Horizon Technology Finance Corporation, et al., 51323-51327 [2017-23920]
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Federal Register / Vol. 82, No. 212 / Friday, November 3, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32888; File No. 812–14738]
Horizon Technology Finance
Corporation, et al.
October 30, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
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AGENCY:
Notice of an 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
permitting certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit a business
development company (‘‘BDC’’) and
certain closed-end investment
companies to co-invest in portfolio
companies with each other and with
affiliated investment funds.
APPLICANTS: Horizon Technology
Finance Corporation (the ‘‘Company’’),
Horizon Credit II LLC (‘‘Credit II’’),
Horizon Life Science Debt Strategies
Fund L.P. (the ‘‘Private Fund’’), and
Horizon Technology Finance
Management LLC (the ‘‘Company
Adviser’’).
FILING DATES: The application was filed
on January 23, 2017, and amended on
June 28, 2017 and September 13, 2017.
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 November 24, 2017 and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.
NE., Washington, DC 20549–1090.
Applicants: 312 Farmington Avenue,
Farmington, CT 06032.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
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at (202) 551–6812, or Robert H. Shapiro,
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. The Company was organized as a
corporation under the General
Corporation Law of the State of
Delaware on March 16, 2010 for the
purpose of acquiring, continuing and
expanding the business of Compass
Horizon Funding Company LLC, its
Wholly Owned Subsidiary (as defined
below). The Company elected to be
treated as a BDC 1 through a notification
of election to be subject to Sections 55
through 65 of the Act on Form N–54A.
The Company’s investment objectives
and strategies are to maximize the total
return of the Company’s investment
portfolio by generating current income
from the debt investments the Company
makes and capital appreciation from the
warrants the Company receives when
making such debt investments. The
Company has a six-member board of
directors (the ‘‘Board’’), of which four
members are not ‘‘interested persons’’ of
the Company within the meaning of
section 2(a)(19) of the Act (the ‘‘NonInterested Directors’’). No NonInterested Director will have any direct
or indirect financial interest in any CoInvestment Transaction or any interest
in any portfolio company, other than
indirectly through share ownership in a
Regulated Fund (as defined below).
2. Credit II is a special purpose
Delaware limited liability company and
a Wholly-Owned Investment Subsidiary
of the Company.
3. The Private Fund was formed as a
Delaware limited partnership on July
20, 2016 and would be an investment
company but for the exclusion from the
definition of investment company
provided by section 3(c)(7) of the Act.
The Private Fund is managed by the
Company Adviser. The Private Fund’s
investment objective is to maximize
total returns for its limited partners by
generating current income from debt
1 Section 2(a)(48) of the Act defines a BDC to be
any closed-end investment company that operates
for the purpose of making investments in securities
described in Section 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
assistance with respect to the issuers of such
securities.
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investments and capital appreciation
from equity participations associated
with those investments. The Private
Fund’s investment objective and
investment policies are substantially
similar to the Objectives and Strategies
of the Company.2
4. The Company Adviser, a Delaware
limited liability company and an
investment adviser registered with the
Commission under the Investment
Advisers Act of 1940 (‘‘Advisers Act’’),
serves as investment adviser to both the
Company and the Private Fund. Under
the investment advisory agreements of
the Company and the Private Fund, the
Company Adviser manages the portfolio
of each entity in accordance with the
investment objective and policies of
each, makes investment decisions for
each entity, places purchase and sale
orders for portfolio transactions for each
entity, and otherwise manages the dayto-day operations of each entity, subject,
in the case of the Company, to the
oversight of its Board.
5. Applicants seek an order (‘‘Order’’)
to permit one or more Regulated Funds 3
and/or one or more Affiliated Funds 4 to
participate in the same investment
opportunities through a proposed coinvestment program (the ‘‘CoInvestment 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
2 ‘‘Objectives and Strategies’’ means a Regulated
Fund’s (defined below) 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.
3 ‘‘Regulated Fund’’ means the Company and any
Future Regulated Fund. ‘‘Future Regulated Fund’’
means any closed-end management investment
company (a) that is registered under the Act or has
elected to be regulated as a BDC, (b) whose
investment adviser is an Adviser, and (c) that
intends to participate in the Co-Investment
Program. The term ‘‘Adviser’’ means (a) the
Company Adviser and (b) any future investment
adviser that controls, is controlled by or is under
common control with the Company Adviser or its
successor and is registered as an investment adviser
under the Advisers Act. The term ‘‘successor,’’ as
applied to each Adviser, means an entity that
results from a reorganization into another
jurisdiction or chang in the type of business
organization.
4 ‘‘Affiliated Fund’’ means the Private Fund and
any Future Affiliated Fund. ‘‘Future Affiliated
Fund’’ means any entity (a) whose investment
adviser is an Adviser, (b) that would be an
investment company but for section 3(c)(1) or
3(c)(7) of the Act, and (c) that intends to participate
in the Co-Investment Program.
