Triloma EIG Energy Income Fund, et al., 12221-12227 [2018-05551]
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or Reuters. Quotation information from
brokers and dealers or pricing services
will be available for U.S. government
obligations, high quality securities
issued or guaranteed by the U.S.
government (in addition to Treasury
bills) and non-U.S. governments, and
each of their agencies and
instrumentalities, money market
instruments, convertible securities,
structured notes, non-exchange-listed
securities of other investment
companies, and OTC options.
The Commission also believes that the
proposal is designed to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Exchange states that trading in the
Shares may be halted for market
conditions or for reasons that, in the
view of the Exchange, make trading
inadvisable. Similarly, trading in the
Shares will be halted if an interruption
to the dissemination of either of the
Intraday Indicative Value or the value of
the Underlying Index persists past the
trading day in which it occurred. The
Exchange will obtain a representation
from the issuer of the Shares that the
NAV per Share will be calculated daily
and made available to all market
participants at the same time.27 If the
Exchange becomes aware that the NAV
for the Shares is not being disseminated
to all market participants at the same
time or the daily public website
disclosure of portfolio holdings does not
occur, the Exchange will halt trading in
the Shares.28
The Exchange has represented that its
surveillance procedures are adequate to
properly monitor the trading of the
Shares on the Exchange during all
trading sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws. The
Exchange has also represented that it
may obtain information regarding
trading in the Shares and other
exchange-traded securities and
instruments held by the Fund via the
ISG from other exchanges that are
members of the ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement.
The Exchange has represented that all
statements and representations made in
this filing regarding the Underlying
Index composition; the description of
the portfolio or reference assets;
limitations on portfolio holdings or
reference assets; dissemination and
availability of the Underlying Index,
reference asset, and intraday indicative
values; and the applicability of
Exchange rules specified in this filing
shall constitute continued listing
requirements for the Shares.
The issuer has represented to the
Exchange that it will advise the
Exchange of any failure by the Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will surveil for
compliance with the continued listing
requirements. If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
BZX Rule 14.12. This approval order is
based on all of the Exchange’s
statements and representations,
including those set forth above and in
Amendment No. 1 to the proposed rule
change.
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Act 29 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
proposed rule change (SR–CboeBZX–
2017–011), as modified by Amendment
No. 1 be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05562 Filed 3–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33047; File No. 812–14848]
Triloma EIG Energy Income Fund, et al.
March 14, 2018.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
under sections 17(d) and 57(i) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act to
permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
29 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
31 17 CFR 200.30–3(a)(12).
27 See
BZX Rule 14.11(c)(9)(A)(ii).
28 See BZX Rule 14.11(c)(1)(b)(iv).
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Summary of Application: Applicants
request an order to permit certain
business development companies
(‘‘BDC’’) and closed-end management
investment companies to co-invest in
portfolio companies with each other and
with affiliated investment funds.
Applicants: Triloma EIG Energy
Income Fund (the ‘‘Perpetual Fund’’),
Triloma EIG Energy Income Fund—
Term I (the ‘‘Term Fund’’ and, together
with the Perpetual Fund, the ‘‘Existing
Regulated Entities’’); Triloma Energy
Advisors, LLC (‘‘Triloma’’); EIG Credit
Management Company, LLC (‘‘EIG’’);
EIG Asset Management, LLC, EIG Funds
Management, LLC, EIG Management
Company, LLC, EIG Global Energy
(Asia) Limited, EIG Harbour Energy
Advisor, L.P. (collectively, together with
EIG, the ‘‘Existing EIG Advisors’’); EIGGateway Direct Investments, L.P., EIG
Energy Fund XVI, L.P., EIG Energy Fund
XVI–B, L.P., EIG Energy Fund XVI–E,
L.P., EIG Energy Fund XVI (Cayman),
L.P., EIG Energy Fund XVI (Scotland),
L.P., EIG-Keats Energy Partners, L.P.,
NYCRS EIG Energy Partners, L.P., EIG
Sunsuper Co-Investment, L.P., EIG
Global Private Debt Fund-A, L.P., EIG
Global Private Debt Fund-A (UL), L.P.,
EIG Global Private Debt Sub B (UL),
L.P., EIG Energy Fund XVII, L.P., EIG
Energy Fund XVII–B, L.P., EIG Energy
Fund XVII (Scotland), L.P., EIG Energy
Fund XVII (Cayman), L.P., EIG-Emerson
Energy Partners, L.P., and Harbour
Energy Ltd. (collectively, the ‘‘Existing
Affiliated Investors’’).
Filing Dates: The application was
filed on November 30, 2017, and
amended on February 15, 2018.
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 April 9, 2018, 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: Triloma and the Existing
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Regulated Entities: 201 N. New York
Avenue, Suite 200, Winter Park, FL
32789; the Existing EIG Advisors and
the Existing Affiliated Investors: 1700
Pennsylvania Ave. NW, Suite 800,
Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT: HaeSung Lee, Attorney-Adviser, at (202)
551–7345 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
website 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. Term Fund was organized under
the Delaware Statutory Trust Act for the
purpose of operating as an externallymanaged, non-diversified, closed-end
management investment company.
Term Fund is a registered investment
company under the Act. Term Fund’s
Objectives and Strategies 1 are to
provide shareholders with current
income; as secondary investment
objective, the Term Fund will seek to
provide capital preservation and, to a
lesser extent, long-term capital
appreciation by investing primarily in a
global portfolio of privately originated
energy company and project debt. Term
Fund has a five member Board,2 of
which three members are Independent
Trustees,3 one member is considered an
‘‘interested person’’ of Triloma, within
the meaning of section 2(a)(19) of the
Act, and one member is considered an
‘‘interested person’’ of EIG.
2. Perpetual Fund was organized
under the Delaware Statutory Trust Act
for the purpose of operating as an
externally-managed, non-diversified,
closed-end management investment
company. Perpetual Fund is a registered
investment company under the Act.
Perpetual Fund has the same Objectives
and Strategies as Term Fund. Perpetual
Fund will be governed by a Board
1 ‘‘Objectives and Strategies’’ means a Regulated
Entity’s (as defined below) investment objectives
and strategies, as described in the Regulated
Entity’s registration statement on Form N–2, other
filings the Regulated Entity 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 Entity’s reports to
shareholders.
2 The term ‘‘Board’’ refers to the board of directors
or trustees of any Regulated Entity.
3 The term ‘‘Independent Trustees’’ refers to the
trustees or directors of any Regulated Entity that are
not ‘‘interested persons’’ of the Regulated Entity
within the meaning of section 2(a)(19) of the Act.
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comprised of the same trustees
(including Independent Trustees) that
serve as the Board of Term Fund.
3. Triloma is a Florida limited
liability company and is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’). Triloma serves as the
investment adviser to the Existing
Regulated Entities. Triloma also
provides administrative services to the
Existing Regulated Entities under an
administrative services agreement.
4. EIG is a Delaware limited liability
company and is registered as an
investment adviser under the Advisers
Act. EIG serves as the sub-adviser to the
Existing Regulated Entities. EIG is an
indirectly owned subsidiary of EIG
Global Energy Partners, LLC (‘‘EIG
Partners’’).
5. Each Existing Affiliated Investors is
a privately-offered fund that would be
an investment company but for section
3(c)(1) or 3(c)(7) of the Act. An Existing
EIG Advisor serves as the investment
adviser to each Existing Affiliated
Investor. Each Existing EIG Advisor is
either, directly or indirectly, controlled
by EIG Partners or under common
control with EIG and is registered as an
investment adviser under the Advisers
Act.
6. Applicants seek to supersede the
Prior Order 4 to permit one or more
Regulated Entities 5 and/or one or more
Affiliated Investors 6 to participate in
the same investment opportunities
through a proposed co-investment
4 The requested order (the ‘‘Order’’) would
supersede an exemptive order issued by the
Commission on May 31, 2016 (the ‘‘Prior Order’’)
that was granted pursuant to Sections 57(a)(4) and
57(i) and Rule 17d–1, with the result that no person
will continue to rely on the Prior Order if the Order
is granted. Triloma EIG Global Energy Fund, et al.,
Investment Company Act Release Nos. 32106 (May
5, 2016) (notice) and 32132 (May 31, 2016) (order).
5 ‘‘Regulated Entity’’ means any of the Existing
Regulated Entities and any Future Regulated Entity.
‘‘Future Regulated Entity’’ means a closed-end
management investment company (a) that is
registered under the Act or has elected to be
regulated as a BDC under the Act, and either (b)
whose investment adviser is a Triloma Advisor and
whose investment sub-adviser is an EIG Advisor or
(c) whose investment adviser is an EIG Advisor.
