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Item 1A. Risk Factors

2022-03-11 compared with 2021-03-12 · 1266 added, 1099 removed, 56 unchanged (98% of the section changed)

1 unchanged sentence

The investor should be aware of various risks, including those described

The investor should carefully consider these risk factors, together with all of the other information included in this

Annual Report.

The investor should carefully consider these risk factors, together with all of the other information included in this Annual

The risks set out below are not the only risks we face.

Additional risks and uncertainties not presently known

to us or not presently deemed material by us may also materially and adversely affect our business, financial condition and/or

operating results.

If any of the following events occur, our business, financial condition, results of operations and cash flows

could be materially and adversely affected.

In such case, the net asset value of our common stock could decline, and an investor

may lose all or part of his or her investment.

The following is a

summary of the principal risks that you should carefully consider before investing in our securities.

Further details regarding

each risk included in the below summary list can be found further below.

Upon Key Personnel of Palmer Square and the Investment Advisor –

of the Company is highly dependent on the financial and managerial expertise of the Investment

Advisor and, in turn, Palmer Square.

in a Highly Competitive Market for Investment Opportunities –

of investing in assets meeting our investment objective is highly competitive.

Investments With Borrowed Money –

The use of leverage magnifies the potential

for gain or loss on amounts invested.

in Interest Rates May Affect Our Cost of Capital and Net Investment Income –

Because we borrow money to make investments, our net investment income will depend, in

part, upon the difference between the rate at which we borrow funds and the rate at which

Additional risks and uncertainties not presently known to us or not presently

deemed material by us may also materially and adversely affect our business, financial condition and/or operating results.

the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely

In such case, the net asset value of our common stock could decline, and an investor may lose all or part of his or her investment.

following is a summary of the principal risks that you should carefully consider before investing in our securities.

Further details

regarding each risk included in the below summary list can be found further below.

Upon Key Personnel of Palmer Square and the Investment Advisor —

The success of the Company is highly dependent on

the financial and managerial expertise of the Investment Advisor and, in turn, Palmer Square.

in a Highly Competitive Market for Investment Opportunities —

The business of investing in assets meeting our investment

objective is highly competitive.

Investments With Borrowed Money —

The use of leverage magnifies the potential for gain or loss on amounts invested.

in Interest Rates May Affect Our Cost of Capital and Net Investment Income —

Because we borrow money to make investments,

our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which

we invest those funds.

● Regulations

Governing Our Operation as a BDC –

Regulations governing our operation

as a BDC affect our ability to raise, and the way in which we raise, additional capital

or borrow for investment purposes, which may have a negative impact on our growth.

● Investments

in Leveraged Portfolio Companies –

Leveraged companies in which we invest

may have limited financial resources and may be unable to meet their obligations under

their loans and debt securities that we hold.

Regarding Distributions –

We cannot assure you that we will achieve investment

results that will allow us to make a specified level of cash distributions or year-to-year

increases in cash distributions.

Material and Adverse Effect of Events Outside of Our Control –

material and adverse effect of events outside of our control could impact the Company

and our portfolio companies and investments.

Governing Our Operation as a BDC —

Regulations governing our operation as a BDC affect our ability to raise, and the

way in which we raise, additional capital or borrow for investment purposes, which may have a negative impact on our growth.

in Leveraged Portfolio Companies —

Leveraged companies in which we invest may have limited financial resources and

may be unable to meet their obligations under their loans and debt securities that we hold.

in Secured Loans —

We cannot guarantee the adequacy of the protection of our interests in secured loans, including

the validity or enforceability of the loan and the maintenance of the anticipated priority, and in the event of any default under

a secured loan, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and

the principal and accrued interest of the secured loan.

in Mezzanine Debt and Other Junior Securities —

Our investments in mezzanine debt and other junior securities are subordinate

to senior indebtedness of the applicable company and are subject to greater risk.

in CLOs —

CLO vehicles that we invest in are typically very highly levered, and therefore, the junior debt and equity

tranches that we invest in are subject to a higher degree of risk of total loss.

in Covenant-Lite Loans —

Our investments may include Covenant-Lite Loans, which may give us fewer rights and subject

us to greater risk of loss than loans with financial maintenance covenants.

Regarding Distributions —

We cannot assure you that we will achieve investment results that will allow us to make a

specified level of cash distributions or year-to-year increases in cash distributions.

Relating to Economic Recessions or Downturns —

Economic slowdowns or recessions could lead to financial losses in our

portfolio and a decrease in our revenues, net income and assets.

Risks Related to our Business and Structure

Limited Operating History

We began operations

on January 23, 2020 and have limited operating history.

As a result, the Company is subject to all of the business risks and uncertainties

associated with any new business, including the risk that it will not achieve its investment objectives and that the value of your

investment could decline substantially or that the investor will suffer a complete loss of its investment in the Company.

In addition, neither

Palmer Square nor the Investment Advisor has ever previously managed a BDC.

The 1940 Act imposes numerous constraints on the operations

of BDCs that generally do not apply to other investment vehicles managed by Palmer Square.

BDCs are required, for example, to invest

at least 70% of their total assets primarily in securities of U.S.

private or thinly traded public companies, cash, cash equivalents,

government securities and other high-quality debt instruments that mature in one year or less from the date of investment.

The Company, the Investment Advisor or Palmer Square have limited experience operating or advising under these constraints, which

may hinder the Company’s ability to take advantage of attractive investment opportunities and to achieve its investment objective.

Upon Key Personnel of Palmer Square and the Investment Advisor

The success of the

Company is highly dependent on the financial and managerial expertise of the Investment Advisor and, in turn, Palmer Square.

individuals may not necessarily continue to remain employed by Palmer Square during the entire term of the Company.

The employees of the

Investment Advisor and other Palmer Square investment professionals expect to devote such time and attention to the conduct of

the Company’s business as such business shall reasonably require.

However, there can be no assurance, for example, that the

members of the Investment Advisor or such investment professionals will devote any minimum number of hours each week to the affairs

of the Company or that they will continue to be employed by Palmer Square.

In the event that certain employees of the Investment

Advisor cease to be actively involved with the Company, we will be required to rely on the ability of Palmer Square to identify

and retain other investment professionals to conduct the Company’s business.

on Strong Referral Relationships

depend upon our Investment Advisor to maintain its relationships with private equity sponsors, placement agents, investment banks,

management groups and other financial institutions, and we expect to rely to a significant extent upon these relationships to

provide us with potential investment opportunities.

If our Investment Advisor fails to maintain such relationships, or to develop

new relationships with other sources of investment opportunities, we will not be able to grow our investment portfolio.

individuals with whom our Investment Advisor has relationships are not obligated to provide us with investment opportunities,

and we can offer no assurance that these relationships will generate investment opportunities for us in the future.

Investment Decisions

analyses and decisions by the Investment Advisor may frequently be required to be undertaken on an expedited basis to take advantage

of investment opportunities.

In these cases, the information available to the Investment Advisor at the time of making an investment

decision may be limited.

Therefore, no assurance can be given that the Investment Advisor will have knowledge of all circumstances

that may adversely affect an investment.

In addition, the Investment Advisor expects to rely upon independent consultants and

other sources in connection with its evaluation of proposed investments, and no assurance can be given as to the accuracy or completeness

of the information provided by such independent consultants or other sources, or as to the Company’s right of recourse against

them in the event errors or omissions do occur.

to Manage Our Business Effectively

Our ability to achieve our investment objective will depend

on our ability to manage our business and to grow our investments and earnings.

This will depend, in turn, on our Investment Advisor’s

ability to identify, invest in and monitor portfolio companies that meet our investment criteria.

The achievement of our investment

objectives on a cost-effective basis will depend upon our Investment Advisor’s execution of our investment process, its ability

to provide competent, attentive and efficient services to us and, to a lesser extent, our access to financing on acceptable terms.

Any failure to manage our business and our future growth effectively could have a material adverse effect on our business, financial

condition, results of operations and cash flows.

Conflicts Related to Obligations

employees of our Investment Advisor serve, or may serve, as officers, directors, members, or principals of entities that operate

in the same or a related line of business as we do, or of investment funds, accounts, or investment vehicles managed by it and/or

its affiliates.

Similarly, the Investment Advisor and its affiliates may have other clients with similar, different or competing

investment objectives.

serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment

of which may not be in the best interests of us or our stockholders.

There is a potential that we will compete with these clients,

and other entities managed the Investment Advisor and its affiliates, for capital and investment opportunities.

As a result, the

Investment Advisor and, as applicable, the members of the Investment Committee may face conflicts in the allocation of investment

opportunities among us and the investment funds, accounts and investment vehicles managed by the Investment Advisor and its affiliates.

Our Investment Advisor intends to allocate investment opportunities among eligible investment funds, accounts and investment vehicles

in a manner that is fair and equitable over time and consistent with its allocation policy.

However, we can offer no assurance

that such opportunities will be allocated to us fairly or equitably in the short-term or over time.

of Material Non-Public Information by Principals and Employees of the Investment Advisor

and other employees of our Investment Advisor, including members of the Investment Advisor’s Investment Committee, may serve

as directors of, or in a similar capacity with, portfolio companies in which we invest, the securities of which are purchased

or sold on our behalf.

In the event that material nonpublic information is obtained with respect to such companies, or we become

subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations,

we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition

may have an adverse effect on us.

Fee Structure Relating to the Investment Advisor

the course of our investing activities, we will pay management and, subsequent to a Listing, incentive fees to the Investment

We have entered into an Advisory Agreement with the Investment Advisor.

Under the incentive fee structure which will

be in place subsequent to a Listing, our adjusted net investment income for purposes thereof will be computed and paid on income

that may include interest income that has been accrued but not yet received in cash.

This fee structure may give rise to a conflict

of interest for the Investment Advisor to the extent that it encourages the Investment Advisor to favor debt financings that provide

for deferred interest, rather than current cash payments of interest.

The Investment Advisor may have an incentive to invest in

deferred interest securities in circumstances where it would not have done so but for the opportunity to continue to earn the

incentive fee even when the issuers of the deferred interest securities would not be able to make actual cash payments to us on

such securities.

This risk could be increased because, under our Advisory Agreement, the Investment Advisor is not obligated to

reimburse us for incentive fees it receives even if we subsequently incur losses or never receive in cash the deferred income

that was previously accrued.

of Interest Created by Valuation Process for Certain Portfolio Holdings

We expect to make

many of our portfolio investments in the form of loans and securities that are not publicly traded and for which no market based

price quotation is available.

As a result, our Board will determine the fair value of these loans and securities in good faith

as described elsewhere in this Annual Report.

In connection with that determination, investment professionals from our Investment

Advisor may provide our Board with valuations based upon the most recent portfolio company consolidated financial statements available

and projected financial results of each portfolio company.

The participation of the Investment Advisor’s investment professionals

in our valuation process could result in a conflict of interest as the Investment Advisor’s management fee is based, in

part, on the value of our total net assets.

in a Highly Competitive Market for Investment Opportunities

business of investing in assets meeting our investment objective is highly competitive.

Competition for investment opportunities

includes a growing number of nontraditional participants, such as hedge funds, senior private debt funds, including BDCs, and

other private investors, as well as more traditional lending institutions and competitors.

Some of these competitors may have

access to greater amounts of capital and to capital that may be committed for longer periods of time or may have different return

thresholds than the Company, and thus these competitors may have advantages not shared by the Company.

Furthermore, many of our

competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the source-of-income, asset

diversification and distribution requirements we must satisfy to qualify and maintain our RIC status.

Increased competition for,

or a diminishment in the available supply of, investments suitable for the Company could result in lower returns on such investments.

We have a limited operating history.

We began operations on January 23,

2020 and have limited operating history.

As a result, we are subject to all of the business risks and uncertainties associated with any

new business, including the risk that it will not achieve its investment objectives and that the value of your investment could decline

substantially or that the investor will suffer a complete loss of its investment in us.

In addition, neither Palmer

Square nor the Investment Advisor has previously managed a BDC.

The 1940 Act imposes numerous constraints on the operations of BDCs

that generally do not apply to other investment vehicles managed by Palmer Square.

BDCs are required, for example, to invest at least

70% of their total assets primarily in securities of U.S.

private or thinly traded public companies, cash, cash equivalents, U.S.

securities and other high-quality debt instruments that mature in one year or less from the date of investment.

We, the Investment Advisor

and Palmer Square have limited experience operating or advising under these constraints, which may hinder our ability to take advantage

of attractive investment opportunities and to achieve our investment objective.

We are dependent upon key personnel of Palmer

Square and the Investment Advisor.

Our success is highly dependent

on the financial and managerial expertise of the Investment Advisor and, in turn, Palmer Square.

The individuals may not necessarily continue

to remain employed by Palmer Square.

Although we have attempted to foster a team approach to investing, the loss of key individuals employed

by Palmer Square or our Investment Advisor could have a material adverse effect on our financial condition, performance and ability to

achieve our investment objectives.

The Investment Advisor’s

and Palmer Square’s investment professionals expect to devote such time and attention to the conduct of our business as such business

shall reasonably require.

However, there can be no assurance, for example, that the members of the Investment Advisor or such investment

professionals will devote any minimum number of hours each week to our affairs or that they will continue to be employed by Palmer

In the event that certain employees of the Investment Advisor cease to be actively involved with us, we will be required to rely

on the ability of Palmer Square to identify and retain other investment professionals to conduct our business.

We are dependent on strong referral relationships.

We depend upon our Investment

Advisor and its affiliates to maintain their relationships with private equity sponsors, placement agents, investment banks, management

groups and other financial institutions, and we expect to rely to a significant extent upon these relationships to provide us with potential

investment opportunities.

If our Investment Advisor and its affiliates fail to maintain such relationships, or to develop new relationships

with other sources of investment opportunities, we will not be able to grow our investment portfolio.

In addition, individuals with whom

our Investment Advisor and its affiliates have relationships are not obligated to provide us with investment opportunities, and we can

offer no assurance that these relationships will generate investment opportunities for us in the future.

Our investment decisions may be expedited.

Investment analyses and decisions

by the Investment Advisor may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.

In these cases, the information available to the Investment Advisor at the time of making an investment decision may be limited.

no assurance can be given that the Investment Advisor will have knowledge of all circumstances that may adversely affect an investment.

Our financial condition, results of operations

and cash flows depend on our ability to manage our business effectively.

Our ability to achieve our

investment objective will depend on our ability to manage our business and to grow our investments and earnings.

This will depend, in

turn, on our Investment Advisor’s ability to identify, invest in and monitor portfolio companies that meet our investment criteria.

The achievement of our investment objectives on a cost-effective basis will depend upon our Investment Advisor’s execution of our

investment process, its ability to provide competent, attentive and efficient services to us and, to a lesser extent, our access to financing

on acceptable terms.

Any failure to manage our business and our future growth effectively could have a material adverse effect on our

business, financial condition, results of operations and cash flows.

Our executive officers and directors, our

Investment Advisor, Palmer Square and their affiliates, officers, directors and employees may face certain conflicts of interest.

The employees of Palmer Square

and our Investment Advisor serve, or may serve, as officers, directors, members, or principals of entities that operate in the same or

a related line of business as we do, or of investment funds, accounts, or investment vehicles managed by it and/or its affiliates.

Palmer Square, the Investment Advisor and their affiliates may have other clients with similar, different or competing investment objectives.

In serving in these multiple

capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best

interests of us or our stockholders.

There is a potential that we will compete with these clients, and other entities managed by the Investment

Advisor and its affiliates, for capital and investment opportunities.

As a result, the Investment Advisor and, as applicable, the members

of the Investment Committee may face conflicts in the allocation of investment opportunities among us and the investment funds, accounts

and investment vehicles managed by the Investment Advisor and its affiliates.

Our Investment Advisor intends to allocate investment opportunities

among eligible investment funds, accounts and investment vehicles in a manner that is fair and equitable over time and consistent with

its allocation policy.

However, we can offer no assurance that such opportunities will be allocated to us fairly or equitably in the short-term

or over time.

Our Investment Advisor or its affiliates

may, from time to time, possess material non-public information, limiting our investment discretion.

