Document ID: SEC-2021-1783-0001
Agency: sec
Document Type: Notice
Title: Application: Neuberger Berman BDC LLC, et al.
Posted Date: 2021-12-22T05:00Z

[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Notices]
[Pages 72658-72667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27697]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34443; File No. 812-15124]

Neuberger Berman BDC LLC, et al.

December 16, 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 and accounts.

Applicants:  Neuberger Berman BDC LLC (``NBBDC''); NB Private Markets 
Fund II (Master) LLC (``NB Private Markets II''); NB Private Markets 
Fund III (Master) LLC (``NB Private Markets III''); NB Crossroads 
Private Markets Fund IV Holdings LLC (``NB Private Markets IV''); NB 
Crossroads Private Markets Fund V Holdings LP (``NB Private Markets 
V''); NB Crossroads Private Markets Fund VI Holdings LP (``NB Private 
Markets VI''); NB Crossroads Private Markets Fund VII Holdings LP (``NB 
Private Markets VII''); NB Crossroads Private Markets Access Fund LLC 
(``NB Private Markets Access'' and, together with NB Private Markets 
II, NB Private Markets III, NB Private Markets IV, NB Private Markets 
V, NB Private Markets VI, and NB Private Markets VII, the ``Existing 
Regulated Funds''); NB Alternatives Advisers LLC (``NBAA''); Neuberger 
Berman Investment Advisers LLC (``NBIA''); Columbia NB Crossroads Fund 
II LP; Golden Road Capital Pooling L.P.; MEP Opportunities Fund 
Holdings LP; NB--Iowa's Public Universities LP; NB 1 PE Investment 
Holdings LP; NB 1911 LP; NB AGI PE Portfolio II Fund LP; NB ASGA Fund 
Holdings LP; NB AYAME Holdings LP; NB Blue Ensign Fund LP; NB Caspian 
Holdings LP; NB CPEG Fund Holdings LP; NB Credit Opportunities Co-
Invest Affordable Care I LP; NB Credit Opportunities Co-Invest I LP; NB 
Credit Opportunities Fund II LP; NB Credit Opportunities II Cayman LP; 
NB Credit Opportunities II Co-Investment Fund (Cayman) LP; NB Credit 
Opportunities II Co-Investment (Whistler) LP; NB Crossroads 23 LC 
Holdings LP; NB Crossroads 23 MC Holdings LP; NB Crossroads 23 SS 
Holdings LP; NB Crossroads 23 VC Holdings LP; NB Crossroads 24 LC 
Holdings LP; NB Crossroads 24 MC Holdings LP; NB Crossroads 24 SS 
Holdings LP; NB Crossroads 24 VC Holdings LP; NB Crossroads XXII--MC 
Holdings LP; NB Crossroads XXII--VC Holdings LP; NB Crystal PE Holdings 
LP; NB Enhanced Income Holdings LP; NB Enstar PE Opportunities Fund, 
LP; NB Euro Crossroads 2018 Holdings SCSP; NB Euro Crossroads 2021 
Holdings SCSP; NB Flamingo Private Debt LP; NB Flat Corner PE Holdings 
LP; NB Gemini Fund LP; NB Granite Private Debt LP; NB Greencastle LP; 
NB Initium Infrastructure (Eur) Holdings LP; NB Initium Infrastructure 
(USD) Holdings LP; NB Initium PE (Eur) Holdings LP; NB Initium PE (USD) 
Holdings LP; NB K-P Loan Partners LP; NB Oak LP; NB PA Co-Investment 
Fund LP; NB PD III Holdings (LO) LP; NB PD III Holdings (LS) LP; NB PD 
III Holdings (UO) LP; NB PD III Holdings (US) LP; NB PD IV Equity LP; 
NB PD IV Holdings (LO-A) LP; NB PD IV Holdings (LS-A) LP; NB PD IV 
Holdings (US-A) (Levered) LP; NB PD IV Holdings (US-B) (Unlevered) LP; 
NB PD IV Holdings (UO-A) LP; NB PEP Holdings Limited; NB Pinnacol 
Assurance Fund LP; NB Private Debt Fund LP; NB Private Debt II Holdings 
LP; NB Private Equity Credit Opportunities Holdings LP; NB Private 
Package LP; NB Rembrandt Holdings 2018 LP; NB Rembrandt Holdings 2020 
LP; NB Rembrandt Holdings 2022 LP; NB Renaissance Partners Holdings S.A 
R.L.; NB RESOF Holdings LP; NB RESOF II Cayman Holdings LP; NB RESOF II 
Holdings LP; NB Resof SP1 LP; NB RP Co-Investment & Secondary Fund LLC; 
NB RPPE Partners LP; NB SBS US 3 Fund LP; NB Select Opps III MHF LP; NB 
Select Opps IV MHF LP; NB Select Opps V MHF LP; NB SHP Fund Holdings 
LP; NB Si-Apollo Sengai Fund Holdings LP; NB SOF III Holdings LP; NB 
SOF IV Cayman Holdings LP; NB SOF IV Holdings LP; NB SOF V Cayman 
Holdings LP; NB SOF V Holdings LP; NB Sonoran Fund Limited Partnership; 
NB Star Buyout Strategy 2020 Holdings Ltd; NB Star Buyout Strategy 2021 
Holdings Ltd; NB Strategic Capital LP; NB Strategic Co-Investment 
Partners IV Holdings LP; NB TCC Strategic Holdings LP; NB Wildcats Fund 
LP; NB ZCF LP; NBAL Holdings LP; NBFOF Impact--Holdings LP; NBPD III 
Equity Co-Invest Holdings A LP; NB-Sompo RA Holdings LP; Neub Holdings 
LP; Neub Infrastructure Holdings LP; Neuberger Berman/New Jersey Custom 
Investment Fund III LP; NYC-Northbound Emerging Managers Program LP; 
NYSCRF NB Co-Investment Fund LLC; NYSCRF NB Co-Investment Fund II LLC; 
Olive Cayman Holdings Ltd; PECO-PD III Borrower LP; SJFED Private 
Equity Strategic Partnership, L.P.; SJPF Private Equity Strategic 
Partnership, L.P.; Soleil 2020 Cayman

[[Page 72659]]

Holdings Ltd; Sunberg PE Opportunities Fund LLC; Sunbern Alternative 
Opportunities Fund LLC; and Toranomon Private Equity 1, L.P.

DATES: The application was filed on April 17, 2020, and amended on 
September 11, 2020, January 22, 2021, August 6, 2021, and November 18, 
2021.

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 [email protected] 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 January 10, 2022, and should be 
accompanied by proof of service on the 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 emailing the Commission's Secretary at [email protected].

ADDRESSES: The Commission: [email protected]. Applicants: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at 
(202) 551-6773 or Terri G. Jordan, 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.

