[Federal Register Volume 84, Number 181 (Wednesday, September 18, 2019)]
[Notices]
[Pages 49142-49150]
[FR Doc No: 2019-20158]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33624; 812-15030]

New Mountain Finance Corporation, et al.

September 12, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order (``Order'') under sections 17(d)
and 57(i) of the Investment Company Act of 1940 (the ``Act'') and rule
17d-1 under the Act to permit certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.

SUMMARY OF APPLICATION: Applicants request an order to permit certain
business development companies and closed-end management investment

companies to co-invest in portfolio companies with each other and with
affiliated investment funds and accounts. The Order would supersede a
prior order.\1\
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    \1\ New Mountain Finance Corporation, et al. (File No. 812-
14799) Investment Company Act Rel. Nos. 32900 (November 20, 2017)
(notice) and 32941 (December 18, 2017) (order).

APPLICANTS: New Mountain Finance Corporation (the ``Company''), NMF
Senior Loan Fund I, Inc. (``BDC II''), New Mountain Guardian Partners
II, L.P., New Mountain Guardian II Master Fund-A, L.P., New Mountain
Guardian II Master Fund-B, L.P., New Mountain Net Lease Partners, L.P.
(``Net Lease Partners'') (collectively, the ``Existing Affiliated
Funds''), New Mountain Net Lease Corporation, New Mountain Finance
Holdings, L.L.C., NMF Ancora Holdings, Inc., NMF QID NGL Holdings,
Inc., NMF YP Holdings, Inc., New Mountain Finance DB, L.L.C., New
Mountain Finance Servicing, L.L.C., New Mountain Finance SBIC, L.P.,
New Mountain Finance SBIC II, L.P. (the ``Existing Wholly-Owned
Subsidiaries'') and New Mountain Finance Advisers BDC, L.L.C. (``BDC
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Adviser'').

FILING DATES: The application was filed on May 9, 2019, and amended on
August 16, 2019.

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 October 7, 2019, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE, Washington, DC 20549-1090. Applicants: 787 Seventh Avenue,
48th Floor, New York, NY 10019.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
202-551-6817, or Kaitlin C. Bottock, Branch Chief, at<PHONE_NUMBER>
(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<PHONE_NUMBER>.

Introduction

    1. The applicants request an order of the Commission under sections
17(d) and 57(i) under the Act and rule 17d-1 under the Act to permit,
subject to the terms and conditions set forth in the application (the
``Conditions''), one or more Regulated Funds \2\ and/or one or more
Affiliated Funds \3\ to enter into Co-Investment Transactions with each
other. ``Co-Investment Transaction'' means any transaction in which one
or more Regulated Funds (or its Wholly-Owned Investment Sub (defined
below) participated together with one or more Affiliated Funds and/or
one or more other Regulated Funds in reliance on the Order. ``Potential
Co-Investment Transaction'' means any investment opportunity in which a
Regulated Fund (or its Wholly-Owned Investment Sub) could not
participate together with one or more Affiliated Funds and/or one or
more other Regulated Funds without obtaining and relying on the
Order.\4\
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    \2\ ``Regulated Funds'' means the Company, BDC II, the Future
Regulated Funds and the BDC Downstream Funds. ``Future Regulated
Fund'' means a closed-end management investment company (a) that is
registered under the Act or has elected to be regulated as a BDC,
(b) whose investment adviser is an Adviser, and (c) that intends to
participate in the proposed co-investment program (the ``Co-
Investment Program'').
    ``Adviser'' means BDC Adviser together with any future
investment adviser that (i) controls, is controlled by or is under
common control with BDC Adviser, (ii) is registered as an investment
adviser under the Investment Advisers Act of 1940 (the ``Advisers
Act'') and (iii) is 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 New Mountain Proprietary Account.
``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, (c) that
intends to participate in the Co-Investment Program, and (d) that is
not a BDC Downstream Fund. Applicants represent that no Existing
Affiliated Fund is a BDC Downstream Fund. ``New Mountain Proprietary
Account'' means any direct or indirect, wholly- or majority-owned
subsidiary of BDC Adviser that is formed in the future that, from
time to time, may hold various financial assets in a principal
capacity.
    \4\ All existing entities that currently intend to rely on the
Order have been named as applicants and any existing or future
entities that may rely on the Order in the future will comply with
the terms and Conditions set forth in the application.
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Applicants

    2. The Company is a Delaware corporation organized as a non-
diversified closed-end management investment company that has elected
to be regulated as a business development company (``BDC'') under the
Act.\5\ The Company is managed by a Board \6\ currently comprised of
seven persons, four of whom are Independent Directors.\7\
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    \5\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in section 55(a)(1) through
55(a)(3) and makes available significant managerial assistance with
respect to the issuers of such securities.
    \6\ ``Board'' means (i) with respect to a Regulated Fund other
than a BDC Downstream Fund, the board of directors (or the
equivalent) of the Regulated Fund and (ii) with respect to a BDC
Downstream Fund, the Independent Party of the BDC Downstream Fund.
     ``Independent Party'' means, with respect to a BDC Downstream
Fund, (i) if the BDC Downstream Fund has a board of directors (or
the equivalent), the board or (ii) if the BDC Downstream Fund does
not have a board of directors (or the equivalent), a transaction
committee or advisory committee of the BDC Downstream Fund.
    \7\ ``Independent Director'' means a member of the Board of any
relevant entity who is not an ``interested person'' as defined in
section 2(a)(19) of the Act. No Independent Director of a Regulated
Fund (including any non-interested member of an Independent Party)
will have a financial interest in any Co-Investment Transaction,
other than indirectly through share ownership in one of the
Regulated Funds.
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    3. BDC II is a Maryland corporation formed for the purpose of
operating a registered non-diversified, closed-end management
investment company. Prior to relying on the requested Order, BDC II
will have filed an election to be regulated as a BDC under the Act. BDC
II will be managed by a Board. A majority of BDC II's directors will be
Independent Directors.
    4. BDC Adviser, a Delaware limited liability company that is
registered under the Advisers Act, serves as the investment adviser to
the Company pursuant to an investment advisory agreement and will serve
as investment adviser to BDC II. BDC Adviser also serves as investment
adviser to each Existing Affiliated Fund.
    5. Applicants represent that each Existing Affiliated Fund is a
separate and distinct legal entity and each would be an investment
company but for section 3(c)(7) of the Act.
    6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary may
be

