Prospect Capital Corporation, et al.; Notice of Application, 3256-3260 [2014-00822]
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those program activities, systems,
procedures, and management activities
that can contribute to program risk.
Priority is given to those programs that
involve the safety of human flight. The
agenda will include:
• Updates on the Exploration Systems
Development
• Updates on the Commercial Crew
Program
• Updates on the International Space
Station Program
The meeting will be open to the
public up to the seating capacity of the
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including the presentation of a valid
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badge. Any member of the public
desiring to attend the ASAP 2014 First
Quarterly Meeting at the Johnson Space
Center must provide their full name and
company affiliation (if applicable) to
Ms. Marian Norris at mnorris@nasa.gov
by January 15, 2014. Foreign Nationals
attending the meeting will be required
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January 7, 2014: Full name; gender;
date/place of birth; citizenship; visa
information (number, type, expiration
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during the first 10 minutes of the
meeting.
At the beginning of the meeting,
members of the public may make a
verbal presentation to the Panel on the
subject of safety in NASA, not to exceed
5-minutes in length. To do so, members
of the public must contact Ms. Marian
Norris at mnorris@nasa.gov or at (202)
358–4452 at least 48 hours in advance.
Any member of the public is permitted
to file a written statement with the
Panel at the time of the meeting. Verbal
presentations and written comments
should be limited to the subject of safety
in NASA. It is imperative that the
meeting be held on this date to
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accommodate the scheduling priorities
of the key participants.
Patricia D. Rausch,
Advisory Committee Management Officer,
National Aeronautics and Space
Administration.
[FR Doc. 2014–00823 Filed 1–16–14; 8:45 am]
BILLING CODE 7510–13–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–30855; File No. 812–14199]
Prospect Capital Corporation, et al.;
Notice of Application
January 13, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 17(d) and 57(i) of
the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
AGENCY:
Summary of Application:
Applicants request an order to permit a
business development company
(‘‘BDC’’) and certain closed-end
management investment companies to
co-invest in portfolio companies with
each other and with affiliated
investment funds.
APPLICANTS: Prospect Capital
Corporation (‘‘PSEC’’), Priority Senior
Secured Income Fund, Inc. (‘‘PRIS’’),
Pathway Energy Infrastructure Fund,
Inc. (‘‘PWAY’’), Prospect Capital
Funding LLC (‘‘PSEC SPV Sub’’),
Prospect Capital Management LLC
(‘‘PCM’’) on behalf of itself and its
successors,1 Priority Senior Secured
Income Management, LLC (‘‘PRISM’’) on
behalf of itself and its successors, and
Pathway Energy Infrastructure
Management, LLC (‘‘PEIM’’) on behalf of
itself and its successors.
DATES: Filing Dates: The application
was filed on August 9, 2013, and
amended on December 4, 2013.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
SUMMARY:
1 The term ‘‘successor,’’ as applied to each
Adviser, means an entity that results from a
reorganization into another jurisdiction or change
in the type of business organization.
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by 5:30 p.m. on February 7, 2014, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Elizabeth M. Murphy,
Secretary, U.S. Securities and Exchange
Commission, 100 F St. NE., Washington,
DC 20549–1090. Applicants: 10 East
40th St., 44th Floor, New York, NY
10016.
FOR FURTHER INFORMATION CONTACT:
David J. Marcinkus, Senior Counsel, at
(202) 551–6882 or David P. Bartels,
Branch Chief, at (202) 551–6821 (Chief
Counsel’s Office, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. PSEC is a Maryland corporation
organized as a closed-end management
investment company that has elected to
be regulated as a BDC under Section
54(a) of the Act.2 PSEC’s Objectives and
Strategies 3 are to generate both current
income and long-term capital
appreciation through debt and equity
investments. PSEC invests primarily in
first and second lien senior loans and
mezzanine debt, which in some cases
are accompanied by an equity
component, and also acquires equity
control of companies. A majority of the
directors of each of the Regulated Funds
is or will be persons who are not
‘‘interested persons’’ as defined in
section 2(a)(19) of the Act (‘‘NonInterested Directors’’). The board of
directors (‘‘Board’’) of PSEC is
comprised of five directors, three of
2 Section 2(a)(48) defines a BDC to be any closedend 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 ‘‘Objectives and Strategies’’ means a Regulated
Fund’s investment objectives and strategies, as
described in the Regulated Fund’s registration
statement on Form N–2, other filings the Regulated
Fund has made with the Commission under the
Securities Act of 1933 (the ‘‘Securities Act’’), or
under the Securities Exchange Act of 1934, and the
Regulated Fund’s reports to shareholders.
