[Federal Register: September 25, 2008 (Volume 73, Number 187)]
[Notices]
[Page 55564-55568]
[DOCID:fr25se08-85]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28383; 812-13355]

Triangle Capital Corporation, et al.; Notice of Application

September 19, 2008.

AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application for an order under sections 6(c),
12(d)(1)(J), and 57(c) of the Investment Company Act of 1940 (``Act'')
granting exemptions from sections 12(d)(1)(A) and (C), 18(a), 21(b),
57(a)(1)-(a)(3), and 61(a) of the Act; under section 57(i) of the Act
and rule 17d-1 under the Act to permit certain joint transactions
otherwise prohibited by section 57(a)(4) of the Act; and under section
12(h) of the Securities Exchange Act of 1934 (``Exchange Act'')
granting an exemption from section 13(a) of the Exchange Act.

Summary of Application: Applicants, Triangle Capital Corporation
(``Triangle''), Triangle Mezzanine Fund, LLLP (``Triangle SBIC''), and
New Triangle GP, LLC (``General Partner''), request an order permitting
a business development company (``BDC'') and its wholly-owned small
business investment company (``SBIC'') subsidiary to (1) engage in
certain transactions that otherwise would be permitted if the BDC and
its SBIC subsidiary were one company, (2) adhere to a modified asset
coverage requirement, and (3) file certain reports on a consolidated
basis.

Filing Dates: The application was filed on January 3, 2007 and amended
on November 5, 2007, and September 16, 2008.

Hearing or Notification of Hearing:  An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5.30 pm
on October 10, 2008, and should be accompanied by proof of service on
applicants, in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. Applicants, c/o Garland S.
Tucker III, Triangle Capital Corporation, 3700 Glenwood Avenue, Suite
530, Raleigh, NC 27612.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at<PHONE_NUMBER>, or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk,

100 F Street, NE., Washington, DC 20549-0102 (tel.<PHONE_NUMBER>).

Applicants' Representations

    1. Triangle, a Maryland corporation organized in October 2006, is
an internally managed, non-diversified, closed-end investment company
that has elected to be regulated as a BDC under the Act.\1\ In
addition, Triangle will elect to be treated for tax purposes as a
regulated investment company (``RIC'') as defined under Subchapter M of
the Internal Revenue Code of 1986, as amended. Triangle operates as a
specialty finance company that provides customized financing solutions
to lower middle market companies that have annual revenues between $10
and $100 million. Triangle's investment objective is to seek attractive
returns by generating current income from debt investments and capital
appreciation from equity related investments.
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    \1\ Section 2(a)(48) of the Act defines a BDC to be any closed-
end investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
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    2. Triangle has a seven member board of directors (``Board''), four
of whom are not ``interested persons'' of Triangle within the meaning
of section 2(a)(19) of the Act. Triangle is internally managed by its
executive officers under the supervision of the Board. As a result,
Triangle does not pay external investment advisory fees, but instead
incurs operating costs associated with employing investment and
portfolio management professionals.
    3. Triangle SBIC, a North Carolina limited liability limited
partnership, is an SBIC licensed by the Small Business Administration
(``SBA'') to operate under the Small Business Investment Act of 1958.
Triangle SBIC filed a registration statement on Form N-5 with the
Commission and has elected to be regulated as a BDC under the Act.
Triangle SBIC has the same investment objectives and strategies as
Triangle. Triangle owns a 99.9 percent limited partnership interest in
Triangle SBIC, and the General Partner, a wholly-owned subsidiary of
Triangle, owns a 0.1 percent general partnership interest in Triangle
SBIC. Triangle SBIC, therefore, is functionally a 100 percent owned
subsidiary of Triangle, because Triangle and the General Partner own
all of the equity and voting interest in Triangle SBIC. Triangle SBIC
is consolidated with Triangle for financial reporting purposes.
Triangle SBIC has a Board consisting of four persons who are not
interested persons of Triangle SBIC within the meaning of section
2(a)(19) of the Act and three persons who are interested persons of
Triangle SBIC.
    4. All investments for Triangle SBIC are approved by the investment
committee of Triangle SBIC, which is a committee of Triangle SBIC and
is subject to approval by the SBA. In addition, Triangle and Triangle
SBIC have entered into a management services agreement whereby Triangle
provides management services to Triangle SBIC, including prospective
investment identification, due diligence and analytical services,
preparation of reports, research and economic/statistical data relating
to potential and existing investments for use by the Triangle SBIC
Board in overseeing the Triangle SBIC investment portfolio, monitoring
of existing investments, including enforcement of rights under
operative agreements, bookkeeping, accounting and other administrative
services, preparation of financial reports and tax returns, preparation
of reports filed with the SBA, provision of office space and clerical
staff, and maintenance of relationships with professionals retained by
Triangle SBIC.
    5. The General Partner is a limited liability company organized
under the laws of the state of North Carolina. The General Partner has
irrevocably delegated its authority to manage the business and affairs
of Triangle SBIC to the Triangle SBIC Board. As a consequence, the
General Partner's only role is to perform certain ministerial functions
that result from decisions made by the Triangle SBIC Board.

