N-2 1 a20170727-pwaynx2.htm N-2 Document
As filed with the Securities and Exchange Commission on July 27, 2017
 
Securities Act File No. 333-______
Investment Company Act File No. 811-22807

 
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
Form N-2

ý REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
o PRE-EFFECTIVE AMENDMENT NO.
o POST-EFFECTIVE AMENDMENT NO.
and/or
ý REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
ý AMENDMENT NO. 16
_________________________________
Pathway Energy Infrastructure Fund, Inc.
(Exact Name of Registrant as Specified in the Charter)
_________________________________
10 East 40th Street, 42nd Floor
New York, NY 10016
(Address of Principal Executive Offices)
(212) 448-0702
(Registrant’s Telephone Number, Including Area Code)
M. Grier Eliasek
Pathway Energy Infrastructure Fund, Inc.
10 East 40th Street, 42nd Floor
New York, NY 10016
(Name and address of agent for service)
COPIES TO:
Steven B. Boehm, Esq.
Cynthia R. Beyea, Esq.
Eversheds Sutherland (US) LLP
700 Sixth St., NW, Suite 700
Washington, DC 20001
Tel: (202) 383-0100
Fax: (202) 637-3593
_________________________________

Approximate date of proposed public offering: From time to time after the effective date of this Registration Statement.

If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as amended, other than securities offered in connection with a distribution reinvestment plan, check the following box.  ý
It is proposed that this filing will become effective (check appropriate box):    o when declared effective pursuant to section 8(c).
If appropriate, check the following box:
c    This post-effective amendment designates a new effective date for a previously filed post-effective amendment registration statement.
c    This form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration statement number of the earlier effective registration statement for the same offering is            .





CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered
Amount to be Registered(1)
Proposed Maximum
Offering Price Per Share(1)
Proposed Maximum
Aggregate Offering Price(1)(2)
Amount of Registration Fee(1)(2)
Common Stock, $0.01 par value per share
99,367,136 shares
$
15.00

$
1,490,507,040

$0
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”).
(2) As discussed below, pursuant to Rule 415(a)(6) under the Securities Act, this Registration Statement carries over 99,367,136 shares of common stock that have been previously registered but the Registrant estimates will remain unsold, with respect to which the registrant paid filing fees of $203,305.160. The filing fee previously paid with respect to the shares being carried forward to this Registration Statement reduces the amount of fees currently due to $0.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

Pursuant to Rule 415(a)(6) under the Securities Act, the securities registered pursuant to this Registration Statement include unsold securities previously registered for sale pursuant to the Registrant’s registration statement on Form N-2 (File No. 333-186877) initially filed by the Registrant on February 26, 2013, or the Prior Registration Statement. The Prior Registration Statement registered 100,000,000 shares of the Registrant’s common stock with a maximum aggregate offering price of $1,500,000,000 for sale pursuant to the Registrant’s initial public offering. The Registrant estimates that approximately 99,367,136 shares of common stock from the initial public offering on the Prior Registration Statement will remain unsold as of the time that the Prior Registration Statement will expire. The unsold shares from the Prior Registration Statement (and associated filing fees paid) are being carried forward to this Registration Statement. Pursuant to Rule 415(a)(6), the offering of unsold securities under the Prior Registration Statement will be deemed terminated as of the earlier of the date of effectiveness of this Registration Statement or 180 days after the expiration of the Prior Registration Statement.





The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.



PRELIMINARY PROSPECTUS     SUBJECT TO COMPLETION, DATED JULY 27, 2017
pathwaylogoa21.jpg

Pathway Capital Opportunity Fund, Inc.
Class A Shares and Class C Shares
$1,000 minimum purchase amount
[Pathway Capital Opportunity Fund, Inc.] (“we”, “us”, “our”, the “Company”) is an externally managed, non-diversified, closed-end management investment company that has registered as an investment company under the Investment Company Act of 1940, as amended. Going forward, we will operate as an interval fund under Rule 23c-3 of the 1940 Act. As such, on [ ], 2017 we adopted a fundamental policy to make a mandatory repurchase offer of no less than 5% of the shares outstanding in each calendar quarter of each year, at a price equal to the net asset value (“NAV”) per share. See “Share Repurchase Program” in this prospectus. We have elected to be treated for federal income tax purposes as a regulated investment company under the Internal Revenue Code of 1986, as amended. We are managed by [Pathway Capital Opportunity Fund Management, LLC], a private investment firm that is registered as an investment adviser with the Securities and Exchange Commission and is an affiliate of ours. [Pathway Capital Opportunity Fund Management, LLC] oversees the management of our activities and is responsible for making investment decisions for our portfolio. Our administrator, Prospect Administration LLC, provides administration services necessary for us to operate.
Investment Objective. Our investment objective is to generate current income and, as a secondary objective, long-term capital appreciation.
Investment Strategy. We expect to seek to achieve our investment objective by investing, under normal circumstances, at least 50% of our total assets, that is net assets plus borrowings, in securities of companies that support the operation, function, growth or development of a community or economy, which we refer to as “Infrastructure companies.” This investment strategy may be changed by our Board of Directors if we provide our stockholders with at least 60 days prior written notice. As part of our investment objective to generate current income, we expect to invest up to 50% of our total assets in other securities, including senior debt, subordinated debt, preferred equity, dividend paying equity and the equity and junior debt tranches of a type of pools of broadly syndicated loans known as Collateralized Loan Obligations, or “CLOs.” The CLOs include a diversified portfolio of broadly syndicated loans and do not have direct exposure to real estate or mortgages.

Securities Offered. Through Provasi Capital Partners LP, an affiliate of our investment adviser and the dealer manager for this offering, we are offering shares of our common stock (our “shares”) in this offering at their current net asset value per share plus any applicable sales charge. Class A shares and Class C shares are offered by this prospectus. The Company has registered 100,000,000 shares and is authorized pursuant to its articles of incorporation to issue 200,000,000 shares.  The initial net asset value is [ ] per share for both Class A shares and Class C shares.  The maximum sales load is 5.75% of the amount invested for Class A shares, while Class C shares are not subject to sales loads. The minimum initial investment by a shareholder for Class A and Class C is $1,000. Subsequent investments may be made with [at least $100].  Class I shares and Class L shares are offered through separate prospectuses.  The Company reserves the right to waive investment minimums.  The dealer manager is not required to sell any specific number or dollar amount of the Company’s shares, but will use its best efforts to solicit orders for the sale of the shares.  Monies received will be invested promptly and no arrangements have been made to place such monies in an escrow, trust or similar account.  During the continuous offering, shares will be sold at the net asset value of the Company next determined plus the applicable sales load. See “Plan of Distribution.”

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Investing in our shares may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of investment. See “Risk Factors” beginning on page 28 to read about the risks you should consider before buying our shares, including the risk of leverage.




Our shares will not be publicly traded and you should not expect to be able to sell your shares regardless of how we perform.
If you are able to sell your shares, you will likely receive less than your purchase price.
Our shares are not currently listed on any securities exchange, and we do not expect a secondary market in the shares to develop in the foreseeable future, if ever.
In order to provide limited liquidity to its stockholders, the Company will offer to repurchase its outstanding shares on a quarterly basis. The Company’s repurchase offers will be conducted pursuant to a fundamental policy, pursuant to which the Company will offer to repurchase 5% of its outstanding shares on a non-discretionary basis in each calendar quarter of each year. See “Share Repurchase Program.”
You may be charged an early withdrawal charge of 1% if you elect to have the Company repurchase your Class C shares within one year of your purchase.
You will have no right to require us to repurchase your shares or any portion thereof. Also, if you invest through a fee-based program, also known as a wrap account, of an investment dealer, your liquidity may be further restricted by the terms and conditions of such program, which may limit your ability to request the repurchase of your shares that are held in such account. See “Share Repurchase Program.” Accordingly, you should consider that you may not have access to the money you invest for an indefinite period of time.
Because you will be unable to sell your shares, you will be unable to reduce your exposure on any market downturn. 
If and to the extent that a public trading market ever develops, shares of closed-end investment companies, such as us, may have a tendency to trade frequently at a discount from their NAV per share, which is determined weekly, and initial offering prices.
Our distributions may be funded from offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to us for investment. Any capital returned to stockholders through distributions will be distributed after payment of fees and expenses.
Our distributions to stockholders may be funded from the reimbursement of certain expenses, including through the waiver of certain investment advisory fees, and additional support payments that are subject to repayment to our adviser if certain conditions are met. Our distributions may not be based on our investment performance and may not continue in the future. The reimbursement of these payments to our adviser (if any such reimbursements are made) would reduce the future distributions to which you would otherwise be entitled.
_______________________________________________________________________________
Purchasers of our shares are subject to dilution as a result of expenses we will incur in connection with this offering. In addition, we intend to continue to issue shares, which subjects your ownership percentage in us to further dilution. See “Risk Factors—Risks Related to an Investment in Our Shares” and “—Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.”
 
This prospectus contains important information about us that a prospective investor should know before investing in our shares. Please read this prospectus before investing and keep it for future reference. We have filed with the SEC a statement of additional information dated as of the date of this prospectus, as may be amended (“SAI”), containing additional information about us. The SAI is incorporated by reference in its entirety into this prospectus. See “Available Information” for a listing of the contents of the SAI. We will also file annual, semi-annual and quarterly reports, proxy statements and other information about us with the Securities and Exchange Commission, or the “SEC.” This information and the SAI will be available free of charge by contacting us at 10 East 40th Street, 42nd Floor, New York, New York, 10016, or by telephone at (212) 448-0702 or on our website at [www.pathway-energyfund.com]. The SEC also maintains a website at www.sec.gov that contains the SAI, and any amendments thereto, and other information regarding us.
_______________________________________________________________________________
 
 
Price to Public
(estimated)
 
Sales Load
 
Proceeds to Registrant
Per Class A Share
 
[ ]
 
[ ]
 
[ ]
Per Class C Share
 
[ ]
 
None
 
[ ]
Total Minimum
 
[ ]
 
[ ]
 
[ ]
Total Maximum
 
[ ]
 
[ ]
 
[ ]





The date of this prospectus is                    , 2017.
_______________________________________________________________________________
Provasi Capital Partners LP



ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the SEC, using a continuous offering process. Periodically, as we make material investments or have other material developments, we will provide a prospectus supplement that may add, update or change information contained in this prospectus.
Any statement that we make in this prospectus will be modified or superseded by any inconsistent statement made by us in a subsequent prospectus supplement. The registration statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC and any prospectus supplement, together with additional information described below under “Available Information.”
You should rely only on the information contained in this prospectus. Neither we nor the dealer manager have authorized any other person to provide you with different information from that contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or sale of our shares. If there is a material change in the affairs of our company, we will amend or supplement this prospectus.

i


TABLE OF CONTENTS


ii


PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. To understand this offering fully, you should read the entire prospectus carefully, including the section entitled “Risk Factors,” before making a decision to invest in our shares.
Unless otherwise noted, the terms “we,” “us,” “our,” and the “Company” refer to [Pathway Capital Opportunity Fund, Inc.]; the term the “Adviser” refers to [Pathway Capital Opportunity Fund Management, LLC]; the term “Prospect Capital Management” refers to Prospect Capital Management L.P.; the term “Priority Income Fund” refers to Priority Income Fund, Inc.; the term “Priority Senior Secured Income Management” refers to Priority Senior Secured Income Management, LLC; the term “Stratera Holdings” refers to Stratera Holdings, LLC; and the terms “Prospect Administration” and the “Administrator” refer to Prospect Administration LLC. In addition, in this prospectus, we use the term “day” to refer to a calendar day, and we use the term “business day” to refer to any day other than Saturday, Sunday, a legal holiday or a day on which banks in New York City are authorized or required to close.
[Pathway Capital Opportunity Fund, Inc.]
We are an externally managed, non-diversified, closed-end management investment company that has registered as an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act. As such, we are required to comply with certain regulatory requirements. See “Regulation” in the statement of additional information, or SAI. Going forward, we will operate as an interval fund under Rule 23c-3 of the 1940 Act. As such, on [ ], 2017 we adopted a fundamental policy to make a mandatory repurchase offer of no less than 5% of the shares outstanding in each calendar quarter of each year, at a price equal to the net asset value (“NAV”) per share. See “Share Repurchase Program” below. We are managed by [Pathway Capital Opportunity Fund Management, LLC], a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act, which oversees the management of our activities and is responsible for making investment decisions for our portfolio. We intend to elect to be treated for federal income tax purposes as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.
Our investment objective is to generate current income and, as a secondary objective, long-term capital appreciation. We seek to achieve our investment objective by investing, under normal circumstances, at least 50% of our total assets, that is net assets plus borrowings, in securities of companies that support the operation, function, growth or development of a community or economy, which we refer to as “Infrastructure companies.” We consider Infrastructure companies to include (a) companies engaged in the ownership, development, construction, maintenance, renovation, enhancement, or operation of infrastructure assets; (b) companies that invest in, own, lease or hold infrastructure assets; and (c) companies that operate infrastructure assets or provide services, products or raw materials related to the development, construction, maintenance, renovation, enhancement or operation of infrastructure assets. This investment strategy may be changed by our Board of Directors if we provide our stockholders with at least 60 days prior written notice and make any necessary corresponding change to our name. We primarily invest in Infrastructure companies that we believe have, or are connected to, an infrastructure, an underlying asset base and/or cash flow so as to enhance downside protection for our investments. Our primary area of focus is Infrastructure assets to which we may have exposure through investments including, without limitation, assets related to:
transportation (e.g., airports, metro systems, subways, railroads, ports, toll roads);
transportation equipment (e.g., shipping, aircraft, railcars, containers)
electric utilities and power (e.g., power generation, transmission and distribution)
energy (e.g., exploration, development, production, gathering, transportation, processing, storage, refining, supply, distribution, mining, transmission, servicing, industrial products and services, energy efficiency, management, generation or marketing of energy), including renewable energies (e.g., wind, solar, hydro, geothermal)
communication networks and equipment
water and sewage treatment
social infrastructure (e.g., health care facilities, government building and other public service facilities)
metals, industrials, materials, mining, and other resources and services (including manufacturing) related to infrastructure assets (e.g., cement, chemical, paper, forest product companies).
As part of our investment objective to generate current income, we expect to invest up to 50% of our total assets in other securities, including senior debt, subordinated debt, preferred equity, dividend paying equity and the equity and junior debt tranches of a type of pools of broadly syndicated loans known as Collateralized Loan Obligations, or “CLOs.” The CLOs include a diversified portfolio of broadly syndicated loans and do not have direct exposure to real estate or mortgages. 
A CLO is a special purpose vehicle (typically formed in the Cayman Islands or another similar foreign jurisdiction) formed to purchase the senior secured loans and issue rated debt securities and equity tranches and/or unrated debt securities

1


(generally treated as equity interests). The rated debt tranches consist of long-term, financing with specified financing terms, including floating interest rates at a stated spread to LIBOR. See “Risk Factors—Risks Related to Our Investments—Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments” and “—Our financial results may be affected adversely if one or more of our significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as we expect.” The equity tranche represents the most junior tranche in the CLO capital structure. The equity tranche is typically not rated and is subordinated to the debt tranches. The holders of equity tranche interests are typically entitled to any cash reserves that form part of the structure at the point at which such reserves are permitted to be released. The equity tranche captures available payments at the bottom of the payment waterfall, after operational and administrative costs of the CLO and servicing of the debt securities.
Our investment objective is to generate current income and, as a secondary objective, long-term capital appreciation. We seek to meet our investment objective by:
utilizing the experience and expertise of our Adviser in sourcing, evaluating and structuring transactions;
employing a yield-oriented investment approach focused on current income and long-term investment performance;
focusing primarily on debt investments in a broad array of private or public Infrastructure companies within North America;
making select equity investments in certain Infrastructure companies that have consistent dividends and growth potential, including companies in which we hold debt investments;
investing primarily in established, stable enterprises with positive cash flow and strong asset and collateral coverage so as to limit the risk of potential principal loss; and
maintaining rigorous portfolio monitoring in an attempt to anticipate and preempt negative events within our portfolio.
We seek to maximize returns to our investors by applying rigorous credit analysis and asset-based lending techniques to make and monitor our investments in asset intensive Infrastructure companies.
Our portfolio is expected to be comprised primarily of income-oriented securities, which includes debt securities and income-focused preferred and common equity interests, of private or public Infrastructure companies within North America. We dynamically allocate our assets in varying types of investments based on our analysis of the credit markets, which may result in our portfolio becoming more concentrated in particular types of credit instruments (such as senior secured floating rate loans) and less invested in other types of credit instruments. These securities are generally rated below investment grade by rating agencies or would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” or “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. We currently intend to initially weight our portfolio towards senior secured and unsecured debt. In addition to investments purchased from other dealers or investors in the secondary markets, we expect to invest in self-originated investments as we believe this should provide us with the ability to tailor investments to best match an issuer’s needs with our investment objectives. Our portfolio may also be comprised of select income-focused preferred or common equity interests, which refers to equity interests that pay consistent, high-yielding dividends, that we believe should produce both current income and long-term capital appreciation. These income-focused preferred or common equity interests may include interests in A) master limited partnerships, or MLPs and B) private companies. MLPs are entities that (i) are structured as limited partnerships or limited liability companies, (ii) are publicly traded, (iii) satisfy certain requirements to be treated as partnerships for federal income tax purposes and (iv) primarily own and operate midstream and upstream energy and related infrastructure assets. Where we hold equity investments in companies, we may also hold senior secured and/or unsecured debt investments in such companies.
Under current market conditions, we expect that our investments will generally range in size from $3 million to $25 million, although this investment size may vary proportionately as the size of our capital base changes and will ultimately be at the discretion of our Adviser, subject to oversight by our Board of Directors. Prior to raising sufficient capital, we may make significantly smaller investments to have a diversified portfolio for RIC qualification purposes.
On August 25, 2015, we satisfied our minimum offering requirement by selling over $3.25 million of shares, including over $2.5 million of shares to persons not affiliated with us or our Adviser, and as a result, admitted our initial investors as stockholders, broke escrow and commenced making investments.
Our Adviser manages our investments and its affiliate, Prospect Administration, provides the administrative services necessary for us to operate.

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Status of Our Ongoing Public Offering
Since commencing our initial public offering and through June 28, 2017, we have sold 577.778 shares of our common stock for gross proceeds of approximately $8.6 million, including approximately $0.2 million contributed by principals of our Adviser. The following table summarizes the sales of our common stock on a quarterly basis since we formally commenced investment operations in August 2015. Dollar amounts are presented in thousands, except per share data:
Quarter Ended
 
Shares Sold
 
Average Price per Share(1)
 
Gross Proceeds
Fiscal 2016
 
 
 
 
 
 
September 30, 2015
 
251,191

 
$
14.76

 
$
3,707

December 31, 2015
 
89,612

 
14.95

 
1,340

March 31, 2016
 
59,760

 
14.96

 
894

June 30, 2016
 
40,081

 
14.99

 
601

Total Fiscal 2016
 
440,644

 
$
14.85

 
$
6,542

 
 
 
 
 
 
 
Fiscal 2017
 
 
 
 
 
 
September 30, 2016
 
40,045

 
$
14.93

 
$
601

December 31, 2016
 
35,504

 
14.90

 
534

March 31, 2017
 
22,820

 
15.25

 
351

June 30, 2017 (through June 28, 2017)
 
38,765

 
15.40

 
597

Total Fiscal 2017
 
137,134

 
15.11

 
2,083

Total
 
577,778

 
$
14.93

 
$
8,625

_______________________________________
(1) Class R, Class RIA and Class I shares were initially sold at a price of $15.00, $14.10 and $13.80 per share, respectively, for net proceeds of $13.80 per share for each class. On December 7, 2016, Class R, Class RIA and Class I shares were increased to a price of $15.25, $14.34 and $14.03 per share, respectively, for net proceeds of $14.03 per share for each class. On December 15, 2016, Class R, Class RIA and Class I shares were increased to a price of $15.40, $14.48 and $14.17 per share, respectively, for net proceeds of $14.17 per share for each class.