Principals and other employees

of our Investment Advisor, including members of the Investment Advisor’s Investment Committee, may serve as directors of, or in

a similar capacity with, portfolio companies in which we invest, the securities of which are purchased or sold on our behalf.

that material nonpublic information is obtained with respect to such companies, or we become subject to trading restrictions under the

internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time

from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us.

Our management and incentive fee structure

with our Advisor may create incentives for our Investment Advisor that are not fully aligned with the interests of our stockholders and

may induce our Advisor to make speculative investments.

In the course of our investing

activities, we will pay management and, subsequent to a Listing, incentive fees to the Investment Advisor.

We have entered into an Advisory

Agreement with the Investment Advisor.

Under the incentive fee structure which will be in place subsequent to a Listing, our adjusted

net investment income for purposes thereof will be computed and paid on income that may include interest income that has been accrued

but not yet received in cash.

This fee structure may give rise to a conflict of interest for the Investment Advisor to the extent that

it encourages the Investment Advisor to favor debt financings that provide for deferred interest, rather than current cash payments of

The Investment Advisor may have an incentive to invest in deferred interest securities in circumstances where it would not have

done so but for the opportunity to continue to earn the incentive fee even when the issuers of the deferred interest securities would

not be able to make actual cash payments to us on such securities.

This risk could be increased because, under our Advisory Agreement,

the Investment Advisor is not obligated to reimburse us for incentive fees it receives even if we subsequently incur losses or never receive

in cash the deferred income that was previously accrued.

The valuation process for certain of our

portfolio holdings may create a conflict of interest.

We may make many of our portfolio

investments in the form of loans and securities that are not publicly traded and for which no market based price quotation is available.

As a result, our Board will determine the fair value of these loans and securities in good faith as described elsewhere in this Annual

In connection with that determination, investment professionals from our Investment Advisor may provide our Board with valuations

based upon the most recent portfolio company consolidated financial statements available and projected financial results of each portfolio

The participation of the Investment Advisor’s investment professionals in our valuation process could result in a conflict

of interest as the Investment Advisor’s base management fee is based, in part, on the value of our total net assets.

We operate in a highly competitive market

for investment opportunities, which could reduce returns and result in losses.

The business of investing in

assets meeting our investment objective is highly competitive.

Competition for investment opportunities includes a growing number of nontraditional

participants, such as hedge funds, senior private debt funds, including BDCs, and other private investors, as well as more traditional

lending institutions and competitors.

Some of these competitors may have access to greater amounts of capital and to capital that may

be committed for longer periods of time or may have different return thresholds than us, and thus these competitors may have advantages

not shared by us.

Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us

as a BDC or the source-of-income, asset diversification and distribution requirements we must satisfy to qualify and maintain our RIC

Increased competition for, or a diminishment in the available supply of, investments suitable for us could result in lower returns

on such investments.

Moreover, the identification of attractive investment opportunities is difficult and involves a high degree of uncertainty.

Company may incur significant expenses in connection with identifying investment opportunities and investigating other potential

investments which are ultimately not consummated, including expenses relating to due diligence, transportation, legal expenses

and the fees of other third party advisors.

respect to the investments we make, we will not seek to compete based primarily on the interest rates we will offer, and we believe

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

In the secondary market

for acquiring existing loans, we expect to compete generally on the basis of pricing terms.

With respect to all investments, we

may lose some investment opportunities if we do not match our competitors’

We may incur significant expenses in connection with identifying investment opportunities and investigating other potential investments

which are ultimately not consummated, including expenses relating to due diligence, transportation, legal expenses and the fees of other

third party advisors.

With respect to the investments

we make, we will not seek to compete based primarily on the interest rates we will offer, and we believe that some of our competitors

may make loans with interest rates that will be lower than the rates we offer.

In the secondary market for acquiring existing loans, we

expect to compete generally on the basis of pricing terms.

With respect to all investments, we may lose some investment opportunities

if we do not match our competitors’

pricing, terms and structure.

However, if we

match our competitors’

pricing, terms and structure, we may experience decreased net interest income, lower yields and increased

risk of credit loss.

of the Need to Raise Additional Capital

may need additional capital to fund new investments and grow our portfolio of investments.

We intend to access the capital markets

periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital.

Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision

by lenders not to extend credit to us.

A reduction in the availability of new capital could limit our ability to grow.

we are required to distribute dividends for U.S.

federal income tax purposes of an amount generally at least equally to 90% of

the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our

stockholders to qualify and maintain our RIC status.

As a result, these earnings will not be available to fund new investments.

An inability on our part to access the capital markets successfully could limit our ability to grow our business and execute our

business strategy fully and could decrease our earnings, if any, which would have an adverse effect on the value of our securities.

Interest Payments

of our debt investments may contain provisions providing for the payment of PIK interest.

Because PIK interest results in an increase

in the size of the loan balance of the underlying loan, the receipt by us of PIK interest will have the effect of increasing our

assets under management.

As a result, because the base management fee that we pay to the Investment Advisor is based on the value

of our total net assets, the receipt by us of PIK interest will result in an increase in the amount of the base management fee

payable by us.

In addition, any such increase in a loan balance due to the receipt of PIK interest will cause such loan to accrue

interest on the higher loan balance, which will result in an increase in our pre-incentive fee net investment income and, as a

result, an increase in incentive fees that are payable by us to the Investment Advisor after a Listing.

Investments With Borrowed Money

The use of leverage magnifies the potential for gain or loss

on amounts invested.

The use of leverage is generally considered a speculative investment technique and increases the risks associated

with investing in our securities.

We intend to continue to borrow from, and may in the future issue debt securities to, banks,

insurance companies and other lenders.

Lenders of these funds will have fixed dollar claims on our assets that are superior to

the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default.

We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms of any debt instruments

we may enter into with lenders.

If the value of our assets decreases, leveraging would cause net asset value to decline more sharply

than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our stake in a leveraged investment.

Similarly, any decrease in our revenue or income will cause our net income to decline more sharply than it would have had we not

However, if we match our competitors’

pricing, terms and

structure, we may experience decreased net interest income, lower yields and increased risk of credit loss.

We may need to raise additional capital.

We may need additional capital

to fund new investments and grow our portfolio of investments.

We intend to access the capital markets periodically to issue debt or equity

securities or borrow from financial institutions in order to obtain such additional capital.

Unfavorable economic conditions could increase

our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.

in the availability of new capital could limit our ability to grow.

In addition, we are required to distribute dividends for U.S.

income tax purposes of an amount generally at least equally to 90% of the sum of our net ordinary income and net short-term capital gains

in excess of net long-term capital losses, if any, to our stockholders to qualify and maintain our RIC status.

As a result, these earnings

will not be available to fund new investments.

An inability on our part to access the capital markets successfully could limit our ability

to grow our business and execute our business strategy fully and could decrease our earnings, if any, which would have an adverse effect

on the value of our securities.

Our investments in PIK interest income may

expose us to risks.

Certain of our debt investments

may contain provisions providing for the payment of PIK interest.

Because PIK interest results in an increase in the size of the loan

balance of the underlying loan, the receipt by us of PIK interest will have the effect of increasing our total net assets.

because the base management fee that we pay to the Investment Advisor is based on the value of our total net assets, the receipt by us

of PIK interest will result in an increase in the amount of the base management fee payable by us.

In addition, any such increase in a

loan balance due to the receipt of PIK interest will cause such loan to accrue interest on the higher loan balance, which will result

in an increase in our pre-incentive fee net investment income and, as a result, an increase in incentive fees that are payable by us to

the Investment Advisor after a Listing.

Our strategy involves a high degree of leverage.

We intend to continue to finance our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested

and may increase the risk of investing in us.

The use of leverage magnifies

the potential for gain or loss on amounts invested.

The use of leverage is generally considered a speculative investment technique and

increases the risks associated with investing in our securities.

We have borrowed and intend to continue to borrow from, and may in the

future issue debt securities to, banks, insurance companies and other lenders.

Lenders of these funds will have fixed dollar claims on

our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets

in the event of a default.

We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms

of any debt instruments we may enter into with lenders.

If the value of our assets decreases, leveraging would cause net asset value to

decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our stake in a leveraged

Similarly, any decrease in our revenue or income will cause our net income to decline more sharply than it would have had

we not borrowed.

Such a decline would also negatively affect our ability to make dividend payments on our common stock.

1 unchanged sentence

service any debt will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive

In addition, our common stockholders will bear the burden of any increase in our expenses as a result of our use of

leverage, including interest expenses.

As a BDC, we generally are required to meet a coverage ratio

of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that

we may issue in the future, of at least 150%.

If this ratio declines below 150%, we will not be able to incur additional debt when

it is otherwise advantageous or necessary for us to do so.

The amount of leverage that we employ will depend on the Investment

Advisor’s and our Board’s assessment of market and other factors at the time of any proposed borrowing.

We cannot assure

you that we will be able to obtain credit at all or on terms acceptable to us.

In addition, the Credit

Facility, the WF Credit Facility, and our future debt facilities may impose financial and operating covenants that restrict our

business activities, including limitations that hinder our ability to finance additional loans and investments or to make the distributions

required to maintain our ability to be subject to tax as a RIC under the Code.

In the event we default

under the Credit Facility, the WF Credit Facility, or any other future borrowing facility, our business could be adversely affected

as we may be forced to sell a portion of our investments quickly and prematurely at what may be disadvantageous prices to us in

order to meet our outstanding payment obligations and/or support working capital requirements under the Credit Facility, the WF

Credit Facility, or such future borrowing facility, any of which would have a material adverse effect on our business, financial

condition, results of operations and cash flows.

In addition, following any such default, the agent for the lenders under the Credit

Facility, the WF Credit Facility, or such future borrowing facility could assume control of the disposition of any or all of our

assets, including the selection of such assets to be disposed and the timing of such disposition, which would have a material adverse

effect on our business, financial condition, results of operations and cash flows.

As part of certain credit facilities, the right

to make capital calls of stockholders may be pledged as collateral to the 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.

in Interest Rates May Affect Our Cost of Capital and Net Investment Income

Because we borrow money to make investments, our net investment

income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those

As a result, we can offer no assurance that a significant change in market interest rates would not have a material adverse

effect on our net investment income given that we use debt to finance our investments.

In periods of rising interest rates, our

cost of funds would increase, which could reduce our net investment income.

We may use interest rate risk management techniques

in an effort to limit our exposure to interest rate fluctuations.

Such techniques may include various interest rate hedging activities

to the extent permitted by the 1940 Act.

Associated with the Discontinuation of LIBOR

In July 2017, the head of the United Kingdom Financial Conduct

Authority (the “FCA”) announced that it intends to phase out of the use of LIBOR by the end of 2021, and in December

2020, the ICE Benchmark Administration Limited, a wholly-owned subsidiary of Intercontinental Exchange, Inc.

and the administrator

of LIBOR, announced that it will extend the LIBOR transition deadline to the end of June 2023.

To identify a successor rate for

dollar LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.

based group convened by the Federal Reserve

Board and the Federal Reserve Bank of New York, was formed.

Similarly, financial regulators in the UK, the European Union, Japan,

and Switzerland formed working groups with the aim of recommending alternatives to LIBOR denominated in their local currencies.

The ARRC is comprised of a diverse set of private-sector entities and a wide array of official-sector entities, banking regulators,

and other financial sector regulators.

The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its

preferred alternative rate for LIBOR.

In addition, our common stockholders will bear the burden of any increase in our expenses as a result of our use of leverage,

including interest expenses.

As a BDC, we generally are

required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings

and any preferred stock that we may issue in the future, of at least 150%.

If this ratio declines below 150%, we will not be able to incur

additional debt when it is otherwise advantageous or necessary for us to do so.

The amount of leverage that we employ will depend on the

Investment Advisor’s and our Board’s assessment of market and other factors at the time of any proposed borrowing.

assure you that we will be able to obtain credit at all or on terms acceptable to us.

We are subject to various covenants under

our credit facilities which, if not complied with, could result in reduced availability and/or mandatory prepayments under our credit

We are subject to various covenants

under our credit facilities which, if not complied with, could result in reduced availability and/or mandatory prepayments under our credit

In the event we default under our credit facilities or any other future borrowing facility, our business could be adversely

affected as we may be forced to sell a portion of our investments quickly and prematurely at what may be disadvantageous prices to us

in order to meet our outstanding payment obligations and/or support working capital requirements under our credit facilities, or such

future borrowing facility, any of which would have a material adverse effect on our business, financial condition, results of operations

and cash flows.

In addition, following any such default, the agent for the lenders under our credit facilities, or such future borrowing

facility could assume control of the disposition of any or all of our assets, including the selection of such assets to be disposed and

the timing of such disposition, which would have a material adverse effect on our business, financial condition, results of operations

and cash flows.

In addition to asset coverage

ratio requirements, our credit facilities contain various covenants which, if not complied with, could accelerate repayment of the indebtedness

under our credit facilities.

This could have a material adverse effect on our business, financial condition and results of operations.

Our borrowings under the BoA Credit Facility are collateralized by the assets in PS BDC Funding.

The agreements governing the BoA Credit

Facility require us to comply with certain financial and operational covenants.

These covenants include a requirement to maintain a first-prior

security interest in the collateral for the benefit of the lenders under the BoA Credit Facility, maintain various policies and procedures,

and maintain a minimum borrowing base under the BoA Credit Facility.

Our borrowings under the WF Credit Facility are collateralized by

the assets in PS BDC Funding II.

The agreements governing the WF Credit Facility require us to comply with certain financial

and operational covenants.

These covenants include a requirement to maintain a first-prior security interest in the collateral for the

benefit of the lenders under the WF Credit Facility, maintain various policies and procedures, and maintain a minimum borrowing base under

the WF Credit Facility.

Our continued compliance with the covenants under our credit facilities depends on many factors, some of which

are beyond our control.

Changes in interest rates may affect our

cost of capital and net investment income

Because we borrow money to

make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the

rate at which we invest those funds.

As a result, we can offer no assurance that a significant change in market interest rates would not

have a material adverse effect on our net investment income given that we use debt to finance our investments.

In periods of rising interest

rates, our cost of funds would increase, which could reduce our net investment income.

In addition, in a prolonged low interest rate environment,

the difference between investment income earned on interest earning assets and the interest expense incurred on interest bearing liabilities

may be compressed, reducing our net investment income and potentially adversely affecting our operating results.

We may use interest rate

risk management techniques in an effort to limit our exposure to interest rate fluctuations.

Such techniques may include various interest

rate hedging activities to the extent permitted by the 1940 Act.

The expected discontinuation of LIBOR could

have significant impact on our business.

In July 2017, the head

of the United Kingdom Financial Conduct Authority (the “FCA”) announced that it intends to phase out of the use of LIBOR by

the end of 2021, and in December 2020, the ICE Benchmark Administration Limited, a wholly-owned subsidiary of Intercontinental Exchange,

and the administrator of LIBOR, announced that it will extend the LIBOR transition deadline for most LIBOR settings to the end of

To identify a successor rate for U.S.

dollar LIBOR, the Alternative Reference Rates Committee (“ARRC”),

based group convened by the Federal Reserve Board and the Federal Reserve Bank of New York, was formed.

Similarly, financial

regulators in the UK, the European Union, Japan, and Switzerland formed working groups with the aim of recommending alternatives to LIBOR

denominated in their local currencies.

The ARRC is comprised of a diverse set of private-sector entities and a wide array of official-sector

entities, banking regulators, and other financial sector regulators.

The ARRC has identified the Secured Overnight Financing Rate (“SOFR”)

as its preferred alternative rate for LIBOR.

SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S.

3 unchanged sentences

replacement rate for U.S.

dollar LIBOR, it is unclear if other benchmarks may emerge or if other rates will be adopted outside

The expected discontinuation of LIBOR could have a material

impact on our business.

We expect that the dollar amount of our debt investments and borrowings that will be linked to LIBOR with

maturity dates after the anticipated discontinuation of LIBOR will be material.

We anticipate operational challenges in connection

with the transition away from LIBOR including, but not limited to, amending loan agreements with borrowers on investments that

may have not included fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued

dollar LIBOR, it is unclear if other benchmarks may emerge or if other rates will be adopted outside of

The expected discontinuation

of LIBOR could have a material impact on our business.

We expect that the dollar amount of our debt investments and borrowings that will

be linked to LIBOR with maturity dates after the anticipated discontinuation of LIBOR will be material.

