What changed in this filing

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Item 1. Business

2022-03-10 compared with 2021-02-26 · 1134 added, 940 removed, 133 unchanged (94% of the section changed)

Kayne Anderson BDC, LLC

was formed in May 2018 as a Delaware limited liability company.

We were formed to make investments in middle-market companies and commenced operations on February 5, 2021 with the purchase of our initial portfolio of investments and related

transactions referred to as the Formation Transactions (as described below).

On this same date, prior to our election to be regulated as a business development company (BDC) under the Investment Company Act of 1940 (the

1940 Act), we completed a conversion from a Delaware limited liability company into a Delaware corporation and Kayne Anderson BDC, Inc.

succeeded to the business of Kayne Anderson BDC, LLC.

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act.

Kayne Anderson BDC, LLC was formed in May

2018 as a Delaware limited liability company.

We were formed to make investments in middle-market companies and commenced operations

on February 5, 2021.

On this same date, prior to our election to be regulated as a BDC under the 1940 Act, we completed a conversion

from a Delaware limited liability company into a Delaware corporation and Kayne Anderson BDC, Inc.

succeeded to the business of Kayne

Anderson BDC, LLC.

We are an externally managed, closed-end, non-diversified management investment company that has elected

to be regulated as a BDC under the 1940 Act.

In addition, for U.S.

federal income tax purposes, we

intend to elect to be treated as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code).

Formation Transactions

On January 25, 2021, we entered into subscription agreements with investors for an aggregate capital commitment of $154.3 million to purchase shares

of our common stock, $.001 par value per share (Common Stock).

On February 5, 2021, we sold 5.7 million shares of our Common Stock to these investors for an aggregate offering price of $85.0 million.

On the same date,

prior to our election to be regulated as a BDC, we used a portion of the proceeds from the sale of Common Stock together with borrowings under our credit facility to purchase our initial portfolio of investments for $103.0 million from an

affiliate of our Advisor (the Warehousing Entity).

The initial portfolio purchased from the Warehouse Entity consisted of 18 loans, with an

average outstanding balance of $5.9 million, an average purchase price of 97.4% of principal value and an average yield on that date of 8.8%.

None of these loans in the initial portfolio were in default or

non-accrual status.

Information about the initial portfolio is not intended to indicate our expected investment return on the initial portfolio or the investment performance of our shares of common stock.

of the loans are senior secured and the borrowers are middle and upper middle market companies.

The purchase of the initial portfolio was completed before we elected to be treated as a BDC under the 1940 Act.

This initial acquisition and all related

transactions are referred to as the Formation Transactions.

federal income tax purposes, we intend to qualify, annually, as a

RIC under Subchapter M of the Code.

We are managed by KA Credit Advisors, LLC

(the “Advisor”) which is an indirect subsidiary of Kayne Anderson Capital Advisors, L.P.

(“KACALP”

or “Kayne

Anderson”).

The Advisor is registered with the Securities and Exchange Commission (“SEC”) as an investment advisor

under the Investment Advisory Act of 1940.

Subject to the overall supervision of the Company’s board of directors (the “Board”),

the Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential

investments, analyzing investment opportunities, negotiating and structuring investments and monitoring its investments and portfolio

companies on an ongoing basis.

The Board consists of five directors, three of whom are independent.

Investment Objective and Strategy

Our investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market

We define middle-market companies as U.S.-based companies that, in general, generate between $10 million and $150 million of annual earnings before interest, taxes, depreciation and amortization, or EBITDA.

to companies that generate between $10 million and $50 million of annual EBITDA as core middle-market companies and companies that generate between $50 million and $150 million of annual EBITDA as upper

Our investment objective is to generate current

income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.

We define “middle-market

companies”

as U.S.-based companies that, in general, generate between $10 million and $150 million of annual earnings

before interest, taxes, depreciation and amortization, or EBITDA.

We refer to companies that generate between $10 million and $50 million

of annual EBITDA as “core middle-market companies”

and companies that generate between $50 million and $150 million

of annual EBITDA as “upper middle-market companies.”

We intend to achieve our investment objective by investing primarily

in first lien senior secured, unitranche and split-lien loans (collectively, “secured middle market loans”) to privately held

middle-market companies.

We intend to achieve our investment objective by investing primarily in first lien senior secured, unitranche and

split-lien loans to privately held middle-market companies.

These middle-market companies, in many cases, have a private equity firm that owns the majority of their equity and controls the companies.

First lien senior secured, unitranche loans and

split-lien term loans, also referred to as senior secured loans, typically pay interest on a floating rate basis, generally calculated as a premium over a benchmark, typically the London Interbank Offered Rate, or LIBOR, or, after June 30, 2023

(as such date may be amended in the future), acceptable alternatives to LIBOR.

Similar to first lien senior secured loans, unitranche loans typically have a first lien on all assets of the borrower but provide leverage at levels similar to a

combination of first lien and second lien and/or subordinated loans.

Depending on market conditions, we expect that between 80% and 90% of our portfolio (including investments purchased with proceeds from borrowings) will be invested in first lien

senior secured, unitranche and split-lien term loans.

We expect that most of these investments will be in core middle market companies, with the remainder in upper middle market companies.

The remaining 10% to 20% of our portfolio will be invested

in higher-yielding investments, including, but not limited to, second lien loans, last-out or subordinated loans, non-investment grade broadly

syndicated first and second lien loans (commonly referred to as leveraged loans), high-yield bonds, structured products (including CLO liabilities), real estate related debt securities, equity securities purchased in conjunction with

debt investments and other opportunistic investments (collectively Opportunistic Middle Market Investments).

Our typical investment

commitment is expected to be up to $50 million, although we expect that the size of our investments may increase as our business grows.

We generally expect to make these investments alongside other Kayne Anderson managed funds and separately

managed accounts pursuant to exemptive relief received from the Securities and Exchange Commission (the SEC).

While we intend to invest primarily in middle-market companies, we may also invest in larger or smaller companies.

in which we intend to invest will typically be highly leveraged, and, in the majority of cases, will not be rated by any credit ratings agency.

investments were rated, we believe such issuers would be rated below investment grade.

Securities that are rated below investment grade are sometimes referred to as high yield

securities or junk bonds and have predominantly speculative characteristics with respect to the issuers capacity to pay interest and repay principal.

Furthermore, a portion of our investments is expected to be in loans

considered covenant-lite securities (primarily our loans to upper middle-market companies and our Opportunistic Middle Market Investments).

As discussed below, our Advisor is an affiliate of Kayne Anderson.

We intend to implement our investment objective by (1) accessing the established loan

sourcing channels developed by Kayne Anderson, which includes an extensive network of private equity firms, other middle-market lenders, financial advisors and intermediaries, and experienced management teams, (2) selecting investments within

our middle-market company focus, (3) implementing Kayne Andersons middle market private credit teams disciplined underwriting process, which includes reviewing environmental, social and governance (ESG) considerations,

and (4) drawing upon the experience and resources of our Advisors investment team and the broader Kayne Anderson network.

The members of the

Advisors investment team are experienced middle-market investors.

The Advisors investment team has been focused on the middle-market since the 1980s.

Prior to joining Kayne Anderson, certain of the Advisors lead investment team

members founded and managed Dymas Capital Management, a middle-market, senior lending business, that was an affiliate of Cerberus Capital Management, L.P.

Additionally, members of the Advisors investment team previously worked together at GE

Capital and Heller Financial as senior investment professionals.

The Advisors investment team has experience in all aspects of private credit financing, including sourcing, credit analysis, due diligence, negotiation and execution of

documentation, portfolio management and restructuring.

Our investment philosophy emphasizes the preservation of capital through a strong credit orientation and a disciplined investment process.

We intend to utilize the thorough and systematic

approach to investing and build upon the lending processes developed and historically employed by the Advisors investment team.

The universe of middle market companies consists of nearly 200,000 potential borrowers that we believe will continue to require access

to debt capital to refinance existing debt, support growth and finance acquisitions.

Further, there is a large amount of uninvested capital held by private equity funds focused on investing in middle market businesses.

We expect these private equity

firms will continue to pursue acquisitions and to seek to fund a portion of these transactions with debt.

We believe there is an opportunity for capital

providers such as us to increase their market share of loans made to middle market companies as regulatory and structural changes in the lending market have reduced the amount of capital banks and other traditional sources of debt capital are

willing to lend to middle market companies.

Additionally, these types of companies are generally limited in their ability to access the institutional leverage loan and high yield markets due to challenging size and liquidity requirements imposed by

these institutional investors.

We believe that these market dynamics create opportunities for us to make investments with attractive risk-adjusted rates

In addition to commanding higher pricing, principally due to illiquidity, directly negotiated middle market financings generally provide for more favorable terms to lenders than broadly syndicated loans, including more conservative

leverage ratios, stronger covenants and reporting packages, better call protection, and more restrictive change-of-control provisions.

The credit investments that we expect to hold in our portfolio will generate what we believe are attractive yields, make quarterly interest payments to

holders and will often rank ahead of other debt instruments in the borrowers capital structure.

The vast majority of our credit investments are expected to be floating rate loans, providing a natural hedge against inflation if interest rates

As a result of Kayne Andersons middle-market private credit teams focus on lending to businesses that we believe to exhibit limited cyclicality, we believe that

operating results for the Companys portfolio investments will have minimal correlation to price changes in the broader equity markets.

This lack of correlation to the broader markets,

combined with attractive yields on senior debt investments are two of the primary reasons we find private credit investments to be compelling for our portfolio.

We compete with a number of BDCs and

investment funds (both public and private), commercial and investments banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity and hedge funds.

Many of our competitors are substantially

larger and have considerably greater financial and marketing resources than we do.

We believe we are able to compete with these entities primarily on the basis of the experience and contacts of our management team, our responsive and efficient

investment analysis and decision-making processes, the investment terms we offer, and our model of investing in companies we know well.

We believe that

some of our competitors may make loans with interest rates that will be lower than the rates that we offer.

We do not seek to compete solely on the interest rates and returns that we offer to potential portfolio companies.

For additional information

concerning competitive risks, see Item 1A Risk Factors.

Similar to first lien senior secured loans, unitranche loans typically have a first lien on all assets of the

borrower, but provide leverage at levels similar to a combination of first lien and second lien and/or subordinated loans.

loans are loans that otherwise satisfy the criteria of a first lien loan but which have been structured with a credit facility that is

senior in right of payment with respect to working capital assets of the borrower and a term loan that is collateralized by all other

assets of the borrower.

Depending on market conditions, we expect that at least 90% of our portfolio (including investments purchased

with proceeds from borrowings) will be invested in secured middle market loans.

It is anticipated that most of these investments will

be in core middle market companies, with the remainder in upper middle market companies.

The remaining 10% of our portfolio may be invested

in higher-returning investments, including, but not limited to, equity securities purchased in conjunction with secured middle market

loans and other opportunistic investments (collectively “Opportunistic Investments”), including junior debt, real estate debt

and infrastructure credit investments.

We expect that the secured middle market loans we invest in will generally have stated maturities

of no more than six years.

We intend to implement our investment objective by (1) accessing

the established loan sourcing channels developed by Kayne Anderson’s middle market private credit team, which includes an extensive

network of private equity firms, other middle-market lenders, financial advisors and intermediaries, and management teams, (2) selecting

investments within our middle-market company focus, (3) implementing Kayne Anderson’s middle market private credit team’s

proven underwriting process, and (4) drawing upon the experience and resources of our Advisor’s investment team and the broader

Kayne Anderson network.

We believe our Advisor’s disciplined

approach to origination, credit analysis, portfolio construction and risk management should allow us to achieve attractive risk-adjusted

returns while preserving investor capital.

We anticipate the portfolio will be comprised of a broad mix of loans, with diversity among

investment size, industry focus and geography.

The Advisor’s team of professionals will conduct in-depth due diligence on prospective

investments during the underwriting process and will be heavily involved in structuring the credit terms of each investment.

Once an investment

has been made, our Advisor will closely monitor portfolio investments and take a proactive approach identifying and addressing sector

or company specific risks.

The Advisor maintains a regular dialogue with portfolio company management teams (as well as their financial

sponsors, where applicable), reviews detailed operating and financial results on a regular basis (typically monthly or quarterly) and

monitors current and projected liquidity needs, in addition to other portfolio management activities.

Market Opportunity

The universe of middle market companies consists

of nearly 200,000 potential borrowers that we believe will continue to require access to debt capital to refinance existing debt, support

growth and finance acquisitions.

Further, there is a large amount of uninvested capital held by private equity funds focused on investing

in middle market businesses.

We expect these private equity firms will continue to pursue acquisitions and to seek to fund a portion

of these transactions with debt.

We believe there is an opportunity for capital providers such as us

to increase their market share of loans made to middle market companies as regulatory and structural changes in the lending market have

reduced the amount of capital that banks and other traditional sources of debt capital are willing to lend to middle market companies.

Additionally, these types of companies are generally limited in their ability to access the institutional leveraged loan and high yield

markets due to challenging size and liquidity requirements imposed by these institutional investors.

Given that banks have not been active

(or consistent) providers of leveraged loans to middle market companies, we believe these financial institutions will continue to have

a difficult time establishing a trusted relationship with private equity sponsors and investment banks in this area of the capital markets.

Finally, as the universe of non-bank lenders has grown, many capital providers have pursued companies in the upper middle market leaving

the core middle market as a less competitive and attractive marketplace.

We believe that these market dynamics create

opportunities for us to make investments with attractive risk-adjusted rates of return.

In addition to commanding higher pricing, principally

due to illiquidity, directly negotiated middle market financings generally provide for more favorable terms to lenders than broadly syndicated

loans, including more conservative leverage ratios, stronger covenants and reporting packages, better call protection, and more restrictive change-of-control provisions.

The credit investments that we expect to hold in our portfolio will

generate what we believe are attractive yields, will make quarterly interest payments to holders and will typically rank ahead of other

debt instruments in the borrower’s capital structure.

The vast majority of our credit investments are expected to be floating rate

loans, providing a natural hedge against inflation if interest rates increase.

As a result of Kayne Anderson’s middle-market private

credit team’s focus on lending at more conservative debt multiples than the broader market and to businesses that exhibit limited

cyclicality, we believe that operating results for the Company’s portfolio investments will have minimal correlation to price changes

in the broader equity markets.

This lack of correlation to the broader equity markets, combined with attractive yields on senior debt

investments and downside protection as a result of our secured middle-market loans’

seniority in such company’s capital structure,

are some of the reasons we find private credit investments to be compelling for our portfolio.

We compete with a number of BDCs and investment funds (both public

and private), commercial and investments banks, commercial financing companies and, to the extent they provide an alternative form of

financing, private equity and hedge funds.

Many of our competitors are substantially larger and have considerably greater financial and

marketing resources than we do.

We believe we are able to compete with these entities primarily on the basis of the experience and contacts

of our management team, our responsive and efficient investment analysis and decision-making processes, the investment terms we offer,

and our model of investing in companies participating in industries which we know well.

We believe that some of our competitors may make loans with interest

rates that will be lower than the rates that we offer.

We do not seek to compete solely on the interest rates that we offer to potential

portfolio companies.