About Our Adviser
We are managed by [Pathway Capital Opportunity Fund Management, LLC] pursuant to an Investment Advisory Agreement (the “Investment Advisory Agreement”). Our Adviser is owned 50% by Prospect Capital Management, an asset management firm and registered investment adviser under the Advisers Act, and 50% by Stratera Holdings, a national provider of specialized investment products designed for the individual and institutional investor. Our Adviser is registered as an investment adviser with the SEC under the Advisers Act and is led by a team of investment professionals from the investment and operations team of Prospect Capital Management. These individuals are responsible for our day-to-day operations on behalf of our Adviser and are responsible for developing, recommending and implementing our investment strategy. Prospect Capital Management also manages Prospect Capital Corporation, a business development company traded on the NASDAQ Global Select Market. See “Risk Factors—Risks Related to our Adviser and Its Affiliates.” Prospect Capital Corporation commenced operations on July 27, 2004, focusing on generating current income and, to a lesser extent, long-term capital appreciation for stockholders, primarily by making investments in senior secured loans, subordinated debt, unsecured debt, and equity of a broad portfolio of U.S. companies. Prospect Capital Corporation had total assets of approximately $6.2 billion as of March 31, 2017 and capital under management of approximately $7.0 billion (including undrawn credit facilities) as of March 31, 2017. Our Adviser’s professionals also manage Priority Income Fund, an externally managed, non-diversified, closed-end management investment company that invests primarily in senior secured loans, including via CLO debt and equity investments, of companies whose debt is rated below investment grade or, in limited circumstances, unrated.
Our Adviser’s investment professionals have significant experience and an extensive track record of investing in companies, managing high-yielding debt and equity investments in Infrastructure companies and have developed an expertise in using all levels of a firm’s capital structure to produce income-generating investments, while focusing on risk management. Such parties also have extensive knowledge of the managerial, operational and regulatory requirements of publicly registered investment companies. Our Adviser does not currently have employees, but has access to certain investment, finance, accounting, legal and administrative personnel of Prospect Capital Management, Prospect Administration and Stratera Holdings and may retain additional personnel as our activities expand. In particular, certain personnel of Prospect Capital Management will be made available to our Adviser to assist it in managing our portfolio and operations, provided that they are supervised at

3


all times by our Adviser’s management team. See “Investment Objective and Strategy—About Our Adviser.” All references to our Adviser’s professionals in this prospectus or the SAI refer to the executive officers of our Adviser and the professionals made available to our Adviser by Prospect Capital Management. See “Management” and “Portfolio Management.” We believe that this depth of experience and disciplined investment approach will help our Adviser to successfully execute our investment strategy. See “Management” and “Portfolio Management” for biographical information regarding our Adviser’s professionals.
All investment decisions will be made by our Adviser’s professionals. Our Board of Directors, including a majority of independent directors, will oversee and monitor our investment performance and relationship with our Adviser. See “Investment Advisory Agreement.”
Risk Factors
An investment in our shares involves a high degree of risk and may be considered speculative. You should carefully consider the information found in “Risk Factors” before deciding to invest in our shares. The following are some of the risks an investment in us involves:
We have only a limited operating history and are subject to business risks and uncertainties, including the risk that we will not achieve or investment objective.
While the management team of our Adviser consists of personnel from the investment and operations team of Prospect Capital Management, the adviser to Prospect Capital Corporation, a RIC, and of Prospect Administration, our Adviser has limited prior entity experience managing a registered closed-end management investment company or a RIC. Therefore, our Adviser may not be able to successfully operate our business or achieve our investment objective.
Capital markets may experience periods of disruption and instability. These conditions may make it more difficult for us to achieve our investment objective.
The downgrade of the U.S. credit rating and economic crisis in Europe could negatively impact our business, financial condition and earnings.
In order to provide limited liquidity to its stockholders, the Company will offer to repurchase its outstanding shares on a quarterly basis. The Company’s repurchase offers will be conducted pursuant to a fundamental policy, pursuant to which the Company will offer to repurchase 5% of its outstanding shares on a non-discretionary basis in each calendar quarter of each year. See “Share Repurchase Program.”
You may be charged an early withdrawal charge of 1% if you elect to have the Company repurchase your Class C shares within one year of your purchase.
Unlike most closed-end investment companies, our shares may not be listed on any securities exchange.
Unlike an investor in most closed-end investment companies, you should not expect to be able to sell your shares regardless of how we perform.
If you are able to sell your shares to a third party, you may receive less than your purchase price and the current net asset value per share. Although we will implement a share repurchase program, only a limited number of shares will be eligible for repurchase. See “Share Repurchase Program.”
If you may need access to the money you invest, our shares are not a suitable investment because you may not have access to the money you invest for an indefinite time.
Distributions may be funded from the capital you invest, or from borrowings, if we do not have sufficient earnings. Any invested capital that is returned to you will be reduced by our fees and expenses, as well as the sales load.
Even if we eventually list our shares on an exchange, shares of closed-end funds frequently trade at a discount from net asset value and this creates a risk of loss for investors who purchase our shares at the current offering price. This risk is separate and distinct from the risk that our net asset value will decrease.
The amount of any distributions we may make is uncertain. Our distribution proceeds may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from this offering. Therefore, portions of the distributions that we make may be a return of the money that you originally invested and represent a return of capital to you for tax purposes. Such a return of capital is not immediately taxable, but reduces your tax basis in our shares, which may result in higher taxes for you even if your shares are sold at a price below your original investment.
Our distributions to stockholders may be funded from expense support payments provided by our Adviser that are subject to repayment to our Adviser if certain conditions are met. Our distributions may not be based on our

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investment performance and may not continue in the future. The reimbursement of these payments to our Adviser (if any such reimbursements are made) would reduce the future distributions to which you would otherwise be entitled.
We intend to continue to qualify as a RIC but may fail to do so. Such failure would subject us to federal income tax on all of our income, which would have a material adverse effect on our financial performance
As a result of the annual distribution requirement to qualify as a RIC, we will likely need to continually raise equity, make borrowings or sell existing investments to fund new investments. At times, these sources of funding may not be available to us on acceptable terms, if at all.
We are subject to financial market risks, including changes in interest rates, which may have a substantially negative impact on our investments.
A significant portion of our portfolio will be recorded at fair value as determined in good faith by our Board of Directors and, as a result, there may be uncertainty as to the value of our investments.
An investment strategy focused in part on privately-held companies presents certain challenges, including the lack of available information about these companies.
Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. securities.
Our investment strategy is to invest, under normal circumstances, at least 50% of our assets in securities of Infrastructure companies, with a primary objective of generating current income. The revenues, income (or losses) and valuations of Infrastructure companies can fluctuate suddenly and dramatically due to a number of environmental, regulatory, political and general market risks, which will impact our financial performance.
Continuation of the current decline in oil and natural gas prices for a prolonged period could have a material adverse effect on us.
We invest primarily in income-oriented securities of private or public Infrastructure companies within the United States, including middle market companies. Our investments in these companies may be risky and we could lose all or a portion of our investment.
The senior debt in which we invest will typically be secured by assets of the issuing company. The collateral securing these investments may decrease in value or lose its entire value over time or may fluctuate based on the performance of the portfolio company which may lead to a loss in principal. Subordinated debt investments are typically unsecured, as are preferred and common equity interests, and this may involve a heightened level of risk, including a loss of principal or the loss of the entire investment.
We will be exposed to leveraged credit risk.
We may enter into total return swap agreements or other derivative transactions which expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
Non-investment grade debt involves a greater risk of default and higher price volatility than investment grade debt.
We may invest in assets with no or limited performance or operating history.
We are exposed to underlying borrower fraud through our portfolio securities.
Our investments are subject to prepayments and calls, increasing re-investment risk.
Our investments in the equity and junior debt tranches of CLOs may be riskier and less transparent to us and our stockholders than direct investments in the underlying companies.
CLOs typically will have no significant assets other than their underlying senior secured loans; payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.
Our investments in the equity and junior debt tranches of CLOs are exposed to leveraged credit risk.
There is the potential for interruption and deferral of cash flow from investments in the equity and junior debt tranches of CLOs.
The payment of underlying portfolio manager fees and other charges on investments in the equity and junior debt tranches of CLOs could adversely impact our returns.
The inability of a CLO collateral manager to reinvest the proceeds of the prepayment of senior secured loans may adversely affect us.
Our investments in the equity and junior debt tranches of CLOs are subject to prepayments and calls, increasing re-investment risk.

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We have limited control of the administration and amendment of senior secured loans owned by the CLOs in which we invest.
We have limited control of the administration and amendment of any CLO in which we invest.
Our financial results may be affected adversely if one or more of our significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as we expect.
Non-investment grade debt involves a greater risk of default and higher price volatility than investment grade debt.
We will have no influence on management of underlying investments managed by non-affiliated third party CLO collateral managers.
We have not identified specific investments that we will make with the proceeds of this offering, and therefore you will not have the opportunity to evaluate our investments prior to purchasing our shares.
We may be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence.
The dealer manager in our continuous offering has limited experience selling shares on behalf of an interval fund and may be unable to sell a sufficient number shares for us to achieve our investment objective.
Because the dealer manager is an affiliate of our Adviser, you will not have the benefit of an independent due diligence review of us, which is customarily performed in firm commitment underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.
The potential for our Adviser to earn incentive fees under the Investment Advisory Agreement may create an incentive for it to enter into investments that are riskier or more speculative than would otherwise be in our best interests, and, since the base management fee is based on average total assets, our Adviser may have an incentive to increase portfolio leverage in order to earn higher base management fees. These incentives, including the hurdle rate and catch-up provision, create an inherent conflict.
This is a “best efforts” offering and if we are unable to raise substantial funds then we will be more limited in the number and type of investments we may make.
Our Adviser and its affiliates face conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which they will attempt to resolve in a fair and equitable manner, but which may result in actions that are not in our stockholders’ best interests.
Our ability to enter into transactions with our affiliates will be restricted.
The purchase price at which you may purchase shares will be determined at each closing date. As a result, such purchase price may be higher than the prior closing price per share, and therefore you may receive a smaller number of shares than if you had subscribed at the prior closing price.
We may be unable to invest a significant portion of the net proceeds of our offering on acceptable terms in an acceptable timeframe.
Investors in this offering will incur dilution.
We may borrow funds to make investments. As a result, we would be exposed to the risks of borrowing, also known as leverage, which may be considered a speculative investment technique. Leverage increases the volatility of investments and magnifies the potential for loss on amounts invested, therefore increasing the risks associated with investing in our shares.
Our investments, especially until we raise significant capital from this offering, may be concentrated in a limited number of investments, which would magnify the effect of any losses suffered by a few of these investments.
See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our shares.
Investment Strategy
Our investment objective is to generate current income and, as a secondary objective, long-term capital appreciation. We seek to achieve our investment objective by investing, under normal circumstances, at least 50% of our total assets, that is net assets plus borrowings, in securities of Infrastructure companies.
We consider Infrastructure companies to include (a) companies engaged in the ownership, development, construction, maintenance, renovation, enhancement, or operation of infrastructure assets; (b) companies that invest in, own, lease or hold infrastructure assets; and (c) companies that operate infrastructure assets or provide services, products or raw materials related

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to the development, construction, maintenance, renovation, enhancement or operation of infrastructure assets. This investment strategy may be changed by our Board of Directors if we provide our stockholders with at least 60 days prior written notice and make a corresponding change to our name. In accordance with the best interests of our stockholders, our Adviser will continue to monitor our targeted investment mix as economic conditions evolve. We expect to invest up to 50% of our total assets in other securities, including senior debt, subordinated debt, preferred equity, dividend paying equity and the equity and junior debt tranches of a type of pools of broadly syndicated loans known as Collateralized Loan Obligations, or “CLOs.” The CLOs include a diversified portfolio of broadly syndicated loans and do not have direct exposure to real estate or mortgages.  Our investments in the equity and junior debt tranches of CLOs will be subordinated to senior loans and are generally unsecured. We may invest in debt and equity positions of CLOs which are a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches. Our CLO investments will be derived from portfolios of corporate debt securities which are generally majority risk rated from BB to B.

When identifying prospective portfolio companies, we focus primarily on the attributes set forth below, which we believe should help us generate attractive total returns with an acceptable level of risk. While these criteria provide general guidelines for our investment decisions, we caution investors that, if we believe the benefits of investing are sufficiently strong, not all of these criteria necessarily will be met by each prospective portfolio company in which we choose to invest. These attributes are:
Significant/meaningful asset value. We target companies that have significant asset value rather than speculative investments or factors beyond the control of a portfolio company. We focus on Infrastructure companies that have strong potential for enhancing asset value through factors within their control. Examples of these types of factors include operating cost reductions and revenue increases driven by improved operations of previously under-performing or under- exploited assets. Such investments are expected to have significant collateral coverage and downside protection irrespective of the broader economy.
Defensible market positions. We target companies that have developed strong positions within their sub-sector and exhibit the potential to maintain sufficient cash flows and profitability to service our debt in a range of economic environments. We seek companies that can protect their competitive advantage through scale, scope, customer loyalty, asset base, product pricing or product quality, thereby minimizing business risk and protecting profitability.
Proven management teams. We focus on companies that have experienced management teams with an established track record of success. We typically require our portfolio companies to have proper incentives in place to align management’s goals with ours.
Commodity price management. We prioritize companies that appropriately manage their commodity price exposure through the use of hedging with highly-rated counterparties, contracts such as power purchase agreements, or PPAs, or tolling agreements and other instruments that seek to minimize the company’s exposure to significant commodity price swings.
Allocation among various issuers and industries. We seek to allocate our portfolio broadly among issuers and sub-sectors within the universe of Infrastructure companies, thereby attempting to reduce the risk of a downturn in any one company or sub-sector having a disproportionate impact on the performance of our portfolio. This flexible mandate allows the Company to take advantage of anticipated trends and avoid developments that we believe are less favorable.
Viable exit strategy. We attempt to invest a majority of our assets in securities that may be sold in a privately negotiated over-the-counter market or public market, providing us a means by which we may exit our positions. We expect that a large portion of our portfolio may be sold on this secondary market for the foreseeable future, depending on market conditions. For investments that are not able to be sold within this market, we intend to focus primarily on investing in companies whose business models and growth prospects offer attractive exit possibilities, including repayment of our investments, an initial public offering of equity securities, a merger, a sale or a recapitalization, in each case with the potential for capital gains.
We will be subject to certain regulatory restrictions in making our investments. We have received an exemptive order from the SEC (the “Order”) granting us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by our Adviser or certain affiliates, including Prospect Capital Corporation and Priority Income Fund. We may only co-invest with certain entities affiliated with our Adviser in negotiated transactions originated by our Adviser or its affiliates in accordance with such Order and existing regulatory guidance. See “Certain Relationships and Related Party Transactions  - Allocation of Investments” in the statement of additional information.
To seek to enhance our returns, we may borrow money from time to time at the discretion of our Adviser within the levels permitted by the 1940 Act (which generally allows us to incur leverage for up to one-third of our assets) when the terms and conditions available are favorable to long-term investing and well-aligned with our investment strategy and portfolio composition, including before we have fully invested the initial proceeds of this offering. We currently expect to use leverage in

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an aggregate amount up to 331/3% of our total assets, which includes assets obtained through such leverage, although we may increase our leverage under the 1940 Act. See “Regulation” in the SAI. We do not intend to issue preferred shares in the 12 months following effectiveness of the registration statement, of which this prospectus forms a part, or, thereafter, until after the proceeds of this offering are substantially invested in accordance with our investment objective. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. The use of borrowed funds or the proceeds of preferred stock to make investments would have its own specific set of benefits and risks, and all of the costs of borrowing funds or issuing preferred stock would be borne by holders of our common stock. See “Risk Factors—Risks Related to Debt Financing” for a discussion of the risks inherent to employing leverage.
While a registered closed-end management investment company may list its shares for trading in the public markets, we have currently elected not to do so. We believe that a non-traded structure initially is appropriate for the long-term nature of the assets in which we invest. This structure allows us to operate with a long-term view, similar to that of other types of private investment funds—instead of managing to quarterly market expectations—and to pursue our investment objective without subjecting our investors to the daily share price volatility associated with the public markets because our shares will not be listed on a national securities exchange. In addition, we believe that this continuous offering may allow us to raise a greater amount of proceeds over an extended time frame than we could through a traditional firm commitment underwritten offering, in view of our lack of an operating history or existing portfolio. Correspondingly, we believe that we may have a greater ability to raise capital on attractive terms through a traditional firm commitment underwritten offering after we have established an investment track record. To provide our stockholders with limited liquidity, we have adopted a fundamental policy to conduct quarterly repurchase offers pursuant to our share repurchase program. This will be the only method of liquidity that we offer. Also, if you invest through a fee-based program, also known as a wrap account, of an investment dealer, your liquidity may be further restricted by the terms and conditions of such program, which may limit your ability to request the repurchase of your shares that are held in such account. See “Share Repurchase Program.” Therefore, stockholders may not be able to sell their shares promptly or at a desired price.
Our shares are not currently listed on an exchange, and we do not expect a public market to develop for them in the foreseeable future, if ever.
See “Investment Objective and Strategy” for additional information regarding our investment strategy.
Market Opportunity
We believe that there are and will continue to be significant investment opportunities in income-oriented securities of private or public Infrastructure companies within the United States that will provide attractive risk-adjusted returns compared to other types of investments. Such investments are expected to be made across all sub-sectors of the Infrastructure markets, which markets include over 10,000 private companies and 1,000 public companies whose aggregate traded market capitalization exceeds $15 trillion.
Assets of Infrastructure companies are growing both in size and importance to the U.S. and the global economy. According to McKinsey, the world spent $9.6 trillion, or 14% of global GDP, on infrastructure in 2013. Like most developed countries, the U.S. has substantial infrastructure in place; however, the condition of these assets is deteriorating rapidly. According to the American Society of Civil Engineers, the cumulative infrastructure investment needs from 2016-2025 in the U.S. will be approximately $3.3 trillion and $10.8 trillion from 2016-2040
 
 
Surface Transportation
Water / Wastewater
Electricity
Airports
Inland Waterways & Marine Ports
Aggregate Economic Impact of All Sectors
Investment Funding Gap - 2016 through 2025
Total Needs
$2,042
$150
$934
$157
$37
$3,320
Funded
$941
$45
$757
$115
$22
$1,880
Funding Gap
$1,101
$105
$177
$42
$15
$1,440
Investment Funding Gap - 2016 through 2040
Total Needs
$7,646
$204
$2,458
$376
$112
$10,796
Funded
$3,312
$52
$1,893
$288
$69
$5,614
Funding Gap
$4,334
$152
$565
$88
$43
$5,182
Source: American Society of Civil Engineers (figures in $ billions)
 
 

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Infrastructure is essential to the functioning of society and the modern economy. It consists of the physical structures and essential services that connect society and facilitate its orderly operation. Infrastructure has a direct impact on the quality of life of individuals, by providing access to a broad range of essential resources, including water and energy, and other services, such as transportation and telecommunications. Given its strategic importance and its impact on quality of life, as well as its high capital cost, the provision of infrastructure has traditionally been a government responsibility.
With constrained government budgets facing challenges with respect to spending requirements, infrastructure funding is increasingly coming from the private sector and additional funding will be required to meet spending needs. Private market infrastructure investments have traditionally been funded by banks. However, with increasing capital regulations forcing banks to de-lever their balance sheets, other types of private market investors have begun to fill the void. The large increase in assets under management invested in infrastructure funds over the last few years marks this growing trend.
In December 2015, the Fixing America’s Surface Transportation (FAST) Act was passed, which is a $305 billion five-year bill focuses on repairing the highways and is the first long-term national transportation spending package to be passed in a decade. In May 2016, the American Society of Civil Engineers published a report called “Failure to Act - Closing the Infrastructure Gap for America’s Economic Future.” In the report, they estimate that from 2016-2025, the United States will have an investment funding gap of $1.1 trillion for its surface transportation (highways, bridges, commuter rail, and transit systems) and a total funding gap of $1.4 trillion for all sectors.
According to the PwC and GIIA Global Infrastructure Investment 2017 report, politicians have responded to pressure by promising new major improvements with the Trump administration pledging US$1 trillion of investment in roads, bridges, schools and hospitals to be largely funded through tax-incentivised private capital.
We believe that Infrastructure debt offers investors a degree of safety versus the broader corporate market. As shown in the chart below, according to Moody’s, the default rate for infrastructure debt is significantly lower than the corporate debt default rate. Infrastructure firms have real assets behind their businesses and have stable cash flows stemming from the typically long-term nature of their contractual agreements.



cumulativedefaultrates.gif
Infrastructure high yield debt has delivered over 20% returns over the past one, three, and five years, as shown in the chart below.

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ibox.gif

We believe we are well positioned to take advantage of any increase in global infrastructure spending. We continue to believe that the combination of urbanization, rising standards of living and population growth can propel infrastructure spending for decades to come. We believe that this large and diversified asset class maintains attractive and distinct investment characteristics, including stable cash flows, high barriers to entry and steady interest payments and distributions with attractive growth profiles.
Potential Competitive Strengths
We believe that we offer our investors the following potential competitive strengths:
Established platform with seasoned investment professionals. We will benefit from the wider resources of our Adviser through the personnel it utilizes from Prospect Capital Management, which is focused on sourcing, structuring, executing, monitoring and exiting a broad range of investments. We believe these personnel possess market knowledge, experience and industry relationships that enable them to identify potentially attractive investment opportunities in Infrastructure companies.
Long-term investment horizon. Unlike private equity and venture capital funds, we are not subject to standard periodic capital return requirements. Such requirements typically stipulate that capital invested in these funds, together with any capital gains on such investment, can be invested only once and must be returned to investors after a pre-determined time period. We believe our ability to make investments with a longer-term view and without the capital return requirements of traditional private investment vehicles will provide us with greater flexibility to seek investments that can generate attractive returns on invested capital.
Our Adviser’s transaction sourcing capability. Our Adviser seeks to leverage its professionals’ significant access to transaction flow. Our Adviser seeks to generate investment opportunities through syndicate and club deals (generally, investments made by a small group of investment firms) and, subject to regulatory constraints imposing certain restrictions on co-investment with affiliates, also through our Adviser’s proprietary origination channels. These include significant contacts to participants in the credit and leveraged finance marketplace, which it can draw upon in sourcing investment opportunities for us. With respect to syndicate and club deals, our Adviser has access to a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Our Adviser seeks to leverage its investment professionals’ long-standing personal contacts within the infrastructure industry to generate access to a substantial amount of originated transactions with attractive investment characteristics, including contacts with private equity sponsors and finance intermediaries. We believe that the broad network available to our Adviser should produce a significant amount of investment opportunities for us.
Efficient tax structure. As a regulated investment company, or “RIC,” we generally will not be required to pay federal income taxes on any ordinary income or capital gains that we receive from our investments and distribute to our stockholders as dividends. Because we are not required to pay federal income taxes on our income or capital gains that we distribute to our stockholders, we expect to be able to offer investment terms to potential issuers that are comparable to those offered by our corporate-taxpaying competitors, and achieve after-tax net returns that are often greater than their after-tax net returns. Furthermore, tax-exempt investors in our shares who do not finance their acquisition of our shares with indebtedness should not

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be required to recognize unrelated business taxable income, or “UBTI,” unlike certain direct investors in MLPs. We expect to form wholly owned taxable subsidiaries to make or hold certain investments in non-traded limited partnerships. Although, as a RIC, dividends received by us from taxable entities and distributed to our stockholders will not be subject to federal income taxes, any taxable entities we own will generally be subject to federal and state income taxes on their income. As a result, the net return to us on such investments that are held by such subsidiaries will be reduced to the extent that the subsidiaries are subject to income taxes.
Disciplined, income-oriented investment philosophy. Our Adviser employs a conservative investment approach focused on current income and long-term investment performance. This investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies, which could result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining potential for long-term capital appreciation.
Investment expertise across all levels of the corporate capital structure. We believe the personnel available to our Adviser have broad expertise and experience investing in companies, managing high-yielding debt and equity investments in Infrastructure companies and have developed an expertise in using all levels of a firm’s capital structure to produce income-generating investments, while focusing on risk management. We attempt to capitalize on this expertise in an effort to produce and maintain an investment portfolio that will perform well in a broad range of economic conditions.
Plan of Distribution
We intend to offer, in reliance on Rule 415 under the Securities Act of 1933, our shares, on a continual basis, through the Dealer Manager. No arrangement has been made to place funds received in an escrow, trust or similar account. The Dealer Manager is not required to sell any specific number or dollar amount of our shares, but will use its best efforts to solicit orders for the purchase of the shares. Our shares will not be listed on any national securities exchange and the Dealer Manager will not act as a market marker in our shares. Class A shares will pay to the Dealer Manager an up-front sales load of 5.75% of the amount invested and a shareholder servicing fee that will accrue at an annual rate equal to 0.25% of our average daily net assets attributable to Class A shares on a quarterly basis. Class A shares are not currently subject to a Distribution Fee. Class C shares will not pay an up-front sales load or shareholder servicing fee, but will pay to the Dealer Manager a Distribution Fee that will accrue at an annual rate equal to 0.75% of our average daily net assets attributable to Class C shares and is payable on a quarterly basis.
The Adviser or its affiliates, in the Adviser’s discretion and from their own resources, may pay additional compensation to financial intermediaries in connection with the sale and servicing of our shares (the “Additional Compensation”). In return for the Additional Compensation, we may receive certain marketing advantages including access to financial intermediaries’ registered representatives, placement on a list of investment options offered by a financial intermediary, or the ability to assist in training and educating the financial intermediaries. The Additional Compensation may differ among financial intermediaries in amount or in the manner of calculation: payments of Additional Compensation may be fixed dollar amounts, or based on the aggregate value of outstanding shares held by shareholders introduced by the financial intermediary, or determined in some other manner. The receipt of Additional Compensation by a selling financial intermediary may create potential conflicts of interest between an investor and its financial intermediary who is recommending our shares over other potential investments. Additionally, the Adviser or its affiliates pay a servicing fee to the Dealer Manager for providing ongoing services in respect of clients with whom they have distributed shares of the Company. Such services may include electronic processing of client orders, electronic fund transfers between clients and us, account reconciliations with our transfer agent, facilitation of electronic delivery to clients of our documentation, monitoring client accounts for back-up withholding and any other special tax reporting obligations, maintenance of books and records with respect to the foregoing, and such other information and ongoing liaison services as we or the Adviser may reasonably request.
Provasi Capital Partners LP acts as the dealer manager in connection with the sale of shares registered in this offering. The dealer manager was formed in 2001 and is an affiliate of our Adviser. Provasi Capital Partners LP also serves as the dealer manager in the initial public offering of shares of common stock of Priority Income Fund, a registered closed-end investment company and our affiliate.
Purchasing Shares
Investors may purchase shares directly from us in accordance with the instructions below. Investors will be assessed fees for returned checks and stop payment orders at prevailing rates charged by DST, our transfer agent. The returned check and stop payment fee is currently $25. Investors may buy and sell our shares through participating broker dealers that have made arrangements with us and are authorized to buy and sell shares of the Company (collectively, “Participating Broker Dealers”). Orders will be priced at the appropriate price next computed after it is received by a Participating Broker Dealer and accepted by us. A Participating Broker Dealer may hold shares in an omnibus account in the Participating Broker Dealer’s name or the Participating Broker Dealer may maintain individual ownership records. Participating Broker Dealers may charge fees for the

