgi/l/email-protection#f5a6909687908194878c86d8ba93939c9690b5869096db929a83"><span class="__cf_email__" data-cfemail="30635553425544514249431d7f5656595355704355531e575f46">[email protected]</span></a>.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 
<a href="/cdn-cgi/l/email-protection#8ddee8eeffe8f9ecfff4fea0c2ebebe4eee8cdfee8eea3eae2fb"><span class="__cf_email__" data-cfemail="3d6e585e4f58495c4f444e10725b5b545e587d4e585e135a524b">[email protected]</span></a>. Applicants: 
<a href="/cdn-cgi/l/email-protection#0a4962786379244d6367686f787e4a797e6b7867657f647e6b6364696b7a637e6b6624696567"><span class="__cf_email__" data-cfemail="aeedc6dcc7dd80e9c7c3cccbdcdaeedddacfdcc3c1dbc0dacfc7c0cdcfdec7dacfc280cdc1c3">[email protected]</span></a> and <a href="/cdn-cgi/l/email-protection#0c5e656f646d7e682264637e637b6578764c68696f64697e78226f6361"><span class="__cf_email__" data-cfemail="c597aca6ada4b7a1ebadaab7aab2acb1bf85a1a0a6ada0b7b1eba6aaa8">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990 or Trace W. Rakestraw, Branch Chief, at (202) 551-
6825 (Division of Investment Management, Chief Counsel's Office).

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. The Fund is a Delaware limited partnership that will convert to 
a Delaware corporation that is a non-diversified, closed-end management 
investment company and intends to elect to be regulated as a business 
development company (``BDC'') under section 54(a) of the Act.\2\ The 
Fund's investment objective is to create a diversified and current 
yielding portfolio composed primarily of senior and subordinated loans 
with equity upside investments in the U.S. small and medium-sized 
business (``SMBs'') market segment. The Fund invests primarily in 
privately negotiated loans and equity investments to SMBs generally 
with annual revenues greater than $15 million and earnings before 
interest, taxes, depreciation and amortization of less than $50 
million. The Fund generates revenues primarily through receipt of 
interest income from the investments it holds. The board of directors 
(the ``Board'') \3\ of the Fund will be comprised of five directors, 
three of whom are not ``interested persons,'' within the meaning of 
section 2(a)(19) of the Act (``Non-Interested Directors''). Prior to 
relying on the requested Order, the Fund will have filed an election to 
be regulated as a BDC under the Act.
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    \2\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \3\ The term ``Board'' refers to the board of directors of any 
Regulated Fund.
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    2. The BDC Adviser is a limited liability company organized under 
the laws of the State of Delaware and is registered with the Commission 
under the Investment Advisers Act of 1940 (the ``Advisers Act''). The 
BDC Adviser serves as the investment adviser to the Fund and each of 
the Existing Affiliated Funds.
    3. The Existing Affiliated Funds pursue strategies focused on 
investing in senior and subordinated loans with equity upside 
investments in U.S. small and medium-sized businesses. Each Existing 
Affiliated Fund is an entity whose investment adviser is the BDC 
Adviser and that would be an investment company but for section 3(c)(1) 
or 3(c)(7) of the Act.
    4. Applicants seek an order (``Order'') to permit a Regulated Fund 
\4\ and one or more other Regulated Funds 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 17(d) 
and/or section 57(a)(4) and rule 17d-1 by (a) co-investing with each 
other in securities issued by issuers in private placement transactions 
in which an Adviser negotiates terms in addition to price; \6\ and (b) 
making additional investments in securities of such issuers, including 
through the exercise of warrants, conversion privileges, and other 
rights to purchase securities of the issuers (``Follow-On 
Investments''). ``Co-Investment Transaction'' means any transaction in 
which a Regulated Fund (or its Wholly-Owned Investment Sub, as defined 
below) participates 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 Fund 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 BDC, (b) whose investment adviser is an 
Adviser, and (c) that intends to participate in the Co-Investment 
Program. The term ``Adviser'' means the BDC Adviser and any future 
investment adviser that (i) controls, is controlled by, or is under 
common control with the BDC Adviser and (ii) is registered as an 
investment adviser under the Advisers Act.
    \5\ ``Affiliated Fund'' means the Existing Affiliated Funds and 
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 of 1933 (the 
``Securities Act'').
    \7\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    5. Applicants state that any of the Regulated Funds may, from time 
to time, form a Wholly-Owned Investment Sub.\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) of the Act and rule 17d-1 under the Act. 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 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