We anticipate operational challenges

in connection with the transition away from LIBOR including, but not limited to, amending loan agreements with borrowers on investments

that may have not included fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued

before maturity.

Beyond these challenges, we anticipate there may be additional risks to our processes and information systems

that will need to be identified and evaluated by us.

Due to the uncertainty of the replacement for LIBOR, the potential effect

of any such event on our business and results of operations cannot yet be determined.

In addition, any further changes or reforms

to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which

could have an adverse impact on the market value of any LIBOR-linked securities, loans, and other financial obligations or extensions

of credit we may hold or may be due to us and could have a material adverse effect on our business, financial condition and results

of operations.

as to the Value of Certain Portfolio Investments

We expect that certain of our portfolio investments may

take the form of securities that are not publicly traded.

The fair value of loans, securities and other investments that are not

publicly traded may not be readily determinable and we will value these investments at fair value as determined in good faith by

Beyond these challenges, we anticipate there may be additional risks to our processes and information systems that will

need to be identified and evaluated by us.

Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event

on our business and results of operations cannot yet be determined.

In addition, any further changes or reforms to the determination or

supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on

the market value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit we may hold or may be

due to us and could have a material adverse effect on our business, financial condition and results of operations.

We may have uncertainty as to the value

of certain portfolio investments.

We expect that certain of our

portfolio investments may take the form of securities that are not publicly traded.

The fair value of loans, securities and other investments

that are not publicly traded may not be readily determinable and we will value these investments at fair value as determined in good faith

by the Board.

Certain of our investments (other than cash and cash equivalents) may be classified as Level 3 assets under Topic 820

Financial Accounting Standards Board’s Accounting Standards Codification, as amended, Fair Value Measurements

and Disclosures (“ASC Topic 820”).

This means that our portfolio valuations will be based on unobservable inputs and

our own assumptions about how market participants would price the asset or liability in question.

We expect that inputs into the

determination of fair value of our portfolio investments will require significant management judgment or estimation.

Even if observable

market data are available, such information may be the result of consensus pricing information or broker quotes, which include

a disclaimer that the broker would not be held to such a price in an actual transaction.

The non-binding nature of consensus pricing

and/or quotes accompanied by disclaimers materially reduces the reliability of such information.

The types of factors that the

Board may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly-traded

securities including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company,

the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and

discounted cash flow, the markets in which the portfolio company does business and other relevant factors.

Because such valuations,

and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods

of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been

used if a ready market for these loans and securities existed.

Our net asset value could be adversely affected if our determinations

regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal

of such loans and securities.

In addition, the method of calculating the management fee may result in conflicts of interest between

the Investment Advisor, on the one hand, and the stockholders of the Company on the other hand, with respect to valuation of investments.

will adjust on a quarterly basis the valuation of our portfolio to reflect the Board’s determination of the fair value of

each investment in our portfolio.

Any changes in fair value are recorded in our statements of operations as net change in unrealized

appreciation or depreciation on investments.

Fluctuations in our Net Asset Value

Financial Accounting Standards Board’s Accounting Standards Codification, as amended, Fair Value Measurements and

Disclosures (“ASC 820”).

This means that our portfolio valuations will be based on unobservable inputs and our own assumptions

about how market participants would price the asset or liability in question.

We expect that inputs into the determination of fair value

of our portfolio investments will require significant management judgment or estimation.

Even if observable market data are available,

such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would

not be held to such a price in an actual transaction.

The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers

materially reduces the reliability of such information.

The types of factors that the Board may take into account in determining the fair

value of our investments generally include, as appropriate, comparison to publicly-traded securities including such factors as yield,

maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral,

the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company

does business and other relevant factors.

Because such valuations, and particularly valuations of private securities and private companies,

are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may

differ materially from the values that would have been used if a ready market for these loans and securities existed.

Our net asset value

may fluctuate over time and, consequently, you may pay a different price per share at subsequent closings than some other investors

paid at earlier closings.

The price per share of a subsequent closing may be above net asset value per share to take into account

the amortization of organizational and offering expenses.

Consequently, investors in subsequent closings may receive a different

number of shares for the same capital contribution that earlier investors made depending on the net asset value at the relevant

Changes in Investment Objective, Operating Policies or Strategies Without Prior Notice or Stockholder Approval

Board has the authority, except as otherwise provided in the 1940 Act, to modify or waive certain of our operating policies and

strategies without prior notice and without stockholder approval.

However, absent stockholder approval, we may not change the

nature of our business so as to cease to be, or withdraw our election as, a BDC.

We cannot predict the effect any changes to our

current operating policies and strategies would have on our business, operating results and the market price of our common stock.

Nevertheless, any such changes could adversely affect our business and impair our ability to make distributions to our stockholders.

Resignation of the Investment Advisor and/or the Administrator

The Investment Advisor

has the right under the Advisory Agreement to resign as our Investment Advisor at any time upon not less than 60 days’

could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that

we ultimately realize upon the disposal of such loans and securities.

In addition, the method of calculating the base management fee may

result in conflicts of interest between the Investment Advisor, on the one hand, and our stockholders on the other hand, with respect

to valuation of investments.

We will adjust on a quarterly

basis the valuation of our portfolio to reflect the Board’s determination of the fair value of each investment in our portfolio

for which market quotes are not readily available.

Any changes in fair value are recorded in our statements of operations as net change

in unrealized appreciation or depreciation on investments.

We may experience fluctuations in our quarterly

operating results.

We could experience fluctuations

in our quarterly operating results due to a number of factors, including the interest rate payable on the loans and debt securities we

acquire, the default rate on such loans and securities, the level of our expenses, variations in and the timing of the recognition of

realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.

In light of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

The Board may change our investment objectives,

operating policies and strategies without prior notice or stockholder approval.

The Board has the authority,

except as otherwise provided in the 1940 Act, to modify or waive certain of our operating policies and strategies without prior notice

and without stockholder approval.

However, absent stockholder approval, we may not change the nature of our business so as to cease to

be, or withdraw our election as, a BDC.

We cannot predict the effect any changes to our current operating policies and strategies

would have on our business, operating results and the market price of our common stock.

Nevertheless, any such changes could adversely

affect our business and impair our ability to make distributions to our stockholders.

Our Advisor and Administrator each have

the ability to resign on 60 days’

notice, and we may not be able to find a suitable replacement within that time, resulting

in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

The Investment Advisor has

the right under the Advisory Agreement to resign as our Investment Advisor at any time upon not less than 60 days’

notice, whether we have found a replacement or not.

If the Investment Advisor were to resign, we may not be able to find a new

investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on

acceptable terms within 60 days, or at all.

If we are unable to do so quickly, our operations are likely to experience a disruption,

our financial condition, business and results of operations as well as our ability to pay distributions to our stockholders are

likely to be adversely affected.

Associated with Cybersecurity and Cyber Incidents

business relies on secure information technology systems.

These systems are subject to potential attacks, including through adverse

events that threaten the confidentiality, integrity or availability of our information resources (i.e., cyber incidents).

attacks could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing

confidential information, corrupting data or causing operational disruption and result in disrupted operations, misstated or unreliable

financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation

and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition

and results of operations.

As our reliance on technology has increased, so have the risks posed to our information systems, both

internal and those provided by the Investment Advisor and third-party service providers.

We, along with our Investment Advisor,

have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these

measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and

do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will

not be negatively impacted by such an incident.

In addition, the costs related to cyber or other security threats or disruptions

may not be fully insured or indemnified by other means.

Furthermore, cybersecurity has become a top priority for regulators around

the world, and some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving

certain types of personal data.

If we fail to comply with the relevant laws and regulations, we could suffer financial losses,

a disruption of our businesses, liability to investors, regulatory intervention or reputational damage.

Related to the 1940 Act

Ability to Enter Into Transactions with Affiliates

1940 Act prohibits or restricts our ability to engage in certain principal transactions and joint transactions with certain “First

affiliates and “Second Tier”

For example, we are prohibited from buying or selling any security

from or to any person who owns more than 25% of our voting securities or certain of that person’s affiliates (each is a

“First Tier”

affiliate), or entering into prohibited joint transactions with such persons, absent the prior approval

We consider the Investment Advisor and its affiliates, including Palmer Square, to be “First Tier”

for such purposes.

We are prohibited under the 1940 Act from participating in certain principal transactions and joint transactions

with a “Second Tier”

affiliate without the prior approval of our Independent Directors.

Any person that owns, directly

or indirectly, 5% or more of our outstanding voting securities will be a “Second Tier”

affiliate for purposes of the

1940 Act, and we are generally prohibited from buying or selling any security from or to such affiliate without the prior approval

of our Independent Directors.

may, however, invest alongside Palmer Square’s investment funds, accounts and investment vehicles in certain circumstances

where doing so is consistent with our investment strategy as well as applicable law and SEC staff interpretations.

we may invest alongside such investment funds, accounts and investment vehicles consistent with guidance promulgated by the SEC

staff to purchase interests in a single class of privately placed securities so long as certain conditions are met, including

that the Investment Advisor and Palmer Square, acting on our behalf and on behalf of such investment funds, accounts and investment

vehicles, negotiate no term other than price.

situations where co-investment with investment funds, accounts and investment vehicles managed by the Investment Advisor and its

affiliates, including Palmer Square, is not permitted or appropriate, such as when there is an opportunity to invest in different

securities of the same issuer or where the different investments could be expected to result in a conflict between our interests

and those of these other clients, the Investment Advisor and Palmer Square will need to decide which client will proceed with

the investment.

These restrictions will limit the scope of investment opportunities that would otherwise be available to us.

the Investment Advisor and Palmer Square have been granted exemptive relief from the SEC to permit greater flexibility to negotiate

the terms of co-investments if our Board determines that it would be advantageous for us to co-invest with investment funds, accounts

and investment vehicles managed by Palmer Square in a manner consistent with our investment objectives, positions, policies, strategies

and restrictions as well as regulatory requirements and other pertinent factors.

We believe that co-investment by us and investment

funds, accounts and investment vehicles managed by the Investment Advisor and its affiliates, including Palmer Square, may afford

us additional investment opportunities and an ability to achieve greater diversification.

Accordingly, our exemptive order permits

us to invest with these investment funds, accounts and investment vehicles managed in the same portfolio companies under circumstances

in which such investments would otherwise not be permitted by the 1940 Act.

Our exemptive relief permitting co-investments applies

only if our Independent Directors review and approve each co-investment.

The exemptive over imposes other constraints on co-investments

that limit the number of instances when the Company may rely on its protections.

Governing Our Operation as a BDC

Regulations governing our operation as a BDC affect our ability

to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative impact

on our growth.

Similarly, our Administrator has the right under the Administration Agreement to resign

at any time upon not less than 60 days’

written notice, whether we have found a replacement or not.

If the Investment Advisor

or Administrator were to resign, we may not be able to find a new investment adviser or administrator, as applicable, or hire internal

management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at

If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results

of operations as well as our ability to pay distributions to our stockholders are likely to be adversely affected.

We are highly dependent on information systems,

and systems failures or cyber-attacks could significantly disrupt our business, which may, in turn, negatively affect the value of shares

of our common stock and our ability to pay distributions.

Our business relies on secure

information technology systems.

These systems are exposed to operational and information security risks resulting from cyberattacks that

threaten the confidentiality, integrity or availability of our information resources (i.e., cyber incidents).

Cyber incidents can result

from unintentional events (such as an inadvertent release of confidential information) or deliberate attacks by insiders or third parties.

These attacks could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing and

unauthorized release of confidential information, corrupting data, denial of service attacks on our websites, “ransomware”

that renders systems inoperable until ransom is paid, or various other forms of cybersecurity breaches.

Such cyber incidents could result

in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection

and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business,

financial condition and results of operations.

As our reliance on technology has increased, so have the risks posed to our information

systems, both internal and those provided by the Investment Advisor and third-party service providers.

Cyber incidents affecting us, our

Investment Advisor, or third-party service providers may adversely impact us or the companies in which we invest, causing our investments

to lose value.

We, along with our Investment Advisor, have implemented processes, procedures and internal controls to help mitigate cybersecurity

risks and cyber intrusions.

However, these measures may not be effective, and there can be no assurance that a cyber incident will not

occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.

the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

cybersecurity has become a top priority for regulators around the world, and some jurisdictions have enacted laws requiring companies

to notify individuals of data security breaches involving certain types of personal data.

If we fail to comply with the relevant laws

and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or

reputational damage.

Failure to maintain our status as a business

development company would reduce our operating flexibility.

If we do not maintain our status

as a business development company, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us

to substantially more regulatory restrictions and correspondingly decrease our operating flexibility.

Our charter includes an exclusive forum

selection provision, which could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us or our

directors, officers, or other agents.

Our charter provides that,

unless we consent in writing to the selection of a different forum, and except for any claims made under the federal U.S.

securities laws,

the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the

District of Maryland, Baltimore Division, shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on

behalf of the Company, (b) any action asserting a claim of breach of any duty owed by a director or officer or other employee of the Company

to the Company or to the stockholders of the Company or asserting a claim of breach of any standard of conduct set forth in the Maryland

General Corporation Law (the “MGCL”), (c) any action asserting a claim against the Company or any director or officer or other

employee of the Company arising pursuant to any provision of the MGCL, the charter or our bylaws, or (d) any action asserting a claim

against the Company or any director or officer or other employee of the Company that is governed by the internal affairs doctrine.

is uncertainty as to whether a court would enforce such a provision, and investors cannot waive compliance with the federal securities

laws and the rules and regulations thereunder.

In addition, this provision may increase costs for shareholders in bringing a claim against

us or our directors, officers or other agents.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital

stock will be deemed, to the fullest extent permitted by law, to have notice of and consented to these exclusive forum provisions.

exclusive forum selection provision in our charter may limit our stockholders’

ability to obtain a favorable judicial forum for

disputes with us or our directors, officers or other agents, which may discourage lawsuits against us and such persons.

It is also possible

that, notwithstanding such exclusive forum selection provision, a court could rule that such provision is inapplicable or unenforceable.

If this occurred, we may incur additional costs associated with resolving such action in another forum, which could materially adversely

affect our business, financial condition and results of operations.

Risks Related to the 1940 Act

Our ability to enter into transactions with

our affiliates is restricted.

The 1940 Act prohibits or restricts

our ability to engage in certain principal transactions and joint transactions with certain “First Tier”

affiliates and “Second

For example, we are prohibited from buying or selling any security from or to any person who owns more than 25%

of our voting securities or certain of that person’s affiliates (each is a “First Tier”

affiliate), or entering into

prohibited joint transactions with such persons, absent the prior approval of the SEC.

We consider the Investment Advisor and its

affiliates, including Palmer Square, to be “First Tier”

affiliates for such purposes.

We are prohibited under the 1940 Act

from participating in certain principal transactions and joint transactions with a “Second Tier”

affiliate without the prior

approval of our Independent Directors.

Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will

be a “Second Tier”

affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security

from or to such affiliate without the prior approval of our Independent Directors.

We may, however, invest alongside

Palmer Square’s investment funds, accounts and investment vehicles in certain circumstances where doing so is consistent with our

investment strategy as well as applicable law and SEC staff interpretations.

For example, we may invest alongside such investment funds,

accounts and investment vehicles consistent with guidance promulgated by the SEC staff to purchase interests in a single class of privately

placed securities so long as certain conditions are met, including that the Investment Advisor and Palmer Square, acting on our behalf

and on behalf of such investment funds, accounts and investment vehicles, negotiate no term other than price.

In situations where co-investment

with investment funds, accounts and investment vehicles managed by the Investment Advisor and its affiliates, including Palmer Square,

is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer or where the

different investments could be expected to result in a conflict between our interests and those of these other clients, the Investment

Advisor and Palmer Square will need to decide which client will proceed with the investment.

These restrictions will limit the scope of

investment opportunities that would otherwise be available to us.

We, the Investment Advisor

and Palmer Square have been granted exemptive relief from the SEC to permit greater flexibility to negotiate the terms of co-investments

if our Board determines that it would be advantageous for us to co-invest with investment funds, accounts and investment vehicles managed

by Palmer Square in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory

requirements and other pertinent factors.

