NF Investment Corp., et al.; Notice of Application, 7235-7239 [2014-02506]
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Federal Register / Vol. 79, No. 25 / Thursday, February 6, 2014 / Notices
controlled by, or is under common
control with a Sub-Advisor.
12. Each Subadvised Series will
disclose the Aggregate Fee Disclosure in
its registration statement.
13. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that
requested in the application, the
requested order will expire on the
effective date of that rule.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–02507 Filed 2–5–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–30900; File No. 812–14161]
NF Investment Corp., et al.; Notice of
Application
January 31, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 17(d), 57(a)(4), 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), 57(a)(4), and 57(i) of the
Act and rule 17d–1 under the Act.
AGENCY:
Summary of Application:
Applicants request an order to permit
business development companies
(‘‘BDCs’’) and certain closed-end
management investment companies to
co-invest in portfolio companies with
each other and with affiliated
investment funds.
APPLICANTS: NF Investment Corporation
(‘‘NFIC’’); Carlyle GMS Finance, Inc.
(‘‘CGMSF,’’ and together with NFIC, the
‘‘Regulated Funds’’); NFIC SPV LLC
(‘‘NFIC Sub’’); Carlyle GMS Finance
SPV LLC (‘‘CGMSF Sub’’ and together
with NFIC Sub, the ‘‘SPV Subs’’); and
Carlyle GMS Investment Management
L.L.C. (‘‘CGMSIM’’) on behalf of itself
and its successors.1
DATES: Filing Dates: The application was
filed on May 29, 2013, and amended on
August 9, 2013, December 12, 2013, and
January 22, 2014.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
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SUMMARY:
1 The term ‘‘successor’’ means an entity that
results from a reorganization into another
jurisdiction or change in the type of business
organization.
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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 25, 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: c/o Ian J.
Sandler, Carlyle GMS Finance, Inc., 520
Madison Avenue, 38th Floor, New York,
NY 10022.
FOR FURTHER INFORMATION CONTACT: Jean
E. Minarick, Senior Counsel, at (202)
551–6811 or Daniele Marchesani,
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. CGMSF and NFIC are both
Maryland corporations organized as
non-diversified, closed-end
management investment companies that
have elected to be regulated as BDCs
under Section 54(a) of the Act.2 The
Objectives and Strategies 3 of both
CGMSF and NFIC are to generate
current income and capital appreciation
primarily through debt investments in
U.S. middle market companies. CGMSF
and NFIC invest primarily in first lien
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 10 under the Securities
Exchange Act of 1934 (‘‘Exchange Act’’), other
filings made with the Commission by the Regulated
Fund under the Exchange Act or under the
Securities Act of 1933 (‘‘Securities Act’’), and the
Regulated Fund’s reports to shareholders.
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senior secured and unitranche loans to
private U.S. middle market companies
that are, in many cases, controlled by
private equity investment firms. A
majority of the directors of the board of
directors (‘‘Board’’) of CGMSF and NFIC
are persons who are not ‘‘interested
persons’’ as defined in section 2(a)(19)
of the Act of CGMSF, NFIC, respectively
(‘‘Non-Interested Directors’’).
2. CGMSIM is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’) and serves as the
investment adviser to CGMSF and NFIC.
CGSIM is a Delaware corporation and a
wholly owned subsidiary of The Carlyle
Group L.P.
3. Applicants seek an order (‘‘Order’’)
to permit one or more Regulated Funds 4
and/or one or more Private Funds 5
(collectively, ‘‘Co-Investment
Affiliates’’) to participate in the same
investment opportunities through a
proposed co-investment program where
such participation would otherwise be
prohibited under sections 17(d) and
57(a)(4) of the Act and rules under the
Act (‘‘Co-Investment Program’’) by (a)
co-investing with each other in
securities issued by issuers in private
placement transactions 6 or loans made
to issuers in which an Investment
Adviser negotiates terms in addition to
price and (b) making additional
investments in securities or loans of
such issuers, including through the
exercise of warrants, conversion
privileges, and other rights to purchase
securities of the issuers (‘‘Follow-On
Investments’’). For purposes of the
application, ‘‘Co-Investment
Transaction’’ means any transaction in
which any of the Regulated Funds (or
any SPV Sub, as defined below)
participated together with one or more
Co-Investment Affiliates in reliance on
the Order. ‘‘Potential Co-Investment
Transaction’’ means any investment
opportunity in which any of the
Regulated Funds (or any SPV Sub, as
4 ‘‘Regulated Fund’’ means CGMSF, NFIC, and
any future closed-end management investment
company that (a) elects to be regulated as a BDC or
is registered under the Act; (b) is advised by an
Investment Adviser; and (c) intends to participate
in the Co-Investment Program (as defined below).
The term ‘‘Investment Adviser’’ means (a) CGMSIM
and (b) any future investment adviser controlling,
controlled by, or under common control with
CGMSIM.