[[Page 12042]]

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 percent 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. All subsidiaries participating in Co-Investment 
Transactions will be Wholly-Owned Investment Subs and will have 
Objectives and Strategies (as defined below) that are either the 
same as, or a subset of, their parent Regulated Fund's Objectives 
and Strategies.
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    6. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the applicable Adviser will consider only the 
Objectives and Strategies,\9\ investment policies, investment 
positions, capital available for investment,\10\ and other pertinent 
factors applicable to that Regulated Fund. The Regulated Fund's Adviser 
expects 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 capital available for investment or 
diversification. The Board of each Regulated Fund, including the Non-
Interested Directors, has determined, or will have determined, that it 
is in the best interests of the Regulated Fund to participate in Co-
Investment Transactions.\11\
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    \9\ ``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, or under the Securities Exchange Act of 1934, and the Regulated 
Fund's reports to shareholders.
    \10\ The amount of each Regulated Fund's capital available for 
investment will be determined based on the amount of cash on hand, 
existing commitments and reserves, if any, the targeted leverage 
level, targeted asset mix and other investment policies and 
restrictions set from time to time by the Board of the applicable 
Regulated Fund or imposed by applicable laws, rules, regulations or 
interpretations.
    \11\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
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    7. Other than pro rata dispositions and Follow-On Investments as 
provided in conditions 7 and 8, and after making the determinations 
required in conditions 1 and 2(a), the Adviser will present each 
Potential Co-Investment Transaction and the proposed allocation to the 
directors of the Board eligible to vote on that Co-Investment 
Transaction under section 57(o) of the Act (``Eligible Directors''), 
and the required majority of such directors of the Board, as defined in 
section 57(o) of the Act (``Required Majority'') \12\ will approve each 
Co-Investment Transaction prior to any investment by the participating 
Regulated Fund.
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    \12\ In the case of a Regulated Fund that is a registered 
closed-end fund, the Board members that make up the Required 
Majority will be determined as if the Regulated Fund were a BDC 
subject to section 57(o).
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    8. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and 
Affiliated Fund in such disposition or Follow-On Investment 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.
    9. 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.
    10. If the Advisers, their principal owners (the ``Principals''), 
or any person controlling, controlled by, or under common control with 
the Advisers or the Principals, and the Affiliated Funds (collectively, 
the ``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Fund (the ``Shares''), then 
the Holders will vote such Shares as required under condition 14.

Applicants' Legal Analysis

    1. 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.
    2. Similarly, with regard to BDCs, section 57(a)(4) of the Act 
generally prohibits certain persons specified in section 57(b) from 
participating in joint transactions with the BDC or a company 
controlled by the BDC in contravention of rules as prescribed by the 
Commission. Section 57(i) of the Act provides that, until the 
Commission prescribes rules under section 57(a)(4), the Commission's 
rules under section 17(d) of the Act applicable to registered closed-
end investment companies will be deemed to apply to transactions 
subject to section 57(a)(4). Because the Commission has not adopted any 
rules under section 57(a)(4), rule 17d-1 also applies to joint 
transactions with Regulated Funds that are BDCs.
    3. 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 set forth in the application ensure that the proposed 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 believe that the 
participation of the Regulated Funds in the Co-Investment Transactions 
done in accordance with the proposed terms and conditions would be 
consistent with the provisions, policies, and purposes of the Act and 
would be done in a manner that was not different from, or less 
advantageous than, the other participants.

Applicants' Conditions

    Applicants agree that the Order shall 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

[[Page 12043]]

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 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 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 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,\13\ 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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    \13\ 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 any other Regulated Fund.
    (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

[[Page 12044]]

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 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 party's capital available for investment in the 
asset class to be allocated, up to the amount proposed to be invested 
by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Funds and 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 which 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 \14\ (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.
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    \14\ Applicants are not requesting and the staff is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    14. If the Holders own in the aggregate more than 25 percent of the 
Shares of a Regulated Fund, then the Holders will vote such Shares in 
the same percentages as the Regulated Fund's other shareholders (not 
including the Holders) 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) under the Act, will prepare an annual report for its 
Board each year that evaluates (and documents the basis of that 
evaluation) the Regulated Fund's compliance with the terms and 
conditions of the application and the procedures established to achieve 
such compliance.

[[Page 12045]]

    For the Commission, by the Division of Investment Management, under 
delegated authority.

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04075 Filed 2-26-21; 8:45 am]
BILLING CODE 8011-01-P


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