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services they provide in connection with processing your transaction order or maintaining an investor’s account with them. Investors should check with their Participating Broker Dealer to determine if it is subject to these arrangements. Participating Broker Dealers are responsible for placing orders correctly and promptly with the Company, forwarding payment promptly. The Company will admit investors into the Company and calculate its NAV on a weekly basis.  Orders transmitted with a Participating Broker Dealer at any time during the week and before the close of regular trading (generally 4:00 p.m., Eastern Time) on a Friday that the NYSE is open for business, will be priced based on the Company’s NAV calculated as of the close of trading on that Friday.
By Mail
To make an initial purchase by mail, complete an account application and mail the application, together with a check made payable to [Pathway Capital Opportunity Fund, Inc.] to:
Via Mail:

[Pathway Capital Opportunity Fund, Inc.]
c/o Stratera Investor Services
P.O. Box 219768
Kansas City, MO 64121-9768
866-655-3650
Via Express/Overnight Delivery:

[Pathway Capital Opportunity Fund, Inc.]
c/o Stratera Investor Services
430 West 7th Street
Kansas City, MO 64105-1407
866-655-3650
 All checks must be in US Dollars drawn on a domestic bank. We will not accept payment in cash or money orders. We also do not accept cashier’s checks in amounts of less than $10,000. To prevent check fraud, we will neither accept third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of shares, nor post-dated checks, postdated on-line bill pay checks, or any conditional purchase order or payment.
It is our policy not to accept applications under certain circumstances or in amounts considered disadvantageous to shareholders. We reserve the right to reject any application.
By Wire - Initial Investment
To make an initial investment in our shares, the transfer agent must receive a completed account application before an investor wires funds. Investors may mail or overnight deliver an account application to the transfer agent. Upon receipt of the completed account application, the transfer agent will establish an account. The account number assigned will be required as part of the instruction that should be provided to an investor’s bank to send the wire. An investor’s bank must include both our name, the account number, and the investor’s name so that monies can be correctly applied. If you wish to wire money to make an investment in us, please call us at 888-655-3650 for wiring instructions and to notify us that a wire transfer is coming. Any commercial bank can transfer same-day funds via wire. We will normally accept wired funds for investment on the day received if they are received by our designated bank before the close of regular trading on the NYSE. Wired funds must be received prior to 4:00 p.m. Eastern time on Friday to be eligible for that week’s pricing. Your bank may charge you a fee for wiring same-day funds. The bank should transmit funds by wire to:
ABA #: (number provided by calling toll-free number above)
Credit: (TO BE COMPLETED)
Account #: (number provided by calling toll-free number above)
Further Credit:
Pathway Capital Opportunity Fund, Inc.
(shareholder registration)
(shareholder account number)
By Wire - Subsequent Investments
Before sending a wire, investors must contact DST, our transfer agent, to advise them of the intent to wire funds. This will ensure prompt and accurate credit upon receipt of the wire. Wired funds must be received prior to 4:00 p.m. Eastern time on Friday to be eligible for that week’s pricing. We, and our agents, including the transfer agent and custodian, are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions.
Automatic Investment Plan - Subsequent Investments

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You may participate in our Automatic Investment Plan, an investment plan that automatically moves money from your bank account and invests it in our shares through the use of electronic funds transfers or automatic bank drafts. You may elect to make subsequent investments by transfers of a minimum of $500.
By Telephone
Investors may purchase additional shares of the Company by calling 888-655-3650. If an investor elected this option on the account application, and the account has been open for at least 15 days, telephone orders will be accepted via electronic funds transfer from your bank account through the Automated Clearing House (ACH) network. Banking information must be established on the account prior to making a purchase. Orders for shares received prior to 4 p.m. Eastern time on Friday will be purchased at the appropriate price calculated for that week.
Telephone trades must be received by or prior to market close. During periods of high market activity, shareholders may encounter higher than usual call waits. Please allow sufficient time to place your telephone transaction.
In compliance with the USA Patriot Act of 2001, DST, our transfer agent, will verify certain information on each account application as part of our Anti-Money Laundering Program. As requested on the application, investors must supply full name, date of birth, social security number and permanent street address. Mailing addresses containing only a P.O. Box will not be accepted.
If DST does not have a reasonable belief of the identity of a customer, the account will be rejected or the customer will not be allowed to perform a transaction on the account until such information is received. We also may reserve the right to close the account within 5 business days if clarifying information/documentation is not received.
Use of Proceeds
We intend to use substantially all of the proceeds from this offering, net of expenses, to make investments in private or public U.S. companies, with a primary objective of generating current income, in accordance with our investment objective and using the strategies described in this prospectus. The remainder we expect to be used for working capital and general corporate purposes. There can be no assurance we will be able to sell all the shares we are registering. If we sell only a portion of the shares we are registering, we may be unable to achieve our investment objective or provide variation in our portfolio, including the variation necessary to meet the asset diversification requirements applicable to RICs. See “Risk Factors—Federal Income Tax Risks.”
We estimate that it will take up to six months for us to substantially invest the net proceeds from each closing of this continuous offering, depending on the availability of attractive opportunities and market conditions. However, we can offer no assurance that we will be able to achieve this goal. Pending such use, we will invest the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities, money market funds, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our election to be taxed as a RIC. See “Use of Proceeds.”
Share Repurchase Program
Our shares are not currently listed on any securities exchange, and we do not expect a public market for them to develop in the foreseeable future, if ever. Therefore, stockholders should not expect to be able to sell their shares promptly or at a desired price.

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In order to provide limited liquidity to our stockholders, the Company intends to offer to repurchase 5% of our outstanding shares on a quarterly basis. The Company is an interval fund and, as such, has adopted a fundamental policy to make one mandatory repurchase offer in each calendar quarter of each year, at a price equal to the NAV per share, of no less than 5% of the shares outstanding. We refer to such repurchase as a “Mandatory Repurchase” because the Company is required to conduct this minimum repurchase offer unless certain limited circumstances occur. However, investors should not rely on Mandatory Repurchases being made in amounts in excess of 5% of Company assets. See “Share Repurchase Program.” There is no guarantee that Stockholders will be able to sell all of the shares they desire in a Mandatory Repurchase offer because stockholders, in total, may wish to sell more than the percentage of the Company’s shares being repurchased. See “Share Repurchase Program.”
Advisory Fees
Our Adviser is compensated for its services. Under the Investment Advisory Agreement, our Adviser is entitled to a fee consisting of two components—a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.0% of our total assets. The base management fee is payable quarterly in arrears and is calculated based on the average value of our total assets as of the end of the two most recently completed calendar quarters. The subordinated incentive fee, which we refer to as the subordinated incentive fee on income, will be calculated and payable quarterly in arrears based upon our “pre-incentive fee net investment income” for the immediately preceding quarter and will be subordinated to a fixed preferred return on the value of our net assets at the end of the immediately preceding calendar quarter equal to 1.5% per quarter, or an annualized rate of 6.0%. See “Investment Advisory Agreement—Overview of Our Adviser—Advisory Fees.”
Expense Support and Conditional Reimbursement Agreement
Pursuant to an expense support and conditional reimbursement agreement (as amended, the “Expense Support Agreement”) our Adviser has agreed to reimburse us for operating expenses in an amount equal to the difference between distributions to our stockholders for which a record date has occurred in each quarter less our available operating income during such period. Under the Expense Support Agreement, we have a conditional obligation to reimburse our Adviser for any amounts funded by our Adviser under the Expense Support Agreement following any calendar quarter in which available operating funds in such calendar quarter exceed the cumulative distributions to stockholders for which a record date has occurred in such calendar quarter. The original expense support agreement was entered into between us and our Adviser on September 2, 2014 and amended and restated on December 17, 2014 and February 24, 2015 (the “Original Expense Support Agreement”).
On March 30, 2016, we and our Adviser entered into the Third Amended and Restated Expense Support and Conditional Reimbursement Agreement (the “Amended Expense Support Agreement”), which removed unrealized losses from the calculation of available operating funds and extended the period during which reimbursements by the Adviser must be made from September 2, 2017 to the date upon which the public offering period of shares of our common stock ends. Expense support payments by us to our Adviser, and reimbursements related to those future expense support payments, will be made pursuant to the Amended Expense Support Agreement.
The recoupment of expense support payments made by the Adviser to us prior to the Amended Expense Support Agreement will be under the terms of the Original Expense Support Agreement, however, we will calculate “available operating funds” for the purpose of making such reimbursements, including the change in unrealized losses in the formula for calculating available operating funds as opposed to unrealized losses. For all expense support payments made prior to the Amended Expense Support Agreement, our Adviser will recoup its previously provided expense support payments when the sum of our net investment income, the net realized capital gains/losses, the changes in unrealized losses, and dividends and other distributions paid to us from our portfolio investments during such period exceeds our dividends and distributions to shareholders. The calculation of changes in unrealized losses shall only reflect further reduction in value of individual investments from the largest previously recorded unrealized loss for such individual investment. Realized losses for such period will only include the amount in excess of the largest previously recorded unrealized loss for the same investment.
The Expense Support Agreement will terminate with the adoption of the Expense Limitation Agreement, however, we will continue to be obligated to reimburse the Adviser for expense support payments pursuant to the terms of the Expense Support Agreement described above. Reimbursements for payments prior to March 29, 2016 will be made per the Original Expense Support Agreement terms. Reimbursement payments from March 29, 2016 to the present will be made under the Amended Expense Support Agreement. The Amended Expense Support Agreement will terminate, but the obligation to reimburse expenses will continue for three years.
Expense Limitation Agreement
The Adviser and the Company have entered into an Expense Limitation Agreement under which the Adviser has agreed contractually to waive its fees and to pay or absorb the ordinary operating expenses of the Company (including offering expenses, but excluding interest, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) to the

14


extent that they exceed [ ]% per annum of the Company's average [daily] net assets, at least through [ ] (the “Expense Limitation”). In consideration of the Adviser's agreement to limit the Company's expenses, the Company has agreed to repay the Adviser in the amount of any fees waived and Company expenses paid or absorbed, subject to the limitations that: (1) the reimbursement will be made only for fees and expenses incurred not more than three years from the end of the fiscal year in which they were incurred; and (2) the reimbursement may not be made if it would cause the Expense Limitation to be exceeded. The Expense Limitation Agreement may be terminated only by the Company's Board of Directors on [ ] days written notice to the Adviser. After [ ], the Expense Limitation Agreement may expire or be renewed or modified to limit expenses to a level different than [ ]% at the Adviser's and Board's discretion.
 
Deferral of Certain Organization and Offering Expense Reimbursement Payments
Under the Investment Advisory Agreement, our Adviser is entitled to receive reimbursement from the Company of organization and offering expenses it has paid on our behalf in an amount of up to 5.0% of the aggregate gross proceeds of the offering of our securities until all of the organization and offering expenses incurred and/or paid by our Adviser have been recovered. On September 2, 2014, our Adviser agreed to reduce such reimbursement and accept a maximum of 2.0% of the aggregate gross proceeds of the offering of our securities until all of the organization and offering expenses incurred and/or paid by our Adviser have been recovered. The Adviser will not recoup all of the organization and offering expenses it has paid on our behalf if we do not raise a sufficient amount of capital.
Administration
We have entered into an administration agreement (the “Administration Agreement”) under which we have agreed to reimburse Prospect Administration for our allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. Prospect Administration is controlled by Prospect Capital Management, which owns 50% of our Adviser. In addition, we have entered into an investor services agreement (the “Investor Services Agreement”) under which we have agreed to reimburse a subsidiary of Stratera Holdings for providing investor relations support and related back-office services with respect to our investors. Stratera Holdings owns 50% of our Adviser. Our Board of Directors will monitor payments we make pursuant to the Administration Agreement and Investor Services Agreement for compliance with the 1940 Act. See “Administration Agreements.”
Conflicts of Interest
Our Adviser and certain of its affiliates may experience conflicts of interest in connection with the management of our business affairs, including, but not limited to, the following:
The directors, officers and other personnel of our Adviser and its affiliates allocate their time between advising us and managing other investment activities and business activities in which they may be involved, including managing and operating Prospect Capital Corporation and Priority Income Fund;
The compensation payable by us to our Adviser and other affiliates will be approved by our Board of Directors consistent with the exercise of the requisite standard of care applicable to directors under Maryland law and our charter and bylaws. Such compensation is payable, in most cases, whether or not our stockholders receive distributions;
We compete with certain affiliates for investments, including Prospect Capital Corporation and Priority Income Fund, subjecting our Adviser and its affiliates to certain conflicts of interest in evaluating the suitability of investment opportunities and making or recommending acquisitions on our behalf;
Regardless of the quality of the assets acquired or the services provided to us, or whether we make distributions to our stockholders, our Adviser will receive base management fees and reimbursement of routine non-compensation overhead expenses in connection with the management of our portfolio and may receive subordinated incentive fees in connection with the generation of net investment income;
Because the dealer manager, Provasi Capital Partners LP, is an affiliate of our Adviser, its due diligence review and investigation of us and this prospectus cannot be considered to be an independent review;
The personnel of our Adviser and its affiliates allocate their time between assisting our Adviser in connection with identifying investment opportunities and making investment recommendations and performing similar functions for other business activities in which they may be involved, including in their capacity as personnel of Prospect Capital Management, the investment adviser to Prospect Capital Corporation, and Priority Senior Secured Income Management, the investment adviser to Priority Income Fund;

15


We may compete with other funds managed by affiliates of our Adviser for investment opportunities, subjecting our Adviser and its affiliates to certain conflicts of interest in evaluating the suitability of investment opportunities and making or recommending acquisitions to us;
From time to time, to the extent consistent with the 1940 Act and the rules and regulations promulgated thereunder, we and other clients (if any) for which our Adviser provides investment management services or carries on investment activities may make investments at different levels of an investment entity’s capital structure or otherwise in different classes of an issuer’s securities. These investments may inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities that may be held by us and such other clients;
Our Adviser and its respective affiliates may give advice and recommend securities to other clients which may differ from advice given to, or securities recommended or bought for, us, even though their investment objective may be similar to ours;
Prospect Capital Management and Stratera Holdings and their affiliates may have existing business relationships or access to material, non-public information that would prevent our Adviser from recommending certain investment opportunities that would otherwise fit within our investment objective;
Our Adviser and its affiliates are not restricted from forming additional investment funds, from entering into other investment advisory relationships or from engaging in other business activities, even though such activities may be in competition with us and/or may involve substantial time and resources of our Adviser or its affiliates. Affiliates of our Adviser, whose primary business includes the origination of investments, engage in investment advisory business with accounts that compete with us; and
To the extent permitted by the 1940 Act and staff interpretations, our Adviser may seek to have us and one or more other investment accounts managed by our Adviser or any of its affiliates participate in an investment opportunity. We have received an exemptive order from the SEC (the “Order”) granting us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by our Adviser or certain affiliates, including Prospect Capital Corporation and Priority Income Fund, Inc., subject to the conditions included therein. Under the terms of the Order permitting us to co-invest with other funds managed by our Adviser or its affiliates, a majority of our independent directors who have no financial interest in the transaction must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. The Order also imposes reporting and record keeping requirements and limitations on transactional fees. We may only co-invest with certain entities affiliated with our Adviser in negotiated transactions originated by our Adviser or its affiliates in accordance with such Order and existing regulatory guidance. See “Certain Relationships and Related Party Transactions—Allocation of Investments” in the statement of additional information. These co-investment transactions may give rise to conflicts of interest or perceived conflicts of interest among us and the other participating accounts. To mitigate these conflicts, our Adviser and its affiliates will seek to allocate portfolio transactions for all of the participating investment accounts, including us, on a fair and equitable basis, taking into account such factors as the relative amounts of capital available for new investments, the applicable investment programs and portfolio positions, the clients for which participation is appropriate and any other factors deemed appropriate.
Available Information
We file periodic reports, proxy statements and other information with the SEC. This information will be available at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549 and on the SEC’s website at www.sec.gov. The public may obtain information on the operation of the SEC’s public reference room by calling the SEC at 1-800-SEC-0330. This information will also be available free of charge by contacting us at 10 East 40th Street, 42nd Floor, New York, New York, 10016, or by telephone at (212) 448-0702 or on our website at [www.pathway-energyfund.com]. These reports should not be considered a part of or as incorporated by reference in this prospectus, or the registration statement of which this prospectus is a part.

16


Portfolio Update
We intend to continue to add securities to our portfolio as our offering progresses. The following is our investment portfolio as of June 30, 2016:
 
 
 
 
 
 
June 30, 2016
Portfolio Investments
Industry
 
Sector (5)
 
Coupon/Yield
 
Legal Maturity
 
Principal Amount
 
Amortized Cost
 
Fair Value(2)
 
% of Net Assets
 
LEVEL 2 PORTFOLIO INVESTMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Unsecured Bonds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bill Barrett Corp.(3)
Energy
 
Upstream
 
7.63
%
 
10/1/2019
 
$
250,000

 
$
205,757

 
$
204,063

 
3.4
 %
Brand Energy & Infrastructure Services, Inc.(3)
Energy
 
Industrial
 
8.50
%
 
12/1/2021
 
250,000

 
230,375

 
239,249

 
4.0
 %
Calumet Specialty Products(3)
Energy
 
Downstream
 
7.75
%
 
4/15/2023
 
300,000

 
278,782

 
212,625

 
3.6
 %
Carrizo Oil and Gas, Inc.(3)
Energy
 
Upstream
 
7.50
%
 
9/15/2020
 
352,000

 
340,352

 
356,840

 
6.0
 %
Concho Resources LP(3)
Energy
 
Upstream
 
7.00
%
 
1/15/2021
 
250,000

 
240,563

 
258,984

 
4.3
 %
CSI Compressco LP(3)
Energy
 
Services
 
7.25
%
 
8/15/2022
 
400,000

 
323,727

 
328,500

 
5.5
 %
Ferrellgas Partners LP(3)
Energy
 
Downstream
 
8.63
%
 
6/15/2020
 
400,000

 
400,399

 
401,374

 
6.7
 %
Gardener Driver, Inc.(3)
Energy
 
Industrial
 
6.88
%
 
8/15/2021
 
250,000

 
222,978

 
227,188

 
3.8
 %
Global Partners LP (3)
Energy
 
Midstream
 
7.00
%
 
6/15/2023
 
350,000

 
325,221

 
293,854

 
4.9
 %
Gulfport Energy Corp.(3)
Energy
 
Upstream
 
7.75
%
 
11/1/2020
 
300,000

 
292,410

 
308,625

 
5.2
 %
Holly Energy Partners LP(3)
Energy
 
Midstream
 
6.50
%
 
3/1/2020
 
300,000

 
295,214

 
304,124

 
5.1
 %
Laredo Petroleum, Inc.(3)
Energy
 
Upstream
 
7.38
%
 
5/1/2022
 
500,000

 
497,554

 
501,875

 
8.4
 %
Martin Midstream Partners LP(3)
Energy
 
Midstream
 
7.25
%
 
2/15/2021
 
400,000

 
378,950

 
368,750

 
6.2
 %
Memorial Production Partners LP(3)
Energy
 
Upstream
 
7.63
%
 
5/1/2021
 
250,000

 
177,723

 
134,688

 
2.3
 %
NGL Energy Partners LP(3)
Energy
 
Midstream
 
6.88
%
 
10/15/2021
 
250,000

 
245,116

 
221,029

 
3.7
 %
Northern Oil and Gas, Inc.(3)
Energy
 
Upstream
 
8.00
%
 
6/1/2020
 
250,000

 
204,299

 
190,313

 
3.2
 %
PDC Energy, Inc.(3)
Energy
 
Upstream
 
7.75
%
 
10/15/2022
 
350,000

 
351,494

 
365,240

 
6.1
 %
Rice Energy, Inc.(3)
Energy
 
Upstream
 
7.25
%
 
5/1/2023
 
350,000

 
331,912

 
356,562

 
6.0
 %
RSP Permian, Inc.(3)
Energy
 
Upstream
 
6.63
%
 
10/1/2022
 
300,000

 
289,527

 
309,750

 
5.2
 %
Weatherford International(3)
Energy
 
Services
 
9.88
%
 
3/1/2039
 
350,000

 
322,249

 
319,125

 
5.3
 %
Western Refining Logistics LP(3)
Energy
 
Midstream
 
7.50
%
 
2/15/2023
 
400,000

 
403,818

 
393,500

 
6.6
 %
WPX Energy, Inc.(3)
Energy
 
Upstream
 
7.50
%
 
8/1/2020
 
350,000

 
343,136

 
350,655

 
5.9
 %
 
 
 
Total Senior Unsecured Bonds
 
 
$
6,701,556

 
$
6,646,913

 
111.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

17


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Investments
Industry
 
Sector (5)
 
Coupon/Yield
 
Legal Maturity
 
Principal Amount
 
Amortized Cost
 
Fair Value(2)
 
% of Net Assets
Senior Secured Bonds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hexion Inc.(3)
Energy
 
Chemicals
 
6.63
%
 
4/15/2020
 
$
200,000

 
$
187,661

 
$
168,250

 
2.8
 %
Westmoreland Coal Co.(3)
Energy
 
Coal
 
8.75
%
 
11/1/2022
 
400,000

 
325,151

 
299,500

 
5.0
 %
 
 
 
Total Senior Secured Bonds
 
 
$
512,812

 
$
467,750

 
7.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Level 2 Portfolio Investments
 
 
$
7,214,368

 
$
7,114,663

 
119.0
 %
 
 
 
 
 
 
 
 
 
LEVEL 3 PORTFOLIO INVESTMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLO - subordinated notes(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carlyle Global Market Strategies CLO 2012-4(4)
Structured Finance
 
N/A
 
36.55
%
 
1/20/2025
 
$
150,000

 
$
85,624

 
$
91,245

 
1.5
 %
GoldenTree 2013-7A(4)
Structured Finance
 
N/A
 
33.90
%
 
4/25/2025
 
250,000

 
171,712

 
172,311

 
2.9
 %
Madison Park Funding XIII, Ltd.(4)
Structured Finance
 
N/A
 
29.75
%
 
1/19/2025
 
250,000

 
169,559

 
207,476

 
3.5
 %
Madison Park Funding XIV, Ltd.(4)
Structured Finance
 
N/A
 
23.45
%
 
7/20/2026
 
250,000

 
189,355

 
207,236

 
3.5
 %
Octagon XXI, Ltd.(4)
Structured Finance
 
N/A
 
30.64
%
 
11/14/2026
 
300,000

 
184,967

 
206,454

 
3.5
 %
Voya 2013-1, Ltd.(4)
Structured Finance
 
N/A
 
17.92
%
 
1/20/2027
 
250,000

 
213,369

 
164,557

 
2.8
 %
Voya 2016-1, Ltd.(4)
Structured Finance
 
N/A
 
26.28
%
 
4/15/2024
 
250,000

 
159,340

 
214,924

 
3.6
 %
 
 
 
Total CLO - subordinated notes
 
 
$
1,173,926

 
$
1,264,203

 
21.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Level 3 Portfolio Investments
 
 
$
1,173,926

 
$
1,264,203

 
21.2
 %
 
 
 
 
 
 
 
Total Portfolio Investments
 
$
8,388,294

 
$
8,378,866

 
140.2
 %
Liabilities in excess of other assets
 
 
 
(2,402,511
)
 
(40.2
)%
Net Assets
 
 
 
$
5,976,355

 
100.0
 %
(1) The CLO subordinated notes/securities, income notes and preference/preferred shares are considered equity positions in the CLOs. Equity investments are entitled to distributions, which are generally equal to the remaining cash flow of the payments made by the underlying loans less contractual payments to debt holders and expenses. The estimated yield indicated is based upon the current projection (as of June 30, 2016) of the amount and timing of these distributions and the estimated amount of repayment of the investment. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(2) Fair value is determined in good faith by the board of directors of the Company.
(3) Security or portion thereof is pledged as collateral supporting the amounts outstanding under the credit facility with BNP Paribas Prime Brokerage International, Ltd.
(4) Co-investment with another fund managed by an affiliate of the Adviser.
(5) The upstream sector includes businesses that locate, develop or extract energy in its most basic, raw form. The midstream sector includes businesses that process, gather, transport, ship, transmit or store raw energy resources or by-products in a form suitable for refining or power generation. The downstream sector includes businesses that refine, market or distribute energy to end-user customers.