5 ‘‘Private Fund’’ means any entity (a) whose
investment adviser is an Investment 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.
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defined below) could not participate
together with one or more CoInvestment Affiliates without obtaining
and relying on the Order.7
4. Applicants state that a Regulated
Fund may, from time to time, form one
or more SPV Subs.8 Such a subsidiary
would be prohibited from investing in a
Co-Investment Transaction with any CoInvestment Affiliate because it would be
a company controlled by its parent
Regulated Fund for purposes of sections
17(d) and 57(a)(4) and rule 17d–1.
Applicants request that each SPV Sub
be permitted to participate in CoInvestment Transactions in lieu of its
parent Regulated Fund and that the SPV
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 SPV 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 SPV Sub. The
Regulated Fund’s Board would make all
relevant determinations under the
conditions with regard to a SPV 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 SPV in the Regulated Fund’s place. If
the Regulated Fund proposes to
participate in the same Co-Investment
Transaction with any of its SPV Subs,
the Regulated Fund’s Board will also be
informed of, and take into
consideration, the relative participation
of the Regulated Fund and the SPV Sub.
CGMSF Sub and NFIC Sub are SPV
Subs of CGMSF or NFIC, respectively,
and formed specifically for the purpose
7 All existing entities that currently intend to rely
on the Order have been named as applicants. Any
other existing or future entity that relies on the
Order in the future will comply with the terms and
conditions of the application.
8 ‘‘SPV Sub’’ means an entity that (a) is whollyowned by a Regulated Fund (with such Regulated
Fund at all times holding, beneficially and of
record, 100% of the voting and economic interests);
(b) whose sole business purpose is to hold one or
more investments on behalf of the Regulated Fund
(and, in the case of an SBIC Subsidiary (as defined
below), maintain a license under the SBA Act (as
defined below) and issue debentures guaranteed by
the SBA (as defined below)); (c) with respect to
which the Regulated Fund’s Board has the sole
authority to make all determinations with respect
to the SPV Sub’s participation under the conditions
of the application; and (d) that would be an
investment company but for section 3(c)(1) or
3(c)(7) of the Act. ‘‘SBIC Subsidiary’’ means an SPV
Sub that is licensed by the Small Business
Administration (the ‘‘SBA’’) to operate under the
Small Business Investment Act of 1958 (the ‘‘SBA
Act’’) as a small business investment company (an
‘‘SBIC’’).
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of procuring financing or otherwise
holding investments.
5. When considering Potential CoInvestment Transactions for any
Regulated Fund, the applicable
Investment Adviser will consider the
Objectives and Strategies, investment
policies, investment positions, capital
available for investment (‘‘Available
Capital’’),9 and other factors relevant to
such Regulated Fund. Opportunities for
Potential Co-Investment Transactions
may arise when an investment adviser
considers for a Co-Investment Affiliate
investment opportunities that may be
appropriate for a Regulated Fund. Upon
issuance of the Order, the Investment
Advisers will refer to the Investment
Advisers of the Regulated Funds all
Potential Co-Investment Transactions
within a Regulated Fund’s Objectives
and Strategies that are considered for a
Co-Investment Affiliate, and such
investment opportunities may result in
a Co-Investment Transaction.
6. Other than pro rata dispositions
and Follow-On Investments as provided
in conditions 7 and 8, and upon making
the determinations required in
conditions 1 and 2(a), the applicable
Investment Adviser will present each
Potential Co-Investment Transaction
and the proposed allocation to the
directors or trustees, as applicable,
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 CoInvestment Transaction prior to any
investment by a Fund.
7. With respect to the pro rata
dispositions and Follow-On Investments
as 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 Co-Investment
Affiliate in such disposition or FollowOn Investment is proportionate to its
outstanding investments in the issuer
immediately preceding the disposition
or Follow-On Investment, as the case
may be; and (ii) the Board of the
Regulated Fund has approved that
Regulated Fund’s participation in pro
9 ‘‘Available Capital’’ consists solely of liquid
assets not held for permanent investment, including
cash, amounts that can currently be drawn down
from lines of credit, and marketable securities held
for short-term purposes. In addition, Available
Capital would include bona fide uncalled capital
commitments that can be called by the settlement
date of the Co-Investment Transaction.
10 With respect to Regulated Funds that are not
BDCs, the defined terms Eligible Directors and
Required Majority apply as if each Regulated Fund
were a BDC subject to section 57(o) of the Act.
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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.
8. No Non-Interested Director of a
Regulated Fund will have a financial
interest in any Co-Investment
Transaction, other than indirectly
through share ownership in one of the
Regulated Funds.
Applicants’ Legal Analysis
1. Section 17(d) of the Act and rule
17d–1 under the Act prohibit affiliated
persons of a registered investment
company from participating in joint
transactions with the company or a
company controlled by such registered
investment company unless the
Commission has granted an order
permitting such transactions. 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
such 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 BDCs. Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1
applies.