prohibited from investing in a Co-Investment Transaction with a
Regulated Fund (other than its parent) or any Affiliated Fund because
it would be a company controlled by its parent Regulated Fund for
purposes of section 57(a)(4) and rule 17d-1. Applicants request that
each Wholly-Owned Investment Sub be permitted to participate in Co-
Investment Transactions in lieu of the Regulated Fund that owns it and
that the Wholly-Owned Investment Sub's participation in any such
transaction be treated, for purposes of the Order, as though the parent
Regulated Fund were participating directly.
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    \8\ ``Wholly-Owned Investment Sub'' means an entity (i) that is
a wholly-owned subsidiary of a Regulated Fund (with such Regulated
Fund at all times holding, beneficially and of record, 95% or more
of the voting and economic interests); (ii) whose sole business
purpose is to hold one or more investments on behalf of such
Regulated Fund (and, in the case of an SBIC Subsidiary (defined
below), maintains a license under the SBA Act (defined below) and
issues debentures guaranteed by the SBA (defined below)); (iii) with
respect to which such Regulated Fund's Board has the sole authority
to make all determinations with respect to the entity's
participation under the Conditions to the application; and (iv) (A)
that would be an investment company but for Section 3(c)(1),
3(c)(5)(C), or 3(c)(7) of the Act, or (B) that qualifies as a real
estate investment trust within the meaning of Section 856 of the
Internal Revenue Code of 1986, as amended (``Code'') because
substantially all of its assets would consist of real properties.
The term ``SBIC Subsidiary'' means a Wholly-Owned Investment Sub
that is licensed by the Small Business Administration (the ``SBA'')
to operate under the Small Business Investment Act of 1958, as
amended, (the ``SBA Act'') as a small business investment company.
The Existing Wholly-Owned Subsidiaries are Wholly-Owned Investment
Subs.
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Applicants' Representations

A. Allocation Process

    7. Applicants represent that BDC 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. 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 \9\ and any Board-Established Criteria \10\
of a Regulated Fund, the policies and procedures will require that the
Adviser to such Regulated Fund receive sufficient information to allow
such Adviser's investment committee to make its independent
determination and recommendations under the Conditions.
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    \9\ ``Objectives and Strategies'' means (i) with respect to any
Regulated Fund other than a BDC Downstream Fund, its investment
objectives and strategies, as described in its most current
registration statement on Form N-2, other current filings with the
Commission under the Securities Act of 1933 (the ``Securities Act'')
or under the Securities Exchange Act of 1934, as amended, and its
most current report to stockholders, and (ii) with respect to any
BDC Downstream Fund, those investment objectives and strategies
described in its disclosure documents (including private placement
memoranda and reports to equity holders) and organizational
documents (including operating agreements).
    \10\ ``Board-Established Criteria'' means criteria that the
Board of a Regulated Fund may establish from time to time to
describe the characteristics of Potential Co-Investment Transactions
regarding which the Adviser to such Regulated Fund should be
notified under Condition 1. The Board-Established Criteria will be
consistent with the Regulated Fund's Objectives and Strategies. If
no Board-Established Criteria are in effect, then the Regulated
Fund's Adviser will be notified of all Potential Co-Investment
Transactions that fall within the Regulated Fund's then-current
Objectives and Strategies. Board-Established Criteria will be
objective and testable, meaning that they will be based on
observable information, such as industry/sector of the issuer,
minimum EBITDA of the issuer, asset class of the investment
opportunity or required commitment size, and not on characteristics
that involve a discretionary assessment. The Adviser to the
Regulated Fund may from time to time recommend criteria for the
Board's consideration, but Board-Established Criteria will only
become effective if approved by a majority of the Independent
Directors. The Independent Directors of a Regulated Fund may at any
time rescind, suspend or qualify 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. The Adviser to each applicable Regulated Fund will then make an
independent determination of the appropriateness of the investment for
the Regulated Fund in light of the Regulated Fund's then-current
circumstances. If the Adviser to a Regulated Fund deems the Regulated
Fund's participation in any Potential Co-Investment Transaction to be
appropriate, then it will formulate a recommendation regarding the
proposed order amount for the Regulated Fund.
    10. Applicants state that, for each Regulated Fund and Affiliated
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, such Adviser's investment committee will
approve an investment amount to be allocated to each Regulated Fund
and/or Affiliated Fund participating in the Potential Co-Investment
Transaction. Applicants state further that, each proposed order amount
may be reviewed and adjusted, in accordance with the Adviser's written
allocation policies and procedures, by the Adviser's investment
committee.\11\ 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.\12\
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    \11\ The reason for any such adjustment to a proposed order
amount will be documented in writing and preserved in the records of
each Adviser.
    \12\ ``Required Majority'' means a required majority, as defined
in section 57(o) of the Act. In the case of a Regulated Fund that is
a registered closed-end fund, the Board members that make up the
Required Majority will be determined as if the Regulated Fund were a
BDC subject to section 57(o). In the case of a BDC Downstream Fund
with a board of directors (or the equivalent), the members that make
up the Required Majority will be determined as if the BDC Downstream
Fund were a BDC subject to section 57(o). In the case of a BDC
Downstream Fund with a transaction committee or advisory committee,
the committee members that make up the Required Majority will be
determined as if the BDC Downstream Fund were a BDC subject to
section 57(o) and as if the committee members were directors of the
fund.
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    11. If the aggregate Internal Orders for a Potential Co-Investment
Transaction do not exceed the size of the investment opportunity
immediately prior to the submission of the orders to the underwriter,
broker, dealer or issuer, as applicable (the ``External Submission''),
then each Internal Order will be fulfilled as placed. If, on the other
hand, the aggregate Internal Orders for a Potential Co-Investment
Transaction exceed the size of the investment opportunity immediately
prior to the External Submission, then the allocation of the
opportunity will be made pro rata on the basis of the size of the
Internal Orders.\13\ If, subsequent to such External Submission, the
size of the opportunity is increased or decreased, or if the terms of
such opportunity, or the facts and circumstances applicable to the
Regulated Funds' or the Affiliated Funds' consideration of the
opportunity, change, the participants will be permitted to submit
revised Internal

