[Federal Register Volume 85, Number 227 (Tuesday, November 24, 2020)]
[Notices]
[Pages 75085-75094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25900]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 34099; 812-15156]
Oaktree Strategic Income II, Inc., et al.
November 18, 2020.
AGENCY: Securities and Exchange Commission (``Commission'')
ACTION: Notice.
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Notice of application for an order under sections 17(d) and 57(i)
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1
under the Act to permit certain joint transactions otherwise prohibited
by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
Applicants request an order to permit certain business development
companies to co-invest in portfolio companies with affiliated
investment funds.
Applicants: Oaktree Strategic Income II, Inc. (``OSI II''), Oaktree
Strategic Income Corporation (``OCSI''), Oaktree Specialty Lending
Corporation (``OCSL''), Oaktree Capital Management, L.P. (``OCM LP''),
Oaktree Fund Advisors, LLC (``OFA LLC''), Oaktree Capital Management
(UK) LLP (``OCM
[[Page 75086]]
UK''), Oaktree Strategic Income, LLC, Oaktree High Yield Bond Fund,
L.P., Oaktree High Yield Fund II, L.P., Oaktree Expanded High Yield
Fund, L.P., Oaktree Global High Yield Bond Fund, L.P., Oaktree European
High Yield Fund, L.P., Oaktree Senior Loan Fund, L.P., Oaktree Enhanced
Income Fund III, L.P., Oaktree Enhanced Income Fund III (Parallel),
L.P., Oaktree CLO 2014-1 Ltd., Oaktree CLO 2014-2 Ltd., Oaktree CLO
2015-1 Ltd., Oaktree CLO 2018-1 Ltd., Oaktree CLO 2019-1 Ltd., Oaktree
CLO 2019-2 Ltd., Oaktree CLO 2019-3 Ltd., Oaktree CLO 2019-4 Ltd.,
Oaktree CLO 2020-1 Ltd., Oaktree EIF I Series A1, Ltd., Oaktree EIF I
Series A, Ltd., Oaktree EIF II Series A1, Ltd., Oaktree EIF II Series
A2, Ltd., Oaktree EIF III Series I, Ltd., Oaktree EIF III Series II,
Ltd., Oaktree Strategic Credit Fund A, L.P., Oaktree Strategic Credit
Fund B, L.P., Ace Strategic Credit Holdings (Cayman), L.P., Exelon
Strategic Credit Holdings, LLC, Oaktree-Minn Strategic Credit, LLC,
Oaktree-NGP Strategic Credit, LLC, Oaktree-TBMR Strategic Credit Fund,
LLC, Oaktree-TBMR Strategic Credit Fund C, LLC, Oaktree-TBMR Strategic
Credit Fund F, LLC, Oaktree-TBMR Strategic Credit Fund G, LLC, Oaktree-
TCDRS Strategic Credit, LLC, Oaktree-TSE 16 Strategic Credit, LLC,
INPRS Emerging Markets Total Return Holdings, LLC, Investin Pro RED
Holdings, LLC, Investin Pro RED Holdings S.[agrave].r.l., Oaktree
Gilead Investment Fund, L.P., Oaktree Gilead Investment Fund AIF
(Delaware), L.P., Oaktree Structured Credit Income Fund, L.P., Oaktree
Alpha Credit Fund, L.P., Oaktree Mezzanine Fund IV, L.P., Oaktree
Mezzanine Fund V, L.P., Oaktree Mezzanine Fund V (Parallel), SCSp,
Oaktree SBIC Fund, L.P., Oaktree Middle-Market Direct Lending Fund,
L.P., Oaktree Middle-Market Direct Lending Unlevered Fund, L.P.,
Oaktree Middle-Market Direct Lending Fund (Parallel), L.P., Oaktree
Middle-Market Direct Lending Unlevered Fund (Parallel), L.P., Oaktree
Middle-Market Direct Lending Fund (Parallel 2), L.P., Oaktree European
Capital Solutions Fund (Parallel), L.P., Oaktree European Capital
Solutions Fund, L.P., Oaktree European Capital Solutions Fund II, L.P.,
Oaktree European Capital Solutions Fund II, SCSp, Oaktree European
Capital Solutions Fund II, SCSp-RAIF, Oaktree Mercury Investment Fund,
L.P., Oaktree European Special Situations Fund, L.P., Oaktree Desert
Sky Investment Fund, L.P., Oaktree Desert Sky Investment Fund II, L.P.,
Oaktree Emerging Markets Debt Total Return Fund, L.P., Oaktree Boulder
Investment Fund, L.P., OCM Convertible Trust, Oaktree Non-U.S.
