Rand Capital Corporation, et al., 12996-13004 [2021-04501]

Download as PDF 12996 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– CboeEDGX–2021–011 and should be submitted on or before March 26, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–04531 Filed 3–4–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34218; 812–15174] Rand Capital Corporation, et al. March 1, 2021. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. jbell on DSKJLSW7X2PROD with NOTICES AGENCY: Notice of application for an order (‘‘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 and closed-end management investment companies to co-invest in portfolio companies with each other and with affiliated investment funds and accounts. The Order would supersede the prior order.1 Applicants: Rand Capital Corporation (‘‘Company’’), BlueArc Mezzanine Partners I, LP (‘‘BlueArc’’), Rand Capital SBIC, Inc. (‘‘Existing Wholly-Owned Subsidiary’’), Rand Capital Management, LLC (‘‘BDC Adviser’’), 17 17 CFR 200.30–3(a)(12). Capital Corporation, et al., Investment Company Act Rel. No. 34006 (Sept. 11, 2020) (notice) and Investment Company Act Rel. No. 34046 (October 7, 2020) (order). 1 Rand VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 Callodine Strategic Credit, LLC (‘‘CSC Adviser’’), Callodine Capital Management, LP (‘‘Callodine Adviser,’’ and, together with the BDC Adviser and the CSC Adviser, the ‘‘Existing Advisers’’), Callodine Commercial Finance, LLC (the ‘‘Existing Callodine Proprietary Account’’), Callodine Capital Master Fund, LP (‘‘Callodine Capital Master Fund’’) and Callodine Special Opportunity Fund, LP (‘‘Callodine Special Opportunity Fund and, together with the Callodine Capital Master Fund, the ‘‘Callodine Private Funds’’). Filing Dates: The application was filed on October 30, 2020, and amended on January 5, 2021. Hearing or Notification of Hearing: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by emailing the Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants with a copy of the request by email. Hearing requests should be received by the Commission by 5:30 p.m. on March 26, 2021 and should be accompanied by proof of service on the applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to Rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary at SecretarysOffice@sec.gov. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: bcollins@callodine.com and pgrum@ randcapital.com. FOR FURTHER INFORMATION CONTACT: Marc Mehrespand, Senior Counsel, at (202) 551–8453 or Trace Rakestraw, Branch Chief, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s website by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. Introduction 1. The applicants request an order of the Commission under sections 17(d) and 57(i) under the Act and rule 17d-1 under the Act to permit, subject to the terms and conditions set forth in the PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 application (the ‘‘Conditions’’), one or more Regulated Funds 2 and/or one or more Affiliated Funds 3 to enter into CoInvestment Transactions with each other. ‘‘Co-Investment Transaction’’ means any transaction in which one or more Regulated Funds (or its WhollyOwned Investment Sub (defined below) participated together with one or more Affiliated Funds and/or one or more other Regulated Funds in reliance on the Order. ‘‘Potential Co-Investment Transaction’’ means any investment opportunity in which a Regulated Fund (or its Wholly-Owned Investment Sub) could not participate together with one or more Affiliated Funds and/or one or more other Regulated Funds without obtaining and relying on the Order.4 Applicants 2. The Company is a New York corporation and operates as a diversified closed-end management investment company that has elected to be regulated as a business development company (‘‘BDC’’) under the Act.5 The Company is managed by a Board 6 2 ‘‘Regulated Funds’’ means the Company, the Future Regulated Funds and the BDC Downstream Funds. ‘‘Future Regulated Fund’’ means a closedend management investment company (a) that is registered under the Act or has elected to be regulated as a BDC, (b) whose investment adviser (and sub-adviser(s), if any) are an Adviser, and (c) that intends to participate in the proposed coinvestment program (the ‘‘Co-Investment Program’’). ‘‘Adviser’’ means the Existing Advisers together with any future investment adviser that (i) controls, is controlled by or is under common control with Callodine Group, LLC (‘‘Callodine’’), (ii) (a) is registered as an investment adviser under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’) or (b) is an exempt reporting adviser pursuant to rule 203(m) of the Advisers Act (‘‘Exempt Reporting Adviser’’) and (iii) is not a Regulated Fund or a subsidiary of a Regulated Fund. 3 ‘‘Affiliated Fund’’ means the Existing Affiliated Funds, any Future Affiliated Fund or any Callodine Proprietary Account. ‘‘Existing Affiliated Funds’’ means BlueArc, the Callodine Private Funds and the Existing Callodine Proprietary Account. ‘‘Future Affiliated Fund’’ means any entity (a) whose investment adviser (and sub-adviser(s), if any) are an Adviser, (b) that would be an investment company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act, (c) that intends to participate in the CoInvestment Program, and (d) that is not a BDC Downstream Fund. ‘‘Callodine Proprietary Account’’ means the Existing Callodine Proprietary Account and any direct or indirect, wholly- or majority-owned subsidiary of Callodine or any Adviser that, from time to time, may hold various financial assets in a principal capacity. 4 All existing entities that currently intend to rely on the Order have been named as applicants and any existing or future entities that may rely on the Order in the future will comply with the terms and Conditions set forth in the application. 5 Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the purpose of making investments in securities described in section 55(a)(1) through 55(a)(3) and makes available significant managerial assistance with respect to the issuers of such securities. 6 ‘‘Board’’ means (i) with respect to a Regulated Fund other than a BDC Downstream Fund, the E:\FR\FM\05MRN1.SGM 05MRN1 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES currently comprised of five persons, three of whom are Independent Directors.7 3. BDC Adviser, a Delaware limited liability company that is registered under the Advisers Act, serves as the investment adviser to the Company pursuant to an investment advisory agreement. 4. CSC Adviser, a Delaware limited liability company, is an Exempt Reporting Adviser and serves as investment adviser to BlueArc. 5. BlueArc is a Georgia limited partnership. 6. The Existing Wholly-Owned Subsidiary is a New York corporation. 7. The Callodine Adviser is a Massachusetts limited partnership and is registered as an investment adviser under the Advisers Act. It serves as investment adviser to each of the Callodine Private Funds. 8. Callodine Capital Master Fund is a Cayman Islands limited partnership and Callodine Special Opportunity Fund is a Delaware limited partnership. 9. The Existing Callodine Proprietary Account is a Delaware limited liability company that is an indirect majorityowned subsidiary of Callodine. 10. Applicants state that a Regulated Fund may, from time to time, form one or more Wholly-Owned Investment Subs.8 Such a subsidiary may be board of directors (or the equivalent) of the Regulated Fund and (ii) with respect to a BDC Downstream Fund, the Independent Party of the BDC Downstream Fund. ‘‘Independent Party’’ means, with respect to a BDC Downstream Fund, (i) if the BDC Downstream Fund has a board of directors (or the equivalent), the board or (ii) if the BDC Downstream Fund does not have a board of directors (or the equivalent), a transaction committee or advisory committee of the BDC Downstream Fund. 7 ‘‘Independent Director’’ means a member of the Board of any relevant entity who is not an ‘‘interested person’’ as defined in section 2(a)(19) of the Act. No Independent Director of a Regulated Fund (including any non-interested member of an Independent Party) will have a financial interest in any Co-Investment Transaction, other than indirectly through share ownership in one of the Regulated Funds. 8 ‘‘Wholly-Owned Investment Sub’’ means an entity (i) that is a wholly-owned subsidiary of a Regulated Fund (with such Regulated Fund at all times holding, beneficially and of record, 95% or more of the voting and economic interests); (ii) whose sole business purpose is to hold one or more investments on behalf of such Regulated Fund (and, in the case of an SBIC Subsidiary (defined below), maintains a license under the SBA Act (defined below) and issues debentures guaranteed by the SBA (defined below)); (iii) with respect to which such Regulated Fund’s Board has the sole authority to make all determinations with respect to the entity’s participation under the Conditions to the application; and (iv) (A) that would be an investment company but for Section 3(c)(1), 3(c)(5)(C), or 3(c)(7) of the Act, or (B) that qualifies as a real estate investment trust within the meaning of Section 856 of the Internal Revenue Code of 1986, as amended (‘‘Code’’) because substantially VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 prohibited from investing in a CoInvestment Transaction with a Regulated Fund (other than its parent) or any Affiliated Fund because it would be a company controlled by its parent Regulated Fund for purposes of section 57(a)(4) and rule 17d–1. Applicants request that each Wholly-Owned Investment Sub be permitted to participate in Co-Investment Transactions in lieu of the Regulated Fund that owns it and that the WhollyOwned Investment Sub’s participation in any such transaction be treated, for purposes of the Order, as though the parent Regulated Fund were participating directly. Applicants’ Representations A Allocation Process 11. Applicants represent that the Existing Advisers have established processes for allocating initial investment opportunities, opportunities for subsequent investments in an issuer and dispositions of securities holdings reasonably designed to treat all clients fairly and equitably. Further, applicants represent that these processes will be extended and modified in a manner reasonably designed to ensure that the additional transactions permitted under the Order will both (i) be fair and equitable to the Regulated Funds and the Affiliated Funds and (ii) comply with the Conditions. 12. If the requested Order is granted, the Advisers will establish, maintain and implement policies and procedures reasonably designed to ensure that when such opportunities arise, the Advisers to the relevant Regulated Funds are promptly notified and receive the same information about the opportunity as any other Adviser considering the opportunity for its clients. In particular, consistent with Condition 1, if a Potential CoInvestment Transaction falls within the then-current Objectives and Strategies 9 all of its assets would consist of real properties. The term ‘‘SBIC Subsidiary’’ means a Wholly-Owned Investment Sub that is licensed by the Small Business Administration (the ‘‘SBA’’) to operate under the Small Business Investment Act of 1958, as amended, (the ‘‘SBA Act’’) as a small business investment company. The Existing Wholly-Owned Subsidiary is a Wholly-Owned Investment Sub. 9 ‘‘Objectives and Strategies’’ means (i) with respect to any Regulated Fund other than a BDC Downstream Fund, its investment objectives and strategies, as described in its most current registration statement on Form N–2, other current filings with the Commission under the Securities Act of 1933 (the ‘‘Securities Act’’) or under the Securities Exchange Act of 1934, as amended, and its most current report to stockholders, and (ii) with respect to any BDC Downstream Fund, those investment objectives and strategies described in its disclosure documents (including private placement memoranda and reports to equity holders) and PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 12997 and any Board-Established Criteria 10 of a Regulated Fund, the policies and procedures will require that the Adviser to such Regulated Fund receive sufficient information to allow such Adviser’s investment committee to make its independent determination and recommendations under the Conditions. 13. The Adviser to each applicable Regulated Fund will then make an independent determination of the appropriateness of the investment for the Regulated Fund in light of the Regulated Fund’s then-current circumstances. If the Adviser to a Regulated Fund deems the Regulated Fund’s participation in any Potential Co-Investment Transaction to be appropriate, then it will formulate a recommendation regarding the proposed order amount for the Regulated Fund. 14. Applicants state that, for each Regulated Fund and Affiliated Fund whose Adviser recommends participating in a Potential CoInvestment Transaction, such Adviser’s investment committee will approve an investment amount to be allocated to each Regulated Fund and/or Affiliated Fund participating in the Potential CoInvestment Transaction. Applicants state further that, each proposed order amount may be reviewed and adjusted, in accordance with the applicable Adviser’s written allocation policies and procedures, by the applicable Adviser’s investment committee.11 The order of a organizational documents (including operating agreements). 10 ‘‘Board-Established Criteria’’ means criteria that the Board of a Regulated Fund may establish from time to time to describe the characteristics of Potential Co-Investment Transactions regarding which the Adviser to such Regulated Fund should be notified under Condition 1. The BoardEstablished Criteria will be consistent with the Regulated Fund’s Objectives and Strategies. If no Board-Established Criteria are in effect, then the Regulated Fund’s Adviser will be notified of all Potential Co-Investment Transactions that fall within the Regulated Fund’s then-current Objectives and Strategies. Board-Established Criteria will be objective and testable, meaning that they will be based on observable information, such as industry/sector of the issuer, minimum EBITDA of the issuer, asset class of the investment opportunity or required commitment size, and not on characteristics that involve a discretionary assessment. The Adviser to the Regulated Fund may from time to time recommend criteria for the Board’s consideration, but Board-Established Criteria will only become effective if approved by a majority of the Independent Directors. The Independent Directors of a Regulated Fund may at any time rescind, suspend or qualify their approval of any Board-Established Criteria, though Applicants anticipate that, under normal circumstances, the Board would not modify these criteria more often than quarterly. 11 The reason for any such adjustment to a proposed order amount will be documented in writing and preserved in the records of each Adviser. E:\FR\FM\05MRN1.SGM 05MRN1 12998 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices Regulated Fund or Affiliated Fund resulting from this process is referred to as its ‘‘Internal Order.’’ The Internal Order will be submitted for approval by the Required Majority of any participating Regulated Funds in accordance with the Conditions.12 15. If the aggregate Internal Orders for a Potential Co-Investment Transaction do not exceed the size of the investment opportunity immediately prior to the submission of the orders to the underwriter, broker, dealer or issuer, as applicable (the ‘‘External Submission’’), then each Internal Order will be fulfilled as placed. If, on the other hand, the aggregate Internal Orders for a Potential Co-Investment Transaction exceed the size of the investment opportunity immediately prior to the External Submission, then the allocation of the opportunity will be made pro rata on the basis of the size of the Internal Orders.13 If, subsequent to such External Submission, the size of the opportunity is increased or decreased, or if the terms of such opportunity, or the facts and circumstances applicable to the Regulated Funds’ or the Affiliated Funds’ consideration of the opportunity, change, the participants will be permitted to submit revised Internal Orders in accordance with written allocation policies and procedures that the Advisers will establish, implement and maintain.14 jbell on DSKJLSW7X2PROD with NOTICES 12 ‘‘Required Majority’’ means a required majority, as defined in section 57(o) of the Act. In the case of a Regulated Fund that is a registered closed-end fund, the Board members that make up the Required Majority will be determined as if the Regulated Fund were a BDC subject to section 57(o). In the case of a BDC Downstream Fund with a board of directors (or the equivalent), the members that make up the Required Majority will be determined as if the BDC Downstream Fund were a BDC subject to section 57(o). In the case of a BDC Downstream Fund with a transaction committee or advisory committee, the committee members that make up the Required Majority will be determined as if the BDC Downstream Fund were a BDC subject to section 57(o) and as if the committee members were directors of the fund. 13 The Advisers will maintain records of all proposed order amounts, Internal Orders and External Submissions in conjunction with Potential Co-Investment Transactions. Each applicable Adviser will provide the Eligible Directors with information concerning the Affiliated Funds’ and Regulated Funds’ order sizes to assist the Eligible Directors with their review of the applicable Regulated Fund’s investments for compliance with the Conditions. ‘‘Eligible Directors’’ means, with respect to a Regulated Fund and a Potential CoInvestment Transaction, the members of the Regulated Fund’s Board eligible to vote on that Potential Co-Investment Transaction under section 57(o) of the Act. 14 The Board of the Regulated Fund will then either approve or disapprove of the investment opportunity in accordance with Condition 2, 6, 7, 8 or 9, as applicable. VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 B. Follow-On Investments 16. Applicants state that from time to time the Regulated Funds and Affiliated Funds may have opportunities to make Follow-On Investments 15 in an issuer in which a Regulated Fund and one or more other Regulated Funds and/or Affiliated Funds previously have invested. 