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whom are Non-Interested Directors of
PSEC.
2. PRIS and PWAY are Maryland
corporations organized as closed-end
investment companies registered under
the Act. PRIS’s Objectives and Strategies
are to generate current income and, as
a secondary objective, long-term capital
appreciation. Applicants state that PRIS
expects to seek to achieve its Objectives
and Strategies by investing, under
normal circumstances, at least 80% of
its total assets, or net assets plus
borrowings, in senior secured loans
made to companies whose debt is rated
below investment grade or, in limited
circumstances, unrated, with an
emphasis on current income. PWAY’s
Objectives and Strategies are to generate
current income and, as a secondary
objective, long-term capital appreciation
through debt and equity investments.
Applicants state that PWAY expects to
achieve its Objectives and Strategies by
investing, under normal circumstances,
at least 80% of its total assets, or net
assets plus borrowings, in securities of
companies that operate primarily in the
energy and related infrastructure and
industrial sectors. The Board of PRIS
consists of five directors, three of whom
are Non-Interested Directors of PRIS.
The Board of PWAY consists of five
directors, three of whom are NonInterested Directors of PWAY.
3. PCM and PRISM are Delaware
limited liability companies registered as
investment advisers under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’) and serve as investment
adviser to PSEC and PRIS, respectively.
PEIM is a Delaware limited liability
company that will be registered with the
Commission as an investment adviser
under Advisers Act and serve as
investment adviser to PWAY.
4. Applicants seek an order (‘‘Order’’)
to permit one or more Regulated Funds 4
and/or one or more Future Affiliated
Funds 5 to participate in the same
investment opportunities through a
proposed co-investment program (the
‘‘Co-Investment Program’’) where such
4 ‘‘Regulated Fund’’ means any of PSEC, PRIS,
PWAY, 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
(a) PCM, PEIM, and PRISM and (b) any future
investment adviser that controls, is controlled by,
or is under common control with PCM and is
registered as an investment adviser under the
Advisers Act.
5 ‘‘Future Affiliated Fund’’ means any entity (a)
whose investment adviser is an Adviser, (b) that
would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act, and (c) that intends to
participate in the Co-Investment Program.
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participation would otherwise be
prohibited under section 57(a)(4) and
rule 17d–1 by (a) co-investing with each
other in securities issued by issuers in
private placement transactions in which
an Adviser negotiates terms in addition
to price; 6 and (b) making additional
investments in securities of such
issuers, including through the exercise
of warrants, conversion privileges, and
other rights to purchase securities of the
issuers (‘‘Follow-On Investments’’). ‘‘CoInvestment Transaction’’ means any
transaction in which a Regulated Fund
(or its Wholly-Owned Investment Sub,
as defined below) participated together
with one or more other Regulated Funds
and/or one or more Future Affiliated
Funds in reliance on the requested
Order. ‘‘Potential Co-Investment
Transaction’’ means any investment
opportunity in which a Regulated Fund
(or its Wholly-Owned Investment Sub,
as defined below) could not participate
together with one or more Future
Affiliated Funds and/or one or more
other Regulated Funds without
obtaining and relying on the Order.7
5. Applicants state that a Regulated
Fund may, from time to time, form one
or more Wholly-Owned Investment
Subs.8 Such a subsidiary would be
prohibited from investing in a CoInvestment Transaction with any Future
Affiliated Fund or Regulated Fund
because it would be a company
controlled by its parent Regulated Fund
for purposes of Section 57(a)(4) and rule
17d–1. Applicants request that each
Wholly-Owned Investment Sub be
permitted to participate in CoInvestment Transactions in lieu of its
parent Regulated Fund and that the
Wholly-Owned Investment Sub’s
participation in any such transaction be
treated, for purposes of the requested
order, as though the parent Regulated
Fund were participating directly.