Applicants' Legal Analysis

    1. Applicants request an order under sections 6(c), 12(d)(1)(J),
57(c) and 57(i) of the Act and rule 17d-1 under the Act granting
exemptions from sections 12(d)(1), 18(a), 21(b), 57(a)(1), 57(a)(2),
57(a)(3), 57(a)(4) and 61(a) of the Act to permit Triangle and Triangle
SBIC to engage in certain transactions that otherwise would be
permitted if Triangle and Triangle SBIC were one company and to permit
Triangle to adhere to a modified asset coverage requirement. Applicants
also request an exemption under section 12(h) of the Exchange Act for
an exemption from section 13(a) of the Exchange Act.
    2. Section 12(d)(1)(A) of the Act, made applicable to BDCs by
section 60 of the Act, limits the amount of securities a registered
investment company or BDC may hold of other investment companies.
Section 12(d)(1)(C) of the Act limits the amount of securities of a
closed-end investment company that may be acquired by an investment
company. Rule 60a-1 exempts a BDC's acquisition of the securities of a
wholly-owned SBIC subsidiary from sections 12(d)(1)(A) and (C).
Accordingly, the transfer of assets from Triangle to Triangle SBIC will
be exempt from the provisions of sections 12(d)(1)(A) and 12(d)(1)(C)
by virtue of rule 60a-1. However, any loans or advances by Triangle
SBIC to Triangle might be deemed to violate section 12(d)(1) if the
loans or advances are construed as purchases by Triangle SBIC of the
securities of Triangle.
    3. Applicants request an exemption under section 12(d)(1)(J) from
section 12(d)(1) to permit the acquisition by Triangle SBIC of any
securities of Triangle representing indebtedness. Section 12(d)(1)(J)
of the Act provides that the Commission may exempt persons or
transactions from any provision of section 12(d)(1) if and to the
extent such exception is consistent with the public interest and the
protection of investors. Applicants state that the requested relief
meets this standard because Triangle SBIC's wholly-owned subsidiary
status and consolidated financial reporting with Triangle will both
eliminate the possibility of overreaching and prevent confusion as to
the financial status of Triangle to Triangle's stockholders, who are
the investors that the Act is intended to protect.
    4. Section 18(a) prohibits a registered close-end investment
company from issuing any class of senior security or selling any such
security of which it is the issuer unless the company complies with the
asset coverage requirements set forth in that section. Section 61(a) of
the Act makes section 18 applicable to BDCs, with certain
modifications. Section 18(k) exempts an investment company operating as
an SBIC from the asset coverage requirements of section 18(a)(1)(A) and
(B) (with respect to senior securities representing indebtedness).
    5. Applicants state that a question exists as to whether Triangle
must comply with the asset coverage requirements of section 18(a) on a
consolidated basis because Triangle may be deemed to be an indirect
issuer of senior securities issued by Triangle SBIC. For Triangle to
comply with these asset coverage requirements would mean that, with
certain exceptions, Triangle would treat as its own all assets held
directly by Triangle and Triangle SBIC and any liabilities of Triangle
SBIC, including liabilities of Triangle SBIC with respect to senior
securities as to which Triangle SBIC is exempt from the asset coverage
requirements of section 18(a)(1)(A) and (B) by virtue of