‘‘Triloma Advisor’’ means Triloma or any future
investment adviser that (i) controls, is controlled by
or is under common control with Triloma, (ii) is
registered as an investment adviser under the
Advisers Act and (iii) is not a Regulated Entity or
a subsidiary of a Regulated Entity. ‘‘EIG Advisor’’
means any Existing EIG Advisor or any future
investment adviser that (i) controls, is controlled by
or is under common control with EIG, (ii) is
registered as an investment adviser under the
Advisers Act, and (iii) is not a Regulated Entity or
a subsidiary of a Regulated Entity.
6 ‘‘Affiliated Investors’’ means the Existing
Affiliated Investors and any Future Affiliated
Investor. ‘‘Future Affiliated Investor’’ means an
entity (a) whose investment adviser is an EIG
Advisor and (b) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act.
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program (the ‘‘Co-Investment Program’’)
where such participation would
otherwise be prohibited under sections
17(d) and 57(a)(4) and the rules under
the Act. For purposes of the application,
‘‘Co-Investment Transaction’’ means any
transaction in which a Regulated Entity
(or its Wholly-Owned Investment
Subsidiary, as defined below)
participated together with one or more
other Regulated Entities and/or one or
more Affiliated Investors in reliance on
the requested Order. ‘‘Potential CoInvestment Transaction’’ means any
investment opportunity in which a
Regulated Entity (or its Wholly-Owned
Investment Subsidiary) could not
participate together with one or more
Affiliated Investors and/or one or more
other Regulated Entities without
obtaining and relying on the Order.7
The term ‘‘Advisor’’ means any Triloma
Advisor or any EIG Advisor.
7. Applicants state that a Regulated
Entity may, from time to time, form a
Wholly-Owned Investment Subsidiary.8
Such a subsidiary would be prohibited
from investing in a Co-Investment
Transaction with any Affiliated Investor
because it would be a company
controlled by its parent Regulated Entity
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 Entity 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
7 All existing entities that currently intend to rely
upon the requested Order have been named as
applicants. Any other existing or future entity that
subsequently relies on the Order will comply with
the terms and conditions of the application.
8 The term ‘‘Wholly-Owned Investment
Subsidiary’’ means an entity (i) that is whollyowned by a Regulated Entity (with such Regulated
Entity at all times holding, beneficially and of
record, 100% of the voting and economic interests);
(ii) whose sole business purpose is to hold one or
more investments on behalf of the Regulated Entity
(and, in the case of an entity that is licensed by the
Small Business Administration to operate under the
Small Business Investment Act of 1958, as amended
(the ‘‘SBA Act’’), as a small business investment
company (an ‘‘SBIC’’), to maintain a license under
the SBA Act and issue debentures guaranteed by
the Small Business Administration); (iii) with
respect to which the Regulated Entity’s Board has
the sole authority to make all determinations with
respect to the entity’s participation under the
conditions of the application; and (iv) that would
be an investment company but for section 3(c)(1) or
3(c)(7) of the Act. All subsidiaries participating in
the Co-Investment Program will be Wholly-Owned
Investment Subsidiaries and will have Objectives
and Strategies that are either substantially the same
as, or a subset of, their parent Regulated Entity’s
Objectives and Strategies. A subsidiary that is an
SBIC may be a Wholly-Owned Investment
Subsidiary if it satisfies the conditions in this
definition.
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Entity 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 Entity’s
investments and, therefore, no conflicts
of interest could arise between the
Regulated Entity and the Wholly-Owned
Investment Subsidiary. The Regulated
Entity’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 Entity’s Board would be
informed of, and take into
consideration, any proposed use of a
Wholly-Owned Investment Subsidiary
in the Regulated Entity’s place. If the
Regulated Entity 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 Entity and the WhollyOwned Investment Subsidiary.
8. It is anticipated that an EIG Advisor
will periodically determine that certain
investments the EIG Advisor
recommends for a Regulated Entity
would also be appropriate investments
for one or more other Regulated Entities
and/or one or more Affiliated Investors.
Such a determination may result in the
Regulated Entity, one or more other
Regulated Entities and/or one or more
Affiliated Investors co-investing in
certain investment opportunities. For
each such investment opportunity, the
Advisors to each Regulated Entity will
independently analyze and evaluate the
investment opportunity as to its
appropriateness for such Regulated
Entity taking into consideration the
Regulated Entity’s Objectives and
Strategies.
9. Applicants state that Triloma serves
as the Existing Regulated Entities’
investment adviser and administrator
and EIG serves as the Existing Regulated
Entities’ sub-adviser, and with respect
to any Future Regulated Entity, either (i)
Triloma or another Triloma Advisor and
EIG or another EIG Advisor will serve in
the same capacities as with Existing
Regulated Entities, or (ii) EIG or another
EIG Advisor will serve as investment
adviser. Applicants represent that
although an EIG Advisor will identify
and recommend investments 9 for each
Regulated Entity for which Triloma or
another Triloma Advisor serves as
investment advisor, prior to any
9 Applicants represent that the Triloma Advisors
will not source any Potential Co-Investment
Transactions under the requested Order.
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investment by such Regulated Entity,
the EIG Advisor will present each
proposed investment to the Triloma
Advisor which has the authority to
approve or reject all investments
proposed for the Regulated Entity by the
EIG Advisor. With respect to any Future
Regulated Entity for which EIG or
another EIG Advisor serves as
investment adviser, rather than subadviser, EIG or such other EIG Advisor
will be responsible for the overall
management of the Future Regulated
Entity’s activities, and for the day-to-day
management of the Future Regulated
Entity’s investment portfolio, in each
case consistent with its fiduciary duties
and pursuant to the terms of an
Advisory Agreement with the Future
Regulated Entity.
10. Applicants state that each EIG
Advisor has (or will have, in the case of
future advisers) an investment
committee through which it will carry
out its obligation under condition 1 to
make a determination as to the
appropriateness of a Potential CoInvestment Transaction for each
Regulated Entity. Applicants represent
that each EIG Advisor, as a registered
investment adviser, has (or will have, in
the case of future advisers) developed a
robust allocation process that is
designed to allocate investment
opportunities fairly and equitably
among its clients over time. Applicants
state that, in the case of a Potential CoInvestment Transaction, the applicable
EIG Advisor would apply its allocation
policies and procedures in determining
the proposed allocation for the
Regulated Entity consistent with the
requirements of condition 2(a).
11. Applicants state that, once the
applicable EIG Advisor determined a
proposed allocation for a Regulated
Entity for which Triloma or another
Triloma Advisor serves as investment
adviser, such EIG Advisor would notify
the applicable Triloma Advisor of the
Potential Co-Investment Transaction
and the EIG Advisor’s recommended
allocation for such Regulated Entity.
Applicants further state that the
applicable Triloma Advisor would then
present the Potential Co-Investment
Transaction and the EIG Advisor’s
proposed allocation to the Triloma
Advisor’s investment committee for its
approval. Applicants represent that the
Triloma Advisor’s investment
committee would review the EIG
Advisor’s recommendation for the
Regulated Entity and would have the
ability to ask questions of the EIG
Advisor and request additional
information from the EIG Advisor.
Applicants further submit that if the
Triloma Advisor’s investment
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committee approved the investment for
the Regulated Entity, the investment
and all relevant allocation information
would then be presented to the
Regulated Entity’s Board for its approval
in accordance with the conditions to the
application. Applicants state that they
believe the investment process between
the EIG Advisors and the Triloma
Advisors, prior to seeking approval from
the Regulated Entity’s Board (which is
in addition to, rather than in lieu of, the
procedures required under the
conditions of the application), is
significant and provides for additional
procedures and processes to ensure that
the Regulated Entity is being treated
fairly in respect of Potential CoInvestment Transactions.
12. If the Advisors to a Regulated
Entity determine that a Potential CoInvestment Opportunity is appropriate
for the Regulated Entity (and the
applicable Triloma Advisor approves
the investment for such Regulated
Entity), and one or more other Regulated
Entities and/or one or more Affiliated
Investors may also participate, the
Advisors will present the investment
opportunity to the Eligible Trustees 10 of
the Regulated Entity prior to the actual
investment by the Regulated Entity. As
to any Regulated Entity, a CoInvestment Transaction will be
consummated only upon approval by a
required majority of the Eligible
Trustees of such Regulated Entity
within the meaning of section 57(o) of
the Act (‘‘Required Majority’’).11
13. With respect to the pro rata
dispositions and follow-on Investments
provided in conditions 7 and 8, a
Regulated Entity 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 Entity
and Affiliated Investor 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) each Regulated Entity’s
Board has approved that Regulated
Entity’s participation in pro rata
10 ‘‘Eligible Trustees’’ means the trustees or
directors of a Regulated Entity that are eligible to
vote under section 57(o) of the Act.
