[Federal Register Volume 85, Number 243 (Thursday, December 17, 2020)]
[Notices]
[Pages 81987-81996]
[FR Doc No: 2020-27714]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34138; 812-14951]

KKR Income Opportunities Fund, et al.

December 11, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order under sections 17(d) and 57(i)
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1
under the Act to permit certain joint transactions otherwise prohibited
by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
    Summary of Application: Applicants request an order to permit
certain business development companies and closed-end management
investment companies to co-invest in portfolio companies with each
other and with certain affiliated investment funds and accounts.
    Applicants: KKR INCOME OPPORTUNITIES FUND (``KIO''), KKR CREDIT
OPPORTUNITIES PORTFOLIO (``KCOP''), KKR CREDIT ADVISORS (US) LLC (``KKR
Credit''), KKR CREDIT ADVISORS (HONG KONG) LIMITED, KKR STRATEGIC
CAPITAL MANAGEMENT LLC, KKR FI ADVISORS LLC, KKR FINANCIAL ADVISORS
LLC, KKR FINANCIAL ADVISORS II, LLC, KKR CS ADVISORS I LLC, KKR
MEZZANINE I ADVISORS LLC, KKR FI ADVISORS CAYMAN LTD., KAM ADVISORS
LLC, KAM FUND ADVISORS LLC, KKR CREDIT FUND ADVISORS LLC, KKR ASSET
MANAGEMENT, LTD., KKR CREDIT ADVISORS (IRELAND) UNLIMITED COMPANY, KKR
CREDIT ADVISORS (EMEA) LLP, KKR CREDIT ADVISORS (SINGAPORE) PTE. LTD.,
KKR CAPITAL MARKETS HOLDINGS L.P., KKR CAPITAL MARKETS LLC, KKR CAPITAL
MARKETS LIMITED, KKR CAPITAL MARKETS ASIA LIMITED, MCS CAPITAL MARKETS
LLC, KKR CAPITAL MARKETS PARTNERS LLP, KKR CAPITAL MARKETS INDIA
PRIVATE LIMITED, KKR CAPITAL MARKETS (IRELAND) LIMITED, KKR CAPITAL
MARKETS JAPAN LIMITED, KKR RTV MANAGER LLC, KKR LOAN ADMINISTRATION
SERVICES LLC, KKR CORPORATE LENDING LLC, KKR CORPORATE LENDING (CAYMAN)
LIMITED, KKR CORPORATE LENDING (UK) LLC, MERCHANT CAPITAL SOLUTIONS
LLC, MCS CORPORATE LENDING LLC, KKR ALTERNATIVE ASSETS LLC, KKR
ALTERNATIVE ASSETS L.P., KKR ALTERNATIVE ASSETS LIMITED, KKR CORPORATE
LENDING (CA) LLC, KKR CORPORATE LENDING (TN) LLC, KKR FINANCIAL
HOLDINGS, INC., KKR FINANCIAL HOLDINGS, LTD., KKR FINANCIAL HOLDINGS
II, LLC, KKR FINANCIAL HOLDINGS II, LTD., KKR FINANCIAL HOLDINGS III,
LLC, KKR FINANCIAL HOLDINGS III, LTD., KKR FINANCIAL CLO HOLDINGS, LLC,
KKR FINANCIAL CLO HOLDINGS II, LLC, KKR TRS HOLDINGS, LTD., KKR
STRATEGIC CAPITAL INSTITUTIONAL FUND, LTD., KKR DEBT INVESTORS II
(2006) IRELAND L.P., KKR DI 2006 LP, KKR EUROPEAN SPECIAL OPPORTUNITIES
LIMITED, 8 CAPITAL PARTNERS L.P., KKR FINANCIAL CLO 2007-1, LTD., KKR
FINANCIAL CLO 2012-1, LTD., KKR FINANCIAL CLO 2013-1, LTD., KKR
FINANCIAL CLO 2013-2, LTD., KKR CLO 9 LTD., KKR CLO 10 LTD., KKR CLO 11
LTD., KKR CLO 12 LTD., KKR CLO 13 LTD., KKR CLO 14 LTD., KKR CLO 15
LTD., KKR CLO 16 LTD., KKR CLO 17 LTD., KKR CLO 18 LTD., KKR CLO 19
LTD., KKR CLO 20 LTD., KKR CLO 21 LTD., KKR CLO 22 LTD., KKR CLO 23
LTD., KKR CLO 24 LTD., KKR CLO 25 LTD., KKR CLO 26 LTD., KKR CLO 27
LTD., KKR CLO 28 LTD., KKR CLO 29 LTD., KKR CLO 30 LTD., KKR CLO 31
LTD., KKR CORPORATE CREDIT PARTNERS L.P., KKR MEZZANINE PARTNERS I
L.P., KKR MEZZANINE PARTNERS I SIDE-BY-SIDE L.P., KKR-KEATS CAPITAL
PARTNERS L.P., KKR-MILTON CAPITAL PARTNERS L.P., KKR-MILTON CAPITAL
PARTNERS II L.P., KKR LENDING PARTNERS L.P., KKR LENDING PARTNERS II
L.P., KKR-VRS CREDIT PARTNERS L.P., KKR PIP INVESTMENTS L.P., KKR
SPECIAL SITUATIONS (DOMESTIC) FUND L.P.,