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to price; 5 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
Subsidiary) participated together with
one or more other Regulated Funds and/
or one or more Affiliated Funds in
reliance on the requested Order.
‘‘Potential Co-Investment Transaction’’
means any investment opportunity in
which a Regulated Fund (or its WhollyOwned Investment Subsidiary) could
not participate together with one or
more Affiliated Funds and/or one or
more other Regulated Funds without
obtaining and relying on the Order.6
6. Applicants state that a Regulated
Fund may, from time to time, form one
or more Wholly-Owned Investment
Subsidiaries.7 Such a subsidiary would
be prohibited from investing in a CoInvestment Transaction with any
Affiliated Fund or Regulated Fund
because it would be a company
controlled by its parent Regulated Fund
for purposes of section 57(a)(4) and rule
17d–1. Applicants request that each
Wholly-Owned Investment Subsidiary
be permitted to participate in CoInvestment Transactions in lieu of its
parent Regulated Fund and that the
Wholly-Owned Investment Subsidiary’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 Subsidiary would have no
purpose other than serving as a holding
vehicle for the Regulated Fund’s
investments and, therefore, no conflicts
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5 The
term ‘‘private placement transactions’’
means transactions in which the offer and sale of
securities by the issuer are exempt from registration
under the Securities Act of 1933 (‘‘1933 Act’’).
6 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.
7 The term ‘‘Wholly-Owned Investment
Subsidiary’’ means an entity (i) that is whollyowned 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 and incur debt (which is or
would be consolidated with other indebtedness of
such Regulated Fund for financial reporting or
compliance purposed under the Act) 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 sections 3(c)(1) or 3(c)(7) of the
Act.
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of interest could arise between the
Regulated Fund and the Wholly-Owned
Investment Subsidiary. The Regulated
Fund’s Board would make all relevant
determinations under the conditions
with regard to a Wholly-Owned
Investment Subsidiary’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 Subsidiary
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 Subsidiaries, the Board will
also be informed of, and take into
consideration, the relative participation
of the Regulated Fund and the WhollyOwned Investment Subsidiary.
7. 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 (‘‘Available Capital’’),
and other pertinent factors applicable to
that Regulated Fund. The Board of each
Regulated Fund, including the NonInterested Directors has (or will have
prior to relying on the requested Order)
determined that it is in the best interests
of the Regulated Fund to participate in
the Co-Investment Transaction.
8. 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’’) 8 will
approve each Co-Investment
Transaction prior to any investment by
the participating Regulated Fund.
9. With respect to the pro rata
dispositions and Follow-On Investments
provided in conditions 7 and 8, a
Regulated Fund may participate in a pro
rata disposition or Follow-On
Investment without obtaining prior
approval of the Required Majority if,
among other things: (i) The proposed
participation of each Regulated Fund
and Affiliated Fund in such disposition
is proportionate to its outstanding
investments in the issuer immediately
preceding the disposition or Follow-On
8 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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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.
10. Applicants also represent that if
the Advisers, the principals of the
Advisers (‘‘Principals’’), or any person
controlling, controlled by, or under
common control with an Adviser or the
Principals, and the Affiliated Funds
(collectively, the ‘‘Holders’’) own in the
aggregate more than 25% of the
outstanding voting shares of a Regulated
Fund (the ‘‘Shares’’), then the Holders
will vote such Shares as required under
condition 14. Applicants believe this
condition will ensure that the NonInterested Directors will act
independently in evaluating the CoInvestment Program, because the ability
of the Advisers or the Principals to
influence the Non-Interested Directors
by a suggestion, explicit or implied, that
the Non-Interested Directors can be
removed will be limited significantly.
Applicants represent that the NonInterested Directors will evaluate and
approve any such independent third
party, taking into account its
qualifications, reputation for
independence, cost to the shareholders,
and other factors that they deem
relevant.
Applicants’ Legal Analysis
1. Section 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 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
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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 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.
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Applicants’ Condition
Applicants agree that the Order will
be subject to the following conditions:
1. Each time an Adviser considers a
Potential Co-Investment Transaction for
an Affiliated Fund or another Regulated
Fund that falls within a Regulated
Fund’s then-current Objectives and
Strategies, the Regulated Fund’s Adviser
will make an independent
determination of the appropriateness of
the investment for the Regulated Fund
in light of the Regulated Fund’s thencurrent 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.
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(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
and Affiliated Funds, collectively, in the
same transaction, exceeds the amount of
the investment opportunity, the
investment opportunity will be
allocated among them pro rata based on
each participant’s Available Capital, up
to the amount proposed to be invested
by each. The applicable Adviser will
provide the Eligible Directors of each
participating Regulated Fund with
information concerning each
participating party’s Available Capital to
assist the Eligible Directors with their
review of the Regulated Fund’s
investments for compliance with these
allocation procedures.