11 In the case of a Regulated Entity that is a
registered closed-end fund, the trustees or directors
that make up the Required Majority will be
determined as if the Regulated Entity were a BDC
subject to section 57(o). As defined in section 57(o),
‘‘required majority’’ means ‘‘both a majority of a
business development company’s directors or
general partners who have no financial interest in
such transaction, plan, or arrangement and a
majority of such directors or general partners who
are not interested persons of such company.’’
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dispositions and follow-on investments
as being in the best interests of the
Regulated Entity. If the Board does not
so approve, any such disposition or
follow-on investment will be submitted
to the Regulated Entity’s Eligible
Trustees. The Board of any Regulated
Entity 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 Trustees.
14. No Independent Trustee of a
Regulated Entity will have a financial
interest in any Co-Investment
Transaction.
15. Under condition 15, if an Advisor
or its principals, or any person
controlling, controlled by, or under
common control with the Advisor or its
the principals, and any Affiliated
Investors (collectively, the ‘‘Holders’’)
own in the aggregate more than 25% of
the outstanding voting securities of a
Regulated Entity (‘‘Shares’’), then the
Holders will vote such Shares as
directed by an independent third party
when voting on matters specified in the
condition. Applicants believe that this
condition will ensure that the
Independent Trustees will act
independently in evaluating the CoInvestment Program, because the ability
of the Advisor or its principals to
influence the Independent Trustees by a
suggestion, explicit or implied, that the
Independent Trustees can be removed
will be limited significantly. Applicants
represent that the Independent Trustees
shall 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 17(d) of the Act and rule
17d–1 under the Act prohibit
participation by a registered investment
company and an affiliated person in any
‘‘joint enterprise or other joint
arrangement or profit-sharing plan,’’ as
defined in the rule, without prior
approval by the Commission by order
upon application. Section 17(d) of the
Act and rule 17d–1 under the Act are
applicable to Regulated Entities that are
registered closed-end investment
companies. Similarly, with regard to
BDCs, section 57(a)(4) of the Act makes
it unlawful for any person who is
related to a BDC in a manner described
in section 57(b), acting as principal,
knowingly to effect any transaction in
which the BDC (or a company
controlled by such BDC) is a joint or a
joint and several participant with that
person in contravention of rules as
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prescribed by the Commission. Because
the Commission has not adopted any
rules expressly under section 57(a)(4),
section 57(i) provides that the rules
under section 17(d) applicable to
registered closed-end investment
companies (e.g., rule 17d–1) are, in the
interim, deemed to apply to transactions
subject to section 57(a). 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), as modified by rule
57b–1, from 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,
unless an application regarding the joint
enterprise, arrangement, or profitsharing plan has been filed with the
Commission and has been granted by an
order entered prior to the submission of
the plan or any modification thereof, to
security holders for approval, or prior to
its adoption or modification if not so
submitted.
2. 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 submit that Each
Regulated Entity may be deemed to be
an ‘‘affiliated person’’ of each other
Regulated Entity within the meaning of
section 2(a)(3) of the Act. Applicants
state that the Regulated Entities, by
virtue of each having either a Triloma
Advisor as investment adviser and an
EIG Advisor as sub-adviser, or an EIG
Advisor as an investment adviser, may
be deemed to be under common control,
and thus affiliated persons of each other
under section 2(a)(3)(C) of the Act.
Section 17(d) and section 57(b) apply to
any investment adviser to a closed-end
fund or a BDC, respectively, including
the sub-adviser. Thus, an EIG Advisor
and any Regulated Entities or Affiliated
Investors that it advises could be
deemed to be persons related to other
Regulated Entities it advises or subadvises in a manner described by
sections 17(d) and 57(b) and therefore
prohibited by sections 17(d) and 57(a)(4)
and rule 17d–1 from participating in the
Co-Investment Program. Applicants
further submit that, because the EIG
Advisors are ‘‘affiliated persons’’ of
other EIG Advisors, Regulated Entities,
and Affiliated Investors advised by any
of them could be deemed to be persons
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related to other Regulated Entities (or a
company controlled by a Regulated
Entity) advised or sub-advised by any of
them in a manner described by sections
17(d) and 57(b) and also prohibited from
participating in the Co-Investment
Program.
4. Applicants state that they expect
that that co-investment in portfolio
companies by a Regulated Entity, one or
more other Regulated Entities and/or
one or more Affiliated Investors will
increase favorable investment
opportunities for each Regulated Entity.
5. Applicants submit that the fact that
the Required Majority will approve each
Co-Investment Transaction before
investment (except for certain
dispositions or follow-on investments,
as described in the conditions), and
other protective conditions set forth in
the application, will ensure that each
Regulated Entity will be treated fairly.
Applicants state that each Regulated
Entity’s participation in the CoInvestment 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 further state
that the terms and conditions proposed
herein will ensure that all such
transactions are reasonable and fair to
each Regulated Entity and the Affiliated
Investors and do not involve
overreaching by any person concerned,
including Triloma or EIG.
Applicants’ Conditions:
Applicants agree that the Order will
be subject to the following conditions:
1. Each time an EIG Advisor considers
a Potential Co-Investment Transaction
for an Affiliated Investor or another
Regulated Entity that falls within a
Regulated Entity’s then-current
Objectives and Strategies, the Advisors
to the Regulated Entity will make an
independent determination of the
appropriateness of the investment for
the Regulated Entity in light of the
Regulated Entity’s then-current
circumstances.
2. a. If the Advisors to a Regulated
Entity deem participation in any
Potential Co-Investment Transaction to
be appropriate for the Regulated Entity,
the Advisors will then determine an
appropriate level of investment for such
Regulated Entity.
b. If the aggregate amount
recommended by the Advisors to a
Regulated Entity to be invested by the
Regulated Entity in the Potential CoInvestment Transaction, together with
the amount proposed to be invested by
the other participating Regulated
Entities and Affiliated Investors,
collectively, in the same transaction,
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exceeds the amount of the investment
opportunity, the amount of the
investment opportunity will be
allocated among the Regulated Entities
and such Affiliated Investors, pro rata
based on each participant’s Available
Capital 12 for investment in the asset
class being allocated, up to the amount
proposed to be invested by each. The
Advisors to each participating Regulated
Entity will provide the Eligible Trustees
of each participating Regulated Entity
with information concerning each
participating party’s Available Capital to
assist the Eligible Trustees with their
review of the Regulated Entity’s
investments for compliance with these
allocation procedures.
c. After making the determinations
required in conditions 1 and 2(a) above,
the Advisors to the Regulated Entity
will distribute written information
concerning the Potential Co-Investment
Transaction, including the amount
proposed to be invested by each
Regulated Entity and any Affiliated
Investor, to the Eligible Trustees of each
participating Regulated Entity for their
consideration. A Regulated Entity will
co-invest with one or more other
Regulated Entities and/or an Affiliated
Investor only if, prior to the Regulated
Entities’ and the Affiliated Investors’
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 Entity and its
shareholders and do not involve
overreaching in respect of the Regulated
Entity or its shareholders on the part of
any person concerned;
(ii) the Potential Co-Investment
Transaction is consistent with:
(a) The interests of the Regulated
Entity’s shareholders; and
(b) the Regulated Entity’s then-current
Objectives and Strategies;
(iii) the investment by any other
Regulated Entity or an Affiliated
Investor would not disadvantage the
Regulated Entity, and participation by
12 ‘‘Available Capital’’ means (a) for each
Regulated Entity, the amount of capital available for
investment determined based on the amount of cash
on hand, existing commitments and reserves, if any,
the targeted leverage level, targeted asset mix and
other investment policies and restrictions set from
time to time by the Board of the applicable
Regulated Entity or imposed by applicable laws,
rules, regulations or interpretations and (b) for each
Affiliated Investor, the amount of capital available
for investment determined based on the amount of
cash on hand, existing commitments and reserves,
if any, the targeted leverage level, targeted asset mix
and other investment policies and restrictions set
by the Affiliated Investor’s directors, general
partners or adviser or imposed by applicable laws,
rules, regulations or interpretations.