We believe that co-investment by us and investment funds, accounts and investment vehicles managed

by the Investment Advisor and its affiliates, including Palmer Square, may afford us additional investment opportunities and an ability

to achieve greater diversification.

Accordingly, our exemptive order permits us to invest with these investment funds, accounts and investment

vehicles managed in the same portfolio companies under circumstances in which such investments would otherwise not be permitted by the

Our exemptive relief permitting co-investments applies only if our Independent Directors review and approve each co-investment.

The exemptive order imposes other constraints on co-investments that limit the number of instances when we may rely on its protections.

Regulations governing our operation as a

BDC affect our ability to, and the way in which we, raise additional capital.

Regulations governing our operation

as a BDC affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have

a negative impact on our growth.

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions,

2 unchanged sentences

We are generally

able to issue senior securities such that our asset coverage, as defined in the 1940 Act, equals at least 150% of gross assets

less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities.

of our assets decline, we may be unable to satisfy this test.

If that happens, we may be required to sell a portion of our investments

at a time when such sales may be disadvantageous to use in order to repay a portion of our indebtedness.

Related to our Investments

Impact of Economic Recessions or Downturns

Many of the portfolio

companies in which we have invested or expect to make investments are likely to be susceptible to economic slowdowns or recessions

and may be unable to repay our loans during such periods.

Therefore, the number of our non-performing assets is likely to increase,

and the value of our portfolio is likely to decrease during such periods.

Adverse economic conditions may decrease the value of

collateral securing some of our loans and debt securities and the value of our equity investments.

Economic slowdowns or recessions

could lead to financial losses in our portfolio and a decrease in revenues, net income and assets.

Unfavorable economic conditions

also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend

credit to us.

These events could prevent us from increasing our investments and harm our operating results.

portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults

and, potentially, termination of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements

and jeopardize our portfolio company’s ability to meet its obligations under the loans and debt securities that we hold.

We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio

In addition, a significant portion of the loans in which we may invest may be Covenant-Lite Loans.

Generally, Covenant-Lite

Loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which

means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration

in the borrower’s financial condition.

Accordingly, to the extent we invest in Covenant-Lite Loans, we may have fewer rights

against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans

with financial maintenance covenants.

in Leveraged Portfolio Companies

companies may issue certain types of debt, such as senior loans, mezzanine or high yield in connection with leveraged acquisitions

or recapitalizations in which the portfolio company incurs a substantially higher amount of indebtedness than the level at which

it had previously operated.

Leverage may have important consequences to these portfolio companies and the Company as an investor.

For example, the substantial indebtedness of a portfolio company could (i) limit its ability to borrow money for its working capital,

capital expenditures, debt service requirements, strategic initiatives or other purposes;

(ii) require it to dedicate a substantial

portion of its cash flow from operations to the repayment of its indebtedness, thereby reducing funds available to it for other

(iii) make it more highly leveraged than some of its competitors, which may place it at a competitive disadvantage;

or (iv) subject it to restrictive financial and operating covenants, which may preclude it from favorable business activities

or the financing of future operations or other capital needs.

leveraged portfolio company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed

money were not used.

In addition, a portfolio company with a leveraged capital structure will be subject to increased exposure

to adverse economic factors, such as a significant rise in interest rates, a severe downturn in the economy or deterioration in

the condition of that portfolio company or its industry.

If a portfolio company is unable to generate sufficient cash flow to

meet all of its obligations, it may take alternative measures (e.g., reduce or delay capital expenditures, sell assets, seek additional

capital, or seek to restructure, extend or refinance indebtedness).

These actions may negatively affect our investment in such

a portfolio company.

in leveraged companies involves a number of significant risks.

Leveraged companies in which we invest may have limited financial

resources and may be unable to meet their obligations under their loans and debt securities that we hold.

Such developments may

be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees

that we may have obtained in connection with our investment.

Smaller leveraged companies also may have less predictable operating

results and may require substantial additional capital to support their operations, finance their expansion or maintain their

competitive position.

of Liquidity in Investments

lack of an established, liquid secondary market for some of our investments may have an adverse effect on the market value of

our investments and on our ability to dispose of them.

Additionally, our investments may be subject to certain transfer restrictions

that may also contribute to illiquidity.

Further, our assets that are typically traded in a liquid market may become illiquid

if the applicable trading market tightens.

Therefore, no assurance can be given that, if the Company is determined to dispose

of a particular investment held by the Company, it could dispose of such investment at the prevailing market price.

of Secured Loans

we may invest in secured loans, they may nonetheless be exposed to losses resulting from default and foreclosure.

Therefore, the

value of the underlying collateral, the creditworthiness of the borrower and the priority of the lien are each of great importance.

We cannot guarantee the adequacy of the protection of the Company’s interests, including the validity or enforceability

of the loan and the maintenance of the anticipated priority and perfection of the applicable security interests.

the Company cannot assure that claims may not be asserted that might interfere with enforcement of the Company’s rights.

In addition, in the event of any default under a secured loan held directly by the Company, the Company will bear a risk of loss

of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the

secured loan, which could have a material adverse effect on the Company’s cash flow from operations.

the event of a foreclosure, we may assume direct ownership of the underlying asset.

The liquidation proceeds upon sale of such

asset may not satisfy the entire outstanding balance of principal and interest on the loan, resulting in a loss to us.

or delays involved in the effectuation of a foreclosure of the loan or a liquidation of the underlying property will further reduce

the proceeds and thus increase the loss.

Debt and Other Junior Securities

mezzanine debt and other junior investments in which we may invest are typically contractually or structurally subordinate to

senior indebtedness of the applicable company, or effectively subordinated as a result of being unsecured debt and therefore subject

to the prior repayment of secured indebtedness to the extent of the value of the assets pledged as security.

In some cases, the

subordinated debt held by the Company may be subject to the prior repayment of different classes of senior debt that may be in

priority ahead of the debt held by the Company.

In the event of financial difficulty on the part of a portfolio company, such

class or classes of senior indebtedness ranking prior to the debt held by us, and interest thereon and related expenses, must

first be repaid in full before any recovery may be had on the Company’s mezzanine debt or other subordinated investments.

able to issue senior securities such that our asset coverage, as defined in the 1940 Act, equals at least 150% of gross assets less all

liabilities and indebtedness not represented by senior securities, after each issuance of senior securities.

If the value of our assets

decline, we may be unable to satisfy this test.

If that happens, we may be required to sell a portion of our investments at a time when

such sales may be disadvantageous to use in order to repay a portion of our indebtedness.

Risks Related to our Investments

Economic recessions or downturns could impair

our portfolio companies, and defaults by our portfolio companies will harm our operating results.

Many of the portfolio companies

in which we have invested or expect to make investments are likely to be susceptible to economic slowdowns or recessions and may be unable

to repay our loans during such periods.

Therefore, the number of our non-performing assets is likely to increase, and the value of our

portfolio is likely to decrease during such periods.

Adverse economic conditions may decrease the value of collateral securing some of

our loans and debt securities and the value of our equity investments.

Economic slowdowns or recessions could lead to financial losses

in our portfolio and a decrease in revenues, net income and assets.

Unfavorable economic conditions also could increase our funding costs,

limit our access to the capital markets or result in a decision by lenders not to extend credit to us.

These events could prevent us from

increasing our investments and harm our operating results.

A portfolio company’s

failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination

of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s

ability to meet its obligations under the loans and debt securities that we hold.

We may incur expenses to the extent necessary to seek

recovery upon default or to negotiate new terms with a defaulting portfolio company.

We may hold the debt securities of leveraged

portfolio companies.

Portfolio companies may issue

certain types of debt, such as senior loans, mezzanine or high yield in connection with leveraged acquisitions or recapitalizations in

which the portfolio company incurs a substantially higher amount of indebtedness than the level at which it had previously operated.

may have important consequences to these portfolio companies and us as an investor.

For example, the substantial indebtedness of a portfolio

company could (i) limit its ability to borrow money for its working capital, capital expenditures, debt service requirements, strategic

initiatives or other purposes;

(ii) require it to dedicate a substantial portion of its cash flow from operations to the repayment

of its indebtedness, thereby reducing funds available to it for other purposes;

(iii) make it more highly leveraged than some of

its competitors, which may place it at a competitive disadvantage;

or (iv) subject it to restrictive financial and operating covenants,

which may preclude it from favorable business activities or the financing of future operations or other capital needs.

A leveraged portfolio company’s

income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

In addition, a portfolio

company with a leveraged capital structure will be subject to increased exposure to adverse economic factors, such as a significant rise

in interest rates, a severe downturn in the economy or deterioration in the condition of that portfolio company or its industry.

portfolio company is unable to generate sufficient cash flow to meet all of its obligations, it may take alternative measures (e.g., reduce

or delay capital expenditures, sell assets, seek additional capital, or seek to restructure, extend or refinance indebtedness).

actions may negatively affect our investment in such a portfolio company.

Investment in leveraged companies

involves a number of significant risks.

Leveraged companies in which we invest may have limited financial resources and may be unable

to meet their obligations under their loans and debt securities that we hold.

Such developments may be accompanied by a deterioration

in the value of any collateral and a reduction in the likelihood of our realizing any guarantees that we may have obtained in connection

with our investment.

Smaller leveraged companies also may have less predictable operating results and may require substantial additional

capital to support their operations, finance their expansion or maintain their competitive position.

The lack of liquidity in our investments

may adversely affect our businesses.

We may acquire a significant

percentage of our portfolio company investments from privately held companies in directly negotiated transactions.

The lack of an established,

liquid secondary market for some of our investments may have an adverse effect on the market value of our investments and on our ability

to dispose of them.

Additionally, our investments may be subject to certain transfer restrictions that may also contribute to illiquidity.

Further, our assets that are typically traded in a liquid market may become illiquid due to events relating to the issuer, market events,

economic conditions or investor perceptions.

Therefore, no assurance can be given that, if we are determined to dispose of a particular

investment held by us, it could dispose of such investment at the prevailing market price.

Our investments in secured loans may nonetheless

expose us to losses from default and foreclosure.

While we may invest in secured

loans, they may nonetheless be exposed to losses resulting from default and foreclosure.

Therefore, the value of the underlying collateral,

the creditworthiness of the borrower and the priority of the lien are each of great importance.

We cannot guarantee the adequacy of the

protection of our interests, including the validity or enforceability of the loan and the maintenance of the anticipated priority and

perfection of the applicable security interests.

Furthermore, we cannot assure you that claims may not be asserted that might interfere

with enforcement of our rights.

In addition, in the event of any default under a secured loan held directly by us, we will bear a risk

of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the

secured loan, which could have a material adverse effect on our cash flow from operations.

In the event of a foreclosure,

we may assume direct ownership of the underlying asset.

The liquidation proceeds upon sale of such asset may not satisfy the entire outstanding

balance of principal and interest on the loan, resulting in a loss to us.

Any costs or delays involved in the effectuation of a foreclosure

of the loan or a liquidation of the underlying property will further reduce the proceeds and thus increase the loss.

Our investments in mezzanine debt and other

junior securities are subordinate to senior indebtedness of the applicable company and are subject to greater risk.

The mezzanine debt and other

junior investments in which we may invest are typically contractually or structurally subordinate to senior indebtedness of the applicable

company, or effectively subordinated as a result of being unsecured debt and therefore subject to the prior repayment of secured indebtedness

to the extent of the value of the assets pledged as security.

In some cases, the subordinated debt held by us may be subject to the prior

repayment of different classes of senior debt that may be in priority ahead of the debt held by us.

In the event of financial difficulty

on the part of a portfolio company, such class or classes of senior indebtedness ranking prior to the debt held by us, and interest thereon

and related expenses, must first be repaid in full before any recovery may be had on our mezzanine debt or other subordinated investments.

Subordinated investments are characterized by greater credit risks than those associated with the senior or senior secured obligations

of the same issuer.

In addition, under certain circumstances the holders of the senior indebtedness will have the right to block

the payment of interest and principal on the Company’s mezzanine debt or other junior investment and to prevent us from

pursuing its remedies on account of such non-payment against the issuer.

Further, in the event of any debt restructuring or workout

of the indebtedness of any issuer, the holders of the senior indebtedness will likely control the creditor side of such negotiations.

issuers of mezzanine debt or other junior securities are highly leveraged, and their relatively high debt-to-equity ratios create

increased risks that their operations might not generate sufficient cash flow to service their debt obligations.

many issuers of mezzanine debt or other junior securities may be in poor financial condition, experiencing poor operating results,

having substantial capital needs or negative net worth or be facing special competitive or product obsolescence problems, and

may include companies involved in bankruptcy or other reorganizations or liquidation proceedings.

Adverse changes in the financial

condition of an issuer, general economic conditions, or both, may impair the ability of such issuer to make payments on the subordinated

securities and result in defaults on such securities more quickly than in the case of the senior obligations of such issuer.

debt and other junior securities may not be publicly traded, and therefore it may be difficult to obtain information as to the

true condition of the issuers.

Finally, the market values of certain of mezzanine debt and other junior securities may reflect

individual corporate developments.

Covenant-Lite

significant number of high yield loans in the market, in particular the broadly syndicated loan market, may consist of Covenant-Lite

A significant portion of the loans in which the Company may invest or get exposure to through its investments in CDOs or

other types of structured securities may be deemed to be Covenant-Lite Loans and it is possible that such loans may comprise a

majority of the Company’s portfolio.

Such loans do not require the borrower to maintain debt service or other financial

ratios and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain

criteria are breached.

Ownership of Covenant-Lite Loans may expose the Company to different risks, including with respect to liquidity,

price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans

that contain financial maintenance covenants.

Early Redemption of Some Investments

terms of loans acquired or originated by the Company may be subject to early prepayment options or similar provisions which, in

each case, could result in the Company realizing repayments of such loans earlier than expected, sometimes with no or a nominal

prepayment premium.

This may happen when there is a decline in interest rates, when the portfolio company’s improved credit

or operating or financial performance allows the refinancing of certain classes of debt with lower cost debt or when the general

credit market conditions improve.

Additionally, prepayments could negatively impact our ability to pay, or the amount of, distributions

on our common stock, which could result in a decline in the market price of our shares.

The Company’s inability to reinvest

such proceeds may materially affect the overall performance.

may invest in high yield debt, a substantial portion of which may be rated below investment-grade by one or more nationally recognized

statistical rating organizations or is unrated but of comparable credit quality to obligations rated below investment-grade, and

In addition, under certain circumstances the holders of the senior indebtedness will have the right to block the payment

of interest and principal on our mezzanine debt or other junior investment and to prevent us from pursuing its remedies on account of

such non-payment against the issuer.

Further, in the event of any debt restructuring or workout of the indebtedness of any issuer, the

holders of the senior indebtedness will likely control the creditor side of such negotiations.

Many issuers of mezzanine debt or other junior

securities are highly leveraged, and their relatively high debt-to-equity ratios create increased risks that their operations might not

generate sufficient cash flow to service their debt obligations.

In addition, many issuers of mezzanine debt or other junior securities

may be in poor financial condition, experiencing poor operating results, having substantial capital needs or negative net worth or be

facing special competitive or product obsolescence problems, and may include companies involved in bankruptcy or other reorganizations

or liquidation proceedings.

Adverse changes in the financial condition of an issuer, general economic conditions, or both, may impair

the ability of such issuer to make payments on the subordinated securities and result in defaults on such securities more quickly than

in the case of the senior obligations of such issuer.

Mezzanine debt and other junior securities may not be publicly traded, and therefore

it may be difficult to obtain information as to the true condition of the issuers.

Finally, the market values of certain of mezzanine

debt and other junior securities may reflect individual corporate developments.

Our investments may include Covenant-Lite

Loans, which may give us fewer rights and subject us to greater risk of loss than loans with financial maintenance covenants.

A significant number of high

yield loans in the market, in particular the broadly syndicated loan market, may consist of Covenant-Lite Loans.

A significant portion

of the loans in which we may invest or get exposure to through its investments in CDOs or other types of structured securities may be

deemed to be Covenant-Lite Loans and it is possible that such loans may comprise a majority of our portfolio.

Such loans do not require

the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender to monitor the performance

of the borrower and declare a default if certain criteria are breached.

Ownership of Covenant-Lite Loans may expose us to different risks,

including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation,

than is the case with loans that contain financial maintenance covenants.