Orders in accordance with written allocation policies and procedures
that the Advisers will establish, implement and maintain.\14\
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    \13\ The Advisers will maintain records of all proposed order
amounts, Internal Orders and External Submissions in conjunction
with Potential Co-Investment Transactions. Each applicable Adviser
will provide the Eligible Directors with information concerning the
Affiliated Funds' and Regulated Funds' order sizes to assist the
Eligible Directors with their review of the applicable Regulated
Fund's investments for compliance with the Conditions. ``Eligible
Directors'' means, with respect to a Regulated Fund and a Potential
Co-Investment Transaction, the members of the Regulated Fund's Board
eligible to vote on that Potential Co-Investment Transaction under
section 57(o) of the Act.
    \14\ The Board of the Regulated Fund will then either approve or
disapprove of the investment opportunity in accordance with
Condition 2, 6, 7, 8 or 9, as applicable.
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B. Follow-On Investments

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

    15. Applicants propose that Dispositions \19\ would be divided into
two categories. If the Regulated Funds and Affiliated Funds holding
investments in the issuer have previously participated in a Co-
Investment Transaction with respect to the issuer, then the terms and
approval of the Disposition would be subject to the Standard Review
Dispositions described in Condition 6. If the Regulated Funds and
Affiliated Funds have not previously participated in a Co-Investment
Transaction with respect to the issuer but hold a Pre-Boarding
Investment, then the terms and approval of the Disposition would be
subject to the Enhanced Review Dispositions described in Condition 7.
Subsequent Dispositions with respect to the same issuer would be
governed by Condition 6 under the Standard Review Dispositions.\20\
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    \19\ ``Disposition'' means the sale, exchange or other
disposition of an interest in a security of an issuer.
    \20\ However, with respect to an issuer, if a Regulated Fund's
first Co-Investment Transaction is an Enhanced Review Disposition,
and the Regulated Fund does not dispose of its entire position in
the Enhanced Review Disposition, then before such Regulated Fund may
complete its first Standard Review Follow-On in such issuer, the
Eligible Directors must review the proposed Follow-On Investment not
only on a stand-alone basis but also in relation to the total
economic exposure in such issuer (i.e., in combination with the
portion of the Pre-Boarding Investment not disposed of in the
Enhanced Review Disposition), and the other terms of the
investments. This additional review is required because such
findings were not required in connection with the prior Enhanced
Review Disposition, but they would have been required had the first
Co-Investment Transaction been an Enhanced Review Follow-On.
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    16. A Regulated Fund may participate in a Standard Review
Disposition either with the approval of the Required Majority under
Condition 6(d) or without Board approval under Condition 6(c) if (i)
the Disposition is a Pro Rata Disposition \21\ or (ii) the securities
are Tradable Securities \22\ and the Disposition meets the other
requirements of Condition 6(c)(ii). Pro Rata Dispositions and
Dispositions of a Tradable Security remain subject to the Board's
periodic review in accordance with Condition 10.
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    \21\ A ``Pro Rata Disposition'' is a Disposition (i) in which
the participation of each Affiliated Fund and each Regulated Fund is
proportionate to its outstanding investment in the security subject
to Disposition immediately preceding the Disposition; and (ii) in
the case of a Regulated Fund, a majority of the Board has approved
the Regulated Fund's participation in pro rata Dispositions as being
in the best interests of the Regulated Fund. The Regulated Fund's
Board may refuse to approve, or at any time rescind, suspend or
qualify, its approval of Pro Rata Dispositions, in which case all
subsequent Dispositions will be submitted to the Regulated Fund's
Eligible Directors.
    \22\ ``Tradable Security'' means a security that meets the
following criteria at the time of Disposition: (i) It trades on a
national securities exchange or designated offshore securities
market as defined in rule 902(b) under the Securities Act; (ii) it
is not subject to restrictive agreements with the issuer or other
security holders; and (iii) it trades with sufficient volume and
liquidity (findings as to which are documented by the Advisers to
any Regulated Funds holding investments in the issuer and retained
for the life of the Regulated Fund) to allow each Regulated Fund to
dispose of its entire position remaining after the proposed
Disposition within a short period of time not exceeding 30 days at
approximately the value (as defined by section 2(a)(41) of the Act)
at which the Regulated Fund has valued the investment.
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D. Delayed Settlement