2. Applicants submit that the
Investment Advisers and the entities
that they advise would be deemed to be
a person related to a Regulated Fund in
a manner described by sections 17(d) or
57(b) and therefore prohibited by
sections 17(d) or 57(a)(4) and rule 17d–
1 from participating in the CoInvestment Transactions. Further,
because the SPV Subs are controlled by
the Regulated Funds, the SPV Subs are
subject to sections 17(d) or 57(a)(4) and
would be prohibited by rule 17d–1 from
participating in the Co-Investment
Transactions without the Order.
3. Rule 17d–1 under the Act generally
prohibits participation by a registered
investment company, or a company
controlled by such registered
investment company, and an affiliated
person (as defined in section 2(a)(3) of
the Act) or principal underwriter for
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that investment company, or an
affiliated person of such affiliated
person or principal underwriter, in any
joint enterprise or other joint
arrangement or profit sharing plan, as
defined in the rule, absent an order by
the Commission. Similarly, rule 17d–1,
as made applicable to BDCs by section
57(i), prohibits any person who is
related to a BDC in a manner described
in section 57(b), acting as principal,
from participating in, or effecting any
transaction in connection with, any
joint enterprise or other joint
arrangement or profit-sharing plan in
which the BDC (or a company
controlled by such BDC) is a participant,
absent an order from the Commission.
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.
4. 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 any Order
granting the requested relief will be
subject to the following conditions:
1. Each time an investment adviser to
any Co-Investment Affiliate considers a
Potential Co-Investment Transaction for
a Co-Investment Affiliate that falls
within a Regulated Fund’s then-current
Objectives and Strategies, the Regulated
Fund’s Investment Adviser will make an
independent determination of the
appropriateness of the investment for
the Regulated Fund in light of such
Regulated Fund’s then-current
circumstances.
2. (a) If the Investment Adviser deems
the Regulated Fund’s participation in
any such Potential Co-Investment
Transaction is appropriate for the
Regulated Fund, it will then determine
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an appropriate level of investment for
the Regulated Fund.
(b) If the aggregate amount
recommended by an Investment Adviser
to be invested by the Regulated Fund in
the Potential Co-Investment Transaction
together with the amount proposed to be
invested by the other Co-Investment
Affiliates, collectively, in the same
transaction, exceeds the amount of the
investment opportunity, the amount
proposed to be invested by each such
party will be allocated among them pro
rata based on each participant’s
Available Capital available for
investment in the asset class being
allocated, up to the amount proposed to
be invested by each. The Investment
Advisers will provide the Eligible
Directors of each participating
Regulated Fund with information
concerning each participating CoInvestment Affiliate’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
Investment Adviser will distribute
written information concerning the
Potential Co-Investment Transaction,
including the amount proposed to be
invested by each Co-Investment
Affiliate, to the Eligible Directors of
each participating Regulated Fund for
their consideration. A Regulated Fund
will co-invest with Co-Investment
Affiliates only if, prior to such
Regulated Fund’s and any CoInvestment Affiliates’ participation in
the Potential Co-Investment
Transaction, a Required Majority of
such Regulated Fund 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 of such 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 such Regulated Fund; and
(B) such Regulated Fund’s thencurrent Objectives and Strategies;
(iii) the investment by the CoInvestment Affiliates would not
disadvantage such Regulated Fund, and
participation by such Regulated Fund is
not on a basis different from or less
advantageous than that of any CoInvestment Affiliate; provided, that if a
Co-Investment Affiliate, other than such
Regulated Fund, gains the right to
nominate a director for election to a
portfolio company’s board of directors
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or the right to have a board observer or
any similar right to participate in the
governance or management of the
portfolio company, such event shall not
be interpreted to prohibit the Required
Majority from reaching the conclusions
required by this condition (2)(c)(iii), if:
(A) The Eligible Directors will have
the right to ratify the selection of such
director or board observer, if any;
(B) the Investment Advisers agree to,
and do, provide, periodic reports to
such 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 Co-Investment Affiliate or any
affiliated person of a Co-Investment
Affiliate receives in connection with the
right of the Co-Investment Affiliate 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
Co-Investment Affiliates (the CoInvestment Affiliates (other than the
Regulated Funds) may, in turn, share
their portion with their affiliated
persons) and the applicable Regulated
Fund in accordance with the amount of
each party’s investment; and
(iv) the proposed investment by such
Regulated Fund will not benefit the
Investment Advisers or the CoInvestment Affiliates or any affiliated
person of either of them (other than the
parties to the Co-Investment
Transaction), except (A) to the extent
permitted by condition 13, (B) to the
extent permitted by sections 17(e) and
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 Investment Adviser
will present to the Board of the
Regulated Fund, on a quarterly basis, a
record of all investments made by the
Co-Investment Affiliates in Potential CoInvestment Transactions during the
preceding quarter that fell within such
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
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offered to the Regulated Fund. All
information presented to the Board of
such Regulated Fund pursuant to this
condition will be kept for the life of
such 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,
below, a Regulated Fund will not invest
in reliance on the Order in any issuer in
which any Co-Investment Affiliate or
any affiliated person of a Co-Investment
Affiliate 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 such Regulated Fund as for the
Co-Investment Affiliates. The grant to a
Co-Investment Affiliate, but not such
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 Co-Investment Affiliate
elects to sell, exchange or otherwise
dispose of an interest in a security that
was acquired in a Co-Investment
Transaction, the applicable Investment
Adviser 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 other
Co-Investment Affiliates.
