What changed in this filing

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Item 1. Business

2024-02-28 compared with 2023-03-10 · 752 added, 529 removed, 924 unchanged (58% of the section changed)

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(the “Code”), and we expect to qualify as a RIC annually.

We are externally managed

by the Investment Advisor, an investment adviser that is registered with the Securities and Exchange Commission (“SEC”) under

the Investment Advisers Act of 1940 (the “Advisers Act”), pursuant to an investment advisory agreement between us and the

Investment Advisor (the “Advisory Agreement”).

Subject to the supervision of our Board of Directors (the “Board”),

a majority of which is comprised of directors that are not “interested persons” as defined in Section 2(a)(19) of the 1940

Act (the “Independent Directors”), our Investment Advisor manages our day-to-day operations and provides us with investment

advisory and management services and certain administrative services.

The Investment Advisor, in its capacity as Administrator, provides

the administrative services necessary for us to operate pursuant to an administration agreement between us and the Administrator (the

“Administration Agreement”).

The Administrator has entered into a sub-administration agreement (the “Sub-Administration

Agreement”) to delegate certain administrative functions to U.S.

Bancorp Fund Services, LLC (the “Sub-Administrator”).

Our Investment Advisor is a majority-owned subsidiary of Palmer Square, which is a privately-held firm specializing in global alternative

(non-traditional) investments with a total return orientation.

On January 22, 2024, we completed

our initial public offering (the “IPO”) issuing 5,450,000 shares of common stock, par value $0.001, at a public offering price

of $16.45 per share.

Our common stock began trading on the New York Stock Exchange under the symbol “PSBD” on January 18,

We are externally managed by the Investment Advisor, an investment

adviser that is registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940 (the

“Advisers Act”), pursuant to an amended and restated investment advisory agreement between us and the Investment Advisor (the

“Advisory Agreement”).

Subject to the supervision of our Board of Directors (the “Board”), a majority of which

is made up of directors that are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act (the “Independent

Directors”), our Investment Advisor manages our day-to-day operations and provides us with investment advisory and management services

and certain administrative services.

The Investment Advisor, in its capacity as Administrator, provides the administrative services necessary

for us to operate pursuant to an administration agreement between us and the Administrator (the “Administration Agreement”).

Our Investment Advisor is a majority-owned subsidiary of PSCM, which is a privately-held firm specializing in global alternative (non-traditional)

investments with a total return orientation.

Our investment objective is

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and enhance our total returns.

We may also receive or purchase warrants or rights to acquire equity or other securities in connection

with making a debt investment in a company.

We will continue to evaluate other investment strategies in the ordinary course of business

with no specific top-down allocation to any single investment strategy.

We may also receive warrants or other rights to acquire equity or similar securities or otherwise purchase

such securities in connection with making a debt investment in a company.

We will continue to evaluate other investment strategies in

the ordinary course of business with no specific top-down allocation to any single investment strategy.

We have two wholly-owned subsidiaries,

(PS BDC Funding and PS BDC Funding II) that were established in connection with our obtaining credit facilities from third party lenders.

The accounts of these subsidiaries are consolidated in the Company’s financial statements.

We “look through” such subsidiaries

to determine our compliance with the provisions of the 1940 Act, including provisions governing capital structure and leverage.

Palmer Square BDC Funding I LLC (“PS BDC Funding”) and Palmer Square BDC Funding II LLC (“PS BDC Funding II”),

that were established in connection with our obtaining credit facilities from third party lenders.

The accounts of these subsidiaries

are consolidated in the Company’s financial statements.

We “look through” such subsidiaries to determine our compliance

with the provisions of the 1940 Act, including provisions governing capital structure and leverage, and such subsidiaries comply with

such provisions on an aggregate basis with us (Section 18 of the 1940 Act).

Our Portfolio

As of December 31, 2022, we

had 204 debt and private fund investments in 176 portfolio companies with an aggregate fair value of approximately $966.9 million.

Listed below are our top ten portfolio companies

and industries represented as a percentage of total assets (excluding short-term investments) as of December 31, 2022:

As of December 31, 2023, we had 227 debt and equity investments in

191 portfolio companies and we had total assets of approximately $1.0 billion.

Listed below are our top ten portfolio companies and industries (excluding

short-term investments) represented as a percentage of total assets as of December 31, 2023:

Portfolio Company

Peraton Corp.

Minotaur Acquisition, Inc.

Vision Solutions, Inc.

Minotaur Acquisition, Inc.

Gainwell Acquisition Corp.

Infinite Bidco, LLC

Acrisure, LLC

Delta Topco, Inc.

Barracuda Networks, Inc.

Moneygram International, Inc.

Micro Holding Corp.

Wilsonart LLC

Ivanti Software, Inc.

Healthcare Providers and Services

Professional Services

Diversified Financial Services

Hotels, Restaurants and Leisure

Building Products

Independent Power and Renewable Electricity Producers

Listed below are our top ten portfolio companies

and industries represented as a percentage of total assets (excluding short-term investments) as of December 31, 2021:

Listed below are our top ten portfolio companies and industries (excluding

short-term investments) represented as a percentage of total assets as of December 31, 2022:

Portfolio Company

Vision Solutions, Inc.

Peraton Corp.

Minotaur Acquisition, Inc.

Vision Solutions, Inc.

Acrisure, LLC

Help/Systems Holdings, Inc.

Quest Software US Holdings Inc

Dotdash Meredith, Inc.

Barracuda Networks, Inc.

Moneygram International, Inc.

Micro Holding Corp.

Specialty Building Products Holdings, LLC

Wilsonart LLC

Healthcare Providers and Services

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Hotels, Restaurants and Leisure

Independent Power and Renewable Electricity Producers

Oil, Gas and Consumable Fuels

Building Products

Independent Power and Renewable Electricity Producers

The Investment Advisor

The Investment Advisor serves

as our investment adviser pursuant to the Advisory Agreement and manages our day-to-day operations and provides us with investment advisory

and management services and certain administrative services.

The investment team (the “Investment Team”) of our Investment

Advisor is responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, structuring

our investments and monitoring and servicing our investments.

As of December 31, 2022, the Investment Team was comprised of 23 investment

professionals, all of whom dedicate a substantial portion of their time to the Company.

In addition, the team has five dedicated operations

professionals.

In addition, the Investment Advisor believes that it has best-in-class support personnel, including expertise in risk management,

legal, accounting, tax, information technology and compliance, among others.

The Investment Team employs

a blend of top-down and bottom-up analysis.

The senior members of the Investment Team have been actively involved in the alternative credit

investing market for an average of 20 years and have built strong relationships with private equity sponsors, banks and financial intermediaries.

The Investment Advisor serves as our investment adviser pursuant to

the Advisory Agreement and manages our day-to-day operations and provides us with investment advisory and management services and certain

administrative services.

The investment team (the “Investment Team”) of our Investment Advisor is responsible for identifying

investment opportunities, conducting research and due diligence on prospective investments, structuring our investments and monitoring

and servicing our investments.

As of December 31, 2023, the Investment Team was comprised of 28 investment professionals, all of whom

dedicate a substantial portion of their time to the Company.

In addition, the team has eight dedicated operations professionals.

The Investment

Advisor believes that it has experienced support personnel, including individuals with expertise in risk management, legal, accounting,

tax, information technology and compliance, among others.

The Investment Team employs a blend of top-down and granular, bottom-up

fundamental credit analysis.

The senior members of the Investment Team have been actively involved in the alternative credit investing

market for an average of 22 years and have built strong relationships with private equity sponsors, banks and financial intermediaries.

The Investment Advisor has an investment committee (the “Investment Committee”) comprised of four members that is responsible

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The Investment Advisor has

entered into a Resource Sharing Agreement (the “Resource Sharing Agreement”) with Palmer Square, pursuant to which Palmer

Square provides the Investment Advisor with access to the resources of Palmer Square, including the Investment Team, so as to enable the

Investment Advisor to fulfill its obligations under the Advisory Agreement.

Through the Resource Sharing Agreement, the Investment Advisor

capitalizes on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management

and monitoring experience of Palmer Square’s investment professionals.

entered into a Resource Sharing Agreement (the “Resource Sharing Agreement”) with PSCM, pursuant to which PSCM provides the

Investment Advisor with access to the resources of PSCM, including the Investment Team, so as to enable the Investment Advisor to fulfill

its obligations under the Advisory Agreement.

Through the Resource Sharing Agreement, the Investment Advisor capitalizes on the significant

deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience

of PSCM’s investment professionals.

Palmer Square Capital Management

Palmer Square is a Delaware

limited liability company formed in 2009 and had approximately $25.4 billion in assets under management as of December 31, 2022.

Palmer Square manages portfolios of both corporate credit and structured credit as well as diverse strategies designed with the intent

to achieve high risk-adjusted returns over market cycles.

We believe Palmer Square’s experience in analyzing companies and investment

structures provides a sustainable competitive advantage over other firms.

Palmer Square is 100% management owned and led by Christopher

PSCM is a Delaware limited liability company formed in 2009 and had

approximately $29.5 billion in assets under management as of December 31, 2023 with approximately $3.4 billion in assets under management

in opportunistic strategies (which includes the Company), approximately $3.4 billion in assets under management in income/short duration

strategies and approximately $22.7 billion in assets under management in private credit/structured credit issuance strategies.

its affiliates, including the Investment Advisor, manage portfolios of both corporate credit and structured credit as well as diverse

strategies designed with the intent to achieve high risk-adjusted returns over market cycles.

We believe PSCM’s experience in analyzing

companies and investment structures provides a sustainable competitive advantage over other firms.

PSCM is 100% management owned and is

led by Christopher D.

Long and Angie K.

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we pay the Investment Advisor a fee for its investment advisory and management services consisting of two components—a base management

fee and, subsequent to the listing of the Company’s common stock on a national securities exchange (a “Listing”), an

incentive fee (the “Income Incentive Fee”).

The cost of both the base management fee and, subsequent to a Listing, the Income

Incentive Fee, is ultimately borne by our stockholders.

fee and, subsequent to the IPO, an incentive fee (the “Income Incentive Fee”).

The cost of both the base management fee and,

subsequent to the IPO, the Income Incentive Fee, is ultimately borne by our stockholders.

Base Management Fee

In return for providing management

services to the Company, the Company pays the Investment Advisor a base management fee, calculated and paid quarterly at an annual rate

of 2.00% of the average value of the weighted average (based on the number of shares outstanding each day in the quarter) of the Company’s

total net assets at the end of the two most recently completed calendar quarters.

The base management fee for any partial quarter will

be pro-rated based on the number of days actually elapsed in that quarter relative to the total number of days in such quarter.

services to the Company, the Company pays the Investment Advisor a base management fee.