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the Regulated Entity would not be on a
basis different from or less advantageous
than that of any other Regulated Entity
or Affiliated Investor; provided, that if
another Regulated Entity or Affiliated
Investor, but not the Regulated Entity
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 a Required
Majority from reaching the conclusions
required by this condition 2(c)(iii), if:
(a) The Eligible Trustees will have the
right to ratify the selection of such
director or board observer, if any; and
(b) the Advisors to the Regulated
Entity agree to, and do, provide periodic
reports to the Regulated Entity’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 other Regulated Entity or any
Affiliated Investor or any affiliated
person of any other Regulated Entity or
an Affiliated Investor receives in
connection with the right of one or more
Regulated Entities or Affiliated Investors
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 Investors
(who may, in turn, share their portion
with their affiliated persons) and any
participating Regulated Entity in
accordance with the amount of each
party’s investment; and
(iv) the proposed investment by the
Regulated Entity will not benefit the
Advisors, any other Regulated Entity or
the Affiliated Investors 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 under sections 17(e)
and 57(k) of the Act, as applicable, (C)
in the case of fees or other
compensation described in condition
2(c)(iii)(c), or (D) indirectly, as a result
of an interest in the securities issued by
one of the parties to the Co-Investment
Transaction.
3. Each Regulated Entity will have the
right to decline to participate in any
Potential Co-Investment Transaction or
to invest less than the amount proposed.
4. The Advisors will present to the
Board of each Regulated Entity, on a
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12225
quarterly basis, a record of all
investments in Potential Co-Investment
Transactions made by any of the other
Regulated Entities or any of the
Affiliated Investors during the
preceding quarter that fell within the
Regulated Entity’s then-current
Objectives and Strategies that were not
made available to the Regulated Entity,
and an explanation of why the
investment opportunities were not
offered to the Regulated Entity. All
information presented to the Board
pursuant to this condition will be kept
for the life of the Regulated Entity and
at least two years thereafter, and will be
subject to examination by the
Commission and its staff.
5. Except for follow-on investments
made in accordance with condition 8,13
a Regulated Entity will not invest in
reliance on the Order in any issuer in
which another Regulated Entity or an
Affiliated Investor or any affiliated
person of another Regulated Entity or an
Affiliated Investor is an existing
investor.
6. A Regulated Entity 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
Entity and Affiliated Investor. The grant
to one or more Regulated Entities or
Affiliated Investors, but not the
Regulated Entity itself, 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 Regulated Entity or
Affiliated Investor elects to sell,
exchange or otherwise dispose of an
interest in a security that was acquired
by one or more Regulated Entities and/
or Affiliated Investors in a CoInvestment Transaction, the Advisors
will:
(i) Notify each Regulated Entity 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 Entity
in the disposition.
b. Each Regulated Entity will have the
right to participate in such disposition
13 This exception applies only to follow-on
investments by a Regulated Entity in issuers in
which that Regulated Entity already holds
investments.
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on a proportionate basis, at the same
price and on the same terms and
conditions as those applicable to the
Affiliated Investors and any other
Regulated Entity.
c. A Regulated Entity may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Regulated Entity and each Affiliated
Investor in such disposition is
proportionate to its outstanding
investments in the issuer immediately
preceding the disposition; (ii) the
Regulated Entity’s Board has approved
as being in the best interests of the
Regulated Entity the ability to
participate in such dispositions on a pro
rata basis (as described in greater detail
in the application); and (iii) the
Regulated Entity’s Board is provided on
a quarterly basis with a list of all
dispositions made in accordance with
this condition. In all other cases, the
Advisors will provide their written
recommendation as to the Regulated
Entity’s participation to the Eligible
Trustees, and the Regulated Entity will
participate in such disposition solely to
the extent that a Required Majority
determines that it is in the Regulated
Entity’s best interests.
d. Each Regulated Entity and each
Affiliated Investor will bear its own
expenses in connection with the
disposition.
8. a. If any Regulated Entity or
Affiliated Investor desires to make a
‘‘follow-on investment’’ (i.e., an
additional investment in the same
entity, including through the exercise of
warrants or other rights to purchase
securities of the issuer) in a portfolio
company whose securities were
acquired by the Regulated Entity and
the Affiliated Investor in a CoInvestment Transaction, the Advisors
will:
(i) Notify each Regulated Entity 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 Entity.
b. A Regulated Entity may participate
in such follow-on investment without
obtaining prior approval of the Required
Majority if: (i) The proposed
participation of each Regulated Entity
and each Affiliated Investor in such
investment is proportionate to its
outstanding investments in the issuer
immediately preceding the follow-on
investment; and (ii) the Regulated
Entity’s Board has approved as being in
the best interests of such Regulated
Entity the ability to participate in
follow-on investments on a pro rata
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basis (as described in greater detail in
the application). In all other cases, the
Advisors will provide their written
recommendation as to such Regulated
Entity’s participation to the Eligible
Trustees, and the Regulated Entity will
participate in such follow-on
investment solely to the extent that the
Required Majority determines that it is
in such Regulated Entity’s best interests.
c. If, with respect to any follow-on
investment:
(i) The amount of a follow-on
investment is not based on the
Regulated Entities’ and the Affiliated
Investors’ outstanding investments
immediately preceding the follow-on
investment; and
(ii) the aggregate amount
recommended by the Advisors to be
invested by the Regulated Entity in the
follow-on investment, together with the
amount proposed to be invested by the
other participating Regulated Entities
and the Affiliated Investors 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 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 be subject to the other conditions
set forth in the application.
9. The Independent Trustees of each
Regulated Entity will be provided
quarterly for review all information
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by other Regulated Entities or
Affiliated Investors that a Regulated
Entity considered but declined to
participate in, so that the Independent
Trustees may determine whether all
investments made during the preceding
quarter, including those investments
which the Regulated Entity considered
but declined to participate in, comply
with the conditions of the Order. In
addition, the Independent Trustees will
consider at least annually the continued
appropriateness for such Regulated
Entity of participating in new and
existing Co-Investment Transactions.
10. Each Regulated Entity will
maintain the records required by section
57(f)(3) of the Act as if each of the
Regulated Entities were a BDC and each
of the investments permitted under
these conditions were approved by a
Required Majority under section 57(f).
11. No Independent Trustee of a
Regulated Entity will also be a trustee,
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director, general partner, managing
member or principal, or otherwise an
‘‘affiliated person’’ (as defined in the
Act) of any Affiliated Investor.
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)
shall, to the extent not payable by the
Advisors under their respective
advisory agreements with the Regulated
Entities and the Affiliated Investors, be
shared by the Regulated Entities and the
Affiliated Investors in proportion to the
relative amounts of the securities held
or to be acquired or disposed of, as the
case may be.
13. Any transaction fee (including
break-up or commitment fees but
excluding brokerage or underwriting
compensation contemplated by section
17(e) or 57(k) of the Act, as
applicable) 14 received in connection
with a Co-Investment Transaction will
be distributed to the participating
Regulated Entities and Affiliated
Investors on a pro rata basis based on
the amount they invested or committed,
as the case may be, in such CoInvestment Transaction. If any
transaction fee is to be held by an
Advisor pending consummation of the
transaction, the fee will be deposited
into an account maintained by the
Advisor 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 Entities and
Affiliated Investors based on the amount
they invest in the Co-Investment
Transaction. None of the other
Regulated Entities, Affiliated Investors,
the Advisors nor any affiliated person of
the Regulated Entities or the Affiliated
Investors 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 Entities
and the Affiliated Investors, the pro rata
transaction fees described above and
fees or other compensation described in
condition 2(c)(iii)(c), (b) brokerage or
underwriting compensation permitted
by section 17(e) or 57(k) of the Act, as
applicable, or (c) in the case of the
Advisors, investment advisory fees paid
in accordance with the Regulated
14 Applicants are not requesting and the
Commission is not providing any relief for
transaction fees received in connection with any
Co-Investment Transaction.
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Entities’ and the Affiliated Investors’
investment advisory agreements).
14. The Advisors to the Regulated
Entities and Affiliated Investors will
maintain written policies and
procedures reasonably designed to
ensure compliance with the foregoing
conditions. These policies and
procedures will require, among other
things, that each of the Advisors to each
Regulated Entity will be notified of all
Potential Co-Investment Transactions
that fall within a Regulated Entity’s
then-current Objectives and Strategies
and will be given sufficient information
to make its independent determination
and recommendations under conditions
1, 2(a), 7 and 8.
15. If the Holders own in the aggregate
more than 25 percent of the shares of a
Regulated Entity, then the Holders will
vote such shares as directed by an
independent third party when voting on
(1) the election of directors or trustees;
(2) the removal of one or more directors
or trustees; or (3) any matters requiring
approval by the vote of a majority of the
outstanding voting securities, as defined
in section 2(a)(42) of the Act.
