UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-01508

REDWOOD ENHANCED INCOME CORP.

(Exact Name of Registrant as Specified in Charter)

Maryland	88-0824777
(State or Other Jurisdiction of Incorporation)	(IRS Employer Identification No.)
250 West 55th Street, 26th Floor
New York, NY	10019
(Address of Principal Executive Offices)	(Zip Code)

(212) 970-1400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None	Not applicable	Not applicable
(Title of each class)	(Trading Symbol(s) )	(Name of each exchange where registered)

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller Reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 31, 2023, there was no established public market for the Registrant’s shares of common stock.

The number of the Registrant’s shares of common stock outstanding on March 18, 2024 was 16,507,490.

REDWOOD ENHANCED INCOME CORP.

FORM 10-K

TABLE OF CONTENTS

	Page
PART I	4
Item 1. Business	4
Item 1A. Risk Factors	31
Item 1B. Unresolved Staff Comments	53
Item 1C. Cybersecurity	53
Item 2. Properties	54
Item 3. Legal Proceedings	54
Item 4. Mine Safety Disclosures	54
PART II	55
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	55
Item 6. [Reserved]	57
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	69
Item 8. Financial Statements and Supplementary Data	70
Report of Independent Registered Public Accounting Firm (PCAOB ID: 248)	71
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	101
Item 9A. Controls and Procedures	101
Item 9B. Other Information	102
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	102
PART III	103
Item 10. Directors, Executive Officers and Corporate Governance	103
Item 11. Executive Compensation	103
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	103
Item 13. Certain Relationships, Related Transactions and Director Independence	103
Item 14. Principal Accounting Fees and Services	103
PART IV	104
Item 15. Exhibits and Financial Statement Schedules	104
Item 16. Form 10-K Summary	105
Signatures	106

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In this annual report on Form 10-K (the “Report”), unless otherwise specified, the terms:

· “we,” “us,” “our,” and “Company” refer to Redwood Enhanced Income Corp., a Maryland corporation;

· “Adviser” refers to Redwood Capital Management, LLC, our investment adviser; and

· “Administrator” refers to the Adviser, in its capacity as our administrator.

FORWARD-LOOKING STATEMENTS

The information contained in this Report should be read in conjunction with our financial statements and related notes thereto appearing elsewhere in this Report. Some of the statements in this Report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or the future performance or financial condition of the Company. The forward-looking statements contained in this Report involve a number of risks and uncertainties, including statements concerning:

· our, or our portfolio companies’, future business, operations, operating results or prospects;

· the return or impact of current and future investments;

· the impact of global health crises, on our or our portfolio companies’ business and the U.S. and global economy;

· the impact of a protracted decline in the liquidity of credit markets on our business;

· the impact of fluctuations in interest rates on our business;

· the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies;

· our contractual arrangements and relationships with third parties;

· the general economy and its impact on the industries in which we invest;

· the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

· our expected financings and investments;

· the adequacy of our financing resources and working capital;

· the ability of our Adviser to locate suitable investments for us and to monitor and administer our investments;

· the timing of cash flows, if any, from the operations of our portfolio companies;

· the timing, form and amount of any dividend distributions;

● our ability to maintain our qualification as a registered investment company (“RIC”) and as a business development company (“BDC”);

● our business prospects and the prospects of our prospective portfolio companies;

● changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets, including changes from the impact of the war between Russia and Ukraine or the war between Israel and Hamas; and

● the elevating levels of inflation, and the potential impact of inflation on our portfolio companies and on the industries in which we invest.

We use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “could,” “may,” “plan” and similar words to identify forward-looking statements. The forward-looking statements contained in this annual report 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 as “Risk Factors” in this Report.

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We have based the forward-looking statements included in this Report on information available to us on the date of this Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

PART I

ITEM 1. BUSINESS.

Redwood Enhanced Income Corp.

Redwood Enhanced Income Corp. (the “Company,” “we” or “our”), a Maryland corporation incorporated on June 21, 2021, is an externally managed, non-diversified closed-end investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company has elected to be treated for federal income tax purposes, and intends to qualify annually, as a regulated investment company (“RIC”) as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with its tax year ended December 31, 2022. As of March 18, 2024, the Company has received aggregate Capital Commitments (as defined below) of $316 million.

The Company’s investment objective is to seek current income as well as capital appreciation, while emphasizing the preservation of capital. The Company’s focus is fixed income investments, primarily in the senior layers of the capital structure of leveraged companies. These investments primarily consist of loans and bonds, sourced either through direct investments, the syndicated market or through trading in the secondary market. In connection with the Company’s debt investments, the Company may also receive equity interests such as options, warrants or other instruments as additional consideration.

The Company generally invests in middle market companies, which Redwood Capital Management, LLC (the “Adviser”) considers to be companies with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of between $50 million and $300 million. The Company may also invest in smaller or larger companies if an attractive opportunity presents itself, particularly during periods of market dislocation.

The companies in which the Company invests typically will be highly leveraged, and, in most cases, not rated by national rating agencies. If such companies were rated, the Adviser believes that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national securities rating agencies. Securities rated below investment grade are often referred to as “leveraged loans” or “high yield” securities or “junk bonds” and are often higher risk and have speculative characteristics as compared to investment grade debt instruments.

The Company’s sole initial stockholder has approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act to the Company. As a result, under current law, the Company is permitted as a BDC to issue senior securities in amounts such that the Company’s asset coverage, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities (a two-to-one debt-to-equity ratio). This requirement will limit the amount that the Company may borrow.

There can be no assurance that the Company’s investment objective will be achieved.

The Company’s board of directors (“Board of Directors”) may contemplate a Liquidity Event (as defined below) for investors on or before the 7-year anniversary of the Company’s initial closing, subject to each individual investor’s decision to participate. Such 7-year period may be extended by the Board of Directors, in its sole discretion, for up to two additional one-year periods. If the Company does not complete a Liquidity Event in the required timeline, the Board of Directors will use its commercially reasonable efforts to wind-down or liquidate and dissolve the Company.

The Adviser and Administrator

The Company’s investment activities are managed by the Adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) entered into between the Company and the Adviser. Under the Investment Advisory Agreement, the Adviser is responsible for (1) determining the composition of the Company’s portfolio, the nature and timing of the changes to the Company’s portfolio and the manner of implementing such changes; (2) identifying, evaluating and negotiating the structure of the investments the Company makes; (3) executing, closing, servicing and monitoring the investments the Company makes; (4) determining the securities and other assets that the Company purchases, retains or sells; (5) performing due diligence on prospective portfolio companies and their

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sponsors; and (6) providing the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its assets. Pursuant to the Investment Advisory Agreement, the Company pays the Adviser a base management fee and an incentive fee for its services. See “Investment Advisory Agreement— Investment Advisory Fees.”

The Adviser is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). As of December 31, 2023, the Adviser had approximately $8.6 billion (including $1 billion uncalled capital) in assets under management.

The Adviser and its affiliates may engage in management or investment activities on behalf of entities that have overlapping objectives and strategies with the Company. The Adviser and its affiliates may face conflicts in the allocation of investment opportunities to the Company and any others to which they may provide management or investment services. In order to address these conflicts, the Adviser has an investment allocation policy that seeks to ensure the fair and equitable allocation of investment opportunities and addresses the co-investment restrictions set forth under the 1940 Act.

As a BDC, the Company may be prohibited under the 1940 Act from conducting certain transactions with its affiliates without the prior approval of its directors who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser) (such directors, “Independent Directors”), and, in some cases, the prior approval of the SEC. On April 1, 2022, the SEC granted to the Adviser and the Company exemptive relief on which we rely to co-invest with other funds managed by the Adviser in a manner consistent with our investment, objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.

The Company has entered into an administration agreement (the “Administration Agreement”) with the Administrator. Under the Administration Agreement, the Administrator performs, or oversee the performance of, the Company’s required administrative services. The Administrator has entered into a sub-administration agreement with U.S. Bancorp Fund Services, LLC (the “Sub-Administrator”), pursuant to which the Administrator has delegated certain administrative functions to the Sub-Administrator. See “Administration Agreement.”

About Redwood Capital Management, LLC

Redwood Capital Management, LLC is an investment management firm focused on investing in credit and other opportunities in stressed and distressed companies. The Adviser was founded in 2000, and is wholly owned by Redwood Capital Management Holdings, LP, a Delaware limited partnership. An entity controlled by Ruben Kliksberg, the Chief Executive Officer and Chief Investment Officer of the Adviser, serves as the general partner of Redwood Capital Management Holdings, LP. Entities controlled by Mr. Kliksberg are the principal owners of the Adviser and its affiliates (collectively “Redwood”), and accordingly, Mr. Kliksberg has ultimate decision-making authority with respect to the Adviser. The Adviser has been registered with the SEC since March 2012, and has its principal place of business at 250 West 55th Street, 26th Floor, New York, NY 10019.

Sean Sauler is the Deputy-CEO and Co-Chief Investment Officer of the Adviser.

Mr. Kliksberg and Mr. Sauler serve as the Company’s Co-Chairmen, Co-Presidents and Co-Portfolio Managers. They have worked at the Adviser for 18 years and 17 years, respectively.

Through its various privately offered investment vehicles, the Adviser focuses on opportunistic credit and other special situation investments across a broad range of industries and geographies. In addition to Mr. Kliksberg and Mr. Sauler, the Adviser’s investment team consists of 11 investment analysts responsible for researching, performing diligence, structuring, sourcing and negotiating investments across the credit spectrum. Each investment analyst focuses on multiple assigned industries and actively follows an extensive list of companies. As a result, the Adviser is able to respond quickly and engage with companies and sponsors across different geographies, issuer sizes and industries. The investment team also consists of two traders that focus on secondary market trading activity. These traders are responsible for screening and sourcing investment opportunities in the secondary market.

The Adviser’s core competency is analyzing leveraged companies that are facing some form of financial stress and/or whose credit quality may be perceived to have a “scratch and dent” and consequently are deemed out of favor by broader market participants. This can be a result of industry issues (such as pricing, lack of demand or technological change), management issues, legal or regulatory issues, among other things.

Competitive Strengths

The Adviser believes that there is currently an opportunity to generate attractive returns for the Company by leveraging the Adviser’s competitive strengths, which include:

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Investing in Securities under Stress.

The Adviser believes that there are market opportunities for investors who are willing to invest in securities that are deemed out of favor by broader market participants due to a company-specific or industry-related problem. The Adviser believes that the markets for these types of securities are frequently inefficient because existing holders are often unprepared or ill-equipped to evaluate the impact that business or macro-economic problems will have on the value of their securities. The Adviser believes that this inefficiency creates attractive investment opportunities in both the primary and secondary markets. The Adviser expects the majority of investments in the portfolio will be out of favor.

Opportunity in the Direct Lending Space.

The Adviser believes that many traditional lenders, such as commercial banks and primary syndicators, have reduced their lending to middle-market companies, creating opportunities for non-traditional lenders. Simultaneously, the ability of companies to place loans directly has grown as financial sponsors and large corporations have hired their own capital markets teams, disintermediating traditional investment banks. The Adviser believes that this should allow for direct loans, especially in areas with some level of stress, to be priced inefficiently due to limited capital availability, allowing for attractive risk and return opportunities.

Attractive Provider of Capital.

The Adviser has developed relationships over many years with management teams, financial intermediaries, financial sponsors and other investors and market participants, frequently being shown attractive direct lending opportunities. As traditional lenders have reduced their total lending, the Adviser believes it is a lender of choice due to its (i) experience in negotiating complex transactions, (ii) reputation and past dealings with companies in many industries, (iii) ability to act quickly and (iv) willingness to invest in companies experiencing financial stress.

Macroeconomic Factors.

The Adviser believes that macroeconomic volatility often drives dislocations throughout global financial markets. This volatility includes sovereign debt crises, political elections and other unexpected geopolitical events such as the Russia-Ukraine war and Hamas-Israel war. These factors drive highly correlated “risk on” and “risk off” market swings and frequently result in the indiscriminate selling or buying of securities and obligations at prices that the Adviser believes are inconsistent with their intrinsic values. The Adviser has a long track record of investing during periods of macroeconomic stress. Furthermore, the Adviser believes that there are lingering effects from the COVID-19 pandemic on many companies, especially those with significant leverage, which can yield attractive opportunities.

Experienced Investment Team.

The Adviser has a long history of investing in both primary and secondary debt securities through its various investment vehicles. The team has also invested through numerous market cycles and many market crises.

Investment Focus and Process

The Company invests in securities in both the primary and secondary market.

When sourcing loans in the primary market, through direct channels or through syndicates, the Adviser draws upon a robust network of relationships with management teams, financial intermediaries, other investors and market participants that have been cultivated since the Adviser’s inception in 2000. The Adviser’s investment professionals actively diligence investment opportunities in their assigned industries to understand and price risk in the primary markets. The Adviser believes that it has gained a reputation as a reliable and thoughtful partner for stressed companies needing financing.

When the Adviser makes investments in the secondary market, it is focused on securities that it believes have traded down in price, but whose longer-term fundamentals the Adviser believes to be more positive than pricing would indicate. These companies could be experiencing cyclical or secular changes, management issues or product challenges, among other things. The Adviser invests in both private and public companies and from a wide range of industries.

Process.

The Adviser undertakes a comprehensive research and analytical process when evaluating prospective investments. The Adviser relies significantly upon fundamental research, utilizing many different sources of information in its research process, including public SEC financial filings, investment presentations, Wall Street research, business, economic, financial and other publications, trade

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journals, third-party data services and one-on-one conversations with company management teams, suppliers, customers, end users and industry specialists, as well as lawyers and academic specialists. In addition, the Adviser plans to utilize third-party consultants to provide it with research, including information regarding various markets, industries and companies.

In the research process, the Adviser focuses primarily on the company’s ability to generate cash flow, asset and enterprise value, barriers to entry, investment monetization strategy, management team quality and covenant protections.

Company Cash Flow.

The Adviser places a strong emphasis on fundamental analysis and analyzing the ability of a company to service its debt and decrease its level of leverage through cash flow generation. The Adviser looks at historical and forecasted cash flow in its analysis. The Adviser’s models also evaluate key factors that drive the financial performance of a company.

Asset and Enterprise Value.