For additional information concerning competitive risks, see “

Item 1A –

Risk Factors.

Investment Advisor

Our investment activities are managed by our Advisor, an investment advisor that is registered with the SEC under the Investment Advisers Act of 1940, as

amended (the Advisers Act), under an investment advisory agreement between us and the Advisor (the Investment Advisory Agreement).

Our Advisor is responsible for originating prospective investments, conducting research and

due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring investments and monitoring our investments and portfolio companies on an ongoing basis.

While we do not have any employees, the

Advisor and its affiliates have a team of approximately 50 investment professionals who are primarily focused on private credit investments and liquid credit investments.

Our investment activities are managed by our Advisor, an investment

advisor that is registered with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), under

an investment advisory agreement between us and the Advisor (the “Investment Advisory Agreement”).

Our Advisor is responsible

for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment

opportunities, negotiating and structuring investments and monitoring our investments and portfolio companies on an ongoing basis.

we do not have any employees, the Advisor and its affiliates have a team of approximately 35 investment professionals who are primarily

focused on private credit investments and liquid credit investments.

The investment team is supported by a team of finance, legal, compliance,

operations and administrative professionals.

The Advisors investment committee has overall responsibility for evaluating and approving the

Companys investments, and its portfolio allocations, subject to the oversight of our Board of Directors.

The investment committee review process is intended to bring the diverse experience and perspectives of the investment committee members

to the analysis and consideration of every investment.

The investment committee currently consists of Michael J.

Levitt, Chief Executive Officer of Kayne Anderson;

Quinn, Vice Chairman of Kayne Anderson;

Blank, Chief Operating

Officer of Kayne Anderson;

Baker, Co-Head of Liquid Energy Infrastructure at Kayne Anderson;

The Advisor’s investment committee has overall responsibility

for evaluating and approving the Company’s investments, and its portfolio allocations, subject to the oversight of our Board of

The investment committee review process is intended to bring the diverse experience and perspectives of the investment committee

members to the analysis and consideration of every investment.

The investment committee currently consists of Terrence J.

Chairman of Kayne Anderson;

Blank, Chief Operating Officer of Kayne Anderson;

Baker, Jr., Co-Head of Liquid

Energy Infrastructure at Kayne Anderson;

Goodwillie, Co-Head of Private Credit at Kayne Anderson;

and Kenneth B.

Leonard, Co-Head of Private Credit at Kayne Anderson.

Eanes, Head of Liquid Credit at Kayne Anderson;

and Jon Levinson, Head of Opportunistic Credit at Kayne Anderson.

The investment

committee also determines appropriate investment sizing and mandates ongoing monitoring requirements.

The investment committee also determines appropriate investment sizing

and mandates ongoing monitoring requirements.

Goodwillie and Kenneth B.

Leonard, each a Co-Chief Investment Officer of the Company, are

jointly and primarily responsible for the day-to-day management of the Companys portfolio.

In addition to reviewing investments, the investment committee meetings serve as a forum to discuss credit views and outlooks.

The investment committee also

reviews potential transactions and deal flow on a regular basis.

Members of the deal team are encouraged to share information and views on credit with the committee early in their analysis.

We believe this process improves the quality of the

analysis and enables deal team members to work more efficiently.

Leonard, each a Co-Chief Investment Officer

of the Company, are jointly and primarily responsible for the day-to-day management of the Company’s portfolio.

In addition to reviewing investments, the

investment committee meetings serve as a forum to discuss credit views and outlooks.

The investment committee also reviews potential

transactions and deal flow on a regular basis.

Members of the deal team are encouraged to share information and views on credit with

the committee early in their analysis.

We believe this process improves the quality of the analysis and enables deal team members to

work more efficiently.

The Administrator

Our Advisor also serves as our administrator.

Pursuant to an administration agreement (the Administration Agreement), our Administrator is

responsible for providing or overseeing the performance of, our required

administrative services and professional services rendered by others, which will include (but not limited to), accounting, payment of our expenses, legal, compliance, operations, technology and

investor relations, preparation and filing of our tax returns, and preparation of financial reports provided to our stockholders and filed with the SEC.

See Item 1.

Business Administration Agreement below for a

discussion of the expenses (subject to the review and approval of our independent directors) that we expect to reimburse to the Administrator.

About Kayne Anderson Capital Advisors, L.P.

Founded in 1984, Kayne Anderson is a leading alternative investment management firm which is registered with the SEC under the Advisers Act, focused on

infrastructure, real estate, credit and private equity.

Kayne Andersons investment philosophy is to pursue niches, with an emphasis on cash flow, where its knowledge and sourcing advantages enable it to deliver above average, risk-adjusted

investment returns.

As responsible stewards of capital, Kayne Andersons investment philosophy extends to promoting responsible investment practices and sustainable business practices to create long-term value for its investors.

As of December 31, 2020, investment vehicles managed or advised by Kayne Anderson had over $32 billion in assets under management for institutional

investors, family offices, high net worth and retail clients.

Pursuant to an administration

agreement (the “Administration Agreement”), our Administrator is responsible for providing or overseeing the performance of

our required administrative services and professional services rendered by others, which will include (but not limited to), accounting,

payment of our expenses, legal, compliance, operations, technology and investor relations, preparation and filing of our tax returns,

and preparation of financial reports provided to our stockholders and filed with the SEC.

About Kayne Anderson Capital Advisors,

Founded in 1984, Kayne Anderson is a leading alternative investment

management firm which is registered with the SEC under the Advisers Act, focused on real estate, credit, infrastructure/energy, renewables

and growth equity.

Kayne Anderson’s investment philosophy is to pursue niches, with an emphasis on cash flow, where its knowledge

and sourcing advantages enable it to deliver above average, risk-adjusted investment returns.

As responsible stewards of capital, Kayne

Anderson’s investment philosophy extends to promoting responsible investment practices and sustainable business practices to create

long-term value for its investors.

As of December 31, 2021, investment vehicles

managed or advised by Kayne Anderson had over $30 billion in assets under management for institutional investors, family offices,

high net worth and retail clients.

Kayne Anderson has over 325 employees located across five offices across the U.S.

The firm has approximately 150 investment professionals, 50 of which are dedicated to credit investing.

Kayne Andersons credit platform operates various fund vehicles that pursue investment opportunities across several investment strategies.

December 31, 2020, the platform managed over $14 billion in credit assets across three main strategies:

middle-market private credit (targeting senior secured loans, unitranche loans and opportunistic credit

investments),

liquid credit (investing in broadly syndicated leveraged loans and high yield bonds), and

real estate private credit (targeting debt investments secured by real estate assets).

This integrated and scaled platform combines direct origination, strong fundamental credit analysis and relative-value perspective.

Private Offering

We expect to conduct private

offerings of our Common Stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the Securities Act).

At the closing of any private offering, each investor will make a

capital commitment (a Capital Commitment) to purchase shares of our Common Stock (Shares) pursuant to a subscription agreement (the Subscription Agreement) entered into with us.

Investors will be required to fund

drawdowns to purchase Shares up to the amount of their respective Capital Commitments each time we deliver a notice to the investors.

All purchases will generally be made pro rata in accordance with the investors Capital Commitments, at a per-Share price as determined by our Board of Directors as of a date that is immediately prior to the date of the applicable drawdown.

The per-Share price will be at least

equal to net asset value, or NAV, per share in accordance with the limitations under Section 23 of the 1940 Act.

Following our initial closing of

the private offering on February 5, 2021 (the Initial Closing) and prior to any Liquidity Event (as defined below), our investment adviser may, in its sole discretion, permit one or more additional closings of the private offering.

A Liquidity Event is defined as (a) an initial public offering of our Shares (the Initial Public Offering) or the listing of our Shares on an exchange (together with the Initial Public Offering, an Exchange

Listing), (b) the sale of the Company or (c) a disposition of the Companys investments and distribution of the net proceeds (after repayment of borrowed funds or other forms of leverage) to the Companys investors.

Our initial private offering of Shares was conducted in reliance on Regulation D under the Securities Act

(Regulation D).

Investors in our initial private offering were required to be accredited investors as defined in Regulation D of the Securities Act.

The criteria required of Regulation D may not apply to investors in

subsequent offerings.

Additional closings are expected to occur from time to time as determined by us.

We are targeting $500 million in commitments

at this time (the Initial Capital Raise), and we expect to complete this offering prior to November 30, 2021.

We reserve the right to conduct additional offerings of securities in the future.

In the event that we enter into a

Subscription Agreement with one or more investors after the Initial Closing, each such investor will be required to make purchases of Shares (each, a Catch-up Purchase) on one or more dates to be

determined by us.

The aggregate purchase price of any Catch-up Purchase will be equal to an amount necessary to ensure that, upon payment of the aggregate purchase price, such investor will have contributed

the same percentage of its Capital Commitment to us as all investors whose subscriptions were accepted at previous closings.

Catch-up Purchases will be made at a

per-Share price as determined by our Board of Directors as of the end of the most recent calendar quarter or such other date as determined by the Board prior to the date of the applicable drawdown notice, or

such other date as may be required to comply with the provisions of the 1940 Act.

In order to more fairly allocate organizational expenses among all of our stockholders, investors subscribing after the initial drawdown will be required to pay a

price per Share above net asset value reflecting a variety of factors, including, without limitation, the total amount of our organizational and other expenses.

The firm has approximately

140 investment professionals, 35 of which are dedicated to credit investing.

Kayne Anderson’s credit platform operates

various fund vehicles that pursue investment opportunities across several investment strategies.

As of December 31, 2021, the platform

managed over $9 billion in credit assets across three main strategies:

middle-market private credit (targeting senior secured loans, unitranche

loans and opportunistic credit investments),

liquid credit (investing in broadly syndicated leveraged loans and

high yield bonds), and

real estate private credit (targeting debt investments secured by real

estate assets).

This integrated and scaled platform combines

direct origination, strong fundamental credit analysis and relative-value perspective.

Private Offerings

We conduct private offerings of our Common

Stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities

At the closing of any private offering, each investor will make a capital commitment (a “Capital Commitment”)

to purchase shares of our Common Stock (“Shares”) pursuant to a subscription agreement (the “Subscription Agreement”)

entered into with us.

Investors will be required to fund drawdowns to purchase Shares up to the amount of their respective Capital Commitments

each time we deliver a notice to the investors.

All purchases will generally be made pro rata in accordance with the investors’

Capital Commitments, at a per-Share price as determined by our Board of Directors as of a date that is immediately prior to

the date of the applicable drawdown.

The per-Share price will be at least equal to net asset value, or NAV, per share in accordance

with the limitations under Section 23 of the 1940 Act.

Following our initial closing of the private

offering on February 5, 2021 (the “Initial Closing”) and prior to any Liquidity Event (as defined below), our investment

adviser may, in its sole discretion, permit additional closings of the private offering.

A “Liquidity Event”

is defined as

(a) an initial public offering of our Shares (the “Initial Public Offering”) or the listing of our Shares on an exchange

(together with the Initial Public Offering, an “Exchange Listing”), (b) the sale of the Company or (c) a disposition

of the Company’s investments and distribution of the net proceeds (after repayment of borrowed funds or other forms of leverage)

to the Company’s investors.

Our initial private offering of Shares was

conducted in reliance on Regulation D under the Securities Act (“Regulation D”).

Investors in our initial private offering

were required to be “accredited investors”

as defined in Regulation D of the Securities Act.

The criteria required of Regulation

D may not apply to investors in subsequent offerings.

We are targeting $800 million in commitments at this time (the

“Initial Capital Raise”), and we expect to complete this offering in early 2022.

Following our Initial Closing, each investor

was required to make purchases of Shares (each, a “Catch-up Purchase”) on one or more dates to be determined by

The aggregate purchase price of any Catch-up Purchase will be equal to an amount necessary to ensure that, upon payment

of the aggregate purchase price, such investor will have contributed the same percentage of its Capital Commitment to us as all investors

whose subscriptions were accepted at previous closings.

Catch-up Purchases will be made at a per-Share price as determined

by our Board of Directors prior to the date of the applicable drawdown, or such other date as may be required to comply with the provisions

of the 1940 Act.

In order to more fairly allocate organizational expenses among all of our stockholders, investors subscribing after the

initial drawdown will be required to pay a price per Share above net asset value reflecting a variety of factors, including, without limitation,

the total amount of our organizational and other expenses.

As of March 4, 2022, we had entered into subscription

agreements with investors for an aggregate capital commitment of $701.5 million to purchase shares of common stock (including a $33.3

million capital commitment that is contingent on us meeting certain conditions).

We conducted the following private offerings

of our common stock associated with these subscription agreements during the year ended December 31, 2021.

call notice date

Common stock issue date

shares issued

($ in millions)

January 25, 2021

February 5, 2021

April 12, 2021

April 23, 2021

July 12, 2021

July 23, 2021

October 19, 2021

October 28, 2021

November 19, 2021

December 2, 2021

Total common stock issued

On January 24, 2022, we sold 4,191,292 shares

of common stock at a price of $16.36 per share for an aggregate offering amount of $68.6 million.

Commitment Period

Upon the earlier of

(a) the conclusion of the three-year period after completion of the Initial Capital Raise or (b) an Exchange Listing (the Commitment Period), investors will be released from any further obligation to purchase additional Shares

with respect to a Capital Commitment.

If we have not otherwise completed an Exchange Listing within three years of the Initial Capital Raise, we may, subject to shareholder approval, extend the Commitment Period by an additional two years.

During the Commitment Period, no investor will be permitted to sell, assign, transfer or otherwise dispose of its Shares or Capital Commitment unless we provide our prior written consent and the transfer is otherwise made in accordance with

applicable law.

Once we have completed the Exchange Listing, each investor will be released from any further obligation to purchase additional Shares

with respect to a Capital Commitment.

If we have not otherwise completed an Exchange Listing and the Commitment Period has ended (including extensions, if any), each investor will be released from any further obligation to purchase additional Shares

with respect to a Capital Commitment, except to the extent necessary to (a) pay our expenses, including management fees, any amounts that may become due under any borrowings or other financings or similar obligations and any other liabilities,

contingent or otherwise, in each case to the extent they relate to the Commitment Period, (b) complete investments in any transactions for which there are binding written agreements as of the end of the Commitment Period (including investments

that are funded in phases), (c) fund follow-on investments made in existing portfolio companies that, in the aggregate, do not exceed 20% of total commitments, (d) fund obligations under any guarantee or

indemnity made by us during the Commitment Period and/or (e) fund any defaulted commitments.

As part of certain credit facilities, the right to make

capital calls of stockholders may be pledged as collateral to a lender, which will be able to call for capital contributions upon the occurrence of an event of default under such credit facility.

To the extent such an event of default does occur,

stockholders could therefore be required to fund any shortfall up to their remaining Capital Commitments, without regard to the underlying value of their investment.

Upon the earlier of (a) December 31,

2024 or (b) an Exchange Listing (the “Commitment Period”), investors will be released from any further obligation to

purchase additional Shares with respect to a Capital Commitment.

If we have not otherwise completed an Exchange Listing by December

31, 2024, we may, subject to shareholder approval, extend the Commitment Period by an additional two years.

