
[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25490-25495]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10238]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30494; File No. 812-13844]


Corporate Capital Trust, Inc., et al.; Notice of Application

April 25, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 57(a)(4) 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 section 57(a)(4) of the Act and rule 17d-1 under the Act.

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Summary of Application:  Applicants request an order to permit a 
business development company (``BDC'') to co-invest with certain 
affiliated investment funds and accounts in portfolio companies.

Applicants:  Corporate Capital Trust, Inc. (the ``Company''); CNL Fund 
Advisors Company (``CFA''); KKR Asset Management LLC (``KAM'' and 
together with CFA, the ``Advisers''); KKR Asset

[[Page 25491]]

Management LTD., KKR CS Advisors I LLC, KKR FI Advisors LLC, KKR FI 
Advisors IV LLC, KKR FI Advisors Cayman LTD., KKR Financial Advisors 
LLC, KKR Financial Advisors II LLC, and KKR Mezzanine I Advisors LLC 
(collectively, with KAM, the ``KAM Affiliated Advisers''); Kohlberg 
Kravis Roberts & Co. L.P. (``KKR & Co.''); KKR CS III Limited, KKR 
Associates CS III L.P., KKR Mezzanine GP LLC, KKR Associates Mezzanine 
I L.P., KKR CS II Limited, KKR Associates CS II L.P., KKR CS I Limited, 
and KKR Associates CS I L.P. (collectively, with KKR & Co., the ``KKR & 
Co. Affiliated Advisers'' and, together with the KAM Affiliated 
Advisers, the ``KKR Affiliated Advisers''); KKR Capital Markets 
Holdings L.P., KKR Capital Markets LLC, KKR Capital Markets Limited, 
KKR Capital Markets Asia Limited, KKR Corporate Lending LLC, KKR 
Corporate Lending (Cayman) Limited, and KKR Corporate Lending (UK) LLC 
(collectively, the ``KCM Companies''); and KKR Debt Investors II (2006) 
Ireland LP, KKR DI 2006 LP, 8 Capital Partners L.P., KKR Financial CLO 
2005-1, LTD., KKR Financial CLO 2005-2, LTD., KKR Financial CLO 2006-1, 
LTD., KKR Financial CLO 2007-1, LTD., KKR Financial CLO 2007-A, LTD., 
KKR Financial CLO 2009-1, LTD., KKR Financial Holdings, Inc., KKR 
Financial Holdings, LTD., KKR Financial Holdings LLC (``KFN''), KKR 
Financial Holdings II, LLC, KKR Financial Holdings III, LLC, KKR 
Financial Holdings IV, LLC, KKR Corporate Credit Partners L.P., KKR 
Mezzanine Partners I L.P., KKR Mezzanine Partners I Side-By-Side L.P., 
KKR TRS Holdings, LTD., KKR-Keats Capital Partners L.P., KKR-Milton 
Capital Partners L.P., and KKR-Milton Co-Investments L.P. 
(collectively, and together with the Existing KKR Proprietary Accounts 
(defined below), the ``Existing Affiliated Investors'').

Filing Dates:  The application was filed on November 15, 2010, and 
amended on May 13, 2011, October 21, 2011, April 6, 2012, July 17, 
2012, November 16, 2012, and March 28, 2013. Applicants have agreed to 
file an amendment during the notice period, the substance of which is 
reflected in this notice.

Hearing or Notification of Hearing:  An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on May 20, 2013, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
St. NE., Washington, DC 20549-1090. Applicants: the Company and CFA, 
450 S. Orange Avenue, Orlando, FL; KAM, the KAM Affiliated Advisers, 
KKR & Co., the KKR & Co. Affiliated Advisers, the KCM Companies, and 
the Existing Affiliated Investors, 555 California Street, 50th Floor, 
San Francisco, CA 94104.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879 or David P. Bartels, Branch Chief, at (202) 
551-6821 (Office of Investment Company Regulation, Division of 
Investment Management).