KKR SPECIAL SITUATIONS (OFFSHORE) FUND L.P., KKR SPECIAL SITUATIONS
(DOMESTIC) FUND II L.P., KKR SPECIAL SITUATIONS (EEA) FUND II L.P., KKR
STRATEGIC CAPITAL OVERSEAS FUND LTD., KKR-CDP PARTNERS L.P., KKR-PBPR
CAPITAL PARTNERS L.P., KKR CREDIT SELECT (DOMESTIC) FUND L.P., KKR
PRIVATE CREDIT OPPORTUNITIES PARTNERS II L.P., KKR PRIVATE CREDIT
OPPORTUNITIES PARTNERS II (EEA) L.P., KKR PRIVATE CREDIT OPPORTUNITIES
PARTNERS II (EEA) EURO L.P., KKR TACTICAL VALUE SPN L.P., KKR LENDING
PARTNERS EUROPE (GBP) UNLEVERED L.P., KKR LENDING PARTNERS EUROPE
(EURO) UNLEVERED L.P., KKR LENDING PARTNERS EUROPE (USD) L.P., KKR
LENDING PARTNERS EUROPE (EURO) L.P., KKR EUROPEAN RECOVERY PARTNERS
L.P., KKR REVOLVING CREDIT PARTNERS L.P., AVOCA CAPITAL CLO X
DESIGNATED ACTIVITY COMPANY, AVOCA CLO XI DESIGNATED ACTIVITY COMPANY,
AVOCA CLO XII DESIGNATED ACTIVITY COMPANY, AVOCA CLO XIII DESIGNATED
ACTIVITY COMPANY, AVOCA CLO XIV DESIGNATED ACTIVITY COMPANY, AVOCA CLO
XV DESIGNATED ACTIVITY COMPANY, AVOCA CLO XVI DESIGNATED ACTIVITY
COMPANY, AVOCA CLO XVII DESIGNATED ACTIVITY COMPANY, AVOCA CLO XVIII
DESIGNATED ACTIVITY COMPANY, AVOCA CLO XIX DESIGNATED ACTIVITY COMPANY,
AVOCA CLO XX DESIGNATED ACTIVITY COMPANY, AVOCA CLO XXI DESIGNATED
ACTIVITY COMPANY, AVOCA CLO XXIV DESIGNATED ACTIVITY COMPANY, KKR
EUROPEAN FLOATING RATE LOAN FUND, ABSALON CREDIT DESIGNATED ACTIVITY
COMPANY, GARDAR LOAN FUND, AVOCA CREDIT OPPORTUNITIES PLC, KKR EUROPEAN
CREDIT OPPORTUNITIES FUND II, PRISMA SPECTRUM FUND LP, POLAR BEAR FUND
LP, KKR TFO PARTNERS L.P., TACTICAL VALUE SPN--APEX CREDIT L.P.,
TACTICAL VALUE SPN-GLOBAL DIRECT LENDING L.P., KKR GLOBAL CREDIT
OPPORTUNITIES MASTER FUND L.P., TACTICAL VALUE SPN-GLOBAL CREDIT
OPPORTUNITIES L.P., KKR PRINCIPAL OPPORTUNITIES PARTNERSHIP L.P., KKR
SPN CREDIT INVESTORS L.P., CDPQ AMERICAN FIXED INCOME III, L.P., KKR
LENDING PARTNERS III L.P., LP III WAREHOUSE LLC, KKR ACS CREDIT FUND,
KKR BESPOKE GLOBAL CREDIT OPPORTUNITIES (IRELAND) FUND, KKR CREDIT
INCOME FUND, KKR DAF DIRECT LENDING FUND, KKR DAF GLOBAL OPPORTUNISTIC
CREDIT FUND, KKR DAF PRIVATE CREDIT FUND, KKR DAF STERLING ASSETS FUND,
KKR DAF SYNDICATED LOAN AND HIGH YIELD FUND, KKR DAF SECURITISED
PRIVATE CREDIT FUND, KKR DRAGON CO-INVEST L.P., KKR EUROPEAN CREDIT
OPPORTUNITIES FUND II DESIGNATED ACTIVITY COMPANY, KKR GLOBAL CREDIT
DISLOCATION (CAYMAN) LTD., KKR DISLOCATION OPPORTUNITIES (DOMESTIC)
FUND L.P., KKR DISLOCATION OPPORTUNITIES (EEA) FUND SCSP, KKR GOLDFINCH
L.P., KKR LENDING PARTNERS EUROPE II (EURO) UNLEVERED SCSP, KKR LENDING
PARTNERS EUROPE II (USD) SCSP, KKR MACKELLAR PARTNERS L.P., KKR PIP
CREDIT INVESTORS LLC, KKR REVOLVING CREDIT PARTNERS EUROPE SCSP, KKR
REVOLVING CREDIT PARTNERS II L.P., KKR SENIOR FLOATING RATE INCOME
FUND, KKR US CLO EQUITY PARTNERS II L.P., KKR US CLO EQUITY PARTNERS
L.P., KKR-BARMENIA EDL PARTNERS SCSP, KKR-CARDINAL CREDIT OPPORTUNITIES
FUND L.P., KKR-DUS EDL PARTNERS SCSP, KKR-GENERALI PARTNERS SCSP SICAV-
RAIF, KKR-MANDATE 2020 DIRECT LENDING FUND, KKR-MILTON CO-INVESTMENTS
II L.P., KKRN EURO LOAN FUND 2018 FCP-RAIF, KKR-NYC CREDIT A L.P., KKR-
NYC CREDIT B L.P., KKR-NYC CREDIT C L.P., KKR-UWF DIRECT LENDING
PARTNERSHIP L.P., PRISMA PELICAN FUND LLC, RR-RW CREDIT L.P., SWISS
CAPITAL KKR PRIVATE DEBT FUND L.P., KKR-JESSELTON HIF CREDIT PARTNERS
L.P., KKR-MILTON CREDIT HOLDINGS L.P., KKR-MILTON OPPORTUNISTIC CREDIT
FUND L.P., KKR CENTRAL PARK LEASING AGGREGATOR L.P., FS KKR CAPITAL
CORP. (``FSK''), FS KKR CAPITAL CORP. II (``FSKR''), FS/KKR ADVISOR,
LLC (``FS/KKR Advisor'').
    Filing Dates: The application was filed on September 13, 2018, and
amended on September 4, 2020, and December 3, 2020.
    Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by emailing the Commission's
Secretary at<EMAIL_ADDRESS>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 4, 2021, and should be
accompanied by proof of service on applicants, in the form of an
affidavit or, for lawyers, a certificate of service. Pursuant to rule
0-5 under the Act, hearing requests should state the nature of the
writer's interest, any facts bearing upon the desirability of a hearing
on the matter, the reason for the request, and the issues contested.
Persons who wish to be notified of a hearing may request notification
by emailing the Commission's Secretary at<EMAIL_ADDRESS>
ADDRESSES: Secretary, U.S. Securities and Exchange Commission,
<EMAIL_ADDRESS>Applicants: Noah Greenhill, KKR Credit
Advisors (US) LLC<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: Jennifer O. Palmer, Senior Counsel, at
(303) 844-1012, or David J. Marcinkus, Branch Chief, at<PHONE_NUMBER>
(Chief Counsel's Office, Division of Investment Management).