17. Applicants propose that FollowOn Investments would be divided into two categories depending on whether the prior investment was a CoInvestment Transaction or a PreBoarding Investment.16 If the Regulated Funds and Affiliated Funds have previously participated in a CoInvestment Transaction with respect to the issuer, then the terms and approval of the Follow-On Investment would be subject to the Standard Review FollowOns described in Condition 8. If the Regulated Funds and Affiliated Funds have not previously participated in a Co-Investment Transaction with respect to the issuer but hold a Pre-Boarding Investment, then the terms and approval of the Follow-On Investment would be subject to the Enhanced-Review FollowOns described in Condition 9. All Enhanced Review Follow-Ons require the approval of the Required Majority. For a given issuer, the participating Regulated Funds and Affiliated Funds need to comply with the requirements of Enhanced-Review Follow-Ons only for the first Co-Investment Transaction. Subsequent Co-Investment Transactions with respect to the issuer would be governed by the requirements of Standard Review Follow-Ons. 18. A Regulated Fund would be permitted to invest in Standard Review Follow-Ons either with the approval of the Required Majority under Condition 8(c) or without Board approval under Condition 8(b) if it is (i) a Pro Rata Follow-On Investment 17 or (ii) a Non15 ‘‘Follow-On Investment’’ means an additional investment in the same issuer, including, but not limited to, through the exercise of warrants, conversion privileges or other rights to purchase securities of the issuer. 16 ‘‘Pre-Boarding Investments’’ are investments in an issuer held by a Regulated Fund as well as one or more Affiliated Funds and/or one or more other Regulated Funds that were acquired prior to participating in any Co-Investment Transaction: (i) in transactions in which the only term negotiated by or on behalf of such funds was price in reliance on one of the JT No-Action Letters (defined below); or (ii) in transactions occurring at least 90 days apart and without coordination between the Regulated Fund and any Affiliated Fund or other Regulated Fund. 17 A ‘‘Pro Rata Follow-On Investment’’ is a Follow-On Investment (i) in which the participation of each Affiliated Fund and each Regulated Fund is proportionate to its outstanding investments in the issuer or security, as appropriate, immediately preceding the Follow-On Investment, and (ii) in the case of a Regulated Fund, a majority of the Board PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 Negotiated Follow-On Investment.18 Applicants believe that these Pro Rata and Non-Negotiated Follow-On Investments do not present a significant opportunity for overreaching on the part of any Adviser and thus do not warrant the time or the attention of the Board. Pro Rata Follow-On Investments and Non-Negotiated Follow-On Investments remain subject to the Board’s periodic review in accordance with Condition 10. C. Dispositions 19. Applicants propose that Dispositions 19 would be divided into two categories. If the Regulated Funds and Affiliated Funds holding investments in the issuer have previously participated in a CoInvestment Transaction with respect to the issuer, then the terms and approval of the Disposition would be subject to the Standard Review Dispositions described in Condition 6. If the Regulated Funds and Affiliated Funds have not previously participated in a Co-Investment Transaction with respect to the issuer but hold a Pre-Boarding Investment, then the terms and approval of the Disposition would be subject to the Enhanced Review Dispositions described in Condition 7. Subsequent Dispositions with respect to the same issuer would be governed by Condition 6 under the Standard Review Dispositions.20 has approved the Regulated Fund’s participation in the pro rata Follow-On Investments as being in the best interests of the Regulated Fund. The Regulated Fund’s Board may refuse to approve, or at any time rescind, suspend or qualify, its approval of Pro Rata Follow-On Investments, in which case all subsequent Follow-On Investments will be submitted to the Regulated Fund’s Eligible Directors in accordance with Condition 8(c). 18 A ‘‘Non-Negotiated Follow-On Investment’’ is a Follow-On Investment in which a Regulated Fund participates together with one or more Affiliated Funds and/or one or more other Regulated Funds (i) in which the only term negotiated by or on behalf of the funds is price and (ii) with respect to which, if the transaction were considered on its own, the funds would be entitled to rely on one of the JT NoAction Letters. ‘‘JT No-Action Letters’’ means SMC Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000). 19 ‘‘Disposition’’ means the sale, exchange or other disposition of an interest in a security of an issuer. 20 However, with respect to an issuer, if a Regulated Fund’s first Co-Investment Transaction is an Enhanced Review Disposition, and the Regulated Fund does not dispose of its entire position in the Enhanced Review Disposition, then before such Regulated Fund may complete its first Standard Review Follow-On in such issuer, the Eligible Directors must review the proposed Follow-On Investment not only on a stand-alone basis but also in relation to the total economic exposure in such issuer (i.e., in combination with the portion of the Pre-Boarding Investment not disposed of in the Enhanced Review Disposition), and the other terms E:\FR\FM\05MRN1.SGM 05MRN1 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices 20. A Regulated Fund may participate in a Standard Review Disposition either with the approval of the Required Majority under Condition 6(d) or without Board approval under Condition 6(c) if (i) the Disposition is a Pro Rata Disposition 21 or (ii) the securities are Tradable Securities 22 and the Disposition meets the other requirements of Condition 6(c)(ii). Pro Rata Dispositions and Dispositions of a Tradable Security remain subject to the Board’s periodic review in accordance with Condition 10. jbell on DSKJLSW7X2PROD with NOTICES D. Delayed Settlement 21. Applicants represent that under the terms and Conditions of the application, all Regulated Funds and Affiliated Funds participating in a CoInvestment Transaction will invest at the same time, for the same price and with the same terms, conditions, class, registration rights and any other rights, so that none of them receives terms more favorable than any other. However, the settlement date for an Affiliated Fund in a Co-Investment Transaction may occur up to ten business days after the settlement date for the Regulated Fund, and vice versa. Nevertheless, in all cases, (i) the date on which the commitment of the Affiliated Funds and Regulated Funds is made will be the same even where the settlement date is not and (ii) the earliest settlement date and the latest of the investments. This additional review is required because such findings were not required in connection with the prior Enhanced Review Disposition, but they would have been required had the first Co-Investment Transaction been an Enhanced Review Follow-On. 21 A ‘‘Pro Rata Disposition’’ is a Disposition (i) in which the participation of each Affiliated Fund and each Regulated Fund is proportionate to its outstanding investment in the security subject to Disposition immediately preceding the Disposition; and (ii) in the case of a Regulated Fund, a majority of the Board has approved the Regulated Fund’s participation in pro rata Dispositions as being in the best interests of the Regulated Fund. The Regulated Fund’s Board may refuse to approve, or at any time rescind, suspend or qualify, its approval of Pro Rata Dispositions, in which case all subsequent Dispositions will be submitted to the Regulated Fund’s Eligible Directors. 22 ‘‘Tradable Security’’ means a security that meets the following criteria at the time of Disposition: (i) it trades on a national securities exchange or designated offshore securities market as defined in rule 902(b) under the Securities Act; (ii) it is not subject to restrictive agreements with the issuer or other security holders; and (iii) it trades with sufficient volume and liquidity (findings as to which are documented by the Advisers to any Regulated Funds holding investments in the issuer and retained for the life of the Regulated Fund) to allow each Regulated Fund to dispose of its entire position remaining after the proposed Disposition within a short period of time not exceeding 30 days at approximately the value (as defined by section 2(a)(41) of the Act) at which the Regulated Fund has valued the investment. VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 settlement date of any Affiliated Fund or Regulated Fund participating in the transaction will occur within ten business days of each other. E. Holders 22. Under Condition 15, if an Adviser, its principals, or any person controlling, controlled by, or under common control with the Adviser or its principals, and the Affiliated Funds (collectively, the ‘‘Holders’’) own in the aggregate more than 25 percent of the outstanding voting shares of a Regulated Fund (the ‘‘Shares’’), then the Holders will vote such Shares in the same percentages as the Regulated Fund’s other shareholders (not including the Holders) when voting on matters specified in the Condition. Applicants’ Legal Analysis 1. Section 17(d) of the Act and rule 17d–1 under the Act prohibit participation by a registered investment company and an affiliated person in any ‘‘joint enterprise or other joint arrangement or profit-sharing plan,’’ as defined in the rule, without prior approval by the Commission by order upon application. Section 17(d) of the Act and rule 17d–1 under the Act are applicable to Regulated Funds that are registered closed-end investment companies. 2. Similarly, with regard to BDCs, section 57(a)(4) of the Act generally prohibits certain persons specified in section 57(b) from participating in joint transactions with the BDC or a company controlled by the BDC in contravention of rules as prescribed by the Commission. Section 57(i) of the Act provides that, until the Commission prescribes rules under section 57(a)(4), the Commission’s rules under section 17(d) of the Act applicable to registered closed-end investment companies will be deemed to apply to transactions subject to section 57(a)(4). Because the Commission has not adopted any rules under section 57(a)(4), rule 17d–1 also applies to joint transactions with Regulated Funds that are BDCs. 3. Co-Investment Transactions are prohibited by either or both of rule 17d– 1 and section 57(a)(4) without a prior exemptive order of the Commission to the extent that the Affiliated Funds and the Regulated Funds participating in such transactions fall within the category of persons described by rule 17d–1 and/or section 57(b), as modified by rule 57b–1 thereunder, as applicable, vis-a`-vis each participating Regulated Fund. Each of the participating Regulated Funds and Affiliated Funds may be deemed to be affiliated persons vis-a`-vis a Regulated Fund within the meaning of section 2(a)(3) by reason of PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 12999 common control because all of the Regulated Funds and Affiliated Funds, including the Callodine Proprietary Accounts, are directly or indirectly controlled by Callodine. This is because (i) CSC Adviser manages and may be deemed to control BlueArc, (ii) Callodine Adviser manages and may be deemed to control the Callodine Private Funds, (iii) an Adviser will manage and may be deemed to control any Future Affiliated Fund; (iv) BDC Adviser manages and may be deemed to control the Company pursuant to the an investment advisory agreement; (v) any future Regulated Fund will be managed by and may be deemed to be controlled by an Adviser; (vi) each BDC Downstream Fund 23 will be, deemed to be controlled by its BDC parent and/or its BDC parent’s investment adviser; and (vii) the Advisers, including the Existing Advisers, will be directly or indirectly controlled by Callodine. Thus, each of the Affiliated Funds could be deemed to be a person related to the Regulated Funds that are BDCs, including the Company and any BDC Downstream Fund, in a manner described by section 57(b) and related to Future Regulated Funds that are registered investment companies in a manner described by rule 17d–1; and therefore the prohibitions of rule 17d–1 and section 57(a)(4) would apply respectively to prohibit the Affiliated Funds from participating in Co-Investment Transactions with the Regulated Funds. Each Regulated Fund would also be related to each other Regulated Fund in a manner described by 57(b) or rule 17d–1, as applicable, and thus prohibited from participating in CoInvestment Transactions with each other. 4. Further, because the WhollyOwned Investment Subs are controlled by the Regulated Funds, the WhollyOwned Investment Subs are subject to Section 57(a)(4) (or Section 17(d) in the case of Wholly-Owned Investment Subs controlled by Regulated Funds that are registered under the Act), and thus also subject to the provisions of Rule 17d–1, and therefore would be prohibited from participating in Co-Investment Transactions. 23 ‘‘BDC Downstream Fund’’ means, with respect to any Regulated Fund that is a BDC, an entity (i) that the BDC directly or indirectly controls, (ii) that is not controlled by any person other than the BDC (except a person that indirectly controls the entity solely because it controls the BDC), (iii) that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act, (iv) whose investment adviser (and sub-adviser(s), if any) are an Adviser, (v) that is not a Wholly-Owned Investment Sub and (vi) that intends to participate in the Co-Investment Program. E:\FR\FM\05MRN1.SGM 05MRN1 13000 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices 5. In addition, because the Callodine Proprietary Accounts, including the Existing Callodine Proprietary Account, are directly or indirectly controlled by Callodine, and, therefore, may be under common control with the Company, the Advisers, and any Future Regulated Funds, the Callodine Proprietary Accounts could be deemed to be persons related to the Regulated Funds (or a company controlled by the Regulated Funds) in a manner described by section 57(b) and also prohibited from participating in the Co-Investment Program. 6. 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. 