Introduction

    1. The applicants request an order of the Commission under sections 
17(d) and 57(i) and rule 17d-1 thereunder (the ``Order'') to permit, 
subject to the terms and conditions set forth in the application (the 
``Conditions''), a Regulated Fund \1\ and one or more other Regulated 
Funds and/or one or more Affiliated Funds \2\ to enter into Co-
Investment Transactions with each other. ``Co-Investment Transaction'' 
means any transaction in which a Regulated Fund (or its Wholly-Owned 
Investment Sub) participated together with one or more Regulated Funds 
and/or one or more Affiliated Funds in reliance on the Order. 
``Potential Co-Investment Transaction'' means any investment 
opportunity in which a Regulated Fund (or its Wholly-Owned Investment 
Sub) could not participate together with one or more other Regulated 
Funds and/or one or more Affiliated Funds without obtaining and relying 
on the Order.\3\
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    \1\ ``Regulated Funds'' means NBBDC, any Existing Regulated Fund 
and any Future Regulated Fund. ``Future Regulated Fund'' means a 
closed-end management investment company formed in the future (a) 
that is registered under the Act or has elected to be regulated as a 
BDC, (b) whose investment adviser (and sub-adviser, if any) is an 
Adviser, and (c) that intends to participate in the Co-investment 
Program. ``Adviser'' means NBAA and NBIA, together with any future 
investment adviser that (i) controls, is controlled by or is under 
common control with NBAA or NBIA, as applicable, (ii) is registered 
as an investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''), and (iii) is not a Regulated Fund or a 
subsidiary of a Regulated Fund.
    \2\ ``Affiliated Fund'' means the Existing Affiliated Funds 
(identified in Appendix A to the application), the Existing NB 
Proprietary Accounts (as defined below), any Future NB Proprietary 
Account, and any entity formed in the future (a) whose investment 
adviser (and sub-adviser, if any) is an Adviser, (b) that either (i) 
would be an investment company but for section 3(c)(1), 3(c)(5)(C) 
or 3(c)(7) of the Act or (ii) relies on rule 3a-7 under the Act, and 
(c) that intends to participate in the Co-Investment Program. 
``Future NB Proprietary Account'' means any direct or indirect, 
wholly- or majority-owned subsidiary of NBAA, or any other Adviser, 
formed in the future that, from time to time, may hold various 
financial assets in a principal capacity. Affiliated Funds may 
include funds that are ultimately structured as collateralized loan 
obligation funds (``CLOs''). Such CLOs would be investment companies 
but for the exception provided in section 3(c)(7) of the Act or 
their ability to rely on rule 3a-7 of the Act. During the investment 
period of a CLO, the CLO may engage in certain transactions 
customary in CLO formations with another Affiliated Fund on a 
secondary basis at fair market value. For purposes of the Order, any 
securities that were acquired by an Affiliated Fund in a particular 
Co-Investment Transaction (as defined below) that are then 
transferred in such customary transactions to an Affiliated Fund 
that is or will become a CLO (an ``Affiliated Fund CLO'') will be 
treated as if the Affiliated Fund CLO acquired such securities in 
the Co-Investment Transaction. For the avoidance of doubt, any such 
transfer from an Affiliated Fund to an Affiliated Fund CLO will be 
treated as a Disposition and completed pursuant to terms and 
conditions of the Application, though Applicants note that the 
Regulated Funds would be prohibited from participating in such 
Disposition by Section 17(a)(2) or Section 57(a)(2) of the Act, as 
applicable. The participation by any Affiliated Fund CLO in any such 
Co-Investment Transaction will remain subject to the Order.
    \3\ All existing entities that currently intend to rely on the 
Order have been named as applicants and any existing or future 
entities that may rely on the Order in the future will comply with 
the terms and Conditions set forth in the application.
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Applicants

    2. NBBDC was organized as a Maryland limited liability company and 
prior to relying on the relief requested in the application will file 
an election to be regulated as a BDC under the Act.\4\ Following the 
election to be regulated as a BDC, NBBDC will be a closed-end 
management investment company. NBBDC intends to have a Board,\5\ a 
majority of which will be Independent Directors.\6\ The Board will 
approve NBAA to serve as investment adviser to NBBDC prior to the 
commencement of NBBDC's operations and the reliance by NBBDC on the 
relief requested in the application.
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    \4\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in section 55(a)(1) through 
55(a)(3) and makes available significant managerial assistance with 
respect to the issuers of such securities.
    \5\ ``Board'' means with respect to a Regulated Fund, the board 
of directors (or the equivalent) of the Regulated Fund.
    \6\ ``Independent Director'' means a member of the Board of any 
relevant entity who is not an ``interested person'' as defined in 
section 2(a)(19) of the Act. No Independent Director of a Regulated 
Fund will have a financial interest in any Co-Investment 
Transaction, other than indirectly through share ownership in one of 
the Regulated Funds.
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    3. NB Private Markets II was organized as a Delaware limited 
liability company and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets II has six 
members, each of whom is an Independent Director.
    4. NB Private Markets III was organized as a Delaware limited 
liability company and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets III has six 
members, each of whom is an Independent Director.
    5. NB Private Markets IV was organized as a Delaware limited 
liability company and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets IV has six 
members, each of whom is an Independent Director.
    6. NB Private Markets V was organized as a Delaware limited 
partnership and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets V has six 
members, each of whom is an Independent Director.
    7. NB Private Markets VI was organized as a Delaware limited 
partnership and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets VI has six 
members, each of whom is an Independent Director.

[[Page 72660]]

    8. NB Private Markets VII was organized as a Delaware limited 
partnership and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets VII has six 
members, each of whom is an Independent Director.
    9. NB Private Markets Access was organized as a Delaware limited 
liability company and is a closed-end management investment company 
registered under the Act. The Board of NB Private Markets Access has 
six members, each of whom is an Independent Director.
    10. NBAA, a Delaware limited liability company that is registered 
under the Advisers Act: (i) Is investment adviser to the Existing 
Affiliated Funds; (ii) will serve as investment adviser to NBBDC at the 
time NBBDC relies on the order requested in the application; and (iii) 
is sub-investment adviser to the Existing Regulated Funds. NBIA, a 
Delaware limited liability company that is registered as an investment 
adviser under the Advisers Act, serves as investment adviser to the 
Existing Regulated Funds and may serve as investment adviser to Future 
Regulated Funds. NBAA, and its direct and indirect wholly-owned 
subsidiaries, from time to time may hold various financial assets in a 
principal capacity (the ``Existing NB Proprietary Accounts'' and 
together with any Future NB Proprietary Account, the ``NB Proprietary 
Accounts'').
    11. The Existing Affiliated Funds are the investment funds 
identified in Appendix A to the application. Applicants represent that 
each Existing Affiliated Fund is a separate and distinct legal entity 
and each would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act.
    12. Each of the applicants may be deemed to be controlled by 
Neuberger Berman Group LLC (``NBG''). NBG owns controlling interests in 
the Advisers and, thus, may be deemed to control the Regulated Funds 
and the Affiliated Funds. Applicants state that NBG does not currently 
offer investment advisory services to any person and is not expected to 
do so in the future. Applicants state that as a result, NBG has not 
been included as an applicant. NBG's voting equity is owned by NBSH 
Acquisition, LLC (``NBSH''). NBSH is owned by current and former NBG 
employees, directors, consultants and, in certain instances, their 
permitted transferees.
    13. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\7\ Such a subsidiary may 
be prohibited from investing in a Co-Investment Transaction with a 
Regulated Fund (other than its parent) or any Affiliated Fund because 
it would be a company controlled by its parent Regulated 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 the Regulated Fund that owns it and 
that the Wholly-Owned Investment Sub's participation in any such 
transaction be treated, for purposes of the Order, as though the parent 
Regulated Fund were participating directly. Applicants represent that 
this treatment is justified because a Wholly-Owned Investment Sub would 
have no purpose other than serving as a holding vehicle for the 
Regulated Fund's investments and, therefore, no conflicts of interest 
could arise between the parent Regulated Fund and the Wholly-Owned 
Investment Sub. The Board of the parent Regulated Fund would make all 
relevant determinations under the Conditions with regard to a Wholly-
Owned Investment Sub's participation in a Co-Investment Transaction, 
and the Board would be informed of, and take into consideration, any 
proposed use of a Wholly-Owned Investment Sub in the Regulated Fund's 
place. If the parent Regulated Fund proposes to participate in the same 
Co-Investment Transaction with any of its Wholly-Owned Investment Subs, 
the Board of the parent Regulated Fund will also be informed of, and 
take into consideration, the relative participation of the Regulated 
Fund and the Wholly-Owned Investment Sub.
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    \7\ ``Wholly-Owned Investment Sub'' means an entity (i) that is 
wholly-owned by NBBDC, an Existing Regulated Fund or a Future 
Regulated Fund (with such Regulated Fund at all times holding, 
beneficially and of record, 100% of the voting and economic 
interests); (ii) whose sole business purpose is to hold one or more 
investments on behalf of such Regulated Fund; (iii) with respect to 
which such Regulated Fund's Board has the sole authority to make all 
determinations with respect to the entity's participation under the 
Conditions; and (iv) that would be an investment company but for 
section 3(c)(1) or 3(c)(7) of the Act.
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Applicants' Representations