The Adviser focuses on companies with significant asset or enterprise value that can provide support for the Company’s investments, particularly in the event of default in which the creditors have the ability to control the business and monetize the company’s assets to minimize losses. The Adviser reviews the value of the assets, both tangible and intangible, and conducts discounted cash flow analyses as well as comparable company analyses.

Barriers to Entry.

The Adviser targets companies it believes have high barriers to entry, such as requiring a large upfront investment, businesses with established and leading market positions within their market, or businesses with valuable long-term contracts. This analysis helps the Adviser determine the future sustainability of a company’s cash flow.

Investment Monetization Strategy.

The Adviser generally invests in companies that it believes will provide the Company with the opportunity to exit the investment in three to five years, including through (i) the repayment of the remaining principal outstanding at maturity, (ii) the recapitalization of the company resulting in the Company’s debt investments being repaid, (iii) the sale of the company, resulting in the repayment of all of its outstanding debt, or (iv) the re-rating of the investment in the secondary trading market to a price that the Adviser believes is attractive to exit.

Management Team Quality.

As part of its diligence process, the Adviser assesses a company’s management team, often by meeting with the team and studying its track record. The Adviser believes that strong management teams can create long-term value and help a company navigate challenging circumstances.

Covenant Protections.

The Adviser generally invests in debt instruments that have strong covenants, in order to minimize the Company’s risk of loss. The Adviser seeks to invest in securities that provide credit protections, including sacred rights, default penalties, information rights and affirmative, negative and financial covenants, such as limitations on debt incurrence, release of collateral, permitted investments and dividends. The Adviser also focuses on taking advantage of call protection, original issue discount and make-wholes to enhance yield.

The Adviser’s investment process is iterative and even after an investment is made, the diligence process continues. In managing the Company’s portfolio, the Adviser monitors each portfolio company to be well-positioned to make hold and exit decisions when credit events occur, collateral becomes overvalued, or opportunities with more attractive risk/reward profiles are identified. Especially in the liquid part of the portfolio, the Adviser is proactive about exiting investments when it believes they are over-valued or the risk/reward is unattractive. In circumstances where a particular investment is underperforming, the Adviser would employ a variety of strategies to maximize its recovery based on the specific facts and circumstances of the underperforming investment, including actively working with management to restructure all or a portion of the business, explore the possibility of a sale or merger of all or a portion of the assets, recapitalize or refinance the balance sheet, negotiate deferrals or other concessions from existing creditors and arrange new liquidity or new equity contributions. The Adviser has extensive experience with financial and operational restructurings that it believes will help preserve the value of the Company’s investments.

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Investment Strategies, Criteria and Guidelines

The Company generally invests in the most senior levels of a company’s capital structure, including senior bank debt, senior notes and senior bonds of corporate issuers.

There are many different types of stressed and distressed instruments in which the Company may invest, including, but not limited to, senior bank debt, senior notes, subordinated notes, trade claims, liquidating trusts, and litigation trusts. The Company may also invest in other instruments that, in the Adviser’s view, complement its main strategies, including high yield bank debt and bonds, U.S. or non-U.S., publicly traded or privately issued or negotiated common stocks, preferred stocks, stock warrants and rights, sovereign debt, corporate debt, bonds, notes or other debentures or debt participations, convertible securities, swaps, options (purchased or written), futures contracts, commodities and other derivative instruments, foreign currencies, partnership interests, and other securities or financial instruments including those of investment companies. The Company may also take long or short positions, as it deems appropriate and subject to any client-specific, market or regulatory limitations, in any of the investment instruments noted above.

Geography

As a BDC, the Company maintains at least 70% of its total assets in private U.S. companies in compliance with the applicable provisions of the 1940 Act. To the extent the Adviser invests in non-U.S. companies, it does so in accordance with 1940 Act limitations and only in jurisdictions with established legal frameworks and a history of respecting creditor rights.

Managerial Assistance

As a BDC, the Company offers, and must provide upon request, managerial assistance to its portfolio companies. This assistance could involve monitoring the operations of the Company’s portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. The Administrator or an affiliate of the Administrator will provide such managerial assistance on the Company’s behalf to portfolio companies that request this assistance. The Company may receive fees for these services and reimburse the Administrator or an affiliate of the Administrator, as applicable, for its allocated costs in providing such assistance, subject to the review and approval by the Board of Directors, including the Independent Directors.

Contribution Transaction

The Company entered into a facility agreement with certain affiliates of the Adviser to acquire our initial portfolio investments by purchasing certain investments owned and held by such private funds prior to the effectiveness of the filing of the Company’s initial registration statement and prior to the Company’s election to be treated as a BDC. The Company purchased such investments by issuing a contingent note to the sellers that was payable upon satisfying certain conditions, namely (i) the Company received aggregate subscriptions of fifty million dollars ($50,000,000) or greater deposited from escrow into its custody account and (ii) the Board of Directors approved the transaction and payment of the note. Both of those conditions have been satisfied. There are no material differences between the investment process used for analyzing the initial investments and the investment process to be employed by the Adviser on the Company’s behalf going forward.

Investment Advisory Agreement

The Company has entered into the Investment Advisory Agreement with the Adviser under which the Adviser, subject to the overall supervision of the Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, the Company. Under the terms of the Investment Advisory Agreement, the Adviser will continue to:

● determine the composition of the Company’s portfolio, the nature and timing of the changes to the Company’s portfolio and the manner of implementing such changes;

● identify, evaluate and negotiate the structure of the investments the Company makes;

● execute, close, service and monitor the investments the Company makes;

● determine the securities and other assets that the Company purchases, retains or sells;

● perform due diligence on prospective portfolio companies and their sponsors; and

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● provide the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its assets.

The Adviser’s services under the Investment Advisory Agreement are not exclusive, and the Adviser is free to furnish similar services without the prior approval of the Company’s stockholders or the Board of Directors to other entities so long as the Adviser’s services to the Company are not impaired. The Board of Directors monitors for any potential conflicts that may arise upon such a development.

Investment Advisory Fees

For providing the services described above, the Adviser receives a fee from the Company consisting of two components—a base management fee and an incentive fee.

Base Management Fee

The Base Management Fee is calculated at a quarterly rate equal to 0.375% (i.e., 1.50% annually) of the Company’s Weighted Average Net Asset Value for the quarter; provided that the quarterly base management fee will be decreased to 0.25% (i.e., 1.00% annually) of the value of the Company’s Weighted Average Net Asset Value during any extension of the period in which the Company may complete a listing of shares of the Company’s common stock on a national securities exchange or a merger or other transaction in which investors receive cash or shares of a publicly-listed issuer (a “Liquidity Event”). “Weighted Average Net Asset Value” means, at the time of any calculation, the weighted average shares outstanding multiplied by the average of the beginning net asset value per share and ending net asset value per share (prior to management and incentive fees) of a period of time.

Incentive Fee

The incentive fee payable under the Investment Advisory Agreement has two parts, as follows:

One part is calculated and payable quarterly in arrears based on the Company’s Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, Pre-Incentive Fee Net Investment Income means interest income, dividend income and any other income, including any other fees (other than fees for providing managerial assistance) such as amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense or amendment fees under any credit facility and distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle. The Company pays the Adviser an incentive fee with respect to Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:

(1)            No incentive fee in any calendar quarter in which Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of one and a half percent (1.50%) per quarter (6.00% annualized);

(2)            One hundred percent (100%) of Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than the percentage at which amounts payable to the Adviser pursuant to the income incentive fee equal fifteen percent (15%) of the Company’s Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply. This portion of the Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than 1.76%) is referred to as the “catch-up.” The “catch-up” is meant to provide the Adviser with 15% of the Company’s Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply; and

(3)            Fifteen percent (15%) of the amount of Pre-Incentive Fee Net Investment Income, if any, that exceeds 1.76% in any calendar quarter (7.04% annualized).

These calculations will be pro-rated for any period of less than a full calendar quarter and will be adjusted for share issuances or repurchases during the relevant quarter, if applicable.

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The following is a graphical representation of the calculation of the quarterly incentive fee based on Pre-Incentive Fee Net Investment Income:

Pre-Incentive Fee Net Investment Income

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment Income

allocated to income-related portion of incentive fee

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 15% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

Under U.S. generally accepted accounting principles (“GAAP”), the Company is required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, the Company considers the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation will not be permitted to be considered in calculating the fee actually payable under the Investment Advisory Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then the Company will record a capital gains incentive fee equal to 15% of such amount, less the aggregate amount of actual capital gains related incentive fees paid or accrued in all prior years. If such amount is negative, then there is either no accrual for such year or a reduction in prior accruals for changes in net unrealized capital appreciation and depreciation. There can be no assurance that such unrealized capital appreciation will be realized in the future.

Incentive Fee Cap

No incentive fee will be paid to the Adviser to the extent that, after such payment, the cumulative income-based incentive fees and capital gains-based incentive fees paid to date would be greater than fifteen percent (15%) of the Company’s Cumulative Pre-Incentive Fee Net Income since the date of its election to become a BDC (the “Incentive Fee Cap”). “Cumulative Pre-Incentive Fee Net Income” is equal to the sum of (a) Pre-Incentive Fee Net Investment Income for each period since the date of the Company’s election to become a BDC and (b) cumulative aggregate realized capital gains, cumulative aggregate realized capital losses, cumulative aggregate unrealized capital depreciation and cumulative aggregate unrealized capital appreciation, in each case, since the date of the Company’s election to become a BDC. If, for any relevant period, the Incentive Fee Cap calculation results in the Company paying less than the amount of the income-based incentive fee and the capital gains-based incentive fee as calculated above, then the difference between (a) such amount and (b) the Incentive Fee Cap will not be paid by the Company, and will not be received by the Adviser, either at the end of such relevant period or at the end of any future period.

Examples of Quarterly Incentive Fee Calculation

Assumptions

Hurdle⁽¹⁾ = 1.50%

Base management fee⁽²⁾ = 0.375%

Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.1375%

Example 1: Income Related Portion of Incentive Fee ^(*):

Alternative 1:

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Additional Assumptions

Investment income (including interest, dividends, fees, etc.) = 1.25%

Pre-Incentive Fee Net Investment Income

(investment income – (base management fee + other expenses)) = 0.7375%

Pre-Incentive Fee Net Investment Income does not exceed hurdle; therefore there is no incentive fee.

Alternative 2:

Additional Assumptions

Investment income (including interest, dividends, fees, etc.) = 2.75%

Pre-Incentive Fee Net Investment Income

(investment income – (base management fee + other expenses)) = 2.2375%

Pre-Incentive Fee Net Investment Income exceeds hurdle; therefore there is an incentive fee.

Incentive fee         = 100% x “catch up” + the greater of 0% AND (15% × (Pre-Incentive Fee Net Investment Income – 1.76%))

= 100% x (1.76% – 1.50%) + 15% x (2.2375% – 1.76%)

= 100% x (0.26%) + (15% x 0.4775%)

= 0.26% + 0.071625%

= 0.331625%

Alternative 3:

Additional Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.75%

Pre-Incentive Fee Net Investment Income

(investment income – (base management fee + other expenses)) = 3.2375%

Incentive fee         = 100% x “catch up” + the greater of 0% AND (15% × (Pre-Incentive Fee Net Investment Income – 1.76%))

= 100% x (1.76% – 1.50%) + 15% x (3.2375% – 1.76%)

= 100% x (0.26%) + 15% x (1.4775%)

= 0.26% + 0.221625%

= 0.481625%

* The hypothetical amount of Pre-Incentive Fee Net Investment Income shown is based on a percentage of total net assets.

⁽¹⁾  Represents quarterly hurdle rate.

⁽²⁾  Represents one-quarter of 1.50% annualized base management fee.

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Example 2: Capital Gains Portion of Incentive Fee:

Alternative 1

Assumptions

Year 1:     $20 million investment made in Company A (“Investment A”) and $30 million investment made in Company B (“Investment B”)

Year 2:     Investment A is sold for $15 million and fair value of Investment B determined to be $29 million

Year 3:     Fair value of Investment B determined to be $27 million

Year 4     Investment B sold for $25 million

The capital gain incentive fee, if any, would be:

Year 1:     None

Year 2:     None (Sales transaction resulted in a realized capital loss on Investment A)

Year 3:     None

Year 4:     None (Sales transaction resulted in a realized capital loss on Investment B)

Each quarterly incentive fee is subject to the Incentive Fee Cap. Below are the necessary adjustments to adhere to the Incentive Fee Cap.

Year 1:     No adjustment.

Year 2:     Investment A sold at a $5 million loss. Investment B has unrealized capital depreciation of $1 million. Therefore, the Adviser would not be paid on the $6 million of realized losses and unrealized capital depreciation, which would reduce the incentive fee by $900,000.

Year 3:     Investment B has additional unrealized capital depreciation of $2 million. Therefore, the Adviser would not be paid on the $2 million of unrealized capital depreciation, which would reduce the incentive fee by $300,000.

Year 4:     Investment B sold at a $5 million loss. Investment B was previously marked down by $3 million; therefore, the Company would realize a $5 million loss on Investment B and reverse the previous $3 million in unrealized capital depreciation. The net effect would be a realized loss of $2 million. The Adviser would not be paid on the $2 million loss, which would reduce the incentive fee by $300,000.

Alternative 2

Assumptions

Year 1:     $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)

Year 2:     Fair value of Investment A determined to be $18 million, fair value of Investment B determined to be $25 million and fair value of Investment C determined to be $25 million

Year 3:     Investment A sold for $18 million. Fair value of Investment B determined to be $24 million and fair value of Investment C determined to be $25 million

Year 4:     Fair value of Investment B determined to be $22 million. Investment C sold for $24 million

Year 5:      Investment B sold for $20 million

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The Capital Gain Incentive Fee, if any, would be:

Year 1:     None

Year 2:     None

Year 3:     None

Year 4:     None

Year 5:      None

Each quarterly incentive fee is subject to the Incentive Fee Cap. Below are the necessary adjustments to adhere to the Incentive Fee Cap.

Year 1:         No adjustment.

Year 2:         There is total unrealized capital depreciation of $7 million. The Adviser would not be paid on the $7 million unrealized capital depreciation, which would reduce the incentive fee by $1,050,000.