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

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''), one or more Regulated Entities \1\ 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 a Regulated Entity (or a Blocker Subsidiary, defined below)
participated together with one or more other Regulated Entities and/or
one or more Affiliated Investors in reliance on the Order or the Prior
Order. ``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Entity (or a Blocker Subsidiary) could
not participate together with one or more other Regulated Entities and/
or one or more Affiliated Investors \3\ without obtaining and relying
on the Order.\4\
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    \1\ ``Regulated Entities'' means the Existing Regulated Entities
and any Future Regulated Entity. ``Existing Regulated Entities''
means FSK, FSKR, KCOP and KIO. ``Future Regulated Entity'' means a
closed-end management investment company (a) that is registered
under the Act or has elected to be regulated as a BDC and (b) whose
investment adviser or sub-adviser is a KKR Credit Adviser that is
registered as an investment adviser under the Act. ``KKR Credit
Adviser'' means an Existing KKR Credit Adviser or any investment
adviser that (i) is controlled by, or is a relying adviser of, KKR
Credit, (ii) is registered as an investment adviser under the
Advisers Act, and (iii) is not a Regulated Entity or a subsidiary of
a Regulated Entity. ``Existing KKR Credit Adviser'' means KKR
Credit, FS/KKR Advisor, and the investment advisory subsidiaries and
relying advisers of KKR Credit set forth on schedule A of the
application (``Schedule A'').
    ``Adviser'' means any KKR Credit Adviser; provided that a KKR
Credit Adviser serving as a sub-adviser to an Affiliated Fund is
included in this term only if (i) such KKR Credit Adviser controls
the entity and (ii) the primary adviser to such Affiliated Fund is
not an Adviser. The term Adviser does not include any other primary
adviser to an Affiliated Fund or a Regulated Entity whose sub-
adviser is an Adviser, except that such adviser is deemed to be an
Adviser for purposes of Conditions 2(c)(iv), 14 and 15 only. Any
primary adviser to an Affiliated Fund or a Regulated Entity whose
sub-adviser is an Adviser will not source any Potential Co-
Investment Transactions under the requested Order.
    \2\ ``Affiliated Fund'' means (a) any Existing Affiliated Fund
or (b) any entity (i) whose investment adviser or sub-adviser is a
KKR Credit Adviser and (ii) that either (A) would be an investment
company but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act or
(B) relies on the Rule 3a-7 exemption from investment company
status; provided that an entity sub-advised by a KKR Credit Adviser
is included in this term only if (i) such KKR Credit Adviser serving
as sub-adviser controls the entity and (ii) the primary adviser of
such Affiliated Fund is not an Adviser. ``Existing Affiliated Fund''
means each investment fund set forth on Schedule A together with its
direct and indirect wholly-owned subsidiaries.
    \3\ ``Affiliated Investor'' means any Affiliated Fund or any
Proprietary Affiliate. ``Proprietary Affiliate'' means any KCM
Company or any KKR Proprietary Account. ``KCM Company'' means (a)
any Existing KCM Company (defined below) or (b) any entity that (i)
is an indirect, wholly- or majority-owned subsidiary of KKR and (ii)
is registered or authorized as a broker-dealer or its foreign
equivalent. ``KKR Proprietary Account'' means (a) any Existing KKR
Proprietary Account (defined below) or (b) any entity that (i) is an
indirect, wholly- or majority- owned subsidiary of KKR, (ii) is
advised by a KKR Credit Adviser and (iii) from time to time, may
hold various financial assets in a principal capacity, as described
in greater detail herein.
    \4\ 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. FS KKR Capital Corp. (``FSK'') and FS KKR Capital Corp. II
(``FSKR'') are closed-end management investment companies that have
elected to be regulated as business development companies (``BDCs'')
under the Act.\5\ FSK and FSKR were each organized under the General
Corporation Law of the State of Maryland for the purpose of operating
as an externally-managed, non-diversified, BDC. FSK and FSKR each have
a Board \6\ that is comprised of a majority of Independent
Directors.\7\
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    \5\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in Section 55(a)(1) through
55(a)(3) and makes available significant managerial assistance with
respect to the issuers of such securities.
    \6\ ``Board'' means the board of directors or trustees of a
Regulated Entity.
    \7\ ``Independent Director'' means the director or trustee of
any Regulated Entity who is not an ``interested person'' within the
meaning of Section 2(a)(19) of the Act. No Independent Director of a
Regulated Entity will have a financial interest in any Co-Investment
Transaction, other than indirectly through share ownership in one of
the Regulated Entities.
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    3. KKR Income Opportunities Fund (``KIO'') and KKR Credit
Opportunities Portfolio (``KCOP'') were organized as statutory trusts
under the laws of the State of Delaware. KIO and KCOP are diversified,
closed-end management investment companies registered under the Act.
KCOP is a continuously offered closed-end fund that operates as an
interval fund. KIO and KCOP each have a five member Board, of which
four members are Independent Directors.
    4. FS/KKR Advisor and KKR Credit are Delaware limited liability
companies registered as investment advisers with the Commission. FS/KKR
Advisor is controlled by KKR Credit. FS/KKR Advisor serves as the
investment adviser to FSK and FSKR. KKR Credit, a subsidiary of KKR &
Co., Inc. (``KKR''), serves as the investment adviser to KIO and KCOP.
Each Regulated Entity will be advised or sub-advised by KKR Credit or
another KKR Credit Adviser that is a registered investment adviser.
    5. The Existing Affiliated Funds are the investment funds
identified on Schedule A, together with their direct and indirect
wholly-owned subsidiaries. Applicants represent that each investment
fund identified on Schedule A is an entity that either (A) would be an
investment company but for Section 3(c)(1) or 3(c)(7) of the 1940 Act
or (B) relies on the Rule 3a-7 exemption from investment company
status. Certain Existing Affiliated Funds are collateralized loan
obligation (``CLO'') entities that rely on Rule 3a-7 under the Act in
addition to Section 3(c)(7) thereof. These Existing Affiliated Funds
are all advised by an Existing KKR Credit Adviser.
    6. KKR Capital Markets Holdings L.P. and its capital markets
subsidiaries set forth on Schedule A, each of which is an indirect,
wholly- or majority-owned subsidiary of KKR, may, from time to time,
hold various financial assets in a principal capacity (the ``Existing
KCM Companies''). In addition, KKR Financial Holdings LLC, its wholly-
owned subsidiaries set forth on Schedule A and its wholly-owned
subsidiaries that may be formed in the future, and other indirect,
wholly- or majority-owned subsidiaries of KKR set forth on Schedule A
may, from time to time, hold various financial assets in a principal
capacity (the ``Existing KKR Proprietary Accounts'').
    7. Applicants state that any of the Regulated Entities may, from
time to time, form a special purpose subsidiary (a ``Blocker
Subsidiary'').\8\ A Blocker Subsidiary would be prohibited from
investing in a Co-Investment Transaction with any other Regulated
Entity or Affiliated Investor because it would be a company controlled
by the Regulated Entity for purposes of Section 57(a)(4) and rule 17d-
1. Applicants request that a Blocker Subsidiary be permitted to
participate in Co-Investment Transactions in lieu of its parent
Regulated Entity and that the Blocker Subsidiary's participation in any
such transaction be treated, for purposes of the Order, as though the
parent Regulated Entity were participating directly.
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    \8\ ``Blocker Subsidiary'' means an entity (a) whose sole
business purpose is to hold one or more investments on behalf of a
Regulated Entity; (b) that is wholly-owned by the Regulated Entity
(with the Regulated Entity at all times holding, beneficially and of
record, 100% of the voting and economic interests); (c) with respect
to which the Regulated Entity's Board has the sole authority to make
all determinations with respect to the Blocker Subsidiary's
participation under the conditions to this Application; (d) that
does not pay a separate advisory fee, including any performance-
based fee, to any person; and (e) that is an entity that would be an
investment company but for Section 3(c)(1) or 3(c)(7) of the Act.
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Applicants' Representations

A. Allocation Process

    8. Applicants state that opportunities for Potential Co-Investment
Transactions may arise when advisory personnel of a KKR Credit Adviser
become aware of investment opportunities that may be appropriate for a
Regulated Entity, one or more other Regulated Entities and/or one or
more Affiliated Investors. In such cases, Applicants state that the
Adviser to a Regulated Entity will be notified of such Potential Co-
Investment Transactions, and such investment opportunities may result
in Co-Investment Transactions. For each such investment opportunity,
the Adviser to a Regulated Entity will independently analyze and
evaluate the investment opportunity as to its appropriateness for each
Regulated Entity for which it serves as investment adviser taking into
consideration the Regulated Entity's Objectives and Strategies \9\ and
any Board-Established