Applicants represent that this treatment
is justified because a Wholly-Owned
6 The term ‘‘private placement transactions’’
means transactions in which the offer and sale of
securities by the issuer are exempt from registration
under the Securities Act.
7 All existing entities that currently intend to rely
upon the requested Order have been named as
applicants. Any other existing or future entity that
subsequently relies on the Order will comply with
the terms and conditions of the application.
8 The term ‘‘Wholly-Owned Investment Sub’’
means an entity (i) that is wholly-owned by a
Regulated Fund (with the Regulated Fund at all
times holding, beneficially and of record, 100% of
the voting and economic interests); (ii) whose sole
business purpose is to hold one or more
investments on behalf of the Regulated Fund; (iii)
with respect to which the Regulated Fund’s Board
has the sole authority to make all determinations
with respect to the entity’s participation under the
conditions of the application; and (iv) that would
be an investment company but for Section 3(c)(1)
or 3(c)(7) of the Act.
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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 WhollyOwned Investment Sub’s participation
in a Co-Investment Transaction, and the
Regulated Fund’s Board would be
informed of, and take into
consideration, any proposed use of a
Wholly-Owned Investment Sub in the
Regulated Fund’s place. If the Regulated
Fund proposes to participate in the
same Co-Investment Transaction with
any of its Wholly-Owned Investment
Subs, the Board will also be informed
of, and take into consideration, the
relative participation of the Regulated
Fund and the Wholly-Owned
Investment Sub. PSEC SPV Sub is a
Delaware limited liability company and
is a Wholly-Owned Investment Sub of
PSEC. PSEC SPV Sub is exempt from
registration under Section 3(c)(7) of the
Act.
6. When considering Potential CoInvestment Transactions for any
Regulated Fund, the applicable Adviser
will consider only the Objectives and
Strategies, investment policies,
investment positions, capital available
for investment, and other pertinent
factors applicable to that Regulated
Fund. The Regulated Fund Advisers
expect that any portfolio company that
is an appropriate investment for a
Regulated Fund should also be an
appropriate investment for one or more
other Regulated Funds and/or one or
more Future Affiliated Funds, with
certain exceptions based on available
capital or diversification.9
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 under section 57(o) of the Act
(‘‘Eligible Directors’’), and the ‘‘required
majority,’’ as defined in section 57(o) of
the Act (‘‘Required Majority’’) 10 will
approve each Co-Investment
9 The Regulated Funds, however, will not be
obligated to invest, or co-invest, when investment
opportunities are referred to them.
10 In the case of a Regulated Fund that is a
registered closed-end fund, the Board members that
make up the Required Majority will be determined
as if the Regulated Fund were a BDC subject to
Section 57(o).
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Transaction prior to any investment by
the participating Regulated Fund.
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 Future Affiliated Fund in such
disposition is proportionate to its
outstanding investments in the issuer
immediately preceding the disposition
or Follow-On Investment, as the case
may be; and (ii) the Board of the
Regulated Fund has approved that
Regulated Fund’s participation in pro
rata dispositions and Follow-On
Investments as being in the best
interests of the Regulated Fund. If the
Board does not so approve, any such
disposition or Follow-On Investment
will be submitted to the Regulated
Fund’s Eligible Directors. The Board of
any Regulated Fund may at any time
rescind, suspend or qualify its approval
of pro rata dispositions and Follow-On
Investments with the result that all
dispositions and/or Follow-On
Investments must be submitted to the
Eligible Directors.
9. No Non-Interested Director of a
Regulated Fund will have a financial
interest in any Co-Investment
Transaction, other than through share
ownership in one of the Regulated
Funds.
Applicants’ Legal Analysis
1. Section 57(a)(4) of the Act prohibits
certain affiliated persons of a BDC from
participating in joint transactions with
the BDC or a company controlled by a
BDC in contravention of rules as
prescribed by the Commission. Under
section 57(b)(2) of the Act, any person
who is directly or indirectly controlling,
controlled by, or under common control
with a BDC is subject to section 57(a)(4).