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

Applicants' Representations

    1. The Company is a closed-end management investment company that 
has elected to be regulated as a BDC under the Act.\1\ The Company's 
investment objective is to provide shareholders with current income 
and, to a lesser extent, long-term capital appreciation. The Company 
has a five-member board of directors (the ``Board''), of which three 
members are not ``interested persons'' of the Company as defined in 
section 2(a)(19) of the Act (``Independent Directors'').
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    \1\ 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 sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
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    2. CFA, a subsidiary of CNL Financial Group, LLC, is registered as 
an investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act'') and serves as the Company's investment adviser.
    3. KKR & Co. L.P. (``KKR'') is an alternative asset manager that 
conducts its business through various subsidiaries, which include 
investment advisers and broker-dealers. KAM, a subsidiary of KKR, is 
registered as an investment adviser under the Advisers Act and serves 
as the Company's sub-adviser. CFA and KAM are not affiliated persons 
(as defined in the Act).
    4. The KCM Companies are indirect, wholly- or majority-owned 
subsidiaries of KKR and, from time to time, may hold various financial 
assets in a principal capacity (in such capacity, the ``Existing KKR 
Proprietary Accounts'' and, together with any Future KKR Proprietary 
Account (as defined below), the ``KKR Proprietary Accounts'')
    5. Applicants seek an order (``Order'') under sections 57(a)(4), 
and 57(i) of the Act and rule 17d-1 under the Act to permit the 
Company, on one hand, and one or more Affiliated Investors,\2\ on the 
other hand, to participate in the same investment opportunities through 
a proposed co-investment program where such participation would 
otherwise be prohibited under section 57 of the Act (the ``Co-
Investment Program''). For purposes of the application, a ``Co-
Investment Transaction'' means any transaction in which the Company (or 
a Blocker Subsidiary, as defined below) participated together with one 
or more Affiliated Investors in reliance on the Order. ``Potential Co-
Investment Transaction'' means any investment opportunity in which the 
Company (or a Blocker Subsidiary) could not participate together with 
one or more Affiliated Investors without obtaining and relying on the 
Order.\3\
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    \2\ ``Affiliated Investor'' means (a) any Existing Affiliated 
Investor (as defined above under ``Applicants''); (b) any Future KKR 
Proprietary Account; or (c) any Future Affiliated Fund. An Existing 
Affiliated Investor, other than KFN, is an entity (a) whose 
investment adviser is a KKR Affiliated Adviser; and (b) that would 
be an investment company but for section 3(c)(1) or 3(c)(7) of the 
Act. KFN is an exchange-listed specialty finance company that is 
externally advised by KAM. KFN is a holding company that engages in 
its specialty finance business through various wholly-owned 
subsidiaries that rely on one or more exemptions or exceptions from 
the definition of investment company. Thus, applicants state that 
KFN itself does not come within the definition of an investment 
company in section 3(a)(1) of the Act. Applicants do not believe 
that allowing the Company to co-invest with KFN raises any 
additional legal or policy issues because KFN is a client of KAM in 
the same way that Existing Affiliated Investors which rely on 
section 3(c)(1) or 3(c)(7) are clients of a KKR Affiliated Adviser. 
``Future KKR Proprietary Account'' means an indirect, wholly- or 
majority-owned subsidiary of KKR that is formed in the future and, 
from time to time, may hold various financial assets in a principal 
capacity. ``Future Affiliated Fund'' means an entity (a) whose 
investment adviser is a KKR Affiliated Adviser or an investment 
adviser controlling, controlled by or under common control with KAM; 
and (b) that would be an investment company but for section 3(c)(1) 
or 3(c)(7) of the Act.
    \3\ All existing entities that currently intend to rely on the 
Order have been named as applicants and any existing or future 
entities that may rely on the Order in the future will comply with 
the terms and conditions of the application.