18


Distributions
Subject to our Board of Directors’ discretion and applicable legal restrictions, we intend to authorize and declare ordinary cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will then calculate each stockholder’s specific distribution amount for the period using weekly record dates with each stockholder eligible to receive distributions beginning the week we accept the stockholder’s subscription for our shares. From time to time, we may also pay interim special distributions in cash or in our shares at the discretion of our Board of Directors. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from this offering. Therefore, portions of the distributions that we make may be a return of the money that you originally invested and represent a return of capital to you for tax purposes. Such a return of capital is not immediately taxable, but reduces your tax basis in our shares, which may result in higher taxes for you even if your shares are sold at a price below your original investment. Each year a statement on Form 1099-DIV identifying the source of the distribution will be mailed to our U.S. stockholders. There can be no assurance that we will be able to pay distributions at a specific rate or at all. See “Material U.S. Federal Income Tax Considerations.”

We intend to make our ordinary distributions in the form of cash, out of assets legally available, unless stockholders elect to receive their distributions in additional shares under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder. If stockholders hold shares in the name of a broker or financial intermediary, they should contact the broker or financial intermediary regarding their election to receive distributions in additional shares.
Based on the our regular weekly cash distribution amount of $0.01772 per share as of June 28, 2017 and our current public offering price of $15.40 per share as of such date, the annualized distribution rate to our stockholders as of June 28, 2017 was approximately 6%. The annualized distribution rate to our stockholders does not represent an actual investment return to our stockholders and may include income, realized capital gains and a return of investors’ capital. Our annualized distribution rate to our stockholders is subject to change and in the future may be greater or less than the annualized distribution rate set forth above. See “Selected Financial Data” and “Distributions.”
Distribution Reinvestment Plan
We have adopted an “opt in” distribution reinvestment plan pursuant to which you may elect to have the full amount of your cash distributions reinvested in additional shares. Participants in our distribution reinvestment plan are free to elect or revoke reinstatement in the distribution reinvestment plan within a reasonable time as specified in the plan. If you do not elect to participate in the plan you will automatically receive any distributions we declare in cash. For example, if our Board of Directors authorizes, and we declare, a cash distribution, then if you have “opted in” to our distribution reinvestment plan you will have your cash distributions reinvested in additional shares, rather than receiving the cash distributions. During this offering, we generally intend to coordinate distribution payment dates so that the same price that is used for the closing date immediately following such distribution payment date will be used to calculate the purchase price for purchasers under the distribution reinvestment plan. In such case, your reinvested distributions will purchase shares at a price equal to 95% of the price that shares are sold in the offering at the closing immediately following the distribution payment date. See “Distribution Reinvestment Plan.” No commissions or fees will be assessed pursuant to our distribution reinvestment plan.
Taxation
We intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders from our tax earnings and profits. To maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Material U.S. Federal Income Tax Considerations.”

Corporate Information
Our principal executive offices are located at 10 East 40th Street, 42nd Floor, New York, New York, 10016. We maintain a website at [www.pathway-energyfund.com]. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be part of this prospectus.

19


Recent Events
On June 20, 2016 our Board of Directors declared a series of distributions for the months of July through September 2016 of $0.01726 per share each. On October 6, 2016 our Board of Directors declared a series of distributions for the months of October through November 2016 of $0.01726 per share each. On November 23, 2016 our Board of Directors declared a series of distributions for the months of December 2016 through February 2017 of $0.01726 per share each. On March 2, 2017 our Board of Directors declared a series of distributions for the months of March through May 2017 of $0.01772 per share each. On May 30, 2017 our Board of Directors declared a series of distributions for the months of June through August 2017 of $0.01772 per share each. Stockholders of record as of each respective record date will be entitled to receive the distribution. Below are the details for each respective distribution:
Amount Per Share
 
Record Date
 
Payment Date
$0.01726
 
July 1, 2016
 
August 1, 2016
0.01726
 
July 8, 2016
 
August 1, 2016
0.01726
 
July 15, 2016
 
August 1, 2016
0.01726
 
July 22, 2016
 
August 1, 2016
0.01726
 
July 29, 2016
 
August 1, 2016
0.01726
 
August 5, 2016
 
August 29, 2016
0.01726
 
August 12, 2016
 
August 29, 2016
0.01726
 
August 19, 2016
 
August 29, 2016
0.01726
 
August 26, 2016
 
August 29, 2016
0.01726
 
September 2, 2016
 
October 3, 2016
0.01726
 
September 9, 2016
 
October 3, 2016
0.01726
 
September 16, 2016
 
October 3, 2016
0.01726
 
September 23, 2016
 
October 3, 2016
0.01726
 
September 30, 2016
 
October 3, 2016
0.01726
 
October 7, 2016
 
October 31, 2016
0.01726
 
October 14, 2016
 
October 31, 2016
0.01726
 
October 21, 2016
 
October 31, 2016
0.01726
 
October 28, 2016
 
October 31, 2016
0.01726
 
November 4, 2016
 
November 28, 2016
0.01726
 
November 11, 2016
 
November 28, 2016
0.01726
 
November 18, 2016
 
November 28, 2016
0.01726
 
November 25, 2016
 
November 28, 2016
0.01726
 
December 2, 2016
 
January 3, 2017
0.01726
 
December 9, 2016
 
January 3, 2017
0.01726
 
December 16, 2016
 
January 3, 2017
0.01726
 
December 23, 2016
 
January 3, 2017
0.01726
 
December 30, 2016
 
January 3, 2017
0.01726
 
January 6, 2017
 
January 30, 2017
0.01726
 
January 13, 2017
 
January 30, 2017
0.01726
 
January 20, 2017
 
January 30, 2017
0.01726
 
January 27, 2017
 
January 30, 2017
0.01726
 
February 3, 2017
 
February 27, 2017
0.01726
 
February 10, 2017
 
February 27, 2017
0.01726
 
February 17, 2017
 
February 27, 2017
0.01726
 
February 24, 2017
 
February 27, 2017
0.01772
 
March 3, 2017
 
April 3, 2017
0.01772
 
March 10, 2017
 
April 3, 2017
0.01772
 
March 17, 2017
 
April 3, 2017
0.01772
 
March 24, 2017
 
April 3, 2017
0.01772
 
March 31, 2017
 
April 3, 2017

20



Amount Per Share
 
Record Date
 
Payment Date
0.01772
 
April 7, 2017
 
May 1, 2017
0.01772
 
April 13, 2017
 
May 1, 2017
0.01772
 
April 21, 2017
 
May 1, 2017
0.01772
 
April 28, 2017
 
May 1, 2017
0.01772
 
May 5, 2017
 
May 30, 2017
0.01772
 
May 12, 2017
 
May 30, 2017
0.01772
 
May 19, 2017
 
May 30, 2017
0.01772
 
May 26, 2017
 
May 30, 2017
0.01772
 
June 2, 2017
 
July 3, 2017
0.01772
 
June 9, 2017
 
July 3, 2017
0.01772
 
June 16, 2017
 
July 3, 2017
0.01772
 
June 23, 2017
 
July 3, 2017
0.01772
 
June 30, 2017
 
July 3, 2017
0.01772
 
July 7, 2017
 
July 31, 2017
0.01772
 
July 14, 2017
 
July 31, 2017
0.01772
 
July 21, 2017
 
July 31, 2017
0.01772
 
July 28, 2017
 
July 31, 2017
0.01772
 
August 4, 2017
 
August 28, 2017
0.01772
 
August 11, 2017
 
August 28, 2017
0.01772
 
August 18, 2017
 
August 28, 2017
0.01772
 
August 25, 2017
 
August 28, 2017


During the period from June 30, 2016 through June 28, 2017, we made eighteen additional investments in existing bond investments totaling $2,319,605. During the period from June 30, 2016 through June 28, 2017, we made three investments in new bond investments totaling $1,723,750.
During the period from June 30, 2016 through June 28, 2017, we made three investments in new CLO investments totaling $578,575. During the period from June 30, 2016 through June 28, 2017, we sold one CLO investment for proceeds of $115,125.
During the period from June 30, 2016 through June 28, 2017, we made one investment in new loan investments totaling $975,000.
During the period from June 30, 2016 through June 28, 2017, we have raised $1,919,579 of capital, net of offering proceeds, through the issuance of 137,134 shares.
We made an offer to purchase, dated September 14, 2016, up to $50,274 in aggregate amount of our issued and outstanding common shares. The offer began on September 22, 2016 and expired at 12:00 Midnight, Eastern Time, on October 19, 2016. No shares were tendered pursuant to the offer.
We made an offer to purchase, dated December 15, 2016, up to $61,131 in aggregate amount of our issued and outstanding common shares. The offer began on December 22, 2016 and expired at 12:00 Midnight, Eastern Time, on January 23, 2017. The Company purchased 772 shares at a price equal to $14.00 per Share for an aggregate purchase price of $10,803. The purchase price per share was equal to the net asset value per share as of January 20, 2017.
We made an offer to purchase, dated March 15, 2017, up to $60,243 in aggregate amount of our issued and outstanding common shares. The offer began on March 23, 2017 and expired at 12:00 Midnight, Eastern Time, on April 24, 2017. The Company purchased 359 shares at a price equal to $14.02 per Share for an aggregate purchase price of $5,034. The purchase price per share was equal to the net asset value per share as of April 21, 2017.
We made an offer to purchase, dated June 15, 2017, up to $65,335 in aggregate amount of our issued and outstanding common shares. The offer began on June 22, 2017 and will expire at 12:00 Midnight, Eastern Time, on July 24, 2017. Payment will be made on or around June 26, 2017, at a purchase price of net asset value per share as of July 21, 2017.

21


FEES AND EXPENSES
Shareholder Transaction Expenses
Class A
Class C
 
Maximum Sales Load (as a percentage of offering price)
5.75%
None
 
Early Withdrawal Fee(1)
None
[ ]%
Annual Expenses (as a percentage of net assets attributable to shares)
 
 
 
Management Fees(2)
[ ]
[ ]
 
Incentive Fees(3)
[ ]
[ ]
 
Interest Payments on Borrowed Funds(4)
[ ]
[ ]
 
Shareholder Servicing Expenses
0.25%
None
 
Distribution Fee(5)
None
0.75%
 
Other Expenses(6)
[ ]
[ ]
 
Acquired Fund Fees and Expenses(7)(8)
[ ]
[ ]
Total Annual Expenses(9)
[ ]
[ ]
 
Fee Waiver and Reimbursement
[ ]
[ ]
Total Annual Expenses (after fee waiver and reimbursement)
[ ]
[ ]
(1)
Class C shareholders may be subject to an early withdrawal fee on shares repurchased during the first 365 days after their purchase.
(2)
Our base management fee under the Investment Advisory Agreement will be payable quarterly in arrears, and will be calculated at an annual rate of 2.0% of the value of our average total assets, payable quarterly in arrears and based on the average value of our total assets as of the end of the two most recently completed calendar quarters). The figure in the table is calculated on the basis of our average total assets over the following twelve months. The amount also assumes that we do not borrow funds during such period. The fees include routine non-compensation overhead expenses of our Adviser under the Investment Advisory Agreement (up to a maximum of 0.0625% of our total assets per quarter, or 0.25% per year). Routine non-compensation overhead expenses consist primarily of expenses related to office space, furnishings, supplies, equipment, communications equipment and services, and insurance. See “Investment Advisory Agreement—Overview of Our Adviser—Advisory Fees.”
(3)
Based on our current business plan, it is possible that we may have net investment income that could result in the payment of a subordinated incentive fee to our Adviser in the following twelve months. However, the subordinated incentive fee payable to our Adviser is based on our performance and will not be paid unless we achieve certain performance targets. For example, the subordinated incentive fee, which we refer to as the subordinated incentive fee on income, will be calculated and payable quarterly in arrears based upon our “pre-incentive fee net investment income” for the immediately preceding quarter and will be subordinated to a fixed preferred return on the value of our net assets at the end of the immediately preceding calendar quarter equal to 1.5% per quarter, or an annualized rate of 6.0%. As we cannot predict whether we will meet the necessary performance target, we have assumed that no subordinated incentive fee will be paid for purposes of this table. We expect the subordinated incentive fees we pay to increase to the extent we earn greater net investment income through our investments. Because the example above assumes a 5.0% annual return, as required by the SEC, no subordinated incentive fee would be payable in the following 12 months. See “Investment Advisory Agreement— Overview of Our Adviser—Advisory Fees” for a full explanation of how this incentive fee is calculated.
(4)
Interest payments on borrowed funds is estimated based on the interest rate currently in effect with respect to the Company’s credit facilities and includes the ongoing commitment fees payable under the terms of the credit facilities. We may borrow funds to make investments, including before we have fully invested the initial proceeds of this offering. To the extent that we determine it is appropriate to borrow funds to make investments, the costs associated with such borrowing will be indirectly borne by our investors. The figure in the table is based on the amount of interest expense on our borrowings under the revolving credit facility with BNP Paribas Prime Brokerage International, Ltd. (the “Revolving Credit Facility”), which bears interest at an annual rate of three-month LIBOR plus 120 basis points with no minimum LIBOR floor. The average interest rate on borrowings under the Revolving Credit Facility for the year ended June 30, 2016 was 1.77%. We do not intend to issue preferred shares in the first 12 months following effectiveness of the registration statement, of which this prospectus forms, or, thereafter, until after the proceeds of this offering are substantially invested in accordance with our investment objective.
(5)
Class C shares will pay to the Dealer Manager a Distribution Fee that will accrue at an annual rate equal to 0.75% of the average daily net assets attributable to Class C shares and is payable on a quarterly basis. See Plan of Distribution.
(6)
Other expenses include accounting, legal and auditing fees as well as the reimbursement of the compensation of our chief financial officer, chief compliance officer, treasurer and secretary and other administrative personnel of our Administrator

22


and fees payable to our independent directors. The amount presented in the table estimates the amounts that will be paid during the 12 months following June 30, 2016 and does not include preferred pricing arrangements we may receive from certain parties as a newly-formed entity. The estimate of our administrative costs is based on our projected allocable portion of overhead and other expenses incurred by Prospect Administration in performing its obligations under the Administration Agreement. “Other expenses” does not include non-recurring expenses. See “Administration Agreements” and “Investment Advisory Agreement.”
(7)
Estimated for current fiscal year.
(8)
Acquired Fund Fees and Expenses are the indirect costs of investing in other investment companies. These indirect costs may include performance fees paid to the Acquired Fund’s adviser or its affiliates. The Adviser estimates that such performance fees may range between [ ]% and [ ]% of the Acquired Fund's realized and, in certain cases, unrealized gains. Acquired Fund Fees and Remaining Other Expenses do not include brokerage or transaction costs incurred by the Acquired Funds. The operating expenses in this fee table will not correlate to the expense ratio in the Company’s financial highlights due to the Acquired Fund Fees & Expenses and certain other adjustments. Amount reflects the estimated annual asset management fees incurred indirectly by us in connection with our investment in CLOs during the next 12 months, including asset management fees payable to the collateral managers of CLO equity tranches and incentive fees due to the collateral managers of CLO equity tranches. The 4.88% is composed of 4.88% of collateral manager fees and zero incentive fees. The 4.88% of collateral manager fees are determined by multiplying 0.4912% (collateral managers fees historically paid) by 9.9 (the total leverage in such CLOs). However, such amounts are uncertain and difficult to predict. Future fees and expenses may be substantially higher or lower because certain fees and expenses are based on the performance of the CLOs, which may fluctuate over time. As a result of such investments, our stockholders may be required to pay two levels of fees in connection with their investment in our shares, including fees payable under our Investment Advisory Agreement, and fees charged to us on such investments.
(9)
The Adviser and the Company have entered into an expense limitation and reimbursement agreement (the Expense Limitation Agreement) under which the Adviser has agreed contractually to waive its fees and to pay or absorb the ordinary annual operating expenses of the Company (including offering expenses, but excluding taxes, interest, brokerage commissions, acquired fund fees and expenses and extraordinary expenses), to the extent that they exceed [ ]% and [ ]% per annum of the Company’s average daily net assets attributable to Class A and Class C shares, respectively (the Expense Limitation). In consideration of the Adviser’s agreement to limit the Company’s expenses, the Company has agreed to repay the Adviser in the amount of any fees waived and Company expenses paid or absorbed, subject to the limitations that: (1) the reimbursement for fees and expenses will be made only if payable not more than three fiscal years following the fiscal year in which they were incurred; and (2) the reimbursement may not be made if it would cause the Expense Limitation to be exceeded. The Expense Limitation Agreement will remain in effect at least until [ ], 2018, unless and until the Board approves its modification or termination. This agreement may be terminated only by the Company’s Board of Directors on 60 days written notice to the Adviser. See Management of the Company.
Example
The following example illustrates the hypothetical expenses that you would pay on $1,000 investment assuming annual expenses attributable to shares remain unchanged, shares earn a 5% annual return (the example assumes the Company’s Expense Limitation Agreement will remain in effect for only one year), and you redeemed your shares in full at the end of such period.
Fund Expense Hypothetical
 
 
1
Year
 
3
Years
 
5
Years
 
10
Years
Class A
 
[ ]
 
[ ]
 
[ ]
 
[ ]
Class C
 
[ ]
 
[ ]
 
[ ]
 
[ ]

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%. In addition, while the example assumes reinvestment of all distributions at net asset value, we generally intend that participants in our distribution reinvestment plan during this offering will receive a number of our shares determined by dividing the total dollar amount of the distribution payable to a participant by a price equal to 95% of the price that shares are sold in the offering at the closing immediately following the distribution payment date. See “Distribution Reinvestment Plan” for additional information regarding our distribution reinvestment plan. See “Plan of Distribution” for additional information regarding stockholder transaction expenses.

23


FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of common stock outstanding throughout the period presented.
 
 Year Ended
 
June 30, 2016
Per share data:
 
Net asset value, beginning of year(a)
$
13.80

 
 
Net investment income(b)
1.21

Net unrealized loss(b)
(0.03
)
Net increase in net assets resulting from operations
1.18

Dividends to stockholders from net investment income(d)
(0.75
)
Offering costs(b)
(0.62
)
Other(c)
(0.80
)
Net asset value, end of year
$
12.81

 
 
Total return, based on NAV(e)
(1.75
)%
Supplemental Data:
 
Net assets, end of year
$
5,976,355

Ratio to average net assets:
 
Expenses without reimbursements
36.65
 %
Expenses after reimbursements
3.41
 %
Net investment income
11.50
 %
 
 
Portfolio turnover
4.27
 %
 
 
(a)Represents the net offering price per share at on June 30, 2015. On August 25, 2015, the Company satisfied its minimum offering requirement by raising over $2.5 million from selling shares to persons not affiliated with the Company or the Adviser (the “Minimum Offering Requirement”), and as a result, broke escrow and commenced making investments.
(b)Calculated based on weighted average shares outstanding.
(c)The amount shown represents the balancing figure derived from the other figures in the schedule.
(d)The per share data for dividends is the actual amount of dividends paid or payable per share of common stock outstanding during the year. Dividends per share are rounded to the nearest $0.01.
(e)Total return is based upon the change in net asset value per share between the opening and ending net asset values per share during the period and assumes that dividends are reinvested in accordance with the Company’s dividend reinvestment plan. The computation does not reflect the sales load for any class of shares. Total return based on market value is not presented since the Company’s shares are not publicly traded.

The Company's complete audited Financial Statements, which include the Financial Highlights presented above, and independent registered public accounting firm's report thereon contained in the Company’s annual report dated June 30, 2016, are incorporated by reference in the Company's SAI. The Company's SAI, annual report and semi-annual report are available upon request, without charge, by calling the Company at (212) 448-0702.