7. Applicants state that in the absence of the requested relief, in many circumstances the Regulated Funds would be limited in their ability to participate in attractive and appropriate investment opportunities. Applicants state that, as required by rule 17d–1(b), the Conditions ensure that the terms on which Co-Investment Transactions may be made will be consistent with the participation of the Regulated Funds being on a basis that it is neither different from nor less advantageous than other participants, thus protecting the equity holders of any participant from being disadvantaged. Applicants further state that the Conditions ensure that all Co-Investment Transactions are reasonable and fair to the Regulated Funds and their shareholders and do not involve overreaching by any person concerned, including the Advisers. Applicants state that the Regulated Funds’ participation in the CoInvestment Transactions in accordance with the Conditions will be consistent with the provisions, policies, and purposes of the Act and would be done in a manner that is not different from, or less advantageous than, that of other participants. jbell on DSKJLSW7X2PROD with NOTICES Applicants’ Conditions Applicants agree that the Order will be subject to the following Conditions: 1. Identification and Referral of Potential Co-Investment Transactions. (a). The Advisers will establish, maintain and implement policies and procedures reasonably designed to ensure that each Adviser is promptly notified of all Potential Co-Investment Transactions that fall within the thencurrent Objectives and Strategies and VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 Board-Established Criteria of any Regulated Fund the Adviser manages. (b). When an Adviser to a Regulated Fund is notified of a Potential CoInvestment Transaction under Condition 1(a), the Adviser will make an independent determination of the appropriateness of the investment for the Regulated Fund in light of the Regulated Fund’s then-current circumstances. 2. Board Approvals of Co-Investment Transactions. (a). If the Adviser deems a Regulated Fund’s participation in any Potential Co-Investment Transaction to be appropriate for the Regulated Fund, it will then determine an appropriate level of investment for the Regulated Fund. (b). If the aggregate amount recommended by the Advisers to be invested in the Potential Co-Investment Transaction by the participating Regulated Funds and any participating Affiliated Funds, collectively, exceeds the amount of the investment opportunity, the investment opportunity will be allocated among them pro rata based on the size of the Internal Orders, as described in section III.A.1.b. of the application. Each Adviser to a participating Regulated Fund will promptly notify and provide the Eligible Directors with information concerning the Affiliated Funds’ and Regulated Funds’ order sizes to assist the Eligible Directors with their review of the applicable Regulated Fund’s investments for compliance with these Conditions. (c). After making the determinations required in Condition 1(b) above, each Adviser to a participating Regulated Fund will distribute written information concerning the Potential Co-Investment Transaction (including the amount proposed to be invested by each participating Regulated Fund and each participating Affiliated Fund) to the Eligible Directors of its participating Regulated Fund(s) for their consideration. A Regulated Fund will enter into a Co-Investment Transaction with one or more other Regulated Funds or Affiliated Funds only if, prior to the Regulated Fund’s participation in the Potential Co-Investment Transaction, a Required Majority concludes that: (i). the terms of the transaction, including the consideration to be paid, are reasonable and fair to the Regulated Fund and its equity holders and do not involve overreaching in respect of the Regulated Fund or its equity holders on the part of any person concerned; (ii). the transaction is consistent with: (A). The interests of the Regulated Fund’s equity holders; and PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 (B). the Regulated Fund’s then-current Objectives and Strategies; (iii). the investment by any other Regulated Fund(s) or Affiliated Fund(s) would not disadvantage the Regulated Fund, and participation by the Regulated Fund would not be on a basis different from, or less advantageous than, that of any other Regulated Fund(s) or Affiliated Fund(s) participating in the transaction; provided that the Required Majority shall not be prohibited from reaching the conclusions required by this Condition 2(c)(iii) if: (A). The settlement date for another Regulated Fund or an Affiliated Fund in a Co-Investment Transaction is later than the settlement date for the Regulated Fund by no more than ten business days or earlier than the settlement date for the Regulated Fund by no more than ten business days, in either case, so long as: (x) the date on which the commitment of the Affiliated Funds and Regulated Funds is made is the same; and (y) the earliest settlement date and the latest settlement date of any Affiliated Fund or Regulated Fund participating in the transaction will occur within ten business days of each other; or (B). any other Regulated Fund or Affiliated Fund, but not the Regulated Fund itself, gains the right to nominate a director for election to a portfolio company’s board of directors, the right to have a board observer or any similar right to participate in the governance or management of the portfolio company so long as: (x) the Eligible Directors will have the right to ratify the selection of such director or board observer, if any; (y) the Adviser agrees to, and does, provide periodic reports to the Regulated Fund’s Board with respect to the actions of such director or the information received by such board observer or obtained through the exercise of any similar right to participate in the governance or management of the portfolio company; and (z) any fees or other compensation that any other Regulated Fund or Affiliated Fund or any affiliated person of any other Regulated Fund or Affiliated Fund receives in connection with the right of one or more Regulated Funds or Affiliated Funds to nominate a director or appoint a board observer or otherwise to participate in the governance or management of the portfolio company will be shared proportionately among any participating Affiliated Funds (who may, in turn, share their portion with their affiliated persons) and any participating Regulated Fund(s) in accordance with E:\FR\FM\05MRN1.SGM 05MRN1 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES the amount of each such party’s investment; and (iv). the proposed investment by the Regulated Fund will not involve compensation, remuneration or a direct or indirect 24 financial benefit to the Advisers, any other Regulated Fund, the Affiliated Funds or any affiliated person of any of them (other than the parties to the Co-Investment Transaction), except (A) to the extent permitted by Condition 14, (B) to the extent permitted by Section 17 (e) or 57(k), as applicable, (C) indirectly, as a result of an interest in the securities issued by one of the parties to the Co-Investment Transaction, or (D) in the case of fees or other compensation described in Condition 2(c)(iii)(B)(z). 3. Right to Decline. Each Regulated Fund has the right to decline to participate in any Potential CoInvestment Transaction or to invest less than the amount proposed. 4. General Limitation. Except for Follow-On Investments made in accordance with Conditions 8 and 9 below,25 a Regulated Fund will not invest in reliance on the Order in any issuer in which a Related Party has an investment.26 5. Same Terms and Conditions. A Regulated Fund will not participate in any Potential Co-Investment Transaction unless (i) the terms, conditions, price, class of securities to be purchased, date on which the commitment is entered into and registration rights (if any) will be the same for each participating Regulated Fund and Affiliated Fund and (ii) the earliest settlement date and the latest settlement date of any participating Regulated Fund or Affiliated Fund will occur as close in time as practicable and in no event more than ten business days 24 For example, procuring the Regulated Fund’s investment in a Potential Co-Investment Transaction to permit an affiliate to complete or obtain better terms in a separate transaction would constitute an indirect financial benefit. 25 This exception applies only to Follow-On Investments by a Regulated Fund in issuers in which that Regulated Fund already holds investments. 26 ‘‘Related Party’’ means (i) any Close Affiliate and (ii) in respect of matters as to which any Adviser has knowledge, any Remote Affiliate. ‘‘Close Affiliate’’ means the Advisers, the Regulated Funds, the Affiliated Funds and any other person described in section 57(b) (after giving effect to rule 57b–1) in respect of any Regulated Fund (treating any registered investment company or series thereof as a BDC for this purpose) except for limited partners included solely by reason of the reference in section 57(b) to section 2(a)(3)(D). ‘‘Remote Affiliate’’ means any person described in section 57(e) in respect of any Regulated Fund (treating any registered investment company or series thereof as a BDC for this purpose) and any limited partner holding 5% or more of the relevant limited partner interests that would be a Close Affiliate but for the exclusion in that definition. VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 apart. The grant to one or more Regulated Funds or Affiliated Funds, but not the respective Regulated Fund, of the right to nominate a director for election to a portfolio company’s board of directors, the right to have an observer on the board of directors or similar rights to participate in the governance or management of the portfolio company will not be interpreted so as to violate this Condition 5, if Condition 2(c)(iii)(B) is met. 6. Standard Review Dispositions. (a). General. If any Regulated Fund or Affiliated Fund elects to sell, exchange or otherwise dispose of an interest in a security and one or more Regulated Funds and Affiliated Funds have previously participated in a CoInvestment Transaction with respect to the issuer, then: (i). The Adviser to such Regulated Fund or Affiliated Fund 27 will notify each Regulated Fund that holds an investment in the issuer of the proposed Disposition at the earliest practical time; and (ii). the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to participation by such Regulated Fund in the Disposition. (b). Same Terms and Conditions. Each Regulated Fund will have the right to participate in such Disposition on a proportionate basis, at the same price and on the same terms and conditions as those applicable to the Affiliated Funds and any other Regulated Fund. (c). No Board Approval Required. A Regulated Fund may participate in such a Disposition without obtaining prior approval of the Required Majority if: (i). (A) The participation of each Regulated Fund and Affiliated Fund in such Disposition is proportionate to its then-current holding of the security (or securities) of the issuer that is (or are) the subject of the Disposition; 28 (B) the Board of the Regulated Fund has approved as being in the best interests of the Regulated Fund the ability to participate in such Dispositions on a pro rata basis (as described in greater detail in the application); and (C) the Board of the Regulated Fund is provided on a quarterly basis with a list of all 27 Any Callodine Proprietary Account that is not advised by an Adviser is itself deemed to be an Adviser for purposes of Conditions 6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i). 28 In the case of any Disposition, proportionality will be measured by each participating Regulated Fund’s and Affiliated Fund’s outstanding investment in the security in question immediately preceding the Disposition. PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 13001 Dispositions made in accordance with this Condition; or (ii). each security is a Tradable Security and (A) the Disposition is not to the issuer or any affiliated person of the issuer; and (B) the security is sold for cash in a transaction in which the only term negotiated by or on behalf of the participating Regulated Funds and Affiliated Funds is price. (d). Standard Board Approval. In all other cases, the Adviser will provide its written recommendation as to the Regulated Fund’s participation to the Eligible Directors and the Regulated Fund will participate in such Disposition solely to the extent that a Required Majority determines that it is in the Regulated Fund’s best interests. 7. Enhanced Review Dispositions. (a). General. If any Regulated Fund or Affiliated Fund elects to sell, exchange or otherwise dispose of a Pre-Boarding Investment in a Potential Co-Investment Transaction and the Regulated Funds and Affiliated Funds have not previously participated in a CoInvestment Transaction with respect to the issuer: (i). The Adviser to such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds an investment in the issuer of the proposed Disposition at the earliest practical time; (ii). the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to participation by such Regulated Fund in the Disposition; and (iii). the Advisers will provide to the Board of each Regulated Fund that holds an investment in the issuer all information relating to the existing investments in the issuer of the Regulated Funds and Affiliated Funds, including the terms of such investments and how they were made, that is necessary for the Required Majority to make the findings required by this Condition. (b). Enhanced Board Approval. The Adviser will provide its written recommendation as to the Regulated Fund’s participation to the Eligible Directors, and the Regulated Fund will participate in such Disposition solely to the extent that a Required Majority determines that: (i). The Disposition complies with Condition 2(c)(i), (ii), (iii)(A), and (iv); and (ii). the making and holding of the Pre-Boarding Investments were not prohibited by Section 57 or Rule 17d– 1, as applicable, and records the basis for the finding in the Board minutes. (c). Additional Requirements: The Disposition may only be completed in reliance on the Order if: E:\FR\FM\05MRN1.SGM 05MRN1 13002 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES (i). Same Terms and Conditions. Each Regulated Fund has the right to participate in such Disposition on a proportionate basis, at the same price and on the same terms and Conditions as those applicable to the Affiliated Funds and any other Regulated Fund; (ii). Original Investments. All of the Affiliated Funds’ and Regulated Funds’ investments in the issuer are PreBoarding Investments; (iii). Advice of counsel. Independent counsel to the Board advises that the making and holding of the investments in the Pre-Boarding Investments were not prohibited by Section 57 (as modified by Rule 57b–1) or Rule 17d– 1, as applicable; (iv). Multiple Classes of Securities. All Regulated Funds and Affiliated Funds that hold Pre-Boarding Investments in the issuer immediately before the time of completion of the Co-Investment Transaction hold the same security or securities of the issuer. For the purpose of determining whether the Regulated Funds and Affiliated Funds hold the same security or securities, they may disregard any security held by some but not all of them if, prior to relying on the Order, the Required Majority is presented with all information necessary to make a finding, and finds, that: (x) Any Regulated Fund’s or Affiliated Fund’s holding of a different class of securities (including for this purpose a security with a different maturity date) is immaterial 29 in amount, including immaterial relative to the size of the issuer; and (y) the Board records the basis for any such finding in its minutes. In addition, securities that differ only in respect of issuance date, currency, or denominations may be treated as the same security; and (v). No control. The Affiliated Funds, the other Regulated Funds and their affiliated persons (within the meaning of Section 2(a)(3)(C) of the Act), individually or in the aggregate, do not control the issuer of the securities (within the meaning of Section 2(a)(9) of the Act). 8. Standard Review Follow-Ons. (a). General. If any Regulated Fund or Affiliated Fund desires to make a Follow-On Investment in an issuer and the Regulated Funds and Affiliated Funds holding investments in the issuer previously participated in a Co29 In determining whether a holding is ‘‘immaterial’’ for purposes of the Order, the Required Majority will consider whether the nature and extent of the interest in the transaction or arrangement is sufficiently small that a reasonable person would not believe that the interest affected the determination of whether to enter into the transaction or arrangement or the terms of the transaction or arrangement. VerDate Sep<11>2014 21:17 Mar 04, 2021 Jkt 253001 Investment Transaction with respect to the issuer: (i). the Adviser to each such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time; and (ii). the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund. (b). No Board Approval Required. A Regulated Fund may participate in the Follow-On Investment without obtaining prior approval of the Required Majority if: (i). (A) The proposed participation of each Regulated Fund and each Affiliated Fund in such investment is proportionate to its outstanding investments in the issuer or the security at issue, as appropriate,30 immediately preceding the Follow-On Investment; and (B) the Board of the Regulated Fund has approved as being in the best interests of the Regulated Fund the ability to participate in Follow-On Investments on a pro rata basis (as described in greater detail in the application); or (ii). it is a Non-Negotiated Follow-On Investment. (c). Standard Board Approval. In all other cases, the Adviser will provide its written recommendation as to the Regulated Fund’s participation to the Eligible Directors and the Regulated Fund will participate in such Follow-On Investment solely to the extent that a Required Majority makes the determinations set forth in Condition 2(c). If the only previous Co-Investment Transaction with respect to the issuer was an Enhanced Review Disposition the Eligible Directors must complete this review of the proposed Follow-On Investment both on a stand-alone basis and together with the Pre-Boarding Investments in relation to the total economic exposure and other terms of the investment. 