Upon completion of the IPO, the base management

fee is calculated and paid quarterly at an annual rate of 1.75% of the average value of the weighted average (based on the number of shares

outstanding each day in the quarter) of the Company’s total net assets at the end of the two most recently completed calendar quarters.

The base management fee for any partial quarter will be pro-rated based on the number of days actually elapsed in that quarter relative

to the total number of days in such quarter.

Prior to the IPO, the base

management fee was 2.00% of the average value of the weighted average (based on the number of shares outstanding each day in the quarter)

of the Company’s total net assets at the end of the two most recently completed calendar quarters.

The Investment Advisor, however,

has agreed to waive its right to receive management fees in excess of 1.75% of the total net assets during any period prior to a Listing.

If a Listing does not occur, such fee waiver will remain in place through liquidation of the Company.

The Investment Advisor will not

be permitted to recoup any waived amounts at any time and the waiver may only be modified or terminated prior to a Listing with the approval

of the Board.

during any period prior to the IPO, agreed to waive its right to receive management fees in excess of an annual rate of 1.75% of the average

value of the weighted average total net assets at the end of each of the Company’s two most recently completed calendar quarters.

The Investment Advisor will not be permitted to recoup any base management fees waived for any period of time prior to the IPO.

Incentive Fee

Pursuant to the Advisory Agreement,

the Investment Advisor is not entitled to an incentive fee prior to a Listing.

Following a Listing, the Investment Advisor will be entitled

to the Income Incentive Fee based on the Company’s pre-incentive fee net investment income for the then most recently completed

calendar quarter, as adjusted downward (but not upward) if over the most recently completed and three preceding calendar quarters aggregate

the Investment Advisor is not entitled to an incentive fee prior to the IPO because the Advisory Agreement provides that no incentive

fee is payable prior to the IPO.

Effective upon completion of the IPO, the Investment Advisor is entitled to the Income Incentive Fee

based on the Company’s pre-incentive fee net investment income for the then most recently completed calendar quarter, as adjusted

downward (but not upward) if over the most recently completed and eleven preceding calendar quarters since the IPO (or if shorter, the

number of calendar quarters since the IPO) (each such period is referred to herein as the “Trailing Twelve Quarters”) aggregate

net realized losses on the Company’s investments exceed the Company’s aggregate net investment income over the same period,

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In this regard, if the Company’s net realized

losses over the most recently completed and three preceding calendar quarters are greater than the Company’s net investment income

over the same period, excluding the most recently completed quarter, then the pre-incentive fee net income used in the calculation of

the Income Incentive Fee would be subject to a downward adjustment.

The amount of the adjustment would be equal to the amount by which

such net realized losses exceed such net investment income.

On the other hand, if the Company’s net investment income over the most

recently completed and three preceding calendar quarters is equal to or greater than the Company’s net realized losses over the

same period, excluding the most recently completed quarter, then no adjustment to pre-incentive fee net investment income would be made.

The Income Incentive Fee will be calculated and payable quarterly in arrears commencing with the first calendar quarter following a Listing.

The Company will pay the Investment Advisor an Income Incentive Fee with respect to its “adjusted net investment income” in

each calendar quarter as follows:

losses over the Trailing Twelve Quarters since the IPO (or if shorter, the number of calendar quarters since the IPO) are greater than

the Company’s net investment income over the same period, excluding the most recently completed quarter, then the pre-incentive

fee net income used in the calculation of the Income Incentive Fee would be subject to a downward adjustment.

The amount of the adjustment

would be equal to the amount by which such net realized losses exceed such net investment income.

On the other hand, if the Company’s

net investment income over the Trailing Twelve Quarters since the IPO (or if shorter, the number of calendar quarters since the IPO) is

equal to or greater than the Company’s net realized losses over the same period, excluding the most recently completed quarter,

then no adjustment to pre-incentive fee net investment income would be made.

The Income Incentive Fee will be calculated and payable quarterly

in arrears commencing with the first calendar quarter following the IPO.

The Company will pay the Investment Advisor an Income Incentive

Fee with respect to its “adjusted net investment income” in each calendar quarter as follows:

no Income Incentive Fee in any calendar quarter in which the Company’s “adjusted net investment income” does not exceed an amount equal to a “hurdle rate” of 1.5% per quarter (6% annualized) of the Company’s total net assets at the end of that quarter (the “Hurdle Amount”);

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income” means the Company’s “pre-incentive fee net investment income” during the then most recently completed

calendar quarter minus the difference, if positive, between (i) the Company’s “net realized losses” over the then most

recently completed and three preceding calendar quarters (or if shorter, the number of calendar quarters that have occurred since the

Listing) and (ii) the Company’s “net investment income” over the three preceding calendar quarters (or if shorter, the

number of calendar quarters that have occurred since the Listing).

No adjustment (downward or upward) will be made to “pre-incentive

fee net investment income” if the difference between clause (i) minus clause (ii) is zero or negative.

calendar quarter minus the difference, if positive, between (i) the Company’s “net realized losses” over the then Trailing

Twelve Quarters (or if shorter, the number of calendar quarters that have occurred since the IPO) and (ii) the Company’s “net

investment income” over the Trailing Twelve Quarters (excluding the then most recently completed calendar quarter).

No adjustment

(downward or upward) will be made to “pre-incentive fee net investment income” if the difference between clause (i) minus

clause (ii) is zero or negative.

“Pre-incentive fee net

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investments in such period and (ii) the aggregate realized capital gains on the Company’s investments in such period.

investment income” in respect of the particular period means interest income, dividend income and any other income (including any

other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio

companies but excluding fees for providing managerial assistance) accrued during the particular period, minus operating expenses for the

particular period (including the base management fee, the Income Incentive Fee, any expenses payable under the Administration Agreement,

and any interest expense and dividends paid on any outstanding preferred stock).

“Net investment income” includes, in the

case of investments with a deferred interest feature such as market discount, OID, debt instruments with PIK interest, preferred stock

with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash.

As noted above,

“net realized losses” will not by itself cause an upward adjustment to adjusted net investment income.

“Net investment

income” in respect of the particular period means interest income, dividend income and any other income (including any other fees

such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies

but excluding fees for providing managerial assistance) accrued during the particular period, minus operating expenses for the particular

period (including the base management fee, the Income Incentive Fee, any expenses payable under the Administration Agreement, and any

interest expense and dividends paid on any outstanding preferred stock).

“Net investment income” includes, in the case of

investments with a deferred interest feature such as market discount, OID, debt instruments with PIK interest, preferred stock with PIK

dividends and zero-coupon securities, accrued income that the Company has not yet received in cash.

The Income Incentive Fee amount,

or the calculations pertaining thereto, as appropriate, will be pro-rated for any period less than a full calendar quarter.

Effective upon completion

of the IPO, the Investment Advisor has also agreed to use the most recently completed and three preceding calendar quarters (each such

period is referred to herein as the “Trailing Four Quarters”) in addition to the Trailing Twelve Quarters to compute the incentive

fee payable to it by the Company.

In conjunction therewith, the Investment Advisor has agreed to calculate the incentive fee based on

the Trailing Twelve Quarters and the Trailing Four Quarters and in the event that any Trailing Four Quarter period calculation produces

a lower incentive fee as compared to the applicable Trailing Twelve Quarter period calculation for any quarterly period, then the Trailing

Four Quarter Period will be used in connection with the calculation of the incentive fee payable to the Investment Advisor by the Company

for such quarter.

The following is a graphical

representation of the calculation of the Income Incentive Fee based on “adjusted net investment income” that will be in place

subsequent to a Listing:

representation of the calculation of the Income Incentive Fee based on “adjusted net investment income” that is now in place

subsequent to the IPO:

Example 1—Income Incentive Fee:

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Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

Alternative 1

Alternative 1 - The Company is below the hurdle

Additional Assumptions

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

Pre-incentive fee net investment income (investment income - (base management fee + other expenses)) = 0.55%

Pre-incentive fee net investment income (investment income —

(base management fee + other expenses)) = 0.5625%

Net realized losses (realized capital losses — realized capital gains) = 0.00% (4)

Adjusted net investment income (pre-incentive fee net investment income — ([ if positive ] (net realized losses - net investment income))) = 0.55% (5)

Adjusted net investment income (pre-incentive fee net investment income

— ([ if positive ] (net realized losses - net investment income))) = 0.5625% (5)

Adjusted net investment income does not exceed

the hurdle rate, therefore there is no Income Incentive Fee.

Alternative 2

Alternative 2 - The Company exceeds the hurdle

Additional Assumptions

Investment income (including interest, dividends, fees, etc.) = 2.30%

Pre-incentive fee net investment income (investment income - (base management fee + other expenses)) = 1.60%

Pre-incentive fee net investment income (investment income —

(base management fee + other expenses)) = 1.6625%

Net realized losses (realized capital losses — realized capital gains) = 0.00% (4)

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= 100% × 0.1625%

(1) Represents

a quarter of the 6.0% annualized hurdle rate.

(2) Represents

a quarter of the 2.0% annualized base management fee.

offering expenses.

calculation of “realized capital losses” and “realized capital gains” are amounts over the four calendar quarters

immediately preceding the payment date.

the amount of net realized losses over the most recently completed and three calendar quarters preceding the payment date exceeds the

amount of net investment income over the same period, excluding the most recently completed quarter, then the amount of adjusted net

investment income is reduced by that amount.

Represents a quarter of the 6.0% annualized hurdle rate.

Represents a quarter of the 1.75% annualized base management fee.

Excludes offering expenses.

The calculation of “realized capital losses” and “realized

capital gains” are amounts over the twelve calendar quarters immediately preceding the payment date.

If the amount of net realized losses over the Trailing Twelve Quarters

preceding the payment date (or, alternatively, the Trailing Four Quarters preceding the payment date) exceeds the amount of net investment

income over the same period, excluding the most recently completed quarter, then the amount of adjusted net investment income is reduced

by that amount.

Otherwise, the amount of adjusted net investment income is not changed.

Alternative 3

Alternative 3 - The Company exceeds the catch-up

Additional Assumptions

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= 0.1875% + 0.0469%

Alternative 4

Alternative 4 - The Company does not exceed

the hurdle due to net realized losses

Additional Assumptions

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the hurdle rate, therefore there is no Income Incentive Fee.

calculation of “realized capital losses” and “realized capital gains” are amounts over the four calendar quarters

immediately preceding the payment date.

the amount of net realized losses over the most recently completed and three calendar quarters preceding the payment date exceeds the

amount of net investment income over the same period, excluding the most recently completed quarter, then the amount of adjusted net

investment income is reduced by that amount.

The calculation of “realized capital losses” and “realized capital gains” are amounts over the twelve calendar quarters immediately preceding the payment date.