section 18(k). Accordingly, applicants request relief under section
6(c) of the Act from sections 18(a) and 61(a) of the Act to permit
Triangle to exclude from its consolidated asset coverage ratio any
senior security representing indebtedness that is issued by Triangle
SBIC.
    6. Section 6(c) of the Act, in relevant part, permits the
Commission to exempt any transaction or class of transactions from any
provision of the Act if, and to the extent that, such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act. Applicants state that, without the requested
relief from sections 18(a) and 61(a), the ability of Triangle SBIC to
obtain the kind of financing that would be available to Triangle if it
were to conduct the SBIC operations itself would be restricted.
Moreover, the exclusion by Triangle from its consolidated asset
coverage ratio of any senior security representing indebtedness that is
issued by Triangle SBIC would not harm the public interest because the
SBA regulates the capital structure of Triangle SBIC.
    7. Sections 57(a)(1) and (2) of the Act generally prohibit, with
certain exceptions, sales or purchases of any security or other
property between BDCs and certain of their affiliates as described in
section 57(b) of the Act. Section 57(b) includes a person, directly or
indirectly, either controlling, controlled by or under common control
with the BDC. Applicants state that Triangle directly owns all of the
limited partnership interests in Triangle SBIC and indirectly owns all
of the general partnership interests in Triangle SBIC through its 100%
ownership of the General Partner. Accordingly, Triangle and Triangle
SBIC are related to each other in the manner set forth in section
57(b).
    8. Applicants state that there may be circumstances when it is in
the interests of Triangle and its stockholders that Triangle SBIC
invest in securities of an issuer that may be deemed to be a controlled
affiliate of Triangle or that Triangle invest in securities of an
issuer that may be deemed to be a controlled affiliate of Triangle
SBIC. Applicants therefore request an exemption from sections 57(a)(1)
and 57(a)(2) of the Act to permit any transaction solely between
Triangle and Triangle SBIC with respect to the purchase or sale of
securities or other property. Applicants also seek an exemption from
these provisions to allow any transaction involving Triangle and/or
Triangle SBIC and portfolio affiliates of either or both of Triangle
and/or Triangle SBIC. Applicants state that the requested relief is
intended only to permit Triangle and Triangle SBIC to do that which
they otherwise would be permitted to do if they were one company.
    9. Section 57(c) provides that the Commission will exempt a
proposed transaction from the provisions of section 57(a)(1), (2), and
(3) of the Act if the terms of the proposed transaction, including the
consideration to be paid or received, are reasonable and fair and do
not involve overreaching of any person concerned, and the proposed
transaction is consistent with the policy of the BDC concerned and the
general purposes of the Act.
    10. Applicants submit that the requested relief from section
57(a)(1) and (2) meets this standard. Applicants represent that the
proposed operation of Triangle and Triangle SBIC as one company will
enhance the efficient operations of both companies and allow them to
deal with portfolio companies as if Triangle and Triangle SBIC were one
company. Applicants contend that the terms of the proposed transactions
are reasonable and fair and do not involve overreaching of Triangle or
its stockholders by any person, and that the requested order would
permit applicants to carry out more effectively their purposes and
objectives of investing primarily in small business concerns.
Applicants also state that since Triangle SBIC will be a wholly-owned
subsidiary of Triangle and no officers or directors of Triangle or
Triangle SBIC (or any controlling persons or other ``upstream
affiliates'' of Triangle) will have any prohibited financial interest
in the transactions described, there can be no overreaching on the part
of any persons in transactions solely between Triangle and Triangle
SBIC. Finally, applicants note that the proposed transactions are
consistent with the policy of Triangle and Triangle SBIC as specified
in filings with the Commission and reports to stockholders, as well as
consistent with the policies and provisions of the Act.
    11. Section 57(a)(3) of the Act makes it unlawful for certain
affiliated persons of a BDC, and certain affiliated persons of those
persons, to borrow money or other property from such BDC or from any
company controlled by the BDC, except as permitted by section 21(b) or
section 62. Section 21(b) of the Act (made applicable to BDCs by
section 62) provides that it shall be unlawful for a BDC to lend any
money or property, directly or indirectly, to any person that controls
or is under common control with the BDC, except for loans to any
company that owns all of the outstanding securities of the BDC (other
than directors' qualifying shares).
    12. Triangle is an affiliated person of Triangle SBIC by reason of
its direct ownership of all of the limited partnership interests in
Triangle SBIC and its indirect ownership of all of the general
partnership interests in Triangle SBIC through its 100% ownership of
the General Partner. Triangle does not directly own all of the
outstanding securities of Triangle SBIC because the General Partner
holds a 0.1 percent general partnership interest in Triangle SBIC and
Triangle SBIC has issued SBA-guaranteed debentures and, in the future,
may have other outstanding securities in the form of indebtedness not
owned by Triangle. Triangle SBIC is an affiliated person of Triangle
because it is deemed to be under the control of Triangle.
    13. Applicants state that there may be instances when it would be
in the best interests of Triangle and its stockholders for Triangle to
make loans to Triangle SBIC or for Triangle SBIC to make loans to
Triangle. Applicants note that, in the case of loans from Triangle SBIC
to Triangle, the loans would be prohibited by section 21(b) and section
57(a)(3) because the borrower controls the lender and the lender may
have outstanding securities not owned by the borrower. Accordingly,
applicants request an order under section 6(c) to exempt the lending of
money or other property by Triangle SBIC to Triangle and by Triangle to
Triangle SBIC from the provisions of section 21(b). Applicants argue
that because these transactions are solely between Triangle and
Triangle SBIC, its wholly-owned subsidiary, they will have no
substantive economic effect and there will be no basis for overreaching
or harm to the public interest. Applicants also request an order under
section 57(c) to exempt the borrowing of money or property by Triangle
from Triangle SBIC from the provisions of section 57(a)(3). Applicants
submit that the requested relief meets the standards of section 57(c).
    14. Section 17(d) of the Act and rule 17d-1 under the Act (made
applicable to BDCs by section 57(i)) prohibit affiliated persons of a
registered investment company, or an affiliated person of such person,
acting as principal, from participating in any joint transaction or
arrangement in which the registered company or a company it controls is
a participant, unless the Commission has issued an order authorizing
the arrangement. Section 57(a)(4) of the Act imposes substantially the
same prohibitions on joint transactions involving any BDC and an