Year 3:         Investment A sold at a $2 million loss. Investment A was previously marked down by $2 million; therefore, the Company would realize a $2 million loss on Investment A and reverse the previous $2 million in unrealized capital depreciation. Investment B has additional unrealized capital depreciation of $1 million. The net effect would be a loss of $1 million. The Adviser would not be paid on the $1 million loss, which would reduce the incentive fee by $150,000.

Year 4:         Investment B has additional unrealized capital depreciation of $2 million. Investment C sold at a $1 million realized loss. The Adviser would not be paid on the $3 million of unrealized depreciation and realized losses, which would reduce the incentive fee by $450,000.

Year 5:         Investment B sold at a $10 million loss. Investment B was previously marked down by $8 million; therefore, the Company would realize a $10 million loss on Investment B and reverse the previous $8 million in unrealized capital depreciation. The net effect would be a loss of $2 million. The Adviser would not be paid on the $2 million loss, which would reduce the incentive fee by $300,000.

Alternative 3

Assumptions

Year 1:     $25 million investment made in Company A (“Investment A”) and $20 million investment made in Company B (“Investment B”)

Year 2:     Investment A is sold for $30 million and FMV of Investment B determined to be $21 million

Year 3:     FMV of Investment B determined to be $23 million

Year 4:     Investment B sold for $23 million

The Capital Gain Incentive Fee, if any, would be:

Year 1:     None

Year 2:     $750,000 (15% multiplied $5 million realized capital gains on sale of Investment A)

Year 3:     None

Year 4:     $450,000 (15% multiplied by $8 million realized capital gains on sale of Investment A and Investment B less capital gain incentive fee paid in year 2)

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Each quarterly incentive fee is subject to the Incentive Fee Cap. Below are the necessary adjustments to adhere to the Incentive Fee Cap.

Year 1:     No adjustment.

Year 2:     No adjustment.

Year 3:     No adjustment.

Year 4:     No adjustment.

Expenses

The Company’s primary operating expenses include the payment of management and incentive fees to the Adviser under the Investment Advisory Agreement, the Company’s allocable portion of overhead under the Administration Agreement and other operating costs as detailed below. The Company bears all other direct or indirect costs and expenses of its operations and transactions, including:

● organizational and offering costs in excess of $1.0 million;

● the cost of calculating the Company’s net asset value, including the cost of any third-party valuation services and software;

● the cost of effecting sales and repurchases of shares of the Company’s common stock and other securities;

● fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence and reviews of prospective investments or complementary businesses, whether or not the investment is consummated;

● expenses incurred by the Adviser in performing due diligence and reviews of investments;

● research expenses incurred by the Adviser (including subscription fees and other costs and expenses related to Bloomberg Professional Services);

● amounts incurred by the Adviser in connection with or incidental to acquiring or licensing software and obtaining research;

● distributions on the Company’s common stock;

● expenses related to leverage, if any, incurred to finance the Company’s investments, including rating agency fees, interest, preferred stock dividends, obtaining lines of credit, loan commitments and letters of credit for the account of the Company and its related entities;

● transfer agent and custodial fees and expenses;

● bank service fees;

● fees and expenses associated with marketing efforts;

● federal and state registration fees and any stock exchange listing fees;

● fees and expenses associated with independent audits and outside legal costs;

● federal, state, local and foreign taxes (including real estate, stamp or other transfer taxes), including costs in connection with any tax audit, investigation or review, or any settlement thereof;

● complying with FATCA and/or any foreign account reporting regimes and certain regulations and other administrative guidance thereunder, including the Common Reporting Standard issued by the Organization for Economic Cooperation and Development, or similar legislation, regulations or guidance enacted in any other jurisdiction, which seeks to implement tax reporting and/or withholding tax regimes as well as any intergovernmental agreements and other laws of other jurisdictions with similar effect;

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● Independent Directors’ fees and expenses;

● brokerage fees and commissions;

● fidelity bond, directors and officers, errors and omissions liability insurance and other insurance premiums;

● the costs of any reports, proxy statements or other notices to the Company’s stockholders, including printing costs;

● costs of holding stockholder meetings;

● litigation, indemnification and other non-recurring or extraordinary expenses;

● any governmental inquiry, investigation or proceeding to which the Company and/or an investment is a related party or is otherwise involved, including judgments, fines, other awards and settlements paid in connection therewith;

● other direct costs and expenses of administration and operation, such as printing, mailing, long distance telephone and staff;

● costs associated with the Company’s reporting and compliance obligations, including under the 1940 Act and applicable federal and state securities laws (including reporting under Sections 13 and 16 under the Exchange Act and anti-money laundering compliance);

● dues, fees and charges of any trade association of which the Company is a member;

● costs associated with the formation, management, governance, operation, restructuring, maintenance (including any amendments to constituent documents), winding up, dissolution or liquidation of entities;

● fees, costs and expenses incurred in connection with or incidental to co-investments or joint ventures (whether or not consummated) that are not borne by co-investors or joint venture partners;

● the allocated costs incurred by the Administrator in providing managerial assistance to those portfolio companies that request it; and

● all other expenses incurred by either the Administrator or the Company in connection with administering the Company’s business, including payments under the Administration Agreement that will be based upon the Company’s allocable portion of overhead, and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including the fees of the Sub-Administrator, rent, technology systems (including subscription fees and other costs and expenses related to Bloomberg Professional Services and the Adviser’s third-party Order Management System), insurance and the Company’s allocable portion of the cost of compensation and related expenses of its Chief Compliance Officer and Chief Financial Officer and their respective staffs.

The allocation of expenses by the Adviser between it, the Company and any client and among clients represents a conflict of interest for the Adviser. To address this conflict, the Adviser has adopted and implemented policies and procedures for the allocation of expenses. See “Item 1A. Risk Factors—Company Operations—The Adviser has obligations to its other clients.”

The Adviser has agreed to limit, indefinitely, the amount of Specified Expenses (as defined below) borne by the Company to an amount not to exceed 0.25% per annum of the greater of (i) the Company’s aggregate capital commitments (“Capital Commitments”) and (ii) the Company’s net assets, at the time of determination (the “Expense Cap”). “Specified Expenses” include the following expenses incurred by the Company in its ordinary course of business: (i) third-party fund administration and fund accounting; (ii) printing and mailing expenses; (iii) professional fees, consisting of legal, compliance, tax and audit fees; (iv) treasury and compliance function expenses, including the salary of any internal Redwood resources reimbursed by the Company; (v) research expenses relating to Bloomberg, expert network services, and investment research subscriptions; (vi) Independent Director fees and expenses; (vii) premiums for director and officer and errors and omissions insurance; and (viii) valuation of Company investments. For the avoidance of doubt, Specified Expenses will not include any other expenses of the Company incurred in connection with its operations, including but not limited to, (i) any advisory fees payable by the Company under an effective advisory agreement, (ii) investment expenses (such as fees and expenses of outside legal counsel or third-party consultants, due diligence-related fees and other costs, expenses and liabilities with respect to consummated and unconsummated investments), (iii) taxes paid, (iv) interest expenses and fees on borrowing, (v) fees incurred in connection with the establishment of borrowing or other leverage arrangements, (vi) brokerage commissions, expenses related to litigation and potential litigation, and (vii) extraordinary expenses not incurred in the ordinary course of the Company’s business, including such expenses as approved by the Board of Directors, including a majority of the Independent

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Directors. The Expense Cap is based on the greater of (i) the Company’s aggregate Capital Commitments, without reduction for contributed capital or Capital Commitments no longer available to be called by the Company and (ii) the Company’s net assets, in each case as calculated at the end of a calendar year. In any year, to the extent that Specified Expenses exceed the Expense Cap of such prior year end, the Adviser will promptly waive fees or reimburse the Company for expenses necessary to eliminate such excess. For the Company’s first year of operations, the Specified Expenses will be annualized and to the extent such annualized Specified Expenses exceed the Expense Cap for such period on an annualized basis, the Adviser will promptly waive fees or reimburse the Company for expenses necessary to eliminate such excess. Such waivers are not subject to future reimbursement by the Company.

Initial Approval

At a meeting held on February 28, 2022, the Board of Directors voted to approve the Investment Advisory Agreement for an initial term of two years commencing upon the Company’s election to be treated as a BDC under the 1940 Act. In reaching a decision to approve the Investment Advisory Agreement, the Board of Directors reviewed a significant amount of information and considered, among other things:

· the nature, extent and quality of services to be provided to the Company by the Adviser;

· the relative investment performance of other entities managed by the Adviser;

· the fees paid by other comparable business development companies; and

· various other matters.

Based on the information reviewed and the considerations detailed above, the Board of Directors, including all of the Independent Directors, approved the Investment Advisory Agreement.

The Company’s sole stockholder also approved the Investment Advisory Agreement on March 31, 2022.

Amended and Restated Investment Advisory Agreement

As discussed in the definitive proxy statement of the Company, filed with the SEC on September 19, 2022 (the “Proxy Statement”), the Company held a special meeting of shareholders (the “Special Meeting”) to approve an amended and restated Investment Advisory Agreement. The Company’s shareholders approved the Investment Advisory Agreement at the Special Meeting.

The Investment Advisory Agreement provides for the quarterly base management fee described above. Previously, the base management fee was calculated based on the value of the Company’s net assets excluding cash and cash equivalents at the end of the two most recently completed calendar quarters.

Duration and Termination

Unless terminated earlier as described below, the Investment Advisory Agreement continues to be in effect for an initial term of two years and then from year to year thereafter if approved annually by the Board of Directors or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, and, in either case, if also approved by a majority of the Independent Directors. The Investment Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, and may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. The holders of a majority of the Company’s outstanding voting securities, by vote, may also terminate the Investment Advisory Agreement without penalty.

Staffing

The Company does not currently have any employees. Our day-to-day investment operations are managed by the Adviser.  

Administration Agreement

The Company has entered into the Administration Agreement with the Administrator pursuant to which the Administrator furnishes the Company with office facilities, equipment and clerical, bookkeeping and record keeping services. Under the Administration Agreement, the Administrator will perform or will oversee the performance of, the Company’s required administrative services, which will include, among other activities, being responsible for the financial records the Company is required to maintain and preparing

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reports to the Company’s stockholders and reports filed with the SEC. In addition, the Administrator will assist the Company in determining and publishing its net asset value, will oversee the preparation and filing of the Company’s tax returns and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to it by others. The Administrator has entered into a sub-administration agreement with the Sub-Administrator, pursuant to which the Administrator will delegate certain administrative functions to the Sub-Administrator. For providing these services, facilities and personnel, the Company may reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including fees of the Sub-Administrator, rent, technology systems (including subscription fees and other costs and expenses related to Bloomberg Professional Services and the Adviser’s third-party Order Management System), insurance and the Company’s allocable portion of the cost of compensation and related expenses of its Chief Compliance Officer and Chief Financial Officer and their respective staffs. The Administrator also will offer on the Company’s behalf managerial assistance to portfolio companies to which the Company will be required to offer such assistance. To the extent that the Administrator outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to the Administrator.

Duration and Termination

Unless terminated earlier as described below, the Administration Agreement will continue in effect for an initial term of two years from its effective date. Thereafter, it will remain in effect if approved annually by the Board of Directors, or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, including, in either case, approval by a majority of the Independent Directors. The Administration Agreement may not be assigned by either party without the consent of the other party. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other.

Indemnification and Exculpation

The Investment Advisory Agreement and the Administration Agreement provide that, absent willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their duties and obligations, the Adviser and the Administrator and their officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with them (the “Indemnified Parties”) are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Adviser’s and the Administrator’s services under the Investment Advisory Agreement or Administration Agreement or otherwise as investment adviser or administrator of the Company. Under the Investment Advisory Agreement, the Indemnified Parties shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (a) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the Indemnified Party; (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnified Party; or (c) a court of competent jurisdiction approves a settlement of the claims against the Indemnified Party and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which the Company’s securities were offered or sold as to indemnification for violations of securities laws.

Regulation as a Business Development Company

General

The Company has elected to be regulated as a BDC under the 1940 Act. As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. The 1940 Act contains prohibitions and restrictions relating to certain transactions between a BDC and certain affiliates (including any investment advisers or sub-advisers), principal underwriters and certain affiliates of those affiliates or underwriters. The 1940 Act also requires that a majority of the Company’s directors be Independent Directors. In addition, the 1940 Act provides that the Company may not change the nature of its business so as to cease to be, or to withdraw its election as, a BDC unless that change is approved by holders of at least a majority of the Company’s outstanding voting securities. Under the 1940 Act, the vote of holders of at least a “majority of outstanding voting securities” means the vote of the holders of the lesser of: (a) 67% or more of the outstanding shares of the Company’s voting securities present at a meeting or represented by proxy if holders of more than 50% of the shares of the Company’s voting securities are present or represented by proxy or (b) more than 50% of the outstanding shares of the Company’s voting securities.

None of these policies, or any of the Company’s other policies described herein, is fundamental and each may be changed without stockholder approval.

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Qualifying Assets

A BDC must be organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) below. Thus, under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. The principal categories of qualifying assets relevant to the Company’s business are the following:

(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

(a) is organized under the laws of, and has its principal place of business in, the United States;

(b) is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

(c) satisfies any of the following:

(i) does not have any class of securities that is traded on a national securities exchange;

(ii) has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;

(iii) is controlled by a BDC or a group of companies including a BDC, and the BDC has an affiliated person who is a director of the eligible portfolio company; or

(iv) is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million.

(2) Securities of any eligible portfolio company which the Company controls.

(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and the Company already owns 60% of the outstanding equity of the eligible portfolio company.

(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.

(6) Cash, cash equivalents, U.S. government securities or high quality debt securities maturing in one year or less from the time of investment.

The Company looks through its subsidiaries, if any, to the underlying holdings (considered together with portfolio assets held outside of its subsidiaries) for purposes of determining compliance with the 70% qualifying assets requirement of the 1940 Act.

Managerial Assistance to Portfolio Companies

In order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business

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objectives and policies of a portfolio company. The Administrator may provide such significant managerial assistance on the Company’s behalf to portfolio companies that request such assistance. The Company may receive fees for these services.