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[[Page 25492]]

    6. Applicants anticipate that KAM or another KKR Affiliated Adviser 
(as defined above under ``Applicants'') will periodically determine 
that certain investments KAM recommends for the Company would also be 
appropriate investments for one or more Affiliated Investors. Such a 
determination may result in the Company, on one hand, and one or more 
of the Affiliated Investors, on the other hand, co-investing in certain 
investment opportunities. When considering Potential Co-Investment 
Transactions for the Company, each of KAM and CFA (together, the 
``Advisers''), will independently analyze and evaluate the investment 
opportunity as to its appropriateness for the Company taking into 
consideration the Company's Objectives and Strategies (as defined 
below).
    7. KAM would notify CFA of the Potential Co-Investment Transaction 
and KAM's recommended allocation for the Company. CFA would review 
KAM's recommendation for the Company and would have the ability to ask 
questions of KAM and request additional information from KAM. If CFA 
approved the investment for the Company, the investment and all 
relevant allocation information would then be presented to the 
Company's Board for its approval in accordance with the conditions of 
the application.\4\ Co-Investment Transaction will be consummated only 
upon approval by a required majority of the directors of the Company 
eligible to vote under section 57(o) of the Act (the ``Eligible 
Directors'') within the meaning of section 57(o) (``Required 
Majority'').\5\ Applicants believe the investment process between KAM 
and CFA, prior to seeking approval from the Company's Board, is 
significant and provides for additional procedures and processes to 
ensure that the Company is being treated fairly in respect of Potential 
Co-Investment Transactions.
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    \4\ Applicants state that both CFA and the Company's Board will 
be provided with all relevant information regarding KAM's proposed 
allocations to the Company and Affiliated Investors, including KKR 
Proprietary Accounts, as contemplated by the conditions of the 
application.
    \5\ Applicants state that no Independent Director will have a 
financial interest in any Co-Investment Transaction.
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    8. Applicants state that, in accordance with KAM's allocation 
policies and procedures, Potential Co-Investment Transactions will be 
offered to, and allocated among, KAM-advised funds, including the 
Company, based on each client's particular investment objective and 
strategies.\6\ If the aggregate amount recommended by KAM to be 
invested by KAM-advised funds, including the Company, in a Potential 
Co-Investment Transaction were equal to or more than the amount of the 
investment opportunity, a KKR Proprietary Account would not participate 
in the investment opportunity. If the aggregate amount recommended by 
KAM to be invested by KAM-advised funds, including the Company, in a 
Potential Co-Investment Transaction were less than the amount of the 
investment opportunity, a KKR Proprietary Account would then have the 
opportunity to participate in the Potential Co-Investment Transaction 
in a principal capacity. Applicants note that a KKR Proprietary Account 
broker/dealer would generally seek to privately place such an 
investment opportunity to one or more unaffiliated third-parties before 
investing in the investment opportunity in a principal capacity.
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    \6\ Applicants note that KAM, as a registered investment 
adviser, has developed a robust allocation process as part of its 
overall compliance policies and procedures. Applicants also state 