affiliated person of such BDC, or an affiliated person of such
affiliated person, as specified in section 57(b) of the Act. Section
57(i) of the Act provides that rules and regulations under section
17(d) of the Act will apply to transactions subject to section 57(a)(4)
in the absence of rules under that section. The Commission has not
adopted rules under section 57(a)(4) with respect to joint transactions
and, accordingly, the standards set forth in rule 17d-1 govern
applicants' request for relief.
    15. Applicants request relief under section 57(i) and rule 17d-1 to
permit any transaction solely between Triangle and Triangle SBIC with
respect to any transfer of assets to Triangle SBIC or operations
thereafter, and any transaction involving investments by Triangle or
Triangle SBIC in portfolio companies in which either is or is proposed
to become an investor, but only to the extent that the transaction
would not be prohibited if Triangle SBIC were deemed to be part of
Triangle.
    16. In determining whether to grant an order under section 57(i)
and rule 17d-1, the Commission considers whether the participation of
the BDC 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. Applicants note that the proposed
transactions are consistent with the policy and provisions of the Act
and will enhance the interests of Triangle's stockholders while
retaining for them the important protections afforded by the Act. In
addition, because the joint participants will conduct their operations
as though they comprise one company, the participation of one will not
be on a basis different from or less advantageous than the others.
Accordingly, applicants believe that the standard for relief under
section 57(i) and rule 17d-1 is satisfied.
    17. Section 54 of the Act provides that a closed-end company may
elect BDC treatment under the Act if the company has either a class of
equity securities registered under section 12 of the Exchange Act or
has filed a registration statement pursuant to section 12 of the
Exchange Act for a class of its equity securities. Section 12(g) of the
Exchange Act requires issuers with specified assets and a specified
number of security holders to register under the Exchange Act. As a
BDC, Triangle has registered its common stock under section 12(b) of
the Exchange Act. In order to elect BDC treatment, Triangle SBIC has
voluntarily registered its securities under the Exchange Act, even
though it is not required to do so by section 12(g) of the Exchange
Act.
    18. By filing a registration statement under section 12 of the
Exchange Act, absent an exemption, Triangle SBIC would be required by
section 13(a) of the Exchange Act to file periodically with the
Commission, even though Triangle SBIC will have only one equity holder.
Accordingly, applicants request an order under section 12(h) of the
Exchange Act exempting Triangle SBIC from the reporting requirements of
section 13(a) of the Exchange Act to permit it to file consolidated
reports with Triangle.
    19. Section 12(h) of the Exchange Act provides that the Commission
may exempt an issuer from section 13 of the Exchange Act if the
Commission finds that by reason of the number of public investors,
amount of trading interest in the securities, the nature and extent of
the activities of the issuer, income or assets of the issuer, or
otherwise, that such action is not inconsistent with the public
interest or the protection of investors. Triangle SBIC will have only
one investor, which is itself a reporting company, and no public
investors. There will be no trading in Triangle SBIC securities, so no
public interest or investor protective purpose will be served by
separate Triangle SBIC reporting. Further, applicants state that the
nature and extent of Triangle SBIC's activities are such that its
activities will be fully reported through consolidated reporting in
accordance with normal accounting rules. Accordingly, applicants
believe that the requested exemption meets the standards of section
12(h) of the Exchange Act.

