82_FR_45518 82 FR 45331 - Oaktree Strategic Income, LLC, et al.

82 FR 45331 - Oaktree Strategic Income, LLC, et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 187 (September 28, 2017)

Page Range45331-45339
FR Document2017-20757

Federal Register, Volume 82 Issue 187 (Thursday, September 28, 2017)
[Federal Register Volume 82, Number 187 (Thursday, September 28, 2017)]
[Notices]
[Pages 45331-45339]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-20757]



[[Page 45331]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32831; File No. 812-14758]


Oaktree Strategic Income, LLC, et al.

September 22, 2017.
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 a business development company to 
co-invest in portfolio companies with affiliated investment funds.

Applicants: Oaktree Strategic Income, LLC (``OSI''), Oaktree Capital 
Management, L.P. (``OCM LP''), Oaktree High Yield Bond Fund, L.P., 
Oaktree High Yield Fund II, L.P., OCM High Yield Trust, 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 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 II Series B1, 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 
FF Investment Fund, L.P., 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, 
Oaktree Mezzanine Fund IV, 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 
European Capital Solutions Fund (Parallel), L.P., Oaktree European 
Capital Solutions Fund, L.P., Oaktree European Special Situations Fund, 
L.P., Oaktree Desert Sky Investment Fund, 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 Huntington Investment Fund II, L.P., 
Oaktree Cascade Investment Fund I, L.P., Oaktree Cascade Investment 
Fund II, L.P., Oaktree Value Opportunities 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 Special 
Situations Fund, L.P., OCM Avalon Co-Investment Fund, 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 Infrastructure Fund, 
L.P., Oaktree Infrastructure Fund (Parallel), L.P., Oaktree 
Infrastructure Fund, S.C.S., Oaktree Energy Infrastructure Fund, L.P., 
Oaktree Energy Infrastructure Fund (Parallel), L.P., Oaktree 
Transportation Infrastructure Fund, L.P., Oaktree Transportation 
Infrastructure Fund (Parallel), 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 Juniper 
Investment Fund, 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 Income Fund, L.P., Oaktree Real 
Estate Debt Securities Fund--SF, LLC, Oaktree Emerging Markets Absolute 
Return Fund, L.P., Oaktree Emerging Markets Equity Fund, L.P., Oaktree 
Value Equity Fund, L.P., Oaktree Japan Absolute Return Fund, L.P., 
Oaktree Private Investment Fund IV, L.P., Oaktree-Forrest Multi-
Strategy, LLC, Oaktree TT Multi-Strategy Fund, L.P., and Oaktree Global 
Credit Fund, L.P.

Filing Dates: The application was filed on March 30, 2017, and amended 
on August 28, 2017.

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 17, 2017, 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 
St. NE., Washington, DC 20549-1090. Applicants: 333 South Grand Ave., 
28th Floor, Los Angeles, CA 90071.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811, or David J. Marcinkus, Branch Chief, at (202) 551-6821 
(Chief Counsel's Office, Division of Investment Management).

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

[[Page 45332]]

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\
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    \1\ ``Regulated Funds'' means OSI and any other Future Regulated 
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 and (b) whose investment adviser is 
an Adviser. ``Adviser'' means OCM LP together with any future 
investment adviser that (i) controls, is controlled by or is under 
common control with OCM LP, (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.
    \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.
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Applicants

    2. OSI is a Delaware limited liability company and a closed-end 
management investment company that will elect to be regulated as a 
business development company (``BDC'') under the Act.\4\ Upon OSI's 
election to be regulated as a BDC, OSI's Board \5\ will be comprised of 
a majority of members who are Independent Directors.\6\
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    \4\ 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.
    \5\ ``Board'' means the board of directors (or the equivalent) 
of a Regulated Fund.
    \6\ ``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. OCM LP, a Delaware limited partnership that is registered under 
the Advisers Act, serves as the investment adviser to OSI.
    4. 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. OCM LP is the Adviser to the Existing 
Affiliated Funds.
    5. Each of the Applicants may be deemed to be controlled by Oaktree 
Capital Group, LLC (``OCG''), a publicly traded company. OCG owns 
controlling interests in the Adviser and, thus, may be deemed to 
control the Regulated Funds and the Affiliated Funds. Applicants state 
that OCG 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, OCG has not been included as 
an Applicant.
    6. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\7\ 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 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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    \7\ ``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

    7. Applicants state that the Adviser is presented with thousands of 
investment opportunities each year on behalf of its clients and after 
OSI elects to be regulated as a BDC, the Adviser 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.
    8. Applicants represent that the 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.
    9. Specifically, applicants state that the 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, the Advisers 
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 \8\

[[Page 45333]]

and any Board-Established Criteria \9\ 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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    \8\ ``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.
    \9\ ``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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    10. 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.
    11. 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.\10\ 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.\11\
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    \10\ The reason for any such adjustment to a proposed order 
amount will be documented in writing and preserved in the records of 
the Advisers.
    \11\ ``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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    12. 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.\12\ 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.\13\
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    \12\ 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.
    \13\ 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

    13. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\14\ 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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    \14\ ``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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    14. 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.\15\ 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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    \15\ ``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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    15. 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 \16\ or (ii) a Non-

[[Page 45334]]

Negotiated Follow-On Investment.\17\ 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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    \16\ 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).
    \17\ 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

    16. Applicants propose that Dispositions \18\ 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.\19\
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    \18\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \19\ 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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    17. 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 \20\ or (ii) the securities 
are Tradable Securities \21\ 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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    \20\ 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.
    \21\ ``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

    18. 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.\22\ 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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    \22\ 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

    19. 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

[[Page 45335]]

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 OCG manage each of the Affiliated Funds and may be deemed 
to control any Future Regulated Fund, (ii) OCG controls OCM LP, which 
manages OSI. Thus, each of the Affiliated Funds could be deemed to be a 
person related to OSI 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. 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

[[Page 45336]]

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 \23\ 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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    \23\ 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,\24\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\25\
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    \24\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \25\ ``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 will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition 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 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; \26\ (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
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    \26\ 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

[[Page 45337]]

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 \27\ 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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    \27\ 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,\28\ 
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
---------------------------------------------------------------------------

    \28\ 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

[[Page 45338]]

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.
    (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

[[Page 45339]]

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.\29\ 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.
---------------------------------------------------------------------------

    \29\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
---------------------------------------------------------------------------

    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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20757 Filed 9-27-17; 8:45 am]
 BILLING CODE 8011-01-P



                              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices                                                      45331