30 To the extent that a Follow-On Investment opportunity is in a security or arises in respect of a security held by the participating Regulated Funds and Affiliated Funds, proportionality will be measured by each participating Regulated Fund’s and Affiliated Fund’s outstanding investment in the security in question immediately preceding the Follow-On Investment using the most recent available valuation thereof. To the extent that a Follow-On Investment opportunity relates to an opportunity to invest in a security that is not in respect of any security held by any of the participating Regulated Funds or Affiliated Funds, proportionality will be measured by each participating Regulated Fund’s and Affiliated Fund’s outstanding investment in the issuer immediately preceding the Follow-On Investment using the most recent available valuation thereof. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 (d). Allocation. If, with respect to any such Follow-On Investment: (i). the amount of the opportunity proposed to be made available to any Regulated Fund is not based on the Regulated Funds’ and the Affiliated Funds’ outstanding investments in the issuer or the security at issue, as appropriate, immediately preceding the Follow-On Investment; and (ii). the aggregate amount recommended by the Advisers to be invested in the Follow-On Investment by the participating Regulated Funds and any participating Affiliated Funds, collectively, exceeds the amount of the investment opportunity, then the Follow-On Investment opportunity will be allocated among them pro rata based on the size of the Internal Orders, as described in section III.A.1.b. of the application. (e). Other Conditions. The acquisition of Follow-On Investments as permitted by this Condition will be considered a Co-Investment Transaction for all purposes and subject to the other Conditions set forth in the application. 9. Enhanced Review Follow-Ons. (a). General. If any Regulated Fund or Affiliated Fund desires to make a Follow-On Investment in an issuer that is a Potential Co-Investment Transaction and the Regulated Funds and Affiliated Funds holding investments in the issuer have not previously participated in a Co-Investment Transaction with respect to the issuer: (i). The Adviser to each such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time; (ii). the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund; and (iii). the Advisers will provide to the Board of each Regulated Fund that holds an investment in the issuer all information relating to the existing investments in the issuer of the Regulated Funds and Affiliated Funds, including the terms of such investments and how they were made, that is necessary for the Required Majority to make the findings required by this Condition. (b). Enhanced Board Approval. The Adviser will provide its written recommendation as to the Regulated Fund’s participation to the Eligible Directors, and the Regulated Fund will participate in such Follow-On Investment solely to the extent that a E:\FR\FM\05MRN1.SGM 05MRN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices Required Majority reviews the proposed Follow-On Investment both on a standalone basis and together with the PreBoarding Investments in relation to the total economic exposure and other terms and makes the determinations set forth in Condition 2(c). In addition, the Follow-On Investment may only be completed in reliance on the Order if the Required Majority of each participating Regulated Fund determines that the making and holding of the Pre-Boarding Investments were not prohibited by Section 57 (as modified by Rule 57b–1) or Rule 17d– 1, as applicable. The basis for the Board’s findings will be recorded in its minutes. (c). Additional Requirements. The Follow-On Investment may only be completed in reliance on the Order if: (i). Original Investments. All of the Affiliated Funds’ and Regulated Funds’ investments in the issuer are PreBoarding Investments; (ii). Advice of counsel. Independent counsel to the Board advises that the making and holding of the investments in the Pre-Boarding Investments were not prohibited by Section 57 (as modified by Rule 57b–1) or Rule 17d– 1, as applicable; (iii). Multiple Classes of Securities. All Regulated Funds and Affiliated Funds that hold Pre-Boarding Investments in the issuer immediately before the time of completion of the CoInvestment Transaction hold the same security or securities of the issuer. For the purpose of determining whether the Regulated Funds and Affiliated Funds hold the same security or securities, they may disregard any security held by some but not all of them if, prior to relying on the Order, the Required Majority is presented with all information necessary to make a finding, and finds, that: (x) Any Regulated Fund’s or Affiliated Fund’s holding of a different class of securities (including for this purpose a security with a different maturity date) is immaterial in amount, including immaterial relative to the size of the issuer; and (y) the Board records the basis for any such finding in its minutes. In addition, securities that differ only in respect of issuance date, currency, or denominations may be treated as the same security; and (iv). No control. The Affiliated Funds, the other Regulated Funds and their affiliated persons (within the meaning of Section 2(a)(3)(C) of the Act), individually or in the aggregate, do not control the issuer of the securities (within the meaning of Section 2(a)(9) of the Act). VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 (d). Allocation. If, with respect to any such Follow-On Investment: (i). the amount of the opportunity proposed to be made available to any Regulated Fund is not based on the Regulated Funds’ and the Affiliated Funds’ outstanding investments in the issuer or the security at issue, as appropriate, immediately preceding the Follow-On Investment; and (ii). the aggregate amount recommended by the Advisers to be invested in the Follow-On Investment by the participating Regulated Funds and any participating Affiliated Funds, collectively, exceeds the amount of the investment opportunity, then the Follow-On Investment opportunity will be allocated among them pro rata based on the size of the Internal Orders, as described in section III.A.1.b. of the application. (e). Other Conditions. The acquisition of Follow-On Investments as permitted by this Condition will be considered a Co-Investment Transaction for all purposes and subject to the other Conditions set forth in the application. 10. Board Reporting, Compliance and Annual Re-Approval. (a). Each Adviser to a Regulated Fund will present to the Board of each Regulated Fund, on a quarterly basis, and at such other times as the Board may request, (i) a record of all investments in Potential Co-Investment Transactions made by any of the other Regulated Funds or any of the Affiliated Funds during the preceding quarter that fell within the Regulated Fund’s thencurrent Objectives and Strategies and Board-Established Criteria that were not made available to the Regulated Fund, and an explanation of why such investment opportunities were not made available to the Regulated Fund; (ii) a record of all Follow-On Investments in and Dispositions of investments in any issuer in which the Regulated Fund holds any investments by any Affiliated Fund or other Regulated Fund during the prior quarter; and (iii) all information concerning Potential CoInvestment Transactions and CoInvestment Transactions, including investments made by other Regulated Funds or Affiliated Funds that the Regulated Fund considered but declined to participate in, so that the Independent Directors, may determine whether all Potential Co-Investment Transactions and Co-Investment Transactions during the preceding quarter, including those investments that the Regulated Fund considered but declined to participate in, comply with the Conditions. (b). All information presented to the Regulated Fund’s Board pursuant to this PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 13003 Condition will be kept for the life of the Regulated Fund and at least two years thereafter, and will be subject to examination by the Commission and its staff. (c). Each Regulated Fund’s chief compliance officer, as defined in rule 38a–1(a)(4), will prepare an annual report for its Board each year that evaluates (and documents the basis of that evaluation) the Regulated Fund’s compliance with the terms and Conditions of the application and the procedures established to achieve such compliance. In the case of a BDC Downstream Fund that does not have a chief compliance officer, the chief compliance officer of the BDC that controls the BDC Downstream Fund will prepare the report for the relevant Independent Party. (d). The Independent Directors (including the non-interested members of each Independent Party) will consider at least annually whether continued participation in new and existing Co-Investment Transactions is in the Regulated Fund’s best interests. 11. Record Keeping. Each Regulated Fund will maintain the records required by Section 57(f)(3) of the Act as if each of the Regulated Funds were a BDC and each of the investments permitted under these Conditions were approved by the Required Majority under Section 57(f). 12. Director Independence. No Independent Director (including the non-interested members of each Independent Party) of a Regulated Fund will also be a director, general partner, managing member or principal, or otherwise be an ‘‘affiliated person’’ (as defined in the Act) of any Affiliated Fund. 13. Expenses. The expenses, if any, associated with acquiring, holding or disposing of any securities acquired in a Co-Investment Transaction (including, without limitation, the expenses of the distribution of any such securities registered for sale under the Securities Act) will, to the extent not payable by the Advisers under their respective advisory agreements with the Regulated Funds and the Affiliated Funds, be shared by the Regulated Funds and the participating Affiliated Funds in proportion to the relative amounts of the securities held or being acquired or disposed of, as the case may be. 14. Transaction Fees.31 Any transaction fee (including break-up, structuring, monitoring or commitment fees but excluding brokerage or 31 Applicants are not requesting and the Commission is not providing any relief for transaction fees received in connection with any Co-Investment Transaction. E:\FR\FM\05MRN1.SGM 05MRN1 13004 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Notices underwriting compensation permitted by Section 17(e) or 57(k)) received in connection with any Co-Investment Transaction will be distributed to the participants on a pro rata basis based on the amounts they invested or committed, as the case may be, in such Co-Investment Transaction. If any transaction fee is to be held by an Adviser pending consummation of the transaction, the fee will be deposited into an account maintained by the Adviser at a bank or banks having the qualifications prescribed in Section 26(a)(1), and the account will earn a competitive rate of interest that will also be divided pro rata among the participants. None of the Advisers, the Affiliated Funds, the other Regulated Funds or any affiliated person of the Affiliated Funds or the Regulated Funds will receive any additional compensation or remuneration of any kind as a result of or in connection with a Co-Investment Transaction other than (i) in the case of the Regulated Funds and the Affiliated Funds, the pro rata transaction fees described above and fees or other compensation described in Condition 2(c)(iii)(B)(z), (ii) brokerage or underwriting compensation permitted by Section 17(e) or 57(k) or (iii) in the case of the Advisers, investment advisory compensation paid in accordance with investment advisory agreements between the applicable Regulated Fund(s) or Affiliated Fund(s) and its Adviser. 15. Independence. If the Holders own in the aggregate more than 25 percent of the Shares of a Regulated Fund, then the Holders will vote such Shares in the same percentages as the Regulated Fund’s other shareholders (not including the Holders) when voting on (1) the election of directors; (2) the removal of one or more directors; or (3) any other matter under either the Act or applicable State law affecting the Board’s composition, size or manner of election. For the Commission, by the Division of Investment Management, under delegated authority. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–04501 Filed 3–4–21; 8:45 am] jbell on DSKJLSW7X2PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91226; File No. SR–BX– 2021–003] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Various BX Options Rules March 1, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 17, 2021, Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Options 2, Section 10 (Directed Market Makers); Options 3, Section 7 (Types of Orders and Order and Quote Protocols); Options 3, Section 10 (Order Book Allocation); and Options 3, Section 15 (Risk Protections). The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/bx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1 15 2 17 VerDate Sep<11>2014 20:30 Mar 04, 2021 Jkt 253001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00105 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Options 2, Section 10 (Directed Market Makers); Options 3, Section 7 (Types of Orders and Order and Quote Protocols); Options 3, Section 10 (Order Book Allocation); and Options 3, Section 15 (Risk Protections). Each change will be described below. Options 2, Section 10 Options 2, Section 10(a), which concerns Directed Market Makers, currently provides, ‘‘Market Makers may receive Directed Orders 3 in their appointed classes in accordance with the provisions of this Rule, Directed Market Makers provided they indicated to the Exchange, in a form specified, that they will receive Directed Orders.’’ The Exchange proposes to amend this sentence to remove the unnecessary phrase ‘‘Directed Market Makers’’ so that the sentence provides, ‘‘Market Makers may receive Directed Orders in their appointed classes in accordance with the provisions of this Rule, provided they indicated to the Exchange, in a form specified, that they will receive Directed Orders.’’ The words ‘‘Directed Market Makers’’ are not necessary and add confusion to the sentence. Options 3, Section 7 The Exchange proposes to amend Options 3, Section 7(a)(4), which describes a Minimum Quantity Order, to amend the word ‘‘require’’ by making it plural. This grammatical amendment is technical and non-substantive. The Exchange proposes to amend Options 3, Section 7(a)(4) to describe a Contingency Order. Today, BX has two order types which have contingencies: (1) Minimum Quantity Orders 4 and (2) All-or-None Orders.5 The Exchange 3 Pursuant to Options 3, Section 7(a)(2), a ‘‘Directed Order’’ is an order to buy or sell which has been directed, provided it is properly marked as such, to a particular Market Maker (‘‘Directed Market Maker’’). 4 ‘‘Minimum Quantity Order’’ is an order that require that a specified minimum quantity of contracts be obtained, or the order is cancelled. Minimum Quantity Orders are treated as having a time-in-force designation of Immediate or Cancel. Minimum Quantity Orders received prior to the opening cross or after market close will be rejected. See Options 3, Section 7(a)(4). 5 ‘‘All-or-None Order’’ is a market or limit order which is to be executed in its entirety or not at all. All-or-None Orders are treated as having a time-inforce designation of Immediate or Cancel. All-orNone Orders received prior to the opening or after market close will be rejected. See Options 3, Section 7(a)(7). E:\FR\FM\05MRN1.SGM 05MRN1