Applicants submit that each of the
Regulated Funds and Future Affiliated
Funds could be deemed to be a person
related to each Regulated Fund in a
manner described by section 57(b) by
virtue of being under common control.
Section 57(i) of the Act provides that,
until the Commission prescribes rules
under section 57(a)(4), the
Commission’s rules under section 17(d)
of the Act applicable to registered
closed-end investment companies will
be deemed to apply to transactions
subject to section 57(a)(4). Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1 also
applies to joint transactions with
Regulated Funds that are BDCs. Section
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17(d) of the Act and rule 17d–1 under
the Act are applicable to Regulated
Funds that are registered closed-end
investment companies.
2. Section 17(d) of the Act and rule
17d–1 under the Act prohibit affiliated
persons of a registered investment
company from participating in joint
transactions with the company unless
the Commission has granted an order
permitting such transactions. In passing
upon applications under rule 17d–1, the
Commission considers whether the
company’s participation in the joint
transaction is consistent with the
provisions, policies, and purposes of the
Act and the extent to which such
participation is on a basis different from
or less advantageous than that of other
participants.
3. Applicants state that in the absence
of the requested relief, the Regulated
Funds would be, in some
circumstances, limited in their ability to
participate in attractive and appropriate
investment opportunities. Applicants
believe that the proposed terms and
conditions will ensure that the CoInvestment Transactions are consistent
with the protection of each Regulated
Fund’s shareholders and with the
purposes intended by the policies and
provisions of the Act. Applicants state
that the Regulated Funds’ participation
in the Co-Investment Transactions will
be consistent with the provisions,
policies, and purposes of the Act and on
a basis that is not different from or less
advantageous than that of other
participants.
Applicants’ Conditions
Applicants agree that the Order will
be subject to the following conditions:
1. Each time an Adviser considers a
Potential Co-Investment Transaction for
a Future 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 CoInvestment Transaction, together with
the amount proposed to be invested by
the other participating Regulated Funds
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and Future 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 Future 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 Future Affiliated Funds
only if, prior to the Regulated Fund’s
participation in the Potential CoInvestment Transaction, a Required
Majority concludes that:
(i) The terms of the Potential CoInvestment 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 Future 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
Future Affiliated Funds; provided that,
if any other Regulated Fund or Future
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:
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(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 Future Affiliated Fund or any
Regulated Fund or any affiliated person
of any Future Affiliated Fund or any
Regulated Fund receives in connection
with the right of an Future 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
Future 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 Future 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 Future Affiliated
Funds during the preceding quarter that
fell within the Regulated Fund’s thencurrent 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.
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5. Except for Follow-On Investments
made in accordance with condition 8, a
Regulated Fund will not invest in
reliance on the Order in any issuer in
which another Regulated Fund, Future
Affiliated Fund, or any affiliated person
of another Regulated Fund or Future
Affiliated Fund is an existing investor.
6. A Regulated Fund will not
participate in any Potential CoInvestment 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 Future Affiliated Fund. The
grant to a Future 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 Future 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 Future Affiliated Funds
and Regulated Funds.
(c) A Regulated Fund may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Regulated Fund and each Future
Affiliated Fund in such disposition is
proportionate to its outstanding
investments in the issuer immediately
preceding the disposition; (ii) the Board
of the Regulated Fund has approved as
being in the best interests of the
Regulated Fund the ability to participate
in such dispositions on a pro rata basis
(as described in greater detail in the
application); and (iii) the Board of the
Regulated Fund is provided on a
quarterly basis with a list of all
dispositions made in accordance with
this condition. In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
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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 Future Affiliated Fund and
each Regulated Fund will bear its own
expenses in connection with any such
disposition.
8. (a) If any Future 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 Future 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 Future 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 Future Affiliated
Funds in the same transaction, exceeds
the amount of the opportunity; then the
amount invested by each such party will
be allocated among them pro rata based
on each participant’s capital available
for investment in the asset class being
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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 CoInvestment Transaction for all purposes
and subject to the other conditions set
forth in this application.