Temporary Investments

Pending investment in other types of qualifying assets, the Company’s investments may consist of cash, cash equivalents, U.S. government securities or high quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as “temporary investments,” so that 70% of the Company’s assets are qualifying assets. The Company may also invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as the Company, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of the Company’s assets that may be invested in such repurchase agreements. However, if more than 25% of the Company’s gross assets constitute repurchase agreements from a single counterparty, the Company would not meet the diversification tests in order to qualify as a RIC. Thus, the Company does not intend to enter into repurchase agreements with a single counterparty in excess of this limit. The Adviser will monitor the creditworthiness of the counterparties with which the Company enters into repurchase agreement transactions.

Indebtedness and Senior Securities

The Company’s sole initial stockholder has approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the Company is permitted, under specified conditions and subject to certain disclosure requirements, to issue multiple classes of indebtedness and one class of stock senior to its common stock if the Company’s asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, while any senior securities remain outstanding, the Company may be prohibited from making any distribution to its stockholders or the repurchase of such securities or shares unless the Company meets the applicable asset coverage requirement at the time of the distribution or repurchase. In addition, the Company may borrow amounts up to 5% of the value of its total assets for temporary or emergency purposes without regard to asset coverage.

Co-Investments

The Company is prohibited under the 1940 Act from participating in certain transactions with its affiliates without the prior approval of the Independent Directors and, in some cases, the SEC. Any person that owns, directly or indirectly, five percent or more of the Company’s outstanding voting securities will be its affiliate for purposes of the 1940 Act, and the Company generally is prohibited from buying or selling any security from or to such affiliate, absent the prior approval of the Independent Directors. The Company considers the Adviser and its affiliates to be its affiliates for such purposes. The 1940 Act also prohibits certain “joint” transactions with certain of the Company’s affiliates, which could include investments in the same portfolio company, without prior approval of the Independent Directors and, in some cases, the SEC. The Company is prohibited from buying or selling any security from or to, among others, any person who owns more than 25% of the Company’s voting securities or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC.

The Company may, however, invest alongside the Adviser and its affiliates’ other clients in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, the Company may invest alongside such accounts consistent with guidance promulgated by the SEC staff permitting the Company and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the Adviser, acting on the Company’s behalf and on behalf of its other clients, negotiates no term other than price. The Company may also invest alongside the Adviser’s other clients as otherwise permissible under regulatory guidance, applicable regulations and the Adviser’s allocation policy. Under this allocation policy, if an investment opportunity is appropriate for the Company and another account, the Adviser will seek to allocate such investment opportunities in good faith in a manner that is fair and equitable over time. Any such allocation takes into account, among other things, (1) whether the risk-return profile of the proposed investment is consistent with an account’s objectives; (2) the potential for the proposed investment to create an imbalance in an account’s collateral portfolio; (3) the liquidity requirements of an account; (4) potentially adverse tax consequences; (5) legal, contractual or regulatory restrictions that would or could limit an account’s ability to participate in a proposed investment; (6) the need to re-size risk in an account’s portfolio; and (7) minimum or maximum investment size requirements.

On April 1, 2022, the SEC granted to the Adviser and the Company exemptive relief on which we expect to rely to co-invest with other funds managed by the Adviser in a manner consistent with our investment, objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.

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Code of Ethics

The Company and the Adviser have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain transactions by the Company’s personnel. These codes of ethics generally do not permit investments by the Company’s and the Adviser’s personnel in securities that may be purchased or sold by the Company.

Compliance Policies and Procedures

The Company and the Adviser have each adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a Chief Compliance Officer to be responsible for administering the policies and procedures.

Other

The Company will be periodically examined by the SEC for compliance with the 1940 Act.

The Company is required by 1940 Act to provide and maintain a bond issued by a reputable fidelity insurance company to protect against larceny and embezzlement. Furthermore, as a BDC, the Company is prohibited from protecting any director or officer against any liability to the Company or its stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act imposes a variety of regulatory requirements on companies with a class of securities registered under the Exchange Act and their insiders. Many of these requirements will affect the Company. For example:

· Pursuant to Rule 13a-14 under the Exchange Act, the Company’s principal executive officer and principal financial officer must certify the accuracy of the financial statements contained in the Company’s periodic reports;

· Pursuant to Item 307 under Regulation S-K, the Company’s periodic reports must disclose the Company’s conclusions about the effectiveness of the Company’s disclosure controls and procedures;

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	·	Pursuant to Rule 13a-15 under the Exchange Act, beginning with the Company’s fiscal year ended December 31, 2023, Company management must prepare an annual report regarding its assessment of the Company’s internal control over financial reporting; and

· Pursuant to Item 308 of Regulation S-K and Rule 13a-15 under the Exchange Act, the Company’s periodic reports must disclose whether there were significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

The Sarbanes-Oxley Act requires the Company to review its policies and procedures to determine whether the Company complies with the Sarbanes-Oxley Act and the regulations promulgated thereunder. The Company will monitor its compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to comply with the Sarbanes-Oxley Act in the future.

JOBS Act

The Company is and expects to remain an “emerging growth company,” as defined in the JOBS Act, until the earliest of:

· The last day of the Company’s fiscal year in which the fifth anniversary of an IPO, if any, of shares of the Company’s common stock occurs;

· The last day of the fiscal year in which the Company’s annual gross revenue first exceeds $1.235 billion;

· The date on which the Company has, during the prior three-year period, issued more than $1.0 billion in non-convertible debt; and

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· The last day of a fiscal year in which the Company (a) has an aggregate worldwide market value of its common stock held by non-affiliates of $700 million or more, computed at the end of each fiscal year as of the last business day of the Company’s most recently completed second fiscal quarter and (b) has been a reporting company under the Exchange Act for at least one year (and filed at least one annual report under the Exchange Act).

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. The Company intends to make an irrevocable election not to take advantage of this exemption from new or revised accounting standards. The Company therefore is subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Proxy Voting Policies and Procedures

The Company has delegated its proxy voting responsibility to the Adviser. The proxy voting policies and procedures of the Adviser are set forth below. These guidelines are reviewed periodically by the Adviser and the Independent Directors, and, accordingly, are subject to change.

As an investment adviser registered under the Advisers Act, the Adviser has a fiduciary duty to act solely in the best interests of its clients, including the Company. As part of this duty, the Adviser recognizes that it must vote portfolio securities in a timely manner free of conflicts of interest and in the best interests of its clients.

The Adviser’s policies and procedures for voting proxies are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

The Adviser will vote proxies relating to the Company’s portfolio securities in what it perceives to be the best interest of the Company’s stockholders. The Adviser will review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by the Company. Although the Adviser will generally vote against proposals that may have a negative impact on the Company’s portfolio securities, it may vote for such a proposal if there exist compelling long-term reasons to do so.

There may be occasions where the voting of proxies may present an actual or perceived conflict of interest between the Adviser and its clients. The Adviser will not vote proxies contrary to the best interest of its clients due to business or personal relationships with an issuer’s management, participants in proxy contests, corporate directors or candidates for corporate directorships, or where the Adviser or an employee may have a personal interest in the outcome of a particular matter before shareholders. When there exists an actual or potential conflict of interest, the Adviser addresses these conflicts or appearances of conflicts by ensuring that proxies are voted in accordance with the recommendations made by a third-party. Where conflicts of interest may be present, the Adviser will disclose such conflicts to the Company, including the Independent Directors, and may request guidance from the Company on how to vote such proxies.

Stockholders may obtain information regarding how the Adviser voted proxies with respect to the Company’s portfolio securities free of charge by making a written request for proxy voting information to: c/o Redwood Capital Management, LLC, Chief Compliance Officer, 250 West 55th Street, 26th Floor, New York, NY 10019.

Privacy Principles

The Company endeavors to maintain the privacy of its stockholders and to safeguard their non-public personal information. The following information is provided to help stockholders understand what non-public personal information the Company collects, how the Company protects that information and why, in certain cases, the Company may share that information with select other parties.

The Company collects non-public personal information about stockholders from the Subscription Agreements or other forms, such as name, address, account number and the types and amounts of investments, and information about transactions with the Company and its affiliates, such as participation in other investment programs, ownership of certain types of accounts or other account data and activity. The Company may disclose the non-public personal information that it collects from stockholders or former stockholders, as described above, to its affiliates and service providers and as allowed by applicable law or regulation. Any party that receives this information from the Company is permitted to use it only for the services required by the Company and as allowed by applicable law or regulation, and is not permitted to share or use this information for any other purpose. The Company permits access only by authorized personnel who need access to that non-public personal information to provide services to the Company and its stockholders. The Company also maintains physical, electronic and procedural safeguards for non-public personal information that are designed to comply with applicable law.

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Material U.S. Federal Income Tax Considerations

The following discussion is a general summary of certain material U.S. federal income tax considerations applicable to the Company, to its qualification and taxation as a RIC for U.S. federal income tax purposes under Subchapter M of the Code and to the acquisition, ownership, and disposition of shares of the Company’s common stock. This summary applies only to beneficial owners that acquire shares of the Company’s common stock in this initial offering at the offering price. This discussion does not purport to be a complete description of all of the tax considerations applicable to the Company or its stockholders. In particular, this discussion does not address certain considerations that may be relevant to certain types of stockholders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, stockholders that are treated as partnerships for U.S. federal income tax purposes, dealers in securities, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, pension plans and trusts, financial institutions, real estate investment trusts, other RICs, tax exempt organizations, banks and other financial institutions, U.S. stockholders whose functional currency is not the U.S. dollar, non-U.S. stockholders (as defined below) engaged in a trade or business in the United States or entitled to claim the benefits of an applicable income tax treaty, persons who have ceased to be U.S. citizens or to be taxed as residents of the United States, “controlled foreign corporations,” “passive foreign investment companies,” and persons that will hold the Company’s common stock as a position in a “straddle,” “hedge,” or as part of a “constructive sale” for U.S. federal income tax purposes or to the owners or partners of a stockholder. This summary is limited to stockholders that hold the Company’s common stock as capital assets (within the meaning of the Code) and does not address owners of a stockholder. This discussion is based upon the Code, its legislative history, existing and proposed U.S. Treasury regulations, and published rulings and court decisions, each as of the date of this Report and all of which are subject to change or differing interpretations, possibly retroactively, which could affect the continuing validity of this discussion. The Company has not sought, and will not seek, any ruling from the U.S. Internal Revenue Service (the “IRS”) regarding any matter discussed herein, and this discussion is not binding on the IRS. Accordingly, there can be no assurance that the IRS would not assert, and that a court would not sustain, a position contrary to any of the tax consequences discussed herein. This discussion does not discuss any aspects of U.S. estate or gift tax or non-U.S., state or local tax laws nor does it discuss the special treatment under U.S. federal income tax laws that could result if the Company invests in tax-exempt securities or certain other investment assets. For purposes of this discussion, a “U.S. stockholder” generally is a beneficial owner of the Company’s common stock that is for U.S. federal income tax purposes:

· an individual who is a citizen or resident of the United States;

· a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof, or the District of Columbia;

· a trust, if a court within the United States has primary supervision over its administration and one or more U.S. persons (as defined in the Code) have the authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes; or

· an estate, the income of which is subject to U.S. federal income taxation regardless of its source.

For purposes of this discussion, a “non-U.S. stockholder” is a beneficial owner of the Company’s common stock that is not a U.S. stockholder.

Tax matters are complicated and the tax consequences to a stockholder of an investment in the Company’s common stock will depend on the facts of the stockholder’s particular situation. Stockholders are strongly encouraged to consult their own tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of the Company’s common stock, as well as the effect of state, local and foreign tax laws, and the effect of any possible changes in tax laws.

Election to be Taxed as a RIC

The Company has elected to be treated and intends to operate in a manner so as to continuously qualify annually thereafter as a RIC under Subchapter M of the Code. As a RIC, the Company generally does not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that the Company timely distributes (or is deemed to timely distribute) to its stockholders as dividends. Instead, dividends the Company distributes (or is deemed to timely distribute) generally will be taxable to stockholders, and any net operating losses, foreign tax credits and most other tax attributes generally will not pass through to stockholders. The Company is subject to U.S. federal corporate level income tax on any undistributed income and gains. To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, the Company must distribute to its stockholders, for each taxable year, at least 90% of its investment company taxable income (which generally is the

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Company’s net ordinary taxable income and realized net short term capital gains in excess of realized net long term capital losses, determined without regard to the dividends paid deduction) (the “Annual Distribution Requirement”) for any taxable year. The following discussion assumes that the Company qualifies as a RIC.

Taxation as a Regulated Investment Company

If the Company (1) qualifies as a RIC and (2) satisfies the Annual Distribution Requirement, then the Company will not be subject to U.S. federal income tax on the portion of its investment company taxable income and net capital gain (i.e., realized net long-term capital gain in excess of realized net short-term capital loss) that the Company timely distributes (or is deemed to timely distribute) to stockholders. The Company is subject to U.S. federal income tax at the regular corporate rate on any of its income or capital gains not distributed (or deemed distributed) to its stockholders.

If the Company fails to distribute in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of its capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year (to the extent that no federal income tax was paid on such amounts) less certain over-distributions in prior years (together, the “Excise Tax Distribution Requirements”), the Company will be subject to a 4% nondeductible federal excise tax on the portion of the undistributed amounts of that income that are less than the amounts required to be distributed based on the Excise Tax Distribution Requirements. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax for the taxable year ending in that calendar year will be considered to have been distributed by year end (or earlier if estimated taxes are paid). The Company currently intends to make sufficient distributions each taxable year to satisfy the Excise Tax Distribution Requirements.

To qualify as a RIC for U.S. federal income tax purposes, the Company generally must, among other things:

(1) elect to be treated as a BDC under the 1940 Act at all times during each taxable year;

(2) derive in each taxable year at least 90% of its gross income from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale of stock, securities, foreign currencies, or other income (including certain deemed inclusions) derived with respect to the Company’s business of investing in that stock, securities, foreign currencies or other income, or (b) net income derived from an interest in a qualified publicly traded partnership (“QPTP”) (collectively, the “90% Gross Income Test”); and

(3) diversify its holdings so that at the end of each quarter of the taxable year:

(a) at least 50% of the value of its assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities that, with respect to any issuer do not represent more than 5% of the value of the Company’s assets or more than 10% of the outstanding voting securities of that issuer; and

(b) no more than 25% of the value of its assets is invested in the securities, other than U.S. government securities or securities of other RICs, of (i) one issuer, (ii) two or more issuers that are controlled, as determined under the Code, by the Company and that are engaged in the same or similar or related trades or businesses, or (iii) one or more QPTPs (collectively, the “Diversification Tests”).

