Variant Alternative Income Fund, et al., 74145-74153 [2021-28324]

Download as PDF Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices Contracts would otherwise be supported by ICE Clear Europe’s existing financial resources, risk management, systems and operational arrangements. The amendments thus appropriately clarify the role and responsibilities of the Clearing House and Clearing Members with respect to physical delivery. As a result, ICE Clear Europe believes the amendments are consistent with the requirements of Rule 17Ad–22(e)(10).11 (B) Clearing Agency’s Statement on Burden on Competition ICE Clear Europe does not believe the proposed amendments would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed amendments to the Delivery Procedures are intended to establish a new set of procedures applicable to the delivery and settlement of ICE ENDEX French PEG Natural Gas Futures Contracts and ICE Endex French PEG Natural Gas Daily Futures Contracts in connection with the listing of such contracts for trading on the ICE Endex market. ICE Clear Europe believes that such contracts would provide opportunities for interested market participants to engage in trading activity in the relevant French natural gas market. ICE Clear Europe does not believe the amendments would adversely affect competition among Clearing Members, materially affect the cost of clearing, adversely affect access to clearing for Clearing Members or their customers, or otherwise adversely affect competition in clearing services. Accordingly, ICE Clear Europe does not believe that the amendments would impose any impact or burden on competition that is not appropriate in furtherance of the purpose of the Act. khammond on DSKJM1Z7X2PROD with NOTICES (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed amendments have not been solicited or received by ICE Clear Europe. ICE Clear Europe will notify the Commission of any comments received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and paragraph (f) of Rule 11 17 12 15 CFR 240.17Ad–22(e)(10). U.S.C. 78s(b)(3)(A). VerDate Sep<11>2014 20:20 Dec 28, 2021 19b–4 13 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ICEEU– 2021–025 and should be submitted on or before January 19, 2022. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Eduardo A. Aleman, Deputy Secretary. Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml) or • Send an email to rulecomments@sec.gov. Please include File Number SR–ICEEU–2021–025 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–ICEEU–2021–025. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings will also be available for inspection and copying at the principal office of ICE Clear Europe and on ICE Clear Europe’s website at https:// www.theice.com/clear-europe/ regulation. All comments received will be posted without change. Persons 13 17 Jkt 256001 74145 PO 00000 CFR 240.19b–4(f). Frm 00083 Fmt 4703 [FR Doc. 2021–28328 Filed 12–28–21; 8:45 am] BILLING CODE 8011–01–P [Investment Company Act Release No. 34452; File No. 812–15265] Variant Alternative Income Fund, et al. December 23, 2021. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: 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. SUMMARY OF APPLICATION: Applicants request an order to permit certain closed-end management investment companies to co-invest in portfolio companies with each other and with affiliated investment funds and accounts. APPLICANTS: Variant Alternative Income Fund (the ‘‘VAIF’’), Variant Impact Fund (‘‘VIF’’ and together with VAIF, the ‘‘Existing Regulated Funds’’), Variant Investments, LLC (‘‘Variant’’) FILING DATES: The application was filed on September 21, 2021 and amended on December 22, 2021. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by emailing the Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants with a copy of the request, by email. Hearing requests should be received by the Commission by 5:30 p.m. on January 18, 2022, and should be accompanied by proof of service on the applicants, in the form of an affidavit, or for lawyers, 14 17 Sfmt 4703 E:\FR\FM\29DEN1.SGM CFR 200.30–3(a)(12). 29DEN1 74146 Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary at SecretarysOffice@sec.gov. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Attn: Joshua B. Deringer, Esq., joshua.deringer@faegredrinker.com; Curtis Fintel, operations@ variantinvestments.com. FOR FURTHER INFORMATION CONTACT: Toyin Momoh, Senior Counsel, at (202) 551–3775 or Trace Rakestraw, Branch Chief, at (202) 551–6821 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s website by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. khammond on DSKJM1Z7X2PROD with NOTICES Introduction: 1. The Applicants request an order of the Commission under sections 17(d) and 57(i) and rule 17d–1 thereunder (the ‘‘Order’’) to permit, subject to the terms and conditions set forth in the application (the ‘‘Conditions’’), a Regulated Fund 1 and one or more other Regulated Funds and/or one or more Affiliated Funds 2 to enter into Co1 ‘‘Regulated Funds’’ means the Existing Regulated Funds and any 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 business development company (‘‘BDC’’); (b) whose investment adviser is an Adviser; and (c) that intends to participate in the co-investment program. ‘‘Adviser’’ means Variant and any other investment adviser that is (i) controlling, under common control with, or controlled by Variant, (ii) registered as an investment adviser under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’), and (iii) not a Regulated Fund or a subsidiary of a Regulated Fund. 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. 2 ‘‘Affiliated Fund’’ means any Future Affiliated Fund or any Variant Proprietary Account. ‘‘Future Affiliated Fund’’ means any entity (a) whose investment adviser is an Adviser; (b) that would be an investment company but for section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act; and (c) that intends to participate in the co-investment program. ‘‘Variant Proprietary Account’’ means any account of an Adviser or its affiliates or any company that VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 Investment Transactions with each other. ‘‘Co-Investment Transaction’’ means any transaction in which one or more Regulated Funds (or its WhollyOwned Investment Sub (defined below)) participated together with one or more Affiliated Funds and/or one or more other Regulated Funds in reliance on the Order. ‘‘Potential Co-Investment Transaction’’ means any investment opportunity in which a Regulated Fund (or its Wholly-Owned Investment Sub) could not participate together with one or more Affiliated Funds and/or one or more other Regulated Funds without obtaining and relying on the Order.3 Applicants 2. VAIF was organized under the Delaware Statutory Trust Act and is a non-diversified, closed-end management investment company registered under the Act. VAIF’s Board 4 will be comprised of a majority of members who are Independent Trustees.5 3. VIF was organized under the Delaware Statutory Trust Act and is a non-diversified, closed-end management investment company registered under the Act. VIF’s Board will be comprised of a majority of members who are Independent Trustees. 4. Variant, an Oregon limited liability company that is registered under the Advisers Act, serves as the investment adviser to each of the Existing Regulated Funds and either it or another will serve as the investment adviser to any Future Regulated Fund or Future Affiliated Fund. 5. Variant Proprietary Accounts will hold various financial assets in a principal capacity. Variant and its affiliates may operate through whollyor majority-owned subsidiaries. Currently, there are no Variant Proprietary Accounts or subsidiaries that exist and currently intend to participate in the co-investment program. is a direct or indirect, wholly- or majority-owned subsidiary of the Adviser or its affiliates, which, from time to time, may hold various financial assets in a principal capacity. 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 the terms and conditions of the application. 4 ‘‘Board’’ means the board of trustees (or the equivalent) of a Regulated Fund. 5 ‘‘Independent Trustee’’ 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 Trustee of a Regulated Fund will have a direct or indirect financial interest in any Co-Investment Transaction or any interest in any portfolio company, other than indirectly through share ownership in one of the Regulated Funds. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 6. Applicants state that a Regulated Fund may, from time to time, form one or more Wholly-Owned Investment Subs.6 Such a subsidiary may be prohibited from investing in a CoInvestment Transaction with a Regulated Fund (other than its parent) or any Affiliated Fund because it would be a company controlled by its parent Regulated Fund for purposes of section 57(a)(4) and rule 17d–1. Applicants request that each Wholly-Owned Investment Sub be permitted to participate in Co-Investment Transactions in lieu of the Regulated Fund that owns it and that the WhollyOwned 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’ Representations A. Allocation Process 7. Applicants state that the Adviser is presented with a substantial number of investment opportunities each year on behalf of its clients, and that the Adviser must 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 investment 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 Affiliated Funds and (ii) comply with the Conditions. In particular, consistent 6 ‘‘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. E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES with Condition 1, if a Potential CoInvestment Transaction falls within the then-current Objectives and Strategies 7 and any Board-Established Criteria 8 of a Regulated Fund, the policies and procedures will require that the Adviser to such Regulated Fund receives sufficient information to allow such Adviser’s investment committee to make its independent determination and recommendations under the Conditions. 