(c) After making the determinations
required in conditions 1 and 2(a), the
applicable Adviser will distribute
written information concerning the
Potential Co-Investment Transaction
(including the amount proposed to be
invested by each participating Regulated
Fund and Affiliated Fund) to the
Eligible Directors of each participating
Regulated Fund for their consideration.
A Regulated Fund will co-invest with
one or more other Regulated Funds and/
or one or more Affiliated Funds only if,
prior to the Regulated Fund’s
participation in the Potential 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
stockholders and do not involve
overreaching in respect of the Regulated
Fund or its stockholders on the part of
any person concerned;
(ii) the Potential Co-Investment
Transaction is consistent with:
(A) The interests of the Regulated
Fund’s stockholders; and
(B) the Regulated Fund’s then-current
Objectives and Strategies;
(iii) the investment by any other
Regulated Funds or Affiliated Funds
would not disadvantage the Regulated
Fund, and participation by the
Regulated Fund would not be on a basis
different from or less advantageous than
that of any other Regulated Funds or
Affiliated Funds; provided that if any
other Regulated Funds or Affiliated
Funds, 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
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51325
governance or management of the
portfolio company, such event shall not
be interpreted to prohibit the Required
Majority from reaching the conclusions
required by this condition (2)(c)(iii), if:
(A) The Eligible Directors will have
the right to ratify the selection of such
director or board observer, if any;
(B) the applicable Adviser agrees to,
and does, provide periodic reports to
the Regulated Fund’s Board with respect
to the actions of such director or the
information received by such board
observer or obtained through the
exercise of any similar right to
participate in the governance or
management of the portfolio company;
and
(C) any fees or other compensation
that any Affiliated Fund or any
Regulated Fund or any affiliated person
of any Affiliated Fund or any Regulated
Fund receives in connection with the
right of the Affiliated Fund or Regulated
Fund to nominate a director or appoint
a board observer or otherwise to
participate in the governance or
management of the portfolio company
will be shared proportionately among
the participating Affiliated Funds (who
each may, in turn, share its portion with
its affiliated persons) and the
participating Regulated Fund in
accordance with the amount of each
party’s investment; and
(iv) the proposed investment by the
Regulated Fund will not benefit the
Advisers, any Affiliated Funds or other
Regulated Funds or any affiliated person
of any of them (other than the parties to
the Co-Investment Transaction), except
(A) to the extent permitted by condition
13, (B) to the extent permitted by
section 17(e) or 57(k) of the Act, as
applicable, (C) indirectly, as a result of
an interest in the securities issued by
one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or
other compensation described in
condition 2(c)(iii)(C).
3. Each Regulated Fund has the right
to decline to participate in any Potential
Co-Investment Transaction or to invest
less than the amount proposed.
4. The applicable Adviser will present
to the Board of each Regulated Fund, on
a quarterly basis, a record of all
investments in Potential Co-Investment
Transactions made by any of the other
Regulated Funds or Affiliated Funds
during the preceding quarter that fell
within the Regulated Fund’s 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
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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 9,
a Regulated Fund will not invest in
reliance on the Order in any issuer in
which another Regulated Fund, an
Affiliated Fund or any affiliated person
of another Regulated Fund or 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 Affiliated Fund. The grant to
an Affiliated Fund or another Regulated
Fund, but not the Regulated Fund, of
the right to nominate a director for
election to a portfolio company’s board
of directors, the right to have an
observer on the board of directors or
similar rights to participate in the
governance or management of the
portfolio company will not be
interpreted so as to violate this
condition 6, if conditions 2(c)(iii)(A), (B)
and (C) are met.
7. (a) If any Affiliated Fund or any
Regulated Fund elects to sell, exchange
or otherwise dispose of an interest in a
security that was acquired in a CoInvestment Transaction, the applicable
Advisers will:
(i) Notify each Regulated Fund that
participated in the Co-Investment
Transaction of the proposed disposition
at the earliest practical time; and
(ii) formulate a recommendation as to
participation by each Regulated Fund in
the disposition.
(b) Each Regulated Fund will have the
right to participate in such disposition
on a proportionate basis, at the same
price and on the same terms and
conditions as those applicable to the
participating Affiliated Funds and
Regulated Funds.
(c) A Regulated Fund may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Regulated Fund and each Affiliated
Fund in such disposition is
proportionate to its outstanding
investments in the issuer immediately
preceding the disposition; (ii) the Board
of the Regulated Fund has approved as
being in the best interests of the
Regulated Fund the ability to participate
9 This exception applies only to Follow-On
Investments by a Regulated Fund in issuers in
which the Regulated Fund already holds
investments.