9. The Non-Interested Directors of
each Regulated Fund will be provided
quarterly for review all information
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by other Regulated Funds or
Future Affiliated Funds that the
Regulated Fund considered but declined
to participate in, so that the NonInterested Directors may determine
whether all investments made during
the preceding quarter, including those
investments that the Regulated Fund
considered but declined to participate
in, comply with the conditions of the
Order. In addition, the Non-Interested
Directors will consider at least annually
the continued appropriateness for the
Regulated Fund of participating in new
and existing Co-Investment
Transactions.
10. Each Regulated Fund will
maintain the records required by
Section 57(f)(3) of the Act as if each of
the Regulated Funds were a BDC and
each of the investments permitted under
these conditions were approved by the
Required Majority under Section 57(f) of
the Act.
11. No Non-Interested Director of a
Regulated Fund will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act) of a
Future Affiliated Fund.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment 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
Future Affiliated Funds and the
Regulated Funds, be shared by the
Regulated Funds and the Future
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 (including
break-up or commitment fees but
excluding broker’s fees contemplated
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 Future Affiliated
VerDate Mar<15>2010
17:00 Jan 16, 2014
Jkt 232001
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 Future Affiliated
Funds based on the amounts they invest
in such Co-Investment Transaction.
None of the Future Affiliated Funds, the
Advisers, the other Regulated Funds or
any affiliated person of the Regulated
Funds or Future 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 Future
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 Future Affiliated Fund.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2014–00822 Filed 1–16–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release Nos. 33–9510; 34–71289, File No.
265–28]
Notice of Meeting of Securities and
Exchange Commission Dodd-Frank
Investor Advisory Committee
Securities and Exchange
Commission.
ACTION: Notice of meeting of Securities
and Exchange Commission Dodd-Frank
Investor Advisory Committee.
AGENCY:
The Securities and Exchange
Commission Investor Advisory
Committee, established pursuant to
Section 911 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act of 2010, is providing notice that it
will hold a public meeting on Friday,
January 31, 2014, in Multi-Purpose
Room LL–006 at the Commission’s
headquarters, 100 F Street NE.,
Washington, DC 20549. The meeting
will begin at 10:00 a.m. (EDT) and end
SUMMARY:
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
at 4:30 p.m. and will be open to the
public, except during portions of the
meeting reserved for meetings of the
Committee’s subcommittees. The
meeting will be webcast on the
Commission’s Web site at www.sec.gov.
Persons needing special
accommodations to take part because of
a disability should notify the contact
person listed below. The public is
invited to submit written statements to
the Committee. The agenda for the
meeting includes: Remarks from
Commissioners; a recommendation from
the Market Structure Subcommittee and
the Investor as Purchaser Subcommittee
regarding decimalization; discussion of
crowdfunding; discussion of rebates and
payments for order flow; and nonpublic
subcommittee meetings.
Written statements should be
received on or before January 31, 2014.
DATES:
Written statements may be
submitted by any of the following
methods:
ADDRESSES:
Electronic Statements
D Use the Commission’s Internet
submission form (https://www.sec.gov/
rules/other.shtml); or
D Send an email message to rulescomments@sec.gov. Please include File
No. 265–28 on the subject line; or
Paper Statements
D Send paper statements in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File No.
265–28. This file number should be
included on the subject line if email is
used. To help us process and review
your statement more efficiently, please
use only one method.
Statements also will be available for
Web site viewing and printing in the
Commission’s Public Reference Room,
100 F Street NE., Room 1580,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. All statements
received will be posted without change;
we do not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
M.
Owen Donley III, Chief Counsel, at (202)
551–6322, Office of Investor Education
and Advocacy, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
FOR FURTHER INFORMATION CONTACT:
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]]>Agencies
[Federal Register Volume 79, Number 12 (Friday, January 17, 2014)]
[Notices]
[Pages 3256-3260]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00822]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-30855; File No. 812-14199]
Prospect Capital Corporation, et al.; Notice of Application
January 13, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 17(d) and
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act to permit certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.
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SUMMARY: Summary of Application: Applicants request an order to permit
a business development company (``BDC'') and certain closed-end
management investment companies to co-invest in portfolio companies
with each other and with affiliated investment funds.
