Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The information in this section contains forward-looking statements that involve risks and uncertainties. See "Risk Factors" and "Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements.

The following discussion is designed to provide a better understanding of our consolidated financial statements, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included or incorporated by reference in Item 8 of this Annual Report on Form 10-K. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future periods.

Amounts are in thousands except percentages, share and per share amounts or as otherwise noted.

Overview of Our Business and Investment Framework

The Company is incorporated under the laws of the State of Maryland and was formed on October 16, 2023. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. For U.S. federal income tax purposes, the Company has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. As a BDC and a RIC, we are required to comply with certain regulatory requirements. We are managed by the Advisor. The Advisor is a limited liability company that is registered as an investment adviser under the Advisers Act. The Advisor is responsible for managing our day-to-day operations and providing investment advisory and management services to the Company. On April 4, 2025, the Company formed a wholly-owned subsidiary, 5CLP BDC I Equity Holdings I LLC ("Equity Holdings I"), a Delaware limited liability company, which is taxed as a C corporation for federal income tax purposes. Equity Holdings I was formed to allow the Company to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements applicable to a RIC under the Code. On October 1, 2025, the Company formed a wholly-owned subsidiary, 5CLP BDC I ABL SPV-A LLC ("ABL SPV-A"), a Delaware limited liability company whose assets are used to secure the ABL Credit Facility (as defined below).

Our investment objective is to generate current income and long-term capital appreciation primarily by investing in U.S.-domiciled upper middle-market companies through direct originations of first lien debt (including stand-alone first lien loans, "unitranche" loans, which are loans that combine both senior and subordinated debt, generally in a first lien position and first lien secured bonds) and, to a lesser extent, second lien debt, unsecured debt and equity or equity-related investments. The Company generally considers upper middle-market companies to consist of companies with earnings before interest, income tax, depreciation and amortization between $50 million to $500 million annually at the time of investment. The Company may from time to time invest in smaller or larger companies and other instruments if the Advisor believes that the opportunity presents attractive investment characteristics and the potential for attractive risk-adjusted returns. Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in private credit instruments issued by corporate issuers (including loans, notes, bonds and other corporate debt securities). The Company's 80% policy with respect to investments in credit-related instruments is not fundamental and may be changed by the Board of Directors without Stockholder approval. Stockholders will be provided with sixty (60) days' notice in the manner prescribed by the SEC before making any change to this policy. We invest primarily in private companies based in the United States, which is subject to compliance with BDC requirements to invest at least 70% of our assets in U.S. companies.

Although not expected to be a primary component of the Company's investment strategy, the Company may also selectively make opportunistic investments in portfolios of loans, receivables or other debt instruments, traded loans, and securities of corporate issuers when market conditions create opportunities with a compelling risk profile, and potential strategic opportunities, including acquisitions of other private and public finance companies, business development companies and asset managers.

Most of the Company's debt investments are expected to be unrated. When rated by a nationally recognized statistical ratings organization, the Company expects that its debt investments will generally carry a rating below investment grade (rated lower than "Baa3" by Moody's Investors Service, Inc. or lower than "BBB-" by Standard & Poor's Rating Services), which is often referred to as "junk."

The Company employs leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed the limitations set forth in the 1940 Act. Pursuant to the 1940 Act, the Company is required to have an asset coverage ratio of at least 150%, which means for every $100 of net assets the Company holds, the Company may raise $200 from borrowings and issuing senior securities (including debt and preferred stock). Under the 1940 Act, any preferred stock we issue, including the Preferred Stock will constitute a "senior security" for purposes of the 150% asset coverage test. Any such leverage would be expected to increase the total capital available for investment by the Company.

The Company intends to seek to list its shares of Common Stock on a national securities exchange (an "Exchange Listing") as determined by the Advisor in its sole discretion within seven years of the initial closing, subject to an additional one-year extension with the approval of the Board of Directors. Any Exchange Listing is subject to future market conditions and there can be no assurance that any exchange listing will occur. Until any Exchange Listing, the Company's Common Stock is not registered under the 1933 Act, or any state securities law, and will be restricted as to transfer by law and the terms of the charter of the Company.

The Company commenced operations on September 26, 2024, the date on which the Company issued 515 shares of Preferred Stock and 80,000 shares of Common Stock. Prior to the commencement of operations, our efforts were limited to the organization of and preparation for the Company's commencement of operations and future operations. The Company commenced investment operations in January 2025.

Emerging Growth Company

The Company is an emerging growth company as defined in the JOBS Act and is eligible to take advantage of certain specified reduced disclosure and other requirements that are otherwise generally applicable to public companies that are not "emerging growth companies" including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. The Company expects to remain an emerging growth company for up to five years following the completion of the Company's initial public offering or until the earliest of (i) the last day of the first fiscal year in which the Company's annual gross revenues equal or exceed $1.235 billion, (ii) December 31 of the fiscal year that the Company becomes a "large accelerated filer" as defined in Rule 12b-2 under the 1934 Act which would occur if the market value of the Common Stock that is held by non-affiliates exceeds $700.0 million as of the last business day of the Company's most recently completed second fiscal quarter and the Company has been publicly reporting for at least 12 months or (iii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period. In addition, the Company will take advantage of the extended transition period provided in Section 7(a)(2)(B) of the 1933 Act for complying with new or revised accounting standards.

Key Components of Our Results of Operations

Revenues

We generate revenue primarily from interest income on debt investments we hold. In addition, we may generate income from capital gains on the repayment or sale of investments, dividend income and various other fees. Our debt investments typically have a term of eight years or less and bear interest on a floating rate basis. Interest on our debt investments is also generally payable quarterly. In certain cases, our investments may provide for deferred or PIK interest or dividend payments. To the extent a debt investment contains PIK provisions, PIK interest is accrued and recorded as interest income at the contractual rates and added to the principal balance of the investment. The principal amount of the investment plus any accrued but unpaid PIK interest or dividend payments are generally due on the maturity date of the investment. In addition, the Company may also generate revenue in the form of commitment, amendment, structuring, syndication, due diligence, unused and other fees.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. To the extent a preferred equity security contains PIK provisions, PIK dividends, computed at the contractual rate specified in each applicable agreement, are accrued and recorded as dividend income and added to the principal balance of the preferred equity security. PIK dividends added to the principal balance are generally collected upon redemption of the equity. Dividend income earned from money market funds is recorded on an accrual basis.