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in such dispositions on a pro rata basis
(as described in greater detail in the
application); and (iii) the Board of the
Regulated Fund is provided on a
quarterly basis with a list of all
dispositions made in accordance with
this condition. In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such disposition solely to
the extent that a Required Majority
determines that it is in the Regulated
Fund’s best interests.
(d) Each Affiliated Fund and each
Regulated Fund will bear its own
expenses in connection with any such
disposition.
8. (a) If any Affiliated Fund or
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 Follow-On
Investment at the earliest practical time;
and
(ii) formulate a recommendation as to
the proposed participation, including
the amount of the proposed Follow-On
Investment, by each Regulated Fund.
(b) A Regulated Fund may participate
in such Follow-On Investment without
obtaining prior approval of the Required
Majority if: (i) The proposed
participation of each Regulated Fund
and each Affiliated Fund in such
investment is proportionate to its
outstanding investments in the issuer
immediately preceding the Follow-On
Investment; and (ii) the Board of the
Regulated Fund has approved as being
in the best interests of the Regulated
Fund the ability to participate in
Follow-On Investments on a pro rata
basis (as described in greater detail in
the application). In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such Follow-On
Investment solely to the extent that a
Required Majority determines that it is
in the Regulated Fund’s best interests.
(c) If, with respect to any Follow-On
Investment:
(i) The amount of the opportunity is
not based on the Regulated Funds’ and
the Affiliated Funds’ outstanding
investments immediately preceding the
Follow-On Investment; and
(ii) the aggregate amount
recommended by the applicable Adviser
to be invested by the applicable
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Regulated Fund in the Follow-On
Investment, together with the amount
proposed to be invested by other
participating Regulated Funds and
Affiliated Funds, collectively, in the
same transaction, exceeds the amount of
the investment opportunity, then the
investment opportunity will be
allocated among them pro rata based on
each participant’s Available Capital, up
to the 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 other Regulated Funds or
Affiliated Funds that the Regulated
Fund considered but declined to
participate in, so that the Non-Interested
Directors may determine whether all
investments made during the preceding
quarter, including those investments
that the Regulated Fund considered but
declined to participate in, comply with
the conditions of the Order. In addition,
the Non-Interested Directors will
consider at least annually the continued
appropriateness for the Regulated Fund
of participating in new and existing CoInvestment Transactions.
10. Each Regulated Fund will
maintain the records required by section
57(f)(3) of the Act as if each of the
Regulated Funds were a BDC and each
of the investments permitted under
these conditions were approved by the
Required Majority under section 57(f) of
the Act.
11. No Non-Interested Director of a
Regulated Fund will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act) of an
Affiliated Fund.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the 1933 Act)
will, to the extent not payable by the
Advisers under their respective
investment advisory agreements with
Affiliated Funds and the Regulated
Funds, be shared by the Regulated
Funds and the Affiliated Funds in
proportion to the relative amounts of the
securities held or to be acquired or
disposed of, as the case may be.
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ethrower on DSK3G9T082PROD with NOTICES
Federal Register / Vol. 82, No. 212 / Friday, November 3, 2017 / Notices
13. Any transaction fee 10 (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 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 Co-Investment
Transaction, the fee will be deposited
into an account maintained by such
Adviser at a bank or banks having the
qualifications prescribed in section
26(a)(1) of the Act, and the account will
earn a competitive rate of interest that
will also be divided pro rata among the
participating Regulated Funds and
Affiliated Funds based on the amounts
they invest in such Co-Investment
Transaction. None of the Affiliated
Funds, the Advisers, the other
Regulated Funds, or any affiliated
person of the Regulated Funds or
Affiliated Funds will receive additional
compensation or remuneration of any
kind as a result of or in connection with
a Co-Investment Transaction (other than
(a) in the case of the Regulated Funds
and the Affiliated Funds, the pro rata
transaction fees described above and
fees or other compensation described in
condition 2(c)(iii)(C); and (b) in the case
of an Adviser, investment advisory fees
paid in accordance with the investment
advisory agreements between such
Adviser and the Regulated Fund or
Affiliated Fund).
14. If the Holders own in the aggregate
more than 25% of the Shares of a
Regulated Fund, then the Holders will
vote such Shares as directed by an
independent third party when voting on
(1) the election of directors; (2) the
removal of one or more directors; or (3)
any other matter under either the Act or
applicable State laws affecting the
Board’s composition, size or manner of
election.
15. Each Regulated Fund’s chief
compliance officer, as defined in rule
38a–1(a)(4), will prepare an annual
report for the Board of such Regulated
Fund that evaluates (and documents the
basis of that evaluation) the Regulated
Fund’s compliance with the terms and
conditions of the application and
procedures established to achieve such
compliance.
10 The Applicants are not requesting, and the staff
is not providing, any relief for transaction fees
received in connection with any Co-Investment
Transaction.