If the amount of net realized losses over the Trailing Twelve Quarters preceding the payment date (or, alternatively, the Trailing Four Quarters preceding the payment date) exceeds the amount of net investment income over the same period, excluding the most recently completed quarter, then the amount of adjusted net investment income is reduced by that amount.

Otherwise, the amount of adjusted net investment income is not changed.

example assumes 8.00% net investment income over the three calendar quarters preceding the most recently completed quarter.

The example assumes 8.00% net investment income over the twelve calendar quarters preceding the most recently completed quarter.

Payment of Our Expenses

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outstanding voting securities, and, in either case, if also approved by a majority of our Independent Directors.

Our Board most recently

determined to re-approve the Advisory Agreement for an additional one-year term ending January 13, 2024 at a meeting held on November

At a meeting held on

March 10, 2022, our Board approved an amended and restated Advisory Agreement, to be effective upon completion of the IPO.

Our Board most

recently determined to re-approve the Advisory Agreement for an additional one-year term ending January 13, 2025 at a meeting held on

November 9, 2023.

The Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by the Investment

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Administration Agreement

The Company has entered into

the Administration Agreement with the Administrator.

Pursuant to the Administration Agreement, the Administrator furnishes office facilities

and equipment and provides clerical, bookkeeping, compliance, recordkeeping and other administrative services at such facilities.

the Administration Agreement, the Administrator performs, or oversees the performance of, required administrative services, which include

being responsible for the financial and other records that the Company is required to maintain and preparing reports to stockholders and

reports and other materials filed with the SEC.

In addition, the Administrator assists the Company in determining and publishing the Company’s

net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports and other materials

to stockholders, and generally overseeing the payment of expenses and the performance of administrative and professional services rendered

to the Company by others.

Under the Administration Agreement, the Administrator also provides managerial assistance on the Company’s

behalf to those portfolio companies that have accepted the offer to provide such assistance.

The Investment Advisor, in

its capacity as Administrator, provides the administrative services necessary for us to operate pursuant to an administration agreement

between us and the Administrator (the “Administration Agreement”).

Pursuant to the Administration Agreement, the Administrator

furnishes office facilities and equipment and provides clerical, bookkeeping, compliance, recordkeeping and other administrative services

at such facilities.

Under the Administration Agreement, the Administrator performs, or oversees the performance of, required administrative

services, which include being responsible for the financial and other records that the Company is required to maintain and preparing reports

to stockholders and reports and other materials filed with the SEC.

In addition, the Administrator assists the Company in determining

and publishing the Company’s net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination

of reports and other materials to stockholders, and generally overseeing the payment of expenses and the performance of administrative

and professional services rendered to the Company by others.

Under the Administration Agreement, the Administrator also provides managerial

assistance on the Company’s behalf to those portfolio companies that have accepted the offer to provide such assistance.

Under the Administration Agreement,

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the fees associated with such functions on a direct basis without any incremental profit to the Administrator.

In addition, the Administrator

has, pursuant to the Sub-Administration Agreement, engaged the Sub-Administrator to act on behalf of the Company’s Administrator

in the performance of certain other administrative services.

The Company has also engaged U.S.

Bank, National Association or its affiliates

(“US Bank”) directly to serve as custodian, transfer agent, distribution paying agent and registrar.

In addition, the Administrator has also entered into an agreement (the

“Sub-Administration Agreement”) to delegate certain administrative functions to U.S.

Bancorp Fund Services, LLC (the “Sub-Administrator”).

The Company has also engaged Equiniti Trust Company, LLC or its affiliates (“Equiniti”) directly to serve as transfer agent,

registrar and dividend disbursing agent and engaged U.S.

Bank or its affiliates directly to serve as custodian.

Prior to the Company’s

engagement of Equiniti upon the closing of the IPO, U.S.

Bank served as the Company’s transfer agent, distribution paying agent and registrar.

Market Opportunity

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that existing market conditions, including those set forth below, have combined to create an attractive investment environment for us:

Large Addressable Market

Opportunity .

Macro volatility resulting from geopolitical tensions, inflationary pressures and rising interest rates has led to increased

opportunities in the secondary loan market, in addition to presenting higher yielding opportunities in the private credit markets.

of the date of this report, we believe the pipeline for the primary loan market is building as debt capital markets have become more active

in the past few months.

In addition, we also believe demand for floating rate loans has remained strong due to the meaningful increase

Risk Adjusted Returns .

Broadly-syndicated fixed and floating rate loans and corporate debt provides an opportunity set that the Investment Team believes offers

an attractive, risk-adjusted return.

Specifically, the Investment Team believes it can mitigate risk and achieve our investment objective

an attractive, risk-adjusted return, including through NAV growth from current porfolio market price improvement and total return opportunities

for broadly syndicated loans.

Specifically, the Investment Team believes it can mitigate risk and achieve our investment objective by:

(i) seeking the best relative value, which may equate to buying new loans or other corporate debt issuances at a discount or purchasing

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lending by banks to smaller private companies, the Investment Team believes there are increased opportunities for alternative lenders

such as us to fill the void.

CLO Equity and Debt .

The Investment Team believes that CLO equity and debt has been a tremendous source of returns for investors historically, and has the

potential to offer investors high cash on cash returns with low credit risk and low correlation to traditional assets classes.

CLO securities are floating rate instruments designed to mitigate interest rate sensitivity, investors may not directly suffer the same

adverse effects that other asset classes may experience due to rising interest rates.

The Investment Team has a strong track record of

investing in CLO equity and debt, and believes that CLO investments continue to offer attractive relative value.

The Investment Team believes that CLO equity and debt has been a tremendous source of returns for investors historically and has the potential

to offer investors high cash on cash returns with low credit risk and low correlation to traditional assets classes.

Because CLO securities

are floating rate instruments designed to mitigate interest rate sensitivity, investors may not directly suffer the same adverse effects

that other asset classes may experience due to rising interest rates.

The Investment Team has a strong track record of investing in CLO

equity and debt, and believes CLO investments continue to offer attractive relative value.

Financing Arrangements

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On February 18, 2020, the

Company, through a special purpose wholly-owned subsidiary, Palmer Square BDC Funding I LLC (“PS BDC Funding” and together

with the Company, the “Borrowers”) entered into a Credit Agreement (the “Credit Agreement”) with certain financial

institutions as lenders (“Lenders”), Bank of America, N.A.

as the administrative agent (“BofA N.A.”) and BofA

Securities, Inc.

(“BofA Securities”), as Lead Arranger and Sole Book Manager, pursuant to which the Lenders agreed to provide

the Company with a revolving line of credit (the “BoA Credit Facility”).

Under the BoA Credit Facility,

which matures on February 18, 2025, the Lenders have agreed to extend credit to PS BDC Funding in an aggregate amount up to the Commitment

(as defined in the Credit Agreement) amount.

The Commitment amount for the BoA Credit Facility was $200.0 million as of the closing date

of the Credit Agreement, increased to $400.0 million on the one-month anniversary of the closing date, further increased to $475.0 million

on October 12, 2020, and further increased to $725 million on September 29, 2021.

The Borrowers’ ability to draw under the BoA Credit

Facility is scheduled to terminate on February 11, 2025.

All amounts outstanding under the BoA Credit Facility are required to be repaid

by February 18, 2025.

Company, through a special purpose wholly-owned subsidiary, PS BDC Funding (together with the Company, the “Borrowers”) entered

into a Credit Agreement (the “Credit Agreement”) with certain financial institutions as lenders (“Lenders”), Bank

of America, N.A.

as the administrative agent (“BofA N.A.”) and BofA Securities, Inc.

(“BofA Securities”), as Lead

Arranger and Sole Book Manager, pursuant to which the Lenders agreed to provide the Company with a revolving line of credit (the “BoA

Credit Facility”).

Under the BoA Credit Facility, which matures on February 18, 2025,

the Lenders have agreed to extend credit to PS BDC Funding in an aggregate amount up to the Commitment (as defined in the Credit Agreement)

The Commitment amount for the BoA Credit Facility is currently $725 million.

The Borrowers’ ability to draw under the BoA

Credit Facility is scheduled to terminate on February 11, 2025.

All amounts outstanding under the BoA Credit Facility are required to

be repaid by February 18, 2025.

The loans under the BoA Credit

Facility may be base rate loans or eurocurrency rate loans.

The base rate loans will bear interest at the base rate plus 1.30%, and the

eurocurrency rate loans will bear interest at the London Interbank Offered Rate (“LIBOR”) plus 1.30%.

The “base rate”

will be equal to the highest of (a) the federal funds rate plus 0.5%, (b) the prime rate and (c) LIBOR.

The Credit Agreement includes

fallback language in the event that LIBOR becomes unavailable.

Interest pursuant to base rate loans is payable quarterly in arrears, and

interest pursuant to eurocurrency loans is payable either quarterly or monthly, as specified by the Borrowers in a loan notice pertaining

The Credit Agreement requires the payment of a commitment fee of 0.50% for unused Commitments until the four-month anniversary

of the Second Amendment to the Credit Agreement.

Thereafter, the commitment fee is 0.50% on unused Commitments up to 30% of the BoA Credit

Facility, and 1.30% on unused Commitments in excess of 30% of the BoA Credit Facility.

Such fee is payable quarterly in arrears.

rate for PS BDC Funding’s Eligible Collateral Assets ranges from 40% for Second Lien Bank Loans to 70% for First Lien Bank Loans

that are B Assets to 100% for Cash (excluding Excluded Amounts) (as each such term is defined in the Credit Agreement).

Facility may be base rate loans or Secured Overnight Financing Rate (“SOFR”) loans.

The base rate loans will bear interest

at the base rate plus 1.40%, and the SOFR loans will bear interest at 1-month SOFR plus 1.40% or 3-month SOFR plus 1.45%.

rate” will be equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate, and (c) 1-month or 3-month SOFR

The Credit Agreement includes fallback language in the event that SOFR becomes unavailable.

Interest pursuant to base rate

loans is payable quarterly in arrears, and interest pursuant to SOFR loans is payable either quarterly or monthly, as specified by the

Borrowers in a loan notice pertaining thereto.

The Credit Agreement requires the payment of a commitment fee of 0.50% for unused Commitments

until the four-month anniversary of the Second Amendment to the Credit Agreement.

Thereafter, the commitment fee is 0.50% on unused Commitments

up to 30% of the BoA Credit Facility, and 1.30% on unused Commitments in excess of 30% of the BoA Credit Facility.

Such fee is payable

quarterly in arrears.

The advance rate for PS BDC Funding’s Eligible Collateral Assets ranges from 40% for Second Lien Bank Loans

to 70% for First Lien Bank Loans that are B Assets to 100% for Cash (excluding Excluded Amounts) (as each such term is defined in the

Credit Agreement).