A. Allocation Process

    14. Applicants state that NBAA maintains relationships with more 
than 540 private equity firms across a diverse range of geographies, 
enterprise value sizes, industries and transaction types, and this 
broad coverage of the private equity space generates a significant 
volume of investment opportunities. Applicants state that, as a result, 
the Advisers must determine how to allocate those opportunities in a 
manner that is, over time, fair and equitable to all of their clients. 
Such investment opportunities may be Potential Co-Investment 
Transactions.
    15. Applicants represent that the Advisers have established, and 
any future Advisers will establish, processes for allocating initial 
investment opportunities, opportunities for subsequent investments in 
an issuer and dispositions of securities holdings reasonably designed 
to treat all clients fairly and equitably over time. Further, 
applicants represent that these processes will be extended and modified 
in a manner reasonably designed to ensure that the additional 
transactions permitted under the Order will both (i) be fair and 
equitable to the Regulated Funds and the Affiliated Funds and (ii) 
comply with the Conditions.
    16. Specifically, applicants state that the Advisers are organized 
and managed such that investment committees (``Investment Committees'') 
responsible for evaluating investment opportunities and making 
investment decisions on behalf of Regulated Funds and other clients 
employing similar strategies are promptly notified of the 
opportunities. If the requested Order is granted, the Advisers will 
establish, maintain and implement policies and procedures reasonably 
designed to ensure that, when such opportunities arise, the Advisers to 
the relevant Regulated Funds are promptly notified and receive the same 
information about the opportunity as any other Advisers considering the 
opportunity for their clients. In particular, consistent with Condition 
1, if a Potential Co-Investment Transaction falls within the then-
current Objectives and Strategies \8\ and any Board-Established 
Criteria \9\ of a

[[Page 72661]]

Regulated Fund, the policies and procedures will require that the 
Adviser to such Regulated Fund receives sufficient information to allow 
such Adviser's Investment Committee to make its independent 
determination and recommendations under the Conditions.
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    \8\ ``Objectives and Strategies'' means with respect to any 
Regulated Fund, its investment objectives and strategies, as 
described in its most current registration statement on Form N-2, 
other current filings with the Commission under the Securities Act 
of 1933 (the ``Securities Act'') or under the Securities Exchange 
Act of 1934, as amended, and its most current report to 
stockholders.
    \9\ ``Board-Established Criteria'' means criteria that the Board 
of a Regulated Fund may establish from time to time to describe the 
characteristics of Potential Co-Investment Transactions regarding 
which the Adviser to the Regulated Fund should be notified under 
Condition 1. The Board-Established Criteria will be consistent with 
the Regulated Fund's Objectives and Strategies. If no Board-
Established Criteria are in effect, then the Regulated Fund's 
Adviser will be notified of all Potential Co-Investment Transactions 
that fall within the Regulated Fund's then-current Objectives and 
Strategies. Board-Established Criteria will be objective and 
testable, meaning that they will be based on observable information, 
such as industry/sector of the issuer, minimum EBITDA of the issuer, 
asset class of the investment opportunity or required commitment 
size, and not on characteristics that involve a discretionary 
assessment. The Adviser to the Regulated Fund may from time to time 
recommend criteria for the Board's consideration, but Board-
Established Criteria will only become effective if approved by a 
majority of the Independent Directors. The Independent Directors of 
a Regulated Fund may at any time rescind, suspend or qualify their 
approval of any Board-Established Criteria, although applicants 
anticipate that, under normal circumstances, a Board would not 
modify these criteria more often than quarterly.
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    17. The Adviser to each applicable Regulated Fund will then make an 
independent determination of the appropriateness of the investment for 
the Regulated Fund in light of the Regulated Fund's then-current 
circumstances. If the Adviser to a Regulated Fund deems the Regulated 
Fund's participation in such Potential Co-Investment Transaction to be 
appropriate, then it will formulate a recommendation regarding the 
proposed order amount for the Regulated Fund.
    18. Applicants state that, for each Regulated Fund and Affiliated 
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, the applicable Investment Committee will 
approve the investment and the investment amount. Prior to the External 
Submission (as defined below), each proposed order or investment amount 
may be reviewed and adjusted, in accordance with the applicable 
Advisers' written allocation policies and procedures, by the Advisers' 
Investment Committee.\10\ The order of a Regulated Fund or Affiliated 
Fund resulting from this process is referred to as its ``Internal 
Order.'' The Internal Order will be submitted for approval by the 
Required Majority of any participating Regulated Funds in accordance 
with the Conditions.\11\
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    \10\ The reason for any such adjustment to a proposed order will 
be documented in writing and preserved in the records of each 
Adviser.
    \11\ ``Required Majority'' means a ``required majority'' as 
defined in section 57(o) of the Act. In the case of a Regulated Fund 
that is a registered closed-end fund, the Board members that make up 
the Required Majority will be determined as if the Regulated Fund 
were a BDC subject to section 57(o).
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    19. Applicants acknowledge that some of the Affiliated Funds may 
not be funds advised by Advisers to Affiliated Funds \12\ because they 
are NB Proprietary Accounts. Applicants do not believe participation by 
these NB Proprietary Accounts should raise issues under the Conditions 
because the allocation policies and procedures of the Advisers provide 
that investment opportunities are offered to client accounts before 
they are offered to NB Proprietary Accounts.
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    \12\ ``Advisers to Affiliated Funds'' means NBAA, NBIA and any 
other Adviser that, in the future, serves as investment adviser (or 
sub-adviser, if any) to one or more Affiliated Funds.
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    20. If the aggregate Internal Orders for a Potential Co-Investment 
Transaction do not exceed the size of the investment opportunity 
immediately prior to the submission of the orders to the underwriter, 
broker, dealer or issuer, as applicable (the ``External Submission''), 
then each Internal Order will be fulfilled as placed and to the extent 
there is excess amount available to invest, the NB Proprietary Accounts 
will be permitted to invest. If, on the other hand, the aggregate 
Internal Orders for a Potential Co-Investment Transaction exceed the 
size of the investment opportunity immediately prior to the External 
Submission, then the allocation of the opportunity will be made pro 
rata on the basis of the size of the Internal Orders and the NB 
Proprietary Accounts will not be permitted to invest.\13\ If, 
subsequent to such External Submission, the size of the opportunity is 
increased or decreased, or if the terms of such opportunity, or the 
facts and circumstances applicable to the Regulated Funds' or the 
Affiliated Funds' consideration of the opportunity, change, the 
participants will be permitted to submit revised Internal Orders in 
accordance with written allocation policies and procedures that the 
Advisers will establish, implement and maintain.\14\
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    \13\ The Advisers will maintain records of all proposed order 
amounts, Internal Orders and External Submissions in conjunction 
with Potential Co-Investment Transactions. Each applicable Adviser 
will provide the Eligible Directors with information concerning the 
Affiliated Funds' and Regulated Funds' order sizes to assist the 
Eligible Directors with their review of the applicable Regulated 
Fund's investments for compliance with the Conditions. ``Eligible 
Directors'' means, with respect to a Regulated Fund and a Potential 
Co-Investment Transaction, the members of the Regulated Fund's Board 
eligible to vote on that Potential Co-Investment Transaction under 
section 57(o) of the Act.
    \14\ However, if the size of the opportunity is decreased such 
that the aggregate of the original Internal Orders would exceed the 
amount of the remaining investment opportunity, then upon submitting 
any revised order amount to the Board of a Regulated Fund for 
approval, the Adviser to the Regulated Fund will also notify the 
Board promptly of the amount that the Regulated Fund would receive 
if the remaining investment opportunity were allocated pro rata on 
the basis of the size of the original Internal Orders. The Board of 
the Regulated Fund will then either approve or disapprove of the 
investment opportunity in accordance with Condition 2, 6, 7, 8 or 9, 
as applicable.
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B. Follow-On Investments