Agencies

[Federal Register Volume 86, Number 42 (Friday, March 5, 2021)]
[Notices]
[Pages 12996-13004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04501]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34218; 812-15174]


Rand Capital Corporation, et al.

March 1, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order (``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 and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds and accounts. The Order 
would supersede the prior order.\1\
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    \1\ Rand Capital Corporation, et al., Investment Company Act 
Rel. No. 34006 (Sept. 11, 2020) (notice) and Investment Company Act 
Rel. No. 34046 (October 7, 2020) (order).
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    Applicants: Rand Capital Corporation (``Company''), BlueArc 
Mezzanine Partners I, LP (``BlueArc''), Rand Capital SBIC, Inc. 
(``Existing Wholly-Owned Subsidiary''), Rand Capital Management, LLC 
(``BDC Adviser''), Callodine Strategic Credit, LLC (``CSC Adviser''), 
Callodine Capital Management, LP (``Callodine Adviser,'' and, together 
with the BDC Adviser and the CSC Adviser, the ``Existing Advisers''), 
Callodine Commercial Finance, LLC (the ``Existing Callodine Proprietary 
Account''), Callodine Capital Master Fund, LP (``Callodine Capital 
Master Fund'') and Callodine Special Opportunity Fund, LP (``Callodine 
Special Opportunity Fund and, together with the Callodine Capital 
Master Fund, the ``Callodine Private Funds'').
    Filing Dates: The application was filed on October 30, 2020, and 
amended on January 5, 2021.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by emailing the Commission's 
Secretary at [email protected] and serving applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on March 26, 2021 and should be accompanied 
by proof of service on the applicants, in the form of an affidavit, or, 
for lawyers, a certificate of service. Pursuant to Rule 0-5 under the 
Act, hearing requests should state the nature of the writer's interest, 
any facts bearing upon the desirability of a hearing on the matter, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by emailing the 
Commission's Secretary at [email protected].

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

FOR FURTHER INFORMATION CONTACT: Marc Mehrespand, Senior Counsel, at 
(202) 551-8453 or Trace Rakestraw, Branch Chief, at (202) 551-6825 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or for an 
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Introduction

    1. The applicants request an order of the Commission under sections 
17(d) and 57(i) under the Act and rule 17d-1 under the Act to permit, 
subject to the terms and conditions set forth in the application (the 
``Conditions''), one or more Regulated Funds \2\ and/or one or more 
Affiliated Funds \3\ to enter into Co-Investment Transactions with each 
other. ``Co-Investment Transaction'' means any transaction in which one 
or more Regulated Funds (or its Wholly-Owned Investment Sub (defined 
below) participated together with one or more Affiliated Funds and/or 
one or more other Regulated Funds in reliance on the Order. ``Potential 
Co-Investment Transaction'' means any investment opportunity in which a 
Regulated Fund (or its Wholly-Owned Investment Sub) could not 
participate together with one or more Affiliated Funds and/or one or 
more other Regulated Funds without obtaining and relying on the 
Order.\4\
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    \2\ ``Regulated Funds'' means the Company, the Future Regulated 
Funds and the BDC Downstream Funds. ``Future Regulated Fund'' means 
a closed-end management investment company (a) that is registered 
under the Act or has elected to be regulated as a BDC, (b) whose 
investment adviser (and sub-adviser(s), if any) are an Adviser, and 
(c) that intends to participate in the proposed co-investment 
program (the ``Co-Investment Program''). ``Adviser'' means the 
Existing Advisers together with any future investment adviser that 
(i) controls, is controlled by or is under common control with 
Callodine Group, LLC (``Callodine''), (ii) (a) is registered as an 
investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act'') or (b) is an exempt reporting adviser pursuant to 
rule 203(m) of the Advisers Act (``Exempt Reporting Adviser'') and 
(iii) is not a Regulated Fund or a subsidiary of a Regulated Fund.
    \3\ ``Affiliated Fund'' means the Existing Affiliated Funds, any 
Future Affiliated Fund or any Callodine Proprietary Account. 
``Existing Affiliated Funds'' means BlueArc, the Callodine Private 
Funds and the Existing Callodine Proprietary Account. ``Future 
Affiliated Fund'' means any entity (a) whose investment adviser (and 
sub-adviser(s), if any) are an Adviser, (b) that would be an 
investment company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of 
the Act, (c) that intends to participate in the Co-Investment 
Program, and (d) that is not a BDC Downstream Fund. ``Callodine 
Proprietary Account'' means the Existing Callodine Proprietary 
Account and any direct or indirect, wholly- or majority-owned 
subsidiary of Callodine or any Adviser that, from time to time, may 
hold various financial assets in a principal capacity.
    \4\ All existing entities that currently intend to rely on the 
Order have been named as applicants and any existing or future 
entities that may rely on the Order in the future will comply with 
the terms and Conditions set forth in the application.
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Applicants

    2. The Company is a New York corporation and operates as a 
diversified closed-end management investment company that has elected 
to be regulated as a business development company (``BDC'') under the 
Act.\5\ The Company is managed by a Board \6\

[[Page 12997]]

currently comprised of five persons, three of whom are Independent 
Directors.\7\
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    \5\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in section 55(a)(1) through 
55(a)(3) and makes available significant managerial assistance with 
respect to the issuers of such securities.
    \6\ ``Board'' means (i) with respect to a Regulated Fund other 
than a BDC Downstream Fund, the board of directors (or the 
equivalent) of the Regulated Fund and (ii) with respect to a BDC 
Downstream Fund, the Independent Party of the BDC Downstream Fund.
    ``Independent Party'' means, with respect to a BDC Downstream 
Fund, (i) if the BDC Downstream Fund has a board of directors (or 
the equivalent), the board or (ii) if the BDC Downstream Fund does 
not have a board of directors (or the equivalent), a transaction 
committee or advisory committee of the BDC Downstream Fund.
    \7\ ``Independent Director'' means a member of the Board of any 
relevant entity who is not an ``interested person'' as defined in 
section 2(a)(19) of the Act. No Independent Director of a Regulated 
Fund (including any non-interested member of an Independent Party) 
will have a financial interest in any Co-Investment Transaction, 
other than indirectly through share ownership in one of the 
Regulated Funds.
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    3. BDC Adviser, a Delaware limited liability company that is 
registered under the Advisers Act, serves as the investment adviser to 
the Company pursuant to an investment advisory agreement.
    4. CSC Adviser, a Delaware limited liability company, is an Exempt 
Reporting Adviser and serves as investment adviser to BlueArc.
    5. BlueArc is a Georgia limited partnership.
    6. The Existing Wholly-Owned Subsidiary is a New York corporation.
    7. The Callodine Adviser is a Massachusetts limited partnership and 
is registered as an investment adviser under the Advisers Act. It 
serves as investment adviser to each of the Callodine Private Funds.
    8. Callodine Capital Master Fund is a Cayman Islands limited 
partnership and Callodine Special Opportunity Fund is a Delaware 
limited partnership.
    9. The Existing Callodine Proprietary Account is a Delaware limited 
liability company that is an indirect majority-owned subsidiary of 
Callodine.
    10. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary may 
be prohibited from investing in a Co-Investment Transaction with a 
Regulated Fund (other than its parent) or any Affiliated Fund because 
it would be a company controlled by its parent Regulated Fund for 
purposes of section 57(a)(4) and rule 17d-1. Applicants request that 
each Wholly-Owned Investment Sub be permitted to participate in Co-
Investment Transactions in lieu of the Regulated Fund that owns it and 
that the Wholly-Owned Investment Sub's participation in any such 
transaction be treated, for purposes of the Order, as though the parent 
Regulated Fund were participating directly.
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    \8\ ``Wholly-Owned Investment Sub'' means an entity (i) that is 
a wholly-owned subsidiary of a Regulated Fund (with such Regulated 
Fund at all times holding, beneficially and of record, 95% or more 
of the voting and economic interests); (ii) whose sole business 
purpose is to hold one or more investments on behalf of such 
Regulated Fund (and, in the case of an SBIC Subsidiary (defined 
below), maintains a license under the SBA Act (defined below) and 
issues debentures guaranteed by the SBA (defined below)); (iii) with 
respect to which such Regulated Fund's Board has the sole authority 
to make all determinations with respect to the entity's 
participation under the Conditions to the application; and (iv) (A) 
that would be an investment company but for Section 3(c)(1), 
3(c)(5)(C), or 3(c)(7) of the Act, or (B) that qualifies as a real 
estate investment trust within the meaning of Section 856 of the 
Internal Revenue Code of 1986, as amended (``Code'') because 
substantially all of its assets would consist of real properties. 
The term ``SBIC Subsidiary'' means a Wholly-Owned Investment Sub 
that is licensed by the Small Business Administration (the ``SBA'') 
to operate under the Small Business Investment Act of 1958, as 
amended, (the ``SBA Act'') as a small business investment company. 
The Existing Wholly-Owned Subsidiary is a Wholly-Owned Investment 
Sub.
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Applicants' Representations