During the Commitment Period,

no investor will be permitted to sell, assign, transfer or otherwise dispose of its Shares or Capital Commitment unless we provide our

prior written consent and the transfer is otherwise made in accordance with applicable law.

Once we have completed the Exchange Listing,

each investor will be released from any further obligation to purchase additional Shares with respect to a Capital Commitment.

have not otherwise completed an Exchange Listing and the Commitment Period has ended (including extensions, if any), each investor will

be released from any further obligation to purchase additional Shares with respect to a Capital Commitment, except to the extent necessary

to (a) pay our expenses, including management fees, any amounts that may become due under any borrowings or other financings or

similar obligations and any other liabilities, contingent or otherwise, in each case to the extent they relate to the Commitment Period,

(b) complete investments in any transactions for which there are binding written agreements as of the end of the Commitment Period

(including investments that are funded in phases), (c) fund follow-on investments made in existing portfolio companies that,

in the aggregate, do not exceed 20% of total commitments, (d) fund obligations under any guarantee or indemnity made by us during

the Commitment Period and/or (e) fund any defaulted commitments.

As part of certain credit facilities, the

right to make capital calls of stockholders may be pledged as collateral to a lender, which will be able to call for capital contributions

upon the occurrence of an event of default under such credit facility.

To the extent such an event of default does occur, stockholders

could therefore be required to fund any shortfall up to their remaining Capital Commitments, without regard to the underlying value of

their investment.

Liquidity Event

Our term is perpetual.

we intend to seek an Exchange Listing within three to five years of completion of our Initial Capital Raise.

If we have not consummated an Exchange Listing or some other type of Liquidity Event within five years of our Initial Capital Raise, our

Board of Directors (to the extent consistent with its

fiduciary duties and subject to any necessary stockholder approvals and applicable requirements of the 1940 Act) will direct the Company to cease making new investments and will direct the

Advisor to commence the orderly disposition of investments (the Wind Down Period).

The Company shall be allowed to make follow-on investments during the Wind Down Period if such investments are

approved by our Board of Directors, subject to the 20% limit that applies after the Commitment Period.

Existing investments will be disposed of (and the proceeds of such dispositions promptly distributed to the Companys investors or used to

satisfy any amounts owed under any borrowed funds or other forms of leverage) in an orderly manner (the Company Liquidation).

If any investments made by the Company are also investments made by any other investment account managed by the

Advisor or any affiliate of the Advisor, such investments shall be disposed of at the same time and on the same terms as such other investment account.

However, we intend to seek an Exchange Listing

after we have substantially invested the proceeds from our Initial Capital Raise and as soon as market conditions warrant.

not consummated an Exchange Listing or some other type of Liquidity Event by December 31, 2026, our Board of Directors (to the extent

consistent with its fiduciary duties and subject to any necessary stockholder approvals and applicable requirements of the 1940 Act) will

direct the Company to cease making new investments and will direct the Advisor to commence the orderly disposition of investments (the

“Wind Down Period”).

The Company shall be allowed to make follow-on investments during the Wind Down Period if such

investments are approved by our Board of Directors, subject to the 20% limit that applies after the Commitment Period.

Existing investments

will be disposed of in an orderly manner and the proceeds of such dispositions promptly distributed to the Company’s investors or

used to satisfy any amounts owed under any borrowed funds or other forms of leverage (the “Company Liquidation”).

If any investments

made by the Company are also investments made by any other investment account managed by the Advisor or any affiliate of the Advisor,

such investments shall be disposed of at the same time and on the same terms as such other investment account.

Shareholder Agreements

We will enter into several

agreements (collectively, the Shareholder Agreements) with investors who participate in our private offering during our Initial Capital Raise (each an Initial Investor).

The Initial Investors will be granted the right to

invest in our investment advisor.

We entered into several agreements (collectively,

the “Shareholder Agreements”) with investors who participate in our private offering during our Initial Capital Raise (each

an “Initial Investor”).

The Initial Investors are granted the right to invest in our investment advisor.

Upon completion of

our Initial Capital Raise, we anticipate that the initial investors will own approximately 32% of our investment advisor.

Investment Advisory Agreement

On February 5, 2021, we entered into the Investment Advisory Agreement with our Advisor.

Pursuant to the Investment Advisory Agreement with our Advisor, we

will pay our Advisor a fee for investment advisory and management services consisting of two components a base management fee and an incentive fee.

Our Advisor may,

from time-to-time, grant waivers on our obligations, including waivers of the base management fee and/or incentive fee, under the Investment Advisory

The Investment Advisory Agreement may be terminated by either party with 60 days written notice.

On February 5, 2021, we entered into the

Investment Advisory Agreement with our Advisor.

Pursuant to the Investment Advisory Agreement with our Advisor, we will pay our

Advisor a fee for investment advisory and management services consisting of two components —

a base management fee and an

incentive fee.

Our Advisor may, from time-to-time, grant waivers on our obligations, including waivers of the

base management fee and/or incentive fee, under the Investment Advisory Agreement.

The Investment Advisory Agreement may be

terminated by either party with 60 days’

written notice.

Base Management Fee

Prior to an Exchange Listing, the base management fee will be calculated at an annual rate of 0.90% of the fair market value of our investments including, in

each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S.

government securities and commercial paper instruments maturing within one year of purchase.

After an Exchange Listing, the base management fee

will be calculated at an annual rate of 1.50% of the fair market value of our investments.

However, following an Exchange Listing, if borrowed funds or other forms of leverage utilized to finance our investments is greater than a debt-to-equity ratio of 1.0x, the base management fee will be 1.00% of the fair market value of the portion of our investments financed with borrowed funds or

other forms of leverage above a 1.0x debt-to-equity ratio.

services rendered under the Investment Advisory Agreement, the base management fee will be payable quarterly in arrears and calculated based on the average value, at the end of the two most recently completed calendar quarters, of our fair market

value of investments, including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S.

government securities and commercial paper instruments maturing within one year of purchase.

Base management

fees for any partial quarter will be appropriately pro-rated.

Prior to an Exchange Listing, the base management

fee is calculated at an annual rate of 0.90% of the fair market value of our investments including, in each case, assets purchased with

borrowed funds or other forms of leverage, but excluding cash, U.S.

government securities and commercial paper instruments maturing within

one year of purchase.

After an Exchange Listing, the base management fee will be calculated at an annual rate of 1.50% of the

fair market value of our investments.

However, following an Exchange Listing, if borrowed funds or other forms of leverage utilized to

finance our investments is greater than a debt-to-equity ratio of 1.0x, the base management fee will be 1.00% of

the fair market value of the portion of our investments financed with borrowed funds or other forms of leverage above a 1.0x debt-to-equity ratio.

For services rendered under the Investment

Advisory Agreement, the base management fee is payable quarterly in arrears and calculated based on the average value, at the end of

the two most recently completed calendar quarters, of our fair market value of investments, including, in each case, assets purchased

with borrowed funds or other forms of leverage, but excluding cash, U.S.

government securities and commercial paper instruments maturing

within one year of purchase.

Base management fees for any partial quarter are appropriately pro-rated.

Incentive Fee

We will also pay the Advisor an incentive fee.

The incentive fee will consist of two partsan incentive fee on income and an incentive fee on capital

Described in more detail below, these components of the incentive fee will be largely independent of each other with the result that one component may be payable even if the other is not.

Incentive Fee on Income

The incentive fee based on income (the income incentive fee) is determined and paid quarterly in arrears in cash.

Our quarterly pre-incentive fee net investment income (as defined below) must exceed a preferred return of 1.50% of the Companys NAV (6.0% annualized but not compounded) (the Hurdle Amount) in order for us to

receive an income incentive fee.

The income incentive fee is calculated as follows:

Prior to an Exchange Listing :

no income incentive fee in any calendar quarter in which our

pre-incentive fee net investment income does not exceed the Hurdle Amount (1.50% of the Companys NAV).

100% of our pre-incentive fee net investment income for the immediately

preceding calendar quarter in excess of 1.50% of the Companys NAV until the Advisor has received 10% of the total pre-incentive fee net income for that calendar quarter (the Pre IPO Catch-up

Pursuant to the Pre IPO Catch-up Provision, when pre-incentive fee net investment income equals 1.6667% in a calendar quarter, the income incentive fee

payable to the Advisor equals 10% of pre-incentive fee net investment income.

10% of our pre-incentive fee net investment income for the immediately

preceding calendar quarter in excess of 1.6667% of the Companys NAV.

After an Exchange Listing (beginning in

the first full quarter after the Exchange Listing) :

no income incentive fee in any calendar quarter in which our

pre-incentive fee net investment income does not exceed the Hurdle Amount (1.50% of the Companys NAV).

100% of our pre-incentive fee net investment income for the immediately

preceding calendar quarter in excess of 1.50% of the Companys NAV until the Advisor has received 15% of the total pre-incentive fee net income for that calendar quarter (the Post IPO Catch-up Provision).

Pursuant to the Post IPO Catch-up Provision, when pre-incentive fee net investment income equals 1.7647% in

a calendar quarter, the income incentive fee payable to the Advisor equals 15% of pre-incentive fee net investment income.

15% of our pre-incentive fee net investment income for the immediately

preceding calendar quarter in excess of 1.7647% of the Companys NAV.

The following are graphical representations of the

calculation of the income incentive fee:

Quarterly Incentive Fee on

Pre-Incentive Fee Net Investment Income

We will also pay the

Advisor an incentive fee.

The incentive fee will consist of two parts—an incentive fee on income and an incentive fee on capital

Described in more detail below, these components of the incentive fee will be largely independent of each other with the result

that one component may be payable even if the other is not.

Incentive Fee on

The incentive fee based

on income (the “income incentive fee”) is determined and paid quarterly in arrears in cash.

Our quarterly pre-incentive fee

net investment income must exceed a preferred return of 1.50% of the our NAV at the end of the immediately preceding calendar quarter

(6.0% annualized but not compounded) (the “Hurdle Amount”) in order for us to receive an income incentive fee.

incentive fee is calculated as follows:

Prior to an Exchange Listing :

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

100% of our pre-incentive fee

net investment income for the immediately preceding calendar quarter in excess of 1.50% of our NAV at the end of the immediately

preceding calendar quarter until the Advisor has received 10% of the total pre-incentive fee net income for that calendar quarter

and, for pre-incentive fee net investment income in excess of 1.6667%, 10% of all remaining pre-incentive fee net

investment income for that quarter.

After an Exchange Listing :

100% of our pre-incentive fee

net investment income for the immediately preceding calendar quarter in excess of 1.50% of our NAV at the end of the immediately

preceding calendar quarter until the Advisor has received 15% of the total pre-incentive fee net income for that calendar

quarter and, for pre-incentive fee net investment income in excess of 1.7647%, 15% of all remaining pre-incentive fee

net investment income for that quarter.

The following are graphical

representations of the calculations of the income incentive fee:

Quarterly Incentive

Pre-Incentive Fee

Net Investment Income

Incentive Fee

Quarterly Incentive Fee on

Prior to an Exchange

as a percentage of the value of net assets)

Pre-Incentive Fee Net Investment Income

Subsequent to an Exchange Listing

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

Quarterly Incentive Fee

100% à

Incentive Fee on

Pre-Incentive Fee

Net Investment Income

Incentive Fee

Pre-incentive fee net investment income is defined as interest income, dividend

income and any other cash or non-cash income accrued during the calendar quarter, minus operating expenses for the quarter, including the base management fee, expenses payable under the

Administration Agreement, any interest expense and distributions paid on any issued and outstanding debt or preferred stock, but excluding the incentive fee.

to an Exchange Listing

as a percentage of the value of net assets)

Pre-Incentive Fee Net Investment Income

does not include any expense support payments and/or any reimbursement by us of expense support payments, nor any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

If market interest rates rise, we may be able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee net investment income and make it easier for the Advisor to surpass the Hurdle Amount and receive an incentive fee on such net investment income.

Payment-in-kind (PIK) interest and original issue discount (OID), both of which are non-cash, will also increase our pre-incentive fee net investment income and make it easier to surpass the Hurdle Amount.

Our pre-incentive fee net investment income used to calculate this part of the

incentive fee is also included in the amount of our total assets (other than cash and cash equivalents but including assets purchased with borrowed amounts) used to calculate the base management fee.

Incentive Fee on Capital Gains

The incentive fee

on capital gains (the capital gain incentive fee) will be calculated and payable in arrears in cash as follows:

Prior to an Exchange

10.0% of our realized capital gains, if any, on a cumulative basis from formation through (a) the day before

an Exchange Listing, (b) upon consummation of a Liquidity Event or (c) upon the termination of the Investment Advisory Agreement, 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.

For the purpose of computing the capital gain incentive fee, the calculation methodology will look through derivative financial instruments or swaps as if we owned the

reference assets directly.

Quarterly Incentive Fee

100% à

Pre-incentive fee net investment income is defined as interest

income, dividend income and any other cash or non-cash income accrued during the calendar quarter, minus operating expenses

for the quarter, including the base management fee, expenses payable under the Administration Agreement, any interest expense and distributions

paid on any issued and outstanding debt or preferred stock, but excluding the incentive fee.

Pre-incentive fee net investment

income does not include any expense support payments and/or any reimbursement by us of expense support payments, nor any realized capital

gains, realized capital losses or unrealized capital appreciation or depreciation.

Incentive Fee on

Capital Gains

The incentive fee on

capital gains (the “capital gains incentive fee”) will be calculated and payable in arrears in cash as follows:

Prior to an Exchange Listing :

10% of our realized capital gains, if any, on a cumulative basis from formation through the earlier

of (a) the day before an Exchange Listing, (b) upon consummation of a Liquidity Event or (c) upon

the termination of the Investment Advisory Agreement, computed net of all realized capital losses and

unrealized capital depreciation on a cumulative basis.

For the purpose of computing the capital gain

incentive fee, the calculation methodology will look through derivative financial instruments or swaps

as if we owned the reference assets directly.

After an Exchange Listing :

15.0% of our realized capital gains, if any, on a cumulative basis from formation through the end of a given

calendar year or upon termination of the Investment Advisory Agreement, 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

Payment of Incentive Fees

Prior to an Exchange Listing, any incentive fees earned by the Advisor shall accrue as earned but only become payable in cash to the Advisor upon consummation

15% of our realized capital gains,

if any, on a cumulative basis from formation through the end of a given calendar year or upon termination of the Investment Advisory

Agreement, 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.

Payment of Incentive

Prior to an Exchange

Listing, any incentive fees earned by the Advisor shall accrue as earned but only become payable in cash to the Advisor upon consummation

of an Exchange Listing.

To the extent the Company does not

complete an Exchange Listing, the incentive fees will be payable to the Advisor (a) upon consummation of a sale of the Company or (b) once substantially all the proceeds from a Company

Liquidation payable to the Companys stockholders have been distributed to such stockholders.

To the extent we do not complete an Exchange Listing, the incentive fees will be payable to the Advisor (a) upon

consummation of a sale of us or (b) once substantially all the proceeds from our Liquidation payable to our stockholders have been

distributed to such stockholders.