The Company has an “opt-out” dividend reinvestment plan (“DRIP”). The tax consequences to stockholders of participating in the DRIP are discussed below – See “Taxation of U.S. Stockholders.”

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 IRS has issued private rulings indicating that this rule will apply even if the issuer limits the total amount of cash that may be distributed, provided that the limitation does not cause the cash to be less than 20% of the total distribution. The Company generally intends to pay distributions in cash to stockholders who have “opted out” of the Company’s dividend reinvestment plan. However, the Company reserves the right, in its sole discretion from time to time (and, so long as the Company is not a publicly offered registered investment company, as discussed below, subject to the receipt of a private letter ruling from the IRS), to limit the total amount of cash distributed to as little as 20% of the total distribution depending on, among other factors, the Company’s cash balances. In such a case, each stockholder receiving cash 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, even if the stockholder had “opted out” of the Company’s dividend reinvestment plan. In no event will any stockholder that has “opted out” of the dividend reinvestment plan receive

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less than 20% of his or her entire distribution in cash. For U.S. federal income tax purposes, the amount of a dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

The Company may have investments that require income to be included in investment company taxable income in a year prior to the year in which the Company actually receives a corresponding amount of cash in respect of that income. For example, if the Company holds corporate stock with respect to which Section 305 of the Code requires inclusion in income of amounts of deemed dividends even if no cash distribution is made, the Company must include in its taxable income in each year the full amount of its applicable share of the Company’s allocable share of these deemed dividends. Additionally, if the Company holds debt obligations that are treated under applicable U.S. federal income tax rules as having original issue discount (“OID”) (such as debt instruments with PIK interest or, in certain cases, that have increasing interest rates or are issued with warrants), the Company must include in its taxable income each year a portion of the OID that accrues over the life of the obligation, regardless of whether the Company receives cash representing that income in the same taxable year. The Company may also have to include in its taxable income other amounts that the Company has not yet received in cash, such as accruals on a contingent payment debt instrument or deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation, such as warrants or stock.

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If the Company’s deductible expenses in a given year exceed its investment company taxable income, the Company will have a net operating loss for that year. A RIC is not able to offset its investment taxable income with net operating losses on either a carryforward or carryback basis, and net operating losses generally will not pass through to stockholders. In addition, expenses may be used only to offset investment company taxable income, and may not be used to offset net capital gain. A RIC may not use any net capital losses (i.e., realized capital losses in excess of realized capital gains) to offset its investment company taxable income, but may carry forward those losses, and use them to offset future capital gains to the extent permitted by the code, indefinitely. Further, a RIC’s deduction of net business interest expense is limited to 30% of its “adjusted taxable income” plus “floor plan financing interest expense.” It is not expected that any portion of any underwriting or similar fee will be deductible for U.S. federal income tax purposes to the Company or the stockholders. Due to these limits on the deductibility of expenses, net capital losses and business interest expenses, the Company may, for U.S. federal income tax purposes, have aggregate taxable income for several years that the Company is required to distribute and that is taxable to stockholders even if this income is greater than the aggregate net income the Company actually earned during those years.

In order to enable the Company to make distributions to stockholders that will be sufficient to enable the Company to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements in the event that the circumstances described in the preceding two paragraphs apply, the Company may need to liquidate or sell some of its assets at times or at prices that the Company would not consider advantageous, the Company may need to raise additional equity or debt capital, the Company may need to take out loans, or the Company may need to forego new investment opportunities or otherwise take actions that are disadvantageous to the Company’s business (or be unable to take actions that are advantageous to its business). Even if the Company is authorized to borrow and to sell assets in order to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements, under the 1940 Act, the Company generally is not permitted to make distributions to its stockholders while the Company’s debt obligations and senior securities are outstanding unless certain “asset coverage” tests or other financial covenants are met. If the Company is unable to obtain cash from other sources to enable the Company to satisfy the Annual Distribution Requirement, the Company may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable state and local taxes). Although the Company expects to operate in a manner so as to qualify continuously as a RIC, the Company may decide in the future to be taxed as a “C” corporation, even if the Company would otherwise qualify as a RIC, if the Company determines that such treatment as a C corporation for a particular year would be in the Company’s best interest. If the Company is unable to obtain cash from other sources to enable the Company to satisfy the Excise Tax Distribution Requirements, the Company may be subject to an additional tax. However, no assurances can be given that the Company will not be subject to the excise tax and the Company may choose in certain circumstances to pay the excise tax as opposed to making an additional distribution.

For the purpose of determining whether the Company satisfies the 90% Gross Income Test and the Diversification Tests, the character of the Company’s distributive share of items of income, gain, losses, deductions and credits derived through any investments in companies that are treated as partnerships for U.S. federal income tax purposes (other than certain publicly traded partnerships), or are otherwise treated as disregarded from the Company for U.S. federal income tax purposes, generally are determined as if the Company realized these tax items directly. Further, for purposes of calculating the value of the Company’s investment in the securities of an issuer for purposes of determining the 25% requirement of the Diversification Tests, the Company’s proper proportion of any investment in the securities of that issuer that are held by a member of the Company’s “controlled group” must be aggregated with the Company’s investment in that issuer. A controlled group is one or more chains of corporations connected through stock ownership with the Company if (a) at least 20% of the total combined voting power of all classes of voting stock of each of the corporations is owned directly by one or more of the other corporations, and (b) the Company directly owns at least 20% or more of the combined voting stock of at least one of the other corporations.

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The Company does not expect to be treated as a “publicly offered regulated investment company.” Unless and until the Company is treated as a “publicly offered regulated investment company” as a result of (1) the Company’s shares collectively being held by at least 500 persons at all times during a taxable year, (2) the Company’s shares being continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act of 1933 (the “Securities Act”)) or (3) the Company’s shares being regularly traded on an established securities market, each U.S. stockholder that is an individual, trust or estate will be treated as having received a dividend for U.S. federal income tax purposes from the Company in the amount of that U.S. stockholder’s allocable share of the management and incentive fees paid to the Adviser and certain of the Company’s other expenses for the calendar year, a non-corporate U.S. stockholder’s allocable portion of these expenses are treated as miscellaneous itemized deductions that are not currently deductible by the U.S. stockholder (and beginning in 2026, will be deductible to the U.S. stockholder only to the extent they exceed 2% of the U.S. stockholder’s adjusted gross income, and will not be deductible for alternative minimum tax purposes). In addition, if the Company is not treated as a “publicly offered regulated investment company,” the Company will not be able to deduct certain “preferential dividends.” U.S. stockholders should consult their own tax advisor as to the deductibility of any management and incentive fees allocated to the U.S. stockholder.

Failure to Qualify as a RIC

If the Company, otherwise qualifying as a RIC, fails to satisfy the 90% Gross Income Test for any taxable year or the Diversification Tests for any quarter of a taxable year, the Company may continue to be taxed as a RIC for the relevant taxable year if certain relief provisions of the Code apply (which might, among other things, require the Company to pay certain corporate-level U.S. federal taxes or to dispose of certain assets). No assurance can be given that any such relief provisions would apply should the Company fail the 90% Gross Income Test or the Diversification Tests. If the Company fails to qualify as a RIC for more than two consecutive taxable years and then seeks to re-qualify as a RIC, the Company would generally be required to recognize gain to the extent of any unrealized appreciation in its assets unless the Company elects to pay U.S. corporate income tax on any of that unrealized appreciation during the succeeding 5-year period.

If the Company fails to qualify for treatment as a RIC in any taxable year and is not eligible for the relief provisions, the Company would be subject to U.S. federal income tax on all of its taxable income at the regular corporate U.S. federal income tax rate, and would be subject to any applicable state and local taxes, regardless of whether the Company makes any distributions to the holders of its common stock. Additionally, the Company would not be able to deduct distributions to its stockholders, nor would distributions to the holders of the Company’s common stock be required to be made for U.S. federal income tax purposes. Any distributions the Company makes generally would be taxable to stockholders as ordinary dividend income and, subject to certain limitations under the Code, would be eligible for the current maximum rate applicable to qualifying dividend income of individuals and other non-corporate U.S. stockholders, to the extent of the Company’s current or accumulated earnings and profits. Subject to certain limitations under the Code, certain U.S. shareholders of the Company’s common stock that are corporations for U.S. federal income tax purposes would be eligible for the dividends-received deduction. Distributions in excess of the Company’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s adjusted tax basis in its shares of the Company’s common stock, and any remaining distributions would be treated as capital gain.

The remainder of this discussion assumes that the Company will continuously qualify as a RIC for each taxable year.

The Company’s Investments—General

Certain of the Company’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (2) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (3) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income, (4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (5) cause it to recognize income or gain without receipt of a corresponding cash payment, (6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (7) adversely alter the characterization of certain complex financial transactions and (8) produce income that will not be qualifying income for purposes of the 90% Gross Income Test. The Company intends to monitor its transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurance can be given that the Company will be eligible for any such tax elections or that any elections it makes will fully mitigate the effects of these provisions.

Gain or loss recognized by the Company from securities and other financial assets acquired by the Company, as well as any loss attributable to the lapse of options, warrants, or other financial assets taxed as options generally will be treated as capital gain or loss. The gain or loss generally will be long-term or short-term depending on how long the Company held a particular security or other financial asset. However, gain on the lapse of an option issued by the Company is treated as short-term capital gain.

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A portfolio company in which the Company invests may face financial difficulties that require the Company to work-out, modify or otherwise restructure its investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, cause the Company to recognize taxable income without a corresponding receipt of cash, which could affect its ability to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements or result in unusable capital losses and future non-cash income. Any such transaction could also result in the Company receiving assets that give rise to non-qualifying income for purposes of the 90% Gross Income Test.

The Company’s investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. Stockholders generally will not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by the Company.

If the Company purchases shares in a “passive foreign investment company,” or PFIC, the Company may be subject to U.S. federal income tax on a portion of any “excess distribution” received on, or any gain from the disposition of, the shares even if the Company distributes the income as a taxable dividend to the holders of its common stock. Additional charges in the nature of interest generally will be imposed on the Company in respect of deferred taxes arising from any such excess distribution or gain. If the Company invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, the Company will be required to include in gross income each year a portion of the ordinary earnings and net capital gain of the QEF, even if that income is not distributed by the QEF. Any inclusions in the Company’s gross income resulting from the QEF election will be considered qualifying income for purposes of the 90% Gross Income Test. Alternatively, the Company may elect to mark-to-market at the end of each taxable year its shares in such PFIC, in which case, the Company will recognize as ordinary income any increase in the value of the shares, and as ordinary loss any decrease in the value to the extent it does not exceed prior increases included in its income. The Company’s ability to make either election will depend on factors beyond the Company’s control and is subject to restrictions which may limit the availability of the benefit of these elections. Under either election, the Company may be required to recognize in any year income in excess of its distributions from PFICs and its proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether the Company satisfies the Excise Tax Distribution Requirements.

Some of the income and fees that the Company recognizes, such as management fees, may not satisfy the 90% Gross Income Test. In order to ensure that this income and fees do not disqualify the Company as a RIC, the Company may be required to recognize the income or fees through one or more entities treated as corporations for U.S. federal income tax purposes. While we expect that recognizing this income through corporations will assist the Company in satisfying the 90% Gross Income Test, no assurance can be given that this structure will be respected for U.S. federal income tax purposes, which could result in such income not being counted towards satisfying the 90% Gross Income Test. If the amount of such income were too great and the Company were otherwise unable to mitigate this effect, it could result in the Company’s disqualification as a RIC. If, as expected, the structure is respected, the corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce the yield on such income and fees for the Company.

The Company’s functional currency is the U.S. dollar for U.S. federal income tax purposes. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Company accrues income, expenses or other liabilities denominated in a currency other than the U.S. dollar and the time it actually collects the income or pays the expenses or liabilities may be treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt denominated in a foreign currency and other financial transactions denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, may also be treated as ordinary income or loss by the Company.

Taxation of U.S. Stockholders

The following summary generally describes certain material U.S. federal income tax consequences of any investment in the Company’s common stock beneficially owned by U.S. stockholders (as defined above). If you are not a U.S. stockholder this section does not apply to you. Whether an investment in shares of the Company’s common stock is appropriate for a U.S. stockholder will depend upon that person’s particular circumstances. An investment in the Company’s common stock by a U.S. stockholder may have adverse tax consequences. U.S. stockholders should consult their own tax advisor about the U.S. tax consequences of investing in the Company’s common stock.

The Company will ordinarily declare and pay dividends from its net investment income and distribute net realized capital gains, if any, once a year. The Company, however, may make distributions on a more frequent basis to comply with the distribution requirements of the Code, in all events in a manner consistent with the provisions of the 1940 Act.

Distributions by the Company generally are taxable to U.S. stockholders as ordinary income or capital gains. Distributions of the Company’s investment company taxable income, determined without regard to the deduction for dividends paid, will be taxable as

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ordinary income to U.S. stockholders to the extent of the Company’s current or accumulated earnings and profits, whether paid in cash or reinvested in additional common stock. To the extent the distributions the Company pays to non-corporate U.S. stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, the distributions (“Qualifying Dividends”) generally are taxable to U.S. stockholders at the preferential rates applicable to long-term capital gains. However, the Company anticipates that its distributions generally will not be attributable to dividends and, therefore, generally will not qualify for the preferential rates applicable to Qualifying Dividends or the dividends received deduction available to corporations under the Code. Distributions of the Company’s net capital gains (which are generally the Company’s realized net long-term capital gains in excess of realized net short-term capital losses) that are properly reported by the Company as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains that are currently taxable at reduced rates in the case of non-corporate taxpayers, regardless of the U.S. stockholder’s holding period for his, her or its common stock and regardless of whether paid in cash or reinvested in additional common stock. Distributions in excess of the Company’s earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in the U.S. stockholder’s common stock and, after the adjusted tax basis is reduced to zero, will “constitute capital gains” to the U.S. stockholder.