Applicants' Conditions

    Applicants agree that the requested order will be subject to the
following conditions:

A. Capital Structure Conditions

    1. Triangle will at all times own and hold, beneficially and of
record, all of the outstanding limited partnership interests in
Triangle SBIC and all of the outstanding membership interests in the
General Partner, or otherwise own and hold beneficially all of the
outstanding voting securities and other equity interests in Triangle
SBIC.
    2. Triangle SBIC will have investment policies not inconsistent
with those of Triangle, as set forth in Triangle's registration
statement.
    3. No person shall serve as a member of the Board of Triangle SBIC
unless such person shall also be a member of the Board of Triangle. The
Board of Triangle SBIC will be appointed by the equity owners of
Triangle SBIC.
    4. Triangle will not itself issue or sell any senior security, and
Triangle will not cause or permit Triangle SBIC to issue or sell any
senior security of which Triangle or Triangle SBIC is the issuer except
to the extent permitted by section 18 (as modified for BDCs by section
61) of the Act; provided that immediately after the issuance or sale of
any such notes or evidence of indebtedness by either Triangle or
Triangle SBIC, Triangle and Triangle SBIC on a consolidated basis, and
Triangle individually, shall have the asset coverage required by
section 18(a) (as modified by section 61(a)), except that, in
determining whether Triangle and Triangle SBIC on a consolidated basis
have the asset coverage required by section 61(a), any borrowings by
Triangle SBIC shall not be considered senior securities and, for
purposes of the definition of ``asset coverage'' in section 18(h),
shall be treated as indebtedness not represented by senior securities.
    5. Triangle will acquire securities of Triangle SBIC representing
indebtedness only if, in each case, the prior approval of the SBA has
been obtained. In addition, Triangle and Triangle SBIC will purchase
and sell portfolio securities between themselves only if, in each case,
the prior approval of the SBA has been obtained.

B. Consolidated Reporting

    1. Triangle will: (a) File with the Commission, on behalf of itself
and Triangle SBIC, all information and reports required to be filed
with the Commission under the Exchange Act and other applicable federal
securities laws, including information and financial statements
prepared solely on a consolidated basis as to Triangle and Triangle
SBIC, such information and reports to be in satisfaction of the
separate reporting obligations of Triangle SBIC; and (b) provide to its
stockholders such information and reports required to be disseminated
to Triangle's stockholders, including information and financial
statements prepared solely on a consolidated basis as to Triangle and
Triangle SBIC, such reports to be in satisfaction of the separate
reporting obligations of Triangle SBIC. Notwithstanding anything in
this condition, Triangle will not be relieved of any of its reporting
obligations including, but not limited to, any consolidating statements
setting forth the individual statements of Triangle SBIC required by
rule 6-03(c) of Regulation S-X.
    2. Triangle and Triangle SBIC may file on a consolidated basis
pursuant to the

above condition only so long as the amount of Triangle's total
consolidated assets invested in assets other than (a) securities issued
by Triangle SBIC or (b) securities similar to those in which Triangle
SBIC invests, does not exceed 10%.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-22508 Filed 9-24-08; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 77, Number 131 (Monday, July 9, 2012)]
[Notices]
[Pages 40389-40392]
[FR Doc No: 2012-16626]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30125; File No. 812-13878]

Gladstone Capital Corporation, et al.; Notice of Application

June 29, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d),
57(a)(4) 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.

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Summary of Application:  Applicants request an order to permit the
Investors (as defined below) to co-invest in portfolio companies with
each other and with an affiliated investment fund.

Applicants:  Gladstone Capital Corporation (``GLAD''), Gladstone
Investment Corporation (``GAIN''), Gladstone Lending Corporation
(``Lending,'' and collectively with GLAD and GAIN, the ``Funds''),
Gladstone Partners Fund, LP (``Partners''), and Gladstone Management
Corporation (``GMC'').

Filing Dates:  The application was filed on March 10, 2011, and amended
on December 21, 2011, April 19, 2012, and June 29, 2012.

Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on July 25, 2012, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St. NE., Washington, DC 20549-1090. Applicants: 1521 Westbranch Dr.,
Suite 200, McLean, VA 22102.

FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Special Counsel, at
(202) 551-6813 or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Office of Investment Company Regulation, Division of Investment
Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. GLAD and GAIN are closed-end management investment companies
that have elected to be regulated as business development companies
(``BDCs'') under the Act. Lending is a closed-end management investment
company that has filed a notice of intent to elect to be regulated as a
BDC pursuant to section 6(f) of the Act. Lending was organized on
December 7, 2009, but has not yet commenced operations. A majority of
the directors of each of the Funds is or will be persons who are not
``interested persons'' as defined in section 2(a)(19) of the Act
(``Non-Interested Directors'').
    2. GMC is registered as an investment adviser under the Investment
Advisers Act of 1940 (the ``Advisers Act'') and serves as the
investment adviser to each Fund. From time to time GMC, or an entity
controlling, controlled by, or under common control with GMC, may serve
as investment adviser or subadviser to other BDCs or registered closed-
end management investment companies (each, a ``Closed-End Fund,'' and
together with the Funds, the ``Investors''). Companies subadvised by
GMC or an entity controlling, controlled by, or under common control
with GMC are included in the term ``Closed-End Fund'' only if the
subadviser controls the Closed-End Fund.
    3. GLAD's Objectives and Strategies are to achieve a high level of
current income by investing in certain debt securities issued by
private businesses that are family-owned businesses or substantially
owned by leveraged buyout funds or individual investors.\1\ GAIN's
Objectives and Strategies are to achieve a high level of current income
and capital gains by investing in debt and equity securities of private
businesses. Lending's proposed Objectives and Strategies are to
generate current income and, to a lesser extent, long-term capital
appreciation through investing in syndicated and non-syndicated debt
investments of small to mid-sized corporations that are typically
larger companies than those in which GLAD or GAIN invest, but which may
from time to time be similar to the types of investments in which GLAD
and GAIN invest.
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    \1\ ``Objectives and Strategies'' means the investment
objectives and strategies of an Investor, as described in the
Investor's registration statement on Form N-2, other filings the
Investor has made with the Commission under the Securities Act of
1933 (``Securities Act''), or under the Securities Exchange Act of
1934, and the Investor's reports to shareholders.
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    4. Partners is a limited partnership organized under Delaware law
and is excluded from the definition of investment company by section
3(c)(1) of the Act. Partners' investment objective is similar to GLAD's
Objectives and Strategies. GMC is the general partner of Partners and
serves as its investment adviser.
    5. Applicants seek an order (``Order'') under sections 17(d),
57(a)(4), and 57(i) of the Act and rule 17d-1 under the Act to permit
two or more of the Investors and Partners to (a) co-invest with each
other in securities issued by issuers in private placement transactions
\2\ in which GMC negotiates terms in addition to price; and (b) make
additional investments in securities of such issuers, including through
the exercise of warrants, conversion privileges, and other rights to
purchase securities of the issuers (such additional investments,
``Follow-On Investments'').\3\ ``Co-Investment Transaction'' means any
transaction in which an Investor participated together with Partners
and/or one or more other Investors in reliance on the Order.
``Potential Co-Investment Transaction'' means any investment
opportunity in which an Investor could not participate together with
Partners and/or one or more other Investors without obtaining and
relying on the Order. The Order would supersede a previous co-
investment order issued to GLAD, GAIN, Partners, Gladstone General
Partner, LLC, and GMC.\4\
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    \2\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
    \3\ All existing entities that currently intend to rely upon the
Order have been named as applicants. Any other existing or future
entity that subsequently relies on the Order will comply with the
terms and conditions of the application.
    \4\ Gladstone Capital, Investment Company Act Release Nos. 27120
(Oct. 25, 2005) (notice) and 27150 (Nov. 22, 2005) (order).
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    6. When considering Potential Co-Investment Transactions for any
Investor, GMC will consider only the Objectives and Strategies,
investment policies, investment positions, capital