Administration Agreement

On February 5, 2021, we entered into an Administration Agreement with our Advisor, which will serve as our Administrator and will provide or oversee the

performance of our required administrative services and professional services rendered by others, which will include (but not limited to), accounting, payment of our expenses, legal, compliance, operations, technology and investor relations,

preparation and filing of our tax returns, and preparation of financial reports provided to our stockholders and filed with the SEC.

We reimburse the

Administrator for its costs and expenses incurred in performing its obligations under the Administration Agreement, which may include our allocable portion of office facilities, overhead, and compensation paid to or compensatory distributions

received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and their respective staff who provide services to us.

As we reimburse the Administrator for its expenses, we will indirectly bear such cost.

Administration Agreement may be terminated by either party with 60 days written notice.

On February 5, 2021, we entered into

an Administration Agreement with our Advisor, which will serve as our Administrator and will provide or oversee the performance of our

required administrative services and professional services rendered by others, which will include (but not limited to), accounting, payment

of our expenses, legal, compliance, operations, technology and investor relations, preparation and filing of our tax returns, and preparation

of financial reports provided to our stockholders and filed with the SEC.

We reimburse the Administrator for its costs and expenses incurred

in performing its obligations under the Administration Agreement, which may include, after completion of our Exchange Listing, our allocable

portion of office facilities, overhead, and compensation paid to or compensatory distributions received by our officers (including our

Chief Compliance Officer and Chief Financial Officer) and their respective staff who provide services to us.

As we reimburse the Administrator

for its expenses, we will indirectly bear such cost.

The Administration Agreement may be terminated by either party with 60 days’

written notice.

Our Administrator engaged U.S.

Bank Global Fund Services

under a sub-administration agreement to assist the Administrator in performing certain of its administrative duties.

The Administrator may enter into

additional sub-administration agreements with third-parties to perform other administrative and professional services on behalf of the Administrator.

Investment Valuation

We will conduct the

valuation of our investments consistent with accounting principles generally accepted in the United States of America (GAAP) and the 1940 Act.

Our investments will be valued no less frequently than quarterly, in accordance with the terms

of Topic 820 of the Financial Accounting Standards Boards Accounting Standards Codification, Fair Value Measurement and Disclosures (ASC 820).

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement.

For some assets and liabilities, observable market transactions or market information might be available.

For other assets and

liabilities, observable market transactions and market information might not be available.

However, the objective of a fair value measurement in both cases is the same to estimate the price when an orderly transaction to sell the asset or

transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair

The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics.

Financial instruments with readily available quoted prices, or for which fair value can be

measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

The fair value hierarchy prioritizes the inputs to valuation

techniques used to measure fair value into the following three broad categories.

Level 1 Valuations based on quoted unadjusted prices for

identical instruments in active markets traded on a national exchange to which the Company has access at the date of measurement.

Valuations based on quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations in which all

significant inputs and significant value drivers are observable in active markets.

Level 2 inputs are those in markets for which there are few transactions, the prices are not current,

little public information exists or instances where prices vary substantially over time or among brokered market makers.

Level 3 Model

derived valuations in which one or more significant inputs or significant value drivers are unobservable.

Unobservable inputs are those inputs that reflect the Companys own assumptions that market participants would use to price the asset or

liability based on the best available information.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair

value hierarchy.

In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement.

of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Traded Investments (Level 1 or Level 2)

Investments for which market quotations are readily available will typically be valued at those market quotations.

Traded investments such as corporate bonds,

preferred stock, bank notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker.

When price quotes for

investments are not available, or such prices are stale or do not represent fair value in the judgment of our Advisor, fair market value will be determined using our valuation process for investments that are privately issued or otherwise restricted

as to resale.

We may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments.

While we anticipate these

equity securities to be issued by privately held companies, we may hold equity securities that are publicly traded.

Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc.

(NASDAQ) are valued, except as

indicated below, at the last sale price on the business day as of which such value is being determined.

If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day.

admitted to trade on the NASDAQ are valued at the NASDAQ official closing price.

Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the

close of the exchange representing the principal market for such securities.

Equity securities traded in the over-the-counter market, but excluding securities admitted

to trading on the NASDAQ, are valued at the closing bid prices.

Non-Traded Investments (Level 3)

Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations

are not available in the judgment of our Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of our Advisor is stale or does not represent fair value, shall each

be valued in a manner that most fairly reflects fair value of the security on the valuation date.

We expect that a significant majority of our investments will be Level 3 investments.

Unless otherwise determined by the Board, the following

valuation process is used for our Level 3 investments:

Investment Team Valuation .

The applicable investments are valued by senior professionals of Kayne Anderson

who are responsible for the portfolio investments.

The value of each portfolio company or investment will be initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments (i.e., illiquid securities/instruments), a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs

will be used to determine a preliminary value.

The investments will be valued no less frequently than quarterly, with new investments valued at the time such investment was made.

Investment Team Valuation Documentation .

Preliminary valuation conclusions will be determined by our

executive officers.

Such valuation and supporting documentation is submitted to the Audit Committee (a committee of our Board) and our Board on a quarterly basis.

Audit Committee .

The Audit Committee meets to consider the valuations submitted by our executive officers

at the end of each quarter.

Between meetings of the Audit Committee, our executive officers are authorized to make valuation determinations.

All valuation determinations of the Audit Committee are subject to ratification by our Board at its next

regular meeting.

Valuation Firm .

Quarterly, a third-party valuation firm engaged by our Board reviews the valuation

methodologies and calculations employed for each of our investments that we have placed on the watch list and approximately 25% of our remaining investments.

The third-party valuation firm will review all of the Level 3 investments

at least once per year, on a rolling twelve-month basis.

We expect the quarterly report issued by the third-party valuation firm will assist the Board in determining the fair values of the investments reviewed.

Board Determination .

Our Board meets quarterly to consider the valuations provided by our executive

officers and the Audit Committee and ratify valuations for the applicable investments.

Our Board considers the report provided by the third-party valuation firm in reviewing and determining in good faith the fair value of the applicable portfolio

The Board of Directors will be ultimately responsible for the determination, in good faith, of the fair value of our

portfolio investments.

Determination of fair value involves subjective judgments and estimates.

Accordingly, the notes to our financial statements will

express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

Global Fund Services under a sub-administration agreement to assist the Administrator in performing certain of its

administrative duties.

The Administrator may enter into additional sub-administration agreements with third-parties to perform other

administrative and professional services on behalf of the Administrator.

Risk Management

Broad Diversification.

We intend to diversify our investments by company, asset type, investment size, industry and geography within the U.S.

Furthermore, we must meet certain diversification tests in order to qualify as a RIC for U.S.

federal income tax purposes

(the Diversification Tests).

See Item 1.

Business Material U.S.

Federal Income Tax Considerations .

We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts

subject to the requirements of the 1940 Act and to applicable CFTC regulations.

While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of such changes with

respect to our portfolio of investments.

The Advisor will claim relief from CFTC registration and regulation as a commodity pool operator with respect to our operations, with the result that we will be limited in our ability to use futures contracts

or options on futures contracts or engage in swap transactions.

Specifically, we will be subject to strict limitations on using such derivatives other than for hedging purposes, whereby the use of derivatives not used solely for hedging purposes is

generally limited to situations where (i) the aggregate initial margin and premiums required to establish such positions do not exceed five percent of the liquidation value of our portfolio, after taking into account unrealized profits and

unrealized losses on any such contracts we have entered into;

or (ii) the aggregate net notional value of such derivatives does not exceed 100% of the liquidation value of our portfolio.

diversify our investments by company, asset type, investment size, industry and geography within the U.S.

Furthermore, we must meet certain

diversification tests in order to qualify as a RIC for U.S.

federal income tax purposes (the “Diversification Tests”).

Business —

Material U.S.

Federal Income Tax Considerations .”

against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the

requirements of the 1940 Act and to applicable CFTC regulations.

While hedging activities may insulate us against adverse changes in

interest rates, they may also limit our ability to participate in benefits of such changes with respect to our portfolio of investments.

The Advisor will claim relief from CFTC registration and regulation as a commodity pool operator with respect to our operations, with

the result that we will be limited in our ability to use futures contracts or options on futures contracts or engage in swap transactions.

Specifically, we will be subject to strict limitations on using such derivatives other than for hedging purposes, whereby the use of

derivatives not used solely for hedging purposes is generally limited to situations where (i) the aggregate initial margin and premiums

required to establish such positions do not exceed five percent of the liquidation value of our portfolio, after taking into account

unrealized profits and unrealized losses on any such contracts we have entered into;

or (ii) the aggregate net notional value of

such derivatives does not exceed 100% of the liquidation value of our portfolio.

Regulation as a Business Development Company

A BDC is a specialized investment vehicle

that elects to be regulated under the 1940 Act as an investment company but is generally subject to less onerous requirements than other registered investment companies under

a regime designed to encourage lending to U.S.-based small and mid-sized businesses.

Unlike many similar types of investment vehicles that are restricted

to being private entities, the stock of a BDC is permitted to trade in the public equity markets.

that elects to be regulated under the 1940 Act as an investment company but is generally subject to less onerous requirements than other

registered investment companies under a regime designed to encourage lending to U.S.-based small and mid-sized businesses.

Unlike many similar types of investment vehicles that are restricted to being private entities, the stock of a BDC is permitted to trade

in the public equity markets.

BDCs are also eligible to elect to be treated as a RIC under Subchapter M of the Code.

A RIC typically does not incur significant entity-level income

taxes, because it is generally entitled to deduct distributions made to its stockholders.

A RIC typically

does not incur significant entity-level income taxes, because it is generally entitled to deduct distributions made to its stockholders.

Qualifying Assets

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 BDCs total assets.

The principal categories of qualifying assets relevant to our proposed business are the following:

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;

(i) does not have any class of securities listed on a national securities exchange or has any class of securities listed on a national

securities exchange subject to a $250 million market capitalization maximum;

(ii) is controlled by a BDC or a group of companies

including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio company.

Securities of any eligible portfolio company which we control.

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.

Securities of an eligible portfolio company purchased from any person in a private transaction if there is no

ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.

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.

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 BDC’s total assets.

The principal categories

of qualifying assets relevant to our proposed business are the following:

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;

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

either of the following:

not have any class of securities listed on a national securities exchange or has any class

of securities listed on a national securities exchange subject to a $250 million market

capitalization maximum;

controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a

controlling influence over the management or policies of the eligible portfolio company,

and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio

Securities of any eligible portfolio company which

Securities purchased in a private transaction from

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.

Securities of an eligible portfolio company purchased from any person

in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the

eligible portfolio company.

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.

Cash, cash equivalents, U.S.

government securities or high-quality debt securities maturing in one year or less

from the time of investment.

We may invest up to 30% of our portfolio opportunistically

in non-qualifying assets.

Managerial Assistance to Portfolio Companies

In addition, 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) above under

Regulation as a Public Business Development CompanyQualifying Assets . However, 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 significant managerial assistance.

However, when the BDC purchases 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 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 objectives and policies of a portfolio company.

government securities or high-quality

debt securities maturing in one year or less from the time of investment.

We may invest up to 30% of our portfolio

opportunistically in “non-qualifying assets.”

Managerial Assistance to Portfolio

In addition, 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) above under “

—Regulation as a Business Development Company—Qualifying Assets .”

However, 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 significant managerial assistance.

However, when

the BDC purchases 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 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 objectives and policies of a portfolio company.

Temporary Investments

Pending investment in other

types of qualifying assets, as described above, our 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 we refer

to, collectively, as temporary investments, so that 70% of our assets are qualifying assets.

Pending investment in other types of “qualifying

assets,”

as described above, our 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 we refer to, collectively, as temporary investments,

so that 70% of our assets are qualifying assets.

Senior Securities and Indebtedness

We will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our Shares if our asset coverage,

as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.

As defined in the 1940 Act, asset coverage of 150% means that for every $100 of net assets we hold, we may raise $200 from borrowing and issuing senior

We currently intend to target asset coverage of 200% to 180% (which equates to a debt-to-equity ratio of 1.0x to 1.25x) but may alter this target based on

market conditions.

In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage

ratios at the time of the distribution or repurchase.

We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage.

Regulations governing our operations as a BDC will

affect our ability to raise, and the method of raising, additional capital, which may expose us to risks.

We will be permitted, under specified conditions,

to issue multiple classes of indebtedness and one class of stock senior to our Shares if our asset coverage, as defined in the 1940 Act,

is at least equal to 150% immediately after each such issuance.

As defined in the 1940 Act, asset coverage of 150% means that for every

$100 of net assets we hold, we may raise $200 from borrowing and issuing senior securities.

We currently intend to target asset coverage

of 200% to 180% (which equates to a debt-to-equity ratio of 1.0x to 1.25x) but may alter this target based on market conditions.

In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders

or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or

We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to

asset coverage.

Regulations governing our operations as a BDC will affect our ability to raise, and the method of raising, additional

capital, which may expose us to risks.

Code of Ethics

We and our Advisor have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures

for personal investments and restricts certain personal securities transactions.

Personnel subject to the joint code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long

as such investments are made in accordance with the codes requirements.

You may review or download the codes of ethics from the SECs Edgar database as part of our filings under www.sec.gov, or by written request to the following:

Compliance Officer, Kayne Anderson, 811 Main Street, 14 th Floor, Houston, TX 77002.

Policies and Procedures

We generally intend to make investments alongside certain entities and accounts advised by our Advisor and its affiliates.

Under the 1940 Act, we are prohibited from knowingly participating in certain joint transactions with our affiliates without the prior approval of the independent directors and, in some cases, prior approval by the SEC.

However, we generally intend

to make investments alongside affiliated entities and accounts pursuant to exemptive relief granted by the SEC to us, our Advisor, and certain of our affiliates on January 7, 2020.

We and our Advisor have adopted a code of

ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain

personal securities transactions.

Personnel subject to the joint code may invest in securities for their personal investment accounts,

including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements.

You may review or download the codes of ethics from the SEC’s Edgar database as part of our filings under www.sec.gov, or by written

request to the following:

Chief Compliance Officer, Kayne Anderson, 811 Main Street, 14 th Floor, Houston, TX 77002.

Compliance Policies and Procedures

We make investments alongside certain entities

and accounts advised by our Advisor and its affiliates.

Under the 1940 Act, we are prohibited from knowingly participating in certain

joint transactions with our affiliates without the prior approval of the independent directors and, in some cases, prior approval by

However, we generally make investments alongside affiliated entities and accounts pursuant to exemptive relief granted by the

SEC to us, our Advisor, and certain of our affiliates on January 7, 2020.

Pursuant to such exemptive relief, and subject to certain

conditions, we are permitted to co-invest in the same security with our affiliates in a manner that is consistent with our investment objective, investment strategy, regulatory consideration and other relevant

If opportunities arise that would otherwise be appropriate for us and an affiliate to purchase different securities in the same issuer, our Advisor will need to decide which account will proceed with such investment.

Our Advisors

investment allocation policy incorporates the conditions of exemptive relief to seek to ensure that investment opportunities are allocated in a manner that is fair and equitable.

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

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

as a BDC, we will be prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such

persons office.