In addition, a significant portion of the loans in which we

may invest may be Covenant-Lite Loans.

Generally, Covenant-Lite Loans provide borrower companies more freedom to negatively impact lenders

because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action

of the borrower, rather than by a deterioration in the borrower’s financial condition.

Accordingly, to the extent we invest in Covenant-Lite

Loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments

in or exposure to loans with financial maintenance covenants.

Our prospective portfolio companies may

prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.

The terms of loans we acquire

or originate may be subject to early prepayment options or similar provisions which, in each case, could result in us realizing repayments

of such loans earlier than expected, sometimes with no or a nominal prepayment premium.

This may happen when there is a decline in interest

rates, when the portfolio company’s improved credit or operating or financial performance allows the refinancing of certain classes

of debt with lower cost debt or when the general credit market conditions improve.

Additionally, prepayments could negatively impact our

ability to pay, or the amount of, distributions on our common stock, which could result in a decline in the market price of our shares.

Our inability to reinvest such proceeds may materially affect the overall performance.

We may invest in high yield debt, which

has greater credit and liquidity risk than more highly rated debt obligations.

High yield debt is generally unsecured and may

be subordinate to other obligations of the obligor.

The lower rating of high yield debt reflect a greater possibility that adverse

changes in the financial condition of the obligor or in general economic conditions (including, for example, a substantial period

of rising interest rates or declining earnings) or both may impair the ability of the obligor to make payment of principal and

Many issuers of high yield debt are highly leveraged, and their relatively high debt-to-equity ratios create increased

risks that their operations might not generate sufficient cash flow to service their debt obligations.

In addition, many issuers

of high yield debt may be in poor financial condition, experiencing poor operating results, having substantial capital needs or

negative net worth or be facing special competitive or product obsolescence problems, and may include companies involved in bankruptcy

or other reorganizations or liquidation proceedings.

Certain of these securities may not be publicly traded, and therefore it

may be difficult to obtain information as to the true condition of the issuers.

Overall declines in the below investment-grade

bond and other markets may adversely affect such issuers by inhibiting their ability to refinance their debt at maturity.

yield debt is often less liquid than higher rated securities, and the market for high yield debt has recently experienced periods

We may invest in high yield

debt, a substantial portion of which may be rated below investment-grade by one or more nationally recognized statistical rating organizations

or is unrated but of comparable credit quality to obligations rated below investment-grade, and has greater credit and liquidity risk

than more highly rated debt obligations.

High yield debt is generally unsecured and may be subordinate to other obligations of the obligor.

The lower rating of high yield debt reflect a greater possibility that adverse changes in the financial condition of the obligor or in

general economic conditions (including, for example, a substantial period of rising interest rates or declining earnings) or both may

impair the ability of the obligor to make payment of principal and interest.

Many issuers of high yield debt are highly leveraged, and

their relatively high debt-to-equity ratios create increased risks that their operations might not generate sufficient cash flow to service

their debt obligations.

In addition, many issuers of high yield debt may be in poor financial condition, experiencing poor operating results,

having substantial capital needs or negative net worth or be facing special competitive or product obsolescence problems, and may include

companies involved in bankruptcy or other reorganizations or liquidation proceedings.

Certain of these securities may not be publicly

traded, and therefore it may be difficult to obtain information as to the true condition of the issuers.

Overall declines in the below

investment-grade bond and other markets may adversely affect such issuers by inhibiting their ability to refinance their debt at maturity.

High yield debt is often less liquid than higher rated securities, and the market for high yield debt has recently experienced periods

of volatility.

The market values of certain of this high yield debt may reflect individual corporate developments.

We may invest a portion

of our investments in loans originated by banks and other financial institutions.

The loans invested in by us may include term

loans and revolving loans, may pay interest at a fixed or floating rate and may be senior or subordinated.

Purchasers of bank loans

are predominantly commercial banks, investment funds and investment banks.

As secondary market trading volumes for bank loans increase,

new bank loans are frequently adopting standardized documentation to facilitate loan trading, which should improve market liquidity.

There can be no assurance, however, that future levels of supply and demand in bank loan trading will provide an adequate degree

of liquidity, that the current period of illiquidity will not persist or worsen and that the market will not experience periods

of significant illiquidity in the future.

In addition, the Company may make investments in stressed or distressed bank loans, which

are often less liquid than performing bank loans.

Compared to securities

and to certain other types of financial assets, purchases and sales of loans take relatively longer to settle.

This extended settlement

process can (i) increase the counterparty credit risk borne by the Company;

(ii) leave the Company unable to timely vote, or otherwise

act with respect to, loans it has agreed to purchase;

(iii) delay the Company from realizing the proceeds of a sale of a loan;

(iv) inhibit the Company’s ability to re-sell a loan that it has agreed to purchase if conditions change (leaving us more

exposed to price fluctuations);

(v) prevent the Company from timely collecting principal and interest payments;

and (vi) expose

the Company to adverse tax or regulatory consequences.

To the extent the extended loan settlement process gives rise to short-term

liquidity needs, we may hold cash, sell investments or temporarily borrow from banks or other lenders.

In certain circumstances,

loans may not be deemed to be securities, and in the event of fraud or misrepresentation by a borrower or an arranger, lenders

will not have the protection of the anti-fraud provisions of the federal securities laws, as would be the case for bonds or stocks.

Instead, in such cases, lenders generally rely on the contractual provisions in the loan agreement itself, and common-law fraud

protections under applicable state law.

We may acquire interests

in bank loans either directly (by way of sale or assignment) or indirectly (by way of participation).

The purchaser of an assignment

typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement

with respect to the debt obligation;

Our investments in bank loans and financial

institutions may be less liquid than our other investments and we may incur greater risk with respect to investments we acquire through

assignments or participations of interests.

We may invest a portion of

our investments in loans originated by banks and other financial institutions.

The loans invested in by us may include term loans and

revolving loans, may pay interest at a fixed or floating rate and may be senior or subordinated.

Purchasers of bank loans are predominantly

commercial banks, investment funds and investment banks.

As secondary market trading volumes for bank loans increase, new bank loans are

frequently adopting standardized documentation to facilitate loan trading, which should improve market liquidity.

There can be no assurance,

however, that future levels of supply and demand in bank loan trading will provide an adequate degree of liquidity, that the current period

of illiquidity will not persist or worsen and that the market will not experience periods of significant illiquidity in the future.

addition, we may make investments in stressed or distressed bank loans, which are often less liquid than performing bank loans.

Compared to securities and

to certain other types of financial assets, purchases and sales of loans take relatively longer to settle.

This extended settlement process

can (i) increase the counterparty credit risk borne by us;

(ii) leave us unable to timely vote, or otherwise act with respect

to, loans it has agreed to purchase;

(iii) delay us from realizing the proceeds of a sale of a loan;

(iv) inhibit our ability

to re-sell a loan that it has agreed to purchase if conditions change (leaving us more exposed to price fluctuations);

us from timely collecting principal and interest payments;

and (vi) expose us to adverse tax or regulatory consequences.

To the extent

the extended loan settlement process gives rise to short-term liquidity needs, we may hold cash, sell investments or temporarily borrow

from banks or other lenders.

In certain circumstances, loans

may not be deemed to be securities, and in the event of fraud or misrepresentation by a borrower or an arranger, lenders will not have

the protection of the anti-fraud provisions of the federal securities laws, as would be the case for bonds or stocks.

Instead, in such

cases, lenders generally rely on the contractual provisions in the loan agreement itself, and common-law fraud protections under applicable

We may acquire interests in

bank loans either directly (by way of sale or assignment) or indirectly (by way of participation).

The purchaser of an assignment typically

succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to

the debt obligation;

however, its rights can be more restricted than those of the assigning institution.

Participation

interests in a portion of a debt obligation typically result in a contractual relationship only with the institution participating

out the interest, and not with the borrower.

In purchasing participations, we generally will have no right to enforce compliance

by the borrower with the terms of the loan agreement, nor any rights of set-off against the borrower, and we may not directly benefit

from the collateral supporting the debt obligation in which it has purchased the participation.

As a result, we will assume the

credit risk of both the borrower and the institution selling the participation.

The bank loans acquired by us are likely to be

below investment-grade.

vehicles that we invest in are typically very highly levered, and therefore, the junior debt and equity tranches that we invest

in are subject to a higher degree of risk of total loss.

We will generally have the right to receive payments only from the CLO

vehicles, and will generally not have direct rights against the underlying borrowers or the entity that sponsored the CLO vehicle.

The failure by a CLO vehicle in which we invest to satisfy certain financial covenants, specifically those with respect to adequate

collateralization and/or interest coverage tests, could lead to a reduction in its payments to us.

In the event that a CLO vehicle

failed those tests, holders of debt senior to us may be entitled to additional payments that would, in turn, reduce the payments

we would otherwise be entitled to receive.

If any of these occur, it could materially and adversely affect our operating results

and cash flows.

addition to the general risks associated with investing in debt securities, CLO vehicles carry additional risks, including, but

not limited to:

(i) the possibility that distributions from collateral securities will not be adequate to make interest or other

(ii) the quality of the collateral may decline in value or default;

(iii) the fact that our investments in CLO tranches

will likely be subordinate to other senior classes of note tranches thereof;

and (iv) the complex structure of the security may

not be fully understood at the time of investment and may produce disputes with the CLO vehicle or unexpected investment results.

Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the

price we paid for those investments.

in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk

and market risk.

Changes in interest rates and credit quality may cause significant price fluctuations.

Additionally, changes

in the underlying leveraged corporate loans held by a CLO vehicle may cause payments on the instruments we hold to be reduced,

either temporarily or permanently.

Structured investments, particularly the subordinated interests in which we intend to invest,

may be less liquid than many other types of securities and may be more volatile than the leveraged corporate loans underlying

the CLO vehicles we intend to target.

Fluctuations in interest rates may also cause payments on the tranches of CLO vehicles that

we hold to be reduced, either temporarily or permanently.

accounting and tax implications of such investments are complicated.

In particular, reported earnings from the equity tranche

investments of these CLO vehicles are recorded under generally accepted accounting principles based upon an effective yield calculation.

Current taxable earnings on these investments, however, will generally not be determinable until after the end of the fiscal year

of each individual CLO vehicle that ends within the Company’s fiscal year, even though the investments are generating cash

In general, the tax treatment of these investments may result in higher distributable earnings in the early years and a

capital loss at maturity, while for reporting purposes the totality of cash flows are reflected in a constant yield to maturity.

interests we acquire in CLO vehicles will likely be thinly traded or have only a limited trading market and may be subject to

restrictions on resale.

Securities issued by CLO vehicles are generally not listed on any U.S.

national securities exchange and

no active trading market may exist for the securities of CLO vehicles in which we may invest.

Although a secondary market may

exist for our investments in CLO vehicles, the market for our investments in CLO vehicles may be subject to irregular trading

activity, wide bid/ask spreads and extended trade settlement periods.

As a result, these types of investments may be more difficult

In addition, our investments in CLO warehouse facilities are short term investments and therefore may be subject to

a greater risk relating to market conditions and economic recession or downturns.

Liability Considerations and Equitable Subordination

recent years, a number of judicial decisions in the United States have upheld the right of borrowers to sue lending institutions

on the basis of various evolving legal theories (collectively termed “lender liability”).

Generally, lender liability

is founded upon the premise that an institutional lender has violated a duty (whether implied or contractual) of good faith and

fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in creation of a fiduciary duty

owed to the borrower or its other creditors or stockholders.

Because of the nature of certain of the Company’s investments,

the Company could be subject to allegations of lender liability.

addition, under common law principles that in some cases form the basis for lender liability claims, if a lending institution

(i) intentionally takes an action that results in the undercapitalization of a borrower to the detriment of other creditors of

such borrower, (ii) engages in other inequitable conduct to the detriment of such other creditors, (iii) engages in fraud with

respect to, or makes misrepresentations to, such other creditors or (iv) uses its influence as a stockholder to dominate or control

a borrower to the detriment of the other creditors of such borrower, a court may elect to subordinate the claim of the offending

lending institution to the claims of the disadvantaged creditor or creditors, a remedy called “equitable subordination.”

Because of the nature of certain of the Company’s investments, the Company could be subject to claims from creditors of

an obligor that the Company’s investments issued by such obligor should be equitably subordinated.

A significant number

of the Company’s investments will involve investments in which the Company will not be the lead creditor.

It is, accordingly,

possible that lender liability or equitable subordination claims affecting the Company’s investments could arise without

the direct involvement of the Company.

the Company purchases debt securities of an affiliate of a portfolio company in the secondary market at a discount, (i) a court

might require the Company to disgorge profit it realizes if the opportunity to purchase such securities at a discount should have

been made available to the issuer of such securities or (ii) the Company might be prevented from enforcing such securities at

their full face value if the issuer of such securities becomes bankrupt.

Failure to Make Follow-On Investments in Portfolio Companies

an initial investment in a portfolio company, we may decide to provide additional funds to such portfolio company, in order to:

or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;

warrants, options or convertible securities that were acquired in the original or subsequent financing;

to preserve or enhance the value of our investment.

is no assurance that we will make follow-on investments or that we will have sufficient funds to make all or any of such investments.

Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because

we may not want to increase our concentration of risk, because we prefer other opportunities or because we are inhibited by compliance

with BDC requirements of the 1940 Act or the desire to maintain our qualification as a RIC.

Any decision by us not to make follow-on

investments or our inability to make such investments may have a substantial adverse effect on a portfolio company in need of

such an investment.

Additionally, a failure to make such investments may result in a lost opportunity for us to increase our participation

in a successful portfolio company or the dilution of our ownership in a portfolio company if a third party invests in the portfolio

Impact of Not Holding Controlling Equity Interests in Portfolio Companies

do not generally intend to hold controlling equity positions in our portfolio companies.

As a result, we will be subject to the

risk that a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders

of a portfolio company may take risks or otherwise act in ways that are adverse to our interests.

Due to the potential lack of

liquidity of the debt and equity investments that we expect to hold in our portfolio companies, we may not be able to dispose

of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the

value of our investments.

addition, we may not be in a position to control any portfolio company by investing in its debt securities.

As a result, we are

subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management

of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not

serve our interests as debt investors.

Incurrence of Debt by Portfolio Companies That Ranks Equally With, or Senior to, Our Investments

characterization of certain of our investments as senior debt or senior secured debt does not mean that such debt will necessarily

be repaid in priority to all other obligations of the businesses in which we invest.

Furthermore, debt and other liabilities incurred

by nonguarantor subsidiaries of the borrowers of senior secured loans made by us may be structurally senior to the debt held by

In the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, the debt and other

liabilities of such subsidiaries could be repaid in full before any distribution can be made to an obligor of the senior secured

loans held by us.

Finally, portfolio companies will typically incur trade credit and other liabilities or indebtedness, which

by their terms may provide that their holders are entitled to receive principal payments on or before the dates payments are due

in respect of the senior secured loans held by us.

we hold a first lien to secure senior indebtedness, the portfolio companies may be permitted to issue other senior loans with

liens that rank junior to the first liens granted to us.

The intercreditor rights of the holders of such other junior lien debt

may, in any liquidation, reorganization, insolvency, dissolution or bankruptcy of such a portfolio company, affect the recovery

that we would have been able to achieve in the absence of such other debt.

Additionally,

certain loans that we may make to portfolio companies may be secured on a second priority basis by the same collateral securing

senior secured debt of such companies.

The first priority liens on the collateral will secure the portfolio company’s obligations

under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio

company under the agreements governing the loans.

The holders of obligations secured by first priority liens on the collateral

will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay

their obligations in full before us.

In addition, the value of the collateral in the event of liquidation will depend on market

and economic conditions, the availability of buyers and other factors.

There can be no assurance that the proceeds, if any, from

sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after

payment in full of all obligations secured by the first priority liens on the collateral.

If such proceeds were not sufficient

to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid

from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining

assets, if any.

where the senior loans held by us are secured by a perfected lien over a substantial portion of the assets of a portfolio company

and its subsidiaries, the portfolio company and its subsidiaries will often be able to incur a substantial amount of additional

indebtedness, which may have an exclusive lien over particular assets.