     SECURITIES AND EXCHANGE                                 European Special Situations Fund, L.P.,               FILING DATES:The application was filed
     COMMISSION                                              Oaktree Desert Sky Investment Fund,                   on March 30, 2017, and amended on
                                                             L.P., Oaktree Emerging Markets Debt                   August 28, 2017.
     [Investment Company Act Release No.                     Total Return Fund, L.P., Oaktree
     32831; File No. 812–14758]                                                                                    HEARING OR NOTIFICATION OF HEARING:      An
                                                             Boulder Investment Fund, L.P., OCM                    order granting the requested relief will
     Oaktree Strategic Income, LLC, et al.                   Convertible Trust, Oaktree Non-U.S.                   be issued unless the Commission orders
                                                             Convertible Fund, L.P., Oaktree High                  a hearing. Interested persons may
     September 22, 2017.                                     Income Convertible Fund, L.P., Oaktree                request a hearing by writing to the
     AGENCY: Securities and Exchange                         High Income Convertible Fund II, L.P.,                Commission’s Secretary and serving
     Commission (‘‘Commission’’).                            Oaktree Opportunities Fund X, L.P.,                   applicants with a copy of the request,
     ACTION: Notice.                                         Oaktree Opportunities Fund X                          personally or by mail. Hearing requests
                                                             (Parallel), L.P., Oaktree Opportunities               should be received by the Commission
        Notice of application for an order                   Fund X (Parallel 2), L.P., Oaktree                    by 5:30 p.m. on October 17, 2017, and
     under sections 17(d) and 57(i) of the                   Opportunities Fund Xb, L.P., Oaktree                  should be accompanied by proof of
     Investment Company Act of 1940 (the                     Opportunities Fund Xb (Parallel), L.P.,               service on applicants, in the form of an
     ‘‘Act’’) and rule 17d–1 under the Act to                Oaktree Opportunities Fund Xb (Parallel               affidavit or, for lawyers, a certificate of
     permit certain joint transactions                       2), L.P., Oaktree Huntington Investment               service. Pursuant to rule 0–5 under the
     otherwise prohibited by sections 17(d)                  Fund II, L.P., Oaktree Cascade                        Act, hearing requests should state the
     and 57(a)(4) of the Act and rule 17d–1                  Investment Fund I, L.P., Oaktree                      nature of the writer’s interest, any facts
     under the Act. Applicants request an                    Cascade Investment Fund II, L.P.,                     bearing upon the desirability of a
     order to permit a business development                  Oaktree Value Opportunities Fund, L.P.,               hearing on the matter, the reason for the
     company to co-invest in portfolio                       Oaktree BAA Emerging Market                           request, and the issues contested.
     companies with affiliated investment                    Opportunities Fund, L.P., Oaktree                     Persons who wish to be notified of a
     funds.                                                  Glacier Investment Fund, L.P., Oaktree                hearing may request notification by
     APPLICANTS: Oaktree Strategic Income,                   TX Emerging Market Opportunities                      writing to the Commission’s Secretary.
     LLC (‘‘OSI’’), Oaktree Capital                          Fund, L.P., Oaktree Emerging Market                   ADDRESSES:  Secretary, U.S. Securities
     Management, L.P. (‘‘OCM LP’’), Oaktree                  Opportunities Fund, L.P., Oaktree                     and Exchange Commission, 100 F St.
     High Yield Bond Fund, L.P., Oaktree                     Special Situations Fund, L.P., OCM                    NE., Washington, DC 20549–1090.
     High Yield Fund II, L.P., OCM High                      Avalon Co-Investment Fund, L.P.,                      Applicants: 333 South Grand Ave., 28th
     Yield Trust, Oaktree Expanded High                      Oaktree European Principal Fund IV,                   Floor, Los Angeles, CA 90071.
     Yield Fund, L.P., Oaktree Global High                   L.P., Oaktree European Principal Fund
     Yield Bond Fund, L.P., Oaktree                                                                                FOR FURTHER INFORMATION CONTACT:    Jean
                                                             IV, S.C.S., Oaktree Power Opportunities
     European High Yield Fund, L.P.,                                                                               E. Minarick, Senior Counsel, at (202)
                                                             Fund IV, L.P., Oaktree Power
     Oaktree Senior Loan Fund, L.P., Oaktree                                                                       551–6811, or David J. Marcinkus,
                                                             Opportunities Fund IV (Parallel), L.P.,               Branch Chief, at (202) 551–6821 (Chief
     Enhanced Income Fund III, L.P., Oaktree
                                                             Oaktree Infrastructure Fund, L.P.,                    Counsel’s Office, Division of Investment
     Enhanced Income Fund III (Parallel),
                                                             Oaktree Infrastructure Fund (Parallel),               Management).
     L.P., Oaktree CLO 2014–1 Ltd., Oaktree
                                                             L.P., Oaktree Infrastructure Fund,
     CLO 2014–2 Ltd., Oaktree CLO 2015–1                                                                           SUPPLEMENTARY INFORMATION:    The
                                                             S.C.S., Oaktree Energy Infrastructure
     Ltd., Oaktree EIF I Series A1, Ltd.,                                                                          following is a summary of the
                                                             Fund, L.P., Oaktree Energy
     Oaktree EIF I Series A, Ltd., Oaktree EIF                                                                     application. The complete application
     II Series A1, Ltd., Oaktree EIF II Series               Infrastructure Fund (Parallel), L.P.,
                                                             Oaktree Transportation Infrastructure                 may be obtained via the Commission’s
     A2, Ltd., Oaktree EIF II Series B1, Ltd.,                                                                     Web site by searching for the file
     Oaktree EIF III Series I, Ltd., Oaktree EIF             Fund, L.P., Oaktree Transportation
                                                             Infrastructure Fund (Parallel), L.P.,                 number, or for an applicant using the
     III Series II, Ltd., Oaktree Strategic                                                                        Company name box, at http://
     Credit Fund A, L.P., Oaktree Strategic                  Oaktree Real Estate Opportunities Fund
                                                             VII, L.P., Oaktree Real Estate                        www.sec.gov/search/search.htm or by
     Credit Fund B, L.P., Ace Strategic Credit                                                                     calling (202) 551–8090.
     Holdings (Cayman), L.P., Exelon                         Opportunities Fund VII (Parallel), L.P.,
     Strategic Credit Holdings, LLC, Oaktree                 Oaktree Real Estate Opportunities Fund                Introduction
     FF Investment Fund, L.P., Oaktree-Minn                  VII (Parallel 2), L.P., Oaktree Real Estate
                                                             Opportunities Fund VII (Parallel 3),                     1. The Applicants request an order of
     Strategic Credit, LLC, Oaktree-NGP                                                                            the Commission under Sections 17(d)
     Strategic Credit, LLC, Oaktree-TBMR                     L.P., Oaktree Real Estate Opportunities
                                                                                                                   and 57(i) and Rule 17d–1 thereunder
     Strategic Credit Fund, LLC, Oaktree-                    Fund VII (Parallel 4), L.P., Oaktree
                                                                                                                   (the ‘‘Order’’) to permit, subject to the
     TBMR Strategic Credit Fund C, LLC,                      Juniper Investment Fund, L.P., Oaktree
                                                                                                                   terms and conditions set forth in the
     Oaktree-TBMR Strategic Credit Fund F,                   Pinnacle Investment Fund, L.P., Oaktree
                                                                                                                   application (the ‘‘Conditions’’), a
     LLC, Oaktree-TBMR Strategic Credit                      Real Estate Debt Fund II, L.P., Oaktree
                                                                                                                   Regulated Fund 1 and one or more other
     Fund G, LLC, Oaktree-TCDRS Strategic                    Real Estate Debt Fund II (Parallel), L.P.,            Regulated Funds and/or one or more
     Credit, LLC, Oaktree-TSE 16 Strategic                   Oaktree Real Estate Income Fund, L.P.,
     Credit, LLC, Oaktree Mezzanine Fund                     Oaktree Real Estate Debt Securities                      1 ‘‘Regulated Funds’’ means OSI and any other
     IV, L.P., Oaktree Middle-Market Direct                  Fund—SF, LLC, Oaktree Emerging                        Future Regulated Funds. ‘‘Future Regulated Fund’’
     Lending Fund, L.P., Oaktree Middle-                     Markets Absolute Return Fund, L.P.,                   means a closed-end management investment
     Market Direct Lending Unlevered Fund,                   Oaktree Emerging Markets Equity Fund,                 company (a) that is registered under the Act or has
                                                             L.P., Oaktree Value Equity Fund, L.P.,                elected to be regulated as a BDC and (b) whose
     L.P., Oaktree Middle-Market Direct                                                                            investment adviser is an Adviser. ‘‘Adviser’’ means
     Lending Fund (Parallel), L.P., Oaktree                  Oaktree Japan Absolute Return Fund,                   OCM LP together with any future investment
     Middle-Market Direct Lending                            L.P., Oaktree Private Investment Fund                 adviser that (i) controls, is controlled by or is under
     Unlevered Fund (Parallel), L.P., Oaktree                IV, L.P., Oaktree-Forrest Multi-Strategy,             common control with OCM LP, (ii) is registered as
                                                                                                                   an investment adviser under the Investment
     European Capital Solutions Fund                         LLC, Oaktree TT Multi-Strategy Fund,                  Advisers Act of 1940 (the ‘‘Advisers Act’’), and (iii)
     (Parallel), L.P., Oaktree European                      L.P., and Oaktree Global Credit Fund,                 is not a Regulated Fund or a subsidiary of a
     Capital Solutions Fund, L.P., Oaktree                   L.P.                                                  Regulated Fund.



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     45332                       Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices

     Affiliated Funds 2 to enter into Co-                       Capital Group, LLC (‘‘OCG’’), a publicly              Regulated Fund proposes to participate
     Investment Transactions with each                          traded company. OCG owns controlling                  in the same Co-Investment Transaction
     other. ‘‘Co-Investment Transaction’’                       interests in the Adviser and, thus, may               with any of its Wholly-Owned
     means any transaction in which one or                      be deemed to control the Regulated                    Investment Subs, the Board of the
     more Regulated Funds (or its Wholly-                       Funds and the Affiliated Funds.                       parent Regulated Fund will also be
     Owned Investment Sub) participated                         Applicants state that OCG is a holding                informed of, and take into
     together with one or more Affiliated                       company and does not currently offer                  consideration, the relative participation
     Funds and/or one or more other                             investment advisory services to any                   of the Regulated Fund and the Wholly-
     Regulated Funds in reliance on the                         person and is not expected to do so in                Owned Investment Sub.
     Order. ‘‘Potential Co-Investment                           the future. Applicants state that as a
                                                                                                                      Applicants’ Representations
     Transaction’’ means any investment                         result, OCG has not been included as an
     opportunity in which a Regulated Fund                      Applicant.                                            A. Allocation Process
     (or its Wholly-Owned Investment Sub)                          6. Applicants state that a Regulated                  7. Applicants state that the Adviser is
     could not participate together with one                    Fund may, from time to time, form one                 presented with thousands of investment
     or more Affiliated Funds and/or one or                     or more Wholly-Owned Investment                       opportunities each year on behalf of its
     more other Regulated Funds without                         Subs.7 Such a subsidiary may be                       clients and after OSI elects to be
     obtaining and relying on the Order.3                       prohibited from investing in a Co-                    regulated as a BDC, the Adviser will
                                                                Investment Transaction with a                         determine how to allocate those
     Applicants                                                 Regulated Fund (other than its parent)                opportunities in a manner that, over
       2. OSI is a Delaware limited liability                   or any Affiliated Fund because it would               time, is fair and equitable to all of its
     company and a closed-end management                        be a company controlled by its parent                 clients. Such investment opportunities
     investment company that will elect to                      Regulated Entity for purposes of Section              may be Potential Co-Investment
     be regulated as a business development                     57(a)(4) and Rule 17d–1. Applicants                   Transactions.
     company (‘‘BDC’’) under the Act.4 Upon                     request that each Wholly-Owned                           8. Applicants represent that the
     OSI’s election to be regulated as a BDC,                   Investment Sub be permitted to                        Adviser has established processes for
     OSI’s Board 5 will be comprised of a                       participate in Co-Investment                          allocating initial investment
     majority of members who are                                Transactions in lieu of the Regulated                 opportunities, opportunities for
     Independent Directors.6                                    Entity that owns it and that the Wholly-              subsequent investments in an issuer and
       3. OCM LP, a Delaware limited                            Owned Investment Sub’s participation                  dispositions of securities holdings
     partnership that is registered under the                   in any such transaction be treated, for               reasonably designed to treat all clients
     Advisers Act, serves as the investment                     purposes of the Order, as though the                  fairly and equitably. Further, Applicants
     adviser to OSI.                                            parent Regulated Fund were                            represent that these processes will be
       4. The Existing Affiliated Funds are                     participating directly. Applicants                    extended and modified in a manner
     the investment funds identified in                         represent that this treatment is justified            reasonably designed to ensure that the
     Appendix A to the application.                             because a Wholly-Owned Investment                     additional transactions permitted under
     Applicants represent that each Existing                    Sub would have no purpose other than                  the Order will both (i) be fair and
     Affiliated Fund is a separate and                          serving as a holding vehicle for the                  equitable to the Regulated Funds and
     distinct legal entity and each would be                    Regulated Fund’s investments and,                     the Affiliated Funds and (ii) comply
     an investment company but for Section                      therefore, no conflicts of interest could             with the Conditions.
     3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act.                 arise between the parent Regulated                       9. Specifically, applicants state that
     OCM LP is the Adviser to the Existing                      Fund and the Wholly-Owned                             the Adviser is organized and managed
     Affiliated Funds.                                          Investment Sub. The Board of the parent               such that the portfolio managers and
       5. Each of the Applicants may be                         Regulated Fund would make all relevant                analysts (‘‘Investment Teams’’),
     deemed to be controlled by Oaktree                         determinations under the Conditions                   responsible for evaluating investment
                                                                with regard to a Wholly-Owned                         opportunities and making investment
        2 ‘‘Affiliated Fund’’ means any Existing Affiliated
                                                                Investment Sub’s participation in a Co-               decisions on behalf of clients are
     Fund (identified in Appendix A to the application)         Investment Transaction, and the Board
     or any entity (a) whose investment adviser is an                                                                 promptly notified of the opportunities.
     Adviser, (b) that would be an investment company           would be informed of, and take into                   If the requested Order is granted, the
     but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the      consideration, any proposed use of a                  Advisers will establish, maintain and
     Act and (c) that intends to participate in the             Wholly-Owned Investment Sub in the                    implement policies and procedures
     program of co-investments described in the                 Regulated Fund’s place. If the parent
     application.                                                                                                     reasonably designed to ensure that,
        3 All existing entities that currently intend to rely                                                         when such opportunities arise, the
                                                                   7 ‘‘Wholly-Owned Investment Sub’’ means an
     on the Order have been named as Applicants and                                                                   Advisers to the relevant Regulated
     any existing or future entities that may rely on the       entity (i) that is wholly-owned by a Regulated Fund
                                                                (with such Regulated Fund at all times holding,       Funds are promptly notified and receive
     Order in the future will comply with its terms and
     Conditions set forth in the application.                   beneficially and of record, 100% of the voting and    the same information about the
        4 Section 2(a)(48) defines a BDC to be any closed-
                                                                economic interests); (ii) whose sole business         opportunity as any other Advisers
                                                                purpose is to hold one or more investments on         considering the opportunity for their
     end investment company that operates for the               behalf of such Regulated Fund (and, in the case of
     purpose of making investments in securities                a SBIC Subsidiary (defined below), maintain a         clients. In particular, consistent with
     described in Section 55(a)(1) through 55(a)(3) and         license under the SBA Act (defined below) and         Condition 1, if a Potential Co-
     makes available significant managerial assistance          issue debentures guaranteed by the SBA (defined
     with respect to the issuers of such securities.                                                                  Investment Transaction falls within the
                                                                below)); (iii) with respect to which such Regulated
        5 ‘‘Board’’ means the board of directors (or the
                                                                Fund’s Board has the sole authority to make all
                                                                                                                      then-current Objectives and Strategies 8
     equivalent) of a Regulated Fund.                           determinations with respect to the entity’s
        6 ‘‘Independent Director’’ means a member of the                                                                 8 ‘‘Objectives and Strategies’’ means with respect
                                                                participation under the Conditions; and (iv) that
     Board of any relevant entity who is not an                 would be an investment company but for Section        to any Regulated Fund, its investment objectives
     ‘‘interested person’’ as defined in Section 2(a)(19)       3(c)(1) or 3(c)(7) of the Act. ‘‘SBIC Subsidiary’’    and strategies, as described in its most current
     of the Act. No Independent Director of a Regulated         means a Wholly- Owned Investment Sub that is          registration statement on Form N–2, other current
     Fund will have a financial interest in any Co-             licensed by the Small Business Administration (the    filings with the Commission under the Securities
     Investment Transaction, other than indirectly              ‘‘SBA’’) to operate under the Small Business          Act of 1933 (the ‘‘Securities Act’’) or under the
     through share ownership in one of the Regulated            Investment Act of 1958, as amended, (the ‘‘SBA        Securities Exchange Act of 1934, as amended, and
     Funds.                                                     Act’’) as a small business investment company.        its most current report to stockholders.



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                               Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices                                                      45333

     and any Board-Established Criteria 9 of a                Fund or Affiliated Fund resulting from                 B. Follow-On Investments
     Regulated Fund, the policies and                         this process is referred to as its ‘‘Internal            13. Applicants state that from time to
     procedures will require that the relevant                Order.’’ The Internal Order will be                    time the Regulated Funds and Affiliated
     Investment Team responsible for that                     submitted for approval by the Required                 Funds may have opportunities to make
     Regulated Fund receive sufficient                        Majority of any participating Regulated                Follow-On Investments 14 in an issuer in
     information to allow the Regulated                       Funds in accordance with the                           which a Regulated Fund and one or
     Fund’s Adviser to make its independent                   Conditions.11                                          more other Regulated Funds and/or
     determination and recommendations                                                                               Affiliated Funds previously have
     under the Conditions.                                       12. If the aggregate Internal Orders for
                                                              a Potential Co-Investment Transaction                  invested.
        10. The Adviser to each applicable
                                                              do not exceed the size of the investment                 14. Applicants propose that Follow-
     Regulated Fund will then make an
                                                              opportunity immediately prior to the                   On Investments would be divided into
     independent determination of the
                                                              submission of the orders to the                        two categories depending on whether
     appropriateness of the investment for
                                                              underwriter, broker, dealer or issuer, as              the prior investment was a Co-
     the Regulated Fund in light of the
                                                              applicable (the ‘‘External Submission’’),              Investment Transaction or a Pre-
     Regulated Fund’s then-current
                                                              then each Internal Order will be                       Boarding Investment.15 If the Regulated
     circumstances. If the Adviser to a
     Regulated Fund deems the Regulated                       fulfilled as placed. If, on the other hand,            Funds and Affiliated Funds had
     Fund’s participation in such Potential                   the aggregate Internal Orders for a                    previously participated in a Co-
     Co-Investment Transaction to be                          Potential Co-Investment Transaction                    Investment Transaction with respect to
     appropriate, then it will formulate a                    exceed the size of the investment                      the issuer, then the terms and approval
     recommendation regarding the proposed                    opportunity immediately prior to the                   of the Follow-On Investment would be
     order amount for the Regulated Fund.                                                                            subject to the Standard Review Follow-
                                                              External Submission, then the allocation
        11. Applicants state that, for each                                                                          Ons described in Condition 8. If the
                                                              of the opportunity will be made pro rata
     Regulated Fund and Affiliated Fund                                                                              Regulated Funds and Affiliated Funds
                                                              on the basis of the size of the Internal
     whose Adviser recommends                                                                                        have not previously participated in a
                                                              Orders.12 If, subsequent to such External
     participating in a Potential Co-                                                                                Co-Investment Transaction with respect
                                                              Submission, the size of the opportunity                to the issuer but hold a Pre-Boarding
     Investment Transaction, the Adviser                      is increased or decreased, or if the terms
     will submit a proposed order amount to                                                                          Investment, then the terms and approval
                                                              of such opportunity, or the facts and                  of the Follow-On Investment would be
     an internal allocation committee which                   circumstances applicable to the
     the Adviser will establish to handle the                                                                        subject to the Enhanced-Review Follow-
                                                              Regulated Funds’ or the Affiliated                     Ons described in Condition 9. All
     allocation of investment opportunities                   Funds’ consideration of the opportunity,
     in Potential Co-Investment Transactions                                                                         Enhanced Review Follow-Ons require
                                                              change, the participants will be                       the approval of the Required Majority.
     (the ‘‘Co-Investment Transaction
                                                              permitted to submit revised Internal                   For a given issuer, the participating
     Allocation Committee’’). Applicants
                                                              Orders in accordance with written                      Regulated Funds and Affiliated Funds
     state further that, at this stage, each
                                                              allocation policies and procedures that                would need to comply with the
     proposed order amount may be
     reviewed and adjusted, in accordance                     the Advisers will establish, implement                 requirements of Enhanced-Review
     with the Advisers’ written allocation                    and maintain.13                                        Follow-Ons only for the first Co-
     policies and procedures, by the Co-                                                                             Investment Transaction. Subsequent Co-
     Investment Transaction Allocation
                                                                11 ‘‘Required Majority’’ means a required
                                                                                                                     Investment Transactions with respect to
                                                              majority, as defined in Section 57(o) of the Act. In   the issuer would be governed by the
     Committee.10 The order of a Regulated                    the case of a Regulated Fund that is a registered
                                                              closed-end fund, the Board members that make up        requirements of Standard Review
       9 ‘‘Board-Established Criteria’’ means criteria that   the Required Majority will be determined as if the     Follow-Ons.
     the Board of a Regulated Fund may establish from         Regulated Fund were a BDC subject to Section             15. A Regulated Fund would be
     time to time to describe the characteristics of          57(o).
     Potential Co-Investment Transactions regarding             12 The Advisers will maintain records of all
                                                                                                                     permitted to invest in Standard Review
     which the Adviser to the Regulated Fund should be        proposed order amounts, Internal Orders and
                                                                                                                     Follow-Ons either with the approval of
     notified under Condition 1. The Board-Established        External Submissions in conjunction with Potential     the Required Majority under Condition
     Criteria will be consistent with the Regulated           Co-Investment Transactions. Each applicable            8(c) or without Board approval under
     Fund’s Objectives and Strategies. If no Board-           Adviser will provide the Eligible Directors with
     Established Criteria are in effect, then the Regulated                                                          Condition 8(b) if it is (i) a Pro Rata
                                                              information concerning the Affiliated Funds’ and
     Fund’s Adviser will be notified of all Potential Co-     Regulated Funds’ order sizes to assist the Eligible
                                                                                                                     Follow-On Investment 16 or (ii) a Non-
     Investment Transactions that fall within the             Directors with their review of the applicable
     Regulated Fund’s then-current Objectives and                                                                      14 ‘‘Follow-On Investment’’ means an additional
                                                              Regulated Fund’s investments for compliance with
     Strategies. Board-Established Criteria will be                                                                  investment in the same issuer, including, but not
                                                              the Conditions. ‘‘Eligible Directors’’ means, with
     objective and testable, meaning that they will be                                                               limited to, through the exercise of warrants,
                                                              respect to a Regulated Fund and a Potential Co-
     based on observable information, such as industry/                                                              conversion privileges or other rights to purchase
                                                              Investment Transaction, the members of the
     sector of the issuer, minimum EBITDA of the issuer,                                                             securities of the issuer.
     asset class of the investment opportunity or             Regulated Fund’s Board eligible to vote on that
                                                              Potential Co-Investment Transaction under Section        15 ‘‘Pre-Boarding Investments’’ are investments in
     required commitment size, and not on
     characteristics that involve a discretionary             57(o) of the Act.                                      an issuer held by a Regulated Fund as well as one
     assessment. The Adviser to the Regulated Fund may
                                                                13 However, if the size of the opportunity is        or more Affiliated Funds and/or one or more other
     from time to time recommend criteria for the             decreased such that the aggregate of the original      Regulated Funds that: (i) Were acquired prior to
     Board’s consideration, but Board-Established             Internal Orders would exceed the amount of the         participating in any Co-Investment Transaction; (ii)
     Criteria will only become effective if approved by       remaining investment opportunity, then upon            were acquired in transactions in which the only
     a majority of the Independent Directors. The             submitting any revised order amount to the Board       term negotiated by or on behalf of such funds was
     Independent Directors of a Regulated Fund may at         of a Regulated Fund for approval, the Adviser to the   price; and (iii) were acquired either: (A) in reliance
     any time rescind, suspend or qualify its approval        Regulated Fund will also notify the Board promptly     on one of the JT No-Action Letters (defined below);
     of any Board-Established Criteria, though                of the amount that the Regulated Fund would            or (B) in transactions occurring at least 90 days
     Applicants anticipate that, under normal                 receive if the remaining investment opportunity        apart and without coordination between the
     circumstances, the Board would not modify these          were allocated pro rata on the basis of the size of    Regulated Fund and any Affiliated Fund or other
     criteria more often than quarterly.                      the original Internal Orders. The Board of the         Regulated Fund.
       10 The reason for any such adjustment to a             Regulated Fund will then either approve or               16 A ‘‘Pro Rata Follow-On Investment’’ is a