We and our Advisor have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation

of the federal securities laws and will be 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.

conditions, we are permitted to co-invest in the same security with our affiliates in a manner that is consistent with our

investment objective, investment strategy, regulatory consideration and other relevant factors.

If opportunities arise that would otherwise

be appropriate for us and an affiliate to purchase different securities in the same issuer, our Advisor will need to decide which account

will proceed with such investment.

Our Advisor’s investment allocation policy incorporates the conditions of exemptive relief to

seek to ensure that investment opportunities are allocated in a manner that is fair and equitable.

We will be periodically examined by the SEC

for compliance with the 1940 Act.

We are required to provide and maintain a

bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

Furthermore, as a BDC, we will

be prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance,

bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We and our Advisor have adopted and implemented

written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and will be 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.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002, as amended, or 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.

The Sarbanes-Oxley Act of 2002, as amended,

or 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 affect us.

pursuant to Rule 13a-14 under the Exchange Act our principal executive

officer and principal financial officer must certify the accuracy of the financial statements contained in our periodic reports;

pursuant to Item 307 under Regulation S-K under the Securities Act our

periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;

pursuant to Rule 13a-15 of the Exchange Act, our management must prepare

an annual report regarding its assessment of our internal control over financial reporting and (once we cease to be an emerging growth company under the JOBS Act, or if later, for the year following our first annual report required to be filed with

the SEC as a public company) must obtain an audit of the effectiveness of internal control over financial reporting performed by its independent registered public accounting firm;

pursuant to Item 308 of Regulation S-K under the Securities Act and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these

controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the

regulations promulgated under such act.

We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we comply with that act in the future.

pursuant to Rule 13a-14 under the Exchange Act our principal

executive officer and principal financial officer must certify the accuracy of the financial statements contained in our periodic

pursuant to Item 307 under Regulation S-K under the Securities

Act our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;

pursuant to Rule 13a-15 of the Exchange Act, our management

must prepare an annual report regarding its assessment of our internal control over financial reporting and (once we cease to be

an emerging growth company under the JOBS Act, or if later, for the year following our first annual report required to be filed with

the SEC as a public company) must obtain an audit of the effectiveness of internal control over financial reporting performed by

its independent registered public accounting firm;

pursuant to Item 308 of Regulation S-K under the Securities

Act and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in

our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the

date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley Act requires us to review

our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated under

We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take

actions necessary to ensure that we comply with that act in the future.

We currently are and expect to remain an

emerging growth company, as defined in the Jumpstart Our Business Startups Act (the JOBS Act), until the earliest of:

the last day of the fiscal year ending after the fifth anniversary of an Exchange Listing occurs;

the end of the fiscal year in which our total annual gross revenues first exceed $1.07 billion;

the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt;

the last day of a fiscal year in which we (1) have an aggregate worldwide market value of our Shares held by

non-affiliates of $700 million or more, computed at the end of each fiscal year as of the last business day of our most recently completed second fiscal quarter and (2) have been an Exchange Act

reporting company for at least one year (and filed at least one annual report under the Exchange Act).

Under the JOBS Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act

(Dodd-Frank), we are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which would require that our independent registered public accounting firm provide an attestation report on the effectiveness of our

internal control over financial reporting, until such time as we cease to be an emerging growth company and become an accelerated filer as defined in Rule 12b-2 under the Exchange Act.

This may increase the

risk that material weaknesses or other deficiencies in our internal control over financial reporting go undetected.

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.

We have made an irrevocable election not to take advantage of this exemption from new or revised accounting standards.

therefore are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

The Commodity Futures Trading Commission (CFTC) and the SEC have issued final rules establishing that certain swap

transactions are subject to CFTC regulation.

Engaging in such swap transactions may cause us to fall within the definition of commodity pool under the Commodity Exchange Act and related CFTC regulations.

The Advisor will rely on an

exclusion from the definition of a CPO under CFTC Rule 4.5 because of our limited trading in commodity interests, and the Advisor will operate us as if we were not registered as a CPO, so that unlike a registered CPO, with respect to us, the Advisor

is not required to deliver a Disclosure Document or an Annual Report (as those terms are used in the CFTCs rules) to shareholders.

Voting Policies and Procedures

We have delegated our proxy voting responsibility to our Advisor.

A summary of the Proxy Voting Policies and

Procedures of our Advisor are set forth below.

These policies and procedures will be reviewed periodically by our Advisor and, subsequent to our election to be regulated as a BDC, our non-interested directors,

“emerging growth company,”

as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), until the

the last day of the fiscal year ending after the fifth anniversary

of an Exchange Listing occurs;

the end of the fiscal year in which our total annual gross revenues

first exceed $1.07 billion;

the date on which we have, during the prior three-year period, issued

more than $1.0 billion in non-convertible debt;

the last day of a fiscal year in which we (1) have an aggregate

worldwide market value of our Shares held by non-affiliates of $700 million or more, computed at the end of each fiscal

year as of the last business day of our most recently completed second fiscal quarter and (2) have been an Exchange Act reporting

company for at least one year (and filed at least one annual report under the Exchange Act).

Under the JOBS Act and the Dodd-Frank Wall

Street Reform and Consumer Protection Act (“Dodd-Frank”), we are exempt from the provisions of Section 404(b) of the

Sarbanes-Oxley Act, which would require that our independent registered public accounting firm provide an attestation report on the effectiveness

of our internal control over financial reporting, until such time as we cease to be an emerging growth company and become an accelerated

filer as defined in Rule 12b-2 under the Exchange Act.

This may increase the risk that material weaknesses or other deficiencies

in our internal control over financial reporting go undetected.

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.

We have made an

irrevocable election not to take advantage of this exemption from new or revised accounting standards.

We therefore are subject to the

same new or revised accounting standards as other public companies that are not emerging growth companies.

Commodities Exchange Act

The Commodity Futures Trading Commission

(“CFTC”) and the SEC have issued final rules establishing that certain swap transactions are subject to CFTC regulation.

Engaging in such swap transactions may cause us to fall within the definition of “commodity pool”

under the Commodity Exchange

Act and related CFTC regulations.

The Advisor will rely on an exclusion from the definition of a CPO under CFTC Rule 4.5 because of our

limited trading in commodity interests, and the Advisor will operate us as if we were not registered as a CPO, so that unlike a registered

CPO, with respect to us, the Advisor is not required to deliver a Disclosure Document or an Annual Report (as those terms are used in

the CFTC’s rules) to shareholders.

Proxy Voting Policies and Procedures

We have delegated our proxy voting responsibility

to our Advisor.

A summary of the Proxy Voting Policies and Procedures of our Advisor are set forth below.

These policies and procedures

will be reviewed periodically by our Advisor and, subsequent to our election to be regulated as a BDC, our non-interested directors,

and, accordingly, are subject to change.

For purposes of these Proxy Voting Policies and Procedures described below, we our and us refers to our Advisor.

An investment advisor registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients.

As part of this duty, we

recognize that we must vote the Companys securities in a timely manner free of conflicts of interest and in the best interests of the Company and its stockholders.

These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

We will vote proxies relating to our portfolio securities in what we believe to be

the best interest of our stockholders.

To ensure that our vote is not the product of a conflict of interest, we will require that:

(1) anyone involved in the decision making process disclose to our chief compliance officer any potential

conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote;

and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we

intend to vote on a proposal in order to reduce any attempted influence from interested parties.

You may obtain information about how we voted proxies by

making a written request for proxy voting information to:

KA Credit Advisors, LLC, 811 Main Street, 14th Floor, Houston, TX 77002, Attention:

For purposes of these Proxy Voting Policies and Procedures described below, “we”

“our”

and “us”

refers to our Advisor.

An investment advisor registered under the

Advisers Act has a fiduciary duty to act solely in the best interests of its clients.

As part of this duty, we recognize that we must

vote the Company’s securities in a timely manner free of conflicts of interest and in the best interests of the Company and its

stockholders.

These policies and procedures for voting

proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers

We will vote proxies relating to our portfolio

securities in what we believe to be the best interest of our stockholders.

To ensure that our vote is not the product of a conflict of

interest, we will require that:

(1) anyone involved in the decision making process disclose to our chief compliance officer any

potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote;

and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to

vote on a proposal in order to reduce any attempted influence from interested parties.

You may obtain information about how we voted

proxies by making a written request for proxy voting information to:

KA Credit Advisors, LLC, 811 Main Street, 14th Floor, Houston, TX

77002, Attention:

Chief Compliance Officer.

We do not have any employees.

Our day-to-day investment operations are managed by our Advisor and the Administrator.

Any compensation paid for services relating to our financial reporting and compliance

will be paid by our Administrator, subject to reimbursement by us of an allocable portion of office facilities, overhead, and compensation paid to or compensatory distributions received by our

officers (including our Chief Compliance Officer and Chief Financial Officer) and their respective staff who provide services to us.

As we reimburse the Administrator for its expenses, we will indirectly bear such cost.

Our day-to-day investment

operations are managed by our Advisor and the Administrator.

Any compensation paid for services relating to our financial reporting and

compliance functions will be paid by our Administrator, subject to reimbursement by us of an allocable portion of office facilities,

overhead, and compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and

Chief Financial Officer) and their respective staff who provide services to us.

As we reimburse the Administrator for its expenses, we

will indirectly bear such cost.

Our Administrator engaged U.S.

Bank Global Fund Services under a sub-administration agreement to assist the

Administrator in performing certain of its administrative duties.

The Administrator may enter into additional sub-administration agreements with third-parties to perform other administrative and professional

services on behalf of the Administrator.

We will pay the fees associated with such functions on a direct basis without profit to our Administrator.

Fund Services under a sub-administration agreement to assist the Administrator in performing certain of its administrative

The Administrator may enter into additional sub-administration agreements with third-parties to perform other administrative

and professional services on behalf of the Administrator.

We will pay the fees associated with such functions on a direct basis without

profit to our Administrator.

Privacy Principles

We are committed to

maintaining the privacy of our investors and to safeguarding their non-public personal information.

The following information is provided to help you understand what personal information we collect, how we

protect that information and why, in certain cases, we may share information with select other parties.

We do not disclose any non-public personal information about our stockholders or a former stockholder to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or

third-party administrator).

We restrict access to non-public personal information about our stockholders to

employees of our Advisor and its affiliates with a legitimate business need for the information.

We will maintain physical, electronic and procedural safeguards designed to protect the non-public personal

information of our stockholders.

We are committed to maintaining the privacy

of our investors and to safeguarding their non-public personal information.

The following information is provided to help you

understand what personal information we collect, how we protect that information and why, in certain cases, we may share information

with select other parties.

We do not disclose any non-public personal

information about our stockholders or a former stockholder to anyone, except as permitted by law or as is necessary in order to service

stockholder accounts (for example, to a transfer agent or third-party administrator).

We restrict access to non-public personal

information about our stockholders to employees of our Advisor and its affiliates with a legitimate business need for the information.

We will maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of

our stockholders.

Reporting Obligations

As a BDC, we make available on our website (www.kaynebdc.com) our annual reports on Form 10-K, quarterly reports on

Form 10-Q and our current reports on Form 8-K.

Shareholders and the public may also read and copy any materials we file with the SEC at the SECs Public Reference

Room, 100 F Street, N.E., Washington, D.C.

20549 and on the SECs website at www.sec.gov.

Information on the operation of the SECs public reference room may be obtained by calling the SEC at (202) 551-8090 or (800) SEC-0330.

The reference to our website and the SECs website is an inactive textual reference only, and the information should not be considered a

part of this Form 10-K.

As a BDC, we make available on our website

(www.kaynebdc.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q and our current reports on Form 8-K.

and the public may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 100 F Street, N.E.,

Washington, D.C.

20549 and on the SEC’s website at www.sec.gov.

Information on the operation of the SEC’s

public reference room may be obtained by calling the SEC at (202) 551-8090 or (800) SEC-0330.

The reference

to our website and the SEC’s website is an inactive textual reference only, and the information should not be considered a part

of this Form 10-K.

Material U.S.

Federal Income Tax Considerations

The following discussion is a general summary of the material U.S.

The following discussion is a general summary

of the material U.S.

federal income tax considerations applicable to us and to an investment in our Shares.

summary does not purport to be a complete description of the U.S.

This summary does not purport

to be a complete description of the U.S.

federal income tax considerations applicable to such an investment.

For example, we have not described certain considerations that may be relevant to certain types of holders subject

to special treatment under U.S.

federal income tax laws, including persons who hold our common stock as part of a straddle or hedging, integrated or constructive sale transaction, stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, brokers or dealers in securities, traders in securities that elect

to mark-to-market their securities holdings, pension plans and trusts, persons that have a functional currency (as defined in Section 985 of the Code)

other than the U.S.

expatriates, regulated investment companies, real estate investment trusts, personal holding companies, persons who acquire an interest in the Company in connection with the performance of services and financial

institutions.

For example, we have not

described certain considerations that may be relevant to certain types of holders subject to special treatment under U.S.

federal income

tax laws, including persons who hold our common stock as part of a straddle or hedging, integrated or constructive sale transaction,

stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, brokers or dealers

in securities, traders in securities that elect to mark-to-market their securities holdings, pension plans and trusts,

persons that have a functional currency (as defined in Section 985 of the Code) other than the U.S.

expatriates, regulated

investment companies, real estate investment trusts, personal holding companies, persons who acquire an interest in the Company in connection

with the performance of services and financial institutions.

Such persons should consult with their own tax advisers as to the U.S.

federal income tax consequences of an investment in our Shares, which may differ substantially from those described herein.

This summary assumes that investors hold

our Shares as capital assets (within the meaning of Section 1221 of the Code).

The discussion is based upon the Code, Treasury regulations, and administrative and judicial

interpretations, each as of the date of the filing of this annual report on Form 10-K and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this

We have not sought and will not seek any ruling from the Internal Revenue Service, or the IRS, regarding any offering of our Shares.

This summary does not discuss any aspects of U.S.

income tax consequences of an investment in our Shares, which may differ substantially from those described herein.

This summary assumes

that investors hold our Shares as capital assets (within the meaning of Section 1221 of the Code).

The discussion is based upon the Code, Treasury

regulations, and administrative and judicial interpretations, each as of the date of the filing of this annual report on Form 10-K and

all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion.

sought and will not seek any ruling from the Internal Revenue Service, or the IRS, regarding any offering of our Shares.

does not discuss any aspects of U.S.

estate or gift tax or foreign, state or local tax.

does not discuss the special treatment under U.S.

federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets.

For purposes of this

discussion, references to dividends are to dividends within the meaning of the U.S.

federal income tax laws and associated regulations and may include amounts subject to treatment as a return of capital under section 19(a) of the 1940

A return of capital distribution is a return to stockholders of a portion of their original investment in the Company and does not represent income or capital gains.

stockholder is a beneficial owner of our Shares that is for U.S.

It does not discuss the special treatment under

federal income tax laws that could result if we invested in tax-exempt securities or certain other investment

For purposes of this discussion, references to “dividends”

are to dividends within the meaning of the U.S.

income tax laws and associated regulations and may include amounts subject to treatment as a return of capital under section 19(a) of

the 1940 Act.