Convertible Fund, L.P., Oaktree High Income Convertible Fund, L.P.,
Oaktree High Income Convertible Fund II, L.P., Oaktree Opportunities
Fund X, L.P., Oaktree Opportunities Fund X (Parallel), L.P., Oaktree
Opportunities Fund X (Parallel 2), L.P., Oaktree Opportunities Fund Xb,
L.P., Oaktree Opportunities Fund Xb (Parallel), L.P., Oaktree
Opportunities Fund Xb (Parallel 2), L.P., Oaktree Opportunities Fund
XI, L.P., Oaktree Opportunities Fund XI (Parallel), L.P., Oaktree
Opportunities Fund XI (Parallel 2), SCSP, Oaktree Opportunities Fund XI
(Parallel 3), L.P., Oaktree Latigo Investment Fund, L.P., Oaktree
Huntington Investment Fund II, L.P., Oaktree Cascade Investment Fund I,
L.P., Oaktree Cascade Investment Fund II, L.P., Oaktree Cascade
Investment Fund III, L.P., Oaktree Value Opportunities Fund, L.P.,
Oaktree Phoenix Investment Fund, L.P., Oaktree BAA Emerging Market
Opportunities Fund, L.P., Oaktree Glacier Investment Fund, L.P.,
Oaktree TX Emerging Market Opportunities Fund, L.P., Oaktree Emerging
Market Opportunities Fund, L.P., Oaktree Glacier Investment Fund II,
L.P., Oaktree Moraine Co-Investment Fund, L.P., Oaktree Emerging
Markets Opportunities Fund II, L.P., Oaktree FF Emerging Markets
Opportunities Fund, L.P., Oaktree Oasis Investment Fund, L.P., Oaktree
Special Situations Fund, L.P., Oaktree Special Situations Fund II,
L.P., OCM Avalon Co-Investment Fund, L.P., Oaktree Avalon Co-Investment
Fund II, L.P., Oaktree Star Investment Fund II, L.P., Oaktree European
Principal Fund IV, L.P., Oaktree European Principal Fund IV, S.C.S.,
Oaktree Power Opportunities Fund IV, L.P., Oaktree Power Opportunities
Fund IV (Parallel), L.P., Oaktree European Principal Fund V, L.P.,
Oaktree European Principal Fund V, SCSp, Oaktree Power Opportunities
Fund V, L.P., Oaktree Power Opportunities Fund V (Parallel), L.P.,
Oaktree Transportation Infrastructure Fund, L.P., Oaktree
Transportation Infrastructure Fund (Parallel), L.P., Oaktree
Transportation Infrastructure Fund (Parallel 2), L.P., Oaktree
Transportation Infrastructure Fund (Parallel 3), L.P., Oaktree Ports
America Fund, L.P., Oaktree Ports America Fund (HS III), L.P., Oaktree
Real Estate Opportunities Fund VII, L.P., Oaktree Real Estate
Opportunities Fund VII (Parallel), L.P., Oaktree Real Estate
Opportunities Fund VII (Parallel 2), L.P., Oaktree Real Estate
Opportunities Fund VII (Parallel 3), L.P., Oaktree Real Estate
Opportunities Fund VII (Parallel 4), L.P., Oaktree Real Estate
Opportunities Fund VIII, L.P., Oaktree Real Estate Opportunities Fund
VIII (Parallel), L.P., Oaktree Real Estate Opportunities Fund VIII
(Parallel), S.C.Sp, Oaktree Real Estate Opportunities Fund VIII
(Parallel 2), L.P., Oaktree Real Estate Opportunities Fund VIII
(Parallel 3), L.P., Oaktree Real Estate Opportunities Fund VIII
(Parallel 4), L.P., Oaktree Pinnacle Investment Fund, L.P., Oaktree
Real Estate Debt Fund II, L.P., Oaktree Real Estate Debt Fund II
(Parallel), L.P., Oaktree Real Estate Debt Fund III, L.P., Oaktree Real
Estate Debt Fund III (Lux), S.C.Sp, Oaktree Real Estate Debt Fund III
(Parallel), L.P., Oaktree-TSE 16 Real Estate Debt, LLC, Oaktree (Lux.)
