[Federal Register Volume 85, Number 243 (Thursday, December 17, 2020)]
[Notices]
[Pages 81987-81996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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.,

[[Page 81988]]

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 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 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 protected].

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 
[email protected]. Applicants: Noah Greenhill, KKR Credit 
Advisors (US) LLC, [email protected].

FOR FURTHER INFORMATION CONTACT: Jennifer O. Palmer, Senior Counsel, at 
(303) 844-1012, or David J. Marcinkus, Branch Chief, at (202) 551-6825 
(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 (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''), one or more Regulated Entities \1\ and/or one or

[[Page 81989]]

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

[[Page 81990]]

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

[[Page 81991]]

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),

[[Page 81992]]

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

[[Page 81993]]

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

[[Page 81994]]

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.
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    (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
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    \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

[[Page 81995]]

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,

[[Page 81996]]

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).
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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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    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