24


QUESTIONS AND ANSWERS ABOUT THIS OFFERING
Set forth below are some of the more frequently asked questions and answers relating to our structure, our management, our business and an offering of this type. See “Prospectus Summary” and the remainder of this prospectus for more detailed information about our structure, our business and this offering.
Q:    What is a “RIC”?
A:
A “RIC” is a regulated investment company under Subchapter M of the Code. A RIC generally does not have to pay corporate level federal income taxes on any income or capital gains that it distributes to its stockholders from its taxable earnings and profits. To qualify as a RIC, a company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, in order to obtain RIC tax treatment, a company must distribute to its stockholders, for each taxable year, at least 90% of its “investment company taxable income,” which is generally its net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. See “Material U.S. Federal Income Tax Considerations” for more information regarding RICs.
Q:
What is an “Interval Fund”?
A:
An interval fund is a closed-end investment company registered under the 1940 Act that has adopted a fundamental policy to make periodic offers to repurchase no less than 5% of its shares outstanding.
Q:
Will I be able to liquidate my investment?
A:
In order to provide limited liquidity to its stockholders, we intend to offer to repurchase our outstanding shares on a quarterly basis. As an interval fund we have adopted a fundamental policy to make repurchase offers in each calendar quarter of each year at a price equal to the NAV per share of no less than 5% and no more than 25% of the shares outstanding. We refer to such repurchase as a “Mandatory Repurchase” because we are required to conduct these repurchase offers unless certain limited circumstances occur. There is no guarantee that stockholders will be able to sell all of the shares they desire in a Mandatory Repurchase offer because stockholders, in total, may wish to sell more than the percentage of our shares being repurchased. We intend to maintain liquid securities, cash or access to a bank line of credit in amounts sufficient to meet the quarterly redemption offer requirements.
Q:    Who will choose which investments to make?
A:
All investment decisions will be made by our Adviser. Our Board of Directors, including a majority of independent directors, will oversee and monitor our investment performance. Beginning with the second anniversary of the date of the Investment Advisory Agreement, our Board of Directors will annually review the compensation we pay to our Adviser to determine that the provisions of the Investment Advisory Agreement are carried out.
Q:    What is the experience of our Adviser?
A:
Our investment activities are managed by our Adviser, who oversees the management of our activities and the day-to-day management of our investment operations. Our Adviser is owned 50% by Prospect Capital Management, an asset management firm registered as an investment adviser under the Advisers Act, and 50% by Stratera Holdings, a national sponsor of alternative investment products designed for the individual and institutional investor. Our Adviser’s professionals have significant experience across private lending and private equity investing, including experience advising and managing a business development company through Prospect Capital Management’s management agreement with Prospect Capital Corporation. See “Management” and “Portfolio Management” for more information on the experience of our Adviser’s professionals.
Q:    How does a “best efforts” offering work?
A:
When shares are offered to the public on a “best efforts” basis, the broker-dealers participating in the offering are only required to use their best efforts to sell our shares. Broker-dealers do not have a firm commitment or obligation to purchase any of the shares.
Q:    Will I receive a share certificate?
A:
No. Our Board of Directors has authorized the issuance of our shares without certificates. We expect that we will not issue shares in certificated form, although we may decide to issue certificates at such time, if ever, as we list our shares on a national securities exchange. We anticipate that all of our shares will be issued in book-entry form only. The use of book-entry registration protects against loss, theft or destruction of share certificates and reduces the offering costs. It is possible that at some point in the future, the shares may be eligible for clearance and settlement through a national clearing agency, which is an entity that acts as an intermediary in making payments or deliveries or both in connection

25


with securities transactions and may permit the settlement of securities transactions without the physical delivery of subscription applications.
Q:    How do I purchase shares?
A:
Investors may purchase shares directly from us in accordance with the instructions below. Investors will be assessed fees for returned checks and stop payment orders at prevailing rates charged by DST, our transfer agent. The returned check and stop payment fee is currently $25. Investors may buy and sell our shares through participating broker dealers and their agents that have made arrangements with us and are authorized to buy and sell shares of the Company (collectively, “Participating Broker Dealers”). Orders will be priced at the appropriate price next computed after it is received by a Participating Broker Dealer and accepted by us. A Participating Broker Dealer may hold shares in an omnibus account in the Participating Broker Dealer’s name or the Participating Broker Dealer may maintain individual ownership records. Participating Broker Dealers may charge fees for the services they provide in connection with processing your transaction order or maintaining an investor’s account with them. Investors should check with their Participating Broker Dealer to determine if it is subject to these arrangements. Participating Broker Dealers are responsible for placing orders correctly and promptly with the Company, forwarding payment promptly. The Company will admit investors into the Company and calculate its NAV on a weekly basis.  Orders transmitted with a Participating Broker Dealer at any time during the week and before the close of regular trading (generally 4:00 p.m., Eastern Time) on a Friday that the NYSE is open for business, will be priced based on the Company’s NAV calculated as of the close of trading on that Friday.
Q:    Is there any minimum initial investment required?
A:
Yes. To purchase shares in this offering, you must make an initial purchase of at least $1,000. Once you have satisfied the minimum initial purchase requirement, any additional purchases of our shares in this offering must be in amounts of at least $[100] except for additional purchases pursuant to our distribution reinvestment plan. See “Plan of Distribution.”
Q:    Can I invest through my IRA, Keogh or after-tax deferred account?
A:
Yes. An approved trustee must process and forward to us subscriptions made through IRAs, Keogh plans and 401(k) plans. In the case of investments through IRAs, Keogh plans and 401(k) plans, we will send the confirmation and notice of our acceptance to the trustee. Please be aware that in purchasing shares, custodians or directors of employee pension benefit plans or IRAs may be subject to the fiduciary duties imposed by the Employee Retirement Income Security Act of 1974, or ERISA, or other applicable laws and to the prohibited transaction rules prescribed by ERISA and related provisions of the Code. In addition, prior to purchasing shares, the trustee or custodian of an employee pension benefit plan or an IRA should determine that such an investment would be permissible under the governing instruments of such plan or account and applicable law.
Q:    How will the payment of fees and expenses affect my invested capital?
A:
The payment of fees and expenses will reduce the funds available to us for investments and the income generated by the portfolio as well as funds available for distribution to stockholders. The payment of fees and expenses will also reduce the book value of your shares.
Q:    Will the distributions I receive be taxable?
A:
Cash distributions by us generally are taxable to U.S. stockholders as ordinary income or capital gains. Distributions of our “investment company taxable income” (which is, generally, our net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to U.S. stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional shares. To the extent such distributions paid by us to non-corporate stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, such distributions, or Qualifying Dividends, may be eligible for a current maximum tax rate of 20%. In this regard, it is anticipated that distributions paid by us generally will not be attributable to dividends and, therefore, generally will not qualify for the current 20% maximum rate applicable to Qualifying Dividends. Distributions in excess of our earnings and profits first will represent a return of capital and reduce a U.S. stockholder’s adjusted tax basis in such stockholder’s shares and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S. stockholder. Special share distributions that we pay ratably to all investors from time to time, if any, may represent a return of capital. While a return of capital is not immediately taxable, it reduces your tax basis in our shares, which may result in higher taxes for you even if your shares are sold at a price below your original investment.

26


Q:    When will I get my detailed tax information?
A:
We (or the applicable withholding agent) will send to each of our U.S. stockholders, as promptly as possible after the end of each calendar year, a notice reporting the amounts to be included in such U.S. stockholder’s taxable income for such year as ordinary income and as long-term capital gain.
Q:    Will I be notified on how my investment is doing?
A:
Following the effectiveness of the registration statement, of which this prospectus forms a part, we will be required to file periodic reports, proxy statements and other information with the SEC. This information will be available at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549 and on the SEC’s website at www.sec.gov. The public may obtain information on the operation of the SEC’s public reference room by calling the SEC at 1-800-SEC-0330. This information will also be available free of charge by contacting us at 10 East 40th Street, 42nd Floor, New York, New York, 10016, or by telephone at (212) 448-0702 or on our website at [www.pathway-energyfund.com]. These reports should not be considered a part of or as incorporated by reference in this prospectus, or the registration statement of which this prospectus is a part. Our net asset value disclosed in the financial statements included in the reports filed with the SEC should not be considered an indication of the price at which our shares would trade if there was a market for such shares.
Q:    Will I be able to sell my shares in a secondary market?
A:
Our shares are not currently listed on an exchange, and we do not expect a public trading market to develop for them in the foreseeable future, if ever. Because of the lack of a trading market for our shares, holders of shares may not be able to sell their shares promptly or at a desired price. If you are able to sell your shares, you may have to sell them at a discount to the purchase price of your shares.
Q:    Are there any restrictions on the transfer of shares?
A:
No. Shares will have no preemptive, exchange, conversion or redemption rights and will be freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. However, our shares are not listed on an exchange, and we do not expect a public trading market to develop for them in the foreseeable future, if ever. We intend to institute a share repurchase program, but we will limit the number of shares that we will offer to repurchase. As a result, your ability to sell your shares will be limited and you may not receive a full return of invested capital upon selling your shares. We will not charge for transfers of our shares except for necessary and reasonable costs actually incurred by us. See “Risk Factors—Risks Related to an Investment in Our Shares.”
Q:    Who can help answer my questions?
A:
If you have more questions about the offering or if you would like additional copies of this prospectus, you should contact your registered representative or the dealer manager at:
Provasi Capital Partners LP
14675 Dallas Parkway, Suite 600
Dallas, Texas, 75244
(866) 655-3650

27


RISK FACTORS
Investing in our shares involves a number of significant risks. In addition to the other information contained elsewhere in this prospectus, you should consider carefully the following information before making an investment in our shares. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, the net asset value of our shares could decline, and you may lose all or part of your investment.
Risks Related to Our Business and Structure
We have limited operating history.
We were formed in February 2013 and commenced investment operations on August 25, 2015 upon satisfying our minimum offering requirement by selling over $3.25 million of our shares, at least $2.5 million of which was from persons who are not affiliated with us or our Adviser. We have limited operating history and are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of our shares could decline substantially.
Our Board of Directors may change our investment strategy by providing our stockholders with 60 days prior written notice, or may modify or waive our current operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
Our investment objective is to generate current income and, as a secondary objective, long-term capital appreciation. We expect to seek to achieve our investment objective by investing, under normal circumstances, at least 50% of our total assets, that is net assets plus borrowings, in securities of Infrastructure companies. This investment strategy may be changed by our Board of Directors if we provide our stockholders with at least 60 days prior written notice and make a corresponding change to our name. In addition, our Board of Directors has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our investment strategy, current operating policies, investment criteria and strategies would have on our business, net asset value, operating results or the value of our shares. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose all or part of your investment. Moreover, we will have significant flexibility in investing the net proceeds of this offering and may use the net proceeds from our public offering in ways with which investors may not agree or for purposes other than those contemplated at the time of our public offering. Finally, since our shares are not listed on a national securities exchange, you will be limited in your ability to sell your shares in response to any changes in our investment strategy, operating policies, investment criteria or strategies.
The SEC’s position on certain non-traditional investments, including investments in CLOs is under review.
The staff of the SEC has undertaken a broad review of the potential risks associated with different asset management activities, focusing on, among other things, liquidity risk and risk from leverage. The staff of the Division of Investment Management has, in correspondence with registered management investment companies, raised questions about the level and special risks of investments in CLOs. While it is not possible to predict what conclusions the staff will reach in these areas, or what recommendations the staff might make to the SEC, the imposition of limitations on investments by registered management investment companies in CLOs could adversely impact our ability to implement our investment strategy and/or our ability to raise capital through public offerings, or cause us to take certain actions with potential negative impacts on our financial condition and results of operations. We are unable at this time to assess the likelihood or timing of any such regulatory development.
Capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations.
The U.S. and global capital markets experienced extreme volatility and disruption during the economic downturn that began in mid-2007, and the U.S. economy was in a recession for several consecutive calendar quarters during the same period. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt, which created concerns about the ability of certain nations to continue to service their sovereign debt obligations. Risks resulting from such debt crisis and any future debt crisis in Europe or any similar crisis elsewhere could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in certain countries and the financial condition of financial institutions generally. In July and August 2015, Greece reached agreements with its creditors for bailouts that provide aid in exchange for certain austerity measures. These and similar austerity measures may adversely affect world economic conditions and have an adverse impact on our business and that of our portfolio companies. In the second quarter of 2015, stock prices in China experienced a significant drop, resulting primarily from continued sell-off of shares trading in Chinese markets. In August 2015, Chinese authorities sharply devalued China’s currency. In addition, the referendum by British voters to exit the European Union in June 2016 has led to further disruption and instability in the global markets and the full extent of its

28


impact remains uncertain. These market conditions have historically and could again have a material adverse effect on debt and equity capital markets in the United States and Europe, which could have a materially negative impact on our business, financial condition and results of operations. We and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. In such circumstances, equity capital may be difficult to raise because subject to some limited exceptions, as a closed end fund, we are generally not able to issue additional shares of our common stock at a price less than net asset value without general approval by our stockholders and approval of the specific issuance by our Board of Directors. In addition, our ability to incur indebtedness or issue preferred stock is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 300% immediately after each time we incur indebtedness or at least 200% immediately after each time we issue preferred stock. The debt capital that may be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.
Given the extreme volatility and dislocation that the capital markets have historically experienced, many closed end funds have faced, and may in the future face, a challenging environment in which to raise capital. We may in the future have difficulty accessing debt and equity capital, and a severe disruption in the global financial markets or deterioration in credit and financing conditions could have a material adverse effect on our business, financial condition and results of operations. In addition, significant changes in the capital markets, including the extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations. The Adviser does not know how long the financial markets will continue to be affected by these events and cannot predict the effects of these or similar events in the future on the United States economy and securities markets or on our investments. The Adviser monitors developments and seeks to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that it will be successful in doing so; and the Adviser may not timely anticipate or manage existing, new or additional risks, contingencies or developments, including regulatory developments in the current or future market environment.
We are required to record certain of our assets at fair value, as determined in good faith by our Board of Directors in accordance with our valuation policy. As a result, volatility in the capital markets may have a material adverse effect on our investment valuations and our net asset value, even if we plan to hold investments to maturity.
The downgrade of the U.S. credit rating and economic crisis in Europe could negatively impact our business, financial condition and earnings.
Although U.S. lawmakers passed legislation to raise the federal debt ceiling and Standard & Poor's Ratings Services affirmed its 'AA+' long-term sovereign credit rating on the United States and revised the outlook on the long-term rating from negative to stable in June of 2013, U.S. debt ceiling and budget deficit concerns together with signs of deteriorating sovereign debt conditions in Europe continue to present the possibility of a credit-rating downgrade, economic slowdowns, or a recession for the United States. The impact of any further downgrades to the U.S. government's sovereign credit rating or downgraded sovereign credit ratings of European countries or the Russian Federation, or their perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. These developments, along with any further European sovereign debt issues, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. Continued adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.
In October 2014, the Federal Reserve announced that it was concluding its bond-buying program. It is unknown what effect, if any, the conclusion of this program will have on credit markets and the value of our investments. These and any future developments and reactions of the credit markets toward these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to obtain debt financing on favorable terms. Additionally, in January 2015, the Federal Reserve reaffirmed its view that the current target range for the federal funds rate was appropriate based on current economic conditions. However, if key economic indicators, such as the unemployment rate or inflation, do not progress at a rate consistent with the Federal Reserve’s objectives, the target range for the federal funds rate may increase and cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.
Rising interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations.
Our debt investments may be based on floating rates, such as London Interbank Offer Rate ("LIBOR"), EURIBOR, the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net investment income. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could

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increase our interest expense, thereby decreasing our net investment income. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.
Because we have borrowed money, and may issue preferred stock to finance investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds or pay distributions on preferred stock and the rate that our investments yield. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase except to the extent we have issued fixed rate debt or preferred stock, which could reduce our net investment income.
You should also be aware that a change in the general level of interest rates can be expected to lead to a change in the interest rate we receive on many of our debt investments. Accordingly, a change in the interest rate could make it easier for us to meet or exceed the performance threshold and may result in a substantial increase in the amount of incentive fees payable to our Adviser with respect to the portion of the Incentive Fee based on income.
Changes relating to the LIBOR calculation process may adversely affect the value of our portfolio of LIBOR-indexed, floating-rate debt securities.
In the recent past, concerns have been publicized that some of the member banks surveyed by the British Bankers' Association ("BBA") in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.
Actions by the BBA, regulators or law enforcement agencies as a result of these or future events, may result in changes to the manner in which LIBOR is determined. Potential changes, or uncertainty related to such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities.
Volatility in the global financial markets resulting from relapse of the Eurozone crisis, geopolitical developments in Eastern Europe, turbulence in the Chinese stock markets and global commodity markets or otherwise could have a material adverse effect on our business, financial condition and results of operations.
Volatility in the global financial markets could have an adverse effect on the economic recovery in the United States and could result from a number of causes, including a relapse in the Eurozone crisis, geopolitical developments in Eastern Europe, turbulence in the Chinese stock markets and global commodity markets or otherwise. The effects of the Eurozone crisis, which began in late 2009 as part of the global economic and financial crisis, continued to impact the global financial markets through 2015. Numerous factors continued to fuel the Eurozone crisis, including continued high levels of government debt, the undercapitalization and liquidity problems of many banks in the Eurozone and relatively low levels of economic growth. These factors made it difficult or impossible for some countries in the Eurozone, including Greece, Ireland and Portugal, to repay or refinance their debt without the assistance of third parties. As a combination of austerity programs, debt write-downs and the European Central Bank’s commitment to restore financial stability to the Eurozone and the finalization of the primary European Stability Mechanism bailout fund, in 2013 and into 2014 interest rates began to fall and stock prices began to increase. Although these trends helped to stabilize the effects of the Eurozone crisis in the first half of 2014, the underlying causes of the crisis were not completely eliminated. As a result, the financial markets relapsed toward the end of 2014. In particular, Greece’s newly elected government, which campaigned against austerity measures, has been unable to reach an acceptable solution to the country’s debt crisis with the European Union, and in June 2015, Greece failed to make a scheduled debt repayment to the International Monetary Fund, falling into arrears. Following further unsuccessful negotiations between the government of Greece and the European Union to solve the Greek debt crisis, on July 5, 2015, Greek voters rejected a bailout package submitted by the European Commission, the European Central Bank and the International Monetary Fund, and while the European Central Bank continues to extend credit to Greece, it is uncertain how long such support will last, whether Greece will receive and accept any future bailout packages and whether Greece will default on future payments. The result of continued defaults and the removal of credit support for Greek banks may cause Greece to exit the European Union, which could lead to significant economic uncertainty and abandonment of the Euro common currency, resulting in destabilization in the financial markets. Continued financial instability in Greece and in other similarly situated Eurozone countries could have a continued contagion effect on the financial markets. Stock prices in China have experienced a significant drop in the second quarter of 2015, resulting primarily from continued sell-off of shares trading in Chinese markets. The volatility has been followed by volatility in stock markets around the world, including in the United States, as well as increased turbulence in

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commodity markets, such as reductions in prices of crude oil. Although the Chinese government has already taken steps to halt the collapse, it is uncertain what effect such measures will have, if any. Continued sell-off and price drops in the Chinese stock markets may have a contagion effect across the financial markets. In addition, Russian intervention in Ukraine during 2014 significantly increased regional geopolitical tensions. In response to Russian actions, U.S. and European governments have imposed sanctions on a limited number of Russian individuals and business entities. The situation remains fluid with potential for further escalation of geopolitical tensions, increased severity of sanctions against Russian interests, and possible Russian counter-measures. Further economic sanctions could destabilize the economic environment and result in increased volatility. Should the economic recovery in the United States be adversely impacted by increased volatility in the global financial markets caused by continued contagion from the Eurozone crisis, developments in respect of the Russian sanctions, further turbulence in Chinese stock markets and global commodity markets or for any other reason, loan and asset growth and liquidity conditions at U.S. financial institutions, including us, may deteriorate.
Our ability to achieve our investment objective depends on our Adviser’s ability to manage and support our investment process. If our Adviser were to lose access to its professionals, our ability to achieve our investment objective could be significantly harmed.
Since we have no employees, we will depend on the investment expertise, skill and network of business contacts of our Adviser. Our Adviser will evaluate, negotiate, structure, execute, monitor and service our investments. Our future success will depend to a significant extent on the continued service and coordination of the professionals of our Adviser. The departure of any of our Adviser’s professionals could have a material adverse effect on our ability to achieve our investment objective.
Our ability to achieve our investment objective depends on our Adviser’s ability to identify, analyze, invest in, finance and monitor companies and investments that meet our investment criteria. Our Adviser’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve our investment objective, our Adviser may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process. Our Adviser may not be able to find investment professionals in a timely manner or at all. Failure to support our investment process could have a material adverse effect on our business, financial condition and results of operations.
Both the Investment Advisory Agreement and Administration Agreement have termination provisions that allow the parties to terminate the agreements without penalty. For example, the Investment Advisory Agreement may be terminated at any time, without penalty, by our Adviser upon 60 days’ notice to us. If either agreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event such agreements are terminated, it may be difficult for us to replace our Adviser or Prospect Administration.
Because our business model depends to a significant extent upon relationships with investment banks, commercial banks and private equity sponsors, the inability of our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
We expect that our Adviser will depend on its relationships with investment banks, commercial banks and private equity sponsors, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our Adviser fails to maintain its existing relationships or develop new relationships with other sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom our Adviser have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.
We may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses.
We compete for investments with other investment companies and investment funds (including private equity funds, mezzanine funds and CLOs), as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, invest in small to mid-sized U.S. companies in the energy and related infrastructure and industrial sectors. As a result of these new entrants, competition for investment opportunities in our targeted investments may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in small and mid-sized U.S. companies in the energy and related infrastructure and industrial sectors is

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underserved by financing sources generally. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act will impose on us as a registered closed-end management investment company.
A significant portion of our investment portfolio will be recorded at fair value as determined in good faith pursuant to our valuation procedures and, as a result, there will be uncertainty as to the value of our investments.
Under the 1940 Act, we are required to carry our investments at market value or, if there is no readily available market value, at fair value as determined pursuant to our valuation procedures. Typically, there will not be a public market for the investments that we intend to make. Many of our investments, and particularly our investments in the equity and junior debt tranches of CLOs, will not be publicly traded or actively traded on a secondary market but, instead, will be traded on a privately negotiated over-the-counter secondary market for institutional investors. As a result, we will value these securities at fair value as determined in good faith pursuant to our valuation procedures. Certain factors that may be considered in determining the fair value of our investments include dealer quotes for securities traded on the secondary market for institutional investors, the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors and estimates of the value of securities in which we invest, which will be supplied, directly or indirectly, by banks, other market counterparties or pricing systems or estimates approved for such purpose by our Board of Directors. Such estimates may be unaudited or may be subject to little verification or other due diligence and may not comply with generally accepted accounting practices or other valuation principles. In addition, these entities may not provide estimates of the value of the securities in which we invest on a regular or timely basis or at all with the result that the values of such investments may be estimated by our Adviser on the basis of information available at the time. Because such valuations, and particularly valuations of private securities, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these non-traded securities existed or if we tried to sell our investments. Due to this uncertainty, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments.
There is a risk that investors in our shares may not receive distributions and that our distributions may not grow over time.
We intend to make distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage test applicable to us as a registered closed-end management investment company, we may be limited in our ability to make distributions. See “Regulation—Senior Securities” in the SAI. Our distributions to stockholders may be funded from the reimbursement of certain expenses, including through the waiver of certain investment advisory fees, and additional support payments that are subject to repayment to our Adviser if certain conditions are met. Our distributions may not be based on our investment performance and may not continue in the future. The reimbursement of these payments to our Adviser (if any such reimbursements are made) would reduce the future distributions to which you would otherwise be entitled. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at all.
The amount of any distributions we may make is uncertain. Our distribution proceeds may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from our public offering. Therefore, portions of the distributions that we make may be a return of the money that you originally invested and represent a return of capital to you for tax purposes.
We intend, subject to change by our Board of Directors, to declare distributions on a quarterly basis and pay distributions on a monthly basis. We will pay these distributions to our stockholders out of assets legally available for distribution. While our Adviser may agree to limit our expenses to ensure that such expenses are reasonable in relation to our income, we cannot assure you that we will achieve investment results that will allow us to make a targeted level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this prospectus. In addition, the inability to satisfy the asset coverage test applicable to us as an investment company may limit our ability to pay distributions. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable investment company regulations and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of our public offering or from borrowings in anticipation of future cash flow, which may constitute a return of your capital. Such a return of capital is not immediately taxable, but reduces your tax basis in our shares, which may result in you recognizing more gain (or less loss) when your shares are sold. Distributions from the proceeds of our public offering or from borrowings also could reduce the amount of capital we ultimately invest in our investments.