9. The Adviser to each applicable Regulated Fund will then make an independent determination of the appropriateness of the investment for the Regulated Fund in light of the Regulated Fund’s then-current circumstances. If the Adviser to a Regulated Fund deems the Regulated Fund’s participation in such Potential Co-Investment Transaction to be appropriate, then it will formulate a recommendation regarding the proposed order amount for the Regulated Fund. 10. Applicants state that, for each Regulated Fund and Affiliated Fund whose Adviser recommends participating in a Potential CoInvestment Transaction, the Adviser will submit a proposed order amount to an internal investment committee which the Adviser will establish to handle the allocation of investment opportunities in Potential Co-Investment Transactions. Applicants state further that, at this stage, each proposed order 7 ‘‘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. 8 ‘‘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 BoardEstablished Criteria are in effect, then the Regulated Fund’s Adviser will be notified of all Potential CoInvestment 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 Trustees. The Independent Trustees 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. VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 amount may be reviewed and adjusted, in accordance with the Adviser’s written allocation policies and procedures, by the Adviser’s investment committee.9 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.10 11. If the aggregate Internal Orders for a Potential Co-Investment Transaction do not exceed the size of the investment opportunity immediately prior to the submission of the orders to the underwriter, broker, dealer or issuer, as applicable (the ‘‘External Submission’’), then each Internal Order will be fulfilled as placed. If, on the other hand, the aggregate Internal Orders for a Potential Co-Investment Transaction exceed the size of the investment opportunity immediately prior to the External Submission, then the allocation of the opportunity will be made pro rata on the basis of the size of the Internal Orders.11 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 an Adviser will establish, implement and maintain. 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. 9 The reason for any such adjustment to a proposed order amount will be documented in writing and preserved in the records of the Adviser. 10 ‘‘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). 11 Each Adviser 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 Trustees with information concerning the Affiliated Fund’s and Regulated Funds’ order sizes to assist the Eligible Trustees with their review of the applicable Regulated Fund’s investments for compliance with the Conditions. ‘‘Eligible Trustees’’ means, with respect to a Regulated Fund and a Potential CoInvestment 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 (treating any registered investment company or series thereof as a BDC for this purpose). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 74147 B. Follow-On Investments 12. Applicants state that from time to time the Regulated Funds and Affiliated Funds may have opportunities to make Follow-On Investments 12 in an issuer in which a Regulated Fund and one or more other Regulated Funds and/or Affiliated Funds previously have invested. 13. Applicants propose that FollowOn Investments would be divided into two categories depending on whether the prior investment was a CoInvestment Transaction or a PreBoarding Investment.13 If the Regulated Funds and Affiliated Funds had previously participated in a CoInvestment Transaction with respect to the issuer, then the terms and approval of the Follow-On Investment would be subject to the Standard Review FollowOns described in Condition 8. If the Regulated Funds and Affiliated Funds have not previously participated in a Co-Investment Transaction with respect to the issuer but hold a Pre-Boarding Investment, then the terms and approval of the Follow-On Investment would be subject to the Enhanced-Review FollowOns described in Condition 9. All Enhanced Review Follow-Ons require the approval of the Required Majority. For a given issuer, the participating Regulated Funds and Affiliated Funds would need to comply with the requirements of Enhanced-Review Follow-Ons only for the first CoInvestment Transaction. Subsequent CoInvestment Transactions with respect to the issuer would be governed by the requirements of Standard Review Follow-Ons. 14. A Regulated Fund would be permitted to invest in Standard Review Follow-Ons either with the approval of the Required Majority under Condition 8(c) or without Board approval under Condition 8(b) if it is (i) a Pro Rata Follow-On Investment 14 or (ii) a Non12 ‘‘Follow-On Investment’’ means an additional investment in the same issuer, including, but not limited to, through the exercise of warrants, conversion privileges or other rights to purchase securities of the issuer. 13 ‘‘Pre-Boarding Investments’’ are investments in an issuer held by a Regulated Fund as well as one or more Affiliated Funds and/or one or more other Regulated Funds that were acquired prior to participating in any Co-Investment Transaction in transactions: (i) In which the only term negotiated by or on behalf of such funds was price in reliance on one of the JT No-Action Letters (defined below); or (ii) occurring at least 90 days apart and without coordination between the Regulated Fund and any Affiliated Fund or other Regulated Fund. 14 A ‘‘Pro Rata Follow-On Investment’’ is a Follow-On Investment (i) in which the participation of each Affiliated Fund and each Regulated Fund is proportionate to its outstanding investments in the issuer or security, as appropriate, immediately E:\FR\FM\29DEN1.SGM Continued 29DEN1 74148 Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices Negotiated Follow-On Investment.15 Applicants believe that these Pro Rata and Non-Negotiated Follow-On Investments do not present a significant opportunity for overreaching on the part of any Adviser and thus do not warrant the time or the attention of the Board. Pro Rata Follow-On Investments and Non-Negotiated Follow-On Investments remain subject to the Board’s periodic review in accordance with Condition 10. khammond on DSKJM1Z7X2PROD with NOTICES C. Dispositions 15. Applicants propose that Dispositions 16 would be divided into two categories. If the Regulated Funds and the Affiliated Funds holding investments in the issuer had previously participated in a Co-Investment Transaction with respect to the issuer, then the terms and approval of the Disposition would be subject to the Standard Review Dispositions described in Condition 6. If the Regulated Funds and Affiliated Funds have not previously participated in a CoInvestment Transaction with respect to the issuer but hold a Pre-Boarding Investment, then the terms and approval of the Disposition would be subject to the Enhanced Review Dispositions described in Condition 7. Subsequent Dispositions with respect to the same issuer would be governed by Condition 6 under the Standard Review Dispositions.17 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 Trustees in accordance with Condition 8(c). 15 A ‘‘Non-Negotiated Follow-On Investment’’ is a Follow-On Investment in which a Regulated Fund participates together with one or more Affiliated Funds and/or one or more other Regulated Funds (i) in which the only term negotiated by or on behalf of the funds is price and (ii) with respect to which, if the transaction were considered on its own, the funds would be entitled to rely on one of the JT NoAction Letters. ‘‘JT No-Action Letters’’ means SMC Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000). 16 ‘‘Disposition’’ means the sale, exchange or other disposition of an interest in a security of an issuer. 17 However, with respect to an issuer, if a Regulated 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 Trustees must review the proposed Follow-On Investment not only on a stand-alone basis but also in relation to the total economic exposure in such issuer (i.e., in combination with the portion of the VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 16. A Regulated Fund may participate in a Standard Review Disposition either with the approval of the Required Majority under Condition 6(d) or without Board approval under Condition 6(c) if (i) the Disposition is a Pro Rata Disposition 18 or (ii) the securities are Tradable Securities 19 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. D. Delayed Settlement 17. Applicants represent that under the terms and Conditions of the application, all Regulated Funds and Affiliated Funds participating in a CoInvestment Transaction will invest at the same time, for the same price and with the same terms, conditions, class, registration rights and any other rights, so that none of them receives terms more favorable than any other. However, the settlement date for an Affiliated Fund in a Co-Investment Transaction may occur up to ten business days after the settlement date for the Regulated Fund, and vice versa. 