     proposed order amount will be documented in              disapprove of the investment opportunity in            Follow-On Investment (i) in which the participation
     writing and preserved in the records of the              accordance with condition 2, 6, 7, 8 or 9, as          of each Affiliated Fund and each Regulated Fund
     Advisers.                                                applicable.                                                                                        Continued




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     45334                     Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices

     Negotiated Follow-On Investment.17                        17. A Regulated Fund may participate                     date on which the commitment of the
     Applicants believe that these Pro Rata                  in a Standard Review Disposition either                    Affiliated Funds and Regulated Funds is
     and Non-Negotiated Follow-On                            with the approval of the Required                          made will be the same even where the
     Investments do not present a significant                Majority under Condition 6(d) or                           settlement date is not and (ii) the
     opportunity for overreaching on the part                without Board approval under                               earliest settlement date and the latest
     of any Adviser and thus do not warrant                  Condition 6(c) if (i) the Disposition is a                 settlement date of any Affiliated Fund
     the time or the attention of the Board.                 Pro Rata Disposition 20 or (ii) the                        or Regulated Fund participating in the
     Pro Rata Follow-On Investments and                      securities are Tradable Securities 21 and                  transaction will occur within ten
     Non-Negotiated Follow-On Investments                    the Disposition meets the other                            business days of each other.
     remain subject to the Board’s periodic                  requirements of Condition 6(c)(ii). Pro
                                                                                                                        E. Holders
     review in accordance with Condition                     Rata Dispositions and Dispositions of a
     10.                                                     Tradable Security remain subject to the                       19. Under Condition 15, if an Adviser,
                                                             Board’s periodic review in accordance                      its principals, or any person controlling,
     C. Dispositions                                                                                                    controlled by, or under common control
                                                             with Condition 10.
        16. Applicants propose that                                                                                     with the Adviser or its principals, and
     Dispositions 18 would be divided into                   D. Delayed Settlement                                      the Affiliated Funds (collectively, the
     two categories. If the Regulated Funds                    18. Applicants represent that under                      ‘‘Holders’’) own in the aggregate more
     and Affiliated Funds holding                            the terms and Conditions of the                            than 25 percent of the outstanding
     investments in the issuer had previously                Application, all Regulated Funds and                       voting shares of a Regulated Fund (the
     participated in a Co-Investment                         Affiliated Funds participating in a Co-                    ‘‘Shares’’), then the Holders will vote
     Transaction with respect to the issuer,                 Investment Transaction will invest at                      such Shares as directed by an
     then the terms and approval of the                      the same time, for the same price and                      independent third party when voting on
     Disposition would be subject to the                     with the same terms, conditions, class,                    matters specified in the Condition.
     Standard Review Dispositions described                  registration rights and any other rights,                  Applicants believe that this Condition
     in Condition 6. If the Regulated Funds                  so that none of them receives terms                        will ensure that the Independent
     and Affiliated Funds have not                           more favorable than any other.                             Directors will act independently in
     previously participated in a Co-                        However, the settlement date for an                        evaluating Co-Investment Transactions,
     Investment Transaction with respect to                  Affiliated Fund in a Co-Investment                         because the ability of the Adviser or its
     the issuer but hold a Pre-Boarding                      Transaction may occur up to ten                            principals to influence the Independent
     Investment, then the terms and approval                 business days after the settlement date                    Directors by a suggestion, explicit or
     of the Disposition would be subject to                  for the Regulated Fund, and vice                           implied, that the Independent Directors
     the Enhanced Review Dispositions                        versa.22 Nevertheless, in all cases, (i) the               can be removed will be limited
     described in Condition 7. Subsequent                                                                               significantly. The Independent Directors
     Dispositions with respect to the same                   in relation to the total economic exposure in such         shall evaluate and approve any
     issuer would be governed by Condition                   issuer (i.e., in combination with the portion of the       independent party, taking into account
                                                             Pre-Boarding Investment not disposed of in the
     6 under the Standard Review                             Enhanced Review Disposition), and the other terms
                                                                                                                        its qualifications, reputation for
     Dispositions.19                                         of the investments. This additional review would be        independence, cost to the shareholders,
                                                             required because such findings would not have              and other factors that they deem
     is proportionate to its outstanding investments in      been required in connection with the prior                 relevant.
     the issuer or security, as appropriate, immediately     Enhanced Review Disposition, but they would have
     preceding the Follow-On Investment, and (ii) in the     been required had the first Co-Investment                  Applicants’ Legal Analysis
     case of a Regulated Fund, a majority of the Board       Transaction been an Enhanced Review Follow-On.
     has approved the Regulated Fund’s participation in         20 A ‘‘Pro Rata Disposition’’ is a Disposition (i) in      1. Section 17(d) of the Act and rule
     the pro rata Follow-On Investments as being in the      which the participation of each Affiliated Fund and        17d–1 under the Act prohibit
     best interests of the Regulated Fund. The Regulated     each Regulated Fund is proportionate to its                participation by a registered investment
     Fund’s Board may refuse to approve, or at any time      outstanding investment in the security subject to
     rescind, suspend or qualify, its approval of Pro Rata
                                                                                                                        company and an affiliated person in any
                                                             Disposition immediately preceding the Disposition;
     Follow-On Investments, in which case all                and (ii) in the case of a Regulated Fund, a majority       ‘‘joint enterprise or other joint
     subsequent Follow-On Investments will be                of the Board has approved the Regulated Fund’s             arrangement or profit-sharing plan,’’ as
     submitted to the Regulated Fund’s Eligible Directors    participation in pro rata Dispositions as being in the     defined in the rule, without prior
     in accordance with Condition 8(c).                      best interests of the Regulated Fund. The Regulated
        17 A ‘‘Non-Negotiated Follow-On Investment’’ is a
                                                                                                                        approval by the Commission by order
                                                             Fund’s Board may refuse to approve, or at any time
     Follow-On Investment in which a Regulated Fund          rescind, suspend or qualify, its approval of Pro Rata      upon application. Section 17(d) of the
     participates together with one or more Affiliated       Dispositions, in which case all subsequent                 Act and rule 17d–1 under the Act are
     Funds and/or one or more other Regulated Funds          Dispositions will be submitted to the Regulated            applicable to Regulated Funds that are
     (i) in which the only term negotiated by or on behalf   Fund’s Eligible Directors.                                 registered closed-end investment
     of the funds is price and (ii) with respect to which,      21 ‘‘Tradable Security’’ means a security that
     if the transaction were considered on its own, the      meets the following criteria at the time of
                                                                                                                        companies.
     funds would be entitled to rely on one of the JT No-    Disposition: (i) It trades on a national securities           2. Similarly, with regard to BDCs,
     Action Letters. ‘‘JT No-Action Letters’’ means SMC      exchange or designated offshore securities market          section 57(a)(4) of the Act generally
     Capital, Inc., SEC No-Action Letter (pub. avail.        as defined in rule 902(b) under the Securities Act;        prohibits certain persons specified in
     Sept. 5, 1995) and Massachusetts Mutual Life            (ii) it is not subject to restrictive agreements with
     Insurance Company, SEC No-Action Letter (pub.           the issuer or other security holders; and (iii) it
                                                                                                                        section 57(b) from participating in joint
     avail. June 7, 2000).                                   trades with sufficient volume and liquidity                transactions with the BDC or a company
        18 ‘‘Disposition’’ means the sale, exchange or       (findings as to which are documented by the
     other disposition of an interest in a security of an    Advisers to any Regulated Funds holding                    Regulated Fund is not yet fully funded because,
     issuer.                                                 investments in the issuer and retained for the life        when the Affiliated Fund or Regulated Fund desires
        19 However, with respect to an issuer, if a          of the Regulated Fund) to allow each Regulated             to make an investment, it must call capital from its
     Regulated Fund’s first Co-Investment Transaction is     Fund to dispose of its entire position remaining           investors to obtain the financing to make the
     an Enhanced Review Disposition, and the Regulated       after the proposed Disposition within a short period       investment, and in these instances, the notice
     Fund does not dispose of its entire position in the     of time not exceeding 30 days at approximately the         requirement to call capital could be as much as ten
     Enhanced Review Disposition, then before such           value (as defined by section 2(a)(41) of the Act) at       business days. Second, where, for tax or regulatory
     Regulated Fund may complete its first Standard          which the Regulated Fund has valued the                    reasons, an Affiliated Fund or Regulated Fund does
     Review Follow-On in such issuer, the Eligible           investment.                                                not purchase new issuances immediately upon
     Directors must review the proposed Follow-On               22 Applicants state this may occur for two              issuance but only after a short seasoning period of
     Investment not only on a stand-alone basis but also     reasons. First, when the Affiliated Fund or                up to ten business days.