VerDate Sep<11>2014
16:18 Nov 02, 2017
Jkt 244001
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–23920 Filed 11–2–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81978; File No. SR–BX–
2017–049]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Remove References to
Nasdaq Options Services
October 30, 2017.
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 October
26, 2017, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to remove
references to Nasdaq Options Services.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqbx.cchwallstreet.com/,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
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
Exchange 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 these
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 aspects of such
statements.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00118
Fmt 4703
Sfmt 4703
51327
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to remove
references to ‘‘Nasdaq Options Services’’
and replace those references with
‘‘Nasdaq Execution Services’’ where the
entity is not otherwise noted. The
Exchange previously filed a proposed
rule change which replaced Nasdaq
Options Services with Nasdaq
Execution Services.3 Some references to
Nasdaq Options Services were not
removed from the Exchange’s Rulebook.
At this time, the Exchange proposes to
remove those references in the Rulebook
and replace with references to ‘‘Nasdaq
Execution Services,’’ where applicable.
No other changes are being proposed
in this filing. The Exchange represents
that these changes are concerned solely
with the administration of the Exchange
and do not affect the meaning,
administration, or enforcement of any
rules of the Exchange or the rights,
obligations, or privileges of Exchange
members or their associated persons in
any way. Accordingly, this filing is
being submitted under Rule 19b–4(f)(3).
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,4 in general, and furthers the
objectives of Section 6(b)(5) of the Act,5
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest by
avoiding confusion with the routing
entity. The Exchange proposes to
remove references to ‘‘Nasdaq Options
Services’’ and replace those references
with ‘‘Nasdaq Execution Services’’
where the entity is not otherwise noted.
The Exchange previously filed a
proposed rule change which replaced
Nasdaq Options Services with Nasdaq
Execution Services.6 This proposed
change is non-substantive.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
3 See Securities Exchange Act Release No. 714
(January 28, 2014), 79 FR 6256 (February 3, 2014)
(SR–BX–2014–004).
4 15 U.S.C. 78f(b).
5 15 U.S.C. 78f(b)(5).
6 See Securities Exchange Act Release No. 714
(January 28, 2014), 79 FR 6256 (February 3, 2014)
(SR–BX–2014–004).
E:\FR\FM\03NON1.SGM
03NON1
]]>Agencies
[Federal Register Volume 82, Number 212 (Friday, November 3, 2017)]
[Notices]
[Pages 51323-51327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23920]
[[Page 51323]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32888; File No. 812-14738]
Horizon Technology Finance Corporation, et al.
October 30, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
Notice of an 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 permitting certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.
SUMMARY OF APPLICATION: Applicants request an order to permit a
business development company (``BDC'') and certain closed-end
investment companies to co-invest in portfolio companies with each
other and with affiliated investment funds.
APPLICANTS: Horizon Technology Finance Corporation (the ``Company''),
Horizon Credit II LLC (``Credit II''), Horizon Life Science Debt
Strategies Fund L.P. (the ``Private Fund''), and Horizon Technology
Finance Management LLC (the ``Company Adviser'').
FILING DATES: The application was filed on January 23, 2017, and
amended on June 28, 2017 and September 13, 2017.
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 November 24, 2017 and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St. NE., Washington, DC 20549-1090. Applicants: 312 Farmington Avenue,
Farmington, CT 06032.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812, or Robert H. Shapiro, 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. The Company was organized as a corporation under the General
Corporation Law of the State of Delaware on March 16, 2010 for the
purpose of acquiring, continuing and expanding the business of Compass
Horizon Funding Company LLC, its Wholly Owned Subsidiary (as defined
below). The Company elected to be treated as a BDC \1\ through a
notification of election to be subject to Sections 55 through 65 of the
Act on Form N-54A. The Company's investment objectives and strategies
are to maximize the total return of the Company's investment portfolio
by generating current income from the debt investments the Company
makes and capital appreciation from the warrants the Company receives
when making such debt investments. The Company has a six-member board
of directors (the ``Board''), of which four members are not
``interested persons'' of the Company within the meaning of section
2(a)(19) of the Act (the ``Non-Interested Directors''). No Non-
Interested Director will have any direct or indirect financial interest
in any Co-Investment Transaction or any interest in any portfolio
company, other than indirectly through share ownership in a Regulated
Fund (as defined below).
---------------------------------------------------------------------------
\1\ Section 2(a)(48) of the Act defines a BDC to be any closed-
end investment company that operates for the purpose of making
investments in securities described in Section 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
---------------------------------------------------------------------------
2. Credit II is a special purpose Delaware limited liability
company and a Wholly-Owned Investment Subsidiary of the Company.