A return of capital distribution is a return to stockholders of a portion of their original investment in the Company and

does not represent income or capital gains.

A “U.S.

stockholder”

is a beneficial

owner of our Shares that is for U.S.

federal income tax purposes:

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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;

income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

an estate, the income of which is subject to U.S.

federal income taxation regardless of its source;

federal income taxation

regardless of its source;

a trust if either a U.S.

court can exercise primary supervision over its administration and one or more U.S.

persons have the authority to control all of its substantial decisions or the trust was in existence on August 20, 1996, was treated as a U.S.

person prior to that date, and has made a valid election to be treated as a U.S.

stockholder is a beneficial owner of our Shares that is

neither a U.S.

court can exercise primary supervision over

its administration and one or more U.S.

persons have the authority to control all of its substantial decisions or the trust was in

existence on August 20, 1996, was treated as a U.S.

person prior to that date, and has made a valid election to be treated as

A “non-U.S.

stockholder”

a beneficial owner of our Shares that is neither a U.S.

stockholder nor a partnership for U.S.

federal income tax purposes.

If a partnership (including an entity treated as a partnership for

federal income tax purposes) holds Shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership.

If a partnership (including an entity treated

as a partnership for U.S.

federal income tax purposes) holds Shares, the tax treatment of a partner in the partnership will generally

depend upon the status of the partner and the activities of the partnership.

A prospective investor that is a partner in a partnership

that will hold Shares should consult its tax advisors with respect to the purchase, ownership and disposition of Shares.

Tax matters are very complicated

and the tax consequences to an investor of an investment in our Shares will depend on the facts of his, her or its particular situation.

We encourage investors to consult their own tax advisors regarding the specific consequences of such an

investment, including tax reporting requirements, the applicability of U.S.

federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty, and the effect of any possible changes in the tax laws.

Tax matters are very complicated and the

tax consequences to an investor of an investment in our Shares will depend on the facts of his, her or its particular situation.

investors to consult their own tax advisors regarding the specific consequences of such an investment, including tax reporting requirements,

the applicability of U.S.

federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty, and

the effect of any possible changes in the tax laws.

Election to Be Taxed as a RIC

We intend to elect

to be treated as a RIC under Subchapter M of the Code.

We intend to elect to be treated as a RIC

under Subchapter M of the Code.

As a RIC, we generally will not have to pay corporate-level U.S.

federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends.

qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).

In addition, to

qualify for RIC treatment, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to the sum of 90% of our investment company taxable income, which is generally our net ordinary income plus

the excess of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid, and 90% of our net tax-exempt interest income,

if any (the Annual Distribution Requirement).

Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute to our

stockholders in respect of each calendar year dividends of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of

the excess (if any) of our realized capital gains over our realized capital losses, or capital gain net income (adjusted for certain ordinary losses), generally for

the one-year period ending on October 31 of the calendar year and (3) the sum of any net ordinary income plus capital gains net income for preceding years that were not distributed during

such years and on which we paid no federal income tax (the Excise Tax Avoidance Requirement).

federal income taxes on any net ordinary

income or capital gains that we timely distribute to our stockholders as dividends.

To qualify as a RIC, we must, among other things,

meet certain source-of-income and asset diversification requirements (as described below).

In addition, to qualify

for RIC treatment, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to the sum of

90% of our “investment company taxable income,”

which is generally our net ordinary income plus the excess of realized net

short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid,

and 90% of our net tax-exempt interest income, if any (the “Annual Distribution Requirement”).

Although not required

for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs,

we must distribute to our stockholders in respect of each calendar year dividends of an amount at least equal to the sum of (1) 98% of

our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of the excess (if any)

of our realized capital gains over our realized capital losses, or capital gain net income (adjusted for certain ordinary losses), generally

for the one-year period ending on October 31 of the calendar year and (3) the sum of any net ordinary income

plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income

tax (the “Excise Tax Avoidance Requirement”).

Taxation as a RIC

1 unchanged sentence

satisfy the Annual Distribution Requirement;

then we will not be subject to U.S.

then we will not be subject

federal income tax on the portion of our investment company taxable income and net capital gain, defined as net long-term

1 unchanged sentence

As a RIC, we will be subject to U.S.

federal income tax at regular corporate rates on any net income or net capital gain not distributed (or deemed distributed)

as dividends to our stockholders.

income tax at regular corporate rates on any net income or net capital gain not distributed (or deemed distributed) as dividends

to our stockholders.

In order to qualify as a RIC for U.S.

federal income tax purposes, we must, among other things:

have in effect an election to be treated as a BDC under the 1940 Act at all times during each taxable year;

derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to

certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our business of investing in such stock or securities, or currencies, other income derived with respect to its business of investing

in such stock, securities or currencies and net income derived from interests in qualified publicly traded partnerships (partnerships that are traded on an established securities market or tradable on a secondary market, other than

partnerships that derive 90% of their income from interest, dividends and other permitted RIC income) (the 90% Income Test);

diversify our holdings so that at the end of each quarter of the taxable year:

at least 50% of the value of our assets consists of cash, cash equivalents, U.S.

government securities,

securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer;

no more than 25% of the value of our assets is invested in the securities, other than U.S.

government securities

or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more

qualified publicly traded partnerships.

We may be required to recognize taxable income in circumstances in which we do not receive

For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or issued with warrants), we

must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year.

We may also have to include in

income other amounts that we have not yet received in cash, such as PIK interest and deferred loan origination fees that are paid after origination of the loan.

Because any original issue discount or other amounts accrued will be included in our

investment company taxable income for the year of accrual, we may be required to make a distribution to our shareholders in order to satisfy the Annual Distribution Requirement, even though we will not have received the corresponding cash amount.

We may invest in partnerships, including qualified publicly traded partnerships, which may result in our

being subject to state, local or foreign income, franchise or other tax liabilities.

In addition, as a RIC, we are subject to ordinary income and capital

gain distribution requirements under U.S.

income tax purposes, we must, among other things:

have in effect an election to be treated as a BDC under the 1940 Act

at all times during each taxable year;

derive in each taxable year at least 90% of our gross income from dividends,

interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived

with respect to our business of investing in such stock or securities, or currencies, other income derived with respect to its business

of investing in such stock, securities or currencies and net income derived from interests in “qualified publicly traded partnerships”

(partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that

derive 90% of their income from interest, dividends and other permitted RIC income) (the “90% Income Test”);

diversify our holdings so that at the end of each quarter of the taxable

at least 50% of the value of our assets consists of cash, cash equivalents,

government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent

more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer;

no more than 25% of the value of our assets is invested in the securities,

other than U.S.

government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as

determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the

securities of one or more qualified publicly traded partnerships.

We may be required to recognize taxable income

in circumstances in which we do not receive cash.

For example, if we hold debt obligations that are treated under applicable tax rules

as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or issued

with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation,

regardless of whether cash representing such income is received by us in the same taxable year.

We may also have to include in income

other amounts that we have not yet received in cash, such as PIK interest and deferred loan origination fees that are paid after origination

Because any original issue discount or other amounts accrued will be included in our investment company taxable income for

the year of accrual, we may be required to make a distribution to our shareholders in order to satisfy the Annual Distribution Requirement,

even though we will not have received the corresponding cash amount.

We may invest in partnerships, including

qualified publicly traded partnerships, which may result in our being subject to state, local or foreign income, franchise or other tax

In addition, as a RIC, we are subject to

ordinary income and capital gain distribution requirements under U.S.

federal excise tax rules for each calendar year (as discussed above).

2 unchanged sentences

federal excise tax distribution requirements will not cause us to lose our RIC status.

Although we currently intend to make sufficient distributions each taxable year to satisfy the U.S.

federal excise tax requirements,

under certain circumstances, we may choose to retain taxable income or capital gains in excess of current year distributions into the next tax year in an amount less than what would trigger payments of federal income tax under Subchapter M of the

We may then be required to pay a 4% excise tax on such income or capital gains.

A RIC is limited in its ability to deduct expenses in excess of its

investment company taxable income.

If our deductible expenses in a given taxable year exceed our investment company taxable income, we may incur a net operating loss for that taxable year.

Although we currently

intend to make sufficient distributions each taxable year to satisfy the U.S.

federal excise tax requirements, under certain circumstances,

we may choose to retain taxable income or capital gains in excess of current year distributions into the next tax year in an amount less

than what would trigger payments of federal income tax under Subchapter M of the Code.

We may then be required to pay a 4% excise tax

on such income or capital gains.

A RIC is limited in its ability to deduct

expenses in excess of its investment company taxable income.

If our deductible expenses in a given taxable year exceed our investment

company taxable income, we may incur a net operating loss for that taxable year.

However, a RIC is not permitted to carry forward net

operating losses to subsequent taxable years and such net operating losses do not pass through to its stockholders.

In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain.

A RIC may not

use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may carry forward such net capital losses, and use them to offset future capital gains,

indefinitely.

Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required to distribute and that is taxable to our stockholders even if

such taxable income is greater than the net income we actually earn during those taxable years.

Any underwriting fees paid by us with respect to our own

stock are not deductible.

In addition, deductible

expenses can be used only to offset investment company taxable income, not net capital gain.

A RIC may not use any net capital losses

(that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may

carry forward such net capital losses, and use them to offset future capital gains, indefinitely.

Due to these limits on deductibility

of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required

to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during

those taxable years.

Any underwriting fees paid by us with respect

to our own stock are not deductible.

We may be required to recognize taxable income in circumstances in which we do not receive cash.

For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments

with PIK interest or, in certain cases, with increasing interest rates or issued with warrants), we must include in income each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such

income is received by us in the same taxable year.

Because any OID accrued will be included in our investment company taxable income for the taxable year of accrual, we may be required to make a distribution to our stockholders in order to satisfy

the Annual Distribution Requirement, even though we will not have received any corresponding cash amount.

Furthermore, a portfolio company in which we hold equity or debt instruments may face financial difficulty that requires us to work out,

modify, or otherwise restructure such equity or debt instruments.

Any such restructuring could, depending upon the terms of the restructuring, cause us to incur unusable or nondeductible losses or recognize

future non-cash taxable income.

Certain of our investment practices may be subject to special and

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) treat dividends that would otherwise be eligible for the corporate dividends received deduction as ineligible for such treatment, (3) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (4) convert

lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (5) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (6) cause us to recognize income or

gain without a corresponding receipt of cash, (7) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (8) adversely alter the characterization of certain complex financial transactions and

(9) produce income that will not be qualifying income for purposes of the 90% Income Test.

We intend to monitor our transactions and may make certain tax elections to mitigate the effect of these provisions and prevent our ability to be subject

to tax as a RIC.

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will

be treated as capital gain or loss.

Such gain or loss generally will be long term or short term, depending on how long we held a particular warrant.

Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order

to satisfy distribution requirements.

However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain asset coverage tests

See Item 1.

Business Regulation as a Business Development Company Senior Securities and Indebtedness . Moreover, our ability to dispose of assets to meet our distribution

requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including the Diversification Tests.

If we dispose of assets in order to meet the Annual

Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

Some of the income and fees that we may recognize, such as fees for providing managerial assistance, certain fees earned with respect to our investments,

income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, will not satisfy the 90% Income Test.

to manage the risk that such income and fees might disqualify us as a RIC for a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S.

federal income tax purposes (therefore, received amounts treated as dividends of such corporations).

Such corporations will be required to pay U.S.

corporate income tax on their earnings, which ultimately will reduce our return on such income and

For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments with PIK

interest or, in certain cases, with increasing interest rates or issued with warrants), we must include in income each year a portion

of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the

same taxable year.

Because any OID accrued will be included in our investment company taxable income for the taxable year of accrual,

we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we

will not have received any corresponding cash amount.

Furthermore, a portfolio company in which we hold equity or debt instruments may

face financial difficulty that requires us to work out, modify, or otherwise restructure such equity or debt instruments.

Any such restructuring

could, depending upon the terms of the restructuring, cause us to incur unusable or nondeductible losses or recognize future non-cash taxable income.

Certain of our 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) treat dividends that would otherwise

be eligible for the corporate dividends received deduction as ineligible for such treatment, (3) disallow, suspend or otherwise

limit the allowance of certain losses or deductions, (4) convert lower-taxed long-term capital gain into higher-taxed short-term

capital gain or ordinary income, (5) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is

more limited), (6) cause us to recognize income or gain without a corresponding receipt of cash, (7) adversely affect the time as

to when a purchase or sale of stock or securities is deemed to occur, (8) adversely alter the characterization of certain complex

financial transactions and (9) produce income that will not be qualifying income for purposes of the 90% Income Test.

to monitor our transactions and may make certain tax elections to mitigate the effect of these provisions and prevent our ability to

be subject to tax as a RIC.

Gain or loss realized by us from warrants

acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss.

gain or loss generally will be long term or short term, depending on how long we held a particular warrant.

Although we do not presently expect to do

so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements.

However, under the 1940 Act,

we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding

unless certain “asset coverage”

tests are met.

Business —

Regulation as a Business Development

Company —

Senior Securities and Indebtedness .”

Moreover, our ability to dispose of assets to meet our distribution

requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification

as a RIC, including the Diversification Tests.

If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise

Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

Some of the income and fees that we may recognize,

such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring

of a portfolio investment, or income recognized from an equity investment in an operating partnership, will not satisfy the 90% Income

In order to manage the risk that such income and fees might disqualify us as a RIC for a failure to satisfy the 90% Income Test,

we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S.

income tax purposes (therefore, received amounts treated as dividends of such corporations).

Such corporations will be required to pay

corporate income tax on their earnings, which ultimately will reduce our return on such income and fees.

Failure to Qualify as a RIC

unable to qualify for treatment as a RIC and are unable to cure the failure, for example, by disposing of certain investments quickly or raising additional capital to prevent the loss of RIC status, we would be subject to tax on all of our taxable

income at regular corporate rates.

The Code provides some relief from RIC disqualification due to failures to comply with the 90% Income Test and the Diversification Tests, although there may be additional taxes due in such cases.

We cannot assure

you that we would qualify for any such relief should we fail the 90% Income Test or the Diversification Tests.

If we were unable to qualify for treatment

as a RIC and are unable to cure the failure, for example, by disposing of certain investments quickly or raising additional capital to

prevent the loss of RIC status, we would be subject to tax on all of our taxable income at regular corporate rates.

The Code provides

some relief from RIC disqualification due to failures to comply with the 90% Income Test and the Diversification Tests, although there

may be additional taxes due in such cases.

We cannot assure you that we would qualify for any such relief should we fail the 90% Income

Test or the Diversification Tests.

Should failure occur, not only would all

our taxable income be subject to tax at regular corporate rates, we would not be able to deduct dividend distributions to stockholders, nor would they be required to be made.

Distributions, including distributions of net long-term capital gain,

would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits.

Subject to certain limitations under the Code, certain corporate stockholders would be eligible to claim a

dividends received deduction with respect to such dividends and non-corporate stockholders would generally be able to treat such dividends as qualified dividend income, which is subject

to reduced rates of U.S.

our taxable income be subject to tax at regular corporate rates, we would not be able to deduct dividend distributions to

stockholders, nor would they be required to be made.