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                              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices                                            45335

     controlled by the BDC in contravention                  the equity holders of any participant                 investments for compliance with these
     of rules as prescribed by the                           from being disadvantaged. Applicants                  Conditions.
     Commission. Section 57(i) of the Act                    further state that the Conditions ensure                 (c) After making the determinations
     provides that, until the Commission                     that all Co-Investment Transactions are               required in Condition 1(b) above, each
     prescribes rules under section 57(a)(4),                reasonable and fair to the Regulated                  Adviser to a participating Regulated
     the Commission’s rules under section                    Funds and their shareholders and do                   Fund will distribute written information
     17(d) of the Act applicable to registered               not involve overreaching by any person                concerning the Potential Co-Investment
     closed-end investment companies will                    concerned, including the Advisers.                    Transaction (including the amount
     be deemed to apply to transactions                      Applicants state that the Regulated                   proposed to be invested by each
     subject to section 57(a)(4). Because the                Funds’ participation in the Co-                       participating Regulated Fund and each
     Commission has not adopted any rules                    Investment Transactions in accordance                 participating Affiliated Fund) to the
     under section 57(a)(4), rule 17d–1 also                 with the Conditions will be consistent                Eligible Directors of its participating
     applies to joint transactions with                      with the provisions, policies, and                    Regulated Fund(s) for their
     Regulated Funds that are BDCs.                          purposes of the Act and would be done                 consideration. A Regulated Fund will
        3. Co-Investment Transactions are                    in a manner that is not different from,               enter into a Co-Investment Transaction
     prohibited by either or both of Rule                    or less advantageous than, that of other              with one or more other Regulated Funds
     17d–1 and Section 57(a)(4) without a                    participants.                                         or Affiliated Funds only if, prior to the
     prior exemptive order of the                                                                                  Regulated Fund’s participation in the
     Commission to the extent that the                       Applicants’ Conditions                                Potential Co-Investment Transaction, a
     Affiliated Funds and the Regulated                        Applicants agree that the Order will                Required Majority concludes that:
     Funds participating in such transactions                be subject to the following Conditions:                  (i) The terms of the transaction,
     fall within the category of persons                       1. Identification and Referral of                   including the consideration to be paid,
     described by Rule 17d–1 and/or Section                  Potential Co-Investment Transactions.                 are reasonable and fair to the Regulated
     57(b), as applicable, vis-à-vis each                     (a) The Advisers will establish,                    Fund and its equity holders and do not
     participating Regulated Fund. Each of                   maintain and implement policies and                   involve overreaching in respect of the
     the participating Regulated Funds and                   procedures reasonably designed to                     Regulated Fund or its equity holders on
     Affiliated Funds may be deemed to be                    ensure that each Adviser is promptly                  the part of any person concerned;
     affiliated persons vis-à-vis a Regulated               notified of all Potential Co-Investment                  (ii) the transaction is consistent with:
     Fund within the meaning of section                                                                               (A) The interests of the Regulated
                                                             Transactions that fall within the then-
     2(a)(3) by reason of common control                                                                           Fund’s equity holders; and
                                                             current Objectives and Strategies and                    (B) the Regulated Fund’s then-current
     because (i) controlled affiliates of OCG                Board-Established Criteria of any
     manage each of the Affiliated Funds and                                                                       Objectives and Strategies;
                                                             Regulated Fund the Adviser manages.                      (iii) the investment by any other
     may be deemed to control any Future
                                                               (b) When an Adviser to a Regulated                  Regulated Fund(s) or Affiliated Fund(s)
     Regulated Fund, (ii) OCG controls OCM
                                                             Fund is notified of a Potential Co-                   would not disadvantage the Regulated
     LP, which manages OSI. Thus, each of
                                                             Investment Transaction under                          Fund, and participation by the
     the Affiliated Funds could be deemed to
                                                             Condition 1(a), the Adviser will make                 Regulated Fund would not be on a basis
     be a person related to OSI in a manner
                                                             an independent determination of the                   different from, or less advantageous
     described by Section 57(b) and related
                                                             appropriateness of the investment for                 than, that of any other Regulated
     to other Future Regulated Funds in a
                                                             the Regulated Fund in light of the                    Fund(s) or Affiliated Fund(s)
     manner described by Rule 17d–1; and
                                                             Regulated Fund’s then-current                         participating in the transaction;
     therefore the prohibitions of Rule 17d–
     1 and Section 57(a)(4) would apply                      circumstances.                                        provided that the Required Majority
     respectively to prohibit the Affiliated                   2. Board Approvals of Co-Investment                 shall not be prohibited from reaching
     Funds from participating in Co-                         Transactions.                                         the conclusions required by this
     Investment Transactions with the                          (a) If the Adviser deems a Regulated                Condition 2(c)(iii) if:
     Regulated Funds.                                        Fund’s participation in any Potential                    (A) The settlement date for another
        4. In passing upon applications under                Co-Investment Transaction to be                       Regulated Fund or an Affiliated Fund in
     rule 17d–1, the Commission considers                    appropriate for the Regulated Fund, it                a Co-Investment Transaction is later
     whether the company’s participation in                  will then determine an appropriate level              than the settlement date for the
     the joint transaction is consistent with                of investment for the Regulated Fund.                 Regulated Fund by no more than ten
     the provisions, policies, and purposes of                 (b) If the aggregate amount                         business days or earlier than the
     the Act and the extent to which such                    recommended by the Advisers to be                     settlement date for the Regulated Fund
     participation is on a basis different from              invested in the Potential Co-Investment               by no more than ten business days, in
     or less advantageous than that of other                 Transaction by the participating                      either case, so long as: (x) The date on
     participants.                                           Regulated Funds and any participating                 which the commitment of the Affiliated
        5. Applicants state that in the absence              Affiliated Funds, collectively, exceeds               Funds and Regulated Funds is made is
     of the requested relief, in many                        the amount of the investment                          the same; and (y) the earliest settlement
     circumstances the Regulated Funds                       opportunity, the investment opportunity               date and the latest settlement date of
     would be limited in their ability to                    will be allocated among them pro rata                 any Affiliated Fund or Regulated Fund
     participate in attractive and appropriate               based on the size of the Internal Orders,             participating in the transaction will
     investment opportunities. Applicants                    as described in section III.A.1.b. of the             occur within ten business days of each
     state that, as required by Rule 17d–1(b),               application. Each Adviser to a                        other; or
     the Conditions ensure that the terms on                 participating Regulated Fund will                        (B) any other Regulated Fund or
     which Co-Investment Transactions may                    promptly notify and provide the Eligible              Affiliated Fund, but not the Regulated
     be made will be consistent with the                     Directors with information concerning                 Fund itself, gains the right to nominate
     participation of the Regulated Funds                    the Affiliated Funds’ and Regulated                   a director for election to a portfolio
     being on a basis that it is neither                     Funds’ order sizes to assist the Eligible             company’s board of directors, the right
     different from nor less advantageous                    Directors with their review of the                    to have a board observer or any similar
     than other participants, thus protecting                applicable Regulated Fund’s                           right to participate in the governance or