Expenses

Our primary operating expenses include the payment of management fees, incentive fees, expenses reimbursable under the Administration Agreement and the Investment Advisory Agreement, professional fees and other expenses.

Except as specifically provided below, all investment professionals and staff of the Advisor, when and to the extent engaged in providing investment advisory services to us, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, will be provided and paid for by the Advisor. We incur all other costs and expenses of our operations, administration and transactions, including, but not limited to (a) investment advisory fees, including the Management Fees and Incentive Fees, to the Advisor, pursuant to the Investment Advisory Agreement; (b) our allocable portion of compensation, overhead (including rent) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including those relating to (i) our Chief Compliance Officer, Chief Financial Officer and their respective staffs; (ii) compensation of investor relations, legal, operations and other non-investment professionals of the Administrator that perform duties for us; and (iii) costs associated with compliance with Sarbanes-Oxley Act of 2002, as amended; and (c) all other expenses of our operations, administration and transactions. See "Item 1. Business- Payment of the Company's Expenses under the Investment Advisory and Administration Agreements" for additional details of expenses borne by the Company.

The Advisor has agreed to advance costs on our behalf. Unless the Advisor waives or elects to cover such expenses pursuant to the Expense Support Agreement, we will be obligated to reimburse the Advisor for such advanced expenses. See the Expense Support Agreement section below. Any reimbursements that may be made by us in the future will not exceed actual expenses incurred by the Advisor and its affiliates.

Expense Support Agreement

On June 18, 2024, the Company entered into an Expense Support and Conditional Reimbursement Agreement (the "Expense Support Agreement") with the Advisor, pursuant to which the Advisor may elect to pay certain of the Company's expenses, including those expenses incurred prior to the first drawdown date which occurred on September 26, 2024, on the Company's behalf ("Expense Payments"), provided that no portion of such Expense Payments will be used to pay any interest expense or distribution and/or stockholder servicing fees. Any Expense Payment that the Advisor commits to pay must be paid by the Advisor to or on behalf of the Company in any combination of cash or other immediately available funds no later than ninety days after such commitment is made in writing, and/or offset against amounts due from the Company to the Advisor or its affiliates.

Following any calendar quarter in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company's stockholders based on distributions declared with respect to record dates occurring in such calendar quarter (the amount of such excess referred to as "Excess Operating Funds"), the Company will pay such Excess Operating Funds, or a portion thereof, to the Advisor until such time as all Expense Payments made by the Advisor to the Company within three years prior to the last business day of such calendar quarter have been reimbursed. As a result, no amounts subject to the Expense Support Agreement will be reimbursed after three years from the date of the respective Expense Payment. Any payments required to be made by the Company under the Expense Support Agreement are referred to as a "Reimbursement Payment." "Available Operating Funds" means the sum of (i) the Company's net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company's net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

The amount of the Reimbursement Payment for any calendar quarter will equal the lesser of (i) the Excess Operating Funds in such quarter and (ii) the aggregate amount of all Expense Payments made by the Advisor to the Company within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by the Company to the Advisor; provided that the Advisor may waive its right to receive all or a portion of any Reimbursement Payment in any particular calendar quarter, in which case such waived amount will remain unreimbursed Expense Payments reimbursable in future quarters pursuant to the terms of the Expense Support Agreement.

The Company's obligation to make a Reimbursement Payment will automatically become a liability on the last business day of the applicable calendar quarter, except to the extent the Advisor has waived its right to receive such payment for the applicable quarter. The Reimbursement Payment for any calendar quarter will be paid by the Company to the Advisor in any combination of cash or other immediately available funds as promptly as possible following such calendar quarter and in no event later than ninety (90) days after the end of such calendar quarter.

No Reimbursement Payment for any applicable calendar quarter shall be made if: (1) the Effective Rate of Distributions Per Share declared by the Company at the time of such proposed Reimbursement Payment is less than the Effective Rate of Distributions Per Share at the time the Expense Payment was made to which such Reimbursement Payment relates, or (2) the Company's Operating Expense Ratio at the time of such proposed Reimbursement Payment is greater than the Operating Expense Ratio at the time the Expense Payment was made to which such Reimbursement Payment relates. "Effective Rate of Distributions Per Share" means the annualized rate (based on a 365-day year) of regular cash distributions per share exclusive of returns of capital and declared special dividends or special distributions, if any. The "Operating Expense Ratio" is calculated by dividing all of the Company's operating costs and expenses incurred, as determined in accordance with generally accepted accounting principles for investment companies, less organizational and offering expenses, Management Fees and Incentive Fees owed to the Advisor, and interest expense, by the Company's net assets.

Either the Company or the Advisor may terminate the Expense Support Agreement at any time, with or without notice, without the payment of any penalty, provided that any Expense Payments that have not been reimbursed by the Company to the Advisor will remain the Company's obligation following any such termination, subject to the terms of the Expense Support Agreement.

For the year ended December 31, 2025, administrative service expenses of $824, professional fees of $1,045, directors' fees of $176, other general and administrative expenses of $414, and amortization of deferred offering costs of $1,298, are subject to conditional reimbursement by the Company under the Expense Support Agreement.

For the year ended December 31, 2024, organizational expenses of $2,285, administrative service expenses of $161, professional fees of $583, directors' fees of $204, other general and administrative expenses of $199, and amortization of deferred offering costs of $358 are subject to conditional reimbursement by the Company under the Expense Support Agreement.

