[Federal Register Volume 85, Number 140 (Tuesday, July 21, 2020)]
[Notices]
[Pages 44117-44125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15685]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33927; File No. 812-14987]
FS Global Credit Opportunities Fund, et al.
July 15, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of application for an order under sections 17(d) and 57(i)
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1
under the Act to permit certain joint transactions otherwise prohibited
by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
Summary of Application: Applicants request an order to permit
certain business development companies (``BDCs'') \1\ and closed-end
management investment companies to co-invest in portfolio companies
with each other and with affiliated investment funds and accounts.
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\1\ 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.
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Applicants: FS Global Credit Opportunities Fund (the ``Fund''); FS
Global Advisor, LLC (``FS''); FS Tactical Opportunities Fund, L.P.
(``Existing Affiliated Fund''); and FS Tactical Advisor, LLC
(``Affiliated Fund Advisor'', and together with the Fund, FS and the
Existing Affiliated Fund, the ``Applicants'').
Filing Dates: The application was filed on December 17, 2018, and
amended on May 20, 2019, October 1, 2019, January 24, 2020, April 23,
2020 and June 30, 2020.
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 August 10, 2020 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: Secretary, U.S. Securities & Exchange Commission:
[email protected]. Applicants: [email protected].
FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel,
at (202) 551-6990, or Trace W. 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 http://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) of the Act and rule 17d-1 thereunder (the ``Order'') to
permit, subject to the terms and conditions set forth in the
application (the
[[Page 44118]]
``Conditions''), a Regulated Fund \2\ and one or more other Regulated
Funds 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 (as 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 Fund and any Future Regulated
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 is an
Adviser, and (c) that intends to participate in the program of co-
investments described in the application (``Co-Investment
Program''). The definitions of Regulated Funds and Future Regulated
Funds do not include FS KKR Capital Corp., FS KKR Capital Corp. II,
FS Energy & Power Fund and FS Credit Income Fund because such funds
are already operating pursuant to existing exemptive relief. See
Corporate Capital Trust, Inc., et al., Investment Company Act Rel.
Nos. 32642 (May 22, 2017)(notice) and 32683 (June 19, 2017)(order);
Triloma EIG Energy Income Fund, et al., Investment Company Act Rel.
Nos. 33047 (Mar. 14, 2018)(notice) and 33070 (Apr. 10, 2018)(order);
and FS Credit Income Fund, et al., Investment Company Act Rel. Nos.
33848 (Apr. 22, 2020)(notice) and 33871 (May 19, 2020)(order).
``Adviser'' means FS, the Affiliated Fund Advisor and any future
investment adviser that is (i) controlling, under common control
with, or controlled by FS Investments (as defined below), (ii)
registered as an investment adviser under the Investment Advisers
Act of 1940 (the ``Advisers Act''), and (iii) not a Regulated Fund
or a subsidiary of a Regulated Fund.
\3\ ``Affiliated Fund'' means any Existing Affiliated Fund any
Future Affiliated Fund or any FS Proprietary Account (as defined
below). ``Future Affiliated Fund'' means any entity (a) whose
investment adviser is an Adviser, (b) that would be an investment
company but for section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act,
and (c) that intends to participate in the Co-investment Program.
\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 Fund is a closed-end management investment company
registered under the Act and organized as a Delaware Statutory Trust.
The Fund has a seven member Board \5\ of which six members are
Independent Trustees.\6\
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\5\ ``Board'' means the board of trustees (or the equivalent) of
the applicable Regulated Fund.
\6\ ``Independent Trustee'' 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 Trustee of a Regulated
Fund will have a financial interest in any Co-Investment
Transaction, other than indirectly through share ownership in one of
the Regulated Funds.
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3. FS, a Delaware limited liability company, is a registered
investment adviser with the Commission under the Advisers Act and
serves as investment adviser to the Fund.
4. The Existing Affiliated Fund is a Delaware limited partnership
that is a privately-offered fund that would be an investment company
but for section 3(c)(1) or 3(c)(7) of the Act. The Affiliated Fund
Advisor is a Delaware limited liability company and is registered as an
investment adviser with the Commission under the Advisers Act and
serves as the investment adviser to the Existing Affiliated Fund.\7\
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\7\ FS and the Affiliated Fund Advisor are each a subsidiary of
Franklin Square Holdings, L.P., a Pennsylvania limited partnership
(``FS Investments''). FS Investments is a leading asset manager
dedicated to helping individuals, financial professionals and
institutions design better portfolios. FS Investments currently owns
a majority of each of FS and the Affiliated Funds Advisor. FS
Investments does not currently offer investment advisory services to
any person and is not expected to do so in the future. Applicants
state that as a result, FS Investments has not been included as an
Applicant.
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5. FS Proprietary Accounts \8\ may hold various financial assets in
a principal capacity. Currently there are no FS Proprietary Accounts.
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\8\ ``FS Proprietary Account'' means any account of an Adviser
or its affiliates or any company that is a direct or indirect,
wholly- or majority-owned subsidiary of the Adviser or its
affiliates, which, from time to time, may hold various financial
assets in a principal capacity.
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6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\9\ 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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\9\ ``Wholly-Owned Investment Sub'' means an entity (i) that is
wholly-owned by a Regulated Fund (with such Regulated Fund at all
times holding, beneficially and of record, 100% of the voting and
economic interests); (ii) whose sole business purpose is to hold one
or more investments on behalf of such Regulated Fund (and, in the
case of a SBIC Subsidiary (defined below), maintain a license under
the SBA Act (defined below) and issue 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; and (iv)
that would be an investment company but for section 3(c)(1) or
3(c)(7) of the Act. ``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.
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Applicants' Representations
A. Allocation Process
7. Applicants represent that the Adviser has 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.
8. Opportunities for Potential Co-Investment Transactions may arise
when investment advisory personnel of an Adviser becomes aware of
investment opportunities that may be appropriate for one or more
Regulated Funds and one or more Affiliated Funds. If the requested
Order is granted, the Adviser will establish, maintain and implement
policies and procedures reasonably designed to ensure that, when such
opportunities arise, the Adviser to the relevant Regulated Funds is
promptly notified and receives 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 \10\ and any Board-Established Criteria \11\ of a Regulated
[[Page 44119]]
Fund, the policies and procedures will require that the Adviser to such
Regulated Fund receives sufficient information to allow such Adviser's
investment committee to make its independent determination and
recommendations under the Conditions. 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, it will
formulate a recommendation regarding the proposed order amount for the
Regulated Fund.
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\10\ ``Objectives and Strategies'' means a Regulated Fund's
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.
\11\ ``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 the 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 Trustees. The Independent Trustees of a
Regulated Fund may at any time rescind, suspend or qualify its
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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9. Applicants state that, for each Regulated Fund and Affiliated
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, the Adviser's investment committee will approve
an investment amount. Prior to the External Submission (as defined
below), each proposed order amount may be reviewed and adjusted, in
accordance with the Adviser's written allocation policies and
procedures, by the Adviser's investment committee.\12\ The order of a
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.\13\
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\12\ The reason for any such adjustment to a proposed order
amount will be documented in writing and preserved in the records of
the Advisers.
\13\ ``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).
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10. 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.\14\ 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 Fund's 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.\15\
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\14\ Each Adviser 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 Trustees with information concerning the
Affiliated Fund's and Regulated Funds' order sizes to assist the
Eligible Trustees with their review of the applicable Regulated
Fund's investments for compliance with the Conditions. ``Eligible
Trustees'' 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 (treating any registered investment company
or series thereof as a BDC for this purpose).
\15\ 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
11. Applicants state that from time to time the Regulated Funds and
Affiliated Funds may have opportunities to make Follow-On Investments
\16\ 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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\16\ ``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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12. 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.\17\ If the
Regulated Funds and Affiliated Fund had 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 Fund 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 Fund would 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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\17\ ``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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13. 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 \18\ or (ii) a Non-Negotiated
Follow-On Investment.\19\ 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
[[Page 44120]]
Non-Negotiated Follow-On Investments remain subject to the Board's
periodic review in accordance with Condition 10.
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\18\ 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 Trustees in accordance with Condition
8(c).
\19\ 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).
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C. Dispositions
14. Applicants propose that Dispositions \20\ would be divided into
two categories. If the Regulated Funds and Affiliated Fund 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 Fund 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.\21\
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\20\ ``Disposition'' means the sale, exchange or other
disposition of an interest in a security of an issuer.