Criteria.\10\ If the Adviser to the Regulated Entity determines that
the opportunity is appropriate for one or more Regulated Entities (and
the applicable Adviser approves the investment for each Regulated
Entity for which it serves as adviser), and one or more other Regulated
Entities and/or one or more Affiliated Investors may also participate,
the Adviser to a Regulated Entity will present the investment
opportunity to the Eligible Directors \11\ of the Regulated Entity
prior to the actual investment by the Regulated Entity. As to any
Regulated Entity, a Co-Investment Transaction will be consummated only
upon approval by a required majority of the Eligible Directors within
the meaning of Section 57(o) of such Regulated Entity (``Required
Majority'').\12\
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    \9\ ``Objectives and Strategies'' means a Regulated Entity's
investment objectives and strategies, as described in the Regulated
Entity's registration statement on Form N-2, other filings the
Regulated Entity has made with the Commission under the Securities
Act of 1933, as amended (the ``1933 Act''), or under the Securities
and Exchange Act of 1934, as amended (the ``1934 Act''), and the
Regulated Entity's reports to shareholders.
    \10\ ``Board-Established Criteria'' means criteria that the
Board of a Regulated Entity may establish from time to time to
describe the characteristics of Potential Co-Investment Transactions
regarding which each Adviser to the Regulated Entity should be
notified under condition 1. The Board-Established Criteria will be
consistent with a Regulated Entity's Objectives and Strategies. If
no Board-Established Criteria are in effect, then each Adviser to a
Regulated Entity will be notified of all Potential Co-Investment
Transactions that fall within the Regulated Entity'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. Each Adviser to a Regulated
Entity may from time to time recommend criteria for the Board's
consideration, but Board-Established Criteria will only become
effective if approved by a majority of the Independent Directors.
The Independent Directors of a Regulated Entity 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.
    \11\ The term ``Eligible Directors'' means the directors or
trustees who are eligible to vote under section 57(o) of the Act.
    \12\ In the case of a Regulated Entity that is a registered
closed-end fund, the directors or trustees that make up the Required
Majority will be determined as if the Regulated Entity were a BDC
subject to Section 57(o).
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    9. Applicants state that each Adviser, acting through an investment
committee, will carry out its obligation under condition 1 to make a
determination as to the appropriateness of the Potential Co-Investment
Transaction for any Regulated Entity. In the case of a Potential Co-
Investment Transaction, the applicable Adviser would apply its
allocation policies and procedures in determining the proposed
allocation for the Regulated Entity consistent with the requirements of
condition 2(a). Applicants note that each Adviser, as a registered
investment adviser with respect to the Regulated Entities and as a
registered investment adviser or a relying adviser with respect to the
Affiliated Funds, has developed a robust allocation process as part of
its overall compliance policies and procedures. Applicants state that
these procedures are in addition to, and not instead of, the procedures
required under the conditions.
    10. Applicants acknowledge that some of the Affiliated Investors
may not be funds advised by an Adviser because they are KKR Proprietary
Accounts or KCM Companies. KKR Proprietary Accounts are balance sheet
entities advised by an Adviser pursuant to an investment management
agreement that hold financial assets in a principal capacity. KCM
Companies are regulated broker-dealers that may hold financial assets
in a principal capacity. Applicants do not believe that the
participation of Proprietary Affiliates in the co-investment program
would raise any regulatory or mechanical concerns different from those
discussed with respect to the Affiliated Investors that are clients.
    11. Applicants represent that the Advisers have implemented a
robust allocation process to ensure that each Regulated Entity is
treated fairly in respect of the allocation of Potential Co-Investment
Transactions. The initial amount proposed by an Adviser to be allocated
to each applicable Regulated Entity is documented in a written
allocation statement. If the amount proposed to be allocated to a
Regulated Entity changes from the time the final written allocation
statement is prepared and the date of settlement of the transaction,
the updated allocation statement will also be recorded and reviewed by
a member of the Regulated Entity's compliance team. Each Regulated
Entity's Board will be provided with all relevant information regarding
the Adviser's proposed allocations to such Regulated Entity and
Affiliated Investors, including Proprietary Affiliates, as contemplated
by the conditions hereof. With respect to Affiliated Investors that are
relying on the Order, each Adviser is subject to the same robust
allocation process. As a result, all Potential Co-Investment
Transactions that are presented to an Adviser would also be presented
to every other Adviser which, as required by condition 1, would make an
independent determination of the appropriateness of the investment for
the Regulated Entities.

B. Follow-On Investments

    12. Applicants state that, from time to time, the Regulated
Entities and Affiliated Investors may have opportunities to make
Follow-On Investments \13\ in an issuer in which a Regulated Entity,
one or more other Regulated Entities and/or one or more Affiliated
Investors previously have invested and continue to hold an investment.
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    \13\ ``Follow-On Investment'' means an additional investment in
an existing portfolio company, the exercise of warrants, conversion
privileges or other similar rights to acquire additional securities
of the portfolio company.
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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.\14\ If the
Regulated Entities and Affiliated Funds (and potentially Proprietary
Affiliates) have previously participated in a Co-Investment Transaction
with respect to the issuer, then the terms and approval of the Follow-
On Investment (a ``Standard Review Follow-On'') would be subject to the
process described in Condition 9. If the Regulated Entities 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 (an
``Enhanced Review Follow-On'') would be subject to the process
described in Condition 10. All Enhanced Review Follow-Ons require the
approval of the Required Majority. For a given issuer, the
participating Regulated Entities and Affiliated Investors would need to
comply with the requirements of Enhanced-Review Follow-Ons only for the
first Co-Investment Transaction. Subsequent Co-Investment Transactions
with respect to the issuer would be governed by the requirements of
Standard Review Follow-Ons.
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    \14\ ``Pre-Boarding Investments'' are investments in an issuer
held by a Regulated Entity as well as one or more Affiliated Funds,
one or more Proprietary Affiliates and/or one or more other
Regulated Entities that were acquired prior to participating in any
Co-Investment Transaction: (i) In transactions 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; or (ii) in transactions
occurring at least 90 days apart and without coordination between
the Regulated Entity and any Affiliated Fund or other Regulated
Entity. ``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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    14. A Regulated Entity would be permitted to invest in Standard
Review Follow-Ons either with the approval of the Required Majority
under Condition

9(c) or without Board approval under Condition 9(b) if it is (i) a Pro
Rata Follow-On Investment \15\ or (ii) a Non-Negotiated Follow-On
Investment.\16\ 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 and Non-
Negotiated Follow-On Investments remain subject to the Board's periodic
review in accordance with Condition 11.
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    \15\ A ``Pro Rata Follow-On Investment'' is a Follow-On
Investment (i) in which the participation of each Regulated Entity
and each Affiliated Investor 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 Entity, a majority of the Board has approved the Regulated
Entity's participation in the pro rata Follow-On Investments as
being in the best interests of the Regulated Entity. The Regulated
Entity'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 Entity's Eligible Directors in accordance with
Condition 9(c).
    \16\ A ``Non-Negotiated Follow-On Investment'' is a Follow-On
Investment in which a Regulated Entity participates together with
one or more Affiliated Investors and/or one or more other Regulated
Entities (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.
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C. Dispositions