16. Each Regulated Entity’s chief
compliance officer, as defined in Rule
38a–1(a)(4), will prepare an annual
report for its Board that evaluates (and
documents the basis of that evaluation)
the Regulated Entity’s compliance with
the terms and conditions of the
application and the 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. 2018–05551 Filed 3–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33049; File No. 812–14789]
Destra Exchange-Traded Fund Trust,
et al.
March 14, 2018
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
daltland on DSKBBV9HB2PROD with NOTICES
AGENCY:
Notice of an application for an order
under section 6(c) of the Investment
Company Act of 1940 (the ‘‘Act’’) for an
exemption from sections 2(a)(32),
5(a)(1), 22(d), and 22(e) of the Act and
rule 22c–1 under the Act, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
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17(a)(2) of the Act, and under section
12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and 12(d)(1)(B) of
the Act. The requested order would
permit (a) actively-managed series of
certain open-end management
investment companies (‘‘Funds’’) to
issue shares redeemable in large
aggregations only (‘‘Creation Units’’); (b)
secondary market transactions in Fund
shares to occur at negotiated market
prices rather than at net asset value
(‘‘NAV’’); (c) certain Funds to pay
redemption proceeds, under certain
circumstances, more than seven days
after the tender of shares for
redemption; (d) certain affiliated
persons of a Fund to deposit securities
into, and receive securities from, the
Fund in connection with the purchase
and redemption of Creation Units; (e)
certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
Funds (‘‘Funds of Funds’’) to acquire
shares of the Funds; (f) certain Funds
(‘‘Feeder Funds’’) to create and redeem
Creations Units in-kind in a masterfeeder structure; and (g) the Funds to
issue Shares in less than Creation Unit
size to investors participating in, to the
extent applicable, a distribution
reinvestment program.
APPLICANTS: Destra Exchange-Traded
Fund Trust (the ‘‘Trust’’), a
Massachusetts business trust that
intends to register under the Act as an
open-end management investment
company with multiple series, Destra
Capital Advisors LLC (the ‘‘Initial
Adviser’’), a Delaware limited liability
company registered as an investment
adviser under the Investment Advisers
Act of 1940, and Destra Capital
Investments LLC (the ‘‘Distributor’’), a
Delaware limited liability company and
broker-dealer registered under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’).
FILING DATES: The application was filed
on June 27, 2017 and amended on
December 21, 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 April 9, 2018, 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
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12227
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: Brent J. Fields, Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090; Applicants: c/o Jane Hong
Shissler, Destra Capital Investments
LLC, One North Wacker Drive, 48th
Floor, Chicago, Illinois 60606.
FOR FURTHER INFORMATION CONTACT:
Asen Parachkevov, Senior Counsel, or
Andrea Ottomanelli Magovern, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as
actively-managed exchange traded
funds (‘‘ETFs’’).1 Fund shares will be
purchased and redeemed at their NAV
in Creation Units only (other than
pursuant to a distribution reinvestment
program described in the application).
All orders to purchase Creation Units
and all redemption requests will be
placed by or through an ‘‘Authorized
Participant’’, which will have signed a
participant agreement with the
Distributor. Shares will be listed and
traded individually on a national
securities exchange, where share prices
will be based on the current bid/offer
market. Any order granting the
requested relief would be subject to the
terms and conditions stated in the
application.
2. Each Fund will consist of a
portfolio of securities and other assets
1 Applicants request that the order apply to the
initial Fund, as well as to future series of the Trust
and any future open-end management investment
companies or series thereof (each, included in the
term ‘‘Fund’’), each of which will operate as an
actively-managed ETF. Any Fund will (a) be
advised by the Initial Adviser or an entity
controlling, controlled by, or under common
control with the Initial Adviser (each such entity or
any successor thereto is included in the term
‘‘Adviser’’) and (b) comply with the terms and
conditions of the application. For purposes of the
requested order, the term ‘‘successor’’ is limited to
an entity that results from a reorganization into
another jurisdiction or a change in the type of
business organization.
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]]>Agencies
[Federal Register Volume 83, Number 54 (Tuesday, March 20, 2018)]
[Notices]
[Pages 12221-12227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05551]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33047; File No. 812-14848]
Triloma EIG Energy Income Fund, et al.
March 14, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
Notice of application for an order under sections 17(d) and 57(i)
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1
under the Act to permit certain joint transactions otherwise prohibited
by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
Summary of Application: Applicants request an order to permit
certain business development companies (``BDC'') and closed-end
management investment companies to co-invest in portfolio companies
with each other and with affiliated investment funds.
Applicants: Triloma EIG Energy Income Fund (the ``Perpetual
Fund''), Triloma EIG Energy Income Fund--Term I (the ``Term Fund'' and,
together with the Perpetual Fund, the ``Existing Regulated Entities'');
Triloma Energy Advisors, LLC (``Triloma''); EIG Credit Management
Company, LLC (``EIG''); EIG Asset Management, LLC, EIG Funds
Management, LLC, EIG Management Company, LLC, EIG Global Energy (Asia)
Limited, EIG Harbour Energy Advisor, L.P. (collectively, together with
EIG, the ``Existing EIG Advisors''); EIG-Gateway Direct Investments,
L.P., EIG Energy Fund XVI, L.P., EIG Energy Fund XVI-B, L.P., EIG
Energy Fund XVI-E, L.P., EIG Energy Fund XVI (Cayman), L.P., EIG Energy
Fund XVI (Scotland), L.P., EIG-Keats Energy Partners, L.P., NYCRS EIG
Energy Partners, L.P., EIG Sunsuper Co-Investment, L.P., EIG Global
Private Debt Fund-A, L.P., EIG Global Private Debt Fund-A (UL), L.P.,
EIG Global Private Debt Sub B (UL), L.P., EIG Energy Fund XVII, L.P.,
EIG Energy Fund XVII-B, L.P., EIG Energy Fund XVII (Scotland), L.P.,
EIG Energy Fund XVII (Cayman), L.P., EIG-Emerson Energy Partners, L.P.,
and Harbour Energy Ltd. (collectively, the ``Existing Affiliated
Investors'').
Filing Dates: The application was filed on November 30, 2017, and
amended on February 15, 2018.
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 April 9, 2018, 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: Triloma and the Existing
[[Page 12222]]
Regulated Entities: 201 N. New York Avenue, Suite 200, Winter Park, FL
32789; the Existing EIG Advisors and the Existing Affiliated Investors:
1700 Pennsylvania Ave. NW, Suite 800, Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT: Hae-Sung Lee, Attorney-Adviser, at
(202) 551-7345 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 website 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. Term Fund was organized under the Delaware Statutory Trust Act
for the purpose of operating as an externally-managed, non-diversified,
closed-end management investment company. Term Fund is a registered
investment company under the Act. Term Fund's Objectives and Strategies
\1\ are to provide shareholders with current income; as secondary
investment objective, the Term Fund will seek to provide capital
preservation and, to a lesser extent, long-term capital appreciation by
investing primarily in a global portfolio of privately originated
energy company and project debt. Term Fund has a five member Board,\2\
of which three members are Independent Trustees,\3\ one member is
considered an ``interested person'' of Triloma, within the meaning of
section 2(a)(19) of the Act, and one member is considered an
``interested person'' of EIG.
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\1\ ``Objectives and Strategies'' means a Regulated Entity's (as
defined below) investment objectives and strategies, as described in
the Regulated Entity's registration statement on Form N-2, other
filings the Regulated Entity 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 Entity's reports
to shareholders.
\2\ The term ``Board'' refers to the board of directors or
trustees of any Regulated Entity.
\3\ The term ``Independent Trustees'' refers to the trustees or
directors of any Regulated Entity that are not ``interested
persons'' of the Regulated Entity within the meaning of section
2(a)(19) of the Act.
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2. Perpetual Fund was organized under the Delaware Statutory Trust
Act for the purpose of operating as an externally-managed, non-
diversified, closed-end management investment company. Perpetual Fund
is a registered investment company under the Act. Perpetual Fund has
the same Objectives and Strategies as Term Fund. Perpetual Fund will be
governed by a Board comprised of the same trustees (including
Independent Trustees) that serve as the Board of Term Fund.
3. Triloma is a Florida limited liability company and is registered
as an investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act''). Triloma serves as the investment adviser to the
Existing Regulated Entities. Triloma also provides administrative
services to the Existing Regulated Entities under an administrative
services agreement.