(c) A Regulated Fund may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Co-Investment Affiliate 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 each Regulated Fund is provided on
a quarterly basis with a list of all
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dispositions made in accordance with
this condition. In all other cases, the
applicable Investment 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 Co-Investment Affiliate will
bear its own expenses in connection
with any such disposition.
8. (a) If any Co-Investment Affiliate
desires to make a Follow-On Investment
in a portfolio company whose securities
were acquired in a Co-Investment
Transaction, the Investment Adviser
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 Co-Investment
Affiliate 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
applicable Investment 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 Co-Investment
Affiliate’s outstanding investments
immediately preceding the Follow-On
Investment; and
(ii) the aggregate amount
recommended by the applicable
Investment Adviser to be invested by
such Regulated Fund in the Follow-On
Investment, together with the amount
proposed to be invested by the other CoInvestment Affiliates 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
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
participant’s Available Capital available
for investment in the asset class being
allocated, up to the amount proposed to
be invested by each.
(d) The acquisition of Follow-On
Investments as permitted by this
condition will be considered a CoInvestment Transaction for all purposes
and subject to the other conditions set
forth in the application.
9. The Non-Interested Directors of
each Regulated Fund will be provided
quarterly for review all information
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by any Co-Investment Affiliate
that the applicable Regulated Fund
considered but declined to participate
in, so that the Non-Interested Directors
may determine whether all investments
made during the preceding quarter,
including those investments which such
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 applicable
Regulated Fund of participating in new
and existing Co-Investment
Transactions. All information presented
to such Regulated Fund’s Board
pursuant to this condition will be kept
for the life of such Regulated Fund and
at least two years thereafter, and will be
subject to examination by the
Commission and its staff.
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 as if
each of the investments permitted under
these conditions were approved by the
Required Majority under section 57(f).
11. No Non-Interested Director of a
Regulated Fund also will be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the 1940 Act) of
any of the Co-Investment Affiliates
(other than any other 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 applicable Investment Adviser
under its respective investment advisory
agreement with the applicable
Regulated Fund or other Co-Investment
Affiliate, be shared by such Regulated
Fund and each Co-Investment Affiliate
in proportion to the relative amounts of
the securities held or to be acquired or
disposed of, as the case may be.
E:\FR\FM\06FEN1.SGM
06FEN1
Federal Register / Vol. 79, No. 25 / Thursday, February 6, 2014 / Notices
13. Any transaction fee (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e) or 57(k) of the Act, as
applicable) received in connection with
a Co-Investment Transaction will be
distributed to the participating
applicable Regulated Fund and the CoInvestment Affiliates on a pro rata basis
based on the amount they invested or
committed, as the case may be, in such
Co-Investment Transaction. If any
transaction fee is to be held by the
Investment Advisers of a Co-Investment
Affiliate pending consummation of the
transaction, the fee will be deposited
into an account maintained by the
Investment Advisers of Co-Investment
Affiliates 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 between
such Fund and the Co-Investment
Affiliates based on the amounts they
invest in such Co-Investment
Transaction. None of the Co-Investment
Affiliates, their investment advisers, nor
any affiliated person (as defined in the
Act) of the Regulated 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 Co-Investment Affiliates, 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 the Investment Advisers, investment
advisory fees paid in accordance with
the agreements between such
Investment Advisers and the CoInvestment Affiliates).
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
Draft 2014–2018 Strategic Plan for
Securities and Exchange Commission
Securities and Exchange
Commission.
ACTION: Request for comment.
AGENCY:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
Send an email to
PerformancePlanning@sec.gov.
CBOE proposes to amend certain of its
rules to provide for the listing and
trading of options that overlie the CBOE
Short-Term Volatility Index (‘‘VXST’’).
VXST options would be cash-settled
contracts with European-style exercise
that expire every week. The text of the
proposed rule change is available on the
Exchange’s Web site https://
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission.
Paper Comments
Send paper comments to Vikash
Mohan, Program Analyst, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–2521.