    21. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\15\ in an issuer in which a Regulated Fund and one or more other 
Regulated Funds and/or Affiliated Funds previously have invested.
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    \15\ ``Follow-On Investment'' means an additional investment in 
the same issuer, including, but not limited to, through the exercise 
of warrants, conversion privileges or other rights to purchase 
securities of the issuer.
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    22. Applicants propose that Follow-On Investments would be divided 
into two categories depending on whether the prior investment was a Co-
Investment Transaction or a Pre-Boarding Investment.\16\ If the 
Regulated Funds and Affiliated Funds had previously participated in a 
Co-Investment Transaction with respect to the issuer, then the terms 
and approval of the Follow-On Investment would be subject to the 
Standard Review Follow-Ons described in Condition 8. If the Regulated 
Funds and Affiliated Funds have not previously participated in a Co-
Investment Transaction with respect to the issuer but hold a Pre-
Boarding Investment, then the terms and approval of the Follow-On 
Investment would be subject to the Enhanced-Review Follow-Ons described 
in Condition 9. All Enhanced Review Follow-Ons require the approval of 
the Required Majority. For a given issuer, the participating Regulated 
Funds and Affiliated Funds must comply with the requirements of 
Enhanced-Review Follow-Ons only for the first Co-Investment 
Transaction. Subsequent Co-Investment Transactions with respect to the 
issuer would be governed by the requirements of Standard Review Follow-
Ons.
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    \16\ ``Pre-Boarding Investments'' are investments in an issuer 
held by a Regulated Fund as well as one or more other Regulated 
Funds and/or one or more Affiliated Funds that were acquired prior 
to participating in any Co-Investment Transaction in: (i) 
Transactions in which the only term negotiated by or on behalf of 
such funds was price in reliance on one of the JT No-Action Letters 
(defined below); or (ii) transactions occurring at least 90 days 
apart and without coordination between the Regulated Fund and any 
Affiliated Fund or other Regulated Fund.
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    23. A Regulated Fund would be permitted to invest in a Standard 
Review Follow-On either with the approval of the Required Majority 
under Condition 8(c) or without obtaining the prior approval of the 
Required Majority if the Standard Review Follow-On is (i) a Pro Rata 
Follow-On Investment \17\ and

[[Page 72662]]

meets the other requirements of Condition 8(b)(i) or (ii) a Non-
Negotiated Follow-On Investment.\18\ Applicants believe that these Pro 
Rata Follow-On Investments and Non-Negotiated Follow-On Investments do 
not present a significant opportunity for overreaching on the part of 
any Adviser and thus do not warrant the time or attention of the Board. 
Pro Rata Follow-On Investments and Non-Negotiated Follow-On Investments 
remain subject to the Board's periodic review in accordance with 
Condition 10.
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    \17\ A ``Pro Rata Follow-On Investment'' is a Follow-On 
Investment in which (i) the participation of each Regulated Fund and 
each Affiliated Fund is proportionate to its outstanding investments 
in the issuer or security, as appropriate, immediately preceding the 
Follow-On Investment, and (ii), in the case of a Regulated Fund, a 
majority of such fund's Board has approved the Regulated Fund's 
participation in the pro rata Follow-On Investment as being in the 
best interests of the Regulated Fund. The Regulated Fund's Board may 
refuse to approve, or at any time rescind, suspend or qualify, its 
approval of Pro Rata Follow-On Investments, in which case all 
subsequent Follow-On Investments will be submitted to the Regulated 
Fund's Eligible Directors in accordance with Condition 8(c).
    \18\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On 
Investment in which a Regulated Fund participates together with one 
or more other Regulated Funds and/or one or more Affiliated Funds 
(i) in which the only term negotiated by or on behalf of the funds 
is price and (ii) with respect to which, if the transaction were 
considered on its own, the funds would be entitled to rely on one of 
the JT No-Action Letters. ``JT No-Action Letters'' means SMC 
Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and 
Massachusetts Mutual Life Insurance Company, SEC No-Action Letter 
(pub. avail. June 7, 2000).
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C. Dispositions