For the period from October 16, 2023 (inception) through December 31, 2023, organizational expenses of $184 are subject to conditional reimbursement by the Company under the Expense Support Agreement.

Expense Waivers

For the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, Management Fees were $1,118, $2, and $0, respectively. Management Fees for the year ended December 31, 2024 were waived by the Advisor.

For the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, $762, $3,493, and $6, respectively, of expenses have been waived by the Advisor, and will not be subject to reimbursement by the Company. Expenses waived for the year ended December 31, 2025 were $762 of administrative service expenses. Expenses waived for the year ended December 31, 2024 were $3,458 of administrative service expenses and $35 of other general and administrative expenses. Expenses waived for the period from October 16, 2023 (inception) through December 31, 2023 were $6 of administrative service expenses. The Advisor's waiver of these expenses was a voluntary election by the Advisor and the Advisor is not obligated to waive any expenses of the Company in future periods.

Leverage

The Company employs leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed the limitations set forth in the 1940 Act. Pursuant to the 1940 Act, and as approved by the Board of Directors and the Company's initial stockholder, the Company is required to have an asset coverage of at least 150%, which means for every $100 of net assets the Company holds, the Company may raise $200 from borrowing and issuing senior securities (including debt and preferred stock). Any such leverage, if incurred, would be expected to increase the total capital available for investment by the Company.

Portfolio and Investment Activity

The Company commenced investment operations in January 2025.

The total fair value of our investment portfolio was $452,442 as of December 31, 2025, consisting of 19 portfolio companies. As of December 31, 2025, our investment portfolio based on fair value consisted of 68.3% first lien debt investments, 19.5% second lien debt investments and 12.2% preferred equity investments.

Our investment activity for the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023 is presented below (the information presented herein is at par value unless otherwise indicated):

As of December 31, 2025 and December 31, 2024, our investments consisted of the following:

As of December 31, 2025, no investments in the portfolio were on non-accrual status.

The Advisor monitors the financial condition and trends of each portfolio company on an ongoing basis to determine if they are meeting their respective business plans and the Advisor's underwriting assumptions and to assess the appropriate course of action with respect to each portfolio company. The Advisor has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

As part of the monitoring process, the Advisor employs an investment performance rating system to categorize our investments. In addition to various risk management and monitoring tools, the Advisor rates the credit risk of all investments on a scale of 1 to 4. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account in certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors. The investment performance rating system for our investments is as follows:

The Advisor rates the investments in our portfolio each quarter and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments with a rating of 3 or 4, the Advisor enhances its level of scrutiny over the monitoring of such portfolio company. The following table shows the composition of our portfolio (excluding investments in money market funds) on the 1 to 4 performance investment rating system at fair value as of December 31, 2025 and December 31, 2024:

Results of Operations

Although the Company was formed on October 16, 2023, we commenced operations on September 26, 2024. As a result, comparisons may not be meaningful. On January 9, 2025, we commenced investment operations.

Operating results for the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, were as follows:

Investment Income

Investment income for the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, was as follows:

Interest income, which includes amortization of upfront fees, increased from $0 for the year ended December 31, 2024 to $18,611 for the year ended December 31, 2025. The increase in interest income was primarily the result of investment operations commencing in January 2025 and growth in our investment portfolio. Paid-in-kind ("PIK") interest income increased from $0 for the year ended December 31, 2024 to $272 for the year ended December 31, 2025, primarily due to new originations of investments with PIK provisions. For the year ended December 31, 2025, 1.3% of our total investment income was comprised of PIK interest. Dividend income increased from $73 for the year ended December 31, 2024 to $285 for the year ended December 31, 2025 and was primarily due to a higher average balance invested in a money market fund during 2025 compared to 2024. Paid-in-kind dividend income increased from $0 for the year ended December 31, 2024 to $1,294 for the year ended December 31, 2025, driven by new originations of investments structured with PIK provisions. For the year ended December 31, 2025, 6.1% of our total investment income was comprised of PIK dividends. Other income increased from $0 for the year ended December 31, 2024 to $716 for the year ended December 31, 2025, primarily due to unfunded commitment fees.

Dividend income increased from $0 for the period from October 16, 2023 (inception) through December 31, 2023 to $73 for the year ended December 31, 2024 and was attributable to dividends earned on a money market fund. There was no other investment income earned during the year ended December 31, 2024 and for the period from October 16, 2023 (inception) through December 31, 2023 as investment operations had not yet commenced.

Expenses

Operating expenses for the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, were as follows:

Interest Expense

Interest expense increased from $0 for the year ended December 31, 2024 to $8,377 for the year ended December 31, 2025. The increase in interest expense was due to an increase in average debt outstanding of $113,426 for the year ended December 31, 2025, resulting from the Company entering into the Revolving Credit Agreement (as defined herein) on January 16, 2025, the Macquarie Transactions (as defined herein) on August 14, 2025 and September 26, 2025, and the Ally Loan Agreement (as defined herein) on November 6, 2025.

For the year ended December 31, 2024 and for the period from October 16, 2023 (inception) through December 31, 2023, the Company did not incur any interest expense as there was no debt outstanding.

Administrative Service Expenses

Administrative service expenses represent fees paid to the Administrator for our allocable portion of overhead, technology and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of certain of our executive officers and other non-investment professionals that perform duties for us. Refer to Note 3 to our consolidated financial statements for additional information regarding the Administration Agreement and the administrative fees thereunder. Administrative service expenses decreased from $3,638 for the year ended December 31, 2024 to $2,896 for the year ended December 31, 2025.

Administrative service expenses increased from $6 for the period from October 16, 2023 (inception) through December 31, 2023 to $3,638 for the year ended December 31, 2024, primarily as a result of the commencement of operations on September 26, 2024.

Organizational Expenses

Organizational expenses include the cost of formation, including legal fees related to the creation and organization of the Company and its related documents of organization. Organizational expenses decreased from $2,285 for the year ended December 31, 2024 to $0 for the year ended December 31, 2025, as organizational activities were substantially completed upon the commencement of operations on September 26, 2024.