FOR FURTHER INFORMATION CONTACT:
Vikash Mohan, Program Analyst, Office
of Financial Management, at (202) 551–
8522, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–2521.
SUPPLEMENTARY INFORMATION: The draft
strategic plan is available at the
Commission’s Web site at https://
www.sec.gov/about/
secstratplan1418.htm or by contacting
Vikash Mohan, Program Analyst, Office
of Financial Management, at (202) 551–
8522, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–2521.
By the Commission.
Dated: February 3, 2014.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2014–02518 Filed 2–5–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
January 31, 2014.
[Release No. 34–71466]
The Securities and Exchange
Commission (SEC) is providing notice
that it is seeking comments on its draft
2014–2018 Strategic Plan. The draft
Strategic Plan includes a draft of the
SUMMARY:
18:18 Feb 05, 2014
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change To List and
Trade CBOE Short-Term Volatility
Index Options
BILLING CODE 8011–01–P
VerDate Mar<15>2010
SEC’s mission, vision, values, strategic
goals, planned initiatives, and
performance goals.
DATES: Comments should be received on
or before March 10, 2014.
ADDRESSES: Comments may be
submitted by any of the following
methods:
[Release No. 34–71458; File No. SR–CBOE–
2014–003]
[FR Doc. 2014–02506 Filed 2–5–14; 8:45 am]
Jkt 232001
7239
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
27, 2014, the Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00076
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to permit the Exchange to list
and trade options that overlie the CBOE
Short-Term Volatility Index (‘‘VXST’’).
VXST options would be cash-settled
contracts with European-style exercise
that expire every week.
The Exchange created the VXST index
in response to market demand for an
option contract on a short-term
volatility index that expires each week.
The VXST index is designed to measure
investors’ consensus view of future
(nine day) expected stock market
volatility. The proposed new VXST
options would trade alongside existing
CBOE Volatility Index (‘‘VIX’’) options
(which expire on a monthly basis and
measure a 30 day period of implied
volatility) and on one Wednesday each
month, the Exchange plans to calculate
two exercise settlement values based on
different S&P 500 index options (one
E:\FR\FM\06FEN1.SGM
06FEN1
]]>Agencies
[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Notices]
[Pages 7235-7239]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02506]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-30900; File No. 812-14161]
NF Investment Corp., et al.; Notice of Application
January 31, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 17(d),
57(a)(4), 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), 57(a)(4), and 57(i) of the Act
and rule 17d-1 under the Act.
-----------------------------------------------------------------------
SUMMARY: Summary of Application: Applicants request an order to permit
business development companies (``BDCs'') and certain closed-end
management investment companies to co-invest in portfolio companies
with each other and with affiliated investment funds.
Applicants: NF Investment Corporation (``NFIC''); Carlyle GMS Finance,
Inc. (``CGMSF,'' and together with NFIC, the ``Regulated Funds''); NFIC
SPV LLC (``NFIC Sub''); Carlyle GMS Finance SPV LLC (``CGMSF Sub'' and
together with NFIC Sub, the ``SPV Subs''); and Carlyle GMS Investment
Management L.L.C. (``CGMSIM'') on behalf of itself and its
successors.\1\
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\1\ The term ``successor'' means an entity that results from a
reorganization into another jurisdiction or change in the type of
business organization.
DATES: Filing Dates: The application was filed on May 29, 2013, and
---------------------------------------------------------------------------
amended on August 9, 2013, December 12, 2013, and January 22, 2014.
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 25, 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: c/o
Ian J. Sandler, Carlyle GMS Finance, Inc., 520 Madison Avenue, 38th
Floor, New York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811 or Daniele Marchesani, 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. CGMSF and NFIC are both Maryland corporations organized as non-
diversified, closed-end management investment companies that have
elected to be regulated as BDCs under Section 54(a) of the Act.\2\ The
Objectives and Strategies \3\ of both CGMSF and NFIC are to generate
current income and capital appreciation primarily through debt
investments in U.S. middle market companies. CGMSF and NFIC invest
primarily in first lien senior secured and unitranche loans to private
U.S. middle market companies that are, in many cases, controlled by
private equity investment firms. A majority of the directors of the
board of directors (``Board'') of CGMSF and NFIC are persons who are
not ``interested persons'' as defined in section 2(a)(19) of the Act of
CGMSF, NFIC, respectively (``Non-Interested Directors'').
---------------------------------------------------------------------------
\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 10 under the Securities
Exchange Act of 1934 (``Exchange Act''), other filings made with the
Commission by the Regulated Fund under the Exchange Act or under the
Securities Act of 1933 (``Securities Act''), and the Regulated
Fund's reports to shareholders.
---------------------------------------------------------------------------
2. CGMSIM is registered as an investment adviser under the
Investment Advisers Act of 1940 (the ``Advisers Act'') and serves as
the investment adviser to CGMSF and NFIC. CGSIM is a Delaware
corporation and a wholly owned subsidiary of The Carlyle Group L.P.