Applicants: Prospect Capital Corporation (``PSEC''), Priority Senior
Secured Income Fund, Inc. (``PRIS''), Pathway Energy Infrastructure
Fund, Inc. (``PWAY''), Prospect Capital Funding LLC (``PSEC SPV Sub''),
Prospect Capital Management LLC (``PCM'') on behalf of itself and its
successors,\1\ Priority Senior Secured Income Management, LLC
(``PRISM'') on behalf of itself and its successors, and Pathway Energy
Infrastructure Management, LLC (``PEIM'') on behalf of itself and its
successors.
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\1\ The term ``successor,'' as applied to each Adviser, means an
entity that results from a reorganization into another jurisdiction
or change in the type of business organization.
DATES: Filing Dates: The application was filed on August 9, 2013, and
---------------------------------------------------------------------------
amended on December 4, 2013.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on February 7, 2014, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F St. NE., Washington, DC 20549-1090. Applicants: 10
East 40th St., 44th Floor, New York, NY 10016.
FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at
(202) 551-6882 or David P. Bartels, Branch Chief, at (202) 551-6821
(Chief Counsel's Office, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. PSEC is a Maryland corporation organized as a closed-end
management investment company that has elected to be regulated as a BDC
under Section 54(a) of the Act.\2\ PSEC's Objectives and Strategies \3\
are to generate both current income and long-term capital appreciation
through debt and equity investments. PSEC invests primarily in first
and second lien senior loans and mezzanine debt, which in some cases
are accompanied by an equity component, and also acquires equity
control of companies. A majority of the directors of each of the
Regulated Funds is or will be persons who are not ``interested
persons'' as defined in section 2(a)(19) of the Act (``Non-Interested
Directors''). The board of directors (``Board'') of PSEC is comprised
of five directors, three of
[[Page 3257]]
whom are Non-Interested Directors of PSEC.
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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\ ``Objectives and Strategies'' means a Regulated Fund's
investment objectives and strategies, as described in the Regulated
Fund's registration statement on Form N-2, other filings the
Regulated Fund has made with the Commission under the Securities Act
of 1933 (the ``Securities Act''), or under the Securities Exchange
Act of 1934, and the Regulated Fund's reports to shareholders.
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2. PRIS and PWAY are Maryland corporations organized as closed-end
investment companies registered under the Act. PRIS's Objectives and
Strategies are to generate current income and, as a secondary
objective, long-term capital appreciation. Applicants state that PRIS
expects to seek to achieve its Objectives and Strategies by investing,
under normal circumstances, at least 80% of its total assets, or net
assets plus borrowings, in senior secured loans made to companies whose
debt is rated below investment grade or, in limited circumstances,
unrated, with an emphasis on current income. PWAY's Objectives and
Strategies are to generate current income and, as a secondary
objective, long-term capital appreciation through debt and equity
investments. Applicants state that PWAY expects to achieve its
Objectives and Strategies by investing, under normal circumstances, at
least 80% of its total assets, or net assets plus borrowings, in
securities of companies that operate primarily in the energy and
related infrastructure and industrial sectors. The Board of PRIS
consists of five directors, three of whom are Non-Interested Directors
of PRIS. The Board of PWAY consists of five directors, three of whom
are Non-Interested Directors of PWAY.
3. PCM and PRISM are Delaware limited liability companies
registered as investment advisers under the Investment Advisers Act of
1940 (the ``Advisers Act'') and serve as investment adviser to PSEC and
PRIS, respectively. PEIM is a Delaware limited liability company that
will be registered with the Commission as an investment adviser under
Advisers Act and serve as investment adviser to PWAY.
4. Applicants seek an order (``Order'') to permit one or more
Regulated Funds \4\ and/or one or more Future Affiliated Funds \5\ to
participate in the same investment opportunities through a proposed co-
investment program (the ``Co-Investment Program'') where such
participation would otherwise be prohibited under section 57(a)(4) and
rule 17d-1 by (a) co-investing with each other in securities issued by
issuers in private placement transactions in which an Adviser
negotiates terms in addition to price; \6\ and (b) making additional
investments in securities of such issuers, including through the
exercise of warrants, conversion privileges, and other rights to
purchase securities of the issuers (``Follow-On Investments''). ``Co-
Investment Transaction'' means any transaction in which a Regulated
Fund (or its Wholly-Owned Investment Sub, as defined below)
participated together with one or more other Regulated Funds and/or one
or more Future Affiliated Funds in reliance on the requested Order.