    15. Applicants propose that Dispositions \17\ would be divided into
two categories. If the Regulated Entities and Affiliated Funds (and
potentially Proprietary Affiliates) holding investments in the issuer
had previously participated in a Co-Investment Transaction with respect
to the issuer and continue to hold any securities acquired in a Co-
Investment Transaction for such issuer, then the terms and approval of
the Disposition (a ``Standard Review Disposition'') would be subject to
the process described in Condition 7. If the Regulated Entities 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 (an
``Enhanced Review Disposition'') would be subject to the process
described in Condition 8. Subsequent Dispositions with respect to the
same issuer would be governed by the requirements of Standard Review
Dispositions.\18\
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    \17\ ``Disposition'' means the sale, exchange or other
disposition of an interest in a security of an issuer.
    \18\ However, with respect to an issuer, if a Regulated Entity's
first Co-Investment Transaction is an Enhanced Review Disposition,
and the Regulated Entity does not dispose of its entire position in
the Enhanced Review Disposition, then before such Regulated Entity
may complete its first Standard Review Follow-On in such issuer, the
Eligible Directors must review the proposed Follow-On Investment not
only on a stand-alone basis but also in relation to the total
economic exposure in such issuer (i.e., in combination with the
portion of the Pre-Boarding Investment not disposed of in the
Enhanced Review Disposition), and the other terms of the
investments. This additional review is required because such
findings were not 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 Entity may participate in a Standard Review
Disposition either with the approval of the Required Majority under
Condition 7(d) or without Board approval under Condition 7(c) if (i)
the Disposition is a Pro Rata Disposition \19\ or (ii) the securities
are Tradable Securities \20\ and the Disposition meets the other
requirements of Condition 7(c)(ii). Pro Rata Dispositions and
Dispositions of a Tradable Security remain subject to the Board's
periodic review in accordance with Condition 11.
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    \19\ A ``Pro Rata Disposition'' is a Disposition (i) in which
the participation of each Regulated Entity and each Affiliated
Investor is proportionate to its outstanding investment in the
security subject to Disposition immediately preceding the
Disposition; and (ii) in the case of a Regulated Entity, a majority
of the Board has approved the Regulated Entity's participation in
pro rata Dispositions as being in the best interests of the
Regulated Entity. The Regulated Entity's Board may refuse to
approve, or at any time rescind, suspend or qualify, their approval
of Pro Rata Dispositions, in which case all subsequent Dispositions
will be submitted to the Regulated Entity's Eligible Directors.
    \20\ ``Tradable Security'' means a security that meets the
following criteria at the time of Disposition: (i) It trades on a
national securities exchange or designated offshore securities
market as defined in rule 902(b) under the Securities Act; (ii) it
is not subject to restrictive agreements with the issuer or other
security holders; and (iii) it trades with sufficient volume and
liquidity (findings as to which are documented by the Advisers to
any Regulated Entities holding investments in the issuer and
retained for the life of the Regulated Entity) to allow each
Regulated Entity 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 1940 Act) at which the Regulated Entity has valued the
investment.
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D. Delayed Settlement

    17. Applicants represent that all Regulated Entities and Affiliated
Investors 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 a Regulated Entity,
and vice versa. Nevertheless, in all cases, (i) the date on which the
commitment of the Affiliated Funds and Regulated Entities 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 Entity participating in the transaction will occur within
ten business days of each other.

E. Holders

    18. Under Condition 17, if an Adviser or its principals, or any
person controlling, controlled by, or under common control with the
Adviser or its principals, and any Affiliated Investor (collectively,
the ``Holders'') own in the aggregate more than 25 percent of the
outstanding voting shares of a Regulated Entity, then the Holders will
vote such shares in the same percentages as the Regulated Entity's
other shareholders (not including the Holders) when voting on matters
specified in the Condition. Applicants believe this Condition will
ensure that the Independent Directors will act independently in
evaluating the co-investment program, because the ability of the
Adviser or its principals to influence the Independent Directors by a
suggestion, explicit or implied, that the Independent Directors can be
removed will be limited significantly.
    Applicants' Legal Analysis:
    1. Section 17(d) of the 1940 Act generally prohibits an affiliated
person (as defined in Section 2(a)(3) of the 1940 Act), or an
affiliated person of such affiliated person, of a registered closed-end
investment company acting as principal, from effecting any transaction
in which the registered closed-end investment company is a joint or a
joint and several participant, in contravention of such rules as the
Commission may prescribe for the purpose of limiting or preventing
participation by the registered closed-end investment company on a
basis different from or less advantageous than that of such other
participant. Rule 17d-1 under the 1940 Act generally prohibits
participation by a registered investment company and an affiliated
person (as defined in Section 2(a)(3) of the 1940 Act) or principal
underwriter for that investment company, or an affiliated person of
such affiliated person or principal underwriter, 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.
    2. Similarly, with regard to BDCs, Section 57(a)(4) makes it
unlawful for any person who is related to a BDC in a manner described
in Section 57(b),