FS S.C.SP. SICAV RAIF, Oaktree Real Estate Income Fund, L.P., Oaktree
Emerging Markets Equity Fund, L.P., Oaktree Value Equity Fund, L.P.,
Oaktree Private Investment Fund IV, L.P., Oaktree-Forrest Multi-
Strategy, LLC, Oaktree TT Multi-Strategy Fund, L.P., Oaktree Global
Credit Fund, L.P., Oaktree GC Super Fund, L.P., Oaktree Huntington-GCF
Investment Fund, L.P., Oaktree Huntington-GCF Investment Fund (Direct
Lending AIF), L.P., Oaktree Absolute Return Income Fund, L.P., Oaktree
Global Credit Plus Fund, L.P., Oaktree Global Credit Plus Fund AIF,
L.P., Oaktree Emerging Market Debt Fund, L.P.
Filing Dates: The application was filed on August 31, 2020.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by emailing the Commission's
Secretary 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 December 14, 2020, and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by emailing the
Commission's Secretary.
ADDRESSES: The Commission: [email protected]; Applicants: 333
South Grand Ave., 28th Floor, Los Angeles, CA 90071.
FOR FURTHER INFORMATION CONTACT: Rochelle Plesset, Senior Counsel, or
David Marcinkus, Branch Chief, at (202)
[[Page 75087]]
551-6821 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Introduction
1. The Applicants request an order of the Commission under Sections
17(d) and 57(i) and Rule 17d-1 thereunder (the ``Order'') to permit,
subject to the terms and conditions set forth in the application (the
``Conditions''), a Regulated Fund \1\ and one or more other Regulated
Funds and/or one or more Affiliated Funds \2\ 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) 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.\3\ The Order sought by this
application will supersede the Prior Order,\4\ dated October 18, 2017,
issued to Oaktree Strategic Income, LLC and certain of its affiliates,
with the result that no person will continue to rely on the Prior
Order.
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\1\ ``Regulated Funds'' means the Existing Regulated Funds and
any other Future Regulated Funds. ``Existing Regulated Funds'' means
each of OSI II, OCSI, and OCSL. ``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 and (b) whose
investment adviser is an Adviser. ``Adviser'' means any Existing
Adviser together with any future investment adviser that (i)
controls, is controlled by or is under common control with any
Existing 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.
``Existing Advisers'' means OCM LP, OFA LLC, and OCM UK.
\2\ ``Affiliated Fund'' means any Existing Affiliated Fund
(identified in Appendix A to the application) or any entity (a)
whose investment adviser is an Adviser, (b) that would be an
investment company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of
the Act and (c) that intends to participate in the program of co-
investments described in the application.
\3\ 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
its terms and Conditions set forth in the application.
\4\ Oaktree Strategic Income, LLC, et al. (File No. 812-14758)
Investment Company Act Rel. Nos. 32831 (September 22, 2017) (notice)
and 32862 (October 18, 2017) (order).
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Applicants
2. OSI II is a Delaware corporation and a closed-end investment
company that has elected to be regulated as a business development
company (``BDC'') under the Act.\5\ OSI II's Board \6\ is comprised of
a majority of members who 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 the board of directors (or the equivalent)
of a Regulated 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 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. OCSI is a Delaware corporation and a closed-end, externally
managed, non-diversified management investment company that has elected
to be regulated as a BDC under the Act. OCSI's Board is comprised of a
majority of members who are Independent Directors.
4. OCSL is a Delaware corporation and a closed-end, externally
managed, non-diversified management investment company that has elected
to be regulated as a BDC under the Act. OCSL's Board is comprised of a
majority of members who are Independent Directors.
5. OFA LLC is a Delaware limited partnership that is registered as
an investment adviser under the Advisers Act and serves as the
investment adviser to OSI II, OCSI, and OCSL. OFA LLC is under common
control with OCM LP and OCM UK.
6. OCM LP is a Delaware limited partnership that is registered as
an investment adviser under the Advisers Act and serves as the
investment adviser to all Existing Affiliated Funds except for certain
Existing Affiliated Funds based in Europe, which are advised by OCM UK.
OCM LP is under common control with OFA LLC and OCM UK.
7. OCM UK is a limited liability partnership registered in England
and Wales that is registered as an investment adviser under the
Advisers Act. OCM UK serves as the investment adviser to certain
Existing Affiliated Funds based in Luxembourg and certain other
Existing Affiliated Funds based in Europe. OCM UK also serves as sub-
advisor for the Existing Affiliated Funds that utilize investment
professionals in both the United States and in Europe, for which OCM LP
serves as investment adviser. OCM UK is an indirect, wholly-owned
subsidiary of Oaktree Capital Group (OCG), and is under common control
with OFA LLC and OCM LP.
8. The Existing Affiliated Funds are the investment funds
identified in Appendix A to the application. 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)(1),
3(c)(5)(C) or 3(c)(7) of the Act. OFA LLC, OCM LP, and OCM UK are
Advisers to the Existing Affiliated Funds.