3. Applicants seek an order (``Order'') to permit one or more
Regulated Funds \4\ and/or one or more Private Funds \5\ (collectively,
``Co-Investment Affiliates'') to participate in the same investment
opportunities through a proposed co-investment program where such
participation would otherwise be prohibited under sections 17(d) and
57(a)(4) of the Act and rules under the Act (``Co-Investment Program'')
by (a) co-investing with each other in securities issued by issuers in
private placement transactions \6\ or loans made to issuers in which an
Investment Adviser negotiates terms in addition to price and (b) making
additional investments in securities or loans of such issuers,
including through the exercise of warrants, conversion privileges, and
other rights to purchase securities of the issuers (``Follow-On
Investments''). For purposes of the application, ``Co-Investment
Transaction'' means any transaction in which any of the Regulated Funds
(or any SPV Sub, as defined below) participated together with one or
more Co-Investment Affiliates in reliance on the Order. ``Potential Co-
Investment Transaction'' means any investment opportunity in which any
of the Regulated Funds (or any SPV Sub, as
[[Page 7236]]
defined below) could not participate together with one or more Co-
Investment Affiliates without obtaining and relying on the Order.\7\
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\4\ ``Regulated Fund'' means CGMSF, NFIC, and any future closed-
end management investment company that (a) elects to be regulated as
a BDC or is registered under the Act; (b) is advised by an
Investment Adviser; and (c) intends to participate in the Co-
Investment Program (as defined below). The term ``Investment
Adviser'' means (a) CGMSIM and (b) any future investment adviser
controlling, controlled by, or under common control with CGMSIM.
\5\ ``Private Fund'' means any entity (a) whose investment
adviser is an Investment 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 on the
Order have been named as applicants. Any other existing or future
entity that relies on the Order in the future will comply with the
terms and conditions of the application.
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4. Applicants state that a Regulated Fund may, from time to time,
form one or more SPV Subs.\8\ Such a subsidiary would be prohibited
from investing in a Co-Investment Transaction with any Co-Investment
Affiliate because it would be a company controlled by its parent
Regulated Fund for purposes of sections 17(d) and 57(a)(4) and rule
17d-1. Applicants request that each SPV Sub be permitted to participate
in Co-Investment Transactions in lieu of its parent Regulated Fund and
that the SPV 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 SPV 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 SPV Sub. The Regulated Fund's Board would make
all relevant determinations under the conditions with regard to a SPV
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 SPV in the Regulated Fund's place. If the Regulated
Fund proposes to participate in the same Co-Investment Transaction with
any of its SPV Subs, the Regulated Fund's Board will also be informed
of, and take into consideration, the relative participation of the
Regulated Fund and the SPV Sub. CGMSF Sub and NFIC Sub are SPV Subs of
CGMSF or NFIC, respectively, and formed specifically for the purpose of
procuring financing or otherwise holding investments.
---------------------------------------------------------------------------
\8\ ``SPV Sub'' means an entity that (a) is wholly-owned by a
Regulated Fund (with such Regulated Fund at all times holding,
beneficially and of record, 100% of the voting and economic
interests); (b) whose sole business purpose is to hold one or more
investments on behalf of the Regulated Fund (and, in the case of an
SBIC Subsidiary (as defined below), maintain a license under the SBA
Act (as defined below) and issue debentures guaranteed by the SBA
(as defined below)); (c) with respect to which the Regulated Fund's
Board has the sole authority to make all determinations with respect
to the SPV Sub's participation under the conditions of the
application; and (d) that would be an investment company but for
section 3(c)(1) or 3(c)(7) of the Act. ``SBIC Subsidiary'' means an
SPV Sub that is licensed by the Small Business Administration (the
``SBA'') to operate under the Small Business Investment Act of 1958
(the ``SBA Act'') as a small business investment company (an
``SBIC'').
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5. When considering Potential Co-Investment Transactions for any
Regulated Fund, the applicable Investment Adviser will consider the
Objectives and Strategies, investment policies, investment positions,
capital available for investment (``Available Capital''),\9\ and other
factors relevant to such Regulated Fund. Opportunities for Potential
Co-Investment Transactions may arise when an investment adviser
considers for a Co-Investment Affiliate investment opportunities that
may be appropriate for a Regulated Fund. Upon issuance of the Order,
the Investment Advisers will refer to the Investment Advisers of the
Regulated Funds all Potential Co-Investment Transactions within a
Regulated Fund's Objectives and Strategies that are considered for a
Co-Investment Affiliate, and such investment opportunities may result
in a Co-Investment Transaction.
---------------------------------------------------------------------------
\9\ ``Available Capital'' consists solely of liquid assets not
held for permanent investment, including cash, amounts that can
currently be drawn down from lines of credit, and marketable
securities held for short-term purposes. In addition, Available
Capital would include bona fide uncalled capital commitments that
can be called by the settlement date of the Co-Investment
Transaction.