    17. Applicants represent that under the terms and Conditions of the
application, all Regulated Funds and Affiliated Funds participating in
a Co-Investment Transaction will invest at the same time, for the same
price and with the same terms, conditions, class, registration rights
and any other rights, so that none of them receives terms more
favorable than any other. However, the settlement date for an
Affiliated Fund in a Co-Investment Transaction may occur up to ten

business days after the settlement date for the Regulated Fund, and
vice versa. Nevertheless, in all cases, (i) the date on which the
commitment of the Affiliated Funds and Regulated Funds is made will be
the same even where the settlement date is not and (ii) the earliest
settlement date and the latest settlement date of any Affiliated Fund
or Regulated Fund participating in the transaction will occur within
ten business days of each other.

E. Holders

    18. Under Condition 15, if an Adviser, its principals, or any
person controlling, controlled by, or under common control with the
Adviser or its principals, and the Affiliated Funds (collectively, the
``Holders'') own in the aggregate more than 25 percent of the
outstanding voting shares of a Regulated Fund (the ``Shares''), then
the Holders will vote such Shares 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 Directors
will act independently in evaluating Co-Investment Transactions,
because the ability of the Adviser or its principals to influence the
Independent Directors by a suggestion, explicit or implied, that the
Independent Directors can be removed will be limited significantly. The
Independent Directors 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 transactions fall within the category of
persons described by rule 17d-1 and/or section 57(b), as modified by
rule 57b-1 thereunder, as applicable, vis-[agrave]-vis each
participating Regulated Fund. Each of the participating Regulated Funds
and Affiliated Funds may be deemed to be affiliated persons vis-
[agrave]-vis a Regulated Fund within the meaning of section 2(a)(3) by
reason of common control because (i) BDC Adviser manages and may be
deemed to control each of the Existing Affiliated Funds and an Adviser
will manage and may be deemed to control each of the Existing
Affiliated Funds, and an Adviser will manage and may be deemed to
control any Future Affiliated Fund, (ii) BDC Adviser manages the
Company and will manage BDC II pursuant to their respective investment
advisory agreements and an Adviser will manage any Future Regulated
Fund;(iii) each BDC Downstream Fund \23\ will be, deemed to be
controlled by its BDC parent and/or its BDC parents's investment
adviser; and (iv) the Advisers will control, be controlled by, or under
common control with, BDC Adviser. Thus, each of the Affiliated Funds
could be deemed to be a person related to the Regulated Funds,
including any BDC Downstream Fund in a manner described by section
57(b) and related to Future 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 57(b) or rule 17d-1, as applicable, and thus
prohibited from participating in Co-Investment Transactions with each
other. In addition, because the New Mountain Proprietary Accounts are
controlled by BDC Adviser and, therefore, may be under common control
with the Company, BDC II, any future Advisers, and any Future Regulated
Funds, the New Mountain Proprietary Accounts could be deemed to be
persons related to the Regulated Funds (or a company controlled by the
Regulated Funds) in a manner described by section 57(b) and also
prohibited from participating in the Co-Investment Program.
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    \23\ ``BDC Downstream Fund'' means, with respect to any
Regulated Fund that is a BDC, an entity (i) that the BDC directly or
indirectly controls, (ii) that is not controlled by any person other
than the BDC (except a person that indirectly controls the entity
solely because it controls the BDC), (iii) that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act,
(iv) whose investment adviser is an Adviser, (v) that is not a
Wholly-Owned Investment Sub and (vi) that intends to participate in
the Co-Investment Program.
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    4. 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 will be subject to the following
Conditions:
    1. Identification and Referral of Potential Co-Investment
Transactions.
    (a). The Advisers will establish, maintain and implement policies
and procedures reasonably designed to ensure that each Adviser is
promptly notified of all Potential Co-Investment Transactions that fall
within the then-current Objectives and Strategies and