9. Each of the Applicants may be deemed to be controlled by Oaktree
Capital Group Holdings, LP (``OCGH''). OCGH owns a majority of the
voting interests in the Advisers and, thus, may be deemed to control
the Regulated Funds and the Affiliated Funds. Applicants state that
OCGH is a holding company and does not currently offer investment
advisory services to any person and is not expected to do so in the
future. Applicants state that as a result, OCGH has not been included
as an Applicant.
10. 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 Entity 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 Entity 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
[[Page 75088]]
participating directly. Applicants represent that this treatment is
justified because a Wholly-Owned Investment Sub would have no purpose
other than serving as a holding vehicle for the Regulated Fund's
investments and, therefore, no conflicts of interest could arise
between the parent Regulated Fund and the Wholly-Owned Investment Sub.
The Board of the parent Regulated Fund would make all relevant
determinations under the Conditions with regard to a Wholly-Owned
Investment Sub's participation in a Co-Investment Transaction, and the
Board would be informed of, and take into consideration, any proposed
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If
the parent Regulated Fund proposes to participate in the same Co-
Investment Transaction with any of its Wholly-Owned Investment Subs,
the Board of the parent Regulated Fund will also be informed of, and
take into consideration, the relative participation of the Regulated
Fund and the Wholly-Owned Investment Sub.
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\8\ ``Wholly-Owned Investment Sub'' means an entity (i) that is
wholly-owned by a Regulated Fund (with such Regulated Fund at all
times holding, beneficially and of record, 100% of the voting and
economic interests); (ii) whose sole business purpose is to hold one
or more investments on behalf of such Regulated Fund (and, in the
case of a SBIC Subsidiary (defined below), maintain a license under
the SBA Act (defined below) and issue debentures guaranteed by the
SBA (defined below)); (iii) with respect to which such Regulated
Fund's Board has the sole authority to make all determinations with
respect to the entity's participation under the Conditions; and (iv)
that would be an investment company but for Section 3(c)(1) or
3(c)(7) of the Act. ``SBIC Subsidiary'' means a Wholly- Owned
Investment Sub that is licensed by the Small Business Administration
(the ``SBA'') to operate under the Small Business Investment Act of
1958, as amended, (the ``SBA Act'') as a small business investment
company.
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Applicants' Representations
A. Allocation Process
11. Applicants state that each Adviser is presented with thousands
of investment opportunities each year on behalf of their clients and
will determine how to allocate those opportunities in a manner that,
over time, is fair and equitable to all of its clients. Such investment
opportunities may be Potential Co-Investment Transactions.
12. Applicants represent that each 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.
13. Specifically, applicants state that an Adviser is organized and
managed such that the portfolio managers and analysts (``Investment
Teams''), responsible for evaluating investment opportunities and
making investment decisions on behalf of clients are promptly notified
of the opportunities. If the requested Order is granted, each Adviser
will establish, maintain and implement policies and procedures
reasonably designed to ensure that, when such opportunities arise, the
Advisers to the relevant Regulated Funds are promptly notified and
receive the same information about the opportunity as any other
Advisers considering the opportunity for their 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 relevant Investment Team responsible
for that Regulated Fund receive sufficient information to allow the
Regulated Fund's Adviser to make its independent determination and
recommendations under the Conditions.
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\9\ ``Objectives and Strategies'' means with respect to any
Regulated 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.
\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 the Regulated Fund should be notified
under Condition 1. The Board-Established Criteria will be consistent
with the Regulated Fund's Objectives and Strategies. If no Board-
Established Criteria are in effect, then the Regulated Fund's
Adviser will be notified of all Potential Co-Investment Transactions
that fall within the Regulated Fund's then-current Objectives and
Strategies. Board-Established Criteria will be objective and
testable, meaning that they will be based on observable information,
such as industry/sector of the issuer, minimum EBITDA of the issuer,
asset class of the investment opportunity or required commitment
size, and not on characteristics that involve a discretionary
assessment. The Adviser to the Regulated Fund may from time to time
recommend criteria for the Board's consideration, but Board-
Established Criteria will only become effective if approved by a
majority of the Independent 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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14. 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 such Potential Co-Investment Transaction to be
appropriate, then it will formulate a recommendation regarding the
proposed order amount for the Regulated Fund.
15. Applicants state that, for each Regulated Fund and Affiliated
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, the Adviser will submit a proposed order amount
to an internal allocation committee which the Adviser will establish to
handle the allocation of investment opportunities in Potential Co-
Investment Transactions (the ``Co-Investment Transaction Allocation
Committee''). Applicants state further that, at this stage, each
proposed order amount may be reviewed and adjusted, in accordance with
the Advisers' written allocation policies and procedures, by the Co-
Investment Transaction Allocation 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
the Advisers.