A Allocation Process

    11. Applicants represent that the Existing Advisers have 
established processes for allocating initial investment opportunities, 
opportunities for subsequent investments in an issuer and dispositions 
of securities holdings reasonably designed to treat all clients fairly 
and equitably. Further, applicants represent that these processes will 
be extended and modified in a manner reasonably designed to ensure that 
the additional transactions permitted under the Order will both (i) be 
fair and equitable to the Regulated Funds and the Affiliated Funds and 
(ii) comply with the Conditions.
    12. If the requested Order is granted, the Advisers will establish, 
maintain and implement policies and procedures reasonably designed to 
ensure that when such opportunities arise, the Advisers to the relevant 
Regulated Funds are promptly notified and receive the same information 
about the opportunity as any other Adviser considering the opportunity 
for its clients. In particular, consistent with Condition 1, if a 
Potential Co-Investment Transaction falls within the then-current 
Objectives and Strategies \9\ and any Board-Established Criteria \10\ 
of a Regulated Fund, the policies and procedures will require that the 
Adviser to such Regulated Fund receive sufficient information to allow 
such Adviser's investment committee to make its independent 
determination and recommendations under the Conditions.
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    \9\ ``Objectives and Strategies'' means (i) with respect to any 
Regulated Fund other than a BDC Downstream Fund, its investment 
objectives and strategies, as described in its most current 
registration statement on Form N-2, other current filings with the 
Commission under the Securities Act of 1933 (the ``Securities Act'') 
or under the Securities Exchange Act of 1934, as amended, and its 
most current report to stockholders, and (ii) with respect to any 
BDC Downstream Fund, those investment objectives and strategies 
described in its disclosure documents (including private placement 
memoranda and reports to equity holders) and organizational 
documents (including operating agreements).
    \10\ ``Board-Established Criteria'' means criteria that the 
Board of a Regulated Fund may establish from time to time to 
describe the characteristics of Potential Co-Investment Transactions 
regarding which the Adviser to such Regulated Fund should be 
notified under Condition 1. The Board-Established Criteria will be 
consistent with the Regulated Fund's Objectives and Strategies. If 
no Board-Established Criteria are in effect, then the Regulated 
Fund's Adviser will be notified of all Potential Co-Investment 
Transactions that fall within the Regulated Fund's then-current 
Objectives and Strategies. Board-Established Criteria will be 
objective and testable, meaning that they will be based on 
observable information, such as industry/sector of the issuer, 
minimum EBITDA of the issuer, asset class of the investment 
opportunity or required commitment size, and not on characteristics 
that involve a discretionary assessment. The Adviser to the 
Regulated Fund may from time to time recommend criteria for the 
Board's consideration, but Board-Established Criteria will only 
become effective if approved by a majority of the Independent 
Directors. The Independent Directors of a Regulated Fund may at any 
time rescind, suspend or qualify their approval of any Board-
Established Criteria, though Applicants anticipate that, under 
normal circumstances, the Board would not modify these criteria more 
often than quarterly.
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    13. The Adviser to each applicable Regulated Fund will then make an 
independent determination of the appropriateness of the investment for 
the Regulated Fund in light of the Regulated Fund's then-current 
circumstances. If the Adviser to a Regulated Fund deems the Regulated 
Fund's participation in any Potential Co-Investment Transaction to be 
appropriate, then it will formulate a recommendation regarding the 
proposed order amount for the Regulated Fund.
    14. Applicants state that, for each Regulated Fund and Affiliated 
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, such Adviser's investment committee will 
approve an investment amount to be allocated to each Regulated Fund 
and/or Affiliated Fund participating in the Potential Co-Investment 
Transaction. Applicants state further that, each proposed order amount 
may be reviewed and adjusted, in accordance with the applicable 
Adviser's written allocation policies and procedures, by the applicable 
Adviser's investment committee.\11\ The order of a

[[Page 12998]]

Regulated Fund or Affiliated Fund resulting from this process is 
referred to as its ``Internal Order.'' The Internal Order will be 
submitted for approval by the Required Majority of any participating 
Regulated Funds in accordance with the Conditions.\12\
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    \11\ The reason for any such adjustment to a proposed order 
amount will be documented in writing and preserved in the records of 
each Adviser.
    \12\ ``Required Majority'' means a required majority, as defined 
in section 57(o) of the Act. In the case of a Regulated Fund that is 
a registered closed-end fund, the Board members that make up the 
Required Majority will be determined as if the Regulated Fund were a 
BDC subject to section 57(o). In the case of a BDC Downstream Fund 
with a board of directors (or the equivalent), the members that make 
up the Required Majority will be determined as if the BDC Downstream 
Fund were a BDC subject to section 57(o). In the case of a BDC 
Downstream Fund with a transaction committee or advisory committee, 
the committee members that make up the Required Majority will be 
determined as if the BDC Downstream Fund were a BDC subject to 
section 57(o) and as if the committee members were directors of the 
fund.
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    15. If the aggregate Internal Orders for a Potential Co-Investment 
Transaction do not exceed the size of the investment opportunity 
immediately prior to the submission of the orders to the underwriter, 
broker, dealer or issuer, as applicable (the ``External Submission''), 
then each Internal Order will be fulfilled as placed. If, on the other 
hand, the aggregate Internal Orders for a Potential Co-Investment 
Transaction exceed the size of the investment opportunity immediately 
prior to the External Submission, then the allocation of the 
opportunity will be made pro rata on the basis of the size of the 
Internal Orders.\13\ If, subsequent to such External Submission, the 
size of the opportunity is increased or decreased, or if the terms of 
such opportunity, or the facts and circumstances applicable to the 
Regulated Funds' or the Affiliated Funds' consideration of the 
opportunity, change, the participants will be permitted to submit 
revised Internal Orders in accordance with written allocation policies 
and procedures that the Advisers will establish, implement and 
maintain.\14\
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    \13\ The Advisers will maintain records of all proposed order 
amounts, Internal Orders and External Submissions in conjunction 
with Potential Co-Investment Transactions. Each applicable Adviser 
will provide the Eligible Directors with information concerning the 
Affiliated Funds' and Regulated Funds' order sizes to assist the 
Eligible Directors with their review of the applicable Regulated 
Fund's investments for compliance with the Conditions. ``Eligible 
Directors'' means, with respect to a Regulated Fund and a Potential 
Co-Investment Transaction, the members of the Regulated Fund's Board 
eligible to vote on that Potential Co-Investment Transaction under 
section 57(o) of the Act.
    \14\ The Board of the Regulated Fund will then either approve or 
disapprove of the investment opportunity in accordance with 
Condition 2, 6, 7, 8 or 9, as applicable.
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B. Follow-On Investments

    16. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\15\ in an issuer in which a Regulated Fund and one or more other 
Regulated Funds and/or Affiliated Funds previously have invested.
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    \15\ ``Follow-On Investment'' means an additional investment in 
the same issuer, including, but not limited to, through the exercise 
of warrants, conversion privileges or other rights to purchase 
securities of the issuer.
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    17. Applicants propose that Follow-On Investments would be divided 
into two categories depending on whether the prior investment was a Co-
Investment Transaction or a Pre-Boarding Investment.\16\ If the 
Regulated Funds and Affiliated Funds have previously participated in a 
Co-Investment Transaction with respect to the issuer, then the terms 
and approval of the Follow-On Investment would be subject to the 
Standard Review Follow-Ons described in Condition 8. If the Regulated 
Funds and Affiliated Funds have not previously participated in a Co-
Investment Transaction with respect to the issuer but hold a Pre-
Boarding Investment, then the terms and approval of the Follow-On 
Investment would be subject to the Enhanced-Review Follow-Ons described 
in Condition 9. All Enhanced Review Follow-Ons require the approval of 
the Required Majority. For a given issuer, the participating Regulated 
Funds and Affiliated Funds need to comply with the requirements of 
Enhanced-Review Follow-Ons only for the first Co-Investment 
Transaction. Subsequent Co-Investment Transactions with respect to the 
issuer would be governed by the requirements of Standard Review Follow-
Ons.
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    \16\ ``Pre-Boarding Investments'' are investments in an issuer 
held by a Regulated Fund as well as one or more Affiliated Funds 
and/or one or more other Regulated Funds that were acquired prior to 
participating in any Co-Investment Transaction: (i) in transactions 
in which the only term negotiated by or on behalf of such funds was 
price in reliance on one of the JT No-Action Letters (defined 
below); or (ii) in transactions occurring at least 90 days apart and 
without coordination between the Regulated Fund and any Affiliated 
Fund or other Regulated Fund.
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    18. A Regulated Fund would be permitted to invest in Standard 
Review Follow-Ons either with the approval of the Required Majority 
under Condition 8(c) or without Board approval under Condition 8(b) if 
it is (i) a Pro Rata Follow-On Investment \17\ or (ii) a Non-Negotiated 
Follow-On Investment.\18\ Applicants believe that these Pro Rata and 
Non-Negotiated Follow-On Investments do not present a significant 
opportunity for overreaching on the part of any Adviser and thus do not 
warrant the time or the attention of the Board. Pro Rata Follow-On 
Investments and Non-Negotiated Follow-On Investments remain subject to 
the Board's periodic review in accordance with Condition 10.
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    \17\ A ``Pro Rata Follow-On Investment'' is a Follow-On 
Investment (i) in which the participation of each Affiliated Fund 
and each Regulated Fund is proportionate to its outstanding 
investments in the issuer or security, as appropriate, immediately 
preceding the Follow-On Investment, and (ii) in the case of a 
Regulated Fund, a majority of the Board has approved the Regulated 
Fund's participation in the pro rata Follow-On Investments as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Follow-On Investments, in which 
case all subsequent Follow-On Investments will be submitted to the 
Regulated Fund's Eligible Directors in accordance with Condition 
8(c).
    \18\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On 
Investment in which a Regulated Fund participates together with one 
or more Affiliated Funds and/or one or more other Regulated Funds 
(i) in which the only term negotiated by or on behalf of the funds 
is price and (ii) with respect to which, if the transaction were 
considered on its own, the funds would be entitled to rely on one of 
the JT No-Action Letters.
    ``JT No-Action Letters'' means SMC Capital, Inc., SEC No-Action 
Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life 
Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000).
---------------------------------------------------------------------------

C. Dispositions

    19. Applicants propose that Dispositions \19\ would be divided into 
two categories. If the Regulated Funds and Affiliated Funds holding 
investments in the issuer have previously participated in a Co-
Investment Transaction with respect to the issuer, then the terms and 
approval of the Disposition would be subject to the Standard Review 
Dispositions described in Condition 6. If the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer but hold a Pre-Boarding 
Investment, then the terms and approval of the Disposition would be 
subject to the Enhanced Review Dispositions described in Condition 7. 
Subsequent Dispositions with respect to the same issuer would be 
governed by Condition 6 under the Standard Review Dispositions.\20\
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    \19\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \20\ However, with respect to an issuer, if a Regulated Fund's 
first Co-Investment Transaction is an Enhanced Review Disposition, 
and the Regulated Fund does not dispose of its entire position in 
the Enhanced Review Disposition, then before such Regulated Fund may 
complete its first Standard Review Follow-On in such issuer, the 
Eligible Directors must review the proposed Follow-On Investment not 
only on a stand-alone basis but also in relation to the total 
economic exposure in such issuer (i.e., in combination with the 
portion of the Pre-Boarding Investment not disposed of in the 
Enhanced Review Disposition), and the other terms of the 
investments. This additional review is required because such 
findings were not required in connection with the prior Enhanced 
Review Disposition, but they would have been required had the first 
Co-Investment Transaction been an Enhanced Review Follow-On.

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[[Page 12999]]

    20. A Regulated Fund may participate in a Standard Review 
Disposition either with the approval of the Required Majority under 
Condition 6(d) or without Board approval under Condition 6(c) if (i) 
the Disposition is a Pro Rata Disposition \21\ or (ii) the securities 
are Tradable Securities \22\ and the Disposition meets the other 
requirements of Condition 6(c)(ii). Pro Rata Dispositions and 
Dispositions of a Tradable Security remain subject to the Board's 
periodic review in accordance with Condition 10.
---------------------------------------------------------------------------

    \21\ A ``Pro Rata Disposition'' is a Disposition (i) in which 
the participation of each Affiliated Fund and each Regulated Fund is 
proportionate to its outstanding investment in the security subject 
to Disposition immediately preceding the Disposition; and (ii) in 
the case of a Regulated Fund, a majority of the Board has approved 
the Regulated Fund's participation in pro rata Dispositions as being 
in the best interests of the Regulated Fund. The Regulated Fund's 
Board may refuse to approve, or at any time rescind, suspend or 
qualify, its approval of Pro Rata Dispositions, in which case all 
subsequent Dispositions will be submitted to the Regulated Fund's 
Eligible Directors.
    \22\ ``Tradable Security'' means a security that meets the 
following criteria at the time of Disposition: (i) it trades on a 
national securities exchange or designated offshore securities 
market as defined in rule 902(b) under the Securities Act; (ii) it 
is not subject to restrictive agreements with the issuer or other 
security holders; and (iii) it trades with sufficient volume and 
liquidity (findings as to which are documented by the Advisers to 
any Regulated Funds holding investments in the issuer and retained 
for the life of the Regulated Fund) to allow each Regulated Fund to 
dispose of its entire position remaining after the proposed 
Disposition within a short period of time not exceeding 30 days at 
approximately the value (as defined by section 2(a)(41) of the Act) 
at which the Regulated Fund has valued the investment.
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D. Delayed Settlement

    21. Applicants represent that under the terms and Conditions of the 
application, all Regulated Funds and Affiliated Funds participating in 
a Co-Investment Transaction will invest at the same time, for the same 
price and with the same terms, conditions, class, registration rights 
and any other rights, so that none of them receives terms more 
favorable than any other. However, the settlement date for an 
Affiliated Fund in a Co-Investment Transaction may occur up to ten 
business days after the settlement date for the Regulated Fund, and 
vice versa. Nevertheless, in all cases, (i) the date on which the 
commitment of the Affiliated Funds and Regulated Funds is made will be 
the same even where the settlement date is not and (ii) the earliest 
settlement date and the latest settlement date of any Affiliated Fund 
or Regulated Fund participating in the transaction will occur within 
ten business days of each other.