4. EIG is a Delaware limited liability company and is registered as
an investment adviser under the Advisers Act. EIG serves as the sub-
adviser to the Existing Regulated Entities. EIG is an indirectly owned
subsidiary of EIG Global Energy Partners, LLC (``EIG Partners'').
5. Each Existing Affiliated Investors is a privately-offered fund
that would be an investment company but for section 3(c)(1) or 3(c)(7)
of the Act. An Existing EIG Advisor serves as the investment adviser to
each Existing Affiliated Investor. Each Existing EIG Advisor is either,
directly or indirectly, controlled by EIG Partners or under common
control with EIG and is registered as an investment adviser under the
Advisers Act.
6. Applicants seek to supersede the Prior Order \4\ to permit one
or more Regulated Entities \5\ and/or one or more Affiliated Investors
\6\ 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 sections 17(d)
and 57(a)(4) and the rules under the Act. For purposes of the
application, ``Co-Investment Transaction'' means any transaction in
which a Regulated Entity (or its Wholly-Owned Investment Subsidiary, as
defined below) participated together with one or more other Regulated
Entities and/or one or more Affiliated Investors in reliance on the
requested Order. ``Potential Co-Investment Transaction'' means any
investment opportunity in which a Regulated Entity (or its Wholly-Owned
Investment Subsidiary) could not participate together with one or more
Affiliated Investors and/or one or more other Regulated Entities
without obtaining and relying on the Order.\7\ The term ``Advisor''
means any Triloma Advisor or any EIG Advisor.
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\4\ The requested order (the ``Order'') would supersede an
exemptive order issued by the Commission on May 31, 2016 (the
``Prior Order'') that was granted pursuant to Sections 57(a)(4) and
57(i) and Rule 17d-1, with the result that no person will continue
to rely on the Prior Order if the Order is granted. Triloma EIG
Global Energy Fund, et al., Investment Company Act Release Nos.
32106 (May 5, 2016) (notice) and 32132 (May 31, 2016) (order).
\5\ ``Regulated Entity'' means any of the Existing Regulated
Entities and any Future Regulated Entity. ``Future Regulated
Entity'' means a closed-end management investment company (a) that
is registered under the Act or has elected to be regulated as a BDC
under the Act, and either (b) whose investment adviser is a Triloma
Advisor and whose investment sub-adviser is an EIG Advisor or (c)
whose investment adviser is an EIG Advisor. ``Triloma Advisor''
means Triloma or any future investment adviser that (i) controls, is
controlled by or is under common control with Triloma, (ii) is
registered as an investment adviser under the Advisers Act and (iii)
is not a Regulated Entity or a subsidiary of a Regulated Entity.
``EIG Advisor'' means any Existing EIG Advisor or any future
investment adviser that (i) controls, is controlled by or is under
common control with EIG, (ii) is registered as an investment adviser
under the Advisers Act, and (iii) is not a Regulated Entity or a
subsidiary of a Regulated Entity.
\6\ ``Affiliated Investors'' means the Existing Affiliated
Investors and any Future Affiliated Investor. ``Future Affiliated
Investor'' means an entity (a) whose investment adviser is an EIG
Advisor and (b) that would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act.
\7\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application.
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7. Applicants state that a Regulated Entity may, from time to time,
form a Wholly-Owned Investment Subsidiary.\8\ Such a subsidiary would
be prohibited from investing in a Co-Investment Transaction with any
Affiliated Investor because it would be a company controlled by its
parent Regulated Entity 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 Entity 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
[[Page 12223]]
Entity 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 Entity's investments and, therefore, no conflicts of interest
could arise between the Regulated Entity and the Wholly-Owned
Investment Subsidiary. The Regulated Entity'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 Entity's Board would be informed of, and
take into consideration, any proposed use of a Wholly-Owned Investment
Subsidiary in the Regulated Entity's place. If the Regulated Entity
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 Entity and the Wholly-Owned Investment Subsidiary.
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\8\ The term ``Wholly-Owned Investment Subsidiary'' means an
entity (i) that is wholly-owned by a Regulated Entity (with such
Regulated Entity at all times holding, beneficially and of record,
100% of the voting and economic interests); (ii) whose sole business
purpose is to hold one or more investments on behalf of the
Regulated Entity (and, in the case of an entity that is licensed by
the Small Business Administration to operate under the Small
Business Investment Act of 1958, as amended (the ``SBA Act''), as a
small business investment company (an ``SBIC''), to maintain a
license under the SBA Act and issue debentures guaranteed by the
Small Business Administration); (iii) with respect to which the
Regulated Entity's Board has the sole authority to make all
determinations with respect to the entity's participation under the
conditions of the application; and (iv) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act. All
subsidiaries participating in the Co-Investment Program will be
Wholly-Owned Investment Subsidiaries and will have Objectives and
Strategies that are either substantially the same as, or a subset
of, their parent Regulated Entity's Objectives and Strategies. A
subsidiary that is an SBIC may be a Wholly-Owned Investment
Subsidiary if it satisfies the conditions in this definition.
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8. It is anticipated that an EIG Advisor will periodically
determine that certain investments the EIG Advisor recommends for a
Regulated Entity would also be appropriate investments for one or more
other Regulated Entities and/or one or more Affiliated Investors. Such
a determination may result in the Regulated Entity, one or more other
Regulated Entities and/or one or more Affiliated Investors co-investing
in certain investment opportunities. For each such investment
opportunity, the Advisors to each Regulated Entity will independently
analyze and evaluate the investment opportunity as to its
appropriateness for such Regulated Entity taking into consideration the
Regulated Entity's Objectives and Strategies.
9. Applicants state that Triloma serves as the Existing Regulated
Entities' investment adviser and administrator and EIG serves as the
Existing Regulated Entities' sub-adviser, and with respect to any
Future Regulated Entity, either (i) Triloma or another Triloma Advisor
and EIG or another EIG Advisor will serve in the same capacities as
with Existing Regulated Entities, or (ii) EIG or another EIG Advisor
will serve as investment adviser. Applicants represent that although an
EIG Advisor will identify and recommend investments \9\ for each
Regulated Entity for which Triloma or another Triloma Advisor serves as
investment advisor, prior to any investment by such Regulated Entity,
the EIG Advisor will present each proposed investment to the Triloma
Advisor which has the authority to approve or reject all investments
proposed for the Regulated Entity by the EIG Advisor. With respect to
any Future Regulated Entity for which EIG or another EIG Advisor serves
as investment adviser, rather than sub-adviser, EIG or such other EIG
Advisor will be responsible for the overall management of the Future
Regulated Entity's activities, and for the day-to-day management of the
Future Regulated Entity's investment portfolio, in each case consistent
with its fiduciary duties and pursuant to the terms of an Advisory
Agreement with the Future Regulated Entity.
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\9\ Applicants represent that the Triloma Advisors will not
source any Potential Co-Investment Transactions under the requested
Order.
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10. Applicants state that each EIG Advisor has (or will have, in
the case of future advisers) an investment committee through which it
will carry out its obligation under condition 1 to make a determination
as to the appropriateness of a Potential Co-Investment Transaction for
each Regulated Entity. Applicants represent that each EIG Advisor, as a
registered investment adviser, has (or will have, in the case of future
advisers) developed a robust allocation process that is designed to
allocate investment opportunities fairly and equitably among its
clients over time. Applicants state that, in the case of a Potential
Co-Investment Transaction, the applicable EIG Advisor would apply its
allocation policies and procedures in determining the proposed
allocation for the Regulated Entity consistent with the requirements of
condition 2(a).
11. Applicants state that, once the applicable EIG Advisor
determined a proposed allocation for a Regulated Entity for which
Triloma or another Triloma Advisor serves as investment adviser, such
EIG Advisor would notify the applicable Triloma Advisor of the
Potential Co-Investment Transaction and the EIG Advisor's recommended
allocation for such Regulated Entity. Applicants further state that the
applicable Triloma Advisor would then present the Potential Co-
Investment Transaction and the EIG Advisor's proposed allocation to the
Triloma Advisor's investment committee for its approval. Applicants
represent that the Triloma Advisor's investment committee would review
the EIG Advisor's recommendation for the Regulated Entity and would
have the ability to ask questions of the EIG Advisor and request
additional information from the EIG Advisor. Applicants further submit
that if the Triloma Advisor's investment committee approved the
investment for the Regulated Entity, the investment and all relevant
allocation information would then be presented to the Regulated
Entity's Board for its approval in accordance with the conditions to
the application. Applicants state that they believe the investment
process between the EIG Advisors and the Triloma Advisors, prior to
seeking approval from the Regulated Entity's Board (which is in
addition to, rather than in lieu of, the procedures required under the
conditions of the application), is significant and provides for
additional procedures and processes to ensure that the Regulated Entity
is being treated fairly in respect of Potential Co-Investment
Transactions.