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 Pre-Boarding Investment not disposed of in the Enhanced Review Disposition), and the other terms of the investments. This additional review would be required because such findings would not have been required in connection with the prior Enhanced Review Disposition, but they would have been required had the first Co-Investment Transaction been an Enhanced Review Follow-On. 18 A ‘‘Pro Rata Disposition’’ is a Disposition (i) in which the participation of each Affiliated Fund and each Regulated Fund is proportionate to its outstanding investment in the security subject to Disposition immediately preceding the Disposition; and (ii) in the case of a Regulated Fund, a majority of the Board has approved the Regulated 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 Trustees. 19 ‘‘Tradable Security’’ means a security that meets the following criteria at the time of Disposition: (i) It trades on a national securities exchange or designated offshore securities market as defined in rule 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 Adviser 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. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 settlement date is not and (ii) the earliest settlement date and the latest settlement date of any Affiliated Fund or Regulated Fund participating in the transaction will occur within ten business days of each other. E. Holders 18. Under Condition 15, if an Adviser, its principals, or any person controlling, controlled by, or under common control with the Adviser or its principals, and the Affiliated Funds (collectively, the ‘‘Holders’’) own in the aggregate more than 25 percent of the outstanding voting shares of a Regulated Fund (the ‘‘Shares’’), then the Holders will vote such Shares in the same percentages as the Regulated Fund’s other shareholders (not including the Holders) when voting on matters specified in the Condition. Applicants’ Legal Analysis 1. Section 17(d) of the Act and rule 17d–1 under the Act prohibit participation by a registered investment company and an affiliated person in any ‘‘joint enterprise or other joint arrangement or profit-sharing plan,’’ as defined in the rule, without prior approval by the Commission by order upon application. Section 17(d) of the Act and rule 17d–1 under the Act are applicable to Regulated Funds that are registered closed-end investment companies. 2. Similarly, with regard to BDCs, section 57(a)(4) of the Act generally prohibits certain persons specified in section 57(b) from participating in joint transactions with the BDC or a company controlled by the BDC in contravention of rules as prescribed by the Commission. Section 57(i) of the Act provides that, until the Commission prescribes rules under section 57(a)(4), the Commission’s rules under section 17(d) of the Act applicable to registered closed-end investment companies will be deemed to apply to transactions subject to section 57(a)(4). Because the Commission has not adopted any rules under section 57(a)(4), rule 17d–1 also applies to joint transactions with Regulated Funds that are BDCs. 3. Co-Investment Transactions are prohibited by either or both of rule 17d– 1 and section 57(a)(4) without a prior exemptive order of the Commission to the extent that the Affiliated Funds and the Regulated Funds participating in such transactions fall within the category of persons described by rule 17d–1 and/or section 57(b), as applicable, vis-a`-vis each participating Regulated Fund. Each of the participating Regulated Funds and Affiliated Funds may be deemed to be affiliated persons vis-a`-vis a Regulated E:\FR\FM\29DEN1.SGM 29DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices Fund within the meaning of section 2(a)(3) by reason of common control because (i) Variant is the investment adviser to, and may be deemed to control, each of the Existing Regulated Funds and an Adviser to the Regulated Funds will be the investment adviser to, and may be deemed to control, any Future Regulated Fund; (ii) any Affiliated Fund will be managed by, and may be deemed to be controlled by, an Adviser to Affiliated Funds; and (iii) an Adviser to Affiliated Funds and an Adviser to Regulated Funds are under common control. Thus, each Regulated Fund would be related to each other in a manner described by 57(b) or rule 17d–1, as applicable, and thus prohibited from participating in CoInvestment Transactions with each other. Each of the Affiliated Funds could also be deemed to be a person related to the Regulated Funds in a manner described by section 57(b) and related to the other 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 CoInvestment Transactions with the Regulated Funds. 4. Because the Variant Proprietary Accounts will be controlled by the Adviser or its affiliates and, therefore, may be under common control with the Existing Regulated Funds, any future Adviser, and any Future Regulated Funds, the Variant Proprietary Accounts could be deemed to be persons related to the Regulated Funds (or a company controlled by the Regulated Funds) in a manner described by section 17(d) or section 57(b) and also prohibited from participating in the co-investment program. 5. In passing upon applications under rule 17d–1, the Commission considers whether a company’s participation in the joint transaction is consistent with the provisions, policies, and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of other participants. 6. Applicants state that in the absence of the requested relief, in many circumstances the Regulated Funds would be limited in their ability to participate in attractive and appropriate investment opportunities. Applicants state that, as required by rule 17d–1(b), the Conditions ensure that the terms on which Co-Investment Transactions may be made will be consistent with the participation of the Regulated Funds being on a basis that it is neither different from nor less advantageous than other participants, thus protecting VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 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 Adviser. Applicants state that the Regulated Funds’ participation in the CoInvestment 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) Each Adviser will establish, maintain and implement policies and procedures reasonably designed to ensure that the Adviser is promptly notified of all Potential Co-Investment Transactions that fall within the thencurrent 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 CoInvestment 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 an 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 an Adviser 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 Trustees with information concerning the Affiliated Funds’ and Regulated Funds’ order sizes to assist the Eligible Trustees with their review of the applicable Regulated Fund’s PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 74149 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 Trustees 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 the 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 shareholders and do not involve overreaching in respect of the Regulated Fund or its shareholders on the part of any person concerned; (ii) the transaction is consistent with: (A) The interests of the Regulated Fund’s shareholders; 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 Fund 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 E:\FR\FM\29DEN1.SGM 29DEN1 74150 Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES right to participate in the governance or management of the portfolio company so long as: (x) The Eligible Trustees 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 20 financial benefit to an Adviser, 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). 3. Right to Decline. Each Regulated Fund has the right to decline to participate in any Potential CoInvestment 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,21 a Regulated Fund will not invest in reliance on the Order in any 20 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. 21 This exception applies only to Follow-On Investments by a Regulated Fund in issuers in which that Regulated Fund already holds investments. VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 issuer in which a Related Party has an investment.22 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 CoInvestment Transaction with respect to the issuer, then: (i) The Adviser to such Regulated Fund or Affiliated Fund 23 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. 22 ‘‘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 an Adviser, 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. 