that KAM's allocation process is designed to allocate investment 
opportunities fairly and equitably among its clients over time. 
Applicants further state that, while each KAM client may not 
participate in each investment opportunity because, for example, the 
client's allocation would be less than its minimum investment size, 
over time each KAM client would participate in investment 
opportunities fairly and equitably. In the case of a Potential Co-
Investment Transaction, KAM would apply its allocation policies and 
procedures in determining the proposed allocation for the Company as 
required under condition 2.
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    9. With respect to the pro rata dispositions and follow-on 
investments provided in conditions 7 and 8, the Company may participate 
in a pro rata disposition or follow-on investment without obtaining 
prior approval of the Required Majority if, among other things: (i) The 
proposed participation of each Affiliated Investor and the Company in 
such disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition or follow-on investment, 
as the case may be; and (ii) the Company's Board has approved the 
Company's participation in pro rata dispositions and follow-on 
investments as being in the best interests of the Company. If the Board 
does not so approve, any such disposition or follow-on investment will 
be submitted to the Company's Eligible Directors. The Company's Board 
may at any time rescind, suspend or qualify its approval of pro rata 
dispositions and follow-on investments with the result that all 
dispositions and/or follow-on investments must be submitted to the 
Eligible Directors.
    10. To allow for an independent review of co-investment activities, 
condition 4 states that the Board will receive, on a quarterly basis, a 
record of all investments made by Affiliated Investors during the 
preceding quarter that: (1) Were consistent with the Company's then 
current Objectives and Strategies, but (2) were not made available to 
the Company. This record will include an explanation of why such 
investment opportunities were not offered to the Company. Presently, 
KAM's allocation procedures prohibit the Company from participating in 
Potential Co-Investment Transactions. As a result, KAM's allocation 
system reports investments in which the Company would have been able to 
invest but for it not having been granted the requested relief. If the 
requested relief is granted, KAM will amend its allocation procedures 
to allow the Company to invest in Potential Co-Investment Transactions 
in accordance with the conditions below. Applicants represent that 
KAM's allocation process is capable of tracking all of the information 
required to be delivered to the Board by condition 4 (as described 
above), which will be presented to CFA and the Company's Board on a 
regular basis.
    11. The Company may, from time to time, form a special purpose 
subsidiary (a ``Blocker Subsidiary'') (a) whose sole business purpose 
is to hold one or more investments on behalf of the Company; (b) that 
is wholly-owned by the Company (with the Company at all times holding, 
beneficially and of record, 100% of the voting and economic interests); 
(c) with respect to which the Company'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. A Blocker 
Subsidiary would be prohibited from investing in a Co-Investment 
Transaction with any Affiliated Investor because it would be a company 
controlled by the Company 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 the Company and 
that the Blocker Subsidiary's participation in any such transaction be 
treated, for purposes of the Order, as though the Company were 
participating directly. Applicants represent that this treatment is 
justified