acting as principal, knowingly to effect any transaction in which the
BDC (or a company controlled by such BDC) is a joint or a joint and
several participant with that person in contravention of rules and
regulations as the Commission may prescribe for the purpose of limiting
or preventing participation by the BDC (or a controlled company) on a
basis less advantageous than that of the other participant. Because the
Commission has not adopted any rules expressly under Section 57(a)(4),
Section 57(i) provides that the rules under Section 17(d) applicable to
registered closed-end investment companies (e.g., Rule 17d-1) are, in
the interim, deemed to apply to transactions subject to Section 57(a).
    3. Co-Investment Transactions would be prohibited by Sections 17(d)
and 57(a)(4) and Rule 17d-1 without a prior exemptive order of the
Commission to the extent that the Affiliated Investors and the other
Regulated Entities fall within the categories of persons described by
Section 17(d) and Section 57(b), as modified by Rule 57b-1 thereunder,
vis-[agrave]-vis each Regulated Entity. Each Regulated Entity may be
deemed to be affiliated persons of each other Regulated Entity within
the meaning of Section 2(a)(3) if it is deemed to be under common
control because a KKR Credit Adviser is or will be either the
investment adviser or sub-adviser to each Regulated Entity. Section
17(d) and Section 57(b) apply to any investment adviser to a closed-end
fund or a BDC, respectively, including the sub-adviser. Thus, a KKR
Credit Adviser and any Affiliated Investors that it advises could be
deemed to be persons related to Regulated Entities in a manner
described by Sections 17(d) and 57(b) and therefore prohibited by
Sections 17(d) and 57(a)(4) and Rule 17d-1 from participating in the
co-investment program.
    4. In addition, because all of the KKR Credit Advisers are
``affiliated persons'' of each other, Affiliated Investors advised by
any of them could be deemed to be persons related to Regulated Entities
(or a company controlled by a Regulated Entity) in a manner described
by Sections 17(d) and 57(b) and also prohibited from participating in
the Co-Investment Program.
    5. Finally, because Proprietary Affiliates are under common control
with each KKR Credit Adviser and, therefore, are ``affiliated persons''
of each KKR Credit Adviser, Proprietary Affiliates could be deemed to
be persons related to Regulated Entities (or a company controlled by a
Regulated Entity) in a manner described by Sections 17(d) and 57(b) and
also prohibited from participating in the Co-Investment Program.
    6. In passing upon applications under rule 17d-1, the Commission
considers whether the participation by the investment company in such
joint enterprise, joint arrangement, or profit-sharing plan on the
basis proposed 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.
    7. Applicants submit that the fact that the Required Majority will
approve each Co-Investment Transaction before investment (except for
certain Dispositions or Follow-On Investments, as described in the
conditions), and other protective conditions set forth in this
Application, will ensure that a Regulated Entity will be treated
fairly. Applicants state that the conditions to which the requested
relief will be subject are designed to ensure that principals of the
Advisers would not be able to favor the Affiliated Investors over a
Regulated Entity through the allocation of investment opportunities
among them. Further, Applicants state that the terms and conditions
proposed herein will ensure that all such transactions are reasonable
and fair to each Regulated Entity and the Affiliated Investors and do
not involve overreaching by any person concerned, including a KKR
Credit Adviser. Applicants submit that each Regulated Entity's
participation in the Co-Investment Transactions will be consistent with
the provisions, policies and purposes of the 1940 Act and on a basis
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. Each time a KKR Credit Adviser considers a Potential Co-
Investment Transaction for an Affiliated Investor or another Regulated
Entity that falls within a Regulated Entity's then-current Objectives
and Strategies and Board-Established Criteria, the Adviser to a
Regulated Entity will make an independent determination of the
appropriateness of the investment for the Regulated Entity in light of
the Regulated Entity's then-current circumstances.
    2. (a) If the Adviser to a Regulated Entity deems participation in
any Potential Co-Investment Transaction to be appropriate for the
Regulated Entity, the Adviser will then determine an appropriate level
of investment for such Regulated Entity.
    (b) If the aggregate amount recommended by the Adviser (to a
Regulated Entity to be invested by the Regulated Entity in the
Potential Co-Investment Transaction, together with the amount proposed
to be invested by the other participating Regulated Entities and
Affiliated Investors, collectively, in the same transaction, exceeds
the amount of the investment opportunity, the amount of the investment
opportunity will be allocated among the Regulated Entities and such
Affiliated Investors, pro rata based on each participant's Available
Capital for investment in the asset class being allocated, up to the
amount proposed to be invested by each. The Adviser to a Regulated
Entity will provide the Eligible Directors of a Regulated Entity with
information concerning each participating party's Available Capital to
assist the Eligible Directors with their review of the Regulated
Entity's investments for compliance with these allocation procedures.
    (c) After making the determinations required in conditions 1 and
2(a) above, the Adviser to the Regulated Entity will distribute written
information concerning the Potential Co-Investment Transaction,
including the amount proposed to be invested by each Regulated Entity
and any Affiliated Investor, to the Eligible Directors for their
consideration. A Regulated Entity will co-invest with one or more other
Regulated Entities and/or an Affiliated Investor only if, prior to the
Regulated Entities' and the Affiliated Investors' participation in the
Potential Co-Investment Transaction, a Required Majority concludes
that:
    (i) The terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Entity and its shareholders and do not involve overreaching in respect
of the Regulated Entity or its shareholders on the part of any person
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the Regulated Entity's shareholders; and
    (B) the Regulated Entity's then-current Objectives and Strategies
and Board-Established Criteria;
    (iii) the investment by any other Regulated Entity or an Affiliated
Investor would not disadvantage the Regulated Entity, and participation
by the Regulated Entity would not be on a basis different from or less
advantageous than that of any other Regulated Entity or Affiliated
Investor; 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 Entity or an
Affiliated Fund in a Co-Investment Transaction is later than the
settlement date for the Regulated Entity by no more than ten business
days or earlier than the settlement date for the Regulated Entity by no
more than ten business days, in either case, so long as: (x) The date
on which the commitments of the Affiliated Funds and Regulated Entities
are made is the same; and (y) the earliest settlement date and the
latest settlement date of any Affiliated Fund or Regulated Entity
participating in the transaction will occur within ten business days of
each other; or
    (B) any other Regulated Entity or Affiliated Investor, but not the
Regulated Entity itself, gains the right to nominate a director for
election to a portfolio company's board of directors or the right to
have a board observer, or any similar right to participate in the
governance or management of the portfolio company so long as: (x) The
Eligible Directors will have the right to ratify the selection of such
director or board observer, if any; (y) the Adviser to the Regulated
Entity agrees to, and does, provide periodic reports to the Regulated
Entity'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 Entity or any Affiliated Investor
or any affiliated person of any other Regulated Entity or an Affiliated
Investor receives in connection with the right of one or more Regulated
Entities or Affiliated Investors 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 the participating Affiliated Investors (who may, in turn, share
their portion with their affiliated persons) and any participating
Regulated Entity in accordance with the amount of each party's
investment; and
    (iv) the proposed investment by the Regulated Entity will not
benefit the Advisers, any other Regulated Entity, or the Affiliated
Investors 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 15, (B) to the extent permitted under Sections
17(e) and 57(k) of the 1940 Act, as applicable, (C) in the case of fees
or other compensation described in condition 2(c)(iii)(B), or (D)
indirectly, as a result of an interest in the securities issued by one
of the parties to the Co-Investment Transaction.
    3. A Regulated Entity will have the right to decline to participate
in any Potential Co-Investment Transaction or to invest less than the
amount proposed.
    4. The Adviser to the Regulated Entity will present to the Board of
each Regulated Entity, on a quarterly basis, a record of all
investments in Potential Co-Investments made by any of the other
Regulated Entities or any of the Affiliated Investors during the
preceding quarter that fell within the Regulated Entity's then-current
Objectives and Strategies and Board-Established Criteria that were not
made available to the Regulated Entity, and an explanation of why the
investment opportunities were not offered to the Regulated Entity. All
information presented to the Board pursuant to this condition will be
kept for the life of the Regulated Entity and at least two years
thereafter, and will be subject to examination by the Commission and
its staff.
    5. Except for Follow-On Investments made in accordance with
condition 9 and 10,\21\ a Regulated Entity will not invest in reliance
on the Order in any issuer in which a Related Party \22\ is an existing
investor.
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    \21\ This exception applies only to Follow-On Investments by a
Regulated Entity in issuers in which that Regulated Entity 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 the Advisers, the Regulated
Entities, the Affiliated Funds and any other person described in
Section 57(b) (after giving effect to Rule 57b-1) in respect of any
Regulated Entity (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 Entity
(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.
---------------------------------------------------------------------------