23 Any Variant Proprietary Account that is not advised by an Adviser is itself deemed to be an Adviser for purposes of Conditions 6(a)(i), 7(a)(i), 8(a)(i), and 9(a)(i). PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 (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; 24 (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 (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 Trustees 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 CoInvestment 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 24 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. E:\FR\FM\29DEN1.SGM 29DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices (iii) each Adviser 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 Fund, 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 Trustees, and the Regulated Fund will participate in such Disposition solely to the extent that a Required Majority determines that: (i) The Disposition complies with Condition 2(c)(i), (ii), (iii)(A), and (iv); and (ii) the making and holding of the PreBoarding 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 PreBoarding 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 VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 maturity date) is immaterial 25 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 (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 CoInvestment 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,26 immediately 25 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. 26 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 any Affiliated Fund, 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 any Affiliated Fund, proportionality will be measured by each participating Regulated Fund’s and Affiliated PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 74151 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 (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 Trustees 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 Trustees 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 an Adviser 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 any Affiliated Funds holding investments in the issuer have not previously Fund’s outstanding investment in the issuer immediately preceding the Follow-On Investment using the most recent available valuation thereof. E:\FR\FM\29DEN1.SGM 29DEN1 khammond on DSKJM1Z7X2PROD with NOTICES 74152 Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices participated in a Co-Investment Transaction with respect to the issuer: (i) The Adviser to each such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time; (ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund; and (iii) the Adviser 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 Trustees, 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 standalone basis and together with the PreBoarding 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 PreBoarding 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 VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 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 an Adviser 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 Affiliated Funds during the preceding quarter that PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 fell within the Regulated Fund’s thencurrent 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 CoInvestment Transactions and CoInvestment Transactions, including investments made by other Regulated Funds or any Affiliated Funds that the Regulated Fund considered but declined to participate in, so that the Independent Trustees, 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 -z6(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 Trustees 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. Trustee Independence. No Independent Trustee 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 E:\FR\FM\29DEN1.SGM 29DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 86, No. 247 / Wednesday, December 29, 2021 / Notices distribution of any such securities registered for sale under the Securities Act) will, to the extent not payable by an Adviser under its respective advisory agreements with the Regulated Funds and the Affiliated Funds, be shared by the Regulated Funds and any 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.27 Any transaction fee (including break-up, structuring, monitoring or commitment fees but excluding brokerage or underwriting compensation permitted by section 17(e) or 57(k)) received in connection with any Co-Investment Transaction will be distributed to the participants on a pro rata basis based on the amounts they invested or committed, as the case may be, in such Co-Investment Transaction. If any transaction fee is to be held by an Adviser pending consummation of the transaction, the fee will be deposited into an account maintained by an Adviser at a bank or banks having the qualifications prescribed in section 26(a)(1), and the account will earn a competitive rate of interest that will also be divided pro rata among the participants. None of the Adviser, the Affiliated Funds, the other Regulated Funds or any affiliated person of the Affiliated Funds or the Regulated Funds will receive any additional compensation or remuneration of any kind as a result of or in connection with a Co-Investment Transaction other than (i) in the case of the Regulated Funds and the Affiliated Funds, the pro rata transaction fees described above and fees or other compensation described in Condition 2(c)(iii)(B)(z), (ii) brokerage or underwriting compensation permitted by section 17(e) or 57(k) or (iii) in the case of the Adviser, investment advisory compensation paid in accordance with investment advisory agreements between the applicable Regulated Fund(s) or Affiliated Fund(s) and its Adviser. 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 in the same percentages as the Regulated Fund’s other shareholders (not including the Holders) when voting on (1) the election of directors; (2) the removal of one or more directors; or (3) any other matter under either the Act or applicable State law affecting the 27 Applicants are not requesting and the Commission is not providing any relief for transaction fees received in connection with any Co-Investment Transaction. VerDate Sep<11>2014 20:20 Dec 28, 2021 Jkt 256001 74153 Board’s composition, size or manner of election. have the same meaning as set forth in the OCC By-Laws and Rules.5 For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Deputy Secretary. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, Uthe Proposed Rule Change [FR Doc. 2021–28324 Filed 12–28–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93867; File No. SR–OCC– 2021–013] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update The Options Clearing Corporation’s Operational Loss Fee Pursuant to Its Capital Management Policy December 23, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 17, 2021, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) 3 of the Act and Rule 19b–4(f)(2) 4 thereunder so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would revise OCC’s schedule of fees, effective January 1, 2022, to update the maximum contingent Operational Loss Fee listed in OCC’s schedule of fees in accordance with OCC’s Capital Management Policy. Proposed changes to OCC’s schedule of fees are included as Exhibit 5 to File Number SR–OCC–2021–013. Material proposed to be added to OCC’s schedule of fees as currently in effect is underlined and material proposed to be deleted is marked in strikethrough text. All capitalized terms not defined herein 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 2 17 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (1) Purpose The purpose of this proposed rule change is to revise OCC’s schedule of fees, effective January 1, 2022, to update the maximum aggregate Operational Loss Fee that OCC would charge Clearing Members in equal shares in the unlikely event that OCC’s shareholders’’ equity (‘‘Equity’’) falls below certain thresholds defined in OCC’s Capital Management Policy. The proposed fee change is designed to enable OCC to replenish capital to comply with Rule 17Ad–22(e)(15) under the Exchange Act, which requires OCC, in pertinent part, to ‘‘hold[ ] liquid net assets funded by equity to the greater of either (x) six months . . . current operating expenses, or (y) the amount determined by the board of directors to be sufficient to ensure a recovery or orderly wind-down of critical operations and service’’ 6 and ‘‘[m]aintain[ ] a viable plan, approved by the board of directors and updated at least annually, for raising additional equity should its equity fall close to or below the amount required.’’ 7 OCC’s Capital Management Policy includes OCC’s replenishment plan.8 Pursuant to the Capital Management Policy, OCC would charge an Operational Loss Fee in equal shares to Clearing Members to raise additional capital should OCC’s Equity, less the Minimum Corporate Contribution,9 fall 5 OCC’s By-Laws and Rules can be found on OCC’s public website: https://www.theocc.com/ Company-Information/Documents-and-Archives/ By-Laws-and-Rules. 6 See 17 CFR 240.17Ad–22(e)(15)(ii). 7 See 17 CFR 240.17Ad–22(e)(15)(iii). 8 See Exchange Act Release No. 88029 (Jan. 24, 2020), 85 FR 5500 (Jan. 30, 2020) (File No. SR– OCC–2019–007) (‘‘Order Approving OCC’s Capital Management Policy’’). 9 The Minimum Corporate Contribution is defined in the Capital Management Policy as the Continued E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 86, Number 247 (Wednesday, December 29, 2021)]
[Notices]
[Pages 74145-74153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28324]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34452; File No. 812-15265]