[[Page 25493]]

because a Blocker Subsidiary would have no purpose other than serving 
as a holding vehicle for the Company's investments and, therefore, no 
conflicts of interest could arise between the Company and the Blocker 
Subsidiary. The Company's Board would make all relevant determinations 
under the conditions with regard to a Blocker Subsidiary's 
participation in a Co-Investment Transaction, and the Company's Board 
would be informed of, and take into consideration, any proposed use of 
a Blocker Subsidiary in the Company's place. If the Company proposes to 
participate in the same Co-Investment Transaction with any of its 
Blocker Subsidiaries, the Company's Board will also be informed of, and 
take into consideration, the relative participation of the Company and 
the Blocker Subsidiary.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons 
of a BDC from participating in joint transactions with the BDC (or a 
company controlled by such BDC) in contravention of rules as prescribed 
by the Commission. Under section 57(b)(2) of the Act, in general, any 
person who is directly or indirectly controlling, controlled by, or 
under common control with a BDC, is subject to section 57(a)(4). 
Section 57(i) of the Act provides that, until the Commission prescribes 
rules under section 57(a)(4), the Commission's rules under section 
17(d) of the Act applicable to registered closed-end investment 
companies will be deemed to apply to transactions subject to section 
57(a)(4). Because the Commission has not adopted any rules under 
section 57(a)(4), rule 17d-1 applies.
    2. Rule 17d-1 under the Act prohibits affiliated persons of a 
registered investment company from participating in joint transactions 
with the company unless the Commission has granted an order permitting 
such transactions. In passing upon applications under rule 17d-1, the 
Commission considers whether the company's participation in the joint 
transaction is consistent with the provisions, policies, and purposes 
of the Act and the extent to which such participation is on a basis 
different from or less advantageous than that of other participants.
    3. Applicants submit that KAM and any Affiliated Investors that it 
advises could be deemed to be persons related to the Company in a 
manner described by section 57(b) and therefore prohibited by section 
57(a)(4) and rule 17d-1 from participating in the Co-Investment 
Program. In addition, because other KKR Affiliated Advisers are 
``affiliated persons'' of KAM, Affiliated Investors advised by any of 
them could be deemed to be persons related to the Company (or a company 
controlled by the Company) in a manner described by section 57(b) and 
also prohibited from participating in the Co-Investment Program. 
Finally, because KKR Proprietary Accounts are under common control with 
KAM and, therefore, are ``affiliated persons'' of KAM, KKR Proprietary 
Accounts could be deemed to be persons related to the Company (or a 
company controlled by the Company) in a manner described by Section 
57(b) and also prohibited from participating in the Co-Investment 
Program.
    4. Applicants state that they expect that co-investment in 
portfolio companies by the Company and the Affiliated Investors will 
increase the number of favorable investment opportunities for the 
Company and that the Co-Investment Program will be implemented only if 
the Required Majority approves it on the basis that it would be 
advantageous to the Company.
    5. Applicants submit that the Required Majority's approval of each 
Co-Investment Transaction before investment, and other protective 
conditions set forth in the application, will ensure that the Company 
will be treated fairly. Applicants state that the Company's 
participation in the Co-Investment Transactions will be consistent with 
the provisions, policies and purposes of the Act and on a basis that is 
not different from or less advantageous than that of other 
participants. Applicants further state that the terms and conditions of 
the application will ensure that all such transactions are reasonable 
and fair to the Company and the Affiliated Investors and do not involve 
overreaching by any person concerned, including CFA or KAM.
    6. Applicants acknowledge that some of the Affiliated Investors may 
not be funds advised by KAM or an affiliate because they are KKR 
Proprietary Accounts (i.e., a KCM Company investing in a principal 
capacity). Applicants further acknowledge that previously ordered 
exemptive applications seeking similar co-investment relief have been 
limited to co-investment transactions between a BDC and its affiliated 
funds only. However, applicants do not believe these KKR Proprietary 
Accounts should raise issues under the conditions of the application 
because, consistent with condition 14, KKR's and KAM's allocation 
policies and procedures provide that investment opportunities are 
offered to client accounts before they are offered to KKR Proprietary 
Accounts.

Applicants' Conditions

    Applicants agree that any Order granting the requested relief will 
be subject to the following conditions:
    1. Each time KAM or an adviser to any Affiliated Investor considers 
a Potential Co-Investment Transaction for an Affiliated Investor that 
falls within the Company's then-current Objectives and Strategies,\7\ 
the Advisers will make an independent determination of the 
appropriateness of the investment for the Company in light of the 
Company's then-current circumstances.
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    \7\ ``Objectives and Strategies'' means the Company's investment 
objectives and strategies, as described in the Company's 
registration statement on Form N-2, other filings the Company 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, and the Company's reports to shareholders.
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    2. a. If the Advisers deem the Company's participation in any 
Potential Co-Investment Transaction to be appropriate for the Company, 
the Advisers will then determine an appropriate level of investment for 
the Company.
    b. If the aggregate amount recommended by the Advisers to be 
invested in the Potential Co-Investment Transaction by the Company, 
together with the amount proposed to be invested by the 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 Company and such Affiliated Investors, pro 
rata based on the ratio of the Company's capital available for 
investment in the asset class being allocated, on the one hand, and the 
Affiliated Investors' capital available for investment in the asset 
class being allocated, on the other hand, to the aggregated capital 
available for investment for the asset class being allocated of all 
parties involved in the investment opportunity, up to the amount 
proposed to be invested by each. The Advisers will provide the Eligible 
Directors with information concerning each party's available capital to 
assist the Eligible Directors with their review of the Company's 
investments for compliance with these allocation procedures.
    c. After making the determinations required in conditions 1 and 
2(a) above, the Advisers will distribute written information concerning 
the Potential Co-Investment Transaction, including the amount proposed 
to be invested by the Company and any Affiliated

