Section 7 of the 1940 Act generally prohibits investment companies that are not
registered under Section 8 of the 1940 Act from selling or redeeming their securities. Under Section 6(e) of the 1940 Act, the Commission, in connection with any Order exempting an investment company from any provision of Section 7 of
the 1940 Act, may require that certain provisions apply to such company, and to other persons in their transactions and relations with such company, as though the company were registered under the 1940 Act, if the Commission deems such requirements
necessary or appropriate in the public interest or for the protection of investors.
B. |
Community of Interests |
The Applicants assert that the protections afforded by the 1940 Act are generally unnecessary for a Fund in view of the community of economic
and other interests among the Investors and Carlyle. The community of interest is based on (i) Carlyles concern with the morale of its employees and the ability of Carlyle to attract and retain highly qualified personnel and (ii) the
absence of any public group of investors in the Funds.
The Applicants also note that a Funds investment program will be conceived
and organized by persons who may be directly or indirectly investing, or eligible to invest, in such Fund. Further, the Funds will not be promoted to Eligible Employees by persons outside of Carlyle seeking to profit from fees for investment advice
or from the distribution of securities.
Carlyle represents, as to each Fund, that:
1. Carlyle will control the Fund within the meaning of Section 2(a)(9) of the 1940 Act. Carlyle, the General Partner and any other person
acting for or on behalf of a Fund shall act in the best interest of the Fund and its security holders.
2. Whenever Carlyle, the General
Partner or any other person acting for or on behalf of the Fund is required or permitted to make a decision, take or approve an action, or omit to do any of the foregoing in such persons discretion, then such person shall exercise such
discretion in accordance with reasonableness and good faith and any fiduciary duties owed to the Fund and its security holders. Any person that acts for or on behalf of a Fund, including any General Partner of a Fund and any member of an investment
committee of a Fund, will be (as applicable) an employee, officer, director, member of an advisory board, investment adviser, or depositor of the Funds or Carlyle within the meaning of Sections 9 and 36 of the 1940 Act and will be
subject to those sections.
3. The governing documents for, and any other contractual arrangement regarding, the Fund, will not contain
any provision which protects or purports to protect Carlyle, the General Partner or their delegates (if any) against any liability to the Fund or its security holders to which such person would otherwise be subject by reason of willful misconduct,
bad faith or gross negligence in the performance of such persons duties.
The Applicants maintain that requiring the Funds to comply with the various provisions of the 1940 Act would present the Funds with
unnecessary burdens. As noted above, the operation of the Funds is not likely to result in the abuses that the 1940 Act was designed to remedy. In addition, the Applicants note that substantial protection is available to investors (i) with
respect to matters such as valuations and access of Investors to reports and (ii) by the governing documents of each Fund restricting the General Partners authority to make certain amendments to the governing documents without the
requisite amount of consents from the Investors.
Section 17(a) of the 1940 Act generally prohibits any affiliated person of a registered investment company or any affiliated person of
such affiliated person, acting as principal, from knowingly selling or purchasing any security or other property to or from the investment company.
The Applicants request an exemption from Section 17(a) of the 1940 Act to the extent necessary to (a) permit Carlyle or a Third
Party Fund (or any affiliated person, as defined in the 1940 Act, of Carlyle or a Third Party Fund), acting as principal, to purchase or sell securities or other property to or from any Fund or any company controlled by such Fund; and
(b) permit a Fund to invest in or engage in any transaction with Carlyle, acting as principal, (i) in which such Fund, any company controlled by such Fund or Carlyle or any Third Party Fund has invested or will invest, or (ii) with
which such Fund, any company controlled by such Fund or Carlyle or any Third Party Fund is or will become otherwise affiliated. The transactions to which any Fund is a party will be effected only after a determination by the General Partner that the
requirements of Conditions 1, 2 and 6 below have been satisfied. In addition, these transactions will be effected only to the extent not prohibited by the applicable governing documents. To the extent any of the transactions described under the
request for exemption from Section 17(d) (and Rule 17d-1) would come within the purview of Section 17(a), such transactions are incorporated hereunder and an exemption from such section is also
requested.
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