Organizational expenses increased from $184 for the period from October 16, 2023 (inception) through December 31, 2023 to $2,285 for the year ended December 31, 2024, as a result of operations commencing on September 26, 2024.

Professional Fees

Professional fees include legal, audit, tax, valuation and other professional fees incurred related to the management of the Company. Professional fees increased from $583 for the year ended December 31, 2024 to $1,823 for the year ended December 31, 2025, primarily as a result of the commencement of investment operations.

Professional fees increased from $0 for the period from October 16, 2023 (inception) through December 31, 2023 to $583 for the year ended December 31, 2024, primarily as a result of the commencement of operations.

Amortization of Deferred Offering Costs

Costs associated with the offering of shares of Common Stock and Preferred Stock are capitalized as deferred offering costs and included on the Consolidated Statements of Assets and Liabilities and amortized over a twelve-month period. For the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, the Company incurred $534, $1,453 and $158 in offering costs, respectively. Amortization of deferred offering costs increased from $385 for the year ended December 31, 2024 to $1,374 for the year ended December 31, 2025, primarily as a result of the commencement of operations.

Amortization of deferred offering costs increased from $0 for the period from October 16, 2023 (inception) through December 31, 2023 to $385 for the year ended December 31, 2024, primarily as a result of the commencement of operations.

Other General and Administrative Expenses

Other general and administrative expenses include insurance, research, sub-administrator, and other costs. Other general and administrative expenses increased from $234 for the year ended December 31, 2024 to $1,006 for the year ended December 31, 2025, primarily as a result of sub-administrator and investment research costs.

Other general and administrative expenses increased from $0 for the period from October 16, 2023 (inception) through December 31, 2023 to $234 for the year ended December 31, 2024, primarily as a result of sub-administrator costs.

Compensation to the Advisor

We pay the Advisor investment advisory fees for its services under the Investment Advisory Agreement consisting of two components: a Management Fee and an Incentive Fee. The cost of both the Management Fee and the Incentive Fee is borne by the Company's stockholders.

Management Fee

The Management Fee is payable quarterly in arrears. The Management Fee is payable at an annual rate of 0.60% of the average value of the Company's gross assets (excluding cash and cash equivalents but including assets purchased with borrowed amounts) at the end of each of the Company's two most recently completed calendar quarters. For purposes of the Investment Advisory Agreement, "gross assets" means the Company's total assets determined on a consolidated basis in accordance with U.S GAAP, excluding cash and cash equivalents, but including assets purchased with borrowed amounts.

The Management Fee for any partial quarter is appropriately prorated (based on the actual number of days elapsed relative to the total number of days in such calendar quarter). See Note 3 to our consolidated financial statements for additional information regarding the Investment Advisory Agreement and the fee arrangement thereunder. Management Fees increased from $2 for the year ended December 31, 2024 to $1,118 for the year ended December 31, 2025 due to an increase in average assets from growth in our investment portfolio.

Management Fees increased from $0 for the period from October 16, 2023 (inception) through December 31, 2023 to $2 for the year ended December 31, 2024 due to an increase in average assets. Management Fees for the year ended December 31, 2024 were waived by the Advisor.

Incentive Fee

We pay the Advisor an Incentive Fee consisting of two parts: (i) an Investment Income Incentive Fee and (ii) a Capital Gains Incentive Fee. The Investment Income Incentive Fee is calculated and payable on a quarterly basis, in arrears, and will equal 10.0% (17.5% in the event of an Exchange Listing) of Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter, subject to a quarterly preferred return of 1.50% (i.e., 6.0% annualized), or "Hurdle," measured on a quarterly basis and subject to a 100% "catch-up" feature. See Note 3 to our consolidated financial statements for additional information regarding the Investment Advisory Agreement and the fee arrangement thereunder.

For the year ended December 31, 2025, Investment Income Incentive Fees were $413. For the year ended December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, the Company did not incur any Investment Income Incentive Fees.

For the year ended December 31, 2025, $126 of Capital Gains Incentive Fees were accrued. As of December 31, 2025, these accrued Capital Gains Incentive Fees are not contractually payable to the Advisor. For the year ended December 31, 2024 and for the period from October 16, 2023 (inception) through December 31, 2023, the Company did not accrue any Capital Gains Incentive Fee as there were no net unrealized and realized gains or losses as of such date.

Reimbursement of expense support

We may owe the Advisor a Reimbursement Payment, subject to certain conditions, in accordance with the Expense Support Agreement. As of December 31, 2025 and December 31, 2024, the Company owed the Advisor $560 and $186 dollars, respectively, for the reimbursement of expense support.

Income Taxes, Including Excise Taxes

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. As a RIC, we must, among other things, distribute to our stockholders in each taxable year generally at least 90% of our investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. To maintain RIC status, we, among other things, intend to make the requisite distributions to our stockholders, which generally relieves us from corporate-level U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we can be expected to carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, we will accrue excise tax on estimated excess taxable income.

For the years ended December 31, 2025, December 31, 2024 and the period from October 16, 2023 (inception) through December 31, 2023, we recorded a net expense of $151, $0, and $0, respectively, for U.S. federal excise tax.

Net Unrealized and Realized Gains (Losses)

We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. For the year ended December 31, 2025, the net change in unrealized gains (losses) on investments was $1,645, which includes $388 attributable to changes in foreign exchange rates on investments, with the remainder largely driven by the tightening in credit spreads relative to the origination date. For the year ended December 31, 2024 and for the period from October 16, 2023 (inception) through December 31, 2023, there was no net change in unrealized gains (losses) on investments as investment operations had not yet commenced.