PS BDC Funding has pledged

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leverage restrictions contained in the 1940 Act and PS BDC Funding complies with 1940 Act provisions relating to affiliated transactions

and custody (Section 17, as modified by Section 57, of the 1940 Act).

The custodian of the assets pledged to BofA N.A.

pursuant to the BoA Credit Facility is U.S.

pursuant to the

BoA Credit Facility is U.S.

Bank National Administration.

The obligations under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, including

in the event of a change of control of PS BDC Funding or if the Investment Advisor ceases to serve as investment adviser to the Company.

The obligations under the Credit Agreement may be accelerated upon the occurrence

of an event of default under the Credit Agreement, including in the event of a change of control of PS BDC Funding or if the Investment

Advisor ceases to serve as investment adviser to the Company.

As of December 31, 2023, we

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On December 18, 2020, the

Company, through a special purpose wholly-owned subsidiary, Palmer Square BDC Funding II LLC (“PS BDC Funding II” and together

with the Company, the “WF Borrowers”) entered into a Loan and Security Agreement (the “Loan Agreement”) with certain

financial institutions as lenders (“WF Lenders”), Wells Fargo Bank, National Association as the administrative agent (“WFB”)

Bank National Association (“U.S.

Bank”), as Collateral Agent and Custodian, pursuant to which the WF Lenders agreed

to provide the Company with a line of credit (the “WF Credit Facility”).

Under the WF Credit Facility,

which matures on December 18, 2025, the WF Lenders have agreed to extend credit to PS BDC Funding II in an aggregate amount up to the

Facility Amount (as defined in the Loan Agreement).

The Facility Amount for the WF Credit Facility was $150.0 million as of the closing

date of the Loan Agreement.

The WF Borrowers’ ability to draw under the WF Credit Facility is scheduled to terminate on December

All amounts outstanding under the WF Credit Facility are required to be repaid by December 18, 2025.

Company, through a special purpose wholly-owned subsidiary, PS BDC Funding II (together with the Company, the “WF Borrowers”)

entered into a Loan and Security Agreement (the “Loan Agreement”) with certain financial institutions as lenders (“WF

Lenders”), Wells Fargo Bank, National Association as the administrative agent (“WFB”) and U.S.

Bank National Association

Bank”), as Collateral Agent and Custodian, pursuant to which the WF Lenders agreed to provide the Company with a line

of credit (the “WF Credit Facility”).

On December 18, 2023, the

Company entered into an amendment to the WF Credit Facility (the “WF Credit Facility Fourth Amendment”) that amends the WF

Credit Facility to, among other things:

(i) increase the amount available for borrowing under the WF Credit Facility from $150,000,000

to $175,000,000, (ii) extend the facility maturity date from December 18, 2025 to December 18, 2028 and (iii) extend the reinvestment

period from December 18, 2023 to December 18, 2026 (subject to other provisions of the WF Credit Facility).

The loans under the WF Credit

Facility may be Broadly Syndicated Loans or Middle Market Loans and shall be eurocurrency rate loans unless such rate is unavailable,

in which case the loans shall be base rate loans until such rate is available.

Broadly Syndicated Loans will bear interest at the LIBOR

or base rate, as applicable, plus 1.85%, and Middle Market Loans will bear interest at LIBOR or base rate, as applicable, plus 2.35%.

The “base rate” will be equal to the highest of (a) the federal funds rate plus 0.5% and (b) the prime rate.

The Loan Agreement

includes fallback language in the event that LIBOR becomes unavailable.

Interest is payable quarterly, as determined by the WFB as the

administrative agent.

Following the Second Amendment of the WF Credit Facility, the Loan Agreement requires the payment of a non-usage

fee of (x) during the first thirteen months following the closing of the WF Credit Facility, 0.50% multiplied by daily unused Facility

Amounts, (y) between thirteen and sixteen months following the closing of the WF Credit Facility, 0.50% multiplied by the lesser of (1)

daily unused Facility Amounts and (2) 50% of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the

daily unused Facility Amount and 50% of the Facility Amount and (ii) zero, and, (z) thereafter, 0.50% multiplied by the lesser of (1)

daily unused Facility Amounts and (2) 20% of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the

daily unused Facility Amount and 20% of the Facility Amount and (ii) zero.

Facility may be Broadly Syndicated Loans or Middle Market Loans and will bear interest at Daily Simple SOFR, or base rate (to the extent

Daily Simple SOFR is unavailable), plus 2.50%, with an interest rate floor of 0.0%.

The “base rate” will be equal to the highest

of (a) the federal funds rate plus 0.50% and (b) the prime rate.

The Loan Agreement includes fallback language in the event that Daily

Simple SOFR becomes unavailable.

Interest is payable quarterly, as determined by the WFB as the administrative agent.

Following an amendment

to the WF Credit Facility on October 13, 2021, the Loan Agreement requires the payment of a non-usage fee of (x) during the first thirteen

months following the closing of the WF Credit Facility, 0.50% multiplied by daily unused Facility Amounts, (y) between thirteen and sixteen

months following the closing of the WF Credit Facility, 0.50% multiplied by the lesser of (1) daily unused Facility Amounts and (2) 50%

of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the daily unused Facility Amount and 50% of

the Facility Amount and (ii) zero, and, (z) thereafter, 0.50% multiplied by the lesser of (1) daily unused Facility Amounts and (2) 20%

of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the daily unused Facility Amount and 20% of

the Facility Amount and (ii) zero.

Such fee is payable quarterly in arrears.

The WF Credit Facility

includes the option to downsize the facility by paying a Commitment Reduction Fee.

The Fee is equal to 2.00% of the facility reduction

amount prior to the one year anniversary of the closing of the WF Credit Facility, and 1.00% thereafter.

The applicable percentage for

PS BDC Funding II’s Eligible Loans ranges from 67.5% for Middle Market Loans to 70% for Broadly Syndicated Loans (as each such term

is defined in the Loan Agreement).

The WF Credit Facility includes the option to downsize the

facility by paying a Commitment Reduction Fee.

The Fee is equal to 2.00% of the facility reduction amount prior to the one-year anniversary

of the WF Credit Facility Fourth Amendment, and 1.00% thereafter.

The applicable percentage for the advance rate on PS BDC Funding II’s

Eligible Loans ranges from 67.5% for Middle Market Loans to 70% for Broadly Syndicated Loans (as each such term is defined in the Loan

PS BDC Funding II has pledged

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under the WF Credit Facility is subject to the leverage restrictions contained in the 1940 Act and PS BDC Funding II complies with 1940

Act provisions relating to affiliated transactions and custody.

The obligations under the Loan Agreement may be accelerated upon the occurrence

of an event of default under the Loan Agreement, including in the event of a change of control of PS BDC Funding II, if the Investment

Advisor ceases to serve as investment adviser to the Company, or if Palmer Square or its affiliates cease to directly or indirectly own

a majority of the membership interests of the Investment Advisor.

Act provisions relating to affiliated transactions and custody (Section 17, as modified by Section 57, of the 1940 Act).

The obligations

under the Loan Agreement may be accelerated upon the occurrence of an event of default under the Loan Agreement, including in the event

of a change of control of PS BDC Funding II, if the Investment Advisor ceases to serve as investment adviser to the Company, or if PSCM

or its affiliates cease to directly or indirectly own a majority of the membership interests of the Investment Advisor.

As of December 31, 2023, we

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Company’s investment objective will be achieved, and investment results may vary substantially on a monthly, quarterly and annual

The Investment Advisor believes that the Company’s investment objective can be achieved by primarily investing in first and

second lien secured loans of small to large private U.S.

companies, and to a lesser extent CLO structured credit funds that typically

own senior secured bank loans of public and private companies.

First and second lien secured loans generally are senior debt instruments

that rank ahead of unsecured debt of a given portfolio company.

These loans also have the benefit of security interests on the assets

of the portfolio company, which may rank ahead of or be junior to other security interests.

A significant portion of the loans in which

the Company may invest or obtain exposure to through its investments in structured securities may be deemed “Covenant-Lite Loans,”

which means the loans contain fewer or no maintenance covenants than other loans 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.

The Investment Advisor seeks to achieve the Company’s investment objective by primarily investing in first and second lien

secured loans of small to large private U.S.

companies, and to a lesser extent CLO structured credit funds that typically own senior secured

bank loans of public and private companies.

The Company seeks to invest in credit and other assets that the Investment Advisor believes

have strong structural protections, limited downside, and low long-term beta, or volatility, in comparison to systemic risk within the

broader credit and equity markets.

First and second lien secured loans generally are senior debt instruments that rank ahead of unsecured

debt of a given portfolio company.

These loans also have the benefit of security interests on the assets of the portfolio company, which

may rank ahead of or be junior to other security interests.

A significant portion of the loans in which the Company may invest or obtain

exposure to through its investments in structured securities may be deemed “Covenant-Lite Loans,” which means the loans contain

fewer or no maintenance covenants than other loans 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.

See “ Item 1A.

Risk Factors—Risks

Related to our Investments—Covenant-Lite Loans ” below.

Risk Factors—Risks Related to our Investments—Covenant-Lite

Loans ” below.

We seek to maximize returns

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on the number of non-U.S.

As of the date of this report, the Investment Advisor believes that the Company’s investment

strategies are positioned to continue to benefit investors for the following three reasons:

attractive yields, with a bias for high quality,

short duration and liquid credits;

the ability to rotate investments to take advantage of dislocations as they arise;

and balance fundamentals

and default risk with valuation.

In addition, to a lesser extent,

portfolio investments may also include, but are not limited to, corporate structured credit, cash and synthetic CLOs, collateralized debt

obligations (each, a “CDO”), swaps, asset backed securities, corporate bonds of large U.S.

companies, corporate

bank loans, preferred stock, municipal bonds or loans and convertible securities.

The Company seeks to invest in credit and other assets

that the Investment Advisor believes have strong structural protections, limited downside, and low long-term beta to the broader credit

and equity markets.

portfolio investments may also include, but are not limited to, corporate structured credit, cash and synthetic CLOs, including the equity

and junior debt tranches of CLOs, collateralized debt obligations (each, a “CDO”), swaps, asset backed securities, corporate

bonds of large U.S.

companies, corporate bank loans, preferred stock, municipal bonds or loans and convertible securities.

While not our primary investment

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determined by the Investment Advisor to be in our best interest, we may acquire a controlling interest in a portfolio company.

we receive with our debt securities may require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value,

we may achieve additional investment return from this equity interest.

intend to create or acquire primary control of any entity which engages in investment activities in securities or other assets other than

entities wholly owned by the Company.

Any warrants we receive with our debt securities may require only a nominal cost to exercise, and

thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest.