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If we internalize our management and administrative functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed.
Our Board of Directors may decide in the future to internalize our management and administrative functions. If we do so, we may elect to negotiate to acquire certain assets and personnel of our Adviser, Prospect Capital Management, Prospect Administration or Stratera Holdings. At this time, we cannot anticipate the form or amount of consideration or other terms relating to any such acquisition. Such consideration could take many forms, including cash payments, promissory notes and our shares. The payment of such consideration could result in dilution of your interests as a stockholder and could reduce the earnings per share attributable to your investment.
In addition, while we would no longer bear the costs of the various fees and expenses we expect to pay to our Adviser, Prospect Administration and a subsidiary of Stratera Holdings under the Investment Advisory Agreement, Administration Agreement and Investor Services Agreement, respectively, we would incur the compensation and benefits costs of our officers and other employees and consultants that are now being paid by our Adviser or its affiliates. In addition, we may issue equity awards to officers, employees and consultants. These awards would decrease net income and may further dilute your investment. We cannot reasonably estimate the amount of fees we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our Adviser, our earnings per share would be lower as a result of the internalization than it otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares. As we are currently organized, we will not have any employees. If we elect to internalize our operations, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims and other employee-related liabilities and grievances.
If we internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity. Currently, individuals employed by Prospect Capital Management, Prospect Administration, Stratera Holdings and their affiliates perform asset management and general and administrative functions, including accounting and financial reporting, for multiple entities. These personnel have a great deal of know-how and experience. We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. An inability to manage an internalization transaction effectively could thus result in our incurring excess costs and/or suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from effectively managing our investments.
Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with such regulations may adversely affect us.
We are subject to the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC. We will be required to periodically review our internal control over financial reporting, and evaluate and disclose changes in our internal controls over financial reporting. As a newly-formed company, developing an effective system of internal controls may require significant expenditures, which may negatively impact our financial performance and our ability to make distributions. This process will also result in a diversion of management’s time and attention. We cannot be certain as to the timing of the completion of our evaluation, testing and remediation actions or the impact of the same on our operations and we may not be able to ensure that the process is effective or that our internal controls over financial reporting are or will be effective in a timely manner. In the event that we are unable to develop or maintain an effective system of internal controls and maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.
Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We, our portfolio companies, and our investments will be subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect.
Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities. Such changes could result in material differences to our strategies and plans as set forth in this prospectus and may result in our investment focus shifting from the areas of expertise of our Adviser to other types of investments in which our Adviser may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.
Changes in the laws or regulations or the interpretations of the laws and regulations that govern registered closed-end management investment companies, RICs or non-depository commercial lenders could significantly affect our operations and our cost of doing business. Our portfolio companies are subject to federal, state and local laws and regulations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, any of which could materially adversely affect

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our business, including with respect to the types of investments we are permitted to make, and your interest as a stockholder potentially with retroactive effect. In addition, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter its investment strategy in order to avail ourselves of new or different opportunities. These changes could result in material changes to the strategies and plans set forth in this prospectus and may result in our investment focus shifting from the areas of expertise of our Adviser to other types of investments in which our Adviser may have less expertise or little or no experience. Any such changes, if they occur, could have a material adverse effect on our business, results of operations and financial condition and, consequently, the value of your investment in us.
On July 21, 2010, the Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, was signed into law. Although passage of the Dodd-Frank Act has resulted in extensive rulemaking and regulatory changes that affect us and the financial industry as a whole, many of its provisions remain subject to extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities. While the full impact of the Dodd-Frank Act on us and our portfolio investments may not be known for an extended period of time, the Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry or affecting taxation that are proposed or pending in the U.S. Congress, may negatively impact our or our portfolio investments’ cash flows or financial condition, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio investments or otherwise adversely affect our business or our portfolio investments.
Over the last several years, there has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether these regulations will be implemented or what form they will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.
We may experience fluctuations in our quarterly results.
We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments that meet our investment criteria, the yield earned or interest rate payable on the securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.
We may be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence.
We are classified as “non-diversified” under the 1940 Act. As a result, we can invest a greater portion of our assets in obligations of a single issuer than a “diversified” fund. We may therefore be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence. We intend to qualify as a RIC under Subchapter M of the Code, and thus we intend to satisfy the diversification requirements of Subchapter M, including its less stringent diversification requirements that apply to the percentage of our total assets that are represented by cash and cash items (including receivables), U.S. government securities, the securities of other regulated investment companies and certain other securities.
Regulations governing our operation as a registered closed-end management investment company affect our ability to raise additional capital and the way in which we do so. As a registered closed-end management investment company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.
We may in the future issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a registered closed-end management investment company, to issue senior securities representing indebtedness so long as our asset coverage ratio with respect thereto, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities representing indebtedness, is at least 300% after each issuance of such senior securities. In addition, we will be permitted to issue additional shares of preferred stock so long as our asset coverage ratio with respect thereto, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities representing indebtedness, plus the aggregate involuntary liquidation preference of our outstanding preferred stock, is at least 200% after each issuance of such preferred stock. If the value of our assets declines, we may be unable to satisfy these tests. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness or redeem outstanding shares of preferred stock, in each case at a time when doing so may be disadvantageous. Also, any amounts that we use to service our indebtedness or preferred dividends would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior

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securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of shares of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.
We will not generally be able to issue and sell our shares at a price below net asset value per share. We may, however, sell our shares at a price below the then-current net asset value per share if our Board of Directors determines that such sale is in the best interests of us and our stockholders, and our common stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more shares, then the percentage ownership of our stockholders at that time will decrease, and you may experience dilution.
Our ability to enter into transactions with our affiliates will be restricted.
We will be prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and we will generally be prohibited from buying or selling any securities from or to such affiliate. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or its affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any portfolio company of an investment fund managed by our Adviser or its affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
We are uncertain of our sources for funding our future capital needs; if we cannot obtain equity or debt financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.
The net proceeds from the sale of shares will be used for our investment opportunities, operating expenses and for payment of various fees and expenses such as base management fees, incentive fees and other fees. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to broaden our portfolio and achieve our investment objective, which may negatively impact our results of operations and reduce our ability to make distributions to our stockholders.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and our ability to continue the offering.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm (when undertaken, as noted below), may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors and lenders to lose confidence in our reported financial information, which could have a negative effect on our ability to continue the offering.
We face cyber-security risks.
Our business operations rely upon secure information technology systems for data processing, storage and reporting. Despite careful security and controls design, implementation and updating, our information technology systems could become subject to cyber-attacks. Network, system, application and data breaches could result in operational disruptions or information misappropriation, which could have a material adverse effect on our business, results of operations and financial condition.

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The failure in cyber-security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
The occurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.
We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.
We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.
Our business is dependent on our and third parties' communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:
sudden electrical or telecommunications outages;
natural disasters such as earthquakes, tornadoes and hurricanes;
disease pandemics;
events arising from local or larger scale political or social matters, including terrorist acts; and
cyber-attacks.
These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.
Risks Related to an Investment in Our Shares
This is a “best efforts” offering, and if we are unable to raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us may be reduced in the event our assets under-perform.
This offering is being made on a best efforts basis, whereby the dealer manager and broker-dealers participating in the offering are only required to use their best efforts to sell our shares and have no firm commitment or obligation to purchase any of the shares. Even though we have satisfied the minimum size of our offering necessary for us to release funds from the escrow account and utilized additional subscription funds, such amounts will not be sufficient for us to purchase a relatively diversified portfolio of investments. If we are not able to raise additional funds, the opportunity to make a broad range of investments may be decreased and the returns achieved on those investments may be reduced as a result of allocating all of our expenses among a smaller capital base.
The shares sold in this offering will not be listed on an exchange or quoted through a quotation system for the foreseeable future, if ever. Therefore, if you purchase shares in this offering, you will have limited liquidity and may not receive a full return of your invested capital if you sell your shares.
We are a closed-end investment management company and designed for long-term investors. Unlike many closed-end funds, our shares are not listed on any securities exchange and are not publicly traded, and does not currently intend to list its shares on any securities exchange. There is currently no secondary market for the shares and we expect that no secondary market will develop. Therefore, shareholders should expect that they will be unable to sell their shares for an indefinite time or at a desired price. Limited liquidity is provided to shareholders only through Mandatory Repurchases. There is no guarantee that shareholders will be able to sell all of the shares they desire in either a Mandatory Repurchase. Our share repurchases may provide a limited opportunity for shareholders to have their shares repurchased, subject to certain restrictions and limitations, at

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a price which may reflect a discount from the purchase price the shareholder paid for the shares being repurchased. See “Repurchases of Shares” for detailed description of our Mandatory Repurchases.
The shares offered by us are illiquid assets for which there is not expected to be any secondary market nor is it expected that any will develop in the foreseeable future, if ever. In addition, although we will conduct quarterly repurchase offers of our shares (four Mandatory Repurchases each year), there is no guarantee that all tendered shares will be accepted for repurchase or that stockholders will be able to sell all of the shares they desire in a quarterly repurchase offer. In certain instances, repurchase offers may be suspended or postponed. See “Share Repurchase Program” for a detailed description of our share repurchase program. Also, if you invest through a fee-based program, also known as a wrap account, of an investment dealer, your liquidity may be further restricted by the terms and conditions of such program, which may limit your ability to request the repurchase of your shares that are held in such account. However, the completion of a liquidity event is in the sole discretion of our Board of Directors, and depending upon the event, may require shareholder approval, and there can be no assurance that we will complete a liquidity event within our proposed timeframe or at all.
In making the decision to apply for listing of our shares, our directors will try to determine whether listing our shares or liquidating our assets will result in greater value for our stockholders. In making a determination of what type of liquidity event is in the best interest of our stockholders, our Board of Directors, including our independent directors, may consider a variety of criteria, including, but not limited to, market conditions, portfolio diversification, portfolio performance, our financial condition, potential access to capital as a listed company, market conditions for the sale of our assets or listing of our shares, and the potential for stockholder liquidity. If our shares are listed, we cannot assure you that a public trading market will develop.
We are not obligated to complete a liquidity event; therefore, it may be difficult or impossible for an investor to sell his or her shares.
Our securities are not currently listed on any securities exchange, and we do not expect a public market for them to develop in the foreseeable future, if ever. Therefore, stockholders should not expect to be able to sell their shares promptly or at a desired price. No stockholder will have the right to require us to repurchase his or her shares or any portion thereof. Because no public market will exist for our shares, and none is expected to develop, stockholders will not be able to liquidate their investment prior to our liquidation or other liquidity event, other than through our share repurchase program, or, in limited circumstances, as a result of transfers of shares to other investors. Stockholders that are unable to sell their shares will be unable to reduce their exposure on any market downturn.
The dealer manager in our continuous offering has limited experience selling shares on behalf of an interval fund and may be unable to sell a sufficient number shares for us to achieve our investment objective.
The dealer manager for our public offering is Provasi Capital Partners LP. Although certain personnel of our dealer manager have experience selling shares on behalf of a registered closed-end management investment company, our dealer manager has limited such experience. There is no assurance that it will be able to sell a sufficient number of shares to allow us to have adequate funds to purchase a relatively broad portfolio of investments and generate income sufficient to cover our expenses. As a result, we may be unable to achieve our investment objective, and you could lose some or all of the value of your investment.
Because the dealer manager is an affiliate of our Adviser, you will not have the benefit of an independent due diligence review of us, which is customarily performed in firm commitment underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.
The dealer manager, Provasi Capital Partners LP, is an affiliate of our Adviser. As a result, its due diligence review and investigation of us and this prospectus cannot be considered to be an independent review. Therefore, you do not have the benefit of an independent review and investigation of this offering of the type normally performed by an unaffiliated, independent underwriter in a firm commitment underwritten public securities offering. This inherent conflict increases the risks and uncertainty you face as a stockholder.
Our ability to successfully conduct our continuous offering is dependent, in part, on the ability of the dealer manager to successfully establish, operate and maintain a network of broker-dealers.
The success of our public offering, and correspondingly our ability to implement our business strategy, is dependent upon the ability of the dealer manager to establish and maintain a network of licensed securities broker-dealers and other agents to sell our shares. If the dealer manager fails to perform, we may not be able to raise adequate proceeds through our public offering to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, you could lose all or a part of your investment.

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Our repurchase policy may subject us to additional risks.
Repurchases of shares will reduce the amount of outstanding shares and, thus, our net assets. To the extent that additional shares are not sold, a reduction in our net assets may increase our expense ratio (subject to the Adviser’s reimbursement of expenses) and limit our investment opportunities.
If a repurchase offer is oversubscribed by stockholders, we will repurchase only a pro rata portion of the shares tendered by each stockholder. In addition, because of the potential for such proration, stockholders may tender more shares than they may wish to have repurchased in order to ensure the repurchase of a specific number of their shares, increasing the likelihood that other stockholders may be unable to liquidate all or a given percentage of their investment in the Company. To the extent stockholders have the ability to sell their shares to the Company pursuant to a repurchase offer, the price at which a stockholder may sell shares, which will be the NAV per share most recently determined as of the last day of the offer, may be lower than the price that such stockholder paid for its shares.
From the time we send a notification of a quarterly repurchase until the repurchase date, we will be required to hold assets equal to at least 100% of the repurchase offer amount in assets that can be sold or disposed of in the ordinary course of business. We may find it necessary to hold a portion of our net assets in cash or other liquid assets, sell a portion of our portfolio investments or borrow money in order to finance any repurchases of our shares. We may accumulate cash by holding back (i.e., not reinvesting or distributing to stockholders) payments received in connection with our investments, which could potentially limit our ability to generate income. We also may be required to sell our more liquid, higher quality portfolio investments to purchase shares that are tendered, which may increase risks for remaining stockholders and increase our expenses. Although most, if not all, of our investments are expected to be illiquid and the secondary market for such investments is likely to be limited, we believe we would be able to find willing purchasers of our investments if such sales were ever necessary to supplement such cash generated by payments received in connection with our investments. However, we may be required to sell such investments during times and at prices when we otherwise would not, which may cause us to lose money. We may also borrow money in order to meet our repurchase obligations. There can be no assurance that we will be able to obtain financing for our repurchase offers. If we borrow to finance repurchases, interest on any such borrowings will negatively affect Stockholders who do not tender their shares in a repurchase offer by increasing our expenses (subject to the Adviser’s reimbursement of expenses) and reducing any net investment income. The purchase of shares by the Company in a repurchase offer may limit our ability to participate in new investment opportunities.
In the event a stockholder chooses to participate in a repurchase offer, the stockholder will be required to provide us with notice of intent to participate prior to knowing what the repurchase price will be on the repurchase date. Although the stockholder may have the ability to withdraw a repurchase request prior to the repurchase date, to the extent the stockholder seeks to sell shares to us as part of a repurchase offer, the stockholder will be required to do so without knowledge of what the repurchase price of the shares will be on the repurchase date. It is possible that general economic and market conditions could cause a decline in the NAV per share prior to the repurchase date. See “Share Repurchase Program” below for additional information on, and the risks associated with, our repurchase policy.
The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our stockholders.
When we make quarterly repurchase offers pursuant to the share repurchase program, we may offer to repurchase shares at a price that is lower than the price that investors paid for shares in our offering. As a result, to the extent investors have the ability to sell their shares to us as part of our share repurchase program, the price at which an investor may sell shares, which will be equal to the net asset value per share of our common stock as of the date of repurchase, may be lower than what an investor paid in connection with the purchase of shares in our offering.
In addition, in the event an investor chooses to participate in our share repurchase program, the investor will be required to provide us with notice of intent to participate prior to knowing what the net asset value per share will be on the repurchase date. Although an investor will have the ability to withdraw a repurchase request prior to the repurchase date, to the extent an investor seeks to sell shares to us as part of our periodic share repurchase program, the investor will be required to do so without knowledge of what the repurchase price of our shares will be on the repurchase date.
We may be unable to invest a significant portion of the net proceeds of our offering on acceptable terms in an acceptable timeframe.
Delays in investing the net proceeds of our offering may impair our performance. We cannot assure you that we will be able to identify any investments that meet our investment objective or that any investment that we make will produce a positive return. We may be unable to invest the net proceeds of our offering on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.

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Before making investments, we will invest the net proceeds of our public offering primarily in cash, cash equivalents, U.S. government securities, money market funds, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, which may produce returns that are significantly lower than the returns which we expect to achieve when our portfolio is fully invested in securities meeting our investment objective. As a result, any distributions that we pay while our portfolio is not fully invested in securities meeting our investment objective may be lower than the distributions that we may be able to pay when our portfolio is fully invested in securities meeting our investment objective.
Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
Potential investors will not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 200,000,000 shares. Pursuant to our charter, a majority of our entire Board of Directors may amend our charter to increase the number of authorized shares without stockholder approval. After an investor purchases shares, our Board of Directors may elect to sell additional shares in the future, issue equity interests in private offerings or issue share-based awards to our independent directors or investment personnel of our Adviser. To the extent we issue additional equity interests after an investor purchases our shares, an investor’s percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.
Certain provisions of our charter and bylaws could deter takeover attempts and have an adverse impact on the value of our shares.
Our charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Our charter provides that a director may be removed only for “cause,” as defined in our charter, and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.
Under our charter, certain charter amendments and certain transactions such as a merger, conversion of the Company to an open-end company, liquidation, or other transactions that may result in a change of control of us, must be approved by stockholders entitled to cast at least 80 percent of the votes entitled to be cast on such matter, unless the matter has been approved by at least two-thirds of our “continuing directors,” as defined in our charter. Additionally, our Board of Directors may, without stockholder action, authorize the issuance of shares in one or more classes or series, including preferred shares; and our Board of Directors may, without stockholder action, amend our charter to increase the number of our shares of any class or series that we have authority to issue. These and other takeover defense provisions may inhibit a change of control in circumstances that could give the holders of our shares the opportunity to realize a premium over the value of our shares.
We entered into a royalty-free license to use the name “[Pathway Capital Opportunity Fund, Inc.]” which may be terminated if our Adviser is no longer our investment adviser.
We entered into a royalty-free license agreement with our Adviser. Under this agreement, our Adviser has granted us a non-exclusive license to use the name “[Pathway Capital Opportunity Fund, Inc.]” Under the license agreement, we will have the right to use the “[Pathway Capital Opportunity Fund, Inc.]” name for so long as our Adviser remains our investment adviser.
Risks Related to Our Adviser and Its Affiliates
Our Adviser has no prior entity experience managing a registered closed-end management investment company or a regulated investment company, or RIC.
While our Adviser’s management team consists of personnel from the investment and operations team of Prospect Capital Management, the investment adviser to Prospect Capital Corporation, and of Prospect Administration, and members of the management team have significant experience investing in Infrastructure companies, our Adviser is a new entity and has no prior entity experience managing a registered closed-end management investment company or a RIC and has no prior entity experience investing in Infrastructure companies. Therefore, our Adviser may not be able to successfully operate our business or achieve our investment objective. As a result, an investment in our shares may entail more risk than the shares of a comparable company with a substantial operating history.
The 1940 Act and the Code impose numerous constraints on the operations of registered closed-end management investment companies and RICs that do not apply to the other types of investment vehicles. Moreover, qualification for RIC tax treatment under subchapter M of the Code requires satisfaction of source-of-income, diversification and other requirements. The failure to comply with these provisions in a timely manner could prevent us from qualifying as a RIC or could force us to pay unexpected taxes and penalties, which could be material. Our Adviser has no experience managing a registered closed-end management investment company or RIC. Its lack of experience in managing a portfolio of assets under such constraints may

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hinder our Adviser’s ability to take advantage of attractive investment opportunities and, as a result, achieve our investment objective.
Our Adviser and its affiliates, including our officers and some of our directors, will face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our stockholders.
Our Adviser and its affiliates will receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. Among other matters, the compensation arrangements could affect their judgment with respect to public offerings of equity by us, which allow the dealer manager to earn additional dealer manager fees and our Adviser to earn increased asset management fees. In addition, if we decide to utilize leverage, it will increase our assets and, as a result, will increase the amount of management fees payable to our Adviser.
We may be obligated to pay our Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
Our Investment Advisory Agreement entitles our Adviser to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
Any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If an investment defaults and was structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the subordinated incentive fee will become uncollectible. Our Adviser is not under any obligation to reimburse us for any part of the subordinated incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying a subordinated incentive fee on income we never received.
Our Adviser’s professionals’ time and resources may be diverted due to obligations they have to other clients.
Our Adviser’s professionals serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by the same personnel. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our stockholders. Our investment objective may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For example, we rely on our Adviser to manage our day-to-day activities and to implement our investment strategy. Our Adviser and certain of its affiliates are currently, and plan in the future to continue to be, involved with activities which are unrelated to us. As a result of these activities, our Adviser, its personnel and certain of its affiliates will have conflicts of interest in allocating their time and resources between us and other activities in which they are or may become involved, including, but not limited to, the management of Prospect Capital Management, Prospect Capital Corporation, Priority Income Fund and Stratera Holdings’s affiliates. Our Adviser and its personnel will devote only as much of its or their time and resources to our business as our Adviser and its personnel, in their judgment, determine is reasonably required, which may be substantially less than their full time and resources.
Furthermore, our Adviser and its affiliates may have existing business relationships or access to material, non-public information that may prevent it from recommending investment opportunities that would otherwise fit within our investment objective. These activities could be viewed as creating a conflict of interest in that the time, effort and ability of the members of our Adviser and its affiliates and their officers and employees will not be devoted exclusively to our business but will be allocated between us and the management of the monies of other advisees of our Adviser and its affiliates.
We may face additional competition due to the fact that individuals associated with our Adviser are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.
Our Adviser’s professionals are not prohibited from raising money for and managing another investment entity that makes the same types of investments as those we target. For example, certain professionals of our Adviser are simultaneously providing advisory services to other affiliated entities, including Prospect Capital Management, which serves as the investment adviser to Prospect Capital Corporation, and Priority Senior Secured Income Management, which serves as the investment adviser to Priority Income Fund. Prospect Capital Corporation is a publicly-traded business development company that focuses on generating current income and, to a lesser extent, long-term capital appreciation for stockholders, primarily by making investments in senior secured loans, subordinated debt, unsecured debt, and equity of a diversified portfolio of U.S. companies and collateralized loan obligation, or CLO, debt and equity investments. Priority Income Fund is an externally managed, non-diversified, closed-end management investment company that invests primarily in senior secured loans, via CLO debt and equity investments, of companies whose debt is rated below investment grade or, in limited circumstances, unrated. As a result, the time and resources that our Adviser’s professionals may devote to us may be diverted to another investment entity. In addition, we may compete with any such investment entity for the same investors and investment opportunities. We have