    6. A Regulated Entity will not participate in any Potential Co-
Investment Transaction unless (i) the terms, conditions, price, class
of securities to be purchased, the date on which the commitment is
entered and registration rights will be the same for each participating
Regulated Entity and Affiliated Investor and (ii) the earliest
settlement date and the latest settlement date of any participating
Regulated Entity 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 Entities or Affiliated Investors, but
not the Regulated Entity itself, 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 6, if Condition
2(c)(iii)(B) is met.
    7. (a) If any Regulated Entity or Affiliated Investor elects to
sell, exchange or otherwise dispose of an interest in a security that
was acquired by one or more Regulated Entities and/or Affiliated
Investors in a Co-Investment Transaction, the applicable Adviser(s)
\23\ will:
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    \23\ For purposes of the requested Order, any KCM Company that
is not advised by an Adviser is itself deemed to be an Adviser for
purposes of this Condition 7(a) and Conditions 8(a), 9(a) and 10(a).
---------------------------------------------------------------------------

    (i) Notify each Regulated Entity of the proposed Disposition at the
earliest practical time; and
    (ii) formulate a recommendation as to participation by the
Regulated Entity in the Disposition.
    (b) Each Regulated Entity 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
Investors and any other Regulated Entity.
    (c) A Regulated Entity may participate in such Disposition without
obtaining prior approval of the Required Majority if:
    (i)(A) The proposed participation of each Regulated Entity and each
Affiliated Investor in such Disposition is proportionate to its
outstanding investments in the issuer immediately preceding the
Disposition; \24\ (B) the Regulated Entity's Board has approved as
being in the best interests of the Regulated Entity the ability to
participate in such Dispositions on a pro rata basis (as described in
greater detail in this Application); and (C) the Regulated Entity's
Board 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 Entity's and Affiliated
Investor's outstanding investment in the security in question
immediately preceding the Disposition.
---------------------------------------------------------------------------

    (ii) each security is a Tradable Security and (A) the Disposition
is not to the issuer or any affiliated person of the issuer; and (B)
the security is sold for cash in a transaction in which the

only term negotiated by or on behalf of the participating Regulated
Entities and Affiliated Investors is price.
    (d) In all other cases, the Adviser to the Regulated Entity will
provide their written recommendation as to the Regulated Entity's
participation to the Eligible Directors, and the Regulated Entity will
participate in such disposition solely to the extent that a Required
Majority determines that it is in the Regulated Entity's best
interests.
    8. (a) If any Regulated Entity or Affiliated Investor elects to
sell, exchange or otherwise dispose of a Pre-Boarding Investment in a
Potential Co-Investment Transaction and the Regulated Entities and
Affiliated Investors have not previously participated in a Co-
Investment Transaction with respect to the issuer:
    (i) The Adviser to such Regulated Entity or Affiliated Investor
will notify each Regulated Entity that holds an investment in the
issuer of the proposed disposition at the earliest practical time;
    (ii) the Adviser to each Regulated Entity that holds an investment
in the issuer, will formulate a recommendation as to participation by
such Regulated Entity in the disposition; and
    (iii) the Advisers will provide to the Board of each Regulated
Entity that holds an investment in the issuer all information relating
to the existing investments in the issuer of the Regulated Entities and
Affiliated Investors, 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) The Adviser will provide its written recommendation as to the
Regulated Entity's participation to the Eligible Directors, and the
Regulated Entity 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) The Disposition may only be completed in reliance on the Order
if:
    (i) Each Regulated Entity 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 Investors
and any other Regulated Entity;
    (ii) All of the Affiliated Investors' and Regulated Entities'
investments in the issuer are Pre-Boarding Investments;
    (iii) 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) All Regulated Entities and Affiliated Investors 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 Entities and Affiliated Investors 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: (i) Any Regulated Entity's or Affiliated Investor'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 (ii) the Board
records the basis for any such finding in its minutes. In addition,
securities that differ only in respect of issuance date, currency, or
denominations may be treated as the same security; and
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    \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.
---------------------------------------------------------------------------

    (v) The Affiliated Investors, the other Regulated Entities and
their affiliated persons (within the meaning of Section 2(a)(3)(C) of
the 1940 Act), individually or in the aggregate, do not control the
issuer of the securities (within the meaning of Section 2(a)(9) of the
1940 Act).
    9. (a) If any Regulated Entity or Affiliated Investor desires to
make a Follow-On Investment in a portfolio company whose securities
were acquired by the Regulated Entity and the Affiliated Investor in a
Co-Investment Transaction, the applicable Adviser(s) will:
    (i) Notify the Regulated Entity of the proposed transaction at the
earliest practical time; and
    (ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by the
Regulated Entity.
    (b) A Regulated Entity may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if:
    (i)(A) The proposed participation of each Regulated Entity and each
Affiliated Investor 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 Regulated Entity's Board has approved as being in the best
interests of such Regulated Entity the ability to participate in
Follow-On Investments on a pro rata basis (as described in greater
detail in this 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 Entities and Affiliated Investors,
proportionality will be measured by each participating Regulated
Entity's and Affiliated Investor'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 Entities or Affiliated Investors,
proportionality will be measured by each participating Regulated
Entity's and Affiliated Investor'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) In all other cases, the Adviser to the Regulated Entity will
provide their written recommendation as to such Regulated Entity's
participation to the Eligible Directors, and the Regulated Entity will
participate in such Follow-On Investment solely to the extent that the
Required Majority determines that it is in such Regulated Entity's best
interests. If the only previous Co-Investment Transaction with respect
to the issuer was an Enhanced Review Disposition, the Eligible
Directors must complete this review of the proposed Follow-On
Investment both on a stand-alone basis and together with the Pre-
Boarding Investments in relation to the total economic exposure and
other terms of the investment.
    (d) If, with respect to any Follow-On Investment:
    (i) The amount of a Follow-On Investment is not based on the
Regulated Entities' and the Affiliated Investors' outstanding
investments immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser to a Regulated
Entity to be invested by the Regulated Entity in the Follow-On
Investment, together with the amount proposed to be invested by the
other participating Regulated Entities and the Affiliated Investors in
the same transaction, exceeds the amount of the opportunity; then the
amount invested by each such party will be allocated