Our Investment Advisor may

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Investment Approach

We seek to achieve our investment

objective by applying rigorous credit analysis and asset-based and cash-flow based lending techniques to make and monitor our investments.

We are routinely pursuing multiple investment opportunities, including primary and secondary purchases of securities.

We seek to achieve our investment objective by applying rigorous credit

analysis and asset-based and cash-flow based lending techniques to make and monitor our investments.

We are routinely pursuing multiple

investment opportunities, including primary purchases of newly issued securities and secondary purchases of securities on the open market.

The Investment Advisor employs

a blend of top-down and bottom-up analysis.

a blend of top-down and granular, bottom-up fundamental credit analysis.

The top-down approach has three components:

(1) macro analysis whereby the Investment Team

undertakes frequent dialogues among its team members regarding macro items including the economic outlook, financial and credit markets,

new and secondary issues, regulatory changes, M&A environment, and valuation levels;

(2) cross-asset relative value analysis which

consists of the Investment Team analyzing various asset classes across the credit spectrum for strong relative value opportunities (e.g.,

analysis of valuation metrics across loans, bonds, convertibles, CLOs and mortgage credits to identify and monitor optimal risk / reward

opportunities);

and (3) active monitoring by the Investment Team of the major sectors within corporate credit, such as software and technology,

healthcare and business services.

With regard to the bottom-up analysis, the Investment Team undertakes frequent dialogue discussing key

analyses including items such as determining an issuer’s ability to service debt, measuring past performance and understanding the

approach of the management team and their ability to meet goals, deal structure model analysis, document analysis and other financial

modeling and scenario testing.

Finally, the bottom-up analysis includes specific analysis.

For example, within the credit spectrum, the

team also seeks to evaluate many trade specifics including liquidity, position size, upside/downside, and relative versus absolute value.

(1) macro analysis

whereby the Investment Team undertakes frequent dialogues among its team members regarding macro items including the economic outlook,

financial and credit markets, new and secondary issues, regulatory changes, M&A environment, and valuation levels;

(2) cross-asset

relative value analysis which consists of the Investment Team analyzing various asset classes across the credit spectrum for strong relative

value opportunities (e.g., analysis of valuation metrics across loans, bonds, convertibles, CLOs and mortgage credits to identify and

monitor optimal risk / reward opportunities);

and (3) active monitoring by the Investment Team of the major sectors within corporate credit,

such as software and technology, healthcare and business services.

With regard to the bottom-up analysis, the Investment Team undertakes

frequent dialogue discussing key analyses including items such as determining an issuer’s ability to service debt, measuring past

performance and understanding the approach of the management team and their ability to meet goals, deal structure model analysis, document

analysis and other financial modeling and scenario testing.

Finally, the bottom-up analysis includes trade specific analysis.

within the credit spectrum, the team also seeks to evaluate many trade specifics including liquidity, position size, upside/downside,

and relative versus absolute value.

We believe our vast experience

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Investment Process – Senior Secured Loans

The Investment Advisor’s

senior secured loan investment strategy has been consistent throughout multiple credit environments and is predicated on the view that

a conservative approach to investing in first lien and second lien senior secured loans is the optimal strategy over the course of a credit

Given the idiosyncratic nature of secured loans, our Investment Team focuses on downside protection and overall credit quality

when evaluating each and every loan borrower.

The Investment Team’s senior secured loan investment strategy

has been consistent throughout multiple credit environments and is predicated on the view that a conservative approach to investing in

first lien and second lien senior secured loans is the optimal strategy over the course of a credit cycle.

Given the idiosyncratic nature

of secured loans, our Investment Team focuses on downside protection and overall credit quality when evaluating each and every loan borrower.

The Investment Team evaluates

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set of projections.

At the conclusion of the due

diligence process, the credit analyst presents a formal investment memorandum to the entire Investment Team, which includes the Investment

Committee (which averages over 25 years of credit investing experience) and all industry credit analysts.

Our Investment Advisor views

this part of our process as unique across credit investment firms but believes that this more fulsome and collaborative process leads

to better investment decisions.

Ultimately the Investment Committee needs to have a unanimous vote in order to approve any of our investments,

working in collaboration with our Chief Investment Officer and the Investment Advisor’s loan portfolio manager to size the position

appropriately for the risk.

At the conclusion of the due diligence process, the credit analyst

presents a formal investment memorandum to the entire Investment Team, which includes the Investment Committee (which averages over 24

years of credit investing experience) and all industry credit analysts.

Our Investment Advisor views this part of our process as unique

across credit investment firms but believes that this more fulsome and collaborative process leads to better investment decisions.

the Investment Committee needs to have a unanimous vote in order to approve any of our investments, working in collaboration with our

Chief Investment Officer and the Investment Advisor’s loan portfolio manager to size the position appropriately for the risk.

Of equal importance, the monitoring

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Investment Process – ESG Integration

We believe that integrating

environmental, social and corporate governance (“ESG”) criteria should be an important component of our investment philosophy

Effective March 1, 2021, we have implemented policies and procedures to screen for ESG criteria in our potential investments,

and our Investment Committee is responsible for monitoring our investments to ensure that our ESG guidelines are met.

We believe that integrating environmental, social and corporate governance

(“ESG”) criteria and risk assessment should be an important component of our overall investment philosophy and process.

formed its initial ESG policy statement and integrated an ESG framework into its investment process in 2019 and became a United Nations

Principles for Responsible Investment signatory in 2020.

It has also formed an ESG Committee which helps to develop and implement its

ESG policies.

The ESG Committee has developed and maintains a proprietary ESG scoring system.

The Investment Team is responsible for utilizing

the system to assign a score to each non-investment grade borrower to which the Company is a lender.

Each scored non-investment grade

borrower is assigned an environmental score, a social score and a governance score, with the scoring based on whether the non-investment

grade borrower is determined to be subject to material environmental, social, or governance risks that may negatively impact credit quality

and/or valuations and/or whether the non-investment grade borrower is believed to not be sufficiently mitigating such risks.

inform our underwriting and monitoring processes, but are not used on a standalone basis to approve or decline an investment.

effective March 1, 2021, we have implemented policies and procedures to screen for Prohibited ESG Securities (as defined below) in our

potential investments.

Our Investment Committee, together with PSCM’s ESG Committee, is responsible for monitoring our investments

to ensure that our ESG guidelines are met.

Our ESG guidelines state that

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for the relevant business, trade or production (as applicable).

Following its effectiveness

on March 1, 2021, our ESG guidelines are followed by our Investment Committee on a go-forward basis, and certain of our investments held

prior to March 1, 2021, including as set forth in the schedule of investments herein or in our prior quarterly reports on Form 10-Q and

annual reports on Form 10-K, may not have satisfied our newly adopted ESG guidelines.

Our Investment Committee is responsible for the

execution and continued progress of integration of ESG criteria into our investment strategy, and will support efforts to collaborate

with our investors and others in the investment industry to assess and prioritize the ESG topics that are most relevant to the Company

and our investors.

Following its effectiveness on March 1, 2021, our ESG guidelines are

followed by our Investment Committee on a go-forward basis, and certain of our investments held prior to March 1, 2021, including as set

forth in the schedule of investments herein or in our prior quarterly reports on Form 10-Q, may not have satisfied our newly adopted ESG

Our Investment Committee is responsible for the execution and continued progress of integration of ESG criteria into our investment

strategy, and will support efforts to collaborate with our investors and others in the investment industry to assess and prioritize the

ESG topics that are most relevant to the Company and our investors.

Investment Process — Ongoing Portfolio

The Investment Advisor employs

an active relative value scoring system to monitor portfolio investments throughout the life of a loan.

Existing positions are assigned

a score of 5 to 1 to each position, which is updated on an ongoing basis and the Investment Advisor’s analysts incorporate both

a fundamental and relative value view.

The scoring system is as follows:

Add Now Where Possible/Outperforming or Compelling Relative

Performing At or Above Plan/Add on Relative Where Applicable

Hold/Fair Value

Sell Opportunistically/Don’t Add

Sell Now Where Possible/Potential for Impairment.

Investment Committee

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or to the distribution and other requirements we must satisfy as a RIC.

We use the expertise of the

investment professionals of Palmer Square to which we have access pursuant to the Resource Sharing Agreement to assess investment risks

and determine appropriate pricing for our investments in portfolio companies.

In addition, we seek to use the relationships of the Investment

Advisor to enable us to learn about, and compete effectively for, financing opportunities with attractive small to large private companies

in the industries in which we seek to invest.

For additional information concerning the competitive risks we face, see “ Item

Risk Factors—Risks Relating to our Business and Structure—Operation in a Highly Competitive Market for Investment Opportunities .”

Our primary operating

expenses include the payment of fees to the Investment Advisor under the Advisory Agreement, our allocable portion of overhead and rental

expenses under the Administration Agreement and other operating costs described below.

We bear all other out-of-pocket costs and expenses

of our operations and transactions, including:

We use the expertise of the investment professionals of PSCM to which

we have access pursuant to the Resource Sharing Agreement to assess investment risks and determine appropriate pricing for our investments

in portfolio companies.

In addition, we seek to use the relationships of the Investment Advisor to enable us to learn about, and compete

effectively for, financing opportunities with attractive small to large private companies in the industries in which we seek to invest.

For additional information concerning the competitive risks we face, see “ Item 1A.

Risk Factors—Risks Relating to our Business

and Structure—We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses .”

Our primary operating expenses

include the payment of fees to the Investment Advisor under the Advisory Agreement, our allocable portion of overhead and rental expenses

under the Administration Agreement and other operating costs described below.

We bear all other out-of-pocket costs and expenses of our

operations and transactions, including:

interest expense and other costs associated with our indebtedness;

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other expenses incurred by the Administrator or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion (subject to the review and approval of our Board) of overhead, including rental expenses.

Implications of Being an Emerging Growth Company

We currently are, and expect

to remain, an “emerging growth company,” as that term is used in the JOBS Act, until the earliest of:

to five years measured from the date of the first sale of common stock pursuant to the registration

statement with respect to the IPO;

last day of the first fiscal year in which our annual gross revenues are $1.235 billion or

date on which we have, during the preceding three-year period, issued more than $1.0 billion

in non-convertible debt securities;

date that we become a “large-accelerated filer” as defined in Rule 12b-2 under

the Exchange Act, which would occur if the market value of our common stock that is held

by non-affiliates exceeds $700 million as of June 30th of any year.

Under the JOBS Act, we are exempt from the provisions of Section 404(b) of

the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), which would require that our independent registered

public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.

This may increase

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

In addition, as an emerging growth company, we have elected to take

advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act and Section 13(a) of

the Exchange Act for complying with new or revised accounting standards.