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received the Order from the SEC granting us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by our Adviser or certain affiliates, including Prospect Capital Corporation and Priority Income Fund. We may only co-invest with certain entities affiliated with our Adviser in negotiated transactions originated by our Adviser or its affiliates in accordance with such Order and existing regulatory guidance. To the extent we are able to make co-investments with our Adviser’s affiliates, these co-investment transactions may give rise to conflicts of interest or perceived conflicts of interest among us and the other participating accounts.
Our incentive fee may induce our Adviser to make speculative investments.
The subordinated incentive fee payable by us to our Adviser may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the subordinated incentive fee payable to our Adviser is determined may encourage it to use leverage to increase the return on our investments. In addition, the fact that our base management fee is payable based upon our average total assets, which would include any borrowings for investment purposes, may encourage our Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of a default, which would adversely affect holders of our common stock. Such a practice could result in our investing in more speculative securities than would otherwise be in our best interests, which could result in higher investment losses, particularly during cyclical economic downturns.
The recognition of income in connection with investments that we purchase with original issue discount may result in the payment of an incentive fee to our Adviser without a corresponding receipt of cash income.
In the event we recognize loan interest income in excess of the cash we receive in connection with an investment that we purchase with original issue discount, we may be required to liquidate assets in order to pay a portion of the incentive fee. Our Adviser, however, is not required to reimburse us for the portion of any incentive fees attributable to non-cash income in the event of a subsequent default on such investment and non-payment of such non-cash income.
Risks Related to Our Investments
Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
We intend to invest primarily in senior secured and unsecured debt and select equity investments issued by private or public U.S.-based Infrastructure companies. As part of our investment objective to generate current income, we expect to invest up to 50% of our total assets in other securities, including senior debt, subordinated debt, preferred equity, dividend paying equity and the equity and junior debt tranches of CLOs.
Senior debt. When we invest in senior debt through secured term loans (1st lien and 2nd lien) we will generally take a security interest in the available assets of the portfolio companies, generally including the equity interests of their subsidiaries. We expect this security interest to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our senior secured debt may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. To the extent our debt investment is collateralized by the securities of a portfolio company’s subsidiaries, such securities may lose some or all of their value in the event of the bankruptcy or insolvency of the portfolio company. Also, in some circumstances, our security interest could be subordinated to claims of other secured creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Loans that are under-collateralized involve a greater risk of loss. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the senior debt’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.
Subordinated debt. Our subordinated debt investments will be subordinated to more senior debt and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our stockholders to non-cash income. Since we will not receive any principal repayments prior to the maturity of some of our subordinated debt investments, such investments will be of greater risk than amortizing debt.
Equity investments. We expect to make select equity investments in income-focused preferred or common equity interests, which may include interests in MLPs. In addition, when we invest in senior secured loans and notes or subordinated debt, we may acquire warrants to purchase equity securities. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

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Net profits interests, royalty interests, volumetric production payments (VPPs). We may invest in energy-specific non-operating investments including net profits interests, royalty interests or VPPs. Net profits interests and royalty interests are contractual agreements whereby the holders of such interests are entitled to a portion of the natural resource production or the cash proceeds received therefrom (either as a share of revenues or net income). A VPP is a type of structured investment whereby the owner sells a specific volume of production in a field or property to an investor and the investor receives a specific quota of production on a monthly basis in either raw output or proceeds therefrom. We will not have any operational control over these investments and our receipt of payments is contingent on the producer’s ability to meet its supply obligations, which can make these types of investments highly speculative.
Non-U.S. securities. We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies. Because evidences of ownership of such securities usually are held outside the United States, we would be subject to additional risks if we invested in non-U.S. securities, which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions which might adversely affect or restrict the payment of principal and interest on the non-U.S. securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. Since non-U.S. securities may be purchased with and payable in foreign currencies, the value of these assets as measured in U.S. dollars may be affected unfavorably by changes in currency rates and exchange control regulations. U.S. companies in which we invest may have international operations subject to the same risks.
Equity and junior debt tranches of CLOs. Our investments in the equity and junior debt tranches of CLOs involve a number of significant risks. CLOs are typically highly levered (~10 times), and therefore the equity and junior debt tranches that we will invest in are subject to a higher risk of total loss. As of June 30, 2017, the range of leverage ratios of the CLO investments in our portfolio was 9.0 times to 11.3 times and the weighted average was 10.2 times. In particular, investors in CLOs indirectly bear risks of the underlying debt investments held by such CLOs. We will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or the entity that sponsored the CLOs. Although it is difficult to predict whether the prices of indices and securities underlying CLOs will rise or fall, these prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. See “Risks Related to Our Investments in CLOs” below.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
We intend to invest primarily in senior secured and unsecured debt and select equity investments issued by private or public U.S.-based Infrastructure companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any proceeds. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Even though we intend to generally structure certain of our investments as senior debt, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. In situations where a bankruptcy carries a high degree of political significance, our legal rights may be subordinated to other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.
We generally will not control our portfolio companies.
We do not expect to control most or any of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements with such portfolio companies may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.
We will be exposed to risks associated with changes in interest rates.

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We are subject to financial market risks, including changes in interest rates. General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly have a material adverse effect on our investment objective and our rate of return on invested capital. To mitigate such interest rate exposure, we may focus on investments with floating interest rates. In addition, an increase in interest rates would make it more expensive to use debt for our financing needs, if any.
Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our investment strategy may involve investments in securities issued by foreign entities, including those that operate in emerging market countries. Investing in such entities may expose us to additional risks not typically associated with investing in U.S. issuers. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Further, we may have difficulty enforcing creditor’s rights in foreign jurisdictions. Such risks are more pronounced in emerging market countries.
Although we expect that most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective.
We may enter into total return swap agreements or other derivative transactions which expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
A total return swap agreement (a “TRS”) is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate. A TRS effectively adds leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a TRS, a TRS often offers lower financing costs than are offered through more traditional borrowing arrangements.
A TRS is subject to market risk, liquidity risk and risk of imperfect correlation between the value of the TRS and the loans underlying the TRS. In addition, we may incur certain costs in connection with a TRS that could in the aggregate be significant. A TRS is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty. In addition, because a TRS is a form of synthetic leverage, such arrangements are subject to risks similar to those associated with the use of leverage. See “—Risks Related to Debt Financing” below.
Second priority liens on collateral securing debt investments that we make in our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Certain debt investments that we intend to make to portfolio companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before repaying our investment. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.
The rights we may have with respect to the collateral securing the debt investments we make to our portfolio companies with senior first lien outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of first lien debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of

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enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; waivers of past defaults under collateral documents; and potentially others. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease, during these periods. Adverse economic conditions may also decrease the value of any collateral securing our first lien or second lien secured loans. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.
A covenant breach by our portfolio companies may harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.
Investing in small and middle market companies involves a number of significant risks, any one of which could have an adverse effect on our operating results.
Investments in small and middle market companies involve the same risks that apply generally to investments in larger, more established companies. However, such investments have more pronounced risks in that they:
may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tends to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;
are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and members of our Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and
may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.
We may not realize gains from our equity investments.
Certain investments that we may make could include warrants or other equity securities. In addition, we may make direct equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests.
An investment strategy focused in part on privately-held companies presents certain challenges, including the lack of available information about these companies.
We intend to invest in privately-held companies. Investments in private companies pose significantly greater risks than investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and the ability to withstand financial distress. Second, the investments themselves tend to be less liquid. As

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such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. As a result, the relative lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns. Finally, little public information generally exists about private companies and these companies may not have third-party debt ratings or, in some circumstances, audited financial statements. We must therefore rely on the ability of our Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. These companies and their financial information will generally not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments.
A lack of liquidity in certain of our investments may adversely affect our business.
We intend to invest in certain companies whose securities are not publicly traded or actively traded on the secondary market and are, instead, traded on a privately negotiated over-the-counter secondary market for institutional investors or not at all, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of certain of our investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. The reduced liquidity of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.
We may not have the funds or ability to make additional investments in our portfolio companies.
We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.
Risk Related to Our Investments in Infrastructure Companies
Our investment strategy is to invest, under normal circumstances, at least 50% of our assets in securities of Infrastructure companies. This investment strategy may be changed by our Board of Directors if we provide our stockholders with at least 60 days prior written notice and make a corresponding change to our name. The revenues, income (or losses) and valuations of Infrastructure companies can fluctuate suddenly and dramatically due to a number of factors including costs associated with environmental, governmental and other regulations, high interest costs for capital construction programs, high leverage, the effects of economic slowdowns, surplus capacity, increased competition, fluctuations of commodity prices, the effects of energy conservation policies, unfavorable tax laws or accounting policies, environmental damage, difficulty in raising capital, increased susceptibility to terrorist acts or political actions, and general changes in market sentiment towards infrastructure assets.
Sector-specific risks may adversely affect the values of the Company’s investments.
A summary of some of the principal sector specific risks is included below. The inclusion of a specific risk below with respect to a specific sector does not mean that that risk does not also apply in respect of the Company’s other investments.
Transportation. Transportation-related infrastructure assets may be adversely affected by, among other things, economic and market changes, fuel prices, labor relations, geo-political concerns and insurance costs. Transportation-related infrastructure assets and related businesses may also be subject to significant government regulation and oversight, which may adversely affect their businesses.
Electric Utilities and Power. Utility- and power-related infrastructure assets may have difficulty obtaining financing during periods of inflation or unsettled capital markets; may be subject to greater competition as a result of deregulation; face changes in climate or environmental policy; face restrictions on operations and increased cost and delays attributable to environmental considerations and regulation; find that existing plants, equipment or products have been rendered obsolete by technological innovations; or be subject to increased costs because of the scarcity of certain fuels or the effects of man-made or natural disasters.
Energy. Energy-related infrastructure assets may be adversely affected by one or more of the following: the levels and volatility of global energy commodity prices, energy supply and demand, capital expenditures on exploration and production of energy sources, energy conservation efforts, exchange rates, interest rates, economic conditions, tax treatment, increased competition, government regulation, technological advances, risk of liability from accidents resulting in injury or loss of life or property, supply of products and services, and world events.

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Renewable Energy. Renewable-energy related infrastructure assets may be adversely affected by changes in government policy relating to incentives and subsidies for renewable energy assets, technological developments (or the application thereof), unforeseen technical deficiencies with installations, and the reliance of any renewable energy project, or group of projects, on variable resources.
Communication Networks and Equipment. Infrastructure assets in the telecommunications sector may be adversely affected by increased competition, regulation by various regulatory authorities, distressed cash flows due to the need to commit substantial capital to meet increasing competition, technological advances, limited availability of franchise and licensing rights, and high barriers to market entry. Various forms of cyber-attack threaten communication networks and could severely hamper any infrastructure project dependent upon communication networks and equipment.
Public and Social Infrastructure. Public and social infrastructure assets, such as hospitals, schools, government accommodations, and other public service facilities projects, may be subject to risks that include, but are not limited to, costs associated with governmental, environmental and other regulations, the effects of economic slowdowns, increased competition from other providers of such services, uncertainties concerning costs, adverse political developments, and the level of government spending on infrastructure projects.
Metals and Mining. Investments in metals and mining related infrastructure assets may be speculative and subject to greater price volatility than investments in other types of companies. The performance of assets in this sector is related to, among other things, worldwide metal prices, and extraction and production costs.
Industrial. Industrial-related infrastructure assets may be adversely affected by supply and demand both for their specific product or service and for industrial sector products in general. Government regulation, world events, exchange rates and economic conditions, changes or trends in commodity prices, technological developments and liabilities for environmental damage and general civil liabilities will likewise affect the performance of these assets and their ability to repay their debts.
While we intend to invest in a number of different issuers, because our investment strategy is to invest, under normal circumstances, at least 50% of our assets in securities of Infrastructure companies, our portfolio will not be well diversified by industry.
We expect to seek to achieve our investment objective by investing, under normal circumstances, at least 50% of our assets in securities of Infrastructure companies. We may invest substantially all of our assets in companies that derive the majority of their revenue from activities in the infrastructure sector. As there can be a correlation in the valuation of the securities in our portfolio and a change in value of the securities of one company may be accompanied by a decline in the valuations of the securities of other companies within the energy industry that we may hold in our portfolio. A decline in value of the securities of such issuers or a downturn in the energy sector might have a more severe impact on us than on an entity that is more broadly diversified among various industries.
Continuation of the current decline in oil and natural gas prices for a prolonged period could have a material adverse effect on us.
A prolonged continuation of the current decline in oil and natural gas prices would adversely affect the credit quality of our debt investments and the underlying operating performance of our equity investments in Infrastructure companies. A decrease in credit quality and the operating performance would, in turn, negatively affect the fair value of these investments, which would consequently negatively affect our net asset value. Should the current decline in oil and natural gas prices persist, it is likely that our energy-related portfolio companies’ abilities to satisfy financial or operating covenants imposed by us or other lenders will be adversely affected, thereby negatively impacting their financial condition and their ability to satisfy their debt service and other obligations to us. Likewise, should the current decline in oil and natural gas prices persist, it is likely that our energy-related portfolio companies’ cash flow and profit generating capacities would also be adversely affected thereby, negatively impacting their ability to pay us dividends or distributions on our equity investments.
An increase or decrease in commodity supply or demand may adversely affect our business.
A decrease in the production of natural gas, natural gas liquids, crude oil, coal or other energy commodities, a decrease in the volume of such commodities available for transportation, refining, mining, processing, storage or distribution, or a sustained decline in demand for such commodities, may adversely impact the financial performance or prospects of Infrastructure companies in which we may invest. Infrastructure companies are subject to supply and demand fluctuations in the markets they serve which will be impacted by a wide range of factors, including fluctuating commodity prices, weather, increased conservation or use of traditional or alternative fuel sources, increased governmental or environmental regulation, depletion of natural gas, natural gas liquids, crude oil or coal production, rising interest rates, declines in domestic or foreign production of natural gas, natural gas liquids and crude oil, accidents or catastrophic events and economic conditions, among others.
An increase or decrease in commodity pricing may adversely affect our business.

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The return on our prospective investments in Infrastructure companies will be dependent on the margins received by those companies for the exploration, development, production, gathering, transportation, refining, processing, storing, refining, distribution, mining, generation or marketing of natural gas, natural gas liquids, crude oil, refined products, coal or power, as well as other energy related industrial companies with businesses engaged in, but not limited to, manufacturing, chemicals, infrastructure, materials, logistics, marketing, waste and environmental services. These margins may fluctuate widely in response to a variety of factors including global and domestic economic conditions, weather conditions, natural disasters, the supply and price of imported energy commodities, the production and storage levels of energy commodities in certain regions or in the world, political instability, terrorist activities, transportation facilities, energy conservation, domestic and foreign governmental regulation and taxation and the availability of local, intrastate and interstate transportation systems. Volatility of commodity prices may also make it more difficult for Infrastructure companies in which we may invest to raise capital to the extent the market perceives that their performance may be directly or indirectly tied to commodity prices.
Cyclicality within the energy sector may adversely affect our business.
Industries within the energy sector are cyclical with fluctuations in commodity prices and demand for, and production of commodities driven by a variety of factors. The highly cyclical nature of the industries within the energy sector may lead to volatile changes in commodity prices, which may adversely affect the earnings of energy companies in which we may invest and the performance and valuation of our portfolio.
Changes in international, foreign, federal, state or local government regulation may adversely affect our business.
Infrastructure companies are subject to significant international, foreign, federal, state and local government regulation, including how natural resources are produced, how facilities are constructed, maintained and operated, the prices they may charge for the products and services they provide and environmental and safety controls, including regulations related to climate change or in response to a catastrophic accident. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. For example, many state and federal environmental laws provide for civil penalties as well as regulatory remediation, thus adding to the potential liability an Infrastructure company may face. More extensive laws, regulations or enforcement policies could be enacted in the future which would likely increase compliance costs and may adversely affect the financial performance of Infrastructure companies in which we may invest.
Infrastructure companies are subject to various operational risks.
Infrastructure companies are subject to various operational risks, such as disruption of operations, mining, exploration, drilling, or installation accidents, inability to timely and effectively integrate newly acquired assets, unanticipated operation and maintenance expenses, lack of proper asset integrity, underestimated cost projections, inability to renew or increased costs of rights of way, failure to obtain the necessary permits to operate and failure of third-party contractors to perform their contractual obligations. Thus, some Infrastructure companies may be subject to construction risk, acquisition risk or other risks arising from their specific business strategies and operations.
Energy companies that focus on exploration and production are subject to numerous reserve and production related risks.
Exploration and production businesses are subject to overstatement of the quantities of their reserves based upon any reserve estimates that prove to be inaccurate, the possibility that no commercially productive oil, natural gas or other energy reservoirs will be discovered as a result of drilling or other exploration activities, the curtailment, delay or cancellation of exploration activities as a result of unexpected conditions or miscalculations, title problems, pressure or irregularities in formations, equipment failures or accidents, adverse weather conditions, compliance with environmental and other governmental requirements and cost of, or shortages or delays in the availability of, drilling rigs and other exploration equipment, and operational risks and hazards associated with the development of the underlying properties, including natural disasters, blowouts, explosions, fires, leakage of crude oil, natural gas or other resources, mechanical failures, cratering and pollution.
Competition between Infrastructure companies may adversely affect our business.
The Infrastructure companies in which we may invest face substantial competition in acquiring assets, expanding or constructing assets and facilities, obtaining and retaining customers and contracts, securing trained personnel and operating their assets. Many of their competitors may have superior financial and other resources.
Inability by companies in which we invest to make accretive acquisitions may adversely affect our business.
The ability of Infrastructure companies in which we may invest to grow and, where applicable, to maintain or increase dividends or distributions to their equity holders can be highly dependent on their ability to make acquisitions of infrastructure assets that result in an increase in free cash flow. In the event that such companies are unable to make such accretive acquisitions because they are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts, because they are unable to raise financing for such acquisitions on economically acceptable terms, or because they are outbid

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by competitors, their future growth and ability to make or raise dividends or distributions will be limited and their ability to repay their debt and make payments to preferred equity holders may be weakened. Furthermore, even if these companies do consummate acquisitions that they believe will be accretive, the acquisitions may instead result in a decrease in free cash flow.
A significant accident or event that is not fully insured could adversely affect the operations and financial condition of Infrastructure companies in which we may invest.
The operations of Infrastructure companies in which we may invest are subject to many hazards inherent in the transporting, processing, storing, distributing, mining, generating or marketing of natural gas, natural gas liquids, crude oil, coal, refined products, power or other commodities, or in the exploring, managing or producing of such commodities, including: damage to pipelines, storage tanks, vessels or related equipment and surrounding properties caused by hurricanes, tornadoes, floods, fires and other natural disasters or by acts of terrorism; inadvertent damage from construction or other equipment; leaks of natural gas, natural gas liquids, crude oil, refined products or other commodities (such as those suffered by the Deepwater Horizon drilling platform in 2010); and fires and explosions. These risks could result in substantial losses due to personal injury or loss of life, severe damage to and destruction of property and equipment and pollution or other environmental damage and may result in the curtailment or suspension of the related operations. Not all Infrastructure companies are fully insured against all risks inherent to their businesses. If a significant accident or event occurs that is not fully insured, it could adversely affect the Infrastructure company’s operations and financial condition.
Energy reserves naturally deplete as they are produced over time and this may adversely affect our business.
Energy reserves naturally deplete as they are produced over time. Many energy companies are either engaged in the production of natural gas, natural gas liquids, crude oil or coal, or are engaged in transporting, storing, distributing and processing these items or their derivatives. To maintain or grow their revenues, these companies or their customers need to maintain or expand their reserves through exploration of new sources of supply, through the development of existing sources or through acquisitions. The financial performance of energy companies in which we may invest may be adversely affected if they, or the companies to whom they provide services, are unable to cost-effectively acquire additional reserves sufficient to replace the depleted reserves. If an energy company fails to add reserves by acquiring or developing them, its reserves and production will decline over time as the reserves are produced. If an energy company is not able to raise capital on favorable terms, it may not be able to add to or maintain its reserves.
Infrastructure assets may be the target of terrorist organizations.
The terrorist attacks in the United States on September 11, 2001, had a disruptive effect on the economy and the securities markets. United States military and related action in the Middle East and elsewhere could have significant adverse effects on the U.S. economy and the stock market. Uncertainty surrounding military strikes or actions or a sustained military campaign may affect an Infrastructure company’s operations in unpredictable ways, including disruptions of fuel supplies and markets, and energy and related infrastructure and industrial assets could be direct targets, or indirect casualties, of an act of terror. The U.S. government has issued warnings that energy and related infrastructure and industrial assets, specifically the United States’ pipeline infrastructure, may be the future target of terrorist organizations. In addition, changes in the insurance markets have made certain types of insurance more difficult, if not impossible, to obtain and have generally resulted in increased premium costs.
Certain Infrastructure companies are dependent on their parents or sponsors for a majority of their revenues and may be subject to affiliate party risk.
Certain Infrastructure companies in which we may invest are dependent on their parents or sponsors for a majority of their revenues. Any failure by an Infrastructure company’s parent or sponsor to satisfy its payments or obligations would impact the Infrastructure company’s revenues and cash flows and ability to make distributions.
Changing economic, regulatory and political conditions in some countries, including political and military conflicts, may adversely affect the businesses in which we invest.
Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, expropriation of privately owned assets by governments, piracy, terrorism, labor strikes, boycotts and government inspections or requisitioning of vessels. These types of events could impact the delivery of commodities or impact pricing of commodities.
Risks Related to Our Investments in MLPs
An investment in MLP units involves certain risks which differ from an investment in the common stock of a corporation. Holders of MLP units have limited control and voting rights on matters affecting the partnership. In addition, there are certain tax risks associated with an investment in MLP units. See “Risk Factors—Federal Income Tax Risks.”