Variant Alternative Income Fund, et al.

December 23, 2021.
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.

Summary of Application: Applicants request an order to permit certain 
closed-end management investment companies to co-invest in portfolio 
companies with each other and with affiliated investment funds and 
accounts.

Applicants: Variant Alternative Income Fund (the ``VAIF''), Variant 
Impact Fund (``VIF'' and together with VAIF, the ``Existing Regulated 
Funds''), Variant Investments, LLC (``Variant'')

Filing Dates: The application was filed on September 21, 2021 and 
amended on December 22, 2021.

Hearing or Notification of Hearing:  An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by emailing the Commission's 
Secretary at [email protected] and serving applicants with a 
copy of the request, by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on January 18, 2022, and should be 
accompanied by proof of service on the applicants, in the form of an 
affidavit, or for lawyers,

[[Page 74146]]

a certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by emailing the 
Commission's Secretary at [email protected].

ADDRESSES: The Commission: [email protected]. Applicants: Attn: 
Joshua B. Deringer, Esq., [email protected]; Curtis 
Fintel, [email protected].

FOR FURTHER INFORMATION CONTACT: Toyin Momoh, Senior Counsel, at (202) 
551-3775 or Trace Rakestraw, Branch Chief, at (202) 551-6821 (Division 
of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or for an 
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Introduction:

    1. The Applicants request an order of the Commission under sections 
17(d) and 57(i) and rule 17d-1 thereunder (the ``Order'') to permit, 
subject to the terms and conditions set forth in the application (the 
``Conditions''), a Regulated Fund \1\ and one or more other Regulated 
Funds and/or one or more Affiliated Funds \2\ to enter into Co-
Investment Transactions with each other. ``Co-Investment Transaction'' 
means any transaction in which one or more Regulated Funds (or its 
Wholly-Owned Investment Sub (defined below)) participated together with 
one or more Affiliated Funds and/or one or more other Regulated Funds 
in reliance on the Order. ``Potential Co-Investment Transaction'' means 
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub) could not participate together with one or more 
Affiliated Funds and/or one or more other Regulated Funds without 
obtaining and relying on the Order.\3\
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    \1\ ``Regulated Funds'' means the Existing Regulated Funds and 
any 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 business 
development company (``BDC''); (b) whose investment adviser is an 
Adviser; and (c) that intends to participate in the co-investment 
program. ``Adviser'' means Variant and any other investment adviser 
that is (i) controlling, under common control with, or controlled by 
Variant, (ii) registered as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act''), and (iii) 
not a Regulated Fund or a subsidiary of a Regulated Fund. 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.
    \2\ ``Affiliated Fund'' means any Future Affiliated Fund or any 
Variant Proprietary Account. ``Future Affiliated Fund'' means any 
entity (a) whose investment adviser is an Adviser; (b) that would be 
an investment company but for section 3(c)(1), 3(c)(5)(C) or 3(c)(7) 
of the Act; and (c) that intends to participate in the co-investment 
program. ``Variant Proprietary Account'' means any account of an 
Adviser or its affiliates or any company that is a direct or 
indirect, wholly- or majority-owned subsidiary of the Adviser or its 
affiliates, which, from time to time, may hold various financial 
assets in a principal capacity.
    \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 
the terms and conditions of the application.
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Applicants

    2. VAIF was organized under the Delaware Statutory Trust Act and is 
a non-diversified, closed-end management investment company registered 
under the Act. VAIF's Board \4\ will be comprised of a majority of 
members who are Independent Trustees.\5\
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    \4\ ``Board'' means the board of trustees (or the equivalent) of 
a Regulated Fund.
    \5\ ``Independent Trustee'' 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 Trustee of a Regulated 
Fund will have a direct or indirect financial interest in any Co-
Investment Transaction or any interest in any portfolio company, 
other than indirectly through share ownership in one of the 
Regulated Funds.
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    3. VIF was organized under the Delaware Statutory Trust Act and is 
a non-diversified, closed-end management investment company registered 
under the Act. VIF's Board will be comprised of a majority of members 
who are Independent Trustees.
    4. Variant, an Oregon limited liability company that is registered 
under the Advisers Act, serves as the investment adviser to each of the 
Existing Regulated Funds and either it or another will serve as the 
investment adviser to any Future Regulated Fund or Future Affiliated 
Fund.
    5. Variant Proprietary Accounts will hold various financial assets 
in a principal capacity. Variant and its affiliates may operate through 
wholly- or majority-owned subsidiaries. Currently, there are no Variant 
Proprietary Accounts or subsidiaries that exist and currently intend to 
participate in the co-investment program.
    6. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\6\ Such a subsidiary may 
be prohibited from investing in a Co-Investment Transaction with a 
Regulated Fund (other than its parent) or any Affiliated Fund because 
it would be a company controlled by its parent Regulated Fund for 
purposes of section 57(a)(4) and rule 17d-1. Applicants request that 
each Wholly-Owned Investment Sub be permitted to participate in Co-
Investment Transactions in lieu of the Regulated Fund that owns it and 
that the Wholly-Owned Investment Sub's participation in any such 
transaction be treated, for purposes of the Order, as though the parent 
Regulated Fund were participating directly.
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    \6\ ``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 a 
substantial number of investment opportunities each year on behalf of 
its clients, and that the Adviser must 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 investment 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 Affiliated Funds and (ii) comply 
with the Conditions. In particular, consistent