``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Fund (or its Wholly-Owned Investment
Sub, as defined below) could not participate together with one or more
Future 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 any of PSEC, PRIS, PWAY, 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 (a) PCM, PEIM, and
PRISM and (b) any future investment adviser that controls, is
controlled by, or is under common control with PCM and is registered
as an investment adviser under the Advisers Act.
\5\ ``Future Affiliated Fund'' means any entity (a) whose
investment adviser is an Adviser, (b) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act, and (c) that
intends to participate in the Co-Investment Program.
\6\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
\7\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application.
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5. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any Future Affiliated Fund or Regulated Fund because it would be a
company controlled by its parent Regulated Fund for purposes of Section
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned
Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be
treated, for purposes of the requested order, as though the parent
Regulated Fund were participating directly. Applicants represent that
this treatment is justified because a Wholly-Owned Investment Sub would
have no purpose other than serving as a holding vehicle for the
Regulated Fund's investments and, therefore, no conflicts of interest
could arise between the Regulated Fund and the Wholly-Owned Investment
Sub. The Regulated Fund's Board would make all relevant determinations
under the conditions with regard to a Wholly-Owned Investment Sub's
participation in a Co-Investment Transaction, and the Regulated Fund's
Board would be informed of, and take into consideration, any proposed
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If
the Regulated Fund proposes to participate in the same Co-Investment
Transaction with any of its Wholly-Owned Investment Subs, the Board
will also be informed of, and take into consideration, the relative
participation of the Regulated Fund and the Wholly-Owned Investment
Sub. PSEC SPV Sub is a Delaware limited liability company and is a
Wholly-Owned Investment Sub of PSEC. PSEC SPV Sub is exempt from
registration under Section 3(c)(7) of the Act.
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\8\ The term ``Wholly-Owned Investment Sub'' means an entity (i)
that is wholly-owned by a Regulated Fund (with the Regulated Fund at
all times holding, beneficially and of record, 100% of the voting
and economic interests); (ii) whose sole business purpose is to hold
one or more investments on behalf of the Regulated Fund; (iii) with
respect to which the Regulated Fund's Board has the sole authority
to make all determinations with respect to the entity's
participation under the conditions of the application; and (iv) that
would be an investment company but for Section 3(c)(1) or 3(c)(7) of
the Act.
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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, investment policies, investment positions,
capital available for investment, and other pertinent factors
applicable to that Regulated Fund. The Regulated Fund Advisers expect
that any portfolio company that is an appropriate investment for a
Regulated Fund should also be an appropriate investment for one or more
other Regulated Funds and/or one or more Future Affiliated Funds, with
certain exceptions based on available capital or diversification.\9\
---------------------------------------------------------------------------
\9\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
---------------------------------------------------------------------------
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 under section 57(o) of the Act
(``Eligible Directors''), and the ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority'') \10\ will approve each
Co-Investment
[[Page 3258]]
Transaction prior to any investment by the participating Regulated
Fund.
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\10\ In the case of a Regulated Fund that is a registered
closed-end fund, the Board members that make up the Required
Majority will be determined as if the Regulated Fund were a BDC
subject to Section 57(o).
---------------------------------------------------------------------------
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
Future Affiliated Fund in such disposition is proportionate to its
outstanding investments in the issuer immediately preceding the
disposition or Follow-On Investment, as the case may be; and (ii) the
Board of the Regulated Fund has approved that Regulated Fund's
participation in pro rata dispositions and Follow-On Investments as
being in the best interests of the Regulated Fund. If the Board does
not so approve, any such disposition or Follow-On Investment will be
submitted to the Regulated Fund's Eligible Directors. The Board of any
Regulated Fund may at any time rescind, suspend or qualify its approval
of pro rata dispositions and Follow-On Investments with the result that
all dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
9. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than through
share ownership in one of the Regulated Funds.