among them pro rata based on each participant's Available Capital for
investment in the asset class being allocated, up to the amount
proposed to be invested by each.
    (e) 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. (a) If any Regulated Entity or Affiliated Investor desires to
make a Follow-On Investment in an issuer that is a Potential Co-
Investment Transaction and the Regulated Entities and Affiliated Funds
holding investments in the issuer have not previously participated in a
Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Entity or Affiliated
Investor will notify each Regulated Entity that holds securities of the
portfolio company of the proposed transaction at the earliest practical
time;
    (ii) the Adviser to each Regulated Entity 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 Entity; and
    (iii) the Advisers will provide to the Board of each Regulated
Entity that holds an investment in the issuer all information relating
to the existing investments in the issuer of the Regulated Entities and
Affiliated Investors, 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) The Adviser will provide its written recommendation as to the
Regulated Entity's participation to the Eligible Directors, and the
Regulated Entity 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
Entity 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) The Follow-On Investment may only be completed in reliance on
the Order if:
    (i) All of the Affiliated Investors' and Regulated Entities'
investments in the issuer are Pre-Boarding Investments; and
    (ii) 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) all Regulated Entities and Affiliated Investors 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 Entities and Affiliated Investors 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: (i) Any Regulated Entity's or Affiliated Investor'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 (ii) 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) the Affiliated Investors, the other Regulated Entities and
their affiliated persons (within the meaning of Section 2(a)(3)(C) of
the 1940 Act), individually or in the aggregate, do not control the
issuer of the securities (within the meaning of Section 2(a)(9) of the
1940 Act); and
    (d) If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to
any Regulated Entity is not based on the Regulated Entities' and the
Affiliated Funds' outstanding investments in the issuer or the security
at issue, as appropriate, immediately preceding the Follow-On
Investment; and
    (ii) the aggregate amount recommended by the Advisers to be
invested in the Follow-On Investment by the participating Regulated
Entities 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 each
participant's Available Capital for investment in the asset class being
allocated, up to the amount proposed to be invested by each.
    (e) 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 this
Application.
    11. The Independent Directors of each Regulated Entity will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Entities or Affiliated Investors
that a Regulated Entity considered but declined to participate in, so
that the Independent Directors may determine whether all investments
made during the preceding quarter, including those investments which
the Regulated Entity considered but declined to participate in, comply
with the conditions of the Order. In addition, the Independent
Directors will consider at least annually (a) the continued
appropriateness for such Regulated Entity of participating in new and
existing Co-Investment Transactions and (b) the continued
appropriateness of any Board-Established Criteria.
    12. Each Regulated Entity will maintain the records required by
Section 57(f)(3) of the 1940 Act as if each of the Regulated Entities
were a BDC and each of the investments permitted under these conditions
were approved by a Required Majority under Section 57(f).
    13. No Independent Director of a Regulated Entity will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the 1940 Act) of any Affiliated
Investor.
    14. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the 1933 Act) shall, to the
extent not payable by the applicable Adviser(s) under their respective
advisory agreements with the Regulated Entities and the Affiliated
Investors, be shared by the Regulated Entities and the Affiliated
Investors in proportion to the relative amounts of the securities held
or to be acquired or disposed of, as the case may be.
    15. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by Section 17(e) or 57(k) of the
1940 Act,

as applicable) \27\ received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Entities
and Affiliated Investors on a pro rata basis based on the amount they
invested or committed, as the case may be, in such Co-Investment
Transaction. If any transaction fee is to be held by an Adviser pending
consummation of the transaction, the fee will be deposited into an
account maintained by the Adviser at a bank or banks having the
qualifications prescribed in Section 26(a)(1) of the 1940 Act, and the
account will earn a competitive rate of interest that will also be
divided pro rata among the participating Regulated Entities and
Affiliated Investors based on the amount they invest in the Co-
Investment Transaction. None of the other Regulated Entities,
Affiliated Investors, the applicable Adviser(s) nor any affiliated
person of the Regulated Entities or the Affiliated Investors will
receive additional compensation or remuneration of any kind as a result
of or in connection with a Co-Investment Transaction (other than (a) in
the case of the Regulated Entities and the Affiliated Investors, the
pro rata transaction fees described above and fees or other
compensation described in condition 2(c)(iii)(B) and (b) in the case of
the Advisers, investment advisory fees paid in accordance with the
Regulated Entities' and the Affiliated Investors' investment advisory
agreements).
---------------------------------------------------------------------------

    \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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    16. The Advisers to the Regulated Entities and Affiliated Investors
will maintain written policies and procedures reasonably designed to
ensure compliance with the foregoing conditions. These policies and
procedures will require, among other things, that each of the Advisers
to each Regulated Entity will be notified of all Potential Co-
Investment Transactions that fall within such Regulated Entity's then-
current Objectives and Strategies and Board-Established Criteria and
will be given sufficient information to make its independent
determination and recommendations under conditions 1, 2(a), 7, 8, 9 and
10.
    17. If the Holders own in the aggregate more than 25 percent of the
Shares of a Regulated Entity, then the Holders will vote such Shares in
the same percentages as the Regulated Entity'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 1940 Act or applicable state law affecting the Board's
composition, size or manner of election.
    18. Each Regulated Entity's chief compliance officer, as defined in
Rule 38a-1(a)(4), will prepare an annual report for its Board each year
that evaluates (and documents the basis of that evaluation) the
Regulated Entity's compliance with the terms and conditions of the
application and the procedures established to achieve such compliance.

    For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27714 Filed 12-16-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 75 (Monday, April 20, 2015)]
[Proposed Rules]
[Pages 21691-21692]
[FR Doc No: 2015-08996]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 271

[EPA-R01-RCRA-2015-0195; FRL-9926-53-Region 1]

Vermont: Proposed Authorization of State Hazardous Waste
Management Program Revisions

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to grant final authorization to the State of
Vermont for changes to its hazardous waste program. In the ``Rules and
Regulations'' section of this Federal Register we are authorizing the
changes to the Vermont hazardous waste program under the Resource
Conservation and Recovery Act (RCRA) as a direct final rule without
prior proposed rule. EPA has determined that these changes satisfy all
requirements needed to qualify for final authorization. If we receive
no adverse comment, we

will not take further action on this proposed rule

DATES: Written comments must be received by May 20, 2015.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R01-
RCRA-2015-0195, by mail to Sharon Leitch, RCRA Waste Management and UST
Section, Office of Site Remediation and Restoration (OSRR07-1), U.S.
EPA Region 1, 5 Post Office Square, Suite 100, Boston, MA 02109-3912.
Comments may also be submitted electronically or thorough hand
delivery/courier by following the detailed instructions in the
ADDRESSES section of the direct final rule located in the rules section
of this Federal Register.

FOR FURTHER INFORMATION CONTACT: Sharon Leitch, RCRA Waste Management
and UST Section, Office of Site Remediation and Restoration (OSRR07-1),
U.S. EPA Region 1, 5 Post Office Square, Suite 100, Boston, MA 02109-
3912; telephone number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>;
email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: In the ``Rules and Regulations'' section of
this Federal Register, EPA is authorizing these changes by a direct
final rule. EPA did not make a proposal prior to the direct final rule
because we believe this action is not controversial and do not expect
adverse comments that oppose it. We have explained the reasons for this
authorization in the preamble to the direct final rule. Unless we
receive written adverse comments which oppose this authorization during
the comment period, the direct final rule will become effective on the
date it establishes, and we will not take further action on this
proposal. If we get comments that oppose this action, we will withdraw
the direct final rule and it will not take immediate effect. We will
then respond to public comments in a later final rule based on this
proposal. You may not have another opportunity for comment. If you want
to comment on this action, you should do so at this time.

    Dated: March 24, 2015.
H. Curtis Spalding,
Regional Administrator, EPA Region 1.
[FR Doc. 2015-08996 Filed 4-17-15; 8:45 am]
 BILLING CODE 6560-50-P