[[Page 74147]]

with Condition 1, if a Potential Co-Investment Transaction falls within 
the then-current Objectives and Strategies \7\ and any Board-
Established Criteria \8\ of a Regulated Fund, the policies and 
procedures will require that the Adviser to such Regulated Fund 
receives sufficient information to allow such Adviser's investment 
committee to make its independent determination and recommendations 
under the Conditions.
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    \7\ ``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.
    \8\ ``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 Trustees. The Independent Trustees 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.
---------------------------------------------------------------------------

    9. The Adviser to each applicable Regulated Fund will then make an 
independent determination of the appropriateness of the investment for 
the Regulated Fund in light of the Regulated Fund's then-current 
circumstances. If the Adviser to a Regulated Fund deems the Regulated 
Fund's participation in such Potential Co-Investment Transaction to be 
appropriate, then it will formulate a recommendation regarding the 
proposed order amount for the Regulated Fund.
    10. Applicants state that, for each Regulated Fund and Affiliated 
Fund whose Adviser recommends participating in a Potential Co-
Investment Transaction, the Adviser will submit a proposed order amount 
to an internal investment committee which the Adviser will establish to 
handle the allocation of investment opportunities in Potential Co-
Investment Transactions. Applicants state further that, at this stage, 
each proposed order amount may be reviewed and adjusted, in accordance 
with the Adviser's written allocation policies and procedures, by the 
Adviser's investment committee.\9\ 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.\10\
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    \9\ The reason for any such adjustment to a proposed order 
amount will be documented in writing and preserved in the records of 
the Adviser.
    \10\ ``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).
---------------------------------------------------------------------------

    11. If the aggregate Internal Orders for a Potential Co-Investment 
Transaction do not exceed the size of the investment opportunity 
immediately prior to the submission of the orders to the underwriter, 
broker, dealer or issuer, as applicable (the ``External Submission''), 
then each Internal Order will be fulfilled as placed. If, on the other 
hand, the aggregate Internal Orders for a Potential Co-Investment 
Transaction exceed the size of the investment opportunity immediately 
prior to the External Submission, then the allocation of the 
opportunity will be made pro rata on the basis of the size of the 
Internal Orders.\11\ 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 an Adviser will establish, implement and maintain. 
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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    \11\ Each Adviser 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 Trustees with information concerning the 
Affiliated Fund's and Regulated Funds' order sizes to assist the 
Eligible Trustees with their review of the applicable Regulated 
Fund's investments for compliance with the Conditions. ``Eligible 
Trustees'' 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 (treating any registered investment company 
or series thereof as a BDC for this purpose).
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B. Follow-On Investments

    12. Applicants state that from time to time the Regulated Funds and 
Affiliated Funds may have opportunities to make Follow-On Investments 
\12\ in an issuer in which a Regulated Fund and one or more other 
Regulated Funds and/or Affiliated Funds previously have invested.
---------------------------------------------------------------------------

    \12\ ``Follow-On Investment'' means an additional investment in 
the same issuer, including, but not limited to, through the exercise 
of warrants, conversion privileges or other rights to purchase 
securities of the issuer.
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    13. Applicants propose that Follow-On Investments would be divided 
into two categories depending on whether the prior investment was a Co-
Investment Transaction or a Pre-Boarding Investment.\13\ 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.
---------------------------------------------------------------------------

    \13\ ``Pre-Boarding Investments'' are investments in an issuer 
held by a Regulated Fund as well as one or more Affiliated Funds 
and/or one or more other Regulated Funds that were acquired prior to 
participating in any Co-Investment Transaction in transactions: (i) 
In which the only term negotiated by or on behalf of such funds was 
price in reliance on one of the JT No-Action Letters (defined 
below); or (ii) occurring at least 90 days apart and without 
coordination between the Regulated Fund and any Affiliated Fund or 
other Regulated Fund.
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    14. A Regulated Fund would be permitted to invest in Standard 
Review Follow-Ons either with the approval of the Required Majority 
under Condition 8(c) or without Board approval under Condition 8(b) if 
it is (i) a Pro Rata Follow-On Investment \14\ or (ii) a Non-

[[Page 74148]]

Negotiated Follow-On Investment.\15\ Applicants believe that these Pro 
Rata and Non-Negotiated Follow-On Investments do not present a 
significant opportunity for overreaching on the part of any Adviser and 
thus do not warrant the time or the attention of the Board. Pro Rata 
Follow-On Investments and Non-Negotiated Follow-On Investments remain 
subject to the Board's periodic review in accordance with Condition 10.
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    \14\ A ``Pro Rata Follow-On Investment'' is a Follow-On 
Investment (i) in which the participation of each Affiliated Fund 
and each Regulated Fund is proportionate to its outstanding 
investments in the issuer or security, as appropriate, immediately 
preceding the Follow-On Investment, and (ii) in the case of a 
Regulated Fund, a majority of the Board has approved the Regulated 
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 Trustees in accordance with Condition 
8(c).
    \15\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On 
Investment in which a Regulated Fund participates together with one 
or more Affiliated Funds and/or one or more other Regulated Funds 
(i) in which the only term negotiated by or on behalf of the funds 
is price and (ii) with respect to which, if the transaction were 
considered on its own, the funds would be entitled to rely on one of 
the JT No-Action Letters. ``JT No-Action Letters'' means SMC 
Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and 
Massachusetts Mutual Life Insurance Company, SEC No-Action Letter 
(pub. avail. June 7, 2000).
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C. Dispositions

    15. Applicants propose that Dispositions \16\ would be divided into 
two categories. If the Regulated Funds and the Affiliated Funds holding 
investments in the issuer had previously participated in a Co-
Investment Transaction with respect to the issuer, then the terms and 
approval of the Disposition would be subject to the Standard Review 
Dispositions described in Condition 6. If the Regulated Funds and 
Affiliated Funds have not previously participated in a 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.\17\
---------------------------------------------------------------------------