    24. Applicants propose that Dispositions \19\ would be divided into 
two categories. If the Regulated Funds and Affiliated Funds holding 
investments in an issuer had previously participated in a Co-Investment 
Transaction with respect to the issuer, then the terms and approval of 
the Disposition would be subject to the Standard Review Dispositions 
described in Condition 6. If the Regulated Funds and Affiliated Funds 
have not previously participated in a Co-Investment Transaction with 
respect to the issuer but hold a Pre-Boarding Investment, then the 
terms and approval of the Disposition would be subject to the Enhanced 
Review Dispositions described in Condition 7. Subsequent Dispositions 
with respect to the same issuer would be governed by Condition 6 under 
the Standard Review Dispositions.\20\
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    \19\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \20\ However, with respect to an issuer, if a Regulated Fund's 
first Co-Investment Transaction is an Enhanced Review Disposition 
and the Regulated Fund does not dispose of its entire position in 
the Enhanced Review Disposition, then before such Regulated Fund may 
complete its first Standard Review Follow-On in such issuer, the 
Eligible Directors must review the proposed Follow-On Investment not 
only on a stand-alone basis but also in relation to the total 
economic exposure in such issuer (i.e., in combination with the 
portion of the Pre-Boarding Investment not disposed of in the 
Enhanced Review Disposition) and the other terms of the investments. 
This additional review would be required because such findings would 
not have been required in connection with the prior Enhanced Review 
Disposition, but would have been required had the first Co-
Investment Transaction been an Enhanced Review Follow-On.
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    25. A Regulated Fund may participate in a Standard Review 
Disposition either with the approval of the Required Majority under 
Condition 6(d) or without obtaining the prior approval of the Required 
Majority if (i) the Disposition is a Pro Rata Disposition \21\ and 
meets the other requirements of Condition 6(c)(i); or (ii) the 
securities are Tradable Securities \22\ and the Disposition meets the 
other requirements of Condition 6(c)(ii). Pro Rata Dispositions and 
Dispositions of a Tradable Security remain subject to the Board's 
periodic review in accordance with Condition 10.
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    \21\ A ``Pro Rata Disposition'' is a Disposition in which (i) 
the participation of each Regulated Fund and each Affiliated Fund is 
proportionate to its outstanding investment in the security subject 
to Disposition immediately preceding the Disposition; and (ii) in 
the case of a Regulated Fund, a majority of the Board has approved 
the Regulated Fund's participation in pro rata Dispositions as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Dispositions, in which case all 
subsequent Dispositions will be submitted to the Regulated Fund's 
Eligible Directors.
    \22\ ``Tradable Security'' means a security that at the time of 
Disposition: (i) Trades on a national securities exchange or 
designated offshore securities market as defined in rule 902(b) 
under the Securities Act; (ii) is not subject to restrictive 
agreements with the issuer or other security holders; and (iii) 
trades with sufficient volume and liquidity (findings as to which 
are documented by the Advisers to any Regulated Funds holding 
investments in the issuer and retained for the life of the Regulated 
Fund) to allow each Regulated Fund to dispose of its entire position 
remaining after the proposed Disposition within a short period of 
time not exceeding 30 days at approximately the value (as defined by 
section 2(a)(41) of the Act) at which the Regulated Fund has valued 
the investment.
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D. Delayed Settlement

    26. Applicants represent that under the terms and Conditions of the 
application, all Regulated Funds and Affiliated Funds participating in 
a Co-Investment Transaction will invest at the same time, for the same 
price and with the same terms, conditions, class, registration rights 
and any other rights, so that no such fund receives terms more 
favorable than any other. However, the settlement date for an 
Affiliated Fund in a Co-Investment Transaction may occur up to ten 
business days after the settlement date for the Regulated Fund, and 
vice versa.\23\ Nevertheless, in all cases, (i) the date on which the 
commitment of the Regulated Funds and Affiliated Funds is made will be 
the same even where the settlement date is not and (ii) the earliest 
settlement date and the latest settlement date of any Regulated Fund 
and Affiliated Fund participating in the transaction will occur within 
ten business days of each other.
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    \23\ Applicants state this may occur for two reasons. First, 
when the Regulated Fund or Affiliated Fund is not yet fully funded 
because, when the Regulated Fund or Affiliated Fund desires to make 
an investment, it must call capital from its investors to obtain the 
financing to make the investment, and in these instances, the notice 
requirement to call capital could be as much as ten business days. 
Second, where, for tax or regulatory reasons, a Regulated Fund or an 
Affiliated Fund does not purchase new issuances immediately upon 
issuance but only after a short seasoning period of up to ten 
business days.
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E. Holders

    27. Under Condition 15, if an Adviser, its principals, or any 
person controlling, controlled by, or under common control with the 
Adviser or its principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Fund (the ``Shares''), then 
the Holders will vote such Shares in the same percentages as the 
Regulated Fund's other shareholders (not including the Holders).

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Funds that are 
registered closed-end investment companies.
    2. Similarly, with regard to BDCs, section 57(a)(4) of the Act 
generally prohibits certain persons specified in section 57(b) from 
participating in joint transactions with the BDC or a company 
controlled by the BDC in contravention of rules as prescribed by the 
Commission. Section 57(i) of the Act provides that, until the 
Commission prescribes rules under section 57(a)(4), the Commission's 
rules under section 17(d) of the Act applicable to registered closed-
end investment companies will be deemed to apply to transactions 
subject to section 57(a)(4). Because the Commission has not adopted any 
rules under section 57(a)(4), rule 17d-1 also

[[Page 72663]]