---------------------------------------------------------------------------
6. Other than pro rata dispositions and Follow-On Investments as
provided in conditions 7 and 8, and upon making the determinations
required in conditions 1 and 2(a), the applicable Investment Adviser
will present each Potential Co-Investment Transaction and the proposed
allocation to the directors or trustees, as applicable, eligible to
vote under section 57(o) of the Act (``Eligible Directors'') and the
``required majority,'' as defined in section 57(o) of the Act
(``Required Majority''),\10\ will approve each Co-Investment
Transaction prior to any investment by a Fund.
---------------------------------------------------------------------------
\10\ With respect to Regulated Funds that are not BDCs, the
defined terms Eligible Directors and Required Majority apply as if
each Regulated Fund were a BDC subject to section 57(o) of the Act.
---------------------------------------------------------------------------
7. With respect to the pro rata dispositions and Follow-On
Investments as 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 Co-Investment Affiliate
in such disposition or Follow-On Investment is proportionate to its
outstanding investments in the issuer immediately preceding the
disposition or Follow-On Investment, as the case may be; and (ii) the
Board of the Regulated Fund has approved that Regulated Fund's
participation in pro rata dispositions and Follow-On Investments as
being in the best interests of the Regulated Fund. If the Board does
not so approve, any such disposition or Follow-On Investment will be
submitted to the Regulated Fund's Eligible Directors. The Board of any
Regulated Fund may at any time rescind, suspend or qualify its approval
of pro rata dispositions and Follow-On Investments with the result that
all dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
8. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than
indirectly through share ownership in one of the Regulated Funds.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company or a company
controlled by such registered investment company unless the Commission
has granted an order permitting such transactions. 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 such 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 BDCs. Because the
Commission has not adopted any rules under section 57(a)(4), rule 17d-1
applies.
2. Applicants submit that the Investment Advisers and the entities
that they advise would be deemed to be a person related to a Regulated
Fund in a manner described by sections 17(d) or 57(b) and therefore
prohibited by sections 17(d) or 57(a)(4) and rule 17d-1 from
participating in the Co-Investment Transactions. Further, because the
SPV Subs are controlled by the Regulated Funds, the SPV Subs are
subject to sections 17(d) or 57(a)(4) and would be prohibited by rule
17d-1 from participating in the Co-Investment Transactions without the
Order.
3. Rule 17d-1 under the Act generally prohibits participation by a
registered investment company, or a company controlled by such
registered investment company, and an affiliated person (as defined in
section 2(a)(3) of the Act) or principal underwriter for
[[Page 7237]]
that investment company, or an affiliated person of such affiliated
person or principal underwriter, in any joint enterprise or other joint
arrangement or profit sharing plan, as defined in the rule, absent an
order by the Commission. Similarly, rule 17d-1, as made applicable to
BDCs by section 57(i), prohibits any person who is related to a BDC in
a manner described in section 57(b), acting as principal, from
participating in, or effecting any transaction in connection with, any
joint enterprise or other joint arrangement or profit-sharing plan in
which the BDC (or a company controlled by such BDC) is a participant,
absent an order from the Commission. 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.
4. 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 any Order granting the requested relief will
be subject to the following conditions:
1. Each time an investment adviser to any Co-Investment Affiliate
considers a Potential Co-Investment Transaction for a Co-Investment
Affiliate that falls within a Regulated Fund's then-current Objectives
and Strategies, the Regulated Fund's Investment Adviser will make an
independent determination of the appropriateness of the investment for
the Regulated Fund in light of such Regulated Fund's then-current
circumstances.