available for investment, and other pertinent factors applicable to
that Investor. Other than pro rata dispositions and Follow-On
Investments as provided in conditions 7 and 8, and after making the
determinations required in conditions 1 and 2(a), GMC will present each
Potential Co-Investment Transaction and the proposed allocation to the
directors eligible to vote under section 57(o) of the Act (``Eligible
Directors''), and the ``required majority,'' as defined in section
57(o) of the Act (``Required Majority'') will approve each Co-
Investment Transaction prior to any investment by the participating
Investor.
    7. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, an Investor may participate
in a pro rata disposition or Follow-On Investment without obtaining
prior approval of the Required Majority if, among other things: (i) The
proposed participation of each Investor and Partners in such
disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition or Follow-On Investment,
as the case may be; and (ii) the board of directors of the Investor has
approved that Investor's participation in pro rata dispositions and
Follow-On Investments as being in the best interests of the Investor.
If the board does not so approve, any such disposition or Follow-On
Investment will be submitted to the Investor's Eligible Directors. The
board of any Investor may at any time rescind, suspend or qualify its
approval of pro rata dispositions and Follow-On Investments with the
result that all dispositions and/or Follow-On Investments must be
submitted to the Eligible Directors.
    8. Applicants state that no Non-Interested Director of an Investor
will have a financial interest in any Co-Investment Transaction, other
than through share ownership in one of the Investors.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC in
contravention of rules as prescribed by the Commission. Under section
57(b)(2) of the Act, any person who is directly or indirectly
controlling, controlled by, or under common control with a BDC is
subject to section 57(a)(4). Applicants submit that each of the
Investors and Partners could be deemed to be a person related to each
Investor in a manner described by section 57(b) by virtue of being
under common control with the Investor. 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 Investors that are BDCs.
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to
Investors that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. In
passing upon applications under rule 17d-1, the Commission considers
whether the company's participation in the joint transaction is
consistent with the provisions, policies, and purposes of the Act and
the extent to which such participation is on a basis different from or
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief,
the Investors would be, in some circumstances, limited in their ability
to participate in attractive and appropriate investment opportunities.
Applicants believe that the proposed terms and conditions will ensure
that the Co-Investment Transactions are consistent with the protection
of each Investor's shareholders and with the purposes intended by the
policies and provisions of the Act. Applicants state that the
Investors' participation in the Co-Investment Transactions will be
consistent with the provisions, policies, and purposes of the Act and
on a basis that is not different from or less advantageous than that of
other participants.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following
conditions:
    1. Each time GMC considers a Potential Co-Investment Transaction
for Partners or another Investor that falls within an Investor's then-
current Objectives and Strategies, GMC will make an independent
determination of the appropriateness of the investment for the Investor
in light of the Investor's then-current circumstances.
    2. (a) If GMC deems an Investor's participation in any Potential
Co-Investment Transaction to be appropriate for the Investor, it will
then determine an appropriate level of investment for the Investor.
    (b) If the aggregate amount recommended by GMC to be invested in
the Potential Co-investment Transaction by the Investors and Partners,
collectively, in the same transaction, exceeds the amount of the
investment opportunity, the amount proposed to be invested by each
party will be allocated among them pro rata based on each party's total
assets, up to the amount proposed to be invested by each. GMC will
provide the Eligible Directors of each participating Investor with
information concerning each participating party's total assets to
assist the Eligible Directors with their review of the Investor's
investments for compliance with these allocation procedures.
    (c) After making the determinations required in conditions 1 and
2(a), GMC will distribute written information concerning the Potential
Co-Investment Transaction (including the amount proposed to be invested
by each Investor and Partners) to the Eligible Directors of each
participating Investor for their consideration. An Investor will co-
invest with another Investor or Partners only if, prior to
participating 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 Investor and its shareholders and
do not involve overreaching in respect of the Investor or its
shareholders on the part of any person concerned;
    (ii) The transaction is consistent with:
    (A) The interests of the shareholders of the Investor; and
    (B) The Investor's then-current Objectives and Strategies;
    (iii) The investment by other Investors or Partners would not
disadvantage the Investor, and participation by the Investor would not
be on a basis different from or less advantageous than that of other
Investors or Partners; provided that, if any other Investor or
Partners, but not the Investor itself, gains the right to nominate a
director for election to a portfolio company's board of directors or
the right to have a board observer or any similar right to participate
in the governance or management of the portfolio company, such event
will not be interpreted to prohibit the Required Majority from reaching
the conclusions required by this condition (2)(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;