E. Holders

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

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Funds that are 
registered closed-end investment companies.
    2. Similarly, with regard to BDCs, section 57(a)(4) of the Act 
generally prohibits certain persons specified in section 57(b) from 
participating in joint transactions with the BDC or a company 
controlled by the BDC in contravention of rules as prescribed by the 
Commission. Section 57(i) of the Act provides that, until the 
Commission prescribes rules under section 57(a)(4), the Commission's 
rules under section 17(d) of the Act applicable to registered closed-
end investment companies will be deemed to apply to transactions 
subject to section 57(a)(4). Because the Commission has not adopted any 
rules under section 57(a)(4), rule 17d-1 also applies to joint 
transactions with Regulated Funds that are BDCs.
    3. Co-Investment Transactions are prohibited by either or both of 
rule 17d-1 and section 57(a)(4) without a prior exemptive order of the 
Commission to the extent that the Affiliated Funds and the Regulated 
Funds participating in such transactions fall within the category of 
persons described by rule 17d-1 and/or section 57(b), as modified by 
rule 57b-1 thereunder, as applicable, vis-[agrave]-vis each 
participating Regulated Fund. Each of the participating Regulated Funds 
and Affiliated Funds may be deemed to be affiliated persons vis-
[agrave]-vis a Regulated Fund within the meaning of section 2(a)(3) by 
reason of common control because all of the Regulated Funds and 
Affiliated Funds, including the Callodine Proprietary Accounts, are 
directly or indirectly controlled by Callodine. This is because (i) CSC 
Adviser manages and may be deemed to control BlueArc, (ii) Callodine 
Adviser manages and may be deemed to control the Callodine Private 
Funds, (iii) an Adviser will manage and may be deemed to control any 
Future Affiliated Fund; (iv) BDC Adviser manages and may be deemed to 
control the Company pursuant to the an investment advisory agreement; 
(v) any future Regulated Fund will be managed by and may be deemed to 
be controlled by an Adviser; (vi) each BDC Downstream Fund \23\ will 
be, deemed to be controlled by its BDC parent and/or its BDC parent's 
investment adviser; and (vii) the Advisers, including the Existing 
Advisers, will be directly or indirectly controlled by Callodine. Thus, 
each of the Affiliated Funds could be deemed to be a person related to 
the Regulated Funds that are BDCs, including the Company and any BDC 
Downstream Fund, in a manner described by section 57(b) and related to 
Future Regulated Funds that are registered investment companies in a 
manner described by rule 17d-1; and therefore the prohibitions of rule 
17d-1 and section 57(a)(4) would apply respectively to prohibit the 
Affiliated Funds from participating in Co-Investment Transactions with 
the Regulated Funds. Each Regulated Fund would also be related to each 
other Regulated Fund in a manner described by 57(b) or rule 17d-1, as 
applicable, and thus prohibited from participating in Co-Investment 
Transactions with each other.
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    \23\ ``BDC Downstream Fund'' means, with respect to any 
Regulated Fund that is a BDC, an entity (i) that the BDC directly or 
indirectly controls, (ii) that is not controlled by any person other 
than the BDC (except a person that indirectly controls the entity 
solely because it controls the BDC), (iii) that would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act, 
(iv) whose investment adviser (and sub-adviser(s), if any) are an 
Adviser, (v) that is not a Wholly-Owned Investment Sub and (vi) that 
intends to participate in the Co-Investment Program.
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    4. Further, because the Wholly-Owned Investment Subs are controlled 
by the Regulated Funds, the Wholly-Owned Investment Subs are subject to 
Section 57(a)(4) (or Section 17(d) in the case of Wholly-Owned 
Investment Subs controlled by Regulated Funds that are registered under 
the Act), and thus also subject to the provisions of Rule 17d-1, and 
therefore would be prohibited from participating in Co-Investment 
Transactions.

[[Page 13000]]

    5. In addition, because the Callodine Proprietary Accounts, 
including the Existing Callodine Proprietary Account, are directly or 
indirectly controlled by Callodine, and, therefore, may be under common 
control with the Company, the Advisers, and any Future Regulated Funds, 
the Callodine Proprietary Accounts could be deemed to be persons 
related to the Regulated Funds (or a company controlled by the 
Regulated Funds) in a manner described by section 57(b) and also 
prohibited from participating in the Co-Investment Program.
    6. 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.
    7. Applicants state that in the absence of the requested relief, in 
many circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants state that, as required by rule 17d-1(b), the 
Conditions ensure that the terms on which Co-Investment Transactions 
may be made will be consistent with the participation of the Regulated 
Funds being on a basis that it is neither different from nor less 
advantageous than other participants, thus protecting the equity 
holders of any participant from being disadvantaged. Applicants further 
state that the Conditions ensure that all Co-Investment Transactions 
are reasonable and fair to the Regulated Funds and their shareholders 
and do not involve overreaching by any person concerned, including the 
Advisers. Applicants state that the Regulated Funds' participation in 
the Co-Investment Transactions in accordance with the Conditions will 
be consistent with the provisions, policies, and purposes of the Act 
and would be done in a manner that is not different from, or less 
advantageous than, that of other participants.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
Conditions:
    1. Identification and Referral of Potential Co-Investment 
Transactions.
    (a). The Advisers will establish, maintain and implement policies 
and procedures reasonably designed to ensure that each Adviser is 
promptly notified of all Potential Co-Investment Transactions that fall 
within the then-current Objectives and Strategies and Board-Established 
Criteria of any Regulated Fund the Adviser manages.
    (b). When an Adviser to a Regulated Fund is notified of a Potential 
Co-Investment Transaction under Condition 1(a), the Adviser will make 
an independent determination of the appropriateness of the investment 
for the Regulated Fund in light of the Regulated Fund's then-current 
circumstances.
    2. Board Approvals of Co-Investment Transactions.
    (a). If the Adviser deems a Regulated Fund's participation in any 
Potential Co-Investment Transaction to be appropriate for the Regulated 
Fund, it will then determine an appropriate level of investment for the 
Regulated Fund.
    (b). If the aggregate amount recommended by the Advisers to be 
invested in the Potential Co-Investment Transaction by the 
participating Regulated Funds and any participating Affiliated Funds, 
collectively, exceeds the amount of the investment opportunity, the 
investment opportunity will be allocated among them pro rata based on 
the size of the Internal Orders, as described in section III.A.1.b. of 
the application. Each Adviser to a participating Regulated Fund will 
promptly notify and provide the Eligible Directors with information 
concerning the Affiliated Funds' and Regulated Funds' order sizes to 
assist the Eligible Directors with their review of the applicable 
Regulated Fund's investments for compliance with these Conditions.
    (c). After making the determinations required in Condition 1(b) 
above, each Adviser to a participating Regulated Fund will distribute 
written information concerning the Potential Co-Investment Transaction 
(including the amount proposed to be invested by each participating 
Regulated Fund and each participating Affiliated Fund) to the Eligible 
Directors of its participating Regulated Fund(s) for their 
consideration. A Regulated Fund will enter into a Co-Investment 
Transaction with one or more other Regulated Funds or Affiliated Funds 
only if, prior to the Regulated Fund's participation in the Potential 
Co-Investment Transaction, a Required Majority concludes that:
    (i). the terms of the transaction, including the consideration to 
be paid, are reasonable and fair to the Regulated Fund and its equity 
holders and do not involve overreaching in respect of the Regulated 
Fund or its equity holders on the part of any person concerned;
    (ii). the transaction is consistent with:
    (A). The interests of the Regulated Fund's equity holders; and
    (B). the Regulated Fund's then-current Objectives and Strategies;
    (iii). the investment by any other Regulated Fund(s) or Affiliated 
Fund(s) would not disadvantage the Regulated Fund, and participation by 
the Regulated Fund would not be on a basis different from, or less 
advantageous than, that of any other Regulated Fund(s) or Affiliated 
Fund(s) participating in the transaction; provided that the Required 
Majority shall not be prohibited from reaching the conclusions required 
by this Condition 2(c)(iii) if:
    (A). The settlement date for another Regulated Fund or an 
Affiliated Fund in a Co-Investment Transaction is later than the 
settlement date for the Regulated Fund by no more than ten business 
days or earlier than the settlement date for the Regulated Fund by no 
more than ten business days, in either case, so long as: (x) the date 
on which the commitment of the Affiliated Funds and Regulated Funds is 
made is the same; and (y) the earliest settlement date and the latest 
settlement date of any Affiliated Fund or Regulated Fund participating 
in the transaction will occur within ten business days of each other; 
or
    (B). any other Regulated Fund or Affiliated Fund, but not the 
Regulated Fund itself, gains the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
a board observer or any similar right to participate in the governance 
or management of the portfolio company so long as: (x) the Eligible 
Directors will have the right to ratify the selection of such director 
or board observer, if any; (y) the Adviser agrees to, and does, provide 
periodic reports to the Regulated Fund's Board with respect to the 
actions of such director or the information received by such board 
observer or obtained through the exercise of any similar right to 
participate in the governance or management of the portfolio company; 
and (z) any fees or other compensation that any other Regulated Fund or 
Affiliated Fund or any affiliated person of any other Regulated Fund or 
Affiliated Fund receives in connection with the right of one or more 
Regulated Funds or Affiliated Funds to nominate a director or appoint a 
board observer or otherwise to participate in the governance or 
management of the portfolio company will be shared proportionately 
among any participating Affiliated Funds (who may, in turn, share their 
portion with their affiliated persons) and any participating Regulated 
Fund(s) in accordance with

[[Page 13001]]

the amount of each such party's investment; and
    (iv). the proposed investment by the Regulated Fund will not 
involve compensation, remuneration or a direct or indirect \24\ 
financial benefit to the Advisers, any other Regulated Fund, the 
Affiliated Funds or any affiliated person of any of them (other than 
the parties to the Co-Investment Transaction), except (A) to the extent 
permitted by Condition 14, (B) to the extent permitted by Section 17 
(e) or 57(k), as applicable, (C) indirectly, as a result of an interest 
in the securities issued by one of the parties to the Co-Investment 
Transaction, or (D) in the case of fees or other compensation described 
in Condition 2(c)(iii)(B)(z).
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    \24\ For example, procuring the Regulated Fund's investment in a 
Potential Co-Investment Transaction to permit an affiliate to 
complete or obtain better terms in a separate transaction would 
constitute an indirect financial benefit.
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    3. Right to Decline. Each Regulated Fund has the right to decline 
to participate in any Potential Co-Investment Transaction or to invest 
less than the amount proposed.
    4. General Limitation. Except for Follow-On Investments made in 
accordance with Conditions 8 and 9 below,\25\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\26\
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    \25\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \26\ ``Related Party'' means (i) any Close Affiliate and (ii) in 
respect of matters as to which any Adviser has knowledge, any Remote 
Affiliate. ``Close Affiliate'' means the Advisers, the Regulated 
Funds, the Affiliated Funds and any other person described in 
section 57(b) (after giving effect to rule 57b-1) in respect of any 
Regulated Fund (treating any registered investment company or series 
thereof as a BDC for this purpose) except for limited partners 
included solely by reason of the reference in section 57(b) to 
section 2(a)(3)(D). ``Remote Affiliate'' means any person described 
in section 57(e) in respect of any Regulated Fund (treating any 
registered investment company or series thereof as a BDC for this 
purpose) and any limited partner holding 5% or more of the relevant 
limited partner interests that would be a Close Affiliate but for 
the exclusion in that definition.
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    5. Same Terms and Conditions. A Regulated Fund will not participate 
in any Potential Co-Investment Transaction unless (i) the terms, 
conditions, price, class of securities to be purchased, date on which 
the commitment is entered into and registration rights (if any) will be 
the same for each participating Regulated Fund and Affiliated Fund and 
(ii) the earliest settlement date and the latest settlement date of any 
participating Regulated Fund or Affiliated Fund will occur as close in 
time as practicable and in no event more than ten business days apart. 
The grant to one or more Regulated Funds or Affiliated Funds, but not 
the respective Regulated Fund, of the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
an observer on the board of directors or similar rights to participate 
in the governance or management of the portfolio company will not be 
interpreted so as to violate this Condition 5, if Condition 
2(c)(iii)(B) is met.
    6. Standard Review Dispositions.
    (a). General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of an interest in a security and 
one or more Regulated Funds and Affiliated Funds have previously 
participated in a Co-Investment Transaction with respect to the issuer, 
then:
    (i). The Adviser to such Regulated Fund or Affiliated Fund \27\ 
will notify each Regulated Fund that holds an investment in the issuer 
of the proposed Disposition at the earliest practical time; and
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    \27\ Any Callodine Proprietary Account that is not advised by an 
Adviser is itself deemed to be an Adviser for purposes of Conditions 
6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i).
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    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to participation by 
such Regulated Fund in the Disposition.
    (b). Same Terms and Conditions. Each Regulated Fund will have the 
right to participate in such Disposition on a proportionate basis, at 
the same price and on the same terms and conditions as those applicable 
to the Affiliated Funds and any other Regulated Fund.
    (c). No Board Approval Required. A Regulated Fund may participate 
in such a Disposition without obtaining prior approval of the Required 
Majority if:
    (i). (A) The participation of each Regulated Fund and Affiliated 
Fund in such Disposition is proportionate to its then-current holding 
of the security (or securities) of the issuer that is (or are) the 
subject of the Disposition; \28\ (B) the Board of the Regulated Fund 
has approved as being in the best interests of the Regulated Fund the 
ability to participate in such Dispositions on a pro rata basis (as 
described in greater detail in the application); and (C) the Board of 
the Regulated Fund is provided on a quarterly basis with a list of all 
Dispositions made in accordance with this Condition; or
---------------------------------------------------------------------------