For the year ended December 31, 2025, we had net unrealized gains (losses) of ($472) on foreign currency transactions, primarily as a result of translating our foreign currency borrowings and fluctuations in the EUR and CAD exchange rates. For the year ended December 31, 2024 and for the period from October 16, 2023 (inception) through December 31, 2023, there were no unrealized gains (losses) on foreign currency transactions.

For the years ended December 31, 2025, December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, there were no net realized gains (losses) on investments.

For the year ended December 31, 2025, we had net realized gains (losses) of $84 on foreign currency transactions, primarily resulting from changes in exchange rates between the date funds were drawn and the date the related investments were funded. For the year ended December 31, 2024 and for the period from October 16, 2023 (inception) through December 31, 2023, there were no realized gains (losses) on foreign currency transactions.

Financial Condition, Liquidity and Capital Resources

We generate cash primarily from (i) the net proceeds of the Private Offerings, (ii) cash flows from our operations, and (iii) proceeds from borrowings under our Credit Facilities. To the extent the Company determines that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board of Directors otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders, the Company may from time to time enter into one or more additional credit facilities including revolving credit facilities, increase the size of our existing Credit Facilities or issue additional senior securities. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, our asset coverage ratio is at least 150%. Any such credit facilities may be secured by certain of our assets and may contain advance rates based upon pledged collateral. The pricing and other terms of any such facilities would depend upon market conditions when we enter into any such facilities as well as the performance of our business, among other factors.

In addition, we may raise capital by securitizing certain of our investments, including through the formation of one or more collateralized loan obligations or warehouse facilities, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity to purchasers on a non-recourse or limited recourse basis.

As of December 31, 2025 and December 31, 2024, the Company's asset coverage ratios were 167.82% and 2,096.46%, respectively. We carefully consider our unfunded commitments for the purposes of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund.

Our primary uses of cash are (i) investments in portfolio companies, (ii) payments of the Company's expenses, (iii) debt service, repayment and other financing costs of our borrowings, and (iv) cash distributions to the Company's Stockholders.

We believe that our current cash and cash equivalents on hand and our anticipated cash flows from operations will be adequate to meet our needs for our daily operations for at least the next twelve months. As of December 31, 2025, we had approximately $198,032 of availability on our Credit Facilities, subject to asset coverage and borrowing base limitations, and $492,157 in undrawn Capital Commitments.

As of December 31, 2025, we had $139,030 in cash and cash equivalents and restricted cash, an increase of $106,750 from December 31, 2024. Restricted cash represents principal and interest collections received that are held at ABL SPV-A, the use of which is restricted based on the terms of the Ally Loan Agreement (as defined below). During the year ended December 31, 2025, cash used in operating activities was $444,174, primarily attributable to funding portfolio investments of $452,552. Cash provided by financing activities was $550,924 during the period, primarily due to borrowings on our Credit Facilities of $1,027,795, Repurchase Obligation proceeds of $80,000 and proceeds from the issuance of Common Stock of $206,000, which were partially offset by Credit Facility paydowns of $676,300, Repurchase Obligations repayments of $80,000, payment of deferred financing costs of $5,886, Common Stockholder distributions paid in cash of $500 and Preferred Stock dividends paid of $185.

As of December 31, 2024, we had $32,280 in cash and cash equivalents, an increase of $32,280 from December 31, 2023. During the year ended December 31, 2024, cash used in operating activities was $84 while cash provided by financing activities was $32,364, primarily from the proceeds of the issuance of Common Stock and Preferred Stock.

Net Assets

The following table summarizes the total shares of Common Stock issued and proceeds received related to the Company's drawdowns of Capital Commitments delivered pursuant to the Subscription Agreements for the year ended December 31, 2025:

During the year ended December 31, 2025, we issued 25,487 shares of Common Stock to Common Stockholders who have not opted out of our distribution reinvestment plan, with a value of $643.

The following table summarizes the total shares of Common Stock issued and proceeds received related to the Company's drawdowns of Capital Commitments delivered pursuant to the Subscription Agreements for the year ended December 31, 2024:

As of December 31, 2025 and December 31, 2024, the Company had received Capital Commitments totaling $729,030 and $604,804, respectively ($492,157 and $573,931 remaining undrawn, respectively), of which $269,745 and $21,550, respectively ($182,090 and $19,450 remaining undrawn, respectively), are from affiliates of the Advisor.

On September 26, 2024, the Company completed a private offering of its Preferred Stock to unaffiliated individual investors who are "accredited investors" as defined in Regulation D of the 1933 Act. Pursuant to this private offering we issued and sold 515 shares of Preferred Stock for an aggregate purchase price of $1,545. We may in the future issue additional series of preferred stock, though we have no intention to do so. The holders of the Preferred Stock are subject to certain dividend, voting, liquidation and other rights that are more fully described in Note 8 to our consolidated financial statements.

There were no Preferred Stock issuances during the year ended December 31, 2025.

Distributions

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify each taxable year for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our stockholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exempt income (if any) for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our stockholders, which generally relieve us from corporate-level U.S. federal income taxes. During the year ended December 31, 2025, $3,080 of Common Stock distributions were declared and $1,143 was paid to Common Stockholders by the Company. During the year ended December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, no distributions had been declared or paid by the Company to Common Stockholders. For the years ended December 31, 2025 and December 31, 2024, and for the period from October 16, 2023 (inception) through December 31, 2023, $185, $54, and $0, respectively, of Preferred Dividends were declared, accrued and paid by the Company. The Preferred Dividends are calculated from and including September 16, 2024.

Depending on the level of taxable income earned in a tax year, we may carry forward taxable income (including net capital gains, if any) in excess of current year distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year distributions from such income, we will accrue excise tax on estimated excess taxable income.

Borrowings

The following tables show the Company's outstanding debt as of December 31, 2025 and December 31, 2024:

Senior Secured Revolving Credit Facility

On January 16, 2025, the Company entered into a revolving credit agreement (as amended, supplemented or otherwise modified from time to time, the "Revolving Credit Agreement"), by and between the Company, as initial borrower, U.S. Bank National Association ("U.S. Bank") as administrative agent, lead arranger, letter of credit issuer and the lenders party thereto from time to time (each a "Lender"). Capitalized terms used herein but not defined will have the meanings ascribed thereto in the Revolving Credit Agreement.