Board-Established Criteria of any Regulated Fund the Adviser manages.
    (b). When an Adviser to a Regulated Fund is notified of a Potential
Co-Investment Transaction under Condition 1(a), the Adviser will make
an independent determination of the appropriateness of the investment
for the Regulated Fund in light of the Regulated Fund's then-current
circumstances.
    2. Board Approvals of Co-Investment Transactions.
    (a). If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
    (b). If the aggregate amount recommended by the Advisers to be
invested in the Potential Co-Investment Transaction by the
participating Regulated Funds and any participating Affiliated Funds,
collectively, exceeds the amount of the investment opportunity, the
investment opportunity will be allocated among them pro rata based on
the size of the Internal Orders, as described in section III.A.1.b. of
the application. Each Adviser to a participating Regulated Fund will
promptly notify and provide the Eligible Directors with information
concerning the Affiliated Funds' and Regulated Funds' order sizes to
assist the Eligible Directors with their review of the applicable
Regulated Fund's investments for compliance with these Conditions.
    (c). After making the determinations required in Condition 1(b)
above, each Adviser to a participating Regulated Fund will distribute
written information concerning the Potential Co-Investment Transaction
(including the amount proposed to be invested by each participating
Regulated Fund and each participating Affiliated Fund) to the Eligible
Directors of its participating Regulated Fund(s) for their
consideration. A Regulated Fund will enter into a Co-Investment
Transaction with one or more other Regulated Funds or Affiliated Funds
only if, prior to the Regulated Fund's participation in the Potential
Co-Investment Transaction, a Required Majority concludes that:
    (i). the terms of the transaction, including the consideration to
be paid, are reasonable and fair to the Regulated Fund and its equity
holders and do not involve overreaching in respect of the Regulated
Fund or its equity holders on the part of any person concerned;
    (ii). the transaction is consistent with:
    (A). The interests of the Regulated Fund's equity holders; and
    (B). the Regulated Fund's then-current Objectives and Strategies;
    (iii). the investment by any other Regulated Fund(s) or Affiliated
Fund(s) would not disadvantage the Regulated Fund, and participation by
the Regulated Fund would not be on a basis different from, or less
advantageous than, that of any other Regulated Fund(s) or Affiliated
Fund(s) participating in the transaction; provided that the Required
Majority shall not be prohibited from reaching the conclusions required
by this Condition 2(c)(iii) if:
    (A). The settlement date for another Regulated Fund or an
Affiliated Fund in a Co-Investment Transaction is later than the
settlement date for the Regulated Fund by no more than ten business
days or earlier than the settlement date for the Regulated Fund by no
more than ten business days, in either case, so long as: (x) The date
on which the commitment of the Affiliated Funds and Regulated Funds is
made is the same; and (y) the earliest settlement date and the latest
settlement date of any Affiliated Fund or Regulated Fund participating
in the transaction will occur within ten business days of each other;
or
    (B). any other Regulated Fund or Affiliated Fund, but not the
Regulated Fund itself, gains the right to nominate a director for
election to a portfolio company's board of directors, the right to have
a board observer or any similar right to participate in the governance
or management of the portfolio company so long as: (x) The Eligible
Directors will have the right to ratify the selection of such director
or board observer, if any; (y) the Adviser agrees to, and does, provide
periodic reports to the Regulated Fund's Board with respect to the
actions of such director or the information received by such board
observer or obtained through the exercise of any similar right to
participate in the governance or management of the portfolio company;
and (z) any fees or other compensation that any other Regulated Fund or
Affiliated Fund or any affiliated person of any other Regulated Fund or
Affiliated Fund receives in connection with the right of one or more
Regulated Funds or Affiliated Funds to nominate a director or appoint a
board observer or otherwise to participate in the governance or
management of the portfolio company will be shared proportionately
among any participating Affiliated Funds (who may, in turn, share their
portion with their affiliated persons) and any participating Regulated
Fund(s) in accordance with the amount of each such party's investment;
and
    (iv). the proposed investment by the Regulated Fund will not
involve compensation, remuneration or a direct or indirect \24\
financial benefit to the Advisers, any other Regulated Fund, the
Affiliated Funds or any affiliated person of any of them (other than
the parties to the Co-Investment Transaction), except (A) to the extent
permitted by Condition 14, (B) to the extent permitted by Section 17
(e) or 57(k), as applicable, (C) indirectly, as a result of an interest
in the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in Condition 2(c)(iii)(B)(z).
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    \24\ For example, procuring the Regulated Fund's investment in a
Potential Co-Investment Transaction to permit an affiliate to
complete or obtain better terms in a separate transaction would
constitute an indirect financial benefit.
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    3. Right to Decline. Each Regulated Fund has the right to decline
to participate in any Potential Co-Investment Transaction or to invest
less than the amount proposed.
    4. General Limitation. Except for Follow-On Investments made in
accordance with Conditions 8 and 9 below,\25\ a Regulated Fund will not
invest in reliance on the Order in any issuer in which a Related Party
has an investment.\26\
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    \25\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
    \26\ ``Related Party'' means (i) any Close Affiliate and (ii) in
respect of matters as to which any Adviser has knowledge, any Remote
Affiliate.
    ``Close Affiliate'' means the Advisers, the Regulated Funds, the
Affiliated Funds and any other person described in section 57(b)
(after giving effect to rule 57b-1) in respect of any Regulated Fund
(treating any registered investment company or series thereof as a
BDC for this purpose) except for limited partners included solely by
reason of the reference in section 57(b) to section 2(a)(3)(D).
    ``Remote Affiliate'' means any person described in section 57(e)
in respect of any Regulated Fund (treating any registered investment
company or series thereof as a BDC for this purpose) and any limited
partner holding 5% or more of the relevant limited partner interests
that would be a Close Affiliate but for the exclusion in that
definition.
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    5. Same Terms and Conditions. A Regulated Fund will not participate
in any Potential Co-Investment Transaction unless (i) the terms,
conditions, price, class of securities to be purchased, date on which
the commitment is entered into and registration rights (if any) will be
the same for each participating Regulated Fund and Affiliated Fund and
(ii) the earliest settlement date and the latest settlement date of any
participating Regulated Fund or Affiliated Fund will occur as close in
time as practicable and in no event more than ten business days

apart. The grant to one or more Regulated Funds or Affiliated Funds,
but not the respective Regulated Fund, of the right to nominate a
director for election to a portfolio company's board of directors, the
right to have an observer on the board of directors or similar rights
to participate in the governance or management of the portfolio company
will not be interpreted so as to violate this Condition 5, if Condition
2(c)(iii)(B) is met.
    6. Standard Review Dispositions.
    (a). General. If any Regulated Fund or Affiliated Fund elects to
sell, exchange or otherwise dispose of an interest in a security and
one or more Regulated Funds and Affiliated Funds have previously
participated in a Co-Investment Transaction with respect to the issuer,
then:
    (i). The Adviser to such Regulated Fund or Affiliated Fund \27\
will notify each Regulated Fund that holds an investment in the issuer
of the proposed Disposition at the earliest practical time; and
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    \27\ Any New Mountain Proprietary Account that is not advised by
an Adviser is itself deemed to be an Adviser for purposes of
Conditions 6(a)(i), 7(a)(i), 8(a)(i) and 9(a)(i).
---------------------------------------------------------------------------

    (ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to participation by
such Regulated Fund in the Disposition.
    (b). Same Terms and Conditions. Each Regulated Fund will have the
right to participate in such Disposition on a proportionate basis, at
the same price and on the same terms and conditions as those applicable
to the Affiliated Funds and any other Regulated Fund.
    (c). No Board Approval Required. A Regulated Fund may participate
in such a Disposition without obtaining prior approval of the Required
Majority if:
    (i). (A) The participation of each Regulated Fund and Affiliated
Fund in such Disposition is proportionate to its then-current holding
of the security (or securities) of the issuer that is (or are) the
subject of the Disposition; \28\ (B) the Board of the Regulated Fund
has approved as being in the best interests of the Regulated Fund the
ability to participate in such Dispositions on a pro rata basis (as
described in greater detail in the application); and (C) the Board of
the Regulated Fund is provided on a quarterly basis with a list of all
Dispositions made in accordance with this Condition; or
---------------------------------------------------------------------------

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

    (ii). each security is a Tradable Security and (A) the Disposition
is not to the issuer or any affiliated person of the issuer; and (B)
the security is sold for cash in a transaction in which the only term
negotiated by or on behalf of the participating Regulated Funds and
Affiliated Funds is price.
    (d). Standard Board Approval. In all other cases, the Adviser will
provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors and the Regulated Fund will
participate in such Disposition solely to the extent that a Required
Majority determines that it is in the Regulated Fund's best interests.
    7. Enhanced Review Dispositions.
    (a). General. If any Regulated Fund or Affiliated Fund elects to
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a
Potential Co-Investment Transaction and the Regulated Funds and
Affiliated Funds have not previously participated in a Co-Investment
Transaction with respect to the issuer:
    (i). The Adviser to such Regulated Fund or Affiliated Fund will
notify each Regulated Fund that holds an investment in the issuer of
the proposed Disposition at the earliest practical time;
    (ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to participation by
such Regulated Fund in the Disposition; and
    (iii). the Advisers will provide to the Board of each Regulated
Fund that holds an investment in the issuer all information relating to
the existing investments in the issuer of the Regulated Funds and
Affiliated Funds, including the terms of such investments and how they
were made, that is necessary for the Required Majority to make the
findings required by this Condition.
    (b). Enhanced Board Approval. The Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Disposition
solely to the extent that a Required Majority determines that:
    (i). The Disposition complies with Condition 2(c)(i), (ii),
(iii)(A), and (iv); and
    (ii). the making and holding of the Pre-Boarding Investments were
not prohibited by Section 57 or Rule 17d-1, as applicable, and records
the basis for the finding in the Board minutes.
    (c). Additional Requirements: The Disposition may only be completed
in reliance on the Order if:
    (i). Same Terms and Conditions. Each Regulated Fund has the right
to participate in such Disposition on a proportionate basis, at the
same price and on the same terms and Conditions as those applicable to
the Affiliated Funds and any other Regulated Fund;
    (ii). Original Investments. All of the Affiliated Funds' and
Regulated Funds' investments in the issuer are Pre-Boarding
Investments;
    (iii). Advice of counsel. Independent counsel to the Board advises
that the making and holding of the investments in the Pre-Boarding
Investments were not prohibited by Section 57 (as modified by Rule 57b-
1) or Rule 17d-1, as applicable;
    (iv). Multiple Classes of Securities. All Regulated Funds and
Affiliated Funds that hold Pre-Boarding Investments in the issuer
immediately before the time of completion of the Co-Investment
Transaction hold the same security or securities of the issuer. For the
purpose of determining whether the Regulated Funds and Affiliated Funds
hold the same security or securities, they may disregard any security
held by some but not all of them if, prior to relying on the Order, the
Required Majority is presented with all information necessary to make a
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's
holding of a different class of securities (including for this purpose
a security with a different maturity date) is immaterial \29\ in
amount, including immaterial relative to the size of the issuer; and
(y) the Board records the basis for any such finding in its minutes. In
addition, securities that differ only in respect of issuance date,
currency, or denominations may be treated as the same security; and
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    \29\ In determining whether a holding is ``immaterial'' for
purposes of the Order, the Required Majority will consider whether
the nature and extent of the interest in the transaction or
arrangement is sufficiently small that a reasonable person would not
believe that the interest affected the determination of whether to
enter into the transaction or arrangement or the terms of the
transaction or arrangement.
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    (v). No control. The Affiliated Funds, the other Regulated Funds
and their affiliated persons (within the meaning of Section 2(a)(3)(C)
of the Act), individually or in the aggregate, do not control the
issuer of the securities (within the meaning of Section 2(a)(9) of the
Act).
    8. Standard Review Follow-Ons.
    (a). General. If any Regulated Fund or Affiliated Fund desires to
make a Follow-On Investment in an issuer and the Regulated Funds and
Affiliated Funds holding investments in the issuer previously
participated in a Co-

Investment Transaction with respect to the issuer:
    (i). The Adviser to each such Regulated Fund or Affiliated Fund
will notify each Regulated Fund that holds securities of the portfolio
company of the proposed transaction at the earliest practical time; and
    (ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to the proposed
participation, including the amount of the proposed investment, by such
Regulated Fund.
    (b). No Board Approval Required. A Regulated Fund may participate
in the Follow-On Investment without obtaining prior approval of the
Required Majority if:
    (i). (A) The proposed participation of each Regulated Fund and each
Affiliated Fund in such investment is proportionate to its outstanding
investments in the issuer or the security at issue, as appropriate,\30\
immediately preceding the Follow-On Investment; and (B) the Board of
the Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in Follow-On Investments on a
pro rata basis (as described in greater detail in the application); or
---------------------------------------------------------------------------

    \30\ To the extent that a Follow-On Investment opportunity is in
a security or arises in respect of a security held by the
participating Regulated Funds and Affiliated Funds, proportionality
will be measured by each participating Regulated Fund's and
Affiliated Fund's outstanding investment in the security in question
immediately preceding the Follow-On Investment using the most recent
available valuation thereof. To the extent that a Follow-On
Investment opportunity relates to an opportunity to invest in a
security that is not in respect of any security held by any of the
participating Regulated Funds or Affiliated Funds, proportionality
will be measured by each participating Regulated Fund's and
Affiliated Fund's outstanding investment in the issuer immediately
preceding the Follow-On Investment using the most recent available
valuation thereof.
---------------------------------------------------------------------------

    (ii). it is a Non-Negotiated Follow-On Investment.
    (c). Standard Board Approval. In all other cases, the Adviser will
provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors and the Regulated Fund will
participate in such Follow-On Investment solely to the extent that a
Required Majority makes the determinations set forth in Condition 2(c).
If the only previous Co-Investment Transaction with respect to the
issuer was an Enhanced Review Disposition the Eligible Directors must
complete this review of the proposed Follow-On Investment both on a
stand-alone basis and together with the Pre-Boarding Investments in
relation to the total economic exposure and other terms of the
investment.
    (d). Allocation. If, with respect to any such Follow-On Investment:
    (i). The amount of the opportunity proposed to be made available to
any Regulated Fund is not based on the Regulated Funds' and the
Affiliated Funds' outstanding investments in the issuer or the security
at issue, as appropriate, immediately preceding the Follow-On
Investment; and
    (ii). the aggregate amount recommended by the Advisers to be
invested in the Follow-On Investment by the participating Regulated
Funds and any participating Affiliated Funds, collectively, exceeds the
amount of the investment opportunity, then the Follow-On Investment
opportunity will be allocated among them pro rata based on the size of
the Internal Orders, as described in section III.A.1.b. of the
application.
    (e). Other Conditions. The acquisition of Follow-On Investments as
permitted by this Condition will be considered a Co-Investment
Transaction for all purposes and subject to the other Conditions set
forth in the application.
    9. Enhanced Review Follow-Ons.
    (a). General. If any Regulated Fund or Affiliated Fund desires to
make a Follow-On Investment in an issuer that is a Potential Co-
Investment Transaction and the Regulated Funds and Affiliated Funds
holding investments in the issuer have not previously participated in a
Co-Investment Transaction with respect to the issuer:
    (i). The Adviser to each such Regulated Fund or Affiliated Fund
will notify each Regulated Fund that holds securities of the portfolio
company of the proposed transaction at the earliest practical time;
    (ii). the Adviser to each Regulated Fund that holds an investment
in the issuer will formulate a recommendation as to the proposed
participation, including the amount of the proposed investment, by such
Regulated Fund; and
    (iii). the Advisers will provide to the Board of each Regulated
Fund that holds an investment in the issuer all information relating to
the existing investments in the issuer of the Regulated Funds and
Affiliated Funds, including the terms of such investments and how they
were made, that is necessary for the Required Majority to make the
findings required by this Condition.
    (b). Enhanced Board Approval. The Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority reviews the
proposed Follow-On Investment both on a stand-alone basis and together
with the Pre-Boarding Investments in relation to the total economic
exposure and other terms and makes the determinations set forth in
Condition 2(c). In addition, the Follow-On Investment may only be
completed in reliance on the Order if the Required Majority of each
participating Regulated Fund determines that the making and holding of
the Pre-Boarding Investments were not prohibited by Section 57 (as
modified by Rule 57b-1) or Rule 17d-1, as applicable. The basis for the
Board's findings will be recorded in its minutes.
    (c). Additional Requirements. The Follow-On Investment may only be
completed in reliance on the Order if:
    (i). Original Investments. All of the Affiliated Funds' and
Regulated Funds' investments in the issuer are Pre-Boarding
Investments;
    (ii). Advice of counsel. Independent counsel to the Board advises
that the making and holding of the investments in the Pre-Boarding
Investments were not prohibited by Section 57 (as modified by Rule 57b-
1) or Rule 17d-1, as applicable;
    (iii). Multiple Classes of Securities. All Regulated Funds and
Affiliated Funds that hold Pre-Boarding Investments in the issuer
immediately before the time of completion of the Co-Investment
Transaction hold the same security or securities of the issuer. For the
purpose of determining whether the Regulated Funds and Affiliated Funds
hold the same security or securities, they may disregard any security
held by some but not all of them if, prior to relying on the Order, the
Required Majority is presented with all information necessary to make a
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's
holding of a different class of securities (including for this purpose
a security with a different maturity date) is immaterial in amount,
including immaterial relative to the size of the issuer; and (y) the
Board records the basis for any such finding in its minutes. In
addition, securities that differ only in respect of issuance date,
currency, or denominations may be treated as the same security; and
    (iv). No control. The Affiliated Funds, the other Regulated Funds
and their affiliated persons (within the meaning of Section 2(a)(3)(C)
of the Act), individually or in the aggregate, do not control the
issuer of the securities (within the meaning of Section 2(a)(9) of the
Act).

    (d). Allocation. If, with respect to any such Follow-On Investment:
    (i). The amount of the opportunity proposed to be made available to
any Regulated Fund is not based on the Regulated Funds' and the
Affiliated Funds' outstanding investments in the issuer or the security
at issue, as appropriate, immediately preceding the Follow-On
Investment; and
    (ii). the aggregate amount recommended by the Advisers to be
invested in the Follow-On Investment by the participating Regulated
Funds and any participating Affiliated Funds, collectively, exceeds the
amount of the investment opportunity, then the Follow-On Investment
opportunity will be allocated among them pro rata based on the size of
the Internal Orders, as described in section III.A.1.b. of the
application.
    (e). Other Conditions. The acquisition of Follow-On Investments as
permitted by this Condition will be considered a Co-Investment
Transaction for all purposes and subject to the other Conditions set
forth in the application.
    10. Board Reporting, Compliance and Annual Re-Approval.
    (a). Each Adviser to a Regulated Fund will present to the Board of
each Regulated Fund, on a quarterly basis, and at such other times as
the Board may request, (i) a record of all investments in Potential Co-
Investment Transactions made by any of the other Regulated Funds or any
of the Affiliated Funds during the preceding quarter that fell within
the Regulated Fund's then-current Objectives and Strategies and Board-
Established Criteria that were not made available to the Regulated
Fund, and an explanation of why such investment opportunities were not
made available to the Regulated Fund; (ii) a record of all Follow-On
Investments in and Dispositions of investments in any issuer in which
the Regulated Fund holds any investments by any Affiliated Fund or
other Regulated Fund during the prior quarter; and (iii) all
information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by other Regulated
Funds or Affiliated Funds that the Regulated Fund considered but
declined to participate in, so that the Independent Directors, may
determine whether all Potential Co-Investment Transactions and Co-
Investment Transactions during the preceding quarter, including those
investments that the Regulated Fund considered but declined to
participate in, comply with the Conditions.
    (b). All information presented to the Regulated Fund's Board
pursuant to this Condition will be kept for the life of the Regulated
Fund and at least two years thereafter, and will be subject to
examination by the Commission and its staff.
    (c). Each Regulated Fund's chief compliance officer, as defined in
rule 38a-1(a)(4), will prepare an annual report for its Board each year
that evaluates (and documents the basis of that evaluation) the
Regulated Fund's compliance with the terms and Conditions of the
application and the procedures established to achieve such compliance.
In the case of a BDC Downstream Fund that does not have a chief
compliance officer, the chief compliance officer of the BDC that
controls the BDC Downstream Fund will prepare the report for the
relevant Independent Party.
    (d). The Independent Directors (including the non-interested
members of each Independent Party) will consider at least annually
whether continued participation in new and existing Co-Investment
Transactions is in the Regulated Fund's best interests.
    11. Record Keeping. Each Regulated Fund will maintain the records
required by Section 57(f)(3) of the Act as if each of the Regulated
Funds were a BDC and each of the investments permitted under these
Conditions were approved by the Required Majority under Section 57(f).
    12. Director Independence. No Independent Director (including the
non-interested members of each Independent Party) of a Regulated Fund
will also be a director, general partner, managing member or principal,
or otherwise be an ``affiliated person'' (as defined in the Act) of any
Affiliated Fund.
    13. Expenses. The expenses, if any, associated with acquiring,
holding or disposing of any securities acquired in a Co-Investment
Transaction (including, without limitation, the expenses of the
distribution of any such securities registered for sale under the
Securities Act) will, to the extent not payable by the Advisers under
their respective advisory agreements with the Regulated Funds and the
Affiliated Funds, be shared by the Regulated Funds and the
participating Affiliated Funds in proportion to the relative amounts of
the securities held or being acquired or disposed of, as the case may
be.
    14. Transaction Fees.\31\ Any transaction fee (including break-up,
structuring, monitoring or commitment fees but excluding brokerage or
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 an 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 Adviser, the Affiliated Funds, the other Regulated Funds or
any affiliated person of the Affiliated Funds or the Regulated Funds
will receive any additional compensation or remuneration of any kind as
a result of or in connection with a Co-Investment Transaction other
than (i) in the case of the Regulated Funds and the Affiliated Funds,
the pro rata transaction fees described above and fees or other
compensation described in Condition 2(c)(iii)(B)(z), (ii) brokerage or
underwriting compensation permitted by Section 17(e) or 57(k) or (iii)
in the case of the Adviser, 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.
Jill M. Paterson,
Assistant Secretary.
[FR Doc. 2019-20158 Filed 9-17-19; 8:45 am]
 BILLING CODE 8011-01-P