We do not currently have any

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Officers, and Corporate Governance.

Our day-to-day investment

operations are managed by the Investment Advisor.

Pursuant to its Resource Sharing Agreement with Palmer Square, the Investment Advisor

has access to the individuals who comprise our Investment Advisor’s Investment Committee and Investment Team.

The Investment Advisor

may hire additional investment professionals to provide services to us, based upon its needs.

Our day-to-day investment operations are managed by the Investment

Pursuant to its Resource Sharing Agreement with PSCM, the Investment Advisor has access to the individuals who comprise our Investment

Advisor’s Investment Committee and Investment Team.

The Investment Advisor may hire additional investment professionals to provide

services to us, based upon its needs.

See above “ Item 1.

The Investment Advisor .”

Business — The Investment Advisor .”

Open Market Share Repurchase Plan

Our Board authorized us to

repurchase shares of our common stock through an open-market share repurchase program for up to $20 million in the aggregate of shares

of our common stock through 12 months from the date of the IPO.

Pursuant to such authorization and concurrently with the closing of the

IPO, we entered into a share repurchase plan (the “Company Rule 10b5-1 Stock Repurchase Plan”) to acquire up to $15 million

in the aggregate of shares of our common stock, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Exchange

The Company Rule 10b5-1 Stock

Repurchase Plan is intended to allow us to repurchase shares of our common stock at times when we otherwise might be prevented from doing

so under insider trading laws.

The Company Rule 10b5-1 Stock Repurchase Plan will require our agent to repurchase shares of common stock

on our behalf when the market price per share of our common stock is below the most recently reported NAV per share of our common stock

(including any updates, corrections or adjustments publicly announced by us to any previously announced NAV per share).

Under the Company

Rule 10b5-1 Stock Repurchase Plan, the agent will increase the volume of purchases made as the price of our common stock declines, subject

to volume restrictions.

The repurchase of shares pursuant

to the Company Rule 10b5-1 Stock Repurchase Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange

Act and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances.

The Company Rule 10b5-1 Stock

Repurchase Plan will commence beginning 60 calendar days following the end of the “restricted period” under Regulation M and

terminate upon the earliest to occur of (i) 12 months from the date of the Company Rule 10b5-1 Stock Repurchase Plan, (ii) the end of

the trading day on which the aggregate purchase price for all shares purchased under the Company Rule 10b5-1 Stock Repurchase Plan equals

$15 million and (iii) the occurrence of certain other events described in the Company Rule 10b5-1 Stock Repurchase Plan.

The “restricted

period” under Regulation M will end upon the closing of the IPO and, therefore, the common stock repurchases/purchases described

above shall not begin prior to 60 days after the closing of the IPO.

PSCM Rule 10b5-1 Stock Purchase Plan

In addition, PSCM will purchase

up to $5 million in the aggregate of shares of our common stock in the open market within one year of the date of the IPO if our shares

of common stock trade below a specific level of NAV per share following the completion of the IPO.

In order to facilitate PSCM’s

purchase commitment, concurrently with the closing of the IPO, PSCM entered into a share purchase plan (the “PSCM Rule 10b5-1 Stock

Purchase Plan”) to permit the purchase of up to $2.5 million of our shares of common stock.

The purchases of shares pursuant to

the PSCM Rule 10b5-1 Stock Purchase Plan will be implemented in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act.

The PSCM Rule 10b5-1 Stock

Purchase Plan is intended to allow PSCM to purchase shares of our common stock at times when it otherwise might be prevented from doing

so under insider trading laws.

The PSCM Rule 10b5-1 Stock Purchase Plan will require PSCM’s agent to purchase shares of common stock

on PSCM’s behalf when the market price per share of our common stock is trading below the most recently reported NAV per share of

our common stock (including any updates, corrections or adjustments publicly announced by us to any previously announced NAV per share).

Under the PSCM Rule 10b-1 Stock Purchase Plan, the agent will increase the volume of purchases made as the price of our common stock declines,

subject to volume restrictions.

The purchase of shares pursuant

to the PSCM Rule 10b5-1 Stock Purchase Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act,

and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances.

The PSCM Rule 10b5-1 Stock Purchase Plan will commence beginning 60

calendar days following the end of the “restricted period” under Regulation M and terminate upon the earliest to occur of

(i) 12 months from the date of the PSCM Rule 10b5-1 Stock Purchase Plan, (ii) the end of the trading day on which the aggregate purchase

price for all shares purchased under the PSCM Rule 10b5-1 Stock Purchase Plan equals $2.5 million and (iii) the occurrence of certain

other events described in the PSCM Rule 10b5-1 Stock Purchase Plan.

The “restricted period” under Regulation M will end upon

the closing of the IPO and, therefore, the common stock repurchases/purchases described above shall not begin prior to 60 days after the

closing of the IPO.

Regulation as a Business Development Company

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Exchange Act and Sarbanes-Oxley Act Compliance

The Sarbanes-Oxley Act of

2002 (the “Sarbanes-Oxley Act”) imposes a wide variety of regulatory requirements on certain publicly held companies and their

Assuming certain requirements are met, many of these requirements affect us.

The Sarbanes-Oxley Act of 2002 imposes a wide variety of regulatory

requirements on certain publicly held companies and their insiders.

Assuming certain requirements are met, many of these requirements

pursuant to Rule 13a-14 of the Exchange Act, our chief executive officer and chief financial officer are required to certify the accuracy of the consolidated financial statements contained in our periodic reports;

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as applied to the Company.

From time to time nonpublic

personal information of our stockholders may be collected as required for legitimate business purposes.

The Company may share all of the

information that we collect with our Investment Advisor and its affiliates in order to service stockholder accounts or provide stockholders

with information about other products and services offered by the Company or the Investment Advisor or its affiliates that may be of interest

From time to time, nonpublic personal information of our stockholders

may be collected as required for legitimate business purposes.

The Company may share all of the information that we collect with our Investment

Advisor and its affiliates in order to service stockholder accounts or provide stockholders with information about other products and

services offered by the Company or the Investment Advisor or its affiliates that may be of interest to them.

In addition, the Company may

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Federal Income Tax Considerations

The following discussion is

a general summary of the material U.S.

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

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

does not purport to be a complete description of the income tax considerations applicable to such an investment.

For example, we have

not described tax consequences that may be relevant to certain types of holders subject to special treatment under U.S.

federal income

tax laws, including stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities,

pension plans and trusts, financial institutions, partnerships and other pass- through entities, U.S.

stockholders (as defined below)

whose functional currency is not the U.S.

dollar, persons who mark-to-market our shares and persons who hold our shares as part of a “straddle,”

“hedge” or “conversion” transaction.

This summary assumes that investors hold our common stock as capital assets

(within the meaning of the Code).

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

each as of the date hereof and all of which are subject to change, possibly retroactively, which could affect the continuing validity

of this discussion.

We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”) regarding

any matter discussed herein.

This summary does not purport to be a complete

description of the income tax considerations applicable to such an investment.

For example, we have not described tax consequences that

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

federal income tax laws, including stockholders subject

to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, pension plans and trusts, financial

institutions, partnerships and other pass-through entities, U.S.

stockholders (as defined below) whose functional currency is not the

dollar, persons who mark-to-market our shares and persons who hold our shares as part of a “straddle,” “hedge”

or “conversion” transaction.

This summary assumes that investors hold our common stock as capital assets (within the meaning

of the Code).

The discussion is based upon the Code, Treasury regulations, and administrative and judicial interpretations, each as of

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

We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”) regarding any matter discussed

Tax counsel has not rendered any legal opinion regarding any tax consequences relating to us or our stockholders.

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

does not discuss any aspects of U.S.

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

It does not discuss the special treatment

It does not discuss the special treatment under

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

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Election to be Taxed as a RIC

As a BDC, we have elected,

and intend to qualify annually, as a RIC under Subchapter M of the Code, beginning with our initial taxable year ending December 31, 2020.

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

federal income taxes on any income that we distribute to our stockholders

from our earnings and profits.

As a BDC, we have elected, and intend to qualify annually, as a RIC

under Subchapter M of the Code, beginning with our initial taxable year ended December 31, 2020.

As a RIC, we generally will not have

to pay corporate-level U.S.

federal income taxes on any income that we distribute (or are deemed to distribute) to our stockholders from

our earnings and profits.

To qualify for and maintain our qualification as a RIC, we must, among other things, meet certain source-of-income

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Diversification Tests.

A RIC is limited in its ability

to deduct expenses in excess of its investment company taxable income.

If our deductible expenses in a given taxable year exceed our investment

company taxable income, we may incur a net operating loss for that taxable year.

However, a RIC is not permitted to carry forward net

operating losses to subsequent taxable years and such net operating losses do not pass through to its stockholders.

In addition, deductible

expenses can be used only to offset investment company taxable income, not net capital gain.

A RIC may not use any net capital losses

(that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may

carry forward such net capital losses, and use them to offset future capital gains, indefinitely.

Due to these limits on deductibility

of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required

to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during

those taxable years.

Certain of our investment

practices may be subject to special and complex U.S.

federal income tax provisions that may, among other things, (1) treat distributions

that would otherwise constitute qualified distribution income as non-qualified distribution income, (2) treat distributions that would

otherwise be eligible for the corporate dividends-received deduction as ineligible for such treatment, (3) disallow, suspend or otherwise

limit the allowance of certain losses or deductions, (4) convert lower-taxed long-term capital gain into higher-taxed short-term capital

gain or ordinary income, (5) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited),

(6) cause us to recognize income or gain without a corresponding receipt of cash, (7) adversely affect the time as to when a purchase

or sale of shares or securities is deemed to occur, (8) adversely alter the characterization of certain complex financial transactions

and (9) produce income that will not be qualifying income for purposes of the 90% Income Test.

We intend to monitor our transactions and

may make certain tax elections to mitigate the effect of these provisions and prevent our ability to be subject to tax as a RIC.

Gain or loss realized by us from warrants acquired by us as well as

any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss.

Such gain or loss generally will

be long-term or short-term, depending on how long we held a particular warrant.

For federal income tax purposes,

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unless certain “asset coverage” tests are met.

See “Regulation as a Business Development Company — Senior Securities.”

Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our

portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests.

If we dispose of assets

to meet the Annual Distribution Requirement or the Excise Tax Distribution Requirement, we may make such dispositions at times that, from

an investment standpoint, are not advantageous.

See “ Regulation — Regulation as a Business Development Company

— Senior Securities.

” Moreover, our ability to dispose of assets to meet our distribution requirements may be limited

by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification

If we dispose of assets to meet the Annual Distribution Requirement or the Excise Tax Distribution Requirement, we may make such

dispositions at times that, from an investment standpoint, are not advantageous.