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     45336                     Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices

     management of the portfolio company                     issuer in which a Related Party has an                  proportionate basis, at the same price
     so long as: (x) The Eligible Directors will             investment.25                                           and on the same terms and conditions
     have the right to ratify the selection of                  5. Same Terms and Conditions. A                      as those applicable to the Affiliated
     such director or board observer, if any;                Regulated Fund will not participate in                  Funds and any other Regulated Fund.
     (y) the Adviser agrees to, and does,                    any Potential Co-Investment                                (c) No Board Approval Required. A
     provide periodic reports to the                         Transaction unless (i) the terms,                       Regulated Fund may participate in such
     Regulated Fund’s Board with respect to                  conditions, price, class of securities to               a Disposition without obtaining prior
     the actions of such director or the                     be purchased, date on which the                         approval of the Required Majority if:
     information received by such board                      commitment is entered into and                             (i) (A) The participation of each
     observer or obtained through the                        registration rights (if any) will be the                Regulated Fund and Affiliated Fund in
     exercise of any similar right to                        same for each participating Regulated                   such Disposition is proportionate to its
                                                             Fund and Affiliated Fund and (ii) the                   then-current holding of the security (or
     participate in the governance or
                                                             earliest settlement date and the latest                 securities) of the issuer that is (or are)
     management of the portfolio company;
                                                             settlement date of any participating                    the subject of the Disposition; 26 (B) the
     and (z) any fees or other compensation
                                                             Regulated Fund or Affiliated Fund will                  Board of the Regulated Fund has
     that any other Regulated Fund or
                                                             occur as close in time as practicable and               approved as being in the best interests
     Affiliated Fund or any affiliated person
                                                             in no event more than ten business days                 of the Regulated Fund the ability to
     of any other Regulated Fund or                                                                                  participate in such Dispositions on a pro
     Affiliated Fund receives in connection                  apart. The grant to one or more
                                                             Regulated Funds or Affiliated Funds,                    rata basis (as described in greater detail
     with the right of one or more Regulated                                                                         in the application); and (C) the Board of
     Funds or Affiliated Funds to nominate                   but not the respective Regulated Fund,
                                                             of the right to nominate a director for                 the Regulated Fund is provided on a
     a director or appoint a board observer or                                                                       quarterly basis with a list of all
     otherwise to participate in the                         election to a portfolio company’s board
                                                             of directors, the right to have an                      Dispositions made in accordance with
     governance or management of the                                                                                 this Condition; or
     portfolio company will be shared                        observer on the board of directors or
                                                             similar rights to participate in the                       (ii) each security is a Tradable
     proportionately among any participating                                                                         Security and (A) the Disposition is not
     Affiliated Funds (who may, in turn,                     governance or management of the
                                                             portfolio company will not be                           to the issuer or any affiliated person of
     share their portion with their affiliated                                                                       the issuer; and (B) the security is sold
     persons) and any participating                          interpreted so as to violate this
                                                             Condition 5, if Condition 2(c)(iii)(B) is               for cash in a transaction in which the
     Regulated Fund(s) in accordance with                                                                            only term negotiated by or on behalf of
     the amount of each such party’s                         met.
                                                                6. Standard Review Dispositions.                     the participating Regulated Funds and
     investment; and                                            (a) General. If any Regulated Fund or                Affiliated Funds is price.
       (iv) the proposed investment by the                   Affiliated Fund elects to sell, exchange                   (d) Standard Board Approval. In all
     Regulated Fund will not involve                         or otherwise dispose of an interest in a                other cases, the Adviser will provide its
     compensation, remuneration or a direct                  security and one or more Regulated                      written recommendation as to the
     or indirect 23 financial benefit to the                 Funds and Affiliated Funds have                         Regulated Fund’s participation to the
     Advisers, any other Regulated Fund, the                 previously participated in a Co-                        Eligible Directors and the Regulated
     Affiliated Funds or any affiliated person               Investment Transaction with respect to                  Fund will participate in such
     of any of them (other than the parties to               the issuer, then:                                       Disposition solely to the extent that a
     the Co-Investment Transaction), except                     (i) The Adviser to such Regulated                    Required Majority determines that it is
     (A) to the extent permitted by Condition                Fund or Affiliated Fund will notify each                in the Regulated Fund’s best interests.
     14, (B) to the extent permitted by                      Regulated Fund that holds an                               7. Enhanced Review Dispositions.
                                                                                                                        (a) General. If any Regulated Fund or
     Section 17(e) or 57(k), as applicable, (C)              investment in the issuer of the proposed
                                                                                                                     Affiliated Fund elects to sell, exchange
     indirectly, as a result of an interest in               Disposition at the earliest practical time;
                                                                                                                     or otherwise dispose of a Pre-Boarding
     the securities issued by one of the                     and
                                                                (ii) the Adviser to each Regulated                   Investment in a Potential Co-Investment
     parties to the Co-Investment                                                                                    Transaction and the Regulated Funds
     Transaction, or (D) in the case of fees or              Fund that holds an investment in the
                                                             issuer will formulate a recommendation                  and Affiliated Funds have not
     other compensation described in                                                                                 previously participated in a Co-
     Condition 2(c)(iii)(B)(z).                              as to participation by such Regulated
                                                             Fund in the Disposition.                                Investment Transaction with respect to
       3. Right to Decline. Each Regulated                      (b) Same Terms and Conditions. Each                  the issuer:
     Fund has the right to decline to                        Regulated Fund will have the right to                      (i) The Adviser to such Regulated
     participate in any Potential Co-                        participate in such Disposition on a                    Fund or Affiliated Fund will notify each
     Investment Transaction or to invest less                                                                        Regulated Fund that holds an
     than the amount proposed.                                  25 ‘‘Related Party’’ means (i) any Close Affiliate   investment in the issuer of the proposed
       4. General Limitation. Except for                     and (ii) in respect of matters as to which any          Disposition at the earliest practical time;
     Follow-On Investments made in                           Adviser has knowledge, any Remote Affiliate.               (ii) the Adviser to each Regulated
                                                             ‘‘Close Affiliate’’ means the Advisers, the Regulated   Fund that holds an investment in the
     accordance with Conditions 8 and 9                      Funds, the Affiliated Funds and any other person        issuer will formulate a recommendation
     below,24 a Regulated Fund will not                      described in Section 57(b) (after giving effect to
                                                             Rule 57b–1) in respect of any Regulated Fund            as to participation by such Regulated
     invest in reliance on the Order in any
                                                             (treating any registered investment company or          Fund in the Disposition; and
                                                             series thereof as a BDC for this purpose) except for       (iii) the Advisers will provide to the
       23 For example, procuring the Regulated Fund’s
                                                             limited partners included solely by reason of the       Board of each Regulated Fund that
     investment in a Potential Co-Investment                 reference in Section 57(b) to Section 2(a)(3)(D).
     Transaction to permit an affiliate to complete or       ‘‘Remote Affiliate’’ means any person described in      holds an investment in the issuer all
     obtain better terms in a separate transaction would     Section 57(e) in respect of any Regulated Fund
     constitute an indirect financial benefit.               (treating any registered investment company or            26 In the case of any Disposition, proportionality
       24 This exception applies only to Follow-On           series thereof as a BDC for this purpose) and any       will be measured by each participating Regulated
     Investments by a Regulated Fund in issuers in           limited partner holding 5% or more of the relevant      Fund’s and Affiliated Fund’s outstanding
     which that Regulated Fund already holds                 limited partner interests that would be a Close         investment in the security in question immediately
     investments.                                            Affiliate but for the exclusion in that definition.     preceding the Disposition.



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                              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices                                            45337