Pursuant to Section 2.15 of the Revolving Credit Agreement ("Section 2.15"), an increase was effective on June 27, 2025 for the revolving credit facility (the "Credit Facility" and, such increase, the "First Committed Accordion Exercise"). The Credit Facility and ABL Credit Facility (as defined below) are referred to collectively as the "Credit Facilities." Pursuant to the First Committed Accordion Exercise, the aggregate Credit Facility commitments pursuant to the Revolving Credit Agreement increased from $150.0 million to $215.0 million. Pursuant to Section 2.15, an increase was effective on September 8, 2025 for the Credit Facility (the "Second Committed Accordion Exercise"). Pursuant to the Second Committed Accordion Exercise, the aggregate Credit Facility commitments pursuant to the Revolving Credit Agreement increased from $215.0 million to $250.0 million, (the "Maximum Principal Amount"), of which $50.0 million is available for standby letters of credit. The Maximum Principal Amount is subject to availability under the borrowing base, which is based on unfunded capital commitments by eligible investors, and the reserve, if any, for borrowings denominated in non-U.S. dollars. Subject to compliance with the terms and conditions of the Revolving Credit Agreement, the Company may request an increase of the maximum principal amount of the Credit Facility up to $1 billion, which request is subject to the discretionary consent of the administrative agent and to the commitment to provide such increase by U.S. Bank or any other new or existing lenders.

On December 19, 2025, the Company entered into a second amendment to its revolving credit agreement ("Second Amendment"). The Second Amendment, among other things, added a newly formed feeder fund, 5C Lending Partners Structured Feeder LP, a Delaware limited partnership (the "New Pledgor") as a credit party under the Revolving Credit Agreement, and provides that the commitments to the New Pledgor will be included in the borrowing base under the Revolving Credit Agreement. In connection with the Second Amendment the New Pledgor entered into certain security documents pledging to the administrative agent customary subscription facility collateral.

Borrowings under the Credit Facility bear interest, at a rate per annum equal to (i) in the case of loans denominated in U.S. dollars, at the Company's option (a) the daily simple SOFR plus 2.30%, (b) the Adjusted Term SOFR for the applicable interest period plus 2.30% or (c) 1.30% plus the greatest of (1) U.S. Bank's prime rate, (2) the federal funds rate plus 0.50% and (3) the daily simple SOFR plus 1.00%; (ii) in the case of loans denominated in Euros, Yen, Australian dollars or other alternative currencies (other than sterling, Canadian dollars or Swiss francs), the Eurocurrency Rate for the applicable interest period plus 2.30%; (iii) in the case of loans denominated in sterling, SONIA plus 2.30%; (iv) in the case of loans denominated in Swiss francs, SARON plus 2.30%; or (v) in the case of loans denominated in Canadian dollars, at the Company's option (a) the adjusted CORRA plus 2.30% or (b) the adjusted Term CORRA for the applicable interest period plus 2.30%. Term SOFR Loans are subject to a credit spread adjustment ranging from 0.00% to 0.25% and CORRA loans are subject to a credit spread adjustment of 0.29547%, subject to certain conditions. The Company also will pay to U.S. Bank an unused commitment fee, payable quarterly in arrears, equal to (a) 0.30% per annum on the unused portion of the lenders' commitments under the Credit Facility when such unused portion is greater than 50% of the maximum commitment; or (b) 0.25% per annum on the unused portion of the lenders' commitments under the Credit Facility when such unused portion is equal to or less than 50% of the maximum commitment, in either case calculated daily and on the basis of actual days elapsed in a year consisting of 360 days.

The Credit Facility will mature upon the earliest of (i) January 15, 2027 (the "Stated Maturity Date"), (ii) the date upon which the administrative agent declares the obligations under the Credit Facility due and payable after the occurrence of an event of default, (iii) forty-five (45) days prior to the termination of the organizational documents of the Company, (iv) forty-five (45) days prior to the date on which the Company's ability to call capital commitments for purposes of repaying the obligations under the Credit Facility is terminated, and (v) the date the Company terminates the commitments pursuant to the Credit Facility. At the Company's option, the Stated Maturity Date may be extended for one term up to 364 days, subject to the satisfaction of customary conditions. The Company's obligations under the Revolving Credit Agreement are secured by the Company's rights, titles, interests and privileges in and to the capital commitments of the Company's investors, including the Company's right to make capital calls, receive and enforce capital contributions, exercise any remedies and claims related thereto together with all proceeds and related rights of any and all of the foregoing and a pledge of the collateral account into which the capital call proceeds are deposited. The Revolving Credit Agreement contains customary representations and warranties and covenants and events of default (with customary notice and cure provisions). Borrowings under the Revolving Credit Agreement are subject to the asset coverage requirements contained in the 1940 Act.

On January 30, 2026, the Company entered into a third amendment to its Revolving Credit Agreement (the "Third Amendment"). The Third Amendment, among other things, (i) extends the Stated Maturity Date from January 15, 2027 to January 14, 2028, (ii) provides that 80% of the aggregate unfunded capital commitments of certain investors will be included in calculations of the borrowing base under the Revolving Credit Agreement once at such times the Company has called and received at least 40% of the aggregate capital commitments of all investors, (iii) reduced the Applicable Margin (as defined therein) (A) in the case of RFR Loans, from 2.30% to 1.85%, (B) in the case of Eurocurrency Rate Loans, from 2.30% to 1.85%, (C) in the case of Reference Rate Loans, from 1.30% to 0.85% (each such loan as defined therein) and (D) in the case of Letter of Credit (as defined therein) fees, from 2.30% to 1.85%, (iv) reduced the unused commitment fee to 0.25% per annum on the unused portion of the lenders'commitments when such unused portion is greater than fifty percent (50%) of the Credit Facility's maximum commitment and (v) amends certain investor concentration limits, and waives the applicability of certain investor concentration limits until June 30, 2026.