3. The Private Fund was formed as a Delaware limited partnership on
July 20, 2016 and would be an investment company but for the exclusion
from the definition of investment company provided by section 3(c)(7)
of the Act. The Private Fund is managed by the Company Adviser. The
Private Fund's investment objective is to maximize total returns for
its limited partners by generating current income from debt investments
and capital appreciation from equity participations associated with
those investments. The Private Fund's investment objective and
investment policies are substantially similar to the Objectives and
Strategies of the Company.\2\
---------------------------------------------------------------------------
\2\ ``Objectives and Strategies'' means a Regulated Fund's
(defined below) 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.
---------------------------------------------------------------------------
4. The Company Adviser, a Delaware limited liability company and an
investment adviser registered with the Commission under the Investment
Advisers Act of 1940 (``Advisers Act''), serves as investment adviser
to both the Company and the Private Fund. Under the investment advisory
agreements of the Company and the Private Fund, the Company Adviser
manages the portfolio of each entity in accordance with the investment
objective and policies of each, makes investment decisions for each
entity, places purchase and sale orders for portfolio transactions for
each entity, and otherwise manages the day-to-day operations of each
entity, subject, in the case of the Company, to the oversight of its
Board.
5. Applicants seek an order (``Order'') to permit one or more
Regulated Funds \3\ and/or one or more Affiliated Funds \4\ 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
[[Page 51324]]
to price; \5\ 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
Subsidiary) participated together with one or more other Regulated
Funds and/or one or more Affiliated Funds in reliance on the requested
Order. ``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Fund (or its Wholly-Owned Investment
Subsidiary) could not participate together with one or more Affiliated
Funds and/or one or more other Regulated Funds without obtaining and
relying on the Order.\6\
---------------------------------------------------------------------------
\3\ ``Regulated Fund'' means the Company and any Future
Regulated Fund. ``Future Regulated Fund'' means any closed-end
management investment company (a) that is registered under the Act
or has elected to be regulated as a BDC, (b) whose investment
adviser is an Adviser, and (c) that intends to participate in the
Co-Investment Program. The term ``Adviser'' means (a) the Company
Adviser and (b) any future investment adviser that controls, is
controlled by or is under common control with the Company Adviser or
its successor and is registered as an investment adviser under the
Advisers Act. The term ``successor,'' as applied to each Adviser,
means an entity that results from a reorganization into another
jurisdiction or chang in the type of business organization.
\4\ ``Affiliated Fund'' means the Private Fund and any Future
Affiliated Fund. ``Future Affiliated Fund'' means any entity (a)
whose investment adviser is an Adviser, (b) that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act,
and (c) that intends to participate in the Co-Investment Program.
\5\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act of 1933
(``1933 Act'').
\6\ 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.
---------------------------------------------------------------------------
6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subsidiaries.\7\ Such a
subsidiary would be prohibited from investing in a Co-Investment
Transaction with any Affiliated Fund or Regulated Fund because it would
be a company controlled by its parent Regulated Fund for purposes of
section 57(a)(4) and rule 17d-1. Applicants request that each Wholly-
Owned Investment Subsidiary be permitted to participate in Co-
Investment Transactions in lieu of its parent Regulated Fund and that
the Wholly-Owned Investment Subsidiary'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 Subsidiary 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 Subsidiary. The Regulated Fund's Board would
make all relevant determinations under the conditions with regard to a
Wholly-Owned Investment Subsidiary'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
Subsidiary 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 Subsidiaries, the Board will also be
informed of, and take into consideration, the relative participation of
the Regulated Fund and the Wholly-Owned Investment Subsidiary.
---------------------------------------------------------------------------
\7\ The term ``Wholly-Owned Investment Subsidiary'' 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 and incur debt (which is
or would be consolidated with other indebtedness of such Regulated
Fund for financial reporting or compliance purposed under the Act)
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 sections 3(c)(1) or 3(c)(7) of the Act.
---------------------------------------------------------------------------
7. When considering Potential Co-Investment Transactions for any
Regulated Fund, the applicable Adviser will consider only the
Objectives and Strategies, investment policies, investment positions,
capital available for investment (``Available Capital''), and other
pertinent factors applicable to that Regulated Fund. The Board of each
Regulated Fund, including the Non-Interested Directors has (or will
have prior to relying on the requested Order) determined that it is in
the best interests of the Regulated Fund to participate in the Co-
Investment Transaction.
8. 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'') \8\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
---------------------------------------------------------------------------
\8\ 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).