     information relating to the existing                    amount, including immaterial relative to               and (B) the Board of the Regulated Fund
     investments in the issuer of the                        the size of the issuer; and (y) the Board              has approved as being in the best
     Regulated Funds and Affiliated Funds,                   records the basis for any such finding in              interests of the Regulated Fund the
     including the terms of such investments                 its minutes. In addition, securities that              ability to participate in Follow-On
     and how they were made, that is                         differ only in respect of issuance date,               Investments on a pro rata basis (as
     necessary for the Required Majority to                  currency, or denominations may be                      described in greater detail in the
     make the findings required by this                      treated as the same security; and                      Application); or
     Condition.                                                 (v) No control. The Affiliated Funds,                  (ii) it is a Non-Negotiated Follow-On
        (b) Enhanced Board Approval. The                     the other Regulated Funds and their                    Investment.
     Adviser will provide its written                        affiliated persons (within the meaning                    (c) Standard Board Approval. In all
     recommendation as to the Regulated                      of Section 2(a)(3)(C) of the Act),                     other cases, the Adviser will provide its
     Fund’s participation to the Eligible                    individually or in the aggregate, do not               written recommendation as to the
     Directors, and the Regulated Fund will                  control the issuer of the securities                   Regulated Fund’s participation to the
     participate in such Disposition solely to               (within the meaning of Section 2(a)(9) of              Eligible Directors and the Regulated
     the extent that a Required Majority                     the Act).                                              Fund will participate in such Follow-On
     determines that:                                           8. Standard Review Follow-Ons.                      Investment solely to the extent that a
        (i) The Disposition complies with                       (a) General. If any Regulated Fund or               Required Majority makes the
     Conditions 2(c)(i), (ii), (iii)(A), and (iv);           Affiliated Fund desires to make a                      determinations set forth in Condition
     and                                                     Follow-On Investment in an issuer and                  2(c). If the only previous Co-Investment
        (ii) the making and holding of the Pre-              the Regulated Funds and Affiliated                     Transaction with respect to the issuer
     Boarding Investments were not                           Funds holding investments in the issuer                was an Enhanced Review Disposition
     prohibited by Section 57 or Rule 17d–                   previously participated in a Co-                       the Eligible Directors must complete
     1, as applicable, and records the basis                 Investment Transaction with respect to                 this review of the proposed Follow-On
     for the finding in the Board minutes.                   the issuer:                                            Investment both on a stand-alone basis
        (c) Additional Requirements. The                        (i) The Adviser to each such                        and together with the Pre-Boarding
     Disposition may only be completed in                    Regulated Fund or Affiliated Fund will                 Investments in relation to the total
     reliance on the Order if:                               notify each Regulated Fund that holds                  economic exposure and other terms of
        (i) Same Terms and Conditions. Each                  securities of the portfolio company of                 the investment.
     Regulated Fund has the right to                         the proposed transaction at the earliest                  (d) Allocation. If, with respect to any
     participate in such Disposition on a                    practical time; and                                    such Follow-On Investment:
     proportionate basis, at the same price                     (ii) the Adviser to each Regulated                     (i) The amount of the opportunity
     and on the same terms and conditions                    Fund that holds an investment in the                   proposed to be made available to any
     as those applicable to the Affiliated                   issuer will formulate a recommendation                 Regulated Fund is not based on the
     Funds and any other Regulated Fund;                     as to the proposed participation,                      Regulated Funds’ and the Affiliated
        (ii) Original Investments. All of the                including the amount of the proposed                   Funds’ outstanding investments in the
     Affiliated Funds’ and Regulated Funds’                  investment, by such Regulated Fund.                    issuer or the security at issue, as
     investments in the issuer are Pre-                         (b) No Board Approval Required. A                   appropriate, immediately preceding the
     Boarding Investments;                                   Regulated Fund may participate in the                  Follow-On Investment; and
        (iii) Advice of counsel. Independent                 Follow-On Investment without                              (ii) the aggregate amount
     counsel to the Board advises that the                   obtaining prior approval of the Required               recommended by the Advisers to be
     making and holding of the investments                   Majority if:                                           invested in the Follow-On Investment
     in the Pre-Boarding Investments were                       (i) (A) The proposed participation of               by the participating Regulated Funds
     not prohibited by Section 57 (as                        each Regulated Fund and each                           and any participating Affiliated Funds,
     modified by Rule 57b–1) or Rule 17d–                    Affiliated Fund in such investment is                  collectively, exceeds the amount of the
     1, as applicable;                                       proportionate to its outstanding                       investment opportunity, then the
        (iv) Multiple Classes of Securities. All             investments in the issuer or the security              Follow-On Investment opportunity will
     Regulated Funds and Affiliated Funds                    at issue, as appropriate,28 immediately                be allocated among them pro rata based
     that hold Pre-Boarding Investments in                   preceding the Follow-On Investment;                    on the size of the Internal Orders, as
     the issuer immediately before the time                                                                         described in section III.A.1.b. of the
     of completion of the Co-Investment                      and extent of the interest in the transaction or       application.
     Transaction hold the same security or                   arrangement is sufficiently small that a reasonable       (e) Other Conditions. The acquisition
     securities of the issuer. For the purpose               person would not believe that the interest affected    of Follow-On Investments as permitted
                                                             the determination of whether to enter into the         by this Condition will be considered a
     of determining whether the Regulated                    transaction or arrangement or the terms of the
     Funds and Affiliated Funds hold the                     transaction or arrangement.                            Co-Investment Transaction for all
     same security or securities, they may                      28 To the extent that a Follow-On Investment        purposes and subject to the other
     disregard any security held by some but                 opportunity is in a security or arises in respect of   Conditions set forth in the application.
                                                             a security held by the participating Regulated            9. Enhanced Review Follow-Ons.
     not all of them if, prior to relying on the             Funds and Affiliated Funds, proportionality will be
     Order, the Required Majority is                                                                                   (a) General. If any Regulated Fund or
                                                             measured by each participating Regulated Fund’s
     presented with all information                          and Affiliated Fund’s outstanding investment in the    Affiliated Fund desires to make a
     necessary to make a finding, and finds,                 security in question immediately preceding the         Follow-On Investment in an issuer that
     that: (x) Any Regulated Fund’s or
                                                             Follow-On Investment using the most recent             is a Potential Co-Investment Transaction
                                                             available valuation thereof. To the extent that a      and the Regulated Funds and Affiliated
     Affiliated Fund’s holding of a different                Follow-On Investment opportunity relates to an
     class of securities (including for this                 opportunity to invest in a security that is not in     Funds holding investments in the issuer
     purpose a security with a different                     respect of any security held by any of the             have not previously participated in a
     maturity date) is immaterial 27 in
                                                             participating Regulated Funds or Affiliated Funds,     Co-Investment Transaction with respect
                                                             proportionality will be measured by each               to the issuer:
                                                             participating Regulated Fund’s and Affiliated
        27 In determining whether a holding is               Fund’s outstanding investment in the issuer
                                                                                                                       (i) The Adviser to each such
     ‘‘immaterial’’ for purposes of the Order, the           immediately preceding the Follow-On Investment         Regulated Fund or Affiliated Fund will
     Required Majority will consider whether the nature      using the most recent available valuation thereof.     notify each Regulated Fund that holds


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     45338                    Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices

     securities of the portfolio company of                  same security or securities, they may                 and an explanation of why such
     the proposed transaction at the earliest                disregard any security held by some but               investment opportunities were not made
     practical time;                                         not all of them if, prior to relying on the           available to the Regulated Fund; (ii) a
        (ii) the Adviser to each Regulated                   Order, the Required Majority is                       record of all Follow-On Investments in
     Fund that holds an investment in the                    presented with all information                        and Dispositions of investments in any
     issuer will formulate a recommendation                  necessary to make a finding, and finds,               issuer in which the Regulated Fund
     as to the proposed participation,                       that: (x) Any Regulated Fund’s or                     holds any investments by any Affiliated
     including the amount of the proposed                    Affiliated Fund’s holding of a different              Fund or other Regulated Fund during
     investment, by such Regulated Fund;                     class of securities (including for this               the prior quarter; and (iii) all
     and                                                     purpose a security with a different                   information concerning Potential Co-
        (iii) the Advisers will provide to the               maturity date) is immaterial in amount,               Investment Transactions and Co-
     Board of each Regulated Fund that                       including immaterial relative to the size             Investment Transactions, including
     holds an investment in the issuer all                   of the issuer; and (y) the Board records              investments made by other Regulated
     information relating to the existing                    the basis for any such finding in its                 Funds or Affiliated Funds that the
     investments in the issuer of the                        minutes. In addition, securities that                 Regulated Fund considered but declined
     Regulated Funds and Affiliated Funds,                   differ only in respect of issuance date,              to participate in, so that the
     including the terms of such investments                 currency, or denominations may be                     Independent Directors, may determine
     and how they were made, that is                         treated as the same security; and                     whether all Potential Co-Investment
     necessary for the Required Majority to                     (iv) No control. The Affiliated Funds,             Transactions and Co-Investment
     make the findings required by this                      the other Regulated Funds and their                   Transactions during the preceding
     Condition.                                              affiliated persons (within the meaning                quarter, including those investments
        (b) Enhanced Board Approval. The                     of Section 2(a)(3)(C) of the Act),                    that the Regulated Fund considered but
     Adviser will provide its written                        individually or in the aggregate, do not              declined to participate in, comply with
     recommendation as to the Regulated                      control the issuer of the securities                  the Conditions.
     Fund’s participation to the Eligible                    (within the meaning of Section 2(a)(9) of                (b) All information presented to the
     Directors, and the Regulated Fund will                  the Act).                                             Regulated Fund’s Board pursuant to this
     participate in such Follow-On                              (d) Allocation. If, with respect to any            Condition will be kept for the life of the
     Investment solely to the extent that a                  such Follow-On Investment:                            Regulated Fund and at least two years
     Required Majority reviews the proposed                     (i) The amount of the opportunity                  thereafter, and will be subject to
     Follow-On Investment both on a stand-                   proposed to be made available to any                  examination by the Commission and its
     alone basis and together with the Pre-                  Regulated Fund is not based on the                    staff.
     Boarding Investments in relation to the                 Regulated Funds’ and the Affiliated                      (c) Each Regulated Fund’s chief
     total economic exposure and other                       Funds’ outstanding investments in the                 compliance officer, as defined in rule
     terms and makes the determinations set                  issuer or the security at issue, as                   38a–1(a)(4), will prepare an annual
     forth in Condition 2(c). In addition, the               appropriate, immediately preceding the                report for its Board each year that
     Follow-On Investment may only be                        Follow-On Investment; and                             evaluates (and documents the basis of
     completed in reliance on the Order if                      (ii) the aggregate amount                          that evaluation) the Regulated Fund’s
     the Required Majority of each                           recommended by the Advisers to be                     compliance with the terms and
     participating Regulated Fund                            invested in the Follow-On Investment                  Conditions of the application and the
     determines that the making and holding                  by the participating Regulated Funds                  procedures established to achieve such
     of the Pre-Boarding Investments were                    and any participating Affiliated Funds,               compliance.
     not prohibited by Section 57 (as                        collectively, exceeds the amount of the                  (d) The Independent Directors will
     modified by Rule 57b–1) or Rule 17d–                    investment opportunity, then the                      consider at least annually whether
     1, as applicable. The basis for the                     Follow-On Investment opportunity will                 continued participation in new and
     Board’s findings will be recorded in its                be allocated among them pro rata based                existing Co-Investment Transactions is
     minutes.                                                on the size of the Internal Orders, as                in the Regulated Fund’s best interests.
        (c) Additional Requirements. The                     described in section III.A.1.(b) of the                  11. Record Keeping. Each Regulated
     Follow-On Investment may only be                        application.                                          Fund will maintain the records required
     completed in reliance on the Order if:                     (e) Other Conditions. The acquisition              by Section 57(f)(3) of the Act as if each
        (i) Original Investments. All of the                 of Follow-On Investments as permitted                 of the Regulated Funds were a BDC and
     Affiliated Funds’ and Regulated Funds’                  by this Condition will be considered a                each of the investments permitted under
     investments in the issuer are Pre-                      Co-Investment Transaction for all                     these Conditions were approved by the
     Boarding Investments;                                   purposes and subject to the other                     Required Majority under Section 57(f).
        (ii) Advice of counsel. Independent                  Conditions set forth in the application.                 12. Director Independence. No
     counsel to the Board advises that the                      10. Board Reporting, Compliance and                Independent Director of a Regulated
     making and holding of the investments                   Annual Re-Approval.                                   Fund will also be a director, general
     in the Pre-Boarding Investments were                       (a) Each Adviser to a Regulated Fund               partner, managing member or principal,
     not prohibited by Section 57 (as                        will present to the Board of each                     or otherwise be an ‘‘affiliated person’’
     modified by Rule 57b–1) or Rule 17d–                    Regulated Fund, on a quarterly basis,                 (as defined in the Act) of any Affiliated
     1, as applicable;                                       and at such other times as the Board                  Fund.
        (iii) Multiple Classes of Securities. All            may request, (i) a record of all                         13. Expenses. The expenses, if any,
     Regulated Funds and Affiliated Funds                    investments in Potential Co-Investment                associated with acquiring, holding or
     that hold Pre-Boarding Investments in                   Transactions made by any of the other                 disposing of any securities acquired in
     the issuer immediately before the time                  Regulated Funds or any of the Affiliated              a Co-Investment Transaction (including,
     of completion of the Co-Investment                      Funds during the preceding quarter that               without limitation, the expenses of the
     Transaction hold the same security or                   fell within the Regulated Fund’s then-                distribution of any such securities
     securities of the issuer. For the purpose               current Objectives and Strategies and                 registered for sale under the Securities
     of determining whether the Regulated                    Board-Established Criteria that were not              Act) will, to the extent not payable by
     Funds and Affiliated Funds hold the                     made available to the Regulated Fund,                 the Advisers under their respective