As of December 31, 2025, the Company was in compliance with the terms of the Credit Facility.

Repurchase Obligations

In order to finance certain investment transactions, the Company may, from time to time, enter into repurchase agreements with Macquarie Bank Limited ("Macquarie"), whereby the Company sells to Macquarie an investment that it holds and concurrently enters into an agreement to repurchase the same investment at an agreed-upon price at a future date, not to exceed 90-days from the date it was sold (each such repurchase agreement, a "Macquarie Transaction").

In accordance with ASC Topic 860, these Macquarie Transactions meet the criteria for secured borrowings. Accordingly, the investments financed by the Macquarie Transactions remain on the Company's Consolidated Statements of Assets and Liabilities as an asset, and the Company records a liability to reflect its repurchase obligation to Macquarie (the "Repurchase Obligations"). The Repurchase Obligations are secured by the respective investments that are the subject of the repurchase agreements.

As of December 31, 2025, the Company had no outstanding Repurchase Obligations. During the year ended December 31, 2025, the Company entered into two repurchase agreements on August 14, 2025 and September 26, 2025 for an aggregate of $80.0 million. Interest under these Repurchase Obligations were calculated at the inception of each repurchase agreement, as the 2 month interpolated SOFR rate in effect, plus the applicable margin of 3.20% or 3.25%. For the year ended December 31, 2025, interest expense on the Repurchase Obligations was $665. The contractual maturities of these repurchase agreements were 60 days and the $80.0 million was repaid during the year ended December 31, 2025.

Ally ABL Credit Facility

On November 6, 2025, the Company, as transferor, entered into the Loan, Security and Collateral Management among the Advisor, as collateral manager (in such capacity, the "Collateral Manager"), ABL SPV-A, as borrower (in such capacity, the "Borrower"), the lenders party thereto, Ally Bank, as administrative agent, and U.S. Bank Trust Company, National Association, as collateral custodian, swingline lender and arranger (the "Ally Loan Agreement"). The Ally Loan Agreement provides for a revolving credit facility (the "ABL Credit Facility") under which the lenders agreed to extend credit to the Borrower in a total amount of up to $300.0 million the proceeds of which may be used, among other things, to acquire eligible loans and to make distributions to the Company. The Collateral Manager will act as collateral manager of the Borrower and manage the Collateral. In addition, to the extent not increased earlier at the option of the Borrower, the commitments under the facility will be automatically increased to an amount equal to $400.0 million on or about February 4, 2026. Borrowings under the ABL Credit Facility will bear interest at a rate per annum equal to a benchmark rate, plus 1.75% per annum. The benchmark rate is SOFR based on, at the Borrower's option, daily SOFR, 1 month term SOFR and 3 month term SOFR. Unused commitments under the ABL Credit Facility are subject to a non-usage fee ranging from 0.50% to 0.75% per annum depending on usage levels. The lenders' commitments to make advances under the ABL Credit Facility will expire on November 6, 2028 and the scheduled final maturity date of the ABL Credit Facility is November 6, 2030. In connection with the Ally Loan Agreement, the Company, as seller, and the Borrower, as buyer, entered into a sale and contribution agreement pursuant to which the Company will transfer to the Borrower certain originated or acquired loans and related assets from time to time. The Company also pledged its equity interests in the Company as collateral. The ABL Credit Facility is secured by all of the assets of the Borrower and the Company's equity interests in the Borrower. The Company and the Borrower has made customary representations and warranties and are required to comply with customary covenants and other requirements for similar facilities. The Ally Loan Agreement includes usual and customary events of default for facilities of this nature.

As of December 31, 2025, the Company was in compliance with the terms of the ABL Credit Facility.

Contractual Obligations

The following table is a summary of contractual principal payment obligations under our Credit Facility and ABL Credit Facility as of December 31, 2025:

In addition to the contractual principal payment obligations in the table above, we also have commitments to fund investments.

Capital Commitments and Subscription Agreements

The Company has conducted and from time to time may conduct Private Offerings in the United States to "accredited investors" within the meaning of Regulation D under the 1933 Act, and outside the United States in accordance with Regulation S or Regulation D under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of a Private Offering, each investor will make a Capital Commitment to purchase shares of the Common Stock pursuant to Subscription Agreements entered into with the Company. Investors are required to fund drawdowns to purchase shares of Common Stock up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice, which will be issued based on the Company's anticipated investment activities and capital needs, in an aggregate amount not to exceed each investor's respective Capital Commitment. Stockholders will be released from any further obligation to purchase additional shares at the earlier of (i) a Liquidity Event and (ii) three years following the Initial Closing, subject to certain conditions.

If a Stockholder fails to fund their commitment obligations or to make required contributions when due, the Company's ability to complete its investment program or otherwise continue operations may be substantially impaired. Additionally, there may be significant adverse consequences for the Stockholder. In addition to losing its right to participate in future drawdowns, a defaulting Stockholder may be forced to transfer its shares of Common Stock to a third party for a price that is less than the net asset value of such shares of Common Stock.

The Company may, in the Company's sole discretion, permit one or more investors to make Subsequent Commitments after the date the first Subscription Agreements are accepted by the Company. Additional Stockholders will be required to make Catch-Up Purchases on a date (or dates) to be determined by the Company.

Other Commitments and Contingencies

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of December 31, 2025 and December 31, 2024, management was not aware of any pending or threatened litigation.

Off-Balance Sheet Arrangements

Portfolio Company Commitments

From time to time, the Company may enter into commitments to fund investments in the form of revolver or delayed draw term loan commitments, which require the Company to provide funding during a specified commitment period when requested by portfolio companies in accordance with underlying loan agreements.