A portion of the Company’s ordinary income dividends paid to corporate U.S. stockholders may, if certain conditions are met, qualify for the 50% dividends-received deduction to the extent that the Company has received dividends from certain corporations during the taxable year, but only to the extent these ordinary income dividends are treated as paid out of earnings and profits of the Company. The Company expects only a small portion of the Company’s dividends to qualify for this deduction. A corporate U.S. stockholders may be required to reduce its basis in its common stock with respect to certain “extraordinary dividends,” as defined in Section 1059 of the Code. Corporate U.S. stockholders should consult their own tax advisor in determining the application of these rules in their particular circumstances.

Certain distributions reported by the Company as Section 163(j) interest dividends may be treated as interest income by U.S. stockholders for purposes of the tax rules applicable to interest expense limitations under Section 163(j) of the Code. Such treatment by a U.S. stockholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that the Company is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Company’s business interest income over the sum of the Company’s (i) business interest expense and (ii) other deductions properly allocable to the Company’s business interest income.

U.S. Stockholders who have not opted-out of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions. Any dividends or distributions reinvested under the plan will nevertheless remain taxable to U.S. stockholders. A U.S. stockholder will have an adjusted basis in the additional common stock purchased through the plan equal to the dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash, unless the Company were to issue new shares that are trading at or above net asset value, in which case, the U.S. stockholder’s basis in the new shares would generally be equal to their fair market value. The additional shares will have a new holding period commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account.

The Company may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate-level tax rates on the amount retained, and therefore designate the retained amount as a “deemed dividend.” In this case, the Company may report the retained amount as undistributed capital gains to its U.S. stockholders, who will be treated as if each U.S. stockholder received a distribution of its pro rata share of this gain, with the result that each U.S. stockholder will (i) be required to report its pro rata share of this gain on its tax return as long-term capital gain, (ii) receive a refundable tax credit for its pro rata share of tax paid by the Company on the gain, and (iii) increase the tax basis for its shares of common stock by an amount equal to the deemed distribution less the tax credit. In order to utilize the deemed distribution approach, the Company must provide written notice to its stockholders prior to the expiration of 60 days after the close of the relevant taxable year. The Company cannot treat any of its investment company taxable income as a “deemed distribution.”

For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of capital gains dividends paid for that year, the Company may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If the Company makes such an election, a U.S. stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by the Company in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by the Company’s stockholders on December 31^st of the year in which the dividend was declared.

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If a U.S. stockholder purchases shares of the Company’s common stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the U.S. stockholder will be subject to tax on the distribution even though it economically represents a return of its investment.

A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder redeems, sells or otherwise disposes of the stockholder’s shares of the Company’s common stock. The amount of gain or loss will be measured by the difference between a U.S. stockholder’s adjusted tax basis in the common stock sold, redeemed or otherwise disposed of and the amount of the proceeds received in exchange. Any gain or loss arising from such sale or disposition generally will be treated as long-term capital gain or loss if the U.S. stockholder has held his, her or its shares for more than one year. Otherwise, the gain or loss will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of the Company’s common stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to those shares. In addition, all or a portion of any loss recognized upon a disposition of shares of the Company’s common stock may be disallowed if substantially identical stock or securities are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition. In such case, any disallowed loss is generally added to the U.S. stockholder’s adjusted tax basis of the acquired stock.

In general, U.S. stockholders that are individuals, trusts or estates are taxed at preferential rates on their net capital gain. Those rates are lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are subject to U.S. federal income tax on both net capital gain and ordinary income at the same maximum rate. A non-corporate U.S. stockholder with net capital losses for a year (i.e., capital loss in excess of capital gain) generally may deduct up to $3,000 of those losses against its ordinary income each year; any net capital losses of a non-corporate U.S. stockholder in excess of $3,000 generally may be carried forward and used in subsequent years as provided in the Code. Corporate U.S. stockholders generally may not deduct any net capital losses for a year, but may carry back those losses for three years or carry forward those losses for five years.

The Company will send to each of its U.S. stockholders, after the end of each calendar year, a notice providing, on a per share and per distribution basis, the amounts includible in the U.S. stockholder’s taxable income for the applicable year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each year’s distributions generally will be reported to the IRS (including the amount of dividends, if any, eligible for the preferential rates applicable to long-term capital gains). Dividends paid by the Company generally will not be eligible for the dividends-received deduction or the preferential tax rate applicable to Qualifying Dividends because the Company’s income generally will not consist of dividends. Distributions by the Company out of current or accumulated earnings and profits generally also will not be eligible for the 20% pass through deduction under Section 199A of the Code, although under recently proposed regulations qualified REIT dividends earned by the Company may qualify for the deduction under Section 199A of the Code. Distributions may also be subject to additional state, local and non-U.S. taxes depending on a U.S. stockholder’s particular situation.

Tax Shelter Reporting Regulations

If a U.S. stockholder recognizes a loss with respect to common stock of the Company in excess of $2 million or more for a non-corporate U.S. stockholder or $10 million or more for a corporate U.S. stockholder in any single taxable year, the stockholder must file with the IRS a disclosure statement on Form 8886. Direct investors of portfolio securities in many cases are excepted from this reporting requirement, but, under current guidance, equity owners of a RIC are not excepted. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have similar reporting requirements. U.S. Stockholders should consult their tax advisor to determine the applicability of these regulations in light of their individual circumstances.

Net Investment Income Tax

An additional 3.8% surtax applies to the net investment income of non-corporate U.S. stockholders (other than certain trusts) on the lesser of (i) the U.S. stockholder’s “net investment income” for a taxable year and (ii) the excess of the U.S. stockholder’s modified adjusted gross income for the taxable year over $200,000 ($250,000 in the case of joint filers). For these purposes, “net investment income” generally includes interest and taxable distributions and deemed distributions paid with respect to shares of common stock, and net gain attributable to the disposition of common stock (in each case, unless the shares of common stock are held in connection with certain trades or businesses), but will be reduced by any deductions properly allocable to these distributions or this net gain.

Taxation of Non-U.S. Stockholders

The following discussion applies only to persons that are non-U.S. stockholders. If you are not a non-U.S. stockholder this section does not apply to you. Whether an investment in shares of the Company’s common stock is appropriate for a non-U.S. stockholder will depend upon that person’s particular circumstances. An investment in shares of the Company’s common stock by a non-U.S. stockholder

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may have adverse tax consequences and, accordingly, may not be appropriate for a non-U.S. stockholder. Non-U.S. stockholders should consult their own tax advisor before investing in the Company’s common stock.

Distributions on, and the Sale or Other Disposition of, the Company’s Common Stock

Distributions by the Company to non-U.S. stockholders generally will be subject to U.S. withholding tax (unless lowered or eliminated by an applicable income tax treaty) to the extent payable from the Company’s current and accumulated earnings and profits.

Actual or deemed distributions of the Company’s net capital gain to a non-U.S. stockholder, and gains recognized by a non-U.S. stockholder upon the sale of the Company’s common stock, will not be subject to withholding of U.S. federal income tax and generally will not be subject to U.S. federal income tax unless (a) the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the non-U.S. stockholder in the United States or (b) the non-U.S. stockholder is an individual, has been present in the United States for 183 days or more during the taxable year, and certain other conditions are satisfied. For a corporate non-U.S. stockholder, distributions (both actual and deemed), and gains recognized upon the sale of the Company’s common stock that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” (unless lowered or eliminated by an applicable income tax treaty). Non-U.S. stockholders of the Company’s common stock are encouraged to consult their own advisor as to the applicability of an income tax treaty in their individual circumstances.

In general, no U.S. withholding taxes will be imposed on dividends paid by RICs to non-U.S. stockholders to the extent the dividends are designated as “interest related dividends” or “short term capital gain dividends.” Under this exemption, interest related dividends and short-term capital gain dividends generally represent distributions of U.S.-source interest income or short term capital gain that would not have been subject to U.S. withholding tax at the source had they been received directly by a non-U.S. stockholder, and that satisfy certain other requirements. No assurance can be given that the Company will distribute any interest related dividends or short term capital gain dividends.

If the Company distributes its net capital gain in the form of deemed rather than actual distributions (which the Company may do in the future), a non-U.S. stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the non-U.S. stockholder’s allocable share of the tax the Company pays on the capital gain deemed to have been distributed. In order to obtain the refund, the non-U.S. stockholder must obtain a U.S. taxpayer identification number (if one has not been previously obtained) and file a U.S. federal income tax return even if the non-U.S. stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return.

Non-U.S. Stockholders who have not opted-out of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions. Any dividends or distributions reinvested under the plan will nevertheless remain taxable to non-U.S. stockholders to the same extent as if such dividends were received in cash. In addition, the Company has the ability to declare a large portion of a dividend in shares of the Company’s common stock, even if a non-U.S. stockholder has not elected to participate in the Company’s dividend reinvestment plan, in which case, as long as a portion of the dividend is paid in cash (which portion could be as low as 20%) and certain requirements are met (including the receipt of a private letter ruling from the IRS, so long as the Company is not treated as a publicly offered regulated investment company), the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, the Company’s non-U.S. stockholders will be taxed on 100% of the fair market value of the dividend paid entirely or partially in the Company’s common stock on the date the dividend is received in the same manner (and to the extent the non-U.S. stockholder is subject to U.S. federal income taxation) as a cash dividend (including the application of withholding tax rules described above), even if most or all of the dividend is paid in common stock. In such a circumstance, the Company may be required to withhold all or substantially all of the cash the Company would otherwise distribute to a non-U.S. stockholder.

Certain Additional Tax Considerations

Information Reporting and Backup Withholding

The Company may be required to withhold, for U.S. federal income taxes, a portion of all taxable distributions payable to stockholders (a) who fail to provide the Company with their correct taxpayer identification numbers (TINs) or who otherwise fail to make required certifications or (b) with respect to whom the IRS notifies the Company that this stockholder is subject to backup withholding. Certain stockholders specified in the Code and the Treasury regulations promulgated thereunder are exempt from backup withholding but may be required to provide documentation to establish their exempt status. Backup withholding is not an additional tax. Any amounts withheld will be allowed as a refund or a credit against the stockholder’s U.S. federal income tax liability if the appropriate information is timely provided to the IRS. Failure by a stockholder to furnish a certified TIN to the Company could subject the stockholder to a penalty imposed by the IRS.

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 Withholding and Information Reporting on Foreign Financial Accounts

A non-U.S. stockholder who is otherwise subject to withholding of U.S. federal income tax may be subject to information reporting and backup withholding of U.S. federal income tax on dividends, unless the non-U.S. stockholder provides the Company or the dividend paying agent with an IRS Form W-8BEN or IRS Form W-8BEN-E (or an acceptable substitute form), or otherwise meets the documentary evidence requirements for establishing that it is a non-U.S. stockholder or otherwise establishes an exemption from backup withholding.

Pursuant to Sections 1471 to 1474 of the Code and the U.S. Treasury regulations thereunder, the relevant withholding agent generally will be required to withhold 30% of any dividends paid on the Company’s common stock to: (i) a foreign financial institution, unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders, and meets certain other specified requirements or is subject to an applicable “intergovernmental agreement”; or (ii) a non-financial foreign entity beneficial owner, unless the entity certifies that it does not have any substantial U.S. owners or provides the name, address and taxpayer identification number of each substantial U.S. owner, and meets certain other specified requirements. If payment of this withholding tax is made, non-U.S. stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to these dividends or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of this exemption or reduction. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. Certain jurisdictions have entered into agreements with the United States that may supplement or modify these rules. Non-U.S. stockholders should consult their own tax advisor regarding the particular consequences to them of this legislation and guidance. The Company will not pay any additional amounts in respect to any amounts withheld.

All stockholders should consult their own tax advisers with respect to the U.S. federal income and withholding tax consequences, and state, local and non-U.S. tax consequences, of an investment in the Company’s common stock.

Available Information

The Company will furnish its stockholders with annual reports containing audited financial statements, quarterly reports and such other periodic reports as the Company determines to be appropriate or as may be required by law. The Company is required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the Exchange Act.

Stockholders and the public may also read and copy any materials the Company files with the SEC at www.sec.gov.

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ITEM 1A. RISK FACTORS.

Investing in the Company’s common stock involves a number of significant risks. Before you invest in the Company’s common stock, you should be aware of various risks, including those described below, together with all of the other information included in this Annual Report, including our financial statements and the related notes thereto. The risks set out below are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or not presently deemed material by it may also impair its operations and performance. If any of the following events occur, the Company’s business, financial condition and results of operations could be materially and adversely affected. In such case, the Company’s net asset value could decline, and you may lose all or part of your investment. The risk factors described below are the principal risk factors associated with an investment in the Company as well as those factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to those of the Company.

Summary of Risk Factors

The risk factors described below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 1A. of this Annual Report on Form 10-K and the other reports and documents filed by us with the SEC.

Company Operations

· ​ · ​ · Market disruptions and other geopolitical or macroeconomic events could create market volatility that negatively impact our business, financial condition and earnings. ​ Inflation has adversely affected and may continue to adversely affect the business, results of operations and financial condition of our portfolio companies. ​ An economic recession or downturn could impair our portfolio companies and harm our operating results.

· The Company is a new company with no operating history and the Adviser has no prior experience advising a BDC.

· The Company can provide no assurance that it will be able to replicate the historical results achieved by other entities managed or sponsored by the Adviser or its affiliates.

· Events outside of the Company’s control, including public health crises, could negatively affect its portfolio companies, Adviser and the results of our operations.

· ​ ​ · The ongoing Russia-Ukraine and Hamas-Israel conflicts have caused political, social, and economic disruptions and uncertainties and material increases in certain commodity prices that may affect our business operations or the business operations of our portfolio companies. ​ The Board of Directors could change the Company’s investment objective, operating policies and strategies without prior notice or stockholder approval.

· The Company is subject to regulatory restrictions on its ability to raise additional capital.

· The Company’s portfolio could be concentrated in a limited number of portfolio companies and industries, which subjects us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.

Investment Risks

· The Company is dependent upon the Adviser’s ability to implement the Company’s investment strategies.

· The Company operates in a highly competitive market for investment opportunities, which could reduce returns and result in losses.

· Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on the Company’s operating results.

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· The Company’s portfolio companies may be highly leveraged.

· The Company is subject to credit and default risk and portfolio companies could be unable to repay or refinance outstanding principal on their loans at or prior to maturity.

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	·	The Company’s investments will include secured debt, which involves various degrees of risk of a loss of capital.