2. (a) If the Investment Adviser deems the Regulated Fund's
participation in any such Potential Co-Investment Transaction is
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 an Investment Adviser to
be invested by the Regulated Fund in the Potential Co-Investment
Transaction together with the amount proposed to be invested by the
other Co-Investment Affiliates, collectively, in the same transaction,
exceeds the amount of the investment opportunity, the amount proposed
to be invested by each such party will be allocated among them pro rata
based on each participant's Available Capital available for investment
in the asset class being allocated, up to the amount proposed to be
invested by each. The Investment Advisers will provide the Eligible
Directors of each participating Regulated Fund with information
concerning each participating Co-Investment Affiliate'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 Investment Adviser will distribute written information
concerning the Potential Co-Investment Transaction, including the
amount proposed to be invested by each Co-Investment Affiliate, to the
Eligible Directors of each participating Regulated Fund for their
consideration. A Regulated Fund will co-invest with Co-Investment
Affiliates only if, prior to such Regulated Fund's and any Co-
Investment Affiliates' participation in the Potential Co-Investment
Transaction, a Required Majority of such Regulated Fund 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 of such
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 such Regulated Fund; and
(B) such Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by the Co-Investment Affiliates would not
disadvantage such Regulated Fund, and participation by such Regulated
Fund is not on a basis different from or less advantageous than that of
any Co-Investment Affiliate; provided, that if a Co-Investment
Affiliate, other than such Regulated Fund, gains the right to nominate
a director for election to a portfolio company's board of directors or
the right to have a board observer or any similar right to participate
in the governance or management of the portfolio company, such event
shall not be interpreted to prohibit the Required Majority from
reaching the conclusions required by this condition (2)(c)(iii), if:
(A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
(B) the Investment Advisers agree to, and do, provide, periodic
reports to such 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 Co-Investment Affiliate
or any affiliated person of a Co-Investment Affiliate receives in
connection with the right of the Co-Investment Affiliate 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 Co-Investment Affiliates (the
Co-Investment Affiliates (other than the Regulated Funds) may, in turn,
share their portion with their affiliated persons) and the applicable
Regulated Fund in accordance with the amount of each party's
investment; and
(iv) the proposed investment by such Regulated Fund will not
benefit the Investment Advisers or the Co-Investment Affiliates or any
affiliated person of either of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by
condition 13, (B) to the extent permitted by sections 17(e) and 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 Investment Adviser will present to the Board of
the Regulated Fund, on a quarterly basis, a record of all investments
made by the Co-Investment Affiliates in Potential Co-Investment
Transactions during the preceding quarter that fell within such
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
[[Page 7238]]
offered to the Regulated Fund. All information presented to the Board
of such Regulated Fund pursuant to this condition will be kept for the
life of such 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, below, a Regulated Fund will not invest in reliance on the
Order in any issuer in which any Co-Investment Affiliate or any
affiliated person of a Co-Investment Affiliate 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 such Regulated Fund as for the Co-Investment
Affiliates. The grant to a Co-Investment Affiliate, but not such
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 Co-Investment Affiliate elects to sell, exchange or
otherwise dispose of an interest in a security that was acquired in a
Co-Investment Transaction, the applicable Investment Adviser 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 other Co-Investment
Affiliates.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Co-Investment Affiliate 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
each 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 applicable Investment 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 Co-Investment Affiliate will bear its own expenses in
connection with any such disposition.
8. (a) If any Co-Investment Affiliate desires to make a Follow-On
Investment in a portfolio company whose securities were acquired in a
Co-Investment Transaction, the Investment Adviser 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 Co-Investment Affiliate 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 applicable Investment 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 Co-Investment
Affiliate's outstanding investments immediately preceding the Follow-On
Investment; and
(ii) the aggregate amount recommended by the applicable Investment
Adviser to be invested by such Regulated Fund in the Follow-On
Investment, together with the amount proposed to be invested by the
other Co-Investment Affiliates 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
Available Capital available for investment in the asset class being
allocated, up to the amount proposed to be invested by each.
(d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in the
application.
9. The Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by any Co-Investment Affiliate that the applicable
Regulated Fund considered but declined to participate in, so that the
Non-Interested Directors may determine whether all investments made
during the preceding quarter, including those investments which such
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
applicable Regulated Fund of participating in new and existing Co-
Investment Transactions. All information presented to such Regulated
Fund's Board pursuant to this condition will be kept for the life of
such Regulated Fund and at least two years thereafter, and will be
subject to examination by the Commission and its staff.
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 as if each of the investments permitted under these conditions
were approved by the Required Majority under section 57(f).
11. No Non-Interested Director of a Regulated Fund also will be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the 1940 Act) of any of the Co-
Investment Affiliates (other than any other 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 applicable Investment Adviser under its
respective investment advisory agreement with the applicable Regulated
Fund or other Co-Investment Affiliate, be shared by such Regulated Fund
and each Co-Investment Affiliate in proportion to the relative amounts
of the securities held or to be acquired or disposed of, as the case
may be.
[[Page 7239]]
13. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable) received in connection with a Co-Investment
Transaction will be distributed to the participating applicable
Regulated Fund and the Co-Investment Affiliates on a pro rata basis
based on the amount they invested or committed, as the case may be, in
such Co-Investment Transaction. If any transaction fee is to be held by
the Investment Advisers of a Co-Investment Affiliate pending
consummation of the transaction, the fee will be deposited into an
account maintained by the Investment Advisers of Co-Investment
Affiliates 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 between such Fund
and the Co-Investment Affiliates based on the amounts they invest in
such Co-Investment Transaction. None of the Co-Investment Affiliates,
their investment advisers, nor any affiliated person (as defined in the
Act) of the Regulated 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 Co-Investment
Affiliates, 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 the Investment Advisers, investment advisory fees paid in
accordance with the agreements between such Investment Advisers and the
Co-Investment Affiliates).
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02506 Filed 2-5-14; 8:45 am]
BILLING CODE 8011-01-P