[[Page 25494]]

Investor to the Eligible Directors for their consideration. The Company 
will co-invest with an Affiliated Investor only if, prior to the 
Company's and the Affiliated Investors' participation in the Potential 
Co-Investment Transaction, a Required Majority of the Eligible 
Directors concludes that:
    (i) the terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair and do not 
involve overreaching in respect of the Company or its shareholders on 
the part of any person concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (a) the interests of the Company's shareholders; and
    (b) the Company's then-current Objectives and Strategies;
    (iii) the investment by an Affiliated Investor would not 
disadvantage the Company, and participation by the Company is not on a 
basis different from or less advantageous than that of any Affiliated 
Investor; provided, that if an Affiliated Investor, but not the 
Company, 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, such event shall not be 
interpreted to prohibit a Required Majority of the Eligible Directors 
from reaching the conclusions required by this condition 2(c)(iii), if:
    (a) the Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any; and
    (b) the Advisers agree to, and do, provide periodic reports to the 
Company'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
    (c) any fees or other compensation that any Affiliated Investor or 
any affiliated person of an Affiliated Investor receives in connection 
with the right of the Affiliated Investor 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 the Company in 
accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Company will not benefit the 
Advisers or the Affiliated Investors or any affiliated person of either 
of them (other than the parties to the Co-Investment Transaction), 
except (A) to the extent permitted by condition 13, (B) to the extent 
permitted under Sections 17(e) and 57(k) of the Act, as applicable, (C) 
in the case of fees or other compensation described in condition 
2(c)(iii)(c), or (D) indirectly, as a result of an interest in the 
securities issued by one of the parties to the Co-Investment 
Transaction.
    3. The Company will have the right to decline to participate in any 
Potential Co-Investment Transaction or to invest less than the amount 
proposed.
    4. The Advisers will present to the Board, on a quarterly basis, a 
record of all investments made by the Affiliated Investors during the 
preceding quarter that fell within the Company's then-current 
Objectives and Strategies that were not made available to the Company, 
and an explanation of why the investment opportunities were not offered 
to the Company. All information presented to the Board pursuant to this 
condition will be kept for the life of the Company 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 8, the Company will not invest in reliance on the Order in 
any issuer in which an Affiliated Investor or any affiliated person of 
an Affiliated Investor is an existing investor.
    6. The Company will not participate in any Potential Co-Investment 
Transaction unless the terms, conditions, price, class of securities to 
be purchased, settlement date, and registration rights will be the same 
for the Company as for any Affiliated Investor. The grant to an 
Affiliated Investor, but not the Company, 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 
conditions 2(c)(iii)(a), (b) and (c) are met.
    7. a. If any Affiliated Investor elects to sell, exchange or 
otherwise dispose of an interest in a security that was acquired by the 
Company and any of the Affiliated Investors in a Co-Investment 
Transaction, the Advisers will:
    (i) notify the Company of the proposed disposition at the earliest 
practical time; and
    (ii) formulate a recommendation as to participation by the Company 
in the disposition.
    b. The Company 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.
    c. The Company may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of the Company and each Affiliated Investor in such 
disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Company's Board 
has approved as being in the best interests of the Company the ability 
to participate in such dispositions on a pro rata basis (as described 
in greater detail in this Application); and (iii) the Company's Board 
is provided on a quarterly basis with a list of all dispositions made 
in accordance with this condition. In all other cases, the Advisers 
will provide their written recommendation as to the Company's 
participation to the Eligible Directors, and the Company will 
participate in such disposition solely to the extent that a Required 
Majority determines that it is in the Company's best interests.
    d. The Company and each of the Affiliated Investors will bear its 
own expenses in connection with the disposition.
    8. a. If any Affiliated Investor desires to make a ``follow-on 
investment'' (i.e., an additional investment in the same entity, 
including through the exercise of warrants or other rights to purchase 
securities of the issuer) in a portfolio company whose securities were 
acquired by the Company and any of the Affiliated Investors in a Co-
Investment Transaction, the Advisers will:
    (i) notify the Company 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 
Company.
    b. The Company may participate in such follow-on investment without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of the Company and each Affiliated Investor in such 
investment is proportionate to its outstanding investments in the 
issuer immediately preceding the follow-on investment; (ii) the 
Company's Board has approved as being in the best interests of the 
Company the ability to participate in follow-on investments on a pro 
rata basis (as described in greater detail in