    \16\ ``Disposition'' means the sale, exchange or other 
disposition of an interest in a security of an issuer.
    \17\ However, with respect to an issuer, if a Regulated 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 Trustees must review the proposed Follow-On Investment not 
only on a stand-alone basis but also in relation to the total 
economic exposure in such issuer (i.e., in combination with the 
portion of the Pre-Boarding Investment not disposed of in the 
Enhanced Review Disposition), and the other terms of the 
investments. This additional review would be required because such 
findings would not have been required in connection with the prior 
Enhanced Review Disposition, but they would have been required had 
the first Co-Investment Transaction been an Enhanced Review Follow-
On.
---------------------------------------------------------------------------

    16. A Regulated Fund may participate in a Standard Review 
Disposition either with the approval of the Required Majority under 
Condition 6(d) or without Board approval under Condition 6(c) if (i) 
the Disposition is a Pro Rata Disposition \18\ or (ii) the securities 
are Tradable Securities \19\ 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.
---------------------------------------------------------------------------

    \18\ A ``Pro Rata Disposition'' is a Disposition (i) in which 
the participation of each Affiliated Fund and each Regulated Fund is 
proportionate to its outstanding investment in the security subject 
to Disposition immediately preceding the Disposition; and (ii) in 
the case of a Regulated Fund, a majority of the Board has approved 
the Regulated 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 Trustees.
    \19\ ``Tradable Security'' means a security that meets the 
following criteria at the time of Disposition: (i) It trades on a 
national securities exchange or designated offshore securities 
market as defined in rule 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 Adviser 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.
---------------------------------------------------------------------------

D. Delayed Settlement

    17. Applicants represent that under the terms and Conditions of the 
application, all Regulated Funds and Affiliated Funds participating in 
a Co-Investment Transaction will invest at the same time, for the same 
price and with the same terms, conditions, class, registration rights 
and any other rights, so that none of them receives terms more 
favorable than any other. However, the settlement date for an 
Affiliated Fund in a Co-Investment Transaction may occur up to ten 
business days after the settlement date for the Regulated Fund, and 
vice versa. Nevertheless, in all cases, (i) the date on which the 
commitment of the Affiliated Funds and Regulated Funds is made will be 
the same even where the settlement date is not and (ii) the earliest 
settlement date and the latest settlement date of any Affiliated Fund 
or Regulated Fund participating in the transaction will occur within 
ten business days of each other.

E. Holders

    18. Under Condition 15, if an Adviser, its principals, or any 
person controlling, controlled by, or under common control with the 
Adviser or its principals, and the Affiliated Funds (collectively, the 
``Holders'') own in the aggregate more than 25 percent of the 
outstanding voting shares of a Regulated Fund (the ``Shares''), then 
the Holders will vote such Shares in the same percentages as the 
Regulated Fund's other shareholders (not including the Holders) when 
voting on matters specified in the Condition.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Funds that are 
registered closed-end investment companies.
    2. Similarly, with regard to BDCs, section 57(a)(4) of the Act 
generally prohibits certain persons specified in section 57(b) from 
participating in joint transactions with the BDC or a company 
controlled by the BDC in contravention of rules as prescribed by the 
Commission. Section 57(i) of the Act provides that, until the 
Commission prescribes rules under section 57(a)(4), the Commission's 
rules under section 17(d) of the Act applicable to registered closed-
end investment companies will be deemed to apply to transactions 
subject to section 57(a)(4). Because the Commission has not adopted any 
rules under section 57(a)(4), rule 17d-1 also applies to joint 
transactions with Regulated Funds that are BDCs.
    3. Co-Investment Transactions are prohibited by either or both of 
rule 17d-1 and section 57(a)(4) without a prior exemptive order of the 
Commission to the extent that the Affiliated Funds and the Regulated 
Funds participating in such transactions fall within the category of 
persons described by rule 17d-1 and/or section 57(b), as applicable, 
vis-[agrave]-vis each participating Regulated Fund. Each of the 
participating Regulated Funds and Affiliated Funds may be deemed to be 
affiliated persons vis-[agrave]-vis a Regulated

[[Page 74149]]

Fund within the meaning of section 2(a)(3) by reason of common control 
because (i) Variant is the investment adviser to, and may be deemed to 
control, each of the Existing Regulated Funds and an Adviser to the 
Regulated Funds will be the investment adviser to, and may be deemed to 
control, any Future Regulated Fund; (ii) any Affiliated Fund will be 
managed by, and may be deemed to be controlled by, an Adviser to 
Affiliated Funds; and (iii) an Adviser to Affiliated Funds and an 
Adviser to Regulated Funds are under common control. Thus, each 
Regulated Fund would be related to each other in a manner described by 
57(b) or rule 17d-1, as applicable, and thus prohibited from 
participating in Co-Investment Transactions with each other. Each of 
the Affiliated Funds could also be deemed to be a person related to the 
Regulated Funds in a manner described by section 57(b) and related to 
the other 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. Because the Variant Proprietary Accounts will be controlled by 
the Adviser or its affiliates and, therefore, may be under common 
control with the Existing Regulated Funds, any future Adviser, and any 
Future Regulated Funds, the Variant Proprietary Accounts could be 
deemed to be persons related to the Regulated Funds (or a company 
controlled by the Regulated Funds) in a manner described by section 
17(d) or section 57(b) and also prohibited from participating in the 
co-investment program.
    5. In passing upon applications under rule 17d-1, the Commission 
considers whether a company's participation in the joint transaction is 
consistent with the provisions, policies, and purposes of the Act and 
the extent to which such participation is on a basis different from or 
less advantageous than that of other participants.
    6. Applicants state that in the absence of the requested relief, in 
many circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants state that, as required by rule 17d-1(b), the 
Conditions ensure that the terms on which Co-Investment Transactions 
may be made will be consistent with the participation of the Regulated 
Funds being on a basis that it is neither different from nor less 
advantageous than other participants, thus protecting the equity 
holders of any participant from being disadvantaged. Applicants further 
state that the Conditions ensure that all Co-Investment Transactions 
are reasonable and fair to the Regulated Funds and their shareholders 
and do not involve overreaching by any person concerned, including the 
Adviser. 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) Each Adviser will establish, maintain and implement policies 
and procedures reasonably designed to ensure that the 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 an 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 an Adviser 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 Trustees with information 
concerning the Affiliated Funds' and Regulated Funds' order sizes to 
assist the Eligible Trustees 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 
Trustees 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 the 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 
shareholders and do not involve overreaching in respect of the 
Regulated Fund or its shareholders on the part of any person concerned;
    (ii) the transaction is consistent with:
    (A) The interests of the Regulated Fund's shareholders; 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 Fund 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