12. If the Advisors to a Regulated Entity determine that a
Potential Co-Investment Opportunity is appropriate for the Regulated
Entity (and the applicable Triloma Advisor approves the investment for
such Regulated Entity), and one or more other Regulated Entities and/or
one or more Affiliated Investors may also participate, the Advisors
will present the investment opportunity to the Eligible Trustees \10\
of the Regulated Entity prior to the actual investment by the Regulated
Entity. As to any Regulated Entity, a Co-Investment Transaction will be
consummated only upon approval by a required majority of the Eligible
Trustees of such Regulated Entity within the meaning of section 57(o)
of the Act (``Required Majority'').\11\
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\10\ ``Eligible Trustees'' means the trustees or directors of a
Regulated Entity that are eligible to vote under section 57(o) of
the Act.
\11\ In the case of a Regulated Entity that is a registered
closed-end fund, the trustees or directors that make up the Required
Majority will be determined as if the Regulated Entity were a BDC
subject to section 57(o). As defined in section 57(o), ``required
majority'' means ``both a majority of a business development
company's directors or general partners who have no financial
interest in such transaction, plan, or arrangement and a majority of
such directors or general partners who are not interested persons of
such company.''
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13. With respect to the pro rata dispositions and follow-on
Investments provided in conditions 7 and 8, a Regulated Entity 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 Entity and
Affiliated Investor 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) each
Regulated Entity's Board has approved that Regulated Entity's
participation in pro rata
[[Page 12224]]
dispositions and follow-on investments as being in the best interests
of the Regulated Entity. If the Board does not so approve, any such
disposition or follow-on investment will be submitted to the Regulated
Entity's Eligible Trustees. The Board of any Regulated Entity 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 Trustees.
14. No Independent Trustee of a Regulated Entity will have a
financial interest in any Co-Investment Transaction.
15. Under condition 15, if an Advisor or its principals, or any
person controlling, controlled by, or under common control with the
Advisor or its the principals, and any Affiliated Investors
(collectively, the ``Holders'') own in the aggregate more than 25% of
the outstanding voting securities of a Regulated Entity (``Shares''),
then the Holders will vote such Shares as directed by an independent
third party when voting on matters specified in the condition.
Applicants believe that this condition will ensure that the Independent
Trustees will act independently in evaluating the Co-Investment
Program, because the ability of the Advisor or its principals to
influence the Independent Trustees by a suggestion, explicit or
implied, that the Independent Trustees can be removed will be limited
significantly. Applicants represent that the Independent Trustees shall
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 17(d) of the Act and rule 17d-1 under the Act prohibit
participation by a registered investment company and an affiliated
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the
Commission by order upon application. Section 17(d) of the Act and rule
17d-1 under the Act are applicable to Regulated Entities that are
registered closed-end investment companies. Similarly, with regard to
BDCs, section 57(a)(4) of the Act makes it unlawful for any person who
is related to a BDC in a manner described in section 57(b), acting as
principal, knowingly to effect any transaction in which the BDC (or a
company controlled by such BDC) is a joint or a joint and several
participant with that person in contravention of rules as prescribed by
the Commission. Because the Commission has not adopted any rules
expressly under section 57(a)(4), section 57(i) provides that the rules
under section 17(d) applicable to registered closed-end investment
companies (e.g., rule 17d-1) are, in the interim, deemed to apply to
transactions subject to section 57(a). 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), as modified by rule 57b-1, from
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, unless an application
regarding the joint enterprise, arrangement, or profit-sharing plan has
been filed with the Commission and has been granted by an order entered
prior to the submission of the plan or any modification thereof, to
security holders for approval, or prior to its adoption or modification
if not so submitted.
2. 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 submit that Each Regulated Entity may be deemed to be
an ``affiliated person'' of each other Regulated Entity within the
meaning of section 2(a)(3) of the Act. Applicants state that the
Regulated Entities, by virtue of each having either a Triloma Advisor
as investment adviser and an EIG Advisor as sub-adviser, or an EIG
Advisor as an investment adviser, may be deemed to be under common
control, and thus affiliated persons of each other under section
2(a)(3)(C) of the Act. Section 17(d) and section 57(b) apply to any
investment adviser to a closed-end fund or a BDC, respectively,
including the sub-adviser. Thus, an EIG Advisor and any Regulated
Entities or Affiliated Investors that it advises could be deemed to be
persons related to other Regulated Entities it advises or sub-advises
in a manner described by sections 17(d) and 57(b) and therefore
prohibited by sections 17(d) and 57(a)(4) and rule 17d-1 from
participating in the Co-Investment Program. Applicants further submit
that, because the EIG Advisors are ``affiliated persons'' of other EIG
Advisors, Regulated Entities, and Affiliated Investors advised by any
of them could be deemed to be persons related to other Regulated
Entities (or a company controlled by a Regulated Entity) advised or
sub-advised by any of them in a manner described by sections 17(d) and
57(b) and also prohibited from participating in the Co-Investment
Program.
4. Applicants state that they expect that that co-investment in
portfolio companies by a Regulated Entity, one or more other Regulated
Entities and/or one or more Affiliated Investors will increase
favorable investment opportunities for each Regulated Entity.
5. Applicants submit that the fact that the Required Majority will
approve each Co-Investment Transaction before investment (except for
certain dispositions or follow-on investments, as described in the
conditions), and other protective conditions set forth in the
application, will ensure that each Regulated Entity will be treated
fairly. Applicants state that each Regulated Entity's 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
further state that the terms and conditions proposed herein will ensure
that all such transactions are reasonable and fair to each Regulated
Entity and the Affiliated Investors and do not involve overreaching by
any person concerned, including Triloma or EIG.
Applicants' Conditions:
Applicants agree that the Order will be subject to the following
conditions:
1. Each time an EIG Advisor considers a Potential Co-Investment
Transaction for an Affiliated Investor or another Regulated Entity that
falls within a Regulated Entity's then-current Objectives and
Strategies, the Advisors to the Regulated Entity will make an
independent determination of the appropriateness of the investment for
the Regulated Entity in light of the Regulated Entity's then-current
circumstances.
2. a. If the Advisors to a Regulated Entity deem participation in
any Potential Co-Investment Transaction to be appropriate for the
Regulated Entity, the Advisors will then determine an appropriate level
of investment for such Regulated Entity.
b. If the aggregate amount recommended by the Advisors to a
Regulated Entity to be invested by the Regulated Entity in the
Potential Co-Investment Transaction, together with the amount proposed
to be invested by the other participating Regulated Entities and
Affiliated Investors, collectively, in the same transaction,
[[Page 12225]]
exceeds the amount of the investment opportunity, the amount of the
investment opportunity will be allocated among the Regulated Entities
and such Affiliated Investors, pro rata based on each participant's
Available Capital \12\ for investment in the asset class being
allocated, up to the amount proposed to be invested by each. The
Advisors to each participating Regulated Entity will provide the
Eligible Trustees of each participating Regulated Entity with
information concerning each participating party's Available Capital to
assist the Eligible Trustees with their review of the Regulated
Entity's investments for compliance with these allocation procedures.
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\12\ ``Available Capital'' means (a) for each Regulated Entity,
the amount of capital available for investment determined based on
the amount of cash on hand, existing commitments and reserves, if
any, the targeted leverage level, targeted asset mix and other
investment policies and restrictions set from time to time by the
Board of the applicable Regulated Entity or imposed by applicable
laws, rules, regulations or interpretations and (b) for each
Affiliated Investor, the amount of capital available for investment
determined based on the amount of cash on hand, existing commitments
and reserves, if any, the targeted leverage level, targeted asset
mix and other investment policies and restrictions set by the
Affiliated Investor's directors, general partners or adviser or
imposed by applicable laws, rules, regulations or interpretations.