applies to joint transactions with Regulated Funds that are BDCs.
    3. Co-Investment Transactions are prohibited by either or both of 
rule 17d-1 and section 57(a)(4) without a prior exemptive order of the 
Commission to the extent that the Regulated Funds and Affiliated Funds 
participating in such transactions fall within the category of persons 
described by rule 17d-1 and/or section 57(b), as applicable, vis-
[agrave]-vis each participating Regulated Fund. Each of the 
participating Regulated Funds and Affiliated Funds may be deemed to be 
``affiliated persons'' vis-[agrave]-vis a Regulated Fund within the 
meaning of section 2(a)(3) of the Act by reason of common control 
because (i) the NBAA manages, and may be deemed to control, each of the 
Existing Affiliated Funds and any other Affiliated Fund will be managed 
by, and may be deemed to be controlled by, an Adviser to Affiliated 
Funds; (ii) at the time that NBBDC relies on the order requested in the 
application, NBAA will serve as investment adviser to NBBDC and may be 
deemed to control NBBDC; (iii) NBIA and NBAA currently serve as 
investment adviser and sub-adviser, respectively, to and may be deemed 
to control the Existing Regulated Funds, and an Adviser to Regulated 
Funds \24\ will be the investment adviser (and sub-adviser, if any) to, 
and may be deemed to control, any Future Regulated Fund; and (iv) the 
Advisers to Regulated Funds and the Advisers to Affiliated Funds will 
be under common control. Thus, each of the Affiliated Funds could be 
deemed to be a person related to the Regulated Funds in a manner 
described by section 57(b) and related to the other Regulated Funds in 
a manner described by rule 17d-1; and therefore, the prohibitions of 
rule 17d-1 and section 57(a)(4) would apply respectively to prohibit 
the Affiliated Funds from participating in Co-Investment Transactions 
with the Regulated Funds. In addition, because the NB Proprietary 
Accounts are controlled by NBAA and, therefore, under common control 
with NBBDC, the Existing Regulated Funds, any future Advisers, and any 
Future Regulated Funds, the NB Proprietary Accounts could be deemed to 
be persons related to the Regulated Funds (or a company controlled by 
the Regulated Funds) in a manner described by section 57(b) and also 
prohibited from participating in the Co-Investment Program.
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    \24\ ``Advisers to Regulated Funds'' means NBAA and NBIA, with 
respect to their management of NBBDC and the Existing Regulated 
Funds, and any other Adviser that, in the future, serves as 
investment adviser (or sub-adviser, if any) to one or more Regulated 
Funds.
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    4. In passing upon applications under rule 17d-1, the Commission 
considers whether the company's participation in the joint transaction 
is consistent with the provisions, policies, and purposes of the Act 
and the extent to which such participation is on a basis different from 
or less advantageous than that of other participants.
    5. Applicants state that in the absence of the requested relief, in 
many circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants state that, as required by rule 17d-1(b), the 
Conditions ensure that the terms on which Co-Investment Transactions 
may be made will be consistent with the participation of the Regulated 
Funds and on a basis that it is neither different from nor less 
advantageous than other participants, thus protecting the equity 
holders of any participant from being disadvantaged. Applicants further 
state that the Conditions ensure that all Co-Investment Transactions 
are reasonable and fair to the Regulated Funds and their stockholders 
and do not involve overreaching by any person concerned, including the 
Advisers. Applicants state that the Regulated Funds' participation in 
the Co-Investment Transactions in accordance with the Conditions will 
be consistent with the provisions, policies, and purposes of the Act 
and would be done in a manner such that each Regulated Fund's 
participation is not different from, or less advantageous than, that of 
the other participants.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
Conditions:
    1. Identification and Referral of Potential Co-Investment 
Transactions.
    (a) The Advisers will establish, maintain and implement policies 
and procedures reasonably designed to ensure that each Adviser is 
promptly notified of all Potential Co-Investment Transactions that fall 
within the then-current Objectives and Strategies and Board-Established 
Criteria of any Regulated Fund the Adviser manages.
    (b) When an Adviser to a Regulated Fund is notified of a Potential 
Co-Investment Transaction under Condition 1(a), the Adviser will make 
an independent determination of the appropriateness of the investment 
for the Regulated Fund in light of the Regulated Fund's then-current 
circumstances.
    2. Board Approvals of Co-Investment Transactions.
    (a) If the Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, it will then determine an appropriate level of investment for the 
Regulated Fund.
    (b) If the aggregate amount recommended by the Advisers to be 
invested in the Potential Co-Investment Transaction by the 
participating Regulated Funds and any participating Affiliated Funds, 
collectively, exceeds the amount of the investment opportunity, the 
investment opportunity will be allocated among them pro rata based on 
the size of the Internal Orders, as described in section III.1.a.ii. of 
the application. Each Adviser to a participating Regulated Fund will 
promptly notify and provide the Eligible Directors with information 
concerning the Affiliated Funds' and Regulated Funds' order sizes to 
assist the Eligible Directors with their review of the applicable 
Regulated Fund's investments for compliance with these Conditions.
    (c) After making the determinations required in Condition 1(b), 
each Adviser to a participating Regulated Fund will distribute written 
information concerning the Potential Co-Investment Transaction 
(including the amount proposed to be invested by each participating 
Regulated Fund and each participating Affiliated Fund) to the Eligible 
Directors of its participating Regulated Fund(s) for their 
consideration. A Regulated Fund will enter into a Co-Investment 
Transaction with one or more other Regulated Funds or Affiliated Funds 
only if, prior to the Regulated Fund's participation in the Potential 
Co-Investment Transaction, a Required Majority concludes that:
    (i) The terms of the transaction, including the consideration to be 
paid, are reasonable and fair to the Regulated Fund and its equity 
holders and do not involve overreaching in respect of the Regulated 
Fund or its equity holders on the part of any person concerned;
    (ii) The transaction is consistent with:
    (A) The interests of the Regulated Fund's equity holders; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Fund(s) or Affiliated 
Fund(s) would not disadvantage the Regulated Fund, and participation by 
the Regulated Fund would not be on a basis different from, or less 
advantageous than, that of any other Regulated Fund(s) or Affiliated 
Fund(s) participating in the transaction; provided, that the Required 
Majority shall not be prohibited from reaching

[[Page 72664]]

the conclusions required by this Condition 2(c)(iii) if:
    (A) The settlement date for another Regulated Fund or an Affiliated 
Fund in a Co-Investment Transaction is later than the settlement date 
for the Regulated Fund by no more than ten business days or earlier 
than the settlement date for the Regulated Fund by no more than ten 
business days, in either case, so long as: (x) The date on which the 
commitment of the Regulated Funds and Affiliated Funds is made is the 
same and (y) the earliest settlement date and the latest settlement 
date of any Regulated Fund or Affiliated Fund participating in the 
transaction will occur within ten business days of each other; or
    (B) any other Regulated Fund or Affiliated Fund, but not the 
Regulated Fund itself, gains the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
a board observer or any similar right to participate in the governance 
or management of the portfolio company so long as: (x) The Eligible 
Directors will have the right to ratify the selection of such director 
or board observer, if any; (y) the Adviser agrees to, and does, provide 
periodic reports to the Regulated Fund's Board with respect to the 
actions of such director or the information received by such board 
observer or obtained through the exercise of any similar right to 
participate in the governance or management of the portfolio company; 
and (z) any fees or other compensation that any other Regulated Fund or 
Affiliated Fund, or any affiliated person of any other Regulated Fund 
or Affiliated Fund, receives in connection with the right of one or 
more Regulated Funds or Affiliated Funds to nominate a director or 
appoint a board observer or otherwise to participate in the governance 
or management of the portfolio company will be shared proportionately 
among any participating Affiliated Funds (who may, in turn, share their 
portion with their affiliated persons) and any participating Regulated 
Fund(s) in accordance with the amount of each such party's investment; 
and
    (iv) the proposed investment by the Regulated Fund will not involve 
compensation, remuneration or a direct or indirect \25\ financial 
benefit to the Advisers, any other Regulated Fund, the Affiliated Funds 
or any affiliated person of any of them (other than the parties to the 
Co-Investment Transaction), except (A) to the extent permitted by 
Condition 14, (B) to the extent permitted by section 17(e) or 57(k), as 
applicable, (C) indirectly, as a result of an interest in the 
securities issued by one of the parties to the Co-Investment 
Transaction or (D) in the case of fees or other compensation described 
in Condition 2(c)(iii)(B).
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    \25\ For example, procuring the Regulated Fund's investment in a 
Potential Co-Investment Transaction to permit an affiliate to 
complete or obtain better terms in a separate transaction would 
constitute an indirect financial benefit.
---------------------------------------------------------------------------