Distributions, including distributions of net long-term capital gain, would

generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and

Subject to certain limitations under the Code, certain corporate stockholders would be eligible to claim a dividends

received deduction with respect to such dividends and non-corporate stockholders would generally be able to

treat such dividends as “qualified dividend income,”

which is subject to reduced rates of U.S.

federal income tax.

Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholders tax basis, and any remaining distributions

would be treated as a capital gain.

If we fail to qualify as a RIC, we may be subject to regular corporate tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the

aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five taxable years.

The remainder of this discussion assumes that we qualify as a RIC and have satisfied the Annual Distribution Requirement for each taxable year.

Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the

extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain.

If we fail to

qualify as a RIC, we may be subject to regular corporate tax on any net built-in gains with respect to certain

of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been

realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized

over the next five taxable years.

The remainder of this discussion assumes

that we qualify as a RIC and have satisfied the Annual Distribution Requirement for each taxable year.

Taxation of U.S.

Distributions by us

generally are taxable to U.S.

Distributions by us generally are taxable

stockholders as ordinary income or capital gains.

Distributions of our investment company taxable income (which is, generally, our net ordinary income plus net short-term capital gains in excess of net

long-term capital losses) will be taxable as ordinary income to U.S.

stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional Shares.

To the extent such distributions paid by us to non-corporate stockholders (including individuals) are

attributable to dividends from U.S.

corporations and certain qualified foreign corporations and if certain holding period requirements are met, such distributions generally will be treated as

qualified dividend income and generally eligible for a maximum U.S.

federal tax rate of either 15% or 20%, depending on whether the individual stockholders income exceeds certain threshold amounts, and if other applicable requirements are met,

such distributions generally will be eligible for the corporate dividends received deduction to the extent such dividends have been paid by a U.S.

In this regard, it is anticipated that distributions paid by us will generally not be

attributable to dividends and, therefore, generally will not qualify for the preferential maximum U.S.

federal tax rate applicable to non-corporate stockholders as well as will not be eligible for

the corporate dividends received deduction.

Distributions of our net capital gains (which is generally our realized net long-term capital gains in excess

of realized net short-term capital losses) properly reported by us as capital gain dividends will be taxable to a U.S.

stockholder as long-term capital gains (currently generally at a maximum rate of either 15% or 20%, depending on

whether the individual stockholders income exceeds certain threshold amounts) in the case of individuals, trusts or estates, regardless of the U.S.

stockholders holding period for his, her or its Shares and regardless of whether paid in

cash or reinvested in additional Shares.

Distributions of our “investment company taxable income”

is, generally, our net ordinary income plus net short-term capital gains in excess of net long-term capital losses) will be taxable as

ordinary income to U.S.

stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested

in additional Shares.

To the extent such distributions paid by us to non-corporate stockholders (including individuals)

are attributable to dividends from U.S.

corporations and certain qualified foreign corporations and if certain holding period requirements

are met, such distributions generally will be treated as qualified dividend income and generally eligible for a maximum U.S.

tax rate of either 15% or 20%, depending on whether the individual stockholder’s income exceeds certain threshold amounts, and

if other applicable requirements are met, such distributions generally will be eligible for the corporate dividends received deduction

to the extent such dividends have been paid by a U.S.

In this regard, it is anticipated that distributions paid by us will

generally not be attributable to dividends and, therefore, generally will not qualify for the preferential maximum U.S.

federal tax rate

applicable to non-corporate stockholders as well as will not be eligible for the corporate dividends received deduction.

Distributions of our net capital gains (which

is generally our realized net long-term capital gains in excess of realized net short-term capital losses) properly reported by us as

“capital gain dividends”

will be taxable to a U.S.

stockholder as long-term capital gains (currently generally at a maximum

rate of either 15% or 20%, depending on whether the individual stockholder’s income exceeds certain threshold amounts) in the case

of individuals, trusts or estates, regardless of the U.S.

stockholder’s holding period for his, her or its Shares and regardless

of whether paid in cash or reinvested in additional Shares.

Distributions in excess of our earnings and profits first will reduce a U.S.

stockholders adjusted tax basis in such stockholders Shares and, after the adjusted basis is reduced to zero, will

constitute capital gains to such U.S.

Stockholders receiving dividends or distributions in the form of additional Shares purchased in the market should be treated for U.S.

federal income tax purposes as receiving a distribution in an

amount equal to the amount of money that the stockholders receiving cash dividends or distributions will receive, and should have a cost basis in the shares received equal to such amount.

Stockholders receiving dividends in newly issued Shares will

be treated as receiving a distribution equal to the value of the shares received and should have a cost basis of such amount.

Although we currently

intend to distribute any net capital gains at least annually, we may in the future decide to retain some or all of our net capital gains but designate the retained amount as a deemed distribution. In that case, among other consequences,

we will pay tax on the retained amount, each U.S.

stockholder will be required to include their share of the deemed distribution in income as if it had been distributed to the U.S.

stockholder’s adjusted tax basis in such stockholder’s Shares and, after the adjusted basis is reduced to zero, will constitute

capital gains to such U.S.

Stockholders receiving dividends or distributions in the form of additional Shares purchased

in the market should be treated for U.S.

federal income tax purposes as receiving a distribution in an amount equal to the amount of

money that the stockholders receiving cash dividends or distributions will receive, and should have a cost basis in the shares received

equal to such amount.

Stockholders receiving dividends in newly issued Shares will be treated as receiving a distribution equal to the

value of the shares received and should have a cost basis of such amount.

Although we currently intend to distribute

any net capital gains at least annually, we may in the future decide to retain some or all of our net capital gains but designate the

retained amount as a “deemed distribution.”

In that case, among other consequences, we will pay tax on the retained amount,

stockholder will be required to include their share of the deemed distribution in income as if it had been distributed to the

stockholder, and the U.S.

stockholder will be entitled to claim a

credit or refund equal to their allocable share of the tax paid on the deemed distribution by us.

stockholder will be entitled to claim a credit or refund equal to their allocable share of the tax paid

on the deemed distribution by us.

The amount of the deemed distribution net of such tax will be added to the U.S.

stockholders tax basis for their Shares.

Since we expect to pay

tax on any retained net capital gains at our regular corporate tax rate, and since that rate is in excess of the maximum rate currently payable by individuals on long-term capital gains, the amount of tax that individual stockholders will be treated

as having paid and for which they will receive a credit or refund will exceed the tax they owe on the retained net capital gain.

stockholder’s

tax basis for their Shares.

Since we expect to pay tax on any retained net capital gains at our regular corporate tax rate, and since

that rate is in excess of the maximum rate currently payable by individuals on long-term capital gains, the amount of tax that individual

stockholders will be treated as having paid and for which they will receive a credit or refund will exceed the tax they owe on the retained

net capital gain.

Such excess generally may be claimed as a credit against the U.S.

stockholders other U.S.

stockholder’s other U.S.

federal income tax

obligations or may be refunded to the extent it exceeds a stockholders liability for U.S.

obligations or may be refunded to the extent it exceeds a stockholder’s liability for U.S.

federal income tax.

A stockholder that is not subject to U.S.

A stockholder that

is not subject to U.S.

federal income tax or otherwise required to file a U.S.

federal income tax return would be

required to file a U.S.

federal income tax return would be required to file a

federal income tax return on the appropriate form in order to claim a refund for the taxes we paid.

In order to utilize the deemed distribution approach, we must provide written notice to our stockholders prior to the

expiration of 60 days after the close of the relevant taxable year.

We cannot treat any of our investment company taxable income as a deemed distribution.

For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any tax year and (2) the amount of capital gain

dividends paid for that tax year, we may, under certain circumstances, elect to treat a dividend that is paid during the following tax year as if it had been paid during the tax year in question.

In order to utilize the deemed

distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close of the relevant

taxable year.

We cannot treat any of our investment company taxable income as a “deemed distribution.”

For purposes of determining (1) whether

the Annual Distribution Requirement is satisfied for any tax year and (2) the amount of capital gain dividends paid for that tax

year, we may, under certain circumstances, elect to treat a dividend that is paid during the following tax year as if it had been paid

during the tax year in question.

If we make such an election, the U.S.

will still be treated as receiving the dividend in the tax year in which the distribution is made.

However, any dividend declared by us 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 calendar year, will be treated as if it had been received by our U.S.

stockholders on December 31 of the calendar year in which the dividend was declared.

With respect to the reinvestment of dividends, if a U.S.

stockholder will still be treated as receiving the dividend in

the tax year in which the distribution is made.

However, any dividend declared by us 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 calendar

year, will be treated as if it had been received by our U.S.

stockholders on December 31 of the calendar year in which the dividend

was declared.

With respect to the reinvestment of dividends,

Shareholder owns Shares registered in its own name, the U.S.

Shareholder will have all cash

distributions automatically reinvested in additional Shares unless the U.S.

Shareholder opts out of the reinvestment of dividends by delivering a written notice to our dividend paying agent prior to the record date of the next dividend or distribution.

Any distributions

reinvested will nevertheless remain taxable to the U.S.

Shareholder will have an adjusted basis in the additional Shares purchased through the reinvestment equal to the amount of the reinvested distribution.

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.

Shareholders account.

an investor purchases Shares shortly before the record date of a distribution, the price of the Shares will include the value of the distribution and the investor will be subject to tax on the distribution even though it represents a return of their

A stockholder generally will recognize taxable gain or loss if the stockholder sells or otherwise disposes of their Shares.

Any gain arising

from such sale or disposition generally will be treated as long-term capital gain or loss if the stockholder has held their Shares for more than one year.

Otherwise, it would be classified as short-term capital gain or loss.

However, any capital

loss arising from the sale or disposition of Shares 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

In addition, all or a portion of any loss recognized upon a disposition of Shares may be disallowed if other Shares are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the

Shareholder will have all cash distributions automatically reinvested

in additional Shares unless the U.S.

Shareholder opts out of the reinvestment of dividends by delivering a written notice to our dividend

paying agent prior to the record date of the next dividend or distribution.

Any distributions reinvested will nevertheless remain taxable

Shareholder will have an adjusted basis in the additional Shares purchased through the reinvestment

equal to the amount of the reinvested distribution.

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.

Shareholder’s account.

If an investor purchases Shares shortly before

the record date of a distribution, the price of the Shares will include the value of the distribution and the investor will be subject

to tax on the distribution even though it represents a return of their investment.

A stockholder generally will recognize taxable

gain or loss if the stockholder sells or otherwise disposes of their Shares.

Any gain arising from such sale or disposition generally

will be treated as long-term capital gain or loss if the stockholder has held their Shares for more than one year.

Otherwise, it would

be classified as short-term capital gain or loss.

However, any capital loss arising from the sale or disposition of Shares 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 such Shares.

In addition, all or a portion of any loss recognized upon a disposition of

Shares may be disallowed if other Shares are purchased (whether through reinvestment of distributions or otherwise) within 30 days before

or after the disposition.

In such a case, the basis of Shares acquired will be increased to reflect the disallowed loss.

In general, individual U.S.

stockholders are

subject to a maximum U.S.

are subject to a maximum U.S.

federal income tax rate of either 15% or 20% (depending on whether the individual U.S.

stockholders income exceeds certain threshold amounts) on their net capital gain, i.e., the excess of realized net long-term

capital gain over realized net short-term capital loss for a taxable year, including a long-term capital gain derived from an investment in our Shares.

Such rate is lower than the maximum federal income tax rate on ordinary taxable income currently

payable by individuals.

stockholder’s

income exceeds certain threshold amounts) on their net capital gain, i.e., the excess of realized net long-term capital gain over realized

net short-term capital loss for a taxable year, including a long-term capital gain derived from an investment in our Shares.

is lower than the maximum federal income tax rate on ordinary taxable income currently payable by individuals.

Corporate U.S.

stockholders currently are subject to U.S.

federal income tax on net capital gain at the maximum 21% rate also applied to ordinary

Non-corporate stockholders incurring net capital losses for a tax year (i.e., net capital losses in excess of net capital gains) generally may deduct up to $3,000 of such losses against their

ordinary income each tax year;

any net capital losses of a non-corporate stockholder in excess of $3,000 generally may be carried forward and used in subsequent tax years as provided in the Code.

Corporate stockholders generally may not deduct any net capital losses for a tax year, but may carry back such losses for three tax years or carry forward such losses for five tax years.

currently are subject to U.S.

federal income tax on net capital gain at the maximum 21% rate also applied to ordinary income.

Non-corporate stockholders incurring

net capital losses for a tax year (i.e., net capital losses in excess of net capital gains) generally may deduct up to $3,000 of such

losses against their ordinary income each tax year;

any net capital losses of a non-corporate stockholder in excess

of $3,000 generally may be carried forward and used in subsequent tax years as provided in the Code.

Corporate stockholders generally

may not deduct any net capital losses for a tax year, but may carry back such losses for three tax years or carry forward such losses

for five tax years.

We will send to each of our U.S.

stockholders, as promptly as possible after the end of each calendar year, a notice detailing, on a per share and per

distribution basis, the amounts includible in such U.S.

stockholders taxable income for such year as ordinary income and as long-term capital gain.

In addition, the U.S.

federal tax status of each calendar years distributions generally

will be reported to the IRS.

Distributions may also be subject to additional state, local and foreign taxes depending on a U.S.

stockholders particular situation.

Dividends distributed by us generally will not be eligible for the

dividends-received deduction or the lower tax rates applicable to certain qualified dividends.

Until and unless we are treated as a publicly

offered regulated investment company (within the meaning of Section 67 of the Code) as a result of either (1) Shares and our preferred stock collectively being held by at least 500 persons at all times during a taxable year,

(2) our Shares being continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act) or (3) Shares being treated as regularly traded on an established securities market for any taxable year,

for purposes of computing the taxable income of U.S.

stockholders that are individuals, trusts or estates, (1) our earnings will be computed without taking into account such U.S.

stockholders allocable shares of the management and

incentive fees paid to our investment advisor and certain of our other expenses, (2) each such U.S.

stockholders,

as promptly as possible after the end of each calendar year, a notice detailing, on a per share and per distribution basis, the amounts

includible in such U.S.

stockholder’s taxable income for such year as ordinary income and as long-term capital gain.

federal tax status of each calendar year’s distributions generally will be reported to the IRS.

Distributions may also

be subject to additional state, local and foreign taxes depending on a U.S.

stockholder’s particular situation.

Dividends distributed

by us generally will not be eligible for the dividends-received deduction or the lower tax rates applicable to certain qualified dividends.