A portfolio company in which

we invest may face financial difficulties that require us to work-out, modify or otherwise restructure its investment in the portfolio

Any such transaction could, depending upon the specific terms of the transaction, result in unusable capital losses and future

non-cash income.

Any such transaction could also result in our receiving assets that give rise to income that is not qualifying income

for purposes of the 90% Income Test.

Our investment in non-U.S.

securities may be subject to non-U.S.

income, withholding and other taxes.

In that case, our yield on those securities would be decreased.

Stockholders generally will not be entitled to claim a U.S.

foreign tax credit or deduction with respect to non-U.S.

taxes paid by the

We may invest in stocks of

foreign companies that are classified under the Code as passive foreign investment companies (“PFICs”).

In general, a foreign

company is classified as a PFIC if at least 50% of its assets constitute investment-type assets or 75% or more of its gross income is

investment-type income.

In general, under the PFIC rules, an “excess distribution” received with respect to PFIC stock is

treated as having been realized ratably over the period during which we held the PFIC stock.

We will be subject to tax on the portion,

if any, of the excess distribution that is allocated to our holding period in prior taxable years (and an interest factor will be added

to the tax, as if the tax had actually been payable in such prior taxable years) even though we distribute the corresponding income to

stockholders.

Excess distributions include any gain from the sale of PFIC stock as well as certain distributions from a PFIC.

distributions are taxable as ordinary income.

We may be eligible to elect

alternative tax treatment with respect to PFIC stock.

Under such an election, we generally would be required to include in our gross income

its share of the earnings of a PFIC on a current basis, regardless of whether any distributions are received from the PFIC.

If this election

is made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply.

Alternatively, we may

be able to elect to mark to market our PFIC stock, resulting in any unrealized gains at year end being treated as though they were realized

and reported as ordinary income.

Any mark-to-market losses and any loss from an actual disposition of the PFIC’s shares would be

deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior years with respect to stock in

the same PFIC.

Because the application of

the PFIC rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition of

income with respect to PFIC stock, as well as subject us to tax on certain income from PFIC stock, the amount that must be distributed

to stockholders, and which will be taxed to stockholders as ordinary income or long-term capital gain, may be increased or decreased substantially

as compared to a fund that did not invest in PFIC stock.

Under the Code, gains or losses attributable to fluctuations in foreign

currency exchange rates that occur between the time we accrue interest income or other receivables or accrues expenses or other liabilities

denominated in a foreign currency and the time we actually collect such receivables or pays such liabilities generally are treated as

ordinary income or ordinary loss.

Similarly, on disposition of some investments, including debt securities and certain forward contracts

denominated in a foreign currency, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition

of the security or contract and the date of disposition also are treated as ordinary gain or loss.

These gains and losses, referred to

under the Code as “section 988” gains and losses, may increase or decrease the amount of our investment company taxable income

to be distributed to stockholders as ordinary income.

For example, fluctuations in exchange rates may increase the amount of income that

we must distribute in order to qualify for treatment as a RIC and to prevent application of an excise tax on undistributed income.

Alternatively,

fluctuations in exchange rates may decrease or eliminate income available for distribution.

If section 988 losses exceed other investment

company taxable income during a taxable year, we would not be able to make ordinary distributions, or distributions made before the losses

were realized would be re-characterized as a return of capital to stockholders for U.S.

federal income tax purposes, rather than as ordinary

dividend income, and would reduce each stockholder’s basis in our shares.

Distributions from capital

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Capital loss carryforwards are reduced to the extent

they offset current-year net realized capital gains, whether we retain or distributes such gains.

they offset current-year net realized capital gains, whether we retain or distribute such gains.

If we incur or have incurred capital

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to limitation.

In determining our net capital

gain, including also in connection with determining the amount available to support a capital gain dividend, our taxable income and our

earnings and profits, we generally may elect to treat part or all of any post-October capital loss (defined as any net capital loss attributable

to the portion, if any, of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term

capital loss attributable to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of (i) our net ordinary

loss, if any, from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year

after October 31, and (ii) our other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December

31) as if incurred in the succeeding taxable year.

In determining our net capital gain, including also in connection with

determining the amount available to support a capital gain dividend, our taxable income and our earnings and profits, we generally may

elect to treat part or all of any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the

taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable

to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of (i) our net ordinary loss, if any, from the

sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year after October 31, and

(ii) our other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in

the succeeding taxable year.

Failure to Qualify as a RIC

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as a capital gain.

To requalify as a RIC in a

subsequent taxable year, we would be required to satisfy the RIC qualification requirements for that year and dispose of any earnings

and profits from any year in which we failed to qualify as a RIC.

Subject to a limited exception applicable to RICs that qualified as

such under the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following

the nonqualifying year, we would be subject to tax on any unrealized net built-in gains in the assets held by us during the period in

which we failed to qualify as a RIC that are recognized within the subsequent 5 years, unless we made a special election to pay corporate-level

federal income tax on such built-in gains at the time of our requalification as a RIC.

To requalify as a RIC in a subsequent taxable year, we would be required

to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to

qualify as a RIC.

Subject to a limited exception applicable to RICs that qualified as such under the Code for at least one year prior

to disqualification and that requalify as a RIC no later than the second year following the nonqualifying year, we would be subject to

tax on any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized

within the subsequent 5 years, unless we made a special election to pay corporate-level U.S.

federal income tax on such built-in gains

at the time of our requalification as a RIC.

We may decide to be taxed as a regular corporation even if we would otherwise qualify as

a RIC if we determine that treatment as a corporation for a particular year would be in our best interests.

The remainder of this discussion

1 unchanged sentence

Taxation of U.S.

Distributions by us generally

are taxable to U.S.

stockholders as ordinary income or capital gains.

Distributions of our “investment company taxable income”

(which is, generally, our net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses)

will be taxable as ordinary income to U.S.

stockholders to the extent of our current or accumulated earnings and profits, whether paid

in cash or reinvested in additional common stock.

To the extent such distributions paid by us to non-corporate stockholders (including

individuals) are attributable to dividends from U.S.

corporations and certain qualified foreign corporations, such distributions (“Qualifying

Dividends”) may be eligible for a maximum tax rate of 20%, provided that we properly report such distribution as “qualifying

dividend income” in a written statement furnished to our stockholders and certain holding period and other requirements are satisfied.

In this regard, it is not anticipated that a significant portion of distributions paid by us will be attributable to qualifying dividends;

therefore, our distributions generally will not qualify for the preferential maximum rate applicable to Qualifying Dividends.

Distributions

of our net capital gain (which is generally our realized net long-term capital gains in excess of realized net short-term capital losses)

properly designated by us as “capital gain dividends” will be taxable to a U.S.

stockholder as long-term capital gains that

are currently generally taxable at a maximum rate of 20% in the case of individuals, trusts or estates, regardless of the U.S.

stockholder’s

holding period for his, her or its common stock and regardless of whether paid in cash or reinvested in additional common stock.

Distributions

in excess of our earnings and profits first will reduce a U.S.

stockholder’s adjusted tax basis in such stockholder’s common

stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S.

Certain distributions that

we report as Section 163(j) interest dividends may be treated as interest income by U.S.

stockholders for purposes of the tax rules applicable

to interest expense limitations under Section 163(j) of the Code.

Such treatment by the U.S.

stockholder is generally subject to holding

period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends

declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent

The amount that we are eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of our

business interest income over the sum of our (i) business interest expense and (ii) other deductions properly allocable to our business

interest income.

Although we currently intend

to distribute any long-term capital gain at least annually, we may in the future decide to retain some or all of our long-term capital

gain, but designate the retained amount as a “deemed distribution.” In that case, among other consequences, we will pay tax

on the retained amount, each U.S.

stockholder will be required to include his, her or its proportionate share of the deemed distribution

in income as if it had been actually distributed to the U.S.

Distributions by us generally are taxable to U.S.

stockholders as ordinary

income or capital gains, whether paid in cash or reinvested in additional shares.

Distributions of our “investment company taxable

income” (which is, generally, our net ordinary income plus realized net short-term capital gains in excess of realized net long-term

capital losses) will be taxable as ordinary income to U.S.

stockholders to the extent of our current or accumulated earnings and profits,

whether paid in cash or reinvested in additional common stock.

To the extent such distributions paid by us to non-corporate stockholders

(including individuals) are attributable to dividends from U.S.

corporations and certain qualified foreign corporations, such distributions

(“Qualifying Dividends”) may be eligible for a maximum tax rate of 20%, provided that we properly report such distribution

as “qualifying dividend income” in a written statement furnished to our stockholders and certain holding period and other

requirements are satisfied.

In this regard, it is not anticipated that a significant portion of distributions paid by us will be attributable

to qualifying dividends;

therefore, our distributions generally will not qualify for the preferential maximum rate applicable to Qualifying

Distributions of our net capital gain (which is generally our realized net long-term capital gains in excess of realized net

short-term capital losses) properly reported by us as “capital gain dividends” will be taxable to a U.S.

stockholder as long-term

capital gains that are currently generally taxable at a maximum rate of 20% in the case of individuals, trusts or estates, regardless

stockholder’s holding period for his, her or its common stock and regardless of whether paid in cash or reinvested in

additional common stock.

Distributions in excess of our earnings and profits first will reduce a U.S.

stockholder’s adjusted tax

basis in such stockholder’s common stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such

Although we currently intend to distribute any long-term capital gain

at least annually, we may in the future decide to retain some or all of our long-term capital gain, but report the retained amount as

a “deemed distribution.” In that case, among other consequences, we will pay tax on the retained amount, each U.S.

will be required to include his, her or its proportionate share of the deemed distribution in income as if it had been actually distributed

stockholder, and the U.S.

stockholder will be entitled to claim a credit

equal to his, her or its allocable share of the tax paid thereon by us.

The amount of the deemed distribution net of such tax will be

added to the U.S.

stockholder’s tax basis for his, her or its common stock.

Since we expect to pay tax on any retained capital gain

at our regular corporate tax rate, and since that rate is in excess of the maximum rate currently payable by individuals on net capital

gain, the amount of tax that individual stockholders will be treated as having paid and for which they will receive a credit will exceed

the tax they owe on the retained net capital gain.

stockholder will be entitled to claim a credit equal to his, her or its allocable share of the tax

paid thereon by us.

The amount of the deemed distribution net of such tax will be added to the U.S.

stockholder’s tax basis for

his, her or its common stock.

Since we expect to pay tax on any retained capital gain at our regular corporate tax rate, and since that

rate is in excess of the maximum rate currently payable by individuals on net capital gain, the amount of tax that individual stockholders

will be treated as having paid and for which they will receive a credit will exceed the tax they owe on the retained net capital gain.