For example, debt and other liabilities incurred by non-guarantor

subsidiaries of portfolio companies will be structurally senior to the debt held by us.

Accordingly, any such debt and other liabilities

of such subsidiaries would, in the event of liquidation, dissolution, insolvency, reorganization or bankruptcy of such subsidiary,

be repaid in full before any distributions to an obligor of the loans held by us.

Furthermore, these other assets over which other

lenders have a lien may be substantially more liquid or valuable than the assets over which we have a lien.

rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding

may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of such

Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first priority

liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of

the holders of the obligations secured by the first priority liens:

ability to cause the commencement of enforcement proceedings against the collateral;

ability to control the conduct of such proceedings;

approval of amendments to collateral documents;

of liens on the collateral;

of past defaults under collateral documents.

may not have the ability to control or direct such actions, even if our rights are adversely affected.

Our portfolio may

include debt securities of non-U.S.

companies, including emerging market issuers, to the limited extent such transactions and

investments would not cause us to violate the 1940 Act.

We expect to invest in the securities of non-U.S.

issuers, including emerging

market issuers.

Participation interests in a

portion of a debt obligation typically result in a contractual relationship only with the institution participating out the interest,

and not with the borrower.

In purchasing participations, we generally will have no right to enforce compliance by the borrower with the

terms of the loan agreement, nor any rights of set-off against the borrower, and we may not directly benefit from the collateral supporting

the debt obligation in which it has purchased the participation.

As a result, we will assume the credit risk of both the borrower and

the institution selling the participation.

The bank loans acquired by us are likely to be below investment-grade.

We may invest in structured products and

such investments may involve significant risks .

We may also invest, to a limited

extent, in structured products, which may include CDOs, CLOs (including the equity tranches thereof), structured notes, and credit-linked

These investment entities may be structured as trusts or other types of pooled investment vehicles.

They may also involve the deposit

with or purchase by an entity of the underlying investments and the issuance by that entity of one or more classes of securities backed

by, or representing interests in, the underlying investments or referencing an indicator related to such investments.

CDOs and CLOs are

types of asset-backed securities issued by special purpose vehicles created to reapportion the risk and return characteristics of a pool

The underlying pool for a CLO, for example, may include domestic and foreign senior loans, senior unsecured loans, and subordinate

corporate loans.

Generally, these are not qualified as eligible portfolio companies.

Investments in the equity tranche or any similarly

situated tranche of a structured product involve a greater degree of risk than investments in other tranches, and such investments will

be the first to bear losses incurred by a structured product.

Our CLO investments are typically highly

levered and subject to a higher degree of risk of total loss.

CLO vehicles that we invest

in are typically very highly levered, and therefore, the junior debt and equity tranches that we invest in are subject to a higher degree

of risk of total loss.

We will generally have the right to receive payments only from the CLO vehicles, and will generally not have direct

rights against the underlying borrowers or the entity that sponsored the CLO vehicle.

The failure by a CLO vehicle in which we invest

to satisfy certain financial covenants, specifically those with respect to adequate collateralization and/or interest coverage tests,

could lead to a reduction in its payments to us.

In the event that a CLO vehicle failed those tests, holders of debt senior to us may

be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive.

If any of these

occur, it could materially and adversely affect our operating results and cash flows.

In addition to the general

risks associated with investing in debt securities, CLO vehicles carry additional risks, including, but not limited to:

(i) the possibility

that distributions from collateral securities will not be adequate to make interest or other payments;

(ii) the quality of the collateral

may decline in value or default;

(iii) the fact that our investments in CLO tranches will likely be subordinate to other senior classes

of note tranches thereof;

and (iv) the complex structure of the security may not be fully understood at the time of investment and

may produce disputes with the CLO vehicle or unexpected investment results.

Our net asset value may also decline over time if our principal

recovery with respect to CLO equity investments is less than the price we paid for those investments.

Investments in structured vehicles,

including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk.

interest rates and credit quality may cause significant price fluctuations.

Additionally, changes in the underlying leveraged corporate

loans held by a CLO vehicle may cause payments on the instruments we hold to be reduced, either temporarily or permanently.

investments, particularly the subordinated interests in which we intend to invest, may be less liquid than many other types of securities

and may be more volatile than the leveraged corporate loans underlying the CLO vehicles we intend to target.

Fluctuations in interest

rates may also cause payments on the tranches of CLO vehicles that we hold to be reduced, either temporarily or permanently.

The accounting and tax implications

of such investments are complicated.

In particular, reported earnings from the equity tranche investments of these CLO vehicles are recorded

under generally accepted accounting principles based upon an effective yield calculation.

Current taxable earnings on these investments,

however, will generally not be determinable until after the end of the fiscal year of each individual CLO vehicle that ends within our

fiscal year, even though the investments are generating cash flow.

In general, the tax treatment of these investments may result in higher

distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows

are reflected in a constant yield to maturity.

Any interests we acquire in

CLO vehicles will likely be thinly traded or have only a limited trading market and may be subject to restrictions on resale.

issued by CLO vehicles are generally not listed on any U.S.

national securities exchange and no active trading market may exist for

the securities of CLO vehicles in which we may invest.

Although a secondary market may exist for our investments in CLO vehicles, the

market for our investments in CLO vehicles may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement

As a result, these types of investments may be more difficult to value.

We may be subject to lender liability and

equitable subordination.

In recent years, a number

of judicial decisions in the United States have upheld the right of borrowers to sue lending institutions on the basis of various

evolving legal theories (collectively termed “lender liability”).

Generally, lender liability is founded upon the premise

that an institutional lender has violated a duty (whether implied or contractual) of good faith and fair dealing owed to the borrower

or has assumed a degree of control over the borrower resulting in creation of a fiduciary duty owed to the borrower or its other creditors

or stockholders.

Because of the nature of certain of our investments, we could be subject to allegations of lender liability.

In addition, under common law

principles that in some cases form the basis for lender liability claims, if a lending institution (i) intentionally takes an action

that results in the undercapitalization of a borrower to the detriment of other creditors of such borrower, (ii) engages in other

inequitable conduct to the detriment of such other creditors, (iii) engages in fraud with respect to, or makes misrepresentations

to, such other creditors or (iv) uses its influence as a stockholder to dominate or control a borrower to the detriment of the other

creditors of such borrower, a court may elect to subordinate the claim of the offending lending institution to the claims of the disadvantaged

creditor or creditors, a remedy called “equitable subordination.”

Because of the nature of certain of our investments, we

could be subject to claims from creditors of an obligor that our investments issued by such obligor should be equitably subordinated.

A significant number of our investments will involve investments in which we will not be the lead creditor.

It is, accordingly, possible

that lender liability or equitable subordination claims affecting our investments could arise without our direct involvement.

If we purchase debt securities

of an affiliate of a portfolio company in the secondary market at a discount, (i) a court might require us to disgorge profit it

realizes if the opportunity to purchase such securities at a discount should have been made available to the issuer of such securities

or (ii) we might be prevented from enforcing such securities at their full face value if the issuer of such securities becomes bankrupt.

Our failure to make follow-on investments

in our portfolio companies could impair the value of our portfolio.

Following an initial investment

in a portfolio company, we may decide to provide additional funds to such portfolio company, in order to:

increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;

exercise warrants, options or convertible securities that were acquired in the original or subsequent financing;

attempt to preserve or enhance the value of our investment.

There is no assurance that

we will make follow-on investments or that we will have sufficient funds to make all or any of such investments.

Even if we have sufficient

capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our

concentration of risk, because we prefer other opportunities or because we are inhibited by compliance with BDC requirements of the 1940

Act or the desire to maintain our qualification as a RIC.

Any decision by us not to make follow-on investments or our inability to

make such investments may have a substantial adverse effect on a portfolio company in need of such an investment.

Additionally, a failure

to make such investments may result in a lost opportunity for us to increase our participation in a successful portfolio company or the

dilution of our ownership in a portfolio company if a third party invests in the portfolio company.

Our portfolio may include equity investments,

which are subordinated to debt investments and are subject to additional risks.

We expect to make select equity

investments in the common or preferred stock of a company, all of which are subordinated to debt investments.

In addition, when we invest

in first lien secured debt, second lien secured debt or subordinated debt, we may acquire warrants to purchase equity investments from

time to time.

Our goal is ultimately to dispose of these equity investments and realize gains upon our disposition of such interests.

However, the equity investments we receive may not appreciate in value and, in fact, may decline in value.

Accordingly, we may not be

able to realize gains from our equity investments, and any gains that we do realize on the disposition of any equity investments may not

be sufficient to offset any other losses we experience.

In addition, many of the equity securities in which we invest may not pay dividends

on a regular basis, if at all.

Because we generally do not hold controlling

equity interests in our portfolio companies, we generally will not be able to exercise control over our portfolio companies or to prevent

decisions by management of our portfolio companies that could decrease the value of our investments.

We do not generally intend

to hold controlling equity positions in our portfolio companies.

As a result, we will be subject to the risk that a portfolio company

may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company may take risks

or otherwise act in ways that are adverse to our interests.

Due to the potential lack of liquidity of the debt and equity investments

that we expect to hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the

actions of a portfolio company and may therefore suffer a decrease in the value of our investments.

In addition, we may not be

in a position to control any portfolio company by investing in its debt securities.

As a result, we are subject to the risk that a portfolio

company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of

the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors.

Our portfolio companies could incur debt

that ranks equally with, or senior to, our investments in such companies and such portfolio companies could fail to generate sufficient

cash flow to service their debt obligations to us.

The characterization of certain

of our investments as senior debt or senior secured debt does not mean that such debt will necessarily be repaid in priority to all other

obligations of the businesses in which we invest.

Furthermore, debt and other liabilities incurred by non-guarantor subsidiaries of the

borrowers of senior secured loans made by us may be structurally senior to the debt held by us.

In the event of insolvency, liquidation,

dissolution, reorganization or bankruptcy of a portfolio company, the debt and other liabilities of such subsidiaries could be repaid

in full before any distribution can be made to an obligor of the senior secured loans held by us.

Finally, portfolio companies will typically

incur trade credit and other liabilities or indebtedness, which by their terms may provide that their holders are entitled to receive

principal payments on or before the dates payments are due in respect of the senior secured loans held by us.

Where we hold a first lien

to secure senior indebtedness, the portfolio companies may be permitted to issue other senior loans with liens that rank junior to the

first liens granted to us.

The intercreditor rights of the holders of such other junior lien debt may, in any liquidation, reorganization,

insolvency, dissolution or bankruptcy of such a portfolio company, affect the recovery that we would have been able to achieve in the

absence of such other debt.

Additionally, certain loans

that we may make to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured debt

of such companies.

The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding

senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements

governing the loans.

The holders of obligations secured by first priority liens on the collateral will generally control the liquidation

of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before us.

the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and

other factors.

There can be no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy

the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens

on the collateral.

If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second

priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against

the portfolio company’s remaining assets, if any.

Even where the senior loans

held by us are secured by a perfected lien over a substantial portion of the assets of a portfolio company and its subsidiaries, the portfolio

company and its subsidiaries will often be able to incur a substantial amount of additional indebtedness, which may have an exclusive

lien over particular assets.

For example, debt and other liabilities incurred by non-guarantor subsidiaries of portfolio companies will

be structurally senior to the debt held by us.

Accordingly, any such debt and other liabilities of such subsidiaries would, in the event

of liquidation, dissolution, insolvency, reorganization or bankruptcy of such subsidiary, be repaid in full before any distributions to

an obligor of the loans held by us.

Furthermore, these other assets over which other lenders have a lien may be substantially more liquid

or valuable than the assets over which we have a lien.

The rights we may have with

respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant

to the terms of one or more intercreditor agreements that we enter into with the holders of such senior debt.

Under a typical intercreditor

agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions

that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority

the ability to cause the commencement of enforcement proceedings against the collateral;

the ability to control the conduct of such proceedings;

the approval of amendments to collateral documents;

releases of liens on the collateral;

waivers of past defaults under collateral documents.

We may not have the ability

to control or direct such actions, even if our rights are adversely affected.

We may also make unsecured

debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies.

Liens on any such portfolio company’s collateral, if any, will secure the portfolio company’s obligations under its outstanding

secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements.

The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from,

any realization of such collateral to repay their obligations in full before us.

In addition, the value of such collateral in the event

of liquidation will depend on market and economic conditions, the availability of buyers and other factors.

There can be no assurance

that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured debt obligations after payment in

full of all secured debt obligations.

If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our

unsecured claims would rank equally with the unpaid portion of such secured creditors’

claims against the portfolio company’s

remaining assets, if any.

We may be subject to risk if we invest in

Our portfolio may include debt

securities of non-U.S.

companies, including emerging market issuers, to the limited extent such transactions and investments would

not cause us to violate the 1940 Act.

Investing in loans and securities of non-U.S.

issuers involves many risks including economic, social, political,

financial, tax and security conditions in the non-U.S.

market, potential inflationary economic environments, less liquid markets

and regulation by foreign governments.

issuers involves many risks including economic,

social, political, financial, tax and security conditions in the non-U.S.

market, potential inflationary economic environments, less

liquid markets and regulation by foreign governments.

There may be less information publicly available about a non-U.S.

issuer than about a U.S.

issuer, and non-U.S.

issuers may not be subject to accounting, auditing and financial reporting standards and practices comparable

to those in the United States.

In addition, with respect to certain countries, there is a possibility of expropriation, imposition

withholding or other taxes on distributions, interest, capital gains or other income, limitations on the removal of

funds or other assets of the Company, political or social instability or diplomatic developments that could affect investments

in those countries.

An issuer of securities may be domiciled in a country other than the country in whose currency the instrument

is denominated.

The values and relative yields of investments in the securities markets of different countries, and their associated

risks, are expected to change independently of each other.

law and process in non-U.S.

jurisdictions may differ substantially from that in the United States, which may result in greater

uncertainty as to the rights of creditors, the enforceability of such rights, reorganization timing and the classification, seniority

and treatment of claims.

In certain developing countries, although bankruptcy laws have been enacted, the process for reorganization

remains highly uncertain, while other developing countries may have no bankruptcy laws enacted, adding further uncertainty to

the process for reorganization.

Risk Relating to Hedging Transactions

are authorized to use various investment strategies to hedge interest rate or currency exchange risks.

These strategies are generally

accepted as portfolio management techniques and are regularly used by many investment funds and other institutional investors.

Techniques and instruments may change over time as new instruments and strategies are developed or regulatory changes occur.

may use any or all such types of interest rate hedging transactions and currency hedging transactions at any time and no particular

strategy will dictate the use of one transaction rather than another.

The choice of any particular interest rate hedging transactions

and currency hedging transactions will be a function of numerous variables, including market conditions.

Investments or liabilities

of the Company may be denominated in currencies other than the U.S.

dollar, and hence the value of such investments, or the amount

of such liabilities, will depend in part on the relative strength of the U.S.

We may be affected favorably or unfavorably

by exchange control regulations or changes in the exchange rate between foreign currencies and the U.S.

Changes in foreign

currency exchange rates may also affect the value of dividends and interest earned as well as the level of gains and losses realized

on the sale of securities.

issuers may not be subject to accounting, auditing and financial reporting standards and practices

comparable to those in the United States.

In addition, with respect to certain countries, there is a possibility of expropriation,

imposition of non-U.S.

withholding or other taxes on distributions, interest, capital gains or other income, limitations on the removal

of funds or other of our assets, political or social instability or diplomatic developments that could affect investments in those countries.

An issuer of securities may be domiciled in a country other than the country in whose currency the instrument is denominated.

and relative yields of investments in the securities markets of different countries, and their associated risks, are expected to change

independently of each other.

Bankruptcy law and process

jurisdictions may differ substantially from that in the United States, which may result in greater uncertainty as

to the rights of creditors, the enforceability of such rights, reorganization timing and the classification, seniority and treatment of

In certain developing countries, although bankruptcy laws have been enacted, the process for reorganization remains highly uncertain,

while other developing countries may have no bankruptcy laws enacted, adding further uncertainty to the process for reorganization.

We may be subject to risks if we engage

in hedging transactions.

We are authorized to use various

investment strategies to hedge interest rate or currency exchange risks.

These strategies are generally accepted as portfolio management

techniques and are regularly used by many investment funds and other institutional investors.