Management Risks

· The Adviser relies on key personnel, the loss of any of whom could impair its ability to successfully manage us.

· The Adviser’s and the Administrator’s liability is limited, and the Company has agreed to indemnify each against certain liabilities, which could lead the Adviser or the Administrator to act in a riskier manner on the Company’s behalf than it would when acting for their own accounts.

· Each of the Adviser and the Administrator can resign on 60 days’ notice, and the Company can provide no assurance that it could find a suitable replacement within that time, resulting in a disruption in the Company’s operations that could adversely affect its financial condition, business and results of operations.

· The majority of the Company’s portfolio investments are recorded at fair value as determined in good faith by the Adviser, the Company’s Valuation Designee, subject to the oversight of the Board of Directors and, as a result, there could be uncertainty as to the value of its portfolio investments.

· The Company is subject to risks associated with communications and information systems.

Offering/Common Stock Risks

· There are restrictions on the ability of holders of the Company’s common stock to transfer shares.

· There is no existing trading market for shares of the Company’s common stock, and no market for the shares is expected to develop in the future.

· Investors in shares of the Company’s common stock may fail to fund their Capital Commitments when due.

· The Company may declare a large portion of a distribution in shares of its common stock instead of in cash.

· The Company incurs significant costs as a result of being registered under the Exchange Act.

· The Company is subject to certain take-over defenses under Maryland law, its charter and bylaws.

· Investing in the Company’s shares involves above average risk.

Risks Related to Conflicts of Interest

· A majority of the Company’s investments are fair valued.

· The Company’s incentive fee structure could affect the Adviser’s management of the Company.

· The Adviser has obligations to its other clients.

· The Adviser allocates investment opportunities among the Company and its other clients.

· The Adviser allocates certain expenses among the Company and its other clients.

Company Operations

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Market disruptions and other geopolitical or macroeconomic events could create market volatility that negatively impact our business, financial condition and earnings.

Periods of market volatility remain and may continue to occur in the future, in response to various political, social, and economic events both within and outside the United States. These conditions have resulted in, and in many cases continue to result in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid and of uncertain value. Such market conditions may adversely affect the Company, including by making valuation of some of the Company’s securities uncertain and/or result in sudden and significant valuation increases or declines in the Company’s holdings. If there is a significant decline in the value of the Company’s portfolio, this may impact the asset coverage levels for the Company’s outstanding leverage.

Risks resulting from any future debt or other economic crisis could also have a detrimental impact on the global economic recovery, the financial condition of financial institutions and our business, financial condition and results of operation. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with respect to certain interest rates, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility, rising interest rates and/or a return to unfavorable economic conditions could impair the Company’s ability to achieve its investment objectives.

Wars, military conflicts, instability, new and ongoing pandemics (such as COVID-19), epidemics or outbreaks of infectious diseases in certain parts of the world, natural/environmental disasters, terrorist attacks in the United States and around the world, social and political discord, debt crises, sovereign debt downgrades, increasingly strained relations between the United States and a number of foreign countries, new and continued political unrest in various countries, the exit or potential exit of one or more countries from the EU or the EMU, continued changes in the balance of political power among and within the branches of the United States government, government shutdowns, among others, may result in market volatility, may have long term effects on the United States and worldwide financial markets, and may cause further economic uncertainties in the United States and worldwide. In particular, the consequences of the Russia-Ukraine and Hamas-Israel conflicts, including international sanctions, the potential impact on inflation and increased disruption to supply chains may impact our portfolio companies, result in an economic downturn or recession either globally or locally in the United States or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional military action, reignited “cold” wars or in the form of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on the Company’s returns and net asset value. Such consequences may also increase our funding cost or limit our access to the capital markets.

Inflation has adversely affected and may continue to adversely affect the business, results of operations and financial condition of our portfolio companies.

Certain of our portfolio companies are in industries that may be impacted by inflation. Recent inflationary pressures have increased the costs of labor, energy and raw materials and have adversely affected consumer spending, economic growth and our portfolio companies’ operations. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net assets resulting from operations. Additionally, the Federal Reserve has raised certain benchmark interest rates in an effort to combat inflation. See “Investment Risks—We are exposed to risks associated with changes in interest rates, including the current rising interest rate environment.”

An economic recession or downturn could impair our portfolio companies and harm our operating results.

Many of our portfolio companies may be susceptible to an economic downturn or a recession and may be unable to repay our loans during such period. Therefore, during an economic downturn or a recession our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity investments. An economic slowdown or a recession could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets, result in a decision by lenders not to extend

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credit to us, or result in the failure of one or more of our portfolio companies to satisfy financial or operating covenants imposed by us or other lenders.

The Company is a new company with no operating history and the Adviser has no prior experience advising a BDC.

The Company is a new company and has no operating history to report to prospective investors. The Company is subject to all of the business risks and uncertainties associated with any new business, including the risk that the Company will not achieve its investment objectives or avoid substantial losses.

In addition, the 1940 Act and the Code impose numerous constraints on the operations of the Company as a BDC and RIC that do not apply to other investment vehicles managed by the Adviser or its affiliates. See “Business—Regulation as a Business Development Company” and “Business—Material U.S. Federal Income Tax Considerations.” Neither the Company nor the Adviser has any experience operating under these constraints, which may hinder the Company’s ability to take advantage of attractive investment opportunities and to achieve its investment objective. Any failure of the Adviser to operate the Company within the constraints imposed by the 1940 Act or the Code could subject the Company to enforcement action by the SEC, cause the Company to fail to satisfy the requirements associated with RIC status or otherwise have a material adverse effect on the Company’s business, financial condition or results of operations. In addition, if the Company does not maintain its status as a BDC, the Company would be subject to regulation as a closed-end investment company under the 1940 Act. As a registered closed-end investment company, the Company would be subject to substantially more regulatory restrictions under the 1940 Act which would decrease its operating flexibility.

The Company can provide no assurance that it will be able to replicate the historical results achieved by other entities managed or sponsored by the Adviser or its affiliates.

Investors are acquiring interests in the Company and not in any other investment funds, accounts or other investment vehicles that are or have been managed or sponsored by the Adviser or its affiliates. The Company may not replicate the historical results achieved by the Adviser or its affiliates, and the Company’s investment returns could be substantially lower than the returns achieved by the Adviser or its affiliates for other investment vehicles in prior periods. Additionally, all or a portion of the prior results of the Adviser and its affiliates may have been achieved in particular market conditions, and current or future market volatility and regulatory uncertainty may have an adverse impact on the Company’s performance.

Events outside of the Company’s control, including public health crises, could negatively affect its portfolio companies, Adviser and the results of our operations.

Periods of market volatility could occur in response to pandemics or other events outside of the Company’s or the Adviser’s control. The Company, the Adviser, and the portfolio companies in which the Company invests could be affected by force majeure events (such as natural disasters, outbreaks of an infectious disease, pandemics or any other serious public health concern, war, terrorism, labor strikes, government shutdowns, major plant breakdowns, ransomware attacks, government macroeconomic policies and social instability). Some force majeure events could adversely affect the ability of a party (including the Company, the Adviser, a portfolio company or a counterparty to the Company, the Adviser or a portfolio company) to perform its obligations. These risks could, among other effects, adversely impact the cash flows available from a portfolio company, damage property, or instigate disruptions of service. In addition, the cost to a portfolio company or the Company of repairing or replacing damaged assets resulting from such force majeure event could be considerable. It is not possible to insure against all such events, and insurance proceeds received, if any, could be inadequate to completely or even partially cover any loss of revenues or investments, any increases in operating and maintenance expenses, or any replacements or rehabilitation of property.

In addition, certain force majeure events (such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which we invest or our portfolio companies operate specifically. Such force majeure events could result in or coincide with: increased volatility in the global securities, derivatives and currency markets; a decrease in the reliability of market prices and difficulty in valuing assets; greater fluctuations in currency exchange rates; increased risk of default (by both government and private issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; less governmental regulation and supervision of the securities markets and market participants and decreased monitoring of the markets by governments or self-regulatory organizations and reduced enforcement of regulations; limited, or limitations on, the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; inability to purchase and sell investments or otherwise settle security or derivative transactions (i.e., a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.

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Additionally, a major governmental intervention into industry, including the nationalization of an industry or the assertion of control over one or more portfolio companies or its assets, could result in a loss to us, including if the investment in such portfolio companies is canceled, unwound or acquired (which could result in inadequate compensation). Any of the foregoing could therefore adversely affect the performance of us and our investments.

The ongoing conflicts in Ukraine and the Middle East have caused political, social, and economic disruptions and uncertainties and material increases in certain commodity prices that may affect our business operations or the business operations of our portfolio companies.

On February 24, 2022, Russia launched a military invasion of Ukraine. In response, countries worldwide, including the United States, have imposed sanctions against Russia and on Russian businesses and individuals, including those in the banking, import and export sectors. Because Russia is a major exporter of oil and natural gas, the invasion and related sanctions have reduced the supply, and increased the price, of energy, which is accelerating inflation, has exacerbated and may continue to exacerbate ongoing supply chain issues. There is also the risk of retaliatory actions by Russia against countries which have enacted sanctions, including cyberattacks against financial and governmental institutions, which could result in business disruptions and further economic turbulence. Although the Company has no direct exposure to Russia or Ukraine, the broader consequences of the invasion may have a material adverse impact on the Company’s portfolio and the value of your investment in the Company. Because this is an uncertain and evolving situation, its full impact is unknown at this time.

In addition, the ongoing conflict involving Israel and Hamas may also cause additional inflation, disrupt supply chain and potentially destabilize the Middle East region. These ongoing conflicts may also disrupt local, regional, national, and global markets and economies affected by the sanctions, and it is not possible to predict how long. It is also not possible to predict with certainty these ongoing conflict’s additional adverse effects on existing macroeconomic conditions, currency exchange rates, and financial markets, all of which may affect our business operations or the business operations of our portfolio companies.

The Board of Directors could change the Company’s investment objective, operating policies and strategies without prior notice or stockholder approval.

The Board of Directors has the authority, except as otherwise provided in the 1940 Act, to modify or waive the Company’s investment objective and certain of its operating policies and strategies without prior notice and without stockholder approval. The Company cannot predict the effect any changes to its investment objective, operating policies and strategies would have on its business, operating results and the value of its common stock. Nevertheless, any such changes could adversely affect the Company’s business and impair its ability to make distributions.

The Company is subject to regulatory restrictions on its ability to raise additional capital.

The Company’s business will require a substantial amount of capital. The Company may acquire additional capital from the issuance of senior securities or other indebtedness, the issuance of additional shares of the Company’s common stock or the issuance of warrants or subscription rights to purchase certain of its securities. The Company may issue debt securities or preferred securities (referred to collectively as “senior securities”) and may borrow money from banks or other financial institutions up to the maximum amount permitted by the 1940 Act. Under the 1940 Act, the Company is permitted to issue senior securities in amounts such that the Company’s asset coverage, as defined in the 1940 Act, equals at least 150%. If the value of the Company’s assets declines, the Company may be unable to satisfy this ratio. If that happens, the Company may be required to liquidate a portion of its investments and repay a portion of its indebtedness at a time when such sales may be disadvantageous, which could materially damage the Company’s business, financial condition and results of operations and the Company may not be able to make distributions in an amount sufficient to be subject to tax as a RIC, or at all.

The Company is not generally able to issue and sell shares of its common stock at a price below net asset value per share. The Company may, however, sell its common stock, or warrants, options or rights to acquire its common stock, at a price below the then-current net asset value per share of its common stock if the Board of Directors determines that such sale is in the best interests of the Company and its stockholders, and if the Company’s stockholders approve such sale. In any such case, the price at which the Company’s securities are to be issued and sold may not be less than a price that, in the determination of the Board of Directors, closely approximates the market value of such securities. The procedures used by the Board of Directors to determine the net asset value per share of the Company’s common stock within 48 hours, excluding Sundays and holidays, of each offering of its common stock (as required by the 1940 Act) may differ materially from and will necessarily be more abbreviated than the procedures used by the Board of Directors to determine net asset value at the end of each quarter because there is a time-intensive process each quarter to determine the net asset value which cannot be completed on the compressed timeframe of an offering. The quarterly process includes preliminary valuation conclusions, engagement of independent valuation firms and review by those firms of preliminary valuation conclusions. By contrast,

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the procedures in connection with an offering may yield a net asset value that is less precise than the net asset value determined at the end of each quarter.

The Company intends to finance its investments with borrowed money, which accelerates and increases the potential for gain or loss on amounts invested and could increase the risk of investing in us.

The Company uses leverage (e.g., borrowings or preferred stock) to finance its investments. However, there can be no assurance that the Company will be able to continuously obtain adequate financing, or that any such financing will be available on acceptable terms, and any failure to add new financings could have a material adverse effect on the Company’s business, financial condition and results of operations, which, in turn, could have a material adverse effect on the value of shares of common stock and the Company’s ability to pay distributions.

Moreover, the use of leverage magnifies the potential for gain or loss on amounts invested and, consequently, increases the risks associated with an investment in the Company. While the Adviser believes that, if successfully implemented, a leverage strategy enhances the Company’s performance, there can be no assurance that leverage will be successful in enhancing the Company’s investment returns. Whether the Company will be able to leverage certain investments will be affected by the eligibility criteria required under the financing vehicles it secures, if any. If the Company is unable to make investments that meet eligibility criteria, collateral quality tests, collateral and interest coverage tests and/or other tests, the Company may not be able to execute its leverage strategy successfully, or at all. Further, any breach of certain representations, warranties and covenants, as well as defaults, may also limit availability under such financing vehicles while increasing the cost of then outstanding financing or restrict or eliminate the Company’s ability to obtain debt financing on acceptable terms or at all. The amount of leverage that the Company employs at any particular time will depend on the Adviser’s assessment of market and other factors at the time of any proposed borrowing.

Money borrowed by the Company will be subject to interest costs, which will be an expense of the Company, and, to the extent not covered by income attributable to the investments acquired, will adversely affect the operating results of the Company. The Company’s ability to service any debt will depend largely on its financial performance and will be subject to prevailing economic conditions and competitive pressures. In addition, the Company’s ability to pay distributions may be restricted when the 150% asset coverage requirement under the 1940 Act is not met, and any cash that the Company uses to service its indebtedness will not be available for distribution to its stockholders.