---------------------------------------------------------------------------
9. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, a Regulated Fund may
participate in a pro rata disposition or Follow-On Investment without
obtaining prior approval of the Required Majority if, among other
things: (i) The proposed participation of each Regulated Fund and
Affiliated Fund in such disposition is proportionate to its outstanding
investments in the issuer immediately preceding the disposition or
Follow-On Investment, as the case may be; and (ii) the Board of the
Regulated Fund has approved that Regulated Fund's participation in pro
rata dispositions and Follow-On Investments as being in the best
interests of the Regulated Fund. If the Board does not so approve, any
such disposition or Follow-On Investment will be submitted to the
Regulated Fund's Eligible Directors. The Board of any Regulated Fund
may at any time rescind, suspend or qualify its approval of pro rata
dispositions and Follow-On Investments with the result that all
dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
10. Applicants also represent that if the Advisers, the principals
of the Advisers (``Principals''), or any person controlling, controlled
by, or under common control with an Adviser or the Principals, and the
Affiliated Funds (collectively, the ``Holders'') own in the aggregate
more than 25% of the outstanding voting shares of a Regulated Fund (the
``Shares''), then the Holders will vote such Shares as required under
condition 14. Applicants believe this condition will ensure that the
Non-Interested Directors will act independently in evaluating the Co-
Investment Program, because the ability of the Advisers or the
Principals to influence the Non-Interested Directors by a suggestion,
explicit or implied, that the Non-Interested Directors can be removed
will be limited significantly. Applicants represent that the Non-
Interested Directors will evaluate and approve any such independent
third party, taking into account its qualifications, reputation for
independence, cost to the shareholders, and other factors that they
deem relevant.
Applicants' Legal Analysis
1. Section 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 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
[[Page 51325]]
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' Condition
Applicants agree that the Order will be subject to the following
conditions:
1. Each time an Adviser considers a Potential Co-Investment
Transaction for an Affiliated Fund or another Regulated Fund that falls
within a Regulated Fund's then-current Objectives and Strategies, the
Regulated Fund's Adviser will make an independent determination of the
appropriateness of the investment for the Regulated Fund in light of
the Regulated Fund's then-current circumstances.
2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
(b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by the other participating Regulated Funds and Affiliated
Funds, collectively, in the same transaction, exceeds the amount of the
investment opportunity, the investment opportunity will be allocated
among them pro rata based on each participant's Available Capital, up
to the amount proposed to be invested by each. The applicable Adviser
will provide the Eligible Directors of each participating Regulated
Fund with information concerning each participating party's Available
Capital to assist the Eligible Directors with their review of the
Regulated Fund's investments for compliance with these allocation
procedures.
(c) After making the determinations required in conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
Affiliated Fund) to the Eligible Directors of each participating
Regulated Fund for their consideration. A Regulated Fund will co-invest
with one or more other Regulated Funds and/or one or more Affiliated
Funds only if, prior to the Regulated Fund's participation in the
Potential Co-Investment Transaction, a Required Majority concludes
that:
(i) The terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its stockholders and do not involve overreaching in respect of
the Regulated Fund or its stockholders on the part of any person
concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(A) The interests of the Regulated Fund's stockholders; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by any other Regulated Funds or Affiliated
Funds would not disadvantage the Regulated Fund, and participation by
the Regulated Fund would not be on a basis different from or less
advantageous than that of any other Regulated Funds or Affiliated
Funds; provided that if any other Regulated Funds or Affiliated Funds,
but not the Regulated Fund itself, gains the right to nominate a
director for election to a portfolio company's board of directors or
the right to have a board observer or any similar right to participate
in the governance or management of the portfolio company, such event
shall not be interpreted to prohibit the Required Majority from
reaching the conclusions required by this condition (2)(c)(iii), if:
(A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
(B) the applicable Adviser agrees to, and does, provide periodic
reports to the Regulated Fund's Board with respect to the actions of
such director or the information received by such board observer or
obtained through the exercise of any similar right to participate in
the governance or management of the portfolio company; and
(C) any fees or other compensation that any Affiliated Fund or any
Regulated Fund or any affiliated person of any Affiliated Fund or any
Regulated Fund receives in connection with the right of the Affiliated
Fund or Regulated Fund to nominate a director or appoint a board
observer or otherwise to participate in the governance or management of
the portfolio company will be shared proportionately among the
participating Affiliated Funds (who each may, in turn, share its
portion with its affiliated persons) and the participating Regulated
Fund in accordance with the amount of each party's investment; and
(iv) the proposed investment by the Regulated Fund will not benefit
the Advisers, any Affiliated Funds or other Regulated Funds or any
affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by
condition 13, (B) to the extent permitted by section 17(e) or 57(k) of
the Act, as applicable, (C) indirectly, as a result of an interest in
the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in condition 2(c)(iii)(C).
3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
4. The applicable Adviser will present to the Board of each
Regulated Fund, on a quarterly basis, a record of all investments in
Potential Co-Investment Transactions made by any of the other Regulated
Funds or Affiliated Funds during the preceding quarter that fell within
the Regulated Fund's then-current Objectives and Strategies that were
not made available to the Regulated Fund, and an explanation of why the
investment opportunities were not offered to the Regulated Fund. All
information presented to the Board pursuant to this condition will be
kept
[[Page 51326]]
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 \9\, a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, an Affiliated Fund
or any affiliated person of another Regulated Fund or Affiliated Fund
is an existing investor.