As of December 31, 2025 and December 31, 2024, the Company had the following unfunded commitments:

As of December 31, 2025 and December 31, 2024, the Company believed that it had adequate financial resources to satisfy its unfunded commitments.

Related-Party Transactions

We have entered into a number of business relationships with affiliated or related parties, including the following:

In addition to the aforementioned agreements, we were granted an exemptive order from the SEC which permits the Company, subject to the satisfaction of specific conditions and requirements, to co-invest in privately negotiated investment transactions with certain affiliates of the Advisor.

Recent Developments

Capital Commitments

Subsequent to December 31, 2025, the Company closed additional Capital Commitments in its private offerings totaling $271.0 million, of which $0.1 million was from affiliates of the Advisor, resulting in total Capital Commitments of $1.0 billion as of March 5, 2026.

Distributions

On March 4, 2026, the Board of Directors of the Company declared a cash distribution of $0.20 per share of the Company's Common Stock. The distribution is payable on March 12, 2026, to the holders of record of the Company's Common Stock as of the close of business on March 6, 2026. Distributions will be paid in cash or reinvested in shares of Common Stock for Common Stockholders participating in the Company's distribution reinvestment plan.

Investment Operations

As of March 5, 2026, the Company's investment portfolio totaled $765.6 million across 22 portfolio companies, comprising of loan commitments of $709.3 million in aggregate principal amount, of which $540.8 million was funded and $168.5 million was unfunded, and a preferred equity investment of $56.3 million.

Recent Transactions

Blue River - Blue River PetCare, LLC

The Company closed on the upsize of a first-lien credit facility for Blue River PetCare ("Blue River") to fund tuck-in acquisitions and organic growth initiatives. Blue River operates a fully integrated platform of general veterinary practices.

Critical Accounting Policies

The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies should be read in connection with our risk factors as described in "Item 1A. Risk Factors."

Investments at Fair Value

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.

The Board of Directors is responsible for overseeing the valuation of our portfolio investments at fair value as determined in good faith pursuant to the Advisor's valuation policy. As permitted by Rule 2a-5 of the 1940 Act, the Board of Directors has designated the Advisor as our valuation designee with day-to-day responsibility for implementing the portfolio valuation process set forth in the Advisor's valuation policy.

We apply Financial Accounting Standards Board Codification Topic 820, Fair Value Measurement ("ASC Topic 820"), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC Topic 820, we consider our principal market to be the market that has the greatest volume and level of activity. ASC Topic 820 specifies a fair value hierarchy that prioritizes and ranks the levels of observability of inputs used in the determination of fair value. In accordance with ASC Topic 820, these three levels are summarized below:

Transfers between levels, if any, are recognized at the beginning of the period in which the transfer(s) occurs. In addition to using the above inputs in investment valuations, the Advisor applies the valuation policy approved by our Board of Directors that is consistent with ASC Topic 820. Consistent with the valuation policy, the Advisor evaluates the source of each input, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When a security is valued based on prices provided by reputable dealers or pricing services (i.e., broker quotes), the Advisor subjects those prices to various criteria to determine whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment.

The Advisor determines the fair value of our investment portfolio on a quarterly basis. Securities that are publicly traded with readily available market prices are valued at the reported closing price on the valuation date. Securities that are not publicly traded with readily available market prices are valued at fair value as determined in good faith by the Advisor, in accordance with the valuation policy approved by the Board of Directors. In connection with that determination, the Advisor prepares portfolio investment valuations which are based on relevant inputs, including, but not limited to, dealer quotes, values of comparable securities, recent portfolio company financial statements, forecasts and other relevant disclosures, and valuations prepared by independent third-party pricing and valuation services.

Due to the inherent uncertainty of determining the fair value of investments that do not have readily available market values, the fair value of such investments may fluctuate from period to period due to changes in the unobservable inputs that the Advisor employs to determine the fair value of such investments. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a readily available market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize an amount(s) that is different from the amount(s) presented and such differences could be material.

Interest and Dividend Income Recognition

Interest income is recorded on an accrual basis and includes amortization of discounts or premiums. Certain investments may have contractual PIK interest or dividends. PIK interest represents accrued interest that is added to the principal amount of the investment on the respective interest payment dates rather than being paid in cash and generally becomes due at maturity. To the extent a debt investment contains PIK provisions, PIK interest is accrued and recorded as interest income at the contractual rates. Discounts and premiums to par value on securities purchased are amortized into interest income over the contractual life of the respective security using the effective yield method or the straight-line method for revolving or delayed draw investments. The amortized cost of investments represents the original cost adjusted for the amortization of discounts or premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts and premiums to par value are recorded as interest income in the current period.

Loans are generally placed on non-accrual status when interest or principal payments become materially past due and there is reasonable doubt that principal or interest will be collected in full. Recognition of interest income from that loan will be ceased until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Company's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in the Company's judgment, are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value or is in the process of collection. Accrued interest is written-off when it becomes probable that the interest will not be collected, and the amount of uncollectible interest can be reasonably estimated.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. To the extent a preferred equity investment contains PIK provisions, PIK dividends, computed at the contractual rate specified in each applicable agreement, are accrued and recorded as dividend income and added to the principal balance of the preferred equity investment on the respective dividend payment dates rather than being paid in cash. PIK dividends added to the principal balance are generally due at certain trigger dates or collected upon redemption of the equity.Dividend income earned from money market funds is recorded on an accrual basis.

Income Taxes

We have elected to be treated as a BDC under the 1940 Act. We have elected to be treated, and intend to qualify each year as a RIC. As a RIC, we generally will not have to pay corporate-level U.S. federal or state income taxes on any ordinary income or capital gains that the Company distributes to the stockholders as dividends. Additionally, as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In order to maintain and obtain RIC status and tax benefits, the Company must distribute to the Company's stockholders, for each taxable year, at least 90% of the Company's "investment company taxable income," which is generally the Company's ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses.