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Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices Regulated Fund will then either approve or disapprove of the investment opportunity in accordance with condition 2, 6, 7, 8 or 9, as applicable.
B. Follow-On Investments
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11. Applicants state that from time to time the Regulated Funds and Affiliated Funds may have opportunities to make Follow-On Investments 12 in an issuer in which a Regulated Fund and one or more other Regulated Funds and/or Affiliated Funds previously have invested.
12. Applicants propose that FollowOn Investments would be divided into two categories depending on whether the prior investment was a CoInvestment Transaction or a PreBoarding Investment.13 If the Regulated Funds and Affiliated Funds had previously participated in a CoInvestment Transaction with respect to the issuer, then the terms and approval of the Follow-On Investment would be subject to the Standard Review FollowOns described in Condition 8. If the Regulated Funds and Affiliated Funds have not previously participated in a Co-Investment Transaction with respect to the issuer but hold a Pre-Boarding Investment, then the terms and approval of the Follow-On Investment would be subject to the Enhanced-Review FollowOns described in Condition 9. All Enhanced Review Follow-Ons require the approval of the Required Majority.
For a given issuer, the participating Regulated Funds and Affiliated Funds would need to comply with the requirements of Enhanced-Review Follow-Ons only for the first CoInvestment Transaction. Subsequent CoInvestment Transactions with respect to the issuer would be governed by the requirements of Standard Review Follow-Ons.
13. A Regulated Fund would be permitted to invest in Standard Review Follow-Ons either with the approval of the Required Majority under Condition 8c or without Board approval under Condition 8b if it is i a Pro Rata 12 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.
13 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 in transactions: i 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 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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Follow-On Investment 14 or ii a NonNegotiated Follow-On Investment.15
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 Boards periodic review in accordance with Condition 10.
C. Dispositions 14. Applicants propose that Dispositions 16 would be divided into two categories. If the Regulated Funds and the Affiliated Funds holding investments in the issuer had 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 CoInvestment 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.17
14 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 Funds participation in the pro rata Follow-On Investments as being in the best interests of the Regulated Fund. The Regulated Funds 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 Funds Eligible Trustees in accordance with Condition 8c.
15 A Non-Negotiated Follow-On Investment is a Follow-On Investment in which a Regulated Fund participates together with one or more Affiliated Funds and/or one or more other Regulated Funds i in which the only term negotiated by or on behalf of the funds is price and ii with respect to which, if the transaction were considered on its own, the funds would be entitled to rely on one of the JT NoAction Letters. JT No-Action Letters means SMC
Capital, Inc., SEC No-Action Letter pub. avail.
Sept. 5, 1995 and Massachusetts Mutual Life Insurance Company, SEC No-Action Letter pub.
avail. June 7, 2000.
16 Disposition means the sale, exchange or other disposition of an interest in a security of an issuer.
17 However, with respect to an issuer, if a Regulated Funds 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
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15. A Regulated Fund may participate in a Standard Review Disposition either with the approval of the Required Majority under Condition 6d or without Board approval under Condition 6c if i the Disposition is a Pro Rata Disposition 18 or ii the securities are Tradable Securities 19 and the Disposition meets the other requirements of Condition 6cii. Pro Rata Dispositions and Dispositions of a Tradable Security remain subject to the Boards periodic review in accordance with Condition 10.
D. Delayed Settlement 16. Applicants represent that under the terms and Conditions of the application, all Regulated Funds and Affiliated Funds participating in a CoInvestment Transaction will invest at the same time, for the same price and with the same terms, conditions, class, registration rights and any other rights, so that none of them receives terms more favorable than any other.
However, the settlement date for an Affiliated Fund in a Co-Investment Transaction may occur up to ten business days after the settlement date for the Regulated Fund, and vice versa.
Regulated Fund may complete its first Standard Review Follow-On in such issuer, the Eligible Trustees must review the proposed Follow-On Investment not only on a stand-alone basis but also in relation to the total economic exposure in such issuer i.e., in combination with the portion of the Pre-Boarding Investment not disposed of in the Enhanced Review Disposition, and the other terms of the investments. This additional review would be required because such findings would not have been required in connection with the prior Enhanced Review Disposition, but they would have been required had the first Co-Investment Transaction been an Enhanced Review Follow-On.
18 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 Funds participation in pro rata Dispositions as being in the best interests of the Regulated Fund. The Regulated Funds 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 Funds Eligible Trustees.
19 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 902b 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 2a41 of the Act at which the Regulated Fund has valued the investment.

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