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An MLP’s cash flow, and consequently its distributions, are subject to operational and general energy industry risks, which may result in disparate quarterly distributions.
A portion of the cash flow received by us may be derived from investments in the equity securities of MLPs. The amount of cash that an MLP has available for distributions and the tax character of such distributions depends upon the amount of cash generated by the MLP’s operations. Cash available for distribution will vary from quarter to quarter and is largely dependent on factors affecting the MLP’s operations and factors affecting the energy industry in general. In addition to the risk factors described above, other factors which may reduce the amount of cash an MLP has available for distribution in a given quarter include increased operating costs, maintenance capital expenditures, acquisition costs, expansion, construction or exploration costs and borrowing costs.
Investments in MLPs may have limited liquidity.
Although common units of some MLPs may trade on public exchanges, certain of these securities may trade less frequently, particularly those with smaller capitalizations. Securities with limited trading volumes may display volatile or erratic price movements. As a result, these securities may be difficult to dispose of at a fair price at the times when we believe it is desirable or necessary to do so. These securities are also more difficult to value, and our judgment as to value will often be given greater weight than market quotations, if any exist. Investment of our capital in securities that are less actively traded, or over time experience decreased trading volume, may restrict our ability to take advantage of other market opportunities. In addition, many MLP units are privately held. See “Risk Factors—Risks Related to Our Investments—A lack of liquidity in certain of our investments may adversely affect our business.”
Investments in MLPs are susceptible to interest rate fluctuation risks.
Interest rate risk is the risk that securities will decline in value because of changes in market interest rates. The yields of equity and debt securities of MLPs are susceptible in the short-term to fluctuations in interest rates and the prices of these securities typically decline when interest rates rise. Accordingly, our net asset value may be impacted by an increase in interest rates. Further, rising interest rates could adversely impact the financial performance of MLPs in which we invest by increasing their costs of capital. This may reduce their ability to execute acquisitions or expansion projects in a cost-effective manner.
Our investments in MLPs may be subject to additional fees and expenses, including management and incentive fees, and, as a result, our investments in MLPs may achieve a lower rate of return for you than our other investments.
MLPs are subject to additional fees, some of which are paid regardless of the performance of its assets. We (and other investors) will pay certain management fees to the adviser entity of any MLP in which we invest. Our Adviser will also earn its base management fee from us based on our total assets, including our investment in any such MLP; therefore, we will be paying both our Adviser’s base management fee and any management fees earned by the manager of an MLP. As a result, our investment returns attributable to MLPs in which we invest may be lower than other investments we select. In addition, because the fees received by an MLP adviser are typically based on the managed assets of the MLP, including the proceeds of any leverage it may incur, the MLP adviser has a financial incentive to utilize leverage, which may create a conflict of interest between the MLP adviser and us as a stockholder in the MLP.
Risks Related to Our Investments in CLOs
Our investments in CLOs may be riskier and less transparent to us and our stockholders than direct investments in the underlying companies.
We will invest in CLOs, including the equity and junior debt tranches of CLOs. Generally, there may be less information available to us regarding the underlying debt investments held by CLOs than if we had invested directly in the debt of the underlying companies. As a result, our stockholders will not know the details of the underlying securities of the CLOs in which we will invest. Our investments in the equity and junior debt tranches of CLOs are subject to the risk of leverage associated with the debt issued by such CLOs and the repayment priority of senior debt holders in such CLOs. Our investments in portfolio companies may be risky, and we could lose all or part of our investment.
CLOs typically will have no significant assets other than their underlying senior secured loans; payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.
CLOs typically will have no significant assets other than their underlying senior secured loans. Accordingly, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans, net of all management fees and other expenses. Payments to us as a holder of CLO junior securities are and will be made only after payments due on the senior secured notes, and, where appropriate, the junior secured notes, have been made in full. This means that relatively small numbers of defaults of senior secured loans may adversely impact our returns.
Our CLO investments are exposed to leveraged credit risk.

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Generally, we are in a subordinated position with respect to realized losses on the senior secured loans underlying our investments in the equity and junior debt tranches of CLOs. The leveraged nature of CLOs, in particular, magnifies the adverse impact of senior secured loan defaults. CLO investments represent a leveraged investment with respect to the underlying senior secured loans. Therefore, changes in the market value of the CLO investments could be greater than the change in the market value of the underlying senior secured loans, which are subject to credit, liquidity and interest rate risk.
There is the potential for interruption and deferral of cash flow from CLO investments.
If certain minimum collateral value ratios and/or interest coverage ratios are not met by a CLO, primarily due to senior secured loan defaults, then cash flow that otherwise would have been available to pay distributions to us on our investments in the equity and junior debt tranches of CLOs may instead be used to redeem any senior notes or to purchase additional senior secured loans, until the ratios again exceed the minimum required levels or any senior notes are repaid in full. This could result in an elimination, reduction or deferral in the distribution and/or principal paid to the holders of the CLO investments, which would adversely impact our returns.
Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our CLO investment strategy allows investments in foreign CLOs. Investing in foreign entities may expose us to additional risks not typically associated with investing in U.S. issuers. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Further, we, and the CLOs in which we invest, may have difficulty enforcing creditor’s rights in foreign jurisdictions. In addition, the underlying companies of the CLOs in which we invest may be foreign, which may create greater exposure for us to foreign economic developments.
The payment of underlying portfolio manager fees and other charges on CLO investments could adversely impact our returns.
We may invest in CLO investments where the underlying portfolio securities may be subject to management, administration and incentive or performance fees, in addition to those payable by us. Payment of such additional fees could adversely impact the returns we achieve.
The inability of a CLO collateral manager to reinvest the proceeds of the prepayment of senior secured loans may adversely affect us.
There can be no assurance that for any CLO investment, in the event that any of the senior secured loans of a CLO underlying such investment are prepaid, the CLO collateral manager will be able to reinvest such proceeds in new senior secured loans with equivalent investment returns. If the CLO collateral manager cannot reinvest in new senior secured loans with equivalent investment returns, the interest proceeds available to pay interest on the rated liabilities and investments may be adversely affected.
Our CLO investments are subject to prepayments and calls, increasing re-investment risk.
Our CLO investments and/or the underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value. Prepayment rates are influenced by changes in interest rates and a variety of economic, geographic and other factors beyond our control and consequently cannot be predicted with certainty. In addition, for a CLO collateral manager there is often a strong incentive to refinance well performing portfolios once the senior tranches amortize. The yield to maturity of the investments will depend on the amount and timing of payments of principal on the loans and the price paid for the investments. Such yield may be adversely affected by a higher or lower than anticipated rate of prepayments of the debt.
Furthermore, our CLO investments generally do not contain optional call provisions, other than a call at the option of the holders of the equity tranches for the senior notes and the junior secured notes to be paid in full after the expiration of an initial period in the deal (referred to as the “non-call period”).
The exercise of the call option is by the relevant percentage (usually a majority) of the holders of the equity tranches and, therefore, where we do not hold the relevant percentage we will not be able to control the timing of the exercise of the call option. The equity tranches also generally have a call at any time based on certain tax event triggers. In any event, the call can only be exercised by the holders of equity tranches if they can demonstrate (in accordance with the detailed provisions in the transaction) that the senior notes and junior secured notes will be paid in full if the call is exercised.
Early prepayments and/or the exercise of a call option otherwise than at our request may also give rise to increased re-investment risk with respect to certain investments, as we may realize excess cash earlier than expected. If we are unable to

50


reinvest such cash in a new investment with an expected rate of return at least equal to that of the investment repaid, this may reduce our net income and, consequently, could have an adverse impact on our ability to pay dividends.
We have limited control of the administration and amendment of senior secured loans owned by the CLOs in which we invest.
We are not able to directly enforce any rights and remedies in the event of a default of a senior secured loan held by a CLO vehicle. In addition, the terms and conditions of the senior secured loans underlying our CLO investments may be amended, modified or waived only by the agreement of the underlying lenders. Generally, any such agreement must include a majority or a super majority (measured by outstanding loans or commitments) or, in certain circumstances, a unanimous vote of the lenders. Consequently, the terms and conditions of the payment obligations arising from senior secured loans could be modified, amended or waived in a manner contrary to our preferences.
We have limited control of the administration and amendment of any CLO in which we invest.
The terms and conditions of target securities may be amended, modified or waived only by the agreement of the underlying security holders. Generally, any such agreement must include a majority or a super majority (measured by outstanding amounts) or, in certain circumstances, a unanimous vote of the security holders. Consequently, the terms and conditions of the payment obligation arising from the CLOs in which we invest be modified, amended or waived in a manner contrary to our preferences.
Senior secured loans of CLOs may be sold and replaced resulting in a loss to us. The senior secured loans underlying our CLO investments may be sold and replacement collateral purchased within the parameters set out in the relevant CLO indenture between the CLO and the CLO trustee and those parameters may typically only be amended, modified or waived by the agreement of a majority of the holders of the senior notes and/or the junior secured notes and/or the equity tranche once the CLO has been established. If these transactions result in a net loss, the magnitude of the loss from the perspective of the equity tranche would be increased by the leveraged nature of the investment.
Our financial results may be affected adversely if one or more of our significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as we expect.
We expect that a majority of our portfolio will consist of equity and junior debt investments in CLOs, which involve a number of significant risks. CLOs are typically highly levered up to approximately 10 times, and therefore the junior debt and equity tranches that we will invest in are subject to a higher risk of total loss. As of June 30, 2017, the range of leverage ratios of the CLO investments in our portfolio was 9.0 times to 11.3 times and the weighted average was 10.2 times. In particular, investors in CLOs indirectly bear risks of the underlying debt investments held by such CLOs. We will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or the entities that sponsored the CLOs. Although it is difficult to predict whether the prices of indices and securities underlying CLOs will rise or fall, these prices, and, therefore, the prices of the CLOs will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally.
The investments we make in CLOs are thinly traded or have only a limited trading market. CLO investments are typically privately offered and sold, in the primary and secondary markets. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLOs carry additional risks, including, but not limited to: (i) the possibility that distributions from the underlying senior secured loans will not be adequate to make interest or other payments; (ii) the quality of the underlying senior secured loans may decline in value or default; and (iii) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO or unexpected investment results. Further, our investments in equity and junior debt tranches of CLOs are subordinate to the senior debt tranches thereof.
Investments in structured vehicles, including equity and junior debt instruments issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. Additionally, changes in the underlying senior secured loans held by a CLO may cause payments on the instruments we hold to be reduced, either temporarily or permanently. Structured investments, particularly the subordinated interests in which we invest, are less liquid than many other types of securities and may be more volatile than the senior secured loans underlying the CLOs in which we invest.
Non-investment grade debt involves a greater risk of default and higher price volatility than investment grade debt.
The senior secured loans underlying our CLO investments typically are BB or B rated (non-investment grade) and in limited circumstances, unrated, senior secured loans. Non-investment grade securities are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal when due and therefore involve a greater risk of default and higher price volatility than investment grade debt.

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We will have no influence on management of underlying investments managed by non-affiliated third party CLO collateral managers.
We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold as those portfolios are managed by non-affiliated third party CLO collateral managers. Similarly, we are not responsible for and have no influence over the day-to-day management, administration or any other aspect of the issuers of the individual securities. As a result, the values of the portfolios underlying our CLO investments could decrease as a result of decisions made by third party CLO collateral managers.
Risks Related to Debt Financing
If we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.
We may borrow funds to make investments, including before we have fully invested the initial proceeds of this offering. We currently expect to use leverage in an aggregate amount up to 331/3% of our total assets, which includes assets obtained through such leverage, although we may increase our leverage under the 1940 Act. See “Regulation” in the SAI. The use of borrowings, also known as leverage, increases the volatility of investments and magnifies the potential for loss on invested equity capital. If we use leverage to partially finance our investments, through borrowing from banks and other lenders, you will experience increased risks of investing in our shares. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income attributable to our stockholders to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make share distribution payments. Leverage is generally considered a speculative investment technique.
In addition, the way in which the subordinated incentive fee payable to our Adviser is determined may encourage it to use leverage to increase the return on our investments. Also, the fact that our base management fee is payable based upon our average total assets, which would include any borrowings for investment purposes, may encourage our Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of a default by us, which would adversely affect holders of our common stock. Such a practice could result in our investing in more speculative securities than would otherwise be in our best interests, which could result in higher investment losses, particularly during cyclical economic downturns.
Changes in interest rates may affect our cost of capital and net investment income.
If we borrow funds to make investments, which we do not expect to do before we have fully invested the initial proceeds of this offering in accordance with our investment objective, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions, and we may have to purchase or develop such expertise.
You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates may make it easier for us to meet or exceed the subordinated incentive fee fixed preferred return and may result in a substantial increase of the amount of incentive fees payable to our Adviser with respect to pre-incentive fee net investment income. See “Investment Advisory Agreement.”
Holders of any preferred stock we might issue would have the right to elect members of our Board of Directors and class voting rights on certain matters.
Holders of any preferred stock we might issue would have the right to elect members of our Board of Directors and class voting rights on certain matters. Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of our Board of Directors at all times and, in the event dividends become two full years in arrears, would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and

52


by requirements imposed by rating agencies or the terms of our credit facilities, might impair our ability to maintain our qualification as a RIC for federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.
Federal Income Tax Risks
We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.
To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements. See “Material U.S. Federal Income Tax Considerations.”
The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. We are subject to an asset coverage ratio requirement under the 1940 Act and may in the future become subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
The income source requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from the sale of shares or securities or similar sources.
The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because some of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
If we fail to qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt or equity investments that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discounts and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes.
Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. If we fail to qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

53


For additional discussion regarding the tax implications of a RIC, see “Material U.S. Federal Income Tax Considerations—Taxation as a Regulated Investment Company.”
If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses.
A “publicly offered regulated investment company” is a RIC whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the taxable year. If we are not a publicly offered RIC for any period, a non-corporate stockholder’s allocable portion of our affected expenses, including our management fees, will be treated as an additional distribution to the stockholder and will be deductible by such stockholder only to the extent permitted under the limitations described below. For non-corporate stockholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered RIC, including advisory fees. In particular, these expenses, referred to as miscellaneous itemized deductions, are deductible to an individual only to the extent they exceed 2% of such a stockholder’s adjusted gross income, and are not deductible for alternative minimum tax purposes. While we anticipate that we will constitute a publicly offered RIC for our first tax year, there can be no assurance that we will in fact so qualify for any of our taxable years.
We may in the future choose to pay dividends in part in our own stock, in which case you may be required to pay tax in excess of the cash you receive.
We may distribute taxable dividends that are payable in cash or shares of our common stock at the election of each stockholder. Under certain applicable provisions of the Code and the Treasury regulations, distributions payable in cash or in shares of stock at the election of stockholders are treated as taxable dividends. The Internal Revenue Service has issued private rulings indicating that this rule will apply even where the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. Under these rulings, if too many stockholders elect to receive their distributions in cash, each such stockholder would receive a pro rata share of the total cash to be distributed and would receive the remainder of their distribution in shares of stock. If we decide to make any distributions consistent with these rulings that are payable in part in our stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock.
We may be adversely affected if an MLP or other non-corporate business structure in which we invest is treated as a corporation, rather than a partnership, for federal income tax purposes.
Our ability to meet our investment objective may partially depend on the level of taxable income and distributions and dividends we receive from the MLPs and other energy company securities in which we may invest, a factor over which we have no control. The benefit we derive from an investment in MLPs is largely dependent on the MLPs being treated as partnerships for federal income tax purposes. As a partnership, an MLP has no tax liability at the entity level. If, as a result of a change in current law or a change in an MLP’s business, an MLP is treated as a corporation for federal income tax purposes, such MLP would be obligated to pay federal income tax on its income at the corporate tax rate. If an MLP were classified as a corporation for federal income tax purposes, the amount of cash available for distribution would be reduced and distributions received by us would be taxed under federal income tax laws applicable to corporate distributions (as dividend income, return of capital or capital gain). Therefore, treatment of an MLP as a corporation for federal income tax purposes would result in a reduction in the after-tax return to us, likely causing a reduction in the value of our investment in such MLP.
Our investments in MLPs may exceed the cash received from such investments.
As a limited partner in the MLPs in which we seek to invest, we will receive our share of income, gains, losses, deductions, and credits from those MLPs. Historically, a significant portion of an investor’s income from an MLP has been offset by tax deductions to the investor from such MLP. As a result, this income has been significantly lower than cash distributions paid by MLPs. We will incur a current tax liability on our share of an MLP’s income and gains that is not offset by tax deductions, losses, and credits, or our net operating loss carryforwards, if any. The percentage of an MLP’s realized income and gains that is offset by tax deductions, losses, and credits will fluctuate over time for various reasons. A significant slowdown in acquisition activity or capital spending by MLPs held in our portfolio could result in a reduction of accelerated depreciation generated by new acquisitions, which may result in an increase in our net ordinary income that we are required to distribute to stockholders to maintain our status as a RIC and to eliminate our liability for federal income tax. If our income from our investments in MLPs exceed the cash distributions received from such investments, we may need to obtain cash from other sources in order to satisfy such distribution requirements. If we are unable to obtain cash from other sources, we may fail

54


to qualify as a RIC and become subject to corporate-level federal income tax. We may also recognize gain in excess of cash proceeds upon the sale of an interest in an MLP. Any such gain may need to be distributed or deemed distributed in order to avoid liability for corporate-level federal income taxes on such gain. See “Material U.S. Federal Income Tax Considerations.”


55


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this prospectus may include statements as to:
our future operating results;
the impact of interest rate volatility on our results, particularly if we elect to use leverage as part of our investment strategy;
our business prospects and the prospects of the companies in which we may invest;
the ability of our portfolio companies to achieve their objectives;
our expected financings and investments;
the adequacy of our cash resources and working capital;
the timing of cash flows, if any, from the operations of our portfolio companies;
our contractual arrangements and relationships with third parties;
the dependence of our future success on the general economy and its impact on the industries in which we invest;
our ability to source favorable investments;
our use of financial leverage;
our tax status;
the tax status of the companies in which we may invest;
the timing and amount of interest distributions and dividends from the investments we make; and
the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus and in our filings with the SEC.
In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this prospectus involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in this prospectus. Other factors that could cause actual results to differ materially include:
 
changes in the economy;
risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and
future changes in laws or regulations and conditions that impact our operations or investments.

We have based the forward-looking statements included in this prospectus on information available to us on the date of this prospectus, and we assume no obligation to update any such forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. During this offering, we will provide updated information in connection with material developments and you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC. The forward-looking statements and projections contained in this prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act.


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USE OF PROCEEDS
The net proceeds of the continuous offering of shares will be invested in accordance with the Company’s investment objective and policies (as stated below) as soon as practicable after receipt. Pending investment of the net proceeds in accordance with the Company’s investment objective and policies, the Company will invest primarily in cash, cash equivalents, U.S. government securities, money market funds, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our election to be taxed as a RIC. Investors should expect, therefore, that before the Company has fully invested the proceeds of the offering in accordance with its investment objective and policies, the Company’s assets would earn interest income at a modest rate. While the Company does not anticipate a delay in the investment of net proceeds from investors, the Company will seek shareholder approval if the net proceeds are not invested within six months of the Company’s initial offering in accordance with the rules under the 1940 Act.




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DISTRIBUTIONS
Subject to our Board of Directors’ discretion and applicable legal restrictions, we intend to authorize and declare ordinary cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will then calculate each stockholder’s specific distribution amount for the period using weekly record dates with each stockholder eligible to receive distributions beginning the week we accept the stockholder’s subscription for our shares. From time to time, we may also pay interim special distributions in the form of cash or shares at the discretion of our Board of Directors. Each year a statement on Form 1099-DIV, identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of paid-in capital surplus, which is a nontaxable distribution) will be mailed to our stockholders. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from our offering. As a result, a portion of the distributions we make may represent a return of capital for tax purposes.
From time to time and not less than quarterly, our Adviser must review our accounts to determine whether cash distributions are appropriate. We shall distribute pro rata to our stockholders funds received by us which our Adviser deems unnecessary for us to retain.
We intend to make our ordinary distributions in the form of cash, out of assets legally available, unless stockholders elect to receive their distributions in additional shares under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder. If stockholders hold shares in the name of a broker or financial intermediary, they should contact the broker or financial intermediary regarding their election to receive distributions in additional shares.
The following table reflects the cash distributions per share that we have declared and paid on our common stock during the fiscal years ended June 30, 2016. Dollar amounts in the table below and the notes thereto are presented in thousands, except per share data:
 
 
Distribution
For the Year Ended June 30,
 
Per Share
 
Amount
2016
 
$
0.75204

 
$
280


58



On June 20, 2016 our Board of Directors declared a series of distributions for the months of July through September 2016 of $0.01726 per share each. On October 6, 2016 our Board of Directors declared a series of distributions for the months of October through November 2016 of $0.01726 per share each. On November 23, 2016 our Board of Directors declared a series of distributions for the months of December 2016 through February 2017 of $0.01726 per share each. On March 2, 2017 our Board of Directors declared a series of distributions for the months of March through May 2017 of $0.01772 per share each. On May 30, 2017 our Board of Directors declared a series of distributions for the months of June through August 2017 of $0.01772 per share each. Stockholders of record as of each respective record date will be entitled to receive the distribution. Below are the details for each respective distribution:
Amount Per Share
 
Record Date
 
Payment Date
$0.01726
 
July 1, 2016
 
August 1, 2016
0.01726
 
July 8, 2016
 
August 1, 2016
0.01726
 
July 15, 2016
 
August 1, 2016
0.01726
 
July 22, 2016
 
August 1, 2016
0.01726
 
July 29, 2016
 
August 1, 2016
0.01726
 
August 5, 2016
 
August 29, 2016
0.01726
 
August 12, 2016
 
August 29, 2016
0.01726
 
August 19, 2016
 
August 29, 2016
0.01726
 
August 26, 2016
 
August 29, 2016
0.01726
 
September 2, 2016
 
October 3, 2016
0.01726
 
September 9, 2016
 
October 3, 2016
0.01726
 
September 16, 2016
 
October 3, 2016
0.01726
 
September 23, 2016
 
October 3, 2016
0.01726
 
September 30, 2016
 
October 3, 2016
0.01726
 
October 7, 2016
 
October 31, 2016
0.01726
 
October 14, 2016
 
October 31, 2016
0.01726
 
October 21, 2016
 
October 31, 2016
0.01726
 
October 28, 2016
 
October 31, 2016
0.01726
 
November 4, 2016
 
November 28, 2016
0.01726
 
November 11, 2016
 
November 28, 2016
0.01726
 
November 18, 2016
 
November 28, 2016
0.01726
 
November 25, 2016
 
November 28, 2016
0.01726
 
December 2, 2016
 
January 3, 2017
0.01726
 
December 9, 2016
 
January 3, 2017
0.01726
 
December 16, 2016
 
January 3, 2017
0.01726
 
December 23, 2016
 
January 3, 2017
0.01726
 
December 30, 2016
 
January 3, 2017
0.01726
 
January 6, 2017
 
January 30, 2017
0.01726
 
January 13, 2017
 
January 30, 2017
0.01726
 
January 20, 2017
 
January 30, 2017
0.01726
 
January 27, 2017
 
January 30, 2017
0.01726
 
February 3, 2017
 
February 27, 2017
0.01726
 
February 10, 2017
 
February 27, 2017
0.01726
 
February 17, 2017
 
February 27, 2017
0.01726
 
February 24, 2017
 
February 27, 2017
0.01772
 
March 3, 2017
 
April 3, 2017
0.01772
 
March 10, 2017
 
April 3, 2017
0.01772
 
March 17, 2017
 
April 3, 2017
0.01772
 
March 24, 2017
 
April 3, 2017
0.01772
 
March 31, 2017
 
April 3, 2017

59


Amount Per Share
 
Record Date
 
Payment Date
0.01772
 
April 7, 2017
 
May 1, 2017
0.01772
 
April 13, 2017
 
May 1, 2017
0.01772
 
April 21, 2017
 
May 1, 2017
0.01772
 
April 28, 2017
 
May 1, 2017
0.01772
 
May 5, 2017
 
May 30, 2017
0.01772
 
May 12, 2017
 
May 30, 2017
0.01772
 
May 19, 2017
 
May 30, 2017
0.01772
 
May 26, 2017
 
May 30, 2017
0.01772
 
June 2, 2017
 
July 3, 2017
0.01772
 
June 9, 2017
 
July 3, 2017
0.01772
 
June 16, 2017
 
July 3, 2017
0.01772
 
June 23, 2017
 
July 3, 2017
0.01772
 
June 30, 2017
 
July 3, 2017
0.01772
 
July 7, 2017
 
July 31, 2017
0.01772
 
July 14, 2017
 
July 31, 2017
0.01772
 
July 21, 2017
 
July 31, 2017
0.01772
 
July 28, 2017
 
July 31, 2017
0.01772