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                              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices                                                  45339

     advisory agreements with the Regulated                    For the Commission, by the Division of              set forth in sections (A), (B), and (C)
     Funds and the Affiliated Funds, be                      Investment Management, under delegated                below, of the most significant aspects of
     shared by the Regulated Funds and the                   authority.                                            such statements.
     participating Affiliated Funds in                       Eduardo A. Aleman,
                                                             Assistant Secretary.
                                                                                                                   (A) Clearing Agency’s Statement of the
     proportion to the relative amounts of the                                                                     Purpose of, and Statutory Basis for, the
     securities held or being acquired or                    [FR Doc. 2017–20757 Filed 9–27–17; 8:45 am]
                                                                                                                   Proposed Rule Change
     disposed of, as the case may be.                        BILLING CODE 8011–01–P
                                                                                                                   (a) Purpose
        14. Transaction Fees.29 Any
     transaction fee (including break-up,                                                                             ICE Clear Europe proposes to adopt
                                                             SECURITIES AND EXCHANGE                               amendments to the CDS Risk Policy
     structuring, monitoring or commitment                   COMMISSION                                            relating to portfolio margining. The
     fees but excluding brokerage or
                                                             [Release No. 34–81680; File No. SR–ICEEU–             changes discussed herein apply to all
     underwriting compensation permitted
                                                             2017–010]                                             cleared credit default swap (‘‘CDS’’)
     by Section 17(e) or 57(k)) received in                                                                        products.
     connection with any Co-Investment                       Self-Regulatory Organizations; ICE                       The amendments are intended to
     Transaction will be distributed to the                  Clear Europe Limited; Notice of Filing                comply with the Portfolio Margining
     participants on a pro rata basis based on               and Order Granting Accelerated                        Limitation implementing the European
     the amounts they invested or                            Approval of a Proposed Rule Change                    Market Infrastructure Regulation
     committed, as the case may be, in such                  Relating to Amendments to the ICE                     (‘‘EMIR’’),4 which requires that where
     Co-Investment Transaction. If any                       Clear Europe CDS Risk Policy                          portfolio margining covers multiple
     transaction fee is to be held by an                                                                           different instruments, the amount of
     Adviser pending consummation of the                     September 22, 2017.                                   margin reduction that the clearing house
     transaction, the fee will be deposited                     Pursuant to Section 19(b)(1) of the                may offer can be no greater than 80% of
     into an account maintained by the                       Securities Exchange Act of 1934                       the difference between the sum of the
     Adviser at a bank or banks having the                   (‘‘Act’’),1 and Rule 19b–4 thereunder,2               margins for each product calculated on
     qualifications prescribed in Section                    notice is hereby given that on                        an individual basis and the margin
     26(a)(1), and the account will earn a                   September 15, 2017, ICE Clear Europe                  calculated based on a estimation of the
                                                             Limited (‘‘ICE Clear Europe’’) filed with             exposure for the combined portfolio. By
     competitive rate of interest that will also
                                                             the Securities and Exchange                           contrast, where the margin reduction
     be divided pro rata among the
                                                             Commission (‘‘Commission’’) the                       relates to positions in the same
     participants. None of the Advisers, the                 proposed rule changes described in                    instrument, the clearing house may
     Affiliated Funds, the other Regulated                   Items I, II, and III below, which Items               apply a margin reduction of up to 100%
     Funds or any affiliated person of the                   have been prepared by ICE Clear                       of that difference. The European
     Affiliated Funds or the Regulated Funds                 Europe. The Commission is publishing                  Securities and Markets Authority
     will receive any additional                             this notice and order to solicit                      (‘‘ESMA’’), the competent authority
     compensation or remuneration of any                     comments on the proposed rule change                  with respect to this requirement under
     kind as a result of or in connection with               from interested persons and to approve                EMIR, has issued an opinion
     a Co-Investment Transaction other than                  the proposed rule change on an                        interpreting this requirement in the
     (i) in the case of the Regulated Funds                  accelerated basis.                                    context of CDS to provide 5 that (i)
     and the Affiliated Funds, the pro rata                                                                        credit derivatives on different
                                                             I. Clearing Agency’s Statement of the
     transaction fees described above and                                                                          underlying names or indexes (including
                                                             Terms of Substance of the Proposed
     fees or other compensation described in                                                                       two series of the same index) should be
                                                             Rule Change
     Condition 2(c)(iii)(B)(z), (ii) brokerage or                                                                  considered different products; and (ii)
     underwriting compensation permitted                       The principal purpose of the                        credit derivatives on the same
     by Section 17(e) or 57(k) or (iii) in the               proposed rule change is to amend ICE                  underlying name or index with different
     case of the Advisers, investment                        Clear Europe’s CDS Risk Policy relating               maturities or coupons may be
     advisory compensation paid in                           to portfolio margining, as described                  considered as the same product.
     accordance with investment advisory                     below, to comply with Article 27 of                   According to ICE Clear Europe, the
     agreements between the applicable                       Commission Delegated Regulation (EU)                  effect of this is to require that credit
     Regulated Fund(s) or Affiliated Fund(s)                 No. 153/2013 3 (the ‘‘Portfolio Margining             derivatives on different index series of
                                                             Limitation’’).                                        the same index family be considered
     and its Adviser.
                                                                                                                   different instruments under the
        15. Independence. If the Holders own                 II. Clearing Agency’s Statement of the
                                                                                                                   Portfolio Margining Limitation and that
     in the aggregate more than 25 percent of                Purpose of, and Statutory Basis for, the
                                                                                                                   therefore portfolio margining for such
     the Shares of a Regulated Fund, then the                Proposed Rule Change
                                                                                                                   instruments must be limited to 80% of
     Holders will vote such Shares as                          In its filing with the Commission, ICE              the gross margins.
     directed by an independent third party                  Clear Europe included statements                         To implement the Portfolio Margining
     when voting on (1) the election of                      concerning the purpose of and basis for               Limitation, ICE Clear Europe is
     directors; (2) the removal of one or more               the proposed rule change and discussed                amending its CDS Risk Policy such that
     directors; or (3) any other matter under                any comments it received on the                       when calculating the spread response
     either the Act or applicable State law                  proposed rule change. The text of these               charge (which provides portfolio margin
     affecting the Board’s composition, size                 statements may be examined at the
     or manner of election.                                  places specified in Item III below. ICE                 4 Regulation (EU) No. 648/2012 of the European

                                                             Clear Europe has prepared summaries,                  Parliament and of the Council of 4 July 2012 on
                                                                                                                   OTC derivatives, central counterparties and trade
                                                                                                                   repositories.
        29 Applicants are not requesting and the               1 15U.S.C. 78s(b)(1).                                 5 Section 3.1.2.C of the ESMA Opinion On
     Commission is not providing any relief for                2 17CFR 240.19b–4.                                  Portfolio Margining Requirements under Article 27
     transaction fees received in connection with any          3 Commission Delegated Regulation (EU) No. 153/     of Commission Delegated Regulation (EU) No. 153/
     Co-Investment Transaction.                              2013 dated 23 February 2013.                          2013 dated 10 April 2017 (the ‘‘ESMA Opinion’’).



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Document Created: 2017-09-28 01:33:06
Document Modified: 2017-09-28 01:33:06
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice.
DatesThe application was filed on March 30, 2017, and amended on August 28, 2017.
ContactJean E. Minarick, Senior Counsel, at (202) 551-6811, or David J. Marcinkus, Branch Chief, at (202) 551-6821 (Chief Counsel's Office, Division of Investment Management).
FR Citation82 FR 45331 

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