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c. After making the determinations required in conditions 1 and
2(a) above, the Advisors to the Regulated Entity will distribute
written information concerning the Potential Co-Investment Transaction,
including the amount proposed to be invested by each Regulated Entity
and any Affiliated Investor, to the Eligible Trustees of each
participating Regulated Entity for their consideration. A Regulated
Entity will co-invest with one or more other Regulated Entities and/or
an Affiliated Investor only if, prior to the Regulated Entities' and
the Affiliated Investors' 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
Entity and its shareholders and do not involve overreaching in respect
of the Regulated Entity or its shareholders on the part of any person
concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(a) The interests of the Regulated Entity's shareholders; and
(b) the Regulated Entity's then-current Objectives and Strategies;
(iii) the investment by any other Regulated Entity or an Affiliated
Investor would not disadvantage the Regulated Entity, and participation
by the Regulated Entity would not be on a basis different from or less
advantageous than that of any other Regulated Entity or Affiliated
Investor; provided, that if another Regulated Entity or Affiliated
Investor, but not the Regulated Entity 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 a Required
Majority from reaching the conclusions required by this condition
2(c)(iii), if:
(a) The Eligible Trustees will have the right to ratify the
selection of such director or board observer, if any; and
(b) the Advisors to the Regulated Entity agree to, and do, provide
periodic reports to the Regulated Entity'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 other Regulated Entity
or any Affiliated Investor or any affiliated person of any other
Regulated Entity or an Affiliated Investor receives in connection with
the right of one or more Regulated Entities or Affiliated Investors 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
Investors (who may, in turn, share their portion with their affiliated
persons) and any participating Regulated Entity in accordance with the
amount of each party's investment; and
(iv) the proposed investment by the Regulated Entity will not
benefit the Advisors, any other Regulated Entity or the Affiliated
Investors 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 under sections
17(e) and 57(k) of the Act, as applicable, (C) in the case of fees or
other compensation described in condition 2(c)(iii)(c), or (D)
indirectly, as a result of an interest in the securities issued by one
of the parties to the Co-Investment Transaction.
3. Each Regulated Entity will have the right to decline to
participate in any Potential Co-Investment Transaction or to invest
less than the amount proposed.
4. The Advisors will present to the Board of each Regulated Entity,
on a quarterly basis, a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Entities or
any of the Affiliated Investors during the preceding quarter that fell
within the Regulated Entity's then-current Objectives and Strategies
that were not made available to the Regulated Entity, and an
explanation of why the investment opportunities were not offered to the
Regulated Entity. All information presented to the Board pursuant to
this condition will be kept for the life of the Regulated Entity and at
least two years thereafter, and will be subject to examination by the
Commission and its staff.
5. Except for follow-on investments made in accordance with
condition 8,\13\ a Regulated Entity will not invest in reliance on the
Order in any issuer in which another Regulated Entity or an Affiliated
Investor or any affiliated person of another Regulated Entity or an
Affiliated Investor is an existing investor.
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\13\ This exception applies only to follow-on investments by a
Regulated Entity in issuers in which that Regulated Entity already
holds investments.
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6. A Regulated Entity 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 Entity and Affiliated
Investor. The grant to one or more Regulated Entities or Affiliated
Investors, but not the Regulated Entity itself, 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 Regulated Entity or Affiliated Investor elects to
sell, exchange or otherwise dispose of an interest in a security that
was acquired by one or more Regulated Entities and/or Affiliated
Investors in a Co-Investment Transaction, the Advisors will:
(i) Notify each Regulated Entity 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 Entity in the disposition.
b. Each Regulated Entity will have the right to participate in such
disposition
[[Page 12226]]
on a proportionate basis, at the same price and on the same terms and
conditions as those applicable to the Affiliated Investors and any
other Regulated Entity.
c. A Regulated Entity may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Entity and each Affiliated Investor in
such disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Regulated
Entity's Board has approved as being in the best interests of the
Regulated Entity the ability to participate in such dispositions on a
pro rata basis (as described in greater detail in the application); and
(iii) the Regulated Entity's Board is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Advisors will provide their written
recommendation as to the Regulated Entity's participation to the
Eligible Trustees, and the Regulated Entity will participate in such
disposition solely to the extent that a Required Majority determines
that it is in the Regulated Entity's best interests.
d. Each Regulated Entity and each Affiliated Investor will bear its
own expenses in connection with the disposition.
8. a. If any Regulated Entity or Affiliated Investor desires to
make a ``follow-on investment'' (i.e., an additional investment in the
same entity, including through the exercise of warrants or other rights
to purchase securities of the issuer) in a portfolio company whose
securities were acquired by the Regulated Entity and the Affiliated
Investor in a Co-Investment Transaction, the Advisors will:
(i) Notify each Regulated Entity 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 Entity.
b. A Regulated Entity may participate in such follow-on investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Entity and each Affiliated
Investor in such investment is proportionate to its outstanding
investments in the issuer immediately preceding the follow-on
investment; and (ii) the Regulated Entity's Board has approved as being
in the best interests of such Regulated Entity 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 Advisors
will provide their written recommendation as to such Regulated Entity's
participation to the Eligible Trustees, and the Regulated Entity will
participate in such follow-on investment solely to the extent that the
Required Majority determines that it is in such Regulated Entity's best
interests.
c. If, with respect to any follow-on investment:
(i) The amount of a follow-on investment is not based on the
Regulated Entities' and the Affiliated Investors' outstanding
investments immediately preceding the follow-on investment; and
(ii) the aggregate amount recommended by the Advisors to be
invested by the Regulated Entity in the follow-on investment, together
with the amount proposed to be invested by the other participating
Regulated Entities and the Affiliated Investors 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 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 be subject to the other conditions set forth in the
application.
9. The Independent Trustees of each Regulated Entity will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Entities or Affiliated Investors
that a Regulated Entity considered but declined to participate in, so
that the Independent Trustees may determine whether all investments
made during the preceding quarter, including those investments which
the Regulated Entity considered but declined to participate in, comply
with the conditions of the Order. In addition, the Independent Trustees
will consider at least annually the continued appropriateness for such
Regulated Entity of participating in new and existing Co-Investment
Transactions.
10. Each Regulated Entity will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Entities were a
BDC and each of the investments permitted under these conditions were
approved by a Required Majority under section 57(f).
11. No Independent Trustee of a Regulated Entity will also be a
trustee, director, general partner, managing member or principal, or
otherwise an ``affiliated person'' (as defined in the Act) of any
Affiliated Investor.
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) shall, to the
extent not payable by the Advisors under their respective advisory
agreements with the Regulated Entities and the Affiliated Investors, be
shared by the Regulated Entities and the Affiliated Investors in
proportion to the relative amounts of the securities held or to be
acquired or disposed of, as the case may be.
13. Any transaction fee (including break-up or commitment fees but
excluding brokerage or underwriting compensation contemplated by
section 17(e) or 57(k) of the Act, as applicable) \14\ received in
connection with a Co-Investment Transaction will be distributed to the
participating Regulated Entities and Affiliated Investors 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 an Advisor pending consummation of the transaction, the fee
will be deposited into an account maintained by the Advisor 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
Entities and Affiliated Investors based on the amount they invest in
the Co-Investment Transaction. None of the other Regulated Entities,
Affiliated Investors, the Advisors nor any affiliated person of the
Regulated Entities or the Affiliated Investors 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 Entities and the Affiliated Investors, the pro rata
transaction fees described above and fees or other compensation
described in condition 2(c)(iii)(c), (b) brokerage or underwriting
compensation permitted by section 17(e) or 57(k) of the Act, as
applicable, or (c) in the case of the Advisors, investment advisory
fees paid in accordance with the Regulated
[[Page 12227]]
Entities' and the Affiliated Investors' investment advisory
agreements).
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\14\ Applicants are not requesting and the Commission is not
providing any relief for transaction fees received in connection
with any Co-Investment Transaction.
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14. The Advisors to the Regulated Entities and Affiliated Investors
will maintain written policies and procedures reasonably designed to
ensure compliance with the foregoing conditions. These policies and
procedures will require, among other things, that each of the Advisors
to each Regulated Entity will be notified of all Potential Co-
Investment Transactions that fall within a Regulated Entity's then-
current Objectives and Strategies and will be given sufficient
information to make its independent determination and recommendations
under conditions 1, 2(a), 7 and 8.
15. If the Holders own in the aggregate more than 25 percent of the
shares of a Regulated Entity, then the Holders will vote such shares as
directed by an independent third party when voting on (1) the election
of directors or trustees; (2) the removal of one or more directors or
trustees; or (3) any matters requiring approval by the vote of a
majority of the outstanding voting securities, as defined in section
2(a)(42) of the Act.
16. Each Regulated Entity's chief compliance officer, as defined in
Rule 38a-1(a)(4), will prepare an annual report for its Board that
evaluates (and documents the basis of that evaluation) the Regulated
Entity's compliance with the terms and conditions of the application
and the 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. 2018-05551 Filed 3-19-18; 8:45 am]
BILLING CODE 8011-01-P