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\9\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which the Regulated Fund already holds
investments.
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6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of
securities to be purchased, settlement date, and registration rights
will be the same for each participating Regulated Fund and Affiliated
Fund. The grant to an Affiliated Fund or another Regulated Fund, but
not the Regulated Fund, of the right to nominate a director for
election to a portfolio company's board of directors, the right to have
an observer on the board of directors or similar rights to participate
in the governance or management of the portfolio company will not be
interpreted so as to violate this condition 6, if conditions
2(c)(iii)(A), (B) and (C) are met.
7. (a) If any Affiliated Fund or any Regulated Fund elects to sell,
exchange or otherwise dispose of an interest in a security that was
acquired in a Co-Investment Transaction, the applicable Advisers will:
(i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest
practical time; and
(ii) formulate a recommendation as to participation by each
Regulated Fund in the disposition.
(b) Each Regulated Fund will have the right to participate in such
disposition on a proportionate basis, at the same price and on the same
terms and conditions as those applicable to the participating
Affiliated Funds and Regulated Funds.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Affiliated Fund in such
disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
(d) Each Affiliated Fund and each Regulated Fund will bear its own
expenses in connection with any such disposition.
8. (a) If any Affiliated Fund or 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 Follow-On Investment at the
earliest practical time; and
(ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Regulated Fund.
(b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Affiliated Fund
in such investment is proportionate to its outstanding investments in
the issuer immediately preceding the Follow-On Investment; and (ii) the
Board of the Regulated Fund has approved as being in the best interests
of the Regulated Fund the ability to participate in Follow-On
Investments on a pro rata basis (as described in greater detail in the
application). In all other cases, the Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority determines
that it is in the Regulated Fund's best interests.
(c) If, with respect to any Follow-On Investment:
(i) The amount of the opportunity is not based on the Regulated
Funds' and the Affiliated Funds' outstanding investments immediately
preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the applicable Adviser to
be invested by the applicable Regulated Fund in the Follow-On
Investment, together with the amount proposed to be invested by other
participating Regulated Funds and Affiliated Funds, collectively, in
the same transaction, exceeds the amount of the investment opportunity,
then the investment opportunity will be allocated among them pro rata
based on each participant's Available Capital, up to the 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 other Regulated Funds or Affiliated Funds that
the Regulated Fund considered but declined to participate in, so that
the Non-Interested Directors may determine whether all investments made
during the preceding quarter, including those investments that the
Regulated Fund considered but declined to participate in, comply with
the conditions of the Order. In addition, the Non-Interested Directors
will consider at least annually the continued appropriateness for the
Regulated Fund of participating in new and existing Co-Investment
Transactions.
10. Each Regulated Fund will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under section 57(f) of the Act.
11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act) of an Affiliated Fund.
12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the 1933 Act) will, to the
extent not payable by the Advisers under their respective investment
advisory agreements with Affiliated Funds and the Regulated Funds, be
shared by the Regulated Funds and the Affiliated Funds in proportion to
the relative amounts of the securities held or to be acquired or
disposed of, as the case may be.
[[Page 51327]]
13. Any transaction fee \10\ (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 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 Co-Investment Transaction, the fee will be
deposited into an account maintained by such Adviser at a bank or banks
having the qualifications prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive rate of interest that will also
be divided pro rata among the participating Regulated Funds and
Affiliated Funds based on the amounts they invest in such Co-Investment
Transaction. None of the Affiliated Funds, the Advisers, the other
Regulated Funds, or any affiliated person of the Regulated Funds or
Affiliated Funds will receive additional compensation or remuneration
of any kind as a result of or in connection with a Co-Investment
Transaction (other than (a) in the case of the Regulated Funds and the
Affiliated Funds, the pro rata transaction fees described above and
fees or other compensation described in condition 2(c)(iii)(C); and (b)
in the case of an Adviser, investment advisory fees paid in accordance
with the investment advisory agreements between such Adviser and the
Regulated Fund or Affiliated Fund).
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\10\ The Applicants are not requesting, and the staff is not
providing, any relief for transaction fees received in connection
with any Co-Investment Transaction.
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14. If the Holders own in the aggregate more than 25% of the Shares
of a Regulated Fund, then the Holders will vote such Shares as directed
by an independent third party when voting on (1) the election of
directors; (2) the removal of one or more directors; or (3) any other
matter under either the Act or applicable State laws affecting the
Board's composition, size or manner of election.
15. Each Regulated Fund's chief compliance officer, as defined in
rule 38a-1(a)(4), will prepare an annual report for the Board of such
Regulated Fund that evaluates (and documents the basis of that
evaluation) the Regulated Fund's compliance with the terms and
conditions of the application and procedures established to achieve
such compliance.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23920 Filed 11-2-17; 8:45 am]
BILLING CODE 8011-01-P