Techniques and instruments may change over

time as new instruments and strategies are developed or regulatory changes occur.

We may use any or all such types of interest rate hedging

transactions and currency hedging transactions at any time and no particular strategy will dictate the use of one transaction rather than

The choice of any particular interest rate hedging transactions and currency hedging transactions will be a function of numerous

variables, including market conditions.

Investments or liabilities of ours may be denominated in currencies other than the U.S.

and hence the value of such investments, or the amount of such liabilities, will depend in part on the relative strength of the U.S.

We may be affected favorably or unfavorably by exchange control regulations or changes in the exchange rate between foreign currencies

Changes in foreign currency exchange rates may also affect the value of dividends and interest earned as well

as the level of gains and losses realized on the sale of securities.

The rates of exchange between the U.S.

dollar and other currencies are affected by many factors, including

forces of supply and demand in the foreign exchange markets.

These rates are also affected by the international balance of payments

and other economic and financial conditions, government intervention, speculation and other factors.

We are not obligated to engage

in any currency hedging operations, and there can be no assurance as to the success of any hedging operations that we may implement.

we intend to engage in any interest rate hedging transactions and currency hedging transactions primarily for hedging purposes

and not for income or enhancing total returns, use of interest rate hedging transactions and currency hedging transactions involves

certain inherent risks.

These risks include (i) the possibility that the market will move in a manner or direction that would

have resulted in gain for us had an interest rate hedging transaction or currency hedging transaction not been utilized, in which

case it would have been better had we not engaged in the interest rate hedging transaction or currency hedging transaction, (ii)

the risk of imperfect correlation between the risk sought to be hedged and the interest rate hedging transaction or currency hedging

transaction utilized, (iii) potential illiquidity for the hedging instrument utilized, which may make it difficult for us to close-out

or unwind an interest rate hedging transaction or currency hedging transaction and (iv) credit risk with respect to the counterparty

to the interest rate hedging transaction or currency hedging transaction.

In addition, it might not be possible for us to hedge

fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S.

currencies because

the value of those loans and securities would likely fluctuate as a result of factors not related to currency fluctuations.

may also enter into certain hedging and short sale transactions for the purpose of protecting the market value of an investment

of the Company for a period of time without having to currently dispose of such investment.

Such defensive hedge transactions

may be entered into when the Company is legally restricted from selling an investment or when the Company otherwise determines

that it is advisable to decrease its exposure to the risk of a decline in the market value of an investment.

Such defensive hedging

transactions may expose the Company to the counterparty’s credit risk.

There also can be no assurance that the Company will

accurately assess the risk of a market value decline with respect to an investment or enter into an appropriate defensive hedge

transaction to protect against such risk.

Furthermore, the Company is in no event obligated to enter into any defensive hedge

The Company may from time to time employ various investment programs, including the use of derivatives, short sales,

swap transactions, currency hedging transactions, securities lending agreements and repurchase agreements.

There can be no assurance

that any such investment program will be undertaken successfully.

OID and PIK Interest Income

investments may include OID and PIK instruments.

To the extent OID and PIK interest income constitute a portion of our income,

we will be exposed to risks associated with such income being required to be included in an accounting income and taxable income

prior to receipt of cash, including the following:

instruments and PIK securities may have unreliable valuations because the accretion of OID as interest income and the continuing

accruals of PIK securities require judgments about their collectability and the collectability of deferred payments and the

value of any associated collateral.

instruments may create heightened credit risks because the inducement to the borrower to accept higher interest rates in exchange

for the deferral of cash payments typically represents, to some extent, speculation on the part of the borrower.

accounting purposes, cash distributions to stockholders that include a component of accreted OID income do not come from paid-in

capital, although they may be paid from the offering proceeds.

Thus, although a distribution of accreted OID income may come

from the cash invested by the stockholders, the 1940 Act does not require that stockholders be given notice of this fact.

higher interest rates on PIK securities reflects the payment deferral and increased credit risk associated with such instruments

and PIK securities generally represent a significantly higher credit risk than coupon loans.

presence of accreted OID income and PIK interest income create the risk of non-refundable cash payments to the Investment

Advisor in the form of incentive fees on income that will be payable subsequent to a Listing based on non-cash accreted OID

income and PIK interest income accruals that may never be realized.

if accounting conditions are met, borrowers on such securities could still default when the Company’s actual collection

is expected to occur at the maturity of the obligation.

interest has the effect of generating investment income and increasing the incentive fees that will be payable subsequent

to a Listing at a compounding rate.

In addition, the deferral of PIK interest also reduces the loan-to-value ratio at a compounding

prices of OID instruments are more volatile because they are affected to a greater extent by interest rate changes than instruments

that pay interest periodically in cash.

required recognition of OID, including PIK, interest for U.S.

federal income tax purposes may have a negative impact on liquidity,

because it represents a non-cash component of the Company’s taxable income that must, nevertheless, be distributed in

cash to investors to avoid us being subject to corporate level taxation.

Income Tax and Other Tax Risks

of Corporate-Level Income Tax

order to qualify and be subject to tax as a RIC under the Code, we must be a BDC at all times during each taxable year and meet

certain source-of-income, asset diversification and distribution requirements.

If we do not maintain our status as a BDC, we may

fail to qualify as a RIC and, thus, may be subject to corporate-level income tax.

The distribution requirement for a RIC is satisfied

if we distribute dividends in respect of each taxable year of an amount generally at least equal to 90% of our investment company

taxable income, determined without regard to any deduction for dividends paid, to our stockholders.

We will be subject, to the

extent we use debt financing, to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan

and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to enable us to

be subject to tax as a RIC.

If we are unable to obtain cash from other sources, we may fail to be subject to tax as a RIC and,

thus, may be subject to corporate-level income tax.

To qualify to be subject to tax as a RIC, we must also meet certain asset

diversification requirements at the end of each quarter of our taxable year.

Failure to meet these tests may result in our having

to dispose of certain investments quickly in order to satisfy these requirements.

Because most of our investments will be in private

or thinly traded public companies, any such dispositions could be made at disadvantageous prices and may result in substantial

If we fail to qualify to be subject to tax as a RIC for any reason and become subject to corporate income tax, the resulting

corporate taxes could substantially reduce our net assets, the amount of income available for distributions to our stockholders

and the amount of funds available for new investments.

Such a failure would have a material adverse effect on us and our stockholders.

Distributions and the Recognition of Income

federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as the

accretion of OID.

This may arise if we receive warrants in connection with the making of a loan and in other circumstances, or

through contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan

Such OID, which could be significant relative to our overall investment activities, or increases in loan balances as a result

of contracted PIK arrangements, will be included in income before we receive any corresponding cash payments.

We also may be required

to include in income certain other amounts that we will not receive in cash.

in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty meeting

the requirement in a given taxable year to distribute at least 90% of our investment company taxable income, determined without

regard to any deduction for dividends paid, as dividends to our stockholders in order to be subject to tax as a RIC.

case, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity

capital or reduce new investment originations to meet these distribution requirements.

If we are not able to obtain such cash

from other sources, we may fail to be subject to tax as a RIC and thus be subject to corporate-level income tax.

Adverse Tax Consequences as a Result of Not Being Treated as a “Publicly Offered Regulated Investment Company”

cannot assure you that we will be treated as a publicly offered regulated investment company for all years.

Unless and until we

are treated as a “publicly offered regulated investment company”

(within the meaning of Section 67 of the Code) by

reason of either (i) shares of our common stock and our preferred stock (if any) collectively are held by at least 500 persons

at all times during a taxable year, (ii) shares of our common stock are treated as regularly traded on an established securities

market or (iii) shares of our common stock are continuously offered pursuant to a public offering (within the meaning of Section

4 of the Securities Act).

dollar and other currencies

are affected by many factors, including forces of supply and demand in the foreign exchange markets.

These rates are also affected by

the international balance of payments and other economic and financial conditions, government intervention, speculation and other factors.

We are not obligated to engage in any currency hedging operations, and there can be no assurance as to the success of any hedging operations

that we may implement.

Although we intend to engage

in any interest rate hedging transactions and currency hedging transactions primarily for hedging purposes and not for income or enhancing

total returns, use of interest rate hedging transactions and currency hedging transactions involves certain inherent risks.

include (i) the possibility that the market will move in a manner or direction that would have resulted in gain for us had an interest

rate hedging transaction or currency hedging transaction not been utilized, in which case it would have been better had we not engaged

in the interest rate hedging transaction or currency hedging transaction, (ii) the risk of imperfect correlation between the risk

sought to be hedged and the interest rate hedging transaction or currency hedging transaction utilized, (iii) potential illiquidity

for the hedging instrument utilized, which may make it difficult for us to close-out or unwind an interest rate hedging transaction or

currency hedging transaction and (iv) credit risk with respect to the counterparty to the interest rate hedging transaction or currency

hedging transaction.

In addition, it might not be possible for us to hedge fully or perfectly against currency fluctuations affecting

the value of securities denominated in non-U.S.

currencies because the value of those loans and securities would likely fluctuate

as a result of factors not related to currency fluctuations.

We may also enter into certain

hedging and short sale transactions for the purpose of protecting the market value of an investment of ours for a period of time without

having to currently dispose of such investment.

Such defensive hedge transactions may be entered into when we are legally restricted from

selling an investment or when we otherwise determine that it is advisable to decrease our exposure to the risk of a decline in the market

value of an investment.

Such defensive hedging transactions may expose us to the counterparty’s credit risk.

There also can be no

assurance that we will accurately assess the risk of a market value decline with respect to an investment or enter into an appropriate

defensive hedge transaction to protect against such risk.

Furthermore, we are in no event obligated to enter into any defensive hedge

We may from time to time employ various investment programs, including the use of derivatives, short sales, swap transactions,

currency hedging transactions, securities lending agreements and repurchase agreements.

There can be no assurance that any such investment

program will be undertaken successfully.

Our investments in OID and PIK interest

income may expose us to risks associated with such income being required to be included in accounting income and taxable income prior

to receipt of cash.

Our investments may include

OID and PIK instruments.

To the extent OID and PIK interest income constitute a portion of our income, we will be exposed to risks associated

with such income being required to be included in an accounting income and taxable income prior to receipt of cash, including the following:

OID instruments and PIK securities may have unreliable valuations because the accretion of OID as interest income and the continuing accruals of PIK securities require judgments about their collectability and the collectability of deferred payments and the value of any associated collateral.

OID instruments may create heightened credit risks because the inducement to the borrower to accept higher interest rates in exchange for the deferral of cash payments typically represents, to some extent, speculation on the part of the borrower.

For accounting purposes, cash distributions to stockholders that include a component of accreted OID income do not come from paid-in capital, although they may be paid from the offering proceeds.

Thus, although a distribution of accreted OID income may come from the cash invested by the stockholders, the 1940 Act does not require that stockholders be given notice of this fact.

The higher interest rates on PIK securities reflects the payment deferral and increased credit risk associated with such instruments and PIK securities generally represent a significantly higher credit risk than coupon loans.

The presence of accreted OID income and PIK interest income create the risk of non-refundable cash payments to the Investment Advisor in the form of incentive fees on income that will be payable subsequent to a Listing based on non-cash accreted OID income and PIK interest income accruals that may never be realized.

Even if accounting conditions are met, borrowers on such securities could still default when our actual collection is expected to occur at the maturity of the obligation.

PIK interest has the effect of generating investment income and increasing the incentive fees that will be payable subsequent to a Listing at a compounding rate.

In addition, the deferral of PIK interest also reduces the loan-to-value ratio at a compounding rate.

Market prices of OID instruments are more volatile because they are affected to a greater extent by interest rate changes than instruments that pay interest periodically in cash.

The required recognition of OID, including PIK, interest for U.S.

federal income tax purposes may have a negative impact on liquidity, because it represents a non-cash component of our taxable income that must, nevertheless, be distributed in cash to investors to avoid us being subject to corporate level taxation.

Federal Income Tax and Other Tax Risks

We will be subject to corporate-level income

tax if we are unable to qualify as a RIC.

In order to qualify and be

subject to tax as a RIC under the Code, we must be a BDC at all times during each taxable year and meet certain source-of-income, asset

diversification and distribution requirements.

If we do not maintain our status as a BDC, we may fail to qualify as a RIC and, thus, may

be subject to corporate-level income tax.

The distribution requirement for a RIC is satisfied if we distribute dividends in respect of

each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to

any deduction for dividends paid, to our stockholders.

We will be subject, to the extent we use debt financing, to certain asset coverage

ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances,

restrict us from making distributions necessary to enable us to be subject to tax as a RIC.

If we are unable to obtain cash from

other sources, we may fail to be subject to tax as a RIC and, thus, may be subject to corporate-level income tax.

To qualify to be subject

to tax as a RIC, we must also meet certain asset diversification requirements at the end of each quarter of our taxable year.

to meet these tests may result in our having to dispose of certain investments quickly in order to satisfy these requirements.

most of our investments will be in private or thinly traded public companies, any such dispositions could be made at disadvantageous prices

and may result in substantial losses.

If we fail to qualify to be subject to tax as a RIC for any reason and become subject to corporate

income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distributions

to our stockholders and the amount of funds available for new investments.

Such a failure would have a material adverse effect on us and

our stockholders.

We may have difficulty paying our required

distributions if we recognize income before, or without, receiving cash representing such income.

federal income

tax purposes, we will include in income certain amounts that we have not yet received in cash, such as the accretion of OID.

may arise if we receive warrants in connection with the making of a loan and in other circumstances, or through contracted PIK interest,

which represents contractual interest added to the loan balance and due at the end of the loan term.

Such OID, which could be significant

relative to our overall investment activities, or increases in loan balances as a result of contracted PIK arrangements, will be included

in income before we receive any corresponding cash payments.

We also may be required to include in income certain other amounts that we

will not receive in cash.

Since in certain cases we may

recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement in a given

taxable year to distribute at least 90% of our investment company taxable income, determined without regard to any deduction for dividends

paid, as dividends to our stockholders in order to be subject to tax as a RIC.

In such a case, we may have to sell some of our investments

at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these

distribution requirements.

If we are not able to obtain such cash from other sources, we may fail to be subject to tax as a RIC and thus

be subject to corporate-level income tax.

If we are not treated as a “publicly

offered regulated investment company,”

as defined in the Code, U.S.

stockholders that are individuals, trusts or estates could be

subject to tax as though they received a distribution of some of our expenses.

We cannot assure you that we

will be treated as a publicly offered regulated investment company for all years.

Unless and until we are treated as a “publicly

offered regulated investment company”

(within the meaning of Section 67 of the Code) by reason of either (i) shares of our common

stock and our preferred stock (if any) collectively are held by at least 500 persons at all times during a taxable year, (ii) shares of

our common stock are treated as regularly traded on an established securities market or (iii) shares of our common stock are continuously

offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act).

For a calendar year, each U.S.

stockholder that is an individual, trust or estate will be treated as

having received a dividend from us in the amount of such U.S.

stockholder’s allocable share of the management fees paid

to our Investment Advisor and certain of our other expenses for the calendar year, and these fees and expenses will be treated

as miscellaneous itemized deductions of such U.S.

For taxable years beginning before 2026, miscellaneous itemized

deductions generally are not deductible by a U.S.

that is an individual, trust or estate will be treated as having received a dividend from us in the amount of such U.S.

stockholder’s

allocable share of the management fees paid to our Investment Advisor and certain of our other expenses for the calendar year, and these

fees and expenses will be treated as miscellaneous itemized deductions of such U.S.

For taxable years beginning before 2026,

miscellaneous itemized deductions generally are not deductible by a U.S.

stockholder that is an individual, trust or estate.

For taxable years beginning

in 2026 or later, miscellaneous itemized deductions generally are deductible by a U.S.

stockholder that is an individual, trust

or estate only to the extent that the aggregate of such U.S.

stockholder’s miscellaneous itemized deductions exceeds 2%

years beginning in 2026 or later, miscellaneous itemized deductions generally are deductible by a U.S.

stockholder that is an individual,

trust or estate only to the extent that the aggregate of such U.S.

stockholder’s miscellaneous itemized deductions exceeds 2% of

stockholder’s adjusted gross income for U.S.

federal income tax purposes, are not deductible for purposes of

the alternative minimum tax and are subject to the overall limitation on itemized deductions under Section 68 of the Code.