\21\ 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 Trustees 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 would be required because such
findings would not have been 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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15. 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 \22\ or (ii) the securities
are Tradable Securities \23\ 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.
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\22\ 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 Trustees.
\23\ ``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
16. 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 the
Affiliated Fund in a Co-Investment Transaction may occur up to ten
business days after the settlement date for a 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
17. 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 Fund (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 as directed by an independent third
party when voting on matters specified in the Condition. Applicants
believe that this Condition will ensure that the Independent Trustees
will act independently in evaluating Co-Investment Transactions,
because the ability of an Adviser or its principals to influence the
Independent Trustees by a suggestion, explicit or implied, that the
Independent Trustees can be removed will be limited significantly. The
Independent Trustees shall evaluate and approve any independent party,
taking into account its qualifications, reputation for independence,
cost to the shareholders, and other factors that they deem relevant.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
participation by a registered investment company and an affiliated
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the
Commission by order upon application. Section 17(d) of the Act and rule
17d-1 under the Act are applicable to Regulated 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 transaction 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 (i) the Affiliated Fund Advisor
manages, and may be deemed to control, the Existing Affiliated Fund and
any other Affiliated Fund will be managed by, and may be deemed to be
controlled by, an Adviser to Affiliated Funds; (ii) FS is the
investment adviser to, and may be deemed to control, the Fund and an
Adviser to the Regulated Funds will be the investment adviser to, and
may be deemed to control, any
[[Page 44121]]
Future Regulated Fund; and (iii) the Advisers to Affiliated Funds and
the Advisers to Regulated Funds are under common control. Thus, each of
the Affiliated Funds could be deemed to be a person related to the
Regulated Funds in a manner described by section 57(b) and related to
the other Regulated Funds 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 section 57(b) or rule 17d-1, as applicable, and thus
prohibited from participating in Co-Investment Transactions with each
other. In addition, because the FS Proprietary Accounts are controlled
by the Adviser or its affiliates and, therefore, may be under common
control with the Fund, any future Advisers, and any Future Regulated
Funds, the FS 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 17(d) or section
57(b) and also prohibited from participating in the Co-Investment
Program.
4. 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.
5. 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 shall 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 an 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 Fund,
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 Trustees with information
concerning the Affiliated Fund's and Regulated Funds' order sizes to
assist the Eligible Trustees 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
Trustees 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 the Affiliated
Fund 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
shareholders and do not involve overreaching in respect of the
Regulated Fund or its shareholders on the part of any person concerned;
(ii) the transaction is consistent with:
(A) The interests of the Regulated Fund's shareholders; 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 Fund 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
Trustees 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
[[Page 44122]]
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 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 Fund
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 Fund 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 FS Proprietary Account that is not advised by the
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 Fund 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
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\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.
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(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 Trustees 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 Fund 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 Fund, 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
[[Page 44123]]
Trustees, 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:
(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 Fund and any other Regulated Fund;
(ii) Original Investments. All of the Affiliated Fund's 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 Fund
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 Fund, 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 any Affiliated Fund,
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 any Affiliated Fund,
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.
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(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 Trustees 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 Trustees 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 Fund's 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 Fund, 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 any Affiliated Fund
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
[[Page 44124]]
(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 Fund, 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
Trustees, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a 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 Fund's 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 Fund
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 Fund, 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 Fund's 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 Fund, 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
Affiliated Fund 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 any Affiliated Fund that the Regulated Fund considered but
declined to participate in, so that the Independent Trustees, 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.
(d) The Independent Trustees 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. Trustee Independence. No Independent Trustee 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 Fund, be shared by the Regulated Funds and any participating
Affiliated Fund in proportion to the relative amounts of the securities
held or being acquired or disposed of, as the case may be.
[[Page 44125]]
14. Transaction Fees.\31\ Any transaction fee (including break-up,
structuring, monitoring or commitment fees but excluding brokerage or
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 Fund, the other Regulated Funds or
any affiliated person of the Affiliated Fund 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 Fund,
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 as directed by an independent third party when voting on
(1) the election of directors; (2) the removal of one or more
directors; or (3) any other matter under either the Act or applicable
State 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. 2020-15685 Filed 7-20-20; 8:45 am]
BILLING CODE 8011-01-P