Until and unless we are treated as a “publicly offered regulated

investment company”

(within the meaning of Section 67 of the Code) as a result of either (1) Shares and our preferred

stock collectively being held by at least 500 persons at all times during a taxable year, (2) our Shares being continuously offered

pursuant to a public offering (within the meaning of Section 4 of the Securities Act) or (3) Shares being treated as regularly

traded on an established securities market for any taxable year, for purposes of computing the taxable income of U.S.

stockholders that

are individuals, trusts or estates, (1) our earnings will be computed without taking into account such U.S.

stockholders’

shares of the management and incentive fees paid to our investment advisor and certain of our other expenses, (2) each such U.S.

stockholder will be treated as having received or accrued a dividend from us in the amount of such U.S.

stockholders allocable share of

these fees and expenses for such taxable year, (3) each such U.S.

stockholder will be treated as having paid or incurred such U.S.

stockholders

allocable share of these fees and expenses for the calendar year and (4) each such U.S.

stockholders allocable share of these fees and expenses will be treated as miscellaneous

itemized deductions by such U.S.

Miscellaneous itemized deductions are generally not deductible by a U.S.

stockholder that is an individual, trust or estate through 2025 and beginning in 2026 and deductible only to the extent

that the aggregate of such U.S.

stockholders miscellaneous itemized deductions exceeds 2% of such U.S.

stockholders adjusted gross income for U.S.

stockholder’s allocable

share of these fees and expenses for such taxable year, (3) each such U.S.

stockholder will be treated as having paid or incurred

stockholder’s allocable share of these fees and expenses for the calendar year and (4) each such U.S.

stockholder’s

allocable share of these fees and expenses may be treated as miscellaneous itemized deductions by such U.S.

Miscellaneous

itemized deductions are generally not deductible by a U.S.

stockholder that is an individual, trust or estate through 2025 and beginning

in 2026 and deductible only to the extent that the aggregate of such U.S.

stockholder’s miscellaneous itemized deductions exceeds

2% of such U.S.

stockholder’s adjusted gross income for U.S.

federal income tax purposes.

Miscellaneous itemized deductions are not deductible at

any time for purposes of the alternative minimum tax for individuals and will be subject an annual cap for income tax purposes for individuals beginning in 2026.

Backup withholding, currently at a rate of 24%, may be applicable to all taxable distributions to

any non-corporate U.S.

stockholder (1) who fails to furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding or

(2) with respect to whom the IRS notifies us that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect.

An individuals taxpayer identification number is

his or her social security number.

Miscellaneous itemized deductions are not

deductible at any time for purposes of the alternative minimum tax for individuals and will be subject an annual cap for income tax purposes

for individuals beginning in 2026.

Backup withholding, currently at a rate

of 24%, may be applicable to all taxable distributions to any non-corporate U.S.

stockholder (1) who fails to

furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding or

(2) with respect to whom the IRS notifies us that such stockholder has failed to properly report certain interest and dividend

income to the IRS and to respond to notices to that effect.

An individual’s taxpayer identification number is his or her

social security number.

Any amount withheld under backup withholding is allowed as a credit against the U.S.

stockholders U.S.

federal income tax liability and may entitle such stockholder to a refund, provided that proper

information is timely provided to the IRS.

stockholder recognizes a loss with respect to Shares of $2 million or more for an individual

stockholder or $10 million or more for a corporate stockholder, the stockholder must file with the IRS a disclosure statement on Form 8886.

Direct stockholders of portfolio securities are in many cases exempted from this reporting requirement,

but under current guidance, stockholders of a RIC are not exempted.

The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayers treatment of the loss is proper.

should consult their tax advisors to determine the applicability of these regulations in light of their specific circumstances.

Shareholder that

is a tax-exempt organization for U.S.

stockholder’s

federal income tax liability and may entitle such stockholder to a refund, provided that proper information is timely provided

stockholder recognizes a loss with

respect to Shares of $2 million or more for an individual stockholder or $10 million or more for a corporate stockholder, the

stockholder must file with the IRS a disclosure statement on Form 8886.

Direct stockholders of portfolio securities are in many cases

exempted from this reporting requirement, but under current guidance, stockholders of a RIC are not exempted.

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.

stockholders should consult their tax advisors to determine the applicability of these regulations in light of their specific circumstances.

Shareholder that is a tax-exempt organization

federal income tax purposes and therefore generally exempt from U.S.

federal income taxation may nevertheless be subject to taxation to the extent that it is

considered to derive unrelated business taxable income (UBTI).

The direct conduct by a tax-exempt U.S.

federal income taxation may nevertheless be subject to taxation

to the extent that it is considered to derive unrelated business taxable income (“UBTI”).

The direct conduct by a tax-exempt

Shareholder of the activities we propose to conduct could give rise to UBTI.

However, a BDC (and RIC) is a corporation for U.S.

federal income tax purposes and its business activities generally will not be attributed to its shareholders for purposes of determining their treatment under current law.

income tax purposes and its business activities generally will not be attributed to its shareholders for purposes of determining their

treatment under current law.

Therefore, a tax-exempt U.S.

Shareholder generally should not be subject to U.S.

taxation solely as a result of the shareholders ownership of our Shares and receipt of dividends with respect to such common

Moreover, under current law, if we incur indebtedness, such indebtedness will not be attributed to a tax-exempt U.S.

a tax-exempt U.S.

Shareholder should not be treated as earning income from debt-financed property and dividends we pay should not be treated as unrelated debt-financed income

taxation solely as a result

of the shareholder’s ownership of our Shares and receipt of dividends with respect to such common stock.

Moreover, under current

law, if we incur indebtedness, such indebtedness will not be attributed to a tax-exempt U.S.

Therefore, a tax-exempt U.S.

Shareholder should not be treated as earning income from “debt-financed property”

and dividends we pay should not be treated

as “unrelated debt-financed income”

solely as a result of indebtedness that we incur.

Legislation has been introduced in Congress in the past, and may be introduced again in the future, which would change the treatment of blocker investment vehicles interposed between tax-exempt investors and non-qualifying investments if enacted.

In the event that any such proposals were to be adopted and applied to BDCs (and

RICs), the treatment of dividends payable to tax-exempt investors could be adversely affected.

In addition, special rules would apply if we were to invest in certain real estate mortgage investment

conduits, which we do not currently plan to do, that could result in a tax-exempt U.S.

Legislation has been introduced in Congress

in the past, and may be introduced again in the future, which would change the treatment of “blocker”

investment vehicles

interposed between tax-exempt investors and non-qualifying investments if enacted.

In the event that any such proposals were to be adopted

and applied to BDCs (and RICs), the treatment of dividends payable to tax-exempt investors could be adversely affected.

In addition, special

rules would apply if we were to invest in certain real estate mortgage investment conduits, which we do not currently plan to do, that

could result in a tax-exempt U.S.

Shareholder recognizing income that would be treated as UBTI.

An additional 3.8% federal tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from us and

net gains from redemptions or other taxable dispositions of our shares) of U.S.

individuals, estates and trusts to the extent that such persons modified adjusted gross income (in the case of an individual) or adjusted gross

income (in the case of an estate or trust) exceed certain threshold amounts.

An additional 3.8% federal tax is imposed

on certain net investment income (including ordinary dividends and capital gain distributions received from us and net gains from redemptions

or other taxable dispositions of our shares) of U.S.

individuals, estates and trusts to the extent that such person’s “modified

adjusted gross income”

(in the case of an individual) or “adjusted gross income”

(in the case of an estate or trust)

exceed certain threshold amounts.

Taxation of Non-U.S.

The following discussion only applies to certain non-U.S.

The following discussion only applies to certain

stockholders.

Whether an investment in the Shares

is appropriate for a non-U.S.

stockholder will depend upon that persons particular circumstances.

An investment in the Shares by

Whether an investment in the Shares is appropriate for a non-U.S.

stockholder will depend upon that person’s

particular circumstances.

An investment in the Shares by a non-U.S.

stockholder may have adverse tax consequences.

stockholders should consult their tax advisors before investing in our Shares.

Subject to the discussion below, distributions of our investment company taxable income to non-U.S.

stockholders (including interest income, net short-term capital gain or foreign-source dividend and interest income, which generally would be free of withholding if paid to non-U.S.

directly) will be subject to withholding of U.S.

federal tax at a 30% rate (or lower rate provided by an applicable treaty) to the extent of our current and accumulated earnings and profits unless the distributions are effectively connected with a

should consult their tax advisors before investing in our Shares.

Subject to the discussion below, distributions

of our “investment company taxable income”

stockholders (including interest income, net short-term capital gain

or foreign-source dividend and interest income, which generally would be free of withholding if paid to non-U.S.

stockholders directly)

will be subject to withholding of U.S.

federal tax at a 30% rate (or lower rate provided by an applicable treaty) to the extent of our

current and accumulated earnings and profits unless the distributions are effectively connected with a U.S.

trade or business of the non-U.S.

1 unchanged sentence

permanent establishment of the non-U.S.

stockholder), in

which case the distributions will generally be subject to U.S.

stockholder), in which case the

distributions will generally be subject to U.S.

federal income tax at the rates applicable to U.S.

In that case, we will not be required to withhold U.S.

federal tax if

stockholder complies with applicable certification and disclosure requirements such as providing IRS Form W-8ECI).

Special certification

requirements apply to a non-U.S.

stockholder that is a foreign partnership or a foreign trust, and such entities are urged to consult their own tax advisors.

Certain properly reported dividends received by a non-U.S.

In that case, we will not

be required to withhold U.S.

federal tax if the non-U.S.

stockholder complies with applicable certification and disclosure requirements

such as providing IRS Form W-8ECI).

Special certification requirements apply to a non-U.S.

stockholder that is a foreign partnership or

a foreign trust, and such entities are urged to consult their own tax advisors.

Certain properly reported dividends received

by a non-U.S.

stockholder generally are exempt from U.S.

federal withholding tax when they (1) are paid in respect of our qualified net interest income (generally, our U.S.

source interest income, other than certain contingent interest and interest from obligations of a corporation or

partnership in which we are at least a 10% stockholder, reduced by expenses that are allocable to such income), or (2) are paid in connection with our qualified short-term capital gains (generally, the excess of our net short-term

capital gain over our long-term capital loss for a tax year) as well as if certain other requirements are satisfied.

Nevertheless, it should be noted that in the case of shares of our stock held through an intermediary, the intermediary may have

withheld U.S.

federal income tax even if we reported the payment as an interest-related dividend or short-term capital gain dividend.

Moreover, depending on the circumstances, we may report all, some or none of our potentially eligible dividends as

derived from such qualified net interest income or as qualified short-term capital gains, or treat such dividends, in whole or in part, as ineligible for this exemption from withholding.

Actual or deemed distributions of our net capital gains to a non-U.S.

federal withholding tax when they (1) are paid in respect of our “qualified

net interest income”

(generally, our U.S.

source interest income, other than certain contingent interest and interest from obligations

of a corporation or partnership in which we are at least a 10% stockholder, reduced by expenses that are allocable to such income), or

(2) are paid in connection with our “qualified short-term capital gains”

(generally, the excess of our net short-term capital

gain over our long-term capital loss for a tax year) as well as if certain other requirements are satisfied.

Nevertheless, it should be

noted that in the case of shares of our stock held through an intermediary, the intermediary may have withheld U.S.

federal income tax

even if we reported the payment as an interest-related dividend or short-term capital gain dividend.

Moreover, depending on the circumstances,

we may report all, some or none of our potentially eligible dividends as derived from such qualified net interest income or as qualified

short-term capital gains, or treat such dividends, in whole or in part, as ineligible for this exemption from withholding.

Actual or deemed distributions of our net

capital gains to a non-U.S.

stockholder, and gains realized by a non-U.S.

stockholder upon the sale of our Shares, will not be subject to U.S.

stockholder upon the sale of our Shares, will not be subject

federal withholding tax and generally will not be subject to U.S.

federal income tax unless the distributions or gains, as the case may

be, are effectively connected with a U.S.

federal income tax unless 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, in the case of an individual non-U.S.

stockholder, the stockholder is present in the United States for

183 days or more during the year of the sale or capital gain dividend and certain other conditions are met.

If we distribute our net capital gains in the

form of deemed rather than actual distributions (which we may do in the future), a 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, in the case of an individual

stockholder, the stockholder is present in the United States for 183 days or more during the year of the sale or capital gain

dividend and certain other conditions are met.

If we distribute our net capital gains in

the form of deemed rather than actual distributions (which we 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

stockholders allocable share of the tax we pay on the capital gains deemed to have been distributed.

federal income tax credit or tax refund equal to the stockholder’s allocable share of the tax we pay on the capital gains deemed

to have been distributed.

In order to obtain the refund, the non-U.S.

stockholder must obtain a U.S.

identification number and file a U.S.

taxpayer identification number and

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.

income tax return.

taxpayer identification

number or file a U.S.

federal income tax return.

For a corporate non-U.S.

stockholder, distributions (both actual and deemed), and gains realized upon the sale of our Shares that are effectively connected with a U.S.

business may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate (or at a lower rate if provided for by an applicable treaty).

stockholder who is a non-resident alien

individual, and 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 us or the dividend paying agent with a U.S.

nonresident withholding tax certification

(e.g., an IRS Form W-8BEN, IRS Form W-8BEN-E, or an acceptable substitute form) or otherwise meets

documentary evidence requirements for establishing that it is a non-U.S.

stockholder or otherwise establishes an exemption from backup withholding.

stockholder, distributions (both actual and deemed), and gains

realized upon the sale of our Shares that are effectively connected with a U.S.

trade or business may, under certain circumstances, be

subject to an additional “branch profits tax”

at a 30% rate (or at a lower rate if provided for by an applicable treaty).

stockholder who is a non-resident

alien individual, and 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 us or the dividend paying agent with

nonresident withholding tax certification (e.g., an IRS Form W-8BEN, IRS Form W-8BEN-E, or an acceptable substitute form) or otherwise

meets documentary evidence requirements for establishing that it is a non-U.S.

stockholder or otherwise establishes an exemption from

backup withholding.

Withholding of U.S.

tax (at a 30% rate) is required by the Foreign Account Tax Compliance Act, or FATCA, provisions of the Code with respect to payments of

dividends made to certain non-U.S.

entities that fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S.

Department of the

Treasury of U.S.-owned foreign investment accounts.

tax (at a 30% rate) is

required by the Foreign Account Tax Compliance Act, or FATCA, provisions of the Code with respect to payments of dividends made to certain non-U.S.

entities that

fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S.

of the Treasury of U.S.-owned foreign investment accounts.

Under proposed U.S.

Treasury regulations, which may be relied upon until final U.S.

Treasury regulations are published, there is no FATCA withholding on gross proceeds from the sale of disposition

of Shares or on certain capital gain distributions.

Stockholders may be requested to provide additional information to enable the applicable withholding agent to determine whether withholding is required.

Treasury regulations, which may be relied upon until final

Treasury regulations are published, there is no FATCA withholding on gross proceeds from the sale of disposition of Shares or on

certain capital gain distributions.

Stockholders may be requested to provide additional information to enable the applicable withholding

agent to determine whether withholding is required.

An investment in shares by a non-U.S.

person may also be subject to U.S.

also be subject to U.S.

federal estate tax.

persons should consult their own tax advisors with respect to the U.S.

persons should consult their own tax advisors with respect to

federal income tax, U.S.

federal estate tax, withholding tax, and state, local and foreign tax consequences of

acquiring, owning or disposing of our Shares.

federal estate tax, withholding tax, and state, local and foreign tax consequences of acquiring, owning

or disposing of our Shares.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business