[[Page 74150]]

right to participate in the governance or management of the portfolio 
company so long as: (x) The Eligible Trustees 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 \20\ financial 
benefit to an Adviser, 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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    \20\ 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.
---------------------------------------------------------------------------

    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,\21\ a Regulated Fund will not 
invest in reliance on the Order in any issuer in which a Related Party 
has an investment.\22\
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    \21\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
    \22\ ``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 an Adviser, 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 \23\ will 
notify each Regulated Fund that holds an investment in the issuer of 
the proposed Disposition at the earliest practical time; and
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    \23\ Any Variant Proprietary Account that is not advised by an 
Adviser is itself deemed to be an Adviser for purposes of Conditions 
6(a)(i), 7(a)(i), 8(a)(i), and 9(a)(i).
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    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to participation by such 
Regulated Fund in the Disposition.
    (b) Same Terms and Conditions. Each Regulated Fund will have the 
right to participate in such Disposition on a proportionate basis, at 
the same price and on the same terms and conditions as those applicable 
to the Affiliated Funds and any other Regulated Fund.
    (c) No Board Approval Required. A Regulated Fund may participate in 
such a Disposition without obtaining prior approval of the Required 
Majority if:
    (i)(A) the participation of each Regulated Fund and Affiliated Fund 
in such Disposition is proportionate to its then-current holding of the 
security (or securities) of the issuer that is (or are) the subject of 
the Disposition; \24\ (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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    \24\ In the case of any Disposition, proportionality will be 
measured by each participating Regulated Fund's and Affiliated 
Fund's outstanding investment in the security in question 
immediately preceding the Disposition.
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    (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 Trustees 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

[[Page 74151]]

    (iii) each Adviser 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 Fund, 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 
Trustees, and the Regulated Fund will participate in such Disposition 
solely to the extent that a Required Majority determines that:
    (i) The Disposition complies with Condition 2(c)(i), (ii), 
(iii)(A), and (iv); and
    (ii) the making and holding of the Pre-Boarding Investments were 
not prohibited by section 57 or rule 17d-1, as applicable, and records 
the basis for the finding in the Board minutes.
    (c) Additional Requirements. The Disposition may only be completed 
in reliance on the Order if:
    (i) Same Terms and Conditions. Each Regulated Fund has the right to 
participate in such Disposition on a proportionate basis, at the same 
price and on the same terms and conditions as those applicable to the 
Affiliated Funds and any other Regulated Fund;
    (ii) Original Investments. All of the Affiliated Funds' and 
Regulated Funds' investments in the issuer are Pre-Boarding 
Investments;
    (iii) Advice of counsel. Independent counsel to the Board advises 
that the making and holding of the investments in the Pre-Boarding 
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable;
    (iv) Multiple Classes of Securities. All Regulated Funds and 
Affiliated Funds that hold Pre-Boarding Investments in the issuer 
immediately before the time of completion of the Co-Investment 
Transaction hold the same security or securities of the issuer. For the 
purpose of determining whether the Regulated Funds and Affiliated Funds 
hold the same security or securities, they may disregard any security 
held by some but not all of them if, prior to relying on the Order, the 
Required Majority is presented with all information necessary to make a 
finding, and finds, that: (x) Any Regulated Fund's or Affiliated Fund's 
holding of a different class of securities (including for this purpose 
a security with a different maturity date) is immaterial \25\ 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
---------------------------------------------------------------------------

    \25\ 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,\26\ 
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
---------------------------------------------------------------------------

    \26\ 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 any Affiliated Fund, 
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 any Affiliated Fund, 
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 Trustees 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 Trustees 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 an Adviser 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 any Affiliated Funds 
holding investments in the issuer have not previously

[[Page 74152]]

participated in a Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Fund will 
notify each Regulated Fund that holds securities of the portfolio 
company of the proposed transaction at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in 
the issuer will formulate a recommendation as to the proposed 
participation, including the amount of the proposed investment, by such 
Regulated Fund; and
    (iii) the Adviser 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 
Trustees, 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 an Adviser 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 
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 any Affiliated Funds that the Regulated Fund considered but 
declined to participate in, so that the Independent Trustees, 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 -z6(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 Trustees 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. Trustee Independence. No Independent Trustee 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

[[Page 74153]]

distribution of any such securities registered for sale under the 
Securities Act) will, to the extent not payable by an Adviser under its 
respective advisory agreements with the Regulated Funds and the 
Affiliated Funds, be shared by the Regulated Funds and any 
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.\27\ Any transaction fee (including break-up, 
structuring, monitoring or commitment fees but excluding brokerage or 
underwriting compensation permitted by section 17(e) or 57(k)) received 
in connection with any Co-Investment Transaction will be distributed to 
the participants on a pro rata basis based on the amounts they invested 
or committed, as the case may be, in such Co-Investment Transaction. If 
any transaction fee is to be held by an Adviser pending consummation of 
the transaction, the fee will be deposited into an account maintained 
by an Adviser at a bank or banks having the qualifications prescribed 
in section 26(a)(1), and the account will earn a competitive rate of 
interest that will also be divided pro rata among the participants. 
None of the Adviser, the Affiliated Funds, the other Regulated Funds or 
any affiliated person of the Affiliated Funds or the Regulated Funds 
will receive any additional compensation or remuneration of any kind as 
a result of or in connection with a Co-Investment Transaction other 
than (i) in the case of the Regulated Funds and the Affiliated Funds, 
the pro rata transaction fees described above and fees or other 
compensation described in Condition 2(c)(iii)(B)(z), (ii) brokerage or 
underwriting compensation permitted by section 17(e) or 57(k) or (iii) 
in the case of the Adviser, investment advisory compensation paid in 
accordance with investment advisory agreements between the applicable 
Regulated Fund(s) or Affiliated Fund(s) and its Adviser.
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    \27\ Applicants are not requesting and the Commission is not 
providing any relief for transaction fees received in connection 
with any Co-Investment Transaction.
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    15. Independence. If the Holders own in the aggregate more than 25 
percent of the Shares of a Regulated Fund, then the Holders will vote 
such Shares in the same percentages as the Regulated Fund's other 
shareholders (not including the Holders) when voting on (1) the 
election of directors; (2) the removal of one or more directors; or (3) 
any other matter under either the Act or applicable State law affecting 
the Board's composition, size or manner of election.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-28324 Filed 12-28-21; 8:45 am]
BILLING CODE 8011-01-P
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