\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).
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16. 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
[[Page 75089]]
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\ However, if the size of the opportunity is decreased such
that the aggregate of the original Internal Orders would exceed the
amount of the remaining investment opportunity, then upon submitting
any revised order amount to the Board of a Regulated Fund for
approval, the Adviser to the Regulated Fund will also notify the
Board promptly of the amount that the Regulated Fund would receive
if the remaining investment opportunity were allocated pro rata on
the basis of the size of the original Internal Orders. 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
17. 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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18. 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 had previously participated in a
Co-Investment Transaction with respect to the issuer, then the terms
and approval of the Follow-On Investment would be subject to the
Standard Review Follow-Ons described in Condition 8. If the Regulated
Funds and Affiliated 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 would need to comply with the requirements
of Enhanced-Review Follow-Ons only for the first Co-Investment
Transaction. Subsequent Co-Investment Transactions with respect to the
issuer would be governed by the requirements of Standard Review Follow-
Ons.
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\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: (i) Were acquired
prior to participating in any Co-Investment Transaction; (ii) were
acquired in transactions in which the only term negotiated by or on
behalf of such funds was price; and (iii) were acquired either: (A)
In reliance on one of the JT No-Action Letters (defined below); or
(B) 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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19. 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
20. Applicants propose that Dispositions \19\ would be divided into
two categories. If the Regulated Funds and 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 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 would be required because such
findings would not have been required in connection with the prior
Enhanced Review Disposition, but they would have been required had
the first Co-Investment Transaction been an Enhanced Review Follow-
On.
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21. 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
22. Applicants represent that under the terms and Conditions of the
Application, all Regulated Funds and
[[Page 75090]]
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.\23\ 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.
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\23\ Applicants state this may occur for two reasons. First,
when the Affiliated Fund or Regulated Fund is not yet fully funded
because, when the Affiliated Fund or Regulated Fund desires to make
an investment, it must call capital from its investors to obtain the
financing to make the investment, and in these instances, the notice
requirement to call capital could be as much as ten business days.
Second, where, for tax or regulatory reasons, an Affiliated Fund or
Regulated Fund does not purchase new issuances immediately upon
issuance but only after a short seasoning period of up to ten
business days.
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E. Holders
23. 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 in the same percentages as the
Regulated Fund's other shareholders (not including the Holders) 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 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) controlled
affiliates of OCGH manage each of the Affiliated Funds and may be
deemed to control any Future Regulated Fund, (ii) OCGH controls the
Existing Advisers, which manages the Existing Regulated Funds. Thus,
each of the Affiliated Funds could be deemed to be a person related to
the Existing Regulated Funds in a manner described by Section 57(b) and
related to other 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.
4. Oaktree Proprietary Accounts are controlled by the Advisers or
their affiliates and, therefore, may be under common control with the
Existing Regulated Funds, the Existing Affiliated Funds, any future
Advisers, and any Future Regulated Funds, the Oaktree Proprietary
Accounts could be deemed to be persons related to the Regulated Funds
(or a company controlled by the Regulated Funds) in a manner described
by Section 17(d) or Section 57(b) and also prohibited from
participating in Co-Investment Transactions.
5. 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.
6. 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
[[Page 75091]]
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 to a Regulated Fund deems the 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
[[Page 75092]]
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 Oaktree Proprietary Account that is not advised by an
Adviser is itself deemed to be an adviser for the Purposes of
Conditions 6(a)(i), 7(a)(i), and 9(a)(i).
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(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
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\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.
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(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
(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 Conditions 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
[[Page 75093]]
(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
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\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.
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(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
[[Page 75094]]
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.
(d) The Independent Directors 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 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 the Adviser at a bank or banks having the qualifications prescribed
in Section 26(a)(1), and the account will earn a competitive rate of
interest that will also be divided pro rata among the participants.
None of the Advisers, the Affiliated 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 Advisers, investment advisory compensation paid in
accordance with investment advisory agreements between the applicable
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
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\31\ Applicants are not requesting and the Commission is not
providing any relief for transaction fees received in connection
with any Co-Investment Transaction.
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15. Proportionate Voting. 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 in the same percentages as the Regulated Fund's
other shareholders (not including the Holders) when voting on (1) the
election of directors; (2) the removal of one or more directors; or (3)
any other matter under either the Act or applicable State law affecting
the Board's composition, size or manner of election.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25900 Filed 11-23-20; 8:45 am]
BILLING CODE 8011-01-P