    3. Right to Decline. Each Regulated Fund has the right to decline 
to participate in any Potential Co-Investment Transaction or to invest 
less than the amount proposed.
    4. General Limitation. Except for Follow-On Investments made in 
accordance with Conditions 8 and 9,\26\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\27\
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    \26\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which such Regulated Fund already holds 
investments.
    \27\ ``Related Party'' means (i) any Close Affiliate and (ii) in 
respect of matters as to which any Adviser has knowledge, any Remote 
Affiliate. ``Close Affiliate'' means the Advisers, the Regulated 
Funds, the Affiliated Funds and any other person described in 
section 57(b) (after giving effect to rule 57b-1) in respect of any 
Regulated Fund (treating any registered investment company or series 
thereof as a BDC for this purpose), except for limited partners 
included solely by reason of the reference in section 57(b) to 
section 2(a)(3)(D). ``Remote Affiliate'' means any person described 
in section 57(e) in respect of any Regulated Fund (treating any 
registered investment company or series thereof as a BDC for this 
purpose) and any limited partner holding 5% or more of the relevant 
limited partner interests that would be a Close Affiliate but for 
the exclusion in the definition of such term.
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    5. Same Terms and Conditions. A Regulated Fund will not participate 
in any Potential Co-Investment Transaction unless (i) the terms, 
conditions, price, class of securities to be purchased, date on which 
the commitment is entered into and registration rights (if any) will be 
the same for each participating Regulated Fund and Affiliated Fund and 
(ii) the earliest settlement date and the latest settlement date of any 
participating Regulated Fund or Affiliated Fund will occur as close in 
time as practicable and in no event more than ten business days apart. 
The grant to one or more Regulated Funds or Affiliated Funds, but not 
the respective Regulated Fund, of the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
an observer on the board of directors or similar rights to participate 
in the governance or management of the portfolio company will not be 
interpreted so as to violate this Condition 5, if Condition 
2(c)(iii)(B) is met.
    6. Standard Review Dispositions.
    (a) General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of an interest in a security and 
one or more Regulated Funds and Affiliated Funds have previously 
participated in a Co-Investment Transaction with respect to the issuer, 
then:
    (i) The Adviser to such Regulated Fund or Affiliated Fund \28\ will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition at the earliest practical time; and
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    \28\ Any NB Proprietary Account that is not advised by an 
Adviser is itself deemed to be an Adviser for purposes of Conditions 
6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i).
---------------------------------------------------------------------------

    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to participation by such 
Regulated Fund in the Disposition.
    (b) Same Terms and Conditions. Each Regulated Fund will have the 
right to participate in such Disposition on a proportionate basis, at 
the same price and on the same terms and conditions as those applicable 
to any other Regulated Fund and the Affiliated Funds.
    (c) No Board Approval Required. A Regulated Fund may participate in 
such a Disposition without obtaining prior approval of the Required 
Majority if:
    (i) (A) The participation of each Regulated Fund and Affiliated 
Fund in such Disposition is proportionate to its then-current holding 
of the security (or securities) of the issuer that is (or are) the 
subject of the Disposition; \29\ (B) the Board of the Regulated Fund 
has approved as being in the best interests of the Regulated Fund the 
ability to participate in such Dispositions on a pro rata basis (as 
described in greater detail in the application); and (C) the Board of 
the Regulated Fund is provided on a quarterly basis with a list of all 
Dispositions made in accordance with this Condition 6; or
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    \29\ In the case of any Disposition, proportionality will be 
measured by each participating Regulated Fund's and Affiliated 
Fund's outstanding investment in the security in question 
immediately preceding the Disposition.
---------------------------------------------------------------------------

    (ii) each security is a Tradable Security and (A) the Disposition 
is not to the issuer or any affiliated person of the issuer; and (B) 
the security is sold for cash in a transaction in which the only term 
negotiated by or on behalf of the participating Regulated Funds and 
Affiliated Funds is price.
    (d) Standard Board Approval. In all other cases, the Adviser will 
provide its written recommendation as to the Regulated Fund's 
participation to the

[[Page 72665]]

Eligible Directors, and the Regulated Fund will participate in such 
Disposition solely to the extent that a Required Majority determines 
that it is in the Regulated Fund's best interests.
    7. Enhanced Review Dispositions.
    (a) General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a 
Potential Co-Investment Transaction and the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer:
    (i) The Adviser to such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to participation by such 
Regulated Fund in the Disposition; and
    (iii) the Advisers will provide to the Board of each Regulated Fund 
that holds an investment in the issuer all information relating to the 
existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition 7.
    (b) Enhanced Board Approval. The Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Disposition 
solely to the extent that a Required Majority determines that:
    (i) The Disposition complies with Conditions 2(c)(i), (ii), 
(iii)(A) and (iv); and
    (ii) the making and holding of the Pre-Boarding Investments were 
not prohibited by section 57 or rule 17d-1, as applicable, and records 
the basis for the finding in the Board minutes.
    (c) Additional Requirements. The Disposition may only be completed 
in reliance on the Order if:
    (i) Same Terms and Conditions. Each Regulated Fund has the right to 
participate in such Disposition on a proportionate basis, at the same 
price and on the same terms and Conditions as those applicable to any 
other Regulated Fund and the Affiliated Funds;
    (ii) Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (iii) Advice of Counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iv) Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial \30\ in 
amount, including immaterial relative to the size of the issuer; and 
(y) the Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency or denominations may be treated as the same security; and
---------------------------------------------------------------------------

    \30\ In determining whether a holding is ``immaterial'' for 
purposes of the Order, the Required Majority will consider whether 
the nature and extent of the interest in the transaction or 
arrangement is sufficiently small that a reasonable person would not 
believe that the interest affected the determination of whether to 
enter into the transaction or arrangement or the terms of the 
transaction or arrangement.
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    (v) No Control. The Affiliated Funds, the other Regulated Funds and 
their ``affiliated persons'' (within the meaning of section 2(a)(3)(C) 
of the Act), individually or in the aggregate, do not ``control'' the 
issuer of the securities (within the meaning of section 2(a)(9) of the 
Act).
    8. Standard Review Follow-Ons.
    (a) General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer and the Regulated Funds and 
Affiliated Funds holding investments in the issuer previously 
participated in a Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time; and
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund.
    (b) No Board Approval Required. A Regulated Fund may participate in 
the Follow-On Investment without obtaining prior approval of the 
Required Majority if:
    (i) (A) The proposed participation of each Regulated Fund and each 
Affiliated Fund in such investment is proportionate to its outstanding 
investments in the issuer or the security at issue, as appropriate,\31\ 
immediately preceding the Follow-On Investment; and (B) the Board of 
the Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in Follow-On Investments on a 
pro rata basis (as described in greater detail in the application); or
---------------------------------------------------------------------------

    \31\ To the extent that a Follow-On Investment opportunity is in 
a security or arises in respect of a security held by the 
participating Regulated Funds and Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the security in question 
immediately preceding the Follow-On Investment using the most recent 
available valuation thereof. To the extent that a Follow-On 
Investment opportunity relates to an opportunity to invest in a 
security that is not in respect of any security held by any of the 
participating Regulated Funds or Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the issuer immediately 
preceding the Follow-On Investment using the most recent available 
valuation thereof.
---------------------------------------------------------------------------

