FS Global Credit Opportunities Fund, et al.

Published date21 July 2020
Record Number2020-15685
SectionNotices
CourtSecurities And Exchange Commission
Federal Register, Volume 85 Issue 140 (Tuesday, July 21, 2020)
[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).
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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\
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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
                ---------------------------------------------------------------------------
                 \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).
                ---------------------------------------------------------------------------
                 (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
                ---------------------------------------------------------------------------
                 \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 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
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 (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
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 (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
                

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