Applicants' Legal Analysis
1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC or a
company controlled by a BDC in contravention of rules as prescribed by
the Commission. Under section 57(b)(2) of the Act, any person who is
directly or indirectly controlling, controlled by, or under common
control with a BDC is subject to section 57(a)(4). Applicants submit
that each of the Regulated Funds and Future Affiliated Funds could be
deemed to be a person related to each Regulated Fund in a manner
described by section 57(b) by virtue of being under common control.
Section 57(i) of the Act provides that, until the Commission prescribes
rules under section 57(a)(4), the Commission's rules under section
17(d) of the Act applicable to registered closed-end investment
companies will be deemed to apply to transactions subject to section
57(a)(4). Because the Commission has not adopted any rules under
section 57(a)(4), rule 17d-1 also applies to joint transactions with
Regulated Funds that are BDCs. Section 17(d) of the Act and rule 17d-1
under the Act are applicable to Regulated Funds that are registered
closed-end investment companies.
2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. In
passing upon applications under rule 17d-1, the Commission considers
whether the company's participation in the joint transaction is
consistent with the provisions, policies, and purposes of the Act and
the extent to which such participation is on a basis different from or
less advantageous than that of other participants.
3. Applicants state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants believe that the proposed terms and
conditions will ensure that the Co-Investment Transactions are
consistent with the protection of each Regulated Fund's shareholders
and with the purposes intended by the policies and provisions of the
Act. Applicants state that the Regulated Funds' participation in the
Co-Investment Transactions will be consistent with the provisions,
policies, and purposes of the Act and on a basis that is not different
from or less advantageous than that of other participants.
Applicants' Conditions
Applicants agree that the Order will be subject to the following
conditions:
1. Each time an Adviser considers a Potential Co-Investment
Transaction for a Future Affiliated Fund or another Regulated Fund that
falls within a Regulated Fund's then-current Objectives and Strategies,
the Regulated Fund's Adviser will make an independent determination of
the appropriateness of the investment for such Regulated Fund in light
of the Regulated Fund's then-current circumstances.
2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
(b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by the other participating Regulated Funds and Future
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
Future 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 Future
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 Future
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 Future
Affiliated Funds; provided that, if any other Regulated Fund or Future
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:
[[Page 3259]]
(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 Future Affiliated Fund
or any Regulated Fund or any affiliated person of any Future Affiliated
Fund or any Regulated Fund receives in connection with the right of an
Future 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 Future 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 Future 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 Future 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, a Regulated Fund will not invest in reliance on the Order
in any issuer in which another Regulated Fund, Future Affiliated Fund,
or any affiliated person of another Regulated Fund or Future Affiliated
Fund is an existing investor.
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 Future
Affiliated Fund. The grant to a Future 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 Future 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 Future
Affiliated Funds and Regulated Funds.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Future Affiliated Fund in
such disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
(d) Each Future Affiliated Fund and each Regulated Fund will bear
its own expenses in connection with any such disposition.
8. (a) If any Future 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 Future
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 Future 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 Future Affiliated
Funds in the same transaction, exceeds the amount of the opportunity;
then the amount invested by each such party will be allocated among
them pro rata based on each participant's capital available for
investment in the asset class being
[[Page 3260]]
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 this
application.
9. The Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or Future Affiliated Funds
that the Regulated Fund considered but declined to participate in, so
that the Non-Interested Directors may determine whether all investments
made during the preceding quarter, including those investments that the
Regulated Fund considered but declined to participate in, comply with
the conditions of the Order. In addition, the Non-Interested Directors
will consider at least annually the continued appropriateness for the
Regulated Fund of participating in new and existing Co-Investment
Transactions.
10. Each Regulated Fund will maintain the records required by
Section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under Section 57(f) of the Act.
11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act) of a Future 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 Future Affiliated Funds and the
Regulated Funds, be shared by the Regulated Funds and the Future
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 (including break-up or commitment fees but
excluding broker's fees contemplated 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 Future
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 Future Affiliated Funds based on the
amounts they invest in such Co-Investment Transaction. None of the
Future Affiliated Funds, the Advisers, the other Regulated Funds or any
affiliated person of the Regulated Funds or Future 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 Future 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 Future
Affiliated Fund.
For the Commission, by the Division of Investment Management,
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2014-00822 Filed 1-16-14; 8:45 am]
BILLING CODE 8011-01-P