The Company may also borrow money in order to reduce its need to hold cash or short-term investments in order to make portfolio investments, pending the receipt of required capital contributions from investors or available cash from other investments, or for any proper purpose relating to the activities of the Company. Any such borrowings are expected to be secured by the investors’ unfunded Capital Commitments. In the event of a default by the Company in connection with any such borrowings, the Company’s investors may be obligated to fund up to their unfunded Capital Commitments to repay any outstanding amounts regardless of whether such default occurred during or after the Investment Period. The “Investment Period” commenced on the initial closing and will continue until the 48-month anniversary of the initial closing, unless the Investment Period is earlier terminated in connection with a Key Person Event (as defined below).

If the Company issues preferred securities, such stock would rank “senior” to common stock in the Company’s capital structure. Preferred stockholders would have separate voting rights and may have rights, preferences or privileges more favorable than those of holders of the Company’s common stock. Payments of dividends on, and repayment of the liquidation preference on, such preferred stock would typically take preference over any dividends or other payments to holders of the Company’s common stock. Furthermore, the issuance of preferred securities could have the adverse effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for the Company’s common stockholders or otherwise be in their best interest.

The Company’s portfolio could be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.

The Company is classified as a non-diversified investment company within the meaning of the 1940 Act, which means that the Company is not limited by the 1940 Act with respect to the proportion of its assets that it may invest in securities of a single issuer, excluding limitations on investments in registered investment companies or business development companies under the 1940 Act and compliance with the asset diversification requirements as a RIC under the Code. Some concentration with respect to particular portfolio companies, regions and industries is expected to exist in the Company’s investment portfolio. Any such concentration would subject the Company to a greater degree of risk with respect to the impact of a default by such portfolio company, or a greater degree of risk related to adverse business conditions in such region or industry.

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The Company will be subject to corporate-level income tax if it is unable to qualify as a RIC.

In order to be subject to tax as a RIC under the Code, the Company must, among other requirements, meet certain source-of-income, asset diversification and distribution requirements. The distribution requirement for a RIC is satisfied if the Company distributes dividends for U.S. federal income tax purposes of an amount generally at least equal to 90% of the Company’s investment company taxable income, determined without regard to any deduction for dividends paid, to its stockholders on an annual basis. The Company will be subject, to the extent it uses debt financing, to certain asset coverage requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict the Company from making distributions necessary to qualify as a RIC. If the Company is unable to obtain cash from other sources, the Company may fail to be subject to tax as a RIC and, thus, may be subject to corporate-level income tax. To be subject to tax as a RIC, the Company must also meet certain asset diversification requirements at the end of each quarter of its taxable year. Failure to meet these requirements may result in the Company having to dispose of certain investments quickly in order to prevent the loss of its qualification as a RIC. Because most of the Company’s investments are expected to be in private or thinly traded public companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If the Company fails to qualify as a RIC for any reason and becomes subject to corporate-level income tax, the resulting corporate taxes could substantially reduce the Company’s net assets, the amount of income available for distributions to stockholders and the amount of such distributions and the amount of funds available for new investments. Such a failure would have a material adverse effect on the Company and its security holders. See “Item 1 Business—Material U.S. Federal Income Tax Considerations — Taxation as a RIC.”

The Company may need to raise additional capital to grow because it must distribute most of its income.

The Company may need additional capital to fund new investments and grow its portfolio of investments. The Company intends to borrow from financial institutions in order to obtain such additional capital, and may access the capital markets periodically to issue debt or equity securities. Unfavorable economic conditions could increase its funding costs, limit the Company’s access to the capital markets or result in a decision by lenders not to extend credit to the Company. A reduction in the availability of new capital could limit the Company’s ability to grow. In addition, the Company is required to distribute each taxable year an amount at least equal to 90% of its investment company taxable income, determined without regard to any deduction for dividends paid as dividends for U.S. federal income tax purposes, to its stockholders to maintain its ability to be subject to tax as a RIC. As a result, these earnings will not be available to fund new investments. An inability to access the capital markets successfully could limit the Company’s ability to grow its business and execute its business strategy fully and could decrease its earnings, if any, which may have an adverse effect on the value of the Company’s securities. If the Company is not able to raise capital and is at or near its targeted leverage ratios, the Company may receive smaller allocations, if any, on new investment opportunities under the Adviser’s allocation policy.

The Company, and the portfolio companies in which we invest, are subject to laws and regulations which could change from time to time.

The Company and its portfolio companies are subject to regulation by laws at the U.S. federal, state and local levels. These laws and regulations, as well as their interpretation, may change from time to time, and new laws, regulations and interpretations may also come into effect. Any such new or changed laws or regulations could have a material adverse effect on the Company’s business, financial condition and results of operations. It is impossible to predict what, if any, changes in the regulations applicable to the Company, the Adviser, or the markets in which they trade and invest may be instituted in the future.

Additionally, any changes to the laws and regulations governing the Company’s operations, including those relating to permitted investments, may cause the Company to alter its investment strategy in order to avail itself of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth herein and may result in the Company’s investment focus shifting from the areas of expertise of the Adviser to other types of investments in which the Adviser may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on the Company’s business, financial condition and results of operations.

Over the last several years, there also 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 any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact the Company’s operations, cash flows or financial condition, impose additional costs on the Company, intensify the regulatory supervision of the Company or otherwise adversely affect its business, financial condition and results of operations.

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The Company may have difficulty paying its required RIC distributions if it recognizes income prior to, or without, receiving cash representing such income.

For U.S. federal income tax purposes, the Company includes in income certain amounts that the Company has not yet received in cash, such as the accretion of original issue discount (“OID”). This may arise if the Company receives warrants in connection with the making of a loan and in other circumstances, or through contracted payment-in-kind (“PIK”) interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such OID, which could be significant relative to the Company’s overall investment activities, or increases in loan balances as a result of contracted PIK arrangements, is included in income before the Company receives any corresponding cash payments.

The part of the management and incentive fees payable to the Adviser that relates to the Company’s net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends, zero coupon securities. An election by a portfolio company to defer PIK interest payments by adding them to principal may increase future investment management fees payable to the Adviser. In addition, if a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible, and the Adviser will have no obligation to refund any fees it received in respect of such accrued income.

The interest payments deferred on a PIK instrument are subject to the risk that the borrower may default when the deferred payments are due in cash at the maturity of the instrument. In addition, the interest rates on PIK instruments are higher to reflect the time value of money on deferred interest payments and the higher credit risk of borrowers who may need to defer interest payments. The deferral of interest on a PIK loan increases its loan to value ratio, which is a measure of the riskiness of a loan. PIK instruments also may have unreliable valuations because the accruals require judgments by the Adviser about ultimate collectability of the deferred payments and the value of the associated collateral. The market prices of these instruments generally also are more volatile and are likely to respond to a greater degree to changes in interest rates than the market prices of instruments that pay cash interest periodically having similar maturities and credit qualities.

Since in certain cases the Company may recognize income before or without receiving cash representing such income, the Company may have difficulty meeting the requirement in a given taxable year to distribute dividends for U.S. federal income tax purposes an amount at least equal to 90% of its investment company taxable income, determined without regard to any deduction for dividends paid, to its stockholders to qualify and maintain its ability to be subject to tax as a RIC. In such a case, the Company may have to sell some of its investments at times the Company would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If the Company is not able to obtain such cash from other sources, it may fail to qualify as a RIC and thus be subject to corporate-level income tax.

The Company is an “emerging growth company.”

The Company is an “emerging growth company,” as defined in the JOBS Act, until the earliest of: (1) the last day of the Company’s fiscal year in which the fifth anniversary of an IPO, if any, of shares of the Company’s common stock occurs, (2) the last day of the fiscal year in which the Company’s annual gross revenue first exceeds $1.235 billion, (3) the last day of a fiscal year in which the Company (a) has an aggregate worldwide market value of its common stock held by non-affiliates of $700 million or more, computed at the end of each fiscal year as of the last business day of the Company’s most recently completed second fiscal quarter and (b) has been a reporting company under the Exchange Act for at least one year (and filed at least one annual report under the Exchange Act) or (4) the date on which the Company has issued more than $1 billion in non-convertible debt securities during the preceding three-year period.

The Company intends to take advantage of some or all of the reduced regulatory and disclosure requirements permitted by the JOBS Act and, as a result, some investors may consider the Company’s common stock less attractive. While the Company is an emerging growth company and/or a non-accelerated filer within the meaning of the Exchange Act, the Company may take advantage of exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that the Company’s independent registered public accounting firm provide an attestation report on the effectiveness of the Company’s internal control over financial reporting. This may increase the risk that material weaknesses or other deficiencies in the Company’s internal control over financial reporting go undetected.

The Company may be the subject of litigation or similar proceedings.

The Company may be the target of securities litigation in the future, particularly if the value of its common stock fluctuates significantly. The Company could also generally be subject to litigation, including derivative actions by its stockholders, or SEC enforcement actions. In addition, the Company’s executive officers and directors and the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from the Company’s investments in the portfolio companies. Any litigation or enforcement

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action could result in substantial costs and divert management’s attention and resources from the Company’s business and cause a material adverse effect on the Company’s business, financial condition and results of operations.

The Company is highly dependent on information systems and systems failures could significantly disrupt its business, which could, in turn, negatively affect the value of its common stock and ability to pay distributions.

The Company’s business depends on the communication and information systems of the Adviser, its affiliates and the Company’s other service providers. These systems are subject to a number of different threats or risks that could adversely affect the Company, despite the efforts of the Adviser and other service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the Company. For example, unauthorized third parties may attempt to improperly access, modify, disrupt the operations of, or prevent access to these systems of the Adviser or other service provider or data within these systems. Third parties may also attempt to fraudulently induce employees, customers, third-party service providers or other users of such systems to disclose sensitive information in order to gain access to data. A successful penetration or circumvention of the security of the Adviser’s or other service provider’s systems could result in the loss or theft of an investor’s data or funds, the inability to access electronic systems, loss or theft of proprietary information or corporate data, physical damage to a computer or network system or costs associated with system repairs. Such incidents could cause the Company to incur regulatory penalties, reputational damage, litigation, additional compliance costs or financial loss. Similar types of operational and technology risks are also present for portfolio companies, which could have material adverse consequences for such portfolio companies, and may cause the Company’s investments to lose value.

If the Company were to undertake a Liquidity Event, it may not be able to do so on acceptable terms, or at all.

In order to complete a Listing, the Company will need to access the capital markets to issue equity securities, and unfavorable economic conditions could limit such access. In the event that the Company does successfully complete a Listing, an active trading market may not develop for shares of the Company’s common stock.

Investment Risks

The Company is dependent upon the Adviser’s ability to implement the Company’s investment strategies.

The success of the Company’s investment activities is dependent on the Adviser’s ability to identify opportunities for positive risk-adjusted returns, which will be dependent in part on a continuing lack of available capital for middle market companies and institutions. Identification of these opportunities involves uncertainty. No assurance can be given that the Adviser will be able to successfully locate investment opportunities and that the Company’s investment program will be successful.

The Company operates in a highly competitive market for investment opportunities, which could reduce returns and result in losses.

A number of entities will compete with the Company to make the types of investments that the Company intends to make. The Company will compete with public and private funds, including collateralized loan obligations and alternative investment funds, commercial and investment banks, commercial financing companies, and other business development companies. As a result of a number of new entrants over the past several years, competition for investment opportunities in middle market companies has intensified, and the Company expects the trend to continue.

Many of the Company’s potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than the Company does. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to the Company. In addition, some of the Company’s competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than the Company. Furthermore, many of the Company’s competitors are not subject to the regulatory restrictions that the 1940 Act imposes on the Company as a BDC. The competitive pressures faced by the Company may have a material adverse effect on the Company’s business, financial condition and results of operations. Furthermore, as a result of this competition, the Company may not be able to take advantage of attractive investment opportunities from time to time, and the Company can offer no assurance that it will be able to identify and make investments that are consistent with its investment objective.

Entrants in the Company’s industry compete on several factors, including price, flexibility in transaction structuring, customer service, reputation, market knowledge and speed in decision-making. The Company will not seek to compete primarily based on the interest rates it offers, and the Company believes that some of its competitors may make loans with interest rates that are lower than the rates the Company offers. The Company may lose investment opportunities if it does not match its competitors’ pricing, terms and structure. However, if the Company matches its competitors’ pricing, terms and structure, the Company may reduce its net investment income and increase its risk of credit loss.

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Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on the Company’s operating results.

The Company generally seeks to invest in U.S. middle market companies. Because there is generally little publicly available information about these businesses, the Company will rely on the ability of the Adviser’s investment professionals to obtain adequate information to evaluate the potential return from investing in these companies. If the Adviser is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and the Company may lose money on its investments. Middle market companies generally have less predictable operating results, may have limited or negative EBITDA and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. Middle market companies generally have more limited access to capital and higher financing costs, may be in a weaker financial position, may need more capital to expand or compete and may be unable to obtain financing from public capital markets or from traditional sources, such as commercial banks, which may limit their ability to grow or repay outstanding indebtedness at maturity. In addition, these companies may not have collateral sufficient to pay any outstanding interest or principal due to the Company in the event of default. Middle market businesses typically have shorter operating histories, narrower product lines, smaller market shares and/or more significant customer concentrations than larger businesses. Therefore, they tend to be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. Typically, the success of a middle market business also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of such persons could have a material adverse impact on the company and its ability to repay its obligations. Middle market companies also may be parties to litigation and may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence. In addition, the Company’s executive officers and directors and the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from the Company’s investments in the portfolio companies.

The Company’s portfolio companies may be highly leveraged.

Some of the Company’s portfolio companies may be highly leveraged, which may have adverse consequences for these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

The Company is subject to credit and default risk and portfolio companies could be unable to repay or refinance outstanding principal on their loans at or prior to maturity.

A portfolio company’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets. This could trigger cross-defaults under other agreements and jeopardize such company’s ability to meet its obligations under the debt securities that the Company holds. The Company 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 investment. In addition, the Company, together with other funds managed by the Adviser and its affiliates, could be expected to take over a portfolio company if the portfolio company defaults on its loans. Depending on factors such as the health of the economy, the credit cycle, and the portfolio