    \28\ In the case of any Disposition, proportionality will be 
measured by each participating Regulated Fund's and Affiliated 
Fund's outstanding investment in the security in question 
immediately preceding the Disposition.
---------------------------------------------------------------------------

    (ii). each security is a Tradable Security and (A) the Disposition 
is not to the issuer or any affiliated person of the issuer; and (B) 
the security is sold for cash in a transaction in which the only term 
negotiated by or on behalf of the participating Regulated Funds and 
Affiliated Funds is price.
    (d). Standard Board Approval. In all other cases, the Adviser will 
provide its written recommendation as to the Regulated Fund's 
participation to the Eligible Directors and the Regulated Fund will 
participate in such Disposition solely to the extent that a Required 
Majority determines that it is in the Regulated Fund's best interests.
    7. Enhanced Review Dispositions.
    (a). General. If any Regulated Fund or Affiliated Fund elects to 
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a 
Potential Co-Investment Transaction and the Regulated Funds and 
Affiliated Funds have not previously participated in a Co-Investment 
Transaction with respect to the issuer:
    (i). The Adviser to such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition at the earliest practical time;
    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to participation by 
such Regulated Fund in the Disposition; and
    (iii). the Advisers will provide to the Board of each Regulated 
Fund that holds an investment in the issuer all information relating to 
the existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition.
    (b). Enhanced Board Approval. The Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Disposition 
solely to the extent that a Required Majority determines that:
    (i). The Disposition complies with Condition 2(c)(i), (ii), 
(iii)(A), and (iv); and
    (ii). the making and holding of the Pre-Boarding Investments were 
not prohibited by Section 57 or Rule 17d-1, as applicable, and records 
the basis for the finding in the Board minutes.
    (c). Additional Requirements: The Disposition may only be completed 
in reliance on the Order if:

[[Page 13002]]

    (i). Same Terms and Conditions. Each Regulated Fund has the right 
to participate in such Disposition on a proportionate basis, at the 
same price and on the same terms and Conditions as those applicable to 
the Affiliated Funds and any other Regulated Fund;
    (ii). Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (iii). Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by Section 57 (as modified by Rule 57b-
1) or Rule 17d-1, as applicable;
    (iv). Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial \29\ in 
amount, including immaterial relative to the size of the issuer; and 
(y) the Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency, or denominations may be treated as the same security; and
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    \29\ In determining whether a holding is ``immaterial'' for 
purposes of the Order, the Required Majority will consider whether 
the nature and extent of the interest in the transaction or 
arrangement is sufficiently small that a reasonable person would not 
believe that the interest affected the determination of whether to 
enter into the transaction or arrangement or the terms of the 
transaction or arrangement.
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    (v). No control. The Affiliated Funds, the other Regulated Funds 
and their affiliated persons (within the meaning of Section 2(a)(3)(C) 
of the Act), individually or in the aggregate, do not control the 
issuer of the securities (within the meaning of Section 2(a)(9) of the 
Act).
    8. Standard Review Follow-Ons.
    (a). General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer and the Regulated Funds and 
Affiliated Funds holding investments in the issuer previously 
participated in a Co-Investment Transaction with respect to the issuer:
    (i). the Adviser to each such Regulated Fund or Affiliated Fund 
will notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time; and
    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund.
    (b). No Board Approval Required. A Regulated Fund may participate 
in the Follow-On Investment without obtaining prior approval of the 
Required Majority if:
    (i). (A) The proposed participation of each Regulated Fund and each 
Affiliated Fund in such investment is proportionate to its outstanding 
investments in the issuer or the security at issue, as appropriate,\30\ 
immediately preceding the Follow-On Investment; and (B) the Board of 
the Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in Follow-On Investments on a 
pro rata basis (as described in greater detail in the application); or
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    \30\ To the extent that a Follow-On Investment opportunity is in 
a security or arises in respect of a security held by the 
participating Regulated Funds and Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the security in question 
immediately preceding the Follow-On Investment using the most recent 
available valuation thereof. To the extent that a Follow-On 
Investment opportunity relates to an opportunity to invest in a 
security that is not in respect of any security held by any of the 
participating Regulated Funds or Affiliated Funds, proportionality 
will be measured by each participating Regulated Fund's and 
Affiliated Fund's outstanding investment in the issuer immediately 
preceding the Follow-On Investment using the most recent available 
valuation thereof.
---------------------------------------------------------------------------

    (ii). it is a Non-Negotiated Follow-On Investment.
    (c). Standard Board Approval. In all other cases, the Adviser will 
provide its written recommendation as to the Regulated Fund's 
participation to the Eligible Directors and the Regulated Fund will 
participate in such Follow-On Investment solely to the extent that a 
Required Majority makes the determinations set forth in Condition 2(c). 
If the only previous Co-Investment Transaction with respect to the 
issuer was an Enhanced Review Disposition the Eligible Directors must 
complete this review of the proposed Follow-On Investment both on a 
stand-alone basis and together with the Pre-Boarding Investments in 
relation to the total economic exposure and other terms of the 
investment.
    (d). Allocation. If, with respect to any such Follow-On Investment:
    (i). the amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii). the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.A.1.b. of the 
application.
    (e). Other Conditions. The acquisition of Follow-On Investments as 
permitted by this Condition will be considered a Co-Investment 
Transaction for all purposes and subject to the other Conditions set 
forth in the application.
    9. Enhanced Review Follow-Ons.
    (a). General. If any Regulated Fund or Affiliated Fund desires to 
make a Follow-On Investment in an issuer that is a Potential Co-
Investment Transaction and the Regulated Funds and Affiliated Funds 
holding investments in the issuer have not previously participated in a 
Co-Investment Transaction with respect to the issuer:
    (i). The Adviser to each such Regulated Fund or Affiliated Fund 
will notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time;
    (ii). the Adviser to each Regulated Fund that holds an investment 
in the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund; and
    (iii). the Advisers will provide to the Board of each Regulated 
Fund that holds an investment in the issuer all information relating to 
the existing investments in the issuer of the Regulated Funds and 
Affiliated Funds, including the terms of such investments and how they 
were made, that is necessary for the Required Majority to make the 
findings required by this Condition.
    (b). Enhanced Board Approval. The Adviser will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Follow-On 
Investment solely to the extent that a

[[Page 13003]]

Required Majority reviews the proposed Follow-On Investment both on a 
stand-alone basis and together with the Pre-Boarding Investments in 
relation to the total economic exposure and other terms and makes the 
determinations set forth in Condition 2(c). In addition, the Follow-On 
Investment may only be completed in reliance on the Order if the 
Required Majority of each participating Regulated Fund determines that 
the making and holding of the Pre-Boarding Investments were not 
prohibited by Section 57 (as modified by Rule 57b-1) or Rule 17d-1, as 
applicable. The basis for the Board's findings will be recorded in its 
minutes.
    (c). Additional Requirements. The Follow-On Investment may only be 
completed in reliance on the Order if:
    (i). Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (ii). Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by Section 57 (as modified by Rule 57b-
1) or Rule 17d-1, as applicable;
    (iii). Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial in amount, 
including immaterial relative to the size of the issuer; and (y) the 
Board records the basis for any such finding in its minutes. In 
addition, securities that differ only in respect of issuance date, 
currency, or denominations may be treated as the same security; and
    (iv). No control. The Affiliated Funds, the other Regulated Funds 
and their affiliated persons (within the meaning of Section 2(a)(3)(C) 
of the Act), individually or in the aggregate, do not control the 
issuer of the securities (within the meaning of Section 2(a)(9) of the 
Act).
    (d). Allocation. If, with respect to any such Follow-On Investment:
    (i). the amount of the opportunity proposed to be made available to 
any Regulated Fund is not based on the Regulated Funds' and the 
Affiliated Funds' outstanding investments in the issuer or the security 
at issue, as appropriate, immediately preceding the Follow-On 
Investment; and
    (ii). the aggregate amount recommended by the Advisers to be 
invested in the Follow-On Investment by the participating Regulated 
Funds and any participating Affiliated Funds, collectively, exceeds the 
amount of the investment opportunity, then the Follow-On Investment 
opportunity will be allocated among them pro rata based on the size of 
the Internal Orders, as described in section III.A.1.b. of the 
application.
    (e). Other Conditions. The acquisition of Follow-On Investments as 
permitted by this Condition will be considered a Co-Investment 
Transaction for all purposes and subject to the other Conditions set 
forth in the application.
    10. Board Reporting, Compliance and Annual Re-Approval.
    (a). Each Adviser to a Regulated Fund will present to the Board of 
each Regulated Fund, on a quarterly basis, and at such other times as 
the Board may request, (i) a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Funds or any 
of the Affiliated Funds during the preceding quarter that fell within 
the Regulated Fund's then-current Objectives and Strategies and Board-
Established Criteria that were not made available to the Regulated 
Fund, and an explanation of why such investment opportunities were not 
made available to the Regulated Fund; (ii) a record of all Follow-On 
Investments in and Dispositions of investments in any issuer in which 
the Regulated Fund holds any investments by any Affiliated Fund or 
other Regulated Fund during the prior quarter; and (iii) all 
information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by other Regulated 
Funds or Affiliated Funds that the Regulated Fund considered but 
declined to participate in, so that the Independent Directors, may 
determine whether all Potential Co-Investment Transactions and Co-
Investment Transactions during the preceding quarter, including those 
investments that the Regulated Fund considered but declined to 
participate in, comply with the Conditions.
    (b). All information presented to the Regulated Fund's Board 
pursuant to this Condition will be kept for the life of the Regulated 
Fund and at least two years thereafter, and will be subject to 
examination by the Commission and its staff.
    (c). Each Regulated Fund's chief compliance officer, as defined in 
rule 38a-1(a)(4), will prepare an annual report for its Board each year 
that evaluates (and documents the basis of that evaluation) the 
Regulated Fund's compliance with the terms and Conditions of the 
application and the procedures established to achieve such compliance. 
In the case of a BDC Downstream Fund that does not have a chief 
compliance officer, the chief compliance officer of the BDC that 
controls the BDC Downstream Fund will prepare the report for the 
relevant Independent Party.
    (d). The Independent Directors (including the non-interested 
members of each Independent Party) will consider at least annually 
whether continued participation in new and existing Co-Investment 
Transactions is in the Regulated Fund's best interests.
    11. Record Keeping. Each Regulated Fund will maintain the records 
required by Section 57(f)(3) of the Act as if each of the Regulated 
Funds were a BDC and each of the investments permitted under these 
Conditions were approved by the Required Majority under Section 57(f).
    12. Director Independence. No Independent Director (including the 
non-interested members of each Independent Party) of a Regulated Fund 
will also be a director, general partner, managing member or principal, 
or otherwise be an ``affiliated person'' (as defined in the Act) of any 
Affiliated Fund.
    13. Expenses. The expenses, if any, associated with acquiring, 
holding or disposing of any securities acquired in a Co-Investment 
Transaction (including, without limitation, the expenses of the 
distribution of any such securities registered for sale under the 
Securities Act) will, to the extent not payable by the Advisers under 
their respective advisory agreements with the Regulated Funds and the 
Affiliated Funds, be shared by the Regulated Funds and the 
participating Affiliated Funds in proportion to the relative amounts of 
the securities held or being acquired or disposed of, as the case may 
be.
    14. Transaction Fees.\31\ Any transaction fee (including break-up, 
structuring, monitoring or commitment fees but excluding brokerage or

[[Page 13004]]

underwriting compensation permitted by Section 17(e) or 57(k)) received 
in connection with any Co-Investment Transaction will be distributed to 
the participants on a pro rata basis based on the amounts they invested 
or committed, as the case may be, in such Co-Investment Transaction. If 
any transaction fee is to be held by an Adviser pending consummation of 
the transaction, the fee will be deposited into an account maintained 
by the Adviser at a bank or banks having the qualifications prescribed 
in Section 26(a)(1), and the account will earn a competitive rate of 
interest that will also be divided pro rata among the participants. 
None of the Advisers, the Affiliated Funds, the other Regulated Funds 
or any affiliated person of the Affiliated Funds or the Regulated Funds 
will receive any additional compensation or remuneration of any kind as 
a result of or in connection with a Co-Investment Transaction other 
than (i) in the case of the Regulated Funds and the Affiliated Funds, 
the pro rata transaction fees described above and fees or other 
compensation described in Condition 2(c)(iii)(B)(z), (ii) brokerage or 
underwriting compensation permitted by Section 17(e) or 57(k) or (iii) 
in the case of the Advisers, investment advisory compensation paid in 
accordance with investment advisory agreements between the applicable 
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
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    \31\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    15. Independence. If the Holders own in the aggregate more than 25 
percent of the Shares of a Regulated Fund, then the Holders will vote 
such Shares in the same percentages as the Regulated Fund's other 
shareholders (not including the Holders) when voting on (1) the 
election of directors; (2) the removal of one or more directors; or (3) 
any other matter under either the Act or applicable State law affecting 
the Board's composition, size or manner of election.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04501 Filed 3-4-21; 8:45 am]
BILLING CODE 8011-01-P
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