[[Page 25495]]

this Application); and (iii) the Company's Board is provided on a 
quarterly basis with a list of all follow-on investments made in 
accordance with this condition. In all other cases, the Advisers will 
provide their written recommendation as to the Company's participation 
to the Eligible Directors, and the Company will participate in such 
follow-on investment solely to the extent that a Required Majority 
determines that it is in the Company's best interests.
    c. If, with respect to any follow-on investment:
    (i) the amount of a follow-on investment is not based on the 
Company's and the Affiliated Investors' outstanding investments 
immediately preceding the follow-on investment; and
    (ii) the aggregate amount recommended by the Advisers to be 
invested by the Company in the follow-on investment, together with the 
amount proposed to be invested by 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 the ratio of the Company's capital available for investment in the 
asset class being allocated, on the one hand, and the Affiliated 
Investors' capital available for investment in the asset class being 
allocated, on the other hand, to the aggregated capital available for 
investment for the asset class being allocated of all parties involved 
in the investment opportunity, up to the amount proposed to be invested 
by each.
    d. The acquisition of follow-on investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
Application.
    9. The Independent Directors will be provided quarterly for review 
all information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by the Affiliated 
Investors that the Company 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 Company considered but declined to participate in, comply with the 
conditions of the Order. In addition, the Independent Directors will 
consider at least annually the continued appropriateness for the 
Company of participating in new and existing Co-Investment 
Transactions.
    10. The Company will maintain the records required by section 
57(f)(3) of the Act as if each of the investments permitted under these 
conditions were approved by a Required Majority of the Eligible 
Directors under section 57(f).
    11. No Independent Director will also be a director, general 
partner, managing member or principal, or otherwise an ``affiliated 
person'' (as defined in the Act) of any Affiliated Investor.
    12. 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 Advisers under the Company's and the 
Affiliated Investors' investment advisory agreements, be shared by the 
Company and the Affiliated Investors in proportion to the relative 
amounts of their securities to be acquired or disposed of, as the case 
may be.
    13. Any transaction fee (including break-up or commitment fees but 
excluding broker's fees contemplated by section 17(e) or 57(k) of the 
Act, as applicable) received in connection with a Co-Investment 
Transaction will be distributed to the Company 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 Act, and the account will earn a competitive 
rate of interest that will also be divided pro rata among the Company 
and the Affiliated Investors based on the amount they invest in the Co-
Investment Transaction. None of the Affiliated Investors, the Advisers 
nor any affiliated person of the Company 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 Company and the Affiliated Investors, the pro rata transaction 
fees described above and fees or other compensation described in 
condition 2(c)(iii)(c) and (b) in the case of the Advisers, investment 
advisory fees paid in accordance with the Company's and the Affiliated 
Investors' investment advisory agreements).
    14. The KKR Proprietary Accounts will not be permitted to invest in 
a Potential Co-Investment Transaction except to the extent the demand 
from the Company and the other Affiliated Investors is less than the 
total investment opportunity.
    15. The Advisers and the advisers to the 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 KAM and CFA will be 
notified of all Potential Co-Investment Transactions that fall within 
the Company's then-current Objectives and Strategies and will be given 
sufficient information to make its independent determination and 
recommendations under conditions 1, 2(a), 7 and 8.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10238 Filed 4-30-13; 8:45 am]
BILLING CODE 8011-01-P