Such excess generally may be claimed as a credit against the U.S.

stockholder’s

federal income tax obligations or may be refunded to the extent it exceeds a stockholder’s liability for U.S.

A stockholder that is not subject to U.S.

stockholder’s other U.S.

federal income tax obligations or may

be refunded to the extent it exceeds a stockholder’s liability for U.S.

federal income tax.

A stockholder that is not subject to

federal income tax or otherwise required to file a U.S.

federal income tax return

would be required to file a U.S.

federal income tax return on the appropriate form to claim a refund for the taxes we paid.

the deemed distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close

of the relevant taxable year.

We cannot treat any of our investment company taxable income as a “deemed distribution.”

federal income tax return would be required to file a U.S.

federal income

tax return on the appropriate form to claim a refund for the taxes we paid.

To utilize the deemed distribution approach, we must provide

written notice to our stockholders prior to the expiration of 60 days after the close of the relevant taxable year.

We cannot treat any

of our investment company taxable income as a “deemed distribution.”

For purposes of determining

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stockholders on December 31 of the year in which the distribution was declared.

The IRS currently requires

that a RIC that has two or more classes of stock allocate to each such class proportionate amounts of each type of its income (such as

ordinary income and capital gains) based upon the percentage of total dividends paid to each class for the tax year.

Accordingly, if we

issue preferred stock, we intend each year to allocate capital gain dividends, if any, between our shares of common stock and shares of

preferred stock in proportion to the total dividends paid to each class with respect to such tax year.

If an investor purchases shares

1 unchanged sentence

and the investor will be subject to tax on the distribution even though economically it may represent a return of his, her or its investment.

A stockholder generally will

recognize taxable gain or loss if the stockholder sells or otherwise disposes of his, her or its shares of our common stock.

of gain or loss will be measured by the difference between such stockholder’s adjusted tax basis in the common stock sold and the

amount of the proceeds received in exchange.

Any gain arising from such sale or disposition generally will be treated as long-term capital

gain or loss if the stockholder has held the shares for more than one year.

Otherwise, it will be classified as short-term capital gain

However, any capital loss arising from the sale or disposition of shares of our common stock held for six months or less will

be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed

received, with respect to such shares.

In addition, all or a portion of any loss recognized upon a disposition of shares of our common

stock may be disallowed if other shares of our common stock or substantially identical position are purchased or acquired (whether through

reinvestment of distributions or otherwise) within 30 days before or after the disposition.

Certain distributions reported by us as section 163(j) interest dividends

may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under section

163(j) of the Code.

Such treatment by the shareholder is generally subject to holding period requirements and other potential limitations,

although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds

that declare dividends daily and pay such dividends on a monthly or more frequent basis.

The amount that we are eligible to report as

a section 163(j) dividend for a tax year is generally limited to the excess of our business interest income over the sum of our (i) business

interest expense and (ii) other deductions properly allocable to our business interest income.

Stockholders generally will recognize taxable gain or loss if the stockholder

sells or otherwise disposes of his, her or its shares of our common stock.

The amount of gain or loss will be measured by the difference

between such stockholder’s adjusted tax basis in the common stock sold and the amount of the proceeds received in exchange.

gain arising from such sale or disposition generally will be treated as long-term capital gain or loss if the stockholder has held the

shares for more than one year.

Otherwise, it will be classified as short-term capital gain or loss.

However, any capital loss arising

from the sale or disposition of shares of our common stock held for six months or less will be treated as long-term capital loss to the

extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares.

addition, all or a portion of any loss recognized upon a disposition of shares of our common stock may be disallowed if other shares of

our common stock or substantially identical position are purchased or acquired (whether through reinvestment of distributions or otherwise)

within 30 days before or after the disposition.

In general, individual U.S.

stockholders currently are subject to a maximum federal income tax rate of 20% on their net capital gain (i.e., the excess of realized

net long-term capital gains over realized net short-term capital losses), including any long-term capital gain derived from an investment

in our shares.

Such rate is lower than the maximum rate on ordinary income currently payable by individuals.

In addition, an additional

3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received

from us and net gains from redemptions or other taxable dispositions of our common stock) of U.S.

high-income individuals, and certain

estates and trusts.

stockholders currently are subject to a

maximum federal income tax rate of 20% on their net capital gain (i.e., the excess of realized net long-term capital gains over realized

net short-term capital losses), including any long-term capital gain derived from an investment in our shares.

Such rate is lower than

the maximum rate on ordinary income currently payable by individuals.

In addition, an additional 3.8% Medicare tax will be imposed on

certain net investment income (including ordinary dividends and capital gain distributions received from us and net gains from redemptions

or other taxable dispositions of our common stock) of U.S.

high-income individuals, and certain estates and trusts.

Corporate U.S.

stockholders currently are subject to federal income tax on net capital gain at the maximum 21% corporate

income tax rate also applied to ordinary income.

Non-corporate stockholders with net capital losses for a year (i.e., capital losses in

excess of capital gains) generally may deduct up to $3,000 of such losses against their ordinary income each year;

any net capital losses

of a non-corporate stockholder in excess of $3,000 generally may be carried forward and used in subsequent years as provided in the Code.

Corporate stockholders generally may not deduct any net capital losses for a year, but may carry back such losses for three years or carry

forward such losses for five years.

currently are subject to federal income tax on net capital gain at the maximum 21% corporate income tax rate also applied to ordinary

Non-corporate stockholders with net capital losses for a year (i.e., capital losses in excess of capital gains) generally may

deduct up to $3,000 of such losses against their ordinary income each year;

any net capital losses of a non-corporate stockholder in excess

of $3,000 generally may be carried forward and used in subsequent years as provided in the Code.

Corporate stockholders generally may

not deduct any net capital losses for a year but may carry back such losses for three years or carry forward such losses for five years.

We (or if a U.S.

95 unchanged sentences

stockholders, no withholding will be required and the distributions generally will not

be subject to federal income tax if (i) the distributions are properly reported in a notice timely delivered to our stockholders as “interest-related

dividends” or “short-term capital gain dividends,” (ii) the distributions are derived from sources specified in the

Code for such dividends and (iii) certain other requirements are satisfied.

No assurance can be given as to whether any of our distributions

will be reported as eligible for this exemption from withholding tax.

be subject to federal income tax if (i) the distributions are properly designated in a notice timely delivered to our stockholders as

“interest-related dividends” or “short-term capital gain dividends,” (ii) the distributions are derived from sources

specified in the Code for such dividends and (iii) certain other requirements are satisfied.

No assurance can be given as to whether any

of our distributions will be reported as eligible for this exemption from withholding tax.

Actual or deemed distributions

8 unchanged sentences

treaty applies, are attributable to a permanent establishment maintained by the Non-U.S.

stockholder in the United States or (ii) in the

case of an individual Non-U.S.

stockholder, the stockholder is present in the United States for a period or periods aggregating 183 days

or more during the year of the sale or the receipt of the distributions or gains and certain other conditions are met.

stockholder in the United States, or such Non-U.S.

stockholder in the United States or (ii) in the case of an individual stockholder, the stockholder is present in the United States for

a period or periods aggregating 183 days or more during the year of the sale or the receipt of the distributions or gains and certain

other conditions are met.

If we distribute our net capital

23 unchanged sentences

stockholder provides us or the

dividend paying agent with an IRS Form W-8BEN (or an acceptable substitute form) or otherwise meets documentary evidence requirements

dividend disbursing agent with an IRS Form W-8BEN (or an acceptable substitute form) or otherwise meets documentary evidence requirements

for establishing that it is a Non-U.S.

4 unchanged sentences

Foreign Account Tax Compliance Act

Under the Foreign Account

Tax Compliance Act or “FATCA,” a 30% withholding tax applies on payments of certain types of income to foreign financial institutions

(“FFIs”) unless such FFIs either (i) enter into an agreement with the U.S.

Treasury to report certain required information

with respect to accounts held by U.S.

persons (or held by foreign entities that have U.S.

persons as substantial owners) or (ii) reside

in a jurisdiction that has entered into an intergovernmental agreement (“IGA”) with the United States to collect and share

such information and are in compliance with the terms of such IGA and any enabling legislation or regulations.

The types of income subject

to the tax include U.S.

Legislation commonly referred

to as the “Foreign Account Tax Compliance Act,” or “FATCA,” generally imposes a 30% withholding tax on payments

of certain types of income to foreign financial institutions (“FFIs”) unless such FFIs either (i) enter into an agreement

with the U.S.

Treasury to report certain required information with respect to accounts held by U.S.

persons (or held by foreign entities

that have U.S.

persons as substantial owners) or (ii) reside in a jurisdiction that has entered into an intergovernmental agreement (“IGA”)

with the United States to collect and share such information and are in compliance with the terms of such IGA and any enabling legislation

or regulations.

The types of income subject to the tax include U.S.

source interest and dividends.

The information required to be reported includes the identity and taxpayer identification

number of each account holder that is a U.S.

person and transaction activity within the holder’s account.

Depending on the status

of a Non-U.S.

stockholder and the status of the intermediaries through which they hold their shares, Non-U.S.

stockholders could be subject

to this 30% withholding tax with respect to distributions on their shares and proceeds from the sale of their shares.

Proposed Treasury

regulations that may be relied on pending finalization provide that FATCA withholding on gross proceeds will be eliminated and, consequently,

this withholding tax on gross proceeds is not currently expected to apply.

Stockholders may be requested to provide additional information

to us to enable us to determine whether withholding is required, such as W-8BEN, W-8BEN-E or other applicable series W-8.

The information required to be reported

includes the identity and taxpayer identification number of each account holder that is a U.S.

person and transaction activity within

the holder’s account.

Depending on the status of a Non-U.S.

stockholder and the status of the intermediaries through which they

hold their shares, Non-U.S.

stockholders could be subject to this 30% withholding tax with respect to distributions on their shares.

may be requested to provide additional information to us to enable us to determine whether withholding is required, such as W-8BEN, W-8BEN-E

or other applicable series W-8.

persons should consult

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You are urged to consult with your own tax

advisor with respect to the impact of recent legislation, including the Tax Act, on your investment in our shares.

THE FOREGOING DISCUSSION SHOULD NOT BE CONSIDERED

TO DESCRIBE FULLY THE FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN US.

YOU ARE STRONGLY ADVISED TO CONSULT WITH YOUR TAX ADVISORS

WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX CONSEQUENCES OF AN INVESTMENT IN US.

advisor with respect to the impact of recent legislation on your investment in our shares.

THE FOREGOING DISCUSSION SHOULD

NOT BE CONSIDERED TO DESCRIBE FULLY THE FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN US.

YOU ARE STRONGLY ADVISED TO CONSULT WITH

YOUR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX CONSEQUENCES OF AN INVESTMENT IN US.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business