    (B) GMC agrees to, and does, provide, periodic reports to the
Investor's board of directors with respect to the actions of the
director or the information received by the board observer or obtained
through the exercise of any similar right to participate in the
governance or management of the portfolio company; and
    (C) Any fees or other compensation that Partners or any Investor or
any affiliated person of Partners or any Investor receives in
connection with the right of Partners or the Investor 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 Partners (who may, in turn, share its portion
with its affiliated persons) and the participating Investors in
accordance with the amount of each party's investment; and
    (iv) The proposed investment by the Investor will not benefit GMC,
Partners or the other Investors or any affiliated person of any of them
(other than the parties to the Co-Investment Transaction), except (A)
to the extent permitted by condition 13, (B) to the extent permitted by
section 17(e) or 57(k) of the Act, as applicable, (C) indirectly, as a
result of an interest in the securities issued by one of the parties to
the Co-Investment Transaction, or (D) in the case of fees or other
compensation described in condition 2(c)(iii)(C).
    3. Each Investor has the right to decline to participate in any
Potential Co-Investment Transaction or to invest less than the amount
proposed.
    4. GMC will present to the board of directors of each Investor, on
a quarterly basis, a record of all investments in Potential Co-
Investment Transactions made by any of the other Investors or Partners
during the preceding quarter that fell within the Investor's then-
current Objectives and Strategies that were not made available to the
Investor, and an explanation of why the investment opportunities were
not offered to the Investor. All information presented to the board of
directors pursuant to this condition will be kept for the life of the
Investor and at least two years thereafter, and will be subject to
examination by the Commission and its staff.
    5. Except for Follow-On Investments made in accordance with
condition 8, an Investor will not invest in reliance on the Order in
any issuer in which another Investor or Partners or any affiliated
person of such Investor or Partners is an existing investor.
    6. An Investor will not participate in any Potential Co-Investment
Transaction unless the terms, conditions, price, class of securities to
be purchased, settlement date, and registration rights will be the same
for each participating Investor and Partners. The grant to Partners or
another Investor, but not the Investor, of the right to nominate a
director for election to a portfolio company's board of directors, the
right to have an observer on the board of directors or similar rights
to participate in the governance or management of the portfolio company
will not be interpreted so as to violate this condition 6, if
conditions 2(c)(iii)(A), (B) and (C) are met.
    7. (a) If Partners or any Investor elects to sell, exchange or
otherwise dispose of an interest in a security that was acquired in a
Co-Investment Transaction, GMC will:
    (i) Notify each Investor that participated in the Co-Investment
Transaction of the proposed disposition at the earliest practical time;
and
    (ii) Formulate a recommendation as to participation by each
Investor in the disposition.
    (b) Each Investor 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 Partners and any other
Investor.
    (c) An Investor may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Investor and Partners in such disposition is
proportionate to its outstanding investments in the issuer immediately
preceding the disposition; (ii) the board of directors of the Investor
has approved as being in the best interests of the Investor the ability
to participate in such dispositions on a pro rata basis (as described
in greater detail in this application); and (iii) the board of
directors of the Investor is provided on a quarterly basis with a list
of all dispositions made in accordance with this condition. In all
other cases, GMC will provide its written recommendation as to the
Investor's participation to the Eligible Directors, and the Investor
will participate in such disposition solely to the extent that a
Required Majority determines that it is in the Investor's best
interests.
    (d) Partners and each Investor will bear their own expenses in
connection with any such disposition.
    8. (a) If Partners or any Investor desires to make a Follow-On
Investment in a portfolio company whose securities were acquired in a
Co-Investment Transaction, GMC will:
    (i) Notify each Investor that participated in the Co-Investment
Transaction of the proposed transaction at the earliest practical time;
and
    (ii) Formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Investor.
    (b) An Investor may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Investor and Partners in such investment
is proportionate to its outstanding investments in the issuer
immediately preceding the Follow-On Investment; and (ii) the board of
directors of the Investor has approved as being in the best interests
of the Investor the ability to participate in Follow-On Investments on
a pro rata basis (as described in greater detail in this application).
In all other cases, GMC will provide its written recommendation as to
the Investor's participation to the Eligible Directors, and the
Investor will participate in such Follow-On Investment solely to the
extent that a Required Majority determines that it is in the Investor's
best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Investors'
and Partners' outstanding investments immediately preceding the Follow-
On Investment; and
    (ii) The aggregate amount recommended by GMC to be invested by each
Investor in the Follow-On Investment, together with the amount proposed
to be invested by Partners in the same transaction, exceeds the amount
of the opportunity; then the amount invested by each such party will be
allocated among them pro rata based on each party's total assets, up to
the amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in this
application.
    9. The Non-Interested Directors of each Investor will be provided
quarterly for review all information concerning Potential Co-Investment
Transactions and Co-Investment Transactions, including investments made
by other Investors or Partners that the Investor considered but
declined to participate in, so that the Non-Interested Directors may
determine whether all investments made during the preceding quarter,
including those investments that the Investor considered but declined
to participate in, comply with the conditions of the Order. In
addition, the

Non-Interested Directors will consider at least annually the continued
appropriateness for the Investor of participating in new and existing
Co-Investment Transactions.
    10. Each Investor will maintain the records required by section
57(f)(3) of the Act as if each of the investments permitted under these
conditions were approved by the Required Majority under section 57(f).
    11. No Non-Interested Director of an Investor will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act), of Partners.
    12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the Securities Act) will, to
the extent not payable by GMC under its investment advisory agreements
with the Investors and Partners, be shared by the Investors and
Partners in proportion to the relative amounts of the securities held
or being acquired or disposed of, as the case may be.
    13. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable) received in connection with a Co-Investment
Transaction will be distributed to the participating Investors and
Partners 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 GMC pending consummation of the
transaction, the fee will be deposited into an account maintained by
GMC at a bank or banks having the qualifications prescribed in section
26(a)(1) of the Act, and the account will earn a competitive rate of
interest that will also be divided pro rata among the Investors and
Partners based on the amounts they invest in such Co-Investment
Transaction. None of Partners, GMC or any affiliated person of the
Investors will receive additional compensation or remuneration of any
kind as a result of or in connection with a Co-Investment Transaction
(other than (a) in the case of the Investors and Partners, the pro rata
transaction fees described above and fees or other compensation
described in condition 2(c)(iii)(C) and (b) in the case of GMC,
investment advisory fees paid in accordance with the agreements between
GMC and the Investors or Partners).

    For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16626 Filed 7-6-12; 8:45 am]
BILLING CODE 8011-01-P