Federal Income Tax on Dividends for Non-U.S.

Distributions

by a BDC generally are treated as dividends for U.S.

federal income tax purposes, are not deductible for purposes of the alternative

minimum tax and are subject to the overall limitation on itemized deductions under Section 68 of the Code.

We may be subject to withholding of U.S.

income tax on distributions for non-U.S.

stockholders.

Distributions by a BDC generally

are treated as dividends for U.S.

tax purposes, and will be subject to U.S.

income or withholding tax unless

the stockholder receiving the dividend qualifies for an exemption from U.S.

tax, or the distribution is subject to one of the

special look-through rules described below.

Distributions paid out of net capital gains can qualify for a reduced rate of taxation

in the hands of an individual U.S.

income or withholding tax unless the stockholder

receiving the dividend qualifies for an exemption from U.S.

tax, or the distribution is subject to one of the special look-through

rules described below.

Distributions paid out of net capital gains can qualify for a reduced rate of taxation in the hands of an individual

stockholder, and an exemption from U.S.

tax in the hands of a non-U.S.

if reported by a RIC, dividend distributions by the RIC derived from certain interest income (such distributions, “interest-related

dividends”) and certain net short-term capital gains (such distributions, “short-term capital gain dividends”)

generally are exempt from U.S.

However, if reported by a RIC,

dividend distributions by the RIC derived from certain interest income (such distributions, “interest-related dividends”)

and certain net short-term capital gains (such distributions, “short-term capital gain dividends”) generally are exempt from

withholding tax otherwise imposed on non-U.S.

stockholders.

Interest-related dividends are dividends

that are attributable to “qualified net interest income”

Interest-related dividends are dividends that are attributable

to “qualified net interest income”

(i.e., “qualified interest income,”

which generally

consists of certain interest and OID on obligations “in registered form”

as well as interest on bank deposits earned

by a RIC, less allocable deductions) from sources within the United States.

Short-term capital gain dividends are dividends that

are attributable to net short-term capital gains, other than short-term capital gains recognized on the disposition of U.S.

property interests, earned by a RIC.

However, no assurance can be given as to whether any of our distributions will be eligible

for this exemption from U.S.

withholding tax or, if eligible, will be reported as such by us.

Furthermore, 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.

Since our common stock will be subject to significant

transfer restrictions, and an investment in our common stock will generally be illiquid, non-U.S.

stockholders whose distributions

on our common stock are subject to U.S.

withholding tax may not be able to transfer their shares of our common stock easily or

quickly or at all.

failure of any portion of our distributions to qualify for the exemption for interest-related dividends or short-term capital

gain dividends would not affect the treatment of non-U.S.

which generally consists of certain interest

and OID on obligations “in registered form”

as well as interest on bank deposits earned by a RIC, less allocable deductions)

from sources within the United States.

Short-term capital gain dividends are dividends that are attributable to net short-term capital

gains, other than short-term capital gains recognized on the disposition of U.S.

real property interests, earned by a RIC.

no assurance can be given as to whether any of our distributions will be eligible for this exemption from U.S.

withholding tax or,

if eligible, will be reported as such by us.

Furthermore, 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

Since our common stock will be subject to significant transfer restrictions, and an investment in our common stock will generally

be illiquid, non-U.S.

stockholders whose distributions on our common stock are subject to U.S.

withholding tax may not be able

to transfer their shares of our common stock easily or quickly or at all.

A failure of any portion of

our distributions to qualify for the exemption for interest-related dividends or short-term capital gain dividends would not affect the

treatment of non-U.S.

stockholders that qualify for an exemption from U.S.

withholding tax

on dividends by reason of their special status (for example, foreign government-related entities and certain pension funds resident

in favorable treaty jurisdictions).

our Qualification as a RIC and Investments Made through Taxable Subsidiaries

maintain RIC tax treatment under the Code, we must be a BDC at all times during each taxable year and meet the following minimum

annual distribution, income source and asset diversification requirements.

The minimum annual distribution requirement for a RIC

will be satisfied if we distribute dividends to our stockholders in respect of each taxable year of an amount generally at least

equal to 90% of our investment company taxable income, determined without regard to any deduction for dividends paid.

regard, a RIC may, in certain cases, satisfy the 90% distribution requirement by distributing dividends relating to a taxable

year after the close of such taxable year under the “spillback dividend”

withholding tax on dividends by reason of their special

status (for example, foreign government-related entities and certain pension funds resident in favorable treaty jurisdictions).

Our business may be adversely affected if

we fail to maintain our qualification as a RIC.

To maintain RIC tax treatment

under the Code, we must be a BDC at all times during each taxable year and meet the following minimum annual distribution, income source

and asset diversification requirements.

The minimum annual distribution requirement for a RIC will be satisfied if we distribute dividends

to our stockholders in respect of each taxable year of an amount generally at least equal to 90% of our investment company taxable income,

determined without regard to any deduction for dividends paid.

In this regard, a RIC may, in certain cases, satisfy the 90% distribution

requirement by distributing dividends relating to a taxable year after the close of such taxable year under the “spillback dividend”

provisions of Subchapter M of the Code.

would be taxed, at regular corporate rates, on any retained income and/or gains, including any short-term capital gains or long-term

capital gains.

We must also satisfy an additional annual distribution requirement with respect to each calendar year in order

to avoid a 4% excise tax on the amount of any under-distribution.

Because we may use debt financing, we are subject to (i) an

asset coverage ratio requirement under the 1940 Act and may, in the future, be subject to (ii) certain financial covenants

under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy

the distribution requirements.

We would be taxed, at regular corporate rates, on any retained income and/or gains, including

any short-term capital gains or long-term capital gains.

We must also satisfy an additional annual distribution requirement with respect

to each calendar year in order to avoid a 4% excise tax on the amount of any under-distribution.

Because we may use debt financing, we

are subject to (i) an asset coverage ratio requirement under the 1940 Act and may, in the future, be subject to (ii) certain

financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary

to satisfy the distribution requirements.

If we are unable to obtain cash from other sources, or chose or be required to retain a portion

of our taxable income or gains, we could (1) be required to pay excise tax and (2) fail to qualify for RIC tax treatment,

and thus become subject to corporate-level income tax on our taxable income (including gains).

income source requirement will be satisfied if we obtain at least 90% of our gross income each taxable year from dividends, interest,

gains from the sale of stock or securities, or other income derived from the business of investing in stock or securities.

asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter

of our taxable year.

To satisfy this requirement, at least 50% of the value of our assets at the close of each quarter of each

taxable year must consist of cash, cash equivalents (including receivables), U.S.

Government securities, securities of other RICs,

and other acceptable securities;

and no more than 25% of the value of our assets can be invested in the securities, other than

government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined

under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified

publicly traded partnerships.”

Failure to meet these requirements may result in our having to dispose of certain investments

quickly in order to prevent the loss of RIC status.

Because a significant portion of our investments will be in private companies,

and therefore may be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial

may invest in certain debt and equity investments through taxable subsidiaries and the net taxable income of these taxable subsidiaries

will be subject to federal and state corporate income taxes.

We also may invest in certain foreign debt and equity investments

which could be subject to foreign taxes (such as income tax, withholding, and value added taxes).

If we fail to qualify for or

maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially

reduce our net assets, the amount of income available for distribution, and the amount of our distributions.

Regarding Distributions

of our taxable income or gains, we could (1) be required to pay excise tax and (2) fail to qualify for RIC tax treatment, and

thus become subject to corporate-level income tax on our taxable income (including gains).

The income source requirement

will be satisfied if we obtain at least 90% of our gross income each taxable year from dividends, interest, gains from the sale of stock

or securities, or other income derived from the business of investing in stock or securities.

The asset diversification requirement will

be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year.

To satisfy this requirement,

at least 50% of the value of our assets at the close of each quarter of each taxable year must consist of cash, cash equivalents (including

receivables), U.S.

Government securities, securities of other RICs, and other acceptable securities;

and no more than 25% of the

value of our assets can be invested in the securities, other than U.S.

government securities or securities of other RICs, of one

issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same

or similar or related trades or businesses or of certain “qualified publicly traded partnerships.”

Failure to meet these requirements

may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status.

Because a significant portion

of our investments will be in private companies, and therefore may be relatively illiquid, any such dispositions could be made at disadvantageous

prices and could result in substantial losses.

We may invest in certain debt

and equity investments through taxable subsidiaries and the net taxable income of these taxable subsidiaries will be subject to federal

and state corporate income taxes.

We also may invest in certain foreign debt and equity investments which could be subject to foreign

taxes (such as income tax, withholding, and value added taxes).

If we fail to qualify for or maintain RIC tax treatment for any reason

and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income

available for distribution, and the amount of our distributions.

There is a risk that you may not receive

distributions or that our distributions may not grow over time and a portion of our distributions may be a return of capital.

We intend to make distributions

on a quarterly basis to our stockholders out of assets legally available for distribution.

We cannot assure you that we will achieve

investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.

Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this

Annual Report.

Due to the asset coverage test applicable to us under the 1940 Act as a BDC and certain limitations under Maryland

law, we may be limited in our ability to make distributions.

In addition, if we violate certain covenants under the Credit Facility,

the WF Credit Facility, or any future credit or other borrowing facility, our ability to pay distributions to our stockholders

could be limited because we may be required by its terms to use all payments of interest and principal that we receive from our

current investments as well as any proceeds received from the sale of our current investments to repay amounts outstanding thereunder.

the tax treatment and characterization of our distributions may vary significantly from time to time due to the nature of our

The ultimate tax characterization of our distributions made during a taxable year may not finally be determined until

after the end of that taxable year.

We may make distributions during a taxable year that exceed our investment company taxable

income and net capital gains for that taxable year.

In such a situation, the amount by which our total distributions exceed investment

company taxable income and net capital gains generally would be treated as a return of capital up to the amount of a stockholder’s

tax basis in the shares, with any amounts exceeding such tax basis treated as a gain from the sale or exchange of such shares.

A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived

from our investment activities.

Moreover, we may pay all or a substantial portion of our distributions from the proceeds of the

sale of shares of our common stock or from borrowings in anticipation of future cash flow, which could constitute a return of

stockholders’

We cannot assure you that we will achieve investment

results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.

to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this Annual Report.

to the asset coverage test applicable to us under the 1940 Act as a BDC and certain limitations under Maryland law, we may be limited

in our ability to make distributions.

In addition, if we violate certain covenants under our credit facilities, or any future credit or

other borrowing facility, our ability to pay distributions to our stockholders could be limited because we may be required by its terms

to use all payments of interest and principal that we receive from our current investments as well as any proceeds received from the sale

of our current investments to repay amounts outstanding thereunder.

Furthermore, the tax treatment

and characterization of our distributions may vary significantly from time to time due to the nature of our investments.

tax characterization of our distributions made during a taxable year may not finally be determined until after the end of that taxable

We may make distributions during a taxable year that exceed our investment company taxable income and net capital gains for that

taxable year.

In such a situation, the amount by which our total distributions exceed investment company taxable income and net capital

gains generally would be treated as a return of capital up to the amount of a stockholder’s tax basis in the shares, with any amounts

exceeding such tax basis treated as a gain from the sale or exchange of such shares.

A return of capital generally is a return of a stockholder’s

investment rather than a return of earnings or gains derived from our investment activities.

Moreover, we may pay all or a substantial

portion of our distributions from the proceeds of the sale of shares of our common stock or from borrowings in anticipation of future

cash flow, which could constitute a return of stockholders’

capital and will lower such stockholders’

tax basis in our shares, which may result in increased tax

liability to stockholders when they sell such shares.

tax basis in our shares,

which may result in increased tax liability to stockholders when they sell such shares.

General Risk Factors

Potential Material and Adverse Effect

of Events Outside of Our Control

Global capital markets could enter a period

of severe disruption and instability.

These conditions have historically affected and could again materially and adversely affect debt

and equity capital markets in the United States and around the world and our business.

Periods of market volatility

have occurred and could continue to occur in response to pandemics or other events outside of our control.

These types of events

have adversely affected and could continue to adversely affect operating results for us and our portfolio companies.

in December 2019, COVID-19, a novel strain of coronavirus, surfaced in China and has since spread to other countries, including

the United States.

This pandemic has led, and for an unknown period of time will continue to lead, to disruptions in local, regional,

national and global markets and economies affected thereby, including the United States.

These types of events have

adversely affected and could continue to adversely affect operating results for us and our portfolio companies.

For example, in February

2022, Russia invaded Ukraine, which disrupted financial markets.

Such war, any expansion of such war or any sanctions imposed on Russia,

including exclusion from SWIFT, could lead to further disruptions in financial markets, which could adversely affect operating results

for us and our portfolio companies.

Furthermore, in December 2019, COVID-19, a novel strain of coronavirus, surfaced in China and

has since spread to other countries, including the United States.

This pandemic has led, and for an unknown period of time will continue

to lead, to disruptions in local, regional, national and global markets and economies affected thereby, including the United States.

With respect to U.S.

credit markets, this

outbreak has resulted in, and until fully resolved is likely to continue to result in, the following (among other things):

restrictions on travel and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories,

resulting in significant disruption to the business of many companies, including supply chains and demand, as well as layoffs of

credit markets, this outbreak has resulted in, and until fully resolved is likely to continue to result in,

the following (among other things):

(i) restrictions on travel and the temporary closure of many corporate offices, retail stores,

and manufacturing facilities and factories, resulting in significant disruption to the business of many companies, including supply chains

and demand, as well as layoffs of employees;

(ii) increased draws by borrowers on revolving lines of credit;

(iii) increased requests by borrowers for amendments

or waivers of their credit agreements to avoid default, increased defaults by borrowers and/or increased difficulty in obtaining

(iii) increased

requests by borrowers for amendments or waivers of their credit agreements to avoid default, increased defaults by borrowers and/or increased

difficulty in obtaining refinancing;

(iv) volatility in credit markets including greater volatility in pricing and spreads;

and (v) rapidly evolving proposals

and actions by state and federal governments to address the problems being experienced by markets, businesses and the economy in

general, which may not adequately address these problems.

The pandemic is having, and any future continuation of the pandemic could

have, an adverse impact on the markets and the economy in general.

We continue to assess

the impact of COVID-19 on portfolio companies.

Although it is impossible to predict the precise nature and consequences of these

events, or of any political or policy decisions and regulatory changes caused by emerging events or uncertainty on applicable laws

or regulations that impact the Company, and our portfolio companies and investments, it is clear that these types of events are

impacting and will, for at least some time, continue to impact the Company and our portfolio companies and investments and in many

instances the impact may be adverse and profound.

Potential Adverse Effects

of New or Modified Laws or Regulations

We and our portfolio

companies will be subject to regulation by laws at the U.S.

and (v) rapidly

evolving proposals and actions by state and federal governments to address the problems being experienced by markets, businesses and the

economy in general, which may not adequately address these problems.

The pandemic is having, and any future continuation of the pandemic

could have, an adverse impact on the markets and the economy in general.

We continue to assess the impact

of COVID-19 on portfolio companies.

Although it is impossible to predict the precise nature and consequences of these events, or of any

political or policy decisions and regulatory changes caused by emerging events or uncertainty on applicable laws or regulations that impact

us, and our portfolio companies and investments, it is clear that these types of events are impacting and will, for at least some time,

continue to impact us and our portfolio companies and investments and in many instances the impact may be adverse and profound.

New or modified laws or regulations governing

our operations could adversely affect our business.

We and our portfolio companies

will be subject to regulation by laws at the U.S.

federal, state and local levels.

These laws and regulations, as well

as their interpretation, may change from time to time, and new laws, regulations and interpretations may also come into effect.

Any such new or changed laws or regulations could have a material adverse effect on our business.

These laws and regulations, as well as their interpretation,

may change from time to time, and new laws, regulations and interpretations may also come into effect.

Any such new or changed laws or

regulations could have a material adverse effect on our business.

UNRESOLVED STAFF COMMENTS

headquarters are located at 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, Kansas 66205.

We believe that our office facilities

are suitable and adequate for our business.

Our headquarters are located

at 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, Kansas 66205.

We believe that our office facilities are suitable and adequate

for our business.

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 1A. Risk Factors