    (ii) it is a Non-Negotiated Follow-On Investment.
    (c) Standard Board Approval. In all other cases, the Adviser will 
provide its written recommendation as to the Regulated Fund's 
participation to the Eligible Directors, and the Regulated Fund will 
participate in such Follow-On Investment solely to the extent that a 
Required Majority makes the determinations set forth in Condition 2(c). 
If the only previous Co-Investment Transaction with respect to the 
issuer was an Enhanced Review Disposition, the Eligible Directors must 
complete this review of the proposed Follow-On Investment both on a 
stand-alone basis and together with the Pre-Boarding Investments in 
relation to the total economic exposure and other terms of the 
investment.
    (d) Allocation. If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii) the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment

[[Page 72666]]

by the participating Regulated Funds and any participating Affiliated 
Funds, collectively, exceeds the amount of the investment opportunity, 
then the Follow-On Investment opportunity will be allocated among them 
pro rata based on the size of the Internal Orders, as described in 
section III.1.a.ii of the application.
    (e) Other Conditions. The acquisition of Follow-On Investments as 
permitted by this Condition 8 will be considered a Co-Investment 
Transaction for all purposes and subject to the other Conditions set 
forth in the application.
    9. Enhanced Review Follow-Ons.
    (a) General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer that is a Potential Co-
Investment Transaction and the Regulated Funds and Affiliated Funds 
holding investments in the issuer have not previously participated in a 
Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund; and
    (iii) the Advisers will provide to the Board of each Regulated Fund 
that holds an investment in the issuer all information relating to the 
existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition 9.
    (b) Enhanced Board Approval. The Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Follow-On 
Investment solely to the extent that a Required Majority reviews the 
proposed Follow-On Investment both on a stand-alone basis and together 
with the Pre-Boarding Investments in relation to the total economic 
exposure and other terms and makes the determinations set forth in 
Condition 2(c). In addition, the Follow-On Investment may only be 
completed in reliance on the Order if the Required Majority of each 
participating Regulated Fund determines that the making and holding of 
the Pre-Boarding Investments were not prohibited by section 57 (as 
modified by rule 57b-1) or rule 17d-1, as applicable. The basis for the 
Board's findings will be recorded in its minutes.
    (c) Additional Requirements. The Follow-On Investment may only be 
completed in reliance on the Order if:
    (i) Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (ii) Advice of Counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iii) Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial in amount, 
including immaterial relative to the size of the issuer; and (y) the 
Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency or denominations may be treated as the same security; and
    (iv) No Control. The Affiliated Funds, the other Regulated Funds 
and their ``affiliated persons'' (within the meaning of section 
2(a)(3)(C) of the Act), individually or in the aggregate, do not 
``control'' the issuer of the securities (within the meaning of section 
2(a)(9) of the Act).
    (d) Allocation. If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii) the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.1.a.ii of the 
application.
    (e) Other Conditions. The acquisition of Follow-On Investments as 
permitted by this Condition will be considered a Co-Investment 
Transaction for all purposes and subject to the other Conditions set 
forth in the application.
    10. Board Reporting, Compliance and Annual Re-Approval.
    (a) Each Adviser to a Regulated Fund will present to the Board of 
each Regulated Fund, on a quarterly basis, and at such other times as 
the Board may request, (i) a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Funds or any 
of the Affiliated Funds during the preceding quarter that fell within 
the Regulated Fund's then-current Objectives and Strategies and Board-
Established Criteria that were not made available to the Regulated Fund 
and an explanation of why such investment opportunities were not made 
available to the Regulated Fund; (ii) a record of all Follow-On 
Investments in and Dispositions of investments in any issuer in which 
the Regulated Fund holds any investments by any Affiliated Fund or 
other Regulated Fund during the prior quarter; and (iii) all 
information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by other Regulated 
Funds or Affiliated Funds that the Regulated Fund considered but 
declined to participate in, so that the Independent Directors may 
determine whether all Potential Co-Investment Transactions and Co-
Investment Transactions during the preceding quarter, including those 
investments that the Regulated Fund considered but declined to 
participate in, comply with the Conditions.
    (b) All information presented to the Regulated Fund's Board 
pursuant to this Condition 10 will be kept for the life of the 
Regulated Fund and at least two years thereafter and will be subject to 
examination by the Commission and its staff.
    (c) Each Regulated Fund's chief compliance officer, as defined in 
rule 38a-1(a)(4), will prepare an annual report for its Board each year 
that evaluates (and documents the basis of that evaluation) the 
Regulated Fund's compliance with the terms and Conditions of the 
application and the procedures established to achieve such compliance.

[[Page 72667]]

    (d) The Independent Directors will consider at least annually 
whether continued participation in new and existing Co-Investment 
Transactions is in the Regulated Fund's best interests.
    11. Record Keeping. Each Regulated Fund will maintain the records 
required by section 57(f)(3) of the Act as if each of the Regulated 
Funds were a BDC and each of the investments permitted under these 
Conditions were approved by the Required Majority under section 57(f).
    12. Director Independence. No Independent Director of a Regulated 
Fund will also be a director, general partner, managing member or 
principal, or otherwise be an ``affiliated person'' (as defined in 
section 2(a)(3) of the Act) of any Affiliated Fund.
    13. Expenses. The expenses, if any, associated with acquiring, 
holding or disposing of any securities acquired in a Co-Investment 
Transaction (including, without limitation, the expenses of the 
distribution of any such securities registered for sale under the 
Securities Act) will, to the extent not payable by the Advisers under 
their respective advisory agreements with the Regulated Funds and the 
Affiliated Funds, be shared by the Regulated Funds and the 
participating Affiliated Funds in proportion to the relative amounts of 
the securities held or being acquired or disposed of, as the case may 
be.
    14. Transaction Fees.\32\ Any transaction fee (including break-up, 
structuring, monitoring or commitment fees but excluding brokerage or 
underwriting compensation permitted by section 17(e) or 57(k)) received 
in connection with any Co-Investment Transaction will be distributed to 
the participants on a pro rata basis based on the amounts they invested 
or committed, as the case may be, in such Co-Investment Transaction. If 
any transaction fee is to be held by an Adviser pending consummation of 
the transaction, the fee will be deposited into an account maintained 
by the Adviser at a bank or banks having the qualifications prescribed 
in section 26(a)(1), and the account will earn a competitive rate of 
interest that will also be divided pro rata among the participants. 
None of the Advisers, the Affiliated Funds, the other Regulated Funds 
or any affiliated person of the Affiliated Funds or the Regulated Funds 
will receive any additional compensation or remuneration of any kind as 
a result of or in connection with a Co-Investment Transaction other 
than (i), in the case of the Regulated Funds and the Affiliated Funds, 
the pro rata transaction fees described above and fees or other 
compensation described in Condition 2(c)(iii)(B), (ii) brokerage or 
underwriting compensation permitted by section 17(e) or 57(k) or (iii), 
in the case of the Advisers, investment advisory compensation paid in 
accordance with investment advisory agreements between the applicable 
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
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    \32\ Applicants are not requesting, and the Commission is not 
providing, any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    15. Independence. 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.
    16. Proprietary Accounts. The NB Proprietary Accounts will not be 
permitted to invest in a Potential Co-Investment Transaction except to 
the extent the aggregate demand from the Regulated Funds and the other 
Affiliated Funds is less than the total investment opportunity.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27697 Filed 12-21-21; 8:45 am]
BILLING CODE P